City of Detroit v. Detroit Citizens Street Railway Company

• Decision Date: 03 March 1902
• Docket Number: No. 152,152
• Citation: 46 L.Ed. 592,184 U.S. 368,22 S.Ct. 410
• Parties: CITY OF DETROIT, William C. Maybury, Mayor, and Charles Flowers, Corporation Counsel, Appts. , v. DETROIT CITIZENS' STREET RAILWAY COMPANY
• Court: U.S. Supreme Court

184 U.S. 368

22 S.Ct. 410

46 L.Ed. 592

CITY OF DETROIT, William C. Maybury, Mayor, and Charles Flowers, Corporation Counsel, Appts.,

v DETROIT CITIZENS' STREET RAILWAY COMPANY.

No. 152.

Argued November 4, 5, 1901.

Decided March 3, 1902.

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 5 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 pred- ecessors 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 135 miles of street railways in the streets of the city of Detroit; that in such operation it has in use upwards of 400 street cars, which are propelled by electricity, and has in its employ, engaged in such operation, upwards of 1,000 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 $8,200,000, payable in gold coin, with semiannual interest at the rate of 5 per cent 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 § 10 of article 1 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 §§ 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.' [2 Mich. Comp. Laws 1897, §§ 6424, 6425.]

In 1867 the above § 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 § 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...