Petition for Review of Order of National Bituminous Coal Commission.
Before SPARKS, MAJOR, and KERNER, Circuit Judges.
This is a petition to review an order of the National Bituminous Coal Commission, entered June 6, 1938, which (1) denied the petitioner's application for exemption from the Bituminous Coal Act of 1937, 15 U.S.C.A. §§ 828-851, insofar as said application was based on Section 4, Part 2(l) of the Act, 15 U.S.C.A. § 883(l) and (2) dismissed as premature, without prejudice the application for exemption of petitioner's intrastate transactions from the Act. The effect of the order thus was to hold only petitioner's interstate transactions subject to the Act.
In view of the rather limited question presented, there seems to be no occasion to go into detail with reference to the provisions of the Act, the general purpose of which was to stabilize the bituminous coal industry. Briefly it provides for the establishment of a Code in which producers of bituminous coal may become members. A penalty tax of 19 1/2% on the price or market value at the mine is imposed on all bituminous coal sold or distributed in the domestic markets in the United States, but such tax is waived or remitted with respect to producers who accept membership therein. The expense of administering the Code is imposed upon the members in the form of assessments computed on a tonnage basis. Petitioner, while a member of the Code, has refused to pay such assessments, claiming exemption from Code requirements in this, as well as in other respects. Its application for exemption is based upon Section 4 - II (l), which provides: "The provisions of [section 831, 832 and] this section shall not apply to coal consumed by the producer or to coal transported by the producer to himself for consumption by him."
A hearing upon petitioner's application was had before an examiner of the Commission, and certain facts established which are not in dispute. Petitioner, a corporation organized in 1905, pursuant to the laws of the State of Maine, was permitted by its charter to conduct a general mining and selling business in connection with coal. All of its stock, with the exception of qualifying shares, was issued to the Chicago, Rock Island and Pacific Railway Company (hereinafter called Railway Company), incorporated under the laws of Illinois and Iowa, on whose behalf petitioner held title to bituminous coal properties and leases. This was done so that the Railway Company might have a cheaper and more dependable supply of fuel for its operations.
The Railway Company, December 1, 1933, instituted in the United States District Court of this jurisdiction, proceedings for reorganization under Section 77 of the Bankruptcy Act, 11 U.S.C.A. § 205, wherein trustees were appointed. At the time of such appointment, title to the capital stock of the petitioner, as well as all other property of the Railway Company, passed to and became vested in the trustees, where it yet remains.
Petitioner originally owned properties in Iowa, Illinois and Indiana. For the past 18 years the only mining properties from which coal has been extracted by it have been in Iowa. Since 1935, the only mine from which coal has been taken by petitioner is known as Mine No. 3, near Williamson, Iowa. In 1905, the Railway Company advanced to petitioner $273,000 cash for the purchase of coal lands in the State of Iowa. The Illinois properties of petitioner were disposed of in 1917 and its Indiana properties in 1920. These properties were sold for cash, which was turned over to the Railway Company.
In 1933, petitioner sold Mine No. 3 to the Rock Island Improvement Company, a subsidiary of the Railway Company, in return for bonds which were turned over to the latter. The Rock Island Improvement Company, the stock of which was also owned by the Railway Company, immediately leased the property back to petitioner, and petitioner now operates the property just as it did before, paying the Improvement Company the sum of 3 per ton for all coal produced for rental and depletion. For many years past the entire output of coal mined by petitioner has been used by the Railway Company and trustees as railroad fuel, with certain exceptions not here material. All funds to enable the petitioner to function have been supplied, from time to time, by the Railway Company and the trustees - no funds having been obtained from any other source. Petitioner has had no debts, since all charges against it have been assumed by the Railway Company and the trustees - has never declared any dividends, and under the working arrangement which it has with the Railway Company and trustees, has never had and could not have any profits.
With the exception of a Superintendent at the mine, the officers of petitioner are appointed by the trustees from their official staff engaged in the operation of the railroad, and they receive no pay from petitioner. The President of petitioner is the Secretary and Tresurer for the trustees; the General Auditor of petitioner is the General Auditor for the trustees; the Vice President of petitioner is assistant to the trustees; the Secretary and Treasurer of petitioner is Assistant Secretary and Assistant treasurer for the trustees, and the Assistant Treasurer of petitioner is Cashier for the trustees. All of petitioner's officers are full time employees of the trustees.
The Superintendent of petitioner at the mine reports directly to, and performs all his duties at the mine under the supervision and direction of the chief operating officer of the trustees who is not an officer of petitioner. The person who purchases all of the materials and supplies for petitioner is the Purchasing Agent for the trustees. Petitioner's books and records are kept by the General Auditor for the trustees in his office at Chicago, and the legal department for the trustees looks after all of the legal work of petitioner, without compensation from it. Each Friday the trustees notify petitioner's Superintendent how much coal will be desired the following week. The trustees take all the coal produced by petitioner at the time (with certain exceptions not here material) which is consigned to various points on the railway system, carried by it without charge, and used exclusively in the operation of the railway system.
Petitioner sends invoices to the trustees on the first and fifteenth of each month showing the tonnage of coal delivered and the cost of production thereof. This covers all items which enter into such cost, including wages and salaries of men employed, compensation and other insurance and the royalty paid by petitioner on account of its lease with the Rock Island Improvement Company. The trustees issue vouchers in such amount to the petitioner without any allowance for profit, which are deposited in a bank account in petitioner's name, from which it, by check, pays for labor, material, supplies and other items of expense incurred in the production of coal. Petitioner's Superintendent contracts for the hiring of men and the purchase of supplies, which authority, as well as all other exercised by him, is subject to supervision by the chief operating officials of the Railway trustees.
The examiner concluded that petitioner and the Railway Company were separate and distinct corporate entities and that petitioner was not a consumer of the coal it produced within the meaning of Section 4 - II (l). He also found that the Railway Company was the consumer of coal produced and that such coal was transported by it in interstate and intrastate commerce after sale and transfer of title at the mine, and that, therefore, the coal produced by the petitioner was not exempt, and recommended that the Commission enter an order denying petitioner's application for exemption. Exceptions were filed to the Examiner's report by the petitioner, based largely, if not entirely, upon the conclusions reached by the Examiner. Such exceptions were overruled by the Commission - its essential conclusion being to the effect that to allow ...