City of Detroit v. Detroit City Ry. Co.

• Decision Date: 31 May 1893
• Docket Number: 3,320.
• Citation: 56 F. 867
• Parties: CITY OF DETROIT v. DETROIT CITY RY. CO. et al.
• Court: U.S. District Court — Eastern District of Michigan

56 F. 867

CITY OF DETROIT v. DETROIT CITY RY. CO. et al.

No. 3,320.

United States Circuit Court, E.D. Michigan.

May 31, 1893

Swan District Judge, dissenting.

John J Speed, E. A. Kent, and Benton Hanchett, for complainant.

Henry M. Duffield, John C. Donelly, Fred A. Baker, Ashley Pond Otto Kirchuer, and Sidney T. Miller, for defendants.

Before TAFT, Circuit Judge, and SWAN, District Judge.

TAFT Circuit Judge.

This was a bill in chancery, originally filed in the circuit court for Wayne county, Mich., by the city of Detroit, against the Detroit City Railway, the Detroit Citizens' Street-Railway Company, Sidney D. Miller and William K. Muir, trustees, and the Washington Trust Company of the City of New York. The defendants all answered in the state court, and then, on the petition of the Washington Trust Company, the case was removed to this court on the ground of local prejudice. See City of Detroit v. Detroit City Ry. Co., 54 F. 1. The case was heard on bill and answer.

The object of the bill was to obtain an injunction, mandatory and prohibitory, to compel the Detroit Citizens' Street-Railway Company, operating a street railway in that city, to remove its tracks from the streets, and to prevent its further running of cars after May 9, 1893. The case set out in the bill was that the easement of the Citizens' Company to occupy the streets ended upon that date, and that the easement until 1909, claimed by the Citizens' Company under assignment of mesne conveyance from the Detroit City Railway, was invalid, because the city council had no power, under the laws of Michigan, to confer an easement upon the Detroit City Railway to last beyond its corporate life, which ended May 9, 1893. The answers of the several defendants whose interests are stated below, after denying the claim of the bill that the grant to the City Railway of the easement until 1909 was invalid, and, after pleading estoppel against the city on two grounds, prayed that the answers might be treated as cross bills; that an ordinance of the city council of 1892, purporting to repeal the 1909 grant, should be decreed invalid, as impairing contract obligations; and that the city and its officers should be enjoined from interfering with the lawful occupation of the streets by the Citizens' Company. The facts to be gathered from the answers and the bill were as follows:

By ordinance approved the 24th of November, 1862, the common council of the city of Detroit conveyed to one Wilcox and associates, their successors and assigns, who should form a corporation for that purpose, the exclusive right to construct, maintain, and operate a street railway, with a single or double track, for 30 years from the date of the ordinance, upon certain named streets of Detroit, and upon such other streets as the common council might direct, and the company assent to, in writing, provided, that if the assent of the company was not forthcoming within 30 days the council might then give the privilege to any other company. The ordinance provided that the track should be laid in such a way as least to obstruct public travel; that if it should become necessary to relay the tracks, in case the city graded, paved, or repaved the streets, the relaying should be done at the expense of the company; that the company should be required to keep the surface of the streets, inside the rails, and for two feet four inches outside thereof, in good order and repair, provided that on the paved portions of the streets the materials for repaving should be supplied at the expense of the city; that the railways within the named streets should be completed within certain fixed times, or in default thereof the rights conferred would be lost therein; that the company should pay to the city, after five years, the annual license fee of $15 a car; and that rights conferred on Wilcox and his associates should vest, without further act or consent of the city, in the corporation they proposed to form. The ordinance was accepted by the grantees or their successors, who on May 9, 1863, organized the corporation as the Detroit City Railway, with a corporate life of thirty years.

The company built the railways required in the ordinance of 1862, and continued to operate them until 1879. It the mean time two other railway companies, under ordinances of the city, built lines of road on certain streets, after the Detroit City Railway Company had declined to do so. They were known as the Detroit & Grand Trunk Junction Street Railway, and the Central Market, Cass Avenue & Third Street Railway. They became embarrassed, and their property and franchises were sold under mortgages, and new companies were organized to operate them. The successor of the former, the Congress & Baker Street Railway Company, was organized September 17, 1875, and the successor of the latter, the Cass Avenue Street-Railway Company, was organized August 18, 1877, each for 30 years. The ordinances under which these companies operated required them, in case the city paved or repaved the streets they occupied, to repave, at their own expense, all of the portion within the track, and two feet nine inches on either side thereof, and imposed a car license of $25 on each double horse car, and $12.50 on each single horse car, and a special tax for the second five years of the ordinance of 1 per cent. on the gross earnings, and after that of 3 per cent.

The city became dissatisfied with the taxes it was receiving in 1879, and, after negotiating between the three companies and the city, an ordinance was passed on November 24th of that year, the validity of which was the main controversy in this action. The first and second sections of the ordinance required certain extensions on the routes of the Detroit City Railway and the Detroit & Grand Trunk Junction Railway. Section 3 repealed the ordinances of June 13, 1873, and of June 16, 1875, granting authority to the Detroit & Grand Trunk Junction Street-Railway Company and to the Central Market, Cass Avenue & Third Street Railway Company to construct and operate street railways through certain streets of Detroit, and provided that the said railways, constructed and operated under those ordinances, should hereafter be subject to, and operated under, the ordinance approved November 24, 1862, and its amendments, granting to the Detroit City Railway Company rights as therein set forth. The fourth section imposed a tax of 1 per cent., half-yearly, on the gross receipts of the companies, and required them to repave between the tracks when the city repaved, but not outside of the tracks, and stipulated that the tax and repaving should be in lieu of license and other taxes and charges for paving under existing ordinances. Section 5 provided that:

'The powers and privileges conferred and obligations imposed on the Detroit City Railway Company by the ordinance of November 24, 1862, and the amendments thereto, are hereby extended and limited to thirty years from this date.'

The ordinance was to take effect on written acceptance of the railway companies. Such acceptances were filed by the Detroit City Railway Company, the Congress & Baker Street Railway Company, and the Cass Avenue Street Railway Company. In 1882 the two other companies conveyed all their property and franchises to the Detroit City Railway. In 1887, after an attempt by the city to collect additional taxes, upon a repeal by the legislature of a section in the incorporating act that had imposed on such railways a tax of half of 1 per cent. on the capital stock paid in, in lieu of all other taxes, a compromise was effected and embodied in an ordinance, confirming the ordinance of 1879, fixing the tax, in lieu of all other taxes by the city, at 1 1/2 per cent. on gross earnings from 1882 until 1896, and 2 per cent. thereafter, and providing that the company should pay the same municipal taxes on all its lands and buildings as were imposed on individuals. The city thereafter attempted to collect, in addition to the taxes under the ordinance of 1887, taxes, under the general laws, upon the value of the tracks, horses, cars, machinery, and other personalty. In an action for the additional taxes the supreme court of Michigan gave judgment against the city, holding that the city was bound by the agreement as to taxes contained in the ordinance of 1887. City of Detroit v. Detroit City Ry. Co., 76 Mich. 421, 43 N.W. 447.

From 1880 to 1889 the city council, by several ordinances, gave authority to the Detroit City Railway to extend its lines under the ordinance of 1879; and much capital was invested in those extensions, and in repaving the streets, under the obligations of, and on the faith of, the validity of the ordinance, and the duration of its grant until 1909. In January, 1890, the Detroit City Railway transferred its property and franchises, by way of mortgage, to Miller and Muir, trustees, to secure bonds amounting to $1,000,000. In December, 1890, the Detroit City Railway Company transferred all its property and franchises to the Detroit Street-Railway Company, a corporation organized for 30 years from December 1, 1890. On September 16, 1891, the Detroit Street-Railway Company conveyed all its property and franchises to the Detroit Citizens' Street-Railway Company, a corporation organized September 2, 1891, for 30 years, and on the same day the Detroit Citizens' Street Railway Company conveyed the same property and franchises to the Washington Trust Company, of New York, in trust, to secure the payment of $3,000,000 of bonds. On March 29, 1892, the common council passed an ordinance, which was approved by the mayor, repealing so much of the ordinance of 1879 as extended the rights of the Detroit City Railway in the streets until 1909, and shortly...