456

Argument for the United States.

earnings is arbitrary, and that, if sustained, it might subsequently be revised, and the proportion of the company from time to time be so reduced as to reach zero. Similar arguments in other cases have been rejected as irrelevant. Atlantic Coast Line R. R. Co. v. Corporation Comm., 206 U. S. 1; Noble State Bank v. Haskell, 219 U. S. 104.

Likewise the argument may not prevail that appellant, owing to claims and suits for loss and damage, overcharges, etc., may not close records and submit reports of earnings for a specified year because of undetermined liability, as it presents a general administrative question which clearly belongs to the rules and regulations of the Interstate Commerce Commission covering such matters. The Court would not determine such questions in advance of the facts of the particular case.

Opposing counsel try to make much of the language of the District Court that the recapture of the excess earnings was in the nature of a tax. One of the briefs points out that the Interstate Commerce Commission has not become a tax assessor and collector, that, as the moneys àre not paid into the Treasury by the carriers and paid out by the Treasurer, there is no tax, hence the District Court erred. The tax referred to in the New England Divisions Case, is very much the same as the tax referred to in the Mountain Timber Case. The point does not require further discussion.

There is little in the briefs of opposing counsel which meets the holding of the District Court that appellant never acquired title to the fund as its absolute property but that it holds the same as trustee for the United States. The Transportation Act does not interfere with intrastate commerce. Wisconsin Rate Case, 257 U. S. 587.

Mr. Samuel W. Moore, by leave of Court, filed a brief for the Kansas City Southern Railway Company, as amicus curiae.

Messrs. Joseph Paxton Blair, Edgar H. Boles, John F. Bowie, Robert J. Cary, Henry W. Clark, Herbert Fitzpatrick, Lawrence Greer, W. S. Horton, William S. Jenney, E. W. Knight, Richard V. Lindabury, Will H. Lyford, Samuel W. Moore, William Church Osborn, Winslow S. Pierce, Henry V. Poor, John H. Agate and Carl A. de Gersdorff, by leave of Court, filed a brief for the numerous railroad companies named in the footnote, post, 475, as amici curiae.

Mr. Winslow S. Pierce, Mr. Lawrence Greer and Mr. F. C. Nicodemus, Jr., by leave of Court, filed a brief for the Wabash Railway Company, the Western Maryland Railway Company, and the St. Louis Southwestern Railway Company, as amici curiae.

Mr. John G. Milburn and Mr. Forney Johnston, by leave of Court, filed a brief for the National Association of Owners of Railroad Securities, as amici curiae.

MR. CHIEF JUSTICE TAFT delivered the opinion of the Court

The main question in this case is whether the so-called recapture" paragraphs of the Transportation Act of 1920, c. 91, § 422, § 15a, paragraphs 5-17, 41 Stat. 456, 489-491, are constitutional.

The Dayton-Goose Creek Railway Company is a corporation of Texas, engaged in intrastate, interstate and foreign. commerce. Its volume of intrastate traffic exceeds that of its interstate and foreign traffic. In response to orders of the Interstate Commerce Commission, the carrier made returns for ten months of 1920, and for the full year of 1921, reporting the value of its railroad property employed in commerce and its net revenue therefrom. It earned $21,666.24 more than six per cent. on the value of its property in the ten months of 1920, and $33,766.99

excess in the twelve months of 1921. The Commission requested it to report what provision it had made for setting up a fund to preserve one-half of these excesses, and to remit the other half to the Commission.

The carrier then filed the present bill, setting forth the constitutional invalidity of the recapture provisions of the act and the orders of the Commission based thereon, averring that it had no adequate remedy at law to save itself from the irreparable wrong about to be done to it by enforcement of the provisions, and praying that the defendants, the United States, the Interstate Commerce Commission, and the United States District Attorney for the Eastern District of Texas, be temporarily restrained from prosecuting any civil or criminal suit to enforce the Commission's orders, and that the court on final hearing make the injunction permanent. The Commission answered the bill. The United States and the District Attorney moved to dismiss it for want of equity jurisdiction, and for lack of equity. An application for an interlocutory injunction before a court of three judges under the Act of October 22, 1913, c. 32, 38 Stat. 208, 220, was denied and the court, proceeding to consider the equities, dismissed the bill.

The question of equity jurisdiction raised below has not been discussed here by counsel for the appellees either upon their briefs or in oral argument. They do not rely on it, but seek without delay a decision on the merits.

While the Dayton-Goose Creek Railway Company was the sole complainant below and is the sole appellant here, nineteen other railway companies have, as amici curiae, upon leave granted, filed briefs in support of its appeal. Their names appear in the margin.1

'Southern Pacific Company; Lehigh Valley Railroad Company; Western Pacific Railroad Corporation; New York Central Railroad Company; Union Pacific Railroad Company; Chesapeake & Ohio Railway Company; Western Maryland Railway Company; Illinois

By § 422 of the Transportation Act, there was added to the existing Interstate Commerce Act and its amendments, § 15a. The section in its second paragraph directs the Commission to establish rates which will enable the carriers, as a whole or by rate groups or territories fixed by the Commission, to receive a fair net operating return upon the property they hold in the aggregate for use in transportation. By paragraph 3, the Commission is to establish from time to time and make public the percentage of the value of the aggregate property it regards as a fair operating return, but for 1920 and 1921 such a fair return is to be five and a half per cent., with discretion in the Commission to add one-half of one per cent. as a fund for adding betterments on capital account. By paragraph 4, the Commission is to fix the aggregate value of the property from time to time, using in doing so the results of its valuation of the railways as provided in § 19a of the Interstate Commerce Act, so far as they are available, and all the elements of value recognized by the law of the land for rate-making purposes, including so far as the Commission may deem it proper, the investment account of the railways.

Paragraph 5 declares that, because it is impossible to establish uniform rates upon competitive traffic which will adequately sustain all the carriers needed to do the business, without giving some of them a net income in excess of a fair return, any carrier receiving such excess shall hold it in the manner thereafter prescribed as trustee for the United States. Paragraph 6 distributes Central Railroad Company; Delaware, Lackawanna & Western Railroad Company; Virginian Railway Company; Duluth, Missabe & Northern Railway Company; Chicago & Eastern Illinois Railway Company; Kansas City Southern Railway Company; El Paso & Southwestern Railroad Company; St. Louis Southwestern Railway Company and Wabash Railway Company; Pere Marquette Railway Company; New York, Chicago & St. Louis Railroad Company; and the New Orleans, Texas & Mexico Railway Company.

the excess, one-half to a reserve fund to be maintained by the carrier, and the other half to a general railroad revolving fund to be maintained by the Commission. Paragraph 7 specifies the only uses to which the carrier may apply its reserve fund. They are the payment of interest on bonds and other securities, rent for leased lines, and the payment of dividends, to the extent that its operating income for the year is less than six per cent. When the reserve fund equals five per cent. of the value of the railroad property, and as long as it continues to do so, the carrier's one-half of the excess income may be used by it for any lawful purpose. Under paragraph 10, and subsequent paragraphs, the general railroad revolving fund is to be administered by the Commission in making loans to carriers to meet expenditures on capital account, to refund maturing securities originally issued on capital account and for buying equipment and facilities and leasing or selling them to carriers.

This Court has recently had occasion to construe the Transportation Act. In Wisconsin R. R. Commission v. C. B. & Q. R. R. Co., 257 U. S. 563, it was held that the act in seeking to render the interstate commerce railway system adequate to the country's, needs had, by §§ 418 and 422, conferred on the Commission valid power and duty to raise the level of intrastate rates when it found that they were so low as to discriminate against interstate commerce and unduly to burden it. In the New England Divisions Case, 261 U. S. 184, it was held that under § 418 the Commission in making division of joint rates between groups of carriers might in the public interest consult the financial needs of a weaker group in order to maintain it in effective operation as part of an adequate transportation system, and give it a greater share of such rates if the share of the other group was adequate to avoid a confiscatory result.