2

having thus been so narrowed as to fail of its full purpose, the commerce clause was broadened so as to take its place, and, thus construed, was applied so as to operate upon interstate carriers not engaged in the coasting trade.1 The widening of the Federal authority appears also in the reasoning and expressions of the Court in the case of the State Tax on Gross Receipts, although the actual rulings in both cases were consistent with early theories. In the first case a State tax on every ton of freight carried in Pennsylvania was declared unconstitutional, while in the second a tax upon the carrier of a certain sum for every dollar received was upheld, the difference being that the first tax fell directly upon the shipper, while the second fell but indirectly upon the shipper and directly upon the carrier. So far as the Federal government was concerned the amount which the carrier might charge for transportation was not a subject of regulation. We concede, the Court said, "the right of the owners of artificial highways to exact what they please for the use of their ways. The subject was one which received great attention at that time both in and out of Congress. When, there

1 Something like this construction of the clause is suggested in Dr. James McHenry's "Notes on the Federal Constitution." Under date of Sept. 1, 1787, he says: "Perhaps a power to restrain any State from demanding tribute from citizens of another State" for navigating interstate waters "is comprehended in the power to regulate trade between State and State." See papers contributed by Professor Bernard C. Steiner to American Historical Review, April, 1906, Vol. 11, p. 595.

2 15 Wall. 232.

3 15 Wall. 277.

House Report No. 57, 40th Cong., 2d Sess., June 9, 1868, supporting Federal power to regulate rates, but with a strong minority report. Senate Report No. 462, 42d Cong., 3d Sess., Feb. 20, 1873. A majority of this committee pass over the constitutional question, because in any event opposed to Congressional legislation at that time. A minority reported against

fore, the question of State authority arose again in 1874, the Court repeated its former statement with greater emphasis.

"This unlimited right of the State to charge, or to authorize others to charge, toll, freight, or fare for transportation on its roads, canals and railroads, arises from the simple fact that they are its own works, or constructed under its authority. It gives them being. It has a right to exact compensation for their use. It has a discretion as to the amount of that compensation. That discretion is a legislative—a sovereign-discretion, and in its very nature is unrestricted and uncontrolled. The security of the public against any abuse of this discretion resides in the responsibility to the public of those who, for the time being, are officially invested with it. In this respect it is like all other legislative power when not controlled by specific constitutional provisions, and the courts cannot presume that it will be exercised detrimentally." 1

This doctrine was followed without question in 1876." Ten years later this long considered and well established rule was changed. The old doctrine was not abandoned hastily, but because, in the language of Mr. Justice Miller, "it is impossible to see any distinction in its effect upon commerce of either class between a statute which regulates the charges for transportation, and a statute which levies a tax for the benefit of the State upon the same transportation.” 3

The States being thus deprived of the power to regu

the Federal power. Senate Report No. 307, 43d Cong., 1st Sess., April 24, 1874, the so-called "Windom Report," in favor of the Federal power, over the dissent of four members of the committee, including Roscoe Conkling. These minority reports deserve special notice because the view thus stated was later approved by the Supreme Court.

1 R. R. Co. v. Maryland (U. S., 1874), 21 Wall. 456, 471.

2 Peik v.

Chicago, etc., R. Co., 94 U. S. 164.

3 Wabash Ry. Co. v. Illinois, 118 U. S. 557, 570; reversing People v. Wabash Ry. Co., 104 Ill. 476.

late interstate rates, the doctrine has now become current that the Constitution gave this power to Congress. Of course the argument by which the limitation of State jurisdiction was achieved, if good at all, should equally be good as a limitation upon Federal power. Congress is forbidden to tax exports from any State; clearly, then, under the rule applied in the case of the State Freight Tax, like the States, it cannot tax transportation from one State to another, and as, in the phrase employed by Mr. Justice Miller in the case of the Wabash Railway, it is impossible to see a distinction in its effect upon commerce between taxation and regulation of rates, therefore, the conclusion should have been that Congress is constitutionally unable to regulate interstate rates.

The argument was used, however, only against the States. So far as concerns Federal power quite a different argument is used. Congress, it is said, is not expressly given this power, neither is the power expressly denied, and as it no longer exists in the States, it must, so it is said, belong to Congress. Upon this argument, and upon no other, is based the contention of Federal jurisdiction to regulate freight rates.

The method of construction seems an inversion of the principle still taught in the schools, for interpretation of State and Federal constitutions, but the departure, possibly, is less of law, than in the facts of modern transportation. This, however, is clear, that the Court, under circumstances wholly unforeseen, has sought only to follow constitutional purposes. Its decisions upon this branch of the subject probably go to the limit of Federal power, and extension of present rules would, as

has been shown by Mr. Olney1 and Mr. Morawetz,2 be embarrassed by extraordinary constitutional difficulties.

3

Federal power has also been extended in other directions so as to prevent State legislation, which would interfere with, or burden, interstate transportation or trade, or obstruct navigation of public waters. The important feature about this history is that the power which was originally given to Congress in order to secure "an unrestrained intercourse between the States" " has developed, under the decisions of the Supreme Court, subject to the influence of this constitutional purpose only, and with no other end in view. The States have been deprived of power to interfere with the freedom of interstate communication, while on the other hand the nature of the jurisdiction which Congress has acquired over the avenues of interstate trade, does not, in any proper view of the Constitution, authorize it to close those avenues to any person.

It is still true, as Professor Tucker said, that "the whole Constitution, in all of its parts, looks to the security of free trade in persons and goods between the States of the Union, and by this clause prohibits either Congress or the States to interfere with this freedom of intercourse and trade." 4

1 "Legal Aspects of Congressional Railroad Rate-Making,” North American Review, October, 1905.

2 "The Power of Congress to Regulate Railway Rates," 18 Harvard Law Review, 572.

3 Federalist, No. II.

* Tucker, Constitution, Sec. 256.

CHAPTER VI

FEDERAL INCORPORATION

THE differences of opinion which have existed over the Federal power of incorporation have arisen from different conceptions of the nature of a charter.1 If it be regarded as the legislative organization of an artificial person, in whose favor State laws forbidding perpetuities, accumulations, and combinations in restraint of trade are by the nature of the organization necessarily suspended, the existence of such a dispensing power in the Federal government may well be doubted. Jefferson, Randolph, and many others, on this and other grounds denied the Federal power of incorporation.

On the other hand, if a charter be regarded as of the nature of a partnership agreement involving no public policy, but like a partnership to be judged by its objects, the organization of corporations for Federal purposes bears a very different relation to Federal powers. This was Hamilton's view of a corporation. He said:— "A strange fallacy seems to have crept into the manner of thinking and reasoning upon the subject. Imagination seems to have been unusually busy concerning it. An incorporation seems to

1 Among the articles on the general subject may be mentioned, “Federal Control of Corporations," Yale Law Journal, Vol. XIV, p. 301, in which Mr. Thomas Thacher argues that the plan proposed by Commissioner Garfield substitutes paternalism for liberty; and "A National Incorporation Law," Michigan Law Review, Vol. II, pp. 358, 501, in which Professor Horace L. Wilgus advocates such a law.