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New York Central Securities Corp. v. United States, 287 U.S. 12 (1932)

New York Central Securities Corporation v. United States

No. 5

Argued October 14, 17, 1932

Decided November 7, 1932

287 U.S. 12


1. Subdivision (2) of § 5 of the Transportation Act empowers the Interstate Commerce Commission, when of the opinion that acquisition by one carrier of control of another,

"either under a lease or by the purchase of stock or in any other manner not involving the consolidation of such carriers into a single system for ownership and operation,"

will be in the public interest, to authorize such acquisition, on such terms and conditions as the Commission finds to be just and reasonable, etc. Subdivision (6) of the same section permits carriers, with the approval of the Commission,

"to consolidate their properties or any part thereof into one corporation for the ownership, management, and operation of the properties theretofore in separate ownership, management, and operation,"

upon the condition (among others) that the consolidation must be in harmony with the complete plan, to be adopted by the Commission under subdivisions (4) and (5), for consolidation of the railway properties of the United States into a limited number of systems.


(1) Under subdivision (2), the Commission may authorize a carrier that already controls others by stock ownership to have control also by lease for the purpose of securing greater economy and efficiency of operation. The disjunctive phrasing, "either under a lease or by purchase of stock" does not mean that one method must be exclusive of the other. Pp. 287 U. S. 22-23.

(2) The extent of control allowable by the Commission under subdivision (2), short of "consolidation," is tested by its relation to the public interest. That interest is served by economy and efficiency in operation. P. 287 U. S. 23.

(3) A consolidation within the meaning of subdivision (2) is one for ownership, as well as operation. The acquisition proposed in this case was not such a consolidation. Id.

(4) Whether the authority to lease in this case would interfere with the plans of the Commission for consolidation of carriers was an administrative question for the Commission to decide. P. 287 U. S. 24.

Page 287 U. S. 13

(5) "Public interest," the criterion of the Commission's authority under subdivision (2), is not the public welfare in general, but the public interest in the adequate transportation service sought to be secured by the Act. Objection that the delegation of authority is invalid for lack of definition is not tenable. P. 287 U. S. 24.

(6) Congress had power to foster interstate commerce by removing the restrictions of the antitrust laws as respects the control by one carrier of the parallel and competing line of another, and to permit such control in aid of the purposes of the Transportation Act, as provided by subdivisions (2) and (8) of § 5 thereof. P. 287 U. S. 25.

(7) An order of the Commission permitting a lease under subdivision (2) is permissive, not mandatory, and the question whether the lease so authorized is beyond the powers of the carriers because of the laws of the states of incorporation relating to leasing of competing lines, minimum rentals, and security for payment and preservation of property, is not a question which the Commission is required to decide or which can be raised in a suit to set aside its order. P. 287 U. S. 26.

(8) The authority of the Commission to impose conditions was not restricted to conditions favored by the carriers, and was not overstepped in this case by a condition that the lessee acquire certain short lines that were complementary to its railway system. P. 287 U. S. 28.

2. By § 20(a) of the Transportation Act, a carrier is forbidden to assume any liability, as lessor, lessee, or otherwise in respect of the securities of another unless, and only to the extent that, the Commission authorizes, and the Commission may make such order only (among other conditions) when it finds that such assumption

"is for some lawful object within its corporate purposes, and compatible with the public interest, which is . . . consistent with the proper performance by the carrier of service to the public as a common carrier, and which will not impair its ability to perform that service."

Subdivision (7) declares that the jurisdiction conferred upon the Commission by the section shall be exclusive and plenary, and that a carrier may assume obligations in accordance with the provisions of the section without securing approval otherwise than as specified therein.


(1) That the requirement that the assumption be "for some lawful object within its corporate purposes" refers not to state limitations upon corporate powers, but to the general field of corporate purposes. P. 287 U. S. 27.

Page 287 U. S. 14

(2) That the Commission need not determine whether there has been compliance with state requirements and the question whether the assumption permitted by its order is contrary to state law could not be raised in a suit to set its order aside. Id.

3. In a suit under U.S.C. Title 28, § 47 ("Urgent Deficiencies Act") to set aside an order of the Interstate Commerce Commission permitting a carrier to acquire control by lease of the railway of another company, questions as to whether the lessee, as majority stockholder of the lessor company, failed in its fiduciary duty to the plaintiff, as a minority stockholder, held not properly raised in the trial court or open to review on appeal. P. 287 U. S. 28.

4. An order of the Commission permitting a lease under § 5(2) will not be set aside upon objections going to the adequacy of the rentals and the propriety of the lease where the parties were fully heard by the Commission and where there is no basis for contending that the order was not adequately supported by evidence, or that it had any confiscatory effect. P. 287 U. S. 29.

54 F.2d 122 affirmed.

Appeal from a decree of the District Court of three judges dismissing a bill to set aside orders of the Interstate Commerce Commission. One of the orders authorized the New York Central Railroad Company to acquire control by lease of the railroad systems of the "Big Four" and Michigan Central companies; another permitted the lessee to assume obligation and liability in respect of certain securities of the lessors. The plaintiff corporation was a minority stockholder in each of the three railroad companies.

Page 287 U. S. 19

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