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rate, fare, or charge shall be reduced, and no
such classification, regulation, or practice shall
be changed in such manner as to reduce any
such rate, fare, or charge, unless such reduc-
tion or change is approved by the Commis-
sion."

[1] The trial court entered judgment for $1,000 and interest. The judgment was affirmed by the St. Louis Court of Appeals, the highest court of the state in which a decision in the suit could be had. 263 S. W. 495. The court held that, under the law of Missouri, which rendered the carrier liable for its full misdelivery of the trunk was a conversion value, and that the state law governed because the journey was intrastate. This court granted a writ of certiorari. 45 S. Ct. 196, 266 U. S. 600, 69 L. Ed. 461. Under the feder

*Mr. Justice BRANDEIS delivered the al law misdelivery is not deemed a converopinion of the Court.

In 1922, Byrd J. Boone, a passenger on an intrastate journey in Missouri over the Missouri Pacific Railroad, checked a trunk which | she took with her. It arrived safely at its destination, but was not delivered to her, because a thief obtained possession through the device of changing checks. She brought this suit against the carrier in a court of the state, and claimed that, under section 9941 of the Revised Statutes of Missouri of 1919, she was entitled to the full value. This law, first enacted in 1855 (Rev. Stat. Mo. c. 39, 45), had never been suspended or repealed by any law of the state. The defendant relied upon a baggage tariff which limited liability to $100 unless a greater value was declared and extra payment made. This tariff, appli

cable to both intrastate and interstate traffic,

*468

had been duly filed by the Director General
of Railroads pursuant to the Federal Control
Act of March 21, 1918, c. 25, § 10, 40 Stat.
451, 456 (Comp. St. 1918, Comp. St. Ann.
Supp. 1919, § 31154j), and was in force on
the termination of federal control, February
29, 1920. The defendant contended that, by
virtue of *section 208 (a) of Transportation
Act Feb. 28, 1920, c. 91, 41 Stat. 456, 464
(Comp. St. Ann. Supp. 1923, § 100714d), this
limitation had remained in force as applied
to intrastate commerce, because the provi-
sion for unlimited liability contained in sec-
tion 9941 of the Missouri Revised Statutes
had not been re-enacted after the termination
of federal control.

Section 208 (a) provides:

"All rates, fares, and charges, and all classifications, regulations, and practices, in any wise changing, affecting, or determining, any part or the aggregate of rates, fares, or charges, or the value of the service rendered, which on February 29, 1920, are in effect on the lines of carriers subject to the Interstate Commerce Act, shall continue in force and effect until thereafter changed by state or federal authority, respectively, or pursuant to authority of law; but prior to September 1, 1920, no such

sion depriving a carrier of the benefit of the
provision limiting liability. American Rail-
way Express Co. v. Levee, 44 S. Ct. 11, 263
U. S. 19, 21, 68 L. Ed. 140. The sole question
for decision is the construction and effect to
be given section 208 (a).

*469

The provision in the baggage tariff limiting liability is within the purview of that section. There was no *legislation by the state on the subject after the termination of federal control. The state had confessedly power to restore the full statutory liability as applied to intrastate commerce unless the Interstate Commerce Commission should, for the purpose of preventing discrimination against interstate commerce, issue an order under Railroad Commission of Wis. v. Chicago, BurTransportation Act 1920 to the contrary. See lington & Quincy R. R. Co., 42 S. Ct. 232, 257 U. S. 563, 66 L. Ed. 371, 22 A. L. R. 1086; U. S. 591, 66 L. Ed. 385. There was no such order. Compare Chicago, Milwaukee & St. 37 S. Ct. 173, 242 U. S. 333, 61 L. Ed. 341. Paul Ry. Co. v. Public Utilities Commission, The precise question is whether the state provision, which had been suspended by the filing of the tariffs of the Director General, became operative on September 1, 1920, without re-enactment, or whether affirmative action by the state after February 29, 1920, was necessary to restore the full liability theretofore created by its statute and which it had not repealed. The analogy of state insolvent laws suspended by the enactment of a bankruptcy act, and again becoming operative upon its repeal, was relied upon. See Tua v. Carriere, 6 S. Ct. 565, 117 U. S. 201, 29 L. Ed. 855; Butler v. Goreley, 13 S. Ct. 84, 146 U. S. 303, 36 L. Ed. 981.

New York v. United States, 42 S. Ct. 239, 257

Most of the rates, fares, and charges in effect on February 29, 1920, had been established without suspending any provision of any statute or the order of any regulatory body. They related to matters with which, both before and after federal control, carriers

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

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(46 S. Ct.)

were, in the main, at liberty to deal in their | proper exercise of power incident to federal discretion, without first securing the consent operation and control during the war. Conof either the federal or the state commission.gress could, under that power, also make reaFor despite the enlarging sphere of regula-sonable provision to ensure workable tariffs tion, the field in which the carrier may exer- on the restoration of the railroads to their cise initiative and discretion was and is still owners. But a repeal by Congress of all such *470 existing state laws, affecting intrastate coma wide one.1 The existing right of the *car-merce, coupled with permission to enact new riers to initiate rates was transferred by the ones, would not be an appropriate means to second paragraph of section 10 of the Federal that end, nor could such legislation be susControl Act to the Director General, with tained under the commerce clause. Regulathree modifications.2 The Interstate Com- tion by a state of intrastate rates is not a merce Commission for the time was made function exercised by permission of the federthe regulatory body in respect to intrastate al government (In re Rahrer, 11 S. Ct. 865, as well as interstate rates. The power of 140 U. S. 545, 564, 35 L. Ed. 572), or because suspending tariffs involving increases (which of its inaction. The power of Congress over had been first conferred upon the Commis- intrastate rates conferred by the commerce sion by Act of June 18, 1910, c. 309, § 12, clause is limited to action reasonably neces36 Stat. 539, 552 [Comp. St. § 8583]) was sary for the protection of interstate comdenied to it in respect to such as were merce. Railroad Commission of Wis v. Chifiled by the Director General. And the pow-cago, Burlington & Quincy R. R. Co., 42 S. Ct. er to fix the date when the new tariffs 232, 257 U. S. 563, 66 L. Ed. 371, 22 A. L. R. 1086. No necessity is here shown. Such is the argument. The section, if so construed, would, at least, raise a grave and doubtful

should take effect was vested in the Director General, instead of being fixed (as provided by section 6 of the Interstate Commerce Act [Comp. St. § 8569]) at not less than 30 days subject to the discretion of the Commission. It was by virtue of the ordinary corporate power of carriers to establish rates, so transferred to the Director General, that the rates, fares, charges, classifications, regulations and practices referred to in the first clause of section 208 (a) had, in the main, been established.3

*471

*472

*constitutional question. Under the settled practice, a construction which does so will not be adopted, where some other is open to us. United States v. Delaware & Hudson Co., 29 S. Ct. 527, 213 U. S. 366, 408, 53 L. Ed. 836; Federal Trade Commission v. American Tobacco Co., 44 S. Ct. 366, 264 U. S. 298, 307, 68 L. Ed. 696, 32 A. L. R. 786. An examination of the section in the light of the then existing federal and state law will make clear that another and reasonable construction is open to us, and that it should prevail.

Section 208 (a) contains two clauses. Each was to take effect immediately. Each dealt with rates, fares, charges, classifications, reg

[2, 3] *In support of the judgment below, it is contended that the section would be unconstitutional, if construed as providing that the Missouri statute, although applicable only to intrastate commerce, should not become operative unless and until re-enacted. The argument is this: If so construed, the Act of Con-ulations and practices. But in purpose, chargress would, in effect repeal all such state acter, and scope the two clauses differ widelaws affecting intrastate commerce existing ly. The primary purpose of the second clause at the termination of federal control, while was to protect the United States from liabilgranting to the states permission to legislate ity on its guaranty to the carriers of the on the subject thereafter or recognizing their standard return. It sought to do so by propower to do so. The prohibition of reduc-hibiting any reduction of rates, fares or tions of intrastate rates during the six charges without the consent of the Intermonths' period of guaranteed return, was a

state Commerce Commission. The prohibition

Com'n R. 105, 130; Public Service Commission of Washington v. Alabama & Vicksburg Ry. Co., 53 Interst. Com. Com'n R. 1; Illinois Coal Traffic Bureau v. Director General, 56 Interst. Com. Com'n R. 426, 431; Utilities Development Corporation v. Pittsburgh, Cincinnati, Chicago & St. Louis Ry. Co. et al., 56 Interst. Com. Com'n R. 694; American Wholesale Lumber Ass'n v. Director General, 66 Interst. Com. Com'n R. 393, 396; Alabama Co. v. Director General, 78 Interst. Com. Com'n R. 561.

1 Even under Transportation Act 1920, the power inheres in the carriers, to initiate increases or decreases of rates, fares, and charges, subject, of course to the control of the appropriate regulatory body. Increases or decreases of interstate rates may, without action by the Interstate Commerce Commission, become operative after 30 days' notice by the simple act of filing, unless the Commission suspends them. See Interstate Commerce Act, section 6(3) and section 15(7) (Comp. St. §§ 8569, 8583). The power of the carrier to initiate intrastate rates, fares and charges, is even broader in many states. See Wil-U. S. Railroad Administration Bulletin No. 4 (Reliam E. McCurdy, "The Power of a Public Utility to Fix its Rates and Charges in the Absence of Regulatory Legislation," 38 Harv. Law Rev. 202.

2 Compare Willamette Valley Lumbermen's Ass'n v. Southern Pacific Co., 51 Interst. Com. Com'n R. 250; Johnston v. Atchison, Topeka & Santa Fé Ry. Co., 51 Interst. Com. Com'n R. 356, 361; California Canneries Co. v. Southern Pacific Co., 51 Interst. Com. Com'n R. 500; Natchez Chamber of Commerce V. Louisiana & Arkansas Ry. Co., 52 Interst. Com.

See General Order No. 28, issued May 25, 1918,

vised), p. 285; reduced tariff rates on building materials, April 11, 1919, Supplement to Bulletin, p. 25. "The rates were made by filing the tariffs with the commission. The orders were directions of the Director General to his officials." Compare Atlantic Coast Line Ry. Co. v. Railroad Commission of Georgia (D. C.) 281 F. 321, 325; Anaconda Coppe Mining Co. v. Director General, 57 Interst. Com. Com'n R. 723, 726; Lehigh Valley Coal Co. v. Director General, 69 Interst. Com. Com'n R. 535, 539.

*474

applied alike to intrastate and to interstate rates. It extended to reductions made by the | gle statute *have restored, as of September 1, carriers, as well as to those made by the 1920, its rates, fares, and charges and all states. But the prohibition was limited to re- classifications, regulations, and practices afductions. Increases might be made. The pro- fecting them, no matter what change the Dihibition was confined to the first six months rector General had made. In those states after the surrender of the railroads to their where the rate-making power was vested in owners, because the government guaranty was a regulatory body in continuous session, a limited to that period. like result could have been attained through The first clause of section 208 (a) is legisla- a single order. On the other hand, in those tion permanent in character. It relates alike states where the local law did not permit to changes which increase rates and to those such prompt action by the rate-making auwhich reduce. It contains no prohibition. It thority, the restoration of rates by state acexplains. Its purpose was not to conserve tion would necessarily have been deferred. revenues but to remove doubts and avoid con- It is not to be assumed that Congress intendfusion. A clarifying provision was needed. ed to adopt a means of protection which Comprehensive changes in the rates, fares, would have been indirect, fortuitous and charges, classifications, regulations and prac- largely futile, and which would obviously tices had been made by the Director General have produced such inequalities among the by filing the same with the Interstate Com-states, when direct, certain, and better means merce Commission, pursuant to power conferred by section 10 of the Federal Control

*473

*Act. It was important that carriers and the public should know whether, and to what extent, these changed rates, fares, charges, classifications, regulations and practices would continue in force after the return of the railroads to their owners. This information the first clause supplied by specifying what tariffs were applicable. To facilitate the conduct of business by this means was an appropriate exercise of the power of Congress. To have undertaken to do so by means of abrogating all rates, fares and charges established by the several states in respect to intrastate commerce, and all classifications and regulations affecting them, would not have been. It is not lightly to be assumed that Congress would have resorted to means so extraordinary for securing workable tar

iffs.

of protection were available.

Moreover, there was no purpose in Congress to maintain in force, after the expiration of the six months', guaranty period, either the interstate or the intrastate rates which had been established by the Director General. It was recognized, when Transportation Act 1920 was enacted, that these were not high enough to yield to the carriers adequate revenues. Means of increasing them were specifically provided by those sections of Transportation Act 1920 which prescribe the essentials of a fair return and empower the Commission, upon notice to the states and with their co-operation, to prevent discrimination against interstate commerce resulting from unduly low intrastate rates, fares and charges. See sections 415, 416, and 422 (Comp. St. Ann. Supp. 1923, §§ 8576, 8581, 8583a). Proceedings were in contemplation by means of which it was proposed to establish largely inIt is suggested that, although the primary creased rates on the expiration of the governpurpose of the first clause of section 208 (a) ment's guaranty, September 1, 1920. The orwas to facilitate the conduct of business, Con- der for such general increase made by Ex gress intended thereby also to protect the car-parte 74, Increased Rates, 1920, 58 Interst. rier's revenues, and that a requirement of an Com. Com'n R. 220, on July 29, 1920, folaffirmative exercise of state power after ter-lowed extensive hearings in which commismination of federal control would, by present-sions ing an obstacle to change make reductions of rates by the states difficult, and thus result in protecting the carrier's revenues. That Congress did not devise the first clause as a means of so protecting revenues appears from the character of the provision there made. The clause applies equally, whether the rate made by the Director General was a reduction or an increase of the rate in effect before federal control. The clause left the several states free to proceed at once to establish reductions, and to make them effec-59 tive upon the expiration of the government's guaranty. Whether a particular state could avail itself of that liberty would thus depend wholly upon its own Constitution, legislation and practice. If at the time Transportation Act 1920 was enacted the Legislature either happened to be in session or could be promptly convened, the state might by a sin

representing the states participated.

*475

*Proceedings were instituted in the states before September 1, 1920, to secure corresponding increases of the intrastate rates. And eral commission to remove obstacles to infurther proceedings were had before the fedcreases of the intrastate rates which existed in same of the states. The six months' pro

• See Annual Report of the Interstate Commerce Commission, December 1, 1920, pp. 6-10; Rates, Fares, and Charges of New York Central R. R. Co., Interst. Com. Com'n R. 290; Intrastate Rates within Illinois, 59 Interst. Com. Com'n R. 350; Wisconsin Passenger Fares, 59 Interst. Com. Com'n R. 391; Railroad Commission of Wisconsin v. Chicago, Burlington & Quincy R. R. Co., 42 S. Ct. 232, 257 U. S. United States, 42 S. Ct. 239, 257 U. S. 591, 66 L. Ed. 385; In re Steam Railroads, P. U. R. 1920F, 7; In re Northern Pac. Ry. Co., P. U. R. 1920F, 11; In re Railroads. P. U. R. 1920F. 17; In re Railroads, P. U. R. 1920F, 33; In re Freight Rates of Carriers, P. U. R. 1921A, 399.

563, 66 L. Ed. 371, 22 A. L. R. 1086; New York v.

(46 S. Ct.)

hibition of reductions provided for by the [Ed. Note.-For other definitions, see Words second clause of section 208 (a) afforded car- and Phrases, First and Second Series, Doing riers and the Interstate Commerce Commis- Business.] sion ample opportunity to take such action as might be deemed advisable for carrying Circuit Court of Appeals for the Second CirOn Writ of Certiorari to the United States out the new policy established by Transporta- cuit.

tion Act 1920.

When the first clause of section 208 (a) is examined in the light of these facts, the construction to be given it becomes clear. In order to remove doubts as to what tariffs were to be applicable after the termination of federal control, Congress declared that the existing tariffs, largely initiated by the Director General, should be deemed operative, except so far as changed thereafter—that is, after February 29, 1920-pursuant to law. Such modification of intrastate tariffs might result from action of the carriers taken on their own initiative. It might result from orders of the Interstate Commerce Commission. It might result from the making either of new state laws or of new orders of a state commission acting under old laws still in force and again becoming operative. Or such modification might result from the mere cessation of the suspension, which had been effected through federal control, of statutes or orders theretofore in force and still unaffected

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Action by the Chile Copper Company against William H. Edwards, Collector of Internal Revenue. Judgment for plaintiff (294 F. 581) was affirmed by Circuit Court of Appeals (5 F. [2d] 1014), and defendant brings. certiorari. Judgment reversed.

Mrs. Mabel Walker Willebrandt, Asst. Atty. Gen., for petitioner.

Mr. Arthur A. Ballantine, of New York City, for respondent.

*453

*Mr. Justice HOLMES delivered the opinion of the Court.

This is a suit to recover the amount of taxes alleged to have been erroneously collected for the years 1917 to 1920. The taxes were levied under the Acts of September 8, 1916, c. 463, § 407, 39 Stat. 756, 789 (Comp. St. § 5980a) and of February 24, 1919, c. 18, § 1000, (a) (1) and (c), 40 Stat. 1057, 1126 (Comp. St. Ann. Supp. 1919, § 5980n). Both statutes impose upon domestic corporations the carrying on or doing business," at cerorganized for profit a tax "with respect to tain rates for the fair value of the capital stock, and both exempt such corporations "not engaged in business" during the preceding taxable year. The question is whether the plaintiff, the Chile Copper Company, brings itself within this exemption. The facts are set forth in the complaint and the case was heard upon a motion to dismiss. In the District Court judgment was given

EDWARDS, Collector of Internal Revenue, V. for the plaintiff Chile Copper Co. v. Ed; CHILE COPPER CO.

wards, 294 F. 581. The judgment was af

(Argued March 10, 11, 1926. Decided March firmed on the opinion below by the Circuit

22, 1926.)

No. 375.

Internal revenue 9-Corporation organizing to hold stock and finance another corporation, which made bond issue and loaned proceeds, held "doing business," within stock taxing statutes (Act Sept. 8, 1916, § 407 [Comp. St. § 5980a]; Act Feb. 24, 1919, § 1000 [a] [1] and [c], being Comp. St. Ann. Supp. 1919, § 5980n).

Court of Appeals. 5 F. (2d) 1014. A writ of certiorari was granted by this Court. 45 S. Ct. 637, 268 U. S. 685, 69 L. Ed. 1156.

The facts are somewhat peculiar. The Chile Exploration Company, a New Jersey corporation, owned mines in Chile and needed to borrow large sums of money in order to develop them. could not mortgage its mines effectively and By the laws of Chile it

*454

therefore could not give security directly for Corporation organized to hold stock of cor- bonds. To meet the difficulty the Chile Copper poration owning mines in Chile, and to finance Company was organized in Delaware for the such corporation by pledge of its stock, its purpose of holding the capital stock of the mines not being subject to mortgage under Chile Exploration Company, issuing bonds Chilean laws, which carried out such purpose, secured by a pledge of the stock, and furnishobtaining money by bond issue and either ad- ing the proceeds from time to time to the vancing it to mining corporation or placing it Exploration Company to enable the latter to on call loans, held "doing business," within Act Sept. 8, 1916, § 407 (Comp. St. § 5980a), and go on with its work. The purpose was carAct Feb. 24, 1919, § 1000 (a) (1) and (c), be- ried out. On April 1, 1917, the plaintiff auing Comp. St. Ann. Supp. 1919, § 5980n, im- thorized the issue of collateral trust bonds posing stock tax, except on corporations not for $100,000,000 to be secured by a pledge of engaged in business during preceding year. all the above-mentioned stock. During the For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

were made and 180 loans amounting to $29,-
100,000 were called. In the same year the
plaintiff received $332,366.90 as interest up-
on these loans. During the previous year it
received $194,579.20 upon similar loans.

If the corporation was one that Congress
had power to tax in this way, it is hard to
say that it is not within the taxing acts. It
was organized for profit and was doing what
it principally was organized to do in order
to realize profit. The cases must be excep-
tional, when such activities of such corpora-
tions do not amount to doing business in the
sense of the statutes. The exemption "when
not engaged in business" ordinarily would
seem pretty nearly equivalent to when not
pursuing the ends for which the corporation
was organized, in the cases where the end is
profit. In our opinion the plaintiff was lia-
ble to the tax. We do not rest our conclu-
sion upon the issue of bonds in the first year
or the call loans made in the last, and for
the same reasons we cannot let the fagot be
destroyed by taking up each item of conduct
separately and breaking the stick.
The ac-

six months ending on June 30, 1917, it exe- 1920, 224 loans amounting to $37,200,000
cuted an agreement with underwriters and
issued $35,000,000 of the bonds, received pay-
ments from subscribers, which were deposit-
ed in a special account with the Guaranty
Trust Company of New York, paid the ex-
penses of the issue from the special account
and made provision for the accrued interest
payable upon the bonds. It also paid the in-
terest on $15,000,000 of bonds outstanding un-
der an earlier pledge. During the same time
stockholders' and directors' meetings were
held, directors and officers were chosen, cor-
porate books and accounting records were
kept, and such other acts were done and ex-
penses paid as were necessary to keep up
the corporate existence. An office was main-
tained for the activities described. The
plaintiff owned and voted on the stock of
the Exploration Company, and elected its di-
rectors, and made advances to it from the
proceeds of the bonds issued in 1917, the
Guaranty Trust Company being directed aft-
er payment of certain matters not to pay
checks drawn upon the special account un-
less accompanied by a letter from the plain-
tiff stating that the proceeds would be used
for specified purposes connected with the de-
velopment of the mines. The plaintiff agreed
to furnish and did furnish the Guaranty
Company statements showing that the pro-
ceeds had been so applied. During the six
months mentioned the sum of $1,250,000 was
advanced to the Exploration Company, and

*455

*interest upon loans and a part of the bond discount paid by it to the plaintiff and payments on account of a dividend also were made.

The activities for succeeding years were similar, advances to the Exploration Company being made each year. The plaintiff had funds received from the issue of bonds in 1917, in excess of the amounts that it thought proper to advance during the given period to the Exploration Company. A part of these it invested in Liberty Bonds, but the greater part, which it had deposited with the Guaranty Trust Company and the Central Union Trust Company, it authorized those companies to lend on call in the plaintiff's name and at its risk, taking security. If the security was not satisfactory the plaintiff directed the Trust Company to call the loan. During the year ending June 30,

*456

tivities and situation must be judged as a
whole. Looking at them as a whole we see
that the plaintiff was a good deal more than
a mere conduit for the Chile Exploration
Company. It was its brain or at least the
efferent nerve without which that company
could not move. The plaintiff owned and by
indirection governed it, and was its continu-
ing support, by advances from time to time
in the plaintiff's discretion. There was some
suggestion that there was only one business
and therefore ought to be only one tax.
if the one business could not be carried on
without two corporations taking part in it,
each must pay, by the plain words of the
Act. The case is not governed by McCoach
v. Minehill & Schuylkill Haven R. Co., 33 S.
Ct. 419, 228 U. S. 295, 57 L. Ed. 842, and
United States v. Emery, Bird, Thayer Realty
Co., 35 S. Ct. 499, 237 U. S. 28, 59 L. Ed.
825. It is nearer to Von Baumbach v. Sar-
gent Land Co., 37 S. Ct. 201, 242 U. S. 503,
61 L. Ed. 460.

Judgment reversed.

But

Mr. Justice SUTHERLAND took no part in the decision of this case.

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