Covington & L. Turnpike Road Co. v. Sandford

• Decision Date: 14 January 1893
• Citation: 20 S.W. 1031
• Parties: Covington & L. Turnpike Road Co. v. Sandford et al.
• Court: Kentucky Court of Appeals

20 S.W. 1031

Covington & L. Turnpike Road Co. v. Sandford et al.

Court of Appeals of Kentucky.

January 14, 1893

Appeal from chancery court, Kenton county.

"To be officially reported."

Injunction by A. P. Sandford and others against the Covington &amp Lexington Turnpike Road Company. From a judgment for plaintiffs, defendant appeals. Affirmed.

Pryor J.

The legislature of 1890 passed an act regulating the tolls on the Covington & Lexington Turnpike Road Company that the company maintains was in violation of its contract with the state by the express terms of its charter; and, further, that the rate of toll is such as amounts to a destruction of the franchise, and is equivalent to a taking of private property for public use without compensation. The original act of incorporation was passed in the year 1834, with the power to construct a turnpike from Covington, through Williamstown, in Grant county, and through Georgetown, in the county of Scott, and ending at the city of Lexington. By a section of the act of incorporation it is provided "that if, at the expiration of five years after the road has been completed, it should appear that for the two years next preceding the net annual dividends shall have exceeded the average of fourteen per cent. per annum, then and in that case, the legislature reserves to itself the right, upon the fact being made known, to reduce the rates of toll so that it shall give that amount of net dividends, and no more." After this road had been completed as far as Williamstown, in Grant county, the legislature, in the year 1839, authorized a separate board of directors to be elected by the stockholders for the purpose of superintending the construction of the road from Williamstown, on to Lexington at the same time giving the stockholders the power to elect a separate board for the part of the turnpike that had been constructed between Covington and Williamstown. In the year 1851 the act of incorporation was amended so as to incorporate the two divisions of the road into two separate and independent corporations. The one corporation of that part of the road north of Williamstown, between that place and Covington, was styled the Covington & Lexington Turnpike Road Company, and the corporation controlling the road south of Williamstown, and between that place and Georgetown, was styled the Georgetown & Dry Ridge Turnpike Road Company. Each company had the exclusive control of its road, and the one was in no wise responsible for the acts and doings of the other; "each to elect its own president and directors, to declare its own dividends, and pay the same to its own stockholders, each company possessing and retaining all the powers, rights, and capacities in severalty granted by the act of incorporation and the amendments thereto to the original company, and subject to all the restrictions to which said company is subject, and neither company shall be liable for the debts and contracts of the other." In the year 1865 the legislature amended the act incorporating the Covington & Lexington Turnpike Road Company by reducing the rates of toll, or regulating them in a different manner from that provided by the original act, passed in 1834, thereby assuming the right to fix the tolls on the road, as if no contract had been made by the terms of the original grant. This amendment was accepted by the corporation, and it has, so far as this record shows, conformed to its provisions. If the original act of incorporation created a contract between the state and the turnpike company, it is contended by the appellees that the act of 1851, creating two distinct corporations out of one, and making them in every respect independent of each other, subjected both to legislative control in regard to tolls, while the appellant maintains that the provisions of the act creating the two corporations, with "each possessing and retaining all the rights, powers, and capacities of the original corporation," carried with it the contract, by which a net profit of 14 per cent. was allowed the company before any legislative interference could be had. If, prior to the act of 1856, now embodied in the General Statutes, a provision was inserted in a charter by which a corporation was invested with the power to fix its own cost of transportation to a limit designated, then there might be some reason for sustaining the exemptions. This was, in effect, decided by the supreme court in the case of Railroad, etc., Co. v. Smith, reported in 128 U.S. 174, 9 S.Ct. 47, but then, as was said in the case cited, "the exemption must appear by such clear and unmistakable language that it cannot be reasonably construed consistently with the reservation of power by the state." In the case of Evansville, H. & N. R. Co. v. Com., reported in 9 Bush, 438, the act of the legislature provided "that the franchises and rights of the Henderson & Nashville Railroad Company, purchased by the Evansville, Henderson & Nashville Railroad Company, are hereby granted to the Evansville, Henderson & Nashville Railroad Company." There was an exemption from taxation in the road or corporation sold and transferred to the purchaser, the Evansville Railroad Company, and the question presented in that case was, did the purchaser, by reason of its purchase of the franchise and rights of the old company, become entitled to exemption from taxation? This court held not, and said, "We cannot give to this language the comprehensive meaning or construction contended for by the appellant," and denied the relief. The privilege of operating the road with all the rights pertaining to such a franchise, to enable its successful operation, would pass to the purchaser, but the exemption from taxation is not such a right, and must be regarded as applying alone to the corporation in whose behalf the exemption is made, and not to a purchaser, unless, by an express provision of the grant, the exemption follows. In this case the liability and duties owing the state and the public by the one corporation had been severed by the act of 1839, and by the act of 1851 two new corporations were created, with the rights and powers of the one entirely distinct from the other, and no means of ascertaining what per cent. the old corporation would have made upon its stock. In fact the old corporation was extinct; and to hold that the new corporations

were exempt from legislative interference would be to restrain the exercise of legislative power by implication when a reasonable construction of the new grants must lead to a different conclusion. In the case of State v. Maine Cent. R. Co., 66 Me. 488, certain railroad companies had provisions in their charters to the effect "that whenever the net annual income of the company, amounting to ten per cent. upon the cost of the road and its appendages and expenses, exceeded ten per cent., one moiety of the sum exceeding ten per cent. should be paid into the treasury, and that no other tax should ever be levied or assessed on the corporation, or any of its privileges or franchises. Afterwards these corporations were consolidated by an agreement of the stockholders, the act of consolidation providing that the one corporation into which all had been merged should have all the powers, privileges and immunities possessed by each corporation entering into the consolidation agreement, etc. This exemption from taxation found in the charter of each...