POSTAL TELEGRAPH-CABLE PANY, Plff. in Err., v.

BOROUGH OF TAYLOR.

(See S. C. Reporter’s ed. 64-73.)

Commerce — validity of state tax on tele¬ graph poles and wires.

An ordinance imposing a license fee on the poles and wires of an intei state telegraph com¬ pany is not a valid exercise of the police power, where the municipality has made no inspection, and has neither paid out any money nor incurred any expense for that purpose, and the fee is twenty times the amount of any expense that might have been reasonably and fairly incurred to make the most careful, thorough, and efficient inspec¬ tion and supervision possible, and for all measures and precautions that possibly could he required to be taken by the municipality for the safety of its citizens and the public.

[No. 93.]

Argued December 11, 1903. Decided Janu¬ ary 4, 1904.

IN ERROR to the Supreme Court, of the State of Pennsylvania to review a judg¬ ment which affirmed a judgment of the Su¬ perior Court of that State, which had af¬ firmed the judgment of the Court of Com¬ mon Pleas of Lackawanna County, award¬ ing to a municipality the amount of a li¬ cense fee imposed by it upon the poles and wires of an interstate telegraph company. Reversed and remanded for further proceed¬ ings.

See same case below, 202 Pa. 583, 52 Atl.

Statement by Mr. Justice Peckham: The plaintiff in error seeks to review the judgment of the supreme court of Pennsyl¬ vania, which affirmed the judgment of the superior court of that state, which in its turn affirmed the judgment of the court of common pleas of Lackawanna county, in favor of the defendant in error in an action brought by it to recover the amount of a license fee imposed upon all telegraph, tel¬ ephone, and electric light companies hav¬ ing poles and wires in the borough. The or¬ dinance was of the same nature as that men¬ tioned in the immediately preceding case or Postal Teleg. Gable Co. v. New Tlope, 192 U. S. 55, ante, 338, 24 Sup. Ct. Rep. 204.

Note. — On corporate taxation in the United States as affected by the commerce clause in the Federal Constitution — see note to Sandford v. Poe, GO L. K. A. 641.

As to the validity of charges on telegraph and telephone poles and wires — see note to Western V. Teleg. Co. v. New Hope, 47 L. ed. U. S. 240. 342

By the plaintilV’s statement of its claim against the defendant, the telegraph com¬ pany, it sought to recover from the com¬ pany the sum of $220.50, including interest from January 31, 1S98.

*The defendant is a corporation engaged

in interstate commerce by transmitting tele¬ graphic communications among the several states, and by its affidavit of defense it averred that it was a company engaged in forwarding telegraphic dispatches among the several states, and was a corporation or¬ ganized under the laws of the state of New York; that it had paid the commonwealth of Pennsylvania all taxes which had by leg¬ islative enactment been levied upon the val¬ ue of its poles and wires erected and main¬ tained in the borough of Taylor and else¬ where in the state; that it had accepted the act of Congress (14 Stat. at L. 221, chap.

230), providing for the construction of tele¬ graph lines over any post road of the Unit¬ ed States; that it had never maintained, and does not now maintain, any office what¬ ever in the borough of Taylor, and that no telegraphic business of any kind is done or transacted by the defendant in that bor¬ ough, except the maintenance of the tele¬ graphic lines and the transmission of tele¬ graphic messages over the same from other places; that the ordinance in question is unreasonable, unjust, and excessive, and is illegal and void, because it is designed and intended to provide revenue by taxation for the general expenses of the borough, and that no other object than this exists, or has at any time existed, for the regula¬ tions imposed by the ordinance; that the borough is under no expense whatever in issuing the license required by the ordi¬ nance, and has not been at any time before, during, or after the period mentioned in the plaintiff's statement for which it makes de¬ mand, under any expense or charge of any kind whatsoever in inspecting and regulat¬ ing the poles and wires; that the license fees imposed by the ordinance are not based upon the cost and expense to the borough for inspection and supervision or regulation of the defendant’s lines and business, but the fees are imposed notwithstanding they are more than twenty times the amount that might have been or could possibly be inci¬ dental to such inspection, supervision, and regulation, together with all reasonable measures and precautions that might have been or possibly could be required to be taken by *the said borough for the safety of

its citizens and the public, or which might have been or possibly could be incurred a3 expenses for the most careful, thorough, and efficient inspection and supervision that might have been made of the poles and wires of the defendant, although the plaintiff lias

192 U. S.

Supreme Court of the United States. COM-

Postal Telegraph-Cable Co. v. Taylor.

not and does not maintain any inspection and supervision or care whatsoever over the poles and wires of the defendant, and has incurred no expense whatever on ac¬ count thereof ; that the borough is a sparse¬ ly populated district, and the land therein of small value, and most of the land along the highway on which the telegraph lines are constructed is not adapted to building purposes nor commercial use, and the high¬ way is little traveled; that the borough is a coal-mining community and the build¬ ings therein consist for the most part of the coal miners’ cabins or houses of one or two stories, and the business buildings are scat¬ tered and consist mostly of small shops or stores ; that the poles and wires thereon are located on the side of the highway and do not interfere in the slightest degree or to any extent with its use for all highway pur¬ poses, and do not interfere with any kind of traffic or with the operation of men or apparatus in extinguishing fires; that the line is not old, decayed, or worn out, but, on the contrary, is comparatively new and sound, and there is no danger of accident from the decay or breaking down of the poles and wires; that the license fees im¬ posed by the ordinance are twenty times more than could be imposed under any pow¬ er existing in the borougli to make charges for all legal purposes; that the amount of the license fees imposed under the ordinance for each year largely exceeds the entire cost to the defendant itself of maintaining said line, including all repairs, reconstruc¬ tion, cost of labor and material, and travel¬ ing expenses of the employees, and all ex¬ penses incurred by the defendant by a care¬ ful and efficient inspection and maintenance of such poles and wires; that the fees im¬ posed by the ordinance are so excessive that if every borough in the state of Pennsylva¬ nia in which defendant has a telegraph sys¬ tem should pass similar ordinances the to-

tal amount collected ’‘would exceed $100,000 per annum, and if the same kind of an or¬ dinance should be passed in the other states by the municipalities in which the poles and lines of the company are placed it could not pay the amount, but would become in¬ solvent by reason of the fact that the ex¬ penses of operation, including the license fees, would be far in excess of the receipts of the defendant.

To this affidavit of defense the plaintiff excepted on the ground that it did not state any sufficient defense to plaintiff’s cause of action, and also on the ground of res judica¬ ta, in that the same questions had been theretofore decided between the same par¬ ties in the courts of the state.

A rule for judgment was taken by the 192 U. S.

66,67

plaintiff for want of a sufficient affidavit of defense, and, upon hearing, the rule was made absolute (the facts set forth in the affidavit of defense being thereby assumed ) , and judgment for the plaintiff being en¬ tered, it was affirmed by the superior and “supreme courts of Pennsylvania.

Mr. Frank R. Sliattuck argued the cause and filed a brief for plaintiff in error:

What is reasonable in one municipality may be oppressive and unreasonable in an¬ other. In determining this question the court will have to regard all the circum¬ stances of the particular city or corporation, the objects sought to be obtained, and the necessity which exists for the ordinance. Regulations proper for a large and pros¬ perous city might be absurd or oppressive in a small and sparsely populated town, or in the country.

Atlantic & P. Teleg. Co. v. Philadelphia, 190 U. S. 160, 47 L. ed. 995, 23 Sup. Ct. Rep. 817.

It has been repeatedly held in the state of Pennsylvania that all of the averments contained in an affidavit of defense must be treated as established facts.

Smyth v. Miller, 174 Pa. 639, 34 Atl. 210.

Mr. John M. Harris argued the cause, and, with Mr. E. 0. Wagenhorst, filed a brief for defendant in error:

A borough in Pennsylvania may, by or¬ dinance, impose upon telegraph companies a reasonable license fee for the poles and wires maintained by them in the limits of the borough.

McKeesport v. McKeesport & R. Pass. R. Co. 2 Pa. Super. Ct. 242; Millerstoicn v. Bell, 123 Pa. 151, 16 Atl; 612; Frankford (£• P. Pass. R. Co. v. Philadelphia, 58 Pa. 119, 98 Am. Dec. 242; Taylor v. Postal Tel¬ eg. d Cable Co. 16 Pa. Super. Ct. 345; John¬ son v. Philadelphia,, 60 Pa. 445.

The provisions of the ordinance do not ob¬ struct commerce; they aid it.

Adams Exp. Co. v. Ohio, 165 U. S. 194, 41 L. ed. 683, 17 Sup. Ct. Rep. 305, 166 U. S. 185, 41 L. ed. 965, 17 Sup. Ct. Rep. 604; Hcnnivgton v. Georgia, 163 U. S. 299, 41 L. ed. 166, 16 Sup. Ct. Rep. 1086; Pull¬ man’s Palace Car Co. v. Pennsylvania, 141 U. S. 18, 35 L. ed. 613, 3 Inters. Com. Rep. 595, 11 Sup. Ct. Rep. 876.

The power to enact laws regulating the internal commerce of a state, and those which respect turnpike roads, has never been surrendered to the general government.

Gibbons v. Ogden, 9 Wheat. 203, 6 L. ed.

A license tax is not a regulation of com¬ merce.

Osborne v. Mobile, 16 Wall. 479, 21 L. cd. 470; License Tax Cases, 5 Wall. 462, 18

343

67-09

Supreme Court of the United States.

Oct. Term,

L. ed. 497; License Cases, 5 How. 504, 12 L. ed. 25(5.

The collection of revenue is not the ob¬ ject of the ordinance. It is therefore a prop¬ er police regulation.

Acte York, A7. H. d FI. R. Co. v. Ncio York, 105 U. S. 628, 41 L. ed. 853, 17 Sup. Ct. Rep. 418.

A telegraph company may not, relying on the post-roads act, occupy the streets of a municipality without compensation to the municipality.

St. Louis v. Western U. Tcleg. Co. 148 U. S. 92, 37 L. ed. 380, 13 Sup. Ct. Rep. 485.

Telegraph companies enjoying the privi¬ leges of the act of July 24, 1800, do so in subordination to the due exercise of the po¬ lice power of the state in which their lines are situated.

Richmond v. Southern Bell Tcleph. d Tel- eg. Co. 174 U. S. 701, 43 L. ed. 1102, 19 Sup. Ct. Rep. 778.

There is no arbiter in such case, beyond the state itself, to determine what legisla¬ tion is just.

Potter’s Uwarr. Stat. ed. 1871, pp. 445-

The 14th Amendment to the Federal Con¬ stitution did not take from the states the police power reserved to them at the time of the adoption of the Constitution.

Slaughter-] louse Cases, 10 Wall. 30, 21 L. ed. 394; Mugler v. Kansas , 123 U. S. 023, 31 L. ed. 205, 8 Sup. Ct. Rep. 273; Cooley, Const. Lim. p. 239.

The ordinance is uniform and operates alike on all, and is, therefore, a proper state regulation.

Western U. Tcleg. Co. v. Atty. Gen. 125 U. S. 530, 31 L. ed. 790, 8 Sup. Ct. Rep. 901; Leloup v. Port of Mobile, 127 U. S. 640, 32 L. ed. 311, 2 Inters. Com. Rep. 134, 8 Sup. Ct. Rep. 1380.

Every phase of the matter here presented has been passed upon and finally adjudi¬ cated in this court.

St. Jjouis v. Western V. Tcleg. Co. 148 U. S. 92, 37 L. ed. 380, 13 Sup. Ct, Rep. 485, Reaffirmed in Postal Tcleg. Cable Co. v. Baltimore, 150 U. S. 211, 39 L. ed. 401, 15 Sup. Ct. Rep. 350; Western U. Tcleg. Co. v. New Hope , 187 U. S. 419, 47 L. cd'. 240, 23 Sup. Ct. Rep. 204; Atlantic d P. Tcleg. Co. v. Philadelphia, 190 U. S. 100, 47 L. ed. 995, 23 Sup. Ct, Rep. 817.

Mr. Justice Peckham, after making the foregoing statement of facts, delivered the opinion of the court:

The grounds of our jurisdiction to review the judgment in this and the preceding case are similar to those which sustained it in the two cases of Western V. Tcleg. Co. v. Ncio Hope, 187 U. S. 419, 47 L. ed. 240, 23 344

Sup. Ct. Rep. 204, and Atlantic d Pacifie Tcleg. Co. v. Philadelphia, 190 U. S. 160,

45 L. ed. 995, 23 Sup. Ct. Rep. 817. By ref¬ erence to the opinions delivered in the state courts in this case it is apparent that it was not decided upon any question of res judicata, as set forth in the plaintiff’s ex¬ ceptions to defendant’s affidavit of defense.

*ln the opinion of the superior court of

Pennsylvania it was stated:'

“Whether or not the fee is so obviously excessive as to lead irresistibly to the con¬ clusion that it is exacted as a return for the use of the streets, or is imposed for rev¬ enue purposes, is a question for the courts, and is to be determined upon a view of the facts, not upon evidence consisting of the opinions of witnesses as to the proper super¬ vision that the municipal authorities might properly exercise, and the expense of the same. Such a decision becomes a precedent which is to be regarded in other cases sim¬ ilarly situated. Were it to be held other¬ wise, the law upon the subject would be in hopeless confusion and uncertainty. We make these remarks because we cannot es¬ cape the conclusion that some of the aver¬ ments of the affidavit of defense are, in reality, but the opinion of the defendant, undoubtedly honestly entertained, as to these matters. They are not stronger than the averments in Philadelphia v. American U. Tcleg. Co. 167 Pa. 406, 31 Atl. 028, and the other facts averred do not distinguish the case from others in which a similar fee in boroughs has been held to be not so ob¬ viously excessive as to warrant the courts in declaring the ordinance void. The cases are collected in the opinion filed herewith in the case of New Hope v. Western U. Tcl¬ eg. Co. 202 Pa. 532, 52 Atl. 127.” [Reported in 202 Pa. 583, 52 Atl. 128.]

The opinion referred to by the superior court is also contained in the record, and cases were cited in that opinion from the state courts holding that they would not declare an ordinance void because of the al¬ leged unreasonableness of the fee charged, unless the unreasonableness be so clearly apparent as to demonstrate an abuse of dis¬ cretion on the part of the municipal author¬ ities. The court further remarked:

“In many of the foregoing cases the li¬ cense fee was the same as that imposed by the ordinance under consideration. In none of the cases was the ordinance declared void for unreasonableness, although it was in- ferentially conceded that a case might arise where the license fee would be so grossly disproportioned *to the burden imposed upon

the municipality in consequence of the erec¬ tion and maintenance of the poles and wires as to warrant the court in presuming that the ordinance was a revenue measure, not a

192 U. S.

Postal Telegraph-Cable Co. v. Taylor.

69-71

police regulation. None of the cases laid down a fixed and invariable rule by which that question is to be determined, but after a comparison of the facts developed on the trial of this case with the facts of some of the cases above cited, we have been led to the conclusion that the court would not have been justified by the precedents in de¬ claring the ordinance void.”

Upon the averments in the affidavit of de¬ fense, which in this proceeding must be tak¬ en to be true, we can come to no other con¬ clusion than that the ordinance was void because of the unreasonable amount of the license fee provided for therein.

It was urged on the argument that this ordinance was a proper police regulation, and that the collection of revenue was not its object; that it was the duty of the bor¬ ough officials to protect the lives and prop¬ erty of its citizens, and that in the dis¬ charge of such duty it had the right to constantly inspect the poles and wires for the purpose of seeing that they were safe.

There is no doubt that, for the purpose mentioned, the borough had the right claimed by its counsel. The averments of the affidavit of defense, however, show that no such duty has been discharged or at¬ tempted to be discharged by the borough. It has done absolutely nothing to protect the lives or property of its citizens by in¬ specting the poles and wires of the defend¬ ant.

In Atlantic & Pacific Teleg. Co. v. Phila¬ delphia, 190 U. S. 100, 47 L. ed. 995, 23 Sup. Ct. Rep. 817, it was held that the tes¬ timony in a case like this might be such as to compel a decision one way or the other, and the court might then be justified in directing a verdict. We think this is one of those cases. We assume that a tax oi this kind ought to be large enough to cover all expenses of police supervision of the property and instrumentalities used by the company in the borough, and that it is not

bound to furnish such supervision *for noth¬ ing, but may, in addition to ordinary prop¬ erty taxation, subject the corporation to a charge for the expenses of the supervision. The borough is also not compelled to make its expenditures for these purposes in ad¬ vance of demanding the tax from the de¬ fendant, but it must be remembered that such a tax is authorized only in support of police supervision; and, if it were possible to prove in advance the exact cost, that sum would be the limit of the law. As, in the nature of things, this is ordinarily impossible, the municipality is at liberty to make the charge enough to cover any rea¬ sonably anticipated expenses, and the pay¬ ment of the fee cannot be avoided because ' it may subsequently appear that it was 192 U. S.

somewhat in excess of the actual expense of the supervision, nor can the company then recover the difference between the amount of the license fee and such oost. These observations are substantially repro¬ duced from the opinion of the court in At¬ lantic t£ Pacific Teleg. Co. v. Philadelphia,

190 U. S. 100, 47 L. ed. 995, 23 Sup. Ct.

Rep. 817, delivered by Mr. Justice Brewer.

We come, then, to an examination of the question whether this fee, in the light of the admitted facts set forth in the affidavit of defense, can, by the widest stretch of imag¬ ination, be regarded as reasonable. The bor¬ ough is, where the poles are planted and the wires stretched, sparsely settled, and the danger to be apprehended from neglect in regard to the poles and wires is reduced to a minimum. The borough has in fact done nothing in the way of inspection or supervi¬ sion during the time covered by the license in question. It has not expended one dol¬ lar for any such purpose. It has incurred no liability to pay any expenses arising from inspection or supervision on its be¬ half. The fee itself is twenty times the amount of expense that might have been reasonably and fairly incurred to make the most careful, thorough, and efficient inspec¬ tion and supervision that might have been made of such poles and wires, and for all reasonable measures and precautions that possibly could be required to be taken by the borough for the safety of its citizens and the public. This is not a mere ex¬ pression *of opinion. It is the averment of

a fact. The company knows the amount it costs for the inspection, which it avers is made by its own servants, and which it avers is a most careful and efficient inspec¬ tion, one intended to place and maintain the poles and wires in a perfectly safe and satisfactory condition. Knowing that cost, and comparing it with the amount demand¬ ed under the ordinance, it is enabled to state as a fact, and not as a mere opinion, that the amount of the license fee exacted under the ordinance is, as stated, twenty times more than it ought to be to secure a reasonable, efficient, and most careful inspec¬ tion, as set forth in the affidavit mentioned.

In Chester City v. Western U. Teleg. Co.

154 Pa. 404, 25 Atl. 1134, cited in Western V. Teleg. Co. v. i Veto Pope, 187 U. S. 419,

425-, 47 L. ed. 240, 244, 23 Sup. Ct. Rep.

204, it was said that the affidavit in that case averred that the rates charged were at least five times the amount of the expenses involved in the supervision exercised by the municipality. The supreme court held that while that averment must be admitted to be true, it did not go far enough, because it referred only to the usual, ordinary, and necessary expenses of the municipal officers

345

71-78

Supreme Court of the United States.

in issuing the license and other expenses thereby imposed upon the municipality, and that it made no reference to the liability imposed upon the city by the erection of the telegraph poles. It was also stated by the court that it is the duty of the city to see that the poles are safe and properly main¬ tained, and should a citizen be injured in person or property by reason of the neglect of such duty an action might lie against the city for the consequences of such neg¬ lect. The court said it was a mistake, there¬ fore, to measure the reasonableness of the charge by the amount actually expended by the city in a particular year to the particu¬ lar purposes specified in the affidavit.

The affidavit in this case goes much fur¬ ther. It includes not only the expenses that might have been incurred for an ordi¬ nary inspection, supervision, and regulation, but takes into account the very matters

that are spoken of in the extract from *the opinion of the supreme court of Pennsyl¬ vania (supra). Instead of the averment that the license fee charged was at least five times the amount of the expense in¬ volved in the supervision exercised by the municipality, it is stated that it is more than twenty times the amount that would reasonably be expended for the purposes 6tated in the affidavit.

The liability to pay for injuries that might arise from the bad condition of the poles and wires, arising from the neglect of the company to inspect and supervise the same, is not a liability which the municipal¬ ity is entitled to recover from the company in advance of its happening, but it is sim¬ ply one of the reasons for an inspection by the borough, which shall be most carefully and continuously performed, in order that injuries may not arise from the neglect of such supervision.

When we come to an examination of the grounds upon which this kind of a tax is justifiable, and when we find that, in this case, each one of those grounds is absent, how is it possible to uphold the validity of such an ordinance? To uphold it in such a case as this is to say that it may be passed for one purpose and used for anoth¬ er; passed as a police inspection measure and used for the purpose of raising revenue; that the enactment as a police measure may be used as a mere subterfuge for the pur¬ pose of raising revenue, and yet, because it is said to be an inspection measure, the court must take it as such and hold it valid, although resulting in a rate 6f taxation which, if carried out throughout the coun¬ try, would bankrupt the company were it added to the other taxes properly assessed for revenue and paid by the company. It is 346

Oct. Term,

thus to be declared legal upon a basis and for a reason that do not exist in fact.

We think the court is not bound to ac¬ knowledge an ordinance such as this to be valid in face of the facts stated in the affi¬ davit of defense. Confessedly there has been here no inspection, no expense incurred to provide for one even though not made, and all expenses and liabilities that might fairly and reasonably be incurred on the part of the borough are not one twentieth of the amount it exacts for an inspection which it has not made. *Under such facts it would

seem to be plain that the ordinance was adopted as a means for the raising of reve¬ nue, and not to repay expenses for inspec¬ tion.

Judging the intention of the borough by its action, it did not intend to expend anything for an inspection of the poles and wires, and did intend to raise revenue under the ordinance. Courts are not to be de¬ ceived by the mere phraseology in which the ordinance is couched, when the action of the borough, in the light of the facts set forth in the affidavit, shows conclusively that it was not passed to repay the expenses or pro¬ vide for the liabilities incurred in the way of inspection or for proper supervision.

We are of opinion that, upon the aver¬ ments contained in the defendant’s state¬ ment of defense, the defendant was entitled to judgment. The judgment of the Supreme Court of Pennsylvania is, therefore, re¬ versed, and tlie cause remanded for further proceedings not inconsistent with this opin¬ ion.

So ordered.

Mr. Justice Harlan and Mr. Justice Brewer dissented.