By an Act of November 28, 1883, the Legislature of Washington
Territory incorporated the City of Walla Walla, conferring upon it,
among other powers, the power to provide a sufficient supply of
water for the city, and the right to permit the use of the city
streets for the purpose of laying pipes for furnishing such supply
for a term not exceeding twenty-five years. The act contained a
further provision fixing the limit of indebtedness of the city at
fifty thousand dollars. The city, under this authority, by contract
granted to the Walla Walla Water Company the right to lay and
maintain water mains, etc., for twenty-five years, reserving to
itself the right to maintain fire hydrants and to flush sewers
during this term, each without charge. The contract further
provided that it was voidable by the city, so far as it required
the payment of money, upon the judgment of a court of competent
jurisdiction whenever there should be a substantial failure of such
supply, or a like failure on the part of the company to perform its
agreements, and that, until the contract should have been so
avoided, the city should not erect, or maintain, or become
interested in other water works. These provisions were accepted by
the Water Company, and were complied with by it, and the contract
was in force when this bill was filed. In 1893, the city
authorities
Page 172 U. S. 2
passed an ordinance to provide for the construction of a system
of water works to supply the city with water, and to issue bonds
for that purpose to the amount of one hundred and sixty thousand
dollars, which ordinance was accepted by the necessary majority of
legal voters. The Water Company then filed its bill to enjoin the
city from creating the proposed water works or from expending city
moneys for that purpose, or from issuing city securities therefor.
To this bill, the city demurred, resting its demurrer upon a want
of jurisdiction, all parties on both sides being citizens of the
Washington.
Held:
(1) That the allegations in the bill raise a question of the
constitutional power of the city to impair the obligations of its
contract with the plaintiffs by adopting the ordinance.
(2) That the grant of a right to supply water to a municipality
and its inhabitants through pipes and mains laid in the streets of
a city, upon condition of the performance of its service by the
grantee, is the grant of a franchise vested in the state (which may
be made by municipal authorities when the right to do so is given
by their charters) in consideration of the performance of a public
service, and, after performance by the grantee, is a contract,
protected by the Constitution of the United States against state
legislation to impair it.
(3) That the plaintiff has no adequate and complete remedy at
law, and the Court has jurisdiction in equity.
(4) That, as the contract was limited to twenty-five years, and
as no attempt was made to grant an exclusive privilege, the city
acted within the strictest limitation of its charter.
(6) That if the contract for the water supply was innocuous in
itself, and was carried out with due regard to the good order of
the city and the health of its inhabitants, the aid of the police
power could not be invoked to abrogate or impair it.
(6) That the stipulation that the city would not erect water
works of its own during the life of the contract did not render it
objectionable.
(7) That the objection that the indebtedness created by the
contract exceeded the amount authorized by the charter was without
merit under the circumstances.
(8) That the act of 1883, being subsequent to the general
statute of 1881, authorizing cities to provide for a supply of
water, was not
in violation of that act.
(9) That the city was bound to procure the nullity of the
contract before the courts before it could treat it as void.
This was a bill in equity filed by the Water Company to enjoin
the City of Walla Walla and its officers from erecting water works
in pursuance of an ordinance of the city to that effect, or from
acquiring any property for the purpose of carrying out such
enterprise, or from expending the moneys
Page 172 U. S. 3
of the city or selling its bonds or other securities for the
purpose of enabling the city to erect such water works.
The facts are substantially as follows: by an Act of the
Territory of Washington, November 28, 1883 (Laws of 1883, 270),
incorporating the City of Walla Walla, it was enacted (section 11)
that the city should have "power . . . to provide . . . a
sufficient supply of water," and by section 10,
"to grant the right to use the streets of said city for the
purpose of laying gas and other pipes intended to furnish the
inhabitants of said city with light or water, to any persons or
association of persons for a term not exceeding twenty-five years,
. . . provided always that none of the rights or privileges herein
granted shall be exclusive, nor prevent the council from granting
the same rights to others."
Other sections are as follows:
"SEC. 11. The City of Walla Walla shall have power to erect and
maintain water works within or without the city limits, or to
authorize the erection of the same, for the purpose of furnishing
the city or the inhabitants thereof with a sufficient supply of
water, . . . and to enact all ordinances and regulations necessary
to carry the power herein conferred into effect; but no water works
shall be erected by the city until a majority of the voters, who
shall be those only who are freeholders in the city, or pay a
property tax therein, on not less than five hundred dollars' worth
of property, shall at a general or special election vote for the
same."
"SEC. 12. Said city is hereby authorized and empowered to
condemn and appropriate so much private property as shall be
necessary for the construction and operation of such water works,
and shall have power to purchase or condemn water works already
erected or which may be erected, and may mortgage or hypothecate
the same to secure to the persons from whom the same may be
purchased the payment of the purchase price thereof."
"
* * * *"
"SEC. 22. The City of Walla Walla shall have power to adopt
proper ordinances for the government of the city, and to carry into
effect the powers given by this act. "
Page 172 U. S. 4
"
* * * *"
"SEC. 23. The City of Walla Walla shall have power to establish
and regulate the fees and compensation of all its officers, except
when otherwise provided, and have such other power and privileges
not here specifically enumerated as are incident to municipal
corporations."
"
* * * *"
"SEC. 24. The power and authority hereby given to the City of
Walla Walla by this act shall be vested in a mayor and council,
together with such other officers as are in this act mentioned, or
may be created under its authority."
"
* * * *"
"SEC. 43. The city council shall possess all the legislative
power granted by this act."
"
* * * *"
"SEC. 103. The rights, powers and duties and liabilities of the
City of Walla Walla and of its several officers shall be those
prescribed in this act, and none others, and this is hereby
declared a public act."
"
* * * *"
"SEC. 105. The limit of indebtedness of the City of Walla Walla
is hereby fixed at fifty thousand dollars."
Pursuant to these sections of the charter, the city council, on
March 15, 1887, passed "An ordinance to secure a supply of water
for the City of Walla Walla," by which it granted, under certain
restrictions, to the water company, for the period of twenty-five
years from the date of the ordinance,
"the right to lay, place and maintain all necessary water mains,
pipes, connections and fitting in all the highways, streets and
alleys of said city, for the purpose of furnishing the inhabitants
thereof with water."
By section 4, the city reserved the right to erect and maintain
as many fire hydrants as it should see fit, and, in case of fire,
that the city should have all reasonable and necessary control of
the water for the extinguishment thereof.
The ordinance also contained the following further
provisions:
"SEC. 5. The City of Walla Walla shall pay to said Walla
Page 172 U. S. 5
Walla Water Company for the matters and things above enumerated,
quarter-yearly, on the first days of July, October, January and
April of each year at the rate of fifteen hundred dollars ($1,500)
per annum, for the period of twenty-five (25) years from and after
the date of the passage of this ordinance, the first quarterly
payment to be made on the first day of October next (October 1,
1887)."
"SEC. 6. The City of Walla Walla shall during said period,
without expense for water, be allowed to flush any sewer or sewers
it may hereafter construct at such time during the day or night as
the water company may determine, and under the direction and
supervision of such officers as the city may from time to time
designate, not oftener than once each week."
"SEC. 7. For all the purposes above enumerated, said Walla Walla
Water Company shall furnish an ample supply of water, and for
domestic purposes, including sprinkling lawns, shall furnish an
ample supply of good wholesome water at reasonable rates, to
consumers at all times during the said period of twenty-five (25)
years, and this contract shall be voidable by the City of Walla
Walla, so far as it requires the payment of money, upon the
judgment of a court of competent jurisdiction, whenever there shall
be a substantial failure of such supply, or a substantial failure
on the part of said company to keep or perform any agreement or
contract on its part, herein specified or in said contract
contained. But accident or reasonable delay shall not be deemed
such failure. And until such contract shall have been so avoided,
the City of Walla Walla shall not erect, maintain or become
interested in any water works except the ones herein referred to,
save as hereinafter specified."
"SEC. 8. Neither the existence of said contract nor the passage
of this ordinance shall be construed to be or be a waiver of or
relinquishment of any right of the city to take, condemn, and pay
for the water rights and works of said or any company at any time,
and in case of such condemnation, the existence of this contract
shall not be taken into consideration in estimating or determining
the value of the said water works of the said Walla Walla Water
Company. "
Page 172 U. S. 6
The water company accepted this ordinance, entered into a formal
contract with the city, and substantially complied with the terms
and conditions of such contract, which has never been avoided by
the city or by the courts, and was still in force at the time the
bill was filed.
After this contract had been in force and the stipulated rentals
paid for about six years, on June 20, 1893, an ordinance was passed
"to provide for the construction of a system of water works" for
the purpose of supplying the city and its inhabitants with water;
to authorize the purchase and condemnation of land for that
purpose, and the issue of bonds to the amount of $160,000 to
provide the necessary funds. Pursuant to the provisions of such
ordinance, an election was held whereby the proposition submitted
by the ordinance was carried by a sufficient majority of the legal
voters.
The answer of the defendants insisted that the contract of the
city with the plaintiff was not a valid and binding contract so far
as concerned the stipulation binding the city not to erect or
maintain, or become interested in, any system of water works other
than that of the plaintiff.
A demurrer to the bill having been overruled, and a preliminary
injunction having been granted pursuant to the prayer of the bill,
the case subsequently went to a hearing upon the pleadings and
proofs, and resulted in a decree perpetuating the injunction. From
this decree defendants appealed directly to this Court, pursuant to
section 5 of the Circuit Court of Appeals Act, allowing such appeal
in any case that involves the construction or application of the
Constitution of the United States.
MR. JUSTICE BROWN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The demurrer to the plaintiff's bill rested principally upon
Page 172 U. S. 7
a want of jurisdiction of the court in certain particulars
hereinafter specified. There was confessedly no diversity of
citizenship, and the case was treated by the court below as one
arising under the Constitution and laws of the United States.
1. The jurisdiction depends specifically upon the allegation in
the bill that defendants insist that the contract of the city with
the plaintiff was not a valid and binding contract, either in
respect to the stipulation binding the city not to erect, maintain,
or become interested in any system of water works other than those
of the plaintiff, or in respect to the stipulation for furnishing
water to the city by the plaintiff, and that, regardless of
plaintiff's rights, the city refuses to be bound by the contract,
and is proposing to borrow money to erect and maintain water works
of its own, and become a competitor with the plaintiff for the
trade and custom of the consumers of water; that the plaintiff is
the owner of property in the City of the value of $125,000, and
pays taxes to the city on the same; that, if the city is permitted
to borrow money and apply the same to the erection of water works,
the indebtedness will become a cloud and burden upon all taxable
property in the city, and that such loan is inequitable, and
imposes upon the taxpayers a large and unnecessary burden; that the
value of plaintiff's property is largely dependent upon the fact of
its having no competition, and that the threatened action of the
city has greatly diminished the value of such property and the
credit of the company, and that it finds itself without the ability
to borrow money to make the necessary additions and repairs to its
property; and, in short, that the proposed action of the city is in
fraud of plaintiff's rights under its contract with the city and
the protection guarantied to it under the Constitution of the
United States.
These allegations, upon their face, raise a question of the
power of the city to impair the obligation of its contract with the
plaintiff by the adoption of the ordinance of June 20, 1893. The
argument of the defendant in this connection is that the action of
the city in contracting with the water company and in passing the
ordinance of 1893 providing for the erection
Page 172 U. S. 8
of water works, was not in the exercise of its sovereignty; that
in these particulars the city was not acting as the agent of the
state, but was merely exercising a power as agent of its citizens,
and representing solely their proprietary interests; that the
council in such cases, as trustee for the citizens, stands in the
relation to them as directors to stockholders in a private
corporation, acting solely as the agent of the citizens, and no
wise as the agent of the state, and therefore that neither the
state nor the city as its agent can be charged either with the
making or the impairing of the original contract; that for these
reasons the Constitution of the United States has no application to
the case, the federal court has no jurisdiction, and the bill, upon
its admitted facts, presents only a violation by a citizen of the
state of its contract with another citizen, and the plaintiff is
bound to resort to the state courts for its remedy.
It may be conceded as a general proposition that there is a
substantial distinction between the acts of a municipality as the
agent of the state, for the preservation of peace and the
protection of persons and property, and its acts as the agent of
its citizens, for the care and improvement of the public property,
and the adaptation of the city for the purposes of residence and
business. Questions respecting this distinction have usually arisen
in actions against the municipality for the negligence of its
officers, in which its liability has been held to turn upon the
question whether the duties of such officers were performed in the
exercise of public functions of merely proprietary powers. It is
sought to carry this distinction a step further and to hold that if
a contract be made by a city in its proprietary capacity, the
question whether such contract has been substantially affected by
the subsequent action of the city does not present one of
impairment by act of the state or its authorized agent, but one of
an ordinary breach of contract by a private party, and hence the
case does not arise under the Constitution and laws of the United
States and the court has no jurisdiction, unless there be the
requisite diversity of citizenship. How far this distinction can be
carried to defeat the jurisdiction of the
Page 172 U. S. 9
Court or the application of the contract clause may admit of
considerable doubt if the contract be authorized by the charter,
but it is sufficient for the purposes of this case to say that this
Court has too often decided for the rule to be now questioned that
the grant of a right to supply gas or water to a municipality and
its inhabitants through pipes and mains laid in the streets, upon
condition of the performance of its service by the grantee, is the
grant of a franchise vested in the state in consideration of the
performance of a public service, and, after performance by the
grantee, is a contract protected by the Constitution of the United
States against state legislation to impair it.
New Orleans Gas
Co. v. Louisiana Light Co.,, 115 U. S. 650,
115 U. S. 660;
New Orleans Water Works Co. v. Rivers, 115 U.
S. 674;
St. Tammany Water Works v. New Orleans Water
Works, 120 U. S. 64;
Crescent City Gas Light Co. v. New Orleans Gas Light Co.,
27 La.Ann. 138, 147.
It is true that, in these cases, the franchise was granted
directly by the state legislature, but it is equally clear that
such franchises may be bestowed upon corporations by the municipal
authorities, provided the right to do so is given by their
charters. State legislatures may not only exercise their
sovereignty directly, but may delegate such portions of it to
inferior legislative bodies as, in their judgment, is desirable for
local purposes. As was said by the Supreme Court of Ohio in
State v. Cincinnati Gas Light & Coke Co., 18 Ohio St.
262, 293:
"And, assuming that such a power [granting franchises to
establish gas works] may be exercised directly, we are not disposed
to doubt that it may also be exercised indirectly, through the
agency of a municipal corporation, clearly invested, for police
purposes, with the necessary authority."
This case is directly in line with those above cited.
See
also Wright v. Nagle, 101 U. S. 791;
Hamilton Gas Light & Coke Co. v. Hamilton,
146 U. S. 258,
146 U. S. 266;
Bacon v. Texas, 163 U. S. 207,
163 U. S. 216;
New Orleans &c. Co. v. New Orleans, 164 U.
S. 471.
The cases relied upon by the appellant are no authority for the
position assumed, that the federal court has no jurisdiction
Page 172 U. S. 10
of a case wherein the charter of a water company is alleged to
have been impaired by subsequent legislation. In several of these
cases, the actions were for negligence in the performance of
certain duties, which the court held to be public or private, as
the case might be.
New Orleans v. Abbagnato, 62 F. 240;
Maxmilian v. Mayor, 62 N.Y. 160;
Western College v.
Cleveland, 12 Ohio St. 375. In
Safety Insulated Wire &
Cable Co. v. Baltimore, 66 F. 140, a contract to put electric
wires underground was held to be for the private advantage of the
city as a legal personality, distinct from considerations connected
with the government of the state at large, and that with reference
to such contracts the city must be regarded as a private
corporation. The contract was held to be one into which the city
could lawfully enter, but no question of jurisdiction was made. In
Illinois Trust &c. Bank v. Arkansas, 76 F. 271, the
power to contract for water works was held to be for the private
benefit of the inhabitants of the city, and that, in the exercise
of these powers, a municipality was governed by the same rules as a
private corporation; but the jurisdiction of the case was
apparently dependent upon citizenship.
We know of no case in which it has been held that an ordinance
alleged to impair a prior contract with a gas or water company did
not create a case under the Constitution and laws of the United
States. Granting that, in respect to the two classes of cases above
mentioned, responsibilities of a somewhat different character are
imposed upon a municipality in the execution of its contracts, our
attention has not been called to an authority where the application
of the constitutional provision as to the impairment of contracts
has been made to turn upon the question whether the contract was
executed by the city in its sovereign or proprietary capacity,
provided the right to make such contract was conferred by the
charter. We do not say that this question might not become a
serious one; that, with respect to a particular contract, the
municipality might not stand in the character of a private
corporation; but the cases wherein the charter of a gas or water
company have been treated as falling within the constitutional
Page 172 U. S. 11
provision are altogether too numerous to be now questioned or
even to justify citation.
2. The argument which attacks the jurisdiction of the Court upon
the ground that the complaint is devoid of facts showing any matter
which vests jurisdiction goes rather to the sufficiency of the
pleading than to the jurisdiction of the Court. Even if this
objection had been sustained, the difficulty could have been easily
obviated by amendment. We think, however, that it sufficiently
appears that, if the city were allowed to erect and maintain
competing water works, the value of those of the plaintiff company
would be materially impaired, if not practically destroyed. The
city might fix such prices as it chose for its water, and might
even furnish it free of charge to its citizens, and raise the funds
for maintaining the works by a general tax. It would be under no
obligation to conduct them for a profit, and the citizens would
naturally take their water where they could procure it cheapest.
The plaintiff, upon the other hand, must carry on its business at a
profit, or the investment becomes a total loss. The question
whether the city should supply itself with water, or contract with
a private corporation to do so, presented itself when the
introduction of water was first proposed, and the city made its
choice not to establish works of its own. Indeed, it expressly
agreed, in contracting with the plaintiff, that until such contract
should be avoided by a substantial failure upon the part of the
company to perform it, the city should not erect, maintain, or
become interested in any water works except the plaintiff's. To
require the plaintiff to aver specifically how the establishment of
competing water works would injure the value of its property or
deprive it of the rent agreed by the city to be paid is to demand
that it should set forth facts of general knowledge, and within the
common observation of men. That which is patent to anyone of
average understanding need not be particularly averred.
3. The objection that a court of equity has no jurisdiction
because the plaintiff has a complete and adequate remedy at law is
equally untenable. Obviously it has no present remedy at law, since
the city has done nothing in violation of its
Page 172 U. S. 12
covenant not to erect competing water works, and the water
company has as yet suffered no damage. It is true that, after the
city shall have gone to the great expense of erecting a plant of
its own and of entering into competition with the plaintiff
company, the latter would doubtless have a remedy at law for breach
of the covenant. In the meantime, great, perhaps irreparable,
damage would have been done to the plaintiff. What the measure of
such damage was would be exceedingly difficult of ascertainment,
and would depend largely upon the question whether the value of the
plaintiff's plant was destroyed or merely impaired. It would be
impossible to say what would be the damage incurred at any
particular moment, since such damage might be more or less
dependent upon whether the competition of the city should
ultimately destroy, or only interfere with, the business of the
plaintiff.
This Court has repeatedly declared in affirmance of the
generally accepted proposition that the remedy at law, in order to
exclude a concurrent remedy at equity, must be as complete, as
practical, and as efficient to the ends of justice and its prompt
administration as the remedy in equity.
Boyce's
Executors v. Grundy, 3 Pet. 210,
28 U. S. 215;
Ins. Co. v.
Railey, 13 Wall. 616,
80 U. S. 621;
Kilbourn v. Sunderland, 130 U. S. 505,
130 U. S. 514;
Tyler v. Savage, 143 U. S. 79,
143 U. S.
95.
Where irreparable injury is threatened, or the damage be of such
a nature that it cannot he adequately compensated by an action at
law, or is such as, from its continuance, to occasion a constantly
recurring grievance, the party is not ousted of his remedy by
injunction. In such a case as this, the remedy will save to one
party or the other a large pecuniary loss -- to the city if it be
obliged to pay to the plaintiff damages occasioned by the
establishment of its competing works; to the plaintiff if it be
adjudged that the city has a right to do so.
But it is further insisted in this connection that, under
section 8 of the contract, the city had the right at any time to
take and condemn the water works of the company, and that in case
of such condemnation, the contract should not be taken into
consideration in estimating the value of the water works,
Page 172 U. S. 13
and hence that if the city elected to establish water works of
its own without condemning those of the plaintiff company, the
value of such water works would furnish the proper measure of
damages in such action. This argument necessarily assumes, however,
that the damages in such action would be the same as in a
proceeding for condemnation. Perhaps, if the plaintiff company were
forced to abandon its works entirely by the competition of the
city, the value of such works might furnish the measure of its
compensation; but it could not be forced to do this, and if the
company elected not to abandon, but to enter into competition with
the city, the damages would have to be estimated by the probable
injury done to the company by such competition. This, as above
indicated, would furnish a most uncertain basis.
4. The case upon the merits depends largely upon the power of
the city under its charter. The ordinance authorizing the contract,
which purports to have been passed in pursuance of this charter,
declared that, until such contract should be avoided by a court of
competent jurisdiction, the city should not erect, maintain, or
become interested in, any water works except the ones established
by the company, while the ordinance of June 20, 1893, provided for
the immediate construction of a system of water works by the city
for the purpose of supplying the city and its inhabitants with
water. Upon the face of the two ordinances, there was a plain
conflict. The latter clearly impaired the obligation of the
former.
The argument of the city is that the council exceeded its powers
in authorizing the contract with the water company for a continuous
supply of water and the payment of rentals for twenty-five years,
and that such contract was specially obnoxious in its stipulation
that the city should not construct water works of its own during
the life of the contract. The several objections to the contract
are specifically stated by counsel for the city in their brief as
follows:
a. The contract creates a monopoly, which, in the
absence of an express grant from the legislature of power so to do,
or such power necessarily implied, is void as in contravention of
public policy.
Page 172 U. S. 14
b. The contract is void as an attempt to contract away
a part of the governmental power of the city council.
c. The contract is void as creating an indebtedness in
excess of the charter limits.
d. The contract is in violation of the express
provision of a general statute of the Territory of Washington.
By section 10 of the city charter, the city is authorized
"to grant the right to use the streets of said city for the
purpose of laying gas and other pipes intended to furnish the
inhabitants of said city with light or water, to any persons or
association of persons for a term not exceeding twenty-five years,
. . . provided always that none of the rights or privileges
hereinafter granted shall be exclusive or prevent the council from
granting the said rights to others,"
and by section 11,
"the City of Walla Walla shall have power to erect and maintain
water works within or without the city limits, or to authorize the
erection of the same for the purpose of furnishing the city, or the
inhabitants thereof, with a sufficient supply of water."
As the contract in question was expressly limited to twenty-five
years, and as no attempt was made to grant an exclusive privilege
to the water company, the city seems to have acted within the
strictest limitation of the charter.
Atlantic City Water Works
v. Atlantic City, 48 N.J.L. 378.
Had the privilege granted been an exclusive one, the contract
might be considered objectionable upon the ground that it created a
monopoly without an express sanction of the legislature to that
effect. It is true that in
City of Brenham v. Brenham Water
Works, 67 Tex. 542, a city ordinance granting to the water
company the right and privilege for the term of twenty-five years
of supplying the city with water, for which the city agreed to pay
an annual rental for each hydrant, the Supreme Court of Texas held
to be the grant of an exclusive privilege to the water company for
the period named. The decision seems to have been rested largely
upon the use of the words "privilege" and "supplying" -- words
which are not found in the contract in this case. Without
expressing an opinion upon the point involved in that case, we are
content to say
Page 172 U. S. 15
that an ordinance granting a right to a water company for
twenty-five years to lay and maintain water pipes for the purpose
of furnishing the inhabitants of a city with water does not, in our
opinion, create a monopoly or prevent the granting of a similar
franchise to another company. Particularly is this so when taken in
connection with a further stipulation that the city shall not erect
water works of its own. This provision is not devoid of an
implication that it was intended to exclude only competition from
itself, and not from other parties whom it might choose to invest
with a similar franchise.
5. The argument that the contract is void as an attempt to
barter away the legislative power of the city council rests upon
the assumption that contracts for supplying a city with water are
within the police power of the city, and may be controlled,
managed, or abrogated at the pleasure of the council. This Court
has doubtless held that the police power is one which remains
constantly under the control of the legislative authority, and that
a city council can neither bind itself nor its successors to
contracts prejudicial to the peace, good order, health, or morals
of its inhabitants; but it is to cases of this class that these
rulings have been confined.
If a contract be objectionable in itself upon these grounds, or
if it become so in its execution, the municipality may, in the
exercise of its police power, regulate the manner in which it may
be carried out, or may abrogate it entirely, upon the principle
that it cannot bind itself to any course of action which shall
prove deleterious to the health or morals of its inhabitants. In
such case, an appeal to the contract clause of the Constitution is
ineffectual. Thus, in
Fertilizing Co. v. Hyde Park,
97 U. S. 659, an
act of the General Assembly of Illinois authorized the fertilizing
company to establish and maintain for fifty years certain chemical
works for the purpose of converting dead animals into agricultural
fertilizers, and to maintain depots in Chicago for the purpose of
receiving and carrying out of the city dead animals and other
animal matter which it might buy or own. Subsequently the charter
of the Village of Hyde Park was revised, and
Page 172 U. S. 16
power given it to define or abate nuisances injurious to the
public health. It was held that under this power, the village had
the right to prohibit the carrying of dead animals or offensive
matter through the streets; that the charter of the company was a
sufficient license until revoked, but was not a contract
guarantying that the company might continue to carry on a business
which had become a nuisance by the growth of population around its
works, or that it should be exempt for fifty years from an exercise
of the police power of the state, citing
Coates v. Mayor, etc.
of New York, 7 Cowen 585.
Substantially the same ruling was made in
Butchers' Union
Co. v. Crescent City &c. Co., 111 U.
S. 746, wherein an act of the Legislature of Louisiana
granting exclusive privileges for maintaining slaughterhouses was
held to be subject to subsequent ordinances of the City of New
Orleans opening to general competition the right to build slaughter
houses.
The same principle has been applied to charters for the
maintenance of lotteries, which, upon grounds of public policy,
have been held to be mere licenses, and subject to abrogation in
the exercise of the police power of the government,
Boyd v.
Alabama, 94 U. S. 645;
Stone v. Mississippi, 101 U. S. 814;
Douglas v. Kentucky, 168 U. S. 488, as
well as to laws regulating the liquor traffic,
Beer Co. v.
Massachusetts, 97 U. S. 25;
Metropolitan Board of Excise v. Barrie, 34 N.Y. 657, and
even laws regulating the inspection of coal oil,
United
States v. De Witt, 9 Wall. 41;
Patterson v.
Kentucky, 97 U. S. 501. In
the latter case, it was held that a person holding a patent under
the laws of the United States for an invention was not protected by
such patent in selling oil condemned by a state inspector as unsafe
for illuminating purposes.
Under this power and the analogous power of taxation, we should
have no doubt that the city council might take such measures as
were necessary or prudent to secure the purity of the water
furnished under the contract of the company, the payment of its
just contributions to the public burdens, and the observance of its
own ordinances respecting the manner in which the pipes and mains
of of the company should be laid through the streets of the city.
New York v.
Squire, 145
Page 172 U. S. 17
U.S. 175;
St. Louis v. Western Union Tel. Co.,
148 U. S. 92;
Missouri v. Murphy, 170 U. S. 78. But
where a contract for a supply of water is innocuous in itself and
is carried out with due regard to the good order of the city and
the health of its inhabitants, the aid of the police power cannot
be invoked to abrogate or impair it.
6. Nor do we think the contract objectionable in its stipulation
that the city would not erect water works of its own during the
life of the contract. There was no attempt made to create a
monopoly by granting an exclusive right to this company, and the
agreement that the city would not erect water works of its own was
accompanied, in section 8 of the contract, with a reservation of a
right to take, condemn, and pay for the water works of the company
at any time during the existence of the contract. Taking sections 7
and 8 together, they amount simply to this: that, if the city
should desire to establish water works of its own, it would do so
by condemning the property of the company and making such changes
in its plant or such additions thereto as it might deem desirable
for the better supply of its inhabitants, but that it would not
enter into a direct competition with the company during the life of
the contract. As such competition would be almost necessarily
ruinous to the company, it was little more than an agreement that
the city would carry out the contract in good faith.
An agreement of this kind was a natural incident to the main
purpose of the contract -- to the power given to the city by its
charter to provide a sufficient supply of water, and to grant the
right to use the streets of the city for the purpose of laying
water pipes to any persons or association of persons for a term not
exceeding twenty-five years. In establishing a system of water
works, the company would necessarily incur a large expense in the
construction of the powerhouse and the laying of its pipes through
the streets, and as the life of the contract was limited to
twenty-five years, it would naturally desire to protect itself from
competition as far as possible, and would have a right to expect
that at least the city would not itself enter into such
competition. It is not
Page 172 U. S. 18
to be supposed that the company would have entered upon this
large undertaking in view of the possibility that, in one of the
sudden changes of public opinion to which all municipalities are
more or less subject, the city might resolve to enter the field
itself -- a field in which it undoubtedly would have become the
master -- and practically extinguish the rights it had already
granted to the company. We think a disclaimer of this kind was
within the fair intendment of the contract, and that a stipulation
to that effect was such a one as the city might lawfully make as an
incident of the principal undertaking.
Cases are not infrequent where, under a general power to cause
the streets of a city to be lighted or to furnish its inhabitants
with a supply of water, without limitation as to time, it has been
held that the city has no right to grant an exclusive franchise for
a period of years; but these cases do not touch upon the question
how far the city, in the exercise of an undoubted power to make a
particular contract, can hedge it about with limitations designed
to do little more than bind the city to carry out the contract in
good faith and with decent regard for the rights of the other
party. The more prominent of these cases are
Minturn v.
Larue, 23 How. 435;
Wright v. Nagle,
101 U. S. 791;
State v. Cincinnati Gas Light & Coke Co., 18 Ohio St.
262;
Logan v. Pyne, 43 Ia. 524;
Jackson Co. Horse
Railroad v. Rapid Transit Railway Co., 24 F. 306;
Norwich
Gas Co. v. Norwich City Gas Co., 25 Conn.19;
Saginaw Gas
Light Co. v. Saginaw, 28 F. 529;
Grand Rapids Electric
Light and Power Co. v. Grand Rapids Edison &c. Gas Co., 33
F. 659;
Gale v. Kalamazoo, 23 Mich. 344. These cases
furnish little or no support to the proposition for which they are
cited.
If, as alleged in the answer, the water company failed to carry
out its contract, and the supply furnished was inadequate for
domestic, sanitary, or fire purposes, and the pressure so far
insufficient that in many parts of the city water could not be
carried above the first story of the buildings, the seventh section
of the contract furnished an adequate and
Page 172 U. S. 19
complete remedy, by an application to the courts to declare the
contract void.
7. The objection that the indebtedness created by this contract
exceeds the amount authorized by the charter raises a serious,
though by no means a novel, question. The objection is founded upon
section 105 of the charter, which enacts "that the limit of
indebtedness of the City of Walla Walla is hereby fixed at fifty
thousand dollars," and upon the allegation in the bill that the
city, at the date of the contract, was indebted in a sum exceeding
$16,000. The city, by section 5 of its ordinance and contract with
the water company, agreed to pay a rental of $1,500 per annum for
twenty-five years, or an aggregate amount of $37,500, which , added
to the existing indebtedness of $16,000, would create a debt
exceeding the limited amount of $50,000.
There is a considerable conflict of authority respecting the
proper construction of such limitations in municipal charters.
There can be no doubt that if the city proposed to purchase
outright or establish a system of water works of its own, the
section would apply, though bonds were issued therefor made payable
in the future.
Buchanan v. Litchfield, 102 U.
S. 278;
Culbertson v. Fulton, 127 Ill. 30;
Coulson v. Portland, Deady 481;
State v. Atlantic
City, 49 N.J.L. 558;
Spilman v. Parkersburg, 35 W.Va.
605;
Beard v. City of Hopkinsville, 95 Ky. 239. There are
also a number of respectable authorities to the effect that the
limitation covers a case where the city agrees to pay a certain sum
per annum if the aggregate amount payable under such agreement
exceeds the amount limited by the charter.
Niles Water Works v.
Niles, 59 Mich. 311;
Humphreys v. Bayonne, 55 N.J.L.
241;
Salem Water Co. v. Salem, 5 Or. 29.
But we think the weight of authority as well as of reason favors
the more liberal construction that a municipal corporation may
contract for a supply of water or gas or a like necessary, and may
stipulate for the payment of an annual rental for the gas or water
furnished each year notwithstanding the aggregate of its rentals
during the life of the contract may exceed the amount of the
indebtedness limited by the charter.
Page 172 U. S. 20
There is a distinction between a debt and a contract for a
future indebtedness to be incurred, provided the contracting party
perform the agreement out of which the debt may arise. There is
also a distinction between the latter case and one where an
absolute debt is created at once, as by the issue of railway bonds
or for the erection of a public improvement, though such debt be
payable in the future by installments. In the one case the
indebtedness in not created until the consideration has been
furnished; in the other, the debt is created at once, the time of
payment being only postponed.
In the case under consideration, the annual rental did not
become an indebtedness within the meaning of the charter until the
water appropriate to that year had been furnished. If the company
had failed to furnish it, the rental would not have been payable at
all, and, while the original contract provided for the creation of
an indebtedness, it was only upon condition that the company
performed its own obligation.
Wood v. Partridge, 11 Mass.
488, 493. A different construction might be disastrous to the
interests of the city, since it is obviously debarred from
purchasing or establishing a plant of its own exceeding in value
the limited amount, and is forced to contract with some company
which is willing to incur the large expense necessary in erecting
water works upon the faith of the city paying its annual rentals.
Smith v. Dedham, 144 Mass. 177;
Crowder v.
Sullivan, 128 Ind. 486;
Saleno v. Neosho, 127 Mo.
627;
Valparaiso v. Gardner, 97 Ind. 1;
New Orleans Gas
Light Co. v. New Orleans, 42 La.Ann. 188;
Merrill Railway
& Lighting Co. v. Merrill, 80 Wis. 358;
Weston v.
Syracuse, 17 N.Y. 110;
East St. Louis v. East St. Louis
Lighting Co., 98 Ill. 415;
Grant v. Davenport, 36 Ia.
396;
Lott v. Waycross, 84 Ga. 681;
Burlington Water
Co. v. Woodward, 49 Ia. 58.
The obvious purpose of limitations of this kind in municipal
charters is to prevent the improvident contracting of debts for
other than the ordinary current expenses of the municipality. It
certainly has no reference to debts incurred for the salaries of
municipal officers, members of the fire and police departments,
school teachers, or other salaried employees, to whom
Page 172 U. S. 21
the city necessarily becomes indebted in the ordinary conduct of
municipal affairs, and for the discharge of which money is annually
raised by taxation. For all purposes necessary to the exercise of
their corporate powers, they are at liberty to make contracts,
regardless of the statutory limitation, provided at least that the
amount to be raised each year does not exceed the indebtedness
allowed by the charter. Among these purposes is the prevention of
fires, the purchase of fire engines, the pay of firemen, and the
supply of water by the payment of annual rentals therefor.
It is true that in the case of
Lake County v. Rollins,
130 U. S. 662, it
was held by this Court that a similar provision in the Constitution
of Colorado was an absolute limitation upon the power to contract
any and all indebtedness, including warrants used for county
expenses, such as for witnesses' and jurors' fees, election costs,
charges for board of prisoners, county treasurer's commissions,
etc.; but the case is readily distinguishable from the one under
consideration. That was a suit against a county upon a large number
of warrants for current expenses, the defense being a want of
authority on the part of the county commissioners to issue warrants
which had been put forth after the limit of indebtedness had been
reached, and even exceeded. They were held to be void. The case is
authority for the proposition that if the annual rentals payable in
this case, with the other expenses, exceeded the limit of
indebtedness, the transaction would be void; but as it appears that
the limit of indebtedness was $50,000, and the amount of the city
debt but $16,000, it is clear that the payment of an annual rental
of but $1,500 would be unobjectionable upon this ground. If such
annual rentals exceeded the limit of indebtedness, a different
question would be presented.
8. Further objection is made to this contract upon the ground
that it is violative of a general statute of the Territory of
Washington enacted December 1, 1881, authorizing cities, etc., to
provide for a supply of water. By the first section of this act,
all cities are authorized to contract for a term not exceeding
twenty-five years with corporations for a supply of water, but
section 2 states that before any such contract
Page 172 U. S. 22
shall be entered into, the terms of the proposed contract shall
be submitted to a vote of the taxpayers at a special election to be
called by the council after a notice of three weeks. As no such
election was held to ratify the contract in this case, it is
insisted that the city council was never authorized to enter into
it.
We are of opinion, however, that the general act of 1881 was, so
far as it applied to the City of Walla Walla, superseded by the
charter of November 28, 1883, which provided that the city might
enter into contracts for the purpose of supplying its inhabitants
with water without any further requirement that an election should
be held to ratify such contract. That no such ratification by the
electors was intended is also evident from section 11 of the
charter, which enacts that no water works shall be
erected
by the city without a vote of a majority of its freeholders. The
fact that such ratification was required where water works were to
be erected, and that no mention was made of a vote where the city
contracted with a corporation for such purpose, clearly evinces an
intent on the part of the legislature to permit the city to make a
contract for a limited term without appealing to the people for
their assent. While the special act is silent with reference to the
ratification of contracts to supply water, we think the maxim
expressio unius est exclusio alterius is applicable, and
that it was clearly the intention of the legislature to supersede
the general law in that particular, leaving the general law to
stand where it is proposed that the city shall erect and maintain
water works of its own.
9. Finally, it is argued that upon the facts of this case, it
clearly appears that the plaintiff company has failed to comply
with its contract to furnish an ample supply of good and wholesome
water, that the pressure in the mains was not sufficient for fire
protection, or for domestic purposes and irrigation of lawns, that
the pressure was not a sufficient supply for satisfactory use in
the second stories of buildings, that several of the city additions
are higher than the reservoir, and cannot be supplied from them,
etc.
We are of opinion, however, that these facts cannot be set
up
Page 172 U. S. 23
in defense to this bill. By the express provision of section 7
of the contract ordinance, it was made voidable by the City of
Walla Walla, so far as it required the payment of money, upon the
judgment of a court of competent jurisdiction whenever there should
be a substantial failure of supply or a failure on the part of the
company to keep or perform any agreement on its part specified in
the contract, and until "so avoided," the city would not erect
water works of its own. Had the city failed to pay its quarterly
rentals, we should have no doubt that, in an action to recover the
same, it might set up the failure of the company to perform its
contract. Perhaps it might itself institute an action for that
purpose, but we do not think it within the power of the city to
constitute itself the judge and to proceed to erect water works of
its own upon the theory that the company had failed to carry out
its contract without, in the language of section 7, obtaining the
judgment of a court of competent jurisdiction to that effect. As
the section provides the manner in which the failure of the company
shall be legally established, we think the city was bound to pursue
this course before taking steps to erect water works of its own. We
have already held that so long as the contract remained in force,
the city had no right to establish water works, but under section 7
of the ordinance and contract, the failure of the company to
furnish a sufficient supply did not, of itself, avoid the contract.
It rendered the contract voidable, not void. The city was bound to
procure its nullity before the courts before it could treat it as
void. Whether, if a sudden emergency arose requiring immediate
action on the part of the city to procure a further supply or to
preserve the health of its inhabitants, a preliminary avoidance of
the contract would be necessary is a question not involved in this
case and upon which we express no opinion. There was no pretense
that the water was impure, and the evidence was conflicting upon
the sufficiency of the supply.
Upon the whole case, we are of opinion that the decree of the
circuit court must be
Affirmed.