Source: https://caselaw.findlaw.com/us-supreme-court/206/496.html
Timestamp: 2019-04-22 19:35:54+00:00

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Statement by Mr. Justice Day: [206 U.S. 496, 497] Cases involving the rights of the Vicksburg Waterworks Company, under the contract made between the city of Vicksburg and the company, for furnishing the water supply of the city, have been before this court in two preceding actions, viz.: Vicksburg Waterworks Co. v. Vicksburg, 185 U.S. 65 , 46 L. ed. 808, 22 Sup. Ct. Rep. 585, and 202 U.S. 453 , 50 L. ed. 1102, 26 Sup. Ct. Rep. 660.
The ordinance, by its terms, ran for thirty years, and Bullock & Company, as provided in 5 of the ordinance, assigned the contract to the Vicksburg Water Supply Company, [206 U.S. 496, 498] and it was duly accepted by that company. The supply company put in the works and operated until August, 1900, when the mortgage upon the property, including all the franchises and contract rights, was foreclosed and purchased by a Mr. Crumpler, who assigned all his rights and title to the Vicksburg Waterworks Company, the appellee herein, which company has operated the works since.
The legislature of Mississippi, on March 18, 1900, passed an act authorizing the city to issue bonds and build a waterworks system of its own for the supply of the city and its inhabitants, and on the 3d of July, 1900, an election was held in the city under the statute, which resulted in a vote to build or buy a waterworks plant of its own.
[206 U.S. 496, 500] During the pendency of the original action the legislature of Mississippi passed an act authorizing the cities and villages of the state to prescribe, by ordinance, maximum rates and charges for the supply of water, electric light, and gas furnished to cities and the inhabitants thereof. Laws of Mississippi 1904, p. 231. Section 1 of this act is inserted in the margin. 1 [206 U.S. 496, 501] On April 20, 1904, about one month before the rendition of the final decree in the original case, the city adopted two ordinances fixing the maximum charge for the use of water, one by what is known as the 'flat rate' and the other for water measured by meters.
On the 7th of January, 1905, the water company, in view of this action by the city, filed another bill, which is the original bill in this case, and was numbered 79, in which it set forth the preceding history of the litigation, the decree of May 18, 1904, the city ordinance of December 7, 1903, and the two of April 20, 1904, and in that bill alleged its contract under the ordinance of 1886 and the former decree, and that the enforcement of the ordinances was in violation of that decree and the company's contract of 1886, and would be destructive of its business, and they prayed for an injunction. A temporary injunction was allowed, and afterwards, the case standing on the bill, answer, and exhibits attached thereto, a final decree was rendered in the case, which final decree is set forth in the margin. 1 [206 U.S. 496, 502] Messrs. Hannis Taylor and George Anderson for appellant. [206 U.S. 496, 504] Messrs. J. Hirsh and Murray F. Smith for appellee.
An examination of the record in the former case shows that the only testimony taken in the case, as to the reasonableness of the rates charged to private consumers, was on behalf of the company, and tended to show that the rates charged were reasonable, and if it could be said that the pleadings put in issue the reasonableness of the rates then charged, was the right of the city to regulate rates under a subsequent law of the state necessarily involved and concluded? The determination of issues as to the right of injunction against the city building its own works, or denying liability or refusing to pay the rentals contracted for, and a finding that existing rates were reasonable, did not necessarily conclude a controversy which might thereafter arise, as to the right of the city to fix rates when the legislature of Mississippi should pass a law for that purpose, giving the city the right to regulate the same. It is to be remembered that when the bill was filed in the original case no such law had been passed; that when the act of March, 1904, went into effect the case was nearly ready for final decree, and the city passed its ordinances long after the beginning of the suit, an shortly before that decree. No supplemental bill was filed, but after the decree, in January, 1905, the present independent suit was brought, with a view to enjoining the proposed action of the city in enforcing ordinances regulating the rates by charges other than those contained in the contract.
Upon the appeal, the question seems to have been argued by the city as though made in the case, though the brief on behalf of the appellee contends that the act of 1904 was not [206 U.S. 496, 508] involved. But a decree must be read in the light of the issues involved in the pleadings and the relief sought, and we are of opinion that the matters now litigated were not involved in or disposed of in the former case, and that, when properly construed, the decree does not finally dispose of the right of the city to regulate rates under a law passed after the contract went into effect, and long after the bill was filed in the case.
That a state may, in matters of proprietary rights, exclude itself from the right to make regulations of this kind, or authorize municipal corporations to do so, when the power is clearly conferred, has been too frequently declared to admit of doubt. Los Angeles v. Los Angeles City Water Co. 177 U.S. 558 , 44 L. ed. 886, 20 Sup. Ct. Rep. 736; Walla Walla v. Walla Walla Water Co. 172 U.S. 1 -7, 43 L. ed. 341-344, 19 Sup. Ct. Rep. 77; New Orleans Waterworks Co. v. Rivers, 115 U.S. 674 , 29 L. ed. 525, 6 Sup. Ct. Rep. 273; Freeport Water Co. v. Freeport, 180 U.S. 587 -593, 45 L. ed. 679-686, 21 Sup. Ct. Rep. 493.
In the latter case this court, following the construction of the supreme court of Illinois, held that where a city council was authorized to contract with any person or corporation to construct and maintain waterworks at such a rate as may be fixed by ordinance for a period not exceeding thirty years, the words 'fixed by ordinance' being capable of application so as to make one ordinance endure for the period of thirty years, fr which the contract was made, or to give the right to pass ordinances from time to time regulating rates, the latter construction was adopted. [206 U.S. 496, 509] In the cases generally in this court it will be found that, in determining the matter of contract, the local decisions have been given much weight and, ordinarily, followed. As this is a Mississippi contract, and the power was exercised under the authority of an act of the legislature of that state, we naturally look to the decisions of the courts of that state, particularly to such as had given construction to similar charters at the time the contract was made, with a view to determining the extent of the power conferred.
'We decline to follow the decision in Griffin v. Goldsboro Water Co. 122 N. C. 206, 41 L.R.A. 240, 30 S. E. 319, in holding that while a water company which accepts an ordinance by which a maximum rate is fixed is bound, and cannot exceed the same because of its contract, yet such rates are not binding upon consumers, who have a right to litigate against unreasonable charges. This holding, it seems to us, practically denies the power of a company, under a contract embodied in its charter giving the power, so to fix a rate as to bind a private consumer at all. It opens a never-ending and limitless field of litigation. It is well settled that the courts cannot fix a rate; and if, proceeding duly under statutes enacted for that purpose, the municipality cannot do so, or authorize the com- [206 U.S. 496, 510] pany by contract to do so, and thereby bind the citizens, then there is no authority by which it can be done.
'The power to contract is an essential attribute of sovereignty and is of prime importance. Its exercise has been productive of incalculable benefits to society, however great may be the evils incident to its injudicious employment. It cannot be denied merely because of its liability to abuse. The power to contract implies the power to make a valid contract. . . . The right to grant charters includes the right to grant such as will be upheld. Conferring power on the grantee of the franchise to fix rates of compensation at discretion, or within prescribed limits fixed by the charter, has been the common practice of the legislatures of the states of the United States from an early period of their history. The fight of the corporators to exercise the powers conferred by the act of incorporation, whether to fix rates themselves or to take those fixed by their charter, and to rest securely on its provisions in this respect, has hitherto been generally regarded as indisputable.
'A grant in general terms of authority to fix rates is not a renunciation of the right of legislative control so as to secure reasonable rates. Such a grant evinces merely a purpose to confer power to exact compensation which shall be just and reasonable.
'If the grant can be interpreted without ascribing to the legislature an intent to part with any power, it will be done. Only what is plainly parted with is gone. Fixing rates in a charter is a specification of what is reasonable,-an exclusion of tacit or implied conditions on the subject. it is an essential part of the contract of incorporation, the most important condition of its existence, the inducing cause of its acceptance.' [206 U.S. 496, 512] We are referred to other cases in Mississippi which deal directly with the extent of the power conferred upon municipal corporations in charters in general terms, some of which we may notice.
'In view of the nature and character of the subject-matter of the contract which the board of mayor and aldermen of the city of Jackson was authorized to make by the 3d section of the act of February 29th, 1888, we think the contract entered into with the appellant was within the delegation of power, so far as the time ofit duration is involved. . . . We know that the machinery, mains, and appliances required for supplying the city with water are costly to begin with, and are relatively of little value if removed when once located. Permanency of the plant is essential to the realization of any profit in the enterprise, and in cities having no greater population than that of Jackson the use of water for municipal purposes would probably be a prerequisite to secure the in- [206 U.S. 496, 513] vestment of the capital necessary to the construction of the plant. The words from 'year to year' relied upon by the appellee as limiting the power of the officers of the city to the making of the annual contracts, derived much of their significance from the subject and nature of the thing contracted for, the character of the body on which the power is conferred, the end to the attainment of which the power is to be exercised, and the extent to which such powers for such purposes are usually conferred. . . .
'The intent of the legislature to confer the power without restriction appears to us to be too plain, from the collocation and order and sequence of the sections and article of the charter act, to admit of obscuration by learned argument about original power. The very last legislative action on the subject, that in the municipal charter of the Code of 1892, shows that the lawmakers thought the power to be one to be conferred or prohibited, because it expressly confers it on cities and towns and prohibits its exercise by villages.
'It is claimed now that the last clause of 1 of the first quoted of the above acts (that approved March 10, 1888) applied to and modified the charter of the city of Vicksbug so as to make the contract here in controversy void because not submitted to vote. In order to this result it is claimed that, in the charter of Vicksburg, it is not 'otherwise provided,' . . . because the charter expressly confers the power, without restriction, on the municipal board at any 'regular or special meeting.' Besides, in construing the section of the act secondly above quoted, this court expressly so held in the case of Light, Heat, & Water Co. v. Jackson, 73 Miss. 644, 19 So. 771. It the precise point was not made, the omission is quite significant of the opinion of the emininent counsel for appellee in that case [206 U.S. 496, 515] that there was nothing in it. aside from this, the question was at the very root of the cause, and was considered and decided, and it is the exact question in the case at bar, except that this case is somewhat stronger in favor of the power than the case decided.
'By 3 of the act of February 29, 1888, the Jackson board was 'hereby authorized and empowered to contract.' etc., while, by the Vicksburg charter act, the board was authorized to so contract 'at any regular or special meeting.' We presume that no charter then existent 'otherwise provided' by an express prohibition of electric lighting without vote. The grant of the power without restriction is to 'otherwise provide."
In the light of these decisions, and others might be cited, we reach the conclusion that, under a broad grant of power, conferring, without restriction or limitation, upon the city of Vicksburg, the right to make a contract for a supply of water, it was within the right of the city council, in the exercise of this power, to make a binding contract, fixing a maximum rate at which water should be supplied to the inhabitants of the city for a limited term of years; and, in the absence of a showing of unreasonableness 'so gross,' as the court of Mississippi has said, 'as to strongly suggest fraud or corruption,' this action of the council is binding, and for the time limited puts the [206 U.S. 496, 516] right beyond legislative or municipal alteration to the prejudice of the other contracting party.
While we, therefore, reach the conclusion that the former case did not adjudicate the matter, we think the contract in this respect was within the power of the council, and cannot be violated consistently with the contract rights of the company by the subsequent ordinances of the city.
In this case the circuit court rendered a final decree practically upon the bill and answer. No testimony was taken, and all that was before the court was the bill, answer, and exhibits. We think the decree goes too far in enjoining the city from interfering with the contract right of the company to charge the rates fixed thereby, in view of the allegations of the answer, that the rates charged by the company exceeded those named in 13 of the ordinance of 1886.
The decree should be modified, so as to enjoin interference on the part of the city during the term of this contract, with the right of the company to charge rates not in excess of 50 cents a thousand gallons to private consumers, as set forth in the ordinance.
With this modification, the decree will be affirmed.
[ Footnote 1 ] Equity, No. 41.
Mayor and Aldermen of the City of Vicksburg, Mississippi.
First. That the defendants, the Mayor and Aldermen of the city of Vicksburg, be and are hereby perpetually enjoined from abrogating and taking away, or from assuming to abrogate or take away, the franchises or contract rights of complainant under and by virtue of the ordinances, franchises, or contract of said defendants entitled, 'An Ordinance to Provide for a Supply of Water to the City of Vicksburg, in Warren County, Mississippi, and to Its Inhabitants, Contracting with Samuel R. Bullok & Company, their Associates, Successors, and Assigns for a Supply of Water for Public Use, and Giving the Said City of Vicksburg an Option to Purchase the Said Works,' ordained the 19th day of November, 1886, approved by John W. Powell, mayor, November 19th, 1886, being the ordinance, contract, and franchise marked exhibit B to the original bill of complaint, and said ordinance, contract, and franchise being specifically and accurately set out in words and figures in the pleadings, which ordinance, contract, and franchise was acquired by and is the sole and exclusive property of said complainant.
Second. That said ordinance, contract, and franchise be and is hereby declared and held to be in every respect legal, valid, and enforceable and binding upon said defendant, and said defendant is hereby perpetually enjoined from infringing, ignoring, rescinding, or denying liability under said ordinance, contract, and franchise in any of its parts, or from in any manner disturbing or interfering with the rights, privileges, and benefits acquired by complainant thereunder.
And also to rescind the ordinance or reso- lution of said defendant adopted the 7th day of February, 1901, when said defendant adopted the report of the committee on waterworks, as set out in the pleadings.
Fourth. That the said defendant refrain from in any manner accepting the benefits of or proceeding under the act of the legislature of the state of Mississippi approved March 9, 1900, and from issuing bonds under and by virtue of said act, or any other act or ordinance, for the purpose of erecting waterworks of its own during the period prescribed by ordinance, contract, and franchise.
Fifth. That the said defendant refrain from constructing waterworks of its own until the expiration of the period prescribed in said ordinance, contract, and franchise, dated the 16th day of November, 1886.
Sixth. That the said defendant be, and is hereby, required to pay all moneys due or owing, or that may hereafter be due and owing to said complainant under and by virtue of said ordinance, contract, and franchise.
Seventh. That the said defendant be, and is hereby, perpetually enjoined from making or adopting any resolutions or ordinance refusing to pay the contract price of water fixed by said ordinance, contract, and franchise until the expiration of the period prescribed in said ordinance, contract, and franchise.
Ninth. That said defendant pay the costs of this cause to be taxed.
[ Footnote 1 ] Section 1. Be it enacted by the legislature of the state of Mississippi, That the corporate authorities of any city, town, or village now or hereafter incorporated under any general or specific laws of this state, in which any individual, company, or corporation has been, or hereafter may be, authorized by said city, town, or village to supply water, electric light, or gas to said city, town, or village, or the inhabitants thereof, be, and they are hereby, empowered to prescribe by ordinance maximum rates and charges for the supply of water, electric light, or gas furnished by such individual, company, or corporation to such city, town, or village or the inhabitants thereof, such rates and charges to be just and reasonable. And in case the corporate authorities of any such city, town, or village shall fix unjust and unreasonable rates and charges, the same may be reviewed and determined by the circuit court of the county in which said city, town, or village may be; provided, that this act shall not be construed so as to impose (impair) the effect of obligation of any valid or binding contract with any waterworks company, electric light company, or gas company, now existing, or heretofore made with any individual or water company, electric light or gas company.
fixing the water rates and prescribing rules and regulations of the Vicksburg Waterworks Company, and that the Vicksburg Waterworks Company shall not be permitted to cut off patrons' water, providing patrons pay the rates fixed in said ordinances.
Second. That said defendant be, and is hereby, enjoined from enforcing the said three ordinances described in said bill, to wit: An ordinance entitled 'An Ordinance to Fix and Prescribe Maximum Rates and Charges for Water Suppliedto the Inhabitants of the City of Vicksburg, Whether Measured by Meters, and for Other Purposes,' approved the 20th of April, 1904, an ordinance entitled 'An Ordinance to Fix and Prescribe the Maximum Flat Rates and Charges for the Supply of Water to Consumers in the City of Vicksburg, and for Other Purposes,' approved the 20th day of April, 1904; and an ordinance entitled 'An Ordinance to Require Waterworks, Gas, and Electric Companies to Present Bills before Charging Damages for a Failure to Pay Them When Due,' approved the 8th day of December, 1903, so far as the latter relates to complainant.
Third. That the restraining order heretofore granted in this cause on the 11th day of January, 1905, be and the same is hereby made permanent.
Fourth. That the said defendant be, and is hereby, enjoined from in any manner interfering with the complainant's contract rights under its said contract with the city of Vicksburg, entered into between Samuel R. Bullock & Company and said city, under the ordinance of November 19th, 1886.
Fifth. That the defendant be, and is hereby, enjoined from interfering with the rules and regulations of complainant, the Vicksburg Waterworks Company, and the water rates for the inhabitants of the city of Vicksburg, now in force, established by the Vicksburg Waterworks Company.
Sixth. That said defendant be, and is hereby, enjoined from interfering with the water rates known as the flat rates, now in force, established by the Vicksburg Waterworks Company.
It is further ordered, adjudged, and decreed that the defendant pay all costs of this cause.
Finally ordered, adjudged, and decreed this, the 3d day of Jan. A. D. 1906.

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