Portrait of Ira Y. Munn. Chicago Board of Trade
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by Morrison R. Waite and Stephen J. Field, 1877
This case, like the Slaughter-House cases of 1873, arose from a conflict between the "police power" of the states and the rights of business. At issue were the prices charged by a Chicago grain elevator combine, Munn and Scott, for storing and handling grain-prices that were in excess of the maximum allowed by Illinois law. Upon their conviction under the statute, certain members of the firm, relying on Justice Stephen Field's dissent in the Slaughter-House cases, appealed on the grounds that the price-fixing legislation violated the Fourteenth Amendment and deprived them of their property without due process of law. The Court's opinion of 1877, written by Chief Justice Morrison Waite, upheld the conviction, but it did not focus on the issue of private property alone; it argued, rather, that private property, if sufficiently involved with the public interest, should be subject to public control. However, Justice Field's dissent, in which he argued that mere procedural due process was inadequate protection for property rights, became the Court's prevailing view in later decisions involving the regulatory power of the states. Portions of the opinion of Chief Justice Waite and of the dissent by Justice Field are reprinted below. The case became particularly important because it signaled a shift away from interpreting the Fourteenth Amendment for protection of African Americans and toward big business. This would have profound consequences for the shape of the American economic and political landscapes for years to come.
Mr. Chief Justice Waite: When one becomes a member of society, he necessarily parts with some rights or privileges which, as an individual not affected by his relations to others, he might retain. "A body politic," as aptly defined in the preamble of the constitution of Massachusetts, "is a social compact by which the whole people covenants with each citizen, and each citizen with the whole people, that all shall be governed by certain laws for the common good." This does not confer power upon the whole people to control rights which are purely and exclusively private ... but it does authorize the establishment of laws requiring each citizen to so conduct himself and so use his own property as not unnecessarily to injure another.
This is the very essence of government and has found expression in the maxim sic utere tuo ut alienum non laedas. From this source come the police powers, which, as was said by Mr. Chief Justice Taney in the License Cases ... "are nothing more or less than the powers of government inherent in every sovereignty ... that is to say ... the power to govern men and things." Under these powers the government regulates the conduct of its citizens one toward another and the manner in which each shall use his own property, when such regulation becomes necessary for the public good. ...
From this it is apparent that, down to the time of the adoption of the 14th Amendment, it was not supposed that statutes regulating the use, or even the price of the use, of private property necessarily deprived an owner of his property without due process of law. Under some circumstances they may, but not under all. The amendment does not change the law in this particular; it simply prevents the states from doing that which will operate as such a deprivation. ...
It remains only to ascertain whether the warehouses of these plaintiffs in error and the business which is carried on there come within the operation of this principle. ...
We also are not permitted to overlook the fact that, for some reason, the people of Illinois, when they revised their constitution in 1870, saw fit to make it the duty of the General Assembly to pass laws "for the protection of producers, shippers, and receivers of grain and produce" ... and ... to require all railroad companies receiving and transporting grain in bulk or otherwise to deliver the same at any elevator to which it might be consigned, that could be reached by any track that was or could be used by such company; and that all railroad companies should permit connections to be made with their tracks so that any public warehouse, etc., might be reached by the cars on their railroads. This indicates very clearly that during the twenty years in which this peculiar business had been assuming its present "immense proportions," something had occurred which led the whole body of the people to suppose that remedies such as are usually employed to prevent abuses by virtual monopolies might not be inappropriate here.
For our purposes we must assume that, if a state of facts could exist that would justify such legislation, it actually did exist when the statute now under consideration was passed. For us the question is one of power, not of expediency. If no state of circumstances could exist to justify such a statute, then we may declare this one void, because in excess of the legislative power of the state. But if it could, we must presume it did. Of the propriety of legislative interference within the scope of legislative power, the legislature is the exclusive judge.
Neither is it a matter of any moment that no precedent can be found for a statute precisely like this. It is conceded that the business is one of recent origin, that its growth has been rapid, and that it is already of great importance. And it must also be conceded that it is a business in which the whole public has a direct and positive interest. It presents, therefore, a case for the application of a long-known and well-established principle in social science, and this statute simply extends the law so as to meet this new development of commercial progress. There is no attempt to compel these owners to grant the public an interest in their property but to declare their obligations if they use it in this particular manner.
It matters not in this case that these plaintiffs in error had built their warehouses and established their business before the regulations complained of were adopted. What they did was from the beginning subject to the power of the body politic to require them to conform to such regulations as might be established by the proper authorities for the common good. They entered upon their business and provided themselves with the means to carry it on subject to this condition. If they did not wish to submit themselves to such interference, they should not have clothed the public with an interest in their concerns. ...
It is insisted, however, that the owner of property is entitled to a reasonable compensation for its use, even though it be clothed with a public interest, and that what is reasonable is a judicial and not a legislative question. ... The practice has been otherwise. In countries where the common law prevails, it has been customary from time immemorial for the legislature to declare what shall be a reasonable compensation under such circumstances, or, perhaps more properly speaking, to fix a maximum beyond which any charge made would be unreasonable. Undoubtedly, in mere private contracts relating to matters in which the public has no interest, what is reasonable must be ascertained judicially. But this is because the legislature has no control over such a contract.
So, too, in matters which do affect the public interest and as to which legislative control may be exercised, if there are no statutory regulations upon the subject, the courts must determine what is reasonable. The controlling fact is the power to regulate at all. If that exists, the right to establish the maximum of charge, as one of the means of regulation, is implied. In fact, the common-law rule which requires the charge to be reasonable is itself a regulation as to price. Without it the owner could make his rates at will and compel the public to yield to his terms or forgo the use. ...
We know that this is a power which may be abused; but that is no argument against its existence. For protection against abuses by legislatures the people must resort to the polls, not to the courts. ...
We come now to consider the effect upon this statute of the power of Congress to regulate commerce.
It was very properly said in the case of the State Tax on Railway Gross Receipts, that "it is not everything that affects commerce that amounts to a regulation of it within the meaning of the Constitution." The warehouses of these plaintiffs in error are situated and their business carried on exclusively within the limits of the state of Illinois. They are used as instruments by those engaged in state as well as those engaged in interstate commerce, but they are no more necessarily a part of commerce itself than the dray or the cart by which, but for them, grain would be transferred from one railroad station to another. Incidentally, they may become connected with interstate commerce, but not necessarily so.
Their regulation is a thing of domestic concern, and, certainly, until Congress acts in reference to their interstate relations, the state may exercise all the powers of government over them, even though in so doing it may indirectly operate upon commerce outside its immediate jurisdiction. We do not say that a case may not arise in which it will be found that a state, under the form of regulating its own affairs, has encroached upon the exclusive domain of Congress in respect to interstate commerce, but we do say that, upon the facts as they are represented to us in this record, that has not been done.
Mr. Justice Field: The question presented ... is one of the greatest importance - whether it is within the competency of a state to fix the compensation which an individual may receive for the use of his own property in his private business and for his services in connection with it.
The declaration of the constitution of 1870, that private buildings used for private purposes shall be deemed public institutions, does not make them so. The receipt and storage of grain in a building erected by private means for that purpose does not constitute the building a public warehouse. There is no magic in the language, though used by a constitutional convention, which can change a private business into a public one or alter the character of the building in which the business is transacted. A tailor's or a shoemaker's shop would still retain its private character even though the assembled wisdom of the state should declare, by organic act or legislative ordinance, that such a place was a public workshop and that the workmen were public tailors or public shoemakers.
One might as well attempt to change the nature of colors by giving them a new designation. The defendants were no more public warehousemen, as justly observed by counsel, than the merchant who sells his merchandise to the public is a public merchant, or the blacksmith who shoes horses for the public is a public blacksmith; and it was a strange notion that by calling them so they would be brought under legislative control.
The Supreme Court of the state - divided, it is true, by three to two of its members - has held that this legislation was a legitimate exercise of state authority over private business; and the Supreme Court of the United States, two only of its members dissenting, has decided that there is nothing in the Constitution of the United States or its recent amendments which impugns its validity. It is, therefore, with diffidence I presume to question the soundness of the decision.
The validity of the legislation was, among other grounds, assailed in the state court as being in conflict with that provision of the state constitution which declares that no person shall be deprived of life, liberty, or property without due process of law, and with that provision of the 14th Amendment of the federal Constitution which imposes a similar restriction upon the action of the state. The state court held, in substance, that the constitutional provision was not violated so long as the owner was not deprived of the title and possession of his property; and that it did not deny to the legislature the power to make all needful rules and regulations respecting the use and enjoyment of the property, referring, in support of the position, to instances of its action in prescribing the interest on money, in establishing and regulating public ferries and public mills, and fixing the compensation in the shape of tolls, and in delegating power to municipal bodies to regulate the charges of hackmen and draymen and the weight and price of bread.
In this court the legislation was also assailed on the same ground, our jurisdiction arising upon the clause of the 14th Amendment ordaining that no state shall deprive any person of life, liberty, or property without due process of law. But it would seem from its opinion that the court holds that property loses something of its private character when employed in such a way as to be generally useful. The doctrine declared is that property "becomes clothed with a public interest when used in a manner to make it of public consequence, and affect the community at large"; and from such clothing the right of the legislature is deduced to control the use of the property, and to determine the compensation which the owner may receive for it.
When Sir Matthew Hale and the sages of the law in his day spoke of property as affected by a public interest and ceasing from that cause to be juris privati solely, that is, ceasing to be held merely in private right, they referred to property dedicated by the owner to public uses, or to property the use of which was granted by the government, or in connection with which special privileges were conferred. Unless the property was thus dedicated, or some right bestowed by the government was held with the property, either by specific grant or by prescription of so long a time as to imply a grant originally, the property was not affected by any public interest so as to be taken out of the category of property held in private right.
But it is not in any such sense that the terms "clothing property with a public interest" are used in this case. From the nature of the business under consideration - the storage of grain - which, in any sense in which the words can be used, is a private business in which the public are interested only as they are interested in the storage of other products of the soil or in articles of manufacture, it is clear that the court intended to declare that, whenever one devotes his property to a business which is useful to the public - "affects the community at large" - the legislature can regulate the compensation which the owner may receive for its use and for his own services in connection with it.
"When, therefore," says the court, "one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use; but, so long as he maintains the use, he must submit to the control." The building used by the defendants was for the storage of grain; in such storage, says the court, the public has an interest; therefore the defendants, by devoting the building to that storage, have granted the public an interest in that use and must submit to have their compensation regulated by the legislature.
If this be sound law, if there be no protection, either in the principles upon which our republican government is founded or in the prohibitions of the Constitution against such invasion of private rights, all property and all business in the state are held at the mercy of a majority of its legislature. The public has no greater interest in the use of buildings for the storage of grain than it has in the use of buildings for the residences of families, nor, indeed, anything like so great an interest; and, according to the doctrine announced, the legislature may fix the rent of all tenements used for residences without reference to the cost of their erection. If the owner does not like the rates prescribed, he may cease renting his houses. He has granted to the public, says the court, an interest in the use of the buildings, and "he may withdraw his grant by discontinuing the use; but, so long as he maintains the use, he must submit to the control."
The public is interested in the manufacture of cotton, woolen, and silken fabrics, in the construction of machinery, in the printing and publication of books and periodicals, and in the making of utensils of every variety, useful and ornamental; indeed, there is hardly an enterprise or business engaging the attention and labor of any considerable portion of the community in which the public has not an interest in the sense in which that term is used by the court in its opinion; and the doctrine which allows the legislature to interfere with and regulate the charges which the owners of property thus employed shall make for its use, that is, the rates at which all these different kinds of business shall be carried on, has never before been asserted, so far as I am aware, by any judicial tribunal in the United States.
The doctrine of the state court that no one is deprived of his property, within the meaning of the constitutional inhibition, so long as he retains its title and possession, and the doctrine of this court that whenever one's property is used in such a manner as to affect the community at large, it becomes by that fact clothed with a public interest and ceases to be juris privati only, appear to me to destroy, for all useful purposes, the efficacy of the constitutional guaranty. All that is beneficial in property arises from its use, and the fruits of that use; and whatever deprives a person of them deprives him of all that is desirable or valuable in the title and possession.
If the constitutional guaranty extends no further than to prevent a deprivation of title and possession and allows a deprivation of use and the fruits of that use, it does not merit the encomiums it has received. Unless I have misread the history of the provision now incorporated into all our state constitutions, and by the 5th and 14th Amendments into our federal Constitution, and have misunderstood the interpretation it has received, it is not thus limited in its scope and thus impotent for good. It has a much more extended operation than either court, state or federal, has given to it.
The provision, it is to be observed, places property under the same protection as life and liberty. Except by due process of law, no state can deprive any person of either. The provision has been supposed to secure to every individual the essential conditions for the pursuit of happiness; and for that reason has not been heretofore, and should never be, construed in any narrow or restricted sense. ...
The same liberal construction which is required for the protection of life and liberty, in all particulars in which life and liberty are of any value, should be applied to the protection of private property. If the legislature of a state, under pretense of providing for the public good, or for any other reason, can determine, against the consent of the owner, the uses to which private property shall be devoted, or the prices which the owner shall receive for its uses, it can deprive him of the property as completely as by a special act for its confiscation or destruction.
If, for instance, the owner is prohibited from using his building for the purposes for which it was designed, it is of little consequence that he is permitted to retain the title and possession; or, if he is compelled to take as compensation for its use less than the expenses to which he is subjected by its ownership, he is, for all practical purposes, deprived of the property, as effectually as if the legislature had ordered his forcible dispossession. If it be admitted that the legislature has any control over the compensation, the extent of that compensation becomes a mere matter of legislative discretion.
The amount fixed will operate as a partial destruction of the value of the property if it fall below the amount which the owner would obtain by contract, and, practically, as a complete destruction if it be less than the cost of retaining its possession. There is, indeed, no protection of any value under the constitutional provision which does not extend to the use and income of the property, as well as to its title and possession. ...
It is true that the legislation which secures to all protection in their rights, and the equal use and enjoyment of their property, embraces an almost infinite variety of subjects. Whatever affects the peace, good order, morals, and health of the community comes within its scope; and everyone must use and enjoy his property subject to the restrictions which such legislation imposes. What is termed the police power of the state, which, from the language often used respecting it, one would suppose to be an undefined and irresponsible element in government, can only interfere with the conduct of individuals in their intercourse with each other and in the use of their property, so far as may be required to secure these objects. The compensation which the owners of property, not having any special rights or privileges from the government in connection with it, may demand for its use, or for their own services in union with it, forms no element of consideration in prescribing regulations for that purpose. ...
Indeed, there is no end of regulations with respect to the use of property which may not be legitimately prescribed, having for their object the peace, good order, safety, and health of the community, thus securing to all the equal enjoyment of their property; but in establishing these regulations it is evident that compensation to the owner for the use of his property, or for his services in union with it, is not a matter of any importance. Whether it be one sum or another does not affect the regulation, either in respect to its utility or mode of enforcement.
SourceUnited States Reports [Supreme Court], Vol. 94, U.S. 113.
