Railway Express Agency v. Commissioner of Int. Rev. , 169 F.2d 193 ( 1948 )

L. HAND, Circuit Judge

(dissenting in part).

Article V, § 4(i), of the Express Operations Agreement provides that, in stating its accounts with the railroads, the Agency may include among its credits the deductions of “Caption IV” except item 329. This refers to a document of the Interstate Commerce Commission, issued in 1914, long before the Agency was created; and “Caption IV” was in five sections, of which item 329 was dividends “declared payable.” Therefore, Article V, § 4(i), means that, if the Agency paid a dividend to the roads, which were its only shareholders, it could not deduct it in accounting with them,1, but would have to pay it to them again. As my brothers say, the Agreement required the Agency to pay over all its net income to the roads; but, so strict has been the interpretation of the section, and so specific are its terms, that I should agree that more was necessary to bring the case within the exemption than our conclusion that net income must have been meant to exclude dividends; some provision was necessary which “expressly deals with the payment of dividends,” and any such payment must “violate” that provision.

I cannot see how we can avoid concluding that Article V, § 4(i), “expressly deals with the payment of dividends”; certainly it must be enough that by reference it expressly excludes item 329 of “Caption IV.” Hence the question becomes whether any “payment of dividends” would “violate” Article V, § 4(i), after “Caption IV”— less item 329 — has been read into it. It is true that verbally it is not Article V, § 4(i), which such a payment would “violate,” but the general requirement that the Agency must pay over all net income. However, in order to learn what that income is, we must have recourse to Article V, § 4(i), expanded as I have just said. To say therefore that such a payment would not “violate” the provision which “expressly deals with the payment of dividends” seems to me to be nothing less than to refuse to allow the Express Operations Agreement to be read as a whole, after all has been incorporated into it that by reference it has incorporated. I do not believe that the section meant to deny to taxpayers such a fundamental canon of documentary interpretation.