Penna. R. Co. v. Duncan

• Decision Date: 11 November 1889
• Citation: 129 Pa. 181
• Parties: PENNSYLVANIA R. CO. v. G. R. DUNCAN'S ADMR.
• Court: Pennsylvania Supreme Court

Page 181

129 Pa. 181

PENNSYLVANIA R. CO. v. G. R. DUNCAN'S ADMR.

Supreme Court of Pennsylvania.

Argued October 24, 1889.

Decided November 11, 1889.

ERROR TO REVIEW THE JUDGMENT OF THE SUPREME COURT OF PENNSYLVANIA.^*

No. 36 October Term 1889, Sup. Court of U. S.; Sup. Ct. of Penna., No. 109 July Term 1884.

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Mr. Wayne MacVeagh (with him Mr. A. H. Wintersteen), for the plaintiff in error:

1. The single question before this court is whether the state of Pennsylvania, in imposing, through its courts, upon the Pennsylvania railroad company the liability for consequential damages provided by the state constitution of 1874, violated the provisions of article I., § 10, of the constitution of the United States, by impairing the obligations of a previous contract contained in the charter of the railroad company and in the terms of an executed grant or sale of property and franchises, made to it by the state in 1857. That charters of private corporations and all executed grants are contracts, the obligations of which no state may impair, has become, in accordance with the doctrines laid down in Fletcher v. Peck, 6 Cranch 87, and the Dartmouth College Case, 4 Wheat. 518, axiomatic law: Binghamton Bridge Case, 3 Wall. 51.

2. A provision in a state constitution may be a law impairing the obligation of a contract: Fisk v. Jefferson Police Jury, 116 U. S. 131; Pacific R. Co. v. Maguire, 20 Wall. 36; Davis v. Gray, 16 Wall. 203; Railroad Co. v. McClure, 10 Wall. 511. The Supreme Court of Pennsylvania having practically held that the contract of the state with the railroad company did not confer upon the latter immunity from the imposition of consequential damages by constitutional amendment, the jurisdiction of this court is apparent under the principles laid down in N. O. Water Works v. La. Sugar Co., 125 U. S. 18; and, once assuming this jurisdiction, it follows that the court is not concluded by the view of the questions involved, taken by the state court: Jefferson Br. Bank v. Skelly, 1 Black 436; Louisville etc. R. Co. v. Palmer, 109 U. S. 244; Bridge Proprietors v. Hoboken L. etc. Co., 1 Wall. 116.

3. The Pennsylvania constitution of 1874 did not attempt to impose upon corporations previously chartered a liability for consequential damages to property. In §§ 1 and 2 of the Schedule, and in §§ 2 and 10 of article XVI., are expressions showing that the framers intended fidelity to the mandates of Federal law, and did not intend or conceive that the constitution would apply to existing corporations, without their own consent, plainly expressed. The provisions of § 8 of article XVI., therefore, ought not by a narrow construction to be applied to such corporations. The argument that because existing municipal corporations are affected by that section, other existing corporations also must be affected, falls, in view of the plain thought of the whole article; because no question of contract rights with the state can arise as to municipal corporations. The position contended for is directly supported by Williamsport Pass. Ry. Co.'s App., 120 Pa. 1, decided by the Supreme Court of Pennsylvania since the decision of the present case.

4. If, however, it be held that a liability for consequential damages was sought to be imposed upon existing private corporations by the constitution of 1874, the attempt was in violation of the Federal constitution. A contract existed, exempting this company from the new burden of such liability. The company was incorporated by act of April 13, 1846, P. L. 312. At that time, and until 1874, there was no general liability in the law of Pennsylvania for consequential damages to property not taken, and the act of incorporation, by not specifically imposing such responsibility upon it, operated as a contract exempting it from the subsequent imposition thereof: Cooley on Const. Lim., *279; Dartmouth College Case, 4 Wheat. 518; Planters Bank v. Sharp, 6 How. 301; Von Hoffman v. Quincy, 4 Wall. 535; McCracken v. Hayward, 2 How. 608; Bronson v. Kinzie, 1 How. 311; Fletcher v. Peck, 6 Cranch 87; Town of Pawlet v. Clark, 9 Cranch 292; Fisk v. Jefferson Police Jury, 116 U. S. 132; Green v. Biddle, 8 Wheat. 1.

5. That a charter not imposing this liability is a contract exempting from its subsequent imposition, was the law in Pennsylvania in 1846 and has been continuously since: Shrunk v. Nav. Co. 14 S. & R. 71; Monongahela Nav. Co. v. Coons, 6 W. & S. 101; S. C. 6 Pa. 379; Henry v. Bridge Co., 8 W. & S. 85; Mifflin v. Railroad Co., 16 Pa. 182; N. Y. etc. R. Co. v. Young, 33 Pa. 175; Watson v. Railroad Co., 37 Pa. 469; Buckwalter v. Bridge Co., 38 Pa. 281; Bald Eagle Boom Co. v. Sanderson, 81* Pa. 402; Hays v. Commonwealth, 82 Pa. 518; Ahl v. Rhoads, 84 Pa. 319; Lewis v. Jeffries, 86 Pa. 340; Long's App., 87 Pa. 114; Penna. R. Co. v. Langdon, 92 Pa. 21; Lycoming Gas & W. Co. v. Moyer, 99 Pa. 615. And, as this was a rule of property in the state, the decisions establishing it will be followed by this court, even though its own judgment might be different from that of the state court: Burgess v. Seligman, 107 U. S. 20; Louisville etc. R. Co. v. Palmer, 109 U. S. 244; Conn. etc. Ins. Co. v. Cushman, 108 U. S. 51.

6. But, whatever view may be taken of the chartered rights of this company as such, the contract by which in 1857 the railroad company purchased from the state the Philadelphia & Columbia railroad, operates to exempt it from the imposition of liability for consequential damages in connection with branches or extensions of that railroad, for two reasons: (1) The act of May 16, 1857, P. L. 519, under which that railroad was sold, provided that the purchaser, if an incorporated company, should hold under the provisions of its charter except as modified by the provisions of the act, and as the charter of the Pennsylvania Railroad Company at that time conferred upon it an immunity from this liability, it is entitled by the contract of purchase to the same immunity respecting the Philadelphia & Columbia railroad; and (2) because, the state not being itself liable for consequential damages, as the owner of said railroad, its grant thereof, with all its rights and privileges therewith connected, passed to the railroad company this exemption.

7. The state court held that, although the railroad company purchased in 1857 the right to build this Filbert street extension, it took the right subject to the state's power to amend, alter or repeal charters, reserved by the act of May 3, 1855, P. L. 423, and the constitutional amendment of 1857; and, therefore, the consequential damage clause in the constitution of 1874 could be made to apply to the corporation defendant. And yet the same court had held in 1870 that, notwithstanding the act of 1855 and the amendment of 1857, the state legislature had no control whatever over the charter of this company: Commonwealth v. Penna. Canal Co., 66 Pa. 41; and vast investments have been made in reliance upon this view as a rule of property. The reserved right of the state was only to alter charters, and the completed act of incorporation in this case was prior to the act of 1855. The act of May 16, 1857, was not, as the state court held, a grant of a new charter, but simply a part of a contract of sale. To alter or impair it, the state has no power: Railroad Co. v. Maine, 96 U. S. 510; Sinking Fund Cases, 99 U. S. 700; Davis v. Gray, 16 Wall. 203; Hall v. Wisconsin, 103 U. S. 5.

8. The constitutional amendment of 1857 has no bearing on the state's right to alter this contract, as it was not adopted until after the contract had become complete. We have, then, only the legislative reservation, in 1855, of the right to alter subsequent charters, and what one legislature has reserved a subsequent legislature can grant away: New Jersey v. Yard, 95 U. S. 104. The grant made by the contract of 1857 said, almost in specific words, that the rights granted could not be revoked or altered except for cause and after judicial decree, and thereby precluded any future legislative control: State v. Commissioners, 37 N. J. L. 240. Again, even if the act of 1855 does apply, it provides that no injustice shall be done to the corporators by any revocation or alteration of charters. So, too, § 15 of the act of 1857 provides that no injury shall be done to the corporators by any annulment of the rights which the state then granted. How can it be said that no injustice or injury is done to the corporators of this company, by the withdrawal of an exemption that was a part of the consideration for which the company paid $7,500,000?

9. The contract rights of the railroad company were not lost by the acceptance of subsequent legislation. This effect cannot be produced unless the specific acts accepted provided, as the condition of their acceptance, that the chartered rights of the company should be subject to legislative interference: Morawetz on Corp., § 1109. Any other rule would make an act pretending to convey a benefit, upon express terms, a mere trap. The case of Monongahela Nav. Co. v. Coon, 6 Pa. 379, upon which the state court rested its decision, merely affirmed that an express grant, in consideration of an express relinquishment of corporate immunities, established the legislature's control over the corporation. The utmost effect that can be given to the amendment of 1857 would be to make rights subsequently conferred by charter, subject to withdrawal or alteration. The effect of the act of 1855 has been already considered.

10. Moreover, even if the rights purchased from the state in 1857 were held subject to the reservation in the act of 1855 and the amendment of 1857, of a right in the legislature to alter or repeal charters, the new constitution of 1874 cannot affect these rights, because its adoption was not a valid exercise of the power thus reserved to the legislature: New Jersey v. Yard, 95 U. S. 104; Commonwealth v. Randall, 10 Phila. 451; ...