US SUPREME COURT DECISIONS

A city invited bids for making a street railroad. Bids were made by an unincorporated company, and accepted -- accepted, however, with a modification. To this modification the company agreed, expressing its readiness to sign a contract embodying the terms and conditions of it. The communication accepting the modification was referred to a committee, but no contract in form was ever signed. At this point of the matter, the city passed a resolution giving permission to the unincorporated company 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."

The unincorporated company accordingly got a charter, and so became an incorporated one. Its charter authorized it to complete all agreements entered into with the city for the use of the streets, AND to operate street railroads in ALL the streets of the city with the consent of the city. The company, in its chartered form, now expressed to the city its readiness to execute their contract (which had been prepared by the city solicitor), and to enter on the construction of the road. This communication was referred to a committee. In the meantime, opposition was made by the citizens to having rails in the streets, and the city resolved to recede from its project of having them, recognizing at the same time its "moral, but not legal, obligation to make good to those who had been incorporated as a street railway any real damage sustained by change of purpose."

Held:

1st. That there was no perfected contract between the city and the unincorporated company.

2d. That if there had been, there was no evidence that the city had accepted the incorporated company in place of the unincorporated one. chanrobles.com-red

Page 77 U. S. 39

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 20, 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 2, and a notice thereof, in writing, with great form and specification that they were so, chanrobles.com-red

Page 77 U. S. 40

given to the board, and by the board, December 8, "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. "

Page 77 U. S. 41

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 20, 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 propertyholders 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 propertyholders 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 chanrobles.com-red

Page 77 U. S. 42

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. chanrobles.com-red

Page 77 U. S. 45