Courts are not to be deceived by the mere phraseology in which
an ordinance may be couched when it appears conclusively that it
was passed for an unlawful purpose, and not for the one stated
therein. A license fee cannot be imposed by ordinance of a
municipality for purposes of inspection on telegraph companies
doing an interstate business which is so far in excess of the
expenses of inspection that it is plain that it was adopted not to
repay such expenses, but as a means for raising revenue.
The plaintiff in error seeks to review the judgment of the
Supreme Court of Pennsylvania, which affirmed the judgment of the
superior court of that state, which in its turn affirmed the
judgment of the Court of Common Pleas of Lackawanna County, in
favor of the defendant in error in an action brought by it to
recover the amount of a license fee imposed upon all telegraph,
telephone, and electric light companies having poles and wires in
the borough. The ordinance was of the same nature as that mentioned
in the immediately preceding case of
Postal Telegraph-Cable
Company v. New Hope.
By the plaintiff's statement of its claim against the defendant,
the telegraph company, it sought to recover from the company the
sum of $220.50, including interest from January 31, 1898.
Page 192 U. S. 65
The defendant is a corporation engaged in interstate commerce by
transmitting telegraphic communications among the several states,
and by its affidavit of defense it averred that it was a company
engaged in forwarding telegraphic dispatches among the several
states, and was a corporation organized under the laws of the State
of New York; that it had paid the Commonwealth of Pennsylvania all
taxes which had by legislative enactment been levied upon the value
of its poles and wires erected and maintained in the Borough of
Taylor and elsewhere in the state; that it had accepted the act of
Congress (14 Stat. 221) providing for the construction of telegraph
lines over any post road of the United States; that it had never
maintained, and does not now maintain, any office whatever in the
Borough of Taylor, and that no telegraphic business of any kind is
done or transacted by the defendant in that borough except the
maintenance of the telegraphic lines and the transmission of
telegraphic messages over the same from other places; that the
ordinance in question is unreasonable, unjust, and excessive, and
is illegal and void, because it is designed and intended to provide
revenue by taxation for the general expenses of the borough, and
that no other object than this exists, or has at any time existed,
for the regulations imposed by the ordinance; that the borough is
under no expense whatever in issuing the license required by the
ordinance, and has not been at any time before, during, or after
the period mentioned in the plaintiff's statement for which it
makes demand, under any expense or charge of any kind whatsoever in
inspecting and regulating the poles and wires; that the license
fees imposed by the ordinance are not based upon the cost and
expense to the borough for inspection and supervision or regulation
of the defendant's lines and business, but the fees are imposed
notwithstanding they are more than twenty times the amount that
might have been or could possibly be incidental to such inspection,
supervision, and regulation, together with all reasonable measures
and precautions that might have been or possibly could be required
to be taken by
Page 192 U. S. 66
the said borough for the safety of its citizens and the public,
or which might have been or possibly could be incurred as expenses
for the most careful, thorough, and efficient inspection and
supervision that might have been made of the poles and wires of the
defendant, although the plaintiff has not and does not maintain any
inspection and supervision or care whatsoever over the poles and
wires of the defendant, and has incurred no expense whatever on
account thereof; that the borough is a sparsely populated district,
and the land therein of small value, and most of the land along the
highway on which the telegraph lines are constructed is not adapted
to building purposes nor commercial use, and the highway is little
traveled; that the borough is a coal mining community, and the
buildings therein consist for the most part of the coal miners'
cabins or houses of one or two stories, and the business buildings
are scattered and consist mostly of small shops or stores; that the
poles and wires thereon are located on the side of the highway and
do not interfere in the slightest degree or to any extent with its
use for all highway purposes, and do not interfere with any kind of
traffic or with the operation of men or apparatus in extinguishing
fires; that the line is not old, decayed, or worn out, but, on the
contrary, is comparatively new and sound, and there is no danger of
accident from the decay or breaking down of the poles and wires;
that the license fees imposed by the ordinance are twenty times
more than could be imposed under any power existing in the borough
to make charges for all legal purposes; that the amount of the
license fees imposed under the ordinance for each year largely
exceeds the entire cost to the defendant itself of maintaining said
line, including all repairs, reconstruction, cost of labor and
material, and traveling expenses of the employees, and all expenses
incurred by the defendant by a careful and efficient inspection and
maintenance of such poles and wires; that the fees imposed by the
ordinance are so excessive that, if every borough in the State of
Pennsylvania in which defendant has a telegraph system should pass
similar ordinances, the total amount collected
Page 192 U. S. 67
would exceed $100,000 per annum, and if the same kind of an
ordinance should be passed in the other states by the
municipalities in which the poles and lines of the company are
placed, it could not pay the amount, but would become insolvent by
reason of the fact that the expenses of operation, including the
license fees, would be far in excess of the receipts of the
defendant.
To this affidavit of defense the plaintiff excepted on the
ground that it did not state any sufficient defense to plaintiff's
cause of action, and also on the ground of
res judicata,
in that the same questions had been theretofore decided between the
same parties in the courts of the state.
A rule for judgment was taken by the plaintiff for want of a
sufficient affidavit of defense, and, upon hearing, the rule was
made absolute (the facts set forth in the affidavit of defense
being thereby assumed), and judgment for the plaintiff being
entered, it was affirmed by the superior and supreme courts of
Pennsylvania.
MR. JUSTICE PECKHAM, after making the foregoing statement of
facts, delivered the opinion of the Court.
The grounds of our jurisdiction to review the judgment in this
and the preceding case are similar to those which sustained it in
the two cases of
Western Union Telegraph Company v. New
Hope, 187 U. S. 419, and
Atlantic &c. Telegraph Company v. Philadelphia,
190 U. S. 160. By
reference to the opinions delivered in the state courts in this
case, it is apparent that it was not decided upon any question of
res judicata, as set forth in the plaintiff's exceptions
to defendant's affidavit of defense.
Page 192 U. S. 68
In the opinion of the superior court of Pennsylvania, it was
stated:
"Whether or not the fee is so obviously excessive as to lead
irresistibly to the conclusion that it is exacted as a return for
the use of the streets, or is imposed for revenue purposes, is a
question for the courts, and is to be determined upon a view of the
facts, not upon evidence consisting of the opinions of witnesses as
to the proper supervision that the municipal authorities might
properly exercise, and the expense of the same. Such a decision
becomes a precedent which is to be regarded in other cases
similarly situated. Were it to be held otherwise, the law upon the
subject would be in hopeless confusion and uncertainty. We make
these remarks because we cannot escape the conclusion that some of
the averments of the affidavit of defense are, in reality, but the
opinion of the defendant, undoubtedly honestly entertained, as to
these matters. They are not stronger than the averments in
Philadelphia v. American Union Telegraph Company, 167 Pa.
406, and the other facts averred do not distinguish the case from
others in which a similar fee in boroughs has been held to be not
so obviously excessive as to warrant the courts in declaring the
ordinance void. The cases are collected in the opinion filed
herewith in the case of
New Hope v. Western Union Telegraph
Company."
The opinion referred to by the superior court is also contained
in the record, and cases were cited in that opinion from the state
courts holding that they would not declare an ordinance void
because of the alleged unreasonableness of the fee charged unless
the unreasonableness be so clearly apparent as to demonstrate an
abuse of discretion on the part of the municipal authorities. The
court further remarked:
"In many of the foregoing cases, the license fee was the same as
that imposed by the ordinance under consideration. In none of the
cases was the ordinance declared void for unreasonableness,
although it was inferentially conceded that a case might arise
where the license fee would be so grossly disproportioned
Page 192 U. S. 69
to the burden imposed upon the municipality in consequence of
the erection and maintenance of the poles and wires as to warrant
the court in presuming that the ordinance was a revenue measure,
not a police regulation. None of the cases laid down a fixed and
invariable rule by which that question is to be determined, but,
after a comparison of the facts developed on the trial of this case
with the facts of some of the cases above cited, we have been led
to the conclusion that the court would not have been justified by
the precedents in declaring the ordinance void."
Upon the averments in the affidavit of defense, which in this
proceeding must be taken to be true, we can come to no other
conclusion than that the ordinance was void because of the
unreasonable amount of the license fee provided for therein.
It was urged on the argument that this ordinance was a proper
police regulation, and that the collection of revenue was not its
object; that it was the duty of the borough officials to protect
the lives and property of its citizens, and that, in the discharge
of such duty, it had the right to constantly inspect the poles and
wires for the purpose of seeing that they were safe.
There is no doubt that, for the purpose mentioned, the borough
had the right claimed by its counsel. The averments of the
affidavit of defense, however, show that no such duty has been
discharged or attempted to be discharged by the borough. It has
done absolutely nothing to protect the lives or property of its
citizens by inspecting the poles and wires of the defendant.
In
Atlantic &c. Telegraph Co. v. Philadelphia,
190 U. S. 160, it
was held that the testimony in a case like this might be such as to
compel a decision one way or the other, and the court might then be
justified in directing a verdict. We think this is one of those
cases. We assume that a tax of this kind ought to be large enough
to cover all expenses of police supervision of the property and
instrumentalities used by the company in the borough, and that it
is not bound to furnish such supervision
Page 192 U. S. 70
for nothing, but may, in addition to ordinary property taxation,
subject the corporation to a charge for the expenses of the
supervision. The borough is also not compelled to make its
expenditures for these purposes in advance of demanding the tax
from the defendant, but it must be remembered that such a tax is
authorized only in support of police supervision; and, if it were
possible to prove in advance the exact cost, that sum would be the
limit of the law. As, in the nature of things, this is ordinarily
impossible, the municipality is at liberty to make the charge
enough to cover any reasonably anticipated expenses, and the
payment of the fee cannot be avoided because it may subsequently
appear that it was somewhat in excess of the actual expense of the
supervision, nor can the company then recover the difference
between the amount of the license fee and such cost. These
observations are substantially reproduced from the opinion of the
court in
Atlantic &c. Telegraph Co. v. Philadelphia,
supra, delivered by MR. JUSTICE BREWER.
We come, then, to an examination of the question whether this
fee, in the light of the admitted facts set forth in the affidavit
of defense, can, by the widest stretch of imagination, be regarded
as reasonable. The borough is, where the poles are planted and the
wires stretched, sparsely settled, and the danger to be apprehended
from neglect in regard to the poles and wires is reduced to a
minimum. The borough has in fact done nothing in the way of
inspection or supervision during the time covered by the license in
question. It has not expended one dollar for any such purpose. It
has incurred no liability to pay any expenses arising from
inspection or supervision on its behalf. The fee itself is twenty
times the amount of expense that might have been reasonably and
fairly incurred to make the most careful, thorough, and efficient
inspection and supervision that might have been made of such poles
and wires, and for all reasonable measures and precautions that
possibly could be required to be taken by the borough for the
safety of its citizens and the public. This is not a mere
expression
Page 192 U. S. 71
of opinion. It is the averment of a fact. The company knows the
amount it costs for the inspection, which it avers is made by its
own servants, and which it avers is a most careful and efficient
inspection, one intended to place and maintain the poles and wires
in a perfectly safe and satisfactory condition. Knowing that cost,
and comparing it with the amount demanded under the ordinance, it
is enabled to state as a fact, and not as a mere opinion, that the
amount of the license fee exacted under the ordinance is, as
stated, twenty times more than it ought to be to secure a
reasonable, efficient, and most careful inspection, as set forth in
the affidavit mentioned.
In
Chester City v. Company, 154 Pa. 464, cited in
Western Union Telegraph Company v. New Hope, 187 U.
S. 419,
187 U. S. 425,
it was said that the affidavit in that case averred that the rates
charged were at least five times the amount of the expenses
involved in the supervision exercised by the municipality. The
supreme court held that, while that averment must be admitted to be
true, it did not go far enough, because it referred only to the
usual, ordinary, and necessary expenses of the municipal officers
in issuing the license and other expenses thereby imposed upon the
municipality, and that it made no reference to the liability
imposed upon the city by the erection of the telegraph poles. It
was also stated by the court that it is the duty of the city to see
that the poles are safe and properly maintained, and should a
citizen be injured in person or property by reason of the neglect
of such duty, an action might lie against the city for the
consequences of such neglect. The court said it was a mistake,
therefore, to measure the reasonableness of the charge by the
amount actually expended by the city in a particular year to the
particular purposes specified in the affidavit.
The affidavit in this case goes much further. It includes not
only the expenses that might have been incurred for an ordinary
inspection, supervision, and regulation, but takes into account the
very matters that are spoken of in the extract from
Page 192 U. S. 72
the opinion of the Supreme Court of Pennsylvania,
supra. Instead of the averment that the license fee
charged was at least five times the amount of the expense involved
in the supervision exercised by the municipality, it is stated that
it is more than twenty times the amount that would reasonably be
expended for the purposes stated in the affidavit.
The liability to pay for injuries that might arise from the bad
condition of the poles and wires, arising from the neglect of the
company to inspect and supervise the same, is not a liability which
the municipality is entitled to recover from the company in advance
of its happening, but it is simply one of the reasons for an
inspection by the borough, which shall be most carefully and
continuously performed in order that injuries may not arise from
the neglect of such supervision.
When we come to an examination of the grounds upon which this
kind of a tax is justifiable, and when we find that, in this case,
each one of those grounds is absent, how is it possible to uphold
the validity of such an ordinance? To uphold it in such a case as
this is to say that it may be passed for one purpose and used for
another; passed as a police inspection measure and used for the
purpose of raising revenue; that the enactment as a police measure
may be used as a mere subterfuge for the purpose of raising
revenue, and yet, because it is said to be an inspection measure,
the court must take it as such and hold it valid although resulting
in a rate of taxation which, if carried out throughout the country,
would bankrupt the company were it added to the other taxes
properly assessed for revenue and paid by the company. It is thus
to be declared legal upon a basis and for a reason that do not
exist in fact.
We think the court is not bound to acknowledge an ordinance such
as this to be valid in face of the facts stated in the affidavit of
defense. Confessedly there has been here no inspection, no expense
incurred to provide for one even though not made, and all expenses
and liabilities that might fairly and reasonably be incurred on the
part of the borough are not one-twentieth of the amount it exacts
for an inspection which it has not made.
Page 192 U. S. 73
Under such facts, it would seem to be plain that the ordinance
was adopted as a means for the raising of revenue, and not to repay
expenses for inspection. Judging the intention of the borough by
its action, it did not intend to expend anything for an inspection
of the poles and wires, and did intend to raise revenue under the
ordinance. Courts are not to be deceived by the mere phraseology in
which the ordinance is couched when the action of the borough, in
the light of the facts set forth in the affidavit, shows
conclusively that it was not passed to repay the expenses or
provide for the liabilities incurred in the way of inspection of
for proper supervision.
We are of opinion that, upon the averments contained in the
defendant's statement of defense, the defendant was entitled to
judgment. The judgment of the Supreme Court of Pennsylvania is
therefore reversed, and the cause remanded for further proceedings
not inconsistent with this opinion.
So ordered.
MR. JUSTICE HARLAN and MR. JUSTICE BREWER dissented.
