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Mr. Evarts gave his opinion at greater length. After drawing the distinction between corporate franchises and corporate property, he asserts, that, in respect of all property lawfully acquired, such corporations as railways, where continuing exercise of a franchise partakes of a public function, are as completely its owners and proprietors under all the conditions of protection and security as individual citizens;1 and that their title to its possession and enjoyment does not depend on the continuance of the contract grant of the franchise, “but rests qua property upon the constitutional guaranties common to all property,” and that the reservation of legislative control over the franchise, whatever it may mean, does not reach to an appropriation by the state of the corporate property. He therefore concludes that
“ The extent of the reserved right to the state, under the clause of the constitution of Wisconsin is, – First, absolutely to terminate the franchise ; thus liberating the grantee from further performance, and restoring to the state the franchise in its plenitude. This would leave the property of the corporation to be wound up under the protection of the constitution, the law, and the courts, and cast upon the state, if railroad service was further desired within the borders of Wisconsin, the duty of providing such service at the public expense, or renewing a grant of the franchise to some new grantee. Second. To modify the granted franchise in its future exercise, either by reducing the privilege or by burdening it with such conditions as the state should see fit to impose. In this case, the grantee would be free to accept or reject the modified or burdened privilege. Its contract exposed it, we may concede, to lose its privilege, at the pleasure of the state, but did not bind it to involuntary and uncompensated servitude to the state as a taskmaster. If the grantee accepts the reduced or burdened service, a new contract is made and new obligations assumed. If the grantee rejects the proffered franchise, thus reduced and burdened, the state may retire from the new exaction, or wholly terminate the franchise. . . . If I could feel any doubt that this interpretation of the constitutional reservation gave to it the just force which its language requires, a recurrence to the motive and occasion upon which this form of reservation was introduced into our legislation would remove such doubt, by showing that this interpretation satisfied as well the reason of the clause as its language. The mischief of irrevocable, immutable grants of franchise, held under inflexible guaranty of the sanctity of contracts, needed some remedy, and this clause was adopted with that object. The interpretation I have given it is coextensive with the mischief.
1 The People v. Batchellor, 53 N. Y. 140.
“ The continuance of the privilege, in whole or in part, is at the option of the state, which satisfies completely the public interest. To carry it beyond this efficiency would be to convert the clause into a means of oppression, even to the extent of confiscation.
“ The act of March 11, 1874, does not purport to terminate the franchises of the railroad absolutely or conditionally ; nor to modify or reduce the service of the corporation in the maintenance or conduct of the franchises in the future, in the least; nor to impose burdens or conditions upon
such future exercise, which the corporation is required to assent to, if it desires to maintain the continued possession of the franchise. The act proceeds upon no such spirit or purpose.
“On the contrary, the act undertakes to secure the full measure of public service, involved in the granted franchises, by the unusual and cumulative compulsion of fines and aggravated damages for any and each refusal to perform the corporate duty of carrying passengers and freight. ...
“ In doing this, it purports to maintain and continue and compel the exercise of the full service of the franchise, which it in no degree terminates, modifies, or curtails. In considering the legal nature of this asserted right on the part of the state, I cannot fail to ascribe to it, if it exists at all, full authority to coerce this corporation, by penal enactments, to the full performance of the franchise service, without according to it any rate of freights or fares that would furnish any earnings to meet the interest on its mortgage debt, or any adequate provision for the running expenses of the road.”
He therefore regards the authority asserted in this legislation to be equivalent to a claim by the state, under cover of this reservation, to "appropriate corporate property to the public service, at the discretion of the legislature, without compensation therefor; and a claim to maintain the contract with the company in full force as to all engagements onerous on the company, but to revoke or modify at will all stipulations for the company's benefit.” He therefore holds the Potter law to be repugnant to the constitutions of the state of Wisconsin and of the United States.
“ But if it be said that, as railroads are declared by the Henderson act to be common carriers and bound to carry freight and passengers for reasonable rates, the rates given in the Potter act are to be deemed a statutory declaration of what are reasonable rates, the answer is, that such questions of reasonableness are only to be judicially determined by a court and a jury upon the facts in each case, and cannot be fixed by enactment. If the Henderson act declaring railroads public highways' means no more than previous decisions had already made familiar law, its import is not objec
tionable. But if the act means to convert the railroad of this company, built and paid for and owned by this private corporation as its property, into a public highway, in the sense that the public have a right to use it without compensation, and any obstruction of that public right by the corporation would be a purpresture, I must insist that such a conversion of the property in question to the public use of a highway, without compensation, is as plain a violation of the constitution of Wisconsin as appropriating a private road through a farm to the public use as a highway would be.”
Mr. Evarts therefore advised that the constitutionality of these laws be tested in the courts.
While railroad corporations in Wisconsin were thus taking the opinion of eminent counsel as to the validity of these acts, it would seem that even in Wisconsin their constitutionality was so much questioned that the governor deemed it expedient to request an opinion upon their constitutionality and validity from the Attorney-General, Mr. A. Scott Sloan, before undertaking to attempt their enforcement. Mr. Sloan, citing Tomlinson v. Jesup; 1 Madison, Watertown, f Milwaukee Plank-road Company v. Reynolds ; 2 Pratt v. Brown ; 3 Nazro v. Merchants' Insurance Company ; 4 Chapin v. Crusen,said, that as to the power of the legislature to pass laws, these cases " seem to warrant the conclusion that there can be no such limitation of the power as is now claimed for it, or that can affect the validity of the law under consideration, and the adjudications in the courts of other states, and of the Supreme Court of the United States, are in entire harmony with our own, and abundantly sustain the legislation of last session and its constitutionality.” In support of his conclusion, he cites McLaren v. Pennington ; 6 Crease v. Babcock ; 7 Suydam v. Moore ; Northern Railroad Company v. Miller ; ' Perrin v. Oliver ; 10 Erie Railroad Cases ; 11 In the matter of the Reciprocity Bank ; 12 Olive Lee Bank ; 13 Pennsylvania College Cases ; 14 Tomlinson v. Jessup; 15 Miller v. State ; 16 Olcott v. Supervisors.17 He then, after saying that it is conceded that under this reservation all acts of incorporation may be absolutely repealed and the corporations created by them dissolved, continues :
1 15 Wall. 454. 2 3 Wis. 287. 8 3 Wis. 603.
14 13 Wall. 190. 16 15 Wall. 478, 2 Kent. Comm. 396. 17 16 Wall. 694
4 14 Wis. 295. 8 8 Barb. 538. 12 22 N. Y. 9. 15 15 .Wall. 454.
“If the legislature can thus wholly destroy every corporation it has created, and compel a total surrender of all franchises and privileges, and of all power to transact business, except such as may be necessary to convert its property into money and wind up its affairs, it seems difficult to urge any valid reason against legislation which merely limits the corporate power and restricts the privilege of charging higher rates for transportation than the legislature may deem just and equitable.” Denying that there are any “latent limitations”
“The power to alter is given by the constitution just as clearly as the power to repeal, and it is difficult to see why a limitation cannot as well be applied to the one as to the other. If the state may take away the franchise entirely, why may it not so regulate and control its exercise as to further the public purpose for which it was bestowed? Ordinarily the greater includes the less; here the lesser power is given in express terms. The legislature may alter, and this word must be given some signification different in sense or in degree from the power to repeal. It cannot be said to apply to the right of taxation and police regulations; for these are inherent in the state, applicable alike to individuals and corporations, and in no way dependent on the clause of the constitution referred to. It must mean that the legislature may, in its discretion, instead of taking the extreme and severe measure of repeal, exercise the lesser and milder right, and impose such restrictions and conditions upon the conduct of the affairs of the corporation, and so limit its charges, as will best promote the object of its creation and prevent the abuse of the powers and privileges granted to it.
“ The corporations cannot justly complain of this.. They have accepted their charters subject to this express reservation, and, having so accepted, they hold them upon the faith of the state only, taking care to deserve its favor or command its justice by the manner in which they exercise the power conferred. If a wrong is done or a mistake made in the exercise of the reserved power, the aggrieved party must resort to the legislature for redress. This was the agreement created by the acceptance of the charter, and the application for relief must be made to the tribunal selected by the contracting parties.
“ But if this limitation, that the rates fixed by the legislature must be reasonable, exists at all, it arises, not from the reservation or its construction, but rather out of the common-law rule, that, in the absence of any legislative enactment on the subject, common carriers are bound to carry all freight and passengers which are offered, at reasonable rates, and cannot discriminate unjustly between shippers. In my judgment, it is impracticable to apply this common-law rule to railroad corporations as a substitute for legislative control and regulation. ... I am led to the conclusion that the
better view is that the judgment of the legislature is, by the reservation of power and the necessities of the case, the measure of the reasonableness of the regulation imposed. The corporation certainly cannot arbitrarily determine the question, and, on the assumption that the rates are unreasonable, disregard the law. The legislative act is conclusive that the rate is reasonable. The exercise of the power is of itself an assertion of its justice and of its necessity. The railroads cannot question it, the courts cannot review it; for, by the agreement of the parties in accepting the charters under the reservation, the whole subject is withdrawn from the domain of judicial decision, and remains only a matter for the legislative conscience.
“ And so with the objection that the provision of this law assumes control of the property of the corporation, and deprives them of its use without making any compensation, and is therefore in conflict with the constitution of the state, and that of the United States. As these corporations have no natural existence, but are created wholly by legislative enactment, their power to act in every particular is derived from the state. Their capacity to make contracts, acquire and use property, aud to charge for its use, comes from the state, and is granted on such terms and to such extent as the legislature may prescribe. The power of the state to grant is given by the constitution, and coupled with this power is found, in the same fundamental law, the authority to alter the act of incorporation as the legislature may think the public interest demands. The rights and privileges conferred cannot be separated from the restrictions and duties imposed. The power to take toll cannnot be distinguished from the duty to take only such as the legislature shall establish. It is difficult to see how restricting these tolls within certain limits which the legislature deems just, is any more depriving the corporation of their property, than it would be to repeal their charters and thus deprive them of the power of charging any rates at all; and this latter power may confessedly be exercised without making compensation. Whether the state can compel the company to operate their roads for such compensation as it chooses to prescribe, is another and different question, not involved in this discussion. The only inquiry, while companies are openly violating the law by charging higher rates than it allows, is as to the power of the legislature to prohibit them from charging above certain fixed rates.
“But it is also claimed that the reserved power to interfere is confined to contracts made by the state with the corporation, and can have no application to such as are made by the companies with bond fide creditors. The latter are said to be within the protection of the Constitution of the United States, which prohibits the passage of any law impairing the obligation of contracts. The views already expressed apply somewhat to this objection; but the direct and obvious answer is, that the creditor contracts.with the corporation precisely as the corporation contracts with the state, and both