Case Name: State of Louisiana vs. The New Orleans Water Works Company
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1901-11
Citations: 107 La. 1
Docket Number: No. 13,701
Parties: State of Louisiana vs. The New Orleans Water Works Company.
Judges: 
Reporter: Louisiana Reports
Volume: 107
Pages: 1–45

Head Matter:
No. 13,701.
State of Louisiana vs. The New Orleans Water Works Company.
Syllabus.
1. Where a private corporation, created under State law, misuses the franchises conferred upon it, with respect to matters which are of the essence of the contract between such corporation and the State, and the acts, or omissions, complained of, are wilful and repeated, and inflict injury upon me public, generally, they constitute just ground for the forfeiture of such franchises and the dissolution of the corporation.
2. The charter of the defendant company, being Act No. 33 of 1877, Extra Session, as amended by Act No. 43 of 1878, prohibits said company, in express terms, from charging higher rates for the- water to be supplied by it than were charged by the City of New Orleans at the date of the passage of said act of 1877; and, as the evidence adduced in this case shows that the defendant has wilfully and persistently disregarded this prohibition, its charter and franchises are declared forfeited.
On Application foe Reheaeinq.
1. A private corporation, upon which has been conferred the exclusive privilege of supplying water to a large community for a number of years, upon condition that its charges shall not exceed those paid to the municipal corporation which preceded it in control of the works, and which is vested with possession and control of the books of the municipal corporation in which those charges are recorded, should preserve such books in safety, and failing, satisfactorily, to account for them, must be held guilty of negligence, and can derive no advantage from their loss.
2. In a suit by the State to have decreed forfeited the charter of such corporation for the violation of its prohibitions and the non-fulfillment of its obligations, records in suits, litigated between the corporation and members of the community affected, in which such violations and non-fulfillment, quoad the individual litigating, have been judicially ascertained and determined, are admissible in evidence as against the defendant.
3. So, also, the testimony of a witness given upon the trial of such a suit, between the corporation and a member of the community affected, may be admitted in evidence for the purposes of the suit brought by the State, though the witness, when placed on the stand, is unable to identify the type-written instrument purporting to contain such testimony, and, ty reason of the lapse of years and advancing age, is unable to recall the facts to which he formerly testified, provided; that the instrument is otherwise identified as containing the testimony which had been given by the witness and the witness affirms that such testimony was true when given.
A PEAL from the civil district court, parish of Orleans — Theard, Jr.
Walter Guión, Attorney General (Benjamin Rice Forman, of Counsel), for Plaintiff, Appellant.
Farrar, Jonas & Eruttschnitt, James R. Beckwith, and E. Howard McGaleb, 'for Defendant, Appellee.
Samuel L. Gilmore, City Attorney, Arthur McGuirk, Assistant City Attorney, for City of New Orleans, Intervenor, Appellant.
Branch E. Miller, for Board of Liquidation, Intervenor, Appellee.
On the application for rehearing by Monroe, J.
Removed to Supreme Court of the United States on writ of error.

Opinion:
Statement op the Case.
The opinion of the court was delivered by
Monroe, J.
In 1898, the General Assembly adopted two concurrent resolutions, which, by the approval of the Governor, became Acts Nos. 5 and 150, respectively, of the session of that year. Act No. 5 provides for the appointment of a legislative committee to investigate certain complaints against the New Orleans Water Works Company, and Act No. 150, after referring to the majority and minority reports, which had been made by the committee so appointed, and after a recital to the effect that said reports involve intricate questions of law and of fact, which it is impossible, for lack of time, for the General Assembly to determine, provides: "That the whole subject matter of said reports, 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." Thereupon, in January, 1899, the Attorney General brought this suit, in the name of the State, praying, for the reasons set forth in the petition, that all the franchises of the said waterworks company be declared forfeited, or, in the alternative, that said company he decreed to have abandoned the monopoly, claimed and enjoyed by it, of furnishing water to the city of New Orleans and its inhabitants.
In the suit thus filed, the City, and the Board of Liquidation .of (the City Debt intervened, the one, joining in the prayer of the plaintiff, and the other, in that of the defendant. Both interventions were, however, disimssed, by the judge a quo, and the Board of Liquidation has taken rib appeal. So that, the case with which we are called upon to deal is that between the State, the City and the defendant company, upon appeals, taken by the State and City from judgment rejecting their demands. The charges upon which those demands are predicated are, in substance; that the defendant has not complied with the obligations imposed by its charter with respect to the quality and quantity of water to be furnished; that it has violated certain provisions of said charter concerning the charging of rates for water, the payment of dividends, the sale of its stock, and the borrowing of money; and that it has abused its franchises by unjust discrimination in the rates charged. It is also alleged that the defendant has accepted the benefit of Act No. 56 of 1884, and has, thereby, and in any event, abandoned its monopoly. It is further claimed, in argument, and the question was passed on by the judge a quo, that the act incorporating the defendant is unconstitutional, because of the failure of its title to disclose the granting of said monopoly.
It appears from the record that, in 1833, the Legislature created a corp ^ration called the "Commercial Bank of New Orleans," -the main purpose of which, as declared by its charter, though it was also vested with banking privileges, was to supply the city and the people of New Orleans with "water from the Mississippi river." The capital stock of the corporation was fixed at $3,000,000 (of which the city took $500,000), and the period of its existence at thirty-five years, with a proviso to the effect that, at the expiration of its charter, the city should have the right to purchase the plant, at a valuation to be determined by appraisement, and to pay for the same in bonds. The act contemplated that the water to be furnished should be obtained from the Mississippi river, and, in general, that it should be delivered as so obtained, but there was a clause reading, "and the said company shall supply a sufficient quantity of clear, pure and wholesome water for the use of the inhabitants, within the limits aforesaid, at the elevation of fifteen feet, when the same may be required" (Acts of 1833, p. 167, Sec. 38), from which it appears that the obligation was imposed upon the company to free the water of the material usually carried by it in suspension when specially so required by consumers. It does not appear, however, that during the thirty-five years of its existence any such requisition was made, or that the company ever furnished any other water, either to the city or its inhabitants, than the water of the river, as taken therefrom. In 1868, upon the expiration of its charter, the tangible property of the company, including lands, buildings, machinery, reservoirs, etc., was appraised, for the purposes of the sale to -the city, at $2,000,000, which was, probably, twice or three times its value, but, as the price was paid in bonds which were worth much less than par, the profit to vendors was not so great as it would, otherwise, have been. The City, moreover, was a stockholder, to the extent of $500,000, and had to her credit, in the hands of the company, $106,600 of dividends which had been, from time to time, declared, and, these two amounts being deducted from the price, she issued her bonds for the balance, amounting to $1,393,-400; and. in January, 1869, the property was turned over to her and placed under the control of a Board of Commissioners and a Superintendent, appointed by, and acting under the authority of, the Mayor and Council. During the city's administration,' which lasted from January, 1869, to April, 1878, the propriety of improving the quality of the water was constantly recognized, and various reports and suggestions upon the subject were made, but nothing was accomplished. The works were, however, extended, and, when turned over to the defendant now before the court, in April, 1878, consisted, so far as facilities for distributing the water were concerned, of sixty-three miles 1794 feet of main pipes, of different dimensions. The question of the tariff of charges was also much considered by the city authorities, and, eventually, with more decisive results than followed upon their deliberations concerning the quality of the water. The Board of Commissioners, apparently before the works actually came into the possession of the City, had adopted a schedule, which has since been known as the "Hatch" tariff, no doubt, because promulgated over the signature of F. H. Hatch, as president pro tempore of said board, and the charges for water were regulated thereby immediately upon the .City's acquisition of the works, and for some time thereafter. As early as February, 1869, a committee, appointed by the Board of Assistant Aldermen to look into the matter, made a report, in which they said: "Your committee on water rates, to whom was referred a resolution directing them to report a table of rates for water rents, have examined the rates now being charged and collected by the Board of Commissioners of the Water Works, and find them entirely too high, and a cause of general complaint among consumers of water. These rates are considerably higher than in many other well regulated cities." This was followed by a statement showing that in Cincinnati and Louisville the charges for water, furnished in large quantities, and by measurement, was 15 cents per thousand gallons, and in Chicago from 10 to 15 cents per thousand gallons, whilst the rates under the Hatch tariff were from 25 to 40 cents per thousand gallons, for water so furnished. And those rates were quite moderate, as compared to the "flat" rates charged to the small consumers. The Board of Commissioners, it appears, had endeavored, by the introduction of meters, to equalize this taxation, and, in April, 1869, General Bragg, the then superintendent of the works, reported upon the subject, in part, as follows, to-wit: "You are presented herewith with an abstract of the measurements of water delivered in the first quarter of this year by meter. 'x' The results are so remarkable and extraordinary as to induce me to ask your special attention" and scrutiny. They go to show the entire correctness of the principle on which you established your rates, viz, to make them uniform, and, though the result is not yet satisfactory, the small consumer still paying too much in proportion, you have made a long stride in the right direction. A few more applications of the meter, now being made, will enable you to do full justice to all parties. The large distillery, for instance, which received its water last year at two and nine-tenths cents per thousand gallons, now pays twenty cents for the same supply. Per contra, the poor laborer, or widow, who paid ninety cents last year, now gets the same allowance for forty cents. The large steam bakery; which paid only eighteen cents, last year, whilst his small neighbor paid eighty, is now put on an equality with the latter, the one being put up and the other put down to a medium. But the greatest contrast is to be found in the larger establishments. In the three largo sugar refineries, one paid four and seven-tenths cents per thousand gallons, another, three and two-tenths cents per thousand gallons, and the third, .and largest, one and four-tenths cents per thousand gallons. Here was a discrimination of more than three hundred per cent, against one man, in favor of another, engaged in the same commercial business."
"Just 15 per cent, of all the water that is paid for is taken now by five large consumers. Yet they have, heretofore, paid only 2 per cent, of the revenues. The working of the meters, so far, goes to show that still further reduction may hereafter be made in the water rates, but, in justice, that reduction should inure almost entirely to the small consumer, until he is brought nearer an equality with his more fortunate neighbor." The committee appointed by the Council, nevertheless, as we have seen, found the Hatch tariff too high, and they recommend the adoption of a tariff, prepared by them, reducing the charges to about the rates established in the cities mentioned. And such a tariff was adopted by the Council, but was vetoed by the Mayor, and was, in March, 1870, passed over the Mayor's veto. Very soon after this action had been taken, the President of the Board of Commissioners addressed a communication to the Mayor and Council, in which, referring thereto, said: "As this tariff is to he put in operation when officially promulgated, the Board of Directors of these works have directed me to call your attention to the serious difficulties which must arise in its operation." He then called attention to the fact that, in December, 1869, a tariff (being the Hatch tariff) had been adopted, for the year 1870, upon the basis of which tariff, all the bills for the ensuing year had been made, and sent out, and that more than one-half of such bills had been paid; and he asked the following qeustions concerning, the proposed new tariff, viz:
"1. Shall it go into effect immediately? 2. Is it to have* any retroactive effect? 3. If retroactive, does it work a change of bills not paid, only, or does it apply to those already paid? 4. As the money collected under the present tariff had already been approprirefunded?" This communication was submitted to the Board of ated by you to pay interest on the waterworks bonds, how can it be Aldermen, March 15, 1870, up to which time, it is quite evident, the ordinance establishing the new tariff had not been promulgated. Upon the following day, March 16, 1870, the Governor of the state approved the Act No. 7, of the Extra Session of 1870, establishing a new form of government for the city of New Orleans, the concluding section of which provided that it should take effect from and after its passage. And nothing was thereafter done with the tariff ordinance, the evidence in the record being conclusive to the effect that it was never promulgated. Under the new city charter, the control of the waterworks was vested in an "Administrator of Water Works and Public Buildings," and the record contains the report of the first of the officers so designated, and also of the last. We learn from these reports, and from other evidence in the record, that, during the year 1868 (being the year preceding the acquisition of the Water Works by the city), there were pumped a total of 2,227,000,000 gallons of water, for which there were received $155,023.75, nr an average of about 69.6 cents per 1000-gallons. What amount of water was pumped during 1869, the first year under the city's administration and under the Hatch tariff, the record does not show, but the receipts amounted to $143,293.00. During the year ending in May, 1871, there were pumped 2,101,015,000 gallons, for which the city received, under the Hatch tariff, $148,064,91, or an average of about 70 cents per thousand gallons. From that time, although the record does not show the quantity of water pumped during the several succeeding years, the falling off in the receipts indicates that the Hatch tariff was abandoned, and that the charges were being reduced below the rates thereby established. Thus, the receipts for 1872 were $132,626.82; for 1873, $125,904.17; for 1874, $113,146.61; for 1875, $100,742.01; for 1876, $90,015.67. During the year 1877 (being the last year of the city's administration of the works), there were pumped 2,408,591,230 gallons of water, and we find it stated in the -report made by the president of the defendant company to his board of directors that the receipts (for the year were $90,148.62, or an average of something over 37 cents per thousand gallons. So that, between the second and the last years of the City's administration, there was a difference of more than 40 per cent, in the average amount received per 1000 gallons of water pumped, and a corresponding difference in the total receipts. That the City, in 1870-1871,collected for all the water pumped by it, including the free water furnished, an average of 70 cents per 1000 gallons, whilst the maximum rates under the Hatch tariff, was 40 cents per thousand, is to be accounted for by the fact,' that the flat rates charged to the small consumers were enormously in excess of those predicated upon measurement, charged to the large consumers. Upon the other hand, the fact that the city, in 1870-1871, under the Hatch tariff, rceeived $148,046.91, for a total of 2,101,015,664 gallons of water pumped, whilst, in 1877, she received but $90,148.62, for a total of 2,408,591,230 gallons pumped, amounts, almost, to a demonstration 'that the Hatch tariff had been abandoned. There is, however, further, direct, evidence, to the same effect, which will be more particularly referred to ¡hereafter. The net receipts for water rents, under the city's administration, over and above the expense of maintaining, extending and operating the works, appears to have been devoted to the payment of interest on the bonds which had been issued in liquidation of the purchase price of said works, and the amount required to pay such interst, on all the bonds so issued, was $69,620.00. When, therefore, the total receipts fell to about $90,000.00, as they did in 1876. whilst the expense of maintaining and operating the plant was not far short of $60,000.00, it can readily be understood that the position of the holders of water works bonds was far from satisfactory. Under these circumstances, it seems not improbable that the General Assembly was induced to take action in the matter as a measure of relief to the holders of such bonds, though there is no direct evidence to that effect in the record. Be that as it may, in March, 1877, an act was'passed (being Act No. 33 of 1877) entitled "An act to enable the City of New Orleans to promote the public health and to afford greater security against fire, by the establishment of a corporation, to be called the New Orleans Water Works Company; to authorize the said company to issue bonds for the purpose of extending and improving the said works, and to furnish the inhabitants of New Orleans an adequate supply of pure and wholesome water; to permit the holders of waterworks bonds to convert them into stock, and to provide for the liquidation of the bonded and floating debt of the city of New Orleans." The provisions of this act, so far ás it is necessary to refer to them, are, substantially, as follows, to-wit:
Section 1, fixes the capital stock at $2,000,000, divided into 20,000 shares of $100 each.
Section 2, requires that, upon the organization of the company, certificates representing the whole amount of the stock shall be turned over to the city to he disposed of as follows, to-wit: (1) $606,600.00 to be retained as the property of the city (this it will be remembered being the amount of the city's interest, upon the basis upon which it purchased the works from the old company); (2) the city further to retain one share of stock for every $100 of waterworks bonds which it may have extinguished by payment, exchange, or otherwise; '(3) The residue of said' stock to be held by the city ifor the benefit of the holders of such bonds, still outstanding, and exchanged for the same on the basis of one share of full-paid stock for every $100 of bonds, exclusive of the value of the overdue coupons
Section 3, provides that, whenever the holders of such outstanding bonds, to the amount of $500,000, shall have exchanged the same for stock, a board, consisting of seven directors, shall he elected, of whom, four shall be named by the Mayor, and three, elected by the stockholders other than the city, the board thus elected to hold office until July 1, 1878.
Section 4, provides for the transfer of the works by the city to the new company.
Section 5, confers upon the company the privileges acquired by the city from the Commercial Bank, and further provides that said company "shall, have, for fifty years from the passage of this act, the exclusive privilege lof supplying the city of New Orleans and its inhabitants with water from the Mississippi river, or any other stream, or river,' by means of pipes and conduits," authorizes the company to purchase, lease, and enter upon, lands, dig ditches and canals, and construct such dykes, reservoirs and other works "as may be required for securing and carrying a full supply of pure water to said city and its inhabitants," etc., etc.
Section 6 provides, that, upon the first Monday in July, 1878, and annually thereafter, four directors, shall be elected, by all the stockholders, and that the Mayor and the Administrator of Water Works and Public Buildings and 'the Administrator of Finance, shall be er officio, members of the board.
Section 8? provides, that the capital stock znay be increased to two million dollars, for the purpose of enabling the company to improve and extend its works, the new stock to be paid for in cash, or in work.
Section 9, authorizes the company to "borrow money for the purpose of improving and enlarging its works, and increasing the supply of pure water," and, to that end, to issue bonds to an amount not exceeding $2,000,000, secured by mortgage on the property of the company, such bonds to be issued and sold, and such mortgages given, only with the consent of the city council.
Section 10, provides, "That said company shall not declare or pay any dividends except in cash, and then only out of the net semiannual, or annual, receipts, after payment of the expenses of operation and the interest on its bonded debt, nor shall any dividends be declared until the contemplated works are completed and in use."
Section 11, provides, that the city shall have the free use of water, for the extinguishment of fires and' for other public purposes, and that the company "shall place, free of any charge whatever, two hydrants, of the most improved construction, in front of each square where a main pipe shall be laid, from which, a sufficient quantity of water may be conveniently drawn for the extinguishment of fires and for other public purposes and, in consideration thereof, the franchises and property of the said New Orleans Water Works Company, used in accordance with this act, shall be exempt, from taxation, state, municipal and parochial."
Section 12, confers upon the company the right to expropriate private property and to appropriate, and use, public property.
Section 13, reads: "That the said Water Works Company, immediately after its organization, shall proceed to the erection of new works and pipes, sufficient in capacity to furnish a full and adequate supply of water, to be drawn from the Mississippi river, or elsewhere, as may be judged most expedient; that said new works and pipes shall be Commenced within twelve months from the passage of this act, and shall be, year by year, completed, so that, within five years from the passage of this act, they shall be completed so as to give an adequate supply of waiter to the people of the city of New Orleans, exclusive of the Fifth District. If the said work be not done as above proscribed, said corporation shall forfeit all exclusive privileges granted herein, and the city shalll have a right to contract with any one else for a supply of water, as above provided, and to expropriate the prop erty of the corporation hereby created. After the completion of the new works and pipes, the new company shall, from time to time, a3 the wants of the population may require, and when the estimated revenue upon the cost of such extension shall equal ten per centum, extend their works throughout the entire limits of the city and suburbs, and any future extension of said city; and any failure of said waterworks company to comply with this provision shall work a forfeiture of this charter.

Section 15, provides, " That the said waterworks company shall " have the right to fix the rate of charges for water, provided that the "net profits of the company shall not exceed ten per centum per " annum; and shall publish semi-annual statements of its business and " condition; and that the city douncil shall have the power to appoint " a committee, of not less than five, who shall have access to the books " of said company, and make such extracts from the same as they may " deem necessary, and, in case the said profits shall exceed ten per cent, "the city council shall have the right to require said company to " reduce the price of water in such manner, and in such proportion, " that the profits shall not exceed the above named rates; and provided " further, that the rates charged shall never exceed the rates now paid " by" (to) "the city, and in ease said company shall refuse compliance, " the demand of said city may be enforced by the writ of mandamus."
Section 16, makes it a criminal ofEence to obstruct the company or " its agents in conveying water to the city, or to injure the works, or " to pollute the water."
Section 17 provides, "That until other works are constructed by " which the present works may be dispensed with the same shall remain " under the control of the city council, and the superintendence " thereof remain in the hands of the Administrator of Water Works " and Public Buildings, but the said company shall be authorized to " collect the revenues thereof and, apply them to the expense of operat- " ing and extending the works." And it is further provided, that the city shall have the right to buy the works of the company at the expiration of its charter.
Section 18 provides, "That nothing in this act shall be so construed " as to prevent the city council from granting to any person, or per- " sons, contigious to the river, the privilege of laying pipes to the " river, exclusively for his own use, or their own use."
This statute failed of its purpose, and, in 1878, the General Assembly passed Act No. 43 of that session, entitled "An act relative to the charter of the New Orleans Water Works Company, amending Act No. 33 of Extra Session of 1877, approved March 31, 1877," which amends the act of 1877, in the following particulars, to-wit:
Section 1 provides, that four out of the seven directors shall he elected by the stockholders, other than the city.
Section 2, amends and re-enacts section 10 of the act of 1877, so as to make it read: "That said company shall not declare any dividends " except in cash, and then only out of the net semi-annual, or annual "receipts, after payment of the expenses of operation, and gradual " extension and the interest on its bonded debt."
Section 3, amends section 17 of said act by eliminating the proviso whereby the city is authorized to retain control of the present works until other works are constructed.
Section 4, provides, that the delay for beginning the erection of new works, shall begin to run six months after the organization of the company, instead of twelve months after the passage of the act of 1877, as provided in that statute.
Section 5, reads: "That the full, complete and adequate supply of " water, referred to in section 13 of said act. No. 33 of 1877, shall ho " so construed as to require a supply of water at the height of not less " than' fifteen feet from the ground, wherever the pipes of the water " works now exist."
Section 6, withdraws the exemption, in so far as State taxation is concerned.
Under the act of 1877, then, as thus amended, the defendant company was organized, and, upon March 30th, 1878, elected iits first board of directors. Upon April 9th, following, the city, by notarial act. transferred to it the entire water works property and plant. It appears from the recitals of this act that the stock of the company was then distributed as follows, to-wit:
1. Amount of full-paid stock, subscribed for by the city as per the terms of the act of 1877................$ 606,600 00
2. Amount issued to the city on account of Water Works bonds funded in premium bonds............ 451,400 00
3. Amount issued to the city for Water Works bonds redeemed . 111,500 00
4. Amount issued to holders of Water Works bonds, in exchange therefor............................... 501,600 00
5. Amount reserved for the benefit of the holders of such bonds, still outstanding..................... 328,900 00
Total .$2,000,000 00
The evidence shows that the bonds in question, and the stock for which they were exchanged, were, at that time, worth 33 cents on the dollar. It further shows that, in April, 1879, one year after going into business, the company, upon a basis of $99,717.92, received for water rents, declared a dividend of 2 per cent upon the par value of its stock, amounting to 6 per cent, on the money actually invested, and that, besides adding largely to the extent and value of its property, it has, from that time to the present, with the exception of one year, paid dividends, amounting, for some years past, to five per cent, per annum, upon the par value of its stock, or about fifteen per cent, on the original investment, and that as a consequence the stock has been sold as high as 128, and, in exceptional cases, even higher, and was quoted considerably above par during the trial of this ease in the district court.
The company, whilst, apparently, holding that it is under no compulsion to furnish clear, or pure, water, at any time during the fifty years of life which it has received, nevertheless, seemed, for a while, to consider that some sort of obligation rested upon it in the premises; and its officers, from time to time, have made reports in which they have recognized the fact that the water, as actually furnished, is unfit for most purposes for which water is used, and have expressed a desire to do something to alleviate the situation. But, for reasons given, which are not always reconcilable, nothing has been accomplished in that direction, and, so far as we are informed by the record, nothing is likely to be accomplished during the life of the defendant's charter. In the first report, of the first president, made to the directors in 1879, he said:
"Although the water delivered to consumers is heavily charged with "sediment, my first study was devoted to supplying an abundance, " such as it is, leaving the problem of clear water to be solved after " this has been accomplished. The delivery of filtered water from the • Mississippi river is an acknowledged possibility, through subsidence " and filtration, but the expense attendant thereon must deter us from " adopting this system at present."
The following year, according to the report of the same officer, provision had been made for 'the " abundance " to which he referred in his previous report, but the expense still stood in the way of any action toward improving the quality of the water. And the same condition was reported in 1881, and 1882. A new president was then installed, but, in the meanwhile, a litigation had arisen between the city and the company (involving the question of the liability of .the company for taxes, on the one hand, and of the city for its water supply, on the other), the pendency of which seemed to operate as a bar to any steps in the direction of better water, the president reporting upon the subject, in April, 1884, as follows, to-wit:
" It is feasible and practicable for our company to supply the city "with crystal clear water. Experiments, conducted by Mr. L. H. " Gardiner, during the past eighteen months, have demonstrated, to the " satisfaction of the directory, the practicability of thus clarifying the "Water of our river and of thus supplying our people with a water " inferior to none, and superior to most public supplies, from what- " ever source derived. Settling reservoirs adapted to this system have " been designed by Col. Cook, to be erected on grounds already owned " by the company. Their cost, and that of the machinery, etc., is " entirely within the limits of prudent investment for such a purpose. " If the relations of the company to the city can be equitably deter- " mined, and the letter and spirit of the charter of the company fairly "construed by the courts, in the now pending litigation, I shall " strongly advocate the adoption of the system for a clear water supply " above alluded to, to he furnished, of course, at our present tariff "rites As raatters now stand, the city is the beneficiary of our com"pany to the extent of about half of'the water we pump, and wants to "exact, additionally, the payment of a large assessment for taxes. "Pending these conditions, I do not recommend any improvement or "expenditure beyond what may be necessary for the maintenance of "our present system." The litigation thus referred to, eventually, resulted most favorably to the company; for, whilst it was held that the company was liable to the city for taxes, it was also held that the city was liable for all water furnished exceeding in value the amount of such taxes, collected, the result being, that, between 1884 and 1898, the city collected $290,239.86, in taxes, and paid for water, which, by the terms of the company's charter was to have been furnished free, the sum of $931,191.26, making a difference of $640,951.40 in favor of the company, as compared with the result if both parties had conformed to the provisions of the charter as written. Nothing, however, has since been accomplished by the company in the way of improving the'quality of tiie water furnished by it. Some years after the termination of the litigation above referred to, another corporation, engaged in the business of supplying filter plants, was allowed to make the experimen L of pumping Mississippi river water through its filters directly into the defendant's distributing mains, with the understanding that should the experiment demonstrate the practicability of furnisjiing pure water, in that way, the defendant should pay for the plant erected for its purposes, and should, in any case, pay .the actual cost of the experiment; and, the attempt proving unsuccessful, the company paid the cost, amounting to $25,000. In the meanwhile, the settling reservoirs, so frequently and confidently reported on, and by means of which, in 1884, the president, assured the directors that crystal clear water cou'd be supplied "within the limits of prudent investment," have never been constructed, and all further effort on the part of the company to furnish pure water has been abandoned, to await the result of experiments which may be made, elsewhere.
In this connection, it is perhaps proper that we should state more distinctly the conclusion which we have reached, from .the evidence before us, as to the character and availability, for ordinary purposes, of the water of the Mississippi river, as taken from that stream and supplied to the people of New Orleans by the defendant company. It? a report made by the defendant's able superintendent to its president and directors, in April, 1888, that officer said: "The silt, or suspended "matter, carried by the Mississippi river varies from sixty grains to " fifteen hundred grains of solid matter per gallon. The character of " the silt is such as to rapidly cut and wear the working parts of all "machinery." "Silt" is defined to he "mud, or fine earth, deposited from running or standing water." (Webster's International Diet.) It is also shown that the suspended matter referred to consists, in part, or, at fimos, of "kaoline," a finely-divided white clay, and that the result of the admixture of silt, kaoline and water, is, in this instance, a tawny, opaque, fluid, which is not only injurious to machinery, but is undesirable for any, and totally unfit for most, domestic uses — even the washing of banquettes or the scrubbing of floors. Upon the other hand, it is conclusively shown that, when the material that is carried in suspension is removed, whether by precipitation or filtration, the water becomes clear, and is uncommonly pure and wholesome, the reason therefor being, that for several hundred miles above New Orleans there is no surface drainage, the source from which streams derive most, if not all, of their organic matter, into the Mississippi river, and that such matter, of that description, as may have been swept into it, higher up, is eliminated during the passage of the water over that distance, by constant agitation and attrition in contact with the inorganic substances, carried in suspension, and with the oxygen of the atmsophere. A large percentage of this inorganic material is, however, left behind, and, whilst it is said by some of the witnesses that the water is none the less palatable and wholesome on that account the weight of the evidence is the other way, and we find nothing in the record to justify the.conclusion that any one. in New Orleans, habitually, drinks river water with its mud in it, or that a fluid that is capable of destroying machinery, made of iron or steel, can, with impunity, be taken, as a beverage, into the human system. The evidence, taken on behalf of the defendants, shows that, whilst Mississippi river water is highly esteemed by mariners visiting this port, it is not so used, the same witness who testifies that it is considered the "finest in the world for sea-going purposes," also says: "We always used to settle it before stowing it for sea-going purposes." Our conclusion, then, may be summarized in the following excerpt taken from a report made by one of the defendant's presidents .to its board of directors, in April, 1882, to-wit: "Dr. Joseph Jones, in his " able report of 1881, says, that in the year 1870, samples of the waters " of the Mississippi river were submitted to him for chemical and "microscopical analysis, and from his examination, he concluded that, " when fr.eed from superficial matter, they are of great purity and will " compare favorably with the drinking water supplied to the largest and " best regulated cities."
Upon the question of what was done by the defendant, within the limit of time fixed by its charter, to extend its works and furnish a supply of water, adequate, as to quantity, a great deal of testimony was taken, the consideration of which, for reasons which will sufficiently appear hereafter, we pretermit. And we now proceed to an examination of the facts, as disclosed by the record, touching the rates charged by the defendant and its alleged discrimination between consumers.
We have-seen that the ordinance, passed by the' city council in 1870, proposing lower rates than those established by the Hatch tariff was never promulgated, and we have also seen that it is practically demonstrated that the Hatch tariff was, nevertheless, abandoned by the city, and a much lower rate adopted, long before the transfer iof the waterworks to the defendant. It is not improbable that the tariff, as thus adopted and enforced by the city, during the last few years of its administration of the works, conformed, in the main, though not altogether, to that embodied in the unpromulgated ordinance of 1870; but, of this we cannot be sure, as the most important books, showing the charges and collections made by the city, have been lost; the defendant, to whom they were delivered, with the works, and who had possession of them for several years thereafter, being now unable to account for them. Taking the evidence as we find it, it appears that, during the first four years of the defendant's administration, the proviso contained in Section 15 of the act of 1877, which reads; "and provided further, that the rates charged shall never exceed those now paid by" (•to) "the city," etc., was construed to mean that the company should not charge more for water than was charged by the city, before, and at the date of, the transfer of the works; and during that period, the charges were regulated accordingly. Such is the positive, uneontradicted, testimony of the gentleman Who, during those years, occupied the position of president of the defendant company. And his testimony is corroborated by the figures, which we find in the record, showing the. quantity of water pumped and the receipts from the sale of the same, as compared to the pumpage and receipts under the city administration. We will not go over these figures in detail. It is sufficient to say that the average receipts from water rates during the last five years of the city's administration were $98,513.23, and the average receipts during the following four years (being the first four years of the company's administration) were $93,601.95, whilst the evidence points strongly to the conclusion that the company pumped more water during that time than had been pumped by the city. The record does not show how much was pumped during the years: 1874, 1875 arid 1876, but it appears, as has, heretofore, been stated, that, in 1877, the city pumped 2,408,591,230 gallons, for which she received $90,148j62; and it also appears that during the year ending in April, 1882, (being the last year of the company's first four years of administration), there were pumped 2,948,347,134 gallons for which the company received $99, 930.70, the average, per thousand gallons, received by the citj being 37.4 cents, and the average received by the company being 33.8 cents. That the company received less than the city, though pumping more water, is accounted for by the fact that there had been a large waste, resulting from leaks in the reservoirs, amounting, according to the estimate of the president of the company, to 600,000 gallons per day.' The financial results thus obtained were unsatisfactory to the stockholders, who, in 1882, elected a new president. And the evidence justifies the conclusion that the company, then, deliberately, abandoned the tariff of charges for water which had been enforced by the city, and by which it had, theretofore, regulated its own charges, and established a new tariff, according to which the rates were much higher. There was little or no noise made about this change of policy, but the results were soon to speak, and have spoken, for themselves. During the year 1883, the company pumped 2,900,549,214 gallons of water, as against 2,948,347,134 gallons the year before, and received $111,794.19 as against $99,930.70, received the year before; thus.pumping nearly 50,000,000 gallons less water, and receiving nearly $12,000 more for it. And the president, in his annual report, used the following language, to-wit:
"The earnest attention of the directory has been engaged in plans " for an improvement in the character of the water we furnish; to an " improvement and reorganization of the system of records and general conduct of current business; to the maintenance of a proper and " reasonable advance in the great majority of the assessmnets, and their equalization. The assessments, (which seem to have been " governed by no fixed rule), when compared with the tariff, have been " found too low. Correction, increase and equalization have created " more or less dissatisfaction. An increase has been established, how- " ever, and the company is still far within the limits of its authorized " tariff." (Italics by the Court.)
In April, 1884, the president reported that he had caused the premises of each consumer to he inspected, and he, thereupon, proceeded, as follows, to-wit:
"The systematic inspection alluded to gave data and basis for a "material increase in the general assessment. Special care has been " taken to have all the assessments fall within the limits of our author- " ized tariff, and at the same time bear an equitable relation to each. " other in the various classes of water takers. The people of " New Orleans have proved willing, after a little natural remonstrance, " to pay a fair price for water supplied by the company, as is shown "by the fact that the collected revenue is $17,000 above that of the " preceding year."
During the year to which this report referred, the company pumped 2,759,022,884 gallons of water for which it received $127,228.50, being an average of 45.7 cents per thousand gallons. During the year ending in April, 1885, the company pumped a total of 2,442,611,478 gallons, for which it received, from private consumers, $129,876.08, and from the city of New Orleans, $17,085.60. Averaging the total amount of water pumped by the amount received from private consumers, only, and we find the charge to have been 53 cents per thousand gallons; whilst, if we.include in the calculation the amount received from the city, the average charge per thousand gallons was 59 cents. During the year ending in April, 1886, the company pumped 2,169,399,232 gallons of water, for which it received, from private consumers, $123,228.73, and from the city, $64,239.60. Averaging the total amount of water by the amount received from private consumers, only, and the charge amounted to 56 cents per thousand gallons, and if the amount received from the city be included, the average charge, per thousand gallons, was 86 cents. It will thus be seen that, within the four years following its change in policy, the company, upon the face of the reports made by the president to its board of directors, had raised the average charge for water, per 1000 gallons, about 50 per cent above the rates previously charged by the city, in 1877, and that, including the amount received from the city, the company received an average of nearly two and a half times as much per thousand gallons, for water pumped in 1886, as the city received in 1877. During some later years, a comparison of the gross pumpage with the gross receipts may not, always, disclose the same high average, but this was not because the charge was not made, but for other reasons; as, for instance, in January, 189.2, the superintendent reported that the record showed that the company pumped 100,000,000 of gallons more in November, 1891, than in November, 1888, whereas the extra quantity was neither pumped nor delivered, but was registered by reason of the defective condition, and "slippage," of the pumps. When that condition began, and how long it lasted, it would be useless to inquire. The facts which have been stated are sufficient, more particularly when considered in connection with the testimony to which we will refer a little later. What the president of the defendant company meant when he stated that the charges for water, established and enforced by the company, were "within the limits of its authorized tariff," the record does not enable us to say. It is quite certain that those charges did not, and do not, fall within the limits of the tariff established by the city, and in force when the charter of the company was adopted, as is shown by the books of the city which were delivered to the company, and served as its guide in the matter of its charges during the first four years of its existence; and if any other tariff was authorized, evidence of that fact has not been produced. The "dissatisfaction," to which the first report refers, resulted in something more than "the little natural remonstrance," mentioned in the second. Isaac Levy, a rice miller, had been paying $150, per annum, for his supply of water, under the city administration, and his rate had been increased to $175 upon the accession of the company, to which he made no objection, as the latter amount was within the tariff established by the city. In 1883, however, the company, under its new administration, increased the charge to $400, whereupon Levy filed suit, complaining that the charge was illegal and praying that the company be compelled to accept the amount to which it was entitled, and that it be enjoined, in the meanwhile, from cutting off his supply of water. And it was finally decided, in 1886, that the company was entitled to charge no higher rate than the city had charged upon March 31st, 1877, («the date of the approval of the Act No. 33 of that year); that the rate then charged by the cits', to consumers such as Levy, was fifteen cents per thousand gallons, and that the amount demanded by the company was in excess of that rate, and, therefore, unauthorized and illegal. State ex rel. Water Works Co. vs. Levy, 38 Ann. 25. The judgment thus rendered was affirmed, in 1887, in the case of Ernst vs. Water Works Co., 39 Ann. 550; and suits brought by several other litigants, and not appealed, appear to have been settled upon.the same basis. Upon the trial of the Levy case, the president of the company, who had administered its affairs during the first four years, testified that, during that time, the rates charged by the company had been regulated by the rates as he found them in the books of the city; and that the rate charged by the city, for water furnished in quantity and by measurement, was 15 cents per 1000 gallons; and he referred the counsel of the company to the books of the city, which were then in the possesson of the company, in verification of his statement. Whether the books were then produced m court, we are unable to say from the record now before us; If they were, the result shows that their contents sustained the testimony of the witness. If they were not, it is fair to presume that it was because the company, though in possession of them, did not find it to its advantage to produce them. Since that time, the books have been lost, and as the memory of the witness who then testified as to their contents has become somewhat uncertain, after the lapse of years, it would be difficult, perhaps impossible, now, to prove what rates were charged by the city in 1877, and the defendant would have a wide latitude in the matter of its charges were it not that the testimony given in the Levy case'Eas been preserved and affirmed by the witness who gave it. After having had its day in court, in ithe several cases referred to, the defendant, apparently, acquiesced in the result reached, and, as late as November, 1890, the superintendent, in his monthly report to the president and directors, referring tó a controversy which had arisen with a large consumer, informed them that he had consulted the attorney of the company as to the rate per thousand gallons that could be charged, and that, quoting the language, "he says that 15 cents per 1000 gallons "having been fixed by the Supreme Court as the legal rate to charge " consumers, this is the rate under the circumstances. I have rendered " a bill in accordance, etc." He also, in the same communication, recommended that certain other consumers, whom he names, should be charged at the same rate. But there were, and are, still other large consumers who were, and are, charged rates greatly in excess of that obtained by those with whom the controversy had arisen, rates in conformity to a tariff published by the company itself, and to which its president, presumably, referred, in speaking of its "authorized" tariff, but which fixes 15 cents per 1000 gallons as the minimum rate to large consumers, taking water by measurement, whilst the maximum rate to such consumers is 35 cents per 1000 gallons.
These rates conform neither to the Hatch tariff nor to the tariff contained in the unpromulgated ordinance of 1870, and they are largely in excess of the tariff enforced by the city in 1877; and, so far as this record discloses, there' is no other authority for them than that of the company itself, exercised in plain disregard of two decisions of this court, rendered in cases to which the company was a party, to the effect that they are unauthorized and illegal; Beyond this, we find; in the jsam^ihlet containing the tariff thus published by the company, the following rules prescribed to consumers of water, to-wit:
"Meters will be of such make and size as will be approved by the " Water Works Company, and will be furnished and maintained by " the consumer. The furnishing of water through meters " will be at the option of the Water Works Company." We also find that such meters as are permitted and approved by the Water Works Company, whilst quite expensive (those of medium size costing in the neighborhood of $40), are rapidly cut and worn out by the action of the silt-bearing water, and that there is, consequently, great irregularity iu their operation, so that one consumer, whose meter registers 1000 cubic feet, is charged with 7500 gallons of water, whilst another, whose meter registers the same quantity, may be charged with from 10,000 to 90,000 gallons, or any other quantity. And this, too, at the rate of 35 or 40 cents per thousand gallons, as against 15 cents per thousand gallons charged to the consumer whose meter measures only seven and a half gallons to the cubic foot. Thus, by -way of illustration, a partícula ' consumer, during a period of twenty-seven months, using an average of 730,000 gallons of water per month, was charged at the uniform rate of 15 cents per 1000 gallons, according to a meter which appears never to have measured more than seven and a half gallons to the cubic foot registered by it. And, at the end of that period, a flat, rate of $700 pe1' year was agreed upon, although, according to the minimum rate, -by meter measurement, with a meter which allowed only the minmum quantity of water per registered cubic foot to pass through, the charge should have been $1,314. Another consumer, who during the ten .months beginning February 1st, and ending November 30th, 1898, used an average of 2868 gallons per month, was charged, during four months, 40 cents, and during the other six monthe 35 cents per 1000 gallons, according to a meter which appears never to have allowed less than ten gallons to the cubit foot, registered by it, to pass through, and from that up to 28 gallons to the cubic foot. Again, one proprietor of a livery stable is charged a uniform rate of 20 cents per 1000 gallons, whilst another, doing about the same business, and not far distant, is never charged less than 25 cents per 1000 gallons, and from that to 45 cents per 1000 gallons; and still another, doing a somewhat smaller business, though taking his water by meter measurement, is charged 35 cents and 40 cents peT 1000 gallons, and, all this, although the maximum charge for water so taken, even according to the defend ant's publish tariff, is 35 cents per 1000 gallons, to consumers using from 100 to 500 gallons per day. The evidence is equally conclusive to the effect that the flat rates, charged to the smaller consumers, have been advanced and maintained, by the company, in excess of those exacted by the city during the last year of its administration.
Opinion.
The foregoing statement includes most of the facts, disclosed by the record, that we find necessary for the decision of the case. Others, which may be pertinent, will be incorporated in this opinion. Many facts have been pretermitted, because, if not wholly immaterial, they are, at least, unnecessary, to the particular issues upon which the case is to be decided. We have stated, in detail, the circumstances under which the defendant company came into existence, and the result of its establishment, regarded as an investment, in order that its exact, relation to the state elf Louisiana and ito the city and people of New Orleans may appear fairly upon the record, inasmuch as the State, the city, the legislative committees which reported the resolution, under the authority of which this suit was brought, and the public officer by whom the suit was brought, have been made the subjects of criticism, in one of the printed arguments presented on behalf of the defendant, which appears to us to be wholly undeserved.
It will be seen from the statement, as thus made, that upon the organization -of the defendant company, the city of New Orleans held $1,169,500, out of a total of $1,671,000 of its stock, actually issued, being also a majority of all the stock called for by its charter, but consented, nevertheless, that the control of the corporation should be vested in the minority stockholders, representing, at that time, but $501,600 of the stock; and that, not only was the entire water works plant, which the city had acquired from the Commercial Bank, together with the extensions and improvements which had been made during the city's administration, turned over to the corporation so controlled, but that there were included grants of power, from the State, which gave to that plant its principal value, viz: the power to operate it in a corporate capacity; to expropriate private, and to appropriate and use, public property as the business of the company might require; the monopoly with respect to the water to be supplied to' the City, and people, of New Orleans, for fifty years; and other powers and privileges, which need not be particularized. So that, the holders of the bonds, which had been given in payment for the bare plant, after the franchises necessary to its operation had expired by limitation, were enabled, with the same bonds, and without additional cost, to re-aequire all the property sold by them, somewhat enlarged and extended, together with privileges worth far more than the property itself. The bonds in question, and the stock for which they were exchanged, were, at that time, worth thirty-three cents on the dollar. When, therefore, at the end of the first year, the company declared a dividend of 2 per cent, it represented 6 per cent, upon the money actually invested; and the dividends of five per cent, which have been declared of late years, have represented fifteen per cent upon that original investment, and have been paid with such regularity that the stock has commanded i premium, exceeding one-fourth of its par value. The owner of the stock, acquired according to the terms of, what is called a "hard bargain," driven by a sovereign state, descending to the level of " a common trader," has therefore gained, up to the present time, nearly three times the amount of his investment, by reason of its appreciation in value, and, almost, if not quite, as much more, in the meanwhile, in the way of dividends, declared from year to year.
There are, no doubt, many of the present stockholders, perhaps a majority ^of .them, who have acquired their holdings by purchases in the market, who have paid the ruling price for their stock, and who have realized but a fair profit upon the money invested; and our remarks in this connection, are intended for no other purpose than to show that the company was not driven by the State into making a bargain, and that the bargain as originally entered into was not a hard one, as is charged.
In 1882, the city of New Orleans sued for ¡taxes, from the payment of which, under Section 4 of the Act of 1877, the defendant was declared to be exempt; and the defendant, by way of reconvention, prayed judgment for the value of the water furnished to the. city, which the same section declared should' be furnished free of charge. It was decided by this court that the exemption from taxation was unconstitutional, but that the city should pay for its water, up to an amount equal to the taxes recovered, leaving upon the defendant, however, the obligation to furnish the water required, exceeding that amount in value, free of charge. City of New . Orleans vs. Water Works Company, 36 Ann. 432.
Thereafter, the General Assembly passed an act (No. 56 of 1884) requiring the city to pay for all the water obtained by it in any year fox which it might claim and recover taxes from the company. And a contract, made pursuant to that legislation, having been sustained by judgment iof this court (Oonery et als. vs. Waterworks Co. et als., 41 Ann. 913), the city has since then, up to 1898, paid a total of over $900,000 fox its water supply, as against less than $300,000 received for taxes. It was, moreover, held that the act of 1884 was not passed for the benefit of the defendant, but was an act intended to regulate the conduct of the city of New Orleans in certain respects, and that, when the city, agreeably to the terms thereof, .agreed to pay for water, to which it was, under the previous decision of this court, entitled, free of charge, there was no such acceptance of benefit or waiver of obligation, on the part of the defendant, as to bring it within the provisions of the constitution, and thereby deprive it of its monopoly, or any other franchise, which it could not, under such circumstances, have continued to enjoy.
We now procede to inquire whether the powers and privileges conferred on the defendant, and from which it has derived such advantage, have been exercised in conformity to the conditions of the grant. It is part of the statement of facts, which precedes this opinion, that the water which the defendant furnishes and which it claims the right to furnish, at its option, whilst susceptible of clarification and purification, is neither clear nor pure. That fact has not only been recognized by the defendant and its officers, and by public officials and analytical chemist's, but by the state of Louisiana in the very legislation under which the water is now supplied, to the exclusion of any better and purer water, to some 300,000 of her citizens. The act of 1877, within which, as amended by the act of 1878, the defendant lives and moves, as we have seen, is entitled " An act to enable the city of New Orleans to promote the public health, and'to afford greater security against fire, by- the establishbent of a corporation to be called 'The New Orleans ."Water Works Company;' to authorize the said company to issue ." bonds, for the purpose of extending and improving the said works, •" and to furnish the inhabitants of New Orleans ah adequate supply of " pure and wholesome water," etc.
'This language plainly.indicates that the attention of the law-makers was attracted to the question of the-quality of the water to be furnished, and that the act to' be passed would deal with that subject. It was no secret 1o. them- that the city ¡oí New Orleans 'had, for thirty- five years, and more, been supplied with the water of the Mississippi river, as taken therefrom, and, if the proposed legislation contemplated only a continuation of the same supply the descriptive terms used were not only unnecessary, but inapplicable. But that such was not the purpose, is evident from the fact that the act confers upon the company the authority to obtain water elsewhere than from the Mississippi river, whereas its predecessor, the Commercial Bank, was restricted to that stream. Moreover, Section 5, confers upon the corporation the power "to construct, dig, or cause to be opened, any canals or ditches, whatever, for the purpose of conducting the water of the rivers from any place or places it may deem fit, and to raise and construct such dykes, mounds, reservoirs as may be required for securing and carrying a full supply of pure water to said city and its inhabitants," etc. And Section 9, provides that: "The Board of Directors shall have power to borrow money for the purpose of improving and enlarging its works and increasing the supply of pure water; and to accomplish this, the said Board are hereby authorized to issue the bonds of the company," etc.
This use of the word "rivers," and of the adjective "pure"; the fact that the purpose expressed by the words, "improving and enlarging the works, and increasing the supply of pure water," is immediately after-wards referred to as "this purpose," rather than "these purposes," taken in connection with the title of the act, leave no doubt that the lawmakers contemplated that the corporation which they were creating should, at some time or another, either purify the Mississippi river water, if, it elected to obtain its supply from that stream, or else should bring water, which required no purification, from some other stream. The proposition that, whilst recognizing the fact that Mississippi river water, in its normal state, is not pure, they should nevertheless have undertaken to restrict a community, consisting of some hundreds of thousands of persons, to its use, as their main supply, for a period of fifty years, and should have undertaken to make a law prohibiting such community from obtaining a supply elsewhere during that period, seems inconceivable, and the argument that, notwithstanding that "pure water" is mentioned in both the title and the context of defendant's legislative charter, it is intended that it should be optional with the defendant, during the long period covered by that charter, to furnish either pure or impure water, as its interest may suggest, lose3 much of its force, when we consider, that if the word "pure" had been entirely omitted, the right of the defendant to furnish water of that description would have been unquestionable. But, let us suppose that the contention on behalf of the defendant, on this point, is well founded, and that it was the deliberate purpose of the law-makers of the last generation to restrict the people of New Orleans, for fifty years (before the expiration of which period the population may increase to half a million), to the use of unpurified water, as their main supply, at the option of a private business corporation; let us suppose that, so long as the corporation fulfills its obligations under the contract, which is said to result from this law, the community affected is without remedy, and must deny itself all water, except that furnished by said corporation, at least, it must be conceded that no such result follows if the corporation disregards alike the obligations and the prohibitions of the contract from which, alone, it could follow.
It is not claimed that the defendant company was granted the monopoly in question, with its other privileges in derogation of common right entirely without conditions. And, if the law-makers intended that it should enjoy that monopoly and those other privileges they also intended that it should observe the conditions upon which they were granted. But, one of the conditions was, that the company should charge no more for the water furnished by it than was paid to the city upon March 31, 1877. The charter of the company, under which its monopoly and all other franchises are enjoyed, contains a plain, positive prohibition to that effect. And yet the evidence in this record shows that the company, from 1883 up to the present time, has grossly, deliberately and persistently, violated that prohibition, by the establishment and enforcement of a tariff of charges for water greatly in excess of that thus authorized; and not only so, but, whilst enforcing its excessive, unauthorized, and illegal charges, has unjustly discriminated between citizens and other corporations with respect to their supply of an element and a commodity, equally necessary to human existence and to human affairs. This violation of the law and of its charter obligations is not one the effect of which is confined to the company, as a business entity, or to the investment of its stockholders. It inures (to their pecuniary advantage; but, in its operation, it oppresses, and has oppressed, and will continue, if allowed to continue at all, in perhaps even greater degree, to oppress an absolutely dependent public. In view of these facts, the law demands that the privileges and corporate life thus abused should be withdrawn. And it requires no other law, and no other construction of law, than such as is found in, and authorized by, the Civil Code of 'this state, to reach such a conclusion.
O. O. Arts. 14, 18, 447; Atchafalaya Board vs. Dawson, 13 La. 497; State vs. New Orleans Gas Light & Banking Co. 2 R. 529. But the same law prevails in other jurisdictions, and the conclusion stated is sustained as well by the authorities furnished on behalf of the defendant as by those furnished on behalf of the plaintiff.
"A private corporation, created by the legislature, may lose its " franchises by a misuser, or. a non-user, of them; and they may be " resumed by the government, under a judicial judgment, upon a quo " warranto to ascertain and enforce the forfeiture. This is the common-law of the land, and is a tacit condition annexed to the creation of every such corporation. Territt vs. Taylor, 9 Cranch 51.
Morawetz on Private Corporations, 1st Ed., Par. 640.
"It has accordingly been held, in various cases, that, if a corporation has assumed the performance of duties for the benefit of the public, generally, it cannot neglect the performance of those duties without incurring a forfeiture of its franchises."
" If a duty is prescribed by the charter of a corporation in express terms it seems that the company will hold its franchises upon the condition that the duty shall be performed; and, hence, an omission to perform will constitute a sufficient ground for declaring a forfeiture of the company's franchises."
" Any act of a corporation which is forbidden by its charter, or by " a general rule of law, and, strictly, every act which the charter does "not expressly or impliedly authorize the corporation to perform, is "unlawful; and if the doing of such act is an injury to the public, it "may be sufficient ground for declaring a forfeiture of the corporate " franchises." Morawetz, Par's. 643-5.
In New York it has been held to be sufficient ground to justify the forfeiture of the charter of an insurance company that such companv had undertaken to carry on banking operations in-violation of a general law prohibiting Unauthorized banking. People vs. Utica Ins. Co., 15 Johns. 358.
In Pennsylvania it has been held that where a bank was prohibited by its charter from making loans at a greater rate of discount than one-half of one per centum, for thirty days, and from dealing in promissory- notes, and it was shown that this provision had been wilfully and repeatedly violated, there was sufficient cause for declaring the charter forfeited. The Court, through the Chief Justice, said:
" It may be affirmed, as a general principle, that where there has " been a misuser or a non-user, in regard to matters which are of the " essence of the contract between the corporation and the State, and " the acts or omissions complained of have been wilful and repeated, " they constitute a just ground for forfeiture." Com. vs. Commercial Bank, 28 Pa. St. 389.
In State vs.* Commercial Bank of Manchester, 33 Miss. 497, the court, referring to a restriction in the charter of the bank with respect to the charging of interest, said: " The same law which gave her " existence imposed the restriction and prescribed to her certain rules " of action, which must be regarded as so many conditions annexed " to the grant, and as tantamount to saying to the bank ' you are now "endowed with certain rights and privileges which you can exercise " and enjoy during the period specified in the charter, upon condition " that you act according to the rules therein prescribed.' The rule "prescribed as aplicable to the case before us, is, that the bank shall "not take exceeding seven per cent, per annum discount on notes "having less than twelve months to run to maturity. This rule is " the law which must govern the case before us, and the replication " alleging, a course of business, persevered in for at least six months, " in palpable violation of this rule, presents, in our opinion, a good " cause for forfeiture."
It is said, however, on behalf of the defendant, that according to the terms of the charter, the only remedy in the case presénted is to lie found in that provision which authorizes the city of New Orleans to proceed by mandamus to enforce a reduction of charges. We do not so construe the law. Section 15 of the Act of 1877 reads: "That the Water Works Company shall have the right to fix the rates for water: provided, that the net profits of the company shall not exceed ten per cent, per annum, and shall publish 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 hooks of said company, and make such extracts from the same as they may deem necessary; and, in case the profit shall exceed ten per cent, the City Council shall have the right to require said company to reduce the price of water in such manner and in such 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" (to) "this city, and in case said company shall refuse compliance, the demand of said city may be enforced by mandamus." This section of the law is somewhat inartificially drawn, but we are of opinion that a reasonable construction requires that the "demand," which the city is authorized to enforce, by mandamus, should be held to relate back to the demand which the city had been previously authorized to malee, to-wit, the demand for a general reduction in the price of water whenever the profits, of the company exceed ten per centum per annum. It would be inadmissible to suppose that the individual consumer, who might be the victim of extortion practiced by the company, was to be left without remedy, and absurd to suppose that, his remedy was to consist of the mandamus proceeding which the City of New Orleans was authorized, but not compelled to bring under the conditions stated in the act. Nor does the fact that such consumers might resist overcharge against them, and have actually and successfully done so, affect the rights and obligations of (he state in the premises.
It is also said, that, whilst the petition alleges that the defendant has been guilty of charging more than was charged by the city during the period immediately preceding the transfer of • the works; it is further alleged that the tariff then enforced by the city was that embodied in the ordinance adopted in 1870, and that, as said ordinance was never promulgated,, it follows that the action must fall, on this ground. We do not concur in this reasoning. The first, and material, proposition of the State is,-that the charges enforced by the defendant have exceeded those which were enforced by the city, and this proposition has been established by conclusive evidence. Beyond that, it is perfectly immaterial whether the charges enforced by the city correspond to those embodied in the unpromulgated ordinance or not.
The defendant was afforded the amplest opportunity, on the trial of this casé, and it has had ample opportunity heretofore, in the Levy and Ernst cases, and in several other cases, to show that the tariff enforced by the city at the date of the transfer of the works, and in March, 1877, was other than as testified to by their ex-president; and if it was unable to make such proof' whilst- it had the books of the city in its possession, there is no réason to suppose that it can do so now, since those books have disappeared.- Holding these views, we find it unnecessary to'consider the other questions presented.
For these reasons, it is ordered, adjudged and decreed that the judg rnent appealed from be annulled, avoided and reversed, and it is now ordered, adjudged and decreed that there be judgment, ip. favor of the plaintiff, the State of Louisiana, and against the defendant, the Nevi Orleans Water Works Company, decreeing the forfeiture of the charter and of all the franchises heretofore conferred upon said defendant corporation. It is further ordered that said defendant pay the costs of these proceedings.
Breaux, J., concurs in the decree. Provosty, J., takes no part, the case having been argued and submitted prior to his appointment on this bench.