Ruggles v. People of the State of Illinois/Opinion of the Court

by Morrison Waite

United States Supreme Court

108 U.S. 526

Ruggles  v.  People of the State of Illinois

In the view we take of this case the only question that need by considered is whether the charter of the Central Military Tract Railroad Company, one of the Illinois corporations which, through agreements of consolidation, are now represented by the Chicago, Burlington & Quincy Railroad Company, purports on its face to grant to the company the right to fix the rates of fare and freight to be charged for the conveyance of persons and property on its railroad free of all control by the state. If, on examination, we find that no such grant was intended, it will be unnecessary to decide whether one legislature has the power to bind succeeding legislatures by a contract to that effect.

The provisions of the charter relied on to establish such a grant may be stated as follows:

On the fifth of November, 1849, an act was passed by the general assembly of Illinois 'to provide for a general system of railroad incorporation.' That act contained the following provisions:

'Sec. 12. The directors of such company shall have power to make by-laws for the management and disposition of stock, property, and business affairs of such company, not inconsistent with the laws of this state, and prescribing the duties of officers, artificers, and servants that may be employed, for the appointment of all officers for carrying on all the business within the object and purposes of such company.

'Sec. 21. Every such corporation shall possess the general powers, and be subject to the general liabilities and restrictions, expressed in the special powers following; that is to say:

* * *

'(8) To take, transport, carry, and convey persons and property on their railroad, by the force and power of steam, of animals, or any mechanical powers, or by any combination of them, and receive tolls or compensation therefor.

* * *

'(10) To regulate the time and manner in which passengers and property shall be transported, and the tolls and compensation to be paid therefor; but such compensation for any passenger and his ordinary baggage shall not exceed three cents a mile, unless by special act of the legislature, and shall be subject to alteration as hereinafter provided.

* * *

'Sec. 32. The legislature may, when any such railroad shall be opened for use, from time to time, alter or reduce the rates of toll, fare, freight, or other profits upon such road; but the same shall not, without the consent of the corporation, be so reduced as to produce with said profits less than 15 per cent. per annum on the capital actually paid in; nor unless, on an examination of the amounts received and expended, to be made by the secretary of state, he shall ascertain that the net income divided by the company from all sources for the year then last past shall have exceeded an annual income of 15 per cent. upon the capital of the corporation actually paid in.'

On the fifteenth of February, 1851, another act was passed to incorporate the Central Military Tract Railroad Company, for the purpose of building and using a railroad between certain designated points. Section 3 of that act is as follows:

'Sec. 3. The said company is hereby created and incorporated for the purpose of organizing under an act entitled 'An act to provide for a general system of railroad incorporations,' in force November 5, 1849, and in all things shall be governed by the provisions thereof, and shall be entitled to have and exercise the powers and privileges and be subject to the liabilities therein enumerated: provided, that the foregoing corporation may attach themselves to and form a part of the Northern Cross Railroad Company, in such manner or on such terms as said companies shall agree.'

On the nineteenth of June, 1852, another act was passed 'to amend an act entitled 'An act to incorporate the Central Military Tract Railroad Company." The following are the parts of this amending act on which, in our opinion, the case depends:

'Sec. 5. All the corporate powers of said company shall be vested in and exercised by a board of directors, and such officers and agents as they shall appoint. * * *

'Sec. 6. The said company shall have power to make, ordain, and establish all such by-laws, rules, and regulations as may be deemed expedient and necessary to fulfill the purposes and carry into effect the provisions of this act, and for the well-ordering, regulating, and securing the affairs, business, and interest of the company: provided, that the same be not repugnant to the constitution and laws of the United States or of this state, or repugnant to this act. The board of directors shall have power to establish such rates of toll for the conveyance of persons or property upon the same, as they shall from time to time, by their by-laws, determine, and to levy and collect the same for the use of the said company. The transportation of persons and property, the width of track, and all other matters and things respecting the use of said road, shall be in conformity to such rules and rgulations as the said board of directors shall from time to time determine.'

It is contended on the part of the company that this amending act repeals clause 10 of section 21 as well as section 32 of the general railroad law, so far as they are applicable to the Central Military Tract Company, and that under section 6 of the amending act the directors have absolute control of rates of fare and freight free of legislative interference. We deem it unnecessary to determine the question of repeal, because on full consideration we are satisfied that section 6 does not have the effect that is claimed for it.

Grants of immunity from legitimate governmental control are never to be presumed. On the contrary, the presumptions are all the other way, and unless an exemption is clearly established the legislature is free to act on all subjects within its general jurisdiction, as the public interest may seem to require. As was said by Chief Justice TANEY, speaking for the court, in Charles River Bridge v. Warren Bridge, 11 Pet. 547: 'It can never be assumed that the government intended to diminish its power of accomplishing the end for which it was created.' This is an elementary principle.

In Chicago, B. & Q. R. Co. v. Iowa, 94 U.S. 155; Peik v. Chicago %& n. w. r/y. Co. Id. 176; and Winona & St. P. R. Co. v. Blake, Id. 180, it was determined that 'a state may limit the amount of charges by railroad companies for fares and freights, unless restrained by some contract in the charter.' The right to a reversal of the present judgment rests on the question whether this company has any such restraining contract, and that depends on the effect to be given the amending section 6.

The company by its original charter was authorized to transport passengers and property, and to receive compensation therefor. This, if there had been nothing more, would, under the rules stated in Munn v. Illinois, 94 U.S. 113, and the several railroad cases decided at the same time, require the company to carry at reasonable rates, and leave the legislature at liberty to fix the maximum of what would be reasonable. So that, laying aside the limitations of the old charter, the question here is whether the amending section relied on has the effect of taking away from the state this power of legislative regulation.

The amending section provides that the company 'shall have power to make, ordain, and establish all such by-laws, rules, and regulations as may be deemed expedient and necessary to fulfill the purposes and carry into effect the provisions of this act, and for the well-ordering, regulating, and securing the affairs, business, and interest of the company: provided, that the same be not repugnant to the constitution and laws of the United States, or of this state, or repugnant to this act.' By section 5, all the powers of the company were vested in and could be exercised by the directors. Clearly, under this authority, no by-law can be established by the directors that does not conform to the laws of the state, and this, whether the laws were in force when the amended charter was granted or came into operation afterwards. The power of the company for the regulation of its own affairs was thus in express terms subjected to the legislative control of the state. The corporate power was a continuing one, and intended for the ordering of the affairs of the company as circumstances might from time to time require. The reserved control by the state was also continuing in its nature, and manifestly intended for the protection of the public whenever in the judgment of the legislative department of the government the necessity should arise.

Then follows the special provision on which the claim of a contract is predicated. It is as follows:

'The board of directors shall have power to establish such rates of toll for the conveyance of persons or property upon the same as they shall from time, by their by-laws, determine, and to levy and collect the same for the use of the company.'

This is the form in which the power to charge and collect compensation for the carriage of persons and property was granted by the amended charter. The rates must be fixed by by-laws, and no by-law can be made that is at all repugnant to the laws of the state. The first paragraph of the section, with its proviso, prescribes generally what is necessary to the validity of a by-law, and the second allows the directors to fix rates by by-laws. It is undoubtedly true that the first paragraph neither adds to nor takes from the inherent power of a corporation to make by-laws for the regulation of its affairs, and that the proviso is nothing more than a legislative declararation of the principle of the common law that all by-laws must be reasonable, and not in conflict with the laws of the state. But the very fact that such a provision would have been implied, adds to the significance of its incorporation in express terms into the charter, and manifests a determination not to leave room for doubt as to the right of the state to use its legislative power, if necessary, for the regulation of the affairs of the corporation, at least by the enactment of general laws applicable to all corporations of a like character, and engaged in a like business. There is nothing which even in the remotest degree indicates that a by-law fixing rates is to be of a different character from those regulating the other business of the company. When, therefore, in a section of the charter which expressly declares that no by-law shall be made that is in conflict with the laws of the state, we find that the rates of charge to be levied and collected for the conveyance of persons and property are to be regulated by by-laws, the conclustion is irresistible that only such charges can be collected as are allowed by the laws of the state. This implies that, in the absence of direct legislation on the subject, the power of the directors over the rates is subject only to the common-law limitation of reasonableness, for in the absence of a statute, or other appropriate indication of the legislative will, the common law forms part of the laws of the state, to which the corporate by-laws must conform. But since, in the absence of some restraining contract, the state may establish a maximum of rates to be charged by railroad companies for the transportation of persons and property, it follows that when a maximum is so established, the rates fixed by the directors must conform to its requirements, otherwise the by-laws will be repugnant to the laws.

It is argued, however, that this cannot be the meaning of the amending act, because if the company had, under its old charter, the absolute right of fixing rates, subject only to a limit of three cents a mile on passengers, and the state had no power to interfere, except to keep the annual profits down to 15 per cent. per annum on the paid-up capital, no one can believe it would have surrendered such a privilege and taken in lieu another so unfavorable as this. It is undoubtedly true, as was claimed in argument, and has been often said from the bench, that amendments to the charters of corporations are usually made at the solicitation of the corporations themselves, who cause the bills to be prepared and submitted to the legislatures for enactment, and that, if there is doubt as to the construction of what is enacted, this fact may be resorted to in aid of interpretation. But Vattel's first general maxim of interpretation is that 'it is not allowable to interpret what has no need of interpretation,' and he continues: 'When a deed is worded in clear and precise terms,-when its meaning is evident and leads to no absurd conclusion,-there can be no reason for refusing to admit the meaning which such deed naturally presents. To go elsewhere in search of conjectures, in order to restrict or extend it, is but to elude it.' Vattel, Law Nat. 244. Here the words are plain and interpret themselves. The directors may establish such by-laws as they please, provided they are not repugnant to the constitution and laws, and they may by their by-laws regulate the rates of fare and freight. As their by-laws must conform to the laws of the state, so must their rates. If the state had not the legislative power to regulate the charges of carriers for hire, the case would be different. But that question has been settled, and the amended charter which this company secured from the legislature must be construed in the light of that established power.

Without, therefore, undertaking to determine what rights as to fares and freights were secured to the company under the old charter, nor whether more was gained by the other provisions of the new charter than was lost by the acceptance of section 6 as it was enacted, we affirm the judgment.

BLATCHFORD, J., did not sit in this case.

Notes