Case Name: THE STATE ex rel. ST. JOSEPH WATER COMPANY v. JACOB GEIGER et al., Constituting Board of Managers of State Hospital Number 2
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 1912-11-26
Citations: 246 Mo. 74
Docket Number: 
Parties: THE STATE ex rel. ST. JOSEPH WATER COMPANY v. JACOB GEIGER et al., Constituting Board of Managers of State Hospital Number 2.
Judges: Valliant, G. J., Lamm and Brown, JJ., concur; 'Woodson, J., concurs in a separate opinion; Graves, J., dissents in an opinion in which Fer-riss, J., concurs.
Reporter: Missouri Reports
Volume: 246
Pages: 74–108

Head Matter:
THE STATE ex rel. ST. JOSEPH WATER COMPANY v. JACOB GEIGER et al., Constituting Board of Managers of State Hospital Number 2.
In Banc,
November 26, 1912.
1. PUBLIC WATER: Rates: Public Use. The business of supplying the public with water is a business impressed with a public use, and an ordinance fixing the rates for such supply is the exercise of governmental power.
2. -: -: By Private Contract: Supplanted by Ordinance Rates. In the absence of legislative action prescribing the rates for water supplied to the public, private parties may-fix them by contract, and the rates so agreed upon will be upheld. But such rates remain in force only so long as. the legislative body having power to fix the rates refrains from the exercise of its powers to prescribe the rates. When public rates are Established by law, rates agreed upon by private contract must yield to the public rates. So that where the city of St. Joseph in 1900 entered into an ordinance contract with a water company by which it was agreed that “water shall be furnished to all private consumers at the same rate” for a period of twenty years and that rate was fixed at six cents pdr 1000 gallons, and in 1905 the board of managers of State Hospital Number 2, then outside the corporate limits of the city, entered into a contract by which said company agreed to supply the hospital with water for the ensuing ten years at the rate of ten cents, per 1009 gallons, and in 1909 the corporate limits of the city were extended to embrace said hospital, the contract rate of ten cents per 1000 gallons was supplanted by the ordinance rate of six cents.
Held, by GRAVES, J., dissenting, with whom' PERRISS, J., concurs, that as a general rule ordinance rates, for water should be, and by force of the law are, extended to territory subsequently annexed to the city. But that rule should not be applied, and cannot justly be applied, where it was agreed in the instrument by the board of managers of the hospital, then situated at a great distance from the city limits, that if the water company would at its own expense lay a water main to the hospital for’the purpose of supplying water to it, the hospital would pay it ten cents per 1000 gallons for all water taken during a period of ten years, instead of the six-cent rate then fixed by the ordinance for supplying like quantities to persons within the city — the company having fully performed its part of the contract, and the mains haying been laid without reference to streets in the territory subsequently added.
3. -: -: -: -: Extending City Limits. When the boundaries of a city are extended, all ordinances and municipal contracts of a general character, in the absence of a special provision to the contrary, are simultaneously extended over, and become operative in, the added territory, and such territory becomes subject to the same burdens' and entitled to the same privileges as that within the original limits.
4. -: -: Extension of Mains: Hydrants. If the water company, with the consent of the consumer, voluntarily extends its mains and supplies him with water, the service, regardless of the costs of the mains, must be done under an ordinance which requires that “water shall be furnished to all private consumers at the same rate.” And those ordinance rates are not affected by the fact that the ordinance required the laying of mains and the placing of hydrants by the water company, under the direction of the city, at intervals of 500-feet, if the company voluntarily laid a main without being di- • rected so to do by the city, or uses a main laid before the city limits were extended.
5. —;-: -: Legality of Contract: State Hospital: Political Subdivision of State: Indebtedness. Held, by WOOD-SON, J„ that the State hospitals do not constitute the State itself, nor are they simply a part or arm of the State, but are political corporations and are embraced in that part of the Constitution which declares that “ho county, city, town, township, school district or other political corporation or subdivision of the State shall be allowed to become indebted in any manner or for any purpose to an amount exceeding in any year the income and revenue provided for such year,” etc., and therefore the board of managers of a State hospital had authority to make a contract for the supply of water to the hospital for a period of ten years at ten cents per 1000 gallons to be paid monthly as used if the biennial appropriations made by the General Assembly for the use of the board were sufficient to pay those accounts as they matured.
Mandamus.
Weit denied.
John E. Dolman for relator.
(1) The contract in question is analogous to contracts for the public supply of water by municipali ties in which it is held “that no indebtedness of the city (within the meaning of Sec. 12, Art. 10, of the Constitution) accrues under the contract until the supply of water has been furnished, as agreed, year by year.” Water Co. v. Lamar, 140 Mo. 145; Saleno v. Neosho, 127 Mo. 627; Water Co. v. Lamar, 128 Mo. 188; Water Co. v. Neosho, 136 Mo. 498; Trask v. County, 210 Mo. 596. The contract in controversy expressly provides that the “party of the second part hereby agrees to take its entire water supply from the St. Joseph Water Company . . . for the said Hospital No. 2 for a period of ten years from December 31, 1905, said water to be supplied by meter measurements and at the rate of ten cents per thousand gallons . . . payment for all water used to be made monthly,” which provisions come squarely within the application thereto, of the' authorities above cited. Sec. 1378, R-. S. 1909, prohibits the contracting of any debt for which there shall not be at the time an adequate appropriation and Sec. 43, Art. 4, and Sec. 19, Art. 101, of the Constitution prohibit the payment of money except pursuant to regular appropriation therefor. No debt was incurred where the contract i<n question was entered into. Not until the water was actually furnished was a debt created. The payment therefor became due monthly as furnished for which payment together with other obligations necessarily incurred for the support and maintenance of the institution, ample appropriations. have been made at each regular session of the General Assembly, including such an appropriation for the years 1911 and 1912. Laws 1911, p. 41. It is the incurring of a debt for which no appropriation has been made and the payment of unappropriated money that the statute and Constitution prohibit; and not the making of a contract which makes the incurring of a debt and the payment of money, contingent upon the furnishing of the article, for which the parties have a right to expect an appro priation, out of which payment may he made upon the happening of the contingency. Martin Co. v. Dubuque, 127 N. W. (Ia.) 1013; Walla Walla v. Water Co., 172 U. S. 1; City y. Water Co., Ill Pac. (Ore.) 864. (2) The State has in general the same power to contract as a corporation or an individual. 36 Cyc. 871. The contracts are usually made by duly authorized officers or agents and their contracts hind the State. Their authority need not he express hut may he implied. 36 Cyc. 872.' And the State can no more impair the obligation of an authorized contract than an individual. Woodruff v. Trapnall, 10' How. (IT. S.) 190: And the fact that the contract extends beyond the life of the hoard making it, is not a valid objection. Pub. Co. v. Commissioners, 13 L. R. A. (N. S.) 1115; 3 Dillon on Municipal Corp. (5 Ed.), Sec. 1307. (3) The rule of law is undoubtedly correct that in accepting a franchise a water company acts not as a private but as a quasi-public corporation. It enjoys and must exercise its opportunities for gain subject to its obligation to the public in the absence of a contract fixing the rates. that it will supply water without unjust discrimination and at uniform rates to all those along the lines off its mains who apply and tender a reasonable compensation. 30 Am. & Eng. Ency. Law, 426. The mains; above referred to are public, not private. The contract between the city and the relator provides water-shall be furnished to all private consumers at the same-rates and no partiality or inequality in rates shall be permitted. These rates, however, are under the public contract with the city based upon an additional compensation of a hydrant rental for each five hundred1 feet of mains laid pursuant to the order of the city and other conditions. The pipe line in question was not' laid pursuant to the city contract and could not be for-the reason that at that time the State Hospital was at least a mile beyond the city limits and it is only by reason of the fact tLat since the limits of the city have- been extended so as to take in the hospital that the defendants claim the benefit of the public rate granted to those inhabitants who are located on one of the public lines described and provided for in the contract with the city. Under section 3 of the contract with the city, the city has the right to order a public line extended to the hospital under the terms and conditions therein expressed. When that is done the hospital will be entitled to the six per cent rate, and until that is done there is no such privity of contract between the water company and the defendants under the city contract, that would give the defendants any right to enforce the rates therein provided for. The city could not under its contract with the relator require the water company to furnish water to the defendants until it had ordered an extension of a public line to their institution and provided for the rental of the requisite number of hydrants as the contract provides — and if the city cannot do so neither can the' defendants — to hold otherwise would be to permit the city through the •defendants to violate the obligation of its contract with the water company and force it to maintain a private line over private property for public use, at public rates, without paying the hydrant rental provided, for in its contract.
SMnnebarger, Blagg & Ellison and Culver, EMI-lip & Spencer for respondents.
(1) The board of managers had no power to make the contract with relator. The contract was made November 1, 1905, and provided that in consideration of the water company, furnishing the labor and material necessary to lay the water main (which amounted to $12,000), the hospital should take its entire supply of water from the company for a period of ten years thereafter at ten cents per thousand gallons. The main was completed May 1, 1906. Neither at or “before the time the contract was entered into, or the main laid, was there any appropriation made by the General Assembly to pay for the water to be used, or for the main to be laid nnder the contract. The board of managers, therefore, had no power to contract any snch debt or liability as was created by the contract. Constitution, Art. 4, Secs. 43 and 44; Art. 10', Sec. 191 It is conceded by counsel for relator that the board of managers had no authority under the Constitution to create any debt before the money necessary to pay it was appropriated for that purpose by the General Assembly. But he insists that the mere making of the contract did not create a debt; that the debt is hot created until the water is furnished; and that as the General Assembly, in 1911, made an appropriation of $475,000 for the support and maintenance of Hospital No. 2 (Laws 1911, p. 41), the appropriation was made before the debt which he seeks to enforce was created, because the water for which he demands pay was not furnished until after the appropriation was made. And in support of his contention counsel cites: Water Co. v. Lamar, 140 Mo. 145; Saleno v. Neosho, 127 Mo. 627; Water Co. v. Lamar, 128 Mo. 188; and Water Co. v. Neosho, 136 Mo. 498. Each of those cases turned on the proper construction of Sec. 12 of Art. 10 of the Constitution. That section has to do only with the amount of indebtedness which a county, city, town, township, school district o.r other political corporation or subdivision of the State may incur, and has nothing to do with the power of the General Assembly to contract or authorize the contracting of any debt or liability on behalf of the State, which matter is governed by Sec. 44, Art. 4 of the Constitution. The contract at bar created not only a liability to take and pay for the water for ten years, but it also created a debt for the water main that was laid at a cost of $12,000. The contract provided that in consideration of the water company furnishing the labor and material necessary to lay the main, excepting the excavating and refilling of the trenches, the hospital was to take its entire water supply for ten years thereafter at ten cents per thousand gallons. The moment the main was completed in 1906 (if not at the time the contract was made) a debt therefor was immediately created. It is conceded that no appropriation had been made to pay for the laying of the main. Therefore, the hoard had no power to make the contract for it. Constitution,. Art. 10, Sec. 19;. (2) The contract between the city and the water company created a legal duty on the part of the latter to furnish water to all of the inhabitants within the city limits as they then existed, or as they might thereafter he extended, at the rates fixed by the contract; and that so long as that contract was in force, the water company could not absolve itself from performing that duty to any person not then within the city limits by making a contract with such person to furnish him with water at a higher rate, which would be binding after the city limits were extended so as to include such person.

Opinion:
KENNISH, J.
This original proceeding in mandamus was brought by relator, the St. Joseph Water Company, a corporation owning and operating a waterworks system at the city of St. Joseph, this State,, against the board of managers of State Hospital Number 2, located within the corporate limits of said city. Relator claims a balance due, for water supplied to said hospital, in the sum of $2186.33, which respondents refuse to pay, and the purpose of this suit is to coerce the payment of such claim by the writ of this court, commanding the respondents to comply with the statutory provisions in the .allowance and payment of valid claims against institutions of that class.
Upon the filing of the petition an alternative writ was issued and in due time respondents made return thereto. Relator filed a general demurrer to the re turn, and the canse is thus at issue.
The facts are not in dispute, and so far as material in the view we take, they are as follows:
In the year 1900 relator was granted a franchise by the pity of St. Joseph, authorizing* it to construct and operate a waterworks system in said city for a term of twenty years. A contract, by ordinance duly enacted by the city and accepted by relator, was entered into, by the terms • of which relator agreed to supply the city and the inhabitants thereof with water,- at the rates therein prescribed, during the term of said franchise. The rate for water, used in such quantity as is admitted was used by the hospital, was six cents per 1000 gallons. Sections 3, 7 and 9 of said ordinance and contract are as follows:
"Sec. 3. Said water company shall extend its mains and pipe lines within the limits of said city along and over its streets, highways and public lands, as the city may from time to time by ordinance direct, and shall for each five hundred feet of said extension or fraction thereof erect and maintain a fire hydrant at such points as may be directed by ordinance or by the city engineer, and of the kind and character prescribed by ordinance; said city hereby agrees to and does rent from said company all hydrants so erected and maintained, and agrees to pay for each hydrant so erected and maintained the sum of forty dollars per annum; said water company shall erect and maintain intermediate hydrants when directed by the city, and shall be paid by the city the actual cost of such hydrants and the cost of setting the same, but shall be entitled to no compensation for the use thereof.
"Sec. 7. It shall be the duty of said water company during the term of this contract to supply good, clear, healthful and wholesome water for private consumption by the inhabitants of the city, and the rates to be charged private consumers of water during the continuance of this contract shall he those named in section 10 of Special Ordinance No. 2295, approved by the mayor of said city of St. Joseph on the 27th day of January, 1899, provided that it shall be the duty of said city from time to time to raise or lower such rates when the same shall be unreasonable.
"Sec. 9. Water shall be furnished to all private consumers at the same rates, and no partiality or inequality in rates shall be permitted."
In the year 1905> when the said State Hospital was situated a short distance outside the corporate limits of. the city of St. Joseph, relator entered into a contract with the board of managers thereof, under which relator agreed to supply the hospital with water, for the ensuing term of ten years, and the board of managers agreed to pay therefor at the rate of ten cents per 1000 gallons. Water was furnished by rela-tors under this contract, and was used and paid for by the hospital until the first day of July, 1910;, being about one-half of the full term covered by the contract. After the date last mentioned, and until the filing of this suit, relator continued to furnish water to said hospital, but respondents have refused to pay therefor in excess of the rate of six cents per 1000 gallons, the rate as fixed in the contract between relator and the city.
In the year 1909 the corporate limits of the city of St. Joseph were extended so that the territory upon which said hospital was located was included in and became a part of said city.
Among other defenses to the issuance of the writ, respondents contend that by reason of the extension of the city limits the contract of 1905 between relator and the board of managers was. abrogated and that the hospital was not bound to pay for water furnished more than the public rate of six cents per 1000 gallons. Respondents have paid relator for the water used at the public rate, but deny liability under the contract of 1905. Relator contends that it is entitled to be paid at the rate of ten cents per 1000 gallons, in accordance with the contract of 1905, and the controversy is as to which of the two contracts shall control in determining the rights of the parties in the premises. If, at the time of instituting this proceeding, the contract of 1905 was in force, then the balance claimed by relator was due and it is entitled to the relief prayed for. On the other hand, if the extension of the city limits so as to include the hospital had the legal effect of limiting relator's charges to the rate provided by the ordinance, then the writ should be denied.
I. The business of supplying the public with water, like that of supplying gas, electricity and other similar services, is a'business impressed with a public use. This proposition is so well recognized that it is needless to cite authorities in its support. It is equally well-settled law that the fixing of rates for such a service is a governmental power.
In the absence of legislative action prescribing such rates, private parties may fix them by contract, and the rates so agreed upon will be upheld. However, rates so fixed by private contract remain in force only so long as the legislative body having authority in the premises refrains from the exercise of its powers. When public rates are established by law, rates fixed by private contract must yield. The law upon this subject is stated in 3 Thompson on Corporations (2 Ed.), Sec. 2953, as follows:
"Until the Legislature or other body having the right to prescribe the rates to be charged by corporations, whose business is affected with a public interest, has exercised this power, the rates are the subject of contract between the corporation and its patrons. And this is the case where the Constitution makes it the duty of the Legislature to prescribe reasonable maximum rates but the Legislature has failed to do so. Since, however, the franchise is tahen subject to regulation by the State in the exercise of its police power, the conclusion seems a sound one that the corporation cannot enter into a binding contract with a patron extending beyond the time when the Legislature or municipal council duly empowered thereto may fix the rate's. It is plain that a public service corporation able to forestall legislative action by contract for a limited time could do so for so long a time as to render futile any legislative control."
The city of St. Joseph, in the exercise of delegated legislative power, had prescribed by ordinance the rates to be charged by relator for water furnished to consumers under its franchise and contract with the city, and that "water shall be furnished to all private consumers at the same rates, and no partiality or inequality in the rates shall be permitted."
When the boundaries of a municipality are extended, all ordinances and contracts of a general character, in the absence of a special provision to the contrary, are simultaneously extended over and become operative in the added territory, and such territory becomes subject to the same burdens and entitled to the same privileges as that within the original limits. [St. Louis Gaslight Co. v. City of St. Louis, 46 Mo. 121; 28 Cyc. 217; 3 Dillon on Municipal Corporations (5 Ed.), Sec. 1325; Thornton on The Law Relating to Oil and Gas (2 Ed.), Secs. 405 and 419; Des Moines v. Waterworks Co., 95 Iowa, 348; Mayor, etc., of City of Birmingham v. Birmingham Water Co., 42 So. (Ala.) 10; Indiana Ry. Co. v. Hoffman, 161 Ind. 593; People v. Detroit United Ry., 162 Mich. 460.]
In the St. Louis Gaslight case, supra, a case frequently cited in the textbooks and in the decisions of courts of other States, it appears that the gas company refused to comply with its contract with the city in territory annexed to the city after the contract was entered into. Discussing that question (p. 133), this court said: "Tiie additional orders for lamps were all to be within the city, and the city is a unit, though with changing boundaries. There might be a question as to the extension of the exclusive rights of the plaintiff, for grants of monopolies are to be strictly construed; but there is no doubt that a city ordinance or a city contract, designed for the city at large, operates throughout its boundaries whatever their change."
The foregoing authorities hold that when a general ordinance, fixing rates for a public service corporation, is in force in a city, such rates will apply to annexed territory, though a different rate, fixed by private contract, was in force in such territory before it was annexed. The case of Indiana Ry. Co. v. Hoffman, supra, declares the law in accordance with this rule, which is well stated in the second syllabus as follows:
"A street railroad company operating under an agreement with the city to issue transfer tickets free of charge to all passengers requesting the same who boarded its cars at any point upon its line within the limits of the city and whose destination might be any point upon any other line of the company within the city limits is bound to carry a passenger, tendering a transfer, to his destination on the company's line, though his destination was at a point in territory annexed to the city after the contract between the city and company was made, and on the company's interurban line on which it had a franchise entitling it to charge an additional fare outside the city as its limits were before the annexation of territory."
The principle upon which the cases hold that the legislative rate will supersede the rate previously fixed by private contract is that the parties enter into the contract in contemplation of the superior right of the government to establish such rates, and with knowledge that "private compacts cannot derogate from public right." [Thompson, supra, Sec. 2954.]
It follows that the contract of 1905* between relator and the board of managers was abrogated by the annexation to the city of the territory npon which the hospital was situated, and that the rate as fixed by. the ordinance must determine the price to be paid for water thereafter nsed by the hospital, unless a different result must be arrived at by reason of relator's contention next to be considered.
II. It is contended by relator that, as the main through which the water was furnished to the hospital was not laid by direction of the city, with hydrants at. intervals of 500 feet, for which the city was obligated to pay relator an annual rental, as provided by section 3 of the ordinance, therefore relator would not-be governed by the ordinance rate for the water thus furnished.
Section 3 of the ordinance requires the laying of mains and the placing of hydrants by relator under the direction of the city. The requirement as to hydrants,, for which a rental is to be paid to relator by the city,, is doubtless for the protection of the public against fire, and when so directed to extend its mains then the question as to the hydrant requirement might properly be raised by relator. However, if relator should voluntarily lay a pipe or main without being directed so to do by ordinance, or use a main laid before the limits were extended, as under the facts of this case, it could not be successfully maintained that by so doing relator would be exempt from the ordinance rate for the reason that the hydrant requirement had not been complied with. Whether compulsory service within the city can be enforced against the public service corporation, by the consumer, regardless of the cost of installing mains, is a mooted question. [1 Wyman on Public Service Corporations, Sec. 278, et seq.] But if, with the consent of the consumer, it should see fit to render the service, then it must be done under the or- dinan.ce -winch, requires that "water shall be furnished to all private consumers at the same rates."
III. Other defenses are made in respondents' return, namely: (1) That the contract of 1905 was invalid for want of capacity of the hoard of managers to make it, and (2) that relator had failed to furnish water to the hospital in accordance with the terms of the contract. As we decide the case in favor of'respondents upon another ground, it is unnecessary to pass upon those defenses.
The alternative writ is quashed and the peremptory writ denied.
Valliant, G. J., Lamm and Brown, JJ., concur; 'Woodson, J., concurs in a separate opinion; Graves, J., dissents in an opinion in which Fer-riss, J., concurs.