In re Appeal of Minneapolis, St. Paul, & Sault Ste. Marie Railroad

Goss, J".

This appeal is from the decision of the district court, wherein trial was had on testimony taken relating to an application by the railroad company to the State Board of Railway Commissioners, made under chap. 200 of Sess. Laws of 1907, Comp. Laws 1913, §§ 4789-4795. Mixed train service was given on the Ambrose-Flaxton Soo branch line. In November, 1910, residents of Ambrose petitioned the Board of Railway Commissioners to order installation of separate daily passenger and freight service. On hearing had the petition was granted. The railroad immediately applied to be relieved therefrom, and upon a second hearing had the application of the railroad was denied and an order was entered June 24, 1911, directing installation of a separate daily passenger service. From this order the railroad appealed to the district court of Burke county. The matter came on for trial as an issue of fact and law on May 30, 1912, and a decision was rendered adverse to the railroad company. It appeals, assigning as error that the evidence is insufficient to justify certain findings entered, and that the findings are insufficient to support the judgment rendered.

This opinion is written after a rehearing had. Prior to rehearing it was held that the order made by the Board of Railway Commissioners, and upon which the appeal was taken to the district court, was nonappealable in that it was merely an order denying the carrier’s application to be relieved from the general statutory requirement to run a daily passenger train, instead of an order directing or compelling action in the matter; and for the further reason that no right of appeal was considered as granted by chap. 200 of the Session Laws of 1907, Comp. Laws 1913, §§ 4789-4795, concerning the matters there mentioned, and that the intent of that particular statute was to leave the Board vested with a discretion as to said matters, uncontrolled by resort to the courts by appeal. It was also mentioned in said opinion that the case was moot, inasmuch as this Ambrose branch had been extended into Montana, pending the appeal, and now accommodates a much greater territory.

Undoubtedly this case might be disposed of as moot and the decision be within the law. However, the Board and the corporation desire a decision as precedent for future action.

The legislature has seen fit to declare that both a daily, passenger and daily freight train shall be run each way over every railroad within this state, “provided, however, that, if any railroad corporation shall make it appear to the Board of Railroad Commissioners of this state that the business on any line of its road will not justify its operating both the passenger and freight train herein provided for, and said Board shall so order, said company may operate one mixed train on such line each way on every business day in the year for such time as said Board may direct.” The order made is appealable, and a review of the action of the Board may be had in the courts and in this court on appeal. Whether the order be merely negative, or on the contrary affirmative action, does not affect the right of appeal. To hold otherwise would allow the right to an appeal to, be dependent on the caprice of the Board in the framing of its order. The right is absolute if granted by tbe statute, and it is plainly apparent from tbe codification of the laws pertaining to tbe powers and duties of tbe Railroad Commissioners, as codified in chap. 115 of tbe Session Laws of 1897, tbat it was tbe legislative intent tbat as to all enactments, past and future, unless tbe contrary was clearly apparent from tbe future act itself, a right of appeal, retrial, and review should be allowed from tbe decision of tbat body to tbe courts. As nothing contained in chapter 200 of tbe Session Laws of 1907, Comp. Laws 1913, §§ 4789-4795, manifests a contrary intention, it must be taken as in pari materia with similar existing enactment and as having been enacted subject to an understood and generally applicable right of appeal in this as in all other similar and related matters. Lewis’s Sutherland, Stat. Constr. 2d ed. §§ 443-448; 36 Cyc. 1147.

Tbe Board of Railroad Commissioners urges tbat it is a part of tbe executive department of tbe state, with functions purely administrative; tbat tbe courts have universally established and maintained a sharp distinction between purely administrative acts- and those which are piirely judicial, relegating one to tbe executive and tbe other as belonging to tbe judicial departments of government respectively. It urges tbat such distinction here exists pertaining to tbe acts 'under review, and tbat “tbe judicial department is powerless to control or review tbe executive department so long as it does not exceed its legal authority;” tbat if its acts are reviewable at all by tbe courts, it is only when they are in palpable excess of jurisdiction or power, and tbat then they are reviewable only on certiorari if at all; and if tbe power to review by appeal has been granted, tbe statute attempting to confer it is unconstitutional “for tbe reason tbat tbe courts have no power over a commission belonging to tbe executive department acting within tbe scope of its authority.” It next contends tbat certiorari will not lie for a mere excess of jurisdiction exercised, and finally arrives at tbe conclusion tbat its acts, because administrative and it constituting a branch of tbe executive arm of government, are practically wholly beyond judicial review.

Tbe powers and duties of this constitutional Board are not prescribed by tbe Constitution, but are left to tbe legislature to create and define. Section 83 of tbe state Constitution declares tbat they “shall be as prescribed by law.” As well observed in Kermott v. Bagley, 19 N. D. 345, 124 N. W. 397, tbe powers of government, although divided generally into three distinct departments, legislative, executive, and judicial, are otherwise undistributed. In other words, our Constitution contains no distributing clause specifically apportioning the three different classes of governmental power. Merely because the duty is administrative, strictly speaking, and nonjudicial in the broad sense of the term, does not bar the legislature from requiring its exercise, nevertheless, by a district court, the constitutional court of general original jurisdiction. Kermott v. Bagley, supra, following Com. ex rel. Carson v. Collier, 213 Pa. 138, 62 Atl. 567. The Constitution does not prevent the legislature (upon which it has imposed the duty of prescribing the powers and duties of the Railroad Commission) from saying that such powers or duties, even though administrative in character, may be reviewable in the district court on appeal, and in which tribunal a trial de novo of even administrative issues may be had.

It is immaterial whether the duties of the Board of Railroad Commissioners may be technically legislative or judicial. There is nothing in the Federal Constitution to hinder a state from uniting “legislative and judicial powers in a single hand.” Prentis v. Atlantic Coast Line Co. 211 U. S. 210-225, 53 L. ed. 150-158, 29 Sup. Ct. Rep. 67; Dreyer v. Illinois, 187 U. S. 71 — 84, 47 L. ed. 79 — 85, 23 Sup. Ct. Rep. 28, 15 Am. Crim. Rep. 253; Winchester & S. R. Co. v. Com. 106 Va. 264-268, 55 S. E. 692; 6 R. C. L. 147); and though in our state Constitution the three departments of government, executive, legislative, and judicial, are primarily separately invested with powers to-be so classified respectively, “it is not meant to affirm that they must be kept wholly and entirely separate and distinct, and have no common link of connection or dependence, the one upon the other, in the slightest degree. The true meaning is that the whole power of one of these departments should not be exercised by the same hands which possess the whole power of either of the other departments.” Story, Const. 5th ed. 393. “Again, ‘indeed, there is not a single Constitution of any state in the Union which does not practically embrace some acknowledgment of the maxim [separation of the powers of government to be-administered by the three arms of government separately], and at the same time some admixture of powers constituting an exception to if Story, Const. 395.” Winchester & S. R. Co. v. Com. 106 Va. 264-270, 55 S. E. 692.

The duties of this Board relative to granting permission to discontinue operation of this daily train are legislative. 6 R. C. L. 159. The order made will be prospective in operation, and relate not to past, but to future, matters. It is analogous to the establishing of rates. The inquiry preliminary to determining the rule to be made concerning it is but such as might, with propriety, have been made by a legislative committee. That the inquiry may be reviewed on appeal in court proceedings matters not, as “that question depends not upon the character of the body, but upon the character of the proceedings.” Ex parte Virginia, 100 U. S. 339 — 348, 25 L. ed. 676-680, 3 Am. Crim. Rep. 547; also Prentis v. Atlantic Coast Line Co. 211 U. S. 210-232, 53 L. ed. 150 — 161, 29 Sup. Ct. Rep. 67, wherein it is held that the fact that an appeal is taken from the Commission to the courts, and a decision given confirming a rate, does not render such decision judicial, instead of legislative, in character. “A state may permit appeals to its courts from the rate-making orders of its Railroad Commission, and upon the review of such orders, it may expressly authorize its judicial tribunals to investigate and decide questions which otherwise would not belong to them, or even to act legislatively." Louisville & N. R. Co. v. Garrett, 231 U. S. 298, at p. 314, 58 L. ed. 229, at p. 243, 34 Sup. Ct. Rep. 48, citing Prentis v. Atlantic Coast Line Co. 211 U. S. 210 — 227, 53 L. ed. 150 — 159, 29 Sup. Ct. Rep. 67. Conceding the premise of the Commission, that its acts may be either legislative or administrative, it does not follow that an appeal to the courts from its decisions in such matters cannot constitutionally be granted. Kermott v. Bagley, 19 N. D. 345-350, 124 N. W. 397; Com. ex rel. Carson v. Collier, 213 Pa. 138, 62 Atl. 567. The original exercise of the power is left with the Commission for its administration, and until the appeal the whole legislative power is there, which suffices the test prescribed by constitutional provisions distributing generally the three powers of government to the three arms of government. Winchester & S. R. Co. v. Com. 106 Va. 264, 55 S. E. 692. While duties cannot be imposed upon this court except such as are judicial, under § 96 of the state Constitution, the limitation does not apply to district court original jurisdiction (Kermott v. Bagley, supra) ; and it is true that the character of the act, as being legislative or judicial, is determined by tbe nature of tbe final act under consideration, yet this proceeding on appeal is but an exercise of appellate jurisdiction, even though concerning administrative subject-matter. Though practically a retrial may be had in this court on the appeal, it does not alter the fact that the jurisdiction exercised is appellate, and the trial in that manner is but one method of exercise of strictly appellate jurisdiction. Christianson v. Farmers’ Warehouse Asso. 5 N. D. 438, 32 L.R.A. 730, 67 N. W. 300; Re Peterson, 22 N. D. 480, at p. 505, 134 N. W. 751. The legislature having the authority to vest the courts of general trial jurisdiction with the appellate jurisdiction of the subject-matter, though administrative or legislative in kind, could prescribe a further appellate jurisdiction therefor and vest this court therewith. The constitutional limitation on the supreme court is not on subject-matter, but instead is that the jurisdiction exercised or conferred shall be appellate jurisdiction only;. except, of course, in the instance prescribed by §§ 86, 87 of the state Constitution conferring original jurisdiction on this court. ' The question is rather one of power of the legislature to grant the right of trial and an appeal therefrom.

Along with nearly every power granted, this board is provided a right of appeal to the courts. It is declared that “the district courts of this state shall have jurisdiction to enforce, by proper decrees, injunctions, and orders” its “reasonable rulings, orders, and regulations affecting public right.” Comp. Laws, § 4732. Section 4736 not only grants the right of appeal to the district courts, but gives them general power to try and determine all issues, whether of a judicial, administrative, or legislative nature. “The district court shall, upon the hearing of such appeal, receive and consider such evidence as may be adduced by either party, and shall rescind, modify, or alter said order appealed from in such manner as may be equitable and just.” Consult also §§ 4744, 4745, a part of the general scheme of review in the courts of such orders.

The weight of the finding of the Board originally made in the matter is a question different from that concerning the power of the courts over the issue on which such findings are offered as evidence.. No doubt cases may arise where the findings of the Commission, as is said in Puget Sound Electric R. Co. v. Railroad Commission, 65 Wash. 75, 117 Pac. 739, Ann. Cas. 1913B, 763, reiterated in State ex rel. Great Northern R. Co. v. Public Service Commission, 76 Wash. 625, 137 Pac. 132, at p. 136, may necessarily be of an expert character and because thereof entitled to great weight, yet the same is not true in the instant case. Courts can satisfactorily determine the issue presented of the reasonableness or unreasonableness of the order made in the light of all the circumstances.

It may be conceded that the legislature could have passed this statute without the proviso, and required daily passenger train service. It had the power to declare such to be the public policy. But it also had the power to declare an exception to be the public policy to be observed, and has done so. Had no exception been made, but a daily train been required, it would not only have been within the power, but it would have been the duty, of the Commission to compel a daily service. With the exception made, however, it is the duty of the Commission to likewise comply with the law and observe the exception. What the Commission might have done had the statute not contained the proviso can furnish no basis for disregard of the proviso, nor make it any the less the statute. That the exception is granted in permissive, rather than in mandatory, language, is immaterial, as it does not signify that it is not its declared policy that, when the facts bring the carrier within the exception, it should enjoy its benefits; nor because it is framed in permissive language does it place the ruling of the Commission beyond appeal and court review.

Now as to merits. The branch line from Elaxton to Ambrose was 51 miles long. Tabulations of receipts and expenditures made, allotted, or apportioned to this line for the three years ending respectively June 30, 1909, 1910, and 1911 are in evidence. During this period mixed train service was given. Erom freight, passenger, mail, and .express, apportioned on a mileage basis, the earnings of this branch show $50,-030, $51,818, and $49,147 per year respectively. It is urged that the apportionment made of these earnings is improper, and does not truly reflect the benefit of the branch to the railroad system as a whole. But of all known methods of apportionment, that on the mileage basis seems most equitable, and has met generally with the approval of the courts. Against these earnings must be charged approximately $22.000 per year for strictly transportation expenses alone, an expense unquestionably disbursed on the branch line in producing its earnings. To this there must necessarily be added $14,000 per year for taxes of this branch line, another expense equally certain, making a total definite expense from these two items alone of $36,000, which includes no overhead charge, such as maintenance of way and structures, maintenance of equipment, traffic, and general expenses of the general railway system, a proper^ proportion of all of which upon an equitable basis must be allotted to or charged against this branch line under the holding in Northern P. R. Co. v. North Dakota, 236 U. S. 585, 59 L. ed. —, P. U. R. 1915C, —•, 35 Sup. Ct. Rep. 429, just decided by the Supreme Court of the United States, or what is commonly known as the North Dakota Lignite Coal Rate Oases. The Federal court reversed this court partially upon the very proposition now under consideration. Our holding was that “out of pocket costs” in effect constituted the real and actual cost of transportation of the particular commodity in fixing a commodity rate, inasmuch as the overhead charges would continue regardless of any or all business done. The Federal Supreme Court, however, has announced the rule applicable to a commodity (and necessarily applicable as well to the total earnings of a branch line), that in calculating the cost of carriage there must be a proper allocation or apportionment of all overhead charge made and added to the out of pocket costs. The portion .of such general overhead charge to this branch line is in excess of $20,000 per year, or about the amount of the local branch line operating expense. This may 'be, and probably is, somewhat excessive, as ordinarily the ratio of operating “out of pocket” expense to overhead charge is as 60 to 40. Figured on this basis the total expense apportionable to this branch line, exclusive of taxes, will reach between $37,000 and $38,000 per year. When taxes are added in the sum of $14,000 per annum, the total expense exceeds by approximately $2,000 the total revenues of the branch. And these figures are the result of a three-year test, during all of which time mixed passenger and freight service only was given. The testimony is that the addition of daily passenger service, as ordered installed by the Commission, will increase the yearly operating expense $14,000. This would increase the actual deficit or expenses over receipts to about $16,000 per annum. These are our deductions. The railroad’s figures are that the deficit will be much greater, approximately $40,000 annually. It is apparent that, if the train service ordered be installed, it will be at an actual outlay in expense over receipts of at least $1,000 a month. There can be no escape from this fact, any more than there can be any from the further conclusion that the people, the patrons of the road elsewhere, must make good this needless deficit if the order is enforced. And the carrier’s property right to a reasonable rate of return on its money invested has been wholly omitted from the foregoing calculations. It has been held that, in prescribing the carrier’s duties to the public, a matter that the public may to an extent control, the public may compel a daily passenger service to be rendered wholly independent of expense to the company. This requirement is held valid on the basis of it being a requirement concerning the public service, and a mere incident to the railroad business as a whole. However, the statute in question contains a proviso in effect excusing the company from operating a separate daily passenger and freight service when it “shall make it appear to the Board that the business on any link of Us road will nob justify its operating both the passenger and freight train herein provided for.” The statute has reference to a portion, i. e., branch lines, and not the entire railroad system. Whether any particular part of the main line of the system may be segregated and come within the statute is unnecessary to determine. It is certain that the statute has particular reference to branch line service. The portion of this road to be taken in this case for the purpose of placing total earnings against total cost of earnings, to determine whether the traffic will or “will not justify its operating both passenger and freight” service, must be this branch line only. In other words, the statute speaks of the business on branch lines, and hence as to this case contemplates that this branch as the one in question shall be considered separate and independent from the receipts and disbursements necessary elsewhere on the system. When the receipts will not “justify its operating both the passenger and the freight train” daily, mixed trains may be run. The receipts must justify, in a business way, the disbursements occasioned by a daily service. It was but another way of stating that the receipts must be sufficient or nearly so to bear the expense of a daily service. 'Necessarily some reasonable latitude for judgment and discretion on the part of the Board must be allowed. And such is allowed by the language used. The measure is the “business” done on the particular line. The railroad cannot, as a matter of strict legal right, refuse to install daily passenger service on the sole ground that to do so would run the total expense above the total income from the branch, as the element of public service which the road is chartered to perform enters into consideration. But in the absence of some strong reason to the contrary, proof that the necessary expense is in excess of total receipts should control the situation, and authorize the conclusion being drawn that the business will not justify such daily service. On proof of these facts the company prima facie justified its failure to install a separate daily passenger service or exonerate itself from so doing.

Of course, this court, 1-ike the Board of Railroad Commissioners, has the right to take judicial notice of and consider with the evidence many outside matters throwing light upon the situation. In so doing it is to be observed thát, shortly after this branch was built to Ambrose, a rival and competing branch of the Great Northern Railroad was built from Crosby to Berthold. This Flaxton-Ambrose branch parallels the international boundary, running east and west from 3 to 10 miles south of it. For about four fifths of its entire length, or from Crosby down, it is closely paralleled on the south by the Great Northern Berthold branch line. The only territory left solely tributary to this Soo line is that portion between Crosby and Ambrose, and not exceeding 9 miles. A daily passenger service from Crosby to Minot and return via Berthold has been maintained, affording all residents in this territory very convenient passenger service on the Great Northern, the only way to meet which by the Soo would necessitate installing a similar return service from Ambrose to Minot and return. The receipts from this branch show that such competition could but result in added useless expense under conditions as they were when this trial was had. The long and short of the whole proposition is that in a territory capable of sustaining but one line of railroad two have been built, and one or both must suffer the consequences of competition for territory. The reason for the deficit then on this branch is as self-evident as is the fact that the branch will sustain or justify but a mixed freight and passenger service. And the fact, too, that the public as a result of such competitive service is having its wants supplied by the Berthold branch is also inconsistent with any claim of justification that might otherwise be urged for a daily Soo passenger service. This does not apply to Ambrose or the territory immediately tributary thereto. But it would be unjust to say that an unprofitable passenger service over 50 miles of branch line railroad should he compelled merely to suit the convenience of a town of 500 people and surrounding community, at the most not exceeding in the aggregate 1,000 people, while all other towns on the line are otherwise adequately served, and then, too, when the particular town complaining has the benefits already of a mixed passenger and freight service. To enforce the order made would be to compel an additional expenditure of $14,000 per annum over receipts, where the traffic now will not return the expense it causes, all to suit the convenience of a single small community. Such an order is not “justified,” to use the statutory term.

It is easy to understand how the opposite conclusion was reached by the Board of Bailway Commissioners and the district court. It is explained by the fifth finding of fact, wherein the court found that the entire mileage of this ráilroad company in this state is 1,110 miles, producing annual earnings of $4,000,000, and that “there is no evidence that the total mileage of the company in the state is operated at a loss as a whole, or that the earnings of that portion of the mileage of the company within this state are not sufficient to pay a reasonable income upon the sum of money invested in the property and rolling stock of the company within the state.” The only purpose of such finding was to allow the court to reason along lines parallel with those heretofore followed by this court in the Lignite Coal Bate Cases, hut as this reasoning was recently condemned by the Federal Supreme Court when applied to a commodity or a classification, it must be equally untenable when used as a basis for determining whether or not the income of a branch line is to he treated with reference to the earnings of the whole system within the state. The Federal Supreme Court negatives any such conclusion, and by analogous reasoning we must determine the question as one of receipts and expenditures of the branch line alone. To quote from the recent Federal decision, “The public interest cannot be invoked as a justification for demands which pass the limits of reasonable protection, and seek to impose upon the carrier and its property burdens that are not incident to its engagement. In such a case it would he no answer to say that the carrier obtains from its entire intrastate business a return, as to the sufficiency of which in the aggregate it is not entitled to complain.” In the West Virginia rate case, Norfolk & W. R. Co. v. Conley, 236 U. S. 605, 59 L. ed. —, P. U. R. 1915C, —, 35 Sup. Ct. Rep. 437, decided at the same time as the North Dakota Lignite Coal Rate Cases, Northern P. R. Co. v. North Dakota, 236 U. S. 585, 59 L. ed. — , P. U. R. 1915C, —, 35 Sup. Ct. R0ep. 429, the same principle was enforced as to different classes of traffic and freight. By analogy the precedent applies. This branch should not be compelled to operate in a particular manner at a great increase of loss over present cost of operation, because forsooth the railroad can afford to suffer this loss by recouping itself from increased rates of revenue obtained elsewhere, or on its other lines within the state. Nor is such the intent of the statute, as has been observed, it providing that the character of the branch service to be given shall be determined from the proceeds of that branch line, and not from the proceeds of all of the system within the state.

Judicial notice is taken of the fact that this branch has been extended into Montana, and present conditions may warrant a daily passenger service. Questions of interstate commerce may now arise. Suitable allowance will be made for possible changed conditions in any judgment and order to be entered herein. The judgment appealed from is ordered vacated, and the District Court will direct the Board of Railway Commissioners of this state to vacate its order of June 24, 1911, as an order erroneously made, and also direct that said Board may either dismiss these proceedings, or may enter such further order, after full hearing afforded the railway company, as present conditions may in its judgment require and the law permit in the matter herein litigated.

Christianson, J., did not participate; Burr, District Judge, sitting in his stead.