State of Texas v. United States

• Citation: 78 L.Ed. 1402,292 U.S. 522,54 S.Ct. 819
• Decision Date: 04 June 1934
• Docket Number: No. 920,920
• Parties: STATE OF TEXAS et al. v. UNITED STATES et al
• Court: U.S. Supreme Court

292 U.S. 522

54 S.Ct. 819

78 L.Ed. 1402

STATE OF TEXAS et al.

v UNITED STATES et al.

No. 920.

Argued May 9, 1934.

Decided June 4, 1934.

Appeal from the District Court of the United States for the Western District of Missouri.

[Syllabus from 523 intentionally omitted] Messrs. A. R. Stout and James V. Allred, both of Austin, Tex., for appellants.

The Attorney General and Harold M. Stephens, Asst. Atty. Gen., for the United States and the Interstate Commerce Commission.

Mr. Samuel W. Moore, of New York City, for appellees Kansas City Southern Ry. Co. and Texarkana & F.S. Ry. Co.

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

The Interstate Commerce Commission, by its report and order of October 4, 1933, authorized the Kansas City Southern Railway Company, a corporation organized under the laws of Missouri, to acquire control by lease of the railroad and properties of the Texarkana & Fort Smith Railway Company, incorporated under the laws of Texas. 193 I.C.C. 521. In this suit, the state of Texas, and officers and municipalities of that state, assailed the order as transcending the authority granted to the Commission by the Congress. The order was sustained by the District Court (6 F.Supp. 63), three judges sitting as required by statute (28 USCA § 47), and from its decree this appeal is taken.

The single point in controversy is with respect to the authority of the Commission to approve the acquisition of control by a lease which permits the lessee to abandon, or to remove from the state, the general offices, shops, etc., of the lessor. The provision of section 5 of the lease, which has that effect, is set forth in the margin.¹ The provi- sion is attacked as being in violation of the laws of Texas, which confine to Texas corporations the right to 'own or maintain any railways' within the state, which require every railroad company chartered by the state to 'keep and maintain permanently its general offices within this State at the place named in its charter,' and at that place also to maintain the offices of its principal officers, and which prohibit any railroad company from changing 'the location of its general offices, machine shops, or roundhouses, save with the consent and approval of the Railroad Commission' of the State.²

The Interstate Commerce Commission was divided in opinion. Upon a prior hearing, the Commission approved the lease upon the condition that the paragraph in controversy should be eliminated. Report and order of December 27, 1932; 189 I.C.C. 253. Following the enactment of the Emergency Railroad Transportation Act 1933 (Act of June 16, 1933, c. 91), the proceeding was reopened, and, after hearing, the Commission modified its order by striking out the above-mentioned condition, thus approving and authorizing the lease with its provision, in section 5, as to offices and shops.

The findings of fact set forth in the Commission's report are not contested. The lines which constitute what is called the Kansas City Southern Railway system (embracing the portions covered by the proposed lease) extend from Kansas City, Mo., to Port Arthur, Tex. (over 800 miles). The line of the Kansas City Southern Railway Company, the applicant, extends from Kansas City, Mo., to Mena, Ark. The line of the Texarkana & Fort Smith Railway Company is in two segments. The northern segment extends from Mena in a southerly direction, crosses the Arkansas-Texas state line, and runs through Texarkana and thence southeasterly into Arkansas and to the Arkansas-Louisiana state line. The portions of this segment in Arkansas are operated by the applicant under a lease previously authorized by the Interstate Commerce Commission. 105 I.C.C. 523. The portion of the northern segment which lies in the state of Texas is approximately 31 miles in length. The southern segment of the Texarkana & For Smith Railway extends from the Louisiana-Texas state line at the Sabine river to Port Arthur, Tex., and is approximately 50 miles in length. Thus the total main line mileage of the Texarkana & Fort Smith Railway in Texas is 81 miles; there are about 18 miles of branch lines. The portion of the railroad system lying between the Arkansas-Louisiana state line and the Louisiana-Texas statel line, approximately 228 miles, is owned by the Kansas City, Shreveport & Gulf Railroad Company, a subsidiary of the applicant.

The Commission, on the first hearing, found that the consummation of the plan presented by the applicant would result in an annual saving, under normal conditions, of about $81,000. This finding was repeated in the final report. The estimated saving would result from the unification of operations, the discontinuance of general offices of the Texarkana & Fort Smith Railway Company at Texarkana, and the removal to Shreveport and Kansas City of many of the activities at Texarkana which caused duplication of work. Thus, under the proposed plan, the auditor's and treasurer's departments of the Texarkana & Fort Smith Railway Company would be transferred to the applicant's headquarters at Kansas City, with an estimated annual saving of over $57,000. The offices of the general freight agent, general passenger agent, superintendent, and division engineer, and of the master mechanic at Port Arthur, would be removed to Shreveport and consolidated with similar offices of the applicant, at an estimated annual saving of over $21,000. There would also be a decrease in expenses for various services in connection with the building at Texarkana. Shreveport, said the Commission, is considered to be more centrally located from an operating standpoint than Texarkana, and there are at that point the applicant's main terminal for the southern territory, shops for heavy repairs, more industry, greater population, and more railroad connections.

The Commission found that for the four years, 1928—1931, the Texarkana & Fort Smith Railway Company handled an average of 993,622 tons of intrastate traffic and 3,405,944 tons of interstate traffic. Of the average total of 4,399,566 tons, the applicant participated in the handling of 3,192,554 tons. The net income of the Taxarkana & Fort Smith Railway Company amounted to $441,922 in 1926, $204,052 in 1927, $437,270 in 1928, $598,172 in 1929, and $95,655 in 1930. In 1931 there appears to have been no net income. The Commission concluded that 'in view of the volume of interstate traffic handled by the T. & F.S. and the net income earned by that carrier, it is clear that the expenditure of approximately $81,000 a year, which will be unnecessary under the plan that the applicant proposes to put into effect under the lease, constitutes an undue burden upon interstate commerce.'

The Commission further found 'that the lease by the Kansas City Southern Railway Company of the railroad and properties of the Texarkana & Fort Smith Railway Company, located in Texas and elsewhere not now under lease, in accordance with the proposed lease, will be in harmony with and in furtherance of the plan for the consolidation of railroad properties heretofore established by us and will promote the public interest.'

The state of Texas raises no question as to the constitutional power of the Congress to confer authority upon the Commission to approve the proposed lease with the stipulations under consideration. The question is simply as to the scope of the authority which has been con- ferred—the construction of the applicable statutory provisions. These are found in section 5 of the Interstate Commerce Act, as amended by the Emergency Railroad Transportation Act 1933 (title 2, §§ 201, 202 (49 USCA § 5)). Paragraphs (4)(a) and (4)(b) of that section make it lawful, with the approval and authorization of the Commission, for two or more carriers to consolidate or merge their properties, 'or for any carrier * * * to purchase, lease, or contract to operate the properties, or any part thereof, of another,' or to acquire control of another through purchase of its stock. On application to the Commission for such approval, appropriate notice of public hearing must be given to the Governor of each state in which any part of the properties of the carriers involved in situated, as well as to the carriers themselves. If, after hearing, 'the Commission finds that, subject to such terms and conditions and such modifications as it shall find to be just and reasonable, the proposed consolidation, merger, purchase, lease, operating contract, or acquisition of control will be in harmony with and in furtherance of the plan for the consolidation of railway properties established pursuant to paragraph (3), and will promote the public interest,' the Commission may give its approval and authorization accordingly.³

These broadening provisions of the Emergency Railroad Transportation Act 1933 confirm and carry forward the purpose which led to the enactment of Transportation Act 1920 (Title 4, 41 Stat. 474 et seq. (49 USCA § 1 et seq.)). We found that Transportation Act 1920 introduced into the federal legislation a new railroad policy, seeking to insure an adequate transportation service. To attain that end, new rights, new obligations, new machinery, were created. Railroad Commission of Wisconsin v. Chicago, Burlington & Quincy R. Co., 257 U.S. 563, 585, 42 S.Ct. 232, 66 L.Ed. 371, 22 A.L.R. 1086; New England Divisions Case, 261 U.S. 184, 189, 190, 43 S.Ct. 270, 67 L.Ed. 605; Dayton-Goose Creek Railway Co. v. United States, 263 U.S. 456, 478, 44 S.Ct. 169, 68 L.Ed. 388, 33 A.L.R. 472. It is a primary aim of that policy to secure the avoidance of waste. That avoidance, as well as the maintenance of service, is viewed as a direct concern of the public. Davis v. Farmers' Co-operative Equity Co., 262 U.S. 312, 317, 43 S.Ct. 556, 67 L.Ed. 996; Texas & Paci ic Railway Co. v. Gulf, Colorado & Santa Fe Railway Co., 270 U.S. 266, 277, 46 S.Ct. 263, 70 L.Ed. 578. The authority given to the Commission to authorize consolidations, purchases ...