[Footnote 1: Scribner's Magazine, vol. XV, p. 653.]
Now, property is but the creature of law; and that is to say, in those of our States which have no common law, of statute. Jurists and communists are alike agreed on this. "Property is robbery," said Proudhon; property is but the creature of law, all English jurists admit. It is, of course, possible to conceive of a social system which recognizes no right of property, or one which makes all property belong to the community, or a middle ground which admits the institution, but holds that every individual holds property subject to the state's, that is, the organized community's, regulation and control. A convenient term for this state of affairs to which, perhaps, in our statutes, we are approaching, is "allowable socialism"; private property is recognized, but its use is regulated. In England they call it "gas-and-water socialism"; but this term, though picturesque, is not sufficiently comprehensive, relating, as it does, only to municipal activities. There is a third variety, the latest and perhaps the most intelligent of all, that believed in by leading modern German and American socialists, which we will call nationalism—the nationalization or municipalization of productive industry—the science of this doctrine being that private property may exist in all personal belongings, articles of pleasure, or domestic necessity, but not in lands, mines, works, or other instrumentalities used for the further production of wealth.
Whatever the future may bring, we must start with the institution of private property recognized to its fullest extent. It is expressly guaranteed in our Federal Constitution, as for the matter of that it was also in Magna Charta, as clearly as the right to liberty, and usually in the very same clause. Not only that, but when we adopted our first State constitutions, from 1776 to 1788, and the Federal Constitution in 1789, every one of them made express guarantee of this right. One or two, following the lead of Massachusetts and Virginia, recognized equality also, or, at least, equality by birth and before the law; but without exception property was expressly recognized as one of two leading constitutional rights, and even in some States, like Virginia, it was termed a natural right. The same thing is true of the Massachusetts Bill of Rights and in the Federal Fifth Amendment, though it is significant that the Declaration of Independence omits the word property, and only mentions among unalienable rights, life, liberty, and the pursuit of happiness—which some courts have held to include private property. Nevertheless, under our constitutions to-day, the right is not only doubly, but even triply, guaranteed; that is to say, by all State constitutions against State action; by the Federal Constitution against national action; and finally, by the Federal government in the Fourteenth Amendment as against State action also. This is the reason why, in any case affecting a cardinal liberty or property right, a litigant may carry his case not only through the State courts, which have sole jurisdiction of ordinary business and domestic matters, but to the courts of the United States as well.
[Footnote 1: Justice Brewer, in the Yale Law Review, for June, 1891. He holds that under "the pursuit of happiness" comes the acquisition, possession, and enjoyment of property, and that they are matters which even government cannot forbid nor destroy. That, except in punishment for crime, no man's property can be taken without just compensation, and he closes: "Instead of saying that all private property is held at the mercy of the public, it is a higher truth that all rights of the state in the property of the individual are at the expense of the people."]
When we come to legislation on the subject, or to modern State constitutions, there is hardly a change in this particular. Naturally, we find no new legislation confirming the right of property abstractly, or restating that that institution is part of our civilization. There is but one significant exception to this statement. While most of the States in their constitutions declare that men have a natural right to acquire, possess, and protect property, and Kentucky and Arkansas go to the length of saying that the right of property is "before and higher than any constitutional sanction"—which latter statement is a legal hyperbole—Oklahoma in its recent constitution, North Carolina, and Missouri state only that men have a natural right to the enjoyment of the fruits of their own labor; on the other hand there are recent intimations coming from Federal sources that individualism or private property rights, at least, and not anarchism or socialism, are part of our constitutional system. Before 1907 a Texas district judge refused to naturalize an immigrant on the ground that he was a socialist and that socialism was inconsistent with the Federal Constitution; and in that year Congress passed an act to regulate all immigration of aliens, which excludes, among other classes, persons who believe in or advocate the overthrow by force or violence of the government of the United States or of all government, or of all forms of law—a definition which would exclude anarchists, but not socialists; and in the case of South Carolina v. United States (199 U.S. 437), the Supreme Court of the United States gave serious consideration to the question whether State socialism was compatible with a republican form of government. This is all, so far as I am aware, that a century and a half of legislation has given us affirming the abstract right of property, though there are several constructive statutes and constitutional provisions applied to the general right to trade or labor, which we shall consider when we come to that subject.
When a right is expressly guaranteed by the Constitution, we need ordinarily have no affirmative legislation about it. Liberty and property being always guaranteed by the State constitutions, it has not been necessary for the States to legislate to protect them.
Our study of this subject, therefore, will be confined to the restrictive or limiting legislation affecting private property or property rights, and of this we shall find plenty. Now there are four, and only four, methods by which the state, that is to say, American society as organized into governments, interferes with the right to property or the enjoyment and use thereof; that is to say, taxation, which is, of course, general; eminent domain, a peculiarly American doctrine; the police power; and the regulation of rates and charges. Some authorities place the last under the police power; but It does not seem to me that it historically, if logically, belongs there.
Starting with the simplest first—eminent domain, an American doctrine which, in its simplest form, subjects the land of any one to the need of the state or, in cases authorized by the Federal Constitution, of the nation. It is questionable whether it applies to personal property. It is an American doctrine, for in England where the king remained in theory the feudal over-lord, it was not necessary for him or the sovereign Parliament, wishing to take or control land, and having no constitution protecting property rights against such action, to invent any new doctrine; but with us all land is allodial. The old charters of the original States creating tenures in free and common socage are, of course, obsolete. Everybody is a freeholder, and the States are not, still less the Federal government, a feudal over-lord. Nevertheless, the property of every one must be subject to the supreme common necessity; and the right is absolute in the States, although limited in the national government by the Federal Constitution. It is an American constitutional principle; and this principle also provides, as does Magna Charta and the early charters of England as to personal property seized by royal purveyors, that full damages must be paid; and to this general principle our constitutions have added that the damages must be paid at the time of the taking and the amount be determined by due process of law; that is to say, in most cases by a jury. Blackstone says: "So great is the regard of the law for private property that it will not authorize the least violation of it; no, not even for the general good of the whole community"; a new road, for instance, cannot be made without consent of the owner of the land, and the words "eminent domain" do not appear in the text of his book. But though we hold the contrary doctrine, the rights of the property owner are sufficiently protected when the taking is directed by the State, or even by a city or town. The menace to property here, with the increasing bulk of legislation, comes in the number of new uses, not only directly for the State or for cities and towns, but for public-service corporations, or often other private corporations, and associations of persons, who are permitted by legislation to take land under eminent domain, or, what is often worse, to acquire easements over it. Most of the States give damages for land not actually taken, but damaged, though our Federal courts have not held this to be necessary under the Fourteenth Amendment; but although land can still, in theory, only be taken for a public use, the number of uses which our legislation makes public Is being enormously increased. The usual national purposes are forts, magazines, arsenals, dockyards, and other needful buildings. Independent of some express permission in the Constitution, the Federal government has no power to take, or even to own, land at all within the State limits. Therefore, it is questioned whether land may be taken for national parks or forest reservations except in the Territories, where title still remains with the Federal government. But the State's power of eminent domain is unlimited, although it began only with the towns or counties taking roads for highways, and cities and towns appropriating lands for schools and other public buildings. Probably the only serious addition of a wholly public use is covered by the general expression, parks and playgrounds; but the analogy of the highway led to the taking of land under eminent domain for railroads, when they were first invented, then for street railways, then for telegraph, telephone, and electric-light lines, underground pipe-lines or conduits of all sorts, and finally, for drains, sewerage districts, public, and often private irrigation purposes. Most of the more complex State constitutions define at great length to the extent of some twenty or thirty paragraphs just what purposes shall be considered a public use under eminent domain. In the absence of such definition, or without such definition, the number of such uses is being enormously increased by statute. Thus, reservoirs, storage basins, irrigation canals, ditches, flumes, and pipes for water drainage, or mining purposes, working mines, as dumps, hoists, shafts, tunnels, are made a public use by the constitutions of the arid States, Idaho and Wyoming. So as to water only in Montana, but in Idaho also to any other use "necessary for the complete development of the material resources of the State or the preservation of the health of its inhabitants." And even by private parties, land may be taken for ways of necessity in many States, and for drains, flumes, and aqueducts by the constitutions of the arid States.
[Footnote 1: Book I, p. 139.]
[Footnote 2: These provisions are collated in "Federal and State Constitutions," p. 159.]
At common law, of course, a man or a set of men, who happen to be neighbors, would have had no right to take my land for a private way, or for drainage or irrigation purposes, however beneficial to their land; still less to take water from my stream across my land to their fields. But this precise thing can be done in an increasing number of States, although it has been held unconstitutional in the courts of one or two of the far Western States, and has even yet not been decided by the Supreme Court of the United States as to the powers of the Federal government. Under the broad definition given in Idaho and Wyoming, you can probably take land to establish a municipal coal-yard, or dispensary, or anything else that the legislature might suppose to be for the general health or benefit of the people. Yet a hotel company would not, as yet, be considered a public use, nor, probably, a private recreation park. And land taken for one use may be subjected to other and totally distinct uses without giving any new right of damages, as was decided in Massachusetts, at least, when land given or taken for an ordinary city street was afterward occupied by a steam railroad. A notable limitation on the use of streets, however, we find imposed by the statutes of New York and many other States, which provide that no railway shall be placed therein without the consent of a majority of the property owners or abutters. There is frequent legislation providing that the betterment taxes collected in case of public improvement shall not exceed the damages given for the property actually taken. In the last two or three years there has been an extension of the doctrine, authorizing cities and towns to take more land than is actually needed, for the purpose of convenience, or in order to get a better bargain, and then sell the surplus; but such laws may be unconstitutional.
Land may, of course, be taken for all municipal purposes, including public squares or parks, playgrounds, reformatories and penal institutions, levees, ditches, drains, and for cemeteries; and the right is being granted to private companies other than those above mentioned, in Colorado, to tunnel, transportation, electric power, and aerial tramway companies; in North Carolina to flume companies; in many States for private irrigation districts; in the West generally to mining or quarrying companies; in West Virginia and other States to electric power, light, or gas companies; while in North Carolina, Washington, and Wisconsin, we find the dangerous grant of this great power to electric-power companies, which are, in Wisconsin at least, expressly permitted to flood lands by right of eminent domain in order to form ponds for power purposes. It is easy to see that under such legislation everybody holds his land not only subject to public need, but to the greed of any designing neighbor. Perhaps the most important question of eminent domain is or was whether it authorized general schemes of internal improvement made by the State or by a municipality, or, worse still, by a private corporation chartered for the purpose. The Constitution of Michigan, with those of the Dakotas and Wyoming, provides that the State cannot be interested in works of internal improvement, nor, in North Dakota and Wyoming, engage in them except on two-thirds vote of the people; nor, in Alabama, may it loan its credit in support of such works; nor, also, in Maryland, Minnesota, Ohio, and Wisconsin, create or contract debts for them; nor, in Kansas and Michigan again, be a party to carrying on such works. But the Tennessee Constitution declares that a well-regulated system of internal improvement should be encouraged by the legislature. So, in Virginia, no town or county may become a party to any work of internal improvement except roads, and they are frequently forbidden from borrowing money for such purposes. There is, therefore, considerable constitutional check to legislation in this direction.
[Footnote 1: See "Federal and State Constitutions," book III, secs. 92, 324, 345 370, 391, and 395.]
Taxation, of course, has from all time been the universal limitation upon property rights, though it is important to remember that until the present budget there has not in modern times been an attempt at direct taxation of the capital value of land in England; Cobbett records many "aids" of a few shillings per hide of land in Anglo-Norman times. The earliest taxation was the feudal aids imposed purely for defensive purposes, for building forts and bridges; later for foreign wars or crusades. We have traced the origin of the scutage tax as a substitute for military service and the two great constitutional principles that all taxation must be with the common consent of the realm; that is to say, of Parliament, later of the House of Commons; and must also and equally be for the common benefit. Theorists have argued, particularly with us, that under the latter principle protective tariffs are unconstitutional; but even if it be admitted that they are not for the benefit of the whole people, the exception is as old as the rule; protective tariff laws, and, earlier still, laws absolutely prohibitive of importation, being plentiful on the English statute-books before and at the time this earliest of constitutional principles appeared. There is a step beyond the protective tariffs, however, which is naturally mentioned in this connection, and that is the bounty—sums of money paid to certain interests and derived from the general taxes fund. Under the Acts of Congress there has been, I think, only one instance of a bounty; that is in the case of the Louisiana sugar-growers. In State legislation it has been a little more usual. Foreign countries, notably Germany and France, as to beet sugar, etc., have been in the habit of giving bounties. This precedent undoubtedly suggested it; but these countries do not enjoy our constitutional principles. There has hardly been a direct decision on the constitutionality of the Federal bounty, but as to State bounties we find several, with an increasing tendency to hold void such laws. There can be no question that they are utterly against our whole constitutional system. The Supreme Court, when considering sugar-bounty laws, seems to have thought that it might be sustained as a compensation made for a moral obligation, the Louisiana planters having been led into industries from which the protection was suddenly removed; of such nature must be the justification, if any, for bounties given in times of flood, fire, or public disaster, which, however, are really sustained only in the absence of objection and on the principle lex non curat de minimis. The most insidious form of the bounty, however, is that of exemption from taxation, or, still worse, granting subsidies or subscribing to the stock and bonds of public-service, or even ordinary private, corporations. Undoubtedly the exception has been established in the case of railroads. The granting of State, city, or county aid to railroads has existed almost from their invention, probably on the analogy of highways; at all events, it is too late to be constitutionally questioned now. The exemption from taxation of private profitable enterprises, such as mills or factories, is less defensible. Frequently, however, they go without question, it being to no one's particular interest to do so. The usual subjects of State bounties were, in 1890, beet-root sugar, binding twine, iron and iron pipe, potato starch, and rope, with tax exemptions to Portland-cement works. Ramie fibre continued a favorite subject of bounty for some years, with seed distributions to farmers, which were in some States held unconstitutional. In 1896 Utah gave a bounty on canaigre leather and silk culture. There was an exemption on salt plants in Michigan, but beet sugar continued the favorite beneficiary. There has been a reaction against bounty legislation of recent years. In 1908, for instance, New York repealed its bounty on beet sugar, and it may be hoped, with greater intelligence of constitutional principles, that all such legislation will be abandoned.
Coming to matters of ordinary taxation, of course the first thing to note is its extraordinary extent. In direct taxation it is not an unfair estimate to say that the States and their municipal organizations undertake to impose an annual assessment on real and personal property which would average at least two per cent. throughout the country; amounting to from one-third to one-half of the income derived therefrom. In indirect taxation, duties, and revenue taxes, a sum far greater is taken from the average household. One might very much wish that the individual householder might at least know how large a sum is thus taken from his earnings annually, for it is safe to say that in no civilized country, not even in the France before the Revolution, was individual taxation anything like so heavy. Therefore, we are beginning to find legislation, even constitutional provisions, carefully limiting the tax rate. The amount of the State tax is thus limited in probably half the States, mostly Southern or Western, and nearly all of them limit also the amount of taxation to be imposed by the counties, cities, towns, school districts, or for other special purposes. In the North-eastern States such limitation is not usual, though in Massachusetts and New York it exists as to certain cities. It may properly be said of such legislation that it does not appear to be so futile as one might have expected. There is, of course, a tendency to raise the limit, involving frequent constitutional amendment, or, in Massachusetts, for instance, where the limitation is put on only by statutes, by later statutes authorizing the borrowing outside of the debt limit; for it should be said that such limitations do usually apply both to the appropriations and to the funded indebtedness incurred. Still I have not observed in the last twenty years any repeal of such laws or constitutional provisions, but rather an increasing number of States adopting them, from which it may be inferred that they work satisfactorily. Nearly all the States purport to tax the capital value of both real and personal property, not, as in England, rents or incomes; and they tax "tangibles" and also "intangibles." That is to say, they undertake to tax stocks or bonds or mortgage debts; the evidence of property, as well as the property itself; and the debt as well as the property securing It. Some States, such as Pennsylvania, impose a smaller, more nominal, tax upon stocks and bonds in the hands of the owner, for the sake of getting a larger return, but in many States, such as Massachusetts, this legislation would be unconstitutional, as not proportional taxation.
There is a mass of legislation every year directed to the assessing and collecting of taxes, tending more and more to become inquisitorial, requiring the tax payer under oath to furnish full schedules of his property, with provision for an arbitrary assessment if he fails to do so. One effect of this has been to drive very wealthy men from Ohio or other Western States to a legal residence in the East, where the laws are more lenient, or their enforcement more lax. The problem is a most important one and I see no signs yet of any solution in the increasing mass of legislation one finds upon this subject every year. It is to be noted—what our socialist friends have never seemed to observe—that just in so far as a man's earnings or income are taken from him in the form of taxation, you are already in a state of socialism. That is to say, to that extent is his income taken from him and administered by the state. This is an observation most unwelcome to the opponents of capitalism, so-called, who resent the conclusion that if the State and Federal governments are already taking forty per cent. of his income from him, a state of perfect socialism could do no more than take the other sixty per cent. This whole problem of taxation, indeed, is evaded at present only by the miserable solution of fraud; hardly any one, except the non-propertied classes, paying what the law purports to take from them; and the non-propertied classes only pay it because their taxation, being indirect, is paid for them by others.
Coming to other forms of taxation, we may distinguish three: Income, succession, and license. Income taxation in England dates, it is said, from 1435; but (in the shape of tithes) it is far older. The power of income taxation (except upon earnings and profits) belongs here only to the States; just as the sole power of imposing duties on imports is given to the Federal government. Many of the States impose an income tax, but I observe no particular increase in that kind of taxation in the legislation of the last twenty years. A man's income is commonly taxed with his other property. It is a form of tax far more evaded here than in England, probably because the English law provides a machinery for collecting a large part of income taxation from the persons from whom the income is derived, as, for instance, from the tenant who pays rent to a landlord; just as with us a corporation is made to pay the tax on its capital stock nominally due from the individual owner. The only notable extension of income tax legislation is in the establishment of the principle of the graded income tax, which is beginning to be adopted in a few States, as in North and South Carolina in 1897.
This principle of graduated taxation has, however, been nearly universal in our next and more modern variety—the succession tax. The old English precedents are the "aids" and fines for alienation. But beginning here about 1893, this form of taxation has now been adopted by nearly all the States, the amount of the tax being graded both according to the relation of the inheritors to the person from whom the succession is derived, and according to the amount of the inheritance itself; the rate of the tax thus varying all the way from an absolute exemption, as to the wife or children, to a tax as high as twenty-five per cent. (in New York) in the case of large estates going to remote relatives. The Federal inheritance tax imposed at the time of the Spanish war was soon repealed, and this domain of taxation, with the income tax, is now almost universally employed by the States. The principle itself can hardly be carried much farther, but it will be necessary to have some understanding or arrangement between the States, whereby double or treble succession taxes are not imposed on the same estate, as notably in the case of the stock or bonds of railroads chartered in several States, all of which may undertake to impose full succession taxes upon such stock. It has been held that succession taxes may be graded even in cases where a State constitution provides for proportionate taxation, the tax being an excise tax and not a direct property tax; but this is not so in respect to income taxes. We may assume therefore that income taxes must be equal in States which have this constitutional provision, although in one or two of them recent statutes have exempted a portion of the income of veterans of the Civil War. This might be sustained as a pension, pensions being for actual military service constitutional, and are in the Southern States expressly permitted to Confederate soldiers and their families—despite the implied prohibition of the Fourteenth Amendment.
The last form of taxation, that of an excise upon licenses or trades, is most usual in the South. An increasing number of trades are thus being taxed or regulated. Sometimes the taxation is put under the guise of a fee for examination and licensing, sometimes plainly as an excise tax. Undoubtedly such taxation is against all the history of our legislation demanding complete freedom of labor and trade. Nevertheless, it has not been held unconstitutional by the States except, of course, when touching a trade which is interstate commerce, though the examination occasionally has been. Such taxation has not yet become popular in the North, except definitely for the purpose of examination and license; but it is almost universal in the South, many States indeed providing by their constitution or laws that all trades and callings may be thus taxed. These taxes may be arbitrary in amount, but are sometimes graded according to the amount of business done. Such legislation has been sustained in so far as it is a tax or a license imposed for protecting the public health in a reasonable manner; thus, doctors, plumbers, nurses, dentists, etc., have been submitted to such regulation, but in the case of blacksmiths its constitutionality was in one State denied, and the law as to barbers in several States annulled. Nevertheless, it will always be a popular method of raising money in the poorer States, where land already bears its full burden and little personal property can be found.
Commissions of inquiry on this whole subject of taxation are continually being appointed—we have had two in Massachusetts in the past ten years—and their recommendations nearly always prove unacceptable. The probable scientific answer, that you must only tax property and not money or the evidence of property, and that if direct taxation thereby becomes too burdensome we must reduce our rate of expenditure, is a conclusion our legislators are yet unwilling to accept. The taxation of corporations presents a different problem and we shall therefore leave it for special consideration with that subject. The matter of betterment taxes may be dismissed with a word, as it is hardly, in theory, taxation at all, but rather using municipal agencies to collect the cost, or part of the cost, of a local work or benefit. It is, of course, closely connected with the subject of eminent domain. That is to say, only a public use, or at least a general local benefit, can justify a betterment tax. There is still considerable legislation on this matter, confined generally to the objects of securing a jury trial, or at least a public hearing, on the amount of the assessment, defining the purposes for which it may be imposed, as, for instance, paving, sewers, water-works where public, and—perhaps the most contested case of all—that of parks or pleasure-grounds; and providing that the amount of betterment taxes imposed shall not exceed one-half the value of the improvement of the property, and shall never exceed the amount paid as damages when part of the owner's land is taken.
By far the greatest mass of legislation relating to property is concerned with the police power and modern extensions thereof. It is also by far the most dangerous to property rights, and this for several reasons: firstly, it involves the destruction of property without any compensation whatever, not upon payment of damages, as in the ease of eminent domain; secondly, on account of the extraordinary extension by our modern legislation of this power to matters not hitherto deemed necessary for the safety, health, or even the well-being of the public, vague as the legal application of the last word is; thirdly, and perhaps most important, because the police power is usually exercised without any common-law guarantees, without process of law or jury trial, but by the arbitrary ruling of some board, or even single commissioner, and often, so far as the statute is concerned, without a jury or even an appeal from the commissioner's ruling to any court of law.
I believe this to be the most dangerous tendency that now confronts the American people—government by commission, tenfold more dangerous than "government by injunction." Not only is there no liberty, no appeal to common right and the courts, but all permanent "boards" tend to become narrow and pedantic or, worse, to be controlled by the works they are created to control. The constitutionality of such boards is, of course, always questionable, but the tendency to create them is perhaps the most striking thing in modern American legislation. Not only do we find them in enormously increased numbers in all the States, but even a late President of the United States seriously recommended that the contracts and affairs of all corporations at least (and the bulk of modern business is done in corporate form) should be so submitted to the control or dictation, or even the nullification, of such an administrative board or commission, and this again with no appeal to the courts. So audacious an upsetting of all Anglo-Saxon ideas of the right to law, it may be said without exaggeration, has never been attempted in the history of the English people, not even by the Stuart kings, who were most of all disposed to interfere in such particulars. Wiser counsels deterred the administration from insisting on this measure, but the fact that it could be brought up, and that with the approval of a large portion of the public, indicates how radical our legislation is getting to be in this particular.
[Footnote 1: Two singular instances happened only the past year: at common law any one may build railroads, and they are certainly for the general advantage whether profitable to the owners or not. Yet the railroad commissions of New York and Massachusetts have recently in each State prevented the building of most important lines, by responsible applicants—under the opposition of other railroads.]
It is a commonplace in the law that no court has defined, or ever will consent to define, the exact limits of this police power; suffice it to say that in the classic words of Chief Justice Shaw of Massachusetts, "it is all that makes for the health, safety, or comfort of the people." As to the health and safety, there can be little question; but when it comes to indefinite words like "comfort" or "well-being," too wide a field is left for the imagination. It has recently been decided that the aesthetic part of life does not necessarily concern the comfort or well-being of the people. That is to say, laws forbidding the use of land for the erection of hideous signs, or forbidding the height of buildings at an inartistic excess have been declared not to fall within the police power, but under eminent domain. So of statutes forbidding the taking of a man's picture, or a woman's portrait for advertising purposes, when not properly obtained; yet it may be questioned if any law is more certainly for the comfort of the persons concerned than such a statute. On the other hand, noisy or noxious trades, mosquito ponds, trees infected with moths, etc., sawdust in water, offensive smoke, and, in Vermont, signs, were all made nuisances by statute of one State or other in 1905 alone. The first historical instance, perhaps, of destruction of property under the police power was the blowing up of buildings to check a conflagration, a practice still common, although its utility was much questioned after the Boston fire, and which, at common law at least, gave the owner no right to compensation; but the more usual use of the police power until very recent years has been limited to the prohibition of offensive trades in certain localities, and the suppression of public nuisances. Later, the prohibition of the manufacture of intoxicating or malt liquors, and the regulation of tenement houses at the orders of the Board of Health. This led to the regulation or prohibition of certain trades conducted in tenement houses or in sweat shops, and to other matters which we shall find it more convenient to consider under the head of labor legislation.
Whether there are any limits to this power is much discussed. There is no question that the power must not be arbitrary or utterly without reason, and of that reason the courts must and do in fact judge. Taking property for a purpose unjustified by the police power is, of course, taking property without due process of law. An arbitrary statute taking the property of A and giving it to B, or even to the public, without compensation has, from the time of Lord Coke himself, been the classic definition of an unjustifiable law and one which with us at least is unconstitutional; but our courts wisely refuse to judge if, when a proper police motive is disclosed in the statute, it is the best method of effecting the result. This, I think, is a clear statement of the principle of our court decisions. If, upon the face of the statute, the court can see no possible relation to the public health or safety, or, possibly, general welfare, it will hold the law null in so far as it invades either property or liberty rights because not under the police power. If, on the other hand, they can see some relation to the public health, safety, or general welfare, even though they do not think it the best method of bringing about the desired result, they will not presume to run counter to legislative opinion. Of the expediency of the statute, the legislature must be and is the final judge.
With us the police power is exercised largely for moral reasons. That is to say, the great instances of its extension have been connected with moral or sanitary reform. No doubt the police power may broaden with advancing civilization and more complex appliances and possibly greater medical knowledge and social solidarity. No doubt purposes which were once lawful may be unlawful, and property devoted to them thus be destroyed by a change in the law. Mr. Justice Brewer, of our Supreme Court, holding the contrary view, was overruled by the majority, and that decision is final. Not only we, but a State, may not even make a contract which shall be immune from future extension of the police power, the Dartmouth College case notwithstanding. For instance, the State of Massachusetts in 1827 granted a perpetual franchise to a corporation to make beer. It was allowed, forty years later, to pass a law that no corporation should make beer, and the brewery became valueless. The State of Minnesota granted a perpetual franchise to a railroad to fix its own fares. Twenty years later it took away that right, thereby, as claimed, making the railroad property valueless; the railroad had no remedy. A man in Connecticut had barrels of whiskey in a cellar for many years, but the State was allowed to pass a law prohibiting its sale; which, of course, had he been a teetotaler, would have deprived that property of all value, and in any case, of all exchange value. A man in Iowa owns one glass of whiskey for several years, and then a law is passed forbidding him to sell it; the law is valid. A youth in Nebraska buys tobacco and paper and rolls a cigarette. The State afterward passes a law forbidding smoking by minors. It is a crime if he light it. Sufficient has, perhaps, been said to show the extraordinary scope and elasticity of this, the widest, vaguest, and most dangerous domain of our modern legislation, though perhaps we should add one or two striking cases affecting personal liberty, as, for instance, a citizen of Pennsylvania marries his first cousin in Delaware and returns to Pennsylvania, where the marriage is void and he becomes guilty of a criminal offence; a white man in Massachusetts who marries a negress or mulatto may be guilty of the crime of miscegenation in other States; a woman might work fifty-eight hours a week in Rhode Island, but if she work over fifty-six in Massachusetts may involve her employer, as well as herself, in a penal offence.
[Footnote 1: Mugler v. Kansas, 123 U. S, 623.]
The most valuable of all police legislation is, of course, that to protect public health and safety; and prominent in the legislation of the last twenty years are the laws to secure pure and wholesome food and drugs. Possibly "wholesome" is saying too much, for our legislative intelligence has not yet arrived at an understanding of the danger from cold storage or imperfectly canned food, though Canada and other English colonies have already legislated on the subject, to say nothing of our tariff war with Germany on the point. One may guess that ninety-nine per cent. of the present food of the American people, leaving out the farmers themselves, is of meat of animals which have been dead many months, If not years, and from vegetables which date at least many months back. It is nonsense to suppose that such food is equally wholesome with fresh food, or that there is not considerable risk of acute poisoning or a permanent impairment of the digestive system. Senator Stewart, of Nevada, has shown that nearly fifty per cent. of the soldiers of the Spanish War had permanent digestive trouble, as against less than three per cent. in the Civil War, which took place before cold-storage food was known, or canned food largely in use. It was hopeless for the States to act until there was Federal legislation on the subject, as the health authorities had no constitutional power over goods imported from other States; but the passage, under Roosevelt, of a national food and drugs act has given a great impetus to the reform, and by this writing more than half the States have passed pure-food laws, being usually, as they obviously should be, an exact copy of the Federal Act. Among the articles specially mentioned in such legislation we find candy, vinegar, meat, fertilizers, milk, butter, spices, sugar, cotton seed, formaldehyde, insecticide, and general provisions against adulteration, false coloring, the use of colors and preservatives, etc.
Going from matters merely unwholesome to actual poisons, the course of legislation on intoxicating liquors is too familiar to the reader to make it necessary to more than refer to it, with the general observation that in the North and East the tendency has been toward high licensing or careful regulation, always with local option; while in the West originally, and now in the South, the tendency is to absolute "State-wide" prohibition and even to express this principle in the constitution. How much this extreme measure is based on the racial question, in the South at least, is a matter of some debate; and the working of such laws everywhere from Maine to Georgia, of considerably more. One may hazard the guess that the wealthier classes have no difficulty in getting their liquor through interstate commerce, while the more disreputable classes succeed in getting it surreptitiously. Prohibition, therefore, if effective at all, is probably only effective among the respectable middle class where, perhaps, of all it is least needed. In the older States, at least in Massachusetts, there has been a decided tendency away from prohibition in the last twenty years, and even from local prohibition in the larger cities. Worcester, for instance, after being the largest prohibition city in the world, ceased to be so this year by the largest vote ever cast upon the question.
Whatever may be said of the strict prohibition of liquor dealing, no one can have any objection to such laws as applied to cocaine, opium, or other poisonous drugs, and we find statutes of this sort in increasing number; while the manufacture and sale of cigarettes to minors or even in some States, their consumption, is strictly prohibited, under criminal penalty. Laws of a similar sort were aimed at oleomargarine when invented, but this probably not so much to protect the health of the people as the prosperity of the dairymen. The mass of such legislation has emerged from the scrutiny of the courts, State and Federal, with the general result that only such laws will be sustained as are aimed to prevent fraud; but the manufacture and sale of oleomargarine under that name cannot be prohibited. Artificial coloring matter may be forbidden, but a New Hampshire law was not sustained which required all oleomargarine to be colored pink; so it may be guessed that the laws of those States which make criminal the sale or use of cigarettes to or by children "apparently" less than sixteen or eighteen, will hardly be sustained as a constitutional police measure; yet such laws existed in 1890, while the State of Washington in 1893 made the sale even of cigarette paper criminal.
Another important line of modern legislation consists in the subjecting of trades to a license for the purpose of examination (the tax feature has been discussed above). Such laws are constitutional when applied to a trade really relating to the public health, but as we have found above, black-smithing is not such an one; when imposed merely for the purpose of raising revenue, such legislation is undoubtedly constitutional under our written constitutions, but opposed to historic English principles, which insisted for seven centuries of statute-making on the utmost liberty of trade. In a South American republic you have to get a concession before going into almost any business, even maintaining a shoe-shop, or a milk farm, which concession is, of course, often obtained by bribery or withheld for corrupt reasons. It is to be hoped that the citizens of our States will never find themselves in that predicament. Still, certain State constitutions, as that of South Carolina, provide absolutely that all trades may be made subject to a tax, and the tendency—particularly in the South—to raise revenue in this way is increasing by leaps and bounds. Among the trades already subjected to such licensing or taxing, we find doctors, of course, and properly, pharmacists, plumbers, pedlars, horse-shoers, osteopaths, dentists, veterinary surgeons, accountants, bakers, junk dealers, coal dealers, optometrists, architects, barbers, commission merchants, embalmers, and nurses. Of course it is a motive to novel or irregular trades to secure a licensing law from the State, for the slight tax insures them protection. This is the reason that we find common statutes allowing osteopaths, etc., to be licensed. So far as I have observed, there is no such statute as yet in any State applying to Christian Scientists.
Police regulation for the safety of the public is found nearly entirely in the laws regulating labor, factories, mines, or machinery, and will be accordingly treated in that connection. Laws protecting the public against fraud, which from earliest times has been a branch of police legislation, have been of late years numerous, principally in connection with the prohibition of dealing in futures or sales on margin, of sales of goods in bulk without due precautions and notice to creditors, of the issue of trading stamps or other device tending to mislead the public. Some States have prohibited department stores, but this legislation has been held unconstitutional, though the early English labor statutes forbidding to any person more than one trade or mystery will by the historical student be borne in mind. Usury laws, of course, are still frequent, but decreasing in number with the increasing modern tendency to allow freedom of contract in this as in other matters, except only to such persons as, for instance, pawn-brokers, who peculiarly require police regulation.
Coming to statutes which merely facilitate business as it now exists, by far the most important movement has been the successful work of the State Commissioners on Uniformity of Law in getting their negotiable instrument act passed in nearly all the States, and in several already their uniform law statute on sales, only recommended in 1907. Some progress has been made in getting a uniform standard of weights and measures, and there is an increasing tendency to prescribe specific weights and markings for packages—possibly unconstitutional legislation. Still more important as a change in previously existing law has been the increasing tendency to make documents other than bills and notes negotiable. Perhaps this is a matter which requires explanation to the lay reader.
The early Anglo-Saxon law could not conceive of ownership of property as distinct from possession, and to their simple minds, when ownership was once acquired it was impossible to divest the owner of his property by any symbolical delivery. Hence the very early statutes making fraudulent sales or conveyances of property without actual and visible change of possession. The notion of a symbol, a paper or writing, which should represent that property would probably have impressed them like a spell or charm in a child's fairy tale. Even theft with asportation could not alter property rights, even in favor of innocent purchasers, when the owner did not intend to part therewith. A moment's recollection of what is now perhaps the most familiar of Teutonic saga to the ordinary reader, the text of Wagner's "Ring of the Nibelung," will give ample evidence of that mental attitude. But the Oriental mind was far more subtile. To the Jews or Lombards we owe the discovery of that bill of exchange—the first of negotiable instruments, and the first historically to bring into our law the legal concept of a symbol of ownership which might be instantly transferred with an absolute change of title in the property thereby represented, and this either to a present transferee or to one far away. Thus, a simple bill of exchange might transfer the ownership in a pile of gold in a moment from a man in Venice to a man in London, thereby (if the law-merchant was respected) freeing the treasure itself from attack at the hands of the Venetian authorities. And not only was this change of ownership instantaneously effected by the transfer of some symbol or document representing it, but there also, and as a necessary part of the invention, grew up the doctrine that the transferee was relieved of any claims against the property at the hands of the previous owner. This is what we mean by negotiable; and it is essential that the precise meaning of the word should be understood if we are to understand the importance of this legislation. Even most business men have a very vague understanding of the difference between negotiable and assignable. Substantially all property and choses in action are assignable, except personal contracts; and in ordinary business many of them are assumed to be negotiable, such as bills of lading, warehouse receipts, trust receipts, or certificates of stock. Most brokers, or even bankers, assume that when they have a stock certificate duly endorsed to them by the owner mentioned on its face they have an absolute and unimpeachable title to the stock therein represented. Such, of course, is not the case except for recent statutes in a few States. To take a familiar example, and I can think of none better to show exactly the difference between a personal contract non-assignable, a document which is assignable, and one which is negotiable—a Harvard-Yale foot-ball ticket. If the ticket is issued by the management to a person under his name, with a condition that it shall be used by no one else, it is a contract non-assignable. If it is issued to him in the same manner, but with no provision against assignment or the use by another person, it would entitle such other person to whom the ticket was given to use the seat, but only under the title of the original holder; and if the assignment was later forbidden, or for other reasons the right recalled by the management, the holder would have no greater title to the seat; the contract is assignable, but not negotiable. The assignee takes it merely as standing in the place of the original holder and subject to all the equities between him and the management. If, for instance, the ticket were given him by fraud, the right to use it might be revoked and the transferee would have no greater right than the original holder. But if the ticket were negotiable, like a bank-note payable to bearer, the holder, not actually himself the thief, would have an absolute title to the seat without regard to anything that happened prior to his getting possession of the ticket.
Now it is obvious that it is for the enormous convenience of business to have business documents made negotiable. If a banker can loan on a bill of lading or a warehouse receipt, or a trader can buy the same, or if a man can give a trust receipt to his banker agreeing that all his general shipments or stock in trade shall be the property of that banker until his debt is paid, it makes enormously for the rapid turning over of capital, and the extension of credit. Of course, an enormous proportion of business in the United States is conducted upon credit, and without the invention of the negotiable instrument those credits could not be secured without an actual delivery of the commodities intended to secure them. And the custom of business is to consider most such documents negotiable even when in fact they are not so. It is more than usual to loan money upon warehouse receipts, bills of lading, stock certificates or trust receipts of all descriptions, regardless of the question whether the law of the State makes them negotiable. Hence the very great tendency to make such instruments negotiable by statute; and I find many such laws, beginning in 1893 in North Carolina, as to warehouse receipts, while the Massachusetts statute concerning stock dates from 1884.
A reaction to the English common law is the statute, common in recent years, prohibiting sales in bulk. It appears to have been a growing custom for merchants, particularly retail merchants, when in financial difficulties to sell their entire stock in trade to some professional purchaser by a simple bill of sale without physical delivery. Nearly all States have adopted statutes against this practice, although in several they have been held unconstitutional. The feeling that they are dishonest is doubtless justified by the facts; but it may also be truly described as a reaction to the simpler English law as against Oriental innovations.
The descent of property throughout the United States is regulated by English common-law ideas. That is to say, there is no primogeniture, although in early colonial times the older son took a double portion; and there is, except in Louisiana, complete liberty of testamentary disposition, although in one or two other States there have been statutes forbidding a man to dispose of all his estate to a charity within a short time previous to his death, to the prejudice at least of his direct heirs. The Code Napoleon, of course, limits testamentary disposition in favor of these latter, so in Louisiana, only half of a man's estate can be given away from his children or widow, and not more than three-fourths of his estate can be bequeathed to strangers or to charity, to the prejudice even of collateral heirs.
In matters of general business the usual lines of legislation have been the ordinary ones found in English history. That is to say, statutes of frauds, usury or interest laws, and other familiar matters. The only tendency one can note is a broad range of legislation devised in the interest of the debtor—not only liberal insolvency laws now superseded by the national bankruptcy act, which is still more liberal than the laws of the States preceding it, but statutes restricting or delaying foreclosure of mortgages, statutes exempting a substantial amount of property, implements of trade, agricultural articles, goods, land, or even money, from the claims of his creditors. The exemption of tools or implements of trade goes back to Magna Charta, it will be remembered, but the exemption of other articles is modern and American. There is probably, however, no subject which is so apt to be let alone by our legislatures as that of business law. Upon that subject, at least, they are fairly modest and inclined to think that the laws of business are known better by business men. Imprisonment for debt is, of course, absolutely abolished everywhere, and in most States a woman is not subject to personal arrest in civil process. The statutes prevailing throughout the country, which give special preference to claims for wages or even for material furnished by "material men," have already been noted. It may be broadly stated that the presumption is that such claims are everywhere a preferred debt to be paid out of the estate of the insolvent, living or dead, in preference to all claims except taxes.
The security of mortgages is very generally impaired by legislation confining the creditor to only one remedy and delaying his possession under foreclosure. That is to say, in far Western States generally, he cannot take the land or other security, and at the same time sue the debtor in an action for debt for the amount due, or the deficiency. This, of course, makes of a mortgage a simple pledge. Moreover, with the practice of delaying possession under foreclosure, appointing receivers in the interest of the debtor, etc., he is in many States so delayed in getting possession of his security that by the time he acquires it he will find it burdened with overdue taxes and in a state of general dilapidation. We have already alluded to the practice in California of compelling the executor of a mortgage to submit himself to the jurisdiction of the local public administrator, which practically results in a sequestration of a considerable portion of the property. For all these reasons, many conservative lawyers in the East, at least, would not permit their clients to invest their money in mortgages in California, Minnesota, Washington, or the other States indulging in such legislation, and partly for this reason the rate of interest prevailing in mortgages is very much higher in the far West than it is in States east of the Missouri River.
The greatest mass of legislation is, of course, that upon mechanic's liens, which are burdensome to a degree that is vexatious, besides being subject to amendment almost every year. In a general way, no land-owner is free from liability for the debt of any person who has performed labor or furnished materials on the buildings placed upon the land, even without the knowledge or consent of the land-owner in some States, though in one or two instances, notably in California, such legislation has been carried to such an extreme as to make it unconstitutional.
The matter of nuisances has been already somewhat covered. Legislation extending the police power and declaring new forms or uses of property to be a nuisance is, of course, rapidly increasing in all States. The common-law nuisance was usually a nuisance to the sense of smell or a danger to life, as, for instance, an unsanitary building or drain. Noise, that is to say, extreme noise, might also be a nuisance, and in England the interference with a man's right to light and air. Legislation is now eagerly desired in many States of this country to make in certain cases that which is a nuisance to the sense of sight also a legal nuisance, as, for instance, the posting of offensive bills on the fences, or the erection of huge advertising signs in parks or public highways. Such a law was, however, held unconstitutional in Massachusetts. There is some legislation against the blowing of steam whistles by locomotives, although I believe none against the morning whistle of factories, and some against the emission of black smoke in specified durations or quantities.
But perhaps the most important legislation affecting simple matters of business other than the line of statutes already mentioned, making new negotiable instruments and controlling the title of property by the possession of a bill of exchange, bill of lading, warehouse or trust receipt, are those statutes prohibiting the buying of "futures," or the enforcement of gambling contracts to buy or sell stocks or shares or other commodities without actual or intended change of possession, which we have necessarily referred to in our discussion of restraint of trade (chapter 4). There is a very decided tendency throughout the country, particularly in the South, to prohibit all buying or selling of futures, that is to say, of a crop not actually sold, or of any article where physical delivery is never intended, and it will be remembered we found plenty of precedent for such legislation in early English statutes. Gambling contracts may be forbidden only in specified places, such as stock exchanges; and the buying of futures may be specially permitted to favored persons, such as actual manufacturers intending to use the goods; and both such statutes will be held constitutional and not an undue interference with the liberty of contract. These matters were largely covered by the statutes of forestalling in early times. Legislation more distinctly modern is that against sales in bulk, and against department stores; more striking still is the statute, already passed in Wisconsin and Virginia, forbidding all tips, commissions, or private advantages secured by any servant or agent in carrying on the business of his principal, his master, or the person with whom he deals; the statute even forbids a gratuity intentionally given directly from the one to the other. It is hard to see how the last clause of the law can be held constitutional, any more than the laws forbidding department stores, although such commissions may be forbidden to be given "unbeknownst."
Weights and measures are standardized by the Federal government, and to these standards the States in practice all conform, but the legal weight of a bushel or other measure of articles varies widely in the different States, and the State Commissioners on Uniformity of Law have tried in vain to get the matter generally regulated. At one time the weight of a barrel of potatoes in New York City was fourteen pounds more than it was in Hoboken, across the river. In Massachusetts the weight of a barrel of onions was increased two pounds to conform with the uniform law recommended to all the States by the commissioners; but a representative in the State Legislature coming from a locality of onion farms lost his seat in consequence, which inspired such terror in other members of the State Legislature that the uniform law was promptly repealed, the weight of the barrel of onions put back at the former figure, and this over the veto of the governor. It is needless to say that the whole value and object of the whole movement for uniformity is to have actual uniformity. That is to say, unless the lawyer or citizen reading the statute can be sure that it is uniform with the laws of all other States without taking the trouble to consult them, the reform has no value. But it has proved almost hopeless to get this through the brain of the average legislator. The uniform law upon bills and notes, indeed, already mentioned, is treated with more respect; because, as has been said above, they regard that as a matter of business, and they have some respect for the expert knowledge of business affairs possessed by business men.
The licensing of trades might be made a very valuable line of legislation to prevent the fleecing of the ultimate consumer by the middleman. Our ancestors were of the opinion that the middleman, the regrator, was the source of all evils, and they were also of the opinion that any combination whatever to control the price of an article of food, or other human necessity, or to resell it elsewhere than at its actual market and at the proper time, was a conspiracy highly criminal and prejudicial to the English people; in both of which matters they were, in the writer's opinion, perfectly right, and far more wise than our modern delusion that "business"—that is to say, the making of a little more profit from the larger number of people—justifies everything. Now, at the time of the coal famine of 1903, Massachusetts passed a statute licensing dealers in coal; the law for the municipal coal-yard having been declared unconstitutional. The object of this statute was not to derive revenue or to restrict trade, but to regulate profits; and in particular to prevent the retail coal-dealers from combining to fix the price of coal themselves. Yet in spite of this legislation, the ice-dealers of Massachusetts only this year (1910) assembled in convention in Boston upon a call, widely advertised in the newspapers, that they were holding the assembly for that precise purpose, that is to say, to fix and control the price and the output of ice. They were, indeed, "malefactors of great wealth"; at least we may guess the latter, and the animus of a more intelligent precedent may some day hopefully be directed to such definite evils, of which our ancestors were well aware, rather than blindly running amuck at all. The coal-dealers in Boston, by the way, made the same argument that is always made, and was made at Athens in the grain combination of the third century B.C.—to wit, that they put up the prices in order to prevent other people buying all the coal and speculating in it; but notwithstanding that showing of their altruistic motives, the secretary of state revoked the license of the coal company in question. The statute also forbade the charging extortionate prices, which, again, was a perfectly proper subject of legislation under the common law; but, unfortunately, was carelessly drawn, so that it resulted in a somewhat cloudy court opinion.
For the matter of uniform legislation the reader must be referred in general to reports of the National Commission. Their greatest achievement has been the code of the law of bills and notes just mentioned. Besides this they have just adopted a code on the law of sales, and they have recommended brief and uniform formalities as well as forms for the execution and acknowledgment of deeds and wills, and have very considerably improved the procedure in matters of divorce.
The best modern legislation concerning trade and business is, of course, that of the pure-food laws. The Federal law has certainly proved effective, although it is in danger of being repealed or emasculated in the interest of the "special interests"; most of the State laws simply copy it. Undoubtedly the laws should be identical in interstate commerce and in all the States; and this can only be done by voluntary uniform action.
REGULATION OF RATES AND PRICES
This, the last method of infringing upon absolute rights of property, has assumed such importance of recent years as to deserve and require a chapter by itself. The reader will remember what precedents we found for the fixing of prices, wages, and rates or tolls in England. It may be convenient for our purposes to use these three definite words to mean the three definite things—prices in the sense of prices of goods or commodities; wages the reward of labor or personal services; and rates (the English word is tolls) for the charges of what we should now term public-service corporations, or in old English law, franchises, or what our Supreme Court has termed "avocations affected with a public interest." The reader will remember that the attempted regulation of prices began early and was short-lived, dating from the Assize of Bread and Beer in 1266, to the Statute of Victuals of 1362, hardly a century, and even these two precedents are not really such, for the first only fixed the price of bread and beer according to the cost of wheat or barley, just as to-day we might conceivably fix the price of bread at some reasonable relation to the price of flour in Minneapolis, and as it was fixed in ancient Greece by the wholesale price of wheat at Athens—not as it now is, from three to four times the cost of bread in London, although made out of the same flour shipped there from Minneapolis; and the two latest statutes expressly say that they fix the price by reason of the great dearness of such articles on account of the Black Death or plague, and the consequent scarcity of labor. Then the Statute of Laborers of 1349 provided that victuals should be sold only at reasonable prices, which apparently were to be fixed by the mayor. With these statutes the effort to fix prices by general statute disappeared from English civilization save, of course, as prices may be indirectly affected by laws against monopoly, engrossing, and restraint of trade; and local ordinances in towns continued probably for some time longer.
[Footnote 1: For an actual report of an indictment and jury trial for forestalling and regrating wheat in the third century B.C., see Lysias's oration, translated by Dr. Frederic Earle Whitaker, in Popular Science Monthly, April, 1910.]
Legal regulation of wages lasted much longer in England; and has reappeared in very recent years, at least in the Australasian colonies, with a beginning of such legislation in Great Britain and Ireland and the State of New York. The first Statute of Laborers merely provides that the old wages and no more shall be given. The next year, however, in 1350, the exact rate of wages was fixed; and this lasted for more than two centuries, to the reign of Elizabeth, the so-called "great" Statute of Laborers consolidating all the previous ones. It is apt to be the case that when a statutory system has reached its full development it falls into disuse; and that is certainly the case here. There is no later statute in England until 1909 fixing directly or indirectly the rate of wages; and it may be doubted whether the justices of the peace continued to fix them for many years under the Statute of Elizabeth. More than three centuries were to go by before this principle reappeared in legislation or attempted legislation; but in Australia, New Zealand, and England there has been recent legislation for a legally fixed rate of wages to be determined for practically all trades by a board of referees, consisting, as such boards usually do consist, of one member to represent capital, one to represent labor, and the third to represent the public or the state. As such third representative almost invariably votes on the side of the greatest number of voters, this practically makes a commission hardly impartial. The working of the system in New Zealand will be found discussed in the Westminster Review for January, 1910. There is an appeal to the courts from the rate of wages fixed by such commission; and it appears that out of four such appeals, in three the decision of the commission was confirmed, and in the fourth set aside; but the workingmen disregarded the judgment of the court and struck for a higher wage—contrary to the whole theory of such legislation, which is to prevent strikes. This strike succeeding, there has, therefore, been no case so far where the increasing rate of wages was checked by any appeal to the courts.
[Footnote 1: So. Australia, 1906, no. 915; 1900, no. 752; Victoria, 1903, no. 1,857; 1905, no. 2,008.]
[Footnote 2: See New Zealand Law of 1900, no. 51; frequently amended since.]
[Footnote 3: 60 and 61 Victoria, c. 37, 9 Edward VII.]
In the British Parliament last year (and the identical bill has been introduced in the State of New York under championship of the Consumers League, as applied to women and children), a bill was introduced, not backed, however, by the government as such, although bearing the name of Lloyd-George, providing in effect that wages might be fixed in this manner in certain definite named trades, and also in such other trades as might be designated from time to time by the home secretary. The economic effect of such measures we are not to discuss. In the United States, except as to public work, they would be probably unconstitutional.
[Footnote 1: Since enacted, see below in chap. XI.]
Coming, therefore, to public work, we use this phrase for all labor contributed directly to the State, to any county, city, town, village, or municipality thereof, to any municipal-owned public-service corporation, gas, water, etc., company, or, finally, and most important, to or under any contractor for the same, or any of them. Some years ago the State of New York adopted legislation to the effect that in all such public employment the wages paid should be the usual rate paid for similar work in the same locality at the same time. As a result of this legislation, many thousands of lawsuits were brought against the City of New York by persons who had done labor for that municipality in the past, complaining that they had not in fact been paid "the prevailing rate," although in fact the work had long since terminated, and they had been discharged, paid in full, and apparently satisfied. Shortly after, the law itself was declared unconstitutional by New York courts. Thereupon the labor interests proposed a constitutional amendment in 1905, to the effect that "the legislature may regulate and fix the wages or salaries, the hours of work or labor, and make provision for the protection, safety, and welfare of persons employed by the State or by any county, city, town, village, or other civil subdivision of the State, or by any contractor or subcontractor performing work, labor, or services for the State or for any city, county, town, village, or other civil division thereof." A very small proportion of the voters of New York took the trouble to vote upon this amendment, although it revolutionized the economic, if not the constitutional, system of the State, so far as property and contract rights are concerned; and it was adopted by a substantial majority. In Indiana there was a statute at one time fixing the rate of wages in public employment at a minimum of not less than fifteen cents per hour, but it was held unconstitutional. It is customary in New England villages to vote annually that the town shall pay its unskilled labor a prescribed rate for the following year, usually two dollars per day. The effect of this has been sometimes to cause the discharge of all but the very most skilful and able-bodied; of those who had, by working at less than full pay, been kept out of the poorhouse; and the selectmen of some towns, notably Plymouth, have refused to obey such a vote. The California Code of 1906 provides a minimum compensation of two dollars per day for public labor, except as to persons regularly employed in public institutions. Delaware has copied the New York statute as to the prevailing rate. Hawaii, in public labor, provides a minimum wage of one dollar and twenty-five cents per day. Nebraska goes further, and provides not only for two dollars per day for public work, but that it must be done by union labor in cities of the first class, while Nevada has a minimum wage of three dollars and an eight-hour day for unskilled labor in public work. On the other hand, the Constitution of Louisiana prescribes that no law shall ever be passed fixing the price of manual labor.
[Footnote 1: This matter will be found further discussed in chap. XI.]
Coming lastly to tolls, or rates of persons or corporations enjoying a franchise, that is to say, a legalized monopoly, or exclusive legislation, or special privilege, such as eminent domain, or the right to occupy the streets; such are, in fact, identical with what we term public-service corporations, the older, the most universal, and certainly the most, if not the only, justifiable example of legal regulation of the returns for the use of property or personal services.
Whatever may be thought of the economic wisdom of attempting to regulate any rate or prices by law (and for a discussion of this subject as to railways, at least, the reader may well be referred to the valuable treatise of Mr. Hugo R. Meyer, "State Regulation of Railways"), such legislation was at least in England constitutional; but in this country, owing to our specific adoption of the principle of property rights and freedom of labor and hence of freedom of contract in our Federal and State constitutions, and as it has been repeatedly decided that to take away the income from property or a reasonable return for labor by legislation is to infringe on the property or liberty right itself, we have a universally recognized constitutional objection which has, in fact, made impossible all regulation of prices and wages, except as above mentioned, and as we are now about to discuss. The first attempt to regulate rates (with the possible exception of some early colonial laws) was the so-called Granger legislation, as shown in the Illinois Constitution of 1870, authorizing a warehouse commission to fix charges for elevating grain, the Act of Iowa of 1874 establishing reasonable maximum rates for railways, a similar act in Wisconsin of the same year relating to railroad, express, and telegraph companies, and in Minnesota; which legislation was all sustained by a divided opinion in the so-called Granger cases headed by Munn v. Illinois, 94 U.S. 113.
In the many years which have elapsed since this famous decision, the clouds have rolled away and the shape and basis of that apex of our jurisprudence been fairly surveyed. It will appear, I think, to any dispassionate jurist to have been rightly decided, at least as to the railroads, though the reasons given by Chief Justice Waite are unsatisfactory and have little logical basis. The true basis of regulation of rates at the common law and in English history was monopoly; either a franchise directly granted by the crown, such as a bridge, ferry, or dock, or one which was geographically, at least, exclusive, like a dock without a franchise. As Lord Ellenborough said in the decision quoted by the Chief Justice himself: "Every man may fix what price he pleases upon his own property, or the use of it; but if for a particular purpose the public have a right to resort to his premises and make use of them, and he have a monopoly in them for that purpose, if he will take the benefit of that monopoly, he must, as an equivalent, perform the duty attached to it on reasonable terms." "If for a particular purpose the public have a right to resort to his premises"—this important qualification from now on seems to have been lost sight of in the majority opinion. Quoting the early precedents such as that statute of William and Mary regulating the charges of common carriers—and our readers will remember many more—and the case of cabmen whose charges are regulated by city ordinances—but they are given stands or exclusive privileges in the streets—the chief justice concluded with the startling proposition that "if they do not wish to submit themselves to such interference, they should not have clothed the public with an interest in their concerns." But the public has an interest, as was afterward pointed out in dissenting opinions, in the price of shoes; yet it has never been supposed that that gave any power of legal regulation of factory prices. A still stronger case is that of inns or hotels, which have always been "a public avocation." They have had to take in all travellers without discrimination; yet there is not a vestige of legislation in the English statute-book regulating the prices to be charged by hotels. Indeed in early times most employments—millers, barbers, bakers—were public in the sense that the man could not refuse a job; yet their prices were never regulated. Yet it was upon this phrase, "public employment" or "private property affected with a public interest," taken from the opinion of Justice LeBlanc in the London Dock Company case, decided in 1810, without its context, that the chief justice built up the whole reason of his decision. The decision in Munn v. Illinois, subject to court review as to whether the rate be confiscatory, remains good law, but the opinion is still open to question; and indeed the most recent decisions of the Supreme Court show a desire to get away from it.
Some writers endeavor to justify, under our constitutions, the regulation of rates by the principle of eminent domain; but this source seems far-fetched and unnecessary. It is, of course, done under the police power; but the precedent for that use of the police power is to be found in the history of English law and statutes. Thus we have noted in the Statute of Westminster I, A.D. 1275, that excessive toll contrary to the common custom of the realm was forbidden in market towns. The very phraseology of this statute indicates the antiquity of the doctrine that tolls must be reasonable; but "toll" was always a technical term, not for ordinary prices of commodities, but for a use or service which was in some way dependent upon law or ordinance. In the very opinion of Chief Justice Waite, he quotes Lord Hale, saying that the king "has a right of franchise or privilege, that no man may set up a common ferry without a prescription time out of mind, or a charter from the king," and so later he quotes Lord Hale as saying that the same principle applies to a public wharf "because they are the wharves only licensed by the king." We also found legislation fixing rents and so on in staple towns, and consequently of the charges of property owners therein, such towns having grant of a special privilege. The early law books are full of cases showing that discrimination and extortion were unlawful, even criminal, offences. And finally, as Chief Justice Waite points out, we find the rates of carriers fixed by law in 1691. Ordinary carriers, not having the right of eminent domain such as express companies, might to-day be considered to have no legal monopoly, and indeed, possibly for that reason, the regulation of charges of express companies has not yet been attempted; but in King William's time it was doubtless considered that the carriers had special privileges on the highways, as indeed they did.
It seems to me, therefore, that the real reason, both logical and historical, for regulation of rates rests on the fact that the person or corporation so regulated is given a monopoly or franchise by some law or ordinance, or at least a special privilege from the State; or at least that he maintains a wharf, a bridge, or a ferry, or other avocation which (really for the same reason) has, from time immemorial, been subject to such regulation. This, indeed, has been the doctrine officially adopted by the Commonwealth of Massachusetts in its legislation—"Where monopoly is permitted, State regulation is necessary." The new "Business" Corporation Act of 1903 makes the express distinction between public-service corporations and all other private corporations for gain: it applies to "all corporations ... established for the purpose of carrying on business for profit ... but not to ... railroad or street railway company, telegraph or telephone company, gas or electric light, heat or power company, canal, aqueduct or water company, cemetery or crematory company, or to any other corporations which now have or may hereafter have the right to take or condemn land or to exercise franchises in public ways granted by the commonwealth or by any county, city, or town." The implication is that such other corporations are not given the entire freedom of action and contract conferred by this Business Corporation Act. Where the State creates a monopoly, it puts the public at the mercy of the grantee of that franchise. Therefore, it is logical and just that it should regulate the rates. The test, however, is not and cannot be, that the man is ready to serve all comers, or even that he is compelled so to do; hotel-keepers, barbers, restaurants, doctors, etc., have never had their charges regulated by law. In early days most tradesmen were compelled to serve any and all, at an equal price, under liability for damages. Mills, indeed, have always been subject to have their tolls regulated; at least, a certain proportion of the grist had to go to the miller; but even if it be held they had no peculiar franchise, the exception is as old as the rule.
[Footnote 1: Holmes J., ex banco, in United States v. Standard Oil Co., March 14, 1910.]
It is further noteworthy that since the Granger cases themselves, there has been no extension of the doctrine of Chief Justice Waite to other trades or industries, while the extent of the doctrine, that is, the amount of regulation permissible under the Constitution, has been very much limited. Waite's opinion gives no intimation of any constitutional limit whatever, but dozens of the decisions of the Supreme Court since draw the limit this side of the point of confiscation; that is to say, at a "reasonable return," whatever that phrase may mean. It was, indeed, at first extended to semi-private grain elevators on the prairies, to elevators monopolizing the water front of Buffalo, New York, and to floating elevators in New York Harbor, the first and last of which show certainly no element of legal monopoly, while the Buffalo case at most only a geographical one. Still, elevators were the subject of Munn v. Illinois itself. And it has never been extended to a mere de facto or "virtual" monopoly arising only from the accident of trade. Moreover, in matters of interstate commerce, although it might have been argued that such affairs were left absolutely to the plenary power of Congress, which might well, if it chose, pass laws preventing any railroad from engaging in interstate business, except at a certain rate per mile for passengers or freight—or that no vessel should be allowed to carry passengers or freight from foreign countries except at a certain price per head or per ton—yet the Supreme Court seems to have held that even this plenary power over commerce expressly given to Congress in the Constitution, is limited by the ordinary property guarantees of that instrument; possibly because the Fifth Amendment is of later date than the body of the Constitution.
[Footnote 1: We may divide monopolies into legal, geographical, and de facto, or "virtual" monopolies—phrases which sufficiently describe themselves.]
We thus find that the earliest legislation regulating rates was that of the States. It was thirteen years after the Iowa statute above referred to that the Interstate Commerce Act was passed, which was supposed to give a power—afterward denied by our Supreme Court—to the Interstate Commerce Commission to fix rates. It certainly did give them power to find, upon complaint, what was a reasonable rate, which was prima facie evidence in case of appeal. In hundreds of cases actual rates were complained of, in probably many more discrimination was complained of, and, according to Mr. Meyer, the commission was found by the Supreme Court to have decided rightly about half the time. In 1903 came the intelligent Elkins Bill against discrimination, which merely re-enacts the common law, and up to within two or three years has proved the only really effective measure of controlling the rates themselves. In 1906 came the Hepburn Act under Roosevelt, giving general power to the commission to fix rates upon complaint, to make joint rates, extending the statute to the oil pipe-lines, express companies, and sleeping-car companies, and going to the verge of the Constitution in an effort to provide that rates fixed by the commission should take immediate effect. So far as most recent decisions go, however, this great statute has not altered the position of the Supreme Court of the United States as to the constitutional necessity of a reasonable return to the carrier, and perhaps the cardinal question remains to be decided, whether such rate-making power is legislative, and, if so, may under the Federal Constitution be delegated by Congress to any board. Congress merely proclaims that the rates shall be reasonable and without discrimination—both mere expressions of the common law—and leaves the determination of what is reasonable between the Interstate Commerce Commission and the Supreme Court, neither of them legislative bodies. The common law may, indeed, be decided by a judicial body; but it is difficult to see why the alteration of the common law is not legislation. And this criticism applies a fortiori to the Taft Bill just enacted (June, 1910), which gives the Interstate Commerce Commission power to fix rates of their own motion. When, therefore—if the author may venture to repeat his words—the commission fix a "just and reasonable" rate, if they are applying the common law, their act is judicial; if they are fixing other standards, it is legislative.