Postal Telegraph Cable Co. v. New Hope, 192 U.S. 55 (1904)

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Postal Telegraph Cable Company v. New Hope

No. 92

Argued December 11, 1903
Decided January 4, 1901
192 U.S. 55

ERROR TO THE SUPREME COURT

OF THE STATE OF PENNSYLVANIA

In an action against a telegraph company doing an interstate business for license fees taxed by a borough in Pennsylvania under an ordinance fixing the amount of the tax per pole and per mile of wire, the court held that, while the question of reasonableness of the tax was one for the court, he would submit it to the jury for their aid and as advisory only, directing them to find for the plaintiff if they regarded the amount as reasonable and for the defendant if they regarded it as unreasonable; the jury found a verdict for plaintiff for an amount less than that fixed by the ordinance, and the court directed judgment to be entered thereon for the amount so found.

Held, that if the amount of the license fee fixed by the ordinance was not reasonable, the ordinance was void, and neither the court nor the jury could fix any other amount.

Held that a verdict for an amount less than that fixed by the ordinance, and the order of the court to enter judgment thereon for the amount so found, amounted to a finding by the jury and the court that the ordinance was not reasonable and the verdict and judgment should have been for defendant.

Held that the general rule that the plaintiff alone can complain of a verdict for less than he is entitled to under the evidence does not apply where the only basis of his claim is an ordinance which is necessarily declared to be void by the finding of a verdict for an amount less than that fixed by the ordinance itself.

The Borough of New Hope, in January, 1899, commenced an action against the telegraph company, the plaintiff in error herein, to recover from it the sum of $552, with interest from the respective times in which portions of the amounts became due, the total charges being due from the defendant, as alleged, on account of a license fee taxed by the borough (by virtue of an ordinance to that effect) of one dollar for each pole and of two and a half dollars for each mile of wire used in the borough by the company, the license to be applied for and the fee to be paid annually.

The company made what is termed in the record an affidavit of defense, which, among other things, averred that it was a corporation organized under the laws of the State of New York, and had accepted the act of Congress, approved July 24, 1866,14 Stat. 221, relating to the construction of telegraph lines over any post road of the United States, and that its poles and wires through the Borough of New Hope were employed and operated in the transmission of messages between the different states, and were therefore instruments of commerce; that the amount of the charges claimed to be due from the defendant under the ordinance was unreasonable, unjust, and excessive; that the fee was sought to be justified as a license merely, but that the amount thereof was wholly disproportionate to the usual, ordinary, and necessary expenses of inspecting and supervising the poles and wires imposed upon the Borough of New Hope, and was largely in excess thereof, and the fee was also largely in excess of any additional liability of that kind and character imposed upon the borough in looking after the safety of the poles and wires and to see that they were properly maintained, and was also in excess of any further liability which might or could arise to the borough by reason of any injuries to persons or property which might arise or may have arisen by reason of the erection of the poles and the stringing of the wires within the limits of the borough. It was further stated that the charges were more than ten times the amount of all kinds and character of expenses and liability which might have been incurred by the borough by reason of these poles and wires, and that, in view of those circumstances, the assessing of the license tax upon the telegraph company was for the purpose of raising and producing revenue, and was therefore void.

The company averred that it had paid the Commonwealth of Pennsylvania all taxes upon the value of its poles and wires, as included in and represented by its capital and upon the gross receipts derived from the use thereof, and it had paid its taxes upon its property in the Borough of New Hope. That the expenses incurred by the borough during the period covered by the claim practically amounted to nothing so far as regarded inspection and supervision.

The parties proceeded to trial, and the borough, having proved the passage of the ordinance, and the number of poles and the number of miles of wire as claimed in the complaint, thereupon rested.

The defendant proved that the only work done by the employees of the borough in regard to the poles and wires of the company during the four years included in the claim was to count the poles each year for the purpose of assessing the tax; that no other service on the part of the borough was performed under its police powers, or at all, in regard to inspection. The defendant also showed that it was an interstate telegraph company; that it had no public office in the borough, nor had there been any commercial office therein during the time in question; that there was no office in which business was received for which tolls were charged.

It was proved also that the entire value of the line of the company in the Borough of New Hope (that is, the cost of the material and construction) amounted to less than $800, and that the claim of the borough, graduated by the number of poles in the borough and the number of miles of wire strung on them, amounted to $138 per year, or to seventeen percentum of the cost of the line in the borough.

The company also proved that it employed servants, whose duty is was to erect the poles, and string the wires, and inspect and watch them, and keep them in proper repair and in safe condition; that the authorities of the borough did nothing whatever in the way of inspection of the lines.

The trial judge charged the jury, among other things, that the question which arose in the evidence in the case was that of the validity of the ordinance, to be determined by the amount and character of the charges against the company; that the borough had the right to enact such police regulations as might be necessary and reasonable in the government of the town, but in regard to the taxing question it had no right to go beyond the exercise of what was termed its police power; that, if the ordinance was unreasonable in amount, it was void; that the power to demand the license fee must be exercised as a means of regulation, and cannot be used as a source of revenue, and that, when exacted as a police power, it must be limited to the necessary and proper expenses of issuing the license and of inspecting and regulating the business the license covers; that the borough had the right to impose such conditions and regulations as are necessary for the general protection of the streets and the uses of the same in the borough; that, in doing this, the borough could not be questioned, provided the license fee was a reasonable and just one and a proper one under the circumstances and commensurate with the probable requirements and exercise of the police or supervisory power of the borough. The court then said that it had a great deal of doubt as matter of fact and law as to whether this was a reasonable subjection or not, and it was frank to say:

That we are inclined to the view that this is an arbitrary imposition of a license or tax rate. But it appears that our brethren upon the bench in other localities have adjudged that similar rates are not unreasonable or unnecessary; but it is argued upon the part of the defense that, in those cases, there was not the same proof as has been developed here. There was not shown as clearly as there is here that the amount of money received as the result of the license was a clear revenue, irrespective of any requirement for police regulation. In other words, that this borough seems to have imposed a license fee to be expended and used in the exercise of a power and a duty which it has failed to exercise at all. Now then, gentlemen, while the question as to whether an ordinance is reasonable or not is for the court, and the court does not propose to evade that question, yet I have concluded to obtain the assistance and judgment of this jury as to whether an assessment such as this is, under the circumstances of this case, is reasonable or unreasonable under the law as I have laid it down, for this surely involves the facts. Now if you believe that it is unreasonable according to the facts, you will render a verdict for the defendant; if you believe that it is reasonable and should be paid in the full amount, you will render a verdict for the plaintiff for the amount of its claim, and the court hereafter will regulate judgment in accordance with such views, either upon a motion for a new trial or otherwise, as we shall entertain after having this opinion from you, in aid of its judgment, and to determine the doubt on the facts.

The court further stated:

The Borough of New Hope had no right to impose any charge for the privilege of erecting and maintaining said poles and wires in said borough except only such sum as will reasonably cover and reimburse to it the expense to it which it may be subjected in consequence of the erection and maintenance of said poles and wires, and if the license fees sued for in this case exceed said sum, your verdict shall be for the defendant.

Instead of finding a verdict for the amount due under the ordinance, or else a verdict for the defendant, as directed by the court, the jury, on October 17, 1899, found a verdict for $466.40. The trial judge directed judgment to be entered for the borough for the amount of the verdict. From that judgment, an appeal was taken by the company to the Superior Court of Pennsylvania, which affirmed the same, that court holding that, the facts being undisputed, the question of the validity of the ordinance was for the court to decide, and that if, on the undisputed facts, the court would not have been warranted in declaring the ordinance void, the submission of the question of its reasonableness to the jury was an error of which the defendant had no just right to complain, and the court held that it would not have been justified by the precedents in declaring the ordinance void.

The supreme court affirmed the judgment of the superior court, and upon the question that the verdict of the jury was for a less sum than the ordinance called for, said that was a matter of which, under the view of the law taken by the court (that the question of reasonableness was for it), the plaintiff might complain, but that it was such good luck for the defendant that it might well rest satisfied. The company thereupon sued out this writ of error.