Source: https://www.legalcrystal.com/case/84858/spring-valley-waterworks-vs-schottler
Timestamp: 2019-04-25 14:25:41+00:00

Document:
Laws requiring gas companies, water companies and other corporations of like character to supply their customers at prices fixed by the municipal authorities of the locality are within the scope of legislative power unless prohibited by constitutional limitation or valid contract obligation.
purposes, and that all laws, general and special, passed pursuant to that provision might be from time to time altered and repealed. A general law was enacted by the legislature for the formation of corporations for supplying cities, counties, and towns with water, which provided that the rates to be charged for water should be filed by a board of commissioners to be appointed in part by the corporations and in part by municipal authorities. The constitution and laws of the state were subsequently changed so as to take away from corporations which had been organized and put into operation under the old constitution and laws the power to name members of the boards of commissioners, and so as to place in municipal authorities the sole power of fixing rates for water. Held that these changes violated no provision of the Constitution of the United States.
The plaintiffs in error were petitioners in the courts of California for a writ of mandamus against the defendants in error. The constitutional question at issue was the right of the California to alter the plaintiff's charter. The facts making the case to raise this question are stated in the opinion of the Court.
"Corporations may be formed under general laws, but shall not be created by special act except for municipal purposes. All general laws and special acts passed pursuant to this section may be altered from time to time or repealed."
"That all canals, reservoirs, ditches, pipes, aqueducts, and all conduits . . . shall be used exclusively for the purpose of supplying any city or county, or any cities or towns, in this state, or the inhabitants thereof, with pure fresh water."
"SEC. 4. All corporations formed under the provisions of this act or claiming any of the privileges of the same shall furnish pure fresh water to the inhabitants of such city and county, or city or town, for family uses, so long as the supply permits at reasonable rates, and without distinction of persons, upon proper demand therefor, and shall furnish water, to the extent of their means, to such city and county, or city or town, in case of fire or other great necessity free of charge. And the rates to be charged for water shall be determined by a board of commissioners, to be selected as follows: two by such city and county, or city or town, authorities, and two by the water company, and in case that four cannot agree to the valuation, then, in that case, the four shall choose a fifth person, and he shall become a member of said board; if the four commissioners cannot agree upon a fifth, then the sheriff of the county shall appoint such fifth person. The decision of a majority of said board shall determine the rates to be charged for water for one year and until new rates shall be established. The board of supervisors, or the proper city or town authorities, may prescribe such other proper rules relating to the delivery of water not inconsistent with this act and the laws and constitution of this state."
County of San Francisco with water. In January, 1878, the board of supervisors of the city and county appointed Isaac B. Friedlander and H. B. Williams, and the company appointed W. F. Babcock and Charles Webb Howard, and these four afterwards appointed Jerome Lincoln, to constitute a board of commissioners to determine, under the provisions of section 4, the rates to be charged by the company for water. This board met and fixed a tariff of rates to go into effect on the 1st of June 1878. In July of the same year, Friedlander, one of the commissioners appointed by the supervisors, died. By his death a vacancy was created in the board which has never been filled.
" Water and Water Rights "
state otherwise than as so established shall forfeit the franchises and water works of such person, company, or corporation to the city and county, or city or town where the same are collected for the public use."
"SEC. 2. The right to collect rates or compensation for the use of water supplied to any county, city and county or town or the inhabitants thereof is a franchise, and cannot be exercised except by authority of and in the manner prescribed by law."
Under this provision of the constitution, and the legislation based thereon, the board of supervisors claim the right and power to fix the rates to be charged by the company for water, and refuse to appoint a member to fill the vacancy in the board of commissioners occasioned by the death of the former incumbent. This suit was begun in the supreme court of the state for a writ of mandamus, requiring the board of supervisors to take action in the matter and fill the vacancy. The court, on final hearing, refused the writ and dismissed the petition. This writ of error was brought by the company to review that judgment.
The general question involved in this case is whether water companies in California, formed under the act of 1858, before the adoption of the Constitution of 1879, have a right which the state is prohibited by the Constitution of the United States from impairing or taking away, to charge their customers such prices for water as may from time to time be fixed by a commission made up of two persons selected by the company, two by the public authorities of the locality, and, if need be, a fifth selected by the other four, or by the sheriff of the county. The Spring Valley Company claims no rights of this character that may not also be claimed by every other company formed under the same act.
the Constitution of the United States, to substitute for this commission another, selected without the cooperation of the company, or some other tribunal of a different character, like the municipal authorities of the locality. The Spring Valley Company claims that it has, under its charter, a right to the maintenance of the commission which was created by the requisite appointments in 1878, and the object of this suit is to compel the board of supervisors to perpetuate that commission by filling the vacancy that exists in its membership. So that the whole controversy here is as to the right of water companies that availed themselves of the privileges of the act of 1858 to secure a virtual monopoly of trade in water at a particular place, to demand the appointment of the commission provided for in that act, notwithstanding the Constitution of 1879 and the legislation under it.
The Spring Valley Company is an artificial being, created by or under the authority of the Legislature of California. The people of the state, when they first established their government, provided in express terms that corporations, other than for municipal purposes, should not be formed except under general laws, subject at all times to alteration or repeal. The reservation of power to alter or repeal the charters of corporations was not new, for almost immediately after the judgment of this Court in the Dartmouth College Case ( Dartmouth College v. Woodward, 4 Wheat. 518), the states, many of them, in granting charters, acted on the suggestion of Mr. Justice Story in his concurring opinion (p. 17 U. S. 712 ) and inserted provisions by which such authority was expressly retained. Even before this decision it was intimated by the Supreme Judicial Court of Massachusetts, in Wales v. Stetson, 2 Mass. 143, that such a reservation would save to the state its power of control. In California, the constitution put this reservation into every charter, and consequently this company was from the moment of its creation subject to the legislative power of alteration, and, if deemed expedient, of absolute extinguishment as a corporate body.
a sufficient supply for the inhabitants in many localities, and as a means of combining capital for such purposes the act of 1858 was passed. Other statutes had been enacted before to effect the same object, but it is said they were not such as a company with capital enough to supply San Francisco was willing to accept. The act of 1858 was thought sufficiently favorable, and the Spring Valley Company, after organizing under it, expended a large amount of money to provide the means of supplying the territory on which San Francisco is built, and make it possible to support a great population there. All this was done in the face of the limitations of the constitution on the power of the legislature to create a private corporation and put it beyond the reach of legislative control, not only as to its continued existence, but as to its privileges and franchises. One of the obligations the company assumed was to sell water at reasonable prices, and the law provided for a special commission to determine what should be deemed reasonable both by the consumers and the company, but there is nowhere to be found any evidence of even a willingness to contract away the power of the legislature to prescribe another mode of settling the same question if it should be considered desirable. In the Sinking Fund Cases, 99 U. S. 700 , it was said that whatever rules for the government of the affairs of a corporation might have been put into the charter when granted could afterwards be established by the legislature under its reserved power of amendment. Long before the Constitution of 1879 was adopted in California, statutes had been passed in many of the states requiring water companies, gas companies, and other companies of like character, to supply their customers at prices to be fixed by the municipal authorities of the locality; and, as an independent proposition, we see no reason why such a regulation is not within the scope of legislative power, unless prohibited by constitutional limitations or valid contract obligations. Whether expedient or not is a question for the legislature, not the courts.
charge may be established in the way provided for in that instrument. It will be time enough to consider the consequences of the omissions of the company when a case involving such questions shall be presented.
But it is argued that as the laws in force before 1858, for the formation of water companies, which provided for fixing the rates by the municipal authorities, were not accepted by the Spring Valley Company, and that of 1858, without such a provision, was, it is to be inferred, that the state contracted with this company not to subject it to the judgment of such authorities in a matter so vital to its interests. If the question were one of construction only, this argument might have force, but the dispute now is as to legislative power, not legislative action. The Constitution of California, adopted in 1849, prohibited one legislature from bargaining away the power of succeeding legislatures to control the administration of the affairs of a private corporation formed under the laws of the state. Of this legislative disability the Spring Valley Company had notice when it accepted the privileges of the act of 1858, and it must be presumed to have built its works and expended its moneys in the hope that neither a succeeding legislature, nor the people in their collective capacity when framing a Constitution, would ever deem it expedient to return to the old mode of fixing rates, rather than on any want of power to do so, if found desirable. The question here is not between the buyer and the seller as to prices, but between the state and one of its corporations as to what corporate privileges have been granted. The power to amend corporate charters is, no doubt, one that bad men may abuse, but when the amendments are within the scope of the power, the courts cannot interfere with the discretion of the legislatures that have been invested with authority to make them.
looked upon as contracts with the City and County of San Francisco. The corporation was created by the state. All its powers came from the state, and none from the city or county. As a corporation it can contract with the city and county in any way allowed by law, but its powers and obligations, except those which grow out of contracts lawfully made, depend alone on the statute under which it was organized, and such alterations and amendments thereof as may, from time to time, be made by proper authority. 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 franchise conferred on any corporation formed under the statute and indissolubly connected with the reserved power of alteration and repeal.
upon the corporation. I shall endeavor to show that this doctrine is unsound, believing that in this case, and in all others where it is asserted, it will work injustice.
By a general law of California, passed April 14, 1853, provision was made for the formation of corporations for manufacturing, mining, mechanical, and chemical purposes, or for the purpose of engaging in any species of trade or commerce, foreign or domestic. It enacted that three or more persons, who desired to form a company for any of the purposes mentioned, should make, sign, and acknowledge, before some officer competent to take the acknowledgments of deeds, a certificate stating the corporate name of the company, the objects of its formation, the amount of its capital stock, the time of its existence, which could not exceed fifty years, the number of shares of which the stock was to consist, the number of trustees and their names, who should manage the concerns of the company for the first three months, and the name of the city, or town, or county in which the principal place of business of the company was to be located, and file the certificate in the office of the clerk of the county in which such principal place of business was located, and a certified copy thereof, under the hand of the clerk and seal of the county court, in the office of the Secretary of State, and that upon filing such certificate the persons signing and acknowledging it, and their successors, should be a body politic and corporate by the name stated in the certificate, and have succession for the period limited, and also such powers as are usually conferred upon corporate bodies.
to all corporations already formed or that might afterwards be formed under said acts for the purpose of supplying any city and county, or any cities or towns, in the state, or the inhabitants thereof, with pure fresh water. On the following day, April 23, 1858, another act was passed, which authorized George H. Ensign and other owners of the Spring Valley Waterworks to lay down water pipes in the public streets of the City and County of San Francisco. On the 19th of June, 1858, the plaintiff was organized as a corporation, referring in its certificate to these last two acts; but as the special act relating to Ensign and others was subsequently declared unconstitutional by the supreme court of the state, the incorporation of the plaintiff rests upon the Act of April 22, 1858, or rather upon the acts of 1853 and of 1855, to which it refers. This act of 1858 gave the corporation thus formed the right to purchase or to appropriate and take possession of, and use and hold, all such lands and waters as might be required for the purposes of the company, upon making compensation therefor; with a proviso, however, that all reservoirs, canals, ditches, pipes, aqueducts, and conduits constructed by the corporation should be used exclusively for the purpose of supplying the city and county and the inhabitants thereof with pure fresh water.
person and he should become a member of the board, and if the four commissioners could not agree upon a fifth, then the sheriff of the county should appoint him, and that the decision of a majority of the board should determine the rates to be charged for water for one year, and until new rates should be established. The act also declared that the board of supervisors might prescribe such other proper rules relating to the delivery of water, not inconsistent with the act and the laws and constitution of the state, and that the corporation should have the right, subject to the reasonable direction of the city authorities as to the mode and manner of exercising it, to use so much of the streets, ways, and alleys of the city and county, or of the public road therein, as might be necessary for laying its pipes for conducting water into the city or county, or through any part thereof.
The certificate of incorporation of the plaintiff declared that the objects for which the company was formed were to introduce pure fresh water into the City and County of San Francisco, and into any part thereof, from any point or place, for the purpose of supplying the inhabitants of the city and county with the same, and to do and transact all such business relating thereto as might be necessary and proper, not inconsistent with the laws and constitution of the state.
The necessary supply of water could not be obtained from any natural streams or lakes on the peninsula, upon the upper end of which the city and county are situated. A small lake near the city furnished an insufficient supply, and of inferior quality. The company therefore soon after its incorporation, undertook to collect the required quantity in artificial reservoirs, as it descended in rain from the heavens.
At a distance of about twenty miles from the city, there is a natural ravine lying between the mountains near the ocean and the hills bordering the bay of San Francisco. The company acquired the lands within this ravine and on its sides, amounting, as represented by counsel, to 18,000 acres, and erected in it heavy walls at long distances apart, thus making great reservoirs, into which the water was collected until lakes were formed extending several miles in length.
With aqueducts, pipes, and other conduits, the water thus collected was carried to the city and distributed in mains. It is said that the cost of these works to the company amounted to nearly $15,000,000. Before their construction and the introduction of this water the inhabitants of the city were poorly and inadequately supplied. With the completion of the works of the plaintiff all this was changed. Water was furnished to all persons calling for it at their houses, and, if desired, in every room, and to the city in abundance for all its needs.
addition to the requirement that its costly works, consisting of aqueducts extending nearly thirty miles out of the city, and mains within it exceeding one hundred miles, should be used exclusively for the purpose of supplying the city and county with water. The reasonable rates allowed for the water furnished to the inhabitants of the city and county constituted the only compensation of the company for the enormous outlay to which it was necessarily subjected, and for all the benefits it undertook to confer. The law in declaring that a company formed under it should supply water to the city and county in cases of great necessity free of charge, and to their inhabitants on demand at reasonable rates, in effect declared that the company complying with such terms should receive those rates for water thus supplied to the inhabitants. When, therefore, the plaintiff organized under the law introduced the water, a contract was completed between it on the one part and the state on the other, that so long as it existed and furnished the water as required it should receive this compensation. The provisions for the creation of an impartial tribunal to determine each year what rates should be deemed reasonable, was the very life of the stipulation, for a reasonable compensation. It would not have done to leave the compensation to be fixed by the company alone, as it might thus make its charges exorbitant; it would not have done to leave the rate to be fixed by the city authorities alone, as they would be constantly under a great pressure to reduce the rates below remunerative prices, as the representatives of the city, itself a larger consumer for public buildings, and as representatives of individual consumers, by whom they were elected and to whom they were to look for the approval of their acts, and because the individuals composing those authorities would also be consumers of the water equally with their constituents. It was therefore provided that the rates should be fixed by commissioners, to be selected as stated above.
tribunal was formed, and, from time to time, reasonable rates for water were established by it. But in 1879, the people of California formed a new constitution, which declared that the use of all water then appropriated, or that might thereafter be appropriated, for sale, rental, or distribution, was a public use, and subject to the regulation and control of the state in the manner to be prescribed by law; that the rates or compensation to be collected by any person, company, or corporation for the use of water supplied to any city and county, or to its inhabitants, should be fixed annually by the board of supervisors of the city and county, or other governing body of the same, by ordinance or otherwise, in the manner that other ordinances or legislative acts or resolutions are passed by such body, and should continue in force for one year and no longer; that such ordinances or resolutions should be passed in the month of February of each year, and take effect on the first day of July thereafter. And it further declared that any board or body failing to pass the necessary ordinances or resolutions fixing water rates, when necessary, within such time, should be subject to peremptory process to compel action at the suit of any party interested, and should be liable to such further processes and penalties as the legislature might prescribe, and that any person, company, or corporation collecting water rates in any city and county, otherwise than as so established, should forfeit its franchises and waterworks to the city and county, where the same are collected, for public use. Article XIV, sec. 1.
as supposed by the court. There is nothing relating to a monopoly in the case. Any five or more persons in California can at any time, form themselves into a corporation to bring water into the City and County of San Francisco on the same terms with the plaintiff, and such new corporation can, in the same way, form reservoirs in the ravines in the hills and collect water for sale, or bring water from the mountain lakes. Until within a few years any three or more persons could form such a corporation. The statement that the plaintiff has a monopoly of any kind in water, and desires to secure forever certain charges, must therefore be taken as one inadvertently made, without due consideration of the facts. The only contention in the case is, whether the clause of the new Constitution abrogating the stipulation for reasonable rates to be established by a commission created as mentioned, is a valid exercise of power by the state.
That the provision of the law of 1858, making that stipulation, was a part of the contract between the state and the company, is not denied by the court; nor is it denied that it was also a part of the contract that the "reasonable rates" should be determined by the commissioners designated. But the position taken, if I understand it, is, that the provision for their appointment is only that the rates shall be established by an impartial tribunal, not necessarily by one created as there prescribed, and that the state has a right to determine what tribunal shall be deemed an impartial one, and, by the fourteenth article of the new constitution, has done so and made the board of supervisors that tribunal, and that this action was within the power reserved by the original act of incorporation.
composing those authorities would be themselves consumers. Admitting for the argument that the meaning of the provision is only that the company shall have an impartial tribunal, and not necessarily the one created as designated, it seems to me to be plain that such new tribunal cannot consist of the city authorities, against whose exclusive control the original contract expressly stipulated. Placing the regulation of rates with them is not furnishing another tribunal equally impartial with the one mentioned. From the very nature of its creation and its relation to others, the board of supervisors, an elective body, cannot be impartial. No tribunal, however honorable and high the character of the persons composing it may be, is, or can be, in a legal sense, impartial, when they are individually interested, and the tribunal itself, in its representative character, is interested in the determination to be made.
It need hardly be said that it is an elementary principle of natural justice that no man shall sit in judgment where he is interested, no matter how unimpeachable his personal integrity. The principle is not limited to cases arising in the ordinary courts of law in the regular administration of justice, but extends to all cases where a tribunal of any kind is established to decide upon the rights of different parties.
In City of London v. Wood, 12 Mod. 687, it was held by the King's Bench that an action in the names of the Mayor and Commonalty of London could not be brought before the court held by the mayor and aldermen, for, said Chief Justice Holt, "it is against all laws that the same person should be party and judge in the same cause," and to the objection that the lord mayor, as the head of the corporation, acted in his political capacity and judged in his natural capacity, he answered: "It is true he acts in different capacities, yet the person is the same, and the difference in the capacities in which he acts does not make a difference," which would remove the disqualification.
"The provision rests upon a principle so obviously just and so necessary for the protection of the citizen against injustice that no argument is necessary to sustain it, but it must be accepted as an elementary truth. The impartiality which it requires incapacitates one to act as judge in a matter in which he has any pecuniary interest, or in which his near relative or connection is one of the parties. It applies to civil as well as criminal causes, and not only to judges of courts of common law and equity and probate, but to special tribunals and to persons authorized on a special occasion to decide between parties in respect to their rights. [And, after referring to several decisions where the principle had been applied, the court said:] These decisions show that the provision is to have no technical or strict construction, but is to be broadly applied to all classes of cases where one is appointed to decide the rights of his fellow-citizens."
be on that subject an interested party, and therefore, on the principle already stated could not act in the matter where the rights of others were concerned.
"or even all of the jurors selected to establish the necessity of taking the property, may refuse to act in fixing the amount of damages, in which case the common council, one of the parties ex parte, may appoint a jury which shall determine the amount of damages the city must pay. It is impossible to comment in a proper manner upon such a provision, which confounds all our notions of fairness, justice, and right."
Lumsden v. Milwaukee City, 8 Wis. 485, 494.
If instead of land the board should desire to acquire personal property -- fuel for the public buildings of the city, paving material for its streets, engines for its fire department, or any other property for its needs -- no one would pretend, independently of any law on the subject, that there would be any justice or fairness in allowing that body alone to determine the price to be paid.
"If it be competent at all, under the provision in question, for the people of San Francisco through their representatives in the board of supervisors to pass the proposed ordinance, it is difficult to perceive why, in looking around for agents or representatives to carry out their will, it is unlawful to ask in advance whether those seeking to represent them will obey their command in these particulars, or to require a pledge to that effect before committing the trust to them."
and confiscation, or to so largely diminish its value as to force a sale to the city at a price far below its real value. It was alleged in the argument, and not denied to be a matter of public history and public notoriety, of which we are authorized to take notice, that such designs have been openly and publicly avowed and advocated by public speakers."
It is difficult to understand how any just man, carefully considering what has been thus stated, can hold that the board constitutes an impartial tribunal such as the law of 1858 assured the plaintiff, as an inducement for its large expenditures, it should always have to determine what rates are reasonable. The great wrong and injustice done to the plaintiff by subjecting the determination of the rates it shall receive for its property to the judgment of a tribunal thus deeply interested against it, and impelled to reduce them by an exacting and constantly pressing constituency, are declared by the court to be justified by the law and constitution of the state, and in no way forbidden by the contract clause of the federal Constitution, which was designed to insure the observance of good faith in the stipulation of parties against state action. Authority to interfere with and destroy the contract rights of the plaintiff is claimed, as already stated, under the power reserved to the state by its Constitution, in force at the time, to alter or repeal the law pursuant to which the plaintiff was incorporated. Such authority is also asserted from the public interest which the state is alleged to have acquired in the use of the water furnished by the plaintiff.
"Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes. All general laws and special acts passed pursuant to this section may be altered from time to time or repealed."
authorized the state to exercise greater control over the business and property of the company than it could have exercised over like business and property of natural persons; that as the repeal of the general law would put an end to the corporation, the state could prescribe the conditions of its continued existence, and therefore could legitimately impose any restrictions and limitations, however burdensome, upon the subsequent possession and use of its property, and require the corporation to comply with them. Indeed, there seems to be an impression in the minds of counsel, and, from the language not infrequently used by some judges, in their minds also, that the reservation in charters of corporations and in laws authorizing the formation of corporations, of a power to alter or repeal such charters or laws, operates as a gift to the state and to the legislature of uncontrolled authority over the business and property of the corporations. And yet no doctrine is more unfounded in principle or less supported by authority. When carried out in practice, it is utterly destructive of all rights of property of corporate bodies. Those who entertain it overlook the occasion which led to the adoption of the clause containing the reservation, and the object it was designed to accomplish.
When this Court, in the Dartmouth College Case, decided that the charter of a private corporation was a contract between the state and the corporators, and therefore within the protection of the inhibition of the federal Constitution against impairment of contracts by state legislation, it was suggested by Judge STORY, who concurred in the decision, that this unalterable and irrepealable character of the contract might be avoided by a reservation of power in the original charter.
am therefore bound to declare that the acts of the Legislature of New Hampshire now in question do impair the obligation of that charter, and are consequently unconstitutional and void."
4 Wheat. 17 U. S. 712 .
In another part of his opinion, he refers to an early decision of the Supreme Court of Massachusetts, which had declared that the rights legally vested in a corporation could not be controlled or destroyed by a subsequent statute, " unless a power for that purpose be reserved to the legislature in the act of incorporation. " Id., 17 U. S. 708 .
When the general character of the decision in the Dartmouth College Case became known, the states acted very generally upon the suggestion of Judge Story, and few charters were subsequently granted without a clause reserving to the legislature the power to alter or repeal them. In some instances, a general law was enacted declaring that all corporations subsequently created should be subject to this reserved power, and in some cases, where a new Constitution was adopted by a state, a clause of similar import was inserted. The object of the reservation, in whatever form expressed, was to preserve to the state control over the corporate franchises, rights, and privileges which, in her sovereign or legislative capacity, she had called into existence -- in other words, to enable her to annul or modify that which she had created. It was not its object to interfere with contracts which the corporation, when once created, might make, nor with the property which it might acquire.
"to prevent a grant of corporate rights and privileges in a form which will preclude legislative interference with their exercise, if the public interest should at any time, require such interference,"
"The reservation affects the entire relation between the state and the corporation, and places under legislative control all rights, privileges, and immunities derived, by its charter, directly from the state. "
In Railroad Co. v. Maine, 96 U. S. 499 , where a law containing a similar reservation was under consideration, we expressed substantially the same thing -- that by the reservation, the state retains the power to alter the act of incorporation in all particulars constituting the grant to it of " corporate rights, privileges, and immunities, " and that "the existence of the corporation and its franchises and immunities, derived directly from the state," are thus kept under her control, adding, however, "that rights and interests acquired by the company, not constituting a part of the contract of incorporation, stand upon a different footing."
the protection of its property; [or when in court, that it shall be subjected to different rules of evidence and be required to prove by two witnesses what individuals may establish by one;] that it shall make no complaint if its goods are plundered and its premises invaded; that it shall ask no indemnity if its lands be seized for public use, or be taken without due process of law, or that it shall submit without objection to unequal and oppressive burdens arbitrarily imposed upon it; that, in other words, toward it and its property the state may exercise unlimited and irresponsible power. Whatever the state may do even with the creations of its own will, it must do in subordination to the inhibitions of the federal Constitution. It may confer by its general laws upon corporations certain capacities of doing business, and of having perpetual succession in its members. It may make its grant in these respects revocable at pleasure; it may make it subject to modifications; it may impose conditions upon its use, and reserve the right to change these at will. But whatever property the corporation acquires in the exercise of the capacities conferred, it holds under the same guarantees which protect the property of individuals from spoliation. It cannot be taken for public use without compensation; it cannot be taken without due process of law; nor can it be subjected to burdens different from those laid upon the property of individuals under like circumstances."
either individuals or corporations any property which they may rightfully have acquired. In the most arbitrary times, such an act was recognized as pure tyranny, and it has been forbidden in England ever since Magna Charta, and in this country always. It is immaterial in what way the property was lawfully acquired, whether by labor in the ordinary vocations of life, by gift or descent, or by making profitable use of a franchise granted by the state; it is enough that it has become private property, and it is then protected by the 'law of the land.'"
"He who first connects his own labor with property thus situated, and open to general exploration, does in natural justice acquire a better right to its use and enjoyment than others who have not given such labor. So the miners on the public lands throughout the Pacific states and territories by their customs, usages, and regulations, everywhere recognize the inherent justice of this principle, and the principle itself was at an early day recognized by legislation and enforced by the courts of those states and territories. "
When the plaintiff brought water to the City of San Francisco, it had a right to sell the property at such reasonable prices as it could obtain, as it might have sold grain, or fruit, or coal, had it brought those articles to market. If the state could interfere and insist that such reasonable prices should be determined by other authority than the company, that authority must also have been other than that of the consumers or of their agents. Of the limitations upon the power of the state in this respect, independently of its contract, and for what compensation it can compel the company to sell its property, I shall hereafter speak. It is sufficient at present to say that the power reserved over the act of incorporation gave the state no control over such compensation which it did not possess without the reservation. Its control here is limited by the stipulations of the contract with the company. The legislature can, of course, repeal the act under which the plaintiff long as the corporation remains, the contract remains, with all its binding force.
granite from its quarries, and the act had provided that, having brought the granite, it should sell it to individuals at a designated price per cubic foot for paving the sidewalks, and to the city for the construction of a court room, or a public hall, would it be pretended that by virtue of its reserved power over the corporation the state could compel the sale and delivery of the granite at a different price? The natural and just answer would be that the contract with the corporation for the purchase of the granite is a different matter from the contract by which the corporators became a corporation, and would the answer be less just and perfect if the contract had stipulated that the price of the stone should be fixed by a commission of stone-cutters, or parties familiar with the value of the material? The different mode of reaching the price would work no change in the binding force of the contract.
Again, suppose that the plaintiff had been incorporated with power to loan money under an act requiring it to make a loan to the city at a specified rate of interest, and, acting upon the authority, it had made a loan for years at such rate, could the state, by virtue of its reserved power over the corporation created, compel it to receive a less rate of interest than that stipulated, and make further loans at such reduced rates? The obvious answer to such a question would be that the contract authorized by the law was not the contract by which the lender became a corporation, and it is to the latter alone that the reserved power applies. Would it make any difference if the contract had stipulated that the interest should be annually fixed by the Secretary of the Treasury, or a commission appointed by him? The mode of reaching the rate of interest would not affect the binding character of the contract. The cases thus supposed in no respect differ in principle from the one before us. If the contract in this case cannot be upheld the contracts in those could not be. Indeed, no contract between the state and a corporation created with the reservation mentioned could bind the state, though every term of obligation and every pledge of honor which language could express should be embodied in it.
power of a state to make a bargain which it cannot break. As observed by one of the distinguished counsel who argued this case, the very notion of the existence of a state -- and it does not require a constitutional provision for that -- is that, being a political body, it has a right to make a business arrangement with a particular party, corporate or personal, about a particular thing, which shall bind both. And in my judgment it is the plain duty of the court, when such an arrangement comes up for consideration, to assert its binding character, and, so far as practicable, hold the parties to it.
I proceed to consider the position that the public of California had acquired such an interest in the water of the plaintiff as to authorize the state to fix the rates at which it shall be sold. The new constitution declares, in its fourteenth article, that the use of all water appropriated for sale, rental, or distribution is a public use, and subject to the regulation and control of the state. I do not suppose that by this declaration the state intended to take possession of, or assert an interest in, all the water within its limits appropriated for sale, rental, or distribution, without regard to the rights of individuals who may have collected it in reservoirs, or stored it in other ways to enable them to dispose of it advantageously. A proceeding to enforce such a declaration would be open to constitutional objections against taking private property for public use without compensation to the owners. The object of the constitutional declaration, as I understand it, was to assert such a control by the state over the sale and distribution of water as to prevent it from being diverted by those who had appropriated, or might appropriate, it from the necessary uses of the public, or from being held at extravagant prices. To such a declaration no one can reasonably object, and, if carried out with the observance of the rules which govern in other cases where private property is taken for public use, no legal obstacle can be raised to its enforcement.
requiring constitutional guarantees, and those conditions are that just compensation shall be made to the owner of the property, and that this compensation shall be ascertained by an impartial tribunal. A compliance with these conditions is essential, without which the taking of the property would be a mere exercise of arbitrary power not recognized as legitimate by any principles obtaining in the government of this country, state or federal.
"A right to a stream of water is as sacred as right to the soil over which it flows. It is a part of the freehold of which no man can be disseized but by lawful judgment of his peers, or by due process of law."
owner for transferring his title. The body of the water passes by its use from his ownership. In all such case, the great principle applies as when property of a durable character is appropriated for public use, that compensation, to be ascertained by an impartial tribunal, must be made to the owner.
"It would be a very curious and unsatisfactory result if in construing a provision of constitutional law, always understood to have been adopted for protection and security to the rights of the individual as against the government, and which has received the commendation of jurists, statesmen, and commentators as placing the just principles of the common law on that subject beyond the power of ordinary legislation to change or control them, it shall be held that if the government refrains from the absolute conversion of real property to the uses of the public, it can destroy its value entirely -- can inflict irreparable and permanent injury to any extent -- can in effect subject it to total destruction without making any compensation, because in the narrowest sense of that word it is not taking it for the public use."
So I say it would be a very curious and unsatisfactory result if in construing this constitutional provision, designed to protect the property of the citizen against spoliation by the government, and to insure to him when taken for public uses just compensation, to be ascertained by an impartial tribunal, it should be held that when the owner is required to surrender the property taken in parcels to different parties and receive compensation as delivered to them, such compensation need be only such as the government in its discretion may think proper to prescribe. As stated in the Pumpelly Case, it would make the constitutional provision an authority for the invasion of private rights under the pretext of the public good, which has no warrant in the laws and practice of our ancestors.
All the authorities lay down the doctrine that the property must be appraised and compensation therefor fixed by an impartial tribunal. It need not be a court of law; it may be composed of commissioners appointed for the special purpose. Whatever its form, its members must be free from interest and should be uninfluenced by prejudice, passion, or partisanship. And its proceedings must be conducted in some fair and just mode, either with or without a jury, as may be provided by law, with opportunity to the parties interested to present evidence as to the value of the property, and to be heard thereon. The legislature which determines the public purpose to be accomplished and designates the property to be taken, cannot act as such tribunal and fix the compensation, for that would be equivalent to allowing the legislature to take the property on its own terms.
"is judicial in its character, and the party in interest is entitled to have an impartial tribunal and the usual rights and privileges which attend judicial investigations. It is not competent for the state to fix the compensation through the legislature, for this would make it the judge in its own cause."
Constitutional Limitations 704. For the same reason, a corporation which has the power to condemn cannot fix the compensation. It would thus become a purchaser at its own price, without regard to the estimate of others as to the value of the property taken. Nor can the corporation appoint the appraisers of the property, for they would, in that case, be its agents, and as such disqualified. Relationship to the parties whose property is to be appropriated, or interest in the property, would disqualify the members of the tribunal as it would jurors before a court.
"While the legislature is the judge of the necessity or expediency of the exercise of the power of eminent domain, it is not the judge of the amount or justness of the compensation to be made when the power is exercised. [And again:] While, therefore, the Constitution prescribes no proper mode in which the compensation shall be determined, it would seem to follow that as to the question of the amount of compensation, the owner of the land taken for public use has a right to require that an impartial tribunal be provided for its determination, and that the government is bound in such cases to provide such tribunal, before which both parties may meet and discuss their claims on equal terms. And such seems to be the tenor of the authorities upon this question. The act in question does not provide such a tribunal. The commissioners to determine the compensation are private citizens, appointed directly by the legislature, without the consent of the persons whose land is taken by the public. No notice of the proceedings before the commissioners is given; the land owner is not authorized to appear at any stage of the proceedings to object to the commissioners; to introduce any proof or allegation before them. The proceedings are entirely ex parte. It certainly cannot be said that this is a just or equitable mode to determine the compensation due to a citizen for property taken for public use."
Langford v. Commissioners of Ramsey County, 16 Minn. 375.
Objections are often made in the courts of law to the reports of commissioners of appraisement, upon application to set them aside, on the ground that the members have been improperly influenced by others, and have allowed their judgment to be warped by solicitations, or by prejudice or partisanship, and when such objections have been sustained by proper proofs the reports have been adjudged invalid.
to hesitate in declaring that in no respect can it be deemed an impartial tribunal, however honest its members may personally be, to determine the compensation which the owners of the water delivered to the city and its inhabitants should receive. Interested as its members are, as consumers of the water, as agents of the city, also a large consumer, and elected by constituents, every one of whom is a daily consumer, it is wanting in every essential particular to render it, in a legal sense, an impartial tribunal. If, therefore, as I have attempted to show, and I think have shown, the water of the plaintiff is its property, and when it is taken under the law of the state for public use, the plaintiff is entitled to just compensation, that board is incompetent to act in determining what that compensation shall be. It is difficult to conceive of any tribunal more liable to be controlled by external influences against the interests of the company.
Upon the action of the supervisors with reference to all other matters, it has been found necessary, for the protection of the public, to impose numerous restrictions. Without them improvident contracts on behalf of the city and county would be made, extravagant schemes of supposed improvement would be undertaken, and its Treasury be depleted. And yet this body, which, without any imputation upon the personal integrity of its members, but out of regard to the common weakness of humanity, the community will not trust in other matters without guards against its improvidence, and which is exposed to every influence which can warp its judgment and pervert its action, is allowed almost unlimited control over the property of the plaintiff and the compensation to be paid for it, and respecting which the plaintiff is not permitted to be heard except as a matter of favor.
of the consumers, the line is passed which separates regulation from spoliation.
For the reasons thus stated, I cannot assent to the judgment of the Court.

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