Petitioners Reply Brief — Public Serv. Comm'n of PR v. Havemeyer
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IN THE
‘Supremé Court of the ited tates
OCTQBER TERM, 1935
>
“
Tue Pousuic Service Commission or Puerto Rico,
. Petitioner,
vs.
Horace HAVEMEYER ET AL.. ( Russell & Co., Suers., S. en C.)
Respondents.
9
§ .
REPLY @RIEF FOR PETITIONER ON CERTIORARI
we
J WuuiM Cattron Ricsy,
| Atiorney for Petitioner.
B: Fernanpez Garcta, :
Attorney General of Puerto Rico,
Naruan R. Marcoxp,
Solicitor for Department of the Interior,
_ OF Counsel. .
‘ - . Page
IS 0 ae eee, rs . 12
- Rep.tyine Anoumant ea ae vee Qe
I—The two-rinds of “reasonableness”. —Courts
-have no general supervisory power over pub- ©
lic service commissions ......... * 2-4
II—Government vight to repeal reserved in frau-
chise places a tabi rights under legis-
lative control and makes franchise terminable
at government’s discretion ...... 4-6
II1I—Cases cited by’ Respondents, — Kuykendall
case and Federal Radio Commission v. Nel-
son,—not to the contrary of our position... 6-10
IV—Cireuit Court of Appeals omitted to notice
controlling character of ‘governmen®right to (
repeal, reserved in the franchise, and that .
- government’s exercise of that contract right
could not be a’deprivation of property with-
out due process of law .................... 10-13
V—Essential difference between outright ‘‘re- ‘, ) .
peal’’ and ‘“amendment”’ of franchise |... . 13-15
' VI—The three questions considered by the insu-
’ » lar courts.. The first question is one of execu-
tive discretion; as contra-distinguished from
the other two, which are judicial questions in lV
ee 15-20
VII—The repeal of this franchise by the Public
» Service Commission, pursuant. to the express -
power of ‘‘repeal’’ reserved in the fran-
chise itself, was an exercise of pure execu-
Loe ed sais ues ees es 6.9 20-21
-, VIII—It was a true ‘‘repeal’’ of the franchise; and
was not in the nature of “alteration or
ee ot waaay tht COOOL ee 21-28,
a ‘IX—It i is immaterial that this repeal was of but —
one of the three parts of the original fran-
chise grant, which were in their nature dis-: —
tinct andseparable ..:............5......, 23-25
X—There is né one word in this whole record
to support Respondents’ idea) of an ‘‘inte-
*~#
,
i
’ Page
grated group’’ owning, or - being ‘chomoihed
eae 26
XI—Decisions of this court iliustrative of the
line of demarcation between the two ‘kinds ©
of ‘‘unreasonableness’’ ................... 26-27
- -XII—This court has marked the distinction be-
tween ‘‘repeal’’ of a franchise, and its ‘‘al- __
teration or amendment”’.................. 27-28
XIII—Replying to Respondents’ reiterated conten-
tion as to ‘‘deprivation of property without ~
due process of law’’, décisions of this court
show that: cancellation of a franchise, pursu- .
ant to the express consent of the franchise. ©
-holder.embodied in the. reserved power in
_* the franchise itself to repeal it, is not a de-
privation of property without. due process
RE eee Sty peta eens aren 1. oe 30
XIV— Whether or not Russell & Co. is, or its prede-
cessor franchise holders were, ‘‘a public ser-
vice corporation’’, is wholly immaterial... 30-31
XV—Respondents’ contention of lack of jurisdic-
tion in the Public Service Commission to
cancel or repeal this franchise was properly
overruled by the Circuit Court of Appeals
both in this case and in the earlier injunction
suit, as also by the insular courts,—(regard-
less of whether that question is open to Re-
spondents in this court) .................. 31-32 _.
Dahle oie six individual respondents are not the. ~~
Sociedad en Comandita, Russell & Co. That
Sociedad is.not here; and these six indi-
viduals had no authority to maintain the ap-
peal from the Supreme Court of Puerto Rico
to the Cireuit Court of Appeals in this case.
(Our original Brief, Point TV, pp. 29- 30). . .32-37
ee ee es tie wane oo 9 38
Appenprx. — Juridical personality of Sociedad en
Comandita.—Puerto Rican cases and statutes. . .39-41
il
TABLE OF CASES aes
: Page
Siskin v. Russell & Co., 34 Puerto Rito Rep. -
Nae ny ee a er eee . Appendix 39,
Alcover & Co. v. Magraner, 31 Puerto Rico Rep:
MR Se ee eo a ee eee Appendix 40
American Colonial Bank v. Registrar, 4 Puerto Rico
, = . ee ee een ee reer Appendix 40
Bridge Co. v. United States, 105 U. 8. 470.°........., 6.
‘‘Board of Control Cases’’ (Springer v. Philippine
Deg, OTT UU... on ccc le recccses: 7,17
Berea College v. Kentucky, 211 U.S. 45....2..0... 13,14
Baltimore & Ohio R. Co. v. Interstate Commerce Com-
ic Gee Ps a be i ie eects lees ees 19
Brenes v. Hartman, 8 Puerto Rico Rep. 361. . _ Appendix 40
Covington v. Kentucky, 173 U. 8. 231 ........7..... 4
Calder v. Michigan, 218 U.S. 591,................. 515,29
Chicago Life Ins. Co. v. Needles, 113 U. S.-574......
' C.M.&St. P. R. R. Co. v. Wisconsin, 238 U. S. 491. .9,13,14
_ Commissioner of Inland Fisheries v. Holyoke Water
Power Co., 13 Gray 239 ......... a Aa cae 14
Carreno v. Russell & Co., 32 Puerto Rico Rep.
ee ee ya a Appendix 39
Cid. v. C. Perez Alverez, Ltd., 31 P. R. Rep. 197. Appendix 40
Cintron v. Colorado, 299P.R.707........««, Appendix 41
Doyle v. Continental Ins. Co., 94 U. 8.535........... 15
Delgado v. Lecaroz & Co., 4 2 eee Appendix 40
Del Pilar v. Velez, 19 P. R. 1061..... ee oo nn Appendix 41
Estape v. Rocafort, Tomo, 2, D. P. R. 252... . Appendix 40
—Federal Radio Commission v. General Electric Co., —
§ eS Br rer ween 7,17
Federal Radio Commission v. Nelson, 289 U: S. 266 .7,8,17,27
Fair Haven R. R. Co. v. New Haven, 203 U. 8. 379... 13.14
F. Fresno & Co. v. Smaine, 31 P..R. Rep. 912. _Appendix 40
Finley\v. Finlay Brothers ‘et al, 8 P. R. 371... Appendix 40
Greenwood v. Freight Co., 105 U.S.13........ 4,6,15,28,29 ©
Gordon v. United States, 117 U. S. GT. ...... Appendix 19
Gandia v. Registrar, 31 P. R. 74............. Appendix 41
Hayburn’s Case, 2 Dall..409 ..+...........000.0.... 19
Knoxville Water Go. v. Knoxville, 189 U. §. 434....: 4,6
tes ;
; ili |
J ae
.. ‘
* -
» 7 Us
a> ’ . am
Je; Coit Z ey D.:& mene r ct SE ONE IO
Page
Keller v. Potomac Electric eee Co., 281 U.S. 428. .7,9 tT
Kilbourfi v. Thompson, 103 U.S. 168 ............... 18
Looker v. Maynard, 179 U.S. 46 .............. 7... 2? @
. Luce v. Registrar of Guayama, 20 F..(2d) 115....... 17
Louisville, C. & C. R. Co. v. Letson, 2 How. 497..... me
Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566. . 36
‘ Monongahela Navigation Co. v. United States, 148
EEE ie SE I 6
Manigault v: Springs, 199 U. S. 473 ................ 6
‘Muskrat v. United States; 219 U. S. 346............ 19
Moral & Co. v. Bull Insular Line, 31 P. R. Rep.
ES a Re aes eee Appendix 40
_New Orleans Waterworks Co. v. edinem, 185 U. S.
cw se a - 6
N. Santini & Co. v. Santini, 31 P. R. Rep. 308. . Appendix 40
Owensboro v. Cumberland Telephone Co., 230 U. S.
a a yo kw ws 15,27,28
Pacific Tel. & Tel. Co: v. Kuykendall, 265 U.S.196... 6
Porter v. Investors’ Syndicate, 286 U.S. 461........ 27
People of Puerto Rico v. Russell & Co., 288 U. S.
CES eS ee I... Sr 33,34,35
People of Puerto Rico v. ies Estates, 279 Fed.
ee cas ees wa eso « - 33
_ People of Puerto Rico v. Rivera Zayas, 29 P. R. Rep.
_ Se eee eee . .34,35,36, and ienenite 39
Puerto Rico v. Russell & Co., Havemeyer, 60 F. (2d) .
o See A eo ee o . . -ddya4
P. Gandia & Co. v. Registrar, 31 P. R. Rep. 74. Appendix 40
Pasapera v. Mendez Brothers,31 P.R.Rep.904. Appendix 40
Quintana Bros. & Co. v. S. Ramirez & Co., 22 P. KR...
Sg EEE Feo Piva oe aka aha wos 36, and Appendix 41
Quinones v. Panzardi & Co.; 31 P. R. Rep. 917. Appendix 40
Ramapo Water Co. v. New York, 236 U.S. 579...... -. 5,15
Russell & Co. v. Benedicto, 26 P. R. Rep. 456. . Appendix 39
R. Boak & Co. v. Armstrong & Co., 31 P. R. Rep.
see PUNE soins ee vc kc cees Appendix 40
South Porto Rico Sugar Co. v. Munoz (Public Service
Commission), 28 F. (2d) 820 ................. 2,31,32
Stanislaus County v. San Joaquin C. & I. Co., 199
3 | eee DME Ec ei hoeccite ees aa 4,13
Shields v.. Ohio, 95 U. S. 319 ..... 0.2.0.2... 9,11,13,14,28
x lv
Stearns v. | 179 U. = Perea se. 13
Sinking-Fund Cases, 99 U. S. 700 .................. 13
Successors of M. Lamadrid & Co. v. Torrens, Marto-
wh 6 Co. P. Boe. Ge... i. ee 36
Successors to Sabrino Fernandez & Co. v. Registrar,
ae ©. BR. Mop. GS... i ee Appendix 40
Saygtiago Umpierre & Co. a Wener, 10 P. R. Rep.»
a Pees, are. t : Appendix 41
Tomlinson v. Jessup, 15 Wall. (82 U.S.) 454....... 4,12,29
Trustees of Dartmouth College v. Woodward, 4 Wheat.
en 4
United States v. Des Moines Navigation & Ry. Co., 142
eee 5
OTHER AUTHORITIES
_ Enciclopedia Juridica Espanola, Vols. 24, 25... Appendix 41
Manresa on the Spanish Civil Code, Vol. 1... . Appendix 41
FEDERAL STATUTES
Former Organic Act for Puerto Rico,
‘Foraker Act’’ of April 12, 1900 :
ee eee ereerres 31-32
Joint Resolution of May 1, 1900 ++ 9: 4h ar ee 11
Puerto Rico 7
ke ee
Civil Code (1930) __
* fe ree 30, and Appendix 39 ©
Secs. 1558, 1560 ...........: Pen 35
Sere 36
Secs. 1591, 1596, 1598 ........:.:..... - 35
Sees. 1583, Ses pee: Pao
Code of Civil Procedure
Secs. 51 and.73 ............ ........... Appendix 40
Code of Commerce (1930)
eae th BL ere rere re 35 .
oa ee Se eer ee 36
Se , ee ae Raises ate omeae nes Appendix 39
: — 39
ad aac 35
ERE 9 BOUTS PRE ee aera
: \ ; a. Page
4 pidoon. 146 to 100 ©... 6. cc cece Appendix 39
F ee Ov Days Bae nee Appendix 40
; IR er Sak Ba cn Se weld arice ocueey ae 36 |
4 Mortgage Code; Sec. PRN aro eine eh er ~~ 8
. Revised Statutes and Codes of Puerto Rico aS
3 Pars. 2180-2190, and 6750 ..................... 17
3 Pars. 4675, 4677, 4678, 4700, 4706, 4708, 5035 and
q ee ne ne pa ees Appendix 40
4 Pars. 7675, 7681, 7704 to 7708 ....... ... Appendix 39
: Pe Pe a ci eee Appendix 40
d
)
vi
IN THE
‘Supreme Court of the United States
_ OCTOBER TERM, 1935 °
No. 115 —
THe Pusuic Service Commission or Purrto Rico,
Petitioner,
vs.
Horace HaveMeyYeEr ET AL. (Russell & Co., Sucrs., S. en C.) |
Respondents.
REPLY BRIEF FOR PETITIONER ON CERTIORARI
Certiorari .was granted in this case, October 14, 1935. -
Petitioner advised the clerk of this court and opposing
counsel that petitioner would stand upon its original peti-
tion.and supporting. brief, together with its ‘‘Reply Brief
for Petitioner in Support of Petition for Certiorari’’, as
its brief on certiorari, and accordingly respondents have
filed their ‘‘Brief for Respondents Upon Review by Certi-
orari of Judgment of the Circuit Court of Appeals for the
First Circuit.’’ This is in -reply to that brief.
In the Petition for Certiorari and Supporting Brief, as
well as in the Reply Brief for Petitioner in Support of
the Petition for Certiorari, filed prior to the granting of
the writ of certiorari, page references to the record were
_ ‘of which were filed with the Petition for Certiorari
“a
Seana Wah e oen te oY aes
to the printed record of the Circuit Court of eals, copies
In the |
present brief, on the other hand, page references are
the penis of the Record as now eis by the clerk
of this court. .
I
Examination of respondents’ brief shows that it, like their
former brief in opposition to the petition for. certiorari,
rather emphasizes the correctness of our position and of the
distinction drawn in our petition and brief between the kind °
of ‘‘reasonableness’’ which means the wisdom ‘or expedi-
ency of administrative action within the acknowledged lim-
its of executive power, and-the other kind of ‘‘reasonable-
‘ ness’’ which has to do with the question whether or not
in the exercise of police powers or other kindred powers
the executive arm has reached beyond the proper limits of
its powers and has acted arbitrarily or capriciously so as -
to deprive any person of. liberty or property without due
process of law. The first kind of ‘‘reasonableness’’ — or
. **ynreasonableness’’ on the contrary, —in the exercise of
admitted executive power,—that is to say, any question of
the wisdom or unwisdom or expediency or inexpediency of -
executive action within its own province,—can never be a
judicia) question, nor the subject of judicial review in a-
constitutional court of the United States. As was well
said by the Circuit Court of Appeals for the First Circuit
. itself in its former opinion when this same controversy
came up upon the initial bill for injunction: (South Porto
Rico Sugar Co. and Russell & Co. v. Miguel-A. Munoz, et al,,
Public Service Commission. of Puerto Rico, 28 F. (2d) 820,
821; Petition; Appendix IT, p. 46) :
{
‘‘Courts have no general supervisory power over
. such tribunals as Public Service Commissions. Judi-
cial interference, apart from express statutory delega-
tion, must.be grounded on illegal encroachment upon.
property rights.’’
WOE pap ee a phegyt4D carne epee > OVP RETEY
. et i i ee EOE ee
3 ‘
But such a ‘‘general supervisory power’’ over the wis-
dom and fairness of the executive action of’ the Com-
_mission in exercising its power to repeal this franchise
is just what the Circuit Court of Appeals did attempt to
exercise in its present decision in this case; and that
is the only kind .of ‘‘reasonableness”’, — and the only
_~ kind of question,—here involved. Russell & Co. had ac-
cepted a franchise subject, by its own terms, and by the
express direction of the Act of Congress under: which it
. Was granted,’ to cancellation at any time at the discretion
\ of:the Puerto Rican government: It was cancelled by the
executive body,—the Public Service Commission,—clothed
with the executive power for that purpose, after a full ’
ee and for administrative reasons which the Commis-
on judged sufficient to require the cancellation; viz., that
the franchise holder was improperly permitting thie level
of the lake to rise, in violation of the terms of the franchise, _
to such a-height as to cause extensive flooding of the dea a
boring Municipality of Lajas.
If the éxercise of. such administrative discretion to can-
cel such a franchise in accordance with the express terms
of the franchise itself, is subject to judicial review, then it -
means that the franchise isnot really terminable at all in
the discretion of the government in accordance with the
terms upon which the grantee accepted it and upon which
the Congress required that it should be granted; but is
really perpetual; and can only be terminated upon the
same basis as though it did not contain the clause reserving
to the government the right to repeal. it. But that cannot
be true. Manifestly, the executive authority of the govern-
ment has, under this clause reserving the power of cancel-
lation, the same power to cancel it at discretion that a land-
lord has in any ordinary lease terminable at will or from
month to month; and its termination by the executive au-
.
' Section 3 of Joint Resolution of Congress No. 23, May 1,
1900, 31 Stat. 715; — petition for certiorari pp. 13- 14.
4
thority is no more subject to judicial. review than is the
action of an ordinary landlord in exercising his discretion
' to terminate. such a lease.
—
Such a reservation of power in the goverment to repeal .
it, embodied in the Tranchine itself, °
‘places saline legislative control all rights, privileges
and immunities derived by its charter directly from the
State’’. (Tomlinson v. Jessup, 15 Wall. o U.S.) 454,
— ) .
Its very purpose is (Tomlinson v. Jessup, supra, at p. 458;
Stanislaus County v. San —— C.& I. Ws 192 U.S. 201,
211):
‘‘To prevent a grant of wataiitile rights and privi-
- leges in a form which will preclude legislative inter- .
ference with their exercise if the public interest should
at any tithe require such interference” ;
‘the reservation of the right to repeal, alter or amend the:
franchise being “itself a part of that contract” (Coving-
ton v. Kentucky, 173 U. S. 231, 238, quoted and followed
in Stanislaus County v. San Joaquin C. & I. Co., supra,
. 192 U. S. 201, 212-213; and see also to the same effect
Knoxville Water Co.:v. Knofville, 189 U. S. 434). This
court said in Greenwood v. Freight Co., 105 U. S. 13, 20- 21,
that:
;
‘*Mr. Justice Story in his concurring opinion in. the
Dartmouth College Case’’ (Trustees of Dartmouth.
College vs. Woodward, 4 Wheat. 518, 708, 712) ‘‘sug-
gested that when the legislature was enacting acharter .
for a corporation, a provision in the statute reserving
to the legislature the right to amend or repeal it, must
be held to be a part of the contract itself. And the sub-
sequent exercise of the right would be in accordance
. , ¢
RET EE LE LE ETS LIT TT ES NIN TEAL IP 1 Ea NTN TE IED —
* ol _e . ° *
eS .
with the contract, and could not, therefore, impair its
' obligation. * * * (p. 20) * * * (Italics supplied)
‘‘This history of the reservation clause in acts of
incorporation supports our proposition that whatever
right, franchise, or power in the corporation :depends
* for its existence upon the granting clauses of the char-
ter is lost by its repeal..(p. 21) * * * oes
_<* * * Tt was, therefore, in the power of the Mas-
sachusetts legislature to grant to another corpora-
tion, as it. did, the authority to operate a street rail-
road. through the same streets and over the same .
- ground previously ocgupied by the Marginal Company.
Whether this action was oppressive or unjust in view
of the public good, or whether the legislature was gov-
erned by sufficient reason in thus fepealing the char-
ter of one company and in chartering another at the.
same time to perform as part of its functions the
‘duties required of the first, is not, as we have seen,
a judicial question in this case.’’ (p. 22)
Speaking by Mr. Justice Hoimes, this court said in
_ Ramapo Water Co, v. New York, 236 U. 8. 579, 583:
‘‘The charter of the company could, of course, be
repealed without impairing the obligation of a con- |
tract, as the right was reserved, as usual, in the Con- -
stitution of the State. Calder v. Michigan, 218 U. S.
591’; ? :
and in the Calder case (Calder v. Michigan, supra, 218 U. S.
991, 598-599), this court said: ,
.“*The defendants now, on the ground that there are
limits even to the operation of a reserved power to
repeal, argue that we should consider these allega-
tions’’ (of unfair motives of the Mayor and city au-
thorities in passing the repealing ordinance).’’ But we
do not inquire into the knowledge, negligence, methods
or motives of the legislature if, as in this case, the re-
peal was passed in due form. United States v. Des
Moines Navigation & Railway Co., 142 U. S. 510, 544.
The only question that we can consider is whether
Cent me Sia Se
6
Ss
there is anything relevant to the present case in the
terms or effect of the repeal that goes beyond the
power that the charter exprfssly reserves.
‘‘The charter provides that ‘The legislature may at
any time hereafter amend or repeal.this act.’ * * *.
By making a contract or incurring a debt the defen.
dants,.so far as they are concerned, could not gét rid
of an infirmity inherent in the corporation. They con-
- tracted ‘subject, not paramount, to the proviso for re-
peal, as is shown by a long line of cases. Greenwood
v.. Freight Co., 105 U. S. 18; Bridge Co. v. United
States, 105 U. 8, 470;.Chicago Life Insurance Co. v.
Needles, 113 U. S. 574; Monongahela hy apie Co. -
v. United States, 148 U. S. 313, 338, 340; New Orleans
- Waterworks Co. v. Louisiana, 185 U. S. 336, 353, 354;
Knoxville Water Co. v. Knoxville, 189 U. S. 434, 437,
_ 438; Manigault v. Springs, 199 U. S. 473, 480. It would
be a waste of words to try to make clearer than it is ©
on its face the meaning and effect of this reservation
of the power to repeal.’’ &
Il
The cases cited by respondents are not to the contrary.
They really recognize the distinction between the two dif-
. ferent classes of cases,—between the two kinds of ‘‘reason-
ableness’’.. They are all cases dealing with questions of
‘ the executive power overstepping its province and attempt-
_ ing to exercise arbitrary or capricious powers and thereby
depriving persons of liberty or property without due proc-
ess of law. For example, in the first case which they cite
(Respondents’ brief, pp. 20-21), Pacific Telephone and Tel-
egraph Co. v. Kuykendall, 265 U. 8. 196, the question in-
volved, as stated by Curer Justice Tart at the outset of the
court’s opinion (265 U. S, at pp. 197-198) was ‘‘of the
confiscatory character of rates for telephone service within
the State of Washington and in the cities of Seattle and
Tacoma (italics supplied), and the bill for injunction was
résted on an allegation (ib. p. 198) ‘‘that the order of the
Department of Public Works if enforced would deprive the
a 7
company of its property without due process of law, in
ilo of Fourteeith Amendment’’, the order being
one forbidding the company from putting into effect ‘‘the
increased rates which the company proposes in all parts
of Washington except Spokane’’, and the company claim-
ing (7b. p. 199) that the rates fixed by the Commission
‘‘were confiscatory.’’ . Manifestly, the question there in-
volved was wholly different in character from the question
here, which is simply of the “‘reasonableness’?, or right-
ness, or wisdom, of this Commission’s exercise of the pbwer,
which the Circuit Court of Appeals agrees that‘it holds
(R. 86), to repeal. this franchise in strict accordance with
its terms.” |
* It is immaterial that the insular statute (Public Service
Act, Sec. 85, petition for certiorari, Appendix I, p. 42) as
interpreted by the insular courts (R. 50 and R. 73, 75)
may give such executive power, to determine ‘whether the
Commission s order is ‘‘reasonable’’, to the insular courts,
which are not constitutional courts of the United States:
The legislative authority may invest Congressional courts
with administrative powers (Keller v. Potomac Electric Co.,
supra, 261 U. &. 428, 444; Federal Radio Commission v.
General Electric Co., 281 U. S. 464, 468-469; Radio Com-
mission v. Nelson, supra, 289 U. S. 266, 275); but not con-
stitutional courts of the United States, such as the Circuit
‘Court of Appeals. - :
(Whether the Legislature of Puerto Rico may validly
invest the Puerto Rican insular courts with such executive
power, in view of the provisions of the Organic Act for
that Island distributing the governmental powers among
the legislative, executive and judicial departments of the
msular government in analogy to the distribution of such
powers made by the Constitution for the federal govern-
~ ment (“Board of Control Cases’’, Springer and Agoncillo
v. Philippine Islands, 277 U. 8. 189) is another question,
not of present importance: in thig case, since the Public
Service Commission’s order was in fact approved by both
of the insular courts, the District Court of San Juan and .
the Supreme Court of Puerto Rico.)
; ;
,
. ;
—_ Nn nee
SD RC aA Sas Bee Sica
side aitt i shechctbS reece, siidteabais
8
And in another case cited by respondents (Brief, pp. 23-
24, and long excerpt in Appendix to Respondents’ Brief,
pp. 88-93), Federal Radio Commission v. Nelson, 289 U. S.
266, this court recognized the distinction between the two
classes of cases, and: that the judicial power is not con-
cerned with any question of “the wisdom or expediency of
the administrative action’? (ib. p. 277). In that case the
District Court of. Appeals’ reversal of the Radio Commis-
sion’s order rested on the ground that the Commission’s.
order was “in a legal sense arbitrary and capricious” (ib.
_ p. 269). This court there expressly recognizes that a con-
stitutional court of the United States may not review the
exercise of executive discretion by administrative or execu-
tive authorities (2b. p. 275), and points out that under the
1930 amendment of the Federal Radio Act of 1927 (Act of
Af uly 1, 1930, c. 788, 46 Stat. 844, amending section 16 of
the Act of 1927) the authority of the District Court of Ap-
peals is limited ‘‘to questions of law’’ and to an examina-
tion of whether the Radio Commission’s findings and or-
ders ‘‘are arbitrary or capricious’’ (tb. pp. 275-276; ttalics
supplied ). That was the kind of question of ‘‘reasonable-
ness’’ which this court in that case held it might review by
virtue of its judicial powers under the Veen, saying
(ib. p. 276) :
‘‘Whether the Commission applies the a
standards validly set up, whether it acts within the
authority conferred or goes beyond it, whether its pro-
ceedings satisfy the pertinent demands of due process,
whether, in short, there is compliance with the legal
requirements which fix the province of the Commission
and govern its action, are appropriate. questions for.
judicial decision. These are questions of law upon
which the Court is to pass’’; (Italics supplied)
/
and that (ib. pp. 276-277)
‘‘The provision that the Commission’s findings of
fact, if supported by substantial evidence, shall be con-
9
clusive unless it clearly appears that the findings are
arbitrary or capricious, cannot be regarded as an at-
tempt to vest in the Court an authority to revise the
action of the Commission from an administrative
standpoint and to make an administrative judgment.
* * * Such an examination is not concerned with the
weight or evidence or with the wisdom or expediency
of the administrativé action. *** ~~
““* * * The controlling question is whether the func-
tion to be exercised by this Court is a judicial function,
and if so, it may be exercised on an authorized appeal
from the decision of an administrative body.” (Italics
supplied ) ~
That is wholly in accordance with what was said in
Keller v. Potomac Electric Co., 261 U. S. 428, 444, cited in -
our original brief (p. 28) and with the general rule, upon *
which- we rely, of the limits of the judicial power.
Respondents also cite (Brief, pp. 26-27) Chicago, Mil-
waukee & St. Paul R, R. Co. v. Wisconsin, 238 U. S. 491, -
vishal only, as quoted by the respondents themselves
((brief, pp. 26-27) from the headnote of that case, that
wS -
/ ‘the reserved right of altering and amending the
charter of a corporation does not confer mere arbi-
trary power \or authorize the taking of the corpora-
tion’s property without compensation ;”’ %
and that (p. 502) as this court had said in Shields v. Ohio, -
95 U. S. 319, 324:
“The alterations must be reasonable.* * * and con-
sistent with the scope and object of the act of mcorpo-
ration.’’ (Italics supplied) Pi
But that has nothing to do with the question here in-
volved. This was not an alteration or amendment. It was
an outright repeal, pursuant to a power expressly reserved
in the franchise itself, which was one of the conditions upon
which the grantee accepted it. As this court said in Shields
v. Ohio, supra, 95 U. 8.319, 324:
10:
‘*It is urged that the franchise here in question was
property held by a vested right, and that its sanctity,
as such, could not be thus invaded.. The answer is
consensus facit jus. It was according to the .agree-
ment of the parties. The company took the franchise
subject expressly to the power of alteration or repeal
by the General Assembly. There is, therefore, no
ground for just complaint against the State.
‘‘Where an act of incorporation is repealed, few
questions of difficulty can arise.”’’
IV
While it is true that the Cirenit.Court of Appeals says
in its opinion (RK. 92) that,
‘‘Under the circumstances disclosed by the record,
the absolute cancellation of that part of the franchise
pertaining to the use of the waters of the Lake * would,
in our opinion, be an arbitrary and unreasonable act,
if it involves, as.it may have, a taking of a valuable
property right acquired by the appellants under the
franchise, viz: the right to take 20,000,000 gallons of
water daily from Guanica Lake’’, |
.
kL INGE RE TENET | SOCAN WB MS
and that (R. 92),
‘‘To avoid future damages from flowage of lands in
Lajas, it was only necessary to amend or modify the
franchise by requiring the establishment of a gauge
above which the waters should not be permitted to be
raised by the owner of the franchise, except during
periods of extraordinary rains, and for a period suff-
cient to permit the excessive waters to be reduced in
due course to the height of the gauge so established’’;
’The only part of the original tripartite franchise for
irrigation, railroad, and wharf, in which Russell & Co., or.
: these respondents, claim any ownership in this case; and
the only part of the franchise in any way involved here,
- (R. 25; petition for certiorari, pp. 6-7; and order cancel-
ling the franchise, R. 27-28).
11
yet the court, in saying that, apparently wholly fails to
~ notice the important, and controlling, fact: that this fran-
chise, on its face, is terminable at any time at the discre-
tion of the government ;‘ and wholly fails to explain how
in view of that contractual right expressly reserved to the .
government, the cancellation could in any way be consid-
ered as an ‘‘arbitrary and unreasonable act’’, or the ‘‘tak- ;
. ing of a valuable property right acquired by the appel-
-lants under the franchise’’, since it is axiomatic that ‘‘con-
sensus facit jus’’ (Shields v. Ohio, suprg, 95 U. S. 319,
324),—if the Circuit Court meant to use those words as
indicating in any way that the action of the Commis-
‘sion was beyond its powers or was an illegal taking of
- property of Russell & Co. without due process of law. And.
if the court does not mean to say that, but means only to
indicate its belief,—which is as far as its language really
goes,—that the act of the Commission was ‘‘an arbitrary
and unreasonable act’’ in the sense that, if the members
of the court had been sitting as members of the Com-
mission, they would have thought the wiser or more rea-
sonable thing to do would have been to modify the fran-
- chise in some such way as the court indicates, instead of
cancelling it,—then that is simply an attempt to substitute
the individual judgment of the members of the court for
that of the members of the Public. Service Commission on
this question of administrative discretion, which was within
the jurisdiction 6f-the Commission, but wholly beyond. ju-
dicial review by a constitutional court of the United States.
‘It is true that the charter of the company when
accepted by the corporators constituted a contract be-
‘Paragraph XVIII of the franchise (R. 13):
— **Tn accordance with Section 3 of Public Resolution
No. 23, approved May Ist, 1900, it is hereby provided
that the franchises, privileges and concessions hereby
granted, shall be subject to amendment, alteration or
repeal.
Op aac Cpe hela ers
CaS arte ES :
12
tween them and the State, and that the amendment,
when accepted, formed a part of the contract from that
date and was of the same obligatory character.’’ (The
amendment to which reference is here made was an
amendatory act of the Legislature of South Carolina,
passed in December, 1855, amending the charter of the
Northeastern Railroad Company so as to exempt its
real estate from taxation during the continuance of the
charter.) ‘‘And it may be equally true, as stated by
counsel, that the exemption from taxation added great-
ly to the value of the stock of the cempany, and in-
duced the plaintiff to purchase the shares held by him.
But these considerations cannot be allowed any weight
in determining the validity of the subsequent taxation.
The power reserved to the State by the law of 1841
authorized any change in the contract as it originally
existed, or as subsequently modified, or its entire revo-
cation. The original corporators, or subsequent stock-—
holders, took their interests with the knowledge of the
existence of this power, and of the possibility of tts
exercise at any time in the discretion of the legislature.
The object of the reservation, and of similar reserva-
tions in other charters, is to prevent a grant of cor-
porate rights and privileges in a form which will pre-
clude legislative interference with their exercise if the’
public interest should at any time require such inter-
ference. It is a provision intended to preserve to the
State control over its contract with the corporators,
which without that provision would be irrepedlable and
protected from any measures affecting its obligation.’’
Tomlinson v. Jessup, supra, 15 Wall. (82 U.S.) 454,
457-458 (Frexp, J.).
Further on in the same opinion Mr. Justice Frevp.speak-
ing for the Court said (at p. 459):
‘Immunity from taxation, constituting in these cases .
a part of the contract of the government, is, by the
reservation of power such as is contained in the law
. of 1841, subject to be revoked equally with any other
provision of the charter whenever the legislature may —
deem it expedient for the public interests that the revo-
|
13
cation shall be made. The reservation affects the en-
tire relation between the State and the corporation,
and places under legislativé control all rights, privi-
leges, and immunities derived by its charter directly
from the State.’’ (Italics supplied)”
Vv
There is an essential difference between cusight “repeal” and
“amendment”. .
_ A. Respondents say (Brief, p. 31, Heading) that there
is ‘‘no sound distinction between a repeal and an amend-
ment’’, and seek to apply to the repeal of this franchise’
the acknowledged rule with relation to amendments of
franchises that the right to alter or amend ‘‘is not without
limits’’, and that the alteration ‘‘must be reasonable’’,
‘‘must be made in good faith, and be consistent with the
scope and objects of the act of incorporation’’, and that
‘‘Sheer oppression and wrong cannot be inflicted under the
guise of amendment or alteration’’. Shields v. Ohio, supra,
-95 U.S. 319, 324-325; Berea College vs. Kentucky, 211 U.S.
45,57; Fair Haven R. R. Co. vs. New Haven, 203 U. S. 379,
388-389; C. M. & St. P. R:i-Go. vs. Wisconsin, 238 U. S.-
491, 501-502; Looker vs. Maynard, 179 U. S. 46, 52; Stearns
vs Minnesota, 179 U. S. 223, 259; Sinking Fund Cases, 99
U. S. 700, 720; Stanislaus County vs. San Joaquin C. & I.
Co., 192 U. S. 201, 213... And the Cireuit. Court of Appeals.
plainly lost sight of the difference between amendment and
outright repeal, because the only cases it cites in support. :
of the ahove quoted statement in its opinion (R. 92) that
‘‘the ‘absolute cancellation of that part of the fran-
chise -pertaining to the use of the waters of the Lake
would, in our opinion, be an arbitrary and unreason-
able act, if it involved, as it may have, a taking of a
der the franchise’’,
valuable property right acquired by the ee un-— :
hee
14
are cases relating solely to amendments of franchises,® and
not to ‘‘absolyte cancellation’’ at all.
B. But the essential distinction between ‘‘amendment
or alteration’? and outright ‘‘repeal’’ is clearly marked,
and rests upon fundamental reasons.
The basic characteristics of the. two classes of acts are
wholly different. ‘‘Repeal’’ or ‘‘revocation’’ or ‘‘cancella-
tion’’ is the act of a single party, requiring no concurrence,
and no further action by the other. party. It simply puts an
end to the contract or franchise, leaving nothing further to
be done under it by the other party. But ‘‘amendment”’ or
‘‘alteration’’, on the other hand, is essentially bi-lateral
in its nature, and it does require affirmative action by the
other party in continuing to carry out the contract or fran-
chise as thus altered or amended. And if it be an ‘‘altera-
‘tion’’ or ‘‘amendment’’ of a franchise, pursuant to a re-
served power to ‘‘alter or amend’’, by government action,
without consulting the franchise holder, it amounts to forc-
ing upon him, against his will, and expecting him to carry
out, perhaps for many years to come, a new contract, dif-
ferent from that to which he had agreed in accepting the
contract, and imposing on him different duties and obliga-.
tions. That is a very different thing from simply ending
it and releasing him. He may well insist’ that he cannot
be required to accept such new contract, and to undertake
‘such new duties and obligations, unless the amendments
thus imposed upon him are reasonably ‘‘consistent with
the scope and objects’’ of the original contract or fran-
chise, and that ‘‘sheer oppression and wrong cannot be’
inflicted’? upon him ‘‘under the guise of amendment or
alteration’’. And so the cases above cited, with relation
5 Shields vs. Ohio, Berea College vs. Kentucky, Fair
Haven & Westville R. R. Co. vs. New. Haven, and C. M. &
St. P. R. Co. vs. State of Wisconsin, supra (ante, p. 13);
and Com. of Inland Fisheries vs. Holyoke Water Power
Co., 13 Gray 239. :
15
to ‘‘alterations and amendments’’, hold. (Ante, p. 13).
And those are the cases relied upon by respondents (brief,
pp. 26-30), and by the Circuit Court of Appeals (R. 92,
supra). | ,
C. But those cases have nothing whatever to do with
an outright repeal of a franchise, such as that here in-
volved, under a reserved power to ‘‘repeal’’. That is a
wholly different thing. iE aie
. No case has been cited, and it is believed that none can be found,
placing any such limitation, or any limitation whatever, upon the
executive power of the government, in its sol- discretion, to exercise
a power of outright “repeal” expressly reserved in a charter or
franchise. And this court has directly repelled and over-
ruled the suggestion that any such limitation upon a re-
served power to ‘‘repeal’’ may be implied. Calder v. Michi-
igan, 218 U. S. 591, 598-599, quoted, ante, pp. 9-6. Doyle v.
Continental Insurance Co., 94 U. S. 535, 040-542. Green-
wood v. Freight Co., supra, 105 U. S. 13, 20-22. Ramapo
Water Co. v. New York, supra, 236 U. S. 079, 583. And
confer the dissenting opinion of Justices Day, McKenna,
Hueues and Pitney, in Owensboro v. Cumberland Tele-
phone Co., 230 U. S. 58, 76-83, at pp. 78-80.
VI
The three questions put by the insular courts (District Court,
R. 50; Supreme Court, R. 73) as the questions which they
hold that the insular statute makes it their duty to answer
upon an appeal from an order of the Public Service Com-
mission, and which the Circuit Court of Appeals holds
(Opinion, R. 85, 92) and respondents now contend (Brief,
p. 26). the Cireuit Court might properly consider upon
appeal from the insular Supreme Court, are:
. _ “*1, Whether the order appealed from, rendered by
the Public Service Commission on March 8, 1929, is
reasonable or not.
‘2. Whether said order is legal or not.
AA
16
‘3, Whether it has been based on incompetent evi-
dence, affecting the decision and order of the Commis-
sion’’,
But those questions may be put at any time in relation to
any act of the exécutive branch of the government, from the
smallest to the greatest. And manifestly, as it seems to us,
those questions belong in different categories. The two
latter questions,—whether the order ‘‘is legal or not’’, and —
whether it was “‘based on incompetent evidence’’,—are ju-
dical questions, properly cognizable by the judicial power.
(And the question whether the order ‘‘is legal or not’’ com-
prehends the question of that kind of ‘‘reasonableness’’ or
‘‘unreasonableness’’ involved in determining whether or
not it exceeds the limits of the executive power or deprives
any person of life, liberty or property without due process
of law; besause, manifestly, if it offends in any such man-
ner, it is not “legal’’.)
But the remsinion question, —the question a oe ‘ual
_as stated by the insular District Court as above quoted,— ;
thus set off in contrast as a separate question over-against
the question whether the order is ‘‘legal’’ or not,—
‘‘Whether the order * * * is reasonable or not’’, plainly
asks for something else, and is in another category. That
question asks whether or not the act was a wise or con-
sidetate exercise of the executive discretion vested in the
Commission; whether or not under the circumstances it
was a ‘‘reasonable’’ way to solve the administrative prob-
‘lem’ which the Commission had before it.’ The insular
gourts apparently understood the insular statute as plac-
ing upon- them the duty of thus reviewing the. executive
discretion of the Public Service Commission, and of deter-
mining whether or not its exercise of its executive discre-
tion was ‘‘reasonable’’; in the same way that an executive
or administrative duty is placed upon the insular Supreme
Court of réviewing the executive action of registrars of
: property by ‘‘administrative appeal’’ under. Section 66 of
17
thi var Mortgage Law. Rev. Stats. and Codes of
Puerto Mieco, 1911, Par. 6750; and Act of March 1, 1902,
Laws of 1902, p, 289, Rev. Stats. and Codes of 1911, Pars.
2180-2190. Luce v. Registrar of Guayama, 20 F. (2d) 115
(C. C. A.-I; June 16, 1927). That kind of administrative
or executive power may, of course, be given to Congres-
sional courts, such as the insular District and Supreme
Courts (Luce v. Registrar of Guyama, supra, 20 F. (2d)
at p. 116; Kellet v. Potomac Electric Power Co., supra, 261
‘U.S. 428, 444; Federal Radio Commission v. General Elec-
tric Co., 281 U. S. 464, 468-469; Radio Commission v. Nel-
son, supra, 289 U: S. 266, 275). But nevertheless the deci-
sions of such Congressional courts on administrative or ex-
ecutive questions of that kind may not.be reviewed on
appeal, or otherwise, by a constitutional court of the United
States, such ‘as the Circuit Court of Appeals. Luce v. Reg-
istrar of Guayama, supra; Keller v. Potomac Electric Co.,
supra. And hence, in this case, the Circuit Court of Appeals
was without power to review that portion of the decision of —
the insular Supreme Court dealing with that’ question of
the executive ‘‘reasonableness’’ of the Commission’s order.
It is not a question of form of procedure, or whether or
not the insular courts, reviewing the executive ‘‘reasonable-
ness’’ of the Commission’s order, had power, if they
thought it unwise or executively ‘‘unreasonable’’, to ‘sub-
stitute their own order in its place, or only to reverse it.
and send it back to the Commission with directions to try
again; or in what form or method whatsoever the. question
may be raised. /t is, on the contrary, a matter of .the es-
sential character of the question itself; whether it is in its.
essence judicial, and sc cognizable by the federal ‘‘ Judicial
Power’’; or is in its essence executive or administrative, ©
to be determined by the executive power. If it be the lat-
ter, then, no matter in what form the question be raised,
and no matter in what method of procedure, it may not. be
considered by the judicial power. ‘‘And this separation
18
and the consequent exclusive character of the powers con-
ferred upon each of the three departments is basic and
vital—not merely a matter of governmental mechanism.’’
Springer v. Philippine Islands, 277 U. 8. 189, 201.
‘Tt is also essential to the successful working of
this system that the persons intrusted with power in
any one of these branches shall not be permitted to
encroach upon the powers confided to the others, but
that each shall by the law of its creation be limited
to the exercise of the powers appropriate to its own
department and no other.’’ Kilbourn v. Thompson,
103 U. S. 168, 191.
As;we have said, the essential difference between the sev-
eral characters of the three questions put by the insular
courts here, as above quoted (R. 50 and 73, supra), and all
of which the Circuit Court of Appeals assumed it was its
duty to examine,—and the clear cut distinction between the
executive or administrative character of the first question,
whether the Commission’s order. ‘‘is reasonable or not’’,
as over against the true judicial character of the other two
questions, whether the order ‘‘is legal or not’’ or is ‘‘ based
on incompetent evidencg’’,—may be illustrated by applying
them to any purely executive act, ‘of the most ordinary, or
of the gravest, character. Thus for example, with refer-
ence to an order of a Park Board to build a fence within
the park or along its béundary, it may be asked whether
the order is legal, that is, within the powers of the board,
and whether it has been made in due form of law, or upon
a proper hearing, as may be required by pertinent statutes
~ or ordinances, and upon competent evidence if a hearing
‘be required. Those are judicial questions, properly cog-
nizable as such in any court clothed with jurisdiction to
review the orders of the board.. But, if the order to build
the fence was legal, and was made in due form and upon
proper hearing, then the further question whether it was
‘‘reasonable’’ or not, whether it would have been wiser
Nd pat ahi VS CORALS AAA LOT A! Re TREE ey NOH ARP
ot . : te vay ; i ea LY ee LT Ao NON RC. < y 24 PE
19
not to build the fence at all, or to build it in some other
place, or to build the fence two feet, higher or a foot lower,
or with steel or concrete posts instead of wood posts, or
to build a fence of ee pickets instead of a wire fence,
are all questions of pure executive discretion, which,—(if
the order is ‘‘legal’’, and made within the powers entrusted
by law to the Park Board),—cannot be made the subject of
review by the judicial power of the United States, in a con-
stitutional court of the United States, in any form of pro-
_cedure. And it is beyond the power of the Congress to
‘invest the constitutional courts of the United States with
jurisdiction to review such administrative questions. Musk-
rat v. United States, supra, 219 U. S. 346, 351-356. Balti-
more & Ohio R. Co. v. Interstate Commerce Commission,
215 U. S. 216. Gordon v. United States, 117 U. S. 697,
Appendix. United States v. Ferreira, 13 How. 40; 52. Hay-
burn’s Case, 2 Dall. 409.
And so also in matters of the gravest import.. For ex-
ample, a similar set of three questions might be asked con-
cerning Lee’s order to Longstreet at Gettysburg for Pick-
ett’s cshege ‘Was it legal’’; that is, was it within Gen-
eral Lee’s powers as Commanding General? Was it in due
form? And finally, was it ‘‘reasonable’’? Manifestly, the
first two questions are judicial in their nature and might,
if properly arising in a case or controversy, be made the
subject of judicial inquiry by the courts. But likewise
plainly the last question, whether the order was ‘‘reason-
able’’, is purely and simply an administrative or executive
question, wholly beyond review by the judicial power in
any form; and the fact that it might,—and did,—deprive
many persons of \property, of liberty, and of life, could
not raise any judicial question of deprivation of life, lib-
erty er property without due process of law, if the order
was ‘“legal’’, ’’ that is to say, within the powers legally vested
in the Commaniiing General.
Such illustrations may go far afield; but the principle
is always the same. If the act be within the scope of the
:
.
——_—_ eae : Stats MER ORS Com DT RRR
BRIA Alsat MARE ek Sine lucien tai ade BERNER SNL
20
powers of the executive authority,—that is, if it be ‘‘legal’’,
and if it be made in the manner and in the form prescribed
by the pertinent laws, then it is not the subject of review
by any other branch of the government, either by the legis-.
lature or by the courts; and whether ‘‘reasonable”’ or ‘‘un-
reasonable’’, whether wise or unwise, whether an act of the
highest statesmanship, or the purest folly, it is beyond re-
view by the judicial power. Historians may dispute. to the
end of time whether or not Lee’s order to Longstreet was
wise or ‘‘reasonable’’ or the reverse; but that kind of a
question of ‘‘reasonableness’’ in an executive act or order
can never be made the subject of review by the judicial
power of the United States.
VII
The repeal of this franchise by the Public Service Commission of
Puerto Rico, pursuant to the express power of “repeal” reserved in
the franchise itself, was an exercise of pure executive power.
Respondents endeavor to avoid this proposition by con-
tending that the Commission’s order (R. 27-28) cancelling
that portion of the original franchise held by Russell & Co.,
viz., that part of the original tripartite franchise to
the Guanica Land Company for the railroad, the wharf,
and the right to take water for irrigation from Lake
Guanica, which had been transferred to Ensenada
Estates, Inc., and by it in turn to Russell & Co.,—the
part comprised in the first four paragraphs of the
franchise ¢R. 8-10),—and which part of the franchise,—
and only thet part, and nothing else,—Russell & Co.
claimed any interest in, by its‘answer before the Public
Service Commission (R. 25),—
was not really a ‘‘repeal’’; but was only in the nature of an
‘‘alteration or amendment’’ of the original. franchise.
Respondents say (Brief, p. 31, Heading) :
—
wpe RGeUs
ae athe
‘
< 21
baal
‘‘but we submit that cancellation of the water rights
was in nature and effect an amendment of the entire
integrated franchise within the meaning of the authori-
ties quoted’’.
Respondents are trying, of course, to avail themselves
of the rule stated in the cases cited in their brief, and in
other cases to which reference is heretofore made (ante,
pp. 13, 15) that, as contradistinguished from the unlimited
character of the executive power of ‘‘repeal’’ under a
reserved power in the franchise the power of ‘‘alteration
or amendment”’ is ‘‘not without limits’’, and that such an
‘‘alteration or repeal’’ must be consonant with the scope
and purpose of the original franchise intended to be still
left in effect as thus modified,
VII
- But, on this record, it is perfectly plain that the cancellation of the
franchise here involved was a true “repeal”, and was not in the nature
of “alteration or amendment”.
The Circuit Court of Appeals treated it as an outright
‘‘repeal’’ or revocation of all of that part of the franchise
in which Russell & Co. (or the individual respondents here,
as its stockholders) had any interest whatever (R. 92);
as did also the insular courts, both the District Court (R.
56, 60) and the insular Supreme Court (R. 65, 68). This
was the only part of the franchise in which Russell & Co.
(or these individual respondents as its stockholders) ever —
had or claimed any interest whatever. The original fran-
chise of March 19, 1901, to the Guanica Land Company |
(R. 8-14) was for three separate things: First, To take not —
exceeding 20,0000,000 gallons of water a day from Guanica
Lake (Pars. I-IV); Second, For a standard gauge private
railway (Pars. V-VII), with respect to which, however, the
Executive Council reserved the right (Par. XXII) to
declare the company, its successors and assigns ‘‘a common
carrier’, and to extend the use of the railroad to the
«sop eS
‘ '
AINSI ET IMD PIM Sp EEN AARR THAME SG Hi con cperasahae ears
22
"general public; and, Third, For a dock or wharf in the Bay
of Guanica, if the consent of the Secretary of War should
be obtained, as a private wharf (Par. VIII-X), but with the
like reserved right to the Executive Council in relation to
the wharf as in relation fo the railroad (Par. XXII, supra),
to declare the ‘‘Company, its successors and assigns, a
common ecarriér’’, and to extend the use of the wharf to
the general public; and also with a provision (Par. XII),
- as to both the railway and the wharf, for their | free use
for certain government purposes.
The entire franchise was transferred by the original
grantee to another corporation, ‘‘Guanica Centrale’’ and
the assignment was approved by the Executive Council of.
Puerto Rico on October 31, 1901; but no subsequent
assignment of the franchise or of any part of it was ever
- approved or authorized by the Executive Council, or by its
successor created by the present Organic Act of Congress
of March 2, 1917, the Public Service Commission of Puerto
Rico (R. 16). But Russell & Co. now claim (Answer of
Russell & Co. to the Rule to Show Cause before the Public
Service Commission, Par. I; R. 25) that on March 15, 1917,
the corporation Guanica Centrale granted to Ensenada
Estates, Inc., a Connecticut corporation
‘Call of that part of said franchise and of the rights
therein contained, referring to the use of certain
waters of Guanica Lake for purposes of irrigation,’
that is, to be more specific, the rights contained under
Paragraphs I and IV, ‘inclusive, of said franchise’:
| and: that Russell & Co.
. ‘fis at present the owner of all that part of said
franchise having to do with the use of water for pur-
poses of irrigation’’; —
ie ae
_ that ‘‘the said’ ee or grants were communicated
to the Executive Council of Puerto Rico and to the Public.
Service Commission”’,
23
‘‘and although it is true that they were not approved
by said Council and Commission, such approval was
unnecessary for their validity inasmuch as the fran-
chise itself authorizes its assignment or grant.’’
And it is that entire part of the franchise thus claimed
to have been granted to the Connecticut Corporation, En-
senada Estates, Inc., and by tt im turn to Russell & Co.,
which was cancelled by the Public Service Commission’s
order of March 8, 1929 (R. 27-28) nereyinvolved. That is,
the order cancelled the whole of that part of the franchise -
in which Russell & Co. had or claimed any interest what-
‘ever.
It. was, antes as to Russell & Co. and as to every
part of the franchise in which Russell & Co. had any
interest, a complete ‘‘repeal’’. It left nothing whatever for
Russell & Co. to do under the contract. It imposed no new.
duties or obligations on Russell & Co.; or on any holder of
that part of the franchise. It ended it. It left nothing
further to be done. It wholly released Russell & Co., and
‘any other holders or claimants in or to that part of the
franchise, from any further obligations under it. That is
the distinctive character of a ‘‘repeal’’, as contra-distin-
guished from an“‘alteration or amendment’’. The latter
_does purport to impose new or changed duties or obliga- |
‘tions upon the franchise holder, and to require him to
continue to discharge them; and does not wholly release
him from obligations to the government under the fran-
chise. (Ante, pp. 14-15). This was, therefore, a true ‘‘re-
peal’’. |
IX
It is immaterial that it was a repeal of but one of the three parts
of the original franchise grant, which were in their’ nature distinct
and separable.
By the separate grant of that part of the franchise
concerning the water rights to the Connecticut corporation, .
Ensenada Estates, Inc., in March, 1917, and by the assign-
CEE SE I eT ee Ee
24
ment by it, in the following June, to Russell & Co., of that
‘‘water rights’’ part of the original franchise as a separate
’ thing, and by Russell & Co.’s acceptance of it, the parties
voluntarily séparated the original franchise into wholly .
separate parts; in effect, into separate franchises. What
became of the other parts of the original franchise does not
appear in this record. It does not appear that Russell &
Co. has any interest whatever in them; or that the holders
of those other parts of the original franchise (if they are
still in existence) have any interest of any kind in this
‘‘water rights’’ part, or any contract of any kind with
Russell & Co. With the validity of this separation, or
attempted separation of the original franchise into sep-
arate parts by the voluntary action of the parties without
the consent of the Executive Council, or of the Public
Service Commission, of Puerto Rico, we need not here con-
cern ourselves. If it was valid, then it effected a complete
separation of the original franchise into separate parts,—
in effect, as we have said, into separate franchises. And
the entire franchise held or ever claimed by Russell & Co.
was repealed outright by the order of the Public Service
Commission on March 8, 1929. And if the parties’
attempted separation of the franchise into several separate
holdings was not valid, and was ineffective, then, of course,
Russell & Co. took nothing by it, and in that event neither
Russell & Co. nor either of these respondents as its stock-
holders is injured in any way by the Public Service Com-
mission’s repealing order.
Respondents speak of a ‘‘group’’; of the ‘‘water rights
and railroad and dock’’, ‘‘closely integrated into a single
franchise which could only be, held and enjoyed by a limited
group’’ (Brief, p. 31); and, in their ‘‘Statement of the
Case’’, of the ‘‘water, railroad and dock provisions’’ of
the franchise as, being ‘‘closely interlocked and inter-de-
pendent, and all rights are confined to the group ‘satd
company, its successors and assigns’ ’’ (Brief, p. 8); and
———
25
that (p..10) the franchise ‘‘was obviously intended to be,
and has, as a matter of fact, been, the basis of a large
investment by the franchise holders in lands, railroad,
sugar mill and dock, constituting an integrated enterprise
of great value to the -franchise holders,—and to Puerto
Rico”’ (Italics supplied); and further that (Brief, pp. 10-
11) Russell & Co., after the assignment to it of the ‘‘water
rights’’ portion of the franchise
‘‘was and continues to be a member of the group’
designated ,throughout the franchise as ‘The Guanica:
Land Company, its successors and assigns’. Of this
group, the South Porto Rico Sugar Company is an
_interested member ‘apparently having acquired rights
under the franchise to the railroad and wharf’’’. ©
The last phrase, as to the South Porto Rico Sugar Com- .
pany, is quoted from the opinion of the Court of Appeals
(R. 83). And that idea of an ‘‘integrated group’’; and,
apparently, as a consequence, that the rights of other mem-
bers of that ‘‘group’’, holding some interest in other parts
of the franchise, were in Some way affected by the cancella-
- tion of the part of the original franchise claiméd by Russell ~
& Co., runs all through the thought of respondents in their
‘‘Statement of the Case’’ and their argument here, and
that, accordingly the Commission’s order cancelling the
water rights part of the original franchise held by Russell
& Co. amounted in some way to an ‘‘alteration or amend-
ment’’ of the whole of the original franchise, instead of
being simply (as it, in fact, was) an.outright ‘‘repeal’’ of
that part which had been transferred to Russell & Co., and
with which alone the Commission was dealing, and that,
therefore, in some way, the Commission’s powers of out-
right repeal of the part of the original: franchise held by
Russell & Co. should be treated as limited by some consider-
ation of its effect on the other parts of the original fran-
chise, the railroad and the wharf,—in which Russell & Co.
_ never had, and never claimed, any interest whatever.”
<
¢
—_ ht Saat oO ‘ ARN RRR CIE ER TSP ES a
26
x °
But there is not one word in this whole record to support
any such idea of an integrated “group”. Not one syllable
or letter. Absolutely nothing of the kind. The as-
signments of that portion of the original tripartite fran-
chise relating to the water rights to the Connecticut cor-
poration, Ensenada Estates, Inc., in March, 1917, and by |
the latter corporation to Russell & Co. in June of that year,
as set out in Russell & Company’s answer before the
Public Service Commission (R. 25), were clean-cut and
complete assignments, with no strings of any kind. There
is neither allegation nor evidence in the record of any
connection whatever remaining between Russell & Co. and.
any holders of any other part (either the railroad or the
wharf) 6f the original franchise. Nothing about any con-
tracts between them; nothing about any reserved rights
between them; nothing as to any inter-company or ‘‘group”’
relations of any sort. They stand on this record as com- .
plete strangers to each other. If Russell & Co. took any-
thing at all, it took it as a new and separate franchise in
itself, for all of that part of the original franchise relating
to the water rights. That was in its nature a complete and
separable thing. It was wholly cancelled by the Commis-
sion’s order. It was a complete ‘‘repeal”’. It was not in
any respect a mere ‘‘alteration or amendment”’’ of the
franchise. It had nothing to do with the holders of any
other parts’ of the original franchise, either with the rail-
road or the wharf. And they have nothing to do with it.
XI -
In determining whether or not a. case presents a question of
“unreasonableness” or “reasonableness”. of executive action within
the meaning of an attempted stretch of executive power beyond
its proper limits, or of deprivation of property without due process
of law in violation of constitutional rights, which may present a
judicial question for determination by the courts, the dividing line
is indicated in opinions of this court.
RN SETI VEER YP Hl Te Sart ec VRAIN PA CRI a Pace tN RRR REET LER WR VR cE ——
> ; - pre {gil as
¢ ‘
27
For example, in one of the cases cited by respondents
(Brief, p. 22), Porter v. Investors’ Syndicate, 286 U.S. 461,
468, it is said that the function of the State District Court
under the State statute there involved is not, strictly
judicial’, because it i is not simply 7
‘‘to set aside a decision of the Commissioner if arbi-
trary or unreasonable AND HENCE violative of constt-
tutional rights’’. ;
~
In other words, if the kind of alleged ‘‘unreasonable-
ness’’ involved is not such a character as to be ‘‘violative
of constitutional rights’’, then it falls into the other cate-:
gory of a question of executive ‘‘reasonableness’’ in the
-_ .exercise of executive discretion.
_ And so this court said in Radio Commission v. Nelson,
989 U. S. 266, 278 (and from which respondents print a
long excerpt as an appendix to their brief }:
‘When on the appeal, as here provided, the parties
come before the Court of Appeals to obtain its deci-
sion.upon the legal question whether the Commission
has acted within the limits of its authority, and to have
their rights, as established by law, determined accord-
ingly, there is a case or controversy which is the ap-.
propriate subject of the — power’’. (Italics
supplied) |
XII
’ This court has marked the distinction between “repeal”: of a
' franchise on the one hand, and its “alteration or amendment” on
the other hand.
Thus in one of the cases cited by respondents, it was
held that the reserved power to ‘‘alter or amend’’ did not
include the power to ‘‘repeal’’. Owensboro v. Cumberland
Telephone Co., 230 U. S. 58, 72; where the court said of
the reservation of the power to “alter or amend”’’:
‘It does not reserve any right to revoke or —
the ordinance, or to affect the rights therein gran
an VSR a
28 ‘
In other words, the two things belong in different cate-
gories, although habitually joined together in the ordinary
statutory reservation of the right to ‘‘alter, amend or
_ repeal’’; and the distinction was particularly marked in
the Owensboro case by the fact that this court expressly
distinguished (at p. 73) from:that case, the case of Green-
wood v. Freight Co., supra, 105 U.S. 13, on the very ground
‘that in the Greenwood case the reservation there involved
‘‘was a plain unmistakeable reservation of the right
to repeal at the pleasure of the State’’.
XIII
Respondents reiterate (Brief, p. 39) that: ‘‘From the
beginning and at every stage of this litigation Russell &
Company has pressed the point that the cancellation order _
deprived it of property without due process of law’’. ©
But, inasmuch as this cancellation was made pursuant to the express
consent of the franchise holder embodied in the reserved power in
the franchise itself to repeal it at the pleasure of the government,
the exercise of such, reserved right of repeal could never be a
deprivation of-property with@ut due process of law.. As this court
said in Shields v. Ohio, 95 U. S. 319, 324, supra, there can
be no vested right to be invaded by such a repeal pursuant ~
to consent embodied in the franchise itself. ‘‘Consensus:
facit jus’’. (See also, ante, pp. 4-6, 11-13).
A direct answer to respondents’ contention is found in the
language of Mr. Justice Day in his dissenting opinion on
behalf of the four dissenting Justices Day, McKenna,
Hueues and Prryey, in Owensboro v. Cumberland Tele-
phone Co.,‘supra., 230 U. S. 58, 81-82, which, although oc-
curring in a dissenting opinion, states the unquestioned
rule:
‘‘It is also said that the exercise of the reserved
right to repeal in cases like this will have the effect
to destroy contract rights, upon the strength of which
large investments may have been made. But this argu-
BIO TS. 2 tee . : ° ae
VRE RAS 2 ES PRN, FRR RE YAP RON I AED. APRS Ce Yo ute ™ -_
18 OMIM MG ER IIR LIT ane caret :
al ‘
29
ment overlooks the proposition ‘that, if the grant was
made subject to the right to revoke by subsequent
action of the authority which made the grant, then no
contract was entered between the parties beyond the
control of the reserved power of the municipality, for
as Mr. Justice Miller said in the Greenwood v. Freight
Co. Case, under such ‘a provision * * * reserving
to the legislature the right to amend or repeal it. must
be held to be part of the contract itself, and the sub-
sequent exercise of the right would be in accordance
with the contract, and could not, therefore, impair its
obligation.’ So, if this limitation in fact existed, the
-right to repeal was inherent in the authority which
made the grant, and the grantee is conclusively pre:
sumed to be aware of this limitation, and to make his:
investments subject to the exercise of the reserved
_ right.’ Calder v. Michigan, supra. Moreover, if limited |
grants are to. be construed into perpetuities thén the
control over streets for railway, telephone and other.
kindred enterprises of enormous value are granted to |
private corporations without compensation for the use
of such valuable rights which belong to the munici-
pality. Recent cases in this court have shown the great
_value of such privileges, and that investors are found
who are willing to pay for the privilege of using the
public streets for these purposes.’’ = -
And so also, it was said in .Tomlinson’s v. Jessup,
supra, 15 Wall. (82 U. S.) 454, 457-458: °
‘‘The original corporators, or subsequent stock-
holders, took their interests with the knowledge of the
existence of this power, and of the possibility of its
exercise at any time in the discretion of the legisla-
ture.’’ :
Counsel say (Respondents’ Brief, p. 40) that the Guanica
‘Land Company,
‘fwould not have dreamed of accepting the franchise,
unless it had believed and expected that the govern-
mental authorities empowered to exercise the reserved
PEON Bee Wap CTR OF PORE SR EMT AIMN SP RN ITN
asace Lot? La a ed
30
power to amend or repeal the franchise would exercise
it reasonably’’.
In other words, they relied upon the fairness and con-
sideration of the executive authorities clothed with that
executive power of amendment ér repeal. They must stilt
so rely; and this record shows no reason for questioning
the fairness or wisdom of the Commission, or any reason
why Russell & Co. should not continue to rely upon its
executive discretion, as its predecessor, the Guanica Land
Company, agreed to do in accepting the franchise. The
Commission’s order shows on its face (R. 27-28) an inten-
tion to deal fairly with the franchise holder. It contains
-an invitation, notwithstanding the reasons which seemed
to the Commission to make the repeal necessary, for the
franchise holder to submit to the Commission.
‘‘specific data with regard to the highest level of the
waters of the lake, as well as the plans of any other
works, in order that this level may be permanently
kept,’’
with a view, of course, to a new franchise.
XIV
Respondents’ contention (Brief, p. 71) that Russell & Co. is not,— .
and that its predecessor, the Guanica Land Co., was not,—a “public
service corporation”, is wholly immaterial.
The contention was made in the Circuit Court of Appeals,
and is answered in the opinion of that court (R. 86-89) —
_overruling it. And, as the Circuit Court of Appeals there
says (R. 87), if Rffksell & Co. was not to be considered as a
‘*nublic service corpsration’’ to the extent at least of being
clothed with the powers it assumed to exercise in accepting
the assignment of this franchise from its predecessor cor-
poration in 1917, in the matter of holding back and taking
the water from the sources in Guanica Lake, then jit would
necessarily follow that, .
, :
i ale ls ee ——
31
-.the- errors assigned and the questions argued as to
the jurisdiction and power of the Public Service Com-
mission to revoke the concession, or any of the other
questions sought to be raised, would be purely aca-
demic and unworthy of any consideration, for neither
the Executive Council nor the Public Service Com-
mission would have authority to grant such a conces-
sion, and Russell & Company would have acquired
nothing by the grant, and there would be nothing to
revoke.”’
XV
And likewise the contention made br Respondents in
Point V (pp. 60, et seq.) of their Brief that
‘con a proper construction of the pertinent acts of
Congress, the Public Service Commission has no power
or jurisdiction to make the order appealed from’’,
- because, as respondents contend (Brief, p, 61),
“The power to amend, alter or repeal the Guanica
franchise—as well as the power to modify and annul—
was by the Organic Act of 1900 and the joint resolu-:
tion and the franchise itself reserved solely to Con-
gress and never vested in the Executive Council”,
was overruled by the Circuit Court of Appeals; beth in its
opinion in the present case (R. 86, 88-90) and also in its
opinion in the earlier injunction suit involving the validity
of this same order of the Commission, South Porto Sugar
Co. v. Munoz, 28 F. (2d) 820 (copy is Appendix II [pp. 45-
50] to our original brief), where the Circuit Court of
Appeals pointed out (28 F (2d) at p. 822; our original
brief, p. 49) that appellants’ (respondent’s) contention
there rested, as it does here (Brief, p. 61, et seq.) upon
the supposed ground that the Congress, by the proviso at
the end of section 32 of the former Organic Act for Puerto
Rico, the Foraker Act of April 12, 1900, 31 Stat. 77, 83-84
(our original brief, p. 13), that all grants of franchises,
32
rights, privileges, or concessions of a public or quasi-public
nature ‘‘shall be reported to Congress, which hereby re- .
' serves the power to annul or modify the same’’ (Italics
supplied), amounted in effect to the Congress reserving
“to itself alone jurisdiction to repeal or amend fran:
chises previously granted by the Executive Council.”
The Circuit Court of Appeals there said,—and as it is
submitted entirely correctly (South Porto Rico Sugar Co.
‘vy. Munoz, supra, 28 F. (2d) 820, 822; our former brief,
5 i: 3
“We cannot adopt this construction of the general
reservation by Congress of the power to annul al! fran-
chises and laws of the experimental local government
set up by Congress in Porto Rico. We are constrained
to hold that the purpose of Congress was, experimen-
tally and gradually, to vest in the Porto Rican govern-
ment the general powers of state governments, subject
to the reserved power to annul or modify franchises
and laws if and when Congress sees fit. The reserva-
tion of ‘the power to annul franchises granted by the
Executive Council is in the same general terms as the
- reservation of the power to annul,all laws. ,It did not a
in 1901 .exclude the power granted by fair‘and neces-
sary implication to the Executive Council to modify.
or repeal franchises granted by that Council. The like
reservation contained in the Jones Act does not ex-
clude or cut down the power of the Public Service Com-
mission to repeal or alter franchises granted by it.
Like the power to repeal statutes, the body that creates
may alter or destroy the creation.” -. ‘a
And as above pointed out,, the Circuit Court of Appeals
adhered. to that decision, in the present case (R. 86).-
XVI.
These’ six individual ovapunieints are not the Socied. ) en Coman-
dita, Russell & Co. That Sociedad is not here; and thkse six indi-
viduals had no authority to maintain the appeal from the Supreme
33,
Court of Puerto Rico to the Circuit Court of Appeals in this case.
(Our original brief, Point IV, pp. 29-30.)
As there pointed out, the appeal was taken from the in-
sular Supreme -Court from its judgment of November 9,
1933, nearly eight months after this court had decided in
the case of People of Puerto: Rico v. Russell & Co., 288
U. S. 476, on March 13, 1933, that this very Sociedad en
Comandita, Russell & Co., was to be treated as a corpora-
tion; and not as a partuieitin.
Respondents deal at length with this question in Point
* IV (pp. 48-59) of their brief; but, it is submitted, wholly
fail to establish any rights in these six individuals to main-
tain this appeal, in the absence of the Sociedad, Russell & .
Co., which alone claims, or ever has claimed, any interest :
in the subject matter of this litigation.
The answer filed with the. Public Service Commission, to
the Rule to Show Cause (R. 24-27), is by the Suvieied
itself, Russell & Co., Sucrs. S. en C. and claims title to the
| franchise (Par. I; R. 25) in the Sociedad, ‘‘the partnership
| appearing herein’’. It is true that the appeal to the insular
District Court was taken (R. 1) in the name of the six
individuals, ‘‘members of the civil agricultural partnership
of Puerto Rico, Russell & Co., Suers..en C.?’, on April 8,
1929 (R. 8); and that the appeal to the Supreme Court of
Puerto Rico on June 26, 1930, was taken (R. 63) by ‘‘the
plaintiffs’’ in the District Court and was captioned, in the
insular Supreme Court in their names, although the Su-
preme Court said in its opinion (R. 65): ‘Russell & Co.
appealed from. that judgment -to this court’’.
But both of those appeals, that from the Public Service
Commission to the insular District Court on April 8,
1929, and that from the District. Court to the insular
Supreme Court on June 26, 1930, were taken after
the Circuit Court of Appeals had held in People of:
Porto Rico v. Fortuna Estates, 279 Fed. 500, 504-505, on
March 8, 1922, followed by it in Puerto aed v. Russell & .
SN eee er
34
Co. (Havemeyer), 60 F. (2d) 10, 12-13, June 27, 1932, that
the Sociedad en Comandita was to be treated as a partner-
ship rather than ‘a corporation,—(overruling in so doing
the earlier decision of the Supreme Court of Puerto Rico
in People v. Rivera Zayas, 29 Puerto Rico Rep. 423, 430,
of May 27, 1921, and what had theretofore apparently been
the established rule in Puerto Rico as to the juridical
personality of such a Sociedad). Those decisions of the
Circuit Court of Appeals stood unreversed at the times
both of those appeals were taken in this case, on April 8,
1929 (R. 8), and on June 26,-1930 (R. 63); and, of course,
were to be respected. And in apparent accordance with
those decisions of the Circuit Court of Appeals, these six
individuals, alleging themselves to be all the partners of
the Sociedad, ‘‘a civil agricultural partnership,’’ came
into court on behalf of the partnership, both in the appeal
from the Public Service Commission to the insular District
Court on April 8, 1929 (R. 1, 2, 8, supra), and on the appeal
from that court to the insular Supreme Court on June 26,
1930 (R. 63, 64, supra).
But before the appeal was taken from the Seishin Supreme Court
to the Circuit Court of Appeals from that Supreme Court’s judg-
ment of November 9, 1933 (Appeal perfected December 28, 1933;
R. 75) the picture had entirely changed. Hight months prior
to that time, on March 13, 1933, this court, in its decision ~~
in Puerto Rico v. Russell & Co., supra, 288 U. S. 476, 478-
482, had reversed the decision of the Circuit Court of
Appeals in the same case (Puerto Rico v. Russell & Co.,
supra, 60 F: [2d] 10), and had expressly overruled the
doctrine, theretofore held by that court, that the Sociedad
en Comandita was to be treated as a mere partnership, and
dita, Russell & Co.,—that it was in effect a. corporation,
and was to be treated as such; and had expressly cited,—
and; -in effect, reinstated (at p. 481),—the earlier doctrine
of the Supreme Court of Puerto Rico enunciated in People
v. Rivera Zayas, supra, 29 Puerto Rico Rep. 423 430, that:
-
_ had held,—and in relation to this very Sociedad en Coman- .
30
‘‘Its members are not thought to have a sufficient
personal interest in a suit brought against the entity
* to entitle them to intervene as parties defendant.”
That was the law when these individual respondents,—and not
the Sociedad itself,— assumed to appeal to the Circuit Court of
- Appeals. from the judgment of the Supreme Court of Puerto Rico
of November 9, 1933, in this case.
And the decision of this court was not merely, as re-.
spondents appear to assume (Brief, pp. 55, 58) that the
Sociedad was to be treated as a corporation for the pur-
‘poses of federal jurisdiction; but it was, on the contrary,
that the Sociedad en Comandita actually is in substance
and effect a corporation, with all the essential characters of
a corporation, and is not essentially a partnership; ahd that
it is for that-reason,—because it really is a corporation,—
that it is to be treated like other corporations for the pur-
poses of federal jurisdiction, as well as for other purposes.
This court there said (Puerto Rico v. Russell & Co., supra,
at pp. er
«Therefore to call the sociedad en commandita a
limited partnership in the common law sense, as the
respondents and others have done, is to invoke a false
analogy. In the law of its creation the, sociedad is
consistently —. as a juridical person. It may
contract, own property-and transact business, sue and
be sued in its own naine and right. Civil Code (1930)
Secs. 27 to 30; Code pf Commerce (1930) Sees. 95, 97,
123, 124. Its ‘memb: s are not thought to have suffi-
ciekt personal interest.in a suit brought against the
entity to entitle them to intervene as parties defendant.
wera Zayas, 29 P. R. 423, 430. It is
created by of Con of association filed as public rec-
ords. Code of Commerce, Secs. 95, 98; compare Civil
Code, Secs. 1558, 1560. Where the articles so provide,
the sociedad endures for a period prescribed by them
regardless of the death or withdrawal of individual
members. Civil Code, Secs: 1591, 1596, 1898; Code. of
Commerce, Sec. 141. Powers of management may be
™.,
i RC eS SMe Nace eS ES Se iar. Mo) a
SR Se RN AREY et 2 eo
36
vested in managers designated by the articles from
among the members whose participation is unlimited,
and they alone may perform acts legally*binding on
the sociedad. Civil Code, Secs. 1583, 1589; Code of
' Commerce,’ Secs. 102, 106, 125. Its members are not
primarily liable for its acts and debts (Code of Com-
“merce, Sec. 156), and its creditors are preferred with .
respect to its assets and property over the creditors
of individual members, although the latter may reach
the interests of the individual members in the common.
capital. Civil Code, Sec. 1590; see Quintana Bros. &
Co. v. S. Ramirez & Co., 22 P. R. 707, 716. Although
the members- whose participation is unlimited are
made contingently liable for the debts of the sociedad
in the event that its assets are insufficient to satisfy
them (Code of Commerte, Secs. 125; 156; see Succes- .
sors of M.. Lamadrid & Co: v. Torrens, Martorell & Co.,
28 P. R. 824), this liability is of no more consequence
for present purposes than that imposed on corporate
stockholders by the statutes of some states. Compare
. Lowisville, C. & C. R. Co. v. Letson, supra, 557, 558;
Iiverpool Insurance Co. v. Massachusetts, 10 Wall. 566,
575. These characteristics under the Codes of Puerto
Rico give content to their declaration that the sociedad
is a Juridical person. That personality is so complete
in contemplation of the law of Puerto Rico that we see
no adequate reason for holding that the sociedad has
a different status for purposes of federal jurisdiction
than a corporation organized under that law.’’
That reinstated the ancient rule of the civil law and the earlier
_ doctrine of the Supreme Court of Puerto Rico, including particu-
larly the decision of that court in People v. Rivera Zayas,
supra, 29 P. R. Rep. 423, 430,-expressly cited by this court .
(at p. 481) that the members of the Sociedad
“are not thought to have a sufficient personal interest
‘in a suit brought against the entity to enable them to
intervene as parties defendant.”
And in the face of that express decision of this court, '
these individual defendants attempt to maintain this ap-
37
peal, taken eight months afterwards. The Circuit Court
of Appeals disposed of this objection, and sustained its |
jurisdiction over.this appeal, by saying (R. 81):
““The order to show cause” (by the Public Service
Commission; R. 15) “was issued to ‘Russell & Co.,
Sucrs. en C., a limited partnership’. That company is
”
here. s
But the court was mistaken. That company is not “here”.
Here are only six individuals claiming to be all of its mem-
‘ bers or stockholders. But they have no power to represent
the corporation in this suit. A judgment for or against
them cannot bind it. Russéll & Co. well knew how to ap-
pedr in the insular courts and to take an appeal in its prop-
er corporate personality, had it desired so to do.. The pre-
cedents and cases collected in the Appendix to this brief:
(infra, pp. 39-41) amply demonstrate that, Some of them
are cases where this very Sociedad, Russell & Co., had itself
appeared in its proper corporate personality.
38
CONCLUSION
As in our original brief, it is submitted that, because of
the absence of the necessary party, Russell & Co., Suers. 8. »
en C., the judgment of the Circuit Court of Appeals ghould
be reversed and the case remanded to that court with diree-
tions to dismiss the appeal from the Supreme Court of
Puerto Rico for want of jurisdiction, or else that the judg-
ment of the Supreme Court of Puerto Rico should be af-
- firmed.
| WituiaM Cattrron Ricsy,
: Attorney for Petitioner.
B. Fernanvbez Ganrci,
Attorney General of Puerto Rico,
- NatHan R. Marcoxp,
Solicitor for Department of the Interior,
Of Couneel.
°.
39
APPENDIX
Juridical Personality of ‘‘Sociedad en Comandita, ap-
pearance in the insular courts in its own name as a juri-
dical person. |
Russell & Co., has at least three times before been in the
Supreme Court of Puerto Rico. See
Russell & Co. v. Benedicto, 26 P.. R. R. (Spanish
text, p. 517; English text, p. 456).
Carreno v. Russell & Co., 32 P. R. R. (Spanish
text, p. 257; English text, p. 248).
Almodovar v. Russell & Co., 34 P. R. R. (Spanish
text, p. 94; English text, p. 90)..
In each of these cases it appeared in its own name as .;
juridical entity. .
A.—It is a long established rule in Puerto Rico that such
a ‘‘Sociedad en Comandita’’ is a juridical person, with the
_capacity to make contracts and to sue and be sued _in its
own name. rer
™~)
Art. 116, Code. of Commerce (Par. 7675, Comp. Laws
of Porto Rico, 1911). (Particularly clause 2, Spanish
text). , ‘
People v. Zayas, Dist. Judge, 29 Porto Rico Rep.,
423, 428-431, 432 (Woxr, J.; involving this very
concern, Russell & Co., S. en C.).
And see, also,
Clause 2, Art. 122, Code of Commerce (Par. 7681,
Comp. Laws, 1911). - :
Sub-Section 2 of Section 27, Civil Code of Rorto
Rico Sections 1569, 1571, 1572, 1594, 1600, 1602, Civil
Code (Pars. 4675, 4677, 4678, 4700, 4706, and 4708,
Comp. Laws).
Articles 146 to 150 Code of Commerce (Pars. 7704.
to 7708, Comp. Laws). i |
Benoa aay 2 CAM OMe BY PESTO RE
40
Sections 51 and 73, Code of Civil Procedure (Pars.
5035, and 5057, Comp. Laws).
See also,
Successors to Sabrino Fernandez & Co., v. Registrar,
27 Porto Rico Rep. 425, 427.
P. Gandia & Co. v. Registrar, 31 Porto Rico Rep. 74.
Suits are habitually brought for and against such part-
nerships’ (socteqades) in the insular courts, in the firm
name (the ‘‘razon social’’ prescribed by Art. 147 of the
Code of Commerce; Par. 7706 Comp. Laws).
For examples, see the cases in a single volume (Vol. 31)
taken at random of the published Reports of the Supreme
_ Court of Puerto Rico, besides the case above cited, of
P. Gandia & Co. v. Registrar, 31 P. R. Rep. 74,
also the following, among others, in that single volume,
viZ.;
Cid. v. C. Petee yay Ltd., 31 P. R. Rep. 197.
N. Santini & Co. v. Santini, 31 P. R. Rep. 308.
Alcover & Co. v. Magraner, 31 P. R. Rep. 747.
Moral & Co. v. Bull Insular Line, 1d., 903.
Pasapera v. Mendez Brothers, id., 904.
F. Fresno & Co. v. Smaine, id., 912.
R. Boak & Co. v. Armstrong & Co., id., 915.
Quinones v. Panzardi & Co., id., 917.
B.—The ‘‘Sociedad en Comatedita’’ is so generally re-
garded in Puerto Rico as a juridical entity, as a matter of
course, that any question as to the character of such an
organization appears to have been seldom raised directly.
However, the following cases in addition to those above
cited indicate its recognized character as a juridical entity:
Estape v. Rocafort, Tomo, 2, D. P. R., p. 252.
_ American Colonial Bank v. Registrar, 4? R., p. 273.
Delgado v. Lecaroz & Co., 4 P. R., 291.
Brenes v. Hartman, 8 P. R., 361 (in the Spanish ver-
25 PAGAL
41
sion the words ‘‘limited commercial partnership”’
‘in this case appear as ‘‘ sociedad en comandita’’).
Finlay v. Finlay Brothers et al, 8 P. R. 371, at p. 388.
Santiago Umpierre & Co. v. Wener, 10 P. R. 505, 507
(this involved a ‘‘ sociedad mercantil’’).
Del Pilar v. Velez, 19 P. R. 1061, 1064.
(Suit must be in name of sociedad; ‘‘it alone could
recover’’; individual partners may not sue).
Quintana v. Ramirez, 22 P. R. 707, 716.
Cintron v. Colorado, 22 P. R. 541, 544.
Gandia v. Registrar, 31 P. RB. 74.
See also,
Enciclopedia Juridica Espanola, Vol. 24, pp. 712-
713; Vol. 28, pp. 870-872.
_ Manresa on the Spanish Civil Code (Codigo Civil
- Espafiol), Vol. 1, pp. 217, 218, 227.
Both of these latter authorities are frequently referred
to by the Supreme Court of Puerto Rico as authoritative
commentaries on Spanish law. The Puerto Rican Civil
Code, the Code of Commerce, and the Mortgage Law, are
all taken directly from the Spanish law. |
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