DOW v. BEIDELMAN 125 U.S. 680 (1888)

[125 U.S. 680, 685]   [N.M. Rose, for plaintiffs in error. [125 U.S. 680, 686]   John H. Rogers, for defendant in error.

GRAY, J.

The general rule of law that governs this case has been clearly stated and developed in opinions of this court, delivered by the late chief justice. In Munn v. Illinois, 94 U.S. 113 , decided at October term, 1876, after affirming the doctrine that, by the common law, carriers or other persons exercising a public employment could not charge more than a reasonable compensation for their services, and that it is within the power of the legislature 'to declare what shall be a reasonable compensation for such services, or, perhaps more properly speaking, to fix a maximum beyond which any charge made would be unreasonable,' the chief justice said: 'To limit the rate of charges for services rendered in a public employment, or for the use of property in which the public has an interest, is only changing a regulation which existed before. It establishes no new principle in the law, but only gives a new effect to an old one.' Id. 133, 134. In Railroad Co. v. Iowa, Id. [125 U.S. 680, 687]   155, decided at the same time, a corporation having a perpetual lease of the railroad of another organized under the general corporation law of Iowa of 1851, c. 43, with the same powers as private individuals to make contracts, as well as the power to establish by-laws and make all rules and regulations deemed expedient for the management of its affairs, in accordance with law, was held to be bound by the subsequent statute of Iowa of 1874, c. 68, entitled 'An act to establish reasonable maximum rates of charges for transportation of freight and passengers on the different railroads of this state,' by which those railroads were classified according to the gross amount of their earnings per mile for the preceding year; and the compensation per mile, which those of each class might receive for the transportation of a passenger with ordinary baggage, was limited to three cents, three cents and a half, and four cents, respectively. Laws Iowa, 1874, p. 61. The chief justice said: 'Railroad companies are carriers for hire. They are incorporated as such, and given extraordinary powers, in order that they may better serve the public in that capacity. They are, therefore, engaged in a public employment, affecting the public interest, and, under the decision in Munn v. Illinois, 94 U.S. 113 , subject to legislative control as to their rates of fare and freight, unless protected by their charters.' 'This company, in the transactions of its business, has the same rights, and is subject to the same control, as private individuals under the same circumstances. It must carry when called upon to do so, and can charge only a reasonable sum for the carriage. In the absence of any legislative regulation upon the subject, the courts must decide for it, as they do for private persons, when controversies arise, what is reasonable. But when the legislature steps in, and prescribes a maximum of charge, it operates upon this corporation the same as it does upon individuals engaged in a similar business.' Id. 161, 162. The same rule was affirmed and acted on in several other cases decided at the same time, in the first of which the chief justice, in answering 'the claim that the courts must decide what is reasonable, and not the legislatr e,' said: 'Where [125 U.S. 680, 688]   property has been clothed with a public interest, the legislature may fix a limit to that which in law shall be reasonable for its use. This limits the courts, as well as the people. If it has been improperly fixed, the legislature, not the courts, must be appealed to for the change.' Peik v. Railway Co., Id. 164, 178; Railroad Co. v. Ackley, Id. 179; Railroad Co. v. Blake, Id. 180; Stone v. Wisconsin, Id. 181. Upon like grounds in Ruggles, v. Illinois, 108 U.S. 526 , 2 Sup. Ct. Rep. 832, and Railroad Co. v. Illinois, 108 U.S. 541 , 2 Sup. Ct. Rep. 839, (decided at October term, 1882,) the statute of Illinois of April 15, 1871, (Laws Ill. 1871, p. 640,) which classified the railroads in the state according to their gross annual earnings per mile, and put different limits on the compensation of the different classes per mile for carrying a passenger and his baggage, was adjudged, in opinions delivered by the chief justice, to be constitutional and valid, in restricting to the limit of three cents a mile existing corporations, whose charters gave them power to make all by- laws, rules, and regulations not repugnant to law, and gave their directors power to establish such rates of toll as they should by their by- laws determine. And two justices who did not assent to those opinions concurred in the judgments, because it was not shown that the rate prescribed by the legislature was unreasonable. In Stone v. Trust Co., 116 U.S. 307 , 6 Sup. Ct. Rep. 334, 388, 1191, decided at October term, 1885, the obligation of a contract, created by a charter granting similar powers to a railroad corporation and its directors, was held not to be impaired by a statute of Mississippi establishing a board of railroad commissioners charged with the duty of preventing the exaction of unreasonable or discriminating rates upon transportation done within the limits of the state; and the chief justice said: 'It is now settled in this court that a state has power to limit the amount of charges, by railroad companies for the transportation of persons and property within its own jurisdiction, unless restrained by some contract in the charter, or unless what is done amounts to a regulation of foreign or interstate [125 U.S. 680, 689]   commerce.' 116 U.S. 325 , 6 Sup. Ct. Rep. 342. He added, however: 'From what has thus been said, it is not to be inferred that this power of limitation or regulation is itself without limit. This power to regulate is not a power to destroy; and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freights, the state cannot require a railroad company to carry persons and property without reward; neither can it do that which in law amounts to a taking of private property for public use, without just compensation, or without due process of law.' 116 U.S. 331 , 6 Sup. Ct. Rep. 345. The opinions of the two dissenting justices were grounded upon the provisions of the charter, and upon its not having been expressly made subject to alteration or repeal by the legislature. The cases, decided at the same time, of Stone v. Illinois Cent. R. Co., 116 U.S. 347 , 6 Sup. Ct. Rep. 348, 388, 1191, and Stone v. New Orleans & N. E. R. Co., 116 U.S. 352 , 6 Sup. Ct. Rep. 349, 391, were substantially similar. As applied to freights and fares for transportation not extending beyond the limits of the state by which the railroad company is incorporated, the authority of the legislature is not affected by the later decision in Railway Co. v. Illinois, 118 U.S. 557 , 7 Sup. Ct. Rep. 4.

The case at bar is quite clear of any of the questions upon which the members of the court have heretofore differed in opinion. If the Memphis & Little Rock Railroad Company, as reorganized by the purchasers at the sale under the decree of foreclosure of the previous mortgages, was a lawful corporation of the state of Arkansas, it was not the same corporation as that chartered by the e gislature in 1853, but was a new corporation, subject to the provisions of the constitution and laws in force when it first came into existence, that is to say, in 1877. Railroad Co. v. Commissioners, 112 U.S. 609 , 5 Sup. Ct. Rep. 299. The constitution of Arkansas of 1874 contains the following provisions: 'Corporations may be formed under general laws, which laws may, from time to time, be altered or repealed. The general assembly shall have power to alter, revoke, or annul [125 U.S. 680, 690]   any charter of incorporation now existing and revocable at the adoption of this constitution, or that may be hereafter created, whenever, in their opinion, it may be injurious to the citizens of the state, in such manner, however, that no injustice shall be done to the corporators.' Article 12, 6. 'The general assembly shall pass laws to correct abuses and prevent unjust discrimination and excessive charges by railroad, canal, and turnpike companies, for transporting freight and passengers, and shall provide for enforcing such laws by adequate penalties and forfeitures.' Article 17, 10. The legislature of Arkansas, by the statute of April 4, 1887, fixed the maximum fare that any corporation, trustees, or persons, operating a line of railroad, might charge and collect for carrying a passenger within the state, at eight cents a mile on a line fifteen miles long or less, five cents a mile on a line more than fifteen and less than seventy-five miles long, and three cents a mile on a line more than seventy-five miles long. The line of the road of the plaintiffs in error is more than seventy-five miles long, and they charged more than three cents a mile, and were therefore held to be subject to the penalty imposed by the statute for any violation of its provisions.

The plaintiffs in error do not contend that it is always or generally unreasonable to restrict the rate for carrying each passenger to three cents a mile. They argue that it is so in this case, by reason of the admitted fact that with the same traffic that their road has now, and charging for transportation at the rate of three cents per mile, the net yearly income will pay less than 1 1/2 per cent. on the original cost of the road, and only a little more than 2 per cent. on the amount of its bonded debt. But there is no evidence whatever as to how much money the bonds cost, or as to the amount of the capital stock of the corporation as reorganized, or as to the sum paid for the road by that corporation or its trustees. It certainly cannot be presumed that the price paid at the sale under the decree of foreclosure equaled the original cost of the road, or the amount of outstanding bonded bebt. Without any proof of the sum invested by the reorganized corporation or its trustees, the court has no means, if [125 U.S. 680, 691]   it would under any circumstances have the power, of determining that the rate of three cents a mile, fixed by the legislature, is unreasonable. Still less does it appear that there has been any such confiscation as amounts to a taking of property without due process of law.

It is equally clear that the plaintiffs in error have not been denied the equal protection of the laws. The legislature, in the exercise of its power of regulating fares and freights, may classify the railroads according to the amount of the business which they have done or appear likely to do. Whether the classification shall be according to the amount of passengers and freight carried, or of gross or net earnings, during a previous year, or according to the simpler and more constant test of the length of the line of the railroad, is a matter within the discretion of the legislature. If the same rule is applied to all railroads of the same class, there is no violation of the constitutional provision securing to all the equal protection of the laws. A similar question was presented and decided in Railroad Co. v. Iowa, above cited. It was there objected that a statute regulating the rate for the carriage of passengers, by differet classes of railroads, according to their gross earnings per mile, was in conflict with article 1, 4, of the constitution of Iowa, which provides that 'all laws of a general nature shall have a uniform operation,' and 'the general assembly shall not grant to any citizen, or class of citizens, privileges or immunities which, upon the same terms, shall not equally belong to all citizens.' In answering that objection, the chief justice said: 'The statute divides the railroads of the state into classes, according to business, and establishes a maximum of rates for each of the classes. It operates uniformly on each class, and this is all the constitution requires.' 'It is very clear that a uniform rate of charges for all railroad companies in the state might operate unjustly upon some. It was proper, therefore, to provilde in some way for an adaptation of the rates to the circumstances of the different roads; and the general assembly, in the exercise of its legislative discretion, has seen fit to do this by a system [125 U.S. 680, 692]   of classification. Whether this was the best that could have been done is not for us to decide. Our province is only to determine whether it could be done at all, and under any circumstances. If it could, the legislature must decide for itself, subject to no control from us, whether the common good requires that it should be done.' 94 U.S. 163 , 164. Judgment affirmed.

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Footnotes

[ Footnote 1 ] Affirming 5 S.W. Rep. 297.[ Dow v. Beidelman 125 U.S. 680 (1888) ]