1. A company incorporated by a statute of Pennsylvania approved
April 8, 1864, was authorized to construct a railway on certain
streets of Philadelphia, subject to the ordinances of the city
regulating the running of passenger railway cars. The charter
requires, among other things, that the "company shall also pay such
license for each car run by said company as is now paid by other
passenger railway companies" in said city. That license was $30 for
each car. An ordinance passed in 1867 increased the license charge
to $50, and in 1888, by a general statute, the legislature provided
that the passenger railway corporations of Philadelphia should pay
annually to the city $50 as required by their charters for each car
intended to run on their roads during the year, and that the city
should have no power to regulate such corporations unless
authorized by the laws of the state expressly in terms relating to
those corporations. The company paid the increased charge until
1875. On its refusing to pay it thereafter, this suit was brought.
Held that the charter did not amount to a contract that
the company should never be required to pay a license fee greater
than that required of such companies at the date when the company
was incorporated.
2. In their widest sense, the words employed in the charter mean
that the company should not then be required by the city to pay any
greater charge as license than that paid by other companies
possessing the same privilege.
Quaere, without further
legislation, could a greater sum have been exacted from the company
?
3.
Semble that even if the charter were sufficient to
import a contract, the legislature, under the constitutional
provision then in force touching the alteration, revocation, or
annulment of any charter in such manner that no injustice be done
to the corporators, had ample power to pass the act raising the
license fee from thirty to fifty dollars.
Page 101 U. S. 529
This was an action brought in the Court of Common Pleas, No. 2,
for the County of Philadelphia, by the City of Philadelphia against
the Union Passenger Railway Company of Philadelphia.
The following case was stated for the opinion of the court, with
the right to either party to sue out a writ of error to the
judgment.
That by "An ordinance supplementary to an ordinance entitled
An ordinance to regulate passenger railways,' approved July 7,
1857," approved April 1, 1859 (139), and by the third section
thereof, it is provided:
"That each and every passenger railway company shall pay into
the office of the chief commissioner of highways in the month of
January of each year, for the use of the city, the sum of thirty
dollars for each car intended to be run upon any road, and for each
and every car placed upon any road before the time herein provided
for paying the license, a proportionate sum shall be paid until the
succeeding January, and that no car shall be placed or run upon any
road or street until it shall be regularly licensed, and a
certificate duly numbered hung in a conspicuous place in said
car."
That the defendants were created a body politic by an act passed
April 8, 1864, P.L. 297, with the authority to construct a railway
on certain named streets in the City of Philadelphia. Among other
things in said act, it is enacted:
"SEC. 4. . . . Said railway shall conform in gauge to the
passenger railways now laid in the City of Philadelphia. . . ."
"SEC. 8. . . . And the said company is hereby authorized and
empowered to construct and lay the said railway, without obtaining
the consent of the City Councils of the City of Philadelphia, but
whenever the said railway shall be laid and used by running
passenger cars thereon, the said company shall be subject to the
ordinances of the City of Philadelphia regulating the running of
passenger railway cars."
"SEC. 10. That the said company shall pay annually into the
Treasury of the City of Philadelphia, for the use of said city,
whenever the dividends declared by said company shall exceed six
percent per annum on the par value of the capital stock thereof, a
tax of
Page 101 U. S. 530
six percent on such excess over six percent, . . . and the said
company shall also pay such license for each car run by said
company as is now paid by other passenger railway companies in the
City of Philadelphia."
By "a further supplement to an ordinance to regulate passenger
railways, approved July 7, 1857," approved Jan. 2, 1867 (1), it is
enacted:
"That each and every passenger railway company shall pay to the
chief commissioner of highways the sum of fifty dollars for each
car run upon their respective roads. . . ."
That by "An Act to define the duties and liabilities of
passenger railway corporations in the City of Philadelphia,"
approved April 11, 1868, P.L. 849, it is enacted:
"That the several passenger railway corporations in the City of
Philadelphia shall pay annually to the said city in the month of
January the sum of fifty dollars, as required by their charters,
for each car intended to be run over their roads during the year,
and they shall not be obliged to pay any larger sum, and said city
shall have no power by ordinance or otherwise to regulate passenger
railway companies unless authorized so to do by the laws of this
Commonwealth expressly in terms relating to passenger railway
corporations in the City of Philadelphia. . . ."
That in each year previous to the year 1875, the defendants paid
the said plaintiff the sum of fifty dollars for each of the cars
run by them during such year.
The defendants, in the month of January, 1875, did run
seventy-nine cars on their road, and admit their liability to pay
to the plaintiffs for each car the sum of thirty dollars and no
more.
If the court shall be of opinion that the plaintiffs are
entitled to recover the sum of fifty dollars for each car, then
judgment to be entered for the plaintiffs at that rate; if not,
then judgment to be entered for the plaintiffs at the rate of
thirty dollars for each car. The damages to be assessed by the
prothonotary.
It is agreed that any act of assembly or ordinance of the City
of Philadelphia which may be pertinent to the case here stated
shall be considered as embraced herein.
Page 101 U. S. 531
Judgment was rendered in favor of the city at the rate of fifty
dollars for each car. It was affirmed by the supreme court of the
state, and this writ was then sued out. The errors assigned are set
out in the opinion of this Court.
Page 101 U. S. 532
MR. JUSTICE CLIFFORD delivered the opinion of the Court.
Stipulations in a statute of a state exempting certain property,
rights, or franchises from taxation or engaging that the same shall
be taxed only at a certain rate, if made for a valuable
consideration received by the state whose legislature enacted the
stipulations, is a contract, and as such comes within the rules of
decision specifying the description of contracts entitled to
protection from modification or repeal under the guaranty of the
tenth section of the first article of the Constitution.
Exemptions of the kind, however, are to be strictly construed,
the rule being that the right of taxation exists unless the
exemption is expressed in clear and unambiguous terms and that in
order that it may be effectual, it must appear that the contract
was made in consequence of some beneficial equivalent received by
the state, it being conceded that if the exemption was granted only
as a privilege, it may be recalled at the pleasure of the
legislature. Cooley, Const.Lim. (4th ed.) 342; Cooley, Taxation
146.
Companies were created by the legislature of the state more than
thirty years ago for running street cars in the streets of the
plaintiff city, whose charters made it necessary that the managers
should obtain the consent of the city councils before they
commenced to use and occupy the streets for that purpose.
Ordinances were accordingly passed by the city authorities which
required companies organized under such statutes to pay for the use
of the city a license fee of thirty dollars for each car intended
to be run. Subsequent charters of the kind were granted by the
legislature which did not contain any provision requiring the
companies or their agents to procure the consent of the authorities
of the city before they could use the public streets for the
running of their passenger cars. These companies denied the
validity of the license charge, which gave rise to litigation and
to new legislation by which authority was given to the city
councils to provide by ordinance for the proper
Page 101 U. S. 533
regulation of omnibuses or vehicles in the nature thereof, and
to that end it was enacted that they might from time to time pass
ordinances to provide for the issuing of licenses to as many
persons as may apply to keep and use omnibuses or vehicles in the
nature thereof, and to charge a reasonable annual or other sum
therefor, and to provide for the punishment of the owners and
drivers of the same for any violation of the provisions of the
ordinances to be created by virtue of the authority conferred.
Sess.Laws Penn. (1850) 469.
Authority was by that act expressly vested in the city
authorities to pass ordinances upon the subject therein described
and to charge a reasonable annual license fee for the license or
other sum for the same. Pending the period during which that
enactment continued to be in operation, the legislature of the
state passed the act incorporating the defendant company, with the
powers, privileges, duties, and obligations expressed in the act of
incorporation.
Id. (1864) 300.
Corporate privileges of the usual character are by the charter
granted to the company, and the tenth section provides that
whenever their dividends shall exceed six percent per annum on the
par value of the capital stock, the company shall pay for the use
of the city a tax of six percent on such excess over six percent on
the par value, and that they shall also pay "such license fee for
each car run by the company as is now paid by other passenger
railway companies."
Railway companies running cars on the streets of the city were
required to pay at the time the defendant company was incorporated,
for each and every car intended to be run, the annual license fee
of thirty dollars, as appears by the ordinance then in force and
fully set forth in the agreed statement of facts. Annual payments
to that amount, it seems, were made by the defendant company, which
may be inferred from the fact that the plaintiff city makes no
claim for any deficit during that period.
Coming to the matter in controversy, it appears that the
legislature, on the 11th of April, 1868, passed the act which is
the principal subject of controversy. Sec. 1 provides that the
passenger railway corporation of the city shall pay annually to the
city in the month of January the sum of fifty dollars, as
Page 101 U. S. 534
required by their charters, for each car intended to run over
their roads during the year, and that they shall not be obliged to
pay any larger sum, and the same section provides that the city
shall have no power to regulate such companies unless so authorized
by the laws of the state. Sess.Laws Penn. (1868) 849.
Regular payments, as required, were made by the defendant
company until the year 1875, when they refused to pay any greater
sum than thirty dollars per year for each car run. Payment of the
excess beyond thirty dollars being refused, he authorities of the
city instituted the present suit in the common pleas to recover the
balance as claimed. Service was made and the parties, having
appeared, filed the agreed statement of facts exhibited in the
transcript. Hearing was had, and the court of original jurisdiction
rendered judgment in favor of the plaintiff city for the sum of
$4,218.60. Dissatisfied with the judgment, the defendant company
removed the cause into the supreme court of the state, where the
judgment was affirmed. Still not satisfied, the defendant company
removed the cause into this Court, and assigns for error the
following causes: 1. that the act of the legislature defining the
duties and liabilities of railway companies is in conflict with
that provision of the Constitution which prohibits a state from
passing any law impairing the obligation of contracts; 2. that the
judgment of the court below is in conflict with that provision of
the Constitution.
Attempt was made about the time the defendant company was
incorporated to support the theory that a street passenger car was
not a vehicle in the nature of an omnibus, and that the street
passenger cars were not taxable in any form under the legislative
act which authorized the city authorities to issue licenses to
persons to keep and use omnibuses or vehicles in the nature
thereof, upon the ground that the street passenger car was not a
vehicle in the nature of an omnibus. Controversy arose, and the
supreme court of the state effectually disposed of the question in
favor of the city.
Questions of importance were decided by the court in that case,
most or all of which are more or less applicable to the case before
the court. They are as follows:
1. That a grant to a corporation to carry passengers in cars
over the streets of
Page 101 U. S. 535
a city does not necessarily involve exemption from liability to
municipal regulations, the right granted being neither greater nor
less than that possessed by a natural person.
2. That when a corporation is authorized to pursue a specified
business within a municipality it is intended that the business
shall be conducted under the rules, restrictions, and regulations
which govern others transacting the same business.
3. That the right to construct cars and own a railway neither
enlarges nor diminishes the right to run cars and carry passengers,
and that a reasonable charge for the use of the privilege to
transact such a business is not a denial of the right.
4. That an ordinance requiring passenger cars to be numbered and
pay a stipulated sum when licensed is a valid police regulation,
and that such an ordinance might be passed under the act which
authorized the city authorities to pass ordinances for the
licensing of omnibuses and other vehicles of conveyance of a like
nature.
Since that decision, it is not doubted that the subject of
imposing license fees in cases like the present is within the
jurisdiction of the city authorities if the statute under which
they have exercised such jurisdiction is a valid act passed in
pursuance of the Constitution.
When the company was incorporated, the charter, as before
remarked, contained the provision providing for the payment of a
six percent tax on the excess of dividends over six percent on the
par value of the stock, and the further provision that the company
shall also pay such license for each car run as is now paid by
other passenger railway companies in the city. What the defendants
contend is that the closing enactment of the section amounts to a
contract that the railway company shall never be required to pay
any greater license fee than was then required of such companies
running passenger cars on the streets of the city. Other railway
companies at that time paid an annual license of thirty dollars,
and the defendants insist that the act of the legislature
increasing the license to fifty dollars per annum is
unconstitutional and void.
Two answers are made to that proposition by the plaintiff city,
either of which is sufficient to show that the judgment must be
affirmed:
1. That the language of the act of incorporation
Page 101 U. S. 536
referred to does not amount to a contract of any kind, and
certainly not to such a contract as that attempted to be set up by
the defendants.
2. That even if the language employed in the charter is
sufficient to amount to a contract that the license charge should
not exceed the amount paid at that date by other such companies,
still it cannot benefit the defendants for the reason that the
constitution of the state in force when the act of incorporation
was passed provides that the legislature shall have the power to
alter, revoke, or annul any charter of incorporation hereafter
conferred by or under any special or general law whenever in their
opinion it may be injurious to the citizens, subject only to the
condition that the alteration, revocation, or annulment shall be
made in such manner "that no injustice shall be done to the
corporators." Art. 1, sec. 26; Purdon, Dig. (9th ed.), p. 17.
Exemptions of the kind set up are to be strictly construed, but
it is unnecessary to invoke that canon of construction to any
considerable extent, as the language employed is not sufficient to
take the case out of the rule that the alleged exemption will not
be sustained unless it be expressed in clear and unambiguous terms.
Taken in their widest sense, the words employed are no more than
sufficient to warrant the construction that the legislature
intended that the corporation should not then be required to pay
any greater charge as license than other companies were required to
pay for the same privilege, and it may perhaps be regarded as a
guaranty against invidious exemptions adverse to the corporators in
future legislation upon the subject, but it is plain that there is
nothing in the language of the section to warrant the court in
holding that the legislature intended to contract that the license
charged for such passenger cars should never exceed the annual sum
of thirty dollars.
Railway companies of the kind, it appears, were first required
to pay an annual sum of fifty dollars for each car run the year
previous to the passage of the act which is the subject of
controversy in the present litigation. Neither party refers to that
act as of any importance in this case except as a part of the state
legislation upon the subject. Then comes the act in controversy, to
which reference has already been made. 9 Sess.Laws Penn. (1868)
848.
Page 101 U. S. 537
When the street railway system of the city was comparatively in
its infancy the city authorities, under the legislative act
empowering them as such authorities to charge reasonable fees for
granting licenses to such companies, fixed the sum at thirty
dollars per annum for each car run. Regulations of the kind were in
force and operation when the charter of the defendant company was
granted. Other companies previously incorporated were at the time
paying only that sum per annum for each car, and the tenth section
of the charter granted to the defendant company provided that the
then new company should pay the same as was paid by the other
passenger railway companies.
Beyond doubt they were required to pay the same amount as was
paid by the other companies, and it is perhaps a reasonable
construction that without further legislation they could not be
required to pay any greater sum, but the language of the section
does not in terms contain any such prohibition. None of the other
companies have any such immunity from increased taxation, and if
construed to have that effect in favor of the defendant company it
would have an extremely invidious operation at the expense of all
other similar companies. Invidious exemptions are not favored, nor
ought they to be, as they are in principle utterly opposed to the
rule of equality, which ought always to prevail in imposing public
burdens.
Taxation is an act of sovereignty to be performed, so far as it
conveniently can be, with justice and equality to all.
Crawford
v. Burrell Township, 53 Pa.St. 219; Cooley, Taxation, 152.
Common burdens should be sustained by common contributions,
regulated by fixed rules, and be apportioned, as far as possible,
in the ratio of justice and equity.
Sutton v. Louisville,
5 Dana (Ky.) 28, 31.
Viewed in the light of these suggestions it is clear that the
state never made such a contract with the defendant company as that
supposed in the assignment of errors.
It seems that the supreme court of the state, when it became
their duty at an earlier period to examine the question, came to
the conclusion that the power to impose the license or tax might be
supported as a police power derived under the act passed for the
regulation of omnibuses or vehicles in the nature
Page 101 U. S. 538
of the same, it appearing that at that time no legislative act
had conferred the express power to tax the cars of the company.
The Frankford &c. Railway Co. v. City of Philadelphia,
58 Pa.St. 119, 124.
Since that the act in question in this case has been enacted,
which itself requires all such companies without discrimination to
pay the annual license or tax of fifty dollars for each car
intended to be run over the city roads during the year.
Stress it appears was laid in the court below upon the words of
the act, "as required by their charters," as if the obligation did
not arise unless it was created by the terms of the charter, but
the Supreme Court showed conclusively that the act of the
legislature, when properly construed, did not sustain the
proposition, and it appears to have been abandoned. Charters of the
kind, as the supreme court showed in the opinion given in this
case, required obedience to the lawful ordinances of the city under
the exercise of its municipal powers, which, as the supreme court
there said, is plainly evidenced by the remainder of the section
imposing the tax of fifty dollars, by which the legislature took
away from the city all power by ordinance or otherwise to regulate
passenger railways "unless authorized by the express terms of a law
referring directly to such corporations."
Voluntary payments of the amount imposed by the new act were
made by the company for sixty or seventy cars, from which the
supreme court of the state held that it followed as a legal
conclusion that the company had accepted the act.
All power to regulate such companies by ordinance or otherwise
was taken away from the city during that period, and the court held
that inasmuch as the company had enjoyed the benefit of that
prohibition ever since it was enacted, it must be understood that
they have accepted the act. Some weight is doubtless to be given to
that argument, but it is clear that the right of the state to
impose such a tax, rate, or imposition in the future cannot be
taken away by mere implication arising from a direction to pay a
certain sum, the universal rule being that it requires some plainer
negative of the power of the state to levy moneys for public
purposes than is found in such a direction.
Page 101 U. S. 539
Indications of such an intention might perhaps be found in other
statutory provisions, sufficient, when added to such a direction
and when taken together as a whole, to amount to a contract to
relinquish the power; but when it is sought to prove such an
exemption the statutory evidence of the same must be plain and
unambiguous, and if not direct it must at least be such as is
inconsistent with any other hypothesis, and conclusive that such
was the intention of the legislature, Cooley, Const.Lim. (4th ed.)
341.
Much discussion of the second proposition, in view of the
conclusive support given to the first, is quite unnecessary. Power
to alter, revoke, or annul any charter of incorporation was vested
in the legislature by the constitution more than a quarter of a
century before the defendant company was incorporated.
Even when the language of the charter is sufficient to amount to
a contract, it was twice admitted by Mr. Justice Story, in
Trustees of Dartmouth College v. Woodward, that
alterations and amendments may be made in the charter, where the
power the that purpose is reserved to the legislature in the act of
incorporation.
17 U. S. 4 Wheat.
518,
17 U. S. 708,
17 U. S.
712.
Acts of incorporation granted subsequently to the adoption of
the constitution must be construed as if the provision of the
instrument in question was embodied in the charter. Private
charters of the kind importing such an exemption are held to be
contracts, because they are based for their consideration on the
liabilities and duties which the corporators assume by accepting
the terms therein specified, and the general rule is that the grant
of the franchise on that account can no more be resumed by the
legislature, or its benefits be diminished or impaired without the
assent of the corporators, than any other grant of property or
legal estate, unless the right to do so is reserved in the act of
incorporation, or by some immemorial usage or general law of the
state in operation at the time the charter was granted.
Holyoke Company v.
Lyman, 15 Wall. 500,
82 U. S.
511.
Charters of private corporations duly accepted, it must be
admitted, are in general executed contracts, but the different
provisions, unless they are clear, unambiguous, and free of
Page 101 U. S. 540
doubt, are subject to construction, and their true intent and
meaning must be ascertained by the same rules of interpretation as
apply to other legislative grants, the universal rule being that
whenever the privileges granted to such a corporation come under
revision in the courts, the grant it to be strictly construed
against the corporation and in favor of the public, and that
nothing passes to the corporation but what is granted in clear and
explicit terms.
Rice v. Railroad
Company, 1 Black 358;
Charles
River Bridge v. Warren Bridge, 11 Pet. 420.
Whatever is not unequivocally granted in such charters is taken
to have been withheld, as all such charters and acts extending the
privileges of corporate bodies are to be taken most strongly
against the corporators. Sedgwick, Stats. (2d ed.) 292;
Lees v.
The Manchester & Ashton Canal Co., 11 East 644.
Vested rights, it is conceded, cannot be impaired under such a
reserved power, but it is clear that the power may be exercised and
to almost any extent, to carry into effect the original purposes of
the grant and to protect the rights of the public and of the
corporators, or to promote the due administration of the affairs of
the corporation.
Pennsylvania College
Cases, 13 Wall. 190,
80 U. S.
218.
Tested by these considerations, it is clear, even if it be
admitted that the language of the charter is sufficient to import a
contract, that the power of the legislature under the constitution
is amply sufficient to justify that department of the state to pass
the act raising the license for each car from thirty to fifty
dollars.
Judgment affirmed.