
    The Interurban Railway & Terminal Co. et al. v. The City of Cincinnati.
    
      Street railways — Rates of fare — Franchise provisions control, when —Annexation of village.
    
    An ordinance passed by a village council, granting a franchise to an interurban railway company to construct its line through the village, contained the following provision: “Should the village of Pleasant Ridge be annexed to the city of Cincinnati, the rate of fare charged for a ride in either direction between any point in said village and the Cincinnati terminus shall not exceed five cents.” The company thereafter duly accepted the franchise and constructed, maintained and operated its line thereunder. Subsequently the village was annexed . to the city. Held: The acceptance of the grant by the company constituted a binding contract between the parties. As long as the company retains the franchise and operates its road thereunder its terms must control.
    (No. 14792
    Decided November 19, 1915.)
    
      Error to the Court of Appeals of Hamilton county.
    The city of Cincinnati brought' a proceeding in the common pleas of Hamilton county to enjoin The Interurban Railway & Terminal Company and others from charging passengers on their cars rates of fare in excess of that provided in an ordinance passed by the council of the village of Pleasant Ridge in November, 1901, the village having been subsequently and prior to the commencement of the action annexed to the city of Cincinnati. The Interurban Railway & Terminal Company is a consolidation of other interurban companies, including The Rapid Railway Company.
    The petition sets out the ordinance passed by the village. It avers that the ordinance was, within a short time after its passage in November, 1901, duly accepted by The Rapid Railway Company. The consolidation of the latter company with the interurban company is alleged and that the latter is bound by all of the obligations of the former under and by virtue of the ordinance. From the terms of the ordinance it appears that The Rapid Railway Company had made the lowest bid for carrying passengers within the corporate limits of-the village after public notice pursuant to statute. The ordinance fixed a rate of fare for carrying passengers within the corporate limits of the village. It also provided that passengers should be carried from any point on said road within the village of Pleasant Ridge to a terminus at or near Fountain Square in the city of Cincinnati, for continuous ride in either direction, adults seven cents, and contained other provisions as to children and the sale of tickets in larger quantities. The ordinance also contained a provision as follows: “Should the village of Pleasant Ridge be annexed to the city of Cincinnati the rate of fare charged for a ride in either direction between any point in said village and the Cincinnati terminus shall not exceed five cents and transfers.”
    It is further averred in the petition that since the annexation of the village to the city, the defendant companies have been and are now charging passengers on their railways a fare of seven cents for a ride in either direction between points in said territory formerly constituting the village and the Cincinnati terminus, as well as between any point in said territory and any other point in the city located outside of the territory formerly constituting" the village.
    The Interurban Railway & Terminal Company filed its answer, in which it admitted that it is a consolidation of other companies, among which was The Rapid Railway Company, and that by virtue thereof it has been and now is maintaining and operating the interurban railway formerly belonging to The Rapid Railway Company, including the railway along and upon the streets of the village of Pleasant Ridge; that said railway on the streets named in the ordinance set forth in the petition was constructed under and by virtue of said grant and franchise and is now maintained and supported by this defendant thereunder.
    
      The defendant admits that its Cincinnati terminus is on Sycamore street between Fourth and Fifth streets of the city of Cincinnati, and that it is operating passenger cars between said terminus and the territory formerly constituting the village of Pleasant Ridge, but that its line of railway terminates at the south corporation line of the said village of Pleasant Ridge, which is also the north corporation line of the city of Norwood, and that through the city of Norwood and the city of Cincinnati it is not the owner of any line of railway, but operates its cars over the tracks of The Cincinnati Street Railway Company, now under lease to The Cincinnati Traction Company, under and by virtue of a certain traffic agreement whereby, among other charges which said defendant is required to pay to. said companies, it pays three cents for every passenger carried on its cars over any portion of the tracks of said company in the city .of Norwood or the city of Cincinnati.
    It admits that it has been and is now charging persons on said railway a fare of seven cents for a ride in either direction between points in the village of Pleasant Ridge and the Cincinnati terminus or any other point in the city of Cincinnati.
    The answer further alleges that the provision in said ordinance to the effect that if the village of Pleasant Ridge should be annexed to the city of Cincinnati the rate of fare charged for a ride in either direction between any point in said village and the Cincinnati terminus should not exceed five cents, is invalid, and the said village had no authority to insert said provision in said ordinance; that at the time the said village established a street-railway route in said village there was no provision in said resolution or ordinance providing for any rate of fare in the event of the annexation of the village to the city; that after.application by The Rapid Railway Company to the village to establish a street-railway route and for the right to construct and operate a street railway on and over the Montgomery road from the east to the west corporation line of the village, to be operated by electricity or power other. than steam, the village advertised for bids for the construction and operation of said street railway over said road and in said advertisement stated that the bid should state the rate of fare for passengers on said route; that in none of said proceedings was there any provision respecting the fare to be charged beyond the limits of the village; that on October 15, 1901, it submitted a bid to the village of Pleasant Ridge in response to the advertisement, but said bid did.not contain any such provision.
    Defendant further says that the village took no action at any time respecting the rate of fare to be charged in the event of annexation to the city of Cincinnati except in said ordinance of November 19, 1901, and that it had no power to insert said provision in said ordinance. Defendant says that said provision is unreasonable, that a fare of five cents from the corporation line of the village of Pleasant Ridge to the Cincinnati terminus, three cents of which the defendant is required to pay to The Cincinnati Traction Company, will not be sufficient to produce an income to pay operating expenses of this defendant and will destroy its existence.
    The plaintiff in its reply denied that the defendant's line terminated at the south corporation line of the village of Pleasant Ridge, which is also the north corporation line of the city of Norwood, and that through the city of Norwood defendant is not the owner of any line of railroad, and alleges that the line of the defendant extends beyond the village of Pleasant Ridge through, a portion of Norwood. It admits the allegations of the answer with reference to the operation of cars over the tracks of The Cincinnati Street Railway Company, and admits that at the time the village established the route there was no provision for any rate of fare in the event of annexation of said village to the city of Cincinnati, and denies the other allegations in the answer with reference thereto.
    The minute book of the village of date of October 15, 1901, which was introduced by the defendant, showed that a communication was received from The Rapid Railway Company submitting bids for rates of fare for passengers over the Montgomery road, through the village and to other points, naming them.
    The court of common pleas found the issues in favor of the city and entered a decree enjoining the defendants in accordance with the prayer of the petition. On appeal in the court of appeals, the Interurban Company sought leave to file ah amendment to its answer, alleging the ordinance was unfair, unreasonable and confiscatory; that the two-cent net fare for the district involved did not produce sufficient income to pay the operating expense of the company, would destroy its existence and prevent it from operating any cars whatever on the line, and had already, since the execution of the decree of the common pleas court, been largely instrumental in forcing the company into the hands of receivers, who now have charge of the property. It was further alleged that the property was thereby confiscated and rendered valueless and taken without due process of law, contrary to the provisions of both federal and state constitutions.
    The court of appeals refused leave to file this amended answer, and on the final hearing of the case found the issues in favor of the plaintiff and likewise entered a decree enjoining the defendants as prayed for in the petition. This proceeding is brought to reverse the judgments below.
    
      Messrs. Dinsmore & Shohl, for plaintiffs in error.
    
      Mr. Walter M. Schoenle, city solicitor, and Mr. Constant Southworth, assistant city solicitor, for defendant in error.
   Johnson, J.

From the above statement it will be seen that the controversy grew out of the provision contained in the ordinance granting the franchise passed by the village in November, 1901, as follows: “Should the village of Pleasant Ridge be annexed to the city of Cincinnati the rate of fare charged for a ride in either direction between any point in said village and the Cincinnati terminus shall not exceed five cents and transfers.”

It is shown by the record that in September, 1901, The Rapid Railway Company mhde application to the council of the village for the right to construct and operate a street railway on and over the Montgomery road within the villáge, and that on the 23 d of that month the village advertised for bids for the construction and operation of the road, asking that the bids should state the rates of fare for passengers on that route. The Rapid Railway Company submitted its bid on October 15 and the clause above quoted was inserted by agreement of the parties at the time the franchise ordinance was passed, and the ordinance was thereafter duly accepted by the company.

The attack upon the judgments below is based upon the claim that the provision of the franchise quoted is without any validity or binding force.

The position of the Interurban Company substantially is that the village was wholly without authority to prescribe or contract for fares beyond the municipal limits, and that notwithstanding that clause was, by agreement of the parties, included in the ordinance as adopted, which was thereafter accepted by the grantee, and, although the line was constructed and operated under and by virtue of the franchise .and is now maintained and operated thereunder, nevertheless it is entitled to disregard and eliminate the provision objected to, and yet retain and enforce the rights and privileges granted to it by the other terms of the franchise,

For a great many years, by consistent statutory provisions, the plan of constructing street railways by grants of the municipalities in which they were constructed has been fixed. The procedure has consisted of the establishment of the route by the municipality and the granting of the privilege to the bidder who, after public advertisement, agrees to carry passengers upon the proposed railroad at the lowest rates of fare. It is not contended that any municipality has the power to grant a franchise for a street railway to be constructed and operated entirely within the corporate limits, except in the manner indicated. Street railroads originally used’ animal power for the movement of their cars. They were designed almost exclusively to furnish facilities for passenger traffic within the limits of the particular municipality. When electric power was applied in street-railway operation, it resulted in the extension of street-railway lines into suburban districts and between cities and towns. In view of this condition, and in response to the general demand for increased traffic facilities between cities and districts around and about them, the act of May 17, 1894 (91 O. L., 285), now included in Sections 9117 to 9122, General Code, was passed. By the terms of this act authority is given for the construction and operation of electric street railroads upon highways outside of municipalities or in private rights of way. By Section 4 of the act authority is given such companies to lease, purchase or make traffic arrangements with any other street railway company as to so much of its track and other property as is necessary or desirable to enable them to enter or pass through a city or village, upon the terms and conditions applicable to other street railroads; and by Section 6 it is provided that such companies -shall be subject to regulations provided for street railroads and have all powers,- so far as they are applicable, that other street-railway companies possess.

It will be seen that the provisions of the act referred to relate to the construction, maintenance and operation of electric railroads on highways outside of municipalities. Of course the legislature must have contemplated that interurban roads would be projected through municipalities and that it would be impracticable to construct such a road without some means of passing through cities and villages that might be along the route. The statute, therefore, authorized- the - making of the traffic arrangements referred to with other street-railway companies operated within the municipalities. In the event that there was no street railway in the city or village through which the interurban company desired to operate, there was no special provision. Section 6 (Section 9122, General Code), however, as pointed out, provided that such company shall be subject to the regulations provided for street railroads and have all powers, in so far as they are applicable, that other street-railway companies possess. Therefore, the right of an interurban company, to extend its line into and through municipal corporations, was fixed by the statutes in force prior to the passage of the interurban law referred to. By Section 3437, Revised Statutes, now Section 9100, General. Code, it was .provided that “Street railways * * * may be constructed or extended within or without, or partly within and partly without, any municipal corporation,” and Section 3438, Revised Statutes, as in force when the ordinance in question was passed, provided that the right to construct or extend such line within or beyond the limits of a municipal corporation could be granted only by the council thereof, by ordinance, and the right to construct such railway within or beyond the limits of an unincorporated village could be granted only by the county commissioners. The last clauses of the section are “except, however, in granting permission to extend existing routes in cities of the first, second and third grade of the first class, and first grade, second class, such cities, and the companies owning such route, shall have the same rights and powers they have under the laws and contracts now existing; and that no extension of any street railroad located wholly without any such city, or of any street railroad wherever located, which has been or shall be built in pursuance of a right obtained from any source or authority other than a municipal corporation, shall be. made within the limits of such city, except as a new route, and subject to the provisions of sections two thousand five hundred and one and two thousand five hundred and two,” Revised Statutes, which provide for bids, etc.; and Section 3439, Revised Statutes, provided for the filing of written consent of the owners of Jnore than one-half of the abutting property. Section 3443, Revised Statutes, now Section 9113, General Code, provided that the “Council, or the commissioners, as the case may "be, shall have the power to fix the terms and conditions upon which such railways may be constructed, operated, extended, and consolidated.”

The foregoing is substantially a statement of the statutory provisions on the subject at the time of the granting of the franchise involved in this suit.

It will be observed that the provisions of Section 3438, Revised Statutes, part of which is now Section 9104, General Code, relate to the extension of a street railway to be made “within the limits of such city.” It is well known that as a general proposition street railways are not constructed in villages except for the purpose of interurban traffic, and that the people in the great majority of villages throughout the state have almost no need for a street railway operated entirely within the limits of their own village. For instance, it is very apparent from this record that the paramount purpose of the village of Pleasant Ridge was to provide interurban service for its residents, as well as that the railroad company entered into the transaction solely to carryout its general interurban plan.

It admits in its answer that it is an interurban electric railway corporation; that the village of Pleasant Ridge is one of the municipal corporations into and through which The Rapid Railway Company constructed, maintained and operated its interurban electric railway from Cincinnati to the village of Lebanon, and that “its railway on1 the streets named in the ordinance set forth in th¿ petition was constructed under and by virtue of said grant and franchise and is now maintained and operated by this defendant thereunder.”

It appears from the record that The Rapid Railway Company had submitted bids, for rates of fare through the village over Montgomery road and other points, naming rates and places, including Fountain Square, Cincinnati.

Circumstances and situations of this nature were so general that the legislature contemplated them when it adopted the provisions of the law, including Section 9122, General Code, which we have pointed out. The provision is plain that no extension of ¿ street railway located wholly outside of such city, or of one wherever located, which is built in pursuance of a right obtained from authority other than that of a municipal corporation, shall be made within the limits “of such city,” except as a new route, but there is no such provision with reference to the extension of a street railway through the limits of a village. It was recognized that such a road might pass for a very short distance through the limits of villages and yet be necessary to the carrying out of the purpose to furnish interurban passenger service to people living in rural districts of the state or in suburban villages in the neighborhood of large centers. It follows that as to villages the construction or extension of an interurban road was then controlled by the general terms of Sections 3437 tq 3443, Revised Statutes, and that the village council was empowered to grant the right to construct or extend the line within or beyond the limits of the village, and by Section 3443 to fix the terms and conditions thereof.

In The Citizens’ Electric Rd. Co. v. County Commissioners, 56 Ohio St., 1, it was held that an ordinance adopted by a city council under Section 3438, Revised Statutes, simply confers on a street railroad company the corporate power to extend its road over a state or county road. In the exercise of the power the right to so extend its road can only be acquired by agreement with the commissioners or by condemnation. The court say: “Without such ordinance a company could not extend its road within or without the municipality. As a corporation it has, without the ordinance, no such power.”

By the first section of the interurban act of 1894, above referred to, the corporate power is conferred upon companies to construct electric street railroads upon highways outside of municipalities, but the ‘right to extend within or without the municipality must still be secured from the municipality itself.

In the absence of statutory provision to the contrary the village was empowered to stipulate as one of the “terms and conditions” which it was authorized to fix by the provisions of Section 3443, Revised' Statutes, for a certain rate of fare for a road from any point in its limits to a point outside of its limits. It would not be disputed- that the rate of fare, to -be charged to and from points in the village to points outside is a matter of interest to the municipality and its residents and a proper subject of negotiation with the company in connection with the grant. It was a matter for mutual consideration and agreement between the parties. Therefore, when the grant was made and accepted with the provision as to the fare included, it became one of the considerations of the grant and one of the elements in the making of the binding contract between the parties, it is familiar law that when the terms of a valid ordinance are accepted by a grantee, such action constitutes a contract, and the rights of the parties are to be determined by the terms of the contract itself. City of Columbus v. Street Rd. Co., 45 Ohio St., 98; The Cincinnati & Springfield Ry. Co. v. Village of Carthage, 36 Ohio St., 631; The East Ohio Gas Co. v. City of Akron, 81 Ohio St., 33; City of Cleveland v. Cleveland City Ry. Co., 194 U. S., 517.

It will be observed that the clause which is here attacked is limited in its application. It is not an attempt to fix fares generally for passengers, except in the specific cases provided for. It only affects a ride in either direction between any point in the village and the Cincinnati terminus, and was not to be effective unless and until the village should be annexed to the city of Cincinnati.. The provision does not attempt to fix fares between points in the former village of Pleasant Ridge and Norwood, or between any intervening points and Cincinnati or elsewhere.

In other jurisdictions this view of the case has been sustained. In Rice v. Detroit, Y. & A. A. Ry. Co., 122 Mich., 677, the court said: “It is contended that the franchise is in force only within the territorial limits of the village, and does not cover territory in other townships. We do not think this contention can be sustained. The franchise is in the nature of a contract, and imposes obligations upon the company which those having occasion to ride from Dearborn to Detroit have a right to enforce. * * * The defendant saw fit to contract with the village of Dearborn for a rate outside of the limits of the village. * * * This contract it cannot repudiate.”

Like views have been held in People v. Suburban Rd. Co., 178 Ill., 594; Vining v. Detroit, Y., A. A. & J. Ry. Co., 133 Mich., 539; Selectmen of Westwood v. Dedham & F. St. Ry. Co., 209 Mass., 213; Public Service Comm. v. Westchester St. Rd. Co., 206 N. Y., 209.

It is insisted that the enforcement of the terms of the franchise under inquiry here will work hardship and irreparable injury to the company; and cases are cited in support of the accepted proposition that neither the state nor any of its agencies can, by regulation or legislation, withhold from the owners of the railroad just compensation for its services. But in this case we are dealing with the subject of contract. It implies a meeting of minds. It is much to be regretted if the amount which the interurban company is required to pay to the Cincinnati company for the use of its tracks is too large a proportion of the fares received, and it is equally to be regretted if the fare provided by the contract itself does not furnish a compensatory return to the company. The presumption is that it was to the interest of the village and to every municipality to provide such a compensation for the services to be rendered by the public utility as will induce the investment of the capital necessary to the furnishing of the service. In fact, it may be said that it is the duty of the municipal and other authorities to provide sufficient compensation. It is equally the duty of the company not to contract to perform a service for less compensation than is proper.

But we are not able to see how the court can alter the terms of the contract in this case as the parties made it. The only thing the court can do is to enforce the contract as it finds it, and to hold that as long- as the company continues to operate under the franchise it must submit to the terms thereof.

The judgment will be affirmed.

Judgment affirmed.

Donai-iue, Wanamaker, Jones and Matthias, JJ., concur.

Nichols, C. J., not participating.  