Panama Canal Company v. Grace Line, Inc. – Oral Argument – April 03, 1958

Media for Panama Canal Company v. Grace Line, Inc.

Audio Transcription for Oral Argument – April 02, 1958 in Panama Canal Company v. Grace Line, Inc.

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Earl Warren:

Mr. Solicitor General you may proceed with your argument.

J. Lee Rankin:

In regard to the last question that was asked me about the judgment of the Court, I’d like to make it clear first that the Court of Appeals sustained the motion for summary judgment.

That question was not supposed to be before the Court at all, because the lower court expressly stayed that question and examined into only the question of whether the court had jurisdiction to act in this manner at all.

But in spite of that and in spite of the fact the government was advised by the lower court that we would have a full opportunity to answer the some 60 pages of the affidavits and over 500 pages of Congressional record and materials that were presented under the summary, motion for summary judgment, the Court of Appeals proceeded to decide the case on its merits and it then proceeded after that as you will note by the opinion to examine into the question of jurisdiction and pass on that.

Now the court sustained the motion for summary judgment, except that it did not permit any refund of the tolls that had been paid or reparations, and the detail of the prayer, of the motion for summary judgment appears on page 11 of the record in this case.

And it is of particular interest, I’d like to call your attention to certain parts of it, because in paragraph one, the motion is that the defendant be directed to proceed, to prescribe tolls as provided in the statute, to propose changes in the tolls and to conduct a public hearing.

Then the second paragraph is enjoining and restraining the defendant from further unlawful withholding and unreasonably delaying the prescription of tolls, proposal of changes in the conduct of a public hearing and then the third paragraph commands and directs us which is mandatory, a mandamus or a mandatory injunction and it’s the position of the government that this Court and other federal courts outside of the District of Columbia, except for action that’s ancillary to their jurisdiction, do not have the power to grant relief of that character unless the statutes expressly so provides.

But regardless of that, we’re directed expressly, commanding and directing and then the next one is enjoining and restraining us from using any account, that are less favorable than the Comptroller General use and the fifth one is retaining jurisdiction, so as to issue appropriate orders that the defendant prescribe tolls and proposed changes in tolls and conduct a public hearing according to law.

Now if you will refer to page 167 of our brief and about two-thirds of the way down, there is provided further and that is the language of the statute, 167 that says what we we’re to do about changes.

Just ahead of that is the first proviso that says that we can maintain the prevailing rate and the measurement in effect on that date, shall continue in effect until changed as provided in this section.

That’s the power that we rely on to continue the $0.90 rate that now is continued in effect if the petitioner finds that it is profit, and that the Congress so contemplated.

Then we turn to the next proviso and it says that the Fed Corporation shall give six months notice, what kind of a notice is it?

What is it going to give notice of?

By publication in the Federal Register of any and all proposed changes in basic rules of measurement and of any and all proposed changes in rates of tolls, so that until we decide, the petitioner decides at least and possibly the President too or at least the petitioner must decide, that there has to be a change.

We can’t have any hearing because that’s the construction of a statute.

The statute contemplates that the petitioner has to first decide that there is to be a change in the tolls.

Then it publishes it for six months in the Federal Register, and there after it proceeds to have hearings during that six-month period and those hearings are not administrative hearings during which you make a record for review of a court like in the ordinary regulatory agency.

They are legislative hearings just like the provision that was in effect before, when the President had the power to fix the tolls.

So if we don’t start first to decide that there has to be a change in these tolls, there is no requirement for a hearing and none is contemplated, because there is no purpose for it and then it’s only a legislative hearing.

Now that’s clearly what the statutes contemplated and all that it provides and we are directed mandatorily to proceed to decide that there must be a change when we have decided that there need not be one and then proceed with hearings when we decided that there is no need for a change, therefore the statute doesn’t provide for a hearing and that’s the character of relief that was given.

William O. Douglas:

Can anyone (Inaudible)

J. Lee Rankin:

No, it isn’t contemplated by the statute and before that it wasn’t contemplated that anybody but the President could do it.

William O. Douglas:

This is all that is subject to the exclusive discretion of the company?

J. Lee Rankin:

Well not because — they have to report every year to the Congress and the Congress reviews their budget, appropriates money, the money is all covered into the treasury, large great portion of it anyway and so the Congress is constantly examining, and they’ve recommended that they give up the Panama Railroad and not operate it anymore, that is the company and that Congress wouldn’t let them.

They’ve been watching this very closely every year and all the budgets and appropriations and so forth.

I’d like to reserve —

Felix Frankfurter:

Before you sit down I like to put to you, I hope Mr. Williams will deal with it when he gets on his feet, this question?

Suppose this Court affirmed the Court of Appeals, suppose it was to affirm it without an opinion to infer, and then the Panama Canal Company says here we’ve got an order of the Court, an order of the Supreme Court, and we go the Court of Appeals to figure, to find out what it is, that it contemplated and they say that we think, the rates that we fixed, the existing rates are within the scope and the authority in the act of Congress, but we are an obedient agency and we’ll do the best we can on the basis of what we deem to be false assumptions in fact, to change the tolls.

The matter then goes to the President, he says they are all wrong and he disallows the changed tolls, he says the old tolls shall remain in force.

I would like to hear from both sides whether that determination by the President is then reviewable by any court, so that we go around and get the same result by the Presidential action?

J. Lee Rankin:

The government doesn’t think that action is reviewable.

Felix Frankfurter:

So that — if the hypothesis that I put to you of the assumption that I’ve indicated in my question are carried out, all these things would be (Inaudible)

J. Lee Rankin:

That’s right, and the courts don’t do those things ordinarily.

Earl Warren:

Mr. Williams.

Charles Dickerman Williams:

May it please the Court, I shall submit to Your Honors three propositions, first that long ago it became the duty of the defendant to prescribe reduced tolls, second that the defendant having failed to perform that duty, the plaintiffs were entitled to a judgment to compel it to do so and third that plaintiffs are entitled to damages for the defendants’ unlawful delay.

Preliminarily I want to explain why we are asking for reduced tolls in a period of generally rising prices.

The reason is this —

Earl Warren:

Mr. Williams, before you get to that, I wonder if it would disturb you too much to answer the inquiry that Mr. Justice Frankfurter made of the Solicitor General just a moment ago, would that disturb your argument to do that?

Charles Dickerman Williams:

[Laughter] well it wouldn’t be in accordance with my argument as outlined, but if that’s Your Honors pleasure, I’d happy to do it.

Earl Warren:

Well just, is your position contrary to his on that issue?

Charles Dickerman Williams:

Well —

Earl Warren:

Then you can —

Charles Dickerman Williams:

Let me say this Your Honor.

Earl Warren:

Yes.

Charles Dickerman Williams:

Our position is that insofar as compulsion is concerned the question of Presidential review, that is to say a judicial review of Presidential action is not yet before the Court.

At the present time we’re merely trying to compel action on that phase of the case and for instance in Chicago and Southern Air Lines against Waterman which is a case upon which my learned friend relies, where it was held the President’s action was not reviewable nevertheless the law indicates that if the Civil Aeronautics Board which was the subordinate agency in that case had simply sat on a proceeding for something like seven years and taken no action, the courts would have had power to compel it to act to move along, as for instance in Virginia Railway against System Federation or Wilbur against Krushnic or Interstate Commerce Commission against Humboldt Steam Ship Company or in Payne against New Mexico all of which are cases where the subordinate agency had filed to act or failed to act in accordance with a correct construction of the statute.

And the courts compel the subordinate agency to act in accordance with a correct construction of the statute although the court had no power to review the action when taken.

So here we say —

Felix Frankfurter:

Well may I, may I interrupt you, I don’t know about the other, but I have a statute question in mind about the Interstate Commerce Commission and the Humboldt, it’s a very different situation, because there a private shipper by statute is given authority to go before the commission and get action and unless you contradict what the answer given to Justice Douglas’s question, is that the situation here?

Charles Dickerman Williams:

Well it is quite true that this statute does not in specific terms say that we have the right to go before the courts and compel this action.

But this statute does impose upon this defendant in the most explicit terms a duty and of course my learned friend said that we haven’t got standing to sue but the Hay-Pauncefote Treaty which is incorporated in this statute made a matter of domestic law for the first time says that vessels of commerce shall be entitled to just an equitable tolls and we say that a user who is entitled to reasonable rates has a standing to sue to enforce a particular statutory right.

Felix Frankfurter:

Then lots of actions commanded by statute upon members of the cabinet for which I don’t suppose you would get mandamus?

Charles Dickerman Williams:

That is true Your Honor but those are matters of executive policy.

We say this is a matter of executive administration of legislative policy.

Rate may be is a legislative function.

Here Congress has defined a policy and imposed upon this defendant a duty to execute it.

Felix Frankfurter:

I’m suggesting legislative policy on the part of Department to give subsidy, a grant and suppose if you can get mandamus it’s advised in the parliament within discretionary power, ultimately it is the President to decide what the figure should be?

Charles Dickerman Williams:

Well Your Honor there are a couple of answers to that.

We say that we have the right to compel the process to get going in any event whatever maybe the power of the President and that comes under cases such as Virginia Railway and System Federation.

We further say even if that that there is — under the Administrative Procedure Act, the courts have power of judicial review after the action of the President, but whether we are right or wrong on that we say that the long line of cases which say that a, that a — someone who is entitled to the benefit a statute, someone for whose benefit a particular statute has enacted has the power to compel an agency or a private corporation and this defendant is subjected to suit like any private corporation that the courts under those circumstances if the suit have such person for whose benefit the statute was enacted may compel the action commanded by the statute.

Felix Frankfurter:

Although the President next day may nullify it?

Charles Dickerman Williams:

Well Your Honor we don’t think that the President can the next day may nullify it and we think that even in such cases such as — take for instance — well we have a variety of positions Your Honor.

Let’s take Norwegian Nitrogen Products against United States that was a case where the President was to construe the statute beyond judicial review and yet this Court took jurisdiction over the procedure and wrote an opinion 28 pages long reviewing the procedure of the tariff commission.

Felix Frankfurter:

What was the upshot of the 28 pages?

Charles Dickerman Williams:

[Attempt to Laughter] Well the upshot of the 28 pages was that the tariff commission had acted properly according to the law.

Felix Frankfurter:

I haven’t read it, but I thought it went on the fact that the President has the ultimate say in the matter.

Charles Dickerman Williams:

The Court held that the interpretation of the statute was up to the President, but the Court did say, the courts did review the procedure and found that the procedure of the tariff commission had been correct.

I think perhaps Your Honor, Your Honor may have in mind a case, United States against George S. Bush & company, which is —

Felix Frankfurter:

No I have in mind the Norwegian case.

Charles Dickerman Williams:

Excuse me Your Honor.

Charles E. Whittaker:

May I ask you even if you have a right to require petitioner to act, did not the Court of Appeals, in sustaining the motion for summary judgment, grant the relief as trade except for the past damage feature?

Charles Dickerman Williams:

Well the judgment of the Court of Appeals was or that the case should be remanded for further proceedings in accordance with the opinion.

Now the opinion at page, pages 248, 249 adopts our theory as to the meaning of the statute.

Could I not develop the meaning of the statute —

Earl Warren:

I wonder, I wonder before you do that if I get a little more precise answer, I am not clear —

Charles Dickerman Williams:

Excuse Your Honor.

Earl Warren:

I am not clear yet as to whether you can claim that there is any judicial review of the action of the President or whether the action of the President in this regard is conclusive.

Charles Dickerman Williams:

Your Honor we do claim that the courts have the power to review after the President has acted, but we also say that — put it this way Your Honor, we think, we say that theoretically there are three possible interpretations of the, of the President’s review power proviso, first that the President may act according to his own whim or fancy.

We think for reasons which I shall explain that that theory is not appropriate.

Second possible theory is that the President was to enforce the statute according to law, according to his definition of the law, but beyond judicial review that is the Norwegian Nitrogen Products or George S. Bush type of situation.

A third theory is that the action of the President is subject to judicial review for errors of law or misinterpretation of a statute, a limited power of review, but we say that whatever the power, the President of the power — the power of the President maybe the courts have the power to compel this defendant to act to get the administrative process underway.

Felix Frankfurter:

And by not acting you don’t think they have acted?

Charles Dickerman Williams:

[Attempt to Laughter] Well Your Honor —

Felix Frankfurter:

(Inaudible) words Mr. Williams.

Charles Dickerman Williams:

Well Your Honor excuse me Your Honor.

The Administrative Procedure Act defines agency action to include failure to act.

We say the Administrative Procedure Act authorizes the courts to compel agency action unlawfully, unreasonably — unlawfully withheld or unreasonably delayed.

Felix Frankfurter:

That starts with the assumption of Administrative Procedure Act applies to this situation.

Charles Dickerman Williams:

Yes I think.

Felix Frankfurter:

Should that be taken for granted?

Charles Dickerman Williams:

Well I think both parties agree on that I maybe mistaken.

I —

Felix Frankfurter:

Well if they agree, then I don’t see why Mr. Solicitor general should have made the argument here.

Charles Dickerman Williams:

Well I may have misunderstood his argument, as I read his brief he — in fact well I’ll put it this way, perhaps I’ll take that back, I’ll say this.

As I understand the theory of the defendant it is that the Administrative Procedure Act precludes judicial review, I am sorry, I guess I misstated it.

It applies in the sense that it, that it precludes review only in that sense.

But we say that we have a right to compel this defendant to act both as a private corporation under ordinary case law and as a United States Agency under both case law and the Administrative Procedure Act.

Now may I explain it, I’ll just very briefly –

Earl Warren:

Yes you may do it now –

Charles Dickerman Williams:

[Attempt to Laughter] — excuse me, refer to why, why the theory of rising prices, to come back where I was, we are asking for reduced tolls.

The reason there is a tremendous increase in traffic through the canal.

The traffic has increased from 20 odd million tons to 40 million odd tons or 20 million odd tons in 1947 the last year before the agitation that resulted the act of September 26th 1950 and 1957 which was last year.

Defendant — tolls and toll credits amounted to 90 million odd in 1947 and amounted to 39 million odd in 1957 representing an increase in traffic as I say from approximately 20 million odd tons to 40 million odd tons.

Now the defendant operates on pretty much fixed cost.

It cost very little (Inaudible) 20 ships a day through the canal and to get only 10 and the direct expense of operating the canal has gone from only 14 million odd dollars, to 16 million odd dollars.

So that on a per tonnage basis, the cost, the cost per ton of getting a ship through the canal or getting a ton through the canal has very much decreased.

Now the act of September 26, 1950, relates tolls to cost and the cost per ton, having gone down so much, we say that tolls also should go down, and in fact there has been the same increase at Suez and at Suez rates have been reduced to 40% in the post war period.

The defendant in his brief relates this situation somehow to Suez and yet the fact is that if rates here were reduced by the full 0.25 cents a ton, indicated by the Comptroller General’s report, rates at Panama would still be higher, relative to Suez rates than they were either in 1937, when the present Panama rate was fixed or in 1948, when the legislative process, legislative history of this act began.

Now my first proposition is that long ago it came to duty of this defendant to prescribe reduce tolls and I say that because the statute compels, directs this defendant to prescribe tolls on the basis of canal activity and without regard to the losses of the so called business activities.

Now if I am correct in that construction of the statute, then the Comptroller General’s report establishes beyond all doubt, that on a canal activity basis, the present rate is far excessive, that collections under this rate far exceed the cost prescribed or defined in the tolls formulated laid down by Act of September 26th.

Felix Frankfurter:

Mr. Williams does the Act give — is the Act explicit as to any relation between the Comptroller General and the operations now?

Charles Dickerman Williams:

No Your Honor.

The only significance of the Comptroller General’s report is evidence.

The Comptroller General’s report provided evidence which according to the Court of Appeals, this defendant had concealed by ambiguous bookkeeping, that’s the characterization of the Court of Appeals.

The Comptroller General provided the evidence.

We don’t rely upon the Comptroller General’s report for the construction of the law.

We get our construction of the law from the legislative history and from the language —

Felix Frankfurter:

Is the finding of (Inaudible) that is based on what, on affidavits and things?

Charles Dickerman Williams:

No it was the —

Felix Frankfurter:

Let me ask you this question, was that relevant for the determination of the Court of Appeals decision, the Comptroller General’s views or findings?

Charles Dickerman Williams:

In this sense that the Comptroller General’s report provides the evidence.

Felix Frankfurter:

Yes, but I mean does that enter into the conclusion of the Court of Appeals?

Charles Dickerman Williams:

As a matter of statutory construction, no Your Honor.

Felix Frankfurter:

Well evidence of what then?

Charles Dickerman Williams:

Evidence that the present rate far exceeds the statutory rate, that they had been collecting far more money than was —

Felix Frankfurter:

Then it was relevant.

Charles Dickerman Williams:

Relevant as evidence Your Honor.

Felix Frankfurter:

Yes.

What I want to know is whether that issue was contested in the District Court, or whether we are to take the determination of the Court of Appeals for what is or is not the fact about the (Inaudible)

Charles Dickerman Williams:

I don’t understand it even in this Court, there is any challenge to the Comptroller General’s report as evidence.

I find nothing in the brief of the defendant company in this Court which challenges the analysis as —

Felix Frankfurter:

What I understand it’s challenge is that the issue of a summary judgment was not contested or canvassed in a District Court, but the Court of Appeal on its own having decided there is standing, then went to the – -dealt with merits and it was never canvassed in the District Court, am I wrong about that?

Charles Dickerman Williams:

Well I would say that Your Honor, it was correct in that – the District Judge never got to the merits, because he held — the district judge held three things, first that the statute permitted the defendant to charge the existing rate as long as it was content to do so, that from his expression, content.

He again held that the Court had no jurisdiction and the third he held that we had standing to sue, so never got to the question of the —

Felix Frankfurter:

But as I understand the government, and I understand the Solicitor General, you can correct me if I’m wrong, it is claimed that in any events the Court of Appeals had no business to go the merits, after they decided the jurisdictional question in your favor, because the District Court having gone into that, am I to take it for granted that the Court — that the government is content to have that issue decided on the situation, in this posture in which it was left in the Court of Appeals, when the merits of that, for all I know, might be challenged by the government.

I know the Comptroller General is (Inaudible) nothing against him, but even he is an infallible creature, isn’t he?

Charles Dickerman Williams:

No Your Honor and we don’t rely on his illegal construction.

We only rely —

Felix Frankfurter:

Yes but insofar as its findings of what kind of books they should have kept, unless the government gets up and says yes you are to assume that we agree with that, and we you wouldn’t contest that, how can I take it for granted that they wouldn’t if the matter were before the District Court?

Charles Dickerman Williams:

Well Your Honor it is undoubtedly true that the District Court never got to these questions.

I always argue that, that in the District Court what the government did was make a cross motion for summary judgment.

At any rate that was the way it was treated by the Court of Appeals.

There are no government affidavits in the District Court, were there?

Charles Dickerman Williams:

Yes there was a government affidavit and by reason of that — that government affidavit gave various excuses or explanations why it had not prescribed tolls earlier.

Well there was no affidavit on the going of the merits?

Charles Dickerman Williams:

No there was not Your Honor.

But I — although the defendant here has written a long brief and has got into a — gone into the bookkeeping to a considerable extent, I do not, I maybe mistaken, but I do not understand that the Comptroller General’s analysis is challenged once it be assumed that the defendant was required by the statute to prescribe tolls on the basis of the canal activity and without regard to the losses of the business activities.

Mr. Rankin can correct me if I’m mistaken.

I find nothing in the brief which challenges the Comptroller General’s analysis as a correct analysis upon that assumption.

Now our reason is the same that the Act of September 26, 1950, directed that tolls be prescribed on the basis of the canal activity and not — and without regard to the losses of the business activities are as I say the language of the statute, the legislative history and defendants own admissions, and let me first take up the legislative history.

Charles Dickerman Williams:

The Act of September 26, 1950 can be understood only in the light of the situation as it existed at that time, because that Act was passed to deal with a particular situation, as I suppose all statutes are.

Now in 1948 the canal authorities proposed an increased toll.

Now at that time the toll was $0.90 a laden ton, having been so fixed by the President in 1937, pursuant to the Act of that August 24, 1937 which authorized the President to fix tolls at not less than $0.75 and not more than $1 per laden ton.

The Panama Canal, the waterway itself was being operated by an unincorporated agency called The Panama Canal.

The Panama Canal also conducted the local government in the canal zone and it further conducted certain business operations such as a shipyard, a printing press and so on.

Now this is a key feature in the legislative history.

The cost of the canal zone government was a great deal more than it otherwise would be, because of the presence of armed forces, large units of the armed forces in the canal zone.

As Your Honors are undoubtedly aware, the canal zone is not only the site of a canal, but it is also a very important military base, and more than half the population of the zone consists of the armed forces and their dependants.

Now the cost to the government, the canal zone government was a great deal more than it otherwise would have been, because of the presence of these troops and their dependants, more schools were necessary, more hospitals were necessary, more police, larger highways, more highway maintenance and so on.

Now a third feature was that at that time the Panama Railroad Company, defendant or it’s predecessor was operating other business activities.

The railroad, the shipping line, commissaries, these other business activities had been profitable for many years, and they paid large sums in dividends to the United States Treasury.

These business activities served the canal as such and also the armed forces and also the Republic of Panama and the public generally.

And a fourth feature, although perhaps only a detail but an important detail is that defendants reports were on an activity basis, that is to say the defendants in its budget program submitted to Congress and its Annual Reports, broke down each activity according to net results after the allocation of general expense, so anyone looking at these reports could tell the final result, financial result of that particular activity considering all factors including general expense.

Now, when the canal authorities proposed this increase, the shipping industry protested on this ground that the additional cost, the higher cost which were the justification for the proposed increase were higher governmental cost, military cost, commercial cost and not higher cost of ship transits.

Now Congress recognized force to that objection and after three years of consideration by the Bureau of the Budget and various congressional committees, the Court of Appeals said three years were spent hammering out a formula.

The net result was the act of September 26, 1950; that provided for the transfer of the canal as a waterway to the defendant.

And in connection with tolls, it provided that the toll should be based upon the canal activity, plus an appropriate share of the cost of the Canal Zone Government, the appropriate share to be determined on the basis of gross revenues.

It was recognized that this formula would result in tolls going up and down from time to time according to fluctuations in costs and canal traffic.

Now that left open the question of who would pay the remaining share of the cost of Canal Zone Government, and it was decided that, that remaining share should be paid by the business activities, that is to say the railroad, shipping line, commissaries and so forth, which as I say had been profitable over a period of many years.

Now, may I ask Your Honors refer to page of 167 of the record, which pages 164 to 167 set forth the report of the Armed Services Committee to the Senate on the bill which became the Act of September 26, 1950.

Now Your Honors will note on the upper right-hand side of page, on the upper part of page 167, a worksheet setting forth the anticipated results of the formula which was embodied in the bill.

Now the significant feature of this worksheet is that those are canal activity figures and not company wide figures.

If the formula would be on a company wide basis, the figures would be a great deal larger, would be around $90 million, $80 million to $100 million.

Harold Burton:

What’s that item other outside revenue?

Charles Dickerman Williams:

That is the pilot charges.

The canal, not only charges tolls, but it also charges a fee for piloting a ship through the canal or certain small marine services which run to approximately, well less than 10% of tolls.

But, [Laughter] the outside revenue does not include the business activities, those would run the figures way, way up.

Now I would also ask Your Honors to look at the paragraph in the middle of the page.

All of the above figures are stated in round numbers and are based on currently available financial data, and then is this significant sentence

.The toll rate will of course be affected by any future changes in operating costs, interest rates and canal traffic and maybe revised either up or down.

Charles Dickerman Williams:

Now I further ask that Your Honors examine the first two full sentences on page 166, of the top of page 166, the remaining cost to the civil government, that is after the appropriate share of the canal activity, would be borne by the other business activities such as hotels, commissaries and so on.

As a result the canal will be on a self-sustaining basis on the other collateral business operating in the Canal Zone must bear their proportionate share of the cost to the civil government, health and sanitation.

Now, so much for the legislative history; I’ve only hit the high spots.

Now, then the statute was enacted and I’ll read to Your Honors Section 412(b) which is the key provision of the statute as we see it.

That’s in Section 412, which is entitled ‘Basis of Tolls’.

Tolls shall be prescribed at a rate or rates calculated to cover as merely as practicable all costs of maintaining and operating the Panama Canal, together with the facilities and appurtenances related thereto, including interest and depreciation and an appropriate share of the net cost of operation of the agency known as the Canal Zone Government, then Section (b), goes on to provide that the appropriate share shall be determined on a gross revenues basis.

A further important provision of Section 412(b) was — of Section 412 was subsection (d), which provides — that — which incorporates in domestic law for the first time Article III, Section 1 of the Hay-Pauncefote Treaty providing that toll shall be just an equitable, which I submit amounted to Congress saying that, that formula constituted its definition of what was just an equitable under the treaty.

Harold Burton:

What (Inaudible)

Charles Dickerman Williams:

I beg your pardon Your Honor.

Harold Burton:

Were you reading there, what page was that?

Charles Dickerman Williams:

Well, at page 169 of the record, that appears in comparative print form, that’s going on from the report of the Committee on Armed Services.

At the top of page 169 Your Honors will find Subsection (b) and then towards the bottom subsection (d), which contains the reference to the Hay-Pauncefote Treaty.

Earl Warren:

Is there anything in the history showing just what is meant by the words together with the facilities and appurtenances related thereto?

Charles Dickerman Williams:

Well, as far as the legislative history is concerned Your Honor, I rely — the legislative history shows beyond all possible doubt, and I’ve gone into it at probably excessive length in my brief, that the business activities which had always kept separate accounts and which should never have been included within the canal accounts were to remain separate and were to bear their share of the cost of the Canal Zone Government, and of course if they were to bear their share of the cost the Canal Zone Government and only an appropriate share was to be borne by tolls, that would necessarily imply that they would continue to be kept separate from tolls.

But however my learned friend suggests that the expression together with the facilities and appurtenances related thereto may refer to such remotely connected facilities as the railroad and the shipping line and so on.

Now, that suggestion is I submit not only answered by the legislative history, but it is also answered by the reference to Section 10 of the statute which is quoted at page 5A of the appendix to my brief, if Your Honors will refer to that.

There is the expression found again in language which from its context can only mean those facilities — makes it clear that the language can only mean those facilities immediately connected with the canal, such as the lochs and the launches, towing locomotives and that sort of thing.

The President is hereby authorized to transfer to the corporation the Panama Canal together with the facilities and appurtenances related thereto, in other words exactly the same language used a little later in Section 12(b), heretofore maintained and operated by the Panama Canal under — excuse me, together with the facilities and appurtenances related thereto, and in other words a distinction is made, any or all of the facilities and appurtenances heretofore maintained and operated by the Panama Canal under (Inaudible) Section 1 of Title 2 of the Canal Zone Code as amended by Section 2 of the Act of August 12, 1949.

Now the Act of August 12, 1949 shows that the other — the facilities and appurtenances heretofore maintained are the business operations which the Panama Canal, the unincorporated agency has asked at that time.

Now as the defendant corporation already had the railroad, the shipping line, and those other business activities, this statute which provides for a transfer cannot possibly relate to them, because the statute authorizing a transfer cannot relate to things that the transferee already has.

Now I also rely on certain admissions by the defendant.

One of these is its 1952 budget program.

That budget program was prepared in the late Summer and Fall of 1950 and was given to Congress by the President in January 1951.

In other words, it was prepared at the time when the legislative process was fresh in everybody’s mind.

That budget program was submitted completely on our theory of the case, that is to say it had presented separate accounts for the canal activity and the other activities and showed that tolls were expected only to cover the cost of the canal activity.

The second admission to which we point is an opinion rendered by the general counsel of the defendant company to its President, all we know about that is a reference in the Comptroller General’s 1954 audit report.

And from that reference it appears that in December 1953, the defendant’s President had submitted – prepared for submission to its Board of Directors a pricing policy statement, the gist of which apparently was that the prices of the business activities need a yield only enough to pay their direct operating expense, the implication being that all the overhead expense could be charged against tolls.

Now the defendant’s general counsel, then according to the General Accounting Office report advised the President that that was unlawful, yet according to the General Accounting Office the President withheld that opinion from the Board of Directors, withheld the pricing policy statement from the Board of Directors and proceeded to go on and do exactly what his own general counsel had told him was unlawful.

I might say that I clamored in the District Court, I clamored in the Court of Appeals and I clamored in my briefs here for a copy of this opinion of the General Counsel but the defendant has not seen fit to give it to me, or give to the any of the courts.

The third admission to which I point is a —

Felix Frankfurter:

General Counsel of the company gave it —

Charles Dickerman Williams:

That’s right Your Honor.

Felix Frankfurter:

— the President of the United States.

Charles Dickerman Williams:

Excuse me, to the President of the defendant.

Felix Frankfurter:

I beg your pardon.

The defendant means —

Charles Dickerman Williams:

The Panama Canal Company.

Felix Frankfurter:

And who is the President of the defendant?

Charles Dickerman Williams:

General Seybold was President at that time.

Felix Frankfurter:

Well and he was a creature, using the word respectfully, of the President of the United States, is that right?

Charles Dickerman Williams:

Your Honor in his capacity as Governor of the Canal Zone, he was the creature of the President of the United States conformed by the Senate incidentally.

Felix Frankfurter:

The President of the Canal Zone.

Charles Dickerman Williams:

Well the President of the —

Felix Frankfurter:

Mr. Seybold was an army officer, wasn’t he?

Charles Dickerman Williams:

All the governors and presidents have been army – up in the Corps of Engineers.

Felix Frankfurter:

That’s what I was trying —

Charles Dickerman Williams:

Yes Your Honor.

Felix Frankfurter:

That the President designated members of the engineering corps (Inaudible) as I understand, is that right?

Charles Dickerman Williams:

Yes Your Honor.

The Governor of the Canal Zone is a Presidential appointee confirmed by the Senate.

The law requires that the Governor of the Canal Zone also be the President of the defendant, the stockholder of the defendant company is designated by the President and he is designated the Secretary of the Army.

The Secretary of the Army designates directors, the members of the Board of Directors of the defendant company and they — I don’t know whether they go through the forms of electing the President because by virtue of law, the President of the defendant must be the same man who is governor of the canal.

Felix Frankfurter:

(Inaudible) was an appointee of the President?

Charles Dickerman Williams:

Yes Your Honor.

Felix Frankfurter:

Without any presidential conformation?

Charles Dickerman Williams:

He is confirmed by the Senate Your Honor.

Felix Frankfurter:

(Inaudible)

Charles Dickerman Williams:

It’s my — that’s my understanding certainly.

Felix Frankfurter:

(Inaudible)

Charles Dickerman Williams:

I believe he is confirmed by the Senate.

Charles Dickerman Williams:

Mr. Rankin says that I’m correct in that.

Felix Frankfurter:

But there was a time when there was a (Inaudible) he was an appointee of the President without (Inaudible)

Charles Dickerman Williams:

At the present time —

Felix Frankfurter:

As part of a member of the Engineering Corps.

What I want to know is, when was that changed?

Charles Dickerman Williams:

I honestly don’t know Your Honor, but it is my understanding for many years, the President —

Felix Frankfurter:

When it became a civil government (Inaudible)

Charles Dickerman Williams:

I think it was changed by the Act of August 24, 1912.

I think in General (Inaudible) day it was The Isthmian Commission.

Then the Act of August 24 1912 abolished The Isthmian Commission and provided that the Panama Canal area and zone should be run by a governor appointed by the President subject to confirmation by the President.

William J. Brennan, Jr.:

Are the corporate directors army officers?

Charles Dickerman Williams:

I beg your pardon Your Honor.

William J. Brennan, Jr.:

The corporate directors also army officers?

Charles Dickerman Williams:

No some of them are but many of them are not.

They are selected at the pleasure of the Secretary of the Army.N

ow as my time seems to be running out somewhat I’ve tried to cut some of this development of the facts short.

I’ve competed my development of the interpretation of the statute as requiring the defendant to prescribe tolls on the basis of the canal activity only in that regard, the losses of business activities.

Now I also submit that that is required by The Hay-Pauncefote Treaty.

In substance, these other expenses are expenses of the armed forces.

In other words the cost of the Canal Zone government is so much greater because of the presence of the armed forces and these business activities largely serve the armed forces or serve them as well as their expenses are a great (Inaudible) zone government are a great deal more because of their service.

Felix Frankfurter:

Is there any relation between having the armed forces there and having the canal in effective operations?

Charles Dickerman Williams:

Not as a canal, in other words the armed forces are there because it’s our Caribbean base, it’s the headquarters of the Caribbean command.

Felix Frankfurter:

And also to prevent the canal from having Pearl Harbor experience.

Charles Dickerman Williams:

It has always been the view of Congress and it apparently is also the view of the British government, that national defense is – costs of national defense are not a proper charge against canal tolls.

That was the view taken by this very act and the British government agrees with that, as I read its brief agrees with that construction of the statute.

Congress has —

Felix Frankfurter:

Does it include school expenses —

Charles Dickerman Williams:

Yes Your Honor.

Felix Frankfurter:

— employees of the canal?

Charles Dickerman Williams:

It includes the school expenses of the employees of the canal and also the school expenses of the members of the armed forces and also the hospital expenses of the members of the armed forces.

Felix Frankfurter:

There is a school system to which both Armed forces children and canal employees’ children directed to go, is that it?

Charles Dickerman Williams:

Yes Your Honor.

Felix Frankfurter:

And one of the problems is the allocation of that expense?

Charles Dickerman Williams:

And that was allocated on the basis of an appropriate chair, appropriate to be —

Felix Frankfurter:

That’s an issue, isn’t it?

In the financing, in the accounting of the business that is one of the problems, the canal company would have to (Inaudible), is that right?

Charles Dickerman Williams:

Yes Your Honor.

William O. Douglas:

(Inaudible)

Charles Dickerman Williams:

That’s right.

It’s a military community.

William O. Douglas:

(Inaudible)

Charles Dickerman Williams:

That’s a little hard to say Your Honor, I would say it was pretty much under military administration.

It’s true that there is nothing which would prevent the President from designating a civilian as governor but he always designated a military man and we have a higher officer as Commander-in-Chief Caribbean Command down there on the Canal Zone too, it’s very much of a military base.

In fact of the area of the Canal Zone seven times as much as under the control of the armed forces as is under the command — under the control of this defendant.

Felix Frankfurter:

Does the record show that the whole cost of the military establishment in the zone is the basis for the toll charges?

Charles Dickerman Williams:

No Your Honor only the cost of the government of the Canal Zone, but that government is far more expenses because of the presence of the armed forces, our troops are not — local police are paid by the Canal Zone government but the wages, salaries of the troops themselves aren’t.

Felix Frankfurter:

On the merits of the accounting of the financial allocation, what it gets down to is, what may fairly be charged for services in which there is a mixed interest?

Charles Dickerman Williams:

Exactly Your Honor.

Earl Warren:

Is that a new method of bookkeeping Mr. Williams to charge those things against the tolls or is that, that had been done over a long period of years?

I presume there’s always some military and some defense down there.

Charles Dickerman Williams:

Well Your Honor prior to this act, the Panama Canal, the unincorporated agency construed by the Act of 1912 operated both the canal, the civil government and certain business operations and the business operations were operated at a profit.

Of course the zone government made no profit, it was a government.

The tolls, according to the statute were not based on anything in particular, it was simply that the President was authorized to prescribe tolls within certain limits, but the statute did not prescribe a tolls-making formula.

The concept of a formula was introduced into the legislation for the first time by the Act of September 26, 1950.

Earl Warren:

I take it then it was not based upon any budgeting at all prior to 1950?

Charles Dickerman Williams:

Well there was — the legislative hearings indicate that there was kind of an understanding between the governor of the zone and the Secretary of War and the President by which tolls would be fixed so as to pay all the costs of not only operating the canal, but also operating the Canal Zone government and also paying 3% on all the investment in the canal.

And it was against that situation, that the shipping industry protested in 1948 when an increase was proposed because of increased governmental and military costs.

At that time — the situation was then brought to a head and we said, that’s not fair, that’s a national defense cost not a ship transit cost, and hence we should only pay part of the cost of the Canal Zone government.

And I won’t go through all the arguments back and forth but the net result was that the force of that argument was recognized by Congress in Section 412(b) which said that tolls would be prescribed on canal operation, interest on the investment to be fixed at the current rate being paid by the government, plus an appropriate share of the cost of the Canal Zone government.

The other share, as to how the other share is to be paid the statute is silent, but the Bureau of the Budget report and the armed services report assert that the remaining share was to be borne by the business activities.

Earl Warren:

Then I take it that this is in your view, this is an old practice that was remedied by the Act of 1950 and that the government has not conformed to the 1950 act?

Charles Dickerman Williams:

Exactly Your Honor.

The Act of 1950 gave us relief, and the government, the defendant has denied this technically.

Felix Frankfurter:

But you’re not suggesting I’m sure that up to 1950 the tolls were fixed by Presidential authority under whimsical or willful basis, putting it to one side, you will agree won’t you that from the beginning, the proper basis of determining what the toll charges should be was in the hand of technical advisors of the President, on the basis of which these toll charges from time to time were reviewed, do you agree with that?

Charles Dickerman Williams:

Yes Your Honor.

Felix Frankfurter:

I’m not saying what the basis was, but that the Presidential authority exercised up till 1950 was an effort to relate tolls to value of services.

What you’re saying is that in 1950 the thing was formalized by Section 412, is that right?

I don’t mean formalized was refined by the statute, is that right?

Charles Dickerman Williams:

Yes Your Honor, may I add just a little?

What Your Honor says is correct, but the President who was authorized by Congress only to fix tolls within certain limits, in other words he had to fix a particular toll within a framework of legislative policy.

But the particular toll that he selected within those limits was a matter which the President did on the basis of advice.

Now that was changed by the Act of September 20 and that was the purpose of the Act of September 26.

Felix Frankfurter:

Would you say this allowed them no maneuvering room?

No, no, no —

Charles Dickerman Williams:

Oh it allows them maneuvering room Your Honor because the — I will agree with my learned friend in this, that the execution of the statute involves discretion, but that discretion must be exercised upon a correct construction of the statute.

We don’t deny that the statute, that the — I mean the languages of the Section 12(b) which I read Your Honors a little while ago clearly involves discretionary determinations, and we say that the approval power of the President is to review the exercise of the discretion within the legislative policy laid down by Section 412(b).

Felix Frankfurter:

As I understand the contention of the government, after the Act of 1950, and indeed before it, the Panama Canal Company and its various names each year had to come before Congress, give an accounting of what they did the year before, state financial conditions, its income, its expenditures, state what the tolls were on the basis of which the appropriations for the next year were made, is that right?

Charles Dickerman Williams:

Not entirely.

Felix Frankfurter:

I’m not asking you to draw inferences from it, but is that right?

Charles Dickerman Williams:

Not entirely right Your Honor, it’s certainly true that they — and in fact we have submitted, as appendix to our brief, we annex some of their budget programs as they have actually submitted them to Congress, I think Appendix F is — I believe was taken on the precise —

Felix Frankfurter:

Aren’t the tolls —

Charles Dickerman Williams:

They do not —

Felix Frankfurter:

Does not the company report what the tolls are for the preceding year?

Charles Dickerman Williams:

Well in its annual report, to its stockholder it reports what the tolls have been.

Felix Frankfurter:

And that doesn’t go to Congress?

Charles Dickerman Williams:

Well I assume that it does.

I don’t — I imagine that the members of the Congress get it, but it’s actually rendered to a stockholder, not to Congress.

But the budget —

Felix Frankfurter:

Doesn’t the President submit something or somebody submits the Congress a report of the Panama Canal Company?

Charles Dickerman Williams:

Well I — Your Honor I would assume that it’s a matter of practice, if not it’s a matter of law, the report does go to members of Congress, but I don’t — the report if you read it says it goes to the stockholder.

Felix Frankfurter:

And the stockholder the President of the United States?

Charles Dickerman Williams:

Secretary of the Army.

Felix Frankfurter:

Who owns the stock?

Charles Dickerman Williams:

MUnited States government owns the stock, but the Secretary of the Army is the stockholder.

Your Honor with respect to this submission to Congress, let me —

Felix Frankfurter:

The reason I put that to you is because this Court has in other situations find it’s important in the submission to Congress of a report of action which — the legality of which was questioned, but because submitted to Congress and acted upon or at least not rejected by Congress draws legal force.

That happens in, if I may say so cases involving even more serious issues than dollars and cents.

Charles Dickerman Williams:

[Attempt to Laughter] Your Honor I think —

Felix Frankfurter:

I’m referring to Seattle against (Inaudible) in 238 U.S.

Charles Dickerman Williams:

Your Honor let me — I think the importance, the deductions to be drawn from these submissions to Congress can best be determined by considering — by reference to the statute under which they are submitted, which is the Government Corporation Control Act, I discuss that at page 99 of my brief Your Honor.

These budget programs are submitted to Congress under Section 849 of Title 31 of the code and are for the purpose of Congress’s action in making available for expenditure, such monies as Congress sees fit.

Now the language of Congress every year in authorizing expenditure, and I might say that because no appropriations are involved, the minutes of the Appropriations Committee considering these budget programs indicate that they are not considered very exhaustibly and here is a company that comes in that isn’t asking for an appropriate —

Felix Frankfurter:

But if you’re right, and if the government is unfairly or illegally extracting toll from your client when it shouldn’t, in order to be relieved of the cost of other activities, then if you’re right the government — the Congress of the United States would have to make appropriations for those other non-canal operating activities.

Charles Dickerman Williams:

No Your Honor, certainly not for the years in question here.

Felix Frankfurter:

Why not, I don’t understand.

Charles Dickerman Williams:

Because our earnings had been so great, that even if the statutory rate had been in effect, no appropriations would have been necessary, and in fact a large — sums in interest would have been paid, we worked that out in our brief.

Felix Frankfurter:

You mean that even at the reduced rates that you’re asking for, if you take them off the income of the (Inaudible) would make no difference?

Charles Dickerman Williams:

Well it would make some difference, it certainly would make a difference, it’d make a lot of difference to us but also in the amount of interest which was paid, they would not pay full interest, but Your Honor said appropriations would be required.

Felix Frankfurter:

Well either appropriations would be required or income would have been earned which – and some action would have been taken.

If it’s a surplus then it would be drawn into the (Inaudible)

Charles Dickerman Williams:

Well if the statutory rate had been in effect, the defendant would not have been able to pay $15 million in dividends.

They would not — the treasurer would undoubtedly have been affected, the defendant could not have paid —

Felix Frankfurter:

That’s what I’m saying.

Charles Dickerman Williams:

Yes Your Honor.

All — my only point is that appropriations would not have been necessary.

Felix Frankfurter:

There would be some change in the fiscal relations of the Canal Company to the concern of Congress.

Charles Dickerman Williams:

That is true but not to the extent that reg appropriations would have been required.

Now, Your Honor Congress in acting on these budget programs has not given its blessing to the toll rate which does not appear in budget programs.

All that appears in the budget programs is estimated income and the actual language of each act has been this, “The following corporation,” referring to defendants, “is hereby authorized to make such expenditures.”

In other words all that Congress does is to authorize the expenditures set forth in the budget program “within the limits of funds and borrowing authority available to it and in accord with law.”

Charles Dickerman Williams:

Now I submit that what Congress is doing and that’s quite consistent with the Government Corporation Control Act is saying to the extent that you can get your money lawfully, you may spend it as you propose.

I don’t see that any additional meaning can be given to these various actions by Congress.

Felix Frankfurter:

I draw the inference from you that Congress doesn’t know what it is you’ve got involved, is that right?

Charles Dickerman Williams:

Well, Congress is quite familiar with this suit.

Felix Frankfurter:

No, not the suit, is it familiar with what the company did in the toll charges it made?

Charles Dickerman Williams:

Oh yes because the Comptroller although the company reports under the statute do not go Congress as I read them, although undoubtedly get there, the Comptroller General’s reports are made to Congress.

However as soon as the Comptroller General came out with his analysis —

Felix Frankfurter:

When was that, what was the date?

Charles Dickerman Williams:

May 1955, and we brought our suit.

Felix Frankfurter:

And has continued since?

Charles Dickerman Williams:

I beg your pardon?

Felix Frankfurter:

And this has continued, these illegal charges have continued, haven’t they?

Charles Dickerman Williams:

Yes, but we immediately brought our suit.

Felix Frankfurter:

But Congress had noted that those toll charges before you brought your suit (Inaudible)

Charles Dickerman Williams:

Well, it had notice of the charges but it didn’t have notice of our claim of illegality.

Felix Frankfurter:

I just want to know whether the facts of the charges and the basis on which they were made, have been before Congress since this Act of 1950?

Charles Dickerman Williams:

Not until May 1955, I would say, at any rate at the Court of Appeals — as the Court of Appeals said the defendant by ambiguous bookkeeping concealed what as going on until the Comptroller General came out with his report in May 1955.

Then in September 1955 we brought this suit to compel the enforcement of the law as we construe it, as the Comptroller General construes it, as the British government construes it and as the Court of Appeals construed it.

Felix Frankfurter:

This concealment, is this concealment anything else or is it something different from the way in which the — the basis on which they imposed the toll, is that what you meant you by concealment?

Charles Dickerman Williams:

No the concealment is this Your Honor, in that it does not — in that the defendant unlike its earlier practice, unlike the practice of other government corporations, at no time gave a breakdown of results by activity after the allocation of corporate overhead.

Felix Frankfurter:

But no suggestion of some skullduggery in the conventional sense of that term originally —

Charles Dickerman Williams:

No, I don’t suggest, all I say is that unlike their own former budge programs, unlike their own formal reports, unlike the reports of other government corporations, unlike the budget programs of — budget programs of other corporations, this corporation has not shown the net result by activity after allocation of corporate overhead.

That sums up and we’re — and —

Felix Frankfurter:

Is this corporation, the Panama Canal Company subject to the general accounting provisions applicable to all branches except by TVA, is it subject to all the accounting provisions applicable to other agencies of the government?

Charles Dickerman Williams:

Well certainly subject to all the provisions of the Government Corporation Control Act.

I think it is a special act that deals with government corporations and it is all — I’m not — I don’t know whether it’s subject to all the provisions applicable to all government agencies, but it’s certainly applicable to all — subject to all the provisions of the Government Corporation Control Act.

Felix Frankfurter:

Well I suppose that the — I maybe wrong, but if the Panama Canal Company like TVA and a few others, has its own independent accounting system, isn’t that right?

I maybe wrong but never mind.

Charles Dickerman Williams:

I would like to make — I have very little time left and I would like to direct my attention to the meaning in this — skipping all other things I intend to say, to the meaning of the President’s review powers provided in Section 411.

Now we say that the duty of the President under the Section 411 proviso was to enforce the law and to review the defendant’s exercise of discretion, but not to act according to his whim or fancy.

Charles Dickerman Williams:

We say that’s because of the legislative history which shows that it was the intent of Congress to grant us relief here to establish a tolls policy, a policy which was very carefully considered, very carefully worked out.

The references to the President’s review power are practically negligible as the Court of Appeals pointed out.

Again the statutory precedents tolls policy has always been a matter of Congressional policy although the President has had a limited discretion within the framework of that policy and when President Wilson, when President Franklin Roosevelt wanted changes in that policy, they went to Congress for that purpose.

We also say the language and the arrangement of the statute, Section 412 deals with policy, basis of tolls, Section 411 deals with authority and procedure.

If the President was to have policy making powers inconsistent with the policy laid down by Congress that would be have been in Section 412.

We also say because of the legal meaning which has been given this Court and other courts to the expression subject to the approval of, that has been repeatedly held to mean that the approving authority determines the lawfulness of the action of a subordinate.

Whether the subordinate has acted within the law and this Court has held most emphatically that it does — that subject to the approval of, does not give the approving authority, the privilege of substituting his own judgment for the will of Congress.

And in Daniels against Wagner this Court most sarcastically described the very argument which is advanced by defendant here.

We also say that it is true under the law of rate making, under which the legislative — rate making as a legislative function, the legislature lays down a policy and leaves it to the executive branch or an independent agent to execute that policy.

We say it’s also shown by the anomalous character of the non-statutory factors which this defendant proposes or the defendant consider.

He proposes that for instance, the defendant proposes that the — if the President may consider the welfare of the railroads, whether or not it will take business away from the railroads.

Now I submit Your Honor that it’s anomalous and violative of our net good faith in the Hay-Pauncefote Treaty, that the shipping of the world, and 70% of shipping is foreign shipping, should have to pay a surcharge for the purposes of bolstering up a competing American facility, as a matter of fact only 10% of the traffic is intercoastal water traffic and that has been going down as compared with pre-war.

If there’s anybody that needs relief it’s the intercoastal water carriers and not the railroads.

The defendant also suggests that the purpose is to consider the welfare of Suez that he must — this traffic is to be — this rate is too adjusted according to the needs of our foreign policy.

Now I submit that, that is highly improper, I mean do we say that the United Arab Republic may adjust the tolls rate at Suez according to the needs of its foreign policy, I submit that, that — the answer to that question is no.

And furthermore our construction fits in entirely with the Constitution which says that the function of the President — that the — a function of the President is to take care that the laws be faithfully executed and we say that the purpose here was that he take care that the defendant faithfully executed Section 412.

Now even if are wrong in that however, we say the President’s views of the law are not reviewable by the courts, still we say that we have the right to compel that this defendant to make a correct application of the statute under cases such as Virginia Railway against Federation and United States against Wilbur which say that a corporation and an agency maybe compelled to exercise their discretion according to the law.

Earl Warren:

Mr. Solicitor General.

J. Lee Rankin:

May it please the Court.

First I’d like to cover the inquiry by Mr. Justice Frankfurter about appropriations and if we refer to page 16 of the report —

Felix Frankfurter:

Page what?

J. Lee Rankin:

You don’t have this but I — it’s the report of the Comptroller General that’s been the subject of talk and debate all the way through this and upon which they rely from time to time when they think they can gain something out of it and which they overlook whenever they find it’s to their advantage.

They overlooked the part in which the Comptroller General said that the formula for tolls should be changed to make sure that the cost to these business activities should not be charged against the taxpayer and that it should be incorporated in the tolls charge, that’s one thing they overlooked.

They apparently overlooked this language of the Comptroller General in the same report on page 16.

If tolls revenue is insufficient to cover the minimum losses appropriations will be needed, such appropriations for the business losses would of course constitute a subsidy to the ship operators.

Comptroller General said that in exactly the same report that we’ve been discussing all the way through here.

Now in regard to the military, the military reimburses the Canal Zone government in full for all the school and hospital service, so that isn’t in here at all.

They were allowed because of the defense features of this Canal Zone operation that the Congress recognized, they took out of the formula of the amount the government had invested in this canal, what they had — the government had collected for some 40 years of time without any objection on the part of the Government of Great Britain or anybody else and that was the cost of the interest for the construction period.

And that’s a proper accounting charge because it did cost this government that amount of money.

But in recognition of the defense aspect, the Congress took that out in figuring the amount of the investment that we had in the canal, and that’s 2500 – that’s $2.5 million a year, they’ve already got that credit for defense and they just want to try to get some more.

Felix Frankfurter:

May I ask you, the argument you’re making now goes to the merits of power of the court or —

J. Lee Rankin:

It goes to the merits Mr. Justice, but I’m trying to reach the merit sometimes because we’re badly bothered, I’ll deal with that next, the fact that the Court of Appeals decided the case on the merits, we don’t agree to all these things that are claimed in these affidavits.

The petitioner acted in good faith in this case.

The Department of Justices reviewed it, the Bureau of the Budget and we think the petitioner in — has properly decided that there should be no change in these tolls and we construe the action of the Congress to exactly the same effect —

William J. Brennan, Jr.:

(Inaudible)

J. Lee Rankin:

The affidavit was only asked to the question of whether or not the court had power to examine this subject matter.

William J. Brennan, Jr.:

Now you said —

J. Lee Rankin:

And it was 10 pages.

William J. Brennan, Jr.:

And you said to us earlier that there’s been some understanding that you would have an opportunity to meet the evidence —

J. Lee Rankin:

May I call you attention to what Judge Walsh said on that very subject in the colloquy that was extended between the parties.

And on — that’s in the record on page 202, at about the second full paragraph, down, and the court – “if you want assurance that I’m not going to pass on the merits or the reasonableness of the delay, but only this court’s power to hear the whole question, why I will give that to you right now.”

In other words, the only question that is going to be raised on December 22nd is whether this court can hear the case to begin with and the only answer that you can get is either one, we can’t even hear it; or two, we can hear it.

Then he goes out and if conclude “We can hear it there will be fresh slate and a fresh start on who is right and who is wrong.”

Felix Frankfurter:

When that was said were all the affidavits before the court that have been talked about —

J. Lee Rankin:

That’s right and Mr. Williams, counsel for the respondents claim that the 10-page affidavit on behalf of the government was a moving motion and therefore it should be construed as an answer.

And the court would not do that and expressly ruled on an affirmative motion we made that the whole action on the motion for a summary judgment be stayed until the question of jurisdiction was determined.

Hugo L. Black:

May I ask you a question –

J. Lee Rankin:

Yes Mr. Justice.

Hugo L. Black:

Are you asking us to say — the holding that there are no circumstances of any kind under which judicial reviews (Inaudible)

J. Lee Rankin:

I don’t think —

Hugo L. Black:

Are you asking us to say here that it was wrong to render summary judgment?

J. Lee Rankin:

I don’t think you have to reach the question whether there would be no judicial review in any event because I think you have partially here the question that we say, we’ve acted, and under our construction of the statute it seems to me that in any event it isn’t clear what we should do.

And so there isn’t any claim that — there can’t be any proper claim under our construction of it, that were acting in bad faith and that that element comes in to require judicial review.

We also say that in any event it was improper for the Court of Appeals to consider summary judgment and decide this case on the merits because we were sure that it would not and the action of the lower court was expressly that it would not be.

Then on page 205, there is a further statement by Judge Walsh, about the middle of the page or toward the upper half of it, the court, “now I’m going to grant your motion to defer hearing on the merits until we pass on this jurisdictional point.”

Now that’s what the court did and we’ve never had a chance to answer some of these contentions.

Felix Frankfurter:

Would you mind enlarging (Inaudible) your answer to Justice Black that in the first place you contend that there was action here and not (Inaudible)

J. Lee Rankin:

That’s right.

Secondly —

Felix Frankfurter:

No but would you give your grounds for making that statement?

J. Lee Rankin:

We did take the position all the way through and we do know that we have examined this formula and we’ve tried to apply it in good faith and we find that under the formula —

Felix Frankfurter:

Who is we?

J. Lee Rankin:

That is the petitioner?

Felix Frankfurter:

Well what – where do I find evidence of that statement in this record?

J. Lee Rankin:

Well the record is not complete on that because it’s under motion for summary judgment.

Felix Frankfurter:

Yes but what can I – where can I go to take judicial notice?

J. Lee Rankin:

Well you can take judicial notice of it from all the reports that we made to Congress in which we set out at length in our briefs, the fact —

Felix Frankfurter:

And in those reports — I’m not clear, do those reports refer to the item, do they deal with or give basis for – inference of the fact that these and these are the toll charges?

J. Lee Rankin:

Exactly they are very precise.

Felix Frankfurter:

Have we got those reports?

J. Lee Rankin:

You have by judicial notice.

Felix Frankfurter:

Yes.

J. Lee Rankin:

And we call attention to them at length, now —

Felix Frankfurter:

Have we got a document, I don’t this —

J. Lee Rankin:

No you don’t have this document but you have a reference to it and I’ll tell you how you take judicial notice of it and what we have to deal with in this case.

We have these annual reports for the stockholders that were made by this petitioner to its one stockholder, and they are preliminary reports, they say on their face and we’ve said that out at length in our reply brief.

Felix Frankfurter:

Is there anything of which I can take judicial notice that these are matters that came to the attention of Congress?

J. Lee Rankin:

Yes.

Felix Frankfurter:

I don’t care whether they have read them, I know most Congressmen don’t read most of the reports that go to them —

J. Lee Rankin:

You haven’t —

Felix Frankfurter:

— take judicial notice of that fact?

J. Lee Rankin:

In detail now here is the annual report of the petitioner, the Panama Canal Company that’s a House document, Number 99 and it’s been made each year except for 1957 and it hasn’t gotten to place yet where we could make it’s in the hands of the printers and that’s the only reason that you haven’t got the last one.

Felix Frankfurter:

Does that — do I find in there reference to the amount, the toll charges?

J. Lee Rankin:

You have a reference to the toll charges, you have the sustaining business activities and how they —

Felix Frankfurter:

And that’s been given to Congress since 1950?

J. Lee Rankin:

Since 1954 in detail in June and July for the first time before they were filled to the Comptroller General’s report, we told them exactly how these tolls were computed, how the business operations, deficits would be figured in accordance with the Comptroller General’s, how we felt at the tolls should not be changed, then when the Comptroller General’s report was made we gave a detailed report in which we told them exactly our theory as I’ve outlined in this Court.

Felix Frankfurter:

The Chief Justice (Inaudible) if you have legally available the copies of those reports I think they might desired (Inaudible)

J. Lee Rankin:

Well, I’ll be glad to furnish those to the court but those are governmental documents and they’ve been made every year and there is almost a 100 pages of statistics of all these things in the completest detail about how this is conducted.

Hugo L. Black:

May I ask you one other question?

J. Lee Rankin:

Yes.

Hugo L. Black:

I assume that we know judicially or otherwise that they have a (Inaudible) and assume furthermore, assume also that they charge those who made flagrant violation of the act which gave them power to proceed, is it your position that a court would have no power to take any action at all in that connection?

J. Lee Rankin:

My position is that, that is not in this case Mr. Justice.

Hugo L. Black:

Well they have alleged have they not that the action taken is unlawful?

J. Lee Rankin:

Yes, but because of the construction of the statute I think, which — I don’t think gets into flagrant action as you’re contemplating the question.

Hugo L. Black:

Well what I meant was, is there something about — if they allege that the act is required to do certain things and they also allege that none of them had been done that the act requires, is it still your position that the court would no jurisdiction to proceed, and if so what is the ground for that?

J. Lee Rankin:

Well my position on that is that the ground is that the difficulty of the discretion that’s involved here, that counsel conceded there was some discretion.

Now if you examine this formula in 412(b) as we have tried to do in absolute good faith, then I hope this Court if it acts in this case and rules against the petitioner will give us some guidance as to how we’re to try to fix these rates because if you examine this formula as we have tried to do in absolute good faith, you find first that they say the toll should be prescribed at the rate or rates calculated to cover the words ‘as nearly as practicable all costs,’ not part of it, all costs of maintaining and operating the Panama Canal together with the facilities and appurtenances related thereto, including interest and depreciation.

Then it goes on to say, and this is the controversy between us, “and an appropriate share of the net costs of the operation of the agency known as the Canal Zone government.”

Now if you’re in our position, as the petitioner, how would you try to interpret it there?

If you were told by somebody to try to pay certain obligations or bills, including the interest on a note to the bank or something, and that instruction was insofar as practicable, you should pay it all, and then you should go ahead and take an appropriate share of some other bills.

And if you try to not pay all these, which is the expense of operation of all of these various activities that are necessary to this operation of this Canal Zone, then your business can’t continue any longer because you would have deficits, that’s the problem that we have.

And we’ve done the best we could to apply that very formula to our operations, and it’s —

Hugo L. Black:

Suppose – suppose (Inaudible) you had acted on the basis of the cost of certain collateral, so called collateral activity (Inaudible), and if that was precisely prohibited by the Act, and that the result of what you did rested on that basis, would you say still the courts have no jurisdiction on this —

J. Lee Rankin:

Well —

Hugo L. Black:

— of any kind?

J. Lee Rankin:

You have a different problem.

If you can look at that statute, the court can, with all respect, and say if this statute is so clear that there is no discretion that has to be exercised by the petitioner, and you can just take that statute, apply it to your affairs and it’s clear as can be that you should do this very thing.

Then of course the court found that we were violating that, it would be just a clear act that the court could direct us to go, get about our business and do them, but that isn’t this case.

Hugo L. Black:

Then you are not claiming that there are no prejudices under which they could get judicial remedy?

J. Lee Rankin:

Well, I’d say it’s different in this case, but that isn’t here in this case, that there are circumstances where if this — if you assume the statute was different, if you assume it was all clear, and there was nothing we should do except go ahead and change the tolls, anybody could see that, and that they should be changed because this formula was so clear, there was no discretion involved, no judgment, all of those things, well then the court would have the power to say go ahead and do your job, but that’s not this case.

Felix Frankfurter:

Mr. Solicitor may I ask you before you sit down, where in this case is different from assuming, if you’re not familiar with the case, then don’t bother to answer, the Secretary of Agriculture against Central Reio Refining Company you have — do you remember that case, which gave the Sugar Act of 1948 to authorize the Secretary to make allotment for control of sugar, sugar quota and in that case we reversed Court of Appeals for the district because (Inaudible) too severe a rate.

It found check rate on the Secretary of Agriculture which he thought was disallowing him to exercise the discretion which the statute (Inaudible), but in that case we didn’t say there was no power to review and we looked to the statute and said what he did was amply within the discretion vested in him.

J. Lee Rankin:

Well, that’s what it seems to me the — where the court can reach this particular problem that — it doesn’t have to get into the area of when review would be permissible because it would come under —

Felix Frankfurter:

You would say it reaches the merits, that’s the kind of disposition you urge here?

J. Lee Rankin:

Yes.

Felix Frankfurter:

But it doesn’t touch the initial question which Judge Walsh found that there was no reviewing power?

J. Lee Rankin:

That’s right.

Felix Frankfurter:

On this record I take it.

William J. Brennan, Jr.:

May I — let’s see if I get this clearly.

What you asked in the brief is that we reinstate Judge Walsh’s judgment dismissing the complaint?

J. Lee Rankin:

Yes.

William J. Brennan, Jr.:

And you ask that on the ground that even taking the respondent’s interpretation of the statute, which imports some discretion in the company, that on this record it appears that what the statute required to be done, the company in fact has done.

J. Lee Rankin:

That’s right.

William J. Brennan, Jr.:

Is that it?

J. Lee Rankin:

That’s correct.

William J. Brennan, Jr.:

And it’s on that basis that you say that the original judgment of dismissal should be reinstated.

Now are you also saying alternatively in any event, on that construction of the statute, if we’re not satisfied, that the record shows that you can (Inaudible) that you’re entitled to be heard in the District Court, in opposition it will be affidavits or whatever it is the respondent offers.

J. Lee Rankin:

We take both positions Mr. Justice.

May I have one more further statement Mr. Chief Justice?

Earl Warren:

Yes you may.

J. Lee Rankin:

I’d like to clear up this business of necessary facilities and appurtenances because I think the construction claimed by respondents is entirely unfair.

On page 157 of our brief, we set out Section 51 of this particular statute, which was passed by the same Congress that dealt with the 1950 Act.

And it is our contention that to try to limit the words of facilities and appurtenances, to what they claim in Section 10 of the statute, is not fair or realistic at all when the same Congress elaborates in Section 51, the latter half of that page, in detail, all of these various things; the dredging facilities, docks, wharfs, sewer systems, civil air terminals, the commissaries, store houses, quarters and any other necessary facilities and appurtenances.

Now that’s the way this very same Congress used the words facilities and appurtenances within five or six months and clearly within the period they were considering this whole thing.

And they only use facilities and appurtenances in the limited manner they did in Section 10, because that was only that portion of those facilities and appurtenances that were contemplated to be transferred because the rest had been.

But if you read these together I think any reasonable construction and this Court in ex rel. Rogers versus Graves has already long before taken the position that all of these various activities were a part of the necessary operations of this canal.

Earl Warren:

Mr. Williams may I ask you a question concerning which I’m rather curious?

I noticed in your brief, you mention that Mr. Henry Chandler the Director of the Administrative Office of the Courts wrote an opinion on this subject on which you relied and which was put in the report on the bill, what brought him into this situation?

It strikes me as a little curious, because I little [laughter] (Inaudible) I would think from his duties.

Charles Dickerman Williams:

This was what happened Your Honor.

A bill was introduced into the Congress which was sitting in 1955 and 1956 to provide that the review of this defendant’s tolls prescription should be in the Court of Appeals and the question arose whether or not this was an appropriate kind of function for the Court of Appeals and Mr. Chandler wrote a letter that it was.

I think his letter said that Judge Clark thought that it was.

I don’t think that’s in our brief, I think that’s in their brief, I don’t recall —

Earl Warren:

Oh I beg your pardon.

[Attempt to Laughter] It’s your brief?

J. Lee Rankin:

Yes.

Earl Warren:

Well I —

J. Lee Rankin:

(Inaudible) Chief Justice, I can explain, we had nothing to do with it.

Earl Warren:

I am sorry I asked you –

J. Lee Rankin:

[Attempt to Laughter] It’s all right.

Earl Warren:

I put the burden on you, I thought it was your brief, would you tell me then I’d just like to —

J. Lee Rankin:

Apparently someone inquired of Mr. Chandler and Mr. Chandler said that he thought it was not a proper subject for judicial review and then he received a communication from Judge Clark suggesting that it should be and he changed his opinion and so advised the committee.

Earl Warren:

Well, was it something that was done at the direction of the judicial conference, do you know?

J. Lee Rankin:

I can only guess that [Attempt to Laughter]

Earl Warren:

Yes, Well I —

J. Lee Rankin:

I don’t –-

Earl Warren:

Was it done at the direction of judicial conference, do you know?

Charles Dickerman Williams:

Not so far as I’m aware, I don’t think — my understanding of the situation is this that this bill, putting review power in the Court of Appeals and Mr. Chandler communicated with Judge Clark —

Hugo L. Black:

Did he communicate with you?

Charles Dickerman Williams:

No he did not, but I communicated with Mr. Chandler.

Hugo L. Black:

(Inaudible)

Charles Dickerman Williams:

Chief Judge of the Second Circuit Court of Appeals [Laughter]

Felix Frankfurter:

What was the bill about?

Charles Dickerman Williams:

This bill put the review power in the Court of Appeals.

Felix Frankfurter:

You mean initially like the other —

Charles Dickerman Williams:

This, instead of having review in the District Court, this put the review power in the Court of Appeals.

Felix Frankfurter:

When was the bill, what’s the date of the introduction of the bill?

Charles Dickerman Williams:

The bill was in 1955, I think.

Felix Frankfurter:

That is not in this litigation (Inaudible)

Charles Dickerman Williams:

No before this litigation.

Felix Frankfurter:

While the litigation was in prospect?

Charles Dickerman Williams:

No, well I don’t recall, I think it went in March — I don’t recall just when it went in (Inaudible)

Felix Frankfurter:

This had nothing to do with this litigation except insofar as it concerned whether reviewing power should be as of other administrative agencies, is that it?

Charles Dickerman Williams:

Well the only question was whether or not the review power should be in the Court of Appeals and Mr. Chandler wrote a letter to Senator Magnuson, I don’t recall the incident very well, the gist of it was however that Senator Magnuson I believe wrote to Mr. Chandler and Mr. Chandler then wrote a letter to Senator Magnuson and then — saying it wasn’t appropriate for judicial review and then he wrote a letter saying that it was appropriate for judicial review, I believe that was the gist of it.

Earl Warren:

Thank you.

Hugo L. Black:

That was the rate fixed?

Charles Dickerman Williams:

That’s right Your Honor.

Hugo L. Black:

The rate fixed?

Charles Dickerman Williams:

Yes.

May I make just a couple of remarks Your Honor?

Earl Warren:

Yes you may Mr. —

Charles Dickerman Williams:

My learned friend referred to Judge Walsh’s remark saying he was only going to consider jurisdiction.

His opinion I submit shows that he went way beyond jurisdictional matters and that exercise — he exercised jurisdiction and didn’t merely decide whether or not he had jurisdiction.

In fact in the Court of Appeals I complained bitterly about Judge Walsh after telling me that he was only going to consider jurisdiction, going way beyond consideration.

I don’t think there’s — one can possible reconcile Judge Walsh’s opinions, but those remarks which he made, which Mr. Rankin read a few minutes ago.

And on this —

Felix Frankfurter:

What was the action that he took Mr. Williams?

Charles Dickerman Williams:

The answer that he took which —

Felix Frankfurter:

The action that he took.

Charles Dickerman Williams:

He dismissed the complaint.

And the reason I say that he went beyond jurisdiction is because you construed the statute as meaning that tolls fixing was a matter of the defendant’s contentment.

As a matter of fact the Court of Appeals’ opinion is largely devoted to that thesis of Judge Walsh.

Felix Frankfurter:

Am I right in saying that whatever he talked he thought was relevant to the determination whether he had jurisdiction and one may have different views at what the arguments which he adduced did or did not establish that thesis?

Charles Dickerman Williams:

Well Your Honor –-

Felix Frankfurter:

Just the thing he was concerned with.

Charles Dickerman Williams:

Your Honor all I can say is that, if I understand jurisdiction correctly and that was my — what I argued with the Court of Appeals at any rate, that he went beyond jurisdiction.

Now I make one request Your Honor with great reluctance because I’m afraid we’ve burdened the Court enormously here already, but Mr. Rankin late Tuesday served a reply brief on me, in which I think he has been mislead by what I — what the Court of Appeals has regarded as defendant’s ambiguous bookkeeping and makes a certain statement that I do not think is supported by the facts.

I think my — and I don’t blame him for it but I think he has been mislead by that bookkeeping and I wondered if I could put in a few, say something not more than five pages.

Earl Warren:

You may.

Charles Dickerman Williams:

Thank you.