American Toll Bridge Co v. Railroad Commission of California

• Decision Date: 05 June 1939
• Docket Number: No. 704,704
• Parties: AMERICAN TOLL BRIDGE CO. v. RAILROAD COMMISSION OF CALIFORNIA et al
• Court: U.S. Supreme Court

307 U.S. 486

59 S.Ct. 948

83 L.Ed. 1414

AMERICAN TOLL BRIDGE CO.

v RAILROAD COMMISSION OF CALIFORNIA et al.

No. 704.

Argued April 21, 1939.

Decided June 5, 1939.

Mr. Max Thelen, of San Francisco, Cal., for appellant.

Mr. Ira H. Rowell, of San Francisco, Cal., for appellees.

Mr. Justice BUTLER delivered the opinion of the Court.

This appeal is from a judgment of the highest court of the State upholding an order of the state railroad commission that reduces tolls for use of appellant's bridge across the Carquinez Straits between the counties of Contra Costa and Solano. Appellant contends that the order violates Art. I, § 10, of the Constitution, U.S.C.A.; that the commission's procedure was repugnant to the due process clause of the Fourteenth Amendment, and that the order, in violation of that clause, prescribes rates that are confiscatory.

February 5, 1923, the board of supervisors of Contra Costa County, exerting power conferred by state legislation,¹ passed ordinance No. 171 granting to the Rodeo-Vallejo Ferry Company a franchise to construct and for 25 years to erate the Carquinez bridge. June 4, 1923, the same board granted to the Delta Bridge Corporation a like franchise for the construction and operation of a bridge across the San Joaquin River near Antioch, between the counties of Contra Costa and Sacramento. Each ordinance provides that, on the expiration of the franchise, the property rights, including title to the bridge, revert to the adjacent counties. Appellant became the owner of both franchises. The Antioch bridge was opened in January, 1926, and the Carquinez in May, 1927.

When the Carquinez bridge opened, the board of supervisors fixed tolls at 60 cents for automobiles and at 10 cents for each person in a vehicle or on foot. ² That scale was in operation when the commission made the order in question which reduced these charges to 45 and 5 cents, respectively. Jurisdiction over toll bridges having been conferred upon it by a statute of 1937,³ the commission in August of that year on its own motion commenced an investigation of all toll bridges. But, in October following, it commenced a separate proceeding solely to investigate reasonableness of Carquinez tolls. February 8, 1938, it announced its opinion and promulgated the order in question. Appellant obtained judicial review; the court upheld the order. Cal.Sup., 83 P.2d 1.

The statutory provisions authorizing the county board to grant the franchises, ordinance No. 171, and the grantees' acceptance constitute a contract between the parties. Contra Costa County v. American Toll Bridge Co., 1937, 10 Cal.2d 359, 74 P.2d 749. As to that, there is no controversy. But appellant contends that under the franchise it has a contract right that the bridge tolls shall not be reduced by the public authorities unless it shall first appear that they are yielding a rate in excess of 15 per cent upon the rate base specified by §§ 2845 and 2846, Political Code.

These sections provide:

§ 2845. 'The board of supervisors granting authority to construct a toll-bridge * * * must at the same time: * * * '2. Fix the amount of license tax to be paid by the person or corporation for taking tolls thereon, not less than three nor over one hundred dollars per month, payable annually;

'3. Fix the rate of tolls which may be collected for crossing the bridge * * * which must not raise annually an income exceeding fifteen per cent on the actual cost of the construction or erection and maintenance of the bridge * * * for the first year, nor on the fair cash value together with the repairs and maintenance thereof for any succeeding year; * * *.'⁴

§ 2846. 'The license tax and rate of toll fixed as provided in the preceding section must not be increased or diminished during the term of twenty years, at any time, unless it is shown to the satisfaction of the board of supervisors at the receipts from tolls in any one year is disproportionate to the cost of construction or erection, or the fair cash value thereof, together with the cost of all necessary repairs and maintenance of the bridge * * *. The license tax fixed by the board of supervisors$must not exceed ten per cent of the tolls annually collected.'

The state court held that § 2846 contemplates increases as well as reductions, limited by the 15 per cent maximum, at any time the disproportion is shown to exist. It construed the language of that section to be inconsistent with the intent to contract that appellant shall have a 15 per cent return, if yielded by the tolls specified in the franchise. The opinion explains that: 'Rather it is to be assumed that the legislature intended, not only to afford an adequate and proportionate return to the grantee, but that it also intended some measure of protection to the public's right to be charged not more than a reasonable toll for the use of the bridge. * * * In 1872, when section 2846 was enacted by the legislature, sufficient scope was allowed between both interests, public and private, to permit adequate elasticity in the exercise of the legislative rate-making function in the light of prevailing economic conditions. Such a statute does not savor of a contract obligation to the grantee. Its object was to delegate to and vest in the designated body the power to regulate tolls as circumscribed by the stated limitation.' 83 P.2d page 6.

Upon the issue whether the order is repugnant to the contract clause, 'No State shall * * * pass any * * * Law impairing the Obligation of Contracts,' state court's construction, will decide for state court's construction, will decided for itself whether, as claimed by appellant, the franchise by contract limits exertion of sovereign powers to regulate tolls. Georgia Ry. & Power Co. v. Decatur, 262 U.S. 432, 438, 43 S.Ct. 613, 615, 67 L.Ed. 1065; New York Rapid Transit Corp. v. New York, 303 U.S. 573, 593, 58 S.Ct. 721, 731, 82 L.Ed. 1024. And, if it plainly appears that it does, this Court will not hesitate so to adjudge. Detroit United Ry. v. Michigan, 242 U.S. 238, 251-253, 37 S.Ct. 87, 91, 92, 61 L.Ed. 268; City of Cleveland v. Cleveland City Ry. Co., 194 U.S. 517, 524, 536, 24 S.Ct. 756, 758, 763, 48 L.Ed. 1102; City of Detroit v. Detroit Citizens' Street Ry. Co., 184 U.S. 368, 382, 389, 22 S.Ct. 410, 416, 418, 46 L.Ed. 592; St. Cloud Public Service Co. v. St. Cloud, 265 U.S. 352, 44 S.Ct. 492, 68 L.Ed. 1050. Compare Georgia v. Chattanooga, 264 U.S. 472, 480, 44 S.Ct. 369, 370, 68 L.Ed. 796.

Upon an elaborate review of the California legislation relating to bridge tolls, appellant says that in the first period, 1850 to 1857, bridge franchises allowed owners to take only such tolls as the courts of sessions and, later, the county boards should fix annually; that in the second period, 1857 to 1864, tolls were limited to those fixed by county boards annually, subject to change by the legislature; that in the third period, 1862 to 1872, general statutes and special acts authorized such rates as the county boards should annually prescribe, declaring, however, that they should not be so low as to make income less than a specified percentage of a defined base. On that foundation, it maintains that there was an evolution of policy to grant to builders and operators of bridges contract rights as to tolls. In that light it examines the language of §§ 2845 and 2846 and concludes that the proper construction of the franchise in question is that unless the yield becomes in excess of 15 per cent the license tax must not be increased and the rate of toll must not be diminished.

We assume, without detailed examination, that the legislation so portrayed indicates that in the period next preceding 1872, when the provisions of § 2846 were enacted, the State had adopted the policy of safeguarding operators of toll bridges against rate reduction by county boards below specified levels. But that fact may not be employed to arrive at a construction not indicated by the language used. So far as concerns the point under consideration, the meaning of the statutory provision is plain. Section 2845 requires the county board, when granting the franchise, to fix the license tax within specified limits and a rate of toll, which must not raise annually an income exceeding 15 per cent of base. Section 2846 declares that the license tax and the rate of toll so fixed must not be diminished unless receipts are disproportionate to base. Thus plainly the commands are that at first the tolls must be fixed, but not to produce income above the 15 per cent specified, and that the tolls so fixed shall not be diminished unless yield is disproportionate to the defined base. Neither in text nor in reason is the 'fifteen per cent' prescribed as maximum yield tied to, or made the test by which to ascertain whether receipts from tolls are, 'disproportionate'. We construe these statutory provisions to negative appellant's claim that by the franchise in question the State bargained away power to reduce tolls for use of the Carquinez bridge unless annual return becomes more than 15 per cent. See e.g. Paducah v. Paducah Ry., 261 U.S. 267, 275, 43 S.Ct. 335, 338, 67 L.Ed. 647; Banton v. Belt Line Ry., 268 U.S. 413, 417-419, 45 S.Ct. 534, 535, 536, 69 L.Ed. 1020; Railroad Commission v. Los Angeles R. Co., 280 U.S. 145, 152, 155, 50 S.Ct. 71, 72, 73, 74 L.Ed. 234. The order is not repugnant to the contract clause.

Appellant claims that, in violation of the due process clause of the Fourteenth Amendment, the commission denied it a full and fair hearing and failed adequately to find the facts. The commission initiated the proceeding, entitled 'In the matter of the investigation upon the commission's own motion, into the rates, charges, contracts, classifications, rules and regulations of American Toll Bridge Company covering its operation of the toll bridge over the Carquinez Straits between the counties of Contra Costa and Solano'; gave appellant notice that the investigation...