162 F. 225 | 8th Cir. | 1908
This is an appeal from a decree of the Circuit Court for the District of Nebraska dismissing the bill of complaint of the Omaha Water Company to compel the city of Omaha to complete the purchase of complainant’s system of waterworks in accordance with a contract giving the city an option to purchase, the exercise of the option, and an appraisal fixing the price to be paid. The objection of the city is to the appraisal.
The installation of the waterworks was begun in 1880 by a predecessor in title of the Omaha Water Company; the original franchise ordinance having been, adopted in that year in the exercise of power granted by a Nebraska statute of 1879. Section 14 of the ordinance provided that, after the expiration of 20 years, the city should have a right to purchase the works at an appraised valuation “ascertained by the estimate of three engineers,, one to be selected by the city council, one by the waterworks company, and these two to select a third.” Nothing was to be paid for the unexpired franchise of the company. The works were completed in 1883, and on September 4th of that year an ordinance was adopted accepting the works as a full and complete compliance with the obligations to the city. In 1903 the Nebraska Degislature passed an act which in effect required the city to buy or build a system of waterworks. Consequently, on March 2d of that year, it was declared by ordinance to be necessary and expedient for the city “to purchase the system of waterworks operated by the Omaha Water Company,” and that the mayor and council “so elect and determine to purchase and acquire such waterworks by virtue of the rights inuring to said city through the contract between said city and the grantors of said water company, and as authorized and provided by section 14 of ordinance No. 423.” Ordinance No. 423 is the ordinance of 1880. Thereupon the water board of the city, having been recently created by legislative act and invested with authority in the premises, nominated an appraiser, and the nomination was confirmed by the city council. The company then named one and those two selected the third. These men were hydraulic engineers. Two of them lived in Chicago, Ill., and one in Milwaukee, Wis. On July 20, 1903, the appraisers organized by the election of one of their number as chairman and another as secretary. Their report which was submitted July 7, 1906, fixed the aggregate value of the property at 86,263,295.49, a sum barely sufficient for the discharge of the outstanding mortgage bonds issued by the company in-
The city says the appraisal is void for several reasons, the two most important of which are: That the appraiser named on behalf of the city refused to concur, and that the appraisers were guilty of misconduct. It is also claimed that improper items of property and elements of value were included in the appraisal, and that the deed tendered by the company embraced property which the city of Omaha had no power to acquire or operate because it lay beyond its corporate limits. Did the refusal of one of the appraisers to concur defeat the appraisal ? The rule is that, when the subject of the inquiry or controversy is of a private character, all intrusted with the power of ascertainment or decision must agree, unless it is otherwise provided by the interested parties. Hobson v. M’Arthur, 16 Pet. 182, 192, 10 L. Ed. 930. Hut it is equally well settled that when the matter in question is of public concern, all being qualified and having assembled and acted, the finding or decision of a majority is a valid execution of the power. Colombia v. Cauca Co., 190 U. S. 524, 23 Sup. Ct. 704, 47 L. Ed. 1159; Grindley v. Barker, 1 Bos. & P. 229; King v. Beetson, 3 Term, 592; Withnell v. Gartham, 6 Term, 388; Gas Co. v. Wheeling, 8 W. Va. 320; Green v. Miller, 6 Johns. (N. Y.) 39, 5 Am. Dec. 184; Ex parte Rogers, 7 Cow. 526; Downing v. Rugar, 21 Wend. (N. Y.) 178, 34 Am. Dec. 223; Crocker v. Crane, 21 Wend. (N. Y.) 211, 34 Am. Dec. 228; People v. Nichols, 52 N. Y. 478, 11 Am. Rep. 734; The People v. Walker, 23 Barb. (N. Y.) 304; Young v. Buckingham, 5 Ohio, 485; Patterson v. Leavitt, 4 Conn. 50, 10 Am. Dec. 98; Eames v. Eames, 41 N. H. 177, 181. That the first of these rules is not applied where matters of public interest are involved is doubtless due in part to a question of its practical wisdom — to the fact that its application generally leads to continued controversy and litigation. The views of those whose interests are at stake are likely to be adopted and insistently maintained by the appraisers or arbitrators they personally select, and the chance of agreement and final disposition of the matter is not materially enhanced by the submission On the other hand, the rule that is applied in cases of public concern is in harmony with the plan of representative governments which move and act by majorities. Public officials are chosen, laws enacted, rights judicially determined, and business transacted by majorities. The affairs of subordinate divisions of the state, such as counties, townships, and cities are conducted by local boards or bodies whose controlling and effective voice is that of the greater number of tire members. The rule pervades almost every branch of the public service where power is lodged in the hands of several, and it is a distinctive
It is not improper to observe that until the report was made the three appraisers were regarded by all parties as composing a board or body invested with powers in their aggregate capacity. Irnme-
The case of Gas Co. v. Wheeling, 8 W. Va. 320, is quite similar to the one at bar. The act incorporating the Wheeling Gas Company contained a provision that at the expiration of 20 years the city might, if it so elected, purchase the gas works at a price to be agreed on or to be ascertained “by the award in writing of three persons to be chosen, the first by the directors of said company, the second by the council of said city and the third by the two thus chosen.” The city having elected to purchase and there being a disagreement as to the price, the. appraisers or arbitrators were selected. All three of them participated, in the investigation, and at the conclusion two of them signed the .awai'd. The third merely 'expressed thereon his dissent. The city tendered the price fixed, the company refused it, the city deposited the money in bank to the order of the company, and took possession of the works. In an action by the -company to regain possession, it was held among other things that the matter was of public interest and the award was valid. In People v. Nichols, 52 N. Y. 478, 11 Am. Rep. 734, there was an appropriation by the state for the purchase from a private person of certain relics, to be paid only upon the certificate of three persons named in the act that the i-elics were in their opinion genuine, and that it was desirable in their judgment that they be placed in the museum of the state library. The parties named having met and inspected the relics, two of them signed the certificate and recited therein that the third refused. Justice Peck-ham, in delivering the opinion of the court, said: .
“In my judgment, by the well-settled rule at common law, this power would have been legally exercised by the signature of two of the three to the certificate when all three assembled to pass upon the question, The only answer specially urged against this rule is that it solely applies ‘to matters of public concern’; that ‘as to matters of private concern,’ as this is claimed to be, all must join to make a valid execution of the power. * * * Then is this a matter of private concern? We are all of opinion it is not. The cases referred to by the respondent cannot fail to establish his doctrine. They hold that arbitrators, to determine controversies between individuals, are engaged in matters of private concern. But, where appraisers act between individuals and the state, it is a matter of ‘public concern,’ and a majority act as the whole, when all have met. In the case at bar the Legislature desired to purchase, upon certain terms, what they regarded as of interest and value to the public. It was a question between an individual and the state. This would seem, then, to be plainly matter of public concern. This certifi*231 cate, therefore, would have been legally given at common law when signed by a majority.”
Colombia v. Cauca Co., 190 U. S. 524, 23 Sup. Ct. 704, 47 L. Ed. 1159, was a bill by the Republic of Colombia to set aside an award of a special commission settling in favor of the Cauca Company a controversy over a concession to build and operate a railroad, and accompanying land grants, etc., and a claim that the concession and grants had been forfeited. The commission was composed of three members, one selected by each party to the controversy and the third by the Secretary of State of this country and the Colombian minister at Washington. A few days before the expiration of the time limited for their action, and when little remained to be done except to sign the award, the Colombian commissioner resigned and the other two made the award. Colombia said the award was void because made by but two of the three commissioners. Several reasons were given by the Supreme Court for sustaining the award, among them one that the matters involved were of public concern.
The city contends that the contract with the water company for the acquisition of the waterworks is not a matter of public concern, and it cites Illinois Trust & Savings Bank v. Arkansas City, 76 Fed. 271, 22 C. C. A. 171, 34 L. R. A. 518, and similar cases to the effect that such contracts are of a private or business nature. But that was said in contradistinction to acts done in the exercise of the legislative and governmental powers of municipalities. It has never been held, and never can be with reason, that a contract between a water company and a city for the acquisition by the latter of a system of waterworks is not a matter of public concern. By common consent a water company is called a public service corporatiort, and is therefore given the use of the public streets for its mains and pipes. Its system of waterworks constitutes a public utility of vital importance to the health and well-being of a city and its inhabitants. The city of Omaha was invested with power to appropriate private property for the public use in constructing and operating waterworks of its own. The rates and charges of water companies are subject to regulation by the state within constitutional limitations; and this on the theory that the property and operations of such a company are affected with a public interest. To say that the matters submitted to the appraisers in this case were not of public concern is to disregard the essential nature of things. It is true that in People v. Nichols, 52 N. Y. 478, a state law provided for the purchase of the relics, and in Gas Co. v. Wheeling, 8 W. Va. 320, the original authority to purchase the gas works was found in the statute incorporating the company, but the proximity or remoteness of a state statute does not determine the character of the subject-matter, whether of private or public concern, though were it otherwise the fact remains that the reservation by the city of Omaha of the right to purchase at an appraised value was a condition authorized by state statute, and, when the election was made, the city was acting under direct mandate of the Nebraska act of 1903. Laws 1903, p. 66, c. 12. Considering the character of the parties, the nature of the contract, the property in
The city also claims that the appraisal is void because of misconduct of the appraisers. The chief complaint in this respect is that the water company sent its books to Cincinnati, Ohio, where the appraisers held a meeting, and thence to Chicago, Ill., where they had them examined by an audit company selected by them for the purpose, and that the city was not given access to the books nor permitted to examine witnesses upon their contents. Emphasis is placed on the fact that for more than a year previously the appraisers held open sessions and received oral testimony from witnesses who were examined and cross-examined by counsel, and it is asserted that the books were received after the inquiry had been closed. The company contends that the action of the appraisers was consistent with the advisory instructions given them when they entered upon their duties, and also with the character of the proceeding in their charge. At the beginning of their inquiry the appraisers were addressed by counsel upon their method of procedure. The city attorney said:
“As to the matter . of the procedure to be adopted by your board, as to the method of arriving at the amount of property owned by the water company, and the determination of its value, the city of Omaha suggests that this board, having been appointed as experts in regard to the value of such property, ought to make a personal investigation as to the amount and extent of property of the water company, together with its condition, and determine therefrom its value. As to the method of arriving at the amount and condition of the property of the water company, the city of Omaha suggests that this board may arrive at such facts by any method or means deemed advisable by it, but that, if the board shall determine to take proof and testimony before it, it «hould go no further than to the question of the amount and condition of the property, and that said testimony should not be conclusive upon this board, but simply for its advice and information in the matter. It is not the opinion of the city of Omaha that it would be proper or necessary to call expert witnesses as to the value, since the members of the board have been selected as experts [to] whose judgment the question of value must be submitted upon the examination of the property.”
That the appraisers at first received evidence in the presence of counsel did not irrevocably commit them to a continuance of that course; and counsel are in error in saying the inquiry was closed when' they ceased doing so. It was distinctly announced at the time by the chairman of the board that much more information must be sought than that already presented, and “the board will undoubtedly wish to call on the city and the company for special information as to details the necessity for which will develop as the work proceeds.” What they did with the company’s books was not exceptional. In performing their duties the appraisers did much investigating in the absence of the parties, doubtless believing that their course of procedure was largely within their discretion, and it cannot be doubted that it was in view of the character of the submission for appraisal and the instructions given them at the beginning. There is no ground for questioning their entire honesty and sincerity. The books were not submitted, audited, or examined at the instance of the company, nor did it offer them in evidence as such act is usually
In Railway Co. v. Moore, 64 Pa. 79, 91, it was said:
“An award, is tlie judgment of a tribunal selected by tbo parties to determine matters actually in variance between them — not merely to appraise and settle tbe price of property contracted for under tbe stipulation tbat tbis term of tbe contract was to be so ascertained. Had tbe parties made tbe c®n-tract, and afterwards, on a dispute arising, cbosen arbitrators to determine wbat was due upon it, that might have been an award. The case is entirely different where tbe parties originally agree to buy and sell at a sum to be fixed by an appraisement to be made by a third person or persons. * * * Nor is such an appraisement subject to the strict rules governing arbitrations and awards. * * * It would not be necessary tbat the appraisers should decide upon evidence heard in tbe presence of the parties. They could decide, and indeed would be expected to fix tbe value of tbe articles, upon their own knowledge of tbe subject, though doubtless they might seek information from other quarters.”
In Palmer v. Clarke, 106 Mass. 373, 389, the court said:
“A reference to a third person to fix by bis judgment the price, .quantity, or quality of material, to make an appraisement of property and the like, especially when such reference is one of tbe stipulations of a contract founded on other and good considerations, differs in many respects from an ordinary submission to arbitration. It is not revocable. Tbe decision may be made without notice to* or hearing of the parties, unless such notice and bearing be required by express provision or reasonable implication ; and it may be made upon such principles as tbe person agreed on may see fit honestly to adopt, or upon such evidence as be may choose to receive.”
The other complaints of the conduct of the appraisers are disposed of by what has been said.
. It is also contended that the appraisal includes property which the city did not contract to purchase and was without power to own. This refers to the extensions of the waterworks system beyond the corporate limits of Omaha into the city of South Omaha and the towns of Dundee .and Florence and the territory known as East Omaha. 'All these immediately adjoin the city of Omaha — Florence -on the north, East Omaha, on the east, South Omaha on the south, and Dundee on the west. South- Omaha, Dundee, and Florence have separate municipal governments under the laws of Nebraska. In 1880, when the installation of the system of waterworks was commenced, Omaha was a city of about 30,000 -inhabitants, but it grew rapidly.and at present contains 125,000 or more. In South Omaha, which was incorporated in 1886 and in 1903 contained more than 31,000 people, there are located extensive industries in the conduct of ‘.which residents of the larger city are interested and which require great quantities, of water. These two cities are connected by continuous streets traversed by continuous .street car. lines. In the
We think, if the statutes of the state are construed in the light bf conditions to which they were intended to apply, they disclose ample authority in the city to own and operate the entire system of waterworks including the parts beyond-its boundaries. In 1880, when the franchisé was granted, the city had power (Laws 1879, p. 99, § 27) “to erect, construct and maintain waterworks either within or without the corporate limits of the city * * * and to contract with and procure individuals or incorporations to construct and maintain waterworks on such terms and under such regulations as may be agreed on.” By virtue of this authority the ordinance of 1880 was adopted. In 1897 (Comp. St. 1901, c. 12a, § 27) Omaha was given power' “to appropriate private property for the use of the city for * •* * waterworks, including mains, pipe lines and settling basins therefor, the right and power * * * to extend a distance of ten miles from the corporate limits of the city”; also “power to appropriate any waterworks system, plant or property already constructed to supply the city and the inhabitants thereof with water, or any part thereof, whether lying or being wholly within said city or in part therein and in part without the city, and within ten miles from the corporate limits of such city, including all real estate, buildings, machinery, pipes, mains, hydrants, basins, reservoirs, and all appurtenances reasonably necessary thereto and a part of or connected with said system, plant or property, and franchises to own and operate the same if any.” This law was in force in 1903 when the city made its election to purchase. The act of 1903 (Laws 1903, c. 12, p. 66) made municipal ownership compulsory, and the city was directed to construct or purchase. .Section 3 commanded the mayor and council of the city “to take the necessary steps to acquire such water plant under the powers granted to such city or by virtue of any rights inuring to such city through contract or otherwise.” Section 10 provided that the authority and powers of the water board should extend i as far beyond the city limits as it might deem necessary, not exceeding 10 miles. A provision of a prior law granting power to the city to construct or purchase waterworks within or without the city was retained, but so amended as to adapt thereto the powers and functions of the water board. Section 135. There were thus three methods provided by law by which the city could secure a system of waterworks:' Eirst, by its own construction in the city and within 10 miles of its exterior limits, exercising in aid thereof the power of eminent domain; second, by appropriating a system already completed whether lying wholly within or partly within and partly without the city, but within the 10-mile limit; and, third,
We are also of the opinion that, when the city made its election, it elected to purchase the entire system of waterworks. The ordinance of 1880 by which the franchise was granted, related to a system of waterworks “within and adjacent to the city of Omaha, in Douglas county, state of Nebraska, for the purpose of supplying said city and the citizens and inhabitants thereof with water.” The ordinance required that the pumping capacity of the works keep pace with the growth of the city, and that in a practical sense meant not merely from day to day, but implied the exercise of business foresight in making reasonable provision for the future. The right of purchase reserved by section 14 of the ordinance refers, of course, to the system of waterworks designed for supplying the city of Omaha with water, but it includes everything fairly appurtenant to the system as a whole. Section 11 provides that, upon failure to comply with the terms of the ordinance, all rights thereunder shall be forfeited, and the city of Omaha shall become vested with the ownership “of said waterworks and property appurtenant thereto and connected therewith subject to the payment of á just compensation therefor to be ascertained as provided in section 14.” In .1896 the city of Omaha commenced a suit to forfeit the franchise granted by this ordinance and to obtain title to the system of waterworks.
A contract of sale and-purchase between the company and the city arose in 1903 which was not subject to impairment by subsequent legislation; but it may be well to notice some provisions in the act of 1905 adopted in anticipation of municipal ownership and operation of the waterworks. Laws 1905, p. 175, c. 15. By that act the water board was authorized to contract with any adjacent municipality to supply it with water for public or private purposes or with any person, copartnership, or corporation engaged in that business. It is said, in effect, that the express grant of power to contract with ipn adjacent municipality or with a corporation engaged therein in supplying water is an implied denial of power to furnish water direct to the inhabitants, and therefore the Legislature intended the outlying distribution systems should not be acquired by Omaha but should be left on the hands of the company to hold or sell if the smaller towns chose to buy. In other words, the contention is that Omaha has no power to own or operate the pipes and mains beyond its limits, but may contract to furnish water to the owner whether it be the company or an adjacent municipality. Ordinarily power in Omaha as owner of the system within its limits and the supply station at
If the act of 1905 affected the fixed contract relations between Omaha and the company, a result would follow so remarkable and so inequitable it is difficult to believe it was intended. If Omaha now bought only the property within its borders and the supply works, and left the outlying distribution systems on the hands of the company, the latter would either have to sell them to the adjacent municipalities, or to Omaha if hereafter invested with power, at their own figure, or continue business under such conditions as would practically destroy the 'value of its property In the latter case, it would be confronted with the problem of procuring a water supply for the smaller communities since the existing facilities would be owned by Omaha. Of course, separate, independent supply works on the river north of Omaha, the only feasible location, would be out of the question. Besides the disproportion of cost to the amount of consumption, the plan would not be practicable unless Omaha granted the right of way for flow lines through her streets. The alternative would be to apply to Omaha for water. If Omaha furnished the water, say, for example, to be used in South Omaha, the only property it would employ in that service would be its supply works at Florence and its flow lines or mains running thence to and through the city to the southern limits thereof where delivery would be made into the distribution system in South Omaha still owned by the company; yet, under the act of 1905, it would charge the company a rate per 1,000 gallons not less than the gross income per 1,000 gallons derived by it from all water furnished within its own limits, includ
When the report of the appraisers came in, the water board adopted a resolution rejecting it, and it is claimed that the act of 1905 conferred authority upon the board to do so. But in 1903 the city, proceeding in accordance with the act of that year, availed itself of the right reserved in the ordinance of 1880 by electing to purchase; and appraisers were duly chosen and were engaged in the performance of their duties when the act of 1905 was passed. The continuing offer of the company to sell arising from the acceptance of the ordinance of 1880 and the election of the city in 1903 to buy made a contract binding upon both parties. The provision for fixing the price by appraisal was a valid one, and it was recognized by the act of 1903 which authorized the water board to nominate an appraiser for confirmation by the city council. There was no withdrawal from the appraisal proceedings. The appraisal being valid the Legislature could no more authorize the water board or the city to reject it than it could authorize the abandonment of the contract of purchase itself. Nor can an.impairment of the obligation of the city to complete the purchase be effected by prescribing new conditions in respect of the voting of bonds. Sala v. New Orleans, Fed. Cas. No. 12,246, 2 Woods, 188.
The ownership by a city of a waterworks system extending beyond its limits is not an unusual thing. The legislative act in the Kansas City case (Laws Mo. 1873, p. 286, § 1) provided that the city might acquire and use for that purpose property “within and without the corporate limits of the city and also in the state of Kansas,” and (section 22) that the city might grant to any person or corporation the right of construction, reserving the privilege of purchase. When the purchase clause was invoked some 20 years Iqter, the company’s distribution system extended beyond the city limits and the main supply
The decree is reversed and the cause is remanded, with direction to proceed to decree in accordance with the views expressed in this opinion.