Railway Co. v. Philadelphia

delivered the opinion of the court.

Stipulations, in a statute of a State, exempting certain property, rights, or franchises from taxation, or engaging that the same shall be taxed only at a certain rate, if made for a valuable consideration received by the State whose legislature enacted the stipulation, is a contract, and as such comes within the rules of decision specifying the description of contracts entitled to protection from modification or repeal under the guaranty of the tenth section of the first article of the Constitution. -

Exemptions of the kind, however, are to be strictly construed, the rule being that the right of taxation exists unless the exemption is expressed in clear and unambiguous terms, and that in order that it may be effectual it must appear that the contract was made in consequence of some beneficial equivalent received by the State, it being conceded that if the exemption was granted only as a privilege it may be recalled at the pleasure of the legislature. Cooley, Const. Lim. (4th ed.) 342; Cooley,-Taxation, 146.

Companies were created by the legislature of the State, more than thirty years ago, for running street cars in the streets of. the plaintiff city, whose charters made it necessary that the managers should obtain the consent of the city councils before they commenced to use and occupy the streets for that purpose. Ordinances were accordingly passed by the city authorities which required companies organized under such statutes to pay for the use of the city a license fee of thirty dollars for each car intended to be run. Subsequent charters of the kind were granted by the legislature which did not contain any provision requiring the companies or their agents to procure the consent of the authorities of the city before they could use the public streets for the running of their passenger cars. These companies denied, the validity of the license charge, which gave rise to litigation and to new legislation, by which authority was given to the city councils to provide by ordinance for the pro

Authority was by that act expressly vested in the city authorities to pass ordinances upon the subject therein described, and to charge a reasonable annual license fee for the license or other sum for the same. Pending the period during which that enactment continued to be in operation the legislature of the State passed the act incorporating the defendant company, with the powers, privileges, duties, and obligations expressed in the act of incorporation. Id. (1864) 300.

Corporate privileges of the usual character are by the charter-granted to the company, and the tenth section provides that whenever their dividends shall exceed six per cent per annuirron the par value of the capital stock, the company shall pay for the use of the city a tax of six per cent on such excess over six per cent on the par value, and that they shall also pay “ such license fee for each car run by the company -as is now paid by other passenger railway companies.”

Railway companies running cars on the streets of the city were required to pay at the timé the defendant company was incorporated, for each and every car intended to be run, the annual license fee of thirty dollars, as appears by the ordinance then in force and fully set forth in the agreed statement of facts. Annual payments to that amount, it seems, were made by the defendant company, which may be inferred from the fact that the plaintiff city makes no claim for any deficit during that period.

Coming to the matter in controversy, it appears that the legislature, on the 11th of April, 1868, passed the act which is the principal subject of controversy. Sect. 1 provides that the passenger railway corporations of the city shall pay annually to the city in the month of January, the sum of fifty dollars, as

Regular payments, as required, were made by the defendant company until the year 1875, when they refused to pay any greater sum than thirty dollars per year for each car .run. ■Payment of the excess beyond thirty dollars being refused, the authorities of the city instituted the present suit in the common pleas to recover the balance as claimed. Service was made, and the parties having appeared, filed the agreed statement of facts exhibited in the transcript. Hearing was had, and the court of original jurisdiction rendered judgment in favor of the plaintiff city for the sum of $4,218.60. Dissatisfied with the judgment, the defendant company removed the cause into the Supreme Court' of the State, where the judgment was affirmed. Still not satisfied, the -defendant • company removed ■ the cause into this court, and assigns for error the following causes: 1, That the act of the legislature defining the duties and liabilities of railway companies is in conflict with that provision of the Constitution which prohibits a State from passing any law impairing the obligation of contracts. 2. That the judgment of the court below is in conflict with that provision of the Constitution.

Attempt was made about the time the defendant company was incorporated to support the theory that a street passenger car was not a vehicle in the natui'e of an omnibus, and that the street passenger cars were not taxable in any form under the legislative act which authorized the city authorities to issue licenses to persons to keep and use omnibuses or vehicles in the nature thereof, upon the ground that the street passenger car was not á vehicle in the nature of an omnibus. Controversy arose, and the Supreme Court of the State effectually disposed of the question in favor 6f the city.

Question's of importance iyére' decided by the court in that case, most or all of which are more or less applicable to the case before the court. They are as follows : 1. That a grant to a corporation to carry passengers in ears over the streets of

Since that decision it is not doubted that the subject of imposing license fees, in cases like the present, is within the jurisdiction of the city authorities, if the statute under which they have exercised such jurisdiction is a valid act passed in pursuance of the Constitution.

When the company was incorporated the charter, as before remarked, contained the provision providing for the payment of a six per cent tax on the excess of dividends over six per cent on the par value of the stock, and the further provision that the company shall also pay such license for each car run as is now paid by other passenger railway companies in the city. What the defendants contend is that the closing enactment of the section amounts to a contract that the railway company shall never be required to pay any greater license-fee than was then required of such companies running passenger cars on the streets of the city. Other railway companies at that time paid an annual license of thirty dollars, and the defendants insist that the act of the legislature increasing the license to fifty dollars per annum is unconstitutional and void.

Two answers are made to that proposition by the plaintiff city, either of which is sufficient to show that the judgment must be affirmed: 1. That the language of the act of incorpo

Exemptions of the kind set up are to be strictly construed, but it is unnecessary to invoke that canon of construction to any considerable extent, as the language employed is not sufficient to take the case-out of the rule that the alleged exemption will not be sustained unless it be expressed in clear and unambiguous terms. Taken in their widest sense, the words employed are no more .than sufficient to warrant the construction that the legislature intended that the corporation should not then be required to pay any greater charge as license than other companies were required to pay for the same privilege, and it may perhaps be regarded as a guaranty against invidious exemptions adverse to the corporators in future legislation upon the subject, but it is plain that there is nothing in the language of the section to warrant the court in holding that the legislature .intended to contract that the license charged for such passenger-cars should never exceed the annual sum of thirty dollars.

Railway companies of the kind, it appears, were first required to pay an annual sum of fifty dollars for each' car run the year .previous to the passage of the act which is the subject of controversy in the present litigation.' Neither party refers to that act as of any importance in this case, except as a part of the State legislation upon the subject. Then comes the act in 'controversy, to which reference has. already been made. 9 Sess. Laws Penn. (1868) 848.

Beyond doubt they were required to pay the same amount as was paid by the other companies, and it is perhaps a reasonable construction that without further legislation they could not be required to pay any greater sum, but the language of the section does not in terms contain any such prohibition. None of the other companies have any such immunity from increased taxation, and if construed to have that effect in favor of the defendant company it would have an extremely invidious operation at the expense of all other similar companies. Invidious exemptions are not favored, nor ought they to be, as they are in principle utterly opposed to the rule of equality, which ought always to prevail in imposing public burdens.

Taxation is an act of sovereignty to be performed, so far as it conveniently can be, with justice and equality to all. Crawford v. Burrell Township, 53 Pa. St. 219 ; Cooley, Taxation, 152. Common burdens should be sustained by common contributions, regulated by fixedrules, and be apportioned, as far as possible, in the ratio of-justice and equity. Sutton v. Louisville, 5 Dana (Ky.), 28, 31.

Viewed in the light of these suggestions it is clear that the State never made such a contract with the defendant company as that supposed in the assignment of errors.

It seems that the Supreme Court of the State, when it became their duty at an earlier period to examine the question, came to the conclusion that the power to impose the license or tax might be supported as a police power derived under the act passed for the regulation of omnibuses or vehicles in the nature

Since that the act in question in this case has been enacted, which itself requires all such companies without discrimination to pay the annual license or tax of fifty dollars for each car intended to be run' over the city roads during the year.

Stress it appears was laid in the court below upon the words of the act, “ as required by their charters,” as if the obligation did not arise unless it rvas created by the terms of the charter, but the Supreme Court showed conclusively that the act of the legislature, when -properly construed, did not sustain the proposition,’and it appears to have been abandoned. Charters of the kind, as the Supreme Court showed in the opinion given in this case, required obedience to the lawful ordinances of the city und.er the exercise of its municipal powers, which, as the Supreme Court there say, is plainly evidenced by the remainder of the section imposing the tax of fifty dollars, by which the legislature took away from the city all power by ordinance or otherwise to regulate passenger railways, ‘-‘unless authorized by the express terms of a law referring directly to such corporations.”

Voluntary payments of the amount imposed by the new act were made by the company for sixty or seventy cars, from which the Supreme Court of the State held that it followed as a legal conclusion that the company had accepted the act.

All power to regulate such companies by ordinance or otherwise was taken away from the city during that period, and the Court held that inasmuch as the company had enjoyed the benefit of that prohibition ever since it was. enacted, it must be understood that they have accepted the act. Some weight is doubtless to be given to that argument, but it is clear that the right of the State to impose such a tax, rate, or imposition in the future cannot be taken away by mere implication arising from a direction to pay a certain sum, the universal rule being that it requires some plainer negative of the power of the State to levy moneys for public purposes than is found in such a di

Much discussion of the second proposition, in view of the conclusive support given to the first, is quite unnecessary. Power to alter, revoke, or annul any charter of incorporation was vested in the legislature by the Constitution more than a quarter of a century before the defendant company was incorporated.

Even when the language of the charter is sufficient to amount to a contract, it was twice admitted by Mr. Justice Story, in Trustees of Dartmouth College v. Woodward, that alterations and amendments may be made in' the charter, where the power for that purpose is reserved to the legislature in the act of incorporation. 4 Wheat. 518 , 708, 712.

Acts of incorporation granted subsequently to the adoption of the Constitution must be construed as if the provision of the instrument in question was embodied in the charter. Private charters of the kind importing such an exemption are held to be contracts, because they are based for their consideration on the liabilities and duties which the corporators assume by accepting the terms therein specified; and the general rule is that the grant of the franchise on that account can no more be resumed by the legislature, or its benefits be diminished or impaired without the assent of the corporators, than any other grant of property or legal estate, unless the right to do so is reserved in the act of incorporation, or by some immemorial usage or general law of the State in operation at the time the charter was granted. Holyoke Company v. Lyman, 15 Wall. 500 , 511.

Charters of private corporations duly accepted, it must be admitted, are in general executed contracts, but the different provisions, unless they are clear, unambiguous, and free of

Whatever is not unequivocally granted in such charters is taken to have been withheld, as all such charters and acts extending the privileges of . corporate bodies are to be taken most strongly against the corporators. Sedgwick, Stats. (2d ed.) 292; Lees v. The Manchester & Ashton Canal Co., 11 East, 644,

Vested rights, it is conceded, cannot be impaired under such a reserved power, but it is clear that the power may be exercised and to almost any extent, to carry into effect the original purposes of the grant and to protect the rights of the public and of the corporators, or to promote the due administration of the affairs of the corporation. Pennsylvania College Cases, 13 Wall. 190 , 218.

Tested by these considerations, it is clear, even if it be admitted that the language of the charter is sufficient to import a contract, that the power of the legislature under the Constitution is amply sufficient to justify that department of the State to pass the act raising the license for each car from thirty to fifty dollars.

Judgment affirmed.