A-50221, JANUARY 10, 1934, 13 COMP. GEN. 187

A-50221: Jan 10, 1934

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

WAS ORGANIZED TO PERFORM EXPRESS SERVICE AS AN AGENCY OF PARTICIPATING RAILROADS. CHARGES FOR EXPRESS SERVICE BY SUCH AGENCY ARE SUBJECT TO LAND-GRANT DEDUCTIONS THE SAME AS IF THE SERVICE BY SUCH AGENCY WAS PERFORMED BY THE PARTICIPATING RAILROADS SUBJECT TO LAND- GRANT LAWS. IN DETERMINING THE AMOUNTS OF LAND-GRANT DEDUCTION FOR SUCH SHIPMENTS THE SAME PRINCIPLES ARE FOR APPLICATION AS MAINTAIN THERE IS NO AUTHORITY FOR ARBITRARILY APPORTIONING THE COMMERCIAL CHARGES BETWEEN COST OF "SUPPLEMENTAL" SERVICES AND "TRANSPORTATION" SERVICE ON THE BASIS OF THE CARRIER'S ALLEGED OPERATING EXPENSES. OVER LAND-GRANT AIDED LINES OF RAILROAD ARE SUBJECT TO DEDUCTION FOR LAND GRANT AND THAT IN ARRIVING AT THE AMOUNT OF THE DEDUCTION THERE IS NO PROPER BASIS FOR CONSIDERING THAT ONLY 57 PERCENT OF APPLICABLE COMMERCIAL CHARGES ARE SUBJECT TO SUCH DEDUCTION.

A-50221, JANUARY 10, 1934, 13 COMP. GEN. 187

TRANSPORTATION - LAND-GRANT DEDUCTIONS - EXPRESS SHIPMENTS UNDER THE REORGANIZATION PLAN OF EXPRESS SERVICE PURSUANT TO WHICH THE RAILWAY EXPRESS AGENCY, INC., WAS ORGANIZED TO PERFORM EXPRESS SERVICE AS AN AGENCY OF PARTICIPATING RAILROADS, CHARGES FOR EXPRESS SERVICE BY SUCH AGENCY ARE SUBJECT TO LAND-GRANT DEDUCTIONS THE SAME AS IF THE SERVICE BY SUCH AGENCY WAS PERFORMED BY THE PARTICIPATING RAILROADS SUBJECT TO LAND- GRANT LAWS. IN DETERMINING THE AMOUNTS OF LAND-GRANT DEDUCTION FOR SUCH SHIPMENTS THE SAME PRINCIPLES ARE FOR APPLICATION AS MAINTAIN THERE IS NO AUTHORITY FOR ARBITRARILY APPORTIONING THE COMMERCIAL CHARGES BETWEEN COST OF "SUPPLEMENTAL" SERVICES AND "TRANSPORTATION" SERVICE ON THE BASIS OF THE CARRIER'S ALLEGED OPERATING EXPENSES, BEFORE MAKING DEDUCTION FOR LAND GRANT.

DECISION BY COMPTROLLER GENERAL MCCARL, JANUARY 10, 1934:

THE RAILWAY EXPRESS AGENCY, INCORPORATED, REQUESTED BY LETTER OF JULY 27, 1933, FURTHER CONSIDERATION OF DECISIONS OF MARCH 12, 1929, 8 COMP. GEN. 484, AND FEBRUARY 10, 1930 (A-26319), HOLDING RESPECTIVELY THAT CHARGES FOR THE TRANSPORTATION OF GOVERNMENT PROPERTY BY THE RAILWAY EXPRESS AGENCY, INCORPORATED, OVER LAND-GRANT AIDED LINES OF RAILROAD ARE SUBJECT TO DEDUCTION FOR LAND GRANT AND THAT IN ARRIVING AT THE AMOUNT OF THE DEDUCTION THERE IS NO PROPER BASIS FOR CONSIDERING THAT ONLY 57 PERCENT OF APPLICABLE COMMERCIAL CHARGES ARE SUBJECT TO SUCH DEDUCTION.

IT IS NOW URGED, FIRST, THAT THE CORPORATE RELATIONSHIP EXISTING BETWEEN THE RAILWAY EXPRESS AGENCY AND THE LAND-GRANT RAILROADS IS NOT SUCH AS TO JUSTIFY, WITH RESPECT TO THE EARNINGS OF THE RAILWAY EXPRESS AGENCY, A DIFFERENT CONCLUSION FROM THAT WHICH HAD BEEN MAINTAINED BY THE GOVERNMENT FOR OVER FIFTY YEARS AS TO THE APPLICABILITY OF LAND GRANT STATUTES TO OTHER EXPRESS COMPANIES; AND SECOND, THAT IN ANY EVENT NO DEDUCTION FOR LAND GRANT SHOULD BE MADE FROM THAT PORTION OF THE EXPRESS CHARGES WHICH REPRESENTS THE AUXILIARY AND SUPPLEMENTAL SERVICE PERFORMED BY THE EXPRESS COMPANY, INDICATED AS BEING APPROXIMATELY 30 PERCENT OF THE TOTAL CHARGES.

AS AFFORDING A SPECIFIC INSTANCE FOR CONSIDERATION IN CONNECTION WITH THESE PROPOSITIONS THE CLAIMANT REFERS TO ITS BILL D/3/5624, IN WHICH IT STATED AND AS UNDER PROTEST, CHARGES ON CERTAIN SHIPMENTS IN A REDUCED AGGREGATE AMOUNT OF $41.83, AND IN PAYMENT OF WHICH W. O. RAWLS, DISBURSING OFFICER, WAR DEPARTMENT, ISSUED CHECK 151954, DATED APRIL 26, 1933, IN SAID AMOUNT.

IN CONFORMITY WITH THE ABOVE BASIS IT IS URGED, FIRST, THAT THE EXPRESS COMPANY IS ENTITLED TO PAYMENT ON THE BASIS OF THE FULL TARIFF CHARGES, STATED AS AGGREGATING $46.99 WITHOUT ANY DEDUCTION FOR LAND GRANT; AND SECOND, THAT, IN ANY EVENT, CONSIDERING 30 PERCENT OF THE TOTAL CHARGES AS REPRESENTING THE COST OF AUXILIARY OR SUPPLEMENTAL SERVICE, AS DISTINGUISHED FROM TRANSPORTATION SERVICE, THE AGGREGATE NET AMOUNTS PROPERLY PAYABLE WOULD TOTAL $43.28, INSTEAD OF $41.83 ORIGINALLY CLAIMED UNDER PROTEST AND PAID BY THE DISBURSING OFFICER.

THE RAILWAY EXPRESS AGENCY, HEREINAFTER REFERRED TO AS THE AGENCY, IS OWNED BY CERTAIN RAILROADS AND IS OPERATED AS A JOINT FACILITY FOR THE RAILROADS IN THE CONDUCT OF EXPRESS BUSINESS OVER SAID RAILROAD LINES. THE PLAN OF ITS ORGANIZATION AND OPERATION IS SET FORTH IN FINANCE DOCKET NO. 7332, 150 I.C.C. 423. ITS CAPITAL STOCK CONSISTS OF 1,000 SHARES WITHOUT NOMINAL OR PAR VALUE, OWNED BY 86 RAILROADS INDICATED AS HAVING DONE DURING PRECEDING YEARS NEARLY 98 PERCENT OF THE GROSS EXPRESS BUSINESS TO WHICH THE AGENCY WAS TO SUCCEED. IT APPEARS, HOWEVER, THAT THE EARNINGS OF THE AGENCY ARE NOT DISTRIBUTED TO THE STOCKHOLDERS AS DIVIDENDS IN PROPORTION TO THEIR STOCKHOLDINGS BUT THAT AVAILABLE EARNINGS ARE DISTRIBUTED PURSUANT TO THE TERMS OF OPERATING CONTRACTS BETWEEN THE AGENCY AND THE RAILROADS OVER WHOSE LINES THE AGENCY OPERATES. IT IS INDICATED ALSO THAT THE AGENCY HAS SUCH OPERATING CONTRACTS NOT ONLY WITH THE 86 RAILROADS, WHICH OWN THE CAPITAL STOCK OF THE SAID AGENCY BUT WITH A LARGE NUMBER OF SMALL RAILROADS, APPROXIMATELY 375 IN NUMBER, AS WELL. UNDER THE TERMS OF THE OPERATING CONTRACTS THE NET REVENUES OF THE AGENCY WILL BE PAID OVER TO THE RAILROADS, PARTIES TO THE AGREEMENTS, ON THE BASIS OF GROSS REVENUES FOR EACH RAILROAD COMPANY. UNDER THE OPERATING CONTRACTS EACH RAILROAD APPOINTS THE AGENCY AS THE EXCLUSIVE AGENT FOR CONDUCTING AND TRANSACTING ALL THE EXPRESS TRANSPORTATION BUSINESS ON ITS LINE. THE DIFFERENCE IN THE NATURE AND PURPOSE OF THE AGENCY, AS COMPARED WITH THAT OF THE AMERICAN RAILWAY EXPRESS COMPANY, ITS PREDECESSOR IN OPERATION, IS INDICATED IN A STATEMENT FROM THE REPORT, SUPRA, OF THE INTERSTATE COMMERCE COMMISSION, RELATIVE TO THE OPERATING CONTRACTS, AS FOLLOWS:

IN ITS MATERIAL TERMS THE POOLING ARRANGEMENT IN ARTICLE V OF THE PROPOSED OPERATING AGREEMENT IS SUBSTANTIALLY THE SAME AS IN THAT ARTICLE OF THE UNIFORM EXPRESS CONTRACTS, ANY DIFFERENCES BEING DUE TO THE FACT THAT AS NOW CONSTITUTED THE EXPRESS COMPANY IS PRIVATELY OWNED AND OPERATED FOR PROFIT, WHILE THE EXPRESS AGENCY WILL BE CONTROLLED BY THE PARTICIPATING RAILROADS, AND THE EARNINGS REMAINING AFTER ACCOUNTING FOR ALL ITEMS OF INCOME AND DEDUCTIONS THEREFROM WILL BE DESIGNATED "RAIL TRANSPORTATION REVENUE" AND PAID TO THE CARRIERS WITHIN SPECIFIED GROUPS THAT ARE ENTITLED TO RECEIVE IT.

PRIOR TO MARCH 1, 1929, THE DATE ON WHICH THE AGENCY BEGAN TO PERFORM THE EXPRESS SERVICE THERETOFORE PERFORMED BY THE AMERICAN RAILWAY EXPRESS COMPANY, TRANSPORTATION CHARGES FOR SHIPMENTS OF GOVERNMENT PROPERTY BY EXPRESS HAD NOT BEEN SUBJECTED TO DEDUCTION FOR LAND GRANT. THIS QUESTION APPEARS FIRST TO HAVE BEEN CONSIDERED IN AN OPINION OF THE ATTORNEY GENERAL IN 1878, 16 OP.ATTY.GEN. 607, 610, WHERE IT WAS SAID:

* * * FOR INSTANCE, IF THE UNITED STATES HAVE OCCASION FOR THE SERVICES OF AN EXPRESS COMPANY UPON A LINE, PART OR ALL OF WHICH LIES OVER A LAND- GRANT ROAD, INASMUCH AS THE CONNECTION AND THE RATES AS BETWEEN THE EXPRESS COMPANY AND THE RAILROAD COMPANY ARE FIXED BY GENERAL ARRANGEMENT, IT WOULD PROBABLY BE IMPRACTICABLE FOR THE UNITED STATES TO OBTAIN A DEDUCTION FOR TOLL. IN SUCH CASE, ALTHOUGH THE ITEM OF TRANSPORTATION DONE BY THE UNITED STATES THROUGH THE EXPRESS COMPANY MAY GO TO SWELL THE AMOUNT OF TOLL RECEIVED BY THE LAND-GRANT RAILROAD COMPANY, IT SEEMS THAT THIS WOULD BE A CASE OF REMOTA CAUSA, NOT WITHIN THE TERMS OF EXCLUSION OF THE LAND-GRANT ACT.

THE OPINION SO EXPRESSED WAS ADOPTED AND APPLIED BY ASSISTANT COMPTROLLER OF THE TREASURY MITCHELL IN A DECISION IN 1901, 7 COMP. DEC. 334, PERTAINING TO CHARGES FOR SERVICES BY THE ADAMS EXPRESS COMPANY. THIS PRINCIPLE WAS ACCEPTED ALSO BY COMPTROLLER OF THE TREASURY TRACEWELL IN A DECISION OF APRIL 8, 1911, AS PROPERLY APPLICABLE TO CHARGES BY WELLS- FARGO AND COMPANY FOR TRANSPORTATION OF GOVERNMENT PROPERTY OVERLAND-GRANT LINES OF RAILROAD, IT BEING CONSIDERED THAT AN ARRANGEMENT OR AGREEMENT BETWEEN THE EXPRESS COMPANY AND THE RAILROAD FOR A DIVISION OF GROSS EARNINGS, ON THE BASIS OF 60 PERCENT TO THE EXPRESS COMPANY AND 40 PERCENT TO THE RAILROAD, APPLIED TO THE GROSS EARNINGS OF THE EXPRESS COMPANY FOR CARRYING EXPRESS MATTER OVER BOND-AIDED AND NONBOND-AIDED ROADS AND IRRESPECTIVE OF THE GOVERNMENT PROPERTY WHICH IT CARRIED. THE SAME OFFICIAL, IN A DECISION OF APRIL 3, 1913, APPLYING THE PRINCIPLE WITH RESPECT TO THE MATTER OF CHARGES BY WELLS-FARGO AND COMPANY FOR THE TRANSPORTATION OF ANOTHER SHIPMENT OF GOVERNMENT PROPERTY FROM STOCKTON, CALIF., TO KLAMATH FALLS, OREG., OVER A LAND-GRANT ROAD OF THE SOUTHERN PACIFIC COMPANY, STATED AS AN ADDITIONAL REASON FOR THE APPLICATION OF THIS PRINCIPLE THAT THERE WAS NO PRIVITY OF CONTRACT BETWEEN THE GOVERNMENT AND A RAILROAD COMPANY WHICH CARRIES GOVERNMENT PROPERTY FOR AN EXPRESS COMPANY OVER ITS LAND-GRANT ROAD, THE EXPRESS COMPANY HAVING A SPECIAL PROPERTY IN THE PROPERTY TRANSPORTED DURING ITS TRANSPORTATION AND THE EXPRESS COMPANY, NOT THE RAILROAD COMPANY, BEING RESPONSIBLE TO THE GOVERNMENT FOR THE LOSS OR DESTRUCTION OF THE PROPERTY WHILE IN TRANSIT.

THIS VIEW OF THE ACCOUNTING OFFICERS--- BASED PRIMARILY UPON THE CITED OPINION OF THE ATTORNEY GENERAL TO THE EFFECT THAT DEDUCTION FOR LANDGRANT FROM THE CHARGES OF THE EXPRESS COMPANIES CONCERNED WAS NOT REQUIRED UNDER THE RELATIONSHIP EXISTING BETWEEN THE EXPRESS COMPANIES AND THE RAILROADS- -- WAS BROUGHT TO THE ATTENTION OF THE UNITED STATES SENATE IN A REPORT, WITH INCLOSURES, MADE MAY 9, 1913, BY THE SECRETARY OF THE TREASURY TO THE PRESIDENT OF THE SENATE, IN RESPONSE TO SENATE RESOLUTION NO. 49 OF APRIL 15, 1913, PROVIDING:

THAT THE SECRETARY OF THE TREASURY BE, AND HE IS HEREBY, DIRECTED TO REPORT TO THE SENATE WHETHER OR NOT PAYMENTS HAVE BEEN FROM TIME TO TIME MADE OUT OF PUBLIC MONEYS TO EXPRESS COMPANIES FOR THE TRANSPORTATION OF PROPERTY OF THE UNITED STATES OVER LINES OF RAILWAY COMPANIES WHICH RECEIVED GRANTS OF LAND FROM THE GOVERNMENT UPON THE EXPRESS CONDITION THAT SUCH LINES SHALL BE AND REMAIN A PUBLIC HIGHWAY FOR THE USE OF THE GOVERNMENT OF THE UNITED STATES, FREE OF TOLL OR OTHER CHARGES UPON THE TRANSPORTATION OF PROPERTY OR TROOPS OF THE UNITED STATES; AND THE SAME SHALL BE TRANSPORTED OVER SAID ROADS AT THE COST, CHARGE, AND EXPENSE OF THE CORPORATION OR COMPANIES OWNING OR OPERATING THE SAME WHEN SO REQUIRED BY THE GOVERNMENT OF THE UNITED STATES, OR CONDITIONS OF LIKE IMPORT.

IN VIEW OF THE FOREGOING, WHEN THE QUESTION WAS PRESENTED TO THIS OFFICE AS TO WHETHER CHARGES BY THE EXPRESS COMPANY FOR TRANSPORTATION OF GOVERNMENT PROPERTY SHOULD BE SUBJECTED TO DEDUCTION FOR LAND GRANT, THE CONCLUSION WAS REACHED THAT WHILE APPARENTLY THERE WAS DOUBT OF THE CORRECTNESS OF THE VIEWS EXPRESSED IN THE SEVERAL FORMER OPINIONS DEALING WITH THE QUESTION, THE SITUATION THEN EXISTING, BY REASON OF THE LONG CONTINUED PRACTICE OF TREATING CHARGES OF PRIVATELY OWNED EXPRESS COMPANIES AS NOT SUBJECT TO SUCH DEDUCTION AND THE FACT THAT THE MATTER HAD FOUND ITS PROPER LODGMENT WITH CONGRESS, WAS SUCH THAT THIS QUESTION WAS ONE FOR THE ATTENTION ONLY OF THE CONGRESS AND NOT ELSEWHERE. THE CHAIRMAN, UNITED STATES SHIPPING BOARD, WAS SO ADVISED BY LETTER DATED NOVEMBER 21, 1928, A-22965. HOWEVER, UPON THE TAKING OVER SUBSEQUENTLY OF EXPRESS BUSINESS BY THE RAILROADS AND THE CONDUCT THEREOF BY THEM THROUGH THE RAILWAY EXPRESS AGENCY, NC., AS A JOINT OPERATING FACILITY, THIS OFFICE DETERMINED THAT DEDUCTION FOR LAND GRANT FROM SUCH EXPRESS CHARGES WAS PROPERLY REQUIRED. THE CLAIMANT'S OBJECTION TO SUCH CONCLUSION APPEARS PREDICATED MAINLY UPON THE PROPOSITION THAT THE RAILWAY EXPRESS AGENCY, INC., IS A SEPARATE CORPORATE ENTITY AND NOT IDENTICAL FOR CORPORATE PURPOSES WITH ANY OF THE RAILROAD CORPORATIONS OVER WHOSE LINES IT OPERATES.

FOR THE PURPOSES HERE CONCERNED, HOWEVER, THERE IS NOT REQUIRED THAT DEGREE OF MERGER OF CORPORATE ENTITIES THAT MIGHT BE REQUIRED FOR OTHER PURPOSES. THE PLAN OF ORGANIZATION ADOPTED BY THE AGENCY INDICATES THAT ALTHOUGH IT IS A SEPARATE CORPORATE ENTITY IT IS SUCH ONLY FOR OPERATING PURPOSES; THAT PROFITS ARE DISTRIBUTED TO THE RAILROADS OVER WHICH IT OPERATES; AND THAT THE CORPORATE EXISTENCE IS ONLY AN INCIDENT TO THE ACCOMPLISHMENT OF THE FUNCTION IMPLIED IN THE CORPORATE APPELLATION--- NAMELY AS AN AGENCY FOR THE RAILROADS. WHILE THE AGENCY IS NOT OPERATING AS AN AGENT SOLELY FOR ANY ONE RAILROAD, THAT CIRCUMSTANCE DOES NOT ALTER THE FACT THAT THE ULTIMATE BENEFICIARIES AS TO THE PROFITS OF ITS OPERATIONS ARE THE RAILROADS WHICH HAVE ENTERED INTO THE OPERATING CONTRACTS WITH THE AGENCY OVER WHOSE LINES THE AGENCY OPERATES. IN THE CASE OF ASTORIA AND COLUMBIA RIVER RAILROAD COMPANY V. THE UNITED STATES, 41 CT.CLS. 284, IT WAS HELD THAT THE GOVERNMENT WAS ENTITLED TO LAND- GRANT DEDUCTIONS FROM THE CHARGES FOR THE TRANSPORTATION OF ITS PROPERTY OVER LAND-GRANT LINES EVEN WHERE THE CARRIER PERFORMING THE SERVICE OF THE CARRIER OWNING THE LINE. THIS PRINCIPLE WAS HELD PROPERLY APPLICABLE ALSO BY THE SUPREME COURT OF THE UNITED STATES IN CHICAGO, ST. PAUL, MINNEAPOLIS, AND OMAHA RAILWAY COMPANY V. UNITED STATES, 217 U.S. 180, WHERE ESSENTIALLY SIMILAR FACTS WERE INVOLVED. CERTAINLY, IF THE CHARGES BY A LESSEE OR LICENSEE OPERATING OVER LAND-GRANT ROUTES ARE SUBJECT TO DEDUCTION FOR LAND GRANT, NO REASON IS APPARENT WHY, WHEN AS HERE, THE LAND-GRANT RAILROAD PARTICIPATES DIRECTLY IN THE PROFITS DERIVED FROM THE OPERATION OVER ITS LINE OF A FACILITY WHICH IS IN EFFECT ITS OWN AGENT, THE RIGHT OF THE GOVERNMENT TO DEDUCTION FOR LAND GRANT DOES NOT A FORTIORI ATTACH. IT WOULD SEEM QUITE EVIDENT, THEREFORE, THAT THE RELATIONSHIP OF THE RAILROADS TO THE PERFORMANCE OF THE EXPRESS BUSINESS AND TO THE ENJOYMENT OF PROFITS ACCRUING THEREFROM, WHICH RESULTED UPON THEIR CREATION OF THE AGENCY, IS MORE THAN SUFFICIENT TO REMOVE, AS TO CHARGES OF THE AGENCY, WHATEVER DOUBT AS TO THE RIGHT OF THE GOVERNMENT TO DEDUCTION FOR LAND GRANT THAT MAY HAVE EXISTED PREVIOUSLY BY REASON OF THE FORMER STATUS OF THE FORMER PRIVATELY OWNED EXPRESS COMPANIES. ACCORDINGLY, THE PRIOR DETERMINATION BY THIS OFFICE THAT THE CHARGES OF THE RAILWAY EXPRESS AGENCY, INC., ARE SUBJECT TO LAND-GRANT DEDUCTIONS MUST BE ADHERED TO.

THERE REMAINS FOR CONSIDERATION, HOWEVER, THE MATTER OF THE BASIS PROPOSED BY THE AGENCY AS PROPER FOR DETERMINING THE AMOUNT TO BE DEDUCTED IN THOSE INSTANCES WHERE THE SERVICE IS OVER LAND-GRANT LINES. THE CLAIMANT URGES THAT EXPRESS SERVICE IS PROPERLY TO BE CONSIDERED AS CONSISTING OF TWO SEPARATE FACTORS WHICH IT DENOMINATES "RAIL SERVICE" AND "SUPPLEMENTAL SERVICES" AND THAT IN NO EVENT SHOULD CHARGES FOR THE "SUPPLEMENTAL SERVICES" BE SUBJECT TO DEDUCTION FOR LAND GRANT. INDICATIVE OF WHAT IS MEANT BY SUPPLEMENTAL SERVICES IT REFERS TO PICK-UP AND DELIVERY OF SHIPMENTS AT ORIGIN AND DESTINATION AND TO INTERMEDIATE CARE BY MESSENGERS, DURING TRANSPORTATION. AS A BASIS OF ARRIVING AT A SEGREGATION OF CHARGES BETWEEN THE RAIL SERVICE AND THE SUPPLEMENTAL SERVICE, IT IS PROPOSED THAT ITEMS OF EXPRESS OPERATING EXPENSES FOR THE YEAR 1931 BE APPORTIONED OR ALLOCATED BETWEEN THE TWO SERVICES, AND THAT THE PERCENTAGE WHICH THE TOTAL OPERATING EXPENSES ALLOCABLE TO SUPPLEMENTAL SERVICE IS OF THE TOTAL TRANSPORTATION CHARGES FOR THAT YEAR BE ADOPTED AS THE PERCENTAGE TO BE APPLIED TO THE CHARGES FOR CURRENT SHIPMENTS OF GOVERNMENT PROPERTY FOR THE PURPOSE OF DETERMINING IN EACH INSTANCE THE PART OF SUCH CHARGES WHICH REPRESENTS COST OF SUPPLEMENTAL SERVICE. THUS THE CLAIMANT REPORTS THAT ITS TOTAL TRANSPORTATION CHARGES FOR THE YEAR 1931 WERE APPROXIMATELY $191,000,000; THAT THE COST OF SUPPLEMENTAL SERVICES DURING THAT YEAR WAS APPROXIMATELY $57,000,000; AND THAT, THEREFORE, THE COST OF SUPPLEMENTAL SERVICE CONSTITUTED 29.72 PERCENT OF THE TOTAL TRANSPORTATION CHARGES. ON THIS BASIS IT PROPOSES THAT WITH RESPECT TO EACH CURRENT SHIPMENT 30 PERCENT OF THE CHARGES BE CONSIDERED AS APPLICABLE TO SUPPLEMENTAL SERVICES AND SO NOT SUBJECT IN ANY EVENT TO DEDUCTION FOR LAND GRANT. FROM THIS IT DEDUCES THAT 70 PERCENT OF GROSS TRANSPORTATION CHARGES ON ANY EXPRESS SHIPMENT REPRESENTS THE MAXIMUM PORTION OF SUCH CHARGES THAT MAY BE CONSIDERED AS SUBJECT TO DEDUCTION FOR LAND GRANT AND AS 50 PERCENT OF THIS PORTION IS 35 PERCENT OF THE TOTAL EXPRESS CHARGE IT URGES THAT "A LAND-GRANT DEDUCTION OF 35 PERCENT APPLIED TO THE TOTAL EXPRESS CHARGE ACCRUING FOR TRANSPORTATION OVER LAND-GRANT MILEAGE IS INDICATED AS THE MAXIMUM REDUCTION WHICH MAY BE MADE.' ITS PROPOSAL, THEREFORE, AS THE PROPER BASIS FOR DETERMINING THE AMOUNT OF DEDUCTION FOR LAND GRANT TO BE MADE FROM EXPRESS CHARGES IS THAT FROM THE PROPORTION OF THE TOTAL TRANSPORTATION CHARGE ACCRUING TO A LAND- GRANT RAILROAD COMPANY, DEDUCTION BE LIMITED TO 35 PERCENT INSTEAD OF 50 PERCENT.

IN CONSIDERING THE ITEMS OF OPERATING EXPENSES, WHICH IT UNDERTAKES TO APPORTION BETWEEN "RAIL" SERVICE AND "SUPPLEMENTAL" SERVICES, THE CLAIMANT STATES IT HAS OBSERVED THE CLASSIFICATION OF OPERATING EXPENSES, WHICH WAS PRESCRIBED BY THE INTERSTATE COMMERCE COMMISSION AS A PART OF THE UNIFORM SYSTEM OF ACCOUNTS FOR EXPRESS COMPANIES, EFFECTIVE JULY 1, 1914. CONCEDES, HOWEVER, THAT THE CLASSIFICATION SO FURNISHED BY THE INTERSTATE COMMERCE COMMISSION DOES NOT PROVIDE FOR A SEPARATION OF OPERATING EXPENSES BETWEEN "RAIL" AND "SUPPLEMENTAL" SERVICES. IT IS OBVIOUS, THEREFORE, THAT THE ALLOCATION OR APPORTIONMENT OF SUCH ITEMS BETWEEN THE TWO SERVICES IS THE UNDERTAKING SOLELY OF THE CLAIMANT, AND, AS THIS OFFICE IS WITHOUT FIRST-HAND INFORMATION AS TO THE CONTROLLING CONSIDERATIONS WHICH MAY HAVE RESULTED IN THE PARTICULAR APPORTIONMENT WHICH IT SUGGESTS AS PROPER, NOTHING HEREIN IS TO BE TAKEN EITHER AS APPROVING OR DISAPPROVING THE RESULTS ATTAINED IN THAT RESPECT.

IT IS PROPER TO POINT OUT, HOWEVER, CERTAIN MATTERS WHICH WOULD APPEAR TO RENDER FATALLY OBJECTIONABLE THE GENERAL BASIS WHICH IT PROPOSES WITHOUT REGARD TO WHETHER THE APPORTIONMENT WHICH IT HAS MADE IS PROPER OR OTHERWISE.

IN THE FIRST PLACE, THE BASIS NECESSARILY ASSUMES THAT EACH SHIPMENT BY EXPRESS INVOLVES THE SAME RELATIVE OPERATING COST FOR "RAIL" SERVICE AND FOR "SUPPLEMENTAL" SERVICE AS EVERY OTHER SHIPMENT BY EXPRESS--- AN ASSUMPTION WHICH A MOMENT'S REFLECTION WILL DEMONSTRATE AS BEING CONTRARY TO THE TRUE SITUATION. THUS IT IS ASSUMED THAT RELATIVE OPERATING COSTS APPORTIONABLE TO "SUPPLEMENTAL" SERVICE, WITH RESPECT TO A SHIPMENT MOVING BETWEEN POINTS AT WHICH NEITHER PICK-UP NOR DELIVERY SERVICE IS AFFORDED, ARE THE SAME AS THOSE WITH RESPECT TO A SHIPMENT MOVING BETWEEN POINTS AT EACH OF WHICH SUCH SERVICE IS RENDERED; OR THAT, WITH RESPECT TO TWO SHIPMENTS, BOTH OF WHICH ARE AFFORDED PICK-UP AND DELIVERY SERVICE, THE PROPORTION OF THE CHARGE ATTRIBUTABLE TO RAIL SERVICE IS THE SAME IN EACH INSTANCE, NOTWITHSTANDING ONE SHIPMENT MAY HAVE BEEN TRANSPORTED A DISTANCE OF 1,000 MILES AND THE OTHER A DISTANCE OF ONLY 25 MILES. MOREOVER, THE BASIS PROPOSED WOULD APPARENTLY ASSUME THAT OPERATING COSTS FOR SUBSEQUENT YEARS ARE PROPERLY APPORTIONABLE BETWEEN "RAIL" SERVICE AND "SUPPLEMENTAL" SERVICE ON THE BASIS OF THE SAME PERCENTAGE RELATIONSHIP WHICH THE CLAIMANT FINDS OBTAINED WITH RESPECT TO THE YEAR 1931, WHEREAS NO REASON FOR SUCH ASSUMPTION IS ADVANCED AND IN VIEW OF THE RAPID CHANGES CONSTANTLY OCCURRING IN TRANSPORTATION FACILITIES, IT WOULD SEEM RATHER UNUSUAL IF SUCH A PERCENTAGE RELATIONSHIP SHOULD MAINTAIN WITHOUT CHANGE FROM YEAR TO YEAR.

IN THE SECOND PLACE, THE PROPOSED METHOD WOULD MAKE THE MATTER OF OPERATING EXPENSES, OR CARRIER COSTS OF SERVICE, DETERMINATIVE AS TO THE BASIS OF ARRIVING AT THE AMOUNT OF DEDUCTION TO BE MADE FOR LAND GRANT, WHEREAS THE STATUTES REQUIRING DEDUCTION PRESCRIBE AS A MEASURE A PERCENTAGE, NOT OF OPERATING COSTS, BUT OF CHARGES WHICH WOULD BE PAYABLE BY THE PUBLIC FOR LIKE SERVICE, AS WAS EMPHASIZED BY THE COMPTROLLER OF THE TREASURY IN A DECISION IN 1902, 8 COMP. DEC. 598. A MORE RECENT STATUTORY PROVISION, TO THE SAME GENERAL EFFECT AS THOSE REFERRED TO BY THE COMPTROLLER OF THE TREASURY, IS FOUND IN THE ACT OF JUNE 7, 1924, 43 STAT. 486, PROVIDING:

* * * THAT HEREAFTER PAYMENTS SHALL BE MADE AT SUCH RATES AS THE SECRETARY OF WAR SHALL DEEM JUST AND REASONABLE AND SHALL NOT EXCEED 50 PERCENTUM OF THE FULL AMOUNT OF COMPENSATION, COMPUTED ON THE BASIS OF THE TARIFF OR LOWER SPECIAL RATES FOR LIKE TRANSPORTATION PERFORMED FOR THE PUBLIC AT LARGE, FOR THE TRANSPORTATION OF PROPERTY OR TROOPS OF THE UNITED STATES OVER ANY RAILROAD WHICH UNDER LAND-GRANT ACTS WAS AIDED IN ITS CONSTRUCTION BY A GRANT OF LAND ON CONDITION THAT SAID RAILROAD SHALL BE AND REMAIN A PUBLIC HIGHWAY FOR THE USE OF THE UNITED STATES, AND FOR WHICH ADJUSTMENT OF COMPENSATION IS REQUIRED IN ACCORDANCE WITH DECISIONS OF THE SUPREME COURT CONSTRUING SUCH LAND GRANT ACTS, OR OVER ANY RAILROAD WHICH WAS AIDED IN ITS CONSTRUCTION BY A GRANT OF LAND ON CONDITION THAT SUCH RAILROAD SHOULD BE A POST ROUTE AND MILITARY ROAD, SUBJECT TO SUCH REGULATIONS AS CONGRESS MAY IMPOSE RESTRICTING THE CHARGE FOR SUCH GOVERNMENT TRANSPORTATION, AND SUCH PAYMENT SHALL BE ACCEPTED AS IN FULL FOR ALL DEMANDS FOR SUCH SERVICE.

THE DEDUCTION FOR LAND GRANT IS THUS DIRECTED TO BE DETERMINED IN RELATION TO THE CHARGES APPLICABLE TO THE PUBLIC FOR LIKE TRANSPORTATION. THERE IS NO PROVISION WHATEVER AFFORDING AUTHORITY FOR CONSIDERING THE COST OF THE SERVICE TO THE CARRIER AS INFLUENCING IN ANY WAY THE AMOUNT OF DEDUCTION TO BE MADE. SEE LOUISVILLE AND NASHVILLE RAILROAD COMPANY V. THE UNITED STATES, 57 CT.CLS. 268, AFFIRMED 267 U.S. 395.

THE METHOD EMPLOYED IN ARRIVING AT THE AMOUNT OF LAND-GRANT DEDUCTION IN THE CASE HERE UNDER REVIEW WAS IN ACCORDANCE WITH THE METHOD THAT HAS BEEN EMPLOYED BY THE ACCOUNTING OFFICERS AND GENERALLY ACCEPTED BY THE CARRIERS OVER A LONG PERIOD OF TIME. IN 18 COMP. DEC. 238, THE COMPTROLLER OF THE TREASURY STATED:

FOR THE PURPOSE OF DETERMINING LAND-GRANT DEDUCTIONS, THIS OFFICE RECOGNIZES THE COMMERCIAL DIVISIONS OF THE THROUGH RATE BY WHICH IS DETERMINED THE PROPORTION THEREOF WHICH ACCRUES TO EACH COMPANY RENDERING A DISTINCT AND SEPARATE PART OF A THROUGH SERVICE FOR WHICH IT IS ENTITLED TO A DIRECT PARTICIPATION IN THE SAID THROUGH RATE.

WHERE A BRIDGE, TRANSFER, OR TERMINAL SERVICE IS RENDERED BY A COMPANY FOR WHICH A SEPARATE AND DISTINCT CHARGE IS MADE, WHICH IS ADDED TO AND INCLUDED IN THE THROUGH RATE AND TO WHICH SAID COMPANY IS ENTITLED IN THE DIVISION OF THE THROUGH RATE AS SEPARATE AND DISTINCT FROM THE CHARGES FOR THE REMAINDER OF THE THROUGH SERVICE, BEING ADDITIONAL TO THE AMOUNT OTHERWISE CHARGEABLE FOR THE TRANSPORTATION, SAID CHARGE IS TO BE CONSIDERED AS A SEPARATE AND DISTINCT ITEM IN THE DIVISION OF THE RATE BY WHICH LAND-GRANT AND OTHER DEDUCTIONS ARE TO BE DETERMINED. BUT WHEN NO SUCH SEPARATE CHARGE IS MADE FOR SAID SERVICE, BUT THE EXPENSES THEREOF ARE BORNE BY THE TRANSPORTATION COMPANY AS A PART OF ITS OPERATING EXPENSES, SAID CHARGE CANNOT BE CONSIDERED AS SEPARATE AND DISTINCT FROM THE CHARGES OF THE TRANSPORTATION COMPANY FOR ITS SERVICES, BUT MUST BE REGARDED AS INCLUDED IN AND AS A PART OF THE SAID SERVICES TREATED AS AN ENTIRETY, AND FOR WHICH THE TRANSPORTATION CHARGE IS ALLOWED.

WHEN AN ARBITRARY SUM, CALLED A BRIDGE, TRANSFER, TERMINAL, OR OTHER CHARGE IS ALLOWED ONE COMPANY IN THE DIVISION OF A THROUGH RATE, SUCH ALLOWANCE, WHEN NOT CHARGED DIRECTLY AND SEPARATELY FOR SAID SERVICE, BECOMES A PART OF THE EARNINGS OF SAID COMPANY FOR THE ENTIRE SERVICE RENDERED BY IT. THE SUM THUS ACCRUING TO SAID ROAD MUST BE REGARDED AS AN ENTIRETY FOR THE SERVICE RENDERED OVER ITS ENTIRE DISTANCE, INCLUDING SAID BRIDGES, TRANSFERS, ETC., AND ACCRUES PROPORTIONATELY FOR EVERY PART OF THE DISTANCE FOR WHICH THE SERVICE IS RENDERED. THE EARNINGS OF THE LAND- GRANT PORTION OF THE ROAD ARE DETERMINED ON THE RATIO OF THE LAND-GRANT MILEAGE TO THE TOTAL MILEAGE INCLUDED. * * *

LIKEWISE, IN 3 COMP. GEN. 615, 616, IT WAS SAID:

WHERE RATES ARE CONSTRUCTED WITHOUT REGARD TO BRIDGE ARBITRARIES, A RAILROAD OPERATING OVER SUCH BRIDGE HAS NO RIGHT TO MAKE TRAFFIC OVER SAID BRIDGE BEAR THE EXPENSE OF ITS CONSTRUCTION OR MAINTENANCE TO THE EXTENT OF AFFECTING THE RIGHTS OF THIRD PARTIES IN RELATION TO SUCH TRAFFIC. A ROAD BUILT AND OPERATED AS A WHOLE, THE RATES CHARGED THE PUBLIC ARE NOT MADE WITH RESPECT TO THE DIFFICULTIES OF EACH PARTICULAR PORTION, CHARGING THE COST OF A BRIDGE TO THE TRAFFIC OF ONE SECTION OR THE COST OF A TUNNEL TO TRAFFIC BETWEEN ITS TWO MOUTHS, BUT EVERY POINT ON THE LINE RECEIVES THE BENEFITS WHICH ACCRUE FROM THE EXISTENCE OF THE BRIDGE OR TUNNEL AND THE BURDEN OF CONSTRUCTING AND MAINTAINING THEM IS DISTRIBUTED JUST AS IS THE BURDEN OF CONSTRUCTING AND MAINTAINING ANY OTHER LINK IN THE RAILROAD SYSTEM. THE REQUIREMENTS OF CARRIER'S DIVISION SHEETS FOR THE DEDUCTION OF A BRIDGE OR OTHER ARBITRARY BEFORE PRORATING AND THE ADDITION, OF THE AMOUNT THUS DEDUCTED, BACK TO THE PROPORTION ESTABLISHED BY THE PRORATE OF A CERTAIN ROAD, IS A METHOD EMPLOYED BY THE CARRIERS, AMONG THEMSELVES, TO INCREASE THE ALLOWANCE OF SUCH ROADS, IN AN ARBITRARY MANNER ON ACCOUNT OF EXPENSIVE TRACKAGE OR OTHER DISABILITIES, AND THE REQUIREMENT THAT THE ARBITRARY DEDUCTION IS TO BE ADDED BACK TO THE PROPORTION ACCRUING TO A CERTAIN LINE INDICATES THAT SUCH ARBITRARY HAS BEEN INCLUDED IN AND BECOMES AN INTEGRAL PART OF THE SAID RAILROAD'S PROPORTION OR CHARGES.

THESE PRINCIPLES ARE SUBJECT TO THE LIMITATION, HOWEVER, THAT A CARRIER MAY NOT ARBITRARILY DISTRIBUTE ITS EARNINGS BETWEEN THE LAND GRANT AND NONLAND-GRANT PORTIONS OF ITS LINE SO AS TO DEPRIVE THE GOVERNMENT OF ITS RIGHT TO A PROPER DEDUCTION FROM COMMERCIAL CHARGES. SEE 18 COMP. DEC. 949.

THE FOREGOING DISCLOSES THE BASIS ON WHICH THE MATTER OF TERMINAL CHARGES OR ARBITRARIES ARE CONSIDERED FOR PURPOSES OF ARRIVING AT LAND GRANT DEDUCTION. WHERE LAWFULLY FILED TARIFFS PUBLISH SEPARATE AND DISTINCT CHARGES FOR TERMINAL OR ACCESSORIAL SERVICES NOT PERFORMED OVER A LAND- GRANT LINE, NO DEDUCTION FOR LAND GRANT IS MADE FROM SUCH CHARGES. ALSO, WHERE THE CHARGES PAYABLE BY THE PUBLIC ARE PUBLISHED IN TARIFFS IN THE FORM OF A THROUGH RATE WITHOUT ANY SEPARATE CHARGE BEING SHOWN THEREIN FOR TERMINAL OR OTHER SIMILAR SERVICE, THE ARRANGEMENTS OR AGREEMENTS OF THE SEPARATE AND DISTINCT RAILROADS PARTICIPATING IN THE THROUGH MOVEMENT, AS TO THE BASIS OF DIVISION OF THE EARNINGS, ARE RECOGNIZED BY THIS OFFICE SUBJECT TO THE LIMITATIONS INDICATED ABOVE. IT DOES NOT APPEAR THAT TARIFFS PUBLISHING CHARGES FOR EXPRESS SHIPMENTS MAKE ANY SEPARATE OR DISTINCT CHARGES FOR THE SERVICES, WHICH THE CLAIMANT CLASSIFIES AS "SUPPLEMENTAL," NOR IS THERE ANY SHOWING OF DIVISIONAL ARRANGEMENTS BETWEEEN SEPARATE AND COMPETING RAILROADS PARTICIPATING IN THE SERVICE, WHICH PROVIDES FOR THE SETTING APART OF A CERTAIN AMOUNT OF THE EARNINGS ON EACH SEPARATE SHIPMENT AS ACCRUING--- BECAUSE OF "SUPPLEMENTAL" SERVICES--- TO ANY PARTICULAR RAILROAD CONCERNED.

IN THE SETTLEMENT OF AGENCY BILLS FOR TRANSPORTATION OF GOVERNMENT SHIPMENTS, THIS OFFICE HAS OBSERVED THE BASIS WHICH THE PARTICIPATING CARRIERS HAVE ESTABLISHED FOR DETERMINING THE AMOUNT ACCRUING TO EACH RAILROAD. IN THIS CONNECTION, IT APPEARS THAT OPERATING CONTRACTS BETWEEN AGENCY AND PARTICIPATING RAILROADS PROVIDE, IN ARTICLE V, SECTION 3, THAT-

THE GROSS EXPRESS TRANSPORTATION REVENUES ACCRUING ON EACH RAILROAD OR OTHER CARRIER IN THE SEVERAL GROUPS, INCLUDING THE LINES OF THE RAIL COMPANY PARTY TO THIS AGREEMENT, SHALL BE ASCERTAINED BY CREDITING EACH RAILROAD OR OTHER CARRIER WITH THE EXPRESS REVENUE EARNED WHOLLY THEREON AND PRORATING THE REVENUE ACCRUING BETWEEN POINTS INVOLVING TRANSPORTATION ON THE LINES OF TWO OR MORE CARRIERS, AS FOLLOWS:

THE GROSS TRANSPORTATION REVENUES ACCRUING FROM THE CARRIAGE OF EXPRESS MATTER ON THE LINE OF THE RAIL COMPANY WHEN CARRIED BY THE EXPRESS COMPANY PARTLY ON AND PARTLY BEYOND THE LINE OF THE RAIL COMPANY, WHERE RATES APPLICABLE TO RAIL TRANSPORTATION APPLY, SHALL BE SUCH PORTION OF THE THROUGH TRANSPORTATION CHARGE OF THE EXPRESS COMPANY AS THE LOCAL FIRST- CLASS EXPRESS RATE PER 100 LBS. BETWEEN POINTS WHERE CARRIED ON THE LINE OF THE RAIL COMPANY BEARS TO THE SUM OF THE LOCAL FIRST-CLASS EXPRESS RATES PER 100 LBS. BETWEEN POINTS WHERE CARRIED ON THE SEVERAL LINES OR ROUTES OPERATED BY THE EXPRESS COMPANY OVER WHICH SUCH EXPRESS MATTER MOVED. SEE APPENDIX B, FINANCE DOCKET NO. 7322, 150 I.C.C. 437, 439. HAVING DETERMINED THE AMOUNT ACCRUING TO EACH PARTICIPATING RAILROAD OUT OF THE GROSS CHARGES APPLICABLE TO THE SHIPMENT, DEDUCTION FOR LAND GRANT IS THEN MADE FROM THE PORTION ACCRUING TO THE LAND-GRANT RAILROAD ON THE BASIS OF A PERCENTAGE EQUAL TO ONE HALF OF THE PERCENTAGE OF LAND-GRANT MILEAGE TO TOTAL MILEAGE OF SAID RAILROAD TRAVERSED BY THE SHIPMENT. THIS IS IN ACCORDANCE WITH THE ESTABLISHED METHOD APPLIED BY THE ACCOUNTING OFFICERS FOR A LONG PERIOD OF TIME AS ABOVE NOTED AND SHOWN IN UNITED STATES V. NORTHERN PACIFIC RAILROAD, 30 FED./2D) 655. ACCORDINGLY, THE CLAIM FOR AN ADDITIONAL AMOUNT FOR THE SERVICE COVERED BY CLAIMANT'S BILL D/3/5624 MUST BE, AND IS, DISALLOWED.

THE BASIS WHICH THE AGENCY PROPOSES AS PROPER FOR DETERMINING DEDUCTION FOR LAND GRANT ON GOVERNMENT SHIPMENTS BY EXPRESS CANNOT BE ACCEPTED AS AFFORDING A DUE OBSERVANCE OF THE REQUIREMENTS IMPOSED BY THE CONGRESS IN PURSUANCE OF THE CONDITIONS UPON WHICH THE GRANTS OF LAND TO RAILROADS WERE MADE.