Source: https://caselaw.findlaw.com/us-supreme-court/243/166.html
Timestamp: 2019-04-20 23:17:25+00:00

Document:
[243 U.S. 166, 168] Messrs. George W. Jolly, Ben D. Ringo, La Vega Clements, and John A. Dean, Jr., for appellant.
Messrs. William T. Ellis and James J. Sweeney for appellee.
This is a suit to enjoin the city of Owensboro, in the state of Kentucky, from obstructing and preventing the maintenance and operation of an existing waterworks plant in that city. The plaintiff relies upon a franchise from the city which the latter insists has expired. In the district court the franchise was held to be still in force, and the city was enjoined from giving effect to an ordinance and a resolution impairing the same.
By the 2d section the city accepted the plaintiff 'as the successor' of the other company in respect of 'the contract for hydrant rental' then existing between the city and the other company 'as fully as if such existing contract had been originally made' by the city with the plaintiff 'without the intervention' of the other company; and by the 3d section the city gave its consent to 'the consummation of the said purchase of the said waterworks.' [243 U.S. 166, 170] The plaintiff accepted the provisions of this ordinance, relied upon them in consummating the purchase, and ever since has maintained and operated the waterworks and used the public highways of the city in that connection.
On May 6, 1914, the plaintiff's articles of association were amended, conformably to the state law (Ky. Gen. Stat. 1888, chap. 56, 7; Ky. Stat. 1903, 540, 559, 574), by adding a provision the declared purpose of which was to extend the plaintiff's corporate existence for the period of twenty-five years.
Whether the plaintiff now has a franchise from the city turns chiefly upon the construction and effect of the Ordinance of June 3, 1889. By it the city then said that 'the franchise and license' to maintain, complete, and operate waterworks in the city and to use its public highways for that purpose 'are hereby granted to the Owensboro Water Works Company, of Owensboro, Kentucky, and to its successors and assigns, for and during the existence of the said corporation.' Now the city claims, first, that by the ordinance it merely assented to the purchase by the plaintiff of the rights of the other company under the Ordinance of 1878; second, that if a franchise was granted to the plaintiff, it was only for the life of the other company; and, third, that even if a franchise was granted to the plaintiff for the period of its own existence, it was not to endure beyond the primary term of twenty-five years, named in the plaintiff's articles of association. But none of these claims has any support in the ordinance. Its terms are direct and its meaning plain. In apt words its 1st section not only grants a franchise to the plaintiff, but makes the life of the franchise coextensive with the plaintiff's existence; and we find nothing in the ordinance which suggests that the words fixing the duration of the franchise are to be taken as comprehending anything less than the full corporate existence of the plaintiff. The right to extend its existence beyond the primary term was [243 U.S. 166, 171] given by statute and expressly reserved in the articles of association, and so it is reasonable to believe that had there been a purpose to limit the franchise to that term it would have been plainly expressed, as was done in the ordinance of 1878. The reasonable implication from the inclusion of such a limitation in the earlier ordinance and its omission from the later one is that the franchise granted by the latter was not to be thus limited.
Of the suggestion that, under this view, the franchise may be made perpetual by repeated extensions of the plaintiff's corporate life, it is enough to say that we are here concerned with but a single extension already effected. The statute permitting such extensions may not be in force when the present twenty-five-year period expires, and, if it be in force, nothing may be done under it.
Because the primary term-the first twenty-five years-expired May 31, 1914, and the amendment to the articles of association stated that the extension for another twenty-five years would begin 'from and after' June 1, 1914, the city insists there was a hiatus of one day between the two periods and that in consequence the extension never became effective. We are not impressed with this contention. While in the computation of time that begins to run 'from and after' a day named it is usual to exclude that day and begin with the next (Sheets v. Selden, 2 Wall. 177, 190, 17 L. ed. 822, 826), this is not done where it will obviously defeat the purpose of those whose words are being construed or applied. The purpose of the amendment was to extend or prolong the plaintiff's corporate existence for another twenty-five years. It was adopted almost a month in advance of the expiration of the first twenty-five years, and, notwithstanding the use of the words 'from and after,' it shows very plainly that the second period was to begin where the first ended. Of course those words were not happily chosen, but as the amendment otherwise makes it certain that the extension was to be [243 U.S. 166, 172] effective on and after June 1, 1914, we think the amendment accomplished its purpose and that there was no hiatus.
The plaintiff's franchise, as before shown, was granted June 3, 1889, and, of course, did not expire September 10, 1903. What did expire on that day was the contract made September 10, 1878, whereby the city agreed to rent and pay for the hydrants for the term of twenty-five years from that date. It is plain, therefore, that what was intended by the word 'franchise' in the seven ordinances was that contract. There was nothing else to which it reasonably could refer.
The city further contends that the plaintiff is estopped from claiming a franchise extending beyond May 31, 1914, because in 1903 and 1904, in two suits against the [243 U.S. 166, 174] city, it described its franchise as granted for a term of twenty-five years, beginning June 1, 1889. But in neither suit was it material whether the life of the franchise was strictly limited to that period or was subject to prolongation by an extension of the plaintiff's corporate existence; and it is not claimed that this question was adjudicated in either suit. At that time nine or ten years of the primary period still remained, and there was as yet no occasion to elect or determine whether the privilege of effecting an extension would be exercised. Besides, in both suits the franchise was also described by the plaintiff as granted for 'the whole period of its corporate existence.' Thus no basis is shown for an estoppel by conduct or by judgment.
Other objections are made to the decree, but they are of less merit and do not require special mention.
This case presents for decision the single but very important question whether the city of Owensboro, Kentucky, by ordinance passed on June 3, 1889, granted to the Owensboro Water Works Company a franchise renewable indefinitely, and therefore in effect perpetual, or only a franchise for twenty-five years, 'to maintain, complete, and operate' waterworks in that city.
On the 9th day of September, 1878, a corporation named the 'Owensboro Water Company' was incorporated under the laws of the state of Kentucky, and, on the next day, the city of Owensboro granted to that corporation the right and franchise to construct and operate in that city a waterworks plant, using the streets and alleys in the customary manner.
After many details as to construction, service, and rentals of hydrants by the city, 13 provides: 'The rights, privileges, and franchises hereby granted to and vested in said company shall remain in force and effect for twenty-five years from the passage of this ordinance.' Thus it is too clear for discussion that the expression 'for the duration of the said company' in 1 of this ordinance of September 10, 1878, was deemed, both by the city granting it and by the company accepting it, as meaning a term of twenty-five years.
Does the grant to the Water Works Company of the franchise and license 'to maintain, complete, and operate' waterworks 'for and during the existence of said corporation' confer on the company a franchise in effect perpetual to use the streets of the city for waterworks purposes, or is it limited to twenty-five years?
The limitation of the grant to the twenty-five years 'duration' of the corporation would be beyond question were it not for the provision of the charter that the termination of the life of the company after twenty- five years shall be subject to such extensions as are provided for by law, and for the provision, of the statute quoted 'that they (such corporations) may be renewed from time to time for periods not greater than was at first permissible,'-in this case for an additional twenty-five years. The conclusion of the majority of the court is that this authority given to the stockholders to renew 'the duration' of the corporation (a discretionary power which is found in the charter, not in the grant, and which might or might not be exercised) expanded and extended the expression of the grant 'during the existence of the corporation' so as to make it as if it read, 'during the existence of the said cor- [243 U.S. 166, 178] poration,' and also for such 'renewals' of such existence as the stockholders of the company may, by appropriate action, favor some time in the future,-thereby making the grant in effect a perpetual one.
This rule was approved in terms in Topliff v. Topliff, 122 U.S. 121 , 30 L. ed. 1110, 7 Sup. Ct. Rep. 1057, and it has been repeatedly announced as the settled doctrine of this court.
Applying these rules in the reverse order of their statement I shall now give my reasons for concluding that the interpretation by the parties to it of the grant under consideration limits it to a life of twenty-five years.
But much more is to be found in the record as to what the parties- particularly as to what the [243 U.S. 166, 181] Water Works Company-thought was the term of this grant.
This bill is sworn to by the president of the Water Works Company and significantly enough is signed by the same counsel who sign the bill in the pending case.
But the Water Company, continuing of the same mind as to the meaning of the grant under consideration, in a petition filed in the circuit court of Daviess county, Kentucky, almost a year later, on the 27th day of May, 1904, in a case in which the company was seeking to collect rentals for hydrants, again alleged that by the grant of 1889 the franchise of the company was 'extended during the whole period of its corporate existence, a period of twenty-five years from and after the 1st of June, 1889,' and that this same ordinance 'conferred upon and vested in it the sole and exclusive right, franchise, and privilege during the period of twenty-five years from and after June 1st, 1889, to maintain, complete, and operate waterworks in the city of Owensboro,' etc.
In this petition plaintiff specifically sets up the ordinances to which we have referred, calling upon the Water Company to construct extensions, and which were accepted by the company, and adds two others of the same purport, one dated May 15, 1899, and one July 25, 1900; alleges that in each of these the city requested the company to extend the lines and place hydrants 'for the [243 U.S. 166, 183] unexpired term of the franchise of this petition,' and that within sixty days from the passage of said ordinances it filed its acceptance of them with the clerk of the city.
It is difficult to imagine an interpretation of a contract by the parties to it more specific or controlling than is to be found in the declarations in these court proceedings, made deliberately and under the advice of counsel.
In the presence of this record I cannot doubt that it was understood and intended in the beginning by the untechnical men of affairs who composed the city council and by the company that this grant was a limited one, extending for not to exceed twenty-five years from June 1st, 1889, and that this conviction continued in the minds of all the parties concerned in it, finding frequent expression in the conduct of business between them for full fifteen years, certainly until 1904, when the company is found claiming in the courts that the grant expired on June 1, 1914; and therefore I cannot assent to the conclusion that it is in effect a perpetual grant of the right to use the streets of the city, convinced, as I am, that such result cannot be reached without doing violence to the rule referred to, so firmly established by this court, which has been penetratingly condensed into the expression, 'Show me what men have done under a contract and I will tell you what it means.' And, I may add, without running also counter to the decision of this court in Tennessee v. Whitworth, 117 U.S. 129 , 29 L. ed. 830, 6 Sup. Ct. Rep. 645, in which it is declared that, in construing contracts springing from statutes, the words employed are, if possible, to be given the same meaning they had in the minds of the parties to the contract when the statute was enacted.
But, turning now from the interpretation placed upon this ordinance by the parties to it, and confining our attention strictly to the language used in making the grant, let us ask ourselves whether it can reasonably be said, upon the facts presented by this record, that a franchise [243 U.S. 166, 184] in effect perpetual was granted in the streets of the city 'in plain terms,' 'in express terms,' without 'ambiguity,' as is required by the first of the rules for the construction of such grants, which we have seen is so fully approved by this court.
I cannot doubt that others than skilled lawyers (and we cannot assume that all of the members of the city council were skilled lawyers), reading such a paragraph as this, would understand that the existence of the life of the Water Works Company, and so of the grant, was for the declared twenty-five year period between the 'commencement of the life' of the corporation and the time when it must 'terminate.' To give it any other meaning is to magnify the subordinate provision for a possible extension of the life of the corporation so as to make that control the definite, specific, clearly expressed limitation of the charter. But specific should always control general provisions in a contract where they conflict,- definite and clearly expressed limitations should dominate indefinite and discretionary privileges. To declare this grant perpetually renewable is to make its duration dependent upon the discretion of the grantee corporation, to be exercised twenty-five years after the grant was made, and [243 U.S. 166, 185] it is not difficult to conceive of circumstances under which the required three fourths of the stockholders of the company would not favor an extension of its corporate life,-if, for instance, its business were a failing one because of competition with a city-owned plant, or if the stockholders differed in opinion as to the wisdom of making a possible sale of its property. This is a result which the court should accept only under sheer coercion-I can designate it by no milder term-of the 'plain,' 'express,' and 'unambiguous' provision in the grant, and very certainly it is a result which should not be derived from ingenious construction of a narrow and optional clause in the charter of the grantee (not in the grant ), which was probably inserted for the purpose of providing for the contingency of a new grant to the company, to be made at the expiration of the one for twenty-five years, rather than in an attempt to automatically make an extension of that grant. When to this it is added that the provision for extending the life of the corporation is not to be found anywhere in the ordinance making the grant, which the councilmen had before them, but only in the charter of the corporation and in the statute of the state, which they probably never saw, I not only cannot bring myself to assent to the conclusion that, resolving, as we must, every doubt in favor of the public, a franchise in effect perpetual in the streets of the city was given to the Water Works company 'in plain,' 'in express,' and in 'unambiguous' terms, but, on the contrary, I am very clear that the language used in making this grant limits it, as we have seen that all of the parties thought that it limited it, to the term of twenty-five years.
These distinctions are, first, that the state law did not provide for 'extensions' of the corporate existence. The most that can be said of the law is that it provided a method by which the stockholders of the company- not the law-might, in their discretion, 'renew' the charter for an additional term after the expiration of the twenty-five-year period which the law provided for. The second distinction is that the authority to 'renew' the corporate existence of the company, given by the statute, becomes in the charter, as written by the company, 'extensions . . . by law provided,' which gives to the corporation the advantage which many courts and writers have found in the distinction between the right of 'extension' and the right of 'renewal' of a contract, the latter indicating an intention to resort to a new grant for the future, while the former contemplates 'a prolongation, a lengthening out,' of a grant previously made. This distinction is perhaps too subtle to serve the ends of substantial justice in practical affairs, but apparently the authors of the charter which we are considering thought it a refinement which it was worth their while to lay hold upon. Whalen v. Manley, 68 W. Va. 328, 69 S. E. 843; Leavitt v. Maykel, 203 Mass. 506, 133 Am. St. Rep. 323, 89 N. E. 1056, and authorities cited.
The district court finds its conclusive authority for holding the grant to be, in effect, a perpetual one in Owensboro v. Cumberland Teleph . & Teleg. Co. 230 U.S. 58 , 57 L. ed. 1389, 33 Sup. Ct. Rep. 988. An inspection of the ordinance there considered shows that there was no attempt whatever in terms to limit the duration of the grant; that no reference was made in the ordinance to the life of the corporation to which the grant was made, and that by express terms the grant [243 U.S. 166, 187] is declared not to be exclusive, and to be subject to alteration and amendment. While it is true that the members of this court differed as to the effect of the provision for alteration and amendment of the ordinance, yet the effect of these distinctions when grouped together is such, it seems to me, as to render the decision in that case wholly inapplicable to an ordinance such as we are considering here.
It may be that the settled conviction which I have that no legislator, congressman, or councilman would knowingly consent to grant perpetual rights in public streets to a private corporation has so darkened my understanding that I cannot properly appreciate the point of view of my associates and the reasons advanced in support of it; but, however this may be, the reasons stated in this opinion convince me that the grant under discussion was not in effect a perpetual grant, but was for the period of twenty-five years, which expired on the 1st day of June, 1914.
Mr. Justice Day concurs in this dissent, upon the ground that, applying the wellsettled rule that grants of the character here in question are to be given strict construction, and doubts as to their meaning resolved in favor of the public, and ambiguities are to be resolved in like manner, it is by no means clear that the city intended to grant to the Water Company a franchise for its then corporate life of twenty-five years and for subsequent renewals thereof, as the stockholders might determine; and he is of the opinion that the franchise expired at the end of the twenty-five-year period for which its charter provided when the grant was made.

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