This Court does not inquire into the knowledge, negligence,
methods or motives of the legislation if, as in this case, the
statute is passed in due form, and where the statute repeals the
charter of a corporation under the reserved power of repeal, the
only question here is whether the statute goes beyond the power
expressly reserved.
A corporation contracts subject, and not paramount, to
reservations in its charter, and cannot, by making contracts or
incurring obligations, remove or affect such reservations.
A franchise given by a city to a public service corporation does
not enlarge the right of the corporation to exist as against an
expressly reserved power to repeal the charter, even if the
corporation has mortgaged such franchise.
In this case, held that the question of parties is not open in
this Court.
153 Mich. 724 affirmed.
The facts are stated in the opinion.
Page 218 U. S. 597
MR. JUSTICE HOLMES delivered the opinion of the Court.
The judgment upon which this writ of error is based ousts the
defendants (plaintiffs in error) from acting as a body corporate
under the name of the Grand Rapids
Page 218 U. S. 598
Hydraulic Company. It was rendered, upon an information in the
nature of
quo warranto, by a county court, and was
affirmed by the supreme court of the state. 153 Mich. 724. The case
was heard on demurrer. The defendants pleaded that, in 1849, the
legislature incorporated the Grand Rapids Hydraulic Company, and
that they were directors of the company; that the company had
constructed and was maintaining an elaborate system of water
supply; that, in 1905, the legislature purported to repeal this
charter, but that, owing to the manner in which the repeal was
passed, as well as to the contents of the act purporting to effect
it, the repeal was void under Article 1, § 10, and the Fourteenth
Amendment of the Constitution of the United States. Seemingly in
aid of this contention, the defendants alleged the issue of bonds
and a mortgage of the company's plant, including its franchise to
own and operate the same, that still are outstanding. To this plea
the state demurred.
As to the manner in which the repeal was obtained and passed,
the plea alleged that the City of Grand Rapids was a rival of the
company in furnishing water, and that the mayor and city
authorities carried out an unfair scheme for getting the repeal
hurried through the legislature without notice to the company. It
set out the particulars with much detail. The defendants now, on
the ground that there are limits even to the operation of a
reserved power to repeal, argue that we should consider these
allegations. But we do not inquire into the knowledge, negligence,
methods, or motives of the legislature if, as in this case, the
repeal was passed in due form.
United States v. Des Moines
Navigation & Railway Co., 142 U.
S. 510,
142 U. S. 544.
The only question that we can consider is whether there is anything
relevant to the present case in the terms or effect of the repeal
that goes beyond the power that the charter expressly reserves.
The charter provides that "the legislature may at any
Page 218 U. S. 599
time hereafter, amend or repeal this act." Laws of 1849, Act No.
223, § 11. Now in the first place, with regard to the reference in
argument to the bondholders, it is enough to say that they are not
before the court. The defendants do not represent them; the
defendants represent the debtors, not the creditors. By making a
contract or incurring a debt, the defendants, so far as they are
concerned, could not get rid of an infirmity inherent in the
corporation. They contracted subject, not paramount, to the proviso
for repeal, as is shown by a long line of cases.
Greenwood v.
Freight Co., 105 U. S. 13;
Bridge Co. v. United States, 105 U.
S. 470;
Chicago Life Insurance Co. v. Needles,
113 U. S. 574;
Monongahela Navigation Co. v. United States, 148
U. S. 313,
148 U. S.
338-340;
New Orleans Waterworks Co. v.
Louisiana, 185 U. S. 336,
185 U. S.
353-354;
Knoxville Water Co. v. Knoxville,
189 U. S. 434,
189 U. S.
437-438;
Manigault v. Springs, 199 U.
S. 473,
199 U. S. 480.
It would be a waste of words to try to make clearer than it is on
its face the meaning and effect of this reservation of the power to
repeal.
But the legislature did not content itself with a bare repeal,
and leave the consequences to the law. Act No. 492 of the Local
Acts of 1905, after repealing the charter, provides that the
company at any time before January, 1906, may present a claim to
the City of Grand Rapids for the value of its real and tangible
estate, "not including franchise," and transfer the property to the
city. If the parties do not agree, an action of assumpsit may be
brought, with the usual incidents, and the amount of the final
judgment is made a claim against the city, to be paid like other
claims. If the company does not elect this course, it may remove
the property, first giving bond, to be approved by the common
council, to protect the city for any damages caused thereby, and is
to leave the streets in as good condition as before. It is argued
that these provisions are void, and the argument may perhaps be
abridged
Page 218 U. S. 600
as follows: corporations with existence limited in time may take
a fee simple or a franchise of longer duration than themselves.
Minneapolis v. Minneapolis Street Ry. Co., 215 U.
S. 417,
215 U. S. 430;
Detroit v. Detroit Citizens' Street Ry. Co., 184 U.
S. 368,
184 U. S.
394-395. There is a distinction between the franchise to
be a corporation and that to operate its plant.
Vicksburg v.
Vicksburg Waterworks Co., 202 U. S. 453,
202 U. S. 464.
As the corporation had been authorized to lay its pipes, and
lawfully had mortgaged not only its pipes, but its franchise to own
and operate them, it must be taken to have given a security not
limited or terminable by anything short of payment. The attempt to
extinguish the corporation, if successful, would render the
security and continuing franchise unavailable, and is void. It is
argued further that the exclusion of "franchise" (assumed to
embrace the supposed franchise to operate the works) from the
valuation is unconstitutional.
We express no opinion as to whether the premises of the
foregoing argument are justified by anything appearing in the
present record. In any event, the conclusion cannot be maintained.
If the city gave the privilege of using the streets to the
corporation forever, it could not enlarge the right of the
corporation to continue in existence as against the sovereign
power, as sufficiently appears from the cases already cited.
See also Arkansas Southern Ry. Co. v. Louisiana & Arkansas
Ry. Co., ante, p.
218 U. S. 431. The
only question before us now is the validity of the judgment ousting
the defendants from "assuming to act as a body corporate, and
particularly under the name and style of the Grand Rapids Hydraulic
Company." This really is too plain to require the argument that we
have spent upon it. We may add that it is a matter upon which the
bondholders have nothing to say. Moreover, the question of parties
is not open here.
New Orleans Waterworks Co. v. Louisiana,
supra; Commonwealth v. Tenth Massachusetts Turnpike
Corporation,
Page 218 U. S. 601
5 Cush. 509, 511. Also, whether the provisions as to valuation
do the bondholders or members of the corporation wrong is not
before the Court.
Judgment affirmed.