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RUSSELL V. SEBASTIAN, 233 U. S. 195 (1914)

U.S. Supreme Court

Russell v. Sebastian, 233 U.S. 195 (1914)

Russell v. Sebastian

No. 415

Argued January 6, 1914

Decided April 6, 1914

233 U.S. 195


In determining the question of impairment under the contract clause of the Constitution, it is the duty of this Court to determine for itself the nature and extent of rights acquired under prior legislative or constitutional action.

The state court having construed a statutory or constitutional provision,

Page 233 U. S. 196

which gave specified privileges in regard to public utilities in a certain class of municipalities under specified conditions without specifying the persons or corporations who could avail thereof or the method of acceptance, to the effect that the grant became effective in any municipality within the designated class by the party accepting it as if it had been made specially to the accepting party, this Court follows such construction in regard to ^ 19 of Art. XI of the Constitution of 1879 of California, as amended in 1884.

When the state declares that it is bound if its offer to grant a privilege, which plainly contemplates the establishment of a plant and the assumption of a duty to perform the services incident to a public utility, is accepted, the grant resulting from the acceptance constitutes a contract, and vests a property right in the accepting party which is within the protection of the contract clause of the federal Constitution.

The rule that public grants are to be construed strictly in favor of the public, and ambiguities are to be resolved against the grantee, is a salutary one to frustrate efforts through skillful wording of the grant by interested parties, but the rule does not deny to public offers a fair and reasonable interpretation or justify withholding that which the grant was intended to convey.

An offer of the state to allow parties, ready to serve municipalities with gas or water, provisions for conveying the gas or water is to be given a practical common sense construction, and the breadth of the offer is commensurate with the requirements of the undertaking invited.

Where the constitution of the state does not forbid, the state may determine the policy of making direct grants for franchises in municipalities, and may determine their terms and scope.

A grant to lay pipes and conduits in the streets of a municipality, dependent only upon acceptance, is not to be regarded as accepted foot by foot as pipes are laid, but in an entirety for all the streets of the municipality, and after acceptance and preparation for compliance with the offer, the grant cannot be withdrawn as to the streets in which pipes have not been laid. Such action would impair the contract.

The duty of a public service corporation to extend its service to meet reasonable demands of the community is correlative to the obligation of the municipality to allow the service to be extended as required by the public needs.

In this case, the public service corporation having, by accepting the offer of the state and making the investment, committed itself irrevocably to the undertaking, it was entitled to continue to lay pipes

Page 233 U. S. 197

in the streets wherever necessary to extend its service, and it could not be prevented from doing so by subsequent legislation impairing the grant.

The amendment of 1911 to § 19 of Art. XI of the California Constitution of 1879, as amended in 1884, and municipal ordinances of Los Angeles adopted in pursuance thereof, were ineffectual under the contract clause of the federal Constitution to deprive a corporation which had accepted the offer of the state, contained in § 19 before the amendment, of its right to continue to lay pipes in the streets of Los Angeles in accordance with the general regulations of the municipality in regard to such work.

163 Cal. 668 reversed.

The facts, which involve the construction and constitutionality under the contract clause of the federal Constitution of provisions of the constitution of California in regard to right of gas and water companies to excavate streets in municipalities for their mains, and the application of such provisions to such corporations in the City of Los Angeles, are stated in the opinion.

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