[238 U.S. 174, 175] Messrs. Henry H. Pierce, Edwin S. Mack, William J. Curtis, George P. Miller, and Arthur W. Fairchild for plaintiff in error.
Messrs. Walter Drew and Lester C. Manson, and Mr. W. C. Owen, Attorney General of Wisconsin, for defendant in error.
Mr. Daniel W. Hoan as amicus curioe.
Mr. Justice Day delivered the opinion of the court:
This suit originated in the circuit court of Dane county, Wisconsin, and was brought by the Milwaukee Electric Railway & Light Company against the Railroad Commission of Wisconsin. The plaintiff, a street railway company, organized under the laws of Wisconsin, and authorized to conduct a street railway business in the city of Milwaukee, sought to enjoin the Railroad Commission, organized under the laws of that state of 1905, from enforcing a certain order against the company, whereby the right of the railway company to charge fares upon its railway system had been reduced below what it was contended had been previously fixed by an ordinance of the city of Milwaukee, which, it was alleged, upon acceptance, constituted an irrevocable contract between the company and the city. In the allegations of the complaint it appears that on January 2, 1900, there was granted to the plaintiff the right to operate over certain streets, and in the ordinances of that date all franchises expiring prior to December 31, 1934, were extended to that date, and all franchises which would otherwise expire subsequently to that date were made to terminate at that time.
Section 6 of the ordinance provides:
The bill sets out the acceptance of this ordinance, and thereby it is claimed the company obtained the right to [238 U.S. 174, 178] charge, until December 31, 1934, a cash fare of 5 cents, and to sell tickets in packages of twenty-five for $1, or six for 25 cents, each of which tickets should entitle the holder to use the same upon the cars between the hours mentioned in the ordinance, and to have the privileges accorded to passengers paying 5 cents fare. In November, 1906, the city of Milwaukee filed a complaint with the defendant Railroad Commission for a reduction of rates of fare, and filed a similar complaint May 13th, 1908. This proceeding resulted in the order complained of, which did not interfere with the cash fare prescribed, but provided that the company should discontinue its rate of twenty five tickets for $1, and should sell tickets in packages of thirteen for 50 cents, which tickets were ordered to be accepted in payment of fare. It is alleged that this action of the Railroad Commission impairs the obligation of the contract between the city and the company, and takes the plaintiff's property without due process of law, in violation of 10 of article 1 of the Constitution of the United States and of the 14th Amendment thereto.
On the hearing in the court of first instance, it was held that there was no contract made by the passage and acceptance of the ordinance which we have quoted, and the complaint was accordingly dismissed. Upon appeal to the supreme court of Wisconsin that judgment was affirmed (153 Wis. 592, L.R.A.--, 142 N. W. 491, Ann. Cas. 1915A, 911). The case was heard before six judges of that court. Three held that the statute upon which the plaintiff relied as conferring authority upon a municipal corporation to make the contract in question did not authorize the making of a contract which would prevent the future exercise of the authority of the state to regulate the rates of fare by legislative action. A fourth judge expressed no view upon this phase of the case, specifically holding that under the Wisconsin Constitution there was no power to delegate to municipal corporations an authority [238 U.S. 174, 179] to make irrepealable contracts respecting rates. Two of the judges dissented upon the ground that there was an irrepealable contract, valid and binding between the company and the city, which was violated by the subsequent legislation creating and empowering the Railroad Commission, and because of the action of that body in reducing the rate of fare.
In the view we take of the case it is unnecessary to pass upon the question whether the ordinance had the effect to make a contract binding between the city and the company until subsequent legislative action by the state, or to decide whether the grant of the rights and privileges as to fares was, under the Wisconsin Constitution, revocable at the will of the legislature.
Section 1862 of the Revised Statutes of 1911 provides:
The fixing of rates which may be charged by public service corporations, of the character here involved, is a legislative function of the state, and while the right to make contracts which shall prevent the state during a given period from exercising this important power has been recognized and approved by judicial decisions, it has been uniformly held in this court that the renunciation of a sovereign right of this character must be evidenced by terms so clear and unequivocal as to permit of no doubt as to their proper construction. This proposition has been so frequently declared by decisions of this court as to render unnecessary any reference to the many cases in which the doctrine has been affirmed. The principle involved was well stated by Mr. Justice Moody in Home Teleph . & Teleg. Co. v. Los Angeles, 211 U.S. 265, 273 , 53 S. L. ed. 176, 182, 29 Sup. Ct. Rep. 50:
The chief justice of Wisconsin, who delivered the opinion in which two other judges concurred, did not call in question the right of the city to make a contract with a public utility corporation, fixing the rates to be charged for a definite period, which would bind the city itself, but placed his decision upon the ground that the section in question gave no distinct authority to the city to contract away the legislative authority of the state to fix tolls [238 U.S. 174, 181] and fares by lowering them if found to be excessive; that while the term 'grant' was used, he held the grant was to be upon terms such as the municipal authorities might determine, and that this language was more appropriate to the exercise of power by the municipality than to the making of a contract between parties. The language of the section certainly lends itself to this construction, and there is nothing in specific terms conferring the right to contract by agreement between parties, much less to make such contract during its existence exclusive of any further right of the state to act upon the subject in the exercise of its legislative authority. It authorizes the grant of the use of the streets upon such terms as the proper authorities shall determine, not upon such terms as the parties in interest shall agree to.
Among cases in this court specially relied upon by the plaintiff in error is Detroit v. Detroit Citizens' Street R. Co. 184 U.S. 368 , 46 L. ed. 592, 22 Sup. Ct. Rep. 410. It was therein held, quoting constructions of the supreme court of Michigan, that the legislation involved authorized the making of a contract between the city and the street railway company, which the city undertook to abrogate by subsequent ordinances; and the fact that the legislature had not attempted to interfere with the rights of the street railway company in Detroit was stated, and the extent of its power to interfere with the rights of the street railway company expressly held not to be involved in the case. In another case relied upon by plaintiff in error, Cleveland v. Cleveland City R. Co. 194 U.S. 517 , 48 L. ed. 1102, 24 Sup. Ct. Rep. 756, it was specifically stated (p. 534) that the courts of Ohio had held that the acceptance of ordinances of the character in question constituted a binding contract, and the Ohio statute was set forth and held to expressly authorize a binding contract for the period covered by the statute. In the case of Minneapolis v. Minneapolis Street R. Co. 215 U.S. 417 , 54 L. ed. 259, 30 Sup. Ct. Rep. 118, the ordinance which was held to constitute a binding contract for the rates of fare prescribed [238 U.S. 174, 182] therein was specifically validated by an act of the legislature of Minnesota subsequently passed.
It is true that this court has repeatedly held that the discharge of the duty imposed upon it by the Constitution to make effectual the provision that no state shall pass any law impairing the obligation of a contract requires this court to determine for itself whether there is a contract, and the extent of its binding obligation; and parties are not concluded in these respects by the determination and decisions of the courts of the states. While this is so, it has been frequently held that where a statute of a state is alleged to create or authorize a contract inviolable by subsequent legislation of the state, in determining its meaning much consideration is given to the decisions of the highest court of the state. Among other cases which have asserted this principle are Freeport Water Co. v. Freeport, 180 U.S. 587 , 45 L. ed. 679, 21 Sup. Ct. Rep. 493, and Vicksburg v. Vicksburg Waterworks Co. 206 U.S. 496, 509 , 51 S. L. ed. 1155, 1160, 27 Sup. Ct. Rep. 762.
Both sides contend that the decisions of the supreme court of the state have decided this controversy. The plaintiff in error insists that it is governed by Linden Land Co. v. Milwaukee Electric R. & Light Co. 107 Wis. 493, 83 N. W. 851. In that case an injunction was sought by a taxpayer and owner of property abutting upon the street, to enjoin the company from accepting the franchise and the state officers from receiving the acceptance of the ordinance of 1900. The Linden Land Company and another, as taxpayers and owners of land abutting upon the street, were afterwards brought in as plaintiffs, and the court, speaking of 1862, said the city was empowered to grant the use of streets and franchises to street railway companies upon such terms as the proper authorities should determine, and that that was a broad grant of discretionary powers, and also said that in the character of suit then before it, the right to maintain it depended upon whether there had been shown any wrongful squandering or surrender of the [238 U.S. 174, 183] moneys, property, or property rights of the city, or unlawful increase of the burdens of taxation threatened by the proposed ordinance, and held that the claim that parties had offered large sums of money for the franchise privileges granted to the company, and that the company itself had offered to pay large sums of money in case the city would grant the right to charge 5 cents fare until the year 1935, did not sustain the allegation that there was a squandering of the money and rights of the city, in rejecting the offers and enacting the ordinance. We do not find in this case any decision of the question here involved, as to whether the alleged contract between the city and the company would have the effect to deny, because of the provisions granting authority to the city in 1862, the subsequent right of the legislature to fix rates binding upon the company.
The chief justice in the opinion in the present case regarded the construction of 1862 as controlled by the previous case of Manitowoc v. Manitowoc & N. Traction Co. 145 Wis. 13, 140 Am. St. Rep. 1056, 129 N. W. 925. In that case, the supreme court of Wisconsin used the following language, which is quoted with approval by the chief justice in this case:
The chief justice further pointed out that 1863, which [238 U.S. 174, 184] was in question in the Manitowoc Case, was substantially the same as 1862, involved in the present case; for while 1863 authorized consent by municipal authorities to the use of streets upon such terms and subject to such rules and regulations and the payment of such license fees as the council or board may from time to time prescribe, it was the same in effect as 1862, authorizing municipal authorities to grant the use of streets upon such terms as they shall determine, and concluded:
While it is true that the opinion of the chief justice in this case was concurred in by only two other judges of the six who sat on this appeal, in view of the decision of the same court in the Manitowoc Case, we can have no doubt that the judicial interpretation of 1862 by the highest court of the state of Wisconsin denies authority to municipal corporations to make contracts concluding the state from the future exercise of its power to fix the rates which may be charged by such public service corporations as are here involved.
In view of the weight which this court gives in deciding questions involving the construction of legislative acts to decisions of the highest courts of the states in cases of alleged contracts, and our own inability to say that this statute unequivocally grants to the municipal authorities the power to deprive the legislature of the right to exercise in the future an acknowledged function of great public importance, we reach the conclusion that the judgment of the Supreme Court of Wisconsin in this case should be affirmed.
We may observe that the contention of deprivation of property without due process of law is practically disposed [238 U.S. 174, 185] of in what we have said. For if the state might still exercise its authority to fix rates notwithstanding the so-called contracting ordinance, the exercise of such lawful power could not deprive the plaintiff of property without due process.