139 F. 405 | U.S. Circuit Court for the District of Oregon | 1905
(after stating the facts). The question presented by the demurrer is whether the city of Tillamook, by proceeding to construct and maintain a system of waterworks for the purpose of furnishing water to the city and its inhabitants, will impair the obligation of its contract with the complainant. It is not disputed that the municipality is given by the law the authority to create, own, and maintain a system of waterworks. The whole question depends upon the nature of its contract with the complainant. There can be no doubt that the grant of an exclusive privilege to a water company to lay water pipes and furnish the inhabitants of a city with water for a stated period of time, accepted and acted upon by the company, is the grant of a franchise given in consideration of the performance of a public service, and is protected against hostile legislation by the state and by the municipality. New Orleans Gas Co. v. Louisiana Light Co., 115 U. S. 650, 6 Sup. Ct. 252, 29 L. Ed. 516; New Orleans Water Co. v. Rivers, 115 U. S. 674, 6 Sup. Ct. 273, 29 L. Ed. 525 ; St. Tammany Waterworks v. New Orleans Waterworks, 120 U. S. 64, 7 Sup. Ct. 405, 30 L. Ed. 563. Nor can there be any doubt that, if a municipality has covenanted that during the life of the privilege it will not institute works of its own, it would be an impairment of the obligation of its contract to institute, before the expiration of that period, a waterworks system, to be owned and operated by the municipality. Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed. 341. But the city of Tillamook gave to the complainant’s grantor no exclusive privilege or franchise, nor did it covenant, as in the Walla Walla Water Case, that it would not erect, maintain, or become interested in any other waterworks.
The principles which must control the decision of the present case are to be found in Charles River Bridge Co. v. Warren Bridge Co., 11 Pet. 420, 9 L. Ed. 773, 938; Long Island Water Supply Co. v. Brooklyn, 166 U. S. 685, 17 Sup. Ct. 718, 41 L. Ed. 1165; Bienville Water Supply Co. v. Mobile, 175 U. S. 109, 20 Sup. Ct. 40, 44 L. Ed. 92; Skaneateles Water Co. v. Skaneateles, 184 U. S. 354, 22 Sup. Ct. 400, 46 L. Ed. 585; Joplin v. Light Co., 191 U. S. 150, 24 Sup. Ct. 43, 48 L. Ed. 127, and Helena Waterworks v. Helena,
“The contract in terms contained no words of exclusion. It gave to the company the privilege of laying its mains in the streets of the town, and contained a covenant on the part of the town to pay certain hydrant rentals; but grants from the public are strictly construed in favor of the public, and grants of a privilege are not ordinarily to be taken as grants of an exclusive privilege.”
In Bienville Water Supply Co. v. Mobile, the water company was authorized to construct canals, ditches, pipes, etc., and was charged with the duty of introducing into the city of Mobile such supply of pure mountain water as the domestic, sanitary, and municipal wants thereof might require. On April 14, 1891, the city entered into a contract with the water company, whereby the latter was to furnish for a period of 12 years a designated number of fire hydrants for the use of the city, and agreed not to charge a greater or higher rate for water for domestic use than that specified in the contract. Six years later, and while that contract was in full force, the city proceeded to acquire waterworks, to be owned and operated by itself. The water company contended that the city had no legal right to impair the value of its plant and to destroy or diminish its income; but the court held that, since the water company had been granted no exclusive franchise to furnish water to the city and its inhabitants, the city had the right to build or acquire a system of waterworks for that purpose, and that to do this was no violation of its contract.
In the Skaneateles Case, the court, in answering the argument that there is an implication that the grantor of a right to lay pipes and furnish water in a town will do nothing to detract from the full and complete operation of the grant, said:
“There is no implied contract in an ordinary grant of a franchise, such as this, that the grantor will never do any act by which the value of the franchise granted may in the future be reduced. Such a contract would be altogether too far-reaching and important in its possible consequences in the way of limitation of the powers of a municipality, even in matters not immediately connected with water, to be left to implication. We think none such arises from the facts detailed.”
In Joplin v. Eight Co., a right had been given to maintain an electric light plant for a period of 20 years. The ordinance conferred rights, exacted obligations, and fixed the rates to be charged. Eight years later the city instituted proceedings to erect an electric light plant, to be owned, controlled, and operated by itself. The court held that, by the terms of the ordinance and its acceptance by the light company, there was no implied contract that the city might not become a competitor with the company.
The case of Helena Waterworks v. Helena is directly in point. The contract in that case was substantially identical with that which is under consideration in the present case, with the exception that it contained a stipulation that the grant was not to be exclusive of the right of the city to contract with another company.
“These cases hold that the grant of a franchise does not of itself raise an implied contract that the grantor will not do any act to interfere with the rights granted to the waterworks company, and that in the absence of the grant of an exclusive privilege none will be implied against the public, but must arise, if at all, from some specific contract binding upon the municipality.”
The decision in that case is a complete answer to the contention made, in this: that the complainant herein entered into a binding contract whereby it agreed to furnish water to the inhabitants of the city of Tillamook for the period of 30 years. The contract in that case contained a similar covenant upon the p'art of the Helena Water Company; but the court said that, although the contract bound the company to furnish water to the inhabitants of the city for a term of 20 years, there was nothing in the contract to bind the inhabitants of the city to take water from the company, and that the city had not and could not undertake to make any contract upon the subject of the private supply of individuals and the city, beyond securing a maximum rate of charge for water supply. The court found nothing in the contract to prevent the city from constructing its own plant.
The complainant earnestly contends that the decision of the Walla Walla Water Case, 172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed. 341, is authority for its contention that by implication it has a contract with the city, the obligation of which the latter is about to impair. In that case an ordinance was passed by the city council of Walla Walla, granting the water comjpany for a term of 25 years the right to lay mains and pipes in all the streets of the city for the purpose of furnishing the inhabitants thereof with water, and by the terms thereof the city agreed to pay certain rentals, and bound itself not to make, maintain, or become interested in waterworks, unless the contract should be avoided by the judgment of a court of competent jurisdiction, on the ground of a substantial failure of performance by the company. After this contract had been in force, and the stipulated rentals paid for about 6 years, an ordinance was passed, providing for the construction of a system of waterworks for the purpose of supplying the city and its inhabitants with water. The Supreme Court held that under its contract with the water company, if the city should desire to establish waterworks of its own, it could do so by condemning the property of the company, but that it could not enter into direct competition with the company during the life of the contract, and that as long as the contract had not been avoided by a court of competent jurisdiction, but remained in force, the city had no right to establish waterworks, because it had expressly so covenanted with the water company.
The demurrer is sustained.
