Broad River Power Co v. State of South Carolina Daniel

• Decision Date: 19 May 1930
• Docket Number: No. 528,528
• Citation: 74 L.Ed. 1023,50 S.Ct. 401,281 U.S. 537
• Parties: BROAD RIVER POWER CO. et al. v. STATE OF SOUTH CAROLINA ex rel. DANIEL, Atty. Gen
• Court: U.S. Supreme Court

281 U.S. 537

50 S.Ct. 401

74 L.Ed. 1023

BROAD RIVER POWER CO. et al.

v STATE OF SOUTH CAROLINA ex rel. DANIEL, Atty. Gen.

No. 528.

Argued May 2, 1930.

Decided May 19, 1930.

[Syllabus from pages 537-539 intentionally omitted]

Mr. Wm. Marshall Bullitt, of Louisville, Ky., for

petitioners.

Messrs. Cordie Page and Irvine F. Belser, both of Columbia, S. C., for respondent.

Mr. Justice STONE delivered the opinion of the Court.

This case is here on certiorari, 280 U. S. 551, 50 S. Ct. 162, 74 L. Ed. —, to review a judgment of the Supreme Court of South Carolina, adjudging the petitioners, the Broad River Power Company and its subsidiary, the Columbia Railway Cas & Electric Company, to be jointly responsible for the operation of an electric street railway system in Columbia, S. C., and directing them to resume its operation, which they had abandoned. 154 S. C. , 153 S. E. 537. The proceeding, in the nature of mandamus, was brought in the state Supreme Court to compel the operation of the system by petitioners. By their answer they set up that the railway was being operated by the railway company at a loss under a franchise separate and distinct from the franchise to make and distribute electric light and power of the Broad River Power Company, whose business is concededly profitable; that the continued operation of the railway under compulsion of the court would deprive respondents of their property without due process of law in violation of the Fourteenth Amendment of the Federal Constitution.

The Supreme Court, upon consideration of the evidence taken before a referee, held (a) that, although the books of the street railway showed large financial losses, it could be operated at a profit if properly managed; (b) that the charter and certain city ordinances under which the street railway system was constructed and operated, and certain extension line and right of way agreements, are effective as contracts imposing on petitioners a duty to operate the system; and (c) that the privilege of operating the street railway is inseparable from that of operating the electric power and light system, and that together they constitute a unified franchise, which cannot be abandoned in part and retained in part without the consent of the state; that so long as respondents retain and operate their electric power system they cannot be permitted to abandon their street railway system. Each of these conclusions is sharply challenged by respondents, but, in the view we take, only the third need be considered here.

Whether the state court has denied to rights asserted under local law the protection which the Constitution guarantees is a question upon which the petitioners are entitled to invoke the judgment of this Court. Even though the constitutional protection invoked be denied on nonfederal grounds, it is the province of this Court to inquire whether the decision of the state court rests upon a fair or substantial basis. If unsubstantial, constitutional obligations may not be thus evaded. Fox River Paper Co. v. Railroad Commission of Wisconsin, 274 U. S. 651, 655, 47 S. Ct. 669, 71 L. Ed. 1279; Ward v. Love County, 253 U. S. 17, 22, 40 S. Ct. 419, 64 L. Ed. 751; Enterprise Irrigation District v. Canal Co., 243 U. S. 157, 164, 37 S. Ct. 318, 61 L. Ed. 644. But, if there is no evasion of the constitutional issue, Nickel v. Cole, 256 U. S. 222, 225, 41 S. Ct. 467, 65 L. Ed. 900; Vandalia Railroad v. Indiana, 207 U. S. 359, 367, 28 S. Ct. 130, 52 L. Ed. 246, and the nonfederal ground of decision has fair support, Fox River Paper Co. v. Railroad Commission, supra, page 657 of 274 U. S. 47 S. Ct. 669, 71 L. Ed. 1279; Enterprise Irrigation District v. Canal Co., supra; Leathe v. Thomas 207 U. S. 93, 28 S. Ct. 30, 52 L. Ed. 118; Vandalia Railroad Co. v. Indiana, supra; Sauer v. New York, 206 U. S. 536, 27 S. Ct. 686, 51 L. Ed. 1176, this Court will not inquire whether the rule applied by the state court is right or wrong, or substitute its own view of what should be deemed the better rule for that of the state court.

The predecessor in interest of the Columbia Electric Gas & Railway Company, the petitioner, was incorporated in 1890 by special act of the Legislature, S. C. Acts of 1890, p. 969, under the name of Columbia Electric Street & Suburban Railway & Electric Power Company, later changed to the Columbia Electric Street Railway Light & Power Company, called the Consolidated Company and, still later, in 1911, changed to its present name. Its corporate life was fixed at thirty years and it was given power, upon the consent of the city council, to construct or acquire railway tracks through any streets of the city of Columbia, to extend them into the country a distance of five miles from the state capital, and to operate cars with electric power over its tracks for the transportation of passengers and freight and to contract for and provide electric power for any other purpose. The act was continued in force provided the 'company begins to operate its railways in said city within five years.'

An Act of December 16, 1891, S. C. Acts of 1891, p. 1453, authorized the consolidation of this company with the Congaree Gas & Electric Company. The latter had been incorporated under the Act of December 24, 1887, S. C. Acts of 1887, p. 1103, for a period of thirty years, with the power, not now involved, to manufacture and distribute gas, and power to sell and distribute light, power, and heat 'made from electricity,' and for that purpose, subject to municipal ordinances, to erect poles and conductors. The Consolidation Act recited that these two companies had agreed to consolidate their franchises and privileges, and authorized them to do so by transfer of their property, franchises, and privileges by deed of indenture to the new consolidated company. This company was incorporated for fifty years, with the usual corporate powers. The act provided that it should be vested with the franchises and subject to the liabilities of the consolidated companies. It was also authorized to acquire the property and franchise of the Columbia Street Railway Company, incorporated for thirty years by Act of February 9, 1882 (17 St. at Large, p. 876), with a franchise to operate horse cars over tracks in the city streets.

The consolidation was effected as authorized. The Consolidated Company acquired the line of street railway of the horse car company, established electric power plants and, under authority of City Ordinance, §§ 561, 562, of 1892, laid additional tracks and electrified the system by erecting poles and wires in the streets; also, so far as practicable, using them and its rights of way in its electric light and power business. from the organization of the Consolidated Company until 1925, both the street railway and power business of the Consolidated Company were expanded as a single business, its capital stock was increased from time to time, and the system of accounts was such that it did not disclose whether its power system was constructed more from the proceeds of its street railway or its power business.

Certain facts in this recital of corporate history are of persuasive if not controlling significance in determining the status of the franchise of the Consolidated Company. The Consolidated Company was a new corporation. Its franchises and privileges were granted for its corporate life, extending beyond the duration of the franchises of the two companies consolidated, all of which would have expired before 1921. It had acquired the franchises of the two consolidated companies, one in terms a franchise to operate a railway and a power system, the railway system being for practical purposes dependent upon the power system for its operation, and the privilege of operating both being conditional upon the establishment of the railway system within five years. The Consolidation Act plainly looked to a consolidation of the franchises by the two companies. None of the special legislative acts defining the privileges conferred upon these several corporations contains any words affirmatively providing that any part of the privileges granted should be deemed separable, or that they might be exercised independently of any other.

The Supreme Court of South Carolina, in referring to this corporate history and the effect of the Consolidation Act, said (page ___ of 154 S. C., 153 S. E. 550): 'When the new company in compliance with this act effected the consolidation, and in pursuance of the provisions of the act, built, constructed, and operated, its electric railway, light and power properties, as parts of one business for nearly 40 years,' these rights, powers, and privileges became inseparably bound together and cannot be separated. As contended by the petitioners (respondents here), 'such diversity as there was in the conditions of the former franchises became obliterated and extinguished by the major purpose of the new Act-namely the consolidation of all powers into one Company for the greater benefit of the public."

In the light of the familiar rule that franchises are to be strictly construed, and that construction adopted which works the least harm to the public, see Blair v. Chicago, 201 U. S. 400, 471, 26 S. Ct. 427, 50 L. Ed. 801; Northwestern Fertilizing Co. v. Hyde Park, 97 U. S. 659, 666, 24 L. Ed. 1036; Slidell v. Grandjean, 111 U. S. 412, 4 S. Ct. 475, 28 L. Ed....