missioner Prouty illustrated the practice at Kansas City as follows:132 "During the period covered by this investigation, which was from April 1st to July 7th, 1896, and for a considerable period prior thereto, the rate on corn from Kansas City to Chicago was 20 cents per 100 pounds. Hutchinson, Kansas, is a station upon the Santa Fe Railway, which runs from there through Kansas City to Chicago, Ill. The through rate from Hutchinson to Chicago was 25 cents, and the local rate from Hutchinson to Kansas City 132 cents. A shipper from Hutchinson would forward a carload of corn to Kansas City and pay the local rate of 132 cents. If afterwards he concluded to send this carload on to Chicago he might ship it by the Santa Fe Road, or by any other road between the two points, at the balance of the through rate from Hutchinson. The Chicago & Alton Railroad, for instance, would transport this carload of corn from Kansas City to Chicago, not for 20 cents per 100 pounds, but for 112 cents. If the grain was sold at Kansas City, the purchaser succeeded to the right of sending it forward at the reduced rate. "When the shipper shipped this carload of corn to Kansas City he had, as an ordinary thing, no idea or purpose as to its ultimate destination. It might be eaten in Kansas City; it might be sent to the Chicago market, or it might go to the Gulf; there was nothing upon any of the papers connected with its transportation to indicate what its destination beyond Kansas City was, or that it was destined to any point beyond, but if he did subsequently elect to ship it beyond Kansas City, the rate to any point he might select was the difference between the through rate from Hutchinson to the point of destination and the local rate which he had already paid from Hutchinson, and this rate was always different from the rate between Kansas City and the point of destination. "The result, of course, was that nearly all grain was shipped into Kansas City upon a local bill of lading in the first 132 Re Alleged Unlawful Rates and Practices in the Transportation of Grain, 7 I. C. C. 240, 241, 242, 247. See also Re Substitution of Tonnage at Transit Points, 18 I. C. C. 280. For a further definition see Cairo Board of Trade v. C. C. C. & St. L. Ry. Co., 46 I. C. C. 343, 348. instance and was afterward sent forward, if it finally went forward, upon a new bill of lading at the balance of the through rate. The difference between the through rate from the point of origin to the point of destination and the local rate from the point of origin to Kansas City was not the same in all cases, nor, indeed, in most cases, and consequently the balance of the through rate continually varied." In the same case, the practice was declared illegal and this rule was stated: "An indispensable element in every through shipment would seem to be a contract for such through service; an agreement between the parties at the inception of the carriage that the freight shall be transported to the point of destination at the through rate." Its disapproval of the practice was indicated by the Commission in the cases of Mayor, etc., of Wichita v. Atchison, T. & S. F. Ry. Co., 9 I. C. C. 534, and Cannon Falls Elevator Co. v. Chicago, etc., R. Co., 10 I. C. C. 650. § 175. Rebilling Found Illegal.-In the Duncan case,133 the Commission, speaking through Mr. Commissioner Clements, describes the practice and states the conclusion of the Commission as follows: "It is contended by defendants that rebilling or reshipping is on the same basis as milling in transit and similar privileges. There is no case before us in this case against milling in transit, but it appears from the record that the privilege of milling in transit is accorded uniformly throughout the southeastern territory and is in no sense applied to Nashville or any other particular point alone. "We are not convinced that the circumstances and conditions under which the reshipping privilege is accorded at Nashville are so dissimilar from those obtained at the other points involved in this traffic as to justify giving it our sanction on that ground. However, there are other aspects independent of this which lead us to regard this privilege with disfavor. 133 Duncan v. N. C. & St. L. Ry. Co., 16 I. C. C. 590. "Illustrating the second feature of the complaint as to the alleged illegality of this privilege, the following example is given: A Nashville dealer buys 2 cars of grain, 1 at Memphis and 1 at Louisville. He pays, up to Nashville on a Memphis car, 11 cents per 100 pounds and on the Louisville car 10 cents. Should this Memphis car burn, after being put in the warehouse, or be sold at Nashville, he would have two expense bills and one car of grain. Should he sell a car at Atlanta, the Nashville merchant would naturally use the Memphis bill which shows a payment of 11 cents, paying the balance of the through rate from Memphis to Atlanta of 9 cents. He has, therefore, shipped the Louisville car to Atlanta for a total of 19 cents, when the through rate from Louisville to Atlanta is 24 cents and the combination of locals 27 cents. It is further alleged that as considerable grain is consumed in Nashville there is always a surplus of expense bills which may be manipulated in order to secure a cheaper rate than that provided in the tariffs. In answer to this defendants say that the operation of the reshipping privilege, as described in this example, is limited by the fact that the Memphis car of grain is worth more to the dealer at Nashville than the St. Louis car, by reason of the difference in the freight rate, and, therefore, Memphis grain is not sold at Nashville proper, but is all reshipped to the southeast. It is to be noted that the tariffs of the carriers contain a rule which prohibits trading in expense bills, and it is hardly probable that such a rule would appear if the manipulation of expense bills is impossible, as contended by defendants. . "While this manipulation of expense bills may not be practiced to the extent apprehended by complainants, we may remark that prohibitions of law are not invariably directed against illegal acts because they may be numerous; a statute may be considered equally necessary by the legislature to prevent sporadic or isolated acts in contravention of public policy. A practice or privilege which permits the movement of a single shipment at less than the rate lawfully applicable to such movement is one which the commission has, under the law, no alternative but to condemn. "In considering a practice at Kansas City similar to the one under consideration (Alleged Unlawful Rates and Prac tices, 7 I. C. C. 240), it was found that the practice of handling grain in connection with this privilege was manifestly open to many abuses. On several occasions the Commission has considered practices of a more or less similar nature and has uniformly regarded them with disfavor. In the case above referred to the finding was based upon the fact that the movement upon which the through rate was applied was in no essential sense a through movement, and we find the same to be true with respect to rebilling or reshipping at Nashville. The grain upon its arrival at Nashville loses its identity, and in every respect may be regarded as a local shipment. There is hardly a single incident of a through shipment involved in the transaction-the bill of lading is local, the rate is local, and there is nothing upon paper connected with the transaction indicating that the grain is to be carried beyond Nashville. If it is the intention to carry it beyond, there is no present idea as to the point of destination. "We are of the opinion that the reshipping or rebilling privilege and the application of rates thereunder obtaining at Nashville is an illegal device by means of which grain, grain products, and hay may be transported at less than the tariff rate applicable thereto; and further, that it gives to Nashville undue and illegal preference and advantage and subjects other points in the southeast to unjust and unreasonable prejudice and disadvantage. § 176. Rebilling Illegal Only When Unjustly Discriminatory. Subsequent to its first opinion in the Duncan case, supra, the Commission, in an investigation, "did not condemn rebilling or reshipping as such," and in a second opinion there was entered a finding and holding that the privilege there under discussion "constituted an unreasonable preference or advantage and undue and unreasonable prejudice and disadvantage in violation of section 3 of the act to regulate commerce. ''134 The Supreme Court, reversing the Commerce Court, sustained the Commission's order in the second case, placing its conclusion more on Section 4 than on Section 3 of the Act, 134 Duncan v. N. C. & St. L. Ry. Co., 21 I. C. C. 186. although Section 3 was the section relied on by the shippers and in the opinion of the Commission.135 Upon further hearing, the Commission reiterated its order.130 The Supreme Court has indicated that such practice is discriminatory, and that when shipments are made at the remainder of the through rate, carriers are estopped to say that such remainder is not a fair rate on all traffic. That court, speaking through Mr. Justice Brewer, said:13 "Under the guise of a rebilling rate, the Vicksburg merchant who dealt with this western road was given a rate of 32 per cent on any grain that he might see fit to ship to Meridian. While it may be true that a local railway's share of an interstate rate may not be a legitimate basis upon which a state railroad commission can establish and enforce a purely local rate, yet, whenever, under the guise or pretense of a rebilling rate, some merchants are given a low local rate, the Commission is justified in making that rate the rate for all. It is not bound to inquire whether it furnishes adequate return to the railway company, for the state may insist upon equality, to be enforced under the same conditions against all who perform a public or quasi public service." § 177. Rebilling-Conclusion. That rebilling offers opportunity for manipulation of expense bills cannot be doubted, although that fact is insufficient to show that the practice is illegal. The decision of the Supreme Court sustaining the second order in the Duncan case, supra, compares a reshipment or rebilling rate with a local rate, and holds in effect that when such rates are so compared, the lower reshipping 135 United States v. L. & N. R. Co., 235 U. S. 314, 59 L. Ed. 245, 35 Sup. Ct. 113. 136 Duncan v. N. C. & St. L. Ry. Co., 35 I. C. C. 477. For the further history of the case, see Louisville & N. R. Co. v. United States, 197 Fed. 58, Opinion Commerce Court No. 47, p. 173. For same case on application for preliminary injunction, see Nashville Grain Exchange V. United States, 191 Fed. 37, Opinion Com- 137 Alabama & V. R. Co. v. Railroad Com. of Mississippi, 203 U. S. 496, 51 L. Ed. 298, 27 Sup. Ct. 163. |