Kansas Electric Utilities Co. v. Kansas City, Kaw Valley & Western Railway Co. , 108 Kan. 285 ( 1920 )

The opinion of the court was delivered by

West, J.:

The plaintiff sued for specific performance and for damages, and the court found in its favor on the first cause of action, the only one involved herein. The defendant appeals, and contends that the contract sued on was void for want of consideration, that it was not assignable, and that it was not approved by the utilities commission.

The petition alleged in substance that the plaintiff as successor of the Lawrence Railway & Light Company was operating a line of street railway in Lawrence under a franchise of the city authorizing the construction of a line from Seventh and Massachusetts streets to the south end of the Kansas river bridge, and over other portions of the streets of the city; that the Lawrence company contracted with the defendant in October, 1915, that the latter might lay and maintain street-railway tracks upon certain portions of the streets, including that between Seventh and the south end of the bridge; that March 1, 1916, the defendant, with the consent and acquiescence of the city, began laying track, and completed the part last referred to July 28,1916, and then began running its cars there-over and has ever since continued so to do; that April 9, 1918, the city passed an ordinance granting the defendant a franchise to operate a standard-gauge electric railroad on certain streets, including those already referred to; that in the contract between the Lawrence company and the defendant it was provided that should the former at any time desire to use any of the tracks for the purpose of its own street railway it should be authorized to do so upon paying the appraised value, and upon such payment such tracks should become its property; that on December 21, 1915, the Lawrence company conveyed all its property and contracts to the plaintiff, and that in 1917 the plaintiff demanded the right to take over the track in the 500 and 600 blocks on Massachusetts street, and finally tendered the proper amount, but the defendant refused to carry out such agreement.

The contract between the Lawrence company and the defendant provides among other things that it shall endure and be in full force—

“During the term of the franchise of the Lawrence Company, . . . and during all of said term The Interurban Company, its. successors and assigns are authorized and agree to use the tracks of the Lawrence Company.”

Provision was made touching the operation of the tracks, the payment to be made for running over them, and other matters not necessary to set forth. The defendant agreed in its contract to build the electric line from Kansas City, at least as far as Lawrence, and have it in operation within two years, and it was provided that the Lawrence company should upon request provide certain storage facilities for the Interurban company, also, that if the question should arise between the two companies concerning the construction of the line these parties could submit the question for arbitration. The first paragraph of section 19 of the contract is in the following words;

“It is understood and agreed that the terms, agreements and conditions of this contract shall be binding upon and shall be construed in favor of the successors and assigns of each of the parties hereto; provided, nothing herein contained shall authorize the Interurban Company to run or operate over the tracks of the Lawrence Company, any cars other than those run or operated by itself, its successors and assigns, for the transaction of its own business.”

The ordinance of the city expressly granted to the Lawrence company “its successors and assigns” the right to operate cars over certain designated streets.

The answer denied any indebtedness to the plaintiff and asserted the invalidity of the contract for want of consideration, want of power of the Lawrence company to assign, or of the plaintiff to accept such assignment, and alleged that when the defendant contracted with the Lawfence company personal relations and personal confidence coupled with personal liabilities were involved and mutual rights entered into which were avoided by the pretended assignment of the contract, and further that the Lawrence company had no franchise.

The defendant asserts want of consideration because the Lawrence company’s franchise had at that time expired. This ordinance became effective April 13, 1909, and gave the Lawrence company, its successors and assigns, permission and authority to locate, construct and operate an electric railroad over various named streets, including “from the south end of the Kansas river bridge south on Massachusetts street to the city limits.” Section 3 provided that the franchise should stand for twenty years after the passage of the ordinance, with provision for extension. Section 14 provided that the grantee should within fifteen days file a written acceptance, and within one year after such filing have ready five miles of its track and the remainder within twenty months of the granting of the franchise, unless delayed by strikes, litigation or other unavoidable causes beyond its control.

Turning to the contract, it must be observed that the right to lay tracks on the named portions of Massachusetts street was in addition to numerous other matters, including the right to lay track in North Lawrence and the use of the car barn. By section 14 the Lawrence company was to save the Interurban company harmless from suits, costs and damages arising from the former’s negligence or failure, and pay all sums recovered against it therefor. Section 15 required the Lawrence company to make certain repairs at cost, plus ten per cent, when desired by the Interurban company. By section 16 it was to keep in condition and repair all of its equipment used-in the operation of the cars in the city of Lawrence.

The franchise granted to the Lawrence company in April, 1909, provided in section 19 that if at any time a bridge should be constructed across the Kansas river “the grantee is given permission, so far as the city can legally grant such permission” to construct and operate its street railway over and across such bridge, and it seems to be conceded that this bridge was not constructed until December, 1916. It was testified that at the time the Lawrence company completed all of its tracks which were completed up to the time limit, it received $2,500 of its deposit, and that a bond was given to insure the construction of the line in North Lawrence. The president of the plaintiff company testified that in 1915, when the contract was made, there was a discussion touching the franchise of the local company, and it was mentioned that such company would build the two blocks between the Eldridge House and the bridge, but it was finally understood that the defendant would undertake to build all of it, the Lawrence company to reserve the right to purchase their leases; and that after the completion of the new bridge across the river the local company took steps towards instituting service to North Lawrence, and some correspondence passed between the two companies.

On November 12, 1915, the Lawrence company wrote to the mayor and commissioners of the city touching the establishment of grades on Locust street. About that time the defendant wrote to the mayor and commissioners, accepting the provisions of ordinance No. 1127 granting it the right to use the new track. In November, 1915, an ordinance was passed establishing the grades on Locust street and the defendant’s president and secretary wrote a letter accepting its terms, reciting in the letter that prior to the passage of the ordinance the defendant entered into a contract with the Lawrence company providing among other things that it might—

“Make, construct and maintain tracks on such portions of the streets of said city as the Lawrence Railway & Light Company is now or may hereafter be authorized to construct and operate its lines upon, and as are not now occupied by the Lawrence Railway & Light Company for such purposes.”

The city passed Ordinance No. 1225 authorizing the defendant company to locate, construct and maintain a standard-gauge electric railway over certain streets in the city of Lawrence—

“Provided, That the rights of the grantee under this ordinance are in all respects subject to the rights heretofore granted to the Lawrence Railway & Light Company, its successors and assigns, by Ordinance No. 413 . . . and the ordinance supplemental thereto, and provided further, however, that said grantee shall not lay or construct any additional track or tracks upon any street or streets occupied by the track or tracks of the Lawrence Railway & Light Company, its successors and assigns, . . .”

It was further provided in section 12- that the grantee was to equip all local cars and to stop at certain streets and take on and discharge passengers—

“Until such time as service is provided by the Lawrence Railway & Light Company, its successors and assigns . . .”

This ordinance was accepted by the defendant company by a letter dated April 15, 1918. October 23, 1917, the city passed a resolution that it had considered four franchises with the defendant company, which had failed to accept two of them after promising to do so, and that the company was now a trespasser without any franchise or contract with the city, and instructed the city attorney to draw an ordinance prohibiting these companies from further extending their railroad tracks in the city without first having obtained a franchise from the city. January 15, 1918, the defendant applied for a franchise. April 9, 1919, a franchise was granted the defendant, and April 16 it was accepted. February 10, 1919, the city commissioners passed a resolution reciting that the city had waited patiently for the defendant and plaintiff companies to furnish street-car service and that it was the sense of the commission that these two companies enter into contract with each other to enable street-car service to be had at the earliest possible moment.

On January 27, 1917, in reply to a written notification that the plaintiff wantéd to purchase the track now in controversy, the defendant’s president replied to the letter “relative to the contract between the Kansas Electric Utilities Co., successor to the Lawrence Railway & Light Company, and the Kansas City, Kaw Valley & Western Ry. Co.,” that he would take up the matter • immediately and confer with its officers in Lawrence as to details, and said:

“As I understand it you do not wish to include in this purchase any of the track on Locust St.”

On May 10, 1917, the president wrote that he had taken up the matter and that his people were under the impression that it would be preferable if the plaintiff company would take over all property in Lawrence except that on the bridge, and closed as follows:

“In the meantime I will go ahead and have a meeting- of our Board and let you hear from me further.”

The foregoirfg sufficiently shows that the city and the defendant both recognized the contract, and the plaintiff as the assignee of the Lawrence company, and looked to it to carry out the contract. It also sufficiently shows that the contract was not without consideration, and that the time limit fixed in the franchise granted to the Lawrence company was not insisted upon by the city or by the defendant, but that such ordinance was.considered and dealt with as valid, thereby giving a practical construction by which the parties to this action are bound.

The defendant contends in the second place that the contract carried with it elements of trust and confidence and was therefore not assignable without consent. It is suggested that it is not an agreement with one- condition only which could be performed as well by one .person as by another, but that it is of that peculiar character which gives to the defendant the right to choose with whom it shall deal. It is said that the defendant was dealing directly with the Lawrence company and had no knowledge that the plaintiff had already been incorporated and was soon to take over the contract. But the president of the plaintiff company testified that he was the former president of the Lawrence company and attended a conference in the spring of 1915 at which was discussed the franchise of the local company to operate in North Lawrence. He also-said that in 1917 he had a conversation with Mr. Heim or Mr. Klemm of the defendant company at the time when the applications to the commissioner of public utilities of the Lawrence company to sell and the plaintiff company to buy were made, and that it was known to the officers of the defendant company that the applications were filed and the merger proposed.

It further appears that negotiations leading up to the purchase of the track involved herein continued without any suggestion as to the matter of assignment, and that arrangements between the assignee and the defendant touching the track and the operation of the properties were made without complaint on this ground.

Everybody knows that street-car and trolley properties are the frequent subjects of sale, and that franchises therefor are as frequently the subject of assignment, and this seems to have been recognized by the express terms of the contract, by the ordinance and its acceptance, and by the conduct and course of dealing between the parties hereto. There is no doubt that the defendant’s theory as to the assignability of contracts is correct, and the authorities cited by- it support such theory, but we are forced to the conclusion that these do not apply to the matters in controversy for the reason that the terms of the instrument and the practical construction given it by the parties render such application impossible (Water Co. v. City of Beloit, 91 Kan. 665., 139 Pac. 388; Carlisle v. Business Association, 104 Kan. 512, 516, 180 Pac. 280.)

Lastly, it is asserted that the contract was never approved by the public utilities commission of the state and is, therefore, void. The original ordinance granting the franchise to the Lawrence company granted the right to construct and maintain and operate a standard-gauge railroad “in, upon and along certain streets of the City of Lawrence.” Express provision was made for use of its tracks for any interurban road which might construct a bridge across the river. This being true, it would seem that the public utilities commission had no jurisdiction, as the statute provides that such are to be controlled by the city commission. (Gen. Stat. 1915, § 8329; Street Lighting Co. v. Utilities Commission, 101 Kan. 438, 166 Pac. 514; Street Lighting Co. v. Utilities Commission, 101 Kan. 774, 169 Pac. 205; City of Parsons v. Water Supply and Power Co., 104 Kan. 294, 300, 178 Pac. 438.)

On November 11, 1915, the state commission acted upon the application of the Lawrence company for permission to sell and transfer its properties and franchise to the plaintiff company, and the application of the latter to buy, and the commission found that—

“Permission and authority to sell and transfer such franchise, properties and plants, should be granted upon the conditions . . . herein set forth.”

And it was ordered that such sale and transfer be permitted. Counsel for the defendant call this a blanket order — and it did include other companies — and ask if such permission was equal to the approval of the contract in question. It was certainly a permission if that body had any power to grant it, for the one company to buy out the other.

Counsel suggest that the- conclusions reached by the trial court were not supported by the facts found, and exception is taken to certain statements in such conclusions. The result of such conclusions, however, without stopping to consider all the expressions found therein, is held to be correct and fully supported by the facts found, with which facts the defendant finds no fault. The alleged error in overruling the motion for new trial is included in what has already been said.

The decree is affirmed.

SYLLABUS BY THE COURT. 1. Specific Performance — Consideration for Contract. There was ample consideration for the contract sued on, and there was no failure of any part of that consideration. 2. Same — Valid Contract Between Street Railway Company and Interurban Railroad Company. A contract may be made between a street-railway company and an interurban railroad company by which the latter obtains the right to run its cars over the tracks of the former. 3. Same — Certain Property Included in Contract. The tracks in the 500 and 600 blocks on Massachusetts street (from Seventh street north to the south end of the bridge across the Kansas river) in Lawrence, were not excluded from the operation of the contract between the Lawrence Railway & Light Company and the Kansas City, Kaw Valley & Western Railway Company. 4. Same — Contract Neither Ultra Vires nor Void. The contract was neither ultra vires nor void. 5. Same — Parties to Contract Rightfully Occupying City Streets. The streets of the city of Lawrence are occupied by the plaintiff and the defendant under ordinances authorized by statute and passed by the proper authorities of the city of Lawrence. 6. Same — Rights Under Contract Assignable. The rights under the contract were assignable. 7. Same — Contract Need Not Have Been Approved by Public Utilities Commission. It is not necessary to obtain the approval of the public utilities commission to a contract made by an interurban railroad company under the control of that commission, with a street-railway company not under the control of the commission, by which contract the interurban company acquires the right to run its cars over the tracks of the street-railway company, and does not modify, restrict, transfer, nor defeat any of the franchise rights of the interurban company.