the principle of the Dartmouth College cause has been so long embedded in the jurisprudence of the country, that it is to all intents and purposes a part of the Constitution itself, and it is now too late to contest it's correctness. It has upheld the contract by the state in a charter, limiting its right to taxation. And in all the cases the court says, the question is not whether the state is bound by its contract, but whether there is a contract.

It would be impossible to foretell what will be the effect of the opinion in the San Francisco case. We know, though, / the result of the decision in the Granger cases upon Wisconsin and her seven sister states. The corporations stood still; railroad construction declined from 3,086 miles in those states in 1872 to 550 in 1876. The obnoxious laws were then removed or modified, and railroad construction rebounded to 2,915 miles in 1880. In Tennessee, this reservation first appeared in a permanent form in her constitution of 1870; since then, a period of fourteen years, and in the midst of great general prosperity, about one hundred charters have been issued to railroad companies, under which some 325 miles of track have been constructed; in other words, an average of some three and one-quarter miles of road to each company, generally narrow guage roads running to coal mines or iron works. As to banks, insurance companies, and the great variety of corporations which we find so indispensable in the ordinary affairs of life, their outlay for equipment is merely nominal, and the repeal, or alteration of their charters, would not be destructive of everything. But if the worst fears of capitalists are realized in the future opinions of the highest court of the nation, the telegraph, telephone, railroad, gas, water, canal companies, having their entire capital invested in their equipments, will hold their property subject to the will of the people. The breath that made them may blow them

away But take the San Francisco case, as it stands adjudicated. Could there be found capital anywhere now sufficient to construct water works valued at $15,000,000, the corporation to fix its own rates, if there was present this reservation, by which afterwards the legislature could have the rates fixed by the city officials, who would be undoubtedly elected by the people upon the express pledge that they would give cheap water rates to their constituents? Certainly not, unless there was an immense margin for possible profits. There is no stability in the investment; and the want of that is what speculation feeds upon. Investors, therefore, have those terrible calamities hanging over them; and we see the failure of a broker's office in New York carry down a bank in Indiana, affect the price of sugar in New Orleans, and depress the value of town lots in Memphis. When vast interests are to be determined by a town meeting or a popular election, well may we say we know not what to expect. We have not quite forgotten how the Italian Court of Cassation lately shocked the moral sense of all lawrespecting communities, by a decision which upheld an act of the Italian legislature, practically confiscating to the use of the government the private property of a religious society. Nor can we soon forget how hard it was for us to reconcile ourselves to the recent opinion of the Supreme Court of the United States, declaring valid an act of the Parliament of. the Dominion of Canada, releasing the lien of the mortgagees of a railroad, and substituting new securities for the bonds.* The principle was that the legislature is omnipotent. There is but a step to that omnipotence with us, from the point to which this reserved power of repeal has led us.

I have no doubt that Chief Justice Marshall would have rendered the same opinion in the San Francisco case. I have the most supreme confidence in the entire correctness

* Canada So. Ry. Co. vs. Gebhard, 109 U. S. 527.

of both that and the college decision. I am also thoroughly satisfied that the practical effect of each is deplorable. It is pitiable to behold a sovereign state so bound up by a contract that she cannot protect the interests of her citizens, fluctuating, as they do, from generation to generation. It is just as pitiable to see a great public enterprise subject to be destroyed at any time by national error or caprice. -Let there be a contract between the state and the corporation; but let it be one in which neither is at the mercy of the other. Like a contract between individuals, it should be fair, just, and honorable in all its parts. Let the state reserve the power of altering the charter, but in such manner only as not to reduce the net earnings below such a stated per centum as the state and the investors shall have agreed upon beforehand, as being a fair annual return upon the capital invested. Such was substantially the English Railway Act of 1844: a stable and equitable plan offered to capital by a monarchical government without a written constitution, and after which it might be wise for us to pattern. No thoughtful person can contemplate the difficulties attending the correct solution of these questions without some apprehensions as to the future of the Republic. Fortunately there is an inner Republic, formed of the Bench and Bar, to whose wisdom, moderation, and patriotism, the issues joined are first submitted. Whatever may be our professional duties to our clients in private. causes, the American Bar, as one of the moral and intellectual forces of the nation, has a clear and important duty to perform in matters of such great public concern. Here it is to do what we fitly may, to lift above the passions of the hour enterprises which are so closely and prominently connected with our chosen profession, and also with the wealth, prosperity, and glory of our common country.

PAPER

READ BY

M. DWIGHT COLLIER.

Stock Dividends and their Restraint.

The growth of corporate interests has been attended by the development of constitutional and statutory provisions. for their regulation and control. The abuses which have arisen have produced the attendant restraints. The too liberal, if a stronger term is not applied, exercise of the legislative power to grant special charters, resulted in the almost universal adoption of constitutional provisions restricting the right to grant charters, to the enactment of general laws, under which alone private corporations could be organized. Under their broad definitions of purposes, and their facility of organization, the past few years have been remarkable for the growth of these interests. The vast majority of the corporations now in existence owe their life to these general laws, and it is this class to which this discussion more especially applies. Whether or not corporations created by special charters come within the prohibitions of the provisions under discussion, is a question involving principles which are not within the limits of this paper.

Another class of legislation has been the outgrowth of another evil, which has resulted from the liberal provisions of the general laws governing corporations and their powers. Corporate securities in the shape of capital stock, bonds, and

other negotiable securities, have increased so largely that the earning capacity of the corporations has been taxed to their full extent in order to meet the fixed charges which some of these entail, and to make any return upon the shares, which represent capital stock apparently invested. That this effort has been too great in many cases, the various foreclosure proceedings and reorganizations show. But the effect of this overburdening of corporations has made itself felt in the increased tax, especially in the case of railroads, which have fallen upon the public. The reaction which this latter burden has produced has given rise to the adoption of means to regulate and relieve it, and to prevent the causes which have occasioned it. The Granger laws, as they are called, were the effort to accomplish the former purpose, and the provisions under discussion that for the latter.

The latter are both constitutional and statutory, and will be given in the order of their importance.

In the states of Alabama, California, Colorado, Louisiana, Missouri, Pennsylvania, and Texas, the constitutional provisions are general, but in Illinois and Nebraska they apply only to railroads. Their language is practically the same, although in some of them it is more specific. The differences, however, are not especially important, for none of them materially affect the intent and purpose. In Illinois and Nebraska the provision that "all stock dividends and other fictitious increase of the capital stock, etc., shall be void," only strengthens the construction of the restraint involved in the entire section.

The language of the section of the constitution of California is so nearly identical with that of most of the states, that it will answer for the examination of the principles involved in them all. It is as follows: "No corporation shall issue stock or bonds except for money paid, labor done, or property actually received; and all fictitious increase of