UNITED STATES REPORTS VOLUME 297 CASES ADJUDGED IN THE SUPREME COURT AT OCTOBER TERM, 1935 From January 6, 1936 (Concluded), to and Including March 30, 1936 ERNEST KNAEBEL REPORTER united states GOVERNMENT PRINTING OFFICE WASHINGTON : 1936 For sale by the Superintendent of Documents, Washington, D. C. - Price $2.00 (Buckram) Erratum.—296 U. S. 609, line 4, “770” should read “270” JUSTICES OF THE SUPREME COURT DURING THE TIME OF THESE REPORTS 1 CHARLES EVANS HUGHES, Chief Justice. WILLIS VAN DEVANTER, Associate Justice. JAMES CLARK McREYNOLDS, Associate Justice. LOUIS D. BRANDEIS, Associate Justice. GEORGE SUTHERLAND, Associate Justice. PIERCE BUTLER, Associate Justice. HARLAN FISKE STONE, Associate Justice. OWEN J. ROBERTS, Associate Justice. BENJAMIN N. CARDOZO, Associate Justice. HOMER S. CUMMINGS, Attorney General. STANLEY REED, Solicitor General. CHARLES ELMORE CROPLEY, Clerk. FRANK KEY GREEN, Marshall. 1 For allotment of the Chief Justice and Associate Justices among the several circuits, see next page. m SUPREME COURT OF THE UNITED STATES Allotment of Justices It is ordered, That the following allotment be made of the Chief Justice and Associate Justices of this Court among the circuits, agreeably to the acts of Congress in such case made and provided, and that such allotment be entered of record, viz: For the First Circuit, Louis Dembitz Brandeis, Associate Justice. For the Second Circuit, Harlan Fiske Stone, Associate Justice. For the Third Circuit, Owen J. Roberts, Associate Justice. For the Fourth Circuit, Charles Evans Hughes, Chief Justice. For the Fifth Circuit, Benjamin N. Cardozo, Associate Justice. For the Sixth Circuit, James C. McReynolds, Associate Justice. For the Seventh Circuit, Willis Van Devanter, Associate Justice. For the Eighth Circuit, Pierce Butler, Associate Justice. For the Ninth Circuit, George Sutherland, Associate Justice. For the Tenth Circuit, Willis Van Devanter, Associate Justice. March 28, 1932. IV TABLE OF CASES REPORTED Page. AAA Case................................... 1 Acme Homestead Assn., Treigle v....... 189, 728 Aetna Insurance Co. v. Atlantic Coast Line R. Co.... 704 Alford v. Cornell....................... 708,728 Allen v. Cloisters Building Corp......... 727 Alton R. Co. v. Industrial Commission.... 715 Aluminum Products Co., Mantle Lamp Co. v....... 638 American Press Co., Grosjean v................... 233 American State Savings Bank, Lansing Drop Forge Co. v697 American Steel Foundries, Hunt v......... 707 Andersen, E. K. Wood Lumber Co. v........ 723 Anderson, Lawyers Mortgage Co. v................ 719 Anderson v. St. Louis Coke & Iron Corp... 727 Anelich, The Arizona v................... 701 Archbishop of Manila, Trinidad v................. 712 Arizona v. California.................... 699 Arizona, The, v. Anelich................. 701 Arkansas v. Tennessee.................... 693 Ashland Refining Co. v. Fox.............. 381 Ashwander v. Tennessee Valley Authority. 288, 728 Asiatic Petroleum Co. v. Insular Collector of Customs.... •....................... 666, 700 Atchison, T. & S. F. Ry. Co., Tipton v... 700 Atkinson, United States v................ 157 Atlantic Coast Line R. Co., Aetna Insurance Co. v.. 704 Baker, In re..................... . 691 Baltimore National Bank v. State Tax Comm’n. 209 Baltimore & Ohio R. Co. v. United States. 695 Banking & Trust Co., Shepherd v.. 717 Basford v: Standard Shipping Co.......... 706 v VI TABLE OF CASES REPORTED. Page. Baton Rouge Rice Mill v. Fontenot....... 110,694, 727 Bayside Fish Flour Co. v. Gentry............... 422 Beadle.v. Spencer.............................. 701 Beck, Kansas ex rel., Wichita Association of Credit Men v........................................ 711 Benton v. United States........................ 705 Bernitz Furnace Appliance Co., Wilson v........ 703 Berthold-Jennings Lumber Co. v. St. Louis, I. M. & S. Ry. Co.................................... 715 Bimbo v. United States......................... 721 Bingaman v. Golden Eagle Western Lines......... 626 Bishop v. St. Joseph-Chicago S. S. Co.......... 703 Blackwell, Southeastern Brewing Co. v.......... 717 Bliss v. Bliss................................. 715 Bliss, Bliss v................................ 715 Blume v. United States......................... 722 Borden’s Farm Products Co. v. Ten Eyck......... 251 Boston & Maine Railroad, Breslin v............. 715 Bowers, Title Guarantee & Trust Co. v.......... 720 Bradford, Commonwealth Trust Co. v............. 613 Breslin v. Boston & Maine Railroad............. 715 Brink v. Callahan.............................. 725 Bronx Brass Foundry v. Irving Trust Co......... 230 Brown, Ex parte................................ 694 Brown v. Mississippi........................... 278 Brown, Palmer Clay Products Co. v.............. 227 Bruce v. Globe Indemnity Co.................... 716 Burco, Inc. v. Whitworth..............:........ 724 Butler, United States v.......................... 1 Cahn v. United States.......................... 691 Calf Leather Tanners’ Assn. v. Morgenthau....... 718 California, Arizona v............................ 699 California, Kristy v........................... 712 California, United States v.................... 175 California Board of Equalization, Matson Navigation Co. v...................iy...... ............ 441 Callaghan v. Reconstruction Finance Corp....... 464 TABLE OF CASES REPORTED. VII Page. Callahan, Brink v.............................. 725 Callahan, General Outdoor Advertising Co. v....... 725 Carpenter v. White............................. 720 Carroll, Wilson v............................... 707 Central Kentucky Gas Co., Wright v............. 537 Certain Lands in Louisville, United States v.... 726 Chandler v. Peketz............................. 609 Chicago Great Western R. Co v. Rambo........... 701 Chicago & N. W. Ry. Co., Mathy v............ 702, 727 Chicago, R. I. & G. Ry. Co., Richardson v...... 727 Cinema Supplies, Inc., v. Western Electric Co... 717 Claris, Oregon Short Line R. Co. v............. 714 Clarke, United States v......................... 726 Cloisters Building Corp., Allen v.................. 727 Coast Property Corp., Minton v............. 704, 727 Cole v. Norristown-Penn Trust Co............... 723 Cole, Norristown-Penn Trust Co. v............... 723 Collier Service Corp. v. Commissioner...... 129, 728 Colorado National Bank, Newton v. . 719 Commissioner, Collier Service Corp, v...... 129, 728 Commissioner, Great Western Power Co. v......... 543 Commissioner, Manhattan General Equipment Co. v.................................... 129,728 Commissioner, Scranton-Lackawanna Trust Co. v.. 723 Commonwealth Trust Co. v. Bradford............. 613 Compania de Inversiones v. Industrial Mortgage Bank...................................... 705 Conservative Homestead Assn., Mitchell v.... 189, 728 Conservative Homestead Assn., Treigle Sash Fac- tory v ................................ J.. 189, 728 Cooley, New York Central R. Co. v.............. 721 Cornell, Alford v........................... 708, 728 Coxey, Helvering v............................. 694 Cutten, Wallace v.............................. 701 Daniel, South Carolina ex rel., Jno. P. Nutt Co. v.. 724 Decatur, Georgia Railway & Electric Co. v....... 620 Delaware, L. & W. R. Co. v. Industrial Board.... 707 VIII TABLE OF CASES REPORTED. Page. Depew, Wichita Association of Credit Men v....... 710 Deppe, In re..................................... 692 Detroit Trust Co., Gause v...................... 695 Dismuke v. United States.................... 167, 728 Dixie Margarine Co. v. United States........... 713 Dore v. Fontenot......................... 110,694,726 Driscoll v. United States........................ 719 Duke, Ex parte................................... 693 Duparquet Huot & Moneuse Co. v. Evans............ 216 Duplate Corporation v. Triplex Safety Glass Co.;. 702 E. K. Wood Lumber Co. v. Andersen................ 723 Electric Boat Co. v. United States............... 710 Emrich v. Erickson............................... 709 Enterprise Ry. Equipment Co., Wine Ry. Appliance Co. v.......................................... 387 Erickson, Emrich v.............................. 709 Evans, Duparquet Huot & Moneuse Co. v............ 216 Ex parte. See name of party. Farmer v. United States.......................... 711 Farmers Rice Milling Co. v. Fontenot.... 110, 694, 727 Fidelity & Deposit Co., Prudence Co. v............ 198 First Carolinas Joint Stock Land Bank, Knotts v... 706 Fisher’s Blend Station v. State Tax Comm’n....... 650 Florida, Jones v.........................■....... 717 Fontenot, Baton Rouge Rice Mill v...... 110, 694, 727 Fontenot, Dore v....................... 110,694,726 Fontenot, Farmers Rice Milling Co. v.... 110, 694, 727 Fontenot, Levy Rice Milling Co. v...... 110,694,727 Fontenot, Noble-Trotter Rice Milling Co. v. 110, 694, 727 Fontenot, Rickert Rice Mills v.......... 110, 694,726 Fontenot, Simon v. .i.................. 110, 694, 727 Fontenot, United Rice Co. v............ 110,694,727 Fourchy v. United States......................... 712 Fourth National Bank v. Gainesville National Bank. 720 Fox, Ashland Refining Co. v..................... 381 TABLE OF CASES REPORTED. IX Page. Fox, Gulf Refining Co. v..................... 1. Z. 381 Fradkin v. United States....................... 720 Freeman, Lee v.............................. i. 722 Fretwell v. Gillette Safety Razor Co........... 704 Gainesville National Bank, Fourth National Bank v. 720 Galatas v. United States....................... 711 Galveston v. United States..................... 712 Gause v. Detroit Trust Co...................... 695 General Fireproofing Co., Remington Rand, Inc. v.. 709 General Outdoor Advertising Co. v. Callahan...... 725 General Outdoor Advertising Co. v. Hoar........ 725 Gentry, Bayside Fish Flour Co. v................. 422 Georgia v. Morgenthau...................... 694, 726 Georgia Railway & Electric Co. v. Decatur........ 620 Gibbons, Ex parteZ.............................. 697 Gillette Safety Razor Co., Fretwell v.......... 704 Gillis v. Welch.............................. ?. 722 Gleckman v. United States...................... 709 Globe Indemnity Co., Bruce v.................. 716 Golden Eagle Western Lines, Bingaman v......... 626 Gooch v. United States......................... 124 Grace, Violet Trapping Co. v................... 119 Grand Trunk Western R. Co. v. H. W. Nelson Co... 717 Great Northern Ry. Co. v. Washington........... 403 Great Northern Ry. Co. v. Weeks................ 135 Great Western Power Co. v. Commissioner........ 543 Grosjean v. American Press Co.................. 233 Grosjean v. Texas Company...................... 697 Gulf Refining Co. v. Fox....................... 381 Gustin v. Worthington Mower Co................. 725 Hanson, Ingraham v............................. 378 Harris, Tuttle v............................... 225 Hastings, Village of, Jewish Mental Health Society v............................................ 696 Hauptmann, Ex parte................... i.... . Z. 693 Havemeyer, Public Service Comm’n v............. 727 X TABLE OF CASES REPORTED. Page. H. & B. American Machine Co., United States v. 726 Hector v. Smith........................... 708 Helvering v. Coxey........................ 694 Helvering, Koshland v.......................... 702 Helvering v. Salvage...................... 106 Helvering, Salvage v...................... 106 Helvering v. San Joaquin Fruit & Investment Co.................................. 496,728 Helvering v. Stevens...................... 693 Higgins v. Oklahoma City.................. 481 Hines v. Stein............................ 700 Hirschfeld, McKinley v.................... 703 Hoar, General Outdoor Advertising Co. v.......... 725 . Hogue v. Wise......................... 709,728 Hoosac Mills Case........................... 1 Hunt v. American Steel Foundries.......... 707 H. W. Nelson Co., Grand Trunk Western R. Co. v... 717 Ickes, U. S. ex rel. Pattison v..................... 713 Illinois Brick Co., Pennsylvania R. Co. v. 447,728 Industrial Board, Delaware, L. & W. R. Co. v.. 7WI Industrial Commission, Alton R. Co. v..... 715 Industrial Mortgage Bank, Compania de Inversiones v.........705 Ingraham v. Hanson........................ 378 In re. See name of party. Insular Collector of Customs, Asiatic Petroleum Co. v................................. 666,700 International Steel & Iron Co. v. National Surety Co. 657 Irving Trust Co., Bronx Brass Foundry v....230 Jefferson Island Salt Mining Co. v. Louisiana.. 716, 729 Jenkins, Phillips Petroleum Co. v................ 629 Jewish Mental Health Society v. Village of Hastings. 696 John E. Moore Co. v. Pan American Petroleum & T. Co................................... 708 Jno. P. Nutt Co. v. South Carolina ex rel. Daniel.. 724 Jones v. Florida.......................... 717 TABLE OF CASES REPORTED. XI Page. Jones v. Securities & Exchange Comm’n...... 699, 705 Kansas ex rel. Beck, Wichita Association of Credit Men v..................................... 711 Kattehnan, Ex parte............................. 692 Kenmore Granville Hotel Co., Meyer v...... 160,727 Knott, United States v.......................... 700 Knott, Withers v............. .................. 706 Knotts v. First Carolinas Joint Stock Land Bank.. 706 Koshland v. Helvering...................*....... 702 Kristy v. California............................ 712 Kyle, Pennsylvania ex rel. Margiotti v.......... 704 Lambs, The, v. United States.................... 713 Lansing Drop Forge Co. v. American State Savings Bank.......................................... 697 Lawyers Mortgage Co. v. Anderson............... 719 Layton, United States v......................... 725 Leahy v. State Treasurer........................ 420 Lee v. Freeman.................................. 722 Legg v. St. John................................ 695 Levell v. Simpson........................... 695,728 Levy Rice Milling Co. v. Fontenot....... 110, 694, 727 Lincoln v. Ricketts.............................‘373 Loudoun National Bank, Moran v................ 698 Loughman v. Wittnebel........................... 716 Louisiana, Jefferson Island Salt Mining Co. v.. 716, 729 Lowell, Triplett v.............................. 638 Lucas v. United States.......................... 709 Lunsford, Southern Ry. Co. v................ 398,729 Madden v. United States......................... 710 Maish, Ex parte................................ 696 Manhattan General Equipment Co. v. Commissioner..................................... 129, 728 Mann v. Schneeberger............................ 718 Mantle Lamp Co. v. Aluminum Products Co........ 638 Margiotti, Pennsylvania ex rel., v. Kyle........ 704 Marks, In re................................... 692 XII TABLE OF CASES REPORTED. Page. Mathy v. Chicago & N. W. Ry Co.............. 702, 727 Matson Navigation Co. v. State Board of Equalization....................................... 441,728 Maxwell, North Carolina ex rel., Norfolk & Western Ry. Co. v.................................. 682 Mayflower Farms v. Ten Eyck................... 266 McCaughn v. Real Estate Land T. &. T. Co... 606, 699 McDermott, Simpkins v.......................... 715 McKinley v. Hirschfeld......................... 703 Meek, New York, C. & St. L. R. Co. v........... 722 Metropolitan Building Co. v. United States....... 713 Meyer v. Kenmore Granville Hotel Co......... 160, 727 Michigan, Wisconsin v....................... 547, 693 Minchella, Ex parte........................... 692 Minton v. Coast Property Corp............... 704, 727 Mississippi, Brown v........................... 278 Mississippi Cottonseed Products Co. v. Sheldon... 721 Missouri v. Ross............................... 702 Mitchell v. Conservative Homestead Assn..... 189,728 Mitchell Irrigation District v. Nebraska ex rel. Sorenson ......................................... 723 Moor v. Texas & New Orleans R. Co.... \. 101 Moore (John E.) Co. v. Pan American Petroleum & T. Co........................................ 708 Moran v. Loudoun National Bank............... 698 Moran, The Margaret A., Pan American Petroleum &T. Co. v.\................................... 708 Morehead v. People ex rel. Tipaldo............. 702 Morgenthau, Calf Leather Tanners’ Assn, v........ 718 Morgenthau, Georgia v....................... 694, 726 Mulloy v. United States........................ 711 National Cash Register Co. v. United States...... 710 National Surety Co., International Steel & Iron Co. v........................................ 657 Nebraska ex rel. Sorenson, Mitchell Irrigation District v........................................ T2& TABLE OF CASES REPORTED. XIII Page. Nebraska Railway Comm’n, Northwestern Bell Tel. Co. v........................................ 471 Nelson (H. W.) Co., Grand Trunk Western R. Co. v. 717 New Mexico, Texas v. 693, 698 Newport Company, Wisconsin Tax Comm’n v....... 720 Newton v. Colorado National Bank............. 719 New York Central R. Co. v. Cooley............. 721 New York, C. & St. L. R. Co. v. Meek.......... 722 New York Life Insurance Co. v. Vigias......... 672 Noble v. Oklahoma City........................ 481 Noble-Trotter Rice Milling Co. v. Fontenot. 110, 694, 727 Norfolk & Western Ry. Co. v. North Carolina ex rel. Maxwell......-.............................. 682 Norristown-Penn Trust Co. v. Cole............. 723 Norristown-Penn Trust Co., Cole v, 723 North Carolina ex rel. Maxwell, Norfolk & Western Ry. Co. v.................................... 682 Northeast Georgia Land Co., Ohio Hardware Mut. Ins. Co. v..................:............... 711 Northern Pacific Ry. Co. v. Washington.......... 403 Northern Pacific Terminal Co. v. Portland..... 716 Northwestern Bell Tel. Co. v. Nebraska Railway Comm’n...................................... 471 N. P. Severin Co. v. Young.................... 711 Nutt (Jno. P.) Co. v. South Carolina ex rel. Daniel. 724 Ocean Transport Co., Van Der Weyde v......... 114 O’Connor v. Rhodes............................ 383 O’Dell, Ex parte................................ 696 Ohio, Whitfield v............................... 431 Ohio Hardware Mut. Ins. Co. v. Northeast Georgia Land Co..................................... 711 Oklahoma City, Higgins v. . 481 Oklahoma City, Noble v...........f............. 481 O’Neal, White ................................ 706 Oregon, Washington v.......................... 517 Oregon Short Line R. Co. v. Claris............ 714 XIV TABLE OF CASES REPORTED. Page. Oregon Short Line R.. Co., Railway Engineering Equipment Co. v.............................. 727 Pacific Indemnity Co., Street v.................. 718 Pacific Tel. & Tel. Co. v. Tax Commission...... 403 Palmer Clay Products Co. v. Brown.............. 227 Pan American Petroleum & T. Co., John E. Moore Co. v........................................ 708 Pan American Petroleum & T. Co. v. The Margaret A. Moran..................................... 708 Parkhill Manufacturing Co. v. White........... 720 Pattison, U. S. ex rel., v. Ickes.............. 713 Peketz, Chandler v.............................. 609 Pennsylvania ex rel. Margiotti v. Kyle......... 704 Pennsylvania R. Co. v. Illinois Brick Co... 447, 728 Pennsylvania R. Co., Small v................... 724 Pennsylvania R. Co., Terminal Warehouse Co. v... 500 People ex rel. Tipaldo, Morehead v............. 702 Peoples Bank & Trust Co. v. U. S. Fidelity & Guaranty Co........................................ 718 Perkins v. United States....................... 710 Philadelphia v. Standard Oil Co................ 705 Phillips, Ex parte............................. 696 Phillips Petroleum Co. v. Jenkins......... 629 Portland, Northern Pacific Terminal Co.- v....... 716 Prince William County v. United States......... 714 Prudence Co. v. Fidelity & Deposit Co.......... 198 Public Service Comm’n v. Havemeyer............. 727 Railway Engineering Equipment Co. v. Oregon Short Line R. Co................................... 727 Rambo, Chicago Great Western R. Co. v.......... 701 Real Estate Land T. & T. Co., McCaughn v.... 606, 699 Reconstruction Finance Corp., Callaghan v......... 464 Reconstruction Finance Corp., Stitt v.......... 464 Remington Rand, Inc. v. General Fireproofing Co.. 709 Reynolds (R. J.) Tobacco Co. v. Robertson...... 719 Rhodes, O’Connor v............................. 383 TABLE OF CASES REPORTED. xv Page. Rhodes, U. S. Shipping Board Merchant Fleet Corp. v........383 Rice v. United Electric Coal Cos............... 714 Richards v. United States...................... 718 Richardson v. Chicago, R. I. & G. Ry. Co........ 727 Rickert Rice Mills v. Fontenot......... 110,694,726 Ricketts, Lincoln v............................ 373 Ridder v. Ridder............................... 721 Ridder, Ridder v............................... 721 Rizzo, United States v.......................... 530 R. J. Reynolds Tobacco Co. v. Robertson........ 719 Robertson, R. J. Reynolds Tobacco Co. v.......... 719 Rogers v. Safety Car Heating & L. Co......... 88, 727 Ross, Missouri v................................ 702 Safety Car Heating & L. Co., Rogers v........ 88, 727 Safety Car Heating & L. Co., United States v... 88, 727 St. John, Legg v............................... 695 St. Joseph-Chicago S. S. Co., Bishop v............. 703 St. Louis Coke & Iron Corp., Anderson v........ 7X7 St. Louis, I. M. & S. Ry., Co., Berthold-Jennings Lumber Co. v................................. 715 Salvage v. Helvering........................... 106 Salvage, Helvering v........................... 106 San Joaquin Fruit & I. Co., Helvering v...... 496, 728 Schneeberger, Mann v.......................... 718 Scranton-Lackawanna Trust Co. v. Commissioner.. 723 Securities & Exchange Comm’n, Jones v...... 699, 705 Securities & Exchange Comm’n, Stock Market Fi- nance, Inc. v................................ 713 Severin (N. P.) Co. v. Young................... 711 Sheldon, Mississippi Cottonseed Products Co. v.... 721 Shepherd v. Banking & Trust Co................. 717 Shores v. United States....................... 705 Simon v. Fontenot....................... 110, 694, 727 Simpkins v. McDermott.......................... 715 43927°—36--n XVI TABLE OF CASES REPORTED. Page. Simpson, Levell v.......................... 695, 728 Small v. Pennsylvania R. Co..................... 724 Smead, Wingert v................................ 724 Smith, Hector v708 Snedigar, Withers v............................. 706 Sorenson, Nebraska ex rel., Mitchell Irrigation District v........................................ 723 South Carolina ex rel. Daniel, Jno. P. Nutt Co. v... 724 Southeastern Brewing Co. v. Blackwell........... 717 Southern Ry. Co. v. Lunsford................ 398, 729 Spencer, Beadle v.......................... i.... 701 Standard Oil Co., Philadelphia v.......<........ 705 Standard Shipping Co., Basford v................ 706 State Board of Equalization, Matson Navigation Co. v............................................. 728 State Tax Comm’n, Baltimore National Bank v.... 209 State Tax Comm’n, Fisher’s Blend Station v........ 650 State Treasurer, Leahy v........................ 420 Steele-Beck, In re............................... 692 Stein, Hines v. 700 Stevens, Helvering v............................ 693 Stitt v. Reconstruction Finance Corp............ 464 Stock Market Finance, Inc. v. Securities & Exchange Comm’n........................................ 713 Street v. Pacific Indemnity Co.................. 718 Sugar Institute v. United States................ 553 Taylor v. United States......................... 708 Ten Eyck, Borden’s Farm Products Co. v......... 251 Ten Eyck, Mayflower Farms v..................... 266 Tennessee, Arkansas v........................... 693 Tennessee Valley Authority, Ashwander v..... 288, 728 Terminal Warehouse Co. v. Pennsylvania R. Co... 500 Tetzke v. Trust No. 2988.................... 707,728 Texas v. New Mexico......................... 693,698 Texas Company, Grosjean v.................... 697 Texas & New Orleans R. Co., Moor v.............. 101 Thrift Homestead Assn., Treigle v........... 189, 728 TABLE OF CASES REPORTED. XVII Page. Timmons v. Virginia............................. 704 Tipaldo, People ex rel., Morehead v..............4 702 Tipton v. Atchison, T. & S. F. Ry. Co........... 700 Title Guarantee & Trust Co. v. Bowers-.......... 720 Treigle v. Acme Homestead Assn.............. 189, 728 Treigle v. Thrift Homestead Assn............ 189,728 Treigle Sash Factory v. Conservative Homestead Assn..........•........................... 189,728 Treigle Sash Factory v. Union Homestead Assn. 189, 728. Trinidad v. Archbishop of Manila................ 712 Triplett v. Lowell.............................. 638 Triplex Safety Glass Co., Duplate Corporation v... 702 Trust Company v. Trust No. 2988................. 707 Trust No. 2988, Tetzke v.................... 707, 728 Trust No. 2988, Trust Company v................ 707 Tuttle v. Harris.............................. 225 Twin City Barge & Gravel Co. v. Whalen.......... 714 Tyson v. United States.......................... 121 Union Homestead Assn., Treigle Sash Factory v. 189,728 United Electric Coal Cos., Rice v.. .4.............. 714 United Rice Milling Products Co. v. Fontenot.... 110, 694, 727 United States v. Atkinson....................... 157 United States, Baltimore & Ohio R. Co. v......... 695 United States, Benton v......................... 705 United States, Bimbo v.......................... 721 United States, Blume v.......................... 722 United States v. Butler........................... 1 United States, Cahn v. . 4............. 691 United States v. California.................. 175 United States v. Certain Lands in Louisville.... 726 United States v. Clarke...................... 726 United States, Dismuke v.................. 167,728 United States, Dixie Margarine Co. v............ 713 United States, Driscoll v719 United States, Electric Boat Co. v.............. 710 United States, Farmer v........................ 711 XVIII TABLE OF CASES REPORTED. Page. United States, Fourchy v........................ 712 United States, Fradkin v......................... 720 United States, Galatas v......................... 711 United States, Galveston v....................... 712 United States, Gleckman v...................... 709 United States, Gooch v.......................... 124 United States v. H. & B. American Machine Co..... 726 United States v. Knott..............'............ 700 United States v. Layton.......................... 725 United States, Lucas v.......................... 709 United States, Madden v.......................... 710 United States, Metropolitan Building Co. v...... 713 United States, Mulloy v....................... 711 United States, National Cash Register Co. v...... 710 United States, Perkins v........................ 710 United States, Prince William County v........... 714 United States, Richards v........................ 718 United States v. Rizzo........................... 530 United States v. Safety Car Heating & L. Co... 88, 727 United States, Shores v. 705 United States, Sugar Institute v.................. 553 United States, Taylor v.......................... 708 United States, The Lambs v..................... 713 United States, Tyson v........................... 121 United States, Veolay, Inc. v.................... 711 United States, Wexler v.......................... 703 United States, Zimmem v...........................701 U. S. ex rel. Pattison v. Ickes.................. 713 U. S. Fidelity & Guaranty Co., Peoples Bank & Trust Co. v.......................................... 718 U. S. Naturopathic Assn., Ex parte............... 699 U.. S. Shipping Board Merchant Fleet Corp. v. Rhodes......................................... 383 Vanderbilt v. Whitney............................ 724 Van Der Weyde v. Ocean Transport Co.............. 114 Veolay, Inc. v. United States.................... 711 Vigias, New York Life Insurance Co. v............ 672 TABLE OF CASES REPORTED. xix Page. Violet Trapping Co. v. Grace................... 119 Virginia, Timmons v............................ 704 Wallace v. Cutten............................. 701 Washington, Great Northern Ry. Co. v........... 403 Washington, Northern Pacific Ry. Co. v......... 403 Washington v. Oregon........................... 517 Washington Tax Comm’n, Pacific Tel. & Tel. Co. v. 403 Weeks, Great Northern Ry. Co. v................ 135 Welch, Gillis v.............................. . 722 Western Electric Co., Cinema Supplies, Inc. v.. 717 Wexler v. United States........................ 703 Whalen, Twin City Barge & Gravel Co. v......... 714 White, Carpenter v............................. 720 White v. O’Neal............................... 706 White, Parkhill Manufacturing Co. v.............. 720 Whitfield v. Ohio.............................. 431 Whitney, Vanderbilt v.......................... 724 Whitworth, Burco, Inc. v....................... 724 Wichita Association of Credit Men v. Depew..... 710 Wichita Association of Credit Men v. Kansas ex rel. Beck........................................ 711 Wilson v. Bernitz Furnace Appliance Co......... 703 Wilson v. Carroll.............................. 707 Wine Ry. Appliance Co. v. Enterprise Ry. Equipment Co..................................... 387 Wingert v. Smead............................... 724 Wisconsin v. Michigan....................... 547,693 Wisconsin Tax Comm’n v. Newport Company........ 720 Wise, Hogue v.............................. 709, 728 Withers v. Knott............................... 706 Withers v. Snedigar............................ 706 Wittnebel, Loughman v.......................... 716 Wood (E. K.) Lumber Co., Anderson v............ 723 Worthington Mower Co., Gustin v............... 725 Wright v. Central Kentucky Gas Co.............. 537 Young, N. P. Severin Co. v711 Zimmern v. United States....................... 701 TABLE OF CASES Cited in Opinions Page. Abercrombie & Fitch Co. v. Baldwin, 245 U. S'. 198 644 Abie State Bank v. Bryan, 282 U. S. 765 542 Abrams v. United States, 250 U. S. 616 438 Abrams v. Van Schaick, 293 U. S. 188 347 Acton v. Blundell, 12 M. & W. 324 525 Adams Express Co. New York City, 232 U. S. 14 416,417 Adkins v. Children’s Hospital, 261 U. S. 525 63, 345,427 Adler v. Hammond, 104 Fed. 862 165 Air-Way Corp. v. Day, 266 U. S. 71 444 Alabama v. United States, 279 U. S. 229 697 Alexander v. Hillman, 296 U. S. 222 618 Alkan v. Bean, Fed. Cas. No. 202 533 Allen v. National Life & Accident Ins. Co., 228 Mo. App. 450 679 Allen v. Pullman Car Co., 191 U. S. 171 416 Allgeyer v. Louisiana, 165 U. S. 578 244 Allis v. United States, 155 U. S. 117 159 Alpha Cement Co. v. Massachusetts, 268 U. S. 203 446 Alton R. Co. v. United States, 287 U. S. 229 507 Page. Altoona Publix Theatres v. American Tri-Ergon Corp., 294 U. S. 477 640,643,646 Aluminum Co. v. Ramsey, 89 Ark. 522 632,636 Ambrosini v. United States, 187 U. S. 1 478 American Column Co. v. United States, 257 U. S. 377 600 American Security Co. v. Freed, 224 Fed. 333 468 Ames v. Kansas, 111 U. S. 449 187 Anglo-Chilean Nitrate Corp. v. Alabama, 288 U. S. 218 444,446 Antigo Screen Door Co., In re, 123 Fed. 249 536 Appalachian Coals, Inc. v. United States, 288 U. S. 344 598,599 Appleby v. New York City, 271 U. S. 364 381,542 Appleton v. Marx, 191 N. Y. 81 207 Arizona v. California, 283 U. S. 423 325,346,347 Arkansas Natural Gas Co. v. Railroad Commission, 261 U. S. 379 429 Armour v. Hahn, 111 U. S. 313 636 Armstrong v. Percy, 5 Wend. 535 208 Armstrong v. Ross, 61 W. Va. 38 678 Atchison, T. & S. F. Ry. v. Matthews, 174 U. S. 96 429 XXI XXII TABLE OF CASES CITED. Page. Atchison, T. & S. F. Ry. v. United States, 284 U. S. 248 151 Atchison, T. & S. F. Ry. v. United States, 295 U. S. 193 182 Atherton Mills v. Johnston, 259 U. S. 13 346 Atkinson v. Railroad Employees Relief Society, 160 Tenn. 158 679 Atlanta v. Oglethorpe University, 178 Ga. 379 656 Atlantic Coast Line v. Daughton, 262 U. S. 413 444,684 Atlantic Life Ins. Co. v. Serio, 171 Miss. 726 679 Authority to Increase Rates, 58 I. C. C. 302 455 Bachtel v. Wilson, 204 U. S. 36 120 Baender v. Barnett, 255 U. S. 224 348 Baldwin v. G. A. F. Seelig, Inc., 293 U. S. 522 697 Ball v. Rutland R. Co., 93 Fed. 513 321 Baltimore National Bank v. State Tax Comm’n, 297 U. S. 209 186 Baltimore & Ohio R. Co. v. Brady, 288 U. S. 448 507,508 Baltimore & Ohio R. Co. v. Groeger, 266 U. S. 521 401 Baltimore & Ohio R. Co. v. Interstate Commerce Comm’n, 215 U. S. 216 649 Bank of California v. Richardson, 248 U. S. 476 212,215 Bank of California v. Roberts, 248 U. S. 497 212,215 Bank of Redemption v. Boston, 125 U. S. 60 212,215 Barbed Wire Patent, 143 U. S. 275 644 Bassett v. Salisbury Mfg. Co., 43 N. H. 569 525 Bass, Ratcliff & Gretton v. Tax Commission, 266 U. S. 271 444,688 Page. Bates & Guild Co. v. Payne, 194 U. S. 106 172 Bear Lake Irrigation Co. v. Garland, 164 U. S. 1 628 Beaver v. Taylor, 93 U. S. 46 159 Bedford v. Eastern Bldg. & Loan Assn., 181 U. S. 227 196 Bedford Cut Stone Co. v. Stone Cutters’ Assn., 274 U. S. 37 513 Beer Co. v. Massachusetts, 97 U. S. 25 635 Bell Telephone Co. v. Van Dyke, 296 U. S. 533 695,696 Belt Railway v. United States, 168 Fed. 542 182,183 Berdick, In re, 56 F. (2d) 288 222 Berea College v. Kentucky, 211 U. S. 45 347,635 Bernheimer v. Converse, 206 U. S. 516 610 Blair v. United States, 250 U. S. 273 341 Blodgett v. Holden, 275 U. S. 142 345,348 Bluefield Waterworks Co. v. Public Service Comm’n, 262 U. S. 679 152,157 Board of Trustees v. United States, 289 U. S. 48 63,84,184 Bohler v. Callaway, 267 U. S. 479 145 Borax Consolidated v. Los Angeles, 296 U. S. 10 337 Bors v. Preston, 111 U. S. 252 187 Boyden v. Burke, 14 How. 575 393 Bowman v. Continental Oil Co., 256 U. S. 642 415,417 Boyce v. Cupper, 37 Ore. 256 525 Bradwell v. State, 16 Wall. 130 437 Bras v. Sheffield, 49 Kan. 702 498 Brasfield v. United States, 272 U. S. 448 159 TABLE OF CASES CITED. XXIII Page. Breece (Geo. E.) Lumber Co. v. Mirabal, 34 N. M. 643 628 Brewster v. Gage, 280 U. S. 327 174 Briscoe v. District of Columbia, 221 U. S. 547 612 Bristol v. Bostwick, 139 Tenn. 304 663 British Queen Mining Co. v. Baker Silver Mining Co., 139 U. S. 222 608 Brix v. People’s Mutual Life Ins. Co., 2 Cal. (2d) 446 679 Bronx Brass Foundry v. Irving Trust Co., 76 F. (2d) 935 228 Brooks v. United States, 267 U. S. 432 438 Brooks-Scanlon Corp. v. Railroad Commission, 251 U. S. 396 413 Brose, In re, 254 Fed. 664 222 Brown v. Maryland, 12 Wheat. 419 129 Brushaber v. Union Pacific R. Co., 240 U. S. 1 319, 320,321,351,352 Bryan v. Welch, 74 F. (2d) 964 220 Buck v. Jewel-LaSalle Realty Co., 283 U. S. 191 653 Buffalo Union Furnace Co. v. Helvering, 72 F. (2d) 399 98 Bullock v. Florida, 254 U. S. 513 413 Burnet v. Coronado Oil & Gas Co., 285 U. S. 393 353 Burnet v. Huff, 288 U. S. 156 94 Burns v. United States, 274 U. S. 328 159 Burton v. United States, 196 U. S. 283 . 347 Butler v. United States, 78 F. (2d) 1 57 Butler (Wm. S.) & Co., In re, 207 Fed. 705 224 Byers v. McAuley, 149 U. S. 608 619 Page. Calder v. Bull, 3 Dall. 386 354 Caldwell v. Frazier, 65 Kan. 24 498 Campbell v. Alleghany Corp., 75 F. (2d) 947 166,470 Carling v. Seymour Lumber Co., 113 Fed. 483 222 Carnegie Steel Co. v. Cambria Iron Co., 185 U. S. 403 640 Cass v. Smith, 146 Tenn. 218 663 Cassidy v. Le Fevre, 45 N. Y. 562 207 Cement Manufacturers Assn. v. United States, 268 U. S. 588 599 Central Funding Corp., In re, 75 F. (2d) 256 470 Central Kentucky Natural Gas Co. v. Railroad Commission, 290 U. S. 264 539 Central Transfer Co. v. Terminal Railroad Assn., 288 U. S. 469 513,514 Central Trust Co. v. Grant Locomotive Works, 135 U. S. 207 536 Central Union Telephone Co. v. Edwardsville, 269 U. S. 190 462 Chandler v. Dodge County Comm’rs, 110 U. S. 156 188 Chapman v. Great Western Gypsum Co., 216 Cal. 420 499 Charles River Bridge v. Warren Bridge, 11 Pet. 420 347 Chesapeake & Ohio Ry. v. Mihas, 280 U. S. 102 453 Chetwood, In re, 165 U. S'. 443 617 Chicago v. Chicago Rapid . Transit Co., 284 U. S. 577 542 Chicago v. Mills, 204 U. S. 321 351 Chicago Board of Trade v. United States, 246 U. S. 231 599 Chicago, B. & Q. R. Co. v. Babcock, 204 U. S. 585 145 Chicago, B. & Q. R. Co. v. McGuire, 219 U. S. 549 428 XXIV TABLE OF CASES CITED. Page. Chicago, B. & Q. R. Co. v. Nebraska, 170 U. S. 57 428 Chicago, B. & Q. R. Co. v. Williams, 205 U. S. 444 648, 649 Chicago & Grand Trunk Ry. v. Wellman, 143 U. S. 339 346 Chicago Great Western Ry. v. Kendall, 266 U. S. 94 155 Chicago, I. & L. Ry. Co. v. McGuire, 196 U. S. 128 463 Chicago, M. & St. P. Ry. v. Ross, 112 U. S. 377 636 Chicago, M. & St. P. R. Co. v. Wisconsin, 238 U. S. 491 635 Chicago, M., St. P. & P. R. Co. v. Risty, 276 U. S. 567 623 Chicago, R. I. & P. Ry. v. Perry, 259 U. S. 548 453 Child Labor Tax Case, 259 U. S. 20 61,70,80 Chisholm v. Commissioner, 79 F. (2d) 14 498 Choteau v. Burnet, 283 U. S. 691 421 Churchill v. Choctaw Ry. Co., 4 Okla. 462 494 Cissna v. Tennessee, 246 U. S. 289 473 Claassen v. United States, 142 U. S. 140 438 Clark v. Williard, 294 U. S. 211 208,536 Cleveland, C., C. & St. L. Ry. v. Backus, 154 U. S. 439 151 Clews v. Jamieson, 182 U. S. 461 618 Clinchfield Coal Corp. v. Compton, 148 Va. 437 525 Close v. Glenwood Ceme- tery, 107 U. S. 466 635 Cobb v. Pacific Mutual Life Ins. Co., 4 Cal. (2d) 565 679,681 Coe • v. Armour Fertilizer Works, 237 U. S. 413 698 Colgate v. Harvey, 296 U. S. 404 437 Collector v. Day, 11 Wall. 113 478 Page. Collins v. Müler, 252 U. S. 364 537 Colorado v. United States, 271 U. S. 153 412 Columbus & Greenville Ry. v. Miller, 283 U. S. 96 348 Comey v. United Surety Co., 217 N. Y. 268 207 Commerce-Guardian Trust & S. Bank v. Devlin, 6 F. (2d) 518 ' 228 Commissioner v. Cummings, 77 F. (2d) 670 498 Commissioner v. Woods Machine Co., 57 F. (2d) 635 93 Concordia Fire Ins. Co. v. Illinois, 292 U. S. 535 347,637 Connecticut v. Massachusetts, 282 U. S. 660 522, 523,524 Consolidated Distributors, Inc., In re, 298 Fed. 859 468 Continental Baking Co. v. Woodring, 286 U. S. 352 277 Continental Illinois Nat. Bank v. Chicago, R. I. & P. Ry., 294 U. S. 648 220, 223,249,469,470 Converse v. Hamilton, 224 U. S. 243 610 Coombes v. Getz, 285 U. S. 434 635 Cooney v. Mountain States Tel. & Tel. Co., 294 U. S. 384 414,416, 654,656 Corbus v. Alaska Treadwell Gold Mining Co., 187 U. S. 455 344,349 Cornell Steamboat Co. v. Sohmer, 235 U. S. 549 415 Corona Cord Tire Co. v. Do-van Chemical Corp., 276 U. S. 358 644 Corporation Commission v. Lowe, 281 U. S. 431 347 Corporation Commission v. Norfolk & Western R. Co., 19 I. C. C. 303 687 Cotting v. Kansas City Stockyards Co., 183 U. S. 79 319,351 TABLE OF CASES CITED. XXV Page. Covington & Lexington Turnpike Co. v. Sandford, 164 U. S. 578 244 Cox v. Texas, 202 U. S. 446 463 Credit Allowance Corp v. Atlantic, P. & G. Rfg. Co., 77 F. (2d) 595 159 Credits Commutation Co. v. United States, 177 U. S. 311 536 Crew-Levick Co. v. Pennsylvania, 245 U. S. 292 656 Cross v. Evans, 167 U. S. 60 648 Crowell v. Benson, 285 U. S. 22 348 Crutcher v. Kentucky, 141 U. S. 47 417,629 Cumberland Coal Co. v. Board of Review, 284 U. S. 23 155,156 Curtis, In re, 100 Fed. 784 468 Cusack Co. v. Chicago, 242 U. S. 526 696 Daley v. People’s Bldg., L. & S. Assn., 178 Mass. 13 678 Dartmouth College v. Woodward, 4 Wheat. 518 354 Davis v. Pringle, 268 U. S. 315 376,377 Davis v. Wakelee, 156 U. S. 680 242 DeForest Radio Co. v. General Electric Co., 283 U. S. 664 653 Degge v. Hitchcock, 229 U. S. 162 172 Delaware & Hudson Co. v. Albany & Susquehanna R. Co., 213 U. S. 435 349 Denning v. State, 123 Cal. 316 183 Denver v. Stenger, 295 Fed. 809 377 Des Moines Nat. Bank v. Fairweather, 263 U. S. 103 212, 215,446 Detroit Bridge Co. v. Tax Board, 287 U. S. 295 444 Detroit Bridge Co. v. Tax Board, 294 U. S. 83 653 Page. Detroit Mortgage Corp., In re, 12 F. (2d) 889 468 Diamond Rubber Co. v. ' Consolidated Rubber Tire Co., 220 U. S. 428 643 Dingley v. Oler, 117 U. S. 490 677 Docket No. 12,765, 3 Ill. C. C. 165 459 Docket No. 10,620, 7 Ill. P. U. C. 1047 455 Dodge v. Woolsey, 18 How. 331 319,320,349/350 Dollar Savings Bank v. United States, 19 Wall. 227 186 Domenech v. National City Bank, 294 U. S. 199 215 Dominion Hotel v. Arizona, 249 U. S. 265 276 Dorchy v. Kansas, 264 U. S'. 286 274 Douglas v. Wallace, 161 U. S. 346 174 Douglas v. Willcuts, 296 U. S. 1 694 Doyle v. Mitchell Bros. Co., 247 U. S. 179 97,101 Duncan Townsite Co. v. Lane, 245 U. S. 308 356 Dunlap v. Schofield, 152 U. S. 244 398 Duparquet Huot & Moneuse Co. v. Evans, 297 U. S. 216 225,226 Duplex Printing Press Co. v. Deering, 254 U. S. 443 513 Durham Public Service Co. v. Durham, 261 U. S. 149 624 Eastern States Lumber Dealers’ Assn. v. United States, 234 U. S. 600 516 Eastman Kodak Co. v. Gray, 292 U. S. 332 608 East Ohio Gas Co. v. Tax Commission, 283 U. S. 465 ■ 414,416 East River Co., In re, 266 U. S. 355 215 Edwards v. Keith, 224 Fed. 585; 231 Fed. 110 98 XXVI TABLE OF CASES CITED. Page. Eisner v. Macomber, 252 U. S. 189 99 Electric Co. v. Dow, 166 U. S. 489. 348 Ellsworth. (Edward) Co., In re, 173 Fed. 699 224 Elmendorf v. Taylor, 10 Wheat. 152 623 Enfield v. Jordan, 119 U. S. 680 648 Engelhard & Sons Co., In re, 231 U. S. 646 541, 542 Ensten v. Simon, Ascher & Co., 282 U. S. 445 643,646 Enterprise Irrigation District v. Canal Co., 243 U. S. 157 696,697 Equitable Surety Co. v. United States, 234 U. S. 448 663 Erie R. Co. v. Purdy, 185 U. S. 148 436 Euclid v. Ambler Realty Co., 272 U. S. 365 696 Eustis v. Bolles, 150 U. S. 361 696 Evans v. United States, 153 U. S. 584 438 Expanded Metal Co. v. Bradford, 214 U. S. 366 643 Ex parte 74, 58 I. C. C. 220 455, 456,457,459 Eyges v. Boylston Nat. Bank, 294 Fed. 286 228 Fairchild v. Hughes, 258 U. S. 126 348 Fair Haven & W. R. Co. v. New Haven, 203 U. S. 379 635 Fairport, P. & E. R. Co. v. Meredith, 292 U. S. 589 185 Fargo v. Hart, 193 U. S. 490 152,153,156 Farmers’ Loan & Trust Co., In re, 129 U. S. 206 537 Fauntleroy v. Lum, 210 U. S. 230 612 Fawcus Machine Co. v. United States, 282 U. S. 375 174 Federal Life Ins. Co. v. Ras-coe, 12 F. (2d) 693 678 Page. Federal Radio Comm’n v. Nelson Bond & Mortgage Co., 289 U. S. 266 655 Fidelity & Deposit Co. v. Tafoya, 270 U. S. 426 634 First National Bank v. Adams, 258 U. S. 362 215 First National Bank v. Fler-shem, 290 U. S. 504 219 Fisher v. Charter Oak Life Ins. Co., 14 Abb. N. C. 32 134 Fisher v. State, 145 Miss. 116 287 Fleischmann Construction Co. v. United States, 270 U. S. 349 608 Florida v. United States, 282 U. S. 194 459 Florida v. United States, 292 U. S. 1 459 Forbell v. New York City, 164 N. Y. 522 525 Fort Smith Light Co. v. Paving District, 274 U. 8. 387 624 Foster-Fountain Packing Co. v. Haydel, 278 U. S. 1 426, 634 Fowble, In re, 213 Fed. 676 186 Fowle v. Lawrason’s Executor, 5 Pet. 495 618 Fox v. Gulf Refining Co., 295 U. S. 75 382 Fox v. Standard Oil Co., 294 U. S. 87 382 Fox Film Corp. v. Muller, 296 U. S. 207 274,697 Franklin Process Co. v. HooSac. Mills Corp., 8 F. Supp. 552 57 Freedman’s Saving & Trust Co. v. Shepherd, 127 U. S. 494 296,221 Frost Trucking Co. v. Railroad Commission, 271 U. S. 583 71, 628,634 Gallagher v. Pennsylvania R. Co., 160 I. C. C. 563 506 Gallup v. Schmidt, 183 U. S. 300 154 Galveston, H. & S. A. Ry. v. Texas, 210 U. S. 217 416, 444,656 TABLE OF CASES CITED. XXVII Page. Gamble v. Garlock, 116 Minn. 59 498 Garbush v. Commercial Travelers, 178 Minn. 535 679 Garland, Ex parte, 4 Wall. 333 345 General Utilities & Operating Co. v. Helvering, 296 U. S. 200 109 Georgia v. Brailsford, 3 Dall. 1 188 Georgia v. Chattanooga, 264 U. S'. 472 184 Gibbons v. Ogden, 9 Wheat. 1 69,328,655 Gibson v. Peters, 150 U. S. 342 617 Gibson v. Shufeldt, 122 U. S. 27 242 Gilman v. Philadelphia, 3 Wall. 713 328 Ginsberg & Sons v. Popkin, 285 U. S. 204 215 Ginsburg v. Pacific Mutual Life Ins. Co., 5 F. Supp. 296 679 Gitlow v. New York, 268 U. S. 652 244 Glenn Coal Co. v. Dickin- son Fuel Co., 72 F. (2d) 885 515 Goodrich v. Edwards, 255 U. S. 527 ' 97 Goodwin v. Colwell, 213 Pa. 614 619 Gordon v. United States, 2 Wall. 561 346 Gordon v. Washington, 295 U. S. 30 220 Graham v. Thrall, 95 Ark. 560 632 Graham v. West Virginia, 224 U. S. 616 695 Graham & Foster v. Goodcell, 282 U. S. 409 79 Granada Hotel Corp., In re, 78 F. (2d) 409 217 Grayson v. Harris, 267 U. S. 352 666 Great Falls Mfg. Co. v. Attorney General, 124 U. S. 581 323,348 Page. Great Northern Ry. v. Mer- chants Elevator Co., 259 U. S. 285 514 Great Northern Ry. v. Steinke, 261 U. S. 119 494 Great Northern Ry. v. Sun- burst Oil & Rfg. Co., 287 U. S. 358 665 Green v. Frazier, 253 U. S. 233 183 Green Bay Canal Co. v. Pat- ten Paper Co., 172 U. S. 58 330,333,337,338 Green Bay Canal Co. v. Pat- ten Paper Co., 173 U. S. 179 334,337,338 Greenwood v. Freight Co., 105 U. S. 13 319,320,350, 635 Gregg Dyeing Co. v. Query, 286 U. S. 472 413 Griffin v. Colver, 16 N. Y. 489 207 Gross v. Irving Trust Co., 289 U. S. 342 222,467 Gsell v. Insular Collector, 239 U. S. 93 669 Guarantee Title & T. Co. v. Title Guaranty Co., 224 U. S. 152 186 Guerini Stone Co. v. Carlin Construction Co., 248 U. S. 334 159 Gumbel v. Pitkin, 113 U. S. 545 536 Haas v. Sachs, 68 F. (2d) 623 228 Hadacheck v. Los Angeles, 239 U. S. 394 696 Hagar v. Reclamation Dis- trict, 111 U. S. 701 154 Hailes v. Albany Stove Co., 123 U. S. 582 643 Hale v. Lewis, 181 U. S. 473 696 Hall, Appeal of, 112 Pa. 42 619 Hallowell v. United States, 209 U. S. 101 648 Ham v. Supreme Court, 70 Wash. 442 527 Hammond v. S’chappi Bus Line, 275 U. S. 164 347 Hammond Packing Co. v. Arkansas, 212 U. S. 322 635 XXVIII TABLE OF CASES CITED. Page. Hancock National Bank v. Farnum, 176 U. S. 640 610 Hanover Fire Ins. Co. v. Harding, 272 U. S. 494 634 Hans Rees’ Sons v. North Carolina, 283 U. S. 123 444, 685,686 Harkin v. Brundage, 276 U. S. 36 219 Harrison v. Chamberlin, 271 U.S. 191 164,165 Harrison v. Moncravie, 264 Fed. 776 619 Harvey Co. v. Malley, 288 U. S. 415 608 Haseltine v. Central Bank of Springfield, 183 IL S. 130 698 Hatch v. Reardon, 204 U. S. 152 347 Hawes v. Oakland, 104 U. S. 450 343,350 Hayburn’s Case, 2 Dall. 409 346 Hayes v. Adams, 109 Ore. 51 525 Hays v. Gauley Mountain Coal Co., 247 U. S. 189 97 Head Money Cases, 112 U. S. 580 60,61 Heald v. District of Columbia, 259 U. S. 114 347 Hebert v. Louisiana, 272 U. S. 312 245,286,287 Hegeman Farms Corp. v. Baldwin, 293 U. S. 163 275 Heiner v. Colonial Trust Co., 275 U. S. 232 187 Heiner v. Crosby, 24 F. (2d) 191 98 Heiner v. Hewes, 30 F. (2d) 787 98 Helgar Corporation v. Warner’s Features, Inc., 222 N. Y. 449 679,680,682 Helson & Randolph v. Kentucky, 279 U. S. 245 628 Helvering v.. Blumenthal, 296 U. S. 552 694 Helvering v. California Oregon Power Co., 64 App. D C. 125 546 Helvering v. Canfield, 291 U. S. 163 96,99 Page. Helvering v. Central States Electric Corp., 76 F. (2d) 1011 546 Helvering v. City Bank Farmers Trust Co., 296 U. S. 85 693 Helvering v. Powers, 293 U. S. 214 184,186 Helvering v. Schweitzer, 296 U. S. 551 694 Helvering v. Stockholms En-skilda Bank, 293 U. S. 84 93 Helvering v. Stokes, 296 U. S. 551 694 Helvering v. Taylor, 293 U. S. 507 145,208 Helvering v. Union Pacific R. Co., 293 U. S. 282 546 Helvering v. Union Public Service Co., 75 F. (2d) 723 546 Henderson Bridge Co. v. Kentucky, 166 U. S. 510 653 Hendrick v. Maryland, 235 U. S. 610 348 Hepburn v. Griswold, 8 Wall. 603 345 Herman v. Youngstown Car Mfg. Co., 19'1 Fed. 579 646 Hewit v. Berlin Machine Works, 194 U. S. 296 164 Hicks v. Christeson, 174 Cal. 712 499 Higgin Mfg. Co. v. Watson, 263 Fed. 378 646 Hill v. Wallace, 259 U. S. 44 80,352 Hines v. Fidelity Mutual Life Ins. Co., 6 F. Supp. 692 679 Hinkley v. Art Students’ League, 37 F. (2d) 225 619 Hoe (R.) & Co. v. Goss Printing Press Co., 31 F. (2d) 565 646 Home Bldg. & Loan Assn. v. Blaisdell, 290 U. S. 398 197 Home Insurance Co. v. Dick, 281 U. S. 397 436,453 Home Savings Bank v. Des Moines, 205 U. S. 503 215 TABLE OF CASES CITED. XXIX Page. Hopkins Federal Savings & Loan Assn. v. Cleary, 296 U. S. 315 197 Horne v. Utah Oil Rfg. Co., 59 Utah 279 525 Hough v. Porter, 51 Ore. 318 523 Hough v. Railway Co., 100 U. S. 213 636 Howard, In re, 9 Wall. 175 536 Howard v. Benefit Association, 239 Ky. 465 678,680 Hulbert v. Chicago, 202 U. S. 275 463 Hume v. Myers, 242 Fed. 827 467 Humphrey v. Bankers Mortgage Co., 79 F. (2d) 345 165 Humphrey’s Executor v. United States, 295 U. S. 602 221,353 Hunt Co. v. Boston Elevated Ry., 199 Mass. 220 206 Hurtado v. California, 110 U. S. 516 243,285 Ide v. United States, 263 U. S. 497 526 Illinois Brick Co. v. Director General, 64 I. C. C. 273 457 Illinois Central R. Co. v. Public Utilities Comm’n, 245 U. S. 493 470 Increased Rates, 1920, 58 I. C. C. 220 455 Indiana Life Endowment Co. v. Reed, 54 Ind. App. 450 678 Ingraham v. Hanson, 297 U. S. 378 542 International Paper Co. v. United States, 282 U. S. 399 335 International Ry. Co. v. Davidson, 257 U. S. 506 135 International Textbook Co. v. Pigg, 217 U. S. 91 629 Interstate Busses Corp. v. Holyoke Street Ry. Co., 273 U. S. 45 416 Interstate Commerce Comm’n v. Goodrich Transit Co., 224 U. S. 194 478 Page. Interstate Commerce Comm’n v. Illinois Central R. Co., 215 U. S. 452 514 Interstate Commerce Comm’n v. New York, N. H. & H. R. Co., 287 U. S. 178 174 Interstate Commerce Comm’n v. Oregon-Wash-ington R. & N. Co., 288 U. S. 14 348 Interstate Commerce Comm’n v. United States, 289 U. S. 385 507,509 Intrastate Rates Within Illinois, 60 I. C. C. 92 454,457 lowa-Des Moines Bank v. Bennett, 284 U. S. 239 155 Jack Lewis, Inc. v. Baltimore, 290 U. S. 585 696 Jamestown & Northern R. Co. v. Jones, 177 U. S. 125 491 Jentzer v. Viscose Co., 13 F. Supp. 540 228 Jewell v. Knight, 123 U. S. 426 648,649 Johnson v. Southern Pacific Co., 196 U. S. 1 128,185 Jones v. Portland, 245 U. S. 217 183 Jutte v. Hughes, 67 N. Y. 267 207 Kadish v. Lyon, 229 Ill. 35 498 Kansas v. Colorado, 206 U. S. 46 336,338,523 Kaukauna Water Power Co. v. Green Bay Canal Co., 142 U. S. 254 334,335 Kehrer v. Stewart, 197 U. S'. 60 415 Kelly v. Security Mutual Life Ins. Co., 186 N. Y. 16 678,679 Kennedy v. United States, 23 Ct. Cis. 363 672 Kentucky v. Indiana, 281 U. S. 163 542 Keogh v. Chicago & Northwestern Ry. Co., 260 U. S. 156 511,515 Kepner v. United States, 195 U. S. 100 215 XXX TABLE OF CASES CITED. Page. Keystone Elevator & Warehouse Co. v. Director General, 73 I. C. C. 273 505 Keystone Warehouse Co. v. Pennsylvania R. Co., 53 I. C. C. 335 505 Kidd v. McCormick, 83 N. Y. 391 205,206 Killian v. Metropolitan Life Ins. Co., 251 N. Y. 44 679 Kimelv. Missouri State Life Ins. Co., 71 F. (2d) 921 679 Kithcart v. Metropolitan Life Ins. Co., 1 F. Supp. 719 679 Kline v. Burke Construction Co., 260 U. S. 226 619 Knox v. McElligott, 258 U. S. 546 691 Krippendorf v. Hyde, 110 U. S. 276 536 Lake Shore & M. S. Ry. v. Smith, 173 U. S. 684 635 Langer v. Grandin Farmers Elevator Co., 292 U. S. 605 697 Laraway v. Perkins, 10 N. Y. 371 208 Larson v. South Dakota, 278 U. S. 429 120,381,542 Law v. United States, 266 U. S. 494 608 Lehigh Valley R. Co. v. Pennsylvania, 145 U. S. 192 413,415 Lehnen v. Dickson, 148 U. S. 71 608 Leloup v. Mobile, 127 U. S. 640 414, 417, 655 Leonard v. Vicksburg, S. & P. R. Co., 198 U. S. 416 348 Liberty Warehouse Co. v. Grannis, 273 U. S. 70 324,346 Light v. United States, 220 U. S. 523 336,347 Lincoln Savings Bank v. Realty Associates, 67 F. (2d) 895 222 Linder v. United States, 268 U. S. 5 69,70,80,326,348 Lindheimer v. Illinois Bell Telephone Co., 292 U. S. 151 ’ 478 Page. Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61 637 Liquid Carbonic Co. v. Gilchrist Co., 253 Fed. 54 646 Liverpool, N. Y. & P. 8. 8. Co. v. Emigration Commissioners, 113 U. S. 33 347 Lloyd Sabaudo Societa v. Elting, 287 U. S. 329 172 Logan v. Davis, 233 U. 8. 613 174 Londoner v. Denver, 210 U. 8. 373 154 Looker v. Maynard, 179 U. 8. 46 635 Looney v. Crane Co., 245 U. 8. 178 634 Lord v. Veazie, 8 How. 251 346 Los Angeles v. Hunter, 156 Cal. 603 526 Los Angeles v. Pomeroy, 124 Cal. 597 525 Los Angeles Gas Co. v. Railroad Commission, 289 U. 8. 287 151 Lottawanna, The, 20 Wall. 201 535,536 Louisiana Navigation Co. v. Oyster Commission, 226 U. S. 99 698 Louisville Bank v. Radford, 295 U. 8. 555 223 Louisville Board of Trade v. Indianapolis, C. & S. Traction Co., 34 I. C. C. 640 684 Louisville Gas & Elec. Co. v. Coleman, 277 U. 8. 32 276 Louisville & Nashville R. Co. v. Ohio Valley Tie Co., 242 U. S. 288 507,509,512 Louisville & Nashville R. Co. v. Woodford, 234 U. 8. 46 463 Low Moor Iron Co. v. Chesapeake & Ohio Ry. Co., 42 I. C. C. 221 684,685 Lucas v. Alexander, 279 U. 8. 573 99,101,348 Lucas v. American Code Co., 280 U. S. 445 94 Lucas v. North Texas Lumber Co., 281 U. S. 11 94 TABLE OF CASES CITED. XXXI Page. Ludwig v. Western Union, 216 U. S. 146 634 Ludy v. Aumwalt, 85 Cal. App. 119 499 Luigart v. Lexington Turf Club, 130 Ky. 473 498 Lynch v. Hornby, 247 U. S. 339 96,99 Lynch v. New York, 293 U. S. 52 662 Lynch v. Tilden Produce Co., 265 U. S. 315 134 Lynch v. Turrish, 247 U. S. 221 97 MacLaughlin v. Alliance Insurance Co., 286 U. S. 244 97,99 Magnano Co. (v. Hamilton, 292 U. S. 40 87,156,157,245 Mansfield Lumber Co. v. Sternberg, 38 F. (2d) 614 228 Maple Flooring Assn. v. United States, 268 U. S. 563 598,600 Maricopa County District v. Southwest Cotton Co., 39 Ariz. 65 525 Marin v. Augedahl, 247 U. S. 142 610,612 Marshall v. New York, 254 U. S. 380 535 Massachusetts v. Mellon, 262 U. S. 447 57,63,73,348 M a s s a c h usetts Protective Assn. v. Jurney, 188 Ark. 821 679 Massachusetts State Grange v. Benton, 272 U. S. 525 346 Mast, Foos & Co. v. Stover Mfg. Co., 177 U. S. 485 642 Matheson v. Ward, 24 Wash. 407 523 Maxwell v. Kent-Coffey Mfg. Co., 204 N. C. 365 688 Maynard v. Elliott, 283 U. S. 273 174 McCallum v. United States, 298 Fed. 373 183 McCardle v. Indianapolis Water Co., 272 U. S. 400 152,157 Page. McClellan v. Carland, 217 U. S. 268 618 McClintock v. Hudson, 141 Cal. 275 525 McCormick Warehouse Co. v. Pennsylvania R. Co., 95 I. C. C. 301 505,506 McCray v. United States, 195 U. S. 27 87 McCready v. Lindenborn, 172 N. Y. 400 680 McCulloch v. Maryland, 4 Wheat. 316 69, 84,211,212,326. McDonald v. Massachusetts, 180 U. S. 311 695 McFeely v. Commissioner, 296 U. S. 102 95 McLean v. Arkansas, 211 U. S. 539 428 McLean v. United States, 226 U. S. 374 169,172 Meadows v. United States, 281 U. S. 271 172 Meccano, Ltd. v. John Wan-namaker, 253 U. S. 136 644 Medbury v. United States, 173 U. S. 492 169,172 Meek v. Beezer, 28 F. (2d) 343 224 Meeker v. Lehigh Valley R. Co., 236 U. S. 412 407 Meeker v. Lehigh Valley R. Co., 162 Fed. 354 512, 515 Memphis v. Dean, 8 Wall. 64 349 Menssen v. Travelers’ Insurance Co., 5 F. Supp. 114 679 Merchants Loan & Trust Co. v. Smietanka, 255 U. S. 509 97 Merchants Warehouse Co. v. United States, 283 U. S. 501 506 Metcalf v. Barker, 187 U. S. 165 222 Metcalf & Eddy v. Mitchell, 269 U. S. 514 184 Metropolitan Casualty Ins. Co. v. Brownell, 294 U. S. 580 278 Mever v. Tacoma Light & Water Co., 8 Wash. 144 525 43927°—36---m XXXII TABLE OF CASES CITED. Page. Meyer v. Wells, Fargo & Co., 223 U. S. 298 444 Michigan v. Michigan Trust Co., 286 U. S. 334 219 Michigan v. Wisconsin, 270 U. 8. 295 530 Miedreich v. Lauenstein, 232 U. S. 236 473 Miller v. State, 15 Wall. 478 635 Miller v. United States, 294 U. S. 435 134,158 Milliken v. United States, 283 U. S. 15 79 Milwaukee County v. M. E. White Co., 296 U. 8. 268 187 Minneapolis, St. P. & S. S. M. Ry. Co. v. Doughty, 208 U. S. 251 494 Minneapolis, St. P. & S. S. M. Ry. v. Rock, 279 U. S. 410 453 Minnesota Rate Cases, 230 U. S. 352 84 Missouri v. Illinois, 200 U. S. 496 522 Missouri, K. & T. Ry. Co. v. Kansas Pacific Ry. Co., 97 U. 8. 491 491 Missouri, K. & T. Ry. Co. v. May, 194 U. S. 267 87 Missouri & North Arkansas R. Co. v. Vanzant, 100 Ark. 462 632 Missouri Pacific Ry. Co. v. Boone, 270 U. S. 466 348 Missouri Pacific Ry. Co. v. Kansas, 216 U. 8. 262 635 Missouri Pacific Ry. Co. v. Larabee Flour Mills Co., 211 U. S. 612 479 Missouri Valley Bridge & Iron Co. v. Malone, 153 Ark. 454 632 Mobley v. New York Life Ins. Co., 295 U. 8. 632 676,677 Monongahela Navigation Co. v. United States,. 148 U. 8. 312 152,156 Montello Salt Co. v. Utah, 221 U. S. 452 332 Moody v. Fiske, Fed. Cas. > No. 9,745 . 643 Page. Mooney v. Holohan, 294 U. S. 103 286 Moore v. Chesapeake & Ohio Ry. Co., 291 U. S. 205 185 Moore v. Dempsey, 261 U. S. 86 286 Moore v. Missouri, 159 U. S. 673 695 Moore v. Security Trust & Life Ins. Co., 168 Fed. 496 680 Morrison v. Work, 266 U. S. 481 105 Morton v. Nebraska, 21 Wall. 660 332 Murray v. Wilson Distilling Co., 213 U. S. 151 185 Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272 249 Muskrat v. United States, 219 U. S. 346 324,346 Mutual Life Ins. Co. v. Johnson, 293 U. S. 335 523 Mutual Life Ins. Co. v. Marsh, 186 Ark. 861 678 Myers v. United States, 272 U. S. 52 353 Napier v>. Atlantic Coast Line R. Co., 272 U. S. 605 401 Nash v. United States, 229 U. S. 373 597 Nashville, C. & St. L. Ry. v. Wallace, 288 U. S. 249 324,325 Nashville, C. & St. L. Ry. v. Walters, 294 U. S. 405 150 National Bank v. Yankton County, 101 U. S. 129 671 National Machine & Tool Co. v. Standard Shoe Machinery Co., 181 Mass. 275 680 National Paper Co. v. Bow- ers, 266 U. S. 373 444 Near v. Minnesota, 283 U. S. 697 244,249 Nebbia v. New York, 291 U. S. 502 197,262,264,271,276 Ness v. Fisher, 223 U. S. 683 172 Nevitt v. Woodburn, 190 Ill. 283 619 New Jersey v. New York, 283 U. S. 336 527 TABLE OF CASES CITED. XXXIII Page. New Jersey v. Sargent, 269 U. S. 328 324,346 N. J. Bell Telephone Co. v. State Board, 280 U. S. 338 444,654 New York v. Illinois, 274 U. S. 488 324 New York v. New Jersey, 256 U. S. 296 522,524 New York v. United States, 257 U. S. 591 184 New York Central R. Co. v. . Johnson, 279 U. S. 310 160 New York Central R. Co. v. White, 243 U. S. 188 636 New York & Colorado Mining Syndicate v. Fraser, 130 U. S. 611 207 N. Y. Scaffolding Co. v. Chain Belt Co., 254 U. S. 32 644 Nichols v. Scranton Steel Co., 137 N. Y. 471 679 Norrington v. Wright, 115 U.S. 188 680 Norris v. Jackson, 9 Wall. 125 608 North American Oil Consolidated v. Burnet, 286 U. S. 417 94,97 North Dakota v. Minnesota, 263 U. S. 365 522, 523,524,529,530 Northern Pacific Ry. v. Department of Public Works, 268 U. S. 39 685 Northern Pacific Ry. v. Hebert, 116 U. S. 642 636 Northern Pacific Ry. v. Solum, 247 U. S. 477 514 Northern Pacific Ry. v. Townsend, 190 U. S. 267 491 Norwegian Nitrogen Products Co. v. United States, 288 U. S. 294 174 O’Connor v. Rhodes, 65 App. D. C. 21 386 Ogden v. Saunders, 12 Wheat. 213 355 O’Gorman & Young v. Hartford Fire Ins. Go., 282 U. S. 251 278,637 Page. Ohio v. Helvering, 292 U. S 360 184,185,187,376 Ohio Oil Co. v. Conway, 279 U. S. 813 242 Ohio Oil Co. v. Indiana, 177 U. S. 190 336 Ohio Tax Cases, 232 U. S. 576 414,415 Old Colony R. Co. v. Commissioner, 284 U. S. 552 499 Olson v. United States, 292 U. S. 246 139 O’Neill v. Supreme Council, 70 N. J. L. 410 678 O’Reilly v. Morse, 15 How. 62 645 Orleans, The Steamboat, v. Phoebus, 11 Pet. 175 533 Osborne v. Florida, 164 U. S. 650 415 Ozan Lumber Co. v. Biddie, 87 Ark. 587 632 Ozawa v. United States, 260 U. S. 178 376 Pacific Express Co. v. Seibert, 142 U. S. 339 415 Pacific Tel. & Tel. Co. v. Washington, 297 U. S. 403 654,656 Palmer Clay Products Co. v. Brown, 297 U. S. 227 232 Panama R. Co. v. Johnson, 264 U. S. 375 348 Panama Refining Co. v. Ryan, 293 U. S. 388 62 Pan American Petroleum Co. v. United States, 273 U. S. 456 332 Pantomimic Corporation v. Malone, 238 Fed. 135 655 Parish v. MacVeagh, 214 U. S. 124 172 Parks v. Maryland Casualty Co., 59 F. (2d) 737 679 Patrick v. Smith, 75 Wash. 407 525 Paul v. Virginia, 8 Wall. 168 244 Peck & Co. v. Lowe, 247 U. S. 165 444 Peck & Co. v. Whitmer, 231 Fed. 893 228, 232 XXXIV TABLE OF CASES CITED. Page. Penn General Casualty Co. v. Pennsylvania, 294 U. S. 189 618,619 Pennsylvania v. Williams, 294 U. S. 176 618,619 Pennsylvania R. Co. v. International Coal Mining Co., 230 U. S. 184 507 Pennsylvania R. Co. v. Jacoby & Co., 242 U. S. 89 507 Pennsylvania R. Co. v. Minds, 250 U. S. 368 159 People v. Monterey Fish Products Co., 195 Cal. 548 430 People v. N. Y. Carbonic Acid Gas Co., 196 N. Y. 421 525 Petrie v. Nampa Irrigation District, 248 U. S. 154 697 Philadelphia Co. v. Stimson, 223 U. S. 605 328 Philadelphia & Southern S. S. Co. v. Pennsylvania, 122 U. S. 326 444,655 Pierce v. Somerset Ry., 171 U. S. 641 348 Pierce v. Tennessee C., I. & R. Co., 173 U. S. 1 677 Pittsburgh, C., C. & St. L. Ry. Co. v. Backus, 154 U. S. 421 684,685 Pollard v. Hagan, 3 How. 212 337 Pollock v. Farmers’ L. & T. Co., 157 U. S. 429 319, 320,350,352,478 Popovici v. Agier, 280 U. S. 379 188 Posadas v. National City Bank, 296 U. S. 497 628 Postal Telegraph Co. v. Adams, 155 U. S. 688 415 Postal Telegraph Co. v. Charleston, 153 U. S. 692 415 Postal Telegraph Co. v. Fremont, 255 U. S. 124 414, 416,419 Postal Telegraph Co. v. Richmond, 249 U. S. 252 414, 416,417,419 Page. Postal Telegraph Co. v. White, 190 Ark. 365 632 Powell v. Alabama, 287 U. S. 45 243,245,249,286 Powell v. United States, 60 Fed. 687 174 Power Mfg. Co. v. Saunders, 274 U. S. 490 634 Priest v. Las Vegas, 232 U. S. 604 528 Procter & Gamble Co. v. United States, 225 U. S. 282 507 Province Securities Corp. v. Maryland Casualty Co., 269 Mass. 75 205 Public Service Comm’n v. Great Northern Utilities Co., 289 U. S. 130 275 Public Service Comm’n v. Havemeyer, 296 U. S. 506 635 Public Service Comm’n v. Texas & N. O. R. Co., 284 U. S. 125 459 Puckett v. National Annuity Assn., 134 Mo. App. 501 679 Puget Sound Power & Light Co. v. Seattle, 291 U. S. 619 183 Pullman Co. v. Adams, 189 U. S. 420 414,416 Pullman Co. v. Kansas, 216 U. S. 56 416 Pullman Co. v. Richardson, 261 U. S. 330 444 Quaker City Cab Co. v. Pennsylvania, 277 U. S. 389 634,637 Radice v. New York, 264 U. S. 292 430 Radio Corporation v. Dubi-lier Condenser Corp., 59 F. (2d) 305 639 Rahrer In re, 140 U. S. 545 438,440,441 Railroad Commission v. Eastern Texas R. Co., 264 U. S. 79 413 Railroad Commissioners v. Great Northern Ry. Co., 281 U. S. 412 479 TABLE OF CASES CITED. XXXV Page. Railroad Company v. Baldwin, 103 U. S. 426 491 Railroad Company v. Fort, 17 Wall. 553 636 Railroad Supply Co. v. Elyria Iron Co., 244 U. S. 285 644 Raley & Bros. v. Richardson 264 U. S. 157 414 Randall v. Baltimore & Ohio R. Co., 109 U. S. 478 . 636 Randolph, Ex parte, Fed. Cas. No. 11,558 347 Rast v. Van Deman & Lewis Co., 240 U. S. 342 120,278,637 Ratterman v. Western Union, 127 U. S. 411 415 Raymond v. Chicago Traction Co., 207 U. S. 20 155 Reagan v. Farmers’ Loan & T. Co., 154 U. S. 362 321 Realty Associates Securities Corp. v. O’Connor, 295 U. S. 295 468 Red Rock v. Henry, 106 U. S. 596 215 Reinecke v. Smith, 289 U. S. 172 499 Reinman v. Little Rock, 237 U. S. 171 696 Retirement Board v. McGovern, 316 Pa. 161 170 Rhodes v. Iowa, 170 U. S. 412 438,439 Richardson v. Hardwick, 106 U. S. 252 498 Richmond Screw Anchor Co. v. United States, 275 U. S. 331 348 Riehle v. Margolies, 279 U. S. 218 619 Rio Grande, The, 19 Wall. 178 242 Rio Grande Western Ry. Co. v. Stringham, 239 U. S. 44 494 Robinson v. Baltimore & Ohio R. Co., 222 U. S. 506 514 Robinson v. Hanson, 75 Utah 30 379 Roehm v. Horst, 178 U. S. 1 677,679, 680,681 Page. Rogers v. Peck, 199 U. S. 425 . 285 Rose v. Himely, 4 Cranch 241 612 Rosencrans v. United States, 165 U. S. 257 215 Rowley v. Chicago & N. W. Ry., 293 U. S. 102 138,144, 152, 153, 154, 156, 685 Rubenstein v. Lottow, 223 Mass. 227 228 Ruddy v. Rossi, 248 U. S. 104 336,491 Ruff v. Rinaldo, 55 N. Y. 664 206,207 Rumbell, The J. E., 148 U. S. 1 536 Russell v. Edmondson, 50 F. . (2d) 175 222 Saetre v. Chandler, 57 F. (2d) 951 610 St. Louis v. Western Union, 166 U. S. 388 608 St. Louis Can Co. v. General American Life Ins. Co., 77 F. (2d) 598 161,165 St. Louis Casting Co. v. Prendergast Construction Co., 260 U. S. 469 323 St. Louis Malleable Casting Co. v. Prendergast Construction Co., 260 U. S. 469 348 St. Louis S. W. Ry. Co. v. Arkansas, 235 U. S. 350 443 Saltonstall v. Saltonstall, 276 U. S. 260 473 Samuel v. Holladay, Fed. Cas. No. 12,288 344 Sanitary District v. United States, 266 U. S. 405 184 Sanitary Refrigerator Co. y. Winters, 280 U. S. 30 642 San Joaquin Light & P. Co. v. McLaughlin, 65 F. (2d) 677 544 Saranac Automatic Machine Corp. v. Wirebounds Patents Co., 282 U. S. 704 644 Saunders v. Commissioner, 29 F. (2d) 834 98 XXXVI TABLE OF CASES CITED. Page. Saunders v. Shaw, 244 U. S. 317 665 Savannah v. Jesup, 106 U. S. 563 536 Schechter Poultry Corp. v. United States, 295 U. S. 495 62,75 Schlosser v. Hemphill, 198 U. S. 173 698 Schneider Granite Co. v. Gast Realty Co., 245 U. S. 288 624 Scholl Mfg. Co. v. Rodgers, 51 F. (2d) 971 232 Schuchardt v. Ship Angelique, 19 How. 239 535 Scott v. Donald, 165 U. S. 58 437 Sears v. Akron, 246 U. S. 242 635 Seattle v. Oregon-Washington R. Co., 255 U. S. 56 337 Seaweard v. Pacific Livestock Co., 49 Ore. 157 527 Security Trust Co. v. Black River Nat. Bank, 187 U. S. 211 619 Selig v. Hamilton, 234 U. S. 652 610 Sessions v. Romadka, 145 U. S. 29 393 Shaffer v. Carter, 252 U. S. 37 444 Shannon v. Shaffer Oil & Rfg. Co., 51 F. (2d) 878 159 Shapiro v. Wilgus, 287 U. S. 348 219 Sherman v. United States, 282 U. S. 25 181,183 Shields v. Ohio, 95 U. S. 319 635 Shively v. Bowlby, 152 U. S. 1 337 Shreveport Case, 234 U. S. 342 84,184 Silberschein v. United States, 266 U. S. 221 172 Siler v. Louisville & Nashville R. Co., 213 U. S. 175 347 Silz v. Hesterberg, 211 U. S. 31 426 Sinclair Refining Co. v. Jenkins Co., 289 U. S. 689 98 Page. Sinking-Fund Cases, 99 U. S. 700 355,635 Sioux City Bridge Co. v. Dakota County, 260 U. S. 441 155 Sioux Remedy Co. v. Cope, 235 U. S. 197 634 Skinner & Eddy Corp., Ex parte, 265 U. S. 86 232 Slaughter-House Case, 1 Woods 21 437 Sloss-Sheffield Co. v. Louisville & N. R. Co., 35 I. C. C. 460 687 Smiley v. Holm, 285 U. S. 355 187 Smith v. Bangham, 156 Cal. 359 499 Smith v. Illinois Bell Tel. Co., 270 U. S. 587 542 Smith v. Kansas City Title Co., 255 U. S. 180 320, 322,352,356 Smyth v. Ames, 169 U. S. 466 244,320,349 Snake Creek Mining & T. Co. v. Midway Irrigation Co., 260 U. S. 596 525 Snyder v. Massachusetts, 291 U. S. 97 285 Soard v. Western Anthracite C. & M. Co., 92 Ark. 502 632 Sonnebom Bros. v. Cureton, 262 U. S. 506 . 440 South Carolina v. United States, 199 U. S. 437 184, 185,186,187 Southern Class Rate Investigation, 100 I. C. C. 513; 109 I. C. C. 300; 113 I. C. C. 200; 128 I. C. C. 567 687 Southern Pacific Co. v. Bo-gert, 250 U. S. 483 534 Southern Ry. Co. v. Kentucky, 274 U. S. 76 151,685 Southern Ry. Co. v. United States, 222 U. S. 20 185 Southern Ry. Co. v. Watts, 260 U. S. 519 156,415 Southern Wisconsin Ry. Co. v. Madison, 240 U. S. 457 624 TABLE OF CASES CITED. XXXVII Page. Southwestern Bell Tel. Co. v. Public Service Comm’n, 262 U. S. 276 152,156 Spector v. Building Inspector, 250 Mass. 63 277 Sperry & Hutchinson Co. v. Rhodes, 220 U. S. 502 277 Sproles v. Binford, 286 U. S. 374 120 Sprout v. South Bend, 277 U. S. 163 347,416 Stalker v. Oregon S. L. R. Co., 225 U. S. 142 491 Standard Accident Ins. Co. v. Sheftall Co., 53 F. (2d) 40 224 Standard Oil Co. v. Anderson, 212 U. S. 215 636 Standard Oil Co. v. Jamison Bros., 166 Tenn. 53 663 Standard Oil Co. v. Marysville, 279 U. S. 582 263, 276 Standard Oil Co. v. United States, 221 U. S. 1 515,597 Standard Oil Co. v. United States, 283 U. S. 163 599 Standard Oil Co. v. United States, 283 U. S. 235 507 Stanley v. Public Utilities Comm’n, 295 U. S. 76 277 State Railroad Tax Cases, 92 U. S. 575 684 Straton v. New, 283 U. S. 318 222 Strouse v. Lawrence, 160 Pa. 421 619 Sullivan v. Rosson, 223 N. Y. 217 221 Sunday Lake Iron Co. v. Wakefield, 247 U. S. 350 156 Swift & Co. v. United States, 196 U. S. 375 515 Swinson v. Chicago, St. P., M. & O. Ry., 294 U. S. 529 185 Switching Rates in Chicago District, 177 I. C. C. 669 454 Taft v. Bowers, 278 U. S. 470 99 Taylor v. Sternberg, 293 U. S. 470 467 Page. Taylor v. Voss, 271 U. S. 176 164,165 Telegraph Co. v. Texas, 105 U. S. 460 415 Terral v. Burke Construction Co., 257 U. S. 529 634 Terre Haute & L. Ry. v. Harrison, 96 Fed. 907 535 Texas v. Interstate Commerce Comm’n, 258 U. S. 158 346 Texas v. Eastern Texas R. Co., 258 U. S. 204 348 Texas & N. O. R. Co. v. Miller, 221 U. S. 408 635 Texas & N. O. R. Co. v. Rail- way Clerks, 281 U. S. 548 145 Texas & Pacific Ry. Co. v. Abilene Cotton OU Co., 204 U. S. 426 513 Thompson v. Tolmie, 2 Pet. 157 612 Thompson v. United States, 142 U. S'. 471 533 Tilden v. United States, 21 F. (2d) 967 183 Titsworth v. Commissioner, 73 F. (2d) 385 135 Todd v. Citizens Gas Co., 46 F. (2d) 855 498 Tomlinson v. Jessup, 15 Wall. 454 635 Towne v. Eisner, 245 U. S. 418 99 Trade-Mark Cases, 100 U. S. 82 347 Trainor Co. v. Aetna Casualty & Surety Co., 290 U. S. 47 205,206 Transcontinental & Western Air, Inc. v. Lujan, 36 N. M. 64 628,629 Trumbull v. Bombard, 171 App. Div. 700 498 Turner v. Wade, 254 U. S. 64 154 Twining v. New Jersey, 211 U. S. 78 245,285 Tyler, In re, 149 U. S. 164 535 Tyler v. The Judges, 179 U. S. 405 347 XXXvm TABLE OF CASES CITED. Page. Underwood Typewriter Co. v. Chamberlain, 254 U. S. 113 414,444,688 Union Pacific R. Co. v. Weld County, 247 U. S. 282 242 Union Stockyards Co. v. United States, 169 Fed. 404 182,183 United Copper Securities Co. v. Amalgamated Copper Co., 244 U. S. 261 343 United Gas Co. v. Public Service Comm’n, 278 U. S. 322 697 United States v. American Bell Tel. Co., 128 U. S. 315 644 United States v. American Linseed Oil Co., 262 U. S. 371 516, 597, 600 United States v. American Tobacco Co., 166 U. S. 468 169 United States v. American Tobacco Co., 221 U. S. 106 515,597 United States v. Atchison, T. & S. F. Ry. Co., 249 U. S . 451 172 United States v. Atchison, T. & S. F. Ry. Co., 142 Fed. 176 515 United States v. Babcock, 250 U. S. 328 172 United States v. Bailey, 9 Pet. 267 649 United States v. Baltimore & Ohio R. Co., 231 U. S. 274 505 United States v. Baltimore & Ohio R. Co., 293 U. S. 454 401 United States v. Bitty, 208 U. S. 393 128 United States v. Brooklyn Terminal, 249 U. S. 296 181, 182,183 United States v. Butler, 297 U. S. 1 113 United States v. Chambers, 291 U. S. 217 531, 533 United States v. Chandler-Dunbar Co., 229 U. S. 53 330, 334,337 Page. United States v. Chicago, M., St. P. & P. R. Co., 282 U. S . 311 634 United States v. Choctaw, O. & G. R. Co., 3 Okla. 404 494 United States v. City Bank, 19 How. 385 649 United States v. Commercial Credit Co., 286 U. S. 63 145 United States v. Constantine, 296 U. S. 287 70,80 United States v. Delaware & Hudson Co., 213 U. S. 366 348 United States v. Ferger, 250 U. S. 199 182 United States v. Ferreira, 13 How. 40 346 United States v. Fort Smith & Western R. Co., 195 Fed. 211 489,491 United States v. Gratiot, 14 Pet. 526 331,336 United States v. Hall, 131 U. S. 50 648,649 United States v. Hartwell, 6 Wall. 385 128 United States v. Hastings, 296 U. S. 188 353 United States v. Heinszen & Co., 206 U. S. 370 79 United States v. Herron, 20 Wall. 251 186 United States v. Hvoslef, 237 U. S. 1 169,172 United States v. Interstate Commerce Comm’n, 294 U. S. 50 356 United States v. Jin Fuey Moy, 241 U. S. 394 348 United States v. Kombst, 286 U. S. 424 628 United States v. Laughlin, 249 U. S. 440 172 United States v. Lewis, 10 F. Supp. 471 211 United States v. Louisiana, 123 U. S. 32 187 United States v. Louisiana, 290 U. S. 70 184 United States v. Mayer, 235 U. S. 55 648 table of cases cited. XXXIX Page. United States v. McDonald, 72 Fed. 898 174 United States v. Mescall, 215 U. S. 26 128 United States v. Michigan, 190 U. S. 379 491 United States v. Moore, 95 U. S. 760 174 United States v. Oklahoma, 261 U. S. 253 218 United States v. One Ford Coupe, 272 U. S. 321 533,534 United States v. Oregon, 295 U. S. 1 528 United States v. Southern Pacific R. Co., 146 U. S. 570 491 United States v. State Investment Co., 264 U. S. 206 • 145 United States v. Stevenson, 215 U. S. 190 353 United States v. Sweet, 245 U. S. 563 332 United States v. Swift & Co., 286 U. S. 106 515 United States v. Turner, Fed. Cas. No. 16,548 533 United States v. Tynen, 11 Wall. 88 188 United States v. Union Stock Yard & T. Co., 226 U. S. 286 182,183 United States v. U. S. Fidelity & G. Co., 236 U. S. 512 159 United States v. U. S. Steel Corp., 251 U. S. 417 515 United States v. Weitzel, 246 U. S. 533 617 United States v. Wells, 283 U. S.102 608 United States v. West Virginia, 295 U. S. 463 187, 324,346 United States v. Williams, 278 U. S. 255 172 United States v. Yuginovich, 256 U. S. 450 188 U. S. Fidelity & G. Co. v. McFerson, 78 Colo. 338 377 U. S. Glue Co. v. Oak Creek, 247 U. S. 321 444 Page. U. S. Mortgage Co. v. Matthews, 293 U. S. 232 120 U. S. Navigation Co. v. Cunard S. S. Co., 284 U. S. 474 512,515 U. S. Navigation Co. v. Cunard S. S. Co., 50 F. (2d) 83 515 Utah v. United States, 284 U. S. 534 535 Utah Power & Light Co. v. Pfost, 286 U. S. 165 330,656 Vallely v. Northern F. & M. Ins. Co., 254 U. S. 348 164 Van Camp Sea Food Co. v. Department of Natural Resources, 30 F. (2d) 111 426 Van Dusen v. Department of Labor, 158 Wash. 414 653 Van Dyke v. Illinois Commercial Men’s Assn., 358 Ill. 458 462 Various Items of Personal Property v. United States, 282 U. S. 577 533 Veazie Bank v. Fenno, 8 Wall. 533 70,87 Violet Trapping Co. v. Grace, 297 U. S. 119 381,542 Violet Trapping Co. v. Grace, 182 La. 405 120 Vitagraph, Inc. v. St. Louis Properties Corp., 77 F. (2d) 590 165 Walker v. Sauvinet, 92 U. S. 90 285 Wall v. Parrot Silver & Copper Co., 244 U. S. 407 323,348 Wallace v. Hines, 253 U. S. 66 685 Walter v. Duffy, 287 Fed. 41 98 Waring v. Clarke, 5 How. 441 249 Washington v. Miller, 235 U. S. 422 215 Washington v. Superior Court, 289 U. S. 361 634 Washington County v. Williams, 111 Fed. 801 680 Waterman v. Canal-Louisi-ana B. & T. Co., 215 U. S. 33 619 XL TABLE OF CASES CITED. Page. Water Rights of Hood River, In re, 114 Ore. 112 527 Waters of Sil vies River, In re, 115 Ore. 27 527 Wathen v. Jackson Oil & Rfg. Co., 235 U. S. 635 349 Watson v. Maryland, 218 U. S. 173 277 Webster v. Cooper, 10 How. 54 649 West v. C. & P. Telephone Co., 295 U. S. 662 139 Western Union v. Alabama, 132 U. S. 472 415 Western Union v. Foster, 247 U. S. 105 634 Western Union v. Kansas, 216 U. S. 1 416,634 Western Union v. Massachusetts, 125 U. S. 530 414 Western Union v. Pennsylvania, 128 U. S. 39 415 Western Union v. Speight, 254 U. S. 17 654 Wharton & Co. v. Winch, 140 N. Y. 287 680 White v. Johnson, 282 U. S. 367 648,649 Wilkerson v. Cooch, 78 F. (2d) 311 165 Willard v. Tayloe, 8 Wall. 557 498 Williams v. Mayor, 289 U. S. 36 278 Williams v. Talladega, 226 U. S. 404 417,419 Williamsport Wire Rope Co. v. United States, 277 U. S. 551 172 Page. Willing v. Chicago Auditorium Assn., 277 U. S. 274 324,346 Wilshire Oil Co. v. United States, 295 U. S. 100 347 Winans v. New York & Erie R. Co., 21 How. 88 643 Wintermute v. Smith, Fed. Cas. No. 17,897 174 Wisconsin v. Illinois, 278 U. S. 367 338 Wisconsin v. Pelican Insurance Co., 127 U. S. 265 187 Wisconsin Railroad Comm’n v. Chicago, B. & Q. R. Co., 257 U. S. 563 184 Witherbee v. Meyer, 155 N. Y. 446 207 Wolfert v. Caledonia Springs Ice Co., 195 N. Y. 118 680 Wolkenstein v. Slonim, 355 Ill. 306 226 Woods v. Provident Life & Accident Ins. Co., 240 Ky. 398 678 Workman v. Commissioner, 41 F. (2d) 139 98 Worthen Co. v. Kavanaugh, 295 U. S. 56 206,221 Worthen Co. v. Thomas, 292 U. S. 426 195 Wyll v. Pacific Mutual Life Ins. Co., 3 F. Supp. 483 679 Wynkoop, H., C. Co. v. Gaines, 227 U. S. 4 536 Wyoming v. Colorado, 259 U. S. 419 520,521 Young, Ex parte, 209 U. S. 123 320,349 Zellerbach Paper Co. v. Helvering, 293 U. S. 172 95,208 TABLE OF STATUTES Cited in Opinions (A) Statutes of the United States Page. 1789, Sept. 24, c. 20, § 13, 1 Stat 80............... 187 1793, Feb. 21, c. 11, §§ 3, 6, 1 Stat. 318............642 1832, July 3, c. 162, 4 Stat. 559................... 642 1836, July 4, c. 357, §§ 6, 15, 5 Stat. 117............642 1837, Mar. 3, c. 45, § 7, 5 Stat. 191............. 643 1842, Aug. 29, c. 263, §§ 5, 6, 5 Stat. 544........... 395 1852, Aug. 30, c. 104, 10 Stat. 56.............. 329 1861, Mar. 2, c. 88, § 13, 12 Stat. 249............. 396 1862, July 2, c. 130, 12 Stat. 503 ................... 83 1864, June 3, c. 106, 13 Stat. 99, 112............... 212 1866, June 27, c. 140, 14 Stat. 74.................... 397 1866, July 4, c. 166, § 5, 14 Stat. 85.............. 332 1868, Feb. 10, c. 7, 15 Stat. 34.....................212 1868, July 25, c. 233, 15 Stat. 171....................329 1870, July 8, c. 230, § 38, 16 Stat. 198...... 392,396 1870, July 8, c. 230, § 39, 16 Stat. 198............. 396 1871, Mar. 3, c. 118, 16 Stat. 538 .................. 329 1872, June 10, c. 416,17 Stat. 370................... 329 1875, Mar. 3, c. 152, 18 Stat. 482............... 491,494 Page. 1879, Mar. 1, c. 125, § 5, 20 Stat. 340............. 535 1882, Aug. 3, c. 376, 22 Stat. 214.................... 60 1887, Feb. 4, c. 104, § 13 (3), (4), 24 Stat. 379 . 453 1887, Feb. 4, c. 104, § 15a (2), 24 Stat. 379..... 454 1887, Feb.-4, c. 104, § 20 (5), 24 Stat. 379 ...... 478-480 1887, Feb. 4, c. 104, § 20 (6), (7), 24 Stat. 379...... 480 1887, Mar. 3, c. 359, 24 Stat. 505..............169, 170 1888, Feb. 18, c. 13, 25 Stat. 35........... 483, 488, 489 1889, Feb. 13, c. 152, 25 Stat. 668.... 483,488,491 1889, Mar. 1, c. 317, 25 Stat. 757................... 483 1889, Mar. 2, c. 412, 25 Stat. 980 .................. 483 1890, May 2, c. 182, 26 Stat. 81.................... 485 1890, May 14, c. 207, 26 Stat. 109................... 485 1890, Aug. 8, c. 728, 26 Stat. 212 42& 1890, Aug. 30, c. 841, 26 Stat. 417.................... 83 1890, Sept. 19, c. 907, 26 Stat. 426............. 329 1891, Feb. 21, c. 249, 26 Stat. 765................... 492 1893, Mar. 2, c. 196, § 2, 27 Stat. 531............. 180 1894, Jan. 22, c. 14, 28 Stat. 27.................... 492 XLI XLII TABLE OF STATUTES CITED. Page. 1894, July 16, c. 138, 28 Stat. 107................... 332 1894, Aug. 18, c. 299, 28 Stat. 238 320 1894, Aug.’24,’ c.’ 330,' 28 Stat. 502................... 487 1894, Aug. 24, c. 330, § 4, 28 Stat. 502............. 492 1896, Apr. 1, c. 87, § 6, 29 Stat. 85.......... 180,187 1896, Apr. 24, c. 122, § 2, 29 Stat. 98.............. 492 1896, May 28, c. 252, §§ 9, 10, 11, 29 Stat. 140... 173 1898, July 1, c. 541, § la (6), 30 Stat. 544.......374,377 1898, July 1, c. 541, §§ la (19), 4 (a), 30 Stat. 544................... 375 1898, July 1, c. 541, § 12, 30 Stat. 544............. 470 1898, July 1, c. 541, § .14, 30 Stat. 544............. 165 1898, July 1, c. 541, § 40, 30 Stat. 544 . 468,469,471 1898, July 1, c. 541, § 40 (a), (c), 30 Stat. 544 . 470,471 1898, July 1, c. 541, § 48, 30 Stat. 544................ 468,469 1898, July 1, c. 541, § 48, (a), (e), 30 Stat. 544............ 466 1898, July 1, c. 541, § 60 (a), (b), 30 Stat. 544. 228 1898, July 1, c. 541, § 64a, 30 Stat. 544............. 375 1898, July 1, c. 541, § 64b, 30 Stat. 544......... 373,374 1898, July 1, c. 541, § 64b (7), 30 Stat. 544. 376,377 1900, Mar. 28, c. Ill, § 2, 31 Stat. 52............. 492 1902, July 1, c. 1369, § 10, 32 Stat. 691.......... 669 1904, Apr. 26, c. 1605, 33 Stat. 309............ 329 1906, June 28, c. 3572, 34 Stat. 539............ 421 1906, June 29, c. 3591, 34 Stat. 584............. 477 1907, Mar. 2, c. 2509, 34 Stat. 1073.................. 329 Page. 1907, Mar. 4, c. 2939, 34 Stat. 1415.................. 182 1909, Mar. 3, c. 264, 35 Stat. 815....................334 1909, Aug. 5, c. 8, § 21, 36 Stat. 130................ 667-671 1910, June 18, c. 309, 36 Stat. 4.77 1910, June 25, ¿ 382, 36 Stat. 630................... 329 1911, Mar. 3, c. 231, 36 Stat. 1087, 1093............ 169 1912, July 25, c. 253, 37 Stat. 201................... 329 1913, Oct. 3, c. 16, 38 Stat. 114.................... 90 1915, Mar. 4, c. 153, 38 Stat. 1164.................. 116 1916, May 15, c. 121, 39 Stat. 191 3RK 1916, June 3, c.’134,’ §124,’39 Stat. 166............. 326 1916, July 27, c. 260, 39 Stat. 391................... 329 1916, Aug. 29, c. 416, §§ 5, 6, 7, 8, 10, 39 Stat. 545.. 669, 670 1916, Sept. 8, c. 463, § 2 (a), (c), 39 Stat. 756....... 96 1917, Feb. 23, c. 114, 39 Stat. 929 86 1917, Oct.' 2, c. 62, 40 Stat. 297................... 332 1920, Feb. 25, c. 86, 41 Stat. 437 339. 1920, Feb.’ 28,’ c’ 91, ’§ 20,’ 41 Stat. 456............. 473 1920, Feb. 28, c. 91, § 208 (a), 41 Stat. 456...... 455 1920, May 22, c. 195, §§ 3, 8, 41 Stat. 614.......... 170 1920, June 10, c. 285, 41 Stat. 1063.................. 324 1921, Nov. 23, c. 136, 42 Stat. 227................... 497 1921, Nov. 23, c. 136, § 201, 42 Stat. 227 ........... 96 1921, Nov. 23, c. 136, § 202, 42 Stat. 227.......... 497 1921, Nov. 23, c. 136, § 202 (b), 42 Stat. 227....... 96 TABLE OF STATUTES CITED. XLIII Page. 1921, Nov. 23, c. 136, § 402 (c), 42 Stat. 227...... 607 1922, Mar. 8, c. 94, 42 Stat. 414................ 487,488 1924, June 2, c. 234, 43 Stat. 253.................... 497 1924, June 2, c. 234, § 204 (a), (b), 43 Stat. 253. 497 1924, June 2, c. 234, § 204 (11) (b), 43 Stat. 253. 96 1924, June 2, c. 234, § 234 (a), 43 Stat. 253.... 545 1924, June 7, c. 320, 43 Stat. 607, 624.............. 158 1924, June 7, c. 348, 43 Stat. 653................... 86 1924, June 7, c. 355, § 2, 43 Stat. 659.............. 400 1925, Feb. 13, c. 229, § 7, 43 Stat. 936.............. 668 1925, Mar. 3, c. 467, 43 Stat. 1186............. 329 1925, Mar. 4, c. 553, 43 Stat. 1302, 1309............. 158 1926, Feb. 26, c. 27, 44 Stat. 9 90 497 1926, Feb.’ 26,'c.' 27,’ §"201/ 44 Stat. 9.............. 96 1926, Feb. 26, c. 27, §i§ 203 (c), 204 (a) (9), 44 Stat. 9................ 132 1926, Feb. 26, c. 27, § 204 (b), 44 Stat. 9.............. 96 1926, Feb. 26, c. 27, § 213 (a), 44 Stat. 9......... 93 1926, Feb. 26, c. 27, § 1115, 44 Stat. 9............. 535 1926, May 27, c. 406, 44 Stat. 662.................... 376 1926, May 27, c. 406, § 3 (a) (5), 44 Stat. 662.. 224 1926, May 27, c. 406, § 24 (a), (b), 44 Stat. 662. 163, 164 1926, May 27, c. 406, § 25 (a), (b), 44 Stat. 662. 162, 163,164 1927, Feb. 7, c. 67, 44 Stat. 1058................... 392 1927, Feb. 23, c. 169, § 1, 44 Stat. 1162............. 653 Page. 1927, Feb. 23, c. 169, §§ 2, 4, 5, 44 Stat. 1162..... 652 1928, May 29, c. 852, 45 Stat. 791................... 497 1929, Jan. 19, c. 79, §§ 1, 2, 45 Stat. 1084......... 434 1929, Feb. 5, c. 153, 45 Stat. 1151.................... 86 1930, May 27, c. 340, § 5, 46 Stat. 391............. 439 1930, May 29, c. 349, § 7, 46 Stat. 468............. 168 1930, May 29, c. 349, §§ 13, 17, 46 Stat. 468..... 171 1930, June 17, c. 497, 46 Stat. 590................... 534 1930, June 17, c. 497, § 307, 46 Stat. 590......... 439 1930, July 3, c. 847, 46 Stat. 918................... 329 1930, July 3, c. 849, § 4, 46 Stat. -992............ 122 1930, July 3, c. 863, § 1, 46 Stat. 1016............ 171 1932, Jan. 22, c. 8, 47 Stat. 5................. 211, 214 1932, June 22, c. 271, 47 Stat. S26 195 1932, July 21, c. 520,' 47 Stat. 709................... 211 1933, Mar. 3, c. 204, § 76, 47 Stat. 1467........ 469 1933, Mar. 3, c. 212, § 16, 47 Stat. 1517............ 171 1933, Mar. 9, c. 1, Title III, 48 Stat. 5............213 1933, Mar. 24, c. 5, 48 Stat. 20 213 214 1933, May ¿2,'c’'25, 48 Stat/ 31 53 119 1933, May 18,’ c.’ 32, 48 Stat/ 58................ 315,365 1933, June 15, c. 79, 48 Stat. 147................... 213 1933, June 16, c. 100, § 8 (a), 48 Stat. 283.......... 168 1934, Jan. 11, c. 1, Title II, § 206, 48 Stat. 317.... 535 1934, Mar. 2, c. 38, 48 Stat. 389 ................... 85 1934, Mar. 24, c. 84, § 7 (6), 48 Stat. 456........... 669 XLIV TABLE OF STATUTES CITED. Page. 1934, Mar. 24, c. 84, § 15, 48 Stat. 456............ 671 1934, Apr. 21, c. 157, 48 Stat. 598 ................. 82 1934, Apr. 21, c. 157, §§ 10, 14, 48 Stat. 598..... 103 1934, May 18, c. 301, 48 Stat. 781.................. 126 1934, May 21, c. 324, 48 Stat. 792................... 86 1934, June 7, c. 424, § 77B, 48 Stat. 911........ 161, 216, 217, 465, 467, 468, 470, 471 1934, June 7, c. 424, § 77B (a), 48 Stat. 911,....217 218,221,223,225 1934, June 7, c. 424, § 77B (b), 48 Stat. 911. 222,223 1934, June 7, c. 424, § 77B (c) (10), 48 Stat. 911. 222 1934, June 7, c. 424; § 77B (c) (11), 48 Stat. 911. 470 1934, June 7, c. 424, § 77B (e), (f), 48 Stat. 911. 223 1934, June 7, c. 424, § 77B (h), 48 Stat. 911. 165,223 1934, June 7, c. 424, § 77B (i), 48 Stat. 911.... 218, 222,223,466,467,470 1934, June 7, c. 424, § 77B (k), 48 Stat. 911.... 163, 164,469,471 1934, June 14, c. 512, 48 Stat. 955.................. 325 1934, June 19, c. 652, 48 Stat. 1064................. 478 1934, June 19, c. 652, 48 Stat. 1081................. 652 1934, June 20, c. 687, 48 Stat. 1184.................. 82 1935, Aug. 24, c. 641, 49 Stat. 750............ 57,79,112 1935, Aug. 24, c. 641, § 21 (a), 49 Stat. 750.... 112 1935, Aug. 24, c. 641, § 21 (d), 49 Stat. 750. 112,113 1935, Aug. 31, c. 836, 49 Stat. 1075,................ 315 Constitution. See Index at end of volume. Page. Judicial Code. § 24 169,241,352,675 § 233 180,187 § 237 472,651,684 § 239 639 § 240 (a) 644 § 649 608 § 687 187 § 700 608 Revised Statutes. § 780.................. 173 § 838 535 § 841 173 § 3213 535 § 3224............. 112,351 §§ 3248 , 3251, 3333... 533 § 3334 535 § 3477 174 § 4377 534 § 4900............. 392-398 § 4901............. 393,396 § 4916................ 640 § 4917 ........ 639,641,643 , §§ 4919, 4921......... 393 § 4922.... 639, 641, 645, 649 § 5219..........212,214,215 U. S. Code. Title 5, §§ 092d, 697a.......... 168 § 703a........... 171 § 707............ 170 § 707a.......... 171 Title 11, § § 21, 21 (a) (5)... 224 § 32 (c).......... 165 § 48 (a).......... 162 § 207......... 161,217 § 207 (a)......... 225 § 207 (i)......... 218 Title 12, §§ 51 (a), 51 (d)....... 213,214 § 548 ............. 212 § 548 (3).......... 214 Title 15, § 1........... 503,571 c. 14............. 211 § 15 ........... 503 § 26 513,514 § 29 571 § 610 ...1...... 214 TABLE OF STATUTES CITED. XLV Page. U. S. Code—Continued. Title 18, § 408a.................•. 126 § 744c.............439 Title 19, § 1307 ....... 439 Title 28, §•41................ 169,675 § 41 (1), (16).... 617 § 341......... 180,187 § 344............. 684 § 344 (b)......... 353 § 346............. 124 § 480............. 383 §§ 773, 875......... 608 Title 35, § 49............. 392 § 50 393 § 54 640 § 65 639 §§ 67, 70.......... 393 § 71 639 Title 38, § 445............... 122 § 512.............. 158 Page. U. S. Code—Continued. Title 43, § 912................487 Title 45, §§ 2, 6.............. 180 § 23 ............... 400 §61 182 Title 46, §§ 801, 812, 815, 816, 876....... 513 Title 47, § 301 ff............ 652 Title 48, § 1237.............. 669 Title 49, § 3 (1)......... 505 § 8 507 § 9 507,508 §§ 10 (4), 41 (3).. 508 § 13 (3), (4)..453 § 16 (1)...... 507,508 § 16 (2)........ 507 §16 (7), (8), (12). 514 § 42 508 § 60 434 (B) Statutes of the States and Territories. Arkansas. Constitution, Art. XII, § 6...........631 Art. XII, § 11. 631-637 Crawford & Moses’ Digest (1907), § 7137............... 631-635 California. 1929 Stat., pp. 19, 1555. 442 1933 Stats., p. 394, §§ 1010, 1060, 1064, 1065, 1066, 1068, 1070 . 424,425 1933 Stats., pp. 484 et seq................. 423 Illinois. 1907 Laws, p. 443, §118. 462 1921 Laws, § 68 Public Utilities Act........ 463 1931 Laws, p. 745, § 72. 452 1933 Laws, pp. 805, 811, §§ 75, 94............ 462 Smith-Hurd Rev. Stats. (1935), c. 110, §§ 199, 218.................. 462 Louisiana. 1902 Laws, p. 195, Act No. 120.............. 191 1916 Laws, p. 568, Act No. 280.............. 191 1932 Laws, p. 454, Act No. 140........ 191-193,196 1934 Laws, Act No. 23 of July 12, § 1..........240 Act No. 23 of July 12 Ri s 942 1934 Laws, Act No. 161. 120 1934 Laws, Second Extraordinary Session, p. 156, Act No. 44...... 196 Maryland. 1935 Code Supp., Art. 81, § 15e.........210,215 Minnesota. Constitution, Art. 10, § 3...................... 610 Mason’s Stats., §§ 8025-8028 .................. 610 XLVI TABLE OF STATUTES CITED. Page. New Mexico. 1931 Laws, c. 31...... 627 1933 Laws, c. 176, § 2.. 627 New York. 1933 Laws, c. 158..... 271 1933 Laws, c. 158, § 317 (c)............ 271,272' 1934 Laws, c. 126... 257,271 1934 Laws, p. 580, Art. 21-A, § 258 (q)......272 North Carolina. 1927 Laws, c. 80, § 312. 684 1929 Laws, c. 345, § 312. 684 North Dakota. 1933 Laws, p. 493, Act of June 29, 1932.... 138 Compiled Laws (1913), §§ 2122, 2242-2244... 138 Compiled Laws Supp. (1925), § 2141a3.... 138 Page. Ohio. Constitution, Art. II, § 41.................436 General Code (1933), §§ 2228-1, 2228-2.....434 Philippine Islands. Constitution, Art. XV, § 2...............•..671 Tennessee. 1917 Acts, c. 74, §6. 658,664 1929 Acts, c. 80........ 664 1929 Acts, c. 80, § 1 (a), (b)........ 659-663 Utah. Compiled Laws (1917), §§ 2055, 2057, 2058, 2071, 2072, 2073.. 379 Washington. 1933 Laws, c. 191.. 410,418 1933 Laws, c. 191, § 2.. 651 West Virginia. 1933 Acts, c. 36....... 382 (C) Treaties. 1827, July 4, 8 Stat. 346 (Sweden and Norway) .................. 115,116 1832, Mar. 24, 7 Stat. 366 (Creek Indians)......482 1833, Feb. 14, 7 Stat. 417 (Creek Indians)......482 1855, June 22, 11 Stat. 611 (Choctaw and Chickasaw Indians)..........483 1856, Aug. 7, 11 Stat. 699 (Creek and Seminole Indians)..............482 1866, June 14, 14 Stat. 785 (Creek Indians)......482 1889, Jan. 19, 25 Stat. 757 (Creek Indians)......483 1928, June 5, 47 Stat. 2135 (Sweden and Norway) ................ 117 CASES ADJUDGED IN THE SUPBEME COUBT OF THE UNITED STATES AT OCTOBER TERM, 1935. UNITED STATES v. BUTLER et al., RECEIVERS OF HOOSAC MILLS CORP. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT. No. 401. Argued December 9, 10, 1935.—Decided January 6, 1936. 1. Processors of farm products have a standing to question the constitutionality of the “processing and floor-stock taxes” sought to be laid upon them by the Agricultural Adjustment Act of May 12, 1933, 48 Stat. 31. Massachusetts v. Mellon, 262 U. S. 447, distinguished. P. 57. 2. A tax, in the general understanding and in the strict constitutional sense, is an exaction for the support of Government; the term does not connote the expropriation of money from one group to be expended for another, as a necessary means in a plan of regulation, such as the plan for regulating agricultural production set up in the Agricultural Adjustment Act. P. 61. 3. In testing the validity of the “processing tax,” it is impossible to wrest it from its setting and treat it apart as a mere excise for raising revenue. P. 58. 4. From the conclusion that the exaction is not a true tax it does not necessarily follow that the statute is void and the exaction uncollectible, if the regulation, of which the exaction is a part, is within any of the powers granted to Congress. P. 61. 5. The Constitution is the supreme law of the land, ordained and established by the people, and all legislation must conform to the principles it lays down. P. 62. 6. It is a misconception to say that, in declaring an Act of Congress unconstitutional, the Court assumes a power to overrule or control the action of the people’s representatives. P. 62. 43927°—36---1 1 2 OCTOBER TERM, 1935. Syllabus. 297 U.S. 7. When an Act of Congress is appropriately challenged in a court, it is the duty of the court to compare it with the article of the Constitution which is invoked and decide whether it conforms to that article. P. 62. 8. All that the court does or can do in such cases is to announce its considered judgment upon the question; it can neither approve nor condemn any legislative policy; it can merely ascertain and declare whether the legislation is in accordance with, or in contravention of, the provisions of the Constitution. P. 62. 9. The question in such cases is not what powers the Federal Government ought to have, but what powers have in fact been given it by the people. P. 63. 10. Ours is a dual form of government; in every State there are two Governments—the State and the United States; each State has all governmental powers, save such as the people, by the Constitution, have conferred upon the United States, denied to the States, or reserved to themselves. P. 63. 11. The Government of the United States is a Government of delegated powers; it has only such powers as are expressly conferred upon it by the Constitution and such as are reasonably to be implied from those expressly granted. P. 63. 12. The Agricultural Adjustment Act does not purport to regulate transactions in interstate or foreign commerce; and the Government in this case does not attempt to sustain it under the commerce clause of the Constitution. P. 63. 13. In Article I, § 8, cl. 1 of the Constitution, which provides that Congress shall have power “to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defence and general welfare of the United States,” the phrase “to provide for the general welfare” is not an independent provision empowering Congress generally to provide for the general welfare, but is a qualification defining and limiting the power “to lay and collect taxes,” etc. P. 64. 14. The power to appropriate money from the Treasury (Constitution, Art. I, § 9, cl. 7) is as broad as the power to tax; and the power to lay taxes to provide for the general welfare of the United States implies the power to appropriate public funds for that purpose. P. 65. 15. The power to tax and spend is a separate and distinct power; its exercise is not confined to the fields committed to Congress by the other enumerated grants of power; but it is limited by the requirement that it shall be exercised to provide for the general welfare of the United States. P. 65. 3 UNITED STATES v. BUTLER. Syllabus. 1 16. The Court is not required in this case to ascertain the scope of the phrase “general welfare of the United States,” or to determine whether an appropriation in aid of agriculture falls within it. P. 68. 17. The plan of the Agricultural Adjustment Act is to increase the prices of certain farm products for the farmer by decreasing the quantities produced; the decrease is to be attained by making payments of money to farmers who, under agreements with the Secretary of Agriculture, reduce their acreage and crops; and the money for this purpose is exacted, as a tax, from those who first process the commodities. Held: (1) The Act invades the reserved powers of the States. P. 68. (2) Regulation and control of agricultural production are beyond the powers delegated to the Federal Government. P. 68. (3) The tax, the appropriation of the funds raised, and the direction for their disbursement, are but parts of the plan—the means to an unconstitutional end. P. 68. (4) The power of taxation, which is expressly granted to Congress, may be adopted as a means to carry into operation another power also expressly granted; but not to effectuate an end which is not within the scope of the Constitution. P. 69. (5) The regulation of the farmer’s activities under the statute, though in form subject to his own will, is in fact coercion through economic pressure; his right of choice is illusory: P. 70. (6) Even if the farmer’s consent were purely voluntary, the Act would stand no better. At best it is a scheme for purchasing with federal funds submission to federal regulation of a subject reserved to the States. P. 72. (7) The right to appropriate and spend money under contracts for proper governmental purposes cannot justify contracts that are not within federal power. P. 72. (8) Congress cannot invade state jurisdiction by purchasing the action of individuals any more than by compelling it. P. 73. (9) There is an obvious difference between a statute stating the conditions upon which moneys shall be expended and one effective only upon the assumption of a contractual obligation to submit to a regulation which otherwise could not be enforced. P. 73. (10) Owing to the supremacy of the United States, if the contracts with farmers contemplated by the Agricultural Adjustment Act were within the federal power to make, the States could not declare them void or prevent compliance with their terms. P. 74. (11) Existence of a situation of national concern resulting from similar and widespread local conditions cannot enable Con- 4 OCTOBER TERM, 1935. Oral Argument of the Solicitor General. 297 U.S. gress to ignore the constitutional limitations upon its own powers and usurp those reserved to the States. P. 74. (12) If the novel view of the General Welfare Clause now advanced in support of the tax were accepted, that clause would not only enable Congress to supplant the States in the regulation of agriculture and of all other industries as well, but would furnish the means whereby all of the other provisions of the Constitution, sedulously framed to define and limit the powers of the United States and preserve the powers of the States, could be broken down, the independence of the individual States obliterated, and the United States converted into a central government exercising uncontrolled police power throughout the Union superseding all local control over local concerns. P. 75. (13) Congress, being without power to impose the contested exaction, could not lawfully ratify the acts of an executive officer in assessing it. P. 78. 78 F. (2d) 1, affirmed. Certiorari, 296 U. S. 561, to review a decree which reversed an order of the District Court (Franklin Process Co. v. Hoosac Mills Corp., 8 F. Supp. 552), directing the receivers of Hoosac Mills, a cotton milling corporation, to pay claims of the United States for processing and floor taxes on cotton, levied under §§ 9 and 16 of the Agricultural Adjustment Act of May 12, 1933. The opinion of this Court begins on p. 53, post; the dissenting opinion on p. 78. Solicitor General Reed, orally, after stating the case: The conditions to which power is addressed are always to be considered when the exercise of power is challenged,—extraordinary conditions may call for extraordinary remedies; but, as the Court has said, “the argument necessarily stops short of an attempt to justify action which lies outside the sphere of constitutional authority. Extraordinary conditions do not create or enlarge constitutional power.” Home Building Loan Assn. v. Blaisdell, 290 U. S. 398; Schechter Case, 295 U. S. 495. In the effort to meet the emergencies arising during this depression, we have proceeded under that view of the 5 UNITED STATES v. BUTLER. Oral Argument of the Solicitor General. 1 law; and we do not now contend that the extraordinary conditions give rise to anything more than an opportunity to use extraordinary remedies; but, of course, such remedies as flow from the language of the Constitution as it has been interpreted by this Court. The Government, in legislating in regard to the depression, was quick to ratify actions that had been taken without clear, specific Congressional authority. The Court will recall that the first ratification by the Congress was as to the closing of the banks, which had been done under a statute conferring that authority, but in terms making ratification advisable. Further, there was an abrogation of the gold clause. There were Acts directed to the relief of distress. Others authorized lending to the home-owner, through the Home Owners Loan Corporation; to the farmer, through the Farm Credit Corporation; and to banks and industry, through the Reconstruction Finance Corporation. As a part of this concerted effort to bring about recovery, the Agricultural Adjustment Act was passed. It should not, however, be approached as an emergency measure, nor as a measure that came into consideration because of the present emergency. Rather should we bear in mind that since the 68th Congress at least, the House and the Senate and the Executive have been giving careful attention to the problem of agricultural surpluses. Eight times have acts been reported by the Agricultural Committee of the House, and ten times by the Committee on Agriculture and Forestry of the Senate. The House has rejected two and passed five. The Senate has rejected two and passed four. It is recalled, of course, that the McNary-Haugen Act was twice vetoed by President Coolidge, that the Federal Farm Board Act was approved by President Hoover, and the Agricultural Adjustment Act by President Roosevelt. 6 OCTOBER TERM, 1935. Oral Argument of the Solicitor General. 297 U.S. We have a long history of Legislative and Executive consideration of the problem of agricultural surplus. There were innumerable acts that dealt with other agricultural difficulties, rather than the surplus as such. But it was the mounting supply of the great staple, non-perishable, agricultural commodities that demanded the attention of the Legislature and of the Executive, and that has received the attention of the courts throughout those years. I need refer only to the Cooperative Marketing Acts passed by States, complemented by acts of Congress, which had for an end not only an orderly marketing of commodities but an endeavor to bring about an adjustment of supply and demand and a hoped-for diminution of a burdensome surplus. They did not achieve that result. The Federal Farm Board Act, 46 Stat. 11, 12 U. S. C. § 1141, while providing for loans to cooperatives that complied with the Capper-Volstead Act, 42 Stat. 388, 7 U. S. C. §§ 291, 292, also contemplated a control of production of cotton and wheat through stabilization corporations. I mean the handling of the surplus, as distinct from a control of the actual growth of the commodity. . . . The present Act is comprehensive. The title probably gives as accurate a reflection of its purposes as any statement of mine could do. I might say parenthetically that this act in separate titles dealt with the Farm Credit Administration and the establishment of the Farm Loan Bank Corporation, through which two billion dollars was loaned to agriculture. The Act opens with a declaration of emergency, and passes on to a declaration of policy. A cursory reading will show that this declaration of policy, while it follows in form and in location in the Act declarations of policy that this Court considered in Panama Rfg. Co. v. Ryan, 7 UNITED STATES v. BUTLER. 1 Oral Argument of the Solicitor General. 293 U. S. 388, and in Schechter v. United States, is entirely distinct. It is a great deal more than a hope of what may happen, and will become important as an actual standard of what Congress sought from the passage of this legislation, and of what discretion it gave to its chosen instruments for carrying that out. The essence of the declaration is that Congress hopes to re-establish prices to farmers at a level that will give agricultural commodities a purchasing power, with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period. For the purpose of this commodity and of all others, I believe, except tobacco, the base period was fixed as August, 1909, to July, 1914. . . . After this declaration of policy, the Act points out what is to be done to effectuate it. Part 2 relates to the authority of the Secretary of Agriculture to achieve this standard which Congress has laid down. Section 8 gives to the Secretary of Agriculture the power to provide for reduction in the acreage or reduction in the production for market, or both, of any basic agricultural commodity through agreements with producers or by other voluntary methods, and to provide for rental or benefit payments in connection therewith. . . . This case involves the floor-stock tax, together with the processing tax. The processing tax is covered by § 9 of the Act. Section 9(a) provides the action that puts the tax into effect, and § 9(b) declares what that tax shall be: “The processing tax shall be at such rate as equals the difference between the current average farm price for the commodity and the fair exchange value of the commodity,” . . . The current farm price for the commodity is a figure determined by the Department of Agriculture. The determination involves many different commodities, but includes all of those which are basic agricultural com- 8 OCTOBER TERM, 1935. Oral Argument of the Solicitor General. 297U.S. modifies under this Act. Prices of farm commodities have been determined and published by the Secretary of Agriculture for at least twenty years. The exchange value of the commodity is defined in § 9 (c) of the Act, and is— “the price therefor that will give the commodity the same purchasing power, with respect to articles farmers buy, as such comodity had during the base period specified in § 2.” That means that the value or farm price would need to be increased according to the rising scale of prices for articles that farmers bought. Both of those factors had been used by the Department of Agriculture for many years. . . . The collection of the tax is left to the Collector of Internal Revenue in the usual form, and an appropriation is made to carry out the purposes of the Act. The appropriation, I am sure, will be found important because it clearly answers the contention that this tax was wholly for the purpose of rental and benefit payments. By § 12 one hundred million dollars are appropriated “For administrative expenses under this title and for rental and benefit payments made with respect to reduction in acreage.” It also appropriated “The proceeds derived from all taxes imposed under this title . . . to be available to the Secretary of Agriculture for expansion of markets and removal of surplus agricultural products and the following purposes under Part 2 of this title: Administrative expenses, rental and benefit payments, and refunds on taxes.” There has been no adjustment of the tax rates in respect to cotton. No question is here as to refunds of the tax, nor of amendments to the Agricultural Adjustment Act. We do not conceive that the amendments (passed in August, 1935, 49 Stat. 750) have any effect upon the present case, unless the Court should determine that the 9 UNITED STATES v. BUTLER. Oral Argument of the Solicitor General. 1 old Act, the first Act, does not properly delegate to the officers of the Government discretion to handle the duties imposed upon them, and in that case there has been a ratification of the action of the officers, so that the tax is now authorized not only by the discretion of the administrative officers, but by the amendatory legislation. The license taxes are in and of themselves a revenue measure; they are levied as an excise on the processing of the commodity, and for that reason are to be collected without regard to the purposes for which they are to be spent, inasmuch as they go into the Treasury of the United States, together with other funds that were appropriated by the same section, and become there a part of the revenue of the Government. It is true that by the very Act which imposed the tax and provided for its collection, the proceeds were appropriated to other purposes. But § 12 shows that if not a dollar had been collected in the way of processing taxes, the Government, nevertheless, made provision for the payment of rental and benefit contracts out of the hundred million dollars which Congress directly appropriated and out of the authority which they gave to the Secretary of the Treasury to furnish funds for carrying on this activity of the Government. As a matter of fact, something less than a billion dollars has already been collected in these taxes. The question of the validity of the Agricultural Adjustment Act as a tax or revenue statute alone is dependent upon a consideration of the cases which this Court has decided, namely, the Child Labor Tax case, 259 U. S. 20, and the case of Hill v. Wallace, 259 U. S. 44, upon the one side, and United States v. Doremus, 249 U. S. 86, Veazie Bank v. Fenno, 8 Wall. 533, and Mag-nano Company v. Hamilton, 292 U. S. 40, upon the other. We distinguish the Child Labor Tax case. That case involved a tax of ten per cent, upon the profits which 10 OCTOBER TERM, 1935. Oral Argument of the Solicitor General. 297 U.S. might be earned by a manufacturer who employed child labor, to be imposed immediately upon a violation of the law. It was not a tax in the sense that it was levied upon an operation by the manufacturer, but was held by this Court to be a penalty which affected the income from the operation of a manufacturer who employed children, and that penalty applied at the very instant when he employed the first child contrary to that Act, and employed that child knowingly. The doctrine of scienter entered into that case. In Hill v. Wallace the tax was upon the selling of futures upon the Grain Exchange, and was levied at a rate of 20 cents a bushel, when the commission of the broker was only a fraction of a cent a bushel, so that it was prohibitive. This Court said in the case of Veazie Bank v. Fenno that.“the judicial cannot prescribe to the legislative department of the government limitations upon the exercise of its acknowledged powers. The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts but to the people, by whom its members are elected.” The case of Hampton Company v. United States, 276 U. S. 394, involved an Act which declared in its very title that it was for the protection of industries and for the raising of revenue. In the present case there is a plain statement in the Act that the tax is to be used for something other than the general support of the Government. The contract which the Secretary of Agriculture makes with the individual producer is to be for the purpose of inducing the producer to reduce his production. In United States v. Doremus, which involved licenses and taxes to control the dealing in drugs, there was a tax, in the earlier acts, of only one dollar a year, and a license for the purpose of handling; and upon that tax Congress built an entire system for information in regard to dealing in morphine and other narcotics. That was upheld. . . . 11 UNITED STATES v. BUTLER. Oral Argument of the Solicitor General. 1 In the case of McCray v. United States, 195 U. S. 27, there was a clear intention on the part of Congress, which was not, however, expressed in the Act itself, to use the power of taxation for purposes other than the raising of revenue. I think it may be said that the Doremus case and the McCray case on one side, and the case of Hill v. Wallace and the Child Labor case on the other, lead to the conclusion that the motives of Congress in levying a tax are not to be considered by this Court. Even if the Act shows that the motive is ulterior to the tax in the mind of Congress, that is immaterial to the validity of the tax, so long as it is based upon an authority which occurs in the Constitution. In both the Child Labor Tax case and in the case of Hill v. Wallace, you had clear evidence of prohibitions against constitutional rights which people had and exercised. In the Child Labor Tax case there had been, up to that time, and of course now is, the right to use child labor in manufacture if there was no’ State prohibition; and of course the brokers who deal upon the Exchange at Chicago, on the Grain Exchanges wherever they may be, have the right to deal upon those exchanges. So you had a tax which in effect prohibited the exercise of a right by the taxpayer. You had, in the Child Labor case, in addition to the excessive tax, an imposition of that tax for a violation of a rule laid down. That, we think, distinguishes those cases from this one. Here is a tax which is to be used, let us say, in rental and benefit payments, together with other things, but there is nothing in the use for a rental or benefit payment which deprives the person who contracts with the Government of any constitutional right which he had at that time. He may be induced to give up a right which he had, which of course every employee of the Government gives up when he gives up his liberty to do other things and agrees to do certain things for the Government. 12 OCTOBER TERM, 1935. Oral Argument of the Solicitor General. 297 U.S. In so far as the excise is concerned, our briefs, I think, cover that thoroughly. We have the question of uniformity, we have the question of floor-stocks, and I pass to the problem of delegation. [Here followed an interesting discussion (interrupted by many questions from the Bench) of the method of fixing the tax and of the question whether the functions sought to be delegated to the Secretary of Agriculture in that regard were constitutionally delegated, with proper legislative standards. The speaker also contended that, in any event, the acts of the Secretary in fixing the taxes were ratified by § 21 (b) of the Amendatory Act of August 24, 1935.] As to whether or not this is a violation of the Fifth Amendment, we contend that there is no power in the taxpayer to question the expenditures that are made. Citing Massachusetts v. Mellon, 262 U. S. 447. . . . If the Court should think it proper to go beyond the tax itself, and consider the purpose for which this money is expended, then we contend that the general welfare clause gave Congress power to expend it for rental and benefit payments. We distinguish, of course, between the use of Federal money to coerce some action by an individual, and the inducement to the individual. We say that the general welfare clause is a clause that is construed not as a general power, but as a special power in Congress to expend this money; and we rely particularly upon the case of United States v. Realty Company, 163 U. S. 427, where it was held that Congress had authority to appropriate for the payment of a claim for sugar bounty which was a moral claim upon the Government, even if the earlier act granting the bounty were unconstitutional. . We also take up a discussion of the purpose of this money—as to whether this tax has been levied for a public purpose. We do not think that that can be ap- 13 UNITED STATES v. BUTLER. Brief for the Government. 1 proached except from the standpoint of the general rules in regard to the use of tax money. We know how hesitant the Court is to interfere with the appropriation by Congress of money for purposes deemed by Congress to be within the public welfare. We accept the decision in the case of Loan Association v. Topeka, 20 Wall. 655, where this Court held that a State act was not for a public purpose, where it had authorized the payment to a local manufacturer of funds to operate his business. Upon the other side, the theory of public purpose upon which we rely is that enunciated in the case of Noble State Bank v. Haskell, 219 U. S. 104. In that case money was taken from the various banks that were operating in the State of Oklahoma and paid into a fund which was to be used to make whole the depositors in banks that failed. That is an illustration of the use of public money for a public purpose. It seems to us similar to the use that is made here of a tax levied on processors in the form of an excise passed on to the general consuming public, the purpose of which is to raise money to be used by the Government in contracts with farmers, for the reduction of surplus production that was pressing on the price and pressing on the supply in the hands of the American handlers of commodities. . . . Extracts from the printed argument for the Government, signed by Attorney General Cummings, Solicitor General Reed, Assistant Attorney General Wideman, As-sistant Attorney General Morris, and Messrs. Sewall Key, Andrew D. Sharpe, Robert N. Anderson, Alger Hiss, Mastin G. White, and Prew Savoy. The sole purpose of the processing and floor-stock taxes is to raise revenue. The processing and floor-stock taxes are excises; not direct taxes. 14 OCTOBER TERM, 1935. Brief for the Government. 297 U.S. The floor-stocks adjustment may be separately justified as a necessary adjunct to the processing taxes. Powers were not unlawfully delegated. If in the original Act Congress exceeded its power to delegate, that is now immaterial because Congress has expressly ratified the assessment and collection of the taxes. Agricultural Adjustment Act, as amended Aug. 24, 1935, § 30, subsec. 21 (b); Rafferty v. Smith, Bell & Co., 257 U. S. 226; The Peggy, 1 Cranch 103, 110; Dinsmore v. Southern Express Co., 183 U. S. 115; Dorchy v. Kansas, 264 U. S. 286; Steamship Co. v. Joliffe, 2 Wall. 450. This Court has recognized that Congress may ratify taxes, illegal when assessed but assessed under claim and color of authority, if it could have imposed such taxes in the first instance and if its power to do so remained unimpaired to the date of ratification. United States v. Heinszen & Co., 206 U. S. 370; Rafferty v. Smith, Bell & Co., 257 U. S. 226. See also Mascot Oil Co. v. United States, 282 U. S. 434; Charlotte Harbor Ry. v. Welles, 260 U. S. 8, 10, 11; Seattle v. Kelleher, 195 U. S. 351, 359-360; Hamilton v. Dillin, 21 Wall. 73; Hodges v. Snyder, 261 U. S. 600, 602-603; Stockdale v. Insurance Companies, 20 Wall. 323, 332; Wagner v. Baltimore, 239 U. S. 207, 216, 217; Mattingly v. District of Columbia, 97 U. S. 687; Kansas City Ry. Co. v. Road District, 266 U. S. 379; Tiaco v. Forbes, 228 U. S. 549. Cf. Matter of People (Title & Mortgage Guaranty Co.), 264 N. Y. 69; Fisk v. Kenosha, 26 Wis. 23; Miller n. Dunn, 72 Cal. 462. A tax is not necessarily invalid because retroactively applied. Taxing acts having retroactive features have been upheld in view of the particular circumstances disclosed. The processing and floor-stocks taxes do not contravene the Fifth Amendment. Helvering v. City Bank Farmers Trust Co., 296 U. S. 85; Nebbia n. New York, 291 U. S. 502, 525; Railroad Retirement Board v. Alton R. Co., 295 U. S. 330, 347 (footnote 5); Magnano Co. v. Hamilton, 292 U. S. 40, 44; McCray v. United States, 195 U. S. 27; 15 UNITED STATES v. BUTLER. 1 Brief for the Government. Nicol v. Ames, 173 U. S. 509, 521; Flint v. Stone Tracy Co., 220 U. S-. 107. The contention that these taxes are not for a public purpose is simply another way of challenging their character as revenue measures. The money collected goes into the Treasury of the United States. One must presume that it will be used for a purpose within the powers of Congress. If so used, no objection could be made on the ground that the taxes are not levied for a public purpose. Mountain Timber Co. v. Washington, 243 U. S. 219; Noble State Bank v. Haskell, 219 U. S. 104; Veazie Bank v. Fenno, 8 Wall. 533. Respondents should not be allowed to question the appropriation as a defense to the payment of their taxes. Massachusetts v. Mellon, 262 U. S. 447, 487. Cf. Knights v. Jackson, 260 U. S. 12, 15; Patton v. Brady, 184 U. S. 608, 620; United States v. Realty Co., 163 U. S. 427. Public policy requires that taxpayers shall not avoid payment of otherwise valid taxes by questioning the purpose of the levy or of an appropriation contained in the taxing statute. The appropriateness of such a rule is particularly apparent where, as here, it is not possible to ascertain the exact use to which the taxpayers’ money will be put. It is true that the Act in its original form contained in itself an appropriation. § 12 (b). But this fact would not have made the money, if collected at that time, any the less a part of the public funds. See Knights v. Jackson, 260 U. S. 12. Furthermore, money collected under the Act could be used to defray any of the Government’s expenses should Congress see fit to change the appropriation before the money was actually transferred from the general fund of the Treasury as a set-off against advances made out of that fund. Cf. Head Money Cases, 112 U. S. 580. In the case of respondents’ taxes, the use is made even more uncertain by the terms of the appropriation provisions found in the Act. 16 OCTOBER TERM, 1935. Brief for the Government. 297 U.S. Under the Act of August 24, 1935, the appropriation is out of the general funds of the Treasury in an amount equivalent to the taxes collected under the original Act. Also, under the appropriation the Secretary of Agriculture may now use any part of the money for additional kinds of payments and for the acquisition of agricultural commodities pledged as security for certain loans made by federal agencies. Thus, additional objects of expenditure and additional elements of uncertainty have been introduced. The general welfare clause should be construed broadly to include anything conducive to the national welfare; it is not limited by the subsequently enumerated powers. Congress may tax (and appropriate) in order to promote the national welfare by means which may not be within the scope of the other Congressional powers. That this, commonly known as the Hamiltonian theory, is correct, is shown by the plain language of the clause; by the circumstances surrounding its adoption; by the opinion of most of those who participated in the early execution of the Constitution; by the opinion of later authorities; and by long-continued practical construction. The question was elaborately discussed in the briefs filed in Field v. Clark, 143 U. S. 649; United States v. Realty Co., 163 U. S. 427; Smith v. Kansas City Title Co., 255 U. S. 180; and Massachusetts v. Mellon, 262 U. S. 447. The Madisonian theory, rejecting the natural meaning, and treating the clause as an introduction to the subsequent enumeration of Congressional powers (1 Richardson’s Messages, etc., 585), violates the basic principle of constitutional construction. Holmes v. Jennison, 14 Pet. 540, 570-571. See Story, Const., §§ 912-913. This would transform a great independent power into a mere incident of other powers. The circumstances surrounding the adoption of the clause and the opinions of most of those who participated 17 UNITED STATES v. BUTLER. 1 Brief for the Government. in the adoption and early execution of the Constitution support the Hamiltonian view. Arts, of Confed. § 8; 9 Writings of James Madison (Hunt ed.), pp. 411^24, 370-375; 4 Madison, Letters and Writings, 126; Elliott’s Debates. The clause was adopted along with that relating to payment of the debts, after a prolonged discussion, not only of the Revolutionary debts, but also of the power of Congress, as against that of the States, in regard to matters of general interest. See Elliott’s Debates, V, I; cf. 4 Madison, Letters and Writings, pp. 121 et seq. Discussion in the ratifying conventions indicates clearly an almost unanimous view that the clause was not limited by the enumerated powers. Elliott’s Debates; Hamilton’s Rep. on Manufactures, 3 Hamilton’s Works, pp. 192, 250; President Monroe, 2 Richardson’s Messages, etc., pp. 165, 173. There would seem no doubt that President Washington agreed with Hamilton and Monroe (Story, Const., § 978, note). And it is clear that John Quincy Adams was of the same opinion (Letter to Stevenson, July 11, 1832, reprinted in Cong. Rec., 49th Cong., 1st Sess., vol. 17, Part 8, Appendix, pp. 226 to 229), as was likewise Calhoun (30 Annals of Congress, 14th Cong., 2d Sess., p. 855). Henry St. George Tucker, of Virginia, representing a special committee of the House of Representatives in 1817, expressed the same opinion (II American State Papers (Mise.), 443, 446, 447), as did also Daniel Webster (Webster’s Great Speeches, 243). Apparently, Jefferson likewise shared this view, although his opinion on the Bank of the United States has been quoted both as supporting the Hamiltonian and the Madisonian view. IV Elliott’s Debates, 2d ed., 610. See Story, Const., § 926 (note); 1 Hare, American Const. Law, 244; and see President Jackson’s statements in his veto of the Maysville Road Bill. [An Appendix to the Government’s brief in this case contains 43927°—30-------2 18 OCTOBER TERM, 1935. Brief for the Government. 297 U.S.. a valuable collection of the opinions on this question delivered before the ratifying conventions, and other examples of contemporaneous exposition. See also 36 Harv. L. Rev. 548; 23 Georgetown L. J. 155; 22 id. 207; 8 Va. L. Rev. 167-180; 42 Yale L. J. 878.] Madison himself in later years recognized that his view had not been followed in practice. 4 Madison’s Letters and Writings. 146. Not only was the Hamiltonian theory adopted by the “weight of contemporaneous exposition” (See Martin v. Hunter, 1 Wheat. 304, 350); it has been accepted by most of the later great commentators on the Constitution. See Story, ubi supra; Pomeroy, the Const. (3d ed., 1883), pp. 174—175; Willoughby, Const., pp. 582-593; 1 Hare, Am. Const. L., pp. 241 et seq.; Mr. Justice Miller’s “Lectures on the Constitution,” pp. 229-231, 235; Burdick, Const., § 77. Of even more importance is the practical construction by the earlier Congresses. 30 Annals of Congress, 14th Cong., 2d Sess., p. 855; II American State Papers (Mise.), 443, 446, 447; Story, op. tit., § 991. The Hamiltonian view has been so continuously and so extensively followed by Congress that many of our most familiar and significant governmental policies and activities are dependent upon its validity. [Under this head the brief cites a large number of instances of appropriations for various objects, including: relief of distress due to catastrophes; health; education; science; social welfare; industry; agriculture.] The relevant judicial authorities support the Hamiltonian theory. United States v. Realty Co., 163 U. S. 427; Missouri Utilities Co. v. California City, 8 F. Supp. 454, 462; United States v. Gettysburg Electric Ry., 160 U. S. 668, 681; Head Money Cases, 112 U. S. 580, 595; Gibbons v. Ogden, 9 Wheat. 1, 197; Flint v. Stone Tracy Co., 220 U. S. 107, 153. The literal reading of the general welfare clause has been adopted by most of the lower federal courts. Langer v. United States, 76 F. (2d) 817; Kansas Gas & Electric 19 UNITED STATES v. BUTLER. 1 Brief for the Government. Co. v. Independence, 79 F. (2d) 32, supplemental opinion on rehearing, 79 F. (2d) 638; Missouri Utilities Co. v. California' City, 8 F. Supp. 454; Vogt Sons v. Rothensies, 11 F. Supp. 225. Of. Miles Planting Co. v. Carlisle, 5 App. D. C. 138; Washington Water Power Co. v. Coeur D’Alene, 9 F. Supp. 263. It is not suggested that the public money may be expended by Congress for any other than national purposes, or for any other uses than those of the Nation. But the question of what is a national purpose, of what is a national use, is, in the first instance, purely a question of governmental policy, of which Congress is to judge. The procedure provided by the Constitution for the consideration by Congress of fiscal measures, and the accountability to the electorate, were the only checks on congressional appropriations. McCulloch v. Maryland, 4 Wheat. 316, 428; Pacific Insurance Co. v. Soule, 7 Wall. 433, 443. The entire range of discussion in the Convention was directed to locating the power and little or no attention was given its extent, which everyone seemed to concede must, in the nature of things, be discretionary. The same is, in general, true of the ratifying conventions. In the early years following the adoption of the Constitution, the view was generally expressed that Congress’ determination of what was for the general welfare was not subject to judicial review. Madison, Veto Message of March 4, 1817; Hamilton, Opinion on the National Bank, 3 Hamilton’s Works (Lodge ed.), p. 485. See also Hamilton’s Report on Manufactures, III Hamilton’s Works (Hamilton ed.), p. 250; Monroe, Veto of the Road Bill, II Richardson, 142, 165, 166; Pomeroy, Const. L. (10th ed.), § 275; 1 Hare, American Const. L., 249; Cooley, Taxation (2d ed.), 109; Story, Const., §§ 924, 944, 991, 1348. In United States v. Realty Co., 163 U. S. 427, it was said that the determination of what debts or claimed debts 20 OCTOBER TERM, 1935. Brief for the Government. 297 U.S. should be paid “depends solely upon Congress” (p. 441); and that the decision of Congress recognizing a claim founded upon principles of right and justice “can rarely, if ever, be the subject of review by the judicial branch of the government” (p. 444). If this be true of the word “debt”—so familiar to our courts—Congressional application of the term “general welfare” cannot be more readily subject to judicial review. The expenditures authorized by the Agricultural Adjustment Act were soundly designed to promote the general welfare. [Here followed an elaborate explanation of the agricultural situation and the application of the statute]. The tax was laid and the proceeds appropriated for a public purpose. Rules applicable to municipal taxation are not relevant to the great power of Congress to raise revenues. 1 Cooley, Taxation, 4th ed., pp. 388-390. While in local taxation the courts may, in extreme cases, review the legislative determination that a particular object is for a public purpose, in federal taxation Congress should be the final arbiter of what constitutes a federal public purpose. That which is for the “general welfare” as those words are used in the Constitution, must of necessity also be for a public purpose. Yet even viewed by the more narrow and critical rules applicable to state taxation, the purpose here was clearly public. Citing and discussing many authorities, including Loan Association v. Topeka, 20 Wall. 655, 665; Green N. Frazier, 253 U. S. 233, 240-242; Fallbrook Irrigation District v. Bradley, 164 U. S. 112; Parkersburg v. Brown, 106 U. S. 487; Cole v. LaGrange, 113 U. S. 1. It is no objection to the tariff acts that they benefit manufacturers as well as the country generally. Field v. Clark, 143 U. S. 649, 696; Hampton & Co. v. United States, 276 U. S. 394, 411, . UNITED STATES v. BUTLER. 21 1 Brief for the Government. The appropriations contemplated by the Act are a valid exercise of the fiscal powers of Congress. To stabilize and preserve the credit structure of the Nation, to protect the banks and other credit agencies which it had already established or sponsored, and to protect the credit of the Government itself. It was inevitable that the sudden and tremendous decrease in farm incomes should have caused a serious strain on the farm-credit agencies which had already been weakened by the long price decline and general liquidation which had characterized agriculture since 1920. Only by increasing the purchasing power of the farmer could the stability of the financial system be restored and the large investments which the Federal Government had made in this field ever be liquidated. Power of control over or regulation of agriculture has not been asserted, but, to the contrary, the steps authorized by this Act and taken under it do not go beyond the appropriation and spending of the money. The contracts are a matter of negotiation and voluntary agreement and on the part of the United States amount to no more than a method by which the Secretary of Agriculture sees that the money appropriated goes to persons in the class specified by Congress. It is, indeed, probable that the Secretary would be held to have the right to enter into contracts of this sort even though he had not been specifically authorized by Congress to do so. See United States v. Fidelity & Deposit Co., 80 F. (2d) 24. Similar contracts are entered into by administrative officials in almost every case where money is expended for such familiar matters as the construction of buildings and the delivery of supplies. It would be most unusual to suppose that a contract of this nature, entered into freely by both parties, is an exercise of sovereign regulation and control over one of 22 OCTOBER TERM, 1935. Brief for the Government. 297U.S. the parties or over the subject matter with which the contract deals. “The United States, when they contract with their citizens, are controlled by the same laws that govern the citizen in that behalf.” United States v. Bostwick, 94 U. S. 53, 66; See also Cooke v. United States, 91 U. S. 389, 398; Smoot’s Case, 15 Wall. 36. No method of enforcement of these contracts has been provided by Congress. Under them the rights of the United States are no greater than would be the rights of a private citizen under similar contracts, and enforcement must be by ordinary judicial process according to the law of the forum. The contracts are not derogatory of any sovereign rights of the States; they are carried out pursuant to and under the protection of the laws of the States. In this Act the Government goes no further than offering benefits to those who comply with certain conditions. If power over the matters to which those conditions relate is vested in the States, they remain free to pass laws rendering it impossible for any of their inhabitants to comply with such conditions. In so doing the States would not be clashing with any enactment of Congress, even though the result were to terminate completely the administration of the agricultural provisions of the Act in those States. There is no attempt to require the States to take or refrain from action with respect to agricultural land within their borders, a power which this Court in Kansas n. Colorado, 206 U. S. 46, has declared does not reside in the Federal Government. The distinction between an application of the law-making power to enforce compliance, and the use of the spending power to persuade, was pointed out in Schechter Poultry Corp. v. United States, 295 U. S. 495, 529, and illustrated by the case of Federal Compress Co. v. McLean, 291 U. S. 17. The effect which the Act of Congress will have in a State is dependent entirely upon the voluntary action of 23 UNITED STATES v. BUTLER. Oral Argument of Mr. Pepper. 1 that State and its inhabitants. The situation is much like that in Massachusetts n. Mellon, 262 U. S. 447. Furthermore, if the expenditure results in regulation of matters normally within state control, that result cannot deprive Congress of the right of taxation for the general welfare given it by the Constitution. McCray v. United States, 195 U. S. 27. Similarly, considering this Act as an exercise of the fiscal powers of Congress, it is not invalid even if it invades state fields. First National Bank v. Fellows, 244 U. S. 416; Legal Tender Cases, 12 Wall. 457, 539. Oral argument of Mr. George Wharton Pepper, for respondents. May it please your Honors, this record gives rise, as I see it, to two entirely distinct questions. One question is whether the portions of the Agricultural Adjustment Act which are under discussion would be constitutional in respect of the taxes levied under their authority, if Congress had itself levied them and settled every detail in connection with them. The second is the entirely distinct question (assuming that Congress might itself have done all that the Secretary of Agriculture has here done) whether the delegation to him of the authority in virtue of which he had undertaken to act was such a valid delegation that the acts done by him have the quality of taxation. Mr. Hale, my colleague, who represents the receivers, respondents in this case, has invited me to address myself to the first of these questions, namely, whether or not this processing tax is a valid exaction, irrespective of the question of delegation; and he, with your Honors’ permission, will address himself to the question of delegation, a great and important question in the case, but quite distinct, as it seems to me, from the one which I am going to discuss. 24 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. I have no disposition to raise an issue with the Solicitor General respecting the seriousness of the situation with which Congress undertook to deal; but when I come to consider whether or not the attempted remedy for the economic evils is or is not within the limits of the power of Congress, I cannot escape the conclusion that in his argument, able as it was, he has indulged somewhat in oversimplification. The case presents to him no difficulty. Congress, in the familiar course of legislation, has done two things, both of which, as he sees it, are well within its power. First it has laid a tax. Second it has made an appropriation. The tax feature is an ordinary exercise of the taxing power; and, as to the appropriation, even if it is for any reason questionable, nobody has a standing to question it. Apart from the question of delegation, he thus readily convicts the court below of error and asks confidently for a reversal. I, on the other hand, find in this record some constitutional questions of great difficulty and of vast importance. It seems to me that a reversal of the judgment appealed from would justify the conclusion that Congress, originating as a federal legislature with limited powers, has somehow been transformed into a national parliament subject to no restraint except self-restraint. I venture to hope that the judicial power of the United States does not extend to working any such transformation and that, to bring it about, we the people of the United States must deliberately resort to the process of constitutional amendment. One of the difficulties necessarily involved in the argument of this case is to identify the relevant portions of the statute and to isolate the essential facts, and then make a statement of them that is full enough to be fair but compact enough to be manageable. Although the Solicitor General has done this to the extent required by his argument, I hope the Court will be patient with me if I attempt a brief restatement. UNITED STATES v. BUTLER. 25 1 Oral Argument of Mr. Pepper. In what I am about to say I am referring to the unamended act, inasmuch as the taxes sought to be recovered by the Government in the instant case had accrued before the amendment. The significance of the amendment will be discussed at the proper point in the argument in connection with what we hold to be an ineffective attempt to ratify taxes theretofore invalid. Any such statement must, as its first point, make a reference to the declared policy of the AAA, which is found in § 2 of Title I. That policy is by an elaborate mechanism to re-create for the farmer the favorable financial conditions which, under the operation of economic law, he for a short time enjoyed about a quarter of a century ago. More specifically, the policy is to raise the price which the farmer receives for a unit of what he produces until the sale of that unit shall enable him to buy as much and as many needed commodities as a unit sale would have enabled him to buy during the base period. The base period selected as the golden age of agriculture is, in the case of all commodities except tobacco and potatoes, the pre-war period from 1909 to 1914. In the case of tobacco and potatoes it is the postwar decade from 1919 to 1929. The golden age value to be secured for the unit is called its “fair exchange value.” Obviously its determination requires first the ascertainment (at any given moment) of the actual current market price of the unit; second the actual current market price of commodities needed by the farmer; third the number of dollars that a unit fetched in the base period; and, fourth, the quantity of needed commodities for which a unit was then exchangeable. When the Secretary of Agriculture has ascertained these factors he has the material for a formula which will determine the gap or “spread” between the actual price and the ideal, or parity, price. This gap it is the laudable purpose of the act to close. Accordingly, the Secretary undertook, in the early part 26 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. of 1933, to determine what had been, in the base period, the farm price per pound of cotton, and he found that it was 12.40 cents. He then ascertained that the price index of the commodities which farmers buy pointed to a figure higher than their price in the base period by 3 per cent, so that the figure was 103 per cent as of the time of his determination compared with the situation in the base period. Applying his 103 per cent to his 12.40, he got 12.77. He then ascertained that the farm price current for a pound of cotton was 8.7 cents. Subtracting the 8.7 cents from 12.77, he got 4.07. Then he made an adjustment, which is explained by the fact that the farm prices have to do with the lint cotton, in bales, and the price to the farmer is based upon the unbaled weight, so he finally determined the gap to be 4.2 per pound. It is perfectly true, as the Solicitor General has said, that we do not dispute that the Secretary of Agriculture did the best job he could do with the figures at his disposal. He gathered a lot of statistics from all over the country, and he weighted them and he did all the things which have been suggested from the bench as the common practice in the departments; and there did result this figure of 4.2, and there is no dispute between us respecting the fidelity with which the Secretary acted in an attempt to find the figures upon which to base the tax. Adjustment of production to consumption by closing the gap in order to increase the purchasing power of agricultural commodities thus being the ultimate objective, the second important point is that the adjustment is to be accomplished by a reduction in acreage, or reduction in the production for market, or both, of any basic agricultural commodity. This reduction of production is relied upon to cause a corresponding diminution of marketable units and a consequent approximation of their actual market price to the golden age price. 27 UNITED STATES v. BUTLER. Oral Argument of Mr. Pepper. 1 I pause to note that the phrase “adjustment of production to consumption” is really not an accurate statement of the objective. The natural meaning of that phrase is that you are merely reducing production to the extent of equalizing it to a consumption which is to remain undisturbed. It is evident, however, that what is really proposed is such a reduced production as will secure for the farmer his parity price, irrespective of the effect produced upon the consumer. The third point is that the closing of the gap through reduction of production is to be accomplished principally through agreements with producers containing provisions for rental or benefit payments in such amounts as the Secretary of Agriculture deems fair and reasonable; the producer in consideration of the payment agreeing to act in conformity with the federal policy. The fourth point is that, in order to raise the money with which to purchase the promise of the farmer to limit his production and otherwise submit to regulation, a processing tax is levied upon processors in respect of the first conversion of raw material into a manufactured product ; and the proceeds of this tax, while paid into the Treasury, are appropriated in advance to the Secretary of Agriculture for the specific purposes which I shall presently state. The rate of tax, per unit processed, is by the act declared to be the difference between the current average farm price for the commodity and the fair exchange value thereof. In other words, the rate of tax corresponds to the gap or spread between the actual and the ideal. Thus the rise and fall of the so-called tax is dependent upon factors wholly unrelated to the business of the processor. From his point of view the tax might as well have been levied at a figure per unit processed dependent upon the rise or fall of the mercury in the Fahrenheit thermometer. The next point to be noted is that the proceeds of the tax when received by the Secretary of Agriculture are to 28 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. be available for specific purposes, to wit, disbursements which include not merely rental and benefit payments to farmers but what is euphemistically described as “expansion of markets” and “removal of surplus agricultural products.” “Expansion of markets” I understand to include those open market operations which, when conducted in financial centers, are described as “rigging the market.” “The removal of surplus agricultural products” means in the case of hogs (for example) the purchase of quantities of animals at high prices and their incineration with a view to limitation of supply. My friend the Solicitor General is quite right when he says that there was appropriated a hundred million dollars initially out of the Treasury, before the scheme got to work, which was available for the time being for rental and benefit payments; but I am sure that the provision of the Act has not escaped him which is to the effect that as the proceeds of the tax come in, the amounts advanced by the Treasury are to be repaid; so that the whole financing of the scheme which I am outlining is accomplished by a tax paid by the processors in accordance with a measure or yardstick which has no relation under heaven to their activity or the business they are to do. Finally, it may be observed that the original list of agricultural commodities as contained in § 11 of the act, has been increased by the subsequent inclusion of many others, the most recent being potatoes. Naturally it is impossible to make a definite statement respecting the scope of that provision of the act which authorizes the imposition of compensating taxes on articles found to be in competition with basic commodities. These competing commodities are to be identified only by the Secretary and might include a vast area of production in addition to the area specified in the act. In making the foregoing statement I have carefully refrained from stating such features of the act as give rise 29 UNITED STATES v. BUTLER. 1 Oral Argument of Mr. Pepper. to the question of delegated power. It seems to me to conduce to clearness to reserve a reference to those features until the argument on delegation is made. I merely remark in passing that the whole scheme of the act necessarily calls for so many determinations, adjustments and decisions on points of policy that it might fairly be described as a scheme for the government of agriculture with the Secretary of Agriculture as Governor General. That is my basic statement of the significant parts of the Act and of the facts which it seems to me it is important to bear in mind in approaching the constitutional questions, which, as I have said, seem to me to be two. I affirm, first, that the processing exaction is not in its nature the exercise of the taxing power of the United States, but is wholly regulatory in character, and is part of a nation-wide scheme for the Federal regulation of local agricultural production; and, second, that if that scheme as a whole is unconstitutional as an invasion of the reserved powers of the States, then the whole scheme falls and the processing tax falls with it. . . . When the Court rose yesterday I had completed an introductory statement upon the basis of which I desire to present two propositions for the consideration of this Court. First: That the exactions called processing taxes are not exercises of the taxing power as such but are integral parts of a regulatory scheme and are themselves regulatory in character. Second: That this regulatory scheme is an invasion of the field reserved by the Tenth Amendment to the States and to the people and that therefore the scheme must fall and carry the processing taxes with it. If I can sustain these propositions, then without regard to the question of delegation, the judgment appealed from must be affirmed, I confidently assert, without 30 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. arguing the point, that if my propositions are sound, nothing in the amendment of August 24, 1935, in any way affects them. I do not understand it to be seriously contended that the amendment has changed the nature of the regulatory scheme. If the original act was invalid for lack of power the amendment is in no better case. The outline of the scheme which I have already made makes it clear that control of production is the objective of Congress. I now wish to show that the processing tax is merely a cog, though an essential cog, in the regulatory machine. That this is its true character appears from the following considerations: There is no tax until the Secretary of Agriculture determines that rental or benefit payments are to be made. See § 9 (a). In other words, the making of rental or benefit payments is the sole occasion for the tax. The declared objective being to close the gap between the farmer’s financial condition today and his condition in a pre-war period, the rate of the tax is declared to be the extent of such gap. § 9 (b). In other words, (as already explained) there is no relation whatever between the rate of tax and the activity of the processor, except that the extent of the gap in the farmer’s income is translated into such-and-such a sum per pound of raw material processed. Congress in so many words has said “We exact from the processor a sum equal to our estimate of what the farmer should be receiving in addition to his present income.” The sum so exacted is to be paid into the treasury but is by the act itself so appropriated as to be available to the Secretary of Agriculture for rental and benefit payments and other features of the reduction program. § 12 (b). In other words, the tax and its use are so related that, except for the specified use, there would be no tax, and except for the tax, the scheme could never go into effect. The tax terminates at the end of the marketing year current at the time the Secretary determines to discon- 31 UNITED STATES v. BUTLER. Oral Argument of Mr. Pepper. 1 tinue rental and benefit payments. § 9(a). In other words, just as the proposed exercise of control is the occasion of the tax so a determination to abandon control marks the end of the tax. The provision on that subject is the reciprocal of the first that I mentioned. The tax goes into effect when the Secretary declares that rental and benefit payments are to be made. The tax ceases to exist at the end of the market year when he declares that the rental and benefit payments are to terminate; and, as I have explained, in the interval the tax, in theory at least, is modified upward or downward by fluctuations in the fortunes of the farmer. I say “in theory at least,” because (referring to the brief filed on behalf of the processors of hogs) you will find that while in the case of cotton it so happens, as so clearly explained by the Solicitor-General yesterday, that the tax has been maintained and still exists at the same figure at which it was originally placed—namely, 4.2 cents per pound, that being the precise mathematical outcome of the formula in the act, with some administrative adjustments—in the case of hogs the authority given to the Secretary to approach compliance with the formula gradually has been exercised so liberally that while the tax which the formula would have yielded at the time the tax was imposed was something over four dollars and a half per hundred-weight of hogs, the Secretary imposed a tax first of fifty cents, then of a dollar, then of a dollar and a half, and subsequently, as of March, 1934, a tax of $2.25 the hundred-weight, which has continued in effect and is in effect at the present time, although at the outset that was only about half the figure yielded by the formula; and the gap has in fact so far closed, owing to the successful operation of the scheme, that there was, I think, one time when the gap disappeared entirely; and there are judicial findings in a number of cases to the effect that the gap had shrunk to 81 cents at the time of the findings in question, although the tax was still maintained at $2.25. 32 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. I mention this to show that the tax is regulatory in character, and does not really follow even the fluctuations as required by the formula, but that resort must be had to that provision of the Act which authorizes the Secretary not merely to fix the rate at the outset in accordance with the formula or a gradual approach to it, but authorizes him to maintain the tax after it has been laid, so that if the tax equals the formula or is less than the formula at the time it is laid, and subsequently the gap closes, even approaching the vanishing point, the power to maintain is invoked for the purpose of keeping the tax at a figure in excess of the formula, provided in the opinion of the constituted authority it is necessary to do that thing in order to regulate local production. Since the object of the scheme of federal control is to enable the farmers to get higher prices for their products, and so close the gap, it must follow that if (for example) the processors of hogs had voluntarily paid to their several vendors such prices as would close the gap there never would have been any tax whatever. While the formula for the tax rate is specified in the act, the Secretary of Agriculture is given discretion to lower it, § 9(b); he is, by § 15(a), given authority to exempt the processing of any commodity from all tax whatever, and even to refund what has been paid; and he is empowered by § 15(d) to impose compensating taxes of unspecified amounts upon commodities competing with basic commodities. In view of the foregoing I submit that what Congress has done is not to exercise its taxing power except as part of and solely in aid of a regulatory scheme, the administration of which it has confided to an executive official. If I am right in my analysis, it is about as clear a case of an exaction masquerading as a tax, but really regulatory in its character, as I think has ever come before this Court, , , . UNITED STATES v. BUTLER. 33 1 Oral Argument of Mr. Pepper. Now, may it please your Honors, if I am right in my contention that this so-called processing tax is merely a regulatory exaction, and not an exercise of the taxing power as such, it remains for me to satisfy your Honors that it is such an exaction as should fall if the scheme itself is beyond the power of Congress. On this point I contend that this Court has decided that wherever it appears upon the face of the statute that levies are being imposed not to replenish the public treasury but to control the conduct of the private citizen, the validity of the levy depends upon whether the exercise of control is within the powers granted by the people to Congress. At this point the Solicitor General advances the objection that there is a difference between this case and the decisions to which I refer. He is right: there is a difference but it is not a significant difference. It is true that in the Child Labor Case and others the tax was laid upon A in order to control A’s conduct. In the instant case the money is exacted from A in order to be used for the control of the conduct of B. If, however, the fact be that control of conduct is the legislative objective and if such control cannot be accomplished without resort to a tax, then it must be immaterial whether the control, if achieved, results from A’s desire to escape the tax or from B’s readiness to exchange his freedom for a share of A’s money. . . . But the objection is then advanced in another form. It is said that in the instant case it is optional with the farmer whether he will accept the benefit payment and that, if he subjects himself to control, he does so voluntarily. This, it seems to me, is a factual distinction without a legal difference. The employer of child labor was not coerced except by economic pressure. The farmer is not coerced except by economic pressure. Whether the pressure takes the form of threatened exaction or of prom- 439270—36-3 34 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. ised bounty, the Court is faced by the same fundamental proposition, namely that Congress is using the device of a tax as a means to the exertion of effective pressure upon the citizen in order to make him conform to congressional policy. If the control thus sought is within some granted power, well and good. If not, the whole scheme fails. The Court will note that I am not contending that a federal loan or a federal bounty to farmers is, per se, invalid. I recognize that for a hundred years there have been all sorts of unchallenged congressional appropriations to promote agriculture. But these measures merely offered advice or instruction or extended financial aid to farmers. In no case, as far as I know, was there an attempt by Congress through the use of money to regulate local production. The type of regulation here attempted is the limitation of local agricultural production. Suppose it were the policy of a given State to stimulate such production through bounties or by more positive coercion. I find it hard to believe that the Constitution of the United States would sanction a public auction in which the farmer is placed on the auction block, the federal government bidding in order to purchase his promise to limit production and the State bidding in order to retain his loyalty to the local law. That is not at all an extravagant illustration, because, if, when your Honors come to look at Mr. Donald’s able brief [referring to one of the briefs filed by amici curiae] you will glance at page 42, you will find the most interesting collection of constitutional and statutory declarations in the several States that seem to me to be at war with this Federal policy; and if it is going to be possible for the Federal Government to offer pecuniary reward to the farmer under conditions such that he cannot very well afford to decline, you get a situation in which he sells his freedom for this mess of pottage, and disavows his allegiance to that State which, under the Tenth Amendment, is entitled to control his UNITED STATES v. BUTLER. 35 1 Oral Argument of Mr. Pepper. production, and subjects himself to what is, in that sense, an alien scheme. I always distrust my capacity to put a perfect dilemma; but I suggest that in this case one of two things is true—either that control acquired by purchase is, if lawful, the supreme law of the land or that a scheme of local regulation which it is within the power of the State to nullify is a scheme which Congress lacks the power to set up. If you look at the case realistically, it is not a voluntary matter with the farmer whether he does or does not accept the regime. It is no more voluntary than it was in the case of the manufacturer of goods made with child labor to continue to pay the tax and still remain in the business of which Congress disapproved. It is not possible for the farmer in any neighborhood who refuses to accept the regime to compete successfully with his next door neighbor who has accepted it. If you think realistically, it is not a voluntary scheme at all; and if you will glance at pages 32 to 36 in Mr. Donald’s brief and note the intensive sales effort that was put out to capture the allegiance of the farmers, you will think that I am not extravagant in saying that that was a method of compulsion that is a good deal more effective than allotting quotas and threatening criminal penalties for their violation. It is a good deal more effective to purchase control with the use of liberal sums of money than it is to enforce obedience to a complicated scheme by means of criminal sanctions. In connection with the emphasis laid by the Government upon the alleged voluntary character of the farmer’s consent to be regulated, I think it significant to note that there is nothing voluntary in the consequences of his action as they affect the processor and the consumer. These people may well be neighbors of the farmer and citizens of the same State. The necessary result of the farmer’s agreement with the federal government to limit 36 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. production is threefold: first, it subjects the processor to a tax; second, it raises the price which the processor must pay to the farmer for his raw material; and, third, even if the processor absorbs the tax, he must reflect the rise in raw material costs in his price to the retailer—who, in turn, exacts an increased price from the ultimate consumer. There is, I repeat, nothing voluntary in this scheme as respects the effect upon processor and public. I mention this merely by the way; because I am contending that the criterion of validity or invalidity is the control sought by Congress and not the nature of the economic pressure exerted to secure it. I have now attempted to establish that these processing exactions are an integral part of a scheme to regulate local production and to affect the price of agricultural commodities and so must be declared invalid if the scheme as a whole is invalid. Before passing to my second proposition—namely, that the scheme is invalid— I wish to notice a final objection made by the Government against treating the scheme of the act as a unity. It is said that while A may resist payment of an exaction intended to control his own conduct, he has no standing to resist it if the proceeds are to go into the Treasury and there become subject to uncontrollable spending power. There is in this objection what seems to me an obvious fallacy. The precedent relied upon by the Government—Massachusetts v. Mellon—is merely authority for the proposition that neither a State nor an individual taxpayer has a sufficiently direct pecuniary interest to give him a standing to question the validity of an appropriation of money which is lawfully in the Treasury and subject to appropriation. The question presented by this record is wholly different. Here the citizen is resisting an attempt of the Federal Government to take money out of his own pocket and is basing his resistance upon the 37 UNITED STATES v. BUTLER. Oral Argument of Mr. Pepper. 1 invalidity of the scheme of which both the threatened collection and proposed disbursement are necessary parts. I do not overlook the announcement recently carried by the press that if this act is declared unconstitutional the next move of Congress will be to levy an excise in one Act and then appropriate money for benefit payments by another. If such a course is followed it will be time enough to discuss the constitutional questions to which it may give rise. I venture the suggestion, however, that if the spending power is ever thus deliberately invoked to enlarge the area of Congressional control, it might not be impertinent to ask this Court to consider whether, in a democracy, the individual citizen has not a standing to call the legislature to account, not because of his pecuniary stake but because of his responsible share in government. I come now to my second proposition—which is that a scheme to regulate farm production and fix farm prices is an invasion of the field reserved by the Tenth Amendment. I do not see how there can be much controversy over the purpose of this Act. The draftsman with commendable frankness has, as we have seen, explicitly stated it. Whether you call it realistically the philosophy of scarcity or euphemistically the adjustment of production to consumption, the plain fact is that the reduction of local production of crops must at all hazards be achieved or else the desired increase in farm prices is unattainable. It seems to me, therefore, that we have, as to agriculture, the same type of regulation unsuccessfully attempted by NRA in the case of industry. If the Court will compare the declarations of emergency in the two Acts it will be seen that obstruction of the normal currents of commerce figures largely in what Congress evidently hoped would be accepted by the Court as jurisdictional facts. In the 38 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. case of both Acts the draftsman had a rosy vision of nationwide economic recovery achieved through increased commodity prices and he mistakenly assumed that this end could be lawfully accomplished through regimentation by a central authority—in one case the President, in the other the Secretary of Agriculture. When NRA was submitted for judicial examination an effort was made to salvage it by seeking authority for the codes in the power to regulate interstate commerce. Now, however, when AAA is before the Court, there is a significant silence on the part of the Government as to the commerce clause. It seems to be conceded, as indeed it would have to be in the light of the Schechter decision, that the federal regulation of production is wholly beyond the scope of the commerce clause. The whole reliance of the Government is accordingly placed upon the proposition that we have nothing to consider but an unimpeachable tax and an uncontrollable appropriation. To support the tax argument, the Government invokes the general welfare clause. This seems to me to afford the coldest kind of cold comfort. As I understand it, when Congress merely imposes a tax (whether it be a uniform indirect tax or an apportioned direct tax) no question of purpose is involved. There are plenty of legitimate governmental needs for money, and Congress, presumably, is merely undertaking to meet them. Accordingly no problem arises unless and until, in the very act of imposing the tax, Congress (as here) specifies the purpose for which the money is sought to be raised. The purpose so specified might be one clearly within some recognized congressional power. In such case no difficulty would be presented. But suppose (as here) that the only specific power that might plausibly be invoked (to wit, the commerce power) falls far short of what is required. It is then, and then only, that recourse is had to the proposition that it is within the exclu- 39 UNITED STATES v. BUTLER. Oral Argument of Mr. Pepper. 1 sive power of Congress to determine that a particular measure will promote the general welfare and that accordingly a tax to be applied for the purposes of that measure is a valid tax. This proposition, as far as I can see, means this: that Congress may determine that a certain nation-wide policy is necessary to the welfare of the nation; ergo that legislation to effectuate such policy must be within the power of Congress; and that, if you cannot find an applicable specific power which covers the case, you invoke the general welfare clause. The practical result of this argument is the same as that which would flow from the doctrine of “inherent national power” upon which this Court put a quietus in Kansas v. Colorado. Whether Congress invokes “inherent power” or wallows in the welfare clause—in either event the powers reserved by the Tenth Amendment disappear and that against which I solemnly protest ensues—namely the conversion of a federal legislature into a national parliament—with the consequent destruction of the right of local self-government. As I understand it, there are three possible views of the general welfare clause. It seems to me to be patient of two interpretations and can be tortured into a third. It is patient of the Madisonian view; it is patient of the Hamiltonian view; and it can be tortured, possibly, although I hope not, to answer the needs of the Solicitor General in the present case. I understand Madison’s view to have been that the welfare for which Congress may appropriate is the welfare which may be achieved in the exercise of the granted powers. I understand the Hamiltonian view to have been that, irrespective of the existence of power in virtue of specific grants or implications, the power to tax may be used to raise revenue for the general welfare, and that appropriations may be made out of that fund for such purposes as Congress may think fit. But I did not know, 40 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. until this statute proposed it, of any interpretation which begins where Hamilton stops, and asserts that because you may appropriate for anything which Congress thinks is consonant with the public welfare, you may, through that appropriation, control the local conduct of the producer in a particular reserved to the States under the Tenth Amendment. That, it seems to me, is the general welfare clause gone mad. It seems to me it is impossible to sustain any such view without throwing overboard once and for all the idea that Congress is a federal legislature with limited powers. It carries you. all the way to the other extreme, which is that of the national parliament subject to no restraint but self-restraint. . . . The commerce clause failing to serve his purpose— and the general welfare clause being unsafe ground on which to build, four subsidiary arguments are advanced by the Solicitor General to which I wish to refer briefly. The first is based upon the historical fact that spending is an executive function. No student of English constitutional history will dispute the proposition and no contemporary observer can doubt that even in the United States the same function is effectively exercised by the Executive. But the conclusion sought to be drawn is a non-sequitur. Because the Executive may spend as he pleases, it is argued that when he pleases to make a certain expenditure his decision puts into operation a tax to raise the money for him to spend. Whether you call this a delegation to him of the taxing power or whether he is attempting to delegate to Congress his executive discretion is largely a matter of words. The practical result would be to give to the President and to Congress an unlimited power to tax for any purpose which could be attained by inflating the general welfare clause to the utmost. . . . Next it is said that Congress may organize banks and other agencies with power to lend money to farmers on 41 UNITED STATES v. BUTLER. Oral Argument of Mr. Pepper. 1 mortgage. This may be conceded. But the conclusion is remarkable—namely, that therefore Congress may take over the control of production in order to increase the farmer’s ability to repay the loan. If this argument had been advanced a year ago it might have saved the NRA; because, since Congress has authorized the formation of National Banks with power to lend money to industrialists, it would seem to follow that Congress may take control of any and all industries to make it more likely that the notes will be paid. Here again the trouble with the argument is that it proves too much. It frees the legislature from all constitutional restraint. The third subsidiary argument is based upon the proposition that power to pay the debts of the United States includes power to discharge a moral obligation. This may be conceded. Thus, if a farmer had performed his part of a contract with the Secretary and the latter were to refuse to pay the consideration on the ground that the contract was void, and if Congress were then to appropriate for the relief of the farmer, nobody could enjoin the appropriation. But to argue that Congress may therefore authorize an unconstitutional scheme in order to create an honorary duty, and may then tax the processor to raise the money to perform it, seems to me to be juggling with words. If the United States is unjustly enriched by accepting a farmer’s performance, let Congress appropriate funds in the treasury not otherwise appropriated. If the honor of all the people is at stake, let all the people vindicate it. But for goodness sake do not permit the United States to purge itself of unjust enrichment by un-justly impoverishing the processor. The United States would not be entitled to a thrill of moral satisfaction merely because it had robbed Processor Peter in order to pay Producer Paul. A fourth subsidiary argument is built around the contention that the farmer needs a tariff—and that therefore 42 OCTOBER TERM, 1935. Oral Argument of Mr. Pepper. 297 U.S. he should have it in the exercise of the same power that justifies the international tariff. The argument overlooks the fact that the international tariff is primarily an exer cise of the express power to regulate commerce with foreign nations. It was so decided in Board of Trustees of State University v. United States in 289 U. S. Being free to forbid admission of goods from abroad, Congress may regulate their admission and use the taxing power in aid of regulation. There is no corresponding power to regulate agricultural production—and the argument loses its force. It has then no other basis than the. exploded doctrine of “inherent national power”—to which reference has already been made. There is one aspect of this case which requires a reference to the Fifth Amendment. The Solicitor General indeed stoutly maintains that the Amendment has nothing to do with this case. I agree that if this processing exaction is merely part of a regulatory scheme that is beyond the power of Congress, then the reason for the invalidity of the tax is, not the Fifth Amendment, but the lack of power to control local production. On the other hand, if I am wrong in my main contention and if Congress may lawfully regulate such production— on the general welfare theory or some other equally vague—it by no means follows that the entire cost of the regulatory process may be taken out of the pockets of the processors. As the Fifth Amendment applies to the exercise of all the powers of government it must apply to the regulatory power of Congress no matter whence derived. I concede that an excise tax on all processors to help raise money for the federal treasury could not be resisted merely because it was too heavy. If (contrary to my earnest contention) it were assumed that regulation of production by benefit payments and other uses of money is within some power of Congress, I should also 43 UNITED STATES v. BUTLER. Oral Argument of Mr. Pepper. 1 have to concede that money in the treasury raised by general taxation is available for such use. I suggest, however, that there is something essentially unjust in compelling the first handler of an agricultural commodity to contribute whatever is necessary to make up deficiencies in the income of the man who produces that commodity. It is all very well to think of the promotion of the agricultural industry as a public purpose; but to integrate the industry for purposes of regulation by treating the handler and producer as having interlocking interests and then to compel the stronger group to extend financial aid to the weaker comes perilously close to taking A’s property and giving it to B. Something like this was attempted by Congress in the Railroad Retirement Act, where strong roads were expected to make up the deficiencies of the weak. This exaction from the processor might be justified if there were any ascertainable relation between the rate of tax and the activity in respect of which the excise is levied. But when it appears that the tax rate is determined by the width of the gap between what the farmer’s income is and what Congress thinks it ought to be, it begins to look as if the processor were brought upon the scene merely in order to have his pocket picked for the benefit of the farmer. It would be hard enough on the processor to have to submit to assessment merely to increase the producer’s income; but when we reflect that the increase is accomplished by using the proceeds of the tax to raise the price which the processor has to pay for his raw material, the question arises whether this is the due process which the Fifth Amendment guarantees. It seems clear to me that it is not due process to measure an excise on processing by a deficiency in producer’s income. It is not possible for me to extract from the due process decisions of this Court a formula for determining what does and what does not come within the condemnation 44 OCTOBER TERM, 1935. Brief for Respondents. 297 U.S. of the Fifth Amendment. Probably the Court has deliberately avoided the formulation of a rule for the same reason that chancellors refuse to specify the limits of fraud. Each case must be determined in the light of its own facts. I suggest, however, that the processing exaction is a far more marked departure from what is usually regarded as permissible in taxation than was the case in Nichols v. Coolidge, 274 U. S. 531 (1927), in Hoeper v. Tax Commission of Wisconsin, 284 U. S. 206 (1931) or in Heiner v. Donnan, 285 U. S. 312 (1932). My time is fleeting and I must not pause to sum up the argument I have made. I have come to the point at which a consideration of delegation is the next logical step, and that is to be dealt with effectively by my colleague, Mr. Hale. But I do want to say just one final and somewhat personal word. I have tried very hard to argue this case calmly and dispassionately, and without vehement attack upon things which I cannot approve, and I have done it thus because it seems to me that this is the best way in which an advocate can discharge his duty to this Court. But I do not want your Honors to think that my feelings are not involved, and that my emotions are not deeply stirred. Indeed, may it please your Honors, I believe I am standing here today to plead the cause of the America I have loved; and I pray Almighty God that not in my time may “the land of the regimented” be accepted as a worthy substitute for “the land of the free.” Messrs. Edward R. Hale and Bennett Sanderson closed the argument for respondents. Following are excerpts from the respondents’ brief, on which were the two gentlemen last named, together with Messrs. George Wharton Pepper, Humbert B. Powell, 45 UNITED STATES v. BUTLER. Brief for Respondents. 1 James A. Montgomery, Jr., J. Willison Smith, Jr., and Edmund M. Toland: Notwithstanding the reservation of the Tenth Amendment, this Act, by purchased control, forces upon agricultural communities within state lines a reduction of production of agricultural commodities without regard to the needs, desires or policies of the State affected. It disregards even the policies against restraints on trade announced by many of the States in formal enactment. Indeed, there is a substantial question of the power of the States themselves either to control agricultural activities and internal prices, or a fortiori, of their ability to grant any such power to the Federal Government. The ordinary legitimate pursuits and transactions of citizens are, except in extraordinary circumstances, traditionally free from control even of the States. New State Ice Co. v. Liebmann, 285 U. S. 262; Tyson Bros. v. Banton, 273 U. S. 418; Fairmont Creamery v. Minnesota, 274 U. S. 1; Williams v. Standard Oil Co., 278 U. S. 235; Van Winkle v. Fred Meyer, Inc., 151 Ore. 455; 49 P. (2d) 1140. If power to regulate the operation of farms and prices of farm products is reserved to the people, as distinguished from the States, it follows that such power may not be delegated to the Federal Government except by an act of the people, expressed in a constitutional amendment. Kansas v. Colorado, 206 U. S. 46, 90. It is argued that there is something voluntary about the crop reduction program which removes it from the limitations upon the Federal Government. As a matter of law we are unable to see any valid distinction arising from the fact that in this Act the regulation of individual activities within the States is accomplished by purchase instead of penalty. While economic compulsion is invoked in the original Act to secure compliance from the producer, Congress has not hesitated to employ legal compulsion where less 46 OCTOBER TERM, 1935. Brief for Respondents. 297 U.S. drastic methods were too slow. Legal compulsion has thus been resorted to in the case of cotton (the commodity involved in the instant case), tobacco and potatoes. The Bankhead Cotton Act of 1934, 48 Stat. 598; The Kerr Tobacco Act, 48 Stat. 1275; The Potato Act of 1935 (being Title II of “An Act to Amend the Agricultural Adjustment Act, and for other Purposes,” approved August 24, 1935, Public No. 320, 74th Congress). Similar power to exert legal compulsion upon the processor or handler is granted in § 8 (3) of the Agricultural Adjustment Act as originally enacted. Such power has been extended by the amendments of August 24, 1935. These related Acts and provisions leave no doubt that the original and continuing Congressional intention in the Agricultural Adjustment Act is to impose the federal will upon production of agricultural commodities. In the light of such intentions and acts, the argument that control is voluntary becomes mere casuistry. The regulatory measures of which the tax is an integral part cannot be justified as a regulation of interstate commerce. Neither the production of commodities by farmers nor the manufacture of articles is subject to the control of Congress. Chassaniol v. Greenwood, 291 U. S. 584; Utah Power & Light Co. v. Pfost, 286 U. S. 165; Heisler ¡V. Thomas Colliery Co., 260 U. S. 245; Oliver Iron Mining Co. v. Lord, 262 U. S. 172; Crescent Cotton Oil Co. v. Mississippi, 257 U. S. 129; Kidd v. Pearson, 128 U. S. 1. Interstate commerce begins only when articles are delivered to a carrier to be transported. It comes to an end when articles are delivered. Schechter Poultry Corp. v. United States, 295 U. S. 495; Federal Compress Co. v. McLean, 291 U. S. 17; United Leather Workers v. Herbert & Co., 265 U. S. 457. Neither agriculture nor manufacturing “affects” or “burdens” interstate commerce. In order to come within UNITED STATES v. BUTLER. 47 1 Brief for Respondents. the interstate commerce power, the effect or burden of activities not commerce must be direct and immediate. Schechter Poultry Corp. v. United States, supra; Railroad Retirement Board v. Alton R. Co., 295 U. S. 330; Levering & Garrigues v. Morrin, 289 U. S. 103; United Leather Workers v. Herkert & Co., 265 U. S. 457; United Mine Workers v. Coronado Coal Co., 259 U. S. 344; Hammer v. Dagenhart, 247 U. S. 251. The processing and floor stocks taxes are levied in violation of the Fifth Amendment. The Act takes from one class without compensation, and gives to members of another. Railroad Retirement Board v. Alton R. Co., 295 U. S. 330; Louisville Joint Stock Land Bank v. Rad-ford, 295 U. S. 555. The taxing power is limited to taxes raised for public as distinguished from private purposes. Loan Association v. Topeka, 20 Wall. 655; Cole v. LaGrange, 113 U. S. 1; Parkersburg v. Brown, 106 U. S. 487; Lowell v. Boston, 111 Mass. 454. The taxes are arbitrary and unreasonable. The Fifth Amendment requires that a law (including a tax law) shall not be unreasonable, arbitrary or capricious. Of tax laws it requires a reasonable classification of objects of taxation, a rate determined upon a reasonable basis, not arbitrary or confiscatory, and reasonableness in the time when the tax becomes effective. The Fifth Amendment also requires that the means selected to carry out one of the granted powers shall have a real and substantial relation to the object sought to be attained. Railroad Retirement Board v. Alton R. Co., 295 U. S. 330, 347, note 5; Louisville Joint Stock Land Bank v. Radjord, 295 U. S. 555, 589, note 19. See also Nebbia v. New York, 291 U. S. 502, 525; Heiner v. Donnan, 285 U. S. 312; Nichols v. Coolidge, 274 U. S. 531; Hoeper v. Tax Commission, 284 U. S. 206. Congress may not, under the guise of the taxing power, assert a power not delegated to it by the Constitution. 48 OCTOBER TERM, 1935. Closing Argument of the Solicitor General. 297 U. S. Ulterior purposes may be accomplished under this power only when they are truly incidental and necessary to a real revenue measure. Cf. Railroad Retirement Board v. Alton R. Co., supra; Hill v. Wallace, 259 U. S. 44; Child Labor Tax Case, 259 U. S. 20. United States v. Doremus, 249 U. S. 86 and McCray v. United States, 195 U. S. 27, distinguished. The taxpayer may contest the tax and question the purpose thereof. Massachusetts v. Mellon, 262 U. S. 447, distinguished. The floor stocks taxes are direct taxes and are void because not apportioned. The Act is invalid in that it delegates legislative power to the Secretary of Agriculture. Panama Refining Co. v. Ryan, 293 U. S. 388; Schechter Poultry Corp. v. United States, 295 U. S. 495; Field v. Clark, 143 U. S. 649; United. States v. Grimaud, 220 U. S. 506; Hampton & Co. v. United States, 276 U. S. 394. Williamsport Wire Rope Co. v. United States, 277 U. S. 551; Blair v. Oesterlein Machine Co., 275 U. S. 220; Heiner v. Diamond Alkali Co., 288 U. S. 502, and United States v. Grimaud, 220 U. S. 506, distinguished. Section 21 (b) of the amendments is ineffective, to validate taxes assessed prior to its passage. United States v. Heinszen, 206 U. S. 370; Rafferty v. Smith, Bell & Co., 257 U. S. 226; Tiaco v. Forbes, 228 U. S. 549; Charlotte Harbor & N. Ry. Co. v. Welles, 260 U. S. 8; Graham & Foster n. Goodcell, 282 U. S. 409; Nichols v. Coolidge, 274 U. S. 531; Blodgett v. Holden, 275 U. S. 142; Untermyer v. Anderson, 276 U. S. 440. Solicitor General Reed closed the argument: May it please the Court, in the brief time remaining to me to close the argument for the Government I should like particularly to call to your Honors’ attention the problem of the welfare clause, the Tenth Amendment, and whether or not this tax is for a public purpose. 49 UNITED STATES v. BUTLER. Closing Argument of the Solicitor General. 1 I do not know whether counsel for the respondents mean to take the position that the welfare clause does give a power of appropriation and a power to tax that can be utilized for the purposes of relief and that can be utilized for the purposes of making loans to agriculture through the Farm Loan Corporation, and making loans to homeowners through the Home Owners Loan Corporation, or can be used for making loans to agriculture, railroads, industry, and banks, through the Reconstruction Finance Corporation; or whether they take the position that the welfare clause as such does not give a right to the Government to make loans. If we can make a loan, can we also make a grant, or if we can make a grant, can we make a contract? The vital point of assault and defense upon the Agricultural Adjustment Act seems to me not to be in the Tenth Amendment, nor in whether this is for a public purpose, but as to whether the Government has the power to appropriate money which it raises by taxation for the benefit of individuals in the States, or to carry out contracts which the Government makes with those individuals. The scope of the welfare clause has never been finally decided by this Court. The Government’s position is not that it may take any action it pleases under the welfare clause. Our contention is that the welfare clause gives the right to tax and the right to appropriate, so long as the appropriations are limited to the general welfare. This interpretation of the welfare clause has met the approval of those who participated in the ratifying conventions. It met the approval of George Washington when he sent his message to Congress that agriculture should be supported and benefited by Congressional appropriations. It met the approval of the early Congresses when they used the power of giving bounties to the cod fisheries of Massachusetts. . . . That is the interpretation of the welfare clause which has met the approval of commentators from Story to 43927°—36--4 50 OCTOBER TERM, 1935. Closing Argument of the Solicitor General. 297 U. S. Justice Miller. With but one exception that I recall, they have been fully settled in the view that the appropriating power of Congress gave it the right to give money for relief, to aid those who were in distress, to lend where money was needed. And surely if it can take those steps, it can also contract to help, where it is also for the public welfare. Is this present Act for the public welfare? I heard the manifestation of deep emotion with which counsel spoke of his interest in the preservation of the welfare of this Government, and I respect his motives and the earnestness with which he presents them to this Court. But there is another side to the argument, as to what is the duty of the Government of the United States. Over and over again counsel have used the words “control” and “regiment.” There is no control or regimentation in this Act. An emergency existed, not of sudden creation, but grown up over the years; lack of balance between different sections of this country, not geographical sections, but different interests of the people of the United States. This very corporation is an excellent example of benefits that have been secured from the taxing powers of this Government—a textile mill which, with its competitors, for more than a hundred years has received the bounties which come and the benefits which flow from the protective tariff system. Surely they should be the last to object to a readjustment of the balance between agriculture and industry. The farmers of the United States comprise 30 per cent of the population, men, women and children, bringing out of the ground the natural resources which sustain the entire American commonwealth, and bringing from the ground the very resource which this corporation uses in its manufacture of textiles. There is no reason to begrudge it the bounties it has received from the Government, but on the other hand there is no reason why the Gov- 51 UNITED STATES v. BUTLER. Closing Argument of the Solicitor General. 1 ernment of the United States, in the exercise of its power under the general welfare clause, should not seek to equalize the interests of agriculture and industry. The Government sought to do that in the Act under consideration. The tax which is criticized has relation to the farmer and relation to the consumer. It was sought to equalize the benefits to the farmer, to give him better prices, and not impose a tax so high that the consumer would pay more than the normal amount the farmer was to receive. Therefore it is written that the tax shall not exceed the difference between the selling price of the commodity at the time the tax is placed upon it and the normal purchasing power of that commodity in what has been taken as a normal period. Is there any reason why this country should be denied a right to help its citizens engaged in agriculture, which is open to every other country? Of course, it is said that we must act within the Constitution. Certainly we must. But the interpretation that is to be given to the Constitution must be viewed in the light of what is reasonable in the exercise of the power of Congress under the general welfare clause. Every nation, from the British Isles to Bechuanaland—we have cited the reports from them in the appendix to our brief—has taken steps to protect its agriculture. We do not mean to say that that gives us a right so to legislate in this country if it is contrary to the Constitution, but we do say that it is evidence of the reasonable exercise of the power, if we have the power to provide for the general welfare, and the power of appropriation under that provision of the Constitution. No one could be more firmly convinced of the necessity of keeping inviolate the separation of powers between the National Government and the States than counsel for the Government who appear here before this Court. 52 OCTOBER TERM, 1935. Amici Curiae Briefs. 297U.S. This Court, however, has laid down the rules by which we are to judge as to whether we are interfering with the rights of a State. The case of Massachusetts v. Mellon has been repeatedly called to your Honors’ attention. We have used it as an argument that the respondent cannot object in this case to the way in which the money is spent. But that is not the most important part of the case of Massachusetts v. Mellon at this moment. In that case the Court said not only that the citizen of a State could not object, but it said that “Probably, it would be sufficient to point out that the powers of the State are not invaded, since the statute imposes no obligation but simply extends an option which the State is free to accept or reject.” It was also said, in the case of Ellis v. United States, 206 U. S. 246, that the United States had the right even to control, by criminal provision, the actions of employers who employed people contrary to the laws of the United States when there was a contract between the employer and the United States. We do not need to go so far in this case but we do say that the right to contract is free from limitation, that we have no more interfered with the rights of the States in this case than we would have interfered with the rights of the State in the case of Massachusetts v. Mellon if that State had accepted the money which was offered. With those views, we submit that the Agricultural Adjustment Act, as it has been enacted and amended, is fully within the authority of the Constitution. By leave of Court, briefs of amici curiae were filed as follows: Mr. Vernon A. Vrooman, on behalf of the League for Economic Equality; Messrs. Frederic P. Lee and Donald Kirkpatrick, on behalf of the American Farm Bureau Federation; Mr. Clay R. Apple, on behalf of the National Beet Growers Assn., and the Mountain States Beet Grow- 53 UNITED STATES v. BUTLER. Opinion of the Court. 1 ers Marketing Assn.; Mr. O.O. Haga, on behalf of the Farmers National Grain Corp.; and Mr. Dan Moody, on behalf of the Texas Agricultural Assn.;—supporting the validity of the Act. Messrs. Nathan L. Miller, John W. Davis, and William R. Perkins, on behalf of Hygrade Food Products Corp., P. Lorillard Co., and National Biscuit Co.; Messrs. Malcolm Donald and Edward E. Elder, on behalf of the National Association of Cotton Manufacturers; Messrs. Kingman Brewster, James 8. Y. Ivins, Percy W. Phillips, 0. R. Folsom-Jones, Richard B. Barker, and John W. Cutler; Mr. John E. Hughes, on behalf of American Nut Co., Inc., et al.; Messrs. Leo P. Harlow and Al. Philip Kane, on behalf of Farmers’ Independence Council of America; Mr. Wm. B. Bodine, on behalf of Berks Packing Co., Inc., et al.; and Messrs. Charles B. Rugg, Frank J. Morley, Thomas Nelson Perkins, and Warren F. Farr, on behalf of General Mills, Inc., et al.;—challenging the validity of the Act. Mr. Justice Roberts delivered the opinion of the Court. In this case we must determine whether certain provisions of the Agricultural Adjustment Act, 1933,1 conflict with the Federal Constitution. Title I of the statute is captioned “Agricultural Adjustment.” Section 1 recites that an economic emergency has arisen, due to disparity between the prices of agricultural and other commodities, with consequent destruction of farmers’ purchasing power and breakdown in orderly exchange, which, in turn, have affected transactions in agricultural commodities with a national public interest and burdened and obstructed the normal currents of commerce, calling for the enactment of legislation. * ’May 12, 1933, c. 25, 48 Stat. 31. 54 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. Section 2 declares it to be the policy of Congress: “To establish and maintain such balance between the production and consumption of agricultural commodities, and such marketing conditions therefor, as will reestablish prices to farmers at a level that will give agricultural commodities2 a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period.” The base period, in the case of cotton, and all other commodities except tobacco, is designated as that between August, 1909, and July, 1914. The further policies announced are an approach to the desired equality by gradual correction of present- inequalities “at as rapid a rate as is deemed feasible in view of the current consumptive demand in domestic and foreign markets,” and the protection of consumers’ interest by readjusting farm production at such level as will not increase the percentage of the consumers’ retail expenditures for agricultural commodities or products derived therefrom, which is returned to the farmer, above the percentage returned to him in the base period. Section 8 provides, amongst other things, that “In order to effectuate the declared policy,” the Secretary of Agriculture shall have power “(1) To provide for reduction in the acreage or reduction in the production for market, or both, of any basic agricultural commodity, through agreements with producers or by other voluntary methods, and to provide for rental or benefit payments in connection therewith or upon that part of the production of any basic agricultural commodity required for domestic consumption, in such amounts as the Secretary deems fair and reasonable, to 3 Section 11 denominates wheat, cotton, field com, hogs, rice, tobacco, and milk and its products, “basic agricultural commodities,” to which the act is to apply. Others have been added by later legislation. 55 UNITED STATES v. BUTLER. 1 Opinion of the Court. be paid out of any moneys available for such payments. ...” “(2) To enter into marketing agreements with processors, associations of producers, and others engaged in the handling, in the current of interstate or foreign commerce of any agricultural commodity or product thereof, after due notice and opportunity for hearing to interested parties. . . .” “(3) To issue licenses permitting processors, associations of producers, and others to engage in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, or any competing commodity or product thereof.” It will be observed that the Secretary is not required, but is permitted, if, in his uncontrolled judgment, the policy of the act will so be promoted, to make agreements with individual farmers for a reduction of acreage or production upon such terms as he may think fair and reasonable. Section 9 (a) enacts: “To obtain revenue for extraordinary expenses incurred by reason of the national economic emergency, there shall be levied processing taxes as hereinafter provided. When the Secretary of Agriculture determines that rental or! benefit payments are to be made with respect to any basic agricultural commodity, he shall proclaim such determination, and a processing tax shall be in effect with respect to such commodity from the beginning of the marketing year therefor next following the date of such proclamation. The processing tax shall be levied, assessed, and collected upon the first domestic processing of the commodity, whether of domestic production or imported, and shall be paid by the processor. . . .” The Secretary may from time to time, if he finds it necessary for the effectuation of the policy of the act, readjust the amount of the exaction to meet the require- 56 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S.. ments of subsection (b). The tax is to terminate at the end of any marketing year if the rental or benefit payments are discontinued by the Secretary with the expiration of that year. Section 9 (b) fixes the tax “at such rate as equals the difference between the current average farm price for the commodity and the fair exchange value,” with power in the Secretary, after investigation, notice, and hearing, to readjust the tax so as to prevent the accumulation of surplus stocks and depression of farm prices. Section 9 (c) directs that the fair exchange value of a commodity shall be such a price as will give that commodity the same purchasing power with respect to articles farmers buy as it had during the base period and that the fair exchange value and the current average farm price of a commodity shall be ascertained by the Secretary from available statistics in his department. Section 12 (a) appropriates $100,000,000 “to be available to the Secretary of Agriculture for administrative expenses under this title and for rental and benefit payments . . .”; and § 12 (b) appropriates the proceeds derived from all taxes imposed under the act “ to be available to the Secretary of Agriculture for expansion of markets and removal of surplus agricultural products . . . administrative expenses, rental and benefit payments, and refunds on taxes.” Section 15 (d) permits the Secretary, upon certain conditions, to impose compensating taxes on commodities in competition with those subject to the processing tax. By § 16 a floor tax is imposed upon the sale or other disposition of any article processed wholly or in chief value from any commodity with respect to which a processing tax is to be levied in amount equivalent to that of the processing tax which would be payable with respect to the commodity from which the article is processed if the processing had occurred on the date when the processing tax becomes effective. UNITED STATES v. BUTLER. 57 1 Opinion of the Court. On July 14, 1933, the Secretary of Agriculture, with the approval of the President, proclaimed that he had determined rental and benefit payments should be made with respect to cotton; that the marketing year for that commodity was to begin August 1, 1933; and calculated and fixed the rates of processing and floor taxes on cotton in accordance with the terms of the act. The United States presented a claim to the respondents as receivers of the Hoosac Mills Corporation for processing and floor taxes on cotton levied under §§ 9 and 16 of the act. The receivers recommended that the claim be disallowed. The District Court found the taxes valid and ordered them paid.3 Upon appeal the Circuit Court of Appeals reversed the order.4 5 The judgment under review was entered prior to the adoption of the amending act of August 24, 1935,6 and we are therefore concerned only with the original act. First. At the outset the United States contends that the respondents have no standing to question the validity of the tax. The position is that the act is merely a revenue measure levying an excise upon the activity of processing cotton,—a proper subject for the imposition of such a tax,—the proceeds of which go into the federal treasury and thus become available for appropriation for any purpose. It is said that what the respondents are endeavoring to do is to challenge the intended use of the money pursuant to Congressional appropriation when, by confession, that money will have become the property of the Government and the taxpayer will no longer have any interest in it. Massachusetts v. Mellon, 262 U. S, 447, is claimed to foreclose litigation by the respondents or other taxpayers, as such, looking to restraint of the expenditure of government funds. That case might be an authority 3 Franklin Process Co. v. Hoosac Mills Corp., 8 F. Supp. 552. 4 Butler v. United States, 78 F. (2d) 1. 5 49 Stat. 750, c. 641. 58 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. in the petitioners’ favor if we were here concerned merely with a suit by a taxpayer to restrain the expenditure of the public moneys. It was there held that a taxpayer of the United States may not question expenditures from its treasury on the ground that the alleged unlawful diversion will deplete the public funds and thus increase the burden of future taxation. Obviously the asserted interest of a taxpayer in the federal government’s funds and the supposed increase of the future burden of taxation is minute and indeterminable. But here the respondents who are called upon to pay moneys as taxes, resist the exaction as a step in an unauthorized plan. This circumstance clearly distinguishes the case. The Government in substance and effect asks us to separate the Agricultural Adjustment Act into two statutes, the one levying an excise on processors of certain commodities, the other appropriating the public moneys independently of the first. Passing the novel suggestion that two statutes enacted as parts of a single scheme should be tested as if they were distinct and unrelated, we think the legislation now before us is not susceptible of such separation and treatment. The tax can only be sustained by ignoring the avowed purpose and operation of the act, and holding it a measure merely laying an excise upon processors to raise revenue for the support of government. Beyond cavil the sole object of the legislation is to restore the purchasing power of agricultural products to a parity with that prevailing in an earlier day; to take money from the processor and bestow it upon farmers6 who will reduce their acreage for 8 8 U. S. Department of Agriculture, Achieving A Balanced Agriculture, p. 38: “ Fanners should not forget that all the processing tax money ends up in their own pockets. Even in those cases where they pay part of the tax, they get it all back. Every dollar collected in processing taxes goes to the farmer in benefit payments.” U. S. Dept, of Agriculture, The Processing Tax, p. 1: “ Proceeds of processing taxes are passed to farmers as benefit payments.” 59 UNITED STATES v. BUTLER. Opinion of the Court. 1 the accomplishment of the proposed end, and, meanwhile to aid these farmers during the period required to bring the prices of their crops to the desired level. The tax plays an indispensable part in the plan of regulation. As stated by the Agricultural Adjustment Administrator, it is “ the heart of the law ”; a means of “ accomplishing one or both of two things intended to help farmers attain parity prices and purchasing power.” 7 A tax automatically goes into effect for a commodity when the Secretary of Agriculture determines that rental or benefit, payments are to be made for reduction of production of that commodity. The tax is to cease when rental or benefit payments cease. The rate is fixed with the purpose of bringing about crop-reduction and price-raising. It is to equal the difference between the “ current average farm price ” and “ fair exchange value.” It may be altered to such amount as will prevent accumulation of surplus stocks. If the Secretary finds the policy of the act will not be promoted by the levy of the tax for a given commodity, he may exempt it. (§11.) The whole revenue from the levy is appropriated in aid of crop control; none of it is made available for general governmental use. The entire agricultural adjustment program embodied in Title I of the act is to become inoperative when, in the judgment of the President, the national economic emergency ends; and as to any commodity he may terminate the provisions of the law, if he finds them no longer requisite to carrying out the declared policy with respect to such commodity. (§ 13.) The statute not only avows an aim foreign to the procurement of revenue for the support of government, but by its operation shows the exaction laid upon processors to be the necessary means for the intended control of agricultural production. 7 U. S. Department of Agriculture, Agricultural Adjustment, p. 9. 60 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. In these aspects the tax, so-called, closely resembles that laid by the Act of August 3, 1882, entitled “An Act to Regulate Immigration,” which came before this court in the Head Money Cases, 112 U. S. 580. The statute directed that there should be levied, collected and paid a duty of fifty cents for each alien passenger who should come by vessel from a foreign port to one in the United States. Payment was to be made to the collector of the port by the master, owner, consignee or agent of the ship; the money was to be paid into the Treasury, was to be called the immigrant fund, and to be used by the Secretary of the Treasury to defray the expense of regulating immigration, for the care of immigrants and relieving those in distress, and for the expenses of effectuating the act. Various objections to the act were presented. In answering them the court said (p. 595): “But the true answer to all these objections is that the power exercised in this instance is not the taxing power. The burden imposed on the ship owner by this statute is the mere incident of the regulation of commerce—of that branch of foreign commerce which is involved in immigration. . . “It is true not much is said about protecting the ship owner. But he is the man who reaps the profit from the transaction, . . . The sum demanded of him is not, therefore, strictly speaking, a tax or duty within the meaning of the Constitution. The money thus raised, though paid into the Treasury, is appropriated in advance to the uses of the statute, and does not go to the general support of the government.” While there the exaction was sustained as an appropriate element in a plan within the power of Congress “to regulate commerce with foreign nations,” no question was made of the standing of the shipowner to raise the ques- 61 UNITED STATES v. BUTLER. Opinion of the Court. 1 tion of the validity of the scheme and consequently of the exaction which was an incident of it. It is inaccurate and misleading to speak of the exaction from processors prescribed by the challenged act as a tax, or to say that as a tax it is subject to no infirmity. A tax, in the general understanding of the term, and as used in the Constitution, signifies an exaction for the support of the Government. The word has never been thought to connote the expropriation of money from one group for the benefit of another. We may concede that the latter sort of imposition is constitutional when imposed to effectuate regulation of a matter in which both groups are interested and in respect of which there is a power of legislative regulation. But manifestly no justification for it can be found unless as an integral part of such regulation. The exaction cannot be wrested out of its setting, denominated an excise for raising revenue and legalized by ignoring its purpose as a mere instrumentality for bringing about a desired end. To do this would be to shut our eyes to what all others than we can see and understand. Child Labor Tax Case, 259 U. S. 20, 37. We conclude that the act is one regulating agricultural production; that the tax is a mere incident of such regulation and that the respondents have standing to challenge the legality of the exaction. It does not follow that as the act is not an exertion of the taxing power and the exaction not a true tax, the statute is void or the exaction uncollectible. For, to paraphrase what was said in the Head Money Cases (supra), p. 596, if this is an expedient regulation by Congress, of a subject within one of its granted powers, “and the end to be attained is one falling within that power, the act is not void, because, within a loose and more extended sense than was used in the Constitution,” the exaction is called a tax. 62 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. Second. The Government asserts that even if the respondents may question the propriety of the appropriation embodied in the statute their attack must fail because Article I, § 8 of the Constitution authorizes the contemplated expenditure of the funds raised by the tax. This contention presents the great and the controlling question in the case.8 We approach its decision with a sense of our grave responsibility to render judgment in accordance with the principles established for the governance of all three branches of the Government. There should be no misunderstanding as to the function of this court in such a case. It is sometimes said that the court assumes a power to overrule or control the action of the people’s representatives. This is a misconception. The Constitution is the supreme law of the land ordained and established by the people. All legislation must conform to the principles it lays down. When an act of Congress is appropriately challenged in the courts as not conforming to the constitutional mandate the judicial branch of the Government has only one duty,—to lay the article of the Constitution which is invoked beside the statute which is challenged and to decide whether the latter squares with the former. All the court does, or can do, is to announce its considered judgment upon the ques- 8 Other questions were presented and argued by counsel, but we do not consider or decide them. The respondents insist that the act in numerous respects delegates legislative power to the executive contrary to the principles announced in Panama defining Co. v. Ryan, 293 U. 8. 388, and Schechter Corp. v. United States, 295 U. S. 495; that this unlawful delegation is not cured by the amending act of August 24, 1935; that the exaction is in violation of the due process clause of the Fifth Amendment since the legislation takes their property for a private use; that the floor tax is a direct tax and therefore void for lack of apportionment amongst the states, as required by Article I, § 9; and that the processing tax is wanting in uniformity and so violates Article I, § 8, clause one, of the Constitution. UNITED STATES v. BUTLER. 63 1 Opinion of the Court. tion. The only power it has, if such it may be called, is the power of judgment. This court neither approves nor condemns any legislative policy. Its delicate and difficult office is to ascertain and declare whether the legislation is in accordance with, or in contravention of, the provisions of the Constitution ; and, having done that, its duty ends.9 The question is not what power the Federal Government ought to have but what powers in fact have been given by the people. It hardly seems necessary to reiterate that ours is a dual form of government ; that in every state there are two governments,—the state and the United States. Each State has all governmental powers save such as the people, by their Constitution, have conferred upon the United States, denied to the States, or reserved to themselves. The federal union is a government of delegated powers. It has only such as are expressly conferred upon it and such as are reasonably to be implied from those granted. In this respect we differ radically from nations where all legislative power, without restriction or limitation, is vested in a parliament or other legislative body subject to no restrictions except the discretion of its members. Article I, § 8, of the Constitution vests sundry powers in the Congress. But two of its clauses have any bearing upon the validity of the statute under review. The third clause endows the Congress with power “to regulate Commerce . . . among the several States.” Despite a reference in its first section to a burden upon, and an obstruction of the normal currents of commerce, the act under review does not purport to regulate transactions in interstate or foreign10 commerce. Its stated pur- 9 Compare Adkins v. Children’s Hospital, 261 U. S. 525, 544; Massachusetts n. Mellon, 262 U. S. 447, 488. ° The enactment of protective tariff laws has its basis in the power to regulate foreign commerce. See Board of Trustees of the University of Illinois v. United States, 289 U. S. 48, 58. 64 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. pose is the control of agricultural production, a purely local activity, in an effort to raise the prices paid the farmer. Indeed, the Government does not attempt to uphold the validity of the act on the basis of the commerce clause, which, for the purpose of the present case, may be put aside as irrelevant. The clause thought to authorize the legislation,—the first,—confers upon the Congress power “to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States. . . It is not contended that this provision grants power to regulate agricultural production upon the theory that such legislation would promote the general welfare. The Government concedes that the phrase “to provide for the general welfare” qualifies the power “to lay and collect taxes.” The view that the clause grants power to provide for the general welfare, independently of the taxing power, has never been authoritatively accepted. Mr. Justice Story points out that if it were adopted “it is obvious that under color of the generality of the words, to ‘provide for the common defence and general welfare,’ the government of the United States is, in reality, a government of general and unlimited powers, notwithstanding the subsequent enumeration of specific powers.” 11 The true construction undoubtedly is that the only thing granted is the power to tax for the purpose of providing funds for payment of the nation’s debts and making provision for the general welfare. Nevertheless the Government asserts that warrant is found in this clause for the adoption of the Agricultural Adjustment Act. The argument is that Congress may appropriate and authorize the spending of moneys for the “general welfare”; that the phrase should be liberally * “Story, Commentaries on the Constitution of the United States, 5th ed., Vol. I, § 907, 65 UNITED STATES v. BUTLER. 1 Opinion of the Court. construed to cover anything conducive to national welfare; that decision as to what will promote such welfare rests with Congress alone, and the courts may not review its determination; and finally that the appropriation under attack was in fact for the general welfare of the United States. The Congress is expressly empowered to lay taxes to provide for the general welfare. Funds in the Treasury as a result of taxation may be expended only through appropriation. (Art. I, § 9, cl. 7.) They can never accomplish the objects for which they were collected unless the power to appropriate is as broad as the power to tax. The necessary implication from the terms of the grant is that the public funds may be appropriated “ to provide for the general welfare of the United States.” These words cannot be meaningless, else they would not have been used. The conclusion must be that they were intended to limit and define the granted power to raise and to expend money. How shall they be construed to effectuate the intent of the instrument? Since the foundation of the Nation sharp differences of opinion have persisted as to the true interpretation of the phrase. Madison asserted it amounted to no more than a reference to the other powers enumerated in the subsequent clauses of the same section; that, as the United States is a government of limited and enumerated powers, the grant of power to tax and spend for the general national welfare must be confined to the enumerated legislative fields committed to the Congress. In this view the phrase is mere tautology, for taxation and appropriation are or may be necessary incidents of the exercise of any of the enumerated legislative powers. Hamilton, on the other hand, maintained the clause confers a power separate and distinct from those later enumerated, is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to ap-43927*—36- 3 66 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. propriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. Each contention has had the support of those whose views are entitled to weight. This court has noticed the question, but has never found it necessary to decide which is the true construction. Mr. Justice Story, in his Commentaries, espouses the Hamiltonian position.12 We shall not review the writings of public men and commentators or discuss the legislative practice. Study of all these leads us to conclude that the reading advocated by Mr. Justice Story is the correct one. While, therefore, the power to tax is not unlimited, its confines are set in the clause which confers it, and not in those of § 8 which bestow and define the legislative powers of the Congress. It results that the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution. But the adoption of the broader construction leaves the power to spend subject to limitations. As Story says: “The Constitution was, from its very origin, contemplated to be the frame of a national government, of special and enumerated powers, and not of general and unlimited powers.”* 18 Again he says: “A power to lay taxes for the common defence and general welfare of the United States is not in common sense a general power. It is limited to those objects. It cannot constitutionally transcend them.” 14 That the qualifying phrase must be given effect all advocates of broad construction admit. Hamilton, in his “Loe. cit. Chapter XIV, passim. 18 Log. cit. § 909. tt Loc. cit. § 922. UNITED STATES v. BUTLER. 67 1 Opinion of the Court. well known Report on Manufactures, states that the purpose must be “general, and not local.”15 Monroe, an advocate of Hamilton’s doctrine, wrote: “Have Congress a right to raise and appropriate the money to any and to every purpose according to their will and pleasure? They certainly have not.”16 Story says that if the tax be not proposed for the common defence or general welfare, but for other objects wholly extraneous, it would be wholly indefensible upon constitutional principles.* 17 And he makes it clear that the powers of taxation and appropriation extend only to matters of national, as distinguished from local welfare. As elsewhere throughout the Constitution the section in question lays down principles which control the use of the power, and does not attempt meticulous or detailed directions. Every presumption is to be indulged in favor of faithful compliance by Congress with the mandates of the fundamental law. Courts are reluctant to adjudge any statute in contravention of them. But, under our frame of government, no other place is provided where the citizen may be heard to urge that the law fails to conform to the limits set upon the use of a granted power. When such a contention comes here we naturally require a showing that by no reasonable possibility can the challenged legislation fall within the wide range of discretion permitted to the Congress. How great is the extent of that range, when the subject is the promotion of the general welfare of the United States, we hardly need remark. But, despite the breadth of the legislative discretion, our duty to hear and to render judgment remains. If the statute plainly violates the stated principle of the Constitution we must so declare. “Works, Vol. Ill, p. 250. 18 Richardson, Messages and Papers of the Presidents, Vol. II, p. 167. 17 Loc. cit. p. 673. 68 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. We are not now required to ascertain the scope of the phrase “ general welfare of the United States ” or to determine whether an appropriation in aid of agriculture falls within it. Wholly apart from that question, another principle embedded in our Constitution prohibits the enforcement of the Agricultural Adjustment Act. The act invades the reserved rights of the states. It is a statutory plan to regulate and control agricultural production, a matter beyond the powers delegated to the federal government. The tax, the appropriation of the funds raised, and the direction for their disbursement, are but parts of the plan. They are but means to an unconstitutional end. From the accepted doctrine that the United States is a government of delegated powers, it follows that those not expressly granted, or reasonably to be implied from such as are conferred, are reserved to the states or to the people. To forestall any suggestion to the contrary, the Tenth Amendment was adopted.18 The same proposition, otherwise stated, is that powers not granted are prohibited. None to regulate agricultural production is given, and therefore legislation by Congress for that purpose is forbidden. It is an established principle that the attainment of a prohibited end may not be accomplished under the pretext of the exertion of powers which are granted. “ Should Congress, in the execution of its powers, adopt measures which are prohibited by the constitution; or should Congress, under the pretext of executing its powers, pass laws for the accomplishment of objects not intrusted to the government; it would become the painful duty of this tribunal, should a case requiring such a de- 18The Tenth Amendment declares: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people.” 69 UNITED STATES v. BUTLER. Opinion of the Court. 1 cision come before it, to say that such an act was not the law of the land.” McCulloch n. Maryland, 4 Wheat. 316, 423. “ Congress cannot, under the pretext of executing delegated power, pass laws for the accomplishment of objects not entrusted to the Federal Government. And we accept as established doctrine that any provision of an act of Congress ostensibly enacted under power granted by the Constitution, not naturally and reasonably adapted to the effective exercise of such power but solely to the achievement of something plainly within power reserved to the States, is invalid and cannot be enforced.” Linder v. United States, 268 U. S. 5, 17. These principles are as applicable to the power to lay taxes as to any other federal power. Said the court, in McCulloch v. Maryland, supra, 421: “ Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.” The power of taxation, which is expressly granted, may, of course, be adopted as a means to carry into operation another power also expressly granted. But resort to the taxing power to effectuate an end which is not legitimate, not within the scope of the Constitution, is obviously inadmissible. “ Congress is not empowered to tax for those purposes which are within the exclusive province of the States.” Gibbons v. Ogden, 9 Wheat. 1, 199. “ There are, indeed, certain virtual limitations, arising from the principles of the Constitution itself. It would undoubtedly be an abuse of the [taxing] power if so exercised as to impair the separate existence and independent self-government of the States or if exercised for ends 70 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. inconsistent with the limited grants of power in the Constitution.” Veazie Bank v. Fenno, 8 Wall. 533, 541. In the Child Labor Tax Case, 259 U. S. 20, and in Hill v. Wallace, 259 U. S. 44, this court had before it statutes which purported to be taxing measures. But their purpose was found to be to regulate the conduct of manufacturing and trading, not in interstate commerce, but in the states,—matters not within any power conferred upon Congress by the Constitution—and the levy of the tax a means to force compliance. The court held this was not a constitutional use, but an unconstitutional abuse of the power to tax. In Linder v. United States, supra, we held that the power to tax could not justify the regulation of the practice of a profession, under the pretext of raising revenue. In United States v. Constantine, 296 U. S. 287, we declared that Congress could not, in the guise of a tax, impose sanctions for violation of state law respecting the local sale of liquor. These decisions demonstrate that Congress could not, under the pretext of raising revenue, lay a tax on processors who refuse to pay a certain price for cotton, and exempt those who agree so to do, with the purpose of benefiting producers. Third. If the taxing power may not be used as the instrument to enforce a regulation of matters of state concern with respect to which the Congress has no authority to interfere, may it, as in the present case, be employed to raise the money necessary to purchase a compliance which the Congress is powerless to command? The Government asserts that whatever might be said against the validity of the plan if compulsory, it is constitutionally sound because the end is accomplished by voluntary cooperation. There are two sufficient answers to the contention. The regulation is not in fact voluntary. The farmer, of course, may refuse to comply, but the price of such refusal is the loss of benefits. The amount offered is intended to be sufficient to exert pressure on him to 71 UNITED STATES v. BUTLER. Opinion of the Court. 1 agree to the proposed regulation.19 The power to confer or withhold unlimited benefits is the power to coerce or destroy. If the cotton grower elects not to accept the benefits, he will receive less for his crops; those who receive payments will be able to undersell him. The result may well be financial ruin. The coercive purpose and intent of the statute is not obscured by the fact that it has not been perfectly successful. It is pointed out that, because there still remained a minority whom the rental and benefit payments were insufficient to induce to surrender their independence of action, the Congress has gone further and, in the Bankhead Cotton Act, used the taxing power in a more directly minatory fashion to compel submission. This progression only serves more fully to expose the coercive purpose of the so-called tax imposed by the present act. It is clear that the Department of Agriculture has properly described the plan as one to keep a non-cooperating minority in line. This is coercion by economic pressure. The asserted power of choice is illusory. In Frost Trucking Co. v. Railroad Comm’n, 271 U. S. 583, a state act was considered which provided for supervision and regulation of transportation for hire by automobile on the public highways. Certificates of convenience and necessity were to be obtained by persons desiring to use the highways for this purpose. The regulatory " U. S. Dept, of Agriculture, Agricultural Adjustment, p. 9. “ Experience of cooperative associations and other groups has shown that without such Government support, the efforts of the farmers to band together to control the amount of their product sent to market are nearly always brought to nothing. Almost always, under such circumstances, there has been a noncooperating minority, which, refusing to go along with the rest, has stayed on the outside and tried to benefit from the sacrifices the majority has made. ... It is to keep this noncooperating minority in line, or at least prevent it from doing harm to the majority, that the power of the Government has been marshaled behind the adjustment programs.” 72 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. commission required that a private contract carrier should secure such a certificate as a condition of its operation. The effect of the commission’s action was to transmute the private carrier into a public carrier. In other words, the privilege of using the highways as a private carrier for compensation was conditioned upon his dedicating his property to the quasi-public use of public transportation. While holding that the private carrier was not obliged to submit himself to the condition, the commission denied him the privilege of using the highways if he did not do so. The argument was, as here, that the carrier had a free choice. This court said, in holding the act as construed unconstitutional: “ If so, constitutional guaranties, so carefully safeguarded against direct assault, are open to destruction by the indirect but no less effective process of requiring a surrender, which, though, in form voluntary, in fact lacks none of the elements of compulsion. Having regard to form alone, the act here is an offer to the private carrier of a privilege, which the state may grant or deny, upon a condition, which the carrier is free to accept or reject. In reality, the carrier is given no choice, except a choice between the rock and the whirlpool,—an option to forego a privilege which may be vital to his livelihood or submit to a requirement which may constitute an intolerable burden.” (p. 593.) But if the plan were one for purely voluntary co-operation it would stand no better so far as federal power is concerned. At best it is a scheme for purchasing with federal funds submission to federal regulation of a subject reserved to the states. It is said that Congress has the undoubted right to appropriate money to executive officers for expenditure under contracts between the government and individuals; that much of the total expenditures is so made. But appropriations and expenditures under contracts for proper 73 UNITED STATES v. BUTLER. Opinion of the Court. 1 governmental purposes cannot justify contracts which are not within federal power. And contracts for the reduction of acreage and the control of production are outside the range of that power. An appropriation to be expended by the United States under contracts calling for violation of a state law clearly would offend the Constitution. Is a statute less objectionable which authorizes expenditure of federal moneys to induce action in a field in which the United States has no power to intermeddle? The Congress cannot invade state jurisdiction to compel individual action; no more can it purchase such action. We are referred to numerous types of federal appropriation which have been made in the past, and it is asserted no question has been raised as to their validity. We need not stop to examine or consider them. As was said in Massachusetts v. Mellon, supra (p. 487): . as an examination of the acts of Congress will disclose, a large number of statutes appropriating or involving the expenditure of moneys for non-federal purposes have been enacted and carried into effect.” As the opinion points out, such expenditures have not been challenged because no remedy was open for testing their constitutionality in the courts. We are not here concerned with a conditional appropriation of money, nor with a provision that if certain conditions are not complied with the appropriation shall no longer be available. By the Agricultural Adjustment Act the amount of the tax is appropriated to be expended only in payment under contracts whereby the parties bind themselves to regulation by the Federal Government. There is an obvious difference between a statute stating the conditions upon which moneys shall be expended and one effective only upon assumption of a contractual obligation to submit to a regulation which otherwise could not be enforced. Many examples pointing the distinction might be cited. We are referred to appropriations in aid 74 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. of education, and it is said that no one has doubted the power of Congress to stipulate the sort of education for which money shall be expended. But an appropriation to an educational institution which by its terms is to become available only if the beneficiary enters into a contract to teach doctrines subversive of the Constitution is clearly bad. An affirmance of the authority of Congress so to condition the expenditure of an appropriation would tend to nullify all constitutional limitations upon legislative power. But it is said that there is a wide difference in another respect, between compulsory regulation of the local affairs of a state’s citizens and the mere making of a contract relating to their conduct; that, if any state objects, it may declare the contract void and thus prevent those under the state’s jurisdiction from complying with its terms. The argument is plainly fallacious. The United States can make the contract only if the federal power to tax and to appropriate reaches the subject matter of the contract. If this does reach the subject matter, its exertion cannot be displaced by state action. To say otherwise is to deny the supremacy of the laws of the United States; to make them subordinate to those of a State. This would reverse the cardinal principle embodied in the Constitution and substitute one which declares that Congress may only effectively legislate as to matters within federal competence when the States do not dissent. Congress has no power to enforce its commands on the farmer to the ends sought by the Agricultural Adjustment Act. It must follow that it may not indirectly accomplish those ends by taxing and spending to purchase compliance. The Constitution and the entire plan of our government negative any such use of the power to tax and to spend as the act undertakes to authorize. It does not help to declare that local conditions throughout the nation have created a situation of national concern; for this 75 UNITED STATES v. BUTLER. 1 Opinion of the Court. is but to say that whenever there is a widespread similarity of local conditions, Congress may ignore constitutional limitations upon its own powers and usurp those reserved to the states. If, in lieu of compulsory regulation of subjects within the states’ reserved jurisdiction, which is prohibited, the Congress could invoke the taxing and spending power as a means to accomplish the same end, clause 1 of § 8 of Article I would become the instrument for total subversion of the governmental powers reserved to the individual states. If the act before us is a proper exercise of the federal taxing power, evidently the regulation of all industry throughout the United States may be accomplished by similar exercises of the same power. It would be possible to exact money from one branch of an industry and pay it to another branch in every field of activity which lies within the province of the states. The mere threat of such a procedure might well induce the surrender of rights and the compliance with federal regulation as the price of continuance in business. A few instances will illustrate the thought. Let us suppose Congress should determine that the farmer, the miner or some other producer of raw materials is receiving too much for his products, with consequent depression of the processing industry and idleness of its employes. Though, by confession, there is no power vested in Congress to compel by statute a lowering of the prices of the raw material, the same result might be accomplished, if the questioned act be valid, by taxing the producer upon his output and appropriating the proceeds to the processors, either with or without conditions imposed as the consideration for payment of the subsidy. We have held in Schechter Poultry Corp. v. United States, 295 U. S. 495, that Congress has no power to regulate wages and hours of labor in a local business. If the petitioner is right, this very end may be accomplished by 76 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. appropriating money to be paid to employers from the federal treasury under contracts whereby they agree to comply with certain standards fixed by federal law or by contract. Should Congress ascertain that sugar refiners are not receiving a fair profit, and that this is detrimental to the entire industry, and in turn has its repercussions in trade and commerce generally, it might, in analogy to the present law, impose an excise of two cents a pound on every sale of the commodity and pass the funds collected to such refiners, and such only, as will agree to maintain a certain price. Assume that too many shoes are being manufactured throughout the nation; that the market is saturated, the price depressed, the factories running half-time, the employes suffering. Upon the principle of the statute in question Congress might authorize the Secretary of Commerce to enter into contracts with shoe manufacturers providing that each shall reduce his output and that the United States will pay him a fixed sum proportioned to such reduction, the money to make the payments to be raised by a tax on all retail shoe dealers or their customers. Suppose that there are too many garment workers in the large cities; that this results in dislocation of the economic balance. Upon the principle contended for an excise might be laid on the manufacture of all garments manufactured and the proceeds paid to those manufacturers who agree to remove their plants to cities having not more than a hundred thousand population. Thus, through the .asserted power of taxation, the federal government, against the will of individual states, might completely redistribute the industrial population. A possible result of sustaining the claimed federal power would be that every business group which thought itself under-privileged might demand that a tax be laid on its vendors or vendees, the proceeds to be appropriated to the redress of its deficiency of income. 77 UNITED STATES v. BUTLER. 1 Opinion of the Court. These illustrations are given, not to suggest that any of the purposes mentioned are unworthy, but to demonstrate the scope of the principle for which the Government contends; to test the principle by its applications; to point out that, by the exercise of the asserted power, Congress would, in effect, under the pretext of exercising the taxing power, in reality accomplish prohibited ends. It cannot be said that they envisage improbable legislation. The supposed cases are no more improbable than would the present act have been deemed a few years ago. Until recently no suggestion of the existence of any such power in the Federal Government has been advanced. The expressions of the framers of the Constitution, the decisions of this court interpreting that instrument, and the writings of great commentators will be searched in vain for any suggestion that there exists in the clause under discussion or elsewhere in the Constitution, the authority whereby every provision and every fair implication from that instrument may be subverted, the independence of the individual states obliterated, and the United States converted into a central government exercising uncontrolled police power in every state of the Union, superseding all local control or regulation of the affairs or concerns of the states. Hamilton himself, the leading advocate of broad interpretation of the power to tax and to appropriate for the general welfare, never suggested that any power granted by the Constitution could be used for the destruction of local self-government in the states. Story countenances no such doctrine. It seems never to have occurred to them, or to those who have agreed with them, that the general welfare of the United States, (which has aptly been termed “ an indestructible Union, composed of indestructible States,”) might be served by obliterating the constituent members of the Union. But to this fatal conclu- 78 OCTOBER TERM, 1935. Stone, J., dissenting. 297 U.S. sion the doctrine contended for would inevitably lead. And its sole premise is that, though the makers of the Constitution, in erecting the federal government, intended sedulously to Emit and define its powers, so as to reserve to the states and the people sovereign power, to be wielded by the states and their citizens and not to be invaded by the United States, they nevertheless by a single clause gave power to the Congress to tear down the barriers, to invade the states’ jurisdiction, and to become a parliament of the whole people, subject to no restrictions save such as are self-imposed. The argument when seen in its true character and in the light of its inevitable results must be rejected. Since, as we have pointed out, there was no power in the Congress to impose the contested exaction, it could not lawfully ratify or confirm what an executive officer had done in that regard. Consequently the Act of 1935 does not affect the rights of the parties. The judgment is Affirmed. Mr. Justice Stone, dissenting. I think the judgment should be reversed. The present stress of widely held and strongly expressed differences of opinion of the wisdom of the Agricultural Adjustment Act makes it important, in the interest of clear thinking and sound result, to emphasize at the outset certain propositions which should have controlling influence in determining the validity of the Act. They are: 1. The power of courts to declare a statute unconstitutional is subject to two guiding principles of decision which ought never to be absent from judicial consciousness. One is that courts are concerned only with the power to enact statutes, not with their wisdom. The other is that while unconstitutional exercise of power 79 UNITED STATES v. BUTLER. 1 Stone, J., dissenting. by the executive and legislative branches of the government is subject to judicial restraint, the only check upon our own exercise of power is our own sense of self-restraint. For the removal of unwise laws from the statute books appeal lies not to the courts but to the ballot and to the processes of democratic government. 2. The constitutional power of Congress to levy an excise tax upon the processing of agricultural products is not questioned. The present levy is held invalid, not for any want of power in Congress to lay such a tax to defray public expenditures, including those for the general welfare, but because the use to which its proceeds are put is disapproved. 3. As the present depressed state of agriculture is nation wide in its extent and effects, there is no basis for saying that the expenditure of public money in aid of farmers is not within the specifically granted power of Congress to levy taxes to “ provide for the . . . general welfare.” The opinion of the Court does not declare otherwise. 4. No question of a variable tax fixed from time to time by fiat of the Secretary of Agriculture, or of unauthorized delegation of legislative power, is now presented. The schedule of rates imposed by the Secretary in accordance with the original command of Congress has since been specifically adopted and confirmed by Act of Congress, which has declared that it shall be the lawful tax. Act of August 24, 1935, 49 Stat. 750. That is the tax which the government now seeks to collect. Any defects there may have been in the manner of laying the tax by the Secretary have now been removed by the exercise of the power of Congress to pass a curative statute validating an intended, though defective, tax. United States v. Heins-zen & Co., 206 U. S. 370; Graham & Foster v. Goodcell, 282 U. S. 409; cf. Milliken v. United States, 283 U. S. 15. The Agricultural Adjustment Act as thus amended de- 80 OCTOBER TERM, 1935. Stone, J., dissenting. 297 U.S. dares that none of its provisions shall fail because others are pronounced invalid. It is with these preliminary and hardly controverted matters in mind that we should direct our attention to the pivot on which the decision of the Court is made to turn. It is that a levy unquestionably within the taxing power of Congress may be treated as invalid because it is a step in a plan to regulate agricultural production and is thus a forbidden infringement of state power. The levy is not any the less an exercise of taxing power because it is intended to defray an expenditure for the general welfare rather than for some other support of government. Nor is the levy and collection of the tax pointed to as effecting the regulation. While all federal taxes inevitably have some influence on the internal economy of the states, it is not contended that the levy of a processing tax upon manufacturers using agricultural products as raw material has any perceptible regulatory effect upon either their production or manufacture. The tax is unlike the penalties which were held invalid in the Child Labor Tax Case, 259 U. S. 20, in Hill v. Wallace, 259 U. S. 44, in Linder v. United States, 268 U. S. 5, 17, and in United States v. Constantine, 296 U. S. 287, because they were themselves the instruments of regulation by virtue of their coercive effect on matters left to the control of the states. Here regulation, if any there be, is accomplished not by the tax but by the method by which its proceeds are expended, and would equally be accomplished by any like use of public funds, regardless of their source. The method may be simply stated. Out of the available fund payments are made to such farmers as are willing to curtail their productive acreage, who in fact do so and who in advance have filed their written undertaking to do so with the Secretary of Agriculture. In saying that this method of spending public moneys is an invasion of the reserved powers of the states, the Court does not assert UNITED STATES v. BUTLER. 81 1 Stone, J., dissenting. that the expenditure of public funds to promote the general welfare is not a substantive power specifically delegated to the national government, as Hamilton and Story pronounced it to be. It does not deny that the expenditure of funds for the benefit of farmers and in aid of a program of curtailment of production of agricultural products, and thus of a supposedly better ordered national economy, is within the specifically granted power. But it is declared that state power is nevertheless infringed by the expenditure of the proceeds of the tax to compensate farmers for the curtailment of their cotton acreage. Although the farmer is placed under no legal compulsion to reduce acreage, it is said that the mere offer of compensation for so doing is a species of economic coercion which operates with the same legal force and effect as though the curtailment were made mandatory by Act of Congress. In any event it is insisted that even though not coercive the expenditure of public funds to induce the recipients to curtail production is itself an infringement of state power, since the federal government cannot invade the domain of the states by the “ purchase ” of performance of acts which it has no power to compel. Of the assertion that the payments to farmers are coercive, it is enough to say that no such contention is pressed by the taxpayer, and no such consequences were to be anticipated or appear to have resulted from the administration of the Act. The suggestion of coercion finds no support in the record or in any data showing the actual operation of the Act. Threat of loss, not hope of gain, is the essence of economic coercion. Members of a long depressed industry have undoubtedly been tempted to curtail acreage by the hope of resulting better prices and by the proffered opportunity to obtain needed ready money. But there is nothing to indicate that those who accepted benefits were impelled by fear of lower prices if they did not accept, or that at any stage in the operation 43927°—36---6 82 OCTOBER TERM, 1935. Stone, J., dissenting. 297 U.S. of the plan a farmer could say whether, apart from the certainty of cash payments at specified times, the advantage would lie with curtailment of production plus compensation, rather than with the same or increased acreage plus the expected rise in prices which actually occurred. Although the Agricultural Adjustment Act was put into operation in June, 1933, the official reports of the Department of Agriculture show that 6,343,000 acres of productive cotton land, 14% of the total, did not participate in the plan in 1934, and 2,790,000 acres, 6% of the total, did not participate in 1935. Of the total number of farms growing cotton, estimated at 1,500,000, 33% in 1934 and 13% in 1935 did not participate. It is significant that in the congressional hearings on the bill that became the Bankhead Act, 48 Stat. 598, as amended by Act of June 20, 1934, 48 Stat. 1184, which imposes a tax of 50% on all cotton produced in excess of limits prescribed by the Secretary of Agriculture, there was abundant testimony that the restriction of cotton production attempted by the Agricultural Adjustment Act could not be secured without the coercive provisions of the Bankhead Act. See Hearing before Committee on Agriculture, U. S. Senate, on S. 1974, 73rd Cong., 2nd Sess.; Hearing before Committee on Agriculture, U. S. House of Representatives, on H. R. 8402, 73rd Cong., 2nd Sess. The Senate and House Committees so reported, Senate Report No. 283, 73rd Cong., 2nd Sess., p. 3; House Report No. 867, 73rd Cong., 2nd Sess., p. 3. The Report of the Department of Agriculture on the administration of the Agricultural Adjustment Act (February 15, 1934 to December 31, 1934), p. 50, points out that the Bank-head Act was passed in response to a strong sentiment in favor of mandatory production control “ that would prevent noncooperating farmers from increasing their own plantings in order to capitalize upon the price advances that had resulted from the reductions made by contract 83 UNITED STATES v. BUTLER. Stone, J., dissenting. 1 signers.”1 The presumption of constitutionality of a statute is not to be overturned by an assertion of its coercive effect which rests on nothing more substantial than groundless speculation. It is upon the contention that state power is infringed by purchased regulation of agricultural production that chief reliance is placed. It is insisted that, while the Constitution gives to Congress, in specific and unambiguous terms, the power to tax and spend, the power is subject to limitations which do not find their origin in any express provision of the Constitution and to which other expressly delegated powers are not subject. The Constitution requires that public funds shall be spent for a .defined purpose, the promotion of the general welfare. Their expenditure usually involves payment on terms which will insure use by the selected recipients within the limits of the constitutional purpose. Expenditures would fail of their purpose and thus lose their constitutional sanction if the terms of payment were not such that by their influence on the action of the recipients the permitted end would be attained. The power of Congress to spend is inseparable from persuasion to action over which Congress has no legislative control. Congress may not command that the science of agriculture be taught in state universities. But if it would aid the teaching of that science by grants to state institutions, it is appropriate, if not necessary, that the grant be on the condition, incorporated in the Morrill Act, 12 Stat. 503, 26 Stat. 417, that it be used for the intended purpose. Similarly it would seem to be compliance with the Constitution, not violation of it, for the government to take and the university to give a contract that the grant would be so used. It makes no dif- 1 Whether coercion was the sole or the dominant purpose of the Bankhead Act, or whether the act was designed also for revenue or other legitimate ends, there is no occasion to consider now. 84 OCTOBER TERM, 1935. Stone, J., dissenting. 297 U.S. ference that there is a promise to do an act which the condition is calculated to induce. Condition and promise are alike valid since both are in furtherance of the national purpose for which the money is appropriated. These effects upon individual action, which are but incidents of the authorized expenditure of government money, are pronounced to be themselves a limitation upon the granted power, and so the time-honored principle of constitutional interpretation that the granted power includes all those which are incident to it is reversed. “Let the end be legitimate,” said the great Chief Justice, “let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the Constitution, are constitutional.” McCulloch v. Maryland, 4 Wheat. 316, 421. This cardinal guide to constitutional exposition must now be re-phrased so far as the spending power of the federal government is concerned. Let the expenditure be to promote the general welfare, still, if it is needful in order to insure its use for the intended purpose to influence any action which Congress cannot command because within the sphere of state government, the expenditure is unconstitutional. And taxes otherwise lawfully levied are likewise unconstitutional if they are appropriated to the expenditure whose incident is condemned. Congress through the Interstate Commerce Commission has set aside intrastate railroad rates. It has made and destroyed intrastate industries by raising or lowering tariffs. These results are said to be permissible because they are incidents of the commerce power and the power to levy duties on imports. See Minnesota Rate Cases, 230 U. S. 352; Shreveport Case, 234 U. S. 342; Board of Trustees of the University of Illinois v. United States, 289 U. S. 48. The only conclusion to be drawn is that re- 85 UNITED STATES v. BUTLER. Stone, J., dissenting. 1 suits become lawful when they are incidents of those powers but unlawful when incident to the similarly granted power to tax and spend. Such a limitation is contradictory and destructive of the power to appropriate for the public welfare, and is incapable of practical application. The spending power of Congress is in addition to the legislative power and not subordinate to it. This independent grant of the power of the purse, and its very nature, involving in its exercise the duty to insure expenditure within the granted power, presuppose freedom of selection among divers ends and aims, and the capacity to impose such conditions as will render the choice effective. It is a contradiction in terms to say that there is power to spend for the national welfare, while rejecting any power to impose conditions reasonably adapted to the attainment of the end which alone would justify the expenditure. The limitation now sanctioned must lead to absurd consequences. The government may give seeds to farmers, but may not condition the gift upon their being planted in places where they are most needed or even planted at all. The government may give money to the unemployed, but may not ask that those who get it shall give labor in return, or even use it to support their families. It may give money to sufferers from earthquake, fire, tornado, pestilence or flood, but may not impose conditions—health precautions designed to prevent the spread of disease, or induce the movement of population to safer or more sanitary areas. All that, because it is purchased regulation infringing state powers, must be left for the states, who are unable or unwilling to supply the necessary relief. The government may spend its money for vocational rehabilitation, 48 Stat. 389, but it may not, with the consent of all concerned, supervise the process which it undertakes to aid. It may spend its money for the suppression of the boll weevil, but may 86 OCTOBER TERM, 1935. Stone, J., dissenting. 297 U.S. not compensate the farmers for suspending the growth of cotton in the infected areas. It may aid state reforestation and forest fire prevention agencies, 43 Stat. 653, but may not be permitted to supervise their conduct. It may support rural schools, 39 Stat. 929, 45 Stat. 1151, 48 Stat. 792, but may not condition its grant by the requirement that certain standards be maintained. It may appropriate moneys to be expended by the Reconstruction Finance Corporation “ to aid in financing agriculture, commerce and industry,” and to facilitate “ the exportation of agricultural and other products.” Do all its activities collapse because, in order to effect the permissible purpose, in myriad ways the money is paid out upon terms and conditions which influence action of the recipients within the states, which Congress cannot command? The answer would seem plain. If the expenditure is for a national public purpose, that purpose will not be thwarted because payment is on condition which will advance that purpose. The action which Congress induces by payments of money to promote the general welfare, but which it does not command or coerce, is but an incident to a specifically granted power, but a permissible means to a legitimate end. If appropriation in aid of a program of curtailment of agricultural production is constitutional, and it is not denied that it is, payment to farmers on condition that they reduce their crop acreage is constitutional. It is not any the less so because the farmer at his own option promises to fulfill the condition. That the governmental power of the purse is a great one is not now for the first time announced. Every student of the history of government and economics is aware of its magnitude and of its existence in every civilized government. Both were well understood by the framers of the Constitution when they sanctioned the grant of the spending power to the federal government, and both were recognized by Hamilton and Story, whose views of the 87 UNITED STATES v. BUTLER. Stone, J., dissenting. 1 spending power as standing on a parity with the other powers specifically granted, have hitherto been generally accepted. The suggestion that it must now be curtailed by judicial fiat because it may be abused by unwise use hardly rises to the dignity of argument. So may judicial power be abused. “The power to tax is the power to destroy,” but we do not, for that reason, doubt its existence, or hold that its efficacy is to be restricted by its incidental or collateral effects upon the states. See Veazie Bank v. Fenno, 8 Wall. 533; McCray n. United States, 195 U. S. 27; compare Magnano Co. v. Hamilton, 292 U. S. 40. The power to tax and spend is not without constitutional restraints. One restriction is that the purpose must be truly national. Another is that it may not be used to coerce action left to state control. Another is the conscience and patriotism of Congress and the Executive. “It must be remembered that legislators are the ultimate guardians of the liberties and welfare of the people in quite as great a degree as the courts.” Justice Holmes, in Missouri, Kansas & Texas Ry. Co. v. May, 194 U. S. 267, 270. A tortured construction of the Constitution is not to be justified by recourse to extreme examples of reckless congressional spending which might occur if courts could not prevent — expenditures which, even if they could be thought to effect any national purpose, would be possible only by action of a legislature lost to all sense of public responsibility. Such suppositions are addressed to the mind accustomed to believe that it is the business of courts to sit in judgment on the wisdom of legislative action. Courts are not the only agency of government that must be assumed to have capacity to govern. Congress and the courts both unhappily may falter or be mistaken in the performance of their constitutional duty. But interpretation of our great charter of government which proceeds on any assumption that the responsibility for the preservation of our institutions is the exclusive 88 OCTOBER TERM, 1935. Syllabus. 297 U.S. concern of any one of the three branches of government, or that it alone can save them from destruction is far more likely, in the long run, “to obliterate the constituent members” of “an indestructible union of indestructible states” than the frank recognition that language, even of a constitution, may mean what it says: that the power to tax and spend includes the power to relieve a nationwide economic maladjustment by conditional gifts of money. Mr. Justice Brandeis and Mr. Justice Cardozo join in this opinion. UNITED STATES v. SAFETY CAR HEATING & LIGHTING CO.* CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE THIRD CIRCUIT. No. 75. Argued December 20, 1935.—Decided January 6, 1936. A patent-owner began suit in 1912 to restrain infringements and for damages and profits. The litigation was pending on February 25, 1913, the effective date of the Sixteenth Amendment, and March 1, 1913, the effective date of the first statute enacted under it, and was continued for many years thereafter during which the patentowner obtained a decree finally sustaining the patent followed by a decree on accounting, of which a definite part was for profits received by the infringer before March 1, 1913, and the remainder for profits received thereafter, the claim for damages having been waived. Pending an appeal by the infringer involving the extent of his liability, a compromise occurred (1925) in which the patentowner accepted a smaller amount in satisfaction of the judgment. Held: 1. The profits thus received accrued to the patent-owner and became taxable as his income, at the time of the settlement and liquidation. P. 93. * Together with No. 76, Rogers, Collector of Internal Revenue, v. Safety Car Heating & Lighting Co. Certiorari to the Circuit Court of Appeals for the Third Circuit. 89 U. S. v. SAFETY CAR HEATING CO. Statement of the Case. 88 2. There is no ground for treating the profits from the infringements committed prior to March 1, 1913, as having accrued to the patent-owner before that date and as being therefore excepted from taxation by the Act of October 3, 1913 and later Revenue Acts. P. 94. 3. The Treasury Regulation classifying claims that existed unconditionally on March 1, 1913, as nontaxable income, “although actually recovered or received subsequent to that date,” was impliedly ratified by Congress by the passage of Revenue Acts without sign of disapproval. P. 94. 4. This regulation implies that conditional or contingent claims, though they may have had an inchoate existence before March 1, 1913, are to be taxed when they become unconditional. P. 95. 5. A claim of a patent-owner to profits received by an infringer, while its validity and amount remain uncertain, is not property transmuted into capital, but rather is contingent income. P. 96. 6. The claim of a patent-owner against an infringer for damages, like a claim for the infringer’s profits, is too contingent and uncertain to have a determinable market value while the validity of the patent is unsettled and contested and while the factors of damage are conjectural. P. 97. 7. The claim in this case cannot be treated as one for damages, since the taxpayer abandoned his claim against the infringer for damages and recovered profits. P. 97. 8. This case must be distinguished from one where the basis of the claim is an injury to capital, with the result that the recovery is never income, no matter when collected. P. 98. 9. Congress has power to tax income which accrued after the adoption of the Sixteenth Amendment through the liquidation and settlement of a claim which was inchoate, but remained uncertain and contested, before the effective date of the Amendment. P. 98. 10. The acceptance in settlement of less than the claim involves no loss deductible by the taxpayer, where from its origin up to the time of settlement the claim was uncertain and contested. P. 99. 76 F. (2d) 133, reversed. Certiorari, 296 U. S. 555, to review judgments affirming judgments of the District Court in two cases,—one an action against the United States to recover money paid as income taxes, 5 F. Supp. 276, and the other an action to recover a payment from the Collector. 90 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. Mr. J. P. Jackson, with whom Solicitor General Reed, Assistant Attorney General Wideman and Mr. James W. Morris were on the brief, for petitioners. Mr. Thomas G. Haight, with whom Messrs. Robert H. Montgomery, Henry T. Stetson, and James O. Wynn were on the brief, for respondent. Mr. Justice Cardozo delivered the opinion of the Court. The respondent claims a refund of income taxes under the Revenue Act of 1926. The petitioner in one of the cases (No. 75) is the United States, a defendant in the court below. The petitioner in the other (No. 76) is the Collector of Internal Revenue for the Fifth District of New Jersey. Since 1907, the taxpayer, respondent, has been the owner of the Creveling patent for an improvement in the electric lighting equipment of railway passenger cars. It brought suit in 1912 against the United States Light & Heating Company to restrain an infringement of the patent, and for an accounting of damages and profits. The suit was pending on February 25, 1913, the effective date of the Sixteenth Amendment, and on March 1, 1913, the effective date of the first statute enacted thereunder. Act of October 3, 1913, c. 16, 38 Stat. 114, 166, 168, 172, 174.* The accused infringer contested its liability for in- * With reference to every corporation subject thereto, that act provides as follows : “ The tax herein imposed shall be computed upon its entire net income accrued within each preceding calendar year ending December thirty-first : Provided, however, That for the year ending December thirty-first, nineteen hundred and thirteen, said tax shall be imposed upon its entire net income accrued within that portion of said year from March first to December thirty-first, both dates inclusive, to be ascertained by taking five-sixths of its entire net income for said calendar year: ... ” 38 Stat. 174. 91 U. S. V. SAFETY CAR HEATING CO. Opinion of the Court. 88 fringement as well as its liability for damages and profits. Not till 1915 was the capital fact of an infringement determined. On February 15, 1915, there was entered in the District Court an interlocutory decree for an injunction, which was affirmed by the Circuit Court of Appeals in July of the same year. An accounting followed before a Master and continued for eight years. On that accounting the complainant waived any recovery for damages, and confined its claim to the profits received by the infringer. On May 26, 1923, the Master filed his report in which he found that there was due to the complainant for profits received by the infringer between January 1, 1909 and April 30, 1914, the sum of $501,180.32. Of this award, a large part ($436,137.41) was for profits applicable to the period before March 1, 1913. The report was confirmed by the District Court on October 10, 1923, at which time the infringing defendant was in the hands of receivers. A final decree followed in October, 1924, the award being adjudged to constitute a superior lien upon the assets of the infringer then held by a successor. Crossappeals were carried to the Court of Appeals for the Second Circuit, the complainant contending that the award was too small, the infringer and its successor contending that the award was too large and that error had been committed also in the declaration of the lien. While the appeals were undetermined, the complainant accepted a settlement in May, 1925, after thirteen years of litigation, whereby it received from the infringer the sum of $200,-000 in satisfaction of the judgment. After deducting the expenses incurred in connection with the suit ($23,-468.05), the net amount collected was $176,531.95, of which part ($153,621.72) is attributable to acts of infringement before March 1, 1913, and part to such acts thereafter. In May, 1926, the taxpayer filed its income tax return for 1925, showing a net income for that year of $1,473,- 92 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. 187.13, and a tax due thereon of $172,610.19, which has been paid. It did not include in the return any part of the proceeds of the patent litigation ($176,531.95), nor did it claim any deduction for loss resulting from the settlement. Thereupon the Commissioner made a deficiency determination of $22,162.07, plus interest, the additional tax due after adding the net proceeds of the settlement to the income of the year. Two claims for refund followed. The first, filed in March, 1929, was for $69,729.18. The taxpayer took the ground that as a result of the settlement it had sustained a loss of $536,378.28, which through error it had failed to deduct in making its return and in paying the tax thereunder. Its books were kept on the accrual basis. The second of the two claims, filed in July, 1930, was for an additional refund in the amount of $19,970.82. In this the taxpayer took the ground that in determining the gross income for 1925 the Commissioner had erred by including that part of the proceeds of the settlement attributable to acts of infringement before March, 1913. Both claims were rejected by the Commissioner. The taxpayer then sued, making the United States the defendant with reference to the first claim and the Collector the defendant with reference to the second. In the suit against the United States the District Court found that the taxpayer’s claim for damages on account of so much of the infringement as had occurred before March 1, 1913, had a “market value” on that date of $436,137.41, the profits of the infringer up to that time as reported by the Master. From this the court concluded that in the year 1925 there had been a deductible loss of the difference between $436,137.41 and the sum of $174,-040.62, a like proportion of the $200,000 actually recovered. The tax upon this difference ($262,096.79) was $34,072.58. The taxpayer received an award of judgment for that amount with interest. 5 F. Supp. 276. In the suit against the Collector, the District Court held that U. S. v. SAFETY CAR HEATING CO. 93 88 Opinion of the Court. such portion of the net settlement as was allocable to acts of infringement before March 1, 1913 ($153,621.72), had accrued to the taxpayer in advance of that date, and was therefore to be treated as capital, not taxable as income for the year when the settlement was made. The taxpayer received an award of judgment for the tax on that amount (i. e., for $24,732.90) with interest. The Circuit Court of Appeals for the Third Circuit affirmed the judgments in both suits. 76 F. (2d) 133. To fix more precisely the taxable quality of contested and contingent choses in action belonging to a taxpayer before March 1, 1913, writs of certiorari issued from this court. First. Congress intended, with exceptions not now important, to lay a tax upon the proceeds of claims or choses in action for the recovery of profits, unless the right to such recovery existed unconditionally on March 1, 1913, the effective date of the first statute under the Sixteenth Amendment. The tax imposed on the respondent was laid under the Revenue Act of 1926 (c. 27, 44 Stat. 9), which includes in gross income (§ 213 (a)) gains on profits “from any source whatever.” We have said of that Act that it reveals in its provisions an intention on the part of Congress to reach “ pretty much every sort of income subject to the federal power.” Helvering v. Stockholms Enskilda Bank, 293 U. S. 84, 89. There is no denial that profits owing to a patentee by the infringer of a patent are income within the meaning of the statute, unless withdrawn from that category by the date of the infringement. Cf. T. R. 45, Art. 52; T. R. 62, Art. 51; T. R. 65, Art. 50; T. R. 69, Art. 50; Commissioner v. & A. Woods Machine Co., 57 F. (2d) 635. Until July, 1915, the existence of any liability was contested and uncertain. The amount remained contested and uncertain until May, 1925, when there was a 94 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. settlement of the liability reported by the Master. Then for the first time the profits flowing from the infringement became taxable as income. North American Oil Consolidated v. Burnet, 286 U. S. 417, 423; Lucas n. American Code Co., 280 U. S. 445, 451, 452; Lucas v. North Texas Lumber Co., 281 U. S. 11; Burnet v. Huff, 288 U. S. 156. The respondent admits this to be true to the extent that the acts of infringement were later than February, 1913. The argument seems to be, however, that accrual has a different meaning when applied to income generated by acts committed earlier. But plainly the respondent’s exemption, if it exists, will have to rest upon some other basis. A claim for profits so contingent and indefinite as to lack the quality of accrued income in March, 1913, cannot have had the quality of such income before that time, its existence and extent being then equally uncertain. Ohly an arbitrary dichotomy could bring us to the conclusion that part of the recovery was income to the taxpayer as of the date of payment or collection and part as of the date of the underlying wrong. The respondent, to prevail, must be able to make out that though the profits were income in * their entirety as of May, 1925, there was an intention of the Congress that part of this income, the part attributable to acts before March, 1913, should be excluded from the reckoning. We find no disclosure of that intention in the provisions of the statute, and none in the history of other acts before it. The first statute following the Sixteenth Amendment laid a tax, as we have seen, on the entire net income “ accrued ” within each calendar year, the impost being coupled with a proviso that for the year 1913 what was to be taxed should be the entire net income “ accrued ” within that portion of the year from March 1 to the end. Definiteness of meaning was given to that and later acts by Treasury Regulations. Article 90 of Regulations 62, 95 U. S. V. SAFETY CAR HEATING CO. Opinion of the Court. 88 adopted in 1922, provides: “Any claim existing unconditionally on March 1, 1913, whether presently payable or not, and held by a taxpayer prior to March 1, 1913, whether evidenced by writing or not ” does “ not constitute taxable income, although actually recovered or received subsequent to such date.” This provision appears without change of form in all Treasury Regulations adopted since that time. T. R. 65, Art. 90; T. R. 69, Art. 90; T. R. 74, Art. 91; T. R. 77, Art. 90. It appears with unimportant verbal differences in earlier regulations. T. R. 45, Art. 87, as amended by T. D. 3206, 5 Cum. Bui. 116. A claim existing “ unconditionally ” would include a claim for interest on a bond or for rent under a lease. A claim existing conditionally can have no better illustration than is found in a claim to recover an infringer’s profits. Cf. 0. D. 917, 4 Cum. Bui. 142; O. D. 1141, 5 Cum. Bui. 134; S. M. 2285, HI-2 Cum. Bui. 87, 89, 90, disapproving I. T. 1294, 1-1 Cum. Bui. 111. Nor does the case for the Government stand upon the regulations alone without confirmatory evidence. By clear implication the regulations have been ratified by Congress, which has passed Revenue Acts at frequent intervals thereafter without a sign of disapproval. “ Congress must be taken to have been familiar with the existing administrative interpretation.” McFeely v. Commissioner, 296 U. S. 102; Zeller-bach Paper Co. v. Helvering, 293 U. S. 172, 179, 180., Claims existing unconditionally before March 1, 1913, being thus excluded from the tax, the plain meaning of the regulation is that conditional or contingent claims, though they may have had an inchoate existence before March 1, 1913, are to be taxed when they are shorn of their conditional or contingent quality and become unconditional or absolute. So far as the problem to be solved depends upon the intention of the Congress in the enactment of the statute,, the result is hardly doubtful. 96 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. Whatever obscurity exists has its origin, one may believe, in a not uncommon confusion of the rule with the exception. There is a tendency now and again to look upon March 1,1913 as fixing a point of time when claims of every kind, no matter how contingent, became transmuted into capital, at least for taxing purposes. This is far from the truth, as the acceptance by Congress of the foregoing regulations sufficiently attests. The intention has rather been that, with exceptions specially declared or dependent upon considerations of established methods of accounting, every form of income accruing fully or unconditionally after February, 1913, shall contribute to the Treasury, though it had a potential existence for years before its capacity to fructify. As already suggested, perception of this intention has been clouded by exceptions, actual or seeming, which have been so insulated and emphasized as to be taken for the rule itself. Thus, Congress has now provided (see, e. g., Revenue Act of 1916, c. 463, § 2 (a), 39 Stat. 756, 757; Revenue Act of 1921, c. 135, § 201, 42 Stat. 224, 228; Revenue Act of 1926, c. 27, § 201, 44 Stat. 9, 10) that dividends may be distributed exempt from the tax to the extent that they are made out of earnings or profits accumulated before March 1, 1913. The exemption is “ a concession to the equity of stockholders ” (Lynch v. Hornby, 247 U. S. 339, 346; Helvering v. Canfield, 291 U. S. 163, 167), and had no existence under the pioneer statute, the Act of 1913, a dividend, irrespective of its source, being then taxable altogether. Lynch v. Hornby, supra. So Congress has now provided (see e. g., Revenue Act of 1924, c. 232, 43 Stat. 253, 259, § 204 (11) (b); supra, § 204 (b); Revenue Act of 1926, supra, § 204 (b)) that in computing gain or loss from the sale or other disposition of property acquired before March 1, 1913, the base shall be the cost or the value on that day, whichever is the greater. See also, Revenue Act of 1916, supra, § 2 (c); Revenue Act of 1921, supra, 97 U. S. v. SAFETY CAR HEATING CO. Opinion of the Court. 88 § 202 (b) (1). Cf. Merchants’ L. & T. Co. v. Smietanka, 255 U. S. 509; Goodrich v. Edwards, 255 U. S. 527. We are not unmindful of cases in which a like formula was applied without the aid of statute. Lynch v. Turrish, 247 U. S. 221; Doyle v. Mitchell Bros. Co., 247 U. S. 179; Hays v. Gauley Mountain Coal Co., 247 U. S. 189; and cf. MacLaughlin v. Alliance Insurance Co., 286 U. S. 244, 251. They do not rule the case at hand. In those cases and others like them assets that were capital in February, 1913, had been converted into cash thereafter. Coal lands and timber lands and timber had been sold by an owner in the ordinary course of business. By the practice of merchants a stock in trade is capital according to its inventory value. Hays n. Gauley Mt. Coal Co., supra, at p. 193. Nothing of the kind is here. The case is not helped by speaking of the claim as “ property.” The question is whether it is property that has been transmuted into capital. In February, 1913, the chose in action now assessed was not a part of the respondent’s capital as merchants or other business men would understand the term. Cf. North American Oil Consolidated v. Burnet, supra. At best it was contingent income, the income of the future. It had no inventory value, much less a value quoted in the market. Whether it would ever be worth anything was still unknown and unknowable. The answer was not given for many years thereafter. The argument is pressed upon us that the claim collected by the respondent is to be viewed as one for damages rather than as one for profits, and that in the aspect of a claim for damages it had a “ market value ” ascertainable at the commencement of the suit and later. There are two reasons, if not more, why the argument must fail. In the first place, the respondent made an election to abandon any claim for damages and to confine itself to the profits received by the infringer. The amount of these profits was unknown at the commencement of the 43927°—36—7 98 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S.. suit and must needs have remained unknown in advance of an accounting. To determine what the respondent got we are to consider what it did, and not what it could have had if it had made another choice. In the second place, a claim for damages like one for an infringer’s profits is too contingent and uncertain to have a determinable market value when the validity of the patent is unsettled and contested and the factors making up the damage are arrived at by conjecture. Sinclair Refining Co. v. Jenkins Petroleum Co., 289 U. S. 689, 697. Cf. Heiner n. Crosby, 24 F. (2d) 191; Walter v. Duffy, 287 Fed. 41. There is significance in the fact that the estimate of the damage in the claim filed with the Commissioner exceeded by nearly $300,000 the estimate of the damage accepted at the trial. The case comes down to this: On February 28, 1913, the respondent had a contested claim for profits which if prosecuted effectively would ripen into income. That claim would not have been capital if it had been acquired for the first time on March 1, 1913. It was not turned into capital because it had been acquired earlier. Edwards n. Keith, 224 Fed. 585; 231 Fed. 110; Workman n. Commissioner, 41 F. (2d) 139. Before March 1, 1913, and afterwards, it was continuously the same thing until reduced to judgment and collected. The case is not to be confused with one where the basis of the suit is an injury to capital, with the result that the recovery is never income, no matter when collected. Examples of such a claim are Saunders v. Commissioner, 29 F. (2d) 834, and Heiner v. Hewes, 30 F. (2d) 787, cited by the taxpayer. Buffalo Union Furnace Co. v. Helvering, 72 F. (2d) 399, is perhaps upon the border line, the claim being not for profits, but for recovery of out of pocket expenses. Confining it to its peculiar facts, we do not read it as inconsistent with the views herein expressed. Second. Congress was not restrained by express or implied restrictions of the Federal Constitution from giving 99 U. S. v. SAFETY CAR HEATING CO. Opinion of the Court. 88 effect to its intention and levying a tax upon the proceeds of the settlement. In February, 1913, if our analysis of the facts is accurate, there was a contested and contingent claim for profits, not fairly to be characterized as income for that year or earlier. In 1925, this inchoate and disputed claim became consummate and established. It was now something more than a claim. It was income fully accrued, and taxable as such. Till then the patentee had its capital, the patent, and an expectancy of income, or income, more accurately, in the process of becoming. Thereafter it had something different. No doubt the income thus accrued derived sustenance and value from the soil of past events. We do not identify the seed with the fruit that it will yield. Income within the meaning of the Sixteenth Amendment is the fruit that is bom of capital, not the potency of fruition. With few exceptions, if any, it is income as the word is known in the common speech of men. Lynch v. Hornby, supra, p. 344. When it is that, it may be taxed, though it was in the making long before. Mac-Laughlin v. Alliance Ins. Co., supra, at pp. 249, 250; Taft v. Bowers, 278 U. S. 470; Helvering v. Canfield, supra. Cf. Lucas v. Alexander, 279 U. S. 573, 577, 578; Towne v. Eisner, 245 U. S. 418; Eisner v. Macomber, 252 U. S. 189, 206, 207. If exceptions are to be allowed in exceptional conditions, they are inapplicable here. Third. The taxpayer is not entitled to a deduction on the basis of a difference between the value of the chose in action on March 1, 1913, or at any other time and the proceeds of collection. (a) At the time of the settlement, the amount of the infringer’s liability was contested as it had been before, the outcome of the contest being uncertain as long as the appeal was pending. The respondent chose to forego a large portion of the judgment in the belief that com- 100 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. promise was prudent. For all that appears, if compromise had been rejected, the judgment would have been so reduced as to make the recovery even less. True the respondent insists that the fear of a reduction was not the motive for the settlement. The motive is said to have been the fear that the judgment, even if not reduced, might not be susceptible of collection. On the other hand, the infringer may have viewed the prospects differently. We have no means of ascertaining whose forecast was the better. What we know is that there was a compromise through which patentee and infringer surrendered rights and opportunities. (b) The value of the chose in action, uncertain at the time of settlement, was even more uncertain in February, 1913. Unpredictable vicissitudes might reduce it to a nullity. The patent might be adjudged invalid. The infringer might become insolvent. In the earlier years as in the later ones the supposed profits of the business might have evaporated as the result of neglect or incapacity. Not till the report by the Master and its confirmation by the court could the recovery be estimated with even approximate correctness. There is no contention by the respondent that the value of the judgment was greater at that time than it was a few months later at the date of the settlement in the face of an appeal. The conclusion is inescapable that the acceptance of the settlement did not involve a loss of income, still less a loss of capital. Fourth. The taxpayer is not entitled to a refund of the proportion of the settlement attributable to the profits of the infringer before the effective date of the Sixteenth Amendment. This conclusion follows without need for elaboration from what has been said in this opinion as to the distinction between capital and income. The judgments are Reversed. MOOR v. TEXAS & N. 0. R. CO. 101 88 Syllabus. Mr. Justice Sutherland, Mr. Justice Butler, and Mr. Justice Roberts are of opinion that the judgments should be affirmed. The claim of respondent was a valid one, constituting property prior to March 1, 1913. It not only had an ascertainable value at that time, but a value which was actually ascertained and found as a fact by the trial judge and affirmed by the court below. Since there is evidence in the record to support these concurrent findings, we are not at liberty to set them aside. The case clearly falls within the principle of Doyle v. Mitchell Brothers Co., 247 U. S. 179; Lucas v. Alexander, 279 U. S. 573, and other cases which might be cited. Certainly promissory notes, bonds, shares of stock and valid claims arising upon contract or in tort may be capital as distinguished from income, quite as much as a stock of goods or other tangible property. And quite as certainly, it is not necessary that these intangibles should have a market value or an inventory value. It is enough that they have an ascertainable value at the statutory time fixed. MOOR v. TEXAS & NEW ORLEANS RAILROAD CO. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT. No. 49. Argued December 10, 1935.—Decided January 13, 1936. 1. A mandatory injunction is not granted as a matter of right, but is granted or refused in the exercise of a sound judicial discretion. P. 105. 2. Plaintiff sought a mandatory injunction to compel a railroad to accept shipments of cotton upon which the tax imposed by the Cotton Control Act of April 21, 1934, had not been paid and which, therefore, by the terms of that statute, the carrier was forbidden to transport. The plaintiff claimed the statute was unconstitutional, and resorted to equity upon the ground that, if he could not move his cotton to market, he would suffer a large financial loss, 102 OCTOBER TERM, 1935. Counsel for Parties. 297 U.S. the amount of which could not be determined accurately, and that he had no adequate remedy at law, and would be obliged to file many suits against railroads for refusal to accept shipments. The showing as to his financial condition was, however, general and meagre, and it did not appear that he could not have obtained the money necessary to move the cotton as he had done in respect of earlier consignments. Refusal to grant a mandatory injunction was sustained as within the District Court’s discretion by the Circuit Court of Appeals. Held that there is no ground for certiorari. P. 105. Writ of certiorari dismissed. Certiorari was granted in this case, 295 U. S. 728, to review a decree of the court below which affirmed the decree of the District Court refusing an injunction and dismissing the bill in a suit to compel the railroad company to accept a shipment of baled cotton. The decision below is reported, 75 F. (2d) 386. Messrs. Thornton Hardie and Henry E. Hackney, with whom Messrs. Garner W. Green and Ben R. Howell were on the brief, for petitioner. Mr. Ben C. Dey, with whom Messrs. J. H. Tallichet, Maury Kemp, and M. Nagle were on the brief, for respondent. By leave of Court, briefs of amici curiae were filed by Messrs. Marcellus Green, Garner W. Green, and Forrest B. Jackson, and Messrs. Ralph W. Malone, George E. Seay, and Henry Moore, Jr., for reversal of the judgment. Solicitor General Reed, by leave of Court, argued on behalf of the United States, as amicus curiae, for affirm-ance of the judgment. With him on the brief were As-sistant Attorney General Wideman and Messrs. Sewall Key, A. H. Feller, J. Paul Jackson, Francis A. LeSourd, Arnold Raum, Charles A. Horsky, Mastin G. White, and H. Stewart McDonald, Jr. MOOR v. TEXAS & N. 0. R. CO. 103 101 Opinion of the Court. Per Curiam. Lee Moor brought this suit on October 23, 1934, for a mandatory injunction to compel the Texas and New Orleans Railroad Company to transport ten bales of cotton from Clint, Texas, to New Orleans. The company had refused to transport the bales because of the lack of the bale tags required by the Cotton Control Act of April 21, 1934 (§§ 10, 14, 48 Stat. 598, 604). Moor contended that the statute was void, as an attempt to regulate the production of cotton contrary to the provisions of the Fifth and Tenth Amendments of the Constitution of the United States. On final hearing, the District Court did not rule upon the constitutional question but denied the injunction and dismissed the complaint upon the ground that it had not been shown that the plaintiff would suffer irreparable injury for which he had no adequate remedy at law. The Circuit Court of Appeals affirmed the decree, 75 F. (2d) 386, and certiorari was granted. The complaint alleged that the plaintiff was the owner of more than 3500 acres of land in El Paso County, Texas; that the encumbrances and the taxes and charges assessed for water were such as to require that he raise and sell annually 2000 bales of cotton for at least ten cents a pound net, or lose his land through foreclosure proceedings; that his cotton would have no value unless it could be transported to cotton markets; that the Cotton Control Act imposed a tax of fifty per centum of the average central market price per pound of lint cotton and in no event less than five cents per pound; that having ginned about 1000 bales of cotton, and being under the financial necessity of selling them, which was impossible under the statute unless he procured bale tags showing that the cotton was exempt or the tax had been paid, he had sought, under duress, and had obtained tax exemption certificates for 855^ bales, the entire amount to which he was entitled; that he would raise and gin a total of about 2500 bales, each of the average weight of 500 pounds, 104 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. during the year 1934, and had already ginned 1833 bales; that he had tendered, without the required tags, ten bales to the Southern Pacific Railroad Company for shipment to New York and ten bales to the defendant for shipment to New Orleans, but shipment had been refused solely by reason of the absence of the tags; that the average central market price of lint cotton was about twelve cents per pound, and, if transported, his cotton would be worth about $60 a bale, and the tax would be about $30 a bale; that if he was not permitted to move his cotton in interstate commerce he would suffer damage to the extent at least of $60,000, but that it would be impossible to determine the amount of damage accurately; that he had no adequate remedy at law and would be required to file a large number of suits based upon the refusal, of the railroad companies to accept shipments. The complaint was not verified. On October 25, 1934, the defendant moved to dismiss the complaint, invoking the provisions of the Act as a valid enactment, and on the same day the defendant answered to the same effect. The case was tried on October 30 and November 5, 1934. Plaintiff made two “trial amendments” which somewhat amplified the allegations of his complaint. Defendant admitted the truth of substantially all the allegations except those relating to duress in connection with plaintiff’s application for exemption certificates and as to the amount of his allotment, those as to future shipments, and those containing legal conclusions as to the invalidity of the Act and the tax which it imposed. The trial court received evidence. Plaintiff did not appear as a witness. The manager of his farm testified generally as to its cotton production, the market for cotton, and plaintiff’s inability to sell or move his cotton without the bale tags; that the average central market price of cotton was about twelve cents a pound, or $60 a bale of 500 pounds; that plaintiff had borrowed $50,000 to finish harvesting his cotton, mortgaging his 855 bales as security MOOR v. TEXAS & N. 0. R. CO. 105 101 Opinion of the Court. for that loan, which had been liquidated; and that plaintiff’s financial condition was such that it was necessary for him to realize on his cotton. Another witness testified as to general market conditions. No testimony was offered for the defendant. The allegations of the complaint with respect to plaintiff’s financial necessities, as a ground for equitable intervention, were of the most general character and the evidence in that relation was general and meagre. There were general statements as to encumbrances and expenses, without any showing of details. Apparently, plaintiff had disposed of the 855 exempt bales and there was no showing that he could not have obtained the money necessary to move the remaining bales. The trial court concluded that plaintiff had failed to make a case for equitable relief and should be left to his legal remedy. The Circuit Court of Appeals, in affirming the decree, rested its decision upon the established principle that a mandatory injunction is not granted as a matter of right, but is granted or refused in the exercise of a sound judicial discretion. Morrison v. Work, 266 U. S. 481, 490. In this view of the record, and of the discretion which the trial court was entitled to exercise, the writ of certiorari was improvidently granted and it is dismissed. Writ dismissed. 106 OCTOBER TERM, 1935. Counsel for Parties. 297 U.S HELVERING, COMMISSIONER OF INTERNAL REVENUE, v. SALVAGE.* CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT. No. 173. Argued December 20, 1935.—Decided January 13, 1936. 1. Upon appeal from an order of the Board of Tax Appeals sustaining a tax assessment, the Circuit Court of Appeals should confine itself to grounds which were presented to or considered by the Board. P. 108. 2. Stock of a corporation worth more than par was acquired from it by the taxpayer upon payment of par value in cash and in further consideration of an option to the corporation to repurchase part of the shares at par and of the taxpayer’s agreement not to compete with the corporation in business. Held: (1) That the taxpayer’s failure to report the profit at the time in his income tax return, due to an innocent mistake, did not estop him, when measuring the gain from a disposition of the shares in a later year, from claiming that their market value at time of purchase was greater than the cash price he had paid for them. P. 109. (2) That the market value of the shares subject to the option of repurchase was necessarily limited to $100 per share. P. 109. 76 F. (2d) 112, affirmed. Certiorari (cross-writs), 296 U. S. 557, to review a judgment reversing an order of the Board of Tax Appeals. Assistant Solicitor General Bell, with whom Solicitor General Reed, Assistant Attorney General Wideman and Mr. John R. Benney were on the brief, for the Commissioner. Mr. John G. Jackson, with whom Messrs. William H. White, Jr., and George B. Brooks were on the brief, for Salvage. * Together with No. 280, Salvage v. Helvering, Commissioner of Internal Revenue. Certiorari to the Circuit Court of Appeals for the Second Circuit. HELVERING v. SALVAGE. 107 106 Opinion of the Court. Mr. Justice McReynolds delivered the opinion of the Court. These cross writs bring up a judgment of the Circuit Court of Appeals, 2nd Circuit, which disapproved a deficiency assessment for 1929 income; and authorized recovery for overpayment below the taxpayer’s claim. The petition for certiorari in No. 173 asserts: “ The question is—Whether the taxpayer is estopped to claim that the difference between the market value of the 1,500 shares as of December 30, 1922 and their cost to him constituted taxable income to him for 1922; and hence that the fair market value of these shares, and not their cost, is the basis to be used in measuring the gain from the disposition of the shares in 1929, no income from the transaction having been reported in 1922.” The points to be urged in No. 280 are stated thus— “ The Circuit Court of Appeals erred: (1) In holding that the cost base of the preferred stock of American Viscose Corporation redeemed in 1929 was to be arrived at by taking as the fair market value of The Viscose Company stock the sum of $100 per share, insofar as the five-sevenths of said stock which was subject to the option to repurchase was concerned. (2) In making a finding as to the value of said optioned stock.” Prior to 1922, Salvage, the taxpayer, bought twenty-five shares, Viscose Company stock. He paid $166.66 for each one—for all $4166.66. In December, 1922, he acquired from the corporation 1500 shares for which he paid $100 per share ($150,000) and entered into an obligation to refrain from competing business, etc. Also, he agreed that during 1923 the corporation might repurchase five-sevenths of 1500 shares at par; during 1924, four-sevenths, etc. Intrinsically (when unincumbered) a share of the company stock was then worth $1164.70. Later during 1922, all these shares (1525) were exchanged for 6100 preferred shares, redeemable at $110, 108 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. and 7625 common shares, American Viscose Corporation. The basis of exchange was four preferred and five common shares of new stock for one share of old. The taxpayer’s return for 1922 (not in evidence) showed no gain from these transactions. During 1929, American Viscose Corporation redeemed its preferred shares at $110; Salvage received $671,000. His return for that year disclosed as net capital gain the difference between that sum and $154,166.66, total outlay for the 1525 converted shares. Upon this, he paid the assessed tax. Apparently, he supposed apportionment between preferred and common stock of their total cost was impossible or unnecessary; also that no taxable gain arose before return of his entire outlay. Upon an audit, the Commissioner ruled that proper apportionment of the total cost—$154,166.66—could be made. He assigned thirty-seven -J- per cent, to the preferred and sixty-two -|- per cent, to the common shares and made a deficiency assessment of $12,005.38. Thereupon, the taxpayer claimed, first that in 1922 each Viscose Company share was fairly worth $1164.70 and with that as the base, no taxable gain arose upon redemption of the preferred stock. Also that he had overpaid to the extent of $63,750. Second, that apportionment of the cost of both between preferred and common shares was impracticable and no taxable gain could arise prior to recovery of the full outlay. Upon these conflicting claims, the Board of Tax Appeals took the matter. There the Commissioner asserted correctness of his action; he presented no affirmative defense; set up no claim of estoppel because of the taxpayer’s failure properly to report 1922 gain. The Board held the difference between the true value of Viscose Company shares and the price paid by the taxpayer was not compensation for services; also that the 109 HELVERING v. SALVAGE. Opinion of the Court. 106 deficiency assessment was properly made. Estoppel was neither presented nor considered. The court below held that the consideration for the Viscose Company stock acquired in 1922 was $100 per share, plus the covenants to resell five-sevenths at par, etc. and not to engage in competing business. Also that the base cost for estimating capital gain in 1929 was the fair market value in 1922 of the shares then held. And since the corporation had the right to repurchase at par, the market value of five-sevenths did not exceed $100 per share. Further, that the failure to disclose 1922 taxable gain apparently resulted from innocent mistake of law; there was no false representation of fact; nothing gave support to the claim of estoppel. The cause was remanded for ascertainment of the amount of the overpayment. We find no reason to disagree with the judgment of the court. The defense of estoppel was not before the Board. Under what we regard as the correct practice, General Utilities & Operating Co. v. Helvering, 296 U. S. 200, the court should have passed the point. Furthermore, the facts disclosed give it no support. Considering the option to repurchase at par, outstanding in 1922, there could be no proper finding of fair market value at that time in excess of $100 per share. In the circumstances, the court did not err in so holding. Pertinent Treasury Regulations, rulings and judicial opinions are adequately pointed out by the court’s opinion. The judgment is affirmed. The cause will be remanded for further proceedings. Affirmed- 110 OCTOBER TERM, 1935. Syllabus. 297 U.S RICKERT RICE MILLS, INC. v. FONTENOT, COLLECTOR OF INTERNAL REVENUE.* CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT. No. 577. Argued December 16, 17, 1935.—Decided January 13, 1936. 1. The infirmities of the Agricultural Adjustment Act, 1933, which were the basis of decision in United States v. Butler, ante, p. 1, holding it unconstitutional, were not cured by the Amendatory Act of August 24, 1935. The so-called tax exacted of processors still lacks the quality of a true tax, and remains a means for effectuating the regulation of agricultural production,—a matter not within the powers of Congress. P. 112. 2. The Court has no occasion to discuss or decide in this case the question whether § 21 (d) of the Amended Act affords an adequate remedy at law for the recovery of money unconstitutionally exacted of a processor. P. 112. 3. In suits by processors to restrain a collector from assessing and collecting “processing taxes” pursuant to the Agricultural Adjustment Act, 1933, as amended by the Act of August 24, 1935, this Court, in granting writs of certiorari, restrained the collection upon the condition that the petitioners pay the amounts of the accruing taxes to a depositary, to be withdrawn only upon the further order of this Court. The exaction of the statute having been found unconstitutional, held that the impounded funds should be returned to petitioners without regard to the adequacy of the remedy under § 21 (d) of the Amended Act for recovery of taxes collected, since the petitioners have not paid those funds as taxes to the collector and cannot now be required to do so, nor can collection be enforced by distraint. P. 112. Decrees of the District Court vacated. Certiorari, 296 U. S. 569, to the Circuit Court of Appeals after denial by that court of applications for injunc- * Together with No. 578, Dore v. Fontenot; No. 579, United Rice Milling Products Co. v. Fontenot; No. 580, Baton Rouge Rice Mid, Inc. n. Fontenot; No. 581, Simon v. Fontenot; No. 585, Levy Rice Milling Co. y. Fontenot; No. 586, Farmers Rice Milling Co. v. Fontenot; and No. 587, Noble-Trotter Rice Milling Co. v. Fontenot—all on writs of certiorari to the Circuit Court of Appeals for the Fifth Circuit. RICKERT RICE MILLS v. FONTENOT. Ill 110 Opinion of the Court. tions, pending appeal, in suits brought by processors of rice against the respondent collector to enjoin assessment and collection of processing taxes under the Agricultural Adjustment Act as amended. The District Court had dismissed the bills. The decrees of this Court provide for return of moneys impounded under its orders; vacate the decrees of the District Court, and remand the cases to that court for entry of decrees of injunction. Messrs. John P. Bullington and Homer L. Bruce, with whom Messrs. Ralph J. Schwarz, Morris B. Redmann, and C. A. McCoy were on the brief, for petitioners. Assistant Attorney General Wideman, with whom Attorney General Cummings, Solicitor General Reed, Messrs. Sewall Key, Norman D. Keller, J. Paul Jackson, Lucius A. Buck, Mastin G. White, Prew Savoy, and Miss Helen R. Carloss were on the brief, for respondent. By leave of Court, briefs of amid curiae were filed as follows: Messrs. Nathan L. Miller, John W. Davis, and William R. Perkins, on behalf of Hygrade Food Products Corp, et al.; Messrs. Charles B. Rugg, Frank J. Morley, Thomas Nelson Perkins, and Warren F. Farr, on behalf of General Mills, Inc., et al.; Mr. John E. Hughes, on behalf of American Nut Co., Inc., et al.; and Messrs. James S. Y. Ivins, Kingman Brewster, Percy W. Phillips, 0. R. Folsom-Jones, Richard B. Barker, and John Ward Cutler,—all in support of the petitioners. Mr. Justice Roberts delivered the opinion of the Court. This is one of eight companion cases.1 They were consolidated for hearing by the District Court. It will be sufficient briefly to state the facts in No. 577: * xThe others are: 578, Dore v. Fontenot; 579, United Rice Milling Products Co., Inc. v. Fontenot; 580, Baton Rouge Rice Mill, Inc. v. Fontenot; 581, Simon v. Fontenot; 585, Levy Rice Milling Co., Inc. v. Fontenot; 586, Farmers Rice Milling Co., Inc. v. Fontenot, and 587, Noble-Trotter Rice Milling Co., Inc. v. Fontenot. 112 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. The petitioner, a processor of rice, filed its bill in the District Court for Eastern Louisiana, to restrain the respondent from assessing or collecting taxes levied for the month of September, 1935, and subsequent months, pursuant to the Agricultural Adjustment Act, 1933,2 as amended by the Act of August 24,1935.3 The bill charges the exaction is unconstitutional and alleges the respondent threatens collection by distraint, which will cause irreparable injury, as the petitioner has no adequate remedy at law to recover what may be collected. A preliminary injunction was sought. The respondent filed a motion to dismiss, citing Revised Statutes 3224 and § 21 (a) of the amended Agricultural Adjustment Act as prohibiting restraint of collection, and also asserting that the petitioner had a plain, adequate, and complete remedy at law. The court refused an interlocutory injunction and entered a decree dismissing the bill. Appeal was perfected to the Circuit Court of Appeals. The District Judge refused to grant an injunction pending the appeal. Application to the Circuit Court of Appeals for such an injunction was denied upon the view that the petitioner had an adequate remedy at law and the statute deprived the court of jurisdiction to restrain collection. In praying a writ of certiorari the petitioner asserted that by reason of the provisions of § 21 (d) it would be impossible to recover taxes collected, even though the act were unconstitutional, since the section forbids recovery except upon a showing of facts not susceptible of proof. This court granted the writ and restrained collection of the tax upon condition that the petitioner should pay the amount of the accruing taxes to a depository, to the joint credit of petitioner and respondent, such funds to be withdrawn only upon the further order of the court. 2 C. 25, 48 Stat. 31. 3 C. 641, 49 Stat. 750. RICKERT RICE MILLS v. FONTENOT. 113 110 Opinion of the Court. The cause was advanced for hearing and has been fully argued on the questions of the constitutionality of the exaction and the inadequacy of the remedy for recovery of taxes paid. The changes made by the amendatory act of August 24, 1935, do not cure the infirmities of the original act which were the basis of decision in United States V. Butler, ante, p. 1. The exaction still lacks the quality of a true tax. It remains a means for effectuating the regulation of agricultural production, a matter not within the powers of Congress. We have no occasion to discuss or decide whether § 21 (d) affords an adequate remedy at law. As yet the petitioner has not paid the taxes to the respondent, and, in view of the decision in the Butler case, hereafter cannot be required so to do. If the respondent should now attempt to collect the tax by distraint he would be a trespasser. The decree of the District Court will be vacated, an appropriate order entered directing the repayment to the petitioner of the funds impounded pendente lite, and the cause remanded to the District Court for the entry of a decree enjoining collection of the assailed exaction. A similar disposition will be made of the companion cases. Decree vacated. 43927°—36---8 114 OCTOBER TERM, 1935. Counsel for Parties. 297 U.S. VAN DER WEYDE v. OCEAN TRANSPORT CO., LTD. ET AL. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT. No. 4. Submitted January 15, 1936.—Decided February 3, 1936. 1. Jurisdiction if otherwise existing in the District Court over a libel of a Norwegian vessel by a seaman for personal injuries sustained on board in 1922, was not affected by Article XIII of the Treaty of 1827 with Sweden and Norway, providing a consular jurisdiction for adjudication of differences between captains and crews, in as much as that Article was terminated in 1919, by this Government, acting through the President and the Secretary of State. P. 116. 2. Under § 16 of the Seamen’s Act of March 4, 1915, by which Congress expressed its judgment that treaty provisions in conflict with the Act should be terminated and requested and directed the President to give notice to that effect to Governments concerned, it was the duty of the President to reach his conclusions as to such conflicts; and his finding of inconsistency between Article XIII of the Treaty of 1827, supra, and provisions of the statute, was neither arbitrary nor inadmissible. P. 117. 3. Norway having agreed to the termination of Article XIII of the Treaty, her consul cannot be heard to question it. P. 118. 4. The Treaty of Friendship, Commerce and Consular Rights, of June 5, 1928, between Norway and the United States, which supplanted most of the Treaty of 1827, including Article XIII cannot be regarded as affecting retroactively the jurisdiction of the District Court. P. 118. 73 F. (2d) 922, reversed. Certiorari, 296 U. S. 567, to review a decree affirming the dismissal of a libel in admiralty for want of jurisdiction. Reported below sub nom. The Taigen Maru. Messrs. John P. Hannon, Wm. P. Lord, and Andrew G. Haley submitted for petitioner. Messrs. Lane Summers, F. T. Merritt, and W. H. Hayden submitted for respondent. 115 VAN DER WEYDE v. OCEAN CO. Opinion of the Court. 114 Mr. Chief Justice Hughes delivered the opinion of the Court. Petitioner brought this libel in 1931, in the District Court for the Western District of Washington, against the vessel “Taigen Maru,” for personal injuries which he sustained as a seaman in 1922. The vessel was then known as the “Luise Nielsen” and was of Norwegian registry. The respondent, Ocean Transport Company, Ltd., a Japanese corporation, made claim as owner, and filed exceptions alleging that a final decree had been entered in the District Court for the District of Oregon in 1924, dismissing a libel, for the same cause, on the intervention of the Norwegian consul. In the present case, there was again an intervention by the Norwegian consul, who claimed that, while the vessel was now Japanese, he was nevertheless officially concerned, as the former Norwegian owner had agreed to deliver the vessel “free from all debts and encumbrances.” The consul filed exceptive allegations to the effect that the libelant, a Dutch subject, had signed Norwegian articles and, so far as his rights as -a, seaman were concerned, was bound by the laws of Norway, which provided for appropriate remedies. The consul asked that, if the cause was not dismissed because of the former decree, the dispute should be left for his adjustment and disposition. The libelant made response and, on hearing, the District Court dismissed the cause “in the exercise of its discretion.” The Circuit Court of Appeals affirmed the decree, but upon the ground that the dismissal should have been for want of jurisdiction rather than as an exercise of discretion. 73 If. (2d) 922. The court based its decision upon the second paragraph of Article XIII of the Treaty of Commerce and Navigation, of 1827, between the United States and the Kingdom of Sweden and Norway, the text 116 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. of which is given, in the margin-1 The court assumed that this provision was still in effect, apparently not being advised of the fact that Articles XIII and XIV of that treaty had been terminated in 1919. See Foreign Relations of the United States, 1919, pp. 47-54. Section 16 of the Seamen’s Act of March 4, 1915,* 2 expressed “the judgment of Congress” that treaty provisions in conflict with the provisions of the Act “ought to be terminated,” and the President was “requested and directed” to give notice to that effect to the several Governments concerned within ninety days after the passage of the Act. It appears that, in consequence, notice was given and that a large number of treaties were terminated in whole or in part.3 The Treaty with Sweden and Norway of 1827 provided that it might be terminated, after an initial period of ten years, upon one year’s notice.4 * On February 2, 1918, the Government gave notice to the Norwegian Government of the denunciation of the treaty in its entirety, to take effect on February 2, 1919, but later by an exchange of diplomatic *8 Stat. 346, 352. “Article XIII. . . . The consuls, vice consuls, or commercial agents, or the persons duly authorized to supply their places, shall have the right, as such, to sit as judges and arbitrators in such differences as may arise between the captains and crews of the vessels belonging to the nation whose interests are committed to their charge, without the interference of the local authorities, unless the conduct of the crews, or of the captain, should disturb the order of tranquillity of the country; or the said consuls, vice consuls, or commercial agents should require their assistance to cause their decisions to be carried into effect or supported. It is, however, understood, that this species of judgment, or arbitration shall not deprive the contending parties of the right they have to resort, on their return, to the judicial authority of their country.” 2 38 Stat. 1164, 1184. 3 Foreign Relations of the United States, 1915, pp. 3 et seq.; 1916, pp. 33 et seq.', 1917, pp. 9 et seq.; 1918, pp. 3 et seq.; 1919, pp. 47 et seq. Article XIX, 8 Stat. 356. 117 VAN DER WEYDE v. OCEAN CO. 114 Opinion of the Court. notes, this Government formally withdrew its denunciation, except as to Articles XIII and XIV. Foreign Relations of the United States, 1919, pp. 50-52. It was expressly stated that Articles XIII and XIV of the treaty, being in conflict with provisions of the Seamen’s Act, were deemed to be terminated on July 1, 1916, so far as the laws of the United States were concerned. Id. pp. 53, 54. On June 5, 1928, the two Governments signed a Treaty of Friendship, Commerce, and Consular Rights, and on February 25, 1929, an additional Article, which supplanted the Treaty of 1827 (so far as the latter had remained effective), save that Article I of the former treaty concerning the entry and residence of the nationals of the one country in the territories of the other for the purposes of trade, was continued in force.6 Respondent contends (1) that the Seamen’s Act did not specifically direct the abrogation of Article XIII, (2) that the Act was not so unavoidably inconsistent with all the provisions of Article XIII as to require its entire abrogation, and (3) that the diplomatic negotiations attempting to effect abrogation of the whole of Article XIII “were in excess of congressional direction and in violation of constitutional authority.” The first and second points are unavailing, if Article XIII was actually abrogated in its entirety, and that this was the purport of the diplomatic exchanges between the two Governments is beyond dispute. As to the third point, we think that the question as to the authority of the Executive in the absence of congressional action, or of action by the treaty-making power, to denounce a treaty of the United States, is not here involved. In this instance, the Congress requested and directed the President to give notice of the termination of the treaty provi- 6 47 Stat. Pt. 2, pp. 2135, 2158, 2159. 118 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. sions in conflict with the Act. From every point of view, it was incumbent upon the President, charged with the conduct of negotiations with foreign governments and also with the duty to take care that the laws of the United States are faithfully executed, to reach a conclusion as to the inconsistency between the provisions of the treaty and the provisions of the new law. It is not possible to say that his conclusion as to Articles XIII and XIV was arbitrary or inadmissible. Having determined that their termination was necessary, the President through the Secretary of State took appropriate steps to effect it. Norway agreed to the termination of Articles XIII and XIV and her consul cannot be heard to question it. The injuries, of which libelant complains, took place after that termination. The effect of the new treaty we need not, and do not, consider, as in any event it could not be regarded as retroactively affecting the jurisdiction of the District Court. The Circuit Court of Appeals fell into error in sustaining the dismissal of the cause upon the ground of want of jurisdiction by reason of the treaty provision invoked. We express no opinion upon any other questions which the cause may present, as these have not been considered by the courts below. They should be considered and determined. The decree is reversed and the cause is remanded for further proceedings in conformity with this opinion. Reversed.. 119 VIOLET TRAPPING CO. v. GRACE. Opinion of the Court. VIOLET TRAPPING CO., INC. v. GRACE, REGISTER STATE LAND OFFICE, et al. APPEAL FROM THE SUPREME COURT OF LOUISIANA. No. 302. Argued January 10, 13, 1936.—Decided February 3, 1936. Lands which a State had acquired by adjudication for nonpayment of taxes were leased by it for a term limited to end if the lands were redeemed by the former owner or sold by the State. Held, that a later statute, permitting redemption on terms less onerous than those in force when the lease was made, did not impair the lessee’s rights under the contract clause of the Constitution or the due process and equal protection clauses of the Fourteenth Amendment. P. 120. 182 La. 405; 162 So. 26, affirmed. Appeal from a judgment affirming the dismissal of a suit in which a mandamus was sought to cancel certificates of redemption of land from tax sales, and an injunction against assertions of title thereunder. Mr. Edward Rightor, with whom Messrs. Eugie V. Parham and Edwin J. Prinz were on the brief, for appellant. Messrs. Emmet Alpha, George A. Dreyjous, and Claude L. Johnson were on the brief for appellees. By leave of Court, Messrs. Bentley G. Byrnes and M. C. Scharff filed a brief on behalf of the Trappers & Fishermen’s Union of St. Bernard and Plaquemines Parishes, as amicus curiae, supporting the position of appellees. Per Curiam. Appellant is a sub-lessee of lands leased by the State of Louisiana in 1924 to the Terre aux Boeufs Drainage District. The lands had become the property of the State by an adjudication for unpaid taxes of 1911 to 1923. The lease by the State contained a clause that the lease would end in case the lands were redeemed by the former owner or sold by the State. At the time the lease and sub-lease 120 OCTOBER TERM, 1935. 297 U.S. Opinion of the Court. were made, the lands could be redeemed only by payment of all taxes, penalties and interest due at the date of redemption. By a subsequent statute, Act No. 161 of 1934, the legislature of Louisiana permitted redemption on different and less onerous terms, that is, by the payment, on an installment basis, of the actual taxes for which the property had been adjudicated to the State. Under that statute, certificates for the redemption of the lands in question were issued by the Register of the State Land Office. Appellant then sought mandamus to compel the cancellation of the certificates, upon the ground that the Act of 1934 violated the Constitution of the United States in that the act impaired the obligation of appellant’s contract of lease, deprived appellant of its property without due process of law, and denied to appellant the equal protection of the laws. Judgment against the appellant was affirmed by the Supreme Court of the State. That court decided that there was no impairment of the contract as the clause in the original lease, making it subject to redemption, was “free of ambiguity and without limitation as to the conditions under which the properties embraced in the lease might be redeemed or sold, or the price to be paid therefor.” State ex ret. Violet Trapping Co. v. Grace, 182 La. 405; 162 So. 26. While this Court, when the contract clause of the Federal Constitution is invoked, may determine for itself the meaning and effect of the contract (Larson v. South Dakota, 278 U. S. 429, 433; United States Mortgage Co. n. Matthews, 293 U. S. 232, 236), we find no reason for disagreeing with the conclusion reached by the state court. The questions sought to be raised under the due process and equal protection clauses of the Fourteenth Amendment are without merit. Bachtel v. Wilson, 204 U. S. 36, 41; Rast v. Van Deman & Lewis Co., 240 U. S. 342, 357; Sproles v. Binford, 286 U. S. 374, 396. The judgment is Affirmed. 121 TYSON v. UNITED STATES. Opinion of the Court. TYSON v. UNITED STATES. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FOURTH CIRCUIT. No. 192. Argued January 7, 1936.—Decided February 3, 1936. 1. Section 19 of the World War Veterans’ Act of 1924, as amended, bars suits on yearly renewable term insurance unless brought within six years after the right accrued or within one year after the date of approval (July 3, 1930) of the amending Act, but suspends the limitation “for the period elapsing between the filing in the bureau of the claim sued upon and the denial of said claim by the director.” Held, where a claim was filed July 3, 1931 and notice of denial was received by claimant through the mail on November 16, 1932, suspension of the limitation ended not later than the latter date and a suit brought on November 17, 1932, alleging disability existing from time of discharge in 1918, was barred. P. 122. 2. Whether denial of the claim occurred prior to the date when notice was received by the claimant, not decided. P. 123. 76 F. (2d) 533, affirmed. Certiorari, 296 U. S. 554, to review a judgment affirming a judgment dismissing an action on a policy of War Risk Insurance. Mr. J. Melville Broughton, with whom Mr. Wm. H. Yarborough, Jr., was on the brief, for petitioner. Mr. Will G. Beardslee, with whom Solicitor General Reed and Messrs. Wilbur C. Pickett, Randolph C. Shaw, and W. Marvin Smith were on the brief, for the United States. By leave of Court, Mr. Warren E. Miller filed a brief, as amicus curiae, supporting the position of petitioner. Mr. Justice McReynolds delivered the opinion of the Court. Petitioner, Tyson, sued to recover total permanent disability benefits under a war risk term insurance contract, 122 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. kept in force by premium payments while the insured remained in service. The petition, filed November 17, 1932, alleged that disability had existed ever since the claimant’s discharge from the Army, December 18, 1918. The trial court dismissed the cause for want of jurisdiction, being of opinion that it was not instituted within the prescribed time. The Circuit Court of Appeals affirmed the judgment. July 3, 1931, Tyson filed his claim with the Veterans’ Administration. November 16, 1932, he received from it a letter, dated November 12, 1932 and mailed at Washington November 14, 1932, which stated that this had been denied. Also—“You may consider such denial final for the purposes of instituting suit under Section 19 of the World War Veterans’ Act, 1924, as amended. If you accept the denial of the claim by the Council as final, the suspension of the statute of limitations provided by Section 19 shall cease from and after the date of this letter plus the number of days usually required by the Post Office Department for the transmission of regular mail from Washington, D. C., to your last address of record.” The question for decision is whether the petitioner brought suit within the time permitted by §19, Act of 1924, as amended. § 445, title 38, United States Code; c. 849, § 4, 46 Stat. 992, approved July 3, 1930. “No suit on yearly renewable term insurance shall be allowed under this section unless the same shall have been brought within six years after the right accrued for which the claim is made or within one year after the date of approval of this amendatory Act, whichever is the later date, . . . : Provided, That for the purposes of this section it shall be deemed that the right accrued on the happening of the contingency on which the claim is founded: Provided further, That this limitation is sus- 123 TYSON V. UNITED STATES Opinion of the Court. 121 pended for the period elapsing between the filing in the bureau of the claim sued upon and the denial of said claim by the director.” Manifestly, suit was not begun within six years after the right accrued, or within one year after July 3, 1930. Permission to sue had expired unless the limitation was suspended between the filing on July 3, 1931 and November 17, 1932, when proceedings began in the trial court. Whether the denial occurred November 12th, the date given the letter of advice, or November 14th, when this was mailed, or November 16th, when the claimant actually received it, although much debated by counsel, we need not consider. The statute provides: No suit . . . shall be allowed . . . unless . . . brought within six years after the right accrued ... or within one year after July 3, 1930, whichever is the later date. But this limitation was suspended by the proviso for the period between the filing and denial of the claim. In any view, the denial occurred not later than November 16th, 1932. And, with that day, the suspension of the statute ended—certainly the period between July 3, 1931 and November 16, 1932 did not extend beyond the latter day. The plain words employed by Congress require this conclusion. Suit was not begun until the 17th, and that was too late. Affirmed. 124 OCTOBER TERM, 1935. Opinion of the Court. GOOCH v. UNITED STATES. 297 U.S. CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS FOR THE TENTH CIRCUIT. No. 559. Argued January 13, 14, 1936.—Decided February 3, 1936. 1. An officer who is unlawfully seized and carried away to prevent the arrest of his captor is “held for . . . reward or otherwise” within the meaning of the Federal Kidnaping Act as amended; and transportation in interstate commerce of the officer while thus restrained constitutes a violation of the Act. Act of June 22, 1932, as amended by Act of May 18, 1934. P. 125. 2. The amending Act added to the words “held for ransom or reward” the words “or otherwise, except, in the case of a minor, by a parent thereof.” The contention that the words “ransom” and “reward” mean only pecuniary benefits, and that ejusdem generis similarly restricts the words “or otherwise” notwithstanding the excepting clause, cannot be sustained. P. 126. 3. The rule of ejusdem generis is an aid in ascertaining the correct meaning of words when there is uncertainty. P. 128. 4. Penal statutes are construed in that sense which best harmonizes with their context and purpose. P. 128. Certificate presenting two questions involving the construction of the Federal Kidnaping Act. Mr. W. F. Rampendahl, with whom Mr. E. M. Frye was on the brief, for Gooch. Mr. Gordon Dean, with whom Solicitor General Reed, Assistant Attorney General Keenan, and Mr. William W. Barron were on the brief, for the United States. Mr. Justice McReynolds delivered the opinion of the Court. By permission of § 346, 28 U. S. C., the Circuit Court of Appeals, 10th Circuit, has certified two questions and asked instruction. “1. Is holding an officer to avoid arrest within the meaning of the phrase, ‘held for ransom or reward or GOOCH v. UNITED STATES. 125 124 Opinion of the Court. otherwise’, in the act of June 22, 1932, as amended May 18, 1934 (48 Stat. 781), 18 U. S. C. A. 408a? “2. Is it an offense under Section 408a, supra, to kidnap and transport a person in interstate commerce for the purpose of preventing the arrest of the kidnaper?” The statement revealing the facts and circumstances out of which the questions arise follows— “Gooch was convicted and sentenced to be hanged under an indictment charging that he, with one Nix, kidnaped two officers at Paris, Texas, ‘for the purpose of preventing his (Gooch’s) arrest by the said peace officers in the State of Texas,’ and transported them in interstate commerce from Paris, Texas, to Pushmataha County, Oklahoma, and at the time of the kidnaping did bodily harm and injury to one of the officers from which bodily harm the officer was suffering at the time of his liberation by Gooch and Nix in Oklahoma. “The proof supports the charge. It established these facts: Gooch and Nix, while heavily armed, were accosted by the officers at Paris, Texas. To avoid arrest, Gooch and Nix resisted and disarmed the officers, unlawfully seized and kidnaped them and transported them by automobile from Texas to Oklahoma, and liberated them in the latter State. During the time Gooch and Nix were kidnaping the officers they inflicted serious bodily injury upon one of the officers, from which injury he was suffering at the time of such liberation in the State of Oklahoma.” The Act of June 22, 1932, c. 271, 47 Stat. 326, provided— “That whoever shall knowingly transport or cause to be transported, or aid or abet in transporting, in interstate or foreign commerce, any person who shall have been unlawfully seized, confined, inveigled, decoyed, kidnaped, abducted, or carried away by any means whatsoever and held for ransom or reward shall, upon convic- 126 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. tion, be punished by imprisonment in the penitentiary for such term of years as the court, in its discretion, shall determine.” The amending Act of May 18, 1934, c. 301, 48 Stat. 781, 18 U. S. C. 408a, declares— “Whoever shall knowingly transport or cause to be transported, or aid or abet in transporting, in interstate or foreign commerce, any person who shall have been unlawfully seized, confined, inveigled, decoyed, kidnaped, abducted, or carried away by any means whatsoever and held for ransom or reward or otherwise, except, in the case of a minor, by a parent thereof, shall, upon conviction, be punished (1) by death if the verdict of the jury shall so recommend, provided that the sentence of death shall not be imposed by the court if, prior to its imposition, the kidnaped person has been liberated unharmed, or (2) if the death penalty shall not apply nor be imposed the convicted person shall be punished by imprisonment in the penitentiary for such term of years as the court in its discretion shall determine: . . .” Counsel for Gooch submit that the words “ransom or reward” import “some pecuniary consideration or payment of something of value”; that as the statute is criminal the familiar rule of ejusdem generis must be strictly applied; and finally, it cannot properly be said that a purpose to prevent arrest and one to obtain money or something of pecuniary value are similar in nature. The original Act (1932) required that the transported person should be held “for ransom or reward.” It did not undertake to define the words and nothing indicates an intent to limit their meaning to benefits of pecuniary value. Generally, reward implies something given in return for good or evil done or received. Informed by experience during two years, and for reasons satisfactory to itself, Congress undertook by the 1934 Act to enlarge the earlier one and to clarify its pur- 127 GOOCH v. UNITED STATES. Opinion of the Court. 124 pose by inserting “or otherwise, except, in the case of a minor, by a parent thereof,” immediately after “held for ransom or reward.” The history of the enactment emphasized this view. The Senate Judiciary Committee made a report, copied in the margin,1 recommending passage of the amending bill and pointing out the broad purpose intended to be accomplished. The House Judiciary Committee made a like recommendation and said— 1 “The Committee on the Judiciary, having had under consideration the bill (S. 2252) to amend the act forbidding the transportation of kidnaped persons in interstate commerce, reports the same favorably to the Senate and recommends that the bill do pass. “The purpose and need of this legislation are set out in the following memorandum from the Department of Justice: “S. 2252; H. R. 6918: This is a bill to amend the act forbidding the transportation of kidnaped persons in interstate commerce—act of June 22, 1932 (U. S. C., ch. 271, title 18, sec. 408a), commonly known as the ‘Lindbergh Act.’ This amendment adds thereto the word ‘otherwise’ so that the act as amended reads: ‘Whoever shall knowingly transport . . . any person who shall have been unlawfully seized . . . and held for ransom or reward or otherwise shall, upon conviction, be punished . . .’ The object of the addition of the word ‘otherwise’ is to extend the jurisdiction of this act to persons who have been kidnaped and held, not only for reward, but for any other reason. “In addition, this bill adds a proviso to the Lindbergh Act to the effect that in the absence of the return of the person kidnaped and in the absence of the apprehension of the kidnaper during a period of 3 days, the presumption arises that such person has been transported in interstate or foreign commerce, but such presumption is not conclusive. “I believe that this is a sound amendment which will clear up border-line cases, justifying Federal investigation in most of such cases and assuring the validity of Federal prosecution in numerous instances in which such prosecution would be questionable under the present form of this act.” 8. Rep. 534, 73d Cong., 2d Sess., March 22, 1934. 128 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. “This bill, as amended, proposes three changes in the act known as the ‘Federal Kidnaping Act? First, it is proposed to add the words ‘or otherwise, except, in the case of a minor, by a parent thereof? This will extend Federal jurisdiction under the act to persons who have been kidnaped and held, not only for reward, but for any other reason, except that a kidnaping by a parent of his child is specifically exempted. . . ?’ H. Rep. 1457, 73d Cong., 2d Sess., May 3, 1934. Evidently, Congress intended to prevent transportation in interstate or foreign commerce of persons who were being unlawfully restrained in order that the captor might secure some benefit to himself. And this is adequately expressed by the words of the enactment. The rule of ejusdem generis, while firmly established, is only an instrumentality for ascertaining the correct meaning of words when there is uncertainty. Ordinarily, it limits general terms which follow specific ones to matters similar to those specified; but it may not be used to defeat the obvious purpose of legislation. And, while penal statutes are narrowly construed, this does not require rejection of that sense of the words which best harmonizes with the context and the end in view. United States v. Hartwell, 6 Wall. 385, 395; Johnson v. Southern Pacific Co., 196 U. S. 1-17, 18; United States v. Bitty, 208 U. S. 393, 402; United States v. Mescall, 215 U. S. 26-31, 32. Holding an officer to prevent the captor’s arrest is something done with the expectation of benefit to the transgressor. So also is kidnaping with purpose to secure money. These benefits, while not the same, are similar in their general nature and the desire to secure either of them may lead to kidnaping. If the word reward, as commonly understood, is not itself broad enough to include benefits expected to follow the prevention of an arrest, they fall within the broad term, “otherwise.” MANHATTAN CO. v. COMMISSIONER. 129 124 Syllabus. The words “except, in case of a minor, by a parent thereof” emphasize the intended result of the enactment. They indicate legislative understanding that in their absence a parent, who carried his child away because of affection, might subject himself to condemnation of the statute. Brown v. Maryland, 12 Wheat. 419, 438. Both questions must be answered in the affirmative. MANHATTAN GENERAL EQUIPMENT CO. v. COMMISSIONER OF INTERNAL REVENUE.* CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT. No. 226. Argued January 8, 1936.—Decided February 3, 1936. 1. A loss resulting from the sale in 1926 of securities in respect of which a distribution pursuant to a plan of reorganization had been made, held properly determined, for the purpose of computing income tax under the Revenue Act of 1926, by the method prescribed by Art. 1599 of Treasury Regulations 65, as amended April 3, 1928, rather than by the original regulation promulgated August 28, 1926, where the effect of applying the original regulation would be to credit the taxpayer with a loss greatly disproportionate as between the stock in respect of which the distribution was made and the stock distributed, contrary to the provision of the statute which requires that the basis shall be “apportioned” between the old and the new stock. P. 132. 2. To apportion is “to divide and assign in just proportion,” “to distribute among two or more a just part or share to each.” P. 134. 3. The validity of an administrative regulation depends on whether it is consistent with the statute and reasonable. P. 134. 4. Since the original regulation could not lawfully be applied in the circumstances of this case, because inconsistent with the statute and unreasonable, the amended regulation in effect became the * Together with No. 227, Collier Service Corp. v. Commissioner of Internal Revenue. Certiorari to the Circuit Court of Appeals for the Second Circuit. 43927°—36----9 130 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. primary and controlling rule in respect of the situation presented, and was not void as retroactive. P. 135. 76 F. (2d) 892, affirmed. Certiorari, 296 U. S. 559, to review a judgment affirming a decision of the Board of Tax Appeals, 29 B. T. A. 395, sustaining determinations of deficiencies in income taxes in two cases. The cases were consolidated before the Board of Tax Appeals and disposed of by a single decision both by the Board and by the Circuit Court of Appeals. Mr. Laurence Graves, with whom Messrs. Emil Weitz-ner, Samuel H. Kaufman, Brode B. Davis, and Isadore Polier were on the brief, for petitioners. Assistant Solicitor General Bell, with whom Solicitor General Reed, Assistant Attorney General Wideman, and Messrs. Sewall Key, Joseph M. Jones, and John R. Ben-ney were on the brief, for respondent. Mr. Justice Sutherland delivered the opinion of the Court. These cases involve identical facts and questions of law, and were disposed of by the court below in one opinion. 76 F. (2d) 892. The facts, so far as they concern the question here, are taken from the statement of that court. “The petitioners are affiliates of United Brokerage Company. That corporation filed income tax returns for itself and its affiliates for 1925 and 1926 and the petitioners seek to review tax deficiencies attributed to them by the Commissioner, which the Board of Tax Appeals has affirmed. . . . “On June 30, 1925, the United Brokerage Company purchased for $3,414,345.63 in cash all the capital stock of Artemas Ward, Inc., [a New York corporation] that was MANHATTAN CO. v. COMMISSIONER. 131 129 Opinion of the Court. issued and outstanding, consisting of 4,964 shares of no par value. ... “On December 31, 1925, pursuant to a plan of reorganization, Artemas Ward, Inc. (N. Y.) transferred to Arte-mas Ward, Inc. (a Delaware corporation), in exchange for 100 shares of stock of the latter company of no par value, all its assets, then of a net book value of $1,246,-920.07, with the exception of cash and accounts receivable aggregating $284,967.21; that is to say, the New York corporation transferred to the Delaware corporation assets of the value of $961,952.86. Immediately after the transfer, and on December 31, 1925, Artemas Ward, Inc. (N. Y.) distributed to United Brokerage Company the 100 shares of stock of Artemas Ward, Inc. (Del.) and accounts receivable amounting to $234,967.21. In December, 1926, United Brokerage sold the entire 4,964 shares of Artemas Ward, Inc. (N. Y.) for $49,640. That stock had cost the United Brokerage $3,414,345.63 and the total must be apportioned between the 100 shares of the Delaware corporation (which it still owns) and the 4,964 shares of Artemas Ward, Inc. (N. Y.) in order to determine the loss suffered by the United Brokerage Company through its sale of the 4,964 shares at $49,640. “Upon the reorganization, the New York corporation had left among its assets, valued at $1,246,920.07, accounts receivable and cash aggregating $284,967.21, or approximately 22.85% thereof, after $961,952.86 had been transferred to the Delaware Company. Under Art. 1599 (2) [as amended, infra,] the portion of $3,414,345.63 paid by the United Brokerage Company for the stock of Artemas Ward, Inc. (N. Y.) represented by that stock after the reorganization was $780,303.97. If from this be deducted $234,967.21 accounts receivable and the $49,640 realized from the sale in December, 1926, there 132 OCTOBER TERM, 1935/ Opinion of the Court. 297 U.S. would be a loss of $495,696.76. This loss the Commissioner allowed in assessing the income tax for 1925. The second point raised on this appeal is whether the loss, for the year 1926, to which the United Brokerage Company and its affiliates were entitled, was only the sum of $495,696-76 or was the sum of $2,167,785.56 which would arise through deducting from $3,414,345.63, (the cost of the stock of the New York company) the value at the time of the reorganization of the Delaware stock, which was $961,952.86 and $234,967.21 realized from accounts receivable and $49,640 realized from sale of the 4,964 shares.” It thus appears, the New York company having parted with all its assets except $50,000 in cash, that the assets behind the 4,964 shares when the 100 share distribution was made consisted of only that sum, while the 100 shares of the Delaware company stock was represented by the transferred assets of the New York company of the value of $961,952.86. The sale of the 4,964 shares brought $49,640; and the simple question to be determined is what method for the purposes of taxation should be employed to determine the loss in respect of the 4,964 shares under the Revenue Act of 1926, § 204 (a) (9), c. 27, 44 Stat. 9, 14, 15. That section provides that the basis for determining the gain or loss from such sale shall be the cost of the property, except that— “(9) If the property consists of stock or securities distributed after December 31, 1923, to a taxpayer in connection with a transaction described in subdivision (c) of section 203,* the basis in the case of the stock in *Sec. 203 (c) provides: “If there is distributed, in pursuance of a plan of reorganization, to a shareholder in a corporation a party to the reorganization, stock or securities in such corporation or in another corporation a party to the reorganization, without the surrender by such shareholder of stock or securities in such a corporation, no gain to the distributee from the receipt of such stock or securities shall be recognized.” MANHATTAN CO. v. COMMISSIONER. 133 129 Opinion of the Court. respect of which the distribution was made shall be apportioned, under rules and regulations prescribed by the Commissioner with the approval of the Secretary, between such stock and the stock or securities distributed; . . At the time of the reorganization, Article 1599 of Treasury Regulations 69, which had been promulgated on August 28, 1926, was in force. Petitioners invoke subdivision 2 of that regulation which provided: “Where the stock distributed in reorganization is in whole or in part of a character or preference materially different from the stock in respect of which the distribution is made, the cost or other basis of the old shares of stock shall be divided between such old stock and the new stock in proportion, as nearly as may be, to the respective values of each class of stock, old and new, at the time the new shares of stock are distributed, and the basis of each share of stock will be the quotient of the cost or other basis of the class with which such share belongs, divided by the number of shares in the class. The portion of the cost or other basis of the old shares of stock to be attributed to the shares of new stock shall in no case exceed the fair market value of such shares as of the time of their distribution.” (Italics added.) April 3, 1928, this regulation was amended by striking from it the italicized portion. The taxpayer contended that its loss should be computed in accordance with the original regulation. This would have resulted in an allocation to the 4,964 shares of the New York corporation of $2,452,392.77; and, after making certain deductions, the allowable loss, as already appears, would have been something over $2,000,000. The commissioner, however, proceeding in strict accordance with the amended regulation, determined the amount of loss to be $495,696.76. Without pursuing the matter in further detail, it is enough to say that the case turns entirely upon the ques- 134 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. tion whether the loss was to be determined in accordance with the original or the amended regulation. If in accordance with the former, the taxpayer is right; if in accordance with the latter, the commissioner is right. The court below held that the amended and not the original regulation furnished the applicable rule, and affirmed the determination of the Board of Tax Appeals, which in turn had sustained the commissioner. We agree with that view. In determining a loss, the statute requires that the basis shall be “apportioned” between the old and the new stock. To apportion is to “divide and assign in just proportion,” “to distribute among two or more a just part or share to each,” Fisher v. Charter Oak Life Ins. Co., 14 Abb. N. C. 32, 36, albeit, a division may be just without necessarily being also an exactly equal division. The result of applying the original regulation here is to bring about an inequitable apportionment, contrary to the intent of the statute, and to credit the taxpayer with a loss essentially and greatly disproportionate. On the other hand, application of the amended regulation effectuates the legislative intent that the basis of apportionment between the old and the new stock shall result in a fair and just division. The power of an administrative officer or board to administer a federal statute and to prescribe rules and regulations to that end is not the power to make law— for no such power can be delegated by Congress—but the power to adopt regulations to carry into effect the will of Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute, is a mere nullity. Lynch v. Tilden Produce Co., 265 U. S. 315, 320-322; Miller v. United States, 294 U. S. 435, 439-440, and cases cited. And not only must a regulation, in order to be valid, be consistent with the statute, but it must be reasonable. GREAT NORTHERN RY. v. WEEKS. 135 Syllabus. 129 International Ry. Co. v. Davidson, 257 U. S. 506, 514. The original regulation as applied to a situation like that under review is both inconsistent with the statute and unreasonable. The contention that the new regulation is retroactive is without merit. Since the original regulation could not be applied, the amended regulation in effect became the primary and controlling rule in respect of the situation presented. It pointed the way, for the first time, for correctly applying the antecedent statute to a situation which arose under the statute. See Titsworth v. Commissioner, 73 F. (2d) 385, 386. The statute defines the rights of the taxpayer and fixes a standard by which such rights are to be measured. The regulation constitutes only a step in the administrative process. It does not, and could not, alter the statute. It is no more retroactive in its operation than is a judicial determination construing and applying a statute to a case in hand. Judgment affirmed. GREAT NORTHERN RAILWAY CO. v. WEEKS, STATE TAX COMMISSIONER, et al. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT. No. 178. Argued January 6, 7, 1936—Decided February 3, 1936. 1. The full and fair value of property for the purpose of a tax assessment is the equivalent of the property in money paid at the time of assessment. P. 139. 2. In assessing railway property for taxation, the assessor is not bound by any rule or formula, but is free to consider all pertinent facts, estimates and forecasts and to give them their reasonable weight. P. 139. 3. Courts will not disturb tax assessments unless clearly unreasonable. To warrant an injunction, overvaluation due to mere error of judgment is not enough; there must have been that which in 136 OCTOBER TERM, 1935. Syllabus. 297 U.S. legal effect is the equivalent of intention or fraudulent purpose to overvalue, and so to set at naught fundamental principles that safeguard the taxpayer’s rights and property. P. 139. 4. An assessment of property for taxation is presumed to have been rightly made on the basis of actual value. P. 139. 5. In apportioning value of an interstate railway system to a State for taxation, there were used as factors the percentages in the State (a) of total track mileage; (b) of physical property, measured by cost of reproduction less depreciation; (c) of car and locomotive miles, average of five years; and (d) of gross earnings, average for five years, the amount of such earnings assigned to the State being found by adding to the intrastate revenue earned in the State the mileage proportion of revenue from traffic moving partly within and partly outside of her boundaries. Though percentages thus used were not higher than those submitted to the taxing board by the Railway Company, the Company contended in this suit that the apportionment operated to tax property outside of the State. Held that, having regard to the size of the entire railway system and the variety of things that affect values to be attributed to its railroad in different States, and the numerous matters as to which there may be wide difference of opinion, the use of the percentages was not shown to be confiscatory or arbitrary. P. 143. 6. In determining whether a tax assessment was arbitrarily made and grossly excessive, the assessors may not be compelled to submit to examination as to the operation of their minds in making it. P. 145. 7. Judicial notice must be taken of the fact that late in 1929 there occurred a great collapse of values of all classes of property—railroads, other utilities, commodities and securities,—and that the depression then commenced progressively became greater. P. 149. 8. In assessing railroad property during the depression, a taxing board was bound to take into account and give due weight to the sudden, progressive and enormous declines of value. P. 149. 9. In a suit by an interstate railway company to enjoin in part the collection of taxes levied on its property in North Dakota for the year 1933, the allegations and evidence on behalf of the state authorities showed that for a series of years, including the depression years 1929-1932, the basis adopted by them and approved by them as the best available for computing the value of the entire railway system, was the five-year average value of the stocks and bonds and capitalized income; that if this basis had been used in 1933, the system valuation for that year and the part of it assignable to and assessed in North Dakota would have been vastly less GREAT NORTHERN RY. v. WEEKS. 137 Opinion of the Court. 135 than in 1932, owing to the effects of the economic depression upon property values, prices and earnings; but that, in assessing for 1933, they had arbitrarily repeated the assessment for 1932, without making a fresh computation of value or paying heed to economic changes. Resolving all doubts in favor of validity, the evidence conclusively showed that the challenged (1933) assessment exceeded the true full value of the railway’s property in North Dakota in 1933 by $10,000,000. Held: (1) That the taxing board’s failure to consider the enormous diminution in value of the railway’s property caused by the 1929 collapse and the progress of the depression, was equivalent in law to intention to make the grossly excessive assessment, and deprived the railway of rights under the due process clause of the Fourteenth Amendment. Pp. 145, 151. (2) The railway’s right to relief was not prejudiced by overassessment and submission to overtaxation in any prior year. P. 152. 77 F. (2d) 405, reversed. Certiorari, 296 U. S. 558, to review the affirmance of a decree dismissing the bill in a suit to enjoin collection of taxes. Mr. F. G. Dorety, with whom Mr. C. J. Murphy was on the brief, for petitioner. Mr. Harold D. Shaft, with whom Mr. P. O. Sathre, Attorney General of North Dakota, was on the brief, for respondents. Mr. Justice Butler delivered the opinion of the Court. This suit was brought in the federal district court for North Dakota by petitioner against the state tax commissioner and the auditors and treasurers of 30 counties, to enjoin collection of about 40% of 1933 taxes laid upon its railroad properties in each county. The assessed value of all petitioner’s railroad property in the State is $78,-832,888. The total of the tax is $1,508,352.34, of which petitioner has paid about 60%. The suit is grounded upon the claim that the taxes are based on a valuation that 138 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. includes properties located outside the State and in other respects are so excessive and arbitrary as to be repugnant to the due process and equal protection clauses of the Fourteenth Amendment to, and the commerce clause of, the Federal Constitution. Issues were joined, the case was tried, the court made findings of fact, concluded that petitioner was not entitled to relief and dismissed the bill. The Circuit Court of Appeals affirmed. 77 F. (2d) 405. The state law requires that all property subject to taxation be assessed at its true and full value in money. Comp. Laws 1913, § 2122. The state board of equalization is required in August of each year to assess at its actual value every railroad within the State and it is governed by the rules that apply to township assessors in valuing other property. § 2242. 1925 Supp., § 2141a3. The average values per mile of main and branch lines, respectively, constitute the bases for assignment of value to counties. § 2243. And on like mileage bases the value given to each county is distributed to its cities, towns, townships and districts, through which the railroad extends. § 2244. The railroad property is taxed, as is personal property, by applying the local rate to 50% of the assessed value.1 Petitioner did not allege that other property was not assessed at its full and true value as required by state law, and does not seek relief on the ground of discrimination. Petitioner claims that the board made the assessment by attributing to North Dakota too great a proportion of a grossly excessive system valuation. More specifically its contentions are: (1) That, by reason of the methods employed for the ascertainment of the percentage of system value to be assigned to North Dakota, the assessment 1 Comp. Laws, 1913, § 2244. Initiated measure, approved June 29, 1932, Laws 1933, p. 493, amending 1925 Supp., § 2122a, reduced the percentage of assessed value to be used in calculating the tax from 75% to 50%. GREAT NORTHERN RY. v. WEEKS. 139 Opinion of the Court. 135 includes the value of property located in other States to the extent of approximately $20,000,000, and (2) that, even if the factors used to make the allocation be not condemned, the assessment must nevertheless be held arbitrary and excessive to the extent of $15,000,000. The full and true value of the property is the amount that the owner would be entitled to receive as just compensation upon a taking of that property by the State or the United States in the exertion of the power of eminent domain. That value is the equivalent of the property, in money paid at the time of the taking. Olson v. United States, 292 U. S. 246, 254. The principles governing the ascertainment of value for the purposes of taxation, are the same as those that control in condemnation cases, confiscation cases and generally in controversies involving the ascertainment of just compensation. West v. C. de P. Telephone Co., 295 U. S. 662, 671. In determining the amount of the assessment the board was not bound by any formula, rule or method, but for guidance to right judgment it was free to consider all pertinent facts, estimates and forecasts and to give to them such weight as reasonably they might be deemed to have. Courts decline to disturb assessments for taxation unless shown clearly to transgress reasonable limits. Overvaluation is not of itself sufficient to warrant injunction against any part of the taxes based on the challenged assessment; mere error of judgment is not enough; there must be something that in legal effect is the equivalent of intention or fraudulent purpose to overvalue the property and so to set at naught fundamental principles that safeguard the taxpayer’s rights and property. Rowley v. Chicago & N. W. Ry., 293 U. S. 102, 109-111. The assessment is presumed to have been rightly made on the basis of actual value. Its validity must be tested upon consideration of the facts established by the evidence and of those of which judicial notice may be taken. 140 OCTOBER TERM, 1935 Opinion of the Court. 297 U.S. There is controversy between the parties as to whether the evidence discloses how the assessment was made. Petitioner maintains that the record shows that the board found system value and apportioned it to North Dakota and also shows the methods by which these determinations were made. The district court refused to find, and the Circuit Court of Appeals held that petitioner failed to prove, that the board made the valuation by methods which petitioner claims that it employed. 1. As to methods employed by the board. Respondents called as a witness Mr. Lyman A. Baker, who had been with the North Dakota tax commissioner for 19 years and during the last 13 years, ending January 1,1933, had been deputy commissioner in charge of the valuation of railroads and other utilities. He was engaged in this litigation in behalf of respondents and spent much time in making computations and in the preparation of exhibits that were put in evidence by respondents. In substance he testified: The first step in the valuation of railroad property wuthin a State is to determine the value of the entire system. There are two classes of evidence ordinarily considered: The average market price of stock and bonds, and the past earnings over a period of years. As the stock and bond prices reflect value of the entire railroad, it is necessary to eliminate the value of non-operating property. The method requires a definite period over which to average price quotations and that must of necessity be somewhat arbitrarily fixed. It assumes that the average price reflects value, but rarely is controlling interest bought or sold on the exchange. Where control is sought prices advance sharply. The method also assumes that purchasers act on accurate knowledge of conditions; it ignores the influence of pure speculation. In applying the method, taxing boards, economists and railroad men have always adopted five-year periods immediately pre- GREAT NORTHERN RY. v. WEEKS. 141 Opinion of the Court. 135 ceding the assessment in order to give stability to the tax value. The depression resulted in a collapse in the stock and bond market. Forced selling brought prices down to a figure that did not fairly represent the value of the property. “Despite all these objections to the stock and bond method of valuation, I still consider it as one of the best indices of value obtainable.” He further testified: Capitalization of net railroad operating income is generally recognized as an important element in estimating the value of railroad operating property. The average net income, usually for five years, is capitalized at a reasonable rate of return. The method assumes the amount so ascertained to be the value of the property. The income of a single year is seldom, if ever, used. As 1931 and 1932 were the worst years in railroad history since the panic of 1893, the use of the three-year period ending in 1932 has but little justification. The five-year period has been given the same weight by the state board for a good many years. It is generally considered that the rate of return that a company is allowed to earn under state and federal law is a fair rate to use. A rate of six percent, is justifiable under present conditions. Economic return from farm property, being about 65% of all that is taxable in North Dakota, decreased about 75% from the 1924-1928 average. Assessments on values indicated by capitalization of average net income for the five years ending in 1932 would result in giving preferential treatment to railroads as compared with other properties. Where properties have been operated at a loss over a period of years, there are no earnings to capitalize. Yet they have present and prospective value which would be reflected by use of the stock and bond valuation method. The criticisms made of these methods are not sufficient to render them valueless. “On the contrary the two methods are universally approved as the two best evidences of the value of a railroad which are available.” 142 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. The answer alleges: In 1932 the tax commissioner made and presented to the board computations based upon a determination of system value by the use of a composite of the average stock and bond values of the petitioner for a period of five years preceding the assessment and the average value ascertained by capitalizing net earnings for the same period; by apportioning the system value to North Dakota upon the basis of the average of five factors: (1) miles of all track, (2) physical property, (3) car and locomotive miles, (4) ton and passenger miles, (5) gross earnings, there was produced a value of $76,-115,715; another apportionment on the basis of the three use factors, viz. car and locomotive miles, ton and passenger miles, and gross earnings, produced $79,417,825, and a third apportionment by the average of track miles and the three use factors produced $80,671,790. The answer further alleged that “upon this evidence and upon all other evidence and matters of common knowledge before it the Board did in the year 1932 fix the valuation of plaintiff’s property in North Dakota at $78,850,024”; that in 1933 the commissioner and the railway company presented to the board the financial and operating statistics of the plaintiff’s railroad and reports and computations based upon the formulas used in 1932 and other evidence of value, and that the board after full consideration of them and all other evidence of value and matters of common knowledge fixed the assessment for 1933 at $78,832,888 “which said amount represented the honest judgment” of the board “and the full and true value of the plaintiff’s North Dakota property in money.” The average of the valuations computed for 1932 as alleged in the answer is $78,735,110; the assessment was $78,850,024. The difference is less than one-sixth of one per cent. The trial court found that for 1933 the board assessed the property at “the sum of $78,832,888, which sum was the same as the 1932 assessment except for a GREAT NORTHERN RY. v. WEEKS. 143 Opinion of the Court. 135 deduction of $17,136 for certain trackage of the plaintiff which had been removed.” It is clear that the computations prepared by the tax commissioner for the use of the board served as guides to, if indeed they were not used as the measure of, value for the assessments made by the board for 1932 and 1933. Respondents’ answer and evidence require a finding that these computations were in fact the controlling bases and constituted the very foundation of the 1932 and 1933 assessments. In view of the relatively small differences between the 1933 assessment and the figures produced by the methods approved by respondents and universally as the best available evidence of value of a railroad, the latter rightly may be used in testing the validity of the former. 2. Petitioner’s claim that the board’s apportionment of system value to North Dakota operated to assess and tax property in other States cannot be upheld. Petitioner maintains that the amount attributed to that State was found by the use of the factors above referred to. More fully described, they are: 1. Miles of all track (as of December 31, 1931)—20.19%. 2. Physical property as measured by cost of reproduction less depreciation (as of December 31, 1931)—13.84%. 3. Car and locomotive miles (average for five years ending with 1931)—19.90%. 4. Ton and passenger miles (average for five years ending with 1931)—18.65%. 5. Gross earnings (average for five years ending with 1931)— 18.45%; the amount assigned to North Dakota was found by adding to the intrastate revenue earned in that State its mileage proportion of revenue derived from traffic moving partly within and partly outside her boundaries. The average of these percentages is 18.206%. The principal grounds on which petitioner assails the board’s apportionment are: Petitioner’s railroad in North Dakota consists largely of relatively cheaper branch lines. 144 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. The most valuable terminals and costly construction are in other States and, while these include little mileage, they contribute as much to system value in proportion to cost as do the cheaper stretches of the road where the same investment is spread over much greater mileage. The problem of apportionment is a difficult one. It is impossible to formulate a rule generally applicable. Controlling conditions vary greatly from time to time. Allocations to be sufficiently accurate for practical purposes must be arrived at by the exercise of sound judgment based on facts that fairly reflect the relation between value of the system as a whole and value of the part within a State. Rowley v. Chicago N. W. Ry., supra, 109, 110. The methods proposed by petitioner discredit its objections to the apportionment made by the board. While the board had the 1933 assessment under consideration, petitioner submitted to it a brief in which it proposed two methods of apportionment. One was by use of the above described factors 1, 3, 4 and 5, and the other by use of 3, 4 and 5, producing, respectively, as calculated by petitioner, 19.35% and 19.14%. These percentages are higher than the average of those that petitioner says the board used. There is no evidence that the assessment was arrived at by use of apportioning percentages higher than those then used by petitioner. Petitioner’s bill suggests a method of apportionment that would assign to North Dakota less than 12%% of system value. Briefly, the method is this: To the revenue derived from North Dakota intrastate traffic add a part of the revenue received from the interstate moving in North Dakota that is equal to its proportion of the property used in, and the cost of, carrying that traffic; deduct the operating expenses incurred in moving it from the total revenue. The relation of the state net earnings GREAT NORTHERN RY. v. WEEKS. 145 135 Opinion of the Court. so found to the net for the system will be the same as that existing between North Dakota value and system value. As petitioner gives this method scant, if any, support here and as it was rejected by the lower courts, we need not consider it. United States v. State Investment Co., 264 U. S. 206, 211. Texas N. 0. R. Co. v. Railway Clerks, 281 U. S. 548, 558. United States v. Commercial Credit Co., 286 U. S. 63, 67. And here petitioner argues that the apportionment should be made on the basis of physical property, i. e. factor 2 above described. That would assign to North Dakota less than 15% of the system value. Petitioner did not submit it to the board as the measure or even include it in the group of factors upon which it based the calculations included in its brief. It is not sustained by evidence. When regard is had to the size of the Great Northern system and the variety of things that affect values to be attributed to its railroad in different States, and the numerous matters as to which there may be wide difference of opinion, it must be held that percentages lower than, or substantially the same as, those petitioner itself used and submitted to the board are not confiscatory or arbitrary. Helvering v. Taylor, 293 U. S. 507, has no bearing. 3. There remains to consider whether the assessment may be sustained against petitioner’s claim that, assuming validity of apportionment, the valuation was arbitrarily made and is grossly excessive. No testimony was given by the tax commissioner or any other member of the board. They could not be compelled to submit to examination as to the operation of their minds in making the challenged assessment. Chicago, B. & Q. Ry. Co. v. Babcock, 204 U. S. 585, 593. Bohler v. Callaway, 267 U. S. 479, 491. It results that resort must be had to determinations of the board, find-43927°—36-----IQ 146 OCTOBER TERM, 1935. 297 U.S. Opinion of the Court. ings of the lower courts, the evidence and the facts judicially known. From the answer and evidence it unquestionably appears that the board valued petitioner’s system and made apportionment to North Dakota. The assessments for the years 1929-1933 are: $83,294,677, $83,294,688, $82,-999,997, $78,850,024 and $78,832,888. The trial judge found no overassessment for 1932 but refused to find the value of the property in 1933 or whether the assessment for that year was excessive; and he found that there is no evidence, other than that offered to show overvaluation, that the assessment was fraudulent or made with intent to defraud petitioner. The Circuit Court of Appeals held that petitioner failed to prove the method employed by the board to make the assessment or that it was grossly excessive and arbitrary. Respondents’ witness prepared tabulations which were put in evidence as Exhibit P. It shows: 1. The value for each year, based on averages for preceding five years, from 1929 to 1933, inclusive, of the system operating property as indicated by: (a) stock and bond value less value of non-operating property; (b) net operating income capitalized at six per cent; (c) the average of (a) and (b). 2. Apportionment of system value to North Dakota by percentages reflected by average of: (a) three use factors, i. e. transportation service, traffic units and gross operating revenue; (b) mileage of tracks operated and the three use factors; (c) mileage of tracks owned and operated and leased and operated and the three use factors; (d) mileage of track operated, physical property and the three use factors; (e) mileage of track operated, physical property, the three use factors and net revenue. 3. Apportionment to North Dakota of: (a) stock and bond value; (b) capitalized value; (c) average of (a) and (b). 4. The North Dakota assessments. Ratio of assessments to apportionments made on (a) stock and GREAT NORTHERN RY. v. WEEKS. 147 135 Opinion of the Court. bond value; (b) capitalized value; (c) average of (a) and (b).2 The composite of the five year average of stock and bond value and of net operating income capitalized for 1932 was $415,278,961; admittedly that was produced by the use of the two methods shown by respondents’ witness to be universally approved as the best methods for finding system value. The 1932 assessment is 99.93% of that figure apportioned on the basis of the three use fac- 2 Exhibit P need not be given in full. The following statement shows by years, 1929-1933, inclusive: Column 1, system value according to average of stock and bond value and capitalized value. Column 2, percentage of system value in North Dakota as reflected by the apportionment factors used in the exhibit. Column 3, values apportioned to North Dakota according to average of stock and bond values and capitalized values. Column 4, the North Dakota assessments. Column 5, ratio of assessments to assigned values on the basis of stock and bond values. Column 6, ratio of assessments to assigned values on the basis of capitalized values. Column 7, ratio of assessments to assigned values on the basis of composite of both. 1 2 3 4 5 6 7 Apportionment to North Dakota on basis of three use factors, i. e., transportation service, traffic units and gross operating revenue. 1929—. ... $437,789,980 18.826% $82,418,342 $83,294,677 112.09% 92.01% 101.06% 1930—. ... 460,989,128 18.80 86,665,956 83,294,688 107.12 87.15 96.11 1931.... ... 455,777,674 18.853 85,927,765 82,999,997 103. 73 90.37 96.59 1932.... ... 415,278,961 19.00 78,903,003 78,850,024 102.36 97.62 99.93 1933.... — 345,188,820 19.14 66,069,140 78,832,888 114.95 124.03 119.32 Apportionment to North Dakota on basis of trackage operated and the three use factors. 1929.... — 437,789,980 19.113 83,674,799 83,294,677 110.40 90.63 99.55 1930.... — 460,989,128 19.148 88,270,198 83,294,688 105.17 85.57 94.36 1931.... ... 455,777,674 19.185 87,440,947 82,999,997 101.94 88.81 94.92 1932.... — 415,278,961 19.298 80,140,534 78,850,024 100.78 96.11 98.39 1933.... ... 345,188,820 19.345 66,776,777 78,832,888 113.73 122. 71 118.05 Apportionment to North Dakota on basis of mileage of tracks owned and operated and leased and operated and the three use factors. 1929----- 437,789,980 19.59 85,763,057 83,294,677 107.72 88.42 97.12 1930----- 460,989,128 19.632 90,501,386 83,294,688 102.58 83.46 92.04 (Continued on next page.) 148 OCTOBER TERM, 1935. 297 U.S Opinion of the Court. tors, 98.39% apportioned on the basis of track mileage operated and three use factors; 96.02% apportioned on tracks owned and operated and leased and operated and the three use factors, 104.29% apportioned on track mileage, physical property and the three use factors; 101.40% apportioned on track operated, physical property, three use factors and net revenue. If the system value for 1933 had been computed on the basis of the stock and bond and capitalized income methods used for 1932, it would have been $345,188,820, about 83% of the corresponding figure for 1932, less than 76% of like figures for 1931 and 1930 and about 79% of that for 1929. See footnote 2. The 1933 assessment exceeds what would have been made on system valuation based on the five-year average of stock and bond values, apportioned by use of the five factors above described (advocated by the State as “the fairest basis of allocation”) by 19.97%, exceeds that based on net operating income capitalized by 29.44%, on the composite of both by 24.52%. The testimony and computations made by respondents’ witness show that the 1933 assessment could not have 1 2 3 4 3 6 7 Apportionment to North Dakota on basis of mileage of tracks owned and operated and leased and operated and the three use factors—Continued. 1931.— .. 455,777,674 19.673 89,665,142 82,999,997 99.41 86.60 92.57 1932 .. 415,278,961 19.775 82,121,415 78,850,024 98.35 93.79 96.02 1933.— .. 345,188,820 19.812 68,388,809 78,832,888 111. 05 119.82 115.27 Apportionment to North Dakota on basis of trackage operated, physical property and the three use factors. 1929— „ 437,789,980 18.05 79,021,091 83,294,677 116.91 95.97 105.41 1930 .. 460,989,128 18.102 83,448,252 83,294,688 111. 25 90.51 99.82 1931— - 455,777,674 18.136 82,659,839 82,999,997 107.84 93.94 100.41 1932— .. 415,278,961 18.206 75,605,688 78,850,024 106.82 101.88 104.29 1933— .. 345,188,820 18.34 63,307,629 78,832,888 119.97 129.44 124.52 Apportionment to North Dakota on basis of trackage operated) physical property, the three use factors and net revenue. 1929-- .. 437,789,980 18. 783 82,230,092 83,294,677 112.34 92.22 101.29 1930— .. 460,989,128 18.773 86,541,489 83,294,688 107.27 87.28 96.25 1931— - 455,777,674 18.710 85,276,003 82,999,997 104.53 91.06 97.33 1932— .. 415,278,961 18.725 77,760,985 78,850,024 103.86 99.05 101.40 1933—- .. 345,188,820 18. 763 64,767,778 78,832,888 117.26 126. 52 121.72 GREAT NORTHERN RY. v. WEEKS. 149 Opinion of the Court. 135 been arrived at by any calculation based on the principles and methods governing the tax commissioner in his computations submitted to the board through a period of years and constituting the controlling bases of the assessments made by it. The five-year average of the composite of the stock and bond and capitalized income values, held by all to be the best method, produced for 1932 a valuation within one-sixth of one per cent, of the assessment for that year. The board arbitrarily adopted that assessment, less value of a short stretch of track removed, as the assessment for 1933. If the assessment for that year had been based on the principles governing in 1932 and preceding years, it would have been less by about $13,000,000 than the amount fixed by the board and here in controversy. The long period through which, even in 1933, the depression had extended compelled the conclusion that it was not temporary. Judicial notice must be taken of the fact that late in 1929 there occurred a great collapse of values of all classes of property—railroads, other utilities, commodities and securities, and that the depression then commenced progressively became greater. In making assessments in that period, the board was bound to take into account and give due weight to the sudden, progressive and enormous declines of value. Respondents’ witness testified: The purchasing power of money greatly increased and correspondingly values decreased from 1929 to 1933. The Dow-Jones & Company average of 30 industrial stocks fell from 383.17 in September, 1929, to 41.22 in July, 1932. The average of 20 railroad stocks fell between the same dates from 189.11 to 13.23; total market value of all common and preferred stocks listed on the New York Stock Exchange fell from eighty-nine and one-half billion to fifteen and one-half billion dollars. Assessing officials and equalizing boards were confronted with a very difficult situation. 150 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. “Values which had been more or less stable for a generation have melted rapidly away. If all assessments had been reduced to conform to actual market value, the State and its subdivisions would have ceased to function, as the revenue would not even approximate necessary expenses.” Changed business conditions affecting petitioner’s traffic, coupled with competition from new methods of transportation, precluded belief that prospective improvement in petitioner’s business and earnings would within a reasonable time, if ever, be sufficient to justify the assessment in question. Cf. Nashville, C. & St. L. Ry. v. Walters, 294 U. S. 405, 423. But from 1929 to and including 1933 the board reduced assessments of petitioner’s North Dakota railroad properties by less than six per cent. It is everywhere known that the general decline in values in that period was very much greater than that. The evidence conclusively shows that the value of petitioner’s system and of its North Dakota railroad properties declined several times six per cent. Its traffic, gross earnings and net income from operation fell off enormously.3 The 1929 collapse and the decline progressively following it resulted in much lower levels of prices and values which at least as early as 1933 were to be regarded 8 The tabulation follows : Railway Net Railway Year Operating Revenue Operating Income 1922............................ $103,452,937 $17,276,598 1923 .......................... 120,077,771 24,731,992 1924 .......................... 110,243,104 24,201,287 1925 .......................... 114,924,960 28,276,183 1926 .......................... 117,383,909 31,280,429 1927 ............................ 117,904,005 29,202,540 1928 .......................... 126,737,091 31,294,069 1929 ....................... 125,932,808 32,457,523 1930 .......................... 104,996,076 21,912,508 1931 .......................... 77,087,454 12,669,420 1932 .......................... 55,549,247 1,290,551 GREAT NORTHERN RY. v. WEEKS. 151 Opinion of the Court. 135 not as temporary but as at least relatively permanent. Atchison, T. £ F. Ry. Co. v. United States, 284 U. S. 248, 260-261. Los Angeles Gas Co. v. Railroad Comrn’n, 289 U. S. 287, 311-312. In cases such as this, courts are not permitted to weigh evidence of value. They may not substitute their opinions for the findings of assessing officers or boards. But, when the jurisdiction of the district court is appropriately invoked, it is its duty to decide upon the merits of the taxpayer’s claim that the assessment of his property was arbitrarily made and is grossly excessive. It clearly appears! that the board failed to give reasonable weight to the falling off of petitioner’s traffic, gross earnings, operating income, the extraordinary shrinkage in values of railroad properties, the prices of commodities and securities generally. The value of petitioner’s property varied with the profitableness of its use, present and prospective. Cleveland, C., C. & St. L. Ry. Co. v. Backus, 154 U. S. 439, 445. Southern Ry. Co. v. Kentucky, 274 U. S. 76, 81-82. Petitioner’s system net operating income was for 1929 in round figures $32,457,000; in the following years $21,912,000, $12,669,000, $1,290,000. The board persistently disregarded known conditions essential to the just ascertainment of value. While the vanishing of values described by respondents’ witness, the reduction of the tax base from 75% to 50%, and the established limitations upon rates of taxation, justify diligence on the part of the assessing authorities that taxable property be assessed at full value, neither these nor any other conditions warrant or excuse arbitrary or excessive valuations. The facts alleged in respondents’ answer, and those shown by the testimony of their witness and his computations above described, compel the conclusion that, by reason of changed conditions affecting value, the methods or system by which the board arrived at the 1933 value of petitioner’s railway as a whole were plainly calculated 152 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. to produce a grossly excessive assessment of its North Dakota property for that year. That assessment being shown to have been arbitrarily made and grossly excessive, petitioner’s right to relief was not conditioned upon overassessment or upon its submission to overtaxation in 1932 or any prior year. It follows that the lower courts erred in holding that petitioner was not entitled to any relief. The evidence persuasively supports petitioner’s claim that by reason of system overvaluation the North Dakota assessment was too high by $15,000,000. And, resolving all doubts in favor of validity, the evidence must be held conclusively to show that the challenged assessment exceeds the true and full value of petitioner’s North Dakota railroad properties in 1933 by $10,000,000. See footnote 2. The board’s failure to consider the enormous diminution in value of petitioner’s property caused by the 1929 collapse and the progress of the depression is, within the principles of our decisions, the equivalent in law of intention to make a grossly excessive assessment for 1933 in disregard of petitioner’s rights under the due process clause of the Fourteenth Amendment. We need not consider whether the assessment is repugnant to the equal protection or commerce clause. Unquestionably, the assessment was made in plain violation of established principles that govern property valuation. Fargo v. Hart, 193 U. S. 490, 502. Rowley v. Chicago & N. W. Ry., supra, 109-110. Southwestern Bell Tel. Co. v. Public Service Comm’n, 262 U. S. 276, 287-288. Bluefield Waterworks Co. v. Public Service Comm’n, 262 U. S. 679, 692. McCardle v. Indianapolis Water Co., 272 U. S. 400, 408-412. Monongahela Navigation Co. n. United States, 148 U. S. 312. The judgment of the Circuit Court of Appeals will be reversed. The case will be remanded to the district court with directions to enter a decree for petitioner, the plaintiff below, that respondents, the defendants below, be GREAT NORTHERN RY. v. WEEKS. 153 Stone, J., dissenting. 135 enjoined from collecting on account of the taxes levied against petitioner on the basis or because of the challenged assessment any amount in excess of such proportion of the taxes levied as the value above indicated, $68,832,888, is to the assessment, $78,832,888, being 87.3149+%; the injunction will be conditioned upon payment by petitioner of that proportion of the taxes. And the decree shall declare that it is without prejudice to the authority of the state board of equalization, if any it has, again to assess petitioner’s properties for 1933. Reversed. Mr. Justice Stone, dissenting. I think the judgment should be affirmed. The decision of the Court turns on the constitutionality of the valuation, for 1933 taxation, of so much of petitioner’s railroad as is located, in North Dakota. The Court finds that the valuation of the railroad within the state is not so disproportionate to the value of petitioner’s entire railroad system as to transcend due process. See Fargo v. Hart, 193 U. S. 490, 500; compare Rowley v. Chicago & Northwestern Ry., 293 U. S. 102, 109-111. It does not find, and there is no contention, that there has been any discrimination in the valuation of petitioner’s property as compared with that of other property in the state. Its decision that the tax is invalid rests on the single ground that the valuation is excessive. This conclusion is based on an elaborate examination of the evidence produced before the trial court, evidence which it is assumed affords the only basis for the valuation of the Board of Equalization. Emphasizing as the important, if not controlling factors, in determining taxable value, the depressed market value of the securities of the entire railroad, representing its property in many states, its diminished earnings, its capitalized value based 154 OCTOBER TERM, 1935. Stone, J., dissenting. 297 U.S. on what it considers, for this purpose, a fair rate of return, the Court concludes that, as prices of securities and earnings were much lower in 1933 than in 1932 and earlier years, the valuation of the railroad property in North Dakota for that year should have been correspondingly reduced. And because the decline in value found by this formula is substantial, something like 20%, and as the Board placed the same valuation on the property in 1933 as in 1932, it is declared that the valuation is so arbitrary as to make any tax based upon it a violation of due process. We may lay aside any consideration of the numerous uncertain and imponderable elements involved in valuation of a railroad which may well make the use of such a formula untrustworthy in times like the present, see Rowley v., Chicago & Northwestern, Ry., supra, 109; which would seem to make it impossible for a court to say that the rejection of the results of such a formula by the taxing officials involved1 anything more than the exercise of an authorized judgment, which courts cannot pronounce arbitrary merely because it does not conform to their own. The feature of the decision which is especially a matter of concern is that for the first time this Court is setting aside a tax as a violation of the Fourteenth Amendment on the ground that the assessment on which it is computed is too high, without any showing that the assessment is discriminatory or that petitioner is in any way bearing an undue share of the tax burden imposed on all property owners in the state. Assessment for taxation is a quasi-judicial act and the tax assessment has the quality of a judgment. Hagar v. Reclamation District, 111 U. S. 701, 709; Gallup v. Schmidt, 183 U. S. 300; Londoner v. Denver, 210 U. 8. 373, 386; Turner N. Wade, 254 U. S. 64. Even if the valuation of the Board be erroneous, the errors of a state GREAT NORTHERN RY. v. WEEKS. 155 Stone, J., dissenting. 135 judicial officer, however gross, whether of law or of fact, are not violations of the Constitution and are not open to review in the federal courts merely because they are errors. If overvaluation, even though gross or intentional, were, without more, held to infringe the Fourteenth Amendment, every taxpayer would be at liberty to ask the federal courts to review a state tax assessment upon the bare allegation that it is grossly excessive, and without showing that it does more than subject him to taxation on the same basis as every other taxpayer. It has long been recognized that discrimination between taxpayers, if intentional or so persistent as to be systematic, is a denial of equal protection, whether the discrimination is in the application of different rates to property in the same class or in inequality in its valuation. lowa-Des Moines Bank v. Bennett, 284 U. S. 239, 245; Cumberland Coal Co. v. Board of Review, 284 U. S. 23, 25ff; Chicago G. W. Ry. Co. v. Kendall, 266 U. S. 94, 98, 99; Sioux City Bridge Co. v. Dakota County, 260 U. S. 441, 445; Raymond v. Chicago Traction Co., 207 U. S. 20, 37. But to hold that a tax is unconstitutional because based upon an assessment which is too high, as compared with the value of the same property for purposes of condemnation, overlooks the principle upon which property taxes are laid and collected. Taxation is but a method of raising revenue to defray the expenses of government, and of distributing the burden among those who must bear it. The taxpayer cannot complain of the tax burden which he has to bear, who shows no inequality in the application of it. And plainly he does not show inequality merely by proving that the valuation of his property for taxation is much higher than its market or its condemnation value. The burden of a property tax like the present is distributed by applying a rate of tax to the assessed valuation of all taxable property. Variation of either, without 156 OCTOBER TERM, 1935. Stone, J., dissenting. 297 U.S. discrimination, affects the amount of the tax but not the equality of its distribution. The activities and expenses of government, over which the state has plenary control, do not cease in time of depression. They may increase. The state may meet those expenses by raising the valuation of taxable property, or by raising tax rates, or both, without infringing any constitutional immunity. Here the state, so far as appears, is raising the needed revenue and distributing the burden as in previous years, by continuing old valuations. However high those valuations may be, if not discriminatory, they impose no unequal share of the tax burden on petitioner and cannot be said to be arbitrary or oppressive in the constitutional sense. Recently we held that a claim that the rate of a non-discriminatory tax is excessively high presents no constitutional question. Magnano Co. v. Hamilton, 292 U. S. 40, 44. No reason has been advanced at the bar, or given in the opinion of the Court, why a tax valuation, excessive when compared with condemnation or market value, should have any different legal consequences. In neither case is inequality of the tax burden established. It is for that reason that this Court has held, without exception, that valuation of property for tax purposes, however excessive, not shown to be discriminatory, infringes no constitutional immunity. Rowley v. Chicago & N. W. Ry., supra, 111; Southern Ry. Co. v. Watts, 260 U. S. 519, 526; and see Cumberland Coal Co. v. Board of Review, 284 U. S. 23, 25ff; Sunday Lake Iron Co. v. Wakefield, 247 U. S. 350. Cases setting aside an excessive allocation of railroad system value to the taxing state, Fargo' v. Hart, supra; Rowley v. Chicago Northwestern Ry., supra, or setting aside improper valuation made for purposes of condemning property, Monongahela Navigation Co. v. United States, 148 U. S. 312, or for determining whether public utility rates are confiscatory, Southwestern Bell Telephone 157 UNITED STATES v. ATKINSON. Counsel for Parties. 135 Co. v. Public Service Comm’n, 262 U. S. 276, 287, 288; Bluefield Waterworks Co. v. Public Service Comm’n, 262 U. S. 679, 692; McCardle v. Indianapolis Water Co., 272 U. S. 400, 408, 412, do not support the decision now made. In such cases the complainant, because the valuation is too high or too low, suffers a harm from which the Constitution guarantees immunity. But the Constitution guarantees no immunity from taxation even though the tax, because of its amount, may be burdensome, see Mag-nano Co. v. Hamilton, supra, or because it is as high in a year of depression and falling property values as in years of prosperity. Beyond this, petitioner does not show that it is harmed, or present any case for invoking the protection of the Constitution. Mr. Justice Brandeis and Mr. Justice Cardozo join in this opinion. UNITED STATES v. ATKINSON. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT. No. 265. Argued January 8, 1936.—Decided February 3, 1936. In the absence of exceptional circumstances, error in a jury trial, which was not brought to the attention of the court by proper exception or request to charge, will not be considered on appeal. P. 159. 76 F. (2d) 564, affirmed. Certiorari, 296 U. S. 559, to review a judgment affirming a judgment against the United States in an action on a policy of converted war risk insurance. Mr. Will G. Beardslee, with whom Solicitor General Reed and Messrs. Wilbur C. Pickett, Fendall Marbury, and W. Marvin Smith were on the brief, for the United States. 158 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. Mr. Warren E. Miller, with whom Mr. A. H. Culwell was on the brief, for respondent. Mr. Justice Stone delivered the opinion of the Court. This case was brought here on certiorari to review a determination of the Court of Appeals for the Fifth Circuit, said to be inconsistent with our decision in Miller v. United States, 294 U. S. 435. The challenged holding is that there is statutory authority for including in contracts of United States government insurance (converted war risk insurance) covering death or total permanent disability a provision that “the permanent loss of hearing of both ears . . . shall be deemed to be total disability.” The case was tried in the district court to a jury which rendered a verdict for the plaintiff, respondent here. Judgment in his favor was affirmed by the Circuit Court of Appeals for the Fifth Circuit, 76 F. (2d) 564, which held that the insertion in the policy of the quoted definition of total disability, pursuant to Veterans’ Administration Regulation, § 3122, was authorized by 43 Stat. 624, 1309, 38 U. S. C., § 512.1 The government, by its assignment of errors here, assails, as it did in the court below, the correctness of 1 “§ 512. Not later than July 2, 1926, all term insurance held by persons who were in the military service after April 6, 1917, shall be converted, without medical examination, into such form or forms of insurance as may be prescribed by regulations and as the insured may request. Regulations shall provide for the right to convert into ordinary life, twenty-payment life, endowment maturing at age sixty-two, and into other usual forms of insurance, . . . Provisions for maturity at certain ages, for continuous installments during the life of the insured or beneficiaries, or both, for cash, loan, paid up and extended values, dividends from gains and savings, and such other provisions for the protection and advantage of and for alternative benefits to the insured and the beneficiaries as may be found to be reasonable and practicable, may be provided for in the contract of insurance, or from time to time by regulations. . . 159 UNITED STATES v. ATKINSON. Opinion of the Court. 157 this ruling, but examination of the record discloses that no such objection was presented to the trial court. In consequence the government is precluded from raising the question on appeal. The trial judge instructed the jury that respondent might recover either on the theory that his loss of hearing constituted in fact a permanent disability preventing his pursuit of any substantially gainful occupation, or that his loss of hearing of both ears, if permanent, was a permanent disability as defined by the policy. The jury was thus left free to return a verdict for respondent if it found that he had suffered permanent loss of hearing of both ears, regardless of its effect upon his ability to earn his livelihood. The government failed to question the correctness of these instructions either by exception or request to charge, and its motion for a directed verdict was upon other grounds not now material. The verdict of a jury will not ordinarily be set aside for error not brought to the attention of the trial court. This practice is founded upon considerations of fairness to the court and to the parties and of the public interest in bringing litigation to an end after fair opportunity has been afforded to present all issues of law and fact. Beaver v. Taylor, 93 U. S. 46; Allis v. United States, 155 U. S. 117, 122, 123; United States v. United States Fidelity & Guaranty Co., 236 U. S. 512, 529; Guerini Stone Co. v. Carlin Construction Co., 248 U. S. 334, 348; Pennsylvania R. Co. v. Minds, 250 U. S. 368, 375; Burns v. United States, 274 U. S. 328, 336; see Shannon v. Shaffer Oil & Refining Co., 51 F. (2d) 878, 880. It is substantially that adopted by Rule 10, Subdivision 1, of the rules of the Court of Appeals for the Fifth Circuit, which requires the party excepting to the charge “to state distinctly the several matters of law” to which he excepts, and directs that “those matters of law, and those only, shall be inserted in the bill of exceptions.” 160 OCTOBER TERM, 1935. Statement of the Case. 297 U.S. In exceptional circumstances, especially in criminal cases, appellate courts, in the public interest, may, of their own motion, notice errors to which no exception has been taken, if the errors are obvious, or if they otherwise seriously affect the fairness, integrity or public reputation of judicial proceedings. See New York Central R. Co. v. Johnson, 279 U. S. 310, 318; Brasfield v. United States, 272 U. S. 448, 450. But no such case is presented here. The judgment must be affirmed for the reason that the error assigned was not made the subject of appropriate exception or request to charge upon the trial. Affirmed. MEYER et al. v. KENMORE GRANVILLE HOTEL CO. ET AL. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT. Nos. 375 and 376. Argued January 16, 1936.—Decided February 3, 1936. 1. An order of the District Court denying a petition which prays dismissal of a proceeding to reorganize a corporation under § 77B of the Bankruptcy Act, and incidentally for the recall of an injunction restraining creditors in that proceeding, is not appealable to the Circuit Court of Appeals as of right but only by leave of that court. Bankruptcy Act, §§ 77B (k), 24, and 25. P. 162. 2. An order of the District Court confirming a plan of reorganization under § 77B of the Bankruptcy Act, is not appealable to the Circuit Court of Appeals as of right but only by leave of that court. P. 165. 77 F. (2d) 1004; 78 F. (2d) 1018, affirmed. Certiorari, 296 U. S. 565, to review orders of the Circuit Court of Appeals dismissing two appeals, and an order denying a petition to appeal, from orders of the District Court in reorganization proceedings under § 77B of the Bankruptcy Act, 161 MEYER v. KENMORE HOTEL CO. Opinion of the Court. 160 Mr. Meyer Abrams, with whom Mr. Max Shulman was on the brief, for petitioners. Mr. Isaac E. Ferguson, with whom Mr. Arthur M. Cox was on the brief, for respondents. Mr. Justice Stone delivered the opinion of the Court. Certiorari was granted in these cases as companion cases to St. Louis Can Co. v. General American Life Insurance Co., 77 F. (2d) 598 (C. C. A. 8th), in which certiorari was granted on the same day, to resolve questions as to the mode of appeal from certain orders entered by a district court in the course of a reorganization proceeding under § 77 B of the Bankruptcy Act, 48 Stat. 912, 11 U. S. C. 207. The writ in St. Louis Can Co. N. General American Life Insurance Co. was later dismissed by this Court on stipulation of the parties, 296 U. S. 660. On February 4, 1935, an involuntary petition was filed in the district court for northern Illinois for reorganization of a corporate debtor. The debtor filed an answer admitting the essential allegations of the petition, and the district court found that the petition was filed in good faith, and ordered that it stand approved, and that creditors be restrained from asserting claims against the property of the debtor. After this order was entered the petitioner here filed a petition in the reorganization proceeding setting up that she owned some of the mortgage bonds to which the property of the debtor was subject; that subsequent to the petition for reorganization, but before it was approved, she had brought suit in the state courts against the debtor and others for an accounting, charging fraud in the issue and sale of the bonds and a fraudulent scheme to bring about a reorganization of the debtor to the detriment of the bondholders and to the advantage of the defendants in the suit. She prayed that the petition for reorganization be 43927°—36-------11 162 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. dismissed for want of good faith and of jurisdiction in the district court, and that the injunction be dissolved. The district court entered an order March 20, 1935, denying the petition. From this order it allowed an appeal to the Court of Appeals for the Seventh Circuit, which dismissed the appeal without opinion. The correctness of this ruling is presented in No. 375. Meanwhile, the district court proceeded with hearings, in which petitioner took no part, on a proposed plan of reorganization. The plan, after certain modifications, was ultimately approved by 94% of the bondholders of one class and 95% of another, and, with further changes directed by the court, was confirmed by order entered May 20, 1935- The Court of Appeals dismissed without opinion petitioner’s appeal from this order, allowed by the district court. And it denied petitioners application for leave to appeal from the same order, on the ground that petitioner, who alone sought leave to appeal, had not objected to the plan in the bankruptcy court, and so was not in a position to challenge the plan on her own behalf or on that of bondholders who had objected. The correctness of these rulings of the Court of Appeals is presented in No. 376. 1. The question in No. 375 is whether the order of the district court denying the application to dismiss the proceeding brought under § 77 B and to dissolve the injunction generally restraining creditors, is, for purposes of appeal, the equivalent of “a judgment adjudging or refusing to adjudge the defendant a bankrupt,” which by § 25 (a) of the Bankruptcy Act, 44 Stat. 665, 11 U. S. C. 48 (a), is appealable as of right to the court of appeals. When § 77 B introduced into the Bankruptcy Act the proceeding for reorganization of a corporation, it was provided that the procedure to be followed in case reorganization were ordered should, so far as practicable, fol- 163 MEYER V. KENMORE HOTEL CO. Opinion of the Court. 160 low that already established by the Bankruptcy Act for liquidation proceedings. Section 77 B (k)1 directs that the other sections of the Bankruptcy Act shall apply to proceedings under § 77 B, unless inconsistent with it, and that . . the date of the order approving the petition or answer under this section shall be taken to be the date of adjudication, and such order shall have the same consequence and effect as an order of adjudication.” The appeal provisions of §§ 24 and 251 2 of the Bankruptcy Act are thus made applicable to orders entered in the course of a reorganization proceeding, and an order approving or disapproving a petition for reorganization is made the equivalent, at least for purposes of an appeal under § 25 (a), of a judgment adjudging or refusing to 1 Section 77 B, sub-section (k): “. . . All other provisions of this title, except such as are inconsistent with the provisions of this section, shall apply to proceedings instituted under this section, whether or not an order to liquidate the estate has been entered. For the purposes of such application, provisions relating to ‘bankrupts’ shall be deemed to relate also to ‘debtors’; ‘bankruptcy proceedings’ or ‘proceedings in bankruptcy’ shall be deemed to include proceedings under this section; the date of the order approving the petition or answer under this section shall be taken to be the date of adjudication, and such order shall have the same consequence and effect as an order of adjudication.” . 2 Section 24: “(a) The Supreme Court of the United States, the circuit courts of appeal of the United States, the Court of Appeals of the District of Columbia, and the supreme courts of the Territories, in vacation, in chambers and during their respective terms, . . . are invested with appellate jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy from which they have appellate jurisdiction in other cases. “(b) The several courts of appeal and the Court of Appeals of the District of Columbia shall have jurisdiction in equity, either interlocutory or final, to superintend and revise in matter of law (and in matter of law and fact the matters specified in section 25 of this title) the proceedings of the several inferior courts of bankruptcy within their jurisdiction. Such power shall be exercised by appeal and in 164 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. adjudge the defendant a bankrupt. By § 24 (a) and (b) appeals in “proceedings” in, bankruptcy, as distinguished from appeals in “controversies arising in bankruptcy,” may be taken only on leave granted in the discretion of the appellate court, except that in the cases enumerated in § 25 (a), including, in clause (1), “a judgment adjudging or refusing to adjudge the defendant a bankrupt,” an appeal may be taken as of right. The petitioner appealed not from the order approving the reorganization, but from that denying her application to dismiss the reorganization proceedings. It is not contended that this order is one in a controversy arising in bankruptcy, appealable as of right under § 24 (a). See Taylor v. Foss, 271 U. S. 176, 181; Harrison v. Chamberlin, 271 U. S. 191; Hewit v. Berlin Machine Works, 194 U. S. 296, 299, 300. It is urged that it is the equivalent of an order approving a petition in a reorganization proceeding, which § 77 B (k) assimilates to an order of adjudication, appealable as of right. But an order refusing to set aside an adjudication of bankruptcy is not within § 25 (a) clause (1). This Court has held that an appeal can be taken from such an order only on leave of the appellate court, under § 24 (b). Vallely v. Northern F. & M. Insurance Co., 254 U. S. 348. The present appeal from the order refusing to dismiss the reorganization the form and manner of an appeal, except in the cases mentioned in said section 25 of this title to be allowed in the discretion of the appellate court.” Section 25 (a): “Appeals, as in equity cases, may be taken in bankruptcy proceedings from the courts of bankruptcy to the circuit courts of appeal of the United States and the Court of Appeals of the District of Columbia and to the supreme courts of the Territories in the following cases, to wit: (1) from a judgment adjudging or refusing to adjudge the defendant a bankrupt; (2) from a judgment granting or denying a discharge; and (3) from a judgment allowing or rejecting a debt or claim of $500 or over. . . MEYER v. KENMORE HOTEL CO. 165 Opinion of the Court. 160 proceedings does not stand on any different footing, and was rightly dismissed because taken without leave of the appellate court. Humphrey v. Bankers Mortgage Co., 79 F. (2d) 345; Vitagraph, Inc. v. St. Louis Properties Corp., 77 F. (2d) 590; St. Louis Can Co. v. General American Life Insurance Co., supra; Credit Alliance Corp. v. Atlantic, Pacific & Gulf Refining Co., 77 F. (2d) 595; and see Wilkerson v. Cooch, 78 F. (2d) 311. That part of petitioner’s application to the district court which asked that the injunction restraining creditors be set aside does not present a “controversy arising in bankruptcy” as distinguished from a “proceeding” in bankruptcy. The relief from the restraining order which petitioner sought was but incidental to her assault on the order approving the petition, and raised no issue capable of litigation independently of the proceeding in the bankruptcy court. It related only to the due administration of the pending proceeding and so was a “proceeding” in bankruptcy, in which the allowance of an appeal is discretionary. See Taylor v.- Voss, supra; Harrison v. Chamberlin, supra. 2. In No. 376 petitioner contends that the order of the district court approving the plan of reorganization corresponds to an order confirming or rejecting a composition with creditors, and that the latter, as was held in United States ex rel. Adler v. Hammond, 104 Fed. 862, is appealable as of right under § 25 as equivalent to an order “granting or denying a discharge.” But we think it plain that an order confirming a plan of reorganization under § 77 B is not the equivalent of a judgment granting or denying a discharge, for, unlike confirmation of a composition, see § 14, 30 Stat. 550, 11 U. S. C., § 32 (c), it does not operate as a discharge. The release of the debtor in a reorganization proceeding is contingent upon the performance of its part of the reorganization plan. Section 77 B (h) commands the debtor and others to execute 166 ÔCTÔBER TERM, 1935. Opinion of the Court. 297 U.S. the plan of reorganization, when confirmed, under the direction of the court, authorizes the court to make appropriate orders to that end, and provides that “upon the termination of the proceedings a final decree shall be entered,” which “shall discharge the debtor from its debts and liabilities.” Discharge is effected not by confirmation of the plan but by the final decree. Confirmation of a plan of reorganization is but a step in the administration of the debtor’s estate, and, for reasons already stated, is an order in a proceeding in bankruptcy rather than a controversy arising in bankruptcy proceedings, and appeal lies only in the discretion of the appellate court. See Campbell v. Alleghany Corporation, 75 F. (2d) 947, 955. 3. In the exercise of the discretion conferred upon it by § 24 (b) the court below denied the application for leave to appeal from the order of the district court confirming the plan of reorganization. Petitioner, who alone asked leave to appeal, made no objection to the plan. Her criticisms of the plan are not of a character to invite the exercise of the discretion of the court to examine them for the first time on appeal. Affirmed. Mr. Justice Van Devanter took no part in the consideration or decision of these cases. 167 DISMUKE v. UNITED STATES. Statement of the Case. DISMUKE v. UNITED STATES. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT. No. 199. Argued January 7, 1936.—Decided February 3, 1936. 1. The District Court has jurisdiction under the Tucker Act of a claim to an annuity founded on § 8 (a) of the Civil Service Retirement Act of June 30, 1933. P. 169. 2. The declaration of that section that annuities shall be payable from the retirement fund, which by an earlier Act is “appropriated for the payment of annuities,” amounts to no more than a direction that they shall be charged on the books of the Treasury to the appropriation made for their payment. It does not impair or restrict the obligation to pay. Id. 3. Claims for annuities payable under the Retirement Act are not claims for pensions or for salary or for compensation for services, within the meaning of the prohibition of the Tucker Act excluding claims of those descriptions from the jurisdiction it confers upon the District Courts. P. 170. 4. An administrative decision rejecting, on a pure question of law, a claim for an annuity under § 8 (a) of the Retirement Act, supra, held open to review by the District Court in a suit by the claimant under the Tucker Act. P. 171. 5. In creating claims against itself, the United States may limit claimants to an administrative remedy; but in the absence of compelling language, resort to the courts to assert the right created will be deemed to be curtailed only so far as authority to decide is given to the administrative officer; and, in the absence of plain command the power of the officer will not be deemed to extend to the denial of that which the statute allows as a right and to which, upon the facts found or admitted by such officer, the claimant is entitled. P. 172. 6. A field deputy United States marshal, during the period 1895-1902, was not an employee of the United States within the meaning of the Retirement Act, supra. P. 173. 76 F. (2d) 715, affirmed. Certiorari, 296 U. S. 554, to review the reversal of a judgment recovered by Dismuke in the District Court in a suit under the Tucker Act. 168 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. Mr. W. A. Bootle, with whom Mr. John J. McCreary was on the brief, for petitioner. Mr. Alexander Holtzoff, with whom Solicitor General Reed, Assistant Attorney General Morris, and Messrs. Paul A. Sweeney and M. Leo Looney, Jr., were on the brief, for the United States. Mr. Justice Stone delivered the opinion of the Court. About June 30, 1933, petitioner filed a claim with the Administration of Veterans’ Affairs for allowance of an annuity under the provisions of § 8 (a) of the Civil Service Retirement Act of June 16, 1933, 48 Stat. 283, 305, 5 U. S. C., § 692d, which authorizes payment of annuities, at a specified rate, under circumstances not now material, to retired government employees in the classified civil service who have rendered at least thirty years’ service. His claim was rejected by the Director of Insurance, on the ground that his employment as a field deputy United States marshal from December 16, 1895 to April 30, 1902, which he had counted as a part of his thirty years’ service, could not be so included, because field deputy marshals during that time were employees of the marshal appointing them, and not of the United States. Deducting this period, his total service was twenty-four years, which, if established in accordance with the provisions of the Act, would entitle him to an annuity at a lower rate, under § 7 of the Act of May 29, 1930, 46 Stat. 468, 474, 5 U. S. C., § 697a. On appeal the Board of Veterans’ Appeals denied petitioner’s application for the same reason. In the present suit, brought in the district court under the Tucker Act, to recover accrued installments of the annuity based on the thirty-year period of service, and 169 DISMUKE V. UNITED STATES. Opinion of the Court. 167 for a declaratory judgment establishing petitioner’s right to such annuity, the court gave judgment for petitioner. The Court of Appeals for the Fifth Circuit reversed, 76 F. (2d) 715, holding that the district court was without jurisdiction because the Retirement Act must be construed as committing the adjudication of claims under it solely to administrative officers, to the exclusion of the courts. This Court granted certiorari in view of the public importance of the questions involved. (1) The government urges that the district court was without jurisdiction to entertain the suit. The Tucker Act of March 3, 1887, 24 Stat. 505, as amended by § 24 of the Judicial Code, c. 231, 36 Stat. 1087, 1093, 28 U. S. C., § 41, permitting suits against the United States, confers on the district courts jurisdiction “concurrent with the Court of Claims of all claims not exceeding ten thousand dollars founded upon . . . any law of Congress or upon any regulation of an executive department or upon any contract, express or implied, with the Government of the United States. . . .” Section 8 (a) of the Retirement Act declares that, under conditions specified, the employee “shall be entitled to ah annuity payable from the civil-service retirement and disability fund.” The provision is mandatory, expressed in terms of the right of the employee, which is inseparable from the correlative obligation of the employer, the United States. The present suit to recover the annuity is thus upon a claim “founded upon a law of Congress” and is within the jurisdiction conferred upon district courts, as are suits to recover sums of money which administrative officers are directed by Act of Congress to “pay” or “repay.” Medbury v. United States, 173 U. S. 492; McLean v. United States, 226 U. S. 374; United States v. Hvoslej, 237 U. S. 1, and see United States v. American Tobacco Co., 166 U. S. 468. The declaration that the annuities are payable from the re- 170 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. tirement fund, which, by § 8 of the Act of May 22, 1920, 41 Stat. 618, is “appropriated for the payment of annuities,” amounts to no more than a direction that they shall be charged on the books of the Treasury to the appropriation made for their payment. It does not impair or restrict the obligation to pay. The Tucker Act declares that it shall not be construed as giving jurisdiction of “claims for pensions” or “of cases brought to recover fees, salary or compensation for services of officers of the United States.” The government argues that the present suit must be either the one or the other. It does not press the contention that the annuities are “salary or compensation,” which we think without merit, see Retirement Board n. McGovern, 316 Pa. 161; 174 Atl. 400, but it insists that the suit is brought to recover a pension. The proviso withholding jurisdiction of suits on claims for pensions was a part of the original Tucker Act, which became law March 3, 1887, long before the enactment of the Retirement Act of May 22, 1920, and at a time when the term “pensions” commonly referred to the gratuities paid by the government in recognition of past services in the Army or Navy. The annuities payable under the Retirement Act are not gratuities in that sense. The annuitant contributes to them by deductions from his salary or by actual payments into the fund, as in the present case, and the scheme of the Act is to provide for payment of annuities, in part at least from contributions by employees, in recognition both of their past services and of services to be performed. The Act itself, in contradistinction to the numerous pension acts, see 38 U. S. C., does not refer to the annuities as pensions, and expressly excludes from the service to be counted, in determining the class to which the annuitant is to be assigned, the period for which the employee “elects to receive a pension under any law 3, Act of May 22, 1920, 41 Stat. 615, 5 U. S. C., 171 DISMUKE v, UNITED STATES. Opinion of the Court. 167 § 707. We conclude that annuities payable under the Retirement Act are not pensions within the meaning of the Tucker Act and that suits against the government to recover them are within the jurisdiction of district courts, if not precluded, as the court below held they are, by the administrative provisions of the Retirement Act. (2) Although the Retirement Act does not, in terms, forbid employees to assert in the courts rights acquired under it, the government insists that such restriction is to be implied from the administrative provisions of the Act. It points to the authority given the Commissioner of Pensions,1 under direction of the Secretary of the Interior, to make rules and regulations for carrying the act into effect, § 17 of the Act of 1930, 46 Stat. 478, 5 U. S. C., § 707a, and to § 13 of the same Act, 5 U. S. C., § 703a, which prescribes the form of application for the annuity, the character of evidence to be presented in its support, and declares that upon receipt of satisfactory evidence the Commissioner of Pensions1 shall forthwith adjudicate the claim of the applicant,” and finally to the administrative appeals authorized by § 17. From this it is argued that the prescribed application to the Commissioner, his adjudication, and the appeal from his decision to departmental officials, afford an exclusive remedy which precludes any resort to the courts for the recovery of the annuity. The United States is not, by the creation of claims against itself, bound to provide a remedy in the courts. 1 By Executive Order dated July 21, 1930, under § 1 of Act of July 3, 1930, 46 Stat. 1016, the functions of the Bureau of Pensions were transferred to the Veterans’ Administration. By Executive Orders Nos. 6670 and 6731, dated respectively April 7, 1934, and June 5, 1934, under § 16 of Act of March 3, 1933, 47 Stat. 1517, and Order of the Civil Service Commission dated August 24, 1934, the administration of the Civil Service Retirement Act was transferred from the Veterans’ Administration to the Civil Service Commission, effective as of September 1,1934. 172 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. It may withhold all remedy or it may provide an administrative remedy and make it exclusive, however mistaken its exercise. See United States v. Babcock, 250 U. S. 328. But, in the absence of compelling language, resort to the courts to assert a right which the statute creates will be deemed to be curtailed only so far as authority to decide is given to the administrative officer. If the statutory benefit is to be allowed only in his discretion, the courts will not substitute their discretion for his. Williamsport Wire Rope Co. v. United States, 277 U. S. 551; United States v. Atchison, T. (è S. F. Ry. Co., 249 U. S. 451, 454; Ness v. Fisher, 223 U. S. 683. If he is authorized to determine questions of fact his decision must be accepted unless he exceeds his authority by making a determination which is arbitrary or capricious or unsupported by evidence, see Silberschein v. United States, 266 U. S. 221, 225; United States v. Williams, 278 U. S. 255, 257, 258; Meadows v. United States, 281 U. S. 271, 274; Degge v. Hitchcock, 229 U. S. 162, 171 ; or by failing to follow a procedure which satisfies elementary standards of fairness and reasonableness essential to the due conduct of the proceeding which Congress has authorized, Lloyd Sabaudo Società v. Elting, 287 U. S. 329, 330, 331. But the power of the administrative officer will not, in the absence of a plain command, be deemed to extend to the denial of a right which the statute creates, and to which the claimant, upon facts found or admitted by the administrative officer, is entitled. United States v. Laughlin, 249 U. S. 440, 443; United, States v. Hvoslef, supra; McLean v. United States, supra, 378; Parish v. Mac-Veagh, 214 U. S. 124; Medbury v. United States, supra, 497, 498; see Bates (è Guild Co. v. Payne, 194 U. S. 106, 109, 110. The Commissioner is required by § 13, “upon receipt of satisfactory evidence” of the character specified, “to adjudicate the claim.” This does not authorize denial of 173 DISMUKE V. UNITED STATES. Opinion of the Court. 167 a claim if the undisputed facts establish its validity as a matter of law, or preclude the courts from ascertaining whether the conceded facts do so establish it. The decisions of the Director of Insurance and the Board of Veterans’ Appeals, and the stipulation of facts upon which the case was tried, show that the petitioner’s claim for an annuity based on thirty years’ service was rejected on the sole ground that his employment as a field deputy United States marshal could not be counted as service as an employee of the United States. The administrative decision thus turned upon a question of law, whether a field deputy marshal during the period from December 16, 1895 to December 30, 1902, was an employee of the United States. The administrative determination of that question is open to review in the present suit, and should have been considered and decided by the court below. (3) We are of the opinion that a field deputy United States marshal from 1895 to 1902 was not an employee of the United States within the meaning of the Retirement Act. Before the Act of May 28, 1896, c. 252, 29 Stat. 140, 181, United States marshals were authorized to appoint deputy marshals, removable from office by the district judge or by the circuit court, R. S. §780, who were to be paid a “proper” allowance, not to exceed three-fourths of the fees earned by them. R. S. § 841. Sections 9 and 10 of the Act of 1896 placed the marshal and office deputy marshals upon a salary basis, but § 11 authorized the marshal to appoint field deputy marshals to hold office during his pleasure unless sooner removed by the district courts, who should receive as compensation three-fourths of the fees, including mileage, earned by them. The status of a field , deputy marshal under this legislation was therefore the same as that of all deputy marshals under the earlier Act. We regard the question whether such a field deputy marshal was an 174 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. employee of the government or of the marshal as settled by the decision and reasoning of this Court in Douglas v. Wallace, 161 U. S. 346, which held that, in view of the manner of a deputy marshal’s appointment and payment, his claim for compensation had the status of that of a claim of an employee of the marshal, not of the government, and so was not affected by R. S., § 3477, declaring void any assignment of any interest in a claim against the United States. To the same effect are United States v. McDonald, 72 Fed. 898, 900; Powell v. United States, 60 Fed. 687; Wintermute v. Smith, 30 Fed. Cas. No. 17,897. This has been the administrative ruling since 1920, see Claim of George Taylor Larkin, recorded in 21 P. & R. D. 42. A construction of such long standing is not lightly to be overturned. See United States v. Moore, 95 U. S. 760, 763; Logan v. Davis, 233 U. S. 613, 627; Maynard v. Elliott, 283 U. S. 273; Brewster v. Gage, 280 U. S. 327, 336; Fawcus Machine Co. v. United States, 282 U. S. 375; Interstate Commerce Comm’n v. New York, N. H. <& H. R. Co., 287 U. S. 178; Norwegian Nitrogen Products Co. v. United States, 288 U. S. 294, 315. Later legislation providing for payment of annuities to employees of the United States must be taken to have been adopted in the light of it. Since the record does not disclose any administrative determination of petitioner’s right to an annuity computed on the basis of twenty-four years service, the sole issue now presented is whether the decision that he was not entitled to the annuity calculated on the basis of thirty years’ service was erroneous. The judgment of the court below must therefore be affirmed, but for reasons stated in this opinion and not those stated in the opinion of the court below. Affirmed. UNITED STATES v. CALIFORNIA. 175 Syllabus. UNITED STATES v. CALIFORNIA. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT. No. 33. Argued January 16, 17, 1936.—Decided February 3, 1936. 1. Whether a transportation agency is a common carrier depends not upon its corporate character or declared purposes, but upon what it does. P. 181. 2. The State Belt Railroad, owned by the State of California and operated by it along the waterfront of San Francisco harbor, which receives all freight cars, loaded and empty, offered to it by railroads, industrial plants and steamships, with which it connects, and hauls them at a flat rate per car, the larger part of such traffic having its origin or destination in States other than California, is a common carrier engaged in interstate commerce. P. 182. 3. In operating a common-carrier railroad in interstate transportation, though the purpose be to facilitate the commerce of a port and the net proceeds be used in harbor improvement, a State acts in subordination to the power of Congress under the commerce clause. P. 183. 4. Even though the State, in the conduct of its railroad, be said to act in its “sovereign,” distinguished from a “private,” capacity, its sovereignty in that regard is necessarily diminished to the extent of the power granted by the Constitution to the Federal Government. P. 183. 5. The principle by which state instrumentalities are protected from federal taxation, and vice versa, is inapplicable by analogy as a limitation upon the federal power to regulate interstate commerce. P. 184. 6. The provisions of the Safety Appliance Act forbidding any common carrier engaged in interstate commerce by railroad to haul cars not equipped with couplers as prescribed, and penalizing infractions, include state-owned interstate rail carriers. P. 185. 7. The canon of construction that a sovereign is presumptively not intended to be bound by its own statute unless named in it, should not be extended so as to exempt from an Act of Congress a business plainly within its terms and purpose, merely because the business is carried on by a State. P. 186. 8- Congress may confer on inferior courts original jurisdiction of suits in which a State is a party. P. 187. 176 OCTOBER TERM, 1935. Argument for the United States. 297 U.S. 9. The inclusion of an earlier provision in the Judicial Code was not a reenactment. P. 187. 10. Section 6 of the Safety Appliance Act, as amended in 1896, provides that any common carrier, for each car hauled by it in violation of the Act, shall be liable to a penalty of $100, “to be recovered in a suit or suits to be brought by the United States district attorney in the district court of the United States having jurisdiction in the locality where such violation shall have been committed.” Section 233, Jud. Code, originally enacted as part of the Judiciary Act of 1789, gave this Court “exclusive jurisdiction of all controversies of a civil nature where a State is a party,” (with certain exceptions). Assuming that a suit to recover the penalty is a controversy of a civil nature, held that, with respect to such suits when brought against States, § 6 supplants § 233, and lodges jurisdiction in the district court of the locality. P. 187. 75 F. (2d) 41, reversed. Certiorari, 296 U. S. 554, to review a judgment reversing a judgment for a penalty recovered by the United States against the State of California by suit in the District Court. Assistant Solicitor General Bell, with whom Solicitor General Reed, Assistant Attorney General Keenan, and Messrs. David V. Cahill, M. S. Huberman, Charles E. Wyzanski, Jr., and Daniel W. Knowlton were on the brief, for the United States. The State of California in the operation of the state-owned State Belt Railroad is a common carrier engaged in interstate commerce by railroad. United States v. Brooklyn Terminal Co., 249 U. S. 296, 304; United States v. Union Stock Yard Co., 226 U. S. 286; United States v. Sioux City Stock Yards Co., 162 Fed. 556; Union Stockyards Co. v. United States, 169 Fed. 404; Belt Ry. Co. v. United States, 168 Fed. 542; United States v. Atlanta Terminal Co., 260 Fed. 779, cert, den., 251 U. S. 559; McCallum v. United States, 298 Fed. 373, cert, den., 266 U. S. 606; Tilden v. United States, 21 F. (2d) 967. Distinguishing: Sherman v. United States, 282 U. S, 25, 177 UNITED STATES v. CALIFORNIA. Argument for the United States. 175 The State is subject to the provisions of the Federal Safety Appliance Act. United States v. Erie R. Co., 237 U. S. 402, 409; St. Louis & I. M. Ry. Co. v. Taylor, 210 U. S. 281, 294-296; Chicago, B. <& Q. R. Co. v. United States, 220 U. S. 559; Delk n. St. Louis & S. F. R. Co., 220 U. S. 580; California Canneries Co. v. Southern Pacific Co., 51 I. C. C. 500, 502-503; United States v. Belt Line R. Co., 56 I. C. C. 121; Texas State Railroad, 34 I. C. C. Vai. Rep. 276; United States v. New York Central R. Co., 272 U. S. 457, 461-462. The power of the Federal Government to regulate state-owned railroads engaged in interstate commerce would seem beyond doubt. Cf. Helvering v. Powers, 293 U. S. 214 (operation of a street railway); South Carolina v. United States, 199 U. S. 437 (sale of liquor under a dispensary system); Ohio v. Helvering, 292 U. S. 360 (sale of liquor through state-owned stores); Georgia v. Chattanooga, 264 U. S. 472, 481; United States v. Planters’ Bank, 9 Wheat. 904; Bank of Kentucky v. Wister, 2 Pet. 318, 323; Curran v. Arkansas, 15 How. 304, 308. It is plain that a state-owned railroad would not be immune from the federal taxing power. So far as the commerce power is concerned it is not clear that any immunity is properly to be implied in favor of the States; but assuming that such immunity exists, it is manifestly no more extensive than the immunity from federal taxation. Board of Trustees v. United States, 289 U. S. 48, 59; Southern Ry. Co. v. Railroad Commission, 236 U. S. 439; Gilvary v. Cuyahoga Valley Ry., 292 U. S. 57, 60-61. Since the Federal Government clearly has the power to regulate state-owned railroads engaged in interstate commerce, no sound reason appears for excepting them from the operation of existing federal statutes. The Safety Appliance Act embraces any common carrier, <3927°—36------12 178 OCTOBER TERM, 1935. Argument for the State. 297 U.S. The historical basis for the rule that a sovereign is not bound by a statute unless specifically named, clearly indicates that it has application only to the enacting sovereign. There is no reason to assume that Congress meant to distinguish between state and privately owned railroads. See Southern Ry. Co. v. United States, 222 U. S. 20, 27; Mathewes v. Port Utilities Comm’n, 32 F. (2d) 913. “The judicial power,” Constitution, Art. Ill, extends to suits by the United States against a State. United States v. North Carolina, 136 U. S. 211; United States v. Texas, 143 U. S. 621, 644, 645; 162 U. S. 1, 90; United States v. Michigan, 190 U. S. 379, 396; Oklahoma v. Texas, 258 U. S. 574, 581; United States v. Minnesota, 270 U. S. 181, 195; cf. Monaco v. Mississippi, 292 U. S. 313, 329; and Congress can vest jurisdiction of such cases in the inferior federal courts. Ames v. Kansas, 111 U. S. 449; United States v. Louisiana, 123 U. S. 32. The Constitutional principle is the same whether the suit be brought with or without the consent of the State. This is shown by Ames v. Kansas, supra, where the State objected to having its suit removed. See also Bors v. Preston, 111 U. S. 252. Mr. Ralph 0. Marron, Deputy Attorney General of California, with whom Mr. U. S. Webb, Attorney General, was on the brief, for the State of California. California is not a common carrier engaged in interstate commerce. Kentucky & Indiana Bridge Co. v. Louisville & N. R. Co., 37 Fed. 567; Sherman v. United States, 282 U. S. 25. The operation of the State Belt Railroad is the exercise of a governmental function. Denning v. State, 123 Cal. 316, 321, 322; Sherman v. United States, supra. Distinguishing Helvering v. Powers, 293 U. S. 214; South Carolina v. United States, 199 U. S. 437; Ohio v. Helver- 179 UNITED STATES v. CALIFORNIA. Argument for the State. 175 ing, 292 U. S. 360, as cases in which the States were acting in a proprietary capacity and to that extent were amenable to the federal taxing power. In order to subject a State to the federal taxing power it is necessary that the State be engaged in a private undertaking. Georgia v. Chattanooga, 264 U. S. 472, 481-482; United States v. Planters’ Bank, 9 Wheat. 904; Bank of Kentucky v. Wister, 2 Pet. 318, 323; Curran v. Arkansas, 15 How. 304, 308. The operation and control of port facilities is a sovereign function. Commissioner v. Ten Eyck, 76 F. (2d) 515. Congress has no power to impose a penalty on a State when engaged in the discharge of a sovereign function. McCulloch v. Maryland, 4 Wheat. 316; Robinson v. Sichel, 127 U. S. 507, 515. The Federal Act is not applicable since States are not specifically referred to therein. Savings Bank n. United States, 19 Wall. 227, 239; New York v. Irving Trust Co., 288 U. S. 329, 331; United States v. Herron, 20 Wall. 251; Guarantee Co. v. Title Guaranty Co., 224 U. S. 142; In re Fowble, 213 Fed. 676; Villere v. United States, 18 F, (2d) 409, cert, den., 275 U. S. 532; United States v. Clausen, 291 Fed. 231. The venue of any action against the State by the United States must be in the Supreme Court of the United States. Const., Art. Ill, § 2; Rhode Island n. Massachusetts, 12 Pet. 657; United States v. Texas, 143 U. S. 621. The provision of Jud. Code, § 233, giving this Court exclusive jurisdiction over all controversies of a civil nature where a State is a party, was not impliedly repealed by the Safety Appliance Act. Great Northern Ry. Co. v. United States, 155 Fed. 945, aff’d 208 U. S. 452; Gay v. Ruff, 292 U. S. 25, 37; Knapp v. Byram, 21 F. (2d) 226, 227; United States v. McIntosh, 57 F. (2d) 573. 180 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. Mr. Justice Stone delivered the opinion of the Court. This is a suit brought by the United States against the State of California in the District Court for northern California to recover the statutory penalty of $100 for violation of the federal Safety Appliance Act, § 2, Act of March 2, 1893, c. 196, 27 Stat. 531, 45 U. S. C. § 2, and § 6 of the Act as amended April 1, 1896, 29 Stat. 85, 45 U. S. C., § 6.1 The complaint alleges that California, in the operation of the state-owned State Belt Railroad, is a common carrier engaged in interstate transportation by railroad, and that it has violated the Safety Appliance Act by hauling over the road a car equipped with defective coupling apparatus. Upon the trial, without a jury, upon stipulated facts, the district court gave judgment for the United States. The Court of Appeals for the Ninth Circuit reversed, 75 F. (2d) 41, on the ground that as exclusive jurisdiction of suits to which a state is a party is conferred upon this Court by § 233 of the Judicial Code, 36 Stat. 1156, 28 U. S. C. 341, the district court was without 1 “Section 2. It shall be unlawful for any common carrier engaged in interstate commerce by railroad to haul or permit to be hauled or used on its line any car used in moving interstate traffic not equipped with couplers coupling automatically by impact, and which can be uncoupled without the necessity of men going between the ends of the cars.” “Section 6. Any common carrier engaged in interstate commerce by railroad using any locomotive engine, running any train, or hauling or permitting to be hauled or used on its line any car in violation of any of the preceding provisions of this chapter, shall be liable to a penalty of $100 for each and every such violation, to be recovered in a suit or suits to be brought by the United States district attorney in the district court of the United States having jurisdiction in the locality where such violation shall have been committed; and it shall be the duty of such district attorney to bring such suits upon duly verified information being lodged with him of such violation having occurred; . . 181 UNITED STATES v. CALIFORNIA. Opinion of the Court. 175 jurisdiction of the cause. We granted certiorari to review the case as one involving questions of public importance, upon a petition of the government which urged that the state is a common carrier by railroad, subject to the Safety Appliance Act, and, under its provisions, to suit in the district court to recover penalties for violation of the Act. In an earlier suit, Sherman v. United States, 282 U. S. 25, brought against the Board of State Harbor Commissioners, which supervises operation of the State Belt Railroad, to recover penalties for violation of the Act, this Court set aside the judgment of the district court for the government because the state had not been made a party. 1. Whether a transportation agency is a common carrier depends not upon its corporate character or declared purposes, but upon what it does. United States v. Brooklyn Terminal, 249 U. S. 296, 304. The State Belt Railroad is owned and operated by the state, see Sherman v. United States, supra. It parallels the water front of San Francisco harbor and extends onto some forty-five state-owned wharves. It serves directly about one hundred and seventy-five industrial plants, has track connection with one interstate railroad, and, by wharf connections with freight car ferries, links that and three other interstate rail carriers with freight yards in San Francisco leased to them by the state. It receives and transports from the one to the other, by its own engines, all freight cars, loaded and empty, and the freight they contain, offered to it by railroads, steamship companies and industrial plants. The larger part of this traffic has its origin or destination in states other than California. For the transportation service it makes a flat charge per car. It issues no bills of lading and is not a party to through rates. It moves the cars on instructions contained in "switch lists” made out by the delivering or receiving carrier, which pays the charge and absorbs it in its rate. The 182 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. charge on cars not delivered to or received from another carrier is paid by the industry concerned. The Belt Railroad is thus a terminal railroad for the industries and carriers with which it connects, and it serves as a link in the through transportation of interstate freight shipped to or from points in San Francisco over the connecting carriers. Its service is of a public character, for hire, and does not differ in any salient feature from that which this Court, in United States v. Brooklyn Terminal, supra, 304, 305, held to be common carriage by rail in interstate commerce within the meaning of the federal Hours of Service Act, 34 Stat. 1415, 45 U. S. C., § 61. The state insists that the facts that it maintains no freight station, issues no bills of lading, and is engaged only in moving cars for a flat rate instead of at a charge per hundred pounds of freight moved, distinguish the operation of its railroad from that of the Brooklyn Terminal. As the service involves transportation of the cars and their contents, the method of fixing the charge is unimportant. Belt Railway of Chicago v. United States, 168 Fed. 542, 544; see United States v. Union Stock Yard & Transit Co., 226 U. S. 286, 299, 300. And while maintenance of a freight station and the issue of bills of lading may be embraced in the service of a common carrier, and a part of interstate commerce, see United States v. Ferger, 250 U. S. 199; Atchison, T. & S. F. Ry. Co. v. United States, 295 U. S. 193, they are not indispensable adjuncts to either where the subject of transportation, here cars loaded and empty, may be effected without. All the essential elements of interstate rail transportation are present in the service rendered by the State Belt Railroad. They are the receipt and transportation, for the public, for hire, of cars moving in interstate commerce. See United States v. Union Stock Yard & Transit Co., supra, 299; Union Stockyards Co. n. United 183 UNITED STATES v. CALIFORNIA. Opinion of the Court. 175 States, 169 Fed. 404; Belt Railway of Chicago v. United States, supra. Its service, involving as it does the transportation of all carload freight moving in interstate commerce between the industries concerned and all railroad and steamship lines reaching the port, is of the same character, though wider in scope, as that held to be common carriage by rail in interstate commerce in the Brooklyn Terminal and the Union Stockyard cases. They abundantly support the conclusion that such is the service rendered by the state in the present case, a conclusion twice reached by the Court of Appeals for the Ninth Circuit, see McCallum v. United States, 298 Fed. 373; Tilden v. United States, 21 F. (2d) 967. 2. The state urges that it is not subject to the federal Safety Appliance Act. It is not denied that the omission charged would be a violation if by a privately-owned rail carrier in interstate commerce. But it is said that as the state is operating the railroad without profit, for the purpose of facilitating the commerce of the port, and is using the net proceeds of operation for harbor improvement, see Sherman v. United States, supra, Denning v. State, 123 Cal. 316, it is engaged in performing a public function in its sovereign capacity and for that reason cannot constitutionally be subjected to the provisions of the federal Act. In any case it is argued that the statute is not to be construed as applying to the state acting in that capacity. Despite reliance upon the point both by the government and the state, we think it unimportant to say whether the state conducts its railroad in its “sovereign” or in its “private” capacity. That in operating its railroad it is acting within a power reserved to the states cannot be doubted. See Puget Sound Power & Light Co. v. Seattle, 291 U. S. 619, 624; Green v. Frazier, 253 U. S. 233; Jones v. Portland, 245 U. S. 217. The only question we need consider is whether the exercise of that power, in 184 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. whatever capacity, must be in subordination to the power to regulate interstate commerce, which has been granted specifically to the national government. The sovereign power of the states is necessarily diminished to the extent of the grants of power to the federal government in the Constitution. The power of a state to fix intrastate railroad rates must yield to the power of the national government when their regulation is appropriate to the regulation of interstate commerce. United States v. Louisiana, 290 U. S. 70, 74, 75; Wisconsin Railroad Comm’n v. Chicago, B. de Q. R. Co., 257 U. S. 563; Shreveport Rate Cases, 234 U. S. 342. A contract between a state and a rail carrier fixing intrastate rates is subject to regulation and control by Congress, acting within the commerce clause, New York n. United States, 257 U. S. 591, as are state agencies created to effect a public purpose, see Sanitary District of Chicago v. United States, 266 U. S. 405; Board of Trustees n. United States, 289 U. S. 48; see Georgia v. Chattanooga, 264 U. S. 472. In each case the power of the state is subordinate to the constitutional exercise of the granted federal power. The analogy of the constitutional immunity of state instrumentalities from federal taxation, on which respondent relies, is not illuminating. That immunity is implied from the nature of our federal system and the relationship within it of state and national governments, and is equally a restriction on taxation by either of the instrumentalities of the other. Its nature requires that it be so construed as to allow to each government reasonable scope for its taxing power, see Metcalf & Eddy v. Mitchell, 269 U. S. 514, 522-524, which would be unduly curtailed if either by extending its activities could withdraw from the taxing power of the other subjects of taxation traditionally within it. Helvering v. Powers, 293 U. S. 214, 225; Ohio v. Helvering, 292 U. S. 360; South Carolina v. United States, 199 U. S. 437; see Murray v. Wilson 185 UNITED STATES v. CALIFORNIA. Opinion of the Court. 175 Distilling Co., 213 U. S. 151, 173, explaining South Carolina v. United States, supra. Hence we look to the activities in which the states have traditionally engaged as marking the boundary of the restriction upon the federal taxing power. But there is no such limitation upon the plenary power to regulate commerce. The state can no more deny the power if its exercise has been authorized by Congress than can an individual. California, by engaging in interstate commerce by rail, has subjected itself to the commerce power, and is liable for a violation of the Safety Appliance Act, as are other carriers, unless the statute is to be deemed inapplicable to state-owned railroads because it does not specifically mention them. The federal Safety Appliance Act is remedial, to protect employees and the public from injury because of defective railway appliances, Swinson v. Chicago, St. Paul, M. & 0. Ry. Co., 294 U. S. 529; Fairport, P. & E. R. Co., v. Meredith, 292 U. S. 589, 594; Johnson v. Southern Pacific Co., 196 U. S. 1, 17, and to safeguard interstate commerce itself from obstruction and injury due to defective appliances upon locomotives and cars used on the highways of interstate commerce, even though their individual use is wholly intrastate. Southern Ry. Co. v. United States, 222 U. S. 20; Moore v. Chesapeake & Ohio Ry. Co., 291 U. S. 205, 214. The danger to be apprehended is as great and commerce may be equally impeded whether the defective appliance is used on a railroad which is state-owned or privately-owned. No convincing reason is advanced why interstate commerce and persons and property concerned in it should not receive the protection of the act whenever a state, as well as a privately-owned carrier, brings itself within the sweep of the statute, or why its all-embracing language should not be deemed to afford that protection. In Ohio v. Helvering, supra, it was held that a state, upon engaging in the business, became subject to a federal 186 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. statute imposing a tax on those dealing in intoxicating liquors, although states were not specifically mentioned in the statute. The same conclusion was reached in South Carolina v. United States, supra; and see Helvering v. Powers, supra. Similarly the Interstate Commerce Commission has regarded this and other state-owned interstate rail carriers as subject to its jurisdiction, although the Interstate Commerce Act does not in terms apply to state-owned rail carriers. See California Canneries Co. v. Southern Pacific Co., 51 I. C. C. 500, 502, 503; United States v. Belt Line R. Co., 56 I. C. C. 121; Texas State Railroad, 34 I. C. C. Vai. R. 276. Respondent invokes the canon of construction that a sovereign is presumptively not intended to be bound by its own statute unless named in it, see Guarantee Title & Trust Co. v. Title Guaranty Co., 224 U. S. 152; United States v. Herron, 20 Wall. 251; In re Fowble, 213 Fed. 676. This rule has its historical basis in the English doctrine that the Crown is unaffected by acts of Parliament not specifically directed against it. United States v. Herron, supra, 255; Dollar Savings Bank v. United States, 19 Wall. 227, 239. The presumption is an aid to consistent construction of statutes of the enacting sovereign when their purpose is in doubt, but it does not require that the aim of a statute fairly to be inferred be disregarded because not explicitly stated. See Baltimore National Bank v. State Tax Commission of Maryland, decided this day, post, p. 209. We can perceive no reason for extending it so as to exempt a business carried on by a state from the otherwise applicable provisions of an act of Congress, all-embracing in scope and national in its purpose, which is as capable of being obstructed by state as by individual action. Language and objectives so plain are not to be thwarted by resort to a rule of construction whose purpose is but to resolve doubts, and whose application in the circumstances would be highly 187 UNITED STATES v. CALIFORNIA. Opinion of the Court. 175 artificial. It was disregarded in Ohio v. Helvering, supra, and South Carolina v. United. States, supra. See Heiner n. Colonial Trust Co., 275 U. S. 232, 234, 235. 3. The jurisdiction of the district court to entertain suits by the United States against a state under the Safety Appliance Act turns on the construction to be given to § 6 of the Act in the light of § 233 of the Judicial Code. Article III, § 2 of the Constitution extends the judicial power of the United States and the original jurisdiction of the Supreme Court to cases “in which a state shall be a party.” See United States v. West Virginia, 295 U. S. 463, 470, and cases cited. But Congress may confer on inferior courts concurrent original jurisdiction of such suits. Ames v. Kansas, 111 U. S. 449, ¡United States v. Louisiana, 123 U. S. 32; compare Bors v. Preston, 111 U. S. 252. Section 233 of the Judicial Code, 28 U. S. C., 341, originally enacted as § 13 of the Judiciary Act of 1789, 1 Stat. 80, became § 687 of the Revised Statutes, and was carried into the Judicial Code in 1911, 36 Stat. 1156. It gives to this Court “exclusive jurisdiction of all controversies of a civil nature where a state is a party, except between a state and its citizens or between a state and citizens of other states or aliens.” The later enacted § 6 of the Safety Appliance Act, see Smiley v. Holm, 285 U. S. 355, provides that the penalty which it imposes is “to be recovered in a suit or suits to be brought... in the district court of the United States having jurisdiction in • the locality where such violation shall have been committed. . . .” If it be assumed that the present suit to recover the payment denominated a “penalty” by § 6 is a controversy of a civil nature, but see Wisconsin v. Pelican Insurance Co., 127 U. S. 265; cf. Milwaukee County v. M. E. White Co., 296 U. S. 268, it is by § 233 of the Judicial Code within the exclusive jurisdiction of this Court, unless that provision is supplanted with respect 188 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. to suits such as the present by the provisions of § 6. Upon that assumption § 6 is in conflict with § 233 of the Judicial Code and supersedes it, United States v. Yugi-novich, 256 U. S. 450, 463; United States ex rel. Chandler v. Dodge County Comm’rs, 110 U. S. 156; United States v. Tynen, 11 Wall. 88, 92, unless, again, the general language of § 6 is to be taken as not applying to suits brought against a state. Since the section which, as we have held, imposes the liability upon state- and privately-owned carriers alike, also provides the remedy and designates the manner and the court in which the remedy is to be pursued, we think the jurisdictional provisions are as applicable to suits brought to enforce the liability of states as to those against privately-owned carriers, and that the district court had jurisdiction. If we lay aside possible doubts, whether the suit is of a “civil nature,” in which case only does § 233 of the Judicial Code purport to make the jurisdiction of this Court exclusive, still, in construing the jurisdictional provisions of § 6 of the Safety Appliance Act practical convenience and “the tacit assumptions” upon which it is reasonable to suppose its language was used, see Ohio ex rel. Popovid v. Agler, 280 U. S. 379, 383, are not to be disregarded. The controversy in a suit authorized by § 6 is essentially local in character and involves issues for which a jury trial may be appropriate, compare Georgia v. Brails]ord, 3 Dall. 1. Their adjudication often requires the presence, as witnesses, of railroad workers, shippers and others of the locality. These are considerations which undoubtedly led to the command that the suit should be brought in the district court of the “locality” where violations occur. They are considerations as applicable to suits against a state as to suits against a privately-owned railroad. The suggestion that it should be assumed that Congress did not intend to subject a sovereign state to the inconvenience and loss of dignity in- TREIGLE v. ACME HOMESTEAD ASSN. 189 175 Syllabus. volved in a trial in a district court is not persuasive when weighed against the complete appropriateness of the court and venue selected for the trial of issues growing out of the particular activity in which the state has chosen to engage. Reversed. TREIGLE v. ACME HOMESTEAD ASSOCIATION.* APPEAL FROM THE SUPREME COURT OF LOUISIANA. No. 287. Argued January 9, 1936.—Decided February 3, 1936. Prior to the adoption of Act No. 140 of 1932 by the legislature of Louisiana, building and loan associations in that State were required, whenever the income ordinarily applicable to the demands of withdrawing members was insufficient to pay all such demands within sixty days from date of notice, to set apart fifty per cent, of the receipts of the association to pay such withdrawing members, and payments were to be made in the order of presentation of notices of withdrawal. Act No. 140 abolished this requirement, and the amount to be allocated to payment of withdrawing members was by that Act left to the sole discretion of the directors, who were authorized to apply the association’s receipts to the making of loans, to payment of old or new debts, to dividends to continuing members, or to the creation of a cash reserve for future dividends. A stockholder who, prior to the adoption of the Act, gave notice of withdrawal, but whose demand had not been paid, although similar applications had been paid, challenged the validity of the Act under the Federal Constitution. Held: 1. The Act impairs the obligation of the stockholder’s contract and destroys his vested rights in violation of § 10 of Article I, and § 1 of the Fourteenth Amendment, of the Federal Constitution. P. 194. * Together with No. 288, Treigle v. Thrift Homestead Assn.; No. 289, Treigle Sash Factory, Inc. v. Conservative Homestead Assn.; No. 290, Treigle Sash Factory, Inc. v. Union Homestead Assn.; and No. 316, Mitchell n. Conservative Homestead Assn. Appeals from the Supreme Court of Louisiana. 190 OCTOBER TERM, 1935. Counsel for Parties. 297 U. S. 2. The Act is not justifiable control or regulation in the public interest of the operations of building and loan associations and is not a valid exercise of the police power. P. 196. 3. As the Act does not purport to deal with any existing emergency and the provisions respecting the rights of withdrawing members are neither temporary nor conditional, it cannot be treated as an emergency measure. P. 195. 4. The challenged sections of the Act are neither intended nor adapted to conserve the assets of building and loan associations, but affect merely the rights of members inter sese, and in this respect are unreasonable and arbitrary interferences with vested contract rights. P. 195. 5. The Act cannot be sustained as within the power of the State to amend the corporation’s charter. P. 196. 6. While building and loan associations, like banks and public service companies, are peculiarly subject to the regulatory power of the State, yet legislation affecting them must be confined to purposes reasonably connected with the public interest as distinguished from purely private rights. P. 197. 7. Though the obligations of contracts must yield to a proper exercise of the police power, and vested rights cannot inhibit the proper exertion of the power, it must be exercised for an end which is in fact public and the means adopted must be reasonably adapted to that end and must not be arbitrary or oppressive. P. 197. 181 La. 941, 971, 972, 973, 974; 160 So. 637, 646, 647, 648, reversed. Appeals from judgments of the state supreme court reversing in five cases judgments of the civil district court holding certain provisions of Act 140 of 1932 unconstitutional and enjoining building and loan associations from compliance therewith. Mr. Alex W. Swords, with whom Mr. A. Giffen Levy was on the brief, for appellants. Mr. Delvaille H. Theard, with whom Messrs. Louis H. Yarrut, Harry Emmet McEnerny, Azzo J. Plough, Percival H. Stern, Elias Goldstein, Joseph W. Carroll, and William John Waguespack, Jr., were on the brief, for appellees. TREIGLE v. ACME HOMESTEAD ASSN. 191 189 Opinion of the Court. By leave of Court, Mr. C. Clinton James filed a brief on behalf of the United States Building & Loan League, as amicus curiae, supporting the position of appellees. Mr. Justice Roberts delivered the opinion of the Court. This is one of five appeals1 from a decision of the Supreme Court of Louisiana,1 2 presenting the question whether certain provisions of Act No. 140, adopted by the legislature of that State on July 12, 1932,3 are consistent with Article I, § 10, and § 1 of the Fourteenth Amendment, of the Constitution of the United States. Prior to the adoption of Act No. 140 the laws of Louisiana provided that every stockholder of a domestic building and loan association should have the right to withdraw as a member upon filing a written notice of intention so to do; and thereupon to receive the amount of his investment and a share of the profits. Every association was required to keep a register, in which notices of withdrawal were to be entered in the order of presentation; and to pay withdrawals in that order. If the proportion of the association’s income ordinarily made applicable to the demands of withdrawing members was insufficient to pay all such demands within sixty days from date of notice, one-half of the association’s receipts was to be set apart to liquidate such members’ claims, until all deferred claims were paid.4 1 The companion cases are: No. 288, Treigle v. Thrift Homestead Association; No. 289, Treigle Sash Factory, Inc. v. Conservative Homestead Association; No. 290, Treigle Sash Factory, Inc. v. Union Homestead Association; No. 316, Joseph Mitchell v. Conservative Homestead Association. 2 181. La. 941; 160 So. 637. The other cases are reported in 181 La. pp. 971 to 973, inclusive; 160 So. 646, 647, 648. 3 Louisiana Laws, 1932, p. 454. 4 Act 120 of 1902, Louisiana Laws, 1902, p. 195, as amended by Act 280 of 1916, Louisiana Laws, 1916, p. 568. 192 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. On May 19, 1932, appellant, as owner of fifty shares of full paid stock of appellee, a building and loan association incorporated and domiciled in Louisiana, gave a written withdrawal notice. Thereafter the Legislature adopted Act No. 140 of 1932. By § 53 the directors of any association are authorized, before making any appropriation of receipts which may be applied to the liquidation of claims of withdrawing members, to use its receipts and funds for operating expenses, maintenance and improvement of repossessed property, payment of obligations and creation of cash reserves for future dividends. Section 54 provides that whenever, subsequent to the passage of the act, the proportion of receipts ordinarily made applicable to the demands of withdrawing members is insufficient to pay all such demands within sixty days from date of application for withdrawal, the applicant first on the list shall receive twenty-five per cent of the amount due him, not less, however, than $500. As to any balance his claim is to be transferred to the end of the list and, except as hereafter noted, he is to receive no further payments until his name shall have reached the head of the list. Each pending application is to be similarly treated. New applications are to be placed at the foot of the list. The association may, however, in its discretion, pay in full any demand which amounts to less than $100 and may also pay not more than $100 per month to any applicant if the directors find his necessities call for such payment. Section 55 gives the directors discretionary power to authorize an allowance on the amount of unpaid withdrawals under such terms and conditions as to the amount of individual withdrawals in view of the time the application has been on the list, or otherwise, as the board may decide; but the amount of such allowance is not to exceed sixty per cent of the rate of dividend currently paid in cash on continuing members’ shares. The allowance may be withdrawn at any time without affecting the TREIGLE v. ACME HOMESTEAD ASSN. 193 189 Opinion of the Court. association’s right to continue to pay dividends on the shares of continuing members. Section 56 empowers the directors to allocate, from receipts or other assets, sums to be paid withdrawing members; and supersedes the earlier provision for setting aside fifty per cent of all receipts for this purpose. The section further provides that twenty-five per cent of the gross receipts may be used for making loans notwithstanding the existence of a withdrawal list and that all, or any part, of the funds and current receipts may be expended for payment of debts, operating expenses, or dividends to continuing members. The appellant brought suit in the civil district court for the Parish of Orleans to restrain the appellee from complying with the foregoing provisions of Act 140. In his petition he recited his ownership of full-paid shares; his rights under the association’s charter and by-laws and the statutes in force prior to the adoption of that act; his application on May 19, 1932, for withdrawal of his shares. He alleged that, subsequent to the date of his notice, other similar applications had been paid in full but that his had not been reached for payment; that, in violation of the contract clause and the Fourteenth Amendment of the Federal Constitution, Act 140 purports to destroy and materially change his vested rights as a withdrawing shareholder. A rule nisi issued, the appellee answered, and also excepted to the petition and demand for failure to state a right of action or a cause of action. Judgment awarding an injunction was reversed by the Supreme Court of Louisiana and the suit was dismissed. The statute, in § 76, provides: “Any person holding shares in an association . . . who attacks the constitutionality ... of any . . . provision of this statute, must file suit to that effect against the association within ninety days from the time when the 43927°—36--13 194 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. present Statute goes into effect; and said period of ninety days is now fixed as the term of prescription within which any remedy in that behalf must be instituted in the courts by any member or other person; and the failure to file such suit within that delay shall be deemed and held by all courts at all times thereafter as an acquiescence in . . . any . . . provision of the present statute, and after such ninety-day period no further attack on the constitutionality of . . . any . . . provision of the present statute can be presented; ...” The appellant instituted his suit within the ninety-day period. In his petition he alleged that he had no adequate remedy at law, and that he would suffer irreparable injury if the appellee’s officers acted as permitted or required by the statute. The Supreme Court said: “There is no doubt, however, that the Act of 1932 did prevent some of the many withdrawing shareholders in building and loan associations throughout the state from collecting the amount of their shares in full at the time when payment would have been made if this statute had not been adopted. We shall rest this decision, therefore, upon the proposition that the Act of 1932 did deprive the plaintiff of an advantage, and of a valuable right, which he enjoyed by virtue of having his name on the withdrawal list more than sixty days before the statute was adopted. The question, therefore, is whether the Legislature could deprive the plaintiff of the advantage and right which he enjoyed, without violating the constitutional limitation forbidding the passing of a law impairing the obligation of contracts, or divesting vested rights.” [954, 955.] The statute impairs the obligation of the appellant’s contract and destroys his vested rights in contravention of Article I, § 10, and Amendment XIV, § 1, of the Constitution. The court below held the challenged sections of the act proper exertions of the state’s police power, upon TREIGLE v. ACME HOMESTEAD ASSN. 195 189 Opinion of the Court. the view that state legislation to promote health, safety, morals or welfare cannot be defeated by private contracts between citizens, or nullified because it interferes with vested rights; and, since building and loan associations are creatures of the state, the power to alter and amend their charters inheres in the sovereign. The appellant, conceding the correctness of these propositions, insists that the statute is not in fact a valid exercise of the police power and cannot be sustained as an amendment of the association’s charter. The appellee asserts the act was adopted to meet the existing economic emergency; members of, and borrowers from, building and loan associations found themselves unable to keep up their dues and interest payments; those whose savings were invested in the shares of such associations were compelled by their necessities to seek withdrawal of the investment ; these conditions imperiled the usefulness, if not the existence, of many building and loan associations; the state had a vital interest in their .preservation and the equitable administration of their assets in the interest of all concerned. The appellant replies that the sections under attack are neither intended nor adapted to conserve the assets of building associations, but, on the contrary, affect merely the rights of members inter sese, and are unreasonable and arbitrary interferences with vested contract rights. The act is a revision and codification of the statutory law governing building and loan associations, including their incorporation, management, supervision by state administrative authority, winding up and dissolution. It does not purport to deal with any existing emergency and the provisions respecting the rights of withdrawing members are neither temporary nor conditional. Compare W. B. Worthen Co. v. Thomas, 292 U. S. 426, 433^34. The sections in question do not contemplate the liquidation of associations, the conservation of their assets or 196 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. the distribution thereof amongst creditors and members. Other sections deal with these matters.5 Section 54 merely changes the order of payment of those entitled to withdraw their investments. The section effects no reduction in the amount of the debt, no postponement of payment of the total, but a redistribution of the proportions to be paid to individuals. The provision is comparable to a statute declaring that whereas preferred stockholders heretofore have enjoyed a priority in the distribution of assets, in that respect they shall hereafter stand pari passu with common stockholders. Such an interference with the right of contract cannot be justified by saying that in the public interest the operations of building associations may be controlled and regulated, or that in the same interest their charters may be amended. The statute merely attempts, for no discernible public purpose, the abrogation of contracts between members and the association lawful when made. This cannot be done under the guise of amending the charter powers of the corporation. Compare Bedford v. Eastern Building & Loan Assn., 181 U. S. 227. Under existing law, and the appellant’s contract, fifty per cent of the receipts of the association had to be set apart to pay withdrawing members. By the new legislation this requirement is abolished and the amount to be set aside is left to the sole discretion of the directors. They are authorized to apply the association’s receipts to the making of loans, to payment of old or new debts, to dividends to continuing members, or to the creation of a cash reserve for future dividends. The sections permitting such use of the amounts collected do not tend to conserve the assets of the association, to render it more solvent, or to insure that its affairs will be administered so as to protect the investments of the continuing and “See §§66 and 67. See also Act No. 44, Second Extraordinary Session of 1934, Louisiana Laws, 1934, p. 156. TREIGLE v. ACME HOMESTEAD ASSN. 197 189 Opinion of the Court. withdrawing members. They do alter the rights of the withdrawing members as between themselves and as against continuing members. The appellee bases its entire argument in support of the challenged enactment upon the proposition that, as building and loan associations are incorporated for a quasi-public purpose, the state has a peculiar interest and a concomitant power of supervision and regulation to prevent injury and loss to their members; and it is said that this court affirmed the principle in Hopkins Federal Savings Loan Assn. n. Cleary, 296 U. S. 315. We have no disposition to qualify what was there said. We recognize that these associations, like banks and public service companies, are subject to a degree of regulation which would be unnecessary and unreasonable in the case of a purely private corporation. But laws touching building and loan associations, like those affecting banks or utility companies, must be confined to purposes reasonably connected with the public interest as distinguished from purely private rights. The legislature has no greater power to interfere with the private contracts of such corporations, or the vested rights of their stockholders as such, under the pretext of public necessity, than it would have to attempt the same ends in the case of a private corporation. Though the obligations of contracts must yield to a proper exercise of the police power,6 and vested rights cannot inhibit the proper exertion of the power,7 it must be exercised for an end which is in fact public and the means adopted must be reasonably adapted to the accomplishment of that end and must not be arbitrary or oppressive. As we have pointed out, the questioned sections deal only with private rights, and are not adapted to the legitimate end of conserving or equitably administering the 6 Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398. 7 Nebbia v. New York, 291 U. S. 502. 198 OCTOBER TERM, 1935. Syllabus. 297 U.S. assets in. the interest of all members. They deprive withdrawing members of a solvent association of existing contract rights, for the benefit of those who remain. We hold the challenged provisions impair the obligation of the appellant’s contract and arbitrarily deprive him of vested property rights without due process of law. The judgment of the Supreme Court of Louisiana must be reversed. As numbers 288, 289, 290 and 316 involve the same question as the instant case, a like judgment will be entered in each. Reversed. THE PRUDENCE CO., INC. v. FIDELITY & DEPOSIT COMPANY OF MARYLAND et al. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT. No. 270. Argued January 8, 9, 1936.—Decided February 3, 1936. 1. In an action by the maker of a building loan, secured by a mortgage on the building, to recover on a bond indemnifying him from loss due to the failure of the borrower to complete the building in time and manner as specified in the loan contract, the measure of damages should be such as will place the lender in the same position as if the building had been completed as stipulated. P. 205. 2. Where the lender, in such a. case, was obliged by the borrower’s defaults in construction of an apartment building, to foreclose his mortgage, buy in the unfinished structure for less than the loan and take a deficiency judgment, it was error to limit recovery on the indemnity bond to the cost of completing the building in accordance with the contract; in the estimation of damages there should be considered also the rents that might have been impounded in the foreclosure proceedings had the building been ready for use, and the reduced value of the building at the foreclosure sale because of its unfinished state. P. 206. 3. The difference between the value of the unfinished building, at the foreclosure sale, and the value it would have had if completed as per contract, may be considered as made up of two elements, the cost of completion and the carrying charges meanwhile. These may 199 PRUDENCE CO. v. FIDELITY CO. Argument for Petitioner. 198 be proved by expert testimony; or where, as in this case, the building was completed by the lender, the actual cost of that may be shown; and the other element may be established by expert proof of the rental value of such a building (finished) at the date of default and later. P. 206. 4. In this case, in proof of damages due to delay in completing the building, evidence was received, without objection, of payments for taxes and insurance and of loss of interest on investment during the time required for its completion. Held that an objection that such carrying charges may have exceeded the rents that might have been received if the building had been finished as agreed, came too late, it not having been made at the trial. P. 207. 5. In an action for damages caused by impairment of a mortgage security, through the borrower’s failure to complete the mortgaged building as agreed, loss of rents is to be classed not as special but as general damage and may be proved without having been specifically alleged. P. 207. 77 F. (2d) 834, modified and affirmed. Certiorari, 296 U. S. 566, to review a judgment reversing one recovered in the District Court, 7 F. Supp. 392, in an action on an indemnity bond. Mr. Alfred T. Davison, with whom Messrs. Martin A. Schenck and Orrin G. Judd were on the brief, for petitioner. Interest, taxes and insurance should be allowed as part of the damages caused by the failure to complete the building at the time guaranteed. Trainor Co. v. Aetna Casualty Co., 290 U. S. 47; Kidd n. McCormick, 83 N. Y. 391. The facts and circumstances of this transaction, specifically show that interest, taxes and insurance premiums were within the contemplation of the parties as items of damage in case of breach. Interest bears the same relation to money as rent does to land, and is clearly recoverable as an item of damage. Woerz v. Schumacher, 161 N. Y. 530, 536; White v. McLaren, 151 Mass. 553; U. S. Fidelity & Guaranty Co. v. Parsons, 147 Miss. 335; Noonan v. Independence In- 200 OCTOBER TERM, 1935. Argument for Petitioner. 297 U.S. demnity Co., 328 Mo. 706; Hexter v. Knox, 63 N. Y. 561; Lord v. Comstock, 20 J. & S. (N. Y.) 548; Dorilan v. Trust Co., 139 N. C. 212; Somerby v. Tappan, Wright (Ohio) 229, 231, 570. The holder of a mortgage, representing a money interest in land, is entitled to the interest, corresponding to the rent of an owner, which he loses, during the delay in completion of a building guaranteed to be finished at a specified time. Interest is recognized as part of the measure of damages for breach of contract, where loss of such interest was within the contemplation of the parties. United States v. New York, 160 U. S. 598, 621; Wilbur n. United States, 284 U. S. 231; Meyer v. Haven, 70 App. Div. 529; Gordon v. Curtis Bros., 119 Ore. 55, 66; Wood v. Joliet Gaslight Co., Ill Fed. 463; DeFord v. Maryland Steel Co., 113 Fed. 72; American Bridge Co. n. Camden Interstate Ry. Co., 135 Fed. 323, 330-31; New York Mining Co. v. Fraser, 130 U. S. 611, 622; South African Territories, Ltd. v. Wallington, [1897] 1 Q. B. 692; Lloyd Investment Co. v. Illinois Surety Co., 164 Wis. 282, 286, 288; Macleod v. National Surety Co., 133 Minn. 351. In addition to being within the contemplation of the parties, interest, taxes and insurance premiums are recoverable because necessarily included in the general rules of damages applicable to bonds guaranteeing completion. If the building had been completed and ready for occupancy with all equipment installed, on December 16, 1930, Prudence Company could have immediately rented it instead of having to wait until October 1, 1931; and out of such rent it would have had a source of payment of its interest, taxes and insurance premiums. The fact that a breach of the obligation to pay the mortgage is also involved does not alter the causal relation between the delay in completion of the building and PRUDENCE CO. v. FIDELITY CO. 201 198 Argument for Respondents. the loss of interest, taxes and insurance premiums. Sauter v. New York Central & H. R. R. Co., 66 N. Y. 50; Lane v. Atlantic Works, 111 Mass. 136; Torts Restatement (Am. L. Inst.) § 447. See Purchase n. Seelye, 231 Mass. 434. Cf. O’Brien v. Illinois Surety Co., 203 Fed. 436, 439. See also Rock v. Monarch Building Co., 87 Ohio St. 244; Kanter v. New Amsterdam Casualty Co., 195 App. Div. 756, 760, aff’d 233 N. Y. 602. Whether the rule of damages be considered from the standpoint of difference in value, cost of completion, or impairment of security, the broad primary rule of putting Prudence Company in as good position as it would have been had the building been properly completed and within the time specified, requires allowance of its actual loss in interest, taxes and insurance premiums. Interest, taxes and insurance premiums during the period of completion must necessarily enter into the determination of difference in value. Taxes, insurance premiums, and interest on the investment during the construction period are uniformly treated for accounting, rate-making and general legal purposes, as part of the cost of construction, and must be included in the entire cost of the erection, construction and completion of the building which the sureties agreed to pay. The provisions of the surety bond in this case obliged the surety in express terms to pay interest on the loan, and taxes and insurance on the mortgaged property until the date of actual completion of the building in accordance with the plans and specifications. Mr. John W. Davis, with whom Messrs. Thomas E. White and Joseph F. Murray were on the brief, for respondents. The measure of damages is the difference between the value of the uncompleted building on the date of the default and its value if it had been completed. Trainor Co. 202 OCTOBER TERM, 1935. Argument for Respondents. 297 U.S. v. Aetna Casualty Co., 290 U. S. 47; Kidd v. McCormick, 83 N. Y. 391; United Real Estate Co. v. McDonald, 140 Mo. 605, 612; Longfellow v. McGregor, 61 Minn. 494; Province Securities Corp. n. Maryland Casualty Co., 269 Mass. 75, 94; Phillipe v. Curran, 218 Ill. App. 517; Comey v. United Surety, 217 N. Y. 268; Kanter v. New Amsterdam Casualty Co., 195 App. Div. 756, aff’d 233 N. Y. 602. Under the decisions in Kidd v. McCormick and Trainor v. Aetna Casualty Co., petitioner is not entitled to recover loss of interest on the mortgage loan, taxes or insurance premiums. The petitioner included in its claimed cost of completion, taxes and insurance premiums covering the period alleged to have been used for completion, but which were due and were paid after petitioner had purchased the ■ property on the foreclosure sale. It also claimed specifically for interest on the mortgage loan claimed to have been lost during the alleged period used for completion. In neither Kidd v. McCormick nor Trainor v. Aetna Casualty Co. did the court allow interest on mortgages, taxes or insurance premiums. In each case it was held that the proper measure of damages was difference in value. Respondents’ bond did not guarantee payment of interest, taxes and insurance premiums, but only guaranteed the completion of a building. Cf. United Real Estate Co. v. McDonald, 140 Mo. 605; Province Securities Corp. v. Maryland Casualty Co., 269 Mass. 75, 94; Mc-Causlan v. Zoar Holding Co., 131 Mise. 148, 150. The obligation of the surety is not to be extended. Smith v. Molleson, 148 N. Y. 241, 246. The bond was a guaranty only of the completion of the building. Maloney v. Nelson, 144 N. Y. 182, 186. Interest on the mortgage loan as damages is not recoverable from respondents because they assumed no ob- PRUDENCE CO. v. FIDELITY CO. 203 198 Opinion of the Court. ligation as to the principal of the loan; and interest as damages cannot be recovered apart from the principal. Matter of Trustees, 137 N. Y. 94, 98; Cutter v. Mayor, 92 N. Y. 166, 170; Southern Central R. Co. v. Moravia, 61 Barb. 180, 188. See United Real Estate Co. v. McDonald, 140 Mo. 605; Province Securities Corp. v. Maryland Casualty Co., 269 Mass. 75, 94. AU cases and authorities recognize the distinction between interest payable by virtue of contract and that payable as damages for breach of nontract. Brewster v. Wakefield, 22 How. 118; Holden v. Trust Co., 100 U. S. 72; O’Brien v. Young, 95 N. Y. 428; Brady v. Mayor, 14 App. Div. 152; Hamilton v. Van Rensselaer, 43 N. Y. 244; M elick v. Knox, 44 N. Y. 676. No evidence was offered by petitioner to show that it suffered any loss of interest on mortgage loan, or taxes or insurance premiums, by reason of failure to complete the building. Since petitioner concedes that it is entitled to recover damages suffered by it only as mortgagee and not as owner, it may not recover interest on mortgage, taxes or insurance premiums, because the foreclosure of the mortgage and the sale of the property terminated its status as mortgagee. The difference in value between a building with and without omissions and substitutions is the proper measure of damages for such omissions and substitutions and the petitioner offered no evidence that the value of the building was lessened by reason thereof. Mr. Justice Cardozo delivered the opinion of the Court. We are to determine the measure of damages upon a bond conditioned against loss through the failure to complete a building at the time and in the manner called for by the building contract. 204 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. In September, 1929, petitioner, the Prudence Company, Inc., undertook to make a mortgage loan of $6,-650,000 in aid of the construction of Essex House, an apartment hotel in the City of New York. The borrower covenanted that the building would conform to plans and specifications, and would be completed not later than December 16, 1930. As part of the same transaction, two surety companies, the respondents in this court, signed a bond in the sum of $3,000,000, indemnifying the lender against loss through the failure of the borrower to construct and pay for a building conforming to the contract, and complete it by the stated time. The bond also provided that in the event of the borrower’s default, the lender, if it so elected, should be at liberty to go forward with the work, and charge the cost against the sureties. Other conditions are believed to be immaterial to any question now before us. On December 16, 1930, the borrower made default under the mortgage, abandoning the work with the building then unfinished. At that time the petitioner’s advances under the building loan agreement were $6,575,-000, the full amount promised, fess $75,000 retained by agreement. On December 18, 1930, petitioner through its nominee brought suit in the state court for the foreclosure of the mortgage. On January 6, 1931, it went into possession with the mortgagor’s consent. On January 19, 1931, there was a judgment of foreclosure, followed by a sale on March 17, 1931, at which the mortgagee was the buyer, the bid of $6,000,000 being applied upon the mortgage. A deficiency judgment of $716,215.02 was entered the next month. Petitioner in possession of the building went on with the unfinished work, bringing it to completion in October, 1931. An action on the bond was then begun against the sureties. The trial court gave judgment for damages in the sum of $798,416.81, made up of three classes of items: 205 PRUDENCE CO. v. FIDELITY CO. Opinion of the Court. 198 the cost of completion; the loss from omissions and inferior substitutions; and the interest on investment, together with taxes and insurance charges, while the building was idle because unready for its occupants. 7 F. Supp. 392. The Circuit Court of Appeals for the Second Circuit found this award to be excessive. In the view of that court no award should have been made for interest, taxes or insurance during the period of idleness. Payments necessary to complete the building were properly allowed, for they were evidence of the difference in value between an incomplete and a completed structure. Reparation was also to be made for omissions and substitutions to the extent that they diminished value, unless strict compliance had been waived by the lender or its agents. However, the extent of the recovery was not susceptible of ascertainment without the aid of a new trial. This was so because evidence of waiver had been offered by the surety and erroneously excluded. A remand was thus necessary to elicit all the facts. 77 F. (2d) 834. Before a second trial was had, a writ of certiorari issued at the instance of petitioner to resolve a claim of conflict between the decision to be reviewed and a decision of this court. Trainor Co. v. Aetna Casualty <& Surety Co., 290 U. S. 47. The writ states that it is “limited to the question of the measure of damages,” thus excluding from our consideration the ruling of the court below as to the effect of waiver of performance. Limiting our review accordingly, we think the extent of the recovery upon the new trial that will be necessary has been too narrowly confined. The petitioner should be placed in the same position it would have occupied if the building had been completed on December 16, 1930. Trainor Co. v. Aetna Casualty & Surety Co., supra, at pp. 54, 55; Kidd v. McCormick, 83 N. Y. 391, 398; Province Securities Corp. v. Maryland Casualty Co., 269 Mass. 75, 94; 168 N. E. 252. To give 206 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. it nothing but the cost of doing the unfinished work, plus the loss resulting from omissions and substitutions, would be a scant measure of reparation, allowing nothing for delay. Ruff v. Rinaldo, 55 N. Y. 664; C. W. Hunt Co. v. Boston Elevated Ry. Co., 199 Mass. 220, 233, 235; 85 N. E. 446; Sedgwick, Damages, 9th ed., § 645. If performance had been prompt, the mortgagee would have had the security of a finished structure, which a buyer at a foreclosure sale could have utilized at once. During the pendency of the suit, the rents might have been impounded at the hands of a receiver and applied upon the deficiency resulting from the sale. Freedman’s Saving & Trust Co. v. Shepherd, 127 U. S. 494, 503; Worthen Co. v. Kavanaugh, 295 U. S. 56, 62. With the building still unfinished there were no rents to be collected and hence none to be applied in reduction of the debt. More important still, the amount of any bid was certain to be reduced by notice to the bidders that the building would be unproductive until ready to be occupied. From the point of view of bidders the reduction in value as the consequence of delay would be made up of two factors: the estimated cost of finishing the work, and the estimated carrying charges, not to exceed the rental value, during the period of idleness. Cf. Trainor Co. v. Aetna Casualty <& Surety Co., supra, at p. 55; Kidd v. McCormick, supra, at p. 398. So at least an assessor of the damages might find as a fair inference of fact, even if the finding does not follow as an inference of law. The effect of the decision is to hold down the recovery to the first of these factors and to eliminate the second. The petitioner might have relied upon the testimony of experts as to the total depreciation and as to the weight of the component factors. It chose a different method. To show the loss sustained from finishing the work, it proved the actual cost, as by the express provisions of the bond it was at liberty to do. Cf. Comey v. 207 PRUDENCE CO. v. FIDELITY CO. Opinion of the Court. 198 United Surety Co., 217 N.»Y. 268, 276; 111 N. E. 832; Appleton v. Marx, 191 N. Y. 81, 85, 86; 86 N. E. 563. One of the factors of diminished value it has thus established with precision. To fix the weight of the other factor, it would have done better to give evidence by experts of the rental value of such a building at the date of the default and later. Griffin v. Colver, 16 N. Y. 489, 496; Cassidy v. Le Fevre, 45 N. Y. 562, 567; Witherbee v. Meyer, 155 N. Y. 446, 453, 454; 50 N. E. 58. Instead of doing this it chose to give evidence of the taxes, insurance premiums and interest on investment. We are told by the respondents now that for anything appearing in the record the carrying charges may have been greater than any rents that could have been earned if the building had been finished. No such objection was made upon the trial. We think it comes too late when first made upon appeal. In the absence of more specific challenge the trier of the facts might not improperly assume that interest on the investment along with taxes and insurance were losses flowing from the failure to receive a finished building. New York & Colorado Mining Syndicate v. Fraser, 130 U. S. 611, 622, 623. The point will not be labored, for the assumption is a safe one that evidence and objection will not be subject to this criticism when the case is tried again. A question is raised as to the form of the complaint. The respondents insist that its allegations are insufficient to permit proof of loss of rents in addition to the cost. We read the pleading otherwise. In the circumstances of this case, loss of rents is to be reckoned as general, not special, damage. Sedgwick, Damages, 9th ed., § 1261; Griffin v. Colver, supra; Cassidy v. Le Fevre, supra; Ruff v. Rinaldo, supra; Jutte v. Hughes, 67 N. Y. 267, 271. It is one of the factors contributing to and measuring the diminished worth of the security. Damages when general are recoverable under a pleading that does not 208 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. enumerate the items. Armstrong v. Percy, 5 Wend. 535, 538, 539; Laraway v. Perkins, 10 N. Y. 371, 373. Here the complaint alleges that except for the default and in particular the delay, the plaintiff would have obtained upon foreclosure the full amount of principal and interest due upon the mortgage; it alleges that through the same causes the value of the mortgage was impaired to the extent of the deficiency judgment; it alleges that the plaintiff has thereby been deprived of any and all return on the amount of the investment. We find these allegations broad enough to let in evidence of damages along the lines that have been marked. Another trial will permit the petitioner to show more accurately than it has done upon the record now before us that the building was continuously untenantable until the completion of the work and that the time taken for completion did not outrun the bounds of reason. What was ruled by the Court of Appeals in respect of the scope of the recovery for omissions and substitutions was not specified as error in the petition for the writ, and will be assumed to be correct. Zellerbach, Paper Co. v. Helvering, 293 U. S. 172, 182; Helvering v. Taylor, 293 U. S. 507, 511; Clark v. Williard, 294 U. S. 211, 216. The judgment is modified by a direction that the measure of damages upon a new trial shall be that defined in this opinion, and as thus modified affirmed. Modified and affirmed. BALTIMORE NAT. BANK v. TAX COMM’N. 209 Statement of the Case. BALTIMORE NATIONAL BANK v. STATE TAX COMMISSION OF MARYLAND. CERTIORARI TO THE COURT OF APPEALS OF MARYLAND. No. 283. Argued January 10, 1936.—Decided February 3, 1936. 1. The consent given by R. S., § 5219, to state taxation of “all” shares of national banks has been heretofore construed to embrace shares of national banks when owned by another national bank, and by parity of reasoning embraces preferred shares of a national bank when owned by the Reconstruction Finance Corporation. P. 212. 2. In the legislation authorizing the Reconstruction Finance Corporation to subscribe for preferred shares of national and state banks, 12 U. S. C., § 51 (d), the proviso limiting the authority to shares of which the holders are exempt from double liability, is significant of the understanding of the Congress that upon the acceptance of the shares the corporation would be exposed to the same measure of liability and would stand in the same position as shareholders in general. P. 213. 3. This view is corroborated by the fact that the authority of national banks to issue preferred shares, and the authority of the Reconstruction Finance Corporation to subscribe for them, were provided by the same Act as parts of the banking system, without suggestion of any distinction in the liabilities of shareholders. P. 213. 4. The general provision in the Act creating the Reconstruction Finance Corporation, 15 U. S. C., § 610, which exempts “the corporation, including its franchise, its capital, reserves, and surplus, and its income” “from all taxation,” (excepting real estate) is to be construed with the earlier, specific provision of § 5219 R. S. permitting state taxation of “all” shares of national banks, and does not preclude a state tax laid on national bank shares belonging to the Reconstruction Finance Corporation and collected from the bank. P. 214. 169 Md. 65; 180 Atl. 260, affirmed. Certiorari, 296 U. S. 538, to review a judgment reversing a judgment of the Circuit Court of Baltimore City, which canceled an order of the State Tax Commission of Maryland upholding a tax on shares of the Bank, 43927°—36-14 210 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. Messrs. Edwin F. A. Morgan and Gaylord Lee Clark for petitioner. Mr. Herbert R. O’Conor, Attorney General of Maryland, and Mr. William L. Henderson, Assistant Attorney General, for respondent. By leave of Court, Messrs. James B. Alley, Max O’Rell Truitt, Hans A. Klagsbrunn, and William Radner, and Florence A. de Haas filed a brief on behalf of the Reconstruction Finance Corporation, as amicus curiae, in support of the proposition that shares of national bank stock held by the Reconstruction Finance Corporation are not subject to state taxation. Mr. Justice Cardozo delivered the opinion of the Court. This case presents the single question whether shares in a national bank, subscribed for and owned by the Reconstruction Finance Corporation, may be taxed by a state. The Baltimore Trust Company closed its doors in February, 1933, and was unable to reopen. It was reorganized in August of the same year as a national banking association under the name of the Baltimore National Bank with a place of business in Baltimore, Maryland. To set the business going, the Reconstruction Finance Corporation subscribed for the entire issue of preferred stock, 10,000 shares of the par value of $1,000,000. Following a provision of the Maryland Code (1935 Supp., Article 81, § 15 e*), the State Tax Commission upheld a tax upon the shares, overruling thereby the protest of the * “Shares of stock assessable under this section shall be taxed to the several owners thereof, and the taxes thereon shall be debts of such owners, but may be collected in each case from the bank or other corporation, which shall be bound to pay the same for account of its BALTIMORE NAT. BANK v. TAX COMM’N. 211 209 Opinion of the Court. bank, which made a claim of immunity under the Federal Constitution for the benefit of the shareholder as well as for itself. The order made by the Commission was reviewed upon appeal by the Circuit Court of Baltimore City, which canceled the assessment. In accord is a ruling of a District Court of the United States for the Western District of Kentucky. United States v. Lewis, 10 F. Supp. 471. Upon an appeal by the Commission to the Court of Appeals of Maryland, the order of the Circuit Court was reversed and the assessment reinstated. 169 Md. 65; 180 Atl. 260. To settle an important question as to the taxing power of a state, a writ of certiorari issued from this court. The Reconstruction Finance Corporation was organized in 1932 to give relief to financial institutions in a national emergency and for other and kindred ends. Act of January 22,1932, 47 Stat. 5; Act of July 21, 1932, 47 Stat. 709; 15 U. S. C.,, c. 14. At the time of its creation and continuously thereafter the United States has been and is the sole owner of its shares. The purpose that it has aimed to serve is not profit to the government, though profit may at times result from one or more of its activities. The purpose to be served is the rehabilitation of finance and industry and commerce, threatened with prostration as the result of the great depression. We assume, though without deciding even by indirection, that within McCulloch v. Maryland, 4 Wheat. 316, a corporation so conceived and operated is an instrumentality of government without distinction in that regard between one activity and another. Even on that assumption taxation by state or municipality may overpass the usual limits stockholders whether or not dividends are declared thereon, as if such corporations were the ultimate taxpayer, but may obtain reimbursement therefor from the respective stockholders, and may charge the same in reduction of any amounts due to the several shareholders as dividends or otherwise.” 212 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. if the consent of the United States has removed the barriers or lowered them. We think consent has been so given where shares in a national bank are the property to be taxed, though an agency of government is the owner of the assets subjected to the burden. By § 5219 of the Revised Statutes (12 U. S. C., § 548; cf. Act of June 3, 1864, 13 Stat. 99, 112; Act of February 10, 1868, 15 Stat. 34) “all” the shares of a national banking association whose principal place of business is within the limits of a state are made subject to taxation at the pleasure of the legislature with conditions as to form and method not important at this time. This court has held that Congress in saying “all” meant exactly what it said, and that shares in a national bank belonging to another national bank were taxable to the same extent as if they belonged to any one else. Bank of Redemption v. Boston, 125 U. S. 60, 69, 70; Bank of California v. Richardson, 248 U. S. 476, 483; Bank of California v. Roberts, 248 U. S. 497; Des Moines National Bank N. Fairweather, 263 U. S. 103. “The manifest intention of the law is to permit the State in which a national bank is located to tax, subject to the limitations prescribed, all the shares of its capital stock without regard to their ownership.” Bank of Redemption v. Boston, supra, at p. 70. True, as we have assumed, the Reconstruction Finance Corporation is a governmental agency, but so also is a national bank. McCulloch V. Maryland, supra. The question thus reduces itself to this, whether there is sufficient reason to believe that immunity from taxes of this kind has been given to the one agency, though by long accepted decisions it has been denied to the other. In such a situation the burden is heavily on the suitor who would subject the word “all” with its uncompromising generality to an unexpressed exception. The petitioner reminds us that the ends to be served by the BALTIMORE NAT. BANK v. TAX COMM’N. 213 209 Opinion of the Court. Reconstruction Finance Corporation are even more predominantly public than those of a national bank, since the bank, while promoting the fiscal needs of the government, is acting at the same time for the profit of its stockholders. The suggestion has its force, but force inadequate, we think, to carry to the goal. Its inadequacy is the more apparent when the capacity of the corporation to become a subscriber to the stock is followed to the sources. Until March, 1933, there was no power on the part of national banks to issue preferred shares. Act of March 9, 1933, Title III, 48 Stat. 5; amended June 15, 1933, 48 Stat. 147; 12 U. S. C., § 51 (a). Until then there was no power on the part of the Reconstruction Finance Corporation to subscribe for such shares or indeed for any others. Act of March 9, 1933, Title III, 48 Stat. 5, 6; amended March 24, 1933, 48 Stat. 20, 21; 12 U. S. C., § 51 (d). By statutes then t enacted a national bank was authorized to issue preferred shares of one or more classes upon the approval first obtained of the Comptroller of the Currency. The Reconstruction Finance Corporation was authorized at the same time, with the approval of the Secretary of the Treasury, to subscribe for preferred shares in national banks and also in state banks and trust companies that were in need of funds for capital purposes, subject to the proviso that no such subscription was to be permitted unless the holders of the preferred shares were exempt from double liability. This proviso in and of itself is highly significant of the understanding of the Congress that upon the acceptance of the shares the corporation would be exposed to the same measure of liability and would stand in the same position as shareholders in general. Other signposts of intention seem to point us the same way, though perhaps with less directness. The newly created power to issue preferred shares was given by an act for the governance of banks (48 Stat. 5), now incor- 214 OCTOBER TERM, 1935, Opinion of the Court. 297 U.S. porated in the United States Code as part of title 12, regulating banks and banking. 12 U. S. C., § 51 (a). The newly created power to subscribe for preferred shares was given by the same act. 48 Stat. 5, 6; amended March 24, 1933, 48 Stat. 20, 21; 12 U. S. C., § 51 (d). The two are incidents and aspects of a unitary scheme. No one will deny that shares put out under this act would have been taxable to the holders in the event that some one other than this particular corporation had acquired the new issue through purchase or subscription. If they were to be exempt in the hands of a particular corporation, empowered to acquire them by an associated section, then was the appropriate time for announcing the exception. Instead there is a clear assumption, brought out into full relief by the exclusion of shares chargeable with double liability, that subscriptions when permitted are to stand on an equality, irrespective of their source. A shareholder in the banking system is a shareholder for every purpose, accepting the attendant liabilities along with the attendant powers. We have reserved to the last an argument strongly pressed in behalf of the petitioner, but one more easily appraised in the light of what has gone before. The act for the formation of the Reconstruction Finance Corporation has its own provisions for exemption, which have now to be considered. “The corporation, including its franchise, its capital, reserves, and surplus, and its income shall be exempt from all taxation . . . except that any real property of the corporation shall be subject to . . . taxation to the same extent according to its value as other real property is taxed.” 47 Stat. 5, 9, 10; 15 U. S. C., § 610.1 The petitioner insists that the tax now in controversy is forbidden by that section. The contention is plausible, yet it will not prevail against analysis. For 1 The real property of national banks is subject to a like exception. R, S. § 5219; 12 U. S. C.. § 548, subdivision 3. BALTIMORE NAT. BANK v. TAX COMM’N. 215 209 Opinion of the Court. the tax now in controversy, whatever its indirect effect, is not laid directly upon the capital, reserves, or surplus of the corporation claiming the immunity or accorded the exemption. It is laid upon the shares in another corporation, a member of the banking system, which must pay it in the first place (Maryland Code, 1935 Supp., Article 81, § 15 e; Home Savings Bank v. Des Moines, 205 U. S. 503, 518), though with a right to be made whole thereafter. “Capital, reserves and surplus” are not taxable by a state if they belong to the Reconstruction Finance Corporation. Neither are they taxable if they belong to a national bank. First National Bank of Gulfport v. Adams, 258 U. S. 362; Des Moines Bank v. Fairweather, supra, at pp. 106, 107; Domenech v. National City Bank, 294 U. S. 199, 204. This has not been thought to exclude the taxation of such a bank upon its shares in other banks, members of the federal system. Bank of Redemption v. Boston, supra; Bank of California v. Richardson, supra; Bank of California v. Roberts, supra; Des Moines National Bank v. Fairweather, supra. With hardly more reason may words of like extension have a broader meaning here. An earlier act, specific in its coverage, will be read as an exception to a later one directed to investments generally. “It is a well-settled principle of construction that specific terms covering the given subject matter will prevail over general language of the same or another statute which might otherwise prove controlling.” Kepner v. United States, 195 U. S. 100, 125; cf. Ginsberg & Sons v. Popkin, 285 U. S. 204, 208; In re East River Co., 266 U. S. 355, 367; Washington v. Miller, 235 U. S. 422, 428; Rosencrans v. United. States, 165 U. S. 257, 262; Red Rock v. Henry, 106 U. S. 596, 603. All shares in national banks—no matter by whom owned—shall be subject to taxation. R. S. § 5219. Across the petitioner’s path there still lies the stumbling block of that uncompromising “all.” The judgment is Affirmed. 216 OCTOBER TERM, 1035. Opinion of the Court. 297 U.S. DUPARQUET HUOT & MONEUSE CO. et al. v. EVANS ET AL. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT. No. 533. Argued January 17, 1936.—Decided February 3, 1936. 1. A receivership in a foreclosure suit, for the purpose of conserving the mortgaged property and collecting the rents pendente lite for the benefit of the lienholder, is not an “equity receivership,” within the meaning of § 77B (a) (i) of the Bankruptcy Act. P. 218. 2. An equity receivership, within the meaning of § 77B, is a receivership for the purpose of conserving and reorganizing or winding up the business of the corporation. P. 218. 3. Under § 3 of the Bankruptcy Act, appointment of a receiver for the debtor’s property is not an act of bankruptcy if not done while the debtor is insolvent. P. 224. 78 F. (2d) 678, affirmed. Certiorari, 296 U. S. 569, to review a decree affirming a decree of the District Court, which dismissed a petition of three creditors for a reorganization of a debtor corporation under § 77B of the Bankruptcy Act. Mr. Harold Harper, with whom Mr. Mark M. Horblit was on the brief, for petitioners. Mr. Daniel A. Shirk, with whom Mr. Edwin R. Wolff was on the brief, for respondents. Mr. Justice Cardozo delivered the opinion of the Court. The question is whether a receivership for the collection of rents and profits in a suit for the foreclosure of a mortgage is an “equity receivership” within the meaning of § 77B of the Bankruptcy Act providing for the reorganization of debtor corporations in involuntary proceedings. Tn 1934 and afterwards, “2168 Broadway Corporation” was the owner of a large hotel in the City of New York, 217 DUPARQUET CO. v. EVANS. Opinion of the Court. 216 and of the fixtures and furniture contained therein. It had no other property. The holder of a mortgage on the hotel began an action of foreclosure and procured the appointment of receivers to collect the rents and profits. Soon after that appointment, three creditors of the corporation, holding claims a little in excess of $1,000, filed a petition in a District Court of the United States for the reorganization of the corporate debtor in accordance with § 77B of the Bankruptcy Act, alleging that the value of the assets was largely in excess of the liabilities, but that the debtor was unable to pay its debts as they matured. The District Court dismissed the petition on the ground that submission to the receivership in the suit for foreclosure was not an act of bankruptcy and did not relieve the creditors from showing in their petition that such an act had been committed. 11 F. Supp. 404. The Circuit Court of Appeals for the Second Circuit affirmed, 78 F. (2d) 678, declining to follow a decision in the Seventh Circuit which upheld a different conclusion. In re Granada Hotel Corp., 78 F. (2d) 409; affirming 9 F. Supp. 909. Because of this conflict and because of the importance of removing doubt as to the meaning of the statute a writ of certiorari was granted by this court. Section 77B of the Bankruptcy Act, which took effect as law on June 7, 1934 (Act of June 7, 1934, 48 Stat. 911, 912; 11 U. S. C., § 207) provides for two classes of proceedings, voluntary and involuntary. Any corporation, with exceptions not now important, may file a petition stating that it is insolvent or presently unable to meet maturing obligations, and that it desires to effect a plan of reorganization. If the petition is approved, the court assuming jurisdiction shall have and may exercise all the powers, unless specially withdrawn, “which a Federal court would have had it appointed a receiver in equity of the property of the debtor by reason of its inability to pay its debts as they mature.” § 77B (a). But juris- 218 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. diction is not confined to proceedings initiated by the debtor. The statute makes provision by the same section for the reorganization of a corporate debtor at the instance of the creditors. Three or more creditors who have provable claims against a corporation aggregating $1,000 or more in excess of the value of securities may file “a petition stating that such corporation is insolvent or unable to meet its debts as they mature and, if a prior proceeding in bankruptcy or equity receivership is not pending, that it has committed an act of bankruptcy within four months,” and that such creditors propose that it shall effect a reorganization. § 77B (a). A later subdivision, § 77B (i); 11 U. S. C., § 207 (i), rounds out the statutory scheme. “If a receiver or trustee of all or any part of the property of a corporation has been appointed by a Federal, State, or Territorial court, ... a petition . . . may be filed under this section at any time thereafter by the corporation, or its creditors as provided in subdivision (a) of this section,” and upon the approval of the petition by a court of appropriate jurisdiction, “the trustee or trustees appointed under this section, or the debtor if no trustee is appointed, shall be entitled forthwith to take possession” of the property, displacing in so doing the possession of the trustee or receiver theretofore appointed. To fix the meaning of these provisions there is need to keep in view the background of their history. There is need to keep in view also the structure of the statute, and the relation, physical and logical, between its several parts. History and structure will be found to teach together that a receivership in a foreclosure suit is not an equity receivership within the meaning of the law. The evils and embarrassments that brought § 77B into existence are matters of common knowledge. Corporations not insolvent in the statutory sense {United States v. Oklahoma, 261 U. S. 253, 260, 261), but presently 219 DUPARQUET CO. v. EVANS. Opinion of the Court. 216 unable to discharge maturing obligations, were without a statutory method for winding up their business without a sacrifice of assets. If they had recourse to voluntary bankruptcy, the forms and methods of administration were rigid and often wasteful, leaving little opportunity for cooperative endeavor on the part of all concerned. See Report of Solicitor General Thacher to the President of the United States submitted to the Congress February, 1932; Senate Document 65, 72nd Congress, 1st Session, p. 90. If they held aloof from courts and put their trust in time and effort, there was the danger of disruptive judgments, which would give a preference to a few, with involuntary bankruptcy little, if at all, deferred. The “equity receivership” flourished in this soil. At the suit of friendly creditors, embarrassed corporations joined in the prayer for the appointment of receivers to stave off other creditors more selfish or impatient, and foster whatever value was latent in the assets. There is little doubt that many of these receiverships were legitimate and helpful. None the less there resided in the practice a capacity for abuses, which will be found reflected in the decisions of this and other courts. At times the receivership was used as an instrument of fraud or covin. Harkin v. Brundage, 276 U. S. 36; Shapiro v. Wilgus, 287 U. S. 348; cf. First National Bank v. Flershem, 290 U. S. 504, 517, 518. At times, however fair in its beginnings, it was inordinately prolonged. Michigan v. Michigan Trust Co., 286 U. S. 334. At times it had a tendency to intrench delinquency in power, and to stifle inquiry into acts of waste or spoliation. Whatever the importance of these abuses or the defects of the existing remedies, the demand became insistent for a practice more open, more responsible, more efficiently and closely regulated, and withal more surely valid, under the supervision of a court of bankruptcy. Section 77B, enacted in 1934, was born of that demand. The remedy to be supplanted or more efficiently con- 220 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. trolled had no relation to receiverships for the collection of rents and profits in actions of foreclosure. The remedy in view was the one generally known as an “equity receivership,” whereby the assets of a corporation were committed to the custody of a court until the time should arrive when they could be returned to the rehabilitated debtor, or if that should be impossible, divided among creditors. The receivership might come into being at the instance of a stockholder (cf. Bryan n. Welch, 74 F. (2d) 964) or oftener a creditor, but always the end to be served was essentially the same. The end was reorganization or liquidation or something akin thereto. Cf. Continental Illinois Nat. Bank v. Chicago, R. I. & P. Ry. Co., 294 U. S. 648, 672; Gordon v. Washington, 295 U. S. 30, 38. Neither the members of the legal profession nor the legislators were in danger of confusing decrees directed to such an end with the sequestration of rents in an action of foreclosure. Bar associations had their special committees on “equity receiverships,” with elaborate reports which were submitted to Congressional Committees.1 Witnesses, appearing in support of one statute or another, discoursed to Congressional Committees on the failings of “equity receiverships,” and on the measures needed for correction.* 2 However colloquial and uncertain the words had been in the beginning, they had won for themselves finally an acceptance and a definiteness that made them fit to play a part in the legislative process. They came into the statute through an amendment proposed when the bill which was adopted as § 77 B was passing through ’Annual Report of the Special Committee on Equity Receiverships, Association of the Bar of the City of New York, Year Book (1927) 299, 301; id. (1930) 407; Hearings before the Judiciary Committee of the House of Representatives, 71st Congress, 2nd Session, April 11, 1930, H. R. 9997, 9998, 9999, 10,000, p. 29. 2 Hearings, supra, at pp. 1-28. Cf. Senate Report 482, Corporate Reorganizations, March 15, 1934, 73rd Congress, 2nd Session. 221 DUPARQUET CO. v. EVANS. Opinion of the Court. 216 the Senate. Congressional Record, vol. 78, part 7, 73rd Congress, 2nd Session, p. 7889. They came there freighted with the meaning imparted to them by the mischief to be remedied and by contemporaneous discussion. Humphrey’s Executor v. United States, 295 U. S. 602, 625. In such conditions history is a teacher that is not to be ignored. Passing from the setting of the statute to a view of its internal structure, we are brought to the same conclusion, but with added firmness of conviction. A receivership in a foreclosure suit is limited and special. The rents and profits are impounded for the benefit of a particular mortgagee, to be applied upon the debt in the event of a deficiency. Freedman’s Saving & Trust Co. v. Shepherd, 127 U. S. 494; Worthen Co. v. Kavanaugh, 295 U. S. 56, 62; Sullivan v. Rosson, 223 N. Y. 217; 119 N. E. 405. The corporation retains its other property, if it has any, unaffected in its power of disposition by the decree of sequestration. The creditors retain their remedies except against the income subjected to the lien. There is neither winding up of the business nor attempt to reorganize it and set it going anew. This is not the equity receivership of which the lawmakers were thinking if context and analogy have capacity to deliver up a lesson. In our scrutiny of the context, we turn to the beginning of the section with its statement of the powers to be exercised after the approval by the court of a voluntary petition. The powers are to be those “which a federal court would have» had it appointed a receiver in equity of the property of the debtor by reason of its inability to pay its debts as they mature.” § 77 B (a). But plainly there is no description here of the powers incidental to the appointment of a receiver in foreclosure. On the contrary, the words describe with aptness an equity receivership to wind up or reorganize. We cannot doubt that the same concept persisted through the section. A 222 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. few sentences thereafter, in the self-same subdivision, Congress used the words in controversy, speaking compendiously of an “equity receivership” as of something ascertained and known. Surely it was not thinking of a different kind of equity receivership from that explained already, about a score of lines before. The words had been defined. In reason there could be no need to expand or redefine them. Still scrutinizing the context, we pass to a later subdivision, § 77 B (i), and mark its implications. We learn from this that a petition may be approved if a receiver or trustee of all or any part of the property of a corporation has been appointed by any court in the United States and that thereupon the possession of the receiver shall be displaced and superseded. But plainly this direction, though fairly applicable to an equity receiver in the sense already indicated, was never meant to apply to a receiver in foreclosure. It is common learning that an equity receiver in suits to conserve the assets or divide them among creditors must yield to a trustee in bankruptcy. Gross v. Irving Trust Co., 289 U. S. 342. On the other hand, it is also common learning that not even a trustee in bankruptcy may override a valid mortgage lien or supersede a receiver who has been put into possession in fulfilment of the mortgage contract. Straton v. New, 283 U. S. 318, 322, 327; Metcalf n. Barker, 187 U. S. 165; Lincoln Savings Bank v. Realty Associates Security Corp., 67 F. (2d) 895; In re Berdick, 56 F. (2d) 288; Russell v. Edmondson, 50 F. (2d) 175; In re Brose, 254 Fed. 664; Carling v. Seymour Lumber Co., 113 Fed. 483, 491. Section 77 B does not make these precedents inapposite. True, the suit for the foreclosure of the mortgage may be stayed or enjoined upon a showing of necessity, § 77 B (c) (10); the lien may be transferred to the proceeds of a sale, § 77 B (b); at times the holder of the lien may have his security modified or reduced by the 223 DUPARQUET CO. v. EVANS. Opinion of the Court. 216 plan of reorganization when finally approved, § 77 B (b), (e), (f), (h). Cf. Continental Illinois Nat. Bank v. Chicago, R. I. & P. Ry. Co., supra, pp. 675, 676, 677; Louisville Bank v. Radford, 295 U. S. 555, 585. Nowhere does the statute say, however, that those results or any of them shall follow automatically upon the approval of the petitition as properly filed. § 77 B (a). Only by excluding a receiver in foreclosure from the scope of subdivision (i) can we avoid anomalous encroachments upon vested rights and interests. Such a reading of the act will help at the same time in the avoidance of other consequences too harsh or incongruous to have been intended by the Congress. The statute speaks, § 77 B (i), of a receiver “of all or any part of the property of a corporation.” These words will have a proper office if the receivership is understood to be a general one for liquidation or for cognate purposes. They will take care of a situation where only part of the property is within the jurisdiction, so that not even an “equity receivership” will be competent always, without ancillary orders, to give possession of the whole. But the situation is very different if the receivership in view is one for the foreclosure of a mortgage. In its normal operation such a receivership does not connote possession of all the property of the debtor or even all the property within the appointing jurisdiction. The mortgage may be a lien upon one parcel or a few, leaving other property of abundant value for payment of the debts. Indeed, the cases must be many where the owner of a mortgaged building, not personally liable for the payment of the mortgage debt, will hold it the part of prudence, whether he is solvent or insolvent, to let the building go. True indeed it is that in this case it so happens that the property subject to the mortgage is everything the debtor has. All that is but an accident, which has little, if any, bearing upon the meaning of the act. True it is also that a court 224 OCTOBER TERM, 1935. Opinion of the Court. 297U.S. receiving a petition for reorganization in invitum may approve or disapprove it, and that any hardship growing out of extreme or unusual situations may thereby be averted. Even so, the search at the moment is for a definition of an equity receivership that will tend to minimize anomalies, and give consistency and coherence to the statutory rule. There is little persuasion in an argument that in despite of all anomalies the system, if it is well administered, may manage to survive. The suggestion is faintly made that under § 3 of the Bankruptcy Act (11 U. S. C., § 21) the respondent corporation has committed an act of bankruptcy, and hence may be declared a debtor irrespective of the meaning of an “equity receivership” in § 77 B. An act of bankruptcy results inter alia if a “person,” natural or corporate, has made a general assignment for the benefit of creditors, or if “while insolvent, a receiver or a trustee has been appointed, or put in charge of his property.” Bankruptcy Act, § 3 (a) (5), 44 Stat. 662, 663; 11 U. S. C., § 21 (a) (5). There is support for the view that to satisfy this provision the receivership must be general, as contrasted with a receivership incidental to the enforcement of a lien. Standard Accident Insurance Co. v. E. T. Sheftall Co., 53 F. (2d) 40, 41. We need not go into that question now. Enough for present purposes that the receiver was not appointed or put in charge “while” the debtor was “insolvent.” By the petitioners’ admission the value of the assets far exceeds the liabilities. In re Edward Ellsworth Co., 173 Fed. 699; In re William S. Butler de Co., 207 Fed. 705; Meek v. Beezer, 28 F. (2d) 343; Standard Accident Insurance Co. v. E. T. Sheftall de Co., supra. The decree is Affirmed. Mr. Justice Van Devanter took no part in the consideration or decision of this case, 225 TUTTLE v. HARRIS. Opinion of the Court. TUTTLE et al. v. HARRIS et al. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT. No. 428. Argued January 17, 1936.—Decided February 3, 1936. A mortgagee let into possession in foreclosure proceedings, under the law of Illinois, is not an equity receiver within the meaning of § 77B (a) of the Bankruptcy Act. Duparquet Huot & Monetise Co. v. Evans, ante, p. 216. P. 226. 78 F. (2d) 409, reversed. Certiorari, 296 U. S. 567, to review a decree affirming one of the District Court, 9 F. Supp. 909, which denied a motion of the present petitioners to dismiss an application under § 77B (a) of the Bankruptcy Act. Mr. George T. Buckingham, with whom Messrs. Don Kenneth Jones and Vincent O’Brien were on the brief, for petitioners. Mr. Maurice Walk, with whom Messrs. Frank E. McAllister and William J. Grace were on the brief, for respondents. Mr. Justice Cardozo delivered the opinion of the Court. The controversy here, as in Duparquet Huot & Moneuse Co. v. Evans, decided at the same time, ante, p. 216, is one as to the meaning of the words “equity receiverships” in the statute for the reorganization of debtor corporations. Bankruptcy Act, § 77 B (a); 11 U. S. C., § 207 (a). A mortgagee brought suit against Granada Hotel Corporation in the Superior Court of Cook County, Illinois, to foreclose a second mortgage upon real property of the corporation located in that state. A receiver was appointed to collect the rents and profits. Thereafter a prior mortgagee, the trustee under a deed of trust to 43927°—36---15 226 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. secure an issue of bonds, brought suit to foreclose the prior mortgage, and in accordance with the law of Illinois laid claim to the possession of the property as owner after condition broken. In response to that claim the state court made an order discharging the receiver, and directing that the prior mortgagee be let into possession. While possession was so held, respondents brought a proceeding under Bankruptcy Act, § 77 B, contending that the possession of the mortgagee was that of an equity receiver or at least equivalent thereto. The District Court upheld that contention, denying a motion by petitioners, who had intervened in the proceeding, to dismiss the application, 9 F. Supp. 909; and the Court of Appeals for the Seventh Circuit affirmed. 78 F. (2d) 409. A writ of certiorari issued from this court. An equity receivership within the meaning of the statute does not result from the appointment of a receiver for the collection of the rents in a suit to foreclose a mortgage. Duparquet Huot & Monetise Co. v. Evans, supra. But here there was no receiver either for the collection of rents or for any other purpose. A mortgagee after condition broken under the law of Illinois is the owner of a legal estate, and as such entitled as of right to the possession of the mortgaged premises. Wolkenstein v. Slonim, 355 Ill. 306; 189 N. E. 312. The grantee under the deed of trust was in possession not as receiver, but as owner. The decree should be reversed, and it is so ordered. Reversed. Mr. Justice Van Devanter took no part in the consideration or decision of this case. 227 PALMER CLAY CO. v. BROWN. Opinion of the Court. PALMER CLAY PRODUCTS CO. v. BROWN, TRUSTEE. CERTIORARI TO THE MUNICIPAL COURT OF BOSTON, MASSACHUSETTS. No. 125. Argued December 13, 1935.—Decided February 10, 1936. Whether a payment to a creditor by an insolvent debtor on an overdue debt, within four months of the debtor’s bankruptcy, operates as a preference, voidable by the trustee, under § 60 (a), (b), of the Bankruptcy Act, depends not upon what would have been its effect on creditors if the debtor’s assets had been liquidated and distributed at the time of the payment but upon its actual effect determined in the ensuing bankruptcy. P. 228. 290 Mass. 108; 195 N. E. 122, affirmed. Certiorari, 296 U. S. 556, to review a judgment recovered by Brown as trustee in bankruptcy. The judgment was entered in the court below pursuant to a rescript from the Supreme Judicial Court of Massachusetts. Mr. Edward F. Smith, with whom Messrs. Frank H. Pardee and F. Paul Welsch were on the brief, for petitioner. Mr. Matthew Brown, with whom Mr. Harrison J. Barrett was on the brief, for respondent. Mr. Justice Brandeis delivered the opinion of the Court. In the Municipal Court of Boston, Matthew Brown, trustee in bankruptcy of Metropolitan Builders’ Supply Company, brought this action against Palmer Clay Products Company, to recover as preferences amounts received on account of an overdue debt. The court found as facts that the defendant had received several such payments within the four months preceding the filing of the petition 228 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. in bankruptcy; and that at» the time of each payment it had reasonable cause to believe that the debtor was insolvent, and also that such payment would effect a preference over other creditors of the same class. It refused to rule that the burden rested on the plaintiff to prove further that each payment had the effect of enabling the defendant to receive a greater percentage of its debt than other creditors of the same class could have received at the time of such payment if the assets had then been liquidated. Judgment for $1,843 was entered pursuant to the rescript of the Supreme Judicial Court of Massachusetts, 290 Mass. 108; 195 N. E. 122, which, in approving the action of the trial court, followed Rubenstein v. Lottow, 223 Mass. 227; 111 N. E. 973. We granted certiorari because the decision, while in accord with Bronx Brass Foundry, Inc. v. Irving Trust Co., 76 F. (2d) 935, in the Second Circuit, and Commerce-Guardian Trust & Savings Bank v. Devlin, 6 F. (2d) 518, in the Sixth Circuit, conflicts with W. S. Peck & Co. v. Whitmer, 231 Fed. 893, and other cases in the Eighth Circuit.1 The question for our determination is the construction to be given to §§ 60 (a) and (b) of the Bankruptcy Act.1 2 1 See Mansfield Lumber Co. v. Sternberg, 38 F. (2d) 614; Haas v. Sachs, 68 F. (2d) 623. Also, Eyges v. Boylston Nat. Bank, 294 Fed. 286 (D. Mass.); Jentzer v. Viscose Co. (S. D. N. Y.), 13 F. Supp. 540. 2 The applicable provisions are: “Sec. 60 (a) A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition . . . made a transfer of any of his property, and the effect of the enforcement of such . . . transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class. “Sec. 60 (b) If a bankrupt shall have . . . made a transfer of any of his property, and if, at the time of the transfer ... the PALMER CLAY CO. v. BROWN. 229 227 Opinion of the Court. The petitioner contends that a creditor who receives a part payment of his claim does not receive a preference, although he has reason to believe that the debtor is insolvent, provided the debtor’s assets at the time of the payment would, if then liquidated and distributed, be sufficient to pay all the creditors of the same class an equal proportion of their claims. Whether a creditor has received a preference is to be determined, not by what the situation would have been if the debtor’s assets had been liquidated and distributed among his creditors at the time the alleged preferential payment was made, but by the actual effect of the payment as determined when bankruptcy results. The payment on account of say 10% within the four months will necessarily result in such creditor receiving a greater percentage than other creditors, if the distribution in bankruptcy is less than 100%. For where the creditor’s claim is $10,000, the payment on account $1000, and the distribution in bankruptcy 50%, the creditor to whom the payment on account is made receives $5500, while another creditor to whom the same amount was owing and no payment on account was made will receive only $5000. A payment which enables the creditor “to obtain a greater percentage of his debt than any other of such creditors of the same class” is a preference. We may not assume that Congress intended to disregard the actual result, and to introduce the impractical rule of requiring the determination, as of the date of each payment, of the hypothetical question: What would have been the financial result if the assets had then been liquidated and the proceeds distributed among the then creditors? . _ _ Affirmed. bankrupt be insolvent and the . . . transfer then operate as a preference, ... it shall be voidable by the trustee and he may recover the property or its value from such person.” 230 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. BRONX BRASS FOUNDRY, INC. v. IRVING TRUST CO., TRUSTEE. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT. No. 232. Argued December 13, 1935.—Decided February 10, 1936. 1. The right of a plaintiff in equity to dismiss his bill when the defendant cannot have affirmative relief on the pleadings and can suffer no prejudice save for the vexation and expense of a second suit, is subject to modification by rule of court. P. 231. 2. Under a rule in the Southern District of New York, the bankruptcy court may refuse to permit the withdrawal of a creditor’s claim after issue joined upon it. P. 232. 3. Palmer Clay Products Co. v. Brown, Trustee, ante, p. 227, followed on a construction of § 60 (a), (b), Bankruptcy Act, concerning preferences. P. 232. 76 F. (2d) 935, affirmed. Certiorari, 296 U. S. 565, to review the affirmance of an order denying a claim in bankruptcy. Mr. Maxwell H. Goldstein for petitioner. Mr. Charles A. Houston for respondent. By leave of Court, Mr. John A. McManus filed a brief on behalf of the Viscose Co., as amicus curiae, contending there had been no voidable preference. Mr. Justice Brandeis delivered the opinion of the Court. J. R. Pahnenberg Sons, Inc., was adjudged bankrupt in the federal court for southern New York in August, 1933. In September, Bronx Brass Foundry, Inc., filed its proof of claim. In January, 1934, the Irving Trust Company, trustee in bankruptcy, moved to expunge the claim on the ground that the creditor had received within the four months preceding the bankruptcy, payments on ac- BRONX BRASS CO. v. IRVING TRUST CO. 231 230 Opinion of the Court. count aggregating $1,000 which were unlawful preferences. The creditor denied the allegations of preference. On the issue thus raised, several hearings were had before the referee and the evidence introduced clearly indicated that the payments would, upon bankruptcy, effect a preference over other creditors of the same class, and that the claimant had received them having reasonable cause to believe the debtor insolvent. But it left uncertain whether the amount received was more than its pro rata share would have been, if the then existing assets had been ratably distributed among all the then creditors. Before the hearing closed, and in view of an adverse ruling on the admission of evidence, the creditor filed a withdrawal of its claim and left the hearing. The trustee objected to allowance of the withdrawal, and introduced further evidence, insisting that it was entitled to an adjudication of the question whether the payments made were unlawful preferences. The referee, at the close of the hearing, ordered that the claim be expunged, unless the creditor within 20 days repay the preference to the trustee, with interest from the date of service of the motion to expunge. He said: “When a creditor files a claim against the bankrupt estate he elects a forum which may hear and determine whether a preference to him was made. Although judgment of recovery may not be granted, the finding thereon, subject to review, is conclusive as between the parties. It is not intended that a party shall have two trials of the same issue or be permitted to present the same issue to different tribunals for determination. When issue is joined upon the question whether a voidable preference has been received, the creditor may not withdraw of his own motion and thereby avoid such determination as the proof warrants.” The District Court approved the order of the referee. Its judgment was affirmed by the Circuit Court of Ap- 232 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. peals, which, held that the creditor had received a preference although the proof did not show that at the times of the payments the assets of the debtor were insufficient to pay proportional amounts to all the other creditors, 76 F. (2d) 935. We granted certiorari, because the ruling on the right of the creditor to withdraw its claim appeared to conflict with Scholl Mfg. Co. v. Rodgers, 51 F. (2d) 971, decided by the Court of Appeals for the Eighth Circuit; and because the ruling on the question of preference conflicted with W. S. Peck & Co. v. Whitmer, 231 Fed. 893, also decided by that court. First. The referee was justified in refusing to permit the creditor to withdraw its claim. The Circuit Court of Appeals recognized that ordinarily a plaintiff in equity has, as stated in Ex parte Skinner & Eddy Corp., 265 U. S. 86, 93, the absolute right to dismiss his bill. Its approval of the referee’s refusal to permit the creditor to withdraw rested on the ground that the District Court had adopted a rule which authorized the court to refuse, after issue joined, “to permit the plaintiff to discontinue even though the defendant cannot have affirmative relief under the pleadings and though his only prejudice be the vexation and expense of a possible second suit upon the same cause of action”; that this modification of the right of voluntary discontinuance was within the judicial power, since it dealt with procedure; that the rule had been approved by the Court of Appeals; that it was applicable also to bankruptcy proceedings; and that it had been properly applied below. We agree with the reasoning and the conclusion reached. Second. The ruling of the referee on the question of preference was correct for the reasons stated in Palmer Clay Products Co. v. Brown, decided this day, ante, p. 227. Affirmed. GROSJEAN v. AMERICAN PRESS CO. 233 Syllabus. GROSJEAN, SUPERVISOR OF PUBLIC ACCOUNTS OF LOUISIANA, v. AMERICAN PRESS CO., INC., ET AL. APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF LOUISIANA. No. 303. Argued January 14, 1936.—Decided February 10, 1936. 1. As respects the amount in controversy, the District Court has jurisdiction of a suit where the requisite value is involved as to each of several plaintiffs though not involved as to others. P. 241. 2. A motion to dismiss the whole case because the amount in controversy as to some of the plaintiffs is too small, should be overruled. Id. 3. There is equitable jurisdiction to enjoin collection of an allegedly unconstitutional state tax, where the taxpayer, if he pays, is afforded no clear remedy of restitution. P. 242. 4. Liberty of the press is a fundamental right protected against state aggression by the due process clause of the Fourteenth Amendment. P. 242. 5. The fact that, as regards the Federal Government, the protection of this right is not left to the due process clause of the Fifth Amendment but is guaranteed in specie by the First Amendment, is not a sufficient reason for excluding it from the due process clause of the Fourteenth Amendment. P. 243. 6. A corporation is a “person” within the meaning of the due process and equal protection clauses of the Fourteenth Amendment. P. 244. 7. A State license tax (La. Act No. 23, July 12, 1934) imposed on the owners of newspapers for the privilege of selling or charging for the advertising therein, and measured by a percent, of the gross receipts from such advertisements, but applicable only to newspapers enjoying a circulation of more than 20,000 copies per week, held unconstitutional. P. 244. 8. From the history of the subject it is plain that the English rule restricting freedom of the press to immunity from censorship before publication was not accepted by the American Colonists, and that the First Amendment was aimed at any form of previous restraint upon printed publications or their circulation, including restraint by taxation of newspapers and their advertising, which were well-known and odious methods still used in England when the First Amendment was adopted. P. 245. 234 OCTOBER TERM, 1935. Argument for Appellant. 297 U.S. 9. The predominant purpose of the grant of immunity was to preserve an untrammeled press as a vital source of public information. P. 250. 10. Construction of a constitutional provision phrased in terms of the common law, is not determined by rules of the common law which had been rejected in this country as unsuited to local civil or political conditions. P. 248. It is not intended in this case to suggest that the owners of newspapers are immune from any of the ordinary forms of taxation for support of Government. The tax in question is not an ordinary form of tax, but one single in kind, with a long history of hostile misuse against the freedom of the press. The manner of its use in this case is in itself suspicious; it is not measured or limited by the volume of advertisements, but by the extent of the circulation of the publication in which the advertisements are carried, with the plain purpose of penalizing the publishers and curtailing the circulation of a selected group of newspapers. 10 F. Supp. 161, affirmed. Appeal from a decree permanently enjoining the enforcement of a state tax on newspapers. Mr. Charles J. Rivet, with whom Mr. Gaston L. Por-terie, Attorney General of Louisiana, was on the brief, for appellant. There is lack of jurisdiction. The value of the disputed tax alone is the amount in controversy. Healy v. Ratta, 292 U. S. 263. The tax in controversy must equal the jurisdictional sum as to each complainant. Scott v. Frazier, 253 U. S. 243; Pinel v. Pinel, 240 U. S. 594; Cole v. Norborne Land Drainage District, 270 U. S. 45; Di Giovanni v. Camden Fire Insurance Assn., 296 U. S. 64. The averments of the bill present no real and substantial federal question. The statute assailed as unconstitutional furnished no means of action to the Supervisor of Public Accounts, charged with its enforcement, other than the institution of a suit in a court of competent jurisdiction, where GROSJEAN v. AMERICAN PRESS CO. 235 233 Argument for Appellant. every objection of law and fact would be open to the defendant in such suit. The statute does not provide for a lien against property, nor for summary seizure thereof, nor for interference with the business by injunction, or otherwise; and no execution is permitted except such as would result from any other final judgment of the state court. No great or irreparable injury can be asserted when the only possible complaint is that a law suit in the state court may result unfavorably to the complainants. Sections 5 and 11 of the Act may be fairly construed to mean that where a tax is paid under protest no remittance is to be made to the State Treasurer until judicial determination of liability. The First Amendment of the Federal Constitution imposes no restriction upon the States with reference to abridging the freedom of speech or of the press. The theory that by effect of the Fourteenth Amendment legislatures of the States are prohibited from passing laws infringing the freedom of the press, finds no support in the jurisprudence of this Court. 1 Cooley’s Const. Lim., 8th ed., p. 67, note. The effect of the second clause of the Fourteenth Amendment was to protect from the hostile legislation of the States, the privileges and immunities of citizens of the United States as distinguished from the privileges and immunities of citizens of the States. To establish a clear and comprehensive definition of this citizenship, the first clause of the Fourteenth Amendment declares that “all persons born or naturalized in the United States and subject to the jurisdiction thereof, are citizen of the United States.” See Slaughter House Cases, 16 Wall. 36. The liberty guaranteed by the Fourteenth Amendment against deprivation without due process of law is the liberty of natural, not of artificial persons. Western Turf Assn. v. Greenberg, 204 U. S. 359. The appellees are cor- 236 OCTOBER TERM, 1935. Argument for Appellant. 297U.S. porations. They do not possess the privileges and immunities of citizens of the United States within the meaning of the Constitution. Liberty Warehouse Co. v. Tobacco Growers Assn., 276 U. S. 71. A corporation cannot claim the protection of the clause of the Fourteenth Amendment which secures the privileges and immunities of citizens of the United States against abridgment or impairment by the law of a State. Selover, Bates Co. v. Walsh, 226 U. S. 112. There is nothing contrary to this in Near v. Minnesota, 283 U. S. 697; Gitlow v. New York, 268 U. S. 652; Whitney v. California, 274 U. S. 357; Fiske v. Kansas, 274 U. S. 380; Powell v. Alabama, 287 U. S. 45. Nor will it do to say that because the stockholders of these corporations are citizens of the United States the corporations must be considered as such. Cf. Bank of Augusta v. Earle, 13 Pet. 519. Furthermore, as pointed out in Near v. Minnesota, supra, the chief purpose of the constitutional protection of liberty of the press is to prevent previous restraints upon publications. Nowhere has it ever been held that a person or corporation engaged in the publishing business is exempt from taxation. The following authorities are to the contrary: In re Jaeger, 29 S. C. 438 (license taxes); Norfolk v. Norfolk Landmark Publishing Co., 95 Va. 564 (license taxes); The Federalist, p. 632. If freedom of the press implied freedom from taxation, the income tax law of the United States, which takes a part of every penny collected as income from the business of publishing a newspaper, would be clearly unconstitutional. The tax is not an occupational license tax on the business of publishing newspapers. The legislature could have levied such a tax, but it did not do so. It imposed GROSJEAN v. AMERICAN PRESS CO. 237 233 Argument for Appellees. the tax on the business “of selling, or making any charge for, advertising or for advertisements.” It is not essential to liberty of speech and freedom of the press, as constitutionally understood, that profit be derived from the exercise of these rights. Nor was it ever contemplated that the constitutional guarantee should extend to charging for and selling advertising. In fact, the constitutional guarantee is limited to the right of the citizen to speak and publish his views, subject to punishment for the abuse of that privilege. Liberty of speech and of the press is not an absolute right. Near v. Minnesota, 283 U. S. 697. Appellees rely also upon § 3 of Art. 1 of the Constitution of Louisiana. The highest court of Louisiana has already construed that provision as not affording an exemption from taxation. New Orleans v. Crescent Newspaper, 14 La. Ann. 804. The state statute does not censure or restrict the free expression of opinions. It merely requires of those who engage in the profitable business of making others pay for the expression of their views, or for advertising their business, a small contribution for the support of government. There was no denial of equal protection. Messrs. Esmond Phelps and Elisha Hanson, with whom Messrs. Bennett C. Clark, J. J. Davidson, Jr., Eberhard P. Deutsch, Ben B. Taylor, and John H. Tucker, Jr., were on the brief, for appellees. The District Court had jurisdiction to determine the questions presented. The case presented called for the exercise of jurisdiction by a court of equity. The statute violates the provisions of § 8 of Art. X of the Constitution of Louisiana of 1921, which requires that license taxes must be levied on all persons engaged in the trade, business, occupation, vocation or profession upon which a license tax is imposed. 238 OCTOBER TERM, 1935. Argument for Appellees. 297U.S. The Act denies appellees the equal protection of the laws. The Act violates the provisions of the Constitution of Louisiana and of the Constitution of the United States guaranteeing freedom of the press. The constitutional guaranties against abridgment of the freedom of the press were intended to prohibit every form of abridgment conceivable in the minds of hostile legislatures. The Act provides for a licensing of the press and a payment of a gross receipts tax on that portion of the revenues of the press derived from the sale and publication of advertising. Further, the Act is limited in its applicability to but thirteen newspapers out of a total of 163 in the State, of which thirteen newspapers twelve were active in their opposition to the dominant political group in the State, which group controlled the Legislature and at whose dictates the Legislature passed this law. Among the efforts to restrain the press with which the framers of the Constitution were familiar were licensing, censorship, taxation, writs of attachment, seditious libel and injunction proceedings. Taxation as a form of restraint was well known and particularly obnoxious to our forefathers. The historical background of the First Amendment was fully discussed by this Court in its decision in Near n. Minnesota, 283 U. S. 697. Not only the First Amendment, but the Fourth and Fifth grew out of the knowledge of our constitution-makers of efforts to control the press, which, if successful, would make it easy for dictators to control their subjects. See Boyd v. United States, 116 U. S. 616. See American Debates by Marion Mills Miller, Vol. 1, p. 20; John Lennox and the Taxes on Knowledge, William Stewart, p. 8, as to application of the Stamp Tax, 1765, to newspapers in the Colonies. GROSJEAN v. AMERICAN PRESS CO. 239 233 Argument for Appellees. At the outbreak of the War for Independence and at the time of the adoption of the Constitution, there were stamp taxes on the circulation and taxes on the advertising matter of English newspapers. The circulation tax became effective in 1712 and it was not repealed until 1855. The advertising tax became effective in 1712 and was abolished in 1853. James Paterson, The Liberty of the Press, London, 1880, pp. 56-58. During the debates on the ratification of the Constitution, one of the burning issues before the public was the failure of the constitutional convention to include in the body of the document a so-called bill of rights including a guaranty of a free press. Richard Henry Lee, Eleazer Oswald, Melancthon Smith, and other patriots in the debates over ratification specifically assailed the Convention for failing to include a free press provision which would prohibit suppression of the press by taxation. Since the ratification of the Fourteenth Amendment, the guaranty of free press expressed in the First Amendment, is binding upon state legislatures as well. Near v. Minnesota, supra; Gitlow v. New York, 268 U. S. 652; Whitney v. California, 274 U. S. 357. The power to tax the press is the power to destroy it. One of the purposes of this tax was to divert business from newspapers having a circulation of more than 20,000 per week to newspapers with less circulation. The levy is a direct tax upon the newspaper publishing business. Its effect is immediate, direct and punitive. Cf. Brown v. Maryland, 12 Wheat. 419; Cook v. Pennsylvania, 97 U. S. 566; Ex parte Harrison, 212 Mo. 88. A tax on the principal source of revenue of a newspaper is a tax upon its subsistence. Evans v. Gore, 253 U. S. 245. An attempt to tax the press over a certain size is a direct violation of this provision. The record shows that circulation is but one of many factors affecting advertis- 240 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. ing. The volume of a newspaper’s circulation certainly has but a remote bearing on its revenues from advertising, if any at all. Even were the law so phrased as to levy the tax by reference to the volume of advertising instead of the volume of circulation, it would be invalid. The fact that these appellees are corporations does not deprive them of the right to resist an attempt to abridge the freedom of the press. Home Insurance Co. v. New York, 134 U. S. 594. This Court has the power to ascertain the nature and effect of this Act, irrespective of its designation or declared purpose. Mr. Justice Sutherland delivered the opinion of the Court. This suit was brought by appellees, nine publishers of newspapers in the State of Louisiana, to enjoin the enforcement against them of the provisions of § 1 of the act of the legislature of Louisiana known as Act No. 23, passed and approved July 12, 1934, as follows: “That every person, firm, association, or corporation, domestic or foreign, engaged in the business of selling, or making any charge for, advertising or for advertisements, whether printed or published, or to be printed or published, in any newspaper, magazine, periodical or publication whatever having a circulation of more than 20,000 copies per week, or displayed and exhibited, or to be displayed and exhibited by means of moving pictures, in the State of Louisiana, shall, in addition to all other taxes and licenses levied and assessed in this State, pay a license tax for the privilege of engaging in such business in this State of two per cent. (2%) of the gross receipts of such business.” The nine publishers who brought the suit publish thirteen newspapers; and these thirteen publications are the GROSJEAN v. AMERICAN PRESS CO. 241 233 Opinion of the Court. only ones within the State of Louisiana having each a circulation of more than 20,000 copies per week, although the lower court finds there are four other daily newspapers each having a circulation of “slightly less than 20,000 copies per week” which are in competition with those published by appellees both as to circulation and as to advertising. In addition, there are 120 weekly newspapers published in the state, also in competition, to a greater or less degree, with the newspapers of appellees. The revenue derived from appellees’ newspapers comes almost entirely from regular subscribers or purchasers thereof and from payments received for. the insertion of advertisements therein. The act requires everyone subject to the tax to file a sworn report every three months showing the amount and the gross receipts from the business described in § 1. The resulting tax must be paid when the report is filed. Failure to file the report or pay the tax as thus provided constitutes a misdemeanor and subjects the offender to a fine not exceeding $500, or imprisonment not exceeding six months, or both, for each violation. Any corporation violating the act subjects itself to the payment of $500 to be recovered by suit. All of the appellees are corporations. The lower court entered a decree for appellees and granted a permanent injunction. 10 F. Supp. 161. First. Appellant assails the federal jurisdiction of the court below on the ground that the matter in controversy does not exceed the sum or value of $3,000, as required by par. 1 of § 24 of the Judicial Code. The case arises under the Federal Constitution; and the bill alleges, and the record shows, that the requisite amount is involved in respect of each of six of the nine appellees. This is enough to sustain the jurisdiction of the district court. The motion was to dismiss the bill—that is to say, the bill in its entirety—and in that form it was properly denied. No motion to dismiss was made or considered 43927°—36---16 242 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. by the lower court as to the three appellees in respect of whom the jurisdictional amount was insufficient, and that question, therefore, is not before us. The Rio Grande, 19 Wall. 178, 189; Gibson v. Shujeldt, 122 U. S. 27, 32. Second. The objection also is made that the bill does not make a case for equitable relief. But the objection is clearly without merit. As pointed out in Ohio Oil Co. v. Conway, 279 U. S. 813, 815, the laws of Louisiana afford no remedy whereby restitution of taxes and property exacted may be enforced, even where payment has been made under both protest and compulsion. It is true that the present act contains a provision (§ 5) to the effect that where it is established to the satisfaction of the Supervisor of Public Accounts of the state that any payment has been made under the act which was “not due and collectible,” the Supervisor is authorized to refund the amount out of any funds on hand collected by virtue of the act and not remitted to the state treasurer according to law. It seems clear that this refers only to a payment not due and collectible within the terms of the act, and does not authorize a refund on the ground that the act is invalid. Moreover, the act allows the Supervisor to make remittances immediately to the state treasurer of taxes paid under the act, and requires him to do so not later than the 30th day after the last day of the preceding quarter; in which event the right to a refund, if not sooner exercised, would be lost. Whether an aggrieved taxpayer may obtain relief under § 5 is, at best, a matter of speculation. In no view can it properly be said that there exists a plain, adequate and complete remedy at law. Davis v. Wakelee, 156 U. S. 680, 688; Union Pacific R. Co. v. Weld County, 247 U. S. 282, 285. Third. The validity of the act is assailed as violating the Federal Constitution in two particulars—(1) that it abridges the freedom of the press in contravention of the due process clause contained in § 1 of the Fourteenth GROSJEAN v. AMERICAN PRESS CO. 243 233 Opinion of the Court. Amendment; (2) that it denies appellees the equal protection of the laws in contravention of the same Amendment. 1. The first point presents a question of the utmost gravity and importance; for, if well made, it goes to the heart of the natural right of the members of an organized society, united for their common good, to impart and acquire information about their common interests. The First Amendment to the Federal Constitution provides that “Congress shall make no law . . . abridging the freedom of speech, or of the press . . .” While this provision is not a restraint upon the powers of the states, the states are precluded from abridging the freedom of speech or of the press by force of the due process clause of the Fourteenth Amendment. In the case of Hurtado v. California, 110 U. S. 516, this Court held that the term “due process of law” does not require presentment or indictment by a grand jury as a prerequisite to prosecution by a state for a criminal offense. And the important point of that conclusion here is that it was deduced from the fact that the Fifth Amendment, which contains the due process of law clause in its national aspect, also required an indictment as a prerequisite to a prosecution for crime under federal law; and it was thought that since no part of the amendment could be regarded as superfluous, the term “due process of law” did not, ex vi termini, include presentment or indictment by a grand jury in any case; and that the due process of law clause of the Fourteenth Amendment should be interpreted as having been used in the same sense, and as having no greater extent. But in Powell v. Alabama, 287 U. S. 45, 65, 68, we held that in the light of subsequent decisions the sweeping language of the Hurtado case could not be accepted without qualification. We concluded that certain fundamental rights, safeguarded by the first eight amendments against federal action, were also safe 244 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. guarded against state action by the due process of law clause of the Fourteenth Amendment, and among them the fundamental right of the accused to the aid of counsel in a criminal prosecution. That freedom of speech and of the press are rights of the same fundamental character, safeguarded by the due process of law clause of the Fourteenth Amendment against abridgement by state legislation, has likewise been settled by a series of decisions of this Court beginning with Gitlow v. New York, 268 U. S. 652, 666, and ending with Near v. Minnesota, 283 U. S. 697, 707. The word “liberty” contained in that amendment embraces not only the right of a person to be free from physical' restraint, but the right to be free in the enjoyment of all his faculties as well. Allgeyer v. Louisiana, 165 U. S. 578, 589. Appellant contends that the Fourteenth Amendment does not apply to corporations; but this is only partly true. A corporation, we have held, is not a “citizen” within the meaning of the privileges and immunities clause. Paul v. Virginia, 8 Wall. 168. But a corporation is a “person” within the meaning of the equal protection and due process of law clauses, which are the clauses involved here. Covington A Lexington Turnpike Co. v. Sandford, 164 U. S. 578, 592; Smyth v. Ames, 169 U. S. 466, 522. The tax imposed is designated a “license tax for the privilege of engaging in such business”—that is to say, the business of selling, or making any charge for, advertising. As applied to appellees, it is a tax of two per cent, on the gross receipts derived from advertisements carried in their newspapers when, and only when, the newspapers of each enjoy a circulation of more than 20,000 copies per week. It thus operates as a restraint in a double sense. First, its effect is to curtail the amount of revenue realized from advertising, and, second, its direct GROSJEAN v. AMERICAN PRESS CO. 245 233 Opinion of the Court. tendency is to restrict circulation. This is plain enough when we consider that, if it were increased to a high degree, as it could be if valid {Magnano Co. v. Hamilton, 292 U. S. 40, 45, and cases cited), it well might result in destroying both advertising and circulation. A determination of the question whether the tax is valid in respect of the point now under review, requires an examination of the history and circumstances which antedated and attended the adoption of the abridgement clause of the First Amendment, since that clause expresses one of those “fundamental principles of liberty and justice which lie at the base of all our civil and political institutions” {Hébert v. Louisiana, 272 U. S. 312, 316), and, as such, is embodied in the concept “due process of law” {Twining v. New Jersey, 211 U. S. 78, 99), and, therefore, protected against hostile state invasion by the due process clause of the Fourteenth Amendment. Cf. Powell v. Alabama, supra, pp. 67-68. The history is a long one; but for present purposes it may be greatly abbreviated. For more than a century prior to the adoption of the amendment—and, indeed, for many years thereafter—history discloses a persistent effort on the part of the British government to prevent or abridge the free expression of any opinion which seemed to criticize or exhibit in an unfavorable light, however truly, the agencies and operations of the government. The struggle between the proponents of measures to that end and those who asserted the right of free expression was continuous and unceasing. As early as 1644, John Milton, in an “Appeal for the Liberty of Unlicensed Printing,” assailed an act of Parliament which had just been passed providing for censorship of the press previous to publication. He vigorously defended the right of every man to make public his honest views “without previous censure”; and declared the impossibility of finding any man base enough to ac- 246 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. cept the office of censor and at the same time good enough to be allowed to perform its duties. Collett, History of the Taxes.on Knowledge, vol. I, pp. 4-6. The act expired by its own terms in 1695. It was never renewed; and the liberty of the press thus became, as pointed out by Wickwar (The Struggle for the Freedom of the Press, p. 15), merely “a right or liberty to publish without a license what formerly could be published only with one.” But mere exemption from previous censorship was soon recognized as too narrow a view of the liberty of the press. In 1712, in response to a message from Queen Anne (Hansard’s Parliamentary History of England, vol. 6, p. 1063), Parliament imposed a tax upon all newspapers and upon advertisements. Collett, vol. I, pp. 8-10. That the main purpose of these taxes was to suppress the publication of comments and criticisms objectionable to the Crown does not admit of doubt. Stewart, Lennox and the Taxes on Knowledge, 15 Scottish Historical Review, 322-327. There followed more than a century of resistance to, and evasion of, the taxes, and of agitation for their repeal. In the article last referred to (p. 326), which was written in 1918, it was pointed out that these taxes constituted one of the factors that aroused the American colonists to protest against taxation for the purposes of the home government; and that the revolution really began when, in 1765, that government sent stamps for newspaper duties to the American colonies. These duties were quite commonly characterized as “taxes on knowledge,” a phrase used for the purpose of describing the effect of the exactions and at the same time condemning them. That the taxes had, and were intended to have, the effect of curtailing the circulation of newspapers, and particularly the cheaper ones whose readers were generally found among the masses of the people, went almost without question, even on the part of GROSJEAN v. AMERICAN PRESS CO. 247 233 Opinion of the Court. those who defended the act. May (Constitutional History of England, 7th ed., vol. 2, p. 245), after discussing the control by “previous censure,” says: . a new, restraint was devised in the form of a stamp duty on newspapers and advertisements,—avowedly for the purpose of repressing libels. This policy, being found effectual in limiting the circulation of cheap papers, was improved upon in the two following reigns, and continued in high esteem until our own time.” Collett (vol. I, p. 14), says, “Any man who carried on printing or publishing for a livelihood was actually at the mercy of the Commissioners of Stamps, when they chose to exert their powers.” Citations of similar import might be multiplied many times; but the foregoing is enough to demonstrate beyond peradventure that in the adoption of the English newspaper stamp tax and the tax on advertisements, revenue was of subordinate concern; and that the dominant and controlling aim was to prevent, or curtail the opportunity for, the acquisition of knowledge by the people in respect of their governmental affairs. It is idle to suppose that so many of the best men of England would for a century of time have waged, as they did, stubborn and often precarious warfare against these taxes if a mere matter of taxation had been involved. The aim of the struggle was not to relieve taxpayers from a burden, but to establish and preserve the right of the English people to full information in respect of the doings or misdoings of their government. Upon the correctness of this conclusion the very characterization of the exactions as “taxes on knowledge” sheds a flood of corroborative light. In the ultimate, an informed and enlightened public opinion was the thing at stake; for, as Erskine, in his great speech in defense of Paine, has said, “The liberty of opinion keeps governments themselves in due subjection to their 248 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. duties.” Erskine’s Speeches, High’s ed., vol. I, p. 525. See May’s Constitutional History of England, 7th ed., tvol. 2, pp. 238-245. In 1785, only four years before Congress had proposed the First Amendment, the Massachusetts legislature, following the English example, imposed a stamp tax on all newspapers and magazines. The following year an advertisement tax was imposed. Both taxes met with such violent opposition that the former was repealed in 1786, and the latter in 1788. Duniway, Freedom of the Press in Massachusetts, pp. 136-137. The framers of the First Amendment were familiar with the English struggle, which then had continued for nearly eighty years and was destined to go on for another sixty-five years, at the end of which time it culminated in a lasting abandonment of the obnoxious taxes. The framers were likewise familiar with the then recent Massachusetts episode; and while that occurrence did much to bring about the adoption of the amendment (see Pennsylvania and the Federal Constitution, 1888, p. 181), the predominant influence must have come from the English experience. It is impossible to concede that by the words “freedom of the press” the framers of the amendment intended to adopt merely the narrow view then reflected by the law of England that such freedom consisted only in immunity from previous censorship; for this abuse had then permanently disappeared from English practice. It is equally impossible to believe that it was not intended to bring within the reach of these words such modes of restraint as were embodied in the two forms of taxation already described. Such belief must be rejected in the face of the then well known purpose of the exactions and the general adverse sentiment of the colonies in respect of them. Undoubtedly, the range of a constitutional provision phrased in terms of the common law sometimes may be fixed by recourse to the applicable rules of that GROSJEAN v, AMERICAN PRESS CO. 249 233 Opinion of the Court. law. But the doctrine which justifies such recourse, like other canons of construction, must yield to more compelling reasons whenever they exist. Cf. Continental Illinois Nat. Bank v. Chicago, R. I. & P. Ry. Co., 294 U. S. 648, 668-669. And, obviously, it is subject to the qualification that the common law rule invoked shall be one not rejected by our ancestors as unsuited to their civil or political conditions. Murray’s Lessee v. Hoboken Land Improvement Co., 18 How. 272, 276-277; Waring v. Clarke, 5 How. 441, 454-457; Powell v. Alabama, supra, pp. 60-65. In the light of all that has now been said, it is evident that the restricted rules of the English law in respect of the freedom of the press in force when the Constitution was adopted were never accepted by the American colonists, and that by the First Amendment it was meant to preclude the national government, and by the Fourteenth Amendment to preclude the states, from adopting any form of previous restraint upon printed publications, or their circulation, including that which had theretofore been effected by these two well-known and odious methods. This court had occasion in Near v. Minnesota, supra, at pp. 713 et seq., to discuss at some length the subject in its general aspect. The conclusion there stated is that the object of the constitutional provisions was to prevent previous restraints on publication; and the court was careful not to limit the protection of the right to any particular way of abridging it. Liberty of the press within the meaning of the constitutional provision, it was broadly said (p. 716), meant “principally although not exclusively, immunity from previous restraints or [from] censorship.” Judge Cooley has laid down the test to be applied— “The evils to be prevented were not the censorship of the press merely, but any action of the government by 250 OCTOBER TERM, 1935. Opinion of the Court. 297U.S. means of which it might prevent such free and general discussion of public matters as seems absolutely essential to prepare the people for an intelligent exercise of their rights as citizens.” 2 Cooley’s Constitutional Limitations, 8th ed., p. 886. It is not intended by anything we have said to suggest that the owners of newspapers are immune from any of the ordinary forms of taxation for support of the government. But this is not an ordinary form of tax, but one single in kind, with a long history of hostile misuse against the freedom of the press. The predominant purpose of the grant of immunity here invoked was to preserve an untrammeled press as a vital source of public information. The newspapers, magazines and other journals of the country, it is safe to say, have shed and continue to shed, more light on the public and business affairs of the nation than any other instrumentality of publicity; and since informed public opinion is the most potent of all restraints upon misgovernment, the suppression or abridgement of the publicity afforded by a free press cannot be regarded otherwise than with grave concern. The tax here involved is bad not because it takes money from the pockets of the appellees. If that were all, a wholly different question would be presented. It is bad because, in the light of its history and of its present setting, it is seen to be a deliberate and calculated device in the guise of a tax to limit the circulation of information to which the public is entitled in virtue of the constitutional guaranties. A free press stands as one of the great interpreters between the government and the people. To allow it to be fettered is to fetter ourselves. In view of the persistent search for new subjects of taxation, it is not without significance that, with the single exception of the Louisiana statute, so far as we can discover, no state during the one hundred fifty years of our 251 BORDEN’S CO. v. TEN EYCK. Syllabus. 233 national existence has undertaken to impose a tax like that now in question. The form in which the tax is imposed is in itself suspicious. It is not measured or limited by the volume of advertisements. It is measured alone by the extent of the circulation of the publication in which the advertisements are carried, with the plain purpose of penalizing the publishers and curtailing the circulation of a selected group of newspapers. 2. Having reached the conclusion that the act imposing the tax in question is unconstitutional under the due process of law clause because it abridges the freedom of the press, we deem it unnecessary to consider the further ground assigned that it also constitutes a denial of the equal protection of the laws. Decree affirmed. BORDEN’S FARM PRODUCTS CO., INC. v. TEN EYCK, COMMISSIONER OF AGRICULTURE & MARKETS OF NEW YORK, et al. APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK. No. 597. Argued January 6, 1936.—Decided February 10, 1936. 1. As an incident to a temporary and experimental scheme for assisting the milk industry by fixing prices to producer and consumer (Nebbia v. New York, 291 U. S. 502), the New York Milk Control Act, as amended, discriminated between dealers who had, and dealers who had not, well-advertised trade names, by permitting the latter to sell bottled milk in the City of New York at a price one cent less per quart than the price prescribed for the former. Held that there was a reasonable basis for the discrimination; and that a dealer of the former class, who failed to show that, in practice, the differential had resulted in any gain of trade at its expense by the latter class of dealers, or had caused it substantial loss, did not 252 OCTOBER TERM, 1935. Argument for Appellant. 297 U.S. prove a violation of the equal protection clause of the Fourteenth Amendment. Pp. 261, 263. 2. The findings in this case establish that, before the fixing of prices under the Act, dealers without well-advertised brands were able to compete for the trade in question, but only by slightly underselling their advertised competitors. The differential is sustained as an attempt, competent to the legislature during the limited term of the experiment, to preserve this trade practice, already existing, which balanced the advantage of a lower price, for the one group, against the advantage of advertisement enjoyed by the other. P. 261. 11 F. Supp. 599, affirmed. Appeal from a decree which dismissed, upon the final hearing, a suit to enjoin the enforcement of a provision of the New York Agriculture & Markets Law. For an earlier phase see s.c., 293 U. S. 194. Cf. p. 266, post. Mr. Walter E. Hope, with whom Mr. Timothy N. Pfeiffer was on the brief, for appellant. The differential constitutes an arbitrary and unreasonable discrimination against appellant and others similarly situated. It has not been advocated by any impartial investigating or administrative agency. It has no relation to cost, quality, or service. It is directly at variance with the avowed objectives of the Milk Control Law. There could have been no reasonable doubt when the statute was passed that the differential would prove injurious to appellant; and it cannot be justified as an effort to protect existing dealers from losses which might result from the State’s emergency price-fixing. There was no ground for a reasonable belief by the legislature that without the statutory differential the independent dealers would be eliminated; and the differential cannot be justified as an effort to preserve the independent dealers in the public interest. The essence of price-fixing is to fix a single compulsory price for products and services of equal grade; its mean- BORDEN’S CO. v. TEN EYCK. 253 251 Argument for Appellant. ing is that price competition is at an end, and that henceforth all competition shall be on the basis of quality, and selling and productive efficiency. In such a conception, there is no room for unequal prices for things of the same grade, whatever their brands or trade names. It follows that if the differential is to be justified at all, it must be on some other principle than those which lend support to ordinary price-fixing. Besides the attempted justifications thus far considered, it has been suggested that the differential is an anti-advertising measure; that it is an anti-monopoly measure; and that it is a measure akin to the chain store tax statutes upheld by this Court in Tax Commissioners v. Jackson, 283 U. S. 527; Liggett Co. v. Lee, 288 U. S. 517; Fox v. Standard Oil Co., 294 U. S. 87. None of these hypotheses fits the case. In the absence of special considerations such as those present in the trading stamp cases (Rast v. Van Deman & Lewis Co., 240 U. S. 342) the validity of a statute penalizing advertising in an ordinary commercial business is at least open to serious doubt. Semler v. State Board of Dental Examiners, 294 U. S. 608. Apart from whether price regulation may be employed to curb monopoly (Fairmont Creamery Co. v. Minnesota, 274 U. S. 1; Williams v. Standard Oil Co., 278 U. S. 235), it is certain that the differential is not an anti-monopoly measure. As for the justification founded on the chain store tax cases, it seems clear that the differential was not intended to foster or preserve free and equal economic opportunity for the public as a whole. If such had been the intent of the statute, its privileges would have been made available to new-comer dealers, to dealers who had been forced out and obliged to start over, and, in general, to all dealers who were still small. Its privileges are not available to such persons but are the monopoly of the favored group 254 OCTOBER TERM, 1935. Argument for Appellant. 297 U.S. of dealers who were already in the field when the differential was first enacted and who were instrumental in procuring its passage. The differential was in reality a thinly veiled attempt by the independent dealers to preempt the New York City store market. The novel character of the differential and the drastic penalty it imposes require that a clear justification for it be shown. It requires no argument to demonstrate the serious consequences of permitting a legislature, under the pressure of interested groups, to determine that one competitor’s product is to enjoy a preference as against another’s irrespective of cost, quality or other distinguishing factors. The building up of a good reputation through the sale of an honest product over a long period of years becomes not an asset but a handicap if the legislature may step in and fix a higher price for such product while it permits a competitor to sell a similar product at a lower price. The competitor with an established reputation is thus denied the right to meet the price of a lesser known rival. The public is required to pay more for the product which it wants or to abandon it in favor of a less desired product because the legislature believes, or professes to believe, that one or more competitors are enjoying what the legislature regards as too large a percentage of the market. The State can and should take proper measures to see that competitive conditions in general are free from improper restrictions and are fair and equal. But if the legislature is to be free to intervene in each competitive group in each community and to discriminate between competitors by arbitrarily establishing different prices for the same article, there can be but one result. Political intrigue and the pressure for advantage by one group against another will inevitably lead to oppression. The dangers are not illusory but real and practical ones. BORDEN’S CO. v. TEN EYCK. 255 251 Argument for Appellees. The differential is not an integral part of the Milk Control Law and may be declared invalid without invalidating the remainder of the statute. Messrs. Samuel Kramer and Henry S. Manley, with whom Mr. John J. Bennett, Jr., Attorney General of New York, and Mr. David L. Weissman were on the brief, for appellees. The differential provision, having as its aims (1) the preservation of competitive opportunities among the dealers, (2) the stabilization of conditions among the producers, and (3) the prevention of monopoly, is neither discriminatory, arbitrary, nor unreasonable. The device of classification, with the application of different regulations for different classes, is a common device of the law. “Classification is the most inveterate of our reasoning processes.” Truax v. Corrigan, 257 U. S. 312, 337-338. The “State has a broad discretion in classification, in the exercise of its power of regulation.” Borders Farm Products Co. v. Baldwin, 293 U. S. 194, 210. Exactness in classification cannot always be obtained, and a tendency to fairness is enough, as is illustrated by Singer Sewing Machine Co. v. Brickell, 233 U. S. 304. The classification is valid unless it is “without any reasonable basis” and one who assails the classification “must carry the burden of showing that it does not rest upon any reasonable basis, but is essentially arbitrary.” Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78-79. The statute is good so long as it does not “preclude the possibility of a rational basis for the legislative declaration.” Ohio ex rel. Clarke v. Deckebach, 274 U. S. 392, 397. “The fact that a statute discriminates in favor of a certain class does not make it arbitrary, if the discrimination is founded upon a reasonable distinction.” Board of Tax Comm’rs v. Jackson, 283 U. S. 527, 537. The thought that runs through all the cases is that all that a classifi- 256 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. cation needs to sustain it is a showing that it rests upon some rational basis. Cf. Nébbia v. New York, 291 U. S. 502. What the legislature did here has been merely to continue a condition which previously existed. Though it is unnecessary to a decison of this case, it will prove fruitful to consider whether the legislature did not have the power to incorporate in the law a differential even if one had not previously existed. Cf. Fox v. Standard Oil Co., 294 U. S. 87. The plaintiff has not shown such damage traceable to the differential as entitles it to relief in equity. The plaintiff is estopped from attacking the constitutionality of the differential provision. By obtaining a license under the Act, it acquired a valuable property right, a right which prevented all unlicensed persons from competing with it in its business. Frost Trucking Co. v. Corporation Commission, 278 U. S. 515. For an entire year it availed itself of the benefits of the Act. The plaintiff is now estopped from attacking that part which it regards as a burden. United Fuel Gas Co. v. Railroad Commission, 278 U. S. 300; Booth Fisheries Co. v. Industrial Commission, 271 U. S. 208; St. Louis Co. v. Prendergast, 260 U. S. 469. Mr. Justice Roberts delivered the opinion of the Court. This cause is here a second time. The prior appeal was from a decree denying a preliminary injunction and dismissing the bill.1 We reversed, holding that evidence should be taken, findings and conclusions made, and a decree thereupon entered. After remand the appellant amended its bill, the court sent the case to a master who made findings of fact, stated his conclusions of law, and * 1293 U. S. 194; 7 F. Supp. 352. BORDEN’S CO. v. TEN EYCK. 257 251 Opinion of the Court. recommended that an injunction be entered. The District Court accepted the master’s findings, and found certain additional facts, but dismissed the bill upon the merits.2 From this judgment the present appeal was taken. As will appear by reference to our former opinion the appellant’s complaint is that the fixing of a differential of not to exceed one cent per quart on sales to stores, in favor of milk dealers not having a “well advertised trade name,” by the Milk Control Law of April 10, 1933 (reenacted by the laws of 1934, chapter 126), was an invasion of rights guaranteed by the Fourteenth Amendment. The bill, as framed when the case was here before, recited that the administrative authority which fixed the minimum price on sales to stores found the appellant and three other milk dealers in the metropolitan market had well advertised trade names and the statute permitted dealers not having such trade names to sell bottled milk to stores at one cent per quart less than the minimum which dealers with well advertised trade names were required to charge, and also permitted stores to resell to their customers the unadvertised brands of milk at a price one cent per quart less than that at which the appellant’s milk could be sold under the minimum fixed by the order. Resulting loss of business and irreparable damage were alleged. In this court the appellees sought to justify the differential by the assertion that the statute was temporary in character, intended to relieve a temporary economic situation, and meanwhile to prevent monopoly of the business by dealers having well advertised names. In support of this position it was said that prior to the adoption of the Milk Control Act of 1933 independent dealers, so-called, had purchased from producers at prices lower than 211 F. Supp. 599. 43927°—36---17 258 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. those paid by appellant and other purveyors of well advertised brands, and in turn charged less to stores than the appellant and others in its class. By the Milk Control Act the independent dealers were compelled to purchase from the farmers on the same basis as the well known dealers; and to deprive them of this advantage and in turn to compel them to charge the same price for their milk as the well advertised brands commanded would be to transfer all their customers to the owners of well known brands, and put them out of business. The appellant replied that, prior to the adoption of the Milk Control Law, there had been a threat to forbid the sale of milk in bulk to stores; this compelled the independents who had formerly sold mostly bulk milk to change to the bottled trade, and keen competition ensued between them and the owners of well advertised brands with destructive price cutting throughout the greater part of New York City, so that there was no fixed price for bottled milk sold to stores either by the independents or the well advertised dealers. In support of these contentions we were referred to statements found in the legislative report leading to the adoption of the Milk Control Law, and the injunction affidavits. We held we could not take judicial notice of local trade conditions prevailing in the City of New York; as the case had been disposed of below on the allegations of the bill, we were not called upon to examine the affidavits submitted in support of the motion for injunction and to find the facts; and the constitutionality of the challenged provision should be determined in the light of evidence upon the matters as to which the parties were in disagreement. By amendment the appellant added to its bill paragraphs to the following effect: Prior to 1932 less than one-third of the fluid milk sold -in New York was bottled, the balance being sold in bulk and under no trade name. 259 BORDEN’S CO. v. TEN EYCK. Opinion of the Court. 251 Toward the end of 1931 a commission recommended that the sale of loose milk to stores be prohibited. The Board of Health made an order, effective January 1, 1933, the effective date of which was subsequently postponed to June 1, 1933, prohibiting the practice. By reason of the impending ban upon the sale of loose milk, dealers engaged in the sale of that commodity were forced to make a drastic change in their methods. The transition from the sale of loose milk to bottled, which began about April 1, 1933, and continued until June 1, 1933, engendered widespread price cutting and a steadily declining price level, and brought about unsettled market conditions and great variations in price. At no time prior to the effective date of the Milk Control Act was there any trade custom, practice, or usage whereby the bottled milk of dealers thereafter classified as not having well advertised trade names was sold to stores at a price different from that of the bottled milk of the appellant and others classified as having well advertised trade names. Before April 10, 1933, and thereafter, the appellant was in active competition with more than one hundred and fifty dealers in the sale of bottled milk to stores in the city. The appellant and others classified as having well advertised trade names sell approximately twenty-one per cent of the bottled milk sold to stores. The prices paid by dealers to producers under the Milk Control Law have been the same for all dealers no matter how classified. All bottled milk must have printed on the cap the name of the dealer distributing it. The services rendered by the appellant and by so-called independent dealers differ in no respect. The assertions of shrinkage of appellant’s sales to stores consequent upon the establishment of the differential were repeated and amplified in the amended bill. An answer was filed denying the allegations of the bill. Much evidence was received. 260 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. The findings of the master establish that the dealers having a well advertised trade name, of which appellant is one, are in keen competition with each other and with the independent dealers, and have no monopoly, nor anything approaching a monopoly, of the sale of bottled milk to stores. The findings further demonstrate that the good will incident to appellant’s well known trade-name “Borden’s” has been built up largely by advertising, and there is no finding that the appellant’s methods in that respect, or its trade practices, have been illegal. Grade B milk, with which we are alone concerned, must conform to standards of quality, purity and cleanliness prescribed by law, whether sold by appellant or by an independent dealer. The service rendered and the conditions of sale are the same for both. It is plain from these facts that the allowance of the differential cannot be justified as a preventive of monopoly or as a deterrent of illegal combination or illegal trade practices, or as a recognition of differences in the service rendered. We are brought to the remaining issue of fact to resolve which the case was remanded. Was there a differential during a substantial period prior to adoption of the act between the price charged to stores by dealers having well-advertised trade names and that charged by those lacking this advantage? The master’s findings upon the point, though the appellant excepted to them, were adopted by the court below. They are to the effect that from November, 1931, to April, 1933, and for several years prior thereto, the independent dealers sold their bottled milk to stores in New York City for resale to consumers at one or more cents per quart below the price at which the advertised dealers were selling their bottled milk to stores in that city; and during the same years the stores were selling the independents’ bottled milk to consumers from one cent to two cents per quart below the price at which they were 261 BORDEN’S CO. v. TEN EYCK. Opinion of the Court. 251 vending the bottled milk of the advertised dealers. The District Court made additional findings, supplementing those of the master, that independent dealers on occasions before November 1, 1931, and until April 1, 1933, tried to sell bottled milk to stores at the same price as that charged by the appellant and another advertised dealer, and in each case were compelled by loss of business to resume their earlier and lower price; and during the same period customers when offered the several brands at the same price would usually take a bottle of the well-advertised dealer’s milk in preference to that of an independent dealer. These findings of the master and the court disclose the circumstances in the light of which the appellant’s claim that it was denied the equal protection of the laws must be considered. The appellant assigns them as error; but they are supported by substantial evidence and we will not disturb them. We hold that the fixing of the differential in favor of the sellers of milk not having a well-advertised trade name, in the situation exhibited by the findings, does not deny the appellant equal protection. The argument is that the classification is arbitrary since the statute puts the appellant and other dealers who have well advertised trade names in a single class solely by reason of the fact that their legitimate advertising has brought them good will. So, it is said, they are penalized for their business skill and acumen. The answer seems sufficiently obvious. In enforcing its policy of price fixing,—a temporary expedient to redress an injurious economic condition,—the legislature believed that a fixed minimum price by dealers to stores would not preserve the existing economic method of attaining equality of opportunity. That method was for the well-advertised dealers to rely on their advertising to obtain a given price, and for the independents to retain their share of the market, not by counter-advertising but by a slight 262 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. reduction of price. The one expedient the law did not purport to touch; the other by fixing the same minimum for all dealers it would effectually destroy. In these circumstances, it was competent to the law makers to attempt, during the limited term of the legislative experiment, to preserve the existing relationship of advantage established by the past trade practices of the two groups. So to do, we must assume, was within the legislative power under the state constitution. No prohibition of the expedient is found in the Federal Constitution, unless in the Fourteenth Amendment. We have held that article does not prevent the fixing of maximum and minimum prices for milk, in the circumstances existing in the State of New York in 1933.3 We now hold that to provide that a differential of one cent maintained by the independent dealers shall continue does not deny their advertised competitors equal protection. There was a plain reason for the classification. It was not merely that appellant had established a good will; it was that there had resulted a balance between that advantage and the resulting disadvantage to the unadvertised dealer,— a balance maintained by a price differential. To attempt the maintenance of that balance was to strive for equality of treatment, equality of burden, not to create inequality. To adapt the law to the existing trade practice was neither unreasonable nor arbitrary. The present case affords an excellent example of the difficulties and complexities which confront the legislator who essays to interfere in sweeping terms with the natural laws of trade or industry. The danger in such efforts always is that unintended dislocations will bring hardship to groups whose situation the broad rules fail to fit. Where, as here, there is recognition of an existing status and an attempt to equate the incidence of the statute in accordance with it, we find a 3 Nebbia v. New York, 291 U. S. 502. 263 BORDEN’S CO. v. TEN EYCK. 251 Opinion of the Court. compliance with, rather than a disregard of the constitutional guarantee of equal protection. The appellant cannot complain if, in fact, the discrimination embodied in the law is but a perpetuation of a classification created and existing by the action of the dealers. In the light of the facts found the legislature might reasonably have thought trade conditions existed justifying the fixing of a differential. Judicial inquiry does not concern itself with the accuracy of the legislative finding, but only with the question whether it so lacks any reasonable basis as to be arbitrary. Standard Oil Co. v. Marysville, 279 U. S. 582, 586-587. A second argument is that, instead of maintaining equality between the two groups, the act has destroyed it by unduly favoring the independents. The differential is said to inflict grievous injury and irreparable and continuing damage upon the appellant. We must look to the record to determine whether it supports the appellant’s claim. The master made numerous findings touching the relative sales of bulk and bottled milk to stores by the two groups of dealers at various times before and after the adoption of the act, and in respect of appellant’s share of that trade in comparison with total sales and those of its independent competitors. He also found: “Since the enactment of the 1933 Law, the advertised dealers have had a smaller proportion relative to the independent dealers of the total sales of bottled milk to stores in New York City than before the enactment of the law.” But neither in his findings nor in his general discussion does he say that the smaller volume of appellant is due to the differential provision. He does state: “the voluminous proofs fail to furnish facts on which to base a finding as to the effect of minimum prices without a differential.” There is no fact finding of loss and damage to plaintiff from the differential. A conclusion of law is: “By reason of the differential provision, the 264 OCTOBER TERM, 1935. McReynolds, J., dissenting. 297U.S. plaintiff is now suffering, and will continue to suffer irreparable damage.” After a full discussion of the master’s findings the District Court said: “From all this it seems to us very doubtful whether the differential has really damaged the plaintiff at all.” We have examined the findings and the evidence, and concur in the conclusion. Though appellant, at the time of the trial, had acquired a large experience of the operation of the differential, its proofs and the findings based upon them, leave serious doubt as to the effect on the appellant’s store trade of other factors, such as seasonal variation, the decrease in the consumption of milk in 1934, the change from loose to bottled milk in store distribution, and the sale of great quantities of so-called relief milk under arrangement with the public authorities. It has failed to show that as a result of the statute the independent dealers have gained trade at its expense, or that it has suffered substantial loss. We have Do occasion to determine whether the differential would become unlawful, and the appellant would be entitled to relief, if there were proof that in practice it produces such gross inequality, and so unnecessarily damages the appellant, as to shock the conscience. Decree affirmed. Mr. Justice McReynolds, dissenting. Mr. Justice Van Devanter, Mr. Justice Sutherland, Mr. Justice Butler and I think the challenged judgment should be reversed. In Nebbia v. New York, 291 U. S. 502, 539, we stated reasons in support of the conclusion that the New York Milk Control Act of 1933 infringed the due process clause. We adhere to what we there said. The present cause raises a distinct, although subordinate, question. Assuming that the general price fixing provisions of the Control Act are valid, do the provisions 265 BORDEN’S CO. v. TEN EYCK. McReynolds, J., dissenting. 251 which permit other dealers to sell below the minimum price prescribed for appellant deprive it of the equal protection of the laws? The answer should be in the affirmative. Rational classification, based on substantial differences, is within legislative power. An act which permits dealer A to sell at less than the price fixed for dealer B obviously denies equality; and in the absence of some adequate reason for different treatment, the enactment is invalid. Here appellant differs from favored dealers only in that it possesses a well advertised brand, while they do not. And solely because of that fact, the Legislature undertook to handicap it and thus enable others profitably to share the trade. There is no question of unfair trade practices or monopoly. By fair advertisement and commendable service, appellant acquired the public’s good will. The purpose is to deprive it of the right to benefit by this and thereby aid competitors to secure the business. This is grossly arbitrary and oppressive. To support the legislation, it is said the Legislature believed that a fixed minimum price to stores would not preserve the existing economic method of attaining equality of opportunity. Apparently, this means that a dealer, who through merit has acquired a good reputation, can be deprived of the consequent benefit in order that another may trade successfully. Thus the statute destroys equality of opportunity—puts appellant at a disadvantage because of merit. Merely because on a given date there were differences in prices under open competition, offers no rational reason for legislation abolishing competition and perpetuating such differences. The status existing under competitive conditions certainly is not preserved by destroying competition. Formerly, appellant had the right to adjust prices to meet trade exigencies and thus protect itself 266 OCTOBER TERM, 1935. Statement of the Case. 297 US. from loss of business. Now it must stand helpless while adversaries take possession of the field. It may suffer utter ruin solely because of good reputation, honestlÿ acquired. MAYFLOWER FARMS, INC. v. TEN EYCK, COMMISSIONER OF THE DEPARTMENT OF AGRICULTURE & MARKETS OF NEW YORK, et al. APPEAL FROM THE SUPREME COURT OF NEW YORK. No. 349. Argued January 15, 1936.—Decided February 10, 1936. 1. The New York Milk Control Act, as amended effective April 1, 1934, discriminates between milk dealers without well-advertised trade names who were in the business before April 10, 1933, and those in that class who entered it later, by granting to the former and denying to the latter the privilege of selling milk in New York City at a price one cent below the minimum binding on competitors with well-advertised trade names. Held that the discrimination is arbitrary and unreasonable and violates the equal protection clause of the Fourteenth Amendment. P. 271. 2. This provision, on its face, is not a regulation of a business in the interest of, or for the protection of, the public, but an attempt to give an economic advantage to those engaged in a given business at an arbitrary date as against all those who entered the business after that date. No reasons for the discrimination are disclosed by the record; and in the absence of such showing the Court has no right to conjure up possible situations which might justify the discrimination. Pp. 272, 274. 3. The question whether the time limitation found unconstitutional is severable from the provision for the price differential, is left for adjudication by the state courts upon remand of the case. P. 274. Reversed. Appeal from a judgment upholding an order denying the appellant a license to sell milk. For reports of the case in the New York courts, see 267 N. Y. 9, 195 N. E. 532; 242 App. Div. 881, 275 N. Y. S. 669. Compare the case next preceding in this volume. MAYFLOWER FARMS v. TEN EYCK. 267 Argument for Appellant. 266 Mr. Seymour Ellenbogen, with whom Mr. Max Cohen was on the brief, for appellant. The purpose of the time limitation is to create a monopoly, by preventing new dealers from entering the field. It was not intended to prevent new and injurious competition; such competition was and is directly and effectively prevented by § 258-c of the Act, which the court below overlooked. It was not enacted to preserve the status quo of the milk dealers in business on April 10, 1933, or upon the ground that the well-advertised dealers would form unadvertised subsidiaries; or on emergency grounds. It cannot be supported as a legitimate exercise of police power. Lawton v. Steele, 152 U. S. 133, 137; Colon v. Lisk, 153 N. Y. 188, 196; Wright v. Hart, 182 N. Y. 330. To prescribe different qualifications for entrance into the business, or to prescribe regulations covering the different classes, is entirely different from proscribing, in effect, the right to engage in such business altogether. This case is like Connolly v. Union Sewer Pipe Co., 184 U. S. 540; Truax v. Corrigan, 257 U. S. 312. The limitation is not based on any factual situation. It is an unusual legislative expedient and its approval will establish a most dangerous precedent. To concede the validity of the time limitation would be to concede the power of the legislature, in the guise of regulation, to destroy a lawful business—a power which this Court has declared in many cases does not exist. Bums Baking Co. v. Bryan, 264 U. S. 504, 513. See also Meyer v. Nebraska, 262 U. S. 390, 399-400; Norfolk Ry. Co. v. Public Service Comm’n, 265 U. S. 70, 74; Pierce v. Society of Sisters, 268 U. S. 510, 534-535; Weaver v. Palmer Bros., 270 U. S. 402, 412-415; Fairmont Co. v. Minnesota, 274 U. S. 1, 9-11; Liggett Co. n. Baldridge, 278 U. S. 105, 113. On the other hand, a decision conceding this appellant a license which it deserves and has qualified for, will not 268 OCTOBER TERM, 1935. Argument for Appellees. 297 U.S. disrupt, but will promote, the working of the milk control system of the State. Appellant falls naturally into the class of unadvertised dealers in New York City for whose benefit the price differential provision was enacted and, as a member of such class, is entitled to that benefit. Standard OU Co. v. Charlottesville, 42 F. (2d) 88; State n. Whitcom, 122 Wis. 110; Chicago, M. St. P. Ry. Co. v. Westby, 178 Fed. 619; Fountain Park Co. v. Hensler, 199 Ind. 95; U. S. Automobile Service Club v. Winkle, 128 Ore. 274; Ex parte Wacholder, 1 Cal. App. (2d) 260; Cook Coffee Co. v. Flushing, 267 Mich. 131; State v. Hinman, 65 N. H. 103; Johnson v. Milwaukee, 88 Wis. 383, 390-392; State ex rel. Resch v. Trustees, 121 Wis. 44, 54; Servonitz v. State, 133 Wis. 231, 238; Borgnis v. Falk Co., 147 Wis. 327, 353, 354; Nichols v. Walter, 37 Minn. 264, 271; Davis Construction Co. v. Board, 192 Ind. 144; Louisville N. R. Co. v. Railroad Commissioner, 19 F. (2d) 679, 695; Tugman v. Chicago, 78 Ill. 405; Alexander v. Elizabeth, 56 N. J. L. 71. For other cases in New Jersey condemning arbitrary time limitations, see State v. Post, 55 N. J. L. 264; State ex rel. Pierson n. O’Connor, 54 N. J. L. 36; Pavonia Horse R. Co. v. Jersey City, 45 N. J. L. 297; Stahl v. Trenton, 54 N. J. L. 444. Sutton v. State, 96 Tenn. 696; Pabst Corporation v. Milwaukee, 190 Wis. 349; Northwestern National Ins. Co. v. Fishback, 130 Wash. 490; Hauser n. N. B. cfi M. Insurance Co., 206 N. Y. 455; People v. Ringe, 197 N. Y. 143; Southeastern Electric Co. v. Atlanta, 179 Ga. 514. The time limitation is separable. Mr. Henry S. Manley, with whom Mr. John J. Bennett, Jr., Attorney General of New York, and Mr. Henry Epstein, Solicitor General, were on the brief, for appellees. There was good reason for limiting the privilege of selling at the “unadvertised” price to dealers who'were in MAYFLOWER FARMS v. TEN EYCK. 269 266 Argument for Appellees. business on April 10, 1933, when the original Milk Control Law was enacted. The classification is not unconstitutional. For the purpose of testing the narrow question of constitutionality involved in this case, it is necessary to examine the facts underlying the statute. The legislature did not wish to increase and intensify the lower-price competition against the “advertised” dealers by permitting new dealers to join it; and if persons and corporations wanted to make investments in the milk business after April 10, 1933, they were required to attach themselves to the higher-price group. New legislation frequently makes important distinctions with relation to its effective date, and such classification, far from being arbitrary and unfair, often is necessary to protect from an unfair burden those who began business before the statute was contemplated. Sperry & Hutchinson Co. v. Rhodes, 220 U. S. 502, 505; Buck v. Bell, 274 U. S. 200, 208; Watson v. Maryland, 218 U. S. 173; People v. Griswold, 213 N. Y. 92, 97; Cooper v. Rollins, 152 Ga. 588; People v. Logan, 284 Ill. 83; Criswell v. State, 126 Md. 103; Commonwealth v. Ward, 136 Ky. 146; Sammarco v. Boysa, 193 Wis. 642; Manheim v. Harrison, 164 La. 564; Aurora v. Burns, 319 Ill. 84; Spector v. Building Inspector, 250 Mass. 63; Standard Oil Co. v. Charlottesville, 42 F. (2d) 88; Norton v. Hutson, 142 Kan. 305; New York City v. Kelsey, 158 App. Div. 183. See, to the same effect, Baylis v. Van Nostrand, 176 App. Div. 396; Moritz v. United Brethren Church, 269 N. Y. 125; Commonwealth v. Charity Hospital, 198 Pa. 270; Commonwealth ex rel. Elkin v. Charity Hospital, 199 Pa. 119. Even if the time limitation is unconstitutional, appellant is not entitled to any relief in this proceeding. This Court will not exercise “judicial surgery” for the pur- 270 OCTOBER TERM, 1935. Opinion of the Court. 297 U. S. pose of extending to the appellant and other new dealers the benefit of the “unadvertised differential” provision. The legislature was moved by the anticipated hardship of an even price, upon dealers whose existing businesses depended upon continuing sales at a lower price, to make them a concession which this Court has said is “novel, if not unique.” Borden’s Farm Products Co. v. Baldwin, 293 U. S. 194, 203. The legislature made the concession only to the extent that it was needed. It intended merely to save existing business done on the lower price level; it had no intention of encouraging new dealers to come in on that basis. The statute now under consideration contains a separability clause; but we do not understand that such a clause is conclusive upon all questions of separability. Such a clause is “but an aid to interpretation and not an inexorable command.” Dorchy v. Kansas, 264 U. S. 286, 290; Williams v. Standard Oil Co., 278 U. S. 235, 242; Utah Power & Light Co. v. Pjost, 286 U. S. 165, 184; Champlin Refining Co. v. Commission, 286 U. S. 210, 235. The general rule as to separability has been stated and applied many times. See, for examples, Sprague v. Thompson, 118 U. S. 90, 94—95; Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 565; Lynch v. United States, 292 U. S. 571, 586. The rule applied by the highest court of New York State is the same. People ex rel. Cement Co. v. Knapp, 230 N. Y. 48, 60; City Bank F. T. Co. v. New York Central R. Co., 253 N. Y. 49, 55-57; People v. Mancuso, 255 N. Y. 463, 472-474. Mr. Justice Roberts delivered the opinion of the Court. The appellant is a corporation formed under the laws of New York, pursuing the business of a milk dealer in Brooklyn. It did not enter the business until the autumn of 1933, when it applied for, and was granted, MAYFLOWER FARMS v. TEN EYCK. 271 Opinion of the Court. 266 a license under the Milk Control Act of March 31, 1933. The statute having been reenacted for the year commencing April 1, 1934, the company, on April 16, 1934, sought a license under the new act. After a hearing the application was denied. The Supreme Court granted a certiorari order, and upon that order and the return the Appellate Division confirmed the order of the Department of Agriculture and Markets refusing a license, and this action was affirmed by the Court of Appeals. The Milk Control Act of 1933/ authorized a board to fix minimum prices for sales of fluid milk in bottles by dealers to stores in cities of more than one million inhabitants, with a differential of one cent per quart in favor of dealers “not having a well advertised trade name.” 2 The term of the act was one year. An amended act, effective April 1, 1934/ which placed milk control under the jurisdiction of a division of the Department of Agriculture and Markets, contained a similar provision with respect to the differential. The pertinent section, as it stood at the time of the appellant’s application for a license, follows; the words in brackets having been in the original act, but eliminated when the statute was revised in 1934, those in italics having been added by the later act: “It shall not be unlawful for any milk dealer who [at the time this act shall take effect is] since April tenth, nineteen hundred thirty-three has been engaged continuously in the business of purchasing and handling milk not having a well advertised trade name in a city of more than one million inhabitants to sell fluid milk in bottles to stores in such city at a price not more than one cent per quart below the price of such milk sold to stores under 1 Laws of 1933 (N. Y.) c. 158. See Nebbia v. New York, 291 U. S. 502. 2Ibid., § 317 (c). . .. 3 Laws of 1934 (N, Y.) c, 126, 272 OCTOBER TERM, 1935. Opinion of the Court. 297U.S. a well advertised trade name, and such lower price shall also apply on sales from stores to consumers; provided that in no event shall the price of such milk not having a well advertised trade name, be more than one cent per quart below the minimum price fixed [by the board] for such sales to stores in such a city.” 4 The appellant had not a well-advertised trade name. The reason for refusing it a license was that though it had not been continuously in the business of dealing in milk since April 10, 1933 it had sold and was selling to stores milk at a price a cent below the established minimum price. The question is whether the provision denying the benefit of the differential to all who embark in the business after April 10, 1933, works a discrimination which has no foundation in the circumstances of those engaging in the milk business in New York City, and is therefore so unreasonable as to deny appellant the equal protection of the laws in violation of the Fourteenth Amendment. The record discloses no reason for the discrimination. The report of the committee, pursuant to which the Milk Control Act was adopted, is silent on the subject. While the legislative history indicates that the differential provision was intended to preserve competitive conditions affecting the store trade in milk, it affords no clue to the genesis of the clause denying the benefit of the differential to those entering the business after April 10, 1933. The Court of Appeals thought a possible reason for the time limitation might be that, without it, the companies having well advertised names could, through subsidiaries, sell milk not bearing their names in competition with unadvertised dealers and thus drive some of the latter ‘Laws of 1933 N. Y., c. 158, § 317 (c); Article 21-A, § 258 (q) of the Agriculture and Markets Law of the State of New York; Laws of 1934 (N. Y.) 580. MAYFLOWER FARMS v. TEN EYCK. 273 Opinion of the Court. 266 out of the field with consequent injury to the farmers who sell them milk. This view ignores the fact that the purchase price to the farmer is fixed and that the introduction of new unadvertised brands of bottled milk would not reduce the total demand for fluid milk in the metropolitan area. The appellees do not attempt now to support the provision on this ground. Another suggested reason for the discrimination is that the legislature believed an equal price basis for all dealers would cause most of the business of selling milk through stores to pass into the hands of the large and well known dealers; the differential provision was designed to prevent this result, and save existing businesses of the independent dealers, but was limited in its scope by the reason for it; the legislature did not wish to increase the lower price competition against well advertised dealers by permitting new independent dealers to go into the business, and so required persons or corporations desiring to make investments in the milk business after April 10, 1933 to attach themselves to the higher price group. This is but another way of saying the legislature determined that during the life of the law no person or corporation might enter the business of a milk dealer in New York City. The very reason for the differential was the belief that no one could successfully market an unadvertised brand on an even price basis with the seller of a well advertised brand. One coming fresh into the field would not possess such a brand and clearly could not meet the competition of those having an established trade name and good will, unless he were allowed the same differential as others in his class. By denying him this advantage the law effectually barred him from the business. We are referred to a host of decisions to the effect that a regulatory law may be prospective in operation and may except from its sweep those presently engaged in the calling or activity to which it is directed. Examples are stat- 439270—36--18 274 OCTOBER TERM, 1935. Cardozo, J., dissenting. 297U.S. utes licensing physicians and dentists, which apply only to those entering the profession subsequent to the passage of the act and exempt those then in practice, or zoning laws which exempt existing buildings, or laws forbidding slaughter houses within certain areas, but excepting existing establishments. The challenged provision is unlike such laws, since, on its face, it is not a regulation of a business or an activity in the interest of, or for the protection of, the public, but an attempt to give an economic advantage to those engaged in a given business at an arbitrary date as against all those who enter the industry after that date. The appellees do not intimate that the classification bears any relation to the public health or welfare generally; that the provision will discourage monopoly; or that it was aimed at any abuse, cognizable by law, in the milk business. In the absence of any such showing, we have no right to conjure up possible situations which might justify the discrimination. The classification is arbitrary and unreasonable and denies the appellant the equal protection of the law. At the argument we were asked to hold that if the time limitation be bad, it is severable, and the provision for the differential, shorn of it, remains in force; and we were referred to a section of the act claimed to show the legislature so intended. While we have jurisdiction to decide the question, it is one which may appropriately be left for adjudication by the courts of New York, Dorchy v. Kansas, 264 U. S. 286, 290, 291; Fox Film Corp. v. Muller, 296 U. S. 207, 209, 210. The judgment is reversed and the cause remanded for further proceedings not inconsistent with this opinion. Reversed. Mr. Justice Cardozo, dissenting. The judgment just announced is irreconcilable in principle with the judgment in Borden’s case, ante, p. 251, announced a minute or so earlier. MAYFLOWER FARMS v. TEN EYCK. 275 Cardozo, J., dissenting. 266 A minimum price for fluid milk was fixed by law in April, 1933. At that time, “independents” were underselling their competitors, the dealers in well-advertised brands, by approximately a cent a quart. There was reason to believe that unless that differential was preserved, they would be driven out of business. To give them an opportunity to survive, the lawmakers maintained the differential in the City of New York, the field of keenest competition. We have learned from the opinion in Borden’s case that this might lawfully be done. The problem was then forced upon the lawmakers, what were to be the privileges of independents who came upon the scene thereafter? Were they to have the benefit of a differential though they had not invested a dollar in the milk business at the passage of the act, or were they to take the chances of defeat by rivals stronger than themselves, as they would have to do in other callings? “The Fourteenth Amendment does not protect a business against the hazards of competition.” Hegeman Farms Corp. v. Baldwin, 293 U. S. 163, 170; Public Service Comm’n v. Great Northern Utilities Co., 289 U. S. 130, 135. To concede the differential to newcomers might mean an indefinite extension of an artificial preference, thereby aggravating the handicap, the factitious barrier to expansion, for owners of established brands. There was danger that the preference would become so general as to occupy an unfair proportion of the field, the statutory norm being thus disrupted altogether. On the other hand, to refuse the differential might mean that newcomers would be deterred from putting capital and labor at the risk of such a business, and, even if they chose to do so, would wage a losing fight. Hardships, great or little, were inevitable, whether the field of the differential was narrowed or enlarged. The legislature, and not the court, has been charged with the duty of determining their comparative extent. To some minds an expansion of the field might seem the course of 276 OCTOBER TERM, 1935. Cardozo, J., dissenting. 297 U.S. wisdom and even that of duty; to others wisdom and duty might seem to point the other way. The judicial function is discharged when it appears from a survey of the scene that the lawmakers did not play the part of arbitrary despots in choosing as they did. Standard Oil Co. v. Marysville, 279 U. S. 582, 586, 587. When a line or point has to be fixed, and “there is no mathematical or logical way of fixing it precisely, the decision of the legislature must be accepted unless we can say that it is very wide of any reasonable mark.” Holmes, J., in Louisville Gas & Electric Co. v. Coleman, 277 U. S. 32, 41. Cf. Dominion Hotel v. Arizona, 249 U. S. 265, 268, 269. The judgment of the court commits us to a larger role. In declaring the equities of newcomers to be not inferior to those of others, the judgment makes a choice between competing considerations of policy and fairness, however emphatic its professions that it applies a rule of law. For the situation was one to tax the wisdom of the wisest. At the very least it was a situation where thoughtful and honest men might see their duty differently. The statute upheld by this court in Nebbia v. New York, 291 U. S. 502, was an experiment, and a novel one, in that form of business enterprise. Relations between groups had grown up and crystallized under cover of the regime of unrestricted competition. They were threatened with disruption by a system of regulated prices which might crowd the little dealers out and leave the strong and the rich in possession of the field. If there was to be dislocation of the price structure by the action of the state, there was a duty, or so the lawmakers might believe, to spread the consequences among the groups with a minimum of change and hence a minimum of hardship. But the position of men in business at the beginning of the change was very different from those who might go into the business afterwards. Those already there would lose something more than an opportunity for a choice between one business and another. They would lose cap- MAYFLOWER FARMS v. TEN EYCK. 277 266 Cardozo, J., dissenting. ital already ventured; they would lose experience already bought; they would suffer the pains incidental to the sudden and enforced abandonment of an accustomed way of life. A newcomer could not pretend that he was exposed to those afflictions. Then, too, the ephemeral character of the project counted heavily in favor of the older dealers, and little in. favor of a newcomer, or rather, indeed, against him. The system of regulation had been set up as a temporary one, to tide producers over the rigors of the great depression. If independents already in the field could have their business saved from ruin, it might come back to them intact when the statute was no longer needed. Those who went into the system later would have to count the cost. Considerations akin to these have seemed sufficient to other legislatures for drawing a distinction between an old business and a new one. They have seemed sufficient to this court in determining the validity of other acts of legislation not different in principle. Stanley v. Public Utilities Comm’n, 295 U. S. 76, 78; Continental Baking Co. v. Woodring, 286 U. S. 352, 370, 371; Sperry c& Hutchinson Co. v. Rhodes, 220 U. S. 502, 505; Watson v. Maryland, 218 U. S. 173,177,178; cf. Spector v. Building Inspector, 250 Mass. 63, 70, 71; 145 N. E. 265. Independents who were in business when the statute was adopted would not have suffered a denial of a constitutional right or privilege if they had been refused a differential, though the refusal might have condemned them to a foreordained and hopeless struggle with advertised competitors stronger than themselves. For the same reason, independents starting afterwards must submit to the same chances unless their equities are as commanding as those of dealers on the scene before. It is juggling with words to say that all the independents make up a single “class,” and by reason of that fact must be subjected to a single rule. Whether the class is divisible into subclasses is the very question to be answered. There may 278 OCTOBER TERM, 1935. Syllabus. 297 U.S. be division and subdivision unless separation can be found to be so void of rationality as to be the expression of a whim rather than an exercise of judgment. “We have no right,” it is now said, “to conjure up possible situations which might justify the discrimination.” The court has taught a different doctrine in its earlier decisions. “A statutory discrimination will not be set aside as the denial of equal protection of the laws if any state of facts reasonably may be conceived to justify it.” Metropolitan Casualty Insurance Co. v. Brownell, 294 U. S. 580, 584; Rast v. Van Deman Lewis Co., 240 U. S. 342, 357; O’Gorman & Young v. Hartford Fire Insurance Co., 282 U. S. 251, 257; Williams v. Mayor, 289 U. S. 36, 42. On this occasion, happily, the facts are not obscure. Big dealers and little ones, newcomers in the trade and veterans, were clamorously asserting to the legislature their title to its favor. I have not seen the judicial scales so delicately poised and so accurately graduated as to balance and record the subtleties of all these rival equities, and make them ponderable and legible beyond a reasonable doubt. To say that the statute is not void beyond a reasonable doubt is to say that it is valid. Mr. Justice Brandeis and Mr. Justice Stone join in this opinion. BROWN et al. v. MISSISSIPPI. CERTIORARI TO THE SUPREME COURT OF MISSISSIPPI. No. 301. Argued January 10, 1936.—Decided February 17, 1936. Convictions of murder, which rest solely upon confessions shown to have been extorted by officers of the State by torture of the accused, are void under the due process clause of the Fourteenth Amendment. Pp. 279, 285. 173 Miss. 542; 158 So. 339; 161 So. 465, reversed. BROWN v. MISSISSIPPI. 279 278 Opinion of the Court. Certiorari, 296 U. S. 559, to review a judgment affirming convictions of murder. Mr. Earl Brewer, with whom Mr. J. Morgan Stevens was on the brief, for petitioners. Messrs. William D. Conn, Jr., and William H. Maynard, Assistant Attorneys General of Mississippi, with whom Mr. Greek L. Rice, Attorney General, was on the brief, for respondent. Mr. Chief Justice Hughes delivered the opinion of the Court. The question in this case is whether convictions, which rest solely upon confessions shown to have been extorted by officers of the State by brutality and violence, are consistent with the due process of law required by the Fourteenth Amendment of the Constitution of the United States. Petitioners were indicted for the murder of one Raymond Stewart, whose death occurred on March 30, 1934. They were indicted on April 4, 1934, and were then arraigned and pleaded not guilty. Counsel were appointed by the court to defend them. Trial was begun the next morning and was concluded on the following day, when they were found guilty and sentenced to death. Aside from the confessions, there was no evidence sufficient to warrant the submission of the case to the jury. After a preliminary inquiry, testimony as to the confessions was received over the objection of defendants’ counsel. Defendants then testified that the confessions were false and had been procured by physical torture. The case went to the jury with instructions, upon the request of defendants’ counsel, that if the jury had reasonable doubt as to the confessions having resulted from coercion, and that they were not true, they were not to be considered as evidence. On their appeal to the Su- 280 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. preme Court of the State, defendants assigned as error the inadmissibility of the confessions. The judgment was affirmed. 158 So. 339. Defendants then moved in the Supreme Court of the State to arrest the judgment and for a new trial on the ground that all the evidence against them was obtained by coercion and brutality known to the court and to the district attorney, and that defendants had been denied the benefit of counsel or opportunity to confer with counsel in a reasonable manner. The motion was supported by affidavits. At about the same time, defendants filed in the Supreme Court a “suggestion of error” explicitly challenging the proceedings of the trial, in the use of the confessions and with respect to the alleged denial of representation by counsel, as violating the due process clause of the Fourteenth Amendment of the Constitution of the United States. The state court entertained the suggestion of error, considered the federal question, and decided it against defendants’ contentions. 161 So. 465. Two judges dissented. Id., p. 470. We granted a writ of certiorari. The grounds of the decision were (1) that immunity from self-incrimination is not essential to due process of law, and (2) that the failure of the trial court to exclude the confessions after the introduction of evidence showing their incompetency, in the absence of a request for such exclusion, did not deprive the defendants of life or liberty without due process of law; and that even if the trial court had erroneously overruled a motion to exclude the confessions, the ruling would have been mere error reversible on appeal, but not a violation of constitutional right. Id., p. 468. The opinion of the state court did not set forth the evidence as to the circumstances in which the confessions were procured. That the evidence established that they were procured by coercion was not questioned. The state BROWN v. MISSISSIPPI. 281 278 Opinion of the Court. court said: “After the state closed its case on the merits, the appellants, for the first time, introduced evidence from which it appears that the confessions were not made voluntarily but were coerced.” Id., p. 466. There is no dispute as to the facts upon this point and as they are clearly and adequately stated in the dissenting opinion of Judge Griffith (with whom Judge Anderson concurred)—■■ showing both the extreme brutality of the measures to extort the confessions and the participation of the state authorities—we quote this part of his opinion in full, as follows {Id., pp. 470, 471): “The crime with which these defendants, all ignorant negroes, are charged, was discovered about one o’clock p. m. on Friday, March 30,1934. On that night one Dial, a deputy sheriff, accompanied by others, came to the home of Ellington, one of the defendants, and requested him to accompany them to the house of the deceased, and there a number of white men were gathered, who began to accuse the defendant of the crime. Upon his denial they seized him, and with the participation of the deputy they hanged him by a rope to the limb of a tree, and having let him down, they hung him again, and when he was let down the second time, and he still protested his innocence, he was tied to a tree and whipped, and still declining to accede to the demands that he confess, he was finally released and he returned with some difficulty to his home, suffering intense pain and agony. The record of the testimony shows that the signs of the rope on his neck were plainly visible during the so-called trial. A day or two thereafter the said deputy, accompanied by another, returned to the home of the said defendant and arrested him, and departed with the prisoner towards the jail in an adjoining county, but went by a route which led into the State of Alabama; and while on the way, in that State, the deputy stopped and again severely whipped the defendant, declaring that he would continue the whipping 282 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. until he confessed, and the defendant then agreed to confess to such a statement as the deputy would dictate, and he did so, after which he was delivered to jail. “The other two defendants, Ed Brown and Henry Shields, were also arrested and taken to the same jail. On Sunday night, April 1, 1934, the same deputy, accompanied by a number of white men, one of whom was also an officer, and by the jailer, came to the jail, and the two last named defendants were made to strip and they were laid over chairs and their backs were cut to pieces with a leather strap with buckles on it, and they were likewise made by the said deputy definitely to understand that the whipping would be continued unless and until they confessed, and not only confessed, but confessed in every matter of detail as demanded by those present; and in this manner the defendants confessed the crime, and as the whippings progressed and were repeated, they changed or adjusted their confession in all particulars of detail so as to conform to the demands of their torturers. When the confessions had been obtained in the exact form and contents as desired by the mob, they left with the parting admonition and warning that, if the defendants changed their story at any time in any respect from that last stated, the perpetrators of the outrage would administer the same or equally effective treatment. “Further details of the brutal treatment to which these helpless prisoners were subjected need not be pursued. It is sufficient to say that in pertinent respects the transcript reads more like pages tom from some medieval account, than a record made within the confines of a modern civilization which aspires to an enlightened constitutional government. “All this having been accomplished, on the next day, that is, on Monday, April 2, when the defendants had been given time to recuperate somewhat from the tortures to which they had been subjected, the two sheriffs, one 283 BROWN v. MISSISSIPPI. Opinion of the Court. 278 of the county where the crime was committed, and the other of the county of the jail in which the prisoners were confined, came to the jail, accompanied by eight other persons, some of them deputies, there to hear the free and voluntary confession of these miserable and abject defendants. The sheriff of the county of the crime admitted that he had heard of the whipping, but averred that he had no personal knowledge of it. He admitted that one of the defendants, when brought before him to confess, was limping and did not sit down, and that this particular defendant then and there stated that he had been strapped so severely that he could not sit down, and as already stated, the signs of the rope on the neck of another of the defendants were plainly visible to all. Nevertheless the solemn farce of hearing the free and voluntary confessions was gone through with, and these two sheriffs and one other person then present were the three witnesses used in court to establish the so-called confessions, which were received by the court and admitted in evidence over the objections of the defendants duly entered of record as each of the said three witnesses delivered their alleged testimony. There was thus enough before the court when these confessions were first offered to make known to the court that they were not, beyond all reasonable doubt, free and voluntary; and the failure of the court then to exclude the confessions is sufficient to reverse the judgment, under every rule of procedure that has heretofore been prescribed, and hence it was not necessary subsequently to renew the objections by motion or otherwise. “The spurious confessions having been obtained—and the farce last mentioned having been gone through with on Monday, April 2d—the court, then in session, on the following day, Tuesday, April 3, 1934, ordered the grand jury to reassemble on the succeeding day, April 4, 1934, at nine o’clock, and on the morning of the day last meh- 284 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. tioned the grand jury returned an indictment against the defendants for murder. Late that afternoon the defendants were brought from the jail in the adjoining county and arraigned, when one or more of them offered to plead guilty, which the court declined to accept, and, upon inquiry whether they had or desired counsel, they stated that they had none, and did not suppose that counsel could be of any assistance to them. The court thereupon appointed counsel, and set the case for trial for the following morning at nine o’clock, and the defendants were returned to the jail in the adjoining county about thirty miles away. “The defendants were brought to the courthouse of the county on the following morning, April 5th, and the so-called trial was opened, and was concluded on the next day, April 6, 1934, and resulted in a pretended conviction with death sentences. The evidence upon which the conviction was obtained was the so-called confessions. Without this evidence a peremptory instruction to find for the defendants would have been inescapable. The defendants were put on the stand, and by their testimony the facts and the details thereof as to the manner by which the confessions were extorted from them were fully developed, and it is further disclosed by the record that the same deputy, Dial, under whose guiding hand and active participation the tortures to coerce the confessions were administered, was actively in the performance of the supposed duties of a court deputy in the courthouse and in the presence of the prisoners during what is denominated, in complimentary terms, the trial of these defendants. This deputy was put on the stand by the state in rebuttal, and admitted the whippings. It is interesting to note that in his testimony with reference to the whipping of the defendant Ellington, and in response to the inquiry as to how severely he was whipped, the deputy stated, ‘Not too much for a negro; not as much as I would have done if it were left to me.’ Two others who had participated BROWN v. MISSISSIPPI. 285 278 Opinion of the Court. in these whippings were introduced and admitted it—not a single witness was introduced who denied it. The facts are not only undisputed, they are admitted, and admitted to have been done by officers of the state, in conjunction with other participants, and all this was definitely well known to everybody connected with the trial, and during the trial, including the state’s prosecuting attorney and the trial judge presiding.” 1. The State stresses the statement in Twining v. New Jersey, 211 U. S. 78, 114, that “exemption from compulsory self-incrimination in the courts of the States is not secured by any part of the Federal Constitution,” and the statement in Snyder v. Massachusetts, 291 U. S. 97, 105, that “the privilege against self-incrimination may be withdrawn and the accused put upon the stand as a witness for the State.” But the question of the right of the State to withdraw the privilege against self-incrimination is not here involved. The compulsion to which the quoted statements refer is that of the processes of justice by which the accused may be called as a witness and required to testify. Compulsion by torture to extort a confession is a different matter. The State is free to regulate the procedure of its courts in accordance with its own conceptions of policy, unless in so doing it “offends some principle of justice so rooted in the traditions and conscience of our people as to be ranked as fundamental.” Snyder v. Massachusetts, supra; Rogers v. Peck, 199 U. S. 425, 434. The State may abolish trial by jury. It may dispense with indictment by a grand jury and substitute complaint or information. Walker v. Sauvinet, 92 U. S. 90; Hurtado v. California, 110 U. S. 516; Snyder v. Massachusetts, supra. But the freedom of the State in establishing its policy is the freedom of constitutional government and is limited by the requirement of due process of law. Because a State may dispense with a jury trial, it does not follow that it may substitute trial by ordeal. The rack and tor- 286 OCTOBER TERM, 1935. Opinion of the Court 297 U.S. ture chamber may not be substituted for the witness stand. The State may not permit an accused to be hurried to conviction under mob domination—where the whole proceeding is but a mask—without supplying corrective process. Moore v. Dempsey, 261 U. S. 86, 91. The State may not deny to the accused the aid of counsel. Powell v. Alabama, 287 U. S. 45. Nor may a State, through the action of its officers, contrive a conviction through the pretense of a trial which in truth is “but used as a means of depriving a defendant of liberty through a deliberate deception of court and jury by the presentation of testimony known to be perjured.” Mooney v. Holohan, 294 U. S. 103, 112. And the trial equally is a mere pretense where the state authorities have contrived a conviction resting solely upon confessions obtained by violence. The due process clause requires “that state action, whether through one agency or another, shall be consistent with the fundamental principles of liberty and justice which lie at the base of all our civil and political institutions.” Hebert v. Louisiana, 272 U. S. 312, 316. It would be difficult to conceive of methods more revolting to the sense of justice than those taken to procure the confessions of these petitioners, and the use of the confessions thus obtained as the basis for conviction and sentence was a clear denial of due process. 2. It is in this view that the further contention of the State must be considered. That contention rests upon the failure of counsel for the accused, who had objected to the admissibility of the confessions, to move for their exclusion after they had been introduced and the fact of coercion had been proved. It is a contention which proceeds upon a misconception of the nature of petitioners’ complaint. That complaint is not of the commission of mere error, but of a wrong so fundamental that it made the whole proceeding a mere pretense of a trial and rendered the conviction and sentence wholly void. Moore v. Dempsey, supra. We are not concerned with a mere BROWN v. MISSISSIPPI. 287 278 Opinion of the Court. question of state practice, or whether counsel assigned to petitioners were competent or mistakenly assumed that their first objections were sufficient. In an earlier case the Supreme Court of the State had recognized the duty of the court to supply corrective process where due process of law had been denied. In Fisher v. State, 145 Miss. 116, 134; 110 So. 361, 365, the court said: “Coercing the supposed state’s criminals into confessions and using such confessions so coerced from them against them in trials has been the curse of all countries. It was the chief inequity, the crowning infamy of the Star Chamber, and the Inquisition, and other similar institutions. The constitution recognized the evils that lay behind these practices and prohibited them in this country. . . . The duty of maintaining constitutional rights of a person on trial for his life rises above mere rules of procedure and wherever the court is clearly satisfied that such violations exist, it will refuse to sanction such violations and will apply the corrective.” In the instant case, the trial court was fully advised by the undisputed evidence of the way in which the confessions had been procured. The trial court knew that there was no other evidence upon which conviction and sentence could be based. Yet it proceeded to permit conviction and to pronounce sentence. The conviction and sentence were void for want of the essential elements of due process, and the proceeding thus vitiated could be challenged in any appropriate manner. Mooney v. Holohan, supra. It was challenged before the Supreme Court of the State by the express invocation of the Fourteenth Amendment. That court entertained the challenge, considered the federal question thus presented, but declined to enforce petitioners’ constitutional right. The court thus denied a federal right fully established and specially set up and claimed and the judgment must be Reversed. 288 OCTOBER TERM, 1935. Syllabus. 297 U.S. ASHWANDER et al. v. TENNESSEE VALLEY AUTHORITY et al. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT. Nos. 403 and 404. Argued December 19, 20, 1935.—Decided February 17, 1936. 1. Owners of a minority of the preferred shares, with voting power, in a corporation have standing to sue in its right to prevent the carrying out of a contract executed in its name by the directors with an agency of the United States, upon the grounds that the contract is unconstitutional and that its performance will cause irreparable injury to the interests of the corporation. P. 318. In order to establish the stockholders’ right of suit, it is not necessary to show that, in executing the contract, the directors acted with fraudulent intent or under legal duress or ultra vires of the corporation. In the absence of an adequate legal remedy, it is enough to show the breach of duty involved in the injurious, illegal action. This may consist in yielding to illegal government demands. The fact that the directors, in the exercise of their judgment, resolved to comply with such demands, is not an adequate ground for denying to the stockholders an opportunity to contest their validity. 2. The opportunity to resort to equity, in the absence of an adequate legal remedy, in order to prevent illegal transactions by those in control of corporate properties, should not be curtailed because of reluctance to decide constitutional questions. P. 321. 3. Estoppel in equity must rest on substantial grounds of prejudice or change of position—not on technicalities. P. 322. 4. Where a contract between an electric power corporation and the Tennessee Valley Authority, a federal agency, for the sale by the former to the latter of transmission lines leading from a government dam where electricity was generated, was attacked in behalf of the corporation upon the ground that legislation by Congress purporting to empower the federal agency was unconstitutional,— held that the corporation was not estopped by having bought electricity of the Government at the dam before and after the passage of the legislation; or by having applied to a state public service commission for approval of the contract; or by a delay of some months in the bringing of a stockholders’ suit to set the contract aside. P. 323. ASHWANDER v. VALLEY AUTHORITY. 289 288 Syllabus. The principle that one who accepts the benefit of a statute may not question its constitutionality, held inapplicable. 5. The judicial power does not extend to the determination of abstract questions. P. 324. 6. The Act providing for declaratory judgments does not attempt to change the essential requisites for the exercise of judicial power. By its terms, it applies to “cases of actual controversy,” meaning a controversy of a justiciable nature, thus excluding advisory decrees upon hypothetical states of fact. P. 325. 7. The dam across the Tennessee River at Muscle Shoals, known as the Wilson Dam, was constructed pursuant to the National Defense Act of June 3, 1916, in the exercise of constitutional functions of the Federal Government, (a) as a means of assuring abundant electric energy for the manufacture of munitions in the event of war; (b) to improve the navigability of the river. P. 326. 8. Judicial notice is taken of the international situation existing when the Act of 1916 was passed. Indisputably, the Wilson Dam and its auxiliary plants, including a hydro-electric power plant, are, and« were intended to be, adapted to the purposes of national defense. P. 327. 9. The power to regulate interstate commerce includes the power to remove obstructions to navigation from the navigable rivers of the United States. P. 328. 10. In the execution of the Wilson Dam project for the constitutional purposes above stated, the United States acquired full title to the dam site, with all riparian rights. Water power, an inevitable incident of the construction of the dam, came into the exclusive control of the Federal Government, and was convertible into electric energy. Held: (1) That the water power, the right to convert it into electric energy, and the electric energy thus produced, constitute property belonging to the United States. P. 330. (2) That this electric energy, so produced at the Wilson Dam, is property of which Congress may dispose pursuant to the authority expressly granted by § 3, Art. IV, of the Constitution. P. 330. (3) The Ninth and Tenth Amendments do not apply to rights which are expressly granted by the Constitution to the Federal Government. P. 330. (4) The authority of Congress to dispose of electric energy generated at the Wilson Dam, is not limited to a surplus necessarily created in the course of making munitions of war or operat- 43927°—36-----19 290 OCTOBER TERM, 1935. Syllabus. 297 U.S. ing the works for navigation purposes, but extends to the remainder of the available energy, which would otherwise be lost or wasted. P. 335. (5) The method of disposing of government property under the constitutional provision (§3, Art. IV) must be appropriate to the nature of the property, and be adopted in the public interest as distinguished from private or personal ends; and, the Court assumes, it must be consistent with the foundation principles of our dual system of Government and must not be contrived to govern the concerns reserved to the States. P. 338. 11. The Government, acting through its agency, the Tennessee Valley Authority, undertook to dispose of electric energy generated at the Wilson Dam by sale to a power company, by interchange of energy with the company, and by purchase from the company of certain transmission lines leading from the dam and providing the means of distributing such energy to a large population within fifty miles. The power company had theretofore been buying energy from the Government at the dam and was apparently the only customer to whom it could be sold there. The purchase of the lines was to enable the Government to seek a wider market. Held: (1) That there was no basis for concluding that the contract exceeded the federal power to dispose of property, and invaded rights reserved to the State or to the people. P. 338. (2) The power company had no constitutional right to insist that the energy should be sold to it at the dam or go to waste. P. 339. The decision on the constitutional question is strictly limited to the right of the Government to dispose of the energy itself,— which is simply the mechanical energy, incidental to falling water at this dam, converted into electric energy, susceptible of transmission,—and the right to acquire these transmission lines as a facility for disposing of that energy. The Government rightly conceded at the bar that it was without constitutional authority to acquire or dispose of electric energy except as it comes into being in the operation of works constructed in the exercise of some power delegated to the United States. The question whether it might constitutionally use the energy generated at Wilson Dam in carrying on manufacturing or commercial enterprises not related to the purposes for which the Government was established, is not involved in this case; nor is the question whether, for disposing of the energy, the Government could acquire or operate local or urban ASHWANDER v. VALLEY AUTHORITY. 291 288 Argument for Petitioners. distribution systems. The Court expresses no opinion as to such questions, nor as to the status of any other dam or power development in the Tennessee Valley, whether connected with or apart from the Wilson Dam, nor as to the validity of the Tennessee Valley Authority Act or of the claims made in the pronouncements and program of that Authority, apart from the questions discussed in relation to the particular provisions of the contract above mentioned affecting the Power Company. P. 339. 78 F. (2d) 578, affirmed. Certiorari, 296 U. S. 562, to review a decree reversing a decree of the District Court, by which that court, at the suit of preferred stockholders of the Alabama Power Company, set aside a contract that had been entered into by the Company and the Tennessee Valley Authority involving the sale and exchange of electric power generated at a government dam, and the acquisition by the Authority of certain transmission lines from the Power Company. Messrs. Forney Johnston and James M. Beck, with whom Mr. Joseph F. Johnston was on the brief, for. petitioners. This proceeding presents for review the constitutional validity of an effort through a corporate agency of the Federal Government to bring about a coup d'etat that would commit the Government permanently to the manufacture and distribution of electricity throughout an initial region comprising approximately one-fifth of the population of the United States. The effort of the agency is to commit the Government to this commercial program by actionable contracts, to endure, without reserved right of cancellation, for a generation. The agency has admitted on this record that its proposed additions to the power supply present an economic problem of the first magnitude. The program, if established as a precedent by this coup, or by custom of the Constitution, or by decision on this record, would open every essential industry and service 292 OCTOBER TERM, 1935. Argument for Petitioners. 297 U.S. to direct and permanent governmental competition, by means of preparedness plants, operated commercially while awaiting governmental use. It would also, in a proceeding to which the States are not parties, establish the pretended right of the Government to extract by a commercial manufacturing business, from every navigable stream and headwater tributary, the entire energy of the flowing waters, an asset in the stream, heretofore regarded as vested inalienably in the States and their citizens, subject only to regulation in the interest of navigation. The Government has sought no compact among the Valley States; it has silenced the state administrations with a revocable stipend. The basis of the case asserted by the Government is that by improving navigation the Government acquires a commodity or proprietary right in the use of the surplus waters not even in a discretionary sense necessary for navigation, and may compel their passage through commercial generating units owned by the Government, which has no physical or functional relation to navigation. The record shows that the program is being pressed in the region by this corporate agency by arbitrary and oppressive methods of competition and by action and commitment wholly inconsistent with federal function; for the admitted purpose of accomplishing primary objectives which have no relation to any governmental use or function. The service proposed will result in a monopoly of electric service by the Federal Government in any area to be taken on by this Board. The establishment of the program means the displacement of any practical regulation of utility functions in the service area thus to be taken over or controlled by the Government. It would displace the existing processes of regulation by substituting a corporate anomaly of the Federal Government, sub- ASHWANDER v. VALLEY AUTHORITY. 293 288 Argument for Petitioners. jected to no standard or restraint, with unlimited discretion highly legislative in character. Petitioners challenge its validity in every aspect, in its entirety, and in detail, asserting that the program and all of its essentials, the means employed to promote it, its dominant objectives, and its arbitrary methods, do not consist with the letter and spirit of the Constitution. Powers not expressly granted to the Federal Government cannot be implied or regarded as incidental where their exercise would be inconsistent with affirmative powers granted by the Constitution or with its letter and spirit. McCulloch v. Maryland, 4 Wheat. 316, 421; Linder v. United States, 268 U. S. 5, 17 ; Bailey v. Drexel Furniture Co., 259 U. S. 20; Hammer v. Dagenhart, 247 U. S. 251; Kansas v. Colorado, 206 U. S. 46; Schechter Poultry Corp. v. United States, 295 U. S. 495. Under the test formulated by Chief Justice Marshall, the means employed by Congress must consist with the letter and the spirit of the Constitution. It is, after all, not solely a question whether the legislative intent was to regulate affairs reserved to the State. There is the further question whether, regardless of intent, the statute is in fact consistent with the theory of the dual system, or plainly and palpably crosses the line. Wisconsin v. Illinois, 278 U. S. 367, 415; Veazie Bank v. Fenno, 8 Wall. 533, 541. The express powers delegated to Congress must be exercised subject to the restrictions implicit in the other provisions of the Constitution. Thus, legislation under the commerce clause must be consistent with the Fifth and Tenth Amendments. Monongahela Navigation Co. v. United States, 148 U. S. 312, 336; United States v. Joint Traffic Assn., 171 U. S. 505, 571-572; Adair v. United States, 208 U. S. 161, 180; United States v. Chicago, M. & St. P. Ry., 282 U. S. 311, 327; Keller v. United States, 213 U. S. 138, 148. 294 OCTOBER TERM, 1935. Argument for Petitioners. 297 U.S. The war power must give heed to the Fifth Amendment. United States v. Cohen Grocery Co., 255 U. S. 81, 88. Even the power of federal taxation must respect these Amendments. Collector v. Day, 11 Wall. 113, 124; Indian Motocycle Co. v. United States, 283 U. S. 570. The means and instrumentalities challenged on this record do not rest upon the Constitution. They rest in part upon an Act of Congress, the prototype of which was vetoed by two Presidents, was rejected by successive previous Congresses, was adopted over the most earnest protest during a period of national disaster and tension, and which constitutes a departure from a tradition unbroken for a century and a half. They rest in part upon the discretion of a board of three men with practically unlimited power. Between them, this board and a majority in Congress are undertaking to commit the Federal Government to a course from which, in fact, there can be no retreat; to a commercial venture within state domain in a field which, over the 150 years of our history, has been recognized as the constitutional domain of the States. The negation of the delegation of legislative power is a necessary implication attaching to the legislative power. Knickerbocker Ice Co. v. Stewart, 253 U. S. 149, 164; Panama Refining Co. v. Ryan, 293 U. S. 388; Schechter Poultry Corp. v. United States, 295 U. S. 495; Jackson v. Jackson, 90 Fla. 563; People v. Brown, 203 N. Y. 136, 142. A commercial program undertaken by an agency of Congress based upon a series of long term contracts devised by a federal board, which irrevocably commit the Government to a course of action intended by the Constitution to remain subject to continuing legislative duty and discretion, does not “consist with the Constitution” and is illegal. Louisville & Nashville Ry. v. Mottley, 219 U. S. 467; Norman v. Baltimore de Ohio R. Co., 294 U. S. 240. ASHWANDER v. VALLEY AUTHORITY. 295 288 Argument for Petitioners. Commitment of the Government by fixed contracts to the permanent business of commercial manufacture of electricity and rendition of regional utility service within state domain is intrinsically alien to federal function. South Carolina v. United States, 199 U. S. 437, 457; Ashwander v. Tennessee Valley Authority, 8 F. Supp. 893; 9 F. Supp. 965; Tennessee Public Service Co. v. Knoxville, Chancery Court, Knox County, Tenn., July 17, 1935; Kansas v. Colorado, 206 U. S. 46; License Tax Cases, 5 Wall. 462; Kidd v. Pearson, 128 U. S. 1, 24. Congress may not invade the field of action reserved to the States and the people under the guise of exercising substantive federal powers. Employers Liability Cases, 207 U. S. 463; Hammer v. Dagenhart, 247 U. S. 251; Child Labor Tax Case, 259 U. S. 20; Hill v. Wallace, 259 U. S. 44; Truster v. Crooks, 269 U. S. 475; Linder v. United States, 268 U. S. 5. This invasion under claim of implied power is comparable to the futile effort to take property desired for public convenience under the guise of regulation (Pennsylvania Mining Co. v. Mahon, 260 U. S. 393) or under the commerce clause or performance of international obligations (International Paper Co. v. United States, 282 U. S. 399). The National Defense Act of 1916, 39 Stat. 166, 215 (the debates at the inception of this matter may be found in Cong. Rec., vol. 53, pt. 5, pp. 5146-9, 5687, 5706, 5956, 5957, 5962, 6031, 6032, 6120, etc.; they are also reported in compact form in Powell, Cong. Debates, pp. 752 et seq.) was the initial step in American history toward establishing the principle of federal commercial operation of “surplus capacity” resulting from intentional construction of plants for commercial operation, or from construction for an actual, or supposed, or miscalculated, government requirement which has become spent or suspended. All such capacity so used is in fact commercial capacity, however acquired. 296 OCTOBER TERM, 1935. Argument for Petitioners. 297 U.S. The Convention declined to permit the inclusion in the Constitution of a clause authorizing Congress to grant corporate charters, lest it be assumed that the power to incorporate carried general jurisdiction to authorize charters not confined to the powers expressly granted. Madison’s Journal, Aug. 18; Farrand, Record, vol. II, p. 325. It deliberately declined to include an express power to the Federal Government to grant any charter whatever for a proprietary purpose. The contention now is that the Federal Government may discharge all proprietary purposes through the device of creating a corporation to “dispose of” government property. It is not possible to reconcile this extraordinary conception with the known attitude of the Convention and of the ratifying States. It cannot be reconciled with the established reason for the adoption of the Tenth Amendment. Kansas v. Colorado, 206 U. S. 46, 90. The indispensable essence of the Constitution is that the meaning and intent of its provisions, as they are interpreted by this Court as of the time of its adoption, shall not be changed except by amendment. South Carolina v. United States, supra, dissent, p. 472; Dred Scott v. Sandford, 19 How. 393, 426; Downes v. Bidwell, 182 U. S. 244, 290-291. The Tenth Amendment was ratified in 1790-91, and was to all intents and purposes a part of the original document. It expressed then, and expresses now, the conception that the States must not be subordinated in their internal affairs to federal control as to matters not expressly delegated. Smith v. Turner, 7 How. 283, 428. The disciplining and regulation of local utilities, by competition or monopoly, the promotion of public ownership of utilities to function under control of the Government, the desire to supplement regulation by state authorities and state processes, the general desire to promote the industrial, social and economic welfare of the ASHWANDER v. VALLEY AUTHORITY. 297 288 Argument for Petitioners. public in state domain in matters reserved to the States, are not functions of the Federal Government, however exigent they may be deemed by Congress. Schechter Poultry Corp. v. United States, 295 U. S. 495; Railroad Retirement Board v. Alton R. Co., 295 U. S. 330; Missouri v. Holland, 252 U. S. 416; License Tax Cases, 5 Wall. 462, 470. It is difficult to conceive of any function which is by nature and tradition more completely local and internal to the States than the function of regulating and operating local utility service. Public Utility Comm’n v. Attleboro Steam & Electric Co., 273 U. S. 83; Utah Power (& Light Co. v. Pjost, 286 U. S. 165; Public Utilities Comm’n v. Landon, 249 U. S. 236; East Ohio Gas Co. v. Tax Commission, 283 U. S. 465; South Carolina Power Co. v. Tax Commission, 52 F. (2d) 515, 524, aff’d 286 U. S. 525. The desire for revenue does not authorize the Federal Government to commit itself to engage in a permanent commercial business to earn it. The property clause of the Constitution (Art. IV, § 3, cl. 2), does not authorize permanent operation of a commercial business by the Federal Government. The property clause is found in the Constitution, not among the legislative powers, but among the clauses dealing with the relations between the state and federal governments. “Clearly it does not grant to Congress any legislative control over the States; and must, so far as they are concerned, be limited to authority over the property belonging to the United States within their limits.” Kansas v. Colorado, 206 U. S., at p. 89. The only power of exclusive legislation conferred upon Congress by the Constitution is Art. I, § 8, cl. 17, relating to the District of Columbia and places purchased by the consent of the legislature of the State in which the same 298 OCTOBER TERM, 1935. Argument for Petitioners. 297 U.S. shall be, for the erection of forts, magazines, arsenals, dock-yards and other needful buildings. Not even in the public domain can Congress regulate the public lands as a territorial legislature in such wise as to impair the rights of the citizens and the States in their traditional functions, as contemplated at the time of the adoption of the Constitution. Kansas v. Colorado, supra; Dred Scott v. Sandford, supra. The genesis of the property clause and, notably, the rejection of a general welfare amendment by the Convention, make clear that wide commercial operations in state domain were not contemplated. Charles Warren, The Making of the Constitution, pp. 599-600; Dred Scott v. Sandford, 19 How. 393, 436, 514. It is absurd to say that this clause was intended to open up the States to the destructive possibility of federal commercial operations, carrying by necessary implication the power of monopoly. To assume that the Constitution meant any such result, would be to condemn the personnel of the Convention to universal derision. This is not a case where the principles of the Constitution are to be applied to new conditions. The Federal Government could, by direct operation of the public lands, have taken every domestic and foreign market in every commodity from the people of the States, if ownership of land in trust for national purposes carried authority to operate commercially. That action would have dried up the tax resources of the States. Its possibility could not have been contemplated or authorized. The proposal is to convert the power in the stream into transportable form, thereby exhausting it from the stream, transport the converted product 250 miles and sell it commercially. When that is done throughout the river, every ounce of water power has been wrung from it by the Federal Government and taken away from the State and ASHWANDER v. NALLWi AUTHORITY. 299 288 Argument for Petitioners. the people who own it, in as real and final a sense as was proposed on behalf of the Government, and denied by this Court, in Kansas v. Colorado, supra. Engaging in the business of operating the steam plant for manufacture of electricity for commercial sale to the public, at any place or for any term, is not a function of “disposal” of the steam plant within the meaning of the property clause. Engaging in the business of manufacturing electricity at the commercial units installed in the dams is not a function of disposal either of the plants or of the “water power,” even if the Government had any proprietary right to exhaust the power in the water as a commodity, by concentrating the surplus waters of the stream. The steam plants and the hydro-electric plants are all that the Government owns or can dispose of. It cannot sell or otherwise dispose of the duty of regulating navigation. It can lease emplacements in the dam. Subject to limitations, it can lease hydro-generators and charge a rental for the use, permitting the lessee, if also licensed by the State, to get the benefit of the water flow, as dispatched by the Government in the regulation of navigation and unfettered by any illegal commitment to antagonistic utility service. The Government has no more authority to sell the water or the right to the flow of the water than it has to sell the right to coin money, or to guarantee that the Bankruptcy Act will not be amended. Not having the right to sell the transit of the water, it cannot dispose of any such right as property. The Government, presumably, can free navigation flumes in the Columbia River of salmon by trapping them out, but the conception that it could go into the permanent business of taking and packing and merchandizing throughout state domain the salmon thus impounded, as a yardstick to regulate the price of salmon in state domain, would be 300 OCTOBER TERM, 1935. Argument for Petitioners. 297 U.S. regarded as preposterous. McCready v. United States, 94 U. S. 391, 394. Even if running water could be regarded as property of the Government, as tangible as coal or oil, it could not be disposed of under the property clause of the Constitution by regarding it as a base raw material to be transformed by commercial manufacture into a different product for commercial sale to the public, any more than the Government can manufacture coal taken from the public domain into coke and by-products, or into power, for commercial competitive sale in state domain,—if either the State or its citizens who are injured object. It results from even a superficial analysis that the Government owns no “water power.” It owns merely a plant, which it may lease, and a sovereign duty which it may not. A commitment of the Government, by long term contracts, to operate a permanent utility business would involve the Government in non-federal functions not fairly related to property. The commitment would involve credit, executive and administrative personnel, and the funds of the Government, in a permanent service nongovernmental in character. These permanent and extraordinary business services are not functions of the ownership of property. There is no right (except use for governmental purpose, sale or disposal outright) in property in the Federal Government; nor any right to engage in proprietary business under any power except where the business itself is in direct furtherance of a substantive power. “The United States cannot hold property as a monarch may for private or personal purposes.” Van Brocklin v. Anderson, 117 U. S. 157, 158. Of. United States v. Trinidad Coal Co., 137 U. S. 160, 170. Power conferred upon a trustee to sell or to convey or dispose of a trust estate carries no authority to engage in business by means of the property. In re Corbin's ASHWANDER v. VALLEY AUTHORITY. 301 288 Argument for Petitioners. Will, 91 N. Y. S. 797; Pearce v. Pearce, 199 Ala. 491; Rifling v. Burnet, 47 F. (2d) 859. This Court asserted in United States v. Gratiot, 14 Pet. 526, that the power to dispose of government property includes the right to lease mineral properties for a rental, payable in smelted ore (lead) desired by the War Department. It said: “There can be no apprehension of any encroachments upon state rights by the creation of a numerous tenantry within their borders, as has been so strenuously urged in the argument.” (p. 538) It is significant also that the Court noted that the statutory authority under which the lease was made was “limited to a short period, so as not to interfere with the power of Congress to make other disposition of the mines should they think proper so to do.” Here Congress has not made a lease for a long or short period. Actually the commitment of the properties by TVA to a permanent and continuing service under actionable, non-assignable contracts is an interference with disposal. It is therefore not a use or disposition of property under any definition of the term which “consists with the letter and spirit of the Constitution.” The conduct of a permanent utility business is not a function of conservation of government property. So far as the property clause is concerned, there is no basis whatever for stating that a steam-electric plant or a hydro-electric plant are being “disposed of” or regulated by committing them permanently to the business of manufacture in order to create a commodity, in order, in turn, to “dispose of” that commodity, in order, in turn, to regulate local utility service, finance and promote public ownership, or like non-federal functions. Possible war uses for a product do not justify its commercial manufacture and sale by the Federal Government. The so-called critical and strategic war materials reasonably necessary for military purposes in time of war, 302 OCTOBER TERM, 1935. Argument for Petitioners. 297U.S. or for the sustenance or war psychology of the civilian population, are innumerable. Every essential industrial plant is a potential war requirement, within the discretion of Congress. Plants for the processing of these materials are plainly within reach of military preparedness, so far as review by the courts is concerned, in the absence of a palpable abuse of the war power. Highland v. Russell Car Co., 279 U. S. 253. Orderly and bona fide liquidation of war investments is clearly distinguishable. Clallam County v. U. S. Spruce Corp., 263 U. S. 341. There are fundamental distinctions between acts of ownership, or the disposal or lease of property, and the function of engaging in business by means of the property. The corporate income tax cases sufficiently illustrate the point to require no further documentation. The constitutional cleavage is clear. The commerce clause does not authorize the Federal Government to engage in a commercial business. Detroit International Bridge Co. v. Tax Appeal Board, 294 U. S. 83; Utah Power & Light Co. v. Pfost, 286 U. S. 165; South Carolina Power Co. v. Tax Commission, 52 F. (2d) 515, 524, affirmed, 286 U. S. 525. Protection of commerce of the States from interferences within the Nation was a basic motive underlying the draft of the Constitution. Charles Warren, The Making of the Constitution, pp. 461, 462, 567-589; id., p. 580; III Farrand, Records of the Federal Convention, p. 463; id., p. 478; Monongahela Navigation Co. v. United States, 148 U. S. 312; United States v. Joint Traffic Assn., 171 U. S., at p. 571. Production is exclusively within the domain of the States and the people. Hammer v. Dagenhart, 247 U. S. 251, 276; Linder V. United States, 268 U. S. 5; Panama Refining Co. v. Ryan, 293 U. S. 388; Schechter Poultry Corp. v. United States, 295 U. S. 495; Utah Power & Light Co. v. Pfost, 286 U. S. 165. ASHWANDER v. NALLWi AUTHORITY. 303 288 Argument for Petitioners. The question whether the Government, in impounding more water in a navigable stream than is necessary to be manipulated for navigation, can thereupon appropriate such water and make it the basis of a general manufacturing and marketing business, is not a question of navigation or of the commerce power. It does not warrant serious discussion under the commerce clause. Wisconsin v. Illinois, 278 U. S. 367, 396. Distinguishing Missouri v. Holland, 252 U. S. 416; United States v. McCullagh, 221 Fed. 288; and United States v. Shauver, 214 Fed. 154. The power to regulate commerce is not the power to engage in and monopolize the business or function regulated. Of. South Carolina v. United States, 199 U. S. 437; Ohio v. Helvering, 292 U. S. 360; Helvering v. Powers, 293 U. S. 214; and Osborne v. Bank, 9 Wheat. 738. Any pretense that commercial production, transmission or sale of electricity is necessary to the functioning of the locks or the regulation of navigation is not only totally insubstantial, but it is repudiated by the terms of the Act and the organization of the Tennessee Valley Authority itself. The contentions of the Valley Authority, and the basis of the decision below, cannot be reconciled with the decisions of this Court as to the rights of the State and its grantees in the waters of navigable streams. Pollard’s Lessee v. Hagan, 3 How. 212; Shively v. Bowlby, 152 U. S. 1,43; Port of Seattle v. Oregon-Washington Ry., 255 U. S. 56; Kansas v. Colorado, 206 U. S. 46; United States v. Arizona, 295 U. S. 174; United States v. West Virginia, 295 U. S. 463. Distinguishing Arizona v. California, 283 U. S. 423. It was settled in Pollard’s Lessee v. Hagan, that the States, in their capacity as proprietors in trust for their citizens, cannot by grant, treaty, or waiver, divest themselves of this sovereign duty and responsibility, even to 304 OCTOBER TERM, 1935. Argument for Petitioners. 297 U.S. the Federal Government. Mobile Transportation Co. v. Mobile, 153 Ala. 409. That which cannot be accomplished directly cannot be accomplished by transitory acceptance by a State of the anomalous and terminable stipend prescribed by § 13 of the Tennessee Valley Authority Act. United States v. Chandler-Dunbar Water Power Co., 229 U. S. 53, distinguished. See Wisconsin v. Illinois, 278 U. S. 367. The decisions of this Court have settled beyond argument that the Government has no proprietary or commodity right in the waters; that it has only a right of regulation that must be related to navigation and not arbitrary, Wisconsin v. Illinois, supra; within bounds that respect the Fifth Amendment, Monongahela Navigation Co. v. United States, supra; and the Tenth, Kansas v. Colorado, supra. Distinguishing Kaukauna Water Co. v. Green Bay Canal Co., 142 U. S. 254 and Green Bay Canal Co. v. Patten Paper Co., 172 U. S. 58; 173 U. S. 179. Active participation by the Government in the control of the proposed defendant municipal systems, and its proven objective in financing these systems, renders the proposed investments dynamic and illegal, without reference to their intrinsic invalidity as appropriations for non-federal purposes. The Federal Government cannot make appropriations and investments for purposes which are beyond its power of affirmative action. Gibbons v. Ogden, 9 Wheat., at p. 199. Even as res integra and without the inexorable history of the clause in the Convention to force the same conclusion, the phrase “common defense and general welfare” appearing in the tax power at the head of a section enumerating the limited functions of the Federal Government, could not be regarded as other than comprehensive terms to extend the taxing power to the range of expressly delegated functions, which alone the Convention ASHWANDER v. VALLEY AUTHORITY. 305 288 Argument for Petitioners. had undertaken to entrust to the general Government. The familiar history of the phraseology, lifted out of the old Articles and plainly referable to the debts “contracted in the common defense,” leaves Madison’s account of the evolution of the clause documented beyond reasonable dispute. No one could have supposed in that day that taxation and spending were substantive ends of government. The theory of redistribution through taxation has only recently been evolved. Loan Association v. Topeka, 20 Wall. 655; Parkersburg v. Brown, 106 U. S. 487; Cole v. La Grange, 113 U. S. 1, 9; Green v. Frazier, 253 U. S. 233; Dodge v. Mission Township, 107 Fed. 821; Lowell v. Boston, 111 Mass. 454. The delegates to the Convention were men of the most finished discrimination in the use of words. It is not credible that they would have included, in a clause relating solely to the raising of revenue for all functions of government, a power provision so broad as to make the subsequent enumeration of powers useless and to undermine the organic theory of federal limitation. Whatever be the conclusion as to the scope of the general welfare provision in the tax clause, there is no opinion deserving consideration which supports the contention that the spending power authorizes Congress to follow the appropriation and engage or participate in nondelegated functions by means of the instrumentality created by the appropriation. 2 Story, Commentaries on the Constitution, 153-154; Kansas Gas & Electric Co. v. Independence, 79 F. (2d) 638; 1 Willoughby, Const. L., 2d ed., § 61, pp. 97-98; Burdick, Amer. Const. L., 181. Where the dominant objective of an Act of Congress, or of an administrative program undertaken by the Federal Government, is to regulate or control matters reserved by the Ninth and Tenth Amendments, the Act or transaction is illegal. “Congress cannot, under the pretext of executing delegated power, pass laws for the ac-43927°—36-------20 306 OCTOBER TERM, 1935. Argument for Petitioners. 297 U.S. complishment of objects not intrusted to the Federal Government.” Veazie Bank v. Fenno, 8 Wall. 533, 541; McCulloch v. Maryland, 4 Wheat. 316, 423; Linder v. United States, 268 U. S. 5; Bailey v. Drexel Furniture Co., 259 U. S. 20; Hammer v. Dagenhart, 247 U. S. 251; Hill v. Wallace, 259 U. S. 366; Trusler v. Crooks, 269 U. S. 475; Chastleton Corp. v. Sinclair, 264 U. S. 543; Magnano Co. v. Hamilton, 292 U. S. 40; United States v. One Ford Coupe, 272 U. S. 32; Pollock v. Farmers Loan & Trust Co., 157 U. S. 429. The contract is not only for the primary purpose of acquiring going utility properties, with attached customers, for continued operation and enlargement by TV A, as part of its commercial utility net work. Its express and necessary purpose and effect are to set up a monopoly of electric service within its territorial area, by an agency not subject to regulation by and within the State of Alabama; an agency to control rates and dominate service. There is a vital distinction between the commercial powers, including competitive functions, which may be granted to a private business corporation created or adopted as a federal agency, and exercise of such powers by the Government. Even in the case of federal agency corporations, privately owned and operating, for profit, Chief Justice Marshall asserted that the corporate powers granted must have relation to the federal objective. Osborne v. Bank, 9 Wheat., at p. 860. So-called precedents where no remedy existed are not judicial precedents. Massachusetts v. Mellon, 262 U. S. 447; Myers v. United States, 272 U. S. 52, 170-171; United States v. Boyer, 85 Fed. 425; Field v. Clark, 143 U. S. 649, 691; Maynard v. Hill, 125 U. S. 190, 204; Fairbank v. United States, 181 U. S. 283, 306-311; Miles Planting Co. v. Carlisle, 5 App. D. C. 138, 161. The action of the Valley Authority in furtherance of its program is characterized by arbitrary administration ASHWANDER v. VALLEY AUTHORITY. 307 288 Argument for Respondent. of the power and resources of the Government and constitutes illegal action and competition. The Tennessee Valley Authority Act of 1933, as amended, is unconstitutional because of the delegation of legislative power. This stockholders’ suit was properly entertained. Mr. John Lord O'Brian and Solicitor General Reed, with whom Attorney General Cummings, Mr. James Lawrence Fly, General Solicitor, Tennessee Valley Authority, and Messrs. Paul A. Freund and Allan D. Jones, and Miss Bessie Margolin were on the brief, for the Tennessee Valley Authority, respondent. The petitioners as minority stockholders have no standing to maintain this suit. In the first place, they are estopped to assert a cause of action on behalf of their corporation, the Alabama Power Company. That Company has purchased Wilson Dam electric energy from the United States since 1926, continuing its purchases after the enactment of the Tennessee Valley Authority Act in May 1933, and later pursuant to the contract of January 4, 1934. These purchases were wholly voluntary. One who thus accepts the benefits of a statute is estopped to assert that it is invalid. Great Falls Manufacturing Co. v. Attorney General, 124 U. S. 581; Wall v. Parrot Silver & Copper Co., 244 U. S. 407; St. Louis Co. n. Prendergast Co., 260 U. S. 469; Buck v. Kuykendall, 267 U. S. 307, 316-317. The Act makes available to others the benefits long enjoyed by the Alabama Power Company. No stockholder made protest until seven months after the execution of the contract in suit. Meanwhile, the Authority had undertaken substantial operations and obligations in reliance on the contract. Secondly, the petitioners have established no basis for the maintenance of this suit upon the refusal of the management to sue. The District Court ruled that the con- 308 OCTOBER TERM, 1935. Argument for Respondent. 297 U.S. tract was not assailable for fraud, negligence, or duress; and that ruling was plainly correct. Nor were the corporate directors guilty of abandonment of discretion; they acted for the best interests of the corporation and disclaimed any opinion that the Act was unconstitutional. The contract was not ultra vires of the corporation. The theory of the District Court that equity may enjoin a contract for the sole reason that it is in furtherance of an illegal purpose, irrespective of damage, can have no application where a statute is attacked on constitutional grounds. Nor can the suit be maintained to enjoin competition, since the contract limited the activities of the Authority during the life of the agreement to that area served by the lines purchased, and the activities within that area are consensual and not competitive. The claim for declaratory relief from possible future competition upon the expiration of the contract does not give petitioners standing to maintain this suit. None of the cases of stockholders’ suits relied on by the petitioners lends support to their position. Cf. Hawes v. Oakland, 104 U. S. 450; Corbus v. Gold Mining Co., 187 U. S. 455; Dodge n. Woolsey, 18 How. 331; Hill v. Wallace, 259 U. S. 44; Pollock v. Farmers Loan & Trust Co., 157 U. S. 429; Smith v. Kansas City Title & Trust Co., 255 U. S. 180. In each of those cases, there was a showing of ultra vires conduct, or duress, or abandonment of discretion, or irreparable injury to the corporation resulting from the application of a taxing or regulatory statute. If it may be assumed that petitioners are properly before the Court, we maintain that the narrow issue involved in this case is the validity of the contract of January 4, 1934, which depends upon the right of the Authority to dispose of the Wilson Dam power alone. Wilson Dam is a dam sui generis. It was constructed to serve two constitutional purposes, navigation and national defense. The generating equipment was installed particularly for national defense purposes. Since the construction of the ASHWANDER v. VALLEY AUTHORITY. 309 288 Argument for Respondent. dam and the power plant those facilities have been maintained and are still being maintained in aid of both constitutional functions. The legislative background of the Act indicates that it was designed to serve recognized federal functions. The Act provides for operation of the Muscle Shoals properties, a vexatious legislative problem for many years, and authorizes development of the entire Tennessee River in the interest of navigation and flood control, a matter of national concern for a century. The navigation and flood control project embodied in the Act includes dams now being constructed by the Authority, with which, we submit, this case is not concerned. It may be noted, however, that these dams are essential parts of a project embodied in the Act, based upon long considered and exhaustive studies for development of the river to secure the maximum improvement to navigation on the Tennessee River and the control of flood waters on the lower Tennessee River and the Mississippi River. The most difficult phase of the historic effort to improve the Tennessee has been the improvement of the thirty-seven mile stretch known as Muscle Shoals, which presented the most serious obstruction to navigation on the river. The War interrupted consideration of various private proposals and precipitated the construction of Wilson Dam at Muscle Shoals, together with Nitrate Plant No. 2, pursuant to the National Defense Act of 1916. The dam was intended to provide hydroelectric energy for the manufacture of synthetic nitrate to meet a recognized need for a permanent domestic supply of this indispensable ingredient of explosives. Completed in 1925, after careful consideration of its importance for navigation, the dam provides a slack-water pool extending fifteen miles upstream, thus eliminating the most serious obstruction to navigation on the river. 310 OCTOBER TERM, 1935. Argument for Respondent. 297 U.S. The disposal of the facilities at the dam, their continued maintenance in aid of national defense and navigation, and, in particular, the disposal of the power created at the dam in such manner as to earn a revenue, to avoid the monopolistic position of the Alabama Power Company, and to diffuse the benefits to numerous small purchasers, were basic factors in the ever-recurring problem. Transmission lines were essential. Under the Commerce Clause, the Federal Government may dispose of the water power created by navigation dams constructed, owned, and maintained by it. This proposition has been settled by an unbroken line of decisions of this Court, culminating in Arizona v. California, 283 U. S. 423. (See Kaukauna Water Power Co. v. Green Bay Canal Co., 142 U. S. 254; Green Bay Canal Co. v. Patten Paper Co., 172 U. S. 58, rehearing denied, 173 U. S. 179; United States v. Chandler-Dunbar Water Co., 229 U. S. 53). No misapprehension as to the meaning of these decisions has existed in the lower federal courts, and the principle which they establish has been a recognized basis of congressional action for half a century. Generation of electric energy and acquisition of transmission lines are reasonable means of facilitating the disposal of the water power inevitably created by Wilson Dam. The various means chosen by Congress to dispose of surplus power at federal navigation dams have paralleled scientific development. The National Defense Act of 1916, the Boulder Canyon Project Act of 1928, and the Tennessee Valley Authority Act of 1933 are an outgrowth of the old leasing statutes and reflect the fact that generation and sale of electric energy constitute usually related incidents of the maintenance of a large navigation dam. The constitutional issue of the choice of means is a narrow one. It cannot seriously be contended that while it is wholly reasonable for Congress to employ independ- ASHWANDER v. VALLEY AUTHORITY. 311 288 Argument for Respondent. ent contractors to generate and deliver energy to purchasers from the Government, it is wholly capricious for Congress to employ its own officers for the same purpose. At Wilson Dam the means chosen by Congress are peculiarly appropriate in view of the maintenance of the generating plant for national defense purposes, the construction of the plant for unitary operation, and the long experience of the United States in attempting to dispose of the power in the public interest. The Muscle Shoals properties, including the dam and generating plant, constitute a valuable national defense asset, as found by the trial court after extensive testimony by responsible officers of the War Department. The Act requires that the properties be maintained for war purposes, and authorizes the manufacture of explosives and the making of experiments in aid of the national defense. Unlike ordinary surplus army supplies, the energy available at the dam must be utilized or it is irretrievably lost. In these circumstances, generation and sale of the surplus power by the United States are appropriate means of disposing of the surplus energy under the war powers. The water power created by Wilson Dam belongs to the United States as owner of the dam. Like other property of the United States, it is held in trust for the people and may be disposed of in the public interest pursuant to the Property Clause of the Constitution. Cf. United States v. Gratiot, 14 Pet. 526; United States v. Beebe, 127 U. S. 338; Camfield v. United States, 167 U. S. 518; Light v. United States, 220 U. S. 523; Ruddy v. Rossi, 248 U. S. 104. In disposing of the surplus power at Wilson Dam, Congress has adopted the long established policy of assuring wide-spread distribution of the benefits of government-owned property. That policy has governed the disposal of public lands from the beginning of our Government, 312 OCTOBER TERM, 1935. Argument for Respondent. 297 U.S. and also is responsible for the undertaking by the Government of extensive reclamation projects in preference to reliance upon private enterprise, which would require large grants to a few individuals. Cf. United States v. Hanson, 167 Fed. 181; Burley v. United States, 179 Fed. 1. In the circumstances existing at Wilson Dam, the transmission and sale of the surplus electric energy by the United States was particularly appropriate. Sales solely to the Alabama Power Company and its affiliates, the only available purchasers of power at the dam, would not avoid waste or monopoly of the power or effect a widespread distribution of its benefits. These principles are reflected in the established practice of the Government. For almost fifty years provision has been made by Congress for the disposition of power incidentally created by the construction and maintenance of federal water developments. For almost thirty years provision has been made for the conversion of the incidental water power into electric energy and the sale of that energy. The Bureau of Reclamation has constructed twenty-two power plants at federal reclamation projects, nine of which were operated by the Government in 1932. The Bureau sells power to towns, villages, rural customers, and power companies, and has built and operated transmission lines for commercial purposes.. A similar practice has been followed with respect to the power produced as a by-product of navigation developments. The general dam act of 1912 authorized the Secretary of War to make provision for future generation of electricity in the construction of all navigation dams. The Boulder Canyon Project Act of 1928 provided for the sale of electric energy by the Secretary of the Interior to various classes of purchasers, preference being given to states and municipalities. The ablest legal advisers of the Roosevelt, Taft, and Wilson administrations were agreed that where the Gov- ASHWANDER v. VALLEY AUTHORITY. 313 288 Argument for Respondent. eminent has constructed a dam for the lawful purpose of improving navigation, it may dispose of the power produced as a by-product. There is no merit in the contention of petitioners that the activities of the Authority are “intrinsically alien to Federal function” and constitute an invasion of state sovereignty. The fact that the activities of the Authority may be described as commercial or proprietary is of no constitutional significance. Cf. Puget Sound Power & Light Co. v. Seattle, 291 U. S. 619, 625; Emergency Fleet Corp. v. Western Union, 275 U. S. 415, 424; JuUliard v. Greenman, 110 U. S. 421, 448. There is no purpose in the Act to regulate matters reserved to the States by the Ninth and Tenth Amendments. The contracts with the municipalities are subservient to the law of Alabama no less than if the municipalities had made contracts with a private wholesaler. The State of Alabama has exercised its regulatory powers in the instant case by authorizing the municipalities to enter into contracts with the Authority under certain stated conditions. The Supreme Court of Alabama has sustained that legislation. Oppenheim v. City of Florence, 229 Ala. 50, 155 So. 859. The “yardstick” is not a law and imposes no regulation or duty. Its function is educational, and, at most, advisory. Cf. Standard Scale Co. v. Farrell, 249 U. S. 571. Both courts below properly exercised their discretion in refusing to grant a declaratory decree on the validity of “proposed extensions of the competition” by the Authority. In No. 404, no justiciable controversy is presented, since the complaint is based upon potential or contingent acts and upon assumed potential invasions. (See New Jersey v. Sargent, 269 U. S. 328, 339; Arizona v. California, 283 U. S. 423, 462.) Aside from the prematurity and hypothetical character of the complaints, the restrictive nature of a stock- 314 OCTOBER TERM, 1935. Argument for Respondent. 297 U.S. holder’s suit is inconsistent with a right to secure declaratory relief in advance of immediately threatened injury. In any event, the granting of a declaratory decree is a discretionary matter. In view of the hypothetical and speculative nature of the complaint, and the complicated and uncertain facts, the refusal to grant a declaratory judgment was a proper exercise of discretion. If the Court should nevertheless deem it appropriate to inquire into activities of the Authority involving new dams, the Record shows that operations thus far undertaken by the Authority are in furtherance of the project “to improve navigation in the Tennessee River and to control the destructive flood waters in the Tennessee River and Mississippi River Basins,” authorized by the Tennessee Valley Authority Act following the exhaustive survey of the Army Engineers in House Document No. 328, adopted by the Rivers and Harbors Act of 1930, 46 Stat. 918. The District Court found that all of the dams now under construction by the Authority are of the type which are indispensable in carrying out these purposes. Mr. W. H. Mitchell submitted for the City of Florence, respondent. Messrs. Thomas W. Martin, Perry W. Turner, and Wm. Logan Martin submitted for the Alabama Power Co., respondent. Messrs. Courtland Palmer and Jehu T. Stokely submitted for The Chemical Bank & Trust Co., respondent. By leave of Court, briefs of amici curiae were filed by Mr. Sam W. Oliver, County Attorney, on behalf of Tallapoosa County, Alabama; Mr. J. M. Holley, County Attorney, on behalf of Elmore County, Alabama; and Mr. Lawrence C. Jones, Attorney General, on behalf of ASHWANDER v. VALLEY AUTHORITY. 315 288 Opinion of the Court. the State of Vermont, all attacking the validity of the Tennessee Valley Authority Act. Mr. Chief Justice Hughes delivered the opinion of the Court. On January 4, 1934, the Tennessee Valley Authority, an agency of the Federal Government,1 entered into a contract with the Alabama Power Company, providing (1) for the purchase by the Authority from the Power Company of certain transmission lines, sub-stations, and auxiliary properties for $1,000,000, (2) for the purchase by the Authority from the Power Company of certain real property for $150,000, (3) for an interchange of hydro-electric energy, and in addition for the sale by the Authority to the Power Company of its “surplus power,” on stated terms, and (4) for mutual restrictions as to the areas to be served in the sale of power. The contract was amended and supplemented in minor particulars on February 13 and May 24, 1934.1 2 * * * & The Alabama Power Company is a corporation organized under the laws of Alabama and is engaged in the generation of electric energy and its distribution generally throughout that State, its lines reaching 66 counties. The transmission lines to be purchased by the Authority extend from Wilson Dam, at the Muscle Shoals plant owned by the United States on the Tennessee River in 1 The Tennessee Valley Authority is a body corporate created by the Act of Congress of May 18, 1933, amended by the Act of Congress of August 31, 1935. 48 Stat. 58; 49 Stat. 1075. 2 The Commonwealth & Southern Corporation, organized under the laws of Delaware, and the owner of the common stock of the Alabama Power Company, was a party to the contract, which also contained agreements with other subsidiaries of the Commonwealth & Southern Corporation, viz: Tennessee Electric Power Company, Georgia Power Company, and Mississippi Power Company. The agreements with these companies are not involved in this suit. 316 OCTOBER TERM, 1935. Opinion of the Court. 297U.S. northern Alabama, into seven counties in that State, within a radius of about 50 miles. These lines serve a population of approximately 190,000, including about 10,000 individual customers, or about one-tenth of the total number served directly by the Power Company. The real property to be acquired by the Authority (apart from the transmission lines above mentioned and related properties) is adjacent to the area known as the “Joe Wheeler dam site,” upon which the Authority is constructing the Wheeler Dam. The contract of January 4, 1934, also provided for cooperation between the Alabama Power Company and the Electric Home and Farm Authority, Inc., a subsidiary of the Tennessee Valley Authority, to promote the sale of electrical appliances, and to that end the Power Company, on May 21, 1934, entered into an agency contract with the Electric Home and Farm Authority, Inc. It is not necessary to detail or discuss the proceedings in relation to that transaction, as it is understood that the latter corporation has been dissolved. There was a further agreement on August 9, 1934, by which the Alabama Power Company gave an option to the Tennessee Valley Authority to acquire urban distribution systems which had been retained by the Power Company in municipalities within the area served by the transmission lines above mentioned. It appears that this option has not been exercised and that the agreement has been terminated. Plaintiffs are holders of preferred stock of the Alabama Power Company. Conceiving the contract with the Tennessee Valley Authority to be injurious to the corporate interests and also invalid, because beyond the constitutional power of the Federal Government, they submitted their protest to the board of directors of the Power Company and demanded that steps should be taken to have the contract annulled. The board refused, and the ASHWANDER v. VALLEY AUTHORITY. 317 288 Opinion of the Court. Commonwealth & Southern Corporation, the holder of all the common stock of the Power Company, declined to call a meeting of the stockholders to take action. As the protest was unavailing, plaintiffs brought this suit to have the invalidity of the contract determined and its performance enjoined. Going beyond that particular challenge, and setting forth the pronouncements, policies and programs of the Authority, plaintiffs sought a decree restraining these activities as repugnant to the Constitution, and also asked a general declaratory decree with respect to the rights of the Authority in various relations. The defendants, including the Authority and its directors, the Power Company and its mortgage trustee, and the municipalities within the described area, filed answers and the case was heard upon evidence. The District Court made elaborate findings and entered a final decree annulling the contract of January 4, 1934, and enjoining the transfer of the transmission lines and auxiliary properties. The court also enjoined the defendant municipalities from making or performing any contracts with the Authority for the purchase of power, and from accepting or expending any funds received from the Authority or the Public Works Administration for the purpose of constructing a public distribution system to distribute power which the Authority supplied. The court gave no consideration to plaintiffs’ request for a general declaratory decree. The Authority, its directors, and the city of Florence appealed from the decree and the case was severed as to the other defendants. Plaintiffs took a cross appeal. The Circuit Court of Appeals limited its discussion to the precise issue with respect to the effect and validity of the contract of January 4, 1934. The District Court had found that the electric energy required for the territory served by the transmission lines to be purchased 318 OCTOBER TERM, 1935. Opinion of the Court. 297U.S. under that contract is available at Wilson Dam without the necessity for any interconnection with any other dam or power plant. The Circuit Court of Appeals accordingly considered the constitutional authority for the construction of Wilson Dam and for the disposition of the electric energy there created. In the view that the Wilson Dam had been constructed in the exercise of the war and commerce powers of the Congress and that the electric energy there available was the property of the United States and subject to its disposition, the Circuit Court of Appeals decided that the decree of the District Court was erroneous and should be reversed. The court also held that plaintiffs should take nothing by their cross appeal. 78 F. (2d) 578. On plaintiffs’ application we granted writs of certiorari. First. The right of plaintiffs to bring this suit. Plaintiffs sue in the right of the Alabama Power Company. They sought unsuccessfully to have that right asserted by the Power Company itself, and upon showing their demand and its refusal they complied with the applicable rule.3 While their stock holdings are sm,all, they have a real interest and there is no question that the suit was brought in good faith.4 If otherwise entitled, they should not be denied the relief which would be accorded to one who owned more shares. Plaintiffs did not simply challenge the contract of January 4, 1934, as improvidently made,—as an unwise exercise of the discretion vested in the board of directors. They challenged the contract both as injurious to the 3 Equity Rule 27. 4 The District Court found that “Approximately 1900 preferred stockholders of the Alabama Company, holding over 40,000 shares of the preferred stock thereof, have associated themselves with a preferred stockholders’ protective committee and authorized their names to be joined with the plaintiffs of record in this case as parties plaintiff.” ASHWANDER v. VALLEY AUTHORITY. 319 288 Opinion of the Court. interests of the corporation and as an illegal transaction,—violating the fundamental law. In seeking to prevent the carrying out of the contract, the suit was directed not only against the Power Company but against the Authority and its directors upon the ground that the latter, under color of the statute, were acting beyond the powers which the Congress could validly confer. In such a case it is not necessary for stockholders—when their corporation refuses to take suitable measures for its protection—to show that the managing board or trustees have acted with fraudulent intent or under legal duress. To entitle the complainants to equitable relief, in the absence of an adequate legal remedy, it is enough for them to show the breach of trust or duty involved in the injurious and illegal action. Nor is it necessary to show that the transaction was ultra vires of the corporation. The illegality may be found in the lack of lawful authority on the part of those with whom the corporation is attempting to deal. Thus, the breach of duty may consist in yielding, without appropriate resistance, to governmental demands which are without warrant of law or are in violation of constitutional restrictions. The right of stockholders to seek equitable relief has been recognized when the managing board or trustees of the corporation have refused to take legal measures to resist the collection of taxes or other exactions alleged to be unconstitutional {Dodge v. Woolsey, 18 How. 331, 339, 340, 345; Pollock v. Farmers’ Loan & Trust Co., 157 U. S. 429, 433, 553, 554; Brushaber v. Union Pacific R. Co., 240 U. S. 1, 10) ; or because of the failure to assert the rights and franchises of the corporation against an unwarranted interference through legislative or administrative action {Greenwood v. Freight Co., 105 U. S. 13, 15, 16; Cotting v. Kansas City Stockyards Co., 183 U. S. 79, 114). The remedy has been accorded to stockholders of public service corporations with respect to rates alleged to be con- 320 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. fiscatory {Smyth v. Ames, 169 U. S. 466, 469, 517; Ex parte Young, 209 U. S. 123, 129, 130, 143). The fact that the directors in the exercise of their judgment, either because they were disinclined to undertake a burdensome litigation or for other reasons which they regarded as substantial, resolved to comply with the legislative or administrative demands, has not been deemed an adequate ground for denying to the stockholders an opportunity to contest the validity of the governmental requirements to which the directors were submitting. See Dodge v. Woolsey, supra, at pp. 340, 345; Greenwood v. Freight Co., supra, at p. 15; Pollock v. Farmers’ Loan & Trust Co., supra, at pp. 433, 553, 554; Brushaber v. Union Pacific R. Co., supra, at p. 10. In Smith v. Kansas City Title Co., 255 U. S. 180, a shareholder of the Title Company sought to enjoin the directors from investing its funds in the bonds of Federal Land Banks and Joint Stock Land Banks upon the ground that the Act of Congress authorizing the creation of these banks and the issue of bonds was unconstitutional, and hence that the bonds were not legal securities in which the corporate funds could lawfully be invested. The proposed investment was not large,—only $10,000 in each of the classes of bonds described. Id., pp. 195, 196. And it appeared that the directors of the Title Company maintained that the Federal Farm Loan Act was constitutional and that the bonds were “valid and desirable investments.” Id., p. 201. But neither the conceded fact as to the judgment of the directors nor the small amount to be invested,—shown by the averments of the complaint— availed to defeat the jurisdiction of the court to decide the question as to the validity of the Act and of the bonds which it authorized. The Court held that the validity of the Act was directly drawn in question and that the shareholder was entitled to maintain the suit. The Court said: “The general allegations as to the interest of the ASHWANDER v. VALLEY AUTHORITY. 321 288 Opinion of the Court. shareholder, and his right to have an injunction to prevent the purchase of the alleged unconstitutional securities by misapplication of the funds of the corporation, give jurisdiction under the principles settled in Pollock v. Farmers’ Loan Trust Co. and Brushaber v. Union Pacific R. Co., supra.” Id., pp. 201, 202. The Court then proceeded to examine the constitutional question and sustained the legislation under attack. A similar result was reached in Brushaber v. Union Pacific R. Co., supra. A close examination of these decisions leads inevitably to the conclusion that they should either be followed or be frankly overruled. We think that they should be followed, and that the opportunity to resort to equity, in the absence of an adequate legal remedy, in order to prevent illegal transactions by those in control of corporate properties, should not be curtailed because of reluctance to decide constitutional questions. We find no distinctions which would justify us in refusing to entertain the present controversy. It is urged that plaintiffs hold preferred shares and that, for the present purpose, they are virtually in the position of bondholders. The rights of bondholders, in case of injury to their interests through unconstitutional demands upon, or transactions with, their corporate debtor, are not before us. Compare Reagan v. Farmers’ Loan & Trust Co., 154 U. S. 362, 367, 368. Plaintiffs are not creditors but shareholders (with equal voting power share for share with the common stockholders, according to the findings) and thus they have a proprietary interest in the corporate enterprise which is subject to injury through breaches of trust or duty on the part of the directors who are not less the representatives of the plaintiffs because their shares have certain preferences. See Ball v. Rutland R. Co., 93 Fed. 513, 514, 515. It may be, as in this case, that the owner of all the common stock has participated in the transaction in question, and the owners of preferred 43927°—36-----21 322 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. stock may be the only persons having a proprietary interest in the corporation who are in a position to protect its interests against what is asserted to be an illegal disposition of its property.5 A court of equity should not shut its door against them. It is said that here, instead of parting with money, as in the case of illegal or unconstitutional taxes or exactions, the Power Company is to receive a substantial consideration under the contract in suit. But the Power Company is to part with transmission lines which supply a large area, and plaintiffs allege that the consideration is inadequate and that the transaction entails a disruption of services and a loss of business and franchises. If, as plaintiffs contend, those purporting to act as a governmental agency had no constitutional authority to make the agreement, its execution would leave the Power Company with doubtful remedy, either against the governmental agency which might not be able, or against the Government which might not be willing, to respond to a demand for the restoration of conditions as they now exist. In what circumstances and with what result such an effort at restoration might be made is unpredictable. If, as was decided in Smith v. Kansas City Title Co., supra, stockholders had the right to sue to test the validity of a proposed investment in the bonds of. land banks, we can see no reason for denying to these plaintiffs a similar resort to equity in order to challenge, on the ground of unconstitutionality, a contract involving such a dislocation and misapplication of corporate property as are charged in the instant case. The Government urges that the Power Company is estopped to question the validity of the Act creating the Tennessee Valley Authority and hence that the stockholders, suing in the right of the corporation, cannot 5 See note 2. ASHWANDER v. VALLEY AUTHORITY. 323 288 Opinion of the Court. maintain this suit. It is said that the Power Company, in 1925, installed its own transformers and connections at Wilson Dam and has ever since purchased large quantities of electric energy there generated, and that the Power Company continued its purchases after the passage of the Act of 1933 constituting the Authority. The principle is invoked that one who accepts the benefit of a statute cannot be heard to question its constitutionality. Great Falls Manufacturing Co. v. Attorney General, 124 U. S. 581; Wall v. Parrot Silver <& Copper Co., 244 U. S. 407; St. Louis Casting Co. v. Prendergast Construction Co., 260 U. S. 469. We think that the principle is not applicable here. The prior purchase of power in the circumstances disclosed may have a bearing upon the question before us, but it is by no means controlling. The contract in suit manifestly has a broader range and we find nothing in the earlier transactions which preclude the contention that this contract goes beyond the constitutional power of the Authority. Reference is also made to a proceeding instituted by the Power Company to obtain the approval of the contract by the Alabama Public Service Commission and to the delay in the bringing of this suit. It was brought on October 8, 1934, following plaintiffs’ demand upon the board of directors in the preceding August. Estoppel in equity must rest on substantial grounds of prejudice or change of position, not on technicalities. We see no reason for concluding that the delay or the proceeding before the Commission caused any prejudice to either the Power Company or the Authority, so far as the subject matter of the contract between them is concerned, or that there is any basis for the claim of estoppel. We think that plaintiffs have made a sufficient showing to entitle them to bring suit and that a constitutional question is properly presented and should be decided. 324 OCTOBER TERM, 1935. Opinion of the Court. 297 U.S. Second. The scope of the issue. We agree with the Circuit Court of Appeals that the question to be determined is limited to the validity of the contract of January 4, 1934. The pronouncements, policies and program of the Tennessee Valley Authority and its directors, their motives and desires, did not give rise to a justiciable controversy save as they had fruition in action of a definite and concrete character constituting an actual or threatened interference with the rights of the persons complaining. The judicial power does not extend to the determination of abstract questions. Muskrat v. United States, 219 U. S. 346, 361; Liberty Warehouse Co. v. Grannis, 273 U. S. 70, 74; Willing v. Chicago Auditorium Assn., 277 U. S. 274, 289; Nashville, C.