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Arizona Corp. Commission v. Southern Pac. Co.

Supreme Court of Arizona

April 6, 1960

ARIZONA CORPORATION COMMISSION and George F. Senner, Jr., E. T. 'Eddie' Williams, Jr., and William T. Brooks, as members of and constituting said Commission, and the City of Tombstone, a municipal corporation, Appellants,
v.
SOUTHERN PACIFIC COMPANY, a corporation, and Railway Express Agency, Inc., a corporation, Appellees.

Page 766

Page 767

[87 Ariz. 311] James F. McNulty, Jr., Bisbee, for appellants.

[87 Ariz. 312] Evans, Kitchel & Jenckes and Earl H. Carroll, Phoenix, for appellees.

JOHNSON, Justice.

This is an appeal from a judgment which vacated and set aside an order of the Arizona Corporation Commission pertaining to the discontinuance of an agent at the Tombstone railroad station.

The proceedings originated by a petition filed by the Southern Pacific Company, hereinafter called the railroad and Railway Express Agency, Inc., with the Arizona Corporation Commission, hereinafter called the Commission to discontinue the services of an agent and to maintain the station as a non-agency station. The Commission denied the petition, and an action was instituted in the superior court to vacate and set aside its order. The City of Tombstone was granted the right to intervene and from the judgment of the superior court vacating and setting aside the Commission order, appeals have been taken to this Court.

The proceedings in the superior court were in the nature of a trial de novo; the court, therefore, was not bound by the rule followed on appeal by this Court that if any reasonable evidence sustains the order of a lower tribunal, an appellate court will not consider and review the weight of the evidence, or the inferences drawn therefrom by the trial court. The superior court had the right to form its own judgment as an independent tribunal as to the conclusions to be drawn from the evidence, subject only to the rule that the burden of proof is on the plaintiff to show by clear and satisfactory evidence that the order of the Commission is unreasonable or unlawful. Corporation Commission of Arizona v. People's Freight Line, Inc., 41 Ariz. 158, 16 P.2d 420. We must therefore determine whether the evidence in the record is sufficient to show that the order of the Commission was unreasonable. Corporation Commission v. Southern Pac. Co., 55 Ariz. 173, 99 P.2d 702.

The essential issue is this: does the public good derived from the maintenance of an agency station overcome the loss sustained in maintaining it as such? Illinois Cent. R. Co. v. Illinois Commerce Commission, 397 Ill. 323, 74 N.E.2d 545.

In order to utilize the appropriate legal tests, the initial distinction must be recognized between absolute duties imposed on the railroad and incidental services supplied by the carrier. A railroad has the absolute duty to furnish transportation services. State of Washington ex rel. Oregon R. & Nav. Co. v. Fairchild, 224 U.S. 510, 32 S.Ct. 535, 56 L.Ed. 863. Where the application is to discontinue a transportation service, the question of expense is of small importance. Kurn v. State, 175 Okl. 379, 52 P.2d 841; State ex [87 Ariz. 313] rel. Utilities Commission v. Atlantic Coast Line R. Co., 233 N.C. 365, 64 S.E.2d 272; Seward v. Denver & R. G. R. Co., 17 N.M. 557, 131 P. 980, 46 L.R.A.,N.S. 242; Atchison, T. & S. F. R. Co. v. State, 189 Okl. 485, 118 P.2d 202. In that contingency, the general rule is that a public utility cannot, because of loss, escape obligations voluntarily assumed; the mere fact that the railroad must make a large expenditure in maintaining the transportation service is not of itself sufficient excuse to abandon. Nor is an expected deficit from continued operation. A railroad may be compelled to continue the service of a branch or part of a line, although the operation involves a loss. This is true even where the system as a whole fails to earn a fair return upon the value of the property.

Page 768

Fort Smith Light & Traction Co. v. Bourland, 267 U.S. 330, 45 S.Ct. 249, 69 L.Ed. 631. And of course utilities may not pick and choose, serving only the portions of the territory covered by their franchises which it is presently profitable for them to serve and restricting the development of the remaining portions by leaving their inhabitants in discomfort without the service which they alone can render. People of State of New York ex rel. New York & Queens Gas Co. v. McCall, 245 U.S. 345, 38 S.Ct. 122, 62 L.Ed. 337.

An application to discontinue an agency station, however, is not tantamount to an application to be relieved of performance of an absolute duty. The duty to maintain an agent is at most incidental to the railroad company's primary and absolute duty to furnish transportation services. Petition of Town of Grenville, 46 N.M. 3, 119 P.2d 632; State ex rel. Utilities Commission v. Atlantic Coast Line R. Co., supra; Southern R. Co. v. Public Service Commission, 195 S.C. 247, 10 S.E.2d 769; Kurn v. State, supra; Atlantic Coast Line R. Co. v. Commonwealth ex rel. State Corporation Commission, 191 Va. 241, 61 S.E.2d 5. It has been said that the maintenance of an agency station primarily involves a question of business policy. Atchison, T. & S. F. R. Co. v. State, supra. It is because of the incidental nature of the services provided that the question of expense assumes often controlling importance. An able statement of the situation before the Commission in this type of case is contained in Petition of Town of Grenville, supra, 119 P.2d at pages 634, 635:

'[The Railway Company's] absolute duty is to transport freight and passengers. It is not its prime duty to provide depots, waiting rooms, station agents, telephone and telegraph facilities. These duties are only incidental to the main purpose of its organization. It might discharge its absolute duties without any of these facilities, by merely stopping its trains at designated places and loading and unloading freight and passengers. When it [87 Ariz. 314] is called upon to perform an absolute duty, of course, the question of expense cannot be considered; but, when the duty is only an incident to the main duty, then the question of expense becomes of more importance, and, in determining the question of reasonableness, the revenue derived by the company from the public, for whose accommodation the facility is to be furnished, becomes of importance and must be considered in connection with the public necessity. * * *

'The constitution does not confer upon the Corporation Commission the right to arbitrarily establish a station or to require a station agent regardless of the expense entailed upon the company, or the benefit to be derived by the public. It is only authorized to make such an order in this regard, as 'the public interests demand, and as may be reasonable and just.' It is not to consider alone the interests of the public affected, by the order, but must determine whether or not, taking into consideration both the interests of the public and the expense entailed upon the railroad company, the order is just and reasonable. Of course, where the question involved in this case of the safety or expedition in the operation of trains, or the performance of an absolute duty, a different proposition would be involved; but these questions are not involved.'

In weighing the public convenience on the one hand, and the expense to the railroad of the maintenance of the service, on the other, to determine the prevailing balance, the Commission should consider the following factors: the financial condition of the entire railroad system, Illinois Cent. R. Co. v. Illinois Commerce Commission, 397 Ill. 323, 74 N.E.2d 545; the financial loss, if any, sustained in the maintenance of the agency, Texas & New Orleans R. Co. v. Louisiana Public Service Commission, 235 La. 973, 106 So.2d 438; the fact of substitute services providing the same essential, although less convenient,

Page 769service, Illinois Central R. Co. v. Illinois Commerce Commission, 399 Ill. 67, 77 N.E.2d 180; the volume of business to be affected and the saving in time and expense to the shipper, State of Washington ex rel. Oregon R. & Nav. Co. v. Fairchild, supra; the character and population of the territory served, Atlantic Coast Line R. Co. v. Commonwealth ex rel. State Corporation Commission, supra; and the proximity to other agency stations, Illinois Cent. R. Co. v. Illinois Commerce Commission,397 Ill. 323, 74 N.E.2d 545. The crucial point, however, is that it is unreasonable to require the maintenance of an agency station where the cost of the service is out of proportion to the revenue derived from [87 Ariz. 315] the portion of the public benefited thereby. Illinois Cent. R. Co. v. Illinois Commerce Commission,399 Ill. 67, 77 N.E.2d 180. Finally, the maintaining of an uneconomic service resulting in an economic waste cannot be justified or excused by a showing that the service has ...


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