that the State would, under a charter duly offered and accepted, become a lawful contracting party; and that the Federal Constitution (herein more conservative than the British Constitution) imperatively forbade State legislation which should "impair the obligation of a contract." Relying on such assurances, foreign capitalists were not afraid to lock up large sums of money. The public highway the property of the people" was not yet surveyed or located. Its precise route-with the exception of its terminal points and general direction—was a question for the discretion of the chartered company. The right of way, in many instances the freehold of the soil over which the railroad was to run, construction, equipment and rolling stock were all paid for in one form or another by the company. If the railroad were sold or leased, the purchase money or the rent confessedly belonged respectively to the vendors or lessors, and not to the State or its people. Whatever the right of the State or the people to a railroad so constructed may have been, it was certainly not a proprietary right, sufficient to authorize compulsory assumption of control, without some equivalent being given in the form of compensation or indemnity. The owners of a limited right, privilege or easement in connection with property are of course entitled to have it effectually protected; but it does not follow that, in order to save the trouble of devising a mechanism suitable for such protection, the real owners should be divested of the management of their property. It is proverbially a subversion of the natural order of things that the "tail should wag the dog."

A good deal has been said about the obligation of common carriers to serve the people in accordance with

*Federal Constitution, Art. I, Sec, 10,

ancient law and custom. No doubt, in the absence of a charter, this obligation might substantially govern the question. But the grant of a charter was a statutory enactment, the formal act of the people. It created a specific contract, changed the law of the land, and altered the relative situation. It was competent to a State to permit all sorts and conditions of men to establish commercial enterprises at their own risk, subject to the general law of the land including (amongst other things) the laws and customs relating to common carriers. It was equally competent to the State, in any given case, to pass a special act embodying a specific contract, and thus to define the privileges and to determine the status of a particular enterprise by the express terms of statute law. For reasons of its own,-which results have shown to be wise reasons,—a State in certain cases thought proper to adopt the latter course. To claim the right to confiscate privileges thus conferred or to change the status thus protected, by appealing to general laws, is something like setting up the statutes relating to intestacy against a devisee entitled under a confessedly valid will.

It may be pertinent to observe closely what, in such a typical instance as above mentioned, the State did not, as well as what it did, offer by way of inducement to capitalists to accept extraordinary risks. It emphatically did not say: You are invited to become the occupiers of ancient highways; the railroad in which you invest your capital will become the property of the people, and you will be virtually their tenants at will. It did not say: If you fail, or as long as your enterprise is unproductive, your loss will be all your own; but, if you succeed, you will always remain exclusively liable for losses, while your profit will be limited by the people at their discretion. It did not

say: You are invited to sink large sums of ready money in the construction of permanent works on American soil. Any increment in value which may hereafter accrue to your railroad will be dealt with as the people think best. What the State did say was of a very different kind. It said in effect: It is competent to us to exercise the right of eminent domain for the public good. We say that, in view of a great public need, the present is a proper case for such exercise; and, if you will lock up some millions of capital for our benefit, we can lawfully offer you the power power of recouping yourselves by the product of your railroads, to be realized under your own management and distributed at your own discretion. The increase of our State wealth which you will effect for us justifies us in giving you this solemn assurance in the name of the people, and in making it part of the statute law.

By such an arrangement the inherent power of the State to "regulate" was not for a moment waived, but the interchange of consideration between the State and the company was emphasized. The State did not by becoming a contracting party abdicate any of its functions as a State; but it brought itself, quo ad the subject-matter of a particular contract, within the provisions of the Federal Constitution, and thereby conferred on contracting companies the right to protection in the Federal courts.* It cannot be doubted that, if it had been sought to import into a charter at the date of its grant any one of the conditions first above formulated, such charter would have been declined with thanks by intending grantees. Results have conclusively shown that charters granted to railroads have proved enormously beneficial contracts to those States

* The Bridge Proprietors vs. The Hoboken Co. I Wal. 116.

which were fortunate or far-sighted enough to obtain willing grantees.

As regards No. 3, nobody doubts the power of a State to assume the ownership of railroads upon proof that such a course is for the public good and upon payment of just compensation. Nobody questions its right to institute appropriate tribunals for the redress or prevention of wrong and for the purposes of "regulation," properly so called. But the representatives of chartered interests. may not unreasonably object, if "regulation" be so construed as to warrant a compulsory divorce between ownership and management, which would leave them wholly responsible for losses, but deprive them of the correlative power of realizing and controlling profits.

They may properly contend that a tribunal authorized to redress or prevent wrong is an expression of the sovereign power compatible with corporate ownership; but that a Commission authorized-in the face of existing charters to fix rates and limit dividends would wield powers incompatible with the control essential to the free enjoyment and succcessful management of corporate property. If State officers are empowered to settle tariffs, restrict dividends, and order additional outlay for purposes outside the requirements of public safety, it is obvious that the solution of leading problems of railroad administration will be practically transferred to the State. It will be competent to the State to determine the earning power of a railroad, the dividends payable on its stock, the distribution between the people and the corporation of the increment of value, and perhaps the liability of stockholders for further expendi

But the entire responsibility for losses incident to defective or unfortunate State management will be left

on the shoulders of the corporation. It must be admitted that this would be an experiment in paternal government, which might or might not be wise, but which, if made at all, must be made at the sole risk of the corporations.

Nor, in view of the relations subsisting between labour and capital, is this risk by any means trivial or imaginary.

To refer to a well-known instance (cited below *), the Supreme Court of the State of New York has recently decided that corporations can be compelled by mandamus to handle promptly all freight offered for transportation in the face of a strike of the freight-handlers. In a city which receives and distributes an enormous amount of produce, this is a very serious obligation. If a corporation be thus bound and liable for losses arising out of delay in moving sensitive or perishable freight, it must-in order to economize such losses-either pay such prices for labour as strikers insist on, or procure unskilled labour to do their work. Now, where a corporation can control its own tariff (within the limits of a liberal maximum), and thus protect itself against emergencies, the obligation to handle promptly all freight offered by the public is a measurable commercial risk. But, if a State which does not actively discourage labour combinations neither permits corporations to protect themselves by raising rates to meet the fluctuations of the labour market, nor itself bears any portion of the loss arising from its official adjustment of the tariff during the existence of a strike, it creates a divorce between management and responsibility. It disarms the

* Attorney-General ex. rel. People of the State of New York vs. N. Y. Central and Erie R. R. Companies. Not reported at date of writing.