Source: https://openjurist.org/230/us/100
Timestamp: 2019-04-23 13:55:46+00:00

Document:
Argued February 27 and 28, 1913.
Ordered for reargument March 17, 1913.
Reargued April 10 and 11, 1913.
Mr. William D. McHugh for appellant.
Messrs. Benjamin S. Baker, William C. Lambert, John A. Rine, and L. J. TePoel for appellee.
The Thompson Company, to which the grant was made, was not then incorporated, but was subsequently incorporated under the laws of Nebraska for a term which was to expire September 26, 1905. It accepted the grant, constructed and put into operation a central generating station and an extensive distributing system, and thereby placed itself in a position to supply electric current to those desiring to use it. At first the current was used almost exclusively for lighting purposes, but it came gradually to be used for power and heat, and in a few years the Thompson Company held itself out as distributing current for all three purposes. The generating plant was enlarged and improved from time to time, and the distributing system extended and adjusted, to meet the increasing demand for current for power and heat as well as for light. In 1903 the entire plant and all rights under the ordinance were transferred by the Thompson Company to the electric company, and the business established by the former has since been conducted in increasing volume by the latter. In 1891 the gross earnings from current for lighting purposes was $104,646.63, and for power and heat, $4,237.67. In 1903 these figures had increased to $261,421.89 and $50,390.11, respectively, and in 1908 to $563,447.57 and $130,537.72. By a series of ordinances, beginning in 1892, the city regulated in material ways the business of the two companies, each in turn, in distributing current for the three purposes, and by ordinances adopted in 1902 and 1904 the city required all their wires within designated districts, whether the current was used for light or for power or heat, to be placed in underground conduits, the ordinances being duly obeyed at a cost of $479,215. After March 4, 1902, the two companies, each in turn, were required to pay, and did pay, to the city, 3 per cent of the gross earnings from their business, including the receipts from the use of current for power and heat. The city also became and remained a purchaser of current in substantial quantities, to be used for power purposes.
This suit is prosecuted by the Old Colony Trust Company, a Massachusetts corporation, against the city of Omaha, to enjoin the enforcement of that resolution. The trust company is the trustee in a mortgage executed in 1903 by the electric company upon all of its property, including its rights under the ordinance of 1884, to secure the payment of upwards of $2,000,000 of bonds issued by it in 1903 and 1904. The claim of the trust company, as set forth in the bill, is that the resolution of 1908 is a law of the state impairing the obligation of the contract resulting from the ordinance of 1884 and the action of the parties in interest thereunder, on the faith of which contract the bonds were purchased by their several holders, and that the resolution is therefore void, because repugnant to § 10 of article 1 of the Constitution of the United States.
The first question to be considered is whether the privilege or franchise granted by the ordinance of 1884 is still subsisting; because if it has expired, it will not be necessary to inquire whether it and the action of the parties thereunder resulted in any contractual rights respecting the use of the streets of the city in the distribution of current for power and heating purposes.
What was the life or duration of the privilege granted by the ordinance? Was it in perpetuity or for the corporate existence of the grantee? There is no claim, nor could there reasonably be, that it was during the pleasure of the city, or revocable at will. The trust company contends that it was a grant in perpetuity, and the city that it was for the corporate existence of the grantee. While the arguments have taken a wide range, it is of first importance to give attention to the statutes and decisions of Nebraska, because the city, being a creature of that state, derives its powers from the laws thereof and is necessarily within the influence of the decisions of the state's court of last resort.
By the charter of the city in force at the time, the city council was charged with 'the care, management, and control of the city,' and was given power 'to provide for the lighting of streets,' and 'to care for and control . . . streets, avenues, parks, and squares within the city.' Laws 1883, p. 89, chap. 10, § 15, subdivs. 8, 24.
State ex rel. Caldwell v. Lincoln Street R. Co., 80 Neb. 333, 343, 14 L.R.A.(N.S.) 336, 114 N. W. 422, involved the construction of an act (Laws 1877, p. 134), relating to the acquisition of a street franchise for a street railroad company. The act provided for the submission to the electors of the simple question whether the grant should be made through particular streets, which were required to be designated in the articles of incorporation and in the notice of the election, and also provided that if the consent of the electors was given, the railroad company could proceed with the construction and operation, 'subject to such rules and regulations as may be prescribed by ordinance of such city.' The act said nothing about the duration of the right. The court said: 'This consent of the electors, when legally given, to a legal proposition submitted to them, constitutes, in our view, a grant of a right of way on and over the streets named in the articles of incorporation and in the notice for the election, and confers upon the railway company an easement in the streets which is irrevocable after the company has, within a reasonable time, acted upon the permission given, and constructed its lines of road.' To the same effect is State ex rel. Caldwell v. Citizens' Street R. Co. 80 Neb. 357, 360, 114 N. W. 429.
In Plattsmouth v. Nebraska Teleph. Co. 80 Neb. 460, 466, 14 L.R.A.(N.S.) 654, 127 Am. St. Rep. 779, 114 N. W. 588, there was brought in question the right of a telephone company under an ordinance granting to it, its successors and assigns, the right of way for the erection and maintenance of poles and wires through the streets, alleys, and public grounds of the city. The provisions of the city charter were substantially like those here. The power of the city to grant the right, or to make it more than a right revocable at will, was challenged, but the court denied both branches of the contention, saying: 'Under the general power given to the plaintiff [the city] by its charter and the general control which it exercises over the streets and public grounds of the city, its right to extend to the defendant the privilege of occupying its streets and public grounds cannot be questioned,' citing Nebraska Teleph. Co. v. Fremont, supra. The city had passed an ordinance, not grounded upon any matter of necessity, requiring the poles and wires to be removed from some of the streets, and the court pronounced that ordinance invalid.
But while these decisions take a uniform view of the power of the cities of the state and of the effect of their action in cases such as this, and show that the grant made by the ordinance of 1884 must be regarded as in perpetuity, they also show that such grants are deemed and held by that court to be ever subject to the full exertion of the police power of the state in respect of the rates to be charged, the mode of conducting the business, and the character and quality of the service rendered. And it is further held that the public nature of the grant explains and justifies it, and that it is forfeitable for acts of abuse, abandonment, or nonuser, but cannot be taken away or impaired arbitrarily.
To the state decisions here cited, counsel for the city interposes the objection that they are not well grounded, and that some of them go beyond what is expressed in the syllabus. We need not say more of the first branch of the objection than that, as the decisions relate to matters of local law, namely, the construction of the state Constitution and statutes and the powers of local municipal corporations, they must be regarded by us as controlling, when their application involves no infraction of any right granted or secured by the Constitution of the United States. Such an infraction is not suggested, nor could it reasonably be. The other branch of the objection is not based upon any statute or rule of court in Nebraska, giving controlling effect to the syllabus. At most it rests upon a statement in Holliday v. Brown, 34 Neb. 232, 51 N. W. 839, respecting 'an unwritten rule' to that effect, but what was said upon the subject in that case has been so pointedly criticized and so far restrained in Williams v. Miles, 68 Neb. 479, 62 L.R.A. 383, 110 Am. St. Rep. 431, 94 N. W. 705, 96 N. W. 151, 4 Ann. Cas. 306, that it is not controlling. Of course, it ought not to be given greater effect here than in the courts of the state.
Concluding, as we do, that the franchise has not expired, but is still subsisting, we come to the question whether it is limited to the distribution of electric current for lighting purposes, or includes its distribution for power and heat.
This question has been elaborately discussed at the bar and in the briefs, and the record contains a large volume of evidence taken for the purpose of shedding light, as is said, upon what commonly was understood, when the ordinance was adopted, as 'a general electric light business,'—that being the phrase used to designate the purpose for which the street franchise was granted. We do not find it necessary to enter upon an original consideration of the meaning of that phrase or of the rules which ordinarily would be applicable in interpreting it.
Generally speaking, the practical interpretation of a contract by the parties to it for any considerable period of time before it comes to be the subject of controversy is deemed of great, if not controlling, influence. Chicago v. Sheldon, 9 Wall. 50, 54, 19 L. ed. 594, 596; Brooklyn L. Ins. Co. v. Dutcher, 95 U. S. 269, 273, 24 L. ed. 410, 411; District of Columbia v. Gallaher, 124 U. S. 505, 510, 31 L. ed. 526, 527, 8 Sup. Ct. Rep. 585; School District v. Estes, 13 Neb. 52, 13 N. W. 16; State ex rel. Seth Thomas Clock Co. v. Cass County, 60 Neb. 566, 572, 83 N. W. 733. Although not strictly such, this rule is sometimes treated as a branch of the law of estoppel. Whether in a case permitting the exercise of an independent judgment we should apply it to franchise contracts such as the one here, we need not consider. In Nebraska, according to the settled course of decision in that jurisdiction, the rule is applicable to them.
In State ex rel. Caldwell v. Lincoln Street R. Co. supra, there was involved the right of a street car company to use the streets of the city under a franchise irregularly obtained twenty years before. The irregularity consisted in the submission to the electors, under the statute before mentioned, of a blanket proposition covering all the streets, instead of one specifying particular streets and the termini of the proposed lines. But, notwithstanding the irregularity, the railroad company, after a favorable vote upon the blanket proposition, proceeded at great expense, and with the acquiescence of all concerned, to the construction and operation of the road through several streets of the city, and continued thereafter in its operation without objection until the commencement of the suit, which was a proceeding in quo warranto in the name of the state, brought on the relation of a local officer. Although pronouncing the election irregular, and holding that no right would have been required had the objection been seasonably made, the court said: (P. 346.) 'So far as these lines have been constructed, we think the defendant may claim an easement over the streets occupied, but the blanket license under which the defendant claims the right to extend its lines or to go upon other streets must be denied.
(P. 361.) 'The manner in which the question of the consent of the electors of the city was submitted was clearly irregular, and the affirmative vote cast thereon just as clearly conferred no power upon the railway companies to use the streets of the city beyond the time when that right should be questioned by some proper authority. But we are not prepared to say that, where the companies acted in good faith and expended their money in the construction of lines under a supposed right to occupy the streets, and this right was not questioned until the bringing of the present action, they or those claiming under them should be ousted from the possession of such streets as are now occupied by their lines, and their property rendered worthless. Under the circumstances of this case, we do not think it would be a wholesome public policy to hold that, because of the irregularity which occurred in granting the right which the people had power to confer, such irregularity renders all proceedings under the vote void and of no effect.
In view of the facts in the present case, as before recited, these decisions of the supreme court of the state are conclusive upon the question of the right of the trust company to have the distribution of electric current for power and heat treated as included within the franchise contract of 1884 while it continues in force. In other words, the trust company is entitled to insist upon a recognition and continuation, subject to all the qualifications inhering in the franchise, of all the rights conferred by the franchise ordinance as the same was interpreted in actual practice by the electric company and the city prior to the resolution of 1908. But neither the trust company nor the electric company is entitled to make that construction a basis for enlarging or extending those rights, against the will of the city, or for enlarging or extending the purposes for which electric current may, through the use of the streets, be transmitted and supplied under the protection of the franchise.
A prior suit by the electric company against the city, largely but not entirely like the present, resulted in a decree against the electric company. The city now takes the position that that decree is conclusive upon the trust company as mortgagee. But the law is otherwise. The trust company's rights, and those of the bondholders whom it represents, were not acquired during or since that suit, but long prior thereto, and the trust company was not a party to it. This being so, the trust company is free to maintain the present suit, unembarrassed by the decree in the other. Keokuk & W. R. Co. v. Missouri, 152 U. S. 301, 313, 38 L. ed. 450, 455, 14 Sup. Ct. Rep. 592; Louisville Trust Co. v. Cincinnati, 22 C. C. A. 334, 47 U. S. App. 36, 76 Fed. 296.
The decree is reversed, and the cause is remanded to the District Court with a direction to enter a decree against the enforcement of the resolution of 1908, in accordance with this opinion.

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