New York Elec. Lines Co. v. Empire City Subway Co. - 235 U.S. 179 (1914)
U.S. Supreme Court
New York Elec. Lines Co. v. Empire City Subway Co., 235 U.S. 179 (1914)
New York Electric Lines Company v.
Empire City Subway Company
Argued November 5, 6, 1914
Decided November 30, 1914
235 U.S. 179
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.