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VICKSBURG WATERWORKS CO v. CITY OF VICKSBURG, 185 U.S. 65 (1902)

U.S. Supreme Court

VICKSBURG WATERWORKS CO v. CITY OF VICKSBURG, 185 U.S. 65 (1902)

185 U.S. 65

VICKSBURG WATERWORKS COMPANY, Appt.,
v.
MAYOR AND ALDERMEN OF THE CITY OF VICKSBURG.
No. 392.

Submitted December 4, 1901.
Decided April 7, 1902.

[185 U.S. 65, 66]   The Vicksburg Waterworks Company, a corporation of the state of Mississippi, filed, in February, 1901, in the circuit court of the United States for the southern district of Mississippi, a bill of complaint against the mayor and aldermen of the city of Vicksburg, a municipal corporation of Mississippi. To this bill the city filed a demurrer and certain special pleas, and subsequently moved the court for leave to withdraw the demurrer and pleas, and for leave to file an answer alleging that said answer embodied all the matters of defense which were set forth in said pleas and demurrer, and also a motion to dissolve a temporary injunction which had been theretofore granted.

On July 1, 1901, the court entered the following order:

On July 3, 1901, the complainant moved the court to 'require defendant to elect on which plea it will stand, whether on demurrer to the whole bill or on the answer.' This motion was overruled, and on July 3, 1901, the court entered the following order and decree:

Thereupon the complainant moved the court to 'continue the restraining order in force as granted until the appeal in this cause is heard by the Supreme Court of the United States, or until the further order is granted by said court.'

The following order was then entered by the court:

On the same day an appeal was allowed to this court, and on July 4, 1901, the following certificate was signed by the trial judge and filed:

Messrs. James A. Carr, S. S. Hudson, and A. N. Edwards for appellant.

Mr. L. W. Magruder for appellees.

Mr. Justice Shiras delivered the opinion of the court:

The sole question for our consideration is whether the bill, as originally filed and as amended, presented a Federal question. As the party plaintiff and the party defendant were both corporations and citizens of the same state, the circuit court of the United States could not take jurisdiction of the controversy between them unless the complainant laid grounds for that jurisdiction by asserting rights arising under the Constitution or laws of the United States, and such assertion must appear in the complainant's statement of its own claim. Metcalf v. Watertown, 128 U.S. 586 , 32 L. ed 543, 9 Sup. Ct. Rep. 173; Tennessee v. Union & Planters' Bank, 152 U.S. 454 , 38 L. ed. 511, 14 Sup. Ct. Rep. 654; Blackburn v. Portland Gold Min. Co. 175 U.S. 571 , 44 L. ed. 276, 20 Sup. Ct. Rep. 222.

It is true that the learned judge, in his certificate to this court, inquires 'whether a Federal question was involved upon the pleadings.' And it is also true that the counsel for the respective parties have gone, in their briefs, into a discussion of questions of fact and law, as if the case were here on appeal from a final decree on the merits.

But our function, in the case before us on this certificate, is restricted to the inquiry whether, upon the allegations of the bill of complaint, assuming them to be true in point of fact, a Federal question is disclosed so as to give the circuit court jurisdiction in a suit between citizens of the same state. If we conclude, after an inspection of the bill, that a Federal question is thereby presented, we must reverse the decree of the circuit court below dismissing the bill, and direct that court to proceed in the orderly exercise of its jurisdiction to determine the con- [185 U.S. 65, 69]   troversy; if we fail to find such a question, the decree of the circuit court must be affirmed.

Addressing ourselves, then, to a consideration of the contents of the bill, original and supplemental, we encounter a very long and somewhat confusing narrative of the facts of the case. We do not think it necessary to state those facts in full in this opinion, but shall confine our attention to the allegations in which questions arising under the laws or Constitution of the United States are claimed to arise.

By an act of the legislature of the state of Mississippi, approved on the 18th day of March, 1886, the city of Vicksburg 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.'

The city received competitive bids for the construction and maintenance of said waterworks, and on November 18, 1886, at a special meeting of the board of mayor and aldermen, a committee reported that the bid made by Samuel R. Bullock & Company, of New York, was the best bid, and submitted the draft of an ordinance, 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. Bullock & Company, Their Associates, Successors, and Assigns, for a Supply of Water for Public Use, and Giving the City of Vicksburg an Option to Purchase Said Works.' This ordinance was then adopted, in terms as follows:

On March 1, 1887, Samuel R. Bullock & Company assigned and transferred, under and by virtue of the 5th section of the aforesaid ordinance, all their rights and privileges acquired under the ordinance to the Vicksburg Water Supply Company, incorporated under the laws of the state of Mississippi, and the said company accepted in writing the said ordinance.

The bill further alleges the construction of the said water plant, in accordance with the specifications contained in the ordinance, and the city accepted the same; that since the completion and acceptance of said waterworks, during a period of fourteen years up to about July, 1900, the said company fully complied with all the terms of the ordinance, and no complaint was made by the city with respect to the execution of the company's part of the contract, and the city, without question, paid to the water company the semiannual payments stipulated for in the ordinance; that on the 8th day of August, 1900, a mortgage that the said company had previously made, and which had fallen into default, was foreclosed, and all the franchises, ordinances, contracts, and property described and conveyed in said mortgage deed were sold to the Vicksburg Waterworks Company, a corporation under the laws of the state of Mississippi, doing business in the city of Vickshurg, and which became the owner of said waterworks property and entered into the operation of the same; that on October 18, 1900, the said the Vicksburg Water Supply Company executed a quitclaim deed to the said the Vicksburg Waterworks Company, convey- [185 U.S. 65, 78]   ing and assigning all rights, titles, and interest it might have or might thereafter acquire in said waterworks property, franchises, ordinances, and contracts; that the Vicksburg Waterworks Company gave the city notice in writing of the said purchase and assignment, with a written acceptance of the terms and provisions of the said ordinance; that since the completion and acceptance of the said waterworks the city continuously received and used the water furnished by said waterworks, during a period of about fourteen years; and said water has at all times been and now is good and wholesome for public and private use, and adequate in supply for the needs of the city and its inhabitants; that said water so furnished from the time the city first received and accepted the same up to the present time is and has at all times been the same character and supply of water, and is and at all times has been in accordance with the said ordinance and contract entered into with said city by said S. R. Bullock & Company, the said Vicksburg Water Supply Company, and the said Vicksburg Waterworks Company, and that the pressure maintained has at all times been and is now greater than required by said ordinance and contract.

Upon these allegations, the appellants claim that a contract was entered into between the city and S. R. Bullock & Company and their assigns, the Vicksburg Water Supply Company and the Vicksburg Waterworks Company, which contract still exists and is within the protection of the Constitution of the United States.

The matters and things which are alleged by the appellants to impair the obligation of said contract and to destroy their property rights are mainly as follows:

On March 9, 1900, the legislature of Mississippi passed an act entitled 'An Act to Authorize the Mayor and Aldermen of the City of Vicksburg to Issue Bonds to the Amount of $375,000, to Purchase or Construct, Equip and Maintain, a Waterworks System; Construct and Establish a Sewerage System; to Purchase Grounds for, Erect and Equip a City Hall; Construct the Necessary Buildings for a Medical College, and for Other Purposes;' by which act, the bill alleges, the legislature assumed to annual and abrogate the aforesaid ordinance and contract the [185 U.S. 65, 79]   city entered into with said Bullock & Company and their assigns in this, that, by reason of said ordinance and contract, said city has no right within the said period of thirty years to engage in the business of supplying water to the inhabitants of said city in competition with said Bullock & Company or their assigns, notwithstanding which said act authorizes and permits said city to construct and maintain waterworks for said purpose, if unable to buy the waterworks of said Vicksburg Water Company at the arbitrary and inadequate price fixed by the said legislative act. The bill further alleges that, in pursuance of said act, and as required by its terms and conditions, an election was held in said city on the 3d day of July, 1900, at which it was voted, by a majority of the votes cast, that said city should issue its bonds in the sum of $150, 000 to buy or construct waterworks for said city; that, on the 7th day of November, 1900, the city passed a resolution and ordinance 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.' The bill further alleges that on December 7, 1900, the city filed a bill in the chancery court of the county of Warren, state of Mississippi, against the Vicksburg Water Supply Company and the Vicksburg Waterworks Company, averring, among other things, that the contract entered into with Samuel R. Bullock & Company was null and void, and the attempt by said mayor and aldermen was a gross abuse of their rights and powers; that the said mayor and aldermen had no right to make a contract for so long a period as thirty years, and beyond their official terms to bind the constituted authorities to pay rents for the said hydrants as therein stipulated; that the rates prescribed in said contract for the use of said hydrants and the rates charged by said company against domestic consumers are exorbitant and illegal, and said board exceeded its power and authority in making a contract stipulating during the [185 U.S. 65, 80]   period aforesaid for said rates; that the said mayor and aldermen, at a meeting held on the 5th day of November, 1900, resolved and declared that 'the said board no longer recognized any liability, under said contract, to said company, by reason whereof said complainants say that said contract no longer exists; that they are entitled, as against the Vicksburg Water Supply Company, to have said contract canceled and annulled, and as against the Vicksburg Waterworks Company to a decree that said company have never acquired any rights in or to said contract, or if mistaken in this, by reason of the matters and things stated, they are entitled to have the same annulled and canceled; praying that the said city may have said relief and such other and further relief as may appear just and proper.'

The present bill further alleges that said suit in the chancery court was brought on petition to the circuit court as involving a Federal question, and that the same is now pending in that court upon a motion to remand.

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 Bullock & Company and their assigns.

It cannot be seriously contended that, under the act of March 18, 1886, authorizing the city to provide for the erection and maintenance of a system of waterworks, and to contract with a party or parties to build and operate waterworks, and under the ordiance of the city of November 18, 1896, providing for a supply of water to the city and its inhabitants by con- [185 U.S. 65, 81]   tracting with Samuel R. Bullock & Company, their associates, successors, and assigns, and the acceptance of said ordinance by Samuel R. Bullock & Company, no contract was entered into. The subject-matter of the contract was within the powers of the city to make; the terms were explicitly set forth in the ordinance; the works erected were approved by the city, and the respective obligations created by the contract were duly complied with without question or complaint, for a period of fourteen years.

After the lapse of that long period and the continuous acquiescence of the city in the contract as a valid and subsisting one, the city, according to the allegations of the bill, now insists that the said contract was invalid because in excess of its powers to contract, and is proposing to borrow money to erect and maintain waterworks of its own, and become a competitor with the complainant for the custom of the consumers of water. And the question for our consideration is whether the subsequent legislation, state and municipal, set forth in the bill, impairs the contract rights of the complainant within the protection of the Constitution of the United States.

As respects the act of March 9, 1900, it is contended by the complainant that it is unconstitutional for several reasons, chiefly because it places an arbitrary valuation on the property of the complainant, and because it purports to authorize the city to build and operate waterworks of its own in derogation of the contract rights of the complainant.

Whether this act of the legislature of Mississippi is, in its terms, subject to those objections, or whether it may be regarded as merely authorizing the city to proceed in such a manner as not to conflict with existing contract obligations, we need not determine at this stage of the case, because we think that the ordinance of the city of November 7, 1900, whereby the mayor was instructed to notify the waterworks company that the mayor and aldermen deny any liability upon any contract for the use of the waterworks hydrants, and the subsequent action of the city in holding an election to authorize the issue of bonds to buy or construct waterworks of its own, and in refusing to pay the amount due and payable under the terms of the ordi- [185 U.S. 65, 82]   nance, do not present the mere case of a breach of a private contract to be remedied by an action at law, but disclose an intention and attempt, by subsequent legislation of the city, to deprive the complainant of its rights under an existing contract; and that, therefore, unless the city can point to some inherent want of legal validity in the contract, or to some such disregard by the waterworks company of its obligations under the contract as to warrant the city in declaring itself absolved from the contract, the case presented by the bill is within the meaning of the Constitution of the United States and within the jurisdiction of the circuit court as presenting a Federal question.

The objections urged in the brief of the appellee to the validity of the contract, because it undertakes to bind the city for a period of thirty years, because an attempt to barter away the legislative power of the city authorities, and because creating an indebtedness in excess of the charter limits, are those that were considered at length in the similar cases of Walla Walla v. Walla Walla Water Co. 172 U.S. 1 , 43 L. ed. 341, 19 Sup. Ct. Rep. 77, and Los Angeles v. Los Angeles City Water Co. 177 U.S. 558 , 44 L. ed. 886, 20 Sup. Ct. Rep. 736, and were in those cases held to be untenable. However, we do not wish to be understood as now determining such questions in the present case, for we are only considering whether or not the circuit court had jurisdiction to consider them.

It is further contended that the bill does not disclose any actual proceeding on the part of the city to displace complainant's rights under the contract, that mere apprehension that illegal action may be taken by the city cannot be the basis of enjoining such action, and that therefore the circuit court did right in dismissing the bill. We cannot accede to this contention. It is one often made in cases where bills in equity are filed to prevent anticipated and threatened action. But it is one of the most valuable features of equity jurisdiction, to anticipate and prevent a threatened injury, where the damages would be insufficient or irreparable. The exercise of such jurisdiction is for the benefit of both parties; in disclosing to the defendant that he is proceeding without warrant of law, and in protecting the complainant from injuries which, if inflicted, would be wholly destructive of his rights. [185 U.S. 65, 83]   It may be said that the action of the circuit court in dismissing the bill may have been based on the fact that the city had proceeded by a bill filed in the chancery court of Mississippi against the waterworks company before the present suit was instituted. But the learned judge does not, in his certificate, suggest such a question, and the bill avers that the record in the city's suit is still pending in the circuit court on a motion to remand. Whether the city's complaint in the state court disclosed a Federal question, and what, if properly removed to the circuit court for that reason, the course of the circuit court ought to be in respect to the formal disposition of the cases, are matters not before us for determination.

Nor can we consider allegations made in behalf of the city in its answer as to misconduct of the waterworks company, in respect to which no issue was found nor proofs taken in the court below. They must be determined by the proper tribunals, which will pass upon the merits of the case.

We think this cause presents a controversy so arising under the laws and Constitution of the United States as to give the Circuit Court jurisdiction, and therefore the judgment of the Circuit Court is reversed, and the cause remanded to that court to take proceedings therein according to law.

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