City of Detroit v. Detroit United Ry., 150.

• Citation: 197 N.W. 697,226 Mich. 354
• Decision Date: 05 March 1924
• Docket Number: No. 150.,150.
• Parties: CITY OF DETROIT v. DETROIT UNITED RY. et al. (SECURITY TRUST CO. et al., Interveners).
• Court: Supreme Court of Michigan

226 Mich. 354

197 N.W. 697

CITY OF DETROIT

v.DETROIT UNITED RY. et al. (SECURITY TRUST CO. et al., Interveners).

No. 150.

Supreme Court of Michigan.

March 5, 1924.

Appeal from Circuit Court, Wayne County, in Chancery; Joseph A. Moynihan, Judge.

Suit by the City of Detroit against the Detroit United Railway, the Guaranty Trust Company of New York, and others, in which the Security Trust Company and others intervened. Decree for plaintiff, and defendant Guaranty Trust Company appeals. Affirmed.

Argued before CLARK, C. J., and McDONALD, BIRD, SHARPE, MOORE, STEERE, FELLOWS, and WIEST, JJ.Richard I. Lawson, Corp. Counsel, of Detroit, for plaintiff.

Stevenson, Carpenter, Butzel & Backus, of Detroit (Elliott G. Stevenson and Thomas G. Long, both of Detroit, and William G. Fitzpatrick, of Highland Park, of counsel), for defendant Detroit United Ry.

Stetson, Jennings, Russell & Davis and Campbell, Bulkley & Ledyard, all of Detroit (Henry M. Campbell, of Detroit, and T. W. Morris. Jr., and Allen Wardwell, both of New York City, of counsel), for defendant Guaranty Trust Co. of New York.

Campbell, Bulkley & Ledyard, of Detroit, for defendant Union Trust Co.

Orla B. Taylor, of Detroit, and Henry V. Poor, of New York City (Larkin, Rathbone & Perry, of New York City, of counsel), for defendant Central Union Trust Co. of New York.

Corliss. Leete & Moody, of Detroit, for defendants New York Trust Co. of New York and Cleveland Trust Co. of Cleveland, Ohio.

Beaumont, Smith & Harris, of Detroit, for defendant Watling.

Douglas, Eaman, Barbour & Rogers, of Detroit, for defendants First Nat. Bank and First Nat. Co.

Keena, Lightner, Oxtoby & Hanley, of Detroit, for defendant Peoples State Bank.

Van Dyke & O'Brien, of Detroit, for defendant Lerchen, and intervening defendants Post & Flagg and Butterworth.

Stellwagen & Groesbeck, of Detroit, for intervening defendant Security Trust Co.

James O. Murfin, of Detroit, attorney for intervening defendant Hutchins.

Archibald H. Taylor, of Baltimore, Md. (Wm. Van Dyke, of Detroit, of counsel), for intervening defendants Julian Taylor and others.

MOORE, J.

From a decree in favor of the plaintiff the case is brought into this court by appeal. The only party appealing is the Guaranty Trust Company of New York.

A motion is pending before us to dismiss this appeal for the reason that the appellant has no such interest in the litigation as to justify its appeal when all the other parties to the litigation are satisfied with the decree entered by the court below.

As the record and briefs are all before us, and the case has been ably argued orally, we have decided to dispose of it upon the merits.

The chancellor filed a carefully prepared opinion from which we quote freely:

‘The bill of complaint was filed by the plaintiff in this cause against the several defendants, praying, among other things, that the court separate, segregate, and allocate the trust property, and the beneficiaries thereof, in a certain trust mortgage dated January 1, 1902, but which in truth and fact was actually executed on the 24th day of January, A. D. 1902, by the Detroit United Railway, and which trust mortgage is designated and known as its first consolidated mortgage issued against and on all of its then existing property, both street railways in the city of Detroit and the interurban railway without the city, without distinction, discrimination, or allocation, and on all afteracquired property, to the Guaranty Trust Company of New York, one of the defendants herein, as trustee to secure an issue of 30-year 4 1/2 per cent. gold bonds of said Detroit United Railway in the sum of $25,000,000, which said mortgage was recorded on February 3, 1902, in the office of the register of deeds for the county of Wayne. * * *

‘After repeated litigation between the Detroit United Railway, cross-plaintiff, maker of the trust mortgage, and the city of Detroit, the plaintiff in this cause in which the claim of the city with reference to its right in the streets and highways of the city was maintained and upheld. * * *

‘On August 2, 1921, an ordinance was adopted by the common council of the city, directing the street railway company to cease operating cars on Woodward and Fort street lines and certain connecting streets, which said ordinance was submitted to the electors of the city of Detroit on November 8, 1921, and was duly approved by said electors by the requisite vote.’

‘On October 3, 1921, the Supreme Court of the state of Michigan affirmed an order of this court in a suit begun by the city against the Detroit United Railway, wherein said Supreme Court determined and decreed that the common council of the city had the right to, by proper resolution, direct the institution of suits against the said railway company, to obtain a decree of ouster against it, in respect of all tracks for which grants had by their terms expired. * * *

‘On or about March 10, 1922, after considerable negotiations had between the city of Detroit, by and through its board of street railway commissioners, and the defendant railway company, through its proper officers, an agreement in writing was made and entered into between the parties, in and by which agreement the city agreed to purchase, and the company to sell, at and for the price of $19,850,000, all the street railways and street railway property, including franchises and other rights, real estate located in the cities of Detroit, Hamtramck, and Highland Park, and in the the village of Springwells this county, and the township of Warren in Macomb county, which said agreement was, by proper resolution, adopted by the common council of the city on March 14, 1922, and submitted to the electors of said municipality for approval, on April 17, 1922, and which said ordinance was by said electors approved.’

‘After the approval of this latter ordinance by the people and on May 15, 1922, possession of said street railways and other property was delivered by the railway company to the city, and the city has continued the maintenance and operation thereof from that time. At the time of taking possession, the city of Detroit paid the initial payment of $2,770,000, required by said agreement, and since that time has paid the further sum of $1,200,000, pursuant to the terms of said agreement.

‘Both parties have kept all of the terms of said agreement by them to be performed, but the city is fearful that the amount of bonds still in the hands of the public under the foregoing trust mortgage, and which aggregates considerably more than the purchase price of the urban systems, will in some manner militate against its receiving of and from the Detroit United Railway and its trustee, under said consolidated mortgage, a free and clear title to the premises and file their bill seeking to separate from the trust mortgage a certain amount of the bonded indebtedness, and apply such portion as should be determined to the interurban lines of the company, and the balance to the urban lines, or the system purchased by the city of and from the railway company. It is the further claim of the city that, through the final expiration of grants, including renewals and extensions in the city of Detroit, the imminence of the expiration of other such grants, the refusal of the electors of said city to approve any new grant, the determination by the court that there was no right to the company of maintenance and operation of tracks after the expiration of the grant, the determination by the electors of the city to acquire and operate a street railway system, and the ordering of the tracks out of streets, that an exigency has arisen which was not contemplated at the time of the creation of the trust mortgage by which the street railways, in the city of Detroit, and the interurban railways, and other property, were conveyed to the Guaranty Trust Company of New York, one of the defendants, by way of mortgage, known as the first consolidated mortgage, it being the further claim of the city, and likewise of the cross-plaintiff, that no such exigency had ever been contemplated, that the municipality would engage in municipal operation of street railway lines, back in 1902, when the trust mortgage was created; otherwise, if there had been any such notion or idea, it would have been taken care of in the trust mortgage, which, according to the contention of both plaintiff and cross-plaintiff, there now exists no machinery in the trust mortgage for the taking care of the present unlooked for condition. The city further deems itself insufficiently protected to go on and continue its payment under the agreement of March 10, 1922, for the reason that, if they pay the entire purchase price, there will still exist, on the city system, certain mortgage liens by reason of said trust mortgage, as, in and by the terms of said mortgage, both the urban and interurban lines are security for the bonds, and they pray that this court interfere, break in upon, set aside, and change the terms, express and otherwise, of said instrument known as the first consolidated mortgage, creating the trust for the benefit and security of said 30-year 4 1/2 per cent. gold bonds, and likewise, as heretofore stated, shall separate, segregate, and allocate the trust property and the beneficiaries thereof, and that the court proceed to hear this cause in respect of all persons who are or may be holders of any bonds, notes or obligations entitled to the benefit and security of any of said mortgage trusts, as a class, separated (a) as to the bonds which are to be allocated to the street railways and other property covered by said purchase agreement of March 10, 1922, between the city and the railway, and (b) as to the bonds which are to be allocated to the interurban railway, and other property retained by said railway from said agreement dated March 10, 1922, and that said defendants to this suit, as holders of any of said bonds, notes, or obligations, may each be deemed...