Case ID: ohio-st_26/html/0086-01.html
Source: Caselaw Access Project
Author: {"author": "Welch, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Joseph Shields v. The State of Ohio.
    Consolidated railroad companies, organized • in pursuance of the act of April 10, 1856 (4 Curwen, 2791), are corporations formed under a. general law, within the meaning of article 13, section 2, of the constitution of 1851, and as such are subject to the limitations and reservations contained in that section, and in article 1, section 2, of that instrument; and the general assembly has power to alter and regulate rates of fare chargeable by such companies.
    Error, to the Court of Common Pleas of Lorain county.
    This was an indictment against Shields for assault and battery, charged to have been committed on the 25th day of December, 1878. Shields was conductor on one of the trains of the Lake Shore and Michigan Southern Railway Company, on its passage from Elyria to Cleveland, and Ulrich, the prosecuting witness in the case, was a passenger. The regular fare fixed by the company for the distance was ninety cents, being over three cents per mile,-the-maximum rate allowed by the act of April 25,1873 (70 Ohio L. 161). This sum Ulrich refused to pay, but offered to pay the conductor seventy-five cents, being at the rate of three cents per mile; and thereupon the conductor ejected, him from the car, but without any rudeness or unnecessary force or violence. On testimony showing these facts,. Shields was convicted .and sentenced, and he now seeks to reverse the judgment of the court, on the ground that the-company is not bound by the act of 1873, and was authorized by law to charge the said sum of ninety cents, and that the expulsion of Ulrich from the ear was therefore justifiable, and the conviction contrary to law.
    The laws and constitutional provisions bearing upon the question, as well as the acts of organization by which the railway company became a corporation, and acquired. its rights and powers in the premises, are sufficiently set forth in the opinion of the court.
    
      James Mason and J. G. Hale, for plaintiff in error:
    I. As to the effect in law of the several consolidations of the original corporations of which the Lake Shore and Michigan Southern Railway Company is the product.
    The act of 1851 (see "Wright’s Railway Rep. 23) and of 1856 (lb. 62) are the acts upon which they are respectively founded. Each one of these acts in explicit terms vests in the consolidated company “ all and singular the rights, privileges, and franchises of each of said corporations, parties to the same.”
    The rights and franchises embodied in and constituting the charter under which the Junction and Cleveland and Toledo Railroad Companies were created, and in which the stockholders invested their money on the faith of the state, were by the explicit provision of a constitutional law incorporated in the charter of the existing consolidated company, and the questions which follow are :
    
      First. Is it provided in section 2, of article 13, of the constitution, that the legislature may divest it of those rights and franchises ? and
    
      Second. Did the act of 1873 purport to take them away or have that effect ?
    We do not doubt that the legislature can repeal or alter the act of 1851 or 1856, under which these consolidations were respectively made, or the act of May 1, 1852, for “ the creation and regulation of incorporated companies in the State of Ohio,” and when repealed, no further consolidations can be effected or corporations be created under those acts; but we do not suppose that corporations then existing, consolidated under them, are to be destroyed, 
      Vested rights of property exist under them, which we suppose the legislature is just as powerless to impair or destroy now as before the constitution of 1851.
    Certain franchises granted prior to the constitution of 1851, vested in the original companies subsequently consolidated, and by explicit provisions of the acts which authorized the consolidation constitute the charter of the existing company. The continued permanent existence of these franchises in no sense conflicts with any provision of the constitution. If they are vested rights until forfeited, no power can exist in the government to destroy them; none is pretended except that which flows from the simple provision that “ all such laws may from time to time be altered or repealed.”
    But for this constitutional provision, the franchise conferred upon this company to charge fares and freights (we care not whether under section 11 of the Junction charter ingrafted upon the charter of the Cleveland and Toledo Railroad Company, or section 12 of the act of 1848), would be admitted to be beyond the power of the legislature. Monongahda Navigation Co. v. Coon, 6 Penn. St. 379.
    Let full effect be given to this provision, and is it true that this franchise is so ingrafted upon the charter of the existing company that by the terms of the contract as interpreted or controlled by the constitution, the franchise or contract itself can be changed, and a different franchise or contract be interpolated, without the consent of the corporate body ?
    The language of the constitution reserves no such power and imports no such consequence. It does not profess to reserve the power to change or repeal rights vested in a corporation created under a general law, but only to alter or repeal the law itself, and control its operation upon corporations thereafter created under it, and the management and conduct of existing corporations so far only as by the terms of the contract such continuing authority under the law existed in the legislature.
    The charter of the company created by general law is as ■much a contract with the state as a charter under a special law. 21 N. T. 14.
    If, by the provisions of the general law, the legislature is to fix fares and freights at its pleasure or on conditions, we suppose the same to be neither more nor less binding than if the same provisions are incorporated in a special charter. In either ease a contract exists between the state and the corporation. 13 Gray, 239, 253; 13 Rich. (S. C.) 277; 1 Ohio St. 567; Sage v. Dillard, 15 B. Mon. 353; Zabriskie v. Hackensack Bailroad Go., 3 Green, 178; Grease v. Babcock, 23 Pick. 334; 1 Wallace, 175, 204; Miller v. N. T. § B. B. B. Go., 21 Barb. 518 ; Thorpe v. B. $ B. B. B. Co., •27 "Vt. —.
    We submit that the cases cited sustain the position that there must be a limit to the power to alter existing corporations.
    The right to alter and repeal, when it exists, must then be limited by the terms of the existing contract, as expressed in the general or special act which creates the corporation, or it must be limited to matters which do not constitute the property or franchise which is tantamount to property conferred upon the corporation, or the doctrine must be vindicated that the legislature, when power to alter •or amend the law is reserved, can rescind, render valueless, or annul the contract.
    It is certainly fair to claim that if this extraordinary power exists when charters have been granted and money invested under them, it must be intelligently expressed, in language,in the law or charter,or in the constitution. Apply the rule to the case before the court.
    The franchise vested in the Cleveland and Toledo Railroad Company to charge fares not limited to three cents per mile, was given by the legislature and accepted by the company. The general act of 1851 permitted that franchise to be retained after its consolidation with another company.
    The general act of 1856 permitted a further consolidation ■with a corporation of an adjoining state, and its retention and exercise of the same franchise. This franchise still exists.
    The consolidated company still lawfully owns and holds it. The laws ■ under which the consolidation was made, whether the same was in fact and in law a new corporation or not, were general, and may be altered or amended by the legislature. Is it a part of the contract expressed or implied that it may also revoke these franchises which were not created by, but were only transmitted under the operation of these acts ?
    The act of March 3,1851, authorizing railroad companies to consolidate (which act is still in force), was passed prior to the constitution of 1851, and rights acquired under it are not liable to be affected by the constitutional right to alter or repeal. Cass v. Dillon, 2 Ohio St. 607; Citizens’ Bank of Steubenville v. Wright, 6 Ohio St. 318. Let us suppose that the legislature should exercise its utmost power to alter or repeal the act of 1856, under which the later consolidations were made of the Lake Shore and Michigan Southern Eailway Company. It could go no further than to alter or repeal the rights which it gave. But it did not give the franchise now claimed to be controlled and altered. It can only withdraw what it conferred, and however much, in the exercise of the power to alter or repeal this act, it may affect the consolidation, it can not touch the franchise conferred by acts not of its creation. We submit that by an alteration or repeal of this act of 1856 is the only means by which this corporation is to be reached under the exercise of the power to alter or repeal; and the act in question certainly does not profess to affect it.
    
      John Little, attorney-general, for the state.
   Welch, J.

The act of April 25, 1873 (70 Ohio L. 161),. provides that “ any corporation, operating a railroad in whole or in part within this State may demand and receive for the transportation of passengers on said road not exceeding three cents per mile,” and imposes penalties for the-charging or receiving of any higher rate of fare. If this ■ provision is binding upon the Lake Shore and Michigan Southern Railway Company, then the conviction was rightful, and the judgment must be affirmed. Whether this provision is binding upon the company is the only question which we find it necessary to decide in the case.

The Lake Shore and Michigan Southern Railway Com- - pany is a consolidated company, formed by the union of several original and independent railroad companies, its line of road extending from Buffalo, in the State of New York, to Chicago, in the State of Illinois. Among the companies forming this consolidation were two Ohio companies, chartered and organized before the adoption of the present constitution, and whose charters were, therefore, not subject to the provision of the present constitution which gives to the legislature the power of alteration, amendment, and repeal of charters, and subjects the stockholders to individual liability for debts. One of these Ohio companies was the Junction Railroad Company, whose line extended from Cleveland to Sandusky, and whose charter contained no limitation as to rates of fare; and it was for passage-over that part of this line which lies between Elyria and Cleveland that the fare in controversy was so charged. It is admitted that this charge was authorized by the charter of the Junction Railroad Company, and that the right to fix its rates of fare ad libitum still subsists, unless the same has been surrendered or extinguished by its act of consolidation.

The consolidation took place in 1869, and was effected in all respects in pursuance of the act of April 10,1856 (4 Curwen, 2791; S. & C. 327); and the claim is that a consolidation under that act is to'be regarded in law as a surrender or relinquishment of the several individual charters-of the companies so uniting, and the acceptance of a charter de novo from the state. If such be the law, it can not well be denied that the consolidated company, organized, as it was, after the taking effect of the present constitution, is bound by and subject to all its provisions. Is such the-legal effect of the consolidation ? Are the old companies ■dissolved, and their charters extinguished, and is the consoli•dated company a new corporation, receiving all its rights and powers directly from the legislature ?

In the light of the decision by this court in the case of The State of Ohio v. Sherman et al. (22 Ohio St. 411), we do not see how an affirmative answer to these questions can be avoided. In the case referred to, the court held, substantially, that a transfer of all its franchises by a corporation, in pursuance of an act of the. legislature authorizing the same, is in legal effect a grant by the legislature of similars, franchises to the transferees, and constitutes them a new •corporation. In that ease, it was held, however, that the grant so made did not have the effect to constitute the transferees a legal corpoi’ation, for the reason that their organization was not authorized, or was not effected in a way which made them individually liable as stockholders in the new corporation. ' No such defect or impediment ■exists in the present case; and surely, if a . statute of the kind in question in the case referred to, is to be regarded as a statute creating a new corporation, much more is the statute in question here, the act of 1856, under which the Lake Shore and Michigan Southern Railway Company was organized, to be so regarded. This statute plainly contemplates and expressly provides for the formation of a “ new corporation.” The old stock is to be surrendered or extinguished; .a new amount of capital stock is to be agreed upon and distributed to parties who voluntarily take the same; and a certificate is to be filed with the secretary of state, which, it is declared, “ shall be evidence of the existence of such corporation.” Section 3 of the act declares that the companies thus uniting “ shall be taken and deemed to be one corporation.” Section 5 provides for the election of a board of directors of the new corporation, which it denominates a “ corporation created by ” the consolidation, “ and by the provisions of” that act, and vests in “such new -corporation,” all and singular “the rights, privileges, and franchises ” of the “former corporations.” Nothing could be much plainer, it seems to us, than that a consolidated company, organized under such a statute, is a corporation “ formed under a general law,” within the meaning of article 13, section 2, of the present constitution, and as such, liable to all the limitations and restrictions therein, equally as corporations organized under the general corporation laws of the state, enacted under the present constitution. The fact that it is formed out of old defunct corporations does not make it any the less a corporation created by thelcgislature. It is not the material out of which it is formed, but the plastic hand which formed it, that we are to look to for its character and status under the constitution.

But it is argued, if we understand counsel, that the consolidated company has the right to fix any l-ates of fare for passage which it deems proper over the old line of the Junction Railroad, because the original company had that right, and because all its franchises and rights have been transferred to the consolidated company. That argument would have been good before the passage of the act of 1873, or of some other act limiting or modifying that right. This right to take unlimited rates of fare, or to take specified rates of fare, is no more exempt from legislative control and alteration than it would have been had the company been formed under the general corporation law of 1852, or under any other general law enacted since the adoption of the present constitution. All the rights and franchises of the company—-this right to make and take-rates of fare among the rest—were derived to the company under and by virtue of the act of 1856, and they are all alike subject, irrespective of the rights of the old companies, to the legislative power of alteration, amendment, and ’"epeal.

But counsel argue, or seem to argue, that the legislature have no power to alter or regulate rates of fare allowed to ■ corporations organized under the present constitution. The claim seems to be, that section 2 of article 13 of the constitution- merely reserves to the legislature the power to-prevent the organization of new companies under the law, by repealing or changing it, and that corporations organized under it before the repeal or change are beyond legislative control, equally as though no such provision bad been inserted in the constitution. We can by no means assent to such a proposition. This section of the constitution is to be construed in connection with section 2 of article 1, which declares that “ no special privileges or immunities shall ever be granted, that may not be altered, revoked, or repealed by the general assembly.”

We have no hesitation in saying that the right in ques-. tion comes under these provisions. The two sections, taken together, most clearly reserve the legislative power in question. The power to repeal the law, and thereby prevent the formation of future corporations under it, existed under the old constitution. If counsel are right in their claim, then these provisions of the present constitution mean nothing, or affect nothing.

Judgment affirmed.

McIlvaine, C. J., White, Rex, and Gilmore, JJ., concurred.