Under the "Federal Control Act" of March 21, 1918, c.25, 40
Stat. 451, railroads taken over and administered under the war
power pursuant to the Act of August 29, 1916, c. 418, 39 Stat. 645,
and the President's Proclamation of December 26, 1917, are in the
full possession and control of the Federal government, and that
government is granted the power through the President and the
Interstate Commerce Commission to fix the rates on intrastate
traffic, superseding the state power over that subject. P.
250 U. S.
148.
The Federal Control Act being an exercise of a complete,
exclusive and necessarily paramount federal power (the war power),
and its provision for a complete change to federal control being
clear and unambiguous, there can be no room for a presumption that
state control over intrastate rates was to remain unchanged because
it previously existed. P.
250 U. S. 149.
Reagan v. Mercantile Trust Co., 154 U.
S. 413, distinguished.
Under § 10 of the Federal Control Act, the power of the
Interstate Commerce Commission to consider rates, like the power of
the President to initiate them, relates to both classes --
intrastate and interstate. P.
250 U. S.
151.
The declaration of § 15 that nothing in the act shall be
construed to amend, repeal, impair, or affect the existing laws or
powers of the states in relation to taxation or "the lawful police
regulations of the several states," except wherein such laws,
powers, or regulations may affect the transportation of troops,
etc., or "the issue of stocks and bonds," cannot be interpreted as
withholding the power to initiate intrastate rates under § 10.
Id.
Where the acts of a federal official are sought to be restrained
in a state court as invasions of state power, there is
jurisdiction, if the claim be not frivolous, to pass upon their
legality, although, if
Page 250 U. S. 136
legal, their restraint would affect directly the interest of the
United States, which cannot be impleaded, and where the decision is
against their legality, this Court, finding it erroneous, has
jurisdiction to review the resulting judgment upon the merit. P.
250 U. S.
152.
172 N.W. 324 reversed.
The case is stated in the opinion.
Page 250 U. S. 141
MR. CHIEF JUSTICE WHITE delivered the opinion of the court.
In taking over the railroads from private ownership to its
control and operation, was the resulting power of the United States
to fix the rates to be charged for the transportation services to
be by it rendered subordinated to the asserted authority of the
several states to regulate the
Page 250 U. S. 142
rates for all local or intrastate business, is the issue raised
on this record. It arises from the allowance by the court below of
a peremptory writ of mandamus commanding the Director General of
the railroads, appointed by the President, and the officers of the
Northern Pacific Railway Company to desist from charging for
transportation in intrastate business in North Dakota the rates
fixed by the United States for such services. When this command was
obeyed, the mandamus ordered that the Director General should
thereafter exact for the services stated only lesser rates which
were fixed in a schedule on file with the state Utilities
Commission prior to the bringing of suit and which rates under the
law of North Dakota could not be changed without the approval of
the Utilities Commission. In the opinion of the court below, it was
stated that all the parties admitted that there was no question as
to the jurisdiction to consider the controversy, and that they all
also agreed that no contention was presented as to the power of
Congress to enact the law upon which the controversy depended, as
the correct interpretation of such law was the only issue to be
decided. We consequently put those subjects temporarily out of
view. We say temporarily since, even upon the assumption that
issues concerning them necessarily inhere in the cause and cannot
be waived by the parties, we could not decide concerning such
issues without interpreting the statute, which we proceed to
do.
On the 29th of August, 1916 (39 Stat. 645), Congress gave the
President power,
"in time of war, . . . to take possession and assume control of
any system or systems of transportation, or any part thereof, and
to utilize the same, to the exclusion as far as may be necessary of
all other traffic thereon, for the transfer or transportation of
troops, war material, and equipment, or for such other purposes
connected with the emergency as may be needful or desirable."
War with Germany was declared in April, 1917, and with Austria
on December 7th of the same year
Page 250 U. S. 143
(40 Stat. 1;
ib. 429). On December 26, 1917, the
President, referring to the existing state of war and the power
with which he had been invested by Congress in August, 1916,
proclaimed that:
"Under and by virtue of the powers vested in me by the foregoing
resolutions and statute, and by virtue of all other powers thereto
me enabling, [I] do hereby . . . take possession and assume control
at 12 o'clock noon on the 28th of December, 1917, of each and every
system of transportation and the appurtenances thereof located
wholly or in part within the boundaries of the continental United
States and consisting of railroads, and owned or controlled systems
of coastwise and inland transportation, engaged in general
transportation, whether operated by steam or by electric power,
including also terminals, terminal companies and terminal
associations, sleeping and parlor cars, private cars and private
car lines, elevators, and warehouses, telegraph and telephone
lines, and all other equipment and appurtenances commonly used upon
or operated as a part of such rail or combined rail and water
systems of transportation, to the end that said systems of
transportation be utilized for the transfer and transportation of
troops, war material, and equipment, to the exclusion so far as may
be necessary of all other traffic thereon, and that, so far as such
exclusive use be not necessary or desirable, such systems of
transportation be operated and utilized in the performance of such
other services as the national interest may require and of the
usual and ordinary business and duties of common carriers."
40 Stat. 1733.
By the proclamation, a Director General of Railroads was
appointed with full authority to take possession and control of the
systems embraced by the proclamation and to operate and administer
the same. To this end, the Director General was given authority to
avail himself of the services of the existing railroad officials,
boards of
Page 250 U. S. 144
directors, receivers, employees, etc., who were authorized to
continue to perform their duties in accordance with their previous
authority "until and except so far as such Director shall from time
to time by general or special orders otherwise provide." Limited by
the same qualification, the systems of transportation taken over by
the government were made subject to existing statutes and orders of
the Interstate Commerce Commission and to all statutes and orders
of regulating commissions of the various states in which said
systems or any part thereof might be located. In addition, however,
to the limitation previously stated, the proclamation in express
terms declared: "But any orders, general or special, hereafter made
by said Director shall have paramount authority, and be obeyed as
such."
The proclamation imposed the duty upon the Director General to
negotiate with the owners of the railroad companies for an
agreement as to compensation for the possession, use, and control
of their respective properties on the basis of an annual guaranteed
compensation and with reservations in the interest of creditors,
bondholders, etc. The proclamation, in concluding, declared
that
"from and after twelve o'clock on said twenty-eighth day of
December, 1917, all transportation systems included in this order
and proclamation shall conclusively be deemed within the possession
and control of said Director without further act or notice."
Carrying out the authority exerted by the proclamation, the
railroads passed into the possession, control, and operation of the
Director General.
On March 21, 1918, dealing with the subject, Congress passed a
law entitled:
"An act to provide for the operation of transportation systems
while under federal control, for the just compensation of their
owners, and for other purposes."
The opening sentences of the act declared:
"The President, having in time of war taken over the possession,
use, control, and operation
Page 250 U. S. 145
(called herein federal control) of certain railroads and systems
of transportation (called herein carriers), is hereby authorized to
agree with and to guarantee to any such carrier making operating
returns to the Interstate Commerce Commission that, during the
period of such federal control, it shall receive as just
compensation an annual sum, payable from time to time in reasonable
installments, for each year and
pro rata for any
fractional year of such federal control, not exceeding a sum
equivalent as nearly as may be to its average annual railway
operating income for the three years ended June 30, 1917."
Without going into detail, it suffices to say that the first
eight sections of the act comprehensively provided for giving
effect to the purposes just stated and in a general way
contemplated affording what was deemed to be just compensation to
the owners for the use of their property. In addition, it empowered
agreements in the interest of security holders of the railroads and
sanctioned provisions deemed fair to the United States and to the
owners of the property for betterments which might be required to
be made during the term of control and for the return of the
property when the government possession came to an end, which
return was to be accomplished within a stated period after the
cessation of war by the proclamation of the ratification of a peace
treaty.
Beyond doubt also, for the purpose of enabling the United States
to perform the obligations which it assumed and to secure it from
ultimate loss from the pecuniary responsibilities which might
result, including the repayment to it of an appropriation of
$500,000,000 which the act made applicable, all the earnings of the
railroads were by the act expressly made the property of the United
States.
The remaining eight sections of the act need not be stated, but
as § 10, which expressly provides for the power to fix rates,
and § 15, making certain reservations concerning
Page 250 U. S. 146
the powers granted, were greatly relied upon in the opinion
below and in the argument at bar, we reproduce in the margin the
more relevant portions of § 10 and the text of § 15.
*
Page 250 U. S. 147
On May 25, 1918, the Director General made an order establishing
a schedule of rates for all roads under his control and covering
all classes of service, intrastate as well as interstate. The order
made these rates effective on designated dates in the month of
June, and they were continuously enforced during a period of about
eight months up to the 14th of February, 1919, when the bill in
this case was filed by the State Utilities Commission for mandamus
against the Director General and the officers of the Northern
Pacific Railway, asserting the want of power in the United States
over intrastate rates and the exclusive right of the State of North
Dakota to fix such rates for all intrastate business done in that
state. The Director General, admitting that he had made the order
complained of and had collected the rates earned thereunder and
paid them into the treasury of the United States, sustained his
action and denied the alleged right of the state upon the
legislation and official acts which we have stated. The Northern
Pacific denied interest on the ground that its railway had passed
under federal control and that it was receiving the compensation
therefor which had been agreed on between itself and the United
States. It alleged that the rates under the order complained of had
been collected by the Director General through agents appointed by
him who were not officials of the company, and therefore it had no
responsibility concerning them. T he prayer was that it be
dismissed from the suit.
Taking the case under the complaint, the returns, and the
exhibits, the court, as we have previously stated, two of its
members dissenting, denied the authority of the United States and
upheld that of the state, and the mandamus was made peremptory as
to both the Director
Page 250 U. S. 148
General and the officers of the Northern Pacific Railway. We are
thus brought to the question whether the state authority controls
the power of the United States as to intrastate rates.
No elaboration could make clearer than do the act of Congress of
1916, the proclamation of the President exerting the powers given,
and the Act of 1918 dealing with the situation created by the
exercise of such authority, that no divided, but a complete,
possession and control were given the United States for all
purposes as to the railroads in question. But if it be conceded
that, despite the absolute clarity of the provisions concerning the
control given the United States and the all-embracing scope of that
control, there is room for some doubt, the consideration of the
general context completely dispels hesitancy. How can any other
conclusion be reached if consideration be given the comprehensive
provisions concerning the administration by the United States of
the property which it was authorized to take, the financial
obligations under which it came, and all the other duties and
exactions which the act imposed, contemplating one control, one
administration, one power for the accomplishment of the one
purpose, the complete possession by governmental authority to
replace for the period provided the private ownership theretofore
existing. This being true, it must follow that there is no basis
for the contention that the power to make rates and enforce them
which was plainly essential to the authority given was not included
in it.
Conclusive as are these inferences, they are superfluous, since
the portion of § 10 as previously reproduced in the margin in
express terms confers the complete and undivided power to fix
rates. The provision is this:
"That, during the period of federal control, whenever in his
opinion the public interest requires, the President may initiate
rates, fares, charges, classifications, regulations, and
practices
Page 250 U. S. 149
by filing the same with the Interstate Commerce Commission,
which said rates, fares, charges, classifications, regulations, and
practices shall not be suspended by the commission pending final
determination."
These quoted words are immediately followed by provisions
further defining the power of the commission and its duty in the
premises, so as to enable it beyond doubt to consider the situation
resulting from the act and to which the rates were to be applied.
The unison between that which is inferable and that which is
expressed demonstrates the true significance of the statute.
A brief consideration of the contentions relied upon to the
contrary will at once show either their inappositeness, the
mistaken premises upon which they rest, or the errors of deduction
upon which they proceed. It is argued that, as state control over
intrastate rates was the rule prior to the enactment of the statute
creating the United States control, the statute must be interpreted
in the light of a presumption that a change as to state control was
not made. But, in view of the unambiguous provision of the statute
as to the new character of control which it created, the principle
of interpretation applied in its ultimate aspect virtually was:
that, because the statute made a fundamental change, it must be so
interpreted as to prevent that change from becoming effective.
Besides, the presumption in question but denied the power
exerted in the adoption of the statute, and displaced by an
imaginary the dominant presumption which arose by operation of the
Constitution as an inevitable effect of the adoption of the
statute, as shown by the following:
(a) The complete and undivided character of the war power of the
United States is not disputable.
Selective Draft Law
Cases, 245 U. S. 366;
Ex parte
Milligan, 4 Wall. 2;
Legal
Tender Cases, 12 Wall. 457;
Stewart v.
Kahn, 11 Wall. 493. On the face of the statutes, it
is manifest that
Page 250 U. S. 150
they were in terms based upon the war power, since the authority
they gave arose only because of the existence of war, and the right
to exert such authority was to cease upon the war's termination. To
interpret, therefore, the exercise of the power by a presumption of
the continuance of a state power limiting and controlling the
national authority was but to deny its existence. It was akin to
the contention that the supreme right to raise armies and use them
in case of war did not extend to directing where and when they
should be used.
Cox v. Wood, 247 U. S.
3.
(b) The elementary principle that, under the Constitution, the
authority of the government of the United States is paramount when
exerted as to subjects concerning which it has the power to control
is indisputable. This being true, it results that, although
authority to regulate within a given sphere may exist in both the
United States and in the states, when the former calls into play
constitutional authority within such general sphere, the necessary
effect of doing so is that, to the extent that any conflict arises,
the state power is limited, since in case of conflict, that which
is paramount necessarily controls that which is subordinate.
Again, as the power which was exerted was supreme, to interpret
it upon the basis that its exercise must be presumed to be limited
was to deny the power itself. Thus, once more it comes to pass that
the application of the assumed presumption was in effect but a form
of expression by which the power which Congress had exerted was
denied. In fact, error arising from indulging in such erroneous
presumption permeates every contention. To illustrate: because, in
Reagan v. Mercantile Trust Co., 154 U.
S. 418, and other cases unnecessary to be referred to,
it was held that it would be presumed that Congress, in creating a
corporation, intended that it should be subject to applicable state
laws and regulations so far as Congress did not otherwise provide,
therefore, because Congress had
Page 250 U. S. 151
taken over to the government of the United States property to be
used by it in the performance of a governmental function, Congress
must be presumed to have intended that such property (and such
functions) should continue to be subject to and controlled by state
power.
The confusion produced is again aptly illustrated by the rule of
interpretation by which it is insisted that the express power to
fix rates conferred by the statute was rightly disregarded. Thus,
while admitting that the power which was conferred to initiate
rates, when considered in and of itself, included all rates, it is
nevertheless said that such power must be presumed to be limited to
the only character of rates which, under the prior law, the
Interstate Commerce Commission had the power to consider -- that
is, interstate rates -- because the new rates when initiated were
to be acted upon by that body. As, however, the statute in terms
gives power to the Interstate Commerce Commission to consider the
new rates in the light of the new and unified control which it
creates, the error in the contention becomes manifest, even putting
out of view the fact that, by the effect of the duty imposed and
the new control created the new rates applying to the new
conditions were within the purview of the power which the
Interstate Commerce Commission previously possessed. Certainly, to
mistakenly disregard one provision of the statute intended to give
effect to another, and upon that basis to decide that the statute
is not enforceable, cannot be said to be a correct interpretation.
And this view is also true as to the application which was made of
the asserted presumption to the excepting clauses of § 15
previously reproduced in the margin, since that section, in the
light of the purpose to retain the prior law, is interpreted so as
to cause it to be but an additional means of destroying the
all-embracing power to initiate rates fixed by § 10.
It follows that the judgment below was erroneous. The
Page 250 U. S. 152
relief afforded against the officer of the United States
proceeded upon the basis that he was exerting a power not conferred
by the statute, to the detriment of the rights and duties of the
state authority, and was subject therefore to be restrained by
state power within the limits of the statute. Upon the premise upon
which it rests -- that is, the unlawful acts of the officers -- the
proposition is undoubted, but, in view of our conclusion that the
acts of the officers complained of were authorized by the law of
the United States, the question arises how far, that being
established, it results that the suit was one against the United
States over which there was no jurisdiction within the rulings in
Belknap v. Schild, 161 U. S. 10;
Postal Supply Co. v. Bruce, 194 U.
S. 601;
Louisiana v. McAdoo, 234 U.
S. 627;
Minnesota v. Hitchcock, 185 U.
S. 373;
Wells v. Roper, 246 U.
S. 335.
The principle of these cases, however, can only be applicable by
giving effect to the conclusion we have reached as to the legality
of the acts of the officers which were complained of, and to decide
which question the United States was not a necessary party. This is
undoubtedly true unless it can be said that the contentions
concerning the want of power in the officers were so unsubstantial
and frivolous as to afford no basis for jurisdiction, and hence
caused the suit to be from the beginning directly against the
United States. As, however, we are of the opinion that there is no
ground for that view, it follows that the case as made gave
jurisdiction to dispose of the question of wrong committed by the
officials, and that a decree giving effect to our conclusion on
that subject will dispose of the entire case.
Our decree therefore must be, and it is,
Reversed and remanded for further proceedings not
inconsistent with this opinion.
MR. JUSTICE BRANDEIS concurs in the result.
*
"Section 10. . . . That, during the period of federal control,
whenever in his opinion the public interest requires, the President
may initiate rates, fares, charges, classifications, regulations,
and practices by filing the same with the Interstate Commerce
Commission, which said rates, fares, charges, classifications,
regulations, and practices shall not be suspended by the commission
pending final determination."
"Said rates, fares, charges, classifications, regulations, and
practices shall be reasonable and just and shall take effect as
such time and upon such notice as he may direct, but the Interstate
Commerce Commission shall, upon complaint, enter upon a hearing
concerning the justness and reasonableness of so much of any order
of the President as establishes or changes any rate, fare, charge,
classification, regulation, or practice of any carrier under
federal control, and may consider all the facts and circumstances
existing at the time of the making of the same. In determining any
question concerning any such rates, fares, charges,
classifications, regulations, or practices or changes therein, the
Interstate Commerce Commission shall give due consideration to the
fact that the transportation systems are being operated under a
unified and coordinated national control, and not in
competition."
"After full hearing, the commission may make such findings and
orders as are authorized by the act to regulate commerce as
amended, and said findings and orders shall be enforced as provided
in said act:
Provided, however, that, when the President
shall find and certify to the Interstate Commerce Commission that,
in order to defray the expenses of federal control and operation
fairly chargeable to railway operating expenses, and also to pay
railway tax accruals other than war taxes, net rents for joint
facilities and equipment, and compensation to the carriers,
operating as a unit, it is necessary to increase the railway
operating revenues, the Interstate Commerce Commission, in
determining the justness and reasonableness of any rate, fare,
charge, classification, regulation, or practice shall take into
consideration said finding and certificate by the President,
together with such recommendations as he may make."
"Sec. 15. That nothing in this Act shall be construed to amend,
repeal, impair, or affect the existing laws or powers of the states
in relation to taxation of the lawful police regulations of the
several states except wherein such laws, powers, or regulations may
affect the transportation of troops, war materials, government
supplies, or the issue of stocks and bonds."