Case Name: The State, ex rel. King, Pros. Atty., v. McClure, Receiver
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1923-05-08
Citations: 107 Ohio St. 551
Docket Number: No. 17731
Parties: The State, ex rel. King, Pros. Atty., v. McClure, Receiver.
Judges: Marshall, C. J., Wanamaker, Robinson, Matthias, Day and Allen, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 107
Pages: 551–557

Head Matter:
The State, ex rel. King, Pros. Atty., v. McClure, Receiver.
County commissioners — Interurban franchise — Release before expiration — Section 9102, General Code — Validity of new franchise.
A grant made in good faith by a board of county commissioners to an interurban company, wherein certain obligations relating to rates of fare and frequency of service imposed in a former franchise are relinquished, is not void by virtue of Section 9102, General Code, if the considerations supporting the second grant are substantial and advantageous to the public.
(No. 17731
Decided May 8, 1923.)
In Quo Warranto.
This is an action in quo warrcmto instituted in this court, whereby it is sought to oust the traction company from the exercise of certain privileges granted to it by the county commissioners of Franklin county by a franchise dated October 13, 1920. This franchise is claimed to be invalid for the reason that the commissioners thereby released the traction company from certain obligations imposed upon it by a former and unexpired franchise. The facts are presented by petition, answer and reply.
It appears that on June 1, 1900, the county commissioners of Franklin county granted to the predecessor of the defendant company a certain franchise extending for a period of 25 years. In this franchise one of the conditions imposed was that the traction company should carry passengers from Columbus, in Franklin county, to the Big Four Crossing, Alton, and Borne, at certain fixed rates, and that certain frequency of city service should be maintained' between the Big Four -Crossing and High street in the city of Columbus. Said franchise also provided for many and various stipulations touching the improvement of the highway through which the road ran, and especially that portion of the highway contained between the tracks and extending one foot from either side thereof.
On March 27, 1920, the county commissioners determined to improve a certain portion of the highway and demanded that the traction company carry out its obligations in respect thereto. The company, representing that it was unable to finance the expenditure required, having no funds available therefor and being unable to borrow the necessary funds, and because its franchise had less than five years to run, asked for and obtained from the county commissioners a new franchise for a period of 25 years. This second franchise was dated October 13, 1920. It expressly repealed or annulled the provisions of the old franchise, omitted the provisions in the old with reference to the rates and frequency of city service aforesaid, and imposed new terms and conditions upon the traction company in respect to the improvement of the highway over which it operated.
The preamble to the grant of October 13,1920, recited that the expenditures necessary for the improvements to be made would not be justified for the short life under the old franchise; that the renewal of the ties, rails and brick pavement would exist long after the expiration of the old franchise; and that “the public interest requires and demands that said improvement be made and that said grant should be made. ’ ’ Following acceptance of the franchise of October 13,1920, the answer of the company alleges that it was able at its own expense, by means of money borrowed on the faith and credit of that franchise, to comply fully with certain stipulations therein provided relating to the improvement of the highway, and that in so doing it made large expenditures and incurred large obligations for the repayment of the money borrowed, and the company admits that it charges appreciably larger rates of fare between Columbus and the stations named and that it ignores the stipulation found in the old franchise touching its obligation requiring certain frequency of service between the Big Four Crossing and High street. The relator claims that the later franchise of 1920 is invalid by reason of Section 9102, General Code, and asks for a judgment ousting the defendant from exercising the privileges therein contained.
Mr. John R. King, prosecuting attorney, and Mr. Wilbur E. Benoy, assistant prosecuting attorney, for relator.
Messrs. Martin <& Gorry and Messrs. Eagleson <& Laylin, for defendant.

Opinion:
Jones, J.
It is urged by the relator that the renewal franchise of October 13, 1920, is void for the reason that it was made in contravention of Section 9102, General Code. That section reads as follows:
"After such grant, or the renewal of any grant has been made, by general or special ordinance, or the order of county commissioners, neither the municipality nor commissioners shall release a grantee from any obligations or liabilities imposed by the terms of the grant, or renewal of any grant, during the term for which such grant or renewal was made."
It is conceded by the pleadings that the second franchise omitted the provisions of the first relating to the rate of fares to be charged to certain outlying points and the frequency of city-service operation between the Big Four Crossing and High street in Columbus. It is therefore claimed that by this second grant the board of county commissioners released the traction company from those obligations imposed by the terms of the first grant, and that because it did so the second grant is void.
What is meant by the clause "release the grantee from any obligations or liabilities imposed by the terms of the grant ' ' ? Evidently it was not intended to mean that an interurban company and the board of county commissioners, or a utility and a municipality, could never modify stipulations of an existing grant in case the modification should be mutually beneficial. Such a construction cannot be so narrowly applied, and if strictly construed might be disadvantageous not only to the utility but to the jjublic. This clause means, and we think it has been so held by this court, that such obligations may not be released except for a consideration advantageous to the public. This was the effect of the holding in Clement v. City of Cincinnati, 16 Wkly. Law Bul., 355, decided by Judges Harmon, Force and Peck in superior court general term. In that case there was an existing grant to a street railway company, operated by the use of horses, at certain specified rates. A second grant was made for a period of 25 years authorizing an increase of rates upon the change of the street car system from horse propulsion to electrio power. It was held that the renewal grant was not void because of Section 9102, General Code (Section 2502, Eevised Statutes), and was not a release within the meaning of that section, but a modification of the former franchise made in good faith for a sufficient consideration. That case was. inferentially approved by this court when it refused leave to file a petition in error from the superior court of Cincinnati (19 Wkly. Law Bui., 74).
The same section was under review by the Supreme Court of the United States in City of Cleveland v. Cleveland City Ry. Co., 194 U. S., 517, 537, 24 Sup. Ct, 756, 763 (48 L. Ed., 1102), where Mr. Justice White stated, that in Ohio it was held:
'On reasoning commending itself, that a modification of a contract between a municipality and the owner of a street railroad, made in good faith for the better accommodation of the public, is not void by virtue of said Section 2502 of the Eevised Statutes of Ohio [Section 9102, General Code]."
Whether the officials of a municipality or county may release a grantee from the obligations of an existing franchise depends upon whether the public has received a substantial consideration therefor. If the public did not receive a quid pro quo, if its representatives did not act in good faith in protecting the public interest, but absolved the company from its contractual obligations without obtaining a corresponding consideration advantageous to the public, manifestly the grant would be inhibited under the section quoted. However, in this case no fraud or bad faith on the part of the commissioners is claimed. We must take the situation confronting the board of county commissioners and the traction company as it was, when the franchise was renewed on October 13, 1920. Less than five years of the existing term of that franchise remained. The traction company represented its inability to finance the expenditure required by the improvement, that it was unable to borrow the necessary funds therefor because of the short term which the franchise had to run, and that a longer term would be necessary in order to finance the proposed improvement at its own expense. The board recognized this fact in its preamble recital, which stated that this expenditure would "not be justified for the short life of the present franchise," that the renewal of the rails and pavement would exist long after its expiration, and that "the public interest requires and demands that said improvement be made and that said grant should be made." In the meantime the public utility act had been adopted by the state, by operation of which rates of fare filed by a utility would be subject to the supervision of the public utilities commission. Furthermore, it appears that some of the provisions contained in the earlier franchise, relating to improvements, were changed in the last franchise, which in some respects enlarged the obligations of the traction company in that regard.' It also appears from the answer that the traction company after its acceptance of the last franchise fully complied with many of the stipulations therein imposed upon it in respect to the improvements which the public officials required.
On the facts pleaded we are therefore constrained to hold that the action of the board of county com missioners in granting the franchise of 1920 was not a release of the obligations of the grantee under the prior franchise, but a modification thereof made in good faith for the accommodation of the public. The writ is denied.
Writ denied.
Marshall, C. J., Wanamaker, Robinson, Matthias, Day and Allen, JJ., concur.