Source: https://supreme.justia.com/cases/federal/us/314/360/
Timestamp: 2019-04-23 04:17:08+00:00

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permission, and in view of the fact that to reject that interpretation now would result in the enrichment of stockholder equity which itself was capitalized, with no thorough scrutiny by the Commission, by virtue of that interpretation. P. 314 U. S. 372.
Appeal from a Judgment affirming a judgment of the municipal court of the City of New York in favor of the above-named appellee in an action against the appellant to recover interest due on bonds issued by the Northern Ohio Railway Company which were guaranteed by the Lake Erie & Western Railroad Company. 175 Misc. 902, 24 N.Y.S.2d 846. The latter company was a constituent of the appellant in this case, a consolidated railroad corporation embracing a number of railroad systems. The case was first argued at the 1940 Term, and the judgment below was affirmed by an equally divided Court, 313 U.S. 538. Rehearing was granted, 313 U.S. 596.
incurred by either of such corporations shall thenceforth attach to such new corporation, and be enforced against it and its property to the same extent as if incurred or contracted by it. [Footnote 1]"
Among the constituent companies was the Lake Erie & Western Railroad. In connection with a lease of certain properties from the Northern Ohio Railway, it had guaranteed payment of principal and interest upon the latter's bonds secured by mortgage on the leased property. Because of the contention that the state law "attached" the obligations of this guaranty to the Nickel Plate, it has now been held liable upon defaulted coupons by a Municipal Court of the City of New York.
and that such approval had not been given. This defense, too, was overruled by the state court, and this federal question comes here by appeal.
"that the New York, Chicago & St. Louis Railroad Company has never applied for, nor received authorization pursuant to section 20(a) of the Interstate Commerce Act to assume any obligation or liability as lessor, lessee, guarantor, endorser, surety, or otherwise in respect of bonds of the Northern Ohio Railway Company."
"That the consolidation had the effect of transferring the guaranty of the Lake Erie to the Nickel Plate appears to be generally assumed by the parties to the reorganization proceeding. . . . [Footnote 3] "
This reference suggests an examination of the administrative history of the Nickel Plate consolidation and financing to learn what administrative application has been made of the statutes in question to the debt structure of this particular appellant.
Shortly after its consolidation, the appellant asked the Interstate Commerce Commission to certify under § 1 of the Interstate Commerce Act that public convenience and necessity required the acquisition and operation by it of the railroad lines owned by the constituent companies. It also asked authority under § 20(a) to issue preferred and common capital stocks in the amounts fixed by the agreements and articles of consolidation. It did not, however, ask under § 5 of the Act for approval of its consolidation. Acquisition and Stock Issue by New York, C. & St.L. R., 79 I.C.C. 581.
of the Commission, and required that they be approved if found, among other things, to be in harmony with such complete plan for general consolidation and if it appeared that the bonds of the consolidated corporations at par, together with the outstanding capital stock at par, would not exceed the value of the consolidated properties as determined by the Commission. By adding § 20(a), the Transportation Act placed the issue of new securities and the assumption of obligations under the control of the Commission. The Act did not, however, provide for federal incorporation or for federal consolidation of carriers, but left the creation of new or consolidated corporations to state laws.
are in force. They are, in fact, the laws to which resort must be had to effectuate consolidations which the interstate commerce act is designed to facilitate. We cannot conclude that they have been nullified or superseded. As valid existing laws, we have no power to suspend them. Whether state corporations, in matters regarding their status as legal entities, as distinguished from their participation in interstate commerce, may avail themselves of such laws does not depend upon our election or anything we do. Authority in us to withhold approval in the public interest of security issues when State laws permit consolidation does not mean that we may not grant approval when public interest requires that we do so. Furthermore, in the absence of mandatory provisions of a Federal statute, we should give full faith and credit to the acts of sovereign States, especially when, as in this case, their action is unanimous."
"it does not seem we should conclude that the Congress intended to prevent voluntary consolidations under available State laws in order thereby to force consolidation under such general plan as we may ultimately adopt."
"if the Congress had intended to suspend State laws until we should at some later time elect to permit their use, such intent would have been manifested in plain terms."
79 I.C.C. at 586. The majority of the Commission concluded that, by virtue of the state proceedings and notwithstanding the lack of approval by the Interstate Commerce Commission, "all things necessary to the completion and consummation of the consolidation have been effected." 79 I.C.C. at 583.
of $23,000,000 par value of the shares in the old Lake Erie Company subject to an agreement to contribute a relatively small part of it to the treasury of the new company, all as provided in the agreements and articles of consolidation.
The Commission did not, in authorizing this stock issue, make any finding that such stock at par, together with bonds at par, did not exceed the value of the consolidated properties. It made no order approving assumption of any indebtedness of any kind. It appears that the appellant at that time sought no such authority. Approaching maturity of some issues of bonds eventually forced it to take some corporate action, and, upon such later occasions, it sought and obtained authorization to extend maturity dates, and, in connection with such extensions, to make an express assumption of liability as primary obligor.
One of the constituent companies -- the old Nickel Plate -- had outstanding at consolidation $16,381,000 of a bond issue dated October 1, 1887, maturing October 1, 1937. The assumption of this obligation was not approved until September 17, 1937, at which time the Commission approved a proposal to extend the maturity date for ten years and to assume obligation as primary obligor in respect of the extended bonds. New York, C. & St.L. R. Co. Bonds and Assumption of Obligation and Liability, 221 I.C.C. 772. The published reports of the Commission disclose two instances of similar approval of extension and assumption of primary liability with respect to bonds of the Lake Erie & Western outstanding at the date of consolidation, one as recent as June 7, 1941. New York, C. & St.L. R. Co. Assumption of Obligation and Liability, 217 I.C.C. 598; New York, C. & St.L. R. Co. Assumption of Obligation and Liability, 247 I.C.C. 71.
"It appears that the consolidation was completed on April 11, 1923, and that the new company is now vested with the property, rights, and franchises of the Nickel Plate and other constituent companies, subject to all their debts, obligations, and liabilities."
"The applicant is the successor, by consolidation, of the Toledo, St. Louis & Western Railroad Company and other companies, and, by virtue of such consolidation, has acquired all property, rights, and powers, and has assumed all obligations of the Toledo, St. Louis & Western Railroad Company."
(Italics supplied.) Pledge of Toledo, St. Louis & Western Bonds by New York, C. & St.L. R., 86 I.C.C. 465.
(Italics supplied.) [Footnote 4] Upon that premise, the Commission made allowance in the plan of reorganization for the indemnification of the appellant because, if required to make good on the guaranty, it would become subrogated to the rights of the Northern Ohio bondholders as a mortgage creditor, and would become a general creditor in the amount of any deficiency.
By its decision in Acquisition and Stock Issue by New York, C. & St.L. R., 79 I.C.C. 581, the Commission adopted the construction of the Transportation Act which the Nickel Plate urged upon it and held itself precluded from supervision of the consolidation under § 5. This Court subsequently approved that construction in Snyder v. New York, C. & St.L. R. Co., 118 Ohio St. 72, 160 N.E. 615, 278 U.S. 578, holding that the Nickel Plate had the rights of a de jure corporation notwithstanding its failure to have its creation by consolidation approved by the Commission, on the ground that the consolidation took place at a time when § 5 had "not as yet become applicable."
"Nothing in this report shall be construed as restricting the commission in its action with respect to the promulgation of a complete consolidation plan or upon the subject of valuation."
securities -as distinguished from the effect of the law of consolidation on the fact of preexisting debts. That such was the holding is further indicated by the Commission's subsequent handling of the obligations of the constituent companies.
although the Commission, with knowledge of the claim of illegality, has set aside securities in the Akron reorganization to compensate it in some measure, and has made no effort to enjoin the Nickel Plate from using its revenues to satisfy, in part at least, the claims of these bondholders.
Under the circumstances of this case, the administrative interpretation on which the Commission has acted in its long course of dealing with Nickel Plate affairs should not be upset. United States v. Chicago, North Shore R. Co., 288 U. S. 1.
"The rights of all creditors of, and all liens upon the property of, either of such corporations, parties to such agreement and act, shall be preserved unimpaired, and the respective corporations shall be deemed to continue in existence to preserve the same, and all debts and liabilities incurred by either of such corporations shall thenceforth attach to such new corporation, and be enforced against it and its property to the same extent as if incurred or contracted by it. No actions or proceedings in which either of such corporations is a party shall abate or be discontinued by such agreement and act of consolidation, but may be conducted to final judgment in the names of such corporations, or such new corporation may be, by order of the court, on motion substituted as a party."
"It shall be unlawful for any carrier to issue any share of capital stock or any bond or other evidence of interest in or indebtedness of the carrier (hereinafter in this section collectively termed 'securities') or to assume any obligation or liability as lessor, lessee, guarantor, indorser, surety, or otherwise, in respect of the securities of any other person, natural or artificial, even though permitted by the authority creating the carrier corporation, unless and until, and then only to the extent that, upon application by the carrier, and after investigation by the commission of the purposes and uses of the proposed issue and the proceeds thereof, or of the proposed assumption of obligation or liability in respect of the securities of any other person, natural or artificial, the commission by order authorizes such issue or assumption. The commission shall make such order only if it finds that such issue or assumption: (a) is for some lawful object within its corporate purposes, and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the carrier of service to the public as a common carrier, and which will not impair its ability to perform that service, and (b) is reasonably necessary and appropriate for such purpose."
Akron, c. & Y. Ry. Co. & Northern O. Ry. Co. Reorganization, 236 I.C.C. 214, 216, 217.
"As to the matter of assumption of obligation and liability in respect of the securities of others, it is our understanding that no authority was sought nor granted in connection with the application recorded under the above Finance Docket number. It is our further understanding that the consolidated company took the properties, rights, and franchises of the constituent companies, subject to all their debts, obligations, and liabilities, such as might be imposed by the consolidation statutes of the states of the constituent companies. See 82 I.C.C. 365 (366)."
Akron, C. & Y. Ry. Co. and Northern O. Ry. Co. Reorganization, 228 I.C.C. 645, 647.
"Appropriate securities of the new company as hereinafter noted, consistent with the other provisions of the plan, with which to recompense the New York, Chicago, and St. Louis Railroad Company for the debtor's and the intervening debtor's liability to it for amounts expended in the performance of its guaranty of the first mortgage bonds of the intervening debtor, shall be issued and held in treasury."
"The New York, Chicago & St. Louis Railroad Company, upon presentation to the treasurer of the new company of appropriate proof of loss sustained in the performance of its contract of guaranty of bonds of the intervening debtor, shall receive of the new company stock issued in reorganization and held in treasury, for each $100 of loss so proved, $22.79, par value, of new common stock, and shall participate equally and ratably with the holders of class A warrants in any distribution of stock pursuant thereto, each $100 of proved loss entitling the New York, Chicago & St. Louis Railroad Company to participate in the distribution to the same extent as one class A warrant."
228 I.C.C. at 681, 682.
"The New York, Chicago & St. Louis should be treated as though having a claim equal to the losses it will sustain in the performance of its guaranty. The mathematical maximum of this claim would be equal to the principal of the outstanding Northern bonds plus the four years of overdue interest thereon, or $3,000,000. The probable maximum would be very much less, but cannot be determined on any definite basis. Securities should accordingly be reserved pending performance of the New York, Chicago & St. Louis guaranty on the basis of its having a $3,000,000 claim."
"as may be made possible through the New York, Chicago & St. Louis settling with the Northern bondholders, or otherwise discharging its liabilities, for less than the maximum. . . ."
228 I.C.C. at 673, 674.
"for enforcing on all in lieu of the guaranty a compromise that may be agreeable to a majority but not acceptable to a minority, and no provision for discharging in these proceedings the New York, Chicago & St. Louis, a solvent obligor able to meet its debts as they mature, from any of its obligations. It follows that a provision in a plan of reorganization of the debtors, pursuant to section 77, releasing the guaranty, would be of such doubtful validity as to require our disapproval, and that settlements for this guaranty should be made separately from the plan of reorganization. . . ."
The application of the Nickel Plate asked authority to issue 327,200 shares of preferred stock and 462,479 shares of common stock to be exchanged share for share for the stocks of the constituent companies. It included a general balance sheet of each constituent company and a consolidated balance sheet showing long-term debts of the constituent companies aggregating $78,897,000, which items and exact amounts were carried into the consolidated balance sheet.
The Lake Erie & Western Railroad Company was shown to have outstanding capital stocks with a par value of $23,680,000, $13,895,600 of long-term debt, and $4,996,944 of "deferred liabilities." The stock was replaced with a like amount of stock in the new company, and the debt and "deferred liabilities" were carried in full into the consolidated balance sheet under the same headings. The obligation in suit was not specified; perhaps it was included in "deferred liabilities."
A Stockholders' Protective Committee of the Old Nickel Plate filed objections to the plan of consolidation, one of the grounds of which was the alleged assumption of a heavy bond indebtedness ahead of the stock, and complaint was specifically made of the indebtedness of the Lake Erie & Western.
This interpretation is not inconsistent with the Commission's practice in other cases. Assumption of Obligation by Hudson River Connecting R., 72 I.C.C. 595, dealt with assumption of liability on a mortgage which the applicant had agreed to assume as part of the purchase price of a piece of land. It had no connection with any consolidation proceeding. Rock Island System Consolidation, 193 I.C.C. 395, was decided after amendment of § 5 by the Emergency Railroad Transportation Act approved June 16, 1933. The Commission had, by the time of that decision, promulgated a plan of consolidation, and it found that the Rock Island consolidation would be "in harmony with and in furtherance of the plan." 193 I.C.C. at 403. It was the absence of such a plan that defeated jurisdiction of the Commission to approve the Nickel Plate consolidation. Snyder v. New York, C. & St.L. R., supra.
While I agree with the opinion of the Court, I think an elaboration of the point, which is the nub of the case, is desirable in view of certain observations in the dissenting opinion.
Appellant is a corporation formed under § 141 of New York Railroad Law which provides for consolidation of railroad corporations. On the filing of the articles or agreement of consolidation, the several constituent companies "shall be one corporation by the name provided in such agreement." And § 141 also provides that "such act of consolidation shall not release such new corporation from any of the restrictions, liabilities or duties of the several corporations so consolidated." By § 143, all debts of the constituent companies "shall thenceforth attach to such new corporation, and be enforced against it and its property to the same extent as if incurred or contracted by it." We are pointed to no provision of the New York law which would permit the creation of the new consolidated corporation without the attachment of the debts of the constituent companies.
the Commission was not necessary to create this consolidated corporation. A necessary and inherent incident of its creation was the attachment of these obligations. Hence, I do not see how we can say that, although authority from the Commission was not necessary to create appellant, such authority was necessary in order for this consolidated corporation to meet the requirements which the New York law exacted as conditions to its creation. But, if we held that an attachment of liability under the New York Consolidation Act was an "assumption" of liability within the meaning of § 20(a), we would be doing just that. Hence, I feel forced to conclude that, in case of this type of consolidation, "assumption" in § 20(a) does not include attachment of liability by virtue of the filing of articles of consolidation under a state statute, though it would, of course, include the issuance of any security or the incurrence or extension of any obligation subsequent to consolidation. Such is one consequence of the failure to follow Commissioner Eastman's views in Acquisition and Stock Issue of New York, C. & St.L. R., 79 I.C.C. 581. But I do not see how, in all fairness, we can reopen at this late stage the unfortunate decision in the Snyder case.
I think the judgment should be reversed, but without prejudice to any right of appellee to recover under § 20(a)(11) of the Interstate Commerce Act.
the only question which they have briefed and argued here is whether § 20(a)(2) precludes the imposition of the asserted liability upon appellant where, as is the case here, its assumption by appellant has not been approved by order of the Commission as required by that section. The Court avoids decision of this question by declaring that the Commission has declined to give its approval because it has construed § 20(a)(2) as inapplicable, and that we are bound by that construction.
Examination of the Commission's opinions and orders from which the Court draws its cryptic answer to the question before us makes it plain that the Commission has placed no such construction on the statute in any case, and that, in the cases cited relating to the Nickel Plate consolidation, it has never had any occasion to construe § 20(a)(2). On the contrary, in several cases, the Commission has construed § 20(a)(2) as applicable to obligations like the present, which "attach" by operation of state law to the acquisition by the carrier of the property of other roads, and, in conformity to that section, has approved the "assumption" of such liability by the carrier.
to be permitted to operate the consolidated lines and to issue securities in conformity to the plan of consolidation, in a proceeding in which the Commission was neither asked to take nor took any action with respect to assumption of liabilities, and this under a statutory scheme of control which plainly contemplates that a consolidation may go into effect without adoption of its assumption of liability feature, which in any case can become operative only by order of the Commission approving it upon application and on findings that the public interest will be served. Rock Island System Consolidation, 193 I.C.C. 395, 403, 404; Acquisition of Lines and Stock Issue by P., O. & D. R.R., 105 I.C.C. 189, 193. The Court infers the Commission's refusal to approve the assumption of liability for want of jurisdiction from the silence and inaction of the Commission when it was not called upon to speak or to act either by the statute or by any application pending before it.
"even though permitted by the authority creating the carrier corporation, unless and until, and then only to the extent that, upon application by the carrier, and after investigation by the commission of the purposes and uses of . . . the proposed assumption of obligation . . . , the commission by order authorizes such issue or assumption."
its ability to perform that service, and (b) is reasonably necessary and appropriate for such purpose."
It will be noted that there is no requirement of the statute that applications for the acquisition of other roads or for the approval of security issues, and applications for approval of the assumption of guarantee obligations, shall be united in a single proceeding. Indeed, it is clear that the statute leaves the Commission free to approve the one and reject an application for the other. And it appears that the uniform practice of the Commission has been, as the statute directs, to entertain neither, except on an application asking the desired approval. And where more than one is asked, the Commission has, by its order, separately dealt with those upon which it intended to act. E.g., Acquisition of C. & O. Northern Ry. Co. by C. & O. Ry., 70 I.C.C. 550; Gainesville Midland Reorganization, 131 I.C.C. 355; Control of Greenbrier, Cheat & Elk R.R., 131 I.C.C. 525; Chicago, M. St. P. & P. R. Co. Acquisition, 158 I.C.C. 770; Elmira & L.O. R. Co. Acquisition, 170 I.C.C. 127.
by the carrier for such authority."
New York Central R. Co. Assumption, 158 I.C.C. 317, 322.
In the Commission's view, authority to consolidate includes the authority to acquire and operate properties of other roads, but neither that authority nor the authority to issue securities upon consolidation includes authority to assume liabilities of the constituent companies. Rock Island System Consolidation, 193 I.C.C. 395, 403, 404; Santa Fe Trail Transp. Co. -- Merger, 5 M.C.C. 324, 328; cf. Illinois Terminal R. Co. Consolidation and Securities, 221 I.C.C. 676. The Court's suggestion that this was not so before the Commission promulgated its general plan of consolidation under § 5 is contrary to the ruling in Acquisition & Stock Issue by P., O. & D. R.R., 105 I.C.C. 189. In that case, before the promulgation of the plan, the Commission was at pains to warn (p. 193) that its approval of an issue of securities to carry out a consolidation under state law did not involve any decision on assumption of liability of the obligations of the consolidated company's constituents. Assumption of Obligation by L.S. & I.R., 86 I.C.C. 640, and Grand Trunk W. R. Co. Unification and Securities, 158 I.C.C. 117, 138, 142-143, both decided before the promulgation of the plan, granted permission to assume the obligations of the constituents, and thus gives further proof that the Commission, when it intended to take any position with respect to the assumption of obligations in connection with a consolidation, did so by action affirmatively expressed, rather than by silence.
I.C.C. 563; cf. Rock Island System Consolidation, 193 I.C.C. 395, 403, 404. And, in the case of this appellant, as of other roads, it has later entertained and disposed of separate applications for the approval of the assumption of the obligations involved. N.Y., C. & St.L. R. Co., Assumption of Obligation and Liability, 217 I.C.C. 598; N.Y., C. & St.L. R. Co. Bonds and Assumption of Obligation and Liability, 221 I.C.C. 772; N.Y., C. & St.L. R. Co. Assumption of Obligation and Liability, 247 I.C.C. 71; St. Louis-S.F. Readjustment, 145 I.C.C. 218; Pacific Coast R. Co. Securities, 189 I.C.C. 79; Cincinnati Union Term. Co. Securities, 166 I.C.C. 419 and 499, and 184 I.C.C. 619; West Jersey & S. R. Co. Bonds, 217 I.C.C. 125; cf. Assumption of Obligation by New Orleans, T. & M. Ry., 94 I.C.C. 218.
Such action by the Commission plainly precludes any inference that, in approving an application for the operation of the consolidated lines or an issue of securities under a consolidation, it was doing more than responding to the petition presented to it, or that it was undertaking to pass on the legality or propriety of the assumption by the consolidated road of guarantee obligations of its constituent companies. We are pointed to nothing suggesting that the Commission has ever regarded such approvals as involving an unasked determination with respect to the assumption by the consolidated carrier of the obligation of its constituent companies.
by appellant of obligations of its constituent companies. In none did it make or decline to make any of the findings or the order required by § 20(a)(2) with respect to such obligations. In none did it express any opinion whether obligations attaching to a consolidated carrier are within the prohibition of the statute, or as to its duty to approve or disapprove of their assumption.
In Operation of Lines and Issue of Capital Stock by the N.Y., C. & St.L. R. Co. Co., 79 I.C.C. 581, the Commission was asked to and did specifically approve the operation by appellant of the consolidated line and the issuance of certain stock by appellant, pursuant to the consolidation plan, and nothing more. It made no mention of any assumption of obligation by appellant, or of the assumption provisions of § 20(a)(2). It neither took nor declined to take action affecting such assumption. For all that appears, the Commission, in its examination of the capital structure and the balance sheet of appellant, may have disregarded the guarantee obligation as one not affecting the consolidated company because its assumption had not been approved by the Commission.
was operative notwithstanding the narrow interpretation which it gave to § 5.
The Commission authorized appellant to issue, under § 20(a)(2), certain preferred and common stock, to be exchanged for the stock of its five constituent companies in carrying out the consolidation. If consolidations under state law could, in the Commission's view, be effected at that time wholly without regard to § 20(a)(2), then the granting of authority to issue the stock would have been superfluous. That the Commission deemed such authority necessary is persuasive that it regarded § 20(a)(2) as applicable to all issues of securities, or assumptions of obligations, which occurred in connection with a consolidation. Freedom to consolidate, in the Commission's view, plainly did not include freedom to make adjustments in capital structure without the authorization required by § 20(a)(2). Hence, the only real question is whether an obligation assumed or attaching merely by operation of law is an "assumption" within the meaning of § 20(a)(2) -- a question which, as will presently appear, the Commission has consistently answered in the affirmative whenever it has been called upon to give an answer.
Commission had not, by its order, approved. In the one case, the application was for authority to make a new bond issue; in the other, for permission to pledge some of its own assets to secure a new note issue. Passing references by the Commission, in recounting the history of the consolidation, to the fact that appellant had acquired the properties of constituent companies "subject to all their debts, obligations, and liabilities," and that it "has assumed all obligations" of a different constituent company from that here involved, can hardly be accepted as evidence of an unasked administrative construction of a provision of a statute which it was not administering, and with respect to which it expressed no opinion.
to determine the question which appellant asks to have determined here, and pointedly left it undecided. Obviously the approved plan gave appellant a powerful incentive to resist performance of the guarantee, and manifestly did not purport to foreclose appellant from securing the adjudication of the liability which it seeks here.
Not only do these cases fail to disclose any self-denying construction of § 20(a)(2) by the Commission, but, in others where the Commission has been called on to consider the question, it has taken the position that the word "assumption" in § 20(a)(2) includes an obligation placed upon the carrier merely by operation of the state law under which it had acquired property.
on our part that it had previously ruled that the obligations assumed were not required to comply with § 20(a)(2).
"While the applicant does not propose to make any indorsement on the bonds, or execute any agreement in respect of the payment of them, it appears that, under the laws of New York, the acceptance of a deed conveying land subject to a mortgage indebtedness, which the grantee agrees to assume, has the effect of making the land the primary fund for the payment of the mortgage indebtedness, so that the grantee becomes the principal debtor and the grantor a surety."
The Commission made the findings prescribed by § 20(a)(2), and ordered that the applicant be "authorized to assume obligation and liability" in respect of the mortgaged bonds, "said assumption of obligation and liability . . . to be accomplished by the acceptance by the applicant of a deed of said lands."
"Prior to consummation of the merger, applicant's liability in respect of the bonds of said companies was of a contingent nature. Under the statutes of New Jersey, all debts and liabilities of merged or consolidated corporations shall thenceforth attach to the consolidated corporation, and may be enforced against it to the same extent as if said debts and liabilities had been incurred or contracted by it. Thus, through completion of said merger, applicant has, by operation of law, become the principal obligor in respect of these bonds, and, as such, has obligations and liabilities in respect thereof which differ from the contingent liability previously existent. In our opinion, assumption of such obligations and liabilities as successor in title is a matter over which we have jurisdiction. [Footnote 2/2]"
never been departed from. But it is novel doctrine that a provision of an act of Congress may be nullified by a construction of the Interstate Commerce Commission which can be inferred only from the fact that the Commission ignored the provision in a proceeding in which, by its settled practice, it was not called upon to construe or apply it. Certainly the Commission does not appear ever to have acted upon any such view, nor has it come before us to advocate it. It seems plain that the rulings of the Commission that § 20(a)(2) is applicable to those obligations which state law attaches to the carrier in consequence of its participation in a consolidation, as well as to those which attach to it by reason of its expressed promise, carry out the purposes of the statute and are consistent with its language. Section 20(a)(2) was enacted to prevent the imposition on the railroads of the country, through consolidation or otherwise, personal liability for the obligations of other roads, such as had occurred in certain well known consolidations notorious for their disregard of the interests of security holders and the public. See 58 Cong.Rec. 8317-18. As the effective means of prevention, it prescribed that all such obligations should be void unless the Commission orders their approval as compatible with the public interest.
to control judicial decision. Courts are not like weathercocks, changing with every administrative wind that blows. They cannot, on the same day, rightly decide that the same statute means different things in different cases merely because the Commission may, on different days, have had shifting impressions which it has not thought sufficiently important to express in any ruling, opinion, decision, or order.
United States v. Chicago North Shore R. Co., 288 U. S. 1, upon which the Court relies, has no significance here. It is one thing to accept judicially the Commission's decision that a particular carrier is an "interurban electric railway," a determination unquestionably within its power and peculiarly within its administrative competence. It is quite another to bind the courts by a construction of the statute which the Commission has never voiced but which, on the contrary, it has consistently denied -- namely, that obligations may be assumed without conscious and express permission of the Commission, and in defiance of the declared will of Congress.
us is whether personal liability can be assumed by appellant without complying with the statute, which makes such an assumption void "even though permitted by the authority creating the carrier corporation . . . unless and until, and then only to the extent that," the Commission has approved the assumption after making the prescribed findings.
The statute does not deprive the holders of obligations of the constituent companies of any rights against them or their property. It only prevents the acquisition by such holders, contrary to the public interest, of new rights against the consolidated carrier without the consent of the Commission, and, by § 20(a)(11), the statute gives a remedy to those who, like appellee, become innocent purchasers of such securities, after consolidation, for the loss of such rights through the operation of § 20(a)(2). The application of the statute in this case no more involves enriching stockholder equities than in any other. The question in every case is whether the public, and railroad security holders, shall be burdened, through repeated reorganizations of railroads, with excessive indebtedness which it was the purpose of the statute to prohibit. It is obvious that the statute would fail of its proclaimed purpose unless, as the Commission has ruled, its prohibitions extend to those obligations which the consolidated carrier assumes by virtue of its entering into a consolidation under state law, as well as those which it assumes by its expressed promise. The words of the statute neither compel nor persuade to the decision now given, which seems to rest on nothing more substantial than a far-fetched surmise. It defeats the Congressional purpose and conflicts with the legislative history and administrative construction of the statute.
MR. JUSTICE REED, MR. JUSTICE FRANKFURTER and MR. JUSTICE BYRNES join in this opinion.
"If . . . any security in respect to which the assumption of obligation or liability is so made void, is acquired by any person for value and in good faith and without notice that the . . . assumption is void, such person may, in a suit or action in any court of competent jurisdiction, hold jointly and severally liable for the full amount of the damage sustained by him in respect thereof the carrier which . . . assumed the obligation or liability so made void, and its directors, officers, attorneys, and other agents, who participated in any way . . . in the authorizing of the assumption of the obligation or liability so made void."
It appears from the record, in an affidavit upon which summary judgment was granted, that, in 1936, after the consolidation, appellee purchased the bonds from a broker for value "without notice of any defense thereto or to the guarantee thereof."
"Under the agreement and the laws of Michigan, the debts, liabilities, and duties of the last two companies named attach to the applicant and are enforceable against it to the same extent and in the same manner as if originally incurred by it. The applicant accordingly seeks authority to assume obligation and liability in respect of the securities of these companies."
"Pursuant to the terms of the joint agreement of merger dated October 1, 1936, and the provisions of the laws of the Pennsylvania, the applicant will assume all the debts and obligations of the"
"No interstate railroad should be permitted to lease or purchase any other railroad, nor to acquire the stocks or securities of any other railroad, nor to guarantee the same, directly or indirectly, without the approval of the federal government."
Senate opposition again proved too strong in 1914, as well as in 1916, but, by the end of the war, opposition to the regulation of railroad capitalization practically disappeared. See Locklin, Regulation of Security Issues by the Interstate Commerce Commission, pp. 12-22; Sharfman, The Interstate Commerce Commission, Vol. I, pp. 86-94, 189-93, and the Commission's Annual Report for 1919, pp. 4-5.
"was not only a fulfillment of the Commission's repeated recommendations, but grew out of a practical unanimity of opinion among the numerous and diverse interests that sought to influence the character of the new legislation. While this extension of the Commission's authority was designed, indirectly, to protect the investing public against the dissipation of railroad resources through faulty or dishonest financing, its dominant purpose was to maintain a a sound structure for the rehabilitation and support of railroad credit, and for the consequent development of the transportation system. It aimed to render impossible the recurrence of the various financial scandals, with their destruction of confidence in railroad investment, which had become notorious, and to prevent the subordination of the carriers' stake as transportation agencies to the financial advantage of alien interests."

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