Gray v. Powell

• Decision Date: 15 December 1941
• Docket Number: No. 18,18
• Citation: 62 S.Ct. 326,86 L.Ed. 301,314 U.S. 402
• Parties: GRAY, Director of Bituminous Coal Division of Department of Interior, et al. v. POWELL et al. Re
• Court: U.S. Supreme Court

314 U.S. 402

62 S.Ct. 326

86 L.Ed. 301

GRAY, Director of Bituminous Coal Division of Department of Interior, et al.

v POWELL et al.

No. 18.

Reargued Oct. 21, 22, 1941.

Decided Dec. 15, 1941.

Messrs. Francis Biddle, Atty. Gen., and Robert L. Stern, of Washington, D.C., for petitioners.

Mr. W. R. C. Cocke, of Norfolk, Va., for respondents.

Mr. Justice REED delivered the opinion of the Court.

Respondents, receivers of the Seaboard Air Line Railway Company, seek from the Bituminous Coal Division of the Department of the Interior an exemption of certain coal from the Bituminous Coal Code on the ground that they were both the producer and consumer of the coal. If Seaboard is held to be a producer-consumer, it is entitled to an exemption by virtue of Section 4 part II(l) and Section 4-A. These sections together with others pertinent to the discussion are set out in a note below.¹ The application for exemption was filed before the National Bituminous Coal Commission August 4, 1937. The first hearing was in September 1937 before the examiners for the Commission. After the passage of the Reorganization Act of 1939, 53 Stat. 561, 5 U.S.C.A. § 133 et seq., and the acquiescence of Congress in Reorganization Plan No. II, 53 Stat. 1433, 5 U.S.C.A. § 133t note, a

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application of the conditions and provisions of the code provided for in section 4, (831—833), or of the provisions of section 4-A, (834), an excise tax in an amount equal to 19 1/2 per centum of the sale price at the mine in the case of coal disposed of by sale at the mine, or in the case of coal disposed of otherwise than by sale at the mine, and coal sold otherwise than through an arms' length transaction, 19 1/2 per centum of the fair market value of such coal at the time of such disposal or sale. In the case of any producer who is a code member as provided in section 4 (831—833), and is so certified to the Commissioner of Internal Revenue by the Commission, the sale or disposal by such producer during the continuance of his membership in the code of coal produced by him shall be exempt from the tax imposed by this subsection.

'Sec. 4. (§ 831.) The provisions of this section shall be promulgated by the Commission as the 'Bituminous Coal Code', and are herein referred to as the code.

'Producers accepting membership in the code as provided in section 5 (835) (a) shall be, and are herein referred to as, code members, and the provisions of such code shall apply only to such code members, except as otherwise provided by subsection (h) of part II (section 833) of this section.

'For the purpose of carrying out the declared policy of this Act (subchapter), the code shall contain the following conditions and provisions, which are intended to regulate interstate commerce in bituminous coal (prescribed in sections 832 and 833), and which shall be applicable only to matters and transactions in or directly affecting interstate commerce in bituminous coal:

Part II—Marketing.

'(s833.) (e) No coal subject to the provisions of this section shall be sold or delivered or offered for sale at a price below the minimum or above the maximum therefor established by the Commission, and the sale or delivery or offer for sale of coal at a price below such minimum or above such maximum shall constitute a violation of the code: Pro- division headed by a Director was established by the Secretary of the Interior known as the Bituminous Coal Division. Order No. 1394, as amended by Order No. 1399 of July 5, 1939, 4 F.R. 2947. Thereafter the hearings proceeded before the Division and the order denying the exemption was passed by the Director, June 14, 1940.

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vided, That the provisions of this paragraph shall not apply to a lawful and bona fide written contract entered into prior to June 16, 1933.

'(l) The provisions of this section (sections 831, 832 and this section) shall not apply to coal consumed by the producer or to coal transported by the producer to himself for consumption by him.

'Sec. 4-A. (§ 834.) Whenever the Commission upon investigation instituted upon its own motion or upon petition of any code member, district board, State or political subdivision thereof, or the consumers' counsel, after hearing finds that transactions in coal in intrastate commerce by any person or in any locality cause any undue or unreasonable advantage, preference, or prejudice as between persons and localities in such commerce on the one hand and interstate commerce in coal on the other hand, or any undue, unreasonable, or unjust discrimination against interstate commerce in coal, or in any manner directly affect interstate commerce in coal, the Commission shall by order so declare and thereafter coal sold, delivered or offered for sale in such intrastate commerce shall be subject to the provisions of section 4 (831, 832 and 833).

'Any producer believing that any commerce in coal is not subject to the provisions of section 4 (831, 832 and 833), * * * may file with the Commission an application, verified by oath or affirmation for exemption, setting forth the facts upon which such claim is based. * * * Within a reasonable time after the receipt of any application for exemption the Commission shall enter an order granting, or, after notice and opportunity for hearing, denying or otherwise disposing of such application. * * * Any applicant aggrieved by an order denying or otherwise disposing of an application for exemption by the Commission may obtain a review of such order in the manner provided in subsection (b) of section 6 (836).

'Sec. 6. (§ 836.) * * * (b) Any person aggrieved by an order issued by the Commission in a proceeding to which such person is a party may obtain a review of such order in the Circuit Court of Appeals of the United States, within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the Better practice might have suggested a dismissal since the Director found Seaboard was not a producer. Subsequently Seaboard sought review under Section 6(b) and obtained the decree, now under consideration, reversing the Director's order. The opinion accompanying the decree held that the facts of this case brought the Seaboard under the classification of producer. 4 Cir., 114 F.2d 752. As the question of federal law was important² and unsettled by any decision of this Court, certiorari was granted, J.C. § 240(a), 28 U.S.C.A. § 347(a), 311 U.S. 644, 61 S.Ct. 442, 85 L.Ed. 410, and the decree below affirmed by an equally divided Court, 312 U.S. 666, 61 S.Ct. 824, 85 L.Ed. 1111. The present consideration is upon a petition for rehearing. 313 U.S. 596, 61 S.Ct. 938, 85 L.Ed. 1550.

Seaboard, a coal-burning railroad, is a large consumer of bituminous coal. The arrangements here in question are with three mines but as there are no significant difference in the plans by which the coal is extracted, we shall describe the contracts relating to one only, the William-Ann Mine, owned by the United Thacker Coal Company and the Cole and Crane Real Estate Trust.

This was the earliest arrangement. It originated in May, 1934, when the coal code of the National Industrial Recovery Act, 48 Stat. 195, was in effect.³ The first step was a lease of coal lands by the Seaboard from the landowners which granted to Seaboard the right to mine coal for fourteen months with the privilege of yearly renewals which originally were not to run beyond June 30, 1939. Successive extensions have continued its effect since that time. During the spring of 1936 two extensions of six weeks each were agreed upon, specifically in view of the case of Carter v. Carter Coal Co., 298 U.S. 238, 56 S.Ct. 855, 80 L.Ed. 1160, decided May 18, 1936. The Carter case involved the Bituminous Coal Act of 1935, 15 U.S.C.A. § 801 et seq., the predecessor of the present act. A per ton royalty, as rent, was reserved to the landowners with an annual minimum of $16,200 payable quarterly. The lease was terminable on fifteen days notice, if the landowners terminated the contractor's lease, about to be referred to, for the contractor's default.

The second step in this arrangement was for the landowner lessors of the lease just described to lease simultaneously to a contractor selected by Seaboard the mining equipment on the demised premises consisting of buildings, tipples, machinery and other appurtenances necessary or convenient for extracting the coal. This equipment was sufficient for reasonably economical mining. It was further provided in the coal lease that the term and the renewal privileges of the equipment lease should be coextensive with those of the coal lease.

The final step was an operating contract between the contractor, Daniel H. Pritchard, referred to in the land lease as the lessee of the facilities for mining, and Seaboard for the extraction of the coal by the contractor or supplier and the delivery of it to Seaboard for consumption. This contract also was made simultaneously with the coal lease. It contained a provision requiring the contractor to obtain a lease of the mining equipment in accordance with that segment of the entire plan referred to in the preceding paragraph. For a flat per ton cost on a sliding scale dependent upon volume, the supplier agreed to mine the coal. His compensation was subject to variation by fluctuations in costs beyond his control such as taxes, wages, machinery and explosives. Alternatively, payment could be made on a cost basis plus ten cents per ton for the contractor's compensation. This operating contract ran for the same term and had the same renewal privileges as the coal lease contract heretofore described and has been continued in effect by extensions made for the same terms as the extensions of the coal lease. The supplier was called an independent contractor in the document. This he was, at least in the sense that he managed the mining in his own way without a right of direction in...