is as to the domestic traffic of each state a corporation of that state subject to the laws of the state not in conflict with the constitution of the United States. It was also established that an authorization of a commission by a state to fix a schedule of rates for a railroad was not an unconstitutional delegation of legislative power. Justice Brewer said in the case first cited that the line of demarcation between legislative and administrative functions was not easily discernable and that the reasonableness of a rate was constantly changing with changing circumstances, and, therefore, was peculiarly a subject for an administrative board to determine.

The entire expense of a state railroad commission may be lawfully assessed upon railroads operating within a state in proportion to their operated mileage within the state. The court said that as the railroad commission was charged with special duties in the general supervision of the railroads of the state for the benefit of the public, it was reasonable that the expense should be so apportioned, and there was in this no violation of the state constitution providing for uniformity in taxation.

$92. The power of regulation independent of state or federal incorporation. This power of regulation under state commissions, as that of the Interstate Commerce Commission, under the Interstate Commerce Act, is dependent upon the character of the traffic, whether intrastate or interstate, and not upon the state or federal incorporation of the carrier. The same railroad is subject as to these two classes of traffic to the state and federal authority, respectively. Thus the power of the interstate commerce commission extends to railroads organized under state and federal authority as well as to corporations organized under the laws of Canada and operating in the United States. In the Merger case a corporation organized under state authority, for the purpose of holding the stock of competing interstate railroads, was adjudged an unlawful combination under the Anti-Trust Act of Congress.3

1 Chicago & N. W. R. Co. v. Dey, 35 Fed. Rep. 866; also Railroad Commission Cases, supra; Regan v. Farmers Loan & Trust Co., supra.

2 See supra, § 58.

3 Regan v. Mercantile Trust Co., supra; Ames v. Union Pacific R. Co., 6 Fed. Rep. 165; Smyth v. Ames, supra.

On the other hand, as to state traffic, it is immaterial by what agency it is performed, that is, whether by a state or a federal corporation. Railroads deriving their franchises from Congress are subject to the control of the state in all matters of taxation, rates on domestic traffic, and to all reasonable police regulations. Such subjection of such corporations to the laws of the state is not based on the acceptance by the railroad company of state legislation, but results from the failure of Congress to express any intention in the act of incorporation that they shall be exempt from state control.1

§ 93. The limitations of the state authority in domestic traffic. It was held in the leading case of the Wabash Railway Company that a state commission had no regulating power over a through interstate rate, that is, over even that part of it which was within the state. The limitations of the state authority were further illustrated in the two Kentucky cases decided in 1901. In the first of these, the court affirmed. the Kentucky court in sustaining a conviction of the railroad company for violation of the long and short haul clause of the Kentucky statute in a rate on an intrastate shipment. The court below had excluded evidence that the rates were reasonable per se, and held that it was immaterial that the less charge for the longer haul was induced by competition, on the ground that the state had authorized the state commission to give relief on application. In the other case at the same term, the Supreme Court held the Kentucky statute unconstitutional as construed by the state court in its application to a long and short haul where the short haul was wholly within the state. and the long haul was partly within and partly without the state. The court said that the direct effect of the statute so construed was to regulate the interstate rate, for it was impossible for the carrier to do any interstate business at the local rate, and so it must give up its interstate business, or else reduce the local rate in proportion. The result therefore was a direct interference with commerce between the states, carried on though it may be by a single company.

1 C. C. & A. R. Co. v. Gibbes, 142 U. S. 503 (1902), 46 L. Ed. 298, revers. U. S. 386, 35 L. Ed. 1051 (1892).

2 L. & N. R. Co. v. Kentucky, 183

ing 103 Fed. Rep. 216.

3 L. & N. R. Co. v. Eubank, 184 U.

S. 27 (1902), 46 L. Ed. 416.

§ 94. The adoption of the Fourteenth Amendment.- Prior to the adoption of the Fourteenth Amendment in 1868, there was no appeal to the federal courts against any violation by state power of due process of law or of the equal protection, of the laws, which did not involve an interference with national authority or a violation of some provision of the federal constitution. The federal courts administered the state laws and followed, as they still do, the decision given by the state courts as to the construction of the state statutes.

The fourteenth amendment provided in its first clause that no state should deprive any person of life, liberty or property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws. Corporations are persons under this amendment and are therefore entitled to due process of law and to the equal protection of the laws,' and a state has no more power to deny the equal protection of the laws to a corporation than it has to individual citizens.?

This far-reaching change in our judicial system, wherein the fundamental rights of property are protected by the federal power against state invasion, was adopted about the same time that the judicial declaration of the freedom of interstate commerce against state interference had opened the way for the direct exercise of the federal regulating power.

The

$95. Federal review of state regulation of carriers. comprehensive power of the state in the regulation of the intrastate traffic of carriers, whether exercised directly under legislative act of the state or through a commission of the state, is subject to the jurisdiction of the courts of the United States under the provisions of the Fourteenth Amendment guaranteeing due process of law and the equal protection of the laws to all persons against any invasion by state authority.

A suit against a state commission or state officials acting under the authority of a state in fixing rates of carriers is not a suit against the state within the meaning of the Eleventh Amendment of the Federal Constitution."

1 Santa Clara County v. Southern Pacific R. Co., 118 U. S. 394 (1886), 30 L. Ed. 118.

2 Railroad Co. v. Ellis, 165 U. S. 1. c. 154 (1897), 41 L. Ed. 667.

3 Chicago, Milwaukee & St. Paul R. Co. v. Becker, 35 Fed. Rep. 883 (1888); Reagan v. Farmers Loan & Trust Co.. 154 U. S. 362 (1894), 38 L. Ed. 1014, 1021; So. Ry. Co. v. Greensboro Ice & Coal Co,, 134 Fed. Rep. 82.

The jurisdiction of the courts of the United States in such cases does not depend upon the unconstitutionality of the state statute, as a valid law may be wrongfully administered by the officers of the state. If the statute of the state, as construed by the highest court of the state having jurisdiction, denies due process of law or equal protection of the laws, the federal jurisdiction under the Fourteenth Amendment may be invoked.'

This power of the federal courts cannot be limited by state legislation. One who is entitled to sue in the federal circuit. court may invoke its jurisdiction in equity whenever the established principles and rules of equity permit such suit in that court, and he cannot be deprived of that right by reason of being allowed to sue at law in the state court or before a state board on the same cause of action.2

An act of a state providing that the rates charged, established by a commission, shall be final and conclusive as to what are reasonable charges, and which, as construed by the supreme court of the state, precludes any judicial inquiry as to the reasonableness of the rates, deprives the company of its property without due process of law and of the equal protection of the laws. The carrier is thus secured under the Fourteenth Amendment, not only in a judicial hearing upon the question of his intrastate rates, but also in his right to charge reasonable rates; and the reasonableness or unreasonableness of the rates established under state authority will be reviewed by the federal courts in determining whether or not the company is deprived of its property without due process of law.*

$96. Procedure in federal review of state regulation.— The question of reasonableness of rates may be raised by a carrier by way of defense by action at law for the penalties imposed by the act of a state legislature, and also, preferably, by a bill in equity directly challenging the validity of the

rates.

The circuit courts of the United States have jurisdiction of

1 Reagan v. Farmers Loan & Trust supra; Chicago, Mil. & St. Paul Co., supra.

2 Smyth v. Ames, supra.

3 Chicago, etc. R. Co. v. Minnesota, 134 U. S. 418 (1890), 33 L. Ed. 970. 4 Smyth v. Ames, supra: Reagan v. Farmers' Loan & Trust Co.,

R. Co. v. Tompkins, 176 U. S. 167, 44
L. Ed. 417; Covington & Lexington
Turnpike Co. v. Sandford, 164 U. S.
578 (1896), 41 L. Ed. 560.

5 St. Louis & S. F. R. Co. v. Gill, 156 U. S. 6(184 695), 39 L. Ed. 567.

an action of the non-resident stockholders of such companies against the companies and the state officials contesting stateimposed rates. As in the case where a suit can be maintained in the courts of a state, the United States circuit court will protect property rights of a citizen of another state who invokes the jurisdiction of the federal courts. But where the basis of the complaint is that the rates established by the state are confiscatory and unreasonable and violative of due process of law under the Fourteenth Amendment, the federal courts would have jurisdiction irrespective of citizenship. This jurisdiction may be exercised through writ of error to the highest court of the state, where the federal right invoked is decided adversely to the claimant by the state court, or the jurisdiction may be exercised in a direct proceeding in the assertion. of the federal right in the United States Circuit Court. It was said by the Supreme Court in a recent case that it was a better practice in cases contesting the reasonableness of carriers' rates to refer the testimony to some competent master to make all needed computations and find fully the facts, and that, in view of the difficulties and importance of such a case, it was imperative that the most competent and reliable master, general or special, should be selected, for it is not a light matter, said the court, to interfere with the legislation of a state in respect to prescribing rates, nor a light matter to permit such state legislation to wreck large property interests.3

897. Limitation by federal authority of the state's power in regulating intrastate rates.-The regulation by the state of intrastate rates in the exercise of its authority over domestic commerce has been reviewed by the Supreme Court in this juridiction under the Fourteenth Amendment in cases from Arkansas,+

1 1 Reagan v. Farmers' Loan & Trust Co., 154 U. S. 391 (1894), 38 L. Ed. 1021.

2 Chicago. Milwaukee & St. Paul, R. Co. v. Tompkins, 176 U. S. 167, 44 L. Ed. 417 (1900), reversing 90 Fed. Rep. 363.

3 As to the proper allegations in the bill of complaint to restrain enforcement of an order of a state commission reducing rates, see Wilmington & W. R. Co. v. Board of

Railroad Commissioners, 90 Fed.
Rep. 33.

4 St. Louis & S. R. Co. v. Gill, supra; Dow v. Beidelman, 125 U. S. 680 (1888), 31 L. Ed. 841. In the latter, an Arkansas case, the court said that in the absence of evidence of the amount invested in an organized corporation the fact that the income of the road at the rate of fare fixed by the legislature would only be one-half of one per cent. on the orig