U.S. Supreme Court Peik v. Chicago & Northwestern Railway Company, 94 U.S. 164 (1876)
Peik v. Chicago & Northwestern Railway Company
94 U.S. 164
APPEALS FROM THE CIRCUIT COURT OF THE UNITED
STATES FOR THE WESTERN DISTRICT OF WISCONSIN
1. The Chicago & Northwestern Railway Company was, by its charter, and the charters of other companies consolidated with it, authorized
"to demand and receive such sum or sums of money for the transportation of persons and property, and for storage of property, as it shall deem reasonable."
The Constitution of Wisconsin, in force when the charters were granted, provides that all acts for the creation of corporations within the State "may be altered or repealed by the legislature at any time after their passage." Held that the legislature had power to prescribe a maximum of charges to be made by said company for transporting persons or property within the state, or taken up outside the state and brought within it, or taken up inside and carried without.
2. Certain Wisconsin railroad corporations were consolidated with others of Illinois on terms which, in effect, required that the consolidated company should, when operating in Wisconsin, be subject to its laws. Held that Wisconsin can legislate for the company in that state precisely as it could have legislated for its own original companies, if no consolidation had taken place.
3. The Act of Wisconsin approved March 11, 1874, entitled "An Act relating to railroads, express and telegraph companies, in the State of Wisconsin," is confined to state commerce, or such interstate commerce as directly affects the people of Wisconsin. Until Congress shall act in reference to the relations of this consolidated company to interstate commerce, the regulation of its fares, &c.;, so far as they are of domestic concern, is within the power of that state.
4. The decision of the Supreme Court of the State of Wisconsin, that said Act of March 11, 1874, was not repealed by that entitled "An Act in relation to railroads," approved March 12, 1874, is binding upon this court.
5. Where property has been clothed with a public interest, the legislature may fix a limit to that which shall in law be reasonable for its use.
6. No party to this record can raise the question that the statute of Wisconsin violates the obligation of the consolidated company, under the land grant to the Wisconsin and Superior Railroad Company, to keep the part of its road which formerly belonged to the latter company open as a public highway for the use of the government of the United states, free from toll, &c.;
The appellants in the first case, nonresidents of the State of Wisconsin, and owners of first mortgage bonds of the Chicago & Northwestern Railway Company, filed their bill to restrain the company from obeying, and Paul, Osborn, and Hoyt, railroad commissioners, and Sloan, Attorney-General of Wisconsin, from enforcing, c. 273, Laws of 1874, of that state, which limits the rate of charges for transporting passengers and freights on all the railroads in the state.
The bill sets out the various acts incorporating the company and the companies with which it is consolidated, and it alleges that the company was authorized to give its bonds and mortgages to secure the payment of borrowed money; that the complainants are owners of bonds issued or guaranteed by the company, and secured by mortgages upon various portions of its railroad, executed pursuant to law; that the tariff of rates charged by the company before the passage of that chapter did not produce sufficient income to pay interest on its debt, the legal rate of interest allowed by the laws of the state to its stockholders, and expenses; that the enforcement of said chapter will cause the destruction of the securities held by the complainants; that the classes of freight established by sec. 3 of said chapter are different from the classes of freight established
by the laws of Illinois, Iowa, and Minnesota, for the transportation of freight upon the railroads of the company in those states, and that it is practically impossible to carry on the business of transporting freight from Wisconsin to either of those states; that the enforcement of said chapter will impair the obligation of the contract entered into between the company and the complainants; that said chapter is in violation of the thirteenth article of the bill of rights of the Constitution of Wisconsin, which declares that the property of no person shall be taken for public use without just compensation therefor; that the General Assembly of Wisconsin had no constitutional power to pass said chapter; that the eighteenth section is a regulation of interstate commerce; and that the company has never accepted said chapter, but will be obliged to conform to the reduced rates of fare and freight therein specified, or cease operations in Wisconsin unless said chapter shall be held to be unconstitutional.
The bill in the second case was filed by stockholders of the company, and is substantially the same as that in the first case.
Chapter 273 classifies railroads in the state, fixes the limit of fare for the transportation of any person, classifies freights and the maximum rates therefor, and prescribes certain penalties and forfeitures for receiving any greater rate or compensation for carrying freight or passengers than the act provides. It appoints railroad commissioners and prescribes their duties and powers. The eighteenth section is in the following words:
"Nothing contained in this act shall be taken as in any manner abridging or controlling the rates for freight charged by any railroad company in this state for carrying freight which comes from beyond the boundaries of the state, and to be carried across or through the state; but said railroad companies shall possess the same power and right to charge such rates for carrying such freight as they possessed before the passage of this act."
The defendants in each case demurred to the bill of complaint therein filed. The demurrers were sustained, and the defendants brought the cases here.
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
These suits present the single question of the power of the Legislature of Wisconsin to provide by law for a maximum of charge to be made by the Chicago & Northwestern Railway Company for fare and freight upon the transportation of persons and property carried within the state, or taken up outside the state and brought within it, or taken up inside and carried without. That company was by its charter authorized "to demand and receive such sum or sums of money for the transportation of persons and property, and for storage of property, as it shall deem reasonable." Charter of the Wisconsin & Superior Railroad Co., sec. 6. Other forms of expression are used in charters granted by Wisconsin to other companies, which by consolidation have become merged in the present corporation; but they are all the same in effect. None goes beyond this.
The constitution of the state in force when each of the several acts of incorporation was passed provides that all acts for the creation of corporations within the state "may be altered or repealed by the legislature at any time after their passage." Art. 11, sec. 1.
It was conceded upon the argument that this reserved power of the constitution gave the legislature "the same power over the business and property of corporations that it has over individuals,"
or, as it is expressed by one of the counsel,
"nothing more could have been intended than to leave the stockholders in corporations in such a position that the legislature could place them on the same footing with natural persons before the law and disable them from permanently evading the burdens on all others engaged in similar vocations by appealing to the letter of their charter. Their object was not to open the door to oppression, but to secure simple equality between citizens of the state, whether working singly or in corporate associations."
And in another place, the same learned counsel says:
"The privilege, then, of charging whatever rates it may deem proper is a franchise, which may be taken away under the reserved power, but the right to charge a reasonable compensation would remain as a right under the general law governing natural persons, and not as a special franchise or privilege."
Without stopping to inquire whether this is the extent of the operation of this important constitutional reservation, it is sufficient to say that it does, without any doubt, have that effect. In Munn v. Illinois, supra, p. 94 U. S. 113 , and Chicago, Burlington & Quincy Railroad Co. v. Iowa, supra, p. 94 U. S. 155 , we decided that the state may limit the amount of charges by railroad companies for fares and freights unless restrained by some contract in the charter, even though their income may have been pledged as security for the payment of obligations incurred upon the faith of the charter. So far, this case is disposed of by those decisions.
It remains only to consider a few questions raised here which were not involved in the cases that have already been decided.
1. As to the consolidation of the Wisconsin corporations with those of Illinois. For the purpose of promoting this consolidation, the Legislature of Wisconsin passed an enabling act, and in so doing provided that if such consolidation was perfected,
"the consolidated company shall be and remain subject to the laws of the State of Wisconsin and the State of Illinois, respectively, and shall have in all respects the same privileges as though this consolidation had not taken place, provided that the laws of Illinois shall have no force and effect in the State of Wisconsin."
Wisconsin Consolidation Act, March 10, 1855,
sec. 8. The second section of the same act also provided that the consolidated company should
"have all the rights, privileges, and franchises conferred on the said companies [those in Illinois as well as those in Wisconsin] by the laws of the States of Illinois and Wisconsin, respectively, the same, and not otherwise, as though the said consolidation had not taken place."
In this way, Wisconsin in effect said to the Illinois companies,
"You may consolidate your interest with those of the named companies in this state, and form one corporation in the two states, but in so doing you must, in Wisconsin, be subject to our laws. In Wisconsin, all corporations are liable to have their charters altered or repealed at the will of the legislature. If you are willing to take this risk, we will care for you within our jurisdiction precisely as we do for our own corporations."
Upon these terms the consolidation was finally perfected, and the consolidated company now exists under the two jurisdictions, but subject to the same legislative control as to its business in Wisconsin as private persons. The Illinois companies might have stayed out. But they chose to come in, and must now abide the consequences. Thus Wisconsin is permitted to legislate for the consolidated company in that state precisely the same as it would for its own original companies if no consolidation had taken place. This is the contract by which the Illinois stockholders must abide. Having availed themselves of what they supposed to be the advantages of the consolidation, they cannot repudiate their corresponding obligations.
There is nothing, therefore, in this objection.
2. The obligations of the consolidated company, under the land grant to the Wisconsin and Superior Railroad Company, to keep that part of its road which formerly belonged to that company open as a public highway for the use of the government of the United states, free from toll or other charges upon the transportation of property or troops of the United states, and to transport the mails at such prices as Congress may by law direct. The United States do not complain. It will be time enough for us to consider this objection when they do.
3. As to the effect of the statute as a regulation of interstate commerce. The law is confined to state commerce, or
such interstate commerce as directly affects the people of Wisconsin. Until Congress acts in reference to the relations of this company to interstate commerce, it is certainly within the power of Wisconsin to regulate its fares, &c.;, so far as they are of domestic concern. With the people of Wisconsin this company has domestic relations. Incidentally, these may reach beyond the state. But certainly until Congress undertakes to legislate for those who are without the state, Wisconsin may provide for those within, even though it may indirectly affect those without.
4. As to the repeal of this act by that of March 12, 1874. The Supreme Court of Wisconsin has decided that there is no such repeal as is claimed. The Atty.-Gen. v. Railroad Companies, 35 Wis. 427. This is binding on us.
5. As to the claim that the courts must decide what is reasonable, and not the legislature. This is not new to this case. It has been fully considered in Munn v. Illinois. Where property has been clothed with a public interest, the legislature may fix a limit to that which shall in law be reasonable for its use. This limit binds 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.
6. The sale of the Chicago, St. Paul, and Fond du Lac Railroad Company. The charter of the company whose road was sold does not confer any right which has been impaired by this legislation. That company, like other railroad companies in Wisconsin, was subject to regulation as to its fares, &c.; It is therefore unnecessary to consider what might under other circumstances have been the effect of such a sale.
This disposes of the case. No other questions need be considered. If the question ever arises whether the company can be compelled to continue its business at the prices fixed, it will be time enough for us to pass upon it when it reaches here in due course of proceeding. It is not here now.
MR. JUSTICE FIELD and MR. JUSTICE STRONG dissented.