Source: https://www.legalcrystal.com/case/97695/northwestern-elec-co-vs-fpc
Timestamp: 2019-04-25 14:29:22+00:00

Document:
Held, that the order was authorized by the Act, and was constitutional. P. 321 U. S. 123 .
1. The method adopted by the Commission for the disposition of the write-up, supported by expert evidence and not plainly arbitrary, may not be set aside on review, even though it may not accord with the best accounting practice. P. 321 U. S. 124 .
2. That the accounting method prescribed interferes with the function of management is not a valid constitutional objection. P. 321 U. S. 124 .
3. That the order prevents the company from redressing the deficiency of paid-in capital by entering among its assets subsequent appreciation in value does not constitute a taking of the property of the company or its stockholders. P. 321 U. S. 124 .
4. That a successor company might have been allowed to carry as an asset the actual cost to it of the physical property of the company is irrelevant. P. 321 U. S. 124 .
5. The order does not violate the reserved powers of the States under the Tenth Amendment. P. 321 U. S. 125 .
6. No conflict exists between the authority here exercised by the Federal Power Commission and that exercised by the Securities and Exchange Commission. P. 321 U. S. 125 .
Acting under § 301(a) of the Federal Power Act of 1935, [ Footnote 1 ] the Commission prescribed a uniform system of accounts for utilities, and ordered reclassification of their electric plant accounts with necessary adjusting entries to reflect such new classification as of January 1, 1937. Northwestern submitted a classification, and the Commission, after investigation, issued a report thereon and requested Northwestern to submit a plan for disposition of the item of $3,500,000 upon its books, and recommended that the amount should be transferred to Account 107 -- Electric Plant Adjustments -- pending submission of such a plan. Northwestern failed to comply with these requests, and an order to show cause was issued, upon which a hearing was held. The Commission found that the cost of the physical property was all represented by obligations issued by the company, and that the common stock did not represent money or property received. The Commission further found that, in the interest of consumers, investors, and the public, the $3,500,000 write-up to be entered in Account 107 should be disposed of by applying net income above preferred stock dividend requirements to its elimination, and added that this disposition would insure the company's receiving value to balance common stock liability, and that dividends ought not to be paid on the common stock until it had an equivalent paid-in value. An order was entered requiring Northwestern to comply with the finding.
fully justified by the Act, [ Footnote 5 ] the relevant provisions of which are within the legislative power. [ Footnote 6 ] The only inquiries now open are whether the order as to the disposition of the $3,500,000 item appearing in Account 107 goes beyond the Commission's statutory mandate or constitutional limitations. We hold that it does neither.
The objections based upon the Constitution are without merit, and need but brief notice. That the accounting method prescribed interferes with the function of management to some extent is beside the point. [ Footnote 8 ] That the Commission's action prevents the company from redressing the deficiency of paid-in capital by entering among its assets appreciation of value subsequent to the issue of the common stock takes nothing from the company or the stockholders. Although, if American had purchased the assets of Northwestern, it might have been allowed to place among its assets on its own books the actual cost to it of the physical property of Northwestern, the fact is irrelevant upon the question whether Northwestern may carry a fictitious asset account representing estimated value of capital stock issued neither for money nor for property at exchange value.
Kansas City Southern R. Co. v. United States, 231 U. S. 423 ; Norfolk & W. R. Co. v. United States, 287 U. S. 134 ; American T. & T. Co. v. United States, 299 U. S. 232 .
See Norfolk & W. R. Co. v. United States, supra, 287 U. S. 141 ; American T. & T. Co. v. United States, supra, 299 U. S. 236 .
Norfolk & Western R. Co. v. United States, supra, 287 U. S. 143 .

References: § 301
 v. 
 v. 
 v. 
 v. 
 v. 
 v.