Full opinion text
WILLIAM C. COLEMAN, District Judge. In the present case, trustees, appointed by this court for the American States Public Service Company, a Delaware corporation having its principal place of business in Baltimore, and being under the jurisdiction of this court by virtue of reorganization proceedings brought pursuant to section 77B of the Bankruptcy Act as amended (11 U.S. Code, § 207 [11 U.S.C.A. § 207]), have petitioned this court for instructions as to their further duties in these proceedings, in view of the enactment of the “Public Utility Act of 1935” (Public, No. 333, 74th Congress, approved August 26, 1935, title 1 [15 U.S.C.A. §§ 79, 79a, et seq.]) ; and, specifically, as to whether that act is valid, and if so, whether they are subject to its provisions. PROCEDURAL PACTS AND PLEADINGS. On June 8, 1934, the debtor corporation filed its original petition, which, on June 19, 1934, was approved, aftd on July 2, 1934, temporary trustees were appointed for the estate of the debtor. On July 21,1934, their appointment was made permanent, and it is they who have filed the petition now before this court. On August 25, 1934, the debtor filed a plan of reorganization which did not affect the debtor’s First Lien bondholders, but shortly thereafter, with leave of this court, this plan was withdrawn because found not feasible. On June 10, 1935, the debtor filed another plan of reorganization to which an amendment was filed on July 19, 1935. On that latter date this court approved the selection of reorganization managers for the purpose of supervising the deposit of securities of the debtor, the solicitation of acceptances, and the carrying out of the plan of reorganization, and directed the trustees to advance money not in excess of a total of $5,000 to defray the expenses of the reorganization managers in the performance of their duties. The court also approved, subject to confirmation of the plan of reorganization proposed by the debtor, payments out of the trust estate to dealers for expenses and compensation in connection with the solicitation of deposits and acceptances under the plan. Pursuant to an order of this court made on the same day, notice was given of a hearing of creditors and stockholders to be held on September 20, 1935, to consider the debtor’s plan for confirmation or modification. On August 15, 1935, a committee, representing at least 25 per cent, of the First Lien bonds outstanding, filed a plan of reorganization known as the “Swart Plan.” That plan was approved by this court as properly filed and also was scheduled for consideration at the hearing on September 20, 1935, by order of this court dated August 19, 1935. However, on September 16, 1935, the trustees filed the petition which gives rise to the present proceeding, asking to be instructed and directed as to their duties in the handling, management, and conservation of the property of the debtor intrusted to their care; and particularly whether they should continue to disburse money in furtherance of the pending plan of reorganization, or should register as a holding company under the Public Utility Act of 1935, title 1, and otherwise comply with the provisions of that law. The petition of the trustees states that they are advised by their counsel (appointed by this court) that this act is unconstitutional. The petition further alleges that if the act is constitutional, the trustees, as a “holding company” within the meaning of the term “holding company” as defined in the act, will be required to register with the Securities and Exchange Commission not later than December 1, 1935, and thereby commit the estate to the expenditure of a substantial sum of money in preparing and filing, within a reasonable time thereafter, a registration statement; that, accordingly, if the act is constitutional the trustees should cause to be prepared promptly, at the expense of the estate, such data as are required to be included in such registration statement; but that if, on the other hand, the act is unconstitutional, preparation of such data will constitute a waste of assets of the estate in a substantial amount; that a situation of even more immediate importance, however, arises out of the fact that if the act is constitutional, neither of the plans of reorganization that have been filed, nor any other feasible plan of reorganization of the debtor, can be consummated on account of the prohibitions contained in the act, and that any expenditures such as the court has heretofore authorized and directed to be made, looking to the consummation of a plan of reorganization, will constitute a waste of assets of the estate; further, that if the act is constitutional and the trustees fail to register on or before December 1, 1935, and if they or any of their subsidiary companies continue to engage in any of the activities forbidden by the act, they become subj ect to imprisonment as well as to a very heavy fine or fines, as great as two years’ imprisonment or'$10,000 fine, or both; that if the two other holding companies, which are subsidiaries of the debtor corporation, should likewise fail to comply with the act, they become subject to a fine as great as $200,000; that, on the other hand, if the act is unconstitutional, the trustees should not go to the expense entailed by registration and by the subsequent preparation and filing with the commission of the elaborate statements required by the act to be filed, but should continue to make expenditures as authorized and directed by this court, looking to the consummation of a plan of reorganization. Because of the filing of this petition by the trustees, this court adjourned the hearing on the plans of reorganization, in order that it might first hear and determine the questions presented by the petition, they clearly raising the question as to the application of the Public Utility Act of 1935, title 1. to the rights, duties, and obligations of the trustees in the present proceeding, since both of the plans of reorganization that are before the court contemplate the continued existence of a holding company (the debtor or a reorganized company) which will continue to hold more than 10 per cent, of the outstanding voting securities of various public utility companies, organized and operating in states other than that where the holding company would be organized or would operate; both contemplate the issuance of new securities not confined to a single class of common stock and bonds secured by a first lien upon physical property; neither restricts the operations of the holding company system as reorganized to a single inter-connected and co-ordinated system confined in its operations to a single area or region, in one or more states; and neither proposes that the plan shall be approved by the Securities and Exchange Commission pridr to its submission to this court—-all of which things, as will hereinafter be shown, being covered by the act. On September 16, 1935, Bureo, Inc., an investment corporation organized under the laws of Delaware, the owner and holder of $150,000 principal amount of First Lien 5% per cent. Gold bonds, Series A, of the debt- or corporation, filed a petition for leave to intervene, asserting that the Public Utility Act of 1935 should be treated as constitutional and in full force and effect; that it (Bureo, Inc.), as well as other creditors of the debtor corporation, will be greatly damaged and the assets available for payment of their claims will be wasted unless some plan of reorganization is accepted within a reasonable time or the estate of the debtor corporation is liquidated by order of this court; and, further, that unless the trustees are directed to register under the Public Utility Act of 1935, title 1, as a holding company, it will be impossible to progress a plan of reorganization of the debtor corporation or to have the same accepted and confirmed, or failing acceptance, to have the estate of the debtor corporation liquidated, inasmuch as the progress, acceptance, and confirmátion of any plan of reorganization or the liquidation of the estate failing the acceptance of such a plan will require the doing of acts which are forbidden by the Public Utility Act of 1935, unless the debtor corporation is a holding company and registered in accordance with the provisions of that act. On the same day Ferd Lautcnbach, the owner of $2,500 principal amount of Ten-Year 6 per cent. Gold debentures, Series A, of the debtor corporation, also filed a petition asking leave to intervene, claiming that the Public Utility Act of 1935 is unconstitutional for various reasons enumerated in the petition which, accordingly, prays that this act be so held by this court; that the trustees be directed not to register thereunder with the Securities and Exchange Commission, or to expend any money of the estate of the American States Public Service Company in so doing; but that they be directed to continue the advancement of money in furtherance of a plan for the reorganization of the debtor in accordance with the decrees and orders hereinbefore passed by this court. Both of these parties were allowed .to intervene, and this court ordered, on September 16, 1935, that the matter be set down for hearing on September 27, 1935, upon giving due notice of such hearing to the Securities and Exchange Commission, Washington, D. C.; to the United States Attorney for the District of Maryland, at Baltimore; to counsel for the reorganization managers under the debtor corporation’s plan of reorganization; and to counsel for the Bondholders’ Protective Committee which had intervened in these proceedings, otherwise known as the Swart Committee. The debtor corporation filed an answer, duly verified, to the trustees’ petition, admitting its material allegations and narrating additional facts as to the debtor corporation’s organization, status, and relation to its various subsidiaries, as well as the facts concerning their organization and activities. At the hearing, counsel for the government and for the Securities and Exchange Commission appeared, declined to ask leave to intervene, but did ask for leave to be heard as amici curi.e, which was granted. Counsel for the reorganization managers, appointed by the court pursuant to the provisions of section 77B of the Bankruptcy Act (11 USCA § 207), appeared at the hearing and stated that these managers felt, because of their position as quasi officers of the court, they should take no action or part in these proceedings unless directed by the court so to do, but should continue their efforts to bring to the attention of the security holders the plan of reorganization that had been filed by the debtor; reserving, however, the right to alter their position should they later deem it desirable to take some part in the proceedings, in behalf of the security holders whom they represent. Similarly, counsel for. the so-called Swart Committee, representing more than 25 per cent, of the First Lien bondholders of the debtor corporation, appeared at the hearing; stated that, in the opinion of that committee, if the Public Utility Act of 1935, title 1, is constitutional, under its provisions that committee’s plan of reorganization for the' debt- or corporation could not validly be approved or confirmed, leaving therefore liquidation as the only alternative under that act; but further stated that the Swart Committee was not yet prepared to take any definite stand in the present proceedings with respect to the Public Utility Act of 1935, title 1, and that, therefore, the committee desired merely to reserve the right to submit a brief, if prior to the expiration of such time limit as the court might fix for filing briefs, the committee might consider that it was its duty to take a definite position on the issue of the statute’s constitutionality. This court thereupon granted permission to both committees to intervene later, or to file briefs, should they so desire. As a result, on October 18, 1935, the reorganization managers filed a petition stating it to be their unanimous conclusion that it is of the first importance-to the security holders of the debtor corporation that an early determination be had of the question of the validity of the Public Utility Act, title 1, and therefore they petitioned the court to act in the matter; alleging further, in their petition, that they have received acceptances of the debtor’s plan of reorganization from approximately 39 per cent, (or $2,954,000 aggregate face amount) of the holders of the debtor’s First Lien 5% per cent, bonds; and acceptances from approximately 48 per cent, (or $1,579,-700 aggregate face amount) of the holders of the debtor’s Ten-Year 6 per cent. Convertible debentures; that, in their opinion, as advised by their counsel, if the Public Utility Act, title 1, is constitutional, the only alternative of the trustees of the debtor is to proceed with liquidation; and that either immediate liquidation or enforced liquidation at a predetermined time is against the best interests of all classes of security holders. The so-called Swart Committee has taken no further action in these proceedings. THE FACTS. The following facts as to the debtor corporation and its subsidiaries are material to the questions here raised and are uncontradicted : The debtor corporation was incorporated under the laws of the state of Delaware in 1928, with its principal place of business in Baltimore, Md. From time to time between the date of its incorporation and the filing of the original petition in these proceedings, it acquired securities of various water and electric companies. Its business is, and has always been solely, that of a holding company owning securities in various public utility companies. It has outstanding in the hands of the public throughout the United States $7,575,400 principal amount of its own First Lien 5% per cent. Gold bonds, Series A, due May 1, 1948; $3,-328,700 principal amount of its own Ten-Year 6 per cent. Gold debentures, Series A, due September 1, 1948; 16,622 shares of $6 cumulative preferred stock; and 100,578 shares of class A stock, and 99,729 shares of class B stock—all of these shares-being without nominal or par value. All or substantially all the First Lien bonds and debentures of the debtor were distributed or made the subject of public offerings by use of the mails or means or instrumentalities of interstate commerce subsequent to January 1, 1925. On October 1, 1935, a substantial part of the First Lien bonds and debentures of the debtor so distributed or made the subject of public offerings was owned or held by persons residing in various states. The trustees of the debtor corporation, by virtue of their appointment by this court, and their having qualified as such, own, control, or hold with power to vote, all the outstanding voting securities of the following eight companies, as well as the other securities hereinafter referred to, of these various companies: I. American States Electric Company, a Delaware corporation, the capitalization of which consists of 10,000 shares without nominal or par value of voting stock and $427,187.13 principal amount of notes. This company in turn owns, controls, or holds the following outstanding securities of the following companies: (1) Edison Sault Electric Company, a Michigan corporation, the capitalization of which consists of 20,000 shares without nominal or par value of voting stock and $500,000 principal amount of mortgage notes (all owned by American States Electric Company), and $96,500 principal amount of notes, all owned by the trustees. This company supplies electricity to the public in Chippewa and Mackinac counties, Mich., and sells electricity at wholesale at Manistique, Schoolcraft county, Mich. All the electricity sold by this company is distributed by it in Michigan, and also generated by it in Michigan, except occasional amounts purchased in Sault Ste. Marie, Mich., under a reciprocal breakdown arrangement with Michigan Northern Power Company. This company also supplies water and sewerage service in Mackinac county, Mich. (2) Dearborn-Ripley Light & Power Company, an Indiana corporation, the capitalization of which is $10,000 par value of voting stock (all owned by American States Electric Company), and $66,400 principal amount of notes, all owned by the trustees. This company supplies electricity to the public in Ripley and Dearborn counties, Ind. It purchases part of its electricity at its transformer at Greendale, Ind., from the city of Greendale, Ind., and part at its transformer at Aurora, Ind., from Public Service Company of Indiana. All the electricity sold by it is purchased by it in Indiana and distributed in Indiana. (3) Hydro Power Company, an Illinois corporation, the capitalization of which is $98,000 par value of voting stock (all owned by American States Electric Company), and $103,600 principal amount of notes, all owned by the trustees. This company in turn owns, controls, or holds the following outstanding securities of: Grimes Pass Power Company, an Idaho corporation, the capitalization of which is $60,000 par value of voting stock (all owned by Hydro Power Company), and $54,160.-83 principal amount of notes, all owned by the trustees. This company supplies electricity to the public in Boise county, Idaho. All the electricity sold by this company is generated by it in Idaho and distributed in Idaho. (4) Hermiston Light & Power Company, an Oregon corporation, the capitalization of which is $10,000 par value of voting stock and $25,000 principal amount of notes (all owned by American States Electric Company), and $55,000 principal amount of notes, all owned by the trustees. This company supplies electricity to the public in Umatilla county, Or. It generates approximately 70 per cent, of its electricity at its own plant in Oregon and purchases the balance at its transformer located in Hermiston, Umatilla county, Or., from Pacific Light & Power Company. All the electricity sold by this company is generated by it in Oregon or purchased by it in Oregon and distributed in Oregon. II. St. Ignace Public Service Company, a Michigan corporation, the capitalization of which is 1,000 shares without nominal or par value of voting stock and $100,000 principal amount of notes (all owned by the trustees), and $66,000 principal amount of mortgage notes in the hands of the public. This company owns electric and water distribution systems for the distribution of electricity and water to the public in Mackinac county, Mich. The systems of this company are leased to and operated by Edison Sault Electric Company. III. Upper Peninsula Power Company, a Michigan corporation, the capitalization of which is 20,000 shares without nominal or par value of voting stock (all owned by the trustees), and $5,800 principal amount of notes, all owned by Edison Sault Electric Company, $178,900 principal amount of mortgage notes and $114,600 principal amount of notes in the hands of the public. This company owns a system for the transmission of electricity in Chippewa, Mackinac, and Schoolcraft counties, Mich. The system of this company is leased to and operated by Edison Sault Electric Company. IV. Plains Light & Water Company, a Montana corporation, the capitalization of which is $25,000 par value of voting stock and $24,000 principal amount of notes (all owned by the trustees), and $8,000 principal amount of mortgage notes in the hands of the public. This company supplies electricity and water to the public in Sanders county, Mont. It has generating facilities but purchases all its electricity at its transformer at Plains, Mont., from Montana Power Company. All electricity sold by it is purchased by it in Montana and distributed in Montana. V. Rathdrum Electric Company, Limited, an Idaho corporation, the capitalization of which i£ $10,000 par value of voting stock and $32,000 principal amount of notes (all owned by the trustees), and $8,000 principal amount of mortgage notes in the hands of the public. This company supplies electricity to the public in Kootenai county, Idaho. It purchases all its electricity at Post Falls, Idaho, from Washington Water Power Company. All electricity sold by it is purchased by it in Idaho and distributed in Idaho. VI. Bear Valley Utility Company, a California corporation, the capitalization of which is $100,000 par value of voting stock, and $270,500 principal amount of notes (all held by the trustees). This company supplies electricity and water to the public in the community of Bear Valley, Cal. It purchases all its electricity at its transformer at Bear Valley, Cal., from Sierra Nevada Power Company. All the electricity sold by this company is purchased by it in California and distributed in California. VII. American States Water Service Company of California, a California corporation, the capitalization of which is $1,-373,300 par value of voting stock, and $3,-013,728 principal amount of no.tes (all owned by the trustees). This company supplies water to the public in California, principally within and adjacent to the city of Los Angeles. VIII. Kellogg Power & Water Company, an Idaho corporation, the capitalization of which is $65,000 par value of voting stock, and $92,997 principal amount of a note (all owned by the trustees). This company supplies water to the public in Shoshone county, Idaho. The facilities of every one of the above companies are situated entirely within the boundaries of a single state, which in each case is the state of incorporation. None of them transmits or distributes electric energy other than electric energy generated or purchased by it in-such state, and none of them transmits or sells any electric energy outside of the boundaries of such state; similarly, none of them obtains or supplies water, or conducts any sewerage business, outside of the boundaries of such state. None of them is engaged in any business other than the electric business or the electric, water, and sewerage business. It will be seen that one of the eight subsidiaries of the debtor corporation is itself merely a holding company, to wit, American States Electric Company, which owns and controls a subsidiary which, m turn, is also a holding company, to wit, Hydro Power Company. Neither of these “junior” holding companies itself generates, purchases, transmits, or distributes any electric power, nor is it engaged in any other business whatsoever except that of a holding company. Two of the remaining seven subsidiaries of the debtor corporation are solely electric power companies, two of them are solely water companies, and the remaining three are both electric power and water companies. Approximately 66 per cent, of the consolidated operating and nonoperating revenues of the trustees of the debtor corporation for the year ended July 31, 1935, accrued from the water business, and approximately 34 per cent, thereof from the electric business, conducted by the various subsidiary companies. Of the income received by the trustees for the six months ended June 30, 1935, approximately 70 per cent, was derived from subsidiary water companies, and approximately 30 per cent, from subsidiary electric companies. THE JUKISDICTIONAi QUESTIONS. At the hearing and in their briefs, counsel for the government, as well as counsel for the Securities and Exchange Commission, stressed the five following points: (1) That this court has no jurisdiction to determine the constitutionality of the Public Utility Act of 1935, title 1, in the present proceeding, because the petitions herein disclose no justiciable case or controversy between any of the petitioners as truly adverse litigants; (2) that even if the petitions are deemed to disclose such a justiciable controversy, this proceeding is premature because any such purported controversy is not immediate, and the proceeding does-not present to the court the infringement or threatened infringement of any direct and immediate right of any party to such controversy; (3) that even if the petitions are deemed to disclose such a justiciable controversy, this court should not assume jurisdiction of such controversy because the record discloses that this proceeding is collusive; (4) that if the Public Utility Act of 1935, title 1, threatens any direct or immediate right of the trustees or the creditors in this proceeding, the proper proceeding is for the trustees to seek authorization from the court to take only such action as the debtor itself might have taken in defense of the debtor’s rights prior to this proceeding; and (5) that since Congress, under its bankruptcy power and its power to constitute federal tribunals inferior to the Supreme Court, has the authority to regulate the practice and procedure to be followed in such courts and by trustees appointed by them, and since Congress in the Public Utility Act, title 1, has regulated the practice and procedure regarding the administration of utility-holding company estates in bankruptcy in these courts, neither the trustees nor the creditors they represent have such an interest as permits them to question the act, even assuming the act might infringe upon the constitutional rights of other persons, not parties to this proceeding, and that the provisions of the act are not separable in- their relation to bankruptcy proceedings. The fourth one of these arguments is too fictitious to warrant more than slight notice. It is, in effect, that if the trustees of the debtor corporation believe that any constitutional right of themselves or their beneficiaries is threatened, the proper procedure is for them to request the court to authorize them to contest the act in such manner and in such proceedings as the act might be contested by a holding company not in bankruptcy. This argument is seemingly based upon two misconceptions of the law, starting with the theory—equally untenable—that this proceeding is in substance a summary proceeding against the government which is not a party to this proceeding. These two misconceptions of the law are: (1) That the government is, in effect, an indispensable party to any proceeding in which the constitutionality of an act-of Congress may be in issue; and (2) that it is not the right, much less the duty, of equity trustees—for such are the present trustees by virtue of the express provisions of section 77B of the Bankruptcy Act under which they have been appointed and are acting— to ask instructions from the court concerning the administration of the property in their hands. On the first point, we need merely mention that our constitutional law from the founding of the nation to the present time is replete with decisions of the Supreme Court, some of them of far-reaching importance, declaring acts of Congress unconstitutional in suits to which the government was neither a party, nor appeared even as amicus curiae [see, among the more recent cases, Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 55 S.Ct. 854, 79 L.Ed. 1593, 97 A.L.R. 1106; Washington v. Dawson & Co., 264 U.S. 219, 44 S.Ct. 302, 68 L.Ed. 646; Knickerbocker Ice Co. v. Stewart, 253 U.S. 149, 40 S.Ct. 438, 64 L.Ed. 834, 11 A.L.R. 1145; Choate v. Trapp, 224 U.S. 665, 32 S.Ct. 565, 56 L.Ed. 941; Butts v. M. & M. Transportation Co., 230 U.S. 126, 33 S.Ct. 964, 57 L.Ed. 1422; Coyle v. Smith, Sec. of State of Oklahoma, 221 U.S. 559, 31 S.Ct. 688, 55 L.Ed. 853]; and where the government appeared only as amicus curiae [see, for example, First Employers’ Liability Cases, 207 U.S. 463, 28 S.Ct. 141, 52 L.Ed. 297; Second Employers’ Liability Cases, 223 U.S. 1, 32 S.Ct. 169, 56 L.Ed. 327, 38 L.R.A. (N.S.) 44; Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429, 15 S.Ct. 673, 39 L.Ed. 759; Hepburn v. Griswold, 8 Wall. (75 U.S.) 603, 19 L. Ed. 513; Ex parte Garland, 4 Wall. (71 U. S.) 333, 18 L.Ed. 366]. It is, of course, recognized that in many such instances the interest of the government was not as direct as here. But in others, it was even more so, as for example in the Pollock Case, supra, involving the validity of the Federal Income Tax Law. The same principle applies to all. As to the second point, citation of authorities to refute it would be equally superfluous. Trustees would be derelict in their duties if they did not seek instructions when in doubt upon any question materially relating to, or appearing to materially relate to, the performance of their duties. A trustee’s bill for instructions is the traditional form of procedure. Nashville, Chattanooga & St. Louis R. Co. v. Wallace. 288 U.S. 249, 263, 53 S.Ct. 345, 77 L.Ed. 730, 87 A.L.R. 1191; Fidelity National Bank v. Swope, 274 U.S. 123, 132, 47 S.Ct. 511, 71 L.Ed. 959. See, also, United States v. Bankers’ Trust Co., 294 U.S. 240, 55 S.Ct. 407, 79 L.Ed. 885, 95 A.L.R. 1352, and Continental Illinois Nat. Bank v. Chicago, Rock Island R. Co., 294 U.S. 648, 55 S.Ct. 595, 79 L.Ed. 1110. The same is true with respect to the reorganization managers who, on behalf of 'a very large portion of the security holders of the debtor corporation, have followed the trustees in requesting the court to make a prompt determination of the question as to the act’s validity. The first three arguments of the government also strike directly at the jurisdiction of this court to entertain the present proceeding. Two of them, namely, the first and third, may be treated together because in substance one and the same, in that they charge collusion by the various parties to the proceeding in the legal sense that here is a suit in which there is really no adverse interest—-that it is a friendly and arranged suit. In answer to this argument, it is sufficient to refer to the prayers of the petition of Bureo., Inc., which have already been referred to, which, summarized, are to the effect that that company as holder of $150,-000 of the debtor corporation’s First Lien bonds, does in fact believe (1) that the debt- or corporation should be liquidated, and (2) that the Public Utility Act of 1935, title 1, is constitutional, and (3) that by its provisions, the debtor corporation is, and should be compelled to liquidate; after registering with the Securities and Exchange Commission and doing the other things required by that act. The regularity of this petition of Bureo, Inc., duly signed and sworn to by an officer of the corporation (whose authority to act by and for the corporation stands unassailed), supported by the testimony of the company’s counsel, Mr. Buell, at the hearing, leaves no ground for asserting that there is a lack of truly adverse interests. It is difficult to see how the interests of the trustees and of this large creditor of the debtor corporation, to wit, Bureo, Inc., could be more truly adverse, unless we are to reject arbitrarily the petition of Burco, Inc., as being utterly false and fraudulent in conception and in execution, and unless we are likewise to assume the supporting testimony of Mr. Buell to be perjured—-things which this court has no ground for doing—because totally without Warrant on the pleadings and the evidence. In short, this court finds without hestitation that there are parties truly adverse in this proceeding, who, if not otherwise barred, are entitled to have their opposing claims judicially decided. The proceedings for the reorganization of the debtor under section 77B of the Bankruptcy Act, 11 U.S. C.A. § 207, constitute the “case” required by article 3, § 2 of the Constitution. Furthermore, a federal court which has jurisdiction of a proceeding also has jurisdiction of another proceeding which is a continuation of, or ancillary to, the first proceeding, although it might not have jurisdiction of the second one, if it were an original action. See Public Utilities Commission v. Landon, 249 U.S. 236, 39 S.Ct. 268, 63 L.Ed. 577; Local Loan Co. v. Hunt, 292 U.S. 234, 54 S.Ct. 695, 78 L.Ed. 1230, 93 A.L.R. 195. It is not forbidden “collusion” for the parties to a case, by agreement, to put it in such shape that the rights and obligations of the parties can be the more readily determined by the court, especially when matters of public moment are involved, requiring speedy settlement, regardless of an adverse effect upon the government’s interests. See Freuler v. Helvering, 291 U.S. 35, 54 S.Ct. 308, 78 L.Ed. 634. What has just been said applies equally to the status of the other intervening petitioner, Ferd Lautenbach, and his counsel. The attempt on the part of counsel for the government and for the Securities' and Exchange Commission to disparage the motives of both interveners and their counsel is not only baseless, but unworthy of any representative of any branch of our government, and an unwarranted reflection upon the trustees, officers of this court, appointed in this proceeding. This brings us to a consideration of the second jurisdictional question raised by the government and the Securities and Exchange Commission, namely, whether, even if this proceeding does disclose a controversy between adverse litigants, this proceeding is nevertheless premature, because any such controversy is not immediate and there is not presented to the court the infringement or threatened infringement of any direct and immediate right of any party to such controversy. A correct answer to this argument can only be given after an analysis and understanding of the Public Utility Act of 1935, and of what it purports to accomplish. We therefore pass now to a consideration of its provisions. ANALYSIS OF THE ACT. The act is entitled an act “to provide for control and regulation of public-utility holding companies, and for other purposes.” It is divided into two titles, which, in practical effect, constitute separate acts. Title 1 is headed “Control of Public-Utility Plolding Companies,” and embraces 'thirty-three sections, thirty-nine pages in length. Title 2 is headed “Amendments to Federal Water Power Act,” and is divided into three parts. The first part bears no separate heading, but part 2 is entitled “Regulation of Electric Utility Companies Engaged in Interstate Commerce,” and part 3 is entitled “Licensees and Public Utilities; Procedural and Administrative Provisions.’.’ Title 2 comprises, in all, forty-two sections, covering twenty-eight pages. The provisions of title 1 (15 U.S.C.A. §§ 79, 79a et seq.) are applicable to holding companies having electrical or retail gas subsidiaries; also to subsidiary companies of such holding companies, and to “affiliates” of all such companies; to “mutual service companies” and to persons whose principal business is the performance of service, sales, or construction contracts with such holding companies or such public utility companies. Administration of title 1 is vested in the Securities and Exchange Commission. The provisions of title 2 (16 U.S.C.A. §§ 791a, 796 et seq.) apply to companies owning or operating facilities for the transmission of electrical energy, or for the sale thereof at wholesale in interstate commerce or (to the extent specifically provided in the title) for the generation of energy for such transmission or sale, and to water power licensees. Administration of title 2 is vested in the Federal Power Commission. By express provision in title 2 (section 318 [16 U.S.C.A. § 825q]), if any individual or company is subject to any requirements of title 1, as well as to any requirements under title 2, the requirements of title 1 shall alone prevail, unless the Securities and Exchange Commission has granted an exemption from such requirements, in which event the requirements of title 2 only shall apply. By virtue of this provision and the particular facts, we are not concerned in this proceeding with title 2. While the thirty-three sections of title 1 are grouped under a large number, the short title of which is the “Public Utility Holding Company Act of 1935,” and variety of subheadings, all of the sections may, for convenience and greater clarity, be classified into seven major divisions, as follows: 1. Declaration of Purpose or Policy of the Act (section 1, 15 U.S.C.A. § 79a); 2. Definitions (section 2, 15 U.S.C.A. § 79b); 3. Exemptions (section 3, 15 U.S.C.A. § 79c); 4. Regulation of Unregistered Holding Companies (section 4, 15 U.S.C.A. § 79d); 5. Registration and Regulation of Holding Companies and their Subsidiaries (sections 5-15, inclusive, 15 U.S.C.A. §§ 79e to 79o); 6. Enforcement, both Civil and Criminal (sections 16-29, inclusive, 15 U.S.C.A. §§ 79p to 79z—3); and 7. Miscellaneous (section 30, 15 U.S. C.A. § 79z—4, studies and surveys by the commission; section 31, 15 U.S.C.A. § 79z—5, employees of the commission; section 32, 15 U.S.C.A. § 79z—6, separability of the act’s provisions; and section 33, 15 U.S.C.A. § 79, short title of the act). Taking up these seven major divisions of the act in their order, we will now analyze the first four more critically. Division 1, covering the purpose or policy of the act, must be read as a whole, in order to be fully comprehended. It is as follows: “Section 1. (a) Public-utility holding companies and their subsidiary companies are affected with a national public interest in that, among other things,-(1) their securities are widely marketed and distributed by means of the mails and instrumentalities of interstate commerce and are sold to a large number of investors in different States; (2) their service, sales, construction, and other contracts and arrangements are often made and performed by means of the mails and instrumentalities of interstate commerce; (3) their subsidiary public-utility companies often sell and transport gas and electric energy by the use of means and instrumentalities of interstate commerce; (4) their practices in respect of and control over subsidiary companies often materially affect the interstate commerce in which those companies engage; (5) their activities extending over many States are not susceptible of effective control by any State and make difficult, if not impossible, effective State regulation of public-utility companies. “(b) Upon the basis of facts disclosed by the reports of the Federal Trade Com-' mission made pursuant to S.Res. 83 (Seventieth Congress, first session), the reports of the Committee on Interstate and Foreign Commerce, House of Representatives, made pursuant to H.Res. 59 (Seventy-second Congress, first session) and H.J.Res. 572 (Seventy-second Congress, second session) and otherwise disclosed and ascertained, it is hereby declared that the national public interest, the interest of investors in the securities of holding companies and their subsidiary companies and affiliates, and the interest of consumers of electric energy and natural and manufacture) gas, are or may be adversely affected— “(1) when such investors cannot obtain the information necessary to appraise the financial position or earning power of the issuers, because of the absence of uniform standard accounts; when such securities are issued without the approval or consent of the States having jurisdiction over subsidiary public-utility companies; when such securities are issued upon the basis of fictitious or unsound asset values having no fair relation to the sums invested in or the earning capacity of the properties and upon the basis of paper profits from intercompany transactions, or in anticipation of excessive revenues from.subsidiary public-utility companies; when such securities are issued by a subsidiary public-utility company under circumstances which subject such company to the burden of supporting an overcapitalized structure .and tend to prevent voluntary rate reductions; “(2) when, subsidiary public-utility companies are subjected to excessive charges for services, construction work, equipment, and materials, or enter into transactions in which evils result from an absence of arm’s-length bargaining or from restraint of free and independent competition; when service, management, construction, and other contracts involve the allocation of charges among subsidiary public-utility companies in different States so as to present problems of regulation which cannot be dealt with effectively by the States; “(3) when control of subsidiary public-utility companies affects the accounting practices and rate, dividend, and other policies of such companies so as to complicate and obstruct State regulation of such companies, or when control of such companies is exerted through disproportionately small investment; “(4) when the growth and extension of •holding companies bears no relation to economy of management an'd operation or the integration and coordination of related operating properties; or “(5) when in any other respect there is lack of economy of management and operation of public-utility companies or lack of efficiency and adequacy of service rendered by such companies, or lack of effective public regulation, or lack of economies in the raising of capital. “(c) When abuses of the character above enumeratéd become persistent and wide-spread the holding company becomes an agency which, unless regulated, is injurious to investors, consumers, and the general public; and it is hereby declared to be the policy of this title, in accordance with which policy all the provisions of this title shall be interpreted, to meet the problems and eliminate the evils as enumerated in this section, connected with public-utility holding companies which' are engaged in interstate commerce or in activities which directly affect or burden interstate commerce; and for the purpose of effectuating such policy to compel the simplification of public-utility holding-company systems and the elimination therefrom of properties detrimental to the proper functioning of such systems, and to provide as soon as practicable for the elimination of public-utility holding companies except as otherwise expressly provided in this title.” (15 U.S.C.A. § 79a.) While by no means entirely clear, because of the sweeping character of this declaration of policy, we interpret it as saying, first, that public utility holding companies and their subsidiaries, generally, without regard to whether they do in fact and in law engage in interstate commerce, are “affected with a national public interest”; and, second, that therefore certain enumerated evils of which all public utility holding companies and their subsidiaries, taken as a whole, have been found by the Congress to be guilty, must be eliminated on the assumption of the Congress, whether it he a fact or not, that these enumerated evils are so “connected with public-utility holding companies which are engaged in interstate commerce or in activities which directly affect or burden interstate commerce,” in the legal or constitutional sense as to give the Congress power to legislate with respect to these enumerated evils. That such interpretation is required, follows necessarily from the language employed in the enumeration of the five different classes of abuses or evils which it is the declared policy of the act to regulate or to eliminate, for in not a single one of these different classes is “interstate commerce” alluded to, much less made the criterion for the exertion of the congressional power. We are not unmindful of the direct reference to the mails and instrumentalities of interstate commerce in subsection (a) (1 to 4), of section 1, 15 U.S.C.A. § 79a (a) (1-4); but while the right to exert the congressional power may have been intended to be predicated upon the mere use of the mails and instrumentalities of interstate commerce for the distribution of the securities of holding companies and their subsidiaries (section 1 (a) (1)—a question which will be dealt with later—the wording of subsection (a) is obviously too broad, when taken in its entirety, to permit of such a narrowing down. Note the use of the word “often” in subsection (a) (2), (3), and (4). Nor have we lost sight of the fact that interstate commerce is once more—but only once more—referred to, that is, in subsection (c), the’ closing paragraph of section 1, where we find this declaration: “It is hereby declared to be the policy of this title, in accordance with which policy all the provisions of this title shall be interpreted, to meet the problems and eliminate the evils as enumerated in this section, connected with public-utility holding companies which are engaged in interstate commerce or in activities which directly affect or burden interstate commerce.” (Italics inserted.) This declaration, it must be noted, is not confined to the regulation of the interstate commerce activities of holding companies, or of their activities which directly affect or burden interstate commerce, but covers various previously enumerated “problems” and “evils” “connected” with such companies so engaged, which may be, in legal contemplation, either closely or remotely so “connected,” and either through transactions interstate in character, or intrastate in character, or both. But whether we resolve the doubt over the phraseology of this entire first section in favor of the broad or the narrow interpretation is unimportant, unless the particular construction adopted is, in fact, supported by the express terms contained in the succeeding sections, that is, in the body of the act, because section 1 is but a preamble and cannot foreclose judicial inquiry. It cannot enlarge or confer powers, or control the words employed in the provisions of the act itself. Yazoo Railroad Co. v. Thomas, 132 U.S. 174, 10 S.Ct. 68, 33 L.Ed. 302; Wolff Packing Co. v. Court of Industrial Relations, 262 U.S. 522, 43 S.Ct. 630, 67 L.Ed. 1103, 27 A.L.R. 1280; Panama Refining Co. v. Ryan, 293 U.S. 388, 55 S.Ct. 241, 79 L.Ed. 446; Schechter Poultry Corporation v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570, 97 A.L.R. 947. So we must proceed to examine these provisions. First, as to definitions: “Persons” means an individual or company. Section 2 (a) (1), 15 U.S.C.A. § 79b(a) (1). “Company” means a corporation, a partnership, an association, a joint-stock company, a business trust, or an organized group of persons, whether incorporated or not; or any receiver, trustee, or other liquidating agent of any of the foregoing in his capacity as such. Section 2 (a) (2), 15 U.S.C.A. § 79b (a) (2). “Electric utility company” means any company which owns or operates facilities for the generation and distribution for sale of electric energy. The commission shall declare a company not an electric utility company if it finds (A) such company is primarily engaged in a business other than an electric utility, and sells such a small amount of electric energy that it is not necessary in the public interest or for protection of investors or consumers that it be considered an electric utility company, or (B) such company operates in a single state and substantially all of its securities are owned by a manufacturing company which uses energy which it generates, and such manufacturing company is not controlled by any other company. The filing in good faith of an application shall exempt applicant until the commission has acted on such application. The commission may require periodic applications for renewal of exemption order, may revoke or modify such order, and may attach conditions or terms thereto. The commission may by rule or regulation exempt any class or classes of companies or persons who fall within (A) or (B). Section 2 (a) (3), 15 U.S.C.A. § 79b (a) (3). “Gas utility company” means any company which owns or operates facilities for the. retail distribution of natural or manufactured gas. Provisions are made for exemption similar to those for an “electric utility company.” Section 2 (a) (4), 15 U.S.C.A. § 79b(a) (4). “Public utility company” means electric utility or gas utility company. Section 2 (a) (5), 15 U.S.C.A. § 79b (a) (5). “Holding company” means (Á) any company which directly or indirectly owns, controls, or holds with power to vote, 10 per cent, or more of the outstanding voting securities of a public utility company or of a holding company; and (B) any person found by the commission to exercise either along or with other persons such a controlling influence over a public utility-company or a holding company as to make it necessary in the interest of the public, investors, or consumers that such person be subject to the act. The commission shall declare a company not a holding company under clause (A) upon finding the company (i) does not in any manner control a public utility company or holding company, (ii) is not an intermediary company through which such control is exercised, and (iii) does not in any manner exercise such a controlling influence over the management and policies of a public utility company or holding company as to make it necessary that it be subject to the act. The filing in good faith of an application for exemption under this provision shall exempt the applicant until the commission has acted on such application, which the commission shall do within a reasonable time. The commission may require periodic applications for renewal of the exemption order, may' revoke or modify such order, and may attach conditions or terms thereto. Section 2 (a) (7), 15 U.S.C.A. § 79b(a) (7). “Subsidiary company” means (A) any company, 10 per cent, or more of whose outstanding voting securities are owned, controlled, or held with power to vote directly or indirectly by a holding company; (B) any person whose management or policies are subject to a controlling influence by a holding company or companies either alone or with other persons so as to make it necessary in the interest of the public, investors, or consumers that such person be subject to the act. The commission shall declare a company not a subsidiary under clause (A) upon finding (i) such company is not controlled in any manner by a holding company, (ii) is not an intermediary company through which such control is exercised, and (iii) its management and policies are not subject to a controlling influence by any holding company or companies so as to make it necessary that it be subject to the act. The filing in good faith of an application for exemption under this provision shall exempt the applicant until the commission has acted on such application, which the cominission shall do within a reasonable time. The commission may require periodic applications for renewal of exemption order and may revoke or modify such order. Section 2 (a) (8), 15 U.S.C.A. § 79b(a) (8). “Holding company system” means a holding company, together with all its subsidiaries, and mutual service companies of which the holding company or any subsidiaries are members. Section 2 (a)(9), 15 U.S.C.A. § 79b(a) (9). “Associate company” means any company in same holding company system. Section 2 (a) (10), 15 U.S.C.A. § 79b (a) (10). “Affiliate” means (A) any person directly or indirectly owning, controlling, or holding with power to vote 5 per cent, of outstanding voting securities of a specified company; (B) any company, 5 per cent, of whose voting securities are owned, controlled, or held with power to vote, by a specified company; (C) officer or director of specified company or of any company which is an affiliate thereof under (A); (D) person so related to specified company that, in the opinion of the commission, after notice and opportunity for hearing, there is liable to be such an absence of arm’s length bargaining as to make it necessary in the public interest or for protection of investors or consumers that he be considered an affiliate. Section 2 (a) (11), 15 U.S.C.A. § 79b(a) (11). “Registered holding company” means any person registered under section 5 (15 U.S.C.A. § 79e). Section 2 (a) (12), 15 U.S.C.A. § 79b (a) (12). “Mutual service company” means any company approved as such under section 13. Section 2 (a) (13), 15 U.S. C.A. § 79b (a) (13). “Member company” means a company which is member of group served by a mutual service company. Section 2 (a) (14), 15 U.S.C.A. § 79b(a) (14). “Integrated public-utility system” means (A) electric: One or more units of generating plants and/or transmission lines and/or distributing facilities, owned by one or more electric utility companies, actually or capable of being physically interconnected, which may be economically operated, under normal conditions, as a single interconnected and coordinated system, in a single region in one or more states; not so large as to impair, advantages of localized management, efficient operation, and effectiveness of regulation; and (B) gas: One or more gas utility companies so located and related that they can be operated more economically as a single coordinated system, in a single region in one or more states; not so large as to impair advantages of localized management, efficient operation, and effective regulation. Companies deriving natural gas from a common source of supply may be deemed to be in a single region. Section 2 (a) (29), 15 U.S.C.A. § 79b(a) (29). No person shall be deemed to be a holding company, or a subsidiary, solely because of “controlling influence,” or an affiliate solely because of “absence of arm’s length bargaining,” except upon order of the commission after hearing, or declaring a class, of which such person is a member, to be affiliates. Such order shall not become effective until at least 30 days after mailing copy thereof to such person, and may be revoked by the commission. In case of determination of affiliates by class or classes, such shall not become effective until 30 days after appropriate publication. Section 2 (b), 15 U.S.C.A. § 79b(b). Various other definitions are given, but because so obvious, they need not be here referred to. Next as to exemptions: The commission, by rules and regulations upon its own motion, or by order upon application, shall exempt a holding company and subsidiaries, . except in so far as it finds exemption would be detrimental to public interest, or interests of investors or consumers, if (1) business of holding company and all public utility subsidiaries from which it derives any material part of its income, is carried on substantially in a single state in which all such companies are organized; (2) holding company is predominantly a public utility company whose operations as such do not extend beyond the state in which organized and states contiguous thereto; (3) holding company is primarily engaged or interested in business other than that of public utility and (A) not deriving material part of its income from subsidiaries engaged principally in public utility business, or (B) if deriving material part of its income from such subsidiaries, owning substantially all of the outstanding securities of such companies; (4) temporarily a holding company because of a liquidation or distribution in connection with a bona fide debt previously contracted or a bona fide arrangement for underwriting or distribution of securities; or (5) the principal business in the United States of neither the holding company nor its subsidiaries from which it derives any material part of its income is that of a public utility company. Section 3 (a), 15 U.S.C.A. § 75c(a). The commission shall exempt any subsidiary company from any provision of the act, when application thereof to such subsidiary is not necessary in interest of the public or investors, if company derives no material part of its income from source within United States and neither it nor any of its subsidiaries is a public-utility operating in United States. Section 3(b), 15 U.S.C.A. § 79c(b). The filing in good faith of an application under subsection (a) by a person other than a registered holding company, or under subsection (b) by a subsidiary company, exempts applicant until the commission has acted thereon. Upon change of circumstances the commission may revoke any exemption granted under above provisions. Section 3 (c), 15 U.S.C.A. § 79c(c). The commission ' may conditionally or unconditionally exempt any class or classes of persons from obligations and liabilities of subsidiaries or affiliates, where exemption is deemed necessary or appropriate in interest of public, investors, or consumers arid not contrary to purposes of the Act. Section 3 (d), 15 U.S.C.A. § 79c(d). Next as to regulation of unregistered holding companies: The act makes it unlawful after December 1, 1935, for any holding company, unless registered, directly or indirectly, to (1) sell, transmit, or distribute, or to own or operate utility assets for the transmission or distribution of, gas or electricity in interstate commerce; (2) use mails or instrumentalities of interstate commerce to (a) negotiate or perform service, sales, or construction contracts; (b) distribute, offer for sale or exchange securities of any holding company, public utility, or affiliate; (c) acquire or negotiate for acquisition of securities or utility assets; (.3) engage in any business in interstate commerce ; (4) own or control securities of subsidiary that does any of foregoing. Section 4 (a), 15 U.S.C.A. § 79d(a). Distribution of securities of holding company through instrumentality of interstate commerce since January 1, 1925, requires registration in conformity with the act, if any such securities were held on October 1, 1935, by nonresidents of state in which company is organized. Section 4 (b), 15 U.S.C.A. § 79d (b). APPLICATION OP THE ACT TO THE DEBTOR CORPORATION, ITS SUBSIDIARIES, AND THE TRUSTEES. From the aforegoing analysis of those provisions of the act which are most pertinent to our immediate inquiry, it will be seen that the trustees of the debtor corporation in their capacity as such, and also the American States Electric Company and the Hydro Power Company, are each a holding company within the meaning of the act, because (1) by section 2 (a) (7), 15 U.S.C.A. § 79b (a) (7), that term embraces any company which directly or indirectly owns, controls, or holds with power to vote 10 per cent, or more of the outstanding voting securities of a public utility company; and (2) because of section 2 (a) (2) of the act, 15 U.S.C.A. § 79b(a) (2), a company includes not merely corporations but “any receiver, trustee, or other liquidating agent” of any corporation “in his capacity as such.” It has been suggested that the words “other liquidating agent” employed to qualify the term “trustee” should be given a strict interpretation, and that since the present trustees are not now engaged in liquidating the debtor corporation, they are not the type of trustees contemplated by section 2 (a) (2). However, this interpretation is, we think, too strained and also contradicted by the history of the enactment of this provision of the law. It appears that in both the Senate (S. 1725) and House (H.R. 5423) texts of the bill as originally introduced, the phrase was “any receiver, trustee, or other liquidating agent of any of the foregoing.” Later, when the House Committee reported the bill, these words were stricken out. Thereafter, the conferees adopted a definition which was a combination of both the House and Senate definition, and which read as does the law as it now stands; the phrase “in his capacity as such” being added. On this point the report to the House by the House conferees stated (page 65) that in section 2 (a) (2) of the Senate Bill, the definition of “company” includes “a receiver, trastee, or liquidating agent” of a company. The substitute agreed to in conference adopts this language with an addition, so that the definition only includes such a person “in his capacity as such.” It is to be noted that the word “other” is omitted in this report, which would seem to indicate that the draftsmen of the definition had no intention of limiting the word “receiver” or the word “trustee” by the words “other liquidating agent.” To limit the scop