for dividends and the directors grow rich. It is suspected, too, that large sums are spent under various disguises in efforts to influence legislation.

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It is not consistent to claim that the citizen must protect himself, by refusing to purchase stock. The law constantly recognizes the fact that people should be defended from false representations and from their own folly and cupidity. It punishes obtaining goods by false pretenses, gambling and lotteries.

"It is a hollow mockery to direct the owner of a small amount of stock in one of these institutions to the courts. Under existing statutes, the law's delay, perplexity and uncertainty leads but to despair.

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The State should either refuse to allow these corporations to exist under its authority and patronage, or acknowledging their paternity and its responsibilty, should provide a simple, easy way for its people, whose money is invested, and the public generally, to discover how the funds of these institutions are spent, and how their affairs are conducted. It should at the same time provide a way by which the squandering or misuse of corporate funds would be made good to the parties injured thereby.

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This might well be accomplished by requiring corporations to frequently file reports made out with the utmost detail, and which would not allow lobby expenses to be hidden under the pretext of legal services and counsel fees, accompanied by vouchers and sworn to by the officers making them, showing particularly the debts, liabilities, expenditures and property of the corporation. Let this report be delivered to some appropriate department or officer, who shall audit and examine the same; provide that a false oath to such account shall be perjury, and make the directors liable to refund to the injured stockholders any expenditure which shall be determined improper by the auditing authority.

"Such requirements might not be favorable to stock speculation, but they would protect the innocent investors; they might make the management of corporations more troublesome, but this ought not to be considered when the protection of the people is the matter in hand. It would prevent corporate efforts to influence legislation; the honestly conducted and strong corporations would have nothing to fear; the badly managed and weak ought to be exposed."

Thus, it will appear from the Governor's own words, with which his actions have been in full accord, that he has insisted that corporations shall observe the limitations of the laws creating them; that their privileges shall be exercised in subordination to the rights of the public; that their affairs shall be open to public scrutiny; and that to their members and the public alike they shall be honest and fair.

The Five Cent Fare Bill-The Public Faith Must be Kept. In this same spirit of exact and equal justice, which has demanded of corporations compliance with the provisions of law binding upon them, the Governor has observed the express rights given to them by law. His principle has been " public faith must be scrupulously kept." Upon this principle he undertook to act in the manner of the veto of what has come to be known as the "Five Cent Fare Bill."

The

The elevated railroads of New York City, under their charters, charged an uniform rate of fare of five cents during certain of the morning and evening hours in which the great body of workingmen went to and from their homes, and ten cents for the rest of the day. In 1883, the Legislature passed a bill to make the rate of fare five cents throughout the day. This bill the Governor vetoed, upon the ground that it involved a breach of faith on the part of the State. The general railroad law, passed in 1850, and for nearly a quarter of a century declaring the policy of the State, had promised that the Legislature would not reduce the rates of any railroad until its reduced rates should produce a profit of ten per centum on the capital actually expended. The Governor declared that until the profits of these roads should have been ascertained to exceed this limit, the policy of the State forbade their reduction. A subsequent examination by the

Railroad Commission, consisting of one Democrat, one Republican and one AntiMonopolist, showed that the earnings of the roads were not such as to justify the proposed reduction of fare, thus justifying the action of the Governor.

Another reason for his veto was found in the express provisions of one of the special acts applicable to one of these roads. It was therein provided that the company should, under bonds, pledge itself to pay a certain percentage into the city treasury, which should "constitute an agreement in the nature of a contract between the city and constructing company, entitling the company to the legalized rates of fare, which shall not be changed without the mutual consent of the parties."

The railroad company having made these payments to the city, the Governor considered that under those terms of this act there had been constituted an agreement in the nature of a contract" between the city and the company, which the State could not in good faith abrogate.

It also appeared that still another contract in writing, to the same effect, had been made between the rapid transit commissioners and the railroad companies, before the roads were built and to induce their construction, thus constituting a third promise on the part of the public which this bill proposed to break. The Governor did not believe that the people of New York nor its Legislature, when brought to a knowledge of these facts, would desire this great State to be even suspected of trifling with its obligations, and so in a message so explicit as to necessarily reach great length, he transmitted to the Assembly the reasons why he was unable to approve the bill. The effect justified his estimate of the honor of the State and of its legislators. (A majority voted to sustain his veto, while twothirds would have been necessary to overrule it.) From every side came expressions of commendation for the scrupulous attention that had been given to the maintenance of the public faith, and (though there was dissent from the Governor's conclusion that a contract existed) none doubted but that this being his honest conclusion, he was by his oath bound to disapprove the bill, which he did in the following

To the Assembly :

Veto Message.

STATE NEW

EXECUTIVE CHAMBER, ALL XO, March 2, 1888. }

Assembly bill No. 58, entitled "An act to regulate the fare to be charged and regulated by persons or corporations operating elevated railroads in the City of New York" is herewith returned without approval.

This bill prohibits the collection or receipt of more than five cents fare on any elevated railroad in the City of New York, for any distance between the Battery and Harlem river, and provides, that if any person or corporation operating such elevated railroads shall charge, demand, collect or receive any higher rate of fare, such person or corporation shall, in addition to all other penalties imposed by law, forfeit and pay to any person aggrieved fifty dollars for each offense, to be recovered by such person in any court of competent jurisdiction.

The importance of this measure and the interest which it has excited, has impressed me with my responsibility, and led me to examine, with as much care as has been possible, the considerations involved.

I am convinced that in all cases the share which falls upon the Executive regarding the legislation of the State should be in no manner evaded, but fairly met by the expression of his carefully guarded and unbiased judgment. In his conclusion he may err, but if he has fairly and honestly acted, he has performed his duty and given to the people of the State his best endeavor.

The elevated railroads in the City of New York are now operated by the Manhattan Railway Company, as the lessee of the New York Elevated Railway Company and the Metropolitan Elevated Railway Company.

Of course whatever rights the lessor company have in relation to the running and operation of their respective roads passed to the Manhattan Company under its lease.

The New York Elevated Railway Company is the successor of the West Side and Yonkers Patent Railway Company.

The latter company was formed under and in pursuance of an act passed on the 20th day of June, 1866.

The third section of that act provides that companies formed under its provisions " may fix and collect rates of fare on their respective roads, not exceeding five cents for each mile, or any fraction of a mile, for each passenger, and with rights to a maximum fare of ten cents.'

On the 22d day of April, 1867, an act was passed in relation to this corporation, which provides for the manner of constructing its road, the eighth section of which act reads as follows:

"The said company shall be authorized to demand and receive from each passenger within the limits of the City of New York rates of fare, not exceeding for any distance less than two miles five cents, and for every mile or fractional part of a mile in addition thereto one cent; provided that when said railway is completed and in operation between Battery place and the vicinity of the Harlem river, the said company may, at its option, adopt a uniform rate, not exceeding ten cents for all distances upon Manhattan Island, and may also collect said last-named rate for a period of five years from and after the passage of this act."

It was further provided by section 9 of this act that the said company should pay a sum not exceeding five per cent. of the net income of said railway from passenger traffic upon Manhattan Island into the treasury of the City of New York, in such manner as the Legislature might thereafter direct, as a compensation for the use of the streets of the city.

In 1868 a law was passed supplementary to the act last referred to, by which the said company was authorized to adopt such form of motor as certain commissioners should, after due experiment, recommend or approve.

Specific provision was made in the act to carry out section 9 of the law of 1867, in relation to the payment of the five per cent. of the net income of the company into the treasury of the city.

Section 3 of this act contains the following provision: "It shall be the duty of the constructing company aforesaid, before opening its railway to public use, to file with the comptroller of the City of New York, in form to be approved by the mayor of the City of New York, its bond in the penal sum of $100,000, conditioned upon the true and faithful payment of the revenue in amount and manner specified in the preceding section, and the payment thereof shall be the legal compensation in full for the use and occupancy of the streets by said railway as provided by law, and shall constitute an agreement in the nature of a contract between said city and constructing company, entitling the latter, or its successors, to the privileges and rates of fare heretofore or herein legalized, which shall not be changed without the mutual consent of the parties thereto as aforesaid; and the mayor, on behalf of said city, may, in case of default in payments as aforesaid, sue for and collect at law any arrearages in such payment, and the claims of the city therefor shall constitute a lien on the railway of said company having priority over all others."

The use of what are called dummy engines was afterwards authorized in the operation of said road by the Commissioners above referred to.

The New York Elevated Railroad Company was organized under the general railroad law passed in 1850, and the laws amendatory thereof and supplementary thereto.

Within a short time thereafter the last named company became the purchaser under a foreclosure, and by other transfers, of the railway and all the rights, privileges, easements and franchises of the West Side and Yonkers Patent Railway Company (the name of which had in the meantime been changed to the West Side Elevated Patented Railway Company of New York City).

We have now reached a point where the New York Elevated Railway Company, one of the lessors of the Manhattan Railroad Company, has succeeded to all the rights and property of the West Side and Yonkers Patent Railway Company.

By a law passed on the 17th day of June, 1875 (the railway still being unfinished), it is declared that the New York Elevated Railroad Company, having acquired by purchase under mortgage foreclosure and sale and other transfer, all

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the rights, powers, privileges and franchises which were conferred upon the West Side and Yonkers Patent Railway Company by the acts above referred to, is hereby confirmed in the possession and enjoyments of the said rights, powers, privileges and franchises as fully and as large as they were so granted in and by the acts aforesaid to the said West Side and Yonkers Patent Railway Company. The Court of Appeals, speaking of this law, uses the following language:

The effect of this act was to secure to the Elevated Railroad Company all the rights, privileges and franchises of the West Side and Yonkers Patent Railway Company under the purchase by and transfer to it.”

By the sixth section of this act, it is provided that the New York Elevated Railroad Company might demand and receive from each passenger on its railroad, not exceeding ten cents for any distance of five miles or less, and with the assent required by section three of the act of 1868, hereinbefore referred to, not exceeding two cents for each additional mile or fractional part thereof.

Another act was passed in 1875, commonly called the Rapid Transit Act, which provided for the appointment of commissioners, who, among other things, were authorized to fix and determine the time within which roads subject to the provisions of the act should be completed, together with the maximum rates to be paid for transportation and conveyance over said railways and the hours during which special cars should be run at reduced rates of fare.

Commissioners were duly appointed by the mayor of the City of New York, as provided by this act, who fixed and determined the route of the road of the New York Elevated Railroad Company, and prescribed with the utmost particularity the manner of its construction and therefore deliberately agreed with said company that it should charge as fare upon trains and cars other than what were called by the parties commission trains and cars. for all distances under five miles not to exceed ten cents, and not to exceed two cents for each mile or fraction of a mile over five miles, until the fare should amount to not exceeding fifteen cents for a through passenger from and between the Battery and the intersection of Third avenue and One Hundred and Twenty-ninth street, and from and between the Battery and High Bridge not to exceed seventeen cents for a through passenger, and that for the entire distance from and between the Battery and Fifty-ninth street the fare should not exceed ten cents per passenger.

It was further agreed between the said company and commissioners that commission trains should be run during certain hours in the morning and evening for the accommodation of the public and the laboring classes, upon which the fare should not exceed five cents from and between the Battery and Fifty-ninth street, nor any greater sum for any distance not exceeding five miles; that it should not exceed seven cents for a through passenger from and between the Battery, or any point south thereof and the Harlem river, and that such fare should not exceed eight cents on such commission cars and trains from and between the Battery and High Bridge.

And it was further agreed by said company that when the net income of the road, after all expenditures, taxes, and charges are paid, should amount to a sum sufficient to pay exceeding ten per cent. per annum on the capital stock of the company; that in such case and within six months thereafter, and so long as said net earnings amount to a sum sufficient to pay more than ten per cent. as aforesaid, the said company would run commission trains on its roads at all hours during which it should be operated at the rates of fare last mentioned.

Having thus completed an agreement with this company, the commissioners transmitted the same to the mayor of the City of New York, accompanied by a very congratulatory report of their proceedings, whereupon the mayor submitted the same to the Board of Aldermen, by whom it was approved. This was in the latter part of 1875.

Since that time the New York Elevated Railroad Company, upon the faith of the laws which have been recited, and its proceedings with the commissioners, at a very large expense, has completed its road from the Battery to Harlem river, a distance of about ten miles.

The bill before me provides that notwithstanding all the statutes that have been passed and all that has been done thereunder, passengers shall be carried the whole length of this road for five cents, a sum much less than is provided for in any of such statutes or stipulated in the proceedings of the commissioners.

I am of the opinion that in the legislation and proceedings which I have detailed, and in the fact that pursuant thereto the road of the company was constructed and

finished, there exists a contract in favor of this company, which is protected by that clause of the Constitution of the United States which prohibits the passage of a law by any State impairing the obligation of contracts.

But let it be supposed that this is not so, and that neither of these lesser companies are in any way protected from interference with their rates of fare, but that, on the contrary, they are subject to all the provisions of the general railroad act, under which they are both organized.

Section thirty-three of that act reads as follows:

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'The legislature may, when any such railroad shall be opened for use, from time to time alter or reduce the rate of freight, fare or other profits upon said road; but the same shall not, without the consent of the company, be so reduced as to produce with said profits less than ten per centum per annum on the capital actually expended, nor unless on an examination of the amount received or expended, to be made by the State Engineer and Surveyor, and the Comptroller, they shall ascertain that the net income derived by the company from all sources, for the year then last past shall have exceeded an annual income of ten per cent. upon the capital of the corporation actually expended."

Even if the State has the power to reduce the fare on these roads, it has promised not to do so except under certain circumstances and after a certain examination. I am not satisfied that these circumstances exist, and it is conceded that no such examination has been made.

The constitutional objections which I have suggested to the bill under consideration are not, I think, removed by the claim that the proposed legislation is in the nature of an alteration of the charters of these companies, and that this is permitted by the State Constitution and by the provisions of some of the laws to which I have referred.

I suppose that while the charters of corporations may be altered or repealed, it must be done in subordination to the Constitution of the United States, which is the supreme law of the land. This leads to the conclusion that the alteration of a charter cannot be made the pretext for the passage of a law which impairs the obligation of a contract.

If I am mistaken in supposing that there are legal objections to this bill, there is another consideration which furnishes to my mind a sufficient reason why I should not give it my approval.

It seems to me that to arbitrarily reduce these fares, at this time and under existing circumstances, involves a breach of faith on the part of the State, and a betrayal of confidence which the State has invited.

The fact is notorious that for many years rapid transit was the great need of the inhabitants of the City of New York, and was of direct importance to the citizens of the State. Projects which promised to answer the people's wants in this direction failed and were abandoned. The Legislature, appreciating the situation, willingly passed statute after statute calculated to aid and encourge a solution of the problem. Capital was timid, and hesitated to enter a new field full of risks and dangers. By the promise of liberal fares, as will be seen in all the acts passed on the subject, and through other concessions gladly made, capitalists were induced to invest their money in the enterprise, and rapid transit but lately became an accomplished fact. But much of the risk, expense and burden attending the maintenance of these roads are yet unknown and threatening. In the meantime, the people of the City of New York are receiving the full benefit of their construction, a great enhancement of the value of the taxable property of the city has resulted, and in addition to taxes, more than $120,000, being five per cent. in increase, pursuant to the law of 1868, has been paid by the companies into the city treasury on the faith that the rate of fare agreed upon was secured to them. I am not aware that the corporations have, by any default, forfeited any of their rights; and if they have, the remedy is at hand under existing laws. Their stock and their bonds are held by a large number of citizens, and the income of these roads depends entirely upon fares received from passengers. The reduction proposed is a large one, and, it is claimed, will permit no dividends to investors. This may not be true, but we should be satisfied it is not before the proposed law takes effect.

It is manifestly important that invested capital should be protected, and that its necessity and usefulness in the development of enterprises valuable to the people should be recognized by conservative conduct on the part of the State govern

ment.