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PEOPLE'S RAILROAD v. MEMPHIS RAILROAD.

December 1, 1869

PEOPLE'S RAILROAD
v.
MEMPHIS RAILROAD.



ERROR to the Supreme Court of Tennessee, the case being thus: The city of Memphis being by its charter empowered 'to regulate the laying of railroad iron and the passage of railroad cars through the city,' and by general law 'to grant privileges in the use and enjoyments of the streets,' passed, on the 11th of November, 1859, an ordinance prescribing the terms on which the board would grant the exclusive privilege of constructing street railways in Main Street, and other streets specially named, and operating them under certain regulations for a term of twenty-five years. By the ordinance, bids were invited to be made, on or before November 20th, to the mayor and finance committee, and were to be reported to and awarded by a board consisting of the mayor and aldermen, at the first meeting thereafter. Accordingly, on the 29th of November, the board met, and received from the finance committee a number of bids, including one from H. D. Small, William Kirk, and nine persons named, 'and others, as the People's Passenger Railroad Company of Memphis;' the proposition being made by Kirk and Small as 'business agents of the company.' The committee reported that the bid thus made was the best one for the interest of the city; and the board proceeded to make their award pursuant to the ordinance. The bid thus reported on contained four propositions, each offering to pay certain amounts, fixed or contingent, for the privilege of running upon certain streets. The board made their award by authorizing the mayor and city attorney to close a contract with Kirk, Small, and the others, upon the terms of their second proposition as to the amount and time of payment, but including other streets, making a reservation of a right to determine the sort and weight of rail to be used, and varying the time of completion. These modifications were accepted by Kirk and Small, in behalf of the persons composing the People's Passenger Railroad Company, December 2d, and a notice thereof, in writing, with great form and specification that they were so, given to the board, and by the board, December 8th, 'read received, and ordered to be filed.' On the same 8th day of December, the board passed a resolution giving permission to the associates, describing them as 'the parties to whom has been awarded the contract for city railroads, under the ordinance passed the ___ day of _____, 1859,' to have themselves incorporated, 'the incorporation in no way to change the conditions of the propositions heretofore made and accepted by the parties respectively, the same being intended to secure the rights and more effectually preserve the remedies of parties against each other respectively, in case of any violation of contract to be hereafter entered into.' On the 1st of February, 1860, that is to say about two months afterwards, Small, Kirk, and their associates were incorporated by the style of 'The People's Passenger Railroad Company of Memphis,' and by section of their charter authorized to complete all the contracts or agreements entered into with the city of Memphis, or other parties, for the use of the streets of said city, and to enlarge and alter the terms of the same with said parties–AND to operate street railroads, by animal power, in ALL the streets of said city, with the consent of the said city. Section 5 authorized the company to extended said road or roads outside the corporate limits. On the 21st of February, 1860, the president and secretary of the People's Passenger Railroad Company laid before the board of mayor and aldermen a copy of their charter, and expressed their readiness to sign the contract which had been prepared for their signature by the city attorney. They say: 'We think that the same is in accordance with the agreement with the city as embodied in the ordinance on the bid and the resolution of grant. By a resolution of our board of directors under the charter which you permitted us to obtain, we are authorized to sign the contract, and hold ourselves in readiness to do so. . . . We are prepared to give the required bonds as soon as the contract is executed.'They express also their readiness to enter immediately upon the construction of the road, for which they say they had made preparations. This communication was referred to a committee, with instructions to report. In the meantime, opposition had arisen among the property-holders on Main Street, one of the streets named in the contract, and the committee recommended a postponement of action as to that street till March 20th, for the purpose of obtaining information as to the effect of street railroads on the value of property. On the 22d of March the board resolved to recede from the undertaking to have a street railway on Main Street, recognized their 'moral but not legal obligation to make good to those who had been incorporated as a street railway company any real damage sustained by change of purpose,' and referred the matter back to the committee, 'to modify the plans for street railways with the company, if it can be effected, or, otherwise, to agree on a settlement of the supposed damages, and report back to the board.' No opposition appeared to have existed on any street but Main Street. The committee and the company came to no settlement as to damages; and the committee made no report till the 23d of April, 1861, when they reported a resolution, which was adopted by the board, offering to sanction the construction of the road on any street, provided the consent of two-thirds of the property-holders thereon were first obtained. The occupation of the city by the army during the rebellion, and the suspension of the courts, prevented any proceedings by the company either to obtain the consent of the property-holders or to enforce its rights by legal proceedings, and so the matter remained until June, 1865. In the month and year last named, the rebellion being now suppressed, the legislature of Tennessee chartered a new company, to wit, 'The Memphis City Railroad Company, with authority to construct, maintain, use, and operate street railways by animal power on all or any of the streets of Memphis,' and to make all contracts and agreements with the city or other parties in connection with the matter. And it repealed the act by which the People's Passenger Railway Company had been incorporated. The new company having begun to lay its track on the streets of Memphis, and opposition being made thereto, on account of the former charter to the other company, the new company filed its bill in chancery, in a State court of Tennessee, the old company being made a defendant, to test the right of the matter. The old company set up as a defense to the bill that they had an existing contract with the city; and that the charter to the new company was a law impairing its obligation. The court decreed in favor of the new company, and that decree being affirmed in the Supreme Court of the State, the old company brought the case here. The questions accordingly were: 1. Whether there existed any contract between the city and the old company? And if yea, then, 2. Whether the statute incorporating the second company was a law impairing the obligation of a contract? Of course, unless the first question was determined affirmatively, that is to say, unless it was determined that a contract had been entered into between the old company and the city, then the second could never arise.

The opinion of the court was delivered by: Mr. Justice Clifford delivered the opinion of the court.

Messrs. McRac, Carlisle, and McPherson, for the old Company, plaintiffs in error:

1. Under the act of 1860 the old company acquired corporate rights in the very matter of this controversy, to wit, the right of laying and operating street railways through certain streets of Memphis.

The advertisement for proposals by the board of mayor and aldermen on the 22d of November, 1859, the propositions of Kirk and Small and their associates offered on the 29th, their acceptance with the alterations in the resolution of that date by the board, and the after-acceptance by the associates, constituted a perfect and full agreement, a congregatio mentium, wherein the terms, stipulations, conditions, and obligations were decided and mutually adopted; and from that moment became binding on all the parties, which a court of equity would require the specific performance of, notwithstanding the formal contract was to be reduced to writing and confirmed, and the bonds confirmed.*fn1

And when the consent of the city was solicited and granted, by the resolution of 8th of December, that the associates should be incorporated for the security of the mutual rights, it was a substitution of the corporation to the benefit of the agreement, so that when the company was chartered and tendered its acceptance of the contract, the previous agreement not having been revoked, its rights became perfect.

The legislature did but incorporate, at the instance of both parties, certain natural persons who had been acting under a company name into a legal entity, even their name being retained, for the more convenient assertion and protection of the rights of both parties in respect of the contract which had been entered into. In other words, it did but substitute, with the consent of both parties, the incorporated company–this plaintiff in error–for the unincorporated one, with which the city of Memphis had contracted.

To this the city had consented in advance. But if she had not, the case shows a subsequent consent, and a complete recognition of the incorporated company so created as standing in the place of the original unincorporated one with which the city had contracted. If, therefore, any renewed consent to the original contract was contemplated by the act of incorporation, that consent was given.

But it cannot be maintained that an act of incorporation, which was in effect applied for by both parties for the avowed and single purpose of making that contract more effectual, could have been intended by either of them, or by the legislature acting upon their joint solicitation, not only to unsettle that contract, but absolutely to annul it. Yet this is the construction which opposing counsel would seek to establish.

In addition, in it more than doubtful if any assent was required in regard to making those reads already contracted for. The words of section four, which authorizes the company 'to complete and execute all contracts and agreements entered into with the city of Memphis, for the use of the streets of said city, or building said railroad,' point to a past transaction, begun, which is to be concluded; an agreement entered into already beforehand, which is to be executed. This agreement was for the use of the streets of the city or building said railroad; that is, the definite, fixed railroad heretofore agreed about. This agreement being already entered into, the parties 'may alter or enlarge the terms of the same.' But this agreement, as is evident from the future words, did not include all the streets nor other roads to be run on the excluded streets not yet the subject of any agreement. So the section goes on to authorize that they 'may operate street rail ROADS (in the plural) by animal power on all the streets of the city of Memphis, with the consent of the city' (not yet had, but to be obtained), for they 'may enter in to all necessary contracts for the building and operating said roads.'

Section 5 shows still further this meaning. The words are: 'Said company may extend said road or roads outside the corporate limits,' &c.

The clear meaning of the legislature, then, was that the company should have the use of the streets to operate its road according to the terms of the agreement it had made with the city, under the consent it had already obtained; and with reference to all streets not included in that agreement it might operate railroads thereon by obtaining the city's consent, under contract to be entered into for that purpose.

2. The act of the legislature incorporating the Memphis City Railroad Company impairs the obligation of the contract of the People's Passenger Railroad Company.

[The learned counsel then argued fully this point, but the court deciding, as it will be seen that it does, that no contract was ever made, the argument had no pertinence, and is not reported.]

We need go into no argument on the question how far the municipal corporation, under its pretty broad powers, had a power to grant a franchise to a railroad company to use the streets. Such discussion would be unprofitable, because the board of mayor and aldermen not only made no effort to grant a franchise in the streets, but expressly, and by the consent of the contracting parties, limited themselves to regulating the terms and conditions on which the iron might be laid and the cars run, leaving the adventurers to secure their rights by obtaining a charter, the city only giving its consent to the incorporation to strengthen its application for a charter in the mutual interest. Without doubt the legislature could have chartered the company with a grant of the streets irrespective of this consent. And by consequence, it might bestow the grant in a charter, drawn conformably to this consent. In this point of view, the action of the city corporation would be regular, and the legislative action in conformity with it, would ratify and adopt it. The question of the confirmation of a void estate does not arise in the case. The act of the legislature is to be interpreted according to the intention appearing upon its face, and if the intention appear to be, to make valid a void thing, it is within the paramount authority of the legislature if no constitutional restriction interpose.

Even if the act of the board went further and undertook to grant the franchise, it would amount to no more than such an irregularity as the ...


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