Stein v. Bienville Water Supply Co., 141 U.S. 67 (1891)

U.S. Supreme Court

Stein v. Bienville Water Supply Co., 141 U.S. 67 (1891) Stein v. Bienville Water Supply Company

No. 344

Argued April 28, 1891

Decided May 11, 1891

141 U.S. 67

APPEAL FROM THE CIRCUIT COURT OF THE UNITED

STATES FOR THE SOUTHERN DISTRICT OF ALABAMA

Syllabus

A contract with a municipal corporation whereby the corporation grants to the contractor the sole privilege of supplying the municipality with water from a designated source for a term of years is not impaired, within the meaning of the contract clause of the Constitution, by a grant to another party of a privilege to supply it with water from a different source.

Page 141 U. S. 68

Where a contract with a municipal corporation is susceptible of two meanings, the one restricting and the other extending the powers of the corporation, that construction is to be adopted which works the least harm to the state.

The case is stated in the opinion.

MR. JUSTICE HARLAN delivered the opinion of the Court.

This case presents a question under the clause of the Constitution of the United States relating to the impairment by state legislation of the obligation of contracts.

The appellant, who was the plaintiff below, claims that his testator, Albert Stein, deceased, acquired by valid contract, and to the exclusion of all other persons or corporations, the right and privilege by a system of public works of supplying the City of Mobile and its inhabitants with water, from whatever stream or river drawn, until that city should redeem and purchase the waterworks constructed and maintained by the testator in accordance with the terms of that contract, and that the obligation of such contract was impaired by an act of the Legislature of Alabama, approved February 19, 1883, incorporating the Bienville Water Supply Company. Acts of Alabama, 1882-83, p. 451. In this view the court below did not concur, and it dismissed the bill for want of equity. 34 F. 145.

It will conduce to a clear understanding of the issue between the present parties if we trace the history of the question of water supply for Mobile and its inhabitants, as disclosed in the legislation of Alabama and in the action upon that subject, from time to time, of the constituted authorities of that city. This being done, the inquiry as to whether the above act of 1883 impairs the obligation of the contract that Stein had with the city can be solved without extended discussion.

The first act to which attention is called is that of December 20, 1820, incorporating the Mobile Aqueduct Company.

Page 141 U. S. 69

Its preamble recites that

"it has been represented that it would be of singular advantage to the health and commerce of the City of Mobile to be supplied with water from some of the running streams in its vicinity, which would be attended with too much labor and expense to be effected by laying a tax for the purpose,"

and that

"it has also been represented that certain individuals have agreed to associate themselves together for the purpose of conducting a supply of water from a creek called 'Three-Mile Creek,' otherwise 'Bayou Chatogue,' for the use of the citizens and other persons residing in the City of Mobile."

In consequence of these representations, certain named persons were constituted a corporation under the name of the "Mobile Aqueduct Company," with authority to establish a channel or canal large enough to contain and conduct water in quantities sufficient to supply the citizens and other persons of Mobile. The act provided

"That the said corporation and their successors shall have and enjoy the exclusive right and privilege of conducting and bringing water for the supply of said city for the space of forty years, provided the said corporation or their successors shall, before the expiration of three years from the passage of this act, cause to be conducted the water from the said bayou or creek to the said City of Mobile in the manner hereinbefore proposed, and provided also that after the expiration of the said term of years, the said waterworks shall become the property of the said city, and shall be for the free use of the inhabitants thereof forever."

Acts of Alabama 1820, p. 72.

Nothing was done by this company, and by an act approved December 24, 1824, amendatory of the charter of Mobile, the Act of December 20, 1820, was declared null and void, and all the rights, privileges, and powers granted by it were transferred to and vested in that city for the use and benefit of its inhabitants. Acts of Alabama 1824-25, p. 68.

On the 1st day of December, 1836, an agreement in writing was entered into between the city and one Hitchcock whereby the former granted and leased to the latter, his executors and assigns, for the term of twenty years, the entire use, control, management, rents, profits, and issues of the "Mobile City

Page 141 U. S. 70

Waterworks," embracing the ground at Spring Hill, where the fountain was situated, and the ground along which the pipes passed from the fountain to the city, together with the use of all the wooden and iron pipes and logs then laid down, as well as all the advantages that had accrued to the city from, by, or under the above Act of December 20, 1820, and from all ordinances or resolutions passed by the city relating to said city waterworks. This grant and lease was in consideration of the payment of certain sums, evidenced by Hitchcock's notes, and upon the condition, among others, that he would, within the space of two years from the date of the agreement,

"put the said waterworks in good and sufficient repair, so as to continue during the time hereby granted, and will also keep up the said waterworks in good order as they now are until they shall be so placed in good order and repair, so that the City of Mobile, and the inhabitants thereof, may at all times be supplied with such quantity of good wholesome water as may be procured through the said aqueduct,"

such waterworks to be surrendered to the city in good order and condition at the end of the twenty years, Hitchcock being paid what they actually cost him during that time. That contract also provided that Hitchcock, his executors, administrators, and assigns, should, during said term of twenty years,

"have the exclusive privilege of furnishing to the citizens and inhabitants of the City of Mobile water from the aqueduct or waterworks aforesaid at a sum or price which shall at no time be less"

than certain named rates, and that he shall have

"the power and authority to make such alterations and repairs upon the said works, and to erect such new work, and in such manner, as he may deem necessary and proper, and may at will change the fountain head, and conduct the water from any part of 'Three-Mile Creek,' so called, so that the same be good and wholesome, he, the

Page 141 U. S. 71

said Henry Hitchcock, procuring at his cost, the necessary ground for the reservoir or reservoirs, and that through which the pipes shall pass. And the said mayor and aldermen of Mobile, for themselves and their successors in office, hereby further covenant and agree that they will at the expiration of the said term of twenty years -- he, the said Henry Hitchcock, his executors, administrators, or assigns, delivering up the said 'waterworks' and appurtenances in good order and repair -- pay to him or them the actual cost and expenses which he or they shall have laid out and expended, and which may be put upon the said works by him or them, or any of them, either by reason of repairs, or addition to the present works, as by alterations or improvements made upon the said waterworks during the said term of twenty years above stated."

Subsequently, December 25, 1837, an act was passed incorporating the Mobile Aqueduct Company, to continue until December 1, 1856, and until it should have been "purchased out" by the City of Mobile, during which period it was to have and enjoy all the rights, privileges, and immunities conferred by the above Act of December 20, 1820, except as modified by the Act of December 25, 1837, the former act being revived and declared to be in force during the continuance of the latter one. The fifth section of the Act of December 25, 1837, recognized and confirmed the contract between the city and Hitchcock, and provided that upon its assignment to the new company (which he was authorized to make), the same was to inure to its benefit, and should be subject to all the covenants therein contained to be performed by Hitchcock. That act further provided that the new company "shall be permitted the use of the streets in the City of Mobile, free of charge, for the purpose of laying down pipes for the conveyance of the water;" also

"that so soon after the 1st day of December, 1856, as the said corporation of Mobile shall pay to the said company the cost of the said work, in conformity with their contract, before referred to, with the said Henry Hitchcock, then this act shall cease to operate, and not before, provided that the said company shall have power to collect its debts and wind up its affairs."

Acts of Alabama 1837, p. 76.

Shortly after the passage of the Act of December 25, 1837, the waterworks property again passed into the possession of the City of Mobile, and the building of the system contemplated by that act was abandoned.

Page 141 U. S. 72

On the 26th day of December, 1840, the City of Mobile and Albert Stein, the testator of the plaintiff, entered into a written agreement whereby the city granted to him, his heirs, executors, administrators, and assigns, the

"sole privilege of supplying the City of Mobile with water from the Three-Mile Creek for twenty years from the date of this agreement, as well as all the advantages and benefits which accrue to the said mayor, aldermen, and common council from, by, or under an act of the Legislature of the State of Alabama, entitled 'An act to incorporate an aqueduct company in the City of Mobile,' passed December 20, 1820, and all ordinances and resolutions passed by the said mayor and aldermen of the City of Mobile, under and by virtue of the said act, or by the act of incorporation of the said City of Mobile, and the several acts amendatory thereto which in any way or manner relate to the said 'City Waterworks,' or the right to supply said city with water, as well as all the benefits and advantages which accrue to the said mayor, aldermen, and common council, or the mayor and aldermen of the City of Mobile, from, by, or under an act of the Legislature of the State of Alabama entitled 'An act to incorporate the Mobile Aqueduct Company,' passed December 25, 1837, to have and to hold the above mentioned and described privileges, together with all and singular the appurtenances unto the same belonging, or in any wise appertaining, unto the said Albert Stein, his executors, administrators, and assigns, from the date hereof, for, during, and until the full end and term of twenty years thence next ensuing."

The city covenanted and agreed that it would at the expiration of the said term, Stein delivering up the waterworks and appurtenances in good order and condition, pay him, his executors, administrators, or assigns, their actual value, as determined by six arbitrators, three to be chosen by each side, whose award should be binding, but in case of disagreement, the value to be left to the determination of the Water Committee of Philadelphia, and their decision, communicated to the city, to be conclusive, and the amount so awarded to be paid on the day it should be reported, when the waterworks and

Page 141 U. S. 73

all appurtenances should be delivered over to the corporation of Mobile. The city also covenanted that Stein, his executors, administrators, and assigns,

"shall have quiet possession of the said works, during their erection and after they shall be completed, for the term of twenty years, and for any further time, until the said parties of the first part [the city authorities] or their successors in office shall redeem the said works from the said party of the second part [Stein], his heirs, executors, administrators, or assigns, according to the aforesaid stipulation;"

that Stein, his executors, administrators, and assigns, he and they performing the stipulations of the contract upon their part to be performed,

"shall and may retain quiet possession of the said waterworks for the said term of twenty years without let, molestation, or hindrance of the said mayor, aldermen, and common council, or their successors in office, or any person or persons claiming by, through, or under them, and that the said Stein, his executors, administrators, and assigns, shall, during the said term of twenty years, or any further time, until said works are redeemed as above stipulated, have the exclusive privilege of supplying to the citizens and inhabitants of the City of Mobile water from the waterworks aforesaid at the sum or price which shall at no time exceed"

certain named rates to be paid by the persons receiving the water. This contract specified the maximum rates to be charged to persons receiving water. Stein, his executors, administrators, and assigns, were given power to collect and receive these rates, and

"power and authority to conduct the water from any part of the 'Three-Mile Creek,' so called, so that the same may be good and wholesome, he, the said Albert Stein, his executors, administrators, or assigns, procuring at his or their expense the necessary ground for the reservoir, engine, and pump house, and that through which the pipes shall pass."

By an act of the legislature approved January 7, 1841, entitled

"An act for the promotion of the health and convenience of the City of Mobile by the introduction of a supply of wholesome water into said city, to be used for domestic purposes and the extinguishment of fires,"

this last agreement was fully

Page 141 U. S. 74

confirmed, and all the rights, powers, privileges, and immunities granted by the acts of December 20, 1820, and December 25, 1837, not inconsistent with the terms of such agreement, were granted and confirmed to Stein and his assigns, with full authority to use such of the public roads of the county

"as may be in the direct route between the reservoir and fountain head of the waterworks hereby to be erected, and the City of Mobile, for the purpose of laying the pipes or conducting the water into the city, free from all charge or claim for damage therefor,"

and with power to dispose of or mortgage any of said privileges, rights, and immunities.

The bill alleges and the demurrer admits that Stein, in good faith, set about, and out of his own private fortune, and by borrowing money from others, raised the means to build, and did construct at an outlay and expense of more than $200,000, a system of public waterworks to supply said City of Mobile and the inhabitants thereof with water, in strict conformity to and compliance with the aforesaid contract and agreement; that he and his executor have ever since maintained and kept the same in good order and condition, and in all respects observed the aforesaid contract and agreement; that the said City of Mobile has not redeemed or purchased, or offered to redeem or purchase, said waterworks property, as by said contract it agreed to do, although said period of twenty years has long since expired; that in the year 1879, the legislature of the State of Alabama repealed the charter of the City of Mobile, and immediately thereafter, and at the same session of the legislature, passed an act incorporating the municipal corporation known as the "Port of Mobile," embracing, however, substantially the same territory and people and public property as that included in the City of Mobile; that said municipal corporation called the "Port of Mobile" succeeded to all the rights, powers, and authority possessed by the said City of Mobile, and said port of Mobile recognized the validity, efficacy, and continuance of the above contract of December 26, 1840.

The Bienville Water Supply Company was incorporated by an Act approved February 19, 1883, which was amended by

Page 141 U. S. 75

an Act approved February 14, 1885. The preamble recites that

"Whereas the inhabitants of the municipality known as the 'Port of Mobile,' and the inhabitants of the village of Whistler, in the County of Mobile, are not provided with an adequate supply of water for domestic and municipal purposes, and whereas it is essential to the public health of the citizens of those towns, and to the protection of their property and the public property therein against conflagration, that an abundant supply of water should be introduced and furnished to said citizens, and whereas, a company of citizens of said county propose to undertake the duty of furnishing such supply to said towns for the public use and benefit."

By the sixth section of the act, that company was charged with the duty of introducing into the port of Mobile and the village of Whistler, in Mobile County, such supply of pure water as the domestic, sanitary, and municipal wants thereof might require, and for this purpose it was authorized to construct all needed canals and ditches, and, by pipes and aqueducts as might be found best suited for the purpose, to carry into said towns, by such lines or route as might be found best, such water as was needed, from any point in that county within twenty miles of the port or City of Mobile.

The same act provides, among other things:

"SEC. 9. That the said corporation hereby created is hereby invested with all the rights and powers which by law or contract was vested in the late municipal corporation known as 'the Mayor, Aldermen, and Common Council of the City of Mobile,' by redemption, purchase, or otherwise, to acquire from any and all other persons, corporations, or associations whatever, any and all property and rights by such person or persons, corporations or associations, held under any former contract or law whatever for the introduction and supply of water into the City of Mobile, or the inhabitants thereof, and for such purpose said Bienville Water Supply Company shall be held and taken to be the assignee of the said 'Mayor, Aldermen, and Common Council of the City of Mobile,' and may proceed to assert said rights, and exercise said powers thus assigned the same as could have been done by the municipal corporation aforesaid;

Page 141 U. S. 76

and for this purpose the commissioners of Mobile, appointed under and by virtue of 'An act to vacate and annul the charter and dissolve the corporation of the City of Mobile,' approved February 11, 1879, are hereby authorized, on the demand of said corporation, to release to said corporation all the rights of said late City of Mobile in and to such right of redemption, purchase, or other acquisitions of such property or rights."

"SEC. 10. That said Bienville Water Supply Company be, and is hereby, authorized to acquire by contract with any person or persons, corporation, company, or association, claiming any right to supply the port or City of Mobile, or the inhabitants thereof, with water, such right or rights as he or they may have in the premises, and the property owned and used in connection therewith, and pay therefor such amount of money as may be agreed upon, or such amount as may be agreed upon, in stock of the said supply company, and in case of failure by contract to obtain such right and property, then said corporation, hereby created, may proceed as directed by law, for the condemnation and the taking of private property for public use, to obtain the same for the purpose of the public use and benefit herein declared of furnishing the port of Mobile, and the Village of Whistler, and the inhabitants thereof, with an adequate supply of water for domestic, sanitary, and municipal purposes."

"SEC. 11. That said corporation shall have and enjoy the exclusive right of conducting and bringing water from any point other than Three-Mile Creek in the County of Mobile for the supply of said port of Mobile and Village of Whistler, for the period of twenty years from the time when said water shall have been brought within the limits of the port of Mobile, and be ready for distribution, and supply to the inhabitants of the port of Mobile, and the houses and dwellings within the limits of said port, and till the municipal authorities of said port and village, if so by law authorized, shall purchase the waterworks and property of said corporation as hereinafter provided; but said corporation within four years from the passage of this act, must begin its works, and within six years from date of the passage of this act, must cause

Page 141 U. S. 77

water to be conducted into the port of Mobile from some stream, point, or place as hereinbefore named, and if and when any existing claim to conduct water into Mobile from Three-Mile Creek, or any other point without the limits of said port, has been obtained by this corporation, then said corporation shall have the exclusive right to supply said port and village, and the inhabitants thereof, with water for the period and the term aforesaid."

But nothing in this act shall be construed to prohibit the organization hereafter of any company for the purpose of supplying the City of Mobile, or any other place, with water which does not interfere with the property rights or rights of obtaining water pertaining to this company.

The plaintiff, alleging in his bill that the Bienville Water Supply Company were engaged in laying down pipes and mains for the avowed purpose of conducting water into Mobile to supply that city and its inhabitants, prays that the defendant may be enjoined from laying pipes in, along, or through the streets and alleys of the city for such a purpose, and that it be perpetually enjoined from interfering with the exclusive right and privilege which the plaintiff, representing the estate of Albert Stein, claims of supplying Mobile and its inhabitants with water under the contract of December 26, 1840, until that city shall redeem and purchase at their actual value, the waterworks constructed and maintained by the testator under that contract.

The present case is not controlled by New Orleans Waterworks Company v. Rivers, 115 U. S. 674, and St. Tammany Waterworks v. New Orleans Waterworks, 120 U. S. 64, to which counsel have referred. The first case involved the validity and effect of a contract between the City of New Orleans and the New Orleans Water Company whereby the former, acting under legislative authority, granted to the latter, for the term of fifty years, the exclusive privilege of supplying that city and its inhabitants

"with water from the Mississippi, or any other stream or river, by mains or conduits, and for erecting and constructing any necessary works or engines or machines for that purpose."

Subsequently, under the sanction of a new state constitution, adopted after that

Page 141 U. S. 78

contract was made, the city passed an ordinance allowing Rivers, or the lessee of the St. Charles Hotel, the right of way and privilege to lay a water pipe from the Mississippi River at any point opposite the head of Common or Gravier Streets, through either of those streets, to convey water to that hotel. This Court held the grant to Rivers to be inconsistent with the previous one to the waterworks company, and that the provision in the new Constitution of Louisiana, and the ordinance under which Rivers proceeded, impaired the obligation of the city's contract with the waterworks company. It was said:

"The right to dig up and use the streets and alleys of New Orleans for the purpose of placing pipes and mains to supply the city and its inhabitants with water is a franchise belonging to the state, which she could grant to such persons or corporations, and upon such terms, as she deemed best for the public interests. And as the object to be attained was a public one, for which the state could make provision by legislative enactment, the grant of the franchise could be accompanied with such exclusive privileges to the grantee, in respect of the subject of the grant, as in the judgment of the legislative department would best promote the public health and the public comfort, or the protection of public and private property. Such was the nature of the plaintiff's grant, which, not being at the time prohibited by the constitution of the state, was a contract, the obligation of which cannot be impaired by subsequent legislation or by a change in her organic law,"

the constitutional prohibition upon state laws impairing the obligation of contracts not, however, restricting

"the power of the state to protect the public health, the public morals, or the public safety, as the one or the other may be involved in the execution of such contract,"

because

"rights and privileges arising from contracts with a state are subject to regulations for the protection of the public health, the public morals, and the public safety, in the same sense as are all contracts and all property, whether owned by natural persons or corporations."

In St. Tammany Waterworks v. New Orleans Waterworks, we maintained the contract which the New Orleans Waterworks Company had with the city against another corporation

Page 141 U. S. 79

that claimed the right, under the general laws of Louisiana -- and was about to take active steps in its enforcement -- of bringing water into New Orleans by means of pipes, laid in the streets of that city parallel with those constructed by the New Orleans Waterworks Company, to convey water from Bogue Falaya River, in the Parish of St. Tammany. As the exclusive right of the New Orleans Waterworks Company to supply the City of New Orleans and its inhabitants with water was not restricted to water drawn from the Mississippi, but embraced water from "any other stream or river," the case was held to be controlled by the decision in New Orleans Waterworks Co. v. Rivers.

The present case is materially different. The exclusive right acquired by Stein, under his contract of 1840 with the City of Mobile and confirmed by the Act of January 7, 1841, of supplying that city and its people with water by means of a system or public works did not, in terms or by necessary implication, embrace all streams or rivers or bodies of water from which he could supply water for public use in Mobile. While the obtaining of water for that city was undoubtedly contemplated by the legislature when it passed the first act -- that of 1820 -- the thing done to that end was to incorporate certain persons proposing to bring water to the city from Three-Mile Creek or Bayou Chatogue. And this idea was apparent in the agreement of 1836 with Hitchcock. So, by the agreement with Stein, he, and his heirs, executors, administrators, and assigns acquired the"sole privilege of supplying the City of Mobile with water from the Three-Mile Creek" for a designated term of years, as well as after the expiration of that term, and until he or they should receive from the city the actual value of his waterworks, determined in the mode prescribed by the contract. The specific power and authority given to Stein and his executors, administrators, and assigns by the city and the state was "to conduct the water from any part of the Three-Mile Creek, so called, so that the same be good and wholesome." Why the parties, in making their agreement, specified a particular stream from which Stein was to conduct water into the City of Mobile for public use does

Page 141 U. S. 80

not distinctly appear, and it is not necessary to inquire, for the question before us depends upon the fair and reasonable interpretation of the agreement actually made. The court has no right to enlarge it, even if it believed that the parties themselves would have done so, if the matter had at the time the agreement was signed, been called to their attention. The exclusive privilege granted, and the power and authority conferred in connection therewith, were to conduct water into the city from Three-Mile Creek. The parties, by the agreement, fixed upon that stream as the source of the water to be brought into the city, and the exclusive privilege granted to Stein had reference only to that stream.

The case then is this: the state incorporated the Bienville Water Supply Company and conferred upon it the exclusive right, for a term of years, to supply the port of Mobile with water conducted and brought from any other point than Three-Mile Creek. The plaintiff seeks a perpetual injunction against the exercise of that right, and in support of his claim of an exclusive privilege of supplying water for Mobile and its people, from whatever source drawn, exhibits the contract which granted to Stein the exclusive right to supply that city and people with water brought from Three-Mile Creek for a fixed term of years and until his works were redeemed by the city. The exercise by the defendant of the exclusive right granted to it will not interfere with the only exclusive privilege acquired by the plaintiff under the contract of 1840, confirmed by legislative enactment in 1841 -- namely, to conduct water for the use of Mobile and its people from Three-Mile Creek. If the contract under which the plaintiff claims was doubtful in its meaning, the result would not be different, for while it is the duty of the courts not to defeat the intention of parties to a contract by a strained interpretation of the words employed by them, it is a settled rule of construction that "in grants by the public, nothing passes by implication," and

"if, on a fair reading of the instrument, reasonable doubts arise as to the proper interpretation to be given to it, those doubts are to be solved in favor of the state, and where it is susceptible of two meanings, the one restricting and the other extending the

Page 141 U. S. 81

powers of the corporation, that construction is to be adopted which works the least harm to the state."

The Binghamton Bridge, 3 Wall. 51, 70 U. S. 75. Guided by this rule, in respect to which there is no difference of opinion in the courts of this country, we are forbidden to hold that a grant, under legislative authority, of an exclusive privilege, for a term of years, of supplying a municipal corporation and its people with water drawn by means of a system of waterworks from a particular stream or river prevents the state from ran ting to other persons the privilege of supplying, during the same period, the same corporation and people with water drawn in like manner from a different stream or river.

The relief asked was in effect an injunction perpetually restraining the defendant from supplying the port and people of Mobile with water drawn from rivers or streams other than Three-Mile Creek. That was the object of the suit, and the decree below must be restricted to a denial simply of that relief. Thus restricted, and without deciding any other question, the decree dismissing the bill must be

Affirmed.

MR. JUSTICE BRADLEY did not participate in the decision of this case.