CITY OF JOPLIN, Appt., v.

SOUTHWEST MISSOURI LIGHT COM¬ PANY.

(See S. C. Reporter’s ed. 150-158.)

Electric lighting — implied contract of city not to enter competition.

An implied contract that the city will not, for twenty years, enter into the business of com¬ mercial electric lighting, does not arise from a municipal grant to certain persons under the authority of Mo. Laws 1891, p. 00, of the right to erect and maintain an electric light plant for that period, where such grant is not exclusive.

[No. 32.]

Argued October 20, 1903. Decided Novem¬ ber 16, 1903.

. PPEAL from the Circuit Court of the A United States for the Western District of Missouri to review a decree enjoining a municipality from entering into the business of commercial electric lighting. Reversed and remanded for the dismissal of the bill. See same case below, 113 Fed. 817.

Statement by Mr. Justice McKenna:

Bill in equity to restrain the appellant from supplying its inhabitants with incan¬ descent lights or other electric lighting in competition with the appellee.

The city of Joplin is a municipality of the

127

151, 152

Supreme Court of the United States.

Oct. Term,

state of Missouri; the appellee is a corpora¬ tion of said state, and the jurisdiction of the circuit court was invoked on the ground that the action of the city impaired the obli¬ gation of the contract existing between it and the appellee, in violation of the Consti¬ tution of the United States, and hence the appeal directly to this court.

A preliminary injunction was granted. 101 Fed. 23. It was made perpetual upon final hearing, and a decree was entered en¬ joining the city “from supplying or furnish¬ ing to the inhabitants, residents, or any other person, firm, or corporation within said city, or any addition thereto or exten¬ sion thereof, electric lights, either incandes¬ cent or arc, or in any other form or manner, for commercial or private lighting, for and during the full term” of the grant to the predecessors and assignors of appellee, to wit, the term of twenty years from and after October 7, 1891. 113 Fed. 817.

A statute of Missouri (Laws 1891, p. 60) authorizes cities to erect, maintain, and operate electric light works, to light the streets, and supply the inhabitants with light for their own use, and to establish rates therefor. Or they may, the statute provides, “grant the right to any person or persons or corporation to erect such works . . . upon such terms as may be pre¬

scribed by ordinance, provided further that such right . . . shall not extend for a

longer period than twenty years.” Subse¬ quently to, and in pursuance of, this statute, the city, by ordinance, October 7, 1891,

[ 152jg,'anted the right to *erect and maintain an electric light plant to certain persons, nam¬ ing them, their successors and assigns, for a period of twenty years. The plant was erected at considerable expense, and has ever since been maintained and operated. The appellee is the successor of the original grantees.

The ordinance conferred rights and exact¬ ed obligations, and fixed, besides, the rates to be charged. It also provided for its writ¬ ten acceptance within ten days after its passage, and the commencement of the work within sixty days. It was accepted.

Subsequently (March, 1899), the city, act¬ ing in pursuance of, and in the manner pro¬ vided in, certain ordinances, issued bonds to the amount of $30,000, “for the purpose of erecting an electric light plant, to be owned, controlled, and operated by the city,” and by the means obtained thereby con¬ structed electrical works, erected poles and wires, established a schedule of rates, and entered into the business of commercial elec¬ trical lighting in competition with appellee. The bill alleged that the appellee was the owner of real and personal property within the city, which is assessed by the city for 128

municipal taxation, and that appellee is compelled, by reason of such taxation, “to aid and assist in operating and maintaining defendant’s (the city’s) electric plant and business as a rival and competing one” with appellee’s electrical plant and business.

Mr. C. H. Montgomery argued the cause, and, with Mr. Samuel W. Moore, filed a brief for appellant:

As the city of Joplin did not expressly grant an exclusive franchise, or expressly disable itself from erecting and maintaining an electric light plant, no such restrictions will be created by implication.

Bienville Water Supply Co. v. Mobile, 95 Fed. 539; Skaneateles Waterworks Co. v. Skaneateles, 184 U. S. 354, 46 L. ed. 585, 22 Sup. Ct. Rep. 400; Freeport Water Co. v. Freeport City, 180 U. S. 587, 45 L. ed. 679, 21 Sup. Ct. Rep. 493; Pearsall v. Great i Northern It. Co. 161 U. S. 664, 40 L. ed. 844, 16 Sup. Ct. Rep. 705; St. Paul Gas¬ light Co. v. St. Paul, 181 U. S. 142, 45 L. ed. 788, 21 Sup. Ct. Rep. 575; Stein v. Bien¬ ville Water Supply Co. 141 U. S. 67, 35 L. ed. 622, 11 Sup. Ct. Rep. 892; Charles Fiver Bridge v. Warren Bridge, 11 Pet. 536, 9 L. ed. 819; Hamilton Gaslight & Coke Co. v. Hamilton, 146 U. S. 258, 36 L. ed. 963, 13 Sup. Ct. Rep. 90; Thompson Houston Elec¬ tric Co. v. Newton, 42 Fed. 723; Levis v. Newton, 75 Fed. 884; Re Brooklyn, 143 N. Y. 596, 26 L. R. A. 270, 38 N. E. 983; Aus¬ tin v. Bartholomew, 46 C. C. A. 327, 107 Fed. 349; Newburyport Water Co. v. Neiv- buryport, 103 Fed. 587.

The power of the city of Joplin to erect and operate its own electric light plant, and the power to grant to some person or cor¬ poration a franchise therefor, are concur¬ rent powers.

Skaneateles Waterworks Co. v. Skaneat¬ eles, 184 U. S. 354, 46 L. ed. 585, 22 Sup. Ct. Rep. 400.

Mr. John A. Eaton argued the cause, and, with Mr. J. McD. Trimble, filed a brief for appellee:

The express provisions of the statute and contract shall be first considered, and then what is necessarily implied from such ex¬ press provisions. This is the only rule for finding the true and entire contract.

Detroit Citizens’ Street R. Co. v. Detroit R. Co. 171 U. S. 48, 43 L. ed. 67, 18 Sup. Ct. Rep. 732; Los Angeles v. Los Angeles City Water Go. 177 U. S. 558, 44 L. ed. 886, 20 Sup. Ct. Rep. 736; Dill. Mun. Corp. 4th ed. U 451-459.

The law implies duties and obligations in a contract from those which are expressed, and the implied duties and obligations are as much a part of the contract as those ex¬ pressed.

191 U. S.

Joplin v. Southwest Missouri Light Co.

Union Depot Go. v. Chicago, K. d H . It. Co. 113 Mo. 213, 20 S. W. 792; Bishop, Contr. 241 ; 2 Parsons, Contr. 6th ed. p. 514; Walla Walla v. Walla Walla Water Co. 172 U. S. 1, 43 L. ed. 341, 19 Sup. Ct. Rep. 77 ; United States v. Babbit, 1 Black, 55, 17 L. ed. 94; Whincup v. Hughes, L. R. 6 C. P. 78; Donahoe v. Kettcll, 1 Cliff. 144, Fed. Css. No. 3,980.

Implication is but another term for mean¬ ing an intention, apparent in the light of ju¬ dicial inspection.

Rhode Island v. Massachusetts, 12 Pet. 723, 9 L. ed. 1260.

The purpose of the contract was not to govern the inhabitants of the city, but to ob¬ tain a private benefit for the city itself and its denizens.

Illinois Trust d Sav. Bank v. Arkansas City, 34 L. R. A. 518, 22 C. C. A. 171, 40 U.

S. App. 257, 76 Fed. 271.

The corporation is estopped from assert¬ ing that no contract relations exist.

Zabriskie v. Cleveland , G. d G. R. Co. 23 How. 381, 16 L. ed. 488.

The obligation of a contract is the law which binds the parties to perforin their agreement; any impairment of the obliga¬ tion of a contract — the degree of impair¬ ment is immaterial — is within the prohibi¬ tion of the Constitution.

Walker v. Whitehead, 16 Wall. 314, 21 L. ed. 357.

Courts may acquaint themselves with the persons and circumstances that are the sub¬ jects of the written agreement, and place themselves in the situation of the parties who made the contract, — view the circum¬ stances as they viewed them, so as to judge of the meaning of the words, and of the cor¬ rect application of the language to the thing described.

Guarantee Go. v. Mechanics’ Sav. Bank d

T. Co. 26 C. C. A. 146, 47 U. S. App. 91, 80 Fed. 766; Goddard v. Foster, 17 Wall. 123, 21 L. ed. 589.

The following cases fully support the right to an injunction in this suit:

C Walla Walla Water Co. v. Walla Walla, 60 Fed. 957; Walla Walla v. Walla Walla Wa¬ ter Co. 172 U. S. 1, 43 L. ed. 341, 19 Sup. Ct. Rep. 77; Westerly Waterworks v. West¬ erly, 75 Fed. 181; White v. Meadville, 177 Pa. 643, 34 L. R. A. 567, 35 Atl. 695.

A legislative act which impairs the obliga¬ tion of an existing contract is void as vio¬ lative of the contract clause of the Consti¬ tution.

Hew Orleans Waterworks Co. v. Rivers, 115 U. S. 674, 29 L. ed. 525, 6 Sup. Ct. Rep. 273; St. Tammany Waterworks Co. v. Hew Orleans Waterworks Go. 120 U. S. 64, 30 L. ed. 563, 7 Sup. Ct. Rep. 405 ; Los Angeles v. ' 191 U. S. U. S., Book 48.

155, 156

Los Angeles City Water Co. 177 U. S. 558,

44 L. ed. 886, 20 Sup. Ct. Rep. 736.

Mr. Justice McKenna, after stating the case, delivered the opinion of the court:

The foundation of the suit is that the ordinances of March, 1899, and the acts and conduct of the city in entering into competi¬ tion with the complainant (appellee) impair the obligation of the contract impliedly aris¬ ing from the ordinance of October 7, 1891, and the acceptance thereof by appellee. In other words, it is contended that under the statute of the state, which we have quoted, the city was given the power to Construct an[ 1 electrical plant and erect poles, etc., to “sup¬ ply private lights for the use of the inhabit¬ ants of the city,” or it could grant that right “to any person or persons or corpora¬ tion” upon such terms as might be pre¬ scribed by ordinance. It chose the latter, and granted to the assignors of appellee the right given by the statute, and expressed it to be “in consideration of the benefits to be derived therefrom.” And it is hence con¬ tended that thereby the city contracted not to build works of its own, and that by doing so it violated § 10 of article 1 of the Consti¬ tution of the United States, which provides that no state shall pass any law impairing the obligation of a contract, and also vio¬ lated that clause of the 14th Amendment of that instrument, which provides that no state shall deprive any person of property without due process of law.

It is by implication from the statute and the ordinance passed under it, not from the explicit expression of either, that the con¬ clusion is deduced that the city is precluded from erecting its own lighting plant, and yet it is conceded that the grant to the ap¬ pellee is not exclusive. That is, it is con¬ ceded the city has not exhausted its power under the statute by the grant held by ap¬ pellee, but may make another to some other person than the appellee. In other words, that the city may make a competitor to ap¬ pellee, but cannot itself become such compet¬ itor. The strength of the argument urged to support the distinction is in the consider¬ ation that competition by the city would be more effective than competition by private persons or corporations — indeed, might be destructive. The city, it is further urged, could be indifferent to profits, and could tax its competitor to compensate losses. But this is speculation and it may be opposed by speculation, and there are, besides, counter¬ vailing considerations. The limitation con¬ tended for is upon a governmental agency, and restraints upon that must not be readily implied. The appellee concedes, as we have seen, that it has no exclusive right, and yet contends for a limitation upon the city 9 129

156-159

Supreme Court of the United States.

Oct. Term,

which might give it (the appellee) *a prac¬ tical monopoly. Others may not seek to compete with it, and if the city cannot, the city is left with a useless potentiality, while the appellee exercises and enjoys a practi¬ cally exclusive right. There are presump¬ tions, we repeat, against the granting of ex¬ clusive rights, and against limitations upon the powers of government.

Many cases illustrate this principle, and some of them were decided in response to contentions similar to those made in the case at bar. In Skaneateles Waterworks Co. v. Skaneateles, 184 U. S. 354, 46 L. ed. 585, 22 Sup. Ct. Rep. 400, the village of Skaneateles, under statutes of the state of New York, granted to the water company the right to construct waterworks, and con¬ tracted with it to supply water to the vil¬ lage and its inhabitants for the period of five years. At the expiration of the term of the contract some difference arose about the terms of its continuance, and the village constructed an independent system of wa¬ terworks. A suit was brought by the water company to restrain the further construc¬ tion of the works and their operation, and the company contended that under the stat¬ ute of the state by which the village granted to the company its franchises, the village had the election to construct works, or con¬ fer such power upon a private company like the water company, and having elected the latter, it impliedly contracted not to con¬ struct works of its own. In reply to this contention this court said, by Mr. Justice Peckham :

‘‘There is no implied contract in an ordi¬ nary grant of a franchise, such as this, that the grantor will never do any act by which the value of the franchise granted may in the future be reduced. Such a contract would be altogether too far-reaching and important in its possible consequences in the way of limitation of the powers of a munic¬ ipality, even in matters not immediately connected with water, to be left to implica¬ tion. We think none such arises from the facts detailed.”

It is true there was an element in that case which is not in the case at bar. The village of Skaneateles had entered into a contract with the water company to take

water from the ^company. This contract had expired before the city constructed its works. It was not that contract, however, which was alleged to have been impaired, but that which the water company claimed to have been implied by reason of its organi¬ zation and incorporation, and in pursuance of the application made to, and with the consent of, the village authorities. The ul¬ timate reliance, therefore, of the water com¬ pany was that from the grant to it the vil- 130

lage impliedly contracted not to construct works of its own. The similarity of the contention with that in the case at bar is apparent. (

In Bienville Water Supply Co. v. Mobile, 175 U. S. 109, 44 L. ed. 92, 20 Sup. Ct. Rep. 40, 186 U. S. 212, 46 L. ed. 1132, 22 Sup. Ct. Rep. 820, it was again decided that the granting of franchises to private persons to construct waterworks in a city does not pre¬ clude the city from afterwards erecting such works, and supplying its inhabitants with water.

Walla Walla v. Walla Walla Water Go. 172 U. S. 1, 43 L. ed. 341, 19 Sup. Ct. Rep. 77, is not in opposition to these views. The city of Walla YValla was, by the statute in¬ corporating it, empowered to erect water¬ works or to authorize the erection of the same. In pursuance of this power it grant¬ ed a franchise to the Walla Walla company, and contracted to take water from the com¬ pany, reserving the right to avoid the con¬ tract under certain contingencies. But it was provided that: “Until such contract shall have been so avoided, the city of Walla Walla shall not erect, maintain, or become interested in any waterworks except the ones herein referred to, save as hereinafter specified.” The contract was in force at the time the suit was brought, and the water company had substantially complied with all of its terms and conditions. The contract passed upon, therefore, was expressed and explicit. The power to make it was sus¬ tained. In the case at bar, restraint upon the power of the appellant city is claimed to be implied by the grant to the appellee. We think, for the reasons stated and upon the authorities cited, such restraint cannot be implied.

Decree reversed and case remanded with directions to dismiss the bill.