American Brake Shoe & Foundry Co. v. Pittsburgh Rys. Co.

• Citation: 270 F. 812
• Decision Date: 01 January 1918
• Docket Number: 201.
• Parties: AMERICAN BRAKE SHOE & FOUNDRY CO. et al. v. PITTSBURGH RYS. CO.
• Court: U.S. District Court — Western District of Pennsylvania

270 F. 812

AMERICAN BRAKE SHOE & FOUNDRY CO. et al. v. PITTSBURGH RYS. CO.

No. 201.

United States District Court, W.D. Pennsylvania.

May Term, 1918

Howard W. Douglass, of McKeesport, Pa., for city of McKeesport.

Chas B. Prichard and Geo. N. Monro, Jr., both of Pittsburgh, Pa for city of Pittsburgh.

Gordon & Smith, Geo. E. Alter, and Geo. C. Bradshaw, all of Pittsburgh, Pa., for receivers.

Reed Smith, Shaw & Beal, of Pittsburgh, Pa., for Consolidated Traction Co. (Pittsburgh Railways Co.).

ORR District Judge.

It appears from the petition of the city of McKeesport that it embraces within its limits what was formerly the borough of Reynoldton; the latter being now the Tenth ward of the said city. It appears, also, that the Pittsburgh Railways Company which is now in the hands of receivers appointed by this court, was, at the time of the appointment of said receivers, operating lines of railway formerly owned and operated by the Dravosburg, Reynoldton & McKeesport Passenger Railway Company and the McKeesport Passenger Railway Company, both of which corporations, by various mergers, agreements, consolidations, and sales, have become part of the system of the Pittsburgh Railways Company.

With respect to the first of said two passenger railway companies, the borough of Reynoldton granted to the former a franchise by ordinance, which, among other things, provided that no license tax for borough purposes should be levied on said company for said franchise until after the expiration of five years from the beginning of operations, but further provided as follows:

'After the expiration of said period of five years, said company shall pay into the borough treasury such sums as license as counsel may hereafter provide for.'

With respect to the second of said passenger railway companies, the city of McKeesport, then the borough of McKeesport, passed an ordinance similar to that which is described as the ordinance of the borough of Reynoldton. The period of 5 years expressed in both of said ordinances was later extended to a period of 15 years.

After the said several companies had commenced operations, and after the expiration of the periods of 15 years, as mentioned in the said ordinances, the city of McKeesport passed two ordinances, one as successor of the borough of Reynoldton, levying a license fee of $2,000 per year, and the other as successor of the borough of McKeesport, levying a license fee of $8,000 per year, and provided for notice of such licenses to be given to the Pittsburgh Railways Company. In addition to the license fees fixed by the ordinances, there is a 10 per cent. penalty provided for in case of failure to pay the same, when due, under the terms of the ordinances.

The petition prays for an order directing the Pittsburgh Railways Company, and the receivers thereof, to pay certain of such license fees which are in default. The court cannot close its eyes upon the picture, so often presented in this case, of a largely extended street railway system, serving, as it does, various municipalities, perhaps exceeding 50 in number. Every one of said municipalities is more or less dependent upon said system for the reasonable accommodation of its inhabitants; yet, so far as has come to our knowledge, there is not one of them which did not exact some annual tribute from the Pittsburgh Railways Company at the time receivers were appointed. Such exactions do not appear to have been based upon any uniformity with respect to municipal requirements or with relation to the amount of service rendered to the people within their respective limits or the rentals therefrom. They are apparently the result of contracts more or less found in municipal ordinances. The variations between the ordinances indicate a disregard of substantial considerations in some of the contracts, in all of which the public are interested. The situation illustrated by the foregoing observations grows out of a lack of consideration of the obligations and duties of those who own public service corporations.

In every consideration of the relations between public service corporations and the public, it is necessary that certain fundamental principals be kept in mind. The public has an interest in every contract entered into by a public service corporation, whether it be a contract by writing and signed by both parties thereto, or a contract arising by reason of the passing of a municipal ordinance and its acceptance by the public service corporation intended to be affected thereby. Such contracts, because of the interest of the public therein, are not to be classed with those personal and private contracts, the impairment of which is forbidden by constitutional provisions. The public service corporation cannot charge undue and excessive rates, for such conduct would be oppressive to the public. On the other hand, the public cannot continue to use the instrumentalities of the private corporation without permitting to the owners thereof a fair return upon a fair value of such property (not dividends upon inflated capital or interest upon excessive bonded indebtedness), for such refusal would amount to confiscation. To avoid oppression on the one hand, and confiscation on the other, should be the mutual desire of the parties interested in such contracts. Where the relative duties are equally balanced, that is to say, when the desire of all parties may be realized in accordance with the foregoing suggestion, it is plain that all the obligations of a public service corporation are, and must naturally be, met by those of the public who are served by it.

The foregoing principles are really fundamental, and are growing more and more generally accepted as such, as appears by various recent decisions of the courts. An interesting case is Munn v. Illinois, 94 U.S. 113, 24 L.Ed. 77. There will be found an elaboration of some of the principles involved, with references to the common law of England, as well as to that of many of the states. By the Public Service Act of 1913 (Pa. St. 1920, Secs. 18057-18214), Pennsylvania gave legislative expression, in more or less concrete form to the foregoing principles, and created a commission with broad powers, to determine questions of contracts to which public service corporations might be parties. Certain contracts previously deemed valid have been held to have...