City of Montreal v. Montreal Street Railway Co., (1904) 34 SCR 459

Supreme Court of Canada

City of Montreal v. Montreal Street Railway Co, (1904) 34 SCR 459

Date: 1904-03-25

CITY OF MONTREAL (PLAINTIFF)

Appellant;

And

THE MONTREAL STREET RAILWAY COMPANY (DEFENDANTS)

Respondents.

1904: Feb 29; 1904: March 25

PRESENT :—Sir Elzéar Taschereau C.J. and Girouard, Davies, Nesbitt and Killam JJ.

ON APPEAL FROM THE COURT OF KING'S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC.

Municipal franchise—Operation of tramway—Suburban lines—Earnings outside municipal limits—Construction of contract—Payment of percentages—Blended accounts—Estimation of separate earnings.

The City of Montreal called for tenders for the establishment and. operation of an electric passenger railway, within its limits, in accordance with specifications and, subsequently, on the 8th of March, 1893, entered into a contract with a company then operating a system of horse tramways in the city which extended into adjoining municipalities. The contract granted the franchise for the period of thirty years from the 1st of August, 1892, and one of its clauses provided that the company should pay to the city, annually, during the. term of the franchise, " from the 1st of September, 1892, upon the total amount of its gross earnings arising from the whole operation of its said railway, either with cars propelled by electricity or with cars drawn by horses " certain percentages specified, according to the gross earnings from year to year. Upon the first settlement, on the 1st of September, 1893 the company paid the percentages without any distinction between earnings arising beyond the city limits and those arising within the city, but, subsequently, they refused to pay the pertages except upon the estimated amount of the gross earnings arising within the city. In an action by the city to recover the percentages upon the gross earnings of the tramway lines both inside and outside of the city limits;

Held, reversing the judgment appealed from, the Chief Justice and Killam J. dissenting that the city was entitled to the specified percentages upon the gross earnings of the company arising from the operation of the tramway both within and outside of the city limits

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APPEAL from the judgment of the Court of King's Bench, appeal side, affirming the judgment of the Superior Court District of Montreal by which the plaintiffs action was dismissed with costs.

The questions at issue on the appeal are stated in the judgments now reported.

Atwater K. C. and Ethier K. C. for the appellant.

Campbell K. C. for the respondents.

THE CHIEF JUSTICE (dissenting.) The amount involved in the controversy between these parties is a very large one for the determination of the case will affect not merely the sum now demanded by the appellants in the present action for the years 1893, 1894 1895 and 1896 but also the amounts to be paid to them by the respondents under the thirty years' contract in question for the other twenty-six years of its duration.

As correctly stated by the appellant in the factum the whole controversy upon this appeal is as to whether the appellant is entitled to the percentage in question upon the whole earnings of the respondents or only upon those which the respondents earn and collect within the city limits.

I am of opinion that the appellant is entitled to claim percentage exclusively upon what the respondents earn and collect within the city limits and that the judgment of the Court of Appeal in that sense should be affirmed.

It appears from the contract itself that tenders had previously been called for by the appellant for the building and operation of a street railway in the City of Montreal. The appellant had no powers outside of the city and did not intend to contract in any way for anything to be done outside of the city limits, And

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it clearly did not do so. The by-law of the city council (which has to be read as forming part of the contract) and the contract itself, provide for a passenger railway in the streets mentioned in the schedules thereto (sec. 12 of contract, sec. 43 of by-law) within the city limits. Not a single clause of either the contract or the by-law has or could possibly have been intended to have any application outside of the city. The respondents could since, at any time have ceased to operate their railway outside the city without committing a breach of their contract with the appellant.

The appellant's contention that clauses 36 and 37. can be singled out of the contract, so as to have an extra territorial application, when, it must concede, all and every one of the other clauses of it apply territorially to the City of Montreal exclusively, cannot, in my opinion, prevail. When clause 36 says

the total amount of its gross earnings arising from the whole operations of its said railway;

or as sect. 35 of the by-law as promulgated in French says,

sur le montant total de ses recettes brutes provenant de toute lexploitation de sea dites voies ferrées,

that clearly means, it seems to me, the railway authorized by the by-law and contracted for the " voies ferrées s mentioned in the schedules and no other. And article 37 of the contract likewise applies exclusively to the subject matter of the contract, to the gross earnings of the company within the City of Montreal, to the gross earnings of the lines of railway that the company has by the first clause of the contract covenanted to build and operate.

This percentage is the price that the company pays to the city for if s franchise in the city and the "privilege of using its streets, but that the company should also pay the city for a benefit it frets not from it but

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from the neighbouring municipalities, would appear to me unreasonable. That is a consideration not by itself conclusive but one it seems to me not to be altogether disregarded in the construction of the wording of this contract.

The appellant seems to rely in support of its contention upon the state of facts that existed at the time when this contract was passed but in a case where the contract itself is clear and explicit no extrinsic facts can be allowed to make it say what it does not say. Then by sect. 42 of the by-law it would seem that the contracting parties intended that all past contracts and agreements should be considered as merged in the new contract.

Then, if, as the appellant contends, the state of things as they existed previously had been in the minds of the contracting parties, would it not have bound the respondents to continue the operation of their railway outside of the city limits, instead of leaving them free to either sell or abandon those parts of it or run them altogether as a separate undertaking?

The appellant's efforts to get assistance from art. 42 of the contract are exclusively based on taking for granted what may be the subject of a serious controversy between the parties at the termination of the contract. It is expedient, in my opinion, to reserve judgment upon the construction of that article till we, or our successors, are called upon to adjudicate upon it.

By art. 34 of the contract (sec. 22 of the by-law) the company is not entitled to charge any rate exceeding five cents for the conveyance of a passenger from one point in the city to another in the city, but that restriction has no application outside the limits of the city, so that the company might well, without breach of this contract, charge 25 cents, or whatever they

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please, for conveying a passenger from any point in an outside municipality to another point therein, and the appellant would claim a percentage on these 25 cents.

That contention cannot be upheld.

I cannot see that the appellant can invoke in support of its case the contracts that the respondents have made or might have made with any other corporations. These are altogether res inter alios acla. It may have been in their interest for the respondents to run all of their lines as one concern but that does not take away the right they would have had, and now have, of treating their lines, outside of the city as entirely separate.

For these reasons, which are substantially those given by Mr. Justice Davidson in the Superior Court, and by the Chief Justice of the Court of Appeal I would dismiss this appeal with costs.

It is in evidence, and found as a fact by the two courts below as reported by the two referees, one of whom was the appellant's treasurer, that, however unsatisfactory the mode of computation adopted by the respondents may have been, an injustice resulting from it. if any has worked in favour of appellant. So that the appellant has received at least all and perhaps more, than the percentage it was entitled to. Then the appellant has not proved any specific amount of the earnings of the company within the city upon which a judgment could in any case be entered.

I would add to the judgment, if desired, a reserve of the right the city might have in an action of account or otherwise that amount to be ascertained if possible, in any way which might be considered more equitable than that adopted by the respondents.

GIROUARD J.—This appeal gives rise to a nice question of interpretation of contract involving large sums

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of money. The respondents, as the name indicates, operate a line of electric railway on the streets of the appellant, extending through a certain number or adjoining towns and villages, which form the suburbs of the city.

 The contract recites that tenders having been called for by the appellant, " for the establishment and operation " of an electric passenger railway in the City of Montreal the tender of the respondents was accepted on the 19th of July, 1892;

that a specification for the establishment and operation of the said railway was, consequently, prepared.

by the city council and submitted to the company for approval l that

after discussion of the said specification by the said company and suggestions made by the latter,

the city council passed a by-law, No. 210, on the 21st of December, 1892, u amending such specification;" and that finally, the said by law constituted the contract which was subsequently, on the 8th March, 1893, put in notarial form and signed by all the parties. It is stated in the deed that copies of the tender and of the specification are annexed to it, signed ne varietur, together with a copy of the by-law. The latter is alone filed and we cannot tell in what particulars it differs from the other documents. The tender might, perhaps, throw some light upon the consideration which the company undertook to pay for the franchise. One thing clearly results from the recitals in the contract * it was not the work of the city alone, but of the two parties. Another fact which appears to be equally certain from the evidence is that, as far as clause 36 is concerned, both parties understood, at the beginning, that it covered the earnings of the whole system.

In consideration of the concession or franchise to run street cars through the city, the respondents have

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promised, by clause 36, to pay to the appellants a certain percentage

of the total amount of the gross earnings arising from the whole operation of the said, railway.

What is the meaning of this convenant? Does it cover the receipts from the operation of the railway accruing from the carriage of passengers over any part of the railway within the city limits even if entering the car and paying fare outside these limits? That is the main question submitted for our decision.

The Superior Court (Davidson J.) and the Court of Appeal (Lacoste C. J., Blanchet and Würtèle JJ.) held that this obligation was limited to the actual receipts within the city, where the passenger was carried within those limits only, and only a mileage percentage of those receipts where the passenger was carried, either to or from the city from or to the suburbs; Bossé and Ouimet JJ. dissenting.

With due deference I must confess that I cannot understand the force of the reasoning of Chief Justice Lacoste speaking for the majority of the Court of Appeal. True the parties have provided for the construction and operation of an electric railway within the city; that was the main object of the contract between them, and for that reason several clauses have reference to that railway only; but quite a few relate to the whole system for instance clause 36. Nothing prevented them from stipulating that the consideration to be paid by the railway company should consist in a certain percentage of the total amount of its gross earnings, no matter where received. The company has only one system of railway having its head-office, works and power-house in the city with mere ramifications or extensions outside. It is like a body having its head, its heart and arteries within the city and a few distant veins extending without. There

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is only one system of railway from which the company gets its revenue, puts it in one cash box and undertakes to pay a percentage to the city. Nothing could be more reasonable in a contract with a municipality granting a concession to a street railway company—the charges for travelling upon which were a fixed or lump sum and not a mileage rate—than a stipulation that all fares paid under which the traveller passed over the the rails within city limits should be taken into account in estimating the percentage payable to the City. It must also be remembered that the tickets giving a right to travel anywhere over the system of the street railway company could be purchased anywhere, and so many for $1 and that the holder could use them all strictly within the city limits or in travelling partly within and partly without those limits, but the price paid went into the gross earnings. True the exercise of the franchise granted by the city is confined to the city territory; but it cannot be denied that it was intended to influence and did in fact influence the franchises obtained from the outside municipalities; without it they were of little value to either party. It does not therefore astonish that in determining the percentage or consideration to he paid to the city, both parties contemplated the operation of the whole railway. The words "total amount of the whole operation" must mean that, and if not they have no meaning, for they are unnecessary if the earnings are merely those received in the city. Without them, especially the last, the clause would be complete: it would then read:

The Company shall pay etc , upon the amount of its gross earnings-arising from the operation of said railway, etc.

Another way of testing the meaning of the words

total amount of the gross earnings arising from the whole operation of the said railway

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is to consider what would be meant if, instead, it spoke of the " total operating expenses of whole operation of the said railway. " it could hardly be suggested that if say 56 per cent would be a fair average for motive expenses that must mean the motive expense of operating the railway in the city alone. and so with respect to that part of the expenses consisting of wages paid. Would it not be plain in the latter case that the words total operating expenses included all the wages paid the men and not only a proportionate part thereof arrived at either on a mileage basis or on that of a population basis or any other arbitrary basis.

In fact there is no justification in the contract for making the deductions " from the total amount of the gross earnings," sanctioned by the judgment appealed from. it is assumed to be an equitable method of dividing such gross earnings. But, apart from the fact that the contract itself does not provide for any such adjustment, the appellant contends that it is most inequitable. As between railways charging for their tickets a sum based upon a mileage rate such an adjustment of receipts, where the ticket covers a part of the mileage travelled on each road, is alike necessary and just. But it is altogether inapplicable to such a contract as this, with a fixed fare irrespective of distance carried, and, besides being largely based upon a rule of thumb, may work most inequitably towards the city.

This aspect of the case seems to have been overlooked by a majority of the judges. It is discussed by Mr. Justice Ouimet. He demonstrates to my satisfaction at least that the "gross earnings " of all the cars running within the city, electric and others, was intended by clause 36 of the contract whether the fares were actually collected in or out of the city. He further points out that the method according to mileage adopted by the railway company of making certain deductions

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for fares received in outside municipalities is arbitrary and unwarranted by the contract. The learned judge correctly concludes:

De deux choses l’une; ou le chemin de fer que la compagnie a construit et opère dans la cite est un chemin de fer indépendant, distinct des prolongements de ses circuits dans la banlieue, ou le tout forme un seul réseau, un seul système dont le tronc se trouve dans la cite avec prolongements à l'extérieur. Dans le premier cas, il faut que les lignes suburbaines soient séparées du tronc principal et opérées séparément comme deux enterprises distinctes. Tant que le tout sera opéré comme un seul et même système de chemin de fer, cette question de séparation des recettes ne peut être soulevée.

We might rest our judgment upon the elaborate and well considered opinion of Mr. Justice Ouimet and allow the appeal. Speaking for myself, who have lived for fifty years in Montreal and its suburbs and like the learned judges in the courts below, am familiar with the localities and the geography of the country and the modus operand of the Montreal Street Railway Company from its inception to the present day no more information as to the facts would be required than those given in their notes. But to one not so acquainted, it might be necessary to give details and review the evidence which is to be found in the charter of the railway company and its amendments the various by-laws and contracts entered into with the City of Montreal and adjoining municipalities, the plan of the said electric railway, and the documentary and oral evidence adduced. This review, it seems to me, is necessary to truly appreciate the real value of the franchise granted by the City of Montreal and determine the construction of the contract of the 8th of March 1893. These various sources of information are not disputed by the parties. Both, in the course of the argument of their counsel, presented their case as if they were as well known to this court as they were to themselves and to the judges of the

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courts below, and have relied only upon the contract with the city. They did not refer to the plan, nor to the contracts with the adjoining municipalities; they did not print them although filed as exhibits and agreed to form part of the case. It was only when reading the printed evidence before us that we were able to notice their existence and demanded the sending up of the manuscript record so as to be able to judge of their contents The plan, as explained in the evidence, graphically shows some of the localities interested, and fully indicates (in colour) the electric railway contemplated by the contract, the lines constructed for horse cars and to be constructed for electric ears in the city. The evidence further establishes that, early in 1893, the company commenced the construction of the electric system within the city immediately after the signing of this contract; (clause 15). But the work in the outside municipalities was not started till some time after, and in some of them nearly one year after. At the time of the contract, the company had only horse cars in Ste. Cunégonde and St. Henri along Notre Dame Street and for a little distance in Maisonneuve and also in Westmount through St. Catherine Street to Green Avenue. So says Mr. St. George, the city surveyor, who produced the plan. Clause 12 of the contract says :

Until further orders the cars shall run in the streets mentioned in the schedule of routes herein below indicated, and designated on the plan hereunto annexed, signed by the parties hereto and by the under-signed notary ne varietur and the several circuits shall remain as they are now established.

The railway is shown on the plan as passing through Montreal, Ste. Cunégonde and Côte St. Antoine, now Westmount. Mr. St. George testifies that the plan shows this v very clearly." The plan, which is 46 by 83 inches, is reproduced below in a reduced form; it

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will undoubtedly help to acquire a fair knowledge of the geography of the premises. The streets upon which the railway was not yet intended to pass are left out, although many have since been supplied by the company with electric service; in fact all the leading streets, with the exception of Dorchester and Sherbrooke, were occupied by the railway. I have added outside of the plan a few localities : to the west; Verdun, Côte St. Paul, St. Henri, Lachine, Toutes Grâces and Montreal West; to the north; Côte des Neiges, St. Laurent and Cartierville; on the Back River; Outremont, St. Louis du Mile End (now the Town of St. Louis ) St. Jean Baptiste and St. Denis Wards, (both parts of the city,) Sault au Récollet on the Back River; to the east; De Lorimier Village, Maisonneuve and Longue Pointe; and finally St. Lambert and Longeuil on the southern side of the River St. Lawrence.

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It seems to me, that this plan, as explained by the witnesses, is an important element in determining the meaning of the words s said railway" in clause 36, for why indicate these outside lines if not contemplated by the contract with the city?

Clause 36 says :

The company shall pay to the city annually, from the first of September, 1892, upon the total amount of its gross earnings arising from the whole operation of its said railway, either with cars propelled by electricity or with cars drawn by horses, etc.

The courts below rely upon the first clause for a definition of the word “railway." This clause declares :

The Montreal Street Railway Company aforesaid shall establish. and operate, subject to the conditions hereafter mentioned, lines of railway for the conveyance of passengers in the city by means of cars propelled by electricity, in the streets hereinafter mentioned, and in all other streets which may hereafter be determined by the council of the City of Montreal.

But as pointed out by Mr. Justice Ouimet, this cannot be the entire meaning of clause 36, as it expressly provides for a percentage on the earnings of horse cars as well. The "plan and the evidence give us the explanation of this stipulation. They establish that horse lines extending into outside municipalities might be kept, and were in fact kept, for some years. So city treasurer Robb says. As the city could not provide for electric service within their limits it exacted the percentage on horse cars as well, to protect its revenue, till the electric system was complete in and out of its limits. Undoubtedly, the city also had in view the term fixed for the completion of the electric system within the city, namely, the 1st September, 1895

Clause 44 conveys the same intention :

In the case of annexation by the city of any of the outside municipalities, the company shall be obliged within three months after being ordered by the council, to extend their system through that new annexed portion of territory not already provided with electric cars' and to furnish a similar service as is furnished to the city

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Horse cars might be kept on for years in the outside municipalities. This result was out of the control of the city, but if any of them be ever annexed, the electric system shall at once be extended through it by the railway company without any charge or indemnity. In fact all the outside municipalities might come in and the railway company could claim nothing. Why? Because the contract with the city was intended to apply to the whole system of this railway company both in and out of the city.

And what can be the meaning of clause 37 of the contract if the. contention of the respondents be upheld? None whatever. It would be of no effect. But are we not bound to construe that clause in a sense that will give some effect to it even if it exceeds clause 36, rather than one in which it can produce none? Art. 1014 C. C. Clause 87 reads as follows :

The said company shall render quarterly a true and just account and statement in writing of the whole of their gross earnings and allow proper inspection of all books, accounts, returns and vouchers for the purpose of checking and verifying such accounts by the city treasurer, city auditor or other accountant appointed by the city council, such accounts to be rendered and to date from the first day of September, 1892, and to take place every three months on the first days of December, March, June and September in each succeeding year.

The statements rendered by the company of their gross earnings shall be so rendered accompanied by a statutory declaration to be made by the president, vice president, treasurer or other authorised officer of the company verifying the correctness thereof.

This clause was clearly intended to give an indisputable effect to clause 36 and to permit the city to collect without trouble or question its proportion of the gross earnings of the railway. It is in evidence that at the beginning no claim was made for. any deduction; just the reverse actually happened. It was only asserted on the 27th October, 1893, when the company passed the following resolution :

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Mr. Cunningham (the general manager), submitted a statement showing the amount of revenue collected in St. Cunegonde and St. Henri during the past year and which has been included in the returns made to the city and subject to a fixed charge of four per cent, but which he suggested should properly be deducted, as also the estimated earnings received in Cote St. Antoine and Maisonneuve. The deduction referred to meeting the approval of the board, the secretary was directed to declare accordingly.

How can such a declaration with arbitrary deductions made such as those suggested in this resolution, be held to be a compliance with a clause requiring "the said company to give a true account of the whole of their gross earnings?" Where is such a deduction authorised? It is purely arbitrary, and without any authority.

The city protested, but to the present time deductions for what is assumed to form the outside receipts have been regularly made by the company, notwithstanding the city's repeated protestations and reservations. Hence the present action for the difference for the years 1893 to 1896, inclusive, amounting altogether to $21,050.87 according to the returns of the company.

The position taken by the company is untenable; it amounts to this : Clause 37 does not establish the amount which you are entitled to under clause 36; we are willing that you should use it, but only to a certain limit you must accept our deductions for gross earnings estimated as received outside the city limits, and if you are not satisfied with this prove your case the best way you can. They admit at the same time that this cannot be done, because all the receipts have been mixed up and cannot be separated. Articles 430 and 442 of the Civil Code enumerate certain rules which are obligatory in certain specified eases of admixture and confusion or mélange, but the present one does not fall within that class of cases.

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Article 429 however lays down, as a principle applicable to all the other cases that they are subordinate to the general rules of "natural equity." In a case like this, according to the English law, the wrongdoer, that is the party who does the admixture, is the one to suffer. Lawrie v. Rathbun ([1]). I believe that this reasonable rule is within the spirit of the Roman law although I cannot find any text in point. Probably the law of Quebec is to the same effect under articles 429 and 1053 of the Civil Code. It was a fault on the part of the company to have so mixed up the receipts that they cannot be separated. The two accounts, if two must exist as contended by the respondents, should have been kept apart, according to actual figures and not imaginary ones. At all events, under the circumstances, there is only one right course to follow, which is not only equitable but also legal : give full effect to clause 37 so as to make clause 36 workable. I must add that I cannot see upon what ground the company can claim any deduction, at least as long as the service in the outside municipalities is part of the city railway system. I do not wish, however, to be understood as expressing any opinion as to its right under its contract with the city to establish an independent service m these municipalities.

Clause 34 and 35 provide for the collection of fares.

34. The company shall not be entitled to charge any rate exceeding five cents for the conveyance of a passenger from one point to another (either going or returning) except between the hours of twelve p.m. and six a.m., when they shall have the right to charge ten cents, without transfer, as above provided in article twenty-nine. A passenger, on paying his fare, shall be entitled to a transfer without further charge from any one of the company's cars to another at a point where routes connect or intersect, so as to enable him to make one continuous trip from one point to another. Children carried on their parents knees shall be conveyed free of charge.

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35. The Company shall also be held to sell tickets in all their offices and cars at the rate of six for twenty-five cents, and twenty-five for a. dollar and to provide tickets for school children at the rate of ten for twenty-five cents, and the Company shall also sell eight tickets for twenty-five cents available between the hours of six and eight o'clock in the morning and between the hours of five and seven o'clock in the evening, on all week days; said hours variable at option of the City Council.

It is not suggested that in these two clauses the contract contemplates only the railway within the city. Ever since it has been operated, the uniform and daily practice of the company has been to convey city passengers to any part of the system, without charging any extra fare, whether carried in the city only or to and through outside municipalities. "From one point to another", according to the interpretation thus sanctioned by the parties themselves, refers undoubtedly to the whole railway system.

Likewise, the contracts with the outside municipalities deal with the railway as a whole, running through the city and the adjoining municipalities and not as an operation confined to their respective limits. By its charter in 1861, the company, then known as The Montreal City Passenger Railway Co., was empowered to run, with the license of the City Council, horse cars upon the streets of the city and also

along the highways in the parish of Montreal, leading into the said streets and contiguous thereto,

in consideration, as explained by the evidence, of a license or business tax which in 1892 amounted to $5000 and so much for each car or horse. (Old Canada,. 24 Vict. c. 84). This parish of Montreal, situated round and out of the city limits, formed what, for more than two hundred years, was known as la banlieue or the suburbs of the city, and comprised, among others, the very municipalities in question in this cause. It is fully described in the Arrêt des Paroisses of the 3rd

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March, 1722, published in the Edits et Ordonnances, vol. 1, p. 443. At that time the city was confined to the territory enclosed in stone walls within the boundaries of the West Centre and East Wards of to-day; between the River, Craig, Lacroix (near C.P.R. depot) and McGill streets as shewn on the plan and is yet designated by the name of Old Montreal, forming an independent parish called" Notre-Dame de Montréal. "At the time of the execution of the contract with the city in 1893, the suburbs were not the old ones known as Faubourgs St. Joseph, St. Antoine, St. Laurent and Quebec, which had already been absorbed by the city; they were new and were, nearly all, almost in their infancy. Ste. Cunégonde which in 1871 had a population of 1500 had one of 9,291 in 1891; St. Henri, an old village heretofore called L Les Tanneries des Rolland ", with a population of 2,815 in 1871 had 13413 in 1891; Westmount which in 1871 had a population of 200 mostly composed of farmers and gardiners, had 3076 in 1891. St. Louis, which had 800 in 1871 had increased to 3537 in 1891. Maisonneuve, unknown in 1871 had a population of 3,958 in 1891. The total population of the suburbs is now about 64,000. These figures and details of past and present geography are taken partly from the evidence and partly from public statutes and official census which under article 1207 of the Civil Code we are bound to notice and are essential to determine the meaning of the words " Parish of Montreal l used in the charter of the railway company.

Having secured the city franchise, the company turned its eyes to the outside municipalities and obtained from them similar and even greater privileges : 1º, from Maisonneuve by contract signed on the 27th of May, 1893; 2°. from côte St. Antoine, now Westmount, by contract of the 11th August 1893;

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3°. from Ste. Cunégonde by contract of the 10th April, 1894; and 4º. from St. Henri also by contract of the 10th April 1894. The contract with the city was probably executed under powers granted by the legislature in 1886 49 & 50 Vict. ch. 86. The contracts with the outside municipalities contain pretty nearly the clauses and conditions of the city contract, except that the company is free from the payment of any percentage, and is exempted from all taxes, and finally Ste. Cunégonde and St. Henri promised not to license any elevated railway. The passengers from these out-side towns and cities became entitled to travel on the city street cars not only through their own territory, but also through the City of Montreal, on a footing of equality with its citizens as to fares, tickets, transfers and connections. The contracts with Maisonneuve and Ste. Cunégonde will illustrate this; Maisonneuve, clause 17 :

The company shall not be entitled to charge any rate exceeding five cents for the conveyance of a passenger from one point to another in the limits of the town or in the City of Montreal, or in the town of Maisonneuve and the City of Montreal together (either going or returning). A passenger on paying his fare shall be entitled to a transfer without further charge from any of the company's cars to another at a point where routes connect or intersect, so as to enable him to go without interruption from one point to another in Maisonneuve or in the City of Montreal.

The contract with Ste. Cunégonde is more liberal:

The company shall be bound to carry passengers upon the line to be so constructed, as well as upon all its lines which shall be in operation within the City of Montreal, Maisonneuve, Côte St. Antoine and St. Henri at the same prices, charges, conditions and privileges as those imposed on the said company by the City of Montreal.

Fully equipped with these extraordinary powers, equal to if not greater than those held by any street railway in the Dominion, the Montreal Street Railway Company, in 1894, went to the Legislature of Quebec for confirmation of these powers. It represented

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that it has converted part of its street railway system into an electric railway system and. has made contracts with the City of Montreal, the town of Maisonneuve and the town of Côte St. Antoine etc.

The contract with Ste. Cunégonde and St. Henri are not mentioned as no arrangement had yet been concluded with them. An Act 51 Vict. ch. 73 was passed on the 8th January, 1894, whereby the said contracts are

confirmed and shall have force and effect, according to their tenor, as fully as if the same were incorporated in the present Act.

Few street railway companies possess greater privileges and a more valuable property. The outside municipalities have made wonderful progress under the operation of the electric tramway. Ste. Cunégonde has now a population of 10,912; St. Henri, 21,-192; Westmount, 8,856; St. Louis, 19,033; Maisonneuve 3,958. Montreal has also increased, not however in the same proportion; its population, which in 1891 was 219,616 is now 267,730. This difference is due in a great measure to the electric service which secures to the inhabitants of outside municipalities one of the most important advantages enjoyed by the citizens of Montreal, namely cheap and quick transportation, without sharing their high rate of taxation, their large public debt and some antiquated public works. From the evidence, I gather that the company is operating 60 miles of railway, one third being in the outside municipalities or suburbs. Its franchise is nominally for thirty years, but practically for a longer period if not for ever, for under clause 42 of the contract the city cannot then nor at any time after, assume the ownership of the railway without paying, not its cost price, but its value, and I presume its market value By clause 43 the contract is not to be deemed as giving "an exclusive franchise"; but under clauses 12 and 13 no rival line can be licensed

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by the city even over streets not used by the company, unless the latter be given the preference to establish said line Lines of omnibuses are unknown in Montreal and the only public mode of transportation within the city is by the street cars of the respondents or cabs. The city may however grant a franchise for an elevated or suspended railway; but by its contracts with Ste. Cunégonde and St. Henri the company has rendered this reservation almost valueless for these outside municipalities have agreed not to allow any such elevated company. The company has no business tax to pay in fact no tax whatever except on its real estate which however must be considerable, for under clause 45

all plant, rolling stock, generators and motors necessary for the working of the said road, shall be manufactured within the limits of the City of Montreal. The shops power houses and offices of the company shall also be situated within the city limits,

under the penalty of the forfeiture of its franchise (clause 40). I presume that the words "said road" mean undoubtedly the whole system and are used in the same sense as s said railway" in clause 36.

I have entered into these details to show the value of the franchises granted by the city. This point is not foreign to the case before us; it is on the contrary most pertinent and à propos. A sound and salutary rule has been established by almost a universal jurisprudence that franchises of this kind must be construed liberally in favour of the grantor and most strictly against the grantee. See Cyc. of Law and Procedure, vo. " Corporations," vol, 10, p. 1088, and Broom's Legal Maxims, (7 ed.) p. 448, where all the cases are collected.

Taken apart from the other clauses of the contract, clause 36 is perhaps open to some doubt, which has already divided the judges of the court below and

[Page 481]

divides the members of this court. Taken with the other clauses of the contract, the majority of this court have come to the conclusion that the clause is not open to any doubt. But even if it is we think that the above rule should be applied and that the city be given the benefit of the doubt.

For these reasons, the appeal is allowed with costs and the conclusion of the appellant's demand is maintained in principal, interest and costs as prayed for.

DAVIES and NESBTTT JJ. concurred in the judgment allowing the appeal for the reasons stated by Girouard J.

KILLAM J. (dissenting) —The questions involved in this appeal arise upon the construction of a written agreement under which the respondent company operates a street railway system in the City of Montreal.

The agreement bore date the 8th March, 1893. It began with the recitals that the city corporation had called for tenders for " the establishment and operation of an electric passenger railway in the City of Montreal;" that the tender of this company (a copy of which was said to be annexed) had been accepted by the city at a meeting of the city council held on the 19th July, 1892; that " a specification for the establishment and operation of the said railway (a copy of which was said to be annexed) had been prepared by the council of the city and submitted to the company for approval l that, after discussion of the specification by the company and suggestions by it, the city, on the 21st December, 1892, had passed a by-law (also said to be annexed) amending the specification; and that the company had accepted the by-law and authorized its president and secretary to sign an agreement in conformity with the by-law.

[Page 482]

By the first article :

The Montréal Street Railway Company aforesaid shall establish and operate, subject to the conditions hereinafter mentioned, lines of railway for the conveyance of passengers in the city by means of cars propelled by electricity, in the streets hereinafter mentioned, and in all other streets which may hereafter be determined by the council of the City of Montreal.

Then followed a large number of articles relating to the system to be used, the powers to be conferred upon the company, the mode of construction, powers reserved to the city, the streets to be traversed, the time of completion, the removal of snow and ice, and regulations respecting the running of the cars.

By article 34 :

The company shall not be entitled to charge any rate exceeding five cent\s for the conveyance of a passenger from one point to another (either going or returning) except between the hours of twelve p.m. and six a.m., when they shall have the right to charge ten cents, without transfer, as above provided in article 29. A passenger, on paying ills faré, shall be entitled to a transfer, .without further charge, from any one of the company's cars to another at a point where routes connect or intersect, so as to enable him to make one continuous trip from one point to another.

The 35th article provided for the sale of tickets at somewhat reduced rates.

Then came the article upon which this action is based.

By article 36:

The company shall pay to the city annually from the first of September, eighteen hundred and ninety-two, upon the total amount of its gross earnings arising from the whole operation of its said railway either with cars propelled by electricity or with cars drawn by horses :

Four per cent of its gross earnings up to one million dollars;

Six per cent of its gross earnings from one million to one million five hundred thousand dollars. &c, &c.,

the rate increasing with the increase of earnings.

By article 37:

[Page 483]

The said company shall render quarterly a true and just account and statement in writing of the whole of their gross earnings, and allow proper inspection of all books, accounts, returns and vouchers for the purpose of checking and verifying such accounts by the city treasurer, city auditor or ether accountant appointed by the city council, such accounts to be rendered and to date from the first day of September eighteen hundred and ninety-two, and to take place every three months on the first days of December, March, June and September in each succeeding year.

The statements rendered by the company of their gross earning shall be so rendered accompanied by a statutory declaration to be made by the president, vice-president, treasurer or other authorized officer of the company verifying the correctness thereof.

By article 39 :

The company shall be liable for all damages which may be occasioned to any person or property by reason of the construction, maintenance, repairs or operation of the railway.

By article 40 :

The company shall be bound to construct the different railway lines in the manner and within the delays mentioned in the present contract; to establish their shops, workshops, offices and other buildings within the limits of the City of Montreal, and to comply with the other requirements of article 45 under the penalty of the forfeiture of their contract and privileges, &c.

Article 41 provided penalties to be paid by the company for contravention of the contract.

By article 42 :

It is agreed between the said city and the said company that the present arrangement or contract for the establishment and operation of the said electric railway shall extend over a period of thirty years from the first of August eighteen hundred and ninety-two.

This article then went on to give to the city the right, after the expiration of the thirty years, and upon certain specified terms and conditions, to

assume the ownership of the said railway and all its real estate, appurtenances, plant and vehicles belonging to the company and necessary for the operation of its line.

By article 44 :

In the case of annexation by the city of any of the outside municipalities, the company shall be obliged, within three months after being

[Page 484]

ordered by the council, to extend their system through that new annexed portion of the territory not already provided with electric cars and to furnish a similar service as is furnished to the city.

By article 45 :

All plant, rolling stock, generators and motors necessary for the working of the said road shall be manufactured within the limits of the City of Montreal, The shops, power-houses and offices of the company shall also be situated within the city limits.

Articles 12 and 46 provided a detailed schedule of the routes and streets by and. on which the railway was to be operated.

Article 12 :

The tracé of routes in the different streets of the city as well as the establishment of circuits and transfer connections, shall be made and shall remain under the control of the city council. Until further orders the cars shall be run in the streets mentioned in the schedule of routes herein below indicated and designated on the plan hereunto annexed, signed by the parties hereto and by the undersigned notary, ne varietur, and the several circuits shall remain as they now are established But whenever the public service shall require it the city shall have the right, by simple resolution of the council, to change and modify such circuits, etc.

Article 46 :

The company shall establish and operate their electric passenger railway in the following routes and in the manner hereafter mentioned, to wit;

(Here follow details specifying the various routes).

By article 48 former by-laws concerning the company were to be repealed, and the company relinquished all its franchises and privileges conferred by such by-laws and its contracts with the city.

The copy of the company's tender and of the original specification stated in the agreement to have been annexed to the agreement do not appear to have been put in evidence. One can only conjecture that the amended specifications were really embodied in the agreement and by-law.

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The by-law was passed the 21st December, 1892. It did not merely authorize the making of the agreement. It enacted in imperative terms most of the provisions of the agreement.

The terms of the previous by-laws and of the con- tracts between the city and the company are not shewn.

The company was incorporated in 1861 by Act of Parliament of the former Province of Canada which has several times been amended by Acts of the Legislature of the Province of Quebec.

Speaking very generally the company was authorized to construct and operate railways upon and along the streets in the city of Montreal, and upon and along the roads and highways in the Parish of Montreal (admittedly more extensive than the city), and in the municipalities adjoining the city, and the company was authorized to enter into agreements with the city and the municipalities, and they respectively with the company, upon various point relating to such railways; inter alia, the amounts of license fees to be paid by the company annually and the amounts of the fares to be paid by passengers.

On the 8th January, 1894, the Provincial Legislature passed an Act ratifying the agreements theretofore made with the city and with the towns of Maisonneuve and Côte St. Antoine, and giving the company power to consolidate with, or acquire the lines of, any other company upon the island of Montreal. By that Act it was recited that the company had converted part of its street railway system into an electric railway system and had made contracts with the city and the two towns mentioned with reference to the operations of an electric street railway within these municipalities.

When the by-law was passed and when the agreement was made, the company owned and was operating

[Page 486]

a street railway system in Montreal, with extensions into surrounding municipalities. Originally the cars were drawn by horses and continued to be so, at least for the most part, until the making of the formal agreement. The purpose of the new agreement evidently was to provide for a change of motive power. The city engineer stated, in his evidence that the change to electricity was made in 1892. It is not clear whether he meant by this to refer to the affecting of the arrangements for the change, or to an actual change in fact of the motive power in use on some part of the railway. Possibly the construction of the new system had been begun in 1892, but it does not appear whether any part of the railway was operated by electricity when the agreement was finally executed.

It appears to me absolutely clear that the agreement was intended to apply solely to a street railway system within the limits of the city of Montreal, including 01 course territory that might from time to time be added to the city. Primâ facie, that would be all that the city would assume to contract about. The agreement originated in the call of the city authorities for tenders "for the establishment and operation of an electric passenger railway in the City of Montreal." The enactments of the by-law could have force, as enactments, only within the city, and it must be implied that they were intended to have force respecting railway lines within the city only. The details relating to dealings with the streets by the city or the company could refer only to streets within the city. So, also, provisions respecting the speed of cars, the places and periods of stopping and many other matters which were not proper for the interference of the council in localities beyond the city limits. The stipulation respecting the company's liability for damages comes within the same reasoning. The provisions

[Page 487]

for assumption by the city of the ownership of the railway, &c, should be presumed to refer only to lines within the city. In agreements with outlying municipalities similar powers were reserved to them respecting lines within their limits.

The plan referred to in the contract was one indicating the streets of the City of Montreal. The limits of the city were not shewn, except upon the west. Along many of the streets were drawn red lines. There was nothing in the contract or upon the plan to shew that these indicated lines of railway, existing or proposed, though the city engineer stated in his evidence that the routes were indicated by different colours. Two of these lines in red, one along Wellington Street and one along Centre Street, extended beyond the line marking the western limit of the city, but the detailed enumeration of the routes Nos. 4 and 18, distinctly specified the proposed lines as extending on those streets to the city limits. Indeed, on a large number of the routes the city limits were expressly mentioned as the starting or finishing point. In the cases of many others they were clearly within the city limits. Neither upon the plan nor in the schedule of routes does there appear to me to be any indication whatever that the lines of railway forming the subject matter of the contract extended or were to extend outside the limits of the city.

Upon the argument before us there was no suggestion whatever that the plan or the schedule afforded any evidence that the words "the said railway" in the 36th article were intended to include extensions into the suburbs.

I take it, then, that neither agreement nor by-law upon its face purported to deal with any railway lines or system beyond the limits of the city. The sole reference to outside municipalities or territory was

[Page 488]

contained in the 44th article, and that assumed to deal with them only upon the hypothesis of future annexation to the city, and when annexed. In that event the company could be required to extend its system into the added territory if this should not then be provided with electric cars. And this was not confined to the case of its being so provided by this company; it extended to such a provision from any source.

It is true that there were some stipulations not explicitly confined to "the said railway," or to the lines within the city only; thus, the 34th article provided for the limit of the charge for conveyance "from one point to another," and the right of transfer where routes connected or intersected; the 39th article for liability for damages by reason of the construction, &c. "of the railway." The 40th for the periods of construction of "the different railway lines." But all of these must necessarily be confined by construction to the subject matter of the contract "an electric passenger railway in the City of Montreal"\ (as in the recital), or "lines of railway for the conveyance of passengers in the city" (as in the first article of the contract). These provisions come directly within article 1020 of the Civil Code, applied by the court below,

However general the terms may be in which a contract is expressed, they extend only to the things concerning which it appears that the parties intended to contract.

In this class comes the 37th article of the contract, requiring the company to render quarterly an account "of the whole of their gross earnings." This clause was ancillary to the 86th article, and intended only to provide a scheme for ascertaining the earnings upon which the percentages were to be paid. It appears to me utterly unreasonable to use it for the purpose of attaching to the 86th article an extended meaning.

[Page 489]

The very fact that when the contract was made, the company had and was operating lines outside the city seems to me to weaken rather than to strengthen the case for the city. If it had been intended that payments were to be made upon the earnings of the outside lines, one would expect this to be clearly stipulated for.

And I can attach no weight to the circumstances that the earnings from cars drawn by horses were included, and that the earnings were to be computed from a day anterior to the execution of the contract

Naturally, time was required for the completion of the electric system, and in the interval portions of the lines would be operated by horse power. The tender of the company was accepted in July, 1892; then followed negotiations upon the details; in December the by-law was passed. When construction of the new system was in fact begun, when electric power was first used on any part of the lines, we do not know. Nor do we know when the period expired for which payments under the former system were made. The parties chose to fix the first of September, 1892, as the commencement of the first yearly period in computing the payments, as they chose to fix the first of August, 1892, from which to compute the thirty years of duration. None of those matters throw any light whatever upon the point now in controversy.

The company's agreement was to pay specified percentages

upon the total amount of its gross earnings arising from the whole operation of its said railway.

The natural meaning of these words confines the stipulation to the earnings from the operation of the lines within the city. The word "whole" does not extend the natural meaning. It is still a question as to what it is the whole operation of which is referred

[Page 490]

to. I think it very probable that the word "whole" was inserted in connection with the words ''either with cars propelled by electricity or with cars drawn by horses," with a view to assist in including both methods of operation.

A perusal of the whole contract and a consideration of the circumstances existing and necessarily contemplated at the time of the execution of the contract appear to me to establish, beyond any doubt, that the parties intended the stipulation to be confined to the earnings from the city lines only. Indeed, had it not been for the strong contention to the contrary on the part of the counsel for the city, and its apparent acceptance by some of the members of the court, I should not have felt it necessary to indicate at such length the reasons for my own opinion.

Then, we come to the question : What were the gross earnings of the company " from the whole operation of its said railway?" The company continued the operation of its lines within and without the city. What were the terms upon which it was operating when the contract in question was made we do not know; whether it then kept separate the receipts from the lines within and without the city we are not informed. Whether single fares were then charged for one journey from without the city to points within, or vice versa, whatever the distance, we are not told. After the completion of the contract with the city, the company entered into contracts for the operation of street railway systems in surrounding municipalities, connecting with the city system. By these it agreed to carry passengers to and from these municipalities and from and to points in the city and other points on its lines irrespective of distances, at single fares of the same amounts as between different points in the city. It conducted its operations accordingly. No account was

[Page 491]

kept of the portions of the railways for conveyance upon which these fares were paid The whole set of railways was operated as one system, with motive power supplied from the same plant within the city, and managed from the same office; and all the receipts went, without distinction, into the same treasury. It is contended that under these circumstances the receipts from all sources were receipts upon which the percentages were payable under the 36th article of the contract. I cannot agree with that contention.

It does not appear to me that the extension of the lines and the system of operating them made the extensions beyond the city a part of "the said railway" referred to in the contract within its meaning. The reasoning which I have already used excludes that conclusion.

Nor does it seem to me that either the fares for carriage wholly outside the city or the whole of the fares for carriage between points within and points without can properly be said to arise from the operation of the lines which alone formed the subject matter of the contract. The existence and operation of the lines within the city may have been necessary to the existence and profitable operation of the outside lines, but the earnings of the latter arise so indirectly from the operation of the former that they cannot properly come within the class of earnings to which the contract refers. And in the case of fares earned for carriage partly within and partly without, while the operation of the city lines was a necessary condition precedent to their being earned in that way so also was the operation of the other lines. I think that the proper way is to consider for what services such fares are paid. The fare for such a journey is paid partly for carriage within and partly for carriage without the city. The earning arises equally from the operation of both sets of lines.

[Page 492]

The portion which should be deemed to be earned by the outside line cannot properly be said to be an earning arising from the operation of the portion within the city to any other extent or in any other manner than if these were two systems under different managements with arrangements for the interchange of traffic.

While the city stipulated against excessive fares, it did not stipulate that the maximum should be charged. The company was not bound to charge the maximum for the portion of a journey which should be wholly within the city. There seems to have been nothing in the contract which would prevent the company from making traffic arrangements with connecting companies upon a basis of charges similar to those upon its own lines, with provisions for a fair apportionment. Indeed a contract of that kind was made with another company in July 1893 under which as I would infer from the evidence of the respondent company's manager the companies are now working.

The local situation of the power plant and of the business office is wholly immaterial. The case would not be different if they were placed without the city.

The sole difficulty in the case arises from the system under which a single fare is charged for an entire journey, irrespective of distance. This was a system which the parties must have contemplated as not unlikely to be extended to connecting lines.

The Legislature confirmed agreements to that effect with two outside towns at the same time as that with the city.

If it once be granted, as I think it must, that the company could apportion by arrangement with another company, it must follow, I conceive, that it could apportion as between its inside and its outside lines. And in that case it becomes only a question of fact

[Page 493]

whether the apportionment made by the company is the proper one, or, if not, what other should be adopted.

The apportionment of earnings between different portions of a railway, or different railways operated in one system, must be found necessary from time to time in the Courts and in such cases reference must be had to the principles upon which those interested in such works are accustomed to act. It is not always possible to do this upon a basis of mileage or one otherwise capable of strict mathematical calculation.

In Pullan v. Cincinnati & Chicago Air Line Railroad Co. ([2]) an apportionment by the master of the court was considered and approved, although admittedly approximate.

In the case of the Manitoba and North Western Railway, where there was a mortgage on one portion of the line and the whole line was subsequently mortgaged together, separate receivers were appointed, and it was necessary for them to settle upon a basis of apportionment under the sanction of the court in Manitoba. It was also found necessary, during the litigation, to settle on a basis of apportionment between that railway and the Canadian Pacific Railway, which was then its only connection.

Under The Railway Taxation Act of Manitoba, R. S. M. [1902] c. 166, s. 5, a provincial tax is imposed upon the gross earnings in the province of railway companies owning or operating lines of railway within the province. All, or nearly all, of those railways extend into other parts of Canada, and a large portion of their traffic is between Manitoba and outside points.

Similarly, the City of Montreal and the neighbouring municipalities might be empowered to tax the earnings, of the street railway lines within their respective boundaries.

[Page 494]

In any such case it becomes necessary to devise an equitable basis of apportionment of through traffic, and the fact that it could not be ascertained with absolute mathematical accuracy would not be a ground for assigning to any one part of a line the earnings of the whole.

The city had no direct right or interest to or in any portion of the earnings. It was not even a mortgagee thereof. It had simply a contractual right to be paid amounts based upon the earnings of the city lines. The receipts were the absolute property of the company which could mix them together and do with them as it chose. The company was under no obligation to keep books or accounts in any particular manner. It was bound only to allow such as it should keep to be inspected by the civic officials, and to render statements of its earnings, though its mode of keeping accounts might raise inferences against it

The rendering of statements showing the amounts of the gross earnings from all sources does not appear to me to stop the company or to bind it otherwise to pay percentages upon the whole amounts, as deductions were made in these very accounts for the proportions claimed by the company to be due to the outside lines There may have been some confusion or some errors at first; but the amount now sued for includes percentages upon sums earned during the first and every succeeding year under the contract and claimed by the company as not proper to be included. The statements have been made up in different forms at different times; but the claim of the company in each year has been the same and the differences of form were matters of book-keeping only.

The courts below were satisfied that the system of division adopted gave to the city all that it could properly be entitled to, and, indeed, operated to the

[Page 495]

advantage of the city. I see no reason to dissent from that conclusion.

In my opinion the appeal should be dismissed.

Appeal allowed with costs.

Solicitors for the appellant: Ethier & Archambault.

Solicitors for the respondents: Campbell, Meredith, Macpherson & Hague.