Source: https://supreme.justia.com/cases/federal/us/333/118/case.html
Timestamp: 2017-06-27 05:29:27
Document Index: 720552858

Matched Legal Cases: ['§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5']

Seaboard Air Line R. Co. v. Daniel (full text) :: 333 U.S. 118 (1948) :: Justia US Supreme Court Center Log In
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Seaboard Air Line R. Co. v. Daniel 333 U.S. 118 (1948)
U.S. Supreme CourtSeaboard Air Line R. Co. v. Daniel, 333 U.S. 118 (1948)Seaboard Air Line Railroad Co. v. DanielNo. 390Argued January 8, 1948Decided February 16, 1948333 U.S. 118APPEAL FROM THE SUPREME COURT OF SOUTH CAROLINA
1. The State Supreme Court had jurisdiction of the suit, with power to determine whether the Commission's order exempted the corporation from compliance with the state railroad corporation laws and, if so, whether the Commission had transcended its statutory authority in making the order. Pp. 333 U. S. 122-123. Page 333 U. S. 119
The constitution and statutes of South Carolina provide that railroad lines within that state can be owned and operated only by state created corporations; a railroad corporation chartered only under the laws of another state is forbidden under heavy penalties to exercise such Page 333 U. S. 120 powers within South Carolina. [Footnote 1] There is a way, however, in which a foreign railroad corporation may, under South Carolina statutes, indirectly exercise some powers over its South Carolina operations. It may organize a South Carolina Subsidiary. In addition, it may, under South Carolina law, consolidate that corporation with itself. In that event, so far as South Carolina statutes can govern, the consolidated result would be a corporation both of South Carolina and of another state. [Footnote 2]
This action was brought by appellant in the South Carolina Supreme Court to enjoin the state attorney general from attempting to collect the statutory penalties from appellant or to enforce the statutory provisions against it. [Footnote 3] The complaint alleged the following facts, Page 333 U. S. 121 about which there is no substantial dispute. Appellant applied to the Interstate Commerce Commission for approval of its purchase of the railway system pursuant to § 5 of the Interstate Commerce Act, as amended, 49 U.S.C. § 5. After notice to the Governor of South Carolina and others, the Commission conducted hearings and made a report in which it found that compliance by appellant with the South Carolina railroad corporation laws would result in "substantial delay and needless expense." It further found that compliance "would not be consistent with the public interest" -- the criterion which § 5 required the Commission to use in passing upon a change in ownership or control of a railroad. The Commission then entered an order which authorized appellant, as a Virginia corporation, to own and operate the entire system including the South Carolina mileage. The complaint also asserted that the order, by explicit reference to the Commission finding in its report, affirmatively authorized appellant to own and operate the entire railway system without complying with the South Carolina railroad corporation laws. [Footnote 4]
The answer to the complaint did not challenge the constitutional power of Congress to relieve appellant of compliance with South Carolina's requirements of state incorporation. It took the position that, insofar as the Commission order could be interpreted as an attempt to override state laws in this respect, it was void because outside the scope of the Commission's statutory authority. Page 333 U. S. 122 The appellant then filed a demurrer on the ground that the answer, as a matter of law, constituted neither a defense nor a counterclaim, since it admitted all allegations of fact in the complaint, and advanced nothing more than erroneous legal conclusions as asserted reasons why appellant should not be granted the relief for which it prayed.
So far as the appellant's complaint is concerned, this is not the kind of action to "set aside" a Commission order of which the federal district courts have exclusive jurisdiction. While the action does involve the scope and validity of a Commission order, the relief requested in the complaint was the removal of an obstruction to the railroad's obedience to the order, not its suspension Page 333 U. S. 123 or annulment. Nor did the answer seek to have the enforcement of the order enjoined, although it did question its validity as a basis for the relief sought in the complaint.
Under the foregoing circumstances, appellant was not compelled to wait until someone who had standing to attack the Commission's order might decide to seek its annulment in a federal district court. It properly sought relief from a court which could obtain jurisdiction of the parties whose refusal to recognize the order gave rise to its predicament. And the state court then had power, because of the issues raised by the complaint and because of the relief requested, to determine whether the order, properly interpreted, did exempt appellant from compliance with the state railroad corporation laws, and, if so, whether the Commission had transcended its statutory authority in making the order. Illinois Cent. R. Co. v. Public Utilities Commission, 245 U. S. 493, 245 U. S. 502-505. See Lambert Run Coal Co. v. Baltimore & Ohio R. Co., 258 U. S. 377, 258 U. S. 381-382; Central New England R. Co. v. Boston & A. R. Co., 279 U. S. 415, 279 U. S. 420-421. Page 333 U. S. 124
Congress has long made the maintenance and development of an economical and efficient railroad system a matter of primary national concern. Its legislation must be Page 333 U. S. 125 read with this purpose in mind. In keeping with this purpose, Congress has often recognized that the nation's railroads should have sound corporate and financial structures, and has taken appropriate steps to this end. The purchase of this very railroad by appellant resulted from extensive reorganization proceedings conducted by the Interstate Commerce Commission and federal district courts in accordance with congressional enactments applicable to railroads. In furtherance of this congressional policy, these agencies approved reorganization plans which called for the purchase and operation of these properties, including the portion in South Carolina, by appellant, as a Virginia corporation.
This Court has previously approved a Commission order entered in a § 5 consolidation proceeding which granted a railroad relief from state laws analogous to the state requirements here. Texas v. United States, 292 U. S. 522. Most of the reasons which justified the Commission's order in that case are equally applicable here. Furthermore, since that case was decided, Congress has given additional proof of its purpose to grant adequate power to the Commission to override state laws which may interfere with efficient and economical railroad operation. By § 5(11) of the Interstate Commerce Act of 1940, 54 Stat. 908, 49 U.S.C. § 5(11), Congress granted the Commission "exclusive and plenary" authority in refusing or approving railroad consolidations, mergers, acquisitions, etc. The breadth of this grant of power can be understood only by reference to § 5(2)(b), which authorizes the Commission to condition its approval upon "such terms and conditions and such modifications as it shall find to be just and reasonable." All of this power can be exercised in accordance with what the Commission may find to be "consistent with the public interest." The purchaser of railroad property with Commission approval is Page 333 U. S. 126 authorized by § 5(11) "to own and operate any properties . . . acquired through said transaction without invoking any approval under State authority," and such an approved owner, according to that paragraph, is
We see nothing in this sentence that detracts from the broad powers granted the Commission by § 5. In fact, the language of the sentence appears to support the Commission's power here exercised. Although the sentence bars creation of a federal corporation, it clearly authorizes a railroad corporation to exercise the powers therein granted over and above those bestowed upon it by the state of its creation. These federally conferred powers can be exercised in the same manner as though they had been granted to a federally created corporation. See California v. Central Pacific R. Co., 127 U. S. 1, 127 U. S. 38, 127 U. S. 40-45. Here, just as a federally created railroad corporation could, for federal purposes, operate in Page 333 U. S. 127 South Carolina, so can this Virginia corporation exercise its federally granted power to operate in that state.