management to keep alive and active a suspicion of the integrity of all railway investments.

The total mileage in the hands of receivers has varied widely from period to period, corresponding in large measure to commercial and industrial conditions governing at a particular time. In so far as records show, the greatest mileage in the hands of receivers at any one time in the United States was in 1894 when almost 41,000 miles, little less than 25% of the mileage of the country, were so situated. The second highest point was reached June 30, 1916, with 37,350 miles, a figure which represented less than 15% of the total then operated. The minimum figure, on the other hand, seems to be that of 1902 when less than 1,500 miles were in the hands of the court, though in the previous year receivership mileage was only about 2,500. Sooner or later in their history, approximately half the railway properties of the United States have undergone a reorganization and more than 1,000 foreclosures have been made. The duration of a railway receivership averages from two to three years, though there are many instances of even important properties which have "wandered in the valley" for a considerable period of time: at the present time the Texas and Pacific has not emerged from a receivership instituted in October, 1916, and one small property, the Danville and Mt. Morris, operating but 15 miles of line, has been in the hands of a receiver since June, 1894, thus exceeding the record of 29 years made by the Central Vermont. At the present time the movement is in the direction of the reduction of receivership mileage-the total declined from 15,600 to 13,950 in the calendar year of 1923—and, barring unusual occurrences, that trend should be maintained until such mileage is reduced to small proportions.

WEAKNESS OF JUDICIAL CONTROL OF PROPERTIES

Despite the fact that the courts have, on the whole, discharged adequately their responsibilities under the present

plan of handling properties in receivership, certain important and some irremediable weaknesses have appeared. In the first place, the courts are ill prepared for the burden thrust upon them, and this is true not only from the standpoint of lack of training for the peculiar responsibilities of financial management, but also because of the heavy burden resting upon the courts in the performance of their usual work. This lack of expert knowledge of railway operation and of the fundamental principles of financial reorganization has shown itself in many cases, but perhaps in no connection more conspicuously than in the increase of capitalization so often resulting from the reorganization of a property. Then, too, at times when a great mileage must be directed by the courts, an almost impossible demand is made upon them in the face of heavy court dockets. A second criticism which may be made of the present policy of handling properties in financial difficulty rests upon fact that it gives into the hands of the courts an unusual power and places at their disposal a patronage which is hardly consistent with the judicial function.

the

In the third place, the present plan has facilitated the establishment of "friendly" receiverships of an essentially fraudulent character and purposed to defeat, for the time being at least, the interests of the real creditors. That this has resulted from a willingness on the part of the courts to encourage unfair tactics, can be legitimately charged in but few instances; rather, it has developed out of judicial ignorance of the conflict of interests within the organization. A fourth criticism, and one closely connected with the one last made, rests upon the fact that all too often the court continues the old management in control, the president or some other high official being placed in charge of the property. If the receivership has been inescapable, the continuance of a management familiar with the problems of the property is to be commended, but if the failure is the consequence of inefficient or fraudulent direction, the retention of the old régime cannot be too strongly condemned. At times the

courts have sought to combine familiarity with the property and outside control by the appointment of two receivers, one from the old management and the other from the outside, yet this plan is weak in that the ignorance of the outside appointee makes him an easy dupe of tricksters, thoroughly familiar with the property. Finally, judicial control has resulted in conflicts of jurisdiction, the classic example being the Northern Pacific which had, in 1895, three separate sets of receivers in as many different groups of states. Even yet there is no definite rule to guide the courts in handling the affairs of an interstate carrier.

POSSIBLE SOLUTIONS

After all, in handling properties in financial straits the court is operating in a sphere which is not judicial; rather, | it is technical and financial. Therefore, since the nature of the business is such that a railway receivership differs widely in problems and purposes from a receivership for a commercial enterprise, the solution of the problem would seem to be the transfer of receivership control from the general courts to some specially constituted court, to the Interstate Commerce Commission, or to some administrative body created for the purpose. In this way the courts would be relieved of a heavy burden during critical years and the evils of the present system would be largely avoided. In addition, more expert direction of the properties would be secured.

In the foregoing discussion, the ways in which the courts function independently in the railway field have been presented. It is not, however, by its independent action that the judiciary functions most importantly in the regulation of the carriers; instead, it is through the interpretation of legislation and the adjudication of Commission orders that its major work is done. But, since that cooperation of the judiciary with the other departments is set forth in later

chapters which deal with the development of positive regulation, it is needless to anticipate here. Therefore attention will be given at once to the development of positive regulation of the railways, state and federal.

References:

BEALE, J. H., JR., and WYMAN, BRUCE. Railway Rate Regulation. W. J. Nagel, 1906.

CLEVELAND, F. A. and POWELL, F. W. Railroad Finance. D. Appleton & Co., 1912.

COMMONS, J. R. and ANDREWS, J. B. Principles of Labor Legislation. Harper & Bros., 1920.

DAGGETT, STUART.

1908.

Railroad Reorganization. Harvard University Press,

JENKS, J. W. and CLARK, W. E. The Trust Problem. Doubleday, Page & Co., 1917.

JOHNSON, E. R. and VAN METRE, T. W. Principles of Railroad Transportation, chap. xxx. D. Appleton & Co., 1021.

RIPLEY, W. Z. Railroads: Finance and Organization, chap. xii. Longmans, Green & Co., 1915.

RIPLEY, W. Z. Railroads: Rates and Regulation, chap. xx. Longmans, Green & Co., 1912.

RIPLEY, W. Z. Railway Problems, chap. ii. Ginn & Co., 1913.

STIMSON, J. F. Handbook to the Labor Law of the United States. Chas. Scribner's Sons, 1896.

WOLFE, J. CALVIN. Railway Receiverships Since 1910. (Thesis written at University of Wisconsin, 1922.)

-Arthur v. Oakes, 63 Fed. 310.

-Barr v. Essex Trades Council, 30 Atl. 881.

-U. S. Supreme Court Reports.

See also: 36 N. J. L. 407; 43 Ohio St. 571; and 54 Fed. 746.

XXIX

STATE REGULATION

The charter as a basis of state action. Inadequacy of charter control. The early commission. Demand for more effective regulation. The advisory commission in Massachusetts and in other states. Causes underlying the demand for positive regulation. Nature of early regulation. Constitutionality of regulatory acts. Recession and later resurgence of the demand for positive control. The present commission: organization; scope of action; powers; procedure. Regulation by specific legislation. The gains of state regulation. Its weaknesses-remediable and inherent. Excellence of work done by certain states. Recent extensions of federal authority. Future of state regulation of railways.

JUDICIAL Control of railways, unable to do more than say "thou shalt not," early proved incapable of adequately protecting public interest. That the first step toward positive control should be made by the state was natural. From the state the railway corporation had received its charter and within its confines often lay a considerable portion of the mileage of early properties. It was natural, too, as the railway net expanded beyond state boundaries, and as through traffic became more important than local, that control by the states should seek to follow, the more so since Congress has not acted to protect interstate movements. But just as natural as that the states should seek to protect the interests of their citizens by this extension of authority, was it inevitable that confusion should arise out of state efforts to control interstate traffic; from this confusion came, in 1885, the Wabash decision which denied the state all powers of control over commerce beyond its own boundaries.

Since that time the tendency has been increasingly in the direction of a further restriction of state action. Notable decisions by the Supreme Court have served to extend the scope of federal control at the expense of state; statutory