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applicable to cities of the second class, to which Lexington belongs. Section 3155 provides:

"All fines and penalties and costs collected in the police court shall be for the use and benefit of the city, and the officer collecting such fines and penalties shall make daily reports of such collections to the treasurer, taking duplicate receipts therefor, one of which shall be delivered to the auditor."

Section 3162 is as follows:

"Said court may assess, in addition to fine or imprisonment, any sum in his discretion, not exceeding three dollars, as costs against any defendant when convicted of any offense; for which, if not paid, the defendant shall be committed to imprisonment in jail or workhouse, as in case of fines. All fines, costs and forfeitures shall be collected by the chief of police and paid into the city treasury, and a duplicate receipt shall be given therefor, one of which shall be filed with the city auditor."

Obviously these sections do not confer upon the police court of the city of Lexington jurisdiction to try and finally dispose of a case of felony. The powers they confer upon the police court are such as that court may exercise with respect to offenses committed in violation of ordinances of the city and within its corporate limits, or such other offenses as it may have jurisdiction to finally dispose of by its judgments.

The police court of a city of the second class acts in a dual capacity. In the trial of offenses against ordinances of the city it judicially acts for the city, although the prosecutions or process may run in the name of the commonwealth for the use and benefit of the city; and in all such cases the fines, forfeitures, or costs adjudged or collected, unless otherwise provided, go to the city, and should be disbursed as provided by the sections supra. But in the trial of certain other cases involving offenses committed against statute or other laws of the commonwealth the police court acts in its judicial capacity for the latter alone, and in such cases the fines, penalties, forfeitures, and costs adjudged or collected go to the commonwealth.

By section 3147, Kentucky Statutes, which, like sections 3155-3162, applies to and defines the judicial powers of police courts of cities of the second class, it is provided that the police court cannot finally try or punish a person guilty of a crime, denominated a felony by the laws of the state. As therein declared, its only jurisdiction, if the offense be a felony, is to sit and try it as an examining court; that is, it may, if the evidence be such as to furnish reasonable grounds that the person on trial has been guilty of a felony, hold him over to the circuit court for indictment by the grand jury, and, if the offense be a bailable one, require of him

a bond to appear in that court to answer any indictment that may be found against him.

Where a bail bond taken by the police court in a felony case is forfeited, the proceeds of such bond must be paid to the commonwealth. Indeed, this is clearly shown by sections 58 and 94, Criminal Code Practice; section 58, providing for the return of the forfeited bond, with the word "forfeited" indorsed on it, to the clerk of the circuit court of the county; section 94, subsec. 1, providing that the court to which the bond is returned shall order summons against the bail and render judgment enforcing the forfeiture; subsection 2, that if the court fail to make the order, the attorney for the commonwealth may, at any time after the term, cause the clerk to issue the summons against the bail. If in a case like the one before us the city is entitled to the proceeds of the forfeited bond, why should not the forfeiture, as in all offenses against the city ordinances, be enforced by the police court instead of the fact that the forfeiture must be enforced by circuit court? On the other hand, the simple the circuit court, even if there were no other reason to be urged, is, it seems to us, sufficiently persuasive to show the right of the commonwealth to the proceeds of the forfeit

ed bond.

[2] But there are yet other grounds sus

taining the commonwealth's right to the money. Section 1139, Kentucky Statutes, declares that:

"All fines and forfeitures which may be imposed by law shall inure and vest in the comwhole or a part thereof, shall be given to a permonwealth, except in cases where, by law, the son or to some particular object, and may be recovered by civil procedure before any judicial tribunal having jurisdiction or upon indictment of a grand jury."

Among the persons evidently referred to in this section to whom parts of the fines and forfeitures indicated go are commonwealth's attorneys and clerks of the circuit court, who are required by law to render services in aid of the prosecution in which they are imposed, and all of whom are compensated wholly or in part for their services by the commonwealth out of the fines and forfeitures after they are collected and received by the treasurer of the state.

It will also be found that section 2285, Ky. St., requires that all fines and forfeitures paid under judgments of the circuit court, without copies or execution, as well as all jury fees, etc., shall be paid directly to the trustee of the jury fund; and section 2286 makes it the duty of the latter to superintend and urge the collection of all fines and forfeitures going to the commonwealth. The trustee of the jury fund does not receive fines or forfeitures imposed by the police courts or collected by the chief of police for violation of ordinances of a city.

Without further elaboration of the reasons that lead us to the conclusion already expressed, we think the commonwealth is clearly entitled to the proceeds of the bond forfeited in this case; and, as such was the judgment of the circuit court, it is hereby affirmed.

POTTER MATLOCK TRUST CO. v. WAR-
REN COUNTY et al.*

G. D. Milliken, Guy Herdman, and O. P. Roper, all of Bowling Green, for appellees. CARROLL, C. J. A statement of some pertinent facts appearing in the record that preceded the beginning of this ligitation, as well as review of the litigation, will be helpful in reaching a solution of the controlling question in the case, which is: Can a street railway company, operating under a franchise granted by a city and county, remove its rails and equipment and permanently abandon the operation of the road

(Court of Appeals of Kentucky. Jan. 21, 1919.) if it appears that it cannot be operated

1. STREET RAILROADS

except at a loss?

Some years ago the council of Bowling Green by an ordinance granted to the Park City Railway Company, the predecessor in title of the Southern Traction Company, a "right of way over the following described streets of the city of Bowling Green subject to the rules regulating and restrictions here

60-OPERATION AT Loss-ABANDONMENT OF FRANCHISE. Where a street railroad was constructed under a franchise for a specified time, the company may be permitted to remove its tracks and abandon the road upon restoration of streets, where operation can be continued only at a loss. 2. EMINENT DOMAIN 2(8) TAKING PRI-in set forth." The ordinance described the VATE PROPERTY — STREET RAILROAD - CoмPELLING OPERATION AT LOSS.

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streets on which the company might construct and operate its railway and contained a number of provisions regulating the manner in which the streets should be used and kept in repair, the fares that should be charged, the license tax that should be paid, and other matters connected with the operation of the roads.

The privilege thus granted was to run for a term of 50 years, which has not yet expired.

The fiscal court of Warren county also granted to the railway company the privilege of using and occupying the public ways of the county for a term of 20 years, not yet expired. This order also contained some provisions concerning the manner in which the highway should be maintained, the track should be laid, as well as others regulating the operation of the road.

Neither the ordinance enacted by the counAppeal from Circuit Court, Warren cil nor the order adopted by the fiscal court County.

contained any stipulation that the street Suit by the Potter Matlock Trust Comcar company should operate its road for the pany, as trustee, against the Southern Trac-time specified in the grants or for any length tion Company, as successor of the Park City Railway Company, and others, to enforce a mortgage lien. Judgment of foreclosure was rendered, but set aside before sale by a settlement agreement involving sale of physical property of traction company, upon failure to carry out which the plaintiff filed an amended petition to which the County of Warren and the City of Bowling Green filed answers. From so much of a judgment of foreclosure as refused to permit the physical property to be sold as junk and removed, the plaintiff appeals. Reversed, with directions.

Wright & McElroy and T. W. & R. C. P. Thomas, all of Bowling Green, for appellant.

of time, although the company had the right under the grants to use the highways and operate its road for the time specified. Nor did either of the grants give to the company the exclusive right to the use of the streets or roads, or contain any provisions that would prevent the city from granting other like privileges to other companies. In brief, the grants merely authorized and permitted the company to construct its line of road along highways and streets named and operate cars thereon for the time specified.

Under the authority of these two grants, the street railway company constructed its line of road in the county and city and op erated cars thereon for a number of years In 1914, the railway company executed to the Potter Matlock Trust Company, as

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes *Rehearing denied February 21, 1919.

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trustee, a mortgage on its property to secure the payment of bonds amounting to $24,500; and in 1916 the trust company brought a suit against the railway company and other persons asking that its mortgage lien be enforced and the property covered by the mortgage, which included everything the street railway company owned as well as the franchises and rights granted to it by the city and county, be sold as a going concern upon the ground that the railway company was insolvent and had defaulted in the payment of the interest on the bonds, thus precipitating the maturity of the debt. In answer to this suit, the railway company and the other defendants named denied that the company was insolvent, and set up that its embarrassed financial condition and inability to pay the interest on the bonded debt was due to the mismanagement of its affairs.

In October, 1917, there was a judgment granting the relief prayed for by the trustee and ordering a sale of all the property rights and franchises of the railway company as a going concern; but before a sale was made under this judgment and on October 25, 1917, the railway company entered into a contract with Hirsch & Sons, by which, in consideration of $21,000 to be paid in cash, it sold to Hirsch & Sons with the consent of the directors and the trustee for the bondholders all of its physical property, agreeing that its rails, ties, and all other equipment might be removed. In other words, under this contract the operation of the road was to be permanently abandoned and all of its physical property taken down and removed by Hirsch & Sons. It further appears that, when this contract was made, the judgment ordering a sale of the road was by agreement of all parties concerned set aside. It is obvious from this that the

owners, the trustee for the bondholders, and perhaps the other creditors, concluded that the sale to Hirsch & Sons for $21,000 would be more beneficial to them than a sale of the road under the judgment; therefore they agreed that the judgment should be set aside in order that the contract with Hirsch & Sons might be carried out.

A few days after this contract with Hirsch & Sons was entered into and in October, 1917, the county of Warren and the city of Bowling Green filed in the Warren circuit court suits against the railway company and Hirsch & Sons asking for an injunction to restrain Hirsch & Sons from taking down or removing the physical property and equip ment of the railway company. When this injunction suit came on to be heard, the judge of the circuit court granted the injunction prayed for and made an order restraining the railway company from selling its physical property and Hirsch & Sons from taking down and removing any of the equipment.

When the order granting the injunction was entered, a motion was made by the railway company and Hirsch & Sons before a judge of this court to dissolve it in order that the contract between the railway company and Hirsch & Sons might be carried out; but the judge of this court to whom the application was made, and the other judges who sat with him in hearing the application, refused to dissolve the injunction granted by the circuit judge and in the course of a brief opinion said:

tion whether under any circumstances a street "We did not consider or determine the quesrailway company that has obtained a franchise to operate a line of railway may, in opposition to the will of the municipality from whom the franchise was obtained, abandon its line of road and remove its rails, poles, cars, and other equipment, but we all agreed that in any event, before a company should be permitted to do this, it should be made plain that it could not operate its road except at a loss.

"We concur in what Judge Moss said that: 'If these bondholders and the stockholders, who are the same parties, do not desire a foreclosure and a sale so as to determine whether or not by that means a purchaser could be obtained who would be willing to undertake the operation of the street railway, then they must continue themselves to operate, and, if at any time they shall fail to do so, it might become proper and necessary for the court to take control it could be determined, either by exposing it through a receiver and to operate same until for sale, or by some other proper method, whether or not said railway is capable, under reasonably economical and efficient management, of being operated and continued as a going concern. The interest of the public demands the most thorough testing of that question before permitting the utter destruction of the value of the property as a street railway.'"

It further appears from the record that, while these injunction proceedings were pending, the suit filed in 1916 by the Potter Matlock Trust Company, as trustee, for a sale of the road, and in which there was a judgment that was set aside, as before stated, was yet on the docket of the Warren circuit court, and in February, 1918, the Potter Matlock Trust Company, as trustee, filed an amended petition in which, after setting up the insolvency of the railway company and its default in the payment of interest, averred that the property of the railway company could be sold for a great deal more if dismantled and sold as junk than the road and its property and privileges could be sold for as a going concern with an obligation upon the part of the purchaser to continue its operation; and therefore it prayed that the court order a sale of the road, its property and privileges as a going concern with an obligation upon the part of the purchaser to continue its operation and also order a sale of all its physical property with the privilege to the purchaser to take down and re

move the same, both sales to be made at the same time, and that one to be approved by the court which realized the larger sum.

To this amended petition the county of Warren and the city of Bowling Green filed answers resisting the effort of the trustee to have the physical property of the road sold as junk, which would of course result in the permanent abandonment of the road.

for a described period the streets and highways mentioned in the grants, and while the grants of these privileges would in themselves put upon the company the duty of continuing the operation of the road for the duration of the grants, if under efficient management it could be operated at a reasonable profit, we do not think the terms or conditions of the grants should be construed to require the owners of the company to continue the operation of the road when to do so would cause them to suffer loss, although they had exercised good business methods in managing the affairs of the company. Selectmen of Amesbury v. Citizens' Electric Street Railway Co., 199 Mass. 394, 85 N. E. 419, 19 L. R. A. (N. S.) 865; San Antonio Street Railway Co. v. State, 90 Tex. 520, 39 S. W. 926, 35 L. R. A. 662, 59 Am. St. Rep. 834; State of Iowa v. Old Colony Trust Co., 215 Fed. 307, 131 C. C. A. 581, L. R. A. 1915A,

Upon hearing, the issues raised by the amended petition and answers thereto, together with the evidence offered thereon, the court adjudged that the road and all of its property and franchises should be sold as a whole with an obligation upon the part of the purchaser to operate it, and further adjudged that the trustee was not entitled to a judgment for a sale of the physical property of the road with the right to remove the same. To so much of this judgment as refused to permit the physical property to be sold as junk and removed, the trustee for the bond-549. holders prosecutes this appeal.

[1] Returning now to what we conceive to be the principal question in the case, our opinion is that when it has been clearly demonstrated that a street railway company, that has secured the privilege as this company or its predecessor did to construct and operate a line of road, cannot continue its operation as a whole under good business management except at a loss, the company may be permitted to remove all its tracks and equipment and abandon the road upon restoring the highways it occupied, in so far as they were occupied by its tracks and other equipment, to the condition of the remainder of the adjacent highways at the time the abandonment took place.

But in announcing this principle we wish it to be distinctly understood that its applicability is to be confined to a state of case similar to that presented by the record. We do not mean to go so far as to say that, where there was a contract obligation upon the part of the company to operate its road for a specified time, it might, upon a showing that the road could not be operated even under efficient management except at a loss, abandon the operation of the road before the term stipulated in the contract had expired.

It seems to us there is no reason why a contract obligation should not be enforced in this character of cases with the same vigor and fullness as in others where contract obligations are assumed and the rights of the parties are to be determined by the terms of the contract and not by the profit or loss that may result in performing its conditions. In this case, however, there was no contract obIligation contained in the ordinance of the city or the order of the fiscal court imposing upon the company the duty of operating its line of road for any specified time. It was simply granted the right to use and occupy

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It is true that when public utility corporations undertake by virtue of permissive grants made by public authority, as this company did, the performance of a public service, this undertaking, when it can be performed under efficient management with fair profit to the owners, carries with it the duty of performing the service in such a way as that the public interest and convenience will be served in the manner contemplated by the terms of the grants and for the time therein specified.

Under conditions like these, neither of the parties to the contract should be permitted to break it or to alter its terms or conditions to the prejudice of the other or the public for whose use and benefit the contract was

entered into. Both parties must fulfill the purpose of the grant in the manner and for the period of time specified. City Railway Co. v. Citizens' Street Railway Co., 166 U. S. 557, 17 Sup. Ct. 653, 41 L. Ed. 1114; Clarksburg Electric Light Co. v. City of Clarksburg (1900) 47 W. Va. 739, 35 S. E. 994, 50 L. R. A. 142; Louisville Home Tel. Co. v. City of Louisville, 130 Ky. 611, 113 S. W. 855; Cumberland Tel. Co. v. City of Hickman, 129 Ky. Co. v. City of Dayton, 177 Ky. 503, 197 S. W. 220, 111 S. W. 311; Chesapeake & Ohio R. R.

969.

als, in the absence of a contract obligation, But we are also sure that private individuare not under a duty of any kind to serve the public at a loss to themselves. Where there is no contract obligation, the public has no right to expect or demand that private individuals will to their own loss continue a service that under efficient management will not return to them a reasonable profit on their investment.

[2] To say that the owners of a public utility company must, in the absence of a contract obligation, continue to render the service contemplated by a merely permissive

grant to use public ways, although it could not be done under efficient management without a loss, would be in effect holding that private property might be taken for public use without compensation; and, of course, this cannot be done. There would be little difference, as it seems to us, between a ruling that the private property of an individual might be boldly taken without compensation for some public use, and a holding requiring the private individual to render, under a grant like the one here in question, a public service at a personal loss to himself. To authorize the doing of either one or the other of these things would plainly be a violation of the provision contained in section 13 of the Constitution that

*

"Nor shall any man's property be taken or applied to public use without just compensation being previously made to him." The views we have expressed appear to be so sound as not to require citation of authority in support of them, but authority is not wanting. In Northern Pacific Railway Co. v. Territory of Washington, 142 U. S. 492, 12 Sup. Ct. 283, 35 L. Ed. 1092, the court said:

"But if the charter of a railroad corporation simply authorizes the corporation, without requiring it, to construct and maintain a railroad to a certain point, it has been held that it cannot be compelled by mandamus to complete or to maintain its road to that point, when it would not be remunerative."

In Sherwood v. Atlantic Railroad Co., 94 Va. 291, 26 S. E. 943, the court, in considering the question whether a railroad company could be compelled by mandamus to operate its road at a loss to the stockholders, said:

"Where the line of railway, taken as a whole, cannot be profitably maintained; where its operation, when discreetly and economically managed, is attended with loss-it is difficult to perceive how a court can, by mandamus or other wise, compel its operation to be continued. If the loss is the result of improvident and unthrifty management, the court may, at the suit of those interested, take charge of it for the benefit of all concerned, and run it through the instrumentality of a receiver; but, if the traffic of the road is really insufficient to support a wise and economical administration of its affairs, there would seem to be no escape from its ultimate abandonment. Such cases are possible, though rare. It more frequently happens, however, that a part of the line becomes unprofitable, though the system as a whole may be valuable. In such an event, the court will inquire, first, as to the positive duties imposed by the charter, and compel their performance by appropriate remedies, while with respect to those duties which were not imposed by the charter, but which have been assumed by the corporation under permissive grants of power, it will consider all the circumstances of the case, and if upon the facts it shall appear that the duty unfulfilled inflicts no particular injury or hardship upon those who make the complaint,

and that the service which they receive is under all the conditions reasonably adapted to their needs, while the performance of the duty would entail a burden and loss upon the company far might in its ultimate effect embarrass or prein excess of any benefit conferred, and which vent the performance of other duties in respect to larger interests, and affecting a far greater number of citizens, the court will withhold its hands."

To the same effect is State of Kansas v. Dodge City Railroad Co., 53 Kan. 329, 36 Pac. 755, 24 L. R. A. 564.

In Jack v. Williams (C. C. A.) 113 Fed. 823, the court had before it the question whether the owners of a railroad could be compelled to operate it at a loss, and said:

"To be thus useful to the public, the road must be kept up in such a condition that life and property both must be made as safe as practicable. The rates of transportation of persons and freight must be reasonable. And the reasonable number of trains must be kept up, dependent upon the circumstances surrounding the railway. Whilst thus serving the public, however, no corporation or private person is obliged to continue the service without a reasonable remuneration. No one can be compelled to serve the public for nothing. Private property of no kind, including railroad property, can be used for public purposes without compensation. Smyth v. Ames, 169 U. S. 467, 18 Sup. Ct. 418, 42 L. Ed. 819; Road Co. v. Sandford, 164 U. S. 578, 17 Sup. Ct. 198, 41 L. Ed. 560; Chicago, M. & St. P. R. Co. v. Minnesota, 134 U. S. 418, 10 Sup. Ct. 462, 33 L. Ed. 970; Railway Co. v. Smith, 173 U. S. 684, 19 Sup. Ct. 565, 43 L. Ed. 858. All these cases determine that a railroad company, in the full enjoyment and use and capacity to use its franchises, cannot be compelled to exercise its franchises without reasonable remuneration. A fortiori a railroad not be compelled to operate that road, not only corporation, or a person owning a railroad, canwithout remuneration, but at a loss. And this not by any means because such corporation or person is insolvent. If a citizen has the wealth of the Rothschilds, he cannot be compelled to use a dollar of his wealth for public purposes without compensation."

This case was affirmed by the Circuit Court of Appeals in State of South Carolina v. Jack, 145 Fed. 281, 76 C. C. A. 165,

The case of Southern Railway Co. in Kentucky v. Hatchett, 174 Ky. 463, 192 S. W. 694, L. R. A. 1917D, 1105, is relied on by counsel for the county and city; but there is no conflict whatever between what was said in that case and what we have said in this one. The facts of the two cases are radically different, and the principle announced in the Hatchett Case has no application to the facts of this case. It should, however, be said that in the Hatchett Case, although ·

the court ruled that a solvent railroad company could not abandon a portion of its road merely because the operation of such portion was unremunerative, it yet recognized and

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