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to so conduct himself, and so use his own property, as not unnecessarily to injure another. This is the very essence of government, and has found expression in the maxim 'Sic utero tuo ut alienus non lædis.' From this source come the police powers, which, as said by Mr. Chief Justice Taney in the License Cases, 5 How. (U. S.) 583, 12 L. Ed. 256, ‘are nothing more or less than the powers of government inherent in every sovereignty,

* that is to say, * * * the power to govern men and things. Under these powers the government regulates the conduct of its citizens one towards another, and the manner in which each shall use his own property, when such regulation becomes necessary for the public good. In their exercise it has been customary in England from time immemorial, and in this country from its first colonization, to regulate ferries, common carriers, hackmen, bakers, millers, wharfingers, innkeepers, etc., and in so doing to fix a maximum charge to be made for services rendered, accommodations furnished, and articles sold. To this day statutes are to be found in many of the states upon some or all of these subjects; and we think it has never yet been successfully contended that such legislation came within any of the constitutional prohibitions against interference with private property.” Munn v. Illinois, 94 U. S. 124, 24 L. Ed. 77.

In another case a specific designation is made as follows:

“This power of regulation is a power of government continuing in its nature, and if it can be bargained away at all it can only be by words of positive grant or something which is in law equivalent." Railroad Commission Cases, 116 U. S. 325, 6 Sup. Ct. 334, 342, 29 L. Ed. 636.

In yet another case it is held, quoting from the syllabus :

“An act of the Legislature of New York (Laws 1888, p. 946, c. 581) provided that the maximum charge for elevating, weighing, and discharging grain should not exceed five-eighths of one cent a bushel; and that, in the process of handling grain by means of floating and stationary elevators, the lake vessels or propellers, the ocean vessels or steamships, and canal boats, should only be required to pay the actual cost of trimming or shoveling to the leg of the elevator when unloading, and trimming cargo when loading. Held, that the act was a legitimate exercise of the police power of the state over a business affected with a public interest, and did not violate the Constitution of the United States and was valid.” Budd v. New York, 143 U. S. 517, 12 Sup. Ct. 468, 36 L. Ed. 247. At page 534 of 143 U. S., and page 472 of 12 Sup. Ct. (36 L. Ed.

( 247), of the same case, appears the following:

"The opinion further said that the criticism to which the case of Munn v. Illinois had been subjected proceeded mainly upon a limited and strict construction and definition of the police power; that there was little reason, under our system of government, for placing a close and narrow interpretation on the police power, or restricting its scope so as to hamper the legislative power in dealing with the varying necessities of society and the new circumstances as they arise calling for legislative intervention in the public interest; and that no serious invasion of constitutional guarantees by the Legislature could withstand for a long time the searching influence of public opinion, which was sure to come sooner or later to the side of law, order, and justice, however it might have been swayed for a time by passion, prejudice, or whatever aberrations might have marked its course. We regard these views which we have referred to as announced by the Court of Appeals of New York, so far as they support the validity of the statute in question, as sound and just.”

In a still later case, the Supreme Court, referring to the matter of rates, said:

"These acts are urged to establish the power in the village of Rogers Park to grant to the plaintiff in error the right to charge and collect for 30 years the rates prescribed by the ordinance of November, 1888.

* A strict construction must be exercised. The contract claimed concerned governmental functions, and such functions cannot be held to have been stipulated away by doubtful or ambiguous provisions.” Rogers Park Water Co. v. Fergus, 180 U. S. 624-629, 21 Sup. Ct. 490, 491, 45 L. Ed. 702.

From the foregoing excerpts it is manifest that the Supreme Court classifies the power to regulate rates as governmental and falling within the police powers of the state. Nor does Los Angeles City Water Co. v. Los Angeles (C. C.) 88 Fed. 721, hold anything to the contrary; but, after quoting from a line of decisions which treat the power in question as proprietary, the court there says:

"If, however, it be conceded, contrary to these authorities, and as claimed by defendants, that the power of the city to regulate water rates is legislative or governmental, the city may by contract abridge such power under an implied as well as an express legislative grant, and this rule is recognized in many of the authorities upon which defendant relies.”

In the Los Angeles Case there was no dispute but that the city had entered into a contract which limited its power to regulate rates, and the court held that, conceding this power to be legislative, still it was competent for the city to bargain it away. Plaintiff's syllogism, substantially as follows: Police power cannot be bartered away. Power to regulate rates may be surrendered by contract. Therefore, power to regulate rates is not a police power—is manifestly unsound in its first premise. It has been authoritatively and repeatedly held that powers of sovereignty may be contractually abandoned. In the earliest case on this subject it is clearly implied that even the sovereign power of taxation may be thus surrendered; the court saying:

“That the taxing power is of vital importance, that it is essential to the existence of the government, are truths which it cannot be necessary to reaffirm. They are acknowledged and asserted by all. It would seem that the relinquishment of such a power is never to be presumed. We will not say that a state may not relinquish it, that a consideration sufficiently valuable to induce a partial release of it may not exist; but, as the whole community is interested in retaining it undiminished, that community has a right to insist that its abandonment ought not to be presumed, in a case in which the deliberate purpose of the state to abandon it does not appear.” Providence Bank v. Billings, 29 U. S. 514, 560, 7 L. Ed. 936.

So, too, the police power of the state may be surrendered or abridged by contract, if the contract be not prejudicial to the peace, good order, health, or morals of its inhabitants. This qualification is stated by a case cited by plaintiff as follows:

"The argument that the contract is void as an attempt to barter away the legislative power of the city council rests upon the assumption that contracts for supplying a city with water are within the police power of the city, and may be controlled, managed, or abrogated at the pleasure of the council. This court has doubtless held that the police power is one which remains constantly under the control of the legislative authority, and that a city council can neither bind itself, nor its successors, to contracts prejudicial to the peace, good order, health or morals of its inhabitants; but it is to cases of this class that these rulings have been confined." Walla Walla v. Walla Walla Water Co., 172 U. S. 1-15, 19 Sup. Ct. 77, 83, 43 L. Ed. 341.

The police powers, however, include other subjects than those enumerated, and, as said in Munn v. Illinois, supra:

“Under these powers the government regulates the conduct of its citizens one towards another, and the manner in which each shall use his own property, when such regulation becomes necessary for the public good. In their exercise it has been customary in England from time immemorial, and in this country from its first colonization, to regulate ferries, common carriers, hackmen, bakers, millers, wharfingers, innkeepers, etc., and in so doing to fix a maximum charge to be made for services rendered, accommodations furnished, and articles sold.”

The Walla Walla Case above referred to, so far from holding that regulation of rates is not a police power, holds that where a contract is itself innocuous it may be sustained, even though it abridges the police power. Thus, at page 16 of 172 U. S., and page 84 of 19 Sup. Ct. (43 L. Ed. 341), the court says:

“Under this power and the analogous power of taxation we should have no doubt that the city council might take such measures as were necessary or prudent to secure the purity of the water furnished under the contract of the company, the payment of its just contributions to the public burdens, and the observance of its own ordinances respecting the manner in which the pipes and mains of the company should be laid through the streets of the city, New York v. Squire, 145 U. S. 175, 12 Sup. Ct. 880, 36 L. Ed. 666; St. Louis v. Western Union Tel. Co., 148 U. S. 92, 13 Sup. Ct. 485, 37 L. Ed. 380; Laclede Gas Light Co. v. Murphy, 170 U. S. 78, 18 Sup. Ct. 505, 42 L. Ed. 955. But where a contract for a supply of water is innocuous in itself and is carried out with due regard to the good order of the city and the health of its inhabitants, the aid of the police power cannot be invoked to abrogate or impair it.”

The same distinction is recognized in another quotation at page 24 of plaintiff's brief, as follows:

"I may add that a law for the purpose of securing and enforcing fair and reasonable charges by common carriers is not to be classed with those laws making for the public health and public morals, the power to enact which cannot be contracted away or parted with by the state." Central Trust Co. v. Citizens Street Ry. Co. (C. C.) 82 Fed. 1-8.

I am clearly of opinion, both upon reason and authority, that control of rates is distinctively a police power of the state. Indeed the decisions of the Supreme Court are conclusive of the question. Such being the character of the power, the rule of construction applicable to cases where parties claim its abandonment or suspension is easily ascertained. The Supreme Court has said:

"This power of regulation is a power of government continuing in its nature; and, if it can be bargained away at all, it can only be by words of positive grant, or something which is in law equivalent. If there is a reasonable doubt, it must be resolved in favor of the existence of the power. In the words of Chief Justice Marshall in the case of Providence Bank v. Billings, 4 Pet. 514-561, 7 L. Ed. 939, 'its abandonment ought not to be presumed in a case in which the deliberate purpose of the state to abandon it does not appear. This rule is elementary, and the cases in our reports where it has been considered and applied are numerous.” Stone v. Farmers' Loan & T. Co., 116 U. S. 307, 6 Sup. Ct. 334, 388, 1191, 29 L. Ed. 636.

Again, it has been said:

“Grants of immunity from legitimate governmental control are never to be presumed. On the contrary, the presumptions are all the other way, and, unless an exemption is clearly established, the Legislature is free to act on all subjects within its general jurisdiction, as the public interests may seem to require. As was said by Chief Justice Taney, speaking for the court, in Charles River Bridge v. Warren Bridge, 11 Pet. (U. S.) 547, 9 L. Ed. 773, 938; 'It can never be assumed that the government intended to diminish its power


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of accomplishing the end for which it was created. This is an elementary principle.” Ruggles v. Illinois, 108 U. S. 526, 2 Sup. Ct. 832, 27 L. Ed. 812.

See, also, Freeport Water Co. v. Freeport, 180 U. S. 587, 21 Sup. Ct. 493, 45 L. Ed. 679; Danville Water Co. v. Danville, 180 U. S. 619, 21 Sup. Ct. 505, 45 L. Ed. 696; Rogers Park Water Co. v. Fergus, 180 U. S. 624, 21 Sup. Ct. 490, 45 L. Ed. 702; Atlantic & Pacific R. R. Co. v. U. S. (D. C.) 76 Fed. 186.

Bearing in mind the rule of construction applicable to contracts which are claimed to abandon or suspend governmental control of rates, let us now examine Ordinance B, granting to plaintiff's assignor its franchise. The ordinance is entitled as follows:

"An ordinance granting to M. A. King and his assigns the right for a period of fifty years, to construct, maintain and operate conduits and wires,” etc., "for the purpose of transmitting sound, signals, conversation, and intelligence by means of electricity and carrying on a general telephone business, together with certain appurtenant and incident rights."

The ordinance then proceeds as follows:

"Section 1. That the right, privilege and franchise is hereby granted to M. A. King and his assigns, to construct, lay down, maintain and operate for the period of fifty years an underground conduit and wires.

"And to transmit sound, signals, conversation and intelligence through and over said wires by means of electricity, together with the right to construct, operate and maintain all necessary feeders, service wires, house connections and such other apparatus and appliances in connection therewith as may be necessary for the purpose of safely and efficiently operating and maintaining said conduit, poles and wires, and carrying on a general telephone business by means thereof.

Section 9 of the ordinance provides, among other things:

"That the rent or charge for unlimited, independent, metallic circuit, telephone service in the system established or maintained under said franchise so long as said system does not connect and exchange with more than 10,000 telephones, shall not exceed $60.00 per annum for a telephone installed in any business office or premises, or $30.00 per annum for a telephone installed in a private residence, and that when said system shall comprise more than 10,000 telephones, the annual rental or charge for the aforesaid services shall not be increased by more than a sum equal to $6.00 per annum for each one thousand telephones in said city connected with said telephone system in excess of 10,000."

Is it true that, by the provisions of said section of said ordinance, the city of Los Angeles abandoned, for 50 years, its right to reasonably limit plaintiff's charges for telephone service? Can it be said that the abandonment of the power in question has been “shown by clear and unambiguous language, which will admit of no reasonable construction consistent with the reservation of the power”? Certainly there is no express abandonment, and the circumstances of this case, particularly the long period of 50 years, forbid an implication of that sort. I do not mean to assert that, if a contract unequivocally abandoned a legislative power for 50 years, the duration of the abandonment would itself avoid the contract; but what I do say is that such a long period is a strong, if not conclusive, reason why an abandonment should not be implied.

The Supreme Court of Illinois, in a case very similar to this one, said:

"The village exercised the power by incorporating in the ordinance a scale of prices as being just and reasonable maximum rates to be paid to the company by the consumer of water. This provision of the ordinance had no effect to establish a contract between the appellant company and the village that the individual inhabitants should and would pay such rates for the period of 30 years, or any fixed period of time, but was simply a declaration on the part of the village that such rates were reasonable. The legal effect was to establish, prima facie, the corporation, in order to discharge the duty it owed to the public, must supply the commodity it had been created to supply at the prices named in the ordinance. It was a mode of regulating and enforcing the discharge of a legal duty-not a proposition looking toward a contract. No contract was necessary to create an obligation on the part of the corporation to supply water at a reasonable rate, for that rested upon it as a duty. Nor did the fixing of rates by the alleged ordinance of the village of Rogers Park vest in the appellant company an irrevocable right to exact such rates for the period it had been granted permission to occupy the streets, alleys, and public places of the village, or for any fixed period. A rate or price reasonable and just when fixed may, in the future, become so unreasonably high that the exaction of such rate or price is but an extortion. The duty of the corporation does not, however, change, but remains the same that is, to exact only reasonable compensation. The power of the state to enforce that duty is not exhausted by its exercise in the first or any subsequent instance, but is continuous, and may be exerted from time to time, whenever necessary to prevent extortion by the agency created by the state to serve the public." Rogers Park Water Co. v. Fergus, 178 Ill. 571-578, 53 N. E. 363, 365.

“Furthermore, section 9 of Ordinance B is not a grant, but a limitation. The franchise granted in the first section to construct a telephone system and carry on a general telephone business necessarily implies a right to charge reasonable rates for telephone service (Winona, etc., Co. v. Blake, 94 U. S. 180, 24 L. Ed. 99), and section 9 is but a limitation upon this right. It confers nothing, but simply qualifies what has already been conferred. It does not give any right whatever to the plaintiff, much less a right to charge up to the maximum rate, for 50 years, but is simply a legislative declaration that any charge in excess thereof would at that time be unreasonable. This distinction and its consequences are amplified in Atlantic & Pacific R. R. Co. v. United States, supra, and, after careful reconsideration of the opinion in that case, which was written by myself, I am satisfied with the principles it enunciates, and their application to the case at bar can but lead to the conclusion that section 9 of Ordinance B is not nor was it intended as a covenant surrendering the city's control of rates.

Plaintiff states its opposing contention, in general terms, thus: A franchise which has fixed maximum rates for the services to be rendered thereunder is a contract as to the rate, and the rate cannot be reduced.” I shall not undertake a full review of the cases cited by plaintiff to this contention, but will briefly notice some of them.

Stone v. Yazoo & Mississippi R. R. Co., 62 Miss. 607, 52 Am. Rep. 193, does not sustain the contention, as appears from the first clause of plaintiff's quotation from the case, which is as follows:

“Section 6 of the charter of the appellee confers on the company power to fix from time to time, by its board of directors, the rates at which it will transport person or property over its railroad, provided they shall not exceed the maximum specified in the act.”

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