NEW ORLEANS WATERWORKS CO. V. RIVERS

• Decision Date: 07 December 1885
• Citation: 115 U. S. 674
• Court: U.S. Supreme Court

New Orleans Waterworks Company v. Rivers

Submitted November 20, 1885

Decided December 7, 1885

115 U.S. 674

APPEAL FROM THE CIRCUIT COURT OF THE UNITED

STATES FOR THE EASTERN DISTRICT OF LOUISIANA

Syllabus

A legislative grant of an exclusive right to supply water to a municipality and its inhabitants, through pipes and mains laid in the public streets, and upon condition of the performance of the service by the grantee, is a grant of a franchise vested in the state, in consideration of the performance of a public service, and, after performance by the grantee, is a contract protected by the Constitution of the United States against state legislation to impair it.

An exclusive franchise granted to supply water to the inhabitants of a municipality by means of pipes and mains laid through the public streets is violated by a grant to an individual in the municipality of the right to supply his premises with water by means of a pipe or pipes so laid.

The facts which make the case are stated in the opinion of the Court.

MR. JUSTICE HARLAN delivered the opinion of the Court.

This suit was commenced by bill in equity filed by the New Orleans Waterworks Company, a corporation of Louisiana, against Robert C. Rivers, a citizen of the same state. A demurrer having been interposed and sustained, the bill was dismissed. The present appeal raises the question whether the plaintiff is entitled, under the allegations of its bill, to the relief asked.

The general object of the suit is to obtain a decree perpetually enjoining the defendant from laying pipes, mains, or conduits

Page 115 U. S. 675

in the streets or public ways of New Orleans for the purpose of supplying the St. Charles Hotel in that city, distant six or seven blocks from the Mississippi River, with water from that stream. The plaintiff rests its claim to relief upon the ground that it had, by valid contract with the state and city, the exclusive right, for the full term of fifty years from March 31, 1877, of supplying the City of New Orleans and its inhabitants, other than those contiguous to the Mississippi River, with water from that stream by means of pipes and conduits placed in the streets of that city, and that the obligation of that contract was protected by the Constitution of the United States against impairment by any enactment of the state. The defendant bases his right to proceed with the construction of pipes, mains, and conduits upon an ordinance of the Common Council of New Orleans, adopted November 15, 1882, enacted, as he contends, in pursuance of authority conferred by the Constitution and laws of Louisiana.

The case made by the bill, the allegations of which are admitted by the demurrer, is substantially as follows:

By an act of the Legislature of Louisiana approved April 1, 1833, the Commercial Bank of Louisiana was incorporated. It is stated by counsel to have been at that time the policy of the state to attach, as a condition of all banking charters, the construction of some work of public utility. At any rate, it appears that this bank was invested with authority to purchase and hold property necessary to carry into complete effect the object of its charter, which was declared to be "the furnishing of the city with good and wholesome water;" that it was given "the exclusive privilege," from and after the date of its charter, of

"supplying the city and inhabitants of New Orleans and its faubourgs with water from the Mississippi River by means of pipes and conduits, and for erecting, constructing, or working of any necessary engine;"

that to that end it could lay and place any number of conduits, pipes, and aqueducts on or over any of the lands or streets of New Orleans and its faubourgs; that the city might, within a prescribed time, subscribe for 5,000 shares of the capital stock of the company, not subject to deduction, to be paid for by city

Page 115 U. S. 676

bonds, redeemable in forty years and bearing an annual interest not exceeding five percent, payable half yearly, and might at any time after the expiration of thirty-five years from the passage of the act, purchase the waterworks constructed by the bank.

The city made the subscription authorized by the act, issuing its bonds in payment therefor, and the bank constructed an extended system of waterworks, which it managed and operated for the full term of thirty-five years at the end of which period, in 1868, the city, exercising the privilege reserved by the state, took possession of and purchased the waterworks at the appraised value of ,000,000, paying, for the bank's interest, in city bonds redeemable in forty years, the sum of ,393,400. The balance of the appraised value represented the city's interest by original subscription and by purchase subsequently from stockholders. Upon such payment's being made, the bank, as it was bound to do, transferred to the city an absolute complete title to the waterworks property and to all the rights, privileges, and immunities which it possessed.

The city managed and controlled the property for several years, during which period it became seriously embarrassed in its finances. That it might be relieved from such embarrassment, the Legislature of Louisiana in 1877 passed an act entitled

"An act to enable the City of New Orleans to promote the public health and to afford greater security against fire by the establishment of a corporation to be called the New Orleans Waterworks Company, to authorize the said company to issue bonds for the purpose of extending and improving the said works, and to furnish the inhabitants of the City of New Orleans an adequate supply of pure and wholesome water, and to permit holders of the waterworks bonds to convert them into stock, and provide for the liquidation of the bonded and floating debt of the City of New Orleans."

By that act, the New Orleans Waterworks Company was created a corporation with a capital stock of ,000,000, to which the Mayor of New Orleans was directed, as soon after the election of directors as the city council should determine, to transfer the waterworks and all the property appurtenant

Page 115 U. S. 677

thereto. The company was required immediately after its organization to issue to the city stock to the amount of 6,600 as full paid and not subject to assessment, and one additional share for every 0 of waterworks bonds which the city had theretofore taken up and extinguished by payment, exchange, or otherwise, the residue of the stock to be received and surrendered to the city for the benefit of the holders of waterworks bonds who might elect to exchange them for stock of the company, and the bonds so exchanged to be cancelled.

The act provided, among other things, that the waterworks company shall own and possess the privileges acquired by the city from the bank; that it shall have, for fifty years from the passage of this act,

"the exclusive privilege of supplying the City of New Orleans and its inhabitants with water from the Mississippi or any other stream or river by mains or conduits, and for erecting and constructing any necessary works or engines or machines for that purpose;"

may purchase or lease such lands or lots of ground, and construct such dykes, mounds, or reservoirs, as may be required for securing and carrying "a full supply of pure water to said city and its inhabitants," for which purpose it could lay and place conduits, pipes, or aqueducts in the streets, public places, and lands of the city, taking care not to obstruct commerce or free circulation; that the city might use water from the pipes and plugs of the company then laid or thereafter to be laid free of any charge for the extinguishment of fires, cleansing of the streets, and for the use of all public buildings, public markets, and charitable institutions; that the company should place, free of any charge, for public purposes, two hydrants of the most approved construction in front of each square where a main pipe was laid; that wherever main pipes are laid, it shall be the duty of the company to supply water, for all the purposes mentioned...