German Alliance Ins. Co. v. Home Water Supply Co.
226 U.S. 220 (1912)

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U.S. Supreme Court

German Alliance Ins. Co. v. Home Water Supply Co., 226 U.S. 220 (1912)

German Alliance Insurance Company v.

Home Water Supply Company

No. 19

Argued April 26, 1912

Decided December 2, 1912

226 U.S. 220

Syllabus

A municipality is not bound to furnish water for fire protection, and if it voluntarily undertakes to do so, it does not subject itself to a greater liability.

While a diversity of opinion exists, a majority of the American courts hold that the taxpayer has no such direct interest in an agreement between the municipality and a corporation for supplying water as will allow him to sue either ex contractu for breach or ex delicto for violation of the public duty thereby assumed.

In this case, held that a taxpayer has no claim against a water supply company for damages resulting from a failure of the company to perform the contract with the municipality.

One agreeing to perform a public service for a municipality is responsible for torts to third persons, but for omissions and breaches of contract he is responsible to the municipality alone.

A contract between a public service corporation and the municipality should not be unduly extended so as to introduce new parties and new rights and subject those contracting to suits by a multitude of

Page 226 U. S. 221

persons for damages for causes which could not in the nature of things have been in contemplation of the parties.

The conclusion that a property owner has no claim against a water supply company for failure to conform to the contract does not deprive him of any right, for had the municipality been guilty of the same acts, no suit could be maintained.

In Guardian Trust Co. v. Fisher,200 U. S. 57, the contract with the water company expressly provided for liability of the company to third parties, and the state court having held that, under the law of North Carolina, an action of this nature can be maintained, that question was not in issue in this Court.

What is said in an opinion of this Court must be limited to the facts and issues involved in the particular record under investigation.

Guardian Trust Co. v. Fisher did not overrule National Bank v. Grand Lodge,98 U. S. 124, holding that a third person cannot sue for the breach of a contract to which he is a stranger unless in privity with the parties, and is therein given a direct interest.

"The Spartan Mills" owned a number of houses in Spartanburg, South Carolina. They were damaged by fire on March 25, 1907. The German Alliance Company, which had insured the buildings, paid $68,000, the amount of the loss, took from the mills an assignment "of all claims and demands against any person arising from or connected with the loss or damage," and brought suit, in the United States Court for the District of South Carolina, against the Home Water Supply Company on the ground that the fire could easily have been extinguished and the damage prevented if the water company had complied with its contract and duty to furnish the inhabitants of the city with water for fire protection.

The complaint alleged that, on February 14, 1900, the city council adopted an ordinance ratifying a contract, previously prepared, between the city and the water company by which the latter was empowered, for a term of thirty-three years, to lay and maintain pipes in the streets and operate waterworks with which "to supply the city and its inhabitants with water suitable for fire, sanitary, and domestic purposes." The city agreed to use the hydrants

Page 226 U. S. 222

for the extinguishment of fires and sprinkling purposes only, to make good any injury which might happen to them when used by its fire department, to pay rent for said fire protection for the term of ten years at the rate of $40 per year for each hydrant, and annually to levy a tax sufficient to pay what should become due under the contract.

The company agreed to lay at least six miles of pipe, but on sixty days' notice from the city would lay additional pipes and install hydrants, not less than ten to the mile, for each of which the city was to pay $40 per year.

The company agreed to keep all hydrants supplied with water for fire protection, and to maintain a height of at least 70 feet of water in the standpipe. If any hydrant remained out of order for more than twenty-four hours after notice, the company was to pay the city $7 per week while each hydrant was unfit for use.

It was further alleged that, in 1905 and 1906, the city ordered the company to

"put in certain hydrants with connecting pipes, . . . which order, if obeyed, would have carried water protection to within about 200 feet of the building which first caught fire on March 25, 1907, instead of 650 feet, which was the distance of the nearest hydrant to the said fire on said day; that, in violation of its duty and obligation to adequately protect the property from fire, and in defiance of the order of council, the defendant failed to make such extensions, and as a direct result there was no plug near enough to furnish water to extinguish said fire -- all due to the defendant's culpable and willful negligence and disregard of duty and obligations to said city and its inhabitants."

Other breaches were charged, in laying 4-inch instead of 6-inch pipe; in neglecting to install the electric cut-off, and "in failing absolutely to furnish water with which to extinguish such fire and prevent its spreading to other houses."

The defendant made no question as to the right of the

Page 226 U. S. 223

insurance company to maintain the action if the Spartan Mills could have done so, but filed a general demurrer which was sustained July 14, 1908. That judgment was affirmed November 4, 1909, by the circuit court of appeals (174 F. 764), and the case was brought here by writ of certiorari.

Page 226 U. S. 227

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