A the tion red be by The tion ons CHAPTER V THE STATE AND THE CORPORATION ITS CHARTER § 23. Visitorial Power. The greater number of private corporations, until within recent years, were of a charitable or ecclesiastical nature, and it was customary for the founder of such a corporation or institution in the organization of the corporation, accompanied generally by a donation of funds for its establishment and maintenance, to provide that a representative, to be selected by him or his heirs, should have the right of "visiting" the institution in order to determine whether the purposes and objects for which it was originally created were being carried out and in a manner in conformity with the original intentions and wishes of the founder. This power of visitation, as it was termed, is, in a historical sense at least, the basis of the right of the State to control and regulate the conduct and the business of private corporations. The deeper reason, as well as the true one, is not derived from the ancient power of visitation, but depends upon the legal proposition that the State creates the corporation and that it alone has this power. All corporations, therefore, assume a corporate existence and engage in the conduct of their business subject to the supreme power of the State to regulate and to control them. This power is only limited by constitutional provisions having for their purpose the protection of fundamental and vested personal and property rights, and since, as will be stated later, the relation between the State and the corporation is a contract one, the power of control and regulation must be exercised in the manner provided by charter and in accordance with the same general principles of law which govern contracts between individuals. 29 § 24. Control of Quasi-Public Corporations. In that section containing the classification of corporations, a division was given based upon the nature or character of the functions performed respectively by different corporations, corporate organizations falling within this classification being known as public, quasi-public and private, or, strictly speaking, public and private, the quasi-public corporation being, in all its essential characteristics a private one. The control by the State of public corporations is absolute, except as limited by constitutional provisions. The extent of the power of control of private corporations by the State is indicated in the preceding section. Quasi-public corporations are private corporations but the conduct of their business affects the interests of the public in a large sense, and for this reason they are subject to a greater degree of control and regulation by the State than other private corporations not falling within this class. It is this fact which gives rise to the designation or term of quasi-public corporations. This principle of greater control and regulation was first authoritatively announced by the Supreme Court of the United States in the so-called Granger cases. The one most frequently cited is Munn v. Illinois,1 where Chief Justice Waite, in the majority opinion, said: "Their business is therefore affected 'with a public interest', within the meaning of the doctrine which Lord Hale has so forcibly stated. But we need not go further. Enough has already been said to show that when private property is devoted to a public use, it is subject to public regulation. This brings us to inquire as to the principles upon which this power of regulation rests in order that we may determine what is within and what is without its operative effect. Looking then to the common law, whence comes the right which the Constitution protects, we find that when private property is affected with a public interest it ceases to be juris privati (of private right) only." The question at issue in the Munn case was in respect 194 U. S. 77. to the power of the State to fix maximum rates of storage to be charged by grain elevators, and because the business so carried on affected, as the court held, the public interest, it was subject to a greater extent to the regulative powers of the State. Familiar illustrations of quasi-public corporations are: common carriers, gas, telegraph, telephone, elevator, and express companies. This power of regulation is generally exercised by the State through administrative boards or commissions created by law and limited strictly in the exercise of their powers to those granted directly or specifically by statute. The Federal Government exercises its supervisory powers over common carriers engaged in the business of conducting interstate commerce through the Interstate Commerce Commission. When the doctrine of regulation was definitely and authoritatively established by the decision in the Munn case, the popular idea of the effect of the decision was that the power to regulate could be exercised by the State without restraint. The Supreme Court of the United States, in the next case2 before it involving the same question, hastened to hold that the power of regulation was not an equivalent of the right of confiscation and that the State could not in the exercise of the power possessed deprive private corporations of their property without due process of law, or appropriate their property without the payment of just compensation. The court, in its opinion by Chief Justice Waite, said: "From what has thus been said, it is not to be inferred that this power of limitation or regulation is itself without limit. This power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freights, the State cannot require a railroad corporation to carry persons or property without reward; neither can it do that which in law amounts to a taking of private property for public use without just compensation or without due process of law." 2 Stone et al. v. Farmers' Loan & Trust Co. 116 U. S. 307. The modified doctrine of the Munn case, as thus stated in the Stone case, has been repeatedly followed by the Supreme Court of the United States, and is the established doctrine, therefore, relating to the exercise of the power of regulation of quasi-public corporations by the State. The power to regulate is not synonymous with a power to destroy or to confiscate, but must be exercised within constitutional provisions not contrary to constitutional prohibitions, and must be of a reasonable character. § 25. Power of Regulation Further Considered. The power of regulation, as stated in the preceding section, and in respect to quasi-public corporations, is based upon the distinction between a public employment and a private business, and depends upon the fundamental duty of the State to protect the public and to prevent extortion and discrimination in the supply of the necessaries of life, whether these are articles consumed or services rendered. Whether a business is public or private seems to depend upon whether it is a monopoly or not. The distinction between a public employment and a private business is an old one, and in respect to public employments there has been a persistence of State regulation for many years. Necessarily, with changed commercial and social conditions employments considered public many years ago have ceased to be regarded in this light, and others formerly considered as private in their nature are now held to be public employments. The grant of legal privileges is not necessarily a ground for regulation. The right of eminent domain given by the State to certain quasi-public corporations does not make them such, but this right is granted by the State because of the nature of their business as a public employment. The authorities are fairly well agreed that virtual monopoly is the only basis of regulation, and this may exist either by or through the grant of exclusive privileges or franchises, so-called; through the character of the business conducted or carried on by the corporation; through the existence of an established plant the duplication of which by other corporations could only be accom plished by the expenditure of large or prohibitory sums of money; through the exclusive ownership of natural products, a limited supply of which exists; or through the ownership of natural locations especially adapted for the rendition of the service or the manufacture of a particular commodity. § 26. The Objects of Regulation. The courts are agreed that the two chief objects of the regulation of quasi-public corporations are: first to prevent extortion and to secure a reasonable charge for the service rendered or the commodity supplied; and, second, to prevent discrimination or the giving of undue preferences either as between persons and localities or in service. From the standpoint of the quasi-public corporation which, it will be remembered, is a private one, the process of regulation cannot go to the extent of fixing a charge for its services so low that no return or an unreasonably low return will be had upon the private property invested in the enterprise. If this is done, it will amount to a taking of the property without due process of law; or a confiscation of property without the payment of just compensation; and these results are prevented through the application of constitutional provisions. The courts have held that the rendition of services, transportation by common carriers, for illustration, is property, and that the State cannot fix, in the exercise of its regulative powers, so low a price to be paid by the public as to compel it to carry on its business at a loss, or otherwise than as indicated in the following paragraph. This, they say, would be a confiscation of private property or a taking of private property belonging to a private corporation without due process of law. In general, therefore, the courts, without exception, have sustained the doctrine that the rendition of a service, whether that of transportation or the supplying of some commodity, is property within the meaning of constitutional provisions relative to the taking of property without due process of law, or without the payment of full and |