Opinion · Supreme Court of the United States

Larson v. South Dakota

Larson v. S.D., 278 U.S. 429 (1929)

Type: Opinion
Court: Supreme Court of the United States
Jurisdiction: Federal
Date: 1929-02-18
Topic: general

How later courts describe this case

observing that franchises to provide ferry service “were contracts between the state and the petitioner”

Citator

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Cited by: 29 opinions

Headnotes

Constitutional Law — Contracts Clause Although a state supreme court's construction of a contract is persuasive, it does not bind the United States Supreme Court when the contract is assailed under the Contract Clause of the Federal Constitution; the Court must independently determine what the contract means and whether, properly construed, the challenged action impairs its obligation. 278 U.S. at 433
Contracts Law — Public Grants — Exclusive Ferry Franchises Exclusive ferry leases granted by a state to a private lessee pursuant to statute are contracts between the state and the lessee. 278 U.S. at 432
Constitutional Law — Public Grants — Strict Construction Public grants are to be construed strictly, and nothing passes to the grantee by implication; one who relies on a public grant as the basis for a private right must bring the claimed right expressly within the grant or statute, and no implication will be made enlarging the grant in the grantee's favor. 278 U.S. at 435
Constitutional Law — Contracts Clause A state is not presumed to have surrendered its power to promote public improvement and accommodation, and where a corporation or grantee alleges that the state has surrendered that power for a term of years in an important line of travel, the community may insist that abandonment of the power ought not to be presumed absent a deliberate purpose by the state to abandon it. 278 U.S. at 435
Contracts Law — Interpretation A contract binding the state is created only by clear language and is not to be extended by implication beyond the terms of the statute. 278 U.S. at 437
Contracts Law — Ferry Franchises — Exclusive Grant Limited to Ferriage An exclusive ferry franchise granted under a statute declaring rival ferry leases unlawful within a stated distance is limited to transportation by ferry and does not, without more, preclude the state from authorizing or constructing a bridge near the ferry; the grant of an exclusive right to carry persons and goods across a stream by means of a ferry is not a grant of the exclusive right to carry them across by any means whatever. 278 U.S. at 437

LARSONv. SOUTH DAKOTA,278 U.S. 429(1929)

49 S.Ct. 196

LARSONv. SOUTH DAKOTA.

APPEAL FROM THE SUPREME COURT OF SOUTH DAKOTA.

No. 102.

Argued January 8, 1929.

Decided February 18, 1929.

1. A construction by a State Supreme Court of a contract between the State and an individual, is not binding on this Court when assailed under the Contract Clause of the Federal Constitution. P. 433. 2. A statute of South Dakota empowers municipal authorities to grant leases to operate ferries upon waters within the State to persons who shall bid and secure the highest rent for the same; declares it unlawful to operate a ferry without a license; and provides that when a lease has been granted, another shall not be granted across the same stream within two miles of the ferry landing of the first. After the plaintiff, by complying with the statute,Page 430had acquired leases and at large expense established a profitable ferry under them, the State, pursuant to later Acts of the Legislature, constructed a free bridge within the granted limits, the effect of which was to destroy the value of his leases and business and render his investment worthless.Held:(1) The exclusive ferry leases were contracts between the State and the lessee. P. 432. (2) A public grant is to be strictly construed and nothing passes to the grantee by implication. P. 435. (3) So construed, the ferry leases were not infringed by the building of the bridge. P. 437.51 S.D. 561, affirmed.

The appellant, hereafter to be called the petitioner, sued the

State of South Dakota, in its Supreme Court, for damages for the

destruction of his ferry franchises on the Missouri River, under

the authority of § 2109, South Dakota Revised Code of 1919.

Petitioner alleged in his complaint that he was granted ferry

franchises under §§ 8696 to 8704 of the same Code. Section 8696

provided:

"It shall be unlawful for any person to establish, maintain or

operate upon any waters within this state any ferry, upon which

to convey, carry or transport any person or property for hire or

reward, without first having procured a ferry lease, as provided

in this article; and where but one bank or shore is in this

state, the board of county commissioners of the proper county, or

the governing body of the proper city or incorporated town, shall

have the same authority as if the entire stream were within this

state so far as the banks and waters actually within it are

concerned, and when any ferry lease has been granted, no other

lease shall be granted within a distance of two miles from the

place described, in the application for a ferry lease, as the

ferry landing across the same stream. . . ."

Section 8697 provided:

"The board of county commissioners of the proper county or the

governing body of the proper city or incorporated town to whom

application shall be made for a ferry

Page 431

lease, in the manner hereinafter provided, shall have authority

and it shall be its duty to grant a ferry lease, for the term of

not exceeding fifteen years, to the person who shall bid and

secure the highest amount of rent for the same. . . ."

The complaint further alleged that the State, by appropriate

action of the county commissioners of Walworth County in 1916,

and of those of Corson County in 1921, for a valuable

consideration, granted to the petitioner exclusive leases or

ferry franchises of fifteen and five years' duration

respectively, and authorized him to operate a ferry upon and

across the Missouri River for such toll charges as were provided

by law, in an area extending two miles in either direction from

the landing point; that the petitioner accepted the ferry

franchises, and invested money in the purchase of ferry boats,

motor boats, landings and buildings to equip the ferry, to the

amount of $14,000. He further alleged that the State, pursuant to

acts of its Legislature, during the years 1923 and 1924,

constructed a steel and concrete bridge across the Missouri River

at a site designated by law, upon and within the confines of

plaintiff's exclusive ferry franchises and within two miles west

of the point of the ferry landing; that the bridge is a free

bridge and became usable about November 10, 1924; that the ferry

had first been run at a loss, as expected, but that recently it

had yielded over $5,000 a year profit; that by the construction

of the bridge petitioner's business as a ferryman and his

property right in his franchises were totally destroyed and the

investments made by him were rendered worthless and resulted in a

damage to him of $44,000, no part of which has been paid. He

therefore asked judgment in that amount.

The defendant, the State, demurred to the complaint of the

petitioner on the ground, among others, that the complaint did

not state facts sufficient to constitute a cause of action. The

Supreme Court sustained the demurrer.

Page 432

The petitioner having failed to file an amended complaint the

original complaint was dismissed.51 S.D. 561.

An appeal to this Court was allowed under § 237(a) of the

Judicial Code.

The petitioner contended in the state court, and contends

here, that the acts of the state Legislature, under which the

bridge was constructed, impaired the obligation of the contract

embodied in his ferry leases or franchises and therefore were

void as being in conflict with the contract clause of the

Constitution of the United States.

Mr. Wm. M. Potts, with whomMr. Byron S. Paynewas on the brief, for appellant.Messrs. Buell F. Jones, Attorney General of South Dakota,Raymond L. Dillman, andRay F. Drewry, Assistant Attorneys General, were on the brief for appellee.

Mr. CHIEF JUSTICE TAFT, after stating the case, delivered the opinion of the Court.

The exclusive ferry leases were contracts between the State and the petitioner.The Binghamton Bridge, 3 Wall. 51. Was the building of the bridge a breach of them?

The Supreme Court of the State has had the meaning of "exclusive ferry franchise" before it twice before this case, inNixonv.Reid,8 S.D. 507, and inChamberlain Ferry CableBridgev.King,41 S.D. 246; but these cases did not require consideration of the effect of the term as applied to anything but ferries. The court said on that subject in the present case:

"All that is contemplated by the statute and all that was granted by the plaintiff's leases was the right to operate a ferry together with a prohibition upon the granting boards from granting other ferry leases within the granted area during the period. . . . Nowhere inPage 433the statute can be found or implied a provision that the State was binding itself not to construct, nor authorize the construction of, a bridge across the river within the four mile area, or not to permit carriage by aviation across it. The fair and reasonable construction of the statute is that it refers solely to transportation by ferry."

Coming from the State Supreme Court, this language is very persuasive of the meaning of the statute and would indicate that in its view the building of a bridge was not a breach of the ferry contracts.

The petitioner relies on the contract clause of the Federal Constitution, and is not prevented from invoking from this Court an independent consideration of what the contract means, and whether by a proper construction, the building of a bridge impairs its obligation.Applebyv.City of New York,271 U.S. 364,380;Columbia Ry. Co. v.South Carolina,261 U.S. 236,245;Long Sault Development Co. v.Call,242 U.S. 272,277;Louisiana Ry. Navigation Co. v.New Orleans,235 U.S. 164,170;Mobile and Ohio R.R. Co. v.Tennessee,153 U.S. 486,492;Huntingtonv.Attrill,146 U.S. 657,684;New OrleansWater Co. v.Louisiana Sugar Co.,125 U.S. 18,38;Wrightv.Nagle,101 U.S. 791,794;Universityv.People,99 U.S. 309,321;Bridge Proprietorsv.Hoboken Co., 1 Wall. 116, 145;The Binghamton Bridge, 3 Wall. 51, 81;Jefferson Bankv.Skelly, 1 Black. 436, 443.

We must therefore treat the question as an open one and determine as an independent matter what the parties must be held to have had in mind in the use of the term "exclusive lease."

The chapter of the Revised Code of the State immediately preceding that which directs the letting and granting of exclusive ferry leases provides for the building of bridges over the rivers of South Dakota. This close relation of the chapters suggests that if bridges were intended to be forbidden by the contract, the parties would havePage 434been likely to mention a bridge as a breach. But there is no mention of a bridge in the statute or contract dealing with ferries.

On the other hand, it is argued that it was so well understood by everyone, including the parties, that the erection of a bridge in the forbidden area would destroy the value of the ferry leases, and so defeat the real object of the leases, that an implication necessarily arises that a bridge would be a breach of the leases.

Reference is made toNewburgh Turnpike Co. v.Miller, 5 Johns. Ch. 101, 111, a decision by Chancellor Kent. That was a suit to enjoin as a nuisance the construction and use of a bridge over the Wallkill River, upon which the plaintiff had a toll bridge of more than ten years' standing, and the injunction was granted.

The Chancellor said:

"It was observed in the case ofOgdenv.Gibbons(4 Johns. Ch. Rep. 150, 160), and shown to be a principle of the common law, that if one had a ferry by prescription, and another erected a ferry so near it, as to draw away its custom, it was a nuisance, for which the injured party had his remedy by action. The same law and remedy were applied to the case of a fair or market, in which an individual had a freehold interest, if another fair or market was erected or used within its vicinity. The same doctrine applies to any exclusive privilege created by statute: all such privileges come within the equity and reason of the principle; no rival road, bridge, ferry, or other establishment of a similar kind, and for like purposes, can be tolerated so near to the other as materially to affect or take away its custom. It operates as a fraud upon the grant, and goes to defeat it. The consideration by which individuals are invited to expend money upon great and expensive and hazardous public works, as roads and bridges, and to become bound to keep them in constant and good repair, is the grant of a right to an exclusive toll.Page 435This right, thus purchased for a valuable consideration, can not be taken away by direct or indirect means, devised for the purpose, both of which are equally unlawful."

It will be observed that the facts there related to two bridges, and the case is not necessarily an express authority holding that an exclusive franchise for a ferry excludes a bridge. Yet it may be strongly argued from the language used that that is what the Chancellor had in mind.

We think, however, a broader question arises in the proper construction of a public grant like this. The leading case on the subject in Federal jurisprudence is that ofCharles RiverBridgev.Warren Bridge, 11 Pet. 420, 547. In that case the Legislature of Massachusetts incorporated a company to build a bridge over the Charles River where a ferry stood, granting it tolls. Years after, the Legislature incorporated another company for the erection of another bridge within 800 feet of the original one. The new bridge was to become free after a few years, and at the time of the litigation it had become actually free. The Charles River Bridge was deprived of the tolls and its value was destroyed. Its proprietors filed a bill against the proprietors of the Warren Bridge, for an injunction against the use of the bridge as an act impairing the obligations of a contract and repugnant to the Constitution of the United States. The Supreme Court of Massachusetts dismissed the bill and the case was brought by error to this Court, which affirmed the judgment of the Massachusetts court. The principle of the case is that public grants are to be strictly construed, that nothing passes to the grantee by implication. The court citedUnitedStatesv.Arredondo, 6 Pet. 691, 738;Jacksonv.Lamphire, 3 Pet. 280, 289;Beatyv.Lessee of Knowler, 4 Pet. 152, 165;Providence Bankv.Billings and Pittman, 4 Pet. 514, 561. In the last case Chief Justice Marshall said, of an asserted limitation on the taxing power:

". . . as the whole community is interested in retaining it undiminished, that community has a right toPage 436insist 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."

The case then before the court was held to be subject to the same rule, although one of a corporate grant. The act of incorporation was silent in respect to the contested power. The argument made in favor of the proprietors of the Charles River Bridge was the same as that of the Providence Bank, namely, that the power claimed by the State, if it existed, must be so used as not to destroy the value of the franchise granted to the corporation. The argument was rejected.

Chief Justice Taney, delivering the opinion in theCharlesRiver Bridgecase, said [p. 547]:

"But the object and end of all government is to promote the happiness and prosperity of the community by which it is established; and it can never be assumed that the government intended to diminish its power of accomplishing the end for which it was created. And in a country like ours, free, active, and enterprising, continually advancing in numbers and wealth, new channels of communication are daily found necessary, both for travel and trade, and are essential to the comfort, convenience and prosperity of the people. A state ought never to be presumed to surrender this power, because, like the taxing power, the whole community have an interest in preserving it undiminished. And when a corporation alleges that a state has surrendered for seventy years its power of improvement and public accommodation, in a great and important line of travel, along which a vast number of its citizens must daily pass, the community have a right to insist, in the language of this Court above quoted, `that its abandonment ought not to be presumed in a case in which the deliberate purpose of the state to abandon does not appear.'"Page 437

The same principle is declared inFanningv.Gregoire, 16 How. 524, 534;Wrightv.Nagle,101 U.S. 791,796;WheelingBelmont Bridge Co. v.Wheeling Bridge Co.,138 U.S. 287,293, andWilliamsv.Mingo,177 U.S. 601,603. Speaking for the Court in the last case Mr. Justice Brewer said:

"A contract binding the State is only created by clear language and is not to be extended by implication beyond the terms of the statute.Fanningv.Gregoire, 16 How. 524, is in point and decisive."

The cases above cited are not exactly on all fours with the specific issue presented here, but they serve to show with great emphasis the necessity for one who relies upon a public grant as a basis for a private right, to bring it expressly within the grant or statute.

It is clear from them that in determining the effect of a public grant to an individual the principleut res magis valeatquam pereatis not to be applied in his favor or an implication to be made enlarging his grant, as seems to have been the view of Chancellor Kent inNewburgh Turnpike Co. v.Miller, supra.

The contention that an exclusive ferry franchise should be construed to cover all methods of travel and transportation across the water is rejected inDyerv.Tuskaloosa BridgeCo., 2 Porter 296 (Ala. 1835);Piattv.CovingtonCincinnati Bridge Co., 8 Bush 31 (Ky. 1871);Snidowv.Boardof Supervisors of Giles County,123 Va. 578(1918);Dibdenv.Skirrow[1908] 1 Ch. 41. There are many strong dicta to this same effect.Moreyv.Orford Bridge, Smith (N.H. 1804) 91, 95;Piscataqua Bridgev.New Hampshire Bridge,7 N.H. 35,59(1834);Bushv.Peru Bridge Co.,3 Ind. 21,24(1851);Parrotv.Lawrence, Fed. Cas. No. 10772 (C.C. Kan. 1872) 18 Fed. Cas. 1234;State ex rel. McPherson Bros. v.SuperiorCourt,142 Wn. 284,291(1927).Page 438

The great weight of authority holds that a contractual term forbidding a ferry or a toll bridge does not exclude a railroad bridge.Mohawk Bridge Co. v.Utica Schenectady R.R., 6 Paige 554, 564 (N.Y. 1837);McLeodv.Savannah, Albany GulfR.R.,25 Ga. 445(1858);Bridge Proprietorsv.Hoboken Co., 1 Wall. 116, 149 (1863);Hopkinsv.Great Northern Ry., 2 Q.B.D. 224 (1877), overrulingReginav.Cambrian Ry., L.R. 6 Q.B. 422 (1871). Contra:Enfield Toll Bridge Co. v.HartfordNew Haven R.R.,17 Conn. 40,45(1845).

There is some conflicting authority on the main question.Gatesv.McDaniel, 2 Stewart 211 (Ala. 1829);Norrisv.Farmers' Teamsters' Co.,6 Cal. 590(1856);Menzel EstateCo. v.City of Redding,178 Cal. 475(1918);Blanchardv.Abraham,115 La. 989(1906). But all of these cases are distinguishable in that the infringing bridge or ferry was established without legal authority, and there were other reasons such as obstruction to navigation, special statutes, or injury to tangible property which affected the decisions.

The strongest case for the appellant isMasonv.Harper'sFerry Bridge Co.,17 W. Va. 396(1880), where a statute forbidding other ferries was held to give an exclusive right to transportation over the river and hence to prohibit rival bridges as well, but the court said that the Legislature could take away at any time all the exclusive privileges of the proprietors theretofore existing.

InHopkinsv.Great Northern Railway, 2 Q.B.D. 224, 230 (1877), a railway company built a railway bridge and a foot bridge across a river one-half mile above an ancient ferry, which then went out of business. It was held that the ferry could not obtain compensation for either bridge, the railway being necessary for new traffic, and the foot bridge being used by those going to the railway station or by trespassers. There was a dictum by a court of distinguishedPage 439English judges "that the owner of a ferry has not a grant of an exclusive right of carrying passengers and goods across the stream by any means whatever, but only a grant of an exclusive right to carry them across by means of a ferry."

We can hardly say, therefore, from the weight of authority, that an exclusive grant of a ferry franchise, without more, would prevent a legislature from granting the right to build a bridge near the ferry. Following the cases in this Court in its limited and careful construction of public grants, it is manifest that we must reach in this case the same conclusion.

The judgment of the Supreme Court of South Dakota isAffirmed.