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U.S. Supreme Court

Cleveland v. Cleveland City Ry. Co., 194 U.S. 517 (1904)

City of Cleveland v. Cleveland City Railway Company

No. 255

Argued April 27, 1904

Decided May 31, 1904

194 U.S. 517


Where the complainant does not base the contract alleged to have been impaired upon the original ordinance granting the franchise which reserved the power of altering fares, but asserts that the contracts impaired resulted from subsequent ordinances which deprived the municipality of exercising the rights reserved in the original ordinance, the circuit court has jurisdiction of the suit as one arising under the Constitution of the United States.

The passage by the municipality of an ordinance affecting franchises already granted in prior ordinances amounts to an assertion that the legislative authority vested in it to pass the original ordinance gave it the continued power to pass subsequent ordinances, and it cannot assail the jurisdiction of the circuit court on the ground that its action in impairing the contracts which resulted from prior ordinances was not an action by authority of the state.

In view of the continuous confusion, risks, and multiplicity of suits which would result from, and the public interests and vast number of people which would be affected by, the enforcement of an ordinance reducing the rates of fare of street railways, which ordinance the companies claim is unconstitutional as impairing the obligation of the contracts resulting from the ordinances granting the franchises, a court of equity has jurisdiction of an action to enjoin the enforcement of the ordinance, especially when the ordinance affects only a part of the system, and would engender the enforcement of two rates of fare over the same line, leading to dangerous consequences.

In this case, it was held that the consolidated ordinance of February, 1885, of the City of Cleveland, and ordinances thereafter passed by the municipality and accepted by the companies, constituted such binding contracts in respect to the rate of fare to be exacted upon the consolidated and extended lines of the railway companies as to deprive the city of its right to exercise the reservations in the original ordinances as to changing the rates of fare, and the ordinance of October 17, 1898, reducing the rate of fare to be charged, was void and unconstitutional within the impairment clause of the Constitution of the United States.

This suit was brought in the circuit court to restrain the

Page 194 U. S. 518

enforcement of an ordinance of the City of Cleveland, passed October, 1898, fixing the rates of fare to be charged by the appellee on a portion of its line of street railroad.

The bill based the right to relief upon two grounds -- that is, a violation of the contract clause of the Constitution of the United States, and of the due process clause of the Fourteenth Amendment, the latter because the rates fixed by the ordinance, if enforced, would be confiscatory.

After hearing, a temporary injunction was allowed. The court, in stating its reasons, confined them exclusively to the alleged impairment of the obligations of contracts, and decided that it was unnecessary to consider the rights alleged under the Fourteenth Amendment. 94 F.3d 5.

Both parties thereupon amended their pleadings so that, upon the face of the record, the facts concerning the alleged impairment of contract rights appeared as found by the court in awarding the temporary injunction. The bill as amended, however, also reiterated the facts originally claimed to constitute a violation of the due process clause of the Fourteenth Amendment. The pleadings being thus amended, the complainant moved as follows:

"The above-named complainant, The Cleveland City Railway Company, now comes and moves the court to enter final decree in its favor as prayed for in the amended bill of complaint herein, adjudging the ordinance in said amended bill of complaint described, entitled "An Ordinance to Provide for a Diminution of the Rate of Fare under section 7 of an Ordinance Passed August 25th, 1879, entitled An Ordinance Granting a Renewal of Franchise to the Kinsman Street Railroad Company to Reconstruct, Maintain and Operate its Street Railroad in and Through Certain Streets of the City of Cleveland,'" passed October 17, 1898, to be null and void and of no effect in that, as appears by the amended bill of complaint and the admissions of the amended answer herein, said ordinance is in violation of the contract obligations existing between the complainant and the defendant herein, and impairs the contract rights of the

Page 194 U. S. 519

complainant, in violation of the Constitution of the United States."

"Complainant further shows that, upon the amended bill, amended answer, and replication, it is entitled to the decree without a determination of any of the matters in respect to which issues are raised by the amended answer of the defendant herein."

The court granted this motion for the reasons which it had expressed in the opinion by it delivered on the allowance of the temporary injunction. A final decree was thereupon entered perpetually enjoining the enforcement of the assailed ordinance. Because of the constitutional question, the case was then appealed directly to this Court.

Page 194 U. S. 523

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