Walla Walla City v. Walla Walla Water Co.

after stating the case, delivered the opinion of the court.

The demurrer to the plaintiff’s bill rested principally upon

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 guaranteed 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 erec

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 wei’e performed in the exercise of public functions or merely proprietary powers. It is now sought to carry this distinction a step farther, 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

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 and 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 , 266; Bacon v. Texas, 163 U. S. 207 , 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 jurisdic

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

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 contracts 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 any one 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

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 , 215; Ins. Co. v. Bailey, 13 Wall. 616 , 621; Kilbourn v. Sunderland, 130 U. S. 505 , 514; Tyler v. Savage, 143 U. S. 79 , 95.

Where irreparable injury is threatened, or the damage be of such a nature that it cannot be 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;

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;

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. Law, 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 Texas, 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

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

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 slaughter houses, 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. DeWitt, 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 the company should be laid through the streets of the city. New York v. Squire, 145

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 power house 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

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 Iowa, 524 ; Jackson Co. Horse Railroad v. Rapid Transit Railway Co., 24 Fed. Rep. 306 ; Norwich Gas Co. v. Norwich City Gas Co., 25 Conn. 19 ; Saginaw Gas Light Co. v. Saginaw, 28 Fed. Rep. 529 ; Grand Rapids Electric Light and Power Co. v. Grand Rapids Edison &c. Gas Co., 33 Fed. Rep. 659 ; Gale v. Kalamazoo, 23 Michigan, 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

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, rvas 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 $1500 per annum for twenty-five years, or an aggregate amount of $37,500, Avhich, added to the existing indebtedness of $16,000, would create a debt exceeding the limited amount of $50,000.’

There is á 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 sj^stem of water works of its OAvn, 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 Illinois, 30; Coulson v. Portland, Deady, 481; State v. Atlantic City, 49 N. J. Law, 558 ; Spilman v. Parkersburg, 35 W. Va. 605 ; Beard v. Hopkinsville, 95 Kentucky, 239. There are also a number of respectable authorities to the effect that the limitation covers a case Avhere 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 Michigan, 311; Humphreys v. Bayonne, 55 N. J. Law, 241 ; Salem Water Co. v. Salem, 5 Oregon, 29.

But Ave think the weight of authority, as Avell as of reason, favors the more liberal construction that a municipal corporation may contract for a supply of water or gas or 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.

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 Indiana, 486; Saleno v. Neosho, 127 Missouri, 627; Valparaiso v. Gardner, 97 Indiana, 1; New Orleans Gas Light Co. v. New Orleans, 42 La. Ann. 188 ; Merrill Railway & Lighting Co. v. Merrill, 80 Wisconsin, 358 ; Weston v. Syracuse, 17 N. Y. 110 ; East St. Louis v. East St. Louis Lighting Co., 98 Illinois, 415; Grant v. Davenport, 36 Iowa, 396 ; Lott v. Waycross, 84 Georgia, 681; Burlington Water Co. v. Woodward, 49 Iowa, 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 employés to whom

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 witness and jurors’ fees, election costs, charges for board of prisoners, county treasurers’ 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 defence 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 $1500 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

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 charter1, 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

Upon the whole case, we are of opinion that the decree of the Circuit Court must be

Affirmed.