In re Increase of Street Car Fares of Charlotte

179 N.C. 151

• Court: Supreme Court of North Carolina
• Decided: December 27, 1919
• Status: Published

Opinion

Hoke, J.,

after stating the case: The power of the Legislature, either directly or through appropriate governmental agencies, to establish reasonable regulations for public-service corporations in matters affecting the public interests is now universally recognized, and the principle has been approved with us in well considered decisions dealing directly with the question. R. R. v. Goldsboro, 155 N. C., affirmed on writ of error to Supreme Court of United States, 232 U. S., 548-558; Corporation Commission v. R. R., 140 N. C., 239; Corporation Commission v. R. R., 137 N. C., 1. Having devoted their property to the public use, and operating under a legislative charter, usually conferring the right of eminent domain, they are in a peculiar sense subject to the police power, said by Associate Justice McKenna, in Mutual Loan Co. v. Martell, 222 U. S., 225, to be but another name for the power of government, and where this has been properly exerted in reference to these companies, the proprietary rights of individual ownership must, to that extent, be subordinated to the public welfare. In Thomas v. Sanderlin, 173 N. C., at page 331, the Court referred to this principle as follows: “It has been properly said that no satisfactory definition of police power can be given for, as our civilization becomes more advanced and complex, the extent and inclusive character of this power is being more and more illustrated, and, in the later decisions, has been held to embrace not only governmental regulations appertaining to the good order, health, and morals of the community, but also such as are considered promotive of the economic welfare and public convenience and comfort.”-

The opinion then quotes with approval from 6 Ruling Case Law, 193, as follows: “All property within the jurisdiction of a State, however unqualified may be the title of the owner, is held on the implied condition or obligation that it shall not be injurious to the equal rights of others to the use and benefit of their own property. In other words, all property is held subject to the general police power of the State so to regulate and control its use in a proper case as to secure the general safety, the public welfare, and the peace, good order, and morals of the community. Accordingly, it is a fundamental principle of the constitutional system of the United States that rights of property, like all other social and conventional rights, are subject to such reasonable restraints and regulations established by law as the Legislature, under the governing and controlling power vested in it by the Constitution, may think necessary and expedient. And to these ends the Legislature, under its police power, may pass laws regulating the acquisition, enjoyment, and disposition of property, even though in some respects these may operate as a restraint on individual freedom or the use of property. The subordination of property rights to the just exercise of the police power has been said to be as complete as is the subjection of these rights to the proper exercise of the taxing power; and it is held that this implied condition is quite irrespective of the source or character of the title. This principle is in effect an application of the maxim which underlies the police power, sic utere tuo ut alienum non laedas ” citing in support of the statement Chicago and Alton Railroad v. Tranberger, 238 U. S., 67; R. R. v. Goldsboro, 232 U. S., 548-558, and other cases.

In R. R. v. Goldsboro, supra, Associate Justice Whitney, for the Court, said: “For it is settled that neither the contract clause nor the due process has the effect of overruling the police power of the State to establish all regulations that are reasonably necessary to secure the health, safety, good order, comfort, or general welfare of the community; that this power can neither be abdicated nor bargained away, and is inalienable even by express grant, and that all contract and property rights are held subject to its fair exerpise.”

In view of this power, and for its primary exercise, our General Assembly, chiefly in Rev., ch. 20, and amendments thereto, have created a Corporation Commission, given it general supervision over the railways, street railways, and like companies of the State, and empowered it to fix such rates, charges, and tariffs as may be reasonable and just, having in view the value of the property, the cost of improvements and maintenance, the probable earning capacity under the proposed rates, the sums required to meet operating expenses and other specified matters pertinent "to such an inquiry. The statute further provides that “any party affected by the decisions and determinations of the commission may appeal”; that the rates as fixed by the commission shall stand pending an appeal, and “until they are changed, revised, or modified by the judgment of the Superior Court on such appeal, and that when approved and confirmed by the court, they shall remain the established rates until the same shall be changed, revised, or modified by a final judgment of the Supreme Court, if there shall be an appeal, and until changed by the Corporation Commission.

Both from the language of the statute and its evident meaning and purpose, this power to fix rates that are just and reasonable extends to an increase as well as a lowering of rates, and, in making decision on these questions, it is clearly contemplated and provided that the commission shall establish such rates and charges as will give to the owners a fair return for their investment and enable them to keep their property and equipment in condition to afford adequate, safe, and convenient service.

Under and by virtue of this Legislative authority and in the exercise of the power referred to, the commission in this instance, on notice given, have had an investigation, and, in their best judgment, have allowed the increase applied for by the petitioners, and, under the express provisions of the statute that are to be considered, the just and reasonable charges for the services rendered unless and until they shall be changed or modified on appeal, or the further action of the commission itself, and under the principle illustrated and approved in the cases cited, and others of like kind, we must affirm the ruling of his Honor that any contract that the city of Charlotte may have for a lower rate must yield to the public interest and requirement as expressed in this authoritative judgment of the commission.

Not only is the judgment of his Honor sustained by the principle more directly involved, but any other ruling in its practical application would likely and almost necessarily offend against the principle which forbids discrimination on the part of these companies towards patrons in like condition and circumstance. If a quasi-public company of this kind could evade or escape regulation establishing fixed rates that are found to be reasonable and just by making long-time contracts or other, this regulation might be made to operate in furtherance of the very evil it is in part designed to prevent.

Accordingly, it has been very insistently held, in case of railroads, that the" rates established by the Interstate Commerce Commission and published pursuant to their order shall always prevail as the charges for transportation notwithstanding any special contract for lower rates made by the parties. Texas Pacific v. Mugg, etc., 202 U. S., 242, and many other cases.

A principle approved, and applied by the Court in reference to intrastate transportation in Latham v. R. R., 176 U. S., 417, and Edenton Cotton Mills v. R. R., at present term, 100 S. E., 341.

And in the recent case of Union Dry Goods Co. v. Gas Public Service Corporation, 145 Ga., 658, it was held that where the State Railroad Commission, having cognizance of the matter, bad fixed upon reasonable rates to be charged by a public-service company supplying electricity to the inhabitants of a city which superseded lower rates agreed on in an existent long-time contract made previously between the company and the consumer, this was a valid exercise of the police power, not impairing the obligation of the contract or depriving the consumer of his property without due process. This case, which seems a direct authority on the question presented, was affirmed on writ of error by the Supreme Court of the United States, 248 U. S., 372. And Associate Justice Clarice, in delivering the opinion, quotes in support of the position, Manigault v. Springs, 199 U. S., 473-80: “It is the settled law of the Court that the interdiction of statutes impairing the obligation of contracts, does not prevent the State from properly exercising such powers as are vested in it for the promotion of the common weal or are necessary for the general good of the public through contracts previously entered into between individuals may be thereby affected.”

And again, from L. & N. R. R. Co. v. Motley, 219 U. S., 467-82, where the Court quotes with approval from Knox v. Lee, 12 Wallace, 450-51: “That contracts must be understood to be made in reference to the possible exercise of the rightful authorities of the Government, and no obligation of the contract can defeat the legitimate Government authority.” It may be noted that this was a decision subordinating to the police power the contract rights of an individual, and all the more will the principle operate when these rights are held by a municipality, which, in the main and on governmental matters, are but governmental agencies of the State, and,,as such, subject to almost unlimited legislative control, except when restricted by constitutional provision. Board of Trustees v. Webb, 155 N. C., 379; Jones v. Comrs., 137 N. C., 579-596; New Orleans v. New Orleans Water Works, 142 U. S., 79; Wildwood v. Public Utilities Co., 88 N. J. L., 81.

We are inclined to the opinion, as contended for by the petitioner, that the provision in the contract restricting the company to a charge of 5 cents per passenger expired at the end of the 10-year period, the courts leaning against a construction that would make a contract of this character indefinite as to duration. Solomon v. Sewerage Co., 142 N. C., 439.

Nor are we inadvertent to the position also taken by the petitioner that the contract is void as in contravention of our constitutional provisions requiring that taxation shall be uniform and ad valorem. In one aspect of the agreement, and the evidence pertinent, it may be that the case presented is at most merely one of ultra vires and that the petitioner or its predecessor in title, having received the stipulated consideration, is not in a position to question its corresponding obligation. See So. Pac. Co. v. City of Portland, 227 U. S., 559; Ry. v. McCarty, 96 U. S., 258; Chicago Ry. v. Chicago, 176 Ill., 188. Without definite ruling on either of these suggestions, however, we prefer to rest our decision on the ground taken by his Honor in the court below, that whatever may have been the rights of the city under and by virtue of the alleged contract, they were taken and held subject to the orders of the Corporation Commission, made in the reasonable exercise of the police power of thp State, conferred upon that body by act of.the General Assembly, and subject to be revised on appeal to the Superior Court, and thence to the Supreme Court, under the express provisions of the statute, Rev., 1074-1079, et seq.

The cases to which we are cited by respondent are in the main where one of the parties to the contract has of its own motion undertaken to justify a departure from its terms and are not authority on the question presented here. See Columbus Power and Light Co. v. The City of Columbus, 249 U. S., Current Reporter, 15 May, 349.

We find no error in respondent’s appeal, and the judgment is

Affirmed.

Appeal of the Southern Public Utilities Company, petitioner.

Hoke, J.

The petitioner appeals from the ruling of the court denying the motion to dismiss made on the ground that the city of Charlotte had no such interest in the controversy as to justify and maintain its appeal, but we are of opinion that on the record and facts in evidence this position cannot be sustained. Not only was the city of Charlotte made a party and recognized as such by the Corporation Commission, but the Charlotte Street Railway Company, the predecessor in title of the petitioner, and under whose charter, so far as the record discloses, this appellant is now maintaining and operating its street railway in the city, has also recognized an interest in'the city, and given it a status in the question and litigation concerning it. Holding, or making a reasonable and bona fide claim to hold, rights under this contract, it must be allowed to have them considered and determined, both before the Corporation Commission and the Superior or Supreme Court, on appeal, as the statute provides. In addition, the question being one of public interest and of concern to each and all of its inhabitants, it was both the right and duty of the city to represent its people, assuredly so since the statute conferring on town and city governments the power to grant franchises of this character, “upon reasonable terms for periods not to exceed 60 years.” Rev., 2916 (6), ch. 73.

Under this statute, at the time of these proceedings instituted and hearing had, the city government having jurisdiction over the subject-matter, it was both its right and in the line of its oficial duty to make contracts and maintain such litigation concerning it as was reasonably necessary to conserve the rights of its people and make its jurisdiction effective and the well considered decisions hold that judgment rendered in such litigations will bind the individual citizen.

This position was approved with us as to counties in Bear v. Comrs., 122 N. C., 434, and as to cities and towns in Hickory v. R. R., 141 N. C., 716, it being held in this last case that “a municipality is a proper party to institute an action to prevent a public nuisance by the proposed enlargement of a freight depot in the city.” And authoritative cases elsewhere, and text-books of approved excellence, are in support of the position. People v. Holladay, 93 Cal., 241; Trustees v. Cowen, 4 Paige, 570; Gas Co. v. City of Mincie, 160 Ind., 97; 19 R. C. L., title “Municipal Corporations,” secs. 345, 427, 433. In this citation to R. C. L., sec. 345, it is said, among other things :

“That a municipal corporation is, in the eye of the law, the legal representative of its inhabitants and taxpayers with respect to all matters properly within its jurisdiction. ... A municipal corporation is the proper representative of the equitable rights of its inhabitants to the use of a public square, and is authorized to file a bill in equity to prevent the erection of a nuisance thereon.”

A judgment against a municipal corporation in a matter of general interest to all of the citizens is binding on the latter, though not parties to the suit, “and every taxpayer is a real,' though not a nominal, party to such judgment and cannot relitigate issues which were litigated in the original action against the county or its legal representatives, and if the county board fails to avail itself of legal defenses the people are concluded by the judgment.” And in section 427: “When a municipal corporation has the power to grant or refuse, in its discretion, permission to a public-service company to occupy the streets with its structure, whether such permission be called a franchise, a license, a permit, or merely designation of the streets to be occupied, it may grant such permission subject to such terms as it sees fit to impose, provided only they are not against public policy or in derogation of any right the company may have under its franchise from the State. Both under its contract, therefore, and as the representative of its inhabitants in a matter of public concern coming under its supervision, we are of opinion that the city had a right to appear in this litigation and to prosecute the appeal in protection of its citizens, and as clearly provided by the statute. The decisions cited to the contrary are really in affirmance of the principle, for, so far as examined, they were made for the reason that the question presented was only a matter of individual interest or affected only a restricted portion of the population. This disposes of the only exception which the petitioner has seen fit to make on his appeal, but as it has been suggested that the respondent has not raised the question as to the reasonableness of the proposed increase of rates, but cbosen to rely on the effect of its contract, we deem it not amiss to say that this position in our view does not correctly interpret the record. On the contrary, it is disclosed that at the principal bearing there were no formal pleadings filed, but the respondent appeared and by cross-examination of the president of the company, the only oral testimony presented during the investigation, the city, by its counsel, endeavored to show that the proposed rates were unreasonable and unjustified by the facts and conditions presented, and no mention of contract was then made. Five days later the contract was offered by the city, and its answer formally filed, alleging in effect that the increase was unreasonable, and setting up said contract also as a further and sufficient answer. When the order was made allowing the increase, the city filed formal exceptions and assignments of error, six of which were addressed to the unreasonableness of the rates and the valuation and methods by which it was sought to uphold them, and one, No. 7, referring to the contract.

When the cause was called for bearing on appeal in the Superior Court, the case was beard on the record, and the exceptions in behalf of the respondent clearly presented its objections to the order, both on the grounds that the rates were unreasonable and that the increase was absolutely inhibited by the terms of the contract held, by the city. True, in the case on appeal it is stated that the city of Charlotte moved for judgment that the said contract be held valid and binding, and that the Southern Public Utilities Company be forbidden and enjoined from charging and collecting fares in excess of five cents, making no reference otherwise to the proposed increase of rates, but this was because the city was insisting upon the effect of its contract as a plea in bar of the reference, and it has a right to test that position on appeal. Jones v. Wooten, 137 N. C., 421. The respondent there made no further reference to the reasonableness of the rates because that question was resolved in its favor, and fully recognized by the judgment of the lower court. If there had been a difference between the ease on appeal and the facts disclosed in the record, the record would control, but, as a matter of fact, there is no inconsistency between the two, and a correct interpretation will disclose that the position of the respondent has been maintained throughout. First, that the proposed change of rates was absolutely forbidden by the contract, and if this were not true, that the increase was unreasonable and unjustified by the facts and conditions presented, and on the record we must affirm the judgment of his Honor below in its entirety, and hold that there has been no error committed to the prejudice of the petitioner’s rights.

The case of Corporation Commission v. R. R., 170 N. C., 560, cited and very much relied upon by appellant, is not an authoritative decision in support of its position. In that case the Corporation Commission, after a full and fair investigation, had fixed upon the location of a railroad station in the town of Ansonville, N. C., and from their order in the case one or more of the citizens of the town, who appeared as parties to the proceedings, excepted and appealed. The Superior Court entered judgment dismissing the appeal, and, on appeal to this Court, the judgment was affirmed, two of the Justices being of opinion that, on a purely administrative measure of that kind an individual citizen of the town had no such interest in the controversy as entitled him to an appeal, an opinion was written in expression of that view. The present writer also wrote an opinion concurring in the disposition made of the appeal, but, on the ground that as the entire facts, which were made a part of the record, showed that the question had been fully investigated and fairly determined by the commission, it would be an idle thing to entertain the appeal and then affirm the judgment on the merits. Associate Justice Allen concurred in the result without further expression of his position, and the Chief Justice dissented, being of opinion that an appeal would lie. So that, even on the facts of that record, a majority of the Court have not expressed agreement as to the interest required for the maintenance of an appeal in these cases. And I think I may safely say that none of the Court entertain the view that the right of appeal in such cases is necessarily restricted to the State, and a defendant corporation, whose interests are adversely affected, but, as held in the subsequent case of R. R. v. R. R., 173 N. C., 413, any one appearing as a party, whether as petitioner or respondent, plaintiff or defendant,^having a proper interest in the controversy, may appeal from an order which affects such interests adversely.

In the present case, as we have endeavored to show, the city of Charlotte has such an interest, and the judgment of his Honor allowing it to prosecute the appeal is