*CTTY OF OWENSBORO, Appt.,

v.

OWENSBORO WATERWORKS COM¬ PANY.

(See S. C. Reporter’s ed. 358-372.) Municipal power to regulate water rates — contract exemption.

Note. — On the legislative poicer to fix tolls, rates, or prices — see note to Winchester & L. \ Tump. Road Co. v. Croxton, 33 L. R. A. 177. On contract exemptions from legislative power

191 U. S.

water shall be furnished to consumers In a municipality, whether furnished by private persons or by the municipality itself, was in¬ cluded in the authority conferred by Ky. act of .Tune 14, 1803 § 3290, on a city of the third class, to provide the city and its inhab¬ itants with water service by contract or by works of Its own, and to make regulations for the management thereof, and to fix and regulate the prices to consumers.

cising the power to fix and regulate water rates, conferred upon it as a city of the third class by Ky. act of June 14, 1893, § 3290, by the provisions of a prior municipal ordinance granting the right to construct waterworks, which gave the grantee “power and authority to make and enforce, as a part of the condi¬ tion upon which it will supply water to its consumers, all needful rules and regulations not inconsistent with the law, or provisions of this ordinance.”

[No. 58.]

Argued November 1/, 5, 1903. Decided No¬ vember 30, 1903.

APPEAL from tbe Circuit Court of the United States for the Western District of Kentucky to review a decree perpetually enjoining a municipality from regulating water rates. Reversed and remanded.

Statement by Mr. Justice McKenna:

This is a bill in equity to enjoin the city of Owensboro, Kentucky, from regulating the rates of the appellee, the Owensboro Waterworks Company.

Lawson Reno, police judge of the city, waa made a party. The circuit court granted a temporary injunction. Before final hearing, a motion was made before Circuit Judge Lurton to dissolve the injunction, the mo¬ tion was denied on the ground of the serious¬ ness of the questions involved, and the pro¬ priety of following the previous ruling. On final hearing, the injunction was made per¬ petual against the city, and the bill dis¬ missed as to Lawson Reno. The city then took an appeal to circuit court of appeals. The appeal was dismissed on the ground that tbe jurisdiction of the circuit court having been invoked *on a constitutional question, the ap-[359 ] peal should have been taken directly to this court. 53 C. C. A. 14G, 115 Fed. 318. The city then brought the case here from the circuit court.

The city asserts the right to regulate the rates of the appellee under a statute of the state. The construction of the statute is contested by the appellee. The appellee urges, besides, that the statute so inter¬ preted violates its contract with the city,

to fix tolls, rates , or prices — see note to Detroit v. Detroit Citizens’ Street R. Co. 46 L. ed. U. S.

217

859-861

Supreme Court of the United States.

Oct. Term,

and that the rates as fixed deprive it (the appellee) of its property without due pro¬ cess of law. These contentions make the issues between the parties. The bill is vo¬ luminous. The allegations with which we are concerned are the following: The appel¬ lant was created a city by the general as¬ sembly of Kentucky in I860. Its charter was amended in 1882, and it continued un¬ der this charter until June, 1893, when it was made a city of the third class under the general laws of the state. These laws pro¬ vided that “the repeal of any law by the pro¬ visions of this law [the charter] shall not in anywise be so construed as to affect any right or liability acquired or accrued there¬ under by or on the part of the city, or any persons or body corporate. This law shall not in any manner affect any right, lien, or liability accrued, established, or subsisting under and by virtue of previous charters or amendments thereto, or ordinances passed thereunder; but such right, lien, or liability shall be enforced, and such action or pro¬ ceeding shall be carried on in all respects as if this law [defendant city’s present charter] had not taken effect; nor shall this law be in anywise so construed as to affect the right or liability acquired or accrued under pre¬ vious charters or amendments thereto, or ordinances passed thereunder on the part of the city or any persons or body corporate.” [Ky. Stat. 1899, § 3258.]

The Owensboro Water Company was in¬ corporated in 1876, and its general business was to construct and operate a waterworks plant for the purpose of supplying the city and its inhabitants with water, and it con¬ structed and operated such works under the privilege and authority of an ordinance of the city, passed September 10, 1889. The [3 60] ordinance had the usual “provision for the use of the streets, and made the duration of the grant identical with the duration of the company. It was provided that the ordi¬ nance should be binding upon the city “as a contract in the event” of its written accept¬ ance within ten days after its passage, and “be the measure of the rights and liabilities of the said city and of the water company.”

Section 9 of the ordinance was as follows:

“Sec. 9. The said company shall have the power and authority to make and enforce, as part of the condition upon which it will sup¬ ply water to its consumers, all needful rules and regulations, not inconsistent with the law or provisions of this ordinance.”

In June, 1889, the appellee began negotia¬ tions with the Owensboro Water Company for the purchase of its franchise and plant, and of all of its contracts with the city, but did not and would not consummate said pur¬ chase until the city agreed to grant it (ap¬ pellee) a franchise and license to maintain 218

a system of waterworks in the city for a period of twenty-five years, and issue and grant to it in its own right all of the rights and privileges which had*, theretofore been granted to the water company by the ordi¬ nance and contracts of September 10, 1878.

On the 3d of June, 1889,- the city passed an ordinance approving such purchase, and granted a franchise and license to the appel¬ lee to maintain and operate a waterworks plant for supplying the city and its inhabi¬ tants with water, and accepted the appellee as the successor of the water company to the contracts between the latter and the city.

The ordinance was expressed to be in consid¬ eration “of the purchase, by the Owensboro Waterworks Company of Owensboro, Ken¬ tucky, of the waterworks of the Owensboro Water Company.”

On the 10th of June, 1889, relying upon the ordinance of the 3d, the appellee con¬ summated the purchase from the water com¬ pany of its works, franchises, and contracts, and received them from that company, and it “has ever since then under the orders and directions” of the city, maintained and ex¬ tended its system, on account of which it has expended large “sums of money, and its

plant is now reasonably worth not less than $250,000, and could not be constructed for less than that sum.

On the 19th of March, 1900, the city passed an ordinance providing “that here¬ after every person, firm, company, and cor¬ poration, engaged in the business of furnish¬ ing water to consumers thereof in the city of Owensboro, shall furnish the same to con¬ sumers thereof for domestic and manufac¬ turing purposes and uses, and for all other purposes and uses, at rates and prices not exceeding the rates and prices herein named fixed, which rates and prices are deemed rea¬ sonable and just; that is to say, water shall be furnished to all mills, laundries, saloons, distilleries, breweries, livery stables, ice fac¬ tories, and manufacturing establishments, hotels, street railway companies, and all fac¬ tories of every kind at the following named rates.”

Then followed a statement of the rates fixed, graduated according to the amount of water consumed or kind or purpose of use.

And it was provided ( § 8 ) , “that if any per¬ son, firm, company, or corporation engaged in the business of furnishing water to con¬ sumers thereof in said city of Owensboro shall demand, charge, exact, or receive, di¬ rectly or indirectly, of or from any consumer or consumers of water in said city, as con¬ sideration or compensation for water fur¬ nished or supplied to such consumer, any money, property, or other thing of value over and above or in excess of the rates and

191 U. S.

861-365

prices for water herein named and pre¬ scribed, or shall fail or refuse for ten days, without reasonable excuse, to supply water as prescribed and required in and by section seven (7) of this ordinance; or shall fail or refuse to keep the accounts or the books re¬ quired to be kept at Owensboro, or make the reports in writing to the common council, as required by section sixth (6th) of this or¬ dinance, such person, firm, company, or cor¬ poration so offending shall be fined, upon conviction, in a sum not less than ten, and not exceeding fifty, dollars for each offense.”

362] * The ordinance in full is inserted in the

margin. t

Waterworks Co.

. It is alleged that the enforcement of the ordinance will cause appellee irreparable in¬ jury, and in what manner that will be Mono

is detailed, and that, appellee “could not, under the most prudent management, earn any per cent upon its investment, but would be compelled to operate its plant at an actual loss.”

*For the reasons alleged the ordinance of[36i] March. 19 violates the Constitution of the state of Kentucky, and the 5th and 14th Amendments of the Constitution of the United ^States. It is also alleged, with much [365 J amplification, that the passage of the ordi¬ nance was “ex parte and partisan,” without

Owensboro v. Owensboro

tAn Ordinance to Fix and Regulate Rates,

Prices, and Charges for Water Furnished

Consumers in the City of Owensboro, and for

Other Purposes.

Be it ordained by the common council of the city of Owensboro :

Sec. 1. That hereafter every person, firm, company, and corporation engaged in the busi¬ ness of furnishing water to consumers thereof in the city of Owensboro, shall furnish the same to such consumers thereof for domestic and manufacturing purposes and uses, and for all other purposes and uses, at rates and prices not exceeding the rates and prices herein named and fixed, which rates and prices are deemed reasonable and just ; that is to say, water shall be furnished to all mills, laundries, saloons, dis¬ tilleries, breweries, livery stables, ice factories, hotels, street railway companies, and all fac¬ tories and manufacturing establishments of every kind, at the following-named rates, sub¬ ject to the exceptions contained in section two (2) of this ordinance, to wit :

(1) In all cases where the amount of water consumed averages 2,000 gallons per day, or less, estimated by the month, $.10 per thousand gal¬ lons; (2) where the daily consumption of water averages 2,000 gallons, or more, and less than 4,000 gallons, estimated by the month, $.09 per thousand gallons; (8) where the daily consump¬ tion of water averages 4,000 gallons, or more, and less than 10,000 gallons, estimated by the month, $.08 per thousand gallons; (4) where the daily consumption of water averages 10,000 gal¬ lons, or more, and less than 15,000 gallons, esti¬ mated by the month, $.07 per thousand gallons ; (5) where the daily consumption of water aver¬ ages 15,000 gallons, or more, and less than 25,000 gallons, estimated by the month, $.05 per thousand gallons ; (6) where the daily consump¬ tion of water averages 25,000 gallons, or more, and less than 40,000 gallons, estimated by the month, $.04 per thousand gallons; (7) where the daily consumption of water averages 40,000 gallons, or more, estimated by the month, $.03% per thousand gallons.

That for the purpose of ascertaining and esti¬ mating accurately the quantity of water con¬ sumed by consumers in the classification of this section, and the compensation to be paid there¬ for, it is hereby made the duty of the persons, firms, companies, and corporations, and they shall, on request made in writing, and within thirty days after such request is made, place n water meter, in good condition and repair, in connection with the pipe or main leading into anil snpplriug water to such consumers, and the

101 u. s.

said meter shall be kept in good repair by the person, firms, company, and corporation furnish¬ ing or supplying the water to such consumers, and the said meters shall be examined and read monthly, for the purpose of ascertaining its con¬ dition and the quantity of water consumed.

Provided, that the minimum annual rate to be paid by all consumers of water described in the classifications thereof in this section, per annum, shall be twenty-four (24) dollars; and in no case shall the consumer of water who uses or consumes, annually, 240,000 gallons of water, or less, be charged or pay more or less than twenty-four (24) dollars per annum.

Sec. 2. That water furnished by said per¬ sons, firms, companies, and corporations to con¬ sumers thereof for domestic purposes and uses where no meter has been put in or attached for ascertaining the quantity of water used, shall be furnished at rates and charges not exceed¬ ing or above the following-named rates and charges, per year, to wit :

(1) For each wash stand, wherein warm and cold water, or either, is used, $2 ; (2) for each kitchen sink, wherein warm and cold water, or either, is used, $2 ; (3) for each bath tub, where¬ in warm and cold water, or either, is used, $2 ; (4) for each water closet and urinal, $2; for sprinkling premises, lawn, pavement, and street in front of or adjacent to the premises, per an¬ num, $2.50 for the first 200 square yards or less, $.01 for each additional square yard; (6) for private dwelling per annum where only one tap or faucet is used, containing four rooms or less, excluding hallways, garrets, bath rooms, water closets, $2, and for each additional room, $.50;

(7) for each cow, $1, for each horse, $1 ; and for each carriage, buggy, and spring wagon, $1 ;

(8) for filling cisterns, $.20 each thousand gal¬ lons.

Sub. Sec. 2. And for furnishing water for of¬ fices, banks, stores, and other places than resi¬ dences (above specified in this section), the rates and charges therefor shall be at rates not exceeding or above the following rates and charges, per year, to wit :

For each wash stand, wherein warm and cold water, or either, is used, $3 ; (2) for each water closet and urinal, $3; (3) for hydrant, $3; (4) for barber shops, for first chair, $3, for each ad¬ ditional chair, $1 ; (5) for blacksmiths, for first forge, $2, and for each additional forge, $1 ; (C) for plasterers, % of 1 cent per square yard ; (7) for bricklayers, $.06 per one thousand brick, sprinkling and laying.

Provided, that any of the consumers embraced in the classification of this section may, in lieu

219

805, 366

Supreme Court of the United States.

Oct. Term,

deliberation or investigation or knowledge,

and, besides, the *city had no power to pass the ordinance, and that the latter violates the contract existing between appellee and the city. It is also alleged that financial in¬ jury will result to appellee from the enforce¬ ment of the ordinance in regard to meters (§ 2), and from the prohibition to collect rates in advance, “except by voluntary con¬ sent of the consumer.” (§ 3.) Prosecutions are threatened under the ordinance, which will result, it is alleged, in irreparable in¬ jury to appellee, and an Injunction is hence prayed against the city.

A demurrer to the bill was overruled. An answer was then filed, which denied the alle¬ gations of the bill, arid justified the action of the city.

& B. Mun. Pol. Ord. § 2; Milne v. David¬ son, 5 Mart. N. S. 409, 16 Am. Dec. 189; Murphy v. Louisville, 9 Bush, 196.

There was no surrender of the right to prescribe rates, and no contract to that ef¬ fect was made.

atone v. Farmers’ Loan & T. Go. 116 U. S. 307, 29 L. ed. 636, 6 Sup. Ct. Hep. 334, 388, 1191; Winchester d L. Tump. Road Go. v. Groxton, 98 Ivy. 739, 33 L. R. A. 177, 34 S. W. 518; Danville v. Danville Water Go. 178 Ill. 309, 69 Am. St. Rep. 304, 53 N. E. 118, Affirmed in 180 U. S. 619, 45 L. ed. 696, 21 Sup. Ct. Rep. 505.

The alleged assignment by the Owensboro Water Company of its franchises, and the transfer of its property to the appellee, are contrary to public policy, ultra vires, and void.

Louisville d A. R. Co. v. Kentucky, 161 U. S. 692, 40 L. ed. 856, 16 Sup. Ct. Rep. 714; Brunsicick Gaslight •Do. v. United Gas, Fuel d Light Go. 85 Me. 532, 35 Am. St. Rep. 385, 27 Atl. 525; Central Transp. Go. v. Pullman’s Palace Car Go. 139 U. S. 24, 35 L. ed. 55, 11 Sup. Ct. Rep. 478; Noyes, Intercorporate Relations, §§ 135-139.

If there had been such contract it would not have been transferable.

at. Louis d a. F. R. Co. V. Gill, 156 U. S. 656, 39 L. ed. 570, 15 Sup. Ct. Rep. 484.

said persous, firms, companies, and corporations from all consumers falling within the provisions of §§ 1 and 2 of this ordinance who have water meters attached, monthly, quarterly, or semi¬ annually, at the election of said persons, firms, companies, or corporations furnishing the water, hut water rates shall not be collected in advance except by voluntary consent of the consumer.

Water may he shut off from any consumer for nonpayment of water rates, or other sufficient reason, only after ten days’ written notice served upon said consumer or his wife, in his absence from home, or in case of absence from premises of both husband and wife, then the said notice shall be delivered by depositing same in the Owensboro postoffice, addressed to said water consumer.

Sec. 4. That if any person, firm, company, or corporation shall be or become a consumer of water, and shall not be included in the classifi¬ cation made and contained in the 2d section of this ordinance, the quantity of water used or consumed by such consumer shall be ascertained by meter, and compensation made therefor at the rates and charges specified in the 1st section of this ordinance.

Sec. 5. That all persons, firms, companies, or corporations furnishing water to consumers In the city of Owensboro, that shall have mains, pipes, and conduits in the streets, alleys, and public ways of the city, shall hereinafter, dur¬ ing the months of April, May, June, July, August, September, October, November in each year, cause all water mains of said persons, firms, companies, and corporations to be washed and cleaned, and for this purpose shall cause all fire hydrants to be open to their full capacity and water discharged from each for at least five minutes once in every two weeks; and during

191 V. S.

Mr. George W. Jolly argued the cause and filed a brief for appellant:

The power of the legislature to delegate to the municipal legislature a sufficient part of the legislative power of the state to en¬ act the ordinance and all other needful local laws cannot be doubted.

Dill. Mun. Corp. 4th ed. § 308; Hopkins v. Swansea, 4 Mees. & W. 621 ; Des Moines Gas Go. v. Des Moines, 44 Iowa, 505, 24 Am. Rep. 758; Taylor v. Carondelet, 22 Mo. 105, 17 Am. & Eng. Enc. Law, 230; Horr

of the above rates, require tbe person, firm, company, or corporation furnishing the water to the consumer to attach to the pipe leading into the premises of the consumer a water meter, and It shall be the duty of the person, firm, company, or corporation furnishing the water to attach the said meter within thirty days after said re¬ quest is made therefor in writing, and thereafter the said consumer shall be charged, and shall pay for the water furnished at the minimum rate of $12 per annum, and for all water con¬ sumed in excess of 120,000 gallons per annum there shall be paid $.10 for each thousand gal¬ lons ; but such meters shall not be attached ex¬ cept by the written request of the consumer.

And, provided further, that before meters are attached to or connected with the pipes or mqins leading into the premises of any consumer de¬ scribed in the classification of this section, by the person, firm, company, or corporation sup¬ plying the water, consent of such consumer shall be first obtained, and if objection shall be made by the consumer, the mayor of the city, upon complaint by the person, firm, company, or cor¬ poration furnishing the water, shall summon the consumer to appear before him, and shall hear and determine the matter, and decide whether the meter shall be attached, and his decision shall be final.

If said persons, firms, companies, or corpora¬ tions furnishing water shall attach a meter in any case to the pipe leading into any consumer’s premises, without his consent, or against his objection, and the water annually consumed shall not be as much as 120 gallons, the con¬ sumer shall pay for the water actually consumed at the rate of $.10 per thousand gallons, and no more.

Sec. 3. That water rates may be collected bj |

220

Owensboro v. Owensboro Waterworks Co.

Mr. Robert W. Bingham argued the cause, and, with Messrs. W. W. Davies and Sweeney , hills, d; Sweeney, iiled a brief for appellee:

A municipal ordinance passed under sup¬ posed legislative authority is regarded as a law of the state, within the meaning of the constitutional prohibition against state laws impairing the obligations of contracts and otherwise violating rights under the Constitution of the United States.

Hamilton Gaslight <& Coke Co. v. Hamil¬ ton, 140 U. S. 202, 30 L. ed. 907, 13 Sup. Ct. Rep. 90; Walla Walla v. Walla Walla Water Co. 172 U. S. 9, 43 L. cd. 345, 19 Sup. Ct. llep. 77 ; Iron Mountain It. Co. v. Memphis, 37 C. C. A. 410, 90 Fed. 120; Cap¬ ital City Gas Co. v. Des Moines, 72 Fed. 818; Owensboro v. Owensboro Waterworks Co. 53 C. C. A. 140, 115 Fed. 318.

A thing which is within the letter of a law is not within the law, unless it is also within the meaning of the law; and the words of a statute, if sufficiently flexible, must be construed in the sense which is most in harmony with that meaning.

Hikes Peak Power Co. v. Colorado Springs, 44 C. C. A. 333, 105 Fed. 9; 23 Am. & Eng. Enc. Law, 305, notes.

Courts, in construing or interpreting a

the months of December, January, February, and March shall, for said purpose, cause all fire hy¬ drants to be open to their full capacity for at least five minutes once in each and every of said months last mentioned.

Sec. 6. That hereafter all persons, firms, com¬ panies, and corporations engaged in the busi¬ ness of furnishing water to consumers shall keep an exact, complete, and true account of all its incomes, gains, and receipts from all and every source whatever, in detail, giving all the items thereof, and date of receipt of the same, and an exact, complete, and true account of all ex¬ penditures, showing date and amount of each and every item of expense, costs and expendi¬ ture and the whole thereof ; and the books con¬ taining said accounts shall be kept at Owens¬ boro, and shall be open at any time to inspec¬ tion and examination by the common council or a committee thereof appointed for that purpose, and shall make and return to the common coun¬ cil, at the end of each six months hereafter, on the first day of January and July of each year, a true and complete summary of the same, which shall be verified by the oath of the president, secretary, or treasurer of said persons, firms, companies, or corporations furnishing water, and the said report shall be spread on the jour¬ nal and filed and preserved by the city clerk in his office.

Sec. 7. That it shall be the duty of any per¬ son, firm, company, or corporation engaged in the business of furnishing water to consumers thereof, in the city of Owensboro, through pipes, mains, or conduits laid in the streets, alleys, and ways of said city, to furnish water to all per¬ sons who may make application therefor in writ¬ ing, and within ten days after the date fixed in such written application, and who desire the same furnished in houses or places situated on 191 U. S.

statute, give much weight to the interpreta¬ tion put upon it at the time of its enact¬ ment, and since such time, by those whose duty it has been to construe, execute, and apply.

23 Am. & ting. Enc. Law, 339, note.

The presumption is that the legislature does not intend to change or modify the law beyond what it explicitly declares, either in express terms or by unmistakable impli¬ cations, for it is not to be supposed that the legislature will overturn an established principle of law without expressing such in¬ tention with irresistible clearness.

23 Am. & Eng. Enc. Law, 357, note; Pilccs Peak Power Co. v. Colorado Springs, 44 0. C. A. 333, 105 Fed. 9.

In order to arrive at the true legislative intent in construing doubtful statutes, that construction should be adopted which is most conformable to reason and justice, and the legislature will not be presumed to have intended that which is against reason.

23 Am. & Eng. Enc. Law, 358, note; Samuels v. Com, 10 Rush, 491; Pikes Peak Power Co. v. Colorado Springs, 44 C. C. A. 333, 105 Fed. 9.

A statute is not to be construed to inter¬ fere with or injure rights of persons without

any of the streets, alleys, or ways or places in the city, wherein any of the said mains, pipes, or conduits are located or laid, and the said per¬ son, firm, company, or corporation shall put down all necessary pipes therefor, at the expense of the person, firm, company, or corporation fur¬ nishing the water to the boundary line of the lot or premises of the applicant for water or con¬ sumer, and the remainder of the pipes, machin¬ ery, or appliances necessary for conveying the water into the houses or upon the premises shall be borne by the said applicant or consumer of water.

Sec. 8. That if any person, firm, company, or corporation engaged in the business of furnish¬ ing water to consumers thereof in said city of Owensboro shall demand, charge, exact, or re¬ ceive, directly or indirectly, of or from any con¬ sumer or consumers of water in said city, as consideration or compensation for water fur¬ nished or supplied to such consumer, any money, property, or other thing of value over and above, or in excess of the rates and prices for water herein named and prescribed ; or shall fail or refuse for ten days, without reasonable excuse, to supply water as prescribed and required, in and by section seven (7) of this ordinance, or shall fail or refuse to keep the accounts, or the books required to be kept at Owensboro, or make the reports in writing to the common council, as required by section six (6) of this ordinance, such person, firm, company, or corporation so offending shall he fined, upon conviction, in a sum not less than $10 and not exceeding $50, for each offense.

Sec. 9. This ordinance shall go into full force and effect on and after the 1st day of April, in the year of our Lord nineteen hundred.

Approved, March 21st, 1900.

221

Supreme Court of the United States.

Oct. Term,

compensation, unless there is no escape from such construction.

Endlich, Interpretation of Statutes, § 25; State ex rcl. Atty. Gen. v. Cincinnati Gas¬ light c§ Coke Go. 18 Ohio St. 301.

The common law will be held to be no further abrogated than is expressly de¬ clared, or the clear import of the language used absolutely requires. The law rather presumes that the legislature did not intend to make any change other than what is spec¬ ified and plainly pronounced. And even the liberal construction of remedial statutes may be modified by this rule.

23 Am. & Eng. Tine. Law, 387, 388; Smith v. Moffat, 1 Barb. 65; We bb v. Mul¬ lins, 78 Ala. 111.

It is a policy of the law to require of municipal corporations a strict observance of their powers. Any doubt or ambiguity arising out of the terms used by the legis¬ lature in making a grant of power must be resolved in favor of the public. A power cannot be exercised where it is not clearly comprehended within the words of the char¬ tering or empowering act, or derived there¬ from by necessary implication.

Pikes Peak Power Co. v. Colorado Springs, 44 C. C. A. 333, 105 Fed. 9; Thom¬ as v. Richmond, 12 Wall. 349, 20 L. ed. 453; Commercial Nat. Bank v. lola, 2 Dill. 353, Fed. Cas. No. 3,061; Ottaica v. Carey, 108 U. S. 110, 27 L. ed. 609, 2 Sup. Ct. Rep. 361; Daviess County v. Dickinson, 117 U. S. 657, 29 L. ed. 1026, 6 Sup. Ct. Rep. 897 ; Savannah v. Kelly, 108 U. S. 184, 27 L. ed. 696, 2 Sup. Ct. Rep. 468 ; Lewis v. Shreve¬ port, 3 Woods, 205, Fed. Cas. No. 8,331; JCelley v. Milan, 127 U. S. 139, 32 L. ed. 77, 8 Sup. Ct. Rep. 1101; Norton v. Dyersburg, 127 U. S. 160, 32 L. ed. 85, 8 Sup. Ct. Rep. 1111; Wells v. Pontotoc County, 102 U. S. 625, 26 L. ed. 122; Concord v. Robinson, 121 U. S. 165, 30 L. ed. 885, 7 Sup. Ct. Rep. 937; Katzenberger v. Aberdeen, 16 Fed. 745; Wheatly v. Covington, 11 Bush, 18; Hen¬ derson v. Covington, 14 Bush, 312; Kniper v. Louisville, 7 Bush, 599; Barnett v. Deni¬ son, 145 U. S. 139, 36 L. ed. 053, 12 Sup. Ct. Rep. 819; Hill v. Memphis, 134 U. S. 205, 33 L. ed. 890, 10 Sup. Ct. Rep. 562; Newport v, Newport Light Co. 84 Ky. 106, 89 Ky. 454, 12 S. W. 1040.

The police power is inherent in the state ( the natural and original soverc; mi ) , but in a city (an artificial and restr.cted sover¬ eign) it exists only so far as the state has clearly granted it by charter or statute, or as it is clearly necessary to, or connected with, the governmental nature of the city in protecting the public health, comfort, morals, convenience, and welfare.

Wheatly v. Covington, 11 Bush, 18; Hen¬ derson v. Covington, 14 Bush, 312.

222

The limited, but clear, grant of powers of control over certain kinds of water works excludes control by statutory or police pow¬ er over the other and separate kind.

Smith, Modern Law of Mun. Corp. § 1320; Horr & B. Mun. Pol. Ord. § 211.

Mr. William T. Elli£ also argued the cause, and, with Messrs. Bingham & Davies and Su'cency, Ellis, & Sweeney, filed a brief for appellee:

The city of Owensboro, at the time it made the contract with the old water com¬ pany, and at the time it made the contract with appellee, having only the power to es¬ tablish public wells, cisterns, reservoirs, and pumps, and to provide for the furnishing of the city and the inhabitants thereof with gas and water, had no power or authority whatever to fix the rates at Which any cor¬ poration, though a public-service corpora¬ tion, should charge private consumers for water.

Dill. Mun. Corp. 2d ed. § 89; White v. Meadville, 177 Pa. 645, 34 L.-R. A. 567, 35 Atl. 693; Rc Long Island Water Co. 30 Abb. N. C. 36, 24 N. Y. Supp. 807 ; St. Louis v. Bell Telepli. Co. 96 Mo. 623, 2 L. R. A. 278, 10 S. W. 197; Lewisville Natural Gas Co. v. State ex rel. Reynolds, 135 Ind. 49, 21 L. R. A. 734, 34 N. E. 702; Henderson v. Covington, 14 Bush, 312; Newport v. New¬ port & C. Bridge Co. 90 Ky. 194, 8 L. R. A. 484, 13 S. W. 720; Mayher v. Lexington, 1 Ky. L. Rep. 68.

Laws which exist at the time and place of making a contract, and at the place where it is to be performed, allecting its validity and construction, enter into and form a part of it.

Walker v. Whitehead, 16 Wall. 314, 21 L. ed. 357 ; 1 Beach, Modern Law of Con- ti'acts, § 734.

No subsequent council could repeal, mod¬ ify, or impair the terms of the contract made by a previous council, although the general assembly may subsequently have conferred on the city such power, and al¬ though the city may, at the time it passed the ordinance, have acted under a power conferred.

Little Falls Electric & Water Co. v. Lit¬ tle Falls, 102 Fed. 663.

No matter how broad the power of appel¬ lant under its charter may be with respect to fixing rates to be charged private con¬ sumers, if the city had contracted that right away prior to the adoption of its pres¬ ent charter, then the ordinance is void.

Los Angeles v. Los Angeles City Water Co. 177 U. S. 559, 44 L. ed. 887, 20 Sup. Ct. Rep. 736.

191 U. S.

Owensboro v. Owensboro Waterworks Co.

366-369

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

By the act of the general assembly of Ken¬ tucky, approved June .14, 1893, the appellant was made a city of the third class, and was given, as a city of that class, the following powers expressed in § 3290: “The common council of each of said cities shall, within the limitations of the Constitution of the state and this act, have power by ordinance;

. . . 5th, to provide *the city and the in¬

habitants thereof with water, light, power, heat, and telephone service by contract, or by works of its own, located either within or beyond the boundaries of the city. To make regulations for the management thereof, and to fix and regulate the prices to private con¬ sumers and customers.”

Under this section the city passed the or¬ dinance which prescribes the rates and regu¬ lations complained of. The circuit court decided that the city was not given the power to pass the ordinance, and considered it unnecessary to pass on the other issues. The court said:

“If the city of Owensboro had no lawful power or authority to pass the ordinance at all, then the enforcement of it would clearly be a taking from the complainant of its right to certain property. First, without compen¬ sation; second, without due process of law; third, without giving to it the equal protec¬ tion of the law.

“This makes it necessary to inquire whether the city had the statutory power and authority to pass the ordinance com¬ plained of. It does not seem to be needful to inquire whether the state Constitution gives the general assembly power to delegate authority in the premises to the city. The initial proposition is, Has the legislature done so in fact, whether it had the power or not? This must depend upon the proper in¬ terpretation and construction of § 3290 of the Kentucky statutes, . . .”

Interpreting the section, the court held that the word “thereof” in the last sentence of the section had for its antecedent the words “works of its own.” Substituting these words for the word “thereof,” the sen¬ tence would read, and the city’s power would be, “to make regulations for the management of its own works, and to fix and regulate the prices to consumers and customers.” But another ambiguity appears, viz., Of what is the city to fix and regulate the prices ? Cer¬ tainly of something, and it would seem from the context, the same thing, of which it was to regulate the management. But this leads to an absurdity, and we must find a purpose

(antecedent) to which *both powers can re-’ fer. The city might, indeed, make regula¬ tions for the management of its works, but 191 U. S.

it could not fix and regulate the prices of them to consumers and customers. Besides, we cannot conceive that an explicit grant of power was necessary to enable the city to manage its own works. The power to con¬ struct would have implied the power to man¬ age and operate. It must not be overlooked that the section was intended to apply to not only to the appellant city but to all cities of the third class, and confer power not only to provide water, but other services, and it might have seemed necessary by the legislature, or at any rate prudent, to re¬ serve to the cities the power over the man¬ agement of works constructed by private persons, and as prudent to reserve a power to fix and regulate the prices to consumers of the services afforded. It is certainly not difficult to conceive the necessity of the exer¬ cise of those powers, and if attempted to be exercised without a reservation, the cities might be met (and there are examples of this) with the contention that the power had been bartered away and was precluded by the obligation of a contract. The construction urged by appellee must, therefore, be re¬ jected. There is a more natural one. The purpose of § 3290 was to provide the inhabi¬ tants of cities of the third class with the services mentioned, — water, light, power, heat, and telephone. They could be provided by the cities directly or they could be pro¬ vided by private persons; but whatever way provided, the power was given to regulate the management and fix the rates of the services, and this was but the endowment of a common governmental power.

It is, however, contended that the ordi¬ nance is in violation of the contracts be¬ tween the city and appellee, constituted by the resolutions and ordinance of the 3d of June, 1889. The argument is that the city had entered into contracts with the Owens¬ boro Water Company, the predecessor of ap¬ pellee, to which contracts and their obliga¬ tions and rights, it is contended, the appellee succeeded by assignment from the water company, w’ith the consent and approval of the city, as expressed *in the resolutions and

ordinance of June 3, 1889. To determine their legal effect, however, it will be neces¬ sary to consider the law Which authorized them.

At the tiifte of the passage of the ordi¬ nance granting the Owensboro Water Com¬ pany the right to construct waterworks the city existed and was exercising its powers under the charter of 1878, and the provision in that for supplying water to the inhabi¬ tants of the city was as follows : “To make, establish, and regulate wells, cisterns, reser¬ voirs, and pumps, and to provide for the furnishing of the city and the inhabitants thereof with water and gas.”

223

869-371

Oct. Term,

Supreme Court of the United States.

The same provision was carried into the charter of 1882, and constituted the author¬ ity of the city when the ordinance and reso¬ lutions of June, 1889, were passed. It is contended that this provision gave the city no power to fix the rates. And counsel say : “In such case, and in the absence of an ex¬ press contract, the individual or corporation furnishing water for domestic purposes may charge whatever seems right and reason¬ able.”

But counsel go farther. They deny the right of the city to fix rates, and yet assert its power to enter into an irrevocable con¬ tract with the water company giving it such power, that is, giving it power to fix rates free from any regulation by the city, not only under any authority the city then pos¬ sessed, but under any authority the city might be given by the legislature.

In this contention there are several ele¬ ments, bat we pass their consideration, and determine what contract, if any, the city en¬ tered into with the water company. Of course, it is implied in the grant to the com¬ pany that it might charge some rates to con¬ sumers, but the question is. Were those rates exempt from regulation by the city under any power it then had or might be given? An affirmative answer is contended for by the appellee under §§ 9, 10, and 14 of the granting ordinance. Section 9 is the pivotal section. The others are complementary. By it the company was given “power and au¬ thority to make and enforce as a part of the 370J condition (italics ours) *upon which it will supply water to its consumers, all needful rules and regulations (italics ours), not in¬ consistent with the law or provisions of this ordinance.” The section is concerned with the rules between the company and con¬ sumers alone. The company may enforce all needful rules and regulations as part of the condition upon which it will supply water. What is the other part of the condition? It must be the payment of rates, but to that part of the condition the power to make reg¬ ulations does not apply. It would ignore the distinctions made by the section, and give, besides, the words “rules and regulations” too large a meaning to make them include the power of fixing rates to consumers. They have adequate and useful signification with¬ out that. There were many things in the supply of water to consumers and in the or¬ derly and prudent conduct of the business of the company which might need rules and regulations.

And even so construed, the power confer¬ red is not without limitation. The rules and regulations must not be inconsistent “with the law,” and this means not only as the law was when the ordinance was passed, 224

but as the law might become. Ruggles v. Illinois, 108 U. S. 527, 27 L. ed. 812, 2 Sup.

Ct. Rep. 832; Railroad Commission Cases,

110 U. S. 307, 29 L. ed. 636“ 6 Sup. Ct. Rep.

334, 388, 1191. In the latter cases a grant of power to the railroad company was to make and prescribe such By-laws, rules, and regulations which the directors might deem needful and proper touching all matters whatsoever which might pertain to the con¬ cern of the company. The company was also given the power “from time to time to fix, regulate, and receive the toll and charges by them to be received for transportation of persons or property on their railroad.”

Prom this grant of power it was claimed that the company had “the right of manag¬ ing its own affairs and regulating its charges for the transportation of persons and prop¬ erty, free of all legislative control.” Mr.

Chief Justice Waite, speaking for the court, replied: “This power of regulation is a

power of government, continuing in its na¬ ture, and if it can be bargained away at all it can only be by words of positive grant, or something *which is in law equivalent. If

there is reasonable doubt, it must be re¬ solved in favor of the existence of the power.”

This doctrine has been affirmed numbers of times since. Freeport Water Co. v. Free¬ port, 180 IT. S. 587, 45 L. ed. 679, 21 Sup.

Ct. Rep. 493; Rogers Park Water Co. v. Fer¬ gus, 180 U. S. 624, 45 L. ed. 702, 21 Sup. Ct.

Rep. 490; Joplin v. Southwest Missouri Light Co. 191 U. S. 150, ante, 127, 24 Sup.

Ct. Rep. 43. And the same doctrine pre¬ vails in Kentucky. Winchester & L. Tump.

Road Co. v. Croxton, 98 Ky. 738, 33 L. R. A.

177, 34 S. W. 518.

Prom these views it follows that if the city had no power under the charters of 1836 and 1S82 to fix rates, and we only assume this, not decide it, such power was conferred by § 3290 of the act of June 14, 1893, and the city is not precluded from the exercise of that power by §§ 9, 10, and 14 of the orig¬ inal ordinance granting the Owensboro Water Company the right to construct waterworks, nor by the ordinance of June 3,

1889, approving the transfer of the rights and contracts of that company to the Owens¬ boro Water Works Company, the appellee herein. Nor is the city, by said ordinance, precluded from regulating the business of the appellee in the manner provided in the ordinance of March 19, 1900, which is the subject of the present controversy. It is true that it is contended that § 3 of the or¬ dinance forbids the appellee from collecting rates in advance from all consumers. But the city does not contend for that construc-

191 U. S.

Anglo-American Provision Co. v. Davis Provision Co.

371-373

tion. It claims only that the provision in regard to the collection of rates in advance applies only to consumers using meters, and even as to those consumers appellee can make reasonable regulations to secure the payment of rates. The ordinance is not ab¬ solutely clear, and we may resolve its am¬ biguities in accordance with the concession of the city. It may be presumed that there was no intention to enact unreasonable and oppressive regulations.

Two other contentions remain to be con¬ sidered, — one made by appellant, and the other made by the appellee. It is difficult to assign a place or purpose in the discussion of the issues to that made by the appellant. The contention is that the Owensboro Water Company had no power to transfer its prop- [372 Jerty ‘and rights and franchises to the ap¬ pellee. To what consequence is the contention directed? Surely the city wants an object for its regulation. The appellee is in pos¬ session of the waterworks, and is supplying the inhabitants of the city with water. It is that service which the city desires to reg¬ ulate, and it is to “every person, firm, com¬ pany, and corporation” engaged in that service the ordinance of March 21, 1900, is addressed. No other person, firm, or corpo¬ ration than the appellee is so engaged in Owensboro, or has been so engaged for some years. We do not think that the legality of the ordinance can be questioned or measured by either the company or the city by the de¬ fects or perfections of the title of the com¬ pany to its franchises or property. It may bo, however, that it is not intended to press the contention so far, but to confine it to the denial of the exemption claimed by appellee as successor of the Owensboro Water Com¬ pany. But, as we hold that the Owensboro Water Company had no such exemption, the contention becomes unimportant.

The other contention made by appellee is that the rates fixed by the city are unrea¬ sonable. Upon this contention we shall not pass. It depends upon many questions of fact and of values to which the circuit court gave no attention, and on which it expressed no judgment. It is better for a trial court to determine such questions in the first in¬ stance. Chicago, M. & St. P. R. Co. v. Tompkins, 176 U. S. 167, 179, 44 L. ed. 417, 422, 20 Sup. Ct. Rep. 336.

Decree of the Circuit Court is reversed, and the case remanded for further proceed¬ ings in accordance with this opinion.

191 U. S. U. S., Book 48.