Statement of the Case v. Balt. Tr. & Guarantee Co., 166 U.S. 673 (1897)

Subsequently to the passage of this act of 1892, the Lake p. 675Roland Company, in the summer and fall of 1892, commenced to lay its tracks in the city and to build a portion of its elevated road. Prior to the laying down of any tracks on Lexington street, between North and Calvert streets, the latter being a street which crosses Lexington street between North and Charles streets at a distance of between three and four hundred feet west from North street, it became known to the railroad company that the mayor and some of the city authorities were opposed to the laying of double tracks in that street between those points. This was a short time prior to the 7th day of November, 1892. On that day the mayor wrote a letter to the president of the railway company, in which he stated that he had noticed the company had commenced laying double tracks on Lexington street, between North and Calvert streets, and that the public interest in his judgment required that no more than a single track should be laid on Lexington street at that point, and that the law officers of the city had informed him that it wras competent for the city council to prohibit the laying of double tracks there. The mayor also stated that at the next session of the council an ordinance would be introduced prohibiting the company from laying double tracks on the portion of Lexington street above described. He ended by saying: “ I write you this to prevent you from going to the unnecessary expense of laying a system of double tracks and afterwards being required to remove them.” On the same day the president of the railroad company received from the city solicitor a notice that he was, at the request of the mayor, preparing an ordinance to prohibit the railroad company from laying more than a single track on Lexington street, between North and Calvert, and he offered to permit the president of the railroad company to see the proposed ordinance before it was sent to the council. It is stated, however, on the part of the railroad company that at no time prior to the 12th day of November, 1892, two days prior to the passage of the ordinance hereafter spoken of, was there any intimation given to the officers of the company that there was any opposition to the laying of the company’s double tracks on Lexington street, between p. 676Calvert and Charles streets, which was a distance of between seven and eight hundred feet immediately west of Calvert street, and the portion of Lexington street, between Calvert and North streets, was immediately east from Calvert street. It is asserted on the part of the company that it laid the double tracks on Lexington street, between Calvert and Charles streets, without opposition on the part of any one so far as it knew, but it admits that it did lay the double tracks between North and Calvert streets, notwithstanding the receipt of the letters mentioned and in spite of the known opposition of the mayor. This work was done, between North and Calvert streets, during the night and on election day, so that before the 14th of November, 1892, the work of laying the double tracks on Lexington street had been substantially completed the whole distance between North and Charles streets. The common council of the city met on the day last named, and passed “ An ordinance to regulate the use of Lexington street between North street and Charles street, by railway tracks, and to prohibit the laying or maintaining or using by North Avenue Railway Company, or any other person or corporation, of more than a single iron railway track upon said portion of Lexington street.” The first section of this ordinance reads as follows:

After the passage of this ordinance and before the expiration of the twenty days mentioned in the proviso to the third section, the railroad company, not admitting the right of the city to pass such ordinance or to compel the company to take up one of its tracks, and yet being embarrassed by the proviso as to the necessity of taking up the tracks within twenty days, came to an understanding with the city authorities that, as both parties desired a speedy determination of the question of law, a case should be made which should raise that question, and it should be presented to the courts for their decision, and that in the meantime the provision limiting the time in which to take up the track would not be enforced. Accordingly a bill was filed in the city court of Baltimore by p. 678the railroad company raising the question, and a demurrer on the part of the city was served and a decree taken against the company proforma in that court. An appeal was then taken by the company to the Court of Appeals of Maryland, which court after full argument of the question decided the case on its merits, and affirmed the judgment of dismissal directed by the court below. Lake Roland Elevated Railway v. Baltimore, 77 Maryland, 352. This decision was rendered about the 16th of March, 1893.

While engaged in this work and on the 1st of April, 1893, the mayor notified the company by letter that he was advised that the company had no authority to lay its track on the bed of Lexington street between North and Charles streets, in the absence of an ordinance granting such a privilege from the mayor and city council. (This letter, it is supposed, was based upon the proposition that the company had not complied with the condition contained in the ordinance of November, 1892, already mentioned.) The mayor therefore advised the company that, in the opinion of the city law officers, the present single track of the company occupying the bed of the street was a violation of law. A suggestion was made by him that an application for an ordinance be at once made to the city council, and that there should be no delay in the matter, as the public convenience required Lexington street to be promptly made passable by repaving. The president of the company replied, declining, under the circumstances, to ask for the passage of another ordinance, because, as he was advised and believed, the company already had a clear right to lay down and maintain its tracks on Lexington street. The mayor, on April 5, 1893, then notified the company that on Wednesday, April 12, the commissioner would commence to take up the tracks on Lexington street, unless in the meantime the railroad company applied to the city council, which p. 679would meet on April 10, for an ordinance giving it a right to keep its track on the street.

Chapter 370 of the act of 1890, referred to in the foregoing statement of facts, distinctly granted to the mayor and city council of Baltimore the power to regulate the use of the streets by railway companies. In the absence of any such positive legislation, we think there could be no well founded doubt of this power, and that any contract entered into by the city with a railroad company would be subject to its exercise, so long as it did not materially modify or impair the rights granted by the contract. Indeed, no question is made of the existence of a power of regulation by any party to this suit. It was not denied by the court below. The only dispute on this branch of the case between the parties is in regard to the question whether the direction to lay but a single track on Lexington street, between the points p. 682mentioned, is or is not a reasonable regulation of the use of that street to which the contract was subjected, as above stated.

Upon the facts already set forth a sufficient foundation was laid for the exercise of a fair and reasonable legislative discretion in determining the question whether the portion of the street mentioned should be occupied by a single or double track of the railway company. A regulation of that portion of the street by subjecting it to the use of but one instead of double railway tracks did not (in our judgment) thereby materially modify nor did it, in effect, prohibit the exercise of the privileges previously granted by the city to the railroad company, nor did it impair the obligation of the contract or destroy vested rights, nor was this regulation substantially inconsistent with the terms of ordinance No. 23. While that ordinance provided generally for double tracks through the streets mentioned therein, the reduction of the right to use two tracks and the granting of the right to use but one for such a comparatively short distance in one particularly crowded and narrow thoroughfare was not a regulation inconsistent with the terms of the original ordinance. It would, we think, be unreasonable to hold that the least limitation of the power to operate double tracks was an infringement and impairment of the contract as set forth in the ordinance. In our opinion, the ordinance does not give any such cast iron right or one which shall be beyond any reasonable limitation and supervision by the city. It granted the use of the streets for double tracks for many miles, and the subsequent limitation of that use to one track related to but a few hundred feet where peculiar and exceptional conditions existed, where the danger to be apprehended from the use of electric cars on double tracks in a narrow and busy thoroughfare was very p. 684great, and where it might fairly be decided by the common council that double tracks at that point would be an unreasonable and dangerous use of the street by the company and directly tend to prevent its reasonable and safe use and enjoyment by the public at large.

If it be said in this case that the city had already regulated the use by prescribing that there should be two tracks, the answer is that this power of regulation is a continuing power; it is not exhausted by being once exercised, and so long as the object is plainly one of regulation, the power may be exercised p. 685LONG ISLAND WATER SUPPLY CO. v. BROOKLYN. 6S5

The fourth section of this act provided, among other things, that “the amount annually payable by said town for water supplied to it under existing contracts between it and the Long Island Water Supply Company, shall, after this act takes effect, during the terms of said contract, or until said city shall purchase or acquire the property of said water company, as in the next section provided, be levied and collected p. 687LONG ISLAND WATER SUPPLY CO. v. BROOKLYN. GST

Subsequent sections prescribed the procedure. Proceedings were had under this act. The commissioners appointed, as provided therein, valued the property of the company at $570,000, of which $370,000 was named as the value of the tangible property, and $200,000 that of the franchises, contracts and all other rights and property of whatsoever nature or kind of the company, including therein the contract between the town of New Lots and the company. The special term of the Supreme Court, on June 29, 1893, made an order vacating and setting aside this report and appointing new commissioners. The city of Brooklyn appealed to the general term of that court, which, on December 1, 1893, reversed the order of the special term and confirmed the report of the p. 688commissioners. The company then took an appeal to the Court of Appeals. That court affirmed the decision of the general term, 143 N. Y. 596, and remitted the record to the Supreme Court, which court, on December 4, 1894, entered final judgment in favor of the city of Brooklyn, and thereupon this writ of error was sued out.

With reference to the first part of this contention it is said that in 1881 the town of New Lots made a contract with the water supply company by which for each and every year during the term of twenty-five years it covenanted to pay to the company so much per hydrant for hydrants furnished and supplied by it; that the act of annexation continued the burden p. 689of this obligation upon the territory within the limits of the. town, although thereafter the town as a separate municipality ceased to exist, and the territory became simply a ward of the city of Brooklyn ; that the condemnation proceedings destroyed this contract and released the territory from any obligation to pay the stipulated hydrant rental ; that a State or municipality cannot do indirectly what it cannot do directly ; that as the municipality could not by any direct act release itself from any of the obligations of its contract, it could not accomplish the same result by proceedings in condemnation. We cannot yield our assent to this contention. All private property is held subject to the demands of a public use. The constitutional guarantee of just compensation is not a limitation of the power to take, but only a condition of its exercise. Whenever public uses require, the government may appropriate any private property on the payment of just compensation. That thê supply of water to a city is a public purpose cannot be doubted, and hence the condemnation of a water supply system must be recognized as within the unquestioned limits of the power of eminent domain. It matters not to whom the water supply system belongs, individual or corporation, or what franchises are connected with it — all may be taken for public uses upon payment of just compensation. It is not disputed by counsel that, were there no contract between the company and the town, the water works might be taken by condemnation. And so the contention is practically that the existence of the contract withdraws the property, during the life of the contract, from the scope of the power of eminent domain, because taking the tangible property will prevent the company from supplying water, and, therefore, operate to relieve the town from the payment of hydrant rentals. In other words, the prohibition against a law impairing the obligation of contracts stays the power of eminent domain in respect to property wrhich otherwise could be taken by it. Such a decision would be far reaching in its effects. There is probably no water company in the land which has not some subsisting contract with a municipality which it supplies, and within which its works are located,

VOL. CLXVI—44 p. 690and a ruling that all those properties are beyond the reach of the power of eminent domain during the existence of those contracts is one which, to say the least, would require careful consideration before receiving judicial sanction. The fact that this particular contract is for the payment of money for hydrant rental is not vital. Every contract is equally within the .protecting reach of the prohibitory clause of the Constitution. The charter of a corporation is a contract, and its obligations cannot be impaired. So it would seem to follow, if plaintiff in error’s contention is sound, that the franchises of a corporation could not be taken by condemnation, because thereby the contract created by the charter is impaired. The privileges granted to the corporation are taken away, and the obligation of the corporation to perform is also destroyed.

The vice of this argument is twofold. First, it ignores the fact that the contract is a mere incident to the tangible property ; that it is the latter which, being fitted for public uses, is condemned. And while the company, by being deprived of its tangible property, is unable to perform its part of the contract, and therefore can make no demands upon the town for performance on its part, it still is true that the contract is not the thing which is sought to be condemned, and its impairment, if impairment there be, is a mere consequence of the appropriation of the tangible property. Second, a contract is property, and, like any other property, may be taken under condemnation proceedings for public use. New Orleans Gas Co. v. Louisiana Light Co., 115 U. S. 650, 673. Its condemnation is of course subject to the rule of just compensation, and that is all that is implied in the decisions such as Nall v. Wisconsin, 103 U. S. 5, cited by counsel. In that case it appeared that Hall had a contract with the State for services entered into in pursuance of a statute, that he performed the services, but that before finishing his work the legislature repealed the statute authorizing the contract. It was held that he was nevertheless entitled to his stipulated compensation. The act of the legislature in the repeal was not one providing for condemnation, and in so far as it partook of the p. 691nature of a condemnation it ignored the obligation of just compensation, and was therefore void; but it was not held that, if just compensation had been provided and a public use required, the contract might not have been condemned.

The true view is that the condemnation proceedings do not impair the contract, do not break its obligations, but appropriate it, as they do the tangible property of the company, to public uses. The statute under which these proceedings were had declares the necessity of the acquisition “ for the public use of the reservoir as well as machinery, pipes, franchises and all other property ” of the company, and the application for the appointment of commissioners not only described the tangible property but also added “all franchises, contracts, more particularly a certain contract dated the 15th day of September, 1881, between the town of New Lots and the said Long Island Water Supply Company, and referred to in chap. 335, Laws of 1886, and all other rights and property of whatsoever nature or kind as the same may so appear.” The commissioners, after a hearing, valued first the tangible property at $370,000 and the franchises, contracts and all other rights and property, including this particular contract, at $200,000. In other words, the condemnation proceedings did not repudiate the contract but appropriated it and fixed its value. The case of West River Bridge Co. v. Dix, 6 How. 507, is in point. The bridge company had a charter from the State of Vermont creating it a corporation and investing it with the exclusive privilege of erecting a bridge over West River within four miles of its mouth and with the right of taking tolls for passing the same. Under that authority it had erected its bridge and was in the enjoyment of the franchise. During the life of the charter, and under authority of an act of the legislature, condemnation proceedings were taken for the purpose of condemning the bridge and extinguishing the charter; converting the former into a free public highway. These proceedings culminated in an award of compensation and a judgment of condemnation. The Supreme Court of the State having sustained the proceedings they were brought to this court on error, and there as here the p. 692contention was that the proceedings were in violation of the tenth section of the first article of the Constitution. This contention was overruled, and in the course of the opinion it was observed:

“No State, it is declared, shall pass a law impairing the obligation of contracts; yet, with this concession constantly yielded, it cannot be justly disputed, that in every political sovereign community there inheres necessarily the right and the duty of guarding its own existence, and of protecting and promoting the interests and welfare of the community at large. This power and this duty are to be exerted not only in the highest acts of sovereignty, and in the external relations of governments ; they reach and comprehend likewise the interior polity and relations of social life, which should be regulated with reference to the advantage of the whole society. This power, denominated the eminent domain of the State, is, as its name imports, paramount to all private rights vested under the government, and these last are, by necessary implication, held in subordination to this power, and must yield in every instance to its proper exercise. . . . Now it is undeniable, that the investment of property in the citizen by the government, whether made for a pecuniary consideration or founded on conditions of civil or political duty, is a contract between the State, or the government acting as its agent, and the grantee; and both the parties thereto are bound in good faith to fulfil it. But into all contracts, whether made between States and individuals, or between individuals only, there enter conditions which arise not out of the literal terms of the contract itself; they are superinduced by the preexisting and higher authority of the laws of nature, of nations or of the community to which the parties belong; they are always presumed, and must be presumed, to be known and recognized by all, are binding upon all, and need never, therefore, be carried into express stipulation, for this could add nothing to their force. Every contract is made in subordination to them, and must yield to their control, as conditions inherent and paramount, wherever a necessity for their execution shall occur. Such a condition is the right of eminent domain. This right p. 693does not operate to impair the contract affected by it, but recognizes its obligation in the fullest extent, claiming only the fulfilment of an essential and inseparable condition. . . . A distinction has been attempted, in argument, between the power of a government to appropriate for public uses property which is corporeal, or may be said to be in being, and the like power in the government to resume or extinguish a franchise. The distinction, thus attempted, we regard as a refinement which has no foundation in reason, and one that, in truth, avoids the true legal or constitutional question in these causes ; namely, that of the right in private persons, in the use or enjoyment of their private property, to control and actually to prohibit the power and duty of the government to advance and protect the general good. We are aware of nothing peculiar to a franchise which can class it higher, or render it more sacred, than other property. A franchise is property and nothing more; it is incorporeal property, and is so defined by Justice Blackstone, when treating, in his second volume, c. 3, p. 20, of the Rights of Things.” See also The Richmond dec. Railroad Company v. The Louisa Railroad Company, 13 How. 71, 83; Boston (& Lowell Railroad v. Salem de Lowell Railroad, 2 Gray, 1, 35, 36.

“ No State could resume a charter, under the power of appropriation, and carry on the functions of the corporation. A bank charter could not be thus taken, and the business of the bank continued for public purposes. Nor could this bridge have been taken by the State, and kept up by it, as a toll bridge. This could not be called an appropriation of private p. 694property to public purposes. There would be no change in the use, except the application of the profits, and this would not bring the act within the power. The power must not only be exercised hona fide by a State, but the property, not its product, must be applied to public use. . . . The use of this bridge, it is contended, is the same as before the act of appropriation. The public use the bridge now as before the act of appropriation. But it was a toll bridge, and by the act it is made free. The use, therefore, is not the same. The tax assessed on the citizens of the town, to keep up and pay for the bridge, may be impolitic or unjust; but that is not a matter for the consideration of this court.”

Neither can it be said that there was not “ due process of law ” in these condemnation proceedings. It is not essential that the assessment of damages be made by a jury. Such award may be made by commissioners, at least where there is p. 695provision for a review of their proceedings in the courts. Central Branch Union Pacific Railroad v. Atchison, Topeka & Santa Fe Railroad, S& Kansas, 453, 463 ; Cooley on Const. Lim. 563. And sections 9 and 10 of the act of 1892, under which these proceedings were had, require that the commissioners make and file a report of their proceedings and determination in the Supreme Court of the county of Kings, and that application must be made to that court for a confirmation of the report; that notice of such application must be given ; and that “ upon such application the court may confirm the report, or may set it aside for irregularity, or for error of law in the proceedings before the commissioners, or upon the ground that the award, in part or in whole, is excessive, or is insufficient;” and appeal was allowed from the decision of that court to a higher. We do not question the proposition that form is not the only thing essential to due process. We said in the recent case of Chicago, Burlington & Quincy Railroad v. Chicago, 166 U. S. 226, “ The mere form of the proceeding instituted against the owner, even if he be admitted to defend, cannot convert the process used into due process of law, if the necessary result be to deprive him of his property without compensation.”

It may be true, as contended, that, as construed by the Court of Appeals, the determination of the commissioners is conclusive as to the mere value of the property, but there is no denial of due process in making the findings of fact by the triers of fact, whether commissioners or a jury, final as to such facts, and leaving open to the courts simply the inquiry as to whether there was any erroneous basis adopted by the triers in their appraisal, or other errors in their proceedings. The error charged against the commissioners in respect to their basis of valuation is that they failed to regard the company as possessed of exclusive rights. It is said by counsel in their brief that the company had, by virtue of its contract and the act of annexation, “ two vested rights as against the city of Brooklyn: 1st. A vested right resting in contract to continue to supply water under and pursuant to the said contracts with the town of New Lots ‘ during the term of said. p. 696contracts ’; that is, for the unexpired period of said contracts — about fourteen years. 2d. A further vested right resting in contract and valid legislative enactment to enjoy its franchises until the expiration of its charter, protected from any rivalry on the part of the city of Brooklyn.”

The Court of Appeals held that neither the statute under which the company was organized, nor the contract, nor the act of annexation, gave to the company rights exclusive and beyond the reach of legislative action. These conclusions of the Court of Appeals are vigorously challenged in the argument, but we are of opinion that they are correct. The statute simply provided for the organization of water companies. The contract in terras contained no words of exclusion. It gave to the company the privilege of laying its mains in the streets of the town, and contained a covenant on the part of the town to pay certain hydrant rentals. But grants from the public are strictly construed in favor of the public, and grants of a privilege are not ordinarily to be taken as grants of an exclusive privilege. Charles River Bridge Co. v. Warren Bridge, 11 Pet. 420 ; Turnpike Co. v. State, 3 Wall. 210; Stein v. Bienville Water Supply Co., 141 U. S. 67; Hamilton Gaslight de Coke Co. n . Hamilton, 146 U. S. 258; Syracuse Water Co. v. Syracuse, 116 N. Y. 167. Nor is there anything in the act p. 697of annexation which made a contract or created a right beyond the power of the legislature to change. It gave the city the right to purchase or condemn at any time within two years, but this specification of time did not operate to prevent the legislature from enlarging the time, or from granting at any subsequent period during the life of the contract a further right of purchase or condemnation. No consent was asked of the town company in the act of annexation; it entered into no new contract; nothing was done to enlarge the rights which it had against the public. The act was simply one of legislative discretion in respect to municipal organization, and, like any other such act, subject to future modification by the legislature.