CHAPTER I

EARLY RAILWAY CHARTERS

General Characteristics. A railway charter may be defined as a special act of a legislative body authorizing a person or persons duly organized to construct and operate a railway or railways in a certain territory under certain conditions. Such a legislative act is a private law. With the exception of a few of the Western States - Arizona (Territory), California, Colorado, Idaho, and Montana - which began with general laws, special charters have been granted by every state and territory in the United States. The charters have numerous resemblances and differences which will be noted more in detail later on, but at the outset it is well to notice certain features which charters in all parts of the United States have in common. In spite of numerous striking differences which exist, we may speak of a typical railway charter.

common to

The leading features which are railway charters of the different states may be associated with the following points, every charter having one or more provisions relating to some or all of these points: Name of company; number

of commissioners; number of board of directors; the amount of capital stock; size and number of shares; the amount of the payment per share at the time of subscription, and the maximum assessment per share, together with the number of days' notice required; systems of voting; the time limit as to beginning and completing construction, junctions, branches, and extensions; route; expropriation and methods of valuation, together with the manner in which disputes are settled; the amount of land which may be held; the number of miles to be constructed before traffic may be opened; the power to borrow money and the rate of interest; the distribution of dividends, liability of stockholders, annual reports, passenger and freight rates. In every state charters may be found which contain provisions on only a few of these points, while in most states charters were granted containing provisions on all of them, and perhaps others not here indicated.

Following an old English custom, a few charters in a number of states contain a preamble. Where a preamble is found, it usually sets forth the reasons why the proposed railway should be constructed, the public service which it can be made to perform, and the manner in which the project is to be carried out. Preambles of this kind can be found in charters of states so far apart as Wisconsin, Pennsylvania, and Georgia. Similarly, charters in some North Atlantic States declare the public use of the projected railways. Both the

preamble and the declaration of public utility serve the same purpose, namely, to bring before the legislative body before the franchise is granted the social and economic conditions which make the project desirable, if not necessary.

While there is no general order in which the different provisions of a typical railway charter are incorporated, in the individual charters of the different states, it is very common for a charter to enumerate first of all a number of persons, designated commissioners, under whose direction the proposed railway is to be organized. These commissioners are authorized to open subscription books in specified localities on a certain date, and to continue to receive subscriptions during a certain period of time. The charter further specifies that, after a certain minimum sum has been subscribed, and a certain payment on each subscription, varying greatly in its amount, has been made, the subscribers shall hold a meeting and elect a board of directors. The size of the board to be elected, like the number of commissioners, varies very greatly in the different charters, although nine and thirteen are perhaps the most common numbers. In a few states, like Connecticut, Maryland, and Kentucky, charters were granted making it obligatory on the part of the elective officers to bind themselves to the performance of their respective duties by an oath.

The board of directors having been elected, the company has obtained legal status and is prepared

to carry out the provisions of the charter in its possession. The powers granted to the company, acting through the board of directors, include powers common to corporate bodies, such as purchasing, holding, selling, and leasing property; to have perpetual succession; to sue and be sued; to use a common seal; and in general to exercise those powers, rights, and privileges which other corporate bodies exercise, in order to carry out the provisions of the charter.

One power which is invariably given to the board of directors, with or without restrictions, relates to rates; and, considering the great importance which has always been attached to the question of rates, it may be well to bring together typical features of charters of different states on this important question.

Charter Provisions as to Rates. A charter granted by Connecticut in 1832 provides that the company may charge "such rates per mile as may be agreed upon and established from time to time by the directors of said corporation." 1 This, in substance, is the provision on rates which is more frequently found in railway charters in the United States than any other. The Connecticut charter just referred to names three "commissioners," who shall be sworn to a faithful discharge of the trust imposed upon them by virtue of the act, and who shall not be interested in any way whatsoever in the company.2

1 Pr. Laws, 1835-36, p. 992.

2 §§ 5, 7, 8, of charter.