Case Name: Pennsylvania Water Company v. Pittsburg, Appellant
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1910-01-03
Citations: 226 Pa. 624
Docket Number: Appeal, No. 47
Parties: Pennsylvania Water Company v. Pittsburg, Appellant.
Judges: Before Mitchell, C. J., Fell, Brown, Mestrezat, Potter, Elkin and Stewart, JJ.
Reporter: Pennsylvania State Reports
Volume: 226
Pages: 624–652

Head Matter:
Pennsylvania Water Company v. Pittsburg, Appellant.
Corporations — Water companies — Boroughs — Contract — Exclusive privileges — Municipal corporations.
A borough ordinance granting without limit as to time permission to a water company to enter the borough and lay its pipes in the streets, when accepted and acted upon by the company, constitutes a contract between the borough and the company to supply water to the public which exhausts the power of the municipality to supply itself with water, and prevents' the borough from erecting its own water works for that purpose so long as the water company continues to furnish a suitable and adequate supply, and this applies whether the company has or has not an exclusive privilege. Such a contract is binding on a city which annexes the borough to itself as a ward, and agrees to recognize all contracts for the supply of water made by the borough.
Brown, Mestrezat and Potter, JJ., dissent.
Argued Nov. 3, 1909.
Appeal, No. 47, Oct. T., 1909, by defendants, from decree of C. P, No. 2, Allegheny Co., July T., 1908, No. 690, on bill in equity in case of Pennsylvania Water Company v. City of Pittsburg et al.
Before Mitchell, C. J., Fell, Brown, Mestrezat, Potter, Elkin and Stewart, JJ.
Affirmed.
Bill in equity for an injunction. Before Miller, J., specially presiding.
The facts are stated in the opinion of the Supreme Court.
Error assigned was decree awarding injunction.
C. K. Robinson, with him W. B. Rodgers, for appellants.—
A wafer company cannot prevent a city- of -the second class from extending its lines into a ward served by the company where the company does not have an exclusive franchise from the state, but has an ordinance, and a limited contract, which has expired, with a pre-existing borough; and a limited contract, which has expired, with the city: Braddock Borough v. Penn Water Co., 189 Pa. 379.
The company does not have an exclusive franchise from the state: Braddock Borough v. Penn Water Co., 189 Pa. 379.
Not having an exclusive franchise, the borough of Brushton, if now in existence, could itself construct its own water system. It is observable that out of the great number of decisions of this court relating to this subject there has gradually evolved a distinction between the rights of water companies possessing an exclusive franchise and those having a nonexclusive franchise. In fact this element has been present and has been considered in the very earliest opinions relating to this subject and has been referred to in the following cases: White v. Meadville, 177 Pa. 643; Centre Hall Water Co. v. Centre Hall Borough, 186 Pa. 74; Philipsburg Water Co. v. Philipsburg Borough, 203 Pa. 562; Philipsburg Water Co. v. Citizens’ Water Co., 189 Pa. 23; Braddock Borough v. Penn Water Co., 189 Pa. 379; Tyrone Gas & Water Co. v. Tyrone Borough, 195 Pa. 566; Boyertown Water Co. v. Boyertown Borough, 200 Pa. 394; Hastings Water Co. v. Hastings Borough, 216 Pa. 178.
The Meadville case does not apply to a water company possessing a nonexclusive franchise: Charles River Bridge v. Warren Bridge, 11 Peters, 420; Philipsburg Water Co. v. Philipsburg Borough, 203 Pa. 562; Hastings Water Co. v. Hastings Borough, 216 Pa. 178.
It seems that this case is very similar to the case of the Troy Water Company v. Troy Borough, 200 Pa. 453, where the company had an exclusive franchise.
The city could now extend its lines into this territory if it were still the borough of Brushton.
There is no contract in this case which prevents the city of Pittsburg from supplying water in its thirty-seventh ward: Muncie Nat. Gas Co. v. Muncie, 160 Ind. 97 (66 N. E. Repr. 436); Valparaiso City Water Co. v. Valparaiso, 33 Ind. App. 193 (69 N. E. Repr. 1018); Boise City Artesian Hot & Cold Water Co. v. Boise City, 123 Fed. Repr. 232; Tillamook Water Co. v. Tillamook City, 139 Fed. Repr. 405; aff'd, 150 Fed. Repr. 117; Bienville Water-Supply Co. v. Mobile, 175 U. S. 109 (20 Sup. Ct. Repr. 40); Helena Water Works Co. v. Helena, 195 U. S. 383 (25 Sup. Ct. Repr. 40); Syracuse Water Co. v. Syracuse, 116 N. Y. 167 (22 N. E. Repr. 381); Knoxville Water Co. v. Knoxville, 200 U. S. 22 (26 Sup. Ct. Repr. 224).
D. T. Watson, with him A. W. Buff and Gordon & Smith, for appellee's.
Where a municipality, instead of building its own water works, contracts with a water company for a supply of water and the water company furnishes such supply, the municipality has thereby exhausted its power to supply water and cannot thereafter build water works in competition with the water company: Metzger v. Beaver Falls Borough, 178 Pa. 1; Wilson v. Rochester Borough, 180 Pa. 509; Welsh v. Beaver Falls Borough, 186 Pa. 578; Carlisle Gas & Water Co. v. Carlisle Water Co., 188 Pa. 51; Troy Water Co. v. Troy Borough, 200 Pa. 453; Nelson v. Warren Borough, 200 Pa. 504; Potter County Water Co. v. Austin Borough, 206 Pa. 297; Olyphant Sewage Drainage Co. v. Olyphant Borough, 211 Pa. 526.
The contracts and indebtedness of the old corporations become the contracts and indebtedness of the consolidated or annexing corporations: 28 Cyclopedia of Law and Procedure, Title, Municipal Corporations, pp. 220-222; Mt. Pleasant v. Beckwith, 100 U. S. 514; Mobile v. Watson, 116 U. S. 289 (6 Sup. Ct. Repr. 398); Shapleigh v. City of San Angelo, 167 U. S. 646 (17 Sup. Ct. Repr. 957); Huffmire v. City of Brooklyn, 162 N. Y. 584 (57 N. E. Repr. 176); Trustees of Erie Academy v. City of Erie, 31 Pa. 515.
January 3, 1910:

Opinion:
Opinion by
Mr. Justice Stewart,
The borough of Brushton, incorporated in 1890, was erected out of part of Sterrett township, Allegheny county. By ordinance dated May 12, 1891, the borough authorized the Pennsylvania Water Company, a corporation chartered under the Act of April 29, 1874, P. L. 73, and its supplements to supply water to Sterrett township, to construct and operate water works within the borough limits, granting to said company the use of the streets of the borough, "to lay pipes for the purpose of supplying water to the borough and its inhabitants, and authorizing a contract with it for the supply of hydrants for fire and other public uses." Prior to this time no action had been taken by the borough to provide a water supply. The water company filed'its written acceptance of the grant, and within the time prescribed constructed its system of mains and pipes throughout the borough. At the time of filing the bill in this case it had laid and was using some eleven and a half miles of iron pipe in what had-been the borough of Brushton, and was supplying therefrom more than 1,600 private consumers, and, in addition, the municipality itself with such amount of water as was required for public purposes. The grant to the water company of the right to use the streets for the purpose aforesaid was without limit as to time; but the ordinance contained a stipulation, however, that the contract between the borough and the company for water for municipal purposes should be limited to ten years. In 1894, the borough of Brushton was annexed to the city of Pittsburg, and became the thirty-seventh ward of that city. The ordinances of the respective municipalities through which this annexation was effected, provided that, "All contracts for the supply of water and all other obligations existing and valid between the said borough and other persons, firms or corporations, shall be accepted and assumed by the said city of Pittsburg, and all the provisions of the same shall be faithfully kept and performed thereby, and the said city shall have and enjoy all the rights, privileges and immunities thereunder." In May, 1908, the city of Pittsburg, claiming the right to extend its own water system within the territory so annexed for the purpose of supplying water therein for public and private purposes, began preparations to that end. Thereupon the Pennsylvania Water Company filed the present bill to restrain the city from proceeding further. The learned chancellor being of opinion that the case fell within the ruling in White et al. v. The City of Meadville et al., 177 Pa. 643, granted an injunction, which on hearing was made perpetual. From this decree the city appeals. This brief statement of facts sufficiently discloses the ground of controversy. The fact that Brushton borough no longer exists as a municipality, adds nothing to the complications of the case. While the controversy is between the city of Pittsburg and the water company, the former stands for the borough of Brushton, and has no rights beyond those which the borough of Brushton could have asserted had it attempted to do what the city is threatening. The case stands as though the ordinances under which the water company makes its present claim were originally enacted by the city of Pittsburg. This would be true even in the absence of an express assumption by the city of the contract obligations of the borough, for it is an undoubted rule that, except where it is otherwise provided by law, the contracts and indebtedness of the old corporation become the contracts and indebtedness of the consolidated or annexing corporation. "There is no doctrine better settled than that a change in the form of government of a community does not ipso facto abrogate pre-existing law, either written or unwritten. This is true in regard to. what is strictly municipal law, even when the change is by conquest. The Act of Assembly converting the borough into a city did not therefore of itself, and in the absence of express provisions to that effect, either repeal former Acts of Assembly relative to the borough, or annul existing ordinances:" Trustees of The Erie Academy v. City of Erie, 31 Pa. 515. The whole effort of the appellant is to distinguish the present case from the Meadville case because of a single fact which appeared in the latter but does not appear in this. In the Meadville case the water company was incorporated under the original act of April 29, 1874, which conferred upon such companies the exclusive right to provide water within the district for which they were chartered. Here the water company was incorporated, subsequent to the amendment of June 2, 1887, P. L. 310, which denies such exclusive privilege to companies thereafter incorporated. The doctrine of the Meadville case needs no other vindication or exposition than is to be found in the opinion. All that is required here is a simple restatement of what the case does decide. In that as in every case the power of the municipality to provide a supply of water rested in express legislative grant. It was the extent of this grant, and what limitations, if any, were imposed on its exercise, that were the questions under consideration. The case decided that the grant left it optional with the municipality to provide water in one of two ways, either by constructing a water system of its own, or through an independent agency; that it could not employ both methods at the same time, and that when it had provided a water supply by contract with an independent agent, it was without power to employ the alternative method, so long as the right of the independent agent to supply the water continued and was being rightfully exercised. This was the whole of the decision; and it was made to rest fundamentally and exclusively on the ground that the municipality having once provided a supply of water for its inhabitants by one of the methods, the power granted it was exhausted. The decision puts no limitation whatever on the contracting power of the municipality where it has elected to get its water supply through an independent company; nor does it confine the municipality to that particular method for any longer period than during the existence of the contract between it and the independent agent. Where it does so contract the terms of the contract are for the municipality to dtefine. It may, as was the case here, grant to the water company the privileges of the public streets for an indefinite term, in which case, the privilege continues so long as the company furnishes an adequate and suitable supply, or it may contract for a long or a short term as it prefers, and repeat the process as often as occasion requires. With the expiration of the term fixed by the contract the power of choice beween methods revives, and the municipality becomes free as ever to adopt thereafter the method it formerly rejected. Now when the ground of the decision — viz., the exhaustion of power in the municipality, that is, the exhaustion of privilege of choice between methods, — is considered, what room can there be for supposing that it is authority only in cases where the company contracted with .has under the law an exclusive privilege? Does not exhaustion result just as certainly where the contract for the supply is with a company not having an exclusive privilege as where it is with one having an exclusive privilege? Exhaustion follows when the object has been accomplished, no matter what the privileges of the agent employed to accomplish it. Any such distinction as is here insisted upon between companies, in this particular connection, would be arbitrary in the extreme, without any justification whatever in reason. Certainly no warrant can be found for it in the Meadville case. Not only so, but at best the distinction is most unsubstantial, when considered as affecting the rights of the municipality. It goes no deeper than this; in the one case the exclusive privilege is derived from express legislative grant; in the other, like exclusiveness necessarily results, against the municipality, for the reason that the latter having made its contract with the company for a water supply through it, has exhausted all the power it had for the time being to employ the other method; not that having contracted with one company, it may not give to another company the right to enter upon the streets and lay pipe; but it may not, whether there be one or several companies supplying the inhabitants with water, build water works of its own to compete with the companies which entered with its consent. Since there is no longer exclusiveness by charter, there is nothing to prevent a municipality from allowing its streets to be torn up by as many companies as choose to avail themselves of the privilege. Security against abuse here lies in the fact, that it is within the discretion of the municipal authorities to withhold assent when the privilege is asked, — since by the act of June 2, 1887, no company theretofore or thereafter incorporated can enter upon the street of any city or borough except by municipal consent; — or, what is perhaps a more certain safeguard, the manifest unprofitableness of any such franchise in territory already fully supplied. Again, the exclusive privilege, as against the municipality, in any water company having a contract with the municipality, we think necessarily results from .quite other considerations as well. Take the present case: The Pennsylvania Water Company by ordinance was given the right to enter upon the streets of the borough with its mains and pipes for the purpose of supplying the inhabitants with water; it did so.enter, and at great cost to itself supplied and placed in position the necessary equipment, and has continued to meet every requirement of its contract with regard to the supply. It will not be pretended that the borough, if it still had a separate existence, could recall the franchise which it gave the company before its expiration, or that it could interfere with the company's mains and pipes in any such way as would prevent the company from furnishing a supply of water to all who desired it. Suppose, however, it were allowed to build and employ water works of its own, what would be the result? Competition? No, not competition — which would be bad under any condition as a gross perversion of municipal function — but absolute and total destruction of the company's property, as complete as would result from a forcible tearing up of the mains and pipes and casting them aside. We can do no better in this connection than repeat what was said by Mr. Justice Dean in the Mead-ville case, page 651: "If anything "be manifest, it is, that if two water mains be laid side by side on the same street, equally accessible to the householder on each side, conveying double the quantity needed, with double sets of hydrants, pumping-stations, offices, salaries and expenses, one or the other must be abandoned. No community will pay double for any article of necessity or luxury. If the property holder must, by compulsory taxation, support the municipal system, he will not voluntarily support the private corporation system; such a conflict of interests will inevitably bankrupt the system which depends on the voluntary patronage of the public. We hesitate to assume, every court is bound to hesitate long before assuming, the legislature intends by grants to distinct corporations for public purposes, there shall arise such conflict in the exercise of the franchises as will result in practical destruction of property of any citizen without compensation. It is a cardinal rule of construction between older and younger grants of franchises, the sovereign does not intend the younger shall infringe on the older; but to assume these franchises can be in existence and in operation at the same time, is to assume the commonwealth has granted precisely the same thing to the municipality that it had already granted to the water company; for in a business view, the contemporaneous exercise of the franchise is impossible." It is clear that except as a contract with a water company for a water supply gives an exclusive right, as against the municipality, this must result— while the municipality may not violently tear from its place the property of the company and so deprive the company of its rights, it must be allowed to accomplish by indirection a result equally destructive and disastrous. The law will not aid in the accomplishment of any such end. For the reasons above given we think the distinction pressed upon our attention is unsubstantial and therefore unimportant. We are not unmindful of the fact that in one, or perhaps two, of our cases expressions may be found which seem to give color to the appellant's contention, notably in the case of Philipsburg Water Company v. Philipsburg Borough, 203 Pa. 562, so much relied on as authority for the position taken by appellant. Nevertheless, explicit as the statement in that case is to the effect that the law as declared in the Meadville case "applies only when an exclusive right is assailed," it may be confidently asserted that neither in that case, nor in any other decided by this court from which can be gleaned an expression in seeming accord with that above quoted, has the adjudication rested on any such distinction, but on facts wholly independent of it. The only question before the court in the Philips-burg case was as to the power of the borough to exercise the right of choice between two water companies, both of which were rightfully exercising their franchises within the borough, but with the borough under no contract obligation to take its water supply from one rather than the other, the contract which the borough had with the .earlier company having terminated. . The appellant's contention, there was, that the borough having once contracted with it — the first company to enter the field — notwithstanding the termination of that contract, the municipal function had passed from the borough, and could only be resumed by the purchase of the company's water works in the way provided by the act of assembly in such cases. The Meadville case was cited in support; ineffectually of course, for under the doctrine of that case nothing whatever in the way of municipal function passed by operation of law from the borough in consequence of its having contracted with the earlier company, except the right to construct and employ a competing system of its own during the continuance of the contract. It is impossible to derive more than this from the Meadville case. The complaining company there rested its right to exclusive privilege not on any contract, but its charter; and this court held that there was nothing in its charter that constituted it the only.company with which the borough could contract for a water supply.. This came far short of deciding that the doctrine of the Meadville case was applicable only where the right was exclusive. The fact is the Meadville case was wholly without applicability to the one then being considered. The only occasion for comment upon .it in that case was the fact that the complaining company had invoked it as an authority for the position taken that the borough, by having once contracted with it for a water supply, notwithstanding the contract had expired, had exhausted its power to contract with any other company. . Whatever in the opinion filed in the Philipsburg case went beyond this, in the way of qualifying or controlling the application of the Mead-ville case, was outside the case that was being considered, and cannot be allowed the effect of an adjudication. Quite as much may be said of the other cases in which there is a suggestion of qualification of the doctrine of the Meadville case as a general rule applicable to all companies, whether with or without exclusive privilege. Not one of them depends for its decision upon any such consideration.
The assignments of error raise several questions beside that we have here considered, but none of them call for particular discussion. The ordinance of the borough of Brushton and the written acceptance of it by the appellee, together with the latter's performance, unquestionably constitute a binding contract. "Where the grantee of such a franchise has performed the public service imposed as a condition of the grant, the franchise is a contract, which falls within the provisions of the Constitution of the United States forbidding the States to pass laws impairing the obligation of contracts:" Dillon's Municipal Corporations, sec. 691, citing New Orleans Gas Light Co. v. Louisiana Light, etc., Co., 115 U. S. 650; Louisville Gas Co. v. Citizens' Gas Light Co., 115 U. S. 683. Conceding, only however for the sake of argument, that under the provisions of its charter and because of the nonexclusive right of the appellee, the city of Pittsburg could have extended its water system within the territory of the borough, the fact, that it did not do so until after the borough had exercised its right to provide its water supply through the agency of the appellee, and after the city had expressly assumed all the obligations of the borough, including its water contracts in the ordinance of annexation, must be conclusive against the present claim of right in this regard. It is a matter of no significance that the appellant, being a city of the second class, has no power under its charter to contract, for a water supply through an independent agent, except in territory not otherwise supplied, and then only for a term of years and without exclusive privilege. The borough of Brushton had such right, unqualified, and exercised it by contracting with the appellee. The limitation in the city's charter which confined its right to contract for a water supply in "territory not supplied with water," could mean nothing more than that its right in this respect was limited to territory not already supplied through the city's established water system. The evident purpose was to avoid and prevent competition in the matter of water supply with the city in the territory that the city actually supplied. When Brushton borough was annexed it was not so supplied, and in assuming the contract obligations of the borough-with the appellee, the city simply was exercising its right to supply territory not supplied through the city system. Besides, we are not concerned in this controversy with the extent of the rights of the city of Pittsburg with respect to its system of water supply. What does concern us is the right in the appellee to exercise the privilege it acquired under its contract with the borough of Brushton. That right was in efféct exclusive as against the borough of Brushton so long as the- contract held; it is no less exclusive against the city of Pittsburg's interference in the way threatened.
A single word as to that way, in concluding this discussion. Had the city introduced it's mains and pipes into the borough of Brushton before the annexation, as it is claimed it had the right to do, it would, in so doing, have occupied toward Brush-ton simply the position of an independent,., competing water company, with which the borough could, other things being out of the way, contract for a water supply. Whatever the city's privileges in this regard, it owed no duty to Brushton. The position now that the borough has been annexed has been wholly changed. If the city were now to introduce its water system it would not be for the purpose of contracting to furnish a supply of water, but with a view to furnish water through its own system in the same manner that it furnished it to every other subdivision of the 'municipality. In effect it would be Brushton borough enlarged supplying its own water. Under settled principles this may not be done under existing conditions.
We have not adverted to the acts of recognition and ratification by the city, since the annexation, of the contract obligation of Brushton with the appellee, not that we have overlooked them or the argument based on them, but only because we are willing to rest our decision on the ground we have indicated as entirely sufficient for the determination of the case.
The case was properly decided by the learned chancellor; the assignments of error are overruled, and the decree is affirmed.