Article XII, Section 22, of the Constitution, provides that the Railroad Commissioners "shall have the power and it shall be their duty to establish rates of charges for the transportation of passengers and freight by railroad or other transportation companies."
Further on in the same section, it is provided that "any railroad corporation or transportation company which shall fail or refuse to conform to such rates as shall be established by such Commissioners, or shall charge rates in excess thereof, * * * shall be fined not exceeding $20,000 for each offense."
The dispute between those who stood for maximum rates - that is to say, the members of the machine lobby, the machine Senators, the Southern Pacific attorneys and those who wanted absolute rates - namely, the anti-machine Senators and the attorneys representing large shipping interests - waxed hot over the words in the above quotation which are printed in Italics.
The advocates of the absolute rate held, with at least apparent reason, that the words "fail to conform to such rates" mean just what the dictionaries say they do: That the railroad charging a rate in excess of that fixed by the Railroad Commissioners, or a rate less than that fixed by the Commissioners, is not conforming to the rates. Such, at least, seems reasonable construction of a very simple phrase.
But not so, insisted the railroad lobby. That aggregation of patriots skimmed over the words "fail to conform to such rates," and saw only, "or shall charge in excess thereof." Inasmuch, the pro-railroad element held, as the Constitution says that the railroads shall not charge in excess of the rates fixed by the Railroad Commissioners, the railroads are at liberty to reduce the rates as fixed by the Commissioners at will. In other words, according to the pro-railroad element, the Constitution authorizes the fixing of maximum rates only.
The pro-railroad claquers even went so far as to claim that the Supreme Court has decided that the maximum rate is the only rate that can be fixed under the State Constitution. They referred the doubtful to the notorious decision in the Fresno passenger rate case known as the Edson decision.
But no question of maximum rates was involved in the Edson case. To be sure, Chief Justice Beatty took occasion to say in his opinion in that case that his understanding had been that the State Constitution provides for the maximum rate. But this had no place in the decision, was purely dictum, and is so regarded.
Attorney-General Webb has an ingenious but very plausible explanation of Judge Beatty's much-discussed observation. General Webb points out that previous to the adoption of the present State Constitution - 1879 - Justice Beatty had been engaged in the active practice of the law in this State. Up to the time of the adoption of the Constitution of 1879 the maximum rate had prevailed in California. About that time, Judge Beatty went to Nevada and was absent from the State for several years. Returning to California, after the State Constitution had been adopted, Judge Beatty found no case in which the duties of the Railroad Commissioners had been involved, until the Edson case came up.
"I am of the opinion," said General Webb in discussing this point, "that when the Chief justice spoke of the maximum rate in the Edson case he was governed by mental impressions received previous to 1879, when the maximum rate was indeed the rule in California."
All this was a very pretty theory. To the common-sense mind "conform to the rates fixed" might mean conform to them; the normal man might be unable to dig out of the Constitution any prohibition of absolute rates. But the confusion caused by the raising of the question got the Stetson bill very much in the air.