Detroit v. Detroit Citizens’ Street Ry. Co., 184 U.S. 368 (1902)
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Detroit v. Detroit Citizens’ Street Railway Company
No. 162
Argued November 4-5, 1901
Decided March 3, 1902
184 U.S. 368
APPEAL FROM THE CIRCUIT COURT OF THE UNITED
STATES FOR THE EASTERN DISTRICT OF MICHIGAN
Syllabus
The Detroit Citizens’ Street Railway Company, at the time this action was commenced, was operating upwards of one hundred and thirty-five miles of street railways in Detroit under grants and permissions made by the city government of Detroit and by the statutes of Michigan set forth in the statement of facts and in the opinion of the Court in this case. This litigation arises out of the different constructions placed by the parties upon the statutes of Michigan, called respectively the Tram-Railway Act, and the Street-Railway Act, both in force when said company acquired its powers. The provisions made by those statutes are summed up in the statement of facts. Held:
(1) That this was not such a case as, on its face, equity could have no jurisdiction over, and that, considering the public interests involved, a case is made out for following the general rule that a defense of want of equity jurisdiction will not be recognized where it has not been taken by answer or in any other manner and is not insisted upon on the hearing before the court.
(2) That there can be no question in this Court as to the competency of a state legislature, unless prohibited by constitutional provisions, to authorize a municipal corporation to contract with a street railway company as to the rate of fares, and so to bind, during the specified period, any future common council from altering or in any way interfering with such contract.
(3) That, such a contract having once been made, the power of the city over the subject, so far as altering the rates of fare or other matters properly involved in and being a part of the contract, is suspended for the period of the running of the contract.
(4) That binding agreements had been made and entered into, between the city, on the one side, and the companies, on the other, relating to rates of fare, and such agreements could not be altered without the consent of both sides.
(5) That those binding agreements constituted a contract as to the rates, equally binding with that in regard to taxes.
(6) That the rate of fare having been fixed by positive agreement, under express legislative authority, the subject was not open to alteration thereafter by the common council alone, under the right to prescribe from time to time the rules and regulations for the running and operation of the road.
(7) That the language of the ordinance which provides that the rate of fare for one passenger shall not be more than five cents does not give any right to the city to reduce it below the rate of five cents established by the company.
(8) That the provisions in the Tram-Railway Act and the Street-Railway Act referred to are entirely harmonious, and may be fully carried out so as to involve neither incongruity nor inconsistency.
(9) That the extension of the terms of the city’s consent beyond the limits of the corporate life of the companies was not illegal and void.
(10) That the fixing of rates being among the vital portions of the agreement between the parties, it cannot be supposed that there was any intention to permit the common council, in its discretion, to make an alteration which might be fatal to the pecuniary success of the company.
The bill in this suit was filed by the railway company for the purpose of obtaining an injunction to restrain the City of Detroit and the individual defendants from enforcing certain ordinances of the common council of the city, adopted in 1899, reducing the rates of fare on the various city railways of the complainant and providing for transfers of passengers from one route to another on payment of one fare of five cents, on the ground that such ordinances were violations of the federal Constitution because they impaired the obligation of contracts theretofore entered into between the city and the various predecessors of the complainant. The circuit court granted a decree perpetually enjoining the defendants as prayed for, and they have appealed therefrom to this Court.
As further ground for equitable jurisdiction, the complainant, after setting up in the bill its alleged contracts with the city and the attempted violation thereof by the latter, made the following averments:
Your orator further shows unto the court that as owner and lessee it is now engaged in the operation of upwards of one hundred and thirty-five miles of street railways in the streets of the City of Detroit; that in such operation it has in use upwards of four hundred street cars, which are propelled by electricity, and has in its employ, engaged in such operation, upwards of one thousand men as motormen and conductors; that it carries an average of ___ thousand passengers per day over the lines owned and operated by it; that, under and by virtue of the provisions of said ordinances, Exhibits A. B, C, D, and E, and the obligation of your orator to carry such passengers as may offer themselves for carriage, it will be subjected to innumerable demands upon the part of the traveling public to sell to such persons as may make such demands tickets in accordance with the provisions of said ordinances, Exhibits A, B, C, D, and E, and to issue as provided and required thereby, and to accept and carry such passengers and transfer the same at the rates of fare fixed by said ordinances; that, on your orator’s refusal to comply with such demands and requests, your orator may be subjected to numerous actions at law by persons so refused, and to annoyance, litigation, and loss by reason thereof; that the said City of Detroit will seek and now seeks and threatens and intends by such power and authority as it may possess, and by vexatious legal proceedings, to compel your orator to comply with the provisions of said ordinances, Exhibits A, B, C, D, and E, and as a result your orator will be put to great loss, damage, hindrance, and annoyance in the transaction of its business, which it is entitled to carry on without such suits, litigation, actions, annoyance, hindrance, loss, and damage.
That, in full reliance upon its right to charge the full rates of fare fixed by the various contracts and grants hereinbefore referred to, and for the purpose of procuring such money as it was necessary that it should have for the construction, maintenance, repairing and reconstruction, and operation of the various lines of railway hereinbefore described, it issued its bonds and borrowed thereon the money so needed; that your orator and its predecessors and lessors have issued for the purposes aforesaid bonds amounting in the aggregate to eight million two hundred thousand dollars, payable in gold coin, with semiannual interest at the rate of five percent per annum; that many of said bonds mature and will be due and payable within the next three years, and it will be necessary for your orator to borrow a considerable amount of money to assist in the payment and retirement of said bonds by the issue of bonds of the same character; that all of said bonds outstanding are secured by mortgages given at various dates, by the terms of which all of the property, rights, privileges, and franchises of your orator, its lessors and predecessors, including the franchises or rights fixed by the said various contracts and grants to charge the rates of fare therein named, together with all the tolls, fares, issues, earnings, and profits arising therefrom, have been mortgaged to trustees therein named for the use and benefit and security of the holders of such bonds; that said bonds have been sold to parties purchasing the same in the full faith and belief that your orator, its lessors and predecessors and grantors, had the right to charge the full rates of fare fixed by the various contracts and grants without any right upon the part of the said City of Detroit, or of any other person, corporation, or authority to interfere with, lessen, reduce, or impair the same, and, the said right to have and receive the rates of fare so fixed being so mortgaged as a part of the security for the payment of said bonded indebtedness, the action of said city by the adoption of the ordinances, Exhibits A and B, is an impairment of the obligation of said contract as against the rights of said bondholders under and by virtue of the security created by said various mortgages and in contravention of said Section 10 of Article I of the Constitution of the United States.
Complainant also averred in its bill the granting of consent by the city to its predecessors to lay tracks in the streets and charge tolls at the rates named in certain ordinances, for transporting passengers, and the due assignments by the various companies of all such rights, by purchase or lease to the complainant, and the defendant by its answer makes no issue as to the validity of such assignments or the ownership by complainant of all the interests of the former companies in the contracts and ordinances set forth in the bill.
The answer admits the passage by the common council of the ordinances of 1899, reducing the rates of fare on the roads operated by the complainant, and also admits that the city intends to compel the complainant to comply with the provisions of such ordinances, which the defendants aver are valid because, as they claim, the former ordinances did not constitute a contract as to rates of fare which could not be altered by the city.
This litigation arises out of the different constructions placed by the parties upon the statutes of Michigan, called respectively the Tram-Railway Act and the Street-Railway Act, and the various amendments of those acts, and also out of the different claims of the parties as to the character and validity of the ordinances passed by the common council subsequently to the passage of those statutes.
The Tram-Railway Act was passed in 1855, and the Street-Railway Act in 1867. Prior to the amendment in 1861, made to the former act, there was no authority for the incorporation of street railways, and in the year named, that act was amended by adding sections 33 and 34, which are as follows:
SEC. 33. It shall be competent for parties to organize companies under this act to construct and operate railways in and through the streets of any town or city in this state.
SEC. 34. All companies or corporations formed for such purposes shall have the exclusive right to use and operate any street railways constructed, owned, or held by them: Provided, that no such company or corporation shall be authorized to construct a railway under this act through the streets of any town or city without the consent of the municipal authorities of such town or city, and under such regulations and upon such terms and conditions as said authorities may from time to time prescribe.
In 1867, the above section 34 was further amended by adding an additional proviso, as follows:
Provided further that, after such consent shall have been given and accepted by the company or corporation to which the same is granted, such authorities shall make no regulations or conditions whereby the rights or franchises so granted shall be destroyed or unreasonably impaired, or such company or corporation be deprived of the right of constructing, maintaining, and operating such railway in the street in such consent or grant named pursuant to the terms thereof.
These sections of the Tram-Railway Act, it will be seen, made no special provisions as to rates of fare, and there were no other sections of the act which did. The last amendment, above set out, of section 34, was passed March 27, 1867, or twenty-two days after the passage of the original Street-Railway Act, March 5, 1867.
The provisions of the Street-Railway Act material in this controversy are as follows:
SEC. 13. Any street railway corporation organized under the provisions of this act may, with the consent of the corporate authorities of any city or village given in and by an ordinance or ordinances duly enacted for that purpose and under such rules, regulations, and conditions as in and by such ordinance or ordinances shall be prescribed, construct, use, maintain, and own a street railway for the transportation of passengers in and upon the lines of such streets and ways in said city or village as shall be designated and granted from time to time for that purpose in the ordinance or ordinances granting such consent, but no such railway company shall construct any railway in the streets of any city or village until the company shall have accepted in writing the terms and conditions upon which they are permitted to use said streets, and any such company may extend, construct, use, and maintain their road in and along the streets or highways of any township adjacent to said city or village upon such terms and conditions as may be agreed upon by the company and the township board of the township, which agreement and the acceptance by the company of the terms thereof shall be recorded by the township clerk in the records of his township. . . .
SEC. 14. After any city, village, or township shall have consented as in this act provided to the construction and maintenance of any street railways therein, or granted any rights and privileges to any such company, and such consent and grant have been accepted by the company, such township, city, or village shall not revoke such consent, nor deprive the company of the rights and privileges so conferred.
SEC. 15. Any street railway company may also purchase and acquire, either at public or private sale, whether judicial or otherwise, or may hire any street railway in any city, village, or township owned by any other corporation or company, together with the real and personal estate belonging thereto, and the rights, privileges, and franchises thereof, and may use, maintain, and complete such road, and may use and enjoy the rights, privileges, and franchises of such company and upon the same terms as the company whose road and franchises were so acquired might have done. Every street railway company may also purchase, hold, own, or take upon lease such real estate, barns, stables, buildings, fixtures and property as may be necessary for the use and business of their road, and the whole or any part thereof, together with their railway, fixtures, property, and appurtenances, rights, privileges, and franchises, may sell, lease, dispose of, pledge or mortgage, whenever the corporation shall deem it expedient so to do.
SEC. 20. The rates of toll or fare which any street railway company may charge for the transportation of persons or passengers over their road shall be established by agreement between such company and the corporate authorities of the city or village where the road is located, and shall not be increased without consent of such authorities.
SEC. 29. All companies and corporations heretofore organized in this state for the purpose of building and operating street railways under the statutes then in force shall have the same powers, rights, protection, and privileges, and shall be subject to all the liabilities, as are hereby provided for companies and corporations organized under the provisions of this act.
Section 30 in substance provides that all companies and corporations thereafter formed for street railway purposes must be organized under this act.
Some of the railroads of which the complainant is the owner or lessee were organized under the Tram-Railway Act, and some were organized under the Street-Railway Act of 1867. The Detroit Street Railway Company, now owned by the complainant, was organized under the Tram-Railway Act, and the city adopted an ordinance assenting to the laying of tracks through the designated streets of the city on November 24, 1862. Section 1 of the ordinance provides:
SEC. 1. That consent, permission, and authority is hereby given, granted and duly vested in Eben N. Wilcox and his associates, who may be approved by the council, their successors and assigns, organized into a corporation, under the laws of the State of Michigan, as aforesaid, to lay a single or double track for a railway, with all the necessary and convenient tracks for turnouts, side tracks and switches, in and along the course of the streets of, and bridges in, the City of Detroit, hereinafter mentioned, and the same to keep, maintain, and use, and to operate thereon railway cars and carriages, during all the term hereinafter specified and described, and in the manner and upon the condition set forth in this ordinance.
The following sections then provide for the streets in which the rails are to be laid, the manner of laying, whether double or single track, and various other matters not essential to enumerate.
Section 8 reads as follows:
The rate of fare for any distance shall not exceed five cents in any one car, or on any one route named in this ordinance, except where cars or carriages shall be chartered for specific purposes: Provided, cars so chartered shall not be considered regular cars within the meaning of the preceding section.
Section 20 limits the powers and privileges conferred by the ordinance to thirty years from and after the date of its passage.
On November 14, 1879, an ordinance was passed supplementary to the one passed on November 24, 1862, which provided for extensions by the railway company of its tracks through various other streets of the city, and also provided, among other things, for a special tax on the gross receipts of the several lines of railway operated by the company, payable to the city, which tax was to be in lieu of license or other taxes and charges under the existing ordinances.
Section 5 of the supplemental ordinance provided that the powers and privileges conferred and the obligations imposed on the railway company, by the ordinance passed November 24, 1862, and the amendments thereto, should be thereby extended and limited to thirty years from date (November 14, 1879).
Section 6 provided that the ordinance should take immediate effect when written acceptances of the terms thereof were filed in the office of the city clerk of Detroit by the different companies controlled by the Detroit City Company, and it also provided that all ordinances or parts of ordinances in conflict with the provisions thereof were thereby repealed, and all ordinances and parts of ordinances not in conflict therewith were thereby affirmed and continued in force. The acceptances were subsequently duly filed in the city clerk’s office.
A similar ordinance to that of November 14, 1879, was passed on June 30, 1880, relative to the Fort Wayne & Elmwood Street Railway Company, confirming and extending for thirty years its grant under the ordinance of January 31, 1865. Similar ordinances were passed in favor of other lines which had been organized under the Tram-Railway Act and its amendments.
And ordinances of the same nature were passed relating to the companies organized under the Street-Railway Act of 1867.
The original ordinance under which the city gave consent to the laying of the rails of the Grand River Street Railway was adopted on May 1, 1868, and the section providing for the rate of fare is the same in language as section 8, in the foregoing ordinance relative to the Detroit Street Railway.
The ordinance relating to the Dix Avenue Railway provided in section 6 "that the rate of fare for a single trip shall not exceed five cents for any distance within the city limits." Similar language was used in section 5 of the ordinance approved by the common council July 13, 1886, relating to the Highland Park Railway. The eighth section of the ordinance approved by the common council January 31, 1868, with regard to the Fort Wayne & Elmwood Railway Company, provides that "the rate of fare for any distance shall not exceed five cents in any car."
These ordinances embrace the various railroads now owned or leased and operated by the complainant, and it is in them, taken in connection with the statutes already referred to, that the complainant finds the contracts or agreements as to the rate of fare, the obligation of which agreements it avers is impaired by the later ordinances passed in 1899.
The Charter of the City of Detroit, approved June 7, 1883, by sections 121 and 122, clothed the common council with power over the streets, highways and alleys, to establish, open, widen, extend, straighten, alter, vacate, etc., and generally to control and regulate the manner in which the highways and streets, avenues, lanes, alleys, public grounds, and spaces within the city should be used and enjoyed.
The Constitution of the State of Michigan, article 15, section 1, provides that --
Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes. All laws passed pursuant to this section may be amended, altered, or repealed.
The various ordinances which have been referred to contain certain reservations of the right to alter, etc., which are thus worded: Section 19 of the grant of November 24, 1862, to the Detroit City Railway, is as follows:
It is hereby reserved to the Common Council of the City of Detroit the right to make such further rules, orders, or regulations as may from time to time be deemed necessary to protect the interest, safety, welfare, or accommodation of the public in relation to said railways.
Section 7 of the grant of November 14, 1879, reenacting and extending the grant of November 24, 1862, is as follows:
The right to amend or repeal this ordinance in case of its violation by said company or companies is expressly reserved.
Section 3 of the grant of January 5, 1885, authorizing the Brush Street line, is as follows:
It is hereby reserved to the Common Council of the City of Detroit the right to make such further rules, orders, or regulations as may from time to time be deemed by the common council necessary to protect the interest, safety, welfare, or accommodation of the city and public in relation to said railway.
Section 3 of the Trumbull Avenue line grant of July 31, 1865, is a literal copy of the one last quoted.
Section 18 of the grant to the Grand River Street Railway of May 1, 1868, is as follows:
It is hereby reserved to the Common Council of the City of Detroit the right to make such further rules, orders, or regulations as may from time to time be deemed necessary to protect the interest, welfare, or accommodation of the public in relation to said railways.
The same reservation was contained in section 4 of the grant of June 27, 1885, of the Myrtle Street route.
And section 3 of the grant of August 3, 1888, relating to the Grand River line, is the same.
Section 19 of the grant of January 31, 1865, to the Fort Wayne & Belle Isle Company is as follows:
It is hereby reserved to the Common Council of the City of Detroit the right to make such further rules, orders, or regulations as may from time to time be deemed necessary to protect the interest, safety, welfare, or accommodation of the public in relation to said railways.