Public Service Commission of Maryland v. Northern Central Railway Co.

Offutt, J., 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 ⁵⁸³ iii conveyance of persons or property within this State- * * *.” Section 413, art. 23, O. P. G. L. of Mel. 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 ⁵⁸⁴ corporation at its inception or to its status at the time of some act, the validity of which depends upon whether the corporation is within the reach of the Transportation Act. Obviously it means more than mere incorporation, and contemplates that the corporation shall have taken such steps as were necessary to enable it to engage in interstate commerce whether it actually did so engage or not.

Giving the language its natural grammatical effect the word “organized” is used in that statute to describe the present and existing status of the corporation and not its status or condition at some past time. 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 ⁵⁸⁵ the State of Maryland, and two thousand by the State of Pennsylvania, and as to its capital stock, the act further provided: “And the shares of the capital stock of the said company shall be deemed and considered personal estate, and shall be exempt from the impositions of any tax or burthen, by the states assenting to this law.” Acts 1827, ch. 72, sec. 20.

Under the powers conferred by the Act of the General Assembly of Maryland of 1854, and an Act of the Legislature of the State of Pennsylvania of the same year, the corporations referred to therein were consolidated under the name of the Northern Central Railway Company, and the new corporation constructed or acquired railroads with the usual appurtenances in Maryland and Pennsylvania together with track-age rights on other roads, which together foamed an extensive railroad system operating in and between the states of Maryland, Pennsylvania and New York. In 1914 the Northern Central Railway Company leased that entire system to the Pennsylvania Railroad ■Company for 999 years at an annual rental of $2,166,368. Under that lease the lessee agreed with the lessor to “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 ⁵⁸⁸ quate and efficient service to the public, and also to require that the lessee during the continuance of 'the lease manage and operate the leased property in the same manner as the lessor “is now or shall and may at any time hereafter, be required by law to do.” And under the lease it is empowered to authorize “improvements, betterments and additions” to the leased property; for the purpose of augmenting its capacity to' adequately discharge “its obligations to- the public,” and to- pay for such improvements, betterments and additions from its funds, or by issuing its stock or bonds. These are active and important duties, which are peculiarly and exclusively incident to the appellee’s status as a common carrier, and which could properly belong to no other status whatever, because the public service which by its chara ter the appellee is to- render is the operation and maintenance of a railroad, and all its obligations to the public are connected with that service. It was originally chartered as a carrier, it was organized as a carrier, until 'the lease referred to, it operated a railroad system as a carrier, it is still required to discharge many duties as a carrier, it is now organized to act as a carrier, and in the event of default on the part of its lessee, it must again actively operate its railroad system as a carrier.

Under those circumstances it remains now as it originally was a common carrier. 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