made by a public service company with third persons are made subject to the police power of the state, and any proper exercise thereof does not constitute any impairment of contract.92 Thus, contracts between an irrigation company and water users, fixing the price of water, are subject to future increases in rates by the state or a commission.93

However, statutory provisions that contracts between a municipality and a public service company for a supply shall not deprive the municipality of the right to regulate rates, do not apply to a contract with individuals for the same purpose.94

§ 4497.Waiver or abandonment of contract rights. Contract rights precluding governmental regulation of rates may be waived or abandoned by the corporation possessing them.95 But the fact that a company has complied with regulations of its rates for many years does not estop it from claiming equitable relief on the ground that such regulations of rates violate the contract between the company and the municipality, where it has annually protested against the conduct of the municipality.96 In a federal case, it was held that the right of a street car company to charge certain rates, as fixed by its street franchise, were not abandoned by its acceptance of an ordinance authorizing it to change its mode of operation from

92 Erie R. Co. v. Board of Public Utility Com'rs, 89 N. J. L. 57, 98 Atl. 13.

93 McCook Irrigation & Water Power Co. v. Burtless, 98 Neb. 141, L. R. A. 1915 D 1205, 152 N. W. 334.

94 Santa Ana Water Co. v. San Beunaventura, 56 Fed. 339.

95 Right given by charter to street car company to charge a certain fixed rate of fare may be waived by the company by consenting to the operation of leased lines under the provisions of the charter of the lessee rather than that of their own charter. Chicago Union Traction Co. v. Chicago, 199 Ill. 484, 59 L. R. A. 631, 65 N. E. 451.

In Wisconsin, the purpose of the Public Utility Law of 1907 was ultimately to secure conformity in public utility franchises-past as well as future grants-to the end that patrons

might obtain service on a plane of equality and at the lowest price practical; and the idea therein as to the surrender of existing franchise and the granting of a new indeterminate permit was that the surrender should operate as an extinguishment of all incidents inhering in the old franchise, and that the permit taken in place thereof should be an exact equivalent as to the privilege feature but as to incidents and duration should be governed by the public utility statute, and hence the surrender of a public utility franchise operates as a waiver by the corporation of all executory features of existing contracts regarding service charges. La Crosse v. La Crosse Gas & Electric Co., 145 Wis. 408, 130 N. W. 530.

96 Los Angeles v. Los Angeles City Water Co., 177 U. S. 558, 44 L. Ed. 886.

the use of horse power to electricity, and by the provisions of such ordinance giving the municipality the right to future control as to the "construction, maintenance and operation" of the lines of the company.97 So in an earlier case it was held that a street railway company which had a valid contract giving it the right to charge five-cent fares did not lose that right by accepting the terms of an ordinance reserving the right to make such further rules, orders and regulations as to the city council might seem proper.9

D. Discrimination in Rates

98

§ 4498. General considerations. Unjust discrimination in rates is not only forbidden by the Interstate Commerce Act but also by the statutes in the various states, so far as public service corporations are concerned,99 and these statutes, at least for the most part, are merely declaratory of the rule at common law as it now exists,1 although it has been stated that "up to twenty-five years ago the prevalent doctrine was that there was no rule against discrimination as such, unless it was shown that the higher rate was unreasonable." 2 This rule as to unjust discriminations, while it had its origin in connection with railroad companies, applies equally well to all public service corporations.

The discrimination may result from rates as fixed by the corporation itself, or from rates as fixed by the legislature, public service commission or municipality; but the same rules govern the validity thereof without regard to who fixed the rate.

However, it is to be noted that it is not discrimination that is forbidden but only "unjust" discrimination. It is only arbitrary discriminations that are unjust. If the difference in rates is based

97 Minneapolis v. Minneapolis St. R. Co., 215 U. S. 417, 54 L. Ed. 259, aff'g 155 Fed. 989.

98 Detroit v. Detroit Citizens' St. R. Co., 184 U. S. 368, 46 L. Ed. 592.

99 See Belfast v. Belfast Water Co., 115 Me. 234, L. R. A. 1917 B 908, 98 Atl. 738.

This subject of discrimination is fully treated in 2 Wyman, Public Service Corporations, §§ 1280-1396, and in Beale & Vyman, Railroad Rate Regulation (2nd Ed.), §§ 610-901. See generally, 4 McQuillin, Municipal Corporations, § 1697.

A state may prohibit any unjust discrimination by a domestic company against certain localities as well as against persons. Portland Railway, Light & Power Co. v. Railroad Commission of Oregon, 229 U. S. 397, 410, 57 L. Ed. 1248.

1 Cumberland Telephone & Telegraph Co. v. Kelly, 160 Fed. 316, 15 Ann. Cas. 1210.

2 Beale & Wyman, Railroad Rate Regulation (2nd Ed.), § 613.

upon a reasonable and fair difference in conditions which equitably and logically justify a different rate, it is not an unjust discrimination. In fact this question of discrimination narrows itself to a determination of whether the discrimination, conceding it to exist, is just, i. e., based on reasonable grounds, or is unjust, i. e., merely arbitrary. There is no unjust discrimination if "all persons similarly situated, affected by like conditions and subject to like circumstances, are given the same rate." In other words, the rates of public service corporations, whether fixed by the corporation or by law, must be uniform so far as applicable to the same service rendered under the same or substantially similar circumstances or conditions, and a different rate cannot be fixed or demanded for an identical kind of service under identical conditions. As has been said, "discrimination without partiality is inoffensive, and partiality exists only in cases where advantages are equal and one party is unduly favored at the expense of another who stands upon an equal footing." So far as common carriers are concerned, and this applies equally well to all public service corporations, it is said that "all individuals have equal rights both in respect to service and charges. Of course, such equality of right does not prevent differences in the modes and kinds of service and different charges based thereon. There is no cast iron rule of uniformity which prevents a charge from being above or below a particular sum, or requires that the service shall be exactly along the same lines. But that principle of equality does forbid any difference in charge which is not based upon difference in service, and even when based upon difference of service, must have some reasonable relation to the amount of difference, and cannot be so great as to produce an unjust discrimination." In short, in charges for service or in rate-making, reasonable classification may be adopted. Rates may be made less for large consumers than for small consumers, it is generally held," or to one class where there. exists differences in conditions affecting the expense or difficulty

3 United States v. Chicago & N. W. Ry. Co., 127 Fed. 785, 792; In re Gardner, 84 Kan. 264, 267, 33 L. R. A. (N. S.) 956, 113 Pac. 1054; Com. v. Interstate Consol. St. R. Co., 187 Mass. 436, 11 L. R. A. (N. S.) 973, 2 Ann. Cas. 419, 73 N. E. 530; State v. Missouri, K. & T. R. Co., 262 Mo. 507, 525, L. R. A. 1915 C 778, Ann. Cas. 1916 E 949, 172 S. W. 35.

4 Puget Sound Elec. Ry. v. Railroad

Commission of Washington, 65 Wash. 75, Ann. Cas. 1913 B 763, 117 Pac. 739.

5 Cleveland, C., C. & I. Ry. Co. v. Closser, 126 Ind. 348, 353, 9 L. R. A. 754, 22 Am. St. Rep. 593, 26 N. E. 159. 6 Western U. Tel. Co. v. Call Pub. Co., 181 U. S. 92, 100, 45 L. Ed. 765.

7 Silkman v. Board Water Com'rs City of Yonkers, 152 N. Y. 327, 37 L. R. A. 827, 46 N. E. 612.

of performing the service which fairly justify a difference in rates. Whether, in a particular case, a discrimination in rates is just or unjust, must be determined, to a large extent, according to the facts of that case. The decisions as to whether a particular rate is discriminatory or not, as unjust, as applicable to the rates of railroad, street railroad, gas, water, electric light, telegraph, telephone, etc., companies, are too numerous to warrant a full discussion in this work; and especially is this so due to the thousands of decisions handed down by public service commissions in regard to discriminations. However, a few illustrations of rates fixed by law, especially those relating to passenger rates, which are of considerable importance, are noticed herein.9

Statutory provisions against unjust discrimination in rates do not apply to services performed which are outside the scope of the duties of the public service corporation.10

§ 4499. Rule as applicable to municipal plants. This rule against unjust discrimination applies equally well to the rates of public utility plants owned and operated by a municipality.11

§ 4500. Rate as discriminatory although reasonable. The fact that a rate is reasonable does not prevent it being unlawful as a discrimination forbidden by statute.12

§ 4501. Different rates in different parts of territory served. A rate may be unreasonable because discriminatory. Thus, if a rate of a surburban street car company in one locality is largely in excess of its rates in other localities similarly situated and subject to like. conditions, it is an unreasonable rate because discriminatory.13 But in some cases it is proper for the commission to segregate a certain district from the rest of the territory supplied by a public service com

8 Williams v. Maysville Tel. Co., 119 Ky. 33, 82 S. W. 995; Western U. Tel. Co. v. Call Pub. Co., 44 Neb. 326, 27 L. R. A. 622, 48 Am. St. Rep. 729, 62 N. W. 506.

9 See §§ 4499-4515, infra.

10 Santa Fe, P. & P. R. Co. v. Grant Bros. Const. Co., 228 U. S. 177, 57 L. Ed. 787; Yazoo & M. V. R. Co. v. Crawford, 107 Miss. 355, L. R. A. 1915 C 250 with note, 65 So. 462.

11 State v. Waseca, 122 Minn. 348, 350, 46 L. R. A. (N. S.) 437, 142 N. W. 319; State v. Jones, 141 Mo. App. 299, 304, 125 S. W. 1169.

12 Portland Railway Light & Power Co. v. Railroad Commission of Oregon, 229 U. S. 397, 411, 57 L. Ed. 1248, aff'g 56 Ore. 468, 109 Pac. 273, 105 Pac. 709.

13 Turner v. Connecticut Co., 91 Conn. 692, 101 Atl. 88.

pany, and fix a rate based upon the property of the company and its earnings in that district alone.14

§ 4502. Different rates for individual consumers and municipality. A provision in a gas rate regulation establishing one rate for the municipality and another for individual consumers is not an unreasonable classification and does not violate the equal protection of the laws clause.15 On the same theory, fixing a reduced rate on railroads for service rendered the state has been upheld.16

§ 4503. Discrimination between residents and nonresidents. An ordinance giving residents of the city a special privilege of riding on a street railway at a less rate than others not residing in the city has been held invalid.17

§ 4504. Rebates. Rebates are not only forbidden by the Interstate Commerce Act but also by statutes in most of the states; and they have also been held illegal at common law independently of statute. Rebates, as forbidden by statute, include not only the outright discounts and the obvious rebates of earlier days, but also any device by which the charge is made less than the schedule rate.18

§ 4505. Long and short hauls. Both the Interstate Commerce Act and the constitutions or statutes in most of the states 19 forbid the charge by common carriers of more for a short than a long haul on the same line in the same direction, the shorter being included in the longer distance. A state may prohibit railway companies from receiving higher charges for shorter hauls than for longer ones when both are wholly within its borders.20 This question is considered at length in textbooks relating to carriers and railroads.21

14 Public Service Gas Co. v. Board of Public Utility Com'rs, 84 N. J. L. 463, 87 Atl. 651.

15 Wilcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. Ed. 382, 48 L. R. A. (N. S.) 1134, 15 Ann. Cas. 1034.

16 State v. Chicago, M. & St. P. R. Co., 118 Minn. 380, 41 L. R. A. (N. S.) 524, Ann. Cas. 1913 E 494, 137 N. W. 2. But see § 4512, infra.

17 State v. Omaha & C. B. Railway & Bridge Co., 113 Iowa 30, 52 L. R. A. 315, 86 Am. St. Rep. 357, 84 N. W. 983. But see Forman v. New Orleans

& C. R. Co., 40 La. Ann. 446, 4 So. 246; De Lucas v. New Orleans & C. R. Co., 38 La. Ann. 930, both of which involved contract as to rates.

18 See Beale & Wyman, Railroad Rate Regulation (2nd Ed.), § 624.

19 Southern Pac. Co. v. California Adjustment Co., 237 Fed. 954, aff'g 226 Fed. 349.

20 Missouri Pac. R. Co. v. McGrew Coal Co., 244 U. S. 191, 61 L. Ed. 1075, aff'g (Mo.), 178 S. W. 1179.

21 See Beale & Wyman, Railroad Rate Regulation, §§ 780-791.