21

but it was sustained against this objection and upon the further ground that the charter of the railway company was subject to alteration in the discretion of the legislature.20 There are cited in support of this ruling cases mentioned in note hereto. The case afformer ruling in New Jersey Supreme Court22 and in New Jersey Court of Errors and Appeals.23 The Supreme Court of New Jersey points to the fact that when the public utilities act was adopted it was the custom of such companies to carry members of the police force free and this company acquired its rights while that custom was in vogue, and "if the custom is now given the force of statutory law, the company loses nothing which it had either in possession or immediate anticipation at the time of its incorporation." This is a somewhat elastic statement, but it serves as an illustration of what is above said of the ready application of rulings to corporations affected with a public interest.

§ 91. Power of City to Surrender Rate-Making Right.-Under the principle that potestas delegata non potest delegari, it has been held that the vesting in a city of the right to fix a rate for a public service company does not authorize it to surrender by contract that right to the company to fix its own rates. Thus where the charter of a city, conferred on it the

20 N. J. Const., art. 4 sec. 7, p. 11.

21 Stanislaus County v. San Joaquin & K. C. & I. Co., 192 U. S. 201, 24 Sup. Ct. 241, 48 L. Ed. 406; San Antonio Traction Co. v. Altgeld, 200 U. S. 304, 26 Sup. Ct. 261, 50 L. Ed. 491; Fair Haven & W. R. Co. v. New Haven, 203 U. S. 379, 27 Sup. Ct. 74, 51 L. Ed. 237.

22 State v. Sutton, 83 N. J. L. 46, 81 Atl. 1057.

23 State v. Sutton, 87 N. J. L. 192, 94 Atl. 788.

power to prescribe charges for telephone service and it granted a franchise to construct and operate a telephone system for fifty years, stipulating for full service to it and two per cent. of the gross receipts and provides a schedule of maximum amounts for service to others, it was held that while the state might authorize a municipal corporation to establish by inviolable contract rates to be charged for a definite end not unreasonable in point of time, it had no right to suspend the governmental power of fixing and regulating rates." But even the authority to suspend an undoubted power for a brief time "must clearly and unmistakenly appear." It is another thing, however, to say that even for a brief time a municipality may wholly surrender to a company the right to fix its own rates. Unmistakable authority is needed to do this.25 Such unmistakable power does not arise out of legislative authority to a city to contract for a supply of water for not exceeding thirty years and maintain same "at such rates as may be fixed by ordinance." In a Pennsylvania case it lately was said, in speaking of a contract with a municipality fixing rates for a water company that: "In many jurisdictions it has been held that a contract as to rates is subject to modification or abrogation by legislative action, either direct or through the medium of a commission. Indeed it must be conceded that the whole trend of modern decision is in this direction, but we have not been called upon

24 Home Telephone Co. v. Los Angeles, 211 U. S. 265, 29 Sup. Ct. 50, 53 L. Ed. 176.

25 Detroit v. Detroit City St. Ry. Co., 184 U. S. 368, 22 Sup. Ct. 410, 46 L. Ed. 592; Cleveland v. Cleveland City Ry. Co. 194 U. S. 517, 24, Sup. Ct. 756, 48 L. Ed. 1102; Vicksburg v. Vicksburg W. W. Co., 206 U. S. 496, 27 Sup. Ct. 762, 51 L. Ed. 1155.

in Pennsylvania to finally decide to what extent the doctrine is applicable here." "26

§ 92. Vesting Regulation in Public Service Commissions. Later this case was referred to by the same court as holding that a contract between a borough and a water company as to rates "unlimited by its terms and hence indeterminate as to time must give

way to the general policy of the law under which the legislature created a special tribunal to pass upon and determine questions relating to the reasonableness of rates charged by public service corporations." This subject is well considered in a Wisconsin case,28 in which a city sought to enjoin an interurban railway company from raising its rates, notwithstanding a contract with a city fixing such rates, permission being given, on the condition of charging the rates specified, to run its cars in the streets of such city. It was ruled that the city had the right to refuse to allow the company to run its cars over its streets, this right being absolute, and its power to impose conditions unlimited. But "no specific authority having been conferred on the city to enter into the contract in question, the right of the state to interfere whenever the public weal demanded was not abrogated. The contract remained valid between the parties to it until such time as the state saw fit to exercise its paramount authority and no longer." This contract, therefore, was held to come within the purview of the state's public service com

26 Turtle Creek v. Pennsylvania Water Co., 243 Pa. 415, 90 Atl.

199.

27 Bellevue v. Ohio Val. W. Co., 245 Pa. 91, 91 Atl. 236.

28 Manitowoc v. Manitowoc & W. Traction Co., 145 Wis. 13, 129 N. W. 925, 140 Am. St. Rep. 1056.

29

mission. In a Georgia case it was ruled that if a charter of a city does not specially authorize a city to fix charges of a telephone company the public service commission may fix such rates. And so, if the charter of a city is by the constitution made "subject to general laws.30 This question has very recently received consideration by U. S. Supreme Court31 in a case where a public service commission fixed a rate for a street railway higher than that provided for by a franchise ordinance. It was said that: "Assuming (what is not clear) that the provision in the franchise ordinances respecting the rates of fare and the transfer privilege are contractual in form, still it is well settled that a municipality cannot, by a contract of this nature, foreclose the exercise of police power of the state unless clearly authorized to do so by the supreme legislative power.' There is then cited the Webster case supra holding as above stated. This case is distinguished from another recent case32 by a case where by legislative act the franchise right depended thereon was granted by a city. In the Puget Sound case there was dissent by the Chief Justice and Justice McKenna upon the ground that it was controlled by the Detroit R. Co. case and in that case there was dissent by Justices Clark and Brandeis.

29 Dawson v. Dawson Teleph. Co., 137 Ga. 62, 72 S. E. 508.

30 State ex rel., v. Superior Court, 67 Wash. 37, 120 Pac. 861, L. R. A. 1915 C, 287 Ann. Cas. 1913 D. 78.

31 Puget Sound Traction, L. & P. Co. v. Public Service Commission, 244 U. S. 574, 37 Sup. Ct. 705, 61 L. Ed.

--.

32 Detroit United R. Co. v. Michigan, 242 U. S. 238, 37 Sup. Ct. 87, 61 L. Ed.-.

CHAPTER XVIII.

PRINCIPLE OF REGULATION UNDER POLICE POWER.

§ 93.

94.

Preliminary remarks.

Rate making in the insurance business.

95. State cases justifying rate making under police power. 96. Dissenting opinion in German-Alliance insurance case. 97. State cases as to rates under police power.

$93. Preliminary Remarks.-Generally it may be said, that thus far in this book concern has been more to point out first what activities or callings at the common law by their public nature or because of privileges accorded to them by royal prerogative were deemed to have submitted themselves to regulation by the public, and, recently, what application of this principle has appeared in American activity, so far as old callings were involved and new pursuits sprang out of new conditions, following upon new discoveries and inventions in our times. As has been seen it is the unfolding of the principles and practices in our common law, which under constitutional guarantees is the reason for all the strides so rapidly made by courts and legislatures in the past forty years in the development of adequate and intelligent control of business needing and receiving assistance out of the treasury of wealth held by the state in trust for the people. To be more precise as to the beginning of this development reference is made to the Munn case' decided in 1876. This case and another,2 decided in 1913, is, as said in a dis

1 Munn v. Illinois, 94 U. S. 113, 24 L. Ed. 77.

2 German Alliance Ins. Co. v. Lewis, 233 U. S. 389, 34 Sup. Ct.. 612, 58 L. Ed. 1011, L. R. A. 1915 C. 1189.