1. Where there were two statutes, an earlier empowering cities
to erect waterworks, if authorized by a majority of the voters, or
to grant the right to private individuals for a term not exceeding
25 years, and a later for the incorporation of water companies to
supply water to municipalities, with power to occupy the streets
subject to regulation by the municipal authorities, and a company
entered a municipality under an ordinance, ratified by the
citizens, limiting its term to 25 years,
held that it was
estopped by its contract from claiming a perpetual franchise under
the later statute, and that, upon the expiration of the term, the
municipality, as against the trustee for the company's bondholders,
could require that the pipes, etc., be removed from the streets. P.
258 U. S.
334.
2. A bill which sought to enjoin a city from enforcing an
ordinance revoking the rights of a water company under a prior
ordinance and requiring removal of its plant from the streets, and
which prayed also a money recovery for damages to its contract
rights and trespass upon its real property,
held not
multifarious. P.
258 U. S.
337.
3. In a suit in the district court by a trustee for the
bondholders of a corporation to protect the corporate property, in
their interest, against destruction by a third party, the
corporation properly may be joined as a defendant. P.
258 U. S.
337.
Affirmed.
Appeal from a decree of the district court dismissing, for want
of equity, the appellant's amended bill, in a suit brought by it,
as trustee for bondholders of the appellee Water Company, to
restrain the other appellee, the City of Raton, from revoking the
company's rights in the city and ousting it from the streets, and
to recover damages.
Page 258 U. S. 330
MR. JUSTICE McKENNA delivered the opinion of the Court.
The waterworks company is a corporation of New Mexico and was
incorporated to furnish the City of Raton with water. Its system is
constituted of pipes, mains, conduits, sources of water, reservoir
sites, and reservoirs.
Page 258 U. S. 331
(These accessories are to be understood when we use the word
"system.")
The Bankers' Trust Company, alleging itself to be the successor
of the original trustee in a deed of trust or mortgage executed by
the waterworks company to secure an issue of bonds brings this
suit: (1) to enjoin the city from enforcing an ordinance requiring
the removal of the waterworks company's system from the city; (2)
to enjoin the disturbance of the system and to protect the
enjoyment of the waterworks company of its water rights; (3) that
the city be required to pay the trust company such sum as will
compensate the bondholders for the loss and injury to the trust
property through the impairment and breach of the contract through
which, it is alleged, the city gave exclusive rights to the water
company to furnish water to the city.
To justify the relief prayed and to establish the jurisdiction
of the district court (and, we may say, of the appeal to this
Court) the trust company alleged the value of the matter in
controversy exceeds $3,000 -- and involves the Constitution of the
Unites states because the acts of the city produced the results
from which relief is prayed by violating the contract the city
entered into with the waterworks company, and will deprive the
trust company of its property without due process of law in
violation of the Fourteenth Amendment to the Constitution of the
United States. The bill is very long and replete with repetitions,
but, as it constitutes the case, we give a summary of it is
follows:
The Town of Raton (it was then a town) having no water supply,
the Raton Water Company was incorporated and constructed a system
to furnish water to the town. The town grew, and its officials and
citizens induced the incorporation of the Raton Waterworks Company,
and selected its present source of the supply of water. The company
then began and completed its water system,
Page 258 U. S. 332
and subsequently purchased the property and rights of the Raton
Water Company.
On or about July 20, 1891, the waterworks company and the city
entered into a contract evidenced by an ordinance by which the
company agreed to furnish water to the city for a period of 25
years and the city agreed that it would not operate or maintain
waterworks in or near the town for the same period from July 25,
1891, and also agreed to pay a rental for fire hydrants for the
same time at a rate fixed in the ordinance. The ordinance was known
as Ordinance No. 10. It was ratified by a vote of the citizens of
the town and accepted by the company. The company constructed a
system in accordance with the contract and the act of its
incorporation, and has performed its terms and conditions. And it
has become the owner of valuable and extensive water rights,
reservoirs, and reservoir sites.
On February 1, 1905, the waterworks company executed and
delivered to the Manhattan company, and selected its present trust
conveying all of the water company's, property, rights, privileges,
and franchises to secure an issue of bonds to the amount of
$30,000.
"The Bankers' Trust Company has duly succeeded to all the
rights, duties and obligations of the Manhattan Trust Company under
and by virtue of the provisions of said deed of trust, and now is
the duly qualified and acting trustee under said mortgage or deed
of trust."
The bonds are outstanding in the hands of holders in due course
and for value, and none has been paid or otherwise cancelled or
satisfied.
The city in 1912 began steps with intention to impair the
contract between it and the waterworks company, and, after an
election authorizing an issue of bonds for the purpose of
constructing a waterworks system, proceeded, in accordance with an
ordinance passed July 16, 1913, to the construction of a waterworks
system and erected fire
Page 258 U. S. 333
hydrants, prior to the expiration of the company's exclusive
contract, which caused the revenues and income from the latter to
be impaired and reduced to the extent of over $30,000.
The city ordered the company to remove its system, and on August
6, 1915, by an ordinance, repealed Ordinance No. 10, and revoked
all the rights conferred by it, and ordered the company to
immediately remove its system, and the mayor, clerk, and city
attorney were directed to enforce the ordinance, which took effect
five days after its passage, and repealed all other ordinances. The
ordinance was known as Ordinance No.197.
The only source of supply for the city's system is that of the
waterworks company, and the city has taken possession of a portion
of the reservoirs of the company, and such taking is a deprivation
of the property of the company without due process of law. Other
deprivations are alleged, and that the city has occupied with some
of its works, the lands of the company more than two miles from the
exterior boundaries of the city. The only source of income to the
company is the system and lands thus taken.
At the time of filing the original bill, there were pending two
actions between the waterworks company and the city, one of which
was in the United States court and the other in the state court, in
each of which there were matters pertinent and material to the
cause of the complainant in this action. By stipulation, this case
was delayed to await the final determination of those actions, and
the bill here has been amended to present the issues as they may
have been changed or affected by those decisions, and the lapse of
time and events since filing the original bill.
The city moved to dismiss the bill on the ground, among others
(the others will be considered later), that
Page 258 U. S. 334
it did not state facts sufficient to constitute a valid cause of
action in equity. The motion was granted. This appeal attacks that
action. The grounds of the attack seem to have for their principal
basis the Act of New Mexico passed February 24, 1887, ยง 24 of which
authorized the incorporation of water companies to supply water to
towns and cities, with the power to lay mains or pipes in, along,
and upon the public streets or alleys of the town or city, subject
to such regulations as may be provided by the corporate authorities
of the city or town, and to furnish and supply such city and town
or the inhabitants thereof, with water upon such terms and
conditions as may be fixed by such corporations or as may be agreed
to by the consumers and such corporations.
It is contended that the act gave a franchise unlimited in
duration, subject, however, to regulation by the town or city. And
it is further contended, in opposition to a contention of the city,
that a prior act (April 1, 1884), which gave a city the power to
erect waterworks if authorized by a majority of the voters of the
city, or the right to grant private individuals such power for a
term not exceeding 25 years, was repealed by the Act of February
24, 1887.
The contentions of the parties are therefore in sharp contrast.
Appellant contends that the Water Company had a perpetual right in
the city, not subject to interference by the city,
* and though not
exclusive, by the contract with the city evidenced by Ordinance No.
10, it was preserved from competition by the city, and that the Act
of 1887 and the ordinance constituted a contract
Page 258 U. S. 335
with the state, that was inviolable under the Constitution of
the United States, and therefore, invulnerable to Ordinance No.197,
repealing Ordinance No. 10 and ordering the company from the
city.
The opposing contention of the city is that there is no
inharmony between the Act of 1884 and the Act of 1887, that they
have coordinate purpose -- the Act of 1887 giving a company
incorporated under it the capacity to receive a grant from a city
with power of regulation by the city. It is further contended the
water company recognized this, and applied to the city for a grant,
and that, in response to the application, the city enacted
Ordinance No. 10 and exercised the power of regulation conferred by
the Act of 1887 by fixing the duration of the grant at 25 years
from July 25, 1891. It was accepted by the company with that
limitation, and, it is the contention, by the application and
acceptance, it is estopped to deny that its right to furnish water
to the city was derived from the contract with the city.
We are not called upon to review in detail the contentions and
consider their various elements. We concur in the view of the city
that the waterworks company is estopped by its contract with the
city, evidenced by Ordinance No. 10 (which, we may remark, was
ratified by a vote of the citizens of the city), and we construe it
as the city construes it. From what act the power to enact it was
derived we need not pronounce. We may say, however, that the
supreme court of the state, in
Raton Waterworks Co. v. City of
Raton, 22 N.M. 464, said the franchise of the company was
granted by an ordinance of the city, and certainly the bill in this
case shows that its term was fixed at 25 years from July 25, 1891.
The term therefore had expired when the amended bill was filed. The
term of the rights having expired, necessarily the rights granted
expired, and the city cannot be enjoined from requiring the removal
of the company's
Page 258 U. S. 336
system from the streets of the city. Whatever rights of property
appellant may have in its reservoirs and in the land upon which
they are located may be the subject of other actions if the city
asserts rights to them that have not been adjudicated. Some of
them, it may be all of them, have been adjudicated.
One of the suits referred to in our summary of the bill as
pending when the original bill was filed (October 27, 1915) was
brought by the waterworks company against the city in the district
court from which this appeal is taken. From the opinion of the
court, annexed to the city's brief, about the same questions here
presented were there presented, and it was decided that the repeal
of Ordinance No. 10 was justified because of the failure of the
waterworks company to furnish pure and wholesome water. And it was
decided that the ordinance gave the city the power of revocation,
and the power was legally exercised by the enactment of Ordinance
No.197, and it should not be enjoined.
The relief prayed by the company on account of the occupation of
its reservoir sites by the city was denied because of a
condemnation suit in a state court, which was proceeding, it was
said, in due course. And we may observe that, in
City of Raton
v. Raton Ice Co., 26 N.M. 300, it is decided that the city has
power of eminent domain, and can exercise it more than two miles
from the city limits. The case passed on the condemnation of one of
the reservoir sites mentioned in the bill in this case. The
decision seems to be a refutation of some of the contentions of
appellant. The judgment of the district court was appealed to the
circuit court of appeals, and dismissed on stipulation. 232 F.
1020. We do not refer to the case as binding upon appellant here,
but to present clearly that the principal question presented by the
present bill is the right of the trust
Page 258 U. S. 337
company under a prior trust deed covering the rights of the
water company to occupy the streets of the city notwithstanding the
expiration of the time given to the company by Ordinance No. 10.
The time having expired, the conduct of the city prior to its
expiration is not important to consider.
The other grounds of dismissal were: (1) there was misjoinder of
parties defendant in that the waterworks company, the owner of the
system, should have been joined with the trust company as
complainant, and that there was no allegation that it refused to
join as complainant; (2) there was a misjoinder of parties
defendant in that the waterworks company is made defendant when it
should have been made complainant; (3) there was a misjoinder of
causes of action in that the bill set forth at least three
independent causes of action: (a) action for damages; (b) action to
enjoin the enforcement of Ordinance No.197; (c) trespass by the
city upon certain real property of the waterworks company. As to
the latter grounds -- that is, the union of independent causes of
action -- it is not very substantial. They are but the
specifications of the elements of the right of suit -- that is, the
equity that appellant has. In other words, they are the
enumerations of the elements of the asserted aggression upon the
company and in emphasis of it. The other grounds of the motion to
dismiss are untenable.
Old Colony Trust Co. v. City of
Omaha, 230 U. S. 100.
Decree affirmed.
*
City of Wichita v. Old Colony Trust Co., 132 F. 641;
Michigan Telephone Co. v. City of Benton Harbor, 121 Mich.
512;
Wisconsin Telephone Co. v. Oshkosh, 62 Wis. 32;
Northwestern Telephone Exchange v. City of Minneapolis, 81
Minn. 140;
New Castle v. Lake Erie & Western R. Co.,
155 Ind. 18.