New Orleans Gas Co. v. Louisiana Light Co.

delivered the opinion of the court. After stating the facts in the language above reported, he continued :

The effect of the consolidation of March 29,1875, is the first question to be considered.

It will be observed that a consolidated company formed under-this act acquires all the rights, privileges, and franchises possessed by its constituent companies.

It is contended — and such was the view taken by the Circuit Court — that, as the original New .Orleans Gas-Light Company had, until April 1, 1875, the exclusive right to manufacture, and distribute gas in New Orleans, and as the like exclusive right of the Crescent City Gas-Light Company did not come into existence until that day, the latter was not, when tlnj act of 1874 was passed, an “existing” business- or manufacturing corporation entitled to the privilege of consolidating with another company. •

In this interpretation of the statute we do not concur. The original and amended charters of the Crescent City Gas-Light Company invested it with powers of an important character,

This brings us to the consideration of questions more difficult. It is contended that the right granted to the Crescent City Gas-Light Company, of manufacturing and distributing illuminating gas, and now enjoyed by the consolidated company, was abrogated, to the extent that it was made exclusive, by that article of the Constitution of Louisiana of 1819, which, while preserving rights, claims, and contracts then existing, provided that “ the monopoly features in the charter of any corporation now existing in this State, save such as may be contained in the charter of railroad companies, are hereby abolished; ” and, that such article is not in violation of the provision of the Constitution of the United States which forbids a State to pass a law impairing the obligation of contracts.

These propositions have received' the careful consideration which their importance demands. ■

It is true, as suggested in argument, that the manufacture and distribution of illuminating gas, by means of pipes or Conduits placed, under legislative authority, in the streets of a town or city, is a business of a public character. Under proper management, the business contributes very materially to the public convenience, while, in the absence of efficient supervision, it may disturb the comfort and endanger the health and property of the community. It also holds important relations to the public through the facilities furnished, by the lighting of streets with gas, for the detection and prevention of crime. An English historian, contrasting the London of his day with the London of the time when its streets, supplied only with oil lamps, were scenes of nightly robberies, says that “ the adventurers in gas-lights did more for the prevention of crime than the government had done since the days of Alfred.” Knight, vol. 1, ch. 21; Macaulay, ch. 3. Municipal corporations constitute a part of the civil government- of the State, and their streets are highways, which it is the province of government by appropriate means to render safe. To that end the lighting of

To the same effect is the decision of the Supreme Court of Louisiana in Crescent City Gas-Light Co. v. New Orleans Gas Light Co., 27 La. Ann. 138 , 147, in which it was said : “ The right to operate gas-workA and to illuminate a city, is not an ancient or usual occupation of citizens generally. No one has

It will therefore be assumed, in the further consideration of this case, that the charter of the Orescent City Gas-Light Company — to whose rights and franchises the present plaintiff has succeeded — so far as it created a corporation with authority to manufacture gas and to distribute the same by means of pipes, mains, and conduits, laid in the streets and other public ways of New Orleans, constituted, to use the language of this court in the case of the Delaware Railroad Tax, 18 Wall. 206 , “ a contract between the State and its corporators, and within the provision of the Constitution prohibiting legislation impairing the obligation of contracts,” and therefore “ equally protected from legislative interference, whether the public be interested in the exercise of its franchise, or the charter be granted for the sole benefit, of its corporators'.” See also Greenwood v. Freight Co., 105 U. S. 13 , 20; New Jersey v. Yard, 95 U. S. 104 , 113.

But it is earnestly insisted that, as the supplying of New Orleans and its inhabitants with gas has relation to the public comfort, and, in some sense, to the public health and the public safety, and, for that reason, is an object to which the police power extends, it was hot competent for one legislature to limit or restrict the power of a subsequent legislature in respect to those subjects. It is, consequently, claimed that the State may at pleasure recall the grant of exclusive privileges to the plaintiff; and that no agreement by her, upon whatever consideration, in reference to a matter connected in any degree Avith the public comfort, the public health or the public safety, will constitute a contract the obligation of which is protected against impairment by the National Constitution. And this position is supposed by counsel to be justified by recent adjudications of this court in which the nature and scope of the police power have been considered.

Illustrations of interference with the rightful authority of the general government by State legislation which was defended upon the ground that it was enacted under the police power, are found in cases where enactments concerning the introduction of foreign paupers, convicts, and diseased persons, were held to be unconstitutional, as conflicting, by their necessary operation and effect, with the paramount authority of Congress to regulate commerce with foreign nations, and among the several States. - In Henderson &c. v. Mayor of New York, 92 U. S. 259 , the court, speaking by Mr. Justice Miller, Avhile declining to decide Avhether in the absence of action by Congress, the States can, or how far they may, by appropriate legislation protect themselves against actual paupers, vagrants, criminals,

That the police power, according to its largest definition, is restricted in its exercise by the National Constitution, is further shown by those cases in which grants of exclusive privileges respecting public highways and bridges over navigable streams have been sustained as contracts, the obligations oi which are fully protected against impairment by State enactments.

In Bridge Proprietors v. The Hoboken Co., 1 Wall. 116 , it was decided íhat a statute of New Jersey empowering certain commissioners to contract for the building of a bridge over the Hackensack River, and providing not only that the “ said contract should be valid on the parties contracting as well as on the State of New Jersey,” but that it should not be lawful “for any person- or persons whatsoever to erect any other bridge over or across the said river for ninety-nine years,” was a contract whose obligation could not be impaired by a law of the State. Mr. Justice Miller, delivering the opinion of the court, after observing that the parties who built the bridges had the positive enactment of the legislature in the .very statute which authorized the contract with them, that no other bridge should be built, and that the prohibition against the erection of other bridges was the necess^^y and only means of securing to them the benefit of their grant, said: “ Without this they would not have invested their money in building the bridges, which were then much needed, and which could not have been built' without some such security for a permanent and sufficient return for the capital so expended. On the faith, of this enactment

In The Binghamton Bridge, 3 Wall. 51 , the question was, whether a charter granted to a company, authorizing it to build and maintain a bridge across a river in New York for the accommodation of the public, in consideration for which it was given a right to take certain tolls, and providing that it should be unlawful for any one to erect a bridge, or establish a ferry, within a distance of two miles on that river, either above or below that bridge, constituted a contract within the meaning of the Constitution. Under authority of a subsequent statute, another company erected a bridge across the same river, within a few rods above the old one, to the injury of the business of the latter. The argument was strenuously pressed that, while the legislature could dispose of all matters properly the subject of bargain, it had no authority to dispose of the right of passing a great river for four miles. The court held that the first company’s charter was a contract between it and the State, within the protection of the Constitution of the United States, and that the charter to the last company was, therefore, null and void. Mr. Justice Davis, delivering the opinion of the court, said, that, if anything was settled by an unbroken chain of decisions in the Federal courts, it was, that an act of incorporation was a contract between the State and the stockholders, “a departure from which now would involve dangers to society that cannot be foreseen, would shock the sense of justice of the country, unhinge its business interests, and weaken, if not destroy, that respect which has always been felt for the judicial department of the government.” p. IS. It was also observed, in language applicable to the present case, in some respects: “ The purposes to be attained are generally beyond the ability of individual enterprise, and can only be accomplished through the aid of associated wealth. This will not be risked unless privileges are given and securities furnished in an act of incorporation. The wants of the public are often so imperative that a duty is imposed on the Government to provide for them; and, as ex

The same principle was declared by the Supreme Court of Louisiana in Pontchartrain Railroad Co. v. Orleans Navigation Co., 15 La. Ann. 404 , 413, where Chief Justice Martin said: “In the same manner as Congress may reward the discoverer of a new invention or mode of constructing roads, by an exclusive privilege, the legislature may reward those who employ their capital and industry in doubtful enterprises, for the construction of a railway between two points, which may be of great utility to the public, though the success of the enterprise may be precarious.” See also Pontchartrain Railroad Co. v. New Orleans Railway Co., 11 La. Ann. 253 ; Pontchartrain Railroad Co. v. Lafayette & Pontchartrain Railroad Co., ubi supra. And in Crescent City Gas-Light Co. v. New Orleans Gas-Light Co., the court said: “As the legislature had the right in 1835 to grant the sole and exclusive privilege to the defendant- company to make and vend gas in New Orleans for forty years, the legislature of 1870 had the same power to confer on the plaintiff the same privilege for fifty years from the termination of the grant to defendant. We therefore, conclude that the grant of the monopoly complained of does not violate the Constitution and is valid.”

Numerous other cases could be cited as establishing the doctrine that the State may by contract restrict the exercise of some of its most important powers. We particularly refer to those in which it "is held that an exemption from taxation, for

If the State can, by contract, restrict the exercise of her power to construct and maintain highways, bridges, and ferries, by granting to a particular corporation the - exclusive right to-construct and operate a railroad within certain lines and. between given points, or to maintain a bridge or operate a ferry over one of her navigable streams within designated limits; if she may restrict the exercise of the power of taxation, by granting exemption from taxation to particular individuals and corporations; it is difficult to perceive upon what ground'We can deny her authority — when not forbidden by her own organic law-’ —in consideration of money to be expended and important services to be rendered for the promotion of the public comfort,.' the public health, or the public safety, to grant a franchise, to be exercised exclusively by those who thus do for the public what the State might undertake to perform either herself or by subordinate municipal agencies.

The former adjudications of this court, upon which counsel mainly rely, do not declare any different doctrine,- or justify the conclusion for which the defendant contends.

In Beer Co. v. Massachusetts, 97 U. S. 25 , 32, ore of the questions considered was, whether the charter of a private corporation, authorizing it to engage in the manufacture of malt liquors, and, as incidental thereto, to dispose of the product, constituted a contract pi’otected against subsequent legislation prohibiting the manufacture of liquor's within the State. The Beer Company claimed the -right, under its charter, to manufacture and sell beer without limit as to time, and without reference to any exigencies in the health or Inoráis of the community requiring such manufacture to cease. • It was decided

The case of Fertilizing Co. v. Hyde Park, 97 U. S. 659 , 663, is much relied on by counsel. But a careful examination will show that it does not militate against the views here expressed. A fertilizing company, having been authorized by its charter to establish and maintain south of a specified line in Cook County, Illinois, chemical- and other works for manufacturing and converting animal matter into an agricultural fertilizer and other chemical products, claimed that its charter constituted a contract the obligation of which was impaired by an ordinance of the village of Hyde Park, where its works were established, prohibiting under penalties the carrying of offal through its streets from Chicago to the company’s place of business. The ordinance was based upon a statute passed after the date of the company’s charter, investing the village authorities with power to define or abate nuisances injurious to the public health, and to regulate, prohibit, or license certain named trades or callings, and “ all establishments and places where nauseous, offensive, or unwholesome business was carried on.” It appeared in proof that the company’s factory was “an unendurable nuisance to the inhabitants for many miles around its location; that the stench was intolerable, producing nausea, discomfort, if not sickness to the people; that it depreciated the value of the property, and was a source of immense annoyance; ” and that the transportation of putrid animal matter by the company through the streets of Hyde Park “ was offensive in a high degree both to sight and smell.” The decision was, that

The same principles underlie the decision in Stone v. Missis sippi, 101 U. S. 814 , in which it was held that any one accepting a grant of a lottery does so “ with the implied understanding that the people, in their sovereign capacity and through their properly constituted agencies, may resume it at any time when the public good shall require, whether it be paid for or not,” the only right acquired by the grantee being “ a suspension of certain governmental rights in his favor, subject to withdrawal at will.” The business, for the protection of which the contract clause of the Constitution was invoked, was declared by the court to be a species of gambling, wrong in its influence, and tending to “ disturb the cheeks and balances of a well-ordered community.” Touching legislation granting the privilege of engaging in business of that character*, the Chief Justice, delivering the opinion of the court, said: “No legislature can bargain away the public health or the public morals. The people themselves cannot do it, much less their servants. The supervision of both these subjects of governmental power is continuing in its nature, and they are to be dealt with as the special exigencies of the moment may require. Government is organized with a view to their preservation, and cannot divest itself of the power to provide for them. For this purpose the largest legislative discretion is allowed, and the discretion cannot be parted with any more than the power itself.” p. 819.

We are referred to Butchers’ Union Co. v. Crescent City Co., 111 U. S. 746 , as authority for the proposition that the State is incapable of making a contract protected by the National Constitution, in reference to any matter within the reach of her police power in its broadest sense. But no such principle is there established. In that case the question was whether

The principle upon which the decisions in Beer Co. v. Massachusetts, Fertilizing Co. v. Hyde Park, Stone v. Mississippi, and Butchers’ Union, Co. v. Crescent City Live-Stock Landing Co., rest, is, that one legislature cannot so limit the discretion of its successors, that they may. not enact such laws as are necessary to protect the public health, or the public morals. That principle, it may be observed, was announced with reference to particular kinds of private business which, in what-; ever manner conducted, were detrimental to the public health or the public morals. It is fairly the result of those cases, that statutory authority given by the State to corporations or individuals to engage in a particular private business attended by such results, while it protects them for the time against public prosecution, does not constitute a contract preventing the withdrawal of such authority, or the granting of it to others.

The present case involves no such considerations. We-have seen, the manufacture of gas, and its distribution. for public and private use by means of pipes laid,- under legislative' authority, in the streets and ways of a city, is' not an ordinary business in which every one may engage,, but is a-franchise belonging to the government, to be granted, for the accomplishment of public objects, to whomsoever,, and upon what, terms, it pleases. It . is a business of a public nature, and meets a public necessity- for which, the State may make provision. It is one which, so far from affecting the public injuriously, has become one of the most- important agencies of civilization, for the promotion of the public , convenience and the public safety.

It is not our province to declare that the legislature unwisely exercised the discretion with which it was invested. Nor are we prepared to hold that the State was incapable — her authority in the premises not being, at the time, limited by her own organic law — of providing for supplying gas to one' of her municipalities and its inhabitants, by means of a valid contract with a private corporation of her own creation. We may repeat here what was said by Chief-Justice Taney in Ohio Life Insurance & Trust Co. v. Debolt, 16 How. 415 , in reference to the authority of a State to limit the exercise of its power of taxation: “But whether such contracts should be made or not is exclusively for the consideration of- the State. It is the exercise of an undoubted power of sovereignty which has not been surrendered by the adoption of the Constitution of the United States, and over which this court has no control. For it can never be maintained in any tribunal in this country

With reference to the contract in this case, it may be said that it is not, in anj^ legal sense, to the prejudice of the public health or the public safety. It is "none the less a contract because the manufacture and distribution of gas, when not subjected to proper supervision, may possibly work injury to the public; for, the grant of exclusive privileges to the plaintiff does not restrict the power of the State, or of the municipal government of New Orleans acting under authority for that purpose, to establish and enforce regulations which are not inconsistent with the essential rights granted by plaintiff’s charter, which may be necessary for the protection of the public agajnst injury whether arising from the want of due care in the conduct of its business, or from an improper use of the streets in laying gas pipes, or from the failure of the grantee to furnish gas .of the required quality .and amount.

Whatever therefore in the manufacture or distribution of gas in the city of New Orleans proves to be injurious to the public health, the public comfort, or the public safety, may notwithstanding the exclusive grant to plaintiff, be prohibited by legislation, or by municipal ordinance passed under legislative authority. It cannot be said with propriety, that to sustain that grant is to obstruct the State in the exercise of her power to provide for the public protection, health, and safety. The article in the State'Constitution of 1879 in relation to monopolies is not in any legal sense an exercise of the police power for the preservation of the public health, or the promotion of the public safety; for, the exclusiveness of a grant has no relation whatever to the public health, or to the public safety. These considerations depend upon the nature of the business or duty to. which the grant relates, and not at all upon the inquiry whether a franchise is exercised by one rather than by many. The monopoly clause only evinces a purpose to reverse the. policy, previously pursued, of granting to private corporations franchises accompanied by exclusive privileges, as a means of accomplishing public objects. That change of policy, although manifested by constitutional enactment, cannot affect contracts which, when entered into, were within the power of the State to make, and which, consequently, were protected against impairment, in respect of their obligation, by the Constitution of the United States. A State can no more impair the obligation of a contract by her organic law than by legislative enactment; for, her constitution is a law within the meaning of the contract clause of the National Constitution. Railroad Co. v.

If, in the judgment of the State, the public interests will be best subserved by an abandonment of the policy of granting.exclusive privileges to corporations, other than railroad companies, in consideration of services to be performed by them for the public, the way is open for the accomplishment of that result, with' respect to corporations whose contracts with the J3tate are unaffected by that change in hér organic law. The rights and franchises which have become vested upon the faith of such contracts can be taken by the public, upon just compensation to the company, under the State’s power of eminent domain. West River Bridge Co. v. Dix, ubi supra; Richmond &c. Railroad Co. v. Louisa Railroad Co., 13 How. 71 , 83; Boston Water-Power Co. v. Boston & Worcester Railroad, 23 Pick. 360 , 393; Boston & Lowell Railroad Co. v. Salem & Lowell Railroad Co., 2 Gray, 1 , 35. In that w;ay the plighted faith of the public will be kept with those who have made large investments upon the assurance by the State that the contract with them will be performed.

The demurrer to the bill of complaint should have been overruled. Upon its averments the complainant was entitled to a decree perpetually restraining the defendants, and each of them, their servants, agents ' and employees, from the manufacture and distribution of gas in New Orleans, by means of pipes, mains, and conduits laid in or along the streets and other public ways and places of that city.

The decree dismissing the bill reversed, amd the cause remcmded for further proceedings in conformity with this opinion.