Source: http://supreme.nolo.com/us/248/429/case.html
Timestamp: 2019-04-26 06:18:15+00:00

Document:
Where the district court, in denying a preliminary injunction, of its own motion dismisses the bill, its action is equivalent to sustaining a demurrer, and, upon appeal, the allegations of the bill must be taken as true. P. 248 U. S. 431.
A city, instead of exercising its power to compel the removal of tracks operated by a street car company without franchise, passed an ordinance looking to their continued operation by the company and prescribing fares and transfer privileges and penalties for violations. Held equivalent to a grant of a right to operate during the life of the ordinance, entitling the company to a fair return on its investment. Denver v. Denver Union Water Company, 246 U. S. 178. P. 248 U. S. 435.
A company operated a system of city street car lines, for some of which it had franchises entitling it to charge a certain fare and for others no franchises. An ordinance, regulating the entire system, purported explicitly to fix the fares for trips over two or more lines, whether franchise or not, and forbade extra charge for transfers, defining a continuous trip as a journey from one point to another in the city, whether made on one car or line or by transferring from car to car or from line to line, declaring, however, that it should not be construed as an attempt to impair the obligation of any valid contract, but should apply to and govern all such street railway passenger traffic in the city except where governed by the provisions of such contract.
Held: (1) that the latter declaration must be construed as referring only to trips wholly on the franchise lines (p. 248 U. S. 435); (2) that, if its enforcement would result in a deficit to the company, as alleged, the ordinance violated the due process clause. P. 248 U. S. 436.
An ordinance compelling a street car company to carry passengers on continuous trips over franchise lines to and over non-franchise lines, and vice versa, for a fare no greater than its franchises entitle it to charge upon the former alone, impairs the obligation of the franchise contracts. Detroit United Railway v. Michigan, 242 U. S. 238. P. 248 U. S. 437.
The bill attacks the ordinance upon two constitutional grounds: first, that it impairs the obligation of the company's existing contracts; second, that it is confiscatory, and hence deprives the company of its property without due process of law. The suit came on for hearing before the district judge upon an application for a temporary injunction, the judge denied the application, and, upon his own motion, dismissed the bill.
The question upon this appeal is did the bill, taking its allegations to be true, state grounds for relief to which the company was entitled upon the facts set forth? The action of the district court was equivalent to sustaining a demurrer to the bill.
The bill alleges that the complainant company is the owner of all the street railways in the City of Detroit, constituting a system of tracks of upwards of 270 miles. The sources of title of the company are set forth in the bill and shown by many exhibits. It is sufficient for the present purpose to say that the system consists of a considerable mileage of tracks upon which the franchises have expired; upon other portions of the system, there are unexpired franchises, some of them derived from villages in which the roads were constructed, which villages were subsequently incorporated into the city. That from December 1, 1917, its system was operated, except the so-called 3-cent lines, upon terms as follows: 5-cent cash fares for each passenger carried on or over its lines, including so-called universal transfers, with workingmen's tickets, 8 for 25 workingmen's tickets, 8 for and on the so-called 3-cent lines a cash fare of 5 cents, with 8 tickets for 25 cents between certain hours; good only on such 3-cent lines with the privilege of a transfer on payment of a 5-cent cash fare, and also with the privilege of purchase of 6 tickets for 25 cents, also good between certain hours. It is averred that afterwards it became necessary to increase rates of fare. The bill recites the demand of the employees of the company for increased wages, which was refused; that a submission of the controversy was made to the War Labor Board; that the board after a hearing awarded a substantial increase of wages, and recommended an increase in passenger fares to enable the company to meet this cost. The bill alleges that the increase made by the War Labor Board amounted to about $2,000,000 per annum. The company petitioned the city for an increase of rates of fare, and this petition was denied.
lines within the city. It is contended that this action of the company was without legal authority. Whether this was authorized or not is not an issue involved in this case, and we express no opinion concerning it. The matters involved in this bill concern the validity of the ordinance passed August 9, 1918.
It is further alleged that Detroit is a city of a population exceeding 750,000; that it is an industrial city with much the larger part of its male population employed in industrial plants within and adjacent to the city; that the operation of the company's railway system was the only means of transportation of such employees from their homes to their places of employment, and that the interruption of the operation of the company's system, or the separation in operation of the franchise from the non-franchise lines, would paralyze the industrial and business life of the city, throw thousands of its residents out of employment, and result in shutting down its industrial plants and factories. Allegations follow setting forth the value of the company's property and stating that the effect of the ordinance, if enforced, will be to require the operation of the company's system at a deficit, and consequently with no return on the investment.
the company's system. This ordinance has application to the entire street railway system. In § 1, it provides that no more than 5 cents shall be charged for a single ride, or 6 tickets for 25 cents, for one continuous trip through the city over any line operated without a franchise. Section 2 purports to preserve the right to charge franchise rates when fixed by contract. Section 3 provides for fares, 8 tickets for 25 cents, except when such fares are contrary to contract rights. Section 4 provides that, where a trip is over two or more lines, whether franchise or not, the maximum fare shall be 5 cents, or 6 tickets for 25 cents, and no transfers shall be exacted which raise these rates of fare. Section 5 defines a continuous trip to mean a journey from one point in the city to another, whether on one car line or by means of transfers, and the company is required to furnish transfers to carry the provisions of the ordinance into effect. It is further provided that the ordinance is not to be construed as an attempt to impair the obligation of any valid contract, but shall apply to all street railway passenger traffic in the city except when the same is governed by the provisions of a contract. Section 6 provides for fines or imprisonment for violations of the provisions of the ordinance. Section 7 provides that the ordinance shall be in effect for the term of one year from August 9, 1918, unless sooner amended or repealed.
"The very act of regulating the company's rates was a recognition that its plant must continue, as before, to serve the public needs. The fact that no term was specified is, under the existing circumstances, as significant of an intent that the service should continue while the need existed as of an intent that it should not be perpetual."
In the present case, the service upon the terms fixed in the ordinance is continued for a year, the city reserving the right to repeal the ordinance at any time.
It is clear that the city might have taken a different course by requiring the company to remove its tracks from the non-franchise lines; it elected to require continued maintenance of the public service, doubtless because it was believed that it was necessary in the existing conditions in the city to continue for a time at least the right of the railway company to operate its lines. This amounted to a grant to the company for further operation of the system during the life of the ordinance. For this public service it was entitled to a fair return upon its investment. Elements to be taken into consideration in valuing the property of the company in estimating a fair return are not involved in this case. If the allegations of the bill are true, and for present purposes they must be so regarded, the continued operation of the railroad system of the company upon the fares fixed in the ordinance will result in a deficit and deny to the company due process of law within the meaning of the federal Constitution.
required, the latter lines would be without compensation for the service rendered. Furthermore, when a continuous trip begins on a non-franchise line and is over a franchise line and a non-franchise line, the former having the right to charge 5 cents for a trip over it, the effect would be to impair the obligation of the franchise contract. Detroit United Railway v. Michigan, 242 U. S. 252.
In our view, the allegations of this bill for the purposes of the demurrer sufficiently alleged violations of the Constitution of the United States in the action of the city in passing and enforcing the ordinance in controversy. The district court should have entertained the bill, heard the application for a temporary injunction, and proceeded to a hearing and determination of the case in due course.
"An ordinance to fix and establish maximum rates of fares and charges which may be exacted and received by persons, corporations or partnerships operating street railways for the carriage of passengers within the City of Detroit, and to fix a penalty for the violation thereof."
"It is hereby ordained by the people of the City of Detroit:"
"Section 1. No person, partnership, or corporation operating a street railway on the streets of the City of Detroit, for the carriage of passengers for hire, shall charge more than 5 cents for a single ride, or 6 tickets for 25 cents, per person for one continuous trip within the city over any line which is now operated or shall hereafter be operated without a franchise fixing the rate of fare."
"Sec. 2. No such person, partnership, or corporation shall charge a higher rate of fare upon any line now or hereafter operated under a franchise contract than is fixed by such franchise."
"Sec. 3. Between the hours of 5 and 6:30 a.m. and 4:45 and 5:45 p.m., tickets in strips of 8 for 25 cents shall be sold on all cars on all lines except where such sale would be contrary to the terms of a franchise contract, which tickets shall entitle the holder to the same rights between said hours as the payment of a 5-cent fare would."
"Sec. 4. Where a trip is over two or more lines, whether franchise lines or not, the maximum fare shall be 5 cents, and no transfer fee shall be exacted which raises the total charge to more than 5 cents or 6 for 25 cents."
"Sec. 5. A continuous trip means one journey from point to point within the city, whether the same is made upon one car or one line or by means of transferring from car to car or from line to line. Each such person, partnership, or corporation, and the officers, agents, servants, and employees thereof, shall, upon demand, furnish proper transfers to carry into effect the provisions of this section. The provisions of this ordinance shall not be construed as an attempt to impair the obligation of any valid contract, but shall apply to and govern all such street railway passenger traffic in the city, except where the same is governed by the provisions of such contract."
"Sec. 6. Any such person, partnership, or corporation which shall violate the provisions of this ordinance, or shall attempt to do so, and any officer, agent, servant or employee who shall order or direct any such violation or attempted violation of the provisions of this ordinance, shall be guilty of an offense, and, upon conviction, shall be fined not to exceed five hundred dollars, or imprisoned in the Detroit House of Correction for not to exceed ninety days, or shall be both fined and imprisoned in the discretion of the court, for each violation."
"Sec. 7. This ordinance is passed for the public welfare in the case of an emergency involving the peace, health, and safety of the people of the city, and it is ordered to take immediate effect. It may be amended or repealed at any time by the Common Council of the City of Detroit. Unless so amended or repealed it shall remain in force for one year from August 9, 1918."
(a) Those in the business and residence streets most productive of traffic, constituting the greater part of the lines of the company. Its authority to maintain these tracks expired in 1909-1910, and they are designated in the record as "non-franchise lines." It will be convenient to refer to the streets in which these lines are located as "non-franchise streets."
remainder of the twenty-four hours. Such tickets entitled the holders to transfer privileges only on all 3-cent lines.
(c) Disconnected sections of track, of small mileage, in streets remote from the business parts of the city. For these lines, the company had unexpired franchises granted by villages and townships before the extension of the city limits included them, which allowed a fare of 5 cents, in some places, in others 5 cents with transportation to the City Hall. The mileage of these grants varied from five miles to "6 blocks" in length; they are described in the bill as lying, some to the north, others to the south, others to the east and others to the west of the city, as it was when the grants were made and, thus widely separated, they had no connection one with the other, except over non-franchise of 3-cent franchise tracks. These are designated as "5-cent franchise lines."
It was stated at the bar by counsel for the city, and not questioned, that there were about 150 miles of non-franchise lines, about 65 miles of the 3-cent franchise lines, and only 55 miles of 5-cent franchise lines.
1917, the company did withdraw from it, and thereafter was allowed to charge, on other than its 3-cent franchise lines, a cash fare of 5 cents, but with 8 tickets for 25 cents, good for one and a half hours in the morning and for one hour in the evening. Universal transfers were allowed for these fares.
This arrangement continued until August 2, 1918, when, not satisfied, the company proposed to the city a 5-cent fare with a charge of one cent for a transfer over all lines in the city one-fare zone, or, in the alternative, a 6-cent fare with ten tickets for 55 cents and universal transfers, the franchise rates on the 3-cent lines to continue, except that, for the fares last named universal transfers would be given.
(1) Over certain of the franchise lines, a 5-cent rate of fare without transfers was provided for in the grants, and because § 4 of the ordinance required transportation "where the trip is over two or more lines, whether franchise lines or not," without transfer charge, it is held that, if this provision were enforced, the effect would be to impair such 5-cent franchise contracts, and that the ordinance is therefore void.
(2) Interpreting the ordinance as a grant to the company of the right to operate its lines, franchise and non-franchise, at rates which the bill alleges to be noncompensatory, the Court holds it invalid because it would deprive the company of its property without due process of law.
As to the first. It is not anywhere alleged in the bill that the "5-cent franchise lines" (no complaint is made as to the 3-cent lines) can be operated separately and profitably or that less income would be realized from them if operated under the terms of § 4 in conjunction with the non-franchise lines than if they were operated as separate properties, if such thing be possible, charging the 5-cent franchise rate without transfers. Without such an allegation, it is pure conjecture to say that the company would suffer loss and that its contract would be impaired by giving effect to § 4. He who would strike down a law must show that the alleged unconstitutional feature injures him and operates to deprive him of rights protected by the federal Constitution. Plymouth Coal Co. v. Pennsylvania, 232 U. S. 531, 232 U. S. 534.
But the bill not only fails to allege that the railway company would suffer loss from giving effect to § 4, but it states facts which render it highly probable, if not entirely clear, that it would benefit by it.
company would be benefited, and not injured, by being permitted to so operate them under section four.
But should this section four be construed to prescribe a rate for transfer over franchise lines?
"for one continuous trip within the city over any line which is now operated or shall hereafter be operated, without a franchise fixing the rates of fare."
Clearly this is intended not to apply to the franchise lines.
The second section declares that the charge over franchise lines shall not be greater than is fixed in the franchise.
This plainly contemplates allowing the full franchise rate where one exists.
Section three provides for the special or "workingmen's" tickets, but carefully excepts from its application "all lines . . . where such sale would be contrary to the terms of the franchise contract."
"The provisions of this ordinance shall not be construed as an attempt to impair the obligation of any valid contract, but shall apply to and govern all such street railway passenger traffic in the city, except where the same is governed by the provisions of such contract."
Thus, we have in the ordinance a declaration that the rate prescribed shall apply only to non-franchise lines, that the franchise rate shall apply on all franchise lines, that special ticket rates shall not apply where they conflict with franchise rates, and, in addition, there is the general declaration that the city council is intending to deal with non-franchise lines only, and that the ordinance shall not be so construed as to impair franchise contracts.
a large and indisputably valid application to both non-franchise and franchise lines. The ordinance was designed to apply to 150 miles of non-franchise lines, extending in all directions throughout the city, and to regulate transfers between various parts of these lines. In addition to this, the 3-cent franchise lines are greater in extent and much more important than the 5-cent franchise lines. From December, 1917, to August 2, 1918, transfers were allowed over all of the non-franchise lines and between the 5-cent and 3-cent franchise lines and the non-franchise lines upon payment of the fare prescribed in section four -- 5-cent fare, or 6 tickets for 25 cents -- and it was plainly the primary purpose of the section to continue this rate and practice, and not to permit the charge to be increased to 6 cents, as contemplated in the proposal of the company to the city of August 2, 1918. No complaint is made of the application of the section to the 3-cent franchise lines.
All of this is overlooked by the Court, and, laying hold of the possible loss to the company (wholly improbable, as we have seen) through the application of the section to the 5-cent lines, the entire ordinance is struck down as unconstitutional.
This judicial power of declaring laws unconstitutional is of so high and delicate a character that it has been often declared by this Court that it would exercise it only in clear cases. Fletcher v. Peck, 6 Cranch 87, 10 U. S. 128; Fairbank v. United States, 181 U. S. 283. Every possible presumption is in favor of a statute, and this continues until the contrary is shown beyond a rational doubt. Sinking Fund Cases, 99 U. S. 700, 99 U. S. 718. The violation of the Constitution must be "proved beyond all reasonable doubt." Ogden v. Saunders, 12 Wheat. 213, 25 U. S. 270; Nicol v. Ames, 173 U. S. 509, 173 U. S. 515.
its 5-cent franchise contracts, even then it would seem that the section should be annulled only insofar as it might be applied to such grants and that the remainder, which is not assailed, should be permitted to stand, under the rule of this Court applied from Bank of Hamilton v. Dudley, 2 Pet. 492, 27 U. S. 526, to St. Louis & Southwestern Ry. Co. v. Arkansas, 235 U. S. 350, that, if only part of an act be unconstitutional, the provisions of that part may be disregarded, and full effect given to the remainder, if severable from the unconstitutional part of the act, as it clearly is in this case.
Coming now to the second and more fundamental ground on which the Court proceeds to its conclusion. It is held that the ordinance contemplates the continued operation of the non-franchise lines, and therefore, applying the novel doctrine of the Denver Union Water Company case, 246 U. S. 178, that it is a grant which, if given effect, would necessarily deprive the company of its property without due process of law, since the allegations of the bill are that it would be noncompensatory.
We are now dealing, not with an alleged attempt on the part of the city to require the company to operate its 5-cent and its 3-cent franchise lines at a loss, but with an offer to it of a right to operate the lines in the non-franchise streets, in which it has no rights, in conjunction with its other lines at what is alleged to be a noncompensatory rate for the entire system. The right of the company to operate the 5-cent and 3-cent lines was complete without the ordinance, and the operation of them as separate properties was quite unaffected by it.
In defining the relation between the city and the company as it was before the ordinance, which is declared invalid, was passed, the Court holds, as it must (229 U.S. 229 U. S. 39) that the company had no rights in the non-franchise streets, and that the city had the right to order its tracks taken out of them.
This being the legal relation between the two parties, the company, on August 2, 1918, made its proposal for increased fares, which was rejected by the city. This proposal, when followed by rejection, obviously did not change the relation of the parties from what they were before it was made.
Thereupon, the city made its counter-proposal by tendering the ordinance rates to the company, which promptly rejected them. It seems equally clear that this proposal and the rejection of it did not change the relations of the parties, and that they continued precisely as they were before, and as they were defined in the opinion of the Court -- the railway company without any rights whatever in the non-franchise streets. But not so, says the Court, for the reason that the ordinance implies that the lines are to be operated, and, under the Denver case, it must therefore be interpreted as a grant (contrary, it would seem, to Blair v. Chicago, 201 U. S. 400, 201 U. S. 463), and, since it is alleged that the rates prescribed are noncompensatory, it is an invalid grant.
If it be conceded that the ordinance is in terms a grant, yet, since every grant implies and requires a grantee, when the company refused to accept it, the grant necessarily failed. It is obvious and elementary that no person or corporation can be made a grantee against his or its will. Kent, Commentaries, 13th ed., vol. 4, p. 455, note b. Thus, again, even on the assumption of the Court, it would seem that the ordinance failed to change the relations of the parties from what they were before.
The conclusion of the district court that this case can be distinguished from the Denver Water Company case, and therefore is not to be ruled by it, seems sound, but the distinction need not be discussed.
which it owns in the streets in which its franchises have expired and in which this Court has decided it has no rights whatever, except upon terms as favorable to the company as it would be entitled to if it had a valid and continuing grant to operate in them. The utmost that can be claimed for the ordinance is that it suffers the company to use streets which it could not use at all without it -- for the company to use them in any other way than as thus permitted would be unlawful. Yet this mere offer of this naked privilege, in terms revocable at will and rejected by the company, is held to give a constitutional right, and at the same time to so violate that right as to render the ordinance invalid. I cannot bring myself to understand how, except by sheer assertion of power, even the apparent justice of the result which it is hoped thus to obtain can be made the basis for creating a constitutional right where no right whatever existed before the passing of this rejected ordinance.
may be required, within a reasonable time, to remove its pipes from the streets. Detroit United Railway v. Detroit, 229 U. S. 39, 229 U. S. 46. . . . In view of that right of the city, which, if exercised, would make the company's whole plant valueless as such, the question recurs whether the fixing of any rate by the city could be said to confiscate property on the ground that the return was too low. . . . The ordinance of the city could mean no more than that the company must accept the city's rates or stop -- and, as it could be stopped by the city out and out, the general principle is that it could be stopped unless a certain price should be paid."
For the reasons thus stated, I think that the ordinance is valid, and that the judgment of the district court should be affirmed, and therefore I am compelled to dissent from the opinion and judgment of the Court.
I am authorized to say that MR. JUSTICE HOLMES and MR. JUSTICE BRANDEIS concur in this opinion.

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