United States v. Chicago Co

• Decision Date: 09 January 1933
• Docket Number: No. 264,264
• Citation: 77 L.Ed. 583,288 U.S. 1,53 S.Ct. 245
• Parties: UNITED STATES v. CHICAGO, N.S. & M.R. CO
• Court: U.S. Supreme Court

288 U.S. 1

53 S.Ct. 245

77 L.Ed. 583

UNITED STATES

v CHICAGO, N.S. & M.R. CO.

No. 264.

Argued Dec. 16, 1932.

Decided Jan. 9, 1933.

Appeal from the District Court of the United States for the Northern District of Illinois.

Messrs. William D. Mitchell, Atty. Gen., and John LordO'Brian, Asst. to the Atty. Gen., for the United States.

[Argument of Counsel from page 2 intentionally omitted] Messrs. Robert E. Quirk, of Washington, D.C., Ralph R. Bradley, of Chicago, Ill., and Claude D. Cass, of Washington, D.C., for appellee.

[Argument of Counsel from pages 3-5 intentionally omitted] Mr. Justice ROBERTS delivered the opinion of the Court.

This is a suit brought pursuant to section 12(1) of the Interstate Commerce Act, as amended,¹ to enjoin the appellee from issuing any securities or assuming any obligation or liability in respect of the securities of others without first having obtained an order from the Interstate Commerce Commission authorizing such action, as required by section 20a of the act.² The petition avers appellee's intention to issue or become guarantor of securities in violation of the last-mentioned section.

The District Court, after making detailed and elaborate fact findings, concluded as matter of law that the rail- road was an independently operated electric interurban railway expressly excepted from the requirements of the section. The question is whether the facts found warrant the decision.

Section 20a forbids a carrier to issue shares, bonds, or obligations, evidence of interest or indebtedness, or to assume any obligation or liability of any other person or corporation, unless the commission, upon application, after investigation, shall by order authorize such issue or assumption, as within the applicant's corporate purpose and compatible with the public interest. After prescribing the procedure before the commission, and declaring its jurisdiction plenary and exclusive, the section enacts that securities or obligations not issued pursuant to its terms shall be void, and imposes civil and criminal liability upon officers and directors participating in their creation.

Paragraph 1 provides: 'As used in this section the term 'carrier' means a common carrier by railroad (except a street, suburban, or interurban electric railway which is not operated as a part of a general steam railroad system of transportation). * * *'

The properties of the appellee have developed, through various transfers and reorganizations, out of a street railway company organized more than twenty-five years ago. The company has for some years owned and operated in interstate commerce an electrified railroad, the main line of which extends from Chicago, Ill., to Milwaukee, Wis. There are 138 route miles of line, 132 miles of second track, and 42 miles of yard and other track. About 40 miles of main and second track are in city streets, on some of which the appellee operates in common with street cars and vehicular traffic. In addition to the main line between Chicago and Milwaukee, there is an alternate line for part of the distance; a branch some 36 miles in length; and two other branches, one of which is 3 and the other 8 miles long. Operation in Chicago is over the elevated tracks of the Chicago Rapid Transit Company from the south side northerly through the loop district to a point on the north side (approximately 16 miles). Thence the line runs northerly through Chicago and Evanston to Wilmette, approximately 8 miles, over elevated dirt fill tracks owned by the Chicago, Milwaukee, St. Paul & Pacific Railroad Company, leased by the appellee jointly with the Chicago Rapid Transit Company. The remainder of the appellee's lines are upon its own right of way, or in streets the use of which is granted by local franchise. The total laid under local franchises, outside of Milwaukee, is approximately 3 miles; in the latter city the operation for 2.67 miles is over the tracks of a street surface railway owned by the appellee.

Twenty fast through passenger trains are operated daily in each direction between downtown Chicago and downtown Milwaukee with a running time equalling that of the fastest trains of the Chicago & Northwestern Railway, which operates fifteen through trains daily between the same cities. Dining cars and parlor cars are included in some of the appellee's fast trains. Modern, well-equipped passenger stations are maintained at a number of points; 51 have agents selling passenger tickets; at some 96 places shelters and platforms are maintained, at 35 platforms only; and at 42 locations at which certain trains stop at streets or highways no facilities are provided. Through railroad and Pullman tickets are sold to any part of the United States, Canada, or Mexico. Local passenger fares are computed on the mileage basis used by steam railroads.

Appellee's tracks are of standard gauge, and are physically connected with those of four steam railroads at some thirteen points, and with those of three electric lines. Eight connections are used for handling interchange carload freight. The railroad has substantial facilities for serving various industries located on its lines, such as side, industrial, team, and switch tracks, and freight classification tracks. It owns seven electric locomotives which are of a small type and unable to haul freight trains of the size usually employed by steam railroads, and 114 freight cars which have no electrical equipment and are interchangeable with steam railroads. Sixteen local freight tariffs are published; in 206 tariffs the railroad participates as initial carrier, and in more than 800 as a delivering or intermediate carrier, in conjunction with steam railroads.

The total transportation revenue in 1930 was over $6,000,000, about 76 per cent. from passenger traffic, and about 22 per cent. from freight. This ratio has been substantially maintained for some years. In 1930, 87 per cent. of carload freight traffic was interchange, and 78 per cent. of all freight traffic was interline, but only 42 per cent. of freight revenue was derived from interline business.

Locomotives are not employed in the passenger service, the cars having installed electrical equipment, and being somewhat shorter and narrower than standard passenger railroad coaches. Freight is hauled by electric locomotives. A merchandise package delivery freight service is supplied by cars similar to baggage cars used on steam railroads, having self-contained electric equipment, operated from the loop in Chicago to Milwaukee in trains of from one to five cars. At certain points gantlet tracks are required for handling freight cars, as the clearances on the main line are insufficient to permit their passage. Grades are much heavier than those customary on steam railroads, and some of the curves are of so short a radius as not to permit the passage of a steam locomotive. The company maintains no facilities for receipt or delivery of carload freight at its terminii in Chicago and Milwaukee, and cannot accomplish interchange of such freight at either; connections for this purpose being outside those cities.

The railroad was constructed to afford a fast electric passenger service between Chicago and Milwaukee and suburban passenger service into and out of Chicago. The freight business is subsidiary to this primary function, and is not fairly comparable to that ordinarily transacted by a standard steam railroad. Passenger traffic, whether measured by car service or by gross earnings, heavily preponderates over interline freight business. The main terminals serve only the passenger and merchandise freight traffic.

We thus have a typical example of an interurban electric line for passenger service, which has developed, in addition, such freight traffic as could advantageously be undertaken without interfering with performance of the main purpose of the carrier....