Source: https://www.legalcrystal.com/case/91456/owensboro-vs-cumberland-tel-co
Timestamp: 2019-04-24 08:41:25+00:00

Document:
Respondent Cumberland Tel. and Tel. Co.
Rights conferred by a municipal ordinance on a corporation qualified to conduct a public business come from the state through delegated power to the city.
A municipal ordinance granting to a corporation qualified to carry on a public business, such as a telephone system, the right to use the streets for that purpose is more than a mere revocable license; it is the granting of a property right, assignable, taxable and alienable, an asset of value and a basis of credit.
Such a grant is one of property rights in perpetuity unless limited in duration by the grant itself or by a limitation imposed by the general law of the state or by the corporate powers of the municipality.
The powers of municipalities of Kentucky to grant licenses in the streets for telephones were not limited in 1889 as to time, and, under a charter provision giving power to regulate streets and alleys, a municipality had ample power to grant a franchise to a telephone company to place and maintain poles and wires thereon.
A corporation is capable of taking a grant of street rights of longer duration than its own corporate existence if the grant expressly inures to the benefit of the grantees, assigns and successors. St. Clair Turnpike Co. v. Illinois, 96 U. S. 63 , distinguished.
control incidental to the unabridgeable police power, and does not reserve a right to revoke or repeal the ordinance itself.
While the power to destroy contract rights may be reserved by a municipality in the ordinance granting them, the reservation must be clear and explicit.
An ordinance requiring a telephone corporation to remove from the streets its poles and wires which had been placed there under a former ordinance granting permission so to do without specifying any period, or else pay a rental not prescribed in the original ordinance, held unconstitutional under the contract clause of the federal Constitution. Greenwood v. Freight Co., 105 U. S. 13 , distinguished.
Where, under the statutes of the state, a corporation formed by consolidation of several previously existing corporations becomes by express terms vested with all the assets of such constituent corporations, rights in the streets under municipal ordinances pass to the new corporation and such rights are protected against impairment by the contract clause of the federal Constitution.
Where the judgment itself makes the opinion a part of the record, the bar of the judgment is confined to those questions to which the opinion expressly declares the litigation was limited.
has 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.
"that said company shall have the right to purchase from the said city a franchise authorizing it to maintain said poles and wires and use same as provided under the laws of the state, upon proper conditions, to be prescribed by an ordinance, to be passed upon request of said company to the common council of said city."
This bill was filed for the purpose of enjoining the enforcement of this ordinance, the contention being that it was an impairment of the company's contractual property rights in the streets, and, as such, in contravention of the contract and due process clauses of the Constitution of the United States. Upon a final hearing, the court below sustained the bill and permanently enjoined the enforcement of the repealing ordinance.
have been made. See Greenwood Lake & P. J. Railroad v. New York &c.; R. Co., 134 N.Y. 435, 440; 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 a temporary purpose. The right conferred came from the state through delegated power to the city. The grantee was clothed with the franchise to be 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 right 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 , 184 U. S. 395 ; City of Louisville v. Cumberland Telephone and Telegraph Co., 224 U. S. 649 , 224 U. S. 661 ; Boise Artesian Water Co. v. Boise City, post, p. 230 U. S. 84 . As a property right it was assignable, taxable, and alienable. Generally it is an 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.
"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.
3. There seems to have been no general law in Kentucky under which a telephone company could acquire the necessary street easement, nor, until the enactment of § 4679b 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 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 has control of the highways. And so municipal corporations may grant franchises to use the streets and public ways of a city."
think, settled by the case of Cumberland Telephone & Telegraph Co. v. Avritt, 120 Ky. 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 & Foundry Co. v. Johnson County, 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.
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 word 'regulate' is one of broad import. It 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 Co., 174 F. 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.
"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 Dilllon, Mun. Corp., 2d ed. § 575; Atchison Street Railway v. Missouri &c.; Ry., 31 Kan. 661; Southern Bell Telephone Co. v. Mobile, 162 F. 523, 526; State v. Murphy, 134 Mo. 562; Brown v. Duplessis, 14 La.Ann. 854; Chicago, B. & Q. Railway v. Quincy, 136 Ill. 489; New Castle v. Lake Erie &c.; Railroad, 155 Ind. 18.
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 200 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, 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 dike and county bridge, and to maintain to 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.
"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."
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 in 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.
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 Wis. 607, 616.
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.
"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 the 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.
none existed under the general right to repeal ordinances. In the same case, 166 U. S. 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 Western Railway v. South Bend, supra.
"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 expressly decided in Louisville v. Cumberland Telephone & Telegraph Co., supra.
"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. Hanscome, 158 U. S. 216 ; Virginia-Carolina Chemical Co. v. Kirven, 215 U. S. 252 .
" Council Proceedings Dec.4th, 1889"
" Minute Book "F," Page 157"
"The following ordinance, after being twice read, was enacted by the following vote, to-wit.: Ayes, Mes. Borer, Brotherton, Vargeson, Cullon, Higdon, Decker, Noes, None. Viz.: "
"Be it ordained by the Mayor and Common Council of Owensboro, Ky.:"
"That the Cumberland Telephone Company, its successors and assigns, is authorized and hereby granted the right to erect and maintain upon the public streets and alleys of said city any number of telephone poles of proper size, straight and shaved, smooth, set plumb and set erect, and any number of wires thereon with the right to connect such wires with the building when telephone stations are established, provided that such poles shall be located and kept so as not to interfere with the travel upon said streets or alleys or the substantial use thereof by the inhabitants of said city."
"SEC. 2. That the said Cumberland Telephone Company shall erect only one line of poles on a street, except for the length of one block upon the street upon which the exchange building may be located, and where the wires of said company enter such exchange building the said company shall have the right to erect and maintain its poles on both sides of such street, and the lowest wire of said telephone company shall not be less than twenty-five feet from the ground, except where such wires enter the exchange building or telephone stations."
"Nothing in this ordinance contained shall be construed as an exclusive right to said company to erect and maintain said poles upon the streets and alleys of said city, and no obstruction shall be placed by said company to the erection and maintenance of poles by any other person or company. Such company shall enjoy such rights in common with all other persons or companies to whom said city may see proper to extend the same right."
"SEC. 3. The said telephone company shall repair all streets and alleys it may enter upon and use for the purpose herein provided which by the acts of said company or persons in its employ shall have become injured or damaged or been made unsafe."
"All proper precautions and safeguards shall be used to prevent such use from becoming either injurious or annoying to the inhabitants of said city, and should any damage or injury result to any person or property by reason of the erection and maintenance of such poles, or the failure to keep the streets and alleys in repair as herein required, and said city shall be held liable by reason thereof, such company shall pay all damages and costs resulting therefrom to the parties injured, or to the city, if paid by her."
"SEC. 4. The rights and privileges herein 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 headquarters, and one for the mayor's office, making at this time only two such telephones to be furnished by said company for the use of the city, shall be kept in good order for constant use by said company."
"Said company shall also allow the city the exclusive use of two feet of one arm on each pole for its fire alarm telegraph. The fire alarm telegraph poles of the city may be used by said company for its wires provided such wires be kept two feet from the said fire alarm telegraph wires, and such poles used by said telephone company shall be replaced by it when needed."
"SEC. 5. All poles of said telephone company shall be set close to the inner side of the sidewalk curbing."
"SEC. 6. This ordinance may be altered or amended as the necessities of the city may demand."
right to use the streets and alleys of the City of Owensboro for the purpose of erecting poles and stringing wires thereon to maintain a telephone system, did not grant a perpetual franchise, because of the limitation upon the authority of the City of Owensboro to grant a perpetual franchise.
The case is not controlled by the previous cases in this Court, such as the late case of Louisville v. Cumberland Telephone Co., 224 U. S. 649 , which had to do with the construction of a legislative grant to a corporation having perpetual succession, and did not involve the construction of the charter of a Kentucky city, such as is here under consideration.
"§ 10. 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, amend, and repeal all ordinances for the following purposes, to-wit . . ."
In other words, the authority granted to regulate the streets is limited by the express reservation that it shall be exercised subject to the power of the city to amend and repeal any ordinance so enacted.
"It became obvious at once that many acts of incorporation which had been passed as laws of a public character, partaking in no general sense of a bargain between the states and the corporations which they created, but which yet conferred private rights, were no longer subject to amendment, alteration, or repeal, except by the consent of the corporate body, and that the general control which the legislatures creating such bodies had previously supposed they had the right to exercise no longer existed. It was, no doubt, with a view to suggest a method by which the state legislatures could retain in a large measure this important power without violating the provision of the federal Constitution that Mr. Justice Story, in his concurring opinion in the Dartmouth College case, suggested that, when the legislature was enacting a charter for a corporation, a provision in the statute reserving to the legislature the right to amend or repeal it must be held to be a part of the contract itself, and the subsequent exercise of the right would be in accordance with the contract, and could not therefore impair its obligation."
In view of that policy, this Court held that, whatever rights remained to its other property, the authority to run cars upon the streets of the City of Boston, being subject to the reservation, terminated upon the repeal of the ordinance.
"The defendants now, on the ground that there are limits even to the operation of a reserved power to repeal, argue that we should consider these allegations. But we do not inquire into the knowledge, negligence, methods, or motives of the legislature if, as in this case, the repeal was passed in due form. United States v. Des Moines Navigation & Railway Co., 142 U. S. 510 , 142 U. S. 544 . The only question that we can consider is whether there is anything relevant to the present case in the terms or effect of the repeal that goes beyond the power that the charter expressly reserves."
". . . By making a contract or incurring a debt the defendants, so far as they are concerned, could not get rid of an infirmity inherent in the corporation. They contracted subject, not paramount, to the proviso for repeal, as is shown by a long line of cases. Greenwood v. Freight Co., 105 U. S. 13 ; Bridge Co. v. United States, 105 U. S. 470 ; Chicago Life Insurance Co. v. Needles, 113 U. S. 574 ; Monongahela Navigation Co. v. United States, 148 U. S. 313 , 148 U. S. 338 -340; New Orleans Waterworks Co. v.
Louisiana, 185 U. S. 336 , 185 U. S. 353 -354; Knoxville Water Co. v. Knoxville, 189 U. S. 434 , 189 U. S. 437 -438; Manigault v. Springs, 199 U. S. 473 , 199 U. S. 480 . It would be a waste of words to try to make clearer than it is on its face the meaning and effect of this reservation of the power to repeal."
". . . The only question before us now is the validity of the judgment ousting the defendants from 'assuming to act as a body corporate, and particularly under the name and style of the Grand Rapids Hydraulic Company.' This really is too plain to require the argument that we have spent upon it. We may add that it is a matter upon which the bondholders have nothing to say."
See also Hamilton Gas Light & Coke Co. v. Hamilton, 146 U. S. 258 .
Kentucky Legislature to reserve in the municipality the authority to repeal such grants as the one here involved is not clearly manifested, at least there is reasonable room for doubt, and such doubt must be resolved in favor of the public. If the doubt be determined in favor of the company, and a grant which is not clearly in perpetuity is held to be such, the effect is to tie the hands of the municipality from obtaining revenue from the use of property held by it in trust for all its people.
"a provision . . . reserving to the legislature the right to amend or repeal, it must be held to be a part of the contract itself, and the subsequent exercise of the right would be in accordance with the contract, and could not therefore impair its obligation."
the privilege of using the public streets for these purposes.
A single case is cited in the opinion of the Court to sustain the conclusion reached upon this branch of the case, and that is Hudson Telephone Company v. Jersey City, 49 N.J.L. 303. An examination of that case shows that it did not involve the question now under consideration. There, the telephone company was organized as such under the prevailing statutes of the state, and had obtained on certain conditions the permission of the municipality to use the streets in accordance with a provision in the statute that the designation of the streets to be used and manner of placing poles should first be secured. An ordinance was passed revoking the permission, although the company had complied with the conditions, and the court held that the revoking ordinance was invalid. The court noticed the power reserved in the corporation act to repeal, suspend, and alter charters and the power of the city council to repeal ordinances. The former was held to run to the legislature solely, and it was said that there was no provision in the act authorizing the municipality to revoke its permission. Of the latter, the court said that the power to repeal was a general power arising from the power to pass ordinances, and existed without the express charter powers, and that such general power would not sustain the rescission of an act authorized by other legislation.
"the same power and control hereafter in reference to the enforcement, amendment, or repeal of said ordinance [granting the franchise] as it has or would have in respect to any ordinance passed under its general powers."
This reservation was held to authorize the repeal of the grant in question. The case upon this point meets the argument made in the opinion in this case that the right to amend, alter, or repeal would have existed without the statute, and cannot be held to cover the grant of franchise privileges to use the streets. Undoubtedly this right of repeal would have existed, and hence its insertion was unnecessary, unless it was to have some further purpose than that the law already gave -- the general power of a municipality to repeal ordinances of a legislative character. We think the intention in this case was the same as in the Maryland case, to preserve in the municipality authority over the streets in the interests of the public.
In my view, the case in its present attitude comes to this: the permission to place poles and string wires in the City of Owensboro was granted under a charter which expressly reserved the right to repeal by subsequent act of the municipal legislature. In the face of this authority, and presumably with knowledge of it, the company has entered upon the streets and made use of them for the purposes intended. Holding its grant subject to this superior right in the city to end it, I think the subsequent repealing ordinance was within the power of the municipality.
MR. JUSTICE McKENNA, MR. JUSTICE HUGHES, and MR. JUSTICE PITNEY concur in this dissent.

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