Monopolies and the People

by D. C. Cloud

The doctrine above enunciated fixes the line of distinction between public and private corporations. Those created for public or governmental purposes are defined to be "public corporations," and those created for the advancement of private enterprises are "private corporations." Private corporations possess none of the attributes of sovereignty, and hence are to be treated in law as private individuals; the act of incorporation being for the purpose of affording the corporators proper facilities for transacting business. Corporations being the mere creatures of the law, they possess only those properties which the charters of their creation confer upon them. Under the decision to which we have referred, and from which we have quoted, corporations are created by statute, and are subject to the control of the power creating them. A grant from the sovereign power to an individual, or to a company, is not necessarily irrepealable, nor will it in all cases be treated as a contract. Corporations created for public or governmental purposes are binding as contracts only so far as they affect private interests, for the good reason that government cannot contract with itself.

Nor could the legislature confer exclusive privileges upon a corporation, the exercise of which would deprive the people of the rights guaranteed to them in the constitution; for the reason that the attempt to clothe a corporation with such privileges would be an unauthorized act on their part. In the case of "Providence Bank vs. Billings & Pittman," decided by the same court, in 1830, it is said that "The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men. This capacity is always given to such a body; any privileges which may exempt it from the burdens common to individuals do not flow necessarily from the charter, but must be expressed in it or they do not exist." The doctrine obtained that corporations can take nothing by implication, and that unless the power to regulate and control them has been surrendered by the legislature, that power remains undiminished. The rule that grants of privileges to corporations are to be strictly construed, when the rights of the public are affected, is recognized in this case. We are warranted in saying that it is only since corporations have become all-powerful in the land that a different rule has obtained. Under the statutes of the United States, and as formerly held by the supreme court, a promissory note given by a citizen of a state to another citizen of the same state, but transferred to a citizen of another state, could not be sued in the United States courts, but the holder was compelled to bring his action in the state courts. This rule obtained until counties, cities, and towns began to issue their bonds to railroad companies, and was then disregarded. Railroad companies had sold and delivered these bonds to parties in Wall street, or elsewhere; they had failed to fulfil their contracts with the parties from whom they had received the bonds, and when suit was brought upon them in the state courts the bondholders were beaten. Suits were then commenced in the federal courts, the plain letter of the statute was disregarded, the established decisions of the supreme courts were overruled, state statutes and constitutions were treated with contempt, the decisions of the supreme court of a state, which had been followed for years, were called "oscillations," and the interests, frauds, and deceits of railroad corporations were fully protected and sustained; not because this course was supported by the statutes or precedents, but because such a course would subserve these harmful interests. This action on the part of the supreme court was not the result of any dishonest or partisan intent, but it was made to prevent what the court was pleased to term great wrongs about to be inflicted on innocent holders of bonds purchased of railroad companies. In many instances the innocent bondholders were the same parties who, as railroad men, had cheated the counties and cities, and by fraud and false representation had obtained these bonds, for which no consideration has been paid to the present time. It will not be out of place here, as showing the influence of these corporations over the supreme court of the United States, to refer to the transactions that caused the first departure by the court from the settled rules of decisions on questions arising under the constitutions and statutes of states, and, we may add, initiated a rule of decisions, followed to the present time, which have well nigh destroyed states rights. Under this new rule the whole country is governed by the supreme court and corporations. The people are powerless, and monopolies reign supreme. We refer to the question of aid by counties and municipal corporations to railroads. In many of the states municipal corporations have subscribed stock and issued their bonds to railroad companies, in some instances under express statute authority, and in others without such authority. No one is prepared to admit that compulsory payment by the citizen of a part of his property, or money, to aid a private corporation in building a railroad, is the payment of taxes for the support of government, or that the levy and collection of a tax for that purpose can be supported by any section of the constitution. Yet we all know that such taxes have been, and are being, levied and collected. Judge Dillon, in his work on municipal corporations, says: "The courts concur, with great unanimity, in holding that there is no implied authority in municipal corporations to incur debts or borrow money in order to become subscribers to the stock of railway companies, and that such power must be conferred by express grant. To become stockholders in private corporations is manifestly foreign to purposes intended to be subserved by the creation of corporate municipalities, and the practice of bestowing powers of this kind is of recent date and origin; and hence the rule, that in order to exist, it must be specially conferred, and cannot be deduced from the ordinary municipal grants."

If the above quotation is good law (and this no one will deny), the recent decisions made by the supreme court cannot be supported. But in order to avoid the force and effect of this principle, and to provide for the collection of bonds illegally issued (by recent decisions), a new doctrine has been promulgated by the court which overturns state statutes, as well as the decisions of state courts. Treating of this class of bonds, Judge Dillon says:—

"Respecting negotiable bonds issued under legislative authority, by municipalities for such and kindred purposes, when in the hands of bona fide holders, the supreme court of the United States, influenced, doubtless, by a keen sense of the injustice and odium of repudiation, has at all times displayed a strong determination effectually to enforce payment. Accordingly it has refused to follow the subsequent decisions of the state courts against the validity of such bonds, in cases where the prior rulings of the state courts had been in favor of the power to issue them; it has adopted liberal constructions of statutes and charters authorizing the creation of such debts; it has given no favor to defences based upon mere irregularities in the issue of the bonds, or non-compliance with preliminary requirements, not going to the question of the power to contract; and has held that the circuit courts of the United States were clothed with full power and authority by mandamus, or otherwise, to enforce the collection of judgments rendered therein on such bonds, and that this authority could not in the least be interfered with, either by the legislature or the judiciary of the states." It will be seen that for the purpose of relieving railroad companies from their liabilities as guarantors, on bonds issued to them by municipalities (for these bonds were uniformly so guaranteed), the supreme court of the United States has declared the statutes of states, and the decisions of state courts, absolutely null and void. In violation of both the letter and spirit of the constitution, in order to compel the payment of bonds issued without authority, and in violation of every principle known to the law, it has said that these bonds must be paid because they are in the hands of bona fide holders.

This same court, as we will hereafter show, when the holders of bonds issued by railroad companies were asking payment, has released the companies from their written agreement to pay in coin, and compelled the holders to take at par depreciated paper. When the bondholders are demanding payment from the people, of the bonds issued without authority, the court, in order to compel payment, nullifies state government; but when these same bondholders demand that railroad companies shall live up to their written contracts, have decided that they need not do so. It fears the stigma of repudiation when the people are called upon to pay, but when the call is made upon corporations it decided in favor of repudiation. Our author continues: "It has upheld and protected the rights of such creditors with a firm hand, disregarding at times, it would seem, principles which it applied in other cases, and asserts the jurisdiction and authority of the federal courts with such striking energy and vigor as apparently, if not actually, to trench upon the lawful rights of states and the acknowledged powers of the state tribunals."

Municipal corporations have no right to become stockholders in private corporations; acts of the legislature pretending to confer such authority are void; the officers who control and administer the municipal government are the mere agents of the municipality, and can only act within the scope of the powers conferred upon them by the charter of the municipality they represent. Neither the constitution of a state, nor of the United States, nor the charter of a municipality, can confer upon the nation, state, county, city, or town the authority to compel any citizen against his will to bestow any part of his money or property upon private corporations. And it matters not whether this comes in shape of a tax, an arbitrary appropriation of a fraction or of all his property or possessions to such private corporation, or by a subscription of stock to it. If the national, state, or municipal government can in either of the above methods compel him to aid in building up and supporting private corporations, then private corporations are clothed with attributes of sovereignty, and all private citizens own and possess their property subject to the will of these corporations. If a majority of the qualified voters of a state, or particular locality, are in favor of taxing the state, or local district, to the extent of one-tenth or one-half of the assessed value of all property in the district, and investing the amount in a railroad enterprise, the minority, notwithstanding their protest and remonstrance, must submit to have their property taken from them and applied to the same object. Their constitutional rights are taken from them, and our boasted free government has no real existence. By recent decisions of the supreme court of the United States, the people of the whole country are placed in that position now. Railroad corporations have been, and are now, under the fostering care and protection of this court. Statutes have been so often disregarded by it, when their interests were to be subserved, and in conflicts between the people and these monopolies the decisions have been so uniformly in favor of the latter, that it is now a question whether the government controls corporations, or corporations control the government. If a pernicious law is enacted by congress, or a state legislature, it is soon repealed. The men who compose those bodies are constantly changing, their term of office is short, and the errors committed by them can be speedily corrected. The judges of the supreme court are appointed for life; the people have no control over them; their decisions cannot be reversed by any department of the government. A decision of the supreme court is the supreme law of the land, and cannot be reversed or amended by any other power in the land. It is superior to all statute law, and the power of the court has no limit, save that fixed in the constitution and statutes of the United States, both of which must receive their construction and interpretation from the court. We have already said that judges of this court are subject to the infirmities common to all men; that they are liable to be influenced by the same causes that influence others; that no matter how honest and pure they may be in their intentions and actions, their decisions were liable to be controlled by surrounding circumstances, and that the influence of this great corporate power did control them. In proof of this we need only look at their course of decisions on municipal bonds, and on bonds given by railroad companies, before referred to, as well as their decisions upon the nature of railroad corporations. It strikes us as remarkable that the supreme court of the nation should have or entertain any doubts as to the fact that these corporations are private. Upon what principle the court can hold that railroads are public highways is not readily seen. The stock, the roads, and all other property belonging to the different railroad companies, are as much their individual or corporate property as are the furnace, the factory, or the mining interests, the property of the companies owning them. Their ownership is as complete as that of the private person who owns the stage and team used for carrying the mails in certain districts. The same law that governs other common carriers, governs these corporations. Government can only interfere with their business when they abuse the privileges granted in their charters. It cannot compel them to carry the mails, save in pursuance of contracts made with them. They own the ground upon which their roads are built, and no one can travel upon these roads, or ship freight over them, save by the permission of the companies. While courts and legislatures have the constitutional right to regulate and control these corporations, and, if need be to prevent abuses and oppressions, to declare their charters forfeited, as in cases of banks, insurance companies, and other corporations,—upon no principle of law can they declare them public corporations. If it is a fact that they are public corporations, then as a resulting consequence they are clothed with the attributes of sovereignty, and are a part of the government. If railroads are public highways for any purpose, they are for all. Until they cease to be owned and controlled by private corporations, it will hardly be claimed by any respectable court that they are public highways, in the same sense as common public roads, nor can they be until they are open to public use. This cannot be until the public becomes the owner of these railroads.

But we are told that the supreme court has decided the question, and declared that they are public highways, no matter whether they are owned by the state or private companies. We have not seen the decision; but if such decision has been made, we are bound to accept it as the law of the land, until the same court reverses it. Yet if the court was to decide that a river was a railroad, or that a steamboat was a train of cars, while we would accept this decision as the law, we would not admit that such was the fact. We are not aware that the question as to whether railroads are public highways has ever been before the supreme court, save in connection with the right of municipalities to subscribe stock and issue bonds therefor, and upon the question of voting taxes to aid in their construction. When these questions have been presented to the supreme court of the United States it has held that they were public highways. It is noticeable that these decisions have been made only when the interests of these corporations were to be subserved. In a recent case from Wisconsin the supreme court decided that they were public highways, and that it was just as lawful to levy taxes for railroads as for any other public works. The same court has decided in a large number of cases when suits were instituted on municipal bonds, that railroad corporations were private companies, and in all of the states where the question has arisen, we believe they have been held to be private corporations. We might cite several recent decisions of the supreme court to the same effect. In the cases of Kansas Pacific Railway Company vs. Prescott, Ribon vs. Chicago, Rock Island, & Pacific Railway Company, Putnam vs. New Albany & Sandusky Railway Company, and Chicago & Quincy Railway Company vs. the County of Otoe, tried in Washington last winter, the court virtually decided the corporations were private, and not public. The doctrine to be gathered from these decisions is, that when the interests of these corporations demand it they are to be treated as private, but when the question is as to their right to compel the people to contribute of their substance to build railroads, then the roads are public highways. If the corporations are private, and their roads are built and owned by them, the fact that these roads are private still exists, notwithstanding the courts as to the law of the case decide that they are public highways. The fact that such a decision has been made, is strong proof of the correctness of our position, that the corporations have a controlling influence over the judiciary of the country more to be dreaded by the people than all the appliances that can be brought to bear upon the legislative and executive department of the government. But in no other instance has the influence of these corporations over the supreme court of the country been made more manifest than in what is known as the "legal tender" decision. And we might add that no other decision of the court, and no act of any department of the government, has proved so disastrous to the people as this decision. We have already referred to the means used by these corporations to secure a majority of the supreme court favorable to their designs, and of their success in the selection of judges committed to their interests. It only remains for us to review this decision to convince the most skeptical of the fact that corporations have captured the supreme court, as well as the other departments of the government, and the effect of this decision has given to these corporations, and Wall street brokers, and gamblers, the absolute control of the finances of the country. But before coming to the decision, it will not be out of place to remark, that money is always the standard of value for all commodities; that the universally adopted idea of money means coin—gold and silver—or, what is called the precious metals. Bank bills, treasury notes, bills of exchange, and all kinds of commercial paper are only valuable as the representatives of money. The fact that they are expected to be converted into money gives them their value in the market. Let it be understood that they cannot at some future day be collected in money, and their commercial value ceases. In proportion to the length of time that must elapse before any bank bills, treasury notes, or other commercial paper can be paid in specie, does its value increase or diminish in commercial transactions. Nothing but money of the standard value can be made a legal tender in contracts between individuals. Congress does not possess the power, under the constitution, to say that A who has contracted to pay B $1,000 in money, can discharge that contract by paying him $1,000 in bank bills or treasury notes, that are worth in money but $800. If such powers exist, then all standard values of property is destroyed, and it fluctuates in value as the price of the paper representing money approaches to, or recedes from, the money standard. The rule that nothing but gold and silver is, or can be, "legal tender" has been uniformly adhered to from the formation of our government, until 1872, when a majority of the supreme court reversed the rule, and decided that what are termed treasury notes are, under the acts of congress, legal tender for all contracts and business intercourse among men.

The question was fully argued in 1869 before a full bench, then composed of a chief justice and seven associates, five of whom concurred in deciding that the act of congress making anything but gold and silver a legal tender was unconstitutional. Before the decision was announced Justice Grier resigned, leaving but six associates on the bench when the opinion was delivered. Chief Justice Chase delivered the opinion, and, in speaking of the powers of congress, says: "No department of the government has any other powers than those delegated to it by the people. All the legislative power granted by the constitution belongs to congress; but it has no legislative power which is not thus granted. * * Not every act of congress, then, is to be regarded as the supreme law of the land, nor is it by every act of congress the judges are bound. This character, and this force, belongs only to such acts as are made in pursuance of the constitution." The court then decides that there is in the constitution no grant of legislative power to make any description of credit currency a legal tender in payment of debts, and that it does not exist as incidental to any of the granted powers. That the power does exist in congress to issue bills of credit or treasury notes, but not to make them legal tender for debts. The opinion concludes as follows: "We are obliged to conclude that an act making mere promises to pay dollars a legal tender to pay debts previously contracted, is not a means appropriate, plainly adapted, really calculated to carry into effect any express power vested in congress; that such an act is inconsistent with the spirit of the constitution, and that it is prohibited by the constitution." This decision was not acceptable to corporations and railroad managers. It would compel them to live up to the contracts they had made, and destroy their power of controlling, in connection with the Wall street stock jobbers and gold brokers, the entire financial interests of the country. We have already shown how this combination of corporate interests secured an increase in the number of judges, and that Messrs. Strong and Bradley were appointed because of their opposition to the legal tender decision. None of the judges who had concurred in the decision of Judge Chase had changed their opinions; these were then dissenting members of the court. The two new appointees uniting with three dissenting judges, a majority of the court could overrule the long settled decisions of the court, and sustain the act of congress making depreciated paper a legal tender. The law of the land, recognized since the organization of the government, approved by all the eminent jurists and statesmen who have lived in the last century, could be overturned; values could be unsettled; the financial and commercial interests of the country could be made subject to this great corporate power which had obtained such complete control of the different departments of the government.

Soon after the appointment of the two judges above named the legal tender question was again brought before the court, a full bench of nine judges sitting and participating in the decision of the question. Five of the nine concurred in holding the legal tender act constitutional, Justice Strong delivering the opinion of the court. It is a noticeable feature of the case that a judge who had just taken his seat should be selected to pronounce the decision; that after a uniform course of decisions, made and upheld by all the great jurists of the country for eighty-five years, two judges who had just been appointed should be found delivering opinions reversing this long settled rule, and that both of said judges were appointed because of their avowed friendship for the corporations which were to be so largely benefited by the reversal of this long settled construction of the constitution upon the question of legal tenders, and it seems that even these judges base their decision upon what they deem the necessity for a reversal rather than upon any constitutional grounds. Justice Strong, as preliminary to the opinion of the court, says: "The controlling questions in these cases are the following: Are the acts of congress, known as the legal tender acts, constitutional when applied to contracts made before their passage? and, secondly, Are they valid as applicable to debts contracted since their enactment? These questions have been elaborately argued, and they have received from the court that consideration which their great importance demands. It would be difficult to overestimate the consequences which must follow our decisions. They will affect the entire business of the country, and take hold of the possible continued existence of the government. If it be held by this court that congress has no constitutional power, under any circumstances, or in any emergency, to make treasury notes a legal tender for the payment of all debts (a power confessedly professed by every independent sovereignty other than the United States), the government is without those means of self-preservation which, all must admit, may, in certain contingencies, become indispensable, even if they were not when the act of congress now called in question was enacted. It is also clear that if we hold the acts invalid as applicable to debts incurred, or transactions which have occurred since their enactment, our decision must cause, throughout the country, great business derangements, wide-spread distress, and the rankest injustice. The debts which have been contracted since February 25th, 1862, constitute, doubtless, by far the greatest portion of the existing indebtedness of the country. They have been contracted in view of the acts of congress declaring treasury notes a legal tender, and in reliance upon that declaration. Men have bought and sold, borrowed and lent, and assumed every variety of obligation, contemplating that payment might be made with such notes. Indeed, legal tender notes have become the universal measure of values. If now, by our decision, it be established that their debts and obligations can be discharged only in gold coin; if, contrary to the expectations of all parties to these contracts, legal tender notes are rendered unavailable, the government has become an instrument of the grossest injustice, and debtors are loaded with an obligation it was never intended they should assume. A large percentage is added to every debt, and such must become the demand for gold to satisfy contracts, that ruinous sacrifices, general distress, and bankruptcy, may be expected. These consequences are too obvious to admit of question. And there is no well-founded distinction to be made between the constitutional validity of an act of congress declaring treasury notes a legal tender for debts contracted after its passage, and that of an act making them a legal tender for the discharge of all debts, as well those incurred before as those made after its enactment. There may be a difference in the effects produced by the acts and in the hardship of their operation; but in both cases the fundamental question, that which tests the validity of the legislation, is, Can congress constitutionally give to treasury notes the character and qualities of money? Can such notes be constituted a legitimate circulating medium having a defined legal value? If they can, then such notes must be available to fulfil all contracts (not expressed by exception) in money, without reference to the time when the contract was made."

This quotation from the opinion of the court may be taken as a sample of the reasoning in favor of a reversal of former decisions on the question of legal tender. After elaborate argument in the same strain, by Justice Strong, and also by Justice Bradley, a majority of the court decide that the legal tender acts are constitutional, while the four judges remaining on the bench, who but a short time before had made a contrary decision, dissent from the opinion of the majority. The argument of the majority in favor of the decision seems to ignore the real question, to-wit, the constitutionality of the acts of congress, and to place the decision upon the ground that a contrary holding would be ruinous to the financial interests of the country. The assertion is made that the decision "will affect the entire business of the country, and take hold of the possible continued existence of the government." The decision was made about one year ago, and its effects on the business interests of the country are made manifest. If the court believed that the decision sustaining the legal tender acts would prove beneficial to the people, it was sadly mistaken. But if it believed such a decision would strengthen monopolies, and enable a few railroad managers and Wall street brokers to corner and control the finances of the country, then the decision was a success. The effect has been to unsettle the commercial and financial interests of the country, and to show that treasury notes, if they are the standard of values, are a fluctuating standard. The consequence of the decision has taken "hold of the possible continued existence of the government," and has enabled the gold and stock gamblers in Wall street to suck the life-blood of the nation. The decision gives strength to corporations, who, uniting with Wall street brokers, are depleting the treasury of the nation to advance their own private purposes. By the decision two standards of value are fixed: one that is stable, and must ever remain so—the standard of money—gold and silver; the other, the standard of fluctuating paper, of no intrinsic value, liable to be inflated or depressed, as shall best subserve the interests of the parties who, by combining, have got such absolute control of the market as to be able to change the value of this legal tender paper at pleasure. The idea advanced in the decision, that to declare that nothing but coin could be a legal tender, would cause widespread ruin, presents but a partial view of this matter. As a matter of fact, no act of congress prior to 1862 had ever been passed making anything but coin a legal tender; nor was there any decision of the supreme court recognizing or deciding that paper money could be a legal tender until 1872; and yet no such widespread ruin had overtaken the financial interests of the country as has manifested itself since that decision was rendered.