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Railroad Commission v. Los Angeles Ry. Corp., 280 U.S. 145 (1929)

Railroad Commission of California v.

Los Angeles Railway Corporation

No. 60

Argued October 22, 1929

Decided December 2, 1929

280 U.S. 145


1. A state may authorize a municipal corporation by agreement to establish public service rates, and thereby to suspend for a term of years not grossly excessive the exertion of governmental power by legislative action to fix just compensation to be paid for service furnished by public utilities. P. 280 U. S. 151.

2. To determine whether such authority has been given in the case before it, this Court, in the absence of decisions of the state courts, must construe the state laws. P. 280 U. S. 152.

3. As it is in the public interest that all doubts be resolved in favor of the right of the state from time to time to prescribe rates, a grant of authority to surrender the power is not to be inferred in the absence of a plain expression of purpose to that end. Id.

4. The following laws of California are considered and held not to have authorized the City of Los Angeles to fix the rates of street car companies by contract:

(1) Civil Code, § 470 (Mar. 21, 1872). merely regulating procedure; id. § 497 (Stats. 1891, p. 12), authorizing political subdivisions to grant authority for the laying of railroads in streets "under such restrictions and limitations" as they may provide;

Page 280 U. S. 146

id. § 501 (Stats.1903, p. 172), providing that the rate of fare in municipalities of the first class "must not exceed five cents." P. 280 U. S. 153.

(2) The Broughton Franchise Act (Stats. 1893, p. 288), as amended, providing that franchises "shall be granted upon the conditions in this Act provided, and not otherwise," and requiring the sale of such franchises upon advertisement stating the character of the franchise or privilege proposed to be granted, but nowhere expressly empowering the city to establish rates by contract, and the amendment thereof, June 8, 1915 (Stats.1915, p. 1300), which authorizes grantors of such franchises to impose such additional terms and conditions, whether "governmental or contractual in character," as in their judgment are in the public interest. P. 280 U. S. 154.

(3) Provisions of the charter of the City of Los Angeles, viz., Art. I, § 2(25), Stats.1905, p. 994, forbidding the granting of franchises for use of public streets except by a specified vote and for a term not to exceed 21 years and providing that

"Every grant . . . shall make adequate provision by way of forfeiture or otherwise to secure efficiency of public service at reasonable rates and the maintenance of the property in good order throughout the term of the grant;"

Art. I, § 2 (30), Stats.1911, p. 2063, empowering the city to fix " rates . . . for the conveyance of passengers . . . by means of street railway cars," and "To regulate, subject to the provisions of the constitution of the state . . . the construction and operation of street railways . . . ;" Art. I, § 2(40), Stats.1913, p. 1633, empowering the city to grant franchises for furnishing transportation and to prescribe the terms and conditions of such grants and to prescribe the procedure for making them. P. 280 U. S. 155.

5. A state has power, upon the application of a street railway company, to terminate rates of fare fixed by contract between the company and a municipal corporation of the state. P. 280 U. S. 156.

6. Under Art. XII, § 23, of the California Constitution, as amended November 3, 1914, and the Public Utilities Act of April 23, 1915, the Railroad Commission has exclusive authority to regulate rates . A five-cent street railway fare, even if established by franchise contract, maybe increased with the approval of the Commission, and not otherwise, and it is the duty of the Commission, upon finding that the rate is unjust or insufficient, to determine the just and reasonable rate thereafter to be observed. P. 280 U. S. 157.

7. The Railroad Commission, upon successive applications of a street railway company in Los Angeles for increased fares at first

Page 280 U. S. 147

found the existing fares insufficient and permitted a mall increase, which the company declined, and later found the existing fares sufficient, thus in legal effect requiring the company to observe them. Held that, assuming the existing fares had been established by franchise contracts, these exercises of jurisdiction by the Commission abrogated the contracts. Pp. 280 U. S. 156-158.

29 F.2d 140 affirmed.

Appeal from a decree of the district court (three judges) permanently enjoining the Railroad Commission from enforcing street railway fares found to be confiscatory. The City of Los Angeles was a party by intervention.

Page 280 U. S. 150

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