What the contract alleged to be impaired by subsequent
legislation is is a question which this Court is bound to determine
for itself, independent of decisions of the state court.
Northern Pacific Ry. v. Duluth, 208 U.
S. 50.
An ordinance conferring a street franchise, passed by a
municipality under legislative authority, creates a valid contract
binding and enforceable according to its terms.
Louisville v.
Cumberland Telephone Co., 225 U. S. 430.
While a validly granted franchise to use streets of a
municipality may be regulated as to its use by subsequent
ordinances, or repealed if its operation becomes injurious to
public health or morals, the franchise, if not injurious to public
health or morals, cannot be repealed and destroyed.
The police power of the state cannot be bartered away, but it
cannot be used to abrogate a valid and innocuous franchise.
Tracks laid in a street under legislative authority become
legalized, and, when used in the customary manner, cannot be
treated as unlawful either in maintenance or operation.
Inconvenience natural to the proper use of a properly granted
franchise cannot be made the basis of exercising the police power
to destroy the franchise.
The power to regulate implies the existence, and not the
destruction, of the thing to be controlled.
A franchise to maintain and operate a double track railway is an
entirety, and if valid, the municipality cannot abrogate it as to
one of the tracks, either as to all or as to a part of the distance
for which it was granted.
Baltimore v. Trust Company,
166 U. S. 673,
distinguished.
The contract clause prevents a state from impairing the
obligation of a contract, whether it acts through the legislature
or a municipality exercising delegated legislative power.
The ordinance of South Bend, Indiana, of 1868, permitting a
railway company to lay a double track through one of its streets,
and which had been availed of as to part of the distance, was a
valid exercise of
Page 227 U. S. 545
delegated legislative power, and no power to alter or repeal
having been reserved, a subsequent ordinance repealing the
franchise as to the double track was not a valid exercise of the
police power to regulate the franchise, but an impairment of the
contract, and unconstitutional under the contract clause of the
Constitution.
174 Ind. 203 reversed.
In 1866, a charter was granted by the State of Indiana to
plaintiff's predecessor in title whereby it was authorized to build
a railroad from the Michigan line west through South Bend to the
Illinois line in the direction of Chicago. The City of South Bend
was a stockholder in this company, and, in 1868, passed and
ordinance granting the company the right to construct its railroad
through the streets of the city, no more than one track to be laid,
except that the privilege was granted to lay a double track along
Division Street, from the bridge over St. Joseph's River to Taylor
Street. The road was constructed and a single track was built in
1871.
Thereafter, in 1881, the company acquired by condemnation and
purchase, from abutting owners on Division Street, the right to use
a strip 18 feet in width on which to lay a double track, and soon
afterward constructed the same on Division Street for about half
the permitted distance. This double track was constantly used, and
in 1901 the business of the company had so increased that it was
necessary to double track the entire line, and the company had so
built 157 miles from Port Huron westward, and was preparing to
construct the balance of the double track on Division Street, when
the city, on October 14, 1901, repealed so much of the ordinance of
1868 as gave the right to a second track in Division Street. Later,
when the work of construction was begun, the mayor ordered the
employees to desist, and threatened to arrest any who should
undertake to construct such double track.
The company thereupon filed a bill, asking that the city be
enjoined from interfering with the building of the
Page 227 U. S. 546
balance of the double track. It alleged that the city was a
stockholder in the original company and in one of the successors,
and knew of the acquisition of the 18-foot strip in Division
Street; that at all times it had recognized the validity of the
contract as an entirety, and from time to time required the
railroad to incur expenses called for thereunder, and was estopped
from denying the validity of the double track privilege.
The bill alleges that, when the ordinance of 1868 was passed, it
understood the double track could be laid whenever the business of
the company made it necessary; that, in consequence of the increase
of business, it is now essential to the successful operation of
plaintiff's freight and passenger business that it should maintain
a second track in Division Street, as by said ordinance authorized,
and that to facilitate and accommodate the present volume of such
traffic, said double line
"is particularly necessary because of the fact that plaintiff's
freight and passenger stations in South Bend are located adjacent
to Division Street, between St. Joseph's River bridge and General
Taylor Street, and at said station the trains, both passenger and
freight, passing over plaintiff's road, have to stop for train
orders. The obstructing of the general public in the use of said
street by passing trains will be much less when two tracks are used
than it now is, when all trains, both ways, have to pass over a
single track; that said street is 82 1/2 feet wide, and that there
is ample room thereon for general travel and for said double
track."
The plaintiff claims that the
"original ordinance of 1886 constituted a contract in its
entirety, . . . is irrepealable by said city, either in whole or in
part, and that said ordinance of repeal is void, as violative of
said contract and plaintiff's right thereunder, as being in
conflict with § 10 of Article I of the Constitution of the United
States."
The city demurred. Later it withdrew the demurrer
Page 227 U. S. 547
and filed an answer. Subsequently it withdrew the answer and
filed a general demurrer, which was sustained by the circuit court.
On appeal, the Supreme Court of Indiana held that there was no
charge that the city proposed to remove the double track already
laid, and that the pleadings, properly construed, only involved the
right to construct the balance of the double track; that, even if
the ordinance of 1866 was a contract, it did not prevent the city
from exercising the police power, and affirmed the judgment. (174
Ind. 203.)
Page 227 U. S. 551
MR. JUSTICE LAMAR, after making the foregoing statement,
delivered the opinion of the Court.
In 1868, the City Council of South Bend, by ordinance, granted
plaintiff's predecessor in title the right to lay a double track
over a part of Division Street. The company built a single track in
1871, and a double track for part of the way in 1881, but, on
attempting in 1902 to extend it, for the balance of the authorized
distance, was prevented from doing so because the city had repealed
so much of the ordinance of 1868 as related to double tracks. In
the record here it appears that, in the litigation which followed,
the action of the city was sustained on the ground that the repeal
was presumptively a reasonable exercise of the police power, and
not a legislative impairment of the contract ordinance.
The assignment of error on this ruling presents a question which
this Court is bound to decide for itself, independent of decisions
of the state court.
Northern Pacific Ry. v. Duluth,
208 U. S. 590.
In doing so, it is necessary first to determine whether the city
had legislative authority to pass the ordinance, for, if there was
no such power, the grant was void and the repeal was not so much
the impairment of the obligation of a contract as the withdrawal of
an assent to occupy the streets.
We are, however, relieved of the necessity of making any
extended inquiry on this primary question because the Indiana
statute provided that the railroad might be built through any city
that would give its consent. In a suit by an abutting owner, the
supreme court of the state, construing this very ordinance of 1868,
held that
Page 227 U. S. 552
the city had power to pass it, "the laying out and operating of
the railway being a new and improved method of using the streets,
germane to its principal object."
Dwenger v. Chicago &
Grand Trunk Ry. Co., 98 Ind. 153. In other cases, that court
held that the statute authorized cities to grant franchises to lay
tracks in the streets; that such an ordinance created that which is
in the nature of a contract "which the municipality itself cannot
materially impair."
Williams v. Citizens' Ry., 130 Ind.
73;
New Castle v. Lake Erie & W. R. Co., 155 Ind. 24.
These rulings accord with the decisions in other jurisdictions and
by this Court in
Louisville v. Cumberland Telephone
Company, 224 U. S. 649,
holding that an ordinance conferring a street franchise, passed by
a municipality under legislative authority, created a valid
contract, binding and enforceable according to its terms.
2. If, then, the City of South Bend was authorized to pass this
ordinance, which granted an easement, the contract cannot be
impaired unless, as claimed by the defendant, the railroad took
subject to a right to amend or repeal, in the exercise of the
police power. And many cases are cited in support of the
proposition that the grant of authority to use the streets of a
city does not prevent the subsequent passage of ordinances needed
for the preservation of the public safety and convenience. Some of
the cases turned on the question as to the city's want of
legislative power to make the grant in the first instance. Others
held that charter grants did not prevent the state from
subsequently repealing franchises, which, in their operation, were
injurious to the morals or health of the public, as in the lottery,
liquor, and fertilizer cases.
Stone v. Mississippi,
101 U. S. 814;
Boston Beer Co. v. Massachusetts, 97 U. S.
25;
Northwestern Fertilizing Co. v. Hyde Park,
97 U. S. 659.
Others related to the change of paving, grade, and location of
viaducts. All of them recognize the municipality's control of the
use of the streets by travelers
Page 227 U. S. 553
on foot or in vehicles, as well as the use by companies which
have a franchise to lay tracks over which to haul cars.
Undoubtedly the railroad here took no vested interest in the
maintenance of the laws or regulations of force when the ordinance
was passed in 1868, but the rights acquired were subject to the
power of the municipality to pass reasonable regulations necessary
to secure the public safety.
Northern Pac. R. Co. v.
Duluth, 208 U. S. 583. And
while the franchise to lay and use a double track was a contract
which could not be impaired, yet, as the police power remained
efficient and operative, the municipality had ample authority to
make regulations necessitating changes of a nature which could not
have been compelled if the grant had been from it as a private
proprietor. The city could therefore legislate as to crossings,
grades, character of rails, rate of speed, giving of signals, and
the details of operating track and train, regulating the use of the
franchise, and preserving the concurrent rights of the public and
the company. And, as in the viaduct cases, it might require these
tracks to be lowered or elevated (
Chicago B. & Q. R. Co. v.
Nebraska, 170 U. S. 57); or
the franchise, and not the particular location, being the essence
of the contract, the city, under the power to regulate, might
compel the company to remove the tracks from the center to the
side, or from the side to the center, of the street.
New
Orleans Gas Light Co. v. Drainage Commission, 197 U.
S. 453;
Macon &c. R. Co. v. Mayor, 112 Ga.
783;
Atlantic & B. Ry. v. Cordele, 128 Ga. 296;
Snouffer v. Cedar Rapids & M.C. Ry. Co., 118 Ia. 287
(5).
These, however, are examples of the persistence of the power to
regulate, and do not sustain the validity of the repealing
ordinance of 1901, since it is not regulative of the use, but
destructive of the franchise. In every case like this, involving an
inquiry as to whether a law is valid, as an exertion of the police
power, or void, as impairing
Page 227 U. S. 554
the obligation of a contract, the determination must depend on
the nature of the contract and the right of government to make it.
The difference between the two classes of cases is that which
results from the want of authority to barter away the police power,
whose continued existence is essential to the wellbeing of society,
and the undoubted right of government to contract as to some
matters, and the want of power, when such contract is made, to
destroy or impair its obligation.
New Orleans Gas Co. v.
Louisiana Light Co., 115 U. S. 650.
The state, with its plenary control over the streets, had this
governmental power to make the grant. There was nothing contrary to
public policy in any of its terms, and being valid and innocuous,
the police power could not be invoked to abrogate it as a whole or
to impair it in part.
Walla Walla v. Walla Walla Water
Co., 172 U. S. 17.
Tracks laid in a street under legislative authority become
legalized, and, when used in the customary manner, cannot be
treated as unlawful either in maintenance or operation. As said by
this Court:
"A railway over . . . the streets of the City of Washington may
be authorized by Congress, and if, when used with reasonable care,
it produces only that incidental inconvenience which unavoidably
follows the additional occupation of the streets by its cars, with
the noises and disturbances necessarily attending their use, no one
can complain that he is incommoded."
Baltimore & Potomac R. Co. v. Fifth Baptist Church,
108 U. S. 317,
108 U. S. 331.
The inconvenience consequent upon the running of a railroad through
a city under state authority is not a nuisance in law, but is
insuperably connected with the exercise of the franchise granted by
the state. If the police power could lay hold of such
inconveniences and make them the basis of the right to repeal such
an ordinance, the contract could be abrogated because of the very
growth in population and business the railroad was intended to
secure.
Page 227 U. S. 555
The power to regulate implies the existence, and not the
destruction, of the thing to be controlled. And while the city
retained the power to regulate the streets and the use of the
franchise, it could neither destroy the public use nor impair the
private contract, which, as it contemplated permanent, and not
temporary, structures, granted a permanent, and not a revocable,
franchise. Both the street and the railroad were arteries of
commerce. Both were highways of public utility, and both were laid
out subject to the authority of the state, though the power to
regulate the use of the streets has been delegated to the
municipality. So that, while the company was itself authorized to
select the route between the terminal points named in the charter,
it could not use streets without the consent of the city through
which the line ran. In determining whether they would grant or
refuse that consent, the municipal authorities were obliged to
balance the present and prospective inconveniences of having trains
operated through its streets against the advantage of having the
railroad accessible to its citizens. It could have refused its
consent except on terms; it could have forced the road to the
outskirts of the town, or could have permitted the company to lay
tracks in the more thickly settled parts of the city. When such
consent was once given, the condition precedent had been performed,
and the street franchise was thereafter held not from the city, but
from the state, which, however, did not confer upon the
municipality any authority to withdraw that consent, nor was there
any attempt by the council to reserve such power in the ordinance
itself.
It is said, however, that even if the city could not prevent the
use of the rails already laid, it could repeal so much of the
ordinance as related to that part of the street on which the double
track had not been actually built. But this was not a grant of
several distinct and separate franchises, where the acceptance and
use of one did not
Page 227 U. S. 556
necessarily execute the contract as to others not connected with
the main object of the ordinance, and not at the time directly
within the contemplation of the parties.
Pearsall v. Great
Northern R. Co., 161 U. S. 673.
This franchise was single and specific, and, when accepted and
acted upon, became binding -- not foot by foot, as the rails were
laid, but as an entirety. Here, the company not only accepted the
ordinance and constructed the road, but, relying on the franchise,
acquired from the abutters by purchase or condemnation an 18-foot
strip with a view of laying thereon a double track as the increase
in business made that necessary. Subsequently it built the double
track for a part of the distance, and has not abandoned or
forfeited the right to use the balance of the easement when needed
for the discharge of its public duties as a carrier.
The ordinance passed in pursuance of the Indiana statute was an
entirety. When accepted, it became binding in its entirety. If the
city has the right to repeal the specific provisions of the
contract, it has the like right to repeal the more general grant to
lay a single track. If South Bend can do so, every other
municipality having granted like rights, under similar ordinances,
and affecting every line of railway in the country, can repeal the
franchise to use double or single track. On the ground of
congestion of traffic, the state's grant and command to operate a
continuous road could be nullified by municipal action, to the
destruction of great highways of commerce, similar in their nature
to the street itself. Such consequences, though improbable, are
rendered impossible by the provision of the Constitution of the
United States prohibiting the impairment of the obligation of a
contract by legislation of a state, whether acting through a
general assembly or a municipality exercising delegated legislative
power.
Mercantile Trust Company v. Columbus, 203
U. S. 320;
New Orleans Gas Co. v. Louisiana Light
Co., 115 U. S. 650;
City Ry. Co. v. Citizens' R. Co., 166 U.
S. 557.
Page 227 U. S. 557
See also Hestonville &c. R. Co. v. Philadelphia, 89
Pa. 210 (3);
Suburban R.T. Co. v. New. York, 128 N.Y. 510,
520;
Asbury Park Ry. v. Neptune Township, 73 N.J.Eq.
329-332;
Brunswick & Western R. Co. v. Mayor, 91 Ga.
573;
Workman v. R. Co., 129 Cal. 536;
Africa v.
Knoxville, 70 F. 729;
Burlington v. Burlington S. R.
Co., 49 Ia. 144;
Arcata v. Arcata & M. R. Co., 92
Cal. 639;
Detroit v. Detroit & H. P. R. Co., 43 Mich.
147;
City of Seattle v. Columbia & P.S. R. Co., 6
Wash. 379;
Noblesville v. Lake Erie & W. R. Co., 130
Ind. 1.
"Obviously, upon the clearest considerations of law and justice,
the grant of authority to defendant, when accepted and acted upon,
became an irrevocable contract, and the city is powerless to set it
aside."
St. Louis v. Western Union Telegraph Co., 148
U. S. 103.
The defendant relies on
Baltimore v. Baltimore Trust &
G. Co., 166 U. S. 673,
where, however, the facts were materially different. For there the
company had a sweeping grant to lay double tracks through many
miles of the streets. The city repealed the ordinance so far as it
related to a short distance in a crowded part of Lexington Street,
which, as appears in the original record, varied from 48 to 50 feet
in width, the sidewalks being about 11 feet in width and the
roadway proper being about 29 feet from curb to curb. With double
tracks, there was only 7 1/2 feet from the curb to the nearest
rail, and, allowing for the overhanging of the car, this space was
not wide enough to permit vans and large wagons to pass. At some
points, buggies and narrow vehicles could only pass by running the
wheels on the edge of the sidewalk. These facts are wholly
different from the situation disclosed by this record, where the
sweeping grant conferred the right to lay a single track, but the
specific grant "immediately within the contemplation of the
parties" (
Pearsall v. Great Northern Ry., 161
U. S. 673) was a definite franchise
Page 227 U. S. 558
to construct this particular double track between designated
points on Division Street, which is 82 1/2 feet wide, or 32 feet
wider than Lexington Street. It is admitted that a double track has
been actually used on it for more than twenty years.
The statute and the ordinance in the Baltimore case were also
materially different from those here involved. The Court declined
to decide whether the council had the power to make an irrepealable
contract, it being sufficient to hold that the direction to lay but
one track for a short distance on Lexington Street did not
substantially change the terms of the contract, granting such very
broad and general right to lay many miles of double track
throughout the city. But, regardless of the construction, there was
no impairment, because of the important fact that the Legislature
of Maryland had ratified the street ordinance on condition that it
might at any time be amended or repealed by the city council.
That decision, based on such different facts and on such
different statute and ordinance, is not applicable here, where the
City of South Bend sought to repeal a part of a street franchise
granted in pursuance of a state statute which, while it authorized
the city to consent, reserved to it no such power to repeal. As
said in
Indianapolis v. Indianapolis Gas Co., 66 Ind. 402,
such a contract ordinance does not in the least restrict
"the legislative powers of the city, except that, as the
sanctity of the contract is shielded by the Constitution of the
United States, it cannot, in the exercise of its legislative power,
impair its validity, for it would be a solecism to hold that a
municipal corporation can impair the validity of a contract when
the state which created the corporation, by its most solemn acts,
has no such power."
The facts stated in the complaint, and admitted by the demurrer,
raise no presumption that the repeal was the reasonable exercise of
the police power, but, on the contrary,
Page 227 U. S. 559
show that the contract of 1868 was materially impaired by the
ordinance of 1901, in violation of the provisions of Art. I, § 10,
of the Constitution.
The judgment is reversed and the case remanded for further
proceedings not inconsistent with this opinion.
MR. JUSTICE DAY concurs in the result on the ground that the
facts stated in the complaint and admitted by the demurrer raise no
presumption that the repeal was the reasonable exercise of the
police power, and that nothing else is necessary to be decided. MR.
JUSTICE HUGHES and MR. JUSTICE PITNEY dissent.
