297 U.S. 288 (2020), Ashwander v. Tennessee Valley Authority
|Citation:||297 U.S. 288, 56 S.Ct. 466, 80 L.Ed. 688|
|Party Name:||Ashwander v. Tennessee Valley Authority|
|Case Date:||February 17, 1936|
|Court:||United States Supreme Court|
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE FIFTH CIRCUIT
1. Owners of a minority of the preferred shares, with voting power, in a corporation have standing to sue in its right to prevent the carrying out of a contract executed in its name by the directors with an agency of the United States, upon the grounds that the contract is unconstitutional, and that its performance will cause irreparable injury to the interests of the corporation. P. 318.
In order to establish the stockholders' right of suit, it is not necessary to show that, in executing the contract, the directors acted with fraudulent intent or under legal duress or ultra vires of the corporation. In the absence of an adequate legal remedy, it is enough to show the breach of duty involved in the injurious, illegal action. This may consist in yielding to illegal government demands. The fact that the directors, in the exercise of their judgment, resolved to comply with such demands is not an adequate ground for denying to the stockholders an opportunity to contest their validity.
2. The opportunity to resort to equity, in the absence of an adequate legal remedy, in order to prevent illegal transactions by those in control of corporate properties should not be curtailed because of reluctance to decide constitutional questions. P. 321.
3. Estoppel in equity must rest on substantial grounds of prejudice or change of position -- not on technicalities. P. 322.
4. Where a contract between an electric power corporation and the Tennessee Valley Authority, a federal agency, for the sale by the former to the latter of transmission lines leading from a government dam where electricity was generated, was attacked in behalf of the corporation upon the ground that legislation by Congress purporting to empower the federal agency was unconstitutional -- held that the corporation was not estopped by having bought electricity of the Government at the dam before and after the passage of the legislation, or by having applied to a state public service commission for approval of the contract, or by a delay of some months in the bringing of a stockholders' suit to set the contract aside. P. 323.
The principle that one who accepts the benefit of a statute may not question its constitutionality held inapplicable.
5. The judicial power does not extend to the determination of abstract questions. P. 324.
6. The Act providing for declaratory judgments does not attempt to change the essential requisites for the exercise of judicial power. By its terms, it applies to "cases of actual controversy," meaning a controversy of a justiciable nature, thus excluding advisory decrees upon hypothetical states of fact. P. 325.
7. The dam across the Tennessee River at Muscle Shoals, known as the Wilson Dam, was constructed pursuant to the National Defense Act of June 3, 1916, in the exercise of constitutional functions of the Federal Government, (a) as a means of assuring abundant electric energy for the manufacture of munitions in the event of war; (b) to improve the navigability of the river. P. 326.
8. Judicial notice is taken of the international situation existing when the Act of 1916 was passed. Indisputably, the Wilson Dam and its auxiliary plants, including a hydroelectric power plant, are, and were intended to be, adapted to the purposes of national defense. P. 327.
9. The power to regulate interstate commerce includes the power to remove obstructions to navigation from the navigable rivers of the United States. P. 328.
10. In the execution of the Wilson Dam project for the constitutional purposes above stated, the United States acquired full title to the dam site, with all riparian rights. Water power, an inevitable incident of the construction of the dam, came into the exclusive control of the Federal Government, and was convertible into electric energy. Held:
(1) That the water power, the right to convert it into electric energy, and the electric energy thus produced, constitute property belonging to the United States. P. 330.
(2) That this electric energy so produced at the Wilson Dam is property of which Congress may dispose pursuant to the authority expressly granted by § 3, Art. IV, of the Constitution. P. 330.
(3) The Ninth and Tenth Amendments do not apply to rights which are expressly granted by the Constitution to the Federal Government. P. 330.
(4) The authority of Congress to dispose of electric energy generated at the Wilson Dam is not limited to a surplus necessarily created in the course of making munition of war or operating
the works for navigation purposes, but extends to the remainder of the available energy, which would otherwise be lost or wasted. P. 335.
(5) The method of disposing of government property under the constitutional provision (§ 3, Art. IV) must be appropriate to the nature of the property, and be adopted in the public interest, as distinguished from private or personal ends, and, the Court assumes, it must be consistent with the foundation principles of our dual system of Government, and must not be contrived to govern the concerns reserved to the States. P. 338.
11. The Government, acting through its agency, the Tennessee Valley Authority, undertook to dispose of electric energy generated at the Wilson Dam by sale to a power company by interchange of energy with the company, and by purchase from the company of certain transmission lines leading from the dam and providing the means of distributing such energy to a large population within fifty miles. The power company had theretofore been buying energy from the Government at the dam, and was apparently the only customer to whom it could be sold there. The purchase of the lines was to enable the Government to seek a wider market. Held:
(1) That there was no basis for concluding that the contract exceeded the federal power to dispose of property, and invaded rights reserved to the State or to the people. P. 338.
(2) The power company had no constitutional right to insist that the energy should be sold to it at the dam or go to waste. P. 339.
The decision on the constitutional question is strictly limited to the right of the Government to dispose of the energy itself -- which is simply the mechanical energy, incidental to falling water at this dam, converted into electric energy, susceptible of transmission -- and the right to acquire these transmission lines as a facility for disposing of that energy. The Government rightly conceded at the bar that it was without constitutional authority to acquire or dispose of electric energy except as it comes into being in the operation of works constructed in the exercise of some power delegated to the United States. The question whether it might constitutionally use the energy generated at Wilson Dam in carrying on manufacturing or commercial enterprises not related to the purposes for which the Government was established, is not involved in this case; nor is the question whether, for disposing of the energy, the Government could acquire or operate local or urban
distribution systems. The Court expresses no opinion as to such questions, nor as to the status of any other dam or power development in the Tennessee Valley, whether connected with or apart from the Wilson Dam, nor as to the validity of the Tennessee Valley Authority Act or of the claims made in the pronouncements and program of that Authority, apart from the questions discussed in relation to the particular provisions of the contract above mentioned affecting the Power Company. P. 339.
78 F.2d 578, affirmed.
CERTIORARI, 296 U.S. 562, to review a decree reversing a decree of the District Court, by which that court, at the suit of preferred stockholders of the Alabama Power Company, set aside a contract that had been entered into by the Company and the Tennessee Valley Authority involving the sale and exchange of electric power generated at a government dam, and the acquisition by the Authority of certain transmission lines from the Power Company.
HUGHES, J., lead opinion
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
On January 4, 1934, the Tennessee Valley Authority, an agency of the Federal Government,1 entered into a contract with the Alabama Power Company providing (1) for the purchase by the Authority from the Power Company of certain transmission lines, substations, and auxiliary properties for $1,000,000, (2) for the purchase by the Authority from the Power Company of certain real property for $150,000, (3) for an interchange of hydroelectric energy, and in addition for the sale by the Authority to the Power Company of its "surplus power," on stated terms, and (4) for mutual restrictions as to the areas to be served in the sale of power. The contract was amended and supplemented in minor particulars on February 13 and May 24, 1934.2
The Alabama Power Company is a corporation organized under the laws of Alabama, and is engaged in the generation of electric energy and its distribution generally throughout that State, its lines reaching 66 counties. The transmission lines to be purchased by the Authority extend from Wilson Dam, at the Muscle Shoals plant owned by the United States on the Tennessee River in
northern Alabama, into seven counties in that State within a radius of about 50 miles. These lines serve a population of approximately 190,000, including about 10,000 individual customers, or about one-tenth of the total number served directly by the Power Company. The real property to be...
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