Case Name: DETROIT UNITED RAILWAY v. CITY OF DETROIT
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1919-01-13
Citations: 248 U.S. 429
Docket Number: No. 666
Parties: DETROIT UNITED RAILWAY v. CITY OF DETROIT.
Judges: I am authorized to say that Me. Justice Holmes and Me. Justice Beandeis concur in this opinion.
Reporter: United States Reports
Volume: 248
Pages: 429–446

Head Matter:
DETROIT UNITED RAILWAY v. CITY OF DETROIT.
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF MICHIGAN.
No. 666.
Argued December 9, 10, 1918.
Decided January 13, 1919.
Where the District Court, in denying a preliminary injunction, of its own motion dismisses the bill, its action is equivalent to sustaining a demurrer, and, upon appeal, the allegations of the bill must be taken as true. P. 431.
A city, instead of exercising its power to compel the removal of tracks operated by a street car company without franchise, passed an ordinance looking to their continued operation by the company and prescribing fares and transfer privileges and penalties for violations. Hold, equivalent to a grant of a right to operate during the life of the ordinance, entitling the company to a fair return on its investment. Denver v. Denver Union Water Company, 246 U. S. 178. P. 435.
A company operated a system of city street car lines, for some of which it had franchises entitling it to charge a certain fare and for others no franchises. An ordinance, regulating the entire system,‘purported explicitly to fix the fares for trips over two or more lines, whether franchise or not, and forbade extra charge for transfers, defining a continuous trip as a journey from one point to another' in the city, whether made ofi-one car or line, or by transferring from car to car or from line to line; declaring, however, that it should not be construed as an attempt to impair the obligation of any valid contract, but should apply to and govern all such street railway passenger traffic in the city except where governed by the provisions of such contract.
Held: (1) That the latter declaration must be construed as referring only to trips wholly on the franchise lines (p. 435); (2) that if its enforcement would result in a deficit to the company, as alleged, the ordinance violated the due process clause. P. 436. '
An ordinance compelling a street car company to carry passengers on continuous trips over franchise lines to and over non-franchise lines, and vice versa, for ■ a fare no greater than its franchises entitle it to charge upon the former alone, impairs the obligation of the franchise contracts. Detroit United Railway v. Michigan, 242 U. S. 238. P. 437.
Reversed.
The case is stated in the opinion.
Mr. Elliott G. Stevenson, with whom Mr. John C. Don-nelly, Mr. William L. Carpenter, Mr. P. J. M. Hally and Mr. Bernard F. Weadock were on the briefs, for appellant.
Mr. Allan H. Frazer and Mr. 'Richard I. Lawson for appellee.

Opinion:
Mr. Justice Day
delivered the opinion of the court.
The Detroit United Railway Company brought this action in the United States District Court for the Eastern District of Michigan to enjoin the City of Detroit from enforcing the provisions of an ordinance regulating street railway fares in that city. The ordinance was passed August 9, 1918. It is printed in the margin.
The bill attacks the ordinance upon two constitutional grounds: 1st, That it impairs the obligation of the company's existing contracts; 2nd, That it is confiscatory and hence deprives the company of its property without due process of law. The suit came on for hearing before the district judge upon an application for a temporary injunction, the judge denied the application and upon his own motion dismissed the bill.
The question upon this appeal is: Did the bill, taking its allegations to be true, state grounds for relief to which the company was entitled upon the facts set forth? The action of the District Court was equivalent to sustaining a demurrer to the bill.
The bill alleges that the complainant company is the owner of all the street railways in the City of Detroit, constituting a system of tracks of upwards of. two hundred and seventy miles. The sources of title of the company are set forth in the bill, and shown by many exhibits. It is sufficient for the present purpose to say that the system consists of a considerable mileage of tracks upon which the franchises have expired; upon other portions of the system there are unéxpired franchises, some of them de-. rived from villages in which the roads were constructed, which villages were subsequently incorporated into the city. : That from December 1, 1917, its system was operated, except the so-called 3-cent lines, upon terms as followfe: 5-cent cash fares for each passenger carried on or over its,.lines, including so-called universal transfers, with Vorkingmen's. tickets, 8 for 25 cents, between certain hours, and bn the so-called 3-cent lines a cash fare of 5 cents, with 8 tickets for 25 cents between certain hours; good only on such 3-cent lines with the privilege of a transfer on payment of a 5-cent cash fare, and also with the privilege of purchase of 6 tickets for 25 cents, also good between certain hours.. It is averred that afterwards it became necessary to increase rates of fare. The bill recites the demand of the employees of the company for increased'wages, which was refused; that a submission of the controversy was made to the War Labor Board; that the Board after a hearing awarded a substantial increase of wages, and recommended an increase in passenger fares to enable the company to -meet this cost. The bill alleges that the increase made by the War Labor Board amounted to about $2,000,000 per annum. The company petitioned the city for an increase of rates of fare, and this petition was denied.
On August 7,1918, the company put in force a schedule of its own, making single fares 6 cents, with' 10 tickets for 5,5 cents, cash fare or tickets good on connecting or inter secting lines within the city. It is contended that this action of the company was without legal authority. Whether this was authorized or not, is not an issue involved in this case, and we express no opinion concerning it. The matters involved in this bill concern the validity of the ordinance passed August 9,1918.
It is further alleged that Detroit is a city of a population exceeding 750,000; that it is an industrial city with much the larger part of its male population employed in industrial plants within and adjacent to the city; that the operation of the company's railway system was the only means of transportation of such employees from their homes to their places of employment, and that the interruption of the operation of the company's system, or the separation in operation of the franchise from the non-franchise lines, would paralyze the industrial and business life of the city, throw thousands of its residents out of employment, and result in shutting down its industrial plants and factories. Allegations follow setting forth' the value of the company's property, and stating that the effect of the ordinance, if enforced, will be to require the operation of the company's system at a deficit, and, consequently, with no return on the investment.
The learned district judge answered the contention of the company by holding, in substance, that as to the non-franchise lines the remedy of the company was to abandon the service and take its property from the city streets, and that as to the franchise lines the exception of, the fifth section of the ordinance saved the company's contract rights from impairment. There can be no question that it was within the city's power to compel the company as to its non-franchise lines to remove its tracks from the streets of the city. This was settled in Detroit United Railway v. Detroit, 229 U. S. 39. The city did not do so. Instead of taking such action it passed the ordinance in controversy, providing for the continued operation of the company's system. This ordinance has application to the entire street railway system. In section one it provides that no more than 5 cents shall be charged for a single ride, or 6 tickets for 25 cents, for one continuous trip through the city over any line operated without a franchise. Section two purports to preserve the right to charge franchise rates when fixed by contract. Section three provides for fares, 8 tickets for 25 cents, except when such fares are contrary to contract rights. Section four provides that where a trip is over two or more lines, whether franchise or not, the maximum fare shall be 5 cents, or 6 tickets for 25 cents, and no transfers shall be exacted which raise these rates of fare. Section five defines a continuous trip to mean a journey from one point in the city to. another, whether on one car line or by means of transfers, and the company is required to furnish transfers to carry the provisions of the ordinance into effect. It is further provided that the ordinance is not to be construed as an attempt to impair the obligation of any valid contract, but shall apply to all street railway passenger traffic in the city except when the same is governed by the provisions of a contract. Section six provides for fines or imprisonment for violations of the provisions of the ordinance. Section seven provides that the ordinance shall be in effect for the term of one year from August 9, 1918, unless sooner amended or. repealed.
The allegations of the bill, which for the present purposes must be taken as true, are ample to the effect that the enforcement of this ordinance will result in a deficit to the company. We cannot construe the exception of section five, having reference to existing franchise contracts, in. such way as to modify the requirements of section four which in explicit terms fixes the fares for trips over two or more lines whether franchise lines or not, and limits the maximum fare without charge for transfers. This must be read .in view of the definition of a continuous trip in section five, as meaning a journey from one point to another point in the city whether the same is made on one car line ór by means of transfers from car to car or from line to line. The exception in section five can have no further effect consistently .with the other provisions of the ordinance, particularly those of section four, than to regulate fares where trips are wholly upon franchise lines. A principal ground upon which the bill was dismissed by the District Court was the view of the learned judge that the power to compel the company to remove its tracks from the streets involving the non-franchise roads included the right to fix terms of continued operation upon such lines, whether remunerative or not. We cannot agree with this view. In our opinion the case in this respect is ruled in principle by Denver v. Denver Union Water Co., 246 U. S. 178. In that case the franchise of a water company had expired, and the city might have refused the further use of the streets to the company. Instead of doing this it passed an ordinance fixing fates and requiring certain duties of the company. We held that in that situation the company was entitled to make a reasonable return upon its investment. So here, the city might have required the company to cease its service and remove its tracks from the non-franchise lines within the city. Instead of taking this course the city enacted an ordinance for the continued operation of the company's system,- with fares and transfers for continuous trips over lines composing the system whether the same had a franchise or not. This action contemplated the further operation of the system, and fixed penalties for violations of the ordinance. By its terms the ordinance is to continue in force for the period of one year, unless sooner amended or repealed. This was a clear recognition that until the city repealed the ordinance the public service should continue, with the use of the streets essential to carry on further service. Within the principles of the Denver Case this service could not be required without giving to the company, thus affording it, a reasonable return upon its investment, In the Denver Case we said: "The verji act of regulating the company's .rates was a recognition that its plant must continue, as béfore, to serve the public needs. The fact that no term was specified is, under the existing circumstances, as significant of an intent that the service should continue while the need existed as of an intent that it should not be perpetual,"
In the present case the service upon the terms fixed in the ordinance, is continued for a year, the city reserving the right Jto repeal the ordinance at any time.
It is clear that the city might have taken a different course by requiring the company to remove its tracks from the non-franchise lines; it ,elected to require continued maintenance of the public service,, doubtless because it was believed that it was necessary in the existing conditions in the city to continue for a time at least the right of the railway company to operate its lines; This amounted to a grant to the company for further operation of the system, during the life of the ordinance. For this public service it was entitled to a fair return upon its investment. Elements to be taken into, consideration in valuing the property of the company in estimating a fair return are not involved in this case. If the allegations of the bill are true, and for present purposes they , must be so regarded, the continued operation of the railroad system of the company upon the fares fixed in the ordinance will result in a deficit, and deny to the company due process of law within the meaning of the Federal Constitution.
As rates of fare aré fixed on some of the existing franchise lines at 5 cents without transfers, it would follow as to . continuous trips over such franchise and non-franchise lines, such trips comprehending much of the trans portation required, the latter lines would be without compensation for the service rendered. Furthermore, when a continuous trip begins on a non-franchise line and is over a franchise line and a non-franchise line, the former having the right to charge 5 cents for a trip over it, the effect would be to impair the obligation of the franchise contract. Detroit United Railway v. Michigan, 242 U. S. 238.
In our view the allegations of this bill for the purposes of the demurrer sufficiently alleged violations of the Constitution of the United States in the action , of the city in passing and enforcing the ordinance in controversy. The District Court should have entertained the bill, heard the application for a temporary injunction, and proceeded to a hearing and determination of the case in due course.
Reversed.
An Ordinance to fix and establish maximum rates of fares and charges which may be exacted and received by persons, corporations or partnerships operating street railways for the carriage of passengers within the City of Detroit, and to fix a penalty for the violation thereof.'
It is Hereby Ordained by the People of the City of Detroit:
Section 1. No person, partnership, or corporation operating a street railway on the streets of the City of Detroit, for the carriage of passengers for hire, shall charge more than five cents for a single ride, or six tickets for 25 cents, per person for one continuous trip within the city over any line which is now operated or shall hereafter be operated without a franchise fixing the rate of fare.
. Section 2. No such person, partnership or corporation shall charge a higher rate of fare upon any line now or hereafter operated under a franchise contract than is fixed by such franchise.
Section 3. Between the hours of five and six-thirty a. m. and four forty-five and five forty-five p. m. tickets in strips of eight for twenty-five cents shall be sold on all cars on all lines except where such sale would be contrary to the terms of a franchise contract, which tickets shall entitle the holder to the same rights between said hours as the payment of a five cent fare would.
Section 4. Where a trip is over two or more lines,, whether franchise lines or not, the maximum fare shall be five cents, and no transfer fee shall be exacted which raises the total charge to more than five cents or six for 25 cents.
Section. 5- A continuous trip means one journey from point to point within the city, whether the saméis made upon one car or one line or by means of transferring from car to car or from line to line. Each such person, partnership or corporation, and the officers, agents, servants and employés thereof, shall, upon demand, furnish proper transfers to carry into effect the provisions of this section. The provisions of this Ordinance shall not be construed as an attempt to impair the obligation of any valid .contract, but shall apply to and govern all such street railway passenger traffic in the city, except where the same is governed by the provisions of such contract.
Section 6. Any such person, partnership or corporation which shall violate the provisions of this Ordinance, or shall attempt to do so, and any officer, agent, servant or employé who shall order or direct any such violation or attempted violation of the provisions of this Ordinance, shall be guilty of an offense, and upon conviction shall be fined not to exceed five hundred dollars, or imprisoned in the Detroit House of Correction for not to exceed ninety days, or shall both fined and imprisoned in the discretion of the court, for each violation.
Section 7. This Ordinance is passed for the public welfare in the case of an emergency involving the peace, health and safety of the people of the city, and it is ordered to take immediate effect. It may be amended or repealed at any time by the Common Council of the City of Detroit. Unless so amended or repealed it shall remain in force for one year from August 9,1918.