the actual value of the investment in that state, regardless of capitalization, upon the finding that the roads were efficiently and honestly managed and traversed a fertile agricultural section with natural resources sufficient to justify their construction and that the cost of building was not greater than the average cost of roads in the southwest. In this case, in addition to the 6 per cent., an allowance of 12 percent. additional in prosperous times where there were no extraordinary losses by casualty was made.1 In the circuit court of Kentucky 2 a telephone company was held entitled to set aside as a reserve a sum equal to 7 per cent. of the value of its property devoted to public use, exclusive of real estate, working cash capitals, supplies on hand, and to enjoy a net revenue equal to 7 per cent. on all its property. This was the case wherein there was serious opposition and the rates were so reduced by ordinance that it could not make such earnings, and the enforcement of the ordinance was enjoined.

The principle announced in all these cases is that no uniform rule as to rate of profit can be declared, but that each case must be judged upon its own facts. In the words of the supreme court, the public service corporation, which owes duties to the public as well as to the stockholders, has no right to any specific rate of dividend upon its capital stock, without reference to the rights of the public, and that the public could not properly be subjected to unreasonable rates in order simply that stockholders may earn dividends.

3

§ 128 (100). Protection of the carrier against discriminating state regulation.-The fourteenth amendment protects the carrier not only against unreasonable state limitation of rates, but also against any state legislation, which unreasonably interferes

1 See also discussion of this subject in the investigation of advances in rates by the Interstate Commerce Commission (1911), 20 I. C. C. R. 307, 336 as to the Western cases, and 20 I. C. C. R. 243 as to the Eastern cases. In the latter case it was said on the assumption that the capital did not exceed its actual value, that the sum remaining after permitting

of fixed charges including as a fixed charge the dividend upon the preferred stock should be equiva lent to between seven and eight percent on the common stock including amount carried to surplus fund.

2 Cumberland v. City of Louisville, C. C., N. D. of Ky. (1911). 8 Turnpike Road Co. v. Sanford, 164 U. S. 578, 41 L. Ed. 560.

with the carrier's right to carry on and manage its concerns. This federal guaranty may be invoked, irrespective of whether there is any contract between the state and the company exempting it in any measure from state control. While the carrier is subject to the general police power of the state in the general conduct of its affairs, the running of its trains and providing for the proper accommodation of the public, it cannot be subjected to discriminating or class legislation. Thus, a statute of Michigan which provided that the railroads should keep for sale onethousand mile tickets good for two years at a reduced rate, such tickets to be issued in the name of the purchaser's wife and children when desired, and redeemable by the company if not used, was held violative of due process of law and the equal protection of the laws. The court said that such legislation was not included in the power to fix maximum rates, and that the company had the right to insist that all persons should be compelled to pay alike and that no discrimination against it in favor of certain classes of married men with families, excursonists or others should be made by the legislature.1

The same principle has been applied in holding invalid a statute requiring a railroad company to deliver its cars to another company from and to any point, where there was a physical connection between the tracks, withuot adequate protection of the law or undue detention and without securing due compensation. It was held that adequate provision for compensation should be made in the law itself, and the defect could not be cured by inserting such provisions in judgments in the discretion of the court.2

A railroad company cannot be compelled, at its own expense and without preliminary hearing, to construct side tracks or

1 Lake Shore & M. So. R. Co. v. Smith, 173 U. S. 684 (1899), 43 L. Ed. 858. Three justices dissenting. The court in this case distinguished the lawful exercise of the state power in the enactment of reasonable state regulations for the public interest in a case of the same company, at the same term. R. R. Co. v. Ohio, 173 U. S. 285, 43 L. Ed. 702 (1899),

where it sustained the statute of Ohio requiring a railroad company to cause three of its regular passenger trains to stop at a station containing over 3,000 inhabitants. See supra, § 31.

2 L. & N. R. Co. v. Central Stock Yards Co., 212 U. S. 133 (1908), 53 L. Ed. 441, reversing 30 Ky. L. R. 18.

switches necessary to reach grain elevators which may be erected adjacent to the right of way, even if the statute was construed as only providing for cases where the demand for the facility was reasonable. The court based its opinion however, upon the absence of preliminary hearing and compensation. The court said in its opinion that it did not intend to prejudice a later amendment providing for a preliminary hearing and compensation, which was said to have been passed.

§ 129 (101). The state power of regulation not limited to rates. The power of the state, in its control of domestic commerce, to fix maximum rates subject to the judicial determination of their reasonableness also includes the power to make any reasonable regulations for the conduct of the carriers' business. subject to the judicial determination of what is reasonable. Thus discriminations may be prohibited, the requirement of facilities for the transfer of freight by direct connection at the intersection of railroads may be required, and the reasonableness of contracts of the carriers, whether such contracts be made directly with the patrons of the road or for a general arrangement between railroads in the transportation of persons and property, are properly subject to state control. The consolidation of parallel or competing lines of railway may be prohibited.

While a charter contract not containing a reservation on the part of the state of the right to alter or amend is protected by the federal constitution against impairment by subsequent legislation, the right may be reserved by the state to alter, amend or repeal the charter contract. In such cases the rights vested in the corporation by the terms of the charter contract may be modified by subsequent legislation, though this right of impairment or annulment does not extend to vested rights in property or contract acquired by user of corporate powers and franchises. Thus where by a railroad charter the general power is given to

1 Missouri Pacific Ry. Co. v. Nebraska, 217 U. S. 196, 54 L. Ed. 727 (1910), reversing 81 Neb. p. 51.

2 Atchison, etc., R. Co. v. Denver, etc., R. Co., 110 U. S. 667 (1884), 28 L. Ed. 291; Wisconsin,

etc., R. Co. v. Jacobson, 179 U. S. 287 (1900), 45 L. Ed. 194.

3 Minneapolis & St. Louis R. Co. v. Minnesota, 186 U. S. 257 (1902), 46 L. Ed. 1151.

4 Louisville & Nashville R. Co. v. Kentucky, 161 U. S. 677 (1896), 40 L Ed. 849.

consolidate with, purchase, lease or acquire the stock of other roads, which had remained unexecuted, the legislature may declare by subsequent acts that this power shall not extend to the purchase, lease or consolidation with parallel or competing lines.1

Where a railroad corporation is organized under state law by the purchasers of the property of a railroad corporation at foreclosure sale, there is no contract right created protected by the federal constitution against the enforcement of subsequent statutory regulations respecting railroad rates existing when the new company was incorporated, though not in force when the mortgage was executed, and the railroad company, by incorporating under a general law of the state, is estopped to contest the validity under the federal constitution of the provisions of an act regulating railroad rates, which form one of the burdens imposed by the state as a condition of becoming an incorporated body."

It is the proper duty of a railroad company to establish stations at proper places on its lines, and it is therefore within the power of a state to make it the prima facie duty of the company to establish stations at all villages and boroughs on their respective lines. A state statute requiring such erection of stations by railroad companies on the order of the state railway and warehouse commission, the burden being imposed upon the company of meeting the presumption that the order of the commission is correct, does not amount to an invasion of the rights of private property and is not repugnant to the constitution of the United States.

The subject of the state power of railroad regulation where affecting interstate commerce has been considered in chapter 2 in connection with the concurrent and exclusive powers. In such cases the power of the state is sustained as a lawful regulation of interstate commerce in the absence of legislation by congress. In the class of cases now under consideration the state legislation is assailed, not on the ground of interference with of New York v. Cook, 148 U. S. 397, 37 L. Ed. 498 (1892).

1 Piersall v. Great Northern R. Co., 161 U. S. 646 (1896), 40 L. Ed. 838.

2 Grand Rapids & Indiana R. Co. v. Osborne, 193 U. S. 17, 48 L. Ed. 598 (1904). See also People

8 Minneapolis, etc., R. Co. v. Minnesota, 193 U. S. 53 (1904), 48 L. Ed. 614.

interstate commerce, but as an impairment of the property rights of the railroad violative of due process of law and the equal protection of the laws as secured by the constitution of the United States.

State regulations have been sustained requiring railroads to adjust and pay claims on intrastate shipments within forty days after the filing of the claim under the penalty of $50.00 for each failure, where there could be no award of penalty unless there was a recovery for the full amount of the claim. The order of a state commission, requiring a railroad to restore a connection at a given point with the train of another road, was within the power of the state, if other connections were inadequate for public convenience, although compliance with the order might necessitate the running of an extra train or the extent of the run of the local train, as long as the income of the railroad from its business in the state afforded adequate remuneration.2

A railroad company in Kansas was compelled by peremptory mandamus by the supeme court of the state to operate a passenger train between a given point and the state line; and this was held within the lawful power of the state. The state also has the right to insist upon equality between all its citizens and to require a rate for all where the railroad, under the guise of a rebilling rate, gives anyone such rate, and may require a railway to operate a particular line, although compliance may entail expense and require the exercise of eminent domain, and may require a railway company to broaden and standardize a narrow guage railroad throughout its length."

A state may also lawfully legislate for the safety of those engaged in railroad business within its limits, and may enact

1 Seaboard Air Line v. Seeders, 207 U. S. 73, 52 L. Ed. 108, affirming 73 N. C. 71 (1907).

2 Atlantic Coast Line R. R. v. Corporation Commission, 206 U. S. 1, 51 L. Ed. 933 (1906), affirming 137 N. C. 18, citing Wisconsin R. Co. v. Jacobson, supra.

3 Missouri Pacific R. R. v. Kansas, 216 U. S. p. 262, 54 L. Ed. 472 (1910). In D. & W. R. Co. v. Stevens, 172 Fed. 595, N. D. of N. Y. (1909), it was held that the State

Public Service Commission of New York could compel an interstate railroad to put on additional trains when required for local purposes.

4 Alabama & Vicksburg R. R. Co. v. Commission of Mississippi, 203 U. S. 496, 51 L. Ed. 289 (1906). 5 Mobile J. & K. C. R. R. Co. v. Mississippi, 210 U. S. 187, 52 L. Ed. 1016 (1908), affirming 88 Miss. 172 and 89 Miss. 724.