Matter of City of Brooklyn

Gray, J.

Upon the facts, as they have been stated, the-legal propositions, which seem to have been urged by the water company and which were passed upon in the court below, in their consideration of the report, as we perceive from the record and the opinions, were, in substance, that the company gained, by incorporation and by its contract with the town of New Lots, certain rights to purvey water to the-town, .which were exclusive and permanent, during the term of the corporate charter, and that the commissioners’ award of compensation should have been based upon a recognition of the inviolable nature of the franchise and the rights of the company. Upon this appeal, a further point is raised as to the constitutionality of the act of 1892; which authorized the city to take the appellant’s property. The argument of the appeal has been made with great ability; the propositions contended for have been pressed with much earnestness and the main question is of high importance; for it concerns the guaranty given to the citizen that he shall be protected in the enjoyment of his property and that it shall not be taken from him, unnecessarily and without a just compensation being made. We have, therefore, given to the question the serious consideration, which it demands.

Upon this appeal the question of the amount of the award is not one we can, or should, review. The act provides for the appointment of live commissioners, “ to ascertain the just compensation to be made for the taking,” (sec. 5); and, upon the application to confirm their report, the Supreme Court is authorized to confirm it, or it may set it aside for irregularity, or for error of law in procedure, or upon the ground that the award is excessive, or is insufficient. (Sec. 10.) An appeal is then permitted to the petitioner, owner, or any aggrieved person, to the General Term of the second department and “ when the report is confirmed, the court shall enter a final order, which shall be binding upon all persons, etc., directing that compensation be made pursuant to the determination of the commissioners, etc.” Notwithstanding a further appeal is authorized to be taken to this court (Chap. 669, Laws 1893), we are confined to the questions of law, which have arisen. We may concede that the evidence would well have justified a larger award, even upon the theory upon which the commissioners proceeded; but having found upon evidence, and their report having been confirmed by the court below, we are concluded as to the amount; if, in arriving at it, they have been guided by no erroneous rule of law. The first and prominent question, which we are called upon to consider, then, is the objection that the commissioners have erred in the legal principles, which they adopted for their guidance in valuing the property to be condemned. The objection does not so much relate to the valuation of the material property, in the lands, buildings and plant of the water company, as to the value affixed to the franchise. The commissioners refused to consider the company’s franchise as exclusive in its nature, and beyond the power of the legislature, or of the local authorities acting under legislation,' to affect through a similar grant to another company and the consequent rivalry. For the company, the argument may be stated to be that its charter was a contract with the state and the town of New Lots, granting to it the right and franchise to supply pure and wholesome water to the town, during the term of its corporate existence, and that, irrespective of the question of whether the state so became a party to a contract, the dealings and proceedings with the town constituted a common-law contract; and that this contract,- however it may be regarded as originating, is protected against any impairment of its obligations by the Constitution of the United States. It is, also, insisted that the contract was with the town as a proprietor and that it conferred the proprietary right to furnish water, which could not be divided, or impaired, during its term. Assuming the correctness of the definition of the capacity in which the town acted, the difficulty with the argument will be to allow its conclusion; whether that be to make the franchise an exclusive one; or to regard the grant by the town as one which makes it part with the whole proprietary right of purveying water within its limits.

Let us look at the statute, under which the water company was incorporated, and the dealings had between the appellant and the town. The act of 1873, and the amendatory acts which had been passed up to 1881, when the appellant’s incorporation took place, constituted a general law of the state, under which any persons might form themselves into water works companies in towns, or villages. As a preliminary step they were, however, required to secure the assent of the particular town, or village, which it was proposed to supply with water, to an application for that purpose. That being secured, the promoters could file their certificate and become a corporate body, with all the extraordinary privileges, rights and immunities, which incorporation confers upon individuals. It is to be observed, with respect to the statute, that, while it permits of incorporation for the business purpose of supplying water, it aims mainly’- at the protection of the community'- and makes it a condition that the promoters shall set forth, not only the general facts relating to the proposed company, but, also, the intended sources of the water supply. The merit of this salutary provision is obvious. There is nothing in the statute, which, either in terms, or by apparent implication, grants to the corporation formed under it an exclusive right to' supply the town or village with water; or which precludes other persons, if they can secure an assent from the authorities to their application, from forming another company to supply water from other sources to the inhabitants of the same town, or village. The statute is general in its operation and in the grant of franchises, subject to the condition mentioned. It simply confers authority and power upon the corporation, when formed, to supply the authorities and the inhabitants of the place with water, at rates to be agreed upon. In its bearing upon the rights of the water company, I think the most to be said is, that it confers a franchise and sanctions the agreement with the municipality. "Whether the charter from the state, or the agreement with the town, be regarded as the contract, in either case, it is certainly entitled to protection against legislation, which would destroy the franchise, or which would, by some alteration of the charter, impair obligations. The company is entitled to have the clause of the Federal Constitution liberally construed, so-as to secure to its franchise every immunity in such respects. It must be remembered that the question here does not turn upon the consideration of any possible destruction of the franchise by the act of the town; but upon the consideration of whether the company enjoyed freedom from competition and the impairment of the value of the franchise by the grant to others of a similar franchise. The commissioners, in awarding compensation for its franchise, separately and as distinct from the cost or value of lands and construction, have ruled that it had no such immunity and the objection goes to the principle of the appraisal. The claim of the appellant is that the commissioners should have appraised the value to it of the franchise, as though it were inviolable; not only by direct action, but by such an impairment as would be caused through granting to others a like franchise to supply water. Of course, it is plain that a franchise of the nature claimed might be of immense value, relatively to the cost, or to the moneys actually put into the enterprise by the promoters,. and that, in this case, if such were the franchise its value should have been stated at far higher figures.

The Dartmouth College case (4 Wheat. 518), while establishing the doctrine that a charter is a contract, cannot help out the general claim of the appellant here. In that case, the legislature attempted to alter the charter of the institution in essential respects ; which concerned the number and mode of appointment of the trustees and the creation of a board of overseers, with power of control over the trustees. The charter was held to be a contract with the crown, to the obligations of which the state of New Hampshire had succeeded, and the legislation was held to be a violation of the clause in the Federal Constitution, forbidding a state from passing any law impairing the obligation of contracts. The principle enunciated has been steadily adhered to, despite criticisms, and is not questioned here; but to say that the legislature of a state, in the absence of a reserved right, cannot pass a law which repeals, or which alters, the charter of a corporation by the annexation of some new terms or conditions, does not require us to say, further, as a necessary, or logical, corollary to the proposition, that a state may not grant a franchise of a similar nature to others, which, in its exercise, may impair the value of the former grant; provided that by the terms of the.former grant the state had not concluded itself from so doing. The distinction in principle is material between legislative action which impairs directly the obligations of the contract by alteration, or otherwise, and legislative action which, because authorizing a competitive or a rival scheme, may impair the value t.o its incorporators of the former corporate project. Any other view would tend to support a right to interfere with, or to control, the power of the state, through its legislature, to exercise its discretion in grants of franchises. We think it is clear upon authority that the statute, under which the appellant was incorporated, being couched in general terms, a charter, secured by compliance with its terms, does not grant to the company an exclusive privilege or franchise to supply water to the town, or village; nor preclude the grant of another charter for a similar franchise. The grantee of the charter takes nothing by implication and the state is not further bound, nor restricted, than can be read in the act. This is in accord with principle and with the authorities. It was said in the case of Proprietors of the Stourbridge Canal v. Wheeley (2 Barn. & Ad. 793), with respect to the plaintiff’s rights, that they were derived from the act of Parliament which authorized the canal, and they could “ claim nothing that is not clearly given them by the act.” Chancellor Kent argued for the view that such grants or franchises might be so extended by implication as to give them due effect, “by excluding all contiguous competition which could be injurious ” through the creation of a rival franchise, or otherwise. (3 Kent’s Com. 459.) He had reasoned for it in previous decisions. (Ogden v. Gibbons, 4 Johns. Ch. *150, *160; Newburgh, etc., Turnpike Co. v. Miller, 5 id. 101.) But this doctrine did not prevail. It was distinctly overruled in The Charles Piver Bridge case (11 Peters, 548); the doctrine of which latter case this court has repeatedly followed in its decisions; notably in the cases of Auburn, etc., Plank Road Co. v. Douglass (9 N. Y. 444); Chenango Bridge Co. v. Binghamton Bridge Co. (27 id. 87); Power v. Village of Athens (99 id. 592); and Syracuse Water Co. v. Syracuse (116 id. 167). The same doctrine was reiterated by the United States Supreme Court, as late as in Stein v. Bienville Water Co. (141 U. S. 67).

In the case of The Charles River Bridge v. Warren Bridge (11 Peters, 548) it appeared that the legislature of Massachusetts had passed an act incorporating the plaintiff for a term of years, with power to erect a bridge and to collect tolls, etc.; and that, subsequently, it incorporated the defendant, with power to erect another bridge, practically alongside of the plaintiff’s bridge, and which, after the expenses of its construction had been reimbursed, should be surrendered to the state. The plaintiff charged that the act incorporating the defendant impaired the obligation of the contract between the state and the plaintiff, and was, therefore, repugnant to the Constitution of the United States. It was claimed, in its behalf, that it had acquired an exclusive right in that line of travel, and that the prior legislative acts necessarily implied that the legislature would not authorize another and a free bridge by the side .of the plaintiff’s; thus rendering its bridge of no value. The case presented the question in a different form to the court, which the Dartmouth College case did not cover; inasmuch as there had been no alteration of the charter of the corporation. The opinion of Chief Justice Taney elaborately discusses the question whether there was such a contract on the part of the state, as implied the agreement on its part not to authorize another bridge; which, from being free and contiguous, rendered the plaintiff’s franchise of no value. It was held that such an agreement could not be implied, by reason of the settled rule of construction that in charters no rights are taken from the public, or given to the corporation, beyond those which the words of the charter, by their natural and proper construction, purport to convey. As there were no words which imported such a contract, none could be implied. Mr. Justice Story dissented from the conclusions reached by the court, in a learned and vigorous opinion ; in which he contended, upon the authority of “ the old law,” for such a liberal construction of legislative grants, as would secure by implication to the grantee the enjoyment of what is granted, and insisted that the grant to the plaintiff carried with it an exclusive franchise to such a reasonable distance upon the river, as that travel would not be diverted by any new bridge. He cited the decision in the Dartmouth College case as apposite in its application to the case before him ; but the argument of that great jurist upon the law and upon the injustice of the other view was without avail to convince a majority of his associates that the legislative grant should be extended by implication. The cases of Stein v. Bienville Water Supply Company (141 U. S. 61) and of Syracuse Water Co. v. City of Syracuse (116 N. Y. 161) are recent expositions of the 'doctrine, which requires a strict construction of public grants of franchises and denies to the grantee anything by implication. Without pursuing further the discussion of the nature of the appellant’s franchise, under its charter, it is our judgment that viewed as a contract, to which the state was a party, there was no grant of a right to^ supply water to the town, which was exclusive in its nature ; or which entitled it to such immunity as would preclude another, or other incorporations for a similar object. The conclusion follows both from the nature of the general act and from the absence of proper words precluding a grant of a similar charter to other applicants.

We, then, come to the consideration of the proceedings had with the town of Mew Lots and 'the contract made subsequently to appellant’s incorporation. The proposition is that the method of incorporation under the statute resulted in a common-law contract between the company and the town, protected for its entire term by constitutional law; by which all the public and joroprietary right to furnish the authorities and inhabitants with water was conferred; and in the undivided and unimpaired exercise of which, during the term of the contract, the company must remain. So far as the proposition involves the construction of the statute, we need not repeat what we have said; and we need only consider what was the. obligation assumed by the town of New Lots, by virtue of the part taken by it in the proceedings for incorporation. A design of the statute, as before suggested, in prescribing an application by the promoters to the town or village authorities, was to furnish some protection to the community, with respect to the establishment of water works companies. It not only is interested in knowing the facts about the proposed corporation, which is to become empowered to construct water works and to lay pipes in the public streets and places but it is vitally concerned in knowing the sources from which it is proposed to distribute water to the inhabitants. The provision for its consent to the application, as a precautionary and politic measure, in the interests of the health of the community, is of undeniable wisdom. But how and why shall we infer that the requirements of the statute, to the effect that the promoters of the water company shall make a detailed application, and that the application shall be granted by the authorities, to be followed up by incorporation by certificate, result in constituting a contract between the parties, which obligates the town authorities not thereafter to contract with other, parties for another supply of water; which, for some adequate reason in the circumstances, might be required ? On its face, the proposition seems to repel. We may concede that the proceedings result in a contract, binding the parties to the observance of all its propositions and entitled to the protection enjoyed by ordinary contracts between individuals ; but we cannot spell out from such a contract, and we are unable to infer from it, regarded in the light of the proceedings in which it was made, an agreement that no like contract should ever be made with other persons, or incorporations. Such an agreement would not be within the delegation of any express powers to the municipality; nor would it be warranted by the letter or the spirit of the proceedings; and the dictates of a sound public policy would forbid its inference. Public policy would discountenance such an agreement, as militating against the public interests and as discounting, unwarrantably, the public needs and emergencies of the community in the future. The dealings with the town authorities amounted to a proposition to form a company for the purpose of supplying water to the inhabitants from certain sources; upon which the authorities acted by voting in acceptance thereof. Under the statute, that warranted the formation of a company and authorized it to proceed with its works and the laying of pipes in the streets. The subsequent formal contract regulated the relations of the contracting parties; fixed the number of miles which the company should pipe; limited the prices to be charged and in other ways arranged for the working of the contract; but we look in vain for an agreement binding the town authorities not to make a like grant or contract to, or with others, if the public needs demand it. The contract is silent on all subjects, except what the company may, or must do. The moral view of the injustice of another similar contract, during the life of the existing contract, pre-supposes political and social conditions rendering a further contract unnecessary. The contract with the appellant was exclusive, only in the sense that no similar one could he made which could infringe its particular property rights, but it did not prevent the town from contracting for a further, or other supply of water. Competition might impair the value of the first contract; but it could not be said that thereby there would be an invasion of the appellant’s franchise, within the constitutional meaning. In our judgment, there was nothing in the contract relations with the town, which insured the company against a possible competition or rivalry in the future by another company, which should be authorized by the town authorities to be formed to purvey water. The cases of Stein v. Bienville Water Supply Co. (141 U. S. 67) and of Syracuse Water Co. v. City of Syracuse (116 N. Y. 167) cannot be slighted as authorities. The complainant, in the latter case, held its franchise under express legislative grant; but that fact cannot affect the application of the decision. The contract here was under legislative sanction and the acceptance of its proposition and the agreement by the town cannot be construed any more strongly in favor of the company, than if the franchise rested solely upon the legislative grant. In the first of the two cases mentioned, the city of Mobile had granted the sole privilege of supplying water from a certain source for a term of years and the agreement was confirmed, subsequently, by an act of the legislature of the state. The defendant was incorporated, afterwards, by an act of the legislature, for the purpose of supplying the city with water from a different source than the one which had been previously designated; and it was held that the previous contract was not impaired, within the constitutional meaning. It was said that, under the rule in the construction of grants by the public, as settled by authority, it could not be held that “ a grant, under legislative authority, of an exclusive privilege, for a term of years, of supplying a municipal corporation and its people with water, drawn by means of a system of water works from a particular stream or river, prevents the state from granting to other persons the privilege of supplying, during the same period, the same corporation and people with water drawn in a like manner from a different stream or river.” In the Syracuse Water Company’s case, it appeared that that company had been incorporated for the purpose of supplying water to the city of Syracuse and its inhabitants and that that was the only means for such supply possessed by the city. It was claimed that its franchise conferred an exclusive right, which would be invaded if the Central City Water Works Company, with which the city of Syracuse had contracted to furnish the city with water, was permitted to exercise the privilege granted by the contract. The latter company was incorporated under the general act and this court, in its Second Division, held that “ the obligation of the contract between the state and the plaintiff, represented by the franchise granted to the latter, was not impaired by the exercise by the defendant company of the privileges granted to it, in the performance of the proposed contract.” Judge Bradley, who delivered the opinion of the court, reviewed the question of the plaintiff’s rights in the light of adjudged cases and held that the grantee in public grants takes nothing, in respect of the exercise of his franchise, by inference. “ Except,” he said, “ so far as they are by the terms of the grant made exclusive, the power is reserved to grant and permit the exercise of competing and rival powers and privileges; however injurious they may be to those taken by the prior grantee.”

The question, which engages our attention, is of great interest and the discussion could be easily prolonged upon the legal principles involved and upon the authorities; but it would not be profitable to continue a discussion, the grounds of which have been gone over, in the one aspect or the other, in the decisions to which reference has been made, as well as in others referred to by counsel; even if the time were at our disposal. The authorities cited by the appellant’s counsel, in support of his position as to the inviolability of the company’s franchise, have not been overlooked. Milhau v. Sharp (27 N. Y. 611); Mayor, etc., v. Second Ave. R. R. Co. (32 id. 272), and People v. O'Brien (111 id. 1) decided that the franchise acquired by a corporation by contract with the municipality was irrepealable and indestructible at the latter’s hands, whether through the action of its officers, or by legislation. We do not assert to the contrary, now, and those cases do not controvert our present views.. In none is it held that the constitutional prohibition against the impairment of contracts by legislation reaches beyond their protection from alteration or repeal, without their consent, and prevents the granting to others of similar franchises, which may impair the value of the prior grant. The legislature may not destroy, or confiscate, the property and franchise of a corporation; but it is not conceivable that the sovereign power can be restricted in its grants of corporate franchises, within constitutional limits, save by its own. express agreement; even though the material consequences may be such as to entail loss, if not ruin, upon existing corporations, through rivalry and competition. Those are risks which, if they cannot be guarded against, are assumed by the grantees. The franchise of the appellant is founded upon the contract which the statute authorized with the town of New Lots. It cannot be taken away, except upon making just compensation; but in estimating its value, in condemnation proceedings, it is not to be regarded as exclusive in its nature. And it is in our view immaterial to the. consideration of the question of the value of the franchise,. whether it was founded upon the contract with the municipality, or in legislative grant. In either case, as no exclusive franchise was granted in terms, none could be inferred.

The appellant further urges that by force of the provisions of the Annexation Act of 1886 (Chap. 335, Laws of 1886), its exclusive right to furnish water was affirmed and estafished. To this view of the act we cannot assent. That act was not intended to and did not operate upon the charter of the appellant. It bore upon the powers of the city of Brooklyn, upon annexation with the new territory, and its purpose was to conditionally protect the company’s franchise in that event. We have defined its effect in the Ziegler case (126 N. Y. 342); when Judge Finch, speaking for. the court, said: “ The plan formulated by the Annexation Act thus accomplished two things; it protected the city, if it chose to purchase, by giving it the power to condemn the company’s franchise as well as its tangible property, which, under the previous acts, it could not have done (Matter of Rochester Water Commissioners, 66 N. Y. 418); and if the city chose not to buy, the act protected the company by excluding during its charter fife the municipal competition.” It was, at the most, a protective measure ; induced by a regard of the possible consequences to the water company, if the municipality of Brooklyn should be disposed to take advantage of the situation upon annexation. It did not grant, and appellant’s counsel do not claim that it granted, any franchise to the company; nor did it enlarge the one possessed. It was simply incidental, as the same counsel say, to the terms and conditions attached to the plan of annexation. But, if the act did not affect the franchise, its provisions were incompetent to make it more extensive and if it constituted, no agreement with the company, which is not and cannot be pretended, then it was not beyond the power of the legislature, subsequently, to repeal the provision and to leave the city free to compete.

In the next place, we will briefly consider the proposition that the Condemnation Act of 1892, which authorized this proceeding, is unconstitutional and void. The important point, in the argument upon this proposition, is that the principle which forbids the taking of a citizen’s property, except . for a necessary public use, requires, for the validity of the legislative act, that the particular public use be designated; whereby the property becomes impressed with a trust for the benefit of the public, and that not only this act is defective in that respect, but it gave no opportunity for a judicial determination of the question of the use. In our judgment, however, while it may have been better legislation to have fixed and limited the particular use, for which the city of Brooklyn was authorized to acquire and hold the appellant’s property, the act is valid. Throughout, it declares the acquisition to be in the public interest and for the public use! Its scheme suggests that the legislature deemed the matter of the water supply of too great public importance to be left to private enterprise and that it should become a part of the great municipal system. The legislature must be presumed to be the best judge of the necessity of public works and improvements ; of how they shall be instituted and of how they should be carried on so as best to subserve public ends. Of the necessity for the exercise of the right of eminent domain, the legislature is the judge; but whether the use, for which the property is to be taken, is a public use, which justifies its appropriation, is a judicial question; upon which the courts are free to decide. The opportunity for the presentation of that question and for obtaining a judicial determination upon it was distinctly provided for in this act. The act, in the first section, declared that the “ public interest requires the acquisition by the city of Brooklyn, for the public' use,” of the properties of the water company and, in the next section, it provided for the presentation of a petition by the city at a Special Term of the Supreme Court; which, after setting forth a description of the properties and franchises and the names of the owners, or of parties having claims, or interests therein, should pray “ that the said city may be authorized to take and hold said property and franchises forever, for the public use, free of all liens and incumbrances, upon making just compensation therefor, etc.” Service of notice of the presentation of this petition was then next provided for and, in the fifth section, after directing the court, upon the petition being presented, to make an order authorizing the city to take and hold the property for the public use, it is further provided that “ any person or corporation having, or claiming any interest whatever in the said property and franchises, shall have a right to be heard in person, or by attorney, upon the said application, etc.” The application referred to plainly means that of the city, upon the presentation of the petition. It can mean nothing else; for that is the only application in question. There was thus afforded the opportunity to raise any objections affecting the right of the city to proceed under the act in the condemnation- of the appellant’s property and to have them judicially heard and determined.

The appellant’s other point as to the unconstitutionality of the act is, that it authorized the condemnation of property, which is already devoted to a public use, without designating any different or larger public use to which it is to be applied. "We do not think that there is force in this objection. While the purpose of the water works company was public in its nature, it cannot be said to be strictly identical with the municipal purpose. A municipal corporation is a public and governmental agency. It holds property for the general benefit, with a larger scope of use. When acquired by the municipality of the city of Brooklyn, the appellant’s property would become a part of a general system, under a single management and conducted essentially as a public work. If in order the better to subserve the public use the appropriation of private property is necessary, even though it be already devoted to a similar use, the right to make it is incident to the legislative power and it is necessary for the general good that the right be conceded. All property within the state is subject to the right of the legislature to appropriate it for a necessary and reasonable public use, upon just compensation being provided to be made therefor, and there can be no distinction in favor of corporations whose franchises and operations impart to them a quasi public character. We think it very apparent -that the public use, to which the appellant’s property is to be devoted by the provisions of the act, does differ and that it is of a higher and wider scope.

None of the other questions, we think, call for a further expression of opinion and our judgment is that the decision of the General Term was correct and that its order should be ' affirmed, with costs.

All concur.

Judgment affirmed.

Case Details

Case Name: Matter of City of Brooklyn

Court Name: New York Court of Appeals

Date Published: Nov 27, 1894

Citation: 62 N.Y. St. Rep. 809

Court Abbreviation: NY