APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF GEORGIA.
Hughes, Holmes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
In this suit, brought in the federal court for northern Georgia, under the Urgent Deficiencies Act, October 22, 1913, c. 32, 38 Stat. 208, 219, the Atlanta, Birmingham & Coast Railroad Company seeks by supplemental bill to enjoin and annul an alleged order of the Interstate Commerce Commission dated October 9, 1929. No formal order was made. Reorganization and Control of Atlanta, Birmingham & Atlantic Ry. Co., 158 I. C. C. 6, 14. The
action challenged as an illegal order is the following passage of the Commission's report of that date concerning entries in the carrier's books of account:
"Upon consideration of the record, as supplemented, we find and conclude that the amount to be included in the balance sheet statement of the new company representing investment in road and equipment as of January 1, 1927, may not exceed $9,261,043.87. The company will be expected to adjust its accounts in accordance with this finding within 60 days from service of this report."
The United States and the Commission contended that the bill should be dismissed for want of jurisdiction, among other reasons, because the action complained of is not an order within the meaning of the Urgent Deficiencies Act. The District Court, three judges sitting, overruled that objection; heard the case on the merits; and entered a final decree which declared that the action of the Commission "in so far as the same fixes the amount at which the Complainant is to return its capital stock and its investment in road and equipment, be set aside . . . and that the supplemental application of the complainant on which said order was entered by the Interstate Commerce Commission stand for further hearing before said commission." 37 F.2d 401. The defendants appealed to this Court.
The Atlanta, Birmingham & Coast Railroad Company was incorporated in 1926 by the bondholders of the Atlanta, Birmingham & Atlantic Railway Company to take over upon foreclosure the property of the latter, consisting of 640 miles of line in Alabama and Georgia. The enterprise had been peculiarly disastrous to investors. Following long years of receivership with annual operating deficits there had been in 1915 a reorganization in which $35,000,000 in stocks and $14,500,000 in bonds were wiped out. Compare Valuation of Atlanta, Birmingham Page 525} & Atlantic R. Co., 75 I. C. C. 645, 703. By the reorganization of 1926, $30,000,000 more of stock was wiped out and the holders of the $8,600,000 bonds then outstanding received for them only 60 per cent of their face value in 5 per cent preferred stock of the new company. The 1926 reorganization was effected pursuant to an agreement between the bondholders' committee and the Atlantic Coast Line Railroad, under which the committee purchased at foreclosure sale all the property; transferred the same to the new company in exchange for all of its stock, being $5,180,344.07 redeemable preferred and 150,000 shares no-par common; transferred the common stock to the Atlantic Coast Line in consideration of its extinguishing the prior liens on the property, aggregating $4,080,699.80, and guaranteeing the preferred stock; and distributed the preferred stock among the bondholders. Thus, the Atlantic Coast Line acquired for $4,080,699.80 in cash and its guaranty of the preferred stock, complete ownership of the property subject only to the $5,180,344.07 redeemable preferred stock. These two sums aggregate $9,261,043.87 -- the sum set forth in the passage of the report of October 9, 1929, which is challenged as an order.
The order of the Commission dated December 21, 1926, which authorized the new company to issue the preferred and common stock (117 I. C. C. 181, 439, 443), and thus made possible the 1926 reorganization, contained this provision:
" Provided, however, that authority to issue said stock is granted upon the express condition, that, for the purposes of the accounting, as provided in the classification of investment in road and equipment in the text of account 41, 'Cost of road purchased,' the cash value of the preferred stock issued must, in ...