US SUPREME COURT DECISIONS

A plan of reorganization of an insolvent railroad company provided for participation by stockholders of the old company through an exchange of their shares, plus a cash payment, for securities of the new company. Part of the proceeds of payments made by stockholders under this arrangement went into a separate fund representing $4 per share of the old stock. Of this sum, an amount equivalent to $1.50 per share was set aside as a special fund to provide for the compensation of the reorganization managers and committees, chanrobles.com-red

Page 282 U. S. 312

etc., it being specially provided that any balance remaining was to be paid over to the new company as additional working capital or returned pro rata to the holders of certificates of deposit for stock, in the discretion of the reorganization managers. Neither the old company nor the new one was a party or was privy to this contract. The remainder of the $4 fund -- that is, $2.50 per share -- was to be appropriated to defraying the expenses and costs of foreclosure and other charges in connection with the acquisition of the properties of the old company by the new, and any balance remaining was to be paid over to the new company. The Interstate Commerce Commission, after hearing, issued a certificate of convenience and necessity, and entered an order, under § 20a of the Transportation Act, authorizing the issuance of securities by the new company, with the proviso, however,

"that the applicant . . . (b) shall impound in a separate fund the money received from the payment by holders of preferred and common stock in an amount equal to $4 a share, which shall not be paid out unless and until so authorized by order of the court in respect to payments subject to the court's jurisdiction or by this Commission."

The present suit was brought to have the foregoing clause (b) of the order declared void, and to enjoin its enforcement.

Held:

1. The terms of the proviso embrace, and were meant to embrace, the entire fund of $4 per share, including the special fund of $1.50. P. 282 U. S. 323.

2. The Commission was without power to impose the condition of clause (b) of the proviso, insofar as the $1.50 fund was concerned, and its action in respect thereto was an interference with private property and rights lying outside the field of federal jurisdiction. The contract in respect of that fund was not one in respect of commerce, but involved a transaction distinct and complete in itself, without regard to its results, and, whether succeeded by commerce or not. was no part of it. Pp. 282 U. S. 324, 282 U. S. 326.

3. The power of the federal government to regulate commerce is not absolute, but is subject to the limitations and guarantees of the Constitution, among which are those providing that private property shall not be taken for public use without just compensation, and that no person shall be deprived of life, liberty or property without due process of law. P. 282 U. S. 327.

4. The principle that the right to continue the exercise of a privilege granted by the state cannot be made to depend upon the grantee's submission to a condition prescribed by the state which is hostile to the provisions of the federal Constitution chanrobles.com-red

Page 282 U. S. 313

is applicable to the order of the Commission here involved. The order in itself, being complete and self-sustaining and resting upon grounds found to be sufficient to support it, cannot be made to depend upon submission to a collateral condition which is beyond the statutory and constitutional power of the Commission to impose. Pp. 282 U. S. 328-329.

5. The condition in respect of the special fund of $1.50 per share was properly set aside, and its enforcement enjoined by the court below. P. 282 U. S. 331.

33 F.2d 582 affirmed.

Appeal from a decree of the district court setting aside and enjoining enforcement of part of an order of the Interstate Commerce Commission, 131 I.C.C. 673. chanrobles.com-red

Page 282 U. S. 318