Court Opinion

ID: 3877250
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:09:51.853451+00
Date Added: 2024-06-11T09:18:21.342129
License: Public Domain

The opinion of Mr. Justice Cothran holds that "if it were not for the Act of Congress known as the Transportation Act of 1920, there would be ample authority in the decisions of this Court to sustain the Commission's order."
The opinion does not discuss the constitutional question which would appear to forbid such a construction as has been thereafter made in the opinion upon said Act. As a result of the views expressed in the opinion, even the "Jim Crow Law" of the State (Civ. Code, 1922, §§ 4944-4948) could not be enforced.
However, I think it is not necessary to resort to the complex constitutional question referred to, as to whether Congress has the power to interdict the order of the State Railroad Commission, involved in this case, which, after all, will be found to be but a pure regulatory police power, because it will be shown that Congress had no intent to destroy the previously existing power of State authorities to make such orders.
The true questions falling out for decision, are: Whether it was the intent of the Transportation Act to interdict such orders of State authorities; and (if so): Whether Congress has the constitutional power to interdict such orders?
The questions are best arranged in this order, because, as stated, if the conclusion is reached that Congress had no such intent, there would be no occasion to consider the difficult constitutional question referred to.
A careful analysis of the Act, will show that it was not the intention of Congress to interdict the orders of State authorities requiring reasonable expenditures for the purpose of providing for intrastate transportation.
The most important new provision (as was said by the Chief Justice) in the Wisconsin Passenger Fare Case, *Page 26 257 U.S. 563; 42 Sup. Ct. 232; 66 L.Ed., 371; 22 A.L.R., 1086, was Section 15a (U.S. Comp. St. Ann. Supp., 1923, § 8583a), which made it the duty of the Federal Commission so to adjust rates that the carriers in the country, as a whole, or within such rate groups as the Commission might divide the country into, should earn upon their aggregate value, as found by the Commission, a return as nearly as may be "equal to a percentage of such value found to be fair by the Commission."
It appears to me that this Section 15a, and certain accounting provisions in the Act, have caused Mr. Justice Cothran to reach the conclusion that the order requiring certain expenditures at Blackville is invalid, as it would increase value; but there are many other provisions in the Act quite inconsistent with any construction of the Act holding that it was the intent of Congress to place "the entire control over the rates, properties, track, terminals, and the facilities of the railroad engaged in interstate commerce, in and under the jurisdiction of the Interstate Commerce Commission," to quote language from A., T.  S.F. Ry. v. R.R.Commission (Cal. Sup.), 211 Pac., 460, which has been given great weight in the said opinion; and in this connection it should be noted the California decision is under appeal.
The United States Supreme Court, since the Act, has not treated the Act as abrogating State power. In State ofTexas v. East Texas R.R., 258 U.S. 204;42 Sup. Ct., 281; 66 L.Ed., 566, we find:
"As a whole these Acts show that what is intended is to regulate interstate and foreign commerce and to affect intrastate commerce only as that may be incidental to the effective regulation and protection of commerce of the other class. They contain many manifestations of a continuing purpose to refrain from any regulation of intrastate commerce, save such as is involved in the rightful exertion of *Page 27 
the power of Congress over interstate and foreign commerce."
In the Wisconsin Rate Case, 257 U.S. 563;42 Sup. Ct. 232; 66 L.Ed., 371; 22 A.L.R., 1086, where an order of the Federal Commission holding certain State rates discriminatory was upheld, Chief Justice Taft said:
"It is said that our conclusion gives the [Federal] Commission unified control of interstate and intrastate commerce. It is only unified to the extent of maintaining efficient regulation of interstate commerce under the paramount power of Congress. It does not involve general regulation of intrastate commerce."
Recurring to the opinion of Mr. Justice Cothran, immediately following the statement referred to, that the Commission has the authority to make the order in question if it were not for the Transportation Act, the opinion states that the Act "placed the entire control over rates, properties, tracks, terminals, and facilities of railroads engaged in interstate commerce, in and under the jurisdiction of the Interstate Commerce Commission."
This was the question to be decided. It appears that the opinion disregards many of the provisions of the Act, and contrary declarations of the United States Supreme Court. To support this ruling are certain citations, which do not seem to me to support it. The first is Akron, etc.,R.R. v. U.S., 43 Sup. Ct., 270; 67 L. Ed — . Referring to it, the opinion says:
"Illustrative of the universality of supervision and control of carriers by the Interstate Commerce Commission, the Court cites: The establishment of railroad labor and adjustment boards; the raising of capital by new government loans," etc.
The language quoted was doubtless an inadvertence. No question of State power was involved in that case. Examination of that case will show that the provisions referred to (in a footnote) were cited by Judge Brandeis, not as *Page 28 
"illustrative of the universality of the supervision and control of carriers by the Interstate Commerce Commission," but rather as indicating the variety of provisions contained in the Act, designated for the purpose of insuring an adequate transportation service. It seems obvious that the Supreme Court would not cite the provision establishing the labor board as illustrating "universality of * * * control * * * by the Interstate Commerce Commission." I am unable to see that the case is in any wise relevant.
The next citation is the Wisconsin Rate Case. It has reference to the new departure in the provisions of the Act, whereby the Federal Commission is required to fix rates, with a view to obtaining a prescribed aggregate return. The case, in language already quoted, denies that the Transportation Act, as construed, vests the Federal Commission with "universality of supervision and control," or "unified control," to use the language of Chief Justice Taft. So the Wisconsin opinion would seem to controvert, instead of support, the ruling which has been made in this case.
After the Wisconsin Case, the opinion quotes from Paragraph 18, § 1, amended Interstate Commerce Act (U.S. Comp. St. Ann. Supp., 1923, § 8563 [18]), language forbidding the extension by any carrier "of its line of railroad" without a certificate of convenience and necessity from the Federal Commission, followed by this paragraph: "The term `railroad,' as used in the Act of 1920" (paragraph 3, § 1, amended Act), is defined as including — "all the road in use by any common carrier operating a railroad, whether owned or operated under a contract, agreement, or lease, and also switches, spurs, tracks, terminals, and terminal facilities of every kind used or necessary in the transportation of the persons or property designated herein including all freight depots, yards, and grounds used, or necessary in the transportation or delivery of any such property." *Page 29 
The significance of this reference is difficult to discover. Certainly this case as to a shed cannot be held to be one of "extension of its line of railroad."
Following the quotations from the statute, the opinion refers to the Los Angeles Union Station Case, and quotes therefrom the following:
"The foregoing excerpts from among the many provisions of said amendatory Act would seem to fully justify the statement of Chief Justice Taft, above quoted from the decision of the Supreme Court of the United States, as to the radical departure effected by the said amendment to the Interstate Commerce Act in the direction of placing the entire control over the rates, properties, track, terminals, and the facilities of the railroads engaged in interstate commerce in and under the jurisdiction of the Interstate Commerce Commission."
And the opinion proceeds:
"If, therefore, Congress has committed to the Interstate Commerce Commission the supervision, control, and direction of railroad facilities of every nature, the field has been occupied, to the exclusion of State regulation."
But it must be noted that the language quoted from the California opinion was upon a different state of facts. It was as to "Changes and extensions of the railroad lines"; and in the concluding paragraphs of the opinion the power of the California Commission to require grade crossing elimination appears to be clearly recognized. The California opinion does not involve a discussion of Paragraph 17 of Section 1 (Section 8563 [17]); and, as heretofore noted, the opinion is under appeal.
Then follow Gibbons v. Ogden, 9 Wheat., 1;6 L.Ed., 23, and the Minnesota Rate Cases, 230 U.S. 352;33 Sup. Ct. 729; 57 L.Ed., 1511; 48 L.R.A. (N.S.), 1151, Ann. Cas., 1916A, 18, quoting language expressive of the paramountcy of Federal power to the extent that it may be necessary to be exercised for the effective regulation of *Page 30 
interstate commerce. Those opinions, and the language quoted from them, relate to the extent of the power of Congress, and not to the extent to which Congress has sought to exercise that power; hence, it would seem, are irrelevant to the point involved in the ruling. The opinion also refers to N.Y. Central R.R. v. Public Service Commission,233 N.Y., 113; 135 N.E., 195; 22 A.L.R., 1073. This opinion was rested entirely upon the proposition that Congress, having exercised (Paragraph 3, § 1), regulatory power with respect to facilities for interchange of traffic, the State were necessarily ousted of their jurisdiction. Paragraph 17 of Section 1 is not referred to in that opinion.
After a complimentary reference back to the California case, the opinion proceeds with a discussion of the effect of Section 15a, which is treated as "conclusive of the purpose of the Act to control the matter of nonproductive additional facilities and terminals"; whereby all regulation by the State is interdicted. The word "nonproductive" is unimportant. Obviously, whatever property is necessary to enable a carrier to function, which is so used, is productive property. It is impossible to see how the facilities ordered here are less productive than stations or cars.
The opinion, having referred to the fixation of the percentage of return on March 1, 1922, by the Federal Commission, proceeds as follows:
"We may conceive an instance of a carrier operating upon a negligible net operating income and making application to the Interstate Commerce Commission for an increase of rates; its statement shows the value of its property to be so much, and its net operating income to be below 6 per cent. of the aggregate value of its property. If such statement be accepted as true, and it appears that the management has been honest, efficient, and economical, and the expenditures for maintenance of way, structures, and equipment reasonable, the Interstate Commerce Commission *Page 31 
will be justified in allowing the increase of rates sufficient to insure the `fair return.' But of all these matters the Interstate Commerce Commission must be satisfied, and it is their duty to determine them. They are no more obligated to accept the dictum of a State Legislature that certain additions, betterments, or equipment are reasonable, than that the management has been honest, efficient, and economical, or that the property is of a certain value."
This paragraph appears to me to involve a double error. It seems to be assumed that Section 15a fixes a standard for the measurement of the reasonableness of the rates of particular carriers, and that any single carrier makes a case for rate increases by showing that it is not earning upon its value the "fair return" prescribed by the Commission under Section 15a and that its management is honest, efficient, and economical, and that its expenditures for maintenance have not been excessive. But a careful study of the Act will show that this is not the situation. Section 15a provides for an aggregate value, and for the measurement of the sufficiency of rates generally upon all roads by the aggregate return upon such aggregate value yielded from the operations of all. The group plan of rate making presupposes that some roads will earn more upon their value than the percentage fixed as a fair return, and that others will earn less. The Commission is commanded to adjust rates so as to make the aggregate "as nearly as may be" equal to the fair return percentage. Obviously, if it attempted to put all the small earning roads on such a percentage individually, the aggregate would naturally be much more than the percentage aggregate aimed at by Section 15a
The other apparently wrong idea involved in the paragraph of the opinion just quoted is in the assumption that the Federal Commission may omit carrier property in use for transportation purposes when fixing aggregate value, if it considers its acquisition and devotion to carrier *Page 32 
purposes unreasonable. It has no such option. The aggregate value of all roads within a group is made up of the value of the individual roads, fixed under the provisions of Section 19a (U.S. Comp. St. Ann. Supp., 1923, § 8591). This is provided in Paragraph 4 of Section 15a. What is to be considered by the Commission in fixing such aggregate value is not a matter of discretion with it, but its duty is mandatory. In Paragraph 2 of 15a it is provided that the return which the Commission is to permit to be earned shall be —
"a fair return upon the aggregate value of the railway property of such carriers held for and used in the service of transportation."
In Section 19a, par. (a), it is provided that the Commission shall "ascertain, and report the value of all the property owned or used"; and in Paragraph (b) of the same section it is provided that it shall — "report in detail as to each piece of property owned or used by said [each] common carrier for its purposes as a common carrier."
The data provided for in said Paragraph (b) constitute the evidence from which the Commission draws its conclusion of the value of the property. Paragraph (f) of Section 19a, further provides that, after the value of the property of a carrier is once made —
"the Commission shall thereafter in like manner keep itself informed of all extensions and improvements or other changes in the condition and value of * * * from time to time, revise and correct its valuations."
It will thus be seen that, under the express provisions of the law, the Federal Commission must value all the property devoted by a carrier to the purposes of transportation, including all improvements, and may not reject any because it is of the opinion that some ought not to have been required or voluntarily made.
The opinion then proceeds with a discussion concerning the accounting requirements of the Federal Commission. *Page 33 
The unquestioned fact is stated that, under the Commission's accounting system, "improvements, betterments, and equipment are chargeable to capital account." But much that is said in the opinion must arise from an unusual view of the Commission's power as to accounts and as to its accounting requirements, and its practices with respect thereto. The Commission's power as to accounts goes only to the prescribing of proper, and the requiring of proper, reports. It is the duty of carriers to keep their accounts and to make reports as required by the Commission. The Commission may inspect carrier's accounts to see that they are kept in accordance with the forms prescribed by it. Paragraph 5, § 20, amended Act (U.S. Comp. St. Ann. Supp., 1923, § 8592 [5]). This is the limit of the Commission's power as to accounts. This is the limit of the Commission's power. The Commission cannot arbitrarily say that expenditures for station sheds (unquestionably "improvements or betterments") shall be charged to operation, or not charged to any account. It not only will not attempt to say that, but it has no power under the Act to say it.
In the opinion then comes this statement:
"Expenditures for additions and betterments * * * cannot be charged to capital account without the sanction of their reasonableness and public necessity by the Interstate Commerce Commission."
Not only is there nothing in the Act which gives the Commission the power to exclude expenditures made from their proper accounts, but the accounting regulations of the Commission will show that there is no attempt to subject carriers to the supervision of the Commission as to the propriety or necessity of the expenditures. It is mandatory on the Commission to value all property "held for and used in the service of transportation." Paragraph 2, § 15a. Mention is also made in the opinion of the use of the words "honest, efficient, and economical" management in Paragraph 3 of Section 15a. But they are there used by *Page 34 
Congress in stating facts which the Commission is commanded to consider in determining how large the percentage of return fixed by it shall be. It is to consider the transportation needs of the country, and such necessity as it may find for enlargement of existing transportation facilities, if such are conducted "under honest, efficient, and economical management."
It is impossible to see that either of the provisions just referred to can in any way have relation to the disposition to be made in the carrier's accounts of expenditures involved in complying with the order in question, or with the right of the carrier, having made compliance, to have the resulting addition to property considered in the fixing of its value, and in the fixing of the aggregate value of the property of all carriers in its group.
The suggestion is also made that, if the improvements ordered are made, and the Southern tries to borrow money from the general railroad contingent fund to pay for them, the Federal Commission will not make the loan unless it approves the expenditure. I am not able to see the relevancy of this suggestion. Certainly state power to require improvements in facilities necessary for intrastate transportation is not to be measured by the extent to which the Federal Government has provided for loans to carriers with which to pay for such improvements.
The remainder of the opinion is to the effect that state requirements as to expenditures must affect either the values upon which a return from operation is to be earned under Section 15a, or the net remaining from operation, and hence must affect the burden upon interstate commerce, and result, if allowed, in breaking down the congressional scheme of rate making.
This argument necessarily goes equally well to the interdiction of State regulations requiring expenditures for operation as to regulations requiring capital expenditures. A state cannot make any law or commission order requiring *Page 35 
a carrier to do anything in the way of improving its facilities or service without requiring it to expend money. If the argument is sound, a state Commission may no longer make any effective order. But the United States Supreme Court (in language quoted from the Wisconsin Rate Case) has said that the Transportation Act does not affect, "general regulations of intrastate commerce." Such regulations remain with the State.
So much upon the intent of the Transportation Act. If this opinion shows that there was no intent upon the part of Congress to destroy State power to make such orders as that involved in this case, there is no occasion to consider the extent of the power of Congress, nevertheless it will be well to refer to certain constitutional considerations which would appear to forbid such a construction as has been placed upon the Act by this Court. There is a line, difficult of demarcation, but undoubtedly existent, beyond which Congress may not go under the commerce clause of the Constitution, in restraining regulation of intrastate commerce by the states. In Louisville, etc., Ry.v. Mississippi, 133 U.S. 587; 10 Sup. Ct., 348;33 L.Ed., 784, the validity of a state statute requiring separate facilities for passengers of different races was under consideration. At page 591, of 133 U.S., at page 349 of 10 Sup. Ct. (33 L.Ed., 784), the Court said:
"So far, therefore, as this class of transportation [intrastate] as an element of commerce, is affected by the statute under consideration, it is not subject to the constitutional provision concerning commerce among the states It has often been held in this Court, and there can be no doubt about it, that there is a commerce wholly within the state, which is not subject to the constitutional provision, and the distinction between commerce among the states and the other class of commerce between the citizens of a single state, and conducted within its limits exclusively, is one which has been fully recognized in this Court, although it *Page 36 
may not be always easy, where the lines of these classes approach each other, to distinguish between the one and the other."
The point of this citation is this: Such a statute requires on the part of carriers expenditures both for capital and for operating purposes. If the decision so far made by our Court is sound, such statutes have become ineffective, because the expenditures would increase the property value, and decrease the net earnings of interstate carriers and interfere with the purpose (as construed by this Court) of Section 15a. But the constitutional rights of a State may not be taken away by Congress. In one of the cases it is said that there is —
"equal necessity, under our system of government, to preserve the power of the States within their sovereignties as to prevent the power from intrusive exercise within the national sovereignty. * * *"
In the opinion already filed in this case is the following:
"Under the section of the South Carolina Code, claimed by the petitioners as their authority for ordering the improvements, * * * they could order new and elaborate station houses at every point in the State; the abolition of every grade crossing, and any other improvement, betterment, or additional equipment that might be suggested, without regard to the condition of the carrier, or of the effect upon its ability to provide adequate transportation after such expenditures may have been made. `No man can serve two Masters.'"
But the conclusion of the Court that because the state might misuse its power of regulation, the power does not exist, is not consistent with the declaration of the United States Supreme Court in the Erie R.R. Case, 254 U.S. 394;41 Sup. Ct., 394; 65 L.Ed., 322. That was a case as to a grade crossing. The point made was that it would burden interstate commerce and impair the ability of the railroad to perform its transportation functions. In an *Page 37 
opinion by Mr. Justice Holmes, this point was summarily disposed of as follows:
"Grade crossings call for a necessary adjustment of two conflicting interests * * * being places to which the public is invited and that it necessarily frequents, the state, in the care of which this interest is, and from which ultimately the railroads derive their right to occupy the land, has a constitutional right to insist that they shall not be made dangerous to the public, whatever may be the cost to the parties introducing the danger. This is one of the most obvious cases of the police power, or to put the same proposition in another form, the authority of the railroads to project their moving masses across thoroughfares must be taken to be subject to the implied limitation that it may be cut down whenever and so far as the safety of the public requires. It is said that if the same requirement were made for the other grade crossings of the road it would soon be bankrupt. That the states might be so foolish as to kill a goose that lays golden eggs for them has no bearing on their constitutional rights. If it reasonably can be said that safety requires the change it is for them to say whether they will insist upon it, and neither prospective bankruptcy nor engagement in interstate commerce can take away this fundamental right of the sovereign of the soil."
The opinion of Mr. Justice Cothran ends by incorporating a hypothetical statement quoted from respondent's argument. I should rather adopt the last above quoted statement, written by the hand of the learned descendant of the world famed author of "The Autocrat of the Breakfast Table."
In concluding, it would be well to revert to Paragraph 17, § 1, of the said Act, wherein Congress declared that nothing in this Act should impair or affect the right of a state, in the exercise of its police power, to require just and reasonable freight and passenger service for intrastate business, except in so far as such requirement is inconsistent with any lawful order of the Commission, made under the *Page 38 
provisions of the Act; and again to the famous "Jim Crow" Case urged by the Attorney General in his supplementary brief, page 14, in the language of Mr. Justice Brewer, as follows:
"So far as the first section is concerned (and with that alone we have to do), its provisions are fully complied with when to trains within the state, is attached a separate car for colored passengers. This may cause an extra expense to the railroad company; but not more so than state statutes requiring certain accommodations at depots, compelling trains to stop at crossings, and a multitude of other matters confessedly within the power of the State."
So, as it is submitted by the Attorney General, that not only a "Jim Crow" car regulation, but separate waiting room regulations for the two races, the Cinder-Finder Act (Civ. Code, 1922, § 4950), and many other state statutes, would all necessarily and automatically become obsolete, under the construction of the act, as contended for by respondent, if adopted.
Also we should bear in mind the general rule of construction, that where an act permits of two constructions, one of which will lead to constitutional difficulties, and the other will render the act valid, the Court should adopt the latter.
Article 9 of the Amendments of the United States Constitution provides that the renunciation in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people. And Article 10 of the Amendments provides that the powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states.
Upon the testimony taken by the referee, under the order of this Court, I find that the petitioners' witnesses have made out a clear case; and the testimony of the respondent's witnesses is evasive, and goes mainly upon an irrelevant question as to the health and habits of the people of Blackville in going about their own premises. *Page 39 
I would rather accept the direct testimony of Edgar A. Brown, Esq., and A.H. Ninestein, Esq., members of this bar, and well known to the Court; and I can see no reason why sheds should be erected at points where a few tourists transfer and not at Blackville where the traffic is principally intrastate. As Mr. Brown says, when questioned on that point: "I do not know that tourists' travel is entitled to more protection than Barnwell County."
I would certainly answer the questions, sent to reference by this Court, and find: That the cost of erecting the shed is inconsiderable; that it is necessary to erect such shed in order to protect the health of the traveling public from the inclemency of the weather at the station in question; that it is necessary for the convenience of the traveling public that the said shed should be erected; that the use of the trains passing said station is largely by intrastate passengers.
I think the petition should be sustained, and the mandamus issued.
MESSRS. JOHNSON, TOWNSEND and SHIPP, Circuit Judges, concur.