Reports of the Industrial Commission...

For the purpose of this report special charters, granted by every State and Territory in the United States, were examined. The session laws of the various legislatures, as published, contain the charters granted by them; and while not all the charters that have been granted were examined, the number which was examined is so large that generalizations may safely be based upon them. As a rule, the charters granted during the first 10 years or so in any one State were compared with one another. The charters granted during the later decades were likewise examined, with a view of noticing in what ways, if any, these differed from the earlier ones. Parallel with these, an analysis of general laws was undertaken, including only the earlier enactments on the subject of railways. The discussion of contemporary railway legislation was based upon the latest edition of the revised statutes of the different States, supplemented by the general laws of the States which had been enacted since the publication of the statutes. In this manner, it is believed, no essential provision of the railway laws of any State, whether included in the revised statutes or not, have been overlooked. The material upon which the treatment of constitutional provisions is based is found in the appendix to this report. The treatment of foreign railway charters and legislation rests almost exclusively upon material submitted by the various departments of public works in the different foreign countries. The respective officers were requested to submit typical charters and important general laws; and there is every reason to believe that the material thus submitted is thoroughly representative of the railway legislation of the countries concerned.

Without attempting to formulate definite conclusions or to express whatever opinions may be justified on the basis of the facts presented in this report, a number of the leading characteristics brought out may be enumerated here. In the first place, the essential similarity of charters the world over has been confirmed. The lineal descent of present railway charters from the earlier canal and turnpike acts in England can likewise not be questioned. While in different countries certain forms of expression found their way into the charter, in many respects more than similarity can be discovered. Identity of contents, even, can in many instances be established. A characteristic of railway legislation in the United States is the great extent to which special legislation was persisted in after general laws had been enacted by the respective State legislatures. In all sections of the country the statute books afford numerous instances of the granting of special railway charters, completely ignoring the existence of general laws for the incorporation of railway companies. In addition, illustrations can be found of the organization of railway companies on the basis of special charters granted many years before, when at the time of such organization general laws and constitutional provisions prohibiting special franchises were found upon the statute books. As a whole, the railway legislation of the United States is incomplete, especially with respect to such subjects as the issuance of stock, making joint arrangements, providing for emergencies, and similar topics. A tabular analysis of railway laws shows at a glance the absence of essential provisions in the laws of many States. Together with this incompleteness there goes a certain lack of uniformity, which must be extremely exasperating to railway companies that attempt to act in obedience to the law. Our great railway systems lie in territory under the jurisdiction of a number of different States, and when two or more of these States legislate in diverse ways on the same subject, it is difficult to see how a railway manager can act in accordance with the laws of all the States to which his road is subject, and at the same time adhere to that unity in management which good business principles demand. The railways are essentially alike all over the United States, and no good reasons can be advanced for the extraordinary differences which exist among the laws of some of the States.

The lack of elasticity in railway legislation is best illustrated by the many constitutional provisions which have been incorporated by various States. It is a well-known fact that amendments can not be readily secured, and, that legislation

which is rigidly limited in its scope by constitutional amendments can not embody that freedom of action which the nature of the railway business demands. Our railways are an important part of our industrial mechanism, and, in common with all other domains of social and economic life, they undergo changes and adjust themselves to modifications and variations in this social and economic life. Rigidity in railway legislation prevents that prompt readjustment which progress demands. The tendency, noticeable in the laws and constitutional provisions of a number of States, to permit supension of the long and short haul provisions, for example, is an excellent illustration of a most commendable tendency in our railway legislation, because it gives to administrative authorities discretionary powers, which will enable them better to adjust the railway service to concrete conditions as the same may arise.

In general, it is true that our laws do not recognize differences in the degrees of importance represented by different railways. A subordinate branch of a small independent road in a remote section of the undeveloped part of a State is subject to the same laws that govern the most important systems, except, perhaps. in regard to taxation, for which purpose various schemes of classification have been adopted. Again, it may be said that our laws do not provide for adequate administrative machinery, and that many of them appear to have been enacted on the assumption that statutes execute themselves. An examination of the commission laws shows clearly the great lack of uniformity in the qualifications of commissioners, their terms of office, and in the powers exercised by them. The question naturally arises whether any system of administrative control could not be greatly strengthened by legal provisions, outlining certain qualifications for every agent who may be a part of the administrative machine. At present there is nothing in our State laws to prevent persons totally unfamiliar with railways from occupying positions which call for high ability and thorough knowledge of railway affairs. Furthermore, there is very little in our laws which enables the commissions or other officers to compel prompt compliance with the laws on part of individual railways which do not see fit to obey them. A single obstinate manager may prevent other managers from voluntarily doing what justice to shippers and railways alike demands, and what every citizen should have a right to demand; and, in case the demand goes unheeded, to have the same enforced through an efficient and prompt administrative agent. A study of the laws of Prussia, Switzerland, and Japan impresses one with the lack of representation of social and economic interests in the management of our railways. The full significance of this becomes apparent when the composition of advisory bodies in these and other countries is taken into view, and the wholesomeness of the influence and power which they exercise over the railway systems of their respective countries is realized. They are, in a sense, clearing houses of information through which the railways and the people learn to know each other.

PART I. EARLY RAILWAY CHARTERS.

General characteristics.-A railway charter may be defined as a special act of a legislative body authorizing a person or persons duly organized to construct and operate a railway or railways in a certain territory under certain conditions. Such a legislative act is a private law. With the exception of a few of the Western States-Arizona (Territory), California, Colorado, Idaho, and Montana— which began with general laws, special charters have been granted by every State and Territory in the United States. The charters have numerous resemblances and differences which will be noted more in detail later on, but at the outset it is well to notice certain features which charters in all parts of the United States have in common. In spite of numerous striking differences which exist, we may speak of a typical railway charter.

The leading features which are common to railway charters of the different States may be associated with the following points, every charter having one or more provisions relating to some or all of these points: Name of company; number of commissioners; number of board of directors; the amount of capital stock: size and number of shares; the amount of the payment per share at the time of subscription, and the maximum assessment per share, together with the number of days' notice required; systems of voting; the time limit as to beginning and completing construction; junctions, branches, and extensions; route; expropriation and methods of valuation, together with the manner in which disputes are settled; the amount of land which may be held; the number of miles to be constructed before traffic may be opened; the power to borrow money and the rate of interest; the distribution of dividends, liability of stockholders, annual reports, passenger and freight rates. In every State charters may be found which contain provisions on only a few of these points, while in most States charters were granted containing provisions on all of them, and perhaps others not here indicated.

Following an old English custom, a few charters in a number of States contain a preamble. Where a preamble is found, it usually sets forth the reasons why the proposed railway should be constructed, the public service which it can be made to perform, and the manner in which the project is to be carried out. Preambles of this kind can be found in charters of States so far apart as Wisconsin, Pennsylvania, and Georgia. Similarly, charters in some North Atlantic States declare the public use of the projected railways. Both the preamble and the declaration of public utility serve the same purpose, namely, to bring before the legislative body before the franchise is granted the social and economic conditions which make the project desirable, if not necessary.

While there is no general order in which the different provisions of a typical railway charter are incorporated, in the individual charters of the different States, it is very common for a charter to enumerate first of all a number of persons, designated commissioners, under whose direction the proposed railway is to be organized. These commissioners are authorized to open subscription books in specified localities on a certain date, and to continue to receive subscriptions during a certain period of time. The charter further specifies that after a certain minimum sum has been subscribed, and a certain payment on each subscription, varying greatly in its amount, has been made, the subscribers shall hold a meeting and elect a board of directors. The size of the board to be elected, like the number of commissioners, varies very greatly in the different charters, although 9 and 13 are perhaps the most common numbers. In a few States, like Connecticut, Maryland, and Kentucky, charters were granted making it obligatory on the part of the elective officers to bind themselves to the performance of their respective duties by an oath.

The board of directors having been elected, the company has obtained legal status and is prepared to carry out the provisions of the charter in its possession.

The powers granted to the company, acting through the board of directors, include powers common to corporate bodies, such as purchasing, holding, selling, and leasing property; to have perpetual succession; to sue and be sued; to use a common seal, and in general to exercise those powers, rights, and privileges which other corporate bodies exercise, in order to carry out the provisions of the charter. One power which is invariably given to the board of directors, with or without restrictions, relates to rates; and, considering the great importance which has always been attached to the question of rates, it may be well to bring together typical features of charters of different States on this important question.

Charter provisions as to rates. A charter granted by Connecticut in 1832 provides that the company may charge "such rates per mile as may be agreed upon and established from time to time by the directors of said corporation." This, in substance, is the provision on rates which is more frequently found in railway charters in the United States than any other. The Connecticut charter just referred to names 3 "commissioners," who shall be sworn to a faithful discharge of the trust imposed upon them by virtue of the act, and who shall not be interested in any way whatsoever in the company.

A Colorado charter of 1865 provides as follows: "They (the board of directors) shall have power to establish such rates for the transportation of persons and property in all matters and things respecting the use of said road and the transportation of property as may be necessary: Provided, That the legislative assembly of this Territory, or any legislative body, having legislative authority over the county in which said road is located, may, after the expiration of 25 years from the passage of this act, and at the expiration of each period of 20 years thereafter, prescribe rates to be charged and collected by said corporation for transporting passengers and freight over said road and the branches thereof."

One of the earliest Florida charters grants the company "the right to demand and receive such prices and sums for transportation as may be from time to time authorized and fixed by the by-laws of said company or companies: Provided, That such prices and sums shall not be increased without at least 60 days' previous notice thereof being given." This charter further provided that the “ tolls" should not yield more to the company than 20 per cent per annum on its stock. and any excess ○ ver 20 per cent should be paid into the internal improvement fund. Maximum rates are prescribed in a charter granted by Georgia in 1837, as follows: Provided, That the charge of transportation or conveyance shall not exceed 25 cents per 100 pounds on heavy articles, and 10 cents per cubic foot on articles of measurement for every hundred miles, and 5 cents a mile for every passenger." Similar provisions were incorporated in Georgia charters during succeeding years.

An Indiana charter of 1832 empowers the company to "change, lower, or raise rates at pleasure: Provided, That the rates established from time to time shall be posted in some conspicuous place or places."

A provision similar to that found in the Florida charter above quoted is found in a Connecticut charter of 1829. "It shall be lawful for them (board of directors) to charge for every hundred pounds transported 60 miles or upwards, 24 mills per hundred pounds weight for each mile; for ever hundred pounds weight transported over 20 miles and under 60 miles, 3 mills for each mile; for every hundred pounds below 20 miles, 34 mills per mile." Passengers were to pay 4 cents per mile.

A charter granted by Maryland in 1827 prescribed different rates for different directions. From north to south the freight charges were not to exceed 1 cent per ton-mile for toll and 3 cents per ton-mile for transportion; south to north the charges were not to exceed 3 cents per ton-mile for tolls and 3 cents per ton-mile for transportation. The maximum rate for the transportation of passengers was fixed at 3 cents per mile. The same State granted a charter in 1831 which fixed the maximum rate for freight at 3 cents per ton-mile for both toll and transportation, and for passengers not exceeding 3 cents per mile, provided the passenger does not carry baggage exceeding 50 pounds in weight and occupying space not exceeding 2 cubic feet.

The early Massachusetts charters, like the charters of other New England States, are the most complete of any that can be found in the legislation of other States. One of the earliest charters, granted in 1829, refers to a general law enacted by Massachusetts in 1808, thus subjecting the corporation created by the charter to the provisions of a general law. That is perhaps the earliest instance of its kind. While this charter fixes à maximum freight rate it does not mention passenger rates at all; but another charter granted by the same State during the same year provides that the company may impose charges not exceeding 3 cents, and for every passenger passing and repassing not exceeding 2 cents per mile,

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