Honorable C. R. McNamee, Director 

Rate Division 

Railroad Commlsslon of Texas 

Austin, Texas 

Dear Sir: Opinion No. O-3118 

Re: (a) Transportation of cotton 

owned by Commodity Credit Corporation, Unlted States Department 

of Agriculture, by a common or 

contract carrier, intrastate, for 

special rates arrived at by contract and in disregard of the published tariff prescribed by the 

Railroad Commission of Texas. 

(b) Transportation of cotton held 

and possessed by Commodity Credits 

Corporation, United States Department of Agriculture, under loan 

agreement not yet in default and 

to which title remains in the producer, on the basis of rates flxed by contract between the parties 

rather than at the published rates 

prescribed by the Railroad Commission for intrastate traffic. 

Your letter of February 3, 1941, submits for OUP opinion the following question, which has been presented to you 

by Mr. C. G. Rausch, Traffic Manager, Cotton Division, Commcditg Corporation, Unlted States Department of Agriculture: 

"'In transporting U. S. Government Cotton 

must the motor truck adhere to Its published 

rates or can a common or contract carrier make 

special rates on this traffic for us?'" 

In connection with the foregoing question, copy of attached letter to you from Mr. 0. G. Rausch, gives the followlng informatlon: 

"In response to the questions propounded 

in Mr. McNamee's letter provlouslg referred to, 

will say that all of the cotton shipped from 
Honorable C. R. McNamee, Director, page 2 o-3118 

one location to another in the State of Texas 

is now owned outright by this Corporation, but 

in some instances is cotton placed In the loan 

by the owner of such cotton as security for the 

funds advanced by the Corporation to the owner 

of such cotton. Of course~thls Corporation 

holds temporary title to such cotton until the 

loan agreements have been complied with or are 

in d,efault; therefore, the cotton may or may 

not at some future date become the outright property of the Corporation. 

"hnswerlng your further inquiry, usually 

the cotton shipped by us moves under documents 

showing the Commodity Credit Corporatlon as both 

the shipper and the receiver of the cotton, and 

as receiver in care of the facility in which 

the cotton will be stored on delivery." 

The business of transporting persons and property from 

one point in Texas to another by common or contract carrier, 

Is a business impressed or affected wi.th a public use of interest, so as to become subject, under the reserved police power 

of the State, to legislative control in all respects necessary 

to protect the public against danger, injustice, and opression, 

including the fixing and regulation of rates. In general, the 

Legislature may make all such reasonable regulations as it may 

deem necessary for the protection of the public In its relations with those who carry on a business affected with the 

public Interest. 

45, 631-632. 

6 Ruling Case Law 228; 13 C. J. S. pages 44- 

To the Railroad Commission, as the duly constituted agency of the State for this purpose, the Legislature 

has delegated the duty of fixing maximum rates for intre~state 

transportation services of common or contract carriers, to 

protect the public from excessive charges and from unjust dlscrimination. 

But the first phase of your questlon does not present 

a controversy between a common or contract carrier and a shipper of cotton in the ordlnarg channels of commerce, i.e. the 

public, so as to require the protection of the police power 

in the above respect. The Commodity Credit Corporation, the 

admitted owner and shipper of the cotton under the first 

phase of your question, is undoubtedly an agency or instrumentality of the United States, being so declared by Congress In 

15 U. S. C. A., Section 713, providing: 

"Notwithstanding any other provision of law, 

Commodity Credit Corporation, a corporation organized under the laws of the State of Delaware 
Honorable C. R. McNamee, Director, page 3 O-3118 

as an agency of the United States pursuant to,the 

executive order of the President of October 16, 

1933, shall continue, until the close of business 

of June 30, 1941, or such earlier date as may be 

fixed by the President by executive order, to be 

an agency of the United States." 

Under Title 5, U. S. C. A. Section 1333, Reorganization Plan No. 1, Part IV, Section 401, the Commodity Credit 

Corporation, its functions ana activities, property and personnel, was transferred to the Department of dgrlculture; a 

duly constituted, executive department of the Government, to 

be administered under the general direction and supervision 

of the Secretary of Agriculture. 

The status of the Commodlty Credit Corporation being 

thus established as an outright and direct agency or lnstrumentality of the Federal Government, created for the purpose of 

discharging the constitutional functions of said Government 

under its Farm Relief Program, it Is for us to determlne 

whether or not the admitted authority of the Railroad Com7nlssion of Texas to fix and promulgate rates for the transportation of persons or property, intrastate, under the police 

power residing In the Legislature, would, in the instant case, 

impose such a-burden or restriction upon such agency or instrumentality, as to contravene the Federal Constitution and 

the powers which stem therefrom. 

The Constitution of the United States does not contain 

any express limitation on the police power of the states as 

such, and does not limit a state's power to make all regulations reasonably necessary to advance or secure the general 

welfare of the people residing within such state. However, 

Article VI, Section 2, of the Constitution of the United States, 

expressly declares that the Constitution itself and the Federal laws and treaties made in pursuance thereof, are the supreme law of the land. The Federal Government, therefore, is 

paramount within the scope of the powers conferred upon it by 

the Constitution, and a state must exercise Its police power 

subject to the constitutional llmitatlons. 16 c. J. s. 565. 

The rule is stated in Western Union Telegraph Co. V. 

Mayor of the City of New York, et al, 38 Fed. 552, as follows: 

"The statutes which the defendants are proceeding to enforce unquestionably belong in the 

category of police regulations, the power to establish which has been left to the indlvldual 

states. But statutes of this class may sometimes 

trench upon the federal jurisdiction; and when 
Honorable C. R. McNamee, Director, page 4 O-3118 

their provisions extend beyond a just regulation of right for the public good, and unreasonably abridge or burden the prlvlleges which 

the national authorl.ty conserves., they cease to 

be operative. The state, when providingby leg-, 

islation for the protection of the public health, 

the public morals, or the public safety, Is subject to the paramount authority of the constitution of the United States, and may not violate 

rights secured or guaranteed by that Instrument, 

or Interfere with the execiation of the powers 

confided to the general,government. Mugler v. 

Kansas, 123 U. S. 623,~663, 8 Sup. Ct. Rep. 273. 

In M0rgan.v. Louisiana, 118 U. S. 462, 6 Sup. Ct. 

Rep. 1114, the supreme court say: 

"'In all cases of this kind it has been repeatedly held that when a question is raised 

whether the state statute is a just exercise of 

state power, or Is intended by roundabout means 

to invade the domain of federal authority this 

court will look into the operation and effect of 

the statute to discern Its purpose.' 

"And again the court say, (page 464:) 

"For, while it may be a police power In. 

the sense that all provisions for the health, 

comfort, and security of the citizens are police 

regulations and an exercise of the police power, 

it has been said more than once in this court 

that, even where such powers are so exercised 

as to come within the domain of federal authority, as defined by the constitution, the latter 

must prevail.'" 

Under the program enacted by Congress for maintaining 

a fixed percentage of parity price for certain farm products, 

cotton which the producer or grower fails, within the terms 

and manner required, to redeem from the loan made to him by 

the Commodi~ty Credit Corporation, becomes the absolute property of the Federal Government, by and through its duly established agency, subject to such sale or other disposition as 

would follow full and complete title. The transportation of 

such cotton from point to point within this State is certainly reasonably necessary to the proper sale or handling of such 

cotton, and the costs of this transportation is a substantial 

item In determining the net price which will be realized by 

the Government in the sale of such cotton. For the State of 

Texas, through its Railroad Commisslon, to require the Federal 
Honorable C. R. McNamee, DFrector, page 5 O-3118 

Government to pay the published maximum rates on Intrastate 

shipments, when presumptively, common and contract carriers 

stood willing and able to give more advantageous rates, 

would constitute, in the amount of such differential, a direct burden upon an agency or Department of the Federal Gov-~ 

ernment. There being no reason to support such added burden, 

in the protectionof the public from extortionate charges 

and unjust dlscrlmlnation, we thlnk~such burden cannot be 

constitutionallg'exacted. The sale, transportation and dlsposition of cotton owned by the Government through the Commodity Credit Corporation; is within the exclusive scope of 

Federal power and Lt Is accordingly our answer to the first 

phase of your question that the police power of the State, in 

the field of rate-making and flxlng, has no application here 

but must be subordtnate to the implied powers of the Federal 

Government, arlsing under the Constitution of the United States. 

This conclusion may be easily distinguished from that 

reached by this Department in Conference Opinion 3106 to 

Honorable Homer Garrison, Jr., Director, Department of Public 

Safety, Austin, Texas, of date November 25, 1940, upholding, 

as to vehicles operated by employees of the Soil Conservation 

Service of the United States Department of Agriculture, the 

provisions of state.law prohibfting the operation of overlength, over-height, over-width and, over-weight vehicles 

on the public highways of this State. The exercise of tAeuPpolice power in the opinion referred to was reasonably designed 

to safeguard the lives, safety and well-being of the inhabitants of the State and to protect the highways of the State 

from damages and Injury, while in the instant discussion the 

police power sought to be exercised bears no reasonable relation to the health, safety and well-being of the people or 

preservation of the property of the State of Texas. In the 

first instance the burden visited upon a Federal agency by the 

police power is reasonable and constitutional while in the 

latter it is not. 

But the same prlnclples of constitutional law will not 

be applicable to the second phase of your lnqulry involving 

the authority of common or contract carriers to transport, lntrastate, at rates other than those fixed by the Raflroad Commission, cotton in the custodg and possession of the Commodity 

Credit Corporation, as security for loans thereon to the producer, under the cotton parity price program, but to which absolute title has not ripened in such Corporation by default 

of such producer. In this situation, the title to the cotton 

remains in the producer, subject to redemption or release of 

the lien thereon by timely payment of the loan or advance made 

by the Government, plus accrued handling costs and charges. 

Title to the cotton cannot be said to rest In the Government 
. . 

Honorable C. R. McNamee, Director, page 6 0-3118 

until the expiration of the date flxed,by law for such payment 

and redemption by the producer. Hence, the producer and not 

the Government is the actual shipper. 

The results which follow from this distinction are 

stated In the.case of Sands v. Calmar S. S. Corporation, 296 

N. Y. sup. 590, involving the validity of the contract of a 

common carrier by water to transport goods sold to the United 

States, under acts of Congress permitting rate reductions for 

the Government: 

"In construing the provision in connection 

with the Interstate Commerce Act, it has been 

held Improper to permit the beneflt of special 

rates on government material to accrue to angone other than the government itself. Havens 

& co. v. Chicago & N. W. Rg. Co. 20, I.C.C. 156; 

Nashville, C. & St. L. Rg. v. State of Tennessee, 

262 U. S. 318, 43 S. Ct. 583, 67 L. Ed. 999; 25 

Op. Attys. Gen. 408. 

"In the opinion of the Attorney General 

(supra), It was stated in substance ~that the 

Interstate Commerce Act is not violated by reductlon of freight rates, authorized by Section 

22 on materials and machinery used by the United 

States, or by parties contracting with them, 

for work upon irrigation systems, provided the 

government receives the whole benefit of the reduced rate or concession; but it is violated if 

the contractor receives any portion of such benefit. 

"I am forced to conclude that it is the 

plalntlff shipper who would benefit by any reduction In rates, and not the government. By 

obtaining such a concession the plaintiff would, 

be benefitted, in that it would find itself 

able to bid more advantageously than other prospectlve bidders not receiving such special rates. 

Therein lies the vice of plaintiff's contention. 

All of these various acts aim to curtail the 

vicious practice resulting from discrimination. 

Discrimination would certainly result if a particular shipper, whether by iradvertance or design, 

is accorded an advantage which is not available 

to others." 

It is therefore, our answer to the second phase of 

your Fnquiry, that the carriage or transportation of such cot- 
F 

. . 

Honorable 6. R. McNamee, Director, page 7 O-3118 

ton by a common or contract carrier at rates less than those 

fixed and published by the Railroad Commission of Texas, 

would constitute an undue and reasonable dFscrImlnatlon in 

favor of the Individual shipper, to the injury and detriment 

of competing shippers. The police power of the State, reasonably eferclsed in the fixing of rates for the protection of 

the public, will not operate to unconstitutionally burden 

an agency or Department of the Federdl Government, and the 

rates fixed thereunder by the Railroad Commission of Texas 

must be fully observed. 

Trusting the foregoing fully answers your inquLry, we 

are 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

By s/Pat M. Neff, Jr. 

Pat M. Neff, Jr. 

Assistant 

PMN:LMzwc 

APPROVED MAY 9, 1941 

s/Grover Sellers 

FIRST ASSISTANT 

ATTORNEY GENWAL 

Approved Opinion Committee By s/BWB Chalrman