Stone v. Yazoo & Mississippi Valley Railroad
J. M. Stone, Railroad Commissioners v. Yazoo and Mississippi Valley Railroad Company
Syllabus
Summary
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Opinion of the Court
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Campbell, C. J.,
delivered the opinion of the court.
It is claimed that the act creating the railroad commission is a violation of Art. 1, § 8, of the Constitution of the United States, which vests in Congress power “ to regulate commerce * * * among the several States,” because the railroad of the appellee connects at Jackson, Mississippi, with the railroad system of the country and at Yazoo City with the waterways, and its inter-State and local commerce and interests are inseparable without ruin. The question thus presented is, How far is the State disabled by the constitutional provision quoted from governing railroads within its limits as to fares and freights ?
There is no denial of the power of Congress “ to regulate commerce * * * among the several States,” for that is plainly conferred; but what is it to regulate commerce ? Prescribing rates of compensation for service rendered by a railway company does not appear to us to be regulating commerce. The right to compensation is an essential attribute of such a corporation. It is the power to exist. Prescribing rates is providing for the existence of the artificial being. It is breathing into it the breath of life, that it may become a living being. The power to do this belongs to the sovereignty that may create corporations and shape their being and define their functions. It must be the State. Its power to create corporations for the various purposes of business and commerce has been uniformly exercised and never questioned. If it may create such corporations it may determine their attributes and prescribe what they may charge for services rendered, as well as the other conditions of their existence. This belongs to the sovereignty of the State and is essential to the regulation of its internal police, and has not been surrendered to Congress. People v. Babcock, 11 Wend. 587 ; Freeholders v. The State, 4 Zabriskie *634 718. It is the sovereign, power to govern the institutions of the State, and is not regulating commerce. It would seem to belong to the State alone, whose creature the corporation is, and whose right to shape its being, in this essential attribute, pertains to it because it is its creature; and such we understand to be the doctrine of the Supreme Court of the United States as announced in Railroad Co. v. Maryland, 21 Wall. 456 , and other decisions.
The principle supporting the decision in Railroad Co. v. Maryland is the right of a State, as a sovereign, to regulate and control the rate of transportation over its creature, the railroad built under a charter by the State. It is recognized by the opinion of the court that, in the very nature of things, the State must have control of rates over highways of its own creation, even though to exercise this power involves, consequentially, an imposition on persons and property carried from State to' State. The railroad extended from Baltimore to Washington, and the State required payment to it of a fixed portion of all money derived by the company from carrying passengers from Baltimore to Washington City, and the question was whether this exaction by the State in the charter of the company was “ a restriction of free intercourse and traffic between the different States,” and it was declared not to be. such. The plain assumption was that, unless the provision in the charter was a restriction of free intercourse and traffic, it was clearly within the legitimate power of the State. It was said by the court “that the power to charge for transportation and the amount of the charge are absolutely within the control of the State;” and “ this unlimited right of the State to charge or authorize others 'to charge toll, freight, or fare for transportation on its roads, canals, and railroads arises from the simple fact that they are its own works or constructed under its authority. It gives them being. It has a right to exact compensation for their use. It has a discretion as to the amount of that compensation.” Attention was called by the opinion to the fact that when the constitution was adopted transportation on land was performed entirely on common roads and in vehicles drawn by animal power, and that “ no one at that day imagined that the roads and bridges (except *635 when the latter crossed navigable streams) were not entirely subject, both as to their construction, repair, and mánagement, to State regulation and control. They were all made either by the States or under their authority. The power of the State to impose or authorize such tolls as it saw fit was unquestioned. No one then supposed that the wagons of the country, which were the vehicles .of this commerce, or the horses by which they were drawn, were subject to national regulation. The movement of persons and merchandise, so long as it was as free to one person as to another, to the citizens of other States as to the citizens of the State in .which it was performed, was not regarded as unconstitutionally restricted and trammeled by tolls exacted on bridges or turnpikes, whether belonging to the State or to private persons.”
There is far more reason for denying authority to the State and claiming it for Congress as to the common roads which cross State lines than as to railroads. They are much more numerous than railroads. Their freedom from restriction is more important as affecting commerce on the borders of States than the freedom of railroads.
So in Hall v. DeCuir, 95 U. S. 485 , the statute of Louisiana requiring common carriers of passengers to give all persons traveling in that State, upon the public conveyances employed in such business, equal rights and privileges in all parts of the conveyance without distinction or discrimination oh. account of race or color was held to be a regulation of commerce and void, even within the State, so far as it affected vessels plying the waters of the Mississippi River between different States. The reason was the steamboat was enrolled and licensed under the laws of the United States and engaged as a regular packet between different States upon the navigable waters of the United States. The vessel was in a sense an institution of the United States, deriving its right to pursue its business from the United States and navigating the national highway common to all, and not the property of private persons or deriving its existence from a State. As Congress had regulated the business by providing for licensing vessels and leaving the license free and untrammeled as to the accommodations of passengers, and as by the common law it pertains to the business of a *636 common carrier to make reasonable and suitable regulations as regards passengers, it was held that Louisiana had no right to add a requirement not imposed by Congress, which in regulating the matter had left the common law in force as to this. As it belonged to Congress to legislate on this matter and it had done so, the action of the State was unauthorized and void wherein it added to the requirements of Congress. Under the acts of Congress and the common law with reference to which they were enacted, the licensed carrier might adopt its own reasonable regulations for the accommodation of passengers. The statute of Louisiana abridged this right and hindered its free exercise. It violated the privilege of a grantee of the United States, and, therefore, was declared to be of no effect.
This seems to us the true foundation of that decision. It was said by the chief justice, in delivering the opinion, that “State legislation which seeks to impose a direct burden upon inter-State commerce or to interfere directly with its freedom does encroach upon the exclusive power of Congress.” We adopt this view, and hold that even in prescribing rates of compensation, which pertains exclusively to the State authority, as we believe, if a direct burden was laid upon inter-State commerce or a direct interference with its freedom was attempted, it would necessarily fail because of the absence of power in a State, in view of the Constitution of the United States, to obstruct the freedom of commerce among the States.
Our view is that the State may regulate rates, but cannot in the exercise of this power obstruct the freedom of commerce among the several States. In the opinion cited a distinction is drawn between acting “ upon the business through the local instruments to be employed after coming within the State ” and acting “ directly upon the business as it comes into the State from without and goes out from within.” This seems to be a full recognition of the distinction we have endeavored to draw between the local instruments of commerce existing by authority of a State and within its limits, and the commerce which may be carried on over them. Grant that wherever commerce goes, whether by land or on water, the power of Congress goes to secure its freedom from hindrance or *637 discrimination by State authority, and it still remains true that the local instrument and vehicle of commerce, deriving its being from the authority of the State, is subject to its regulation in the essential attribute of earning a support and continuing to perform its functions and accomplish the end of its creation, and that the only limitation of the power of the State, with reference to commerce among the States, is to abstain from any obstruction of its freedom or any burden upon it.
It may be conceded that a State law requiring railway companies to give equal accommodations on cars going from State to State to all passengers would fall under the condemnation of the decision in Hall v. DeCuir , and it would not follow that State regulation of compensation for service must be denied, for there is a wide difference between the exercise of the right to live and act and those collateral matters which do not relate to the very existence of a being, but to its mere convenience.
Congress has not regulated railroads. They do not owe their existence to Congress. They do not operate by its license. They are State institutions and subject to State authority, in subordination to the constitutional inhibition of any restriction by the States of the freedom of commerce among the several States; not absolute freedom, but such freedom as makes no distinction between the rights of persons and things because of locality. The constitutional provision being considered was designed to prevent each State from legislating with reference to its own interest regardless of the interests of others. It should be so construed as to accomplish this end, and should be limited to that.
Pensacola Telegraph Co. v. West, 96 U. S. 1 , was decided on the principle that a State may not obstruct or unnecessarily encumber an instrumentality of commerce and of government authorized by it.
In Lord v. Steamship Co., 102 U. S. 541 , the act of Congress limiting the liability of the owner of any vessel navigating the high seas between ports of the same State in certain cases specified in the act was upheld as a valid exercise of the power of Congress to regulate commerce.
In delivering the opinion, the chief justice lays stress on the fact *638 that the vessel, on her voyages between the ports of the State, entered on a navigation which was necessarily connected with other nations, because she went out of California and the United States and upon the ocean, the common property of all nations.
What analogy is there between a vessel navigating the ocean and a railroad situate wholly within a State, but connecting at the State line' with a railroad in another State ? Does it arise from the fact that these connecting roads afford a track for trains of cars to be drawn from State to State ? While the train is in one State it is subject to its jurisdiction. The instant the State boundary is crossed the jurisdiction of another State attaches. The right of each State to govern -within its limits must be upheld. This right to govern is limited only by the Constitution of the State and of the United States. The contention now being examined is that government by the State within its limits of such railroads is denied because Congress has power to regulate commerce among the several States. The reply is that the local instrument or vehicle of commerce existing in the State by its authority, including the trains while in the State, are subject to all such regulations adopted by the State for their government as are not, in their nature and effect, an imposition upon or a hindrance of free intercourse and traffic between the States. The State cannot, in regulating rates or in any other manner, discriminate against persons or products of other States or countries, but it may govern all within its limits impartially and justly. In the State, cars and -cargo and passengers are amenable to its laws, although they will soon become subject to the laws of another State which possesses like power of control over them, subject to the constitutional restriction against burdening or hindering commerce. Any unauthorized restriction would fall by the silent operation of the Constitution of the United States, made effective through the courts; and it may be admitted that Congress could lawfully legislate on this matter to the extent necessary in its judgment to smooth the way of commerce carried on over railroads from State to State, as many contend,- and still it would not follow that Congress can fix the rates of compensation, for carriage in. a State..
*639 In Telegraph Co. v. Texas, 105 U. S. 460 , it was decided that the business of a railroad or telegraph company “ is commerce itself,” and that a tax by the State for each message sent was unlawful as an imposition on messages sent beyond the State, but that is a widely different question from that of the right of a State to deal with the earning capacity of individuals or corporations.
Commerce among the different States must be free — not free from the cost of service, not to go without paying its way, but free from impositions on it the necessary effect of which is to hinder it.
In Munn v. Illinois, 94 U. S. 113 , it was decided that the regulation of warehouses for the storage of grain, owned by private individuals and situated in Illinois, although “ used as instruments by those engaged in State as well as those engaged in inter-State commerce,” was a thing of domestic concern and pertained to the State. The warehouses were declared to be no more a part of commerce itself than the dray or the cart by which, but for them, grain would be transferred from one railroad station to another. This utterance was as to the effect of the power of Congress to regulate commerce; and it is observable that the distinguished judge who delivered a dissenting opinion in that case did not place his dissent on the ground that Congress had the power to regulate the storage of grain in the warehouses. This decision affirms the right of the State to regulate the business of one engaged in a' public employment in that State, although that business consisted in storing and transferring immense quantities of grain in its transit from the fields of production to the markets of the world.
The regulation of a public employment conducted in a State by natural persons belongs to the State in whose jurisdiction they are. There can be no distinction between natural and artificial persons except this: Natural persons possess rights not conferred by the State, while corporations depend on the act of their creation for their rights and powers. They must exist and act as made by the authority which brings them into being. The State, being the creator of a corporation, must determine its attributes and functions, and it must, from the .necessity of the case, act in obedience ho the law of its being.
*640 The State may not invade the domain of Congress and regulate commerce among the several States in creating corporations any more than in any other way, but as it is for the State to create corporations, and as they cannot live without earning money, the power to earn it and the limit of their right in this respect must be subject to the regulation of the authority of the State, because it is not regulating commerce. It is incidentally or consequentially affecting it, perhaps, but to deal with the local instrument of commerce in a manner vital to its existence is not regulating commerce in the sense of the constitution. It is providing for the véry being of the corporation, just as the State protects the natural person in the enjoyment of all his rights.
Congress has supreme, and it may be conceded exclusive, power over commerce among the several States, and any attempt of the State to regulate this commerce or to fetter or burden or restrict it in any way is unconstitutional, but it is not everything which may incidentally or consequentially affect this commerce which is to be held void. A regulation of inter-State commerce as such is prohibited, but power may be legitimately exercised by the States in many ways over the instruments of commerce among the States and not be justly condemned.
So long as there is no discrimination against persons and things •carried across State lines, or attempt to so regulate such movement as to affect it because it is across the State boundary, it cannot be said that there is an unwarranted interference with commerce among the States.
The railroad commission is not a restriction or hindrance of the freedom of commerce, but is intended to facilitate it and smooth its way by removing hindrances. The fear is professed that the commission will cripple or destroy the instruments of commerce. If there is danger of this, that cannot make any difference, so far as relates to the question now being discussed, because the creator may at pleasure destroy the work of its own power unquestioned as to the right to do it.
In Peik v. Railway Co., 94 U. S. 164 , it was held that the legislature of the State of Wisconsin had the power to prescribe *641 a maximum of charges to be made by a railroad company, whose road was connected by means of a bridge and a consolidation of companies with a railroad in another State, for transporting persons or property within the State, or taken up outside the State and brought within it, or taken up inside the State and carried without. The right of the State was put on the ground of the absence of action by Congress on the subject, and because of this it was said the State could provide for the people within the State, even though it might indirectly affect those without. Of course, this reasoning implies the existence of power in Congress to regulate charges, which we question.
Congress has not attempted to regulate the charges to be made by railroad companies, and if the right of the State to act with reference to fares and freights carried across the boundaries of the State depends on the absence of congressional action, the right of the State must be upheld.
The authoritative declaration is that the power to regulate commerce among the several States is exclusively in Congress and denied to the States in all those cases where, from the nature of the subject, uniformity of regulation is required, and that as to these subjects the absence of congressional legislation is equivalent to a declaration that there shall not be any regulation, and any State legislation in such cases must fall before the silent but efficient power of the constitution.
We think that regulating rates for the transportation of persons and property does not fall within the class of matters requiring or admitting of uniformity. Perhaps no subject admits of and demands greater diversity with varying localities and circumstances justly affecting the value of service.
If a State should build and operate a railroad connected with the railway system and navigable waters of the country for revenue, might Congress prescribe charges over it for persons and things en route beyond the limits of the State ? May Congress regulate tolls and charges on the Erie Canal, connecting the navigable waters of the lakes with those in the East ?
Section 6 of the charter of the appellee confers on the company *642 power to fix from time to time by its board of directors tbe rates at which it will transport persons or property over its railroads, provided they shall not exceed a maximum specified in the act.
The power to contract is an essential attribute of sovereignty and is of prime importance. Its exercise has been productive of incalculable benefits to society, however great may be the evils incident to its injudicious employment. It cannot be denied merely because of its liability to abuse. The power to contract implies the power to make a valid contract. Chartering railroad companies and other similar associations has long been an acknowledged and a favorite exercise of legislative authority. The right to grant charters includes the right to grant such as will be upheld. Conferring power on the grantee of the franchise to fix rates of compensation at discretion, or within prescribed limits fixed by the charter, has been the common practice of the legislatures of the States of the United States from an early period of their history. The right of the corporators to exercise the powers conferred by the act of incorporation, whether to fix rates themselves or to take those fixed by their charter, and to rest securely on its provisions in this respect, has hitherto been generally regarded as indisputable.
A grant in general terms of authority, to fix rates is not a renunciation of the right of legislative control so as to secure reasonable rates. Such a grant evinces merely a purpose to confer power to exact compensation which shall be just and reasonable.
It is only where there is an unmistakable manifestation of a purpose to place the unrestricted right in the corporation to determine rates of compensation that the power of the legislature afterward to interfere can be denied. It is not to be presumed that the right of legislative control was intended to be renounced. Every presumption is against that. If the grant can be interpreted without ascribing to the legislature an intent to part with any power it will be done. Only what is plainly parted with is gone. Fixing rates in a charter is a specification of what is reasonable — an exclusion of tacit or implied conditions on the subject. It is an essential part of the contract of incorporation, the most important condition of its existence, the inducing cause of its acceptance.
*643 That it was the legislative intent to vest in the appellee the unrestricted right to fix rates within the limits prescribed by the charter is clear; that this was a valid contract by the State, obligatory and inviolable by it, we regard as settled authoritatively by Federal and State decisions too numerous for citation.
If anything is or ever can be settled in American constitutional law, the sanctity and inviolability of a contract between a State and individuals in the shape of a charter for a business enterprise, accepted and acted on by the corporators on the faith of its terms and provisions, must be so regarded.
The appellee has the unquestionable right from time to time, by its board of directors, to fix the rates at which it will transport over its railroads, provided those rates shall not exceed the maximum prescribed by the charter. That is the contract. These terms were expressly made. On the faith of them capital was invested and the enterprise set on foot. It is not allowable now for one of the contracting parties to interfere with the exercise by the other of its plainly granted rights. They are secured beyond the reach of legislation and cannot be impaired. The State cannot, by an act of its legislature, abdicate the right to govern artificial as well as natural persons, but it may create corporations, and where they are not a part of the machinery of government, the franchise cannot be resumed by the legislature or its benefits be essentially impaired without the consent óf the grantee. To hold otherwise would be revolutionary and disturb the foundations of society as molded by the judicial utterances of half a century of constitutional government in America.
While the rates at which the appellee will transport over its roads, not exceeding what is stipulated for in the charter, is for the determination of the appellee and not subject to the control within the chartered limits of the State, it is indisputable that the State may create a commission or board by any name to see that the creature of the State keeps within its charter limits and violates •none of its obligations as a common carrier. : Whatever the charter rights of the appellee, there are many police regulations the State may lawfully adopt, and it may commit their enforce *644 ment to any agency of its selection. It may intrust the oversight and supervision of the .operations of railroads to a commission charged with the duty of guarding against abuses the State has the right to correct.
We do not feel called on to pass upon all of the numerous provisions of the act complained of, and will decide only so much as will properly dispose of this case, leaving other questions to be decided as they arise. The bill is to restrain the commission “ from interfering with the tariff of charges of (complainant), or with the operation, control, or income of said railroad * * * * and from * * any revision of orator’s tariff, or from instituting or aiding in the prosecution of suits for recovery of penalties under said acts, or doing anything under said acts as to orator.”
In view of what is written, it must be held that the railroad commission cannot interfere with the rates fixed by the board of directors of the appellee from 'time to time for transporting persons and property over its railroad, if those rates are within the limits prescribed by the charter, and that the commission cannot adopt any rule or regulation as to rates violative of the clearly expressed or necessarily implied charter rights of the company • but while this is true, the commission may investigate the control and operation of the company in order to ascertain that it is conforming to its authorization by the charter. It may do many things contemplated by the act creating it without any violation of the inviolable rights of the company. No reason is perceived why the company may not be required to submit its tariff of charges to the commission in order that it may see that it conforms to the limits fixed by the charter. So it may be said that the company has no right to make unjust discrimination or show partiality not authorized by its charter in transporting persons and things, and all this the commission may look after, and it may hear complaints as to any matter over which it has control as to the operations of the company.
We do not see why the appellee shall not be subject to the requirement of the thirteenth section of the act creating the railroad commission and be bound to give notice, as required by that *645 section, to the commissioners in case of any aecident to a train attended with serious personal injury. And we think the appellee is subject to the eighteenth section of the act as to a suitable reception-room at each depot and as to bulletin boards.'
Our view is that the right this company has secured by its charter to fix rates and to manage its affairs by a board of directors, does not exempt it from such reasonable regulations as the State from time to time may see fit to adopt for the impartial government of railroads in the State for the interest of the people. This company may fix rates and collect them within the limits of its charter and may earn all it can within these limits, but it is a creature of the State, subject to its government and control, except wherein the State has renounced in plain terms its right of regulation and control. The rights of the company, secured by its charter, must be upheld, and the railroad commission must abstain from any interference with these rights, but outside of these bounds and as to all those legitimate requirements of legislative authority prescribed in the interest of the community and consistent with the full enjoyment of its contract rights by the company, it must yield to the authority of the State to supervise it.
The act creating the railroad commission is not violative of the fourteenth amendment of the Constitution of the United States, or of any provision of the constitution of the State, in that it creates a commission and charges it with the duty of supervising railroads.
As before stated, we do not intend to express an opinion on all of the provisions of the act. Many questions may arise under it not necessary to be now disposed of, and we leave them for consideration when presented. We hold that the State had the right to create an agency of the State to exercise such supervision as it may lawfully employ over railroads within its limits and have declared the immunity from interference secured to the appellee by its charter, and this is all that is necessary to dispose of this case.
. Decree reversed, and decree made here to modify the injunction in accordance with this opinion.
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