Los Angeles v. Los Angeles City Water Co. - 177 U.S. 558 (1900)


U.S. Supreme Court

Los Angeles v. Los Angeles City Water Co., 177 U.S. 558 (1900)

Los Angeles v. Los Angeles City Water Company

No. 148

Submitted March 15, 1900

Decided April 30, 1900

177 U.S. 558

Syllabus

July 22, 1868, Los Angeles City leased to Griffin and others for a named sum its water works for a term of 30 years and granted them the right to lay pipes in the street, and to take the water from the Los Angeles River at a point above the dam then existing, and to sell and distribute it to the inhabitants of the city, reserving the right to regulate the water rates, provided that they should not be reduced to less than those then charged

Page 177 U. S. 559

by the lessees. The lessees agreed to pay a fixed rental, to erect hydrants and furnish water for public uses without charge, and at the expiration of the term to return the works to the city in good order and condition, reasonable wear and damage excepted. This contract was procured for the purpose of transferring it to a corporation to be formed, which was done. Subsequently the limits of the city were extended as stated by the court, and the expenses of the corporation were increased accordingly. The city subsequently established water rates below those named in the contract, and the company collected the new rates, without in any other way acquiescing in the change. This suit was brought by the company to enforce the original contract.

Held,

(1) That the power to regulate rates was an existent power, not granted by the contract, but reserved from it with a single limitation, the limitation that it should not be exercised to reduce rates below what was then charged, and that undoubtedly there was a contractual element, but that it was not in granting the power of regulation, but in the limitation upon it.

(2) That the City of Los Angeles, by its solemn contract, and for various considerations therein stated, gave to the party under whom defendant claims, the privilege of introducing, distributing and selling water to the inhabitants of that city on certain terms and conditions, which defendant has complied with, and it was not within the power of the city authorities, by ordinance or otherwise, afterward to impose additional burdens as a condition to the exercise of the rights and privileges granted.

(3) By acquiescing in the regulations of rates ever since 1880, the company is not estopped from claiming equitable relief and is guilty of no laches.

This suit involves the constitutionality of an ordinance of the City of Los Angeles, adopted February 23, 1897, fixing the water rates to be charged and collected by the Los Angeles City Water Company for the year ending June 30, 1898.

It is claimed that the ordinance impairs the obligation of the contract made with the grantors of the company on the 20th of July, 1868.

The facts were stipulated, and are substantially as follows:

On the 22d of July, 1868, the City of Los Angeles entered into a contract with John S. Griffin, P. Beaudry, and Solomon Lazard, whereby it leased its waterworks to the said persons and their assignees for a term of thirty years, with the right to lay pipes in the streets of the city, and to sell and distribute the water for domestic purposes to the inhabitants of the city;

Page 177 U. S. 560

also with the right to take water from the Los Angeles River at a point at or above the present dam, to be selected within sixty days of the date of the contract. It was provided that no more than ten inches of water should be taken from the river without the previous consent of the mayor and common council.

The city bound itself not to make any other lease, sale, contract, grant, or franchise to any person, corporation, or company for the sale or delivery of water to the inhabitants of the city for domestic purposes during the continuance of the contract.

And it was provided

"that the mayor and common council of said city shall have, and do, reserve the right to regulate the water rates charged by said parties of the second part, or their assigns, provided that they shall not so reduce such water rates or so fix the price thereof to be less than those now charged by the parties of the second part for water."

The said persons agreed to pay the city a rental of fifteen hundred dollars for the waterworks; to lay down in the streets of the city twelve miles of iron pipes of sufficient capacity to supply the inhabitants with water for domestic purposes; to extend the pipes as fast as the citizens would agree to take sufficient water to pay ten percent upon the cost of such extension; to erect one hydrant, as protection against fire at one corner of each crossing of streets where pipes were or might be laid; to erect an ornamental fountain on the public plaza at a cost not exceeding $1,000; to construct and erect, within two years, such reservoirs, machinery, ditches, and flumes as would secure the inhabitants with a constant supply of water for domestic purposes; to furnish water free of charge for the public schoolhouses hospitals, and jails; to keep in repair all of said improvements at the cost and expense of the parties of the second part, for said term of thirty years, and to return said waterworks to said party of the first part at the expiration of said term, in good order and condition, reasonable wear and damage of the elements excepted, upon payment to said parties of the value of the aforesaid improvements, to be ascertained as provided for in the contract; to give a bond in the sum of twenty thousand dollars for the performance of said contract, and to pay all state and county taxes assessed upon the waterworks during the period of thirty years.

Page 177 U. S. 561

And as the circuit court found:

"Griffin, Beaudry, and Lazard applied for and procured said contract on behalf and for the benefit of themselves and other persons, with the intention of forming a corporation to carry out said contract, and afterwards, about the middle or latter part of August, 1868, themselves and said other persons being the incorporators, organized, under the laws of the State of California, the Los Angeles City Water Company, for the purpose of supplying the inhabitants of said city with water for domestic purposes, etc., under the terms of said contract, and assigned all their rights and franchises under said contract to said company by a written instrument dated June the 12th, 1869, and recorded in the office of the recorder of said County of Los Angeles, June the 15th, 1869."

"On April the second 1870, the legislature of California passed an act hereinafter set forth, in terms ratifying and confirming said contract."

"Griffin, Beaudry, and Lazard did nothing personally in carrying out said contract or constructing or maintaining said waterworks, but said company, after it was organized, took possession of said waterworks, and has performed all of the above-mentioned obligations of said contract, except the one providing for the return of the waterworks at expiration of lease, and in such performance has laid 320 miles of pipe, erected over 500 hydrants for protection against fire, and constructed six reservoirs, with an aggregate capacity of nearly sixty-six millions of gallons, and is now, as it has been at all times since the contract was made, furnishing the City of Los Angeles with water for the extinguishment of fires and for the public schools, hospitals, and jails in said city free of charge. The aforesaid extensions of the waterworks were rendered necessary by the growth of said city, whose population in 1868 was between 5,000 and 6,000, and is now about 103,000."

"During the whole of the year 1868, the territorial limits of the City of Los Angeles were as follows: four square leagues in a square form, the center of which was the center of the old pueblo plaza."

"About 1872, the limits were extended 420 yards south of

Page 177 U. S. 562

the former south boundary, and within the past three years, and prior to July, 1897, the limits were further extended so as to take in between ten and fifteen square miles of additional adjoining territory. Immediately after the extension of the said limits, the Los Angeles City Water Company began to extend its pipes over the said addition to the city as the same was settled up and improved, and ever since has been and is now furnishing water to the people in said district added to the original territory of the city, and, upon the demands of the city council, erected fire hydrants within the said additional territory and furnished water free of charge, and has in all respects continued to lay pipes, erect fire hydrants, and furnish the inhabitants with water for domestic uses in like manner as it has conducted the same business within the original limits of the city as established by the act incorporating it, and so with the more recent extensions of the city limits, to-wit, those made within the last three years, the company has also extended its pipes in portions of those limits and furnished water in the same way."

"The quantity of water required to supply the domestic wants of the people of said city is one inch of water, measured under a four-inch pressure, to every one hundred inhabitants. To meet the increased demands upon it for water under said contract, said company has, among other things, purchased the system known as the 'Beaudry System of Waterworks,' and also certain water rights in the Arroyo Seco, and conducted water from the Arroyo Seco into the city on the east side of the Los Angeles River, and has been furnishing the inhabitants of that portion of the city with water from said system, and also acquired the stock of the corporation known as the East Side Spring Water Company -- the same mentioned in paragraph 10 of the complaint."

"In the growth of the city, its settlement extended to localities of higher elevation than those occupied by its inhabitants at the time of said contract, and the point originally selected for the diversion of the water of the Los Angeles River for supplying the city and its inhabitants, as in said contract provided, was so located in said river that it was impracticable to

Page 177 U. S. 563

there maintain dams and diversion works that would not occasionally be swept away or rendered useless by floods, and the surface water of the river after severe storms became muddy and unfit for supplying the inhabitants with water for domestic uses, and in the year 1889, the Crystal Springs Land & Water Company made excavations in the places referred to in the bill of complaint, and laid the pipes therein as alleged, and the water that has been used by the Los Angeles City Water Company for supplying the city with water, as provided in said contract, has ever since been obtained from that source, except that from time to time a further supply of water has been taken from the Los Angeles River in order to supply said inhabitants, which diversions have been at or near the place where the said underground pipes are laid, and that, by these means the water can be delivered to the higher elevations, and the underground waters, as to quality and amount, are thus protected against the influences of floods."

"The Los Angeles City Water Company ever since its incorporation has taken more than ten inches of water, measured under a four-inch pressure, from the Los Angeles River, and the amount taken has increased with the increase of the population of the city and the demands of the municipality itself for water for extinguishing fires and the other public purposes referred to in the said contract, and the amount has increased until now it requires from 1,000 to 1,500 inches of water, measured under a four-inch pressure, for such purposes, and during the summer season the amount of water used by the Los Angeles City Water Company for the purposes aforesaid runs from 1,000 to 1,500 inches under a four-inch pressure, inclusive of the water obtained by the underground excavations, which latter furnish from 650 to 690 inches, measured under a four-inch pressure."

"The City of Los Angeles has always had flowing in the Los Angeles River at the point from which said Los Angeles City Water Company has always diverted water from said river a quantity of water sufficient to have supplied said Los Angeles City Water Company with all the water required to supply said city and its inhabitants with water for domestic purposes and

Page 177 U. S. 564

municipal uses, and has never objected, up to October 20, 1896, to said Los Angeles City Water Company's taking as much water from said river as it might require for said uses, and during all of said period said city has never objected to said company's taking from the surface stream of said river at said point as much water as said company needed for said uses."

"On October the 19th, 1896, the City Council of the City of Los Angeles adopted a resolution requiring the Los Angeles City Water Company to pay to the City of Los Angeles an amount of money equal to forty percent of the gross rates received by said company from the consumers of water as rental for all water taken by said company from the Los Angeles River, and before the 21st day of October, 1896, to attorn to the City of Los Angeles, as tenant of said city, for all of the water so taken from said river, and to agree to pay said rental to said city, and, in case of failure to attorn and agree to pay said rental, to refrain from diverting, taking, or interfering with any of the water mentioned in said resolution, except ten inches after the 20th day of October, 1896."

"On October the 19th, 1896, the city attorney, in writing, notified the Los Angeles City Water Company and the Crystal Springs Land & Water Company of said resolution, and demanded compliance therewith, delivering a copy of said resolution to each of said companies. Neither of them ever attorned to said city for said water or any part thereof, or ever agreed to pay any rental for the same. After the passage of said resolution and ever since said notification up to the present time, the Los Angeles City Water Company has continually taken from the Los Angeles River at a point above the northern boundary of said city for the purposes of distribution and selling the same in said city a quantity of water varying from 400 to 1,000 inches, measured under a four-inch pressure."

"On the 19th day of April, 1870, the Common Council of the City of Los Angeles accepted, and the mayor approved, the following report:"

"To the Honorable the Mayor and Common Council of the City of Los Angeles and the Los Angeles City Water Company:"

"The undersigned commissioners, duly appointed on behalf

Page 177 U. S. 565

of your honorable bodies to adjust, fix, and establish the rates and charges of the Los Angeles City Water Company (a corporation duly incorporated under the laws of the State of California for the purpose of supplying the inhabitants of Los Angeles City with pure, fresh water), respectfully report that they have established water rates and charges for domestic purposes, taking as a guide, as near as can be, the charges and rates for domestic purposes charged in July, 1868; that your committee have also fixed the rates and charges for other reasonable objects and purposes, and report as follows, to-wit:"

"[Then follow the rates agreed upon.]"

"The commissioners referred to in said report had been previously selected, two by the city and two by the Los Angeles City Water Company."

"In June, 1871, the city council, on a report of a committee constituted similarly to the one above mentioned, established the same rates as those established in April, 1870."

"On the 13th of August, 1874, a committee constituted in the same manner and for the same purposes as the committee already mentioned reported that they had established water rates and charges for domestic purposes, taking as a guide, as near as possible, the charges and rates for domestic and other reasonable objects and purposes charged in July, 1868. The report was adopted and a committee appointed in conjunction with the city attorney to draft an ordinance embodying the rates fixed in said report, and thereafter, on August the 20th, 1874, an ordinance so drawn was adopted by the council of said city, and the rates established by said ordinance were the same as those established in 1870 and 1871."

"Since and including the year 1880, the City Council of the City of Los Angeles has, in February of each year, passed an ordinance fixing the rates to be charged by all corporations and persons within said city supplying water to the inhabitants thereof, to be in force for one year from and including July the 1st, which rates have been less than the rates charged in 1870, as contained in the ordinance hereinbefore mentioned, and the Los Angeles City Water Company has collected the rates thus fixed by the City of Los Angeles, and no more, but in

Page 177 U. S. 566

the year 1896, the Council of the City of Los Angeles passed an ordinance fixing the rates to be charged for water for the year commencing July the 1st, 1896, and ending June 30, 1897 at less than they had ever been fixed before, and a suit was then brought by the complainants herein in this Court against the City of Los Angeles to set aside the said ordinance, and in February of the year 1897, the City of Los Angeles passed the ordinance which is assailed in this suit, making a still further reduction in the rates."

"The action of the Los Angeles City Water Company in collecting the rates fixed by said several ordinances constitutes the only acquiescence (if it be an acquiescence) in the action of said council."

"If the rates established in 1870 were collected for the year beginning July the 1st, 1897, and ending June the 30th, 1898, the revenues received by the Los Angeles City Water Company from said rates would be more than $50,000 in excess of the amount which would be received under the rates named in the ordinance of February, 1897."

"In January, 1882, the Los Angeles City Water Company furnished to the Council of the City of Los Angeles a statement of its transactions for the preceding year, protesting at the same time against the establishment of any rates less than those which were in force at the date of the lease hereinbefore mentioned, to-wit, July the 22d, 1868."

"In January, 1883, said company again furnished said council with a statement showing the names of the consumers of water, the rates paid during the year preceding the date of the statement, and also an itemized statement of the expenditures made for supplying water during the year preceding, but expressly denying any legal right on the part of the council to demand said statement or to fix any rates less than those which were in force in July, 1968."

"Similar statements, accompanied by similar protests, were made annually thereafter up to and including the year 1889, and since that time unverified statements or reports showing its receipts and expenditures have been made by said company to the city council each year. "

Page 177 U. S. 567

"Article XIV of the present Constitution of California, adopted in 1879, is as follows:"

"ARTICLE XIV"

"Water and Water Rights"

" SEC 1. The use of all water now appropriated, or that may hereafter be appropriated, for sale, rental, or distribution, is hereby declared to be a public use, and subject to the regulation and control of the state in the manner to be prescribed by law: Provided, that the rates or compensation to be collected by any person, company, or corporation in this state for the use of water supplied to any city and county, or city or town, or the inhabitants thereof, shall be fixed annually by the board of supervisors, or city and county, or city or town council, or other governing body of such city and county, or city or town, by ordinance or otherwise, in the manner that other ordinances or legislative acts or resolutions are passed by such body, and shall continue in force for one year, and no longer. Such ordinances or resolutions shall be passed in the month of February of each year, and take effect on the 1st day of July thereafter. Any board or body failing to pass the necessary ordinances or resolutions fixing water rates, where necessary, within such time, shall be subject to peremptory process to compel action at the suit of any party interested, and shall be liable to such further processes and penalties as the legislature may prescribe. Any person, company, or corporation collecting water rates in any city and county, or city or town in this state, otherwise than as so established, shall forfeit the franchises and waterworks of such person, company, or corporation to the city and county, or city or town, where the same are collected, for the public use."

" SEC. 2. The right to collect rates or compensation for the use of water supplied to any county, city and county, or town, or the inhabitants thereof, is a franchise, and cannot be exercised except by authority of and in the manner prescribed by law."

"To carry out these provisions of the Constitution, the Legislature of California passed an act entitled 'Act to Enable

Page 177 U. S. 568

the Board of Supervisors, Town Council, Board of Aldermen,' etc., which was approved March the 7th, 1881. (Statutes of California 1881, page 54.)"

"In the year 1888, the electors of the City of Los Angeles, pursuant to provisions of the Constitution of said state authorizing them so to do, adopted a charter for said city, which charter was, under the provisions of said Constitution, submitted to the legislature of said state for its approval, ratification, and adoption, and the said charter was, on the 31st day of January, 1889, adopted by said legislature, and thereupon became and ever since has been the Charter of the said City of Los Angeles, and by the said charter it is provided, in section 193 as follows:"

" The rates of compensation for use of water to be collected by any person, company, or corporation in said city shall be fixed annually by ordinance, and shall continue in force for one year, and no longer. Such ordinance shall be passed in the month of February of each year, and take effect on the 1st day of July thereafter. Should the council fail to pass the necessary ordinance fixing the water rates within the time hereinbefore prescribed, it shall be subject to peremptory processes to compel action at the suit of any party interested."

"The ordinance of 1897 now sought to be annulled was passed pursuant to the foregoing constitutional and statutory provisions."

A decree was entered for complainants (appellees), adjudging that that part of the contract entered into between the City of Los Angeles and Griffin, Beaudry, and Lazard, insofar as said contract provides that the city shall not reduce the water rates below those charged on the date of said contract, is valid, and that the ordinance of February 23, 1897, reduced the water rates below those so charged, and

"impaired the obligation of such contract, and said ordinance is null and void, and it is further ordered, adjudged, and decreed that the said ordinance be, and the same is, hereby vacated and set aside and held for naught."

From the judgment, this appeal is taken.

The assignments of error present the contentions discussed in the opinion.

Page 177 U. S. 569



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