
    NEVADA-CALIFORNIA-OREGON RAILWAY v. THE UNITED STATES
    [No. D-42.
    Decided February 27, 1928]
    
      On the Proofs
    
    
      Eminent domain; Federal control act; absence of actual taking. — ■ See Marion & Bye Valley By. Oo. v. United States, 60 C. Cls. 230; 270 U. S. 280.
    
      The Reporter’s statement of the case:
    
      Mr. George H. Parlcer for the plaintiff. Mr. Milton C. Elliott was on the brief.
    
      Messrs. Louis R. Mehlinger and Sidney F. Andrews, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant. Mr. Perry W. Howard was on the brief. .
    The court made special findings of fact, as follows:
    I. On December 28, 1917, plaintiff was a common carrier of passengers and freight for hire, and owned and operated a three-foot narrow-gauge steam railroad.
    Prior to June 30, 1917, plaintiff’s railroad lines consisted of 235 miles of main line extending from Eeno, Nevada, to Hackstaff, California, and from the latter point to Lake-view, Oregon, together with a branch line about 40 miles in length, constructed through the Feather River Canyon. That portion of the main line which extends from Reno to Hack-staff, a distance of 64 miles, together with the branch line running through the Feather River Canyon, was sold to. the Western Pacific Railroad Company, title passing in June, 1917; plaintiff continuing to operate same under a contract by which it was to continue such operation until the Western Pacific Railroad Company had completed the work of standardizing the roadway and track of the lines so sold, and assuming the entire expense of such operation and retaining the profits thereof, if any.
    The Western Pacific Railroad Company took over the actual physical operation of the lines so sold on January 29, 1918. Plaintiff retained the ownership of and operated the line extending from Hackstaff, California, to Lakeview, Oregon, about 171 miles of main-line track. Prior to the sale of a portion of its lines, plaintiff connected with the Southern Pacific Railroad at Reno, Nevada, .and Wendel, California, with the Western Pacific at Wendel, California, following said sale with the Southern Pacific at Wendel, California, and with the Western Pacific at Hackstaff, California.
    The plaintiff is the sole owner of the claim here involved and has made no assignment thereof.
    II. Under authority of the act of Congress, approved August 29, 1916 (89 Stat. 645), the President of the United States, on December 28, 1917, issued a proclamation published on page 6, Bulletin No. 4 (revised), Public Acts and Proclamations by the President relating to the United States Railroad Administration, and general orders and circulars issued by the Director General of Railroads, and by reference made part of this finding.
    III. Plaintiff received from said Director General the following letters, dated December 28,1917, and January 8,1918:
    “ Having assumed the duties imposed upon me by, and in pursuance of, the proclamation of the President dated December 26, 1917, you will, until otherwise ordered, continue the operation of your road in conformity with said proclamation. You are requested to make every possible effort to increase efficiency and to move traffic by the most convenient and expeditious routes.
    “ I confidently count on your hearty cooperation. It is only through, united effort, unselfish service, and effective work that this war can be won and America’s future be secured.” »
    “The Government of the United States having assumed possession and control of the railroads for the period of the present war with Germany, it becomes more than ever obligatory upon every officer and employee of the railroads to apply himself with unreserved energy and unquestioned loyalty to his work.
    “ The supreme interests of the Nation have compelled the drafting of a‘great army of our best young men, and sending them to the bloody fields of France to fight for the lives and liberties of those who stay at home. The sacrifices we are exacting of these noble American boys call to us who stay at home with an irresistible appeal to support them with our most unselfish labor and effort in the work we must do at home, if our armies are to save America from the serious dangers that confront her. Upon the railroads rest a grave responsibility for the success of the war. The railroads can not be efficiently operated without the whole-hearted and loyal support of everyone in the service, from the highest to the lowest.
    “ I earnestly appeal to you to apply yourselves with new devotion and energy to your work, to keep trains moving on schedule time, and to meet the demands upon the transportation lines, so that our soldiers and sailors may want for nothing which will enable them to fight the enemy to a standstill and win a glorious victory for united America.
    
      “ Every railroad officer and employee is now, in effect, in the service of the United States, and every officer and employee is just as important a factor in winning the war as the men in uniform, who are fighting in the trenches.
    “I am giving careful consideration to the problems of the railroad employees, and every effort will be made to deal with these problems justly and fairly and at the earliest possible moment. There should be a new incentive to everyone in railroad service, while under Government direction, to acquit himself with honor and credit to himself, and to the country.”
    IY. Plaintiff received general orders from the Director General of Kailroads, to wit:
    General Orders Nos. 1, 2, 3, 4, 5, 6, and supplement to No. 6; General Orders Nos. 8, 9, 10, 11, 12, and supplement to No. 12; General Orders Nos. 13, 14, 15, 16, 17, 18, 18-a, 19, 20, 22, 24, 25, 25-a, 26, 28, and supplement to No. 28; General Orders Nos. 30 and 31, all of which are published on pp. 141 to 310 of said Bulletin No. 4 (revised), and by reference made part of this finding.
    Plaintiff complied with some of these orders. The evidence fails to show what, if any, compliance plaintiff made with General Orders 4, 5, supplement to 6; 13, 15, 16, 17, 18-a, 19, 22, 24, 25, 25-a, supplement to 28; 30, and 31. Certain questionnaires were received by plaintiff relative to crossties, which were replied to; also certain circulars from the regional director relative to selling scrap iron and scrap material; circular 99 relative to classification of employees; this latter was replied to. Certain other questionnaires were answered.
    V. Plaintiff also received the following request:
    INTERSTATE COMMERCE COMMISSION,
    Washington, Jcmwdry 5,1918.
    
    
      To the President of N evojda-0 aliforwid-Oregon By. Gom-fany.
    
    Dear Sir : By direction of the Director General of Bail-roads you will let me have by not later than January 15th, the following information:
    First. A statement showing the amount of capital your •company will require to raise during the calendar year 1918, and also separately for the first six months of that calendar year—
    1. To meet all maturing bonds and note issues which have not already been provided for, or which are not to be paid out of the cash_ resources of your company, showing dates of such maturities.
    2. To pay for improvement, betterment, and construction work already contracted for and partially finished (this statement should show what portion, if any, of such work can be stopped now without detriment).
    3. An approximate estimate of the capital which may be imperatively important to provide for other construction work, improvements, and betterments, including additional terminals and new equipment (showing equipment separately) .
    4. An approximate estimate of the capital which, in the judgment of the management of your company, it is desirable to provide for the above purposes, but for which the demand is not absolutely necessary for the protection of the property or for the maintenance of its earnings.
    Second. A statement as to the character of stocks, bonds, or notes with which your company expects to be able to raise the capital so required.
    
      The above information is to be immediately transmitted and may be supplemented later with such additions as become only later available.
    Very truly yours,
    W. M. DANIELS,
    
      Commissioner.
    
    Plaintiff furnished information, as follows:
    JANUARY, 17, 1918.
    Mr. W. M. Daniels,
    
      Commissioner, Interstate Commerce Commission,
    
    
      Washington, D. C.
    
    Dear Sir: Your request of the 5th calling for certain financial data to be returned not later than the 15th just received to-day. The following is the desired information from this company:
    1. — 1. None.
    2. $50,000.00 to complete terminals now under construction at Alturas, Calif., brought about by sale of part of the line including present terminals.
    3. Engine house and tracks, Lakeview, Oreg., $2,000.00; engine house and tracks, Hackstaff, Calif., $3,000.00; oil-storage reservoir, Amedee, Calif., $2,000.00; total, $7,000.00.
    The above expenditure necessary, account having to move from our present terminals. See answer to question 2.
    4. All work necessary for proper protection of property.
    II. — 1. Capital required as above to be raised from the sale of first mortgage, 6% gold bonds, authority for which has been given by the California Eailroad Commission in the amount of $125,000.00, $75,000.00 of which has been sold, and proceeds applied on work already completed.
    VI. On or about July 4th plaintiff received from John Barton Payne, general counsel for the Director General of Eailroads, the following letter, to wit:
    United States Eailroad Administration,
    W. G. McAdoo, Director General,
    Interstate Commerce Building,
    
      _WasMngton, June 29,1918.
    
    (Division of Law: John Barton Payne, general counsel)
    Dear Sir: Pursuant to the recommendation of the regional director, the Nevada-California-Oregon Eailway is relinquished from Federal control.
    It will be the policy of the Eailroad Administration to cooperate with relinquished roads as to a fair division, of joint rates, car supply, and, as far as may be consistent with the national needs, that there be no undue discrimination as to routing.
    If you feel that hardship may result from relinquishment and desire to make a contract on fair terms, right is reserved to consider the advisability of making such a contract.
    Very truly yours,
    JOHN BARTON PaYNE.
    Mr. Charles MoraN,
    
      Président Nevada-G alifornia-Oregon Railway,
    
      68 William Street, New York, N. Y.
    
    VII.Plaintiff presented its claim to the Interstate Commerce Commission, under section 204 of the transportation act, 1920, in which the commission made an order as follows:
    “ The Nevada-California-Oregon Railway, a corporation of the State of Nevada, hereinafter termed the carrier, is a steam railway company which, during the Federal control period, engaged as a common carrier in general transportation, operating between Hackstaff, Calif., and Lakeview, Oreg., a distance of approximately 171 miles, its line connecting at Wendel, Calif., with the line of the Southern Pacific Company, and at Hackstaff, Calif., with that of the Western Pacific Railroad Company, lines of railway or systems of transportation under Federal control. It sustained a deficit in its railway operating income while under private operation in the Federal control period. It is therefore a carrier within the meaning of paragraph (a) of section 204 of the transportation act, 1920.
    “ The carrier was under Federal control from January 1, 1918, to June 30, 1918, inclusive, and is subject to the provisions of section 204 for the period from July 1, 1918, to February 29, 1920, inclusive. * * * ” (71 I. C. C. 548.)
    VIII. It is agreed that the allegations in paragraphs 1, 2, 3, 5, 9, and 13 of the plaintiff’s petition filed herein shall be taken as true.
    IX. Plaintiff filed with the Director General of Railroads a claim for just compensation for the alleged use and occupation of its railroad under the provisions of the Federal control act (40 Stat. 453, 454). The Director General declined to pay the whole or any part of the amount claimed, and no part of the said claim for just compensation has been paid to the plaintiff.
    Upon the refusal of the Director General to pay the said claim, plaintiff applied to the Interstate Commerce Commission for the appointment of a board of referees authorized by section 3 of the Federal control act (40 Stat. 454). The board made a report, a copy of which is an exhibit to the petition herein.
    X.It was ascertained that plaintiff’s net railway operating income for each of the years of the test period — that is, the three years of 1915, 1916, and 1917- — including the full earnings for the entire line for the month of January in each of said years, but for the remaining months of those years including only the net railway operating income as applicable to the 171 miles retained by plaintiff, after allocating and apportioning “operating' revenues and expenses to and between that part of the line sold and that part retained, is as follows:
    1915 (deficit)_ $2,807.17
    1916_ 40,363.70
    1917_ 69, 669.20
    Total_ 107, 225.73
    Annual average_ 35, 741.91
    Semiannual average- 17,870.96
    XI. The net railway operating loss of plaintiff’s railroad during the period January 1 to June 30,1918, was $26,305.44, such amount having been determined in accordance with the accounting classifications of the Interstate Commerce Commission, and being in consonance with the term “ standard return ” used to describe the average net railway operating income for the three years ended June 30,1917.
    It was ascertained that the average annual net railway operating income for the 275 miles of line for the three years ended June 30, 1917, was $16,530.96.
    XII. Plaintiff’s freight tonnage was not dependent upon the continued operations of any one industry, but was diversified between livestock and miscellaneous commodities.
    XIII. Plaintiff’s railroad is and for many years has been a party to through rates in connection with other railroads, and has received as its revenue amounts based upon divisions of such rates, which have been the subject of agreement between plaintiff and its connecting railroads.
    
      In connection with the sale of the portion of its line to the Western Pacific Eailroad, elsewhere referred to, plaintiff made a contract, running for fifteen years from April, 1917, whereby the plaintiff was to receive the same divisions which it had theretofoi'e enjoyed based on the Eeno haul, in respect to movements of traffic to be interchanged at Hack-staff with the Western Pacific, which compelled the Southern Pacific to meet the Hackstaff divisions at Wendel (i. e., grant the same divisions of the through rate on traffic moving via Wendel as the Western Pacific contract provided for with reference to the traffic via Hackstaff), which plan of interchange occasioned,- as to plaintiff, a haul some 65 miles less in the case of the interchange at Eeno and 40 miles less in the case of the interchange at Hackstaff.
    XIY. Plaintiff was never ousted from the actual possession and control in the operation of its railroad throughout the period in question but continued to operate the same as it had done before the issuance of said proclamation or orders and without change in the manner, method, or purpose of operation. During the period in question it did not serve any military camp nor transport troops or munitions. The character of the traffic remained the same as prior thereto.
    During said period plaintiff retained its earnings and expended the same and made no accounting therefor to the Government.
    The court decided that plaintiff was not entitled to recover.
   Campbell, Chief Justice,

delivered the opinion of the court:

This is an action by the Nevada-California-Oregon Eail-way to recover just compensation for the alleged taking of its railroad by the Government. The taking is based upon the proclamation by the President issued December 28, 1917, under the provisions of the general defense act, 39 Stat. 619, 645. The allegation is that the road was taken and kept under Federal control for the period between January 1 to June 29, 1918. The petition prays that this court “ determine the amount of such just compensation as provided by said section 3 of the Federal control act,” 40 Stat. 454.

The facts show that the plaintiff was a common carrier of passengers and freight and owned certain lines of railway consisting of 235 miles of main line extending from Heno, Nevada, to Hackstaff, California, and thence to Lakeview, Oregon, and also a branch line of about 40 miles through the Feather River Canyon. That part of the main line extending from Reno to Hackstaff, a distance of 64 miles, and the branch line of 40 miles had been sold in June, 1917, to the Western Pacific Railroad Company, but under the terms of a contract between plaintiff and the purchaser the former was to continue the operation of the line and branch, sold as stated, until certain work on them had been completed by the purchaser, and to assume the entire expense of such operation and retain the revenues therefrom. The purchaser took over the physical operation of these lines on January 29, 1918. The line of railroad, therefore, which the plaintiff corporation owned on January 1,1918, was a three-foot narrow-gauge railroad extending, from Hackstaff, California, to Lakeview, Oregon, consisting of about 171 miles of main-line track.

The plaintiff received the letters sent out by the Director General of Railroads under dates of December 28, 1917, and January 8, 1918. It also received other letters and questionnaires and complied with some of these, and it received a letter from the general counsel of the Director General dated June 29, 1918, addressed to its president in New York, and stating that this road was relinquished from Federal control. The facts also establish that plaintiff company was never ousted from the actual possession of its road throughout the period in question, but continued to operate the same exactly as it had done before the issuance of the President’s proclamation and without change in the manner, method, or purpose of operation. The general character of its traffic remained the same as before, and it did not serve any military camp, nor did it transport troops or munitions. During the six months in question it received all earnings of the railroad and expended the same without interference. It did not account to the Government or to any agency of the Government for its earnings or its disposition of them.

In these circumstances, the case is not substantially different from that of Marion & Rye Valley Railway Co. 270 U. S. 280. This court was of opinion that the alleged taking of that road was not sustained by the proof, though it appeared that the company had received a number of the Director General’s orders and a final order relinquishing it from Federal control. The opinion of the Supreme Court says (p. 282): “ We have no occasion to determine whether in law the President took possession and assumed control of the Marion & Rye Valley Railway. For even if there was technically a taking, the judgment for defendant was right. Nothing was recoverable as just compensation, because nothing of value was taken from the company and it was not subjected by the Government to pecuniary loss.” The most that can be said of the effect of the proclamation and orders upon plaintiff or its road is that they amounted to a technical taking under Federal control. The Government was certainly not in actual possession. No accounting was made of its income. Its operation was by its officers. There is renewed here a contention that was made in the Marion & Rye Valley case, supra, upon the effect of section 1 of the Federal control act. But that act merely authorized the President to enter into an agreement to pay as much as the so-called “ standard return.” It did not direct him to pay anything in the absence of an authorized agreement. The President could refuse to pay as much as the “ standard return ” and the road was left free to reject any offer that might be made. Marion & Rye Valley case, p. 284. The provision did not establish a rule of compensation. Ib. The act provides that where no agreement is reached the carrier is relegated to section 3 of the Federal control act providing a method for ascertaining just compensation and the claim here asserted is in one phase of it based upon the action of the board of referees provided for in section 3. But “ the fact that the right to recover compensation is a statutory one did not relieve the railroad from the burden of proving the value of the use taken from the company or the damage suffered by it under rules ordinarily applicable to takings by eminent domain.” Marion & Rye Valley cause, supra, p. 285. The report of the referees is attached to the petition and it is subject to the criticism applied in the case just cited. The petition avers and the report confirms the allegation, “ that compensation for the use of plaintiff’s railroad property should be calculated upon the basis of an implied lease by the Government and agreement to pay the fair rental therefor.”

This method was rejected in the Marion & Rye Valley case. The board reported that a stated sum was just compensation to plaintiff on account of the Government’s “ failure to return the property in as good repair and complete equipment as it was at the commencement of Federal control,” but this finding of the board is made “subject to such accounting adjustments as may be finally determined proper” under certain accounting rules of the Interstate Commerce Commission. The board also, subject to the same accounting rules, reported that there was a stated operating deficit during the period in question, and concluded that “the obligation of the Government to assume any net railway operating deficit that might be incurred during the operation of plaintiff’s property and to return plaintiff’s property in as good repair and complete equipment as it was in at the commencement of Federal control was, and is, just compensation to the plaintiff for the aforesaid use of its property during the said period of Federal control and the preservation thereof.” The amounts thus ascertained were $26,305.44 “ operating deficit ” and $14,546.92 on account of depreciation. Claiming these items, the petition also claims additional sums. The statute, section 3, provides that the report of the referees shall be prima facie evidence of the amount of just compensation and of the facts therein stated. This is not to say that the conclusions of the board, based upon an erroneous view of the elements making up just compensation, are controlling or, indeed, have any effect. The amount ascertained as operating deficit and the amount ascertained as depreciation may be correct, but the conclusion that these constitute parts of the just compensation to which the company may be entitled is clearly erroneous. With the effect of these items, if an agreement such as is authorized by section 1 of the Federal control act were made, we have nothing to do. The agreement was not made. Failing that agreement, the company’s recourse was to section 8; which authorizes the board of referees to act, and also authorizes an agreement by the President with the earner that may include provisions similar to those mentioned in section 1.

It is upon the failure to have the agreement authorized by section 3 that the company may come to this court. Except in the particulars above stated, the board finds the evidence insufficient to ascertain what just compensation should be awarded. This condition is not relieved by the evidence adduced in this court. The two items mentioned were before the court in the Marion & Rye Valley case, 60 C. Cls. 230, 248. It is true here, as it was in that case, that “ No evidence was introduced before it to show that the alleged taking had subjected the company to any pecuniary loss or had deprived it of anything of pecuniary value, although the hearing before the board was commenced long after the period of alleged possession and control had expired.” 270 U. S. 286. On the other hand, it does appear that the company uniformly had an operating deficit for the first six months of each year because it was what was called “ a seasonal road,” its principal earnings being during the last half of the year, when the cattle and wool moved. During the first six months of the three-year “ test period ” the company invariably had a deficit. There is no proof that any order of the Director General or its observance added anything to the company’s loss or that the alleged “ undermain-tenance” was induced or affected by his orders. That the cost of- labor and of materials may have increased is quite likely owing to the general increases arising out of war conditions. As already stated, the question before us is whether the plaintiff’s property was taken; and if so, the just compensation it is entitled to receive. There can not be a judgment for nominal damages. Grant case, 7 Wall. 331, 338. No recoverable loss or damage is shown. The petition should be dismissed. And it is so ordered.

Moss, Judge; Geaham, Judge; and Booth, Judge, concur.  