Lehigh Water Company's Appeal ( 1883 )

Mr. Justice Paxson

delivered the opinion of the court, April 9th 1883.

This was an appeal from the refusal of the corirt below to grant a special injunction. With a view to obtain a decision of this court upon the whole case, an agreement was filed at bar giving to the decision below the effect of a final decree. We will therefore treat it as a decree entered upon a general demurrer to the bill. This admits all the facts sufficiently averred by the plaintiffs, which places them in as favorable a position as they could desire;

The plaintiffs seek to restrain the borough of Easton (defendants) from erecting water-works for the purpose of supplying said borough with water. The facts necessary to a proper understanding of the case, briefly stated, are its follows :

On the 19th of March 1867, an Act of Assembly was passed authorizing the borough of Easton to construct water-works, and to buy the works of any existing water companies, the works to be erected by three water commissioners, to be elected by the qualified voters of the borough : P. L. 412. A supplement to this Act was passed on April 15th 1867, providing that the water-works should not be built by the borough until after the question of the erection of said works has been submitted to a popular vote at a spring election, when, if a majority of the qualified voters were in favor of such erection, the town council should proceed to construct said works. A vote was taken at the spring election-in 18S1, resulting in a majority in favor of the works. Three persons were elected water commissioners at the same time, who purchased a lot upon which to erect said works, and presented a petition to the Court of Common Pleas of Northampton county for the purpose of .compelling the town council of the borough of Easton to supply the necessary funds.

The Lehigh Water Company (plaintiff) is a corporation duly authorized by its charter to supply the borough of Easton with water, and has expended a large amount of money in the construction of its works. It is required by its charter to erect a sufficient number of fire-plugs, and supply water to the borough for the extinguishment of fires without charge. This obligation has been performed, at least in part, and it has furnished the citizens of the borough with water. • On the 21st of June 1880, the said company accepted the provisions of the Act of 29th of April 1874, P. L. 93, section 34 of which provides for the incorporation of water companies, and enacts that “the right to have and enjoy the franchises and privileges of such incorporation within the district or locality covered by its charter shall be an exclusive one,” &c. *

The grounds upon which the water company seeks to restrain the borough are : 1. That under the Act of 1874 the right of the water company is exclusive ; 2. That the borough has no power under the Act of 1867 to construct waterworks; and, 3. That to do so would contravene article I. section 10, of the Constitution of the United States, which declares that “ no State shall pass any law impairing the obligation of contracts.”

Neither of these positions can be sustained. While the language from the Act of 1874 above quoted would seem to favor the' exclusive right claimed by the water company, a careful examination of clause 3 of section 34 shows that the legislature intended that the right should be exclusive only as against other water companies, for immediately in this connection occur the words : “ And no other company shall be incorporated for that purpose until the said corporation shall have from its earnings realized and divided among its stockholders, during five years, a dividend equal to eight per centum per annum upon its capital stock.” The provision that another company shall not be incorporated was not intended to prohibit a city or borough from providing its citizens with pure water by means of works constructed by itself from money in its own treasury. Aside from this, the water company claims this exclusive right by reason of the Act of 1874, while the right of the borough to' construct the works was conferred by the prior Act of 1867, and there is no pretence that the one Act repeals the other.

It was urged on behalf of the water company, however, that the borough cannot invoke the aid of the act of of 1867, for the reason that not having availed itself thereof prior to the adoption of the Constitution, the right to do so now is taken away by section 1 of article XVI. of that instrument, which provides that: “ All existing charters or grants of special or exclusive privileges, under which a bona fide organization shall not have taken place, and business been commenced in good faith, at the time of the adoption of this Constitution, shall thereafter have no validity.” The 10th article of the Constitution has reference to “private corporations,” and it is to such corporations alone that the first section applies. It was intended to extinguish a vast number of charters obtained for speculative purposes, under which “ a bona fide organization ” had not taken place nor “ business been commenced in good faith,” but which were being hawked about to the manifest shame of the commonwealth. No one ever supposed that this article was intended to repeal an Act of Assembly conferring additional powers upon a municipal corporation, for the mere reason that the power had not been exercised in whole or in part.

It was urged, however, with considerable ingenuity, that in erecting water works and supplying its citizens with water the borough was not acting in its capacity as a municipal corporation, but rather in that of a private or business corporation, and Western Saving Fund Society v. The City, 7. Casey 175; and Wheeler v. The City, 27 P. F. S. 338, were cited in support of this proposition. Those cases decide that when a municipal corporation undertakes to supply its citizens with gas and water it must be held to its contracts precisely as a private corporation. Rut that it is nevertheless a municipal corporation plainly appears from Wheeler v. The City, where it was attempted to restrain the city from borrowing money for the use of the gas works, upon the ground that such borrowing was prohibited by article IX. section 7, of the Constitution, which declares that the “ General Assembly shall not authorize any county, city, borough, township, or incorporated district, to become a stockholder in any company, association or corporation, or to obtain or appropriate money for,- or loan its credit to any corporation, association, institution or individual.” The gas cases, established the principle that a municipal corporation may perform the functions of a private corporation in supplying its citizens with gas and water. But that by doing so it loses its distinctive municipal character is a proposition that does not require discussion.

The third ground of objection is wholly without merit. By constructing water-works of its own the borough will not destroy the franchises of the plaintiff company. It may impair their value, and probably will do so, but of this the company have no legal cause of complaint. The granting of a new charter to a new corporation may sometimes render valueless the franchises of an existing corporation ; but unless the state by contract has precluded itself from such new grant the incidental injury can constitute uo obstacle: Charles River Bridge v. Warren Bridge, 11 Peters 420; Turnpike Co. v. The State of Maryland, 3 Wallace 210; Piscataqua Bridge v. New Hampshire Bridge, 7 N. H. 35. No contract has been shown between the water company and the state by which the latter is precluded from granting to the borough of Easton the privilege of erecting works to supply its citizens with water.

We need not pursue the subject further in view of the elaborate and careful opinion of the learned judge below.

The decree is affirmed, and the bill dismissed at the cost of the appellants.