Kornegay v. City of Raleigh

152 S.E.2d 186 (1967)

269 N.C. 155

Alton W. KORNEGAY, James L. Stough, and David M. Crenshaw, as taxpayers, citizens and voters in and of the City of Raleigh, North Carolina, on behalf of themselves and all other taxpayers, citizens and voters of said City who may desire to join in this action, Plaintiffs, v. The CITY OF RALEIGH, a municipal corporation, and Southeastern Cablevision Company, a North Carolina corporation, Defendants.

No. 545.

Supreme Court of North Carolina.

January 20, 1967.

*189 Johnson, Gamble & Fogel, Raleigh, for plaintiff appellants.

Smith, Leach, Anderson & Dorsett, Raleigh, for defendant Southeastern Cablevision Co.

Donald L. Smith, Raleigh, for defendant City of Raleigh.

LAKE, Justice.

In the appellees' brief the proposed operation by Southeastern is described as follows:

"[I]t must be noted that a CATV system does not obstruct or in any manner actually interfere with the use of the street by the public or with an adjoining property owner. The receiving tower and antenna are located on the CATV Company's private property, with the coaxial cables which extend ABOVE the city streets being strung upon the existing pole system of the telephone and power companies. THUS THE CATV CABLES OCCUPY A MINIMAL AMOUNT OF AIR SPACE ABOVE THE CITY STREETS AND WILL IN MOST INSTANCES BE LOCATED BETWEEN EXISTING WIRES OF THE UTILITY COMPANIES. It cannot be said that there is any unreasonable encroachment on the city streets and in fact there is no encroachment at all."

The nature and validity of the grant to Southeastern, and the right of these plaintiffs to attack it in this litigation, must, however, be determined by what the grant authorizes the grantee to do, not by what it presently intends to do or by what operators of such businesses usually do.

The grant in this instance does not restrict Southeastern to the stringing of cables upon existing poles of other companies. It is empowered to construct and operate, in and along all public ways of the city, its own towers, poles, lines and cables, together with all other necessary apparatus for amplifying and distributing audio and video signals. Thus, the nature and validity of the grant are the same as if there were no other poles and cables now in, over and along the streets and other public ways of the city.

The plaintiffs' right to maintain this action cannot be sustained on their contention that they have been deprived of their right to vote. They do not, of course, contend that they have been denied the right to vote in an election in which others have voted. Their contention is that they have been damaged irreparably because no election has been held. If, as they contend, an election is essential to the validity of a grant by the city of the right purported to be granted to Southeastern, then the alleged grant is not valid, for the demurrer admits no election has been held. In that event, the plaintiffs are in the same position they would occupy if an election had been held and the majority of votes had been cast in opposition to the grant. Thus, the plaintiffs have not been injured in any way by the failure to hold the election. Their status as registered voters of the city does not, therefore, entitle them to maintain this action.

The plaintiffs, as taxpayers, stand in a better position. When we consider that this grant purports to give to Southeastern the right to erect a city-wide system of poles, towers, cables and wires along all the streets of the city, notwithstanding Southeastern's apparent intent to engage in a much less extensive program of construction, it becomes apparent that the construction which this grant purports to authorize may bring about extensive damage to and disturbance of pavements and other street and sidewalk surfaces. Such damage if it occurs, will have to be repaired at substantial expense. The grant also contemplates that the operation of the proposed business may subject the city to liability to third persons. Part or all of these expenses and liabilities may fall upon the taxpayers of *190 the city, notwithstanding provisions in the ordinance requiring Southeastern to bear them and the agreement by Southeastern to indemnify the city against such losses. This is sufficient to give the plaintiffs, as taxpayers, the right to institute and maintain this action to determine the validity of the grant and to enjoin the exercise of rights thereunder if it be unlawful. Shaw v. Asheville, N.C., 152 S.E.2d 139, decided today, and cases therein cited.

The decision in Angell v. City of Raleigh, 267 N.C. 387, 148 S.E.2d 233, does not bar these plaintiffs from maintaining this action. There, the city had made no grant to anyone under the ordinance. Here, it has and the activity authorized by the grant will be carried on unless the defendants are enjoined from doing so. The plaintiffs have no adequate remedy at law. It thus becomes necessary in this action to determine whether the proposed activity would be unlawful.

Here, as in Shaw v. Asheville, supra, it is not necessary for us to determine, and we do not determine, whether Southeastern if it carries on a business of the type authorized by this grant, would be subject to regulation by the North Carolina Utilities Commission under the provisions of Chapter 62 of the General Statutes.

The determination of this appeal turns upon whether the rights purported to be granted by the city to Southeastern by the resolution of the City Council constitute a franchise, as that term is used in § 18 of the charter of the city of Raleigh. If so, the demurrer to the complaint should have been overruled, for the complaint alleges and the demurrer admits that the question of whether a franchise for such operation shall be granted has not been submitted to the qualified voters of the city.

Whether a grant of rights by a municipal corporation is the grant of a franchise does not depend upon the status of the grantee but upon the nature of the rights granted. Shaw v. Asheville, supra. The status of the grantee is a material factor in determining the validity of a grant of a franchise under the authority of G.S. § 160-2, for that statute authorizes municipal corporations to grant franchises only to "public utilities," though it does not necessarily follow that such grantee must be the operator of a business within the definition of "public utility" contained in G.S. § 62-3. Shaw v. Asheville, supra. Here, the city charter, by implication, authorizes the granting of franchises without limitation as to the status of the grantee.

The grant by a city to a person, firm or corporation of the right to construct a city-wide system of towers, poles, cables, wires, and other apparatus in, along and over its streets and other public ways and to operate such systems for the profit of the grantee is clearly a franchise, for it is the grant of a right not held by all persons in common and which may be granted only by the act of the sovereign or its authorized agent. Shaw v. Asheville, supra, and authorities there cited. A franchise need not be exclusive. Indeed, if it is exclusive, an additional question as to its validity arises under the Constitution of North Carolina, Article I, §§ 7 and 31, a question which we do not now need to determine and do not determine.

Though the ordinance of the city of Raleigh expressly provides that the rights purported to be granted to Southeastern "shall not be exclusive," they are, nevertheless, not rights which all members of the public are free to exercise. The ordinance provides that no person may exercise such right within the city without an application to and a grant by the City Council, which grant the Council may withhold for any "good cause."

We conclude that the rights which the city attempted to grant to Southeastern constitute a franchise, notwithstanding the fact that the ordinance denominates them a "license." The grant is, therefore, void because the procedure required by § 18 of the city charter for the granting of a franchise has not been followed.

*191 We are not to be understood as holding that the city of Raleigh cannot grant such a franchise to Southeastern, or others properly qualified. Likewise, it is not necessary for us now to determine, and we do not now determine, the authority of the city to impose upon the grantee of such franchise any duty or restriction set forth in any provision of its Ordinance No. (1964)256. We hold that the city has undertaken to grant a franchise and, in doing so, has not followed the procedure required by the Legislature in the city charter. If this procedure be deemed by the city unduly burdensome and restrictive, the remedy must be sought from the Legislature.

The plaintiff taxpayers, having no adequate remedy at law for the proposed unauthorized and, therefore, unlawful use of the city streets, are entitled to maintain this action for the equitable relief of an injunction to restrain such activity. The demurrer was, therefore, improperly sustained.

Reversed.