Case Name: Pennsylvania Railroad Company v. Philadelphia County, Appellant
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1908-01-20
Citations: 220 Pa. 100
Docket Number: Appeal, No. 346
Parties: Pennsylvania Railroad Company v. Philadelphia County, Appellant.
Judges: Before Mitchell, C. J., Fell, Bbown, Mestbezat, Potteb, Elkin and Stewabt, JJ.
Reporter: Pennsylvania State Reports
Volume: 220
Pages: 100–138

Head Matter:
Pennsylvania Railroad Company v. Philadelphia County, Appellant.
Constitutional law — Railroads—Common carriers — Regulation of rates— Acts of April 13, 1846, P. L. 312, April 13, 1846, P. L. 326, and April 5, 1907, P. L. 59 — Confiscation.
While the legislature is permitted to alter or revoke the charter of a corporation, it is prohibited from doing so in such manner that injustice will be done to the corporators. Whether the legislature has attempted to enact a measure prohibited by the constitution is for the courts; whether injustice has been done in any particular case is inherently and necessarily a judicial question.
The findings of fact of the court below that the Act of April 5, 1907, P. L. 59, in its operation reduced the returns to the shareholders of the Pennsylvania Railroad Company from their property to such an extent as to render the property unremunerative, will not be reviewed by the appellate court, unless shown to be clearly erroneous. In such a case the finding cannot be attacked because the court below confined its inquiry to the passenger traffic instead of taking into consideration the entire traffic of every kind.
Even so-called public service corporations are private property organized and conducted for private corporate profit and are entitled to make a fair profit on every branch of their business, subject to the limitation that their corporate duties must be performed even at a loss.
Public service corporations in Pennsylvania are entitled to look for a rate of return, if their property will earn it, not less than the legal rate of interest, and a system of charges that yields no more income than is fairly requisite to maintain the plant, pay fixed charges and operating expenses, provide a suitable sinking fund for the payment of debts and pay a fair profit to the owners of the property, cannot be said to be unreasonable.
In the operation of an unreasonable statute regulating the rates of railroad companies, the point of injustice may be reached long before that of confiscation, and to make the word “confiscatory” really appropriate to such statute, the word must be read, not in the sense of producing actual confiscation, but of having an inevitable tendency thereto.
Mestrezat, Potter and Stewart, JJ., dissent.
Argued Nov. 11, 1907.
Appeal No. 346, Jan. T., 1907, by defendant, from decree of C. P. No. 4, Phila. Co., March T., 1907, No. 5,312, on bill in equity in case of The Pennsylvania Railroad Company v. Philadelphia County.
Before Mitchell, C. J., Fell, Bbown, Mestbezat, Potteb, Elkin and Stewabt, JJ.
Affirmed.
Bill in equity for an injunction to restrain the county of Philadelphia from the collection of any penalty imposed by the act .of April 5, 1907, for failure to comply with its provisions.
The court below filed an opinion which was in part as follows:
The evidence before the court establishes the following facts material to the decision of the question whether the act of April 5, 1907, is a reasonable regulation of passenger fares so far as concerns the Pennsylvania Railroad Company.
a. For the first quarter of the year 1907 the plaintiff’s receipts from passenger traffic between points within this state (i. e., exclusive of interstate traffic) were $3,070,935.55.
b. Of these receipts the sum of $1,084,982.37 came from the sale of excursion tickets at the average price of 2.406 cents per mile. The sum of $595,997.31 came from the sale of excursion tickets at the average price of 2.109 cents per mile; $399,254.60 from commutation tickets at 1.46 cents per mile, and $990,701.27 from mileage tickets at two cents per mile.
c. As nearly as can be ascertained through a careful application of a rule of apportionment approved by railroad experts and in actual use by most of the large railroads of the country, the approximate cost to the plaintiff of handling its intrastate passenger business during the first three months of the present year was $2,921,607.91.
d. In the year 1906 the proportion borne by the receipts from intrastate passenger traffic for the first quarter to the total of such receipts for the whole year was 20.8 per cent. The proportion of the expenses connected with that branch of the plaintiff’s business for the first quarter of the year to the year’s total expenditure was 24.7 per cent. These proportions are practically (in each case) the same as the average for the previous ten years. Hence they may be fairly taken as the basis of a calculation of the probable receipts, expenditures and profits of the plaintiff on its intrastate passenger business for the year 1907 at the rates at present established.
e. Calculated upon this basis, the receipts on this class of business for 1907 will probably be $14,764,113.22, and the operating expenses will probably be $11,828,372.11. The amount of taxes apportionable to the plaintiff’s intrastate passenger business under the usual and reasonable rule will probably be $380,350.86. The deduction of this sum from the amount of the difference between probable receipts from this business for 1907 and its probably cost as ascertained above leaves as the probable surplus of receipts over all expenditures the sum of $2,555,390.25 net.
f. Since most of the facilities employed by the plaintiff in handling its freight business are used in carrying on its passenger traffic, and as the same tracks, stations, etc., are employed for the handling of the intrastate passenger traffic that are used in its intrastate passenger business, the amount of the Pennsylvania Railroad Company’s investment in the business last mentioned can be approximated only by apportionment. Under a rule of apportionment reasonable in itself and in general use for such purposes, the plaintiff’s books show an investment in property required to conduct this branch of its business amounting to $53,600,598.74, of which $21,051,795.96 represents mortgage or otherwise funded indebtedness, giving rise to a yearly interest charge of $894,701.33. The sum of $32,548,802.78, therefore, approximately represents the amount of money contributed by the plaintiff’s stockholders, plus the amount set aside from surplus earnings in past years, actually invested in the intrastate passenger business. It is to be noted that the par value of the shares and bonds of this corporation includes nothing but the sum which it actually received of them in cash.
g. Upon the actual investment of $32,548,802.78 of its own money, the plaintiff’s probable earnings for 1907 from the intrastate passenger business, viz.: $2,555,780.82 less the year’s probable taxes, would yield a return of 5.1 per cent, on the basis of the rates charged at present.
h. The business of carrying suburban passengers is remunerative to the Pennsylvania Railroad Company, even at the low rate at which commutation tickets are sold them, because the cost of such business in proportion to the number of passengers carried is much less than the cost of the ordinary passen ger traffic, and because the carrying of commuters produces incidentally much business at higher rates of fare. It is improbable that the doing away with commutation tickets and the exaction of a two cents per mile fare from those who have been using such tickets, would serve to increase the net profits of the plaintiff, since, in all likelihood, such a change would so reduce the number of suburban riders and the amount of higher rate business that such passengers incidentally bring to the company as to practically offset the increase of receipts due to the increase of fare.
i. The bases of several of the calculations above referred to are deduced from ,the experience of the Pennsylvania Railroad Company during the past few years. During that time the amount of business done has been very great. Should it fall off, as is not an unlikely occurrence, the expense of operating the plaintiff’s railroad would not decrease in the same ratio in which-its receipts would diminish. Moreover, the cost of operating the road shows a marked tendency to increase through the general increase of wages and the price of materials.
j. Assuming that no change is made in the price of commutation tickets and that all other fares in excess of two cents per mile are reduced to that rate, the profits of the plaintiff for 1907 upon its intrastate passenger business, calculated upon the same bases that are employed in the calculations above, would probably be reduced to $1,527,406.25, which after payment of interest charges would be a return of but 1.94 per cent upon the company’s investment of $32,548,802.78.
Upon these facts we are asked by the plaintiff to declare that the regulation of passenger fares attempted by the act of April 5, 1907, is unreasonable. To this there is advanced on behalf of the defendant the particular objection that no evidence has been presented to show the results of the plaintiff’s freight business; that its intrastate passenger business is so combined with its intrastate freight business as to be indistinguishable in their joint result; that greater profits on the one kind of traffic may make up for the lowering of profits on the other, and that, therefore, before it can be said that the act under consideration regulates the plaintiff’s business unreasonably, the whole of that business must be considered, freight traffic with passenger traffic. This objection we think is overcome by the following considerations :
1. Men who understand the railroad business thorough^ and on whose opinion in relation to the subject we may with confidence rely, declare that intrastate passenger traffic may readily be distinguished from the rest of the plaintiff’s business by the application of certain rules developed by experience and-approved by general use; second, the legislature itself, in the very act now under discussion has, for purposes of regulation, attempted to segregate the passenger traffic of the railways and to deal with it as if it existed as a thing apart from all else; third, if pushed to its logical result the argument advanced would justify a law requiring that the railroad companies of the state should -carry all intrastate passengers without charge and look to their freight business for reimbursement of expenses, and for a return on their investment in the business, which, of course, is the reductio ad absurdum.
It is further and more generally objected by the defendant that the plaintiff invites the court in this case to leave the domain of fact, where it has to guide it, the testimony of witnesses who have seen the things that they describe and to enter the realm of speculation where all evidence is mere guesswork, and where probability is the nearest approach to reality and truth that can be found. This objection seems at first sight-more formidable than it really is. Antithesis always arrests attention. In an inquiry, however, as to conditions resulting from the operation of a regulation not yet in force, nothing but probabilities can be expected. Such a situation is not one with which the law is unfamiliar. It has never required mathematical proof of the facts with which it deals. Most verdicts rest on the likelihood (not the certainty by any means) that witnesses will tell the truth under oath. Nevertheless, judgments are entered solemnly on such verdicts. And this is in accordance with the common practice of mankind in the affairs of daily life. No plan for future conduct was ever formed that was not based upon the probability as to what circumstances would develop at the time for its performance. There is nothing more uncertain than human life, but the study of the probabilities of its duration has made the insurance of lives a safe and profitable business. It may well be doubted that the business of life insurance has received more careful attention than has been applied by intelligent students to the traffic of the country’s railways. To such experts what seems to others mere chance and guesswork becomes reliable forecast. In our opinion, the approximations and probabilities worked out upon a broad foundation of established facts by men of experience and sound judgment, testifying under oath, may properly be considered a safe ground on which to base judicial action. Having such testimony before us we feel justified in accepting and acting upon the probabilities which it establishes.
Our conclusions upon the facts above outlined are:
1. Under the rule laid down by the Supreme Court of Pennsylvania in Brymer v. Butler Water Company, 179 Pa. 231, the schedule of rates under which the plaintiff now conducts its intrastate passenger business is not unreasonable, since the return produced does not yield the “ legal interest on the investment ” to which, as was said in that case, the investor in a public service business is entitled.
2. Since the reduction to the rate of two cents per mile fixed by the act of April 5, 1907, of all fares now established on a higher basis, would probably have the effect of reducing the profits of the plaintiff from its intrastate passenger business to a sum equivalent to less than two per cent on its investment in the facilities necessary for carrying that business on ; and since a return so small is not fair remuneration for the use and risk of its property, Brymer v. Butler Water Co., 179 Pa. 231, the regulation attempted by the legislature in that act must, so far as it relates to the plaintiff and for so long as the present conditions continue, be adjudged to be unreasonable.
There remains now to be disposed of the question whether the act of April 5, 1907, is to be denied enforcement on the ground that by reason of the generality of its language it extends to interstate commerce and thus infringes on the province of the federal law. This question must be answered in the negative. It is, of course, not to be disputed that when, under its constitutional power to regulate commerce among the states, congress has undertaken the regulation of interstate railroad rates, the legislature of Pennsylvania has no authority to meddle with that matter. But a legislative intent to exceed constitutional rights and to violate fundamental law is never to be presumed, if the language of the statute can be satisfied by a contrary construction. Interpretatio fienda est ut res magis valeat.quam pereat. A statute is to be construed in connection with a constitutional provision in pari materia. The act with which we are concerned is, therefore, to be regarded as intended to apply only to that part of the passenger business of the railroads over which the legislative power of regulation extends, and since that business is not so confused with interstate passenger traffic as to be insusceptible of separate regulation, we hold that the act is not invalid for the reason last suggested.
Upon the whole case we are of opinion, and, therefore, find that, although with respect to its title and other matters of form no valid objection to the act of April 5, 1907, exists, its operation, so far as it relates to the Pennsylvania Railroad Company, is objectionable on constitutional grounds for the following reasons:
1. As a regulation by the legislature of the rates of fare for passengers on the lines constructed by the plaintiff under the act of April 13, 1846, between Harrisburg and Pittsburg and between Pittsburg and Erie, the act violates an existing contract between the plaintiff and the commonwealth, and so contravenes article I, sec. 10, of the constitution of the United States.
2. As a regulation of the plaintiff’s intrastate passenger business in its entirety the act, under existing circumstances, is unreasonable and confiscatory, and, by depriving the plaintiff of its property without due process of law, violates amendment XIV of the constitution of the United States.
3. Since-the taking from the plaintiff of the profitable use of its property invested in the intrastate passenger business may be regarded as a taking quoad hoc of that property for public purposes, and, since no just compensation is made therefor, the act violates article I, sec. 10, of the constitution of Pennsylvania.
4. Viewed as an alteration or revocation of the plaintiff’s franchise to establish and enforce over the lines of road that are now operated by it, and that have been leased or otherwise acquired by it since May 3, 1855, such rates as, within the maxima fixed by the second proviso of sec. 21 of the act of April 13, 1846, its president and directors may deem reasonable, the act of April 5, 1907, violates article XYI, sec. 10, of the constitution of Pennsylvania, because it does injustice to the corporators of the Pennsylvania Railroad Company by establishing so low a maximum rate of fare for the carriage of passengers as to render that branch of the plaintiff’s business unremunerative, but providing no compensation for the loss thereby occasioned.
We accordingly adjudge that the act of April 5, 1907, cannot be enforced so far as concerns the Pennsylvania Railroad Company, and that the county of Philadelphia should be restrained from demanding fines and attempting by action to collect them, if the maximum rate which that act attempts to establish be disregarded by the plaintiff.
Error assigned was decree entered in accordance with the terms of the opinion.
J. Howard Qendell, city solicitor, and M. Hcmvpton Todd, attorney general, with them Andrew W. Crawford and Ernest Lowengrund, assistant city solicitors, for appellant.
The legislature has the right to regulate the charges of railroad companies : Sharpless v. Mayor of Philadelphia, 21 Pa. 147 ; Atlantic Coast Line R. R. Co. v. North Carolina Corporation Commission. 206 U. S. 1 ; Ruggles v. Illinois, 108 U. S. 526, 536 ; Illinois Central R. R. Co. v. Illinois, 108 U. S. 541 ; Stone v. Ill. Cent. R. R. Co., 116 U. S. 347 ; Stone v. R. R. Co., 116 U. S. 352 ; Dow v. Beidelman, 125 U. S. 680 ; Charlotte, etc., R. R. Co. v. Gibbes, 142 U. S. 386 ; Chicago, etc., Ry. Co. v. Wellman, 143 U. S. 339 ; Pearsall v. Ry. Co., 161 U. S. 646.
The presumption in favor of the rate specified is very strong. The company must clearly show that it is so unjust as to bo “ confiscatory: ” Chesapeake & Potomac Tel. Co. v. Manning, 186 U. S. 238 ; Minneapolis & St. Louis R. R. Co. v. Minnesota, 186 U. S. 257 ; Chicago, etc., Ry. Co. v. Tompkins, 176 U. S. 167 ; Lake Shore, etc., Ry. Co. v. Smith, 173 U. S. 684 ; San Diego Land & Town Co. v. Jasper, 189 U. S. 439 ; Atlantic Coast Line R. R. Co. v. N. C. Corp. Commission, 206 U. S. 1 ; Steenerson v. Great Northern Ry. Co., 69 Minnesota, 353 ; State v. A. C. L. R. R. Co., 37 So. Repr. 657.
In determining whether a rate is reasonable the entire traffic of every kind must be taken into consideration. We cannot confine ourselves to passenger traffic alone, but must include the receipts from freight, expressage, packages and all other sources : Chicago & Grand Trunk Ry. Co. v. Wellman, 143 U. S. 339 ; Missouri Pac. Ry. Co. v. Smith, 60 Arkansas, 221 ; Atlantic Coast Line R. R. Co. v. North Carolina Corporation Commission, 206 U. S. 1 ; Com. v. Covington, etc., Bridge Co., 14 Ky. L. R. 836 ; St. Louis & San Francisco Ry. Co. v. Gill, 156 U. S. 649 ; M. & St. L. R. Co. v. Minnesota, 186 U. S. 257 ; Covington, etc., Turnpike Road Co. v. Sandford, 164 U. S. 578 ; Brabham v. A. C. L. R. R. Co., 11 Interstate Commerce Rep. 464 ; Artz v. Seaboard Air Line Ry. Co., 11 Interstate Commerce Rep. 458 ; Chicago, Milwaukee & St. Paul Ry. Co. v. Smith, 110 Fed. Repr. 473 ; Matthews v. Board of Corp. Commissioners, 106 Fed. Repr. 7 ; Railroad Commission Cases, 116 U. S. 307 ; Savannah Bureau v. C. & S. Ry. Co., 7 Interstate Commerce Rep. 901, 608, 609.
Plaintiff has not proved that the rate named in the statute is too low — much less that it is confiscatory.
Even if the plaintiff were entitled to segregate its passenger business, and if it could separate the capital incident thereto, and if the future business, expenses and profits could be foretold accurately, it does not follow that it is necessarily entitled to six per cent thereon, for several reasons.
The company is not the only one to be considered. The reasonable rights of the traveling public must be protected : Covington & Lexington Turnpike Co. v. Sandford, 164 U. S. 578 ; Dow v. Beidelman, 125 U. S. 680 ; Steenerson v. Ry. Co., 69 Minn. 353 ; Matthews v. Board of Corp. Commrs., 106 Fed. Repr. 7 ; Chicago, etc., Ry. Co. v. Tompkins, 176 U. S. 167;
The plaintiff’s charter does not give it immunity from regulation of rates by the legislature.
It is seriously questionable whether the power to regulate charges, which is one of the police powers of the state, can be bartered away by the legislature at all. The general principle certainly is that all governmental powers are held by the government as a trustee for the people: Butchers’ Union, Slaughter House Co. v. Crescent City Live Stock Landing Co., 111 U. S. 746 ; Mott v. Penna. R. R. Co., 30 Pa. 9.
The plaintiff having “ formally accepted the new constitution by a vote, duly passed, of its directors and stockholders, as referred to in the answer ” by writing filed on March 8, 1901, formally accepting “all its provisions and particularly the provisions of the 16th and 17th articles thereof” the legislature has the “ power to alter, revoke or annul ” the charter, “ whenever in their opinion it may be injurious to the citizens of this Commonwealth: ” McNeill’s Election, 111 Pa. 235 ; Tyrone Gas & Water Co. v. Tyrone Borough, 195 Pa. 566.
The charter was revocable at the time of the adoption of the present constitution : Com. v. Flannery, 203 Pa. 28.
Under art. XVI, section 3, relating to the police power, the legislature may regulate rates, even if it has not gained general'control of plaintiff’s charter.
The act of 1907 is a proper exercise of the reserved power of the legislature and does no injustice to the corporators: Wagner Free Institute v. Philadelphia, 132 Pa. 612 ; Com. v. Beneficial Asso., 10 Phila. 554 ; Gas Co. v. Mitchell, 1 Dauphin County Rep. 71 ; Zimmerman v. Perkiomen, etc., Turnpike Co., 81* Pa. 96 ; Peik v. Chicago, etc., Ry. Co., 94 U. S. 164.
John O. Johnson, with him Francis I. Qowen, for appellee.
By the terms of its charter appellee was vested with the right and power to itself determine what should be a reasonable rate to be charged for the transportation of passengers, and as the legislature reserved to itself no right either to control or interfere with such determination or to revoke or annul the grant itself, the right and power thus devolved upon and vested in appellee must be regarded and treated as secured to it by a contract with the state which the latter is powerless to revoke or impair: Philadelphia & Lancaster Turnpike Co. v. Gartland, 6 Phila. 128 ; Hartman v. Bechtel, 1 Woodward’s Decisions, 32 ; Stanislaus County v. Canal & Irrigation Co., 192 U. S. 201 ; Georgia Banking Co. v. Smith, 128 U. S. 174; Reagan v. Farmers’ Loan & Trust Co., 154 U. S. 362; Chicago, etc., R. R. Co. v. Iowa, 94 U. S. 155 ; Shields v. Ohio, 95 U. S. 319 ; City of Cleveland v. Cleveland City Ry. Co., 194 U. S. 517.
Nothing has transpired since the grant was thus made to appellee through and by its charter which has had the effect of converting such grant into one revocable at the will of the legislature or subject to alteration or amendment at its instance: Gloninger v. R. R. Co., 139 Pa. 13 ; Penna. R. R. Co. v. Miller, 132 U. S. 75 ; Com. v. Canal Co., 66 Pa. 41.
Even upon the assumption that the legislature has power to amend the charter of the appellee the act in question was not a valid exercise of such power, because:
a. Its passage was not warranted by the existence of a condition “ injurious to the citizens of the commonwealth,” a prerequisite to the exercise by the legislature of the power of amendment.
h. Its enforcement would do injustice to the corporators and stockholders of the appellee and, therefore, its enactment violated the restriction imposed by the constitution that in the exercise of the power of amendment no injustice should be done to stockholders: Com. v. R. R. Co., 58 Pa. 26 ; Wagner Free Institute v. Philadelphia, 132 Pa. 612 ; Hays v. Com., 82 Pa. 518 ; Cotting v. Kansas City Stock Yards Co., 183 U. S. 79 ; Louisville, etc., R. R. Co. v. McChord, 103 Fed. Repr. 216.
The enforcement of the act would so diminish the appellee’s receipts from its passenger traffic within the state of Pennsylvania as to make that business noncompensatory, thus leading to both a deprivation of its property without due process of law, and a denial to it of the equal protection of the laws: Smyth v. Ames, 169 U. S. 466.
The act, by its terms, extends to, and includes, all passenger traffic on any railroad within the commonwealth ; as well that which crosses the state line as that which begins and ends with the state and because it thus attempts to regulate interstate commerce, it is invalid and ineffective.
January 20, 1908 :

Opinion:
Opinion by
Mr. Chief Justice Mitchell,
It may be conceded that the legislature has a power of supervision over corporations exercising quasi public functions, which in general includes the right to regulate the rates and charges of railroads as common carriers. The principles on which the right is based as well as its extent and limitations have, however, been very broadly assumed, and in many the recent cases without adequate consideration of the exceptional nature of this legislative power exercised in derogation of the fundamental principle that the management of property belongs to its owner. But it is not necessary to discuss this point. Attention has been called to it merely that the reasoning and conclusions of some of the more recent decisions may not be accepted without due consideration.
The Pennsylvania Railroad was chartered by the Act-of April 13, 1846, P. L. 312, to construct and operate a railroad between what was then the borough — and is now the city — of Harrisburg and the city of Pittsburg. By section 21 of this act it is empowered, inter alia, from time to time to establish " such rates of toll or other compensation for the use of the said road and of said motive power and for the conveyance of passengers . as to the president and directors shall seem reasonable; provided, however, nevertheless, that . in the transportation of passengers no charge shall be made to exceed three cents per mile for through passengers, and three and a half cents per mile for way passengers."
By the Act of April 5, 1907, P. L. 59, entitled " An act to regulate the maximum rate and' minimum fare to be charged for transportation of passengers by railroad companies and prescribing the penalty for violation thereof," it was enacted, "Section 1. That after the thirtieth day of September, one thousand nine hundred and seven, no company operating a railroad, in whole or in part, in this Commonwealth, shall demand or receive more than two cents fare per mile, or for a fraction thereof, contracted to be traveled or traveled by any passenger on such railroad in this Commonwealth; Provided, however, that the minimum fare charged by such company need not be less than five cents." Sec. 2 imposes a penalty of $1,000 for each offense upon any railroad company that shall exact a higher rate of fare than is authorized by sec. 1, and it is provided that the penalty so incurred shall be payable to the county within whose limits the illegal charge is made. The present bill was filed by the Pennsylvania Rail road to enjoin the enforcement of this act against it as unconstitutional.
One of the contentions of the appellee sustained by the court below is that the right to fix rates given by the act of April 13, 1846, being in the nature of a contract between the railroad and the state cannot be impaired by subsequent legislation, and the Act of April 5, 1907, P. L. 59, is, therefore, not enforceable against it. On the same day, however, that the act incorporating the Pennsylvania Railroad Company was passed, a supplement to it was approved providing that nothing in the original act " shall be so construed as in any wise to impair the right of the legislature to pass such additional laws as may be deemed expedient in furtherance of the objects contemplated by said act, and for the better enforcement of the provisions thereof: " P. L. 326.
This supplement and its effect upon the act incorporating the appellee, however, were not considered by the court below because not brought to its attention, nor have they been argued here except incidentally after attention was called to them by a member of the court. In view of our reasons for affirming the decree of the court below, it is not essential that we now pass upon this question. If it were, we would order a reargument and dispose of it. For the present we leave the immunity of the Pennsylvania Railroad Company proper from legislation fixing passenger rates at a maximum below that which its board of directors are authorized to fix by the act of 1846, that being the only point raised by this appeal, as an open question.
The exact question to be determined on this appeal, therefore, is not the general constitutionality of the act of 1907, but the right to enforce it against the appellee. The same clause in the constitution that authorized its passage provides that such legislation shall do no injustice to the corporators of any company whose charter is thereby altered. The act is, therefore, to be read as if there was incorporated in it a clause that, " This act shall not be enforced against any corporation'if its provisions shall do injustice to the corporators thereof." Would the provisions of the act of 1907 do injustice to the corporators of the appellee ?
There are not wanting strong judicial expressions, in this state that whether a charter is injurious to the citizens is not a matter of arbitrary legislative opinion, and that there should at least be required the assignment of a valid ground for so declaring : Commonwealth v. Railroad Co., 58 Pa. 26 ; Hays v. Commonwealth, 82 Pa. 518 ; Williamsport Passenger Railway Co. v. Williamsport, 120 Pa. 1. The case of Wagner Free Institute v. Philadelphia, 132 Pa. 612, dealt with exemptions from taxation, which, as there said, is always and inherently a matter affecting public interests as to which the legislative control is paramount. The case does not close the general subject of the conclusiveness of legislative determination on the question of what is injurious to the citizens. There may arise cases where the legislative action would be so clearly capricious and unconstitutional as to require the courts to intervene, but for the present it is enough to say that, prima facie, it is a legislative question.
But. while the legislature is permitted to alter or revoke, it is prohibited from doing so in such manner that injustice will be done to the corporators. Whether the legislature has' attempted to enact a measure prohibited by the constitution is for the courts ; whether injustice has been done in any particular case is inherently and necessarily a judicial question.
The real question in the case is whether the act of 1907 transgresses the provisions of article XYI, section 10 that the legislative power to alter or annul shall be exercised only in such manner that no injustice shall be done to the corporators.
It is argued by appellee that the penalties imposed by the act for any disregard of its provisions are so great, and so out of proportion to the fault as to be evidence that they were not, in good faith intended to secure observance of the law, but to force acceptance of its terms by deterring a resort to the courts. So regarded it would clearly be an injustice to the corporators and unconstitutional. We do not find it necessary to pass upon this point, however, and refer to it only to avoid the inference that it is meant to be decided.
Whatever may be the law in other jurisdictions, the fundamental test in Pennsylvania is whether injustice in the constitutional sense has been done to the corporators. The direct question has so seldom arisen that it is quite bare of authorities. In other states, and in the absence of any cases of our own, it has been sometimes assumed that to be held invalid the provisions of the statute must be unreasonable to the extent of being confiscatory of the corporation's property or rights, and this phrase was used by the court below. But it is manifest that it is used in a special and qualified sense. The point of, injustice is reached long before that of confiscation, and to make the word confiscatory really appropriate it must be read, not in the sense of producing actual confiscation, but of having an inevitable tendency thereto.
The court below after receiving much evidence and giving it a most painstaking and elaborate consideration found that the aet does injustice to the corporators in that it reduces the returns from their property to such an extent as to render it unremunerative. As this is a question of fact the findings of the court cannot be disturbed unless shown to be clearly erroneous, and as this has not been shown we might well abide by the general rule and rest the case on this finding, but as the method of reaching the- fact in a case of such complicated elements is complained of, it is proper to discuss some special objections.
' It is claimed by appellant that the presumption in favor of the prescribed rate is very strong, and the company must clearly show that it is so unjust as to be confiscatory. The sense in which confiscatory must be understood has been already discussed. The court below conceded the general rule and held that " Any attempt by the legislature at the regulation of charges is presumptively reasonable. The burden of demonstrating its unreasonableness lies on him who objects to the regulation enacted." And further " Public service corporations in Pennsylvania are entitled to look for a rate of return, if their property will earn it, not less than the legal rate of interest, and a system of charges that yields no more income than is fairly requisite to maintain the plant, pay fixed charges and operating expenses, provide a suitable sinking fund for the payment of debts and pay a fair profit to the owners of the property cannot be said to be unreasonable : Brymer v. Butler Water Co., 179 Pa. 231." In so holding the court committed no error of which the appellant can complain. The presumption in favor of the prescribed rate is no more than the ordinary presumption in favor of the constitutionality of the acts of assembly. It has no special strength or sanctity, and in view of the public history of the passage of the act of 1907 without investigation and in obedience to a popular agitation for the same rate not only in Pennsylvania but over the whole country, it might well be said that very slight evidence would rebut the presumption in this case.
What was said in Brymer v. Water Company, 179 Pa. 231, was that the company was entitled to a fair return, not less than the legal rate of interest. In naming the legal rate the court was naming a minimum not maximum rate. Six per cent is the legal estimate of the legitimate profit from the ordinary safe use of money. No business man in 1816, even if now, went into a new and extensive venture of uncertain outcome without the hope of more than common interest. Because his judgment or foresight was good is no reason that he should be shorn of his profits in the result. What is a fair profit is a complicated and difficult question, but there are certain elements that are plainly to be regarded to avoid injustice, such as the original investment, the risks assumed at that time, the returns as compared with other enterprises as nearly similar as may be, the cost of maintenance and improvement, the prospects of increase and the present value in view of the preceding elements. Injustice is done by anything that fails to consider these, and to deal equitably with the private as well as the public interests involved. It is not necessarily regulated by what others would now make the venture for, under the present circumstances and with present knowledge. The public having long reaped the incidental profits from the development of the country by the enterprise and venture of capital, in the increased value of land, the opening of new and wider markets for crops and manufactures and the facility of intercourse and exchange for persons and property, the courts should not now ignore this aspect of the subject in considering the question of injustice to the corporators. In view of the evidence before the court and the proper elements with which it must be considered the court below certainly did not err against the appellant in finding that the statutory rates of fare would do injustice to the corporators.
Another objection to the method pursued in the investigation of this subject is that the court confined the inquiry to the passenger traffic instead of taking into consideration the entire traffic of every kind as appellant claims should be done.
This is the most urgently pressed of the appellant's points, but it does not carry conviction. It would be sufficient answer to say that the legislature itself in the act of 1901 has treated the passenger traffic as a separate and independent subject of examination and regulation. If the legislature may do that in ascertaining whether the charter franchise is injurious to the citizens of the commonwealth why may not the courts do the same in ascertaining whether injustice has been done to the corporators? Both are elements to be considered, and both are powers exercised under the same section of the constitution.
But independently of this, true business principles require that the passenger and freight traffic not only may, but should be separately considered. The intelligent business of the world is done in that way. Every merchant and manufacturer examines and ascertains the unprofitable branches of his business with a view to reducing or cutting them off entirely, and there is no reason why a railroad or other corporation should not be permitted to do the same thing as long as its substantial corporate duties under its franchise are performed. While the public has certain rights which in case of conflict must prevail, yet it must not be forgotten that even so-called public service corporations are private property organized and conducted for private corporate profit. And unless necessary for the fulfillment of their corporate duties they should not be required to do any part of their business in an unbusinesslike way with a resulting loss. If part is unprofitable it is neither good business nor justice to make it more so because the loss can be offset by profit on the rest. To concede that principle would, as the court below indicated, permit the legislature to compel the carriage of passengers practically for nothing though the inexorable result would be that freight must pay inequitable rates that passenger travel may be cheap. The corporation is entitled to make a fair profit on every branch of- its business subject to the limitation that its corporate duties must be performed even though at a loss. What is a fair profit is, as already said, a highly complicated and difficult question. The learned court below availed themselves of all the best evidence that was offered or shown to be attainable, considered it with exemplary patience and care, and their conclusion that the enforcement of the act of 1907 against the complainant would do injustice to the corporators is beyond just criticism.
Decree affirmed.