Case Name: STATE OF NORTH DAKOTA EX REL. WILLIAM LANGER, Attorney General, Petitioner, v. NORTHERN PACIFIC RAILWAY COMPANY, and Walker D. Hines, as Director General of Railroads of the United States, Defendants
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1919-04-01
Citations: 43 N.D. 556
Docket Number: 
Parties: STATE OF NORTH DAKOTA EX REL. WILLIAM LANGER, Attorney General, Petitioner, v. NORTHERN PACIFIC RAILWAY COMPANY, and Walker D. Hines, as Director General of Railroads of the United States, Defendants.
Judges: Christianson and Bobinson, JJ. concur.
Reporter: North Dakota Reports
Volume: 43
Pages: 556–619

Head Matter:
STATE OF NORTH DAKOTA EX REL. WILLIAM LANGER, Attorney General, Petitioner, v. NORTHERN PACIFIC RAILWAY COMPANY, and Walker D. Hines, as Director General of Railroads of the United States, Defendants.
(172 N. W. 324
[reversed in 250 U. S. 135, 63 L. ed. 897, P.U.R.1919D, 705, 39 Sup. Ct. Rep. 502, 18 N. C. C. A. 878]).
Under the authority vested in him by Act of Congress of August 29, 1916, the President of the United States, on December 26, 1917, issued a proclamation assuming the possession and control of the railroad systems of the United States. On March 21, 1918, an act of Congress was approved, which provided for the operation of the transportation systems then under government control and for just compensation to their owners. Acting under § 10 of that act, the Director General of Railroads promulgated general order No. 28, increasing freight rates horizontally and prescribing a uniform passenger fare of 3 cents per mile, not distinguishing between interstate and intrastate traffic. Weld:
Note. — Authorities discussing the question of power of the President in time of war, to take possession and assume control of any system of transportation, are collated in notes in 4 A.L.R. 1680; 8 A.L.R. 969; 10 A.L.R. 956 and 11 A.L.R. 1450, on Federal control of public utilities
Railroads — Federal control during- war with Germany — extent of President’s power.
1. The Act of Congress of March 21, 1918, confers upon the President extraordinary executive powers rendered necessary by the existence of a state of war.
Railroads — Federal control did not cease with signing of armistice.
2. The termination of hostilities under the armistice does not justify judicial interference to restrain the further exercise of the extraordinary executive powers rendered necessary by the existence of a state of war.
Railroads — President’s power over interstate rates during Federal control.
3. Section 10 of the Act of Congress of March 21, 1918, which gives to the President power to initiate rates, fares, charges, classifications, regulations, and practices, is construed .in the light of the other provisions of the act and of the pre-existing method of regulating commerce through the agencies of Federal and state governments, and as so construed it does not confer original authority to initiate intrastate rates which will supersede pre-existing lawful rates, prescribed by the legislature or other competent state authority.
Railroads — Federal control —- review of rates by Interstate Commerce Commission.
4. Rates initiated by the President or Director General, under § 10, are subject to review by the Interstate Commerce Commission, and its power to revise or alter is the power previously vested in it under the act to regulate interstate commerce, as amended, which gives it no authority to regulate intrastate rates as such.
Railroads — review of rates by Interstate Commerce Commission.
5. Under the Interstate Commerce Act as amended, the Interstate Commerce Commission has authority to modify intrastate rates otherwise valid only when the modification of such rates is necessary to the complete exercise of its jurisdiction over interstate commerce.
Railroads — regulation of rates by state.
6. In the absence of a clear expression of intention to repeal existing state regulations affecting intrastate commerce, it will not be presumed that Congress so intended.
Railroads — Federal control — rates existing before Federal control in interstate police regulation.
7. Under § 15 of the Act of March 21, 1918, which provides that nothing in the act shall be construed to repeal, impair, or affect the existing lawful police regulations of the states except where such regulations may affect the transportation of troops, war materials, and government supplies, or the issue of stocks and bonds, pre-existing intrastate rates continue in effect as lawful police regulations.
Railroads — police regulation.
8. The term “police regulations” as used in § 15 is not limited to regulations directly affecting the health, lives, and morals of the people, but embraces regulations designed to prevent discrimination and economic oppression.
Opinion filed April 1, 1919.
Original proceeding in mandamus on relation of the Attorney General.
Peremptory writ awarded.
Charles Donnelly, Attorney for Director General, M. A. Hildreth, United States District Attorney for North Dakota, John Carmody, Assistant United States District Attorney for North Dakota, of counsel.
Congress was empowered by the Constitution to vest in the President, or in the Interstate Commerce Commission, control over intrastate rates and fares. Pappens v. United States, 252 Fed. 55; Minnesota Rate Cases, 230 U. S. 352, 399; Shreveport Case, 234 U. S. 342.
By the acts of August 29, 1916, and March 21, 1918, the President was given control over all traffic, state and interstate, and was empowered to initiate rates, fares, and charges by filing them with the Interstate Commerce Commission. Act of August 29, 1916/j Act of March 21, 1918, §§ 9, 10; Employer’s Liability Cases, 207 U. S. 463, 500; TradeMark Cases, 100 U. S. 82, 98; Beer Co. v. Massachusetts, 97 U. S. 25, 33.
Any doubt as to the meaning of the law will be resolved in favor of the executive’s practical construction of it. Heath v. Wall”'’'', 138 U. S. 573, 582; Pennoyer v. McOonnaughy, 140 U. S. 1, 23; Hahn v. United States, 107 U. S. 402; United States v. Moore, 95 U. S. 760.
William Danger, Attorney General (Frank E. Packard of counsel) for petitioner.
The right of action in the instant case arises under the Constitution and statutes of the state of North Dakota, and is not a Federal question. Tennessee v. Union Planters Bank, 152 U. S. 454; Chappie v. Water-worth, 155 U. S. 102; Walker v. Collins, 167 U. S. 57.
The decisions are assembled in Stanfield v. Umattlie River Water Users Asso. 152 Fed. 596.
Reasonable regulations to safeguard the resources upon which the nation depends for military success must be regarded as being within the powers confided to Congress to enable it to prosecute a successful Navy. McCullough v. Maryland, 4 Wheat. 316-421; Miller v. United States, 11 Wall. 268; Steward v. Hahn, 78 U. S. 493-507; Mayfield v. Richards, 115 U. S. 137.
The boundary line of state and Federal power has been clearly marked out by the Supreme Court in such leading decisions as the Minnesota Rate Cases, 230 U. S. 352, the Shreveport Cases (Houston & T. R. Co. v. United States, 234 U. S. 342).

Opinion:
Rikdzelr, J.
On the application of the above-named plaintiff an alternative writ of mandamus issued out of this court, commanding the defendants to desist from collecting any fares, rates, or charges for carrying passengers, freight, and baggage between points wholly within the state of North Dakota, other than those stated in the schedules on file in the office of the board of railroad commissioners of the state; or that they show cause why they have not done so. The foregoing writ issued in accordance with the prayer of a complaint and petition, alleging, among other things not material to be noticed, that, by virtue of an Act of Congress of August 29, 1916, the President of the United States issued a proclamation on December 26, 1917, following which he assumed possession and control of the railroad systems of the United States, and that he has been in such possession since January 1, 1918; that on May 25, 1918, William G. McAdoo, predecessor in office of the defendant Walker D. Hines, as Director General of Railroads of the United States, issued general order No. 28, whereby he directed the railroads, under his control, to put into force and effect on June 10, 1918, certain passenger fares and baggage charges, and on June 25, 1918, certain freight rates, which fares, charges, and rates were in excess of those previously authorized to be collected on the intrastate commerce of the defendant company within the state of North Dakota.
Separate answers were filed by the railroad company and by the said Hines, as Director General. The answer of the railroad company alleges that from December 28, 1917, until on or about August 1, 1918, the Director General exercised possession and control of its transportation system through the officers and agents of the defendant company; but that since August 1, 1918, such possession and control have been exercised through various agents appointed by the Director General. Denying that the defendant company has any power or authority over the tariffs complained of, it asks .that the action be dismissed as to it.
The answer of the Director General sets forth the legal basis relied 'upon to support general order No. 28, and asks that the alternative writ be quashed.
Counsel for the Director General, at the outset of the argument, expressly state that no question relating to the jurisdiction of the court is raised; that jurisdiction is conceded, and that the question before the court is one of the power of the Director General under the Rail Control Act. Consequently it is unnecessary for us to consider what the authority of the Director General may be outside the act.
There is, then, but a single question involved in this proceeding, and that is the validity of general order No. 28 as applied to rates, fares^ and charges for the intrastate commerce. The effect of the order, if valid, is admitted. It fulfils the intention therein expressed to increase freight rates upon all business, both interstate and intrastate, 25 per cent, and to establish passenger fares on the basis of 3 cents per mile for both interstate and intrastate carriage (except that where the intrastate rate of fare may exceed 3 cents per mile it is not reduced), and changes are also effected in charges for excess baggage, which purport to be applicable to both interstate and intrastate commerce.
The validity of the order depends upon the construction of § 10 of the Act of March 21, 1918, which is entitled "An Act to Provide for the Operation of Transportation Systems While under Federal Control, for the Just Compensation of Their Owners and for Other Purposes." The section which is relied upon as containing the authority to promulgate the order in question is as follows:
"Section 10. That carriers while under Federal control shall be subject to all laws and liabilities as common carriers, whether arising under state or Federal laws or at common law, except in so far as may be inconsistent with the provisions of this act or any other act applicable to such Federal control or with any order of the President. Actions at law or suits in equity may be brought by and against such carriers and judgments rendered as now provided by law; and in any action at law or suit in equity against the carrier, no defense shall be made thereto upon the ground that the carrier is an instrumentality or agency of the Federal government. Nor shall any such carrier be entitled to have transferred to a Federal court any action heretofore or hereafter instituted by or against it, which action was not so transferable prior to the Federal control of such carrier; and any action which has heretofore been so transferred because of such Federal control, or of any act of Congress or official order or proclamation relating thereto shall upon motion of either party be retransferred to the court in which it was originally instituted. But no process, mesne or final,, shall be levied against any property under such Federal control.
"That during the period of Federal control, whenever in his opinion the pvMic interest requires, the President may initiate rates, fares, charges, classifications, regulations, and practices by filing the same with the Interstate Commerce Commission, ivhich said rates, fares, charges, classifications, regulations, and practices shall not be suspended by the Commission pending final determination.
"Said rates, fares, charges, classifications, regulations, and practices shall be reasonable and just and shall-take effect at such time and upon -such notice as he may direct, but the Interstate Commerce Commission shall, upon complaint, enter upon a hearing concerning the justness and reasonableness of so much of any order of the President as establishes or changes any rate, fare, charge, classification, regulation, or practice of any carrier under Federal control, and may consider all the facts and circumstances existing at the time of the making of the same. In determining any question concerning any such rates, fares, charges, classifications, regulations, or practices or changes therein, the Interstate Commerce Commission shall give due consideration to the fact that the transportation systems are being operated.under a unified and co-ordinated national control and not in competition.
"After full hearing the Commission may make such findings and orders as are authorized by the act to regulate commerce as amended, and said findings and orders shall be enforced as provided in said act: Provided, however, That when the President shall find and certify to the Interstate Commerce Commission that in order to defray the expenses of Federal control and operation fairly chargeable to railway operating expenses, and also to pay railway tax accruals other than war taxes, net rents for joint facilities and equipment, and compensation to the carriers, operating as a unit, it is necessary to increase the railway operating revenues, the Interstate Commerce Commission in determining the justness and reasonableness of any rate, fare, charge, classification, regulations, or practice shall take into consideration said finding and certificate by the President, together with such recommendations as he may make." [40 Stat. at L. 456, chap. 25, Comp. Stat. § 3115f- j, Fed. Stat. Anno. Supp. 1918, p. 762.]
Before entering upon the discussion of the meaning of the above section, we should note the fact that possession and control of the railroads had been assumed by the President, acting under the authority of an Act of Congress of August 29, 1916, which provided that the President in time of war was "empowered, through the Secretary of War, to take possession and assume control of any system or systems of transportation, or any part thereof, and to utilize the same, to the exclusion as far as may be necessary of all other traffic thereon, for the transfer or transportation of troops, war material and equipment, or for such other purposes connected with the emergency as may be needful or desirable." [39 Stat. at L. 645, chap. 418, Comp. Stat. § 1974a, 9 Fed. Stat. Anno. 2d ed. p. 1095.] The act, of which § 10 first above quoted is a portion, was adopted after Federal control was an established fact. It should be stated, too, that the finding and certificate referred to in the proviso of § 10 above were made and filed with the Interstate Commerce Commission.
The contention of the plaintiff is that the authority to "initiate rates, fares, charges, etc.," is only applicable to interstate commerce, and in support of this contention, arguments are advanced which are drawn from the history of the Federal regulation of commerce, as well as from other sections of the act in question, considered in connection with the act to regulate interstate and foreign commerce, as amended. It is also argued that the order is void on the ground that it is not apparent that the act giving such plenary power to the President was adopted for the purpose of enabling him to exercise the broad executive functions rendered necessary by the existence of a state of war. And, further, that, if such powers are justified only as war-powers, the justification ceased upon the signing of the armistice. It is recalled that immediately fol lowing this event the President announced to Congress, "The war thus comes to an end; for, having accepted these terms of armistice, it will be impossible for the German command to renew it." We feel that the latter contention may be briefly disposed of by referring to § 10 of the act. It provides for the initiation of rates by the President "whenever, in his opinion, the public interest requires." The vesting of such a power in the Executive is so patently obnoxious to the competent method of rate regulation under normal conditions, that it is not to be assumed Congress would have vested the power in such terms except as a means of facilitating the extraordinary executive functions which are conferred upon the President in times of war. The power to regulate rates is legislative, and rates are initiated either by the carriers themselves, by legislation, or by a tribunal or agency upon which the legislature has imposed the duty.
It was not until the Act of June 18, 1910, that the power to prescribe a rate applicable to interstate commerce was vested in the Interstate Commerce Commission. Prior thereto, under § 15 of the Hepburn Act of June 29, 1906, the Interstate Commerce Commission had power to declare given rates unjust or unreasonable; but it was held by the United States Supreme Court, in Interstate Commerce Commission v. Cincinnati, N. O. & T. R. Co. 167 U. S. 479, 42 L. ed. 243, 17 Sup. Ct. Rep. 896, that the power to declare certain rates charged by the carrier to be unreasonable and unjust did not include the power to prescribe or fix rates, and, as this power was legislative in character, it could not be held to be vested in the Interstate Commerce Commission by implication. Later, however, when the Act of 1910 vested in the Commission power to prescribe and fix rates, the court held, in Interstate Commerce Commission v. Louisville & N. R. Co. 227 U. S. 88, 57 L. ed. 431, 33 Sup. Ct. Rep. 185, that the statute which, in reality, delegated the legislative function to the Interstate Commerce Commission, was valid; but it was held to be valid because it provided for due process of law in such matters. The court said: "Put the statute gave the right to a full hearing, and that conferred the privilege of introducing testimony, and at the same time imposed the duty of deciding in accordance with the facts proved. A finding without evidence is arbitrary and baseless. And if the government's contention is correct, it would mean that the Commission had a power possessed by no other officer, administrative body, or tribunal, under our government. It would mean that, where rights depended upon facts, the Commission could disregard all rules of evidence,' and capriciously make findings by administrative fiat. Such authority, however, beneficently exercised in one case, could be injuriously exerted in another, is inconsistent with rational justice, and comes under the Constitution's' condemnation of all arbitrary exercise of power."
The above language is, of course, as applicable to any attempt to confer upon the President a power to prescribe, without a hearing, rates which cannot be suspended pending a final determination by another tribunal as to any attempt to vest a similar power in a commission. The fact that Congress originally authorized the possession and control to be taken in the event of war, coupled with the fact that it expressly made applicable a rate-making procedure which would be clearly unconstitutional in times of peace, is satisfactory evidence that the possession and control of the railroads by the President is purely a war measure. As a war measure, the government necessarily assumes its constitutional obligation to make compensation. See United States v. Russell, 13 Wall. 623, 20 L. ed. 474. And the burden of administration was placed where it would be free from possibility of conflict with the constitutional authority to command the armies and Navy, hence it devolved primarily upon the Chief Executive.
The foregoing observations would not be strictly applicable to the fixing of rates for a service that is supplied by the government itself through its own agency or instrumentality. But we do not find in the act in question any evidence that Congress intended to treat the transportation systems as belonging to the government. It rather appears that they are to be utilized primarily for war purposes, while at the same time their ordinary uses are to continue as far as possible. It is provided, for instance, that suits may be maintained against the carriers; that the rates, fares, and charges are to be measured by an existing standard of reasonableness, which is to be finally determined and applied by an authority other than the President, and that the property is to remain subject to the taxing power of the states. These and other provisions sufficiently indicate the intention to continue the pre-existing legal relationship between the carriers on the one hand, and the public on the other, that we ought not to presume, in the absence of some definite expression, a purpose to discontinue the ordinary standards and means for determining the rights of patrons. Except to the extent that these standards and means are subordinated to the needs of the government in handling the problem before it, they still exist.
Neither can we construe the military exigency which gave rise to the necessity for the government taking possession of the transportation facilities to have terminated. The act itself fixes the period of control as one which shall continue during the war "and for a reasonable time thereafter, which shall not exceed one year and nine months first following the date of the proclamation by the President of the exchange of the ratifications of the treaty of peace." So, even though hostilities may have ceased, it is apparent that the time has not arrived for the mandatory termination of government control under the act of Congress, or for the enforced rescission of orders thereunder, originally justified, as meeting war emergencies. A reading of the legislation upon the subject of transportation in its relation to the national defense discloses that there are many interests affected, both of the government, of the carriers, and of the public, which are sought to be safeguarded through the employment of appropriate means to that end by the executive department. The variety and extent of these interests suggest numerous intricate problems to be solved by the legislative and executive departments. For these reasons it is apparent to us that the termination of Federal control cannot be judicially fixed at any other time than that prescribed by Congress.
The case then resolves to a mere question of statutory construction, and in arriving at the meaning of the act the various provisions must be read so that all may be given effect without inconsistency (New Lamp Chimney Co. v. Ansomia Brass & Copper Co. 91 U. S. 656-661, 23 L. ed. 336-338), and particular words must not be selected or given an ' effect that will "virtually destroy the meaning of the entire context" or "give them a significance which would be clearly repugnant to the statute, looked at as a whole, and destructive as of its obvious intent." Van Duke v. Cordova Copper Co. 234 U. S. 188-191, 58 L. ed. 1273-1274, 34 Sup. Ct. Rep. 884. It is important that every provision of the act shall be regarded, and that it shall be so construed as to give effect to its spirit and paramount purpose. In so construing the law, it is proper not only to consider the language found within its four corners, but to look as well to tbe history of the subject-matter involved, in an effect to harmonize, if possible, any provisions that are apparently conflicting.
It is true, as asserted by counsel for the petitioner, that Congress, prior to the enactment of the legislation in question, had never undertaken to regulate commerce carried on within a state. Section 1 of the Interstate Commerce Act expressly provides that it "shall not apply to the transportation of passengers or property, or to the receiving, delivering, storage, or handling of property, wholly within one state, and not shipped to or from a foreign country from or to any state or territory as aforesaid."- [24 Stat. at L. 379, chap. 104, Comp. Stat. § 8563, 4 Fed. Stat. Anno. 2d ed. p. 337.] Since this-act, as amended from time to time, gives to the Interstate Commerce Commission all the regulatory authority it possesses (unless the Federal Control Act enlarges it), it is clear that it has not been authorized to regulate, directly and primarily, intrastate commerce. It will readily be conceded that Congress possesses ample power to regulate intrastate commerce to the extent necessary to make effective its power to regulate interstate commerce. Shreveport Case (Houston, E. & W. T. R. Co. v. United States) 234 U. S. 342, 58 L. ed. 1341, 34 Sup. Ct. Rep. 833; American Exp. Co. v. South Dakota, 244 U. S. 617, 61 L. ed. 1352, P.U.R.1917F, 45, 37 Sup. Ct. Rep. 656; but it is important to keep' in mind the limitations. In the absence of clearly expressed legislative intention it will not be presumed that the power to regulate interstate commerce has been so vested in Federal authorities as to nullify every state regulation that only indirectly or remotely affects interstate business. Reagan v. Mercantile Trust Co. 154 U. S. 413, 38 L. ed. 1028, 4 Inters. Com. Rep. 575, 14 Sup. Ct. Rep. 1060; Minnesota Rate Cases (Simpson v. Shepard) 230 U. S. 352, 57 L. ed. 1511, 48 L.R.A.(N.S.) 1151, 33 Sup. Ct. Rep. 729, Ann. Cas. 1916A, 18.
• Neither are we inclined to question the power of Congress', in providing for Federal control of transportation during a war emergency, to vest in the President the full administrative power necessary to effectuate such a degree of unified control as would be independent in every respect of existing state regulations or of all state regulating authority. We are only concerned here with ascertaining whether or not Congress has vested powers in the President which may properly be exercised independently of all state regulations affecting intrastate rates. It would seem that, if it were intended to invest the President with the broadest range of authority, language would have been employed which would be w'holly adequate to manifest that intent. As was said by Mr. Justice Brewer in the'case of Reagan v. Mercantile Trust Co. supra, page 416, in interpreting an act under which a railroad corporation was organized: "There is in the act creating this company nothing which indicates an intent on the part of Congress to so remove it [i. e., from state regulation], and there is nothing in the enforcement by the state of reasonable rates for transportation wholly within the state which will disable the corporation from discharging- all the duties and exercising all the powers conferred by Congress. By the act of. incorporation, Congress authorized the company to build its road through the state of Texas. It knew that, when constructed, a part of its business would be the carrying of persons and property from points within the state to other points also within the state, and that in so doing it would be engaged in a business, control of which is nowhere by the Federal Constitution given to Congress. It must have been known that, in the nature of things, the control of that business would be exercised by the state, and if it deemed that the interests of the nation and the discharge of the duties required on behalf of the nation from this corporation demanded exemption in all things from state control, it would unquestionably have expressed such intention in language ivhose meaning would be clear. Its silence in this respect is satisfactory assurance that, in so far as this corporation should engage in business wholly within the state, it intended that it should be subjected to the ordinary control exercised by the state over such business. Without, therefore, relying at all upon any acceptance by the railroad corporation of the legislature of the state, passed in 1813 in respect to it, we are of opinion that the Texas & Pacific Railway Company is, as to business done wholly within the state, subject to the control of the state in all matters of taxation, rates, and other police regulations."
Another expression opposed to the implying of restrictions on the power of the states to regulate intrastate commerce is that of Mr. Justice Hughes, in the Minnesota Rate Cases (Simpson v. Shepard) supra, page 417: "If this authority of the state be restricted, it must be by virtue of the paramount power of Congress over interstate commerce and its instruments; and, in view of the nature of the subject, a limitation may not be implied because of a dormant Federal power; that is, one which has not been exerted, but can only be found in the actual exercise of Federal control in such measure as to exclude this action by the state which otherwise would clearly be within its province."
The argument that the intrastate commerce rates prescribed by the Minnesota statutes were invalid because operating' prejudicially upon interstate rates was met by the following considerations, page 420: "Having regard to the terms of the Federal statutes, the familiar range of state action at the time it was enacted, the continued exercise of state authority in the same manner and to the same extent after its enactment, and the decisions of this court, recognizing and upholding this authority, we find no foundation for the proposition that the act to regulate commerce contemplated interference therewith.
. "Congress did not undertake to say that the intrastate rates of interstate carriers should be reasonable, or to invest its administrative agency with authority to determine their reasonableness. Neither by the original act nor by its amendment did Congress seek to establish a unified •control over interstate and intrastate rates; it did not set up a standard for interstate rates, or prescribe, or authorize the Commission to prescribe, either maximum or minimum rates for intrastate traffic. It cannot be supposed that Congress sought to accomplish by indirection that which it expressly disclaimed, or attempted to override the accustomed authority of the states without the provision of a substitute. On the contrary, the fixing of reasonable rates for intrastate transportation was left where it had been found; that is, with the states and the agencies created by the states to deal with that subject."
The terse statement of Mr. Justice Harlan, in delivering the opinion of the court in the case of Reid v. Colorado, 187 U. S. 137-148, 47 L. ed. 108-114, 23 Sup. Ct. Rep. 92, 12 Am. Crim. Rep. 506, supports the .rule of construction for acts of Congress which we deem to be proper when the subject-matter vitally affects the principal power of a state, and one which must give way to the paramount power of the Federal government only when Congress deems it wise to intervene. The statement is: "It should never be held that Congress intends to supersede, or by its legislation suspend the exercise of the police powers of the states, even when it may do so, unless its purpose to effect that result is clearly manifested."
Since the only portion of the act in question which may be said to vest in the President the authority contended for is that portion of § 10 giving him power to initiate rates, fares, charges, etc., it remains to be seen whether, when read in connection with its context and with other sections of the act in the light of the pre-existing scheme, according to which commerce was regulated by the Federal and state governments, Congress has clearly manifested its desire to authorize what has been done. Standing alone, the expression of authority to initiate 'rates would clearly be broad enough to cover both interstate and intrastate commerce. We are of the opinion, too, that this broad language was entirely appropriate. The power to "initiate" a rate is one that has always been exercised by the carriers, and with the assumption of Federal control it was essential that the full, power be placed in a Federal agency. This is a sufficient reason for vesting the power in unrestricted terms. But the crucial question is whether or not limitations upon its future exercise are not prescribed in the act.
The same section provides for an appeal to the Interstate Commerce Commission, and authorizes that body to set aside or modify any rate, fare, charge, etc., that may be found to be unjust or unreasonable. In making its findings, the authority of this body must be sought in the act to regulate commerce as amended, since it is expressly remitted to that act for authority to make its findings and enforce its orders. It is clearly the intent of § 10, construed as a whole, to give to the Interstate Commerce Commission an authority to review that is coextensive with the authority of the President to initiate. It is doubtless also intended to require that all rates, fares, charges, etc., initiated under the act shall be just and reasonable in the light of the circumstances, taking into consideration the necessity for increased operating revenue. It follows from this that, if increased powers, extending to existing lawful intrastate rates, are given to the Interstate Commerce Commission, they are given in the Federal Control Act, and it is not at all clear that such was intended. To give to the control act the construction necessary to support the contention made is equivalent to amending by implication the Interstate Commerce Act so as to extend its scope to matters which were never before embraced within it. Indeed, it is tantamount to repealing the express provision that it shall not operate as to transportation wholly within a state. This might well have been the intention as to matters not pi'eviously covered by state regulations; but it is another matter entirely to ascribe such an intention as to a field of regulation already occupied.
That it was not intended to entirely supplant pre-existing regulations of the states seems to us to be even more clearly demonstrated by § 15. The section is as follows:
"Section 15. Nothing in this act shall be construed to amend, x*epeal, impair or affect the existing laws or powers of the states in relation to taxation or the lawful police regulations of the several states, except wherein such laws, powers, or regulations may affect the transportation of txeops, war materials, government sxxpplies, or the issue of stocks and bonds." [40 Stat. at L. 458, chap. 25, Comp. Stat. § 3115|-o, Fed. Stat. Anno. Supp. 1918, p. 765.]
The foregoing section lays down a rule of construction for the entire act, according to which it shall not be held to amend, repeal, or impair or affect existing lawful police regxxlations of the several states, except wherein such regulations may affect the transportation of troops, war materials, government supplies, or the issue of stocks and bonds. The query arising from this section is, Does the expression "lawful police regulations" include existing regulations with respect to intrastate rates, fares, and charges ? It is contended on behalf of the Director General that such regulations are not included, because, it is stated, the regulation of rates is not an exercise of the police power of the state. In support of this contention, it is argued that the police power, in the exercise of which lawful police regulations are made, is one which exists for the general welfare of society, and is, therefore, one which cannot be bargained away. Attention is called to the fact that the regulation of rates is frequently accomplished, to a degree at least, by the exercise of the power to contract. We fail to perceive the force of the argument that would remove rate regulations from the category of the lawful police regulations of the state on account of the practical necessity which has rendered necessary the recognition of contract obligations originating in franchises. Never since Lord Hale gave expression in his De Portibus Maris, to the principle according to which public callings are subject to regulation, has there been any doubt of the right or the power of the state to regulate charges. In fact, it was the exaction of "arbitrary and excessive duties for cranage, wharfage, etc.," that led to the exercise of the power of control which was vindicated in the statement referred to. .See 2 Hargrave, Law Tracts, 78. That this power is a part of the state's police power is hardly open to question, since the decision in Munn v. Illinois, 94 U. S. 113, 24 L. ed. 77. ' In that case, Chief Justice Waite, delivering the opinion of the court, quoted the definition of the police powers as framed by Chief Justice Taney in the License Cases, 5 How. 583, 12 L. ed. 292, in which he referred to them as "nothing more nor less than the powers of government inherent in every sovereignty . . .; that is to say, . . . the power to govern men and 'things." They were said to be powers which sprung from adherence to the. maxim, "sic uteri tuo ut alienum non laedas." It is the purpose, of all rate regulations to preserve the common right to the service rendered in a public calling at a reasonable cost. Fundamentally this is as much a matter of police regulation as are regulations designed to protect health and safety or to prevent disorimination. It matters little whether, in considering specific arrangements looking toward the security of the rights of the public in relation to common carriers, it may become necessary to recognize contractual Arrangements made by a legislative body as a practical expedient; the power to regulate the rate is in its essence police, and the exercise of the power results in a "police regulation."
In the case of Reagan v. Mercantile Trust Co. 154 H. S. 413, 38 L. ed. 1028, 4 Inters. Com. Rep. 575, 14 Sup. Ct. Rep. 1060, supra, it will be noted that the United States Supreme Court expressly char.acterized state regulations of rates as "police regulations" in the following expression: "We are of the opinion that the Texas & Pacific Eailway Company is, as to business done wholly within the state, subject to the control of the state in all matters of taxation, rates, and other police regulations."
But, it is contended that the term, "police regulations" appearing in the statute is one which may be used either in a limited sense or in a very comprehensive sense, and that in the statute in question it is used in its "ordinary accepted sense" as referring to the exercise of the power to protect the health, lives, and morals' of the people (Manigault v. Springs, 199 H. S. 473-481, 50 L. ed. 274-279, 26 Sup. Ct. Rep. 127), rather than in the broader acceptation, which, in reality, embraces everything essential to "the great public needs." Noble State Bank v. Haskell, 219 U. S. 104-111, 55 L. ed. 112-116, 32 L.R.A.(N.S.) 1062, 31 Sup. Ct. Rep. 186, Ann. Cas. 1912A, 487; Barbier v. Connolly, 113 U. S. 27, 28 L. ed. 923, 5 Sup. Ct. Rep. 357. In substance, tbe contention is that the particular sense in which the term is used in a given place must be gathered from the context. We find nothing in the act, however, which, in our opinion, makes it necessary in executing its various provisions to distinguish between those police regulations that affect the health, lives, and morals of the people, and those that protect their convenience and economic welfare.
The argument that the reservation of "lawful police regulations," rather than the police power, shows a purpose to limit the scope of the meaning, is well met by a comparison with the reservation of the taxing power in the same section. The section preserves in full, not only the existing laws of the states relative to taxation, but it preserves as well, unimpaired, the power to tax. See Congressional Record, vol. 56, part 4, p. 3313. So, the states may pass such future legislation upon the subject of taxation as would be constitutional if the roads were in private hands; provided, of course, it does not interfere with the transportation of troops, war materials, and government supplies. The roads are not declared to be in public ownership, and the power to tax is as broad as the similar power over roads incorporated by act of Congress (Union P. R. Co. v. Peniston, 18 Wall. 5, 21 L. ed. 787; see also Congressional Record, supra), or as conceded by act of Congress in the case of national banks.' On the other hand, with regard to the police power generally, it is not to be exerted anew, or in a different measure or manner during Federal control from that existing before. The act only continues in force the existing police regulations, and the railroad administration is not bound to respect any additional police regulations. Centralization of administrative authority free from future interruptions was accomplished, but Congress accepted the status quo ante, so far as police regulations were concerned; and it authorized them to be ignored only when necessary to secure military efficiency in the matter of the transportation of troops, war materials, and government supplies.
The suggestion that a rate prescribed by statute, from which a carrier is prohibited from departing under penalty, is not a police regulation > concerning the carriage of intrastate commerce, seems to us also, as hereinabove indicated, to ignore the fundamental considerations that deter mine the validity of such regulations. In Reagan v. Farmers' Loan & T. Co. 154 U. S. 362, 38 L. éd. 1014, 4 Inters. Com. Rep. 560, 14 Sup. Ct. Rep. 1047, it was said: "There can be no doubt of their power and duty [of the courts] to inquire whether a body of rates prescribed by a legislature or a commission is unjust and unreasonable, and such as to work a practical destruction to rights of property, and, if found so to be, to restrain its operation."
To a similar effect are Covington & L. Turnp. Road Co. v. Sandford, 164 U. S. 578, 41 L. ed. 560, 17 Sup. Ct. Rep. 198, and Lake Shore & M. S. R. Co. v. Smith, 173 U. S. 684, 43 L. ed. 858, 19 Sup. Ct. Rep. 565; German Alliance Ins. Co. v. Lewis, 233 U. S. 389, 58 L. ed. 1011, L.R.A.1915C, 1189, 34 Sup. Ct. Rep. 612. Rates are regulated because the business is affected with a public interest. Every regulation must be measured by the yardstick of reasonableness, and must fall short of prohibition, destruction, or confiscation in order to be valid. Freund, Pol. Power, § 63. Nothing, it seems to us, falls more properly within the domain of police regulations than rules prescribed as a means of preventing economic oppression and securing equality' of right to the service in a public calling. See Freund, Pol. Power, § 378.
A strong indication that the term "police regulations" was used in a much broader sense than that contended for is the fact that, in making exceptions to the regulations that should continue in force, Congress saw fit to expressly except regulations affecting the issuance of stock and bonds. It will be noted that § 7 gives to the President, in unambiguous terms, the right to control the issuance of securities during the period of Federal operation. Yet it was thought necessary in § 15 to expressly except from the police regulations of the states which were to continue in force those affecting the issuance of stocks and bonds. Clearly these regulations are of a character that would not directly affect the public health, 'safety, or morals. They are as much designed to protect the economic welfare of society as are those relating to rates, and there would have been no occasion to make the'exception had the term "police regulations" been used in the sense contended for. (A statute of this character was involved in a recent case, — Union P. R. Co. v. Public Service Commission, 248 U. S. 67, 63 L. ed. 131, P.U.R.1919B, 315, 39 Sup. Ct. Rep. 24.)
The Congressional history of the act in question, appended hereto,, in our judgment, amply supports this construction. When the bill originally passed the Senate it provided only for the continuation of the states^ powers to tax. It was amended, however, in the House, by the addition of the following clause: "Or the lawful police regulations of the several states, except wherein these regulations may affect the transportation of troops, war materials, or government supplies, the regulation of rales, the expenditure of revenues, the addition or improvement of properties or the issue of stocks and bonds.- Congressional Record, vol. 56, part 3, p. 2820.
The foregoing clause, after being tacked on the provision "that nothing in this act shall be construed to amend, repeal, impair, or affect the existing laws or powers of the states in relation to taxation," as previously contained in the bill, was transferred to the end and became a new section — now § 15. The conference committee later, reporting to the House and Senate, struck from the exceptions to the proviso above those exceptions which are italicized. This is a matter of some significance in determining the sense in which the term "police regulations" is used. If the exception of "'the regulation of rates" previously inserted had been allowed to stand, it is clear that every existing state regulation affecting rates would have been rendered nugatory upon the promulgation of an order by the Director General superseding such rates, whether or not the transportation of troops, war materials, or government supplies was affected, and the power would have existed just as it is contended for in this case. The striking of that clause, however, from the exceptions, indicates an intention to preserve existing state regulations affecting rates, except in so far as the transportation of troops, war materials, and government supplies may be affected. To this must also be added, we believe, the power to prevent existing intrastate rates from operating in such a way as to result in unlawful discriminations on accoimt of such regulations as it may be found necessary to promulgate in operating the roads as a unit.
As hereinbefore stated, the Federal government is supreme in the domain of interstate commerce, and there is nothing in this act to indicate that the regulatory power, as it previously existed, was intended to be modified in the slightest degree by existing state regulations. All the powers possessed by the Interstate Commerce Commission are to continue except the power to suspend rates.
In the case of Houston, E. & W. T. R. Co. v. United States, 234 U. S. 342, 58 L. ed. 1341, 34 Sup. Ct. Rep. 833, supra, the Supreme Court of the United States held that under § 3 of the original Act to Regulate Commerce, February 4, 1887 (see chap. 104, 24 Stat. at L. 379, 380, Comp. Stat. § 8563, 4 Fed. Stat. Anno. 2d ed. p. 337). Congress, having prescribed discriminatory rates and practices, the Commission had authority to correct unjust discrimination^ even though, in so doing, it became necessary to alter pre-existing rates on intrastate commerce. Thus, under the power previously possessed by the Commission, under the Act to Regulate Commerce, it would have full power to alter any intrastate rate that might result in an unlawful discrimination by reason of the initiation of a new interstate rate by executive authority, or that may result from a valid routing order. To the same effect is the recent case of American Exp. Co. v. South Dakota, 244 U. S. 617, 61 L. ed. 1352, P.U.R.1917F, 45, 37 Sup. Ct. Rep. 656, supra.
The order in the instant case, as it relates to intrastate commerce, does not purport to have been promulgated for the purpose of obviating discriminations. On the contrary, a portion of the order, at least,— that which relates to intrastate pass.enger fares, — cannot possibly be justified on any such basis, as a simple illustration will suffice to demonstrate. Prima facie, .it creates discriminations by disturbing the balance of pre-existing fares that were just and reasonable. Prior to the order in question intrastate tickets were sold to and from all points within Minnesota at 2 cents per mile; from and to all points within North Dakota at 2-3,- cents per mile; and from and to all points in Montana at 3 cents per mile, and the interstate fares were based upon the local rates. These intrastate fares were all presumptively legal and had been in operation for some time. Such differences as existed were readily accounted for by differences in cost of constructing roads in the various states, density of traffic, etc. Yet the necessity demanding increased revenues from the purely intrastate business was not recognized in the order as being general. The burden is not distributed by percentage increases that will affect all localities alike; but the patrons in one state are required to pay 50 per cent above the previous lawful and reasonable fare, in another, 20 per cent above, and in the other, no additional charge is imposed. This is a sufficient demonstration that a portion of the order at least is not to be justified as a means of preventing diserimi nation; so it woTild not fall within any regulatory power previously exercised by the Federal government or possessed by the Interstate Commerce Commission.
In considering the character of order No. 28 in its direct effects upon interstate commerce, it is also proper to note that all rates initiated are to be measured upon review by the Interstate Commerce Commission according to the "expenses of Federal control and operation favrly chargeable to railway operating expenses " and to pay certain fixed charges. This is not a blanket authority to increase rates, but a limitation. Its true character is perhaps best understood by referring to the very substantial appropriation of $500,000,000 to be used as a revolving fund, and to the then recent fact of the denial by the Interstate Commerce Commission of an application for a general increase of 15 per cent in interstate freight rates. Fifteen Per Cent Case, 45 Inters. Com. Pep. 303. These facts, together with the further well-known fact that by far-the larger percentage of earnings is from interstate commerce, do not indicate that a percentage raise on all trafile, or that a mileage raise on a portion of the passenger traffic, was in contemplation.- On the contrary, they rather indicate that, at the time Congress passed the Control Act, there was no immediate necessity for increased revenues, and that, if such necessity should arise, it was contemplated that it could be fully met by applying the remedy which had so recently been sought, and without making possible a general repeal of numerous laws of sovereign states whenever, in the judgment of the Director General, such repeal might seem to be desirable for reasons apart from military efficiency, or even to enable the exercise- of an unhampered control of interstate commerce.
The requirement that the Interstate Commerce Commission shall take into consideration "the fact that the transportation systems are being operated under a unified and co-ordinated national control, and not in competition, "does not, in our opinion, broaden the authority of the Director General or the Interstate Commerce Commission, except where it may be sought to correct conditions incompatible with a unified system, and which were probably due to previous unwholesome competition.
The Congressional debates affirmatively disclose that the propriety of compelling the patrons of the railroads to pay all additional costs incident to Federal control was considered and weighed as against the plan of meeting prospective deficiencies, in part at least, by Congressional appropriation. The question is one with which Congress might well be concerned, for upon its decision would depend whether additional burdens directly due to the war are' to be borne by taxation, or whether the particular burden must be borne by those who use the service, — a service which has been inextricably interwoven into the business fabric of the nation. In the act it is clearly contemplated that only such added burden may be placed upon the traffic as is "fairly chargeable to railroad operating expenses," and the President is also authorized to meet deficiencies from the appropriation. The act, as we view it, is neither a revenue measure nor a general license to supplant pre-existing regulations made by competent authority.
Another significant fact which is disclosed by a study of the Congressional debates upon the subject of the rate-fixing power is that all of the discussion of § 10, pertaining to the power given the President to initiate rates, concerns only the merits of that proposal as compared with a proposal to vest the power directly in the Interstate Commerce Commission, so that it might continue to exercise, in but slightly modified form, the authority previously vested in it. Nowhere was it suggested that the powers of the Commission should be extended to embrace original regulations of intrastate rates, nor was it ever intimated, so far as our observation goes, that the powers contended for were being vested in the Executive.
Being of the opinion that the rate statutes of this state and the tariffs on file with the state railroad commission, in accordance with statutory requirements, in so far as they pertain to intrastate commerce1, haw> not been lawfully superseded by any competent order made by the Director General under the Bail Control Act, and particularly by general order No. 28, a writ will issue in accordance with the views expressed in the foregoing opinion.
Christianson and Bobinson, JJ. concur.