#### Washburn Water Works Company, Respondent, vs. City of Washburn, Appellant.

*May 9*

June *21, 1906.*

*Municipal corporations: Waterworks: Contract to pay hydrant rentals: Liability of city as successor of town.*

For the benefit of the inhabitants of an unincorporated village therein a town passed an ordinance granting to plaintiff’s assignors a franchise for the construction of waterworks in said village and contracting to pay certain hydrant rentals, etc. The waterworks plant was constructed by plaintiff wholly within the limits of the village. Afterwards the village became incorporated as a city, and plaintiff continued to furnish water to the city and its inhabitants under the terms of the ordinance contract, all parties acting upon the assumption that the city had succeeded to all the rights and liabilities of the town thereunder. The town .thereafter was not concerned in the waterworks property, exercised no supervision over it, and derived no benefit from it. *Held,*that the city was bound by the ordinance contract as the successor of the town.

Appeal from a judgment of tbe circuit coart for Bayfield •county: JoiiN K. Parish, Circuit Judge.

*Affirmed.*

Tbe plaintiff in this action presented its claim to tbe common council of tbe city of *Washburn,*defendant, for $5,300, claimed to be due for tbe year ending January 1, 1905. The claim was allowed at $852, and an appeal taken by plaintiff to tbe circuit court. The court directed that formal pleadings be made, which was done.

Tbe complaint alleges, in effect, tbe corporate existence of tbe plaintiff, and that defendant is one of tbe duly organized •cities of tbe county of Bayfield, Wisconsin; that prior to tbe ■6th day of May, 1889, the town of Washburn contained tbe unincorporated village of Washburn with more than 1,000 inhabitants, and that tbe electors of said town at tbe annual meeting prior to tbe 6tb day of May, 1889, conferred upon tbe town and town board all powers relating to villages and *74conferred upon village boards by ch. 40, R. S. 1878; that on May 6, 1889, the town board of the town of Washburn duly-passed and published an ordinance for the construction of waterworks in said town for the purpose of obtaining a water supply, and with all the necessary machinery and attachments-to supply the town and its inhabitants with water suitable for fire and domestic purposes, and empowered Lewis *&*Maxcy, grantees in said ordinance, their representatives and assigns, to construct the same and occupy the streets of said village of' Washburn and town of Washburn in said county of Bayfield for such purposes, and agreed to and did rent hydrants from said grantees or their assigns-for a term of years, and agreed to pay an annual rent of $4,000 in semi-annual instalments-therefor, together with town and municipal taxes which might be assessed against the grantees or their assigns for the first ten years, the town reserving the right at the expiration of a term of years to purchase the works from said grantees or their assigns, together with extension rights and franchises; that the plaintiff duly succeeded to the rights of Lewis & Maxcy under said ordinance with said town of Washburn and constructed the works in the unincorporated village of Wash-burn; that in April, 1904, the inhabitants of the unincorporated village of Washburn voted to incorporate a city under the general laws of the state, and a 'charter was duly issued and tlie territory comprising the unincorporated village of Washburn became a city of the fourth class known as the city of *Washburn,*defendant in this action; that, ever since the organization of the city of *Washburn,*the plaintiff has continued to supply defendant with water under the terms of the ordinance, and that the amount due for supplying water under said ordinance to July 1, 1904, is $2,650, and to January 1, 1905, $2,650, which sum was due January 1, 1905, and that the city became indebted to the plaintiff for said sum;, that at all times since the incorporation of the city the officers thereof and the plaintiff -have assumed that the relations be*75tween them were governed by tbe terms of said ordinance, and that tbe city assumed all tbe rights and privileges of tbe town of Washburn and recognized and acquiesced in tbe rights of' tbe plaintiff thereunder, and that by reason of tbe actions of the city and its officers there has been a novation of tbe said ordinance, and that tbe city is estopped from denying tbe existence of tbe contract with tbe plaintiff.

Tbe defendant answered, admitting the corporate existence-of tbe plaintiff and defendant, as well as tbe corporate existence of tbe town of Washburn, and that tbe town of Washburn contained tbe unincorporated village of Washburn, having more than 1,000 inhabitants, and that tbe electors conferred on tbe town board the.powers conferred on village boards; also admitting that tbe ordinance referred to in tbe complaint' was adopted and published, and that the plaintiff constructed its waterworks system wholly within tbe limits of tbe unincorporated village of Washburn, and has operated tbe same since October, 1889, and that tbe population of the city of *Washburn*is about 5,000 and that of tbe town of Washburn about 500, and that about fifty-five per cent, of tbe value of' tbe property in tbe old town of Washburn is now situate in tbe city of *Washburn.*Defendant further set up a counterclaim to tbe effect that on tbe 18th day of July, 1904, the-town of Washburn recovered a judgment for delinquent personal property tax against the plaintiff in tbe sum of $2,310, which has not been paid, and that fifty-five per cent, thereof' belonged to tbe defendant, and that plaintiff is indebted to the-defendant in tbe sum of $1,969.60 for taxes dire defendant for tbe year 1904, and that in 1904 tbe town of Washburn recovered a judgment against tbe plaintiff in tbe supreme court for tbe sum of $52, no part of which has been paid, fifty-five-per cent, of which belonged to defendant, and demanded judgment on said counterclaim against plaintiff for $4,331.60,. with interest and costs.

Tbe case was tried by tbe court and a jury in May, 1905-*76'The court submitted to the jury the question of the reasonable rental value of the hydrants for the year 1904, and the jury found the same to be $4,940. The court found as follows:

*Findings of fact:*That the number of hydrants used by defendant is as alleged in the complaint. That since the organization of the defendant as a city the plaintiff has continued to supply water to the city and the inhabitants thereof, under ■■the terms of the ordinance and contract, set forth in the complaint, and the same has been used by such city. That, at all times since the incorporation of said 'city, said city and the ■officers thereof and the plaintiff herein have treated and assumed that the relations between plaintiff and defendant were wholly governed by the terms of the ordinance, and that the •city succeeded to all the rights of the town under said ordinance, also all liabilities thereunder from and after the date ■of its incorporation. That said city has assumed all the rights and privileges of the town of Washburn under the ordinance set forth in the complaint. That the said city has recognized and acquiesced in all the rights of the plaintiff under the ordinance set forth in the complaint. That the plaintiff furnished water to the defendant under the terms of said ordinance for the months of May and June in the year 1904, and for the succeeding six months until January 1/1905. That the population of the city of *Washburn*at the time of its incorporation was 5,000, and that the population of the town of Washburn at the time of the incorporation of said city was •500. That the valuation of the property included in the city of *Washburn*is fifty-five per cent, of the value of the property in the old town of Washburn, and that the value of the property in the present town of Washburn is twenty-nine per cent, of the valuation of the property of the old town of Washburn. That there was assessed against and is now due the defendant from the plaintiff for taxes in the year of 1904, on its plant and franchise, the sum of $1,969.60. That the plaintiff’s waterworks system is wholly constructed within the city of *77Washburn, and that it is impossible for plaintiff to supply water to the town of Washburn. That the town of Washburn is mostly inhabited by farmers and' is sparsely populated, and includes five government townships.

*Conclusions of law:*That the city of *Washburn*assumed the ordinance set forth in the complaint, and that the same is a valid contract subsisting between plaintiff and defendant,, from the time of the organization of the city of *Washburn.*That the defendant became indebted to the plaintiff by reason of the furnishing and supplying of ivater under the terms of said ordinance in the sum of $3,533.35. That there should be set off against said sum the taxes due the city of *Washburn*for the year 1904, to wit, $1,969.60. That plaintiff is entitled to recover from defendant the sum of $1,563.75, with costs.

Counsel for defendant .excepted to the findings of fact and conclusions of law and to the order directing judgment. Judgment was entered in favor of the plaintiff for the sum of $1,563.75 damages, together with costs, from which this appeal is taken.

*John Walsh*and *W. M.*Tomkinsfor the aj>pellant.

*A. W.*McLeod, for the respondent.

Keewist, J.

The material facts in this case are covered by the findings heretofore stated. The controlling questions involved are: (1) Whether the defendant city assumed the contract of the town with the plaintiff; and (2) whether fifty-five per cent, of the judgment in favor of the town and against the plaintiff should be set off against the claim made for hydrant rentals. As appears from the findings of fact, the contract of the plaintiff with the town was in fact for the benefit of the inhabitants of the unincorporated village which after-wards became the incorporated city of Washburn, defendant in this action; the waterworks plant was constructed wholly within the territory comprising the city of Washburn, and *78since its incorporation plaintiff has continued to furnish it and its inhabitants with water according to contract, the town deriving no benefit whatever from the waterworks plant; the city ■of *Washburn*and its officers and the plaintiff have assumed that the relations between plaintiff and defendant were governed by the terms of the ordinance, and that the city succeeded to all the rights and liabilities of the town under such ordinance from and after the date of the incorporation of defendant; at the time of incorporation the population of the .■city of *Washburn*was 5,000 and that of the town 500; and the valuation of the property of the city of *Washburn*was greater ■than the valuation of the property in the town.

It is claimed, however, by appellant that, the contract being with the town, the city did not become liable upon it, on the ground that, when the territory embraced within the limits of the defendant city became detached from the town and formed into a separate municipality, no liability followed the new creation. The case made here is not within the rule contended for by the appellant. No part of the waterworks plant remained in the town after the incorporation of the defendant. The town had no supervision over it, nor was it in any manner interested in it. It was retained, managed, and controlled solely for the benefit of the city and wholly within its limits. It was constructed for the benefit of the inhabitants of the unincorporated village of Washburn, and afterwards continued for the benefit of such inhabitants under their organization .as the city of *Washburn.*The appellant does not, as we understand his position, contend that the town is still liable, or that the plaintiff’s claim could be enforced against the town; but it is insisted that the case is one where by operation of law it has become impossible for the parties to the water contract to perform, and that, where performance of a contract becomes wholly or in part impossible by reason of change in the» law, the contract is to that extent discharged. We think it ■very clear that the contract has not been extinguished or ren*79dered incapable of performance, but is still a valid, subsisting obligation, and the question bexe is whether it is enforceable against the defendant. While it was made in form with the "town, it was in fact made for the benefit of the inhabitants of the unincorporated village situate within the limits of the town, and continued to be performed under the supervision of the town, for the benefit of such village, until the incorporation of the defendant city. The city of *Washburn*and its inhabitants are solely benefited by the supply of water. They .alone are interested in the execution of the contract; they .alone receive the benefits and should in equity and good conscience bear the burdens. *National F. & P. Works v. Oconto City*W. *S. Co.*105 Wis. 48, 81 N. W. 125; *Mount Pleasant v.*Beckwith, 100 U. S. 514. It is not necessary to decide here, and we do not decide, whether the town remains liable upon the contract.

The history of legislation on this subject, we think, clearly shows that it was the intention of the legislature that cities incorporated under the established facts in this case should succeed to the rights, privileges, and liabilities of such contracts. Oh. 292, Laws of 3883, confers upon town boards in towns containing one or more unincorporated villages, having each a population of not less than 1,000, the powers relating to villages and conferred upon village boards by the provisions of ch.. 40, R. S. 1878, and acts amendatory thereof, excepting those the exercise of which would conflict with the provision of law relating to towns and town boards, and makes them applicable to such unincorporated village or villages in such town, and may be exercised when directed by a resolution of the qualified electors of the town. The power to make the contract in question was conferred upon the town because it contained an unincorporated village of not less than 1,000 inhabitants, and obviously for the purpose of giving the unincorporated village within the limits of the town the same advantages as an incorporated village; the , needs and neces*80sities of such unincorporated village necessarily requiring the exercise of governmental powers somewhat different from the ordinary township community, especially in regard to police regulations, facilities for the extinguishment of fires, and care and improvement of streets. Land, *L. & L. Co. v. Brown, 73*Wis. 294, 40 N. W. 482. A franchise or contract to construct waterworks can he conferred only through authority delegated from the state. *Allen v. Clausen,*114 Wis. 244, 90 N. W. 181. It is grossi public in its nature. *State ex rel. Att'y Gen. v. Janesville W. Co.*92 Wis. 496, 66 N. W. 512. Sec. 925—8, Stats. 1898, regarding the incorporation of cities, provides, among other things, that 100 or more electors- and taxpayers of any village, incorporated or unincorporated, may apply by petition to the trustees of said village or to the proper town board to have the question of incorporating said village, or the same and adjacent territory, containing together a population of not less than 1,500, as a city, submitted to a vote of the electors of the territory described in the petition. Subsequent sections provide for the submission of the question of incorporation to a vote of the electors residing within the limits proposed and for the perfecting of such incorporation. The legislative scheme, therefore, obviously was to give unincorporated villages the right to secure and maintain waterworks within their limits under the supervision of the town board, the same as incorporated villages under-village boards. The legislature doubtless had in view that the unincorporated village would form a nucleus for an incorporated village or city, and that waterworks constructed by contract under such legislative authority for the benefit of inhabitants of an unincorporated village should pass to the-village or city organized by such inhabitants in the manner provided by statute.

It is contended on the part of the appellant that at common law, upon division of a town, whether by creating a new town or a city out of a part of the old town, the old town retained *81all the property and was liable for all indebtedness. But tbe power to divide municipalities is strictly a legislative power, and tbe power to prescribe tbe rule by wbicb a division of tbe property of tbe old municipality shall be made is incident to tbe power to make such division, and is in its nature legislative. Sucb division must rest upon tbe circumstances of each case. *Bristol v. New*Chester, 3 N. H. 524; *Laramie Co. v. Albany Co.*92 U. S. 307; *Knight v.*Ashland, 61 Wis. 233, 21 N. W. 65. The doctrine upon wbicb tbe division of property of municipalities is founded is an equitable doctrine resting upon tbe relative rights of tbe municipalities, tbe character of tbe property to be divided, and legislative regulation upon tbe subject. *Bloomfield v. Glen*Ridge, 54 N. J. Eq. 276, 33 Atl. 925; *Schriber v.*Langlade, 66 Wis. 616, 29 N. W. 547, 554; *Knight v.*Ashland, *supra; Broughton v.*Pensacola, 93 U. S. 266.

We have been cited by counsel on either side to no case precisely in point upon tbe main question before us, nor have wo be'en able after much research to find any. But we think tbe principle enunciated in some of tbe cases cited sustains tbe liability of tbe defendant upon tbe facts established here. As we have already seen, tbe contract for waterworks and the construction thereof within the limits of tbe unincorporated village was for tbe benefit of the inhabitants thereof, and continued to be after incorporation of tbe defendant city. In municipal corporations it is tbe inhabitants and tbe territory wbicb form tbe essential elements of tbe corporation, and where they are tbe same, or substantially tbe same, it will be presumed that the legislature intended a continued existence of tbe same corporation, although different powers are possessed under tbe new charter and different officers administer tbe affairs of the municipality. And, in the absence of express provision to tbe contrary, it will be presumed that tbe legislature intended tbe liabilities as well as tbe rights of property of tbe corporation in its old form should accompany tbe *82corporation in its re-organization. *Broughton v. Pensacola, supra; Higginson v. Turner,*171 Mass. 586, 51 N. E. 172. In *O'Connor v. Memphis,*6 Lea, 730, 735, it is said:

> “Neither the repeal of the charter of a municipal corporation, nor a change of its name, nor an increase or diminution of its territory or population, nor a change in its mode of government, nor all of these things combined, will destroy the identity, continuity, or succession of the corporation, if the people and territory re-incorporated constitute an integral part of the corporation abolished. The reason is to be found in the peculiar nature of such corporations. A charter for municipal purposes is an investing of the people of a place with the local government thereof, constituting an *imperium in imperio,*and the corporators and the territory are the essential elements; all else being mere incidents or forms.”

And in *Mobile v. Watson,*116 U. S. 289, 6 Sup. Ct. 398, it was held in effect that where the legislature of a state has given a local community living within the designated boundaries a municipal organization, and by subsequent acts repeals its charter and dissolves the corporation and incorporates substantially the same people under a new name for the same general purposes, and the great bulk of the taxable property of the old corporation is included within the limits of the new, and the property of the old corporation used for public purposes is transferred without consideration to the new for the same public uses, the latter, though greatly reduced in corporate limits, is the successor of the former and liable for its debts. To substantially the same effect are *Mount Pleasant v. Beckwith,*100 U. S. 514, and *Girard v. Philadelphia,*7 Wall. 1.

We think the principle of the cases cited and many others which may be found applies here. True, the corporate existence of the town continued after the organization of the city out of its territory. But the inhabitants of the unincorporated village, for whose benefit the contract was made, continued the inhabitants of the city. It is said by counsel for appellant that, where one corporation goes out of existence by *83being annexed to or merged in another, no arrangement being made respecting tbe payment of the liabilities of the former, the latter will be entitled to all the property and be responsible for the liabilities; but it is insisted that the town of Washburn has never been dissolved, hence this rule does not apply. The situation, so far as the unincorporated village of Washburn is concerned, is the same as if the town had gone out of existence by merger or otherwise, since it has no further interest in the execution of the contract. The town is not concerned in the waterworks property, and can exercise no supervision over it or derive any benefit from it, and the rights of the inhabitants of the city of *Washburn*under the ordinance, if enforced at all, must be by the defendant city as the successor of the town. *Bloomfield v. Glen Ridge,*54 N. J. Eq. 276, 33 Atl. 925; *Curtis v. Board of*Education, 43 Kan. 138, 23 Pac. 98. The findings of fact respecting the assumption of the contract by the defendant are fully supported by the evidence. The plaintiff continued to furnish water after the incorporation, and the city received it without objection, repeatedly acknowledged the existence of the contract, acted upon it through its officers, and treated it as a valid and existing obligation between the plaintiff and defendant. We conclude that the defendant city is bound by the contract or ordinance in question.

2. Counsel for appellant further claims that fifty-five per cent, of certain judgments recovered by the town of Wash-burn against the plaintiff should be offset against the plaintiff’s claim in this action; but they fail to point out in their briefs upon what ground the same should be made, -and we are unable to discover from the record any ground which would warrant such offset. The court below obviously disregarded this claim of appellant, and we find no error in this respect.

We are of the opinion that the judgment of the court below is right and should be affirmed.

*By the Court.*— The judgment of the court below is affirmed.