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GRACE LINE, INC. v. PANAMA CANAL CO.

June 28, 1956

GRACE LINE, Inc., et al., Plaintiffs,
v.
PANAMA CANAL COMPANY, Defendant



The opinion of the court was delivered by: WALSH

This is an action by a group of steamship lines to compel defendant to prescribe new tolls for the Panama Canal and for damages based upon its collection of allegedly excessive tolls. Defendant moves to dismiss the complaint, claiming that the court has no jurisdiction over the subject matter because(1) the prescription of new tolls is discretionary; (2) plaintiffs have no standing to sue; and (3) defendant's action is subject to the approval of the President.

The statute in question is Sections 411 and 412, Tit. 2, of the Canal Zone Code *fn1" which reads:

"411. Authority To Prescribe Measurement Rules and Tolls. -- The Panama Canal Company is authorized to prescribe and from time to time change (1) the rules for the measurement of vessels for the Panama Canal, and (2), subject to the provisions of the section next following, the tolls that shall be levied for the use of the Panama Canal: Provided, however, That the rules of measurement, and the rates of tolls, prevailing on the effective date of this amended section shall continue in effect until changed as provided in this section: Provided further, That the said corporation shall give six months' notice, 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, during which period a public hearing shall be conducted: And provided further, That changes in basic rules of measurement and changes in rates of tolls shall be subject to, and shall take effect upon, the approval of the President of the United States. whose action in such matter shall be final and conclusive."

 "412. Bases of Tolls. -- * * *

 "(b) Tolls shall be prescribed at a rate or rates calculated to cover, as nearly as practicable, all costs of maintaining and operating the Panama Canal, together with the facilities and appurtcnances related thereto, including interest and depreciation, and an appropriate share of the net costs of operation of the agency known as the Canal Zone Government. * * *"

 It is incidental to the authorization for the transfer of the Canal to the defendant by the President and took effect upon the execution of that transfer on July 1, 1951. *fn2" Until then the Canal had been administered as an independent agency, under the Secretary of War and the Secretary of the Army.

 Defendant is a government corporation, reorganized in 1948 to conform with the Government Corporation Control Act. *fn3" Its predecessor, the Panama Railroad Company, had been a New York corporation, organized in 1849 for the purpose of constructing a railroad across the Isthmus. The United States had acquired all of its stock from the French stockholders who had previously attempted to dig the Canal. Until 1950, defendant operated facilities incidental to the Canal, such as a railroad, steamship line, dry docks and hotels, but it did not operate the Canal itself.

 The United States, as owner of the defendant, is represented by the President or such other officer of the United States as he may designate. The President or the designated officer is known as the stockholder. The Board of Directors is appointed by and holds office at his pleasure, except that the Governor of the Panama Canal Zone *fn4" must be a director and president of the corporation. *fn5"

 The transfer of the Canal was in furtherance of a plan to make the commercial facilities of the Canal self-supporting. *fn6" It was authorized upon a recommendation of the Bureau of the Budget to separate the facilities for the service of commerce from those required for national defense and the police functions of the Canal Zone Government, and to get the former under the businesslike accounting and budget control which a government corporation is permitted to use rather than those required of government departments. *fn7" It was precipitated by the belief that an increase in Canal tolls was necessary, and one had actually been proclaimed by the President although it was deferred pending consideration of the legislation. *fn8" It was hoped that the statute would establish a permanent tolls policy which would permit periodic adjustment of tolls, to keep the commercial facilities of the Canal self-supporting and make it most useful to commerce. *fn9"

 There is no question but that new tolls, if they are prescribed, must conform with Section 412. The first question is whether the statute which 'authorized' the fixing of flexible toll rates in accordance with this section, mandated a change to toll rates so computed, or whether it left to the discretion of the defendant, the continuation of the prevailing rates for an indefinite period of time. Plaintiffs claim that Section 411 mandates the prescription of new tolls in accordance with the formula contained in Section 412; that plaintiffs, as users of the Canal, have a right to transit at these prescribed tolls; that execution of the formula of Section 412 would result in a reduction in toll rates; and that the continuation of the previous tolls constitutes an unlawful exaction for the exercise of this right. It is assumed for the purpose of this motion that tolls prescribed pursuant to Section 412 would be lower than those now prevailing, but defendant contends that under such circumstances it was left with the discretion to keep the prevailing toll rates in effect.

 It is my conclusion that the statute did not compel prescription of tolls under the statutory formula as long as defendant was content with the then prevailing tolls. It fixed no time within which the new tolls were required to be prescribed. It expressly provides for the continuation of the prevailing tolls until changed by the defendant. Its language giving power to prescribe new tolls under the statute is permissive in form; it 'authorizes' the prescription of new tolls. *fn10" When the present provision is read against the pre-existing one, it is apparent that the language 'is authorized to prescribe and from time to time change' is identical with the language formerly authorizing the fixing of tolls by the President, whose power was indisputably discretionary. *fn11" The discriminating use of the permissive form in Section 411 and the mandatory form 'shall' in Section 412 manifests an intent to make this language permissive. *fn12" In addition, grammatically, the phrase subjecting tolls to the statutory formula, 'subject to the provisions of the section next following', modifies the words 'prescribe' and 'change' not 'authorize'. Consequently, it is a limit on the extent of change, not the decision whether to change or not. The essential language is as follows:

 'The Panama Canal Company is authorized to prescribe and from time to time change * * *, subject to the provisions of the section next following, the tolls that shall be levied for the use of the Panama Canal * * *'.

 In amending the section Congress did not leave that phrase in its original position immediately following the word 'authorize' but moved it away from that word to a position after the words 'prescribe' and 'change'. *fn13" Such a transposition was quite evidently a precaution against the very ambiguity which plaintiffs are now trying to read into the statute. *fn14"

 The legislative history is consistent with this construction of the statute's language. Congress in all probability expected that the new formula would be resorted to as soon as defendant could conveniently make the required studies and computations because it had been informed that the new formula would produce more revenue than the prevailing toll rates. Congress did not, however, suggest or consider compelling defendant to depart from the then prevailing tolls. It assumed defendant would do so voluntarily. The expectation that tolls would be increased is spread through the reports of the Congressional Committees and their hearings. *fn15" The estimate submitted to Congress by the Bureau of the Budget was that a five cent per ton increase would be required by the statutory formula, ...


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