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Schenley Corp. v. United States, 326 U.S. 432 (1946)

American Government Special Collections Reference Desk

American Government

Schenley Corp. v. United States, 326 U.S. 432 (1946)
United States Supreme Court

From the U.S. Government Printing Office via GPO Access
 
Case:   SCHENLEY CORP. V. UNITED STATES

Case #: 326US432


NO. 560.  DECIDED 2 January 1946.  - 61 F.SUPP.  981, AFFIRMED. 


IN ORDER TO OBTAIN A DETERMINATION AS TO WHETHER IT WAS A "CONTRACT
CARRIER BY MOTOR VEHICLE" AS DEFINED BY SEC. 203(A)(15) OF PART II OF
THE INTERSTATE COMMERCE ACT OR A "PRIVATE CARRIER OF PROPERTY BY MOTOR
VEHICLE" AS DEFINED BY SEC. 203(A)(17), ONE OF THE APPELLANTS APPLIED
TO THE INTERSTATE COMMERCE COMMISSION FOR A PERMIT UNDER SEC. 209(B) TO
OPERATE AS A "CONTRACT CARRIER."  IN THE PROCEEDINGS BEFORE THE
COMMISSION, IT MOVED TO DISMISS ITS OWN APPLICATION ON THE GROUND THAT
THE PROPOSED OPERATIONS WERE NOT SUCH AS TO MAKE IT A "CONTRACT
CARRIER," INTRODUCED NO EVIDENCE TO PROVE COMPLIANCE WITH SEC. 209(B),
AND SOUGHT A RULING BY THE COMMISSION THAT IT COULD CARRY ON ITS
OPERATIONS AS A "PRIVATE CARRIER" WITHOUT OBTAINING A PERMIT.  IT
CONTENDED THAT IT WAS A "PRIVATE CARRIER" BECAUSE ITS OPERATIONS WERE
TO BE PERFORMED FOR ITS PARENT CORPORATION (WHICH OWNED ALL OF
APPLICANT'S STOCK) AND FOR OTHER CORPORATIONS OWNED OR CONTROLLED BY
THE PARENT.  THE COMMISSION RULED IN ITS REPORT THAT APPLICANT WAS A
"CONTRACT CARRIER" AND NOT A "PRIVATE CARRIER" AND MADE THIS REPORT A
PART OF AN ORDER DENYING THE APPLICATION BECAUSE OF FAILURE TO SHOW
COMPLIANCE WITH SEC. 209(B).  APPLICANT AND ITS PARENT CORPORATION SUED
TO SET ASIDE THE COMMISSION'S ORDER.  HELD: 

1.  THE PARENT CORPORATION HAD NO STANDING TO SUE, SINCE IT DID NOT
APPLY FOR A PERMIT AND ITS SOLE INTEREST IN THE PERMIT SOUGHT BY THE
APPLICANT WAS THAT OF A STOCKHOLDER.  P. 435. 

2.  THE PARENT CORPORATION IS ADEQUATELY REPRESENTED FOR THE PURPOSES
OF SUCH A SUIT BY THE SUBSIDIARY, WHOSE CONDUCT OF THE LITIGATION IT
CONTROLS.  P. 435. 

3.  IT WAS APPROPRIATE FOR THE COMMISSION TO TREAT THE FILING OF AN
APPLICATION UNDER SEC. 209(B), WITH A REQUEST THAT IT BE DISMISSED ON
THE GROUND THAT IT IS NOT REQUIRED, AS A PROPER METHOD OF RAISING THE
ISSUE WHETHER THE APPLICANT IS SUBJECT TO THE ACT.  CORNELL STEAMBOAT
CO. V. UNITED STATES, 321 U.S. 634, 635, REAFFIRMED.  P. 436. 

4.  THE COMMISSION'S ORDER DETERMINING THAT APPLICANT IS SUBJECT TO
THE ACT IS A REVIEWABLE ORDER.  P. 436. 

5.  APPLICANT'S PROPOSED OPERATIONS WOULD CLEARLY CONSTITUTE IT A
"CONTRACT" RATHER THAN A "PRIVATE" CARRIER.  P. 436. 

6.  WHILE CORPORATE ENTITIES MAY BE DISREGARDED WHEN THEY ARE USED TO
AVOID A CLEAR LEGISLATIVE PURPOSE, THEY WILL NOT BE DISREGARDED WHERE
THOSE IN CONTROL HAVE DELIBERATELY ADOPTED THE CORPORATE FORM IN ORDER
TO SECURE ITS ADVANTAGES AND WHERE NO VIOLENCE TO THE LEGISLATIVE
PURPOSE IS DONE BY TREATING THE CORPORATION AS A SEPARATE LEGAL
PERSON.  P. 437. 

7.  THE FACT THAT SEVERAL CORPORATIONS ARE USED IN CARRYING ON ONE
BUSINESS DOES NOT RELIEVE THEM OF THEIR SEVERAL STATUTORY OBLIGATIONS. 
P. 437. 

SCHENLEY DISTILLERS CORP. ET AL. V. UNITED STATES ET AL. 

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT
OF DELAWARE. 

APPEAL FROM A JUDGMENT OF A DISTRICT COURT OF THREE JUDGES DISMISSING
A SUIT TO SET ASIDE AN ORDER OF THE INTERSTATE COMMERCE COMMISSION. 

PER CURIAM. 

THIS IS AN APPEAL FROM A JUDGMENT OF A DISTRICT COURT, THREE JUDGES
SITTING, CONSTITUTED UNDER THE URGENT DEFICIENCIES ACT, 38 STAT. 220,
28 U.S.C. SEC. 47, DISMISSING APPELLANTS' PETITION TO SET ASIDE AN
ORDER OF THE INTERSTATE COMMERCE COMMISSION.  APPELLANT SCHENLEY
DISTILLERIES MOTOR DIVISION, INC., APPLIED TO THE COMMISSION FOR A
PERMIT, UNDER SEC. 209(B) OF PART II OF THE INTERSTATE COMMERCE ACT, 49
U.S.C. SEC. 309(B), AUTHORIZING OPERATION AS A "CONTRACT CARRIER BY
MOTOR VEHICLE" OF SPECIFIED COMMODITIES IN INTERSTATE COMMERCE BETWEEN
SPECIFIED POINTS.  AT THE OUTSET OF THE PROCEEDINGS BEFORE THE
COMMISSION, THE APPELLANT MOVED FOR DISMISSAL OF THE APPLICATION ON THE
GROUND THAT THE PROPOSED OPERATIONS WERE NOT SUCH AS TO CONSTITUTE
APPLICANT A "CONTRACT CARRIER BY MOTOR VEHICLE," DEFINED BY SEC.
203(A)(15) OF THE ACT, 49 U.S.C. SEC. 303(A)(15), AS "ANY PERSON WHICH,
UNDER INDIVIDUAL CONTRACTS OR AGREEMENTS, ENGAGES IN THE TRANSPORTATION
(OTHER THAN TRANSPORTATION REFERRED TO IN PARAGRAPH (14) AND THE
EXCEPTION THEREIN) BY MOTOR VEHICLE OF PASSENGERS OR PROPERTY IN
INTERSTATE OR FOREIGN COMMERCE FOR COMPENSATION." 

APPLICANT CONTENDED AT THE HEARING THAT IT WAS A "PRIVATE CARRIER OF
PROPERTY BY MOTOR VEHICLE," WHICH IS DEFINED BY SEC. 203(A)(17) AS "ANY
PERSON NOT INCLUDED IN THE TERMS 'COMMON CARRIER BY MOTOR VEHICLE' OR
'CONTRACT CARRIER BY MOTOR VEHICLE', WHO OR WHICH TRANSPORTS IN
INTERSTATE OR FOREIGN COMMERCE BY MOTOR VEHICLE PROPERTY OF WHICH SUCH
PERSON IS THE OWNER, LESSEE, OR BAILEE, WHEN SUCH TRANSPORTATION IS FOR
THE PURPOSE OF SALE, LEASE, RENT, OR BAILMENT, OR IN FURTHERANCE OF ANY
COMMERCIAL ENTERPRISE." 

APPLICANT INTRODUCED NO EVIDENCE TO PROVE COMPLIANCE WITH THE
REQUIREMENTS SET FORTH BY SEC. 209(B) FOR GRANTING A PERMIT AS A
"CONTRACT CARRIER" BUT SOUGHT A RULING BY THE COMMISSION THAT IT COULD
CARRY ON ITS OPERATIONS AS A "PRIVATE CARRIER" WITHOUT OBTAINING A
PERMIT.  STATING THAT "THE PRIMARY REASON FOR FILING THIS APPLICATION
WAS TO SECURE A DETERMINATION AS TO WHETHER THE INVOLVED OPERATIONS
WERE THOSE OF A CONTRACT CARRIER OF PROPERTY BY MOTOR VEHICLE OR OF A
PRIVATE CARRIER," DIVISION 5 OF THE COMMISSION IN ITS REPORT RULED THAT
THE APPLICANT WAS A "CONTRACT CARRIER" AND NOT A "PRIVATE CARRIER."  AS
NO EVIDENCE HAD BEEN INTRODUCED TO SHOW THAT THE PROPOSED OPERATIONS
WOULD COMPLY WITH SEC. 209(B), DIVISION 5 MADE ITS ORDER DENYING THE
APPLICATION, AND MADE THE REPORT A PART OF THE ORDER.  RECONSIDERATION
BY THE FULL COMMISSION WAS DENIED. 

THIS SUIT TO SET ASIDE THE COMMISSION'S ORDER WAS BROUGHT BY THE
APPLICANT, SCHENLEY DISTILLERIES MOTOR DIVISION, AND BY SCHENLEY
DISTILLERS CORPORATION, OWNER OF ALL THE STOCK OF THE FORMER.  THE
DISTRICT COURT HELD THAT IT HAD JURISDICTION TO REVIEW THE ORDER.  IT
DISMISSED THE SUIT AS TO THE PARENT CORPORATION ON THE GROUND THAT IT
HAD NO LEGAL INTEREST SUFFICIENT TO ENTITLE IT TO MAINTAIN SUIT.  THE
COURT HELD THAT THE COMMISSION PROPERLY RULED THAT THE APPLICANT WAS A
"CONTRACT CARRIER," AND ACCORDINGLY DISMISSED THE COMPLAINT. 

THE DISTRICT COURT RIGHTLY HELD THAT THE PARENT CORPORATION HAD NO
STANDING TO SUE.  IT DID NOT ASK THAT A PERMIT BE ISSUED TO IT, AND ITS
SOLE INTEREST IN THE PERMIT SOUGHT FOR ITS CO-APPELLANT WAS THAT OF A
STOCKHOLDER.  WE HAVE HELD THAT A MINORITY STOCKHOLDER OF A CARRIER
CORPORATION CANNOT BRING SUIT TO SET ASIDE A COMMISSION ORDER AGAINST
THE CORPORATION.  PITTSBURGH & W. VA. R. CO. V. UNITED STATES, 281 U.S.
479, 486-488.  A PARENT CORPORATION WHICH BY ITS STOCK OWNERSHIP
CONTROLS ITS SUBSIDIARY, AND WHICH AS A PARTY LITIGANT ASSERTS ONLY ITS
STOCKHOLDER'S DERIVATIVE RIGHTS TO HAVE ITS SUBSIDIARY SECURE THE
PERMIT, CF. AMERICAN POWER CO. V. S.E.C., 325 U.S. 385, 389, IS EVEN
LESS AGGRIEVED BY THE COMMISSION'S ORDER DENYING THE PERMIT THAN WOULD
BE A MINORITY STOCKHOLDER.  FOR THE PARENT IS ADEQUATELY REPRESENTED
FOR PURPOSES OF SUIT BY THE SUBSIDIARY WHOSE CONDUCT OF THE LITIGATION
IT CONTROLS.  WE CONCLUDE THAT THE CHARACTER OF A STOCKHOLDER'S
INTEREST IN THIS REGARD IS NOT SO ALTERED BY THE MERE FACTS THAT IT
OWNS ALL THE STOCK OF THE CORPORATION AGAINST WHICH THE COMMISSION'S
ORDER IS ENTERED AND THAT THE PARENT MANAGES AND CONTROLS ITS
SUBSIDIARY, AS TO GIVE THE STOCKHOLDER STANDING TO SUE TO SET ASIDE THE
COMMISSION'S ORDER. 

AS TO APPELLANT SCHENLEY DISTILLERIES MOTOR DIVISION, INC., THE
APPELLEE URGES THAT THE JUDGMENT SHOULD BE AFFIRMED ON THE GROUND THAT
THE APPELLANT MADE NO SHOWING SUFFICIENT TO REQUIRE THE ISSUANCE OF THE
PERMIT SOUGHT BY THE APPLICATION AND THAT THUS THE COMMISSION'S ORDER
RESTS ON A CONTROLLING GROUND, I.E., LACK OF EVIDENCE.  BUT THERE
REMAINS THE QUESTION WHETHER THE COMMISSION'S DETERMINATION THAT
APPELLANT WILL BE A "CONTRACT CARRIER" IS REVIEWABLE IN THE PRESENT
SUIT.  THE COMMISSION MADE ITS REPORT A PART OF ITS ORDER, AND THE
REPORT DENIED THE RELIEF WHICH APPELLANT SOUGHT, NAMELY, A
DETERMINATION THAT IT WAS A "PRIVATE CARRIER" ENTITLED TO CARRY ON ITS
OPERATIONS WITHOUT A PERMIT AND WITHOUT SUBJECTING ITSELF TO CRIMINAL
PROCEEDINGS.  THE COMMISSION HAS TREATED THE FILING OF AN APPLICATION
UNDER SEC. 209(B) WITH A REQUEST THAT THE APPLICATION BE DISMISSED ON
THE GROUND THAT IT IS NOT REQUIRED, AS A PROPER METHOD OF RAISING THE
ISSUE WHETHER THE APPLICANT IS SUBJECT TO THE ACT.  ANY OTHER
CONSTRUCTION OF THAT SECTION WOULD MAKE IT NECESSARY FOR A CARRIER TO
TAKE THE RISK OF OPERATING ILLEGALLY AND INCURRING CRIMINAL AND OTHER
PENALTIES IN ORDER TO SECURE A DETERMINATION WHETHER IT IS WITHIN THE
PERMIT REQUIREMENT.  WE HAVE ALREADY DECIDED THAT THE COURSE FOLLOWED
HERE WAS "APPROPRIATE," AND THAT AN ORDER DETERMINING THAT THE
APPELLANT IS WITHIN THE PERMIT REQUIREMENT IS A REVIEWABLE ORDER. 
CORNELL STEAMBOAT CO. V. UNITED STATES, 321 U.S. 634, 635.  WE REAFFIRM
THAT HOLDING. 

WE THINK THE DISTRICT COURT WAS PLAINLY RIGHT IN UPHOLDING THE
COMMISSION'S DECISION THAT APPELLANT'S PROPOSED OPERATIONS WOULD
CONSTITUTE IT A "CONTRACT" RATHER THAN A "PRIVATE" CARRIER. 
APPELLANT'S CONTENTION TO THE CONTRARY IS BASED ON THE FACT THAT ITS
OPERATIONS WERE TO BE PERFORMED FOR ITS PARENT AND FOR OTHER
CORPORATIONS OWNED OR CONTROLLED BY THE PARENT.  APPELLANT SAYS THAT
THE TRANSPORTATION WILL BE IN FURTHERANCE OF ONE "COMMERCIAL
ENTERPRISE" WITHIN THE MEANING OF SEC. 203(A)(17).  BUT THAT SECTION
APPLIES ONLY TO THE EXTENT TO WHICH SEC. 203(A)(15) DOES NOT, AND THE
EVIDENCE SUPPORTS THE COMMISSION'S FINDING THAT THE TRANSPORTATION WAS
TO BE "FOR COMPENSATION" FROM APPELLANT'S PARENT AND THE OTHER
CORPORATIONS CONTROLLED BY THE PARENT.  APPELLANT URGES THAT WE
DISREGARD THE SEPARATE CORPORATE ENTITIES WHICH ARE TO PAY COMPENSATION
TO APPELLANT FOR THE TRANSPORTATION AND TREAT THE CORPORATIONS
CONTROLLED BY APPELLANT'S PARENT AS ONE SINGLE COMMERCIAL ENTERPRISE. 
WHILE CORPORATE ENTITIES MAY BE DISREGARDED WHERE THEY ARE MADE THE
IMPLEMENT FOR AVOIDING A CLEAR LEGISLATIVE PURPOSE, THEY WILL NOT BE
DISREGARDED WHERE THOSE IN CONTROL HAVE DELIBERATELY ADOPTED THE
CORPORATE FORM IN ORDER TO SECURE ITS ADVANTAGES AND WHERE NO VIOLENCE
TO THE LEGISLATIVE PURPOSE IS DONE BY TREATING THE CORPORATE ENTITY AS
A SEPARATE LEGAL PERSON.  ONE WHO HAS CREATED A CORPORATE ARRANGEMENT,
CHOSEN AS A MEANS OF CARRYING OUT HIS BUSINESS PURPOSES, DOES NOT HAVE
THE CHOICE OF DISREGARDING THE CORPORATE ENTITY IN ORDER TO AVOID THE
OBLIGATIONS WHICH THE STATUTE LAYS UPON IT FOR THE PROTECTION OF THE
PUBLIC. 

THE FACT THAT SEVERAL CORPORATIONS ARE USED IN CARRYING ON ONE
BUSINESS DOES NOT RELIEVE THEM OF THEIR SEVERAL STATUTORY OBLIGATIONS
MORE THAN IT RELIEVES THEM OF THE TAXES SEVERALLY LAID UPON THEM.  "IF
THE ONE BUSINESS COULD NOT BE CARRIED ON WITHOUT TWO CORPORATIONS
TAKING PART IN IT, EACH MUST PAY, BY THE PLAIN WORDS OF THE ACT." 
EDWARDS V. CHILE COPPER CO., 270 U.S. 452, 456.  CF. GRAY V. POWELL,
314 U.S. 402, 414; MOLINE PROPERTIES V. COMMISSIONER, 319 U.S. 436. 
AFFIRMED. 

MR. JUSTICE JACKSON TOOK NO PART IN THE CONSIDERATION OR DECISION OF
THIS CASE. 



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