Earl Warren: Number 46, Virgil Herdman versus Pennsylvania Railroad. Mr. McNamara.
Donald S. McNamara: If the Court please. Virgil Herdman, the petitioner in this case was the complainant, the plaintiff in the original trial of the case. This case was tried in the District Court of Columbus, Ohio and submitted on the basis of res ipsa loquitur. Only the complainant, the petitioner and his two doctors testified. At the end of the case, the Court directed the verdict for the respondent railroad. Virgil Herdman worked for 22 years for the respondent railroad as a brakeman and as a freight conductor. Back in 1951, his work then was as a freight conductor. He worked from Columbus, Ohio to Richmond, Indiana and back on the following day working seven days a week. His work as a freight conductor was that of the paperwork on the freight train. He rode in the caboose and performed his work as the train moved along at prescribed route, from one city to another and from one railroad yard to another. He had the responsibility of the bills of lading and as he said, he checked them and wrote them up as the train moved from one place to another and he set of the bills of lading when the cars were set off in their prescribed place. It was customary that all the paperwork be concluded, by the time the train reached it's -- the end of its destination. In the caboose was provided not only a bunk to rest on but a table and chair on which the petitioner was to perform his paperwork as they move from city to city. Herdman, as he testified, was in charge of the train from the caboose forward to the coal tender, not including the coal tender, the diesel locomotive and the steam locomotive that made up this train. In February 1st, 1951, the train in which he was riding consisted of about 67 freight cars. A diesel locomotive, coal tender and a steam engine on the head end. They had left Richmond, Indiana and was proceeding eastwardly through Dayton, Ohio. Virgil was working in the caboose as prescribed with his paperwork. When they reached the point within the yard limits or what's called sometimes the Dayton limits of the respondent railroad near the City of Dayton, at a point were there was no reason to stop about three miles as a matter of fact from the next stop, three miles from the next yards, a certain -- a running of a slack occurred. The caboose was jerked violently forward. The petitioner was thrown from his position, the edge of a bunk forward into the caboose into the wall and down. The man working in the caboose with him landed on top of him, and he sustained personal injuries. He got out of the caboose. Some few minutes afterwards, he walked outside, heard the air coming back through the air line of the caboose and got back in. The railroad owed Virgil Herdman, by common law and under the FELA, a duty to provide him a safe place to work. This is a continuing duty. His safe place to work supposedly was within the caboose area. It was there he was to do his work, the same as the engineer in the engine and the fireman in the engine on the locomotive. When that violent running of slack occurred, his place to work was then made unsafe. He was thrown from one end of the caboose to the other and sustained the injuries to the extent that he has not returned to work since then, that's February 1951. He testified. The facts showed that after he got out of the caboose and he heard the air coming back in, he knew then that something had occurred in the frontend of the train to cause the sudden stop of the train and the running of the slack in the subsequent injury. He got back on the caboose. They rode on into the Dayton yards, completed their work, come on into Columbus, Ohio and completed the run of the train some time around midnight that night. If the Court please, it is the claim of the petitioner that those facts, so setup showed the duty of the respondent railroad to provide a safe place to work. Those facts show a breach of that duty, which constitutes negligence. It is the petitioners claim then, that on the basis of that -- of those facts, he had a right to expect his case to go to the jury on the basis of res ipsa loquitur. To go on with the facts a minute, because the defense of the case has been rested primarily upon the facts that occurred after this point, they come on into Columbus, Ohio about midnight. Herdman as the freight conductor is charged with all of the paperwork of the train. About arriving in Columbus, according to information that came out in the trial on cross-examination and which was objected to, the engineer told Herdman that he had applied the brake in the maximum manner because a car, an automobile went across the crossing. Somebody wrote out a report. It was Herdman's duty to report, to do the paperwork of making all reports and so forth, and Herdman signed the report that somebody else wrote out that that was what occurred. Herdman, 67 cars, a diesel, a tender and a steam locomotive to the rear, of course had no personal knowledge of what took place at the front end of the train. He could have no personal knowledge except what somebody else told him had occurred. When plaintiff's -- the petitioner rested his case on cross-examination they asked Mr. Herdman if he had not made such a report and the testimony as in the record is that he signed the report that somebody else wrote, that he had been told by the engineer that that was what had occurred. He personally had no knowledge whatsoever. We respectfully submit to the Court, that the evidence shows that the stopping of the train occurred by reason of some conduct, Herdman said, that occurred at the front end of the train. Now, there were two locomotives up there.
Speaker: Do that report get into evidence?
Donald S. McNamara: Yes. That report got in over the objection of Herdman's counsel.
Speaker: Was it objected to?
Donald S. McNamara: Yes, sir, and it appears on page 32 of the record.
Speaker: 32?
Donald S. McNamara: I believe is where that objection appears. Towards the bottom of page 32, question, "Did the engineer told you that he applied the emergency break from hitting an automobile that came onto the track?" Answer - "He told me that." Mr. McNamara - “I want to object to hearsay in what the engineer through this man is not subject matter for cross-examination.” Mr. Barton - “I think it is entirely proper on cross-examination.” Mr. McNamara - “The engineers are available for testimony.” The Court - “I will overrule the objection, note exception.” And then again on the top of page 33 --
Speaker: That doesn't relate to the report.
Donald S. McNamara: Sir?
Speaker: That doesn't relate to the report, is it?
Donald S. McNamara: That relates to the reading of the report and the statement, Mr. Herdman had stated that that was all hearsay, that he personally knew nothing about it, that all that there was in the report was hearsay. And there was an objection to cross-examination as to the hearsay matter. If -- if the Court --
Earl Warren: They just read it into the record in cross-examination and then didn't introduce it --
Donald S. McNamara: That is right.
Earl Warren: -- (Voice Overlap) as a document. Is that right?
Donald S. McNamara: That is right. Mr. Barton asked the petitioner to read it and he had trouble reading the report. And so, Mr. Barton read the reports to the jury. It's in the record. He read the report and when he started to ask the question, then following that, we objected. We objected to hearsay and what the engineer told this man which stated, “It was not matters to be brought out on cross-examination.” The Court overruled our objection. Again, on the top of page 33 --
Earl Warren: Did the engineer testify?
Donald S. McNamara: No, sir. Only the petitioner and his two doctors testified. The Court -- the trial court sustained a motion for a directed verdict. It was respectfully submitted that this Court has held many times that res ipsa loquitur is a rule of evidence that applies in federal employer -- employee liability cases. Under FELA, the doctrine does apply. This Court has held for Bailey versus Central Vermont in U.S. Administrative cases cited in there show the continuing duty to provide the petitioner with the safe place to work. The act in itself, we think shows a violation of that duty to a point where there is a situation that the jury, an inference of negligence may be drawn by the jury and under the doctrine of res ipsa loquitur as it has been described, it is compulsory that the matter go to the jury to determine whether or not there was negligence for which the respondent railroad should be held responsible. Now, in the head end -- at the head end of this train, the evidence is that the engineer on the head end on the steam engine could have applied either intentionally or accidentally that control brake to throw this train into a sudden stop. The engineer in the diesel could have intentionally or accidentally thrown the train into this sudden stop. The control arm was described, I guess sort of like, "old street tires" control arms that swings around in a semicircle and can -- as Mr. Herdman said, "There are two ways in which to use that control arm to apply the breaks." They have what they call a service application, an application of the break that will bring the train to a smooth stop, which is a matter of common knowledge to everybody in riding trains. That it is possible to bring trains to a smooth even stop. You can then, in the alternative throw the break, the maximum, what the railroad or sometime referred to as big hauler. There's a niche-like at the end and they throw it around there and it holds it in position and they big haul it and puts it on the breaks in the maximum condition which then will permit or cause a running of the slack and cause the caboose on the rear end to be jerked forward suddenly and then all of a sudden it runs into the rear of 66 other cars and stops. If the Court please, this -- this Court had before it, this fall as a matter of fact, the case that is cited in the brief, the Kansas City Southern Railway in Justice case versus Justice which they denied the petition for a writ by the Kansas City in Southern Railroad. It was a case where the man in the same position as Herdman, a freight conductor was riding and there they knew that a stop was to be made. In the Kansas City Southern case, they knew that a stop was to be made for an inspection and a rush stop occurred sufficiently to throw the conductor from one end of the caboose to the other and he sustained injuries. The case went to the jury on res ipsa. There was a $45,000 recovery. The Circuit Court of Appeals down there, I believe it's the Fifth Circuit sustained it. The Railroad then files a petition for a writ here, claiming that the case should not have been allowed to go to the jury on res ipsa and this Court overruled, in October of this year. Clearly, I think the elements of res ipsa are all set forth the movement of this train. Its actual control movement was in that of the engineers who in substance are the respondents. They are the railroad. The exclusive control of the movement of the train was in the defendant railroad. There is no negligence, no inference of negligence on the part of the petitioner. He was working in the place where he was assigned to work and virtually a haul at the rear end of the moving train, where he has no idea, no observation of what goes on and no way can control what goes on, so that the exclusive control is vested in and was in the respondent railroad. There is no question that the petitioner was not guilty of any negligence of his own when the sudden stop occurred. Third comes the question on which the other half of the respondent railroad's defense argument has been made. Was it something that occurs in the exercise of proper care? Now, proper care --
William J. Brennan, Jr.: Well, was it -- rather the other way whether or not a sudden stop, if it occurs ordinarily will not occur unless someone failed to use it.
Donald S. McNamara: Unless fails -- someone fails to use the (Inaudible)
William J. Brennan, Jr.: Why?
Donald S. McNamara: The Court -- the Court is right.
William J. Brennan, Jr.: Why -- what is the ordinary experience? Don't trains --
Donald S. McNamara: No.
William J. Brennan, Jr.: Don't they stop suddenly?
Donald S. McNamara: Now, the testimony is on his. Yes, they do. Now --
William J. Brennan, Jr.: Well then, and if that's case --
Donald S. McNamara: Now, may -- may I go on for one moment as to the testimony here. Virgil Herdman, 22 years of freight conductor, says he has been on trains four, five or six times in 22 years in which there was such a sudden stop.
William J. Brennan, Jr.: Well, I know, but do you rely to the res ipsa just on the record or was it the matter of ordinary human experience that --
Donald S. McNamara: Well --
William J. Brennan, Jr.: -- was drawn in?
Donald S. McNamara: I -- I don't think that ordinary human experience need to come in. I think there was enough here in the record. Although, if the Court will apply human -- human knowledge, common knowledge, I think the Court will arrive at the same conclusion. Now --
William J. Brennan, Jr.: Well, I see, you mean that --
Donald S. McNamara: That train --
William J. Brennan, Jr.: -- the mere -- the mere fact that it's ordinary human experience that when a train stops suddenly, it wouldn't do so unless someone fail to use due care --
Donald S. McNamara: Right.
William J. Brennan, Jr.: -- is ordinary --
Donald S. McNamara: That is right. Due care to the man on the rear end to whom they owed care, not due care to some other condition, but due care, proper care to the man to whom they owed that duty on the rear end of the caboose, the man who has no way to protect himself, the man who can receive no warning of what is going to happen. It is the same as the elevator cases. Elevators, since they were first constructed, since they first built a mechanical lift, elevators have fallen. They have fallen. I have personally in the last five years tried three elevator cases. So that goodness only knows how many years they have been going on, fallen elevators still occur.
William J. Brennan, Jr.: Well, I -- I don't think elevators fall very often fortunately, do they?
Donald S. McNamara: Well, you and I --
William J. Brennan, Jr.: (Voice Overlap) --
Donald S. McNamara: You and I ride elevators and I don't think there is a more classic case --
William J. Brennan, Jr.: No, but the train -- the train --
Donald S. McNamara: -- (Voice Overlap) up the situation.
William J. Brennan, Jr.: Trains do stop suddenly quite a bit, don't they?
Donald S. McNamara: Virgil Herdman testified it is 22 years.
William J. Brennan, Jr.: Yes. But don't they -- in your own experience?
Donald S. McNamara: No. Not enough to knock you off your feet. If they did, passengers would not ride trains.
Hugo L. Black: Suppose the train did stop on account of an automobile, what would you say then?
Donald S. McNamara: Then, it still goes to the jury. The permissible inference of res ipsa does not say that they must fine for the plaintiff. The application of res ipsa says that the case shall go to the jury to determine. The permissible inference of negligence is to be determined by the jury. Now --
Speaker: But that -- that's in a case is it not where there's no explanation of the stopping?
Donald S. McNamara: No, sir, and this Court refuse to review that Kansas City Southern and Justice case where they knew the train was going to stop. The matter of knowledge is not a basis for the application of res ipsa. The -- well, the Flower case is where the guy walked --
Speaker: It has -- it has to be negligence, doesn't it?
Donald S. McNamara: Right. Now, a violation of a duty is that negligence?
Speaker: And you say it -- it might be negligence to stop in order to save a collision with a truck.
Donald S. McNamara: We do not know that that is the true situation. There isn't anything in the record that that is a true situation, Mr. --
Hugo L. Black: Why is that?
Donald S. McNamara: Sir?
Hugo L. Black: Why is that?
Donald S. McNamara: Because Mr. Herdman said, “I was told by the engineer.”
Hugo L. Black: Yes, but --
Donald S. McNamara: That is only hearsay.
Hugo L. Black: On page 32 --
Donald S. McNamara: Yes, sir.
Hugo L. Black: -- the statement was introduced in evidence.
Donald S. McNamara: Yes, sir.
Hugo L. Black: There was no objection made to it.
Donald S. McNamara: Well, there --
Hugo L. Black: Has this Court not held several times that the -- by hearsay is introduced in evidence without objection? That it -- it can be considered along with the other evidence, it could be.
Donald S. McNamara: Yes, sir. It maybe, that's right. But we think the objection that follows a little lower down on the page was sufficient to order to request the Court --
Hugo L. Black: That was not an objection to the statement.
Donald S. McNamara: It was a -- it says, “I want to object to hearsay and what the engineer told this man is not subject matter for cross examination.” Now, whether or not it is through the introduction of the statement --
Hugo L. Black: But suppose you -- suppose you have not done that?
Donald S. McNamara: Suppose I have not done that?
Hugo L. Black: What would you say then?
Donald S. McNamara: Now, I still say that it's a res ipsa situation. It is for the jury to decide that whether or not the -- the negligence is there. It is not for the Court to decide that the inference has already been rebutted. It is a jury question to decide. The Court cannot intervene and say, “I think that is a good explanation. I will refuse to let the case go to the jury.” Now, the jury is the one who shall decide whether or not the inference of negligence has been rebutted by the explanation, not the trial court.
Hugo L. Black: What cases have held that a mere sudden stop is enough to infer negligence --
Donald S. McNamara: Well --
Hugo L. Black: -- to a mere sudden stop?
Donald S. McNamara: They are in -- they are in the brief, the Kansas City Southern Railway case and Justice which came before this Court. It's cited in the -- in the brief where there was a sudden stop. I think there are quite a few cases cited in there, if the Court please.
Speaker: Is that a passenger case?
Donald S. McNamara: No. That was the man working in the caboose the same as the petitioner, a freight conductor. And he knew that they were to make a stop for an inspection, and they made the stop but they made it so rough that they threw him from one end of the caboose to the other, the same as the petitioner and he was hurt. The case --
William J. Brennan, Jr.: Don't you think there's a difference between a scheduled stop where as you've phrased it, "It's made roughly?” And a -- and a sudden stop at the time as we have here?
Donald S. McNamara: No, the duty -- the duty is --
William J. Brennan, Jr.: No, I'm speaking in terms of -- if it's a scheduled stop, ordinarily, you would expect it to be smoothly made, that's --
Donald S. McNamara: Yes.
William J. Brennan, Jr.: -- ordinarily the case.
Donald S. McNamara: Yes, you do.
William J. Brennan, Jr.: So, when you have a sudden stop en route not at a scheduled point ordinarily --
Donald S. McNamara: You would expect --
William J. Brennan, Jr.: -- the fact that you make it does --
Donald S. McNamara: Yes.
William J. Brennan, Jr.: Would it be made -- do you think it's made (Inaudible)
Donald S. McNamara: Because Herdman has the right to assume no stop will be made.
William J. Brennan, Jr.: Has it?
Donald S. McNamara: We believe so.
William J. Brennan, Jr.: So that's the question, isn't it?
Donald S. McNamara: Yes. Now, if -- if the Court please.
Hugo L. Black: But why would he have a right to assume that?
Donald S. McNamara: Well, because they have scheduled stops. They have scheduled stops to set off freight carts.
Hugo L. Black: But sometimes stops have to be made on account of objects on the tracks.
Donald S. McNamara: Well, if stops have to be made, then it is a question of whether or not -- that is a jury question then. The jury -- the jury can say, “This stop was made, we think with due care. The stop should have been made. There was no negligence on the part of the railroad. Mr. Herdman is not entitled to recover.” But that is a jury question.
Hugo L. Black: Is there any evidence in the record that this was a stop of a kind testified to by extra or long railroad men with long experience of a kind that does not happen when the train is properly operated?
Donald S. McNamara: Herdman says it is only -- he has only known of such a stop, 22 years in the railroad, he has only been in the caboose for five or six times, I think was his language. Maximum, six times in 22 years that such a stop occurred. Now, that is not something that happens in the ordinary course of events.
Hugo L. Black: Is there any evidence such as I've suggested that from someone with experience (Voice Overlap) --
Donald S. McNamara: No evidence by -- no evidence by any one except Herdman.
Hugo L. Black: This is an extraordinary stop.
Donald S. McNamara: Yes, sir.
Hugo L. Black: Why did he say that?
Donald S. McNamara: Well, he testified that -- I only wish if I could find it in the record. If the Court please, it -- it is in the record and I cannot --
Earl Warren: Isn't it --
Hugo L. Black: That's alright.
Earl Warren: Isn't it at page 75 up towards the top.
Donald S. McNamara: Well --
Earl Warren: The right, the bottom of 34.
Donald S. McNamara: Yes, yes. At the bottom of 34 -- let's see. It was on -- on direct examination. I stated -- or no, that's on cross-examination, “That in your experience as a conductor, you've been riding in a caboose only about four times when the emergency application break made.” “I said a few times, maybe three, four or five times.” “Is that all then?” “Answer - “I rode in a caboose for years, but those emergency stops are not a common occurrence.”
William J. Brennan, Jr.: Well, now, should you think you have read at the bottom of the page, Mr. McNamara?
Donald S. McNamara: Sir?
William J. Brennan, Jr.: The bottom of that page over on 36, says, “I've known it but many times.”
Donald S. McNamara: Yes. He had known -- he had known of it.
William J. Brennan, Jr.: Known whether that was an emergency application, I know about many emergency applications --
Donald S. McNamara: Yes.
William J. Brennan, Jr.: -- applied to the other fellows that I wasn't involved.
Donald S. McNamara: Yes, yes.
William J. Brennan, Jr.: Well, is that --
Donald S. McNamara: And it -- it is the same as --
William J. Brennan, Jr.: Do we get the same inference then?
Donald S. McNamara: I believe so. It is just the same as, saying that, we know of many elevator falls, but it does not excuse their negligence if one falls with you and I on it. Even though I know it happened many times, I'm going to continue to ride them. It will not excuse their negligence. It will permit -- I do believe that here I will cut short to try and permit the completion. I think here clearly, the duty owing to Herdman was there. This was his place to work. It was the place that he had a right to anticipate would be kept in a safe condition. There was a violation of that duty and it was made unsafe. No negligence on his part, exclusive control by the railroad, it does not happen in the common course of events and coming along afterwards and telling him.
Hugo L. Black: Now, why do you have that evidence? It does not happen in the common course of events.
Donald S. McNamara: It -- it is not a common occurrence. It is not a common occurrence by the testimony that is in the record. It is not a common occurrence, four times in 22 years. It is not a common occurrence. We believe that here, there was an inference of negligence sufficient that the case should be submitted on res ipsa, not that their negligence must be bound, but that the case should be submitted to the jury. Now, the defendant as I said has -- has argued primarily that because Virgil Herdman was told about it that that should excuse the -- the negligence or should warrant the directed verdict. Now, the mere fact that he was told about it does not in itself prevent the jury from drawing an inference of negligence that that was not a correct situation. The mere fact that he was told what took place even if the objection is not to the introduction of the -- of the report itself to any examination on it. The fact that he was told what took place, it's up to the jury to decide whether that is sufficient to rebut the inference of negligence. The trial court apparently decided that the inference of negligence had been rebutted. And so, he directed the verdict or else he decided that res ipsa loquitur doesn't apply in the railroad cases, I don't know which. I have --
Speaker: Well, you don't claim that it was an error to admit this report.
Donald S. McNamara: Error to admit this report? I believe it was whether or not my objection, if the Court please, was quick enough, I don't know.
Speaker: No, no. On page 31 --
Speaker: You made no point to that when you took your position of certiorari here.
Donald S. McNamara: That it was error to admit. No, but I did say that it was error to cross-examine him in reference to hearsay, matters that he --
Speaker: No, no. When you -- when you filed your petition for certiorari and stated your grounds for it. You never have mentioned anything about the petition to this record.
Donald S. McNamara: I do not believe so. I believe so --
Speaker: The preceding page, I -- I read this, you said you were perfectly willing to have them go ahead and read the report. Mr. McNamara - “We are willing.” Mr. Barton - “Read it if the Court please, if there was --”
Donald S. McNamara: I -- I think that's right that Mr. Barton read it.
Speaker: Oh, and your objection was to somebody else reading it.
Donald S. McNamara: Well, he could -- he said he couldn't read it and I think in here that he was having a hard time reading it. We said that we have no objections to Mr. Barton reading it and then any questions in reference to it, we objected to. I think I have about five minutes left I would like to reserve.
Earl Warren: Mr. Eckler.
John A. Eckler: May it please this Honorable Court. The issue before Your Honor is a simply one of the plaintiff that has established prima facie case, so well the District Judge and unanimous Circuit of Court of Appeals was correct in directing a verdict for defendant in this case. The petition in this case was filed in 1951 based on the Federal Employers' Liability Act. Now, the Court knows that Federal Employers' Liability Act, it is not an insurance law. It is not a workmen's compensation law. There is liability under the Federal Employers' Liability Act only if the employer is negligent. Plaintiff in his complaint filed in 1951 reflects that fact and it has three specific allegations of negligence for which the railroad is charged. One was that the negligence failed to supply a safe place to work. Negligence failed to operate the train, making an emergency stop and finally, negligence to fail to warn the plaintiff to stop. Immediately after filing the complaint, the plaintiff indulged in most elaborate discovery procedures. Two different sets of involved detail and regulatories were filed to which sworn answers were prepared and filed to the Court. Then, the deposition was taken of the engineer, the fireman, everyone else who had any knowledge of this particular accident taken by the plaintiff and prepared and ready for trial. And yet, when the plaintiff came on to establish his case, to establish these allegations of negligence, only the testimony of the petitioner or plaintiff, Mr. Herdman was introduced. The detailed depositions were not used. The detailed interrogatories were not used along with the testimony of Mr. Herdman. A large portions of the record before Your Honors seemed to us to be totally irrelevant to the issues in this case. More than that, some of -- some of the assertions of fact that I have just heard my judgment are completely a departure from those of the record and I should like to review the facts. Their facts show that Mr. Herdman had been a conductor for the defendant railroad. As such conductor, he was in charge of the train, responsible for its general movements. It was his -- it was his responsibility to report all incidents in the operation of the train. On February 1st, 1951, Mr. Herdman was the conductor of a regular scheduled train running from Richmond, Indiana to Columbus, Ohio. The -- it was a very cold day, an icy day, a slippery day, snow moved through the air. Mr. Herdman was discharging his functions as a conductor riding in the caboose of the train. The train had proceeded into the City of Dayton on the mainline of the railroad. It was going through a closely build up section at a speed of some eight to 10 miles an hour. As the train approached at Great Crossing on the main streets of the City of Dayton, it went to an emergency breaking situation. Mr. Herdman testifies that it's a result of the brake that he was thrown about in the caboose. Incidentally, a fellow trainman who was riding with him was not called to testify as to what actually happened at the time of the stop. The question of Mr. Herdman's injuries are not before the Court. Although plaintiff took the liberty in its brief to suggest that Mr. Herdman was seriously injured indicated here today that he hadn't work. I think it's only fair that we suggest to Your Honors that we categorically deny that Mr. Herdman was in fact seriously injured. But even as it may, as soon as the emergency stop was made, Mr. Herdman, as it was his responsibility jumped off the caboose and started forward to determine why the emergency stop. After he'd gone past the couple of cars, he heard the air coming back in the system. He turned around and jumped back on the caboose and testified that he had first looked at the -- the air pressure shortly before the accident and then the air pressure came back. It was normal at the exhaust so he knew there was nothing wrong with the equipment that something had gone on, on the front end. Shortly after the air pressure came on the train left, went three more miles and the main line of the railroad departed and went into a switching yard. As soon as it has gone the switching yard to let some cars off and pick up some cars, again Mr. Herdman went forward and talked to the engineer. The engineer told him that the reason he had made the emergency stop was because an automobile of -- appeared to be school children at 3 o'clock in the afternoon had come up to the crossing, stopped, slid over and became stopped directly on the railroad tracks and that for that reason he threw the car, the train into emergency. Mr. Herdman then when they arrived in Columbus about midnight made a report of this particular incident and Mr. Herdman the next day filed a written report with the railroad as it was his duty to report. Now, that has been discussed and I want to again call the Court's attention to the fact that the report was marked for identification purposes as defendant's Exhibit A. It was shown to Mr. Herdman on the stand. Mr. Herdman himself undertook to read that report and did read the report into evidence. And then, Mr. McNamara said, “We are willing Mr. Barton to read it, if the Court please, if the witness can't make it up,” and then, Mr. Barton read the report with the witness following the report and that report is then this was filed, Mr. Herdman immediately after the accident, "CN 28, Engine 8800 and 5680 moving east through Dayton, with 67 cars, at estimated speed of eight to 10 miles per hour. Automobile drove over crossing just east of Dayton Rubber Works. To prevent striking the automobile, engineman applied air in emergency causing rough stop. I was standing in the cabin observing air gauge and when stop was made, knocked me to the floor of cabin bruising my hip." Now, if it please the Court, there has been no objection. There was not one objection to this report, the official report, the report made in the ordinary course of business by Mr. Herdman to the railroad. There was no objection to that report. They introduced and is a part of this case in chief and is a part of this record. Immediately thereafter, Mr. Barton asked Mr. Herdman about it and he said, “Now, is the fact the way the accident happened, the way the statement -- that statement says” and Mr. Herdman said, "The engineer told me that was the way he did it." But again, there has been no objection. The first objection that was made to any of this testimony was on a third repetition of a portion of it and Mr. McNamara then said, "I object on the grounds of hearsay and improper cross-examination." That objection was overruled and Mr. Herdman has not taken an appeal even at the Circuit Court of Appeals or to this Court. Mr. Justice Black, it is true that where evidence which is hearsay of this is introduced and is before the Court in the record, it is entitled to its full formative value. But more than that, gentlemen, this evidence was not hearsay evidence. If it was hearsay, it was entitled to admission under the res gestae exception. But more than that, the actual statement, the actual report is admissible under the Ohio statutes for a regular -- records made in the record course of business which under your rule -- Federal Rule 20 something -- 43 (a) is entitled to admission. So, there was no basis to keep this evidence out. It was proper evidence and it is in record before this Court. It supplies the answer to why this emergency stop was made and inference of negligence is drawn only at the completion of the entire plaintiff's case. It's then you say from the facts which the plaintiff has approved, it is their inference of negligence. An inference never was created in this case. There was no overcoming an inference. There was no rebutting an inference. There was no -- the Court setting itself in -- in place of the jury. An inference never arose because the plaintiff himself in his own case established at the conclusion of his case the reason for the emergency stop which was a non-negligence stop. Now then, this question of is an emergency stop a -- an unusual thing. In that regard and I want to be accurate and I'll try to follow my notes regarding the emergency stop. The plaintiff testified in this record that a railroad had to expect emergency stops, page 37. That he had to think about them. The record shows on the deposition just a few days before trial that the plaintiff told me that he himself personally had experienced while riding in a caboose many times when there was an emergency stop. His particular testimony at that is as follows. I said, “Have you ever been in a caboose before when there was an emergency application of steam?" He says, "Many times." "Was there anything different about this time?" “Emergency of air you mean? I have said emergency of steam and air?” And I said, “Yes.” And he said “Many times. I've seen the tracks jump out.” And I say, “And you have had that happen to you many times?” “I am very much alert to expecting that.” Now this was his -- his deposition a week before the trial.
Hugo L. Black: Suppose instead of that, there had been evidence?
John A. Eckler: Pardon?
Hugo L. Black: Supposed instead of that, there had been evidence that this was -- this stop was a very severe, very extraordinary and that he had never known it to happen in case of -- of -- unless there was something wrong with it.
John A. Eckler: Well, what --
Hugo L. Black: Would that make a difference in your judgment?
John A. Eckler: Your Honor, you -- you grant that this is hypothetical because there's nothing suggested.
Hugo L. Black: That's what I'm saying.
John A. Eckler: But I would say no, no, sir. No, sir, and if it was -- it was very violent based on the emergency of children sliding on -- in front of the train, the engineer putting an emergency stop, if by chance for some mechanical reason happened to be very severe. Unfortunately, Mr. Herdman had no claim of action since it's based on the negligence of the railroad. Unfortunately, we don't have workmen's compensation law to compensate men in this regard. The men themselves don't seem to want it but -- but I would answer your question categorically that the degree of violence of the stop makes no difference and -- and where he's confronted with an emergency --
Hugo L. Black: Not unless -- not unless there's evidence, if there is evidence that the degree of violence does make a difference (Voice Overlap).
John A. Eckler: Well, well -- oh yes, yes.
Hugo L. Black: That's what I asked you, if it doesn't happen.
John A. Eckler: Yes. Now --
Hugo L. Black: You say there's no such evidence as to (Voice Overlap) --
John A. Eckler: Correct. There was no such evidence at all. There -- there is a statement and that there were two questions asked to Mr. Herdman. “Is there any other way to stop the train?” He says, “By service application.” “What does that mean?” “Well, that gradually let's off the air, but that's all.” There's no statement that confront with emergency with a 150 feet of track ahead of you and a carload of school children on the car that an emergency application can be used. There's no evidence to support any that there's any other means. In fact, emergency is emergency as Mr. Herdman says that he's experienced it many times that he knew of it for many times. He says that the conductor himself, he has a conductor riding that can pull emergency stop for instance if I had the reason or if it was necessary. “I can pull the air,” he said. Now, this is in the regular operation of a railroad that an emergency stop can be made by the conductor. Anyone on the statement, the regular operation of a freight train and this is testimony that the engineman, the engineer can make emergency stops for a variety of reasons, if the trail line brakes at air plus or if the engineer is faced with an emergency, which is precisely the situation here that it is an expected thing of railroading -- railroading men must experience. He says that emergency stops are common knowledge, something we have to know about. And then he concluded, “You've got to expect them.” So, this was an act that happens in the ordinary course of railroading that happens without the explanation of negligence or inference of negligence. Now, if it please the Court, that is the total proof in this record to establish the three specific allegations of negligence.
Earl Warren: Mr. Eckler, there is just one thing in there that that bothered me and it's this. You said that the severity of the -- of the shock wouldn't make any difference in a situation of this kind? I was wondering if it -- if it would say -- say the train was going 35, 40, 50 miles an hour and an automobile came across the crossing and they applied the -- applied the brakes very quickly as an emergency, why of course it would -- it would throw you from one end of the car to the other. But on the other hand, if you're going very slowly, the application of the air brakes even in slight manner not as an emergency but even in a just -- just throttling it down would -- would slow you down with practically no -- no shock at all. Now, I notice in this -- in this statement that the train was going eight to ten miles an hour. It took eight miles an hour. It's just about a dog track and if -- if the brakes are in condition, I thought I read here a moment ago that he said they were in condition. At eight miles an hour, you -- you wouldn't think that it would take a terrific shock that way and if it -- if one would think that way, maybe -- maybe it's sure he would have the right to -- to determine whether it was -- had anything to do with the safe place to work.
John A. Eckler: Well, of course you see the -- the record is silent at that point. This issue had not been raised in this record and -- and in the deposition, the engineer which the plaintiff have taken, they testified that by putting an emergency stop, they can practically knock the paint off of the automobile and the train didn't stop for some 400 feet on the other side of the crossing. Now, this of course under your discovery procedures, the plaintiff knew. They knew that only by the emergency that was a close miss, a near miss as it was. Well, this evidence wasn't introduced but the record that he built here has no evidence at all. He talks about an emergency, that the emergency is the device that an engineer uses to stop a train when confronted with emergency. At 3 o'clock was there blowing on the school children. He came, he -- he threw an emergency operation which Mr. Herdman says, “We expect many times.” There is no foundation in this record and as a matter of fact, in the depositions, he knew none could be made, no matter what kind of testimony. No experts or otherwise could support the proposition that there was any other means of stopping this particular locomotive at this time that it was the proper device, the only device and it was a very fortunate device. It was a matter of -- of children just might have been killed.
Earl Warren: You may proceed, proceed to -- we're going to finish the case.
John A. Eckler: Well, thank -- thank you very much, Your Honor. Now, confronted with this total failure of proof, plaintiff made a motion for a directed verdict at the end of plaintiff's case and that was argued by the trial court. The Court held in our favor and granted the motion. An appeal was made to the Circuit Court of Appeals. Briefs were filed and it was unanimously determined to be the District Court's duty to have directed our verdict. Now, the two of the three specifications of negligence, negligence take place over negligence of operation, failure to warn. The plaintiff abandoned the first and third in the trial in the Circuit Court of Appeals and we understand this case here that they're abandoned. He's talking not only about the negligent operation of the train which we suggest to Your Honors has been totally the fruit for which has been a total failure. Confronted by this failure and the plaintiff knew he could not establish any negligence nor could he establish any of the three -- these three allegations of negligence. The plaintiff in 1954, the complaint was filed in 1951, in 1954, late in the afternoon of the day before this case came to trial, he filed a minute complaint. And at that time, asserted language which he thought might lay a foundation for this res ipsa loquitur argument. It was 100% a Johnny-come-lately idea by this -- by the plaintiff after he knew he had no case to establish negligence against the railroad. Now, this document is res ipsa loquitur. The doctrine appears to be a substitute for the requirements on the part of a plaintiff to establish by clear and convincing proof the -- his case. And because of that fact, this Court and many courts, many tax writers have given considerable attention to the question of res ipsa loquitur to still down the various propositions seem to require this. The various discussions of very res ipsa loquitur seem to require that before you can use res ipsa loquitur in the case, each of four basic conditions must be met. First that the actual cause, the events complained of is not in evidence. Two, that the plaintiff does not have knowledge of how the occurrence happened. Three, that the accident is one which does not happened in the ordinary course of events unless they are failure to use due care and four, that the instrumentality causing the injury must be in the exclusive control of the defendant. Now, not only does the plaintiff's case failed to satisfy all four of these conditions, in truth, it failed to satisfy any one of the conditions. This first one regarding the first condition that the actual cause of the events complained of is not in evidence. Now, this has been stated in different ways and different cases. In Johnson against United States, 333, Justice Douglas, you made the statement that the rule deals only with permissible inferences from unexplained events. And Justice Frankfurter, you said, “It is after all a rule of necessity to be invoked only when necessary evidence is absent and not readily available.” Now, I submit to this course -- Court that in this particular case, the actual cause of the event complained of, namely, the emergency stop is in evidence. There is no question about it. It is in evidence in this record. It explains why the stop was made, namely, the emergency stop. The doctrine of res ipsa loquitur as I suggested, is a fact in which permits an inference from proven facts, but it is an inference. It is a doctrine which applies only at the completion of the whole case. It's at the end of the plaintiff's case that you say is there an inference of negligence. And at the completion of this plaintiff's case, not at his testimony in chief but at all of his testimony, the question asked, “Can an inference be drawn of negligence at this time?” And in the record that's before Your Honor, you can't read the record without knowing the reason for the emergency stop that there was no negligence. Therefore, there could be no permissible inference and the case or there was a properly a directed verdict. Now, I have talked about this word of -- word about the proof. Recall that it was this plaintiff's duty to -- to determine the cause of the stop. Seconds after the stop, he started out this charge of that duty. Three miles down the line, he did determined and he did file a report. That report is in evidence. The counsel for the plaintiff suggested that Mr. Barton read the -- the report and it was marked for identification purposes as our exhibit and is in reference here. I have discussed the question of the -- the -- that this evidence is relevant even if there had been objection, there was no objection. One objection was made to only one statement and no appeal has been taken from that and the -- the general testimony regarding the stop is in evidence without any objection. And I will repeat again the plaintiff's suggestion that the -- the question you've asked, Mr. Chief Justice, about the stop not being necessary, I repeat that there is no evidence in this record that you might ask. He also said, “Well -- well, could you stop a train by just letting off the (Inaudible) cause to stop of course you could.” Everyone knows there's a service application, but there's no evidence that in the facts confronting the engineer and fireman here, automobile on the tracks that a service application could have done the job. There was no jury question presented, no testimony which would support it. The plaintiff himself said that the use of emergency stop in emergency situations and -- and on that point, I think the Court might be interested in the testimony of Mr. Herdman, statements of Mr. Herdman which answered the res -- just that question and -- and answer this question that again this is his statement, a little salt here, made no lawyers off this track to the courtroom and here is Mr. Herdman's deposition when he has stated that he had talked to the engineer, the question was, “What did he tell you?” Mr. Herdsman's answer - "He told me when I got off, he had a pickup, he set off and whatnot." That was, he had some cars to change after been going down three miles from the stop. And I asked him, "What in the hell was he trying to do back there? Are you trying to kill us in the caboose?" He said, "No, Virg," he said, "I didn't give it a thought." I had -- there was a carload of school children, some kids in the car. He felt they might be school children who are going home or whatnot. And he said, “They skidded out on the tracks and stopped," and he said, "My God, it was you, to get you back there, take a chance on you or kill them kids." And he said, “That was the reason he done it.” Now, I suggest that with any test of hearsay and I suggest within any question confronted with this emergency, this firemen and engineer did the one thing he could do, was stop this train. Certainly, that doesn't imply negligence, in the inference of negligence which supports the claim under the FELA. The next part that I have lost track of my time but I -- I think I can keep track of it. The second condition which must be shown is that the plaintiff does not have knowledge of the event. This again has been stated in many ways. What in here is perfectly clear that the plaintiff did know, plaintiff not only testified as to the report that he made. He testified in detail as to the validity of the report.
Hugo L. Black: Was that deposition in evidence?
John A. Eckler: Pardon?
Hugo L. Black: Was the deposition in evidence?
John A. Eckler: No, deposition was not in evidence.
Hugo L. Black: Well, you read it, but --
John A. Eckler: Pardon? I -- I read this one portion which is -- which is the same testimony. I said this was a little more colorful, a little salt here, of his testimony and of the -- the statements. He makes the same statements in -- in the record that he was told and he was asked about that particular point on page --
Hugo L. Black: We can't consider the deposition?
John A. Eckler: No, no, Your Honor. That's right. And of course, it's on page 23 in the record that says, “As a matter of fact Mr. Herdman in the deposition Mr. Eckler took from you three days ago. You told him that the engineer told you that there was a load of school children in an automobile and he stopped to avoid striking the automobile, didn't he?” And his answer is, "The engineer told me that". Now, it was that particular testimony that -- that I called the Court's attention --
Hugo L. Black: There was no objection to this --
John A. Eckler: No, sir.
Hugo L. Black: -- that you just read?
John A. Eckler: Well, yes. At one portion -- at one portion he said --
Hugo L. Black: You've just read.
John A. Eckler: Yes, Mr. McNamara said “objection,” but there was no ruling and he didn't press the objection. There's no question now in this case. Now, I should like to call the Court's attention of the knowledge which the corporate defendant had of this instance. It was only the knowledge it got from the plaintiff himself since the plaintiff was the one charged with responsibility of making this report. He was the conductor, and it was his report to the defendant that gave a defendant any knowledge, the only knowledge it had. An honest question of the plaintiff does not have knowledge of the event. I should like to call the Court's attention and I have not seen this discussed in any case, but this is a fundamental requirement, they suggested through and through that the plaintiff does not have knowledge. Yet, while that may have had validity back in 1860 when the case was -- the doctrine was first given a name, a barrel falling out of a head in the English case and hitting the man, the head and so forth. Now, since the Court has approved and adopted Federal Rules of Procedure for discovery, there is a real question with the -- there's any validity any longer and this question of plaintiff does not have knowledge of the event. And in this particular case as the record shows detailed interrogatories were taken. Depositions were taken. The plaintiff knew not only from the actual facts but from the discovered procedure of the defendant. The third condition, which must be shown the res ipsa loquitur apply is that the accident is one which does not happen in the ordinary course of events unless there is a failure to use due care. Now, here again, the plaintiff's proof failed and when I discussed the fact, I've called your attention that the testimony here by the plaintiff was that many times he had experienced stops, emergency stops and -- and that the engineer himself has to use the emergency stops when faced -- faced with such an -- such situations. I call the Court's attention, the statement of Circuit Court of Appeals Judge Boldt in another case in which he said, “It is common knowledge that trainmen -- among trainmen, that air brakes are applied in emergency, not frequently yet -- but yet commonly enough to be an incident of freight train operation. Trainmen must expect the occasional necessity for such applications. When they are made in order to protect life, it is the performance of a duty.” And I submit that that's exactly what we have in this case. The engineer stopped the train to protect life. It was a -- a performance of the duty. And finally, if it please the Court, the fourth grounds for proving a res ipsa loquitur must be shown is that the instrumentality be in the control of the defendant. But the instrumentality here was an automobile sliding out in front of the train and striking the similar effect that was presented in Smith against the (Inaudible) in which this Court denies certiorari in 346. Their train was involved by a tractor trailer at a great crossing, and the plaintiff's fireman was killed. The Circuit Court of Appeals said the doctrine of res ipsa loquitur has no application to the facts in this case for the reason that the tractor trailer which collided with the locomotive was not under the control of the appellee, just as the automobile was not here. Now, I would like to say to the Court that there is no confusion in this record as to where this accident took place. This accident happened on a regular schedule run from Richmond to Columbus as the train came in riding through Dayton, Ohio in a closely built up residential section as an automobile drove out, come to, and in front of this train. Now, the counsel for plaintiff suggested in his argument, he suggest that every page in his brief or reply brief that this happened within the limits of the Dayton yards. There is that statement, but plaintiff knows that the Dayton yards is an administrative decision for a maintenance section on the railroad. The fact show that this was on the mainline, that this was not a switching yard situation. This was not a classification yard situation where the railroad controls the whole area. And if it has to make an emergency stop because someone got on the tracks then it is their own fault. Here, it was at a great crossing and the train on the mainline, so they have no control over this particular great crossing. Finally, I suggest that because the -- not only has the plaintiff not shown all four conditions they must show, he has not been able to show any one of the four that this was not a proper case for res ipsa loquitur. I also would like to suggest the Court that there is no conflict in the district in the disregard. Just this past month, this Court in Number 361, (Inaudible) against Northwestern refused certiorari in a case in their own county where the Court had granted a directed verdict in an FELA case at the completion of the plaintiff's case. The various Circuits have required these four basic conditions and plaintiff is not satisfied. And therefore, we suggest it and -- and probably even more important is that there never was and in our judgment never will be another Herdman case. You can't disassociate a res ipsa loquitur case from the facts to the particular case. And in this case, we have a conductor charged with responsibility and finds out and goes in the record the cause of the accident certainly there is no conflict with any of the decision. Finally, I would like to suggest that the FELA is not a workmen's compensation law. Now, there have been numerous members of this bench that have suggested it might be well for Congress to -- to pass the workmen's compensation law for railroad. With that proposition, we certainly do not have -- deny or question or disagree what Congress does. The FELA remains an Act based entirely on negligence and negligence must be shown is not presumed and was not shown in this case. And finally, and I have just lived through the shortest 30 minutes of my life. I would like to call the Court's attention that on page number -- on point number three of our brief, we call the attention to the sound, the judicial discretion which should properly be accorded trial judges. And I would like to suggest the Court in the trial of these cases, we have found occasionally when a motion for directed verdict is made that the trial judge is implying to reserve his opinion and let their defendant put in his case and then when it's renewed he again reserves his opinion and judgment on the motion until the matter has been submitted to the jury. We often suspect that maybe it is designed to -- to hope that the jury might protect the judge and require to make the -- it's his decision. I would like to say that it is refreshing indeed to see the evidence of a really courageous, straightforward, direct piece of judicial statements here and a Court approved a -- a motion for directed verdict. That was done in this case. The Circuit Court of Appeals has affirmed. We resolutely and respectfully submit to this Court from that action. May I have --
Earl Warren: You -- you have one minute, Mr. --
Donald S. McNamara: In the rebuttal --
Earl Warren: -- McNamara
Donald S. McNamara: -- very quickly, this record that they introduced is not plaintiff's evidence. It was marked defendant's exhibit and introduced in the cross-examination that it is not plaintiff's evidence which destroys the possibility of the application of res ipsa. He said that he discussed the matter of a 150 feet of track or something like that. He is bringing matters. I don't know where he got them. There isn't anything in the record in an effort to pervert the attention of the Court. Depositions are improperly used here and I would like for you to know, I will not take the time but if you knew what the engineer had to say, you would then understand why the engineer was not called to testify, why he was not made plaintiff's witness whom we could not impeach from the story. He told the story is absolutely contradictory to the evidence that has been read here from a deposition. Now, it said, “Defendant's explanations may preclude recovery,” and that is exactly correct. We do not say that we are entitled to recovery. We say that the duty, the violation of a duty and the evidence is here to permit an inference of negligence that should be decided by the jury. The judge should not say that it was rebutted. In this case, there was no collision. He cited two cases that the Court said, had previously said where there was a collision with an automobile, everything wasn't in exclusive control of the defendant. That is not the true situation here.


Earl Warren: Number 155, Michigan National Bank et al., Appellants, versus Michigan et al. Mr. Klein.
Victor W. Klein: Mr. Chief Justice, may it please the Court. This is an appeal from a judgment of the Michigan Supreme Court. The basic question in this case is whether or not, the National Bank Tax Act known as Revised Statute 5219 was violated by the State of Michigan under Act 9 of the Public Acts of 1953, taxing shares of national banks at a rate 13 times greater than the state taxes shares of savings and loan associations. Now, although Act 9 was enacted in 1953, it relates back to the 1952 taxes. There had been a tax in effect, the appellant paid that tax some $18,000 and then this Act 9 of 1953 also imposed this new tax of $5.5 per thousand of paid up capital surplus and undivided profits has contrasted with a tax of only 40 cents a thousand on shares of savings and loan associations. The appellant paid the tax, the additional $49,000 tax under protest took the proper procedure, tried it in front of the Court of Claims in Michigan, then to the Supreme Court and we are now here. There are other taxes from 1953 to 1959 or 1960 the date in which there are cases pending awaiting the determination of this case. Before giving even a preliminary outline, I want to point out one thing to the Court that this is not a case of tax immunity or tax avoidance. This is a tax -- this is a case in which the appellant urges on this Court that under the federal statute, national banks are entitled to be taxed equally but at no greater rate than other moneyed capital which comes into competition with the business of the national banks. And we say in this case, if that injunction of the federal statute were observed, the State of Michigan would collect additional taxes from savings and loan associations shareholders in the annual amount of $8,000,000 a year. Now preliminarily, I'd like to point out to the Court that we submit that savings and loan associations are the dominant and principle competitors of national banks in the residential mortgage loan business, that that business is a substantial business. In the year in question, it was over -- over a half of billion dollars was employed in the State of Michigan by savings and loan in their business, the day over a billion and a half dollars and that type of business, your residential mortgage loan business, is a vital, essential, substantial, important phase of the business of national banks. In the case of appellant, that residential mortgage loan business amounted to 40% of appellants' total loans, three times more than its commercial loans accounted for 32% of its total income and constituted over 20% of its gross assets. I gave to that in a preliminary way only. We'll get into the details. So, the Court has the proper background. I should like to point out that in the year 1952 which is the year which -- which we're here concerned, there were 77 national banks operating in the State of Michigan and there were 67 savings and loan associations, about half were domestic Michigan saving and loan associations and the other half federal savings and loan associations. The Appellant Bank is a national bank which operates in seven cities throughout the State. They are not large metropolitan cities like Detroit where commercial loans are of greater importance than they are to the out state bank mortgage loans, residential mortgage loans are very important in fact, the most important, I would say operation of the out state national banks. The Appellant operates in cities like Battle Creek, Michigan population 48,000, Port Huron population 35,000, Lansing 92,000, Saginaw 92,000, Flint 163,000, Grand Rapids 176,000 and then one small community of Marshall 5700. But they're all medium, small medium modern size cities not comparable to the big city banks although the city banks are now more and more engaged in the residential mortgage. Now, with that background, we come to the power of the state to tax. I believe this Court has clearly stated that absent congressional grant of authority of the State, no State has the power to tax national banks or their shares at all, because national banks are governmental agencies instrumentalities actually performing in many respects. The basic physical policies of the United States Government, and this Court has therefore held that because national banks perform that essential government function, the State of Michigan, no State absent congressional authority would have power to tax either national banks or their shares at all, and you so held in two cases cited in our brief. However --
Potter Stewart: One of these banks in the Jackson, Michigan?
Victor W. Klein: No sir, but one of -- there are five intervening banks sir and one of Jackson Banks did intervene the -- the National Bank of Jackson intervened sir. The -- in the case of the intervenors was held in advance because the time consumed in preparing this voluminous record and the burden upon us was so great that we elected to defer trial of the intervening cases until the disposition of this case. Now, Congress did authorize and empower states to tax originally in 1864, to tax only shares of national banks and that wasn't broadened until 1923 when there were two other methods of taxation permitted the tax on the dividens from shares and also in income tax on the bank itself as contrasted with shares. And in 1926, there was authorized. States were permitted to impose a franchise tax measured by income. But Congress provided that when a State, elected one method of taxation, that method was in lieu of all others, it could not employ both methods at the same time. In this case, Act 9, I'll call it Act 9 of Michigan, imposed a tax on shares. It is a share tax just as the original Act permitted to be imposed, on shares of national banks which it imposed upon the bank which in turn could or could not pay it for its shareholders but the assessment was made and is made on the banks. Now, Section R.S. Section Revised Statute 5219, the tax on shares, the empowering of a State to tax on shares, specifically provide Section 1 (b) that such tax by a State and I quote, "shall not be at a greater rate, than as assessed upon other moneyed capital in the hands of individual citizens of such State coming into competition with the business of national banks." Now, this Court has held that a State so empowered to tax, national bank shares may only do it in the manner and through the extent and subject to the expressed limitations provided by Congress in this R.S. 5219. One, the injunction is that the tax shall not be at a greater rate than it's assessed upon other moneyed capital. The other moneyed capital must come in the competition with the substantial phase of the business of the national bank. And three, such competition when compare is substantial when compared to the total capitalization of national banks in the State. In this case, it's three times the total capitalization. Now, looking at this empowering statute of Congress, we first determined what is meant by other moneyed capital. Originally, when this Act was passed other moneyed capital meant any kind, all kinds of intangible personal property, stocks, bond, judgments, anything, coming in the competition was not in the statute and it wasn't a requirement. But in 1887, this Court redefined moneyed capital in the Mercantile case, and it said, and this becomes important, and I quote, "That moneyed capital include shares of stock or other interests owned by individuals in all enterprises in which the capital employed in carrying on its business is money where the object of the business is the making of profit by its use as money reduced again to money and reinvested." In other words, moneyed capital means that its money either employed by an individual, in an individual capacity partnership by investing in shares and that business employing it in a business where the inventory so to speak is money, money is loaned out and money is the business carried out and it's a business of money. And we submit, and we'll get into this more in detail, that shares in a savings and loan associations are moneyed capital. In other words, an individual buy some shares. Those shares are employed by a corporation, whose business is money, loaning out the money primarily on real estate residential mortgages. So we say, initially and we'll get more into detail on that, that investment in shares in savings and loan association is other moneyed capital because its business is money, the loaning of money.
John M. Harlan II: Is there -- is there any dispute between you on that issue?
Victor W. Klein: Well, there wasn't up until through the Supreme Court, sir. I think the Supreme Court of Michigan assumed it was moneyed capital but I do believe at this point the appellee questions asked, and we will discuss that because we will -- if you wish I will answer it now appropriately. Up through the Supreme Court of Michigan including its opinion, I believe it was assumed that it was other moneyed capital. And that other moneyed capital did not have to be in stock. It could be an individual. I could go in the real estate mortgage business and put a certain amount of money in it, loan it out on residential mortgages, get paid back and loan some more out, and then if l think I had too much in the business, I could retire that and keep a lesser amount of this. Now, the second part of the statute, the question of coming into competition, it must be moneyed capital, coming into competition with the substantial phase of the business of national banks. Originally, as up till Mercantile, the moneyed capital did not have to come into competition with the business of national banks. It was all kinds of intangible money. Then in Mercantile, the Court -- this Court said, it had to come into competition and there was lot of backing and filling and finally in 1923 Congress codified that determination of this Court into the statute and provided that it had to be not only other moneyed capital, but it had to come into competition with the business of national banks. And this Court has go on further that it had to be substantial in amount, and that it had to come into competition with the substantial phase of the business of national banks. I, again, will come back to the history. Now, what are the facts in this case? Today, in 1952, these savings and loan associations in Michigan in fact throughout the country will come into this are nothing more than commercial enterprises for profit of its stockholders seeking residential mortgages primarily from the general public of all economic classes, rich, middle class, poor, just like any borrower from a bank, the testimony is uncontroverted from all the savings and loan officers and they were all hostile, that the borrower on the mortgage of the savings and loan association was no different than a borrower of bank that they passed upon that mortgage solely on his personal credit and on the security of his home. There was no difference. Now, what is the competition? We called as witnesses, 16 executive officers of each of the 16 savings and loan associations in the city, is where we did business. And each one of them admitted and I, again, say they were hostile that they -- their associations were the principal, dominant competitors of national banks, our bank, in other banks, in the business of residential mortgage loans. We obtained the recordings in the seven counties were we did business of all of the mortgages recorded in those counties for the year 1952, it's a very voluminous exhibit and there's abstract showing that the savings and loan associations were the largest principle mortgage lender in those counties. We subpoenaed the association reports showing the competition and we have the bank officers testified that in their opinion, the savings and loan associations or the principle and dominating competitor of Appellant Bank in the communities in which they awkward it. Their loans were on the same pro-types of property, they loaned of the same types of individual, they loaned to all classes of people, rich, middle class, poor, of all professions, business not just wage earners. That is undisputed. Now, if Your Honors would be good enough to look at page 17, because I think that tells the story --
Hugo L. Black: (Voice Overlap)
Victor W. Klein: -- of our principle brief, our principle brief. We have a chart on page 17 of our principle brief. Page 17 sir. Now, the top line and this is all back by the testimony. The top line shows the seven cities in which the Appellant Bank operates. In 1952, our bank, in the seven cities had $60,000,000 of residential mortgage loans, some contract did in that year and in some priorities. The 16 savings and loan associations had $97,000,000 of loans in those same cities. Now, the next chart and these numbers might be helpful if you would write on the left side of the page 77 because that's the national banks in Michigan and on the right side of page 67, there were 77 national banks in Michigan, that's the left side of the page, and the right side of the page 67 associations, it shows that in 1952 the banks had $300,000,000 of residential mortgage loans, and the 67 101, savings and loan associations had $433,000,000, many contracted during the year 1952 on the same basis. Now, the next chart shows a comparison of national basis and then the very extraordinary and interesting thing is the 1957 figure which shows that in the five-year period from 1952 to 1957, savings and loan mortgage business increased three times greater than the mortgage loan business on residences of national banks. And we say with all humility and we've read the records in most of the leading cases on this subject, that we doubt that there's any case in which there has been such a showing of extensive and dominating competition by the other moneyed capital with the business of a national bank as we have demonstrated in this record. We say on the showing that we've made under the decisions of this Court, that the rate is greater the money invested by savings and loan associations and shares is other moneyed capital that this is substantial in amount, and it competes with the substantial phase of the business of national banks. You so decided in Hartford, Minnesota, Anderson, and Richmond. Now, we submit to the Court, that notwithstanding this showing of competition in a substantial vital phase of our business and I again point out that the residential mortgage loans in Appellant Bank were $60,000,000 and its commercial loans were only $22,000,000. In other words, their residential mortgage loan business was three times greater than our commercial loan business. We say notwithstanding that showing, the lower court in the appellee statute admitted extensive competition. In fact, you cannot have competition as a matter of law, because savings and loan associations are of a different character, purpose and organization. In other words, the appellee puts this question in its brief, how can fundamentally different institutions be in substantial competition under R.S. 5219? Pointing out that savings and loan associations under the Michigan law, under the federal law cannot accept deposits, cannot engage in the general banking business. Competition in fact is extensive, at minute, they dominate the fee. Carried to its final conclusion, this decision of the lower court in our opinion and the contention of appellee, means that there could be no business that could engage in the business of deposits or general banking except the bank. And following further, the only conclusion you can reach from that argument is that other moneyed capital means other banks. This Court in Hartford and in Richmond and in Minnesota has held directly to the contrary. Congress was act -- asked on two or three different occasions to limit the term "other moneyed capital" to other banks, and it refused to do so. The Michigan court and appellee contend contrary that the position taken by this Court and contrary to the act of Congress. The next point appellee makes -- says "Well, savings and loan don't engage in all of the banking activities and therefore, you can't be in competition." And this Court also has decided in Hartford and in Minnesota that competition may exist under the statute even though the competition be with some but not all phases of the business of national banks. And on this character and nature proposition, this Court has said, competition in the sense intended arises not from the character of the business of those who compete, but from the manner of the employment of the capital at their command and pointed out the gross of various businesses not in the banking business, in phases of the business of national banks which if permitted to enjoy favored state taxation would place the national bank shares, those who invested in national bank shares any distinct and decided disadvantage. Then, the next argument appellee makes well even if one competitors in one phase and some competitors in another phase, you've got to show that this competes in all phases of the banking business have been favored by taxation. And this Court certainly has held to the contrary we believe, when it says a particular phase so long as that phase is substantial, substantial in amount and substantial when compared to the total capitalization of all banks. That this residential mortgage business is substantial in the case at bar, I again say is demonstrated when I tell you that 40% of Appellant's loans are in the residential mortgage business. We get 32% of our income, total income from the residential mortgage loans and it constitutes over 20% of our assets. And furthermore, this competition of savings and loan associations at that time $1.5 billion dollars in 1959 over $1.5 billion invested in shares was three times the total capitalization of all national banks in the State of Michigan which is the test this Court has laid down. Appellee says, or -- or the lower court says, this is too narrow field of the banking business, which as I pointed out. It's probably the most important field in the out state national banks today, and it's gotten to be a very important field in all nations.
Earl Warren: Mr. Klein --
Victor W. Klein: Yes, sir.
Earl Warren: -- I don't know whether it makes any difference, but I'm just wondering, is there any difference in the size of these loans --
Victor W. Klein: No, sir.
Earl Warren: -- that comes from the billing of loans in those companies.
Victor W. Klein: They're all comparable size sir. The record is replete with. I don't -- we have exhibits, we asked witness after witness. They're the same type of loans and the same locality, the same type the houses. In fact, we have dozens and dozens of exhibits where, they, the associations refinanced the bank loans and the banks refinanced the association loans. We have pictures that we didn't put it in this exhibit showing the identical houses, the neighborhoods, the character, the type of people, they're the same, sir. They're all types of loans. There are some conventional loans, there are FHA loans, and there are VA loans. At that time, the associations took more conventional loans percentage-wise than we did, although we have many conventional loans. We took percentage-wise more FHA and VA loans then the savings and loan associations. Although -- yes, sir?
Charles E. Whittaker: Do I correctly understand that the question is not one of the facts of competition with one law --
Victor W. Klein: Yes sir.
Charles E. Whittaker: -- where there couldn't be competition.
Victor W. Klein: Yes, sir.
Charles E. Whittaker: Is that it?
Victor W. Klein: That is it sir.
William O. Douglas: What year was the last case involved in this question before this Court?
Victor W. Klein: 20 -- 912 involved in this competition question. In 1926, you had a subsequent case but this phase of the case was not discussed. There was the Hartford case and the Minnesota case --
William O. Douglas: 1926?
Victor W. Klein: 1926.
William O. Douglas: Is that under the national banks where they were the business?
Victor W. Klein: They were to a small degree but they were sufficient for this Court to recognize that the competition of mortgage contenders individual partnerships and incorporations in the State of both Wisconsin and Minnesota was substantial enough to have the Court say that the discriminatory tax could not be maintained because of the competition sir, and that was the unanimous court in both to those cases. Now, the one point of shares the appellee claims, the lower court didn't get into this and I think Mr. Justice Harlan have said. The lower court didn't raise this question. But appellee now says, "All these shares and savings and loan associations are not other moneyed capital, because they're like bank deposits, and commercial bank deposits aren't other moneyed capital." They raised this for the first time. Now, that position is directly contrary to the Michigan statute which provides that a payment for shares is for capital stock, capital stock. It's contrary to the bylaws of these associations which cause these payments, capital and provides for the issuance of shares and stock. It's contrary to the stock certificates which are -- coupled of which are attached to our reply brief wherein its whole capital stock and they're transferable in the manner of capital stock now in some instances, the certificates in a booklet. This -- this question was raised before the Michigan Supreme -- and -- and there's also a provision in the Michigan statute, that these associations cannot take deposits and that a shareholder of an association is not a creditor. So, how a shareholder could be a depositor if he couldn't be a creditor, and if the association couldn't take deposits as suggested by appellee is beyond us, but to go further, this counsel, the Attorney General of Michigan argued before the Michigan Supreme Court two years ago just as we are arguing before you today, and he took the position successfully in a case where the question was whether a state agency could invest in shares of savings and loan associations. The Savings & Loan League of Michigan attempted to have a determination that in substance, a share was lightly deposit and therefore, it didn't violate the constitutional injunction of Michigan against agencies purchasing shares in a corporation.
Charles E. Whittaker: In other words, is that means of a -- they're speaking of some deposited state funds?
Victor W. Klein: Yes sir. And the Attorney General very enabling a sale the position of the Savings & Loan League, and pointed out and we put the quotation in our reply brief that payments on shares of savings and loan associations do not constitute deposits. And the Michigan Supreme Court said, in substance, in substance, they do not constitute deposit, but purchases of stock in a private corporation for profit. Those are the Attorney General's work on "private corporation or profit." So we submit that this is moneyed capital, and it fits within the definition of this Court shares in a corporation or other interest of an individual put in an enterprise engaged in a business or profit. These are shares, they're stock, the statute says so, the case is so hold, the Attorney General of Michigan has always been of that opinion because there are a number of opinions which we've have cited. And the Michigan Supreme Court says that that is their relationship. And the language of the federal statute is also in terms of shares and capital. Now, we come to the next question, they say its other moneyed capital coming in competition was a substantial business of national banks and substantial in comparison with the capitalization of national banks. We say the question of greater rate requires no great debate. It can't be controverted that the rate is 13 times greater; it just takes simple mathematics $5.5 of thousand versus 40 cents of thousand. Now, on domestic corporation --associations in Michigan, there was a 25 cents of thousand in your privilege tax. So, even giving the domestic corporations credit for that, that would be $5.5 to 65 cents, eight times, 8:1, 13:1 in case of federal association. Now --
Tom C. Clark: (Voice Overlap) -- the other taxes?
Victor W. Klein: The other taxes were unimportant sir. The both banks and associations have to pay the same type of real estate tax valued in the same manner at the same rate also unemployment taxes, both were subject. So, it becomes out -- there's an examination fee which we say it's for a service that banks have to pay an examination fee. There were few other taxes which we've listed in our brief, but it's very inconsequential sir, and I think for all practical purposes, we can say 13:1 in cases of federal associations, 13 -- 8:1 domestic corporations. So what does the appellee do in the court below? He urged the proposition directly contrary to the position of this Court and the Michigan Court followed. He said, "Because, we're dealing with two different types of organizations here, one that takes deposit does lot of business with deposits and one that does not." This tax shouldn't be on shares, it ought to be measured by the tax burden on total assets of each institution. In other words, if we figured out how many dollars of taxes banks paid or the bank in our bank pay and took the ratio of total assets without deducting the deposit liability of it and did the same thing for savings and loan which didn't borrow very much because they are a more conservative operation in banks in that respect that we have that liability. Why? They said there is substantial equality. Now, to do that required and rewriting in the statute, this is a tax on shares not on gross assets of the corporation. And this Court held, when this very same proposition was urged to this Court in Minnesota in 1926. The argument ignores the fact that the tax authorized by 5219 is against the holders of the bank shares, and is measured by the value of the shares and not by the assets of the bank without deduction of its liabilities. In other words, it's a tax on the shares not on the assets of a corporation without deducting its liabilities to ascertain the equity of the shares. The Minnesota -- this Court Minnesota completely rejected without qualification that argument. Now, the appellee -- and the Michigan Court followed the rule which is directly contrary to this Court in Minnesota. Now, the appellee urges that this Court considered a different tax, just ignored the fact that the share of capital, and only take the reserves and undivided profits of the savings and loan associations. And if you did that, you might get approximate equality. First place, the Michigan statute doesn't permit that. The Michigan statute says, "This is a tax on the shares of savings and loan and only the paid up capitals for that part." It talks not about the undivided profits, and if the tax under paid up capital of the national bank and its undivided profits and its service. We submit that under the rulings of this Court going back to Weaver and Hepburn which cited in our brief, that where you have the same type of taxation which you do here, this is not a question of different methods of taxation. Any tax which exacts from the owner of the shares, a larger sum in proportion to their actual value than it does from the owner of other moneyed capital, valued in a light manner thus tax them at a greater rate. It doesn't just decide in one case, the shares are invested in a corporation which borrows little money and some shares are invested in the corporation which borrows more money and a bank has a lot of indebtedness to bank deposit. It doesn't say that that Congress has said, once we determine that this is other moneyed capital and it comes in competition substantially, rate valued in the same manner, if it's the same type of tax is the determining bank. Now, the last point, and that's the point upon which I think appellee and the lower court relied very heavily a so-called "partial exemption ordinance." There were some old cases, going back to the 1800s up till 1899 are originally when moneyed capital was not as its now defined when it wasn't -- its inventory wasn't money. It's all intenders of any kind didn't have to come in competition with the bank in the old days. And some portion, not material, was exempt noncompeting. The Court in those days said, "There could be a partial exemption. It was not in competition and it was not moneyed capital as now defined." If it was a material, even though not in competition, there was violation. Then when the Court decided Mercantile and throughout the years and limited moneyed capital to only those businesses share -- which -- which shares were had, which business was moneyed. The competition became the dominant factor, and not for 61 years has this Court ever mentioned partial exemption anymore in any case. But even if there is a partial exemption doctrine now, we say there is not. We say that's been gone with this new principle of coming into competition was a substantial phase of the business through the bank. But even if that doctrine applies, the appellee presents to this Court the most extraordinary proposition. He contends that the State of Michigan having granted partial exemption to shares of savings and loan associations, this Court is foreclosed from considering whether or not there was just cause from the -- for the State exempting from taxes something which might violate that federal statute which have just caused to exempt something under a federal statute and he suggests this Court can't even consider that question. We submit in the first place, that although originally savings and loan associations were exempt by Michigan statute, they no longer are. They are subject to taxes, and there is no partial exemption that tax is on all of the shares but add 1/13th of the rate. That isn't a partial exemption, that's a preference a tax of discrimination.
Charles E. Whittaker: Did the privilege allowed (Inaudible) tax?
Victor W. Klein: Yes, sir.
Charles E. Whittaker: Just as a bank saving.
Victor W. Klein: Yes, sir. Now, in arriving at this so-called just cost, appellee relies on old cases at a time one, when national banks could not be in the mortgage business. It's only been permitted to have mortgages since 1916 and really in real volume since 1933, a work permitted to take savings until 1927 by statute. They weren't in the competition factually or otherwise with savings and loan associations in those days. Now, on the just cause for exemption --
Hugo L. Black: What was the reason for the exemption?
Victor W. Klein: In the old days, sir?
Hugo L. Black: Yes.
Victor W. Klein: First, the savings bank cases. They dealt with poor people of limited means who had no place to put their savings and no place to get mortgages. And they -- in the savings bank cases, they were publicly managed. The -- the trustees were appointed by the State not by the depositors. Now, the savings and loan associations in the older days and Justice Taft -- then Judge Taft commented in an early case in 1890 or something that they were comprised of poor people who banded together under a mutual thrift plan to afford a facility from which they could borrow money. And that, and that I -- that worked in this way and Michigan had the same case. It was quasi charitable, nonprofit, noncommercial, because you had to be a borrower, you had to be a stockholder, and he could only bid for a loan to the extent that he has subscribed for his stock. He couldn't bid more. In other words, in the old days if I were a poor man which I might qualify filed -- I had to be a stockholder, I've signed up for $1000 worth of stock and agreed to pay $2 or $5 a week. And then, when the money was bid on, I could come and bid for it in competition with other stockholders, but I can only bid up to the amount of my stock subscription.
Hugo L. Black: Did have.
Victor W. Klein: -- or a mortgage against the other members who own stock.
Hugo L. Black: For a loan?
Victor W. Klein: For a loan. He had to pay a premium in those days. Then he would get a loan for $1000 and he'd have to pay on his stock subscription. The only thing he paid on his mortgage was interest. He paid so much a week on his stock subscription and if the -- there was money profit made, the dividends would pay -- be paid to him and he could then use that to pay his interest. If there were losses, he got no dividends or received no dividends. And in case of a failure, and this is the importance, he had to pay his mortgage loan 100% in full, received no credit for what he had paid on the stock. In fact, he might have had to pay the balance of his subscription of general creditors when it's answered. So, he was on both sides of the deal. It was a cooperative, noncommercial neutral enterprise.
Hugo L. Black: On that basis, the State decided a good (Voice Overlap) --
Victor W. Klein: Exempt, but it doesn't exempt in anymore sir. The Federal Government removed the exemption in 1951 and we quoted the part in there and they're to be taxed, it was the intent of Congress that these associations be taxed just like other corporations. Now, in 1935, the State of Michigan amended the Home Owners Act and we've got a little writer on page 72 of our principle brief. I hope it's been appended to all of your briefs. It's page 76, Your Honor. Pointing out that in 1935, the stat -- this Section was amended so no longer does a stockholder -- does a borrower have to own stock in order to take a loan. In other words, he doesn't have to be an investor and he doesn't -- he can borrow any amount regardless of what his stock ownership may be. He doesn't even have to be a stock ownership before he can only borrow to the extent of his stock ownership.
Hugo L. Black: So you've appended a right (Voice Overlap) --
Victor W. Klein: Well, we've asked that it'd be appended on page 76. We asked the clerk to do it. Now, he may have failed to do so.
Earl Warren: No, it is (Inaudible)
Victor W. Klein: Well, we will -- we will ask the clerk to do it again. We have extra copy because that calls your attention to this one.
Felix Frankfurter: It carried it out but not by fixing it under the case.
Victor W. Klein: I see, sir. Now, that is a significant change because now, there is no mutuality and stockholders are from all economic classes, corporations, trust, pension trust, professional men, businessmen, they're out solely for the profit and borrowers are out solely to get the best loans they have. There's no mutuality of interest. One is just like a -- any stock in a -- in a corporation where you're out to get as much profit as you can and the borrower is out to get as much as he -- to the best loan he can get. And the class of investors are all classes across the board, no longer poor people. As I say, there is advertising campaigns locally, statewide, nationally. In fact, over the weekend, there were two national, big national corporations, football games, savings and loan people seeking to get investors of all classes, corporations otherwise to invest in their stock or savings and loan associations seeking to get borrowers of all classes. And it's no different in a bank they compete for the mortgage business just as they do in the case of banks and there is no just reasons, no just reasons why they should enjoy a preference, and it is a preference, it's not an exemption in state taxation in view of the injunction of Congress that a State shall not pass this other moneyed capital at a greater rate than national banks. And if there's every been a time when our fiscal policy and our economic stability had to be safeguard, I think most responsible people are in agreement that such time is now and in encroachment of this kind against national banks would be very serious indeed.
Earl Warren: We'll recess now.