City of Owensboro v. Cumberland Telephone & Telegraph Co.

230 U.S. 58, 33 S. Ct. 988, 57 L. Ed. 1389, 1913 U.S. LEXIS 2678

• Court: Supreme Court of the United States
• Decided: June 16, 1913
• Docket: 244
• Status: Published

Opinions

Mr. Justice Lurton,

after making the foregoing statement, delivered the opinion of the court.

. 1. That the right conferred by the ordinance involved is something more than a mere license, is plain. A license-has been generally defined as a mere personal privilege to' do acts upon the'-land of the licensor of a temporary character, and revocable at the will of the latter unless, according ■to some authorities, in the meantime expenditures contemplated by the licensor when the license was given, have been made. See Greenwood Lake & P. J. Railroad v. New York &c. Railroad, 134 N. Y. 435, 440; Trustees of Southampton v. Jessup, 162 N. Y. 122, 126.

That the grant in the present case was not a mere license is evident from the fact that it was upon its face neither personal, nor for á temporary purpose. The right conferred came from the State through delegated power to the city. The grantee was clothed with the franchise to lie a corporation and to conduct a public business, which required the use of the streets, that it might have access to the people it- was to serve. Its charges..were subject to regulation by law and it was subject to all of the police power of the city.

That an ordinance granting the light, to place and maintain upon the streets of a city poles and wires of such a company is the granting of a property right, has been too many times decided by this court to need more than a reference to some of the later cases: Detroit v. Detroit Street Railway Co., 184 U. S. 368, 395; City of Louisville v. Cumberland Telephone and Telegraph Co., 224 U. S. 649, 661; Boise Water Co. v. Boise City, opinion just handed down, post, p. 84. As a property right, it, was assignable, taxable and alienable. ' Generally it is air asset of great-value to such utility companies and a principal basis for credit.

2. The grant by ordinance to an incorporated telephone company, its successors and assigns, of the right to occupy the streets and alleys of a city with its poles and wires for the necessary conduct of a public telephone business, is a grant of a property right in perpetuity, unless limited in duration by the grant itself or as a consequence of some limitation imposed by the general law of the State, or by the corporate powers of the city making the grant. Detroit v. Detroit Street Railway, supra; Louisville v. Telephone Co., supra; People v. O'Brien, 111 N. Y. 1, 42; Woodhaven Gas Light Co. v. Deehan, 153 N. Y. 528; Mobile v. L. & N. Railroad Co., 84 Alabama, 115; Town of Arcata v. Arcata Railroad Co., 92 California, 639; Hudson Tel. Co. v. Jersey City, 49 N. J. L. 303; Dillon Mun. Corp., 5th ed., § 1265; Nebraska Telephone Co. v. Fremont, 72 Nebraska, 25, 29; Plattsmouth v. Nebraska Tel. Co., 80 Nebraska, 460, 466. If there be authority to make the grant and it contains no limitation or qualification as to duration, the plainest principles of justice and right demand that it shall not be cut down, in the absence of some controlling principle of public policy. This conclusion finds support from a consideration of the public and permanent character of the business such companies conduct and the lafge investment which is generally contemplated. If the grant be accepted and the contemplated expenditure made, the right cannot be destroyed by legislative enactment or city ordinance based upon legislative power, without violating the prohibitions placed in the Constitution for the protection of property rights. To quote from a most weighty writer upon municipal corporations, in approving of the decision in People v. O’Brien, supra, a decision accepted and approved by this court in Detroit v. Detroit Street Railway, supra — “ The grant to the Railway Company may or'may not have been improvident on the part of the municipality, but haying been made and the rights of innocent, investors and of third' parties as creditors and otherwise having intervened, it would have been a denial of justice to have refused to give effect to the franchise according to its'tenor and import,’when fairly construed, particularly, when the, construction adopted by the court was in' accord with the general understanding. In the absence of language expressly limiting the estate or right of the company, we think the court correctly held under the legislation and facts that the right created by the grant of the 'franchise was perpetual, and not for a limited term only.” Dillon on Mun. Corp., 5th ed., § 1265.

3. There seems to have been no genéral law in Kentucky under which a telephone company could acquire the necessary street easement; nor until the enactment of § 4639-b of the Kentucky Statutes, was there any provision in the general law in regard to the acquisition of such rights in or upon the public roads outside of municipal corporations. In both cases the right to place and maintain poles and wires upon either streets or roads was dependent in the one case upon the municipal power of control over its streets, and in the other upon .the power of the county fiscal courts by virtue of their control over county roads.

The original source of power over both streets and highways is the State. But this power of control is generally delegated in some form to the municipalities and county authorities of the State. Thus the county fiscal courts, by §4306, Kentucky Statutes, are given “general charge and supervision of the public roads,” etc. Concerning the power resulting from the grant by the State to control streets or public highways, the Kentucky court, in American Car Co. v. Johnson County, 147 Kentucky, 69, 71, said: “The right to grant a franchise presupposes and is based upon the right of the authority granting the franchise to control the property over which the franchise is granted or which is affected by it. For example, the fiscal court could grant a franchise authorizing the erection of poles along the highways of the county, as 'the fiscal court had control of the highways. And so, municipal corporations may grant franchises to use the streets and public ways of a.city.” Again, in Jackson-Hazard Telephone Co. v. Holliday, 143 Kentucky, 149, 150, the court said:“That the fiscal court having, as it did, under section 4306, Kentucky Statutes, the control and supervision of the public roads of the county, had authority before the enactment of section 4679-b of the Kentucky Statutes to grant the company the right to erect its poles along this road in the absence of a statute expressly giving the court such authority, is we think settled by the case of Cumberland Telephone & Telegraph Co. v. Avritt, 120 Kentucky, 34.” Section 4679-b, referred to, gives to telephone companies the right to place their poles along such roads subject to regulation by the fiscal courts, but it does not deal with the streets of municipal corporations. The right of such companies to occupy the streets'of villages and cities was, therefore, dependent upon the charter powers, express or implied, under which they were organized.

Owensboro was granted a special charter in 1882, by which, among other things, it is given power “to regulate the streets,alleys and sidewalks and all improvements and repairs thereof.” If the county fiscal courts had power to grant to such companies a franchise to place their poles and wires along-the public roads of a county under the statute giving them “general charge ” and right to “supervise” such roads, it logically follows, as stated in American Car &c. Co. v. Johnson, supra, that the City of Owensboro under the power to “regulate ” its streets and alleys had ample authority to grant a franchise to the Telephone Company to place and maintain its poles and wires upon the streets.

The character of the- business of such companies was well known. Access with their lines to the houses of their customers in the city absolutely required the right to use the public streets, either longitudinally or to cross them. By such an exertion of its power to control and regulate the use of the streets it did not authorize a new public use. Such a use was a legitimate street use and did not impose upon the owner of the fee in the street an additional burden. Cumberland Telephone and Telegraph Co. v. Avritt, 120 Kentucky, 34. Neither was the city thereby stripped of its police power over the streets. Louisville City Railway v. City of Louisville, 8 Bush, 415, 420. Nor did it 'undertake to grant an exclusive right. Express power to grant an exclusive street franchise has generally been held essential. Dillon, Mun. Corp., 5th ed. §§ 1215, 1218, 1234. The grant in this case was not exclusive, and we are not called upon to deal with that question, since the ordinance here involved expressly reserves the right to make similar grants to other companies.

The great power of Congress over interstate commerce is wrapped up in the power to “regulate ” such commerce. The authority of the City of St. Louis to compel the Western Union Telegraph Company to pay a rental for the maintenance of its poles and wires upon the streets of the city grew out of a charter power to “regulate” its streets and alleys. In this case (149 U. S. 465, 469), the court said:

“The word 'regulate' is one of broad import. Tt is the word used in the Federal Constitution to define the power of Congress over foreign and interstate commerce, and he who reads the many opinions of this court will perceive how broad and comprehensive it has been held to be. If the city gives a right to the use of the streets or public grounds, as it did by ordinance No. 11,604, it simply regulates the use when it prescribes the terms and conditions upon which they shall be used.”

In City of Owensboro v. Cumberland Telephone & Telegraph Company, 174 Fed. Rep. 739, a case involving the regulation of the rates and charges of the present appellee, the power of the City of Owensboro under its charter power to “regulate” was held by the Circuit Court of Appeals of the Sixth Circuit to amply justify the grant here involved, though its duration was not involved or considered.

That the power to “regulate ” embraces power to grant to such companies the right to place and maintain their poles upon'the streets has been generally held: Pikes Peak Power Co. v. Colorado Springs, 105 Fed. Rep. 1; C. C. A. 8th Circuit; Detroit Citizens’ Railway v. Detroit, 64 Fed. Rep. 628, 636; C. C. A. 6th Circuit. In the latter case it was held that a charter power to “open, close and widen streets, and to prescribe, control and regulate the manner in which the highways, streets and avenues shall be used and enjoyed,” was a power broad enough to permit the city to consent to the use of its streets for such purposes by any company having the requisite franchise of a street railway company. To the same effect see Dillon, Mun. Corp., 2d ed., § 575; Atchison Street Railway v. Missouri &c. Ry., 31 Kansas, 661; Southern Bell Telephone Co. v. Mobile, 162 Fed. Rep. 523, 562; State v. Murphy, 134 Missouri, 562; Brown v. Duplessis, 14 La. Ann. 842; Chicago, B. & Q. Railway v. Quincy, 136 Illinois, 489; New Castle v. Lake Erie &c. Railroad, 155 Indiana, 18.

4. It is next insisted that the grant is' limited to the life of the corporation that accepted it. The assumption that this life was limited to twenty-five years from the date of the organization of the grantee corporation is erroneous. The articles of agreement did provide that the company should terminate in twenty-five years, but as this was an agreement of the stockholders inter sese, it was competent for them, if the general incorporating act under which the company was organized permitted, to extend its life. This is precisely what the Kentucky act under which the company was organized permitted. Thus it provided that corporations organized for any work of internal improvement could be formed to endure for fifty years, and those formed for other purposes, for twenty-five years. General Statutes of Kentucky 1888, c. 56, § 7, p. 764. But the same act provided tha^ in either case the term might be extended by action of three-fourths of the stockholders. Thus, if it be assumed that the grant was limited to the life of the grantee, that life was capable of extension at the will of the stockholders, and an extension did occur as contemplated! But this ordinance was to the Cumberland Telephone Company and its assigns. It vested a property right, capable.of passing to an. assignee, and did in fact pass to the present consolidated company, whose life, by express action of its entire body' of stockholders, is for two hundred years. That a corporation is capable of taking a grant of street rights of longer duration than its own corporate existence is the settled law of this court: Detroit v. Detroit Street Railway, supra; Louisville v. Cumberland Telephone & Telegraph Co., supra.

The case of St. Clair County Turnpike Company v. Illinois, 96 U. S. 63, has been cited and relied upon as deciding that a grant to a corporation is- limited in duration to the life of the grantee. If the case is to be regarded as holding the wide doctrine for which it has been cited, it is in conflict with the cases cited above. But it does not go so far as claimed. The grant there involved was of the. right to extend an existing turnpike over a certain dyke and county bridge, and to maintain a toll-gate upon the extension. The company to which this additional right was given had been incorporated for a term of twenty-five years. The grant was to the particular company by.name' and was not to its assigns or successors. This court likened such a grant to a grant at common law to a natural person without words of restriction, which, said the court, “creates only an estate for the life of the grantee;,for he can hold the property no longer than he himself exists.” The grant here involved was to the- corporate grantee, its assigns and successors; and falls under the principle of the cases cited above.

5. It is next said that the power to grant found in the city charter is coupled with the power to amend or repeal. The tenth section of the city charter provides that “TDJie Common Council shall have control of the finances and all property, real.and personal, belonging to the’city, and shall. have, full power "to .make; publish, and repeal all ordinances for the following purposes.” Then follows fifty-seven sub-sections relating to the legislative power of the council. The twenty-seventh section gives the council the power “to regulate the streets, alleys and sidewalks and all repairs thereof.”

The power to be a corporation and to conduct a telephone business did not come from the city, nor could it. The only thing which the ordinance pretends to do is to grant an easement jn the streets which, as we have already shown, was an unlimited right to place and maintain poles and wires upon the streets, subject, however, to the police power of the city. - This repealing ordinance, though it-purports to be an exercise of the police power in the “whereas” clause, proceeds immediately to contradict the assertion that the poles and.wires are a “nuisance” by the proviso giving the 'company an opportunity to purchase the right to continue the use of the streets under conditions “to be prescribed by ordinance,” upon request of said. company. It is a plain attempt to destroy the vested property right under which a great plant had been installed and operated for more than twenty-five years. When that grant was accepted and- acted upon' by the grantee it became a contract between the city and the telephone company, which could not be revoked: or repealed, unless the power to repeal was clearly and unmistakably reserved.'

,The sixth section of the- granting ordinance provides that, “This ordinance may be altered or amended as the necessities of the city may demand.” This is no more than a reservation of the police .control of the streets and of the mode and manner of placing and maintaining the poles and wires incident to the unabridgeable police power of the city. See Grand Trunk Railway v. South Bend, 227 U. S. 544. It does not reserve any right to revoke or repeal the ordinance, or to affect the,rights therein granted.- Nor does the city attempt to justify its action in requiring the poles and wires to be removed from the streets under that section, but solely upon the.general power in the city charter “to make, publish and repeal ordinances.” This general power to repeal ordinances obviously refers to ordinances which are legislative in character, and exertions of the governmental power of the municipal council, — a power in its nature not to be abridged by irrepealable ordinances. Baltimore v. Baltimore Trust Co., 166 U. S. 673; Grand Trunk Railway v. South Bend, supra. The power to repeal, alter and amend such ordinances is one which inheres in the power to legislate, and its mention is pure surplusage.

To construe this general power of repeal as a reservation of a power to revoke or destroy contractual rights which have Vested under an ordinance, which, upon its face, makes no such reservation, would be to place every contract made by the city by virtue of an ordinance, legislative in form, subject to the mercy of changeable city councils. In the absence of an express reservation in the, contractual ordinance, or an express delegation of power to revoke contracts under such ordinances, we think no such extraordinary power is to be implied. Ashland v. Wheeler, 88 Wisconsin, 607, 616.

Much the same question arose in Hudson Telephone Company v. Jersey City, 49 N. J. L. 303, where the right granted was held to be irrevocable under a similar power. Greenwood v. Freight Co., 105 U. S. 13, is not in point. That case involved the repeal by the Massachusetts legislature of a legislative charter, under a reserved power, by general law of thé State making “every act of incorporation (after a certain date) subject to amendment, alteration or repeal, at the pleasure of the legislature.” That was a plain, unmistakable reservation of the right to repeal at the pleasure of the State. This clause of the charter in the instant case reserves no more than the power to repeal, as well as to make and amend ordinances, but by no means operates to convey the power to “repeal ” a grant of street rights which had been accepted and had thereby become a contract under the protection of the contract clause of the Constitution. That the right may be reserved to destroy a contract may be conceded; but when such a right is claimed, it must be clear and explicit. The contention here advanced, if conceded, would paralyze the contractual power of the city, for if it has application to this ordinance, it would equally apply to every other contractual ordinance which the city might enact, though the contract had been accepted and expenditures made.

In Lake Roland El. Ry. v. Baltimore, 77 Maryland, 352, an ordinance consenting to the laying of a double track over designated streets was involved. This ordinance could not become effective until confirmed by the legislature. The confirming act contained these words: “The said Mayor and City Council to have the same power and-control hereafter in reference to the enforcement, amendment or repeal of said ordinance as it has or would have in respect to any ordinance passed under its general power.” Later this ordinance was in part repealed, and the repeal was held valid upon the ground that the control of the city over its streets was a legislative power and that the council could not consent to any rights therein which were not revocable, although the city might be liable for damages. The opinion does not rest upon the theory that' any right of repeal was specially reserved in the ordinance or by the confirmatory act. The validity of the repeal was put upon the right to repeal every ordinance legislative in character* The case is out of line with thé great weight of authority in respect to the irrevocable character of property rights vested under an ordinance when the right to revoke is not expressly reserved.

" In Baltimore Trust Co. v. Baltimore, 64 Fed. Rep. 153, Circuit Judge Goff refused to follow the case, holding that the question of contract or no contract finder such an ordinance was a Federal question, and that the confirmatory legislation reserved no right of repeal, and that none existed under the general right to repeal ordinances. In the same case, 166 U. S. 673, the decree of Judge Goff was reversed upon the sole ground that the requirement of the so-called repealing ordinance, that the railway company should maintain but one track on one of the designated streets was a legitimate exercise of the police power, and not a substantial change of the contract. The case is so explained and distinguished in Grand Trunk Railway v. South Bend, supra.

6. In June, 1900, the Cumberland Telephone and Telegraph Company consolidated with the Ohio Valley Telephone Company, likewise a Kentucky corporation, under authority of the Kentucky act of April 5, 1893 (Acts of 1891,1893, e. 171, p. 612). Although the separate existence of the constituent corporations was terminated and they became a single corporation, the consolidated company was, by express provision of the act referred to, “vested with all the property, business, credits, assets and effects of the constituent corporations, without deed or transfer, and bound for all their contracts and liabilities.” Being property, alienable and assignable, the street rights of the constituent companies passed to the consolidated company. The same question arose and was ^xpressly decided in Louisville v. Cumberland Telephone & Telegraph Co., supra.

7. Finally, it was claimed that in a prior litigatipn in a state court, between the same parties, the ordinance of 1889 had been held to be in excess of the power of the city as nothing more than a revocable license. The suit referred to had been brought by the Telephone Company to restrain the city from placing poles and wires of an electric light system, in course of construction by the city, in such close proximity to the poles and wires of the Telephone Company as to interfere with its current. One of the defenses was that the city had no power under its charter to make, the grant which it had assumed to make by the ordinance of 1889, and that the Telephone Company was, therefore, a trespasser upon the streets. Upon a final hearing the bill was dismissed. This decree was pleaded as an adjudication of the question of the validity of the ordinance under which the Telephone Company now claims. But the judgment makes .the opinion of the court filed at the time “a part of the record.” That opinion shows that the court dismissed the bill because its object had failed, the city having. actually constructed its lines before final decree. In reference to the issue as to the validity of the Telephone Company’s street rights, the Kentucky court said: "In passing upon the question of granting or refusing the injunction, I deem it wholly unnecessary to pass upon the validity or invalidity of the ordinance discussed.” The litigation, though between the same parties, is upon an entirely different cause of action. The bar of the former judgment is, therefore, confined to the questions which were actually litigated and decided in the former case, and it devolved upon the city to show in support of its plea, the cause of. action being different in' the present case, that the point here in issue was adjudged in the former case. DeSollar v. Hansome, 158 U. S. 216; Virginia-Carolina Chemical Co. v. Kirven, 215 U. S. 252.

We find no error in the decree of the court below and it is, therefore,

Affirmed.-