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
MR. JUSTICE WHITE, after making the foregoing statement,
delivered the opinion of the Court.
At the threshold, we are met with the objection, raised below
and urged at bar, that the circuit court was without jurisdiction
because the bill, on its face, did not state a case arising
Page 193 U. S. 576
under the Constitution or laws of the United States within the
intendment of the Act of August 13, 1888. 25 Stat. 433. As the case
is here on direct appeal from the decree of the circuit court of
the United States, the solution of this question necessarily
involves also deciding whether the cause was properly brought to
this Court. As the existence of the constitutional question is the
only basis of the right to the direct appeal, if there was no such
question in the court below, there was and is no such issue by
which the direct appeal to this Court can be sustained. Under these
circumstances, if the contention as to want of jurisdiction of the
court below, arising from the alleged absence of constitutional
questions, be well founded, our duty is not simply to dismiss the
appeal, but to reverse the decree below, with instructions to the
circuit court to dismiss the bill for want of jurisdiction.
Defiance Water Company v. Defiance, 191 U.
S. 184.
If jurisdiction is to be determined by the mere fact that the
bill alleged constitutional questions, there was, of course,
jurisdiction. But that is not the sole criterion. On the contrary,
it is settled that jurisdiction does not arise simply because an
averment is made as to the existence of a constitutional question,
if it plainly appears that such averment is not real and
substantial, but is without color of merit.
Underground
Railroad v. New York, 193 U. S. 416;
Arbuckle v. Blackburn, 191 U. S. 405;
Owensboro v. Owensboro Waterworks Co., 191 U.
S. 358;
Defiance Water Co. v. Defiance,
191 U. S. 184;
Swafford v. Templeton, 185 U. S. 487;
McCain v. Des Moines, 174 U. S. 168,
174 U. S. 181,
and cases cited. Whether the Constitution of the United States was
and is, in a real and substantial sense, involved depends upon
apparently two considerations: first, the proposition that the sale
made by the company to the city was compulsory, and hence there was
a taking of the property in disregard of due process of law; and,
second, that the failure of the commissioners to value the future
profits arising from the contract for the furnishing for fires of a
water supply to the city impaired the obligations of the company's
contract. We
Page 193 U. S. 577
say apparently two, since the questions are virtually one,
depending both on the same considerations.
Now it is conceded that the charter of the water company was not
exclusive, and was subject to repeal, alteration, or amendment at
the will of the legislature. This being the case, it is evident
that no deprivation of property without due process of law or
impairment of the obligations of a contract did or could arise from
the act of the legislature empowering the city to erect its own
waterworks. Having this power, the legislature could therefore have
exercised it without compelling the city to buy the plant of the
water company, and the bill proceeds upon the theory that, if this
right had been exerted by the legislature, the company would have
been ruined, and the value of its property in effect entirely
destroyed. This follows because the averments are based upon the
assumption that the conveyance by the company of its property to
the city was not voluntary, since, if it had not so conveyed, the
exercise by the city of the right to construct its own plant would
have destroyed the company's property. The contentions, therefore,
as to the Constitution of the United States are based solely upon
the proposition that, because the legislature sought to protect the
company and save its property from ruin by conferring upon it the
privilege of selling its property to the city, if it chose to do
so, thereby compulsion and consequent violation of the Constitution
of the United States arose. In other words, that, because there was
conferred a benefit upon the corporation, which the legislature
need not have bestowed, and which the company availed of, that its
property was taken from it forcibly and without its consent. When
the contention is thus reduced to its ultimate analysis, it comes
to this -- that the property of the company was taken from it
without its consent because, by the action of the legislature, for
the benefit of the company, it was enabled to sell its plant to the
city, and thus escape a serious loss. Indeed, in reason, the theory
upon which the bill is based could not be maintained without
deciding that the company had an exclusive contract, and
therefore
Page 193 U. S. 578
that there was a want of power in the legislature to authorize
the city to erect its own plant or, what is tantamount thereto,
declaring that, although there was no exclusive right and therefore
power in the legislature to give the city the right to erect its
own plant, that body must have abstained from the exercise of its
lawful authority unless it determined to exert it so as to destroy
and ruin the company. The power being in the legislature, it was
competent for that body to exert it for the benefit and in the
interest of the water company, to enable that company, if it chose,
to sell its plant upon the terms stipulated, and thus avoid the
loss which otherwise, the bill avers, would have been entailed. And
these considerations take this case out of the reach of the
authorities which are relied upon as establishing that one cannot
enforce a contract benefit derived from or advantage gained over
another by coercing his will by means of threats even of the doing
of a lawful act. The advantage resulting from the power conferred
upon the company to sell enured to its benefit, since it saved it
from a ruin which otherwise would have been occasioned. No
compulsion in any legal sense can be said to have been exerted on
the company by the option given it, because the exercise by the
company of the option, upon its own theory of the case, saved its
property from destruction. To indulge in the assumption that the
action of the company was not voluntary would require the
assumption that the company would have willingly suffered a most
grievous wrong when, by accepting as it did the benefits of the
act, such consequences were averted. The Supreme Judicial Court of
Massachusetts, in passing upon the award made by the commissioners,
aptly said (168 Mass. 554):
"It must be remembered that the transaction before us springs
out of a voluntary offer by the petitioner to sell upon the
statutory terms, and therefore there is no reason to try to bend
those terms in its favor. Of course, an offer by a water company,
made under a threat of municipal competition and to avoid ruin,
might be voluntary only in name. But we have
Page 193 U. S. 579
no reason to assume in this case that the petitioner is the
victim of robbery, and must treat it as having acted of its free
choice in fact as well as in form."
It is to be observed that in the legislative act which the
company accepted, and in furtherance of which it voluntarily
conveyed its property to the city, it was expressly stipulated that
the value of such property "should be estimated without enhancement
on account of future earning capacity or goodwill, or on account of
the franchise of said company." It is also worthy of note that,
before the state courts, the only question presented for
consideration was the proper interpretation of the statute in
question and whether or not it provided for payment for certain
incorporeal rights and franchises which the water company contended
should have been allowed for by the commissioners. Having accepted
the statute, conveyed its property to the city, provoked the state
proceedings to value the property, and derived the benefits
resulting from the legislation of the State of Massachusetts, the
water company may not now, because of disappointment at the result
of the interpretation which the statute received at the hands of
the state court, change its position and cause its voluntary
acceptance to become an involuntary one in order to assail the
constitutionality of the legislation in question.
Concluding for the foregoing reasons that the rights asserted in
the bill under the Constitution of the United States, upon which
the jurisdiction of this Court depends and upon which, also, the
jurisdiction of the lower court depended were so attenuated and
unsubstantial as to be absolutely devoid of merit, our duty is to
direct that the decree of the circuit court be reversed at
appellant's costs, and that the case be remanded to that court with
instructions to dismiss the bill for want of jurisdiction.
And it is so ordered.
[
Footnote 1]
"
Chapter 474"
"
An Act to Provide for the Purchase of the Property of the
Newburyport"
"
Water Company by the City of Newburyport"
"
Be it enacted, etc., as follows:"
"SEC. 1. If, within thirty days after the passage of this act,
the Newburyport Water Company shall notify the mayor of the City of
Newburyport in writing that it desires to sell to said city all the
rights, privileges, easements, lands, waters, water rights, dams,
reservoirs, pipes, engines, boilers, machinery, fixtures, hydrants,
tools, and all apparatus and appliances owned by said company and
used in supplying said city and the inhabitants thereof with water,
said city shall not proceed to supply water to itself or its
inhabitants under the authority of chapter 471 of the acts of the
year 1893, unless it shall have first purchased of said company the
property aforesaid, and said company is authorized to make sale of
said property to said city, and said city is authorized to purchase
the same. Whenever said city shall, by a majority vote of the legal
voters of said city present and voting thereon at a meeting called
for that purpose, vote to purchase said property, notice of the
desire of said company to sell the same having been given as
hereinbefore provided, said company shall, within twenty days after
the vote aforesaid, execute and deliver to said city proper deeds
and instruments in writing conveying to said city the property
aforesaid, and said property thus conveyed shall thereupon become
the property of said city, and said city shall pay to said company
the fair value thereof, to be ascertained as hereinafter provided.
If, at the first meeting, a majority of the voters present and
voting do not vote to purchase said property, other meetings may be
called and held therefor. In case the said city and the said
company shall be unable to agree upon the value of said property,
the Supreme Judicial Court shall, upon application of either party
and notice to the other, appoint three commissioners, two of whom
shall be skilled engineers and the third learned in the law, who
shall determine the fair value of said property for the purposes of
its use by said city, and whose award, when accepted by the court,
shall be final. Such value shall be estimated without enhancement
on account of future earning capacity or goodwill, or account of
the franchise of said company."
"SEC. 2. In case said Newburyport Water Company shall convey its
property to the City of Newburyport in accordance with the
provisions of the preceding section, said city shall manage and use
the property thus conveyed for the purposes and under the
provisions of chapter 471 of the acts of the year 1893."
"SEC. 3. The said city may, for the purpose of paying the
necessary expenses and liabilities incurred under the provisions of
this act, issue from time to time bonds, notes, or scrip to an
amount sufficient for such purpose; such bonds, notes, or scrip
shall bear on their face the words 'Newburyport water loan,' shall
be payable at the expiration of periods not exceeding thirty years
from the date of issue, shall bear interest payable semiannually at
a rate not exceeding six percentum per annum, and shall be signed
by the treasurer of the city and countersigned by the water
commissioners provided for by chapter 471 of the acts of the year
1893. The said city may sell such securities at public or private
sale, or pledge the same for money borrowed for the purposes of
this act, upon such terms and conditions as it may deem proper,
provided that such securities shall not be sold for less than the
par value thereof. The city shall provide at the time of
contracting said loan for the establishment of a sinking fund, and
shall annually contribute to such fund a sum sufficient, with the
accumulations thereof, to pay the principal of such loan at
maturity. The said sinking fund shall remain inviolate and pledged
to the payment of said loan, and shall be used for no other
purpose."
"SEC. 4. In case said city shall, in violation of section 1 of
this act, proceed to supply itself or its inhabitants with water
before making the purchase aforesaid, the Supreme Judicial Court
shall, upon petition of said company, have jurisdiction in equity
to enjoin said city from so doing until it shall have made such
purchase."
"SEC. 5. This act shall take effect upon its passage."
"Approved June 14, 1894."
[
Footnote 2]
"To the Newburyport Water Company:"
"In accepting the conveyance made to the City of Newburyport by
the Newburyport Water Company, dated January 29, 1895, and
delivered to the mayor on that day by the clerk of that corporation
for examination, it is not admitted, on behalf of the city that any
franchise is acquired by the said city under such conveyance, or
that the city is under any obligation to make payment on account of
any franchise of said corporation by reason thereof."
"It is further not admitted or claimed that the four filters,
with their gates, pipes, appliances, and appurtenances, described
in item 2 of said deed as situated upon the second lot of land
described in item 1 therein, are used in supplying said city or its
inhabitants with water, or that the city is bound to pay for the
same or any part thereof."
"It is further not admitted or claimed that the Newburyport
Water Company has any right or authority to convey by said
conveyance, or the City of Newburyport to accept or make payment
for anything whatever, except according to provisions of chapter
474 of the act of 1894."
"Adopted by a unanimous yea vote, six aldermen present and
voting."
