Newburyport Water Co. v. Newburyport
193 U.S. 561 (1904)

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U.S. Supreme Court

Newburyport Water Co. v. Newburyport, 193 U.S. 561 (1904)

Newburyport Water Company v. Newburyport

No. 182

Argued March 16, 1904

Decided April 4, 1904

193 U.S. 561

Syllabus

Where the contention as to want of jurisdiction of the circuit court, arising from the alleged absence of constitutional questions, is well founded, it is the duty of this Court not simply to dismiss the appeal, but to reverse the decree at appellant's costs with instructions to the circuit court to dismiss the bill for want of jurisdiction.

Jurisdiction of the circuit court does not arise simply because an averment is made that the case is one arising under the Constitution or laws of the

Page 193 U. S. 562

United States if it plainly appears that such averment is not real or substantial, but is without color of merit.

Where the charter of a water company is not exclusive, and is subject to repeal, alteration, or amendment at the will of the legislature, no deprivation of property without due process of law or impairment of the obligation of a contract can arise from an act of the legislature empowering the city to erect its own waterworks.

Where the legislature of a state authorizes a city to erect its own waterworks, but on the condition that it purchase the plant of a company then supplying it at a valuation to be fixed by judicial proceedings as provided in the act, and the water company institutes proceedings under the act, it cannot thereafter claim that, because certain incorporeal rights, franchises, and possible future profits were not allowed for in fixing the valuation, that its property was taken without due process of law, and, changing its position, cause its voluntary acceptance to become an involuntary one in order to assail the constitutionality of the legislation in question.

The Newburyport Water Company, appellant, is a Massachusetts corporation created by special act on April 23, 1880, which act was subject to alteration, amendment, or repeal at the pleasure of the legislature.

As authorized by its charter, the water company established a water supply system in the City of Newburyport. On August 17, 1880, the water company entered into a contract with the city to furnish water for fire purposes during a term of twenty years, with the privilege to the city of purchasing the waterworks property after the expiration of ten years.

In the year 1893, the legislature passed an act (chapter 471) conferring power upon the city, if sanctioned by popular vote, to provide its own water plant, to supply itself and its inhabitants with water, and, if also approved by the voters, to acquire, by agreement with the water company, its plant. The voters of the city, however, decided not to purchase the plant, but to establish and maintain an independent water supply system. On June 14, 1894, an act, designated as chapter 474, was passed by the legislature, forbidding the City of Newburyport, in the event that the water company, within thirty days after the passage of the act, elected to offer its property for sale to the city, from acting under the authority of chapter 471 of

Page 193 U. S. 563

the acts of 1893 unless the city first purchased the plant of the company. A copy of the act is inserted in the margin. [Footnote 1]

Availing themselves of the privilege conferred by this act,

Page 193 U. S. 564

the stockholders of the water company voted to sell to the city, and served notice to that effect upon the mayor. The city, by popular vote, decided to buy. The water company thereupon, on January 20, 1895, executed and delivered to the city a deed of all its property, both corporeal and incorporeal. In accepting the deed, however, the city served upon the water company the notice printed in the margin. [Footnote 2]

Page 193 U. S. 565

Under the deed of the water company, the city took possession of the plant. The parties being unable to agree as to the sum to be paid, the water company petitioned the Supreme Judicial Court for the County of Essex to appoint three commissioners to fix the amount, which was done. Hearings were had, and the commissioners made an award of $275,000, but no allowance was made for the franchise or right of the water company to lay and maintain pipes in the streets, and for its right to collect water rates, or for the profits which the company might have made on the contract for furnishing water to the city for fire purposes had not the sale of the plant to the city taken place. It is stipulated by counsel that the commissioners did not value such contract, "it being their opinion that the same in law could not be valued," and that, although the water company offered the contract before the commissioners,

"no evidence of the quantity of water supplied to the city under the contract, nor any direct evidence of the cost of performing the contract, or of its value to the company,"

was introduced. The stipulation also recites --

"That counsel for the city, in his closing argument, asked counsel for the water company if he had waived the claim to have the contract valued, and the latter replied that he did not waive it, and was not prepared to say what use he should make of it. That thereupon counsel for the city proceeded to argue that the contract should not be valued; that the counsel for the water company, in his closing argument, mentioned the contract as one of the items of property which the company had parted with to the city, and urged, but not in this connection, that it was the duty of the commissioners to estimate the value of all of the property of the company as one whole."

The report on the award made by the commissioners was

Page 193 U. S. 566

heard before a single justice of the Supreme Judicial Court, who reserved for the full court whether the award should be recommitted or be accepted. The full court affirmed and accepted the award of the commissioners. 168 Mass. 541. A rehearing was applied for, but, while the petition was pending, the water company brought the present suit in equity in the Circuit Court of the United States for the District of Massachusetts. After the bringing of such equity suit, the petition for rehearing was dismissed.

In the bill of complaint, the foregoing facts, except as to the recited provisions referred to as embraced in the stipulation, were set out with much amplitude, and it was alleged that no claim was made before the commissioners or in the state courts (except in the petition for rehearing) that the act of 1894 was repugnant to the Constitution of the United States.

In substance, the grounds for relief propounded in the bill were that, as the act of the legislature which gave the privilege to the water company to sell had been construed by the Supreme Judicial Court as not entitling that company, on the sale by it made to the city, to compensation for its franchises and other valuable incorporeal rights, that act, as construed, amounted to a taking of the property of the water company against its consent, without due process of law, and in violation of the Fourteenth Amendment to the Constitution of the United States. The bill based this contention upon the charge that, as the legislative act which gave the company the privilege to sell to the city, if it chose to do so, was coupled with the right conferred upon the city, if the company did not sell, to erect a water plant of its own, the sale by the company was compulsory, since the execution by the city of the authority to erect its own plant would have worked the ruin of the water company. In addition, it was charged in the bill that the failure under the legislative act, of which the company had availed itself, to value the future profits which the company might have derived from its contract to furnish the city with water impaired the obligation of the contract arising from the

Page 193 U. S. 567

charter, in violation of the contract clause of the Constitution of the United States. Charging that it was the intention of the city to issue bonds for the purpose of raising funds with which to pay the award in question, the bill prayed an injunction and the appointment of a receiver to manage the property claimed by the water company, which it had conveyed to the city, until the controversy was finally determined. The ultimate and substantial relief sought by the bill was first, a restoration to the water company of the property which it had conveyed to the city, with damages for its detention, and, in the alternative, that full compensation be awarded. The city, appearing specially for the purpose, moved to dismiss for want of jurisdiction. This, after hearing, was overruled. Thereupon a demurrer was filed to the bill, which, after argument, was overruled. Application was next made for a rehearing on the demurrer, and, pending action thereon, an answer and replication were filed. The application for a rehearing on the demurrer was overruled. A motion was then made for leave to file a special demurrer to that portion of the bill and prayer in which a right to a decree for compensation was asserted. This was refused, and thereafter, by consent of parties, the following order was made by the court:

"Ordered: That the constitutional question, to-wit, whether or not the plaintiff has been deprived of its property without due process of law, in violation of the Fourteenth Amendment of the Constitution of the United States, be first heard, and that all questions as to plaintiff's relief, if any (including questions of valuation of the property alleged to have been taken) await the determination of the constitutional question."

Soon afterwards, a hearing was had upon the question referred to in said order, and the decision of the court was adverse to the water company. 103 F. 584. After this, the court heard argument upon the contention of the water company that the act of 1894 impaired the obligation of its contract with the city, and in consequence violated Section 10 of Article I of the Constitution of the United States. It was decided that the

Page 193 U. S. 568

failure to value the contract in question "does not tend to prove that the act of 1894 was repugnant to the contract clause of the Constitution." The court, having thus decided all the constitutional questions raised by the water company against that company, entered a final decree dismissing the bill. This appeal, directly to this Court, was then taken.

Page 193 U. S. 575

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