1. A construction by a state supreme court of a contract between
the state and an individual is not binding on this Court when
assailed under the Contract Clause of the federal Constitution. P.
278 U. S.
433.
2. A statute of South Dakota empowers municipal authorities to
grant leases to operate ferries upon waters within the state to
persons who shall bid and secure the highest rent for the same;
declares it unlawful to operate a ferry without a license, and
provides that, when a lease has been granted, another shall not be
granted across the same stream within two miles of the ferry
landing of the first. After the plaintiff, by complying with the
statute,
Page 278 U. S. 430
had acquired leases and at large expense established a
profitable ferry under them, the state, pursuant to later Acts of
the legislature, constructed a free bridge within the granted
limits, the effect of which was to destroy the value of his leases
and business and render his investment worthless.
Held:
(1) The exclusive ferry leases were contracts between the state
and the lessee. P.
278 U. S.
432.
(2) A public grant is to be strictly construed, and nothing
passes to the grantee by implication. P.
278 U. S.
435.
(3) So construed, the ferry leases were not infringed by the
building of the bridge. P.
278 U. S. 437.
51 S.D. 561 affirmed.
The appellant, hereafter to be called the petitioner, sued the
State of South Dakota, in its Supreme Court, for damages for the
destruction of his ferry franchises on the Missouri River, under
the authority of § 2109, South Dakota Revised Code of 1919.
Petitioner alleged in his complaint that he was granted ferry
franchises under §§ 8696 to 8704 of the same Code. Section 8696
provided:
"It shall be unlawful for any person to establish, maintain, or
operate upon any waters within this state any ferry, upon which to
convey, carry or transport any person or property for hire or
reward, without first having procured a ferry lease, as provided in
this article, and where but one bank or shore is in this state, the
board of county commissioners of the proper county, or the
governing body of the proper city or incorporated town, shall have
the same authority as if the entire stream were within this state
so far as the banks and waters actually within it are concerned,
and when any ferry lease has been granted, no other lease shall be
granted within a distance of two miles from the place described, in
the application for a ferry lease, as the ferry landing across the
same stream. . . ."
Section 8697 provided:
"The board of county commissioners of the proper county or the
governing body of the proper city or incorporated town to whom
application shall be made for a ferry
Page 278 U. S. 431
lease, in the manner hereinafter provided, shall have authority
and it shall be its duty to grant a ferry lease, for the term of
not exceeding fifteen years to the person who shall bid and secure
the highest amount of rent for the same. . . ."
The complaint further alleged that the state, by appropriate
action of the County Commissioners of Walworth County in 1916, and
of those of Corson County in 1921, for a valuable consideration,
granted to the petitioner exclusive leases or ferry franchises of
15 and 5 years' duration, respectively, and authorized him to
operate a ferry upon and across the Missouri River for such toll
charges as were provided by law, in an area extending two miles in
either direction from the landing point; that the petitioner
accepted the ferry franchises and invested money in the purchase of
ferryboats, motorboats, landings, and buildings to equip the ferry,
to the amount of $14,000. He further alleged that the state,
pursuant to acts of its legislature, during the years 1923 and
1924, constructed a steel and concrete bridge across the Missouri
river at a site designated by law, upon and within the confines of
plaintiff's exclusive ferry franchises and within two miles west of
the point of the ferry landing; that the bridge is a free bridge,
and became usable about November 10, 1924; that the ferry had first
been run at a loss, as expected, but that recently it had yielded
over $5,000 a year profit; that, by the construction of the bridge,
petitioner's business as a ferryman and his property right in his
franchises were totally destroyed, and the investments made by him
were rendered worthless, and resulted in a damage to him of
$44,000, no part of which has been paid. He therefore asked
judgment in that amount.
The defendant, the state, demurred to the complaint of the
petitioner, on the ground, among others, that the complaint did not
state facts sufficient to constitute a cause of action. The supreme
court sustained the demurrer. The petitioner having failed to file
an amended complaint, the original complaint was dismissed. 51 S.D.
561, 215 N.W. 880.
An appeal to this Court was allowed under § 237(a) of the
Judicial Code.
The petitioner contended in the state court, and contends here,
that the acts of the state legislature under which the bridge was
constructed impaired the obligation of the contract embodied in his
ferry leases or franchises, and therefore were void as being in
conflict with the contract clause of the Constitution of the United
States.
Page 278 U. S. 432
MR. CHIEF JUSTICE TAFT, after stating the case, delivered the
opinion of the Court.
The exclusive ferry leases were contracts between the state and
the petitioner.
The Binghamton
Bridge, 3 Wall. 51. Was the building of the bridge
a breach of them?
The supreme court of the state has had the meaning of "exclusive
ferry franchise" before it twice before this case, in
Nixon v.
Reid, 8 S.D. 507, and in
Chamberlain Ferry & Cable
Bridge v. King, 41 S.D. 246, but these cases did not require
consideration of the effect of the term as applied to anything but
ferries. The court said on that subject in the present case:
"All that is contemplated by the statute and all that was
granted by the plaintiff's leases was the right to operate a ferry
together with a prohibition upon the granting boards from granting
other ferry leases within the granted area during the period. . . .
Nowhere in
Page 278 U. S. 433
the statute can be found or implied a provision that the state
was binding itself not to construct, nor authorize the construction
of, a bridge across the river within the four-mile area, or not to
permit carriage by aviation across it. The fair and reasonable
construction of the statute is that it refers solely to
transportation by ferry."
Coming from the state supreme court, this language is very
persuasive of the meaning of the statute, and would indicate that
in its view the building of a bridge was not a breach of the ferry
contracts.
The petitioner relies on the contract clause of the federal
Constitution, and is not prevented from invoking from this Court an
independent consideration of what the contract means, and whether
by a proper construction, the building of a bridge impairs its
obligation.
Appleby v. City of New York, 271 U.
S. 364,
271 U. S. 380;
Columbia Ry. Co. v. South Carolina, 261 U.
S. 236,
261 U. S. 245;
Long Sault Development Co. v. Call, 242 U.
S. 272,
242 U. S. 277;
Louisiana Ry. & Navigation Co. v. Behrman,
235 U. S. 164,
235 U. S. 170;
Mobile & Ohio R. Co. v. Tennessee, 153 U.
S. 486,
153 U. S. 492;
Huntington v. Attrill, 146 U. S. 657,
146 U. S. 684;
New Orleans Waterworks Co. v. Louisiana Sugar Co.,
125 U. S. 18,
125 U. S. 38;
Wright v. Nagle, 101 U. S. 791,
101 U. S. 794;
Northwestern University v. Illinois ex rel. Miller,
99 U. S. 309,
99 U. S. 321;
Bridge Proprietors v. Hoboken
Co., 1 Wall. 116, 145;
The
Binghamton Bridge, 3 Wall. 51,
70 U. S. 81;
Jefferson Branch Bank v.
Skelly, 1 Black 436,
66 U. S.
443.
We must therefore treat the question as an open one, and
determine as an independent matter what the parties must be held to
have had in mind in the use of the term "exclusive lease."
The chapter of the Revised Code of the state immediately
preceding that which directs the letting and granting of exclusive
ferry leases provides for the building of bridges over the rivers
of South Dakota. This close relation of the chapters suggests that,
if bridges were intended to be forbidden by the contract, the
parties would have
Page 278 U. S. 434
been likely to mention a bridge as a breach. But there is no
mention of a bridge in the statute or contract dealing with
ferries.
On the other hand, it is argued that it was so well understood
by everyone, including the parties, that the erection of a bridge
in the forbidden area would destroy the value of the ferry leases,
and so defeat the real object of the leases, that an implication
necessarily arises that a bridge would be a breach of the
leases.
Reference is made to
Newburgh & C. Turnpike Co. v.
Miller, 5 Johns.Ch. (N.Y.) 101, 111, a decision by Chancellor
Kent. That was a suit to enjoin as a nuisance the construction and
use of a bridge over the Wallkill River, upon which the plaintiff
had a toll bridge of more than 10 years' standing, and the
injunction was granted. The Chancellor said:
"It was observed in the case of
Ogden v. Gibbons (4
Johns.Ch.Rep. 150, 160), and shown to be a principle of the common
law, that, if one had a ferry by prescription, and another erected
a ferry so near it as to draw away its custom, it was a nuisance
for which the injured party had his remedy by action. The same law
and remedy were applied to the case of a fair or market, in which
an individual had a freehold interest, if another fair or market
was erected or used within its vicinity. The same doctrine applies
to any exclusive privilege created by statute; all such privileges
come within the equity and reason of the principle; no rival road,
bridge, ferry, or other establishment of a similar kind, and for
like purposes, can be tolerated so near to the other as materially
to affect or take away its custom. It operates as a fraud upon the
grant, and goes to defeat it. The consideration by which
individuals are invited to expend money upon great, and expensive,
and hazardous public works, as roads and bridges, and to become
bound to keep them in constant and good repair, is the grant of a
right to an exclusive toll.
Page 278 U. S. 435
This right, thus purchased for a valuable consideration, cannot
be taken away by direct or indirect means devised for the purpose,
both of which are equally unlawful."
It will be observed that the facts there related to two bridges,
and the case is not necessarily an express authority holding that
an exclusive franchise for a ferry excludes a bridge. Yet it may be
strongly argued from the language used that that is what the
Chancellor had in mind.
We think, however, a broader question arises in the proper
construction of a public grant like this. The leading case on the
subject in federal jurisprudence is that of
Charles
River Bridge v. Warren Bridge, 11 Pet. 420,
36 U. S. 54. In
that case, the Legislature of Massachusetts incorporated a company
to build a bridge over the Charles river where a ferry stood,
granting it tolls. Years after, the legislature incorporated
another company for the erection of another bridge within 800 feet
of the original one. The new bridge was to become free after a few
years, and, at the time of the litigation, it had become actually
free. The Charles River Bridge was deprived of the tolls, and its
value was destroyed. Its proprietors filed a bill against the
proprietors of the Warren Bridge for an injunction against the use
of the bridge as an act impairing the obligations of a contract and
repugnant to the Constitution of the United States. The Supreme
Court of Massachusetts (7 Pick. 344) dismissed the bill, and the
case case was brought by error to this Court, which affirmed the
judgment of the Massachusetts court. The principle of the case is
that public grants are to be strictly construed, that nothing
passes to the grantee by implication. The court cited
United States v. De la Maza
Arredondo, 6 Pet. 691;
Jackson ex
dem. Hart v. Lamphire, 3 Pet. 280,
28 U. S. 289;
Beaty v. Lessee of
Knowler, 4 Pet. 152,
29 U. S. 165;
Providence Bank v. Billings
and Pittman, 4 Pet. 514,
29 U. S. 561.
In the last case, Chief Justice Marshall said, of an asserted
limitation on the taxing power:
". . . as the whole community is interested in retaining it
undiminished, that community has a right to
Page 278 U. S. 436
insist that its abandonment ought not to be presumed in a case
in which the deliberate purpose of the state to abandon it does not
appear."
The case then before the court was held to be subject to the
same rule, although one of a corporate grant. The act of
incorporation was silent in respect to the contested power. The
argument made in favor of the proprietors of the Charles River
Bridge was the same as that of the Providence Bank -- namely, that
the power claimed by the state, if it existed, must be so used as
not to destroy the value of the franchise granted to the
corporation. The argument was rejected.
Chief Justice Taney, delivering the opinion in the
Charles
River Bridge case, said:
"But the object and end of all government is to promote the
happiness and prosperity of the community by which it is
established, and it can never be assumed that the government
intended to diminish its power of accomplishing the end for which
it was created. And, in a country like ours, free, active, and
enterprising, continually advancing in numbers and wealth, new
channels of communication are daily found necessary, both for
travel and trade, and are essential to the comfort, convenience,
and prosperity of the people. A state ought never to be presumed to
surrender this power, because, like the taxing power, the whole
community have an interest in preserving it undiminished. And when
a corporation alleges that a state has surrendered for 70 years its
power of improvement and public accommodation in a great and
important line of travel along which a vast number of its citizens
must daily pass, the community have a right to insist, in the
language of this Court above quoted, 'that its abandonment ought
not to be presumed in a case in which the deliberate purpose of the
state to abandon it does not appear.' "
Page 278 U. S. 437
The same principle is declared in
Fanning v.
Gregoire, 16 How. 524,
57 U. S. 534,
Wright v. Nagle, 101 U. S. 791,
101 U. S. 796,
Wheeling & Belmont Bridge Co. v. Wheeling Bridge Co.,
138 U. S. 287,
138 U. S. 293, and
Williams v. Wingo, 177 U. S. 601,
177 U. S. 603.
Speaking for the court in the last case. Mr. Justice Brewer
said:
"A contract binding the state is only created by clear language,
and is not to be extended by implication beyond the terms of the
statute.
Fanning v. Gregoire, 16 How.
524, is in point and decisive."
The cases above cited are not exactly on all fours with the
specific issue presented here, but they serve to show with great
emphasis the necessity for one who relies upon a public grant as a
basis for a private right, to bring it expressly within the grant
or statute.
It is clear from them that, in determining the effect of a
public grant to an individual, the principle "
ut res magis
valeat quam pereat" is not to be applied in his favor or an
implication to be made enlarging his grant, as seems to have been
the view of Chancellor Kent in
Newburgh & C. Turnpike Co.
v. Miller, supra.
The contention that an exclusive ferry franchise should be
construed to cover all methods of travel and transportation across
the water is rejected in
Dyer v. Tuskaloosa Bridge Co., 2
Porter 296 (Ala. 1835);
Piatt v. Covington & Cincinnati
Bridge Co., 8 Bush 31 (Ky. 1871);
Snidow v. Board of
Supervisors of Giles County, 123 Va. 578 (1918);
Dibden v.
Skirrow, (1908) 1 Ch. 41. There are many strong dicta to this
same effect.
Morey v. Orford Bridge, Smith 91, 95 (N.H.
1804);
Piscataqua Bridge v. New Hampshire Bridge, 7 N.H.
35, 59 (1834);
Bush v. Peru Bridge Co., 3 Ind. 21, 24
(1851);
Parrot v.Lawrence, Fed.Cas. No. 10772 (C.C. Kan.
1872);
State ex rel. McPherson Bros. v. Superior Court,
142 Wash. 284, 291 (1927).
Page 278 U. S. 438
The great weight of authority holds that a contractual term
forbidding a ferry or a toll bridge does not exclude a railroad
bridge.
Mohawk Bridge Co. v. Utica & Schenectady R.
Co., 6 Paige 554, 564 (N.Y. 1837);
McLeod v. Savannah,
Albany & Gulf R. Co., 25 Ga. 445 (1858);
Bridge
Proprietors v. Hoboken Co., 1 Wall. 116,
68 U. S. 149
(1863);
Hopkins v. Great Northern Ry., 2 Q.B.D. 224
(1877),
overruling Regina v. Cambrian Ry., L.R. 6 Q.B. 422
(1871).
Contra: Enfield Toll Bridge Co. v. Hartford & New
Haven R. Co., 17 Conn. 40 (1845).
There is some conflicting authority on the main question.
Gates v. McDaniel, 2 Stew. 211 (Ala. 1829);
Norris v.
Farmers' & Teamsters' Co., 6 Cal. 590 (1856);
Menzel
Estate Co. v. City of Redding, 178 Cal. 475 (1918);
Blanchard v. Abraham, 115 La. 989 (1906). But all of these
cases are distinguishable in that the infringing bridge or ferry
was established without legal authority, and there were other
reasons, such as obstruction to navigation, special statutes, or
injury to tangible property which affected the decisions.
The strongest case for the appellant is
Mason v. Harper's
Ferry Bridge Co., 17 W.Va. 396 (1880), where a statute
forbidding other ferries was held to give an exclusive right to
transportation over the river, and hence to prohibit rival bridges
as well, but the court said that the legislature could take away at
any time all the exclusive privileges of the proprietors
theretofore existing.
In
Hopkins v. Great Northern Railway, 2 Q.B.D. 224, 230
(1877), a railway company built a railway bridge and a footbridge
across a river one-half mile above an ancient ferry, which then
went out of business. It was held that the ferry could not obtain
compensation for either bridge, the railway being necessary for new
traffic and the footbridge being used by those going to the railway
station or by trespassers. There was a dictum by a court of
distinguished
Page 278 U. S. 439
English judges
"that the owner of a ferry has not a grant of an exclusive right
of carrying passengers and goods across the steam by any means
whatever, but only a grant of an exclusive right to carry them
across by means of a ferry."
We can hardly say, therefore, from the weight of authority, that
an exclusive grant of a ferry franchise, without more, would
prevent a legislature from granting the right to build a bridge
near the ferry. Following the cases in this Court in its limited
and careful construction of public grants, it is manifest that we
must reach in this case the same conclusion.
The judgment of the Supreme Court of South Dakota is
Affirmed.
