The provision in sec. 2486 of the Revised. Statutes of Ohio
authorizing cities and villages in that state to erect gas works at
the expense of the municipality or to purchase any gas works
therein do not infringe the contract clause of the Constitution of
the United States when exercised by a municipality within which a
gas company has been authorized, under the provisions of the acts
of May 1, 1852, and March 11, 1853, to lay down pipes and mains in
the public streets and alleys and to supply the inhabitants with
gas and has exercised that power, and with which the municipal
authorities have contracted, by contracts which have expired by
their own limitation, to supply the public streets, lanes and
alleys of the municipality with gas.
A municipal ordinance not passed under legislative authority is
not a law of the state within the meaning of the constitutional
prohibition against state laws impairing the obligation of
contracts.
Public grants susceptible of two constructions mast receive the
one most favorable to the public.
Although a legislative grant to a corporation of special
privileges may be a contract when the language of the statute is so
explicit as to require such a construction, yet if one of the
conditions of the grant be that the legislature may alter or revoke
it, a law altering or revoking the exclusive character of the
granted privileges cannot be regarded as one impairing the
obligation of the contract.
The Court stated the case as follows:
The Hamilton Gaslight and Coke Company invokes against a certain
ordinance of the City of Hamilton, a municipal corporation
Page 146 U. S. 259
of Ohio, the protection of the clause of the Constitution of the
United States which forbids the passage by a state of any law
impairing the obligation of contracts as well as the clause
declaring that no state shall deprive any person of property
without due process of law. By the final judgment, a temporary
injunction granted against the city was dissolved, and the bill
dismissed. 37 F. 832.
The appellant became a corporation on the 6th day of July, 1855,
under the general statute of Ohio of May 1, 1852, providing for the
creation and regulation of incorporated companies. By the
fifty-third section of that statute, it was provided that any
corporation formed under it should have full powers, if a gas
company, to manufacture and sell and to furnish such quantities of
gas "as might be required in the city, town, or village where
located, for public and private buildings, or for other purposes,"
with authority to lay pipes for conducting gas through the streets,
lands, alleys, and squares in such city, town, or village, "with
the consent of the municipal authorities of said city, town, or
village, and under such reasonable regulations as they may
prescribe." The fifty-fourth section gave the municipal authorities
power "to contract with any such corporation for lighting . . . the
streets, lands, squares, and public places in any such city, town,
or village." 1 Swan & Critchfield Stats. 271, 300; 50 Ohio Laws
274.
On the 11th of March, 1853, a supplementary act was passed
authorizing the city council to regulate by ordinance from time to
time the price which gaslight or gaslight and coke companies should
charge for gas furnished to citizens or for public buildings,
streets, lanes, or alleys in such cities, and providing that such
companies should in no event charge more than the price specified
by ordinance of the city council, and that the city council might
by ordinance regulate and fix the price for the rent of meters.
Other sections of the act were in these words:
"SEC. 31. That if such companies shall at any time hereafter be
required by any city council, as aforesaid, to lay pipes and light
any street or streets, and shall refuse or neglect for six months
after being notified by authority of such city council to lay pipes
and light said streets, then and in that case
Page 146 U. S. 260
such city council may lay pipes and erect gas works for the
supply of said streets and all other streets which are not already
lighted, and the said gas companies, gaslight and coke companies,
shall thereafter be forever precluded from using or occupying any
of the streets not already furnished with gas pipes of such
companies, and such city council may have the right to open any
street for the purpose of conveying gas as aforesaid."
"SEC. 32. That a neglect to furnish gas to the citizens or other
consumers of gas, or to any city, by such companies, in conformity
to the preceding section of this act and in accordance with the
prices fixed and established by ordinance of such city council,
from time to time, shall forfeit all rights of such company under
the charter by which it has been established, and any such city
council may hereafter proceed to erect, or by ordinance empower any
person or persons to erect, gas works for the supply of gas to such
city and its citizens, as fully as any gaslight or gaslight and
coke company can now do, and as fully as if such companies had
never been created."
Curwen's Stats. c. 1248, pp. 2153, 2164, 2165; 51 Ohio Laws
360.
Another act was passed April 5, 1854, empowering the city
council to fix from time to time, by ordinance, the minimum price
at which it would require the company to furnish gas for any period
not exceeding ten years, and providing that from and after the
assent of the company to such ordinance, by written acceptance
thereof filed in the clerk's office of the city, it should not be
lawful for the council to require the company to furnish gas to the
citizens, public buildings, public grounds, or public lamps of the
city at a less price during the period of time agreed on, not
exceeding ten years. That act, it was declared, should not operate
to impair or affect any contract theretofore made between any city
and any gaslight or gaslight and coke company. It was further
provided:
"SEC. 2. That the city council of such city may at any time
after the default mentioned in the thirty-first section of the act
to which this is supplementary [c. 1248, p. 2164], by ordinance
permit such gas company to use and occupy the streets of such city
for the purpose of lighting the same and furnishing the gas to
Page 146 U. S. 261
the citizens and public buildings."
"SEC. 3. That any temporary failure to furnish gas shall not
operate as a forfeiture under the thirty-second section of the act
to which this is supplementary unless such failure shall be by
neglect or misconduct of such gaslight or gaslight and coke
company,
provided that such company shall, without
unnecessary delay, repair the injury and continue to supply such
gas."
Curwen's Stats. c. 1248, p. 2164; 52 Ohio Laws 30.
When the municipal laws of Ohio relating to gas companies were
revised and codified in 1869, the above provisions were retained
without material alteration, and now appear in the Revised Statutes
of Ohio. 66 Ohio Laws, Title "Municipal Code," 145, 149, 218, 219,
§§ 415-423; 1 Rev.Stats. Ohio, Title 12, Div. 8, c. 3, p. 637
et seq. 3d ed, 1890.
But this revision and codification contained a provision not
appearing in any previous statute, and now constituting section
2486 of the Revised Statutes of Ohio. That section is in these
words:
"SEC. 2486. The council of any city or village shall have power,
whenever it may be deemed expedient and for the public good, to
erect gas works at the expense of the corporation or to purchase
any gas works already erected therein."
By an ordinance of the City of Hamilton passed July 9, 1855, the
appellant was authorized to place pipes in streets, lanes, alleys,
and public grounds to convey gas for the use of the city and its
inhabitants, the company to have
"the exclusive privilege of laying pipes for carrying gas in
said city, and of putting up pipes in dwellings in connection with
the street pipes for the term of twenty years from the passage of
this ordinance,"
but not to charge for gas furnished the city or its inhabitants
a price greater than, during the period of the contract, was
usually charged in cities of similar size and with like facilities
for the making and furnishing of gas. The company from time to
time, as required by the city, placed lamp posts at the points
indicated by resolutions passed by the council.
Written contracts were made from time to time between the
parties for lighting the city. The first one was dated
Page 146 U. S. 262
April 10, 1862. The last one was dated July 16, 1883, and
expired by its terms January 1, 1889.
On the second day of January, 1889, the council passed a
resolution reciting the termination of the last contract and
declaring that the city no longer desired the company to furnish
gas for lighting streets and public places, and would not after
that date pay for any lighting furnished or attempted to be
furnished by the company, which was forbidden the use of the lamp
posts and other property of the city and notified to remove without
delay any attachment or connection theretofore maintained with the
city's lamp posts and other property. The company, having been
served with a copy of this resolution, protested against the
validity of this action of the city. In a written protest addressed
to the council, it announced that its gas mains, filled with gas,
extended throughout all the streets, etc., as theretofore
designated and required by the city;
"that all said mains are connected with your lamp posts, lamps,
and the burners thereon, and are all ready and fit for the purpose
for which they were constructed and connected, and that this
company is ready now and at all times to supply all the gas needed
for the wants of your city and its inhabitants, and will furnish
the same upon notice from you. This company owns the mains through
which such gas is furnished and distributed for said public and
private lighting; you own the lamp posts, lamps, and burners
connected therewith."
The city, January 4, 1889, passed an ordinance looking to the
issuing (such issuing being first approved by the popular vote) of
bonds for the purpose of itself erecting works to supply the city
and its inhabitants with gas.
The present suit was thereupon commenced by the company. The
relief asked was a decree perpetually enjoining the city from
disconnecting its lamp posts from the company's mains, or from
lighting the city by any means or process other than that of the
plaintiff's gas, as well as from issuing bonds for the purpose of
erecting gas works or for the purpose of providing gas works to
supply gaslight for the streets, lanes, alleys, public buildings
and places, and for private consumers.
Page 146 U. S. 265
MR. JUSTICE HARLAN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The plaintiff's first contention is that there is no statute of
Ohio authorizing any city, in which there are already gas works in
full and complete operation, to erect gas works or to levy a tax
for that purpose. If this were conceded, we should feel obliged --
the plaintiff and defendant both being corporations of Ohio -- to
reverse the judgment and remand the cause with directions to
dismiss the suit for want of jurisdiction in the circuit court. The
jurisdiction of that court
Page 146 U. S. 266
can be sustained only upon the theory that the suit is one
arising under the Constitution of the United States. But the suit
would not be of that character if regarded as one in which the
plaintiff merely sought protection against the violation of the
alleged contract by an ordinance to which the state has not, in any
form, given or attempted to give the force of law. A municipal
ordinance not passed under supposed legislative authority cannot be
regarded as a law of the state within the meaning of the
constitutional prohibition against state laws impairing the
obligations of contracts.
Murray v. Charleston,
96 U. S. 432,
96 U. S. 440;
Williams v. Bruffy, 96 U. S. 176,
96 U. S. 183;
Lehigh Water Co. v. Easton, 121 U.
S. 388;
N.O. Water Works v. Louisiana Sugar
Co., 125 U. S. 18,
125 U. S. 31,
125 U. S. 38. A
suit to prevent the enforcement of such an ordinance would not,
therefore, be one arising under the Constitution of the United
States. We sustain the jurisdiction of the circuit court because it
appears that the defendant grounded its right to enact the
ordinance in question, and to maintain and erect gas works of its
own, upon that section of the Municipal Code of Ohio, adopted in
1869 (now section 2486 of the Revised Statutes), providing that the
city council of any city or village should have power, whenever it
was deemed expedient and for the public good, to erect gas works at
the expense of the corporation or to purchase gas works already
erected therein, which section, the plaintiff contends, if
construed as conferring the authority claimed, impaired the
obligation of its contract previously made with the state and the
city.
What, then, we must inquire, is the scope and effect of section
2486? This precise question has been determined by the Supreme
Court of Ohio in
State v. City of Hamilton, 47 Ohio St.
52, which was an action brought in the name of the state to
determine whether the city had authority to erect its own gas
works. It was there contended, both by the Attorney General and the
Hamilton Gaslight and Coke Company, that by sections 2480 and 2482
of the Revised Statutes (which are the same as sections 31 and 32
of the Act of March 11, 1853), the legislature specified the
conditions under which the council might build gas works; that, in
the absence of those
Page 146 U. S. 267
conditions, the city was without power to do what it proposed to
do, and that such an expression of the legislative will excluded
the right of the city to erect gas works under any circumstances.
But the court said:
"Those two sections designate what refusal or neglect on the
part of gas companies to meet the requirements of law would work a
forfeiture of their rights under their charter, and authorize the
council to lay pipes, and erect gas works, and exclude a gas
company already in operation from occupying any streets not already
furnished with gas pipes of such companies; but such authority is
very different from the general power conferred upon the council by
section 2486 to construct gas works without reference to the manner
in which the existing company may use its franchise."
"Section 2486," the court proceeds,
"in plain language gives the power to the council either to
erect gas works or to purchase such works already erected. The
authority granted is not coupled with any conditions or
contingency, but is to be exercised when the council may deem it
expedient and for the public good. The language is free from
ambiguity. The discretionary power would hardly seem consistent
with the limitation sought to be imposed, that the council can
build gas works only where there are no gas works in the
municipality or where gas companies already organized refuse or
neglect to comply with the requirements of the law as to lighting
or laying pipes, or neglect to furnish gas to citizens. The
interest of the city may demand that a gas company established and
doing business, although complying with all statutes and
ordinances, should not continue to enjoy exclusive possession of
the field of operation."
Again:
"In its present form, section 2486 was passed many years after
the two sections which are reproduced in section 2480 and section
2482. Between the earlier and later statutory provisions we
discover no repugnancy, and the canons of statutory construction do
not require that either should prevail over the other. The
authority given to municipalities by the later section is distinct
from and independent of the power granted by the two antecedent
sections."
Accepting as we do this decision of the highest court of
Page 146 U. S. 268
the state as correctly interpreting the legislative will, and
therefore assuming that the legislature intended by section 2486 to
confer authority upon the City of Hamilton to erect gas works at
its expense whenever deemed by it expedient or for the public good
to do so, the next contention of the plaintiff is that such
legislation is within the constitutional inhibition of state laws
impairing the obligations of contracts. This view is inadmissible.
The statutes in force when the plaintiff became a corporation did
not compel the city to use the gaslight furnished by the plaintiff.
The city was empowered to contract with the company for lighting
streets, lanes, squares, and public places within its limits, but
it was under no legal obligation to make a contract of that
character, although it could regulate by ordinance the price to be
charged for gaslight supplied by the plaintiff and used by the city
or its inhabitants. It may be that the stockholders of the
plaintiff supposed at the time it became incorporated, and when
they made their original investment, that the city would never do
what evidently is contemplated by the ordinance of 1889. And it may
be that the erection and maintenance of gas works by the city at
the public expense, and in competition with the plaintiff, will
ultimately impair, if not destroy, the value of the plaintiff's
works for the purposes for which they were established. But such
considerations cannot control the determination of the legal rights
of the parties. As said by this Court in
Curtis v.
Whitney, 13 Wall. 68,
80 U. S. 70:
"Nor does every statute which affects the value of a contract
impair its obligation. It is one of the contingencies to which
parties look now in making a large class of contracts that they may
be affected in many ways by state and national legislation."
If parties wish to guard against contingencies of that kind,
they must do so by such clear and explicit language as will take
their contracts out of the established rule that public grants
susceptible of two constructions must receive the one most
favorable to the public. Upon this ground it was held in
Stein
v. Bienville Water Supply Co., 141 U. S.
67,
141 U. S. 81,
that
"we are forbidden to hold that a grant under legislative
authority of an exclusive privilege for a term of years of
supplying a municipal
Page 146 U. S. 269
corporation and its people with water drawn by means of a system
of water works from a particular stream or river prevents the state
from granting 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."
What was said in
Turnpike Company v.
State, 3 Wall. 210,
70 U. S. 213,
is quite applicable to the present case. The State of Maryland
incorporated a company with power to construct a turnpike between
Baltimore and Washington, and subsequently incorporated a railroad
company, with authority to construct a railroad between the same
cities, the line of which ran near to and parallel with the
turnpike. One of the questions in the case was whether the last act
impaired the obligation of the contract with the turnpike company,
it appearing that the construction of the railroad had rendered it
impracticable for the company, out of its diminished income, to
maintain the turnpike in proper order. This Court said:
"The difficulty of the argument in behalf of the turnpike
company, and which lies at the foundation of the defense, is that
there is no contract in the charter of the turnpike company that
prohibited the legislature from authorizing the construction of the
rival railroad. No exclusive privileges had been conferred upon it,
either in express terms or by necessary implication, and hence,
whatever may have been the general injurious effects and
consequences to the company from the construction and operation of
the rival road, they are simply misfortunes which may excite our
sympathies, but are not the subject of legal redress."
So, it may be said, in the present case, neither the statutes
under which the plaintiff became a corporation nor in any contract
it had with the city after January 1, 1889, was there any provision
that prevented the state from giving the city authority to erect
and maintain gas works at its own expense or that prevented the
city from executing the power granted by the section of the Code of
1869 to which we have referred.
This conclusion is required by other considerations. By the
Constitution of Ohio, adopted in 1851, it was declared that "no
special privileges or immunities shall ever be granted
Page 146 U. S. 270
that may not be altered, revoked, or repealed by the General
Assembly," that "the General Assembly shall pass no special act
conferring corporate powers," and that "corporations may be formed
under general laws, but all such laws may, from time to time, be
altered or repealed." Sec. 2, Art. 1; Secs. 1, 2, Art. 13. If the
statute under which the plaintiff became incorporated be construed
as giving it the exclusive privilege, so long as it met the
requirements of law, of supplying gaslight to the City of Hamilton
and its inhabitants by means of pipes laid in the public ways,
there is no escape from the conclusion that such a grant, as
respects at least, its exclusive character, was subject to the
power of the legislature, reserved by the state constitution, of
altering or revoking it. This reservation of power to alter or
revoke a grant of special privileges necessarily became a part of
the charter of every corporation formed under the general statute
providing for the formation of corporations. A legislative grant to
a corporation of special privileges, if not forbidden by the
constitution, may be a contract; but where one of the conditions of
the grant is that the legislature may alter or revoke it, a law
altering or revoking, or which has the effect to alter or revoke,
the exclusive character of such privileges cannot be regarded as
one impairing the obligation of the contract, whatever may be the
motive of the legislature or however harshly such legislation may
operate in the particular case upon the corporation or parties
affected by it. The corporation, by accepting the grant subject to
the legislative power so reserved by the constitution, must be held
to have assented to such reservation. These views are supported by
the decisions of this Court. In
Greenwood v. Freight Co.,
105 U. S. 13,
105 U. S. 17,
the question was as to the scope and effect of a clause in a
general statute of Massachusetts providing that every act of
incorporation passed after a named day "shall be subject to
amendment, alteration, or repeal at the pleasure of the
legislature." This Court, referring to that clause, said:
"Such an act may be amended -- that is, it may be changed by
additions to its terms or by qualifications of the same. It may be
altered by the same power, and it may be repealed. What is it may
be
Page 146 U. S. 271
repealed? It is the act of incorporation. It is this organic law
on which the corporate existence of the company depends, which may
be repealed, so that it shall cease to be a law; or the legislature
may adopt the milder course of amending the law in matters which
need amendment, or altering it when it needs substantial change.
All this may be done at the pleasure of the legislature. That body
need give no reason for its action in the matter. The validity of
such action does not depend on the necessity for it, or on the
soundness of the reasons which prompted it."
The words "at the pleasure of the legislature" are not in the
clauses of the Constitution of Ohio, or in the statutes to which we
have referred. But the general reservation of the power to alter,
revoke, or repeal a grant of special privileges necessarily implies
that the power may be exerted at the pleasure of the
legislature.
We perceive no error in the record in respect to the federal
question involved, and the judgment must be
Affirmed.
