Detroit Citizens' St. Ry. Co. v. City of Detroit

• Decision Date: 02 October 1894
• Docket Number: 200.
• Parties: DETROIT CITIZENS' ST. RY. CO. et al. v. CITY OF DETROIT. CITY OF DETROIT v. DETROIT CITY RY. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

64 F. 628

DETROIT CITIZENS' ST. RY. CO. et al. v. CITY OF DETROIT.

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

No. 200.

United States Court of Appeals, Sixth Circuit.

October 2, 1894

[Copyrighted Material Omitted]

James C. Carter, for appealing railway companies.

Ashley Pond and Otto Kirchner, for Detroit Citizens' St. Ry. Co.

Sidney T. Miller, for first mortgage bondholders.

John C Donelly (Fred A. Baker and Henry M. Duffield, of counsel) for Washington Trust Co.

Charles A. Kent and Benton Hanchett, for City of Detroit.

Before JACKSON, Circuit Justice, LURTON, Circuit Judge, and SAGE, District Judge.

LURTON Circuit Judge.

The relief which the bill seeks is the removal from the streets of Detroit of the tracks and cars of the Detroit Citizens' Street-Railway Company. The ground upon which the relief is sought is that the term for which the city consented to the use of the streets occupied by that company has expired by limitation, and that that company is therefore an unlawful trespasser on the streets, and its tracks and cars a public nuisance. The Detroit Citizens' Street-Railway Company is the assignee and successor of the Detroit City Railway Company. The street easements or privileges now involved were derived from the Detroit City Railway Company, and the controversy depends upon the duration of the term acquired by that company from the city.

In November, 1862, the city council of Detroit, by ordinance, consented to the use of certain designated streets for a term of 30 years, by Cornelius S. Buchnell and his associates and their successors and assigns, when they should become incorporated as a street-railway company under the general law of Michigan providing for the incorporation of street-railway companies. Though that easement was to Buchnell and associates, yet it was given in anticipation that they would become incorporated, and thereby acquire the franchises essential to the operation of a street railway for tolls; and the grant was so framed as to inure to them in their corporate capacity. Subsequently, they did comply with the requirements of the law of the state, and became incorporated under the name of the Detroit Street-Railway Company, with a corporate life limited to 30 years. The date of this incorporation was May * * *, 1863. This consent ordinance contained numerous provisions concerning the streets to be occupied, the kind of structure to be put down, the mode in which the cars should be operated and track maintained, the amount and kind of license tax to be paid the city, etc.

Immediately upon incorporation, the company proceeded to construct and operate the contemplated road. Frequent ordinances recognizing the original consent, and enforcing the terms and conditions upon which it was made, leave no doubt but that consent has inured to the Detroit City Railway Company. In course of time the relations between that company and the city council became complicated and unsatisfactory. A new adjustment of the terms and conditions upon which the consent had been given was regarded as a necessity. The ordinance of 1862 was therefore, in November, 1879, amended in numerous particulars. New burdens and obligations were imposed upon the company, additional taxes were provided for, some reduction in tolls was required, and certain extensions deemed desirable by the public were demanded. Under the statute providing for obtaining the consent of cities and villages to the construction and operation of street-car lines on or in the streets of such cities and villages, it was provided that after such consent had been granted it should not be revoked or altered without the consent of each party to the contract. The inducement operating upon the railway company to give its assent to the very serious burdens imposed by the change proposed in the terms and conditions upon which the city had consented to its occupancy of the streets was found in a provision of the new ordinance, by which the term for which the city consented to the use of its streets for street-railway purposes was extended for 30 years from the date of the new arrangement. The original consent would have expired in May, 1893, being for 30 years. The extension of the rights and privileges originally conferred would operate to extend the term until November, 1909. This extension of the term seems to have been the sole consideration for the assumption by the company of the new burdens imposed by the new proposal. It was regarded as a sufficient consideration, and was accepted in writing as required by law, and became a binding and irrevocable agreement, unless the contract was void as being in excess of the corporate powers of the contracting parties.

The act under which the Detroit City Railway Company became incorporated contained a provision limiting the corporate life of all companies organized thereunder to a term of 30 years from date of organization. Thus, the grant of an extension of the term was to a company whose corporate life would expire 16 years before its street rights and privileges. This fact has given rise to this litigation, and the question to be decided turns upon the significance to be attached to the grant of a 30-year street easement to a corporation having only 14 years of corporate life. That the corporate life of the Detroit City Railway Company would expire 16 years before the expiration of the extended term of street rights was a fact well known both to the city authorities and the railway company. Upon the expiration of the corporate life of the corporation, its corporate franchises to operate for tolls a line of street railway would likewise expire. The grantee in the extension ordinance could not, therefore, effectively enjoy the rights and privileges conferred beyond the period of its corporate existence. This, we must assume, was well known to both of the contracting parties. What, then, was the consideration moving the corporation to accept the new burdens and obligations to obtain a grant it could not personally enjoy beyond the duration of its corporate life? The answer is obvious. The original consent was not limited to Buchnell and his associates, nor to the corporation which they were promoting and to which the consent was to inure. That consent was to the grantees named and described, and their 'successors or assigns.' The ordinance of 1879 was not a new grant or a new consent; it was confessedly an extension of the old grant of consent, upon the terms and conditions of the old consent, except in so far as those terms were readjusted. It follows that the extension of that term was a grant to the Detroit City Railway Company and its successors and assigns. While, therefore, neither party supposed that it was in the power of the city council to extend the corporate life or corporate franchises of the Detroit City Railway Company beyond the term prescribed in the law which gave it birth, yet it was supposed and believed by each that the value of the extended term would consist in its assignability to a grantee endowed with the franchises essential to the enjoyment of the city's consent to the use of its streets for street-railway purposes. These considerations operated to induce the acceptance of the new terms imposed, and reliance upon the soundness of the opinions then entertained has led to the investment by the company in important extensions and costly improvements, aggregating in amount upward of a million of dollars. In reliance upon the property value of the extended term, the property, franchises, and property rights of the company were mortgaged by the Detroit City Railway Company to the defendants Sidney D. Miller and W. K. Muir as trustees to secure an issue of $1,000,000 of bonds, all of which are now outstanding in the hands of purchasers who have relied upon the validity of the extension ordinance. In January, 1891, that company sold and assigned its railway, franchises, rights of way, and property rights of every kind to the Detroit Street-Railway Company, a corporation of the state of Michigan. In October, 1891, the Detroit Street-Railway Company sold and transferred all its railway and franchises and easements of every kind to the defendant the Detroit Citizens' Street-Railway Company. The latter was a corporation lately organized under the general incorporation law of Michigan, and having all the powers and franchises necessary to the operation of a street railway. Each of these sales and assignments was in pursuance of express statutory authority, and neither transaction is in any way questioned. After the Citizens' Street-Railway Company had acquired the road and property of its predecessors, it executed a mortgage to the defendant the Washington Trust Company to secure an issue of $3,000,000 of bonds, of which $2,000,000 are outstanding in the hands of holders induced to buy in reliance upon the extension of the term made in 1879. To grant the relief sought will entirely extinguish rights and privileges in the streets which the complainant avers can now be disposed of for upward of a million of dollars. It is equally plain that the value of the tangible property owned by the railroad company and conveyed in its mortgages, such as its tracks and equipment, will be enormously reduced if removed from the streets. That the extension was made and accepted in good faith is not questioned. That the street-car companies have not faithfully complied with all the terms and conditions imposed by the adjustment made in 1879 is not averred in any pleadings. The only theory upon which the bill was filed is that the opinion entertained at the time of the extension as to the power of the city council to extend the term of the street rights of the street-railway company beyond the duration...