Restraints upon governmental agencies will not be readily
implied. There are presumptions against the granting of exclusive
rights and against limitations upon the powers of government.
By the statute of 1891, cities in Missouri may erect and operate
their own electric light plants, or they may grant the right to
persons or corporations to erect and operate such plants for not
exceeding a period of twenty years. The City of Joplin, by
ordinance adopted subsequent to the statute, granted such right for
twenty years to a corporation which erected and has ever since
operated the plant. The ordinance conferred rights, exacted
obligations, fixed rates and provided for its written acceptance,
and the corporation so accepted it. By a later ordinance, the city
provided for the issue of bonds to build its own plant.
In an action brought by the Light Company to restrain the
erection of the plant during the continuance of the twenty-year
term on the ground that the ordinance violated the federal
constitution in that it impaired the obligation of the contract
existing under the ordinance granting the franchise,
Page 191 U. S. 151
held that, as such ordinance did not provide that the
city would not erect its own plant, no such provision could be
implied.
Held that the fact that cities could elect under the
statute of 1891 either to erect their own plants or grant
franchises could not, in case of their election to grant the
franchise, be construed as an implied contract not to erect their
own plants during the period for which the franchise was
granted.
Bill in equity to restrain the appellant from supplying its
inhabitants with incandescent lights or other electric lighting in
competition with the appellee.
The City of Joplin is a municipality of the State of Missouri;
the appellee is a corporation of said state, and the jurisdiction
of the circuit court was invoked on the ground that the action of
the city impaired the obligation of the contract existing between
it and the appellee in violation of the Constitution of the United
States, and hence the appeal directly to this Court.
A preliminary injunction was granted. 101 F. 23. It was made
perpetual upon final hearing, and a decree was entered enjoining
the city
"from supplying or furnishing to the inhabitants, residents, or
any other person, firm, or corporation within said city, or any
addition thereto or extension thereof, electric lights, either
incandescent or arc, or in any other form or manner, for commercial
or private lighting, for and during the full term"
of the grant to the predecessors and assignors of appellee,
to-wit, the term of twenty years from and after October 7, 1891.
113 F. 817.
A statute of Missouri, Laws 1891, April 2, p. 60, authorizes
cities to erect, maintain, and operate electric light works, to
light the streets and supply the inhabitants with light for their
own use, and to establish rates therefor. Or they may, the statute
provides,
"grant the right to any person or persons or corporation to
erect such works . . . upon such terms as may be prescribed by
ordinance, provided further that such right . . . shall not extend
for a longer period than twenty years."
Subsequently to, and in pursuance of, this statute, the city, by
ordinance, October 7, 1891, granted the right to
Page 191 U. S. 152
erect and maintain an electric light plant to certain persons,
naming them, their successors and assigns, for a period of twenty
years. The plant was erected at considerable expense, and has ever
since been maintained and operated. The appellee is the successor
of the original grantees.
The ordinance conferred rights and exacted obligations, and
fixed besides the rates to be charged. It also provided for its
written acceptance within ten days after its passage, and the
commencement of the work within sixty days. It was accepted.
Subsequently, and on March, 1899, the city, acting in pursuance
of, and in the manner provided in, certain ordinances, issued bonds
to the amount of $30,000, "for the purpose of erecting an electric
light plant, to be owned, controlled, and operated by the city,"
and by the means obtained thereby constructed electrical works,
erected poles and wires, established a schedule of rates, and
entered into the business of commercial electrical lighting in
competition with appellee. The bill alleged that the appellee was
the owner of real and personal property within the city, which is
assessed by the city for municipal taxation, and that appellee is
compelled, by reason of such taxation,
"to aid and assist in operating and maintaining defendant's [the
city's] electric plant and business as a rival and competing one
with appellee's electrical plant and business. "
Page 191 U. S. 155
MR. JUSTICE McKENNA, after stating the case, delivered the
opinion of the Court.
The foundation of the suit is that the ordinances of March,
1899, and the acts and conduct of the city in entering into
competition with the complainant (appellee) impair the obligation
of the contract impliedly arising from the ordinance of October 7,
1891, and the acceptance thereof by appellee. In other words, it is
contended that, under the statute of the state which we have
quoted, the city was given the power to
Page 191 U. S. 156
construct an electrical plant and erect poles, etc., to "supply
private lights for the use of the inhabitants of the city," or it
could grant that right "to any person or persons or corporation"
upon such terms as might be prescribed by ordinance. It chose the
latter, and granted to the assignors of appellee the right given by
the statute, and expressed it to be "in consideration of the
benefits to be derived therefrom." And it is hence contended that
thereby the city contracted not to build works of its own, and
that, by doing so it violated Section 10 of Article I of the
Constitution of the United States, which provides that no state
shall pass any law impairing the obligation of a contract, and also
violated that clause of the Fourteenth Amendment of that instrument
which provides that no state shall deprive any person of property
without due process of law.
It is by implication from the statute and the ordinance passed
under it, not from the explicit expression of either, that the
conclusion is deduced that the city is precluded from erecting its
own lighting plant, and yet it is conceded that the grant to the
appellee is not exclusive. That is, it is conceded the city has not
exhausted its power under the statute by the grant held by
appellee, but may make another to some other person than the
appellee. In other words, that the city may make a competitor to
appellee, but cannot itself become such competitor. The strength of
the argument urged to support the distinction is in the
consideration that competition by the city would be more effective
than competition by private persons or corporations -- indeed,
might be destructive. The city, it is further urged, could be
indifferent to profits, and could tax its competitor to compensate
losses. But this is speculation, and it may be opposed by
speculation, and there are, besides, countervailing considerations.
The limitation contended for is upon a governmental agency, and
restraints upon that must not be readily implied. The appellee
concedes, as we have seen, that it has no exclusive right, and yet
contends for a limitation upon the city which might give it (the
appellee)
Page 191 U. S. 157
a practical monopoly. Others may not seek to compete with it,
and if the city cannot, the city is left with a useless
potentiality, while the appellee exercises and enjoys a practically
exclusive right. There are presumptions, we repeat, against the
granting of exclusive rights and against limitations upon the
powers of government.
Many cases illustrate this principle, and some of them were
decided in response to contentions similar to those made in the
case at bar. In
Skaneateles Waterworks Co. v. Skaneateles,
184 U. S. 354, the
Village of Skaneateles, under statutes of the State of New York,
granted to the water company the right to construct waterworks, and
contracted with it to supply water to the village and its
inhabitants for the period of five years. At the expiration of the
term of the contract, some difference arose about the terms of its
continuance, and the village constructed an independent system of
waterworks. A suit was brought by the water company to restrain the
further construction of the works and their operation, and the
company contended that, under the statute of the state by which the
village granted to the company its franchises, the village had the
election to construct works, or confer such power upon a private
company like the water company, and, having elected the latter, it
impliedly contracted not to construct works of its own. In reply to
this contention, this Court said, by MR. JUSTICE PECKHAM:
"There is no implied contract in an ordinary grant of a
franchise such as this that the grantor will never do any act by
which the value of the franchise granted may in the future be
reduced. Such a contract would be altogether too far-reaching and
important in its possible consequences in the way of limitation of
the powers of a municipality, even in matters not immediately
connected with water, to be left to implication. We think none such
arises from the facts detailed."
It is true there was an element in that case which is not in the
case at bar. The Village of Skaneateles had entered into a contract
with the water company to take water from the
Page 191 U. S. 158
company. This contract had expired before the city constructed
its works. It was not that contract, however, which was alleged to
have been impaired, but that which the water company claimed to
have been implied by reason of its organization and incorporation,
and in pursuance of the application made to, and with the consent
of, the village authorities. The ultimate reliance, therefore, of
the water company was that, from the grant to it, the village
impliedly contracted not to construct works of its own. The
similarity of the contention with that in the case at bar is
apparent.
In
Bienville Water Supply Company v. Mobile,
175 U. S. 109,
186 U. S. 186 U.S.
212, it was again decided that the granting of franchises to
private persons to construct waterworks in a city does not preclude
the city from afterwards erecting such works and supplying its
inhabitants with water.
Walla Walla v. Walla Walla Water Co., 172 U. S.
1, is not in opposition to these views. The City of
Walla Walla was, by the statute incorporating it, empowered to
erect waterworks or to authorize the erection of the same. In
pursuance of this power, it granted a franchise to the Walla Walla
company, and contracted to take water from the company, reserving
the right to avoid the contract under certain contingencies. But it
was provided that:
"Until such contract shall have been so avoided, the City of
Walla Walla shall not erect, maintain, or become interested in any
waterworks except the ones herein referred to, save as hereinafter
specified."
The contract was in force at the time the suit was brought, and
the water company had substantially complied with all of its terms
and conditions. The contract passed upon therefore was expressed
and explicit. The power to make it was sustained. In the case at
bar, restraint upon the power of the appellant city is claimed to
be implied by the grant to the appellee. We think, for the reasons
stated and upon the authorities cited, such restraint cannot be
implied.
Decree Reversed and case remanded with directions to dismiss
the bill.
