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    MAYOR AND ALDERMEN OF CITY OF VICKSBURG v. VICKSBURG WATERWORKS, 206 U.S. 496 (1907)

    U.S. Supreme Court

    MAYOR AND ALDERMEN OF CITY OF VICKSBURG v. VICKSBURG WATERWORKS, 206 U.S. 496 (1907)

    206 U.S. 496

    MAYOR AND ALDERMEN OF THE CITY OF VICKSBURG, Appt.,
    v.
    VICKSBURG WATERWORKS COMPANY.
    No. 275.

    Argued April 24, 1907.
    Decided May 27, 1907.

    Statement by Mr. Justice Day: [206 U.S. 496, 497]   Cases involving the rights of the Vicksburg Waterworks Company, under the contract made between the city of Vicksburg and the company, for furnishing the water supply of the city, have been before this court in two preceding actions, viz.: Vicksburg Waterworks Co. v. Vicksburg, 185 U.S. 65 , 46 L. ed. 808, 22 Sup. Ct. Rep. 585, and 202 U.S. 453 , 50 L. ed. 1102, 26 Sup. Ct. Rep. 660.

    Owing to the previous statements of the case, it is only necessary to set out enough of the facts involved in the controversy now before us to make plain the conclusions at which we arrive.

    The city of Vicksburg, by act of the legislature of Mississippi (Laws of 1886, chap. 358, 5, p. 695), was authorized 'to provide for the erection and maintenance of a system of waterworks to supply said city with water, and to that end to contract with a party or parties, who shall build and operate waterworks.'

    Acting under this authority conferred by the legislature, the city of Vicksburg made a contract with Samuel R. Bullock & Company, their associates and assigns, for the supply of water to the city and its inhabitants, which was contained in the ordinance of November 18, 1886, 13 thereof providing that--

    The ordinance, by its terms, ran for thirty years, and Bullock & Company, as provided in 5 of the ordinance, assigned the contract to the Vicksburg Water Supply Company, [206 U.S. 496, 498]   and it was duly accepted by that company. The supply company put in the works and operated until August, 1900, when the mortgage upon the property, including all the franchises and contract rights, was foreclosed and purchased by a Mr. Crumpler, who assigned all his rights and title to the Vicksburg Waterworks Company, the appellee herein, which company has operated the works since.

    The contract contained an agreement to pay a stipulated rental for certain hydrants for public use.

    The legislature of Mississippi, on March 18, 1900, passed an act authorizing the city to issue bonds and build a waterworks system of its own for the supply of the city and its inhabitants, and on the 3d of July, 1900, an election was held in the city under the statute, which resulted in a vote to build or buy a waterworks plant of its own.

    The city repudiated any contract relations with the company. Thereupon the company filed its bill in the United States circuit court for the district of Mississippi on the 14th day of February, 1901, the objects of which were thus stated by Mr. Justice Shiras, in delivering the opinion of the court ( 185 U.S. 65 , 46 L. ed. 808, 22 Sup. Ct. Rep. 585):

    The bill prays for an injunction to restrain the defendant from assuming to abrogate and take away the franchises and contract rights of the complainant, and from attempting to coerce the company to sell its works to the defendant for an inadequate price, and that said act of the legislature of Mississippi, adopted on March 9, 1900, and said resolution and ordinance adopted and passed by said city on the 7th day of November, 1900, be declared to impair the obligations of said contract between said city and said Bullock & Company and their assigns, and to cast a cloud upon the title, franchises, and rights of complainant, and said act, ordinance, and resolution, and each of them, are alleged to be in contravention of the Constitution of the United States in this: that they impair the obligations of said contract between said city and said Bullick & Company and their assigns.' [206 U.S. 496, 499]   In the court of original jurisdiction the bill was dismissed for want of jurisdiction. On appeal, 185 U.S. 65 , 46 L. ed. 808, 22 Sup. Ct. Rep. 585, the judgment was reversed, and this court held that there was jurisdiction, and the cause was remanded. The case went to trial upon its merits, and on May 18, 1904, a final decree was rendered, which was affirmed on appeal to this court in the case reported in 202 U.S. 453 , 50 L. ed. 1102, 26 Sup. Ct. Rep. 660. The decree in that case, known in the record as No. 41, is given in the margin. 1  

    [206 U.S. 496, 500]   During the pendency of the original action the legislature of Mississippi passed an act authorizing the cities and villages of the state to prescribe, by ordinance, maximum rates and charges for the supply of water, electric light, and gas furnished to cities and the inhabitants thereof. Laws of Mississippi 1904, p. 231. Section 1 of this act is inserted in the margin. 1   [206 U.S. 496, 501]   On April 20, 1904, about one month before the rendition of the final decree in the original case, the city adopted two ordinances fixing the maximum charge for the use of water, one by what is known as the 'flat rate' and the other for water measured by meters.

    On December 7, 1903, the city passed an ordinance prohibiting the water company and gas company from charging damages and other penalties for failure to pay bills, until ten days after presenting the same, and giving an opportunity for the payment thereof.

    On the 7th of January, 1905, the water company, in view of this action by the city, filed another bill, which is the original bill in this case, and was numbered 79, in which it set forth the preceding history of the litigation, the decree of May 18, 1904, the city ordinance of December 7, 1903, and the two of April 20, 1904, and in that bill alleged its contract under the ordinance of 1886 and the former decree, and that the enforcement of the ordinances was in violation of that decree and the company's contract of 1886, and would be destructive of its business, and they prayed for an injunction. A temporary injunction was allowed, and afterwards, the case standing on the bill, answer, and exhibits attached thereto, a final decree was rendered in the case, which final decree is set forth in the margin. 1   [206 U.S. 496, 502]   Messrs. Hannis Taylor and George Anderson for appellant. [206 U.S. 496, 504]   Messrs. J. Hirsh and Murray F. Smith for appellee.

    [206 U.S. 496, 506]  

    Mr. Justice Day delivered the opinion of the court:

    It is contended on behalf of the appellee that the original decree of May 18, 1904, finally disposed of all the issues between the parties, including the right of the city to make rates for water consumption to private consumers under the authority of the act of March 19, 1904, and that the present controversy is foreclosed by the decree in the former case.

    While it is true that the decree is very broad, we cannot agree to the contention of the appellee that it finally disposed of the matter now in controversy. When the case was first here, reported in 185 U.S. 65 , 46 L. ed. 808, 22 Sup. Ct. Rep. 585, while there are expressions in the opinion affirming the validity of the contract and the authority of the city to make it, the issue really decided was as to the jurisdiction of the court as a Federal court, which was sustained, and the cause remanded for further proceedings. Upon the second hearing of the case, and the appeal here, the opinion shows that the adjudication was regarded as settling the right of the Vicksburg Waterworks Company, under the contract, to carry on its business without the competition of works to be built by the city itself, as the city had lawfully excluded itself from the right of competition; and it was further held, as incidental to that controversy, in passing upon an issue made in the suit, that the Vicksburg Waterworks Company had succeeded to all the right, title, and interest of the original contracting party, and that the contract, having been made prior to the Constitution of 1890, was not controlled by its provisions. The right to recover for rentals was also directly involved, as the city had denied its liability therefor, and an accounting was prayed in the original bill, and the decree specifically disposed of that issue. It is true that in the answer it was averred that the alleged contract imposed upon the inhabitants of Vicksburg an onerous [206 U.S. 496, 507]   and extortionate burden; 'that no such contract would now be made with the Vicksburg Waterworks Company or any other company; that the rates ath orized in said ordinance far exceeded the rates charged in other cities under like circumstances, and, in general terms,' the city denied that it was bound to the complainant by contract; 'that, for the many reasons therein set forth, no liability existed on the part of the city by reason of the contract.'

    An examination of the record in the former case shows that the only testimony taken in the case, as to the reasonableness of the rates charged to private consumers, was on behalf of the company, and tended to show that the rates charged were reasonable, and if it could be said that the pleadings put in issue the reasonableness of the rates then charged, was the right of the city to regulate rates under a subsequent law of the state necessarily involved and concluded? The determination of issues as to the right of injunction against the city building its own works, or denying liability or refusing to pay the rentals contracted for, and a finding that existing rates were reasonable, did not necessarily conclude a controversy which might thereafter arise, as to the right of the city to fix rates when the legislature of Mississippi should pass a law for that purpose, giving the city the right to regulate the same. It is to be remembered that when the bill was filed in the original case no such law had been passed; that when the act of March, 1904, went into effect the case was nearly ready for final decree, and the city passed its ordinances long after the beginning of the suit, an shortly before that decree. No supplemental bill was filed, but after the decree, in January, 1905, the present independent suit was brought, with a view to enjoining the proposed action of the city in enforcing ordinances regulating the rates by charges other than those contained in the contract.

    Upon the appeal, the question seems to have been argued by the city as though made in the case, though the brief on behalf of the appellee contends that the act of 1904 was not [206 U.S. 496, 508]   involved. But a decree must be read in the light of the issues involved in the pleadings and the relief sought, and we are of opinion that the matters now litigated were not involved in or disposed of in the former case, and that, when properly construed, the decree does not finally dispose of the right of the city to regulate rates under a law passed after the contract went into effect, and long after the bill was filed in the case.

    Holding, then, that the plea of res judicata must be denied, had the city authority, under the charter of Vicksburg, passed in 1886, to make a binding contract, fixing maximum rates for water supply to private consumers for a definite period, thirty years in the present case? The grant of legislative power upon its face is unrestricted, and authorizes the city 'to provide for the erection and maintenance of a system of waterworks to supply said city with water, and to that end to contract with a party or parties who shall build and operate waterworks.'

    That a state may, in matters of proprietary rights, exclude itself from the right to make regulations of this kind, or authorize municipal corporations to do so, when the power is clearly conferred, has been too frequently declared to admit of doubt. Los Angeles v. Los Angeles City Water Co. 177 U.S. 558 , 44 L. ed. 886, 20 Sup. Ct. Rep. 736; Walla Walla v. Walla Walla Water Co. 172 U.S. 1 -7, 43 L. ed. 341-344, 19 Sup. Ct. Rep. 77; New Orleans Waterworks Co. v. Rivers, 115 U.S. 674 , 29 L. ed. 525, 6 Sup. Ct. Rep. 273; Freeport Water Co. v. Freeport, 180 U.S. 587 -593, 45 L. ed. 679-686, 21 Sup. Ct. Rep. 493.

    In the latter case this court, following the construction of the supreme court of Illinois, held that where a city council was authorized to contract with any person or corporation to construct and maintain waterworks at such a rate as may be fixed by ordinance for a period not exceeding thirty years, the words 'fixed by ordinance' being capable of application so as to make one ordinance endure for the period of thirty years, fr which the contract was made, or to give the right to pass ordinances from time to time regulating rates, the latter construction was adopted. [206 U.S. 496, 509]   In the cases generally in this court it will be found that, in determining the matter of contract, the local decisions have been given much weight and, ordinarily, followed. As this is a Mississippi contract, and the power was exercised under the authority of an act of the legislature of that state, we naturally look to the decisions of the courts of that state, particularly to such as had given construction to similar charters at the time the contract was made, with a view to determining the extent of the power conferred.

    While the case now before us was pending, Griffith and others, citizens of Vicksburg, filed a bill, setting forth the city ordinances of 1903 and 1904, and asking to have them established and maintained and an injunction granted against enforcing charges for higher rates, and, upon appeal, the case went to the supreme court of Mississippi, and is reported in 40 So. 1011. In that case the supreme court of Mississippi held that the municipal corporation represented the citizens and taxpayers of the city, and that, where a right had been adjudged as between the company and the city, it would conclude private citizens; and while the court declined to pass directly upon the question here involved, because of its pendency in the Federal courts, it used this pertinent and suggestive language:

    The case to which the court refers in the preceding extract, Stone v. Yazoo & M. Valley R. Co. supra, as having been decided prior to the enactment of the charter of Vicksburg under which the contract in question was made, did not directly involve the question of authorizing municipal corporations to make such contracts, but did ai ntain, after an exhaustive consideration of the subject, that a grant to a railroad company, in the charter, of a right to fix rates within maximum limits named, was a contract, within the meaning of the Federal and state Constitutions, which could not be violated by a subsequent attempt to prescribe different rates, and held that the railroad company's grant was not a renun- [206 U.S. 496, 511]   ciation of the legislative power to secure reasonable rates, but rather an exercise of that power, and, when rights were thus conferred, to that extent there was a renunciation of the right of the state to control the subject. In the course of the discussion the learned judge, speaking for the court, said:

    ... * *

    In Light, Heat, & Water Co. v. Jackson, 73 Miss. 598, 19 So. 771, the city of Jackson had filed its bill, undertaking to annul a contract binding the city to pay for water for a period of twenty years at a price and rate fixed in a certain ordinance, on the ground that it was ultra vires and without authority from the legislature. In that case the authority conferred was in general terms, authorizing the city to contract with any reliable corporation, association, or individual for supplying the city of Jackson with water and electric or gas lights from year to year. Under authority of this general power the city undertook to make a contract with the Light, Heat, & Power Company of Jackson, contracting for the furnishing of water to the public at certain annual rentals for a period of twenty years, and fixing a certain rate for annual rentals to private consumers. The supreme court of Mississippi dealt directly with the question: Was the contract made between the city and company, and set forth in the bill, invalid for want of power in the city to contract for a series of years? And the court said:

    Again, in the case of Reid v. Trowbridge, 78 Miss. 542, 29 So. 167, the mayor and aldermen of the city of Vicksburg had been authorized, in general terms, to provide for the lighting of said city by electric light or other method. Under this general power the city made a contract with the Vicksburg Railroad, [206 U.S. 496, 514]   Power, & Manufacturing Company for lighting the streets by electricity, at a given rental per annum, for 125 lights, for a period of ten years. The taxpayers of the city of Vicksburg filed a bill to enjoin the carrying out of the contract, alleging that the city had no authority to make such a contract without submitting it to a vote of the people, under the act of March, 1888, passed subsequent to the charter, requiring submission to a vote of the people, that the contract was unreasonable and oppressive, and that the council had acted arbitrarily and without exercising discretion in awarding it. The court held that the act of 1888 had no application to the case, and, speaking of the general terms of the charter authorizing a contract for lighting purposes, said:

    ... * *

    And the court held that, under this power, the municipal authorities had the right to make the contract for electric lights without advertising for bids, and without submitting the matter to a popular vote, and the power was not taken away by the act of March, 1888

    In this case the learned judge, speaking for the court, further said:

    In the light of these decisions, and others might be cited, we reach the conclusion that, under a broad grant of power, conferring, without restriction or limitation, upon the city of Vicksburg, the right to make a contract for a supply of water, it was within the right of the city council, in the exercise of this power, to make a binding contract, fixing a maximum rate at which water should be supplied to the inhabitants of the city for a limited term of years; and, in the absence of a showing of unreasonableness 'so gross,' as the court of Mississippi has said, 'as to strongly suggest fraud or corruption,' this action of the council is binding, and for the time limited puts the [206 U.S. 496, 516]   right beyond legislative or municipal alteration to the prejudice of the other contracting party.

    While we, therefore, reach the conclusion that the former case did not adjudicate the matter, we think the contract in this respect was within the power of the council, and cannot be violated consistently with the contract rights of the company by the subsequent ordinances of the city.

    In this case the circuit court rendered a final decree practically upon the bill and answer. No testimony was taken, and all that was before the court was the bill, answer, and exhibits. We think the decree goes too far in enjoining the city from interfering with the contract right of the company to charge the rates fixed thereby, in view of the allegations of the answer, that the rates charged by the company exceeded those named in 13 of the ordinance of 1886.

    The decree should be modified, so as to enjoin interference on the part of the city during the term of this contract, with the right of the company to charge rates not in excess of 50 cents a thousand gallons to private consumers, as set forth in the ordinance.

    With this modification, the decree will be affirmed.

    Footnotes

    [ Footnote 1 ] Equity, No. 41.

    Vicksburg Waterworks Company

    vs.

    Mayor and Aldermen of the City of Vicksburg, Mississippi.

    This day this cause came to be heard in accordance with the motion of complainant and defendant filed January 12th, 1904, upon the original bill, amended and supplemental bill, exhibits, answer of defendant, proof, and exhibits, and the court, after hearing and attending the evidence and the arguments of counsel, and being fully advised in the premises, and being satisfied that the complainant is entitled to the relief prayed for in its original and amended and supplemental bills, and for full relief, it is thereupon hereby ordered, adjudged, and decreed:

    First. That the defendants, the Mayor and Aldermen of the city of Vicksburg, be and are hereby perpetually enjoined from abrogating and taking away, or from assuming to abrogate or take away, the franchises or contract rights of complainant under and by virtue of the ordinances, franchises, or contract of said defendants entitled, 'An Ordinance to Provide for a Supply of Water to the City of Vicksburg, in Warren County, Mississippi, and to Its Inhabitants, Contracting with Samuel R. Bullok & Company, their Associates, Successors, and Assigns for a Supply of Water for Public Use, and Giving the Said City of Vicksburg an Option to Purchase the Said Works,' ordained the 19th day of November, 1886, approved by John W. Powell, mayor, November 19th, 1886, being the ordinance, contract, and franchise marked exhibit B to the original bill of complaint, and said ordinance, contract, and franchise being specifically and accurately set out in words and figures in the pleadings, which ordinance, contract, and franchise was acquired by and is the sole and exclusive property of said complainant.

    Second. That said ordinance, contract, and franchise be and is hereby declared and held to be in every respect legal, valid, and enforceable and binding upon said defendant, and said defendant is hereby perpetually enjoined from infringing, ignoring, rescinding, or denying liability under said ordinance, contract, and franchise in any of its parts, or from in any manner disturbing or interfering with the rights, privileges, and benefits acquired by complainant thereunder.

    Third. That said defendant be, and he is hereby, directed to rescind its resolution and ordinance adopted the 7th day of November, 1900, which is in words and figures as follows: 'Resolved, that the mayor be and is hereby instructed to notify the Vicksburg Waterworks Company that the mayor and

    aldermen deny any liability upon any contract for the use of the waterworks hydrants. That from and after August, 1900, they will pay reasonable compensation for the use of said hydrants. That the city attorney take such action as shall be necessary to determine the rights of the city in the premises.'

    And also to rescind the ordinance or reso- lution of said defendant adopted the 7th day of February, 1901, when said defendant adopted the report of the committee on waterworks, as set out in the pleadings.

    Fourth. That the said defendant refrain from in any manner accepting the benefits of or proceeding under the act of the legislature of the state of Mississippi approved March 9, 1900, and from issuing bonds under and by virtue of said act, or any other act or ordinance, for the purpose of erecting waterworks of its own during the period prescribed by ordinance, contract, and franchise.

    Fifth. That the said defendant refrain from constructing waterworks of its own until the expiration of the period prescribed in said ordinance, contract, and franchise, dated the 16th day of November, 1886.

    Sixth. That the said defendant be, and is hereby, required to pay all moneys due or owing, or that may hereafter be due and owing to said complainant under and by virtue of said ordinance, contract, and franchise.

    Seventh. That the said defendant be, and is hereby, perpetually enjoined from making or adopting any resolutions or ordinance refusing to pay the contract price of water fixed by said ordinance, contract, and franchise until the expiration of the period prescribed in said ordinance, contract, and franchise.

    Eighth. (Relates to certain sewers.)

    Ninth. That said defendant pay the costs of this cause to be taxed.

    [ Footnote 1 ] Section 1. Be it enacted by the legislature of the state of Mississippi, That the corporate authorities of any city, town, or village now or hereafter incorporated under any general or specific laws of this state, in which any individual, company, or corporation has been, or hereafter may be, authorized by said city, town, or village to supply water, electric light, or gas to said city, town, or village, or the inhabitants thereof, be, and they are hereby, empowered to prescribe by ordinance maximum rates and charges for the supply of water, electric light, or gas furnished by such individual, company, or corporation to such city, town, or village or the inhabitants thereof, such rates and charges to be just and reasonable. And in case the corporate authorities of any such city, town, or village shall fix unjust and unreasonable rates and charges, the same may be reviewed and determined by the circuit court of the county in which said city, town, or village may be; provided, that this act shall not be construed so as to impose (impair) the effect of obligation of any valid or binding contract with any waterworks company, electric light company, or gas company, now existing, or heretofore made with any individual or water company, electric light or gas company.

    [ Footnote 1 ] This case coming on to be finally heard at this January term, 1906, of this court, upon the original bill of complaint and the answer of the defendant thereto, and all the exhibits which are made such, to said original bill of complaint and said answer, and all of the other pleas and proceedings in this cause, together with a certified copy of the charter of the said Vicksburg Waterworks Company, which is filed in the record as evidence in the cause, also the petition of the defendant for a modification of the temporary injunction granted in this cause, so that the complainant shall not be authorized to cut off water from its patrons who refuse to pay the rates of complainant, claiming the right to have the injunction modified by virtue of the ordinances of the defendant, fixing water rates; and the motion of complainant to have said injunction granted heretofore made perpetual. And the court having heard the arguments of counsel, and being fully advised in the premises, and being satisfied that the complainant is entitled to the relief prayed for in its bill of complaint for full relief, it is thereupon finally ordered, adjudged, and decreed:

    First. That the defendant, the mayor and aldermen of the city of Vicksburg, is hereby denied the relief prayed for in its petition, to wit, that the injunction be modified so that the mayor and aldermen of the city of Vicksburg shall not be restrained from enforcing the ordinances passed by them

    From this decree the present appeal has been prosecuted.

    fixing the water rates and prescribing rules and regulations of the Vicksburg Waterworks Company, and that the Vicksburg Waterworks Company shall not be permitted to cut off patrons' water, providing patrons pay the rates fixed in said ordinances.

    Second. That said defendant be, and is hereby, enjoined from enforcing the said three ordinances described in said bill, to wit: An ordinance entitled 'An Ordinance to Fix and Prescribe Maximum Rates and Charges for Water Suppliedto the Inhabitants of the City of Vicksburg, Whether Measured by Meters, and for Other Purposes,' approved the 20th of April, 1904, an ordinance entitled 'An Ordinance to Fix and Prescribe the Maximum Flat Rates and Charges for the Supply of Water to Consumers in the City of Vicksburg, and for Other Purposes,' approved the 20th day of April, 1904; and an ordinance entitled 'An Ordinance to Require Waterworks, Gas, and Electric Companies to Present Bills before Charging Damages for a Failure to Pay Them When Due,' approved the 8th day of December, 1903, so far as the latter relates to complainant.

    Third. That the restraining order heretofore granted in this cause on the 11th day of January, 1905, be and the same is hereby made permanent.

    Fourth. That the said defendant be, and is hereby, enjoined from in any manner interfering with the complainant's contract rights under its said contract with the city of Vicksburg, entered into between Samuel R. Bullock & Company and said city, under the ordinance of November 19th, 1886.

    Fifth. That the defendant be, and is hereby, enjoined from interfering with the rules and regulations of complainant, the Vicksburg Waterworks Company, and the water rates for the inhabitants of the city of Vicksburg, now in force, established by the Vicksburg Waterworks Company.

    Sixth. That said defendant be, and is hereby, enjoined from interfering with the water rates known as the flat rates, now in force, established by the Vicksburg Waterworks Company.

    It is further ordered, adjudged, and decreed that the defendant pay all costs of this cause.

    Finally ordered, adjudged, and decreed this, the 3d day of Jan. A. D. 1906.

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