Case ID: ad_115/html/0658-01.html
Source: Caselaw Access Project
Author: {"author": "Jenks, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

City of Mount Vernon, Respondent, v. New York Inter Urban Water Company, Appellant.
    Second Department,
    November 21, 1906.
    Corporation— duty of water company to give reasonable rates is part of • . franchise — municipality cannot bind private owners by a contract fixing rates — party — private consumers must sue if rates are , unreasonable.
    The requirement of section 81 of the Transportation Corporations Law that a public service water supply company shall supply the inhabitants of a city with water at a reasonable rate is part of its franchise derived from the State, and a municipal contract made with siich company fixing the rates at which water is to be supplied to private consumers is not binding upon such con- ■ sumers who may test the reasonableness of the rates by private action. The fact that certain of said rates at which water is to be supplied to private consumers are “minimum” raises no presumption that the rates are unreasonable.
    No action lies by the municipality either to reform a contract made by it with such water company fixing the rates for private-consumers by striking out such provisions or to determine whether such rates are reasonable.. If'the rartes be unreasonable the remedy is in the hands of the private consumers. •
    Appeal by the defendant, the Mew York Inter Urban Water Company, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Westchester on the 4tli day of May, 1905, upon the decision of the court, rendered after a trial at, the Westchester Special Term, overruling the defendant’s demurrer to the complaint.
    
      Arthur E. Walradt, for the appellant.
    
      David Swits, Corporation Counsel, for the respondent.
   Jenks, J.:

.The defendant is a domestic corporation organized under the 3d section of the Stock Corporation Law and is the successor of the New York Suburban Water Company. In 1898 the last-named corporation and the city of Mount Vernon entered into an agreement which contains these provisions: “ Fifth. * * * The meters rate to private consumers shall be as follows : To premises having but one fixture, not provided with sewer connection, a minimum charge of One Dollar eighty-seven and one-half cents (1.87-£) per quarter, for which Eight hundred and thirty-three (833) cubic feet of water may be used. To all other premises, except those occupied or used for manufacturing or business purposes, a minimum charge of Three Dollars ($3.00) per quarter, for which One thousand three hundred and thirty-three (1,333) cubic feet of water may be used. All quantities of water in excess of the minimum above provided for shall be charged for at the rate of twenty-two and one-half (22£) cents per one hundred (100) cubic feet. The Water Company may, however, make special rates for premises occupied for business and manufacturing purposes not exceeding, however, twenty-two and one-half (22(r) cents per one hundred (100) cubic feet, subject to a minimum charge increased in proportion to the size of the meter required.”

This action is brought to reform the agreement “ so as to confine its operation to matters and details which the common council of the City of Mount Vernon and the City of Mount Vernon may lawfully fix, regulate and enforce, to wit, those matters which affect the services rendered to the city as a contracting party and striking therefrom all provisions affecting the contractual rights or obligations of individual or private consumers of water.” The plaintiff does not declare upon any of the equitable principles for ref or-. mat-ion like unto fraud or mistake, but rests upon the proposition that the -provisions in the agreement relating to private consumers are ultra vires the municipality- and its officers. The agreement recites that the predecessor of the defendant Was -duly created and existed under the laws of New York for the purpose of supplying • the city of Mount Vernon and the inhabitants thereof with water. Certain of the provisions may be construed as expressions of the maximum rates. But in other expressions,- the difficulty arises over the word “ minimum.” Save for this expression “ minimum-,”, there would be, I'think,,.no room for discussion, and for the reason that - all - the rates named, would be Construed as the maxinnum rates, '-.binding upon the Water company in its dealings with private consumers. .(Spring Valley Water Works v. Schottler, 110 U. S. 347, 356; Janvrin, Petitioner, 174 Mass. 514, 516; Farnham Waters & Water Rights, 856; Griffin v. Water Company, 122 N. C. 206, 210.) And such provisions would be germane to this agreement for "the reasons stated by Bartlett, J., in Pond v. New Rochelle Water Co. (183 N. Y. 330, 338). .

By qualification of the rates as minimum, the parties to this agreement could not bind private consumers to pay them; (Griffin v. Water Company, supra) The right to supply water vested in the corporation was of the nature of a franchise belonging to the State" itself. (Skaneateles W. W. Co. v. Village of Skaneateles, 161 N. Y. 154; New Orleans Water Works Co. v. Rivers, 115 U. S. 674.) It was the duty of the corporation in the acceptance of the franchise and in the exérCise of its rights .thereunder, to supply the authorities of the city and the inhabitants thereof with pure and wholesome water at reasonable rates and cost. (Transp. Corp. Law, § 81 ; Janvrin,.Petitioner, supra; Spring Valley Water Works v. Schottler (supra) The provision that the rates should be reasonable must be regarded as part of the. franchise. In Spring Valley Water Works v. Schottler (supra),, the court, per the chief justice, says: “The provision for fixing rates cannot be separated from the remainder of the statute by calling it a contract. It was a condition attached to the franchises conferred on any corporation formed under, the statute, and indissolubly connected with the reseiwed power of. alteration and repeal,” We have lately held, per Gtaynoe, J., that “ the rule is that public service corporations may charge only a reasonable rate, and the courts may ascertain such rate in a given case.” (Brooklyn Union Gas Co. v. City of New York, 115 App. Div. 69.) I think that any consumer has the lawful right to insist upon a supply of water at a rate that was reasonable despite these provisions in the agreement. (Rogers Park Water Co. v. Fergus, 178 Ill. 571.)

Although some of the rates named are qualified by the word “ minimum,” nevertheless they are specified rates. The effect, if any there can be, of' the word minimum ” is that the rates shall not be less. But the fact that there is a provision that they shall not be less, or the fact that there is no provision that they shall not be more, does not alter the fact that these are fixed rates. The statute requirement that the rate and cost shall be reasonable is to afford protection to thé corporation and to the consumer alike, that there may be neither confiscation nor extortion, and if the rate named be not reasonable so as to afford a fair profit to the corporation and a fair price to the consumer, the courts will ascertain it.

The purpose of the qualification “ minimum ” is to make for the protection of the corporation. But the mere fact that the corporation has thus sought to protect itself does not raise the presumption that the rates are not reasonable. As I have said, it has no binding force against the consumer if the rates are not reasonable. These provisions may be regarded as specifications of the present rate which the company would charge as reasonable under all the circumstances acquiesced in by the city in making the agreement and in its visitorial capacity. They are, in effect, the present prices, and they may be regarded prima facie reasonable. (Des Moines v. Waterworks Co., 95 Iowa, 365; Farnham Waters & Water Rights, 858.) The complaint shows that the rates thus named are the prices that have been charged and that are to be charged to the private consumers. Mr. Farnham on Waters and Water Rights says (at p. 856) : The charter or ordinance by which the franchise is granted should make provision as to the rates to be charged, but even if they do not do so the public authorities may compel the company to make its rates reasonable. If the charter gives an independent tribunal the right to fix rates, the company is bound to submit to those imposed by it. But in the absence of any public action tending to fix the rates the company may fix them at such amount as it deems necessary to the successful operation of its business.”.

So far as this action is to reform the contract by-striking out these provisions I think it does not lie.

So far as the action seeks a judicial scrutiny of the rates, as unreasonable to the private consumers, I think it cannot be maintained. The municipal corporation has not such legal concern or interest in the relations of the company and the individual consumer as warrants the bringing of such a suit. (Abb. Mun. Corp. § 1160, n. 76, and authorities cited. See, too, People v. Law, 34 Barb. 494; People v. Albany & Susquehanna R. R. Co., 57 N. Y. 161; Park v. Modern Woodmen of America, 181 Ill. 214, 235.) The individual consumer has his remedy. (Pond v. New Rochelle Water Co., 183 N. Y. 330.)

I advise that the interlocutory judgment be reversed, with costs, and that the demurrer be sustained, with costs.

Woodward, Hooker, Gaynor and Rich, JJ., concurred.

Interlocutory judgment reversed, with costs, and demurrer sustained, with costs.. 
      
      See Laws of 1890, chap. 566, § 81, as amd. by Laws of 1896, chap. 678,—[Rep,