Source: https://supreme.justia.com/cases/federal/us/210/266/
Timestamp: 2019-04-21 08:41:59+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 210 › St. Louis v. United Railways Co.
While a state, or a municipal corporation acting under the authority of the state, may deprive itself by contract of its lawful power to impose certain taxes or license fees, such deprivation only follows the use of clear and unambiguous terms; any doubt in the interpretation of the alleged contract is fatal to the exemption.
The fact that a street railway company has agreed to pay for the use of the streets of a city for a given period does not, in the absence of unequivocal terms to that effect, create an inviolable contract within the meaning and protection of the contract clause of the federal Constitution which will prevent the exaction of a license tax within the acknowledged power of the city. New Orleans City and Lake Railway Co. v. New Orleans, 143 U. S. 192.
These cases were submitted together, and involve the effect of certain ordinances of the City of St. Louis, which are alleged to be binding contracts protected by the federal Constitution.
A bill was filed in the Circuit Court of the United States for the Eastern District of Missouri by the United Railways Company of St. Louis and the St. Louis Transit Company, the former being the lessor and the latter the lessee of a large system of street railways in the City of St. Louis. The bill seeks to enjoin the enforcement of a certain ordinance, No. 21,087, in the City of St. Louis, passed March 25, 1903, alleging violation of the contract clause of the Constitution and of rights secured by the Fourteenth Amendment. The case was tried upon the bill, answer, replication, and an agreed statement of facts.
The complainants are the owners of certain rights granted by ordinances to a number of street railway companies in the City of St. Louis, the assignors of the complainants. These ordinances are set out in the record, and are quite numerous. Some of them cover quite extended terms, running as long as forty and fifty years. They purport on their face to grant to the railway companies named in the ordinances, their licensees, successors, and assigns, rights in certain streets "to operate, maintain, and construct," -- "to lay down, construct, operate, and maintain," -- "to reconstruct its tracks and maintain and operate its railway thereon." The grants in these ordinances are in consideration of certain undertakings and obligations stated therein on behalf of the railway companies, which are thus epitomized, in the opinion of the learned judge in the case in the circuit court: (1) to commence and complete the work of laying down the tracks and installing the road within certain specified periods; (2) to grade the streets from curb to curb; (3) to construct and keep in repair that portion of the street lying between the tracks and twelve inches outside thereof; (4) to cause cars to be run day and night at certain intervals named in the ordinances; (5) to pay certain stipulated sums of money, or certain percentages of the gross earnings of the several companies, to the city each year during the continuance of the privileges specified in the contract.
"No law shall be passed by the general assembly granting the right to construct and operate a street railroad within any city, town, village, or on any public highway without first acquiring the consent of the local authorities having control of the street or highway proposed to be occupied by such street railroad, and the franchises so granted shall not be transferred without similar assent first obtained."
"SEC. 1. Authority of municipal assembly in reference to street railroads; may sell franchises or impose a per capita tax or a tax on gross receipts. -- The municipal assembly shall have power by ordinance to determine all questions arising with reference to street railroads, in the corporate limits of the city, whether such questions may involve the construction of such street railroads, granting the right of way, or regulating and controlling them after their completion, and also shall have power to sell the franchise or right of way for such street railroads to the highest bidder, or, as a consideration therefor, to impose a per capita tax on the passengers transported, or an annual tax on the gross receipts of such railroad, or on each car, and no street railroad shall hereafter be incorporated or built in the City of St. Louis except according to the above and other conditions of this charter, and in such manner and to such extent as may be provided by ordinance."
its road only within this city, which shall allow any person to ride or travel on its road gratuitously or for less than usual price of fare unless such person be an officer or employee of such company."
The fifth subdivision of § 26 of Article III, clause 5, confers upon the mayor and assembly the power to license, tax, and regulate certain occupations and kinds of business, vehicles, conveyances, etc., among others, street railway cars. As appears from the agreed statement of facts, at the time the ordinances granting rights to the street railways were passed, there were sections of the Municipal Code of St. Louis (2134 et seq.) in force, requiring the street railway companies to pay to the city collector an annual license fee of $25 for each and every car used by them in transporting passengers for hire in the city. These sections were passed under the power conferred to license, tax, and regulate occupations, vehicles, and street railway cars.
The ordinance which is the subject matter of this controversy is No. 21,087, purporting to impose a tax equal to one mill for each pay passenger on each car, and purporting to be an amendment of the sections of the municipal code fixing the license tax at $25 per car. It is stipulated in the agreed statement of facts that all the railway companies named in the complaint, including the United Railways Company and the St. Louis Transit Company, paid the annual license of $25 per car until the going into effect of ordinance 21,087.
"There is neither statutory command nor any perceptible reason why both these powers should not be exercised in one and the same ordinance, and such, in my opinion, is the obvious purpose of the original ordinances granted to complainants' assignors."
"The right 'to construct and operate' is conferred in terms admitting of no doubt. The license, which is essentially an occupation tax, is, in my opinion, also fixed in each of the ordinances. The several original ordinances or contracts clearly mean that the city exacted, among other things, certain quarterly or yearly payments of money to be made to it by the railroad companies as a consideration for the grant by it of the right to occupy and use its streets for the purpose of laying down, maintaining, and operating railroad tracks thereon. The law nowhere commands that the license fee, as authorized by the fifth subdivision in question, shall be for annual or other terminal occupation. And I perceive no reason why the city may not at the outset fix such a license for the full term of its grant. This is what I think it did in and by the terms and stipulations of the several ordinances in question."
The theory, then, upon which the bill was framed and this case decided, was that the city, having once fixed a price for the use of its streets, which the railway companies had agreed to pay, there was no right to impose a license tax upon the railway companies under the ordinance of March 25, 1903, amending the municipal code in the manner already referred to. These sections of the municipal code, requiring the payment of the license fee, impose a tax, as the main purpose of their enactment is the raising of revenue. City of St. Louis v. Spiegel, 75 Mo. 145, 146.
license fees at the same time the principle has been established that such deprivation can only follow when the state or city has concluded itself by the use of clear and unequivocal terms. The existence of doubt in the interpretation of the alleged contract is fatal to the claim of exemption. The section of the Missouri Constitution, and the laws to which we have referred, clearly show that, while the franchise of the corporation essential to its existence is derived from the state, the city retains the control of its streets, and the use of them must be acquired from the municipal authorities upon terms and conditions which they shall fix. Blair v. Chicago, 201 U. S. 400.
An examination of the cases in this Court shows that it is not sufficient that a street railway company has agreed to pay for the privilege of using the streets for a given term, either in a lump sum, or by payments in installments, or percentages of the receipts, to thereby conclude the municipality from exercising a statutory authority to impose license fees or taxes. This right still exists unless there is a distinct agreement, clearly expressed, that the sums to be paid are in lieu of all such exactions.
railroad company upon the streets where their right of way was sold unless by mutual agreement between the city and the purchaser or purchasers of the franchises.
Afterwards, in the year 1887, under authority of a legislative act, the city imposed a license tax upon the business of carrying on, operating, and running a horse or steam road for the transportation of passengers within the limits of the city, payable annually and based on the annual gross receipts; when the same exceeded $500,000, the amount to be $2,500. The railroad company admitted its receipts exceeded that sum, and claimed the protection of the Constitution of the United States for its franchise contract extending to January 1, 1906, as above set forth.
"Exemption from taxation is never to be presumed. The legislature itself cannot be held to have intended to surrender the taxing power unless its intention to do so has been declared in clear and unmistakable words. Vicksburg &c. Railroad v. Dennis, 116 U. S. 665, 116 U. S. 668, and cases cited. Assuming, without deciding, that the City of New Orleans was authorized to exempt the New Orleans City Railroad Company from taxation under general laws of the state, the contract between them affords no evidence of an intention to do so. The franchise to build and run a street railway was as much subject to taxation as any other property."
annually for public purposes and declaring that, upon its accepting and complying with the provisions of the act, the faith of the state was pledged not to impose any further tax or burden upon the corporation during the continuance of the charter exempted the stockholders from taxation on their stock, and so much of the opinion as might, taken by itself, seem to support this writ of error, has been often explained or disapproved. State Bank v. Knoop, 16 How. 369, 57 U. S. 386, 57 U. S. 401-402; People v. Commissioners, 4 Wall. 244, 71 U. S. 259; Jefferson Bank v. Skelly, 1 Black 436, 66 U. S. 446; Farrington v. Tennessee, 95 U. S. 679, 95 U. S. 690, 95 U. S. 694; Stone v. Farmers' Loan & Trust Company, 116 U. S. 307, 116 U. S. 328."
"The case at bar cannot be distinguished from that of Memphis Gaslight Co. v. Shelby County, in which this Court upheld a license tax upon a corporation which had acquired by its charter the privilege of erecting gasworks and making and selling gas for fifty years, and, speaking by Mr. Justice Miller, said:"
"The argument of counsel is that, if no express contract against taxation can be found here, it must be implied, because to permit the state to tax this company by a license tax for the privilege granted by its charter is to destroy that privilege. But the answer is that the company took their charter subject to the same right of taxation in the state that applies to all other privileges and to all other property. If they wished or intended to have an exemption of any kind from taxation, or felt that it was necessary to the profitable working of their business, they should have required a provision to that effect in their charter. The Constitution of the United States does not profess in all cases to protect property from unjust and oppressive taxation by the states. That is left to the state constitution and state laws."
"109 U.S. 398, 109 U. S. 400."
"Applying these well established rules to the several contracts, it will be perceived that there was no express relinquishment of the right of taxation. The plaintiff in error must rely upon some implication, and not upon any direct stipulation. In each contract, there was a grant of privileges, but the grant was specifically of privileges in respect to the construction, operation, and maintenance of a street railroad. These were all that in terms were granted. As consideration for this grant, the grantees were to pay something, and such payment is nowhere said to be in lieu of, or as an equivalent or substitute for, taxes. All that can be extracted from the language used was a grant of privileges and a payment therefor. Other words must be written into the contract before there can be found any relinquishment of the power of taxation."
Many state authorities have reached the same conclusion. We will refer to some of them: Springfield v. Smith, 138 Mo. 645; Wyandotte v. Corrigan, 35 Kan. 21; State ex Rel. Cream City Ry. Co. v. Hilbert, 72 Wis. 184; Newport &c. Ry. Co. v. Newport News, 100 Va. 157; New Orleans v. Orleans Ry. Co., 42 La.Ann. 4; New Orleans v. New Orleans Ry. Co., 40 La.Ann. 587; San Jose v. S.J. Railway, 53 Cal. 475, 481; State v. Herod, 29 Ia. 123.
"Said Lindell Railway Company shall, in lieu of all payments now required of it under any and all previous ordinances, and such as are now, or may hereafter by ordinance passed be required of any railroad company whose tracks it is hereby authorized to acquire, etc., on the first day of [various months] pay to the City of St. Louis, etc. [various sums], which several sums said Lindell Railway Company, its successors and assigns, in consideration of the rights and privileges granted by this ordinance, hereby agrees to pay to the City of St. Louis at the times, . . ."
The stipulation as to the payments to be in lieu of all other payments under previous ordinances, and such as are now or may, by ordinance, be hereafter passed, etc., in this ordinance may well be referred to the special ordinances passed under the right to grant the use of the streets "in consideration of the rights and privileges" therein granted, and are not designed to repeal pro tanto the section of the municipal code then in effect, imposing a license fee on railway cars operated in the city.
No ordinance contains any express relinquishment of the right to exact a license fee or tax. It is true that the city, in granting the right to use the streets by special ordinance and in exercising by general ordinance the right conferred in the charter to impose a license tax upon cars, is dealing with rights and privileges somewhat similar, but nevertheless essentially separate and distinct. In the special ordinances, the city is making an arrangement with the railway company to confer the right to use the streets in consideration of certain things the company is to do by way of operation and otherwise, including, it may be, payment of fixed sums or a proportion of receipts in consideration of the rights and privileges conferred.
The city does this by virtue of its power to grant rights and privileges and control their exercise in the streets of the city -- power expressly conferred in the charter of the city.
whatever sum imposed, would take something from the gross receipts of the company.
It seems to us that this case is virtually decided by the rule laid down in Railway Company v. New Orleans, 143 U. S. 192, which holds that, because a street railway company has agreed to pay for the use of the streets of the city for a given period, it does not thereby create an inviolable contract which will prevent the exaction of a license tax under an acknowledged power of the city, unless this right has been specifically surrendered in terms which admit of no other reasonable interpretation.
We are of the opinion that an application of settled principles, derived from the decisions of this Court, shows that these ordinances do not contain any clearly expressed obligation on the part of the city surrendering its right to impose further license fees or taxes upon street railway cars, and we are of the opinion that the learned circuit court erred in reaching the contrary conclusion, and in granting a decree perpetually enjoining the enforcement of the ordinance in controversy.
We have discussed this case on the record and briefs filed in No. 193. It was said by the learned counsel in the argument at bar that cases Nos. 194, 195, involved identical questions. For the reasons stated, the decrees in the three cases are reversed.

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