Court Opinion

ID: 6250122
Source: CourtListenerOpinion
Date Created: 2022-02-17 21:12:11.835158+00
Date Added: 2024-06-11T08:59:23.956241
License: Public Domain

Mr. Justice Mestrezat,
dissenting:
In the majority opinion, it is said: “The ordinance of the borough of Brushton and the written acceptance of it by the appellee (Pennsylvania Water Company), together with the latter’s performance, unquestionably constitute a binding contract.” And further: “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 effect exclusive as against the borough of Brush-ton so long as the contract held.” From this assumption of the existence of a contract between the borough and the water company, created by the ordinance and its acceptance, the majority of the court holds that the borough has exercised its municipal function to provide a supply of water for the use of its inhabitants, and therefore has exhausted its power and cannot now construct a water plant of its own. The borough (now the city) denies that the ordinance and the acceptance constitute a contract, obligating the water company to supply water to the public and preventing the borough from erecting a water plant of its own, and hence the question on which the case turns is: Does a borough ordinance, without limit as to time, granting permission to a water company to enter the municipality and lay its pipes in the streets, and regulating the use of the streets by the company, constitute 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 thereafter prevents the borough from erecting its own water works for that purpose? The majority of the court answers that question in the affirmative.
The Pennsylvania Water Company, the plaintiff, is a corporation organized under the Act of April 29, 1874, P. L. *63773 and its supplements, to supply water to the public in Sterrett Township, Allegheny County. It did not record 'its charter until May 3, 1888, and hence became subject to the *act of June 2, 1887, which repealed the exclusive privileges conferred on water companies by the act of 1874. Brushton Borough was erected out of a part of Sterrett Township in 1890, and on May 12, 1891, passed “an ordinance authorizing the Pennsylvania Water Company to construct and operate water works within the borough limits, and granting the use of streets to lay pipes for the purpose of supplying water to the borough and its inhabitants, and authorizing a contract for the .supply of hydrants for fire and other public uses.” The water company by a resolution of its board of directors accepted “the grant of the right of way through the streets, lanes and alleys of the borough of Brushton, Pa., under the terms and subject to the conditions of.an ordinance containing said grant.” A contract was entered into between the borough and the water company by which the latter agreed to furnish to the borough water for extinguishing fires, etc., on the terms therein stipulated for ten years from the date of the contract. It expired May 18, 1901.
In 1894 the borough of Brushton was annexed to the city of Pittsburg, and became the thirty-seventh ward of the city. By virtue, of its charter powers, the city proposed to extend its own water system and furnish water in the annexed territory. This bill was filed to restrain such action on the part of the city. The court below sustained the prayer of the bill and the city has taken this appeal.
I concede that the city of Pittsburg now occupies the same relative position towards the. water company that Brushton borough did prior to its annexation to the city, and that the city is required to observe all contracts which were entered into between the borough' and the water company. That question, which is discussed in the majority opinion may be eliminated from the case. I do not agree that the ordinance of May 12, 1891, and its acceptance constitute a contract between the company and Brushton borough which exhausts the power of the borough to supply water *638to the public or prevents it from erecting its own water plant or the city from extending its water system and furnishing water within the same territorial limits. The affirmative of that proposition, I submit, is not supported by reason or precedent.
The act of April 29, 1874, declares that water companies shall have power to provide, erect and maintain a water plant for introducing water into a municipality where they may be located, and for that purpose may maintain reservoirs, pipes and conduits; and they are further authorized to enter upon such streets as may be necessary to occupy, and to occupy, ditch and lay pipes through the same. It will be conceded that the legislature had the right to grant such powers to a water company, and hence by the express terms of their charter they have the right to enter the municipality and construct their plant for the purpose of furnishing water to the public. The Pennsylvania Water Company therefore was duly authorized to enter Brushton borough and lay its mains and pipes in the streets of the borough for the purpose of supplying water to the public without any contract with or grant of power by the municipality. Any attempted grant of such power by the borough was without force or effect, and conferred no-authority upon the water company which it did not already possess through the powers granted by its charter.
While a water company organized under the act of 1874 and its supplements has authority to enter a borough and construct its plant without the consent of the municipality, yet it may not do so without submitting to police regulation. The power to enter the borough and supply water is one thing, the manner in which the water company may exercise its charter functions by the use of the streets and other highways of the municipality is quite another question. The former power is conferred directly by the state; the latter, by statutory provision, is under the immediate control of the municipality. The same clause of the act of 1874, as amended by the Act of May 16, 1889, P. L. 226, which invests water companies with their corporate powers places the police regula*639tion over the streets in the municipality.' That clause, after .conferring upon water companies their powers to furnish water and to enter the municipality for that purpose, contains this provision: “Subject to such regulations in regard to streets, roads, lanes and. other highways and impairing the free use thereof as little as possible, and subject to such regulations as the councils of said borough, toym, city or district may adopt in regard to grades or for the protection and convenience of public travel over the same.” The only manner or way by which a borough can exercise its statutory or inherent police power of regulating the use of streets by a water company is by ordinance; and as this is the sole authority the borough had over the water company, the ordinance attempted to exercise only such power.. This necessarily and logically follows from the powers conferred upon the water company and the borough. It will not be presumed that the borough attempted to exercise any other authority, as the ordinance itself does not declare any greater grant of power. In fact, the borough could exercise only such authority in dealing with the water company as was conferred upon it by the legislature or as it inherently possessed by virtue of its police power. ■
Brushton borough was incorporated under the general borough Act of April 3, 1851, P. L. 320, and it was therefore authorized, inter alia, “to provide a supply of water for the •use of the inhabitants” of the borough. It may perform this function by establishing its own water plant or by contracting with a water company for that purpose. When, however, a water company claims a contract by which the borough agrees that the company shall perform the municipal function and supply water to the residents of the municipality, it must assert its claim through an ordinance which clearly authorizes such contract. If the ordinance is of doubtful meaning or does not clearly disclose the intention of the borough to divest itself of the power to establish its own water plant or to contract with another company, the agreement will not be construed to effect such purpose: Skaneateles Waterworks Co. v. Village of Skaneateles, 184 U. S. 354; *640Knoxville Water Co. v. Knoxville, 200 U. S. 22. In Coosaw Mining Co. v. South Carolina, 144 U. S. 550, Mr Justice Harlan delivering the opinion said (p. 562): “The doctrine is firmly established that only that which is granted in clear and explicit terms passes by a grant of property, franchises, or privileges in which the government or public has an interest. Statutory grants of that character are to be construed strictly in favor of the public, and whatever is not unequivocally granted is withheld, nothing passes by mere implication.” In Knoxville Water Co. v. Knoxville, 200 U. S. 22, the same Justice delivering the opinion, after quoting the above extract from the Coosaw Mining Co. case, said (p. 34): “We have never departed from or modified these principles, but have reaffirmed them in many cases. . . . The authorities are all agreed that a municipal corporation, when exerting its functions for the general good, is not to be shorn of its powers by mere implication. If, by contract or otherwise, it may, .in particular circumstances, restrict the exercise of its public powers, the intention to do so must be manifested by words so clear as not to admit of two different or inconsistent meanings.”
Interpreting the ordinance in question in accordance with these well established rules of construction, it is clear that it is not and was not intended to be a contract by which the borough exercised its municipal function in furnishing water to the public and thereby deprived itself of the power to establish a water plant. The ordinance authorizes the water company “to construct, maintain and operate water works in the borough of Brushton.” As observed above, the water company acquired this authority through its charter from the state itself, and hence this clause of the ordinance was useless and granted no additional authority to the company. It is without any force or effect so far as it may have attempted to grant the water company authority to exercise its charter powers within the borough. It is not a contract, nor does it authorize the municipal officers to enter into a contract by which the company is to supply water to the public within the territorial limits of the borough. The ordinance in terms *641does not bear such interpretation, and the rules of construction in such cases compel the interpretation in favor of the municipality and against the grantee. Hence this clause of the ordinance establishes no contractual relation with the water company authorizing it “to provide a supply of water for the use of the inhabitants,” resident within the territorial limits of the former borough of Brushton.
The ordinance also grants to the water company the use of the streets to lay pipes for the purpose of supplying water to the borough and its inhabitants. This is simply the grant of the use of the streets for the purpose of laying its pipes, and contains none of the elements of a contract. It is not a contract on the part of the borough with the company to supply water to the public; nor does it obligate the company, by its acceptance of the ordinance, to furnish water to the borough or to any of the inhabitants thereof. This, like the preceding part of the ordinance, shows that it was simply a permission to occupy the streets for the purpose of laying pipes and constructing the water plant, and did not require the company to assume the municipal function of providing a supply of water to the public.
The ordinance empowered the municipal officers to enter into a contract with the water company for the erection of fire hydrants for the supply of water for municipal purposes for a term of ten years, and a contract was subsequently entered into and expired in 1901. During the continuance of the contract, it is conceded, the borough was without authority to supply water for such purposes-by means of its own plant or by securing water from another water company. The contract entered into in pursuance of this part of the ordinance was obligatory upon the borough and, like the contract of an individual, could of course be enforced against the municipality. At the expiration of the contract, however, the municipality was again at liberty to obtain a supply of water for such purpose from any other source, through its own plant or from another company.
With this analysis of the ordinance, it must be manifest that it is not and was not intended to be a contract by which *642the borough exercised the municipal function of supplying water to its inhabitants. It does not do so in terms and it is against the well established rules of interpretation to extend the language of the ordinance so as to -give it that effect.
The act of 1874 confers upon a water company an exclusive right to furnish water in the territory for which it is chartered, and under that act, no other company could be chartered or was permitted to furnish water within the territorial limits supplied by a prior corporation.- It was not a question of contract with the borough. The state by legislative enactment declared that a water company should have exclusive authority to furnish water in such territory, and the municipality was without authority to control or deny the power. For thirteen years the people of the' commonwealth submitted to the monopoly thus imposed, and then the legislature, by the Act of June 2,1887, P. L. 310, repealed this clause of the act of 1874 granting exclusive privileges, and water companies incorporated thereafter did not possess an exclusive franchise. The Pennsylvania Water Company is subject to the act of 1887 and therefore could not claim exclusive authority to supply water within the territorial limits of Brushton borough. The state may now grant charters to as many water companies as it deems proper to supply water in the same .municipality, and such companies have the right to enter and lay their pipes in the municipality, subject only to police regulation.
The majority opinion maintains that the alleged contract is within the protection of the federal constitution, and quotes in support of its position the following from Dillon's Municipal Corporations, sec. 691; “When the grantee of such a franchise has performed the public service inposed as a condition of the grant, the franchise is a contract which falls within the provision of the constitution of the United States forbidding the states to pass laws impairing the obligations of contracts.” This doctrine is settled by both the federal and state courts. It is unquestionably true that a grant by ordinance, supported by a consideration, becomes a contract within the protection of the federal constitution. *643In order, however, to give-such effect to an ordinance, it must be contractual in its nature and impose an obligation which is to be observed by the water company. Municipal ordinances are of different forms, depending upon their nature or character, and 'include those sustaining or enforcing the police power of the municipality, those relating to public improvements, and those which are contractual in their nature and, therefore, in their construction and application involve contract relations with third persons: 2 Abbott Municipal Corporations, 1318. If a private corporation enters a borough in pursuance of an ordinance which grants the permission in consideration of a duty to be performed or a consideration to be paid by the corporation, on compliance therewith by the corporation a contract is established which cannot be impaired by any action of the municipality. In the present case, the nature of the ordinance and the language of the acceptance clearly show that it was enacted to enforce the police power of the municipality over the use of the streets by the water company, and therefore it established no contractual relation between the borough and the company by which the latter agreed to supply water to the inhabitants of the municipality. There is not a single word in the ordinance or in the company’s acceptance of it which discloses the intention to make it such a contract. The ordinance did not require the company to supply water to the public, resident within the borough, as a condition of the grant, and hence there was no service imposed by the ordinance, the performance of which by the company would constitute the franchise an enforceable contract to supply water, protected by the federal constitution. As pointed out above, the water company was authorized by its charter to enter the borough, and hence was not required to do so under any contract with the municipality. It was, however, compelled to submit to the police regulation of the municipality, and that police regulation was established by the ordinance with which the water company was required to comply. It cannot be ousted from the borough so long as it complies with the police regulation established by the ordinance, not because the ordinance creates a contractual relation thereby protecting' *644it from interference by the municipality, but because its charter confers full authority upon it to enter and remain in the municipality for the purpose of exercising its charter rights.
In Skaneateles Waterworks Company v. Village of Skaneateles, 184 U. S. 354, the supreme court of the United States considered the nature and effect of a franchise or privilege like the one under consideration, and unanimously decided that it did not prevent the municipality from constructing and maintaining a waterworks system to supply itself with water, and that in constructing and operating such system, the municipality did not violate a contract within the protection of the federal constitution. There, the water company, with consent of the village of Skaneateles, obtained a charter to supply pure and wholesome water to the authorities and the inhabitants of the village and to lay its pipes in the streets of the village. After the construction of the works, the village and the company entered into a five-year contract for a supply of water and the erection of hydrants and for the payment of certain compensation therefor. At the expiration of the contract, the village began proceedings for erecting and operating waterworks of its own. The water company filed a bill to restrain this action. The supreme court and court of appeals of New York held that the bill should be dismissed, and the supreme court of the United States concurred in the judgment. In the trial court, the referee, whose conclusions of law were affirmed by the courts, found as follows: “That the consent of the village of Skaneateles to the organization of the plaintiff as a waterworks company, and the making of a contract by the village of Skaneateles with the plaintiff for the supply of pure and wholesome water, did not vest in plaintiff the exclusive right to furnish said village with water, or prevent the village from granting to another -corporation the right to supply water within said village, or the village from constructing and maintaining a waterworks system to supply itself with water.” In affirming the judgment of the state court, the supreme court of the United States, speaking by Mr. Justice Peckham, 'said (p. 362): “There is no implied contract in an ordinary *645grant of a francMse, such as this, that the grantor will never do any act by which the value of the franchise granted may in the future be reduced. Such a contract would be altogether too far reaching and important in its possible consequences in the way of limitation of the powers of a municipality, even in matters not immediately connected with water, to be left to implication.”
The Pennsylvania Water Company has not, by its charter, an exclusive privilege to supply water -to the public of Brush-ton borough, and it is not claimed that another water company cannot be organized under the act of 1874 and its supplements and enter the borough and supply water to the public. It is not contended that the borough, sincé the expiration of its ten-year contract, may not contract with another water company to furnish water to the inhabitants of the borough. Conceding the correctness of these propositions, is there any sound reason why the municipality may not erect its own waterworks for the purpose of supplying the public with water? The argument made in the Meadville case and by the majority of the court in this case is that competition would be ruinous to the original water company, but that argument is without force when it is conceded that, under the act of 1887, another water company may enter the borough and supply the inhabitants with water. This creates competition that would be equally as detrimental to the financial interests of the original water company as the erection of a water plant by the municipality. Competition was prevented by the exclusive grant conferred by the act of 1874, under which the water company in the Meadville case was incorporated; but since the act of 1887, it is limited only by the number of water companies incorporated for supplying water in the same municipality.
The majority opinion relies upon White v. Meadville, 177 Pa. 643, to sustain its position that the ordinance of May 12, 1891, is a contract between the water company and the borough which deprives the borough of the right to erect its own water plant. This view fails to note the character of the contract in that case. There, certain persons submitted a *646proposition to furnish a supply of water to the city which was accepted by councils, and a committee was appointed “to contract for the construction of such works with the ' Mead-ville Water Company/ as soon as the company was duly incorporated.” The company was subsequently chartered, and a contract for a water supply was executed by the proper municipal officers. The" case was ruled upon the construction of the two acts of assembly, the general corporation act of April 29, 1874, and the act of May 23, 1874, conferring upon cities of the third class the exclusive right to supply themselves with water or to contract with a water company to do so. In the opinion, Mr. Justice Dean says (p. 653): “We do not doubt the legislature could, by the act of May 23, 1874 (not the corporation act of April 29, 1874), have granted to the city the right to change back and forth from one method of supply to the other, as whim or interest might dictate; it is sufficient to say, it did not do so.” This remark of the learned justice shows not only that the Meadville case was decided principally upon the court’s interpretation of the Act of May 23, 1874, P. L. 230, but that in construing the act the court overlooked the important and controlling fact that clause 9 of sec. 20 of the act only authorized the city to make a contract for a water supply “for any length of time not exceeding ten years.” The act, therefore, did give the city the right to change its method of supply, “as whim or interest may dictate,” at the expiration of each decennial period. And such is the present law: Act of May 23, 1889, P. L. 277.
The water company in the Meadville case had an exclusive franchise, having been incorporated prior to the act of 1887. What was determined in that and kindred cases following it, as understood by Justice Dean who wrote the opinion, was subsequently declared by him in Carlisle Gas, etc., Co. v. Carlisle Water Company, 188 Pa. 51. The full bench heard the Meadville case and five of the same justices heard the Carlisle Water Company case. Referring to those cases, Mr. Justice Dean in the latter case said (p. 54): “In all these cases we held that by the present legislation on the subject a municipality was authorized to adopt one of two methods to *647supply itself with water: 1. It could construct and operate its own works by municipal taxation; or, 2. It could contract with a private corporation to construct works and to supply the municipality with water.” It will therefore be observed that, under those decisions, a contract with a private corporation which would estop a municipality from erecting its own waterworks must be an agreement “to construct works and to supply the municipality with water.” It is not sufficient that the municipality simply grants permission to a water company to lay its pipes in the streets in the manner prescribed in the ordinance, but the contract must stipulate for the erection of the works and a supply of water, in other words, must bind the water company to construct the works and also to supply the public with water. There certainly would be ample ground for the contention that a municipality would be estopped from erecting its own works after it had entered into an agreement with a private corporation like the contract in the Mead-ville case, and the works had been constructed and the water was being supplied in strict conformity with the agreement. Such a contract would be enforceable, under the doctrine of the Meadville case, against a municipality as it would be against an individual.
But in the case in hand we are not confronted with such a contract by the borough man attempt to exercise its municipal function in furnishing a supply of water to its inhabitants. There was no inducement held out by the borough or any official action on its part inducing the Pennsylvania Water Company to procure its charter and erect its plant to supply water to the residents of the borough:. It is not contended on the part of the water company that it has an exclusive franchise or that it has any contract that estops the borough from exercising its function to supply water, other than the ordinance of May 21, 1891, and its acceptance by the company. The ordinance was passed in pursuance of the legislative authority contained in the act of 1874, as amended by the act of 1889, conferring police jurisdiction, for the purpose of regulating the use of the streets by the water company, and did not establish a contractual relation with the water *648company granting it authority to supply water to the public in Brushton borough. Such has been the unanimous opinion of this court in more than one of its recent decisions: Philipsburg Water Company v. Philipsburg Borough, 203 Pa. 562; Hastings Water Company v. Hastings Borough, 216 Pa. 178.
The consequences of this decision are far-reaching, and affect the people in every municipality of the commonwealth which is supplied with water by an incorporated water company. Notwithstanding the legislature by the act of 1887 repealed the exclusive privileges conferred on water companies by "the act of 1874, the majority of the court, by judicial construction, now practically repeals the later statute and restores the exclusive privilege conferred by the earlier act as against the municipality. If an ordinance granting permission to a water company to lay its pipes and mains in the streets of a borough constitutes a contract authorizing the company to supply the people of the municipality with water for an indefinite period, then an exclusive franchise, as against the borough, has been restored to all water companies, as no company can legally enter any municipality without the authority of an ordinance subjecting it to police regulations. The situation in the state under this decision, is that when a water company enters a borough by permission of an ordinance imposing police regulations and indefinite as to duration, a contract, inviolable under the federal constitution, is thereby created and the municipality cannot thereafter erect a plant and supply water to its inhabitants. This is, as I conceive, in direct antagonism to our own decisions, it interprets corporate grants most strongly in favor of the corporation and against the public, contrary to the settled rules of statutory construction, and is at variance with the decisions construing similar statutes by the courts of last resort in other states and by the supreme court of the United States.
I would reverse the decree of the court below and dismiss the bill.
Brown, J., concurs in this dissent.