Contemporary American History, 1877-1913

by Charles A. Beard

Both of these contentions were rejected by the Court, and the constitutionality of the Illinois statute was upheld. The opinion of the Court was written by Chief Justice Waite, who undertook an elaborate examination of the "due process" clause of the Fourteenth Amendment. The principle of this Amendment, he said, though new in the Constitution of the United States, is as old as civilized government itself; it is found in Magna Carta in substance if not in form, in nearly all of the state constitutions, and in the Fifth Amendment to the Federal Constitution. In order to ascertain, therefore, what power legislatures enjoyed under the new amendment, it was only necessary to inquire into the limitations which had been historically imposed under the due process clause in England and the United States; and after an examination of some cases in point the Chief Justice came to the conclusion that "down to the time of the adoption of the Fourteenth Amendment it was not supposed that statutes regulating the use or even the price of the use of private property necessarily deprived an owner of his property without due process of law." When private property "is affected with public interest" and is used in a manner to make it of public consequence, the public is in fact granted an interest in that use, and the owner of the property in question "must submit to be controlled by the public for the common good, to the extent of the interest he has thus created."

But it was insisted on behalf of the plaintiffs that the owner of property is entitled to a reasonable compensation for its use even when it is clothed with the public interest, and that the determination of what is reasonable is a judicial, not a legislative, matter. To this Chief Justice Waite replied that the usual practice had been otherwise. "In countries where the common law prevails," he said, "it has been customary from time immemorial for the legislature to declare what shall be a reasonable compensation under such circumstances, or perhaps more properly speaking to fix a maximum beyond which any charge made would be unreasonable.... The controlling fact is the power to regulate at all. If that exists, the right to establish the maximum of charge as one of the means of regulation is implied. In fact, the common law rule which requires the charge to be reasonable is itself a regulation as to price.... To limit the rate of charge for services rendered in a public employment, or for the use of property in which the public has an interest, is only changing a regulation which existed before. It establishes no new principle in the law, but only gives a new effect to an old one. We know that this is a power which may be abused; but that is no argument against its existence. For protection against abuses by legislatures the people must resort to the polls, not to the courts."[20]

The principle involved in the Munn case also came up in the same year (1876) in Peik v. Chicago and Northwestern Railroad Company, in which Chief Justice Waite, speaking of an act of Wisconsin limiting passenger and freight charges on railroads in the state, said: "As to the claim that the courts must decide what is reasonable and not the legislature, this is not new to this case. It has been fully considered in Munn v. Illinois. Where property has been clothed with a public interest, the legislature may fix a limit to that which shall be in law reasonable for its use. This limit binds the courts as well as the people. If it has been improperly fixed, the legislature, not the courts, must be appealed to for the change."

The total results of the several Granger cases, decided in 1876, may be summed up as follows:

(1) That the regulatory power of the state over "public callings" is not limited to those businesses over which it was exercised at common law, but extends to any business in which, because of its necessary character and the possibilities for extortion afforded by monopolistic control, the public has an interest.

(2) That such regulatory power will not be presumed to have been contracted away by any legislature, unless such intention is unequivocally expressed.

(3) That the exercise of such regulatory power belongs to the legislature, and not to the judiciary.

(4) And the dictum that the judiciary can grant no relief from an unjust exercise of this regulatory power by the legislature.

Although the denial of the right of the judiciary to review the "reasonableness" of a rate fixed by the legislature in the Granger cases had been dictum, a case was not long arising in which the issue was squarely raised. Had this case gone to the Supreme Court, the question of judicial review would have been decided a full decade or more before it really was. In this case, the Tilley case, a bondholder of a railroad operating in Georgia sought to restrain the railroad from putting into force a tariff fixed by the state railroad commission, on the ground that it was so unreasonably low as to be confiscatory. Judge Woods, of the Federal circuit court, refused to grant the injunction, basing his decision squarely upon the dictum in Munn v. Illinois, and declaring that the railroad must seek relief from unjust action on the part of the commission at the hands of the legislature or of the people.

It was not till seven years after the Granger cases that another case involving rate regulation was presented to the Federal courts.[21] The Ruggles case, brought to the Supreme Court by writ of error to the supreme court of Illinois, in 1883, involved a conviction of one of the agents of the Illinois Central Railway for violating a maximum passenger fare statute of that state, and raised substantially the same question as all of the Granger cases except the Munn case—the right of the legislature to regulate the rates of a railroad which was itself empowered by its charter to fix its own rates. The Court affirmed the doctrine of the Granger cases, Chief Justice Waite again writing the opinion. The case is noteworthy only for the opinion of Justice Harlan, concurring in the judgment, but dissenting from the opinion, of the Court, in so far as that opinion expressed, as he declared, the doctrine that the legislature of Illinois could regulate the rates of the railway concerned, in any manner it saw fit. Justice Harlan argued that inasmuch as the charter of the railroad had conferred upon it the right to demand "reasonable" charges, the legislature, when it resumed the power of fixing charges, was estopped from fixing less than "reasonable" charges; and should charges lower than "reasonable" be fixed, it would be within the province of the judicial branch to give relief against such an impairment of the obligation of contract.