Kansas City v. Terminal Railway Co. , 324 Mo. 882 ( 1930 )

I am convinced that the conclusions reached in Paragraph I of the majority opinion are unsound and in conflict with the rulings of this court since the Public Service Commission Act was passed in 1913, as well as in conflict with rulings of the United States Supreme Court and the courts of last resort of the other states.

In the majority opinion, it is said: "The precise question here involved is whether the ordinance contract, and particularly Section 8, does in fact limit, abridge or hamper the exercise of the police power of the State." The subject of the crossing of one railroad or street car line by another or the crossing of either by a public highway is a matter of great public concern and is a subject so affecting the public safety and welfare as to bring such subject within the power of the State to regulate and control it under its police power. Hence, any contract which undertakes to deal with and control anything affecting such subject limits and abridges the police power of the State.

It may be conceded that, prior to the passage of the Public Service Commission Act and in the absence of any other action upon the subject by the General Assembly, Kansas City had full right and power to regulate and control all railroad crossings within its limits and to contract with respect to the burden of the cost thereof. But this power was exercised under the possibility that the State itself might take over the whole or any part of such subject to the entire exclusion of future control thereof by the city and unhampered by any contracts previously made by the city affecting so much of the subject as the State elected to take under its control.

This is exactly what the State did in 1913 when the Public Service Commission Law was enacted. Section 50 of that act (now Sec. 10459, R.S. 1919) provides that "the commission shall have the exclusive power to determine and prescribe the manner, including the particular point of crossing, and the terms of installation, operation, maintenance, apportionment ofexpenses, use and protection of each crossing . . . of a public road or highway by a railroad," etc. (Italics my own.)

Section 8 of the ordinance undertook to deal with the subject of payment of the expense of installation and maintaining crossings in said city by means of viaducts and subways. Thereafter the apportionment of the expense of such crossings was by the Public Service Commission Law placed within theexclusive power of the Public Service Commission to determine. The ordinance provisions requiring the Terminal Company to pay the entire cost was thereupon superseded by the statute.

The ordinance under consideration did not make any specific contract respecting the crossing at Oak Street. The provision contained was general in terms and looked to the future and purported to place upon the Terminal Company the expense of construction and maintenance of each and every viaduct or subway the city, under the terms specified in the ordinance, might require said company to construct and maintain during the full two hundred years of the life of the ordinance. If that provision is controlling and exclusive as to a crossing conceived and required to be built ten or twelve years after the ordinance was passed and accepted, it must be held to be equally controlling during the full two-hundred-year term of the ordinance. Merely to assert such a proposition is to demonstrate the invalidity of the provision as against the exercise by the State of its police power over the identical subject.

Upon the enactment of the Public Service Commission Act the manner and point of crossing and the terms of installation, operation and maintenance, together with the apportionment of the expense of the crossing, at once became a subject about which railroads and municipal corporations could make no contracts binding on the Public Service Commission, to which was confided the exclusive power of determination as to those subjects. The very language of Section 10459 precludes the thought that, after the passage of the Public Service Commission Act, any contracts could be made by the city and the company with respect to the apportionment of the expense of the proposed Oak Street viaduct, which would be binding upon the Public Service Commission in the exercise of its exclusive power to determine for itself how the cost of the erection and maintenance of such viaduct should be apportioned.

The fact that the franchise ordinance, including the provisions of Section 8, antedated the passage of Section 10459 of the Public Service Commission Act does not prevent the Commission from the exercise of its exclusive power to determine the apportionment of the expense of the construction and maintenance of the proposed Oak Street viaduct. Neither inferior governmental agencies within the State nor the General Assembly itself, under our Constitution, has the power by contract to deprive the State of its right to exercise its police power. Provisions of franchise ordinances, whether passed before or after the enactment of the Public Service Commission Law, which deal with subjects coming within the police power of the State, must be regarded as having been enacted with reference to and in recognition of the full power and duty of the State, in the rightful exercise of such police power, to deal with such subjects without regard to and unembarrassed by prior or subsequent contracts in relation to such subjects.

The majority opinion considers at some length whether Section 8 of the ordinance is regulatory or contractual. To my mind it makes not the slightest difference how we regard it. To contend that said provision is an inviolable contract and can be specifically enforced by the courts, notwithstanding the General Assembly, in the exercise of the State's police power, has declared that the Public Service Commission shall have theexclusive power to apportion the cost of such construction and maintenance, is to deny the power of the State to legislate on the subject and to ignore controlling decisions in this and other jurisdictions, as well as numerous cases in point on the general principle involved.

State ex rel. Railroad Companies v. Public Service Commission,271 Mo. 270, 197 S.W. 56, was a case where the Public Service Commission required the widening and reconstruction of a subway in Moberly. At the time of the original construction of the subway in 1887, it was agreed that the city and the railroad company would each pay one-half of the cost of any subsequent repairs or changes made in the subway. The existence of this contract was set up as precluding the power of the Public Service Commission to assess against the railroad companies more than one-half of the cost of widening and reconstructing the subway. At page 287 (271 Mo.), Judge WILLIAMS, speaking for the Court en Banc, said:

"Assuming (but without deciding) that the above mentioned contract was in fact duly executed as the law requires of contracts executed by a municipality, yet the contract cannot avail the appellant in this proceeding, for the reason that such a contract is void as against public policy in that, if held valid, it would amount to a limitation on the exercise by the State of its police power."

In Northern Pacific Railway Co. v. Duluth, 208 U.S. 583, the contract required the city to keep the viaduct in repair for fifteen years and to maintain the approaches perpetually. Within the period of fifteen years thereafter, the city, through a mandamus proceeding in the Minnesota courts, compelled the railroad to improve the viaduct at its own expense, contrary to the provisions of the contract. The United States Supreme Court affirmed the action of the Minnesota courts and in doing so said: "The result of these cases is to establish the doctrine of this court to be that the exercise of the police power in the interest of public health and safety is to be maintained unhampered by contracts in private interests, and that uncompensated obedience to laws passed in its exercise is not violative of property rights protected by the Federal Constitution."

In Chicago, etc., Railroad v. Nebraska, 170 U.S. 57, the railroad and the city of Omaha had contracted concerning the expense of constructing a viaduct. Although there was no express agreement as to repairs and maintenance, the court, upon the assumption that the duty under the contract may have been upon the city when the contract was made, said that, "In view of the paramount duty of the Legislature to secure the safety of the community at an important crossing within a populous city, it was and is within its power to supervise, control, and change such agreements as may be, from time to time, entered into between the city and the railroad company, in respect to such crossing, saving any rights previously vested. Any other view involves the proposition that it is competent for the city and the railroad company, by entering into an agreement between themselves, to withdraw the subject from the reach of the police power, and to substitute their views of the public necessities for those of the Legislature." The requirement of the city ordinance, under authority of subsequent legislation by the State, that the railroad companies crossed by the viaduct should repair said viaduct at their own expense, was held to be a valid exercise of the police power, notwithstanding provisions of the contract to the contrary.

In the City of Cape Girardeau v. St. Louis-San Francisco Railway Company, 305 Mo. 509, 267 S.W. 601, quite a similar situation arose. One of the provisions of the ordinance granting the railroad the use of the city streets was that the railroad should maintain at Cape Girardeau shops for making light or running repairs on its equipment. The railroad proposed to move its shops and the city sought to enjoin such action under the provisions of said ordinance. The injunction was denied on the ground that the ordinance provision was one affecting the proper operation of the railroad, which the State in the exercise of its police power had intrusted to the Public Service Commission. The Court en Banc there said: "Neither the State nor any of its agencies has or ever has had the power to contract away the police power of the State and . . . franchises granted or ordinances passed by cities affecting subjects and matters, coming within the police power of the State, must be considered as having been granted or passed with reference to the power of the State, in the exercise of its police power, to legislate with respect to such matters and subjects, unfettered by provisions of such franchises and ordinances."

In Southwest Missouri Railroad Co. v. Public Service Commission, 281 Mo. 52, 219 S.W. 380, the Court en Banc ruled that the Public Service Commission had jurisdiction to authorize a street railway company to abandon and remove part of its tracks which were operated at such a loss as to impair its ability to give service, notwithstanding a franchise provision required the street car company to operate cars upon all streets covered by its franchise.

There are a great many decisions, involving rates for the service rendered by public utilities, where franchise provisions fixing rates have been held not to be binding upon the State in the exercise of its police power. Such cases are clearly in point. In State ex rel. Sedalia v. Public Service Commission,275 Mo. 201, 204 S.W. 497, it was held that the franchise rate for hydrant rental was not controlling upon the State acting through its Public Service Commission in fixing reasonable and just water rates. In Fulton v. Public Service Commission, 204 S.W. 386, it was held that the Public Service Commission was not bound by provisions of a telephone company franchise fixing maximum rates for telephone service. In St. Louis v. Public Service Commission,276 Mo. 509, 207 S.W. 799, it was held that the Public Service Commission was not bound by franchise provisions as to rates of fare in fixing reasonable and just fares for street-car service.

Citation of cases could be made at great length, but they are all to the same general effect, to-wit, that all contracts between cities and their public utilities, which have a bearing upon the public safety and welfare and the ability of such public utilities to render efficient public service, are made with reference to and in recognition of the power and duty of the State itself, or through its lawfully authorized agent, the Public Service Commission, in the exercise of the police power of the State, to make orders, rules and regulations in respect to the subjects affected by such contracts unhampered and unembarrassed by existing contracts; that, when cities and other utilities enter into contracts of that character, they do so with reference to and in full recognition of the power of the State in the exercise of its police power to enact laws inconsistent with and subversive of such contracts.

Applying these rules to the case at bar, when the State of Missouri passed the Public Service Commission Act and provided that the Commission should have exclusive power to determine and prescribe the manner, including the particular point where, a street should cross a railroad and the terms of installation, operation, maintenance and apportionment of expense thereof and to require separation of grades where practicable and to prescribe the terms upon which such separation shall be made and the proportions in which the expense of such separation of grades should be borne, all rights of the city to have additional viaducts or subways constructed and maintained at the sole expense of the Terminal Company were terminated, notwithstanding the specific contract on the point, and the whole question of the apportionment of the expense of the construction and maintenance of such viaducts and subways was delegated to the Public Service Commission for determination upon considerations wholly independent of the provisions of Section 8 of the franchise ordinance.

The main reliance of the city in the case at bar is upon the opinion of Division One of this court (erroneously marked in our official reports as a decision by the Court en Banc) in State ex rel. Terminal Railroad Company v. Public Service Commission.308 Mo. 359. In 272 S.W. 957, the case is properly reported as a decision by Division One. The majority opinion in the case at bar does not cite the case as supporting the conclusion reached therein. The reason probably is that every thing said therein about enforcing specific performance of Section 8 of the ordinance is clearly obiter.

The majority opinion cites M.K. T. Railroad Co. v. Oklahoma,271 U.S. 303, but does not set out its facts and conclusions. That is the only case cited by the city which seems to lend any support to its contention that the provisions of Section 8 of the ordinance do not limit the police power of the State and hence are binding upon it, notwithstanding the subsequent passage of the Public Service Commission Law. In that case there was a specific agreement that if at any time the city desired to extend and open a particular street. to-wit, Commanche Street, where the underpass in controversy was to be built, the crossing should be made under the tracks and at the sole cost and expense of the city and the consideration for this agreement was the agreement of the railroad company to waive all claim for damages for right of way caused by the opening and establishing of the underpass. The court held that it was competent for the city to acquire the right of way by contract, purchase or condemnation. It could not take the right of way without compensation. It paid for the future right of way by its contract to bear the entire cost of the crossing. It was authorized to make the contract for compensation for such right of way in advance of the need of the right of way. The railroad company's agreement to grant the right of way for the crossing was a valid consideration for the city's agreement to bear the cost of construction. The agreement was concerning the right of way for and cost of crossing a specified street and was not a general plan covering all crossings which might become necessary during a long period of years, as was provided in the ordinance in the case at bar. It was a valid and binding agreement when made. The rights of the city and the railroad in respect to the particular crossing thereby became vested. For these reasons the order of the corporation commission assessing one-half of the cost of the underpass to the railroad company impaired the obligation of a subsisting contract and was invalid.

The court fully recognized the rule that the provisions of contracts will not be enforced where such provisions operate to hamper the State in the exercise of its police power in relation to the construction of railroad crossings and the assessment of the cost of their construction and maintenance, but was of the opinion that the enforcement of that particular contract would not have that effect.

I regard the cases of Northern Pacific Railway Co. v. Duluth, supra, and Chicago, etc., Railroad v. Nebraska, supra, as fully supporting the contention of the company in the case at bar. The same court which decided the Duluth and Nebraska cases was able to distinguish the Duluth case from the Oklahoma case without overruling or criticising that case. If the Oklahoma case can properly be understood as holding that contracts of that sort generally do not hamper the State in the exercise of its police power, it must be deemed to be in conflict with numerous pronouncements of this court and the courts of other states and the United States Supreme Court itself.

The majority opinion holds that "if a contract between a municipality and a railroad requires the latter to bear all the expense of a crossing, the contract is not in that respect a limitation of the police power: by its exercise the railroad could not be coerced into paying more."

This is a remarkable pronouncement in view of Section 50 of the statute of 1913 and the decisions of this court and of the other jurisdictions holding that franchise agreements in respect to rates and service of public utilities are not binding upon the State in the exercise of its police power over such subjects. The underlying principle of the rule that public utility rates may be increased above rates specified in the franchise is that such public utility cannot bind itself to charge a rate or to perform a service which will destroy or seriously impair its ability to render efficient public service. Nor is the State bound by franchise provisions concerning rates which enable the utility to charge more than is reasonable and necessary to enable it to render such efficient public service. If the State, in the exercise of its police power, is not bound by a franchise provision as to rates for public service, it is not bound by franchise provisions requiring expenditures, capital or operating, which are necessarily and directly reflected in rates. A reasonable return upon the capital invested is just as much an element for consideration in fixing reasonable rates as operating expenses. To deny the State the power to pass upon the reasonableness of or the necessity for capital expenditures is to impair its power to fix reasonable rates and charges. But, aside from these general principles, to assert that the ordinance provision under consideration does not limit the police power of the State is to ignore the plain language of the statute giving to the Public Service Commission the exclusive power of determination in respect to the very subject-matter of said provision.

I am convinced that the trial court had no power specifically to enforce the provisions of Section 8 of the ordinance and that its decree ordering such specific performance was unauthorized. The contrary conclusion has been reached by the majority. Hence, I respectfully dissent.