NEW YORK ELEC. LINES CO. V. EMPIRE CITY SUBWAY CO.
| Decision Date | 30 November 1914 |
| Citation | 235 U. S. 179 |
| Court | U.S. Supreme Court |
ERROR TO THE SUPREME COURT
OF THE STATE OF NEW YORK
If it sufficiently appears that plaintiff in error raised the question of constitutionality of later legislation repealing that on which its contract rested as impairing the obligation of that contract, and that the state court gave effect to the repealing legislation, the case is properly here under § 237, Judicial Code.
Under such conditions, it is the duty of this Court to determine for itself whether a contract existed and whether its obligation has been impaired.
A street franchise which becomes operative upon the grant of the consent of the city is a property right. The grant is not a nude pact, but rests upon an obligation, expressly or impliedly assumed, to carry on the undertaking to which the grant relates. Such grants are made and received with the understanding that the recipient is protected by a contractual right from the moment the grant is accepted and during the course of performance as contemplated, as well as after that performance.
Grants of franchises are subject to the tacit condition that they may be lost by nonuser or misuser. The condition thus implied is a condition subsequent.
A franchise is given in order that it may be exercised for the public good, and failure to exercise as contemplated is ground for revocation and withdrawal.
An indefeasible interest only becomes vested under a franchise which has not only been duly granted, but has also been exercised in conformity with the grant.
Whether the authorities shall proceed in case of forfeiture of franchise for nonuser or misuser by quo warranto or, as in this case, by ordinance of repeal, the propriety of which can be adjudicated in a subsequent legal proceeding, is entirely a matter of state law.
In this case, held that, as the right to use the streets was to be used within a reasonable time or lost, and as it never had been used, an ordinance of the City of New York of May 11, 1906, revoking the right of the plaintiff in error to lay wires in, and otherwise to use, the
streets of New York under a permission granted in 1878 did not contravene the impairment of obligation clause of the federal Constitution.
Judgment based on 201 N.Y. 329 affirmed.
The facts, which involve rights and obligations of a corporation licensed by municipal ordinance to maintain electric wires, and the validity under the impairment of obligation clause of the federal Constitution of a subsequent revocation of the license by the municipality owing to misuser and nonuser, are stated in the opinion.
This is a writ of error to review the denial by the state court of an application for a writ of peremptory mandamus directing the Empire City Subway Company (Limited) to lease space in its conduits in the City of New York to the plaintiff in error.
In the year 1884, the Legislature of the State of New York required that "all telegraph, telephonic, and electric light wires" in certain cities -- New York and Brooklyn -- should be placed under the surface of the streets (Laws of 1884, c. 534). Under the authority of a statute passed in the next year (Laws of 1885, c. 499, amended by Laws of 1886, c. 503), the Board of Commissioners of Electric Subways adopted a plan by which the City of New York should enter into a contract with a company to construct the necessary subways, etc., which other companies operating electrical wires should be compelled to use, paying therefor a reasonable rent. Under contracts made accordingly and ratified by the legislature (Laws of 1887, c. 716), subways, etc., were constructed by the Consolidated Telegraph & Electrical Subway Company. The board first mentioned was succeeded by the Board of Electrical Control (Laws of 1887, c. 716), and, in 1890, the subways, conduits, and ducts for low tension conductors which had been thus provided were transferred to the Empire City Subway Company (Limited), the defendant
in error. The latter company, by contract with the board and the city made in 1891 under legislative authority (Laws of 1891, c. 231) agreed to build, maintain, and operate subways, etc., as specified, it being provided that spaces therein, upon application, should be leased "to any company or corporation having lawful power to operate telegraph or telephone conductors in any street" in the City of New York.
The plaintiff in error, the New York Electric Lines Company, claiming to be entitled to space in these subways, made application therefor on or about June 10, 1910. The request was refused, and the present proceeding for a peremptory mandamus was brought. The assertion of right rested upon a permission granted by the City of New York, through its Common Council, to the plaintiff in error, on April 10, 1883, to lay electrical conductors in the city's streets. This permission, the city, by its Board of Estimate and Apportionment, which had succeeded to the powers of the former Common Council in the matter, had formally revoked by a resolution adopted on May 11, 1906, reciting that whatever rights the company had secured under the permission in question had long since been forfeited by nonuser. The Court of Appeals of the state, holding that the Board of Estimate and Apportionment had this power of revocation, and had duly exercised it, affirmed an order refusing the writ of mandamus. 201 N.Y. 321. The plaintiff in error insists that the resolution thus sustained was an unconstitutional impairment of the obligation of its contract with the city.
We think that it sufficiently appears that this question was raised in the state court, and as the state court gave effect to the repealing resolution the case is properly here. It is therefore the duty of this Court to determine for itself whether a contract existed and whether its obligation has been impaired. Douglass v. Kentucky, 168 U. S. 488, 502;
St. Paul Gas Light Co. v. St. Paul, 181 U. S. 142, 148; Grand Trunk Western Ry. Co. v. South Bend, 227 U. S. 544, 551; Atlantic Coast Line v. Goldsboro, 232 U. S. 548, 556; Louisiana Railway & Navigation Co. v. Behrman, ante, P. 164.
and "for the purpose of owning franchises for laying and operating the said lines of electric conductors." Chapter 483 of the Laws of 1881 had authorized any company so incorporated "to construct and lay lines of electrical conductors underground in any city," provided that it "first obtain from the Common Council" of such city the "permission to use the streets" for the purposes set forth. The permission in question, which, as already stated, was granted by the Common Council of the City of New York on April 10, 1883, was (omitting parts not here material) as follows:
On April 24, 1883, the plaintiff in error presented to the Common Council, and the latter spread upon its minutes, a formal acceptance of the permission, which, after the recitals, states:
"Now therefore the said New York Electric Lines Company by these presents accepts the said franchise as contained in the ordinance and resolutions adopted by the honorable the Board of Aldermen, April 10, 1883, and agrees to, assumes, and obligates itself in the observance of all the requirements, provisions, restrictions, conditions, and limitations contained in the said last-mentioned ordinance as adopted April 10, 1883, as well also as to the provisions, conditions, and obligations of said general ordinance approved by the Mayor December 14, 1878."
The ordinance of 1878, referred to, regulated the method of laying wires under the streets, and provided that within six months after the grant of permission, grantees should file with the county clerk "maps, diagrams, and tabular statements indicating the amount and position of the spaces proposed to be occupied by them." In May, 1883, the plaintiff in error, in asserted compliance with the ordinance, filed a map, diagrams, and statement. It is alleged in the affidavits presented on the application for mandamus that the plaintiff in error secured inventions and patent rights, that it had an office and factory, that it prosecuted experimental work in relation to its project, and expended in this way large sums of money. But, in the actual construction of conduits or laying of wires, nothing was done prior to the legislation of 1885 and 1886, which, as we have seen, provided for a comprehensive plan for the building of subways in which electrical conductors should be placed.
Section 3 of the Act of 1885 expressly made it obligatory upon any company...
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