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No. 24351

ARMOUR & COMPANY v. ATCHISON, TOPEKA & SANTA FE RAILWAY COMPANY ET AL.

Decided December 12, 1932

Upon reconsideration, finding in former report, 183 I. C. C. 245, that the rates charged were unreasonable, reversed. Finding for the future modified. See former report for appearances.

REPORT OF THE COMMISSION ON RECONSIDERATION

BY THE COMMISSION:

In the former report, 183 I. C. C. 245, division 3, one member dis senting in part, found that the fifth-class rates of 86 and 98 cents per 100 pounds, minimum 36,000 pounds, charged on can stock from Chicago, Ill., to Oklahoma City, Okla., and North Fort Worth, Tex., respectively, were, are and for the future will be, unreasonable to the extent they exceeded or may exceed 70 cents to Oklahoma City and 80 cents to North Fort Worth, minimum 80,000 pounds, and awarded reparation. These rates are the column 32.5 rates under the southwestern revision.

Upon petition of defendants the proceeding was reopened for reconsideration on the record as made, and the order, as modified, was indefinitely postponed. The pertinent facts appear in the original report and will not be restated.

In the southwestern revision we prescribed the column 32.5 rates, minimum 40,000 pounds, from, to, and within the Southwest on the general list of iron and steel articles, including bar, plate, and sheet iron and steel. In general the list was restricted to semimanufactured articles or those not in a high state of finish. Galvanized. painted, or plain sheet iron was included, and in the first supplemental report in that proceeding plain tin plate was added. Lithographed or lacquered tin plate was not included, nor was can stock. Lithographed or lacquered tin plate or terne plate prior to April 7, 1932, was rated fourth class. Effective that date it was rated class A in the western classification, minimum 30,000 pounds. The class A rates from Chicago to Oklahoma City and North Fort Worth are 97 cents and $1.11, respectively.

Complainant relies to some extent upon the heavy loading of its shipments. We were asked by certain interests in the southwestern

revision to prescribe two sets of alternative rates on iron and steel, the lower rates to be subject to a materially higher minimum than the higher rates, in recognition of the substantial number of heavily loaded cars moving, but we declined to do so. We have pointed out, in Mathieson Alkali Works v. Louisville & N. R. Co., 153 I. C. C. 784, and elsewhere, that alternative rates for heavy-loading freight give an advantage, and perhaps an undue advantage, to those who can ship and receive exceptionally large consignments over those who can not.

Iron or steel wire was included in the list of articles accorded the column 32.5 rates in the southwestern revision, but in the seventh supplemental report therein we declined to accord those rates to such wire when manufactured into rope, prescribing the column 38 rates instead. In Kansas City Paper Co. v. Chicago, R. I. & P. Ry. Co., 169 I. C. C. 515, we prescribed the column 40 rates on garment hangers made of iron wire. Similarly, plain plate or sheet iron was accorded the column 32.5 rates in the southwestern revision, but in Southwestern Rates, 173 I. C. C. 662, the column 35 rates were found reasonable for such plate or sheet when stamped out to form the tops and bottoms of metal drums. The manufacturing process and the enhancement in value entailed in converting plain tin plate into lithographed and lacquered can stock is quite extensive. For these reasons we are of the opinion that tin can or pail stock should not be included in the iron or steel list, but properly should be subject to somewhat higher rates. The rates assailed were the fifth-class rates of 86 cents to Oklahoma City and 96 cents to North Fort Worth, which are 40 per cent of first class. Under the column 38 rates of the southwestern revision, which we prescribed on wire when manufactured into rope, the respective rates to those points would be 82 and 93 cents. The record is not convincing that the rates assailed were unreasonable under the then existing adjustment.

Upon reconsideration, we find that the rates assailed were not unreasonable, but that they are and for the future will be unreasonable to the extent that they exceeded or may exceed the column 38 rates under the southwestern revision, minimum 40,000 pounds, from and to the same points. The emergency charges authorized in Ex parte 103 may be added thereto.

An appropriate order will be entered.

McMANAMY, Commissioner, dissenting:

The rates prescribed to Oklahoma City in the original report by division 3 yield 17.5 mills per ton-mile and 87 cents per car-mile for a haul of 796 miles and to North Fort Worth 16.6 mills per ton-mile

and 82.3 cents per car-mile for a haul of 962 miles. This can not be said to be short-haul traffic. Can stock, the commodity involved, is at most a semimanufactured material and probably can be fairly compared in that respect with steel plates and shapes.

In I. and S. 3727, Canned Goods from Pacific Coast, 188 I. C. C. 687, recently decided, we found not unlawful a rate on canned goods which yields ton-mile earnings of 7.96 mills and car-mile earnings of 23.89 cents for an average haul of about 2,260 miles. We have found, therefore, that rates on a semifinished commodity yielding 17.5 mills per ton-mile and 87 cents per car-mile are too low, but a shipper can take this material, complete its manufacture into a tin can, fill the can with fruit or vegetables, and ship it at a rate that yields less than 8 mills per ton-mile and 28.58 cents per car-mile based on a loading of 71,600 pounds. Such a difference can not be justified by either distance or value. Both decisions can not be right. The range is too great. If earnings of 7.96 mills per ton-mile and 28.58 cents per car-mile on a finished can filled with foodstuffs are not below the minimum of reasonableness, then earnings of 17.5 mills per ton-mile and 87 cents per car-mile can not be too low for can stock.

The rates originally found reasonable by division 3 were as high as the record would justify and its findings should be affirmed. COMMISSIONER FARRELL joins in this expression.

COMMISSIONERS EASTMAN and BRAINERD dissent.

190 I. C. C.

No. 21917

ACCOUNTING FOR REBUILDING FREIGHT CARS BY CHESAPEAKE & OHIO RAILWAY COMPANY

Submitted June 9, 1932. Decided December 13, 1932

1. Notwithstanding the abolition of the so-called major portion rule, as applied to equipment, the accounting classification construed as requiring that a series of hopper-bottom gondolas, in the manufacture of which there was utilized reusable material (reconditioned where necessary) consisting of air-brake equipment and portions of the trucks from a series of hopper-bottcm gondolas demolished and converted into salvage and scrap as a part of the same process, be accounted for as additions when constructed with new bodies of increased strength, improved design and material, and altered capacity, the trucks having been substantially rebuilt and including large amounts of new material and some parts of improved design.

2. In accounting for the retirement of equipment involved in the foregoing, the charges to operating expenses and accrued depreciation reserve are properly based upon the original cost or ledger value of the retired units. 3. Decision in former report, 153 I. C. C. 9, affirmed on further hearing. M. Carter Hall, J. W. Reavis, and W. A. Dougherty for Chesapeake & Ohio Railway Company.

REPORT OF THE COMMISSION ON FURTHER HEARING DIVISION 4, COMMISSIONERS MEYER, EASTMAN, AND MAHAFFIE BY DIVISION 4:

The Chesapeake & Ohio Railway Company, herein referred to as the carrier, filed exceptions to the report proposed by the examiner, and the case was argued orally.

This case presents the question of the proper accounting for certain expenditures of the carrier with respect to 2,390 70-ton hopperbottom gondolas, incurred during the years 1926, 1927, and 1928. The expenditures for 1926 and 1927, aggregating $1,698,933.91 net, were originally charged to operating-expense account 314, " Freighttrain cars-Repairs," and those for 1928, amounting to $1,327,872.28 net, would have been so charged but for the informal ruling referred to and sustained in the decision next mentioned.

In a former report, 153 I. C. C. 9, based upon an agreed statement of facts, we held that these expenditures should be accounted for in accordance with the following paragraph of our accounting classification governing investment in road and equipment:

Additions are additional facilities, such as additional equipment, tracks (including timber and mine tracks), buildings, bridges, and other structures; additions to such facilities, such as extensions to tracks, buildings, and other structures; additional ties laid in existing tracks; and additional devices applied to facilities, such as air brakes applied to cars not previously thus equipped. When property, such as a section of road, track, unit of equipment, shop or power plant machine, building, or other structure, is retired from service and replaced with property of like purpose, the newly acquired property shall, for the purpose of this classification, be considered as an addition, and the cost thereof accounted for accordingly.

The carrier complied under protest, reversing its charges for 1926 and 1927 and the first 11 months of 1928 and initiating the accounting for the last month of 1928 in conformity with our ruling. Under like protest, it adopted such accounting in connection with 577 cars, hereinafter mentioned, which were handled in 1929.

A petition filed by the carrier for reopening of the case was denied, but thereafter, on September 29, 1930, we reopened the proceeding upon our own motion and assigned it for further hearing. Evidence was introduced by the carrier and by our Bureau of Accounts.

The manner in which the case arose is set forth in the former report. At the further hearing, not only were the facts contained in the agreed statement amplified by the development of considerable detail, but additional facts having an important bearing upon the question presented were also adduced. For convenience, we shall make this report complete in itself except so far as specific reference may be made to portions of the former report.

FACTS

Before making the adjustments required by us, the total number of hopper-bottom gondolas owned or leased by the carrier and used in the transportation of coal, together with the cost and ledger value thereof, was thus stated in its books as of the dates indicated:

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When the shopping program, hereinafter described, was initiated, the carrier's coal equipment included 70-ton steel hopper-bottom gondolas in series 72,000-74,999, of which 2,000 had been acquired in 1916 at a cost of about $1,500 per car, and 1,000 in 1917 at about $2,000 per car. They were originally covered by an equipment trust, but this, for all practical purposes, had been discharged, be

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