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Now that Congress has directed the railroads to abandon the coal business, in so far as it relates to interstate commerce, can they justly complain, in view of the fact that they have carried it on for more than thirty years in direct violation of the Constitution of Pennsylvania, and the laws of the Commonwealth? Is it “commercial lynch law” on the part of the government to prohibit the practice, or is it not rather * commercial lynch law on the part of the carrier to continue the business in defiance of law?
COAL PROPERTIES CONTROLLED BY CARRIERS. The anthracite coal properties of the carriers in Pennsylvania are exceedingly valuable, worth hundreds of millions of dollars. In order to obey the law, therefore, the railroads must shift the ownership of these properties, let go the profits of the business, the control of the coal trade, and the power to control the output of the mines, and the price to the consumer. Will this change work legal injustice ? On the contrary, the carriers and their stockholders will be benefitted, because the railroads will continue to carry the coal as they always did, but they will get the tariff rates of freight on every ton transported, and this will inure to the benefit of the stockholders, because the rebates which formerly found their
way into the pockets of the subsidiary companies, controlled by the carriers, being no longer diverted, will flow directly into the treasury of the railroad company and will inaterially increase the earnings of the carrier. The merchant can once more engage in the coal business, because his principal rival and competitor, the railroad, acting in the
1 Their value can be estimated by reference to the amount of bond-, stock and certificates of indebtedness issued by the holding companies, having custody of the various properties held by them as representativez of the carriers. The Philadelphia North American, in July, 1906, pub. lished a summary of these values, as follows: The Reading, represented by the Philadelphia & Reading
Coal & Iron Co.:
$8,000,000 Sinking fund loan
1,320,000 Reading Co, advance
CONTROL OF COAL PROPERTIES.
interest of its subordinate corporations, can no longer destroy his business by discriminating against him, either as to rates, or as to furnishing cars, or as to the use of terminal facilities. The net result will benefit the stockholder of the carrier by directly increasing its earning capacity. It will benefit the public and the consumer by destroying the coal monopoly. It will open the entire field of mining and selling coal to any capitalist or operator who may choose to engage in the business; develop new properties, and open new mines and new industries, and give the commercial world an impetus not dreamed of under present conditions.
The value of these coal lands, however, is too great to permit of the presumption that the carrier will divorce absolutely the business of carrier from that of miner and dealer, until they have received from the Supreme Court of the United States an interpretation of the statute.
Some may seek to accomplish indirectly that which they cannot The Lehigh Valley, represented by Cox Brothers & Co.: Purchase-money bonds
$19,000,000 Lehigh Valley Coal Co. stock
1,965,000 Lehigh Valley Coal Co. bonds
12,968,000 Lehigh Valley Coal Co. certificates of indebtedness to railroad company
The Erie, represented by Pennsylvania Coal properties,
cost Hillsdale Coal & Iron Co., stock Blossburg Coal Co., stock
The New Jersey Central, represented by Lehigh & Wilkes
barre Coal Co.: Capital stock of holding company Lehigh & Wilkesbarre Coal Co., bonds
The Delaware & Lackawanna R. R. owns directly its coal
companies, claims right under its charter: Estimated value of Anthracite properties
The Delaware & Hudson, claims same as Lackawanna:
Estimated value of unmined coal
$15,100,000 The Ontario & Western:
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.
Elk Hill Coal & Iron 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.
1 Northern Securities Co. v. United States, 193 U. S. 197.
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.