THE ALBANY LAW JOURNAL A Monthly Record of the Law and the Lawyers Published by THE ALBANY LAW JOURNAL COMPANY, Albany N. Y. Chas. J. Hailes, Pres. and Secy. E. Brumaghim, Treas Contributions, items of news about courts, judges and law. yers' queries or comments, criticisms on various law questions, addresses on legal topics, or discussions on questions of timely interest, are solicited from members of the bar and those interested in legal proceedings. All communications intended for the Editor should be addressed simply to the Editor of the ALBANY LAW JOURNAL. All letters relating to advertisements, subscriptions or other business matters should be addressed to THE ALBANY LAW JOURNAL COMPANY. Subscription price, Three Dollars per annum, in advance, Single number, Twenty-five Cents. ALBANY, N. Y., NOVEMBER, 1907 Current Topics. The decision of the Supreme Court of the State of New York, affirming the constitutionality of the so-called Public Utilities Law enacted by the Legislature of 1907, is of more than usual importance. Many of the ablest lawyers of the State questioned the right of the Commission to fix rates and charges for all forms of public service, which by the law in question they are empowered to do, subject to review by the courts of the State, in case the decisions of the Commission are complained of as unreasonable. Unfortunately, the opinion of the Supreme Court was not unanimous, the division of the court being three to two. The appeal came from the village of Saratoga, where the gas company refused to accept the rates fixed by the Commission, and appealed. In the prevailing opinion the court says: state Commerce Commission v. Railway Co., 167 U. S. 499, Justice Brewer, in writing for the court, says: 'The power to establish a tariff of rates for carriage and by a common carrier is a legislative and not an administrative or judicial function.' In C., B. & Q. R. R. Co. v. Jones, 149 Ill. 377, it is said: 'The power to regulate and control the charges of railroad companies or other agencies engaged in public employments is legislative and not judicial.' "Although legislative power, properly speaking, cannot be delegated, the law-making body, having enacted into the statutes the standard of charges which shall control, may intrust to an administrative body not exercising in the true sense judicial power the duty to fix rates in conformity with that standard. In the same brief 22. States are named which have similar statutes. "In the courts of this State this question has not been directly decided; but the principle is, I think, established in analagous cases. "It will thus be seen that the assumption of this power by the Commission is justified by convincing authority. Not a decision is cited in the State or Federal courts which questions the power provided the determination of the commissioners is directed by some standard which is presented in the statute. It is strongly insisted that the statute fixes no such standard. If in this the appellant be correct, the authorities cited, it is claimed, establish the constitutionality of the act. The power of the Commission is given in these words: 'After such hearing and upon such investigation as may have been made by the Commission, or its officers, agents or inspectors, the Commission, within the limits prescribed by law, may fix the maximum price of gas or electricity which shall be charged by such corporation or person in such municipality. The commissioners are not required in explicit terms to fix a reasonable rate, nor a just rate, nor an equal rate. They are given no standard as a percentage of profits by which they are to fix the rate. Their only guide is to fix the rate within the limits prescribed by law.' "The law is settled by repeated adjudication that the Legislature itself cannot fix a rate which would be confiscatory of the property of the corporation. The law is equally well settled that a public service corporation has not the right of a purely private corporation, to charge what it will for its product, but must serve the public at just and reasonable rates. "This Commission has assumed to fix a maximum charge for gas and electricity within the village of Saratoga Springs. By this appeal their right to do so is challenged upon the ground that such power is legislative and cannot be delegated to a commission. The question raised is an important one, as it goes "It thus appears that the stockholders of a public to the foundation of a policy which has been adopted service corporation are not entitled to require the by the State, and which, if such power be denied, is public to pay dividends upon fictitious stock or for of little efficacy. That the power to fix a tariff of their extravagance or waste. Such a corporation, rates for a public service corporation is executive however, is entitled to a fair return upon the actual will not be contended. That such power as an origi- value of its property that it is devoting to the public nal power is not judicial will be admitted. In Inter-use, after paying all expenses and liabilities reason ably charged against the same. ment of the court. What is deemed a The New York Court of Appeals, in a re fair return must depend ultimately upon the judg cent decision, holds to be unconstitutional the so-called recount act passed by the Legisla ture of 1907, under which there could have been a recount of the ballots cast in the McClellan-Hearst mayoralty election in New York city in November, 1905. The opinion in the case was by Chief Judge Cullen and was unanimously concurred in by all of the other sitting judges. "Both upon principle and necessity, a fair return upon the value of the property actually used is such a return as shall be fair compensation for the risk assumed by the investor in permitting his money to remain in such an enterprise. The public cannot fairly question this application of the rule, and must pay such rates as will ordinarily yield such return to the stockholders of the public service corporation." Under the provisions of this far-reaching act, it will be within the power and province of the Public Utilities Commission to regulate the operation and fares to be charged by the railroad companies of the State, not only, but the rate that shall be paid by the people for gas or electric light or power, the tariff for hacks and carriages, the charges for hauling trunks and express packages, and in fact every form of service furnished the public by any individual or corporation. The term Public Service has not yet been defined, and there are, of course, wide differences of opinion as to its limits. The case will, of course, be taken to the highest court, and its final decision will be awaited with much interest, especially by the numerous corporations vitally interested. How far the courts will sometimes go in recognizing an ancient custom or habit is shown in Temple v. McCoombs City Elec. St. & Power Co., 42 Southern Rep. 874. In this case the Supreme Court of Mississippi was called upon to pass on the regularity of a verdict against the electric light company for damages caused by injury to a small boy who had climbed into a tree through or over which the company's uninsulated wires were stretched. The court remarks that an electric light company, stretching its wires over trees filled with abundant branches reaching almost to the ground, must take notice of the immemorial habit of small boys to climb such trees; and hence it held the company liable for injuries to a boy due to coming in contact with a wire passing through the tree in which he was climbing. Judge Cullen, in his opinion, declares it the view of the court that "the statute so clearly contravenes the Constitution in one or two respects as to render it unquestionably invalid." The proceeding authorized, he "It is un says, either is, as its title indicates, a recanvass of the votes cast for the office of mayor, or is a judicial hearing and determination of the title of the respective candidates at that election to the office of mayor. necessary to determine which," he adds, "because if it is a recanvass it contravenes section 6 of article 2 of the Constitution, which provides: 'All laws creating, regulating or affecting boards or officers charged with the duty of registering voters, or of distributing ballots at the polls to voters, or of receiving, recording or counting votes at elections, shall secure equal representation of the two political parties which, at the general election next preceding that for which such boards or officers are to serve, cast the highest and the next highest number of votes.' If, on the other hand, it is a judicial determination of the title to office it contravenes section 2, article 1, of the Constitution, which provides: The trial by jury in all cases in which it has been heretofore used shall remain inviolate for ever.' "That the courts by whom the recanvass is to be made are not bi-partisan bodies is apparent, and that the statute provides for no determination by a jury of the disputed issues of fact is equally clear. Here we may well rest, and it is necessary to consider only the arguments adduced to withdraw the statute from both these constitutional limitations." The relation of corporations as instrumentalities to effectuate commerce between States; the source of the authority to create such corporations, and the relation thereof to the power of Congress to exclusively regulate such commerce, have prompted me to inquire, whether, in view of certain conditions pertaining to commerce between States, they, the States, should be divested of the power to create such corporations as may engage in interstate commerce, and whether it lies within the scope of constitutional authority for Congress to so enact, or to regulate the creation thereof by a Federal license plan? These speculations presented to a body of men who have been sworn to support the Constitution of their respective States and of the United States, should be of more than passing moment. They would, to the members of this Bar Association, be ordinarily considered to be mere questions of policy or expediency and not of doubtful constitutionality, but for the challenge given the same in a recent work of considerable merit, and by an author of fair renown.1 Others have" viewed with alarm" the growth of the commerce clause with its "encroachments" made upon the so-called "reserved powers of the States," and sounded the warning that " our entire system of government, both State and Federal, is entering upon the third great test of history," and urge that "the questions arising are scarcely second in importance to those around which the battle of secession raged."2 To the lawyer, who in the quietness of his office, has given such consideration as is possible to the attractive questions clustering about this "dread expansion," and who has followed the judicial development thereof, there comes no alarm, no fear. sees in its development no conflict between State and Federal authorities and believes, with a recent author, that, He "So far as the thoughts of mortals may approach the Divine mind, the architecture of our Constitution resembles that of the heavens, where States circle like planets about the Federal government as a central sun, the source of life, power, harmony and beauty, productive of separate existences and destructive of none."3 government proclaimed 120 years ago by Alexander Hamilton, the most gigantic intellect of that or any other period, quietly, persistently and triumphantly overcoming the objections of federationists and antinationalists, being incorporated in concrete law and sustained and permanently established by a long unchallenged line of judicial précedents. I am ardent in my belief that the line of demarkation between Federal and State control is firmly established by the decisions of the Supreme Court of the United States; but I do not seek to defend certain well-intentioned legislation, which fails to observe the distinction between commerce and manufacture, or sale as an incident of manufacture; nor of those proposed acts which would make of the commerce clause a substitute for the law of torts. And I would further be compelled to admit that childhood is not a subject over which the government can exercise jurisdiction by virtue of the commerce clause, as now construed.1 The inquiry upon which we enter invites consideration of the following propositions: 1. What is the extent of the authority of Congress, if any, to create corporations? 2. The power of Congress to deny to the State the creation of corporations that shall engage in interstate commerce, or to prescribe that the right of State-created corporations to engage in such commerce, is to be dependent upon a Federal license. 3. The results to be obtained by the adoption of either a Federal incorporation or Federal license plan, for such corporations. First. As to the authority of Congress to create corporations and the extent of that authority. This inquiry will be prosecuted no farther than pertains to the subject of interstate commerce; yet it is apparent that if the authority is sustained as a proper exercise of Federal legislative power, in connection with one subject of Federal jurisdiction, the same argument should sustain it as to other subjects of the same jurisdiction, or for the accompli sluent of which a corporation might be shown to be a proper instrumentality. The Constitution of the United States provides in section 8 of Article I of that instrument that, "The Congress shall have power. . . to regulate commerce with foreign nations, and among the several States, and with the Indian tribes," etc., and Congress shall have power to make all laws which shall be necessary and proper for carry He further sees, with satisfaction, the theory of ing into execution the foregoing powers, and all other powers vested by this Constitution in the government 1 Prentice's "Federal Power Over Carriers and of the United States, or in any department or officer Corporations," pp. 5 and 6. 2 Address of John W. Davis, President West Virginia State Bar Association, delivered at Elkins, W. Va., December 28, 1906. 3 Oration of the James Wilson Memorial, by Hampton L. Carson, Attorney-General of Pennsylvania. thereof." These clauses thus invest Congress with the power to regulate commerce, other than that which may be described as domestic or interstate, and with the 1 The Beveridge Senate bill prohibiting child labor. legislative authority to carry such delegated power at length the reasons of the opposing parties. There into execution. Is the creation of a corporation as a means for carrying out an express Federal power, a proper exercise of legislative authority? It would be sufficient for the purpose of this paper to rest the proposition upon the reasoning of Chief Justice Marshall in McCulloch v. Maryland.1 This justly celebrated case was decided by the Supreme Court of the United States at the February Term, 1819. Historical accuracy would require us to state that the argument of the great Chief Justice was a reproduction of the language of Hamilton, who had been slain by Burr 15 years before the decision was announced. is given the argument of Hamilton as to the construction of the word " necessary" as used in the abovequoted clause "to make all laws necessary and proper for carrying into execution the foregoing powers," etc. "The degree in which a measure is necessary can never be a test of the legal right to adopt it. The relation between the measure and the end; between the nature of the mean employed toward the execution of a power, and the object of that power must be the criterion of constitutionality, not the more or less necessity or utility." The means by which national exigencies are to be provided for, national inconveniences obviated and national prosperity promoted, are of such infinite variety, extent and complexity, that here must of necessity be great latitude of discretion in the selection and application of those means. Hence the necessity and propriety of exercising the authority intrusted to a government on principles of liberal construction." "To give the word 'necessary' the restrictive operation contended for would not only depart from its obvious and popular sense, but would give it the same force as if the word absolutely or indispensably had been prefixed to it." Frequent reference has been made to Marshall as a jurist, but in my reading upon this subject I have met no reference to him as a historian. In his history of Washington he has extensively dealt with the discussion provoked by the bill to incorporate a national bank. He states that the Secretary of the Treasury (Hamilton) had uniformly been an advocate of a national bank. He had recommended its adoption in the first general system which he presented to Congress. In 1791 he had repeated that recommendation in a special report containing an argument on the policy of the measure. A bill conforming to his plan was sent down from the Senate "Such a construction would beget endless uncerand permitted to proceed in the House of Represen-tainty and embarrasment. The cases must be paltatives to the third reading. On the final question an unexpected opposition was made to its passage. Mr. Madison, Mr. Giles, Mr. Jackson and Mr. Stone spoke against it. The bill was supported by Mr. Ames, Mr. Sedgwick, Mr. Smith of South Carolina, Mr. Lawrence, Mr. Boudinot, Mr. Gerry and Mr. Vining. The policy of the measure was conceded, but the objections made were to the constitutional authority of Congress so to enact. The point which had been agitated with so much zeal in the House of Representatives was examined with equal deliberation by the Executive. The cabinet was divided upon it. The Secretary of State (Jefferson) and the AttorneyGeneral (Randolph) conceived that Congress had clearly transcended its constitutional powers, while Hamilton, as Secretary of the Treasury, maintained the opposite opinion. The advice of each member of the cabinet, with his reasoning in support of it, was required in writing, and their arguments were considered by the President with all that attention which the magnitude of the question and the interest taken in it by the opposing parties, so eminently required. This deliberate investigation of the subject terminated in a conviction that the Constitution of the United States authorized the measure, and the sanction of the Executive was given to the act. In an appendix to the second volume he sets forth 14th Wheaton, 316. pable and extreme in which it could be pronounced with certainty that a measure was absolutely necessary, or one without which a given power would be nugatory. There are few measures of any government which would stand so severe a test. To insist upon it would be to make the criterion of the exercise of an implied power a case of extreme necessity; which is rather a rule to justify over-leaping the bounds of constitutional authority than to govern the ordinary exercise of it." Space does not permit the repetition of the argument of the learned Secretary of the Treasury. It is sufficient to state that it convinced Washington of its accuracy, and he approved the measure. The historian thus proceeds: "The power of the government then to create corporations in certain cases being shown .. it was then affirmed to have a relation more or less direct to the power of collecting taxes, to that of borrowing money, to that of regulating trade be tween the States, to those of raising, supporting and maintaining fleets and armies; and in the last place to that which authorizes the making of all needful rules and regulations concerning the property of the United States, as the same had been practiced upon by the government." It is, therefore, not in derogation of the learning of the great chief that we contend that the argument of Hamilton was the genesis of the opinion in MeCulloch v. Maryland, for Marshall, the historian, ad mits it himself in a history written years before the opinion was framed. That opinion enunciates that the Constitution does not profess to enumerate the means by which the powers it confers may be executed; nor does it prohibit the creation of a corporation, if the existence of such a being be essential to the beneficial exercise of those powers. If the creation of a corporation appertains to sovereignty it pertains to the sovereignty of the Union as well as those of the States. They are each sovereign with respect to the objects committed to them, and neither sovereign with respect to the objects committed to the other. The corporation being found to be a proper means, essential or helpful in carrying out this express power, it is comprehended as one of the subjects of legislation embraced in the legisla tive program that Congress may make all laws which shall be necessary and proper for carrying into execution the foregoing powers. The Chief Justice further contends that this provision is made in a Constitution intended to endure for ages to come, and consequently to be adapted to the various crisis of human affairs. "To have prescribed the means by which government should in all future times execute its powers would have been to change entirely the character of the instrument, and give it the properties of a legal code." When the Constitution of the United States was framed the business of the country was generally done by natural persons. Of moneyed corporations, such as now control so much of it, there were at the close of 1787 less than thirty. Nine were incorporated by Massachusetts, one by New York, four by Pennsylvania, two by Maryland, six by Virginia and three by South Carolina.1 The subject of corporations was before the convention which framed that instrument. In the case of Paul v. Virginia, 75 U. S. 168, Justice Field said that, "The power conferred upon Congress to regulate commerce includes as well commerce carried on by corporations as commerce carried on by individuals. At the time of the formation of the Constitution a large part of the commerce of the world was carried on by corporations. The East India Company, the Hudson Bay Company, the Hamburgh Company, the Levant Company, and the Virginia Company may be named among the many corporations then in exist ence which acquired from the extent of their policy celebrity throughout the commercial world. This state of facts forbids the supposition that it was intended in the grant of power to Congress to exclude from its control commerce of corporations. The language of the grant makes no reference to the instrumentalities by which commerce may be carried on; it is general and includes alike commerce by in 1 From "2 Centuries Growth of American Law." dividuals, partnerships, associations and corporations." Also, in providing as to the parties over whom the jurisdiction of the courts of the United States should extend, the convention refused to give any particular attention to private corporations. It had rejected, by a vote of eight States to three, a motion made by Madison to insert in the Constitution a grant of power to Congress to create corporations for certain purposes, preferring to have it embraced within the general section which included the power to make all necessary laws.1 There existed a general popular jealousy of such a mode of combining capital and concentrating power that the States had refused to charter but the few existing at that time. The author to whom I have heretofore referred as opposing the view that Congress had the power to create corporations, includes within his denial of such authority both interstate carriers as well as trading companies, but with the qualifying statement that "if any such power exists it is of very recent origin." A few enactments of Congress creating corporations, as interstate carriers, should be sufficient to establish the long acquiescence in Federal authority so to do, viz.: The act of March 3, 1829, by which was incorporated the Washington, Alexandria and Georgetown Steam Packet Company. The act of March 2, 1870, by which was incorporated the Washington Mail Steamboat Company, to run a line of steamers between Washington and Norfolk and other ports. The act of May 14, 1870, by which was incorporated the Washington and Boston Steamship Company. The acts of July 2, 1864, May 7, 1866, and July 1, 1868, provided for the organization of the Northern Pacific Railroad Company. The Union Pacific Railway Company was organized under the acts of July 1, 1862, July 2, 1864, and March 3, 1865. The Atlantic and Pacific Railroad Company was organized by the act of July 27, 1866. The Texas Pacific Railway Company by the act of March 3, 1871. As incident to the consideration of corporations by Congress, and the powers possessed by Congress to delegate to them its right of eminent domain, it may be said that in 1875, Hon. E. W. Kitridge, long a leading member of the Cincinnati bar, contended in the Supreme Court of the United States that no act of Congress had been passed for the exercise of the right of eminent domain, and urged that in taking real estate for Federal purposes resort would have to be had by the general government to private purchase or by appropriation under the authority of State laws in State tribunals. The answer of that 1 Elliott's Debates, Vol. 5, 440, 543. |