Blair v. Chicago

[Syllabus from pages 400-404 intentionally omitted]

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 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 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 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 lwful 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 leasor 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 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 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 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 10th 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 Fed. 848.

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.

Messrs. Clarence S. Darrow, Glenn Edward Plumb, Edgar Bronson Tolman, and James Hamilton Lewis for the city of Chicago.

[Argument of Counsel from pages 411-430 intentionally omitted] Page 430

Messrs. Brainard Tolles, John S. Miller, John G. Johnson, John P. Wilson, John J. Herrick, Joseph S. Auerbach, Frederic D. McKenney, and W. W. Gurley for the receivers and railway companies.

[Argument of Counsel from pages 430-447 intentionally omitted]

Mr. Justice Day delivered the opinion of the court: