Court Opinion

ID: 9417834
Source: CourtListenerOpinion
Date Created: 2023-08-02 20:40:54.553707+00
Date Added: 2024-06-11T17:21:51.437134
License: Public Domain

Me. J ustioe McKenna,
after stating the case as above, delivered the opinion of the court.
*593The Supreme Court of the State based its decision on its opinions in the case of Danville v. Danville Water Co., 178 Illinois, 299, and 180 Illinois, 235. In that case the same statutes were in volved, as in the case at bar, and the contract which was claimed was based upon a substantially similar ordinance to that involved in the pending controversy.
It is not clear from, the opinion of the court whether it intended to decide that municipal corporations could' not be invested with the powér to bind themselves by an irrevocable contract not to regulate water rates. If so, we cannot concur in that view. We have decided to the contrary many times,, and very lately in Los Angeles v. Los Angeles City Water Co., 1900, 177 U. S. 558. See also Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 7, where the subject is more extensively discussed and the cases reviewed. See also New Orleans Water Works Co. v. Rivers, 115 U. S. 674.
We do not mean-to sáy that if it was the declared policy óf the State that the power of alienation of a governmental function did not exist, a subsequently asserted contract would not be controlled by such policy. In Stevenson v. School Directors, 87 Illinois, 225, 255, and in Davis v. School Directors, 92 Illinois, 298, it was held that a school boat'd could not make a contract for the employment of teachers to extend beyond the current year and this was put upon the ground of the inability of one board to control the exercise of the functions of its successor. In East St. Louis v. East St. Louis Cas Light & Coke Co., 98 Illinois, 415, decided in May, 1881, the doctrine of those *594cases was not adopted as applicable to a contract for gas rates, nor was it rejected. One Justice asserted it with great emphasis, quoting those cases. The court, however, left it disputable, placing the decision on other grounds. There was at least admonition in those cases to persons entering into contracts with municipalities. If there was anything more, we need not decide, as there are other grounds for judgment.
The Supreme Court did decide in the Danville case (l).that the water company having been incorporated under the genefal incorporation act of the State, approved April 18, 1872, the provisions of the act entered into and formed a part of its charter, and that by section 9 of the act (inserted in the margin,1) the right of the legislature to regulate and provide for the rates, at which the company should supply water to the city, was reserved; and (2) that the language of the act of April 9, 1872, and in force July 1, 1872, (inserted in the margin,1) did “ not necessarily imply the power to make and fix rates.” The court further said in 178 Illinois at page 309: “ The authority ‘ to contract for a supply of water for public use for a period not exceeding thirty years’ does not necéssarily imply that the price of the supply should be fixed for the entire period. The supply could be made for the entire term, but the price is to be determined from time to time, and the rates to be settled by the rules of the common law. Carlyle v. Carlyle Water, Light & Power Co., 52 Illinois App. 577.”
*595It is true that we do not necessarily have to follow this decision. "When section 10, article 1, is invoked we decide for ourselves the fact of contracts — not only its formal execution but its legal basis in law, and therefore construe for ourselves the statutes of the State upon which it is claimed to rest." In such case, we have also said, we are disposed to incline to agreement with the state court. These principles hardly need the citation of cases. They have become elementary. We may quote, however, the language of Mr. Justice Bradley in Burgess v. Seligman, 107 U. S. 20, 33. After stating the peculiarity of the existence of two coordinate jurisdictions in the same territory and the necessity for the exercise of mutual respect and deference to avoid anomalous and inconvenient results, and yet asserting the necessity in the Federal courts of the right to exercise an independent judgment, the learned Justice said:
“ Since the ordinary administration of the law is carried on by the state courts, it necessarily happens that by the course of their decisions certain rules are established which become rules of property and action in.the State, and have all the effect of law, and which it would be wrong to disturb. ■ This is especially true with regard to the law of real estate and the construction of state constitutions and statutes. Such established rules are always regarded by the Federal courts, no less, than by the state courts themselves, as authoritative declarations of what the law is. But where the law has not been thus settled, *596it is the right and duty of the Federal courts to exercise their own judgment; as they always do in reference to the doctrines of commercial law and general jurisprudence. So when contracts and transactions have been entered into, and rights have accrued thereon under a particular state of the decisions, or when there has been no decision of the state tribunals, the Federal courts properly claim the right to'adopt their own interpretation of the law applicable to the case, although a different interpretation may be adopted by the state courts after such rights have accrued. But even in such case, for the sake of harmony and to avoid confusion, the Federal courts will lean towards an agreement of views with the state courts if the question seems to them balanced with doubt. Acting on these principles, founded as they are on comity and good sense, the courts of the United States, without sacrificing their own dignity as independent tribunals, endeavor to avoid, and in most cases do avoid, any unseemly conflict with the well-considered. decisions of the state courts.”
Applying these principles to the case at bar, we solve its questions. The Supreme Court of the State in passing .on the case not only considered the acts of the 9th and 10th of April, 1872, regarding municipalities, but also, as we have said, the general incorporation act of April 18,1872. Under the latter the plaintiff was incorporated, and it was held that the act “ must be regarded as entering into and forming part of the charter ” of the plaintiff: The statute reserves to the general assembly the power to prescribe in the government of corporations “ such regulations and provisions as it may deem advisable.” The language is very comprehensive. Regarding it alone, it is difficult to conceive what objects of legislation are not covered by it. The Supreme Court of the State has construed it to be of greater import than the usual reservation of the power to alter and amend the charters of corporations.
The plaintiff, however, contends that it was not intended by the terms, “ regulations and provisions,” “ to interfere with the internal business management' of the corporation itself,” but regulate “ those classes of acts which control the relation existing between stockholders as individuals and the corporation as *597an entirety, and the relations between corporations and third persons ; that is, the manner of carrying on their business or exercising the powers of a corporation.” We think the construction is too narrow. The statute made no distinction between the internal and the external business of corporations— between their relations to stockholders and their relations to third persons. Such are but special exertions of the power which the legislature possesses.
In Beer Co. v. Massachusetts, 97 U. S. 25, a provision wa£ passed on of an act defining the .general powers and duties of manufacturing corporations as affecting the beer company. The general statute was enacted in 1809, and the provision construed was as follows: “ Provided always, that the legislature may from time to time, upon' due notice to any corporation, make further provisions and regulations for the management of the corporation and for the government thereof, or wholly to repeal any act or part thereof, establishing any corporation, as shall be deemed expedient.” The beer company was incorporated in 1828 “ for the purpose of manufacturing malt liquors in all their varieties.” It was held that the provisions of 1809 were adopted in' the charter of the beer .company* and were a part of the contract between the State and the company, rendering the latter subject to the exercise of that power; and the seizure and forfeiture of certain malt liquors, which were intended to be sold in violation of the prohibitory liquor law-passed in 1869, were sustained.
But assuming that section 9 of the general incorporation act is correctly interpreted by plaintiff, we are brought to the question of the power of the city to make an irrevocable contract for thirty years, fixing water rates. The power is claimed under the statutes' of 1872, heretofore quoted. The Supreme Court of the State, as we have seen, decided against the claim, and 'the principle of Burgess v. Seligman applies if-the ruling of the court and the contention of the plaintiff is “ balanced with doubt.” There "were no previous interpretations of the statutes by the state courts upon which the plaintiff had a right to rely. It acted upon the faith of the statutes alone, and committed its rights to a judicial interpretation of the statutes. *598The rule which governs interpretation in such cases has often been declared. We expressed it, following many prior decisions, in Detroit Citizens’ Street Railway v. Detroit Railway, 171 U. S. 48, to be that the power of a municipal corporation, to grant exclusive privileges must be conferred by explicit terms. If inferred from other powers, it is not enough that the power is convenient to other powers; it must be indispensable to them.
In Smith v. McDowell, 148 Illinois, 51, 62, the Supreme Court of the State expressed the rule as follows: “ Their power [the power of municipal corporations] is measured by the legislative grant, and they can exercise such powers only as are expressly granted, or are necessarily implied from the powers expressly conferred.”
The Supreme Court of the State applied these principles. It held that an irrevocable contract for specific rates was not indispensable to the other powers with which the cities of the State were invested. And a distinction was made between a contract which related to a governmental function, which the regulation of rates was said to be, and a contract which related to franchises which, though public in their nature, yet were not governmental, which the supply of water was said to be. This distinction, it was held, the statutes of 1872 observed, and gave the power to make one kind of contract but not the other — the power to contract for a supply of water, but not the power to contract “ to pay a fixed and unalterable rate for thirty years.” This was deduced from the silence of the statute of the 9th of April and the necessity of resolving all ambiguities in favor of the public. But ambiguity disappears, it was said, when the statute of the 9th was considered with the statute of the 10th, as it necessarily had to be, as the statutes were “inpari materia, and should be construed together.” Section one of the act of the 10th of April “ authorizes,” the court said, “ the city council to empower a private corporation to construct and maintain waterworks at such rates as may be fixed by ordinance. The meaning of this language is mot that the waterworks are to be maintained at such established rate as may be fixed by one ordinance for a period not exceeding thirty years. The clause, ‘ for a period not exceeding thirty years,’ qualifies the words *599‘construct and maintain the same,’ but dops not qualify the words ‘at such rates as may be fixed by ordinance.’”
The statutes are certainly ambiguous, and in resolving the ambiguity in favor of the public the court applied the rule declared in many cases. We said in the Railroad Commission Cases, 116 U. S. 307, 325, by Chief Justice Waite, of the power of the regulation of rates :
“ This power of regulation is a power of government, continuing in its nature, and if it can be bargained away at all it can only be by words of positive grant, or something which is in law equivalent. If there is reasonable doubt, it must be resolved in favor of the existence of the power. In the words of Chief Justice Marshall in Providence Bank v. Billings, 4 Pet. 514, 561, ‘ its abandonment ought not to be presumed in a case in which the deliberate purpose of the State to abandon it does not appear.’' This rule is elementary, and the cases in our reports where it has been considered and applied are numerous.”
These remarks are obviously applicable to the Illinois statutes. The question is whether the power given to the municipalities of the State was to be continuing or occasional, indeed only special in its purpose, intended to have but one exercise and then bound in''contract for thirty years. If the latter had been the intention it would have been natural to express it. The- fullness of sovereignty can be taken for granted, and naturally would be and should be taken for granted. An example is afforded by the act of June 6, 1891. By that act the corporate authorities of any city which have authorized or shall authorize any individual, company or corporation to supply water, “ be and are hereby empowered to prescribe by ordinance maximum rates and charges for the supply of water furnished by such individual, company or corporation. . . .” There is no explicit provision for repetitions of the power — none declaring the power conferred a continuing one. Who now doubts that it is ? If rights were claimed and were pleading for a different interpretation we might have to listen to them, but now undis-. turbed by them we yield without resistance to that meaning which the subject-matter demands in the absence of negativing words.
*600Our conclusion is that the powers conferred by the statutes of 1872 can, without straining, be construed as distributive. The city council was authorized to contract with any person or corporation to construct and maintain waterworks “ at such rates as may be fixed by ordinance, and for a period not exceeding thirty years.” The words “ fixed by ordinance ,” may be construed to mean by ordinance once for all to endure during the whole period of thirty years; or by ordinance from time to time as might be deemed necessary. Of the two constructions that must be adopted, which is most favorable to the public, not that one which would so tie the hands of the council that the rates could not be adjusted as justice to both parties might require at a particular time. •
It is also urged by plaintiff that the ordinance of February 10, 1896, deprives the plaintiff of its property without due process of law. The grounds of this contention are that (1) by the statute of June 6, 1891, none of the circumstances which, it is claimed, constitute a rate just and reasonable, are required to be considered by the authorities of cities nor is previous notice required to be given to the parties furnishing water; (2) establishing rates is a legislative, not a judicial act, and that, therefore, the power to review and determine them given by the statute to the circuit court is void; (3) the cities, towns and villages of the State are made judges in their own cases.
The first ground is answered by San Diego Land & Town Co. v. National City, 174 U. S. 739, 750, and we may say there is no question of the reasonableness of the rates. It was alleged in the pleas of the defendant that the rate's of the ordinance of June, 1882, were unreasonable when established. This was conceded by the demurrer. It was alleged in the pleas that they continued unreasonable. This was conceded by the demurrer. It was also alleged that the rates established by the ordinance of February 10,1896, were just and reasonable. This was also conceded. The allegations, therefore, must be accepted as true conclusions from investigation. And it was averred besides that “ the plaintiff refused to treat ” with a committee appointed by the city council, “ and neglected to reduce or fix such rental and water rates so as to make them just, reasonable and fair.”
*601Of the second ground it is only necessary to say that the. statutes of 1872 gave to the city the power to fix the rates. It became a condition therefor of the privileges granted to plaintiff. The act of 1891 only repeated and emphasized the power.
The third ground urged why plaintiff is deprived of its property without due process of law is as abstract, as free from real grievance to plaintiff, as the other grounds. With what functions the circuit courts of the State' may be invested may not be of Federal concern. It is also a matter of construction, in which we might be obliged to follow the state courts. The ground we are now reviewing seems not to have been presented to the Supreme Court of the State either in the case at bar or the cases referred to by it and upon which it based its opinion.
In City of Danville v. Danville Water Co., supra, the provision of the statute was referred to, but not in such way that it can be confidently said that the power given to the circuit court was to only review the rates fixed by the city council and to determine them to be reasonable or unreasonable, or whether the court could go farther and fix rates. The former seems a natural construction. But whether it is or not, the plaintiff has yet no reviewable grievance. No power has been attempted to be exercised by the circuit court against the plaintiff and no judicial remedy has been denied it.

Judgment affirmed.