Atl. Coast Elec. Ry. Co. v. Bd. of Pub. Util. Com'rs

• Decision Date: 17 June 1918
• Docket Number: No. 68.,68.
• Citation: 104 A. 218
• Parties: Atlantic Coast electric ry. co. v. board of public utility com'rs et al.
• Court: New Jersey Supreme Court

104 A. 218

Atlantic Coast electric ry. co.

v. board of public utility com'rs et al.

No. 68.

Court of Errors and Appeals of New Jersey.

June 17, 1918.

(Syllabus by the Court.)

Walker, Ch., and White, J., dissenting.

Appeal from Supreme Court.

Certiorari on the application of the Atlantic Coast Electric Railway Company to review an order of the Board of Public Utility Commissioners as to rates in the borough of Bradley Beach. The order was set aside (89 N. J. Law, 407, 99 Atl. 395), and defendants appeal. Reversed.

L. Edward Herrmann, of Jersey City, for appellant Public Utility Com'rs. Robert H. McCarter, of Newark (Durand, Ivins & Carton, of Asbury Park, on the brief), for appellee:

SWAYZE J. The question is whether the ordinance of Bradley Beach and its acceptance by the street railway company made a contract which the state of New Jersey could not thereafter control, for, unless the state was deprived of its control by the act of the municipality, the Board of Public Utility Commissioners is free to act under authority of the act of 1911 by which it was created. The grant of power is strictly construed in favor of the state just as all grants of corporate power are strictly construed. Meday v. Rutherford, 65 N. J. Law, 645, 48 Atl. 529. The Senate and General Assembly, in whom by our Constitution the legislative power is vested, must necessarily, as the representative of all the people of the state, be held to retain all sovereign powers, except as far as they have by unmistakable language intrusted them to others. Our Constitution does not, like the Constitutions of some states, confer upon municipalities the right to grant street franchises. We have been careful to keep the sovereignty of the state unimpaired, and have not parceled out the sovereign powers among minor political subdivisions. Municipalities with us act solely by virtue of legislative authority and as legislative agents. The Legislature may intrust to municipal corporations, or even, as in the case of eminent domain, to private corporations, certain powers, and may even authorize them to make irrepealable contracts; but the courts ought to be, as they have been, astute to see that such powers are not unnecessarily extended by implication.

The powers of municipalities in the granting of franchises to street railways are to be found in the traction act of 1893 (C. S. 5021) and the act of 1896 (C. S. 5040). They are limited to giving consent to the construction, operation, and maintenance of the street railway, the location of tracks, and imposing lawful restrictions.

The peculiar language of the acts is noteworthy. They nowhere expressly authorize the municipality to contract; they nowhere declare that the consent and acceptance constitute a contract. Section 32 merely declares that the consent and acceptance shall have the "force and effect" of a contract. This language would be unnecessary, if the consent and acceptance were in fact a contract, in the full sense of the word, for a contract necessarily has such force and effect. It must be because the consent and acceptance are in the nature of municipal legislation, rather than of private agreement, that the Legislature thought it necessary to add that they should have the force and effect of a contract. We must, indeed, attribute to the words all the meaning that the Legislature meant to attach thereto; but the question is what force and effect was meant, since they are clearly subject to some limitation. The consent and acceptance are surely subject to the taxing power and the police power of the state. No one would suggest that the power to consent and impose lawful restrictions upon the street railway company could be so exercised as to deprive the state government of its general control over the highways in which the rails are laid, including the power to vacate, to regulate speed of vehicles, to enact a law of the road, to give fire apparatus the right of way, to transfer control to county boards or to the state, instead of the municipality, and to determine as to other matters of police. Northern Pacific Railway v. Duluth, 208 U. S. 583, 28 Sup. Ct. 341, 52 In Ed. 630, and cases there cited. So, also, it is quite inconceivable that the municipality could, by its ordinance granting consent, make provisions that would limit the taxing power of the state, whether by granting exemption from local taxes or by special contract as to amount or method of assessment. To that extent, surely, the ordinance could not have the force and effect of a contract. To what extent does the ordinance limit the other sovereign power of controlling rates of public utility companies?

It is well settled that a power to fix rates may be delegated to the municipality, and that rates so fixed may amount to an irrepealable contract, binding future Legislatures. The leading cases are cited by the Supreme Court. But, as was said in Home Telephone Co. v. Los Angeles, 211 U. S. 265, 273, 29 Sup. Ct. 50, 52 (53 L. Ed. 176):

"For the very reason that such a contract has the effect of extinguishing pro tanto an undoubted power of government, both its existence and the authority to make it must clearly and unmistakably appear, and all doubts must be resolved in favor of the continuance of the power."

In that case the city charter gave power to regulate telephone services and the use of telephones within the city, and to fix and determine the charges for telephones and telephone service and connection. This as the court said, is "ample authority to exercise the governmental power of regulating charges, but it is no authority to enter into a contract to abandon the governmental power itself. It speaks in words appropriate to describe the authority to exercise the governmental power, but entirely unfitted to describe the authority to contract. It authorizes command, but not agreement." And the court made a distinction between an ordinance "to fix and determine the charges" and an ordinance to "agree" upon the charges. In that case, the franchise had been sold by the municipality under statutory authority for a valuable consideration, and an ordinance had been passed granting the franchise and providing that the charges for service should not exceed specific amounts. Afterward the city passed an ordinance establishing lower rates. The later ordinance was held valid. Here the subsequent action was by municipal ordinance. In a later case, the subsequent action was by a state board. Milwaukee Electric Railway v. Wisconsin R. R. Comm., 238 U. S. 174, 35 Sup. Ct. 820, 59 L. Ed. 1254. In that case the power of the municipality under the act of the Legislature was to "grant" the rights to street railways to use the streets upon such terms as the proper authorities should determine. The ordinance authorized the street railway company to charge a fare not to exceed 5 cents and required the sale of 25 5-cent tickets for a dollar. Later an order of the Wisconsin Railroad Commission required the sale of 13 tickets for 50 cents. The order was held valid. The opinions in these cases review the earlier precedents upon which our Supreme Court relied in the present case, and show that those precedents arose under an express power to contract, or under statutes which ratified the municipal action and in effect made it the action of the Legislature itself. There is no such statute in New Jersey. Since the ultimate decision in cases where a claim is made to an irrepealable contract must rest with the United States Supreme Court, we must follow their decisions.

There is, as we have already said, no express grant of power to the municipality to fix rates or to contract as to rates. The power is implied from the power to grant or refuse consent to a location of tracks and to impose lawful restrictions. Jersey City & Hoboken Horse R. Co. v. Jersey City & Bergen R. Co., 21 N. J. Eq. 550; Jersey City v. Jersey City & Bergen Railway Co., 70 N. J. Law, 360, 57 Atl. 445. Neither in section 1 nor section 7 of the act of 1893, nor in the act of 1896, is there any mention of a contract; nor does the title of the ordinance granting consent indicate an intention to contract as to rates of fare, or even to impose lawful restrictions. It purports only to grant consent to the construction, operation and maintainance of a new line of street railway, a location of the route, and a location of the tracks and rails. Since the power to contract as to fares is only an implied power, the implication ought not to be extended so as to restrict the sovereign power of the state, unless we are compelled to that result by the necessity of giving meaning to the words "force and effect of a contract." Such a result is not necessary. Full effect can be given to the language by holding that the force and effect of a contract given...