684

EXCLUSIVE RIGHT TO CONSTRUCT

incidental, arising from a second grant which conflicts with the first; and a stipulation in the charter of a bridge or railway company that no road or structure of a like kind shall be built between the same points or within a certain distance on either side, is valid, and will preclude the right to grant another franchise which will impair the value of the first.1

In the case last cited, a bridge was built at Binghamton across the Chenango River under a charter from the legislature of New York which provided that the company should have all the rights, privileges, and advantages conferred in the charter of the Delaware Bridge Co. and that "all the provisions, sections, and clauses of said charter should be extended to the charter of the Binghamton Bridge, if not inconsistent therewith." Among these clauses was one providing that no bridge should be erected within two miles on either side. Binghamton was then an inconsiderable village ; but it subsequently became a large and thriving town, and a single bridge was inadequate to the wants of the inhabitants. The legislature of New York accordingly authorized the construction of a second bridge near the first, to meet the need. When the question came before the Supreme Court of the United States on a writ of error, that tribunal held that the Binghamton Bridge Co. had all the rights of the Delaware Bridge Co., and among them that of insisting that no other bridge should be built within two miles of their own. So the grant of an exclusive right to supply gas to a city and its inhabitants through pipes and mains laid in the public streets is a contract which binds the municipality, and will be impaired by the grant of a like right to another company during the period fixed for the continuance of the first;2 and such also is the rule as to a franchise for the supply of water.3

1 See The Boston & Lowell R. R. v. The Salem & Lowell R. R., 2 Gray, 1; East Hartford v. The Hartford Bridge Co., 17 Conn. 78; New Orleans Gas Co. v. Louisiana Light Co., 115 U. S. 650, 662; The Charles River Bridge v. The Warren Bridge, 11 Peters, 420; The Richmond R. R. v. The Louisa R. R., 13 Howard, 71; The Binghamton Bridge Case, 3 Wallace, 51.

2 New Orleans Gas Co. v. Louisiana Light Co., 115 U. S 650. 8 New Orleans Water Works v. Rivers, 115 U. S. 674; ante, p. 607.

A BRIDGE OR RAILWAY.

685

The inconvenience of such a course of decision is obvious, and would be intolerable, but that, as I have elsewhere stated, the franchises granted by a State are, like all other property, subject to the right of eminent domain, and may be resumed by the legislature on the payment of an adequate compensation. In these instances the grant was exclusive in terms; and when such is not the case, conferring a chartered right or privilege will not preclude the legislature from making a like grant to another company, although it materially lessens the value of the first. The rule in such cases is the converse of that which prevails between individuals, where in a doubtful case that interpretation will be adopted which is most favorable to the grantee.

A law imposing a duty on either party to a contract that does not arise from its terms, may be an arbitrary deprivation; but if it does no more, will not impair the obligation of the other party to him. The case is obviously different where the statute makes requirements which are conditions precedent, and must be fulfilled before the opposite party can be compelled to do as he agreed. The obligation of a mutual or bilateral contract will consequently be impaired by so increasing the obligation of either party as to lessen the debt due to him or hinder him from enforcing it by suit. A tenant is entitled to quiet enjoyment during the term, and the landlord to possession when it ends; and a law making either right dependent on the performance of an act not enumerated in the lease-as, for instance, that the tenant shall pay the taxes, or the landlord make compensation for improvementswill be invalid. Parliament, as the recent course of English legislation indicates, may so deal with contracts; but no such power resides in Congress or the legislatures of the several States. Such also would be the effect of a law authorizing a vendor to deliver less than the contract calls for, or requiring the purchaser to pay more in order to entitle him to a

1 See West River Bridge Co. v. Dix, 6 Howard, 507; Richmond R. R. . Louisa R. R., 13 Id. 71; New Orleans Gas Co. v. Louisiana Light Co., 115 U. S 650, 673. See ante, p. 608.

2 Palairet's Appeal, 67 Pa. 493; The Sinking Fund Cases, 99 U. S. 700.

686

A STATE CANNOT IMPAIR CONTRACTS

conveyance; and an enactment that a failure of title shall be a defence to an action brought for the purchase-money of land, in the absence of a warranty or covenant of seisin, would fall in the same category.

Whatever the rule may be in other instances, where, as in the case of a charter, the State is a party to the contract, it cannot impose any terms or conditions not contained in the grant. A stipulation that an incorporated company shall do so much, implies that they shall not be called on for more; and if more is required, the obligation will be impaired, because the presumption is that the charter was accepted in the belief that its terms would be observed. It is equally clear that a State cannot evade the constitutional prohibition by declaring a valid contract void for a want of form or substance, or as having been made for an illegal end; and such legislation will simply leave the obligation where it was before the passage of the statute.2 The question is not necessarily concluded by a decision of the highest State tribunal that the contract was invalid from the outset, because the duty of the Supreme Court of the United States to see that the obligation of contracts is not impaired, involves the right to determine whether the contract was obligatory under the pre-existing law. Although the federal tribunals are also courts of the several States and should administer justice according to the laws of each State as construed by its courts of last resort, wherever the operation of the Constitution of the United States, of treaties, or of acts of Congress is not involved, yet in this last class of cases the Supreme Court of the United States is the arbiter by whose opinion the judgments. of the highest courts of the respective States must stand or fall. It was on this ground that the Supreme Court of

1 The Planters' Bank v. Sharp, 6 Howard, 301.

2 Keith v. Clark, 97 U. S. 454.

See ante, p. 503.

4 Knoup v. The Piqua Bank, 1 Ohio, N. s. 603; The Jefferson Bank v. Skelly, 1 Black, 436; The Northwestern University v. People, 99 U. S. 309; Delmas v. The Insurance Co., 14 Wallace, 661; Keith v. Clark, 97 U. S. 454; The Commonwealth v. The Pittsburgh R. R. Co., 8 P. F. Smith, 26, 44.

BY DECLARING THEM VOID.

687

the United States held that laws exempting the property of an incorporated company or an individual from taxation might operate as contracts, contrary to the opinion of the State tribunals that a legislature cannot bind its successors or part with any sovereign power which has been conferred for public ends. So contracts made payable in or in consideration of the paper currency of the Confederacy have been sustained by the same tribunal, although the highest court of the State had declared them void as contrary to public policy and in obedience to the popular will as signified by a convention.1

When, therefore, a contract is declared void by a State legislature or constitutional convention, and the State court subsequently sets it aside on the ground that it is contrary to public policy and was never valid, the Supreme Court of the United States will consider the case in both aspects and reverse the judgment if in their opinion the alleged defect does not exist, although they might have been bound by the decision of the State court had not the passage of the law enlarged their jurisdiction.2

In Keith v. Clark, the State of Tennessee had agreed in chartering the Bank of Tennessee to receive all its issues of circulating notes in payment of taxes; and a subsequent Constitutional amendment declaring the issues of the bank during the civil war invalid, and forbidding their receipt for taxes, was held to conflict with the Constitution of the United States.

A statute varying a grant or charter, or taking away any right which it confers, cannot be defended on the ground that the infringement is slight and does not injuriously affect the contract. The question in such cases is not one of degree, but whether the obligation is so varied as to alter the relations of the parties, or preclude a right that might have been enforced but for the change. A covenantee is entitled to the

1 Louisiana v. Pilsbury, 105 U. S. 27; see Keith v. Clark, 97 Id. 454. Keith v. Clark, 97 U. S. 454.

See Green v. Biddle, 8 Wheaton, 84; Von Hoffman v. Quincy, 4 Wallace, 552; Edwards v. Kearzey, 96 U. S. 600; Palairet's Appeal, 67 Pa. 479, 493.

688

SUBSTITUTION OF A DIFFERENT THING.

very thing for which he stipulated, and the legislature cannot substitute a different thing, although of greater value.1

In Palairet's Appeal an act providing for the extinguishment of irredeemable ground-rents on the payment of a sum fixed by a jury called to estimate the value, but which was not in any case to be computed at less than twenty years' purchase, was held to be at variance with the organic laws of the State and of the General Government. "Here," said Sharswood, J., "is a perpetual covenant, personal as to the original covenantor, but running with the land, to pay an annual rent issuing out of it; and the act provides for the release of one of the parties from the performance of his contract upon the doing of a collateral act not stipulated in the contract itself. No one has ever contended that an act of assembly could authorize one of the parties to a lawful pre-existing contract to tender a collateral thing in satisfaction or extinguishment, whatever the value of that thing might be as compared with the damage occasioned by the breach. Yet in effect that is just what is done by this act. The covenant is to pay an annual sum or rent forever; a jury are authorized to say what principal sum shall be a satisfaction and extinguishment of that covenant,—a collateral thing not provided for in the contract, and which might as well be anything else as money."

1 See The Planters' Bank v. Sharp, 6 Howard, 301, 307; Palairet's Appeal, 67 Pa. 479.