City of Bessemer v. Bessemer City Water Works

44 So. 663, 152 Ala. 391, 1907 Ala. LEXIS 91

• Court: Supreme Court of Alabama
• Decided: July 2, 1907
• Status: Published

Opinion

DENSON, J.

This bill is filed by the Bessemer Waterworks against the city of Bessemer. For the sake of brevity we shall in the opinion refer to the complainant as the “company” and to the respondent as the “ctiy.” The company was incorporated in Jeeffrson county in 1890, under the general incorporation laws of this state as they are written in the Code of 1886, and at once began to supply the city and its inhabitants with water through a system of waterworks owned and operated by it. A new charter was established for the city by an act of the General Assembly approved December 13, 1900. Acts 1900-01, p. 441. The express power of the city in respect to supplying it and its inhabitants with water may be found in the twenty-ninth section of the charter, in this language: “The mayor and aldermen of the city of Bessemer shall have full and ample power, jurisdiction and authority * * to make, erect and repair public wells, cisterns, and establish fire plugs and hydrants, and to make all needful provision by contract, ownership of waterworks, or otherwise, for the supply of the city and the citizens thereof with water; and the hoard of mayor and aldermen shall have the power to regulate and prescribe the quality of water tó be furnished, the rates to be charged therefor to the city and to private citizens and consumers within the city limits, and to pass all such by-laws, resolutions and ordinances as may be necessary and expedient to this end. * * * Provided, that the rates for water' * * * that may be prescribed shall be reasonable.”

It is fairly inferable from the averments of the bill, if not expressly averred therein, that in 1904 the company’s plant, and necessarily the supply of water furnished by it, had come to be inadequate to meet the necessities of the city and its inhabitants. So in 1904 negotiations began between the company and the authorities of the city looking to the improvement of the company’s system of waterworks and the betterment of its supplpy of water. The city proposed to the company that if it would improve its system of waterworks the city would enter into a contract with the company under which the company should supply the city and its inhabitants with water for a period of 30 years. The bill shows that the negotiations were pending for a period of 6 months, that during their pendency the cost of the necessary improvements was canvassed and considered by the company and the authorities of the city, and that in connection therewith accurate calculations were made by the agents of the company and of the city as to the rates tha.t should be charged for water to be furnished by the company, in order to afford the company a fair and just return on the value of its plant, including the cost of the contemplated improvements and betterments. The result of the negotiations was an ordinance contract entered into on the 20th day of August, 1904, between the city and the company. The ordinance was adopted on the 2d day of August, 1904. In it the contract proposed by the company is set out in full, and it ordains an acceptance and ratification of the provisions of the contract on behalf of the city, and authorizes and empowers the mayor to execute the contract in the name of and on behalf of the ■city. It was further ordained that the ordinance and contract should go into effect on the approval and publication thereof and the completion of all improvements provided for in section 3 of the contract. On the 20th of August, 1904, the ordinance contract was duly accepted and formally signed by the city, acting through the may- or, and by the company, through its president.

The bill shows that, relying on the contract as the binding agreement of the city, the company at an expense of $150,000 made the improvements provided for in the contract. By the terms of the ordinance the city granted the company the franchise and privilege of the use of the streets for the laying of its water mains, etc., .and of supplying the city and the inhabitants thereof with water. The maximum rates at which water should be supplied are fixed by the terms of the contract, and the contract, in reference to its duration, provides as follows: “The term of this contract shall be 30 years from the date the contract goes into force, during whicü time all the provisions of this contract shall be binding on the parties hereto and remain in force.” See Const. Ala. 1901, § 228. The contract is in 18 sections, and covers all matters usually embraced in such agreements; but those which have been specifically referred to are all that we need mention just now. On September 9, 1906, and after the company had been for some time supplying water under the contract, the mayor and aldermen of the city, without the consent of the company, passed an ordinance reducing the maximum rates which might be charged by firms and corporations furnishing or supplying water to the citizens of the city of Bessemer. This •ordinance provides for the punishment by fine and imprisonment, one or both, of any person, firm, or corporation, haying a franchise to furnish water to the inhabitants of Bessemer, who shall violate any of its provisions. It also provides that any person, firm, or corporation, having a franchise from the city of Bessemer to furnish water to the inhabitants of the city, who violates the ordinance, shall forfeit such franchise and all rights thereunder. But for the injunction, the ordinance, under the charter of the city, would have taken effect on the 30th of September, 1906. The passage of this ordinance was the cause of this litigation.

The bill was filed on the 29th of September, 1906, in the circuit court of Jefferson county, to enjoin the enforcement of the ordinance reducing the rates. On the exhibition of the hill to the judge of the Tenth judicial circuit, its prayer for a preliminary injunction was granted. The points of attack made on the ordinance by the bill are that the rates fixed therein are unreasonable and arbitrary, that it impairs the obligation of the company’s contract with the city, that it deprives the company of its property without due process of law, and that it infringes complainant’s franchise granted by the city. Motions to dismiss the bill for want of equity and because the complainant had a complete and. adequate remedy at law, and to dissolve the injunction, on the same grounds and upon the additional ground (among others) that the bill sought to enjoin a threatened prosecution for a violation of the ordinance, were severally overruled; and a demurrer raising the same question as those presented by the motions, together with other questions respecting the sufficiency of the averments of the bill, was likewise overruled. This appeal is prosecuted from the decree overruling the motions and the demurrer.

In respect to the jurisdiction of the court, or, rather, to the question of complete and adequate remedy at law, section 638 of the Code of 1896 provides that the powers and jurisdiction of the chancery court (and the circuit court in this case sits'as a court of chancery) extend “to all civil causes in which a plain and adequate remedy is not provided in the other tribunals.” As a general proposition it is well and conclusively settled by this court that “courts of equity are without power to enjoin the commission of threatened crimes on the one hand, and to enjoin threatened prosecutions for the commission of alleged crimes on the other; that violations of state laws and violations of penal municipal ordinances, and prosecutions for both stand upon the same footing in this connection; and that it is wholly immaterial that the statute or ordinance for the violation of which prosecution is threatened is -absolutely void.” — Brown v. Mayor and Aldermen of Birmingham, 140 Ala. 590, 37 South. 173, and authorities there cited; Old Dominion Co. v. Powers, 140 Ala. 220, 37 South. 195; Weller v. City of Gadsden, 141 Ala. 642, 662, 37 South. 682; City Council of Montgomery v. West, 40 South. 215. But it is insisted that the case made by the present bill presents an exception to the general proposition, in this: that the privilege granted the company under the contract of August 20,1904, including the right to charge for water supplied at prices not exceeding the maxima fixed by that contract, is a vested franchise, and the enforcement of the ordinance reducing those rates would seriously impair-that franchise and the city’s contractual obligations.

The jurisdiction of equity to protect a vested franchise from unlawful innvasion or disturbance, upon the ground of irreparable injury, or such injury as cannot be adequately estimated in damages at law, seems to be recognized by our decisions. — Moses v. Mayor, etc., 52

Ala. 198; Port of Motile v. L. & N. R. R. Go., 84 Ala. 115, 123, 4 South. 106, 5 Am. St. Rep. 342;; Forcheimer v. Port of Motile, 84 Ala. 126, 4 South. 112; N. G. & St. L. Ry. v. City of Attalla, 118 Ala. 362, 24 South. 450; Brown v. Mayor and Aldermen of Birmingham, 140 Ala. 590, 601, 37 South. 173. See, also, City of Rushville. v. Rushville Natural Gas Go., 132 Ind. 575, 28 N. E. 853,15 L. R. A. 321; South Covington Street R. Go. v. Berry, 93 Ky. 43, 18 S. W. 1026, 15 L. R. A. 604, 40 Am. St. Rep. 161; Georgia Packing Go. v. Macon (G. O.) 60 Fed. 774, p2 L. R. A. 775; Deems v. Baltimore, 80 Md. 164, 30 Atl. *48, 26 L. R. A. 541, 45 Am. St. Rep. 339; Farmer v. St. Paul, 65 Minn. 176, 67 N. W. 990, 33 L. R. A. 199; Cicero Lumter Go. v. Cicero, 176 Ill. 9, 51 N. E. 758, 42 L. R. A. 696, 68 Am. St. Rep. 155; City of Los Angeles v. Los Angeles City Waterworks, 177 U. S. 58, 20 Sup. Ct. 736, 44 L. Ed. 886; Aqua Pura Go. v. Las Vegas,. 10 N. M. 6, 60 Pac. 208, 50 L. R. A. 224, 230. Relief, however, is granted in cases which come within the exception, not against the void ordinance, but against the wrongful act which threatens invasion of right.- — Weller v. City of Gadsden, 141 Ala. 642, 663, 37 South. 682. If there is doubt as to the right claimed by the company, or if it is uncertain Avhether the acts complained of are infractions of it, a court of equity should not interfere. — 52 Ala. 198. It is expressly charged in the hill on behalf of the 'company that the enforcement of the ordinance reducing the rates would he an impairment of the obligations of the ordinance contract, and hence a violation of the Constitution of the United States. The insistences of the city, in response to the charges made in the hill, are that the power to fix rates to be charged for water is a public attribute — a legislative power — continuing in its nature, and which from its nature is incapable of being alienated or restrained by the obligations of a contract, even though express authority to do so- be conferred by the Legislature upon the city; that even if this were not the case, to contract for rates to be paid for a definite terra required authority from the Legislture; that no such grant to the city was conferred by its charter, because, albeit the charter of the city gave it power to contract for a supply of water, and expressly conferred authority to prescribe and regulate the rates to be charged therefor, this did not give the right to fix the rates to be paid for the water during the entire life of the contract — “the argument being that the power to contract for a definite time is one thing, and the fixing of rates for the same time for the water contracted for is another and different thing.”

Assuming, then, for argument’s sake, that the power conferred by the Legislature on the city to make all needful provision by contract for the supply of the city and the citizens thereof with water, included the power to fix water rates for a stated period in such contract, the argument that the contract in respect to rates is void must be, and is, based upon the theory that fixing rates is within. the police poAver, and may be controlled, managed, or abrogated at the pleasure of the board of mayor and aldermen of the city, and that the Legislature was without power to authorize the-city to suspend such power by contract. There is no express limitation in the Constitution of Alabama, restricting the power of the Legislature to authorize a city to contract for Avater and in such contract to agree upon the rates to be charged by the water company for Avater to be supplied to the city and its inhabitants; and the decisions of the Supreme Court of the United States are in harmony to the effect that, while the police power is one that remains constantly under the control of the legislative authority, and that a city council can neither bind itself nor its successors to contracts prejudicial to the peace, good order, health, safety, or morals of its inhabitants, yet it is in reference to cases of the class named that contracts may not be made. And “if a contract be objectionable in itself upon these grounds, or if it becomes so in its execution, the municipality may, in the exercise of its police power, regulate the manner in which it may be carried out, or may abrogate it entirely, upon the principle that it cannot bind itself to any course of action which shall prove deleterious to the health or morals of its inhabitants. In such case an appeal to the contract clause of the Constitution is ineffectual. * " * But where a contract for a supply of water is innocuous in itself, and is carried out with due regard to the good order of the city and the health of its inhabitants, the police power cannot be invoked to abrogate or impair it.” A careful reading of the cases will disclose that a distinction is clearly drawn by the Supreme Court between cases where the grant has been claimed to confer privileges injurious to public safety, public morals, or public health, and those where they compensated persons for reforming public service. In the former the police power remains intact, and may be applied Avith all its vigor, while in the latter the city cannot justify a repudiation of its solemn engagements by the claim that the police poAver cannot be diminished or suspended. In the latter category falls the contract we have in hand, and the insistence that the city, even though authorized by the- Legislature to bind itself by an irrevocable contract not to regulate water rates, cannot do so, because the power to regulate rates is a continuing legislative power- — cannot be sustained. —Los Angeles v. Los Angeles City Water Co., 177 U. S. 558, 20 Sup. Ct. 736, 44 L. Ed. 886; Walla Walla v. Walla Walla Water Co., 172 U. S. 7, 19 Sup. Ct. 77, 43 L. Ed. 344; New Orleans Gas Co. v. Louisiana Light & Heat Co., 115 U. S. 650, 6 Sup. Ct. 252, 29 L. Ed. 516; New Orleans Waterworks Co. v. Rivers, 115 U. S. 674, 6 Sup. Ct. 273, 29 L. Ed. 525; Vicksburg v. Vicksburg Waterworks Co., 202 U. S. 453, 26 Sup. Ct. 660, 50 L. Ed. 1302; Freeport Water Co. v. City of Freeport, 180 U. S. 587, 21 Sup. Ct. 493, 45 L. Ed. 679; Omaha Water Co. v. City of Omaha, 147 Fed. 1, 77 C. C. A. 267; Pingree v. Michigan Central R. R. Co., 118 Mich. 314, 76 N. W. 635, 53 L. R. A. 274; Crosby v. City Council of Montgomery, 108 Ala. 498, 18 South. 723.

In keeping with the principles above announced, our own court has held that a city, in making a contract for water to be supplied to itself and its inhabitants, is not in the exercise of its governmental, but of its proprietary or business, powers, and is governed by the rules applicable to business corporations; the purpose in making the contract being, not to govern its inhabitants, but to obtain a public benefit for the city itself and its inhabitants. But it must be observed that in neither of our cases was the question of the continuing authority of the city to fix rates necessarily or directly involved.— Greenville v. Greenville Waterworks Co., 125 Ala. 625, 27 South. 764; Weller v. City of Gadsden, 141 Ala. 642, 658, 37 South. 682. See, also, 1 Dill. Mun. Corp. 3d Ed.) §§ 26, 27, 66, and cases cited in the notes; Illinois Trust & Savings Bank v. Arkansas City, 76 Fed. 271, 22 C. C. A. 171, 34 L. R. A. 518; Little Falls Electric & Wire Co. v. Little Falls (C. C.) 102 Fed. 663; Omaha v. City of Omaha, 147 Fed. 1, 77 C. C. A. 267. The conclusion announced in no wise conflicts with the case of Mayor and Aldermen, etc., v. Birmingham Water Co., 139 Ala. 531, 36 South. 614, 101 Am. St. Rep. 49, in which it is held that the city of Birmingham cannot bind itself by contract as to the license' tax to be paid by the water company for doing business.

The question as to the power of the city at common law to fix by ordinance the price at which water shall be supplied to consumers need not be considered, as that authority is expressly conferred by the city’s charter.— In re Pryor, 55 Kan. 724, 41 Pac. 985, 29 L. R. A, 398, 49 Am. St. Rep. 280. Notwithstanding we have reached the conclusion that a city may by contract fix rates at which water shall be supplied for a. definite period, and in this way suspend its power to fix rates during the period prescribed in the contract, we have, in doing so, gone upon the assumption that the Legislature has conferred the authority on the city to so limit its power. But in this case the city denies that the Legislature conferred on it any such authority, and so we are brought to a consideration of that question. As the contention of the company places a contractual limitation on the power of the. city, presumably to- be exercised for the public benefit, we must, in interpreting the charter power, resolve doubts in favor of the city’s power to regulate and fix rates by ordinance; “in other words, that no contract limitation on the powers of government can be upheld by mere implication, or sustained if there be doubt on the subject. The existence of such contract limitation must arise clearly and by express intendment.” This is but another way of stating the rule that 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. — 1 Dill. Mun. Corp. (2d Ed.) § 55.

With the rule as stated in vieAv, we must determine whether or not the city, under its charter, had the authority contended for by the company and denied by the city, to wit, the authority to contract for rates at which water shouid be supplied to its citizens for a definite period, and, of consequence, to suspend its charter power in respect to the regulation of rates during such fixed period. Confessedly the city by the charter is expressly authorized to make all needful provisions by contract for a supply of water for itself and its citizens, and, in view of section 228 of the Constitution, no objection can be taken to the time period prescribed in the ordinance contract. But the argument of the city is that the right to contract for a supply of water for 30 years is an independent proposition, and does not include the power to agree upon the sum to be paid for it for that period. In other words, where authority is given to contract for a supply of Avater for a fixed period, this power to contract does not, as a necessary incident, import authority also to agree upon the rates for the same period. “From the nature of the subject-matter, it is essential that the agreement for a Avater supply should contain something more than the obligation of the water company to supply Avater.” What something is more essential or indispensable than the fixing for a definite period of the rates at Avhieh the Avater should be supplied to the city and its inhabitants, we confess it is hard to conceive. ■ The supply of water to the city and its inhabitants Avas a matter of serious consideration. It Avas no small enterprise. It involved a large outlay of money. Indeed, to meet this corporate duty Avith watenvorks of its OAvn Avas doubtless beyond the financial ability of the city. Nevertheless we are warranted in inferring that the Avants of the city, Avith its 10,000 inhabitants, in respect to the supply of Avater, Avere imperative. The Legislature Avas applied to, and it said to the city, by its charter: “You shall have full and ample poAver, jurisdiction, and authority to make all needful provision by contract to supply yourself and your inhabitants with water.”

To assume that the Legislature in making this grant of power intended to withhold authority to fix the rates, would be to impute to the lawmakers ignorance of the essential elements of a contract. How could it he expected that the city could procure any person, firm, or corporation to embark with money, time, and skill in an enterprise ample to accommodate the public necessities upon an uncertain stipulation as to what the renumeration would be? Is it not more rational, and more in keeping with business 'principles, to say that the Legislature necessarily intended, by the grant, to confer on the city authority to award privileges such as would justify some responsible person, firm, or corporation in the expenditure of so large a sum of money? And why is not the privilege to charge not exceeding a fixed rate during the life of the contract one of the “needful provisions” and within the legislative intention? As said by Sanborn, J., in Omaha v. City of Omaha, 147 Fed. 1, 13, 77 C. C. R. 267, 279: “The main purpose of city waterworks is revenue derived from private consumers of water. The rates which they pay absolutely determine the financial success or failure of a city water company’s enterprise. The term or regulation in a contract for the construction and operation of waterworks which more than any other conditions the nature and the prospect of the undertaking, is that which fixes the rates which the owner may collect of private consumers. These are matters of common knowledge. The members of the Legislature could not have been ignorant when they granted to this city the power to agree upon terms and regulations upon which the works should be built and operated, and it is incredible that they intended to except from this general grant the authority to agree upon the cardinal term which alone conditions the success of the entire undertaking. They make no such exception, and that raises a conclusive presumption that they intended to make none; and it is not the province of the court to do so.” In the Omaha Case, the city was given the power “to contract with and procure individuals and incorporations to construct and maintain waterworks on such terms and under such regulations as may be agreed on.” The city made a contract which provided the rates should not exceed certain maxima set forth in the contract. It was held that the city could not by subsequent ordinance nullify its contract.

But it is insisted that power and authority is conferred on the board of mayor and aldermen to regulate and prescribe the rates to be charged for water by such by-laws, resolutions, and ordinances as may be necessary and expedient, in the same section of the charter that the power to contract is found, and is separated from the clause containing the power to contract only by a semicolon, and that it is as much a part of the contract made with the company as any express provision in it; that the contract was made with reference to it. The argument is that it is, in legal effect, inserted in the contract that the rates herein designated as maximum rates are subject to change at any time by the board of mayor and aldermen, with the limitation on the power of that board that the rates shall not be made unreasonable. If the company had notice of the power to fix rates, it also had notice of the city’s authority to contract in reference to rates if such power existed. Cannot operation be found for the power to regulate rates without its conflicting with contract rates? We think it can. As is suggested in the brief of counsel for the company (appellee) : “For example, at the expiration of a contract it might be desirable to regulate rates or to regulate them for uses not mentioned in a contract. — Cedar Rapids Water Co. v. City of Cedar Rapids, 91 N. W. 1081, 118 Iowa, 234.” And if the power is conferred on it to embrace in the contract maximum rates, by making the contract the rates are regulated. Furthermore, the charter provides that the city may own and operate waterworks, and the contract has in it a provision whereby the city may eventually become the owner of the company’s plant. On the happening of either event the field for the operation of the power to regulate rates is left wide open. If the city of Bessemer is incumbered with an inalienable right to fix rates notwithstanding its contracts, then the power given it to contract for a water supply might prove entirely futile, because it is common knowledge that rates at fixed amounts are the desideratum — the consideration for such contracts — or, as suggested by Sanborn, J., in the case quoted from, supra, the rates alone condition the success of the entire undertaking. In the case of Capital City Water Co. v. City Council of Montgomery, 92 Ala. 367, 371, 376, 9 South. 348, the water company contracted to supply water to the city and its citizens at rates fixed; the contract being made pursuant to folly vying charter power: “To establish or purchase and maintain waterworks, or contract for the furnishing of water for fully supplying the city and its inhabitants with wholesome water, and to regulate the manner and rate of furnishing ivater to private consumers.” The court, through McClellan, J., said: “To the exerecise of this power it is manifestly essential that the city should have authority with respect to making a contract for the supply of water to incur just such liabilities as it has assumed.”

We cannot see that the power to fix rates given in the same section of the charter should be held to be an inhibition on the city’s power to contract rates, if such power to contract can be necessarily implied from the power to contract for the supply of water; and our con-elusion is that the right of tie city to fix maximum rates, if not expressly given, arises by necessary implication from tlie language in which the charter power to contract is clothed. The many cases cited by counsel for appellant have been read, but to undertake a review of them would extend this opinion to too great length. It suffices to say of these that each was decided on its own peculiar facts, and that upon comparison of any with the facts of the case in hand, we do not think the conclusion will be in conflict with that we have here reached. In the case of Omaha Water Co. v. City of Omaha, supra, will be found a very able and instructive review of the cases bearing on this subject, and the reasoning there employed in differentiating the cases is appropriate to the case made by this record. See, also, Detroit v. Detroit Citizens’ St. R. Co., 184 U. S. 368, 22 Sup. Ct. 410, 46 L. Ed. 592.

On the foregoing considerations the conclusion is that the company has a valid contract with the city, and under it a vested right to charge for water that may be supplied at rates not exceeding the maxima named therein, and that the ordinance which attempts to reduce these rates impairs the obligation of the contract. It follows that the bill on this ground has equity in it, and it is unnecessary to consider whether or not the bill shows that the reduced rates are unreasonable or confiscatory. The decree of the chancellor must be affirmed.

Affirmed.

Tyson, C. J., and Haralson and Simpson, JJ., concur.