146 Md. 580 | Md. | 1924
delivered the opinion of the Court.
This appeal presents but a single question: Whether the Northern Central Eailway Company, a Maryland corporation, has the right without the permission of the Public Service Commission of Maryland to issue its capital stock to pay for the improvement and maintenance of its property.
That right, if it exists, depends upon these propositions : (1) that the Northern Central Eailway Company is a carrier engaged in interstate commerce within the meaning of the Transportation Act of 1920; ('2) that subsection 1, section 20a, of that act is valid, and (3) that the terms of the Transportation Act apply to the facts of this case, for if these propositions correctly state the law, it necessarily follows that the appellant was not entitled to the relief sought in its bill of complaint and that that bill was properly dismissed by the lower court.
The first question involved in any examination of those propositions is whether the appellee is a carrier engaged in interstate commerce.
The term “common earner” as used'in the Publiq, Service Commission law of Maryland includes “all railroad corporations * * * operating transportation agencies for public use
The term “railroad corporation” as used in that law includes every corporation “owning, operating, managing or controlling any railroad * * *,” Ibid, and the term “transportation of property or freight” includes any service in connection with “the receiving, delivering, elevation, transfer in transit, ventilation, refrigeration, icing, storage and handling of the property or freight transported.” Ibid.
The term “carrier” as used in section 20a o-f the Transportation Act of 1920 is made by subsection 1 to- mean “a common carrier by railroad (except a street, suburban, or interurban electric railway which is not operated as a part of a general steam railroad system of transportation) which is subject to this act, or any corporation organized for the purpose of engaging in transportation by railroad subject to- this act.” Federal Statutes Annotated, 1920, page 120. By comparing these statutes it appears that the definition of the term “carrier” found in the State statute is to some- extent inconsistent with the definition of the same term given in the federal statute, in that the federal statute gives it a broader and more comprehensive meaning. For while in the Maryland statute the term as applied to- a railroad corporation includes only corporations operating some agency for the conveyance of persons or property, as used in the federal statute it includes “any corporation organized for the purpose of engaging in transportation by railroad” subject to that act. But, assuming that Congress had power to extend the jurisdiction of the federal government by enlarging the meaning of “carriers” to- include corporations organized for transportation by railroad as well as corporations actually engaged in1 that business, we are bound by the definition given in the Transportation Act, since to the extent of any inconsistency the State act must yield to the federal act.
The word “organized” as used in section 20a, subsection 1, Transportation Act, co-uld refer either to the status of the
The question then is: Was the appellee when it undertook to issue the stock which is referred to in the bill a “common carrier by railroad,” or organized for the purpose of engaging in transportation by railroad subject to' the Transportation Act. By chapter 250 of the Acts of 1854 of the General Assembly of Maryland, the Baltimore & Susquehanna Railroad Company, the York and Maryland Line Railroad Company, the York and Cumberland Railroad Company, and the 'Susquehanna Railroad Company, were authorized to consolidate into one corporation under the name of the “Northern Central Railway Company.” The consolidated corporation was expressly authorized to issue securities to pay for completing “the road to' Sunbury” in Pennsylvania, and it was expressly subjected to' all the “contracts, engagements and liabilities,” of the Baltimore & Susquehanna Railroad Company, and all existing laws and ordinances of 'the State of Maryland or of the City of Baltimore affecting that company were continued in force so far as they applied to and were “consistent with the new organization of the said consolidated company.”
The Baltimore & Susquehanna Railroad Company was incorporated by chapter 72 of the Acts of 1827, for the construction of a railroad from the City of Baltimore to some point on the 'Susquehanna River. Its capital stock was fixed at one million dollars divided into- shares of $50 each, of which,' two thousand were to' be received for subscription by
“at all times during the continuance of this lease, manage and operate the said railroads and property hereby demised, in the same manner as the lessor, as the owner thereof, is now, or shall and may at any time hereafter, be required by law to do; and observe and fully comply with the terms, conditions, and requirements of the leases and other contracts, agreements and arrangements enumerated or referred to in the granting clause of this lease; and the said lessee shall and will, at its own proper cost and expense, and without deduction from the rent aforesaid, at all times during the continuance of this lease, maintain, preserve and keep the railroads, motive power, rolling stock and equipment, and premises hereby demised, and every part of the same, in thorough repair, working order and condition, and will use and employ thereon its own motive power, rolling stock and equipment, in addition to the motive power, rolling stock and equipment of the lessor when needed for the*586 proper and efficient operation thereof, so that the business of the said demised railroads shall be preserved, encouraged and developed; and that the same shall be at all times done with safety and expedition, and the public be accommodated in respect thereto with reasonable convenience and facilities, and that all future growth of such business, as the same may occur or be reasonably anticipated, shall be duly provided for. And the lessee hereby promises and agrees to and with the lessor that the lessee shall and will, at its own proper cost and expense, and without deduction from the rent aforesaid, from time to time, when as it shall deem necessary during the continuance of this lease, do, or cause to be done, to and upon the said demised railroads, motive power, rolling stock and equipment, and premises, any and all repairs, replacements and renewals; and also, in the manner and upon the terms and conditions expressed in said Article ‘Fifth’ of these presents, any and all additions, constructions and improvements which may be reasonably required for the purpose aforesaid.” It is also agreed “that for the purpose of enabling the lessor to properly meet and discharge its obligations to the public, the lessee shall, from time to time during the continuance of this lease, make all such improvements, betterments and additions upon and to the railroads and property of the lessor hereby demised as shall be deemed necessary and shall be approved and authorized by resolution of the directors of the lessee and lessor, respectively, * * * ' which shall be considered substantial betterments to the demised property and so determined by the directors of the lessee and lessor, respectively, and approved and authorized by each accordingly; and the lessee shall, in the first instance, provide and furnish all moneys, material and labor required therefor, and conduct and prosecute all work connected therewith, and shall from time to time render to the lessor full and detailed statements of the cost thereof, and such cost shall constitute an indebtedness of the lessor to the lessee, which shall,*587 when and as such statements are rendered, be promptly paid by the lessor to the lessee in money, if and to such extent as, either in its treasury or otherwise, the lessor shall then have moneys available therefor and properly applicable thereto; or in case at any such times the lessor shall not have moneys available therefor, such indebtedness, or any portion thereof, not then paid in money, shall be paid and discharged by either bonds or capital stock, or both, of the lessor, as the lessee shall at the time elect and designate in writing.”
And it is further provided in it that if the lessee shall at any time be in default for ninety days in the payment of rent or in the performance of any of the covenants of the lease the lessor shall have the right to re-enter and repossess the demised property, and that all rights of the lessee under the lease shall cease.
Upon these facts the appellant, contends, first, that the appellee is not a carrier, and second, that even if it is a carrier, the issuance of its stock under the circumstances of this case is not commerce. But we are unable-to accept either-of those contentions.
The contention that the appellee is not a carrier is based upon the theory that, since under the lease the actual work of transporting persons and property is. performed by the lessee, that the lessor has lost its status as a carrier. But we think that contention involves too narrow a construction of the word carrier. For while the lessee does perform the actual work of transportation over the leased system of railroads, the lessor still has important duties and functions to perform in connection with that transportation, in which the public has a vital and immediate interest and which are necessarily predicated upon and assume its continued status as a carrier. Under the terms of the lease it has the right, and under the laws of the State it is charged with the duty, of requiring the lessee to maintain the leased property in such a condition as may be necessary to enable it to render ade
But, assuming that it is a carrier, it is contended that issuing its securities to pay for 'improvements to its system is not “commerce,” and that therefore such an act is not affected by the Federal Transportation Act of 1920. But the question of whether railroad transportation between the several states is commerce, and the appellant’s contention amounts to that, is no longer open.' And yet the operation and the right to raise money to operate are parts of the same thing, and the operation of a railroad or other system of transportation and the right to raise money for such operation, are inseparable. Funds in the very nature of 'things are the life blood of a corporation. If it cannot secure funds through the sale of its stock or securities, it cannot function,
It is urged however, that if the State could, prior to the Transportation Act of 1920, “constitutionally require the railroad company to secure its consent to a stock issue, it could only do so because Hiere was in this no interference with or regulation of interstate commerce.” But we cannot agree with that argument. Eor while Congress had the power to regulate the issuance of securities prior to that act, the power was dormant, and until it was exercised the State could, so long as it did not hinder or interfere with the operation of the service of the corporation as an interstate carrier, regulate and control the issuance of its securities, and the test of the State’s power was whether its exercise in any given ease interfered with or hindered interstate commerce. But when Congress did exercise the power, and by app«> priate legislation placed the right to regulate and control the issuance of such securities in a federal agency, the power of the State to regulate and control the issuance of securities by an interstate carrier ceased. This conclusion is, we think, supported by the Supreme Court in a series of cases- beginning with Wilson v. Blackbird Creek Co., 2 Pet. 245, and concluding with Bowman v. R. R. Co., 125 U. S. 465, which are analyzed and compared in Professor Willoughby’s .work on the Constitution, sec. 304. In the case first cited, the ¡Sítate of Delaware had authorized the construction of a dam across a navigable creek. That act was attacked as a violation of the commerce clause, but in denying that contention Chief Justice Marshall said: “If Congress had passed any.'.aht
Applying that principle to such .facts as those involved in this case, the conclusion seems to- be justified that, until Congress through the Transportation Act of 1920 assumed the right to regulate the issuance of securities by carriers engaged in interstate commerce, the states co-uld exercise that power within the- limits stated above-. The transportation business of the country is carried on by a great, number of corporations, varying widely in their resources, their liabilities, their necessities, their earning capacity, and their duties, all of which may be affected by local conditions. The vahie of their securities must naturally be affected to- so-me extent by all o-f these elements which could properly be considered by agencies, local to the corporation issuing securities, and until -Congress did act there- was no- reason why the several states should not have exercised the po-wer of regulating the issTiance of such securities by corporations respectively created by them, even though engaged at the time in interstate commerce, so long as their regulation did not in
' The second proposition is that subsection Y, section 20a, of 'the Transportation Act of 1920 is valid. The appellant’s ' contention is that if that act divests 'the State commission of ■its authority over tho stock issues of a Maryland corporation under the circumstances of this case, that it is an “unconstitutional invasion by the federal government into the governmental sphere reserved to the states.” And much of the very careful and able argument of counsel for the State was devoted to an exposition of various evil consequences which may flow from the grant of any such power to the federal government, but as that is a political and legislative and not a judicial question, we will not refer to it further than to say this: 'that whatever the consequences following that act may be, whether 'beneficial 'or injurious,' they must be dealt 'with by the legislative branch of the government, and so- loughs that legislature acts within its constitutional powers the wisdom of its acts cannot be reviewed by the courts.
Nor do we feel called upon to consider the suggestion that the Interstate Commerce Commission may, if that legislation is valid, authorize a corporation to issue capital stock in excess of the amount authorized by the state which created it. That question is not involved in this case, since it is not suggested by anything in the record that the issue of stock under consideration here is in excess of the amount which the cor
The contention that the provision in question is an unconstitutional invasion of the sovereign power of the state, necessarily rests upon the assumption that the state never granted to the federal government the right, to regulate stock issues by corporations created by it. But if the issuance of securities by an interstate carrier is. interstate commerce, which we have decided, and if the state granted to the federal government the right to regulate interstate commerce among the states, as it has done, there is no force in that contention either. For there can be no invasion of the sovereign power of the state through the exercise of a power which it voluntarily surrendered and granted to the federal government.
The fact that by .that provision the state is deprived of its power to regulate the issuance of securities by a corporation which it itself incorporated constitutes no invasion of its sovereignty, because it consented to that deprivation when it assented to the commerce clause. When that assent was given, it was necessarily contemplated that the grant of power to regulate commerce included all incidental and implied powers necessary to make that grant effective, and there is no more reason to hold that the right of the corporation to issue securities was beyond that grant than was its right to exercise any other corporate function or duty which are conceded to be in it. And the necessity for its inclusion has been demonstrated and illustrated by the history of transportation in this country in recent years. If each state had the unrestricted power to control the issuance of securities by interstate carriers, then any one of the several states, could have the power to some extent to interfere with, cripple or hinder the commerce of the entire country, by refusing to permit such parts or links of transportation systems as operated within their respective borders through corporations chartered by such states respectively to secure funds to enable them to adequately discharge their duties as interstate
The third proposition is -that it is applicable to- the- facts of this case, and in view of what has already been said we have no doubt that it is. Subsection 2 of section 20a makes it unlawful for an interstate carrier to issue any stocks,, bonds or other securities even when authorized by tbe “authority creating” the corporation, until authorized by the Interstate Commerce Commission, while section Y relieves the corporation of the necessity of securing the consent of the state-of its creation to such issue. There is no necessary conflict-in these provisions. It could uot have been intended 'by section 2 to give to tbe authority creating tbe corporation engaged in interstate transportation tbe absolute power to veto-a proposed issue of securities by it, because that would have-been to confer upon the several states powers which they did. not then have, and which Congress could not grant to them,, and because it is the obvious intention of -tbe act to- extend and not to restrict federal control over issuance of securities by interstate carriers. The two sections together mean, what in clear terms they say, that the assent of the authority creating an interstate carrier, to the issuance of securities by it, is nugatory and ineffective, and will not in itself authorize-such issue and therefore may be dispensed with.
For these reasons we entirely concur in the conclusion reached by tbe learned court below and will affirm the decree: appealed from.
Decree affirmed, with costs..