Page images

lawfully do directly. The language of the prohibition is that the carrier shall not have any interest in business other than that of carrier, either “direct or indirect.” How far the language of ancient charters will serve in this connection remains to be seen. If a holding company is formed to take over the coal properties of the carrier, will the transaction be held to be within the statute, as was the case of the holding company, which was resorted to, as a device to evade the provisions of the Sherman Act, in the Northern Securities case." That transaction was an attempt to consolidate the property of carriers, to be operated by carriers.

Some of the carriers have declared that they purposed to abandon the business of miner and dealer in coal. In July, 1906, a corporation was organized with a capital of $8,000,000, known as the Pennsylvania, Beech Creek and Eastern Coal Company. This company was created for the purpose of mining and selling bituminous coal. It has negotiated for the control of a number of properties heretofore operated in the interest of the carriers, and has acquired, under a 999 year lease, mining properties from the Pennsylvania Coal and Coke Company, the Webster Coal and Coke Company, and the North River Coal and Wharf Company.

The Ontario & Western:

Elk Hill Coal & Iron Co. bonds
Scranton Coal Co. bonds



The Lehigh Coal & Navigation Company claims an investment in anthracite property of


Valued on basis of Delaware & Hudson basis, the value of

the investment would be $35,000,000; on Reading basis,

the value would be about half that amount.
The Pennsylvania R. R. Co., represented by Susquehanna

Coal Co.:
Susquehanna Coal Co, stock
Susquehanna Coal Co. bonds
Manor Hill, real estate, stock and bonds.
Stock of other minor companies




1 Northern Securities Co. v. United States, 193 U. S. 197.

[merged small][ocr errors]

POWER OF VISITATION AND SUPERVISION. Of far-reaching importance also are the amendments to section 20 of the Commerce Act. If the requirements of this section, as amended, are faithfully complied with, evidence as to how the business of the carrier is conducted, the amount of its gross earnings, and its net earnings, the detail of its receipts and expenditures, in what manner soever received or incurred, will be preserved in convenient form, readily accessible to the government as well as to the stockholder and the general public. These details and official data, including reports of all accidents, are required to be put in the form of reports, which, when filed, become official documents and may be used in evidence in any Federal court.

In requiring the carrier to furnish these minute details of all interstate business the government exercises the power to visit the corporation engaged in such business, which power is inherent in the sovereign and has always existed among civilized nations. Speaking of this power, Sir WilLIAM BLACKSTONE, the most distinguished commentator of the common law of England, observes that “the general duties of all bodies politic, considered in their corporate capacity, may, like those of natural persons be reduced to this single one, that of acting up to the end or design, whatever it be, for which they were created by their founder.”

In this terse sentence BLACKSTONE has admirably stated the reason and philosophy which underlies the rule of law giving to the founder of every corporation power to visit it. Corporations, though artificial bodies, are composed of individuals, and like individuals are subject to human frailties and are liable to abuse their powers and franchises and deviate from the performance of those duties with which they have been entrusted, and in the exercise of which carrying corporations exercise the attributes of sovereignty. The sovereign, therefore, as founder has wisely provided proper persons to visit, inquire into, and correct all irregularities that arise, and for which the corporation is responsible.

At the common law the king was the founder of all civil corporations, and his prerogative in regard to the power of visitation was exercised through his majesty's Court of King's Bench. The power of visitation includes the right to inflict the extreme penalty of civil death upon the corporation by a decree dissolving it. Forfeiture of a corporate charter might be for negligence or abuse of its franchises in which cases the law judges that the body politic has broken the condition upon which it was incorporated.” The same principle applies in the United States to corporations created by an act of the Legislature. Of these the founder is the Commonwealth.

Strictly speaking the Federal government is not the founder of corporations chartered under State laws. Few of them have Federal charters. But the fact that a carrying company

receives its franchise from the State is not material because, when the carrier assumes to exercise its franchise in connection with interstate commerce, it can do so only in subordination to the power of Congress to regulate such commerce. The carrier when doing interstate business becomes subject to a dual sovereignty, and the Federal government possesses the same right to compel obedience to Federal laws, as the State has to enforce obedience to its laws with respect to domestic or internal commerce, within the borders of the State. The power of the Federal government in respect to an act of Congress relating to interstate commerce is supreme, and may be exercised as if the corporation were chartered by Federal authority.

The power of Congress, therefore, to regulate interstate commerce includes the power to create a body with inquisitorial powers which are analogous to the power of visitation exercised in England by the crown through the Court of King's Bench as founder of all corporations receiving char

1 Canal Co. v. Railroad Co., 4 Gill & Johns.

2 The Union Pacific Railroad received aid and grants of land from the United States. Congress has declared that the books, records, and correspondence, and all other documents of the company “shall at all times be open to inspection by the Secretary of the Treasury, or such persons as he may delegate ” and has forbidden the company to declare dividends other than from net earnings, or to issue new stock or securities of any kind without leave of Congress, except to fund its debt then existing. U. S. Rev. Stat., Sec. 5256, Act March 3, 1873, Chap. 226, Sec. 4.

[blocks in formation]

ters from the king or the Parliament. In the case of national banks, this power is conferred upon the banking department and is exercised through the bank examiner. As to carriers the power is vested in the Interstate Commerce Commission supplemented by the aid of the Bureau of Corporations in the Department of Commerce and Labor.


Under section 20 of the Commerce Act the Commission has power to prescribe the form of all accounts, records, and memoranda to be kept by carriers, including details as to the movement of traffic and of all receipts and expenditures. The carrier is forbidden to keep any accounts other than those prescribed by the Commission. False entries in books and records, the mutilation of books or records, falsification of any records, failure to keep true and correct books or correct entries, or to keep books or accounts other than those prescribed by the Commission, or a refusal to submit them to the examiner for inspection is declared to be a misdemeanor. The Commission may employ special agents or examiners, to examine all records of the carrier, with power to administer oaths, examine witnesses, and receive evidence.

The primary objects of the Commerce Act, as has been observed, is to abolish rebates, false billing, false weights, false classification of freights, and all sorts of discrimination. The object of requiring but one set of books was to render accessible evidence of any violations of law in this respect, upon the theory that with all books open to the inspection of a government expert examiner, it would be wellnigh impossible to conceal such violations, as a record of every transaction must be kept; and to alter, mutilate, or conceal any entry is declared to be a crime.

The carrier, in the absence of these requirements, might be able to baffle an investigation of its affairs through an ingenious system of bookkeeping. What part of the disbursements of the carrier should be charged to capital account? How is the stockholder to know, or how is the shipper to know, or how is the Commission to know what constitutes a reasonable rate for freight charges, if income which should be used for operating expenses is used for something else? Expenses which should be charged to capital account might be charged to operating expenses, or might be credited to a fund used to liquidate damage suits incurred by the carrier in killing and maiming passengers and employees, for thousands are killed and maimed by the carrier every year.

The bookkeeping problem also bears directly upon the accuracy of schedules of rates and charges, required to be kept and posted, so that rebates cannot be hidden by manipulating these schedules, as has been done frequently and successfully. Mr. ALPHEUS B. STICKNEY, President of the Chicago and Great Western railroad, is perhaps as well qualified as any one to enlighten the public on this phase of the railroad problem. Mr. STICKNEY heartily approves of a rigid compliance with the requirements of the Commerce Act in this regard.

“In order to furnish this information,” says Mr. STICKNEY, “the tariffs must be published in such a way that a man of ordinary understanding can tell what the rate is. Now the tariffs are published in a private cipher, which no one save the expert clerk who has immediate charge of this business can understand. The tariff managers and the freight agents cannot find the rates in their tariffs. Every officer must have what is called a tariff clerk who keeps track of the tariff amendments, and when it is desired to know what the rate is, he is called upon for information.

“As an illustration, suppose a tariff is made upon a certain commodity. The tariff is modified by an amendment. Another amendment may follow. Then a circular will be issued which further modifies the rate. Thus the stream of schedules grows in volume until there are more than 2,500,000 tariffs filed in the office of the Interstate Commerce Commission.

“An example of the effect of the modification of tariffs is found in the way in which the Standard Oil Company secured lower rates for its shipments from Whiting, Ind., to East St. Louis, than did its independent competitors. The

« PreviousContinue »