In Ruggles v. Illinois" the point was made that the legislature was restrained by contract from regulating the rates of fare by reason of a provision in the charter of the railroad giving the company the right to make by-laws, provided they were not repugnant to law; and to establish such rates of toll as they. should by their by-laws establish. The court held that immunity from legislative control is not to be presumed, and the charter would not constitute a contract exempting the company from the power of the legislature to regulate rates unless it were expressly so provided. In this case, on the other hand, it was provided that the fixing of rates by the company must be by by-law not repugnant to law; and it therefore left the legislature free to

act.

In Stanislaus County v. San. Joaquin and King's River Canal and Irrigation Company,8 the charter gave the company power to fix rates, subject to regulation by a board of supervisors, who, however, were not to reduce the rates below a certain maximum; it was held that this did not prevent the legislature itself from affecting the rates. "There is no promise made in the act that the legislature would not itself subsequently alter that authority."

§ 1327. Contracts made by municipal ordinance.

A contract limiting the power over rates may be made between a city and a public service company. Before holding that such a contract exists, a court must first determine whether the city has power to make such a contract. Such power may be conferred on a city.10

7 108 U. S. 526, 27 L. Ed. 872, 2 Sup. Ct. 832 (1883).

8 192 U. S. 201, 48 L. Ed. 406, 24 Sup. Ct. 241 (1903).

9 Freeport Water Co. v. Freeport, 180 U. S. 587, 45 L. Ed. 679, 21 Sup. Ct. 493 (1901).

10 Los Angeles v. Los Angeles City Water Co., 177 U. S. 558, 44 L. Ed. 886, 20 Sup. Ct. 736 (1900). See, also, Walla Walla v. Walla Walla Water Co., 172 U. S. 7, 43 L. Ed. 344, 19 Sup. Ct. 77 (1898).

A city ordinance, accepted by a public service company, which defines the duties of the company and names a maximum rate of compensation, constitutes a contract, and the rate named in such an ordinance cannot thereafter be diminished.11 There is, however, a constant tendency to find that the ordinance did not constitute a contract and that the power over rates continues. 12

§ 1328. Charter by Congress.

The grant of a charter by Congress does not remove a railroad from the power of a State to regulate rates within the State.13 Even though it is expressly provided in the charter that Congress may reduce rates, this does not constitute a contract by implication that the State shall not do so.14

14

§ 1329. Non-user and waiver of the privilege of exemption. The contractual exemption from regulation of rates may, it would seem, be lost by a company by long-continued non-user (as evidence of rescission of the contract), or by waiver. In San Joaquin and King's River Canal and Irrigation Company v. Stanislaus County, 15 it appeared that by a provision in its charter the company's revenues should not be reduced so as to yield a profit of less than 1 1-2 per cent. a month. This provi

11 Detroit v. Detroit Citizens' St. Ry., 184 U. S. 368, 46 L. Ed. 592, 22 Sup. Ct. 410 (1902); Cleveland v. Cleveland City Ry., 194 U. S. 517, 48 L. Ed. 1102, 24 Sup. Ct. 756 (1904), affirming 94 Fed. 385; Crosby v. City Council, 108 Ala. 498, 18 So. 723 (1895); State v. Laclede Gas-Light Co., 102 Mo. 472, 14 S. W. 974 (1890); Columbus v. Columbus Street Ry., 45 Ohio St. 98, 12 N. E. 651 (1886).

12 Freeport Water Co. v. Freeport, 180 U. S. 587, 45 L. Ed. 679, 21 Sup. Ct. 493 (1901); Rogers Park Water Co. v. Fergus, 180 U. S. 624, 45 L. Ed. 702, 21 Sup. Ct. 490 (1901).

13 Reagan v. Mercantile Trust Co., 154 U. S. 413, 14 Sup. Ct. 1060 (1894). 14 Smyth v. Ames, 169 U. S. 466, 42 L. Ed. 819, 18 Sup. Ct. 418 (1898). 15 113 Fed. 930 (1902). On appeal the Supreme Court held that there was no contract. Stanislaus County v. San Joaquin & K. R. C. & I. Co., 192 U. S. 201, 48 L. Ed. 406, 24 Sup. Ct. 241 (1903).

sion was made in 1862, and from that time until 1896 the company, fixing its own rates, never realized so much profit. In 1885 a statute was passed which provided that the rates of such companies should not be less than six nor more than eighteen per cent. a year. In 1896 the proper board made rates which yielded revenue less than eighteen per cent. a year. The court held the act legal, on the ground that the company having never for so long a period reduced its nominal right to possession had waived it. "It is perhaps true," Circuit Judge Morrow said, "that there might be cases where a corporation of the character of the complainant, having invested capital in good faith, would not be held to have waived its ultimate right to the limit of income provided in its charter by the acceptance of a smaller income during the progress of construction, or perhaps even longer, until its system of irrigation had brought prospective tracts of land under successful cultivation;" but in this case the long-continued action of the company constituted a waiver.

In Chicago Union Traction Company v. Chicago, 16 the privilege of charging a five-cent fare had been granted to a line leased by the Traction Company. The latter company was formed under a statute which provided that the legislature should have the right to make such regulations as it should deem desirable for carrying on its business. The court held that the privilege granted to the leased line had been waived by its lease to the Traction Company, and that the latter could not exercise it, but was subject to statutory regulation in the matter.

§ 1330. Assignment of privilege of exemption.

The privilege of exemption is ordinarily personal with the grantee, and cannot be assigned in case of sale, lease or consolidation to another company which succeeds to its property

16 199 III. 484, 65 N. E. 451, 59 L. R. A. 631 (1902).

17

and franchises. So a statute dividing a turnpike company into two distinct corporations, controlling different portions of the road, and providing that each shall retain "all the powers, rights, and capacities" granted by the charter of the original company, does not pass to the new companies a right of exemption from legislative control of tolls which was reserved to the original company by its charter. 18 And so an exemption from State regulation of the price of gas, contained in the charter of a gas company, does not extend to the plants of, and territory occupied by, certain other gas companies, not possessing such immunity in their own right, when absorbed by the former company under the general power of consolidation and merger conferred upon gas companies by an act which provided that the consolidated corporation should be subject to the legal obligations of the companies absorbed. 19

In Chicago Union Traction Company v. Chicago,2 20 the question of violation of a contractual right of the company was involved. The company was lessee of two other street railway; both the latter had a right to charge a five-cent fare for each passenger carried, and this right in each case was alleged to have been assigned to the Traction Company. The court expressed the opinion that the grant of such a privilege is personal to the grantee, and cannot be assigned. The court followed the decision in St. Louis and San Francisco Railway v. Gill,21 and distinguished the later case of Detroit v. Detroit Citizens' Street Railway22 on the ground that in that case the question of the assignability of the exemption was not raised.

17 St. Louis & S. F. Ry. v. Gill, 156 U. S. 649, 39 L. Ed. 567, 15 Sup. Ct. 484 (1895). But see Ball v. Rutland R. R., 93 Fed. 513 (1899).

18 Covington & L. T. R. Co. v. Sandford, 164 U. S. 596, 41 L. Ed. 566, 17 Sup. Ct. 198 (1896).

19 People's Gaslight & Coke Co. v. Chicago, 194 U. S. 1, 48 L. Ed. 851, 24 Sup. Ct. 520 (1904).

20 199 Ill. 484, 65 N. E. 451, 59 L. R. A. 631 (1902).

21 156 U. S. 649, 39 L. Ed. 567, 15 Sup. Ct. 484 (1895).

22 184 U. S. 372, 46 L. Ed. 592, 22 Sup. Ct. 412 (1902).

SUB-TOPIC 4-PROTECTION OF PROPERTY.

§ 1331. Unreasonably low rates constitute a taking of property.

When a rate is fixed so low as to impair the earning power of the corporation and render it impossible to obtain a fair return upon its investment, the rate operates a confiscation of the property invested in the business, and is unconstitutional as depriving the company of its property without due process of law. As the rule is generally expressed, an unreasonably low rate is an illegal rate, whether it is fixed by the legislature itself,1 or by a municipal corporation or board,2 or by a commission.3

§ 1332. The doctrine of the “Granger cases.”

The question was first raised for decision in the Supreme. Court of the United States in the "Granger Cases," so called.*

1 Chicago & G. T. Ry. v. Wellman, 143 U. S. 339, 36 L. Ed. 176, 12 Sup. Ct. 400 (1892); Lake Shore & M. S. Ry. v. Smith, 173 U. S. 684, 43 L. Ed. 858, 19 Sup. Ct. 565 (1899); Cotting v. Kansas City S. Y. Co., 183 U. S. 79, 46 L. Ed. 92, 22 Sup. Ct. 30 (1901); Ball v. Rutland R. R., 93 Fed. 513. (1899); Beardsley v. New York, L. E. & W. R. R., 162 N. Y. 230, 56 N. E. 488 (1900).

2 San Diego L. & T. Co. v. National City, 174 U. S. 739, 43 L. Ed. 1154, 19 Sup. Ct. 854 (1899); Cleveland G. & C. Co. v. Cleveland, 71 Fed. 610 (1896); Capital City Gas Co. v. Des Moines, 72 Fed. 818, 829 (1896); New Memphis G. & L. Co. v. Memphis, 72 Fed. 952 (1896); Milwaukee E. R. & L. Co. v. Milwaukee, 87 Fed. 577, B. & W. 336 (1898); Spring Valley W. W. v. San Francisco, 124 Fed. 574 (1903); Palatka Waterworks v. Palatka, 127 Fed. 161 (1903); Spring Valley Waterworks v. San Francisco, 82 Cal. 286, 22 Pac. 910 (1890); San Diego Water Co. v. San Diego, 118 Cal. 556, 50 Pac. 633, 62 Am. St. Rep. 261, 38 L. R. A. 460 (1897); Chicago v. Rogers Park Water Co., 214 Ill. 212, 73 N. E. 375 (1905); Des Moines Waterworks v. Des Moines, 95 Ia. 348, 64 N. W. 269 (1895).

3 Smyth v. Ames, 169 U. S. 466, 42 L. Ed. 819, 18 Sup. Ct. 418 (1898); Chicago & N. W. Ry. v. Dey, 35 Fed. 866 (1888); Southern Pac. Co. v. Railroad Comrs., 78 Fed. 236 (1896); Haverhill G. L. Co. v. Barker, 109 Fed. 694 (1901); Wallace v. Arkansas Cent. R. R., 118 Fed. 422, 55 C. C. A. 192 (1902).

4 Munn v. Illinois, 94 U. S. 113, 24 L. Ed. 77 (1876); Chicago, B. & Q.