Creek Ry Co v. United States v. 16 19, 1923, DAYTON-GOOSE

Decision Date07 January 1924
Docket NumberDAYTON-GOOSE,No. 330,330
Citation263 U.S. 456,68 L.Ed. 388,33 A.L.R. 472,44 S.Ct. 169
PartiesCREEK RY. CO. v. UNITED STATES et al. Argued Nov. 16-19, 1923
CourtU.S. Supreme Court

Messrs. Frank Andrews, of Houston, Tex., Robert J. Carey, of New York City, and Robert H. Kelley, of Houston, Tex., for appellant.

[Syllabus and Argument of Counsels from pages 456-464 intentionally omitted] Mr. P. J. Farrell, of Washington, D. C., for Interstate Commerce Commission.

[Argument of Counsel from pages 464-466 intentionally omitted] Mr. Solicitor General Beck, of Washington, D. C., for the United States.

[Argument of Counsel from pages 466-474 intentionally omitted]

Page 474

Mr. Chief Justice TAFT delivered the opinion of the Court.

The main question in this case is whether the so-called 'recapture' paragraphs of the Transportation Act of 1920 (chapter 91, § 422, 41 Stat. 456, 489-491 [Comp. St. Ann. Supp. 1923, § 8583a] adding section 15a, pars. 5-17, to the Interstate Commerce Act) are constitutional.

The Dayton-Goose Creek Railway is a corporation of Texas, engaged in intrastate, interstate, and foreign commerce. Its volume of intrastate traffic exceeds that of its interstate and foreign traffic. In response to orders of the Interstate Commerce Commission, the carrier made returns for 10 months of 1920, and for the full year of 1921, reporting the value of its railroad property employed in commerce and its net revenue therefrom. It earned $21,666.24, more than 6 per cent., on the value of its property in the 10 months of 1920, and $33,766.98

Page 475

excess in the 12 months of 1921. The Commission requested it to report what provision it had made for setting up a fund to preserve one half of these excesses, and to remit the other half to the Commission.

The carrier then filed the present bill, setting forth the constitutional invalidity of the recapture provisions of the act and the orders of the Commission based thereon, averring that it had no adequate remedy at law to save itself from the irreparable wrong about to be done to it by enforcement of the provisions, and praying that the defendants, the United States, the Interstate Commerce Commission, and the United States district attorney for the Eastern district of Texas, be temporarily restrained from prosecuting any civil or criminal suit to enforce the Commission's orders and that the court on final hearing make the injunction permanent. The Commission answered the bill. The United States and the district attorney moved to dismiss it for want of equity jurisdiction and for a lack of equity. An application for an interlocutory injunction before a court of three judges under the Act of October 22, 1913, c. 32 (38 Stat. 208, 220), was denied, and the court, proceeding to consider the equities, dismissed the bill.

The question of equity jurisdiction raised below has not been discussed here by counsel for the appellees, either upon their briefs or in oral argument. They do not rely on it, but seek without delay a decision on the merits.

While the Dayton-Goose Creek Railway Company was the sole complainant below and is the sole appellant here, 19 other railway companies have, as amici curiae, upon leave granted, filed briefs in support of its appeal. Their names appear in the margin.1-

Page 476

By section 422 of the Transportation Act there was added to the existing Interstate Commerce Act, and its amendments, section 15a. The section in its second paragraph directs the Commission to establish rates which will enable the carriers, as a whole or by rate groups of territories fixed by the Commission, to receive a fair net operating return upon the property they hold in the aggregate for use in transportation. By paragraph 3 the Commission is to establish from time to time and make public, the percentage of the value of the aggregate property it regards as a fair operating return, but for 1920 and 1921 such a fair return is to be 5 1/2 per cent., with discretion in the Commission to add one-half of 1 per cent. as a fund for adding betterments on capital account. By paragraph 4 the Commission is to fix the aggregate value of the property from time to time, using in doing so the results of its valuation of the railways as provided in section 19a of the Interstate Commerce Act (Comp. St. § 8591) so far as they are available and all the elements of value recognized by the law of the land for rate-making purposes, including so far as the Commission may deen it proper, the investment account of the railways.

Paragraph 5 declares that because it is impossible to establish uniform rates upon competitive traffic which will adequately sustain all the carriers needed to do the business, without giving some of them a net income in excess of a fair return, any carrier receiving such excess shall hold it in the manner thereafter prescribed as trustee for the United States. Paragraph 6 distributes

Page 477

the excess, one half to a reserve fund to be maintained by the carrier, and the other half to a general railroad revolving fund to be maintained by the Commission. Paragraph 7 specifies the only uses to which the carrier may apply its reserve fund. They are the payment of interest on bonds and other securities, rent for leased lines, and the payment of dividends, to the extent that its operating income for the year is less than 6 per cent. When the reserve fund equals 5 per cent. of the value of the railroad property, and as long as it continues to do so, the carrier's one-half of the excess income may be used by it for any lawful purpose. Under paragraph 10, and subsequent paragraphs, the general railroad revolving fund is to be administered by the Commission in making loans to carriers to meet expenditures on capital account, to refund maturing securities originally issued on capital account and for buying equipment and facilities and leasing or selling them to carriers.

This court has recently had occasion to construe the Transportation Act. In Wisconsin R. R. Commission v. C., B. & Q. R. R. Co. 257 U. S. 563, 42 Sup. Ct. 232, 66 L. Ed. 371, 22 A. L. R. 1086, it was held that the act in seeking to render the interstate commerce railway system adequate to the country's needs had by sections 418 and 422 (Comp. St. Ann. Supp. 1923, §§ 8583, 8583a), conferred on the Commission valid power and duty to raise the level of intrastate rates when it found that they were so low as to discriminate against interstate commerce and unduly to burden it. In the New England Divisions Case, 261 U. S. 184, 43 Sup. Ct. 270, 67 L. Ed. 605, it was held that under section 418 the Commission in making division of joint rates between groups of carriers might in the public interest consult the financial needs of a weaker group in order to maintain it in effective operation as part of an adequate transportation system, and give it a greater share of such rates if the share of the other group was adequate to avoid a confiscatory result.

Page 478

In both cases it was pointed out that the Transportation Act adds a new and important object to previous interstate commerce legislation which was designed primarily to prevent unreasonable or discriminatory rates against persons and localities. The new act seeks affirmatively to build up a system of railways prepared to handle promptly all the interstate traffic of the country. It aims to give the owners of the railways an opportunity to earn enough to maintain their properties and equipment in such a state of efficiency that they can carry well this burden. To achieve this great purpose, it puts the railroad systems of the country more completely than ever under the fostering guardianship and control of the Commission which is to supervise their issue of securities, their car supply and distribution, their joint use of terminals, their construction of new lines, their abandonment of old lines, and by a proper division of joint rates, and by fixing adequate rates for interstate commerce, and in case of discrimination, for intrastate commerce, to secure a fair return upon the properties of the carriers engaged.

It was insisted in the two cases referred to, and it is insisted here, that the power to regulate interstate commerce is limited to the fixing of reasonable rates and the prevention of those which are discriminatory, and that when these objects are attained, the power of regulation is exhausted. This is too narrow a view of the commerce clause. To regulate in the sense intended is to foster, protect and control the commerce with appropriate regard to the welfare of those who are immediately concerned, as well as the public at large, and to promote its growth and insure its safety. The Daniel Ball, 10 Wall. 557, 564, 19 L. Ed. 999; County of Mobile v. Kimball, 102 U. S. 691, 696, 697, 26 L. Ed. 238; California v. Pacific Railroad Co., 127 U. S. 1, 39, 8 Sup. Ct. 1073, 32 L. Ed. 150; Wilson v. Shaw, 204 U. S. 24, 33, 27 Sup. Ct. 233, L. Ed. 351; Second Employers' Liability Cases, 223 U. S. 1, 47, 32 Sup. Ct. 169, 56 L. Ed. 327, 38 L. R. A. (N. S.) 44; Luxton v. North River

Page 479

Bridge Co., 153 U. S. 525, 529, 14 Sup. Ct. 891, 38 L. Ed. 808. Mr. Justice Bradley, speaking for the court in California v. Pacific Railroad Company, 127 U. S. 39, 8 Sup. Ct. 1080 (32 L. Ed. 150), said:

'The power to construct, or to authorize individuals or corporations to construct, national highways and bridges from state to state, is essential to the complete control and regulation of interstate commerce. * * * This power in former times was exerted to a very limited extent, the Cumberland or National road being the most notable instance. * * * But since, in consequence of the expansion of the country, the multiplication of its products, and the invention of railroads and locomotion by steam, land transportation has so vastly increased, a sounder consideration of the subject has prevailed and led to the conclusion that Congress has plenary power over the whole subject.'

If Congress may...

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