City of Owensboro v. Cumberland Tel. & Tel. Co., 230 U.S. 58 (1913)

A reservation to alter or amend in a municipal ordinance, granting rights in the streets to a corporation to carry on a public utility, as the necessities of the city demand, is simply a reservation of police p. 59control incidental to the unabridgeable police power and does not reserve a right to revoke or repeal the ordinance itself.

Sec . 4. The rights and privileges hereby granted to said telephone company are upon the terms, and conditions following, viz: That said company shall furnish free of charge one telephone for each engine or hose house, now erected or which may hereafter be erected by said city, one for police head-quarters, and one for the mayor’s office p. 61has used the company’s poles for the maintenance of its fire alarm service, and has had the benefit of a free public telephone service for municipal purposes.

Under the provisions of the act of the legislature of the State of Kentucky creating a new charter for the City of Owensboro, in 1882 and in force when the grant in question was made, the power of amendment and repeal was given and reserved to the city, and the grant to the appellee was necessarily made subject to this power. Section 10, 1 Acts Kentucky, 1881, pp. 817-856; Kentucky Statutes (1909), p. 63§ 570; Kentucky Constitution, § 190; Gas Co. v. Des Moines, 44 Iowa, 508; Greenwood v. Freight Co., 105 U. S. 13; Griffin v. Kentucky Ins. Co., 3 Bush (Ky.), 592; Hager v. Walker, 128 Kentucky, 1; Hopkins v. Swansea, 4 M. & W. 621; City Ry. Co. v. Louisville, 8 Bush, 420; Presbyterian Church v. New York, 5 Cowan, 532; Southern Telephone & Telegraph Co. v. Richmond, 98 Fed. Rep. 672; N. C., 103 Fed. Rep. 31; Stuyvesant v. New York, 7 Cowan, 585; Vanderbilt v. Adams, 7 Cowan, 349; Cooley’s Const. Lim. (5th ed.) 196, 240; Dillon on Mun. Corp. §§ 245-573; 23 Cyc. 1142, and cases cited in note 57.

Where there has been a previous litigation between the p. 64same parties relative to the same cause of action, the judgment of the court therein places the matter at rest forever between the parties thereto and their privies. Bigelow on Estoppel, 72, 73, 152; Black on Judgments, §§ 720, 731; Case v. Beauregard, 101 U. S. 688; Coffey v. United States, 116 U. S. 436; Davis v. McCorkle, 14 Bush (Ky.), 754; Frances v. Wood, 81 Kentucky, 22; Freeman on Judgments, §§ 249, 270; Hanley v. Donoghue, 116 U. S. 6; Hardwick v. Young, 110 Kentucky, 504; Henderson v. Henderson, 3 Hare, 115; Water Co. v. Knoxville, 200 U. S. 33; Lyon v. Perin Mfg. Co., 125 U. S. 700; Martin v. Evans, 85 Maryland, 8; Rex v. Duchess of Kingston, 20 Howell’s St. Tr. 355; Van Fleet on Former Adjudication, §§ 37, 40; Baker v. Cummings, 181 U. S. 117-124-5; >8. P. R. Co. y. United States, 168 U. S. 48,49, 50.

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. p. 65have 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.

vol . ccxxx—5 p. 66Railroad 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, 12 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 large 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 having 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.

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 America^, 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 p. 68think 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.

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 p. 69been 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.

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 p. 70it 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 that 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 p. 71property 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.

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 “The 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 p. 72of the council. The twenty-seventh section gives the council the power “to regulate the streets, alleys and sidewalks and all repairs thereof.”

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 p. 73power 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.

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 the 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 p. 74thereby 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 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 under such an ordinance was a Federal question, and that the Confirmatory legislation reserved no right of repeal, and that p. 75none 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.

I am unable to concur in the judgment and opinion announced in this case. In my opinion the ordinance of December 4,1889, granting to The Cumberland Telephone & Telegraph Company, its successors and assigns, the p. 77230 U. S. Day , Mc Ken na , Hugh es and Pit ne y , JJ., dissenting.

If there is such right to repeal, the authorities are con- p. 79230 U. S. Day , Mc Ken na , Hug he s , and Pit ne y , JJ., dissenting.

It is said, however, and that seems to be the ground upon which the decision of the court upon this point rests, at last, that the reservation of the right to repeal does not clearly appear in the charter of Owensboro, as it did in the Massachusetts legislation considered in Greenwood v. Freight Co., supra, and it is said that such right, when it is claimed, must be clear and explicit. To my mind the purpose of the Kentucky legislature was evidenced with perfect clearness, for I think that the same law which gave the city the right, which otherwise would have rested with the legislature alone of exercising authority over the streets, which in this case, it is held, authorized their use for telephone purposes, in unmistakable terms made such authority subject to the clearly stated and definite limitation named. Furthermore, the doctrine is well settled that legislative grants of municipal authority shall be construed most favorably to the public and against persons claiming thereunder, a doctrine sanctioned by decisions of this court. Moran v. Commissioners of Miami County, 2 Black, 722; Citizens’ Street Railway v. Detroit Railway, 171 U. S. 48; Los Angeles v. Los Angeles City Water Co., 177 U. S. 558. Surely, if the intention of the p. 81230 U. S. Day , Mc Ken na , Hug he s and Pitn ey , JJ., dissenting.

A somewhat diligent search has failed to discover cases exactly in point construing a reservation of the character herein involved. The case of Lake Roland Elevated Railway Co. v. Mayor &c. of Baltimore, 77 Maryland, 352, followed and approved in United Railways v. Hayes, 92 Maryland, 490, is, however, closely analogous. In that case the city granted a franchise to the railway company permitting it to lay tracks in the streets of the city and also to erect an elevated railway in a certain street. A statute passed to con- p. 83230 U. S. Day , Mc Ken na , Hug he s and Pit ne y , JJ., dissenting.

Where there is a limitation in the law of the State of duration for which easements in streets can be granted by municipalities, an easement granted for an indefinite period continues for the statutory period. There is a distinction between a definite grant for a period longer than p. 85230 U. S. Counsel for Parties.

This was accepted and the grantees named therein immediately began the construction of their plant. Later, in July, 1890, similar street rights were granted to a corporation of Idaho known as the Artesian Water and Land Improvement Company. This last named company accepted the ordinance and expended much money in the construction of another water supply system. At some p. 88date prior to 1895, apparently on March 28, 1891, each of these grantees conveyed and assigned all of their rights, franchises and easements to the present plaintiff in error. It has since that time made large expenditures in improving the plants acquired from its predecessors, and has since maintained its pipes in the streets and has continuously furnished water to the city for fire purposes and to private consumers. The ordinance which is claimed to be an impairment of the street rights acquired by the ordinance of 1889 and long occupancy was passed on June 7, 1906, and is in these words:

Upon the issues there was a judgment against the city for the full amount claimed as due for water furnished for fire purposes, less the agreed amount of the city’s counter-claim, which, by direction of the court, was found for it, being so much of the claim for rentals as had p. 90accrued after April 1, 1909, and before the bringing of this action.

The right which is acquired under an ordinance granting the right to a water company to lay and maintain its pipes in the streets is a substantial property right. It has all of the attributes of property. It is assignable and will pass under a mortgage sale of the property and franchises of the company which owned it. Dillon’s Mun. Corp., p. 915th ed., § 1265; Detroit v. Detroit Street Railway, 184 U. S. 368, 395, 396; Louisville v. Cumberland Tel. & Tel. Co., 224 U. S. 649, 661. Detroit Railway Co. v. City of Detroit, 64 Fed. Rep. 628. The grant was made in contemplation of the investment of large capital in the construction of a system of water works for the permanent supply of the city with water. The presumption is that no such enterprise would have been entered upon if the street easement was subject to immediate revocation. The city had the express power to provide its inhabitants and itself with water, under its legislative charter. It could not grant a corporate franchise to a water company. Neither did it undertake in this ordinance to enter into a contract for a supply of water for public or private purposes. What it undertook to do was to grant to those who proposed to construct and maintain works for that purpose the right to “lay and repair” their distributing pipes along the streets of the city. There is no limitation in the general law of the State, nor in the charter of the city, as to the duration of a contract granting an easement in the streets for that purpose, unless it be found in § 2710, Revised Statutes of Idaho, being § 2838, Revised Codes of Idaho. That statute is in these words:

The original grant of street rights was assignable on its face and was made to individuals. It was held in the case of Jack v. Village of Grangeville, 9 Idaho, 291, that the section above set out applied only to corporations. A p. 92later ordinance granted similar rights to a corporation. The plaintiff in error has succeded to the rights of both. The ordinance of June 7, 1906 imposes the rental charge, called a “license fee,” for the privilege granted by the ordinance of October 3, 1889, which was the grant to the Eastmans. But, if it be assumed that § 2710 limits the term of any contract or grant with any water company, corporate or otherwise, the most that can be said is, that such a grant for an indefinite term is thereby limited to a term of fifty years. There are cases which hold that when by law a municipality is prohibited from entering into a particular class of contracts, or from granting a franchise for a term longer than one specified, that a definite contract for a longer term than is permitted, is not effective even for the shorter statutory term: Manhattan Trust Co. v. City of Dayton, 59 Fed. Rep. 327. But this ordinance is indefinite in duration, and there is a substantial distinction between a contract which on its face'shows a plain intent to grant and obtain more than is legal and a contract for an indefinite term. In the latter case the parties may be assumed as intending to grant or acquire no longer term than the law provides. The statute in the one case is openly and purposely defied and in the other, the term being indefinite, is limited by the statute. The distinction was noted and observed by District Judge Rogers in the case of Old Colony Trust Co. v. City of Wichita, 123 Fed. Rep. 762, which case was affirmed by the Circuit Court of Appeals, 132 Fed. Rep. 641; and by the Supreme Court of New York, in People ex rel. Flatbush Gas Company v. Coler, 54 N. Y. Miscellaneous Rep. 21, a case reversed upon another point. 190 N. Y. 268.

For the purposes of this case we need go no further than to hold, as we do, that the street easement was not a mere revocable license, and that if limited in time by § 2710, Revised Statutes of Idaho, that time had not expired when the ordinance of 1896 was passed. The plain effect p. 93of this later ordinance was to impair the obligation of the contract resulting from the ordinance conferring the street easement. The court below erred, therefore, in instructing the jury to allow the counter-claim.

The city may not object to the change in the obligation of the Water Company to supply free water. It was a burden which had been imposed by the State under p. 94general law, applicable to all water companies, imposed solely for the benefit of the municipalities of the State. Such municipalities are mere emanations from the State, exercising such public power as the State chooses to grant. If such a provision in the general law of the State providing for the incorporation of water companies can be considered in any sense as constituting a contract, it was one to which the municipalities of the State were not parties, and we can imagine no constitutional reason why the State might not, if it sees fit, relieve even existing companies from the burden of such a law. The provisions of the original §2711 were taken from the California statutes, and were held by the California courts not to impose any burden upon such companies that could not be removed without contravening the obligation of any contract within the prohibition of the Constitution. Spring Valley Water Co. v. San Francisco, 61 California, 18.

Prior to furnishing the water for fire purposes which constitutes the demand sued upon in this case, the commissioners provided for by the section above referred to were appointed and they agreed upon a schedule of charges for all purposes, whereby the charge for water for fire purposes was fixed at $3,000 per annum for fire hydrants “now in use and $3.50 monthly for such additional hydrants hereafter established.” This schedule of rates p. 95was not changed or modified, so far as here appears, during the period covered by the account of the Water Company in suit, and by the terms of § 2839, Revised Codes, continued in force for three years “and until new rates should be established.” The claim that the plaintiff in error, the Water Company, was under obligation to furnish free water, is wholly without merit.

That this report and the schedule of rates and charges were never adopted by the city council is of no moment. They were reported to the city and were effective by the p. 96terms of § 2839, Revised Codes of Idaho, when agreed to by a majority of the commissioners, for a term of three years and until new rates should be established. From August 1, 1905 to May 1, 1906, the city paid the monthly rates fixed by the schedule, but from that date it refused to pay and gave notice that it would pay no longer. But there was evidence that the Water Company denied the city’s right to refuse to take water upon the notice given, and continued to maintain its service and to furnish water, and that the city continued to use the water for fire purposes.

“If you find that the City, through the fire department, and with the knowledge of the responsible and governing officers of the City, that is, the city council and the mayor, continued to maintain these hydrants for fire purposes, and from time to time as there was need continued to use the water therefrom and required the company to connect its mains with other hydrants—there is some testimony to the effect that eleven additional hydrants were installed at the instance of the city, and connected with the Company’s mains,—in other words if you find from all of the evidence in the case that the City, through its responsible officers, the city council and the mayor, continued to maintain these hydrants and use them as there was need, and take water from the company’s mains, the water company's mains, as there was need therefor, if this was done knowingly, I say, then there arises by implication of law what we call an implied contract on the part of the city to pay for the water, and in this case an implied obligation to pay in accordance with the schedule rates. In other words, the Water Company here stood in the position of a merchant or other person having goods to sell, with the prices thereof quoted. If you go and order an article with p. 97price so quoted you do so with the implied agreement and the obligation upon your part to pay for the article the price at which it is offered for sale. So here the Water Company stood in the position of having water for sale, for culinary purposes, for use in business buildings, for sprinkling lawns, and for fire purposes, and if a private person took this water and used it he would do so with the implied understanding that he would pay for it at the rate quoted, and, if the City took it, it took it with the implied understanding and imposed obligation to pay for it in accordance with the rates quoted.”