U.S. Supreme Court Ashwander v. Tennessee Valley Auth., 297 U.S. 288 (19 !" Ashwander v.

Tennessee Valley Author#ty $os. %& and %&% Ar'ued (e)em*er 19, 2&, 19 + (e)#ded ,e*ruary 17, 19 ! 297 U.S. 288 CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT Syllabus 1. Owners of a minority of the preferred shares, with voting power, in a corporation have standing to sue in its right to prevent the carrying out of a contract executed in its name by the directors with an agency of the United States, upon the grounds that the contract is unconstitutional, and that its performance will cause irreparable injury to the interests of the corporation. P. !" U. S. #1$. %n order to establish the stoc&holders' right of suit, it is not necessary to show that, in executing the contract, the directors acted with fraudulent intent or under legal duress or ultra vires of the corporation. %n the absence of an ade(uate legal remedy, it is enough to show the breach of duty involved in the injurious, illegal action. )his may consist in yielding to illegal government demands. )he fact that the directors, in the exercise of their judgment, resolved to comply with such demands is not an ade(uate ground for denying to the stoc&holders an opportunity to contest their validity.

. )he opportunity to resort to e(uity, in the absence of an ade(uate legal remedy, in order to prevent illegal transactions by those in control of corporate properties should not be curtailed because of reluctance to decide constitutional (uestions. P. !" U. S. # 1. #. *stoppel in e(uity must rest on substantial grounds of prejudice or change of position ++ not on technicalities. P. !" U. S. # . ,. -here a contract between an electric power corporation and the )ennessee .alley /uthority, a federal agency, for the sale by the former to the latter of transmission lines leading from a government dam where electricity was generated, was attac&ed in behalf of the corporation upon the ground that legislation by 0ongress purporting to empower the federal agency was unconstitutional ++ held that the corporation was not estopped by having bought electricity of the 1overnment at the dam before and after the passage of the legislation, or by having applied to a state public service commission for approval of the contract, or by a delay of some months in the bringing of a stoc&holders' suit to set the contract aside. P. !" U. S. # #. Page !" U. S. $! )he principle that one who accepts the benefit of a statute may not (uestion its constitutionality held inapplicable. 2. )he judicial power does not extend to the determination of abstract (uestions. P. !" U. S. # ,. 3. )he /ct providing for declaratory judgments does not attempt to change the essential re(uisites for the exercise of judicial power. 4y its terms, it applies to 5cases of actual controversy,5 meaning a controversy of a justiciable nature, thus excluding advisory decrees upon hypothetical states of fact. P. !" U. S. # 2.

". )he dam across the )ennessee 6iver at 7uscle Shoals, &nown as the -ilson 8am, was constructed pursuant to the 9ational 8efense /ct of :une #, 1!13, in the exercise of constitutional functions of the ;ederal 1overnment, <a= as a means of assuring abundant electric energy for the manufacture of munitions in the event of war> <b= to improve the navigability of the river. P. !" U. S. # 3. $. :udicial notice is ta&en of the international situation existing when the /ct of 1!13 was passed. %ndisputably, the -ilson 8am and its auxiliary plants, including a hydroelectric power plant, are, and were intended to be, adapted to the purposes of national defense. P. !" U. S. # ". !. )he power to regulate interstate commerce includes the power to remove obstructions to navigation from the navigable rivers of the United States. P. !" U. S. # $. 1?. %n the execution of the -ilson 8am project for the constitutional purposes above stated, the United States ac(uired full title to the dam site, with all riparian rights. -ater power, an inevitable incident of the construction of the dam, came into the exclusive control of the ;ederal 1overnment, and was convertible into electric energy. Held: <1= )hat the water power, the right to convert it into electric energy, and the electric energy thus produced, constitute property belonging to the United States. P. !" U. S. ##?. < = )hat this electric energy so produced at the -ilson 8am is property of which 0ongress may dispose pursuant to the authority expressly granted by @ #, /rt. %., of the 0onstitution. P. !" U. S. ##?. <#= )he 9inth and )enth /mendments do not apply to rights which are expressly

granted by the 0onstitution to the ;ederal 1overnment. P. !" U. S. ##?. <,= )he authority of 0ongress to dispose of electric energy generated at the -ilson 8am is not limited to a surplus necessarily created in the course of ma&ing munition of war or operating Page !" U. S. !? the wor&s for navigation purposes, but extends to the remainder of the available energy, which would otherwise be lost or wasted. P. !" U. S. ##2. <2= )he method of disposing of government property under the constitutional provision <@ #, /rt. %.= must be appropriate to the nature of the property, and be adopted in the public interest, as distinguished from private or personal ends, and, the 0ourt assumes, it must be consistent with the foundation principles of our dual system of 1overnment, and must not be contrived to govern the concerns reserved to the States. P. !" U. S. ##$. 11. )he 1overnment, acting through its agency, the )ennessee .alley /uthority, undertoo& to dispose of electric energy generated at the -ilson 8am by sale to a power company by interchange of energy with the company, and by purchase from the company of certain transmission lines leading from the dam and providing the means of distributing such energy to a large population within fifty miles. )he power company had theretofore been buying energy from the 1overnment at the dam, and was apparently the only customer to whom it could be sold there. )he purchase of the lines was to enable the 1overnment to see& a wider mar&et. Held: <1= )hat there was no basis for concluding that the contract exceeded the federal power to dispose of property, and invaded rights reserved to the State or to the people. P. !" U. S. ##$.

< = )he power company had no constitutional right to insist that the energy should be sold to it at the dam or go to waste. P. !" U. S. ##!. )he decision on the constitutional (uestion is strictly limited to the right of the 1overnment to dispose of the energy itself ++ which is simply the mechanical energy, incidental to falling water at this dam, converted into electric energy, susceptible of transmission ++ and the right to ac(uire these transmission lines as a facility for disposing of that energy. )he 1overnment rightly conceded at the bar that it was without constitutional authority to ac(uire or dispose of electric energy except as it comes into being in the operation of wor&s constructed in the exercise of some power delegated to the United States. )he (uestion whether it might constitutionally use the energy generated at -ilson 8am in carrying on manufacturing or commercial enterprises not related to the purposes for which the 1overnment was established, is not involved in this case> nor is the (uestion whether, for disposing of the energy, the 1overnment could ac(uire or operate local or urban Page !" U. S. !1 distribution systems. )he 0ourt expresses no opinion as to such (uestions, nor as to the status of any other dam or power development in the )ennessee .alley, whether connected with or apart from the -ilson 8am, nor as to the validity of the )ennessee .alley /uthority /ct or of the claims made in the pronouncements and program of that /uthority, apart from the (uestions discussed in relation to the particular provisions of the contract above mentioned affecting the Power 0ompany. P. !" U. S. ##!. "$ ;. d 2"$, affirmed.

0ourt, by which that court, at the suit of preferred stoc&holders of the /labama Power 0ompany, set aside a contract that had been entered into by the 0ompany and the )ennessee .alley /uthority involving the sale and exchange of electric power generated at a government dam, and the ac(uisition by the /uthority of certain transmission lines from the Power 0ompany. Page !" U. S. #12 76. 0A%*; :US)%0* AU1A*S delivered the opinion of the 0ourt. On :anuary ,, 1!#,, the )ennessee .alley /uthority, an agency of the ;ederal 1overnment, B;ootnote 1C entered into a contract with the /labama Power 0ompany providing <1= for the purchase by the /uthority from the Power 0ompany of certain transmission lines, substations, and auxiliary properties for D1,???,???, < = for the purchase by the /uthority from the Power 0ompany of certain real property for D12?,???, <#= for an interchange of hydroelectric energy, and in addition for the sale by the /uthority to the Power 0ompany of its 5surplus power,5 on stated terms, and <,= for mutual restrictions as to the areas to be served in the sale of power. )he contract was amended and supplemented in minor particulars on ;ebruary 1# and 7ay ,, 1!#,. B;ootnote C )he /labama Power 0ompany is a corporation organiEed under the laws of /labama, and is engaged in the generation of electric energy and its distribution generally throughout that State, its lines reaching 33 counties. )he transmission lines to be purchased by the /uthority extend from -ilson 8am, at the 7uscle Shoals plant owned by the United States on the )ennessee 6iver in Page !" U. S. #13

0*6)%O6/6%, !3 U.S. 23 , to review a decree reversing a decree of the 8istrict

northern /labama, into seven counties in that State within a radius of about 2? miles. )hese lines serve a population of approximately 1!?,???, including about 1?,??? individual customers, or about one+ tenth of the total number served directly by the Power 0ompany. )he real property to be ac(uired by the /uthority <apart from the transmission lines above mentioned and related properties= is adjacent to the area &nown as the 5:oe -heeler dam site,5 upon which the /uthority is constructing the -heeler 8am. )he contract of :anuary ,, 1!#,, also provided for cooperation between the /labama Power 0ompany and the *lectric Aome and ;arm /uthority, %nc., a subsidiary of the )ennessee .alley /uthority, to promote the sale of electrical appliances, and, to that end, the Power 0ompany, on 7ay 1, 1!#,, entered into an agency contract with the *lectric Aome and ;arm /uthority, %nc. %t is not necessary to detail or discuss the proceedings in relation to that transaction, as it is understood that the latter corporation has been dissolved. )here was a further agreement on /ugust !, 1!#,, by which the /labama Power 0ompany gave an option to the )ennessee .alley /uthority to ac(uire urban distribution systems which had been retained by the Power 0ompany in municipalities within the area served by the transmission lines above mentioned. %t appears that this option has not been exercised, and that the agreement has been terminated. Plaintiffs are holders of preferred stoc& of the /labama Power 0ompany. 0onceiving the contract with the )ennessee .alley /uthority to be injurious to the corporate interests and also invalid, because beyond the constitutional power of the ;ederal 1overnment, they submitted their protest to the board of directors of the Power 0ompany and demanded that steps should be ta&en to have the contract annulled. )he board refused, and the

Page !" U. S. #1" 0ommonwealth F Southern 0orporation, the holder of all the common stoc& of the Power 0ompany, declined to call a meeting of the stoc&holders to ta&e action. /s the protest was unavailing, plaintiffs brought this suit to have the invalidity of the contract determined and its performance enjoined. 1oing beyond that particular challenge, and setting forth the pronouncements, policies and programs of the /uthority, plaintiffs sought a decree restraining these activities as repugnant to the 0onstitution, and also as&ed a general declaratory decree with respect to the rights of the /uthority in various relations. )he defendants, including the /uthority and its directors, the Power 0ompany and its mortgage trustee, and the municipalities within the described area, filed answers, and the case was heard upon evidence. )he 8istrict 0ourt made elaborate findings and entered a final decree annulling the contract of :anuary ,, 1!#,, and enjoining the transfer of the transmission lines and auxiliary properties. )he court also enjoined the defendant municipalities from ma&ing or performing any contracts with the /uthority for the purchase of power and from accepting or expending any funds received from the /uthority or the Public -or&s /dministration for the purpose of constructing a public distribution system to distribute power which the /uthority supplied. )he court gave no consideration to plaintiffs' re(uest for a general declaratory decree. )he /uthority, its directors, and the city of ;lorence appealed from the decree, and the case was severed as to the other defendants. Plaintiffs too& a cross+appeal. )he 0ircuit 0ourt of /ppeals limited its discussion to the precise issue with respect to the effect and validity of the contract of :anuary ,, 1!#,. )he 8istrict 0ourt had found that the electric energy re(uired for

the territory served by the transmission lines to be purchased Page !" U. S. #1$ under that contract is available at -ilson 8am without the necessity for any interconnection with any other dam or power plant. )he 0ircuit 0ourt of /ppeals accordingly considered the constitutional authority for the construction of -ilson 8am and for the disposition of the electric energy there created. %n the view that the -ilson 8am had been constructed in the exercise of the war and commerce powers of the 0ongress and that the electric energy there available was the property of the United States and subject to its disposition, the 0ircuit 0ourt of /ppeals decided that the decree of the 8istrict 0ourt was erroneous, and should be reversed. )he court also held that plaintiffs should ta&e nothing by their cross+appeal. "$ ;. d 2"$. On plaintiffs' application, we granted writs of certiorari. First. The right o !lai"ti s to bri"g this suit. Plaintiffs sue in the right of the /labama Power 0ompany. )hey sought unsuccessfully to have that right asserted by the Power 0ompany itself, and, upon showing their demand and its refusal, they complied with the applicable rule. B;ootnote #C -hile their stoc& holdings are small, they have a real interest, and there is no (uestion that the suit was brought in good faith. B;ootnote ,C %f otherwise entitled, they should not be denied the relief which would be accorded to one who owned more shares. Plaintiffs did not simply challenge the contract of :anuary ,, 1!#,, as improvidently made ++ as an unwise exercise of the discretion vested in the board of directors. )hey challenged the contract both as injurious to the Page !" U. S. #1!

interests of the corporation and as an illegal transaction ++ violating the fundamental law. %n see&ing to prevent the carrying out of the contract, the suit was directed not only against the Power 0ompany, but against the /uthority and its directors upon the ground that the latter, under color of the statute, were acting beyond the powers which the 0ongress could validly confer. %n such a case, it is not necessary for stoc&holders ++ when their corporation refuses to ta&e suitable measures for its protection ++ to show that the managing board or trustees have acted with fraudulent intent or under legal duress. )o entitle the complainants to e(uitable relief in the absence of an ade(uate legal remedy, it is enough for them to show the breach of trust or duty involved in the injurious and illegal action. 9or is it necessary to show that the transaction was ultra vires of the corporation. )he illegality may be found in the lac& of lawful authority on the part of those with whom the corporation is attempting to deal. )hus, the breach of duty may consist in yielding, without appropriate resistance, to governmental demands which are without warrant of law or are in violation of constitutional restrictions. )he right of stoc&holders to see& e(uitable relief has been recogniEed when the managing board or trustees of the corporation have refused to ta&e legal measures to resist the collection of taxes or other exactions alleged to be unconstitutional < #$ U. S. %%$& #$ U. S. %'(& #$ U. S. %'#) Polloc& v. ;armers' Goan F )rust 0o., *#+ U. S. ',$& *#+ U. S. '%%& *#+ U. S. ##%& *#+ U. S. ##') 4rushaber v. Union Pacific 6. 0o., ,'( U. S. *& ,'( U. S. *(-) or be.ause o the ailure to assert the rights a"d ra".hises o the .or!oratio" agai"st a" u"/arra"ted i"ter ere".e through legislative or ad0i"istrative a.tio" 11reenwood v. ;reight 0o., *(# U. S. *%& *(# U. S. *#& *(# U. S. *2) 0otting v. Hansas 0ity Stoc&yards 0o., *3% U. S. +$& *3% U. S. **'-. The re0edy has bee" a..orded to sto.4holders o !ubli. servi.e .or!oratio"s /ith res!e.t to rates alleged to be .o" is.atory

Page ,$+ U. S. %,( 1Smyth v. /mes, *2$ U. S. '22& *2$ U. S. '2$& *2$ U. S. #*+) *x parte Ioung, ,($ U. S. *,%& ,($ U. S. *,$& ,($ U. S. *%(& ,($ U. S. *'%-. The a.t that the dire.tors& i" the e5er.ise o their 6udg0e"t& either be.ause they /ere disi".li"ed to u"derta4e a burde"so0e litigatio" or or other reaso"s /hi.h they regarded as substa"tial& resolved to .o0!ly /ith the legislative or ad0i"istrative de0a"ds has "ot bee" dee0ed a" ade7uate grou"d or de"yi"g to the sto.4holders a" o!!ortu"ity to .o"test the validity o the gover"0e"tal re7uire0e"ts to /hi.h the dire.tors /ere sub0itti"g. See 8odge v. -oolsey, supra, at !!. #$ U. S. %'(& #$ U. S. %'#) 1reenwood v. ;reight 0o., supra, at !. *(# U. S. *#) Polloc& v. ;armers' Goan F )rust 0o., supra, at !!. *#+ U. S. '%%& *#+ U. S. ##%& *#+ U. S. ##') 4rushaber v. Union Pacific 6. 0o., supra,J at p. ,? U. S. 1?. %n S0ith v. 8a"sas City Title Co.& 22 U. S. 1$?, a shareholder of the )itle 0ompany sought to enjoin the directors from investing its funds in the bonds of ;ederal Gand 4an&s and :oint Stoc& Gand 4an&s upon the ground that the /ct of 0ongress authoriEing the creation of these ban&s and the issue of bonds was unconstitutional, and hence that the bonds were not legal securities in which the corporate funds could lawfully be invested. )he proposed investment was not large ++ only D1?,??? in each of the classes of bonds described. Id. pp. 22 U. S. 1!2, 22 U. S. 1!3. /nd it appeared that the directors of the )itle 0ompany maintained that the ;ederal ;arm Goan /ct was constitutional, and that the bonds were 5valid and desirable investments.5 Id.& p. 22 U. S. ?1. 4ut neither the conceded fact as to the judgment of the directors nor the small amount to be invested ++ shown by the averments of the complaint ++ availed to defeat the jurisdiction of the court to decide the (uestion as to the validity of the /ct and of the bonds which it authoriEed. )he 0ourt held that the validity of the /ct was directly drawn in (uestion, and that the shareholder

was entitled to maintain the suit. )he 0ourt saidK 5)he general allegations as to the interest of the Page !" U. S. # 1 shareholder, and his right to have an injunction to prevent the purchase of the alleged unconstitutional securities by misapplication of the funds of the corporation, give jurisdiction under the principles settled in Pollo.4 v. Far0ers9 Loa" : Trust Co. and ;rushaber v. U"io" Pa.i i. R. Co.& su!ra.5 Id.& pp. 22 U. S. ?1, 22 U. S. ? . )he 0ourt then proceeded to examine the constitutional (uestion, and sustained the legislation under attac&. / similar result was reached in ;rushaber v. U"io" Pa.i i. R. Co.& su!ra. / close examination of these decisions leads inevitably to the conclusion that they should either be followed or be fran&ly overruled. -e thin& that they should be followed, and that the opportunity to resort to e(uity, in the absence of an ade(uate legal remedy, in order to prevent illegal transactions by those in control of corporate properties should not be curtailed because of reluctance to decide constitutional (uestions. -e find no distinctions which would justify us in refusing to entertain the present controversy. %t is urged that plaintiffs hold preferred shares, and that, for the present purpose, they are virtually in the position of bondholders. )he rights of bondholders, in case of injury to their interests through unconstitutional demands upon, or transactions with, their corporate debtor are not before us. Co0!are Reaga" v. Far0ers9 Loa" : Trust Co.& 12, U. S. #3 , 12, U. S. #3", #3$. Plaintiffs are not creditors, but shareholders <with e(ual voting power share for share with the common stoc&holders, according to the findings=, and thus they have a proprietary interest in the corporate

enterprise which is subject to injury through breaches of trust or duty on the part of the directors who are not less the representatives of the plaintiffs because their shares have certain preferences. See ;all v. Rutla"d R. Co.& !# ;ed. 21#, 21,, 212. %t may be, as in this case, that the owner of all the common stoc& has participated in the transaction in (uestion, and the owners of preferred Page !" U. S. # stoc& may be the only persons having a proprietary interest in the corporation who are in a position to protect its interests against what is asserted to be an illegal disposition of its property. B;ootnote 2C / court of e(uity should not shut its door against them. %t is said that here, instead of parting with money, as in the case of illegal or unconstitutional taxes or exactions, the Power 0ompany is to receive a substantial consideration under the contract in suit. 4ut the Power 0ompany is to part with transmission lines which supply a large area, and plaintiffs allege that the consideration is inade(uate, and that the transaction entails a disruption of services and a loss of business and franchises. %f, as plaintiffs contend, those purporting to act as a governmental agency had no constitutional authority to ma&e the agreement, its execution would leave the Power 0ompany with doubtful remedy, either against the governmental agency, which might not be able, or against the 1overnment, which might not be willing, to respond to a demand for the restoration of conditions as they now exist. %n what circumstances and with what result such an effort at restoration might be made is unpredictable. %f, as was decided in S0ith v. 8a"sas City Title Co.& su!ra& stoc&holders had the right to sue to test the validity of a proposed investment in the bonds of land ban&s, we can see no reason for denying to these plaintiffs a similar resort to e(uity in

order to challenge, on the ground of unconstitutionality, a contract involving such a dislocation and misapplication of corporate property as are charged in the instant case. )he 1overnment urges that the Power 0ompany is estopped to (uestion the validity of the /ct creating the )ennessee .alley /uthority, and hence that the stoc&holders, suing in the right of the corporation, cannot Page !" U. S. # # maintain this suit. %t is said that the Power 0ompany, in 1! 2, installed its own transformers and connections at -ilson 8am, and has ever since purchased large (uantities of electric energy there generated, and that the Power 0ompany continued its purchases after the passage of the /ct of 1!## constituting the /uthority. )he principle is invo&ed that one who accepts the benefit of a statute cannot be heard to (uestion its constitutionality. <reat Falls =a"u a.turi"g Co. v. Attor"ey <e"eral& 1 , U. S. 2$1> >all v. Parrot Silver : Co!!er Co.& ,, U. S. ,?"> St. Louis Casti"g Co. v. Pre"dergast Co"stru.tio" Co.& 3? U. S. ,3!. -e thin& that the principle is not applicable here. )he prior purchase of power in the circumstances disclosed may have a bearing upon the (uestion before us, but it is by no means controlling. )he contract in suit manifestly has a broader range, and we find nothing in the earlier transactions which preclude the contention that this contract goes beyond the constitutional power of the /uthority. 6eference is also made to a proceeding instituted by the Power 0ompany to obtain the approval of the contract by the /labama Public Service 0ommission and to the delay in the bringing of this suit. %t was brought on October $, 1!#,, following plaintiffs' demand upon the board of directors in the preceding /ugust. *stoppel in e(uity must rest on substantial grounds of prejudice or change of position,

not on technicalities. -e see no reason for concluding that the delay or the proceeding before the 0ommission caused any prejudice to either the Power 0ompany or the /uthority, so far as the subject matter of the contract between them is concerned, or that there is any basis for the claim of estoppel. -e thin& that plaintiffs have made a sufficient showing to entitle them to bring suit, and that a constitutional (uestion is properly presented and should be decided. Page !" U. S. # , Se.o"d. The s.o!e o the issue. -e agree with the 0ircuit 0ourt of /ppeals that the (uestion to be determined is limited to the validity of the contract of :anuary ,, 1!#,. )he pronouncements, policies and program of the )ennessee .alley /uthority and its directors, their motives and desires, did not give rise to a justiciable controversy save as they had fruition in action of a definite and concrete character constituting an actual or threatened interference with the rights of the persons complaining. )he judicial power does not extend to the determination of abstract (uestions. =us4rat v. U"ited States& 1! U. S. #,3, 1! U. S. #31> Liberty >arehouse Co. v. <ra""is& "# U. S. "?, "# U. S. ",> >illi"g v. Chi.ago Auditoriu0 Ass".& "" U. S. ",, "" U. S. $!> ?ashville& C. : St.L. Ry. Co. v. >alla.e& $$ U. S. ,!, $$ U. S. 3 , $$ U. S. 3,. %t was for this reason that the 0ourt dismissed the bill of the State of 9ew :ersey which sought to obtain a judicial declaration that, in certain features, the ;ederal -ater Power /ct B;ootnote 3C exceeded the authority of the 0ongress and encroached upon that of the State. ?e/ @ersey v. Sarge"t& 3! U. S. # $. ;or the same reason, the State of 9ew Ior&, in her suit against the State of %llinois, failed in her effort to obtain a decision of abstract (uestions as to the possible effect of the diversion of water from Ga&e 7ichigan upon hypothetical water power developments in

the indefinite future. ?e/ Aor4 v. Illi"ois& ", U. S. ,$$. /t the last term, the 0ourt held, in dismissing the bill of the United States against the State of -est .irginia, that general allegations that the State challenged the claim of the United States that the rivers in (uestion were navigable, and asserted a right superior to that of the United States to license their use for power production, raised an issue 5too vague and ill+defined to admit of judicial determination.5 U"ited States v. >est Birgi"ia& !2 U. S. ,3#, !2 U. S. ,",. 0laims based merely upon 5assumed potential invasions5 Page !" U. S. # 2 of rights are not enough to warrant judicial intervention. AriCo"a v. Cali or"ia& $# U. S. , #, $# U. S. ,3 . )he /ct of :une 1,, 1!#,, B;ootnote "C providing for declaratory judgments, does not attempt to change the essential re(uisites for the exercise of judicial power. 4y its terms, it applies to 5cases of actual controversy,5 a phrase which must be ta&en to connote a controversy of a justiciable nature, thus excluding an advisory decree upon a hypothetical state of facts. See ?ashville& C. : St.L. Ry. Co. v. >alla.e& su!ra. -hile plaintiffs, as stoc&holders, might insist that the board of directors should ta&e appropriate legal measures to extricate the corporation from particular transactions and agreements alleged to be invalid, plaintiffs had no right to demand that the directors should start a litigation to obtain a general declaration of the unconstitutionality of the )ennessee .alley /uthority /ct in all its bearings, or a decision of abstract (uestions as to the right of the /uthority and of the /labama Power 0ompany in possible contingencies. *xamining the present record, we find no ground for a demand by plaintiffs except as it related to the contracts between the /uthority and the /labama Power 0ompany. /nd as the contract of 7ay 1,

1!#,, with the *lectric Aome and ;arm /uthority, %nc., and that of /ugust !, 1!#,, for an option to the /uthority to ac(uire urban distribution systems, are understood to be inoperative <a"te& p. !" U. S. #13=, the only remaining (uestions that plaintiffs are entitled to raise concern the contract of :anuary ,, 1!#,, providing for the purchase of transmission lines and the disposition of power. )here is a further limitation upon our in(uiry. /s it appears that the transmission lines in (uestion run from the -ilson 8am, and that the electric energy generated at that dam is more than sufficient to supply all the re(uirements Page !" U. S. # 3 of the contract, the (uestions that are properly before us relate to the constitutional authority for the construction of the -ilson 8am and for the disposition, as provided in the contract, of the electric energy there generated. Third. The .o"stitutio"al authority or the .o"stru.tio" o the >ilso" Da0. )he 0ongress may not, 5under the pretext of executing its powers, pass laws for the accomplishment of objects not entrusted to the government.5 0hief :ustice 7arshall, in *+ U. S. ',%) Ginder v. United States,J 3$ U. S. 2, 3$ U. S. 1". )he 1overnment's argument recogniEes this essential limitation. )he 1overnment's contention is that the -ilson 8am was constructed, and the power plant connected with it was installed, in the exercise by the 0ongress of its war and commerce powers, that is, for the purposes of national defense and the improvement of navigation. -ilson 8am is described as a concrete monolith one hundred feet high and almost a mile long, containing two loc&s for navigation and eight installed generators. 0onstruction was begun in 1!1", and completed in 1! 3. /uthority for its

construction is found in @ 1 , of the 9ational 8efense /ct of :une #, 1!13. B;ootnote $C %t authoriEed the President to cause an investigation to be made in order to determine 5the best, cheapest, and most available means for the production of nitrates and other products for munitions of war5> to designate for the exclusive use of the United States 5such site or sites upon any navigable or nonnavigable river or rivers or upon the public lands as in his opinion will be necessary for carrying out the purposes of this /ct5 and 5to construct, maintain and operate5 on any such site 5dams, loc&s, improvements to navigation, power houses, and other plants and e(uipment or other Page !" U. S. # " means than water power as in his judgment is the best and cheapest, necessary or convenient for the generation of electrical or other power and for the production of nitrates or other products needed for munitions of war and useful in the manufacture of fertiliEers and other useful products.5 )he President was authoriEed to lease, or ac(uire by condemnation or otherwise, such lands as might be necessary, and there was further provision that 5)he products of such plants shall be used by the President for military and naval purposes to the extent that he may deem necessary, and any surplus which he shall determine is not re(uired shall be sold and disposed of by him under such regulations as he may prescribe.5 Id.

-e may ta&e judicial notice of the international situation at the time the /ct of 1!13 was passed, and it cannot be successfully disputed that the -ilson 8am and its auxiliary plants, including the hydroelectric power plant, are and were intended to be adapted to the purposes of national defense. B;ootnote !C -hile the 8istrict 0ourt found that there is no intention to use the nitrate plants or the hydroelectric units installed at -ilson 8am for the production Page !" U. S. # $ of war materials in time of peace, 5the maintenance of said properties in operating condition and the assurance of an abundant supply of electric energy in the event of war, constitute national defense assets.5 )his finding has ample support. )he /ct of 1!13 also had in view 5improvements to navigation.5 0ommerce includes navigation. 5/ll /merica understands, and has uniformly understood,5 said 0hief :ustice 7arshall in J U. S. 1!?, 5the word .o00er.e&9 to .o0!rehe"d "avigatio".E The !o/er to regulate i"terstate .o00er.e e0bra.es the !o/er to 4ee! the "avigable rivers o the U"ited States ree ro0 obstru.tio"s to "avigatio"& a"d to re0ove su.h obstru.tio"s /he" they e5ist. EFor these !ur!oses&E said the Court i" <il0a" v. Philadel!hia& % >all. +*%& +,#& 50ongress possesses all the powers which existed in the States before the adoption of the national 0onstitution, and which have always existed in the Parliament in *ngland.5 See also Philadel!hia Co0!a"y v. Sti0so"& # U. S. 3?2, # U. S. 3#,.

)he )ennessee 6iver is a navigable stream, although there are obstructions at various points because of shoals, reefs and rapids. )he improvement of navigation on this river has been a matter of national concern for over a century. 6ecommendation that provision be made for Page !" U. S. # ! navigation around 7uscle Shoals was made by the Secretary of -ar, :ohn 0. 0alhoun, in his report transmitted to the 0ongress by President 7onroe in 1$ ,, B;ootnote 1?C and, from 1$2 , the 0ongress has repeatedly authoriEed protects to develop navigation on that and other portions of the river, both by open channel improvements and by canaliEation. B;ootnote 11C )he -ilson 8am project, adopted in 1!1$, gave a nine+foot slac& water development, for fifteen miles above ;lorence, over the 7uscle Shoals rapids and, as the 8istrict 0ourt found, 5flooded out the then existing canal and loc&s, which were inade(uate.5 )he 8istrict 0ourt also found that a 5high dam of this type was the only feasible means of eliminating this most serious obstruction to navigation.5 4y the /ct of 1!#?, after a protracted study by the 0orps of *ngineers of the United States /rmy, the 0ongress adopted a project for a permanent improvement of the main stream 5for a navigable depth of nine feet.5 B;ootnote 1 C -hile, in its present condition, the )ennessee 6iver is not ade(uately improved for commercial navigation, and traffic is small, we are not at liberty to conclude either that the river is not susceptible of development as an important waterway or that 0ongress has not underta&en Page !" U. S. ##? that development, or that the construction of the -ilson 8am was not an appropriate mean to accomplish a legitimate end.

)he -ilson 8am and its power plant must be ta&en to have been constructed in the exercise of the constitutional functions of the ;ederal 1overnment. Fourth. The .o"stitutio"al authority to dis!ose o ele.tri. e"ergy ge"erated at the >ilso" Da0. )he 1overnment ac(uired full title to the dam site, with all riparian rights. )he power of falling water was an inevitable incident of the construction of the dam. )hat water power came into the exclusive control of the ;ederal 1overnment. )he mechanical energy was convertible into electric energy, and the water power, the right to convert it into electric energy, and the electric energy thus produced, constitute property belonging to the United States. See <ree" ;ay Ca"al Co. v. Patte" Pa!er Co.& 1" U. S. 2$, 1" U. S. $?> U"ited States v. Cha"dlerFDu"bar Co.& ! U. S. 2#, ! U. S. " , ! U. S. "#> Utah& Po/er : Light Co. v. P ost& $3 U. S. 132, 1"?. /uthority to dispose of property constitutionally ac(uired by the United States is expressly granted to the 0ongress by @ # of /rticle %. of the 0onstitution. )his section providesK 5)he 0ongress shall have Power to dispose of and ma&e all needful 6ules and 6egulations respecting the )erritory or other Property belonging to the United States, and nothing in this 0onstitution shall be so construed as to Prejudice any 0laims of the United States, or of any particular State.5 )o the extent that the power of disposition is thus expressly conferred, it is manifest that the )enth /mendment is not applicable. /nd the 9inth /mendment <which petitioners also invo&e= in insuring the maintenance of the rights retained by the people does not withdraw the rights which are expressly granted to the Page !" U. S. ##1

;ederal 1overnment. )he (uestion is as to the scope of the grant, and whether there are inherent limitations which render invalid the disposition of property with which we are now concerned. )he occasion for the grant was the obvious necessity of ma&ing provision for the government of the vast territory ac(uired by the United States. )he power to govern and to dispose of that territory was deemed to be indispensable to the purposes of the cessions made by the States. /nd yet it was a matter of grave concern because of the fear that 5the sale and disposal5 might become 5a source of such immense revenue to the national government as to ma&e it independent of and formidable to the people.5 Story on the 0onstitution, @@ 1# 2, 1# 3. )he grant was made in broad terms, and the power of regulation and disposition was not confined to territory, but extended to 5other property belonging to the United States,5 so that the power may be applied, as Story says, 5to the due regulation of all other personal and real property rightfully belonging to the United States.5 /nd so, he adds, 5it has been constantly understood and acted upon.5 Id. )his power of disposal was early construed to embrace leases, thus enabling the 1overnment to derive profit through royalties. )he (uestion arose with respect to a government lease of lead mines on public lands, under the /ct of 7arch #, 1$?". )he contention was advanced that 5disposal is not letting or leasing5> that 0ongress had no power 5to give or authoriEe leases5 and 5to obtain profits from the wor&ing of the mines.5 )he 0ourt overruled the contention, sayingK 5)he disposal must be left to the discretion of 0ongress. /nd there can be no apprehensions of any encroachments upon state rights, by the creation of a numerous tenantry within their borders, as has been so strenuously urged in the argument.5

%$ U. S. #%3. The !oli.y& early Page ,$+ U. S. %%, ado!ted a"d steadily !ursued& o segregati"g 0i"eral la"ds ro0 other !ubli. la"ds a"d !rovidi"g or leases !oi"ted to the re.og"itio" both o the ull !o/er o dis!osal a"d o the "e.essity o suitably ada!ti"g the 0ethods o dis!osal to di ere"t sorts o !ro!erty. The !oli.y re.eived !arti.ular e0!hasis ollo/i"g the dis.overy o gold i" Cali or"ia i" *3'3. GFoot"ote *%H For e5a0!le& a" A.t o *322& deali"g /ith gra"ts to ?evada& de.lared that& Ei" all .ases& la"ds valuable or 0i"es o gold& silver& 7ui.4silver& or .o!!er shall be reserved ro0 sale.E GFoot"ote *'H A"d Co"gress& ro0 the outset& ado!ted a si0ilar !ra.ti.e i" reservi"g salt s!ri"gs. $$ U. S. 2". See also& as to the reservation and leases of oil lands, Pa" A0eri.a" Petroleu0 Co. v. U"ited States& "# U. S. ,23, "# U. S. ,$". 4ut when 0ongress thus reserved mineral lands for special disposal, can it be doubted that 0ongress could have provided for mining directly by its own agents, instead of giving that right to lessees on the payment of royaltiesL B;ootnote 13C Upon what ground could it be said that the 1overnment could not mine its own gold, silver, coal, lead, or phosphates in the public domain, and dispose of them as property belonging to the United StatesL )hat it could dispose Page !" U. S. ### of its land, but not of what the land containedL %t would seem to be clear that, under the same power of disposition which enabled the 1overnment to lease and obtain profit from sales by its lessees, it could mine and obtain profit from its own sales. )he (uestion is whether a more limited power of disposal should be applied to the water power, convertible into electric

energy, and to the electric energy thus produced at the -ilson 8am constructed by the 1overnment in the exercise of its constitutional functions. %f so, it must be by reason either of <1= the nature of the particular property, or < = the character of the 5surplus5 disposed of, or <#= the manner of disposition. <1= )hat the water power and the electric energy generated at the dam are susceptible of disposition as property belonging to the United States is well established. %n the case of <ree" ;ay Ca"al Co. v. Patte" Pa!er Co.& su!ra& the (uestion was 5whether the water power, incidentally created by the erection and maintenance of the dam and canal for the purpose of navigation in ;ox 6iver5 was 5subject to control and appropriation by the United States, owning and operating those public wor&s, or by the State of -isconsin, within whose limits ;ox 6iver lies.5 Id. pp. 1" U. S. 3$, 1" U. S. 3!. %t appeared that, under the authority of the 0ongress, the United States had ac(uired, by purchase from a 0anal 0ompany, title to its improvement wor&s, lands and water powers, on the ;ox 6iver, and that the United States had consented to the retention by the 0anal 0ompany of the water powers with appurtenances. -e held that the 5substantial meaning of the transaction was that the United States granted to the 0anal 0ompany the right to continue in the possession and enjoyment of the water powers and the lots appurtenant thereto, subject to the rights and control of the United States as owning and operating the public wor&s,5

and that the method by which the arrangement was Page !" U. S. ##, effected was 5as efficacious as if the entire property had been conveyed to the United States by one deed, and the reserved properties had been reconveyed to the 0anal 0ompany by another.5 Id.& p. 1" U. S. $?. -e thought it clear that the 0anal 0ompany was 5possessed of whatever rights to the use of this incidental water power that could be validly granted by the United States.5 Id.& p. 1" U. S. 3!. /nd, in this view, it was decided that, so far as the 5water powers and appurtenant lots are regarded as property,5 the title of the 0anal 0ompany could not be controverted, and that it was 5e(ually plain that the mode and extent of the use and enjoyment of such property by the 0anal 0ompany5 fell within the sole control of the United States. See 8au4au"a >alter Po/er Co. v. <ree" ;ay Ca"al Co.& 1, U. S. 2,> <ree" ;ay Ca"al Co. v. Patte" Pa!er Co.& 1"# U. S. 1"!. %n U"ited States v. Cha"dlerFDu"bar Co.& ! U. S. 2#, the United States had condemned land in 7ichigan, lying between the St. 7arys 6iver and the ship canal strip of the 1overnment, in order to improve navigation. )he riparian owner, under revocable permits from the Secretary of -ar, had placed in the rapids 5the necessary dams, dy&es and forebays for the purpose of controlling the current and using its power for commercial purposes.5 Id.& p. ! U. S. 3$. )he /ct of 7arch #, 1!?!, B;ootnote 1"C authoriEing the improvement, had revo&ed the permit. -e said that the 1overnment 5had dominion over the water power of the rapids and falls,5 and could not be re(uired to pay 5any hypothetical additional value to a riparian owner who had no right to appropriate the current to his own commercial use.5 Id.& p. ! U. S. "3. )he

/ct of 1!?! also authoriEed the Secretary of -ar to lease 5any excess of water power which results from the conservation of the flow of the river, and the wor&s which the 1overnment may construct. 5 Page !" U. S. ##2 5%f the primary purpose is legitimate,5 said the 0ourt, 5we can see no sound objection to leasing any excess of power over the needs of the 1overnment. )he practice is not unusual in respect to similar public wor&s constructed by state governments.5 Id.& p. ! U. S. "#. 6eference was made to the case of 8au4au"a >ater Po/er Co. v. <ree" ;ay Ca"al Co.& su!ra& where the 0ourt had observed in relation to a -isconsin statute of 1$,$, which had reserved to the State the water power created by the dam over the ;ox 6iverK 5/s there is no need of the surplus running to waste, there was nothing objectionable in permitting the State to let out the use of it to private parties, and thus reimburse itself for the expenses of the improvement.5 %n I"ter"atio"al Pa!er Co. v. U"ited States& $ U. S. #!!, the 1overnment made a wartime re(uisition of electrical power, and was held bound to ma&e compensation to a lessee who thereby had lost the use of the water to which he was entitled. )he 0ourt brushed aside attempted 5distinctions between the ta&ing of power and the ta&ing of water rights,5 saying that the 1overnment intended 5to ta&e and did ta&e the use of all the water power,5 and had exercised its power of eminent domain to that end. Id. pp. $ U. S. ,?", $ U. S. ,?$. < = )he argument is stressed that, assuming that electric energy generated at the dam belongs to the United States, the 0ongress

has authority to dispose of this energy only to the extent that it is a surplus necessarily created in the course of ma&ing munitions of war or operating the wor&s for navigation purposes> that is, that the remainder of the available energy must be lost or go to waste. -e find nothing in the 0onstitution which imposes such a limitation. %t is not to be deduced from the mere fact that the electric energy is only potentially available until the generators are operated. )he 1overnment has no less right to the energy thus available by letting the water course over its turbines than it has Page !" U. S. ##3

Su!!ose& or e5a0!le& that& i" the ere.tio" o a da0 or the i0!rove0e"t o "avigatio"& it be.a0e "e.essary to destroy a da0 a"d !o/er !la"t /hi.h had !reviously bee" ere.ted by a !rivate .or!oratio" e"gaged i" the ge"eratio" a"d distributio" o e"ergy /hi.h su!!lied the "eeds o "eighbori"g .o00u"ities a"d busi"ess e"ter!rises. >ould a"yo"e say that& be.ause the U"ited States had built its o/" da0 a"d !la"t i" the e5er.ise o its .o"stitutio"al u".tio"s& a"d had .o0!lete o/"ershi! a"d do0i"io" over both& "o !o/er .ould be su!!lied to the .o00u"ities a"d e"ter!rises de!e"de"t o" it& "ot be.ause o Page ,$+ U. S. %%+

to use the appropriate processes to reduce to possession other property within its control, as, for example, oil which it may recover from a pool beneath its lands, and which is reduced to possession by boring oil wells and otherwise might escape its grasp. See Ohio Oil Co. v. I"dia"a& 1"" U. S. 1!?, 1"" U. S. ?$. /nd it would hardly be contended that, when the 1overnment reserves coal on its lands, it can mine the coal and dispose of it only for the purpose of heating public buildings or for other governmental operations. Or, if the 1overnment owns a silver mine, that it can obtain the silver only for the purpose of storage or coinage. Or that, when the 1overnment extracts the oil it has reserved, it has no constitutional power to sell it. Our decisions recogniEe no such restriction. %$ U. S. 33& ,(2 U. S. 3$) Gight v. United States, ,,( U. S. #,%& ,,( U. S. #%2& ,,( U. S. #%+) 6uddy v. 6ossi, ,'3 U. S. *('& ,'3 U. S. *(2. The U"ited States o/"s the .oal& or the silver& or the lead& or the oil it obtai"s ro0 its la"ds& a"d it lies i" the dis.retio" o the Co"gress& a.ti"g i" the !ubli. i"terest& to deter0i"e o ho/ 0u.h o the !ro!erty it shall dis!ose. >e thi"4 that the sa0e !ri".i!le is a!!li.able to ele.tri. e"ergy. The argu0e"t !ressed u!o" us leads to absurd .o"se7ue".es i" the de"ial& des!ite the broad ter0s o the .o"stitutio"al !rovisio"& o a !o/er o dis!osal /hi.h the !ubli. i"terest 0ay i0!eratively re7uire.

a"y u"/illi"g"ess o the Co"gress to su!!ly it& or o a"y overridi"g gover"0e"tal "eed& but be.ause there /as "o .o"stitutio"al authority to ur"ish the su!!lyI Or that& /ith abu"da"t !o/er available /hi.h 0ust other/ise be /asted& the su!!ly to the .o00u"ities a"d e"ter!rises /hose very li e 0ay be at sta4e 0ust be li0ited to the sle"der a0ou"t o sur!lus u"avoidably i"volved i" the o!eratio" o the "avigatio" /or4s be.ause the Co"stitutio" does "ot !er0it a"y 0ore e"ergy to be ge"erated a"d distributedI I" the .ase o the 1reen 4ay 0anal 0o., above .ited& /here the gover"0e"t /or4s su!!la"ted those o the Ca"al Co0!a"y& the Court ou"d "o di i.ulty i" sustai"i"g the <over"0e"t9s authority to gra"t to the Ca"al Co0!a"y the /ater !o/ers /hi.h it had !reviously e"6oyed& sub6e.t& o .ourse& to the do0i"a"t .o"trol o the <over"0e"t. A"d i" the .ase o United States v. 0handler+8unbar 0o., supra,J the statutory provision, to which the 0ourt referred, was 5that any excess of water in the St. 7arys 6iver at Sault Sainte 7arie over and above the amount now or hereafter re(uired for the uses of navigation shall be leased for power purposes by the Secretary of -ar upon such terms and conditions as shall be best

calculated in his judgment to insure the development thereof.5 %t was to the leasing, under this provision, 5of any excess of power over the needs of the 1overnment5 that the 0ourt saw no valid objection. Id.& p. ! U. S. "#. )he decisions which petitioners cite give no support to their contention. '' U. S. *#. Those .ases did "ot .o".er" the do0i"a"t authority o the Federal <over"0e"t i" the i"terest o "avigatio" to ere.t da0s a"d avail itsel o the i".ide"tal /ater !o/er. >e e0!hasiCed the do0i"a"t .hara.ter o that authority i" the .ase o Page ,$+ U. S. %%3 the 1reen 4ay 0anal 0o., supra,J by this statement, at p. 1" U. S. $?K 5/t what points in the dam and canal the water for power may be withdrawn, and the (uantity which can be treated as surplus with due regard to navigation, must be determined by the authority which owns and controls that navigation. %n such matters, there can be no divided empire.5 )he case of >is.o"si" v. Illi"ois& "$ U. S. #3", related to the diversion by the State of %llinois of water from Ga&e 7ichigan through the drainage canal at 0hicago, and the (uestions now before us with respect to the disposition of surplus energy created at a dam erected by the ;ederal 1overnment in the performance of its constitutional functions were in no way involved. <#= -e come then to the (uestion as to the validity of the method which has been adopted in disposing of the surplus energy generated at the -ilson 8am. )he constitutional provision is silent as to the method of disposing of property belonging to the United States. )hat method, of course, must be an appropriate means of disposition according to the nature of the property, it must be one adopted in the

public interest, as distinguished from private or personal ends, and we may assume that it must be consistent with the foundation principles of our dual system of government, and must not be contrived to govern the concerns reserved to the States. See 8a"sas v. Colorado& su!ra. %n this instance, the method of disposal embraces the sale of surplus energy by the )ennessee .alley /uthority to the /labama Power 0ompany, the interchange of energy between the /uthority and the Power 0ompany, and the purchase by the /uthority from the Power 0ompany of certain transmission lines. /s to the mere sale of surplus energy, nothing need be added to what we have said as to the constitutional authority to dispose. )he 1overnment could lease or sell and fix the terms. Sales of surplus energy to the Power 0ompany by the /uthority continued a practice begun by the 1overnment several years before. )he contemplated Page !" U. S. ##! interchange of energy is a form of disposition, and presents no (uestions which are essentially different from those that are pertinent to sales. )he transmission lines which the /uthority underta&es to purchase from the Power 0ompany lead from the -ilson 8am to a large area within about fifty miles of the dam. )hese lines provide the means of distributing the electric energy generated at the dam to a large population. )hey furnish a method of reaching a mar&et. )he alternative method is to sell the surplus energy at the dam, and the mar&et there appears to be limited to one purchaser, the /labama Power 0ompany, and its affiliated interests. -e &now of no constitutional ground upon which the ;ederal 1overnment can be denied the right to see& a wider mar&et. -e suppose that, in the early days of mining in the -est, if the 1overnment had underta&en to operate a silver mine on

its domain, it could have ac(uired the mules or horses and e(uipment to carry its silver to mar&et. /nd the transmission lines for electric energy are but a facility for conveying to mar&et that particular sort of property, and the ac(uisition of these lines raises no different constitutional (uestion, unless in some way there is an invasion of the rights reserved to the State or to the people. -e find no basis for concluding that the limited underta&ing with the /labama Power 0ompany amounts to such an invasion. 0ertainly, the /labama Power 0ompany has no constitutional right to insist that it shall be the sole purchaser of the energy generated at the -ilson 8am ++ that the energy shall be sold to it or go to waste. -e limit our decision to the case before us as we have defined it. )he argument is earnestly presented that the 1overnment, by virtue of its ownership of the dam and power plant, could not establish a steel mill and ma&e and sell steel products, or a factory to manufacture clothing or shoes for the public, and thus attempt to ma&e its Page !" U. S. #,? ownership of energy, generated at its dam, a means of carrying on competitive commercial enterprises, and thus drawing to the ;ederal 1overnment the conduct and management of business having no relation to the purposes for which the ;ederal 1overnment was established. )he picture is elo(uently drawn, but we deem it to be irrelevant to the issue here. )he 1overnment is not using the water power at the -ilson 8am to establish any industry or business. %t is not using the energy generated at the dam to manufacture commodities of any sort for the public. )he 1overnment is disposing of the energy itself, which simply is the mechanical energy, incidental to falling water at the dam, converted into the electric energy which is susceptible of transmission. )he (uestion here is simply as to the ac(uisition of the transmission lines as a facility for the

disposal of that energy. /nd the 1overnment rightly conceded at the bar, in substance, that it was without constitutional authority to ac(uire or dispose of such energy except as it comes into being in the operation of wor&s constructed in the exercise of some power delegated to the United States. /s we have said, these transmission lines lead directly from the dam, which has been lawfully constructed, and the (uestion of the constitutional right of the 1overnment to ac(uire or operate local or urban distribution systems is not involved. -e express no opinion as to the validity of such an effort, as to the status of any other dam or power development in the )ennessee .alley, whether connected with or apart from the -ilson 8am, or as to the validity of the )ennessee .alley /uthority /ct or of the claims made in the pronouncements and program of the /uthority apart from the (uestions we have discussed in relation to the particular provisions of the contract of :anuary ,, 1!#,, affecting the /labama Power 0ompany. )he decree of the 0ircuit 0ourt of /ppeals is A ir0ed. Page !" U. S. #,1 B;ootnote 1C )he )ennessee .alley /uthority is a body corporate created by the /ct of 0ongress of 7ay 1$, 1!##, amended by the /ct of 0ongress of /ugust #1, 1!#2. ,$ Stat. 2$> ,! Stat. 1?"2. B;ootnote C )he 0ommonwealth F Southern 0orporation, organiEed under the laws of 8elaware, and the owner of the common stoc& of the /labama Power 0ompany, was a party to the contract, which also contained agreements with other subsidiaries of the

0ommonwealth F Southern 0orporation, viC: )ennessee *lectric Power 0ompany, 1eorgia Power 0ompany, and 7ississippi Power 0ompany. )he agreements with these companies are not involved in this suit. B;ootnote #C *(uity 6ule ". B;ootnote ,C )he 8istrict 0ourt found that 5/pproximately 1!?? preferred stoc&holders of the /labama 0ompany, holding over ,?,??? shares of the preferred stoc& thereof, have associated themselves with a preferred stoc&holders' protective committee and authoriEed their names to be joined with the plaintiffs of record in this case as parties plaintiff.5 B;ootnote 2C See note B;ootnote 3C ,1 Stat. 1?3#. B;ootnote "C ,$ Stat. !22. B;ootnote $C #! Stat. 133, 12. B;ootnote !C /mong the findings of the 8istrict 0ourt on this point are the followingK 5#$. )he 7uscle Shoals plants, including the Sheffield steam plant and the $ hydroelectric units installed at -ilson 8am, were authoriEed for war purposes by

Section 1 , of the 9ational 8efense /ct of 1!13 in anticipation of participation in the great war. )he original conception was for the use of 9itrate Plant 9o. 1, employing the Aaber process, and Plant 9o. , employing the cyanamide process, for the fixation or manufacture of nitrogen and its subse(uent conversion into ammonium nitrate for explosives. Plant 9o. 1 was completed, but was never practicable, due to the lac& of &nowledge of the Aaber process. Plant 9o. successfully developed calcium cyanamide from a manufacturing standpoint, but, due to the availability of ammonium nitrate as a result of commercial development of byproduct or synthetic processes, the commercial or peacetime manufacture of calcium cyanamide at 9itrate Plant 9o. is considered uneconomical and undesirable, and is not proposed or suggested by either the -ar 8epartment or the )./. )he 0ourt further finds, however, that the plant, with the aid of electric power furnished by -ilson 8am and the Sheffield steam plant, can be operated to produce annually 11?,??? tons of ammonium nitrate by the cyanamide process, and that the present plans of the -ar 8epartment count upon that plant to supply that amount annually in the event of a major war. . . .5 5,?. )he existence of these facilities, which ma&e available large (uantities of nitrogenous war materials by use of either the nitrogen fixing process or the oxidation of synthetic ammonia, is a valuable national defense asset.5 B;ootnote 1?C Sen.8oc. 9o. 1, 1$th 0ong., d sess.> A.6.8oc. 9o. 11!, 3!th 0ong., 1st sess., 11, 1 . B;ootnote 11C See 6ivers and Aarbors /cts of /ugust #?, 1$2 , c. 1?,, 1? Stat. 23, 3?> :uly 2, 1$3$, c. ##, 12 Stat. 1"1, 1",> 7arch #, 1$"1, c.

11$, 13 Stat. 2#$, 2, > :une 1?, 1$" , c. ,13, 1" Stat. #"?, #" > September 1!, 1$!?, c. !?", 3 Stat. , 3, ,,2, ,,3> /ugust 1$, 1$!,, c. !!, $ Stat. ##$, #2,> /pril 3, 1!?,, c. 13?2, ## Stat. #?!> 7arch , 1!?", c. 2?!, #, Stat. 1?"#, 1?!#> :une 2, 1!1?, c. #$ , #3 Stat. 3#?, 32 > :uly 2, 1!1 , c. 2#, #" Stat. ?1, 12> :uly ", 1!13, c. 3?, #! Stat. #!1, #!!> 7arch #, 1! 2, c. ,3", ,# Stat. 11$3, 11$$> :uly #, 1!#?, c. $,", ,3 Stat. !1$, ! ", ! $. See also A.6.8ocs. 9o. #1!, 3"th 0ong., d sess.> 9o. ,#, 3!th 0ong., 1st sess.> 9o. 1$2, "?th 0ong., 1st sess.> 9o. # $, "1st 0ong., d sess. B;ootnote 1 C /ct of :uly #, 1!#?, c. $,", ,3 Stat. !1$, ! ", ! $. B;ootnote 1#C See citations of numerous statutes in U"ited States v. S/eet& ,2 U. S. 23#, ,2 U. S. 23$, ,2 U. S. 23!. B;ootnote 1,C /ct of :uly ,, 1$33, c. 13, @ 2, 1, Stat. $2, $3. B;ootnote 12C /ct of :uly 13, 1$!,, c. 1#$, $ Stat. 1?". B;ootnote 13C See& as to royalties under leases 5to promote the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain,5 the /ct of ;ebruary 2, 1! ?, c. $2, ,1 Stat. ,#". Also& as to leases of public lands containing potassium deposits, the /ct of October , 1!1", c. 3 , ,? Stat. !". B;ootnote 1"C #2 Stat. c. 3,, $12, $ ?, $ 1.

76. :US)%0* 46/98*%S, concurring. 50onsiderations of propriety, as well as long+established practice, demand that we refrain from passing upon the constitutionality of an act of 0ongress unless obliged to do so in the proper performance of our judicial function, when the (uestion is raised by a party whose interests entitle him to raise it.5 ;lair v. U"ited States& 2? U. S. "#, 2? U. S. "!. % do not disagree with the conclusion on the constitutional (uestion announced by the 0hief :ustice> but, in my opinion, the judgment of the 0ircuit 0ourt of /ppeals should be affirmed without passing upon it. )he 1overnment has insisted throughout the litigation that the plaintiffs have no standing to challenge the validity of the legislation. )his objection to the maintenance of the suit is not overcome by presenting the claim in the form of a bill in e(uity and complying with formal prere(uisites re(uired by *(uity 6ule ". )he obstacle is not procedural. %t inheres in the substantive law, in well settled rules of e(uity, and in the practice in cases involving the constitutionality of legislation. Upon the findings made by the 8istrict 0ourt, it should have dismissed the bill. ;rom these it appearsK the /labama Power 0ompany, a corporation of that State with transmission lines located there, has outstanding large issues of bonds, preferred stoc&, and common stoc&. %ts officers agreed, with the approval of the board of directors, to sell to the )ennessee .alley /uthority a part of these lines and incidental property. )he management thought that the transaction was in the interest of the company. %t acted in the exercise of its business judgment, with the utmost good faith. B;ootnote M1C Page !" U. S. #,

)here was no showing of fraud, oppression, or gross negligence. )here was no showing of legal duress. )here was no showing that the management believed that to sell to the )ennessee .alley /uthority was in excess of the 0ompany's corporate powers, or that it was illegal because entered into for a forbidden purpose. 9or is there any basis in law for the assertion that the contract was ultra vires of the 0ompany. Under the law of /labama, a public utility corporation may ordinarily sell a part of its transmission lines and incidental property to another such corporation if the approval of the Public Service 0ommission is obtained. )he contract provided for securing such approval. 7oreover, before the motion to dissolve the restraining order was denied, and before the hearing on the merits was concluded, the Gegislature, by /ct 9o. 1, approved :anuary ,, 1!#2, and effective immediately, provided that a utility of the State may sell all or any of its property to the )ennessee .alley /uthority without the approval of the Public Service 0ommission or of any other state agency. First. The substa"tive la/. )he plaintiffs who object own about one three hundred and fortieth of the preferred stoc&. )hey claimed at the hearing to represent about one+ninth of the preferred stoc& ++ that is, less than one forty+fifth in amount of all the securities outstanding. )heir rights are not enlarged because the )ennessee .alley /uthority entered into the transaction pursuant to Page !" U. S. #,# an act of 0ongress. )he fact that the bill calls for an en(uiry into the legality of the transaction does not overcome the obstacle that ordinarily stoc&holders have no standing to interfere with the management. 7ere belief that corporate action, ta&en or contemplated, is illegal gives the stoc&holder no greater right to interfere than is possessed by any other citiEen.

Stoc&holders are not guardians of the public. )he function of guarding the public against acts deemed illegal rests with the public officials. -ithin recogniEed limits, stoc&holders may invo&e the judicial remedy to enjoin acts of the management which threaten their property interest. 4ut they cannot secure the aid of a court to correct what appear to them to be mista&es of judgment on the part of the officers. 0ourts may not interfere with the management of the corporation unless there is bad faith, disregard of the relative rights of its members, or other action seriously threatening their property rights. )his rule applies whether the mista&e is due to error of fact or of law or merely to bad business judgment. %t applies, among other things, where the mista&e alleged is the refusal to assert a seemingly clear cause of action, or the compromise of it. U"ited Co!!er Se.urities Co. v. A0alga0ated Co!!er Co.& ,, U. S. 31, ,, U. S. 3#+ 3,. %f a stoc&holder could compel the officers to enforce every legal right, courts, instead of chosen officers, would be the arbiters of the corporation's fate. %n Ha/es v. Oa4la"d& 1?, U. S. ,2?, 1?, U. S. ,3 , a common stoc&holder sought to enjoin the 0ontra 0osta -aterwor&s 0ompany from permitting the 0ity of Oa&land to ta&e without compensation water in excess of that to which it was legally entitled. )his 0ourt, in affirming dismissal of the bill, saidK 5%t may be the exercise of the highest wisdom to let the city use the water in the manner complained of. )he directors are better able to act Page !" U. S. #,, understandingly on this subject than a stoc&holder residing in 9ew Ior&. )he great body of the stoc&holders residing in Oa&land or other places in 0alifornia may ta&e this view of it, and be content to abide

by the action of their directors. %f this be so, is a bitter litigation with the city to be conducted by one stoc&holder for the corporation and all other stoc&holders, because the amount of his dividends is diminishedL5 I" Corbus v. Alas4a Tread/ell <old =i"i"g Co.& 1$" U. S. ,22, 1$" U. S. ,3#, a suit by a common stoc&holder to enjoin payment of an /las&a license tax alleged to be illegal, the 0ourt saidK 5)he directors represent all the stoc&holders, and are presumed to act honestly and according to their best judgment for the interests of all. )heir judgment as to any matter lawfully confided to their discretion may not lightly be challenged by any stoc&holder, or at his instance submitted for review to a court of e(uity. )he directors may sometimes properly waive a legal right vested in the corporation in the belief that its best interests will be promoted by not insisting on such right. )hey may regard the expense of enforcing the right or the furtherance of the general business of the corporation in determining whether to waive or insist upon the right. /nd a court of e(uity may not be called upon at the appeal of any single stoc&holder to compel the directors or the corporation to enforce every right which it may possess, irrespective of other considerations. %t is not a trifling thing for a stoc&holder to attempt to coerce the directors of a corporation to all act which their judgment does not approve, or to substitute his judgment for theirs. B;ootnote M C5 Se.o"d. The e7uity !ra.ti.e. *ven where property rights of stoc&holders are alleged to be violated by the management, stoc&holders see&ing an injunction must Page !" U. S. #,2 bear the burden of showing danger of irreparable injury, as do others who see&

that e(uitable relief. %n the case at bar, the burden of ma&ing such proof was a peculiarly heavy one. )he plaintiffs, being preferred stoc&holders, have but a limited interest in the enterprise, resembling, in this respect, that of a bondholder, in contradistinction to that of a common stoc&holder. /cts may be innocuous to the preferred which conceivably might injure common stoc&holders. )here was no finding that the property interests of the plaintiffs were imperiled by the transaction in (uestion, and the record is barren of evidence on which any such finding could have been made. Third. The !ra.ti.e i" .o"stitutio"al .ases. )he fact that it would be convenient for the parties and the public to have promptly decided whether the legislation assailed is valid cannot justify a departure from these settled rules of corporate law and established principles of e(uity practice. On the contrary, the fact that such is the nature of the en(uiry proposed should deepen the reluctance of courts to entertain the stoc&holder's suit. 5%t must be evident to any one that the power to declare a legislative enactment void is one which the judge, conscious of the fallibility of the human judgment, will shrin& from exercising in any case where he can conscientiously and with due regard to duty and official oath decline the responsibility.5 1 0ooley, 0onstitutional Gimitations <$th ed.=, p. ## . )he 0ourt has fre(uently called attention to the 5great gravity and delicacy5 of its function in passing upon the validity of an act of 0ongress, B;ootnote M#C and has restricted exercise of this function by rigid insistence that the jurisdiction of federal courts is limited to actual cases and controversies, and that they have no power to give advisory

Page !" U. S. #,3 opinions. B;ootnote M,C On this ground, it has in recent years ordered the dismissal of several suits challenging the constitutionality of important acts of 0ongress. %n Te5as v. I"terstate Co00er.e Co009"& 2$ U. S. 12$, 2$ U. S. 13 , the validity of )itles %%% and %. of the )ransportation /ct of 1! ?. %n ?e/ @ersey v. Sarge"t& 3! U. S. # $, the validity of parts of the ;ederal -ater Power /ct. %n AriCo"a v. Cali or"ia& $# U. S. , #, the validity of the 4oulder 0anyon Project /ct. Co0!are U"ited States v. >est Birgi"ia& !2 U. S. ,3#, involving the ;ederal -ater Power /ct, a"d Liberty >arehouse Co. v. <ra""is& "# U. S. "?, where this 0ourt affirmed the dismissal of a suit to test the validity of a Hentuc&y statute concerning the sale of tobacco> also =assa.husetts State <ra"ge v. ;e"to"& " U. S. 2 2. )he 0ourt developed, for its own governance in the cases confessedly within its jurisdiction, a series of rules under which it has avoided passing upon a large part of all the constitutional (uestions pressed upon it for decision. )hey areK 1. )he 0ourt will not pass upon the constitutionality of legislation in a friendly, nonadversary, proceeding, declining because to decide such (uestions 5is legitimate only in the last resort, and as a necessity in the determination of real, earnest and vital controversy between individuals. %t never was the thought that, by means of a friendly suit, a party beaten in the legislature could transfer to the courts an in(uiry as to the constitutionality of the legislative act.5 Chi.ago : <ra"d Tru"4 Ry. v. >ell0a"& 1,# U. S. ##!, 1,# U. S. #,2. J0ompare ,! U. S. 12.

. )he 0ourt will not 5anticipate a (uestion of constitutional law in advance of the necessity of deciding it.5 Page !" U. S. #," Liver!ool& ?.A. : P. S.S. Co. v. E0igratio" Co00issio"ers& 11# U. S. ##, 11# U. S. #!> B;ootnote M2C Abra0s v. Ba" S.hai.4& !# U. S. 1$$> >ilshire Oil Co. v. U"ited States& !2 U. S. 1??. 5%t is not the habit of the 0ourt to decide (uestions of a constitutional nature unless absolutely necessary to a decision of the case.5 ;urto" v. U"ited States& 1!3 U. S. $#, 1!3 U. S. !2. #. )he 0ourt will not 5formulate a rule of constitutional law broader than is re(uired by the precise facts to which it is to be applied.5 Liver!ool& ?.A. : P. S.S. Co. v. E0igratio" Co00issio"ers& su!ra) .o0!are Ha00o"d v. S.ha!! ;us Li"e& "2 U. S. 13,, "2 U. S. 13!+1" . ,. )he 0ourt will not pass upon a constitutional (uestion, although properly presented by the record, if there is also present some other ground upon which the case may be disposed of. )his rule has found most varied application. )hus, if a case can be decided on either of two grounds, one involving a constitutional (uestion, the other a (uestion of statutory construction or general law, the 0ourt will decide only the latter. Siler v. Louisville : ?ashville R. Co.& 1# U. S. 1"2, 1# U. S. 1!1> Light v. U"ited States& ? U. S. 2 #, ? U. S. 2#$. /ppeals from the highest court of a state challenging its decision of a (uestion under the ;ederal 0onstitution are fre(uently dismissed because the judgment can be sustained on an independent state ground. ;erea College v. 8e"tu.4y& 11 U. S. ,2, 11 U. S. 2#. 2. )he 0ourt will not pass upon the validity of a statute upon complaint of one who fails to show that he is injured by its operation. B;ootnote M3C *+$ U. S. 2,*. A0o"g the 0a"y a!!li.atio"s o this rule& "o"e is 0ore

stri4i"g tha" the de"ial o the right o .halle"ge to o"e /ho la.4s a !erso"al or !ro!erty right. Thus& the .halle"ge by a !ubli. o i.ial i"terested o"ly i" the !er or0a".e o his o i.ial duty /ill "ot be e"tertai"ed. 0olumbus F 1reenville 6y. v. 7iller, ,3% U. S. $2& ,3% U. S. $$F*((. I" ;airchild v. Aughes, ,#3 U. S. *,2& the Court a ir0ed the dis0issal o a suit brought by a .itiCe" /ho sought to have the ?i"etee"th A0e"d0e"t de.lared u".o"stitutio"al. I" 7assachusetts v. 7ellon,J 3 U. S. ,,", the challenge of the federal 7aternity /ct was not entertained, although made by the 0ommonwealth on behalf of all its citiEens. 3. )he 0ourt will not pass upon the constitutionality of a statute at the instance of one who has availed himself of its benefits. B;ootnote M"C <reat Falls = g. Co. v. Attor"ey <e"eral& 1 , U. S. 2$1> >all v. Parrot Silver : Co!!er Co.& ,, U. S. ,?", ,, U. S. ,11+,1 > St. Louis =alleable Casti"g Co. v. Pre"dergast Co"stru.tio" Co.& 3? U. S. ,3!. ". 5-hen the validity of an act of the 0ongress is drawn in (uestion, and even if a serious doubt of constitutionality is raised, it is a cardinal principle that this 0ourt will first ascertain whether a construction of the statute is fairly possible by which the (uestion may be avoided.5 Cro/ell v. ;e"so"& $2 U. S. 3 . B;ootnote M$C Page !" U. S. #,! Fourth. % am aware that, on several occasions, this 0ourt passed upon important constitutional (uestions which were presented in stoc&holders' suits bearing a superficial resemblance to that now before us. 4ut in none of those cases was the (uestion presented under circumstances similar to those at bar. %n , $2 U. S.

none were the plaintiffs preferred stoc&holders. %n some, the 0ourt dealt largely with (uestions of federal jurisdiction and collusion. %n most, the propriety of considering the constitutional (uestion was not challenged by any party. %n most, the statute challenged imposed a burden upon the corporation and penalties for failure to discharge it, whereas the )ennessee .alley /uthority /ct imposed no obligation upon the /labama Power 0ompany, and, under the contract, it received a valuable consideration. /mong other things, the /uthority agreed not to sell outside the area covered by the contract, and thus preserved the corporation against possible serious competition. )he effect of this agreement was e(uivalent to a compromise of a doubtful cause of action. 0ertainly the alleged invalidity of the )ennessee .alley /uthority /ct was not a matter so clear as to ma&e compromise illegitimate. )hese circumstances present features differentiating the case at bar from all the cases in which stoc&holders have been held entitled to have this 0ourt pass upon the constitutionality of a statute which the directors had refused to challenge. )he cases commonly cited are theseK B;ootnote M!C J 2! U. S. #,1+#,3, was a suit brought by a common stoc&holder to enjoin a breach of trust by the directors which, if submitted to, would seriously injure the plaintiff. )he 0ourt drew clearly the distinction between 5an error of judgment5 and a breach Page !" U. S. #2? of duty> declared that it could not interfere if there was only an error of judgment> held that, on the facts, the threatened action of the directors would be a breach of trust, and pointed to the serious injury necessarily resulting therefrom to the plaintiff. B;ootnote M1?C <re"/ood v. Freight Co.& 1?2 U. S. 1#, 1?2 U. S. 113, was a suit brought by a common

stoc&holder to enjoin the enforcement of a statute alleged to be unconstitutional as repealing the corporation's charter. )he 0ourt saidK 5%t is sufficient to say that this bill presents so strong a case of the total destruction of the corporate existence . . . that we thin& the complainant as a stoc&holder comes within the rule . . . which authoriEes a shareholder to maintain a suit to prevent such a disaster where the corporation peremptorily refuses to move in the matter.5 Pollo.4 v. Far0ers9 Loa" : Trust Co.& 12" U. S. , !, 12" U. S. 22#+22,, was a suit brought by a common stoc&holder to enjoin a breach of trust by paying voluntarily a tax which was said to be illegal. )he stoc&holder's substantive right to object was not challenged. )he (uestion raised was that of e(uity jurisdiction. )he allegation of threatened irreparable damage to the corporation and Page !" U. S. #21 to the plaintiff was admitted. )he 0ourt saidK 5)he objection of ade(uate remedy at law was not raised below, nor is it now raised by appellees, if it could be entertained at all at this stage of the proceedings> and, so far as it was within the power of the government to do so, the (uestion of jurisdiction, for the purposes of the case, was explicitly waived on the argument. . . . Under these circumstances, we should not be justified in declining to proceed to judgment upon the merits.5 )he jurisdictional issue discussed in the dissent <12" U.S. at 12" U. S. 3?$+31 = was the effect of 6.S. @ # ,. Cotti"g v. 8a"sas City Sto.4 Aards Co.& 1$# U. S. "!, 1$# U. S. 11#, was a suit brought by a common stoc&holder to enjoin enforcement of a rate statute alleged to be unconstitutional against which the directors

refused to protect the corporation. %t was alleged and found that its enforcement would subject the company to great and irreparable loss. )he serious contention concerning jurisdiction was, as stated by 7r. :ustice 4rewer, whether a suit lay against the /ttorney 1eneral of the State. Of the jurisdiction of the suit 5as one involving a controversy between the stoc&holders and the corporation and its officers, no serious (uestion is made.5 Chi.ago v. =ills& ?, U. S. # 1, was a suit brought by a common stoc&holder of the People's 1as, Gight and 0o&e 0ompany to enjoin enforcement of an ordinance alleged to be illegal. )he sole (uestion before this 0ourt was whether the federal court had jurisdiction. )hat (uestion raised an issue of fact. )his 0ourt, in affirming the judgment below, said <p. ?, U. S. ##1=K 5Upon the whole record, we agree with the 0ircuit 0ourt that the testimony does not disclose that the jurisdiction of the ;ederal court was collusively and fraudulently invo&ed. . . .5 ;rushaber v. U"io" Pa.i i. R. Co.& ,? U. S. 1, ,? U. S. !+1?, was a suit brought by a common stoc&holder to restrain the corporation from voluntarily paying a tax alleged to Page !" U. S. #2 be invalid. /s stated by plaintiff's counselK 5)he contention ++ and this is the only objection that is made to the suit ++ that it see&s to do indirectly what the 6evised Statutes B@ # ,C have said shall not be done ++ namely, enjoin the collection of a tax.5 )he 0ourt, assuming that the averments were identical with those in the Pollo.4 case, declared that the right of the stoc&holder to sue was clear.

S0ith v. 8a"sas City Title : Trust Co.& 22 U. S. 1$?, 22 U. S. 1!!+ ? , was a suit brought by a common stoc&holder to enjoin investment by the company in bonds issued under the ;ederal ;arm Goan /ct. 9either the parties nor the government, which filed briefs as a0i.us& made any objection to the jurisdiction. 4ut, as both parties were citiEens of 7issouri, the 0ourt raised, and considered fully, the (uestion whether there was federal jurisdiction under @ , of the :udicial 0ode. %t was on this (uestion that 7r. :ustice Aolmes and 7r. :ustice 7c6eynolds dissented. )he 0ourt held that there was federal jurisdiction, and upon averments of the bill, assumed to be ade(uate, sustained the right of the stoc&holder to invo&e the e(uitable remedy on the authority of the ;rushaber and Pollo.4 cases. Hill v. >alla.e& 2! U. S. ,,, 2! U. S. 3?+ 3#, was a suit by members of the 4oard of )rade of 0hicago to restrain enforcement of the ;uture )rading /ct, alleged to be unconstitutional. )he 0ourt held that the averments of the bill, which included allegations of irreparable injury, stated 5sufficient e(uitable grounds to justify granting the relief5 on the cases above cited. %f, or insofar as, any of the cases discussed may be deemed authority for sustaining this bill, they should now be disapproved. )his 0ourt, while recogniEing the soundness of the rule of stare de.isis where appropriate, has not hesitated to overrule earlier decisions shown, upon fuller Page !" U. S. #2# consideration, to be erroneous. B;ootnote M11C Our present &eener appreciation of the wisdom of limiting our decisions rigidly to (uestions essential to the disposition of the case before the court is evidenced by U"ited States v. Hasti"gs& !3 U. S. 1$$, decided at this term. )here, we overruled U"ited States v. Steve"so"& 12 U. S. 1!?,

12 U. S. 1!2, long a controlling authority on the 0riminal /ppeals /ct. Fi th. %f the 0ompany ever had a right to challenge the transaction with the )ennessee .alley /uthority, its right had been lost by estoppel before this suit was begun, and, as it is the 0ompany's right which plaintiffs see& to enforce, they also are necessarily estopped. )he )ennessee .alley /uthority /ct became a law on 7ay 1$, 1!##. 4etween that date and :anuary, 1!#,, the 0ompany and its associates purchased approximately #?,???,??? &wh electric energy at -ilson 8am. Under the contract of :anuary ,, 1!#,, which is here assailed, continued purchase of -ilson 8am power was provided for and made, and the /uthority has acted in other matters in reliance on the contract. %n 7ay, 1!#,, the 0ompany applied to the /labama Public Service 0ommission for approval of the transfers provided for in the contract, and, on :une 1, 1!#,, the 0ommission made, in general terms, its finding that the proposed sale of the properties was consistent with the public interest. 7oreover, the plaintiffs, in their own right, are estopped by their long inaction. /lthough widespread publicity was given to the negotiations for the contract and to these later proceedings, Page !" U. S. #2, the plaintiffs made no protest until /ugust ", 1!#,, and did not begin this suit until more than eight months after the execution of the contract. Others ++ certain ice and coal companies who thought they would suffer as competitors ++ appeared before the 0ommission in opposition to the action of the /uthority, and apparently they are now contributing to the expenses of this litigation. Si5th. *ven where by the substantive law stoc&holders have a standing to challenge the validity of legislation under which the management of a corporation is acting, courts should, in the exercise of their

discretion, refuse an injunction unless the alleged invalidity is clear. )his would seem to follow as a corollary of the long established presumption in favor of the constitutionality of a statute. 7r. :ustice %redell said as early as 1"!$, in J # U. S. #!!K 5%f any act of 0ongress, or of the Gegislature of a state, violates those constitutional provisions, it is un(uestionably void, though % admit that, as the authority to declare it void is of a delicate and awful nature, the 0ourt will never resort to that authority but in a clear and urgent case.5 7r. 0hief :ustice 7arshall said, in J 1" U. S. 3 2K 5On more than one occasion, this 0ourt has expressed the cautious circumspection with which it approaches the consideration of such (uestions, and has declared that in no doubtful case would it pronounce a legislative act to be contrary to the constitution. B;ootnote M1 C 5 Page !" U. S. #22 7r. :ustice -ashington said, in J 2 U. S. "?K 54ut if % could rest my opinion in favor of the constitutionality of the law on which the (uestion arises on no other ground than this doubt so felt and ac&nowledged, that alone would, in my estimation, be a satisfactory vindication of it. %t is but a decent respect due to the wisdom, the integrity, and the patriotism of the legislative body by which any law is passed to presume in favor of its validity until it violation of the constitution is proved beyond all reasonable doubt. )his has always been the language of this 0ourt when that subject has called for its decision, and % &now that it expresses the honest sentiments of each and every member of this bench.5

7r. 0hief :ustice -aite said in the Si"4i"gF Fu"d Case& !! U. S. "??, !! U. S. "1$K 5)his declaration Bthat an act of 0ongress is unconstitutionalC should never be made except in a clear case. *very possible presumption is in favor of the validity of a statute, and this continues until the contrary is shown beyond a rational doubt. One branch of the government cannot encroach on the domain of another without danger. )he safety of our institutions depends in no small degree on a strict observance of this salutary rule.5 )he challenge of the power of the )ennessee .alley /uthority rests wholly upon the claim that the act of Page !" U. S. #23 0ongress which authoriEed the contract is unconstitutional. /s the opinions of this 0ourt and of the 0ircuit 0ourt of /ppeals show, that claim was not a matter 5beyond peradventure clear.5 )he challenge of the validity of the /ct is made on an application for an injunction ++ a proceeding in which the court is re(uired to exercise its judicial discretion. %n proceedings for a mandamus, where, also, the remedy is granted not as a matter of right but in the exercise of a sound judicial discretion, Du".a" To/"site Co. v. La"e& ,2 U. S. #?$, ,2 U. S. #11+#1 , courts decline to enter upon the en(uiry when there is a serious doubt as to the existence of the right or duty sought to be enforced. /s was said in U"ited States v. I"terstate Co00er.e Co009"& !, U. S. 2?, !, U. S. 3#K 5-here the matter is not beyond peradventure clear, we have invariably refused the writ Bof mandamusC even though the (uestion were one of law as to the extent of the statutory power of an administrative officer or body.5

A ortiori& this rule should have been applied here, where the power challenged is that of 0ongress under the 0onstitution. 76. :US)%0* S)O9*, 76. :US)%0* 6O4*6)S, and 76. :US)%0* 0/68ONO join in this opinion. B;ootnote M1C )he management explained that it was in the best interest of the 0ompany to accept the offer of the /uthority for the purchase of the transmission lines in a limited area, coupled with an agreement on the part of the /uthority not to sell outside of that area during the life of the contract. %t protected the 0ompany against possible entrance of the /uthority into the territory in which were located nine+tenths of the 0ompany's customers, including the largest, and it assured the 0ompany that, so long as the latter retained its urban distribution systems within the territory served by the transmission lines, those systems would be serviced by power from -ilson 8am. Upon delivery of the transmission lines, the /uthority agreed to pay the 0ompany D1,12?,???. B;ootnote M C See also Sa0uel v. Holladay& 1 ;ed.0as. 9o. 1 , $$, pp. #?3, #11+#1 . B;ootnote M#C E.g.& 7iller, :., in +* U. S. %3,) "2 U. S. 31?> Ad4i"s v. Childre"9s Hos!ital& 31 U. S. 2 2, 31 U. S. 2,,> Aolmes, :., in ;lodgett v. Holde"& "2 U. S. 1, , "2 U. S. 1,"+1,$. B;ootnote M,C E.g.& , U. S. 8all. ,?!> U"ited States v. Ferreira& 1# Aow. ,?> <ordo" v. U"ited States& -all. 231, 11" U.S. 3!"> =us4rat v. U"ited States& 1! U. S. #,3> >illi"g v. Chi.ago Auditoriu0 Ass".& "" U. S. ",.

B;ootnote M2C E.g.& *x parte 6andolph, ? ;ed.0as. 9o. 11,22$, pp. , , 2,> %2 U. S. ##%) )rade+ 7ar& 0ases, *(( U. S. 3,& *(( U. S. $2) /riEona v. 0alifornia,J $# U. S. , #, $# U. S. ,3 +,3,. B;ootnote M3C E.g.& Hat.h v. Reardo"& ?, U. S. 12 , ?, U. S. 13?+131> Cor!oratio" Co00issio" v. Lo/e& $1 U. S. ,#1, $1 U. S. ,#$> Heald v. Distri.t o Colu0bia& 2! U. S. 11,, 2! U. S. 1 #> S!rout v. South ;e"d& "" U. S. 13#, "" U. S. 13"> Co".ordia Fire I"sura".e Co. v. Illi"ois& ! U. S. 2#2, ! U. S. 2,". B;ootnote M"C Co0!are Ele.tri. Co. v. Do/& 133 U. S. ,$!> Pier.e v. So0erset Ry.& 1"1 U. S. 3,1, 1"1 U. S. 3,$> Leo"ard v. Bi.4sburg& S. : P. R. Co.& 1!$ U. S. ,13, 1!$ U. S. , . B;ootnote M$C E.g.& U"ited States v. Dela/are : Hudso" Co.& 1# U. S. #33, 1# U. S. ,?"+,?$> U"ited States v. @i" Fuey =oy& ,1 U. S. #!,, ,1 U. S. ,?1> ;ae"der v. ;ar"ett& 22 U. S. ,> Te5as v. Easter" Te5as R. Co.& 2$ U. S. ?,, 2$ U. S. 1"> Pa"a0a R. Co. v. @oh"so"& 3, U. S. #"2, 3, U. S. #!?> Li"der v. U"ited States& 3$ U. S. 2, 3$ U. S. 1"+1$> =issouri Pa.i i. R. Co. v. ;oo"e& "? U. S. ,33, "? U. S. ,"1+," > Ri.h0o"d S.re/ A".hor Co. v. U"ited States& "2 U. S. ##1, "2 U. S. #,3> ;lodgett v. Holde"& "2 U. S. 1, , "2 U. S. 1,$> Lu.as v. Ale5a"der& "! U. S. 2"#, "! U. S. 2""> I"terstate Co00er.e Co009" v. Orego"F>ashi"gto" R. : ?. Co.& $$ U. S. 1,, $$ U. S. ,?. B;ootnote M!C Others are +# U. S. +%) Smyth v. /mes, *2$ U. S. '22& *2$ U. S. #*#F#*3) 0orbus v.

/las&a )readwell 1old 7ining 0o., *3+ U. S. '##) *x parte Ioung, ,($ U. S. *,%& ,($ U. S. *'%) 8elaware F Audson 0o. v. /lbany F Sus(uehanna 6. 0o., ,*% U. S. '%#) -athen v. :ac&son Oil F 6efining 0o.,J #2 U. S. 3#2. B;ootnote M1?C )he resolution of the directors <p. 2! U. S. #,?= was thisK 56esolved, that we fully concur in the views expressed in said letter as to the illegality of the tax therein named, and believe it to be in no way binding upon the ban&> but, in consideration of the many obstacles in the way of testing the law in the courts of the State, we cannot consent to ta&e the action which we are called upon to ta&e, but must leave the said Hleman to pursue such measures as he may deem best in the premises.5 6eferring to Dodge v. >oolsey& the 0ourt pointed out, in Ha/es v. Oa4la"d& 1?, U. S. ,2?, 1?, U. S. ,2!K 5/s the law then stood, there was no means by which the ban&, being a citiEen of the same State with 8odge, the tax collector, could bring into a court of the United States the right which it asserted under the 0onstitution to be relieved of the tax in (uestion, except by writ of error to a State court from the Supreme 0ourt of the United States.5 B;ootnote M11C / notable recent example is Hu0!hrey9s E5e.utor v. U"ited States& !2 U. S. 3? , which limited <p. !2 U. S. 3 3 et se7.= =yers v. U"ited States& " U. S. 2 , disapproving important statements in the opinion. ;or lists of decisions of this 0ourt later overruled, see ;ur"et v. Cor0ado Oil : <as Co.& $2 U. S. #!#, $2 U. S. ,?3+ ,?!> 7alcolm Sharp, 7ovement in Supreme 0ourt /djudication ++ / Study of 7odified

and Overruled 8ecisions, ,3 Aarv.G.6ev. #31, 2!#, "!2. B;ootnote M1 C %n 1$11, 0hief :ustice )ilghman of the Supreme 0ourt of Pennsylvania, while asserting the power of the court to hold laws unconstitutional but declining to exercise it in a particular case, stated the practice as followsK 5;or weighty reasons, it has been assumed as a principle in constitutional construction by the Supreme 0ourt of the United States, by this court, and every other court of reputation in the United States, that an /ct of the legislature is not to be declared void unless the violation of the constitution is so manifest as to leave no room for reasonable doubt.5 :ames 4. )hayer, after (uoting the passage in )he Origin and Scope of the /merican 8octrine of 0onstitutional Gaw, " Aarv.Gaw 6eview 1 !, 1,?, called attention <p. 1,,= to 5a remar& of :udge 0ooley to the effect that one who is a member of a legislature may vote against a measure as being, in his judgment, unconstitutional, and, being subse(uently placed on the bench, when this measure having been passed by the legislature in spite of his opposition, comes before him judicially, may there find it his duty, although he has in no degree changed his opinion, to declare it constitutional.5 Separate opinion of 76. :US)%0* 7c6*I9OG8S. 0onsidering the consistent rulings of this court through many years, it is not difficult for me to conclude that petitioners have presented a justiciable controversy which we must decide. %n S0ith v. 8a"sas City Title Co.& 22 U. S. 1$?, the grounds for jurisdiction were far less substantial than those here disclosed. -e may not with propriety avoid disagreeable duties by

lightly forsa&ing long respected precedents and established practice. 9or do % find serious difficulty with the notion that the United States, by proper means and for legitimate ends, Page !" U. S. #2" may dispose of water power or electricity honestly developed in connection with permissible improvement of navigable waters. 4ut the means employed to that end must be reasonably appropriate in the circumstances. Under pretense of exercising granted power, they may not, in fact, underta&e something not intrusted to them. )heir mere ownership, e.g.& of an iron mine, would hardly permit the construction of smelting wor&s followed by entry into the business of manufacturing and selling hardware, albeit the ore could thus be disposed of, private dealers discomfited, and artificial prices publiciEed. Aere, therefore, we should consider the truth of petitioners' charge that, while pretending to act within their powers to improve navigation, the United States, through corporate agencies, are really see&ing to accomplish what they have no right to underta&e the business of developing, distributing and selling electric power. %f the record sustains this charge, we ought so to declare and decree accordingly. )he 0ircuit 0ourt of /ppeals too& too narrow a view of the purpose and effect of the contract of :anuary ,, 1!#,. )hat went far beyond the mere ac(uisition of transmission lines for proper use in disposing of power legitimately developed. Gi&e all contracts, it must be considered as a whole, illumined by surrounding circumstances. *special attention should be given to the deliberately announced purpose of 8irectors, clothed with extraordinary discretion and supplied with enormous sums of money. -ith D2?,???,??? at their command, they started out to gain control of the electrical business

in large areas, and to dictate sale prices. )he power at -ilson 8am was the instrumentality seiEed upon for carrying the plan into effect. -hile our primary concern is with this contract, it cannot be regarded as a mere isolated effort to dispose of property. /nd certainly to consider only those provisions Page !" U. S. #2$ which directly relate to /labama Power 0ompany is not permissible. -e must give attention to the whole transaction ++ its antecedents, purpose and effect ++ as well as the terms employed. 9o abstract (uestion is before us> on the contrary, the matter is of enormous practical importance to petitioners ++ their whole investment is at sta&e. Properly understood, the pronouncements, policies and program of the /uthority illuminate the action ta&en. )hey help to reveal the serious interference with the petitioners' rights. )heir property was in danger of complete destruction under a considered program commenced by an agency of the 9ational 1overnment with vast resources subject to its discretion and bac&ed by other agencies li&ewise intrusted with discretionary use of huge sums. )he threat of competition by such an opponent was appalling. )he will to prevail was evident. 9o private concern could reasonably hope to withstand such force. )he )ennessee 6iver, with headwaters in -est .irginia and 9orth 0arolina, crosses )ennessee on a southwesterly course, enters /labama near 0hattanooga, and flows westerly across the northern part of that State to the northeast corner of 7ississippi. )here it turns northward, passes through )ennessee and Hentuc&y, and empties into the Ohio forty miles above 0airo. )he total length is nine hundred miles> the drainage basin approximates forty thousand s(uare miles. )he volume of

water is extremely variable> commercial navigation is of moderate importance. /t 7uscle Shoals, near ;lorence, /labama <twenty miles east of the 7ississippi line and fifteen south of )ennessee=, a succession of falls constitutes serious interference with navigation, also presents possibilities for development of power on a large scale. 8uring and immediately after the -orld -ar, a great dam was constructed there by the United States, intended primarily for generation Page !" U. S. #2! of power. Production of electricity soon commenced. Some of this was devoted to governmental purposes> much was sold, delivery being made at or near the dam. 8uring the last thirty years, several corporations have been engaged in the growing business of developing electric energy and distributing this to customers over a networ& of interconnected lines extending throughout )ennessee, 1eorgia, /labama and 7ississippi. /t great expense, they gradually built up extensive businesses and ac(uired properties of very large value. /ll operated under state supervision. )hrough stoc& ownership or otherwise, they came under general control of the 0ommonwealth F Southern 0orporation. /mong the associates were the /labama Power 0ompany, which serviced /labama, the 7ississippi 0ompany, which serviced 7ississippi, and the )ennessee 0ompany, which operated in eastern )ennessee. Auge sums were invested in these enterprises by thousands of persons in many states. /pparently, the companies were diligently developing their several systems and responding to the demands of the territories which they covered. %n 1!##, operations began under an imposing program for somewhat improving )ennessee 6iver navigation, and especially for developing the water power along its

whole course at public expense. )his plan involved conversion of water power into electricity for wide distribution throughout the valley and adjacent territory. %ts development was intrusted to the )ennessee .alley /uthority, a federal corporation wholly controlled by the United States. )his promptly too& over the -ilson 8am and began wor& upon the -heeler 8am, twenty miles up the 6iver, and the Pic&wic& 8am, some forty miles lower down. /lso it commenced construction of 9orris 8am across 0linch 6iver, a branch of the )ennessee, two hundred miles above the -ilson 8am. /ll these, with probable additions, were to be connected by transmission wires, Page !" U. S. #3? and electric energy distributed from them to millions of people in many states. Public service corporations were to be brought to terms or put out of business. /t least D"2,???,??? of public funds was early appropriated for expenditure by the 8irectors, and other governmental agencies in control of vast sums were ready to lend aid. 6eadily to understand the issues now before us, one must be mindful of these circumstances. )he trial court made findings of fact which fill more than sixty printed pages. )hey are not controverted, and, for present purposes, are accepted> upon them the cause stands for decision. )hey are much (uoted below. Plainly they indicate, and that court, in effect, declared, the contract of :anuary ,th was a deliberate step into a forbidden field, ta&en with definite purpose to continue the trespass. 9othing suggests either necessity or desirability of entering into this agreement solely to obtain solvent customers willing to pay full value for all surplus power generated at -ilson 8am. /pparently there

was ample opportunity for such sales, deliveries to be made at or near the dam. 9o attempt was made to show otherwise. )he definite end in view was something other than orderly disposition. )he /uthority's /nswer to the 0omplaint is little more than a series of denials. %t does not even allege that the contract of :anuary ,th was necessary for ready disposal of power> or that thereby better prices could be obtained> or that no buyer was ready, able and willing to ta&e at the dam for full value> or that the 4oard expected to derive ade(uate return from the business to be ac(uired. 9o sort of explanation of the contract is presented ++ why it was entered into, or whether profitable use probably could be made of the property. /nd % find in the /uthority's brief no serious attempt to justify the purchases because necessary. or, in fact, an advantageous method, for disposing Page !" U. S. #31 of property. 9othing in the findings lends support to any such view. )he record leaves no room for reasonable doubt that the primary purpose was to put the ;ederal 1overnment into the business of distributing and selling electric power throughout certain large districts, to expel the power companies which had long serviced them, and to control the mar&et therein. / government instrumentality had entered upon a pretentious scheme to provide a 5yardstic&5 of the fairness of rates charged by private owners, and to attain 5no less a goal than the electrification of /merica.5 5-hen we carry this program into every town and city and village, and every farm throughout the country, we will have written the greatest chapter in the economic, industrial and social development of /merica.5

/ny reasonable doubt concerning the purpose and result of the contract of :anuary ,th or of the design of the /uthority should be dispelled by examination of its 6eports for 1!#, and 1!#2. O Page !" U. S. #3 5)he conception was to establish an independent networ& comparable in all respects with the electric utility system serving the area, with which )./ sought to establish interchange arrangements, both as outlets for its Page !" U. S. #3# own power and to use existing systems as a standby or bac&up service.5 5)he )./ plan as conceived and in process of execution contemplates complete and exclusive control and jurisdiction over all power sites on the )ennessee 6iver Page !" U. S. #3, and tributaries.5 5)he )./ policy contemplates full corporate discretion by )./ in developing, executing and extending its electric system and service within transmission limits.5 5)his policy contemplated service utility in type and covered not only generation, but transmission and distribution <preferably through public or nonprofit agencies, if available=, both wholesale and retail. )hat is, Page !" U. S. #32 moreover, implicit in both the :anuary , contract and the now terminated /ugust !th contract.5 )he challenged contract is defended upon the theory that the

5;ederal 1overnment may dispose of the surplus water power necessarily created by -ilson 8am, and may authoriEe generation of electric energy and ac(uisition of transmission lines as means of facilitating this disposal.5 4ut to facilitate disposal was not the real purpose> obviously the thing to be facilitated was carrying on business by use of the purchased property. Under the guise of disposition, something wholly different was to be accomplished ++ devotion of electric power to purposes beyond the sphere of proper federal action, an unlawful goal. )here is no plausible claim that such a contract was either necessary or desirable merely to bring about the sale of property. )his 0ourt has often affirmed that facts, not artifice, control its conclusions. )he /gency has stated (uite clearly the end in viewK 5)his public operation is to serve as a yardstic& by which to measure the fairness of electric rates.5 5)he )./ power policy was not designed or limited with a view to the mar&eting of the power produced and available at 7uscle Shoals.5 5%n formulating and going forward with the power policy, the 4oard was considering that policy as a permanent and independent commercial function.5 ;or present purposes, a complete survey of relevant circumstances preceding the contract of :anuary ,th and all its conse(uences is not essential. )he pleadings and findings fairly outline the situation. -hat follows is mainly (uoted or derived from them. )he /ct of 7ay 1$, 1!##, created the )ennessee .alley /uthority as a body corporate 5for the purpose of maintaining and operating the properties now owned by the United States in the vicinity of 7uscle Shoals, /labama, in the interest of the national defense and for agricultural

Page !" U. S. #33 and industrial development, and to improve navigation in the )ennessee 6iver and to control the destructive floodwaters in the )ennessee 6iver and 7ississippi 6iver 4asins.5 %t provided, a board of three directors 5shall direct the exercise of all the powers of the 0orporation,5 and 5is authoriEed to ma&e alterations, modifications or improvements in existing plants and facilities, and to construct new plants5, and to 5produce, distribute, and sell electric power as herein particularly specified.5 )he 0orporation 5shall have such powers as may be necessary or appropriate for the exercise of the powers herein specifically conferred upon the 0orporation>5 5to ac(uire real estate for the construction of dams, reservoirs, transmission lines, power houses, and other structures, and navigation projects at any point along the )ennessee 6iver, or any of its tributaries.5 /lso, the 4oard is 5hereby empowered and authoriEed to sell the surplus power not used in its operations, and for operation of loc&s and other wor&s generated by it, to States, counties, municipalities, corporations, partnerships, or individuals, according to the policies hereinafter set forth, and to carry out said authority, the board is authoriEed to enter into contracts for such sale for a term not exceeding twenty years.5 5%n order to promote and encourage the fullest possible use of electric light and power on farms within reasonable distance of any of its transmission lines, the board, in its discretion, shall have power to construct transmission lines to farms and small villages that are not otherwise supplied with electricity at reasonable rates, and to ma&e such rules and regulations governing such

sale and distribution of such electric power as in its judgment may be just and e(uitable.5 5One of the first corporate acts of )./ after its organiEation was to formulate and announce a power policy to govern the commercial distribution of electric power by )./. )he evidence establishes the fact that the 4oard, Page !" U. S. #3" from the outset, has considered that it has general corporate discretion as to the establishment and extension of its electric power policy. %n establishing a power policy, the 4oard was not primarily considering merely the (uestion of disposal of power produced at 7uscle Shoals no longer re(uired for governmental purposes as a result of overbuilding, obsolescence of plants, or termination of war purpose. 9or was it considering disposal of prospective increases in electric power to be unavoidably created in excess of some governmental re(uirement. %t was considering the matter from the standpoint of the successful establishment and permanent operation of an independent and well rounded government+owned electric distribution system and the general civic, social, and industrial planning and development of the )ennessee .alley region as a whole.5 5Under date of /ugust 2, 1!##, )./ announced its power policy, indicating both the initial stage of its development and certain later steps originally determined upon. . . . )his power policy had not been rescinded or abandoned or modified at the time of submission of this cause.5 5%n September, 1!##, the /uthority announced its wholesale and retail rate schedules, which are shown by the evidence to be materially lower than corresponding schedules of the existing utilities in the area. ;ollowing this action,

numerous municipalities in the area began to ma&e efforts to construct municipal systems with which to distribute )./ current, and Public -or&s /dministration <called P-/= gave assurances of favorable consideration of applications for loans to that end.5 Under such circumstances, 0ommonwealth F Southern 0orporation negotiated the :anuary ,th contract for its operating subsidiaries ++ /labama Power 0ompany, 1eorgia Power 0ompany, 7ississippi Power 0ompany, and )ennessee *lectric Power 0ompany. Page !" U. S. #3$ )his recited that the /labama 0ompany, the 7ississippi 0ompany, and the )ennessee 0ompany desired to sell, and the /uthority desired to purchase, certain land, buildings and physical properties devoted to the generation, transmission and distribution of electricity, together with certain franchises, contracts and going business. )he /labama 0ompany agreed to sell for D1,???,??? all of its low tension <,, H. or lower= transmission lines, substations <including the high tension station at 8ecatur and the Sheffield Steam Plant Station= and all rural lines and rural distribution systems in five /labama counties and parts of two others. B)hese counties are northwestern /labama, and lie on both sides of the )ennessee 6iver for eighty miles or more.C )he 7ississippi 0ompany, in consideration of D$2?,???, agreed to transfer all of its transmission and distribution lines, substations, generating plants and other property in Pontotoc, Gee, %tawamba, Union, 4enton, )ippah, Prentiss, )ishomingo and /lcorn counties <except one dam site in )ishomingo 0ounty= State of 7ississippi, used in connection with the generation, transmission, distribution or sale of electrical energy. B)hese counties are the

northeastern section of the state, a territory sixty miles s(uare.C ;or D!??,???, the )ennessee 0ompany agreed to convey its transmission and distribution lines, substations, distribution systems and other properties used in connection with the transmission, distribution and sale of electrical energy in /nderson, 0ampbell, 7organ and Scott counties, *ast )ennessee, and 5all of the 33 H. transmission line from 0ove 0ree& to Hnoxville.5 B)hese counties are in the mountains northward from Hnoxville within a radius of about sixty miles. )hey lie northeast of 7uscle Shoals, and some points therein are much more than a hundred miles from -ilson 8am. )hey have a population of $3,???.C Page !" U. S. #3! )he power companies agreed, that 5any conveyance of property shall include not only the physical property, easements and rights+of+way, but shall also include all machinery, e(uipment, tools and wor&ing supplies set forth in the respective exhibits, and all franchises, contracts and going business relating to the use of any of said properties.5 /lso, 5to transfer or secure the transfer of said franchises, contracts and going business, and to transfer said properties with all present customers attached, so far as they are able.5 /lso, 5that, during the period of this contract, none of said companies will sell electric energy to any municipality, corporation, partnership, association or individual in any portion of the above+described counties or parts thereof in /labama, )ennessee and 7ississippi,5

etc. )he /uthority agreed not to sell electric energy outside of the specified counties to the customers of non+utilities supplied by the power companies. Other covenants provided for interchange of electric energy between the contracting parties and for cooperation in the sale of electric appliances throughout the entire territory served by the power companies. 5Power 0ompanies covenant and agree that, after the expiration of this agreement, the interchange arrangement then in effect will be maintained by Power 0ompanies for an additional period <not exceeding eighteen months= sufficient to permit /uthority to construct its own transmission facilities for serving all of the territory which it is then serving in whole or in part with power obtained at such interchange points.5 5Power 0ompanies agree to have available at all times for exchange, at each point of exchange, energy and capacity to supply the entire demands of the customers served by /uthority from such points of exchange, subject to the limitations as to transmission capacity set forth in Section 1?<h= hereof> Provided, that the maximum Page !" U. S. #"? amount which /uthority shall be entitled to demand at all points of exchange shall be "?,??? &.v.5 Prior to the agreement for sale, )he /labama 0ompany had derived D"2?,??? gross annual revenue from its properties located within the 5ceded area.5 )his district had a population of 1!?,???, and the 0ompany had therein 1?,??? individual customers ++ approximately 1M1? of all those directly served by it. )he lines transferred by the 7ississippi Power 0ompany served directly ,,??? customers in ! counties, having total population of 1$,,???. -hen this cause began, the 7ississippi properties were being operated by )./, and rural lines

were in process of extension by it in both 7ississippi and /labama. 5/ll of the electric properties and facilities covered by the contract of :anuary ,, 1!#,, . . . were contracted for by )./ for the purpose of continuing and enlarging the utility service for which they were used by the respective power companies.5 5)he operation of a commercial utility service by )./ and the wholesaling and retailing by )./ of electricity in the area served by the /labama Power 0ompany is not and will not be in aid of the regulation of navigation or national defense or other governmental function insofar as any plan, purpose or activity of the )./ or of the United States disclosed on this record would indicate.5 /nswering the Petitioners' 0omplaint, /labama 0ompany admitted 5that the public statements of )./ indicated the program therein alleged, and the directors of respondent company considered that to vest such an agency as therein alleged with unlimited power and access to public funds in a program of business competition and public ownership promotion in the area served by respondent company would in effect destroy this respondent's property, and such conclusion on its part was the Page !" U. S. #"1 principal inducement for it to enter into the contracts of :anuary , and /ugust !, 1!#,, and respondent company thereby was and will be enabled to salvage a larger amount of its property than it could have done by competition.5 /lso, 5that, under the circumstances of threatened competition, directed or controlled by )./ as averred therein, this

respondent agreed to the sale of certain of its transmission lines and property, and entered into the contract dated :anuary ,, 1!#,. . . . 6espondent company admits that, at and before the execution of the contract, the threat was made to use federal funds to duplicate the facilities of respondent, which would result in competition with rates not attainable by or permissible to this respondent, and such rates would be stipulated, controlled and regulated by )./.5 /s matter of law, the trial court found ++ 5)he function intended by )./ under the evidence in relation to service, utility in type, in the area ceded by the contract of :anuary ,, 1!#,, transcends the function of conservation or disposition of government property, involves continuing service and commercial functions by the government to fill contracts not governmental in origin or character.5 5Performance of the contract of :anuary ,th, 1!#,, would involve substantial loss and injury to the /labama Power 0ompany, including, i"ter alia& the loss or abandonment of franchises, licenses, going business and service area supporting its general system and power facilities, and, unless resisted, would tend to invite a progressive encroachment on its service area by the )ennessee .alley /uthority.5 50ongress has no constitutional authority to authoriEe )ennessee .alley /uthority or any other federal agency to underta&e the operation, essentially permanent in character, of a utility system, for profit, involving the Page !" U. S. #" generation, transmission and commercial distribution of electricity within State domain, having no reasonable relation to a lawful governmental use.5

5)he contract of :anuary ,, 1!#,, expressly provided for the transfer of all or substantially all of the lines and properties of the /labama Power 0ompany for the service of the ceded area, included transmission lines, rural distribution systems and certain urban distribution systems, and contemplated the eventual transfer of fourteen urban distribution systems. )his contract, expressly contemplating service of the ceded area by the )ennessee .alley /uthority with electricity to be generated or purchased by the )ennessee .alley /uthority for that purpose, was in furtherance of illegal proprietary operations by the )ennessee .alley /uthority in violation of the ;ederal 0onstitution, and void. )he contract was accordingly ultra vires and void as to the /labama Power 0ompany.5 Aaving made exhaustive findings of fact and law, the trial court entered a decree annulling the :anuary ,th contract and enjoining the /labama Power 0ompany from performing it. )he 0ircuit 0ourt of /ppeals reversed, upon the theory that the /uthority was ma&ing proper arrangements for sale of surplus power from the -ilson dam. )he injunction was continued. % thin& the trial court reached the correct conclusion, and that its decree should be approved. %f, under the thin mas& of disposing of property, the United States can enter the business of generating, transmitting and selling power as, when, and wherever some board may specify, with the definite design to accomplish ends wholly beyond the sphere mar&ed out for them by the 0onstitution, an easy way has been found for brea&ing down the limitations heretofore supposed to guarantee protection against aggression. O ;rom the /nnual 6eport, )./ 4oard, for 1!#,, pp. #, ,, 2, 3, ", and $. 5)o provide a wor&able and economic basis of operations, the /uthority plans initially to

serve certain definite regions, and to develop its program in those areas before going outside.5 5)he initial areas selected by the /uthority may be roughly described as <a= the region immediately proximate to the route of the transmission line soon to be constructed by the /uthority between 7uscle Shoals and the site of 9orris 8am> <b= the region in proximity to 7uscle Shoals, including northern /labama and northeastern 7ississippi, and <c= the region in the proximity of 9orris 8am <the new source of power to be constructed by the /uthority on the 0linch 6iver in northeast )ennessee=.5 5/t a later stage in the development, it is contemplated to include, roughly, the drainage area of the )ennessee 6iver in Hentuc&y, /labama, 1eorgia, and 9orth 0arolina, and that part of )ennessee which lies east of the west margin of the )ennessee drainage area.5 5)o ma&e the area a wor&able one and a fair measure of public ownership, it should include several cities of substantial siEe <such as 0hattanooga and Hnoxville= and, ultimately, at least one city of more than a (uarter million, within transmission distance, such as 4irmingham, 7emphis, /tlanta, or Gouisville.5 5-hile it is the /uthority's present intention to develop its power program in the above+ described territory before considering going outside, the /uthority may go outside the area if there are substantial changes in general conditions, facts, or governmental policy which would necessarily re(uire a change in this policy of regional development, or if the privately owned utilities in the area do not cooperate in the wor&ing out of the program.5 5)he /uthority entered into a 2+year contract on :anuary ,, 1!#,, with the 0ommonwealth F Southern 0orporation and its /labama, )ennessee, 1eorgia, and

7ississippi subsidiaries. )he contract covered options to purchase electric properties in certain counties of /labama, 7ississippi, and )ennessee, the sale of distribution systems to municipalities in these counties, restrictions on territorial expansion by the contracting parties, the interchange of power, and other matters.5 5Alaba0a !ro!erties. ++ /ll of the low+ tension <,,,??? volts or lower= transmission lines, substations, rural lines, and rural distribution systems of the /labama Power 0o., in the counties of Gauderdale, 0olbert, Gawrence, Gimestone, and 7organ <except the Aulaco area= were included in the contract> also those in the north half of ;ran&lin 0ounty, including the town of 6ed 4ay, and the territory in the northern part of 0ullman 0ounty served by a line of the /labama Power 0o. extending south from 8ecatur. )he price of these properties was set at D1,1?1, 23. )he purchase had not been completed at the end of the fiscal year.5 5)he power company agreed to attempt to sell the local distribution systems in the above counties to the respective municipalities, the /uthority reserving the right to serve them if sales were not consummated within # months of bo"a ide negotiation and effort. 4ecause of the failure of any BmanyC of the municipalities in northern /labama to consummate negotiations for the purchase of the distribution systems serving them, the /uthority entered into negotiations for the direct purchase of these distribution systems, but a purchase contract had not been completed on :une #?.5 5=ississi!!i !ro!erties. ++ )he contract covered all of the properties of the 7ississippi Power 0o. in the counties of Pontotoc, Gee, %tawamba, Union, 4enton, )ippah, Prentiss, )ishomingo, and /lcorn, except a dam site on the )ennessee 6iver in )ishomingo 0ounty. )he purchase price was D$2?,???. )he purchase was

completed, and delivery was accepted on :une 1, 1!#,.5 5)he transmission and generation facilities ac(uired in 7ississippi and to be retained as part of the /uthority's system include the followingK5 bwmK ,,,???+volt transmission lines. . . . . . . . . . . . miles 3# ,,,???+volt substations . . . . . . . . . . . . . . . 3 ,???+volt transmission lines. . . . . . . . . . . . miles ,2 ,???+volt substations . . . . . . . . . . . . . . . , )upelo steam stand+by generating plant. . Hilovolt+amperes ,,#", 0orinth steam stand+by generating plant. . . . . . do , 2 4lue 7ountain 8iesel generating plant. . . . . . . do 12? 7yrtle 8iesel generating plant . . . . . . . . . . do "2 ewmK 5Part of the local distribution facilities ac(uired in 7ississippi were sold prior to the end of the fiscal year, and it is expected that all will be sold eventually, as noted hereafter.5 5Te""essee !ro!erties. ++ )he contract covered all of the properties of the )ennessee *lectric Power 0o. in the counties of /nderson, 0ampbell, 7organ <except the lines extending into 7organ 0ounty from Aarriman=, and Scott> also those in the west portion of 0laiborne 0ounty, and the 33,???+volt transmission line from /nderson 0ounty to Hnoxville. )he

price of these properties was set at D!??,???. )he purchase had not been completed at the end of the fiscal year.5 59egotiations were carried on diligently for several months with the 9ational Power F Gight 0o., an affiliate of the *lectric 4ond F Share 0o., in an endeavor to ac(uire the eastern )ennessee electric properties of the )ennessee Public Service 0o., a subsidiary of the 9ational Power F Gight 0o. )he electric distribution system in the city of Hnoxville is included in these properties. )he negotiations resulted in a contract after the end of the fiscal year.5 50onstruction of rural electric lines in northern /labama and northeastern 7ississippi was commenced in the latter part of 1!## with relief labor, the /uthority furnishing supervision and materials. 6elief labor was withdrawn on ;ebruary 12, 1!#,, after which date the wor& was continued by the /uthority with its own forces. /pproximately !#.2 miles of rural electric lines were under construction in Gauderdale and 0olbert 0ounties, /la. on :une #?, and approximately 1 " miles in Gee, Pontotoc, /lcorn, %tawamba, Prentiss, 7onroe, and )ishomingo 0ounties, 7iss.5 5/ standard form of ?+year contract was devised to govern the sale of power at wholesale to municipal distribution systems, and was first used in a contract with the city of )upelo, 7iss. )he )upelo contract has been published by the /uthority, and is available for distribution.5 /nnual 6eport, )./ 1!#2, pp. !, #? ++ 5)he /uthority has devoted special attention during the year to the problems of rural electrification, as re(uired by section 1? of the act. 4y the close of the fiscal year, ?? miles of rural electric line had been built, and 1$1 additional miles were in process of construction. )hese lines are divided among the various counties as followsK5

7iles 7iles in /labamaK completed progress 0olbert . . . . . . . . . . 1! 12 Gauderdale. . . . . . . . . " PP 7ississippiK /lcorn. . . . . . . . . . . ,1 ! Gee and %tawamba. . . . . . ,1 3 Pontotoc. . . . . . . . . . " Prentiss. . . . . . . . . . PP " )ennesseeK Gincoln . . . . . . . . . . PP 1?, +++ +++ )otal. . . . . . . . . . . . . ?? 1$1 %n addition to the above, a number of the rural lines purchased from the 7ississippi Power 0o. were rehabilitated in order to improve operating and safety conditions, and to provide for increases in load. /lso, additional customers were connected to all existing rural lines.