Source: https://supreme.justia.com/cases/federal/us/185/336/
Timestamp: 2019-04-25 19:47:19+00:00

Document:
In order to warrant the exercise by this Court of jurisdiction over the judgments of state courts, there must be some fair ground for asserting the existence of a federal question, and in the absence thereof, a writ of error will be dismissed although the claim of a federal question was plainly set up, and where by the record it appears that such a claim, although set up, had no substance or foundation, the fact that it was raised was not sufficient to give this Court jurisdiction.
That the state has power to forfeit the charter of a corporation for an abuse of its privileges is recognized as law in Louisiana.
In Louisiana, a corporation is liable to be proceeded against for taking illegal rates by quo warranto at the suit of the state.
Upon a careful review of all the questions, the Court is of opinion that no federal question exists in this record, and that the Court is without jurisdiction in this case.
of the state, to obtain a forfeiture of the charter of the defendant, the waterworks company. Upon the trial, there was judgment in favor of the company, but upon appeal to the supreme court of the state, that judgment was reversed and judgment in favor of the state and against the company was entered decreeing the forfeiture of the charter and of all the franchises heretofore conferred upon the defendant. The company has brought the case here by writ of error for review.
"Whereas the majority and minority reports of the joint committee of the house and senate, appointed to investigate the affairs, administration, and condition of the New Orleans Waterworks Company, have been submitted to the general assembly, together with the testimony and evidence adduced at the various sessions of the said committee; and"
"Whereas the subject matter of the said reports involves the consideration and the determination of intricate questions of law and fact; and"
"Whereas it is impossible in view of the limited time at its disposal for the general assembly to give the matter the examination and consideration necessary for a proper determination thereof;"
"Be it therefore resolved by the senate, the house of representatives concurring, that the whole subject matter of the said report, together with the testimony and evidence upon which they are based, be respectfully referred to the Attorney General of the state for such action in the premises as he may deem proper. "
The Attorney General, after such reference, commenced this proceeding, and in the petition it was averred that the water company had been duly incorporated by the state legislature, and that, after its incorporation it had been guilty of repeated and continuous violations of the charter, and had thereby forfeited the same and its franchises, and the petition then set forth twelve different causes of forfeiture which were alleged to have been violations of its charter. It was alleged that the company had failed to supply the inhabitants of the city with pure water; that the supply was not only muddy and impure, but also wholly inadequate either to extinguish fires, to wash yards, alleys, and streets, or to furnish the inhabitants with water for bathing and domestic purposes; that the water furnished was at no time fit for drinking or cooking.
It was also averred that the company had habitually, since 1878 to the time of filing the petition, illegally exacted and collected greater rates than those exacted and collected by the City of New Orleans for the same quantity of water when it was the owner of the plant, and that the company had no right to charge any greater rate than had then been charged by the city. Various other grounds were stated in the petition not necessary to be particularly noticed. The prayer of the petition was for the forfeiture of the charter of the company and all its franchises, and, in the alternative, should that relief not be granted, that then it might be decreed that the company had forfeited all exclusive privileges, and that the City of New Orleans should be adjudged to have the right to contract with anyone else for a supply of water and to expropriate the tangible property of the company if the city should see fit, etc.
the state then answered the petition in intervention of the board of liquidation, and the water company filed its answer to the petition of the City of New Orleans.
The answer further specifically denied all grounds of forfeiture and prayed that the plaintiff's suit might be dismissed. The case came to trial in the City of New Orleans, and after an investigation of the issues raised by the pleadings, including the examination of a large number of witnesses and the hearing of arguments of counsel, the court determined (1) that the two intervening parties, the City of New Orleans and the board of liquidation, should not have been allowed to intervene, and accordingly it was decreed that the intervention of those parties should be dismissed at the cost of the respective interveners; (2) the court then ordered judgment in favor of the water company and against the plaintiff, the State of Louisiana, rejecting its demand for the forfeiture of the defendant's charter. The state appealed from that judgment to the supreme court, and the City of New Orleans also took a separate appeal from the judgment dismissing its intervention. Upon hearing in the supreme court, the judgment in favor of the water company was reversed, and, as already stated, a judgment was entered forfeiting the charter of the water company.
The defendant in error has made a motion to dismiss this writ of error on the ground of a lack of jurisdiction, because no federal question is disclosed in the record.
"(1) The charter of the waterworks company prescribing mandamus as a remedy to maintain a lawful tariff of water rates, is not the substitution by the writs of forfeiture of charter, as a remedy for the maintenance of unlawful rates, a breach of the contract, and a deprivation of the property without due process of law, and a denial of the equal protection of the laws?"
"(2) If such remedy be sanctioned by and sought pursuant to a state statute, subsequent in date to the charter of the waterworks company, does not such a statute impair the obligation of the charter contract, divest vested rights, and deny to said company the equal protection of the laws?"
"(3) Can the state forfeit such a charter and take back the franchises at the same time that she leaves the corporation in possession of the physical property depleted in value by the loss of the franchise, and at the same time that she keeps the money paid for the property plus the franchise?"
"(4) The general law of the state providing a restitutio in integrum in all cases where a synallagmatic, commutative contract is dissolved, and the charter containing no special provision taking the state's contract from under general provisions of law, is not a state authorizing the Attorney General to institute proceedings to forfeit the contract and take back the franchise at the same time that the state keeps the consideration paid for the same, a statute impairing the obligations of a contract? "
"(5) Is not a judicial decision refusing to apply to this contract the general provisions of the law of contracts prevailing in the state a taking by the state through her judiciary of the property of the defendant corporation without due process of law?"
"(6) Is not the legislative resolution, the action of the Attorney General, and the action of the supreme court of the state the taking by the State of property without due process of law through the instrumentality of her legislative, her executive, and her judicial departments, both jointly and severally?"
"(7) Is not the refusal to apply to this case the general provisions of the law of contract prevailing in the State of Louisiana a denial to the plaintiff in error of the equal protection of the laws of the State of Louisiana?"
These questions are, as is said, simply amplifications of the grounds actually taken by plaintiff in error upon the trial and on the argument of the case in the supreme court of the state, and which are plainly set out in the record. This may be assumed, and the point which arises is whether the matters thus set forth do in truth create even a color of a federal question.
"Something more than a bare assertion of such an authority seems essential to the jurisdiction of this Court. The authority intended by the act is one having a real existence, derived from competent governmental power."
an authority exercised under the United States was drawn in question, and the decision was against its validity. It was held not sufficient to make the claim, but there must be some color of foundation for its assertion.
"While there is in the amended and supplemental answer of the city a formal averment that the ordinance No. 909 impaired the obligation of a contract arising out of the act of 1877, which entitled the city to a supply of water free of charge, the bare averment of a federal question is not in all cases sufficient. It must not be wholly without foundation. There must be at least color of ground for such averment, otherwise a federal question might be set up in almost any case, and the jurisdiction of this Court invoked simply for the purpose of delay."
"It is doubtful whether there is a federal question in this case. A real, and not a fictitious, federal question is essential to the jurisdiction of this Court over the judgment of state courts,"
citing the two cases just above referred to.
"We cannot accede to the proposition that, because the acts of Congress which authorized the construction of the bridge in question gave the right to build a railroad and toll bridge, the conceded power of the state to tax did not extend to the bridge in both aspects. Nor can we agree that the making of such a contention raised a federal question of a character to confer original jurisdiction in the circuit court of the United States. Not every mere allegation of the existence of a federal question in a controversy will suffice for that purpose. There must be a real, substantive question on which the case may be made to turn."
Although the above case relates to the jurisdiction of the circuit court, yet, so far as this question is concerned, the principle is the same as to both courts.
And in Wilson v. North Carolina, 169 U. S. 586, it was held that there must be a real and substantial federal question existing in order to give this Court jurisdiction to review a judgment of a state court, and if the question raised were so unfounded in substance that the court would be justified in saying there was no fair color for the claim that it was of a federal nature, the writ would be dismissed.
These cases show the rule and its limitations, and where by the record it appears that, although a claim of a federal question had been plainly made, if it also clearly appear that it lacked all color of merit, and had no substance or foundation, the mere fact that it was not sufficient to give this Court jurisdiction.
We must look at the question submitted by the plaintiff in error in the light of these decisions for the purpose of determining whether there is any fair foundation for the several claims. It must also be remembered that, for years prior to and at the time of the formation of this corporation, it was the unquestioned law that all corporations were created by the state subject to its implied power, if not stated in the charter, to dissolve the corporation for a misuse or for a nonuse of its corporate powers or obligations. The contract contained in a charter is always subject to this power residing in the state.
"A private corporation created by the legislature may lose its franchises by a misuser or a nonuser of them, and they may be resumed by the government under a judicial judgment upon a quo warranto to ascertain and enforce a forfeiture. This is the common law of the land, and is a tacit condition annexed to the creation of every such corporation."
to the prosecution, for the judgment is that the parties be ousted, and the franchises seized into the hands of the government.
"The case upon the merits, so far as they involve any question of which this Court may take cognizance, is within a very narrow compass. The main proposition of the counsel is that the obligation of the contract which the company had with the state in its original and amended charter will be impaired if that company be held subject to the operation of subsequent statutes regulating the business of life insurance and authorizing the courts, in certain contingencies, to suspend, restrain, or prohibit insurance companies incorporated in Illinois from further continuance in business. This position cannot be sustained consistently with the power which the state has, and, upon every ground of public policy, must always have, over corporations of her own creation. Nor is it justified by any reasonable interpretation of the language of the company's charter. The right of the plaintiff in error to exist as a corporation, and its authority, in that capacity, to conduct the particular business for which it was created, were granted subject to the condition that the privileges and franchises conferred upon it should not be abused or so employed as to defeat the ends for which it was established, and that, when so abused or misemployed, they might be withdrawn or reclaimed by the state in such a way and by such modes of procedure as were consistent with law. Although no such condition is expressed in the company's charter, it is necessarily implied in every grant of corporate existence. Terrett v. Taylor, 9 Cranch 43, 13 U. S. 51; Angell & Ames on Corporations, 9th ed., sec. 774, note."
as to the company's insolvency, nor whether the facts make a case which, under the statute of 1874, required or permitted a judgment perpetually enjoining it from doing any further business. We are restricted by the settled limits of our jurisdiction to the specific inquiry whether the statute themselves, upon which the judgment below rests, impair the obligation of any contract which the company or its policyholders had with the state, or infringe any right secured by the national Constitution. . . . Did the company, by its charter, have a contract that it should, without reference to the will of the state or the public interests, exercise the franchise granted by the state after it became insolvent and consequently unable to meet the obligations which, as a corporation, under the sanction of the state, it had assumed to its policyholders? Our answer to these questions is sufficiently indicated by what has been said."
The statute in question in the above case, it will be observed, was passed subsequently to the grant of the charter to the corporation. Even there, it was held that such a statute did not impair the obligation of the contract contained in such charter. In the case before us, there is no subsequent statute.
"It is further contended that the state enactments in question impair the obligation of the contracts which the company has made with its creditors and policyholders. To this it is sufficient to reply in the language of the Court in Mumma v. Potomac Co., 8 Pet. 281, 33 U. S. 287, where it was said:"
"A corporation, by the very terms and nature of its political existence, is subject to a dissolution, by a surrender of its corporate franchises, and by a forfeiture of them for willful misuse and nonuse. Every creditor must be presumed to understand the nature and incidents of such a body politic, and to contract with reference to them. And it would be a doctrine new in the law that the existence of a private contract of the corporation should force upon it a perpetuity of existence contrary to public policy and the nature and objects of its charter."
company has any property or assets, their interests can be protected, and are protected, by that judgment. The action of the state may or may not have affected the intrinsic value of the company's policies; that would depend somewhat on the manner in which its affairs have been conducted, upon the amount of profits it has realized from business, and upon its actual condition when this suit was instituted; but the state did not, by granting the original and amended charter, preclude herself from seeking, by proper judicial proceedings, to reclaim the franchises and privileges she has given when they should be so misused as to defeat the objects of her grant, or when the company had become insolvent so as not to be able to meet the obligations which, under the authority of the state, it had assumed to policyholders and creditors."
That the state has power to forfeit the charter of a corporation for an abuse of its privileges is recognized as the law of Louisiana. The Civil Code of that state, article 447, has for many years authorized a proceeding in the nature of a quo warranto to forfeit the charter for misuse, and it has been held that such article applies to every charter granted since its adoption. Atchafalaya Bank v. Dawson, 13 La. 497; State v. New Orleans Gas Light & Banking Company, 2 Rob. (La.) 529, 532.
Again, the claim that the judgment deprives the plaintiff in error of property without due process of law must be looked at with reference to the cases upon the subject as to what constitutes due process of law. Thus, in Davidson v. New Orleans, 96 U. S. 97, it was held that a statute which required that, before an assessment upon land should become effectual, it must be submitted to a court of justice, with notice to the owner of the property and an opportunity given him to appear and contest the assessment, constituted due process of law.
this the answer must be two-fold. We must examine the Constitution itself, to see whether this process be in conflict with any of its provisions. If not found to be so, we must look to those settled usages and modes of proceeding existing in the common and statute law of England before the emigration of our ancestors, and which are shown not to have been unsuited to their civil and political condition by having been acted on by them after the settlement of this country."
In Kennard v. Louisiana, 92 U. S. 480, cited in Foster v. Kansas, 112 U. S. 201, 112 U. S. 206, it was held that a state statute regulating proceedings for the removal of a person from a state office was valid with regard to the federal Constitution if it provided for bringing the party proceeded against into court, notifying him of the case he had to meet, giving him an opportunity to be heard in his defense, and for the deliberation and judgment of the court.
And in Simon v. Craft, 182 U. S. 427, it was held that the essential elements of due process of law were notice and an opportunity to defend, and in determining whether those rights were denied the court will be governed by the substance of things, and not by mere form; that the due process clause in the Fourteenth Amendment of the Constitution did not necessitate that the proceedings in a state court should be by a particular mode, but only that there should be a regular course of proceeding in which notice was given of the claim asserted and opportunity offered to defend against it.
Regarding the impairment of any alleged contract, it must be borne in mind that the constitutional provision refers to state legislation, or to an enactment of a legislative character, though by a municipal corporation, made subsequent to the contract, and which impairs its obligation. New Orleans Waterworks Company v. Louisiana Sugar Refining Company, 125 U. S. 18, 125 U. S. 30; St. Paul Gas Light Company v. St. Paul, 181 U. S. 142, 181 U. S. 148.
of the contract, and the judgment of that court must rest on the statute either expressly or by necessary implication. Railroad Company v. Rock, 4 Wall. 177, 71 U. S. 180; Railroad Company v. McClure, 10 Wall. 511; Knox v. Exchange Bank, 12 Wall. 379.
These cases are referred to and applied in Lehigh Water Co. v. Easton, 121 U. S. 388, 121 U. S. 392.
With these principles in mind, we come to an examination of the questions raised by the plaintiff in error.
The answer to the first question, as to mandamus being the exclusive remedy for illegal rates, is that the state court has otherwise construed the charter, and has held that mandamus is not the only remedy, but that the company was liable to be proceeded against by quo warranto at the suit of the state through its Attorney General. The claim that, by so proceeding, there is any impairment of the obligation of a contract by any subsequent legislation, or that there has thus been a deprivation of property without due process of law, or a denial of the equal protection of the laws, has no colorable foundation.
An examination of this question, among others, was made by the state court after full hearing by all parties, and all that can possibly be claimed on the part of the plaintiff in error is that such court erroneously decided the law. That constitutes no federal question.
after a full hearing has been accorded it in such proceeding. This was due process of law, and no federal question arises from the decision of the court.
The same answer would seem to fit the other questions submitted by the plaintiff in error. They are all based upon the proposition that the judicial determination of these particular questions by the state tribunal was erroneous, and on account of such error the rights of the plaintiff in error, under the federal Constitution, have been violated. But mere error in deciding questions of this nature furnishes no ground of jurisdiction for this Court to review the judgments of a state court.
Assuming that there was a contract, as is claimed by the plaintiff in error, arising by virtue of the passage of the acts of 1877 and 1878 and their acceptance by the corporation, yet still the erroneous decision by the state court, admitting, arguendo, that it was erroneous, raises no federal question. This Court does not and cannot entertain jurisdiction to review the judgment of a state court, solely because that judgment impairs or fails to give effect to a contract. Curtis v. Whitney, 13 Wall. 68, holds that a statute may even affect a prior contract without always impairing its obligation. The judgment must give effect to some subsequent state statute or state constitution, or, it may be added, some ordinance of a municipal corporation passed by the authority of the state legislature, which impairs the obligation of a contract, before the constitutional provision regarding the impairment of such contract comes into play. See authorities above cited.
of its charter, was implied in the very grant of the charter itself. The claim, therefore, that the forfeiture was a violation of the charter, and of the contract therein contained, and was on that account a taking of defendant's property without due process of law, or that the state by such judgment had denied to defendant the equal protection of the laws -- cannot obtain. Whether defendant had so violated its charter was a fact to be decided by the state court. That court had full jurisdiction over the parties and the subject matter, and its decision of the question was conclusive in this case so far as this Court is concerned.
Neither the legislative resolution, nor the action of the Attorney General, nor that of the supreme court of the state, nor all combine, can, as contended for by plaintiff in error, be in anywise regarded as the taking by the State of property without due process of law through the instrumentality of its legislative, its executive, and its judicial departments, either jointly or severally. When analyzed, the whole claim is reduced to the assertion that in enforcing a condition which is impliedly a part of the charter, the state, through the regular administration of the law by its courts of justice, has by such courts erroneously construed its own laws. This Court in such a case has no jurisdiction to review that determination.
The assumption that the state court has refused to apply to the contract herein set up the general provisions of the law of contracts prevailing in the state, and that therefore the state has taken through her judiciary the property of the plaintiff in error without due process of law, is wholly without foundation. If it were otherwise, then any alleged error in the decision by a state court, in applying state law to the case in hand, resulting in a judgment against a party, could be reviewed in this Court on a claim that, on account of such error, due process of law had not been given him. This cannot be maintained.
of the corporation deal with it subject to this power. They must accept the result of the decision of the state court.
"SEC. 12. Be it further enacted, etc., That said waterworks company shall have the right to fix the rates of charges for water, provided that the net profits of the company shall not exceed ten percent per annum, and shall publish sworn annual statements of its business and condition, and that the city council shall have the power to appoint a committee of not less than five, who shall have access to the books of the said company and make such extracts from the same as they may deem necessary, and in case the said profit shall exceed ten percent, the city council shall have the right to require said company to reduce the price of water in such manner and in such a proportion that the profits shall never exceed the above-named rates, and provided further that the rates charged shall never exceed those now paid by the city, and in case said company shall refuse compliance, the demand of said city may be enforced by a writ of mandamus."

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