permit the earning of a fair return upon the business. As to railroad rates the Supreme Court has said:

"We hold, however, that the basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. And in order to ascertain that value, the original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present as compared with the original cost of construction, the probable earning capacity of the property under particular rates prescribed by the statute, and the sum required to meet operating expenses, are all matters for consideration, and are to be given such weight as may be just and right in each case. We do not say that there may not be other matters to be regarded in estimating the value of the property" (36).

Under our dual system of government, internal state rates may be regulated by the state alone, and interstate rates by the United States alone; and in determining what is a fair return upon the value of the property, the income from internal transportation must alone be considered in fixing the internal rates, and vice versa. See § 293, below. Governmental regulation of public service business is fully discussed in the article upon Public Service Corporations in Volume VIII of this work.

Banks and insurance companies are usually the subject (36) Smyth v. Ames, 169 U. S. 466, 547-8.

of rather stringent regulations in order to protect their patrons from loss due to unwise or dishonest management.

§ 162. Regulation of corporations. As has been explained elsewhere (see § 149, above), corporations owe their existence and powers entirely to legislation and they are therefore subject to much more stringent and arbitrary regulation than are individuals. As a condition of the grant of a corporate charter the corporation may be required to consent in advance to exactions that could not be required of it under ordinary legislative powers. Thus, it may validly agree to carry passengers at rates too low to make a fair profit (37). See also §§ 291, 296, below. The Federal Constitution may forbid the enforceability of some terms even in a franchise grant, as for instance an agreement not to remove suits into the Federal courts; but though the state may not specifically enforce such an agreement it may punish the corporation by expelling it from the state for breach of it (38).

§ 163. Regulation of ownership of property. The state may regulate the future creation of interests in property, as by forbidding perpetuities or long time leases of agricultural lands. The use and appropriation of certain peculiar kinds of property may also be regulated, such as running water, game, fish, natural gas, and oil. The wanton waste of these substances may be forbidden in the interest of the public, though otherwise private rights in them may be left untouched. The public control over

(37) Grand Rapids, etc. R. R. Co. v. Osborne, 193 U. S. 17. (38) Home Ins. Co. v. Morse, 20 Wall, 445; Security Ins. Co. v. Prewitt, 202 U. S. 246.

game, fish, and navigable waters is very extensive, and their taking for private purposes may be forbidden, or allowed subject to qualifications (39). The prohibition of the wasteful destruction of natural gas or forest trees by private owners has been upheld (40).

§ 164. Compelling joint action to improve property. Where property is so situated that it cannot be most beneficially enjoyed by its owners acting separately, the legislature may compel some of the owners, upon receiving compensation, to submit to measures enabling the others to obtain the most beneficial use of the joint property, provided that this result is of considerable public benefit. Thus, where a large water power can be developed from a stream by damming it and flooding the upper riparian land, the legislature may authorize such a dam and compel the upper owner to submit to flooding upon being paid therefor by the owner of the dam (41). Similarly, when land is held by several tenants in common or joint tenants, the legislature may authorize a compulsory partition and sale in order to secure the more beneficial use of the property.

Much the same principle is involved where the property of several owners is so situated that all must concur to obtain some important public improvement such as a land irrigation or drainage system. All of the owners

(39) Geer v. Connecticut, 161 U. S. 519; Hudson Water Co. v. McCarter, 209 U. S. 349.

(40) Ohio Oil Co. v. Indiana, 177 U. S. 190; Opinion of Justices, 103 Me. 506.

(41) Head v. Amoskeag Co., 113 U. S. 9.

whose land is benefited may be required to contribute to a common system (42). A compulsory sharing of the expense of party walls is in some states treated similarly.

§ 165. Special liabilities due to nature of business. If the nature of the business requires special supervision, or exposes other persons and property to special hazard, even when carefully conducted, the cost of such supervision and the burden of such hazard may be placed wholly upon the business occasioning them. Thus, the railroads of a state may be made to pay the expense of a railroad commission; coal mines must pay for mine inspectors; and so on (43). Railroads may be made absolutely liable for fire from their engines, or for the injuring of passengers, even though all proper precautions are used to prevent these accidents; and a liquor seller may be made liable for damage done by intoxicated persons to whom he has sold liquor. The businesses themselves are hazardous and may be made to bear the expense of their hazards (44). Similarly, a business may be made to bear the expense of guarding against injuries likely to occur in its conduct; for instance, railroads must pay for fencing their tracks, for the installation of safety devices, and for track elevation in populous districts (45).

§ 166. Special liabilities due to natural condition of property. At common law a landowner was not liable for a nuisance occasioned on his premises by the ordinary

(42) Wurts v. Hoagland, 114 U. S. 606.

(43)

Railroad Co. v. Gibbes, 142 U. S. 386.

(44) St. Louis, etc., Ry. v. Mathews, 165 U. S. 1; Chicago, R. I & P. Ry. v. Zernecke, 183 U. S. 582; Howes v. Maxwell, 157 Mass. 333. (45) New York, etc., Ry. v. Bristol, 151 U. S. 556.

operation of natural causes, such as stagnant water in a natural swamp, or the springing up of noxious weeds injurious to the crops of his neighbors (46). But by statute he may be required to remedy these defects at his own expense, unless the trouble and expense of doing so is unreasonably great. Thus he may be required to fill up a city lot to a grade fixed so as to prevent the accumulation of stagnant water (47), or to cut noxious weeds, or kill diseased animals (48); but he cannot be required to free his farm land from ground squirrels and similar refractory vermin, where the expense and burden is excessive as compared with the public benefit (48). Compulsory public improvements on a large scale, requiring the united efforts of the landowners of a district, are discussed in § 164, above.

§ 167. Retroactive laws. Retroactive laws that affect prejudicially persons charged with crime, or which impair the obligations of contracts are dealt with elsewhere in this article as ex post facto laws and laws impairing the obligations of contracts. (See Chapters VI and XI.) Other retroactive laws, however, may be passed by the legislature which will be invalid if they amount to a taking of property without due process of law. A statute enacting merely that land now owned by A should become the property of B would of course be invalid. But suppose A purports to convey land to B by a deed which is invalid for some formal defect, and the legislature by

(46) Roberts v. Harrison, 101 Ga. 773; Giles v. Walker, 24 Q. B. D. 656.

(47) Nickerson v. Boston, 131 Mass. 306. (48) Ex parte Hodges, 87 Cal. 162.