Case ID: ohio-st_104/html/0245-01.html
Source: Caselaw Access Project
Author: {"author": "Jones, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The State, ex rel. Ruff, Pros. Atty., v. The Northern Ohio Traction & Light Co.
    
      Franchises — Misuse and forfeiture — Interurban railway — Failure to remove and reconstruct tracks — Nonpayment of installments — Quo warranto — Forfeiture and ouster denied.
    
    1. A franchise resolution adopted by a board of county commissioners and accepted toy the grantee, granting the franchise upon condition that the latter begins the removal of its old tracks and the construction of new toy July 1, 1920, is not such a condition precedent as will authorize a forfeiture of the grant if the condition is not then complied with, in the absence of a provision creating a forfeiture for such noncompliance.
    2. A franchise resolution effective on December 1, 1919, contained provisions for the payment to the grantor of three installments of $25,000 each, payable respectively on July 1, 1920, July 1, 1921, and July 1, 1922; it also provided that if the grantee failed to pay the several installments when due as therein provided no rights should be deemed to have vested “after said third installment is due; but all its rights hereunder shall then be deemed to be terminated.” Held: The nonpayment of the second installment at the time provided will not sustain a forfeiture, or authorize a judgment of ouster, under the terms of the grant.
    (No. 17223
    Decided February 14, 1922.)
    In Quo Warranto.
    This is an action in quo warranto brought in this court. The petition recites that on November 7, 1919, the commissioners of Stark county passed a resolution granting a franchise to The Northern Ohio Traction & Light Company, which the latter accepted in writing on November 26, 1919; that the traction company had a single interurban railroad track on the state highway between the cities of Canton and Massillon and had asked for a. grant of authority to construct a double track thereon; and that the commissioners desiring to improve the highway were willing to confer a franchise upon certain terms and conditions and said resolution was accordingly adopted, and accepted by the grantee. So much of the terms and conditions upon which the grant was made as are pertinent to this case are as follows:
    “Time op Constructing Railroad.
    “5. The work of constructing said tracks, including the removal of the present tracks from the north side of said highway to its proper location as herein specified, shall be commenced by the Company on or before July 1st, 1920; and the entire double track railroad shall be completed by the Company on or before July 1st, 1922, unless the Board of Commissioners shall, upon the Company showing reasonable grounds . therefor, extend said period; but in no event shall said extension of time run beyond December 31, 1922.
    “The N. O. T. & L. Co. to Pat $75,000 to Board op Commissioners.'
    “11. In consideration of the granting of this franchise and of the consent of the abutting property owners to the construction and operation of said double track railroad, and in consideration of the other things herein cited, The Northern Ohio Traction & Light Company by the acceptance of this franchise, agrees to and will pay the sum of Seventy-five Thousand dollars ($75,000) in installments as hereinafter set forth to said Board of County Commissioners of Stark County, Ohio, which sum (and any interest accruing thereon) shall be used only toward defraying the cost of setting curbs and paving with brick the north side of said highway at such time as the same may be improved. The total width of said curbs and paving to be not less than eighteen (18) feet. Until such sum of money is so used, it shall be held as a special fund for said purpose by the Board of Commissioners and kept at interest in the same manner as other public funds. The first Twenty-five Thousand Dollars ($25,000) of said sum shall be paid by the Company not later than July 1st, 1920; the second Twenty-five Thousand ($25,000) Dollars shall be paid on July 1st, 1921, and the third Twenty-five Thousand Dollars ($25,000) shall be paid on July 1st, 1922. The last two installments, i. e., the amounts payable on July 1,1921, and July 1,1922, shall bear interest from the date a contract may be entered into by the public authorities for improving the north side of said highway, or at least two-thirds (2-3) thereof. The rate of interest payable by the Company on the last two installments shall be the same as the rate borne by the bonds which will be sold for the purpose of obtaining funds to pay the costs of paving said highway. The interest on the last two installments shall cease when said installments are paid.
    “Terms oe Franchise.
    “12. All the rights, privileges and franchises hereby granted shall continue from the time this grant becomes effective as hereinafter provided until the date when the last installment of said Seventy-five Thousand Dollars ($75,000) is payable as above, and if the several installments of said Seventy-five Thousand Dollars ($75,000) shall have been paid at the several dates above provided therefor, and if interest shall have been paid on said last two installments as above provided, then said rights, privileges and franchises shall continue until December 1,1944; it being distinctly understood and provided hereby that the payment of said Seventy-five Thousand Dollars ($75,000) and interest as aforesaid shall be a condition precedent to the vesting of said right, privileges and franchises, and to their continuation after, the date when said third installment of Twenty-five Thousand Dollars ($25,000) is payable as above set forth; and if said company fails to pay the several installments of said Seventy-five Thousand Dollars ($75,000) and interest as above provided, then said Company shall be deemed to have no rights, privileges or franchise vested in it hereunder after said third installment is due; but all its rights hereunder shall then be deemed to be terminated.
    “When Franchise Will Go Into Effect.
    “17. This franchise shall become effective on December 1st, 1919, provided The Northern Ohio Traction & Light Company shall have filed its written acceptance thereof with the Board of County Commissioners prior to said date.”
    The petition in quo warrcmto recites that on August 3,1921, the defendant had failed to comply with the conditions of the grant; that it failed to commence construction and removal of its existing tracks and had further failed to pay the sum of $25,-000 on July 1, 1921, in accordance with the terms of the grant. Thereupon a majority of the board of county commissioners adopted a resolution declaring in effect the grant to be void and directing the traction company to remove its equipment from the highway. The prosecuting attorney was directed to institute proceedings to prevent the further continuance of the company’s operations upon the highway between Canton and Massillon. The petition further recites that the traction company paid the sum of $25,000 on July 1, 1920, but that the sum of $25,000 due July 1,1921, was not then paid and had not been paid up to the filing of the petition on August 29, 1921. It is also alleged that the traction company had neither removed its present tracks nor begun construction in accordance with the provisions of the resolution of the county commissioners. The petition asks that the traction company be ousted from its privileges and franchise and that it be compelled to remove its present tracks from the highway. To this petition the defendant filed a general demurrer, upon which the ease was submitted to this court.
    
      Mr. Walter S. Ruff, prosecuting attorney, and Mr. C. B. McGUwtoch, assistant prosecuting attorney, for plaintiff.
    
      Messrs. Mather & Nesbitt and Messrs. Welty & Burt, for defendant.
   Jones, J.

Whether the defendant has misused its franchise or privilege conferred by the resolution of the board of county commissioners and whether it should be ousted therefrom depend upon the construction of the grant adopted by the board of county commissioners and accepted by the traction company. The plaintiff seeks a judgment of ouster for the reason that under the terms of the resolution the defendant failed to begin the work of construction and the removal of its present tracks on or before the first day of July, 1920, and failed to pay the second installment of $25,000 due on July 1, 1921.

In the construction of this contract the plaintiff invokes the well-established rule that grants of this character should be strictly construed in favor of the public and against the grantee. However, this is subject to another rule that forfeitures are regarded as odious. "Where privileges or franchises have once attached, and where there has been no abandonment thereof, a forfeiture of a contractual grant should not be decreed unless the terms of the grant fairly evince that the parties thereto contemplate a forfeiture of the grant for noncomplianeo with its terms.

Paragraph five of the resolution provided that construction and removal of the present track should be commenced on or before July 1, 1920. This was not made a condition precedent. The clause does not stipulate even by implication that the grant should be void if work were not so commenced; and in view of the provision that the double track should be completed on or before July 1, 1922, unless the time should be extended by the board, discloses that the time provision was a condition subsequent. However, it is insisted that the rights of the defendant became null and void and its privileges and franchises forfeited because of the nonpayment of the second installment of $25,000 due July 1,1921. Here again the plaintiff invokes the rule that contracts of this character must be construed in favor of the board. It was no doubt the purpose of the board of commissioners to secure the commencement of the removal of the tracks by July 1, 1920, in order to permit the board to contract for the improvement of the highway. The resolution provided that the $75,000 it was to obtain from the traction company was to be kept as a fund which was to be applied by the board on the cost of this improvement.

In Pomeroy’s discussion of “penalties and forfeitures” it is said: “The general doctrine was finally settled that, wherever a penalty or forfeiture is inserted merely to secure the payment of money, or the performance of some act, or the enjoyment of some right or benefit, equity regards such payment, performance, or enjoyment as the real and principal intent of the instrument, and the penalty or forfeiture as merely an accessory, and will therefore relieve the debtor partly [party] from such penalty or forfeiture, whenever the actual damages sustained by the creditor party can be adequately compensated.” 1 Pomeroy’s Equity Jurisprudence (4ed.), Section 381.

> By paragraph 17 of the resolution it is provided that the franchise became effective on December 1, 1919, if the traction company should have filed its written acceptance thereof prior to that date. The rights and privileges of the traction company attached at that time. An inspection of paragraph 12 of the resolution discloses that these rights and privileges were to continue until the date the third installment was payable July 1, 1922, and if upon that date the three installments, totaling $75,000, had been paid, the franchise was to continue until December 1, 1944. The conclusion of that paragraph emphasizes the construction that payment of the three installments was not regarded as a condition precedent to the vesting of the franchise. The language of the grant is: “And if said Company fails to pay the several installments of said Seventy-five Thousand Dollars ($70,000) and interest as above provided, then said Company shall be deemed to have no rights, privileges or franchise vested in it hereunder after said third installment is due; but all its rights hereunder shall then be deemed to be terminated.”

The entire paragraph conclusively shows that the termination of the franchise was made to depend upon the payment of the three installments by July 1, 1922, and if fully paid by that time that “said rights, privileges and franchise shall continue until December 1st, 1944.” If the traction company has failed to pay its second installment under the terms of the grant a right of action may arise for the amount due, but an action in quo warranto will not lie for the failure to pay it on July 1,1921.

It is alleged in the petition that the defendant cannot complete its removal by July 1, 1922, but this is an unwarranted conclusion in view of the fact that the defendant still has several months in order to comply with the terms of its accepted franchise. The demurrer of the defendant is sustained and the petition dismissed.

Demurrer sustained.

Johnson, Robinson and Matthias, JJ., concur.

Marshall, C. J., Hough and Wanamaker, JJ., concur in the judgment.