The Citizens' Street Railway Company of Indianapolis was
organized is 1864 under an act of the Legislature of Indiana of
1861 authorizing such a company to be " a body politic and
corporation in perpetuity." January 18, 1864, the common council of
that city passed an ordinance authorizing the company to lay tracks
upon designated streets, and providing that "the right to operate
said railway shall extend to the full time of thirty years," during
which time the city authorities were not to extend to other
companies privileges which would impair or destroy the rights
Page 166 U. S. 558
so granted. In April, 1880, the common council amended the
original grant "so as to read thirty-seven years where the same now
reads thirty years." The company, desiring to issue bonds to run
for a longer period than the thirty years, had, for that purpose,
petitioned the common council for an extension to forty-five years.
The city government was willing to extend to thirty-seven years,
and this was accepted by the company as a compromise. On the 23d of
April, 1888, the road and franchises were sold and conveyed to the
Citizens' Street Railroad Company, which sale and transfer were
duly approved by the city government. December 18, 1889, a further
ordinance authorized the use of electric power by the company and
provided how it should be applied. In accordance with its
provisions, the company, at great expense, built a powerhouse and
changed its plant to an electric system. In April, 1893, the city
council, claiming that the rights of the company would expire in
thirty years from January 18, 1864, granted to another corporation
called the City Railway Company the right to lay tracks to be
operated by electricity in a large number of streets then occupied
by the tracks of the Citizens' Street Railroad Company, whereupon a
bill was filed in the circuit court of the United States by the
Street Railroad Company against the City Railway Company to enjoin
it from interrupting or disturbing the railroad company in the
maintenance and operation of its car system, alleging that the
action of the city council sought to impair, annul and destroy the
obligation of the city's contract with the plaintiff.
Held,
(1) That the Circuit Court had jurisdiction, although both
parties were corporations and citizens of Indiana.
(2) That the right of repeal reserved to the legislature in the
act of 1861 was not delegated to the city government.
(3) That the circumstances connected with the passage of the
amended ordinance of April 7, 1880, operated to estop the city from
denying that the charter was extended to thirty-seven years.
(4) That the continued operation of the road was a sufficient
consideration for the extension of the franchise.
(5) That the Citizens' company had a valid contract with the
city which would not expire until January 18, 1901, and that the
contract of April 24, 1893, with the City Railway Company was
invalid.
(6) But no opinion was expressed whether complainant was
entitled to a perpetual franchise from the city.
This was a bill in equity by the Citizens Street Railroad
Company to enjoin the appellant from interrupting or disturbing
complainant in the construction, operation, and maintenance of its
street car system in the City of Indianapolis, and for the
establishment of complainant's rights, and the quieting of its
title in that connection.
The facts of the case are substantially as follows: in 1861,
Page 166 U. S. 559
the General Assembly of the State of Indiana passed an act
authorizing the incorporation of street railway companies, the
second section of which act provided that the stockholders in such
companies and their successors should be "a body politic and
corporate in perpetuity, by the name stated in the articles of
association," and the eleventh and twelfth sections which were as
follows:
"SEC. 11. This act may be amended or repealed at the discretion
of the legislature."
"SEC. 12. Nothing in this act contained shall be so construed as
to take away from the common councils of incorporated cities the
exclusive powers now exercised over the streets, highways, alleys
and bridges within the corporate limits of such cities, and all
street railroad companies which may be organized under the
provisions of this act shall first obtain the consent of such
common council to the location, survey and construction of any
street railroad through or across the public streets of any city
before the construction of the same shall be commenced."
Pursuant to this act, the Citizens' Street Railway Company was
organized January 15, 1864, and on January 18, 1864, the Common
Council of Indianapolis passed an ordinance, the first, third, and
fifteenth sections of which contained the following:
"SECTION 1.
Be it ordained by the Common Council of the City
of Indianapolis that under and by virtue of an act of the
General Assembly of State of Indiana entitled 'An act to provide
for the incorporation of street railroad companies,' approved June
4, 1861, and by virtue of the powers and authority of the common
council otherwise by law vested, consent, permission, and authority
are hereby given, granted, and duly vested unto the company
organized with R. B. Catherwood as President, a body politic and
corporate by the name of the Citizens' Street Railway Company of
Indianapolis, and their successors, to lay a single or double track
for passenger railway lines, with all the necessary and convenient
tracks for turnouts, side tracks, and switches, in, upon, and along
the course of the streets and alleys of the City of Indianapolis
hereinafter mentioned, and to keep, maintain, use,
Page 166 U. S. 560
and operate thereon railway cars and carriages in the manner and
for the time and upon the conditions hereinafter prescribed."
"SEC. 3. The cars to be used on such tracks shall be operated
with animal power only. . . ."
"SEC. 15. The right to operate said railway shall extend to the
full time of thirty years from the passage hereof, and the said
City of Indianapolis shall not, during all the time to which the
privileges hereby granted to said company shall extend, grant to or
confer upon any person or corporation any privilege which will
impair or destroy the rights and privileges herein granted to the
said company. . . ."
The second section of this ordinance named certain streets upon
which the company was authorized to lay its tracks, and in the
following year (1865), a supplemental ordinance was passed giving
to the company the right to lay its tracks upon all the streets or
roads within the the corporate limits of the city, and providing,
in section 4, "that in laying, constructing and operating" the same
the company should be governed by the provisions of the ordinance
of January 18, 1864.
The Citizens' Street Rail
way Company constructed and
operated its plant until April 23, 1888, when it was sold and
conveyed to the complainant, the Citizens' Street Rail
road
Company.
On April 7, 1880, the common council passed another ordinance
supplemental to that of 1864, providing that section 15 of that
ordinance should be amended so as "to read thirty-seven years,
where same now reads thirty."
On April 23, 1888, an ordinance was passed approving the sale
and transfer of the railway company to the railroad company, and on
December 18, 1889, a further ordinance was passed, supplementary to
that of January 18, 1864, authorizing the use of electric power,
and providing the manner in which it should be applied. This
ordinance was formally accepted by the railroad company on January
4, 1890. The company thereupon proceeded at very great expense to
build a power house, and change its plant to an electric
system.
In 1893, a dispute arose between the board of public works
Page 166 U. S. 561
of the city and the President and directors of the complainant
over the question whether complainant's franchise would expire on
January 18, 1894 -- 30 years from its date.
On February 6, 1893, a further ordinance was passed, declaring
it to be unlawful for any person or corporation to cut or dig into
a paved street without first obtaining from the board of public
works a written permit so to do.
On April 24, 1893, pursuant to an act of the General Assembly of
the state, quoted in the opinion, the city, through its board of
public works, entered into contract with the defendant -- the City
Railway Company -- giving it permission to lay its tracks for
street railway lines to be operated by electricity, or other
improved power, through a large number of streets, most of which
were already occupied by the lines of the complainant company. This
contract was approved upon the same day be the common council, and
was accepted by the defendant.
The bill a averred that it was impossible that electric cars
other than complainant's could be operated on such streets without
their practical destruction as thoroughfares for public travel. It
further set forth certain acts on the part of the city, which are
alleged to be part of plan of the city authorities, in combination
with the defendant, to prevent it from making extensions and
improvements and from operating its lines of railway, and that
they, the city and the defendant, were asserting the right of the
city to disregard and set aside, by the exercise of the legislative
power conferred upon its common council by the legislature of the
state in the charter of 1891, a contract duly entered into and
existing between the state and the complainant under its charter,
and between the city and the complainant, thereby seeking to
impair, annul, and destroy the obligation of such contracts, in
violation of the Constitution of the United States. This bill was
filed on May 11, 1893, within a month after the contract and
ordinance of April 24th.
A motion was made to dismiss the bill upon the ground of the
want of jurisdiction in the circuit court, which was denied. 56 F.
746. The bill was subsequently amended, and
Page 166 U. S. 562
the case, being put at issue upon an answer and replication,
came on to be heard upon the pleadings and proofs, and resulted in
a decree in accordance with the prayer of the bill and the opinion
of the presiding judge, forever enjoining the defendant from
disturbing the complainant in the enjoyment of its rights to the
streets occupied by it at the time of the commencement of the suit.
and declaring the contract and ordinance of April 24, 1893, to be
void, insofar as they attempted to confer upon the defendant
company any right to the streets occupied by the complainant at the
commencement of the suit. 64 F. 647. From this decree an appeal was
taken to this Court.
MR. JUSTICE BROWN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
This case involves the right of the Citizens' Street Railroad
Company of Indianapolis to operate a street railroad upon the
streets upon which it had constructed its tracks at the
commencement of this suit, as well as the validity of a certain
contract and ordinance ratifying the same between the city and the
City Railway Company, insofar as the city attempted to confer upon
that company a right to lay its tracks upon the streets already
occupied by the complainant, or to abridge its rights in the use of
such streets.
1. There can be no doubt that the circuit court had jurisdiction
of the case notwithstanding the fact that both parties are
corporations and citizens of the State of Indiana. It should be
borne in mind in this connection that jurisdiction depended upon
the allegations of the bill, and not upon the facts as they
subsequently turned out to be. The gravamen of the bill is that,
under the act of the General Assembly of
Page 166 U. S. 563
1861, and the ordinances of January 18, 1864, and April 7, 1880,
the Citizens' Railroad Company had become vested with certain
exclusive rights to operate a street railway in the City of
Indianapolis, either in perpetuity or for the term of 30 years or
37 years, which the city had attempted to impair by entering into a
contract with the City Railway Company to lay and operate a railway
upon the same streets.
All that is necessary to establish the jurisdiction of the court
is to show that the complainant had, or claimed in good faith to
have, a contract with the city, which the latter had attempted to
impair. Conceding that the legislature of the state alone had the
right to make such grant, "it may," as was observed in
Wright
v. Nagle, 101 U. S. 791,
101 U. S.
794
"exercise its authority by direct legislation, or through
agencies duly established, having power for that purpose. The
grant, when made, binds the public, and is directly or indirectly
the act of the state. The easement is a legislative grant, whether
made directly by the legislature itself of by any one of its
properly constituted instrumentalities. . . . The complainants
claim,"
as in the case under consideration, "they have such a grant
through the agency of the inferior court, acting under the
authority of the legislature."
See also Saginaw Gaslight Co. v.
Saginaw, 28 F. 529;
Weston v. Charleston, 2 Pet. 462
[argument of counsel -- omitted];
Waterworks Co. v.
Rivers, 115 U. S. 674.
That the complainant had a contract with the city is entirely
clear. It was so held by the Supreme Court of Indiana in
Western Paving & Supply Co. v. Citizens' Street Railroad
Co., 128 Ind. 525, in which the liability of the company for
certain street improvements was discussed, and passed upon. It is
true that, by section 11 of the original act of 1861, a right was
reserved to the General Assembly to amend or repeal at their
discretion, the act authorizing the incorporation of street railway
companies; but that was a right reserved to the General Assembly
itself, and was never delegated, if in fact it could be delegated,
to the common council of the city.
That the city did attempt to impair this contract by the
Page 166 U. S. 564
agreement of April 24, 1893, with the City Railway Company and
its ordinance ratifying the same is equally clear. This contract
was entered into in pursuance of a supposed right given by the act
of the General Assembly of March 9, 1891, known as the "City
Charter," the fifty-ninth section of which enacted that
"the board of public works shall have power . . . to authorize
and empower by contract telephone, telegraph, electric light, gas,
water, steam, or street car or railroad companies to use any
street, alley, or other public place in such city; . . . provided,
that such contracts shall, in all cases, be submitted by said board
to the council of such city and approved by them by ordinance
before the same shall take effect."
This contract and ordinance of April 24, 1893, even if otherwise
valid, could not be construed to interfere with the rights of the
complainant to occupy the streets of the city under the act of
1861, and the ordinance of January 18, 1864, without coming in
conflict with that provision of the Constitution which forbids
states from enacting laws impairing the obligation of contracts.
Whether the state had or had not impaired the obligation of this
contract was not a question which could be properly passed upon on
a motion to dismiss, so long as the complainant claimed in its bill
that it had that effect, and such claim was apparently made in good
faith, and was not a frivolous one.
New Orleans v. New Orleans
Water Co., 142 U. S. 79,
142 U. S.
88.
Even if the charter were held to have expired on January 18,
1894 -- 30 years from its date -- it would not have necessarily
affected the jurisdiction of the court to entertain this bill,
since it was filed eight months before that time, although it might
have affected the right of the complainant to a decree.
Did the act of 1891, known as the "New Charter," repeal the act
of 1861 authorizing the incorporation of railway companies? In
other words, should it be construed as an exercise of the power,
reserved to the state in the eleventh section of the act of 1861,
to amend or repeal that act at the discretion of the legislature?
As the act of 1891 practically established a new system, and vested
the whole power of the legislature
Page 166 U. S. 565
over street railway companies in the board of public works of
the several cities therein named, subject to the approval of the
common council of such cities, perhaps it might be construed to
repeal the former, so far as there was a conflict between the two
acts, but it certainly should not be construed to act
retrospectively or to affect contracts entered into prior to its
passage unless its language be so clear as to admit of no other
construction. While it was doubtless intended to authorize the
board of public works of the cities covered by the act to contract
for the use of their streets by railway companies, there is nothing
from which can be inferred a power to disturb or interfere with
contracts already existing; indeed, it is highly improbable that it
would ever have delegated such a power to a subordinate body. There
is always a presumption that statutes are intended to operate
prospectively only,
Shreveport v. Cole, 129 U.
S. 39, and we see nothing in this statute to rebut such
presumption.
2. In arguing the case upon the merits, complainant insisted
with great earnestness that inasmuch as the act of 1861, providing
for the incorporation of street railway companies, had declared in
section 2 that the stockholders in the companies organized under
that act, and their successors, should be "a body politic and
corporate in perpetuity, by the name state in the articles of
association," the Common Council of Indianapolis, which by section
12 must have given consent "to the location, survey, and
construction" of any street railway before the construction of the
same could be commenced, had no power, in its ordinance of January
18, 1864, to limit the right of the complainant to operate its
railway to the term of thirty years, and that such ordinance,
though valid insofar as it gave consent to build and operate the
railway, was invalid insofar as it attempted to abridge the
franchise granted by the General Assembly, which existed in
perpetuity. We do not, however, find it necessary to express an
opinion upon this question in view of the conclusion we have
reached upon the legality of the ordinance of April 7, 1880,
amending section 15 of the original ordinance by extending
complainant's franchise from thirty to thirty-seven years.
Page 166 U. S. 566
No question was made respecting the validity of the original
ordinance, but the amended ordinance of April 7, 1880, was attacked
principally upon the ground of a want of consideration for the
extension of the franchise for seven years. The facts connected
with this amendment were substantially as follows: the railway
being mortgaged for $200,000 in first mortgage bonds and $100,000
in second mortgage bonds at seven percent interest at the time of
the purchase by the railroad company, the company was desirous of
paying them off, as they were at liberty to do under the mortgages,
and of renewing the loan in one mortgage at a lower rate of
interest. In negotiating with the proposed purchasers of the bonds,
it was insisted that the contract with the city ought to do
extended, as the proposed new issue of bonds would run beyond the
time fixed for the termination of the contract. The manager of the
road thereupon applied to the common council for an ordinance
amending section fifteen of the original ordinance, by making it
read "forty-five years" instead of "thirty years." The committee
declined to agree to this, but recommended as a compromise an
ordinance fixing the term of the original ordinance at thirty-seven
years instead of forty-five years. To this the company finally
agreed. Thereupon the common council adopted the ordinance in
question.
While this transaction cannot properly be termed a legal
consideration for the ordinance, since the negotiation of the new
loan was neither a benefit to the city nor a detriment to the
railway company, yet we think that the subsequent negotiation of
the loan operates against the city by way of estoppel. All that is
necessary to create an estoppel
in pais is to show that,
upon the faith of a certain action on the part of the city, which
it had power to take, the company incurred a new liability -- as,
for example, by the negotiation of a new loan, and the issue of a
new bond and mortgage to secure the same. Under such circumstances,
justice to the bondholders, who have in good faith invested their
money in reliance upon the validity of such action, demands that
the city shall be held to its contract notwithstanding there may
have been originally no consideration to support it. The
consequences
Page 166 U. S. 567
of a different ruling would not only destroy the credit of the
company, but might be disastrous to the bondholders, the value of
whose investment would depend very largely upon the length of time
the bonds were to run. Experience shows that the value of bonds or
debentures depends not only upon the sufficiency of the security
and the rate of interest, but upon the length of time they have to
run and the certainty that they will not, before the expiration of
such time, be called in for redemption. But however this may be, it
seems to us that the continued operation of the road may itself be
regarded a sufficient consideration for the extension of the
franchise. This extension was not a mere gratuity or bounty, within
the case of
Grand Lodge v. New Orleans, 166 U.
S. 143, recently decided, but was an agreement to
prolong the privilege of occupying the streets of the city in
consideration that the company should continue the facilities
already afforded to its citizens. The original ordinance of January
18, 1864, was plainly a proposition on the part of the city to
grant to the company the use of its streets for thirty years, in
consideration that the company lay its tracks and operate a railway
thereon upon certain conditions prescribed by the ordinance. This
proposition, when accepted by the company, and the road built and
operated as specified, became a contract which the state was not at
liberty to impair during its continuance; but if at the expiration
of the 30 years, the road had been sold to another company, and
that company had applied for and obtained from the common council a
franchise to occupy its streets for another period, it seems to be
clear that such a contract would need no other consideration to
support it than the continued operation of the road under such
conditions as the city chose to impose. But this is practically
such a case, since it makes no difference in principle whether the
road passes into the hands of a new company or is retained by the
old one, or whether the extension is granted at the time of or
before the original franchise expired. In either case, the
consideration,
viz., the continued operation of the road,
is the same. If, instead of extending the original ordinance, this
ordinance had been surrendered by the company
Page 166 U. S. 568
and a new one had been enacted by which the franchise was
extended, it would hardly be contended that the continued operation
of the road would not be a sufficient consideration for the new
ordinance. This was in reality part of the consideration upon which
the original franchise was granted, and is, we think, a valuable
consideration within the meaning of the law, and sufficient to
support the extension.
This ordinance is also attacked upon the ground that it was
never formally accepted by the company. There is really nothing in
this contention. No formal resolution of acceptance is necessary in
any case if the facts show an actual, practical acceptance by the
company or action which would be only explicable in case the
amendment were accepted. There are two circumstances in this case,
either of which is sufficient to constitute an acceptance.
Mr. Johnson, the manager of the road, who desired the extension
of the charter, applied for an amendment making the original
section fifteen read "forty-five years" instead of "thirty years,"
and in that connection says:
"After a good deal of argument, I was finally forced to concede
to the wishes of the committee, and they recommended to the council
an ordinance making it read 'thirty-seven years,' instead of the
'forty-five' we applied for. This ordinance we consented to in
committee, and afterwards agreed to with the council, as the best
we could do under the circumstances."
This was sufficient, as it is universally held that a previous
request for an ordinance obviates the necessity of a subsequent
acceptance.
Atlanta v. Gate City Gaslight Co., 71 Ga. 106;
1 Morawetz on Corporations § 23;
Illinois River Railroad
Co. v. Zimmer, 20 Ill. 654;
Lincoln & Kennebec Bank v.
Richardson, 1 Me. 79;
State v. Dawson, 22 Ind. 272;
Newton v. Carbery, 5 Cranch C.C. 632;
Perkins v.
Sanders, 56 Miss. 732, 739.
We are also of opinion that an acceptance may be presumed from
the fact that the amendment was beneficial to the corporation,
United States v.
Dandridge, 12 Wheat. 64,
25 U. S. 70;
Charles River Bridge v. Warren Bridge, 7 Pick. 344;
Commonwealth v. Cullen, 13 Penn.St. 133, 140;
Bangor,
Old Town & Milford Railroad Co. v. Smith, 47 Me. 34, and
from the further
Page 166 U. S. 569
fact that it issued its bonds, as was contemplated when the
ordinance was applied for, and made them fall due at the expiration
of the enlarged franchise.
There is nothing in the so-called "electrical ordinance" which
affects this question. It seems that in December, 1889, the common
council adopted an ordinance amendatory of the original ordinance
of January 18, 1864, to the effect that "the cars to be used on
such tracks shall be operated with animal or electrical power
only." The ordinance further provided that
"nothing herein contained shall be construed so as to lengthen
the term of the franchise, enlarge or in any other way change or
affect the rights of the Citizens' Street Railroad Company of the
City of Indianapolis, under said ordinance of January 18, 1864,
except to authorize the use of electrical as well as animal
power."
It was also provided that the appellee should signify its
acceptance by writing, within sixty days, filed with the city
clerk, which was done.
At this time, there was no law of the state permitting
electricity to be used, and it is now claimed that the common
council exceeded its powers in authorizing this change to be
made.
But it seems that on March 3, 1891, a law was enacted by the
General Assembly declaring
"that any street or horse railroad heretofore or hereafter
organized . . . may, with consent of the common council of the
city, . . . use electricity for motive power."
Conceding, although not deciding, that the city might have
exceeded its lawful power in authorizing the change from animal
power to electricity in the absence of legislative authority so to
do, we think the act of 1891 should be construed not only as
conferring a new authority upon the city, but as a ratification of
what the city had already done in that direction. In view of the
large expenditures incurred by the company upon the faith of this
ordinance, it is ill becoming the city to set up its own want of
power to make it when such power was directly and explicitly given
a few months thereafter.
The fact that the ordinance declared that it should not be
Page 166 U. S. 570
so construed as to lengthen the term of the franchise under the
ordinance of January 18, 1864, is wholly immaterial, since the
ordinance had been amended, changing the original limitation of
time from 30 to 37 years. In fact, the ordinance had but a single
object, which was to permit the substitution of electric for animal
power, and it is scarcely possible that if either party had
understood that the franchise was to expire in January, 1894, four
years from the time the electric ordinance was adopted, the
complainant company would have entered upon the work of changing
its entire system of street railway into an electrical system, and
incurred the very large expense necessary for that purpose, knowing
that before it could reap any substantial return from such an
investment, its rights in the streets of the city would expire by
limitation. The improbability becomes the more apparent when it is
considered that it was under no compulsion to made the change, and
might, at its option, have continued the use of horse power until
the original franchise had expired.
We are therefore of opinion that the complainant company had a
valid contract with the city under the original ordinance of
January 18, 1864, as amended by the ordinance of April 7, 1880,
which will not expire until January 18, 1901, and that the contract
and ordinance of April 24, 1893, with the defendant company is
invalid insofar as it may be construed to interfere with the
complainant in the construction, operation, and maintenance of its
street car system in the City of Indianapolis. But, as we are not
called upon to express an opinion whether complainant is entitled
to a perpetual franchise from the city,
The decree of the court below must be modified by striking
out from the second paragraph the words, "without regard to any
limitation of time mentioned in any ordinance of the city," and
also the word "forever," and, as so modified, it is
affirmed.
MR. JUSTICE GRAY and MR. JUSTICE WHITE concurred in the
result.
Page 166 U. S. 571
MR. JUSTICE SHIRAS was of opinion that the decree should be
affirmed without modification.
MR. JUSTICE HARLAN did not hear the argument or participate in
the decision of this case.
