BLAIR V. CHICAGO, 201 U. S. 400 (1906)

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U.S. Supreme Court

Blair v. Chicago, 201 U.S. 400 (1906)

Blair v. City of Chicago

Nos. 331-336

Argued January 11, 12, 15, 1906

Decision announced March 12, 1906

Opinion filed April 2, 1906

201 U.S. 400


Where notes are made by a corporation payable to the order of its own treasurer, a citizen of the same state, as a matter of convenience and custom, and indorsed and delivered by him to a bona fide holder who, a citizen of a different state, furnishes the money represented by the note directly to the corporation, the treasurer is not in fact an assignee of the note within the meaning of the Act of August 13, 1888, 25 Stat. 433, and suit may be brought by such holder in the circuit court of the United States having jurisdiction of the parties, notwithstanding such diversity does not exist as to the treasurer first indorsing the note. Falk v. Moebs, 127 U. S. 597; Holmes v. Goldsmith, 147 U. S. 160.

Where there is a proper cause of action and diverse citizenship, jurisdiction of the federal courts exists, and the motive of the creditor who desires to litigate in that forum is immaterial, and does not affect the jurisdiction; nor is such jurisdiction if it actually exists, affected by the fact that a

Page 201 U. S. 401

receivership was in view when judgments were entered. South Dakota v. North Carolina, 192 U. S. 286.

Where, as in this case, the attitude and claims of the municipality cast a cloud upon the title to property consisting largely of franchises in the hands of receivers and to be administered under orders of the court, the receivers may, with the authority of the court, proceed by ancillary bill to protect the jurisdiction and right to administer the property, and to determine the validity of claims of parties which cast a cloud upon such franchises, and in such a case it is proper to grant an injunction until the rights of the parties can be determined.

Whether a corporation having a limited and definite capacity to purchase and hold real estate has exceeded those limits concerns only the state within whose jurisdiction the property is situated; the question cannot, unless the statute expressly or by necessary implication authorizes it, be raised collaterally by private persons. Fritts v. Palmer, 132 U. S. 282.

The generality of the title of a state statute does not invalidate it under a provision of the constitution of the state that private and local laws shall only embrace one subject which shall be expressed in the title, so long as the title is comprehensive enough to reasonably include within the general subject or the subordinate branches thereof, the several objects which the statute seeks to effect, and does not cover legislation incongruous, in itself and which by no fair intendment can be included as having any necessary and proper connection. Montclair v. Ramsdell, 107 U. S. 147.

Although decisions of the highest court of a state are not binding on this Court in determining whether a contract was made by legislative action of that state which is entitled to protection under the impairment of obligation clause of the federal Constitution, it will consider decisions of that court on the point in question.

One asserting private rights in public property under grants of franchises must show that they have been conferred in plain terms, for nothing passes by the grant except it be clearly stated or necessarily implied. Legislative grants of franchises which are in any way ambiguous as to whether granted for a longer or a shorter period are to be construed strictly against the grantee.

As a rule of construction, a statute amended is to be understood in the same sense exactly as if it had read from the beginning as it does amended.

Although a corporation be organized under a charter for a limited period, it may receive a grant inuring to the benefit of its lawful successors for a period beyond its corporate life, but the right granted must be construed with reference to the system of which it is a part, and where that general system is for a limited period, a single ordinance, not naming a specific term, will not be construed as granting a franchise in perpetuity.

A declaration in the title of state statutes that they concern horse railways, where it is apparent that these terms were intended to indicate street railways, as distinguished from steam railways, will not, because of a constitutional provision that the object of the statute must be expressed in the title, prevent the city from exercising its powers under the statute in

Page 201 U. S. 402

such manner as to authorize the use of other power such as cable or electricity.

The repeal of a state statute authorizing every street railway to be operated by such animal, electric or other power as the municipal authorities may have granted would not destroy its effect to ratify contracts in existence when it was passed.

Where a state statute requires the consent of a municipal officer to authorize the extension of a street railway, the abolition of that office does not authorize the extension without any official consent, and where the consent of municipal authorities is required for franchises relating to special localities by a statute, and subsequently a general act limits the time for which any such franchise can be granted in any city or village, the consent given will be presumed, in the absence of any period specified, not to be in perpetuity, but for the period as so limited.

Under the law of Illinois, municipal corporations have a fee simple in, and exclusive control over, the streets, and the municipal authorities may do anything with, or allow any use of, the streets not incompatible with the ends for which streets are established, and it is a legitimate use of a street to allow a street railroad track to be laid down in it.

Applying the foregoing principles to the construction and effect of the various acts of the Legislature of the State of Illinois, and of the ordinances of the municipal authorities of the City of Chicago and adjacent towns, in regard to the franchises of the several street railway companies owned and controlled by the Chicago Union Traction Company, and the receivers thereof held that

1. The Circuit Court of the United States for the Northern District of Illinois had jurisdiction to render the judgments against the Chicago Union Traction Company, the North Chicago Street Railroad Company, and the West Chicago Street Railroad Company set up in the bills afterwards filed for the appointment of receivers.

2. The proceedings for the appointment of receivers were not shown to be collusive and fraudulent, and the court had jurisdiction to entertain the bills and appoint the receivers and put them in possession of the property of the railway companies.

3. The ancillary bills filed by the receivers were maintainable in aid of the court's jurisdiction to settle controversies as to the property which was to be administered and disposed of under the orders and decree of the court.

4. The acts of 1859, 1861 and 1865 were not unconstitutional under the Constitution of Illinois of 1848 in force when the same were passed.

5. The Act of February 6, 1865, amending the Act of February 14, 1859, had the effect to extend the corporate lives of the Chicago City Railway Company, the North Chicago City Railway Company and the Chicago West Division Railway Company for the term of ninety-nine years. It

Page 201 U. S. 403

affirmed the contracts with the city prescribing rights and privileges in the streets of Chicago in all respects as theretofore made, including time limitations as contained in the ordinances previously passed. It recognized and continued in force the right of the city and the companies to make contracts for the use of the streets upon terms and conditions, including the time of occupancy, as might be agreed upon between the council and the corporations.

6. Corporate privileges can only be held to be granted as against public rights when conferred in plain and explicit terms. The ambiguous phrase in the act of 1865, "during the life hereof," did not operate to extend existing contracts for the term of ninety-nine years or limit the right of the city to make future contracts with the companies covering shorter periods.

7. The amending act of 1865 had reference to the North Chicago City Railway Company, as well as the corporations specifically named in the first sections of the acts of 1859 and 1861.

8. The ordinances of May 23, 1859, granting rights and privileges in certain streets to the Chicago City Railway Company and the North Chicago City Railway Company, respectively, are radically different. The grant to the former company for the south and west divisions of the city is during all the term specified in the act of February 14, 1859, which act expressly ratified the ordinance of 1858, granting the right to use the streets therein named for the term of twenty-five years and until the city shall purchase and pay for the same as set forth in said ordinance. On the north side, the term granted is for twenty-five years "and no longer." The privileges conferred upon the Chicago City Railway Company and its grantee were confirmed, as made, by the act of 1865, with the effect to continue the right of the companies to occupy the streets named in the ordinances of 1858, May 23, 1859, and similar ordinances, for the term of twenty-five years and until the city shall elect to purchase and pay for the property of said railway companies. On the north side, no such right exists to remain in the use of the streets until purchase by the city.

9. Whatever rights existed in the streets were not lost to the companies by the acceptance of the ordinances granting a change from animal to cable or electric power in the operation of the railways.

10. The grants in the Town of Jefferson, having been made after the acceptance of the Cities and Villages Act, are limited to the term of twenty years.

11. The grants by the supervisor of Lake View are not in perpetuity, as the Lake View road was but an extension of the North Side system, which was expressly limited in the duration of its grants to the term of twenty-five years. No intention will be presumed to make an extension of this part beyond the life of the grant to the main lines of the North Side road.

12. The grants by the trustees of Lake View will not extend beyond the life of the corporation making them, and upon the annexation of the Town of Lake View to Chicago, the further right to use the streets must be derived

Page 201 U. S. 404

from grants by the council of that city under power conferred by the Cities and Villages Act.

The decree is reversed and cause remanded for further proceedings in accordance with the views herein expressed.

These are appeals from the decree of the Circuit Court of the United States for the Northern District of Illinois. The origin of the cases dates from April 22, 1903, when the Guaranty Trust Company of New York, a corporation and citizen of that state, filed three suits in the Circuit Court of the United States for the Northern District of Illinois against the Chicago Union Traction Company, the North Chicago Street Railroad Company, and the West Chicago Street Railroad Company, corporations and citizens of the State of Illinois. On the day the declaration was filed, the general issue was joined, the jury waived, and, upon trial, judgment was rendered against the respective defendants for $318,690.66, $565,052.66, and $270,440. Executions having been awarded and returned "no property found," bills were filed by the Guaranty Trust Company, and receivers appointed for the property of each and all of those companies. Under the order of the court of July 18, 1903, the receivers filed two ancillary bills, one against the City of Chicago, the Chicago West Division Railway Company, the Chicago Union Traction Company, and the West Chicago Street Railroad Company; the other against the City of Chicago, the Chicago Union Traction Company, the North Chicago Street Railroad Company, and the North Chicago City Railway Company. They were afterwards amended by leave of the court. These bills state, among other things (having reference now to the west side case), that, as receivers, and under the order of the court, the complainants were in possession of the system of street railroads; that the property included the rights, privileges, and franchises originally granted to the Chicago West Division Railway Company by the State of Illinois; that, on October 20, 1887, the Chicago West Division Railway Company leased the property to the West Chicago Street Railroad Company for the full term of nine

Page 201 U. S. 405

hundred and ninety-nine years; that, on June 1, 1889, that company transferred and conveyed to the Chicago Union Traction Company all its property, franchises, and rights, which were taken possession of by that company and were possessed and enjoyed by it with the consent of the city council until the appointment of complainants as receivers; that, since the appointment they have been directed by the court to make expenditures of about $580,000 in procuring new equipment; for that purpose, it was necessary to issue receiver's certificates to borrow money, which they alleged they were unable to do because of the hostile acts of the City of Chicago, its mayor, its council committees and representatives, which amounted to an impairment of the contract rights and franchises secured to the complainants and granted by the acts of the General Assembly of Illinois, passed February 14, 1859, and February 6, 1865. They received a notice from the superintendent of streets, dated July 16, 1903, addressed to them as receivers and stating that all permits issued to the Chicago Union Traction Company to do work and make repairs upon the streets, alleys, or public places in the City of Chicago were to be revoked on July 30, 1903. The bill sets out a large number of ordinances of the city and acts of the State of Illinois, under which acts, it was alleged, privileges and franchises were granted on fifty-six of the streets of the city for the period of ninety-nine years from February 14, 1859.

It is averred that the city denies any contract right with the complainants under and by virtue of the said laws and ordinances, and, for the purpose of coercing the railroad companies to surrender their franchises, received from the state, asserts and claims that the act of 1865 is unconstitutional and void; that, if valid, it only operates to the extent of such lines as were authorized and consented to before its passage; that, if valid, the railroads could only operate their lines by animal power; that, by force of the ordinance of July 30, 1883, the right to operate lines constructed prior thereto was absolutely limited to July 30, 1903, and that thereafter the railroad company

Page 201 U. S. 406

would be a trespasser upon the streets of the city; that, by messages and official declarations of the mayor and council of the defendant city, it was given out that, unless the railroad company would surrender its franchises and rights to occupy the streets of the city, the city would oust the railroad company therefrom and pass an ordinance granting the right to operate street railways upon the streets now occupied by the railroad company to other persons or corporations. That, unless an injunction is granted, the city will, after July 30, 1903, proceed, by declaration of forfeiture or otherwise, to interfere with and prevent the occupation and enjoyment of the fifty-six railway routes described in the bill. That, as to the street railroads where ordinances provided for possession until the city shall purchase the lines, the city has never made an offer to purchase, and seeks to force a surrender of the franchises and privileges and to compel the railroad company to accept a twenty years' license at an oppressive and ruinous annual rental. That if the claim and contentions of the city are sustained, the entire system of the railroad company will be destroyed and its charter rights illegally confiscated.

The prayer for relief is that the Chicago West Division Railway Company be decreed to be vested by the State of Illinois with the franchises and right to own, maintain, and operate fifty-six street railway routes, described in the bill, until 1960, and until such time thereafter as the city shall purchase the lines and pay for them in cash at their then appraised value, according to the terms of the ordinance contract; that it be decreed that the claim of the City of Chicago that the rights of the companies will expire on July 30, 1903, impairs the obligation of the charter subsisting between the State of Illinois and the said companies, and constitutes an unlawful taking of the rights and property of the company without compensation, and an unlawful interference with the property in the custody of the court; that the charter rights of the companies to maintain, operate, and enjoy the lines described in the bill until the

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year 1960, and thereafter until the city purchases the same, be established and quieted as against the hostile claims of the city, and that such claims be declared and decreed unconstitutional, contrary to law, and exist as clouds upon the title of the company, and for a perpetual injunction against the city from asserting the claims aforesaid, or interfering with the possession, occupation, and enjoyment of the railroad's property, except in the proper exercise of its police power, until the lawful determination of the charter rights.

The bill in the North Chicago case is substantially the same. It avers that the property vested in the receivers in the north division of the city is about 100 miles of street railroad and the franchises and privileges thereunto belonging; that, on May 24, 1886, the North Chicago City Railway Company leased to the North Chicago Street Railroad Company for the term of nine hundred and ninety-nine years all its property, franchises, and rights except the right to exist as a corporation. That on June 1, 1899, the North Chicago Street Railroad Company leased and conveyed the property, for the full life of the lessor corporation, to the Chicago Union Traction Company; that the traction company entered into possession of the property and continued to use the same until the appointment of the receivers named therein.

The city answered and set up, among other things, that the suits wherein the receivers were appointed were collusive and in pursuance of a scheme concocted by the West Chicago Street Railroad Company, the North Chicago Street Railroad Company, the Chicago Union Traction Company, and the Guaranty & Trust Company of New York for the purpose of conferring jurisdiction upon the circuit court of the United States on the ground of diverse citizenship; that the Guaranty Trust Company was not a bona fide owner of the judgment upon which the suits were brought, and that the evidences of indebtedness upon which that company brought suit and obtained judgment as a colorable basis for the allowance of creditor's bills and appointment of receivers were not in fact owned by the Guaranty

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Trust Company, but were owned by divers persons and corporations of the State of Illinois.

The city denies that the city council passed any ordinance or resolutions that constitute an impairment of the contract rights of the complainants, granted under the acts of the General Assembly of the State of Illinois, February 14, 1859, and February 6, 1865, or the ordinances of the city, and denies that it has ever threatened interference with any lawful rights, franchises, or privileges held by the complainants. It admits that its superintendent of streets sent a written notice to the complainants, as alleged in the bill, but without authority from the defendant, and that, on July 21, 1903, the same was rescinded and recalled.

The answer then sets up the claims of the city concerning the legislative acts and ordinances pleaded in the bill, admits the passage or attempted passage thereof, but denies that the same has resulted in investing the railroad companies with a franchise from the state to maintain and operate the system of railroads for ninety-nine years, and avers that the rights under certain of the ordinances set up in the bill expire on July 30, 1903. Defendant denies that it unlawfully or oppressively injured the lawful rights of the company; admits that it has contended and now contends that the alleged act of 1865 is unconstitutional and void as construed by the company; that the said act, when properly construed, did not operate to extend the duration of time beyond that fixed in various ordinances respectively relating to said lines; that the said companies have no right to operate street railway lines by other than animal power, and that the time for operation of certain of the lines existing under ordinances passed prior to July 30, 1883, expired on July 30, 1903, by reason of the time limits prescribed in said ordinances, as extended by the ordinance of July 30, 1883, and by reason of the limitation in the power of the city by the city and village law of the State of Illinois, passed July 1, 1872. It avers that it has never claimed or asserted that the time for the operation of lines constructed

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under ordinances passed prior to July 30, 1883, absolutely ceased and determined, but, on the contrary, has recognized and conceded the existence of the purchase clause contained in certain of said ordinances as affecting the time limitations therein, and has endeavored to procure proper fiscal legislation by the General Assembly of the state, which would enable the city to avail itself of said ordinance provisions with reference to purchase, and has frequently proposed and desired negotiations with the companies to provide new ordinances for the purchase by the defendant of the tangible property of said companies. The answer denies the allegations of the bills as to unlawful threats and compulsions, but admits that it does intend to enforce its rights in its streets against the unlawful claims of the companies, and admits that, unless restrained by injunction, it will proceed by every proper and lawful method to enforce its rights in its streets as set up in the answer, and to procure necessary street railway facilities for the citizens of Chicago and to prevent the companies from unlawful usurpation of rights in the streets or from continuing to occupy the same after the right so to do has ceased and determined. It admits that, as early as 1883, a serious difference as to the nature and extent of the legal and contract rights of the street railway companies in certain of the streets of the city arose between the companies and defendant. It sets up the messages of the mayor and copies of the various resolutions of the council with regard to opening negotiations with the companies for the ascertainment of their rights and those of the city.

The case having been tried, the circuit court rendered a decree holding that the legislative acts of 1859, 1861, and 1865 constituted a grant to the companies to use the streets of the city to be designated by the council, but that the franchise to use the streets was a grant from the state; that the acts of 1859, 1861, as amended in 1865, extended the franchises of the companies for ninety-nine years, the extended life of the corporation; that the Constitution of Illinois of 1870 prohibited the further creation of corporations by special laws, and decreed

Page 201 U. S. 410

that the General Assembly should not grant the right to construct any street railways in the city without acquiring the consent of the local authorities then having control over the streets; that the Cities and Villages Act of 1872 empowered cities organized under that act to permit, regulate, or prohibit the locating, laying, or constructing of tracks of horse railroads in any street, alley, or public place, but such permission was limited to a period not to exceed twenty years; that the acts of 1859, 1861, as amended in 1865, did not constitute a grant by the legislature of streets which were authorized to be used and occupied by the city after it adopted and elected to be governed by the City and Village Act, and that, after date of May 3, 1875, as to such streets, the street railway companies' rights were regulated by the city ordinances affecting the same; that the act of 1859, under the tenth section of which the North Chicago City Railway Company was incorporated, amended by the act of February 21, 1865, extended the life of the corporation for ninety-nine years, and held that said amendment applied not only to the Chicago City Railway Company, but as well to the rights conferred by the act of 1859 on the North Chicago City Railway Company. The case is reported in 132 F.8d 8.

Pertinent parts of the ordinance of August 16, 1858, the Acts of February 14, 1859, February 21, 1861, and February 6, 1865, are given in the margin.{1}

Page 201 U. S. 447

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