found as a fact that the article was so used, it was exempt from duty. If the statute in this case had said that starch was dutiable, including all preparations from whatever substance produced, expressly intended and fit for use as starch, then tapioca flour, if fit and intended for such use, might be dutiable under the paragraph in question, and not be exempt as a form of tapioca. But when the language is, fit for use as starch, it is so much more general that it is properly qualified by the subsequent paragraph which exempts tapioca, and consequently tapioca flour, one of its commercially known forms. agreed statement of facts stipulated between the parties, yet there is nothing in the evidence or in the stipulation to show that the enumerated purposes were starch purposes. In the stipulation it is said that the substance in controversy is used in the eastern states by calico printers, etc. The expres sion "for starch purposes" does not appear in the agreed statement of facts, and in naming the uses for which the substance is used it would appear that most of them are not what would be ordinarily understood as a starch purpose. Sizing cotton goods might perhaps be regarded as somewhat of a starch purpose, as Thus far we have proceeded upon the as- starch is sometimes used in that way. The [162]sumption that tapioca *flour was a prepara- evidence does not show that this use is gention fit for use as starch, and therefore du-eral, and the expression, fit for use a starch, tiable under paragraph 323, unless excepted therefrom by paragraph 730; but we are of opinion that tapioca flour is not a preparation fit for such use within the meaning of the statute. The substance in question is not commercially known as stach, nor as any preparation fit for use as such. In the markets of the United States it is commercially known as tapioca flour, while the term "tapioca" includes precisely the same substance. Its use as starch for laundry purposes is limited to the Chinese on the Pacific coast. would not in our judgment include that use. Assuming, as counsel for the government claims, and as is undoubtedly entirely true, It is not imported into San Francisco by that the policy shown in the tariff act is any other than Chinese, nor is it manufac- protection to American industries, yet the tured in this country into the article com- article here in controversy does not and canmonly known as starch, nor is it to any ex- not compete with American starch, for any tent used as a substitute therefor, although of the purposes for which starch is commonit is chemically a starch because a large partly and ordinarily used in this country. The of it consists of a starchy substance. evidence to that effect, we think, is conclusive. Upon the finding and the proofs in this case we are of opinion that this article does In Chung Yune v. Kelly, 14 Fed. Rep. 639, not come within paragraph 323. We think the circuit court for the district of Oregon the language of that paragraph means any submitted to the jury whether "the article preparation which is so far fit for use as in question" (which was in fact tapioca starch as to be commonly used or known as flour, though imported as sago flour), “imsuch or as a substitute therefor. This sub- ported and entered by the defendant, is a stance does not come within that language starch known to commerce as such,, and made as thus construed. The use of the article and intended to be used primarily by launby the Chinese on the Pacific coast for laundrymen in the stiffening and polishing of dry purposes is so infinitesimally small that clothes." The jury returned a negative anit wholly fails to show that it is fit for that swer and the court said: "This answer is use within the meaning of the statute. The undoubtedly according to the law and the evidence in this case is that the attempt to fact." The substance was held to be exempt[164) use it for laundry purposes by white laun- from duty under the tariff act (Rev. Stat. drymen in California gave such poor results p. 488) as root flour, but the plaintiff was that it was abandoned as a failure. not allowed to recover back the duty which he had paid, because having claimed in his protest that the article was sago flour, the court felt compelled to confine him to his specific ground of protest, and consequently the government kept his money, although the imPorter had in fact imported an article entitled to free entry under the law. There is one finding by the circuit judge in this case in which it is said that the substance is used in the eastern states for starch purposes by calico printers and carpet manufacturers to thicken colors; also for book binding and in the manufacture of paper; also for filling in painting, and in the manufacture of a substitute for gum arabic and other gums, sometimes for sizing cotton goods, and also as an adulterant in the manufacture of candy in some cases and in other articles. The expression in that finding, that the substance is used in the eastern states for starch purposes, is an inadvertence, because the finding, although it 163 rests upon the evidence as well as upon the 14 U. S. App. 413, 56 Fed. Rep. 222, 5 C. C. same amount of evidence that has been given in this case upon the question whether the article is or is not fit for use as starch. But in the opinion delivered in the case it is seen that, while not precisely identical, the facts are substantially the same as in the case at bar. The court says the article is used mostly by calico printers and carpet manufacturers to thicken colors and in the manufacture of a substance for gum arabic or other gums; also for the sizing of cotton goods. a purpose for which: starch is also used to a certain extent, but the weight of the testimony was in the opinion of the court that it was not used for laundry purposes. We, think the same facts appear in the case before us, the use for laundry purposes by a few Chinese on the Pacific coast not being sufficient in extent to enable us to say that it is so used in any but the most minute quantities. It seems to us clear from the finding and from the evidence that the substance is not commercially known by the people in this country as starch nor as adapted to the ordinary purposes of that article, and it has not been manufactured into commercial starch, and is not known and is rot fit for use as such. free list as "root flour, sago crude, and sago On September 21, 1888, certain so-called flour was imported which the importers claimed to be free of duty, and upon which the collector assessed a duty of 22 cents per pound under the provisions of the act al· ready mentioned, providing for such a duty on "other starch," etc. Samples of the mer United States chemist at the port of New York, who found the article to be tapioca starch, and under the department's decisions of July 7, 1883, and January 11, 1887, it was held that flour made from tapioca although chemically a starch, was to be admit ted free of duty under the provisions for tapioca, without regard to the use to which it was ultimately intended. The appeal was allowed, and the collector directed to reliquidate the entry and to take measures for refunding the duties exacted. Treasury Department Decisions, supra, No. 9031. The Treasury Department has heretofore announced decisions which are entitled to much weight upon the question herein pre-chandise in question were submitted to the sented. Prior to the tariff act of 1870 (16 [165]Stat. at L. 256, 268, *chap. 255), both starch and tapioca had been made dutiable, sometimes at the same and sometimes at different rates of duty. By the latter act, "tapioca, cassava, or cassada" were placed in the free list, while "root flour" was placed in the free list in 1872. 17 Stat. at L. 236, chap. 315. The Treasury Department held tapioca flour entitled to free entry as tapioca. The Secretary said: "It appears, upon investigation, that tapioca is prepared in three forms, namely, flake, pearl, and flour, and that these terms do not indicate any substantial difference in the character or qual ity of the article, but merely indicate its form or appearance." Decisions, Treasury Department, 1887-1890, No. 3161, March 23, 1877. These decisions were principally based upon the provisions of the acts which related to tapioca (one decision being exclusively upon the tapioca provision), and although in some cases in which the question as tc tapioca arose the act also provided for the free entry of root flour, the decisions that tapioca flour was entitled to free entry were substantially founded upon the tapioca provision in the act, and not upon the root flour item. Under the act of 1883 (22 Stat. at L. 488, 521, chap. 121), tapioca was continued in the free list, as was also root flour (page 520), while starch was made dutiable as potato or corn starch at a certain rate, "other starch, two and a half cents per pound" Subsequently, when Congress by the act of (page 503). The Treasury Department, held, July 7, 1883, that tapioca flour was to be admitted free of duty, without regard to the use for which it was ultimately intended, and that the provision in that act for a duty upon "other starch" than potato or corn starch did not cover tapioca flour. Decisions, Treasury Department, No. 5802. Subsequently to that time various importations had been made of this article, upon which duties had been assessed at the rate of 21⁄2 cents per pound, as starch, although imported under various names as "sago, sago crude, sago flour, tapioca," etc. Exemption had been claimed for these articles as coming under the provisions of the 1890 omitted root flour from the free list such flour to the dutiable list. Not so as to tapioca flour which is still found in the free list. The omission of root flour from the free list, therefore, had no effect upon tapioca flour, and if there had been an intention to include it in the dutiable list, especially after these repeated decisions of the Treas. ury that it was entitled to free admission as tapioca, we cannot but believe that Congress would have expressed that intention with reasonable clearness. The judgment of the Circuit Court of Appeals of the Ninth Circuit should be reversed, and that of the Circuit Court for the Northern District of California affirmed, and the case remanded to that court with such directions, and it is so ordered. CHICAGO, MILWAUKEE, & ST. PAUL v. WILLIAM H. TOMPKINS, W. T. La Follette, and Alexander Kirkpatrick, Constituting the Board of Railroad Commissioners of the State of South Dakota, et al. (See S. C. Reporter's ed. 167-180.) Statute fixing carrier's rates-reasonableness of rates—insufficient findings. The reasonableness of a schedule of rates 1. for local business of a railroad company must be determined by a comparison between the NOTE. Reasonableness of state limitation of railroad rates Although the formation of a tariff of charges for transportation by a common carrier is a legislative or ministerial rather than a judicial function, it is well established that the courts may decide whether or not such rates are unjust or unreasonable, and such as to work a practical destruction to rights of property, and if so found may restrain their operation. other words, the legislature has power to fix railroad rates, and the extent of judicial interference is protection against unreasonable rates. In Unreasonableness does not necessarily mean confiscation; rates are not necessarily reasonable because they produce some revenue, much or little. Southern P. Co. v. Railroad Comrs. 78 Fed. Rep. 236. The question whether the cost of a railroad or its present value should be taken as the basis of computation in determining the reasonbleness of rates is suggested by Mr. Justice Brewer in Ames v. Union P. R. Co. 64 Fed. Rep. 165, 4 Inters. Com. Rep. 835, but it is not answered further than to say that he thinks there is no hard and fast test which can be laid down to determine in all cases whether the rates prescribed by the legislature are just and reasonable, and that often many factors enter into the determination of the problem. 2. gross receipts and the costs of doing the busi- The especial importance of a full and clear [No. 131.] Argued October 31 and November 1, 1899. A PPEAL from a decree of the Circuit Court of the United States for the District of South Dakota dismissing a bill to restrain the enforcement of a schedule of maximum charges for the control of local railroads. Reversed. See same case below, 90 Fed. Rep. 363. Statement by Mr. Justice Brewer: *On February 3, 1897, the legislature of[168] South Dakota passed an act relating to com. mon carriers. Laws of 1897, chap. 100. The act provided for the appointment of a board of railroad commissioners, and by § 20 this board was authorized to make a schedule of reasonable maximum fares and charges for The The cost of reproduction is too narrow a basis for the determination by a railroad com mission of the value of the road on which it is entitled to earn a return from tariff rates. location of the road and the increment of its value due to the settling, seasoning, and permanent establishment of the railroad and to its established business and goodwill should be taken into consideration. Metropolitan Trust In affirming the decision in this case the Co. v. Houston & T. C. R. Co. 90 Fed. Rep. 683. United States Supreme Court says: "The If there is room for a difference of intellibasis of all calculations as to the reasonable- gent opinion as to whether or not the rates ness of rates to be charged by a corporation fixed by commissioners will be remunerative, maintaining a highway under legislative sanc- the courts must leave the matter to the test tion must be the fair value of the property be-experiment. Pensacola & A. R. Co. v. State, 176 U. S. U. S., Book 44. 417 27 the transportation of passengers, freight, railway companies for like transportation in and cars on the railroads within the state. other states. In addition to these matters There was a proviso in the section that the the answer averred that the plaintiff and the maximum charge for the carriage of passen- Chicago & Northwestern Railway Company gers on roads of standard gauge should not were owners of competing lines of railway, be greater than 3 cents per mile. On Au- running westerly from Chicago and traversing gust 26, 1897, the board of railroad commis- the states of Illinois, Wisconsin, Minnesota, Bioners, having taken the preliminary steps and Iowa; that during the years from 1880 to required by the statute in respect to notice, 1883 as competing companies they constructetc., made and published its schedule of max- ed their lines of railway into and through imum charges for the control of all local that part of the then territory of Dakota, railroads. On the next day the Chicago, now the state of South Dakota; that at that Milwaukee, & St. Paul Railway Company, time there were no people, business, or indusplaintiff and appellant, filed its bill in the try to be accommodated or served by the concircuit court of the United States for the dis- struction of said lines of railway, and that trict of South Dakota, seeking to restrain the construction was not in response to any the' enforcement of such schedule. The bill existing demand for the same, but was for alleged generally that the existing rates the purpose of pre-empting and occupying were fair and reasonable; that those estab- the territory in anticipation of its settlelished by the railroad commissioners were ment and development; that a rapid occupaunjust and unreasonable; would not only tion followed such extension of railroad fail to afford the plaintiff adequate compen- lines, and a large immigration flowed into [169]sation for the services to be performed, but the territory; that this rapid immigration also would operate to deprive it of its prop-ceased in 1884, and that many of the settlers erty without just compensation. The railroad commissioners filed their answer on October 4, 1897, in which they alleged that the existing rates were extortionate and unreasonably high-in many instances so high as to prohibit the shipment of ordinary products; that the freight rates were much higher than those charged by the complainant company for similar services upon its lines of railway in other and adjoining states, being about 90 per cent higher than the rates charged in the state of Iowa; that the passenger rates were at least 25 per cent higher than those charged by the plaintiff over its lines of railway in other states, and much higher than those charged by other 25 Fla. 310, 3 L. R. A. 661, 2 Inters. Com. Rep., 522, 5 So. 833: Chicago, B. & Q. R. Co. v. Dey, 38 Fed. Rep. 656. Rates fixed by legislative authority which will give some compensation, however small, to the owners of railroad property cannot be held by the courts to be insufficient; but when the rates prescribed will not pay any compensation to the owners, i. e., some dividend to stockholders after payment of fixed charges and costs of service, the courts have power to interfere. Chicago & N. W. R. Co. v. Dey, 35 Fed. Rep. 866. 1 L. R. A. 744, 2 Inters. Com. Rep. 325. disappeared in the years following, so that 418. A tariff of railroad rates fixed by a commission, which will so diminish the earnings of a road that they will not be able to pay half the interest on its bonded debt above the operating expenses, is unjust and unreasonable. where, without waste or mismanagement in construction or operation, the road has cost far more than the amount of stock and bonds outstanding. which represent money expended in its construction, and the rates have been voluntarily decreased by the company more than 50 per cent during ten years. while under these rates the stock representing two fifths of the value of the road has never received a dividend, and for the last three years the earnings above The justice of the statute limiting rates of transportation must be determined with reference to its effect on the whole of a class of railroads, where they are classided by the statute, and not with reference to its effect on one particular road. St. Louis & S. F. R. Co. v. Gill, 54 Ark. 101, 11 L. R. A. 452, 15 S. W. 18. The effect on the entire line of a railroad is the correct test of the reasonableness of rates of fare which are attacked as a taking of prop-operating expenses have been insufficient to pay erty without just compensation or due process of law. St. Louis & S. F. R. Co. v. Gill, 156 U. S. 649, 39 L. ed. 567, 15 Sup. Ct. Rep. 484, Affirming 54 Ark. 101, 11 L. R. A. 452, 15 S. W. 18. The rates are not necessarily unreasonable or unjust because they are not remunerative on a certain portion of the line. Missouri P. R. Co. v. Smith, 60 Ark. 221, 5 Inters. Com. Rep. 34S. 29 S. W. 752. Reagan v. the interest on the bonded debt. A street railroad company is deprived of its property without due process of law by an ordinance requiring it to sell commutation tickets, where its net earnings, after paying 5 per cent Interest on its bonds in a market in which 6 per cent is the usual rate for real es ate mortThe reasonableness or unreasonableness of gages and like securities, are only 5.2 per cent plainant than the mere pro rata mileage of | ing June 30, 1896, was $328,105.95, and for the lines in that state would indicate, and the year ending June 30, 1897, was $311,085.that no account had been taken or allowance 42. made for the value to the plaintiff of the "IV. That the local earnings on the comlong-haul business done on other parts of its plainant's lines under existing tariffs, on the lines afforded by the interstate business run- same proportion of the total value of the[171] ning into Dakota. Upon the issue thus pre-roads in South Dakota as the local earnings sented by these pleadings testimony was bear to the gross earnings from all sources taken before an examiner. This testimony in South Dakota, were: For the year 1894, is preserved in the record, and amounts to 18.5 per cent; for the year 1895, 12.7 per several hundred printed pages. The exam- cent; for the year 1896, 15.6 per cent; for iner simply reported the testimony, without the year 1897, 16.3 per cent. any findings of fact or conclusions of law. "V. That applying the schedule of rates The case went to hearing before the district sought to be enjoined in this action to the judge, who, without the aid of a master, ex-local traffic during the years above menamined the pleadings and this volume of testimony, and, on July 20, 1898, rendered a decree dismissing plaintiff's bill. 90 Fed. Rep. 363. Besides delivering an opinion, the court made the following findings of facts and conclusion of law: "This cause came on to be heard upon the pleadings and proofs at this term, and was argued by counsel; and thereupon, upon consideration thereof, the court finds the following facts: I. That the value of complainant's property in the state of South Dakota is ten mill ion dollars. "II. That the fair value of the proportion of complainant's said property assignable to local traffic was, for the year ending June 30, 1894, $2,200,000, and for the year ending June 30. 1895, $2,600,000, and for the year ending June 30, 1896, $2,100,000, and for the year ending June 30, 1897, $1,900,000. "III. That the gross local earnings of complainant in the state of South Dakota for the fiscal year ending June 30, 1894, was $407,606.35, and for the year ending June 30, 1895, was $330,642.85, and for the year endadopting a conservative estimate of the value of its property and the largest estimate of its earnings. Milwaukee Electric R. & Light Co. v. Milwaukee, 87 Fed. Rep. 577. | tioned, on the same method of calculation, "Vl. Under the commissioners' schedule the gross earnings from local traffic would "VII. That these earnings for the fiscal year 1894 would equal 18 per cent of the value thus ascertained, and for the year 1895 would equal 12.1 per cent, and for the year 1896 would equal 15.3 per cent, and for the year 1897 would equal 16.2 per cent. "VIII. That owing to the small difference between the percentage earned under the complainant's schedule of rates and fares and the commissioners' schedule of rates and fares for the four years prior to the comfrom date of purchase, was held to be an “arbitrary enactment" in favor of those who were willing and able to buy such tickets, and to violate the constitutional right of railroad compa of the laws. It is not sufficient to show that railroad prop-nies to due process of law and equal protection erty is confiscated or taken without due process of law because the income at the rates of fare fixed by law will pay only 1 per cent on the original cost of the road, when the road is held by a reorganized corporation or its trustees after foreclosure. Dow v. Beidelman, 125 U. S. G80, 31 L. ed. 841, 2 Inters. Com. Rep. 56, 8 Sup. Ct. Rep. 1028. The fact that rates are not large enough to enable the company to pay expenses and interest on its debts, does not show that they are unreasonably low, since the earnings might be insufficient for this, and yet be large enough to defray current repairs and expenses and pay a profit on the reasonable cost of building and equipping the road. The debts may have been contracted through extravagance and mismanagement. Missouri P. R. Co. v. Smith, 60 Ark. 221, 5 Inters. Com. Rep. 348, 29 S. W. 752. The power of the state to fix maximum rates and charges for railroad transportation does not include the right to compel a discrimination in rates in favor of those who buy 1000-mile tickets. Lake Shore & M. S. R. Co. v. Smith, 173 U. S. 684, 43 L. ed. 858, 19 Sup. Ct. Rep. 565. In this case the Michigan statute, requiring 1000-mile tickets to be sold by railroad companies at a reduced rate, to be valid for two years On the authority of this case, the New York court of appeals in Beardsley v. New York, L. E. & W. R. Co. 162 N. Y. 230, 56 N. E. 488, declared the New York statute requiring railroad companies to issue mileage books to be invalid as to companies existing at the time of its enactment as in violation of the Federal Constitution. An allegation that rates fixed by the commissioners for one road are unjust and unreasonable when compared with rates permitted on other lines of railroad in the same state, operated under the same conditions. is not sufficient to overthrow the reasonableness or justice of the rate complained of, as a rate reasonable and just in itself for one road may not be so for another, though they connect with each other. Storrs v. Pensacola & A. R. Co. 29 Fla. 617, 11 So. 226. Reasonableness of the rates established by statute is not shown by the fact that they are higher than those charged in another state, since the kind and amount of business and its cost are factors which determine largely the question of rates, and these vary in the different states. Smyth v. Ames, 169 U. S. 466, 42 L. ed. 819, 18 Sup. Ct. Rep. 418. |