Northern Ohio Traction Light Company v. Ohio ex rel Ponitius/Opinion of the Court

The Northern Ohio Traction & Light Company through successive assignments from William A. Lynch acquired the interurban electric railroad between Canton and Massillon, Ohio, October, 1906; the Cleveland Trust Company is trustee under a mortgage on the road intended to secure an issue of bonds. The line was constructed under resolution by the board of county commissioners, Stark county, passed February 22, 1892, which granted to William A. Lynch, and such railroad corporation as he might cause to be incorporated for that purpose, the right to locate, construct, maintain and operate an electric railroad along the state highway without specifying any limit of time. This resolution is copied in the margin.

A disagreement concerning rates having arisen, by resolution of March 27, 1912, the commissioners declared the original grant to Lynch not a perpetual franchise but subject to termination by either party and that the passenger rate was excessive and should be reduced. It continued:

'Therefore, be it resolved, that unless said Northern Ohio     Traction & Light Company comply with the above-mentioned      matters of reduction of amount of fare charged for      transporting people between the cities of Canton and      Massillon and from intermediate points, together with the      transfer on the city lines of Canton and Massillon, on or      before the 27th day of April, 1912, the said grant given to      said William A. Lynch on February 22, 1892, to operate an      electric railroad between the said cities of Canton and      Massillon is hereby declared terminated and the prosecuting      attorney of this county is hereby instructed to take such      legal proceedings as may be necessary to have said grant made      null and void and the said electric railway removed from said public      highway between the said cities of Canton and Massillon.'

April 26, 1912, the commissioners returning to the matter resolved:

'In the event that demands are not met by the said company on     or before the time mentioned in the said resolution of March      27th, 1912, the prosecuting attorney of this county be and he      is hereby instructed to immediately proceed to have      injunction proceedings filed against said Northern Ohio      Traction & Light Company restraining said company from      operating said electric railway on the public highways      between the cities of Canton and Massillon or running cars      thereon and to further compel said Northern Ohio Traction &      Light Company to remove said electric railway from said      public highway, and, be it further resolved, that this      resolution be contingent upon and in accordance with the      conditions of the said resolution passed by this board on      March 27th, 1912. * *  * '

Accordingly, August 13, 1912, Charles Krichbaum, prosecuting attorney, instituted quo warranto proceedings in the circuit court asking that plaintiff in error Traction & Light Company be ousted from exercising the franchise to operate a railroad along the Canton-Massillon highway, and be compelled to remove its tracks and switches. A demurrer was sustained because (1) the petition did not state facts sufficient to constitute a cause of action; (2) it did not state facts sufficient to justify relief prayed; (5) plaintiff had no legal power to try or bring the action. No appeal was taken from a final judgment entered June 3, 1913.

February 19, 1913, the commissioners adopted another resolution which, after referring to the one of 1892 and the construction and operation of the railroad, stated that the grant continued from day to day so long as both parties consented and could be terminated at will, and then declared 'that said term of said grant and conveyance be terminated on this date.' It is in the margin.

Obeying this last resolution, Hubert C. Pontius, prosecuting attorney, instituted the proceeding under review in the Supreme Court of Ohio. The petition alleged control of the railway by the Traction & Light Company; set up resolutions of 1892 and 1913 authorizing its contruction and directing removal; and declared the company continued operations 'which said conduct plaintiff avers is without warrant or authority of law.' It concluded:

'Wherefore, because of the premises and matters herein set forth, the plaintiff prays the advice of the court, and     that the defendant, to wit, the Northern Ohio Traction &      Light Company be compelled to answer by what warrant it      claims to have the use and to enjoy the rights, privileges      and franchises aforesaid, in the operation of its said      interurban electric railroad between the cities of Canton and      Massillon, ohio, in said county and state; and that it be      ousted from exercising the same and be compelled to remove      its tracks and switches from the said Canton-Massillon road      between the corporate limits of the said cities of Canton and      Massillon, and plaintiff further prays that such other and      further relief be granted in the premises as to the court may      seem just and proper.' The answer relied upon final judgment in proceedings instituted by Krichbaum as an adjudication of the grant's validity; also a resolution by the  ounty commissioners May 3, 1909, providing for double-tracking as recognition and continuation of original franchise. And further:

'This defendant says that said resolution of February 22,     1892, and said amending resolution of May 3, 1909, by the      acceptance thereof by this defendant and its predecessors in      title, constitute a contract between the board of county      commissioners of Stark County, Ohio, and this defendant, and      that any ouster of this defendant from its use and operation      of said electric railroad between Canton and Massillon would      be an impairment of the obligation of this defendant's      contract, and a taking of the defendant's property without      due process of law, and would also be a denial to this      defendant of the equal protection of the law, all in      violation of the Constitutions of Ohio and of the United      States.'

Without opinion or other explanation the Supreme Court pronounced the following decree October 19, 1915:

'This cause came on to be heard on the pleadings and the     evidence and was argued by counsel. On consideration whereof,     the court finds upon the issues joined in favor of the      plaintiff on the authority of Gas Co. v. City of Akron, 81      Ohio St. 33, 90 N. E. 40, 26 L. R. A. (N. S.) 92, 18 Ann. Cas. 332. It is, therefore, ordered and adjudged that the     said defendant be ousted from the exercise and use of the      rights, privileges, and franchises described in the petition      of the plaintiff in the operation of the interurban electric      railroad therein described, and it is hereby ordered to      remove its tracks and switches from the said Canton and      Massillon road between the corporate limits of the said      cities of Canton and Massillon within ninety days from this      date. It is further ordered and adjudged that the plaintiff     recover of the defendant its costs herein, taxed at $_____.'

'The sole question in this case as presented is whether the board of county     commissioners can revoke and annul a franchise granted by the      state without having the power so to do delegated to it by      the sovereign authority.' 93 Ohio St. 466, 114 N. E. 53.

Plaintiffs in error maintain that the commissioners' resolution dated February 19, 1913, was an exercise of state authority repugnant to the federal Constitution, because it impaired their contract, took their property without due process of law, and denied them equal protection of the laws.

In East Ohio Gas Co. v. City of Akron (decided October, 1909) 81 Ohio St. 33, 90 N. E. 40, 26 L. R. A. (N. S.) 92, 18 Ann. Cas. 332, relied upon to support the judgment below, a city ordinance, without specifying anything as to duration, provided 'that the East Ohio Gas Company, its successors and assigns, are hereby granted the right to enter upon the streets, alleys and public grounds of the city of Akron, Ohio, * *  * to maintain, operate, repair and remove mains and pipes *  *  * together with the right to construct and maintain, repair and remove all necessary regulators,' etc. And the court said (81 Ohio St. pp. 52, 53, 90 N. E. 40, 42 [126 L. R. A. (N. S.) 92, 18 Ann. Cas. 332]):

'It is true that the ordinance grants the right to enter and     occupy the streets, but in respect to the time when it shall      terminate its occupancy and withdraw, the ordinance is      silent. May we infer from this silence that the gas company     has a perpetual franchise in the streets? We are not now     prepared to hold that the company has thus acquired such a      perpetual franchise. * *  * It comes then to this, that in the      absence of limitations as to time, the termination of the      franchise is indefinite and, to preserve mutuality in the      contract, the franchise can continue only so long as both      parties are consenting thereto.'

The Supreme Court determined, in effect, that a valid franchise to construct and maintain the railroad granted to Lynch and his successors in 1892 was terminated by resolution of 1913. Accepting this ruling, is the latter resolution inoperative and void because in conflict with article 1, § 10, of the federal Constitution? Manifestly it amounted to action by the state. St. Paul Gas Light Co. v. St. Paul, 181 U.S. 142, 148, 21 Sup. Ct. 575, 45 L. Ed. 788; Ross v. Oregon, 227 U.S. 150, 163, 33 Sup. Ct. 220, 57 L. Ed. 658, Ann. Cas. 1914C, 224.

It is suggested that in 1892 Ohio statutes only empowered county commissioners to grant franchises not exceeding twenty-five years in duration, and the present one accordingly expired in February, 1917. But by its final judgment (1915) the Supreme Court recognized a valid franchise existing in 1913 and declared it ended by the resolution of that year without discussing the subject of limitation. Consideration of the point is therefore unnecessary-our concern is with rights struck by the resolution. We express no opinion as to whether those have now expired. Neither are we concerned with the General Assembly's reserved power to revoke or repeal privileges; it has taken no action. Ohio Constitution (1851) art. 1, § 2, and article 13, § 2.

Beyond serious doubt, under constitution and statutes of Ohio in 1892 county commissioners had power to grant franchises over public roads valid for twenty-five years, if not perpetually. Nothing said by the state courts prior to Gas Co. v. Akron (1909) is cited which intimates that grants, without specified limit of time, were revocable at will. Evidently this was not the settled view in 1903 when the circuit court distinctly adjudged that accepted ordinances by a city between 1861 and 1873, authorizing construction and operation of street railways, silent as to time, created perpetual rights, subject however to revocation by the General Assembly. State ex rel. v. Columbus Ry. Co. (1903) 1 Ohio Cir. Ct. R. (N. S.) 145. This judgment was affirmed in 1905, 73 Ohio St. 363, 78 N. E. 1139, 'on the sole ground that the defendant had present right to occupy the streets at the time of the commencement of this action'-a result hardly intelligible upon the theory that the grants were revocable at will. Apparently the doctrine announced in Gas Co. v. Akron, was not suggested in either court.

The circumstances surrounding the grant of 1892 shows no intention either to give or accept a mere revocable right. It would be against common experience to conclude that rational men wittingly invested large sums of money in building a railroad subject to destruction at any moment by mere resolution of county commissioners. Detroit v. Detroit Citizens' St. Ry. Co., 184 U.S. 368, 384, 22 Sup. Ct. 410, 46 L. Ed. 592.

Where there are no controlling provisions in state Constitution or statutes and no prior adjudication by its courts to the contrary, we have distinctly held that franchises like the one under consideration are contracts not subject to annulment as here undertaken. Louisville v. Cumberland Telephone Co., 224 U.S. 649, 664, 32 Sup. Ct. 572, 56 L. Ed. 934; Grand Trunk Western Ry. v. South Bend, 227 U.S. 544, 556, 33 Sup. Ct. 303, 57 L. Ed. 633, 44 L. R. A. (N. S.) 405; Owensboro v. Cumberland Telephone Co., 230 U.S. 58, 73, 33 Sup. Ct. 988, 57 L. Ed. 1389; Old Colony Trust Co. v. Omaha, 230 U.S. 100, 117, 33 Sup. Ct. 967, 57 L. Ed. 1410.

As construed by the Supreme Court of Ohio the resolution of 1913 impaired a valid contract, upon which plaintiffs in error properly relied. It was accordingly invalid and without effect.

The judgment below is reversed and the cause remanded for further proceedings not inconsistent with this opinion.

Reversed and remanded.

Mr. Justice DAY took no part in the consideration or decision of this cause.

Mr. Justice CLARKE, dissenting.

The parties to this suit are a board of commissioners of an Ohio county and two corporations organized under the law of the same state, and the jurisdiction of this court, if it exists at all, must be found in the claim that the resolution of the county commissioners of February 19, 1913, is a law of the state of Ohio which impairs the obligation of the grant by he commissioners of February 22, 1892, within the meaning of the Constitution of the United States. This resolution, printed in the margin of the court's opinion, declares that the commissioners 'contend' that the term of the grant of February 22, 1892, 'is an indeterminate one, continuing from day to day, and that said term extends and continues only so long as both parties to said grant * *  * agree and consent' and that it may be terminated at any time by either party to it. The resolution then declares the grant terminated as of the date of the resolution and that the prosecuting attorney of the county be, and he is, directed to take such steps as he may deem necessary to prevent further operation of the railroad on the highway, as provided for by the grant.

The effect of the decision by the Supreme Court of Ohio is that this 'contention' of the county commissioners that the grant is one determinable at the will of either party to it, is sound and that the commissioners having elected to terminate it the rights of the railway company were at an end. This court reverses this decision of the State Supreme Court and holds that the grant of 1892 was not revocable at will by the county commissioners, that the resolution of February 19, 1913, in terms revoking it is invalid and void, and without deciding whether the power of the commissioners was limited to the granting of such a franchise for twenty-five years and if so whether the grant has expired the court returns the case to the state courts for further proceedings not inconsistent with its opinion.

It is impossible for me to concur in the conclusion thus arrived at by the court and my reasons for dissenting will be briefly stated.

The resolution of February 19, 1913, is in terms simply an expression of the 'contention' of the county commissioners as to the legal effect of the grant of 1892, coupled with notice of their election to terminate the same agreeably to their interpretation of it and with direction and authority given to the prosecuting attorney of the county to test in the courts the validity of the position asserted by the board.

That such a resolution to apply to the courts of the country to establish an asserted legal right, is not a law impairing the obligation of a contract is expressly decided, it seems to me, in Des Moines v. Des Moines City Railway Co., 214 U.S. 179, 29 Sup. Ct. 553, 53 L. Ed. 958, and in principle in Defiance Water Co. v. Defiance, 191 U.S. 184, 24 Sup. Ct. 63, 48 L. Ed. 140. A resolution such as was passed here is the only form in which the board of county commissioners could assert, in advance of litigation, its contention as to its rights under the contract and it is not different in effect from what it would have been if the same contention had been expressed in another form, such as by way of an answer filed in behalf of the commissioners in a suit brought by the companies to enforce what they considered to be their rights under the grant. The decision of this court that the obligation of the contract was thus impaired amounts to holding 'that whenever it is asserted on the one hand that a municipality (county) is bound by a contract to perform a particular act and the municipality denies that it is liable under the contract, thereby an impairment of the contract arises in violation of the Constitution of the United States, but this amounts to the contention that every case involving a controversy concerning a municipal contract is one of federal cognizance, determinable ultimately in this court.' This court in the language quoted has declared such a conclusion to be obvious error in St. Paul Gas Light Co. v. St. Paul, 181 U.S. 142, 149, 21 Sup. Ct. 575, 45 L. Ed. 788.

These three clear and well-reasoned cases seem to me to correctly decide that the court is without jurisdiction to consider this case and that it should be dismissed.

But even if we should assume that this court has jurisdiction to decide the case, it, nevertheless, would be impossible for me to concur in the conclusion arrived at.

The resolution of the county commissioners under discussion does not, in words, define the term for which the franchise to operate a railroad on the public highway is to continue. The Supreme Court of Ohio holds that it results from this failure to define 'in express terms,' 'in plain terms,' the duration of the grant that it should be considered an indeterminate one, but this court holds that this failure to clearly define the duration of the grant results in its being a perpetual one, unless it be otherwise limited by constitution or statute.

The rule for the construction of grants such as we have here will nowhere be found more clearly or imperatively stated than in the decisions of this court.

In Blair v. Chicago, 201 U.S. 400, 463, 26 Sup. Ct. 427, 50 L. Ed. 801, a decision obviously rendered upon 'great consideration,' it is declared that a corporation which would successfully assert a private right in a public street must come prepared to show that it has been conferred 'in plain terms,' 'in express terms,' and that any ambiguity in the terms of the grant must be resolved in favor of the public and against the corporation, 'which can claim nothing which is not clearly given.' The sound reason given for this rule is that 'grants of this character are usually prepared by those interested in them,' and that 'it serves to defeat any purpose, concealed by the skillful use of terms, to accomplish something not apparent on the face of the act.' This is declared to be 'sound doctrine which should be vigilantly observed and enforced.'

The Supreme Court of Ohio is not less definite in adopting the same rule of construction, saying, in Railroad Co. v. Defiance, 52 Ohio St. 262, 40 N. E. 89:

'Every grant in derogation of the right of the public in the     free and unobstructed use of the streets *  *  * will be construed strictly against the grantee and liberally      in favor of the public and never extended beyond its express      terms when not indispensable to give effect to the grant.'

What results from the application of this rule to the grant we are considering?

The fact that two such courts as this one and the Supreme Court of Ohio differ so widely that the one holds the grant on its face to be perpetual, and the other holds it to be determinable at will, is, to me, convincing evidence that a perpetual grant is not conferred 'in plain terms,' 'in express terms,' that it is 'something not apparent on the face of the grant,' and that, therefore, to give such a construction to the resolution is to find in it a most vital and important provision which 'those interested' in obtaining the grant would have been eager to incorporate into it had they thought it possible to obtain consent to it. It is impossible for me to doubt that a proposal to the county commissioners to make the resolution read 'Resolved, that the right is hereby granted * *  * to construct, maintain and operate perpetually an electric railroad *  *  * on the state road between Canton and Massillon' would have been summarily rejected by the commissioners. The public indignation which the making of such a grant would have excited was sufficient protection against its being made 'in plain terms' and the rule we have quoted, in my judgment, should be the protection of the public against such a result being accomplished by construction.

The Supreme Court of Ohio may have been influenced in its decision of this case by the fact that from the time when the development of the state became such as to make of public importance the terms of grants of street railway rights in the streets and public roads of that state, the General Assembly of the state limited to twenty-five years the term for which such rights might be granted, either by county commissioners or by municipal corporations. It is difficult for a man living in such a legal atmosphere with respect to such grants to think in terms of perpetual franchises. An attempt to remove this restriction f om grants by county commissioners was declared unconstitutional by the Supreme Court in Railway Co. v. Railway Co., 5 Ohio Cir. Ct. R. (N. S.) 583, affirmed 73 Ohio St. 364, 78 N. E. 1122.

The decision of this case by the Supreme Court of Ohio is without written opinion, but it is rested by the court upon its previous decision in the East Ohio Gas Co. v. Akron, 81 Ohio St. 33, 90 N. E. 40, 26 L. R. A. (N. S.) 92, 18 Ann. Cas. 332. In that case the city of Akron contended that the franchise granted to the Gas Company, in terms unrestricted as to time, was perpetual, and the Gas Company contended that it was determinable at the will of either party. After having the case under advisement for six months, and as the court says in its opinion 'on account of its great importance to the public as well as to all public service corporations' having given unusual consideration to the case, the contention of the Gas Company was sustained and the grant was held 'simply determinable, existing only so long as the parties mutually agree thereto.' Paragraph three of the syllabus of the case, which in Ohio has the approval of the entire court, reads:

'While much regard will be given to the clear intention of     the parties, yet where the contract is entirely silent as to      a particular matter, the courts will exercise great caution      not to include in the contract by construction, something      which was intended to be excluded.'

This decision was rendered in 1909 by a unanimous court, and six years later it was made authority for the decision of this case. There is no Supreme Court authority in Ohio to the contrary. The judgment by an inferior court (State ex rel. Taylor v. Columbus R. Co., 1 Ohio Cir. Ct. R. [N. S.] 145), cited in the majority opinion, that street railway grants made before the statutory limit of twenty-five years was imposed and silent as to duration were perpetual, was promptly discountenanced when the case reached the Supreme Court. Id., 73 Ohio St. 363, 78 N. E. 1139.

A decision by a state Supreme Court, repeated after the lapse of six years, of a question involving the construction of local laws is, in my judgment, entitled to very great weight.

There was no question raised in the Ohio court but that a contract was created by the passing and accepting of the resolution of 1892, and the record shows that the sole question for decision, and which was decided, was, whether the grant was an indeterminate or a perpetual one. If the grant had contained an express provision that it was revocable at will, it would have been impossible, having any regard to the meaning of words, to have said that the resolution of 1913 impaired its obligation. It would have been simply and only a form of exercising a legal right the exercise of which was contemplated by the contract. The case is not different if the grant, without such expression, really means, as the Supreme Court of Ohio held that it means, the same thing as if such provision had been incorporated into it, and since the state court arrived at its result by the construction of the grant wholly unaffected by the subsequent resolution terminating it, it seems clear enough, upon repeated decisions of this court, that a decision should not be rendered here based on the theory that the grant was impaired by a resolution in form terminating it. While this court has held that in such cases it will for itself determine whether a contract exists and what its terms are, yet where the decision of the state court is so manifestly unaffected by the later 'law' as it is in this case, it should be given weight and authority comparable at least to that which would have been given it if it had been directed to the validity of the granting 'law' under the state Constitution.

The power to declare laws of states unconstitutional and to reverse the judgments of the Supreme Courts of states is so fateful and is so unprecedented in the history of governments other than ours that, as this court has repeatedly declared, it should be exercised only in cases which are clear, and it is impossible for me to think that this is such a case.

The only reason given by the court in its opinion for differing with the Supreme Court of Ohio in its construction of the granting resolution of 1892 is that:

'The circumstances surrounding the grant of 1892 show no     intention either to give or accept a mere revocable right. It     would be against common experience to conclude that rational      men wittingly invested large sums of money in building a      railroad subject to destruction at any moment by mere      resolution of county commissioners.'

There is no evidence whatever in this record that there were any special circumstances 'surrounding the grant of 1892,' and to undertake to infer what the unexpressed intention of the parties to this grant was twenty-five years ago is, it seems to me, an unusual and unpromising enterprise.

That it would be against common experience to conclude that rational men would wittingly invest their money in a railroad constructed under a grant determinable by the action of county commissioners is reasoning which it seems is more persuasive with courts than with investors or men of affairs. To reason upon what is reasonable is always uncertain and often misleading, but in this case we have ascertained facts to guide us.

Until recent years street railroad franchises (locations), and also electric light, gas, and other public utility franchises were revocable in Massachusetts, by aldermen in cities, and by selectmen in towns (counties), and they are still in the main so revocable, save that as to railroad grants revocation is now subject to approval by the state Railroad Commission, and as to some other 'locations' revocation is subject to approval by the Board of Gas and Electric Light Commissioners. Mass. Rev. Laws, 1902, vol. 2, §§ 7, 32, pp. 1044, 1051. Springfield v. Springfield St. Ry. Co., 182 Mass. 41, 48, 64 N. E. 577; Boston Electric Light Co. v. Boston Terminal Co., 184 Mass. 566, 6 N. E. 346; Metropolitan Home Telephone Co. v. Emerson, 202 Mass. 402, 88 N. E. 670. Yet hundreds of millions of dollars have been invested in that state in dependence upon these revocable ordinances.

In legislating for the District of Columbia, Congress has followed the Massachusetts example and has made street railroad grants indeterminate and revocable at the will of Congress. Act May 17, 1862, c. 73, 12 Stat. L. § 6, p. 390; Act July 29, 1892, c. 322, 27 Stat. L. § 8, p. 334.

Wisconsin, in 1907, adopted the principle of indeterminate franchises (Laws of Wisconsin, 1909, p. 775, § 1797t-2), and the new Constitution of Michigan recognizes it by providing that any franchise not revocable at will shall require the affirmative vote of sixty per cent. of the voters before it can become valid. Constitution, 1908, art. 8, § 25. Wilcox Municipal Franchises, vol. 1, pp. 36, 37, vol. 2, pp. 46, 47, and chapter 27.

This form of franchise has been called 'a tenure during good behavior,' it has resulted in superior service to the public and, to the surprise of those who reason a priori on the subject, such franchises have proved in effect perpetual. This type of franchise is undergoing modification in various parts of the country, which will, no doubt, improve it, but, of it even as it now is, Wilcox has this to say:

'Unquestionably, with the recognition of the unspeakable     wrong that is inherent in the grant of perpetual franchises,      and the great practical disadvantages that usually arise in      connection with limited-term grants, public sentiment is      rapidly crystallizing in favor of the indeterminate franchise      as the most promising basis for public control of street      railways.' Municipal Franchises, vol. 2, p. 240.

Perpetual franchises have proved to be such a burden in communities upon which they have been imposed (Wilcox, vol. 2, c. 26) that, for the reasons so well stated in Blair v. Chicago, supra, it is impossible for me to agree that any grant is perpetual unless the language used i it is so express and clear that reasonable men cannot differ in giving to it that effect.

Thus for the reasons (1) that a perpetual grant is not 'in plain terms' made by the resolution of 1892; (2) that appropriate consideration seems to me not to be given to the decision of the Supreme Court of Ohio; and (3) that the reasons stated for inferring that an irrevocable franchise was intended by the granting power in the case before us are not sound reasons, I should dissent from the opinion of the court even if convinced that it had jurisdiction to decide the case.

Mr. Justice BRANDEIS concurs in this dissent.