concerned, it is immaterial whether the owner of the business is an individual or a firm or a corporation. The question is not as to the ownership but is whether the business is affected with a public interest. For instance in Maine, the regulation of rates of a public grist-mill was upheld although operated by individuals and the court said that it was conceded that certain named enterprises "are of that public. nature to be put under public control, whether operated under the authority of charters from the state, or by individual enterprise." 80 To further illustrate, it is well settled that the rates of hackmen may be regulated although ordinarily they are owned by individuals rather than corporations. And in the leading New York case of People v. Budd the court expressly states that "the mere fact of a corporate character does not extend the power of legislative regulation." "" 81 § 4467. Power to regulate not affected by failure to exercise power for long time. So far as the power to regulate rates is concerned, it is immaterial that the power was not exercised until many years after the company was organized or that before the power was exercised the company had pledged its income as security for the payment of debts incurred, and had leased its road to a tenant that relied upon the earnings for the means of paying the agreed rent.82 § 4468. Power to require and regulate street car transfers. As a part of the power to regulate rates, the government may require street railway companies to issue transfers,83 and a municipality having the power to regulate street car companies may forbid the use of street car transfers except by the person to whom issued. So statutes 80 State v. Edwards, 86 Me. 102, 25 L. R. A. 504, 41 Am. St. Rep. 528, 29 Atl. 947. 81 People v. Budd, 117 N. Y. 1, 21, 5 L. R. A. 559, 15 Am. St. Rep. 460, 22 N. E. 670, 682. 82 Chicago, B. & Q. Ry. Co. v. Iowa, 94 U. S. 155, 162, 24 L. Ed. 94. 83 Chicago Union Traction Co. v. Chicago, 199 Ill. 484, 59 L. R. A. 631, 65 N. E. 451; Oklahoma R. Co. v. Powell, 33 Okla. 737, 127 Pac. 1080; Barre v. Barre & M. Power & Traction Co., 88 Vt. 304, 92 Atl. 237. But see Atlanta v. Old Colony Trust Co., 88 Power conferred upon a municipality to fix the rate of fare to be charged by street railway companies includes power to require them to furnish transfers to connecting lines of the same company without additional payment. Chicago Union Traction Co. v. Chicago, 199 Ill. 484, 59 L. R. A. 631, 65 N. E. 451. 84 Ex parte Lorenzen, 128 Cal. 431, requiring a street railroad company to accept transfers from contiguous independent lines are upheld,85 although there is some authority to the contrary.86 But if there is a valid contract fixing the rates of a street car company made by a municipality with authority, so as to be within the constitutional protection forbidding impairment of contracts, a municipality cannot in effect reduce the rates by requiring transfers.87 So where a municipality has failed to reserve the right to compel two street car companies to issue transfers to each other's lines, the "courts" are powerless to compel such transfers, so long as they are legally independent of each other, since courts cannot make contracts or supply omissions in contracts, or bind one company by the contract of another.88 § 4469. Power as extending to increasing as well as reducing rates. The authority to regulate and fix rates is not limited to reducing rates but also includes the power to increase rates.89 Thus, the fact that a city fixes maximum rates, but without any authority so to do delegated by the legislature, does not preclude the public service commission from increasing such rates above said maximum.90 § 4470. Particular companies whose rates may be regulated. As said by Justice Andrews in the New York Court of Appeals, there is no doubt that the legislature is without power "to regulate private business, prescribe the conditions under which it shall be conducted, fix the price of commodities or services, or interfere with freedom of contract. "'91 There is a difference between regulation of prices and 50 L. R. A. 55, 79 Am. St. Rep. 47, 61 Pac. 68; St. Paul v. Robinson, 129 Minn. 383, L. R. A. 1916 E 845, 152 N. W. 777. 85 District of Columbia v. Capital Traction Co., 41 App. Cas. (D. C.) 115. "Notwithstanding the apparent effect of the statutory regulation, if otherwise valid, may be to compel the carriage of the transferred passengers at a serious loss, so far as their carriage is concerned, the act is not void upon its face as depriving" the company "of its property without due process of law, because it is to be presumed that the loss will not be such as to render the business of the corporation unremunerative as a whole." District of Columbia V. Capital Traction Co., 41 App. Cas. 86 Chicago City Ry. Co. v. Chicago, 88 State V. Tacoma Railway & 89 Iowa Railway & Light Co. v. Jones Auto Co., Iowa 164 N. W. 780. 90 People v. Public Service Commission, 2d District, 175 N. Y. App. Div. 869, 162 N. Y. Supp. 405. 91 People v. Budd, 117 N. Y. 1, 15, 5 L. R. A. 559, 15 Am. St. Rep. 460, 22 N. E. 670, 682. 93 [§ 4470 other police regulations. Thus all corporations may be subjected to ordinary police regulations, without regard to the nature of the corporation, while only those whose property is engaged in the use of the public or is affected with a public interest are subject to be regulated as to rates.92 Moreover, it would seem that the business of some companies may be of such a public nature that regulations forbidding discriminations between patrons might well be upheld and yet regulations of their rates would be held to be beyond the power of the state.9 The corporations whose business is affected with a public interest, so as to be subject to greater regulation than other corporations, including regulation of their rates or charges, have already been enumerated in a preceding subdivision of this chapter,94 as have the corporations which are within the jurisdiction of public service commissions.95 Now, neither the federal government, a state legislature, nor a municipal corporation, can regulate the rates of any corporation except it belongs to one of the enumerated classes or is a like company whose business is affected with a public interest. For instance, there is no question but that the charges of an ordinary manufacturing corporation cannot be regulated. On the other hand, the rates or charges of all the so-called public service corporations, including railroad, street railroad, telegraph, telephone, water, gas, electric light, irrigation, grain elevator, etc., may be regulated, provided such regulation does not unduly interfere with interstate commerce, impair the obligation of a contract, take property without due process of law, deny the equal protection of the laws, or violate other constitutional provisions.9 Furthermore, the list of companies whose business may be said to be affected with a public interest so as to be subject to rate regulation has been extended recently by the Supreme Court of the United States to fire insurance companies,97 a decision which is destined to have an important effect on future legislation in general. 96 It is to be noted, however, that a corporation may be a public service one or otherwise one whose business is affected with a public interest, and yet not one within the jurisdiction of the public service commis 92 See State v. Edwards, 86 Me. 102, 105, 25 L. R. A. 504, 41 Am. St. Rep. 528, 29 Atl. 947, and also § 4362, supra. 93 For instance, regulations forbidding discriminations as between patrons of hotels, theaters, etc., are upheld but it would seem that the state has no power to regulate their prices. 94 See § 4375, supra. Power of municipality to fix rates does not extend to company furnishing water to its stockholders only. McFadden v. Board Sup'rs Los Angeles Co., 74 Cal. 571, 16 Pac. 397. 95 See § 4379, supra. 96 Constitutional prohibitions, $$ 4485-4497, infra. 97 See § 4464, supra. see sion so as to subject it to rate regulation by such a commission although its rates may be regulated by the legislature or a municipality,98 Generally, however, the statutes creating public service commissions are sufficiently broad in enumerating the kinds of business within their jurisdiction to include all, or nearly all, the corporations, whose rates are subject to regulation by the legislature. § 4471. Rates of municipal plants. Rates of a municipality which owns its own water, gas, electric light, or the like, plant, must be reasonable, and if they are not reasonable the courts may interfere.99 This subject is further discussed in textbooks on the law of municipal corporations.1 § 4472. Fixing rates by contract as distinguished from "regulation" of rates independently of agreement-In general. The courts often use the words "fix" and "regulate," as applied to rates, as synonymous, and they are so at least in so far as the establishment of rates without the consent of the company or companies affected are concerned. Sometimes, however, the "fixing" of rates is used in the sense of contracting in regard thereto, and when so used a different question is presented than when the regulation of rates is concerned. In fact considerable confusion has resulted from the failure to clearly keep in mind the difference between the power (ordinarily exercised only by the municipality) to contract as to rates with a company and the power to regulate rates independently of any agreement.2 98 See § 4386, supra. 99 Chicago v. Northwestern Mut. Life Ins. Co., 218 Ill. 40, 1 L. R. A. (N. S.) 770, 75 N. E. 803; Culver v. Jersey City, 45 N. J. L. 256. 1 See 4 McQuillin, Municipal Corporations, 1803. 2 Boerth v. Detroit City Gas Co., 152 Mich. 654, 18 L. R. A. (N. S.) 1197, 116 N. W. 628. "This power to legislate within the authority delegated to them by law is distinct from the power to contract, although exercised by the same corporation. They cannot by contract delegate or restrict their legislative power, nor can they merely by their legislative power make a contract. These two powers need not be confounded. The exercise of the legislative power requires the consent of no person except those who legislate, while it is impossible to make a contract without the consent of another or others. We think, therefore, that when the city of Indianapolis made the contract in question with the gaslight company (a contract like that involved in this case) it made it in the exercise of its power to contract, and not in the exercise of its power to legislate, although the power to make the contract was authorized by an ordinance; and, having the power to make a contract touching the subject-matter, it had the right to make it according to its own discretion as to its prudence or good policy within the limits of its franchise." Indianapolis v. Gaslight & Coke Co., 66 Ind. 396. "The power to fix and regulate the § 4473. Power of municipality to "contract" as to rates. As will be noticed hereafter, the power of a municipality to contract with a public service company as to rates for the community is held to be very limited where the question involved is whether there is a valid contract within the constitutional prohibition against impairment of contracts. However, there is a class of decisions, not involving any question of impairment of contract, but merely deciding whether the contract for rates, contained in a street franchise, is within the power of the municipality so as to be binding upon the company in controversies with the municipality or with patrons or consumers, which hold that where the municipality has power to refuse the use of its streets to a public service company, and the agreement as to rates to be charged patrons is a part of the grant of the franchise to use the streets and therefore supported by a valuable consideration, the power to impose conditions on granting the franchise includes the power to stipulate in the franchise as to the rates. In other words, a municipal rates which the inhabitants of a city shall pay to business corporations for water, gas, transportation, and other public utilities partakes of the nature of a governmental power and also of that of a business power. Are the inhabitants of a city paying rates not fixed by contract to quasi public corporations for public utilities? The power to so regulate these rates that they shall not be unreasonable is a legislative, a governmental power which the state or city may exercise, but may not renounce. Is a city without waterworks and hence without rates at which anyone will furnish water therefrom to the municipality or its inhabitants? The making of a contract for the construction and operation of waterworks wherein the parties agree what rates may be collected by the owner of the works from private consumers during a reasonable term of years is the exercise of one of the business powers of the corporation. The purpose of such a contract is not to regulate rates, for there are no rates to regulate. It is to procure water and to get rates for the city and for its inhabitants."' Omaha Water Co. v. Omaha, 147 Fed. 1, 5, 12 L. R. A. (N. S.) 736, 8 Ann. Cas. 614. 3 See § 4490, infra. 4 Indiana. Noblesville v. Noblesville Gas & Improvement Co., 157 Ind. 162, 60 N. E. 1032. Louisiana. Shreveport Traction Co. v. Shreveport, 122 La. 1, 129 Am. St. Rep. 345, 47 So. 40. Maryland. Charles Simon's Sons Co. v. Maryland Telephone & Telegraph Co., 99 Md. 141, 63 L. R. A. 727, 57 Atl. 193. Massachusetts. Selectmen of Clinton v. Worcester Consol. St. R. Co., 199 Mass. 279, 85 N. E. 507, holding restrictions requiring half fare for pupils attending schools could not be attacked, and that the word "schools" included a state normal school, but not a college or a business institute. Michigan. Boerth v. Detroit City Gas Co., 152 Mich. 654, 18 L. R. A. (N. S.) 1197, 116 N. W. 628. New Jersey. Long Branch Commission v. Tintern Manor Water Co., 70 N. J. Eq. 71, 62 Atl. 474, aff'd without opinion 71 N. J. Eq. 790, 71 Atl. 1134. |