The present cause arises on a petition to review and modify, or set aside an order of the Securities and Exchange Commission.
Pacific Gas and Electric Company, petitioner, hereafter called the company, is a California corporation, and was organized in 1905. On March 23, 1912, the Public Utilities Act of California became effective, St.1911, Ex.Sess., p. 18, and sine© that date, the company could issue securities only with the approval of the Railroad Commission of California. All its securities now outstanding, have' been authorized by the Railroad Commission except 15% of its common stock which was issued prior to March 23, 1912. All the company’s public utility properties are located in, and its business is conducted in, the State of California.
The Public Utility Holding Company Act of 1935, 15 U.S.C.A. § 79 et seq., hereafter called the act became effective on August 26, 1935. Section 2(a) (8) of the act defines a “subsidiary company” as meaning:
“(A) any company 10 per centum or more of the outstanding voting securities of which are directly or indirectly owned, controlled, or held with power to vote, by such holding company * * * unless the Commission, as hereinafter provided, by order declares such company not to be a subsidiary company of such holding company; and
“(B) any person the management or policies of which the Commission, after notice and opportunity for hearing, determines to be subject to a controlling influence, directly or indirectly, by such holding company (either alone or pursuant to an arrangement or understanding with one or more other persons) so as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that such person be subject to the obligations, duties, and liabilities imposed in this chapter upon subsidiary companies of holding companies.
“The Commission, upon application, shall by order declare that a company is not a subsidiary company of a specified holding company under clause (A) if the Commission finds that (i) the applicant is not controlled, directly or indirectly, by such holding company (either alone or pursuant to an arrangement or understanding with one or more other persons) either through one or more intermediary persons or by any means or device whatsoever, (ii) the applicant is not an intermediary company through which such control of another company is exercised, and (iii) the management or policies of the applicant are not subject to a controlling influence, directly o.r indirectly, by such holding company (either alone or pursuant to an arrangement or understanding with one or more other persons) so as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that the applicant be subject to the obligations, duties, and liabilities imposed in this chapter upon subsidiary companies of holding companies. The filing of an application hereunder in good faith shall exempt the applicant from any obligation, duty, or liability imposed in this chapter upon the applicant as a subsidiary company of such specified holding company until the Commission has acted upon such application. Within a reasonable time after the receipt of any application hereunder, the Commission shall enter an order granting, or, after notice and opportunity for hearing, denying or otherwise disposing of, such application.”
Section 79f makes it unlawful for a subsidiary company of a registered holding company to issue or sell any of its securities except with the approval of the Commission.
On November 29, 1935, the company filed an application with the Commission for an order declaring that it was not a subsidiary company of the North American Company, *381a registered holding company under the act which has held 17.71% of the company’s voting stock since June 12, 1930. On September 4, 1940, the Commission directed a hearing upon such application, and on October 10, 1940, directed that such hearing commence, and it did commence, on November 12, 1940. The hearing concluded on January 16, 1941. The trial examiner on April 22, 1941, filed his report recommending that the company’s petition be granted.
On July 1, 1941, the California Railroad Commission authorized the company to issue and sell 400,000 shares of its 5% First Preferred Stock, and it commenced to sell them after July 8, 1941.
On September 10, 1941, the Commission entered an order denying the company’s application. At that time the company had sold 199,433 shares of the stock above mentioned. On September 18, 1941, the company filed a petition in this court to Review and Modify or Set Aside the order of the commission, and for a stay pending such review. On the same date it filed an affidavit in support of the stay. On the following day, this court made an ex parte order staying and suspending the order and the “operation” thereof, reciting “that by Section 24 of the Public Utility Holding Company Act of 1935 said petitioner is entitled to a review of said order, and that the Court may stay the operation of said order pending review thereof”.
On October 17, 1941, the Commission moved to vacate so much of the order of September 19, 1941, as provided for the stay and suspension, on four grounds: (1) the Commission’s order is not susceptible of being stayed, because of the act, the company is a subsidiary company, and to stay the order is to have no effect other than to leave the company in the status in which the statute places it, i.e., a subsidiary company; (2) if effective to remove the company from its status as a subsidiary, the stay does not preserve the status quo because when the Commission acted, the company was a subsidiary company under the dct, and a "stay could not change it; (3) no great or irreparable loss or injury will be suffered by the company, if the stay is vacated, but if not, the national public interest and the interests of investors and consumers may be adversely affected; and (4) this court was without jurisdiction to stay the Commission’s order because the jurisdiction to stay is for the purpose of preserving the statu quo, but here, statu quo, i.e., as a subsidiary company, is preserved without the stay.
Upon the hearing of respondent’s motion the cause was set for hearing on the merits, and the motion taken under advisement. In view of our decision on the merits, the motion has become moot.
The Commission held that the Trial Examiner had reached his recommendation because he had misconstrued the statute. The Commission construed § 2(a) (8) of the act as meaning (1) that the applicant had the burden of proving that its management and policies are not subject to the controlling influence of North American; and (2) that “controlling influence” meant something less in the form of influence on the management or policies of a company than “control” of such company, that “control” includes the power to control, and “subject to a controlling influence” includes susceptibility to domination. It found that petitioner “has not demonstrated that its management and policies are not subject to the controlling influence of North American * * * ” The two rules of law mentioned above and the finding are challenged here.
As to the finding, petitioner contends, as the Board found “that the record does not reveal any past attempts by North American to interfere affirmatively with the management or policies of P. G. & E.” If petitioner’s contention regarding the second rule of law above mentioned is correct, then reversal follows. However, if the Commission’s view on the second rule of law is correct, then the question arises as to whether there is any substantial evidence to support the finding.
Section 2(a) (8) of the act provides that the Commission shall declare that an applicant is not a subsidiary company, if it finds three facts: (1) that the applicant is not controlled directly or indirectly by a holding company; (2) that the applicant is not the medium of control of another company by a holding company; and (3) that “the management or policies of the applicant are not subject to a controlling influence, directly or indirectly, by such holding company * * * so as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that the appli*382cant be subject to the obligations, duties, and liabilities imposed in this chapter upon subsidiary companies of holding companies.” Since the statute requires findings of all three facts, in order to exempt a subsidiary as s.uch, and since the third fact was not found by the Commission, the company is not entitled to exemption if the Commission’s action regarding the third fact is sustained here.
The company contends that the language of the statute describing the third fact means “actual and existing control”, rather than “susceptibility to control” as the Commission held, and since the Commission found that the evidence affirmatively showed a lack of actual and existing control, an exemption order should have been granted. The company quotes a portion of a committee report, and a part of Senator Wheeler’s argument in the debates on the act. While the report sheds no light on the present question, the portion of the argument mentioned definitely supports the company’s view. We think such argument must be disregarded because contrary to the plain meaning of the act. Pennsylvania R. R. Co. v. International Coal Co., 230 U.S. 184, 198, 199, 33 S.Ct. 893, 57 L.Ed. 1446. If the company’s argument were adopted, then the first and third facts enumerated in the statute would be identical, and the third would therefore be surplusage. In view of the rule, that a legislative body is presumed to have used no superfluous words in a statute (Platt v. Union Pac. R. Co., 99 U.S. 48, 58, 25 L.Ed. 424), and the rule that “effect shall be given to every clause and part o'f a statute” (Ginsberg & Sons v. Popkin, 285 U.S. 204, 208, 52 S.Ct. 322, 323, 76 L.Ed. 704) we think the construction of the statute by the Commission which gives effect to the entire statute is correct and must be sustained.
We are thus brought to the questions regarding the findings and the evidence. The Commission found that the company had not “demonstrated” a lack of susceptibility to control by North American. The company argues that the Commission thus saddled it with a burden of proof to a clear and convincing degree. The Commission argues that the company has the burden of proving the lack of susceptibility to control. Dispute between the parties exists with respect to the question as to whether the statute creates a rebut-table presumption that the company is a “subsidiary company” or whether the company is “prima facie” such a subsidiary.
The words “burden of proof” are used in two senses: (1) the duty to prove a charge by a degree of proof such as a preponderance of the evidence; and (2) the duty to go forward with the evidence. Department of Water and Power v. Anderson, 9 Cir., 95 F.2d 577, 582, 583. In the first sense, “burden of proof” has no application to an administrative proceeding such as this. The statute does not specify any degree of proof required for any particular finding. The statute in question permits an application to be granted without hearing, but requires “notice and opportunity for hearing” if the application is denied or otherwise disposed of.
The statute does not even specify the party who shall have the duty of opening and closing the hearing. If such a hearing is held it is only common-sense which requires the company to present its evidence, since it seeks a particular declaration. When the evidence is all in, the Commission considers the whole body of evidence, both pro and con, and finds what the ultimate facts are, unrestrained by any rule regarding burden of proof, as used in the first sense. The sole restraining rule is that the fact found must be supported by substantial evidence, as is provided in § 24(a) of the act, and if such fact is so supported, it is conclusive, whether it is supported by what someone other than the Commission thinks is a preponderance of the evidence or not.
Since the company is, by the terms of the act, a “subsidiary” oompany and can be relieved of that status only by an order of the Commission, and since such an order may be made only when the Commission finds three facts, in a broad sense, it is natural to say that the company has the “burden of proof”. However, when those words are used, neither of the technical senses, mentioned above, is intended. What is meant is that the company must present substantial evidence which convinces the Commission as to the three facts mentioned. We do not understand that anything different was meant in Securities and Exchange Comm. v. Sunbeam Gold M. Co., 9 Cir., 95 F.2d 699, 702 and Detroit Edison Co. v. Securities. & Exchange Commission, 6 Cir., 119 F.2d 730, 739.
The company contends that the finding of the Commission that the company “has *383not demonstrated that its management and policies are not subject to the controlling influence of North American” is not sustained by substantial evidence. The Commission relied on facts and made inferences to support its finding, as follows:
(a) North American owns 17.71% of the voting stock in petitioner. The second largest stockholder holds 1.72% of the voting stock. The rest of the stock is owned by corporations and individuals, scattered widely. Of the total voting stock 47.9% is held by non-residents. The Commission said:
“ * * * It is apparent that if a vital and substantial conflict arose between applicant and North American and matters came to the point of a proxy fight, the holdings of North American represent a tremendous advantage in any such fight. Counsel have argued as to the possible outcome of such a proxy fight. We need not speculate here as to whether North American’s 17.71% of voting power, plus the votes it could attract would be offset by the voting power which the local management could attract. It cannot be denied that, in any event, North American’s holdings would make it a formidable opponent. And the mere fact that there is a strong possibility that North American could prevail would, in itself, be a potent tool in influencing the management to give heed to North American’s wishes.”
(b) North American’s holdings have represented from 25% to 30% of the total votes cast at stockholders’ meetings from 1931-1940. The Board said:
“ * * * First, so long as North American is satisfied with the present management, North American’s voting power and the proxy machinery in the hands of the management make it virtually impossible for any other interest or group of interests to elect a majority of the directors. Second, North American’s votes have represented 25 to 30% of the votes cast at stockholders’ meetings, and by virtue of its stockholdings, North American had the power to break a quorum at all but two stockholders’ meetings since it became applicant’s largest stockholder; if it had chosen to do so, no business could have been transacted at such meetings. Third, the ownership of virtually % of applicant’s common stock gives North American an effective veto power over any corporate action requiring the consent of % of each class of stock — e.g., mergers and consolidations.”
(c) Petitioner was organized in 1905 and now represents the consolidation of over 400 separate companies. It formerly purchased power from Great Western Power Company, which was organized in 1906. During most of the latter’s existence, 90% of its revenues came from territory in competition with petitioner. Several unsuccessful attempts were made by petitioner to acquire the properties of Great Western between 1911 and 1925. Petitioner’s present president is one Black, formerly an employee of Great Western. North American acquired control of Great Western in 1925, and in 1927, Black went to New York as vice president of North American — his principal duties at that time being to keep in touch with and assist Great Western and its subsidiaries.
In 1930, following negotiations begun in the previous year between Black and petitioner’s then president, resulted in the acquisition by petitioner of the securities held by North American in Great Western and its subsidiaries. It was orally agreed that North American would not interfere with petitioner’s management, that North American would be entitled to three members on petitioner’s board of directors and one member on its executive committee. Black became a member of petitioner’s board of directors as North American’s representative.
Regarding these facts, the Commission said:
“It is wholly untrue to characterize North American’s relationship to P. G. & E. as merely that of a stockholder holding an investment interest. It now has two of its representatives on P. G. & E.’s board of directors, and by cumulating its votes it could elect at least three directors. Moreover, under the agreement made at the time of the Western Power Deal, it could at any time have a representative elected to applicant’s executive committee. Against the background of the other facts we have discussed, the fact that North American has been given the ‘right’ to such representation on applicant’s board of directors and executive committee is, we think, of material significance. We find some significance, too, in the frequent and detailed reports of every phase of applicant’s operations sent by applicant to *384North American; no such reports are sent to any other stockholder.”
(d) Regarding the facts mentioned under (c), the Commission said:
“Nor can we disregard the fact that applicant’s most important executive officer, Black, its president, was, for eight years just prior to his appointment, a senior executive of North American. From February 1927 to June 1930 Black’s primary duty as vice president of North American was to exercise holding company supervision over the activities of the subsidiaries of Western Power Corporation. He conducted the negotiations for North American in which Western Power was transferred to P. G. & E. and as a result of which North American acquired its interest in P. G. & E. For five years, from 1930 to 1935, Black was the individual in the North American organization who, more than any other one person, kept advised as to applicant’s business and followed applicant’s affairs in the light of North American’s interest. It is also significant that since Black became president of P. G. & K, no effort has been made to North American to have' representation in the executive committee, and no one in North American’s management has followed applicant’s affairs as closely as he did. It is wholly unreal to suppose that Black would be uninfluenced by these circumstances and, in his dealings with North American, would treat it as merely a large stockholder of P. G. & E.”
The facts, as thus stated, are not disputed. It is contended that the inferences drawn are contrary to the evidence. Such evidence was, of necessity, opinion evidence, because the facts inferred by the Commission were events which might happen, not what actually happened. In other words, the evidence relied on consisted of predictions that specified events would not occur, and did not consist of facts that such events could not happen. Manifestly, the Commission was not bound to accept the predictions as facts. As said in National Labor Relations Board v. Link-Belt Co., 311 U.S. 584, 597, 61 S.Ct. 358, 365, 85 L.Ed. 368: “Congress entrusted the Board, not the courts, with the power to draw inferences from the facts. * * * The Board, like other expert agencies dealing with specialized fields * * * has the function of appraising conflicting and circumstantial evidence, and the weight and credibility of testimony”. The rules quoted are applicable here.
Regarding the inferences made, the only question which we may consider is one of law, that is, were the inferences made reasonable? We think a reasonable man could reach the conclusion the Commission reached,' and therefore the finding must be sustained.
The company also contends that the Commission did not consider other evidence which tended to show that North American had not attempted to dominate the company in the past. However, as quoted above, the Commission found specifically in accordance with such evidence. In view of what we regard as the proper construction of the words' in the statute, “subject to a controlling influence”, a finding for the company is not compelled by the fact that North American had not dominated the company in the past. Congress may prevent an evil from occurring, and need not wait till the damage is done before acting. Compare: Consolidated Edison Co. v. National Labor Relations Board, 305 U.S. 197, 222, 59 S.Ct. 206, 83 L.Ed. 126. We think the construction of the statute approved here, carries out what we think Congress regarded as a preventive measure. .
After finding that petitioner had..failed to sustain its burden of ..showing, that it was not subject to the. controlling influence of North American, the Commission held that it was necessary or. appropriate in the public interest or for the protection of investors or consumers, for petitioner to be subject to the act. It stated in this connection that petitioner “is a company with stated assets of almost $800,-000,000 serving in excess of 1,500,000 customers ; its securities are listed and traded on national security exchanges and aré owned by investors throughout the country”. This finding arises by reason of' § 2 (a)' (8) of the act quoted above.
It is obvious that what is “necessary or appropriate in the public interest” is a question for the Commission to decide. Section 1(b) of the act enumerates a number of evils existing between holding companies and their subsidiaries. Section 1(c) provides in part: “ * * * it is hereby declared to be the policy of this title [chapter], in accordance with which policy all the provisions of this title [chapter] shall be interpreted, to meet the problems and *385eliminate the evils as enumerated in this section * * *.”
The company contends that this quoted provision is the standard by which the Commission is to be guided in determining what is “necessary or appropriate in the public interest” and that there is no showing of the existence of present evils, or of “such a controlling influence as would enable the holding company to bring about the evils enumerated in the Act”.
We think it is unnecessary to decide this question, because of the construction of § 2(a) (8). The words “so as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that the applicant be subject to the obligations, duties, and liabilities imposed in this title [chapter] upon subsidiary companies of holding companies”, which we will refer to as the necessity clause, are such that the meaning of the entire sentence is not clear. We think there are three possible constructions of the entire sentence.
The narrowest construction of the sentence arises when the necessity clause is construed as modifying all three of the conditions mentioned in (i), (ii) and (iii), that is, e.g., that the control mentioned in (i) must be of a kind which makes it necessary or appropriate for the applicant to be held to be subject to the act. The Commission in Matter of Wisconsin Valley Improvement Company, - S.E.C. -, found that the applicant was subject to. the controlling influence of holding companies, but that because of “the character of applicants business and the nature and extent of statutory and state commission regulation” it was not necessary or appropriate to make the act applicable to the applicant. That decision cannot be said to be unreasonable. It seems as reasonable to say that there might be actual control under (i) and yet the same factors would prevent the control from being exercised.
A second, and more liberal construction, insofar as it gives the Commission broader powers, arises when the necessity clause is considered as modifying only the condition mentioned in (iii). In other words, if there is control, specified in (i) or applicant is the intermediary through which such control is exercised, then the application should be denied, regardless of whether such control makes it necessary or appropriate that the applicant be held to be subject to the act, and that it is only when the applicant is subject to a controlling influence, that there must be necessity or appropriateness in the public interest for applicant to be subject to the act. Considered superficially from the standpoint of sentence structure the second construction seems to be correct. However, even though there is no control under (i) it may be that such control cannot be exercised, or the control may be regarding a thing which could not possibly harm any^ one. In either event, it seems illogical to say that the necessity clause modifies the controlling influence, under (iii) but not the control under (i).
A third construction, and the one which gives to the Commission the broadest powers, arises when the necessity clause is not considered as a modifying clause at all, but as a fourth condition. As thus construed, before the application could be granted it would be necessary for the Commission to find that there was no control under (i), that applicant was not an intermediary through which such control might be exercised under (ii), that applicant was not subject to a controlling influence under (iii), and that it was not necessary or appropriate in the public interest to make the act applicable to applicant. If the contrary of any of the four conditions thus enumerated were found by the Commission, then the application would have to be denied. In other words,' if the Commission found control under (i), or that applicant was the medium of control under (ii), or that applicant was subject to a controlling influence under (iii), the application would have to be denied regardless of whether there was necessity or appropriateness under the necessity clause; on the other hand, if the Commission found that none of those three conditions were present, it could still deny the application on the ground that there was a necessity or appropriateness that the act be held to be applicable to the applicant under the necessity clause.
We believe the latter construction is correct. Congress thought that the ownership by one corporation of 10% or more of the voting securities of another sufficient to declare the latter corporation to be a subsidiary, regardless of any other factor. It became a subsidiary not because of “control”, or because it was the medium of control, or because it was subject to a “controlling influence”, but because of the ownership of at least 10% of its stock. *386Congress recognized that harm might result to the public when there was such ownership, regardless of whether any of the three factors were present. It did not make as a condition to regulation any of these three factors. It is unreasonable to say that Congress intended to exempt from regulation when those three conditions only were not present. It seems apparent that harm might result to the public when none of such factors was present — that is the harm might spring from other factors. Such factors would be covered by the fourth condition, because of its generality.
This view is not contrary to the result of the Commission’s holding above mentioned. It is inconsistent to say that A is subject to the controlling influence of B, when B is prevented from exercising it. In such event, A is not subject to a controlling influence because B cannot in fact exercise it.
The remaining portion of § 2(a) (8) of the act speaks of the “conditions specified in clauses (i), (ii), and (iii)”. It does not say that there are only three conditions, but makes it clear that the conditions referred to are thqse “regarding the affiliations or intercorporate relationships”. The fourth condition relates to the conditions between the subsidiary and the public.
As thus construed, the application was properly denied regardless of whether the finding under the necessity clause was sustained by substantial evidence or not.
The company suggests that some constitutional questions are involved, but it does not appear that such questions were presented to the Commission, and therefore we cannot consider them. See § 24(a).
The petition to review is denied.