OLD COLONY TRUST CO. V. OMAHA, 230 U. S. 100 (1913)

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U.S. Supreme Court

Old Colony Trust Co. v. Omaha, 230 U.S. 100 (1913)

Old Colony Trust Company v. City of Omaha

No. 754

Argued February 27, 28, 1913

Argued April 10, 11, 1913

Decided June 16, 1913

230 U.S. 100


A municipality, being a creature of the state, derives its powers from the laws thereof, and is within the influence of the decisions of the state's court of last resort.

Under the laws of Nebraska, as construed by the highest courts of that state, municipalities had the power in 1884 of granting licenses to use the streets for public business; and, in the absence of specific limitation

Page 230 U. S. 101

of duration, such licenses were in perpetuity, and conveyed rights of property within the protection of the contract clause of the Constitution of the United States.

Such grants are subject to reasonable police power of the state, and forfeitable for acts of abuse or nonuser, but they cannot be taken away or impaired arbitrarily.

Decisions of the highest court of the state relating to such matters of local law as the construction of the constitution and statutes of the state and the powers of its municipalities are controlling upon this Court so long as their application involves no infraction of rights secured by the Constitution of the United States.

In the absence of any controlling statute, this Court will not give any greater effect to the syllabus of a case decided by the highest court of a state and reported in the official reports of that court than is given thereto in the courts of the state.

A provision in an ordinance that the grantee of a franchise to use the streets of a municipality may be required to remove therefrom what it has placed therein under the franchise when necessity demands, held, in this case, not to be an intention to limit the franchise to the corporate existence of the grantee.

An ordinance, not based upon necessities of the municipality, requiring an electric light company to remove its poles and wires held, in this case, to be an arbitrary impairment of the contract of the original ordinance granting the right in perpetuity and therefore void because unconstitutional under the contract clause of the Constitution of the United States.

Quaere what is the exact meaning of the phrase "general electric light business" as used in an ordinance granting a franchise to a corporation for that purpose, and whether it includes distribution of electricity for power and heat.

The practical interpretation of a contract by the parties thereto for a considerable period before a controversy arises is of great, if not controlling, influence, and this rule is applicable in Nebraska as in the nature of estoppel.

Acquiescence by the municipality in the extension of a franchise for electric light to distribution of electricity for power and heat evidenced, as in this case, by collection of taxes imposed on receipts therefrom and the purchase by the city of current for power, held to entitle those who had advanced money on the security of the franchise to insist upon the recognition and continuation of the right of the corporation to supply electricity for power and heat as well as light, and an ordinance requiring the corporation to discontinue

Page 230 U. S. 102

such distribution of heat and power is void under the contract clause of the Constitution of the United States. A judgment against corporation construing its franchise is not res judicata as against a mortgagee who was not a party to the suit and whose rights were acquired prior to the commencement of the suit in which the judgment was entered.

The facts, which involve the construction of ordinances of the City of Omaha, Nebraska, granting franchises for distribution of electric current, the extent of the rights thereunder and the effect of subsequent ordinances thereon and the constitutionality of the latter under the contract clause of the Constitution of the United States, are stated in the opinion.

Page 230 U. S. 108

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