To furnish an ample supply of pure and wholesome water is the
highest police duty resting on a municipality.
One contracting to furnish a municipality with an ample supply
of pure water must at all times maintain his ability to meet the
requirements of the contract, and a continuous supply of water is a
vital part of the contract.
The maxim that he who seeks equity must do equity applies to one
affirmatively seeking relief. It does not vest a court of equity
with power to impose on a defendant terms as a condition for
dismissing the bill where plaintiff wholly fails to prove his case,
even if defendant has filed a cross-bill for defensive relief.
Where a water company has wholly failed to live up to its
contract and the municipality has determined by ordinance to erect
its own plant, a court of equity cannot, in a suit brought by the
water company to restrain the municipality on the ground of
impairment of contract, require the municipality to purchase any
part of the plaintiff's plant as a condition for dismissing the
bill.
The enforcement of a municipal ordinance will not be enjoined as
impairing the obligations of an existing contract at the instance
of a complainant who fails to show that the contract has been
complied with.
A mortgagee of contract rights has no greater right to restrain
the enforcement of an ordinance on the ground that it impairs the
obligation of the contract than has the contracting party
himself.
Where the breach justifies the abrogation of a contract
otherwise protected by the contract clause of the federal
Constitution, considerations of hardship and the interests of
creditors cannot prevail to set up and enforce that contract
against the party having the right to treat the contract as
ended.
Where the contractor under a municipal water supply contract
wholly fails to furnish an adequate supply of pure water according
to the
Page 218 U. S. 646
contract, the municipality has no adequate remedy at law; it may
treat the contract a ended and a court of equity may enforce such
rescission.
The facts, which involve the constitutionality of certain
ordinances of the city of Columbus, Georgia, are stated in the
opinion.
Page 218 U. S. 649
MR. JUSTICE LURTON delivered the opinion of the Court.
This is a bill by the trustee under a mortgage made by the
Columbus Water Works Company upon its plant and franchise to secure
an issue of bonds, to enjoin the municipal authorities of Columbus,
Georgia, from constructing and operating a municipal water system,
thereby impairing the obligation of a contract between the city and
the waterworks company, granting to the latter for a term of thirty
years an exclusive right to maintain a waterworks system in the
streets of the city.
The bill, in substance, avers, and the answer admits, that the
city has procured from the Legislature of Georgia authority to
construct and operate a municipal water plant, and to issue the
bonds of the city for that purpose, and that, in pursuance of this
legislative authority, ordinances have been passed providing for
the construction
Page 218 U. S. 650
of such waterworks, and for the issuance of bonds to provide the
means, and that notice of that purpose, and that the city no longer
regards the contract with the Columbus Water Works Company as
binding or obligatory, has been given.
The material defenses are, first, that the city had no power to
make an exclusive contract; second, that the contract for rental of
hydrants created an aggregate indebtedness prohibited by the
Constitution of the state; and, third, that the waterworks company
had not kept its contract in respect of the character or capacity
of the plant it was to provide and maintain, and has failed in its
obligation to furnish an abundant and constant supply of pure and
wholesome water, thus compelling the municipality to construct a
system of its own for the protection of the health and property of
its inhabitants.
These defenses were relied upon in the answer of the city as a
defense against the injunction sought by the complainant, and were
made the subject of a cross-bill against the complainant and the
waterworks company, praying relief against the contract as having
been first broken by the company.
Prior to the filing of this bill, the same complainant had filed
its original bill in the same court against the Columbus Water
Works Company, praying a foreclosure of its mortgage, a default
having occurred. The bill referred to was filed December 22, 1902.
The present bill was not filed until July 30, 1903. One of the
allegations of the foreclosure bill was
"that, during the continuance of this deed in trust, the said
party of the first part will not do or suffer to be done any act or
acts whereby the security of the said bondholders shall be in any
way or manner or in any amount impaired, and that the said party of
the first part will at all times preserve, maintain, and keep its
waterworks, pumps, machinery, reservoirs, piping, hydrants, and
equipments in good repair, working order, and condition,
Page 218 U. S. 651
and supplied with all the machinery, equipments, and appliances
for providing water to the city of Columbus and vicinity, and shall
and will, from time to time, make all needful and proper repairs,
renewals, and replacements, and useful and proper alterations,
additions, betterments, and improvements."
"3. That your orator is informed that, for more than six months
last past, the Columbus Water Works Company has suffered the
security of the bondholders to become impaired by not maintaining
and keeping its water works supplied with all the machinery,
equipments, and appliances for providing water to the City of
Columbus and vicinity, and by not making useful and proper
additions, betterments, and improvements to said waterworks.
Further explaining the foregoing allegation, your orator states
that, owing to an unprecedented and protracted drought, the sources
of supply of water for the said waterworks have to a large extent
failed for the time being, that it is within the power of the said
waterworks company to provide for such a contingency by seeking and
availing itself of other sources of supply, but that, as your
orator is informed, owing to the attitude of the City of Columbus,
which now is taking steps to provide a water supply of its own, the
Columbus Water Works Company is unable to sell its bonds reserved
in its treasury for such purposes, and which could have been sold
except for the attitude of the said city, and therefore is unable
to carry out the betterments and improvements in its water supply
above mentioned."
Under that bill, which was unopposed, a receiver was appointed,
who has ever since been in possession and is still operating said
works. Upon application of the mortgage trustee, and by consent of
the bondholders and of the company, receiver's certificates have
been issued to the extent of $50,000, and expended in repairing and
improving the supply of water and the distributing system.
Page 218 U. S. 652
There has never been any consolidation of the two suits, but, by
an amended bill in the present case, filed October 15, 1903, the
fact of the pendency of the aforementioned foreclosure bill and the
action had thereunder was stated. It was also averred in this
amendment that, by means of the receiver's certificates issued in
the foreclosure case, such improvements and enlargements had been
made in the plant of the company that the receiver was then
supplying an abundance of wholesome water, and that the trustee, by
direction of the bondholders, was willing to expend such other sums
as should be found necessary to enable the mortgagor company to
carry out its contract.
Upon the bill as thus amended, the answer and cross-bill and the
answer thereto, and upon
ex parte affidavits, the court
heard a motion for an injunction
pendente lite. Upon that
hearing, the court disposed of two legal defenses arising upon the
face of the contract -- namely, whether a contract extending over
thirty years for the rental of hydrants was the creation of an
indebtedness for the aggregate of the rental, and second, whether
the city had power to make an exclusive contract. Both of these
questions were decided by Judge Newman against the city. On
November 19, 1903, an injunction pending the suit was allowed, and
the cause referred to a special master to take proof and report his
findings of law and fact in respect to the issues with reference to
the failure of the waterworks company to comply with its contract.
See 130 F. 180.
On January 23, 1904, the city filed its petition praying a
dissolution of this injunction, alleging that a great amount of
evidence had been taken by the special master, and that the
reservoir had again failed, and that water was now being taken from
the Chattahoochee River, and that the water at the intake was
polluted by reason of the fact that one of the city's sewers
emptied into the stream
Page 218 U. S. 653
a short distance above the intake, and also that a polluted
branch which drained a suburb of the city emptied into the river a
short distance above the river intake. Thereupon, on January 25,
1904, the preliminary injunction was dissolved.
The special master, on November 19, 1904, filed a full,
elaborate, and able report, with findings of fact and law. Upon the
material questions, he found in favor of the contentions of the
city in respect to both fact and law. His findings of fact, as
condensed by him, which are material to be here set out, are as
follows:
"I have found that acceptance by the city was based on statement
of the water company that the system had been completed in
compliance with the contract, and upon assurances by the company
that the water would be wholesome, abundant, and lasting."
"I have found that the system, as accepted by the city in 1882,
had not met the general requirements of the contract, and that, on
complaints to the company, the system had been improved to such an
extent that, in 1889, the service was at that time accepted as
satisfactory to the city."
"That, from 1889 to May, 1900, there was dissatisfaction and
complaints on the part of the city because of insufficiency of
water supply, and especially with the unsupplied needs of the city
for water in its newly acquired territory; that the company had
notice of this, and recognized the necessity of increased water
supply; that, during this period, the city, through its council,
twice made an effort to repudiate the contract, but were not
sustained by the requisite popular vote on submission of the
question to the people; that the company in good faith endeavored
to adjust the differences by offer to arbitrate, and the city
declined the offer, and that finally the city accepted the existing
conditions and concluded a supplemental agreement by which the
company was given an opportunity to test its ability to carry out
the requirements of the contract; that
Page 218 U. S. 654
the company failed in this, and that, in 1902, both the council
and the people determined to no longer depend upon the water
company."
"That the water company has at no time complied with § 3,
requiring a reservoir of 125 million gallons available supply, and
from 1884, it has failed to comply with the requirements of § 12 as
to the construction and maintenance of the reservoir."
"That paragraph XI as to filtration has not been complied with
on the part of the company."
"That the company has failed to comply with section V of the
contract as to distribution in not connecting together the ends of
its system, and placing mains sufficiently large to at all times
give full supply of water."
"With reference to the supply of water, I have found that the
company has failed to comply with §§ I and X, in that sufficient
supply of wholesome, constant, and ample water has not and cannot
be furnished from the source of supply as selected, nor is the same
sufficient to meet the wants of the city and private consumers for
present and future requirements."
"I have found that the company has not complied with section IV
as to supply main."
"That as to pressure from 1893 to 1902, the pressure was
variable and uncertain; that the gravity plan could not sustain it
to the requirements of the contract, and that the standpipe and
pumping devices adopted to assist it, while practically beneficial,
were not at all times satisfactory; that the company has not met
the requirements of section XXVII in maintaining pressure at 32
pounds, nor supplemental contract requirement of 40 pounds, and
that in fires of any magnitude the pressure and water supply is
insufficient, and that the supply is not ample for fire protection,
as required by section IX, and that the receiver, by improvement of
the pumping station, has greatly bettered conditions. "
Page 218 U. S. 655
"With reference to the wholesomeness of the water, as required
by section X, I have found that the reservoir water, when
available, is, under normal conditions, a wholesome water, but when
the water is low it, is not wholesome; that, prior to July, 1902,
the water furnished by the company was, with few exceptions, within
the requirements of the contract, and in these exceptions the city
has not availed itself of the provisions of section XIII of the
contract to correct impurities; that, since July, 1902, the company
has not furnished a constant supply of wholesome water, nor has the
receiver been able to do so; that the Chattahoochee River cannot be
relied on as a constant source of supply for wholesome water, but
only so when, on a normal flow of the river, water is taken from
points above all possibility of contamination, and properly
filtered."
"That the company has not been able, for want of available
funds, to maintain and improve its system as the growth of the city
demanded, and that extensions since 1891 have, from time to time,
been, with the exception of a small amount, paid for by a necessary
increase of a bonded indebtedness originally out of all proportion
to the earning capacity of the system, and constantly growing
further beyond the ability of the system to maintain; that the
system has not been reinforced and strengthened as its needs
require, and that the owners of the bonds of the company recognized
this fact."
"That the actual amount expended by the receiver to January,
1904, on betterments, is $42,220.85."
To the findings of fact, the complainant excepted.
Upon a final hearing, the court, while not fully agreeing with
the master as to the effect of the original acceptance of the works
as constructed and as to the effect of subsequent acceptance of
enlargements, repairs, and improvements made by the company, from
time to time, to meet complaints as to quantity and quality of
water, concurred fully in the master's report that the company had
not
Page 218 U. S. 656
complied with its obligation to construct and maintain adequate
means for continuously furnishing an ample and wholesome supply of
water for public and domestic purposes. Among other things, upon
this vital aspect of the case, Judge Newman said:
"In my judgment, the facts in evidence were sufficient to
justify the master in finding that there was a failure on the part
of the company to furnish an abundant supply of pure and wholesome
water, as provided in the contract, and finding the company at
fault in this respect. It is a serious matter to undertake to
supply the inhabitants of a city with an ample supply of good and
wholesome water, and persons entering into a contract to do this
necessarily must do so with an understanding of the important
character of the undertaking. This is particularly true of a
growing city. Taking this whole record together, and considering
all the evidence, the master, as has been stated, was justified in
reaching the conclusion that there was a failure to comply with the
contract in this respect."
Although there was a consensus of finding by master and court
that there was an obligation upon the water works company to
furnish an adequate and continuous supply of pure water, and that
the waterworks company had therefore broken this vital part of its
agreement, yet the court ruled that the city should be denied
rescission under its cross-bill, and affirmatively restrained from
establishing its own system, unless it "should do equity to the
bondholders," by whose money the plant had been constructed, by
purchasing
"so much of the waterworks plant as may be hereafter determined
at a fair valuation, as a condition of and before entering a decree
in its favor finally denying an injunction in the case against the
issuance by the city of its waterworks bonds."
Time was given the city to determine whether it would accept the
conditions imposed by purchasing at a fair valuation
Page 218 U. S. 657
such parts of the system as the court should determine were
usable by the city at a price to be fixed by a subsequent decree.
The city declining to assent to such a condition, an injunction was
granted permanently restraining the city from the construction of
its own plant, and dismissing the cross-bill, and taxing all of the
costs to the city.
Pretermitting any opinion as to whether the contract for rental
of hydrants for a term of thirty years constituted an aggregate
indebtedness prohibited by the Constitution of the State of
Georgia, as well as the question of the power of the city to
obligate itself by a contract excluding it from constructing and
operating its own waterworks, and assuming, for the purposes of
this case, that the contract between the city and the waterworks
company was perfectly valid, we come at once to the question of
whether the court below was right in denying relief under the
cross-bill, and in granting the relief prayed by the original bill,
because the city declined to purchase at a price fixed by the court
or by arbitration the usable parts of the waterworks system.
The primary and vital obligation of the company was to furnish
an adequate and constant supply of water for both public and
private use, which should be pure and wholesome. By the first and
second clauses of the contract, the company obligated itself to
provide "all the real estate, rights of way, water rights, and
water that shall be found requisite for the successful prosecution
and operation of the waterworks," and to supply "dams and
embankments of ample size and strength, good and durable quality,
that may be required for the works." By the third clause, it bound
itself to construct "a storage reservoir having an available
capacity for the storage and supply of not less than 125 million
gallons." This, in passing, we may observe, was never done, and the
insufficiency of the reservoir capacity was one of the factors
Page 218 U. S. 658
in the subsequent failure to furnish at all times an adequate
supply of water. By the tenth clause of the contract, it was
provided that
"the source of water supply shall be determined by Thos. R.
White (who assigned to the Columbus Water Works Company), he
guaranteeing, however, that the supply of water, both in quality
and amount, shall be wholesome, constant, and amply sufficient to
meet the wants of the city and private consumers for future and
present requirements."
The eleventh and twelfth clauses related to the construction and
maintenance of a filter, and to the maintenance of wholesome
conditions at the storage reservoir.
The single object of the agreement was to obtain a constant and
adequate supply of wholesome water. This was guaranteed in express
terms, to say nothing of the necessary implication from the
character of the contract. This guaranty was a continuing one, and
dominated every other detail of the agreement. The company selected
its own source of supply, and was under the highest obligation to
continuously furnish an ample supply for all purposes of water
which should be wholesome -- that is, clean, pure, and fit for
domestic use. This supply was to be adequate not only for the
demands of the present, but ample to meet the demands of the
future.
No higher police duty rests upon municipal authority than that
of furnishing an ample supply of pure and wholesome water for
public and domestic uses. The preservation of the health of the
community is best obtained by the discharge of this duty, to say
nothing of the preservation of property from fire, so constant an
attendant upon crowded conditions of municipal life. If a
municipality elect to contract with another for the discharge of
this function, it is under the greatest obligation to require that
the contractor shall engage to construct and maintain adequate
means and furnish an adequate supply, in quality and quantity, to
at all times meet the public necessity.
Page 218 U. S. 659
So too, the contractor must satisfy himself as to the
sufficiency and qualify of the source of supply, and maintain
adequate storage and distributing instrumentalities to meet
conditions. That his source of supply is at times adequate and
wholesome is not enough. The wants of the public must, under all
conditions, be supplied. We do not take account of temporary and
unusual conditions which cannot be reasonably foreseen. But that
which can be and should be foreseen must be taken into account by a
private contractor who undertakes so vital a function as that of
supplying water to a growing community.
The continuing character of the obligation to furnish an
adequate supply of wholesome water, as we have before suggested, is
not met by showing that such a supply has been furnished at times,
nor is the nonperformance of the agreement excused by the
occurrence of conditions which are likely to occur in a climate of
long, dry summers. Nor is such a contract fulfilled by showing
that, at the time of completion of the works, the company was able
to carry out the contract. Ability to carry out the agreement must
be maintained. From time to time during the operation of the works,
specific complaints were made by the city in consequence of the
failure of the water company to furnish an adequate supply of
water, or on account of the quality of the water or insufficient
pressure. These complaints generally resulted in an effort to
remedy the matter, and more than one change and improvement made
seemed to produce good results, leading the municipality to accept
for the time the repair, or enlargement, or change as meeting the
necessities of the particular exigency, and giving promises of
ability to carry out the contract. In consequence of such efforts
to improve the service in quantity and quality of water supplied,
the electorate of the municipality twice voted against a bond issue
to construct a municipal plant, manifesting thereby
Page 218 U. S. 660
a willingness that further opportunity should be given the
company to show its ability to bring its plant up to the
requirements of the contract. Indeed, the attitude of the city and
its people toward the water company, as shown by the record, seems
to have been forbearing and generous. This acceptance of improved
conditions resulting from complaints has been relied upon as
estopping the city. But no such result may rightfully follow unless
such improved conditions resulted in the maintenance thereafter of
a continuous, adequate supply of wholesome water. This was not the
case. Want of capital may have been the cause for adoption by the
company of expedients to meet a particular exigency which were
inadequate to permanently overcome a radically insufficient source
of supply, as well as insufficient storage and filtration
instrumentalities. The relief resulting from all that was done by
the company or its receiver was not abiding, nor the character of
the water permanently improved. That the works were not able to
come up to the requirements of the contract, and not able to meet
the reasonable necessities of the city, was a question of fact upon
which the master and the court have agreed. The contract to furnish
an adequate supply of water of good, usable quality was, as we have
already said, a continuing and vital part of the contract. Touching
a similar contract, this Court, in
Farmers' Loan and Trust Co.
v. Galesburg, 133 U. S. 156,
133 U. S. 170,
said:
"Whether or not the water company was able to furnish the
required quantity of water every twenty-four hours, and whether or
not its quality as to purity and goodness for domestic and other
uses was in compliance with the ordinance, must rest upon facts as
proved to exist. Moreover, the estoppel, so far as it did exist,
was not a continuing one. The obligation of the water company to
furnish the quantity and quality of water required by the contract
was a continuing obligation, and was not
Page 218 U. S. 661
met once for all by a compliance with the fire test of December
6, 1883. The right of the company to enjoy the consideration of the
contract was thereafter to depend upon its continuing to perform
it. There was not and could not be a final and absolute acceptance
of the waterworks by the city without regard to a future compliance
on the part of the water company with the requirements of the
contract. The case was not one of works constructed for the city,
and to become its property upon acceptance, and the acceptance
related merely to the sufficiency of the structures for fire
service at the time."
There remains, then, the simple question as to whether the
circuit court was justified, upon a finding that the water company
had not and was not able to do what it agreed to do, in restraining
the city from meeting the plain necessities of the case by
constructing and operating its own plant, because the city would
not accept as a condition the purchase at a price fixed by the
court of so much of the waterworks plant as the court should be of
opinion it could use in its own system. If, as is manifestly the
case, the waterworks company has not complied with its contract in
vital particulars, the city had the legal right to say, as it did
in substance say,
"You have failed to maintain a continuous and adequate supply of
water fit for domestic purposes, as you were bound to do. Public
considerations of the highest obligation require that the city and
its inhabitants shall have a continuous water service adequate to
the preservation of the public health and the public safety. We
therefore shall treat the contract as at an end, and undertake this
function by means of a municipal plant."
However serious the result to the water company or its
creditors, the plain law of the case was with the city. The
bondholders had neither legal nor equitable rights superior to the
contract between the city and the water company. If the latter had
not complied with the contract
Page 218 U. S. 662
after repeated experiments and much indulgence by the city, what
is the equitable foundation for the enforcement of a broken and
continuing obligation by enjoining the city from doing what it had
a plain legal right to do if the water company was unable to carry
out the contract upon its part? Nevertheless, the learned judge,
after reaching and announcing the conclusions already stated as to
the facts of the case, granted to the complainant the full
equitable relief sought, because the city declined to agree to
conditions imposed. The court justified the imposition of
conditions under the maxim that he who seeks equity must do equity.
But this maxim is one which applies to him who affirmatively seeks
equitable relief.
The complainant had, beyond serious doubt, failed to make a case
entitling it to relief. But the court in substance said to the city
that, unless the city would agree to mitigate the injury and loss
which must come to the creditors of the defaulting company by
buying so much of the company's plant as the court should think
adapted to use in the plant to be constructed by the city, that a
decree should go for the complainant, although it had failed to
make a case entitling it to the enforcement of the contract between
the company and the city.
Manifestly the maxim cannot vest in the chancellor the power
which has been exercised. It is true that the city, by a
cross-bill, asked to have the contract declared at an end for
nonperformance. But this was defensive relief. If the complainant
had shown a valid contract which was impaired by the legislation
providing for a construction of rival waterworks, it was clearly
entitled to a decree enjoining the city from proceeding with the
construction of a municipal system. In that event, the cross-bill
would be dismissed as a necessary result of such decree upon the
original bill. But if complainant failed to show a state of facts
which entitled it to restrain the city from
Page 218 U. S. 663
doing anything in impairment of the contract between it and the
mortgagor water company, the only logical result was a decree
dismissing the original bill because the city had not kept its
contract, and a decree under the cross-bill declaring the contract
abrogated rightfully by the city as a consequence of its breach in
vital particulars.
A consideration of the consequence to creditors of the
contracting company is not an answer to the legal rights of the
city. Considerations of hardship cannot prevail to set up and
enforce a broken agreement, which in law results in giving to the
opposite party a right to treat the agreement as ended.
Hamilton Gas Light Company v. City of Hamilton,
146 U. S. 258;
Atty. Genl. v. Council of Birmingham, 4 Kay & J. 539;
Kneeland v. American Loan & Trust Co., 136 U. S.
89. In the case of
Atty. Genl. v. Birmingham,
the Vice Chancellor said:
"I am not sitting here as a committee of public safety, armed
with arbitrary power to prevent what it is said will be a great
injury not to Birmingham only, but to the whole of England; that is
not my function."
The city should be left its freedom of contract in respect to
buying such parts of the company's plant as it can profitably
use.
The remedy by an action for damages was wholly inadequate to the
city. The city had a right to treat the contract as terminated, and
to invoke the aid of a court of equity to enforce its rescission.
133 U. S. 133 U.S.
156,
133 U. S.
179.
Reverse the decree and remand, with direction to dismiss the
bill and grant the relief as prayed in the cross-bill.
Reversed.