187 F. 890 | 8th Cir. | 1911
The New York Trust Company brought suit in the Circuit Court to enjoin the “city and county of Denver” in the state of Colorado and certain of its officers including the members of the Public Utilities Commission from issuing bonds and constructing a system of waterworks, for a decree that certain provisions of the municipal charter are in violation of the Constitution of the United States, for the specific performance of an alleged contract to purchase the existing waterworks system, and for general relief. The Denver Union Water Company, which is the owner of the existing system of waterworks, and the South Platte Canal & Reservoir Company, a subsidiary corporation whose stock is owned by the Water Company, were made parties defendant. The Circuit Court granted orders of temporary injunction on complainant’s bill and a cross-bill of the Water Company. The case is here on appeal from those orders.
The complainant Trust Company and defendants the city and county
When a water company assumes the duty of supplying a rapidly growing city and its inhabitants with water for a period of 20 years,
“See. 11. At the expiration of tlie period of twenty years from and after the date of the passage and approval of the ordinance, in case the city shall then elect so to do, the said works may be purchased by the said city, and in case the parties cannot agree, after such election, npon the price to be paid by the city for the waterworks of the said company, its successors and assigns. then their- fair cash value shall be determined by arbitration, by five disinterested persons, none of whom shall be residents of Denver, two of them to be chosen by the city, two by the company, and the fifth by the four first chosen. * * * and the decision of a majority of said board shall be final and binding upon both i>arties, and upon the payment, or tender of payment. by said city, the said company shall convey to said city all of its property, real or personal, easements, rights and privileges, and thereafter all franchises, rights and privileges which have been at any time theretofore granted said company, its successors or assigns, and which it may then possess, shall cease and be at an end.
“Sec. 12. At the expiration of the said period of twenty years the said city may. at its election, renew the contract hereby made, by ordinance to that effect, for a like period of twenty years, but at a price for hydrant rental 10 per cent. less than mentioned in section 10 hereof, for the period remaining after the ten years after May 1st, 1891, and for successive- periods- of twenty*896 years at the price last aforesaid, as often and as long as the city may choose. * * * ” '
Section 20 provided that all the apparatus owned by the Water Company and composing its plant, then or thereafter placed in or upon the streets, alleys and other public places in the city shall be and remain the sole and absolute property of the Water Company, and it “shall forever be considered and entitled to be in possession thereof, except in case of purchase by said city under the terms of this ordinance, or some agreement between said city and said company, * * * when all rights of whatsoever nature of said company, * * * in and to the subject-matter hereof shall vest in said city.”
“See. 21. While the consideration for the respective agreements of the city and the company are upon each side the several agreements of the other, all of the several grants, contracts and agreements in this ordinance contained are to be deemed independent agreements with the same force and effect as if each section of this ordinance was contained in a separate ordinance by itself.’'
This construction of the contract embodied in the ordinance of 1890 finds confirmation in the subsequent acts of the parties. In 1894 the city annexed the town of South Denver and thereby became the owner of a water system belonging to that' municipality. Finding it was operating it at a loss an ordinance was adopted by the city December 15, 1894, and accepted by the Water Company, whereby the plant was leased to the company at an annual rental for the period ending April 10, 1910, which was the date of the expiration of the principal contract or franchise of 1890. This ordinance required the Water Company to put in new construction for the better equipment and efficiency of the leased property, and provided that at the termination of the lease the city, if it elected to clo so, might purchase the new construction .at the appraised value thereof. But it was also provided, as in the principal ordinance, that the election to purchase should precede the appraisal. If the .city concluded not to purchase the new construction then the Water Company tvas required to purchase what it had leased of the city, and in that event it was io receive a franchise upon the same terms as in the ordinance of 1S90, the rales, restrictions, and limitations io be as ■under the franchise elsewhere in the city. That ordinance is a complement of the one of 1890 to which it made express reference, and was designed to secure a uniform status for the entire city, either municipal ownership of the property of the Water Company or private ownership Under an extended franchise. It shows quite clearly what the parties meant by sections 11 and 12 of the older ordinance contract.
Before proceeding to the question whether the obligation of the contract between the city and the Water Companjr has been impaired by a subsequent law of the state or under its authority, reference may appropriately be made to an appraisal of the property of the Water Company including that controlled by it, under an ordinance adopted October 2, 1907. Pursuant to the terms of that ordinance five appraisers were selected in the manner specified in section 11 of the ordinance of 1890, the city participating. They were disinterested hydraulic and civil engineers of national standing and reputation— one of Boston, Mass., one of Providence, R. I., two of New York City and one of St. Louis, Mo. After a thorough and exhaustive investigation covering about 18 months tliej'- announced a valuation of approximately $14,000,000. It was contemplated by the ordinance under which the appraisal was had that alternative propositions of purchase of the propeiW or renewal of the franchise at rates to be fixed by the board of appraisers should be submitted to the qualified voters of the city, but it was not done for a reason for which neither the city nor the Water Company was responsible, and because of this neither, of them waived any of its rights under the original ordinance
The Constitution of Colorado of 1902 established the municipal corporation which is termed the city, and provided for the election, by the electors thereof, of 21 taxpayers to constitute a charter convention to frame a charter for submission to the people for adoption. A charter was accordingly framed, and adopted in 1904. The Constitution also conferred upon the citizens of the city the exclusive power to amend the charter. In May, 1910, the month following the expiration of the Water Company’s franchise of 1890, an amendment to the charter known as section 264a was adopted at an election. On July 6, 1910, ordinance No. 98 of that year’s series was passed to carry out the terms of the charter amendment. It is contended by both the Trust Company and the Water Company that section 264a of the charter and the ordinance No. 98, both of which are laws within the meaning of the contract clause of the Constitution of the United States, impair the obligation of the contract between the company and the city, and are therefore void.
“Except as in this section provided, the city and county shall never purchase or acquire or exercise any option, right, privilege or power of purchasing or acquiring any water plant or system from any person, persons or corporation except upon a vote of the qualified electors first had and obtained authorizing the same, and wherever in any ordinance or contract the former city of Denver was given the right, or the city and county now has the privilege or power to purchase or acquire any water system or plant or to extend any contract with reference thereto, the term ‘city’ used in any such ordinance or contract shall be taken and held to mean the qualified electors of the city and county and not otherwise.’’
“Upon a vote of the taxpaying electors authorizing the same, as hereinafter .provided, the city and county of Denver shall and it does hereby authorize the creation of an indebtedness in the sum of eight million dollars to provide a municipal water plant or system and everything incidental or necessary thereto for supplying the city and county and its inhabitants with water for all uses and purposes, said indebtedness to be evidenced by its bonds of the par value of eight million dollars, in convenient denominations of not more than one thousand dollars each and bearing four and one-balf per centum interest per annum of such date and in such form and maturing at such times as may be prescribed by said commission. The council shall pass such ordinances as said commission may deem necessary respecting the issuance of said bonds or to the full exercise of all the powers given it, in the form recommended by the commission, and without amendment, and the mayor shall sign the same.”
“If the Denver Union Water' Company shall place in escrow with the Continental Trust Company oí Denver, on or before July 1, 1910, a good add sufficient deed of conveyance from said water company to the city and county of Denver for all the property of every description included and embraced in the appraisement made under ordinance 1G3, series of 1907, free and clear of all liens, incumbrances, claims and demands of every kind and character, accompanied by a valid surrender and release of any and all rights, claims and demands said company or any of its subsidiary, associated or affiliated companies may bave against the city and county or against any of said property,. with direction in writing to deliver the same to said commission in exchange for seven million dollars of said bonds at par, then the commission shall file its acceptance with said trust company and the same shall constitute a binding contract of purchase.”
“In case the Denver Union Water Company shall fail or refuse to fully comply with all the foregoing provisions as to the things to be done and performed by it, then at the special election aforesaid in lieu of the foregoing question, there shall be submitted to the qualified taxpaying electors on the ballot the question of issuing eight million dollars in bonds to be sold or used to construct and put into operation a complete system of waterworks for supplying said city and county and the inhabitants thereof with water for all uses and purposes.”
“Such bonds, or so much thereof as the commission may deem necessary, shall be sold or used by it to construct and put into operation a complete system of waterworks for supplying said city and county and its inhabitants with water for all uses and purposes, and said commission shall forthwith proceed to construct the same. The said commission shall, immediately upon its election, in case the Denver Union Water Company has not accepted the seven million dollars in bonds for its plant as aforesaid, proceed to make a careful investigation of the value of said plant for the uses and purposes of the city and county of Denver and its inhabitants, and also proceed to make*901 a careful estimate of the cost of constructing a complete new water system for the city and county of Denver and the inhabitants thereof and may submit an alternative bond proposition at said special election for the issuance of bonds in such sum as it may deem advisable for the acquisition or construction of a water plant or any part thereof by any of tlie ways within its powers herein mentioned.”
Tlie provision that-if the Water Company did not accept the offer of $7,000,000 in bonds of the city the commission should make an investigation of the value of the company’s property and might submit at the election a proposition for the issuance of bonds “for the acquisition or construction of a water plant or any part thereof by any of the ways within its powers herein specified” includes the employment of the power of eminent domain. The ordinance of 1910 follows the lines of the charter amendment and need not be more particularly noticed save to say that it calls an election and provides for the submission of the various propositions mentioned in the charter amendment.
The Water Company did not deposit a conveyance of its property and accept the offer of $7,000,000 therefor, and it appears from supplemental pleadings filed after the temporary injunctions were, granted that the special election was held and the proposition to issue. $8,000,000 of city bonds “to be sold or used to construct and put into operation a complete system of waterworks for supplying said city' and county and inhabitants thereof with water for all uses and purposes” was carried, it having received a majority of the votes cast thereon. Section 264a and the supplemental ordinance constitute an attempted annulment of all obligation of the city under the ordinance of 1890; and the provisions for a bond issue for a municipal plant are an integral, inseparable part of the plan and purpose. The offer contained in the section of the charter of $7,000,000 for the property of the Water Company and the provision for the construction of a municipal plant in case the company refused to accept that sum constitute a distinct assertion that there will be no election to purchase according to the terms of section 11 of the ordinance of 1890. Thai section required that the city elect to purchase before the matter of price or value should be entered upon. If after the election was made the parties could not agree, there was then to be an appraisal by five disinterested nonresident persons which should “be final and binding upon both parties.” These provisions are important and substantial, and the charter section is adverse to them. In effect that section declares that if the Water Company declines to accept the sum arbitrarily fixed the city shall then proceed to construct a plant of its own; and that means there shall be no purchase according to the contract.
There is also a clear conflict between the charter section and section 12 of the ordinance of 1890. An express contract was embodied in the ordinance that the Water Company should install hydrants upon its mains and supply them with water, and that the city should accept the service and pay the company therefor a specified annual compensation. A renewal of the contract would necessarily embrace a continuance of hydrant service and compensation; but the charter section has a different plan in view. By section 7 of the ordinance of 1890 the Water Company purchased from the city 493 hydrants which the
' “For the period of ten years from and after the 1st flay of May, 1891, tlie sum of $35 per hydrant per annum for all hydrants then set and in operation, and for the remaining period until the right of purchase shall accrue, as mentioned in section 11 hereof, the sum of $25 per hydrant per annum for all hydrants then set and in operation.”
It does not appear how many hydrants in addition to the thousand were installed upon the mains laid, after the first year of the ordinance, nor how many were within the limits of South Denver or afterwards placed there, but it appears that the hydrant rentals were the principal if not the only compensation for the service rendered the city as a corporation. Such rentals are generally an important part of the income of a water company. Section 12 as already indicated provides for a renewal of “the contract hereby made, by ordinance to that effect, for a like period of twenty years but at a price for hydrant rental 10 per cent, less than that mentioned in section 10”; that is to say, 10 per cent, less than the rate which prevailed at the expiration of the contract, April 10, 1910. An extension of the contract as provided by section 12 would necessarily imply a continuation for 20 years of all of the terms of the ordinance except as otherwise specified, and it would include an obligation on the part of the company to furnish the hydrants with water, and on the part of the city to pay the reduced rental for the same. But section 264a of the charter contemplates the construction and operation of “a complete system of waterworks for supplying said city and county and its inhabitants with water for all uses and purposes. This means that the city shall not contract to accept from the company the hydrant service and pay it annually the large sum for hydrant rental.
It is well settled that a contract not to compete will not be implied from the mere grant of a franchise to build and operate, but that rule does not apply to the case at bar. Here, the contract was that when the 20-year period expired, if the city did not b)' ordinance grant the company a renewal embracing an obligation on its part to accept hydrant service as before and pay for the same at the reduced rate, h would take over the entire business bv buying the property. It is no answer to say that the city may buy one complete system of waterworks and also build another, or may renew a contract entailing the annual payment of a large sum for hydrant service and also build a system of its own “for all uses and purposes.” It is impossible to be
Affirmed.
For othur casos seo samo topic & § numble in Deo. & Am. Digs. 1907 to date, & Rep’r Indexes
For other oases see same topic & § number in Deo. & Am. Digs. 1907 to date, & Rep’r Indexes