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of liability in the absence of other evidence contradicting such inference.
Tested by these principles, the statute as construed and applied by the Mississippi court in this case is unobjectionable. It is not an unreasonable inference that a derailment of railway cars is due to some negligence, either in construction or maintenance of the track or trains, or some carelessness in operation.
From the foregoing considerations it must be obvious that the application of the act to injuries resulting from “the running of locomotives and cars" is not an arbitrary classification, but one resting upon considerations of public policy, arising out of the character of the business.
EMPLOYERS' LIABILITY-RAILROAD COMPANIES-RELIEF BENEFITS-RECEIPT NOT A BAR IN SUITS FOR DAMAGES-CONSTRUCTION OF STATUTE.—Chicago, Burlington & Quincy Railroad Co. v. McGuire, Supreme Court of the United States, 31 Supreme Court Reporter, page 259.--This case was before the Supreme Court of the United States on appeal from the supreme court of the State of Iowa, in which court & judgment had been affirmed in favor of Charles L. McGuire on account of injuries received by him in the year 1900, through negligence imputable to the railroad company. (McGuire v. C., B. & Q. R. R. Co., 131 Iowa 340, 92 N. W.462.) The particular point involved was the validity of section 2071 of the Code of Iowa as amended in 1898, which provides in effect that the receipt of relief insurance, benefit, or indemnity by an injured person or his heirs shall constitute no bar or defense to an action for damages against a railway company under the statute declaring liability for the acts of fellow servants in the use or operation of a railway. The company maintained a relief department, of which McGuire had become a member, and under the terms of his agreement was entitled to benefits payable in accordance with the regulations, the acceptance of which was to discharge the company from liability for damages. McGuire received from the relief department benefits amounting to $822, which the company contended was, under his agreement, full satisfaction of the claim for which the suit was brought. Under the regulations of the relief department it was provided that membership should be voluntary, and the amount of monthly contributions was fixed according to the wages received by the members. The company's contributions, furnishing the offices and the supply of examiners, and the services of clerks and officers were adduced as showing the amount of support rendered by the company for the maintainence of this fund, amounting in all to several hundred thousand dollars. The facts were not in dispute, the question turning on the constitutionality of the foregoing provision of law, which was held by the company to amount to an unwarranted interference with the liberty to make contracts and a denial of the equal protection of the laws, in violation of
the provisions of the fourteenth amendment of the Constitution of the United States. As stated, the statute was upheld by the State supreme court, and on appeal this judgment was affirmed by the Supreme Court of the United States, as appears from the following quotation from the opinion of the court as delivered by Judge Hughes:
We pass without comment the criticisms which are made of certain details of the relief plan, for neither the suggested excellence nor the alleged defects of a particular scheme may be permitted to determine the validity of the statute, which is general in its application. The question with which we are concerned is not whether the regulations set forth in the answer are just or unjust, but whether the amended statute transcends the limits of power as defined by the Federal Constitution.
The first ground of attack is that the statute violates the fourteenth amendment by reason of the restraint it lays upon liberty of contract. This section of the Code of Iowa (sec. 2071), as originally enacted, imposed liability upon railroad corporations for injuries to employees, although caused by the negligence or mismanagement of fellow servants. And it was held by this court that it was clearly within the competency of the legislature to prescribe this measure of responsibility. (Minneapolis & St. Louis Railway Co. v. Herrick, 127 U. 9. 210 8 Sup. Ct. 1176, following Missouri Railway Co. v. Mackey, id. p. 205 8 Sup. Ct. 1161.) The statute in its original form also provided that no contract which restricts such liability shall be legal or
Subsequent to this enactment the railroad company established its relief department, and the question was raised in the State court as to the legality of the provision then incorporated in the contract of membership, by which, in case of suit for damages, the payment of benefits was to be suspended until the suit should be discontinued, and the acceptance of benefits was to operate as a full discharge. The two principal contentions against it were, first, that it was against public policy, and second, that it was in violation of the statute. Both were overruled, and with reference to the statute it was held that the contract of membership did not fall within the prohibition for the reason that it did not restrict liability, but put the employee to his election. (Donald v. C. B. & Q. R. Čo., 93 Iowa 284; Maine v. C. B. & Q. R. Co., 109 Iowa 260.) The legislature then amended the section by providing expressly that a contract of this sort and the acceptance of benefits should not defeat the enforcement of the liability which the statute defined.
Manifestly the decision that the existing statute was not broad enough to embrace the inhibition did not prevent the legislature from enlarging its scope so that it should be included. Nor was the holding of the court final upon the point of public policy, so far as the power of the legislature is concerned. The legislature, provided it acts within its constitutional authority, is the arbiter of the public policy of the State. While the court, unaided by legislative declaration and applying the principles of the common law, may uphold or condemn contracts in the light of what is conceived to be public policy, its determination as a rule for future action must yield to the legislative will when expressed in accordance with the organic law.
If the legislature had the power to incorporate a similar provision in the statute when it was passed originally, it had the same power with regard to future transactions to enact the amendment.
It may also be observed that the statute, as amended, does not affect contracts of settlement or compromise made after the injury, and the question of the extent of the legislative power with respect to such contracts is not presented. The amendment provides, nothing contained herein shall be construed to prevent or invalidate any settlement for damages between the parties subsequent to the injuries received." As was said by the State court in construing the act (131 Iowa, p. 377): “The legislature does not in this act forbid or place any obstacle in the way of such insurance, nor does it forbid or prevent any settlement of the matter of damages with an injured employee fairly made after the injury is received. On the contrary, the right to make such settlement is expressly provided for in the amendment to Code section 2071. The one thing which that amendment was intended to prevent was the use of this insurance or relief for which the employee has himself paid in whole or in part, as a bar to the right which the statute has given him to recover damages from the corporation.” It is urged, however, that the amendatory act prohibits the making of a contract for settlement“by acts done after the liability had become fixed." The acceptance of benefits is, of course, an act done after the injury, but the legal consequences sought to be attached to that act are derived from the provision in the contract of membership. The stipulation which the statute nullifies is one made in advance of the injury that the subsequent acceptance of benefits shall constitute full satisfaction of the claim for damages. It is in this aspect that the question arises as to the restriction of liberty of contract.
It has been held that the right to make contracts is embraced in the conception of liberty as guaranteed by the Constitution. (Allgeyer v. Louisiana, 165 U. S. 578; Lochner 0. New York, 198 U.S. 45; Adair v. United States, 208 U. S. 161.) In Allgeyer v. Louisiana, supra, the court, in referring to the fourteenth amendment, said
(p: 589): “The liberty mentioned in that amendment means not only the right of the citizen to be free from the mere physical restraint of his person, as by incarceration, but the term is deemed to embrace the right of the citizen to be free in the enjoyment of all his faculties; to be free to use them in all lawful ways; to live and work where he will; to earn his livelihood by any lawful calling; to pursue any livelihood or avocation, and for that purpose to enter into all contracts which may be proper, necessary and essential to his carrying out to a successful conclusion the purposes above mentioned." But it was recognized in the case cited, as in many others, that freedom of contract is a qualified and not an absolute right. There is no absolute freedom to do as one wills or to contract as one chooses. The guaranty of liberty does not withdraw from legislative supervision that wide department of activity which consists of the making of contracts, or deny to government the power to provide restrictive safeguards. Liberty implies the absence of arbitrary restraint, not immunity from reasonable regulations and prohibitions imposed in the interests of the community. (Crowley v. Christensen, 137 U. S. p. 89; Jacobson v. Massachusetts 197 U. S. p. 11.) “It is within the undoubted power of government to restrain some individuals from all contracts, as well as all individuals from some contracts. It may deny to all
. the right to contract for the purchase or sale of lottery tickets; to the minor the right to assume any obligations, except for the necessaries of existence; to the common carrier the power to make any contract releasing himself from negligence, and, indeed, may restrain all engaged in any employment from any contract in the course of that employment which is against public policy. The possession of this power by government in no manner conflicts with the proposition that, generally speaking, every citizen has a right freely to contract for the price of his labor, services, or property.” (Frisbie v. United States, 157 U. S. pp. 165, 166.)
The right to make contracts is subject to the exercise of the powers granted to Congress for the suitable conduct of matters of national concern, as for example the regulation of commerce with foreign nations and among the several States. (Cases cited.]
It is subject also, in the field of State action, to the essential authority of government to maintain peace and security, and to enact laws for the promotion of the health, safety, morals and welfare of those subject to its jurisdiction. (Cases cited.]
The principle involved in these decisions is that where the legislative action is arbitrary and has no reasonable relation to a purpose which it is competent for government to effect, the legislature transcends the limits of its power in interfering with liberty of contract; but where there is reasonable relation to an object within the governmental authority, the exercise of the legislative discretion is not subject to judicial review. The scope of judicial inquiry in deciding the question of power is not to be confused with the scope of legislative considerations in dealing with the matter of policy. Whether the enactment is wise or unwise, whether it is based on sound economic theory, whether it is the best means to achieve the desired result, whether, in short, the legislative discretion within its prescribed limits should be exercised in a particular manner, are matters for the judgment of the legislature, and the earnest conflict of serious opinion does not suffice to bring them within the range of judicial cognizance.
Here there is no question as to the validity of the regulation or as to the power of the State to impose the liability which the statute prescribes. The statute relates to that phase of the relation of master and servant which is presented by the case of railroad corporations. It defined the liability of such corporations for injuries resulting from negligence and mismanagement in the use and operation of their railways. In the cases within its purview it extended the liability of the common law by abolishing the fellow-servant rule. Having authority to establish this regulation, it is manifest that the legislature was also entitled to insure its efficacy by prohibiting contracts in derogation of its provisions. In the exercise of this power, the legislature was not limited with respect either to the form of the contract, or the nature of the consideration, or the absolute or conditional character of the engagement. It was as competent to prohibit contracts, which on a specified event, or in a given contingency, should operate to relieve the
corporation from the statutory liability which would otherwise exist as it was to deny validity to agreements of absolute waiver.
The policy of the amendatory act was the same as that of the original statute. Its provision that contracts of insurance relief, benefit or indemnity, and the acceptance of such benefits, should not defeat recovery under the statute, was incidental to the regulation it was intended to enforce. Assuming the right of enforcement, the authority to enact this inhibition can not be denied. If the legislature had the power to prohibit contracts limiting the liability imposed, it certainly could include in the prohibition stipulations of that sort in contracts of insurance relief, benefit or indemnity, as well as in other agreements. But if the legislature could specifically provide that no contract for insurance relief should limit the liability for damages, upon what ground can it be said that it was beyond the legislative authority to deny that effect to the payment of benefits, or the acceptance of such payment, under the contract ?
The asserted distinction is sought to be based upon the fact that under the contract of membership the employee has an election after the injury. But this circumstance, however, appropriate it may be for legislative consideration, can not be regarded as defining a simitation of legislative power. The power to prohibit contracts, in any case where it exists, necessarily implies legislative control over the transaction, despite the action of the parties. Whether this control may be exercised in a particular case depends upon the relation of the transaction to the execution of a policy which the State is competent to establish. It does not aid the argument to describe the defense as one of accord and satisfaction. The payment of benefits is the
performance of the promise to pay contained in the contract of membership. If the legislature may prohibit the acceptance of the promise as a substitution for the statutory liability, it should also be able to prevent the like substitution of its performance.
For the reasons we have stated, the considerations which properly bear upon the wisdom of the legislation need not be discussed. On the one hand it is said that the relief department is in the control of the corporation; that by reason of their exigency the employees may readily be constrained to become members; that the relief fund consists in larger part of contributions made from wages; that the acceptance of benefits takes place at a time when the employee is suffering from the consequences of his injury and, being seriously in need of aid, he may easily be induced to accept payment from the fund in which, by reason of his contributions, he feels that he is entitled to share; and that such a plan, if it were permitted through the payment of benefits to result in a discharge of the liability for negligence, would operate to transfer from the corporation to its employees a burden which, in the interest of their protection and the safety of the public, the corporation should be compelled to bear. On the other hand it is urged that the relief plan is a beneficent scheme avoiding the waste of litigation, securing prompt relief in case of need due to sickness or injury, making equitable provision for deserving cases, and hence tends in an important way to promote the good of the service and the security of the employment. Even a partial statement of these various considerations shows clearly that they are of a character to invoke the judgment of the legislature in deciding, within the limits of its power, upon the policy of the State. And, whether the policy declared by the statute in question is approved or disapproved, it can not be said that the legislative power has been exceeded either in defining the liability or in the means taken to prevent the legislative will, with respect to it, from being thwarted.