WHAT ARE RAILWAY CORPORATIONS ? WHAT ARE RAILWAY RATES ? AND WHAT ARE THE LIMITATIONS TO THE STATE'S CONTROL OF RATES? A Paper Prepared for the Convention ot Railway Commissioners Held in Washington, D. C., May 19, 1896. BY A. B. STICKNEY, PRESIDENT OP THE CHICAGO GREAT WESTERN RAIEWAY COMPANY. The problem which has engaged the attention of the American peo¬ ple as much as any other during the last twentj' years is presented by the question ; Has the government the i-ight to control the rates charged by railway companies; and, if so, what limitations are there to the authority of tlie government in this respect? The authority of the government depends upon the nature of railway corporations and upon the essential characteristics of the revenue thej' collect. When the controversy com¬ menced a quarter of a century ago, it was the contention on the part of the companies that railway corpo¬ rations were private corporations, engaged in the private occupa¬ tion of the "common carrier," and that the amount of compensa¬ tion which they should receive for their services should be fixed by contract, expressed or implied, with¬ out interference from the govern¬ ment. Granting the premises of their contention, the American people were in no condition to deny their conclusion; for if there is any eco¬ nomic principle which is univers, ly admitted by this pe(^||gM||^^t prices of all articles cHH^|prc(>, including services (at l«ist nRheir domestic commerce) must be fixed by the natural laws of untrammeled trade; that is to say, by free compe¬ tition in the open market. Early in the controversy, how¬ ever, the advocates of governmental control disputed the private corpo¬ ration theory, and after years of discussion the highest courts have decided that railway companies are not private, but quasi public corpo¬ rations, and in this view the best thought of the country seems to coincide. The distinction between a public and a quasi public corporation is ob¬ scure in the public mind. A quasi public corporation is a new identity. Before the advent of railway cor¬ porations there were only two classes—private and public corpo¬ rations. A private corporation was an as¬ sociation composed of individuals created for the purpose of conduct¬ ing some business which in its na¬ ture could be conducted by an indi¬ vidual; or, in other words, for the purpose of exercising an individual function, such as trading, manufac¬ turing, or the carrying of goods for ire, either on the free highways of the 'seas or of the land, as the case Äiight be. The tille to the property of the private corporation vested in the — 2 — corporation, and the members of the corporation were stockholders; in effect, owners of undivided por¬ tions of the common property. A public corporation was a cor¬ poration organized for the purpose of exercising limited governmental functions. A county, a city, and a township, in America, are illustra¬ tions of public corporations. The property within the jurisdic¬ tion of a public corporation was owned in severally by the members, over which the corporation had a limited authority to incumber with debt, to levy and collect taxes, and to exercise other governmental functions. The principal difference, there¬ fore, between a private and a public corporation relates to the functions they were organized to perform and the ownership of the property. When the controversy over the rights of the government to exercise control of railway rates arose, it became important to investigate the essential qualities of railway corporations. Then it was discovered that a new class of corporations had come into existence, which had no name in the law dictionaries. It was found that railway corporations were technically neither public nor pri¬ vate, but possessed points of resem¬ blance to both. In respect to form and the property they owned they re¬ sembled private corporations, but in respect to both the i)urposcs for which they were organized and the functions they were authorized to perform they were public corpora¬ tions. So for want of a better name the courts called them qnusi public corporations. The Latin Avord quasi is placed before English Avords to ex¬ press resemblance. Hence a quasi public corporation means a corpora¬ tion resembling a public corpora¬ tion, or Avhich is partly a public cor¬ poration. The public characteristic of the railway corporation predominates, because the prime purpose of the organization is to perform a public or governmental function. It may be said that the ])articular gOA'ern- mental function Avhich railway com¬ panies ])erform is of the first im¬ portance, lying at the foundations of the Avhole fabric of civil govern¬ ment. Indeed, it is not; putting it too strongly to say it is necessarily coincident AA'ith the foundation of civilization. For the foundation of civilization is private OAvnership in land. The parting of the Avay be¬ tween that nomadic condition which preceded and the civilization Avhich folloAved b(>gan Avith private ownership of land. The first man who fenced in his quarter section of the earth's surface, and ])ut up no¬ tices that he claimed to OAvn it, and that he proposed to build on it a home for himself and his posterity, and to defend the possession against all outsiders, Avas the great forefather of civilization. With the private OAvnership of the land came the necessity of high¬ ways. The tAvo are inseparable; at least, the first cannot exist Avith- out the latter. The individual OAvnership of land is not a natural right, in the sense that any man can trace the title of the land Avhich he jiossesses back to a deed from the Creator, or in the sense that he is entitled to its pos- ' session because he made it. Therefore it seems that the high¬ est natural title to the land is vest¬ ed in all the i)eo])le in equal, undi- A'ided portions. But the same con¬ ditions Avhich made governments — 3 — necessary made it necessary tliat a limited individual ownership of land should be recognized, and in process of time the logic of civiliza¬ tion vested the paramount title of all the land in the sovereign or gov¬ ernment, as the representative of all the people, the government in turn granting the right of possession of limited areas to the individual; but upon conditions. One of these conditions is, that the sovereign or government, but no one else, may again take pos¬ session, by due process of law, and upon payment of a just compensa¬ tion, of the whole or any part for a public use. The most important of the public uses for which land may be thus taken is for the purpose of public highways. But there is no authority in the government, or in anyone else, to take by process of law, or other¬ wise, private land for a private road or for any private use. The pre¬ rogative of sovereignty to take pri¬ vate property for a public use, with¬ out the consent of the owner, Is del¬ egated to railway corporations, and without such authority it wouid be impracticable to build railways. This fact alone would seem to be conclusive evidence of the public' character of railway corporations and that railways are public high¬ ways, created for the public use, and therefore should be open to the use of every citizen upon equal terms and conditions. The fact that the power and duty of providing highways is exclusive¬ ly and inalienably vested in the sov¬ ereign or government is the founda¬ tion fact, the fundamental princi¬ ple, on which turns the right and duty of the government to control railway rates; hence all legislative enactments intended to exercise control of rates should be based upon this fundamental fact, and be built up consistently with the rights and duties of the government in exercising an exclusive power and prerogative. There is another fundamental principle which should be taken note of at the same time, viz., that while a government can delegate the use of sovereign power to an agent, it cannot irrevocably alien¬ ate or part with a single sovereign ])0wer. Therefore all such powers exercised by an agent are subject at all times to the supervision and control of the sovereign or govern- m(uit. Before proceeding further, as the wliole argument turns upon these fundamental principles, it is proper to repeat, that the right to provide all kinds of highways, including the ordinary country road, the city streets, and the railroads, is a func¬ tion and prerogative vested exclu¬ sively in the sovereign or govern¬ ment; that while the use of such function and prerogative may be delegated to an agent, they cannot be alienated, nor can the sovereign divest himself of the duty to exer¬ cise proper control over his agents in the exercise of such delegated functions and prerogatives. The first question of the subject has been answered. Tersely stated, a railway corporation is a cor¬ poration created for the purpose of exercising a function and preroga¬ tive of the sovereign, under his license or as his agent, and subject to his control. WHAT ARE RAII.WAY RATES? The second question. What are railway rates? will next be con¬ sidered. — 4 — A great deal of confusion upon the nature of railway rates has crept into the minds of legislators, judges, and the common peo])le, bv the similarity belAveen the services performed by railway compaiiiv's and the services performed by '•com¬ mon carriers," and from this simi¬ larity of services, railway conu)a- nies have come to be regarded as "common carriers." and railway rates have come to be regarded as of the same nature as charges made by "common cariáers," i. c.. as a quantum uicniit for Ihe specific serv¬ ices performed. Issue is taken with both of these conclusions. A railway cori)ora- tion is not a "common carrier" in the technical sense in which the words are known to the common law. Xeitlier are the I'ates collect¬ ed by railway corporations in the nature of a quantum meruit, or ¡)ay- ments for s])ecific services. This proposition is not put forth as the settled law, for in the deci¬ sions of courts railway corporations are often called common carriers. But, in sound reasoning, there is a broad distinction between the mod¬ ern railway corporation and the common law "common carrier," and between the nature of railway rates and a quantum meruit. In this connection it may be stat¬ ed that a failure to observe the dis¬ tinction will lead the courts into a corner, from which they will be un able to extricate themselves until they back out and give due regard to the distinction. The legislatures have enacted that all rates shall be reasonable and just, and if the courts shall hold that this language means that each rate shall be a quantum meruit for each specific service performed, it will become necessary for the courts to determine the value of each particular service on the basis of cost, which is impossible. There are so manv ever-varying known and unknown factors which would necessarily enter into such a com¬ petition that all the railway experts, all the astute mathematicians, all the lawyers, all the politicians, and all the "grangers" cannot produce satisfactory evidence as to the rea¬ sonableness of any specific rate based on the cost of carriage. It is safe to defy them all, indi¬ vidually and collectively, to give any good reason, based on cost, why a ton of coal should be hauled a certain distance for two dollars, while fifteen dollars is charged for the same service in reference to a ton of dry goods. The cost of carrying dry goods may be considered more on account of the greater bulk and value, but the difi'erence is not equal to the disparity of rates. The mysteries of a reasonable rate, in the popular meaning of the words, passeth all understanding. And there is no way out of the cor¬ ner except to recognize the distinc¬ tion which exists between railway corporations and the "common car¬ rier," and the broad distinction which exists between the essential characteristics of railway rates and a quantum meruit. Having stated these propositions thus broadly, it is ])roper to examine the subject more iniuutely and see what basis they have to rest upon. In the first ])lace, the common carrier of the common law is an in¬ dividual or a ])rivate corpoi-ation, trans])ortiug goods on the common highways, eitlier on the land or sea, over which he has no control or ex¬ clusive right. Ile possesses and ex¬ ercises none of the functions of the — 5 — sovereign, and consequently has none of the duties of the sovereign to perform. His obligations, what¬ ever they may be, rest upon his contract with his customers, ex¬ pressed or implied. He can go in and out of the business whenever he chooses. In short, he is an indi¬ vidual,—a subject,—exercising or¬ dinary individual or private func¬ tions in the same manner and gov¬ erned by the same laws which ap¬ ply to other private individuals. His rates are usually fixed in ad¬ vance by express contract, and when perchance he does some serv¬ ice without expressly bargaining as to his compensation, the law says to him, as it sa.ys to every other in¬ dividual in the absence of contract, "You must accept Avhat your serv¬ ices are reasonably Avorth." This is the Avhole extent of tin; much- vaunted "reasonable compensation" which the "common cari-ier" is bound to accept. On the other hand, railway cor¬ porations are ]¡ublic coiqAorations, exercising the sovereign function and prerogative of taking private property for a ])ublic use, building, controlling, and operating, to the exclusion of all olhers, publi',- hiah- Avays. One is ])e7'forraing an indi¬ vidual function; the other a sover¬ eign function. Each individual function performed may have a quantum meruit; but each sovereign function, never. The individual may trade, and even jockey; the sover¬ eign, never. The individual may have favorites; the sovereign, nev¬ er. The right of an individual to recover for services perfoimied is based upon a contract expressed or implied, but the right of a railway corporation to recover for services rests, not ux)on the law of contract but upon the license of the sover¬ eign to collect tolls. This is logic, and it is law. There is a long line of decisions in the highest courts, by the most eminent judges, who hold (quoting the language of one) that "the title of a railway company to its rights to demand compensation for this service is not derived to it ujaou common laAv principles, and is not to be measured by the rules of the common law; and whether it may laAvfully demand com])ensation from a person Avho uses its highway for the carriage of goods, in the only Avay in which it can be used, de¬ pends upon the language of its char¬ ter, and not upon the rules of com¬ mon law ; and if its charter conferred the right to collect tolls, it could collect them. OtlierAvise, it is im¬ possible to see upon what princixAle it could be contemhal that it was not compellable to ]ternrit the public to use it without i)aying tolls."' The decisions of the courts, as well as reason, make evident the es¬ sential charactm'istics of raÜAvay rates: they are not a quantum mer¬ uit for specific sei-vices, but tolls. A toll is a tax. ItailAvay rates are taxes, and all the rules applicable to the levying of taxes are ai>i)Iic:ible to the levying of raik.vay tolls or rates. And aa'hen the acts of tlie legisla¬ tures Avhich read (hat all railway rates shall be just and reasonable are construed by the courts to mean that all t.axes levied by railAA'av com])anies shall be just ami reason¬ able under the rules pertaining to the IcA'ying of taxes, llie insux)era- ble difficulties of asctu-taiuing the value of each sjtecific service Avill •United States Supreme Court, Taney, C. J., 9 Howard, 172. — 6 — be aToided, the courts will be let out of the corner and will stand on familiar ground. The first ste]) towards levying just and reasonable taxes is to aj)- proxiinate the app'reeate amount re¬ quired. This is (lone by estimatini;' the 0]>era1in»i' expenses, and addinii' the tixed charu'cs yrou iuresent own¬ er bought it out of ])rolits which he made from buying United States bonds ;tt about thirty-sevtm and one- half Iter cent of their jtar \-alue and holding tliem till their value appre¬ ciated to par. It is impossible to state with ex¬ actness, but it is probably safe to estimate that the par value of the United States bonds oulslanding at the close of the war was fully twice, and ])erhai)S three times, as much as it would have cost to conduct the war had it been conducb'd on a cash basis. By the same process of reasoning which some a])i)ly to railway securi¬ ties, ])robably from one-thii'd to one- half of all the United Stales govern¬ ment, bonds which were issued dur¬ ing the war ]>eriod were ''water," and therefore should not be ])aid, licit hei' should the government be allowed to collect taxes for the pur¬ pose of ¡la.ving the interest on "wa¬ ter." Tlu» i)henomenon of ]jroperty cost¬ ing more than it would have cost if it had been jmrchased for cash is not confined to governments or pub¬ lic corporations. What man is there who has not purchased property and agreed to pay in the future a larger sum than it would have been necessary to pay in spot cash? It would evidently be subversive of all credit and of commerce if gov¬ ernments, corporations, or individu¬ als were iiermitted to repudiate any part of their contract obligations on the grounds, that, if they had paid cash, they could have bought cheaper. Urom this point of view the "wa¬ tered stock" claim falls to the ground. It seems that the only tenable ])osition is that all bonds and stocks of railway coiqiorations which have been issued within the authority of law, without fraud, are valid obligations, entilh.Hl to pay- hient according to their tenor, if they can be thus paid by the collection of the taxes (rates) which such corpo¬ rations were authorized to levy and collect under their charters. Hence it would seem clear that the aggregate taxes (ra.tes) which railway corporations a.i-e entitled to collect (if the}' can, within the au¬ thority of their cli arters) is an amount sufficient to ])ay their oper¬ ating ex])enses, the agreed interest on their outstanding obligations, and a I'easonable dividt.md on their stocks. „Vnd such taxes would be just and reasonabhe But with a great man.y railway corporations, especiall.\- in sjiarsely settled districts, there are jiractical dillicultii's about colled ing the full amount they would thus be entitled to, whii.-h will be considered later on. Having determined the amount of the re(]uirements, the next step in levying taxes is to determine upon — 8 — what to base them. The sovereign has a wide range of discretion. Ex¬ cept constitutional limitations, there seems to be no limit to the sov¬ ereign's discretion. The Constitution of the United States contains few limitations np- on the taxing power. Section 8 be¬ gins: "The Congress shall have power to levy and collect taxes, du¬ ties, imposts, and excises, pay the debts and provide for the common defense and general welfare of the United States; but all duties, im¬ posts, and excises shall l»e uniform throughout the United Slates." Congress, therefore, may levy taxes on property, duties or im¬ posts on imports, and excises on articles of domestic manufacture; about the only limitation seeming to be uniformity. The states have like¬ wise an almost limitless lield, sub¬ ject also to the rule of uniformity and imi»artiality. But the held of agents of the sovereignty—the pub¬ lic cornorations, such as comities, cities, towns, and railway corjiora- tions—is strictly limited to the authoriti" given in the charters which create them. The authority of counties, cities- and towns usually exlemls to levy¬ ing a percentage tax on the value of the pro])erty within their jurisdic- lion. a poll tax uiion the inhabitaiils. and a license tax upon I'arious oc¬ cupations. The authorlly of rail¬ way cor])orations is limited to tolls in respect to the persons and the tonnage trans])orted. The next steii in levying taxes is a consideration of the veiy j)ractical problem, as to whether the lield of authority is large enough to collect taxes equal to the requirements. In the case of the railway coiqioration, the inquiry would be: Does the rail¬ way have, or can it procure, a suf¬ ficient volume of traliic to enable it to collect enough revenue to meet its requirements? This dilemma is not presented to railway corpora¬ tions alone. The highest potentates and the richest governments are fre¬ quently brought face to face with this practical problem. In fact, many of the sovereign governments of the earth are chronically affected with such practical difficulties in raising necessary revenues. When the condition of all the gov¬ ernments and the ])ublic corpora¬ tions, and especially railu a.v cor¬ porations, is considered from this point of view, they are found to naturally divide into lu'o classes— "the cans'' and "the can'ls." Many of the governmeuts of the world belong in the "can't'' cate¬ gory, and go on from year to year borrowing money at extravagant rates of interest, piling up indebt¬ edness which will end—the good Lord only knows how. For several years during the Ci\il \'\'ar the United States was in the "can't" class, and piled up a l.'onded debt of huge jH'oportions. Many counties, cities, auc towns have at times been in ilie "can't" class, and have been couqielle.i to comjiromise with their crediKus. I'erlia])s it is uuueeessary 1o say that many railway cor]iurati()US have been, and now are, in the "can't'' class, and it seems probable that some of Lliem always will be¬ long in that class. But that is neither here nor there, exce¡)t so far as it alTects the rule of taxation, which will soon be considered. The holders of the securilies of "can't'' cori)orations took Ihe "can't'' risk when they bought them, and are en¬ titled to no consideration on that ac- — 9 — count. Such corporations are en¬ titled to collect just such taxes (rates) as they can in fact under the authority of their charters, and no more; hut they are entitled to col¬ lect all they can. Having determined the aggregate amount of just and reasonable rates, and on what they can be levied, the next step is to determine the distri¬ bution as between the different classes which are subjects of taxa¬ tion, or, in common parlance, the in¬ dividual rate. Before proceeding with the dis¬ cussion of the method of distribut¬ ing taxation, the gist of the whole contention as to the meaning of just and reasonable taxation should be stated as tersely as possible. It is the contention that just and reasonable rates are determined by the aggregate just and reasonable requirements. The aggregate has relation to aggregate cost of opera¬ tion, because it is made up by add¬ ing to the cost of operating the in¬ terest and dividend charges. But a single rate has no relation to cost. A single rate may be just and rea¬ sonable which is less tlian cost, and a single rate which is several times the cost may also be just and rea¬ sonable. Thus it is tliat two dol¬ lars may be a just and reasonable rate for hauling a ton of coal, while flfteen dollars is also a just and rea¬ sonable rate for a like service in re¬ spect to a ton of dry goods, although the cost of each service is substan¬ tially the same. The aggregate taxation of the gov¬ ernment of the United States in or¬ der to be just and reasonable must have relation to the cost of carry¬ ing on the government; but the rate of duty on any class of imports has no relation to such cost. When congress comes to deter¬ mine what rate shall be paid upon a gallon of whisk.y, it does not stop to ascertain, or even to consider, what proportion of the ex])enses of government is due to that gallon of whisky. Or when it decides what rate of duty shall be paid upon the importation of artificial flowers, it does not undertake to find out what juirt of the cost of carrying on the government is due to the wearing of flowers in ladies' hats. The particular rates of duties, im- ])osts, and excises have no relation whatever to cost of any kind, either specific or average. This is a general principle which runs through the distribution of all kinds of taxation. The distribution of taxation is under some conditions determined by public policy, and un¬ der other conditions by the law of j)ossibility. With those govern¬ ments and corporations whose field of taxation is so large that it is easily possible to collect sufficient revenue to meet all requirements, reasons of public policy may pre¬ vail. On the other hand, with those governments and public corpora¬ tions whose field is so small that it is difficult or impossible to raise sufficient revenue, the law of pos¬ sibility controls. Take, for illustration, the national government, whose general policy is to raise tlu! bulk of its revcume from duties on imports—a form of tax¬ ation most closely resembling the taxes levied b.y railway corpora¬ tions. The importations into the United States are so large and of such a class that there is no prac¬ tical difficulty in collecting more than is required. Hence, for reasons of public pol¬ icy, some articles, such as are re- — 10 — garded as necessities, are admitted without tax; others that are regard¬ ed as luxuries are heavily taxed; and still others which it is thought desirable to have produced in this country, are protected by so large a tax that it almost prevents importation, and therefore does not produce so much revenue as a small¬ er tax would ])roduce. A country rich relatively to its requirements in taxable resources can thus con¬ sider ])uhlic policy. But let condition change about. Let the volume of imports decrease until it becomes diflicult to get suffi¬ cient revenue. Then the law of pos¬ sibility would control. The distinc¬ tion between luxuries and necessi¬ ties, or the policy of protection of home industry, could no longer be regarded. The necessities of the government would compel it to scrutinize the possibility of each class of im])orts as a revenue pro¬ ducer, and such a rate of duty (nei¬ ther too low nor too high) would have to be applied to each as would bring the largest revenue. In this connection it is well to re¬ call the fact, that taxes in the na¬ ture of duties and railway imtes may be too high, as well as too low, to produce in the long run the maxi¬ mum revenue. Consider a single example. There is now imported annually into the United States about 3,500,000,000 pounds of sugar, and an impost tax of one cent per ponnd will give the government the enormons revenue of $35,000,000 from sugar alone. But let the duty be raised to, say, Ave cents a pound, and in a few years the government wonld receive no revenue whatever from the importation of sugar. Not because the American people would stop consuming sugar, but because a sufficient quantity wonld be pro¬ duced in this country cheaper than it could be imported. The same principle aj)j)lies to rail¬ way rates. It is as i)ossible to get them too high as too low to ])roduce the largest net revenue. If too high, they will stop production, and that would stop transportation, and, as has been shown and is evident, railway corporations cannot collect rates on what they do not trans¬ port. Hence with that large class of railways in the newer and sparsely settled districts which "can't" col¬ lect sufficient revenue to meet all their requirements, the correct rate on each class and commodity is that nicely adjusted rate, neither too high nor too low, which will pio- duce the largest revenue. And it is the contention of this argument, that, whenever the ques¬ tion of the reasonableness of a rate is presented, in respect to a railway company which is not collecting suf¬ ficient revenue to meet all its re¬ quirements, it is only necessary for the court to inquire and determine whether or not the rate is too high or too low to produce in the long run the greatest possible revenne from the class of traffic to which the rate applies. This is the only ques¬ tion involved in the problem of a reasonable rate under such condi¬ tions. If the inquiry arise.s in respect to a railway corporal ion which is col¬ lecting a larger aggregate revenue than is just and reasonable, the nice adjustment of the rate for the pur- l)Ose of producing the maximum re¬ sults may be disregardcul, and the aggregate revenue may be decr(>ased by either raising or lowering the rate, as the reasons of public policy may demand. — 11 — LIMITATIONS OF STATE CONTROL. At this point in the argument the duty of the sovereign in respect to control and the limitations of his power may be discovered. If the premises are correct, the railway and municipal corporations are of the same class. Their rights of contracting obligations and issu¬ ing evidences thereof, and of collect¬ ing taxes for the purpose of fulfill¬ ing their obligations, stand upon the same foundation. Therefore the sovereign's duty and right of con¬ trol is the same over railway as over municipal corporations; no more, no less. In regard to contracting obliga¬ tions, it is the sovereign's right and duty to confine such corporations to the authority which has been grant¬ ed to them. In regard to the collection of taxes, it is also his right and duty to see to it that their authority is strictly pursued, that their taxes are levied with uniformity and im¬ partiality, and that they do not col¬ lect more revenue than the law al¬ lows. And it is equally the sover¬ eign's duty to compel them to col¬ lect all the law does allow, if the maximum collection is necessary to meet their obligations, and if the field for taxation is large enough to permit it. The latter lu'oposition is a well- recognized principle of law in re¬ spect to municipal corporations. If such a corporation has issued bonds, and its governing board wantonly refused to levy and collect sulficient taxes to meet the interest obliga¬ tions of such bonds, upon the appli¬ cation of any bondholder, the court will issue its writ of mandamus to compel the levy and collection of a proper tax. It is submitted, that, when the governing board of a railway com¬ pany wantonly refuses or neglects to levy sufficient rates to meet its obligations, upon the application of any obligee, it is equally the right and duty of the court to issue its writ in like manner to compel the members of such governing board to do their duty, and if the condition of the company is such as to re¬ quire the maximum collection, to compel them to adjust the rates, either by raising or lowering them, as the case may require, so as to produce the largest possible reve¬ nue. The last proposition is perhaps novel. It is certain the courts have never taken such action, and, as far as known, such relief has never been sought in the courts. But it would seem that the holders of railway securities have a clear case of right, supported by reason and by the let¬ ter of the laiv, if its words have their reasonable and ordinary sig¬ nificance. For the law of congress says (and the laws of the states have similar provision) that all rail¬ way rates shall be "reasonable and just," and "every unjust and unrea¬ sonable" rate is prohibited and de¬ clared unlawful. The question is, if a rate which is too high is "unreasonable and un¬ just," is not a rate which is too low equally "unreasonable and unjust?" It is the highest duty of the sover¬ eign to do justice. Distributive jus¬ tice belongs to the sovereign and consists in giving to everyone that right or equity which the laws and the principles of equity require. The right of the state to control rail¬ way rates is limited by the obliga¬ tions of justice. The general prin¬ ciples of the laws and of equity per¬ taining to the determination of rail¬ way rates have already been stated. V-