Opinion — New York Elec. Lines Co. v. Empire City Subway Co.

fe ee EM ONG LDA GAMER

N.Y. ELECTRIC LINES v. EMPIRE CILY SUBWAY. 170

S. 235 U.S. Syllabus.

* NEW YORK ELECTRIC LINES COMPANY pv. EM

1- PIRE CITY SUBWAY COMPANY.

Tr ERROR TO THE SUPREME COURT OF THE STATE OF NEW YORK.

de

‘e No. 63. Argued November 5, 6, *914.—Decided November 30, 1914,

te

d If it sufficiently appears that plaintiff in error raised the question of con-

stitutionality 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

C. here under § 237, Judicial Code.

n Under such conditions, it is the duty of this court to determine for itself

2 whether a contrect existed and whether its obligation has been in-

t. paired.

A street franchise which becomes operative upon the grant of the con-

8; sent 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

of by a contractual right from the moment the grant is accepted and

os during the course of performance as contemplated, as well as afte:

i that performance.

c- Grants of franchises are subject to the tacit condition that they may

h be lost by non-user or mis-user. The condition thus implied is a

d * condition subsequent.

Ww A franchise is given in order that it may be exercised for the publie good

r and failure to exercise as contemplated is ground for revocation and

withdrawal.

it ry ;

An indefeasible interest only becomes vested under a franchise whic

& has not only been duly granted, but has also been exereised in con

formity with the grant.

Whether the authorities shall proceed in ease of forfeiture of franchise

for non-user or mis-user by quo warranto or, as in this ease, by ordi-

nance of repeal, the propriety of which ean be adjudicated in a subse

quent 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

St Sei

180 OCTOBER TERM, 1914.

Argument for Plaintiff in Error. 235 U. S.

streets of New York under a permission granted in 1878 did not con-

travene the impairment of obligation clause of the Federal Consti-

tution.

Judgment based on 201 N. Y. 329, affirmed.

Tue 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 subse-

quent revocation of the license by the municipality owing

to mis-user and non-user, are stated in the opinion.

Mr. Alton B. Parker and Mr. J. Aspinwall Hodge, with

whom Mr. Henry A. Gildersleeve was on the brief, for

plaintiff in error:

Relator’s permit of 1883 was an irrevocable contract.

Performance was unnecessary for the creation of this

property right; there was, however, performance which

would have been complete but for the acts of the State

and city. Acts of 1848, ch. 265; 1853, ch. 471; 1873, ch.

335; 1881, ch’ 483; 1884, ch. 534; 1885, ch. 499; 1887,

ch. 716; 1891, ch. 231; Africa vy. Mayor, 70 Fed. Rep.

729; Mayor v. Telephone Co., 115 Fed. Rep. 304; Cap-

ttal City Co. v. Tallahassee, 186 U. S. 401; Louisville vy.

Cumberland Tel. & Tel. Co., 224 U. 8S. 649; New York

v. Bryan, 196 N. Y. 158; Rochester v. Rochester Ry. Co.,

182 N. Y. 99; Detroit v. Detroit &c. Ry. Co., 64 Fed. Rep.

628; S. C., 184 U. S. 368: Ghee v. Northern Gas Co., 158

N. Y. 510; Re Brooklyn El. R. R., 125 N. Y. 434; Mayor v.

Africa, 77 Fed. Rep. 501; Milhan y. Shape, 27 N. Y. 611:

Owensboro v. Cumberland Tel. Co., 230 U. S. 58; Pearsall

v. Great Northern Ry., 73 Fed. Rep. 933; S. C., 161 U. 8.

646; People v. O’Brien, 111 N. Y.1; People v. Sturtevant,

9 N. Y. 273; N. Y. Edison Co. v. Willcox, 207 N. Y. 86;

Woodhaven Gas Co. v. Deehan, 153 N. Y. 528; S. R. T.

Co. v. New York, 128 N. Y. 510: Trustees v. Jessup, 162

N. Y. 122; Wright v. Nagle, 101 U. 8. 791.

SSRN 3 ’ . “ ETN sue F

N. Y. ELECTRIC LINES v. EMPIRE CITY SUBWAY. 181

235 U. 8. Argument for Plaintiff in Error.

This appeal .necessarily involves a Federal question.

That the Federal question was raised and decided ap-

pears from the record and the opinion of the state court.

The Federal question was necessarily decided by the

state court.

The relator accepted and acted upon its franchise.

The relator’s franchise includes the right to lay wires

in the streets for telephonic purposes, and to either use

them or to lease them to others for such purposes.

By reversing its own construction of the relator’s con-

tract, the State of New York has impaired the obligation

of the contract of the relator with the city and with the

State.

The relator completed its formal acceptance of its

franchise from the city by duly filing the map which the

ordinance called for.

The relator has wholly complied with ch. 263 of the

Laws of 1892 and no issue of non-compliance has ever

been raised, nor can it be.

The relator is the real party in interest.

The application for the writ of mandamus was made

in good faith.

The relator has lost no rights by alleged laches and no

statute of limitations is involved herein.

The relator has never assigned its franchise.

The city is estopped to question the relator’s franchise

by the acceptance of taxes.

In support of these contentions see cases supra and

Adams Co. v. B. & M. R. Co., 39 Iowa. 507; American

Emigrant Co. v. Iowa Land Co., 52 Towa, 323; Atty. Gen’l

v. P. & R. R., 6 Iredell, 456: Audubon Co. v. American

Emigrant Co., 40 Towa, 460; Brandriff v. Harrison, 50

Iowa, 164; Central &c. Co. v. Averrill, 199 N. Y. 128;

Chambers v. Baltimore and Ohio R. Co., 207 U. S. 142;

Commercial Power Co. v. Tacoma, 17 Washington, 670;

Curran v. Arkansas, 15 How. 302; Dorr v. Esders, 112

182 OCTOBER TERM, 1914.

Argument for Defendant in Error. 235 U.S.

App. Div. 897; Douglas v. Kentucky, 168 U. S. 488, 502:

Kichner v. Met. St. R. R., 114 App. Div. 247; Franchise

Tax Cases, 174 N. Y. 417; Furman vy. Nichol, 8 Wall.

44, 56; Gelpcke v. Dubuque, 1 Wall. 175; Gumbes v. Hicks,

116 App. Div. 120; Hess v. N. ¥Y. Underground Telegraph

Co., N. Y. Register, Jan. 25, 1887; James v. Signell, 60

App. Div. 75; Jersey City Ry. Co. v. Passaic, 68 N. J. L.

110; In re Long Acre Co., 51 Mise. 407; S. C., 188 N. Y.

361; Los Angeles v. Water Works Co., 177 U.S. 570, 576;

Louisiana vy. Pillsbury, 105 U. 8. 278, 294; McCullagh v.

Reby, 9 N. Y. Supp. 361; Muhlker v. N. Y. & H.R. R.,

197 U.S. 544, 570; Murdock v. City of Memphis, 20 Wall.

590; Northern Pacific Ry. v. Boyd, 228 U. 8. 482; Peck

v. Burr, 10 N. Y. 294; Lodes v. Health Dept., 189 N. Y. 187;

NV. ¥, Electric Lines v. Ellison, 115 App. Div. 254; S. C.,

ISS N.Y. 531; N. Y. Electric Lines v. Squire, 14 Daly,

184; S. C., 107 N. Y. 593; 8. C., 145 U.S. 175; People v.

W. & D. R. R., 128 N. Y. 240; Philadelphia Fire Ass’n vy.

New York, 119 U. 8. 110, 116; Pollitz v. Wabash R. R.,

207 N. Y. 113; Roby v. Colehour, 146 U.S. 153; Water

Co. v. Rochester, 176 N. Y. 36; St. Louis v. West. Un. Tel.

Co., 148 U. 8. 92; Sauer v. New York, 206 N. Y. 536;

Simplot v. Dubuque, 49 Iowa, 630; Sullivan v. Texas, 207

U.S. 416, 423; Traction Co. v. North Arlington, 67 N. J.

L.. 162; Walter A. Wood Co. v. Skinner, 139 U. S. 293:

Laws of 1892, ch. 263; Laws of 1899, ch. 712; Transporta-

tion Law, § 140.

Mr. Edmund L. Mooney, with whom Mr. Charles T.

Russell and Mr, Frederick A. Card were on the brief, for

defendant in error:

The appeal should be dismissed as not involving a Fed-

eral question.

No Federal question was raised or decided.

If any Federal question was raised, its decision was not

necessary to judgment.

=

N. Y. ELECTRIC LINES v. EMPIRE CITY SUBWAY. 183

235 U.S. Argument for Defendant in Error.

Non-user and-abandonment is a non-Federal question.

There is no existing demand, occupation is not assured,

public interests do not require construction; all these are

non-Federal questions.

This proceeding is solely to enable relator to promote a

telephone business, which was beyond the scope of the

permission granted.

Relator was incorporated to conduct a subway conduit

business, not a telephone business.

Declarations and disclaimers in previous litigations and

acts of the parties furnish practical construction of the

franchise.

The permission granted to relator by resolution of

Common Council of April 10, 1883, was not accepted and

acted upon in fact, and is no longer in force.

The attempted transfer of the franchise to the Great

Eastern Co. was a breach of condition contained in the

resolution of permission.

The permission or the secondary franchise was lost by

non-user and abandonment.

Assuming that a formal acceptance would have been

sufficient, the acceptance in writing of the permission was

not a complete formal acceptance, in the absence of the

filing of a bona fide map, specifying amount and position

of spaces.

The decision of the Federal question, if such be properly

raised, does not control the whole case. Other points

warrant affirmance.

A party applying for a peremptory writ of mandamus

admits the truth of the allegations in the opposing affi-

davits.

The relator is not the real party in interest.

The application is not made in good faith.

The relator lost whatever right it had by laches.

In support of these contentions, see cases cited by plain-

tiff in error which can be distinguished and In re Bingham-

— oy

184 OCTOBER TERM, 1914.

Argument for Defendant in Error. 235 U. S.

ton Bridge, 3 Wall. 51; Boise Artesian Co. v. Boise City, 230

U.S. 84; Bridge Proprietors v. Hoboken Co., 1 Wall. 116;

Castillo v. McConnico, 168 U. 8. 674; Chicago City Ry.

Co. v. Storey, 73 Illinois, 541; New York v. N. Y. Refriger-

ating Co., 146 N. Y. 210; City Ry. Co. v. Citizens St. Ry.

Co., 166 U. S. 557; Coosaw M ining Co. v. South Carolina,

144 U. S. 550; De Saussure v. Gaillard, 127 U. S. 216;

Delaware, L. & W. R. R. Co. v. Oswego, 92 N. Y. App.

Div. 551; Dewey v. Des Moines, 173 U.S. 193; Endowment

Assn. y. Kansas, 120 U. 8. 103; Eustis vy. Bolles, 150 U.S.

361; City Ry. Co. v. Galveston City St. Ry., 63 Texas, 529;

Harshman v. Bates County, 92 U. 8. 569; Hulbert v. Chi-

cago, 202 U.S. 275; Insurance Co. v. Dutcher, 95 U. 8. 269 :

Johnson v. N. Y. &e. Co., 187 U.S. 491: Layton v. Mis-

sourt, 187 U.S. 356; Leathe vy. Thomas, 207 U.S. 93; Louis-

ville Trust Co. v. City of Cincinnati, 76 Fed. Rep. 296;

Matter of Taylor, 117 N. Y. App. Div. 248; Moore y.

Mississippi, 21 Wall. 636; New York Cent. R. R. v. Neu

York, 186 U. S. 269; New Orleans Gas Co. v. Louisiana

Light Co., 115 U. 8. 650; Nicoll v. Sands, 131 N. Y. 19;

Otis v. Oregon S. S. Co., 116 U.S. 548; People yv. Adiron-

dack Ry., 160 N. Y. 225; People v. ( ollis, 6 N. Y. App. Div.

467; People v. French, 31 Hun (N. Y.), 617; People vy.

Rome, Watertown &c. Co., 103 N. Y. 95; Althause v. Giroux

&e. Co., 122 App. Div. 617; Connolly v. Board of Education,

114 App. Div. 1, aff'd 187 N. Y. 535; Durant v. Jeroloman,

139 N. Y. 14; Hunter v. National Park Bank, 122 App.

Div. 635; Lehmaier v. Interurban St. Ry. Co., 85 App. Div.

407; McMackin v. Board of Police, 46 Hun, 296: Millard

v. Chapin, 104 N. Y. 96; Nelson vy. Marsh, 82 App. Div.

571, aff'd 178 N. Y. 618; Phelps v. Delaware Common

Pleas, 2 Wend. 257; Pumpyansky v. Keating, 168 N. Y.

390; Sherwood v. Board of Canvassers, 129 N. Y. 360; Postal

Tel. Co. v. Baltimore, 156 U. S. 210; Seeberger v. McCor-

mack, 175 U. 8. 274; Seymour v. Warren, 179 N. Y. 1:

State v. Board of Liquidation, 98 U. S. 140; Telluride

N. Y. ELECTRIC LINES v. EMPIRE CITY SUBWAY. 185

235 U.S. Opinion of the Court.

Power Co. v. Rio Grande R. R. Co., 187 U. 8. 569: The

Victory, 6 Wall. 382; Waters-Pierce Oil Co. v. Texas, 212

U.S. 86; Winona ee. R. Co. v. Plainview, 143 U. S. 371;

Woolsey v. Funke, 121 N. Y. 87: Yazoo & M. R. Co. v.

Adams, 180 U. 8S. 41; Zadig v. Baldwin, 166 U.S. 485.

By leave of court Mr. Alfred B. Cruikshank filed a brief

as amicus curi@, on behalf of Clifford L. Middleton.

Mr. Justice Huaues delivered the opinion of the court.

This is a writ of error to review the denial by the state

court of an application for a writ of peremptory manda-

mus directing the Empire City Subway Company (Lim-

ited) 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, chap. 534). Under the authority of a statute passed

in the next year (Laws of 1885, chap. 499, amended by

Laws of 1886, chap. 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 com-

panies 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, chap. 716), subways, ete., were constructed by the

Consolidated Telegraph & Electrical Subway Company.

The board first-mentioned was succeeded by the Board of

Electrical Control (Laws of 1887, chap. 716); and, in 1890,

the subways, conduits and ducts for low tension con-

ductors, which had been thus provided, were transferred

to the Empire City Subway Company (Limited), the de-

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186 OCTOBER TERM, 1914.

Opinion of the Court. 235 U.S.

fendant in error. The latter company, by contract with

the Board and the City, made in 1891 under legislative

authority (Laws of 1891, chap. 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 sub-

ways, 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 se-

cured under the permission in question had long since been

forfeited by non-user. 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. Matter

of New York Electric Lines Co., 201 N. ¥. 321. The plain-

tiff 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. Douglas v. Kentucky, 168 U. 8. 488, 502;

N. Y. ELECTRIC LINES v. EMPIRE CITY SUBWAY. 187

235 U.S. Opinion of the Court.

St. Paul Gas Light Co. y. 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. New Orleans, de-

cided this day, ante, p. 164.

The plaintiff in error was incorporated in the year 1882,

under a general law of the State of New York (Laws of

1848, chap. 265, as amended by Laws of 1853, chap. 471).

Its certificate of incorporation stated, among other things,

that it was incorporated for the purpose of ‘owning, con-

structing, using, maintaining and leasing lines of telegraph

wires or other electric conductors for telegraphic and tele-

phonic communication and for electric illumination, to be

placed under the pavements of the streets . . . of the

Cities of New York and Brooklyn’ 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 coun-

cil’ 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:

“Resolved, that permission be and hereby is granted to

the New York Electric Lines Company, to lay wires or

other conductors of electricity in and through the streets,

avenues and highways of New York City and to make con-

nections of such wires or conductors underground by means

of the necessary vaults, test boxes and distributing con-

duits, and thence above ground with points of electric

illuminations or of telegraphic or telephonic signals in ac-

cordance with the provisions of anordinance . . . ap-

proved . . . December 14, 1878.”

It was also resolved that the Company should not

—y

Opinion of the Court. 235 U.S.

188 OCTOBER TERM, 1914.

‘transfer or dispose of the franchise hereby granted with-

out the further authority of the Common Council.’

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 or-

dinance as adopted April 10, 1883, as well also as to the

provisions, conditions and obligations of the 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 or-

dinance, 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 ‘operating or intending to operate elec-

N. Y. ELECTRIC LINES v. EMPIRE CITY SUBWAY. 189

235 U. 8. Opinion of the Court.

trical conductors,’ and desiring or being required to place

its conductors underground, to file with the board of com-

missioners a ‘map or maps, made to scale,’ showing the

proposed plan of construction of its underground electrical

system and ‘to obtain the approval by said board of said

plan’ before any underground conduits should be con-

structed. The plaintiff in error did not submit a plan to

the board as required by the statute. In July, 1886, it

applied to the Commissioner of Public Works for a permit

to make the necessary excavations in the streets for the

purpose of laying conductors, and, on the application being

denied petitioned for a writ of peremptory mandamus to

direct the Commissioner to grant it. It was insisted in its

petition in that proceeding that it had ‘never operated or

intended to operate electrical conductors,’ its intention

having always been ‘to lease to other persons, natural or

corporate, all of its electrical conductors, and not to op-

erate itself any’ of them; that the acts of 1885 and 1886

(above mentioned), relating to the construction of sub-

ways, did not apply to the plaintiff in error; and that, if

they were applicable, they violated the Federal Constitu-

tion being an impairment of its contract with the City and

operating to deprive the plaintiff in error of its property

without due process of law. The state court held that the

statutes in question were applicable to the plaintiff in error,

and were constitutional, and refused the mandamus.

People, ex rel. New York Electric Lines Co. v. Squire, 107

N. Y. 593.

This court affirmed the judgment (id., 145 U.S. 175),

saying (pp. 187, 188):

“Tn no sense of the term do we think it can be safely

averred that the acts of 1885 and 1886 are not applicable

to the relator. . . . Neither can it be said that the

acts of 1885 and 1886 have a retroactive effect, at least

so far as the relator is concerned, since whatever rights it

obtained under the ordinance of 1883, which it accepted

SSE RE RUN oe BF ME TE

190 OCTOBER TERM, 1914.

Opinion of the Court. 235 U.S.

as the basis of the contract it claims to have entered into,

were expressly subject to regulation, in their use, by the

highest legislative power in the-State acting for the benefit

of all interests affected by those rights and for the benefit

of the public generally, so long as the relator’s essential

rights were not impaired or invaded. New Orleans Gas

Company v. Louisiana Light Company, 115 U. S. 650:

Stein v. Bienville Water Supply Company, 141 U. S. 67.”

And conceding for the purpose of the discussion, but

‘without deciding,’ that the plaintiff in error had a contract

with the City ‘for the laying of its wires, and the construc-

tion of its underground electrical system,’ this court

reached the conclusion that its rights had in no way been

impaired by the legislation under review.

This decision was rendered in May, 1892. Meanwhile,

pursuant to the statutes above mentioned, a plan of con-

struction had been adopted by the board charged with

that duty, subways had been built, and the defendant in

error had entered into its contract to maintain and operate

them for low tension conductors, as specified, including

telegraph and telephone conductors. But for fifteen years

after the final decision in the case cited no application was

made by the plaintiff in error for space in these subways.

The first application for such space was made in June,

1907, and was not granted.

Nor, during this long period, was any attempt made by

the plaintiff in error either to build conduits or to place

wires under the City’s streets, save that in December,

1905, it applied to the Commissioner of Water Supply,

Gas and Electricity for a permit to open, the streets for

that purpose and, on its being denied, a proceeding was

begun to obtain a peremptory writ of mandamus. This

was refused, and the order to that effect was affirmed by

the Court of Appeals of the State. People, ex rel. New York

Electric Lines Co. v. Ellison, 188 N. Y. 523. The pertinent

legislation and the subway contracts were reviewed and

s/s

r

N. Y. ELECTRIC LINES v. EMPIRE CITY SUBWAY. 191

235 U.S. Opinion of the Court.

the requirement thet electrical conductors should be placed

in conduits constructed in accordance with the adopted

plan, instead of the plaintiff in error being permitted to

build its own subways for such conductors, was sustained.

In arriving at this result, it was again assumed that the

plaintiff in error had a continuing right under the City’s

permission, but this question was expressly reserved (¢d.,

Pp. 527). A writ of error sued out from this court was

dismissed on motion of the plaintiff in error. 214 U. 8.

529, ,

It was about the time when the last-mentioned proceed-

ing was instituted that the City’s permission was revoked

(May 11, 1906); and the state court, in its opinion in the

present case, said that the question ‘remaining to be de-

termined’ was whether ‘the relator, under the resolution

of the common council of April, 1883, has the right, as a

matter of law, to have its wires inserted in the ducts of the

Empire City Subway Company, notwithstanding the revo-

cation of such resolution.’ Did a “bare acceptance’ of the

permission operate to vest an irrevocable franchise? 20]

N. Y. pp. 321, 329. This question was answered in the

negative in the view that such a permission is ‘a license

merely, revocable at the pleasure of the city, unless it has

been accepted and some substantial part of the work per-

formed,’ as contemplated by the permission, ‘sufficient to

create a right of property and thus form a consideration

for the contract.’

The plaintiff it error challenges this view, insisting that

by virtue of the City’s permission it is the grantee of an

irrevocable franchise in the City’s streets; that this fran-

chise was derived from the State; that when the consent of

the City was given, as provided in the Statute, the grant,

became immediately operative and could not thereafter

be revoked or impaired by municipal resolution or ordi-

nance; that the granted right, however named, is prop-

erty,—and, as such, is inviolable; and that this position is

192 OCTOBER TERM, 1914.

Opinion of the Court. 235 U.S.

supported by numerous decisions both of the state court

and of this court, which are cited in the margin.' Thus in

Ghee v. Northern Union Gas Co., 158 N. Y. 510, 513, re-

ferring to the legal effect of the consent of the municipal

authorities under a statute empowering the corporation

to lay gas conduits in streets, on such consent, the court

said: “It operates to create a franchise by which is vested

in the corporation receiving it a perpetual and indefeasible

interest in the land constituting the streets of a munic-

ipality. It is true that the franchise comes from the

State, but the act of the local authorities, who represent

the State by its permission and for that purpose, con-

stitutes the act upon which the law operates to create the

franchise.” And in Louisville v. Cumberland Telephone

Co., 224 U. S. 649, 659, where a corporation was author-

ized to erect poles, etc., over the streets with the consent

of the General Council of the City, it was held that the

charter franchises became ‘fully operative’ when the

City’s consent was obtained. “Such a street franchise

has been called by various names—an incorporeal heredita-

ment, an interest in land, an easement, a right of way—

but, howsoever designated, it is property.” 224 U. S.,

p. 661. Again, in the recent case of Owensboro v. Cumber-

land Telephone Co., 230 U.S. 58, 65, it was said: “That an

' Milhau v. Sharp, 27 N.Y. 61 1, 620; People v. O’Brien, 111 N. Y. 1,

38; Suburban Rapid Transit Co. v. The Mayor, 128 N. Y. 510, 520;

People ex rel. Woodhaven Gas Co. v. Deehan, 153 N. Y. 528, 532: Ghee

v. Northern Union Gas Co., 158 N. Y. 510, 513; City of Rochester vy.

Rochester Railway Co., 182 N. Y. 99, 119; City of New York vy. Bryan,

196 N. Y. 158, 164, 165; New Orleans Gas Light Co. v. Louisiana Light

&c. Co., 115 U. S. 650, 660; New Orleans Water Works Co. v. Rivers,

115 U. S. 674, 680, 681; Walla Walla v. Walla Walla ( /0., 172 U. 8.

1, 9; Detroit v. Detroit &c. Ry. Co., 184 U. 8. 368, 394; Louisville vy.

Cumberland Telephone ( '0., 224 U. S. 649, 658, 663; Grand Trunk Rail-

way Co. v. South Bend, 227 U.S. 544, 552; Owensboro v. Cumberland

Telephone Co., 230 U. 8. 58, 65: Boise Water ( ‘0. Vv. Boise City, 230

U.S. 84, 90, 91; Russell y. Sebastian, 233 U.S. 195, 204.

N. Y. ELECTRIC LINES v. EMPIRE CITY SUBWAY. 193

235 U.S. Opinion of the Court.

ordinance granting the right to place and maintain upon

the streets of the 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.” See also Boise Water Co. v. Boise City,

230 U.S. 84, 91. These municipal consents ave intended

to afford the basis of enterprise with reciprocal advan-

tages, and it would be virtually impossible to fulfil the

manifest intent of the legislature and to secure the bene-

fits expected to flow from the privileges conferred, if, in

the initial stages of the enterprise when the necessary pro-

ceedings preliminary to the execution of the proposed

work are being taken with due promptness, or when the

work is under way, the municipal consent should be sub-

ject to revocation at any time by the authorities,—not

upon the ground that the contract had not been per-

formed, or that any condition thereof, express or implied,

had been broken, but because as yet no contract whatever

had been made and there was nothing but a license which

might be withdrawn at pleasure. Grants like the one un-

der consideration are not nude pacts, but rest upon obliga-

tions expressly or impliedly assumed to carry on the un-

dertaking to which they relate. See The Binghamton

Bridge, 3 Wall. 51, 74; Pearsall y. Great Northern Railway,

161 U.S. 646, 663, 667. They are made and received with

the understanding that the recipient is protected by a con-

tractual right from the moment the grant is accepted and

during the course of performance as contemplated, as well

as after that performance. The case of ( ‘apital City Light

& Fuel Co. v. Tallahassee, 186 U.S. 401, to which the de-

fendant in error refers, is not opposed. There the com-

plainant, upon the ground of an exclusive privilege, sought

to enjoin a municipality from operating its own electric

light plant; although ten years had elapsed since the com-

plainant’s grant, the complainant had done nothing what-

ever to establish an electric light business and under the

VOL. CCXXXV—13

og

Opinion of the Court. 235 U.S.

194 OCTOBER TERM, 1914.

express terms of the statute the exclusive privilege had

not attached (186 U.S. 410).

But, while the grant becomes effective when made and

accepted in accordance with the statute and the grantee

is thus protected in starting the enterprise, it has always

been recognized that, as the franchise is given in order

that it may be exercised for the public benefit, the failure

to exercise it as contemplated is ground for revocation or

withdrawal. In the cases where the right of revocation in

the absence of express condition has been denied, it will

be found that there has been performance at least to some

substantial extent or that the grantee is duly proceeding to

perform. And when it is said that there is vested an inde-

feasible interest, easement, or contract right, it is plainly

meant to refer to a franchise not only granted but exer-

cised in conformity with the grant. (See cases cited

supra.) It is a tacit condition annexed to grants of fran-

chises that they may be lost by mis-user or non-user.

Terrett v. Taylor, 9 Cranch, 43, 51; Chicago Life Insurance

Co. v. Needles, 113 U. 8. 574, 580; Given v. Wright, 117

U.S. 648, 656. The condition thus implied is, of course, a

condition subsequent. The same principle is applicable

when a municipality under legislative authority gives the

permission which brings the franchise into being; there is

necessarily implied the condition of user. The conception

of the permission as giving rise to a right of property in no

way involves the notion that the exercise of the franchise

may be held in abeyance for an indefinite time, and that

the right may thus be treated as a permanent lien upon

the public streets, to be enforced for the advantage of the

owner at any time, however distant. Although the fran-

chise is property, ‘it is subject to defeasance or forfeiture

by failure to exercise it (People v. Broadway R. R. Co. of

Brooklyn, 126 N. Y. 29), or by subsequent abandonment

after it has been exercised (People v. Albany & Vermont

R. R. Co., 24 N. Y. 261).’ If ‘no time is prescribed, the

6

N. ¥. ELECTRIC LINES v. EMPIRE CITY SUBWAY. 195

235 U.S. Opinion of the Court.

franchise must be exercised within a reasonable time.’

City of New York v. Bryan, 196 N. Y. 158, 164.

It follows that where the franchise has not been exer-

cised within a reasonable time in accordance with the

condition which inheres in the nature of the grant, its

revocation upon this ground cannot be regarded as an

impairment of contractual obligation. The privileges

conferred may be withdrawn by such methods of procedure

as are consistent with established legal principles. ‘This

rule, frequently recognized in cases where franchises have

been abused or misemployed (see Chicago Life Insurance

Co. v. Needles, supra; Farmers Loan & Trust Co. v. Gales-

burg, 133 U.S. 156, 179; New Orleans Water Works Co. v.

Louisiana, 185 U. 8S. 336, 347; Columbus v. Mercantile

Trust &e. Co. of Baltimore, 218 U. 8S. 645, 663; Dillon,

Munic. Corp., 5th ed., § 1311), must also be applicable

where thev have been neglected, that is, have not been

used in due time. Whether in such cases, where there has

been a municipal permission for use of streets, the State

shall proceed directly by quo warranto, or whether it shall

authorize the municipality to pass a resolution or ordi-

nance of repeal or revocation leaving the propriety of its

course to be determined in an appropriate legal proceeding

in which the default of the grantee may be adjudicated,

is a question of state law with which we are not concerned.

The resolution in such case serves to define the attitude of

the public authorities, and to revoke the permission where

sufficient ground exists for such revocation. Whether

there has been such a mis-use or non-exercise of the fran-

chise as to warrant its withdrawal is a matter for judicial

consideration.

In the present case, the plaintiff in error, insisting upon

its continuing right, despite the resolution of revocation,

applied for a peremptory writ of mandamus to compel

the Subway Company—a quasi-public instrumentality

to furnish the desired space in its conduits. It had been

196 OCTOBER TERM, 1914.

Opinion of the Court. 235 U.S,

held by the state court that this was an available remedy

where a company had ‘lawful power’ to operate its con-

ductors in the City’s streets and had been denied the space

which the Subway Company by its contract with the City

had agreed to give. Matter of Longacre El. L. & P. Co.,

ISS N. Y. 361. The question of ‘lawful power’ of the

plaintiff in error was considered and the application re-

fused. It is true that it was stated that there was a license

only which by reason of non-performance had not ripened

into a contract right, but it is equally true that the non-

performance shown was available to defeat that right,

assuming it to have been created at the time of the grant,

and to make the resolution of revocation—which the state

court has held was adopted under state authority—entirely

proper.

For a long period of years after the final determination

of the validity of the statutes authorizing a comprehensive

scheme of subway construction, and after the contract

with the Subway Company had been made, the plaintiff

in error made no attempt to secure space and to exercise

the franchise now claimed. It treated that right as sus-

ceptible of practically indefinite retention unused. In the

circumstances disclosed, its excuses are unavailing. The

right conferred, assuming it to be a contract right, was to

be used within a reasonable time or lost. In view of the

state of the case as to non-exercise, it cannot be said that

its constitutional right has been infringed.

Judgment affirmed.

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