Source: https://supreme.justia.com/cases/federal/us/173/684/
Timestamp: 2019-04-19 14:59:44+00:00

Document:
The provision in the Act of the Legislature of Michigan, No. 90, of the year 1891, amending the general railroad law, that one thousand mile tickets shall be kept for sale at the principal ticket. offices of all railroad companies in this state or carrying on business partly within and partly without the limits of the state at a price not exceeding twenty dollars in the Lower Peninsula and twenty-five dollars in the Upper Peninsula; that such one thousand mile tickets may be made nontransferable, but whenever required by the purchaser, they shall be issued in the names of the purchaser, his wife and children, designating the name of each on such ticket, and in case such ticket is presented by any other than the person or persons named thereon, the conductor may take it up and collect fare, and thereupon such one thousand mile ticket shall be forfeited to the railroad company; that each one thousand mile ticket shall be valid for two years only after date of purchase, and in case it is not wholly used within the time, the company issuing the same shall redeem the unused portion thereof, if presented by the purchaser for redemption within thirty days after the expiration of such time, and shall on such redemption be entitled to charge three cents per mile for the portion thereof used, is a violation of that part of the Constitution of the United States which forbids the taking of property without due process of law, and requires the equal protection of the laws.
case does not partake of the character of legislation fairly or reasonably necessary to attain any of those objects, and that it does violate the federal Constitution as above stated.
". . . Provided, further, that one thousand mile tickets shall be kept for sale at the principal ticket offices of all railroad companies in this state or carrying on business partly within and partly without the limits of the state at a price not exceeding twenty dollars in the Lower Peninsula and twenty-five dollars in the Upper Peninsula. Such one thousand mile tickets may be made nontransferable, but whenever required by the purchaser, they shall be issued in the names of the purchaser, his wife and children, designating the name of each on such ticket, and in case such ticket is presented by any other than the person or persons named thereon, the conductor may take it up and collect fare, and thereupon such one thousand mile ticket shall be forfeited to the railroad company. Each one thousand mile ticket shall be valid for two years only after date of purchase, and in case it is not wholly used within the time, the company issuing the same shall redeem the unused portion thereof if presented by the purchaser for redemption within thirty days after the expiration of such time, and shall on such redemption be entitled to charge three cents per mile for the portion thereof used."
and held that the statute applied only to the railway lines of the plaintiff in error operated within the State of Michigan.
The defense set up by the railway company was that, under the charter from the state to one of the predecessors of the company to whose rights it had succeeded, it had the right to charge three cents a mile for the transportation of all passengers, and that such charter constituted a contract between the state and the company which the former had no right to impair by any legislative action, and that the statute compelling the company to sell thousand-mile tickets at the rate of two cents a mile was an impairment of the contract, and was therefore void as in violation of the Constitution of the United States. It also alleged that the act was in violation of the Fourteenth Amendment of the Constitution of the United States in that it deprived the company of its property and liberty of contract without due process of law, and also deprived it of the equal protection of the laws. The act was also alleged to be in violation of the Constitution of the State of Michigan on several grounds.
The supreme court of the state decided that there was no contract in relation to the rates which the company might charge for the transportation of passengers, and that the statute violated no provision either of the federal or the state constitution, but was a valid enactment of the legislature, and therefore the court affirmed the order for mandamus, the ticket to be good upon and limited to the railway lines of the defendant railroad company within the State of Michigan. 72 N.W. 328. The company sued out a writ of error from this Court.
The two questions of a federal nature that are raised in the record are (1) whether the act violates the Constitution of the United States by impairing the obligation of any contract between the state and the railroad company, and (2) if not, does it nevertheless violate the Fourteenth Amendment of the Constitution by depriving the company of its property or liberty without due process of law or by depriving it of the equal protection of the laws? If we should decide that this act violates any provision of the Fourteenth Amendment, it would be unnecessary to examine the question whether there was any contract between the state and the company, as claimed by it. We will therefore first come to an investigation of the legislative authority with reference to that amendment.
If unhampered by contract, there is no doubt of the power of the state to provide by legislation for maximum rates of charges for railroad companies, subject to the condition that they must be such as will admit of the carrier earning a compensation that, under all the circumstances, shall be just to it and to the public, and whether they are or not is a judicial question. If the rates are fixed at an insufficient amount within the meaning of that term as given by the courts, the law would be invalid as amounting to the taking of the property of the company without due process of law. Chicago & Grand Trunk Railway Company v. Wellman, 143 U. S. 339, 143 U. S. 344; Reagan v. Farmers' Loan & Trust Company, 154 U. S. 362, 154 U. S. 399; St. Louis & San Francisco Railway Co. v. Gill, 156 U. S. 649; Smyth v. Ames, 169 U. S. 466, 169 U. S. 523.
Railroad v. Illinois, 163 U. S. 142; Lake Shore & Michigan Southern Railway v. Ohio, 173 U. S. 285, and cases cited. These cases arose under the commerce clause of the federal Constitution, the inquiry being whether the legislation in question violated that provision. In the cases in which the legislation was upheld, it was on the ground that the state was but exercising its proper authority under its general power to legislate regarding persons and things within its jurisdiction, sometimes described as its police power, and that, in exercising that power in the particular cases, it did not violate the commerce clause of the federal Constitution by improperly regulating or interfering with interstate commerce. The extent of the right of the state to legislate was examined in these various cases, so far at least as it was affected by the commerce clause of the Constitution of the United States.
In Illinois Central Railroad v. Illinois, the state statute imposed the duty upon the company of stopping its fast mail train at the station at Cairo, to do which the train had to leave the through route at a point three miles from that station and then return to the same point in order to resume its journey. This statute was held to be an unconstitutional interference with interstate commerce, and therefore void.
reach subjects over which national legislation can be constitutionally extended."
"were sustained upon the ground that they were not directed against, nor were direct burdens upon, interstate or foreign commerce, and having been enacted only to protect the public safety, the public health, or the public morals, and having a real, substantial relation to the public ends intended to be accomplished thereby, were not to be deemed absolutely forbidden because of the mere grant of power to Congress to regulate interstate and foreign commerce, but to be regarded as only incidentally affecting such commerce, and valid until superseded by legislation of Congress on the same subject."
"They are nothing more or less than the powers of government inherent in every sovereignty to the extent of its dominions. And whether a state passes a quarantine law, or a law to punish offenses, or to establish courts of justice, or requiring certain instruments to be recorded, or to regulate commerce within its own limits, in every case it exercises the same power -- that is to say, the power of sovereignty, the power to govern men and things within the limits of its dominion."
and property. Assuming that the state is not controlled by contract between itself and the railroad company, the question is how far does the authority of the legislature extend in a case where it has the power of regulation, and also the right to amend, alter, or repeal the charter of a company, together with a general power to legislate upon the subject of rates and charges of all carriers? It has no right, even under such circumstances, to take away or destroy the property or annul the contracts of a railroad company with third persons. Greenwood v. Freight Company, 105 U. S. 13, 105 U. S. 17; Commonwealth v. Essex Co., 13 Gray 239; People v. O'Brien, 111 N.Y. 1, 52; City of Detroit v. Detroit & Howland Plankroad, 43 Mich. 140.
A railroad company, although a quasi-public corporation, and although it operates a public highway, Cherokee Nation v. Southern Kansas Railway, 135 U. S. 641; Lake Shore &c. Railway v. Ohio, 173 U. S. 285, 173 U. S. 301, has nevertheless rights which the legislature cannot take away without a violation of the federal Constitution, as stated in Smyth v. Ames, 169 U. S. 466, 169 U. S. 544. A corporation is a person within the protection of the Fourteenth Amendment. Minneapolis & St. Louis Railway v. Beckwith, 129 U. S. 26; Smyth v. Ames, 169 U. S. 522, 169 U. S. 526. Although it is under governmental control, that control must be exercised with due regard to constitutional guaranties for the protection of its property.
The question is presented in this case whether the legislature of a state, having power to fix maximum rates and charges for the transportation of persons and property by railroad companies, with the limitations above stated, and having power to alter, amend, or repeal their charters within certain limitations, has also the right, after having fixed a maximum rate for the transportation of passengers, to still further regulate their affairs and to discriminate and make an exception in favor of certain persons and give to them a right of transportation for a less sum than the general rate provided by law.
lower those rates in certain cases and in favor of certain individuals while maintaining them or permitting them to be maintained at a higher rate in all other cases. It is asserted also that this is only a proper and reasonable regulation.
provide for the safety, the health, and the convenience of the public, and to prevent improper exactions or extortionate charges from being made by the company.
It is stated upon the part of the defendant in error that the act is a mere regulation of the public business, which the legislature has a right to regulate, and its apparent object is to promote the convenience of persons having occasion to travel on railroads, and to reduce for them the cost of transportation; that its benefit to the public who are compelled to patronize railroads is unquestioned; that it brings the reduction of rates to two cents per mile within the reach of all persons who may have occasion to make only infrequent trips, and that there is no reason why the legislature may not fix the period of time within which the holder of the ticket shall be compelled to use it. The reduction of rates in favor of those purchasing this kind of ticket is thus justified by the reasons stated.
The right to claim from the company transportation at reduced rates by purchasing a certain amount of tickets is classed as a convenience. As so defined, it would be more convenient if the right could be claimed without any compensation whatever. But such a right is not a convenience at all, within the meaning of the term as used in relation to the subject of furnishing conveniences to the public. And also the convenience which the legislature is to protect is not the convenience of a small portion only of the persons who may travel on the road, while refusing such alleged convenience to all others; nor is the right to obtain tickets for less than the general and otherwise lawful rate to be properly described as a convenience. If that were true, the granting of the right to some portion of the public to ride free on all trains and at all times might be so described. What is covered by the word "convenience" it might be difficult to define for all cases, but we think it does not cover this case. An opportunity to purchase a thousand mile ticket for less than the standard rate, we think, is improperly described as a convenience.
a company and its affairs does not include the power to compel it to make an exception in favor of some particular class in the community, and to carry the members of that class at a less sum than it has the right to charge for those who are not fortunate enough to be members thereof. This is not reasonable regulation. We do not deny the right of the legislature to make all proper rules and regulations for the general conduct of the affairs of the company relating to the running of trains, the keeping of ticket offices open, and providing for the proper accommodation of the public.
This act is not like one establishing certain hours in the day during which trains shall be run for a less charge than during the other hours. In such case, it is the establishing of maximum rates of fare for the whole public during those hours, and it is not a discrimination in favor of certain persons by which they can obtain lower rates by purchasing a certain number of tickets, by reason of which the company is compelled to carry them at the reduced rate, and thus in substance to part with its property at a less sum than it would be otherwise entitled to charge. The power to compel the company to carry persons under the circumstances as provided for in this act for less than the usual rates does not seem to be based upon any reason which has hitherto been regarded as sufficient to authorize an interference with the corporation, although a common carrier and a railroad.
factors which make it unreasonable to say that the tickets shall be valid for five or for ten years? It may be said that circumstances can change within that time. That is true, but circumstances may change within two just as well as within five or ten years. There is no particular time in regard to which it may be said in advance, and as a legal conclusion, that circumstances will not change. And can the validity of the regulation be made to depend upon what may happen in the future, during the running of the time in which the legislature has decreed the company shall carry the purchaser of the ticket? Regulations for maximum rates for present transportation of persons or property bear no resemblance to those which assume to provide for the purchase of tickets in quantities at a lower than the general rate, and to provide that they shall be good for years to come. This is not fixing maximum rates; nor is it proper regulation. It is an illegal and unjustifiable interference with the rights of the company.
If this power exist, it must include the right of the legislature, after establishing maximum freight rates, to also direct the company to charge less for carrying freight where the party offering it sends a certain amount, and to carry it at that rate for the next two or five or ten years. Is that an exercise of the power to establish maximum freight rates? Is it a valid exercise of the power to regulate the affairs of a corporation? The legislature would thus permit not only discrimination in favor of the larger freighter as against the smaller one, but it would compel it. If the general power exist, then the legislature can direct the company to charge smaller rates for clergymen or doctors, for lawyers or farmers or school teachers, for excursions, for church conventions, political conventions, or for all or any of the various bodies that might desire to ride at any particular time or to any particular place.
but it cannot enact a law making maximum rates and then proceed to make exceptions to it in favor of such persons or classes as in the legislative judgment or caprice may seem proper. What right has the legislature to take from the company the compensation it would otherwise receive for the use of its property in transporting an individual or classes of persons over its road, and compel it to transport them free or for a less sum than is provided for by the general law? Does not such an act, if enforced, take the property of the company without due process of law? We are convinced that the legislature cannot thus interfere with the conduct of the affairs of corporations.
But it may be said that, as the legislature would have the power to reduce the maximum charges for all to the same rate at which it provides for the purchase of the thousand mile ticket, the company cannot be harmed or its property taken without due process of law, when the legislature only reduces the rates in favor of a few, instead of in favor of all. It does not appear that the legislature would have any right to make such an alteration. To do so might involve a reduction of rates to a point insufficient for the earning of the amount of remuneration to which a company is legally entitled under the decisions of this Court. In that case, reduction would be illegal. For the purpose of upholding this discriminatory legislation, we are not to assume that the exercise of the power of the legislature to make in this instance a reduction of rates as to all would be legal, and therefore a partial reduction must be also legal. Prima facie, the maximum rates as fixed by the legislature are reasonable. This, of course, applies to rates actually fixed by that body.
reduction, by means of this discrimination, is therefore also valid. And this argument also loses sight of the distinction we made above between the two cases of a general establishment of maximum rates and the enactment of discriminatory, exceptional, and partial legislation upon the subject of the sale of tickets to individuals willing and able to purchase a quantity at any one time. The latter is not an exercise of the power to establish maximum rates.
True it is that the railroad company exercises a public franchise, and that its occupation is of a public nature, and the public therefore has a certain interest in, and rights connected with, the property, as was held in Munn v. Illinois, 94 U. S. 125, and the other kindred cases. The legislature has the power to secure to the public the services of the corporation for reasonable compensation so that the public shall be exempted from unreasonable exactions, and it has also the authority to pass such laws as shall tend to secure the safety, convenience, comfort, and health of its patrons and of the public with regard to the railroad. But in all this we find it neither necessary nor appropriate, in order that the legislature may exercise its full right over these corporations, to make such a regulation as this, which discriminates against it and in favor of certain individuals without any reasonable basis therefor and which is not the fixing of maximum rates or the exercise of any such power.
in this way taken out of its own management not by any general law applicable to all, but by a discrimination made by law to which the company is made subject. Whether an act of this nature shall be passed or not is not a matter of policy to be decided by the legislature. It is a matter of right of the company to carry on and manage its concerns, subject to the general law applicable to all, which the legislature may enact in the legal exercise of its power to legislate in regard to persons and things within its jurisdiction.
This case differs from that which has just been decided. Lake Shore &c. Company v. Ohio, 173 U. S. 285. In that case, the convenience of the public in the state was the basis of the decision, regard being also had to the convenience of the public outside of and beyond the state. It included all the public who desired to ride from the stations provided for in the act, and the convenience to the people in taking a train at these stations was held by this Court to be so substantial as to justify the enactment in question.
But in this case, it is not a question of convenience at all, within the proper meaning of that term. Aside from the rate at which the ticket may be purchased, the convenience of purchasing this kind of a ticket is so small that the right to enact the law cannot be founded upon it. It is no answer to the objection to this legislation to say that the company has voluntarily sold thousand mile tickets good for a year from the time of their sale. What the company may choose voluntarily to do furnishes no criterion for the measurement of the power of a legislature. Persons may voluntarily contract to do what no legislature would have the right to compel them to do. Nor does it furnish a standard by which to measure the reasonableness of the matter exacted by the legislature. The action of the company upon its own volition, purely as a matter of internal administration, and in regard to the details of its business which it has the right to change at any moment, furnishes no argument for the existence of a power in a legislature to pass a statute in relation to the same business imposing additional burdens upon the company.
the charter of the company, and thus to terminate its legal existence, does not answer the objection that this particular exercise of legislative power is neither necessary nor appropriate to carry into execution any valid power of the state over the conduct of the business of its creature. To terminate the charter, and thus end the legal life of the company, does not take away its property, but, on the contrary, leaves it all to the shareholders of the company after the payment of its debts.
In Attorney General v. Old Colony Railroad, 160 Mass. 62, the statute required every railroad corporation in the commonwealth to have on sale certain tickets which should be received for fare on all railroad lines in the commonwealth, etc., and the statute was held invalid. The precise question involved in this case was not there presented, and the court said it was not necessary or practicable to attempt to determine in that case just how far the legislature could go by way of regulating the business of railroad companies, or just where were the limits of its power.
The power to enact legislation of this character cannot be founded upon the mere fact that the thing affected is a corporation, even when the legislature has power to alter, amend, or repeal the charter thereof. The power to alter or amend does not extend to the taking of the property of the corporation, either by confiscation or indirectly by other means. The authority to legislate in regard to rates comes from the power to prevent extortion or unreasonable charges or exactions by common carriers or others exercising a calling and using their property in a manner in which the public have an interest.
safety, health, or proper convenience of the public, but an arbitrary enactment in favor of the persons spoken of, who, in the legislative judgment, should be carried at a less expense than the other members of the community. There is no reasonable ground upon which the legislation can be rested, unless the simple decision of the legislature should be held to constitute such reason. Whether the legislature might not, in the fair exercise of its power of regulation, provide that ordinary tickets purchased from the company should be good for a certain reasonable time is not a question which is now before us, and we need not express any opinion in regard to it.
The judgment of the Supreme Court of the State of Michigan should be reversed, and the case remanded for further proceedings not inconsistent with the opinion of this Court, and it is so ordered.

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