Petition — Smith v. Snow
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Sup eme Court, U.S;
- lpi
ashi AUG 25 1977 |
Supreme Court of the United tates a
Octoser TERM, 1977
——9'7-310
ee -_—— - —
eS
ee
DONALD R. SMITH, Treasurer of Illinois, MICHAEL
J. BAKALIS, Comptroller of Illinois, ROBERT M.
WHITLER, Department of Revenue of Illinois, JOHN
W. CASTLE, Director, Department of Local Govern-
ment Affairs of Illinois,
Petitioners,
vs.
ROBERT H. SNOW, individually and on behalf of
all other taxpayers similarly situated, MARVIN E.
SCHATZMAN, individually and on behalf of all other
taxpayers of Cook County, Illinois, EDWARD J. ROSE-
WELL, as Treasurer and Ex-Officio Collector of Cook
County, Illinois, STANLEY T. KUSPER, JR., Clerk
of Cook County, Illinois, THE COUNTY OF COOK,
a body politic and corporate, ILLINOIS CENTRAL
GULF RAILROAD CO., a Delaware Corporation,
Respondents.
PETITION FOR WRIT OF CERTIORARI TO
THE SUPREME COURT OF ILLINOIS
WILLIAM J. SCOTT,
Attorney General of the State of Illinois,
160 North LaSalle Street,
Chicago, Illinois 60601,
Attorney for Petitioners.
Hersert Lee Capian,
Assistant Attorney General,
(312) 793-3813,
Mary ©. Usarusa,
Assistant Attorney General,
(312) 793-2877,
Of Counsel.
Keenan Printine Company (312) 372-0066-qy> 365
INDEX
I hud Cs CaN bain bidet od caVeceveves 2
I Ts Bhai boas co cee ncccebeccdccoeses 2
QUESTIONS PRESENTED ...........cccccceeess 2
oe GE 4
STATEMENT OF THE CASE.................... 5
A. The Special Illinois Charter and the Charter
Property Gross Receipts Tax................. 5
I Cc dh ecb cudcnseccacdeeevoes 6
C.F en Or Goa oc csn cu cwcccescecess 6
D. How the Federal Question Is Presented....... 8
REASONS FOR GRANTING THE WRIT......... 10
I. THE DECISION OF THE ILLINOIS SU-
PREME COURT ERRONEOUSLY CON-
STRUES AND APPLIES THE PERMIS-
SIVE ACTION TAKEN BY THE INTER-
STATE COMMERCE COMMISSION AND
ERRONEOUSLY PRESUMES THAT THE
COMMISSION INTENDED AND EFFEC-
TIVELY ORDERED THE STATE CHAR.
TER PROPERTY GROSS RECEIPTS TAX
AND RELATED STATE STATUTES TO
Se EE wb apie we dhasete sees 10
A. Interstate Commerce Commission Approv-
al of a Section 5(2) Voluntary Reorgani-
zation Will Not Be Conclusively Presumed
to Render State Statutes Invalid When
the State Law Was Not In Issue Before
the Commission and No Findings Were
Made to Evidence or Support Such an In-
EE BOS codon ics KiccdedsKeidoseescioss
ii.
Pace
B. The Commission’s Approval of a Volun-
untary Reorganization Should Not Be Con-
strued so as to Compel All Necessary Par-
ties to Consent, Nor Should It Be Con-
strued so as to Impliedly Override State
Contract and Corporation Law to Elimi-
nate Questions of Proper Legal Title....
C. The Rights and Obligations Created in the
Charter Between the Railroad and the
State and the State’s Tenth Amendment
Powers May Not Be Abrogated Merely
By Commission Approval of the Plan of
ESE ST AR ae aie
I ie a Fads sass ius neuwubaniad wuss
Appendix A - Opinion of the Illinois Supreme Court
Appendix B ~ Judgment Order of the Circuit Court
CPt GON i eis hated
Appendix C - Order and Relevant Parts of the Deci-
sion of the Interstate Commerce Com-
BS pace ly endip es a ARS Sate
Appendix D - Statutes
Tenth Amendment to the United States
RR en eh ae ae
Interstate Commerce Act, Section 5(a)
gL AR cena aaa talc ea a
Interstate Commerce Act, Section 5(11)
gs RNID ROSES
14
Cl
D1
-
Pace
An Act to Incorporate the Illinois Cen-
tral Railroad Co., Section 18, 19; Il.
Rev. Stats. 1975, chap. 120, sec. 373,
a EIEN een ee eer eee D6
The Business Corporation Act of 1933,
Section 160; Ill. Rev. Stats. 1975, chap.
CED ba ngcloderrin hoe seedy D8
An Act to Increase the Powers of Rail-
road Corporations, Section 2; Ill. Rev.
Stats. 1975, chap. 114, sec. 166........ D9
TABLE OF AUTHORITIES
Tenth Amendment of the United States Constitution 20
Interstate Commerce Act, Section 5(2); 49 U.S.C.
ie ee ida dia pdse puduetcbateedsne 11
Interstate Commerce Act, Section 5(11); 49 U.S.C.
DA kc Ve Cheese Snbad dds bacbteebaes bonvecs ave 11
CasEs:
Arkansas Railroad Com. v. Chicago, RI. & P.R. Co.,
ss halk, oka a's pues So0c) 00 soes'e 13
Branch v. Jesup, 106 U.S. 458 (1883)................ 19
Central Freight Lines, Inc. - Contro] - Alamo Exp.,
8 ey eer 15
Central Transportation Co. v. Pullman’s Palace Car
ER a er ae oe oy Pe a 19
Florida v. United States, 282 U.S. 194 (1930)......... 12
Illinois Central R. Co. v. Emmerson, 299 Til. 325, 132
ne wees 18
iv.
Illinois Central R. Co. v. Howlett, 525 F. 2d 178 (7th
Cir. 1975), cert. den. 424 U.S. 976 (1976)..........
Illinois Central R. Co. v. Public Utilities Com., 245
ih 8 Pe gr oe nee meee ap eee oa
Lawrence v. St. Louis—San Francisco Ry. Co., 274 U.S.
OOD CII iv ds hb ca dn heed R barn det bs Cee tis
McGary Transportation Co., Inc. —- Purchase — DeMelle,
OO WE ZUAS DD CRs oa Seer. een a ie veo cb bee
Neustadt, et al. v. Illinois Central R. Co., 31 Ill. 484
North Carolina v. United States, 325 U.S. 507 (1944)..
Palmer v. Massachusetts, 308 U.S. 79 (1939).........
Pennsylvania R. Co. v. St. Louis A. € T.H.R. Co., 118
Ey SD & os 5 web de> daehescadeseyetentothess
People ex rel. Chicago v. Illinois Central R. Co., 235
Ss BOR WN 3 sib eo Sec devcbcwaswls bnccceunraceen
Seaboard Air Line R. Co. v. Daniel, 333 U.S. 118
Snow v. Dixon, et al., 66 Tl. 2d 443 (1977)............
Texas & N.O.R. Co. v. Brotherhood of Railroad Train-
men, 307 F. 2d 151 (6th Cir. 1962), cert. den. 371
U.S. 952 (1963), reh. den. 375 U.S. 871 (1963)......
Thomas v. West Jersey R. Co., 101 U.S. 71 (1879).....
United States v. Interstate Commerce Commission, 396
Ui GEE. COR i onc hawks coc cnd evi ae
York & M.C.R. Co. v. Winans, 58 U.S. 30 (1854)
17
t
-
Supreme Court of the United States
Ocroser Term, 1977
No.———
DONALD R. SMITH, Treasurer of Illinois, MICHAEL
J. BAKALIS, Comptroller of Illinois, ROBERT M.
WHITLER, Department of Revenue of Illinois, JOHN
W. CASTLE, Director, Department of Local Govern-
ment Affairs of Illinois,
Petitionezs, _
vs. .*
ROBERT H. SNOW, individually and on behalf of
all other taxpayers similarly situated, MARVIN E.
SCHATZMAN, individually and on behalf of all other
taxpayers of Cook County, Illinois, EDWARD J. ROSE-
WELL, as Treasurer and Ex-Officio Collector of Cook
County, Illinois, STANLEY T. KUSPER, JR., Clerk
of Cook County, Illinois, THE COUNTY OF COOK,
a body politic and corporate, ILLINOIS CENTRAL
GULF RAILROAD CO., a Delaware Corporation,
Respondents.
PETITION FOR WRIT OF CERTIORARI TO
THE SUPREME COURT OF ILLINOIS
2
Petitioners, Donald R. Smith, State Treasurer of Ili-
nois, Michael J. Bakalis, Comptroller of the State of [I-
linois, Robert W. Whitler, Director of the Department of
Revenue of Illinois, and John W. Castle, Director of the
Department of Local Government Affairs of Illinois, re-
spectfully pray that a writ of certiorari issue to review
the judgment and opinion of the Supreme Court of IIli-
nois, entered in this proceeding on April 5, 1977.
OPINION BELOW
The opinion of the Supreme Court of Illinois is reported
at 66 Ill. 2d 443 (1977) and appended hereto as Appendix
A. The judgment order of the Circuit Court of Cook Coun-
ty, Illinois, not reported, is appended hereto as Appendix B.
The order and relevant parts of the decision of the Inter-
state Commerce Commission, 338 I.C.C. 805, 879-880, 940-1
(1971) are appended hereto as Appendix C.
JURISDICTION
The judgment of the Supreme Court of Illinois was en-
tered on April 5, 1977. The order denying rehearing was
entered May 27, 1977. This Court’s jurisdiction is con-
ferred by 28 U.S.C. 1257(3) and 2106.
QUESTIONS PRESENTED
Whether the 125-year-old Illinois Central Charter Prop-
erty Gross Receipts Tax and related State statutes have
been repealed by action of the Interstate Commerce Com-
mission,
3
Whether the plenary power of the Interstate Commerce
Commission to enforce its .rders must be conclusively pre-
sumed to’render State statutes invalid in a Section 5(2)
voluntary reorganization when the State law was not in
issue before the Commission and findings were not made
to evidence or support such an intention nor an appropri-
ate order entered to mandate such a result.
Whether Interstate Commerce Commission permission
for a carrier to voluntarily reorganize pursuant to Section
5(2) of the Interstate Commerce Act operates to compel
all parties necessary to the transaction to consent and by
implication overrides State contract and corporation law
to eliminate questions of proper legal title necessary to
effectuate the reorganization.
Whether sound principles of federalism and comity re-
quire that an exercise of federal regulatory power in con-
travention of the Tenth Amendment to the United States
Constitution not be presumed in the absence of a clear
statement of intent to so act and an unavoidable situation
for interposing federal preemption.
STATUTES INVOLVED
Tenth Amendment to the United States Consti-
tution.
Interstate Commerce Act, Section 5(2), (11), 49
U.S.C. Section 5(2), (11).
An Act to Incorporate the Illinois Central Rail-
ruad Co., Section 18, 19, Ill. Rev. Stats. 1975,
chap. 120, See. 373, 374.
The Business Corporation Act of 1933, Section
160, Ill. Rev. Stats. 1975, chap. 32, Sec. 157.160.
An Act to Increase the Powers of Railroad Cor-
porations, Section 2, Ill. Rev. Stats. 1975, chap.
114, Sec. 166.
Pertinent text is set forth in Appendix D.
STATEMENT OF THE CASE
ai:
The Special Illinois Charter and the Charter
Property Gross Receipts Tax.
The Illinois Central Railroad Company was created by
special legislative act on February 10, 1851. Under this
legislative charter, the Illinois Central Railroad Company
received a grant in trust of a two-hundred-foot right-of-
way, together with such other lands necessary for ancil-
lary uses, and approximately 2,595,000 acres of public
lands adjacent to the right-of-way (R. C604, 757, 763), as
well as other valuable assets, rights and privileges, for
“the only and sole purpose of surveying, locating, con-
structing, completing, altering, maintaining and operating
a railroad’’ and branches, pursuant to the covenants and
conditions of the grant, as a ‘‘solemn and binding con-
tract.’’
An Illinois Charter Property Gross Receipt Tax was
simultaneously imposed upon the Illinois Central Rail-
road Company ‘‘in consideration of the grants, privileges
and franchises . . . conferred upon said company.’’ (Ill.
Rev. Stat. 1975, ch. 120, sec. 373.) The annual tax now
exceeds $5.6 million and since August 10, 1972, the date
Illinois Central Railroad Company purportedly dissolved
itself, collections have aggregated over $18 million (R.
C399-400).
To further secure payment of of the tax, the Illinois
Railroad Corporation Act, enacted in 1885 (Ill. Rev. Stats.
1975, ch. 114, sec. 166), provides in part:
6
‘‘ |. nothing herein contained shall be so construed
as to authorize or permit the Illinois Central Railroad
Company to sell the railway constructed under its
charter, approved February 10, 1851, or to mortgage
the same, except subject to the rights of the state
under its contract with said company, contained in its
charter, or to dissolve its corporate existence, or to
relieve itself or its corporate property from its obli-
gations to this state, under the provisions of said
charter.”’
The Illinois Business Corporation Act, first adopted in
1919 (Ill. Rev. Stats. 1975, ch. 32, sec. 157.160) also con-
tains the above provision.
B. The Reorganization
On or about May 16, 1968, Illinois Central Industries,
Inc., a Delaware Corporation, of which Illinois Central
Railroad Company is a wholly owned subsidiary, and Gulf,
Mobile and Ohio Railroad Company, a Mississippi Corpo-
ration, filed with the Interstate Commerce Commission a
voluntary petition for approval and authorization to con-
solidate and merge pursuant to 49 U.S.C. Sec. 5(2)(a).
The plan was approved by the Commission in its deci-
sion rendered December 20, 1971. (338 I.C.C. 805). The
State of Illinois was not a party to the proceedings before
the Commission. The Commission did not decide any ques-
tion concerning the power of the Illinois Central to unilat-
erally dissolve its Illinois corporate existence and trans-
fer away its charter properties, so as to relieve it from its
obligation to pay the Charter Property Receipts Tax and
other duties and obligations existing under Illinois law.
C.
The Origin of the Case
This action originated on November 20, 1973, when the
plaintiff, Robert H. Snow, filed his petition for leave to
7
file a complaint in the Circuit Court of Cook County, Illi-
nois (R. C79-104). Plaintiff, as a citizen and taxpayer of
the State of Illinois, sought to enjoin the State defend-
ants from expending public funds to continue to collect
the Charter Property Gross Receipts Tax from [Illinois
Central Railroad Company, and to enjoin Illinois Central
from paying the tax to the state (R. C133-150). Over ob-
jection of all defendants, leave to file was granted (R.
C132).
The amended complaint alleges that ‘‘effective August
10, 1972, Illinois Central [Railroad Company] effectively
ceased to exist because it merged into [Illinois Central]
Gulf {Railroad Co.] and conveyed all of its assets to
Gulf’’ and the Charter Property Gross Receipts Tax
**ceased to be of legal effect and became null and void.’’
(R. C138).
Motions of defendants to strike and dismiss the amended
complaint (R. C154; 157; 166; 184; 200) were overruled.
(R. C215). Thereafter, motions of defendants for sum-
mary judgment (R. C382-414; 448-459; 482-499) were de-
nied, and plaintiff’s motion for summary judgment (R.
C600-65) was allowed. (R. C936-946).
The judgment order of May 17, 1976, inter alia, finds:
‘5. That a plan of reorganization was approved by the
Interstate Commerce Commission whereby the Illinois Cen-
tral Gulf Railroad Company (‘‘Gulf’’) acquired the assets
of Illinois Central Railroad Company (‘‘I.0.’’) and Illi-
nois Central Railroad Company was to be dissolved. This
plan became effective on August 10, 1972 and under said
plan 1.C. sold and conveyed all of its assets, including the
Charter Property, to Gulf... . 10. That under the Plan
of Reorganization, the Charter Property Tax did not be-
8
come an obligation of Gulf, and Gulf did not acquire LC.’s
exemption from all other taxation as described in Section
22 of the 1851 Charter.’’ (R. C939-941).
The State defendants perfected a direct appeal to the
Illinois Supreme Court. On April 5, 1977, the Court ren-
deréd its opinion which affirmed the judgment of the circuit
court as modified, and remanded the cause for further pre-
ceedings. The State defendants’ petition for rehearing was
denied on May 27, 1977.
D.
How the Federal Question Is Presented
The effect of the Interstate Commerce Commission’s
approval of the reorganization upon State law was first
raised in the Answer of Illinois Central Gulf Railroad
Company to the Amended Compiaint (R. C219-23), and
again in the Reply of Plaintiff Snow to Answer of Illinois
Central Gulf Railroad (R. C301-2), and the Memorandum
in Support of Certain Defendants’ Motions for Summary
Judgment. (R. C450, 455).
A suit had been filed by Illinois Central Railroad Com-
pany in the District Court to litigate the question whether
the Illinois Central Special Charter had been ‘‘duly dis-
solved’’ over state objections, but the district court action
was involuntarily dismissed on procedural grounds without
ever reaching the substantive issue. (Jllinois Central Rail-
road Company v. Howlett, 525 F. 2d 178 (7th Cir. 1975),
cert. denied, 424 U.S. 976 (1976)).
In the case a bar, plaintiff expressly argued that:
‘‘There is no issue before this Court as to whether or
not the I.C. is ‘empowered to dissolve its corporate
existence’; that issue is being litigated between the
9
I.C. and the Illinois “Secretary of State in Federal
Court, and is not an issue which has been raised by
any pleading in this case.’’ (R. C625; 691; 920)
Intervening defendant Schatzman adopted the same po-
sition: that the matter had not been asserted in the Com-
plaint, was not a direct issue in the case, had not been
fully briefed and should not be a part of the final judg-
ment or decree. (R. C920)
Intervening defendants, Rosewell, Kusper and Carey
adopted this identical position. (R. C912)
Nevertheless, in its judgment order, the Court found
that by virtue of the Commission’s approval of the re-
organization, the Illinois Central Gulf Railroad acquired
the assets of the Illinois Central Railroad Company, in-
cluding the charter property, and the Ilinois Central was
then dissolved.
In their brief filed with the Illinois. Seatitiits Court,
the State defendants again raised the issue whether the
Special Illinois Charter of the Illinois Central Railroad,
the Charter Property Gross Receipts Tax, and State laws
prohibiting I.C.’s corporate dissolution and transfer of
charter assets have been effectively repealed by the or-
der of the Interstate Commerce Commission.
In its opinion, the Illinois Supreme Court, by relying
solely on ‘‘federal grounds,’’ rejected the State defend-
ants’ contention that the Illinois Central Railroad Com-
pany had no power under State law to dissolve its char-
ter and transfer its charter property. Specifically, the
Court found that any charter which would prevent the
sale of the Illinois Central and all of its assets, including
the charter property, would be overriden under 49 U.S.C.
Sec. 5(11) in order to effect the transaction approved by
the Interstate Commerce Commission. (66 Tl]. 2d at 457-
462).
10
REASONS FOR GRANTING THE WRIT
I. |
THE DECISION OF THE ILLINOIS SUPREME COURT
ERRONEOUSLY CONSTRUES AND APPLIES THE
PERMISSIVE ACTION TAKEN BY THE INTER-
STATE COMMERCE COMMISSION AND ERRONE-
OUSLY PRESUMES THAT THE COMMISSION IN-
TENDED AND EFFECTIVELY ORDERED THE
STATE CHARTER PROPERTY GROSS RECEIPTS
TAX AND RELATED STATE STATUTES TO BE
OVERRIDDEN.
The Special Illinois Central Railroad Company Charter
and statutes subsequently adopted prohibit the Railroad
from unilaterally dissolving its corporate existence or re-
lieving itself or its corporate property from its obliga-
tions to the State under the provisions of the Charter.
One of the primary obligations of the Railroad under the
Charter is the payment of the Charter Property Gross
Receipts Tax to the State.
Over the past 124 years, every change or amendment to
the charter operations of Illinois Central Railroad Com-
pany has been by mutual consent of the railroad and the
State of Illinois, effected by appropriate legislative en-
actments and acceptance of the enactments by the corpo-
rate officers of the railroad. This has even occurred subse-
quent to the purported reorganization which triggered the
instant action. (R. C454-5, 670-1)
- The issue of whether the Illinois Central Railroad Com-
pany has the right to unilaterally dissolve its special char-
ter existence, transfer away its charter property and thus
relieve itself of its duty to pay the Charter Property
11
-
Gross Receipts Tax in contravention of Illinois law was
not decided by the Interstate Commerce Commission, nor
has the issue ever been adjudicated in a court of competent
jurisdiction.
Nevertheless, the Illinois Supreme Court assumed that
because the voluntary reorganization was approved by the
Interstate Commerce Commission, any inhibiting State law
was automatically nullified under 49 U.S.C. 5(11).
This erroneous view of the meaning of an order of the
Interstate Commerce Commission cannot stand. It is prem-
ised upon a basic misunderstanding of the effect of Com-
mission approval of a voluntary reorganization, is con-
trary to the Commission’s own interpretation of its au-
taority, and constitutes an nnwarranted extension of fed-
eral jurisdiction into a matter of state concern.
A.
Interstate Commerce Commission Approval of a Sec-
tion 5(2) Voluntary Reorganization Will Not Be Conclu-
sively Presumed To Render State Statutes Invalid When
The State Law Was Not In Issue Before The Commission
and No Findings Were Made To Evidence or Support Such
An Intention.
There is no dispute that under 49 U.S.C. 5(11), the
Interstate Commerce Commission may exercise power to
suspend inhibiting State laws to the extent necessary to
effect a voluntary reorganization. The issue is not, how-
ever, what the Commission may have power to effectuate
in an appropriate case, but rather what in fact the Com-
mission did decide in reviewing the Illinois Central reor-
ganization petition.
12
The decision of the Commission in the reorganization
reveals no express intention to override the provisions of
the Special Illinois Charter and related statutes. It did
not find that Illinois law should be superseded, nor did it
mandate such a result in its order. Nevertheless, the Illi-
nois Supreme Court has supplied such an intention purely
by implication and has thus invalidated the aforementioned
Illinois laws.
This Court has never held that a decision of the Inter-
state Commerce Commission will automatically supersede
State laws and powers where the Commission made no
finding that such a result was intended. Rather, the deci-
sions of this Court show that where State law is to be
invalidated by an order of the Commission, the intention
to override must be expressly set out the order.
As Chief Justice Hughes stated in this Court’s opinion
in Florida v. United States, 282 U.S. 194, 211-212 (1930):
‘‘The question in the present cases then, is not one of
authority but of its appropriate exercise. The pro-
priety of the exertion of the authority must be tested
by its relation to the purpose of the grant and with
suitable regard to the principle that whenever federal
power is exerted within what would otherwise be the
domain of state power, the justification of the exercise
of the federal power must clearly appear.’’ (Empha-
sis added)
In Seaboard Air Line R. Co. v. Daniel, 333 U.S. 118,
124 (1948), relied upon by the Illinois Supreme Court in
rendering its decision, this Court held that the appellant
railroad company was relieved of the necessity of com-
plying with certain South Carolina constitutional and stat-
utory provisions because the Interstate Commerce Commis-
sion had expressly stated in its order that this was its
intention.
13 ;
In the absence of such specific findings, this Court has
declined to presume that state laws and powers are auto-
matically overriden by decisions of the Commission. North
Carolina v. United States, 325 U.S. 507, 520 (1944). In
Arkansas Railroad Com. v. Chicago, R. I. & P. R. Co.,
274 U.S. 597 (1926), the issue was whether an order of
the Interstate Commerce Commission had extended to in-
trastate rates. At page 603 of the opinion, Justice Brandeis
wrote:
‘‘The intention to interfere with the state function of
regulating intrastate rates is not to be presumed.
Where there is serious doubt whether an order of the
Interstate Commerce Commission extends to intrastate
rates, the doubt should be resolved in favor of the state
power.”’ "
The Court further noted that if the railroad believed
that the Commission had intended to include the intra-
state rates within its order, the railroad should have taken
action to secure an express statement from the Commis-
sion that such was its intention. Similarly, if the Illinois
Central felt that the Illinois Charter Property Law should
be overridden, it had a duty to request a specific ruling on
the issue by the Commission. It did not.
The Commission made no specific findings that the Illi-
nois charter law should be overriden. The Illinois Supreme
Court nevertheless assumed that such an intention was
implied in the Commission’s finding that the reorganiza-
tion was in the public interest.
State laws, however, should not be so lightly set aside.
As this Court held in Illinois Central Railroad Co. v.
Public Utilities Commission, 245 U.S. 493, 510 (1918) :
‘*In construing federal statutes enacted under the
power conferred by the Commerce Clause of the Con-
14
stitution, the rule is that it should never be held that
Congress intends to supersede or suspend the exer-
cise of the reserved powers of a State, even where
that may be done, unless, and except so far as, its
purpose to do so is clearly manifested. Reid v. Colo-
rado, 187 U.S. 137, 148; Cummings v. Chicago, 188
U.S. 410, 430; Savage v. Jones, 225 U.S. 501; Missouri,
Kansas ¢ Texas Ry. Co. v. Harris, 234 U.S. 412, 419.
This being true of an act of Congress, it is obvious
that an order of a subordinate agency, such as the
Commission, should not be given precedence over a
State rate statute otherwise valid, unless, and except
so far as, it conforms to a high standard of certainty.’’
If the Commission had intended to override the provi-
sions of the special Illinois charter and related statutes,
it would have said so. No such intention was stated or
implied, and the Illinois Supreme Court was clearly in
error when it supplied such an intent by pure implication
and effectively repealed several Illinois statutes.
The Commission’s Approval Of A Voluntary Reorgani-
zation Should Not Be Construed So As To Compel All Nec-
essary Parties To Consent, Nor Should It Be Construed So
As To Imliedly Override State Contract And Corporation
Law To Eliminate Questions Of Proper Legal Title.
The Illinois Supreme Court apparently believed that
Commission approval of the reorganization meant that the
transaction was of necessity to be accomplished, regardless
of any questions remaining to be resolved under Illinois
law. This is contrary to the Commission’s own view of its
powers.
Commission review and approval in any proposed reor-
ganization is a federal statutory precondition to the com-
15
pletion of such transaction. But, its approval of a reor-
ganization is permissive only, and not mandatory. The
Commission has described its authority as follows:
‘*As to vendor’s desire to withdraw from the trans-
action, we have repeatedly found that authority
granted under former section 213 and present sec-
tion 5 is permissive only, and may, or may not, be
exercised by the parties, and that all matters involv-
ing the interpretation and enforcement of the terms
of contracts must be left for settlement between the
parties themselves or by the courts.’’ McGary Trans-
portation Co., Inc. — Purchase — DeMelle, 50 MCC 608,
611 (1948).
In Central Freight Lines, Inc. - Control — Alamo Exp.,
90 MCC 96, 100-101 (1962), the Commission further stated:
‘‘Our function under the statute is to determine
whether the transaction proposed will be consistent
with the public interest, and whether the terms and
conditions proposed, subject to such conditions or mod-
ifications as we may require, are just and reasonable.
... Whether the transaction will be consummated, or
consummation could be legally compelled by appli-
cants, is not for us to decide. Our authority is per-
missive only. We cannot force consummation of any
transaction approved by us under section 5. In our
view, the fact that the transaction conceivably may not
be consummated under the modified terms does not
inhibit our authority to approve the transaction on the
revised terms proposed by applicants.’’
Clearly, where such a reorganization is voluntary and
by request of the carriers, an I.0.C. order does not man-
date that the action be taken nor compel any dissenting
party to conform.
In Texas d N. O. R. Co. v. Brotherhood of Railroad
Trainmen, 307 F. 2d 151, 159-60 (6th Cir. 1962), cert. den.
371 U.S. 952, 83 S. Ct. 508 (1963), Reh. den. 375 U.S. 871,
84 8. Ct. 28 (1963), the Court said:
16
‘‘Now, are we to read into the authority of the ICC
to ‘approve’ a transaction, the right of the carrier to
unilaterally create one of the contracts which may be
necessary to the completion of that transaction and
thereupon bind a third party to it? Clearly, that does
not follow as a matter of course from the normal
meaning of the terms used in section 5(2) (a).
‘Nor has the ICC, in its interpretation of section 5(2),
found any such hidden authority. It looks upon its
duties as purely permissive, approving with appropri-
ate conditions contracts, agreements, and consolida-
tions which are negotiated by the parties under the
normally applicable law governing such transactions in
other fields. As the Commission has often held, it has
no power to compel a carrier to undertake 4 section
5(2 )transaction. ...
‘‘F'rom these cases, we believe the Commission is of
the opinion that the carriers must rely upon applicable
contract and corporate law to carry their section 5(2)
transaction into effect, and may not rely upon the
Commission’s ‘approval’ to coerce a recalcitrant party
into line.’’ (Emphasis added)
Even if the proposed partners to a reorganization agree,
a voluntary reorganization still cannot be legally consum-
mated unless under state law all the necessary parties
to such a merger or consolidation have proper title to the
rights and property which they wish to bring into the
reorganization and are able to execute the necessary con-
tracts to accomplish the transaction.
The law is most clearly stated by the United States
Supreme Court in the recent Northern Lines merger cases,
United States v. Interstate Commerce Commission, 396
U.S. 491, 526 (1970). Chief Justice Burger said:
‘‘The premise of Livingston’s position is that under
this statute before the Commission can assume juris-
diction over a merger application it must determine
17
that the applicants have proper legal title to. the
rights and property which they seek to bring into the
merger. This is an erroneous assumption. The Com-
mission is not required to deal with the subtleties of
**good title’ before assuming jurisdiction over a sec-
tion 5 matter. Cf. 0. C. Wiley & Sons v. United States,
85 F. Supp. 542, 543-545 (D. C. W. Va.), aff’d per cu-
riam, 338 U.S. 902 (1949); Walker v. United States,
208 F’. Supp. 388, 396 (D. C. W. D. Tex. (1962) ; Inter-
state Investors, Inc. v. United States, 287 F. Supp.
374, 392 n. 32 (D. C. S. D. N. Y. 1968), aff’d per cu-
riam, 393 U.S. 479 (1969). And because a Commission
order under section 5(2) ‘is permissive, not manda-
tory,’ New York Central Securities Corp. v. United
States, 287 U.S. 12, 26-27 (1932), the approval of a
merger proposal does not amount to an adjudication
of any such questions. These are matters for the
courts, not for an agency that has responsibility in the
realm of regulating transportation systems.’’ (Empha-
sis added)
The 1.C.C. order entered December 20, 1971, did not
consider or decide any issues existing between the State
of Illinois and Illinois Central Railroad Co. concerning
good title. These were left to the courts to resolve, and
were the subject matter of Illinois Central Railroad v.
Howlett, 525 F. 2d 178 (7th Cir. 1975), cert. den. 424 U.S.
976 (1976), which was dismissed on procedural grounds
without reaching the merits of the case. They are the is-
sues remaining to be adjudicated in a court of competent
jurisdiction on proper pleadings where the parties are
correctly aligned.
18
C
The Rights And Obligations Created In The Charter Be-
tween The Railroad And The State And The State’s Tenth
Amendment Powers May Not Be Abrogated Merely By
Commission Approval Of The Plan Of Reorganization.
The Charter of the Illinois Central Railroad is a solemn
contract between the State and the Railroad which cannot
be altered or abandoned without the consent of both con-
tracting parties. Illinois Central R. Co. v. Emmerson, 299
Tl. 325, 132 N.E. 471 (1921); People ex rel. Chicago v. Ilh-
nois Central R. Co., 235 Ill. 374, 85 N.E. 606 (1908); Neu-
stadt, et al. v. Illinois Central R. Co., 31 Ill. 484 (1863).
Central to the Charter is the obligation of Illinois Central
to pay the 7% Charter Gross Receipts Tax to the State.
The annual tax now exceeds $5.6 million and since August
10, 1972, the date Illinois Central purportedly dissolved
itself, collections have aggregated over $18 million. (R.
C399-400)
Decisions of this Court have consis ently held that rail-
road corporations cannot unilaterally absolve themselves
from the performance of their obligations under their
charters without the consent of the State legislature.
In Thomas v. West Jersey R. Co., 101 U.S. 71, 83 (1879),
this Court said;
‘¢* * * [Where a corporation, like a railroad com-
pany, has granted to it by charter franchise intended
in large measure to be exercised for the public good,
the due performance of those functions being the con-
sideration of the public grant, any contract which dis-
ables the corporation from performing those func-
tions, which undertakes, without the consent of the
State, to transfer to others the rights and powers con-
ferred by the charter, and to relieve the grantees of
19
-
the burden which it imposed is a violation of the con-
tract with the State, and is void as against public
policy.’’
See also York & M. L. R. Co. v. Winans, 58 U.S. 30, 39
(1854); Branch v. Jesup, 106 U.S. 458, 463 (1883); Penn-
sylvania R. Co. v. St. Louis A. & T. H. R. Co., 118 US.
290, 313 (1886); Central Transportation Co. v. Pullman’s
Palace Car Co., 139 U.S. 24, 41 (1891).
The Illinois Supreme Court in its opinion recognized the
fact that a contract exists between the State and the
Railroad when it stated: ‘‘The contractual nature of the
charter and the 7% charter tax imposed on IC therein are
firmly established.’’ (66 Ill. 2d at 455). Nevertheless, the
court’s decision effectively denied the State the opportu-
nity to assert its rights under the contract by regarding
Commission approval of the plan as conclusive on all
issues.
As the authorities set out in Part B of this Petition
clearly show, the Commission refrains from adjudicating
the contractual disputes that may arise between the parties.
Furthermore, where federal jurisdiction impinges upon
an area traditionally reserved to the States under the
Tenth Amendment (taxation in the instant case), this
Court has always required a clear intent to supersede State
laws and an actual conflict between State and federal au-
thority. As stated in Palmer v. Massachusetts, 308 U.S.
79, 84 (1939):
‘‘Therefore, in construing legislation this court has
disfavored inroads by implication on state authority
and resolutely confined restrictions upon the tradi-
tional power of states to regulate their local transpor-
tation to the plain mandate of Congress,’’
i i,
20
In d*scussing the resolution of a controversy concern-
ing the respective powers of the federal government and
the states over railroads engaged in interstate commerce,
Justice Brandeis wrote in Lawrence v. St. Louis—San Fran-
cisco Ry. Co., 274 U.S. 588, 595 (1926) :
‘‘The delimitation of the respective powers of the two
governments requires often nice adjustments. The fed-
eral power is paramount. But public interest demands
that whenever possible conflict between the two au-
thorities and irritation be avoided. To this end it is
important that the federal power be not exerted un-
necessarily, hastily, or harshly. It is important also
that the demands of comity and courtesy, as well as of
the law, be deferred to.’’
In its decision, the Illinois Supreme Court assumed that
the Interstate Commerce Commission intended to repeal
the Illinois State Charter Law and related statutes, and
effectively denied the State its right to collect the 7% Char-
ter Property Gross Receipts Tax. Sound principles of
comity and federalism require that an exercise of fed-
eral regulatory power in contravention of the Tenth
Amendment not be presumed in the absence of a clear
statement of intent to so act and an unavoidable situa-
tion for interposing federal preemption. Since the Com-
mission expressed no intention to override Illinois law in
its order approving the reorganization, the Illinois Su-
preme Court was clearly in error.
CONCLUSION
For 125 years since its creation, the State of [linois
has imposed a Charter Property Gross Receipts Tax upon
the Illinois Central Railroad Company ‘‘in consideration
of the vast and valuable grants, privileges and franchises
... conferred upon -said company.’’
21
To secure payment of the tax, maintenance of the char-
ter lines, and faithful performance of the other duties
and obligations imposed by law upon Illinois Central Rail-
road Co., the railroad is prohibited from dissolving its
Illinois Corporate existence or transferring away its prop-
erty so as to relieve itself from its obligations to this
State under the provisions of its special charter.
Over the past 124 years, every change or amendment
in the charter of the Illinois Central Railroad Company
has been by mutual consent of the railroad and the State
of Illinois, effected by appropriate legislative enactments
and acceptance of the enactment by the corporate officers
of the railroad.
The Illinois Central Railroad Company petitioned the
Interstate Commerce Commission for federal permission
to voluntarily reorganize its corporate structure pursuant
to section 5(2) of the Interstate Commerce Act.
The Interstate Commerce Commission was not peti-
tioned to override the Illinois Central Charter Property
Gross Receipts Tax or the related Illinois statutes which
secure the tax. The Commission made no findings and
entered no order to mandate the repeal of the Illinois
laws.
The Illinois Supreme Court erroneously concluded that
the Interstate Commerce Commission had ruled that the
reorganization must be effected and, consequently, the
Charter Property Gross Receipts Tax and related stat-
utes were nullified.
The decision of the Illinois Supreme Court is premised
upon an uncorrect view of the meaning of the Commission’s
order and the impact of federal law, and is nothing less
than ‘‘petitio principlii.’’” Where a State’s Tenth Amend-
22
ment powers are at stake, the principles of comity and
federalism require a definite statement of intent to over-
ride State law, and such an intent may not be supplied by
implication, as the Illinois Supreme Court has done here.
WHEREFORE, for these reasons, Petitioners pray that
a writ of certiorari issue to review the judgment and
opinion of the Illinois Supreme Court entered April 5,
1977.
Respectfuly submitted,
Wun J. Scort,
Attorney General of the State of Illinois,
160 North LaSalle Street,
Chicago, Illinois 60601,
Attorney for Petitioners.
Respondents.
Hersert Lee Capian,
Assistant Attorney General,
(312) 793-3813,
Mary C. Usatusa,
Assistant Attorney General,
(312) 793-2877,
Of Counsel.
Al
APPENDIX A
OPINION OF THE ILLINOIS SUPREME COURT
(66 Ill. 2d 443)
MR. JUSTICE MORAN delivered the opinion of the
court:
In 1851, by ‘‘An Act to incorporate the Illinois Central
Railroad company’’ (1851 Private Laws of Illinois 61,
hereinafter, the charter), the Illinois General Assembly
authorized construction of a railroad line between Chi-
cago and Cairo with a branch to the Mississippi River via
Galena, and granted for that purpose a 200-foot right-of-
way and approximately 2.6 million additional acres along
that right-of-way. Most of this land derived from Fed-
eral land grants of the prior year. The line constructed
pursuant to this charter (the charter line) includes 705.5
miles of main line. This, in addition to 1,820 miles of
non-charter-line track, was operated by the Illinois Central
(IC) until August 10, 1972, when, pursuant to a plan of
reorganization (Plan) approved by the Interstate Com-
merce Commission (Commission), the IC sold and con-
veyed all of its assets to the defendant, Illinois Central
Gulf Railroad Company (Gulf), a newly formed Delaware
corporation, in exchange for stock. The IC distributed this
stock to its shareholders and purportedly dissolved. Gulf
has since owned and operated the IC's former charter
line and the noncharter lines, as well as the former Gulf,
Mobile & Ohio Railroad lines. In the same manner as the
IC before it, Gulf has paid the 7% gross revenue tax
imposed on IC’s charter line. This tax, under sections 18
and 22 of the charter (which may be found, as modified,
in Ill. Rev. Stat. 1975, ch. 120, pars. 373, 374), was imposed
on IC in lien of ordinary taxes. Gulf, likewise, has paid it
in lieu of other taxes, and it has been thus accepted for
the years 1972 through 1975 without challenge by the
defendant State of Illinois officials (State).
A2
The instant dispute arises from the claim of Robert
H. Snow, an Illinois taxpayer, that State funds are being
disbursed to effect the collection from Gulf of the illegal
7% tax on charter properties. He brings this action under
‘‘An Act in relation to suits to restrain and enjoin the
disbursement of public moneys by officers of the state’’
(Ill. Rev. Stat. 1975, ch. 102, par. 11 et seq.) (the Public
Monies Act). The essence of the action is that this 7% tax
was an exemption personal to IC, not applicable to Gulf,
and is being illegally collected in lieu of other taxes which
would ordinarily be due from the charter line. Marvin
E. Schatzman (as a Cook County taxpayer), Edward J.
Rosewell (as Cook County treasurer), and Stanley T.
Kusper, Jr. (as Cook County clerk), intervened. On cross
motions, the circuit court rendered summary judgment for
the plaintiff on May 17, 1976, finding that under the plan
of reorganization the tax on the charter line did not
become an obligation of Gulf, and Gulf did not acquire
IC’s special tax exemption. The chancellor decreed IC
dissolved, enjoined the State from continuing to collect
the charter tax from Gulf and from expending public
funds in connection therewith, and ordered the Director
of the Department of Local Government Affairs, effective
August 10, 1972, to ‘‘assess the Charter Property in the
same manner as he assesses the property of other railroads
in the State’’ and to ‘‘transmit the lists and information to
the various proper taxing authority of the Illinois counties
in which Charter Property is located.’’
On appeal, Gulf urges that the charter property tax
obligation and corresponding immunity from other tax
were contract rights passed to Gulf by virtue of the
Commission’s approval of its plan of reorganization. Gulf
furtbcr urges that, should this court disagree with this
A3
proposition, the trial court’s order requiring Gulf’s char-
ter line to be assessed in the same manner as other Illinois
railroads should be applied prospectively only.
The State agrees with Gulf that the 7% charter tax
is due and owing, but contends it is due from IC; that the
contract rights created in the charter between IC and the
State may not be unilaterally abrogated by the IC or
by the powers of the Commission to approve the Plan.
Additionally, the State asserts that Snow lacks standing to
attack the voluntary payments of a tax by another, and
that administrative review, rather than suit under the Pub-
lie Monies Act, is the proper vehicle for this action.
With reference to the question of standing and appro-
priateness of this action under the Public Monies Act, the
State asserts that the amounts collected by the 7% tax
total over $5.6 million per year, whereas the $41,400 éx-
pended in auditor’s salary for its collection are de mini-
mis, and that therefore Snow and the other taxpayers he
represents have no interest in preventing the token ex-
penditure. The State ignores the fact evidenced by the
record that the time of literally hundreds of State em-
ployees is devoted in some part to the assessment and
collection of this tax. Furthermore, there is no require-
ment that a taxpayer’s individual interest in a suit under
the Public Monies Act be substantial. In the case of Krebs
v. Thompson (1944), 387 Ill. 471, 475-76, the court acknowl-
edged that, ‘‘{u]nder the settled rule in this State, ev-
ery taxpayer is injured by the misapplication of public
funds, whether the amount be great or small. Such injury
is not prevented by the fact that the State may thereafter
receive fees under an unconstitutional statute in excess of
the cost of its administration.’’ Long before the enactinent
of the Public Monies Act, the citizens and taxpayers of this
A4
State have been permitted to sue to enjoin the misuse of
public funds. (See Barco Manufacturing Co. v. Wright
(1956), 10 Ill. 2d 157, 160, and Fergus v. Russel (1915),
270 Ill. 304, 314, and cases cited therein. See also Cusack
v. Howlett (1969), 44 Ill. 2d 233, 236.) Furthermore, a
taxpayer may bring suit to enjoin the misuse of public
funds in administering an illegal legislative act even though
the taxpayer is not subject to the provisions of that act.
(Mansfield v. Carpentier (1955), 6 Ill. 2d 455, 460-61;
Bode v. Barrett (1952), 412 Ill. 204, 233-34; Krebs v.
Thompson (1944), 387 Ill. 471, 474.) The case of Droste
v. Kerner (1966), 34 Ill. 2d 495, cited by the State for the
proposition that the taxpayers have no standing to sue
because the public funds allegedly disbursed illegally were
de minimis, was a consolidated appeal from two actions:
one attacking a legislative enactment conveying State lands
brought under the Public Monies Act; another attacking
the same enactment on a theory of public trust. The court
found that the Public Monies Act did not give the plain-
tiffs standing to maintain the first action, for conveyance
of public lands was not the improper ‘‘disbursement”’ of
public ‘‘funds’’ contemplated by the Act. In the second
action, under the public trust doctrine, the plaintiff alleged
that certain State funds would be expended for land
surveys, title reports and the like to carry out the pro-
tested act. The court viewed these allegations as ‘‘no more
than speculative conclusions’? and then determined that
‘tin any event, the expenditures which plaintiff alleges are
de minimis for purposes of standing to sue as a taxpayer.’’
(Droste v. Kerner (1966), 34 Ill. 2d 495, 505.) The court’s
statement regarding de minimis expenditures specifically
referred to standing to sue under the public trust doctrine
rather than under the Public Monies Act. Furthermore,
A5
this aspect of Droste was overruled in Paepcke v. Public
Building Com. (1970), 46 Tll. 2d 330, 341. Droste is clearly
irrelevant to the issue of standing in the case at hand.
Other cases which the State cites to demonstrate that
the Public Monies Act is an inappropriate vehicle for
this suit are not on point. Daly v. County of Madison
(1941), 378 Ill. 357, 361, brought by taxpayers to en-
join an election, was characterized by the court as an
action involving a political question which the courts of
equity have no power to resolve. The case of People ex rel.
Morse v. Chambliss (1948), 399 Ill. 151, was not brought
under the Public Monies Act. The plaintiff taxpayer there
sued the property owner to enforce a tax lien of about
$13,500 against defendant’s property, which lien he
claimed to have arisen as a result of taxing officials’
unauthorized acceptance of $14,500 as full satisfaction for
back taxes of $28,000. The court in Cham liss observed
that ‘‘[t]here can be no question but that the suit is for
the collection of taxes alleged to be due and owing’’ (399
Till. 151, 153), that the taxing body must direct the
bringing of such suit, and that an individual taxpayer has
no right to bring suit for the collection of taxes. The case
sub judice is clearly distinguishable. It is designed to
prevent the continued acceptance of an allegedly unlawful
tax in lieu of all other taxes, when the appropriate taxing
authorities have declined, and still decline, to follow ap-
plicable statutory procedures requiring them to assess all
of Gulf’s property in the same manner as other railroad
properties assessed.
The State asserts that administrative review is the
appropriate method for determining the correctness of a
vehicle because it was not intended to enlarge the rights of
citizens or extend the established jurisdiction of a court of
A6
equity. (Daly v. County of Madison (1941), 378 Ill. 357,
376.) Owens-Illinois Glass Co. v. McKibbin (1943), 385 Ill.
245, 256-57, reviewed the decisions of this court regarding
injunctive relief in tax matters and acknowledged the
firmly established principle that ‘‘equity has jurisdiction to
enjoin the collection of an unauthorized tax, although
there exists a coneurrent remedy at law.’’ This principle
continues to be viable (see Sta-Ru Corp. v. Mahin (1976),
64 Ill. 2d 330, 334; Illinois Bell Telephone Co. v. Allphin
(1975), 60 Ill. 2d 350, 359-61) despite a modification to
that rule created in Illinois Bell. In Illinois Bell (60 Ill. 2d
350, 359), this court held that the above proposition from
Owens was no longer applicable where an administrative
remedy was available under the Administrative Review
Act. The State, for the first time on appeal, asserts that
prior to bringing this suit the plaintiffs failed to invoke
correct administrative remedies (presumably administra-
tive review of defendant Kirk’s assessment, or lack thereof,
on the charter property). Since this argument was pre-
sented for the first time on appeal, it is deemed waived, and
the rule of Illinois Bell is thus inapplicable. We conclude
that this action is one traditionally entertained by courts of
equity. We do not, therefore, address the applicability of
the Owens rule in an action seeking an iniunction under
the Public Monies Act where administrative remedies are
allegedly available. For the reasons above, we hold that
plaintiff had standing and may properly maintain this
action under the Public Monies Act.
_ It is the position of both Gulf and the State that the
imposition of the charter tax in the years 1972 to 1975
was lawful, but their rationales differ. Gulf claims that all
of IC’s rights and obligations, including the charter tax
and exemption from other taxes, were transferred to Gulf
AT
under the ‘‘plenary power’’ of the Commission to effec-
tuate such transfer. The State argues that the charter
constitutes a contract between IC and the State; that it
was beyond the power of the Commission, by approving
the plan of reorganization, to transfer the charter proper-
ties, rights, and obligations to Gulf in abrogation of the
charter contract; and that, therefore, IC has not been dis-
solved and the charter tax is still due and owing from it.
Plaintiff Snow maintains that the tax rights and
obligations derived under the charter were personal to IC
and were nontransferable without the consent of the
Illinois General Assembly ; that the language of the charter
itself anticipates and authorizes the sale of the IC charter
property; that the charter itself expressly cuts off the
right to IC’s tax exemptions when the charter property is
sold to third persons; that the Commission’s approval of
the Plan did not purport to transfer IC’s charter tax rights
and immunities to Gulf; that the Commission’s power ex-
tends to all acts necessary to effectuate the Plan (including
the sale of all IC assets to Gulf) but its power does not
extend to matters of taxation exclusively reserved to the
States; and that the effect of the approved sale of all IC .
property to Gulf was the dissolution of IC by operation of
law.
The history of IC’s organization is well recorded in the
judicial opinions of this State. Most of the land was
provided to the IC by land grant from the Federal govern-
ment through the State.
‘The Congress of the United States * * * in 1850
passed an act granting to the State of Illinois a right
of way through the public lands and the ownership
of every alternate section of land for more than
six miles in width on each side thereof, to aid the
A8
State in constructing the railroad finally built by
[IC].’’ (People v. Illinois Central R.R. Co. (1916),
273 Ill. 220, 234.)
‘‘The act provided that the lands granted should
be subject to the disposal of the legislature of Illinois
and be applied to the construction of the said road
and branches, and to no other purpose. * * * By sec-
tion 15 of the charter appellee was granted all the
lands ceded to the State by the act of Congress of
1850; also depot grounds in the city of Cairo, the
right of way and all the improvements made thereon
by the Internal Improvement Commission and the
Great Western Railway Company under the acts of
1837. This latter property was in addition to that ceded
to the State by the act of Congress of 1850.’’ (State
v. Illinois Central R.R. Co. (1910), 246 Ill. 188, 197-98.)
‘*When this charter was granted, the privilege or
franchise to build this railroad was not considered of
any special value. In the fifteen years, more or less,
previous to the granting of this charter the public
authorities had made several attempts to build a rail-
road similar to the one that was finally constructed
by appellant company, and in one act the State had
appropriated three and a half million dollars for
that purpose. * * * The year this charter was granted,
Gov. French, then chief executive of the State, said:
‘The constitution having wisely debarred the State
from again involving its credit in wild and visionary
schemes of internal improvement, their chance of suc-
cess rests upon individual skill, capital and enter-
prise.’ ’’ People v. Illinois Central R.R. Co. (1916),
273 Ill. 220, 234-35.
_ The land then granted to IC by the charter was largely
‘‘undeveloped and its ultimate value entirely problemati-
cal.’’ People v. Illimois Central R.R. Co. (1916), 273 Ill.
220, 235.
‘*TIn passing the Land Grant Act, granting to the State
the alternate sections of land afterward received by
A9
appellant company from the State, Senator Stephen
A. Douglas in the United States senate said: ‘* * *
These lands have been in the market from fifteen to
thirty years. The average time is about twenty-three
years. But they will not sell at the usual price of $1.25
per acre because they are distant from any navigable
stream or a market for produce. * * *’ ’’ People v. Ill-
nois Central R.R. Co. (1916), 273 Ill. 220, 234.
Likewise, the contractual nature of the charter and the
7% charter tax imposed on IC therein are firmly estab-
lished. (State v. Illinois Central R.R. Co. (1910), 246 Ill.
188, 205-07, and cases cited therein.) Sections 18 and 22 of
the charter, authorizing the charter tax, are set out in
full in People v. Illinois Central R.R. Co. (1916), 273 Til.
220, 224-25. Section 22 provided:
‘*Sec. 22. The lands selected under said act of con-
gress, and hereby authorized to be conveyed, shall be
exempt from all taxation under the laws of this state,
until sold and conveyed by said corporation or trus-
tees, and the other stock, property and effects of said
company shall be in like manner exempt from taxation
for the term of six years from the passage of this act.’’
(Emphasis added.) 1851 Private Laws of L[llinois 72.
Plaintiff Snow asserts that the above section of the
charter contemplates the sale of the charter line and that
the tax exemptions indicated therein are effective only
until the property is sold and conveyed. He also asserts the
transaction between IC and Gulf constituted such sale and
conveyance of IC properties, which sale to Gulf cut off the
tax exemption and did not effect a transfer to Gulf of the
right and obligation to pay the charter tax in lieu of other
taxes. The State, on the other hand, asserts that the above
charter section contemplated only the sale of non-right-
of-way properties to raise funds from time to time. Such
A10
properties would lose their tax-exempt status upon trans-
fer to a third party. This section does not, it is asserted,
speak to the sale of the railroad as an entity and,
consequently, does not speak to the question of charter
rights and obligations in the hands of a purchaser of the
railroad as an entity. Both the State and Gulf urge, in this
regard, that the intent of the charter may be gleaned by
referring to the subsequent actions of the legislature in
1885 (Ill. Rev. Stat. 1975, ch. 114, par. 165), and in 1933
(Ill. Rev. Stat. 1975, ch. 32, par. 157.160). The former act
provides, in terms virtually identical to those used in the
latter, that nothing in the act ‘‘shall be so construed as to
authorize or permit the Illinois Central Railroad Company
to sell the railway constructed under its charter, * * *
except subject to the rights of the state under its con-
trac with said company, * * * under the provisions of said
charter.’’ The State urges that the intent to disallow uni-
lateral abrogation of the charter terms is evident in these
enactments. Gulf, on the other hand, argues that these
enactments support its proposition that the charter per-
mitted the sale of the IC charter property, subject only
to the buyers assuming the IC’s obligations to the State
under the charter.
The circuit court concluded (as was suggested by Snow)
that section 22 of the charter contemplated a sale or con-
veyance of the railroad as an entity. This interpretation
is erroneous. The cited portion of section 22 refers to
two broad classes of properties: those ‘‘lands * * * hereby
authorized: to be conveyed,’’ and the ‘‘other stock,
property, and effects of said company.’’ (Emphasis added.)
We believe the phrase ‘‘lands * * * hereby authorized to
be conveyed’’ necessarily refers to the land adjacent to and
along the railroad right-of-way, the sale of which was
All
specifically provided for by section 16 of the charter.
(1851 Private Laws of Illinois 70.) That the sale of less
than all of the railroad property was authorized by the
charter terms is implicit in the use in section 22 of the
specific term ‘‘lands’’ rather than the more general term
‘‘properties.’’ Furthermore, immediately after the refer-
ence to ‘“‘lands * * * authorized to be conveyed,’’ the
charter deals with ‘‘other stock, property, and: effects
* © *” (Emphasis added.) Although we are unable to
conclude that these provisions authorize the sale of the
railroad as an entity, we are likewise unable to infer from
these and other charter terms that the IC was forbidden to
make such a sale. No language in the charter may be fairly
interpreted to prohibit such sale, and we decline the
State’s invitation to construe the acts of the legislature,
34 years or more after the charter’s acceptance by IC and
enactment by the General Assembly, to imply such a term
in the contract between IC and the State.
The State nevertheless asserts that, where a corpora-
tion such as a railroad has been granted a charter franchise
intended to be exercised ‘‘for the public good, the due
performance of those functions being the consideration of
the public grant, any contract which disables the corpora-
tion from performing those functions which undertakes,
without the consent of the State, to transfer to others the
rights and powers conferred by the charter, and to relieve
the grantees of the burden which it imposes, is a violation
of the contract with the State, and is void as against public
policy.’’ (Thomas v. West Jersey R.R. Co. (1879), 101 U.S.
71, 83, 25 L. Ed. 950, 952.) By this and like citations, the
State asserts that the unilateral acts of the IC, purporting
to transfer all its assets, rights and obligations to Gulf
without State consent, constitutes a forfeiture and rever-
2
Al2
sion of the railroad. It is also suggested, inferentially, that
the State has a contractual interest, implied by law and
because of public policy, in the continued existence of the
charter, maintenance of the charter line by IC, and the
right to collect the 7% charter tax from IC. We take no
issue with the holding in Thomas, but we believe its effect
is overriden to the extent necessary to effect a transaction
approved by the Commission under 49 U.S.C. see. 5 (1970).
Section 5(11) provides:
‘‘[A]ny carrier * * * participating in * * * any trans-
action approved by the Commission [under section 5]
* * * shall have full power * * * to carry such transac-
tion into effect and to own and operate any properties
and exercise any control or franchises acquired
through said transaction without invoking any ap-
proval under State authority; and any carriers * * *
participating in a transaction approved or authorized
under the provisions of this section shall be and they
are relieved from the operation of * * * prohibitions
of law, Federal, State or municipal, insofar as may be
necessary to enable them to carry into effect the trans-
action so approved or provided for * * *, and to hold,
maintain, and operate any properties and exercise any
control or franchises acquired through such transac-
tion. *.* * 9?)
The power of the Commission to approve transactions
under section 5 in derogation of State law, of course,
ultimately derives from the powers of Congress under the
supremacy clause of the United States Constitution (U.S.
Const., art. VI), which provides that a constitutional act
of Congress shall be the supreme law of the land, the laws
_of any State to the contrary notwithstanding, and from the
interstate commerce clause (U.S. Const., art. I, sec. 8),
which empowers Congress to regulate commerce among
the several States. It has been long recognized, however,
Al3
that congressional power to occupy a field of law is not
necessarily coextensive with its exercise of that power.
Willson v. Black Bird Creek Marsh Co. (1829), 27 U.S. (2
Pet.) 245, 7 L. Ed. 412; Cooley v. Board of Wardens
(1851), 53 U.S. (12 How.) 299, 13 L. Ed. 996.
It is, of course, clear that an agency of Congress has
authority to act only within the scope of powers delegated
to it by statute. Relevant to an understanding of the
scope of the authority given the Commission under 49
U.S.C. see. 5 is the brief history provided by the Supreme
Court of the development and regulation of our nationwide
system of railroads:
‘‘The basic railroad facilities of the United States
were constructed under state authorization and re-
strictions by corporations whose powers and limita-
tions were prescribed by state legislatures, or resulted
from limitations on the states themselves. Construction
in reference primarily to local or regional transporta-
tion needs created duplicating and competing falilities
in some areas and provided inadequate ones in others.
Expansion neressary to serve advancing national fron-
tiers was stimulated by extensive subsidies from the
Federal Government, largely in the form of land
grants. But the stress and strain of World War I
brought home to us that the railroads of the country
did not function as a really national system of trans-
portaion. Tha crisis also made plain the confusions, in-
efficiencies, inadequacies and dangers to our national
defense and economy flowing from the patchwork
railroad pattern that local interests under local law
had created.
The demand for an integrated, efficient and coordi-
nated system of rai) transport, equal to the needs of
Al4
our national economy and defense, resulted in the
Transportation Act of 1920. In a series of decisions
on particular problems, this Court defined the general
purposes of that Act ***. The tenor of all of these was
to confirm the power and duty of the Interstate Com-
merce Commission, regardless of state law, to control
rate and capital structures, physical make-up’ and
relations between carriers, in the light of the public
interest in an efficient national transportation system.
[Citations.]
As a means to this end, the 1920 Act required the
Commission to prepare and adopt a plan for nationwide
consolidations of the railway properties of the Coun-
try. eee
The Transportation Act of 1940 relieved the Com-
mission of formulating a nationwide plan of consoli-
dations. Instead, it authorized approval by the Com-
mission of carrier-initiated, voluntary plans of merger
or consolidation if, subject to such terms, conditions
and modifications as the Commission might prescribe,
the proposed transactions met with certain tests of pub-
lie interest, justice and reasonableness, in which case
they should become effective regardless of state au-
thority. *** This Court has recently and unanimously
said in reference to this Act, ‘Congress has long made
the maintenance and development of an economical
and efficient railroad system a matter of primary na-
tional concern. Its legislation must be read with this
purpose in mind.’ Seaboard Air Line R. Co. v. Daniel,
333 U.S. 118.’’ Schwabacher v. Unite dStates (1948),
334 U.S. 182, 191-93, 92 L. Ed, 1305, 68 S. Ct. 958, 963-
64.
- NN ea -
Ald
' The Commission’s approval of a section 5 transaction
is dependent upon, among other considerations, a finding
that such transaction will be ‘‘consistent with the public
interest.” (Schwabacher v. United States (1948), 334 U.S.
182, 194, 92 L. Ed. 1305, 1313, 68 S. Ct. 958, 965.) In its
opinion approving the subject transaction, the Commission
pointed out at page 841:
‘‘The phrase ‘consistent with the public interest,’
as judicially construed, means compatible with, or not
contradictory or hostile to the public interest. See Pa-
cific Power and Light Co. v. Federal Power Comm.,
111 F. (2d) 1014, 1016. As was stated by the Supreme
Court in New York Central Securities Corp. v. United
States, 287 U.S. 12, 25:
‘The term ‘‘ public interest’’ *** has a direct relation
to the adequacy of our transportation system, to its
essential conditions of economy and efficiency and
to appropriate provision and best use of transporta-
tion facilities.’’’ (Illinois Central Gulf R.R. Co.—
Acquisition—Gulf, Mobile & Ohio R.R. Co., [llinois
Central R.R. Co. et al. (1971), 338 I.C.C. 805, 841.)
The Commission, further, made a specific finding that the
transaction was in the best interest of the public. (338
L.C.C. 805, 834.) We therefore believe that public policy
was adequately served by the Commission’s necessary
finding that the transaction was in the public interest. In-
sofar as necessary to effect a section 5 transaction, sec-
tion 5(11) suspends any charter term, express or implied,
which would otherwise prevent the sale of IC. As the sale
of all IC assets, including the substantial charter line prop-
erties, was the very foundation of the transaction approved
by the Commission, such sale was clearly encompassed
A16
within the section 5(11) protection from inhibiting State
laws. Seaboard Air Line R.R. Co. v. Daniel (1948), 333
U.S. 118, 92 L. Ed. 580, 68 8. Ct. 426.
It has been observed that ‘‘[t]he law does not expressly
dissolve the selling corporation, but it leaves it without
stock, officers, property, or franchises. A corporation with-
out shareholders, without officers to manage its business,
without property with which to do business, and without
the right lawfully to do business, is idssolved by the opera-
tion of the law which brings this condition into existence.”
(Rochester R. Co. v. Rochester (1907), 205 U.S. 236, 256, 51
L. Ed. 784, 792, 27 S. Ct. 469.) The State, nevertheless, fur-
ther objects that the chancellor incorrectly ruled on the
issue of IC’s dissolution because that issue has never been
presented to the court on proper pleadings where the par-
ties are correctly aligned. (We point out in this regard that
the State, though given notice and invitation to attend the
Commission hearings on the subject plan of reorganization,
declined to attend.) The circuit court afforded the State the
opportunity to plead this issue and provided a 30-day con-
tinuance expressly for that purpose. The State did not so
plead. We therefore hold that, under all these circum-
stances, the circuit court correctly ruled that the IC was
dissolved. |
Snow urges that, although approval of the Plan was
sufficient to effect a sale of the IC properties to Gulf, such
approval did not confer upon Gulf the IC’s charter tax
status. He maintains that these tax exemptions and ob-
ligations did not survive the sale and conveyance of the
charter line properties to Gulf. Snow’s argument is three-
pronged. First, section 22 provides that the tax-exempt
status of the charter property existed only until the charter
property was sold and conveyed. Second, he argues that the
Al7
so-called Charter Immunity Cases (cited later) establish
that tax exemptions created as to one corporation are per-
sonal to that corporation and are not part of the general
franchises which may be transferred upon sale to another
corporation. Instead, the new corporation becomes subject
to the general tax laws existing at the time of its formation.
Third, Snow poses that the Commission’s approval did not
have the effect of overriding the nontransferability of tax
exemptions under State law because such override was not
necessary to effect the section 5 transaction, and because
the Commission did not purport to address the State taxa-
tion issue.
Snow’s first argument fails because section 22 of the
charter, as discussed above, cuts off the tax exemption of
charter properties ‘‘hereby authorized to be conveyed.”
Section 22 does not deal with the sale of the charter line as
an entity, or with the transfer or loss of the special tax
status incident thereto. No other charter provision deals
with the tax status of the charter properties in the hands
of a third party. However, in the absence of a specific
charter provision or a valid act of the General Assembly
expressly providing therefor, we hold that the tax ex-
emption and charter tax granted IC were personal to IC
and could not pass on sale to Gulf. The body of law evolved
in the 10 so-called Charter Immunity Cases amply sup-
ports this conclusion. Yazoo & Mississippi Valley R.R. Co.
v. City of Vicksburg (1908), 209 U.S. 358, 52 L. Ed. 833, 28
S. Ct. 510; Rochester Ry. Co. v. City of Rochester (1907),
205 U.S. 236, 51 L. Ed. 784, 27 S. Ct. 469; Yazoo &€Missis-
sippi Valley R.R. Co. v. Adams (1901), 180 U.S. 1, 45 L.
Ed. 395, 21 S. Ct. 240; Chesapeake & Ohio Ry. Co. v. Miller
(1885), 114 U.S. 176, 29 L. Ed. 121, 5 8. Ct. 813; St. Louis,
Iron Mountain @ Southern Ry. Co. v. Berry (1885), 113
Al8
U.S. 465, 28 L. Ed, 1055, 5 S. Ct. 529; Memphis ¢ Little
Rock R.R. Co. v. Berry (1884), 112 U.S. 609, 28 L. Ed. 837,
5 S. Ct. 299; Louisville @ Nashville R.R. Co. v. Palmes
(1883), 109 U.S. 244, 27 L. Ed. 922, 3 S. Ct. 193; Wilson v.
Gaines (1881), 103 U.S. 417, 26 L. Ed. 401; Atlantic d Gulf
R.R. Co. v. Georgia (1879), 98 U.S. 359, 25 L. Ed. 185;
Morgan v. Louisiana (1876), 93 U.S. 217, 23 L. Ed. 860, See
Cincinnati, Indianapolis & Western R.R. Co. v. Barrett
(1950), 406 Til. 499, 504-05.
Did the Commission’s approval of the sale of the IC’s
property to Gulf effect a transfer to Gulf of IC’s charter
tax status which otherwise ended under the Charter Im-
munity Cases? It is Gulf’s thesis that the Commission’s
approval of a plan of reorganization operates, under section
5(11), to suspend the effect of State tax law. Gulf’s reading
of section 5(11) emphasizes reference to the ‘‘plenary
powers’’ of the Commission, but Gulf ignores the effect of
the express limitation of that section to suspensions of
State law only ‘‘insofar as may be necessary to enable
them to carry into effect the transaction so approved ***.”’
49 U.S.C. see. 5(11) (1970).
As discussed above, Congress’ power to fully occupy a
field of law is not necessarily coextensive with the exercise
of that power. On the other hand, matters of State taxation
are reserved to the States under the tenth amendment to the
Constitution. (See Thomson v. Union Pacific R.R. Co.
(1870), 76 (9 Wall.) U.S. 579, 591, 19 L. Ed. 792.) The
power of the State legislature to levy and collect taxes is
unrestricted where such tax is not otherwise unconstitution-
al. (People ex rel. Schuler v. Chapman (1939), 370 Ill. 430,
437; see also State v. Illinois Central R.R. Co. (1910), 246
Til. 188, 206). When the United States Constitution has
granted the Federal government plenary jurisdiction in a
certain field, and an act of Congress within that field im-
Al9
pinges upon an area traditionally reserved to the States
(taxation, in this instance), a rule of constrution has grown
up to shelter this delicate area of State’s rights. This rule
affirms that ‘‘Congress may circumscribe its regulation
and occupy a limited field” and prescribes that ‘‘the in-
tention to supersede the exercise by the state of its au-
thority as to matters not covered by the Federal legislation
is not to be implied unless the act of CUngress fairly inter-
preted is in conflict with the law of the state.” Atchison,
Topeka & Santa Fe Ry. Co. v. Railroad Com. (1930), 283
U.S. 380, 392-93, 75 L. Ed. 1128, 1137, 51 S. Ct. 553, 556.
Section 5(11) of the Act reveals congressional intention
to abrogate State law in section 5 transactions no further
than necessary to effect than transaction. It is our opinion
that a fair reading of that act does not reveal a congres-
sional intent to supersede State law in the matter of State
taxation, where the otherwise applicable State tax imposes
no unconstitutional burden upon interstate commerce. As
the authority of an agency of Congress extends no further
than the act conferring that authority, it is our opinion
that the Commission’s approval of the Plan did not operate
to extend the otherwise invalid charter tax and concurrent
exemptions to Gulf.
This conclusion is further based on the fact that the Com-
mission did not address, much less attempt to adjudicate,
the question of such charter tax exemptions in its detailed,
76-page opinion approving the transfer. The Plan itself no-
where makes any explicit reference to the charter tax obli-
gations of IC or of their transfer to Gulf. Only in exhibit C
to the Plan, entitled ‘‘Indenture Sale, Assignment and
Transfer,’’ is any reference whatsoever made to IC’s char-
ter tax obligations. Paragraph 3(e) thereto provides that
Gulf ‘“‘assumes all contracts, obligations or liabilities ***
A20
and agrees that any lien of the State *** upon, or right to
tax, the charter line property *** in accordance with the
provisions of the charter ***, approved February 10, 1851,
shall not be released, suspended, modified, altered, remitted
or in any manner diminished or impaired as against [Gulf]
but the same, as applicable to the charter line property
*** shall be and remain *** binding upon [Gulf].’’ This
provision appears to reffect IC’s desire and Gulf’s assent
that [C be held harmless by Gulf for any charter taxes
thereafter imposed upon IC by the State. Further, no ex-
press reference to the charter tax exemptions is made any-
where in the Plan, the exhibits, or the opinion of the Com-
mission.
Fairly considered, the Commission’s approval of the plan
of reorganization, which plan contained no reference to
IC’s special tax exemption and referred to IC’s tax status
only obliquely in an exhibit thereto, cannot be deemed to
authorize the transfer to Gulf of IC’s charter tax obliga-
tions or immunities, in the absence of some express refer-
ence to the contrary in the Commission’s opinion. No such
reference here exists. We hold that IC’s special tax obliga-
tion and immunities did not pass to Gulf under the terms
of IC’s charter, or by enabling legislation, or by virtue of
the Commission’s approval of the reorganization. It fol-
lows that the taxes generally applicable to railroads in this
State were applicable to Gulf commencing August 10, 1972.
It remains for this court to determine whether these gen-
erally applicable State taxes can and should be applied
retroactively upon Gulf. Gulf maintains that the taxes may
be assessed and collected only pursuant to statute, and
that there is no statutory scheme which permits such
retroactive application; that reassessment may be accom-
plished only by way of administrative review prior to
finalization of the assessments, and once these have been
A21
certified to the county clerk by the Department of Local
Government Affairs there can be no reassessment. The tax
action which the chancellor ordered the Department of
Local Government Affairs to take herein is erroneously
characterized by Gulf as a ‘‘ reassessment.’’ Such characteri-
zation is based upon the following: section 80 of the
Revenue Act of 1939 (Ill. Rev. Stat. 1975, ch. 120, par.
561) provides that all real estate property be assessed as a
unitfi Gulf’s charter line property must necessarily be
included in any such unit; there is no statutory authority
for assessing the charter line separately ; and, therefore, the
Gulf property was fully assessed for the years in question
(albeit, Gulf concedes, ‘‘ perhaps erroneously’’). As applied
to the charter line property, historically treated as a
separate tax entity, this argument clearly elevates form
over substance. Sections 79 through 90 of the Revenue
Act of 1939 (Tll. Rev. Stat. 1975, ch. 120, pars. 560-571)
provide ample direction, and section 220 (Ill. Rev. Stat.
1975, ch. 120, par. 701) provides the Department ample
authority to access the charter property for years past. We
note, parenthetically, that defendant Kirk, who is charged
with the duties of this assessment, does not deny the
assessment can be carried out under his statutory author-
ity, nor that such duty would be unduly burdensome.
The cireuit court’s judgment order provided that,
effective August 10, 1972, ‘‘the Director of the Depart-
ment of Local Government Affairs shall assess the Charter
Property in the same manner as he assesses the property of
other railroads in the State and he shall transmit the lists
and information to the various proper taxing authorities of
the Illinois counties in which Charter Property is located.’’
(Emphasis added.) Section 86 of the Revenue Act of 1939
(Ill. Rev. Stat. 1971, ch. 120, par. 567) contemplates (with
minor variations) that the equalized assessed value of the
ar.
A22
railroad properties subject to assessment shal] be listed and
taxed in the several taxing districts in the proportion that
the length of track within the taxing district bears to the
total length of track owned or used in the State. Thus, the
circuit court was in error in its concluding phrase, ‘‘in
which Charter Property is located,’’ for this phrase has the
effect of directing the transmission of such assessment lists
only to the taxing districts in which the charter line is
located.
By the order of the circuit court, Guli was responsible
for property taxes as of August 10, 1972. One of the
attorneys for the plaintiffs pointed out at oral argument
that section 81 of the Revenue Act of 1939 (Tll. Rev. Stat.
1971, ch. 120, par. 562) requires new railroad companies
to file their schedules ‘‘pertaining to real property in
January, and pertaining to personal property on April 1
next after the location of their road.’’ We interpret this to
mean that filling was required by January and April 1973,
respectively, and therefore conclude that the trial court
erred in requiring Gulf, a new corporation, to be respon-
sible for the period from August 10, 1972, through
December 31, 1972.
As stated above, there is adequate statutory authority
to hold Gulf legally subject to retrospective taxation for
the years 1973 to 1975. Separate considerations govern
whether, for equitable reasons, Gulf should be required to
make such payments in addition to the 7% gross receipt
tax concededly paid for 1973, 1974 and 1975. Because
there was no express charter authorization for the transfer
of IC’s charter tax status to Gulf, and because the law of
the Charter Immunity Cases holds such attempted trans-
fers invalid in the absence of express legislation, Snow
argues that Gulf knew or should have known that such tax
A23
status could not be transferred to it by IC. He further
urges that the judgment makes no change in existing law,
unlike cases where this court has provided only prospective
application. Gulf, to the contrary, asks not to be subjected
to ‘‘double taxation’’ by the retrospective application of
this judgment. We believe the circumstances of this case
require us to fashion a judgment which does not impose an
inequitable tax burden upon Gulf. The limited effect of
the Commission’s approval upon IC’s charter tax status
was not clearly foreshadowed in view of the constitutional
powers of Congress to regulate commerce between the
States and the powers to suspend State law bestowed upon
the Commission in section 5(11). Moreover, Gulf could
reasonably have taken various acts of the State legislature,
subsequent to the charter, to indicate that the State would
attempt to hold Gulf responsible for he payment of the
charter tax. Gulf could likewise reasonably have expected
the State to view the charter tax as the fair equivalent of
other taxes, and could reasonably have expected the State
to take the posture that the State did ultimately take—to
accept the charter taxes in lieu of all other taxes. Based on
the foregoing, we determine that partial retrospective
application is appropriate. The trial court’s judgment order
is modified to provide that if any additional tax is found
to be due and owing from Gulf for any one of the years
1973, 1974, and 1975, such tax shall be limited to an
amount that exceeds the charter tax. already paid to the
State for that year.
The judgment of the circuit court is hereby affirmed
as modified, and the cause is remanded for further
proceedings consistent with the views expressed herein.
Affirmed as modified;
cause remanded.
CLARK and DOOLEY, JJ., took no part in the
consideration or decision of this case.
eee ents eee
Bl
APPENDIX B
JUDGMENT ORDER OF THE CIRCUIT COURT
OF COOK COUNTY
IN THE CIRCUIT COURT OF
COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT — CHANCERY DIVISION
ROBERT H. SNOW, individually and»
on behalf of all other taxpayers
similarly situated,
Plaintiff,
vs.
ALAN J. DIXON, State Treasurer of
Illinois, GEORGE W. LINDBERG,
Comptroller of State of Lllinois,
ROBERT H. ALLPHIN, Director } No. 73 CH 2723
of the Department of Revenue of
Illinois, and FRANK A. KIRK,
Director of the Department of Local
Government Affairs of Illinois,
and ILLINOIS CENTRAL GULF
RAILROAD CO., a Delaware cor-
poration,
Defendants. J
JUDGMENT
This cause coming on to be heard upon motion for sum-
mary judgment of plaintiff ROBERT H. SNOW (‘‘Snow’’),
the motion for summary judgment of defendant Lllinois
Central Gulf Railroad Co. (‘‘Gulf’’), and the motion for
summary judgment of Alan J. Dixon (‘‘Dixon’’), State
Treasurer of Illinois, George W. Lindberg (‘‘Lindberg’’),
Comptroller of the State of Illinois, Robert H. Allphin
(‘‘Allphin’’), Director of the Department of Revenue of
—_— * .» —-=
B2
Illinois, and Frank A. Kirk (‘‘Kirk’’), Director of the
Department of Local Government Affairs of [Illinois
(Dixon, Lindberg, Allphin and Kirk being hereinafter some-
times referred to collectively as the ‘‘State Defendants’’),
and certain stipulations of fact submitted by the parties
herein; and the Court having examined the pleadings, cer-
tain stipulations of fact, certain interrogatories and their
answers, certain stipulated depositions, and the memoranda
of law filed herein, having heard the arguments and repre-
sentations of counsel, and being otherwise fully advised in
the premises:
THE COURT DOES HEREBY FIND:
1. Snow has been, and now is, a citizen of the State of
Illinois, a resident of the City of Chicago, County of Cook,
State of Illinois, and is a taxpayer, both in and to the
County of Cook and the State of Illinois; that this lawsuit
is properly brought as a taxpayer’s suit under ‘‘an Act
in relation to suits to restrain and enjoin the disbursement
of public monies by officers of the State’’, (Ill. Rev. Stats. ;
1973 Ch. 102, § 11 et seq.) that Snow’s claims are typical of
the claims of said taxpayers; and that Snow and his coun-
sel will fairly and adequately protect the interests of the
taxpayers of the State of Illinois.
2. That by private law in force February 10, 1851, the
Illinois General Assembly enacted ‘‘An Act to Incorporate
the Illinois Central Railroad Company”’ (the ‘‘ Private
Law’’), certain portions of which Private Law provide as
follows:
(a) Section 1 of said Private Law provides as follows:
‘*Whereas, in the judgment of this general assembly,
the object of incorporating the Central Railroad Com-
pany cannot be attained under general laws; therefore,
Section 1, Be it enacted by the people of the State of
B3
[llinois, represented in the General Assembly, That
Robert Schuyler, George Griswold, Gouverneur Morris,
Franklin Haven, David A. Neal, Robert Rantoul,
junior, Jonathan Sturgis, George W. Ludlow, John F.
A. Sanford, Henry Grinnell, William H. Aspinwall,
Leroy Wiley, and Joseph W. Alsop, and all such per-
sons as shall hereafter become stockholders in the
company hereby incorporated, shall be a body politic
and corporate, by the name and style of the ‘‘Illinois
Central Railroad company,’’ and under that name
and style shall be capable of suing and being sued, im-
pleading and being impleaded, defending and being
defended against, in law and equity, in all courts and
places whatsoever, in like manner and as fully as
natural persons; may make and use a common seal,
and alter or renew the same at pleasure; and by their
said corporate name and style, shall be capable, in law,
of contracting and being contracted with, shall be and
are hereby invested with the powers, privileges, im-
munities and franchises, and of acquiring, by purchase
or otherwise, and of holding and conveying, real and
personal estate which may be needful to carry into
effect, fully the purposes and objects of this act.’’
3. That certain sections, as amended, of the aforesaid
Private Law appear in Illinois Revised Statutes, 1973 Ch.
120, as follows:
“TLLINOIS CENTRAL RAILROAD’’
Act of Feb. 10, 1851, R. S.-1847, p. 909
373. Five percent of income.] §18. In considera-
tion of the grants, privileges and franchises herein
conferred upon said company for the purposes afore-
said, the said company shall, on the first Mondays
of December and June in each year, pay to the De-
partment of Revenue of the State of Illinois five per
centum on the gross or total proceeds, receipts or in-
come deprived from said road and branches, for the
six months then next preceding. The first payment of
such percentage on the main trunk of said road to
B4
commence four years from the date of said deed of
trust, and on the branches, six years from the date
aforesaid, unless said road and branches are sooner
completed, then from the date of completion. And for
the purpose of ascertaining the proceeds, receipts or
income aforesaid, an accurate account shall be kept by
said company, a copy whereof shall be furnished to the
Governor of the State of Illinois and to the Depart-
ment of Revenue; the truth of which account shall be
verified bv the affidavits of the treasurer and secretary
of such company. And for the purpose of verifying and
ascertaining the accuracy of such account, full power
is hereby vested in the Governor of the State of Illi-
nois, the Director of the Department of Revenue, or
any other person by law appointed, to examine the
books and papers of said corporation, and to examine,
under oath, the officers, agents, and employees of said
company, and other persons. And if any person so ex-
amined by the Governor or other authority, shall
knowingly and wilfully swear falsely, or if the other
officers making such affidavits shall knowingly and wil-
fully swear falsely, every such person shall be subject
to the pains and penalties of perjury.
374. Land taxable when conveyed—Application of
tax, etc.] § 22. The lands selected under the act of
congress entitled ‘‘An Act granting the right of way,
and making a grant of land to the states of Illinois,
Mississippi and Alabama, in aid of the construction of
a railroad from Chicago to Mobile’’, passed September
20, 1850, and authorized by this Act to be conveyed
shall be exempt from all taxation under the laws of
this state, until sold and conveyed by the Illinois Cen-
tral Railroad Company or the trustees designated in
this Act. The stock, property and assets belonging to
the company shall be listed by the president, secretary
or other officer, with the Department of Revenue and
an annual tax for state purposes shall be assessed,
upon all the property and assets of every name, kind
and description belonging to that company. Whenever
the taxes levied for state purposes shall exceed %4 of
Bd
1% per year, such excess shall be deducted from the
gross proceeds or income required to be paid by the
company to the state, and the company is hereby ex-
empted from all taxation of every kind, except as here-
in provided for. The revenue arising from such taxa-
tion, and the 5% of gross or total proceeds, receipts or
income aforesaid, shall be paid to the Department of
Revenue and covered into the general revenue fund in
the state treasury and applied to the payment of in-
terest-paying state indebtedness until the extinction
thereof. In case the 5% provided to be paid into the
state treasury and the state taxes to be paid by the
corporation do not amount to 7% of the gross or total
proceeds, receipts or income, however, then the com-
pany shall pay the difference, so as to make the whole
amount paid equal, at least to 7% of the gross receipts
of the company.”’
4. That certain lands were thereafter conveyed to the
Illinois Central Railroad Company (‘‘IC’’) pursuant to the
Private Law, and other ancillary lands having been ac-
quired by IC, all of which lands are hereinafter referred
to as the Charter Property, and pursuant to the Private
Law, IC began to pay, with respect to the Charter Property
the special tax described in §§ 18 and 22 of the Private Law,
such special tax being hereinafter referred to as the Charter
Property Tax, and also pursuant to the Private Law, IC
with respect to the Charter Property only, became and was
exempt from all state and local taxation other than the
Charter Property Tax.
5. That a Plan of Reorganization was approved by the
Interstate Commerce Commission whereby Illinois Cen-
tral Gulf Railroad Company (‘‘Gulf’’) acquired the assets
of Illinois Central Railroad Company (‘‘IC’’) and Gulf,
Mobile & Ohio Railroad Company (‘‘GM&O’’) and Illinois
Central Railroad Company was to be dissolved. This Plan
ae
B6
became effective on August 10, 1972 and under said Plan
IC sold and conveyed all of its assets, including the Charter
Property, to Gulf.
6. That the parties have stipulated that the discovery
deposition of Harold J. Weldrake (‘‘Weldrake’’), an em-
ployee of Allphin’s, heretofore taken in this cause, as cor-
rected by said deponent, may be used in lieu of calling Wel-
drake as a witness and that at pp. 6, 17-18, 23 of his deposi-
tion Weldrake (whose testimony is not contradicted by any
other evidence) stated that at the time of the taking of his
deposition the Illinois Department of Revenue employed
three full-time auditors (one permanently assigned and
two in training), whose aggregate annual salary was $41,-
400.00, to verify and ascertain the accuracy of the accounts
and returns submitted in connection with the Charter Prop-
erty and the Charter Property Tax.
7. That Snow submitted certain interrogatories to the
State Defendants and that in their answer to Interrogatory
11, the State Defendants state that in relation to the assess-
ment and collection of the Charter Property Tax, for the
period between 1968 and May 1, 1975, there are literally
hundreds of employees of the State of Iilinois who had as
some portion of their responsibilities, duties relating to any
or all of the following:
(a) Verification of the accuracy of the list of stock,
property and assets submitted;
(b) Recording of the list of stock, proper*y and assets
submitted ;
(c) Establishing the valuation of the items contained
on the list of stock, property and assets;
(d) Establishing the tax rate to be applied;
(e) Establishing the tax to be assessed against each
such item on the list of stock, property and assets;
B7
(f) Receiving or processing in any way tex payments;
(g) Verifying or ascertainir, whether the total tax
paid amounts to seven percent of the gross or total pro-
ceeds, receipts or income, or issuing deficiency notices,
where applicable ; or
(h) Secretarial or clerical duties in connection with
the duties or responsibilities above described or in relation
or in connection with any duty or responsibility relating in
any way to the procedures set forth in Section 374 of the
Illinois Revised Stats., 1973, Chapter 120.
8. That unless enjoined and restrained, the State De-
fendants, or some of them, as to Gulf, will continue to col-
lect and to enforce the collection of the Charter Property
Tax, and will continue to spend public funds of the State
of Illinois in connection with the enforcement and collection
of the Charter Property Tax.
9. That since August 10, 1972, Gulf, and not IC, has
been filing Charter Property Tax accounts and returns,
and has been paying the Charter Property Tax on the
Charter Property.
10. That under the Plan of Reorganization, the Charter
Property Tax did not become an objection of Gulf, and
Gulf did not acquire IC’s exemption from all other taxation
as described in said Section 22 of the 1851 Charter.
11. That effective as of August 10, 1972, the Director of
the Department of Local Governmental Affairs should
assess the Charter Property in the same manner as he
assessed the property of other railroads in the State and
transmit the lists and information to the various proper
taxing authorities of the Illinois counties in which Charter
Property is located.
12. That trusts should be declared by this Court for
all tax moneys heretofore paid by Gulf on the Charter
B8
Property which have not been paid into the general state
treasury and for all future sums of money paid by Gulf,
subsequent to the date of this judgment, on account of
taxes of any nature on or pertaining to the Charter Prop-
erty, which moneys should be placed into segregated funds,
at interest, pending the further order of this Court, and said
funds not to be disbursed or commingled pending further
order of this Court.
13. That Snow is without adequate remedy at law and is
entitled to the injunctive relief described herein and that
Snow’s motion for summary judgment should be granted,
and the motions for summary judgment of Gulf and of the
State Defendants should be denied.
14, That the relief prayed for in paragraphs A and B
of the prayer in the amended complaint is proper and should
be granted to the extent hereinafter provided, that pursuant
to Section 45(4) of the Civil Practice Act of Illinois, this
judgment will terminate the litigation except for the matters
reserved herein, and that there is no just reason for delay-
ing the enforcement of this judgment or an appeal there-
from.
15. That the charter granted to IC was a binding con-
tract between the State of Mlinois and IC.
IT IS THEREFORE ORDERED, DECLARED, AD-
JUDGED AND DECREED AS FOLLOWS:
A. The motions for summary judgment of Gulf and the
State Departments are denied, the motion for summary
judgment of Snow is granted, and judgment is entered in
favor of Snow and against the defendants.
B. The Charter Property Tax did not become an obli-
gation of Gulf and the exemptions from state and local
taxation granted to IC and the Charter Property under the
B9
1851 law were not as a matter of law conveyed to or ac-
quired by Gulf pursuant to the Plan of Reorganization;
and IC’s sale and conveyance of the Charter Property to
Gulf, pursuant to said Plan, was a sale and conveyance of
the Charter Property within the meaning of Section 22 of
the 1851 law, so that effective August 10, 1972, the Charter
Property lost its exemption from all applicable state and
local taxation from which it previously was exempt.
C. Effective as of August 10, 1972, the Director of the
Department of Local Government Affairs shall assess the
Charter Property in the same manner as he assesses the
property of other railroads in the State and he shall trans-
mit the lists and information to the various proper taxing
authorities of the Illinois counties in which Charter Prop-
erty is located.
D. Pursuant to said Plan of Reorganization and ap-
proval thereof by the Interstate Commerce Commission, IC
has been duly dissolved.
E. The State Defendants are permanently enjoined and
restrained from continuing to collect or from expending
public funds of the State of Illinois in connection with the
enforcement and collection of the Charter Property Tax
from Gulf, and such a permanent writ of injunction is or-
dered to be issued forthwith, by the Clerk and under the
Seal of this Court.
F. Trusts are hereby declared for all tax moneys here-
tofore paid by Gulf on account of the Charter Property
Tax which have not been paid into the general revenue fund
of the State Treasury and for all future sums of money
paid by Gulf, subsequent to the date of this judgment, on
account of taxes of any nature on or pertaining to the
Charter Property and the Court retains jurisdiction thereof.
Cs ae 7
B10
G. With respect to all moneys heretofore paid by Gulf on
account of the Charter Property Tax which have not been
paid into the general State Treasury and for all future
moneys which Gulf may pay on account of the Charter Prop-
erty Tax subsequent to this judgment, pending the further
order of this Court, Allphin, or his successor, and Dixon, or
his successor, are ordered to place all such sums of money
into a segregated protest fund, at interest, said fund not to
be disbursed or commingled, pending the further order of
this Court, and a permanent writ of injunction is ordered
to be issued forthwith, by the Clerk and under the Seal of
this Court.
H. With respect to all moneys paid by Gulf, subsequent
to this judgment, on account of state taxes of any nature
(other than the Charter Property Tax) on or pertaining to
the Charter Property, pending the further order of this
Court, the State Defendants are ordered to place all such
sums of money into one or more segregated funds, at inter-
est, said funds or funds not to be disbursed or commingled,
pending the further order of this Court, and a permanent
writ of injunction is ordered to be issued forthwith, by the
Clerk and under the Seal of this Court.
I. With respect to all sums of money hereinafter paid by
Gulf to the Cook County Collector on behalf of Cook County
taxing bodies, subsequent to the date of this judgment, on
account of all back taxes (if any) resulting from assess-
ments (if any) for the period between August 10, 1972 and
the date of this judgment (including but not limited to per-
sonal property taxes and real estate taxes), on or pertain-
ing to the Charter Property, such tax moneys shall be held
by defendant Edward J. Rosewell, Cook County Collector
(‘‘Rosewell’’), or his successors, in one or more segregated
interest bearing accounts, until the further order of this
Court. :
Bil
J. With respect to all sums of money when paid by Gulf
on account of all future taxes due for assessments made for
the first full taxable year after the date of this judgment
(including but not limited to personal property taxes and
real estate taxes) on or pertaining to the Charter Property,
payable to the Cook County Collector on behalf of Cook
County taxing bodies, such moneys shall be deemed to have
been paid under protest in accordance with the statutes per-
taining to the payment of taxes under protest, and one third
of such tax moneys when paid shall be held by Rosewell, or
his successors, in one or more segregated interest bearing
accounts until the further order of this Court. The remain-
ing two thirds shall be distributed to the taxing bodies so
entitled.
K. Without limiting the finality of this judgment, the
Court retains jurisdiction of this cause for the purpose of
entering appropriate orders with respect to the award of
plaintiff’s costs and counsel fees, and the enforcement of
this judgment.
L. This cause is continued generally, to be called for
hearing upon five days’ notice from any party in the event
that defendants do not perfect an appeal within the time
permitted by law or following a final determination of any
appeal.
Dated this 17th day of May, 1976.
ENTER:
DONALD JJ. O’BRIEN,
Judge.
NEISTEIN, RICHMAN, HAUSLINGER
& YOUNG, Ltd.
Attorneys for Plaintiff
33 N. La Salle Street
Chicago, Llinois 60602
782-2555
Cl
APPENDIX C
DECISION OF
THE INTERSTATE COMMERCE COMMISSION,
338 I.C.C. 805, 879-880 (1971).
STATUTORY FINDINGS
Subject to the terms, conditions, and modifications here-
inbefore discussed, which we find to be just and reasonable,
we find that (1) the acquisition by Illinois Central Gulf
Railroad Company of the properties, franchises, and oper-
ating authorities of Gulf, Mobile ead Ohio Railroad Com-
pany, including motor carrier operating rights held by
Illinois Central Railroad Company; (2) the acquisition by
Illinois Central Gulf Railroad Company of sole or joint
control of carriers subject to the Interstate Commerce Act
subsidiary to, or affiliated with Gulf, Mobile and Ohio Rail-
road Company and/or Illinois Central Railroad Company
through ownership of stock or lease, including trackage
rights over, or joint use of, railroad lines of certain car-
riers; (3) the amendment to the lease of the properties of
the New Orleans Great Northern Railway Company dated
July 1, 1933, as supplemented as of September 4, 1940, un-
der which the Illinois Central Gulf Railroad Company will
operate the properties of the New Orleans Great Northern
Railway Company; (4) the acquisition by Illinois Central
Industries, Inc., of sole control of Illinois Central Gulf
Railroad Company by way of (a) sale, assignment, and
transfer of the properties of Gulf, Mobile and Ohio Rail-
road Company to Illinois Central Gulf Railroad Company,
(b) the merger of Gulf, Mobile and Ohio Railroad Company
into Illinois Central Industries, Inc., (c) the sale, assign-
ment, and transfer of the properties of [Illinois Central
Railroad Company to Illinois Central Gulf Railroad Com-
pany, and the liquidation and dissolution of Illinois Central
Railroad Company, are all transactions within the scope
C2
of subparagraph (a) of section 5(2) of the act and will
be consistent with the public interest; (5) the inclusion of
Bonhomie & Hattiesburg Southern Railroad Company, the
Fernwood, Columbia and Gulf Railroad Company, and the
Columbus and Greenville Railway Company into the IIli-
nois Central Gulf Railroad Company, as a prerequisite to
our approval of the principal transactions herein, is upon
equitable terms and is consistent with the public interest;
(6) the issuance by Illinois Central Gulf Railroad Company
of 1,000 shares of common stock, par value $1 per share,
and the assumption by [linois Central Gulf Railroad Com-
pany of the certain obligations of Central, Gulf, and Co-
lumbus and Greenville Railway Company are (a) for a law-
ful object within the corporate purposes of Illinois Central
Gulf Railroad Company, and are compatible with the pub-
lic interest, which is necessary or appropriate for or con-
sistent with the proper performance by the merged com-
pany of service to the public as a common carrier, and
which will not impair the ability of the merged company
to perform that service, and (b) are reasonably necessary
and appropriate for such purposes; (7) Industries should
he considered as a carrier under section 5(3) for the pur-
pose of compliance with sections 20(5) and 20a to the ex-
tent previously indicated; that Industries motion to dis-
miss its application under section 20a in Finance Docket
No. 25106 should be, and it is hereby, denied in view of
our action herein, and that the proposed issuance of se-
curities by Industries in connection with our authorization
in Finance Docket Nos. 25103, 25104, and 25105, is con-
sistent with the proper performance of its service to the
publie by each carrier which is under the control of such
corporation ; that it will not impair the ability of any such
carrier to perform such service, and that it is otherwise
consistent with the public interest ; and that Industries will
C3
continue to be considered a carrier under section 5(3) and
subject to the provisions of sections 20(1) and (2) as afore-
said; and (8) that the increase in total fixed charges re-
sulting from the merger and inclusion transactions will not
be contrary to the public interest.
An appropriate order will be entered.
VICE CHAIRMAN HARDIN and COMMISSIONER
BREWER did not participate.
ORDER OF
THE INTERSTATE COMMERCE COMMISSION,
338 1.C.C. 805, 940-1 (1971).
Investigation of the matters and things involved in these
proceedings having been made, a hearing having been held,
oral argument having been heard, and the Commission, on
the date hereof, having made and filed a report containing
its findings of fact and conclusions thereon, which report
and the report of the hearing examiner are referred to and
made a part hereof:
It is ordered, That subject to the terms, conditions, and
modifications referred to in our report, (1) the acquisition
by Illinois Central Gulf Railroad Company of the proper-
ties, franchises and operating authorities of the Gulf, Mo-
bile and Ohio Railroad Company and of the Illinois Central
Railroad Company; (2) the acquisition by Illinois Central
Gulf Railroad Company of sole or joint control of carriers
subject to the Interstate Commerce Act subsidiary to, or
affiliated with the Gulf, Mobile and Ohio Railroad Company
C4
and/or the Illinois Central Railroad Company through
ownership of stock or lease, including trackage rights over,
or joint use of, railroad lines of certain carriers; (3) the
amendment to lease of the properties of the New Orleans
Great Northern Railway Company dated July 1, 1933, as
supplemented as of September, 1940; (4) the acquisition
by Illinois Central Industries, Inc., of sole control of Tli-
nois Central Gulf Railroad Company by way of (a) the
sale, assignment, and transfer of the properties of Gulf,
Mobile and Ohio Railroad Company to Illinois Centtal Gulf
Railroad Company, (b) the merger of the Gulf, Mobile and
Ohio Railroad Company into Illinois Central Industries,
Inc., and (c) the sale, assignment, and transfer of proper-
ties of the Illinois Central Railroad Company to the Illinois
Central Gulf Railroad Company and the liquidation and
dissolution of the Illinois Central Railroad Company; and
(5) the inclusion of the Bonhomie & Hattiesburg Southern
Railroad Company, the Fernwood, Columbia and Gulf Rail-
road Company, and the Columbus and Greenville Railway
Company be, and they are hereby, approved and author-
ized.
It is further ordered, That the issuance by the Illinois
Central Gulf Railroad Company of 1,000 shares of com-
mon stock, par value $1 per share, and the assumption by
Illinois Central Gulf Railroad Company of the outstanding
obligations of the Gulf, Mobile and Ohio Railroad Com-
pany, the Illinois Central Railroad Company and the Co-
lumbus and Greenville Railway Company and the issuance
of certain securities by Illinois Central Industries, Inc.,
in connection with authorization herein and as proposed in
F.D. No. 25106, be, and they are hereby, authorized.
It is further ordered, That except as herein authorized,
the aforesaid stock shall not be sold, pledged, repledged,
C5
or otherwise disposed of by the Illinois Central Gulf Rail-
road Company unless or until so ordered or approved by
this Commission.
It is further ordered, That nothing herein shall be con-
strued to imply any guaranty or obligation as to said se-
eurities or dividends thereon on the part of the United
States.
It is further ordered, That Illinois Central Industries,
Inc., shall be considered as a carrier under section 5(3) and
made subject to sections 20(1), (2), and (5), and to section
20a as aforesaid.
It is further ordered, That motions for discovery, peti-
tions for an order overruling the examiner on matters re-
lating to the admission or exclusion of evidence, and all
motions or petitions to dismiss the proceedings, or to re-
mand the proceedings to the examiner be, and they are
hereby, denied.
It is further ordered, That the request of the Kansas City
Southern Lines for further hearing with respect to its re-
quested conditions be, and it is hereby, denied.
It is further ordered, That the Illinois Central Gulf Rail-
road Company when establishing changes in traffic rates
and charges as may be required in effectuating the transac-
tions herein approved may do so upon notice to this Com-
mission and to the general public by not less than 10 days’
filing and posting in the manner prescribed in section 6
of the Interstate Commerce Act and shall in schedules mak-
ing such changes refer to this order by date and docket
number.
It is further ordered, That if the authority herein grant-
ed is exercised, the Illinois Central Gulf Railroad Company
shall submit for the consideration and approval of the
Commission three copies of the journal entries required
to record the transactions authorized herein,
C6
It is further ordered, That this order shall become effec-
tive from and after 35 days from date of service.
It is further ordered, That if the authority granted here-
in is not exercised within 1 year from the effective date
of this order, it shall be of no further force and effect.
And it is further ordered, That jurisdiction be, and it is
hereby retained, over these proceedings, for the purpose
of considering all matters which may be submitted pur-
suant to our requirements regarding ownership interests
in the applicants and other railroads being granted relief
herein or our conditions prescribed in the matter of em-
ployee protection, and for issuing such further orders as
may be appropriate.
By the Commission.
ROBERT L. OSWALD,
Secretary.
(SEAL)
D1
APPENDIX D
TENTH AMENDMENT TO THE
UNITED STATES CONSTITUTION
The powers not delegated to the United States by the
Constitution, nor prohibited by it to the States, are re-
served to the States respectively, or to the people.
INTERSTATE COMMERCE ACT,
SECTION 5(2). (49 U.S.C. 5(2))
§ 5, par. (2). Unifications, mergers, and acquisitions of
control. (a) It shall be unlawful, with the approval and
authorization of the Commission, as provided in subdivi-
sion (b) of this paragraph—
(i) for two or more carriers to consolidate or merge
their properties or franchises, or any part thereof, into
one corporation for the ownership, management, and opera-
tion of the properties theretofore in separate ownership;
or for any carrier, or two or more carriers jointly, to pur-
chase, lease, or contract to operate the properties, or any
part thereof, of another; or for any carrier, or two or more
carriers jointly, to acquire control of another through own-
ership of its stock or otherwise; or for a person which is
not a carrier to acquire control of two or more carriers
through ownership of their stock or otherwise; or for a
person which is not a carrier and which has control of one
or more carriers to acquire control of another carrier
through ownership of its stock or otherwise; or
(ii) for a carrier by railroad to acquire trackage rights
over, or joint ownership in or joint use of, any railroad line
or lines owned or operated by any other such carrier, and
terminals incidental thereto.
D2
(b) Whenever a transaction is proposed under subdi-
vision (a) of this paragraph, the carrier or carriers or
person seeking authority therefor shall present an appli-
cation to the Commission, and thereupon the Commission
shall notify the Governor of each State in which any part
of the properties of the carriers involved in the proposed
transaction is situated, and also such carriers and the ap-
plicant or applicants (and, in case carriers by motor ve-
hicle are involved, the persons specified in section 305(e)
of this title), and shall afford reasonable opportunity for
interested parties to be heard. If the Commission shall con-
sider it necessary in order to determine whether the find-
ings specified below may properly be made, it shall set said
application for public hearing; and a public hearing shall
be held in all cases where carriers by railroad are involved
unless the Commission determines that a public hearing is
not necessary in the public interest. If the Commission finds
that, subject to such terms and conditions and such modifi-
cations as it shall find to be just and reasonable, the pro-
posed transaction is within the scope of subdivision (a) of
this paragraph and will be consistent with the public in-
terest, it shall enter an order approving and authorizing
such transaction, upon the terms and conditions, and with
the modifications, so found to be just and reasonable: Pro-
vided, That if a carrier by railroad subject to this chapter,
or any person which is controlled by such a carrier, or
affiliated therewith within the meaning of paragraph (6)
of this section, is an applicant in the case of any such pro-
posed transaction involving a motor carrier, the Commis-
sion shall not enter such an order unless it finds that the
transaction proposed will be consistent with the public in-
terest and will enable such carrier to use service by motor
vehicle to public advantage in its operation and will not
unduly restrain competition.
D3
(c) In passing upon any proposed transaction under the
provisions of this paragraph, the Commission shall give
weight to the following considerations, among others: (1)
The effect of the proposed transaction upon adequate trans-
portation service to the public; (2) the effect upon the
public interest of the inclusion, or failure to include, other
railroads in the territory involved in the proposed trans-
action; (3) the total fixed charges resulting from the pro-
posed transaction; and (4) the interest of the carrier em-
ployees affected.
(d) The Commission shall have authority in the case
of a proposed transaction under this paragraph involving
a railroad or railroads, as a prerequisite to its approval
of the proposed transaction, to require, upon equitable
terms, the inclusion of another railroad or other railroads
in the territory involved, upon petition by such railroad
or railroads requesting such inclusion, and upon a finding
that such inclusion is consistent with the public interest.
(e) No transaction which contemplates a guaranty or
assumption of payment of dividends or of fixed charges,
shall be approved by the Commission under this paragraph
except upon a specific finding by the Commission that such
guaranty or assumption is not inconsistent with the public
interest. No transaction shall be approved under this
paragraph which will result in an increase of total fixed
charges, except upon a specific finding by the Commission
that such increase would not be contrary to public interest.
(f) As a condition of its approval, under this para-
graph, of any transaction involving a carrier or carriers
by railroad subject to the provisions of this chapter, the
Commission shall require a fair and equitable arrangement
to protect the interests of the railroad employees affected.
In its order of approval the Commission shall include terms
D4
and conditions providing that during the period of four
years from the effective date of such order such trans-
action will not result in employees of the carrier or car-
riers by railroad affected by such order being in a worse
position with respect to their employment, except that the
protection afforded to any employee pursuant to this sen-
tence shall not be required to continue for a longer period,
following the effective date of such order, than the period
during which such employee was in the employ of such
carrier or carriers prior to the effective date of such
order. Notwithstanding any other provisions of this chap-
ter and chapters 8 and 12 of this title, an agreement per-
taining to the protection of the interests of said employees
may hereafter be entered into by any carrier or carriers
by railroad and the duly authorized representative or repre-
sentatives of its or their employees. Feb. 4, 1887, c. 104,
Pt. I, § 5, 24 Stat. 380; Feb. 28, 1920, ¢. 91, § 407, 41 Stat.
580; June 16, 1933, ¢. 91, Title II, §§ 201, 202, 48 Stat. 217;
Aug. 9, 1935, ¢. 498, § 1, 49 Stat. 543; Sept. 18, 1940, c. 722,
Title I, § 7, 54 Stat. 905; Aug. 2, 1949, c. 379, § 3, 63 Stat.
485.
INTERSTATE COMMERCE ACT,
SECTION 5(11). (49 U.S.C. 5(11))
§ 5, par. (11). Plenary nature of authority under sec-
tion. The authority conferred by this section shall be ex-
clusive and plenary, and any carrier or corporation par-
ticipating in or resulting from any transaction approved
by the Commission thereunder, shall have full power (with
the assent, in the case of a purchase and sale, a lease, a
corporate consolidation, or a corporate merger, of a ma-
jority, unless a different vote is required under applicable
State law, in which case the number so required shall as-
D5
sent, of the votes of the holders of the shares entitled to
vote of the capital stock of such corporation at a regular
meeting of such stockholders, the notice of such meeting
to include such purpose, or at a special meeting thereof
called for such purpose) to carry such transaction into ef-
fect and to own and operate any properties and exercise
any control or franchises acquired through said transac-
tion without invoking any approval under State authority;
and any carriers or other corporations, and their officers
and employees and any other persons, participating in a
transaction approved or authorized under the provisions
of this section shall be and they are relieved from the
operation of the antitrust laws and of all other restraints,
limitations, and prohibitions of law, Federal, State, or mu-
nicipal, insofar as may be necessary to enable them to
carry into effect the transaction so approved or provided
for in accordance with the terms and conditions, if any,
imposed by the Commission, and to hold, maintain, and
operate any properties and exercise any control or fran-
chises acquired through such transaction. Nothing in this
section shall be construed to create or provide for the crea-
tion, directly or indirectly, of a Federal corporation, but
any power granted by this section to any carrier or other
corporation shall be deemed to be in addition to and in
modification of its powers under its corporate charter or
under the laws of any State. Feb. 4, 1887, c. 104, Pt. I, § 5,
24 Stat. 380; Feb. 28, 1920, c. 91, § 407, 41 Stat. 480; June
16, 1933, ec. 91, Title II, $ 202, 48 Stat. 217; Sept. 18, 1940,
ce. 722, Title I, § 7, 54 Stat. 905.
D6 | D7
AN ACT TO INCORPORATE THE ILLINOIS CEN-
TRAL RAILROAD COMPANY, SECTION 18, 19
(Ill. Rev. Stat., 1975, Chap. 120, § 373) :
“373. Five per cent of income.) §18. In consid-
officers making such affidavits shall knowingly and
wilfully swear falsely, every such person shall be sub-
ject to the pains and penalties of perjury.’’
(Ill. Rev. Stats. 1975, Chap. 120, § 374):
eration of the grants, privileges and franchises here-
in conferred upon said company for the purposes
aforesaid, the said company shall, on the first Mon-
days of December and June in each year, pay to the
Department of Revenue of the State of Illinois five
per centum on the gross or total proceeds, receipts or
income derived from said road and branches, for the
six months then next preceding. The first payment of
such percentage on the main trunk of said road to
commence four ;cais from the date of said deed of
trust, and on the branches, six years from the date
aforesaid, unless said road and branches are sooner
completed, then from the date of completion. And for
the purpose of ascertaining the proceeds, receipts or
income aforesaid, an accurate account shall be kept
by said company, a copy whereof shall be furnishtd
to the Governor of the State of Ilinois and to the De-
partment of Revenue; the truth of which account shall
be verified by the affidavits of the treasurer and secre-
tary of such company. And for the purpose of verify-
ing and ascertaining the accuracy of such account, full
power is hereby vested in the Governor of the State
of Illinois, the Director of the Department of Revenue,
or any other person by law appointed, to examine ‘ae
books and papers of said corporation, and to examine,
under oath, the officers, agents and employees of said
company, and other persons. And if any persons, so
examined by the Governor or other authority, shall
knowingly and wilfully swear falsely, or if the other
“374. Lands taxable when conveyed—Application
of tax, etc.) §22. The lands selected under the act
of congress entitled ‘‘An Act granting the right of way,
and making a grant of land to the states of Illinois,
Mississippi and Alabama, in aid of the construction of
a railroad from Chicago to Mobile”, passed September
20, 1850, and authorized by this Act to be conveyed
shall be exempt from all taxation under the laws of
this state, until sold and conveyed by the Illinois Cen-
tral Railroad Comr ny or the trustees designated in
this Act. The stock, property and assets belonging
to the company shall be listed by the president, secre-
tary or other officer, with the Department of Reve-
nue, and an annual tax for state purposes shall be as-
sessed, upon all the property and assets of every
name, kind and description belonging to that com-
pany. Whenever the taxes levied for state purposes
shall exceed 34 of 1% per year, such excess shall be
deducted from the gross proceeds or income required
to be paid by the company to the state, and the com-
pany is hereby exempted from all taxation of every
kind, except as herein provided for. The revenue aris-
ing from such taxation, and the 5% of gross or total
proceeds, receipts or income aforesaid, shall be paid
to the Department of Revenue and covered into the
general revenue fund in the state treasury and ap-
plied to the payment of interest-paying state indebted-
ness until the extinction thereof. In case the 5% pro-
vided to be paid into the state treasury and the state
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taxes to be paid by the corporation do not amount to
7% of the gross or total proceeds, receipts or income,
however, then the company shall pay the difference, so
as to make the whole amount paid equal, at least, to
7% of the gross receipts of the company.”
BUSINESS CORPORATION ACT OF 1933, SEC-
TION 160
(Ill. Rev. Stats. 1975, Chap. 32 § 157.160) :
“157.160. §160. Application of Act in certain
eases. Nothing contained in this Act shall be held or
construed to:
(a) Authorize or permit the Illinois Central Rail-
road Company to sell the railway constructed under
its charter approved February 10, 1851, or to mortgage
the same except subject to the rights of the State
under its contract with said company, contained in its
said charter, or to dissolve its corporate existence, or
to relieve itself or its corporate property from its ob-
ligations to the State, under the provisions of said
charter; nor shall anything herein contained be so
construed as to in any manner relieve or discharge
any railroad company, organized under the laws of
this State, from the duties or obligations imposed by
virtue of any statute now in force or hereafter en-
acted.
(b) Alter, modify, release, or impair the rights of
this State as now reserved to it in any railroad char-
ter heretofore granted, or to effect in any way the
rights or obligations of any railroad company derived
from or imposed by such charter.
D9
(c) Alter, modify, or repeal any of the provisions
of an Act entitled ‘‘An Act concerning public utili-
ties,’’ approved June 29, 1921, and amendments thereto.
The term ‘‘ public utility” or ‘‘public utilities’ as used
in this Act shall be the same as defined in said Act
concerning public utilities.”
AN ACT TO INCREASE THE POWERS OF RAIL-
ROAD CORPORATIONS, SECTION 2
(Ill. Rev. Stats. 1975, Chap. 114, § 166) :
‘And provided further, that nothing herein con-
tained shall be so construed as to authorize or permit
the Illinois Central Railroad Company to sell the rail-
way constructed under its charter, approved February
10, 1851 or to mortgage the same, except subject to
the rights of the state under its contract with said
company, contained in its said charter, or to dissolve
its corporate existence, or to relieve itself or its corpo-
rate property from its obligations to this state, under
the provisions of said charter; nor shall anything
herein contained be so construed, as to in any manner,
relieve or discharge any railroad company, organized
under the laws of this state, from the duties or obli-
gations imposed by virtue of any statute now in force
or hereafter enacted: And provided. further, that noth-
ing in this act shall be so construed as to authorize
any corporation, other than those organized in and
under the laws of this state, to purchase or otherwise
become the owner, owners, lessee or lessees of any
railroad within this state.’’
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.