28 F. 529 | U.S. Circuit Court for the District of Eastern Michigan | 1886
A preliminary objection to the jurisdiction of the court in this case demands our first consideration. That no jurisdiction
In section 1 of the act of 1875 the phraseology is but slightly changed, and jurisdiction given of “controversies” “between citizens of different states;” but the construction of the act is the same, except that the court may examine the record, and rearrange the parties upon different sides of the actual “controversy” or the real matter in dispute. Pacific R. R. v. Ketchum, 101 U. S. 289, 297; Teal v. Walker, 10 Ch. Leg. News, 131.
The same language is used in first clause of the second section of the same act, providing for the removal of cases from state courts, and to this language a like construction has been given in a large number of cases. Removal Cases, 100 U. S. 457; Blake v. McKim, 103 U. S. 336; Shainwald v. Lewis, 108 U. S. 158; S. C. 2 Sup. Ct. Rep. 385; Hyde v. Ruble, 104 U. S. 407.
As there is no doubt that the parties in this cause are properly arranged upon the record, the jurisdiction must fail, unless it can be supported upon some other ground.
It is insisted, in this connection, that the suit is one “arisingunder the constitution or laws of the United States,” within the meaning of the act of 1875, and that, therefore, this court may take cognizance of the case independent of the citizenship of the parties. Granting the premises, plaintiff’s conclusion therefrom is undoubtedly correct. Its claim is that the resolution of the common council of the city of Saginaw adopted July 21, 1886, accepting the proposition of the electric light company, granting permission to that company to purchase a location, to erect buildings, and to put up a plant in said city, and contracting with the company to light the public streets'of the city with electric lights, is a practical repudiation of its contract with the plaintiff, and a violation of the constitutional provision that “no state shall pass any law impairing the obligations of contracts.” If
But if- the case be not one of this class, — in other words, if the resolution of the common council in question be not a “state law,” within the meaning of this clause, — then we cannot be called upon to determine whether it impairs the obligation of plaintiff’s contract. To illustrate: If the plaintiff corporation had received its franchise directly from the state legislature, and the electric light company-had also received its franchise of July 21,1886, from the same body, there could be no question that the consonance of this action with the above clause of the constitution would be directly put in issue by this case. Suits arising upon conflicting legislative grants of this description are of frequent occurrence, and have been uniformly held to be cognizable in the federal courts. State Bank v. Knoop, 16 How. 369; Providence Bank v. Billings, 4 Pet. 561; Charles River Bridge v. Warren Bridge, 11 Pet. 420; Richmond, etc., R. Co. v. Louisa R. Co., 13 How. 81; New Jersey v. Wilson, 7 Cranch, 164; New Orleans Gas Co. v. Louisiana Light Co., 115 U. S. 650; S. C. 6 Sup. Ct. Rep. 252; Louisville Gas Co. v. Citizens’ Gas Co., 115 U. S. 683; S. C. 6 Ct. Rep. 265.
Upon the other hand, it is equally clear that if the city of Saginaw possessed no greater powers than those of any private corporation, its action in passing the resolution of July 21st would have amounted to nothing more than the breach of an ordinary contract with, the plaintiff, and would have involved no question of legislative power. -It is only where a party is acting under authority of a “state” that his action can be obnoxious to the clause in question, prohibiting “states” from impairing the obligations of contracts. In the absence of this clause, a state might enact laws which would have that effect. This is one of the attributes of complete sovereignty, and the power to do this has more than once been exercised by the imperial parliament of Great Britian, and by other sovereign bodies, — notably in the recent Irish land act; but no one will pretend it can be done by an individual, or a private corporation. Hence it is the act of a sovereign state upon which this clause is intended to operate. As to all other bodies or persons, the provision is unnecessary. Thus, we have no jurisdiction to inquire whether the political body which passed a particular statute was in fact a “state” legislature, within the meaning of this clause. Scott v. Jones, 5 How. 343. Nor to determine whether the law of a territorial legislature impairs the obligations of a contract. Miners’ Bank v. Iowa, 12 How. 1; Messenger v. Mason, 10 Wall. 507. Nor is the authority conferred by a state statute upon its supreme court to hear and determine cases the kind of authority referred to in the judiciary act, which gives the federal supreme court the right to review its decisions where is drawn in question the va
As was said by Mr. Justice Miller in Railroad Co. v. Rock, 4 Wall. 177, 181: “It must be the constitution, or some law of the state, which impairs the obligation of a contract, or which is otherwise in conflict with the constitution of the United States..” See, also, Knox v. Exchange Bank, 12 Wall. 379; Tarver v. Keach, 15 Wall. 67.
But if the authority exercised be that of the state itself, whether acting directly through its legislature, or indirectly through a subordinate body, to which the legislature has delegated a portion of its powers, it is competent for this court to inquire whether it has exceeded its authority, and violated the constitutional provision in question.
Thus, in the case of Weston v. City of Charleston, 2 Pet. 462, a municipal ordinance of the city of Charleston was held to be the exercise of “an authority under the state of South Carolina, the validity of which might be drawn in question by the supreme court on the ground of its repugnancy to the constitution.
In Wright v. Nagle, 101 U. S. 791, the jurisdiction of the court was sustained upon the following state of facts : An inferior state court had entered into a contract granting to the plaintiff the exclusive right of opening ferries and building bridges over a certain river. Subsequently the commissioners of roads and revenues for the same county authorized the defendants to erect and maintain a toll-bridge across the same river within the limits of the original grant to plaintiff. The bill averred that the commissioners, in mating and granting such franchise, exercised legislative powers conferred upon it by the statute; that the grant was in the nature of a statute of the legislature, and was an infringement of the grant to the plaintiff, and impaired the obligation of his contract. On motion to dismiss the case because no federal question was involved, the court held that the legislature of the state alone had authority to make the grant, but that it might exercise this authority by direct legislation, or through agencies duly established, having power for that purpose; that the grant, when made, was directly or indirectly the act of the state; and that the court had jurisdiction to inquire whether the grant so made impaired the obligation of the prior contract with the plaintiff. Upon a careful consideration of this case, we have come to the conclusion that it is controlling here, and decisive in favor of our jurisdiction.
The general law authorizing the formation of gas-light companies, under which both the plaintiff corporation and the electric light company were organized, provides that (Laws 1871, § 2908) “such corporation shall have power to lay conductors, etc., with the consent of the municipal authorities of said city, town, or village, under such reasonable regulations as they may prescribe.” In enacting such regulations, then, the common council is acting under the authority of the state, and the question of their consonance with the consti
As incident to the constitutional question, we are also at liberty to inquire whether, admitting that the common council granted an exclusive franchise to the four persons named in the resolution, it had the power to do this under its charter. Wright v. Nagle, 101 U. S. 791. What, then, were the powers of the common council in this particular? The answer must be found either in the city charter, in the general law authorizing the formation of gas companies, or be inferred from the powers expressly granted in these acts. But the charter of 1867, under which the city was incorporated at the time it granted the franchise to plaintiff, is silent upon this subject. In enumerating the powers and duties of the common council, in section 10 of this charter, no mention whatever is made of a power to light the streets; and it was not until 1871 that the act was so amended as to authorize the common council “to cause the streets, lanes, and alleys to be lighted.” 2 Laws 1871, p. 424. In view of this fact, we find it difficult to see how the ordinance of 1868 can be supported.
We understand the law to be perfectly well settled, as stated by Judge Dillon in his admirable work upon Municipal Corporations, § 89, that “a municipal corporation possesses and can exercise the following powers, and no others: (1) Those granted in express words; (2) those necessarily or fairly implied, or incident to the powers expressly granted; (3) those essential to the declared object and purposes of the corporation, not simply convenient, but indispensable. Any fair, reasonable doubt concerning the existence of power is resolved by the courts against the corporation, and the power is denied. Of every municipal corporation, the charter or statute by which it is created is its organic act. Neither the corporation nor its officers can do any act, or make any contract, or incur any liability, not authorized thereby. All acts beyond the scope of the powers granted are void. ” While lighting the streets of a city is undoubtedly greatly conducive to the comfort and convenience of its inhabitants, it is by no means indispensable to a city government, nor is it one of those incidental powers which are sometimes implied from other powers expressly conferred.
But conceding, for the purposes of the case, that the ordinance of 1871, which was passed after the act of 1871 amending the charter had taken effect, was a recognition and adoption of the ordinance of 1868, it remains to be considered whether, at this time, the common council had the power to confer an exclusive franchise upon the plaintiff to light its streets with gas for 30 years. That the state, in its sovereign capacity, may grant a monopoly of this description, and that such monopolies will be protected against a subsequent conflicting grant, has lately been settled by the supreme court in New
It is clear, however, that there is no authority expressly given to confer upon any corporation an exclusive right to occupy its streets for a number of years. It is true, it may, in effect, grant such exclusive right by refusing to any other company the franchise or privilege it has already granted to one; but this presupposes a continued and abiding consent on the part of the city to keep alive its contract, and is quite distinct from the right of the city to surrender its power to make another contract, and to vest in the plaintiff the right to determine for itself whether a rival company shall be permitted to enter its domain. While there is great force in plaintiff’s argument that individuals would not be likely to incur the groat expense of establishing gas-works and laying pipes without some assurance of a profitable and continued employment for a sufficient length of time to remunerate them for their outlay, wo think the law is too well settled that this cannot be done, without express permission of the sovereign power, to be now disturbed. If a grant of this kind for 30 years may he supported, why may it not, by parity of reasoning, be upheld for a hundred years, or in perpetuity ?
The common law of England declares that monopolies cannot emanate from the crown, and can only be conferred by act of parliament, (Bac. Abr. tit. “Monopoly,”) and a by-law which creates a monopoly is void, (Jac. Law Diet.)
The great weight of authority in this country is in the same direction. Thus, in Norwich Gas Co. v. Norwich City Gas Co., 25 Conn. 19, a municipal ordinance, purporting to grant the exclusive privilege of laying gas-pipes through the streets of a city for a period, of 15
We are not, however, without the direct authority for our proposition that nothing will be intended from a legislative grant to a municipal corporation.
In Minturn v. Larue, 23 How. 435, it was held that a charter authorizing the city of Oakland to establish and regulate ferries, or to authorize the construction of the same, gave no power to the city to grant an exclusive privilege. In delivering the opinion Mr. Justice Nelson observed:
“It is a well-settled rule of construction of grants by the legislature to corporations, whether public or private, that only such powers and rights can be exercised under them as are clearly comprehended within the words of the act, or derived therefrom by necessary implication, regard being liad to the objects of the grant. Any ambiguity or doubt arising out of the terms used by the legislature must be resolved in favor of the public.”
In the case of Wright v. Nagle, 101 U. S. 791, to which reference has already been made, it was held that legislative power given to an inferior body to establish ferries and bridges did not authorize such body to grant the exclusive fight to one person, though there was no doubt that the legislature itself had authority to make such a grant. The case is upon all fours with the one under consideration.
The same question was argued with great skill and thoroughness in State v. Cincinnati Gas-light & Coke Co., 18 Ohio St. 262. In this case the charter conferred on the gas'company power “to manufacture and sell gas, to lay pipes,” etc., provided the consent of the city council be obtained for that purpose. Under a power given to the city council of Cincinnati “to cause said city, or any part thereof, to be lighted with oil or gas,” and to levy a tax for that purpose, it contracted to invest the defendant with the full and exclusive privilege of using the streets, etc., for the purpose of lighting the city for the term of 25 years, and thereafter, until the city should purchase the works. It was held that, while there was no doubt that the city might by contract provide for lighting by gas, there was no necessity for making such right exclusive, and that the city had no authority to make the grant.
So, in Richmond Co. Gas-light Co. v. Middletown, 59 N. Y. 228, the board of the towm corporation was authorized to cause the streets to be lighted with gas whenever they deemed it necessary, and required the board to contract with the plaintiff company to supply the same with
Other analogous cases are to the same effect:
Logan v. Pyne, 43 Iowa, 524, in which an exclusive grant to one person to run omnibuses was held not to be the valid exercise of a power to “license, tax, and regulate omnibuses.”
Jackson County Horse R. Co. v. Rapid Transit Co., 24 Fed. Rep. 306. In this case it was held by J udge Biíewkr that, in the absence of express authority in its charter, the city of Kansas had no power to grant to a street railway company the sole right, for the space of 21 years, to construct, maintain, and operate their railway over and along the streets of the said city.
The only case to which our attention has been called, which points in the other direction, is that of City of Newport v. Newport Light Co., 8 Ky. Law Rep. 22. In this case the charter of the Newport Light Company provided that “it might furnish any city * * * with gas, or other lights, for such time, and upon such terms, as may be agreed upon by the partieswhile the charter of the city of Newport empowered that municipality “to construct, maintain, and operate gas-works, and to pass all ordinances necessary to regulate the same.” It was held that under these acts a grant to the light company of an exclusive privilege of using its streets, etc., for the purpose of laying pipes, for 25 years, was a valid exercise of its power. It was said that, being invested with the right to light its streets with gas, or to construct and maintain gas-works for that purpose, its right to contract under such power was unquestioned; and that, when there was a valid contract to that effect, there was no reason why it should not be enforced or governed by the same rules applicable to contracts between natural persons. We think, however, the court erred in treating the cases in Ohio and Connecticut as being inconsistent with the recent cases in the supreme court of the United States, wherein the franchises of the New Orleans and Louisville Gas Companies were upheld, and in overlooking the distinction between the grant of a monopoly by the legislature of the state, possessing sovereign powers in that particular, and the bestowal of a like monopoly by the common council of a city, -whose powers are strictly limited by its charter. We think the statement, of the court that the question was one of contract, or of the right to contract, must be taken with the qualification that the power to contract with one company is not of such a character as to deprive the city of its power to contract with another. It is the very power to contract which the city bargains away and relinquishes by the grant of a monopoly for a term of years, and this, it seems to us, it cannot do. Gale v. Kalamazoo, 23 Mich. 344; Mayor of N. Y. v. Second Ave. R. R., 32 N. Y. 261.
But, conceding this franchise to have been legally granted, there is another obstacle no less formidable to the maintenance of this bill. The'grant in this ease is of an exclusive right “to maintain and operate gas-works, to lay gas-pipes through the streets, and to supply the city and its inhabitants with gas. It is not the exclusive privilege of lighting the city, but of lighting it with gas, that is contemplated. There is nothing to prevent the city from using oil, electricity, or any other means of illumination, except gas. At the time this ordinance was passed the employment of gas was the favorite and only effectual means of lighting a city, and it was undoubtedly supposed by both parties that it would continue to be so. But in the progress of human science another method has been invented, which bids fair to supersede the old one, and the city may well claim that it ought not to be deprived of the benefits of the latest discoveries in that direction. Suppose, before the employment of gas as an illuminator, a city had contracted with an individual to light its streets with oil for 50 years, would it not be a hardship to claim that it was thereby debarred, of availing itself of the later invention? We think it would require the most explicit and unequivocal language to justify this interpretation. Had the contract been for lighting the city generally, there would be plausibility in claiming that the grantee was invested with a monopoly of all forms of illumination. But these ordinances evidently contemplated that some might prefer, upon the ground of economy or otherwise, to light their houses with oil or candles, and reserved the right to do so.
In this connection we are referred to a recent case decided by a Bavarian court, in relation to lighting the city of Munich, in which it seems to have been held that good faith requires that a contract by a city to have its streets lighted with gas should be extended to all forms of illumination. In delivering the opinion the learned judge observed:
“There has been an effort made to lay weight on the point that the lighting of the streets with gas was conceded to the company, that this did not hinder the introduction of electric lighting, since this could take place with*539 out violating the conditions of section 4. This interpretation is entirely contrary to good faith, — bona/ides. Bat, besides that, the city has bound itself, for thirty-six years, to have the streets lighted with gas, and must do this in fultillinent of the contract, since a contrary behavior would involve a ilagrant broach of the contract. * * * It is fully evident that the gas company undertook, for thirty-six years, the obligation of lighting the streets and squares of Munich with gas, and that the city is bound for the time agreed upon to allow the lighting of the city to be done by the gas company exclusively.”
We cannot assent tó a similar interpretation of the franchise in this case. The city does not obligate itself to take any particular quantity of gas, or to continue the exclusive employment of gas for a definite period. The contract between the city of Munich and the gas company is not set forth in the opinion, but the language would indicate that the city bound itself in terms to have its streets lighted with gas. If this be so, the case differs very materially from the one under consideration, and the opinion is entitled to no weight. If there were a simple concession to the company of an exclusive privilege of lighting the city with gas, the case is undoubtedly authority for the plaintiff’s contention; hut, in explanation, it should be observed that the civil law prevails in the kingdom of Bavaria, and by that law grants made by the sovereign are regarded with favor, and are given a large and liberal interpretation.
In Domat’s Buies for the Interpretation of Laws it is said, rule IT:
“The grants and gifts of the sovereign are to be favorably regarded, and to have that extension to which they are entitled from the natural presumption of princely liberality: provided, however, that they are not to be so liberally construed as to injure other individuáis.”
It is scarcely necessary to say that, in the jurisprudence of Anglo-Saxon communities, gifts of the sovereign are treated with less consideration, and a totally different rule of interpretation obtains. Nothing is better settled than that statutes creating monopolies, granting franchises, and charters of incorporation, must be construed liberally in favor of the public, and strictly as against the grantee. Monopolies are justly regarded as encroachments upon the natural rights of the people, and are viewed with jealousy by courts. Whatever is not equivocally granted in such act is taken to have been withheld. All acts of incorporation, and acts extending the privileges of incorporated bodies, are to be taken most strongly against the companies. Sedg. St. Law, 339.
In regard to the rights of franchises, it is said by the supreme court that, where the grant is designed by the sovereign power to bo a general benefit aud accommodation to the public, if the meaning of the words bo doubtful, they shall be taken most strongly against the grantee and for the government, and therefore the grant is not to be extended, by implication, in favor of the grantee, beyond the obvious and natural moaning of the words employed. Other authorities, putting it sententiously, say that a doubt is fatal to a grant. Thus,
But it is useless to multiply authorities in support of this proposition. The general principle is too firmly established to admit of argument. Its application to this case, we think, is entirely clear. The plaintiff took nothing by its franchise but the privilege of lighting the streets with gas, and this it will continue to enjoy so far as its patrons prefer the use of gas to electricity. But its claim to the exclusive privilege of lighting the city by all methods of illumination cannot be supported upon legal principles, and the injunction must therefore be denied.