Altgelt v. City of San Antonio & Waterworks Co. ( 1891 )

The appellant brought this suit in the District Court of Bexar County to vacate a contract, set forth at length in his petition, entered into by the city of San Antonio with the San Antonio Waterworks Company, incorporated under the general laws of this State. The appellant also sought to restrain said city from paying to said company any of the municipal funds by virtue of said contract, which was alleged to be illegal and unauthorized, and from making any appropriation of public money to satisfy said contract.

The defendant's exceptions to the petition were sustained; and the plaintiff declining to amend, the cause was dismissed, and this appeal is the result.

It will be unnecessary to state all of the grounds upon which the exceptions were predicated, or to set forth the entire petition. So much of the pleadings will be referred to as is thought to be essential to a proper understanding of the questions out of them.

It appears from the petition that on or about the 3d of October, 1877, the city of San Antonio entered into a contract in writing with what is now known as the San Antonio Waterworks Company for the purpose, as stated in the preamble of the contract, of "supplying said city with water for fire protection, sanitary, public, and domestic purposes; said company using the head of San Antonio River as a source of supply."

By the first section of the contract it was provided in substance that the company would erect the necessary buildings and machinery, etc., upon land to be set aside by the city for that purpose to accomplish the object in view. The second section provided for a system of pipage, etc., to be laid from the source of the supply of water, and for the distribution of the water throughout the city, and the location of fire hydrants at such points as the city council might decide to be proper. The third made provision also for laying pipes, main conductors, aqueducts, etc., to conduct water throughout the city, and for the necessary buildings and machinery. The fourth section stipulated that such additional hydrants should be erected as were required by the city council. The fifth section provided for flushing the gutters on streets and sprinkling said streets, and for supplying water for the fire department, etc. The sixth section guaranteed that the works should be of the most durable material, etc., and capable of affording a supply to the citizens of the city of a specified number of gallons, etc. The Seventh prescribes the time within which the work shall be completed, and provides for the erection of a reservoir. The eighth section regulates the rate at which water will be supplied to private consumers.

Such is a synopsis of the obligations entered into by the waterworks company. The first section of that part of the contract containing the grants, etc., made by the city, provided for a lease of six acres of land to the company for a reservoir. The second conceded to the company full power to enter upon the streets, squares, alleys, etc., and to take up pavements, etc., to lay pipes and construct culverts to conduct and distribute the water, etc., giving the company the right of way free of cost over all public grounds controlled by the city. The third was as follows: "The said city further obligates itself not to grant to any other body of men or persons during the continuance of said contract the right to furnish water for fire hydrants or other public purposes." The sixth section provided, among other things, "that said contract should subsist for a period of twenty-five years from the completion of said works, at the end of which time said city should have the right to buy the works at an appraised value. But if said city did not buy at the end of twenty-five years said contract should run until the works are finally purchased, and the right to purchase the same should inure to the city every five years thereafter, after giving twelve months notice."

The waterworks, except the reservoir, were to be completed not later than July, 1878.

A supplemental contract was entered into between the city and the company in January, 1881, by the terms of which it was stipulated that for the use of the one hundred fire hydrants then established in accordance with the first contract the city should pay an annual rent of $50 each, instead of $100 as originally required, "and in consideration of said reduction of the rent of said one hundred fire hydrants the said city further remitted and relinquished to the waterworks company all city taxes whatever which might otherwise be assessed and levied upon any of the property of said waterworks company, and owned or held by said company for the purpose of operating their works, such property, however, not to exceed in value the sum of $250,000, so that said waterworks company should be discharged from the payment of all city taxes during the continuance of the original contract aforesaid by the terms thereof."

The petitioner further alleged that these contracts were illegal and against public policy, because they attempted to create a monopoly on the part of said waterworks company to supply water to said city; and because they attempted to exempt from taxation by said city the property of said defendant (the waterworks company), which otherwise would be liable to taxation as other property within said municipal corporation. He further alleges that "by exempting the property of said San Antonio Waterworks Company from taxation the rate of taxation upon property within said city is increased and continues to be increased, and that thereby petitioner and all other inhabitants and taxpayers of said city have been compelled to pay higher taxes than he and they would otherwise be compelled to do; and that such taxation increased as aforesaid will continue unless the injunction hereinafter prayed for is granted. Petitioner avers that since the making of said supplemental contract said city of San Antonio has exempted from taxation the property of its said codefendant to the value of $250,000, and will continue so to exempt the same unless the relief hereinafter prayed for is granted. Petitioner further shows by the grant, or supposed grant, of exclusive privileges to San Antonio Waterworks Company by said city, that all competition is avoided, and that in consequence thereof excessive and unreasonable rates and prices for water are charged and collected from the inhabitants of said city, including petitioner."

The exceptions of the appellee to plaintiff's petition, which were sustained by the court, raise the following questions: Was the contract set forth in the petition and entered into between the city of San Antonio and the waterworks company unauthorized and invalid because it attempted to create a monopoly and an exclusive privilege upon the part of said company to furnish said water, and because the city council could not impair and embarrass the exercise of the power conferred on said city by its charter to provide water for said city? And was it also illegal because it attempts to exempt from taxation by said city the property of said waterworks company? If for the above reasons or either of them it is determined that the contract was illegal, then the next question is whether this suit can be maintained by plaintiff under the allegations contained in his petition. If under either of them it can be, the judgment should be reversed.

In so far as the first question above mentioned is involved, there is no material distinction between this case and that of the City of Brenham v. The Water Company, 67 Tex. 545, where it was decided. Without attempting to enumerate the different provisions of the contracts respectively entered into by these cities, and the sections of their charters authorizing said cities to enter into contracts to supply their inhabitants with water, and without citing the statutes which were looked to in that case in determining this question, it will be sufficient to say that said charters and contracts are substantially the same, and the statutes referred to are the same and are now in force. It follows, therefore, that for the reasons given and elaborated in that case by Chief Justice Stayton, the contract in the case under consideration is illegal and unauthorized. But it does not follow, we think, in this case that because the contract is, as alleged by plaintiff, unauthorized and illegal and creates a monopoly, or attempts so to do, and surrenders for the period of twenty-five years the legislative power with which the city is invested, that for these reasons alone the plaintiff can in this suit vacate or set aside said contract. In the case mentioned the suit was by the waterworks company to enforce the contract. This was resisted by the city of Brenham upon the ground that it attempted to create a monopoly and was a surrender of the legislative power in the city with reference to that subject for twenty-five years. In the case under consideration the city is not complaining. On the contrary, the contract is recognized by the city, and as long as it is so recognized by the city through its properly constituted authorities it can not be vacated by plaintiff upon these grounds.

The plaintiff does not show by his averments that he as a taxpayer of the city is authorized to maintain this action by reason of any injury resulting to him from the contract of October, 1877, entered into by the city of San Antonio. It does not appear from the petition that he is prevented from obtaining water upon any better terms, nor does it appear that he is compelled under the terms of that contract to get water from the defendant waterworks company only. We do not mean to say that a taxpayer of a municipal corporation can not maintain a suit like the present under proper averments showing injury to him as such taxpayer resulting from an illegal and unauthorized contract. But the petition does not present such a case with respect to the contract originally entered into by the city in October, 1877.

It does sufficiently appear, however, from the allegations of the petition, that the release from or exemption by the city of San Antonio of the property of the defendant waterworks company during the continuance of the contract, which is alleged to have been done under the supplemental contract of January, 1881, operates to the injury of the plaintiff. It is shown that this exemption of said property, valued at $250,000, resulted in increasing the rate of taxation upon property in the city, and that thereby petitioner and all other inhabitants and taxpayers of said city have been and will continue to be compelled to pay higher taxes than they would otherwise be required to do.

That the city of San Antonio did not have the power to exempt this property from taxation is well settled in the case of The City of Austin v. Gas Company, 69 Tex. 187. In the same case it was held that the power to commute taxes was but an incident of the power to exempt, and as the latter power did not exist, so the incidental power must be denied. This is decisive of the question in this case.

We are of opinion that under the plaintiff's allegations of injury resulting to him as a taxpayer from the exemption by the city of the property of the waterworks company, thereby increasing the rate of taxation on his property and compelling him to pay higher taxes than he would otherwise be required to do, he is entitled to maintain this suit, and that there was error in dismissing it; and that for the error in dismissing the suit, we think the judgment should be reversed and the cause remanded.

A rehearing was granted.

ON REHEARING.