Commonwealth v. Covington & C. Bridge Co.

• Decision Date: 25 March 1893
• Citation: 21 S.W. 1042
• Parties: COMMONWEALTH v. COVINGTON & C. BRIDGE CO. SAME v. COVINGTON & C. EL. RY. & BRIDGE & TRANSFER CO. COVINGTON & C. BRIDGE CO. v. COMMONWEALTH.
• Court: Kentucky Court of Appeals

21 S.W. 1042

COMMONWEALTH v. COVINGTON & C. BRIDGE CO.

SAME v. COVINGTON & C. EL. RY. & BRIDGE & TRANSFER CO.

COVINGTON & C. BRIDGE CO. v. COMMONWEALTH.

Court of Appeals of Kentucky.

March 25, 1893

Appeal from circuit court, Kenton county.

To be officially reported.

The Covington & Cincinnati Bridge Company and the Covington &amp Cincinnati Elevated Railway & Bridge & Transfer Company were indicted for noncompliance with Act March 31, 1890 regulating the tolls to be charged on bridges owned by them. From a judgment for defendants on demurrer the commonwealth appeals. Reversed. The Covington & Cincinnati Bridge Company was also indicted for noncompliance with said act in regard to charges on a ferry operated by it. From a judgment of conviction, defendant appeals. Reversed.

Wm Goebel, Wm. J. Hendrick, and Reid Rogers, for the Commonwealth.

Wadsworth & Son, W. H. Jackson, W. M. Ramsey, J. T. & C. H. Fisk, and O'Hara & Bryan, for bridge companies.

PRYOR J.

These three cases will be considered together, as similar questions are involved on each appeal. The bridge company, the appellant in the one case and the appellee in the other, was indicted for its refusal to comply with the provisions of an act of the legislature passed on the 31st of March in the year 1890, regulating the tolls to be charged for those passing over its bridge on foot, in vehicles, or otherwise and also for refusing to comply with the provisions of the same act, that also regulated the charges on its ferry, that it had purchased under legislative authority, and was operating in transporting freight, and passengers across the Ohio river between the cities of Covington and Cincinnati, etc. The Covington & Cincinnati Elevated Railroad & Transfer & Bridge Company was indicted for violating the same statute, and in like manner.

It is contended, and was so adjudged by the court below, that the legislation of March, 1890, reducing the toll on both bridges, was in violation of section 10, art. 1, of the constitution of the United States, prohibiting the passing of laws impairing the obligation of contracts, and also of section 20, art. 13, of the constitution of this state, containing a like provision. In regard to the ferry it is also maintained that the reduction of tolls by the act of 1890 has so lessened its revenues as to place the receipts below the expenses, and that its effect is to destroy the franchise, and is equivalent to the taking of private property for public use without compensation, or the appropriation of private property for the use of the public without due process of law. On the 17th of February in the year 1846 the charter of the appellee was passed, with its capital stock fixed at $300,000, and the provision in relation to the rates of toll to be charged for the transportation of freight, live stock, passengers, etc., over its bridge between the cities of Covington and Cincinnati is found in section 8 of the act of incorporation, that reads as follows: "That the president and directors shall have the right to fix the rates of toll for passing over said bridge, and to collect the same from all and every person or persons passing thereon with their goods, carriages, or animals of every description or kind: provided, however, that the said company shall pay before the legislature of this state a correct statement of the cost of said bridge, and an annual statement of the tolls received for passing the same, and also the cost of keeping said bridge in repair, and of the other necessary expenses of the company; and the said president and directors shall, from time to time, reduce the rates of toll, so that the net profits of said bridge shall not exceed 15 per cent. per annum, after the proper deductions are made for repairs and charges of other descriptions. Toll gates shall be kept, and tolls received at each end of the bridge, and the rates of tolls shall be posted up in some conspicuous place where toll is demanded." On the 5th of February, 1861, the capital stock was increased to $1,000,000, and the company also authorized to issue one half of the amount in preferred stock, provided "that it shall be lawful to prefer such stock to the extent of fifteen per cent. per annum, and no more." By an act approved on the 21st of January, 1865, the capital stock was increased to $1,250,000, the additional $250,000 to be held as preferred stock. The bridge was opened for travel in the year 1867, after a struggle for nearly 20 years to raise money in order to secure its completion. The record shows that this bridge cost (its construction) $1,785,000, and the receipts from the bridge since its construction shows a payment to the preferred stockholders on an average of 7.8 per cent. per annum, and the net earnings during that period would have paid on the original cost 4.82 per cent. per annum. In a controversy between the nonpreferred and the preferred stockholders, coming to this court by an appeal, and reported in 10 Bush, 69, it was held that the action of the board in issuing preferred stock was legal, and the entire earnings have been applied, after paying expenses, to those who hold the preferred stock, and they are realizing a handsome dividend on the investment, and will receive as much as 6 per cent. on the reduction of the tolls as made by the act of 1890. Such is the history of this great enterprise from the grant of its charter, in the year 1846, up to the passage of the act of 1890, by which the power to fix the tolls was taken from the grantee and assumed by the grantors, for the reason, as the state maintains, that no contract ever existed between the state and the bridge company by which legislative control in the regulation of tolls was surrendered. We understand the rule to be well settled by numerous decisions of the supreme court that the regulation of tolls or other charges made by a corporation or an individual for the use of his or its property by the public is a governmental power, and, when such a power is contracted away by the sovereign, it must be done by positive grant, or the use of such language in the charter or grant as carries with it necessarily an abandonment of legislative control.

The question, therefore, arising in this case is: "Did the legislature, by section 8 of appellee's charter surrender its power to regulate the toll on appellee's bridge so long as the company realized not exceeding 15 per cent. on the investment? It is true, as maintained by the state, that no repeal has been made of the right of the appellee to make 15 per cent. of annual net profit, but when the tolls are reduced at least 25 per cent. less than the rates fixed by the corporation, it must be assumed that no such income can be realized as 15 per cent. per annum, and, if a contract exists, it must be regarded as impaired by the legislation of 1890, as under that act the annual net profits will be greatly reduced. The case of Hamilton v. Keith, reported in 5 Bush, 458, comes nearer sustaining the views of counsel for the appellee and the judgment below than any case to which our attention has been called. The charter of the Covington & Lexington Railroad Company was amended on the 5th of February, 1854, as follows: "The rates of freight to be charged by said company shall be fixed by the directory, and may be by the ton, hundred, car, or specific article: provided, when the charge shall be by the ton or barrel, the through rate shall not exceed three and one half mills per mile per one hundred pounds, nor one cent per mile per barrel, and other through rates in proportion." By another amendment of March, 1865, the company was authorized to increase its legal rates 25 per cent. on freight and passengers from Covington to Lexington, and vice versa. By an act passed in the year 1869, the sixth section of the amended charter of 1854 was repealed, and a tariff of way freights established, not to exceed for 50 miles or over 25 per cent. per mile over the rates of through freights. Hamilton tendered a lot of freight, and demanded that it be carried at the rates established by the act of 1869, and, the company refusing, an action was instituted against the company, and this court held that the sixth section of the amended act of 1854, providing that "the company might charge such rates of freight as shall be fixed by the directors," was a contract, and, for the reason that it became a part of the charter, that it was as inviolable as any other privilege conferred, and therefore in violation of both the federal and state constitutions. The opinion in that case was a clear misconception of the doctrine of the Dartmouth College Case, and was delivered before any adjudication of the supreme court in regard to the governmental powers of state legislatures in reference to grants made private corporations where private property was clothed with a public use, and for that use the public required to pay certain rates or charges to the corporation. Mr. Justice Cooley, in treating of that clause of the federal constitution forbidding the states to pass laws impairing the obligation of contracts, says: "And it has been held without dissent that that clause does not remove from state control the rights and properties which depend for their existence or enforcement upon contracts, as to relieve them from the operation of such general regulations for the good government of the state and the protection of the rights of individuals as may be deemed important;" and in reference to charters of private corporations he says: "Although these charters are to be regarded as contracts, and the rights assumed by them are inviolable, it does not follow that these rights are at once, by force of the charter contract, removed from the sphere of state regulation,...