Covington & Lexington Tpk. Road Co. v. Sandford
164 U.S. 578 (1896)

Annotate this Case

U.S. Supreme Court

Covington & Lexington Tpk. Road Co. v. Sandford, 164 U.S. 578 (1896)

Covington & Lexington Turnpike Road Company v. Sandford

No. 50

Submitted May 7, 1898

Decided December 14, 1896

164 U.S. 578

Syllabus

The Legislature of Kentucky, by an act passed in 1834, created the Covington and Lexington Turnpike Road Company with authority to construct a turnpike from Covington to Lexington. One section prescribed the rates of tolls which might be exacted; another provided

"that if at the expiration of five years after the said road has been completed, it shall appear that the annual net dividends for the two years next preceding of said company, upon the capital stock expended upon said road and its repairs, shall have exceeded the average of fourteen percent per annum thereof, then and in that case, the legislature reserves to itself the right, upon the fact being made known, to reduce the rates of toll, so that it shall give that amount of dividends per annum, and no more."

In 1851, two new corporations were created out of the one created by the act of 1834, one to own and control a part of the road and the other the remaining part, and each of the new companies was to possess and retain "all the powers, rights and capacities in severalty granted by the act of incorporation, and the amendments thereto, to the original company." In 1865, an act was passed reducing the tolls to be collected on the Covington and Lexington turnpike. In 1890, another act was passed largely reducing still further the tolls which might be exacted.

Held:

(1) That the new corporations created out of the old one did not acquire the immunity and exemption granted by the act of 1834 to the original company from legislative control as to the extent of dividends it might earn.

(2) That the statute of Kentucky passed February 14, 1856, reserving to the legislature the power to amend or repeal at will charters granted by it, had no application to charters granted prior to that date.

(3) That an exemption or immunity from taxation is never sustained unless it has been given in language clearly and unmistakably evincing a purpose to grant such immunity or exemption.

(4) That corporations are persons within the meaning of the constitutional provisions forbidding the deprivation of property without due process of law as well as a denial of the equal protection of the laws.

(5) That the principle is reaffirmed that courts have the power to inquire whether a body of rates prescribed by a legislature is unjust and unreasonable and such as to work a practical destruction of rights

Page 164 U. S. 579

of property, and if found so to be, to restrain its operation, because such legislation is not due process of law.

(6) That the facts stated make a prima facie case invalidating the act of 1890 as depriving the turnpike company of its property without due process of law. Where a defense arises under an act of Congress or under the Constitution, the question whether the plea or answer sufficiently sets forth such a defense is a question of federal law, the determination of which cannot be controlled by the judgment of the state court.

(7) That when a question arises whether the legislature has exceeded its constitutional power in prescribing rates to be charged by a corporation controlling a public highway, stockholders are not the only persons whose rights or interests are to be considered, and if the establishment of new lines of transportation should cause a diminution in the tolls collected, that is not, in itself, a sufficient reason why the corporation operating the road should be allowed to maintain rates that would be unjust to those who must or do use its property, but that the public cannot properly be subjected to unreasonable rates in order simply that stockholders may earn dividends.

(8) That the constitutional provision forbidding a denial of the equal protection of the laws, in its application to corporations operating public highways, does not require that all corporations exacting tolls should be placed upon the same footing as to rates, but that justice to the public and to stockholders may require in respect to one road rates different from those prescribed for other roads, and that rates on one road may be reasonable and just to all concerned, while the same rates would be exorbitant on another road.

The case is stated in the opinion.

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