Citizens' St. R. Co. v. City of Memphis

• Decision Date: 04 January 1893
• Citation: 53 F. 715
• Court: U.S. District Court — Western District of Tennessee
• Parties: Citizens' ST. R. CO. v. CITY OF MEMPHIS et al.

53 F. 715

Citizens' ST. R. CO. v. CITY OF MEMPHIS et al.

United States Circuit Court, W.D. Tennessee.

January 4, 1893

Turley & Wright, for the motion.

Metcalf & Walker, opposed.

HAMMOND J.

The troublesome question in this case is that of our jurisdiction. The defendant city contends that the power to alter or repeal the charter of the plaintiff company is absolute, and therefore, that there can be no inviolable obligation of the contract, arising out of the charter, to be protected by the federal constitution, which forbids any state to pass a law impairing the obligation of contracts wherefore it contends that no federal question is presented to sustain our jurisdiction, and that whatever rights the plaintiff may have, either of property or action, or whatever injuries it may have received at the hands of the city authorities, are matters solely within the jurisdiction of the state, and cognizable only in its tribunals, like all other rights or injuries with which the federal authority has no concern. If it were certain that the state had the power to alter and repeal the plaintiff's charter at will, I should be inclined to take the defendant's view of this question, and hold that, so far as this particular article of the federal constitution is concerned, no federal question could be presented, under such a charter; because what the state might do of itself it could do by its municipal agencies as well, and whether or not the state had authorized such an agency to do such a thing as that complained of, or whether or not the state had the power, under its constitution, to confer such authority on the given agency and the like, would present no federal question, but one only of the law of the state, apart from its connection with the other. There are intricacies of this subject, I know, arising out of the consideration that it is impossible to take any contract-- or its obligation, rather-- out of that protection afforded unreservedly by the federal constitution to all contracts, whether they be private contracts, purely, or charter contracts, by special or general law, and that this impossibility necessarily imposes always a federal inquiry whenever complaint is made that the obligation-- whatever it be, much or little-- has been impaired by state legislation. Whether a reservation-- for example, to alter, amend, or repeal a charter-- is operative to protect the particular legislation against the imputation of federal prohibition may be, it is said, itself a federal question to support the jurisdiction; just as in a purely private contract there may be a reservation of power of revocation to either party; but it does not follow that the state, because of such reservation, may pass a law impairing the obligation of that class of contracts, or that the class is exempt from the influence of the federal prohibition. But I do not care at this time, to go into these intricacies of constitutional construction. Charters of incorporation are peculiar contracts, which have been-- by grace or favor, it has been said by some-- placed upon an equality with private contracts in this matter of federal protection against state legislation impairing their obligation, by the celebrated Dartmouth College Case; and it has been generally thought that the state might avoid the tremendous restrictions placed by that case upon their authority over corporations, and retain to themselves what many believe to be a wise power of absolute dominion, by agreeing with each incorporation at the time of the charter, as a part of the contract, and of its obligation, that this power of absolute dominion should exist, and the state be at liberty, whenever it chooses, to not only impair the obligation of the charter contract by amendment or other alteration, but, by repeal, to destroy it wholly; or, by importing such a reservation of power into all charters, by a constitutional provision to that effect, to preserve this absolute dominion over them. Water Co. v. Clark, 143 U.S. 1, 12 S.Ct. 346. Under such a charter it would seem that no federal question could arise, as to impairing its obligation, for the plain reason that the power to do that thing is reserved. Whether the state has exercised the power or not, or whether the state has or has not, in fact, authorized one of its municipalities to exercise the power for it, or whether the particular action of the municipality comes within its granted powers, and the like, are all, under such a charter, mere questions of state law, with which the federal constitution can, in the nature of the thing, have no concern whatever. It may be that such a state of law, and such absolute dominion, would make corporation property and franchises unsafe and unstable, but that is an infirmity of the state law, and not of the federal constitution, and investors would consider that infirmity when making their investments; but, justly, they could not rely upon federal authority for help in their distress upon the question whether the state had or had not injured their property and franchises, whether it had left them in full enjoyment of these franchises, or armed its agencies with powers to injure them. These would not be federal questions at all. I say, again, the fullness of this doctrine, as contended for by the defendants' counsel, will be conceded by the court here, for the purposes we now have in hand. But I do not think the plaintiff's charter is subject to such absolute dominion by the state, and perhaps no charter can be, whether before or after the constitution of 1870; but of that we need not inquire at this time.

The plaintiff company owes its origin to two companies,-- one chartered in 1865, known as the Memphis City Railroad, and the other chartered in 1866, known as the Citizens' Street Railroad Company. These charters, of course, were unaffected by the constitutional provision of 1870, now under consideration, and were fully under the protection of the federal constitution, in the matter of the inviolability of their charter contracts. How have they lost this advantage if at all? It is said that by consolidation into one company a new corporation has been formed, the old ones dissolved, and the new brought within the constitutional reservation of the power to alter, amend, or repeal a charter, and thereby subject to this absolute dominion which the state has reserved over all charters granted since 1870; and to support this position a class of cases to be presently noticed is relied upon by the city. Undoubtedly this result must follow, if the legislature has intended it, and if it has the constitutional power to effect that intention. Nothing in the legislation, by express terms, manifests any intention to deprive the old corporations of the advantage of any right or immunity that they had under their charters, but, upon the contrary, they are all expressly preserved to them, notwithstanding the consolidation. Necessarily a consolidated corporation must be, in a certain sense, a new corporation; but not necessarily, in every sense, nor in the fullest sense, must it be so entirely new that the old corporation is extinct. There is nothing in the nature of the subject-matter, nor of the process of consolidation, that requires this extinction of the old corporations to make the new. It may be done, or it may not. Whether it be desirable to the state and the corporations involved, or to either party to the contract, to extinguish the old charters entirely, or to preserve them in whole or in part, depends upon the circumstances, and whether they have agreed to that extinction or not, for, be it remembered, it is a matter of agreement between them,-- depends upon the nature and character of the purposes they have in view in effecting the new arrangement. Now, is it to be supposed that these old companies desired or were willing, for the mere privilege of consolidation, to surrender their old charter rights including that involved here of inviolability of the contract, or that the state, in consideration of the grant of that privilege, imposed such a surrender upon them? Naturally, if the consolidation could be constitutionally effected without this, the companies would desire it, and, if they have surrendered that inviolability, such purpose would be manifested in the legislation itself, and not left to implication; and, on the other hand, the state would have insisted that the surrender, and the intention to impose it, should be plainly manifested and secured by the agreement-- that is to say, by the legislation--itself. Contrary to this, as I shall undertake to show presently, the form of the legislation, its historical surroundings, and its appearances of substance and phraseology, are all against the idea of any open and unconcealed purpose of both parties to this agreement of consolidation that the old charters would be surrendered, in the sense that they became extinct; or of the state, that it would, in open and unconcealed terms, impose this surrender as a consideration for the newly-granted privilege of consolidation; and there seem to be provided the appliances necessary for the convenience of the companies which enable them to obtain the benefits of administration through one company, rather than two, such as a new name or a consolidated name, and a privilege of being a new corporate entity, instead of a double-headed concern, and the like, the possession of which would not be inconsistent at all with a retention of all its rights, immunities, and privileges; including again, I say, this more valuable one, of inviolability of its charter fights, and, incidentally, (and I say this particularly because it is, in my judgment, only an incident, and in the just sense a quite unimportant and immaterial one,...