#### The State, ex rel. Indian Hill Acres, Inc., *v.*Kellogg, City Mgr., et al.

(No. 6795

Decided May 5, 1947.)

*Messrs. Taft, Stettinius & Hollister*and *Mr. John H. More,*for relator.

*Mr. John D. Ellis,*city solicitor, and *Mr. Ed F. Alexander,*for respondents.'

Matthews, P. J.

This is an action instituted in this court, seeking a writ of mandamus directing the *66city manager and the superintendent of the waterworks department of the city of Cincinnati to permit relator to connect its water-main extensions to the water mains in Miami road, a public street, to permit consumers of .water to be served by such water-main extensions and connections and to accept the application of the relator to make such connections and permit the same to be made.

Stated tersely, the relator asks that the respondents, as the officials of the city of Cincinnati, charged with the duty, be required to supply the relator with water from the municipal waterworks, upon compliance by relator with the required conditions.

An alternative writ was issued and the cause now comes before this court on the relator’s prayer for a mandatory writ in conformity to the alternative writ.

There is substantial agreement on the facts.

The city of Cincinnati during all the time material here owned and operated a municipal waterworks with a capacity in excess of the normal requirements of the municipality and its residents. Although there is apprehension that at no distant time the capacity of the waterworks may be taxed to supply the increased needs of the municipality, it is clear that at the present time there is a surplus of water and that this surplus is being disposed of to consumers outside the munici pality.

Acting under the authority conferred by Section 6602-17, General Code, the county commissioners of Hamilton county, in 1925, established in Sewer District No. 1 a waterworks system to supply water to the public. They caused to be constructed in Miami road (then a highway in unincorporated territory in Hamilton county, but now in the incorporated village of Indian Hill) a 16-inch water main, as well as other mains, and, as authorized by law, levied an assess*67ment of $2.13 per front foot plus $25 per acre to pay the cost.

The relator’s land consists of 43 lots of an area of more than one acre each, no part of which is contiguous to the city of Cincinnati. These lots formed a part of a tract of 213 acres acquired by the relator and its predecessor in title, all located in Sewer District No. 1. This land was acquired between 1929 and 1936 for the purpose of dividing it into residential lots of not less than one acre each, and this has - been done, at least in part. The part that has not been subdivided abuts on Miami road, where the 16-inch water main was installed.

The relator and its predecessor in title have paid in the form of assessments the- sum of $16,892.59 as their share of the cost of installing this water distribution system in Sewer District No. 1.

In 1935, while this land was still in unincorporated territory, the relator’s predecessor in title, as required by law, filed with the city planning commission of Cincinnati a preliminary plan for the subdivision of such land, which plan was tentatively approved, and, in 1942, after the land was incorporated as a part of the village of Indian Hill, the plan was filed with that village and tentatively approved on January 28, 1946.

The investment, including the original cost, plus the cost of constructing roads, streets, sewers, etc., totals somewhere between a quarter and a half million dollars. A very substantial portion of this cost was incurred in constructing water-main extensions under the supervision of and in accordance with the plans of the waterworks department of the city of Cincinnati, with the purpose of securing the supply of water through the water main previously constructed in Miami road.

*68In 1925, when the county commissioners, acting-under authority of Section 6602-1, General Code, created Sewer District No. 1 and laid out the water-distribution system therein, as heretofore set forth, they entered into a contract with the city of Cincinnati to provide the water for this district and eight others. On October 10, 1930, a new contract was substituted. This contract was to expire on May 29, 1946, and provided that the city of Cincinnati would furnish water from its surplus at one and one-half times the price charged by it to its residents and would collect the charges directly from the users in Sewer District No. 1.

After May 29, 1946, the city of Cincinnati continued and still continues to furnish water to residents in Sewer District No. 1, to whom it was supplying water on that date.

In making this contract with the county commissioners to supply water for the distribution system in Sewer District No. 1, the city of Cincinnati acted under the general authority conferred by Section 6 of Article XVIII of the Constitution of Ohio, which authorizes municipalities owning and operating waterworks systems to sell to others outside the municipal limits any surplus not exceeding 50 per cent of the total furnished' within the municipality. By Section 6602-17, General Code, municipalities are specifically authorized to sell their surplus water to water-supply systems established by counties.

In August 1946, the relator applied to the waterworks department for leave to attach or have attached the water-main extensions which it had constructed in Miami road, so that the relator’s property would be served with water on the same terms as it was served to all others in such district. When this application was placed before the council of the city of Cincinnati in the form of a proposed ordinance au*69thorizing the connection, the council refused to adopt it. In November 1946, the relator made written demand upon the respondents for this' service, which was refused on January 18, 1947, on the ground that, as the relator refused to comply with Ordinance 164-1946, -they were not authorized to comply with the request. By section '1 of that ordinance, the city manager was authorized to continue for a period of five years from May 29, 1946, in accordance with the terms of existing contracts, except as modified by such ordinance, to supply water from such surplus as it might have to areas outside .the city of Cincinnati at the rate of 15 cents per 100 cubic feet; with the proviso, however,, that no water should be furnished through any extension of existing mains outside the city. There was imposed a furthér limitation that whenever an owner of land outside the city, which land was so located that it should become a part of the city, made a binding commitment on behalf of himself and subsequent owners to sign any petition or other document necessary to procure annexation of the land, and to do all things necessary or proper to bring about the annexation of the land, then the city manager should report such facts and his recommendations to council for its consideration as to whether water should be furnished to such owner. This ordinance expressly reserved the right of council to furnish water outside the city limits without such commitment, where a denial would cause gre.at hardship or serious economic social disadvantage to the community.

Since May 29, 1946, council has adopted 46 ordinances authorizing the city manager to supply water, through water-main extensions to be constructed, to owners outside the city who had committed themselves to co-operate in proceedings to annex their lands to *70the city as required by Ordinance 164-1946. In one instance the city manager was authorized to sell water to an owner outside the city on the ground that a denial would result in great hardship and serious economic and social disadvantage to the community. None of these instances, however, was in Sewer District No. 1, The relator refused to commit itself to co-operate in annexation proceedings. It is assured that relator would have been furnished water had it so committed itself.

As the others in Sewer District No. 1 are being furnished water without being required to commit themselves to co-operate in annexation proceedings, we pass by, without deciding, the interesting question as to the validity of a contract purporting to commit a citizen to co-operate in the desire of municipal officials to enlarge the municipal territory and authority. ,Valid or not, the relator’s refusal to sign a commitment was the only reason assigned for the respondents ’ refusal to furnish water.

As we view this case, it does not involve the general question of the right of any owner of land outside Cincinnati to have water supplied to him by Cincinnati or the right of any owner of land in Hamilton county outside of Sewer District No. 1. The question,' as we see it, is the limited one of the right of an owner of land in Sewer District No. 1 to have water furnished to his property upon the same terms and conditions as it is being furnished to the other owners of land in that district. Whether, in some other relation, the reason assigned for the refusal would be valid *per se*is of no consequence.

That an effective sewage-disposal and water-distribution system relates to the public health and, therefore, is a proper object of government, no one disputes at this late day. Although the limits of the *71pólice or sovereign power are often disputed, the fact that it includes every exertion that has any reasonable tendency to prevent disease and promote health is never the subject of argument. The power to enact all laws having any relation to those subjects is a part of the power expressly reserved to the state by the Tenth Amendment to the Constitution of the United States. However, this power must be exercised subject to the limitations upon state power imposed by other provisions of the United States Constitution, among which are the provisions of the fourteenth Amendment, that no state shall deprive any person of life, liberty or property without due process of law nor' deny to any person within its jurisdiction the equal protection of the law. The sovereign people of the state have recognized these limitations upon their, power by expressly imposing by Sections 2 and 19 of Article I of the Ohio Constitution these same limitations upon the agencies of government instituted by them.

So the city of Cincinnati, by . virtue of the power delegated to municipalities in the Ohio Constitution to exercise all local police power (Section 3 of Article XVIII) not in conflict with general laws and to own and operate a waterworks system (Section *4*of Article XVIII), was and is fully authorized to make distribution of the water and own and operate the facilities necessary or convenient to accomplish that purpose, limited, however, g-eographically by the municipal boundaries and constitutionally by the provisions that forbid the power to be so exercised as to deny to any person due process of law or the equal protection of. the law. There must be no discrimination. This does not prevent the classification of users of water within the city and regulation of use and rates according to classes, but the classification must be *72based on actual and substantial distinctions and all within the same class must be served without discrimination. Those similarly situated must be similarly treated.

"When the city of Cincinnati, engages in the supplying of water to the residents within its border, it is performing a governmental function. We are not concerned here with the distinction between governmental capacity and proprietary capacity for the purpose of fixing tort liability. Regardless of that distinction, the city is exercising the sovereign power of the state when it is engaged in such enterprise and it must do so without discrimination. The city is not authorized to enter into the private business of supplying water. No such power has been conferred upon it. However, if, in the exercise of the governmental function of supplying water to' its residents, a surplus is found to exist, the city becomes the owner of that surplus, and, as it is not used or useful for any governmental purpose within the municipality, it may be disposed of as any other property of which the city- may become the owner and for which it has no public use. It is an exercise of governmental power to dispose of such property, but upon the sale of such property, the governmental function ceases. On this subject, it is said,-in 37 American Jurisprudence, 748, Section 132:

‘ ‘ * * * where, as a necessary result of carrying on a legitimate public enterprise in a reasonably prudent manner, a surplus of the material used or distributed is acquired, or a by-product created, a municipal corporation may lawfully engage in the business of disposing of such surplus or by-product for profit, without special legislative authority.”

Speaking- of the status of surplus property (water power and electric energy) acquired in the exercise *73of the power of government, Chief Justice Hughes, in *Ashwander v. Tennessee Valley Authority,*297 U. S., 288, 333, 80 L. Ed., 688, 56 S. Ct., 466, said:

“That the water power and the electric energy-generated at the dam are susceptible of disposition "as property belonging to the United States is well established. In the case of *Green Bay Canal Co.*v. *Patten Paper Co., supra*[172 U. S., 58, 43 L. Ed., 364, 19 S. Ct., 97], the question was ‘whether the water power, incidentally -created by the erection and maintenance of the dam and canal for the ^purpose of navigation in Fox river’ was ‘subject to control and appropriation by the United States, owning and operating those public works, or by the state of Wisconsin, within whose limits Fox river lies.’ *Id.,*pp. 68, 69 * * * it was decided # # that it was ‘equally plain that the mode and extent of the use and enjoyment of such property by the canal company’ fell within the sole control of the United States.”

On the subject of sale of property once devoted to. a public purpose, but no longer used or useful for such purpose, it is said, in 3 McQuillin Municipal Corporations (Rev. 2 Ed.), 1028, Section 1243:

“Property devoted to a public use cannot be sold- or leased without special statutory authority, although property which has ceased to be used or is not .used by the public may be sold or leased as the public welfare may require.' * * * Municipal corporations hold all property in which the public is intérested, such as streets, alleys, public squares, commons, parks and wharves, in trust- for the use of the public, and on principle, such trust property can no more be disposed of by the municipality than can any other trust property held by an individual.”

Both by constitutional provision and by statute, the state of Ohio has recognized that surplus water *74beyond the municipal needs might result from the operation of a water-works system, and has provided that such surplus can be sold, but such authority to sell did not transmute the local municipal 'sovereign into a roving sovereign going beyond the city limits into the domain of other rulers. Such sovereign shed the regal panoply when it stepped beyond the municipal boundaries. Notwithstanding the power to sell the surplus, water, the city could not supplant the governmental power of the political subdivision into which the water might be taken. If the city entered the territory of other political subdivisions in order to sell its surplus, it did so as an owner of property for which it had no public use, seeking a purchaser or purchasers in a locality over which it had no governmental power.

Likewise in matters of county-wide concern, policy-making power has been delegated to the commissioners, and specifically has this power been confided to such board in the matter of establishing sewer districts and water-distribution systems and providing by contract or otherwise for a supply of water. Although the power to divide the county into districts is conferred, this power must not be exercised arbitrarily. The district bounds must be drawn with some reasonable relation to topography and habitation, so as to include to a practical degree all those similarly situated. When the district is established, all those residing within its bounds must be served without any discrimination.

Although the county commissioners are given the power to contract with a municipality for water and the municipality is authorized to sell water from its surplus, it is the county commissioners that exercise the sovereign power of the state in determining whether there shall be established and operated a *75sewer-disposal and water-distribution system within the unincorporated portion of the county and it is to the county commissioners that has been delegated the auxiliary power of taxation, assessment and eminent domain to effectuate the policy determined by them. When the city of Cincinnati entered the unincorporated portion of the county, it did so in its own right only as a vendor of surplus water. Whatever it has rightfully done in distributing water to the residents of the district has been as an agent of the county commissioners. It was and is without power to establish a county sewer district or to determine how such district shall be operated. That power rests in the county commissioners and discrimination is prevented by constitutional provisions. The commissioners themselves must not discriminate, and what they cannot do themselves, they cannot authorize any other person or corporation to do.

• We believe the principles 'announced in the case of *Western Reserve Steel Co.*v. *Village of Cuyahoga Heights,*118 Ohio St., 544, 161 N. E., 920, are controlling here.

The facts in that case were:

The village of Cuyahoga Heights secured the water for its water-distribution system from the city of Cleveland under a contract containing a provision that if a user of water failed to pay the city of Cleveland for the water, the city of Cleveland had the right to turn off the water. If after such shutting off, the consumer failed to pay, then the village of Cuyahoga Heights would pay the city of Cleveland for the water, in which event the city of Cleveland would not turn the water on again for the delinquent consumer, or for anyone holding title through such consumer, unless the village of Cuyahoga Heights consented. A consumer defaulted, was adjudged- a bankrupt and *76the premises to which the water had been supplied were sold to Western Reserve Steel Company. The water bill not having been paid, the village of Cuyahoga Heights refused to consent to the turning on of the water connecting with the premises. Neither by contract nor by ordinance was the unpaid water bill made a lien on the premises where the water had been consumed. The suit was brought to require the turning on of the water. 7

The court held, as stated in the syllabus:

“1. It is the duty of a municipality which undertakes to supply water' to its public, to do so without discrimination. The duty arises out of such undertaking, regardless of the mode adopted to accomplish such purpose. The municipality cannot absolve'itself of such duty by a contract to which the person sought to be discriminated against and to whom it owes the duty is not a party. * * *

“3. When a municipality contracts to supply water to the public of another municipality, it dedicates itself in that respect to the service of the public of such other municipality; and while it may limit, by contract, the scope and extent of its duty to the municipality as such, it cannot, while enjoying the privileges and immunities of a public utility, by such contract absolve itself from the duties toward such public that are cast upon it by law by reason of such dedication. ’ ’

And at pages 549 and 550, the court said:

“With reference to the two municipalities themselves, the city of Cleveland and the village*of Cuyahoga Heights, the contention of the defendants in error is probably tenable. It is probably true that neither could enforce performance by the other- without performance - or tender of performance to the other, for, in respect to supplying water to each other and each other’s public, they owed no duty except *77such as they might impose upon themselves by contract. But when a municipality, under the authority conferred upon it by the Constitution, engages in the operation of a public utility, it enters that field burdened with the same duties and subject to the same restrictions, in respect to, the public of the territory served, as would apply to and govern a private corporation similarly engaged; and especially where it engages in such enterprise *extra territorium*is its relationship to the public shorn of sovereign prerogative. ’ ’ •

It is true that a factual distinction exists between the *Western Reserve Steel Company case*and the instant one, in .that that case involved a contract between two municipalities. However, we do not perceive where a municipal corporation owes any greater duty to serve its residents with water without discrimination than do county commissioners in serving the residents of a sewer district established by .the commissioners for the sole purpose of furnishing such service. It is also true that the contract involved in the steel company case was for an unexpired term, whereas, in the instant case, the original contract between the city of Cincinnati and the county commissioners was for a term of twenty years, which had elapsed. However, Cincinnati continued to supply water to consumers within Sewer District No. 1 through the water-distribution system established by the county commissioners in the exercise of their governmental powers. Cincinnati could do this only by the consent of the county commissioners; in other words, it was done as a result of a contract, tacit or express, between the two political agencies. Whether the contract was for a definite term or only at will is entirely unimportant. The important and controlling element is that the county commissioners through the *78the city of Cincinnati are furnishing a public service and under constitutional provisions are not permitted to discriminate among those similarly situated.

For these reasons, a peremptory writ of mandamus will be issued in conformity to the alternative writ heretofore issued.

*Writ allowed.*

Matthews, P. J., and Hildebrant, J., concur in the syllabus, opinion and judgment.

Ross, J.,

concurring in the syllabus and judgment. I concur in the conclusion of my associate, Judge Matthews.

It is stated in the second paragraph of the syllabus in the case of *City of Barberton*v. *Miksch,*128 Ohio St., 169, 190 N. E., 387:

“In the construction and maintenance of a system for supplying water to its inhabitants, a municipality acts in a proprietary capacity.” See, also, City *of Salem*v. *Harding,*121 Ohio St., 412, 417, 169 N. E., 457.

I consider certain statements made' in the opinion of my associate to be in conflict with those authorities.

In *Cleveland Ry. Co.*v. *Village of North Olmsted,*130 Ohio St., 144, 148, 198 N. E., 41, 101 A. L. R., 426, where the *Barberton case*is cited with approval, it is stated:

“This court held, in the first paragraph of the syllabus in *State, ex rel. White,*v. *City of Cleveland,*125 Ohio St., 230, 181 N. E., 24, 86 A. L. R., 1172:

“ ‘A municipality, in so far as it acts in a proprietary capacity, possesses the same rights anql powers and is subject to the same restrictions and regulations as other like proprietors.’ ”

In *Western Reserve Steel Co.*v. *Village of Cuya*
      *79
      *hoga*Heights, 118 Ohio St., 544, 552, 161 N. E., 920, it is stated:

“At the same time, because of its having entered the field of public utilities, there devolved upon the city of Cleveland certain duties toward the public of the territory it had undertaken to serve that were cast upon it, not by the contract, but because of the contract, among which was the duty to serve the utility to the public of the designated territory without discrimination, from the performance of which duty it could not absolve itself except by contract with the person to whom it owed the duty.”

Many authorities are cited in support of that statement. The principle is incorporated in the syllabus quoted in the opinion of my associate.

The city of Cincinnati having seen fit in its proprietary capacity to assume to furnish water to some residents in Sewer District No. 1, Hamilton county, is subject to the same restrictions against discrimination as would apply to*any public utility assuming a similar service.

Under such circumstances, therefore, those residents of Sewer District No. 1, who are refused a service granted to other residents, may have the benefit of a writ of mandamus, through which such discrimination may be eliminated.