City of Louisville v. Cumberland Telephone & Telegraph Co.

after making the foregoing statement, delivered the opinion of the court.

1. Under the present constitution of Kentucky street franchises cannot be granted for longer than twenty years and then only to the highest bidder, after public advertisement by the city authorities. But in 1886, when the Ohio Valley Telephone Company was chartered, the legislature . not only had the sole right to create corporations and to grant franchises but, without municipal consent, it could have authorized the company to use any and all streets in the city of Louisville. Instead, however, of exercising this plenary power, the charter declared that the company might maintain its telephone system, erect poles and string wires over the streets and highways of the city, with and by the consent of the General Council. These provisions of the charter gave the municipality ample authority to deal with the subject, and by virtue of this statutory power it could have imposed terms, which the company might have been unable or unwilling to accept— in which event the franchise granted by the State would have been nugatory. But, when the assent was given the condition precedent had been performed, the franchise was perfected and could not thereafter be abrogated by municipal action. For, while the city was given the authority to consent, the statute .did not confer upon it the power to withdraw that consent, and no attempt was made to reserve such a right in the collateral contract contained in those provisions of the ordinance relating to the com

2. In 1891 a new constitution was adopted by the State of Kentucky conferring upon municipalities the right to grant street franchises, and later, under the reserve power, a statute was passed repealing all special corporate privileges. • It is claimed that in consequence of these laws the street rights granted the Ohio Valley Telephone Company have been withdrawn, or at least made subject to municipal revocation. But we find in the cited sections of the constitution (156, 163, 164 and 199) and the statutes (§§ 573, 2742, 2783 and 2825) nothing which sustains this contention, which, if correct, would lead to the conclusion that all structures theretofore lawfully placed in city streets by water, light, telephone, railway and other public utility companies became nuisances, and as such were removable after September, 1898, to the damage of the community at large and the destruction of property of immense value dedicated to public purposes. The general repeal of all special privileges, referred to in the statute, related to exclusive grants, tax exemptions, monopolies and similar immunities (Ky. Stat. 573; Covington v. Kentucky, 173 U. S. 231 ), and not to those corporate powers and property rights needed

3. The provisions of the constitution and statutes relied on as revoking licenses from municipalities or as conferring power upon cities to repeal grants are in the main prospective and do not in any event support , the claim that the General Council can destroy the rights granted the Ohio Valley Telephone Company, whether they be treated as having been acquired under the charter of April 3, 1886, or under the ordinance of. August 17, 1886. On the contrary, the constitution of 1891, while limiting for the future the power to sell street franchises, distinctly protected the interests of those public utility companies “whose charters have been heretofore granted, conferring such rights, and work has- in good faith been begun thereunder.” Inasmuch, therefore, as the charter of the Ohio Valley Telephone Company was granted and as the exchanges were in operation.before the adoption of the constitution, that company’s rights are expressly preserved by the organic law of the State.

4. The Ohio Valley Company, thus owning the right to use the streets for telephone purposes, was consolidated on January 27, 1900, into the Cumberland Telephone and' Telegraph Company, the defendant in error, and the. latter claims that, as successor, it acquired and now holds these privileges. This is denied by the city on the ground that while the statute, then of force, provided for the transfer of the “property” of the constituent companies, it was not until the amendment of 1902 that provision was made by which their “franchises” could pass to the consolidated company.

It is not necessary to determine whether that amendment

That the street rights, however designated, passed to the Cumberland Company is the natural and obvious construction of the act.- The plant and property of a telephone company are useless when dissevered from the streets, and there would, in effect, have been no property out of which to pay the debts or with which to perform the public duties imposed if the street rights of the constituent companies bad not been transferred by the

5. The plaintiff in error makes the further contention that its general demurrer should have been sustained and the bill dismissed because the original grant of street rights, having been indefinite as to time, was either void ab initio, or revocable at the will of the General Council, or that it expired in 1893 when (Ky. Stat., 1909, § 2742) Louisville was made a city of the first class with new and enlarged power. In support of this proposition numerous

None of these decisions are applicable to a case like the present, where the Ohio Valley Telephone Company, with a perpetual charter, has received, not from the municipality, but from the State of Kentucky, the grant of an assignable right to use the streets of a city which remains the same legal entity, although by a later statute it has been put in the first class and given greater municipal powers. Vilas v. Manila, 220 U. S. 345 , 361.

In considering, the duration of such a franchise it is necessary to consider that a telephone system cannot be operated without the use of poles, conduits, wires and fixtures. These structures are permanent in their nature a.nd require a large investment for their erection and construction. To say that the right to maintain these appliances was only a license, which could be revoked at will, would operate to nullify the charter itself, and thus defeat the State’s purposé to secure a telephone system for public use. For, manifestly, no one would have been willing to incur the heavy expense of installing these necessary and costly fixures if they were removable at will of the city and the utility and value of the entire plant

This grant was not at will, nor for years, nor for the life of the city. Neither was it made terminable upon the happening of a future event, but it was a necessary and integral part of the other franchises conferred upon the company, all of which were perpetual and none of which could be exercised without this essential right to use the streets. The duration of the public business in which these permanent structures were to be used, the express provision that franchises could be mortgaged and sold, the nature of the grant, and the ternas of the charter as a whole, compel a holding that the State of Kentucky com ferred upon the Ohio Valley Telephone Company the right to use the streets to the extent and for the period necessary to enable the company to perform tíre perpetual obligation to maintain and conduct a telephone system in the city of Louisville. Such has been the uniform‘holding of courts construing similar grants to like corporations. Milhau v. Sharp, 27 N. Y. 611 (1863); Hudson Telephone Co. v. Jersey City, 49 N. J. L. 303 ; Mobile v. L. & N. R. R., 84 Alabama, 122; Seattle v. Columbia & P. S. R. R., 6 Washington, 379, 392; People v. Deehan, 153 N. Y. 528 . The earlier cases are reviewed in Detroit St. R. R. v. Detroit, 64 Fed. Rep. 628 , 634, which was cited with approval in Detroit v. Detroit St. R. R., 184 U. S. 368 , 395, this court there saying that “Where the grant to a corporation of a franchise to construct and operate its road is not, by its terms, limited and revocable, the grant is in fee.”

The right to conduct a telephone exchange and to use the streets of the city of Louisville, which had been vested by law in the Cumberland Telephone & Telegraph Company, could not be impaired or forfeited by an ordinance of the General Council; nor had it expired by lapse of

Affirmed.