nineteen hundred and seventeen, the total railway operating income of the lines so acquired, leased, or consolidated, for the period beginning July first, nineteen hundred and fourteen, and ending on the date of such acquisition, lease, or consolidation, or on December thirty-first, nineteen hundred and seventeen, whichever is the earlier. The average annual railway operating income shall be ascertained by the Interstate Commerce Commission and certified by it to the President. Its certificate shall, for the purpose of such agreement, be taken as conclusive of the amount of such average annual railway operating income. Every such agreement shall provide that any Federal taxes under the Act of October third, nineteen hundred and seventeen, or Acts in addition thereto or in amendment thereof, commonly called war taxes, assessed for the period of Federal control beginning January first, nineteen hundred and eighteen, or any part of such period, shall be paid by the carrier out of its own funds, or shall be charged against or deducted from the just compensation; that other taxes assessed under Federal or any other governmental authority for the period of Federal control or any part thereof, either on the property used under such Federal control or on the right to operate as a carrier, or on the revenues or any part thereof derived from operation (not including, however, assessments for public improvements or taxes assessed on property under construction, and chargeable under the classification of the Interstate Commerce Commission to investment in road and equipment), shall be paid out of revenues derived from railway operations while under Federal control; that all taxes assessed under Federal or any other governmental authority for the period prior to January first, nineteen hundred and eighteen, whenever levied or payable, shall be paid by the carrier out of its own funds, or shall be charged against or deducted from the just compensation. Every such agreement shall also contain adequate and appropriate provisions for the maintenance, repair, renewals, and depreciation of the property, for the creation of any reserves or reserve funds found necessary in connection therewith, and for such accounting and adjustments of charges and payments, both during and at the end of Federal control as may be requisite in order that the property of each carrier may be returned to it in substantially as good repair and in substantially as complete equipment as it was in at the beginning of Federal control, and also that the United States may, by deductions from the just compensations or by other proper means and charges, be reimbursed for the cost of any additions, repairs, renewals, and betterments to such property not justly chargeable to the United States; in making such accounting and adjustments, due consideration shall be given to the amounts expended or reserved by each carrier for maintenance, repairs, renewals, and depreciation during the three years ended June thirtieth, nineteen hundred and seventeen, to the condition of the property at the beginning and at the end of Federal control and to any other pertinent facts and circumstances. The President is further authorized in such agreement to make all other reasonable provisions, not inconsistent with the provisions of this Act or of the Act entitled "An Act making appropriations for the support of the Army for the fiscal year ending June thirtieth, nineteen hundred and seventeen, and for other purposes," approved August twenty-ninth, nineteen hundred and sixteen, that he may deem necessary or proper for such Federal control or for the determination of the mutual rights and obligations of the parties to the agreement arising from or out of such Federal control. If the President shall find that the condition of any carrier was during all or a substantial portion of the period of three years ended June thirtieth, nineteen hundred and seventeen, because of nonoperation, receivership, or where recent expenditures for additions or improvements or equipment were not fully reflected in the operating railway income of said three years or a substantial portion thereof, or because of any undeveloped or abnormal conditions, so exceptional as to make the basis of earnings hereinabove provided for plainly inequitable as a fair measure of just compensation, then the President may make with the carrier such agreement for such amount as just compensation as under the circumstances of the particular case he shall find just. That every railroad not owned, controlled, or operated by another carrier company, and which has heretofore competed for traffic with a railroad or railroads of which the President has taken the possession, use, and control, or which connects with such railroads and is engaged as a common carrier in general transportation, shall be held and considered as within "Federal control," as herein defined, and necessary for the prosecution of the war, and shall be entitled to the benefit of all the provisions of this Act: Provided, however, That nothing in this paragraph shall be construed as including any street or interurban electric railway which has as its principal source of operating revenue urban, suburban, or interurban passenger traffic, or sale of power, heat and light, or both. The agreement shall also provide that the carrier shall accept all the terms and conditions of this Act and any regulation or order made by or through the President under authority of this Act or of that portion of the Act entitled "An Act making appropriations for the support of the Army for the fiscal year ending June thirtieth, nineteen hundred and seventeen, and for other purposes," approved August twenty-ninth, nineteen hundred and sixteen, which authorizes the President in time of war to take possession, assume control, and utilize systems of transportation. Historical Note The unprecedented demand made upon the transportation facilities of the country, almost from the outbreak of the World War, soon resulted in serious congestion. Efforts of the railway executives to deal with the situation, although productive of some good, proved ineffectual, in part because of the failure to repose plenary power in the committees created for the purpose, and in part because of the uncertainties in respect of the application of the antitrust and antipooling provisions of law to attempted unification of operation. Issuance of orders to obtain priority in transportation for troops and materials of war, first by the War and Navy Departments and the United States Shipping Board and later by the Priority Director (see title 49, c. 1, sec. 6 (8) and 1 (24), U. S. Code), the regulations of the Food Administrator and the Fuel Administrator (see act of Aug. 10, 1917, c. 53, 40 Stat. 276), and the increased volume of traffic following the entry of this country into the war on Apr. 6, 1917, added to the strain. On Dec. 5, 1917, the commission transmitted to Congress a report supplemental to its annual report expressing its conviction that "it has become increasingly clear that unification in the operation of our railroads during the period of conflict is indispensable to their fullest utilization for the national defense and welfare." See 1918 Ann. Rep., p. 4. The two possible ways of effecting this unification indicated were suspension of the antitrust and antipooling laws, or the operation of the roads as a unit by the President. By proclamation of Dec. 26, 1917, the President, under the power vested in him by the act of Aug. 29, 1916 (title 10, c. 31, sec. 1361, U. S. Code), and by virtue of all other enabling powers, took possession and assumed control at 12 m. Dec. 28, 1917 (12 p. m. Dec. 31, 1917, for accounting purposes), of “each and every system of transportation and the appurtenances thereof located wholly or in part within the boundaries of the continental United States and consisting of railroads and owned or controlled systems of coastwise and inland transportation engaged in general transportation, whether operated by steam or by electric power, including also terminals, terminal companies, and terminal associations, sleeping and parlor cars, private cars and private car lines, elevators, warehouses, telegraph and telephone lines, and all other equipment and appurtenances commonly used upon or operated as a part of such rail or combined rail-and-water systems of transportation." He also appointed a Director General of Railroads to exercise the possession, control, operation, and utilization of such transportation systems. Subsequently he recommended to the Congress that statutory provision be made for compensation, maintenance, and operation, and enactment of this act followed. For the termination of Federal control, see historical note to transportation act. 1920. 10. Agent of director general may be agent of carrier. 11. United States bailee of property in transportation. 12. Compensation to carriers; power of Congress to fix amount. 13. Carrier's contract releasing Government from claims. 14. Power of director general to enter into contract. 15. Burden of proof as to amount due. 16. "Standard return"; adequacy. 17. Ascertainment of average annual operating income; findings not reviewable. 18. Taxes assessed. 1. Constitutionality. - Federal control of railroads by the United States was a constitutional exercise of the war power of Congress.-Northern Pac. Ry. Co. v. State of North Dakota ex rel. Langer, 250 U. S. 135, 63 L. ed. 897, 39 Sup. Ct. Rep. 502, reversing 44 N. D. 556; Kambeitz v. United States, 262 Fed. 378. 2. Construction. This act and the transportation act, 1920, must be construed together.-Empire Refining Co. v. Davis, 6 Fed. (2d) 305. For a proper construction of the act, the whole of it must be read to ascertain the legislative intent.-Wainwright v. Pennsylvania R. Co., 253 Fed. 459. A construction of this section of the act which holds that it was the intent of Congress to differentiate between roads upon the basis of the extent of Federal direction is unnecessary and inconsistent with other provisions of the act.-St. Joseph Belt Ry. Co. Application, 65 I. C. C. 443. 3. "Systems of transportation " and "carriers."-The "systems of transportation and the "carriers" mentioned in the act are the physical properties of the various railroads, not the corporation owning or operating them.-Hines v. Dahn, 267 Fed. 105, affirmed, Dahn v. Davis, 258 U. S. 421, 66 L. ed. 696, 42 Sup. Ct. Rep. 320. 4. Nature of taking and operation. The United States in their sovereign capacity took over and operated the railroad systems as a war meas ure under a right in the nature of eminent domain.-Northern Pac. Ry. Co. v. State of North Dakota ex rel. Langer, 250 U. S. 135, 63 L. ed. 897, 39 Sup. Ct. Rep. 502, reversing 44 N. D. 556; Missouri Pac. R. Co. v. Ault, 256 U. S. 554, 65 L. ed. 1087, 41 Sup. Ct. Rep. 593, reversing 140 Ark. 572; North Carolina R. Co. v. Lee, 260 U. S. 16, 67 L. ed. 104, 43 Sup. Ct. Rep. 2; E. I. du Pont de Nemours & Co. v. Davis, 264 U. S. 456, 68 L. ed. 788, 44 Sup. Ct. Rep. 364, affirming Davis v. E. I. du Pont de Nemours & Co., 287 Fed. 522; Davis v. O'Hara, 266 U. S. 314, 69 L. ed. 303, 45 Sup. Ct. Rep. 104, reversing 109 Neb. 615. The taking over and operation was not as lessee.-North Carolina R. Co. v. Lee, 260 U. S. 16, 67 L. ed. 104, 43 Sup. Ct. Rep. 2. 5. Sovereign right not waived.— In taking over and operating the railroads under Federal control, the United States did not waive any sovereign right or privilege unless plainly provided.-E. I. du Pont de Nemours & Co. v. Davis, 264 U. S. 456, 68 L. ed. 788, 44 Sup. Ct. Rep. 364, affirming Davis v. E. I. du Pont de Nemours & Co., 287 Fed. 522; Davis V. O'Hara, 266 U. S. 314, 69 L. ed. 303, 45 Sup. Ct. Rep. 104, reversing 109 Neb. 615. 6. Executory contracts made before Federal control.-Carriers' contracts for supplies and services were rendered impossible of performance by the governmental action in taking over control of the railroads. Such contracts were not kept alive and appropriated by the Government, but were frustrated or ended. Corona Coal Co. v. Davis, 20 Fed. (2d) 738, reversing 8 Fed. (2d) 297. On taking control of a railroad, the director general was not bound to carry out its contract for buying, on commission, and unless it was adopted by him, no action for its breach would lie.-Martin v. Richmond, F. & P. R. Co., 3 Fed. (2d) 26. 7. Right of director general to benefits. During his administration the director general had a legal interest in an existing contract for the supplying of fuel oil to a railroad and could maintain an action to recover damages from one who maliciously interfered with its performance.-Gulf, C. & S. F. R. Co. v. Cities Service Co., 273 Fed. 946. The director general could maintain an action on an indemnity contract with a railroad company, notwithstanding he was not a party to such contract.-National Transit Co. V. Davis, 6 Fed. (2d) 729, affirming Payne v. National Transit Co., 300 Fed. 411, certiorari denied, National Transit Co. v. Davis, 269 U. S. 579, 70 L. ed. 422, 46 Sup. Ct. Rep. 104. 66 9. Employees of carriers not employees of United States.-A baggage porter employed in a station of a railroad under Federal control was not a person acting for or on behalf of the United States in any official function," within sec. 39 of the Criminal Code (U. S. Code, title 18, sec. 91), concerning bribery.-Krichman v. United States, 256 U. S. 363, 65 L. ed. 992, 41 Sup. Ct. Rep. 509, reversing 263 Fed. 538. There is no provision in the act under which employees of raroads were made employees of the Government, so as to disqualify a railroad employee as a juror on that ground. Ong v. United States, 264 Fed. 315, certiorari denied, 254 U. S. 642, 65 L. ed. 453, 41 Sup. Ct. Rep. 14. 10. Agent of director general may be agent of carrier.-An agent of the director general might at the same time be an agent of the owner of the carrier upon whom service might properly be made.-Vicksburg, S. & P. Ry. Co. v. Anderson-Tally Co., 261 Fed. 741. 11. United States bailee of property in transportation.-The United States was the bailee of property during its interstate transportation over railroads under Federal control.Bloch v. United States, 261 Fed. 321; United States v. United States Brokerage & Trading Co., 262 Fed. 459. 12. Compensation to carriers; power of Congress to fix amount.See also sec. 204, transportation act, 1920 (U. S. Code, title 49, sec. 73), for reimbursement of carriers during Federal control. See also transportation act, 1920, sec. 203, for compensation to carriers with which no contract was made. See also U. S. Code, title 10, sec. 1361, note 4. Congress has power to provide for compensation to railroads under Federal control even where there was no damage according to rules of law ordinarily applicable to takings by eminent domain.-Marion & R. V. Ry. Co. v. United States, 270 U. S. 280, 70 L. ed. 585, 46 Sup. Ct. Rep. 253, affirming 60 Ct. Cl. 230. The ultimate determination of the amount of compensation which an owner shall receive for the use of his property during Federal control is a judicial function. Congress has no power to fix such compensation, nor the rules by which it shall be measured.-Railway Steel Spring Co. v. Chicago & E. I. R. Co., 261 Fed. 690. The just compensation to which a railroad is entitled for its use during Federal control should be measured by its earning capacity at the time the Government took possession of the property.-Railway Steel Spring Co. v. Chicago & E. I. R. Co., 261 Fed. 690. The act, in authorizing the President to agree with any carrier whose railroad was taken over by the Government for a certain annual compensation, did not establish a rule of com |