Public Service Commission v. Union Pacific Railroad Company
| Decision Date | 30 June 1917 |
| Citation | 197 S.W. 39,271 Mo. 258 |
| Parties | PUBLIC SERVICE COMMISSION, Appellant, v. UNION PACIFIC RAILROAD COMPANY |
| Court | Missouri Supreme Court |
Appeal from Jackson Circuit Court. -- Hon. T. J. Seehorn, Judge.
Affirmed.
A. Z Patterson and James D. Lindsay for appellant.
(1) The Legislature vested the Public Service Commission with complete authority and jurisdiction over the issuance by every railroad corporation of bonds to be secured by liens upon the property of such corporations situated in this State, whether such corporations be organized under the laws of this State or of some other State. Secs. 43, 54, 55, 57, 58 and 59, also subdivisions, 6, 8 and 9 of Section 2, Public Service Commission Act 1913; State ex rel. v. Public Service Comm., 187 S.W. 827; Laws 1870, p. 90; Sec. 790 R. S. 1879; Sec. 3078, R. S. 1909; State ex rel. v Patterson, 105 Mo. 303; Black on Interpretation of Laws, 141. (2) The State has the right to control the method and conditions of the conveyance or encumbrance of real property within its jurisdiction. In the absence of Congressional action regulating the encumbrance to secure a bond issue by a public service corporation of property located in and forming part of the State, though forming part of a system extending into another State and used in interstate transportation, the right of encumbrance of property within the State must be held and exercised in conformity with the laws of the State. State ex rel. v. Public Service Comm., 187 S.W. 829; DeLashmutt v. Teetor, 261 Mo. 433; Arndt v. Griggs, 134 U.S. 316; United States v. Fox, 94 U.S. 315. (3) The Provisions of the Public Service Commission Act, and particularly sections 54, 56, 57, 58 and 59 thereof, as applied to respondent are an exercise of the police power of the State, exerted for the general welfare in the absence of Congressional action on the same subject, affecting the interstate commerce of defendant only incidentally and remotely, and not in a manner to constitute a regulation of or an inhibited interference with said interstate commerce. Hall v. Geiger-Jones Co., 242 U.S. 539; Railroad v. Illinois, 177 U.S. 514; Express Co. v. Croninger, 226 U.S. 500; Railroad v. Kansas, 216 U.S. 262; Hennington v. Georgia, 163 U.S. 299; Railroad v. Ohio, 173 U.S. 285; Fuller on Interstate Commerce, p. 19; Pearsall v. Railroad, 161 U.S. 677; Securities Co. v. United States, 193 U.S. 317; Railroad v. Solan, 169 U.S. 133; Railroad v. Tobacco Co., 169 U.S. 311. (4) Supervision over the making and sale of bond issues secured by liens upon the property of public service corporations owning property and doing business in the State is the essential purpose of law. The fee provided for is a secondary and incidental matter, and is not a tax in any proper sense. The one is a measure of protection of the State and of its citizens, and of the property in the State devoted to public use; the other a provision for reimbursement to the State for the services performed by the commission in the exercise of supervisory power. State ex rel. v. Public Service Comm., 187 S.W. 827; Tel. Co. v. New Hope, 187 U.S. 419; Tel. Co. v. Philadelphia, 190 U.S. 160. (5) The fee charged is not a tax. As a fee it is not invalid because measured by the amount of the entire bond issue which is also secured in part by property situated outside of this State. Railway Co. v. Botkin, 240 U.S. 227; Mining Co. v. Massachusetts, 231 U.S. 68; Railroad v. Stiles, U. S. Supreme Court Advance Opinions (January 15, 1917), No. 4, page 58. (6) Property held by respondent in this State is held "subject to all regulations and provisions of the law governing railroads in this State." Sec. 3078, R. S. 1909; Railroad v. Public Service Comm., 187 S.W. 829.
Henry N. Clark, N. H. Loomis, R. W. Blair and I. N. Watson for respondent.
(1) Section 55 of the Public Service Commission Law concerns the transfer and encumbering of public service franchises; it is an exercise of jurisdiction inhering in the State's own grant of such franchises. Section 57 concerns the issue of securities by domestic corporations; it is an exercise of the reserved power over the State's own creatures. Neither section is an exercise of the police power or of the sovereign power over the ownership of real property. People ex rel. v. Stevens, 197 N.Y. 1; People ex rel. v. Public Service Comm., 203 N.Y. 299; Christian Union v. Yount, 101 U.S. 352; Coppage v. Kansas, 236 U.S. 14; Railroad Co. v. McGuire, 219 U.S. 569. (2) Sections 55 and 57, correctly construed, are inapplicable to the bond issue and incidental encumbrance in suit, since the railroad company is a foreign corporation, enjoys no franchise from the State of Missouri and engages therein exclusively in interstate commerce. Christian Union v. Yount, 101 U.S. 352; Western Union v. Kansas, 216 U.S. 21; Moran v. Ross, 79 Cal. 159; Elliott on Railroads (2 Ed), sec. 1 (a). (3) If, however, sections 55 and 57 are construed as applicable to the bond issue and incidental encumbrance in suit they constitute a direct burden upon interstate commerce and upon property and business outside the State. Crutcher v. Kentucky, 141 S. 47; Western Union v. Kansas, 216 U.S. 1; Text Book Co. v. Pigg, 217 U.S. 91; Laird v. Railroad, 121 Md. 179.
OPINION
In Banc.
I. The Public Service Commission seeks by this action to enjoin the Union Pacific Railroad Company from making a proposed issue of bonds to cover its expenditures for rolling stock and other improvements and betterments, without first applying to it for authority.
The Union Pacific is one of the largest railroad systems in the United States. It was incorporated under the laws of the State of Utah, and now owns and operates 3500 miles of railroad, which traverses seven states from its western terminus at Ogden, Utah, to its eastern terminus at Kansas City, Missouri. The book value of the company's holdings and property is about three hundred millions of dollars, of which only three millions is located in Missouri. Its Missouri property consists of rights of way and land acquired by purchase for terminal purposes and warehouses for the handling and storage of freight, together with its main track, which extends into the State only half a mile, and certain spur or switch tracks maintained for the accommodation of private shippers and industrial plants, its total trackage in Missouri being only about one thousand feet.
In 1908, the company executed its First Lien and Refunding Mortgage on its entire system to secure an issue of $ 200,000,000 four per cent bonds. This mortgage was duly recorded in the recorder's office of Jackson County Missouri, prior to the enactment of the Public Service Commission Law, and only $ 65,902,000 of bonds were issued thereunder, the balance being reserved for future issue to cover expenditures to be made from time to time for construction of new track, rolling stock, improvements and betterments.
Having expended over two million of dollars for equipment and improvements, in 1914 the company applied to the trustee under the original mortgage for the issuance of $ 2,250,000 additional of reserved bonds by way of reimbursement, and the bonds having been authenticated and delivered to the company they are now in its treasury available for sale.
The commission contends the Union Pacific Company is subject to the provisions of the Public Service Commission Act of the State of Missouri, which took effect April 15, 1913, and that before consummating the sale and delivery of such bonds, it must secure permission to do so from the commission. The respondent railroad contends that the act does not apply to railroad corporations incorporated under the laws of another State, enjoying no franchise from the State of Missouri, and engaged therein exclusively in interstate commerce; that the application of the provisions of the act to defendant company would impose a direct burden upon interstate commerce and property and business outside the State. The pertinent portions of the Public Service Commission Act will be stated in the opinion.
On the allegations of the petition and answer both parties moved for judgment. The court sustained the motion of defendant, whereupon the plaintiff appealed to this court.
II. That the Legislatures of the several states may delegate to administrative bodies any power which is not "strictly and exclusively legislative" (Chief Justice Marshall) is an evolution of the law wrought by the logic of events and now firmly established. We have moved beyond the over-restrictive ancient rulings and now accord to lawmaking bodies full power, within the Constitution, to make use of any special agency necessary to effective action. In many states this is secured by adequate constitutional amendments. In others, lacking that facility, the organic law has received constructions narrowing its limitations to the strict letter of the chart. In the solution the reciprocal rights of the public and the great carriers and utility corporations, the Legislature cannot, in many cases, do justice to both, since its constitution and term of office disable it to make the investigation essential to that end. In such cases to act with wisdom, fairness and promptness, it must have expert and informative findings beyond the scope of any direct inquiry by the Legislature itself. Hence the necessity of employing special administrative bodies "charged with the solution of a problem demanding expert treatment" and having "no functions outside the field offered by this problem." This is the primal principle in the nature of the commissions created by the states. The...
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