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under g 1583 of the Alabama Code of 1886, 4 Inters. Com. Rep. 664, 14 Sup. Ct. Rep. which provides in substance, as follows: 865: That whenever the lines of any two or more "Nor is the question at issue affected by railroads chartered under the laws of that the fact that some of the constituent eleor any other state, which, when completed, ments which entered into the consolidated may admit the passage of burden or pas- company were corporations owning and senger cars over any two or more of such operating property in another state. The roads continuously without break or inter- power of corporations of other states to ruption, such companies are authorized be become corporations, or to constitute themfore or after completion to consolidate them selves a consolidated corporation under the selves into a single corporation, in the man. Ohio statutes, and thus avail of the rights ner following: The directors of such given thereby, is as completely dependent corporations may enter into an agreement, on the will of that state as is the power prescribing the terms and conditions thereof, of its individual citizens to become a corpomode of carrying into effect, name, number rate body, or the power of corporations of of directors, etc., and such new corporation its own creation to consolidate under its shall possess all the powers, rights, and laws. Bank of Augusta v. Earle, 13 Pet. franchises conferred upon the two or more 519, 10 L. ed. 274; Lafayette Ins. Co. v. corporations, and shall be subject to all the French, 18 How. 404, 15 L. ed. 451; Paul restrictions, and perform all the duties, v. Virginia, 8 Wall. 168, 181, 19 L. ed. imposed by such statute. Provision is also 357, 360.” made for ratification of such consolidation
on This doctrine has been affirmed since. by the stockholders, after which ratification Louisville & N. R. Co. v. Kentucky, 161 the agreement is deemed completed, as to U. S. 677, 703, 40 L. ed. 849, 860, 16 Sup. each corporation. It is also provided that Ct. Rep. 714, and previous cases in this "every such new corporation so formed shall court therein cited; Interstate Consol. Street keep an office in the state of Alabama, and R. Co. v. Massachusetts, 207 U. S. 79, 84, be in all respects subject to the laws of the 52 L. ed. 111, 114, 28 Sup. Ct. Rep. 26, 12 state of Alabama as a domestic corpora- Ann. Cas. 555. tion.” The corporation is to be deemed con- The railroads comprising this consolidasolidated when a copy of the agreement is tion entered upon it with the Alabama statfiled with the secretary of state, and after ute before them and under its conditions, the election of the first board of directors and, subject to constitutional objections as the property and franchises of each corpo- to its enforcement, they cannot be heard ration shall be vested in the new corpora- to complain of the terms under which they tion, and it shall be subject to the liabilities voluntarily invoked and received the grant of its integral parts, as if such debts had of corporate existence from the state of been incurred by it.
Alabama. It will be noted that this statute, which
The specific objections based upon the is a grant of corporate rights from the Federal Constitution remain to be noticed. state of Alabama to the consolidated com
It is said that the company is deprived of
the equal protection of the laws, this conpany, contains the express provision that such company shall in all respects be sub
tention being based upon the fact that ject to the laws of the state of Alabama as
domestic corporations, operating only with.
in the state, are required to pay the tax a domestic corporation. Applying § 12 of the statute, the Alabama supreme court has upon property within the state, and foreign
corporations are taxed only upon the basis of held that the railroad company is a cor: property within the state. To support this poration organized under the laws of that contention as to denial of equal protection state, and, as such, subject to the franchise of the laws, the company relies principally tax imposed by that section of the statute. upon the decision of this court in Southern
The Federal questions (which are alone R. Co. v. Greene, 216 U. S. 400, 54 L. ed. within the jurisdiction of this court) are to 536, 30 Sup. Ct. Rep. 287, 17 Ann. Cas. be determined upon this construction of the 1247. In that case, a foreign corporation, state statute by its highest court.
complying with the laws of Alabama, enWhen the companies comprised in this tered upon business within the state, paid consolidation sought to avail themselves of both license and property taxes imposed by the laws of Alabama, they were asking a the laws of the state, and when it was atprivilege and right which, subject to the tempted to impose upon it another tax for limitations of the Federal Constitution, was the privilege of doing business in the state, a within the authority of the state. This business in all respects like that done by principle was succinctly stated in Ashley v. domestic corporations of a similar charace Ryan, 153 U. S. 436, 442, 38 L. ed. 773, 777,'ter who were not subjected to the additional
tax complained of, it contended that it was So of the objection that the tax imposes denied equal protection of the law, and this a burden upon interstate commerce, the test court so held.
of validity recognized in previous cases and That case is readily distinguishable from repeated in Kansas City, Ft. S. & M. R. the one now under consideration. Here the Co. v. Botkin, supra, is the nature and charstate imposes the franchise tax equally acter of the tax imposed. The state may upon all of its corporations, consolidated not regulate interstate commerce or impose and otherwise. The fact that a wholly in burdens upon it; but it is authorized to levy trastate corporation may own no property a tax within its authority, measured by outside of the state, while the consolidated capital in part used in the conduct of such company does, presents no case of arbitrary commerce, where the circumstances are such classification. In both cases, the franchise as to indicate no purpose or necessary effect tax is based upon a percentage of the capi- in the tax imposed to burden commerce of tal stock. There is no denial of equal pro- that character. tection of the laws because a state may im- franchise tax is imposed upon the capital
In the present case, the pose a different rate of taxation upon a stock of a corporation consolidated under foreign corporation for the privilege of do the state law, and engaged in both intering business within the state than it applies
state and intrastate commerce. to its own corporations upon the franchise which the state grants in creating them.
We find nothing in the amount or characIt is urged that this tax is void because ter of the tax which makes it a burden upon it undertakes to tax property beyond the interstate commerce, and so beyond the aujurisdiction of the state, and imposes a di- thority of the state to impose. It results rect burden upon interstate commerce.
Ob that the judgment of the Supreme Court of jections of this character were so recently Alabama must be affirmed. discussed, and the previous cases in this court considered, in Kansas City, Ft. S. & M. R. Co. v. Botkin, 240 U. S. 227, 60 L. ed. 617, 36 Sup. Ct. Rep. 261, that it would be
(242 U. S. 60) superfluous to undertake extended discussion
LOUISVILLE & NASHVILLE RAILROAD of the subject now. In that case, after a
COMPANY et al., Appts., full review of the previous decisions in this court, it was held that each case must de
UNITED STATES OF AMERICA et al. pend upon its own circumstances, and that while the state could not tax property be- CARRIERS C33 INTERSTATE COMMERCE yond its borders, it might measure a tax
COMMISSION POWERS COMPELLING within its authority by capital stock which
SWITCHING SERVICE — USE OF TERMINAL
FACILITIES. in part represented property without the
Two railway carriers who are joint taxing power of the state. As to the objec-owners of a considerable portion of the tertion based upon the due process clause of minals in a certain city used by them in the Constitution, we think that principle common, and who manage them as a whole controlling here. There is no attempt in and deal with them in the same way as they this case to levy a property tax; a franchise would if their title were joint in every tax within the authority of the state is in part, may not be compelled by the Inter. part measured by the capital stock repre- cqual facilities requirement of the Act of
state Commerce Commission, under the senting property owned in other states.
February 4, 1887 (24 Stat. at L. 380, chap. The tax is not of the character con- 104, Comp. Stat. 1913, § 8565), § 3, redemned in Western U. Teleg. Co. v. Kansas, specting the interchange of traffic, which is 216 U. S. 1, 54 L. ed. 355, 30 Sup. Ct. Rep. qualified by the proviso that it “shall not 190, and kindred cases. In the latter case, be construed as requiring any such coma tax of large amount was imposed upon mon carrier to give the use of its tracks
or terminal facilities to another carrier ena foreign corporation engaged in interstate commerce, for the privilege of doing local gaged in like business," to discontinue as business within the state. Under the cir- switch interstate traffic to and from the
discriminatory their practice of refusing to cumstances therein disclosed and the char- tracks of a third carrier entering that city acter of the business involved, this court on the same terms which they contemheld that the statute was in substance an poraneously maintain with respect to simiattempt to tax the right to do interstate lar shipments to and from their own rebusiness, and to tax property beyond the spective tracks in said city, although, confines of the state, and was therefore void. instead of each carrier doing its own switchHere, a franchise tax is levied upon a cor
ing over the terminals used in common, they
switch jointly through a single agency for poration consolidated under the laws of the both, each paying substantially as it would state by its own acceptance of that law in if it did its own work alone, since what is incorporating under it.
done is not reciprocal switching, but the
For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes
use of a joint terminal in the natural and i general public by not less than thirty days' practical way.
filing and posting in the manner prescribed (Ed. Note.-For other
Carriers, in § 6 of the Act to Regulate Commerce, Cent. Dig. $$ $6-90; Dec. Dig. 33.]
i and thereafter to maintain and apply to the
switching of interstate traffic to and from (No. 290.]
the tracks of the Tennessee Central Rail. Argued October 13 and 16, 1916. Decided charges which shall not be different than
road Company at said Nashville, rates and December 4, 1916.
they contemporaneously maintain with reA
PPEAL from the District Court of the spect to similar shipments to and from their
United States for the Middle District respective tracks in said city, as said relaof Tennessee to review a decree which, dis- tion is found by the Commission in its said missing the petition, denied a preliminary report to be nondiscriminatory." The apinjunction against the enforcement of an
pellants contend as matter of law that the order of the Interstate Commerce Commis. relations between them exclude any charge sion. Reversed. Injunction to issue with of discrimination that is based only upon a out prejudice to further orders by the Com. refusal to extend to the Tennessee Central mission.
road the advantages that they enjoy. See same case below, 227 Fed. 258, 273.
The order is based upon discrimination The facts are stated in the opinion.
and is limited by the duration of the interMessrs. Edward S. Jouett, H. L. Stone, change between the appellants found to be W. A. Colston, Claude Waller, John B. discriminatory, and the question argued by Keeble, R. Walton Moore, and Frank w. the appellants is the only question in the Gwathmey for appellants.
Therefore it is necessary to consider Assistant Attorney General Underwood relations between the appealing railroads for the United States.
that were left on one side in Louisville & Messrs. Charles W. Needham, Joseph
N. R. Co. v. United States, 238 U. S. 1, 18, W. Folk, and Edward W. Hines for the In- 59 L. ed. 1177, 1183, 35 Sup. Ct. Rep. 696. terstate Commerce Commission.
The Louisville & Nashville traverses
Nashville from north to south, the NashMr. Justice Holmes delivered the opin ville & Chattanooga from west to southion of the court:
east, the Tennessee Central from northwest This is an appeal from a decree, made by to east. They all are competitors for Nashthree judges sitting in the district court, ville traffic. In 1872, contemplating a poswhich denied a preliminary injunction
sible Union Station, the Louisville & Nashagainst the enforcement of an order of the ville acquired trackage rights from the Interstate Commerce Commission and dis- Nashville & Chattanooga that connected its missed the appellants' petition. 227 Fed. northern and southern terminals in the city 259, id. 273. See 33 Inters. Com. Rep. 76, (previously separate), and the terminal of for the report of the Interstate Commerce the Nashville & Chattanooga. It now owns Commission. The order complained of re
71 per cent of the stock of the latter. In quired the appellants, the Louisville & Nash 1893 these two roads caused the appellant ville Railroad Company, the Nashville, Terminal Company to be organized under Chattanooga, & St. Louis Railway, and the the general laws of Tennessee, with the Louisville & Nashville Terminal Company right to let its property. The Louisville & to desist and abstain “from maintaining a
Nashville owns all the stock of this compractice whereby they refuse to switch in. pany. In 1896 the two roads respectively terstate competitive traffic to and from the let to the Terminal Company their several tracks of the Tennessee Central Railroad properties in the neighborhood of the origiCompany at Nashville, Te ssee, on the nal depot grounds of the Nashville & Chatsame terms as interstate noncompetitive tanooga for 999 years, and shortly aftertraffic, while interchanging both kinds of wards the Terminal made what is termed baid traffic on the same terms with each a lease of the same, and subsequently acother, as said practice is found by the Com- quired property to the two roads jointly for mission in its said report to be unjustly a like term. It covenanted to construct all discriminatory." It was further ordered: necessary passenger and freight buildings, “That the Louisville & Nashville Railroad tracks, and terminal facilities, the roads to Company, Nashville, Chattanooga, & St. pay annually as rental 4 per cent of the Louis Railway, and Louisville & Nashville actual cost, and to keep the properties in Terminal Company be, and they are hereby, repair. The Terminal Company then made notified and required to establish, on or be- a contract with the city for the construction fore May 1, 1915, upon notice to the Inter- of a Union Station, the two roads guar. state Commerce Commission and to the antying the performance, and the construc
For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes
tion was completed in 1900; the tracks con- noncompetitive traffic with the former, but necting with those of the two roads, but not the Louisville & Nashville has refused to with those of the Tennessee Central. The switch competitive traffic and coal except Terminal Company, as part of the improve- at its local rates, and the Nashville & Chatments, purchased large additional proper- tanooga has refused to switch it at all. The ties, the two roads advancing the funds, switching of coal was dealt with by this and the company executing a mortgage for court in Louisville & N. R. Co. v. United $3,000,000 guaranteed by the roads. $2,- States, 238 U. S. 1, 59 L. ed. 1177, 35 Sup. 535,000 of the bonds were issued and the Ct. Rep. 696. But the case now before us proceeds used to repay the roads.
is not concerned with the effect of the car. On August 15, 1900, the two roads, at riers having thrown the terminals open to that time being the only two roads enter many branches of traffic (238 U. S. 18). ing Nashville, made the arrangement under It arises only upon the question of the which they since have operated. They made discrimination supposed to arise from the an unincorporated organization called the appellants' relations to each other, as we Nashville Terminals which was to maintain have explained,-a question grazed but not and operate the property let to the two | hit by the decision in 238 U. S. See p. 19. roads jointly by the Nashville Terminal If the intent of the parties or purpose of Company and also 8.10 miles of main track the arrangement was material in a case like and 23.80 miles of side track contributed this, obviously there was none to discrimi. by the Louisville & Nashville, and 12.15 nate against the Tennessee Central road. miles of main and 26.37 miles of side track That road did not enter Nashville when the contributed by the Nashville & Chattanooga. plan was formed, and the two appellants The agreement between the roads provided had a common interest, although competia board of control consisting of a superin- tors,-an interest that also was public and tendent and the general managers of the in which the city of Nashville shared. By two roads, the superintendent having the § 3 of the Act to Regulate Commerce as it immediate control and appointing under of now stands, the act "shall not be construed ficers, etc. The total expense of mainte. as requiring any such common carrier to nance and operation is apportioned monthly give the use of its tracks or terminal facili. between the two roads on the basis of the ties to another carrier engaged in like busitotal number of cars and locomotives han- ness.” [24 Stat, at L. 380, chap. 104, Comp. dled for each. There is no switching Stat. 1913, § 8565.) Therefore if either charge to or from locations on tracks of the carrier owned and used this terminal alone, Nashville Terminals within the switching it could not be found to discriminate against limits on freight from or to Nashville over the Tennessee Central by merely refusing either road. The Tennessee Central tracks to switch for it, that is, to move a car to now connect with those of the Nashville & or from'a final or starting point from or Chattanooga at Shops Junction, in the west to a point of interchange. We conceive that ern section of the city, within the switch- what is true of one owner would be equally ing limits, and with those of the Louisville true of two joint owners, and if we are & Nashville at Vine Hill, outside the switch right the question is narrowed to whether ing limits, and just outside the city on the that is not, for all practical purposes, the south.
position in which the appellants stand. It should be added that in December, They do still hold jointly a considerable 1902, a further agreement was made pur portion of the terminals, purchased with porting to modify the lease to the railroads their funds. They manage the terminals as jointly by excluding from it the property a whole, and, in short, deal with them in the that came from them respectively, and re- same way that they would if their title was mitting the roads to their several titles as joint in every part. Of course they do not they stood before the lease, subject only to own their respective original tracks jointly, the mortgage, with some other changes that and it is matter for appreciation that per: Deed not be mentioned. This partial change haps defies more precise argument whether from joint tenancy back to several titles the change back to a several tenure of those does not affect the substantial equality of tracks changed the rights of the parties. the contribution of the two roads, and the We cannot see in this modification of the joint tenure of the considerable property paper title any change material to the point purchased by the Terminal Company was in hand. Neither road is paid for the use left unchanged.
of its tracks, but the severally owned and Another matter that seems immaterial to the jointly held are brought into a single the case before us is that, since the connec- whole by substantially equal contributions tion between the Tennessee Central and the and are used by each as occasion requires. appellant roads, the latter have interchanged The fact principally relied upon to uphold the order of the Commission is that, interests of the country, deem it a duty to instead of each road doing its own switch- set forth the grounds of my dissent. ing over the terminals used in common, they The Interstate Commerce Commission switch jointly; and it is said that there found as matter of fact (33 Inters. Com. fore each is doing for the other a service Rep. 76, 84): “Defendants [the two railthat it cannot refuse to a third. We can road companies, now appellants] unquesnot believe that the rights to their own tertionably interchange traffic with each other minals, reserved by the law, are to be de- and without distinction between competifeated by such a distinction. We take it tive and noncompetitive traffic. The cars that a several use by the roads for this pur- of both roads are moved over the individual. pose would open no door to a third road. ly owned terminal tracks of the other to If the title were strictly joint throughout and from industries on the other, and both in the two roads, we can see no ground for lines are rendered equally available to inprejudice in the adoption of the more dustries located exclusively on one. The economical method of a single agency for movement, it is true, is not performed im. both, each paying substantially as it would mediately by the road over whose terminal if it did its own work alone. But, as we tracks it is performed, but neither is it per, have indicated, a large part of the terminals formed immediately by the road whose cars is joint property in substance, and the are moved. It is performed by a joint agent whole is held and used as one concern. for both roads, and that being so, we are What is done seems to us not reciprocal of the opinion that the arrangement is esswitching, but the use of a joint terminal sentially the same as a reciprocal switchin the natural and practical way. It is ob- ing arrangement, and accordingly constijected that, upon this view, a way is opened tutes a facility for the interchange of traffic to get beyond the reach of the statute and between, and for receiving, forwarding, and the Commission. But the very meaning of delivering property to and from defendants' a line in the law is that right and wrong respective lines, within the meaning of the touch each other, and that anyone may get second paragraph of g 3 of the act. (Interas close to the line as he can if he keeps state Commerce Act.] ... We cannot on the right side. And further, the distinc agree with defendants' contention that they tion seems pretty plain between a bona have merely exchanged trackage rights. fide joint ownership or arrangement 80 But, even if they have, we think the term nearly approaching joint ownership as this,'facility,' as used in § 3 of the act, also inand the grant of facilities for the inter- cludes reciprocal trackage rights over terchange of traffic that should be extended to minal tracks, the consequences and advan. others on equal terms. The joint outlay of tages to shippers being identical with those the two roads has produced much more than accruing from reciprocal switching arrangea switching arrangement; it has produced ments.” a common and peculiar interest in the sta- The district court, three judges sitting tion and tracks even when the latter are not (227 Fed. 258, 269), after careful considerajointly owned. In our opinion the order tion, reached the following conclusions: was not warranted by the law; but, in over. "The operation jointly carried on by the turning it upon the single point discussed, Louisville & Nashville and the Nashville & we do so without prejudice to the Commis- Chattanooga under the Terminals agreesion's making orders to prevent the appel- ment is not a mere exchange of trackage lants from discriminating between competi- rights to and from industries on their retive and noncompetitive goods, so long as spective lines at Nashville, under which they open their doors to the latter, the ap- each does all of its own switching at Nash. pellants being entitled to reasonable com- ville and neither switches for the other. It pensation, taking into account the expense is, on the contrary, in substance and effect, of the terminal that they have built and an arrangement under which the entire paid for.
switching service for each railroad over the Decree reversed. Injunction to issue, joint and separately owned tracks is perwithout prejudice to further orders by the formed jointly by both, operating as prin. Interstate Commerce Commission as stated cipals through the Terminals as their joint in the opinion.
agent, each railroad, as one of such joint
principals, hence performing through such Mr. Justice Pitney, with whom concurred agency switching service for both itself and Mr. Justice Day, Mr. Justice Brandeis, the other railroad. . And, viewed in and Mr. Justice Clarke, dissenting: - its fundamental aspect, and considered with
I am unable to concur in the opinion of reference to its ultimate effect, we entirely the court, and, in view of the far-reaching concur in the conclusion of the Commission effect of the decision upon the commercial 'that such joint switching operation 'is es