Baltimore Trust & Guarantee Co. v. Mayor of Baltimore

64 F. 153, 1894 U.S. App. LEXIS 3034

• Court: U.S. Circuit Court for the District of Maryland
• Decided: November 13, 1894
• Status: Published

Opinions

GOFF, Circuit Judge.

The bill in this case was filed by the Baltimore Trust & Guarantee Company against the mayor and city council of Baltimore. The plaintiff is a corporation organized under the laws of the state of Maryland, and defendant is the public municipal corporation, of Baltimore city in that state. On the first day of September, 1892, the Lake Roland Elevated Railway Company executed a certain indenture, in which the plaintiff is trustee, for the purpose of securing the payment of the principal and interest of 1,000 first mortgage coupon bonds, of the denomination of $1,000 each, payable in the gold coin of the United States of America, the principal being due on the 1st day of September, 1942. By this deed the Lake Roland Elevated Railway Company granted and conveyed to the Baltimore Trust & Guarantee Company, and to its successor in the trust thereby created, all the railway and railway tracks owned, used, occupied, and enjoyed by said company, including the ■line of railway authorized to be constructed by the North Avenue Railway Company of Baltimore City, by virtue of Ordinance No. 23, approved April 8, 1891-, of the ordinances of the mayor and city council of Baltimore, which authorized the construction of double tracks on Lexington street, in Baltimore, from the corner of Charles and Lexington streets (the city terminus of the railway system of the Lake Roland Elevated Railway Company), eastwardly, along Lexington street, to where it corners with North street. On the 3d day of August, 1892, the board of directors' of the Lake Roland Elevated Railway Company contracted for the construction of that road, agreeing to pay therefor the said 1,000 bonds, aggregating $1,000,000, and $100,000 in cash, which action of the board of directors was subsequently, at a meeting of the stockholders of that company held August 6, 1892, duly ratified. In accordance with this contract and the order of the railway company, the mortgage was duly executed, dated September 1, 1892; the bonds also bearing that date. After 11 ip execution and recordation of the mortgage, all of said bonds wen* duly executed, certified by (be Baltimore Trust & Guarantee Oompan.w as trustee, left with tire trustee (for purposes connected with said indenture and ¡he building of the road), and afterwards, on the order of the board of directors thereof, delivered to (In* contractors then engaged in constructing the line. After the work had commenced, when a considerable portion of the road had been finished, and after large expenditures had been made for labor and material for the uncompleted part on which work war, then being prosecuted, and after tin* bonds had been, as before mentioned, delivered, the defendant, on November 18, 1892, by Ordinance No. 1, of that date, repealed so much of the ordinance of April 8, .1891, No. 28, as authorized the placing of double tracks upon Lexington street between North and Charier streets. Tire plaintiff claims that ike effect of this repealing ordinance has been to lake away part of ike security of the bonds so placed in its custody as trustee, causing the value of the same to materially decrease, and therefore the plaintiff, “in the interest, for the prelection, and at (he request of all the bondholders, for the purpose of protecting them from an irreparable injury, files ibis bill.”

The Lulu* Roland Eleva led Kail way Company was formed and duly organized under the Jaws of the stale of Maryland, by an agreement of consolidation between the North Avenue Kailway Company of Baltimore City and the 'Baltimore, Hampden & Lake .Roland Kail way Company, which said two companies were corporations created under the laws of that state, the former under the general corporation laws, and the latter by an act of the general assembly. By an act of fsbtt (chapter 217) of the general assembly of Maryland, the charrer of ¡he North Avenue Ballway Company of Baltimore City was amended, by authorizing if to lease, purchase, or aid other roads, in the general railway act, under which that company was incorporated, it wjus provided “that no railroad company shall be allowed to pass through ¡he oily of Baltimore without the consent of the municipal authorities”; and therefore the said North Avenue Company made application to the mayor and city council of Baltimore for con-cent to the use of certain streets of that city, including the right to lay and maintain double railway tracks on Lexington street, from North street to Charles street, so that it might thereby reach its proposed terminus at the corner of Charles and Lexington streets.

An ordinance was offered in the council on the 17th day of November, 1890, properly referred, considered, and reported, and on April 8, 1891, passed and approved, now known as “Ordinance No. 22.” Hy it the 'North Avenue Kaihvay Company was authorized "(o lay down and construct double iron laihvay tracks for the purpose of its business” on a number of the streets of Baltimore, including Hurt; portion of Lexington before mentioned. This right., so granted, was upon certain conditions, expressly set forth in the ordinance, to Hu* peL-iormance of which the North Avenue "Railway Company hound itself by accepting ilie ordinance*, and which was assumed by the Lake Roland Elevated Ilailvvav Company, by virtue of the agreement of consolidation under which it succeeded to all of the corporate rights of the North Avenue Railway Company. The following are among the terms and conditions set forth in said ordinance: That the North Avenue Company shall permit other railway companies to use its tracks upon certain conditions; that it shall carry over its lines, free of charge, passengers who present transfer tickets from any other city passenger railway company connecting with it; that it shall at all times keep the space between its tracks, and two feet on each side thereof, in good repair, and whenever any portion of any street upon which its tracks shall be laid shall be repaved, the company shall pay the entire expense of repaving such space with such pavement as the mayor and city council shall prescribe; that the company shall permit all electric light, telephone, telegraph, or other wires on North street to be strung on its elevated structure; that the company shall be liable for the payment of the park tax, and be subject to all the general regulations then existing or thereafter to be made relative to city passenger railways not inconsistent with said ordinance; that the mayor and city council of Baltimore shall have the privilege, within two years after the expiration of fifteen years from the passage of said ordinance, to purchase the stock and interest of said company, with such appurtenances to the same as the mayor and city council might deem proper.

Before the Lake Roland Company began the erection of its elevated railway on North street, it was necessary for it to obtain from the general assembly of Maryland a ratification of Ordinance No. 23, which was done by chapter 112, Acts 1892, in the following words:

“Be it enacted by the general assembly of Maryland: Section 1. That Ordinance Xo. 23, of the mayor and city council of Baltimore, approved April 8,1891, be, and tbe same is hereby, ratified and confirmed; this ratification to have the same effect as if the mayor and city council of Baltimore, at the time of the passage of said ordinance, had been fully authorized by the general assembly to pass.said ordinance, and to grant each and all of the powers and privileges therein contained; the said mayor and city council to have the same power and control hereafter, in reference to the enforcement, amendment or repeal of said ordinance, as it has or would have, in respect to any ordinance passed under its general powers.”

This act certainly removes all doubt as to the power of the city authorities to pass Ordinance No. 23; and, if the right did not exist before, this action of the legislature cures the defect, and makes the grant of the mayor and city council valid, subject to their right to enforce, amend, or repeal, possessed by them under their general powers.

The plaintiff insists that Ordinance No. 23, by which the North Avenue Company was authorized to lay and maintain double tracks on Lexington street (it having been accepted, and large expenditures of money made thereunder), constitutes an inviolable contract between the municipal corporation and the company, the terms of which cannot be altered or impaired without the consent of both parties thereto; and that, consequently, the repealing ordinance of November 18, 1892, is in contravention of the tenth section of the first article of the constitution of the United States (that part thereof which forbids a state from passing a law impairing the obligation of contracts), and is therefore void. The defendant claims that no federal question is involved in this controversy, and that this court is without jurisdiction of the case. I am clearly of the opinion, for reasons that will be stated fully as I proceed with its consideration, that this court has jurisdiction of this case, and consequently the demurrer of defendant to the bill will be overruled.

I now come to the consideration of Ordinance No. 23. Did its enactment and acceptance constitute a contract of the character claimed by the plaintiff, and, if so, has such contract been impaired by the repealing ordinance of November 18, 1892? These questions are to be answered as the law is found to be applicable to the facts I have stated. The defendant insists that Ordinance No. 23 was a mere license to the railroad company to use the streets designated in it for railroad purposes, subject to modification or repeal at the will of the municipal authorities of the city of Baltimore; also, that the court of appeals of the state of Maryland, prior to the passage of said ordinance, had decided that lie mayor and city council of the city of Baltimore could not pass an irrepoalable ordinance, which decision, it is Claimed, under the rules of construction relating to such matters, became part of the city’s agreement with the railroad company. In support of this contention, the cases of Rittenhouse v. Mayor, etc., 25 Md. 337, and State v. Graves, 19 Md. 351, are cited. I have examined them carefully, considering the facts in each in connection with the opinions of tie court relating thereto; and I am convinced that it was not the intention of the court of appeals to hold as the defendant here claims, but that it really designed to and did announce the now well-established doctrine that municipal corporations, so far as their own internal affairs are concerned,- — such as opening, closing, and grading streets, or constructing buildings for public use in a particular manner, or at a certain place, — can pass no irrepealable ordinance. The court in those cases did not regard the ordinances as contracts, but considered them municipal enactments or regulations, repealable at the pleasure of the city, as the public interest might‘demand.

It may be admitted that, as the general railway act of the state of Maryland was passed after the adoption by the people of that state of the constitution of 1867, the right is reserved to the general assembly io repeal, alter, or amend the charters of the North Avenue Kailway Company, and of the Lake Boland Elevated Kailway Company; and also it may be conceded that if the general assembly of Maryland had repealed the ordinance relative to double tracks upon Lexington street, or authorized the mayor and city council of Baltimore to do so, then there would be no impairment of the obligation of the contract relied on in this case, and that the plaintiff would not be entitled to the relief sought. It is certainly true that ihe general assembly has not directly legislated relative to the; modification or the repeal of said Ordinance No. 23. The question next i.o be answered is, has the mayor and city council, under the authority of the general assembly, done so? That the municipal authorities of the city of Baltimore, in passing the repealing ordinance, acted under supposed legislative authority, and not in the exercise of a right under their general powers to repeal a mere license or rule of regulation, is, I think, clear. That they have not the right, under their general powers, to repeal an ordinance passed by them, by which a contract has been created, is also clear; and as their only legislative grant of powers to repeal limits such action, so far as Ordinance No. 23 is concerned, to their general powers, it is quite evident that the authority under which they acted in passing Ordinance No. 1 was supposed, and not real. I cannot agree with counsel for defendant that authority can be found in chapter 370, Acts 1890, and in chapter 112, Acts 1892, General Assembly of the State of Maryland, giving the mayor and city council of Baltimore the power to amend or repeal Ordinance No. 23; but after hearing their arguments, and reading the opinion of the city solicitor relative to their power under said, legislation (a copy- of which is found in the record of this cause), I can readily understand why the municipal authorities of that city supposed that they had power from the general assembly to pursue the course they did. It is true that by the Acts of 1890 (chapter 370) it is provided that the mayor and city council of Baltimore shall have power to regulate the use of the streets, lanes, and alleys in that city, by railway or other tracks, gas or other pipes, telegraph, telephone, electric light, or other wires and poles, in, under, over, or upon the same; but except in regard to underground conduits for • wires, for which purpose it seems to have been enacted, I do not find that It gives any additional authority to said officials, so far as the use of the streets of Baltimore and the regulation of the same are concerned. It has been conceded for years — long recognized as the law — that the mayor and city council of Baltimore have full control over the streets and highways of that city, and the act of 1890 has been held to be “an amplification of their general power over, and right and duty to regulate and maintain the streets and highways of the city for the use of the public.” The general railway act of 1876 gave the municipal corporation of Baltimore the general power to consent or to refuse assent to the use of its streets by railroad tracks, and, independent of this, it has been held for years that such municipali-' ties have that general power without the direct authority of the legislature, so far as local or street railways are concerned. Dill. Mun. Corp. (4th Ed.) § 724; Hinchman v. Railroad Co., 17 N. J. Eq. 75; Jersey City & B. R. Co. v. Jersey City & H. R. Co., 20 N. J. Eq. 69; Atchison St. Ry. Co. v. Missouri Pac. Ry. Co., 31 Kan. 661, 3 Pac. 284; Brown v. Duplessis, 14 La. Ann. 842; State v. Corrigan Consol. St. Ry. Co., 85 Mo. 263.

The rule of construction, with respect to legislative grants to corporations, relied on by the defendant, may be conceded, — “that only such powers and rights can be exercised under them as are clearly comprehended within the words of the act, or derived therefrom by necessary implication, regard being had to the objects of the grant. Any ambiguity or doubt arising out of the terms used by the legislature must be resolved in favor of the public.” Minturn v. Larue, 23 How. 435; Barnett v. Denison, 145 U. S. 135, 12 Sup. Ct. 819; Hamilton Gaslight & Coke Co. v. Hamilton City, 146 U. S. 258, 13 Sup. Ct. 90; Fertilizing Co. v. Hyde Park, 97 U. S. 659.

Did chapter 132, Acts 1892, to which I have already alluded, and to which, in connection with the rules and authorities just cited, I will again refer, justify the repeal of Ordinance No. 23 ? So far as it relates to the right to repeal, does it give to the defendant any power additional to that possessed by the city authorities before its passage? It seems to me that it does not, so plainly so that it is rather strange it should be seriously contended to the contrary. What right to amend, alter, or repeal did the city possess, under its “general powers,” prior to the date of said enactment? In this case it has just such right, and no more, as it reserved in Ordinance No. 28. The general assembly, by said chapter 3.12, did not intend to reserve to the city authorities any additional or absolute right of amendment or repeal, but is careful to limit them to the “same power and control” as they would have under their “general powers.” If an ordinance passed by them does not constitute a contract, but simply relates to affairs as to which the city alone is interested, then, under their general powers, their right to amend or repeal it is without limit. If a. contract has been created by the ordinance, then the right to amend or repeal is such as was reserved to the city in the enactment itself. The only clause in Ordinance No. 23 providing for changes in or amendments to it is in the following words: “rind shall be subject to all the general regulations now existing or hereafter to be made, relating to city passenger railways not inconsistent with this ordinance.” I do not find the right to repeal in this reservation, but simply the right to regulate, provided that the regulations proposed are not inconsistent with the terms of the ordinance. The right to regulate will not be held to mean the right to repeal or materially modify, or, in effect, to prohibit, the exercise of privileges previously granted by the state and city, or to impair the obligation of a contract or destroy vested rights. I thinlc that municipal corporations, invested wiik full power to control and regulate the use of their streets, do not exceed their powers in making irrepealable contracts, not exclusive in character, for the use of said streets for purposes relating to the public comfort and convenience; and, also, that a legislative grant made either directly by the legislature, or indirectly through a municipal corporation duly authorized so to act, constitutes a contract between the parties thereto, the terms of which cannot be altered without their mutual consent, except so far as the right to alter, amend, or repeal is expressly reserved in the grant itself, or existed in constitutional or legislative provisions at the time of its passage. Were this not so, there would be but little security for investments made on the faith of such, grants, and no inducement to those controlling capital to make improvements absolutely necessary for the health and happiness of the people, and for the progress and prosperity of the country. Justice requires that such legislative enactments, when the grantees thereof have accepted the same and acted thereunder, should become absolute and irrevocable contracts, which neither party thereto will he permitted to revoke, nor allowed to disregard or add conditions thereunto more onerous than those first imposed.

I find from the decisions involving the questions I have been considering that where rights and privileges have been lawfully granted to and accepted by either a private or public corporation, and valuable improvements have been made on the faith of such grant, á contract has been thereby entered into, the impairment of which by a law of the state mailing such grant, passed by the legislature thereof, or by a municipality authorized by it, or acting under the authority of a statute supposed to give the power (the right so to do not having been reserved), is forbidden by section 10 of article 1, of the constitution of the United States. Trustees v. Woodward, 4 Wheat. 518; Chicago v. Sheldon, 9 Wall. 50; Shields v. Ohio, 95 U. S. 319; New Jersey v. Yard, Id. 104; Railroad Co. v. Richmond, 96 U. S. 521; Wright v. Nagle, 101 U. S. 791; Greenwood v. Freight Co., 105 U. S. 13; Railroad Co. v. Delamore, 114 U. S. 501, 5 Sup. Ct. 1009; New Orleans Gaslight Co. v. Louisiana Light & Heat Producing & Manuf'g Co., 115 U. S. 650, 6 Sup. Ct. 252; Waterworks Co. v. Rivers, 115 U. S. 674, 6 Sup. Ct. 273; Sioux City St. Ry. Co. v. Sioux City, 138 U. S. 98, 11 Sup. Ct. 226; St. Louis v. W. U. Tel. Co., 148 U. S. 92, 13 Sup. Ct. 485; Saginaw Gaslight Co. v. City of Saginaw, 28 Fed. 529; Coast Line R. Co. v. Mayor, etc., City of Savannah, 30 Fed. 646; Citizens’ St. R. Co. v. City of Memphis, 53 Fed. 715; State v. Corrigan Consol. St. Ry. Co., 85 Mo. 263; City of Burlington v. Burlington St. Ry. Co., 49 Iowa, 144.

I do not think it necessary, having reached the conclusions indicated, to consider other questions referred to in the pleadings and argument of' this case, among them those of res adjudicata, of acquiescence, and of the police power of municipalities. I will simply add that, as the plaintiff in this case was not a party to the case in the state courts between the Lake Roland Elevated Railway Company and the mayor and city council of Baltimore, it is not bound by the judgment rendered therein; that even if, the railroad company did acquiesce in the repeal of Ordinance No. 23, which is not at all apparent, this plaintiff would not be concluded thereby; and that, as I hold Ordinance No. 23 to be a contract of the character described, it will be profitless to now consider the police powers of the municipal authoritites of the city of Baltimore. In declaring this result, I am constrained to dissent entirely from the opinions delivered by the court of appeals of Maryland in the case of Lake Roland El. Ry. Co. v. City of Baltimore, 77 Md. 352, 26 Atl. 510, construing the legislation of the general assembly of that state and the ordinances of the mayor and city council of Baltimore relating to this controversy. The judgment of that deservedly distinguished tribunal, announced after careful consideration, and reaffirmed after additional deliberation, caused me, as I examined this case, to doubt the correctness of the conclusion I found myself reaching, and forced me again to reflect on the facts and study the authorities pertinent thereto. A careful re-examination of this case led me to conclude that my brothers had compelled me, in the discharge of my judicial duty, to differ with them. In construing the statutes of a state, we follow, as a rule, the interpretation placed thereon by its court of last resort; but, when connected therewith is involved also the construction of the federal constitution and the security of the interests protected by it, we feel impelled to rely upon the decisions of the supreme court of the United States. We may add that should we, under such circumstances, be without the guidance of that court, we would in that emergency beg to be permitted to think and act for ourselves, indulging the hope that our conclusion would accord with the decision of the state tribunal; and we would be unworthy of the respect of those with whom we differ,.and deserving of the contení])! of all who agree with us, should we, under such circumstances, decline to enter such decree as, in our judgment, the tine interpretation of the federal constitution requires ns to announce.

A decree will he passed as indicated in this opinion, in substance as prayed for in plaintiff's bill.