Bienville Water Supply Co. v. Mobile, 186 U.S. 212 (1902)

Please note: this case begins in mid-page. It therefore shares a citation with the last page of the previous case. If you are attempting to follow a link to the last page of 186 U.S. 206, click here.

Bienville Water Supply Company v. Mobile

No. 126

Argued January 22-23, 1902
Decided June 2, 1902
186 U.S. 212

APPEAL FROM THE CIRCUIT COURT OF THE UNITED

STATES FOR THE SOUTHERN DISTRICT OF ALABAMA

Syllabus

The plaintiff took its charter with notice that it was not given the exclusive right of supplying the City of Mobile with water, and it had not at the time of the transactions referred to in the pleadings, obtained that which its charter before amendment purported to authorize it to obtain -- to-wit, an exclusive right to all the sources of supply in the county.

The legislature had the right of revocation and amendment.

On February 21, 1899, the appellant, as complainant, filed its bill in the Circuit Court of the United States for the Southern District of Alabama to restrain the City of Mobile from building or operating prior to July 1, 1908, or before the city should have purchased the waterworks of the complainant, any system of waterworks connected with or having for its source of supply any stream of water in Mobile County. Upon answer and proofs, the circuit court entered a decree dismissing the bill, whereupon an appeal was taken directly to this Court.

The facts are these: in 1840, the City of Mobile made a contract with Albert Stein, which was ratified by an act of the legislature of the state, January 7, 1841. By this contract, Stein received the exclusive right to supply the city with water from a stream called Three Mile Creek, and the city the right to purchase his plant at a price to be fixed by arbitration. Stein constructed his plant, and it was for many years the sole source of supply. But it was not satisfactory, and hence the charter to the appellant. This charter was granted by two statutes, dated respectively February 19, 1883, and February 14, 1885. By these statutes, the company was given all the rights vested by contract or law in the city to purchase the Stein franchise and plant, and for that purpose was to be considered the assignee of the city; also generally the right to acquire by contract with the owners any franchise and plant for supplying Mobile with water, and in case of disagreement with the owners as to price, the right to condemn and take the said franchise and plant under the state’s right of eminent domain. It was given for twenty years, and until a purchase of its plant by the city the exclusive right to supply the city with water from any source in the County of Mobile, other than Three Mile Creek (the Stein source of supply), and when it should acquire the Stein franchise, the exclusive right from that creek also, subject to this proviso:

But nothing in this act shall be construed to prohibit the organization hereafter of any company for the purpose of supplying the City of Mobile or any other place with water which does not interfere with the property rights or rights of obtaining water pertaining to this company.

It was required to begin its work within four years and to supply water within six years. It was also required to supply water at a cost to the consumers, not exceeding certain maximum rates fixed by the act, and to put fire plugs on any square at the request of the owners of three-fourths of the improved property thereon. After twenty years, the city was given the right to purchase the plant of the company at a price to be fixed by arbitration.

The owners of the Stein franchise endeavored by litigation to prevent the erection of the appellant’s plant, but a decree in favor of the Bienville company was affirmed by this Court. 141 U.S. 67.

Appellant constructed its plant and supplied the City of Mobile with water under contracts, the last of which would not have expired until July 1, 1900.

By an act of February 23, 1899 (Local Acts Ala. 1898-99, p. 1689), its charter was amended by striking out the word "exclusive," thus leaving a grant, but not an exclusive grant.

By an Act of February 6, 1897, a new charter was granted to the City of Mobile, and, by its terms, express authority was given to the city to build or acquire public works, subject to the approval of its citizens by a majority vote. On August 2, 1897, there was submitted to vote and approved by a majority of citizens a proposition that the city should purchase, build, or otherwise acquire a system of sewerage to cost not exceeding $250,000, to be paid for by bonds secured by a mortgage upon said public works.

By other statutes, the city was given power to issue bonds secured by a mortgage on any plant which it should buy or construct; also power to acquire or condemn made between the plaintiff and the city, and in Mobile County excepting only Clear Creek, the source of appellant’s supply of water; and, third, to condemn all interest, legal or equitable, not owned by the city in the Stein plant.

Nothing had been done by the appellant under the right given it to purchase or condemn the Stein franchise and property, although its treasurer had in its behalf purchased interests in such franchise and property amounting to 54 28/100 percent of the full value thereof. On February 18, 1898, the city council passed a resolution to purchase the Stein franchise and property. An arbitration was held, and on its report, the city took possession of the property and filed a bill against the treasurer of the appellant to compel him to carry out the arbitration and purchase. The circuit court, however, held the arbitration illegal and dismissed the bill.

On February 21, 1899, appellant brought in the circuit court of the United States a suit in equity against the city. In the bill was set forth the contracts of appellant with the city, and it was contended that there was an implied agreement by the latter not to enter into competition. This suit was dismissed by the circuit court, and its decree was affirmed by this Court. 175 U.S. 109. The present bill, filed on the same date, is based on the rights given to the appellant by its charter, and it is contended that any legislation authorizing the city to violate such charter rights is in conflict with that clause in the first paragraph of Section 10 of Article 1 of the federal Constitution, which prohibits a state from passing any law impairing the obligations of contracts.

The Constitution of Alabama (1875), which was in force at the time of the transactions herein referred to, contained these several provisions:

Article I, section 23: That no ex post facto law, or any law impairing the obligation of contracts, or making any irrevocable grants of special privileges or immunities, shall be passed by the general assembly.

Article XIV, section 1: Corporations may be formed under general laws, but shall not be created by special act, except for municipal, manufacturing, mining, immigration, industrial, and educational purposes, or for constructing canals, or improving navigable rivers and harbors of this state, and in cases where, in the judgment of the General Assembly, the objects of the corporation cannot be attained under general laws. All general laws and special acts passed pursuant to this section may be altered, amended, or repealed.

Article XIV, section 2: 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 ratification of this Constitution, shall thereafter have no validity.

Article XIV, section 10: The general assembly shall have the power to alter, revoke, or amend any charter of incorporation now existing and revocable at the ratification of this Constitution, or any that may hereafter be created, whenever, in their opinion, it may be injurious to the citizens of the state, in such manner, however, that no injustice shall be done to the corporators. No law hereafter enacted shall create, renew, or extend the charter of more than one corporation.