Court Opinion

ID: 7875272
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:06:40.86099+00
Date Added: 2024-06-11T16:31:22.439332
License: Public Domain

Comegys,

on the same side. Whenever a grant is made to a company every thing necessary to the power is granted with it, for such is the general principle of implication in all corporate grants. The counsel on the other side had rested the power of the legistature to pass the section of the act in question, on two grounds, the police power of the State, and the power residing in the Legislature to regulate common carriers. The police power of a State *525has been defined in the authority cited by him, and he was content with that definition. It extends to the protection of the lives, limbs, health, comfort and quiet of all persons, and of all property within it. It must, of course, be within the range of legislative action to define the mode and manner in which every one may so use his own as not to injure others. By the general police power of the State, persons and property are subjected to all kinds of restraints and burdens, in order to secure the general comfort, health and prosperity of the State; of the right of the legislature to do which, no question ever was, or upon acknowledged general principles, ever can be made, so far as natural persons are concerned. Thorpe v. R. & B. R. R. Co. 27 Verm. 149. Cool. Const. Lim. 572. That power however does not concern the business of men in general, or of incorporated companies either, but only so far as it prejudicially affects the comfort, health, safety and well being of others. Under this power the legislature can if it sees proper, regulate the speed of railroad trains, require signals to be displayed or given to avoid danger and prevent injury to persons both on or off the trains, and even to preclude the overloading of them, and such other like salutary restraints for similar purposes. But under that well known and well understood power for such important and special purposes, the legislature can no more interfere with or attempt to regulate the general rates of freight or fares on railroads, than it can under the same power claim to regulate wages of individuals, or prescribe or limit the prices to be charged by a copartnership in its business; for under that power the legislature has no more authority for the object and purposes of it, over any company incorporated by it, than it has over any individual under the like circumstances, unless that authority is expressly reserved to it in the charter of the company.
It was not necessary to consider or inquire what authority or power the legislature may have to regulate the charges of an individual, or of two or more persons conducting *526the business of a common carrier at common law merely, and without any charter or act of incorporation conferring upon him or them the right to conduct and charge for such business in a corporate name, and as a corporate franchise and privilege, for in the former case there could be no contract either express or implied between the State and such a common carrier in regard to the matter, and, therefore, no question as to the impairment of the obligation of it, could possibly arise in any such case. But here we have a common carrier, not at common law, but expressly made and incorporated by a statute as such, with chartered rights, franchises and privileges, and with full and ample powers, first to construct at vast expense, but at their own cost, a.great railroad, and afterward to operate it, and to manage and regulate its business and to charge for the service and facilities afforded by it to all who might have occasion to use it, such rates of compensation as the directors might think reasonable, without any limitation or restriction on their discretion except that which is expressly imposed by the proviso contained in the seventeenth section of the charter; and without any reservation of the right to further limit or restrict it, there could be no question on the authorities cited by his colleague, that such a charter constitutes a contract between the State and the company that it shall have and retain this, as well as other rights and franchises granted and conferred by it, undiminished and unimpaired by any future act of the legislature without the consent of the company, and, therefore, the fourth section of the statute which had been made a part of the case stated, was unconstitutional. If riot so held to be by the court, it would be difficult to estimate or detail the evils which it will entail alike on the company and the community which it serves. Under it, if the company should even issue commutation tickets, which is common with all railroad companies, and not unfair or unjust in principle, it would constitute a prohibited discrimination and would subject it to the forfeiture of ten-fold the difference of the price between a *527regular and a commutation ticket, nor could there be any more excursion trains, or special trains on any occasion at reduced rates, or at either more or less than the usual and one uniform scale of charges, for it distinctly provides that no discriminations are to be permitted. But these were only a few of the illiberal and injurious constructions that could and would be given to it.
Lore-, Attorney General, on behalf of the State.
The design of the legislature and the sole object of the section in question was simply to prevent any unjust discriminations by this, or any other railroad company, against the people of this, and in favor of the people of any other State, which, it was alleged, had been made by it. Or, in other words, the object simply was to establish a just equality of rates between our own citizens and the citizens of other States; and although the phraseology of the section was not as clear and explicit as it might and should be, the simple meaning of it is that for the like or the same distances over the roads of this or any other company, the rates imposed upon our own citizens shall be the same as those imposed upon the citizens of other States, which would he in strict accordance with the charter of the company, and with any contract that might be implied in it between the State and the company; and if the section was susceptible of that construction, or such a construction as would obviate the objection made to the constitutionality of it, the Court would be hound so to construe it. Bailey v. P., W. & B. R. R. Co., 4 Harr. 389. Cool. Const. Lim. 574. The Court was further bound to presume it to be constitutional, until the contrary satisfactorily appeared. Whether it was properly embraced in the police power of the State, or not, he had no doubt whatever of the constitutional power of the legislature to regulate the rates of the railroad companies of the State, which were the creatures of its own making, so far, at least, as to prevent any discrimination in rates in favor of the people of any State, or of any community and against *528those of another for the like amount of service rendered to each of them. For if the legislature had not this power, then it would be competent for such a company by such an odious and unjust discrimination, to build up one community upon the ruins of another, so far as it could be effected by the management of its business. And it had been so decided in the recent case of the People v. The Chicago & Alton Railroad Company in the Courts of Illinois. And if such was, as he believed, the true and proper meaning and construction of the section in question there could be no difficulty or inconvenience whatever in the company's regulating its rates in conformity with it.
Bates, Chancellor,
announced the opinion of the Court:
The questions reserved in these actions for the opinion of the Court of Errors and Appeals draw under consideration the validity of the fourth Section of An Act of the General Assembly of this State, passed at Dover, April 11, 1873. The provision in controversy is in these words, viz:—
Section 4.—That if the said Philadelphia, Wilmington and Baltimore Railroad Company, or any other railroad company in this State, shall, either as the operator of its own railroad or railroads, or as lessee of other railroads within the State, charge and receive a greater rate per mile for the carriage of passengers (except so far as the same may be increased to the amount of the tax annually paid under the provisions of Chapter 458, Volume 12 of the laws of Delaware) or for the carriage or transportation of goods, wares or merchandise or other property whatsoever, from place to place within the State, or from a place within the State to a place without the State, than is charged by such company for the carriage of passengers and the transportation of property or freight for like distances, or per mile, from places without the State to places within the State, or from places without the State through the State to other places without the State, the person or *529persons paying such charges, either as fare or freight, shall be entitled to recover from such company so charging and receiving the same, a sum of ten-fold the amount of the money so paid, to be recovered in an action of debt or assumpsit, as like amounts are now recovered by law.”
Several objections to this statute were made at the bar. The objection which in the judgment of the Court is decisive, and upon which alone its opinion will be given, is that which treats the Act as within the clause of the Constitution of the United States, which declares that no State shall pass any “ law impairing the obligation of contracts.”—Art. I, Sec. 10.
A wide range of argument was taken, but among all the questions discussed two only are material. These are, (1) is the charter of the Philadelphia, Wilmington and Baltimore Railroad Company a contract in the sense of the constitutional provision ? and (2) if it be such, then does the Act impair its obligation ?
Both these questions are answered by rules for the construction of this provision of the Constitution long since established by the Supreme Court of the United States— the tribunal which is the ultimate and only authoritative expounder of the Federal Constitution.
In the first place, then, since the decision of the celebrated Dartmouth College Case, in 1819, (4 Wheat. S. C. Rep. 518) it bad ceased to be a point for discussion that a corporate charter is a contract within the prohibitory clause referred to; and further, that a charter is none the less protected against legislative interference, although the franchise granted be one in the exercise of which the public are interested, if, nevertheless, the corporation itself be a private one. For, the uses of a corporation may in a certain sense be public, and yet the corporation, with its franchises and property, be private,—as much so as if such franchises and property were vested in a single person instead of in a company ; and nothing can be clearer than that franchises and property which in their nature are private must be equally inviolate whether vested in a *530corporation or in an individual. To this class of private corporations for public uses belong a large number, such as colleges, banks, insurance, turnpike companies, &c. A broadly marked distinction is taken in the Dartmouth College case between these quasi-public corporations and those of a more limited class which are strictly public corporations. The latter might be more properly distinguished as civil or municipal corporations. These are created by the Legislature solely for purposes of local government, such as are incorporated cities, towns, or counties. They are depositories of a portion of the political power of the State, which they exercise not as a private franchise but as a public trust,—as the mere agents or trustees of the Legislature, subject to its supervision and control. Such a charter is not in any proper sense a contract inter partes, within the prohibitory clause of the constitution. It is therefore revocable, and is subject to alteration at the pleasure of the Legislature, saving any private rights and interests which may have previously become vested under the action of the coporate body. But charters creating what may be termed business corporations possess all the ingredients of contracts. First, there are parties, whose concurrent action is essential to give them force and effect, the government proffering and the corporations accepting the franchise, with such privileges and conditions as the Legislature may see fit to attach to it. There are also mutual obligations impliedly assumed by the parties,—the Government becoming bound, on the one hand, for the secure enjoyment by the grantees of the corporate franchise, according to the terms and conditions of the charter, and the corporators, on the other hand, undertaking, in consideration of the privileges bestowed, to exercise them faithfully for the purposes contemplated in the grant of them. Further, the business conducted under such charters, quite as much as like enterprises set on foot by persons unincorporated, is provided for by private capital invested by the corporators for their individual profit, and the property *531held and employed by the corporation belongs to the corporators. The State takes no part in the outlay or profits of the enterprise, and holds no interest whatever in the corporate property or effects, except in some special instances in which the State becomes a stockholder. The corporate franchise itself, although created by the Legislature! becomes when vested by due acts of acceptance, a species of private property, and is recognized and protected at common law as fully as any other kind of property. The interest which the public have in the objects and operations of these business corporations is purely incidental, and in no degree detracts from the private nature of the corporation and of its franchises.
The Supreme Court in the Dartmouth College case, in its most elaborate examination of this subject, found that at common law charters of incorporation had always been recognized and treated as contracts between the crown and the grantees; that it is not competent even for royal prerogative, without the consent of the corporation, to alter or abridge them; that they could be revoked only in the case of a forfeiture for negligence or abuse of the franchise, judicially ascertained. The Court, therefore, considered that charters were strictly and technically within the language of the Constitution, since that instrument must be presumed to have employed the term “contract” according to its settled usage at common law. And this construction the Court found to be supported by all the considerations of policy which led to the adoption of the prohibitory clause; since for no species of legal rights could the protection of the clause be more important than for those created by charters, whether we consider the heavy outlays of capital often made under them, the value of the property acquired, or the public interests not unfrequently involved in their objects and operations. So clearly did the Supreme Court consider all charters (other than such as are strictly public or municipal) to be within the prohibitory clause, that in the case cited they extended the protection of the clause *532to a charter which was granted not for private gain or profit, nor for any of the ordinary purposes of trade or business, but purely for a public charity, i. e. for the christianizing of Indians and the education of youth. For the Court considered that the corporate franchise, for whatever object it might have been granted, together with the right to exercise it according to the terms and conditions of the charter, was itself, when once vested, a legal right, and as such was as well entitled to the protection of the constitution and laws as were any of the more tangible species of private property, for the acquiring or holding of which corporations are ordinarily created.
It need only be further remarked on this point that our Court of Errors and Appeals has already accepted the ruling of the Dartmouth College case as the law of this State, and, as it happens, has applied it to the protection of the very corporation now before us. In Bailey vs. The Philadelphia, Wilmington and Baltimore Railroad Co., 4 Harring. 389, the charter of this company was held to be a contract within the prohibitory clause of the Federal Constitution, and an Act of the Legislature abridging certain corporate privileges under it was on that ground held to be invalid.
We may next proceed to inquire whether the Act of the General Assembly under consideration impairs the the obligation of the contract contained in the charter of the railroad company. And to this question also the Dartmouth College case will be found to afford a clear and conclusive answer.
The sense of the phrase “impairing the obligation of a contract” and the precise effect of the constitutional prohibition will vary somewhat according to the subject matter to which it is applied. In the case of contracts wholly executory, which were doubtless those directly contemplated by the Constitution, the operation of the clause would be to prohibit any law discharging or releasing a party to the contract from the stipulations *533undertaken to be performed on his part, or modifying such stipulations. It is thus that a State insolvent law which undertakes to discharge a debt contracted prior to its passage comes in conflict with the constitutional provision . Where the contract is an executed one, as is a grant, the obligation of it is held to be impaired by a law operating to divest any right or estate which has passed or become vested under the grant. Such was the construction of the phrase under consideration in the celebrated case of Fletcher v. Peck, 6 Cranch 87, in which an Act of a State Legislature, undertaking to re-assume rights which had vested under a grant made by a prior Legislature, was held-to impair the obligation of the contract implied in the grant. The Dartmouth College case was the first in which this phrase “ impairing the obligation of a contract,” received a direct judicial construction as applied to a corporate charter. Such a charter would seem to be quite clearly within the principle of Fletcher vs. Peck. For treating a charter simply as a grant or executed contract, the franchise which is the subject matter of the grant, must be as clearly protected by the Constitution against any revocation or abridgment of it, as is a title to land which may be the subject of a legislative grant. But a charter is a contract both executed and executory; and viewing it in the latter aspect, the Court in the Dartmouth College case held that in the grant of a charter there is an implied contract on the part of the Government that the corporators having accepted the franchise, shall, so long as they exercise their corporate powers faithfully, in accordance with the ends and purposes of their incorporation, enjoy the franchise as fully and beneficially as it is granted, without abridgment or alteration. Hence the Court deduced as the principle of its decision, that a law altering the charter in any of its material provisions, without the consent of the corporation, impaired the obligation of the contract. How, what will or will not amount to such a material alteration of the charter as to bring a law into conflict with the *534constitutional prohibition it may not be easy to define, but it is sufficient and quite safe to say that an Act having the effect to abridge or restrict any power or privilege vested by the charter which is material to the beneficial exercise of the franchise granted, and which must be supposed to have entered into the consideration which induced the corporators to accept the charter and to assume the duties imposed by it, is such an alteration as the constitutional provision forbids, and that any Act so operating is invalid.
Let us apply this principle to the case in hand. The object and effect of the law under consideration is to regulate, and so far to restrict, the power of the railroad company to charge for the transportation of passengers and freight. Of such a power it is hardly enough to say that it is one of value and importance to the company ; it is one essential to the enjoyment of the franchise, and must be presumed to have been the consideration for which the corporators accepted the charter, invested their money, and assumed the obligations imposed upon them. It was undoubtedly competent for the Legislature, by a provision in the charter, to reserve to itself the right to supervise and regulate in the future this power of the company ; but, upon a careful examination of the original Acts incorporating the several companies no'w composing the Philadelphia,Wilmington and Baltimore Railroad Company, we are unable to find in them any reservation of such legislative control over these companies as is necessary to sustain the Act under consideration. The power to adjust its tariff of charges by its own officers, according to their views of the necessities of business and of justice to the public, without supervision, was a part of the franchise as it was granted. The attempted regulation by the Legislature of this power materially abridges the beneficial exercise of it by the corporation, and without any doubt impairs the obligation of the contract in the sense of the constitution as interpreted by the Dartmouth Colige case. The question *535is not admissible in what degree the power of the company to chai’ge is restricted by the statute, or whether the regulation enacted by it is or is not a reasonable or proper one. The principle is that any material modification of the charter, or of the franchises or powers granted under it, is prohibited by the Constitution. In the Dartmouth College case the amendment of the charter by the Legislature of Hew Hampshire appears to have been made in good faith, with a view to enlarge the sphere and increase the usefulness of that institution. What was before a college only was by the Act converted into a university; the original board of trustees was increased in number, and the general administration of the institution by the trustees was made subject to the supervision of a Board of Overseers, who were to be appointed by the Governor and Council, and who thus directly represented the State. ‘ Says Chief Justice Marshall, in his opinion, after detailing these changes : “ This may be for the advantage of this college in particular, and may be for the advantage of literature in general, but it is not according to the will of the donors, and is subversive of that contract on the faith of which their property was given.” Mr. Justice Washington, also, speaking to the same point, says : “ In all respects in which the contract has been altered without the assent of the corporation, its obligations have been impaired, and the degree can make no difference in the construction of the above provision of the Constitution.”
It may be worth while to notice here, that the operation of the statute of Hew Hampshire upon the charter of Dartmouth College, was essentially similar to (he effect of the Act of our General Assembly now under consideration. The governing power of the College was by the original charter vested exclusively and without restriction in the Trustees therein appointed and their successors. By the amendment to the charter this power was subjected to the supervising control of the State through a Board of Overseers to be appointed by its *536officers, the Governor and Council; and thus what had been under the charter an absolute power of administration in the corporators was brought under the regulation of the State. This modification was strongly commented on by the Chief Justice as the feature of the New Hampshire statute which was most clearly repugnant to the consitutional prohibition. Precisely such is the effect of the Act before us. It assumes for the State the right to regulate what under the charter was granted as an absolute discretion in this corporation, viz., the right to adjust its tariff of charges for the carriage of passengers and freight.
We have attentively considered the arguments urged with much ingenuity and force by the learned counsel who maintained the validity of this Act. Among them the argument of greatest force, and the one most relied on, was an effort to bring the Act within the scope of those legislative powers which are so essential to good government and the social welfare that they are treated as inalienable; so that one Legislature cannot, even by contract, abridge the full control of a succeeding Legislature over the same subject matter. Such, for example, is the right of the Government at all times to provide for the common defence, to take private property for the public use, to raise revenue, and what is termed the police power of the State. It was the last of these inalienable powers, viz., that of internal police regulation, to which the Act before us was in the argument sought to be referred. The importance of the question here raised requires and has received our serious consideration.
The police power of the State comprehends all those general laws of internal regulation which are necessary to secure the peace, good order, health, and comfort of society. We are now concerned, not so much to discuss this power, at large as to ascertain, with sufficient precision for the case before us, what is the proper limit of the State police power in its bearing upon chartered rights and privileges, as these are protected by the Constitution of the United *537States. It is not difficult to ascertain a rule sufficiently definite to be readily applied to cases, and one securing all interests involved—saving to the State, on the one hand, all needful authority for the legitimate purposes of police regulation, and yet, on the other hand, not trenching upon the constitutional protection of chartered rights. Such a rule would seem to be this : that the Legislature may at all times regulate the exercise of the corporate franchise by general laws passed in good faith for the legitimate ends contemplated by the State police power-—that is, for the peace, good order, health, comfort, and welfare of society—but that it cannot, under color of such laws, destroy or impair the franchise itself, nor any of those rights or powers which are essential to its beneficial exercise. Thus, Acts regulating the mode of carriage of passengers with a view to their safety, or regulating the speed of travel through towns or cities, or prescribing certain precautions for the public safety at crossings, or requiring the erection of fences, &c., &c., are proper exercises of the power of police regulation. Such Acts leave the franchise unimpaired and simply regulate the exercise of it in some particulars plainly essential to the general safety, health, or comfort of society. But quite different are Acts which directly touch the constitution of the corporation, or abridge or modify any of those corporate powers which are essential to the very ends of its creation; such powers, for example, as the right to operate a railroad at all, the right to take tolls, or fares and freights, or to adjust their tariff of such charges. These are not police regulations, but are in substance and effect amendments of the charter; and it is most obvious that if, under color of the police power, corporations may be thus dealt with, the constitutional provision, so solemnly adjudged by the Supreme Court to be a protection to their rights is, after all, as to them, wholly nugatory.
This view of the limit of the police power, as exercised over corporations, was taken by the Supreme Court of Vermont in Thorpe vs. The Rutland and Burlington Railway, *53827 Vt. 140, cited fully in Redfield on Railways, ch. 31, sec. 2, note 1. That case drew into question the right of the Legislature to require existing railway companies to respond in damages for cattle killed or injured by their trains until they should erect suitable cattle guards at farm crossings. The Court, in the course of an elaborate discussion by Chief Justice Redfield of the general liability of corporations to legislative control, say: “ It must be conceded that all which goes to the constitution of the corporation and its beneficial operation is granted/by the Legislature, and cannot be revoked, either directly or indirectly, without a violation of the grant, which is regarded as impairing the contract, and so prohibited by the United States Constitution.” Again, they say, “ the privilege of operating the road, or taking tolls or freight and fare is the essential franchise conferred. Any Act essentially paralyzing this franchise, or destroying the profit therefrom arising, would no doubt be void. But beyond that the entire power of legislative control resides in the Legislature,” &c. And the Court proceeded to sustain the Act before them, requiring the erection of cattle-guards, as an act of police regulation only, such as did not impair the franchise or any of its essential rights or powers. In a late treatise on the subject of Constitutional Limitations by Judge Cooley, p. 577, upon an extended and very satisfactory examination of the point now before us, substantially the same limitation is drawn to the exercise of the police power as affecting chartered rights. The requisites to the valid exercise of the police power the author holds to be these: “ The regulations must have reference to the, comfort, safety, or welfare of society; they must not be in conflict with any of the provisions of the charter; and they must not, under pretence of regulation, take from the corporation any of the essential rights and privileges which the charter confers. In short, they must be police regulations in fact, and not amendments of the charter, in curtailment of the corporate franchise. The maxim, sic utere tua ut alienum non laedas, is that which lies at the foundation of the power, *539and to whatever enactment affecting the management and business of private corporations it cannot fairly be applied, the power itself will not extend. It has accordingly been held that where a corporation was chartered with the right to take toll from passengers over their road, a subsequent statute authorizing a certain class of persons to go toll free, was void. Pingrey vs. Washburn, 1 Aiken 268. This was not a regulation of existing rights, but it took from the corporation that which they before possessed, namely, the right to tolls, and conferred upon individuals that which, before, they had not, namely, the privilege to pass over the road free of toll.”
The Attorney General, who appeared on behalf of the State, put in the. strongest possible form the argument in support of this Act as an exercise of internal regulation, by insisting that there must at all times inhere in the Legislature an authority to protect the public against extortionate charges and unjust discriminations by carriers exercising a public employment, and that to this power railroad corporations, as well.as other common carriers, must be held amenable. That the Legislature possesses the general power here claimed for it is not doubted; but the real question still remains, viz., in what mode may such power be constitutionally exercised,— at least over corporations ? The answer is, that the Legislature may by general laws forbid extortion and unjust discrimination on the part of common carriers, as it may prohibit any other offence against social order or the general welfare. It was riot disputed in the argument that for the breach of such laws, corporations as well as natural persons may be held liable; but such liability would be enforced by a judicial proceeding, in which the alleged extortionate or unjustly discriminating character of the charges drawn into question would be judicially ascertained. Such remedies against common carriers already exist at the common law, and to these as well as to the common law liabilities of common carriers generally, incorporated carriers as well as natural persons are subject by the public nature of their employment. Very different, however, from such a mode of reg*540ulation by general laws, with a liability to judicial remedies, is the attempt by a legislature to prescribe in advance a tariff of charges for carriers,—to do which is in effect to take out of their hands the management of their own business. This certainly cannot be done in the case of a corporation. How far the Legislature can directly regulate charges by common carriers not incorporated is a question not now arising; but the right of a corporation to conduct its own business—to adjust its tariff of charges (subject to the implied condition that such charges shall not be unreasonable) stands upon a special ground not applicable to an unincorporated carrier. For such right, being a part of the corporate franchise granted by charter, is protected by the Constitution of the United States. And this brings the case back to the view before presented as to the true limitation of the police power over corporations. It is the only view by which both the general power of police regulation by the State over corporations and their due protection under the Constitution can be preserved and kept in harmony.
Enough has been said to show to what conclusion the Court is impelled. We are of opinion that, inasmuch as the Act under consideration assumes the absolute power to regulate and control the exercise of a corporate right which was granted to this company as a part of its franchise, without guy reserved power of such future regulations by the Legislature, it is not a legitimate exercise of the State police power, but is in substance and effect an alteration of the charter, and materially impairs the obligation of the contract in the sense of the constitutional prohibition as interpreted by the Supreme Court. The constitution, so interpreted, is the supreme law of the land, and we have no alternative but to apply it to the case before us. A contrary judgment of this Court would be practically an attempt to subvert the Constitution of the United States within this State.
Let a certificate answering the question reserved be drawn in accordance with this opinion.