privileges or immunities shall be made,, City Street R. Co. 83 Tex. 548, 29 Am. but that all privileges and franchises St. Rep. 679, 19 S. W. 127; Rio Grande granted by the legislature, or created under R. Co. v. Brownsville, 45 Tex. 88; Galits authority, shall be subject to the control thereof, contract with a public service veston & W. R. Co. v. Galveston, 90 Tex. corporation as to street railway fares, so 398, 36 L.R.A. 33, 39 S. W. 96. as to permit their enforcement if they are so low as to be confiscatory.

Rochester Teleph. Co. v. Ross, 125 App. | 90 Tex. 411, 36 L.R.A. 33, 39 S. W.
Div. 76, 109 N. Y. Supp. 381; Potter v. 96.
Calumet Electric Street R. Co. 158 Fed.
520.

Mr. Chief Justice White delivered the opinion of the court:

L. ed. 1317, P.U.R.1917F, 64, 37 Sup. | begun by an individual, and from a Ct. Rep. 701; Knoxville v. Knoxville ruling adverse to the company's contenWater Co. 212 U. S. 15, 53 L. ed. 380, tion, the case was taken to the court of 29 Sup. Ct. Rep. 148; San Diego Land & civil appeals. That court held that it Town Co. v. National City, 174 U. S. was unnecessary to consider whether the 757, 43 L. ed. 1161, 19 Sup. Ct. Rep. rate requirement was a contract be804; Municipal Gas Co. v. Public Service cause, as it was adopted long after the Commission, 225 N. Y. 89, P.U.R.1919C, provision of the state Constitution that 364, 121 N. E. 772. "no irrevocable or uncontrollable grant of special privileges or immunities shall be made; but all privileges and franchises granted by the legislature, or created under its authority, shall be subject to the control thereof," it was necessarily to that extent restricted, and therefore left the state free, within the limits of the restriction, to exert the authority to regulate. As a result, the half-fare law was upheld, obviously upon the conclusion that it was within the power [550] to regulate as restricted by the constitutional provision (- Tex. Civ. App. -, 81 S. W. 106).

The decree below enjoined the city of San Antonio from enforcing a 5 cents fare against the Public Service Company, operating street railway lines in that city, on the ground that the right to enforce such rate was not secured to the city by contract, and such enforcement was beyond the power of the city because of the confiscation of the property of the railway company, which would result in violation of the 14th Amendment to the Constitution of the United States.

The consideration we must give the subject will be clarified by outlining the origin and development of the controversy.

In March, 1899, the city of San Antonio by ordinance extended to July 1, 1940, "the rights, privileges, and franchises heretofore granted to and existing in the San [549] Antonio Gas Company, Mutual Electric Light Company, San Antonio Street Railway Company, and the San Antonio Edison Company." The ordinance provided, among other things, that the two companies last named, which operated street railways in the city, "shall charge 5 cents fare for one continuous ride over any one of their lines, with one transfer to or from either line to the other."

In April, 1900, all the property of the two railway companies was sold under a decree of a state court to the San Antonio Traction Company, and that company, with the approval of the city, thereafter controlled and carried on both lines.

Because of the Federal question the case was brought to this court and the decree was affirmed substantially on the ground which had controlled the decision below. In addition, however, the court was careful to point out that the state Constitution prohibited a rate regulation which was confiscatory, but that, in view of the absence of all averment that the rate in question was confiscatory, it was unnecessary to deal with that subject. San Antonio Traction Co. v. Altgelt, 200 U. S. 304, 50 L. ed. 492, 26 Sup. Ct. Rep. 261.

Presumably under the power to regulate as thus established, the city thereafter passed, and the Traction Company carried out, an ordinance imposing the duty of free transportation of policemen and firemen.

In 1912 the state Constitution was amended so as to authorize cities having more than 5,000 inhabitants, by vote of their electors, to amend their charters or adopt new ones, subject to the limitation that the charters should not contain any provision inconsistent with the Constitution or general laws of the state.

In 1903 the state enacted a half-fare law, making it the duty of the Traction In the meantime the two companies, Company to carry school children and gas and electric, dealt with in the Ordistudents for half fare, and subsequently nance of 1899, were consolidated and an ordinance was passed by the city in became the San Antonio Gas & Electric furtherance of this law. The company Company, and in 1917 the appellee, refusing to carry out this legislation, on the San Antonio Public Service Comthe ground that it impaired the obliga-pany, petitioned the city government tion of its contract as to rate of fare to consent to its acquisition of all resulting from the Ordinance of 1899, in violation of the Constitutions of the state and of the United States, a suit by mandamus to compel it to do so was

the rights and property of the San Antonio Traction Company and of the San Antonio Gas & Electric Company, thus proposing to bring under one control the

four corporations dealt with in the Ordinance of 1899. The city consented by an ordinance which expressly subjected the Public Service Company to all the limitations, duties, and obligations which rested upon the Traction Company and the Gas & Electric Company. The ordinance further provided that:

"In accepting the provisions of this ordinance the [551] San Antonio Public Service Company agrees that the city shall hereafter have the right to pass all ordinances not in direct conflict with the laws of this state fixing and regulating the rates, prices, and terms at which gas and electricity shall be furnished for public and private purposes to the city and its inhabitants."

the same time prohibiting, under a penalty which was stated, any person, firm, or corporation operating any street railway within or partly within the city from charging more than a 5 cents fare.

Thereupon the company commenced this suit by filing its bill to enjoin the city from enforcing the 5 cents fare ordinance. The bill, after alleging the adequacy of the rate of 5 cents when originally fixed in 1899, contained the amplest averments concerning its present confiscatory character. The prayer was for a temporary injunction restraining the enforcement of the 5 cents fare ordinances, and from interfering with the company in putting in a 7 cents fare instead, and from enforcing the ordinances which forbade a change of fare. It was prayed that if the company was not permitted to put in effect the 7 cents fare, the court would itself

This was followed by provisions requiring the keeping of such accounts by the Public Service Company in its gas and electric departments as would en-establish that rate, or such other as it able the city to exercise the power to fix rates as to gas and electricity. The ordinance having been accepted by the Public Service Company, the consolidation was accomplished.

might find necessary to enable the company to pay its operating expenses and to earn a reasonable sum on its investment, and that a permanent injunction securing the results prayed be awarded.

At and for a long time prior to the The city moved to dismiss the bill for consolidation the Penal Code of the city want of jurisdiction because it presentcontained a provision, accompanied by a ed no substantial Federal question, as penalty for its violation, forbidding, ex- it showed on its face that the parties cept during certain hours of the night, were bound by the 5 cents fare provithe charging of more than a 5 cents fare sion of the franchise ordinance as a within the city limits. Shortly after contract subject to be enforced, even the approval of the consolidation an- though the rate was confiscatory, and other ordinance was passed forbidding moreover because the bill otherwise and penalizing any person, firm, or cor- stated no ground for equitable relief. poration, enjoying franchises within the The court overruled the motion. It recity limits, or their agents or employees, viewed the history of the case and from charging more than the rate then decided that, in view of the controversy charged and collected, without obtaining as to contract growing out of the enthe permission of the city. In conform-forcement of the half-fare law, termiity with this last-mentioned ordinance nated by the ruling of this court in the the Public Service Company, in August, 1918, applied to the city for permission to increase its rate of fare from 5 to 6 cents, based upon the ground that although the 5 cents fare was remunerative at the time it was fixed, it had, by the increase in cost of operation in practically every department, become wholly insufficient for that purpose, and could not be continued without confis- The city then answered reiterating cating the property of the company. the grounds of its previous challenge to After a hearing the city, by an ordi- the jurisdiction, and asserting that the nance reciting that as the company was franchise ordinance rate was based bound by the forty-year franchise, upon a contract resulting from that granted in 1899, to charge 5 cents fare, ordinance and from the action taken at the city did not feel authorized nor the time, and in furtherance of the concalled upon to set it aside, and further-solidation. It further asserted an esmore, that the hearing had shown no toppel to deny the contract arising from necessity for [552] the change in rate various acts of the city and the corpoasked, refused the company's request, at ration or its predecessors from the time

Altgelt Case, as well as of all the subsequent dealings between the parties, the existence of a contract as to the 5 cents fare was not established, and hence, the attempt to enforce it, because of the confiscation to result, gave a cause of [553] action under the Constitution of the United States. 257 Fed. 467.

of the Ordinance in 1899 to the bringing of the suit in 1918. Moreover, disputing the confiscatory character of the 5 cents fare, it claimed the right to compel its continued exaction in virtue of its general governmental authority to regulate the fares of street railway companies.

Some weeks afterward the final decree was entered. It enjoined the city from interfering with the complainant in substituting a 7 cents fare for the 5 cents fare, and besides enjoined the city from enforcing the various ordinances complained of in the bill prohibiting and punishing the charging of a The case was referred to a master to higher rate than 5 cents. The decree rereport on the facts and the law. Be-served, however, the right to the city to fore the master, a hearing was had, fol- ask relief whenever, because of a change lowed by an elaborate report on both in conditions, the 5 cents fare should subjects. As the action of the court overruling the exception to its jurisdiction had adversely disposed of the question of the existence of the contract concerning the 5 cents fare, the master put that subject out of view and therefore reported only on the facts as to the confiscatory character of the 5 cents rate and of the power of the court, under the assumption that it was confiscatory, to restrain its enforcement.

A few words from the report will suffice to make manifest the conclusion of the master. He said: "The rate prescribed by the ordinance is insufficient, because of the changed conditions since the rate was fixed twenty years ago, to enable the company to earn a fair return; but I have reached the conclusion that to admit the contention of the company would be for the court to exercise a power it does not possess; . . . A rate, reasonable when fixed, does not become unreasonable, from the judicial point of view, because of changed conditions."

[554] Although the Public Service Company excepted to the conclusion of law thus stated and to some of the separate conclusions of fact made by the master, no exception whatever to the report was made by the city, and the case therefore went to the court upon the admitted confiscatory character of the rate, upon the question of contract, and upon the power of the court, if no such contract existed, to restrain the confiscation which would result from giving effect to the rate. Adhering to its previous ruling the court declared that it had jurisdiction to prevent the admitted confiscation which would result from the 5 cents rate. Concluding, however, that as the court was not a primary rate-making authority it would not fix a reasonable rate to replace the 5 cents rate, the enforcement of which would be enjoined, and expressing the hope that the parties might agree upon such a rate, it announced that it would postpone shaping the final decree for that purpose.

cease to be confiscatory. In addition, the enforcement of the city ordinance imposing the half-fare rate for school children was enjoined, although the continued enforcement of the state halffare law, which had been upheld in the Altgelt Case, was expressly declared not to be restrained. On the direct appeal of the city because of the constitutional question involved, we are called upon, as at the outset stated, to determine whether error was committed in the decree thus rendered.

[555] That, in view of the admitted fact of confiscation, the court had power to deal with the subject, we are of opinion is too clear for anything but statement. And we think it is equally clear that as the right to regulate gave no power whatever to violate the Constitution by enforcing a confiscatory rate,-a result which could only be sustained as a consequence of the duty to pay such rate arising from the obligations of a contract,-it follows that the solitary.question to be considered is whether a contract existed empowering the city to enforce the confiscatory rate.

Primarily the answer to that question must depend upon whether the Ordinance of 1899, fixing the 5 cents rate, was a contract. That it was not and could not be, we are of opinion, is the necessary result of the provision of § 17, article 1, of the state Constitution, existing in 1899, prohibiting "any irrevocable or uncontrollable grant of special privileges," etc., when considered in the light of the irrevocable and uncontrollable elements which must necessarily inhere in the Ordinance of 1899 to give it the contract consequence relied upon. Indeed, this result is persuasively established by the ruling in the Altgelt Case, to the effect that if the contract right were conceded there would, in view of the constitutional restriction, be such an inevitable conflict between that right and the dominant power to regulate as to render the contract right inoperative, and therefore to