IRON MOUNTAIN R. CO. OF MEMPHIS v. CITY OF MEMPHIS et al., 96 F. 113

TAFT, Circuit Judge (after stating the facts as above). The first question which arises on this rqcord is whether the action taken and proposed to be táken by the city was an attempt by the state to take the property of the complainant without due process of law. Kentucky avenue was one of the streets of the city of Memphis. Title to the easement or the fee in the street was held in trust by the taxing district of Shelby county and the city of Memphis for the use of the public at large.

The power to contract with reference to the street, and the power to exercise control over it, was originally vested in the legislature, and the city derived the power to control the street and to contract with reference to its use by delegation from the state through its legislature.

Judge Dillon, in his work on Municipal Corporations (volume 2, § 656), states this principle as follows: “Public streets, squares, and commons, unless there be some special restriction, when the same are dedicated or acquired, are for the public use; and the use is none the less for the public at large, as distinguished from the municipality, because they are situate within the limits of the latter, and because the legislature may have given the supervision, control, and regulation of them to the local authorities.

The legislature of the state represents the public at large, and has, in the absence of special constitutional restraint, and subject (according to the weight of more recent judicial opinion) to the property rights and easements of the abutting owner, full and paramount authority over all public ways and public places. ‘To the commonwealth here,’ says Chief Justice Gibson, ‘as to the king in England, belongs the franchise of every highway as a trustee for the public; and streets regulated and repaired by the authority of a municipal corporation are as much highways as are rivers, railroads, canals, or public roads laid out by the authority of the quarter sessions,’ ”— citing O’Connor v.

Pittsburgh, 18 Pa. St.

Section 47 of tbe charter of tbe city of Memphis, enacted by tbe general assembly of tbe state, is as follows: “The general council shall have power to regulate the laying of railroad iron and the passage of railroad cars through the city.”

Section 50 of tbe charter is as follows: “The general council shall have power to improve, preserve and keep in good repair the streets, sidewalks, public landing and squares of the city; to open and widen streets, and to lay off new streets and alleys necessary, always paying the party injured therefor; and by unanimous vote to close up, transfer or sell any street, alley or public easement; and shall have and exercise complete and perfect control over all the streets, squares and other property of the city, whether lying within or without the limits of the city.

They shall also have the power to compel the owner or owners of any ground or private alley to keep the same clean; or, if necessary thereunto, to compel him or them to improve the same, and remove any nuisance from the same.” In tbe control of tbe streets, in contracting with reference to tbeir nse, in tbe declaration of nuisances upon the streets,in tbe resumption' of tbe complete control over tbe streets after tbe termination of easements in tbe street enjoyed by any private person or corporation, tbe city is acting as trustee, not alone for tbe citizens and residents of tbe city, but as a trustee for tbe public at large, and is exercising a power delegated to it by tbe state, and in tbe exercise of such a power is necessarily, therefore, a state agency.

That this is true in Tennessee appears from tbe case of Williams v. Taxing District, 16 Lea, 531. That case presented tbe question whether tbe taxing district of Shelby county was liable in damages to tbe person whose property was injured by a failure to keep tbe streets in repair.

Section 19 of tbe act creating it provided that tbe taxing district should not be liable for damages or injuries to person or property by reason of defects in tbe street under its control. It was contended that this act was in violation of the constitution (article 1, § 17) of the state of Tennessee, which provided: “That all courts shall be open; and every man, for an injury dono him in his lands, goods, person or reputation, shall have remedy by due course of law and right and justice administered without sale, denial or delay.

Suits may be brought against the state in such manner and in such courts as the legislature may, by law, direct.” It was held that, because such suits were really against the state of Tennessee, it lay within the power of the legislature to grant or deny the right to private persons to bring suits for neglect to repair streets by a municipal corporation. Judge Cooper, in delivering the opinion, said: “By the common law the citizen had no remedy against a county for an injury caused by tbe neglect of the county to keep the public roads in good repair.

And such is the state of the law to this day, although the county is a municipal corporation. Wood v. Tipton Co., 7 Baxt. 112; White’s Creek Turnpike Co. v. Davidson Co., 14 Lea, 73.

The reason is that the county, in its municipal capacity, is only an arm or Instrument of the state to carry out its sovereign prerogative In opening and keeping up public roads, and the legislature may give It only such powers as it deems best, and limit Its liabilities accordingly. * * * The current of authority, while recognizing the exemption of counties from liability for injuries caused by failing to keep the public roads In repair, nevertheless holds an incorporated town liable for a similar injury occasioned by neglect of Its public streets.

Tbe reason of the distinction is that municipal corporations of this class, while still arms of the state government, are more complete entities, and are enjoined and given the power to maintain the streets in a safe condition.” The ratio decidendi of the court’s conclusion is that the legislature may give to a corporation such power as it chooses, but that in doing so it only vests it with the power of the state as a state agency.

When, therefore, the taxing district of the county of Shelby made a contract with the complainant company by which it secured to that company for 55 years occupancy of Kentucky avenue, it was acting as an agent of the state, and as a trustee of the public at large. When now the city of Memphis, as the successor of the taxing district, comes to assert the rights secured to it by that contract, it is asserting the rights of the state and of the public at large as a state agent. Among the prohibitions of the first

section of the fourteenth amendment to the constitution of the United States is this: “Nor shall any slate deprive any person of life, liberty or property without due process of law.” The first question presented is whether action by tbe legislative council of the city of Memphis under its general power of controlling the streets and of enforcing contracts with reference to their occupancy by individuals or corporations, is action by a state within the operation of this amendment. There can be little doubt upon this point. In Ex parte Virginia, 100 U. S. 339, Mr.

Justice Strong, speaking for the supreme court, said: “We have said the prohibitions of the fourteenth amendment are addressed to the states. * * * They have reference to actions of tbe political body denominated a state, by whatever instruments or in whatever modes that action may be taken. A state acts by its legislative, its executive, or its judicial authorities. It can act in no other way.

Tbe constitutional provision, therefore, must mean that no agency of the state, or of the officers or agents by whom its powers are exerted, shall deny to any person within its jurisdiction the equal protection of the laws. Whoever, by virtue of public position under a state government, deprives another of property, life, or liberty, without due process of law, or denies or takes away the equal protection of the laws, violates the constitutional inhibition; and as he acts in the name and for the state, and is clothed with the state’s power, his act is that of the state.

This must be so, or the constitutional prohibition has no meaning. Then the state has clothed one of its agents with power to annul or to evade it.” The principle was applied in Ex parte Virginia to the judge of a county court who had excluded jurors from a jury in a state court on account of race, color, and previous condition of servitude. It was followed and restated in Neal v. Delaware, 103 U. S. 370-397, where the particular act under investigation was the act of the officers charged-by the law with the selection of jurors.

This was held to be state action, and in so far as the officers excluded from the jury men on account-of their race it was held to be a violation of the fourteenth amendment. The same principle is laid down in the Civil Rights Cases, 109 U. S. 3-17, 3 Sup. Ct. 18. In Yick Wo v. Hopkins, 118 U. S. 356, 6 Sup.

Ct. 1064, the ordinance of a municipal corporation with reference to regulating the carrying on of public laundries which conferred arbitrary power upon the municipal authorities to give or withhold consent to the carrying on of such business was held to be state action violative of the guaranty of protection in the first clause of the fourteenth amendment. In Missouri Pac. R. Co. v. Nebraska, 164 U. S. 403, 17 Sup.

Ct. 130, it was held that the order of the board of transportation acting under a state law, requiring a railroad corporation to furnish land for the erection of a grain elevator to a private person, was a taking of private property by the state in violation of the fourteenth amendment. In Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418, and in Reagan v. Trust Co., 154 U. S. 362, 14 Sup.

Ct. 1047, action by a state railroad commission in the regulation of rates under a statute authorizing regulation generally was held to be state action, and within the fourteenth amendment, if it resulted in depriving a person of his property without due process of law. The principle was approved in Scott v. McNeal, 154 U. S. 34, 14 Sup. Ct. 1108, and applied to the action of a state court as an agency of the state.

It was held that the judgment of the highest court of a state by which a purchaser, at an administrator’s sale under order of a probate court, of land of a living person, who had no notice of its proceedings, was held to be entitled to the land as against him, deprived him of his property without due process of law, contrary to the fourteenth amendment of the constitution. In Chicago, B. & Q. R. Co. v. City of Chicago, 166 U. S. 226, 17 Sup.

Ct. 581, the principle was reasserted in a case which involved the question whether the supreme court of the state had by its decision deprived a citizen of his property without due process of law in a condemnation proceeding.

It necessarily follows that if, in the case at bar, the resolution of the legislative council, under its authority to control the streets, has deprived, or was about to deprive, the complainant of its property without due process of law, complainant was entitled to a judicial remedy, under the United States circuit court jurisdiction act of 1887-1888 and the fourteenth amendment, against such action.

The aver-mont of the bill was that the council passed a resolution of forfeiture, and of the declaration of its purpose to take possession of the street, intending to use the police force in enforcing such declaration. It could only use the police force in its governmental capacity as a branch of the state government. We concur with the court below in the opinion that the answer does not deny the charge of the bill that the intention of the legislative council in passing the resolution of March 25, 1898, was to carry out that resolution, and put the city in possession by use of its police power.

The denial of the defendants possibly directed to the specific charge of the bill that they intend to use the police force to enforce the forfeiture declared, and oust complainant from the street, is as follows: “Defendants deny that they have threatened to forcibly dispossess complainant of any of its property or vested rights.” As the answer denies that complainant had any property or right in the streets, this cannot be regarded as a denial at all of the charge. A similar denial that they have any intention to disturb the vested rights of the complainant is equally defective and insufficient.

The court below held, and, we think, rightly, that whether the action of the railroad company with reference to rights wits a breach of the condition, and justified a forfeiture or not, an attempt by the city, through a resolution by its legislative council, declaring the forfeiture on that account, and the forcible taking possession, would together constitute the taking of property of the railroad company without due process of law.

It is argued that the resolution was in exact accord with the stipulation of the parties, and in the language of the condition itself contained in the contract: by which the railroad company entered upon the occupancy of the street. It is contended that it left to the city rhe right to declare such forfeiture at its option, and upon the declaration of such forfeiture to resume possession of the street. The language of the conditions of the contract and of the forfeiture clause are like an ordinary condition subsequent in any lease or deed conveying an estate.

Buck forfeiture clauses always provide that upon the breach of the condition, the lessor or the grantor may re-enter upon the premises, and have the same in his former estate; but it would be novel law to hold that under such a clause the lessor or grantor might lawfully by force and arms repossess himself of the estate, after a breach of the condition, if such repossession were resisted by the lessee or grantee. In Railroad Co. v. Johnson, 119 U. S. 608, 7 Sup. Ct. 339, the supreme court laid down the rule which has been the common law ever since the statute of 5 Rich.

II. c. 7, and was probably then only declaratory of the law, that a lessor entitled to possession may acquire such possession by lawful entry, but that entry by force is not lawful. Referring to forcible entry and detainer statutes, the court, speaking by Mr. Justice Miller, said: “The general purpose o£ these statutes is that, not regarding the actual condition of (lie title to the property, whore any person is in the, peaceable and quiet possession of it, he shall not he turned out hy the strong hand, hy force, by violence, or hy terror.

The party so using force and acquiring possession may have the superior title, or- may have the hotter right to llie present possession, hut the policy of the law in this class of cases is to prevent disturbances of the public peace, to forbid any person righting himself, in a case of that kind, by his own hand, and by violence, and to require that the party who has in this manner obtained possession shall restore It to the party from whom it has been so obtained; and then, when the parties are in statu quo, or in the same position as they were before the use of violence, the party out of possession must resort to legal means to obtain his possession, as he should have done in the first instance.” The case just cited arose under the statutes of Arkansas, but the general principle was applied without respect to the statute in the case of Railway Co. v.

Harris, 7 Sup. Ct. 1286. The language just quoted was quoted with approval in that case, which arose out of an attempt by one railroad company to seize a railroad in possession of another railroad company on the ground that the first railroad company had the right of possession. The leading case upon this subject is that of Newton v. Harland, 1 Man. & G. 644, and a number of American cases upholding the same principle will be found cited in Ames, Cas. Torts, 143, note.

In such cases as the present, where resistance would create a riot, and lead to the irreparable injuries so frequently resulting therefrom, equity will enjoin the threatened use of force without respect to the question who has the right of possession. In Cooke v. Boynton, 135 Pa. St. 102,19 Atl. 944, the plaintiff was the lessee of certain coal mines. The lessor claimed that he had forfeited his rights as such, and that the lessor was entitled to enter.

The lessor tore up by force a tramway laid under the lease, and an injunction was then issued and sustained in enjoining the lessor from a continuance of such interference with the possession of the lessee,, and this without regard to the merits of the controversy. The same rule was laid down in Easton, S. E. & W. E. P. Ry. Co. v. City of Easton, 133 Pa. St. 505,19 Atl. 486, where a municipal corporation attempted to oust a street-railway company from the use of its streets on the ground that it was not complying with the terms of its grant. The same doctrine is laid down in Delaware County & P. Electric Ry.

Co. v. City of Philadelphia, 164 Pa. St. 457, 30 Atl. 396, and in Asheville St. Ry. Co. v. City of Asheville, 109 N. C. 688, 14 S. E. 316, which were also cases of the interference by a municipal corporation with the occupation of streets by street-railway companies. See, also, Brooklyn Cent. R. Co. v. Brooklyn City R. Co., 32 Barb. 358, 367. It is difficult to reconcile these cases with that of Pacific R. Co. v. Leavenworth, 1 Dill. 393, Fed. Cas. No. 10,649, which can hardly be. supported.

It is argued with much vigor and force that to hold that the resolution of the city declaring a forfeiture and its intention to resume possession of the premises is nothing but the declaration of the existence of a breach of the contract between two private persons by one of them, and that to hold that it comes within,the inhibition of the fourteenth amendment, will be to hold that any tort or improper seizure by the officials of a municipal corporation is the act of the state, and a taking of property without due process of law, contrary to the federal constitution.

It is true that a municipal corporation, when it exercises state authority as a state agency, may, by its torts and breaches of contract, come within the fourteenth amendment, or some other clause of the federal constitution, where a private individual would not. It does not follow, however, that all its torts and all its breaches of contracts are within those prohibitions, because in the case of some of its contracts it acts only as a private corporation.

With respect to the occupancy of a street, however, which it controls by virtue of its being an agent of the state, and a trustee for the public, its action in depriving persons having vesied property rights in the street will, if without due process of law, be state action, within the inhibition of the fourteenth amendment. For our present purpose, it is not important whether this threatened taking possession of a street under a resolution by force is to be regarded as legislative or executive action, for either, as we have seen, is within the inhibition of the clause of the first;

section of the fourteenth amendment, which forbids a state to deprive a person of his property without due process of law. What has been said necessarily leads to the conclusion that the court below was right in sustaining its jurisdiction on the ground that the action of the city taken and contemplated would constitute a violation of the fourteenth amendment, and might be prevented by injunction. In so far as the appeal of the city is concerned, therefore, the decree of the court below must he affirmed.

We come now, however, to a much more difficult question, which arises on the appeal of the complainant below, the railroad company. The court below held that there was no jurisdiction under the bill, except that which arose out of the threatened taking "possession of the street, and ousting the railroad company therefrom by force, without due process of law. It enjoined the city only from tailing forcible possession of tbe street. This injunction might property have been founded on the relative situations of the parties as they were admitted to be.

The fact that the railroad company was in possession of the street, gained lawfully, and that the city could not rightly enforce a forfeiture without; judicial proceedings, was a sufficient ground for granting the injunction which the court below granted, and it became immaterial, therefore, in furnishing this remedy, whether the railroad company had violated a condition forfeiting its estate. If the threatened use of the police to enforce the resolution of forfeiture was essential to the federal jurisdiction, then it would seem that the order of the court below disposed of the entire controversy before it.

If, however, the resolution of the legislative council was a law of the state regulating interstate commerce, or was a law of the state impairing the obligation of contracts, or depriving a person of its property without due process of law, then the complainant could invoke the jurisdiction of the court below to enjoin its enforcement, without regard to the method by which it was proposed to carry it into effect. This brings us to the next question in the ease. Was the action of the city a law attempting to regulate interstate commerce? Plainly it was not.

A railroad company has a right to make a contract with respect to interstate commerce, and to bind itself to certain rates, if it chooses to do so. It bound itself here to impose no rates which were unequally discriminating against the city of Memphis. This was its duty under the interstate commerce law, if it had any power to fix rates upon such, commerce, and it might contract with any person or city to do that which it was its duty to do under the law.

The action of the city, therefore, was merely an attempt to enforce a contract right, and not to regulate interstate commerce, except in so far as the common carrier had lawfully bound itself to the city contractually with respect to a particular part of that commerce. We come, then, to the question: Did this resolution violate that part of

section 10, art. 1, of the constitution of the United States, declaring that “no istate shall ⅜ ⅞ ⅞ pass any s * * law impairing the obligation of contracts”? First. Was the resolution a law of the state within the meaning of this clause?

It has frequently been decided that, where a municipal council -passes an ordinance in pursuance of authority vested in it by the state legislature, which is legislative in its character, and which is merely the exercise of delegated power to make laws that the legislature might have made directly, such an ordinance is a law within the inhibition of the constitution if it impairs the obligation of a contract. Murray v. Charleston, 96 U. S. 432; U. S. v. New Orleans, 98 U. S. 381, 392; Meriwether v. Garrett, 102 U. S. 472; Waterworks Co. v. Rivers, 115 U. S. 674, 6 Sup. Ct. 273; City of Walla Walla v.

Walla Walla Water Co., 172 U. S. 1, 19 Sup. Ct. 77. If such ordinance is administrative, rather than legislative, then it is not within the constitutipnal inhibition, even though it impairs the obligation of a contract. New Orleans Waterworks Co. v. Louisiana Sugar Refining Co., 125 U. S. 18, 8 Sup. Ct. 741. The resolution in the case before us is admitted to have been passed with all the forms required, and by the vote necessary to enact an ordinance.

It concerned the occupancy of the streets, which, as we have seen, the legislative council controls under delegated authority from the state legislature, as an agency of the state and a trustee fol* the public at large. It purported to find and adjudged the ground to exist for declaring a forfeiture of a grant of an easement and a franchise in the streets which the legislative council as the agent of the state had made, and it exercised the option.reserved to it in the grant of insisting upon such grounds as a forfeiture unless the grantee within 50 days should change its course of conduct.

It is conceded that the grantee did not change its course of conduct, and that the resolution has become operative by its terms, if it can have any efficacy to effect a divestiture of title. Where the sovereign makes a grant upon condition subsequent, the breach of the condition does not of itself devest title and light of possession, but the power is in the sovereign, as grantor, to manifest his will that the condition shall be enforced, and this manifestation of his will is by legislative action.

In this case the condition expressly requires that the council should exercise an option before forfeiture should ensue. In exercising such an option, the council is acting in a legislative capacity. Its declaration is a law. In Schulenberg v. Harriman, 21 Wall. 44, 63, in dealing with the question of enforcing forfeiture of grants of public lands granted upon condition, and the divestiture of title, Mr.

Justice Field, speaking for the court, said: “And it is settled law that no one can take advantage oí the nonperformance oí a condition subsequent annexed to an estate in fee hut tlie’grantor or his heirs, or the successors of the grantor if the grant proceed from an artificial person; and, if they do not see fit to assert their right to enforce a forfeiture on that ground, the title remains unimpaired in the grantee. The authorities on this point, with hardly an exception, are all one way from the Year Books down. And the. same doctrine obtains where the grant upon condition proceeds from the government.

No individual can assail the title it has conveyed on tlie ground that the grantee has failed to perform tits conditions annexed. In w hat manner the reserved right of the grantor for broach of the condition must be asserted so as to restore tlie estate depends upon tlie character of the grant.

If It be a private grant, that right must be asserted by entry or its equivalent If the grant be a public one, it must be asserted by judicial proceedings authorized by law, the equivalent of an inquest of office at common law, finding tlie fact of forfeiture and adjudging the restoration of the estate on that ground; or there must be some legislative assertion of ownership of the property for breach of the condition, — such as

an act directing the possession and appropriation of tlie property, or that it bo offered for sale or settlement. At common law the sovereign could not make ail entry In person, and therefore an oiiiee-found was necessary to determine the estate; but, as said by this court in a late case, ‘the mode of asserting or of resuming- the forfeited grant is subject to the legislative authority of the government.

It may be after judicial investigation, or by taking possession directly under the authority of the government without these preliminary proceedings.’ In the present case no action has been taken, either by legislation or judicial proceedings, to enforce a forfeiture of the estate granted by the acts of J.85G and !86l. The title; remains, therefore, in the state as completely as it existed oil the day whim the title by location of the route of the railroad acquired precision and became attached to the adjoining alternate sections.” In U. S. v.

Repentigny, 5 Wall. 211, 268, it was said, "The mode of asserting or of assuming the forfeited grant is subject to the legislative authority of the government.” See, also, Farnsworth v. Railroad Co., 92 U. S. 49, 66; Van Wyck v. Knevals, 106 U. S. 360, 368, 1 Sup. Ct. 336; Railroad Co. v. Mingus, 165 U. S. 413, 17 Sup. Ct. 348. An examina lion of these cases makes it entirely clear that a declaration of a forfeiture of a public grant for condition broken is legislative in its character. It is not conclusive, of course, of (.he facts asserted, and may be judicially resisted (see Railroad Co. v. Mingus, 165 U.

S. 413, 434, 17 Sup. Ct. 348); but, if the condition in fact has been broken, it operates to devest the title and the right of possession. Tlie resolution in question was a declaration enacted in form of law by the legislative council, a slate agency, vested with legislative authority over the streets, by which, if valid, the title of the city and state and public in the streets granted t:o the complainant was de-vested from it, and revested in the grantors. Clearly, the resolution was and is a law of the slate within tlie meaning of the cons tit u-1ion.

It is contended that it cannot he a law, because it does not declare a present forfeiture, but only a future one, contingent on conduct of the grantee. We do not think this feature of the resolution deprives it of its legislative character. The operation of laws is frequently postponed to a future day, and made to depend on a eon-(ingency. When, as is conceded in the present case, the time of suspension is passed, and the contingency has happened, they are as efficacious as if they had contained no conditions.

This resolution found and adjudged a condition to be broken, and declared that the council exercised its option to declare a forfeiture and to resume possession if'the breach continued 50 days. The conduct declared by the council to he a breach, it is conceded, has continued, and the declaration of forfeiture has become operative. There are many cases in which the supreme court has declared a city ordinance to be a law within the. contract clause of the constitution which have much less of legislative character than public forfeitures of rights in the streets by municipal legislatures.

Such a case is that of City of Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 19 Sup. Ct. 77. The water company filed a bill to enjoin the city of Walla Walla and its officers from erecting waterworks in pursuance of an ordinance of the city to that effect. The water company had a contract with the city by which the city stipulated that during the term of the contract it should not erect, maintain, or become interested in any waterworks except the one provided for in the contract, which it was given power to condemn.

Subsequently the city passed an ordinance for the erection of new waterworks, and the question was -whether that was a law impairing the obligation of a contract such as to give a -federal court jurisdiction to enjoin its enforcement. The court, speaking by Mr.

Justice Brown, states the objection to the jurisdiction as follows: “The argument of the defendant in this connection is that the action of the city in contracting with the. water company, and in passing the ordinance of 1893, providing- for the erection of waterworks, was not in the exercise of its sovereignty; that in these particulars the city was not acting as the agent of the state, hut was merely exercising a power as agent of its citizens, and representing solely their proprietary interests; that the council in such cases, as trustee for the citizens, stands in the relation to them as directors to stockholders in a private corporation, acting solely as the agent of the citizen, and no wise as the agent" of the state, and therefore that neither the state, nor the city as its agent, can be charged either with the making or the impairing of the original contract; that for these reasons the constitution of the United States has no application to the case, the federal court has no jurisdiction, and the bill, upon its admitted facts, presents only a violation by a citizen of the state of its.contract with another citizen, and the plaintiff is bound to resort to the state courts for its remedy.

It may be conceded, as a general proposition, that there is a substantial distinction between the acts of a municipality as the agent of the state for the preservation of peace and the protection of persons and property and its acts as the agent of its citizens for the care and improvement of the public property and the adaptation of the city for the purposes of residence and business.

Questions respecting this distinction have usually arisen in actions against the municipality for the negligence of its officers, in which its liability has been held to turn upon the question whether the duties of such officers were performed in the exercise of public functions or merely proprietary powers.

It is now sought to carry this distinction a step further, and to hold that, if a contract be made by a city in its proprietary capacity, the question whether such contract has been substantially affected by the subsequent action of the city does not present one of impairment by act of the state or its authorized agent, but one of an ordinary breach of contract by a private party; and hence the case does not arise under the constitution and laws of the United States, and the court has no jurisdiction, unless there be the requisite diversity of citizenship.

How far this distinction can be carried to defeat the jurisdiction of the court or the application of the contract clause may admit of considerable doubt if the contract be authorized by the charter; but it is sufficient for the purposes of this case to say that this court has too often decided for the rule to be now questioned that the grant of a right to supply gas or water to a municipality and its inhabitants through pipes and mains laid in the streets, upon condition of the performance of its service by the grantee, is the grant of a franchise vested in the state, in consideration of the performance of a public service, and, after performance by the grantee, is a contract protected by the constitution of the United States against state legislation to impair it.

New Orleans Gaslight Co. v. Louisiana Light & Heat Producing & Manufacturing Co., 115 U. S. 650, 660, 6 Sup. Ct. 252; Waterworks Co. v. Rivers, 115 U. S. 674, 6 Sup. Ct. 273; St. Tammany Waterworks Co. v. New Orleans Waterworks, 120 U. S. 65, 7 Sup. Ct. 405; Crescent City Gaslight Co. v. New Orleans Gaslight Co., 27 La. Ann. 138, 147. It is true that In these cases the franchise was granted directly by the state legislature, but it Is equally clear that such franchises may be bestowed upon corporations by the municipal authorities, provided the right to do so is given by their charters.

State legislatures may not only exercise their sovereignty directly, but may delegate such portions of it to inferior legislative bodies as, in their judgment, is desirable for local purposes. As was said by the supreme court of Ohio in State v.

Cincinnati Gaslight & Coke Co., 18 Ohio St. 262, 293: ‘And assuming that such a power [.granting franchises to establish gas works] may be exercised directly, we. are, not disposed to doubt that it may also be exercised indirectly, through the agency of a municipal corporation, clearly Invested, for police purposes, with the necessary authority.’ This case is directly in line with those above cited. See, also, Wright v. Nagle, 101 U. S. 791; Hamilton Gaslight & Coke Co. v. Hamilton City, 146 U. S. 258, 266, 13 Sup. Ct. 90; Bacon v. Texas, 163 U. S. 207, 216, 16 Sup. Ct. 1023; New Orleans Waterworks Co. v.

City of New Orleans, 164 U. S. 471, 17 Sup. Ct. 101. * * * We know of no case in which it lias been held that an ordinance alleged to impair a prior contract with a gas or water company did not create a case un-tier the constitution and lavs s of the United States.

Granting that in respect to tlie two classes of cases above mentioned responsibilities of a somewhat different character are imposed upon a municipality in the execution of its contracts, our attention lias not been called to an authority where the application of the constitutional provision as to the impairment of contracts has been made to turn upon the question whether the contract was executed by the city in its sovereign or proprietary capacity, provided the right to make such contract was conferred by the charter.

We do not say that this question might not become a serious one; that, with respect to a particular contract, the rnu-jiicipaliiy might not stand in the character of a private corporation; but the cases wherein llie. charter of a gas or water company have been treated as falling within the constitutional provision are altogether too numerous to be now questioned, or even to justify citation.” Here the contract, the obligation oí which was found to be impaired, concerned only the furnishing' of water to the citizens of a municipal corporation, — a subject-matter certainly not regarded as more within the governmental functions of a city than the supervision and control of the streets, and the granting and resuming of public rights therein; and the law which was held to impair the obligation of the eoniract was merely another ordinance providing for the construction of oilier waterworks by the city.

Such municipal action as the building of waterworks has usually been regarded as proprietary, i-ather than governmental, and yet the ordinance directing it was held to be a law in violation of the federal constitution. Second. Does the resolution impair the obligation of the contract contained in the grant? If what the complainant has done and is doing is a breach of the condition of the grant, then the resolution was certainly neither a breach nor an impairment of the contract.

It was only legislative action equivalent to a re-entry upon condition broken in its effect upon the title and right of possession, and was, therefore, in exact accord with the terms of the contract and grant. If, however, the condition has not been in fact and in law broken, then the resolution as law assumes to devest title and the right of possession, when not permitted by the terms of the contract, and purports to secure a right to the city apd her officers of resuming possession which would be violative of its provisions. This is certainly an impairment of the obligation of a contract.

It is true that the question whether the resolution impairs the obligation of a contract turns on mixed questions of law and fact, — First, whether the contract .provides for a forfeiture upon a breach of the covenant that the complainant will not charge to Memphis and her citizens unequally discriminating rates; and, second, whether complainant, or any corporation for whom complainant is responsible, is charging such rates. That the application of the constitutional restriction .depends partly on a question of fact is no reason for holding that the case is not one in which it may be relied on.

The existence of the contract, the impairment of which is averted, may often be an issue of fact. The circumstances which render the operation of the law an impairment of the obligation of the contract may often be brought to the knowledge óf the court by parol proof. Nor does it avoid the application of the constitutional restriction to say that, if the condition was not broken, this resolution was a mere breach of the contract, and not an impairment of its obligation.

To begin with, it may be doubted whether a mere declaration of forfeiture, when the condition is not broken, not followed by forcibly taking possession, is a breach of the contract and grant. It forms a cloud upon the grantee’s title, but does it break any covenant in the grant? It is not necessary to discuss this question, because it is immaterial whether it is a breach of the contract or not. It impairs the obligation of a contract if it purports by force of law to authorize any one to do that which would be a breach of the contract.

This the resolution certainly does, assuming the condition not to have been broken, for by declaring the revestiture of title and right of possession in the city, it authorizes the city officers peaceably to take possession of the street, and to take up the tracks, and would doubtless authorize the bringing of suits by abutting owners for a nuisance peculiarly harmful to them. The language of Chief Justice Waite in Brown v. Colorado, 106 U. S. 95, 98,1 Sup.

Ct. 175, on a point not in judgment, might, upon first reading, justify the conclusion that the fact that a law is a breach of a contract previously made with the state prevents it from impairing the obligation of the contract, but such is not the proper construction of the words of the chief justice. The case was one coming to the supreme 'court from the highest court qf the state under the twenty-fifth

section of the judiciary act, to review a judgment in ejectment in favor of the state of Colorado against one who had granted the land to the state, and who defended on the ground that a condition of the grant was that the capítol was to be built thereon, and it had been broken by a statute placing the capítol elsewhere. The state court had found there was no such condition in the grant.

The supreme court held that the validity or invalidity of the statute and its impairment of the contract were not in question, because the state did not admit the condition, and did not rely on the statute as a justification for a breach of it.

The chief justice said, in effect, not generally that a breach of a contract by a state law would not impair its obligation, but only that in the case then before the court, where the statute ivas.not relied on by the state as authority for its alleged breach of its contract, the statute did not impair the obligation of the contract in such way that the defendant could make, in that case, a federal question on its validity, upon which to reach the supreme court.

Certainly, the chief justice meant to lay down no general rule that a law which violates a contract does not impair its obligation, for cases in the supreme court supporting a contrary view are too numerous. In the Walla Walla Case, cited above, it is difficult to see in what respect the ordinance of the city directing the construction of waterworks impaired the obligation of the prior' exclusive grant, except in that it was an express breach of the covenant of the city in the grant that the city would not construct waterworks of its own, but would buy those of the grantee.

In the case at. bar we have a law which, if that which is recited lo be a fact by its terms is not a fact, purports to give? state authority to commit acts which would he breadles of a contract. It purports to restore the street to the city, so that private citizens would be authorized (hereby to treat the same as city property, and city officers would he authorized to take peaceable possession, peaceably to take up the tracks, and to remove other properly of the grantee therefrom. It .seems to us that (his is a law impairing the obligation of a contract if founded on a nonexistent breach of a. condition.

It is unnecessary for us lo discuss at length the reasons for holding that the resolution was a law depriving the complainant of its property without due process of law, if, in fact, the condition had not been broken, for they are substantially the same as those just, stated for concluding that: tlu; resolution is a law of the state impairing the obligation of the contract.

If this resolution violates the federal constitution, there can he no doubt that complainant is entitled to equitable relief, it is certainly a cloud upon the title of the railroad company in its occupancy of the street, which it may ask a court of equity to semove, and to enjoin any claim under it.

We conclude, therefore, That, the hill staled a good cause of action on the ground that the resolution of the city of March 25, 1898, impaired the obligation of the contract under which the railroad company occupied Kentucky avenue, if it be true, is averred in the hill, that no condition of the contract had been broken justifying forfeiture.

This gave to the court below jurisdiction of the whole controversy between the city and the railroad company; and, inasmuch as the suit hail been brought a considerable time before the state suits were brought, it justified and required the court below to enjoin the suits in the state court as an impairment of its jurisdiction over the controversy with which it had been invested by the filing of the bill. That such a remedy is not in conflict with

section 720 of the Revised Statutes, forbidding’ the federal courts to issue injunctions against proceedings in a state court, is abundantly established by authority. French v. Hay, 22 Wall. 250-253; Dietzsch v. Huidekoper, 103 U. S. 494-498; Fisk v. Railroad Co., 10 Blaichf. 518, 9 Fed. Cas. 167; Union Mutual Life Ins. Co. v. University of Chicago, 6 Fed. 443; Sharon v. Terry, 36 Fed. 337; Garner v. Bank, 16 C. C. A. 86, 67 Fed. 833. In this view of the case, the court below should have permitted the filing of the supplementary bill, and should have granted the injunction to restrain the suits in the state court. We are of opinion that the fifteenth

section of the contract was one of the conditions referred to in

section 10, and, therefore, that the only issue made is whether

section 15 has been violated or not. Upon this issue the court below should allow evidence to be taken, and should declare the rights of the parties accordingly. The decree of the court in so far as it refused the further relief prayed for by the complainant in its bill is reversed, with directions to take further proceedings not inconsistent with this opinion.