145 California, 638; Stockton Gas Co. v. San Joaquin Co., 148 California, 313, 318; San Francisco v. Oakland Water Co., 148 California, 331, 333; People v. Los Angeles Gas Co., 150 California, 557; Pugh v. McCormick, 14 Wall. 361.

MR. JUSTICE HOLMES delivered the opinion of the court.

This is a bill brought by the appellee, a California corporation, to restrain the City of Pomona from removing the appellee's poles and wires from the streets of the city, and from preventing the appellee's placing further poles and wires in the streets. The Circuit Court dismissed the bill, 164 Fed. Rep. 561, but the decree was reversed and an injunction granted by the Circuit Court of Appeals. 172 Fed. Rep. 829. 97 C. C. A. 251. Two of the grounds originally relied upon were that the appellee, being a telegraph as well as a telephone company, had rights under the act of Congress of July 24, 1866, c. 230, 14 Stat. 221 (Rev. Stat., §§ 5263 et seq.), that were infringed, and that the conduct of the city had given rise to a contract. These are no longer pressed, but they warranted taking the case to the Circuit Court of Appeals. Spreckles Sugar Refining Co. v. McClain, 192 U. S. 397, 407. The remaining ground is that the constitution of California as amended in 1911, or the statutes of the State, contained a grant with which the Constitution of the United States does not permit the city to interfere. This is the only argument pressed here. Unless the appellee got a grant from one of these two sources it has no right to occupy the streets.

The claim based upon the amendment to Article XI, § 19, of the constitution of the State, October 10, 1911, does not impress us. Before that date the article provided that in cities having no public works for artificial light, etc., individuals or corporations of the State duly authorized should have the privilege of using the streets, etc., for the purpose, upon the condition that

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Opinion of the Court.

the municipal government should have the right to regulate the charges. By the amendment "any municipal corporation may establish and operate public works for telephone service" either by construction or by purchase. It then goes on, "Persons or corporations may establish and operate works for supplying the inhabitants with such service upon such conditions and under such regulations as the municipality may prescribe under its organic law, on condition that the municipal government shall have the right to regulate the charges thereof." We agree with the appellants that the amendment seems intended as a step in the direction of municipal ownership or control. The words 'upon such conditions,' etc., are not to be confined to police powers, which are conferred by § 11 of the same article, but are of general import. If the municipal corporation does not see fit to establish the public works itself it may let others do it, but its power to impose conditions excludes the notion that the constitution alone is a grant to others of a right to occupy the streets without its consent.

The claim founded upon the statutes seems to us stronger. By § 536 of the Civil Code "Telegraph corporations may construct lines of telegraph along and upon any public road or highway and may erect poles in such manner and at such points as not to incommode the public use of the road." This is treated by the Supreme Court of California as a grant when acted upon. Western Union Telegraph Co. v. Hopkins, 116 Pac. Rep. 557. But as the words 'telegraph corporations' have been construed not to include telephone corporations; Sunset Telephone & Telegraph Co. v. City of Pasadena, 118 Pac. Rep. 796; a construction that we know no sufficient reason for not following; Yazoo & Mississippi Valley R. R. Co. v. Adams, 181 U. S. 580; Richmond v. Southern Bell Telephone & Telegraph Co.,

174 U. S. 761; the section until amended did the appellee no good. On March 20, 1905, however, the section was amended so as to include telephone corporations, so that, if that were all, the case of the appellee would be clear, the City of Pomona not having been organized under provisions of the constitution that withdrew certain cities from the operation of general laws. See Ex parte Helm, 143 California, 553; Sunset Telephone & Telegraph Co. v. Pasadena, 118 Pac. Rep. 796, 803.

But the amendment did not go into effect for sixty days, and two days later, on March 22, a franchise act was passed, to take effect immediately, providing that "every franchise or privilege to erect or lay telegraph or telephone wires, to construct or operate street or interurban railroads or to exercise any other privilege whatever hereafter proposed to be granted" by the legislative body of any county, city and county, city or town, except telegraph or telephone lines doing an interstate business, should be granted upon the conditions specified in the act and not otherwise. "Any applicant for any franchise or privilege above mentioned" was required to file an application, there was to be an advertisement for bids, etc., with other particulars that need not be specified, as the appellee does not claim under this statute. It contends that this act establishes conditions only for counties, cities and towns, and does not qualify the grant from the State in the amended § 536. The appellant, on the other hand, argues that the franchise act repealed § 536, so far as it affects this case, except as to telephones doing an interstate business. In view of the frame of the act as a whole, of a general repealing clause at the end, naming certain exceptions of which § 536 is not one, and of the fact that the grant of such franchises seems generally to have been left to the local subdivisions concerned, Sunset Telephone & Telegraph Co. v. Pasadena, 118 Pac. Rep. 796, 803, we construe the words quoted as

of general application, and are of opinion that they cannot be supposed to have had the narrow operation that would be left to them if there were in force a grant from the State of almost universal scope. Until the state court shall decide otherwise we must take § 536 to have been repealed, subject to the exception contained in the later act, before any grant or right under it had accrued to the appellee.

We come then to consider the extent of the exception. This is not a question whether all telephones having the usual connections might not be instruments of commerce among the States; it is not a question whether the State could interfere with the local business of lines engaged in such commerce. It is a question of how far the offer of a grant that had not yet taken effect should be understood to have been left on foot by the repealing act; a question as to the meaning of words. In construing them it may be assumed that the exception was made unwillingly. No policy can be discovered that would be likely to induce the making of it, and it is most easily explained by the uncertainty then prevailing as to the power of the State over telegraphs, etc., running into other States, in view of the commerce clause of the Constitution and the act of July 24, 1866; an uncertainty then lately and since largely dispelled. Western Union Telegraph Co. v. Pennsylvania Railroad Co., 195 U. S. 540. Western Union Telegraph Co. v. Richmond, April 1, 1912. The words to be interpreted are 'except telegraph or telephone lines doing an interstate business.' The qualification 'doing an interstate business' shows that not all telephones were expected to benefit by the grant in § 536, and the limitation is presumably substantial. The legislature probably supposed by mistake that it was bound to grant a right to direct through lines but evidently meant to grant no more than it must. It was understood so by the city. The order and threat of the city were confined to poles and wires

doing a state and local business. This appears by the bill and the finding of the Circuit Court, not disturbed above, as to what actually was done. We are of opinion that the city's interpretation was correct.

The result is that the appellee must be taken to have a grant of the right to keep its main through lines in the streets of Pomona, but not to maintain the posts and wires by which it connects with subscribers. So far as appears the city attacks only the latter, and therefore no present ground is shown for the bill. But as the line of distinction may be delicate and questions may arise the bill will be dismissed without prejudice.

Decree reversed.

Bill to be dismissed without prejudice.

TITLE GUARANTY & SURETY COMPANY v.

NICHOLS.

ERROR TO THE SUPREME COURT OF THE TERRITORY OF ARIZONA.

No. 102. Argued December 13, 1911.-Decided April 8, 1912.

While liability under a surety bond for honesty of an employé would be defeated if the loss was due to neglect of the employer to take the precautions required by the bond, the condition is subsequent and not precedent, and there is no occasion for an averment in respect thereto; it is a matter of defense that must come from the other side, upon whom the onus rests.

Where the evidence, as in this case, shows that examinations were made, it is for the jury to determine whether reasonable diligence had been used in making them.

The certificate of correctness of employé's accounts on obtaining renewals of surety bond for his honesty held in this case not to be a