1. Provisions of the California Political Code requiring county
supervisors when granting a toll bridge franchise to fix tolls
which must not raise annually an income exceeding 15 percent. of a
specified base, and providing that tolls shall not be increased or
diminished unless it be shown that the receipts from them in any
one year are "disproportionate" to the base, cannot be construed to
mean that tolls shall not be reduced unless they yield in excess of
the 15 percent. P.
307 U. S.
488.
2. A toll bridge company was notified that an investigation of
the operation of its bridge would extend to the tolls. It was
accorded and accepted opportunity to introduce evidence, and
submitted its case for decision without request for findings or
argument. The state commission, in reducing tolls, filed a decision
sufficiently indicating the facts on which it made the order. In
its petitions for rehearing and for judicial review, the company,
though setting forth other objections specifically, did not claim
that procedural due process had been denied by the commission.
Held, that there is no basis for asserting the claim in
this Court.
Morgan v. United States, 304 U. S.
1, is not in point. P.
307 U. S.
492.
3. A company owning two bridges objected to regulation of the
tolls on one without including the other, claiming that they were
parts of the same system but competing, and that reduction of tolls
on the one would force reduction on the other.
Held:
(1) That determination of the proper unit was in the first
instance for the rate-fixing commission. P.
307 U. S.
494.
(2) As the other bridge is not used or useful in rendering any
of the service covered by the tolls under investigation, and the
duty to operate the one is independent of the duty to operate the
other, the claim that the commission, in confining its regulation
to the one bridge, abused its discretion and denied procedural due
process is without foundation. P.
307 U. S.
494.
4. Where an order reducing bridge tolls extended only to
automobiles and passengers, leaving intact the tolls for other
classes of traffic, a claim that the reduction was confiscatory was
not established by proof that the revenues as a whole from all of
the traffic
Page 307 U. S. 487
were inadequate; there must be allocation or apportionment, to
the traffic covered by the reduced tolls, of operating expenses,
cost of depreciation, taxes, sinking fund contributions, property
values, etc., fairly attributable to the service covered by the
order. P.
307 U. S.
494.
12 Cal. 2d
184, 83 P.2d 1, affirmed.
Appeal from a judgment of the Supreme Court of California
upholding an order of the State Railroad Commission which reduced
in part the tolls charged for use of one of the appellant's
bridges.
MR. JUSTICE BUTLER delivered the opinion of the Court.
This appeal is from a judgment of the highest court of the State
upholding an order of the state railroad commission that reduces
tolls for use of appellant's bridge across the Carquinez Straits
between the counties of Contra Costa and Solano. Appellant contends
that the order violates Art. I, § 10, of the Constitution, that the
commission's procedure was repugnant to the due process clause of
the Fourteenth Amendment, and that the order, in violation of that
clause, prescribes rates that are confiscatory.
February 5, 1923, the board of supervisors of Contra Costa
County, exerting power conferred by state legislation, [
Footnote 1] passed ordinance No. 171
granting to the Rodeo-Vallejo Ferry Company a franchise to
construct, and for 25 years to operate, the Carquinez bridge. June
4, 1923, the same board granted to the Delta Bridge Corporation a
like franchise for the construction and operation of a bridge
across the San Joaquin River near Antioch, between the counties of
Contra Costa and Sacramento.
Page 307 U. S. 488
Each ordinance provides that, on the expiration of the
franchise, the property rights, including title to the bridge,
revert to the adjacent counties. Appellant became the owner of both
franchises. The Antioch bridge was opened in January, 1926, and the
Carquinez in May, 1927.
When the Carquinez bridge opened, the board of supervisors fixed
tolls at 60 cents for automobiles and at 10 cents for each person
in a vehicle or on foot. [
Footnote
2] That scale was in operation when the commission made the
order in question which reduced these charges to 45 and 5 cents,
respectively. Jurisdiction over toll bridges having been conferred
upon it by a statute of 1937, [
Footnote 3] the commission, in August of that year on its
own motion, commenced an investigation of all toll bridges. But, in
October following, it commenced a separate proceeding solely to
investigate reasonableness of Carquinez tolls. February 8, 1938, it
announced its opinion and promulgated the order in question.
Appellant obtained judicial review; the court upheld the order.
12 Cal. 2d
184.
The statutory provisions authorizing the county board to grant
the franchises, ordinance No. 171, and the grantees' acceptance
constitute a contract between the parties.
Contra Costa County
v. American Toll Bridge Co., 10 Cal. 2d
359, 74 P.2d 749. As to that, there is no controversy. But
appellant contends that, under the franchise, it has a contract
right that the bridge tolls shall not be reduced by the public
authorities unless it shall first appear that they are yielding a
rate in excess of 15 percent upon the rate base specified by §§
2845 and 2846, Political Code.
These sections provide:
§ 2845.
"The board of supervisors granting authority to construct a
toll-bridge . . . must at the same time:"
"
* * * *
Page 307 U. S.
489
"
"2. Fix the amount of license tax to be paid by the person or
corporation for taking tolls thereon, not less than three nor over
one hundred dollars per month, payable annually;"
"3. Fix the rate of tolls which may be collected for crossing
the bridge . . . which must not raise annually an income exceeding
fifteen percent on the actual cost of the construction or erection
and maintenance of the bridge . . . for the first year, nor on the
fair cash value together with the repairs and maintenance thereof
for any succeeding year. . . . [
Footnote 4]"
§ 2846.
"The license tax and rate of toll fixed as provided in the
preceding section must not be increased or diminished during the
term of twenty years at any time, unless it is shown to the
satisfaction of the board of supervisors at the receipts from tolls
in any one year is disproportionate to the cost of construction or
erection, or the fair cash value thereof, together with the cost of
all necessary repairs and maintenance of the bridge. . . . The
license tax fixed by the board of supervisors must not exceed ten
percent of the tolls annually collected."
The state court held that § 2846 contemplates increases as well
as reductions, limited by the 15 percent maximum at any time the
disproportion is shown to exist. It construed the language of that
section to be inconsistent with the intent to contract that
appellant shall have a 15 percent return, if yielded by the tolls
specified in the franchise. The opinion explains that:
"Rather, it is to be assumed that the legislature intended not
only to afford an adequate and proportionate return to the grantee,
but
Page 307 U. S. 490
that it also intended some measure of protection to the public's
right to be charged not more than a reasonable toll for the use of
the bridge. . . . In 1872, when section 2846 was enacted by the
legislature, sufficient scope was allowed between both interests,
public and private, to permit adequate elasticity in the exercise
of the legislative ratemaking function in the light of prevailing
economic conditions. Such a statute does not savor of a contract
obligation to the grantee. Its object was to delegate to and vest
in the designated body the power to regulate tolls as circumscribed
by the stated limitation."
12 Cal. 2d 195, 83 P.2d 6.
Upon the issue whether the order is repugnant to the contract
clause, "No State shall . . . pass any . . .Law impairing the
Obligation of Contracts," this Court, while inclining to the state
court's construction, will decided for itself whether, as claimed
by appellant, the franchise by contract limits exertion of
sovereign powers to regulate tolls.
Georgia Ry. Co. v.
Decatur, 262 U. S. 432,
262 U. S. 438;
New York Rapid Transit Corp. v. New York, 303 U.
S. 573,
303 U. S. 593.
And, if it plainly appears that it does, this Court will not
hesitate so to adjudge.
Detroit United Ry. v. Michigan,
242 U. S. 238,
242 U. S.
251-253;
Cleveland v. Cleveland City Ry. Co.,
194 U. S. 517,
194 U. S. 524,
194 U. S. 536;
Detroit v. Detroit Citizens' Street Ry. Co., 184 U.
S. 368,
184 U. S. 382,
184 U. S. 389;
St. Cloud Public Service Co. v. St. Cloud, 265 U.
S. 352.
Compare Georgia v. Chattanooga,
264 U. S. 472,
264 U. S.
480.
Upon an elaborate review of the California legislation relating
to bridge tolls, appellant says that, in the first period, 1850 to
1857, bridge franchises allowed owners to take only such tolls as
the courts of sessions and, later, the county boards should fix
annually; that, in the second period, 1857 to 1864, tolls were
limited to those fixed by county boards annually, subject to change
by the legislature; that, in the third period, 1862 to 1872,
general statutes and special acts authorized such rates as the
Page 307 U. S. 491
county boards should annually prescribe, declaring, however,
that they should not be so low as to make income less than a
specified percentage of a defined base. On that foundation, it
maintains that there was an evolution of policy to grant to
builders and operators of bridges contract rights as to tolls. In
that light, it examines the language of §§ 2845 and 2846 and
concludes that the proper construction of the franchise in question
is that, unless the yield becomes in excess of 15 percent, the
license tax must not be increased and the rate of toll must not be
diminished.
We assume, without detailed examination, that the legislation so
portrayed indicates that, in the period next preceding 1872, when
the provisions of § 2846 were enacted, the State had adopted the
policy of safeguarding operators of toll bridges against rate
reduction by county boards below specified levels. But that fact
may not be employed to arrive at a construction not indicated by
the language used. So far as concerns the point under
consideration, the meaning of the statutory provision is plain.
Section 2845 requires the county board, when granting the
franchise, to fix the license tax within specified limits and a
rate of toll which must not raise annually an income exceeding 15
percent of base. Section 2846 declares that the license tax and the
rate of toll so fixed must not be diminished unless receipts are
disproportionate to base. Thus, plainly the commands are that at
first the tolls must be fixed, but not to produce income above the
15 percent specified, and that the tolls so fixed shall not be
diminished unless yield is disproportionate to the defined base.
Neither in text nor in reason is the "fifteen percent" prescribed
as maximum yield tied to or made the test by which to ascertain
whether receipts from tolls are "disproportionate." We construe
these statutory provisions to negative appellant's claim that, by
the franchise in question, the State bargained away power to reduce
tolls for use of the Carquinez bridge unless
Page 307 U. S. 492
annual return becomes more than 15 percent.
See e.g.,
Paducah v. Paducah Ry. Co., 261 U. S. 267,
261 U. S. 275;
Banton v. Belt Line Ry. Corp., 268 U.
S. 413,
268 U. S.
417-419;
Railroad Commission v. Los Angeles Ry.
Corp., 280 U. S. 145,
280 U. S. 152,
280 U. S. 155.
The order is not repugnant to the contract clause.
Appellant claims that, in violation of the due process clause of
the Fourteenth Amendment, the commission denied it a full and fair
hearing and failed adequately to find the facts. The commission
initiated the proceeding, entitled
"In the matter of the investigation, upon the commission's own
motion, into the rates, charges, contracts, classifications, rules
and regulations of American Toll Bridge Company covering its
operation of the toll bridge over the Carquinez Straits between the
counties of Contra Costa and Solano;"
gave appellant notice that the investigation would extend to
tolls for use of that bridge; accorded it opportunity to introduce
evidence and present is contentions, and received the evidence
offered by it, 233 pages of the printed record and numerous
exhibits. Appellant submitted the case for decision without making
any request for findings and without argument, oral or written. The
commission, without formal findings, filed its decision which,
sufficiently to meet requirements of due process, indicates the
facts on which it made the order.
Then appellant filed petition for rehearing. That document,
including eight captions and 12 sub-captions and an exhibit,
occupies 39 printed pages of the record. [
Footnote 5] It
Page 307 U. S. 493
specifically sets forth the grounds on which appellant claimed
the decision to be unlawful. These include the commission's
determination of the various classes of facts usually considered in
cases in which prescribed rates are challenged as confiscatory. The
petition contains no hint of claim that the commission denied
appellant procedural due process. Nor was that specified in the
petition for judicial review.
Morgan v. United States,
304 U. S. 1, on
which appellant relies, was decided after filing of that petition
and before argument in the California court. That court rightly
held it not in point.
Page 307 U. S. 494
Appellant also claims that the commission denied it procedural
due process by excluding the Antioch bridge rates from the
proceeding. It moved to include with this proceeding an
investigation of the Antioch bridge tolls. In support of the
motion, it suggested that the bridges are part of a single system,
but compete with each other; that operations of the Antioch are
less satisfactory financially than those of the Carquinez, and that
reduction of Carquinez tolls would force reduction of Antioch
tolls.
In the first instance, at least, determination of the proper
unit for ratemaking was for the commission. The Antioch bridge is
not used or useful to render any service covered by the Carquinez
tolls; appellant's duty to operate either bridge is independent of
its obligation to operate the other. The record discloses no basis
on which it reasonably may be held that, by limiting the
investigation to the Carquinez tolls, the commission abused its
discretion, and clearly there is no foundation for the claim that,
in excluding the Antioch, the commission denied appellant
procedural due process.
See Gilchrist v. Interborough Co.,
279 U. S. 159,
279 U. S. 206,
279 U. S. 209;
Wabash Valley Elec. Co. v. Young, 287 U.
S. 488,
287 U. S.
495-498;
Florida Power & Light Co. v.
Miami, 98 F.2d 180;
International Ry. Co. v.
Prendergast, 1 F. Supp.
623.
Cf. Coney v. Broad River Power Co., 171 S.C. 377,
172 S.E. 437.
There is no foundation for the claim that the commission's
procedure violated the due process clause of the Fourteenth
Amendment.
There remains for consideration the contention that the
prescribed rates are confiscatory. The burden is on appellant to
show that enforcement of the order will compel it to furnish the
service covered by the reduced rates for less than a reasonable
rate of return on the value of the property used at the time it is
being used, for that service . And, in the absence of clear and
convincing proof that the reduced tolls are too low to yield that
return, it
Page 307 U. S. 495
may not be adjudged that the State by enforcement of the measure
complained of will deprive appellant of its property without due
process of law.
Chicago & G.T. Ry. Co. v. Wellman,
143 U. S. 339,
143 U. S.
344-345;
San Diego Land & Town Co. v.
Jasper, 189 U. S. 439,
189 U. S. 441,
189 U. S. 446;
Knoxville v. Water Co., 212 U. S. 1,
212 U. S. 8,
212 U. S. 16;
The Minnesota Rate Cases, 230 U.
S. 352,
230 U. S. 433,
230 U. S. 452;
Brush Elec. Co. v. Galveston, 262 U.
S. 443,
262 U. S. 446;
Aetna Insurance Co. v. Hyde, 275 U.
S. 440,
275 U. S.
448.
The terms of the order must first be given attention. It directs
appellant to change the items of its schedule of charges, reading
as follows: "Passengers (7 years of age and older) on foot or in
vehicles. . . .10. Auto only. . . .60" so as to read: "Passengers
(7 years of age and older) on foot or in vehicles. . . .05. Auto
only. . . .45." Thus, the order extends only to automobiles and
passengers. The Carquinez franchise specifies, until otherwise
ordered by the commission, tolls applicable to other classes of
traffic crossing the bridge, namely, bicycles, carts and wagons,
commercial or delivery automobiles and motor trucks, ditchers,
harvesters, etc., cattle and stock, motor stages to which
commutation rates are applied when operated as specified, freight,
hearses, horses, motorcycles, and trailers.
Appellant fails to establish, by allocation or apportionment to
the traffic covered by the tolls so reduced, the operating
expenses, cost of depreciation, taxes, and contributions to the
sinking fund for amortization of investment that are fairly
attributable to the service covered by the order; it also fails to
establish the amount of property value that is justly assignable to
that traffic. Obviously, the return to be yielded by the reduced
tolls cannot be found without comparison of the revenues to be
derived from the service with the amounts of operating expenses and
other charges rightly to be made against them. Inadequacy of
revenues from all traffic
Page 307 U. S. 496
does not tend to show that the rates on automobiles and persons
prescribed by the commission's order are too low.
Minnesota
Rate Cases, supra, pp.
230 U. S.
452-453;
Baltimore & Ohio R. Co. v. United
States, 298 U. S. 349,
298 U. S. 372,
298 U. S. 378,
298 U. S. 381.
It follows that appellant is not titled to a decree that the order
is confiscatory.
More need not be written to dispose of the issues presented in
this case. But, in view of appellant's earnest contentions, it is
not inappropriate to say that the record, considered in the light
of its argument, fails to show that the rate reduction will so
lessen revenues from the Carquinez bridge that there will remain
less than sufficient under the due process clause to constitute
just compensation for its use a reasonable rate of return on the
value of the bridge property.
Judgment affirmed.
MR. JUSTICE BLACK, MR. JUSTICE FRANKFURTER and MR. JUSTICE
DOUGLAS concur in the result.
[
Footnote 1]
Political Code, §§ 2843, 2845, 2846, and 2872 (as amended May 8,
1923, Cal.Stats.1923, p. 272).
[
Footnote 2]
The franchise ordinance fixed these tolls at 75 cents and 15
cents.
[
Footnote 3]
Act of August 27, 1937, Cal.Stats.1937, p. 2473.
[
Footnote 4]
By Act of May 9, 1923, par. 3 was amended to read as
follows:
"Fix the rate of tolls which may be collected for crossing the
bridge . . . which may raise annually an income not exceeding
fifteen percent on the actual cost of the construction or erection
of the bridge . . . and such additional income as will provide for
the annual cost of operation, maintenance, amortization and taxes
of the bridge. . . ."
Cal.Stats.1923, p. 288.
[
Footnote 5]
"I. Introduction."
"II. Exclusion of Antioch Bridge."
"1. The Facts."
"2. Inevitable Effect of Decision on Tolls of Carquinez Bridge,
Antioch Bridge and Martinez-Benicio Ferry."
"3. The Decision is Contrary to the Commission's Own Traditions
and Policy."
"4. The Commission's Action Deprives American Toll Bridge
Company of Its Property Without Due Process of Law in Violation of
Guarantees of the Federal and the State Constitutions."
"III. Failure to Give Fair Return on Fair Value of Carquinez
Bridge."
"1. Calculations of Commission in Computing Its Rate."
"2. Errors in Commission's Computations."
" (1) Rate Base."
" (2) Money Available for Return on Rate Base (under 50
toll)."
"3. Return Under Rate Fixed by Commission."
"4. In View of the Cost of Money to American Toll Bridge
Company, a Return of Only 6.6% Or 6.9% On the Fair Value of the
Carquinez Bridge Would be Confiscatory."
"5. Summary as to Fair Return, Carquinez Bridge."
"IV. Failure to Give Fair Return on Fair Value of Carquinez and
Antioch Bridges."
"1. Rate Base."
"2. Return Under Rate Fixed by Commission."
"3. Effect of Commission's Decision Would be to Confiscate
Property of American Toll Bridge Company in Both Carquinez and
Antioch Bridges."
"V. Under Commission's Tolls American Toll Bridge Company Would
be Unable to Meet Its Requirements to Its Bondholders and
Stockholders."
"VI. Impairment of Contract Obligations."
"VII. False Analogy With Publicly Owned and Operated San
Francisco Bay Bridges."
"VIII. Violation of Constitutional and Statutory Rights."