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PART IV.-PRESENT GENERAL RAILWAY LEGISLATION.
Terms applicable to later charters. In a technical sense the term "charter" can scarcely be applied to the instruments issued to railway corporations under contemporary general laws. The word charter, through long usage, has come to signify a special grant of authority and power. In the constitutions of 21 States, as was noticed in the preceding section, the incorporation of railway companies under special or local acts is prohibited; in other States this prohibition is found in general laws; and in some States in both the constitution and in the general laws. The statutes of South Carolina mention the organization of railway companies "under charters," and in the Kansas statutes the term charter is also used. But these are exceptions. Terms like "articles of association," "certificate of incorporation," "articles of incorporation," "articles of agreement," and "letters patent" have come into use, and carry with them the significance of earlier special charters. Articles, certificates, etc., are charters only in a loose and general sense, because the contents of the franchise itself are expressed in the general law relating to railways and the constitutional limitations under which these have been exacted. The grant of a charter involves a distinct legislative act, authorizing the company receiving the same to exercise, in a measure, the rights of sovereignty, and to do the things for which the organization was accomplished. A certificate of incorporation, on the other hand, is issued in pursuance of law by administrative and not by direct legislative authority. Formerly a separate act of the legislature was necessary. Under general laws an administrative act for each such grant of power is all that is requisite for the organization of a railway company. To be sure, there is a very direct connection between the earlier charters and the later general laws, for many of the latter embody not only the essential features of the former, but frequently they are expressed in similar and even identical language. The change of name from article or certificate did not carry with it any radical change in the nature of the franchise. In this respect there exists continuity of development. The greatest change brought about by the transition from special charters to incorporation under general laws consisted in uniformity. Almost infinite variety in charter provisions was common during the earlier period of special legislation. Under general laws, even when compliance therewith was not enforced or enforceable, a certain degree of uniformity was brought about from the very first.
Conditions under which railway companies may be organized.—There are, however, features of railway legislation in the United States which reveal many elements of uniformity as to the conditions under which railway companies may be organized; and yet, after admitting this much, we are compelled to recognize the fact that railway laws are very far from being uniform, and that numerous variations and differences are noticeable.
The number of persons who may associate themselves for the purpose of incorporating railway companies varies from two or more in Washington to any number in Iowa. Between these extremes there exist 10 different numerical groups which may effect an organization: Three or more in Florida, Oregon, Montana, and Wyoming; 5 or more in Illinois, Indiana, Kansas, Nebraska, Wisconsin, Montana, etc.; 6 in Louisiana; 7 in Michigan, Kentucky, Alabama, New Jersey (for roads less than 10 miles in length); 10 in Maine, Georgia, Arkansas, Texas, etc.; 13 in New Jersey (for roads more than 10 miles in length); 15 in New York, Indiana, etc.; 20 in Vermont; 25 in Massachusetts, New Hampshire, etc. These numbers, or more, may in some States be composed of any persons whatsoever; in others, a certain proportion must be citizens; and, in a few, all of them must be citizens. Certain restrictions are occasionally made with respect to residence, both on the part of the stockholders and on the part of the board of directors and officers. The object of restrictive provisions relating to residence was evidently
to prevent the projected road from being controlled by "foreign influence." During the early history of railways in the United States the possibility of foreign control, on the assumption that such control would result in the neglect of local interests, was used as a weapon to encourage local subscriptions to the stock of railway companies.
Contents of the articles.-The nature of the contents of the articles of association, or certificates of incorporation, can best be indicated by presenting the salient features of such articles in a few of the leading States, which may be considered typical of analogous provisions from the laws of other States-understanding by the term "typical" not identity, but essential similarity, leaving room for modifications of one kind or another in particular cases.
The law of Illinois requires a statement of the name of the corporation to be organized, the States from and to which the railway is to be constructed, the location of the principal offices, the time of beginning and completing construction of the railway, the amount of capital stock and the number and size of the shares, the names and residences of the persons who contemplate effecting an organization, and the names of the first board of directors.
According to the statutes of Maine, the articles must contain the name of the corporation and the gauge of the projected railway, the names of the places from and to which the same is to be constructed, the amount of the capital stock, which shall be not less than $3,000 per mile for narrow-gauge and $6,000 for standardgauge railways, the number of shares of stock, and the names and residences of 5 directors. Since, on this point, the laws of Maine (General Laws, 1899, p. 117, Sec. I) are in many respects much better than those of most of the States, a full quotation is here inserted:
"Said directors shall present to the board of railroad commissioners a petition for the privilege of said articles of association, accompanied with a map of the proposed road, on a proper scale. The board of railroad commissioners shall, on presentation of such petition, appoint a day for a hearing thereon, and the petitioners shall give such notice thereof as the said board deems reasonable and proper. in order that all persons interested may have an opportunity to appear and be heard therein. If the board of directors, after notice and hearing parties, finds that all the provisions (of law) have been complied with and that public convenience requires the construction of said railroad, said board shall indorse upon said articles a certificate of such facts and the approval of the board, in writing. The secretary of state shall, upon payment of $20 to the State, cause the same, with the indorsement thereon, to be recorded, and shall issue a certificate in the following form."
Then follows the prescribed form of certificate, with the contents indicated above.
The laws of Arkansas, for 1899, created a State board of railroad incorporation, composed of the governor, who acts as chairman, the attorney-general, auditor, secretary of state, treasurer, and commissioner of State lands. This board hears all applications for certificates of incorporation, and on its recommendation such certificates may be filed with the secretary of state, and thus legally empower an organization to construct a railway under the terms of the general laws of the State. Ten or more persons may organize, elect a board of directors, and subscribe to the articles of association when $2,000 per mile has been subscribed and 5 per cent of the subscriptions paid to the board of directors, a majority of which must be citizens of the State.
The laws of California require the articles of incorporation to state the name of the projected corporation; the purpose for which it is to be organized; the places from and to which the railway is to be constructed, as well as all intermediate branches; the estimated length of the road; the amount of the capital stock, $1,000 per mile of which must be subscribed before the articles can be filed, and 10 per cent actually paid in. The number of directors varies from 5 to 11. but 5 of them must be residents of the State. The sale of railway franchises and municipalities must be advertised, and the franchise given to the highest bidder. Massachusetts.-The articles must contain the name, route, gauge, capital stock, and other common items. In case of standard-gauge railways $10.000 per mile must have been subscribed and for narrow gauge $3,000. The amount of the capital stock depends upon the detailed estimate of costs. No increase in capital stock can be made without the authority of the railway commission, before whom a hearing must previously have been given, upon which such increase or refusal to permit such increase is determined. The articles and certificate must be filed with the secretary of state. All petitions (compare the laws of Maine) for such charters must be accompanied by a map upon a proper scale, showing in detail the entire route of the road. A "certificate of public exigency" is also required
before a charter can be granted. The railway commission, upon due notice, must give a hearing to all persons interested in the projected railway, and not until such persons have been given an opportunity to be heard and all the other provisions of the law complied with can a charter be granted. It will be noticed that the Massachusetts law still provides for the granting of special charters, although these special grants are surrounded by wholesome and what appear to be entirely adequate provisions and safeguards.
Michigan.-Although a law of 1891 of this State declared every railway company operating within the limits of the State" to be in all respects subject to the general laws of the State respecting railroads, as now existing or as hereafter amended," a conflict between such charter provisions and general law provisions is still possible, as has already been indicated in another connection. Consequently, in 1889, there was created in this State a commission-composed of the commissioner of railroads, the State treasurer, and the secretary of state-whose duty it is to negotiate with railway companies operating under special charter, to determine upon what terms such railway companies will surrender their charter rights. For this purpose the commission is given authority to inquire into the business of railways, to secure the necessary information by subpœnaing witnesses, etc.
Georgia. In addition to the usual provisions of the articles of incorporation the laws of Georgia provide for a petition which must be presented at least 4 weeks before a charter can be secured. Companies may amend their charters by adopting the general railway laws of the State.
Significance of certificates and articles.-These articles and certificates empower railway companies to make examinations and surveys for the proposed railway, in order to select the most advantageous route; to purchase, receive, and hold an amount of real estate necessary for the construction, maintenance, and operation of the road; to own other kinds of property essential to railway business; to have perpetual succession, or succession for a certain period of time; to have the power to sue and to be sued; to establish connections with other railways; to charge or to receive such remuneration for their services as from time to time may seem reasonable; and, in general, to enjoy those rights, privileges, and immunities which the law guarantees to all similar corporations, and which are essential in carrying out the legitimate aims and purposes of the corporation. The completeness with which the powers and duties of railway corporations are prescribed in different laws vary somewhat, yet there exists, perhaps, greater similarity and more completeness in this respect than in any other subject of railway legislation. In some States corporate powers of railway companies are enumerated in separate laws; and, in others, all the leading features of legal provisions relating to railways are expressed in the commission laws. It is unnecessary to enumerate in the lengthy phraseology of the law books the detailed rights and privileges of railway companies, for they are the same as those enjoyed by corporations in general, and are not essential to a consideration of the degree of regulation and control which is possible under the existing railway laws of the different States of the Union.
The provisions of the few articles which have been presented above are sufficient to show that there exist differences among the States with respect to the time limits within which railways may be constructed; the amount of capital stock, and the subscriptions thereon per mile of railway; the degree of publicity given to the applications for charters, and other things. A fee for filing certificates is charged in a number of States. For instance, in North Carolina $250 must be paid before a bill can be introduced to incorporate or amend. In Maine, a fee of $20 is exacted; and similar fees are charged in Wisconsin, Washington, and other States. The laws are weak in the financial requirements which they exact of railway companies. It would seem that some definite proportion should exist between the amount of the capital stock and the length and characteristics of the projected road; but such is not generally the case. Idaho and Indiana require a subscription of $1,000 per mile; Kentucky, $250 per mile, of which 20 per cent must be paid in cash; Arkansas, $2,000 per mile; Maryland, 10 per cent payment on shares; Virginia, a payment of $2 per share when subscriptions are made; New Jersey, $10,000 per mile, and a deposit of $2,000 per mile when the articles of association are filed, which latter sum, however, is returned to the board of directors when the road is completed. This is sufficient to show existing variations.
Corporate life and reserved rights of the State.-While many of the early charters and general laws were unrestricted in their nature, it was not long before a reaction against this lack of restraint set in, and regulating features, more or less adequate in their nature, were introduced in charters and certificates. Many such charters contained in one of their concluding sections the proviso that the
charter in question should be considered a public act and, as such, to be construed favorably for the purposes for which the company was organized. Both in England and the United States, however, it has been held that the mere insertion of such a clause does not make a special or private law a public act, and that unless a charter is public by the nature of its contents it will be construed as a special act when passed with reference to a particular company organized to construct a certain road. The public importance of railways and the vital connection between them and the social and economic interests of the States, frequently led legislators into a good deal of indulgence, especially during the early period of railway development. The limitations of charter rights had not yet been established; and it was not uncommon for incorporators to maintain that the rights and privileges granted by their charter were absolute and unrestricted. Not until the advent of Granger legislation, culminating in the leading case of Munn v. Illinois, had the right of the State to interfere in the management of railways incorporated under special charters been established; and at the present time nearly twothirds of the States have statutory provisions reserving to the respective States the right to alter, amend, or repeal the franchise of any corporation, whether organized under special or general law. Reference to Part III, on constitutional provisions, will show similar limitations placed upon franchises by State constitutions.
The nature of the reserved rights of the States and the limitations placed upon the corporate life of railway companies are illustrated by provisions in several States here inserted:
Maine. The laws of Maine provide that "no corporation can assign its charter or any rights under it; lease or grant the lease or control of its right or any part of it, or divest itself thereof, without consent of the legislature." In addition, all corporations, whether organized under special or general laws, shall be subject to general laws. In Maine and Massachusetts the State may amend or repeal the charter, or the Commonwealth may purchase railways on 1 year's notice, after 20 years' corporate existence.
Michigan.-Legislation in Michigan on this point has already been indicated. Illinois.-In Illinois charters are granted for 50 years, with the privilege of renewal for the same length of time; and a law of 1895 reserves to the legislature power to enact laws on all the leading topics relating to corporate existence.
Iowa.-In Iowa companies may likewise be chartered for 50 years, with the privilege of renewal for as many more, and they shall eventually be subject to legislative control. The legislature may alter, abridge, set aside the charter, or impose new conditions which it deems necessary for the public good.
Kansas.-Special charters which do not designate the period of corporate life continue 99 years. The legislature has power to extend the charter period as it may deem proper.
Wisconsin. The legislature of Wisconsin expressly reserves the power to pass laws relating to reasonable maximum rates, the correction of abuses, unjust discrimination, and for the protection of the just rights of the public. Corporations, however, under the laws of this State "shall continue perpetually."
North Carolina.-Sixty years, unless otherwise provided for in the act creating the same, is the corporate life under the laws of North Carolina.
Louisiana. This State limits the corporate existence to 99 years.
Texas.-In Texas a charter is forfeited if 10 miles of the proposed road are not put into running order within 2 years, and 20 miles during every year thereafter until the road is completed. Charters may be granted for a period of 50 years, with the privilege of renewal for an equal number of years.
Maryland and Rhode Island illustrate an entirely different type of statutory provision:
Rhode Island. The laws of Rhode Island prescribe a course of procedure which appears to be entirely in harmony with the needs of our growing railway and industrial systems. In that State the general law alters special charters whenever the latter are found to be inconsistent with the former.
Maryland.-Exactly the opposite is true in Maryland, where the adoption of the "general code" is not to affect the rights and privileges granted by special charters.
Provisions found in the laws of all the other States dealing with this subject at all, do not contain anything not found in what has here been presented.1
1States having statutory or constitutional provisions, or both, directly reserving to those States the power to alter, repeal, or amend charters, are the following: Arkansas, California, Colorado, Indiana, Iowa, Kansas, Massachusetts, Michigan, Mississippi, Montana, New Hampshire, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Virginia, Washington, West Virginia, Wisconsin.
Determination of route.-Under early railway methods the route was very indefinitely indicated, the best of all descriptions being frequently contained in that clause in the charter naming the termini of the road; and it will be remembered that not all of the termini were mentioned in some charters, but that merely certain zones thought to contain "eligible points were loosely indicated. In other charters not only the termini but one or more important intermediate points were designated; in but very few, often insignificant, charters was the entire route described with sufficient definiteness to enable one to tell beforehand exactly where the railway would be constructed. The course of a railway is a matter in which the public has an interest. The manner in which the right of eminent domain has been exercised has depended very greatly upon the extent of the public interest in the railway in question. Before the charter was granted to the Liverpool and Manchester Railway-known to all the world as the first important modern railway-every piece of land to be crossed by the proposed railway had to be described and the exact location of the entire line definitely determined before the charter was granted. Such a mode of procedure had been practically unknown in the United States until more recent times. Even at the present time great competing systems quietly send out their surveyors to gain an advantage in entering new sections or in constructing lines which will shorten the route between important competitive points. It is not uncommon to have one railway build, section by section, year after year, until finally the design, which must from the first have directed the movements of the constructors, dawns upon the public mind and the real significance of what appeared to be perhaps the construction of a subordinate branch becomes apparent. This may or may not be desirable; that is immaterial. The fact, however, remains that important public interests are affected by just such movements, and every interest which is thus liable to be affected should have an opportunity to be heard before such important industrial operations are undertaken. No State in the Union has legislated in this respect with greater care and completeness than Massachusetts. The laws of that State provide that the termini, together with the names of the cities and towns through which the projected road or branch is to run, are to be given with as much certainty as the nature of the case will admit. The articles of association of the company fostering the project must be published in each county once a week for a period of three weeks; and the map of the proposed route, together with the report, must be submitted to the mayor, aldermen, and selectmen of the different municipalities affected, Public hearings, after due notice to all persons interested, are also provided for.
In Maine the railroad commissioners must approve the location of the railway before construction is begun. Extensions of existing lines may be built on application to and approval of the commission. Frequently the more remote States are less restrictive in such matters; but the laws of Arkansas make it obligatory for the company to file the map with the county clerk of every county through which the proposed railway is to be run, for the inspection of all persons interested. The location having once been established, no modifications in the line, exceeding a certain distance, are permitted, and a map of the road, together with such modifications, must be filed with the secretary of state. One of the most important provisions bearing upon this question is found in a recent law (1899) of Tennessee, which prohibits one railway company from holding exclusive possession of a narrow pass, thus preventing another railway company from laying its tracks through the same. If the pass is so narrow that only one track can be laid, joint use of the same is made mandatory upon the road which has built through it. No point named in the articles of incorporation can be avoided under the laws of California. A map of the road must be filed with the secretary of state after location. Changes in the line must also be filed. In Connecticut a map of an approved route must be filed with the town clerks on a prescribed scale; and, after construction, the lineament of the road can be changed only by permission of the board of commissioners. Florida charters must state the place from which and to which the road is to be constructed; its length, and the name of each county through which it runs. However, the direction of the road may be changed by a vote of two-thirds of the directors. Similar provisions are found in the laws of Georgia.
In a number of States maps are not required to be filed until after construction has begun or is completed, or within a year after the road has been finished. In Indiana, on the other hand, a map must be filed with the county clerk in every county named in the articles of association before construction can begin. If necessary, the route may be changed, but no place named in the articles is to be avoided. Kansas also requires the filing of a map with county clerks before construction; and the road bed may be changed, but not the general route. The map, approved by the president and secretary of the railway company, the attor