Page images

The Wisconsin statutes, like those of most other States, as will be noted more in detail later, prohibit the consolidation, lease, purchase, or control by one railway corporation of another parallel or competing line, to be determined by jury. To complete its franchise the Northern Pacific filed this charter in all the other States through which it runs, and appointed certain persons as its legal representatives in those Commonwealths. În Idaho a special promise is exacted to the effect that the corporation accepts in full the provisions of the State constitution. It should be noticed that the reorganization of the Northern Pacific under a special charter took place at a time when every State through which its lines pass had on its statute books general laws governing the organization of railway companies.

The physical location of the railway is by no means an indication of the source of its legal power, for, as in the case of the Northern Pacific, a great system may be operated on the basis of a charter granted to an insignificant road in a distant State. The Southern Pacific, for instance, is organized under the laws of Kentucky. What constitutes the essence of the legal privilege of a modern railway corporation is an extremely complex problem, the difficulty of which is strongly impressed upon us when we realize that scores, if not hundreds, of separate charters granted by different States are comprised in the existing franchises of our great companies. The Pennsylvania company, for instance, represents more than 150 original lines, each having its special charter or certificate of incorporation. Many of these charters represent conflicting, if not mutually exclusive privileges, and what the charter rights of such a corporation are is a question difficult of solution. Not only is there a possibility of conflict between the diverse provisions of different charters, but also between the charters and the general laws, although in many States the supremacy of general over special laws has been at least acquiesced in, if not publicly recognized. The chairman of the Massachusetts railway commission writes that in that State it has been recognized that general laws have superseded the earlier special enactments. This appears especially significant when we remember that, with a few minor exceptions, all the railways of Massachusetts were incorporated under special charters-a compilation of which makes a good-sized volume-before comprehensive general laws had been passed. This possibility of a conflict between special and general laws is illustrated in the railway history of Michigan. The legislature of that State in 1898 created a commission, composed of the railway commissioner and two State officers, to negotiate with certain railwa companies of the State operating under special charters, for the purpose of ascertaining upon what terms the companies would be willing to surrender their charters. While the question of the amount of taxes these companies were to pay was the immediate cause of this action on the part of the legislature, a similar situation with respect to the other question is by no means an impossibility. No further reference is here made to this difference between the railways and the State, because it involves the question of taxation, which the Industrial Commission has fully treated in another part of its report. (The well-known instance of the Illinois Central and the reserved rights of the State with respect to taxation in the charter of that company is also suggested in this connection.)


Early general laws.—In the first part of this report on early charters reference is made to an early law of Massachusetts of 1808. In 1833 the legislature of that State enacted a law "defining the rights and duties of railway corporations in certain cases." This law was included in a larger act on canals, turnpikes, and railroads. The law of 1833 also embodied the idea of a preamble by specifying that petitions for the construction of a railway shall be accompanied by the report of a competent engineer. Connecticut, in 1849, adopted a fairly comprehensive amendment to the earlier act relating to railway companies. In the first section this law provides that all railway companies shall be subject to general laws, except when otherwise specially provided for. A provision similar to that found in Massachusetts was embodied in the 1 w providing for the report of a competent engineer in connection with the petition for a charter. The usual provisions with respect to organization, shares of stock, location, annual reports, and other financial affairs of railway companies were provided for. In Maine a general law adopted in 1841 contained the following section: "No petition for the establishment of any railroad corporation shall be acted upon unless the same is accompanied and supported by the report of a skillful engineer, founded on actual examination of the road and by other evidence, showing the character of the soil, the manner in which it is proposed to construct said railroad, the general profile of the country through which it is proposed to be made, the feasibility of the route, and an estimate of the probable expense of constructing the same.


petition shall set forth the places of beginning and ends of the proposed railroad, the distance between the same, the general course of said railroad, together with the names of 5 towns through which the same, on actual survey, may be found to pass." This provision is typical of analogous clauses in the laws of other North Atlantic States. By 1848 Maine granted charters containing only a few sections, together with the additional statement that "all the privileges and immunities usually granted to such corporations" shall be delegated to the company thereby formed. New Hampshire adopted a general law in 1843 dealing with expropriation, crossings, fences, contracts among railway companies, and so on. The year following "An act to render railroad corporations public in certain cases, and constituting a board of railroad commissioners" was adopted. The commission established by this law was empowered to lay out routes on petition only, to inspect roads and railway accounts. Vermont enacted similar laws in 1846-47 and 1849, the latter being quite a comprehensive general law.

New York, which is representative of the Middle States, had passed 30 general laws before 1834, beginning with an act to prevent injury to railroad property and to insure the safety of passengers. These laws embraced subjects like the relation of railroads to canals, highways, Indian lands, to taxation, maps and profiles, contracts, loaning the credit of the State, carrying mails, junctions, baggage checks, altering lines, transportation of freight, suits against companies, destruction of noxious weeds, and such like. A law of 1843 compelled railway companies to report annually to the secretary of state. Like the New England States, New York declared the "public use" of a railway, and demanded proof that the proposed railway was of "sufficient utility to justify the taking of private property" in accordance with the provisions of the general law authorizing the organization of railway companies. By 1848 New York had worked out a fairly comprehensive general law, but it was not until 1850 that what may be called the fundamental law of the State was adopted. (The New York law of 1850 was transcribed, with the exception of a few sections relating to the Erie Canal, by the legislature of Wisconsin in 1853, which, however, failed to pass the bill.) The law of 1850 forbids the organization of corporations by special acts, except for municipal purposes and in cases where, in the judgment of the legislature, the objects of the corporation can not be obtained under general laws. In addition, it contains, among others, provisions relating only to the organization of railway companies, subscription and forfeiture of stock, transfer and increase of stock, expropriation, change of route, filing maps and profiles, paying labor employed in construction, formation of trains, baggage, intoxication of employees, annual report of over 100 items, and other phases of legislative control.

Notwithstanding numerous general laws, the New York and Erie Railway secured 17 amendments before 1850. The Portsmouth and Concord Railway secured 1 amendment during each of the first 10 years of its existence. The Western Branch, Massachusetts, secured 22 amendments before 1853, and the Eastern Branch secured 18. Thirteen were granted to the Housatonic between 1838 and 1850; the Camden and Amboy, 15; the Delaware and Raritan, 14. The Pennsylvania adopted 22 up to 1854, and the Baltimore and Ohio 21 between 1828 and 1852. Since these amendments dealt with such topics as the increase of stock, the issuance of bonds, holding lands, building telegraphs, extending lines and forming connections, the construction of bridges, and so on, it is obvious that a single comprehensive law, properly observed would have answered all the purposes, and in a uniform way, of all the special charters with which the various legislatures had to concern themselves. Numerous contemporary newspaper paragraphs can be found deploring the fact that legislatures are obliged to use so much of their time for the construction of special laws which could be so much more efficiently dealt with under general statutes.

Among the States of the Middle West, Illinois began early. In 1849 the legislature of that State passed "an act to provide for a general system of railroad incorporations." This law prescribes the formation of railway corporations and the powers, duties, and liabilities of officers. The board of directors is given full power over rates, but these are limited to 3 cents per mile for passengers, unless otherwise provided for by special act of the legislature. The legislature is empowered to reduce rates without the consent of the company, but no such reduction shall cause the net profits to fall below 15 per cent per annum. The probable use of the proposed railway must first be ascertained, and the interested parties must be given an opportunity to be heard. Annual reports are demanded, and the act is to apply to all existing corporations, so far as the same is not in conflict with special charters granted. The legislature of Massachusetts, in 1855, adopted a comprehensive general law including provisions on legislative control of rates, junctions, taxing capital stock 1 per cent per annum, providing for reasonably good service, consolidation, and so on. However, in this, as in so many

other States, during succeeding years charters were granted by the legislature which are as long and involved as if no general laws had been in existence. Iowa (consult Dixon, State Railroad Control in Iowa) passed an incorporation law, providing for the incorporation of railroads, at the first session of its general assembly, and in most of the earlier legislation of that State interference with railway management is foreshadowed. A law of 1856 contains the significant provision that "railroad companies accepting the provisions of this act shall at all times be subject to such rules and regulations as may from time to time be enacted." In 1860, maximum rates were prescribed, and 2 years later railways were required to maintain offices within the State and to submit annual reports. Another law provided for the periodical publication of rates and certain provisions relating to safety.

The active regulation of rates was attempted in 1866, but most of the restrictive laws enacted up to this time were rarely enforced. Kansas, after most prolific crops of private charters, passed an elaborate general law in 1857, but within 3 days after this law had been passed a special charter was granted without reference to the act in question, although covering in its provisions matters which the general law treated very elaborately. The contents of this rather elaborate law are essentially like those of the Illinois law.

Taking North Carolina and Alabama as representatives of another section of the country, it may be said that their general laws, while fairly comprehensive, are not as complete as the best laws of States farther north. The North Carolina law of 1871 embraces 70 sections, in one of which a maximum rate of 5 cents for passengers is prescribed; another calls for an annual report of 105 items, and another prohibits consolidation with parallel or competing lines. The Alabama law of 1850 reserves to the legislature the right to alter or repeal any certificate of incorporation; it places a limit upon the indebtedness which the company may assume; and contains furthermore the very novel provision that no railroad shall be constructed through an orchard without the owner's consent. In 1853 all railway companies were made subordinate to general laws.

California was one of the few States which began to legislate on railway matters in general rather than special acts, beginning with 1850. In 1853 a law was passed which enabled any 25 persons to form a railway company. The life of the franchise was limited to 50 years. While section 2 of the law specified that the capital stock of the company shall exactly equal the actual cost of the road, section 16 empowered the company to increase its capital stock "to any amount which may be deemed sufficient and proper for the purpose of the corporation." This law was amended in 1853, 1856, and 1857, but in 1861 the whole of it was repealed and another law, supplementary to the original general act of 1850, was adopted. An important provision of this last law is found in section 1, which specifies that at least $1,000 per mile shall be subscribed, and 10 per cent actually paid in before the articles of incorporation can be filed. The form of the articles of the association is prescribed, and the period of its existence limited to 50 years. A sinking fund for the redemption of bonds is provided for and the unusual liberty of laying out its road, "not exceeding 9 rods wide," is given to the company. There are elaborate sections on eminent domain, arbitration, tolls, and so on. By a vote of three-fourths of the constituents of the companies, consolidated railway corporations may be organized. Maximum rates of 10 cents per passenger-mile and 15 cents per ton-mile are prescribed, although the company can not be compelled to undertake the transportation of a small quantity of freight for less than 25 cents. The maximum rates of the California law are in part exceeded by those prescribed in a Washington charter granted in 1862, which are 10 cents per passenger-mile and 40 cents per ton-mile. It is also a significant fact that the first general law enacted by the legislature of Washington, in 1873, relates to extortion and unjust discrimination in the rates charged for the transportation of passengers and freight on railroads in this Territory.' Montana, Colorado, Arizona (Territory), and Idaho are other States which, like California, began with general laws.


General considerations.-Constitutional provisions probably represent the more fundamental and permanent features of railway legislation. It may be assumed that the provisions incorporated in the constitutions of the various States of the Union were thought to represent those matters respecting railways which the people of the different States, represented in their respective legislatures, considered most important and least likely to require changes in the future. The history of American constitutions does not reveal an undue readiness on the part of the people to change or modify their organic laws; and in view of this slowness in bringing about constitutional changes an element of fixity and rigidity is infused into the legislative control of railways.

The constitutions of the older States, as a class, contain fewer and less comprehensive provisions relating to railways; and two of them, Massachusetts and New Hampshire, embody no direct provisions of this kind, while Rhode Island is saved from being classified with these two States by a brief and rather unimportant constitutional provision. In addition, there is an absence of clauses relating to railways in the organic codes of the Territories of Arizona and New Mexico. With these exceptions, every State in the Union contains more or less elaborate provisions on this subject, varying from the less comprehensive and incomplete sections of many of the constitutions of the older States to those much wider in their scope and stringent in their nature, as in the recently adopted constitution of Montana.

By far the greater part of the contents of all the constitutional provisions may be grouped under three general heads: First, those relating to incorporation; second, those relating to public aid; and, third, to direct regulation and control, the latter having in view the correction of abuses and the establishment of equitable rates. While a few of these provisions are negative in their character, a good many of them are positive, empowering legislatures to establish rates and to do other things calculated to subordinate the agencies of transportation to the public good.

Acceptance of the constitution.-Fifteen State constitutions contain provisions to the effect that no railway, canal, or other transportation company in existence at the time of the ratification of the constitution shall have the benefit of any future legislation by general or special laws, other than in execution of a trust created by law or by a contract, except on the condition of complete acceptance of all the provisions of the section or article of the constitution in question. In a few instances the further provision is embodied that whenever existing charters are revised or amended, the same shall become subject to the constitution. (The constitutions incorporating such provisions are found in Alabama, Arkansas, Colorado, Delaware, Idaho, Kentucky, Louisiana, Mississippi, Montana, North Dakota, Pennsylvania, South Dakota, Texas, Utah, Wyoming.)

Corporations organized under general laws.-In the first section of this report it was noted that great crops of special charters were produced in all sections of the country, and it was perhaps a reaction against those excesses in special and local legislation which led to the adoption of constitutional provisions prohibiting the organization of railway and similar companies under special charters. One method of avoiding these constitutional and statutory provisions was observed in the case of the Northern Pacific Railway; but Section XXI of the original charter of the Superior and St. Croix Railroad Company declared “that in the judgment of the legislature of this State the objects of the corporation hereby created can not be attained under the general laws." The later constitutions of the Western States are very stringent in this respect, and the organization of a large class of corporations, of which railways are an important member, under special acts, is rigidly prohibited. (The following States have incorporated

such prohibitions in their constitutions: Arkansas, California, Colorado, Delaware, Florida, Illinois, Idaho, Indiana, Iowa, Louisiana, Maryland, Michigan, Minnesota, Missouri, New York, North Carolina, South Carolina, Utah, West Virginia, Wisconsin, Wyoming.)

Previously granted charters.-Closely allied to the last type of constitutional provisions is another, found in only 6 States, which invalidates all charters and special or exclusive privileges granted before the adoption of the constitution, unless organization had been actually effected. Organization thereafter could not be effected without a full acceptance of the new constitution. (This is found in the constitutions of Arkansas, California, Colorado, Kentucky, Idaho, Wyoming.)

Special charters. In addition to the positive provision that railway companies shall be organized under general laws, 19 constitutions contain the negative clause that no special charters shall be granted, except for charitable, educational, and certain other purposes, when the same shall remain under State control. A few constitutions specify that special charters may be granted to corporations and organizations not having in view financial gain. (The following are the States whose constitutions contain such provisions: Arkansas, Colorado, Idaho, Kentucky, Kansas, Minnesota, Mississippi, Missouri, Nevada, New Jersey, North Dakota, Ohio, Oregon, South Dakota, Tennessee, Texas, Utah, Washington, Wyoming.)

Railways public carriers.-The analogy of railways to common roads and other public highways is expressed in constitutional provisions declaring all railway and canal companies to be common carriers. While provisions bearing on this topic are differently worded in the different constitutions, sometimes a separate section being devoted to it, and in other instances only a phrase or sentence embodied in another section, the meaning is usually the same; namely, the declaration that the railway is a public highway and that railway companies are common carriers. (The following constitutions contain such provisions: Alabama, Arkansas, Colorado, Idaho, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Pennsylvania, South Dakota, Texas, Utah, Washington, West Virginia, Wyoming.)

Eminent domain and public use.-Ever since the Supreme Court of the United States handed down the decision of Munn v. Illinois, declaring that whenever a person devotes his property to a use in which the public has an interest, he must grant, to the extent of that interest, the right of the State to control that property, no one could consistently question the public nature of railways. This fact has found common expression in the term "quasi public," which is now generally applied to railway corporations. A large number of State constitutions declare that the respective legislatures may take the franchise and property of railway companies and subject the same to public use, when the general welfare requires it, in the same manner in which the property of individuals is taken. In other words, these States reserve in their constitutions the power to exercise the right of eminent domain over all the corporate property of a railway company. (The following States have this provision: Arkansas, California, Colorado, Idaho, Illinois, Kentucky, Mississippi, Missouri, Montana, Nebraska, North Dakota, Pennsylvania, South Dakota, Washington, West Virginia, and Wyoming.)

Power to annul charters.-Sixteen States reserve constitutional power to alter, amend, revoke, or annul charters granted under special or general laws, whenever in the opinion of the legislature it may be injurious to the citizens of the State in question to continue the same. Usually the additional clause is incorporated that in case of such repeal or revocation no injustice shall be done to the members of the corporation. (Found in the constitutions of Arkansas, California, Colorada, Idaho, Iowa, Kansas, Mississippi, Montana, New York, North Carolina, Oregon, South Dakota, Utah, Washington, Wisconsin, and Wyoming.)

Public aid. Even after the downfall of the national system of internal improvements, together with the failure of individual States to make such works a success, subordinate political units-counties, towns, cities, villages, etc.-extended aid to railway companies in a variety of ways, the most common among which were granting the right of way, making cash donations, purchasing bonds, or becoming stockholders, loaning the public credit, etc. Provisions relating to subscriptions to stock are found in 14, and to loaning of the public credit in 15 constitutions. (The former including the following States: Arkansas, Connecticut, Delaware, Florida, Idaho, Louisiana, Kentucky, Mississippi, Missouri, Oregon, Pennsylvania, Virginia, Washington, Wyoming; the latter, Connecticut, Florida, Maine, Mississippi, Nevada, New York, North Carolina-excepting a few specified casesOregon, Pennsylvania, Texas, Utah, Virginia, Washington, Wisconsin, Wyoming. Idaho breaks the monotony of this rule, in that it prohibits certain political units

« PreviousContinue »