Milwaukee Electric Railway & Light Co. v. Railroad Commission

Winslow, C. J.

We are much indebted to counsel for the illuminating briefs and able oral arguments with which we have been favored by both sides in this case. It is but just to say that our labors have been much lightened thereby.

The case, however, is not in itself complicated or difficult of statement. There is in fact but a single question, and that is whether the ordinances referred to in the statement of facts, so far as they specify the rates of fare which may be charged, constitute contracts which are protected by the state and federal constitutions from impairment.

On the part of the appellant the familiar principle is relied on that where municipal authorities, acting under clear and unmistakable legislative authority so to do, have granted the use of streets to a public utility corporation for the purpose of serving the people, and the grant has been accepted by the utility and performance entered upon, a contract has been created between the public and the corporation, which cannot be impaired, by subsequent legislation. Walla Walla v. Walla Walla W. Co. 172 U. S. 1, 19 Sup. Ct. 77; Wright v. Milwaukee E. R. & L. Co. 95 Wis. 29, 69 N. W. 791. We do not understand that it is seriously questioned by tbe respondent in tbe present case that so far as tbe use of tbe streets is concerned tbe grants contained in tbe ordinances before us became contracts wbicb, when accepted and acted upon, could not be subsequently impaired by legislation. Tbe primary contention of tbe respondent is, however, that so far as tbe rates of fare are concerned tbe legislature bas not given to municipal authorities tbe power to hamper future legislative action in any way, and that tbe ordinances in question, when fairly construed, do not attempt to do so.

This contention involves primarily careful consideration and construction of tbe language of tbe statute under wbicb tbe city acted in passing tbe ordinances in question.

Tbe statute in question now appears as sec. 1862, Stats. 1911, and provides that any municipal corporation or county may grant to a street railway corporation, or to any person who bas tbe right to construct, maintain, and operate street railways, “upon such terms as tbe proper authorities shall determine,” tbe use of streets, bridges, and parkways for tbe purpose of laying tracks for street railway purposes, tbe cars to be propelled by animals or such other power as may be agreed upon. Tbe section further provides that every such road shall be constructed on tbe most approved plan and be subject to “such reasonable rules and regulations and the payment of such license fees” as tbe municipal authorities may from time to time prescribe. This section first appeared in substance upon tbe statute books of tbe state as cb. 313 of tbe Laws of 1860. So far as tbe questions involved in this case are concerned there bas been no substantial change in tbe language or legal effect of tbe statute since its enactment in 1860. In tbe original act tbe grant of tbe use of tbe streets was authorized to be made “upon such terms and conditions” as the common council might impose. In the revision of 1878, however, the act of 1860 was condensed into one section (sec. 1862), and in the process of condensation the word “conditions” was dropped out as surplusage, which it plainly was.

The various ordinances, prior to the ordinance of 1900', provided that the rate of fare “shall not exceed five cents,” except for chartered cars, etc. The ordinance of 1900 changed this language somewhat and provided that the rate of fare “shall be not to exceed five cents for a single fare, except for children under ten years of age the rate of fare shall be three cents for one child and five cents for two children, and infants under three years of age free.” The last named ordinance also made elaborate provision for transfers and provided that the company “shall” sell tickets in packages of twenty-five for one dollar, etc., as will more fully appear by examination of sec. 6 of the ordinance, which is printed in full in the statement of facts. Some contention is made by the appellant to the effect that the difference in language between the earlier ordinances, which provide that the fare “shall not exceed five cents,” and the ordinance of 1900, which provides that the fare “shall be not to exceed five cents,” is indicative of a purpose in 1900 to make a fixed rate instead of placing a limitation upon the rate, but we do not regard the change in language as of any substantial significance. The two phrases seem to us as indicating the same essential purpose.

In construing the meaning of the statute in question, certain fundamental considerations must be kept clearly in mind if we would reach correct and just conclusions, and some of the more important of these considerations will first be stated.

The power to fix rates and tolls to be charged by public utilities is one of tbe attributes of sovereignty. With ns this great power is vested in the legislature, ahd when the legislature speaks upon the subject its voice is controlling and supreme, unless indeed some constitutional guaranty is invaded. Madison v. Madison G. & E. Co. 129 Wis. 249, 108 N. W. 65. A century ago this great power was of little practical importance, and very seldom used. The public utility as we know it had not yet come. Life was comparatively simple, individual wants few, and individual resources generally sufficient to provide for them. The ordinary citizen knew little about gas and less about electricity, which he regarded as nothing more than a supernatural and remorseless destroying force. He drove his own horse, if fortunate enough to own one, drank water from his own well, had no telephone, sent no telegrams, used no railroad, sent no express packages, and was dependent upon no public utility, either for the necessities or the luxuries of life. No such life is possible today, however. The progress of science and invention, combined with the tremendous growth of congested urban areas, has made the great mass of the people absolutely dependent upon the great public utilities of the time. Modem business and modern life could not go on without them. The urban citizen of today goes to his business upon the street railway and transacts it with the aid of the telegraph, the telephone, the express company, and the commercial railway. The gas and electric companies light his home, cook his meals, furnish him power for domestic operations, and sometimes even furnish him heat; while water companies provide him with water and telephone companies afford him opportunity at any moment for conversation with friends either at home or in distant cities.

We must catalogue our public utilities and try to imagine how we would get along without them if we would realize our dependence upon them. Only by so doing can we appreciate the supreme importance of the rate-making power and the necessity of keeping that power intact in the hands of the legislature. If it he not so kept the opportunities for abuse are numerous. Clearly the legislature should not part with the power, even for a limited time, except upon the most potent and convincing considerations.

No presumption can be indulged that it has parted with the power, nor will doubtful words be construed as having that effect. He who asserts that the state has surrendered any part of its sovereign power even temporarily in his favor must prove the fact by the most convincing evidence. The presumptions, if any there he, must run the other way.- If it were to be admitted for the purposes of the argument that the legislature could by express language authorize municipal authorities to make contracts with public utilities fixing rates which should exist for definite periods in the future and be beyond legislative control during those periods (a proposition concerning which we intimate no opinion), the question here is whether such express language is to be found in sec. 1862.

The section does not contain the word “contract,” nor any words of similar import, except- that the provision relating to the motive power provides that the cars shall he propelled , by animals, or “such other power as shall be agreed on.” The word “grant” is, of course, a contract word, but the grant simply covers the right to the use of the streets; nothing else is specifically authorized to be “granted.” This grant is to be upon “terms.” Not such terms as may be agreed on (as in the case of the motive power), but such terms as the municipal authorities “shall determine.” Here clearly is language appropriate to the exercise of power by the municipal authorities, rather than to the making of a contract; to the imposition of commands by a superior power rather than to the reaching of a result by negotiation and agreement between equals.

Assuming that under this language a city might make a contract with a public utility, fixing rates or tolls for a definite period, which would hind the city itself and prevent any change of rates hy the city authorities during the contract period, the question still remains whether the section can he construed as giving the city authorities any power to bargain away the sovereign right of the state to regulate fares and tolls and lower them, if found to he excessive.

' If this question were a new one in this state we should entertain no doubt that it should be answered in the negative, but we do not regard it as new.

In the case of Manitowoc v. Manitowoc & N. T. Co. 145 Wis. 13, 129 N. W. 925, the question of the proper construction of sec. 1863, Stats., with regard to the extension of street railways into adjoining towns and through other cities, so as to constitute interurban lines, was before the court. In that case the city of Manitowoc had by ordinance, passed in November, 1902, fixed the fare to be charged between the cities of Manitowoc and Two Rivers at ten cents, and the ordinance had been accepted by the interurban company, the track laid, and the line operated until May 1, 1909, when the company raised the fare to fifteen cents, and the city brought its action in equity to compel the interurban company to abide by its contract and carry all passengers at the contract rate. It was strenuously urged in that case that the ordinance and acceptance formed a contract between the state and the company, which could not be impaired by the legislature itself, while it was contended on the other side that the Railroad Commission Act had already amended and superseded the ordinance. This contention brought the question of the power of the legislature squarely into the case, and made it not only proper but really necessary to determine whether by the passage and acceptance of the ordinance the power of the state to regulate fares had been suspended. Upon these contentions it was held that while the ordinance and its acceptance constituted a contract wbicb bound the interurban company to carry passengers at the ten-eent rate in the absence of legislative action, still the power of the legislature to regulate rates had not been in any way impaired by the action of the city and the company. In this connection this court then said:

“No specific authority having been conferred on the city to enter into the contract in question, the right of the state to interfere whenever the public weal demanded was not abrogated. The contract remained valid between the parties to it until such time as the state saw fit to exercise its paramount authority, and no longer. To this extent, and to this extent only, is the contract before us a valid subsisting obligation. It would be unreasonable to hold that by enacting sec. 1862, Stats. (1898), or sec. 1863, Stats. (Supp. 1906: Laws of 1901, ch. 425), the state intended to surrender its governmental power of fixing rates. That power was- only suspended until such time as the state saw fit to act.”

If it be said that sec. 1863 was in question in that case instead of sec. 1862, and hence that the language cannot be considered as decisive, the answer is that so far as the question here presented is concerned the provisions of the two sections are practically identical. Sec. 1862 authorizes the municipal authorities to “grant” .the use of streets “upon such terms” as they shall determine, and sec. 1863 authorizes “consent” to the use of streets “upon such terms” and subject to such rules and regulations and the “payment of such license fees as the council or board may from time to time prescribe.” We are of opinion, therefore, that the holding in the Manito-woc Case, to the effect that neither section indicated any legislative intention of surrendering the sovereign power of the state to regulate fares, was entirely correct and was advisedly made.

The appellant places great reliance upon the cases of Detroit v. Detroit Citizens St. R. Co. 184 U. S. 368, 22 Sup. Ct. 410; Cleveland v. Cleveland City R. Co. 194 U. S. 517, 24 Sup. Ct. 756; and Minneapolis v. Minneapolis St. R. Co. 215 U. S. 417, 30 Sup. Ct. 118. Iu none of these cases, however, was the question here presented before the court. Those cases were all actions between the city and a street railway company operating under a city ordinance, passed under legislative authority, fixing the rates of fare to be charged, which ordinance had been accepted by the company, and in each of them the city had endeavored to lower the rates of fare by subsequently enacted ordinances. In each case it was held that the ordinance and its acceptance constituted a contract between the city and the company which was binding on both parties during its term, and hence that the subsequent ordinance attempting to lower the contract rate of fare was an attempt to impair the obligations of a contract, and void. This was practically the decision of this court in the Manitowoc Case, and these cases were there cited. In no way, however, do they affect the question whether the legislature of the state has lost its sovereign power to fix reasonable rates.

The case here is much more similar in principle to the case of Georgia R. & B. Co. v. Smith, 128 U. S. 174, 9 Sup. Ct. 47, where the legislature in 1833 had chartered a railroad, and authorized it to charge tolls and rates of fare “not exceeding” certain specified sums. It was argued on behalf of the railroad company that by this clause the railroad was exempted from legislative interference with its rates within the designated limits for all time. This contention was however rejected, and it was said that “to effect this result the exemption must appear by such clear and unmistakable language that it cannot be reasonably construed consistently with the reservation of the power [i. e. the power to regulate rates] by the state.”

It is unnecessary to consider other questions which were much discussed by counsel in the present case. If under sec. 1862 no power was given to municipal authorities to hamper or impair the sovereign right of the state to regulate fares, then the ordinances in question cannot, of course, affect that power, whatever may be their terms. So far as the state is concerned the ordinance constitutes no obstacle to the exercise of its power to regulate rates.

We reach this conclusion the more readily because this state has adopted an eminently just and wise policy in dealing with the matter of rates and tolls. By the Railroad Commission legislation it has laid down the general rule that every rate must be reasonable, and has left it to a commission of experts to determine, after full investigation, the reasonable rate, and apply it. It is believed that this board passes on these questions with judicial fairness after the most careful and searching investigation of the conditions, and with a single eye to the attainment of a fair result. So long as these provisions of law remain in force and are allowed to control the situation, all danger of immature, hasty, or vindictive changes in rates is practically eliminated. On the one hand, the citizen is protected from unreasonable and excessive fares; on the other, the capitalist and investor is assured a reasonable and fair return upon his investment. No door is open for any serious injustice.

The view which is here tahen of the meaning and effect of the provisions of sec. 1862 renders unnecessary any consideration of the question whether the ordinances in question are subject to alteration or repeal under sec. 1 of art. XI of the constitution, which authorizes the enactment of general laws for the formation of corporations without banking powers, and forbids the creation of corporations by special act except in certain instances, and reserves the right to alter or repeal at any time all such general laws or special acts.

The proposition decided in this case is that see. 1862, Stats., does not empower municipal authorities to make any contract with a street railway company fixing rates of fare so that- they may not be changed by the legislature, or through a legislative agency in the manner provided by law.

By the Court. — Judgment affirmed.