Eastern Union Co. of Delaware, Inc. v. The Moffat Tunnel Improvement District

• Decision Date: 19 March 1934
• Citation: 178 A. 864,36 Del. 488
• Court: Delaware Superior Court
• Parties: EASTERN UNION COMPANY OF DELAWARE, INC., a corporation of the State of Delaware, v. THE MOFFAT TUNNEL IMPROVEMENT DISTRICT, a corporation organized and existing under special act of the State of Colorado

178 A. 864

36 Del. 488

EASTERN UNION COMPANY OF DELAWARE, INC., a corporation of the State of Delaware, v. THE MOFFAT TUNNEL IMPROVEMENT DISTRICT, a corporation organized and existing under special act of the State of Colorado

Superior Court of Delaware, New Castle County

March 19, 1934

Superior Court for New Castle County, No. 56, January Term 1934.

This case was begun by foreign attachment. No service was obtained upon the defendant itself, but the Denver and Salt Lake Rwy Co., a corporation of the State of Delaware, was summoned as garnishee on December 1, 1933. On January 4, 1934, a plea of nulla bona was entered by the garnishee and on January 9 the defendant appeared specially and moved to vacate the writ of foreign attachment, to quash the service and return, and to discharge the garnishee for the reason that the Court was without jurisdiction in the premises.

Four grounds were advanced in support of the motion, which may be briefly described as follows:

1. That the plaintiff took nothing by its attachment laid in the hands of the garnishee and that, therefore, there is no res upon which to base any subsequent proceedings in the suit.

2. That the defendant is a municipal (or public) corporation of the State of Colorado and as such not subject to the jurisdiction of this court.

3. That anything which the plaintiff has attached in this action constitutes public revenue of the defendant as a municipal (or public) corporation and as such is not subject to attachment.

4. That the situs of any debt which might have been owing from the garnishee to the defendant is in Colorado and as such not subject to attachment in Delaware.

The case was heard, by agreement of counsel and stipulation filed, by the Court without the intervention of a jury. Testimony was taken and the following facts proven:

The defendant was an improvement district created and incorporated by the General Assembly of the State of Colorado (Chapter 2 of Session Laws of Colorado, Extraordinary Session 1922 [page 88]). By the terms of that Act, a large part of the State of Colorado, comprising all or a portion of nine counties east and west of the Continental Divide and extending between and including the City and County of Denver on the east and Routt County, in the northwest corner of the State, on the west, a distance of about two hundred and fifty miles, was incorporated as the Moffat Tunnel Improvement District. The Act declared that to provide an avenue of communication by a transportation tunnel through the Continental Divide would reduce the barrier to commercial intercourse between the eastern and western portions of the State, facilitate communication at all seasons, and promote the health, comfort, safety, convenience and welfare of the people of the State; and the Act directed the construction of a tunnel to be used by standard gauge railroads, telegraph and telephone lines, transmission of power, transportation of water, automobiles and other vehicles. The commission created by the Act and charged with the construction of the tunnel was authorized to issue bonds, levy assessments and taxes and and to contract with persons and corporations for the use of the tunnel.

The garnishee was a Delaware corporation, a user of the tunnel and the funds sought to be attached represented rentals owed by the garnishee for such use.

The service and return quashed, and the garnishee discharged.

Hugh M Morris and Alexander J. Nichols for plaintiff.

Howard Duane and Erskine R. Myer (of Denver, Colorado) for defendant.

Paul Leahy (of Ward and Gray) for the garnishee.

LAYTON, C. J., and RODNEY, J., sitting.

OPINION

RODNEY, J.

We are of the opinion that the motions of the defendant should be granted and the attachment dissolved. In view of the announced appellate disposition of the case, our reasons will not be unduly extended, but need only be sufficient to show the basis of our conclusion form the foundation for appellate action.

The sole question to be briefly discussed is the liability to suit of a public corporation--a municipal, or quasimunicipal corporation--in a State other than that of its creation.

The defendant, we think, is a public corporation. It is a geographical subdivision of the State itself; it has no stock or stockholders; and it exercises important attributes of sovereignty such as the levying of assessments and taxes; and its expressed purposes are public.

The identical act creating the present defendant has been considered by the Supreme Court of the United States in Milheim v. Moffat Tunnel Improvement District, 262 U.S. 710, 43 S.Ct. 694, 698, 67 L.Ed. 1194. There the Court said:

"We conclude that the purpose for which the tunnel is to be constructed is not private, but public, and such as warrants the exercise by the State of the power of taxation."

The purposes of the defendant being public, we do not propose to consider whether its proper designation is a public corporation--a municipal or a quasi-municipal corporation--for the legal principles applicable in this case would be appropriate regardless of the name by which the defendant corporation should be called.

The law seems to be quite well settled that a municipal corporation is liable to suit only in the State of its creation. Many of the authorities are collected in Parks v. City of Decatur (C. C. A.), 138 F. 550; Marshall v. Kansas City, 95 Kan. 548, 148 P. 637, L.R.A. 1915F, 1025 and note. We do not understand that this principle is denied by the plaintiff--on the other hand, it was tacitly admitted--but the plaintiff contends that in the making of the leases and the collection of the rentals for the use of the tunnel, the defendant was not acting in a public or governmental capacity, but exercising a proprietary interest, and as to such matters is liable to suit and can be sued outside of the State of its incorporation. As evidence of the proprietary action of the defendant, the plaintiff relies upon the language of Moffat Tunnel Improvement District v. Denver and S. L. Rwy. (C. C. A.), 45 F. (2d) 715, 725. There the Court said:

"We conclude further that in the making of such leases, the District was acting in a proprietary capacity and is subject to the same restrictions as a private individual."

A public or municipal corporation may have governmental functions and at the same time it may have proprietary functions; and at times the line of demarcation between the two may be, and often is, quite shadowy. Functions which are by one Court deemed governmental are by other Courts held to be proprietary. One difference between two functions is that governmental or public functions apply to the State at large and the proprietary or private functions exist for the private benefit of a compact community. A proprietary interest or function has been held to exist where corporate action is to cover and be binding over a long period of time and so be binding on the successors to those in charge of the public corporation which is ordinarily not true of the exercise of governmental functions. It is possible that this is the basis of the decision in Moffat Tunnel Improvement District v. Denver S. L. Rwy., supra, for such seems to be the holding of some of the authorities cited by that Court.

When the supreme authority in a state (the General Assembly) carves out a geographical area, makes it a public corporation, commands and requires that certain things be done in a certain definite way by a designated authority set up in the act, and also requires that leases be made for a stipulated time fixed by the General Assembly and not by the public corporation, there would then seem to be on the part of the public corporation no element of desire or volition to exercise a proprietary function. Whether this element is essential to the existence of the proprietary function need not be determined.

At all events, even though a public or municipal corporation does exercise both governmental and proprietary functions, yet it is still a governmental agency of the State of its incorporation, even though it may be subject within that State to the distinction between the two types of functions. It may be sued for causes arising out of the exercise of its proprietary functions, but it still, we think, must be sued in that State of which it forms a part of the government unless the State itself has provided for its suit elsewhere, or unless the public or municipal corporation has itself moved the exercise of its proprietary functions outside of the geographical limits theretofore effective. This was the precise holding in Board of Directors of St. Francis Levee District v. Bodkin, 108 Tenn. 700, 69 S.W. 270. To the same effect is Marshall v. Kansas City, 95 Kan. 548, 148 P. 637, L.R.A. 1915F, 1025.

In the Bodkin Case, supra, the appellant was a public corporation of the State of Arkansas; the claim of the appellee arose in Arkansas; the appellant maintained a fiscal office and had a bank deposit in Tennessee. The Court held that the public corporation was only liable to be sued in the state of its creation.

In the Marshall Case, supra, it was held that although the City of Kansas City, Mo., a municipal corporation of Missouri, had a water plant across the river in the State of Kansas, yet the municipal corporation was not liable to be sued in Kansas for a cause of action arising in Missouri. The Kansas Court again considered this matter in Baker v. City of Kansas City, 118 Kan. 27 233 P. 1012, 1013, 1015. There the plaintiff was a resident of Kansas and performed his services in Kansas for the municipal corporation of Missouri exercising its proprietary functions in Kansas and the Court distinguished the Marshall Case "without detracting from the...