Georgia Railway & Power Co. v. Town of Decatur

Background

A local government (the Town of Decatur) sued two street railway companies to stop them from raising a long‑standing five‑cent fare on the line between Decatur and Atlanta. Around 1902 the town and the electric company agreed, and the town passed an ordinance, that the main Decatur line would charge no more than five cents and would provide transfer tickets. The company kept that five‑cent fare until 1920, when it said it would raise fares to seven cents; nearby Atlanta residents intervened, claiming the Decatur deal unfairly discriminated against them.

Reasoning

The Court first agreed the town had authority to make the contract and that the contract was valid as a binding agreement. The central question then became whether the five‑cent obligation could be forced to cover areas added to the town after the contract was made. The Court held that extending the low fare into newly annexed territory would substantially add to the company’s burden and impair the contract, so the extension could not be sustained. The Court also found that the state railroad commission’s orders about keeping transfer practices and providing extra seating did not conflict with the contract.

Real world impact

As a result, the five‑cent fare applies only within the Town of Decatur as it existed when the contract was made; newly annexed areas are not automatically covered. Railway companies thus avoid expanded fare duties outside the original town boundaries, while municipal contracts remain effective until state law directly overrides them. The state supreme court’s judgment extending the rate was reversed and the case was sent back for further proceedings consistent with this ruling.