City of Omaha v. Omaha Water Company

• Decision Date: 31 May 1910
• Docket Number: No. 159,159
• Citation: 54 L.Ed. 991,218 U.S. 180,30 S.Ct. 615
• Parties: CITY OF OMAHA, Petitioner. v. OMAHA WATER COMPANY
• Court: U.S. Supreme Court

218 U.S. 180

30 S.Ct. 615

54 L.Ed. 991

CITY OF OMAHA, Petitioner.

v OMAHA WATER COMPANY.

No. 159.

Argued April 19, 1910.

Decided May 31, 1910.

Messrs. John L. Webster, Carl C. Wright, and Harry E. Burnam for petitioner.

[Argument of Counsel from pages 181-187 intentionally omitted] Messrs. Howard Mansfield, R. S. Hall, and Herbert C. Lakin for respondent.

[Argument of Counsel from pages 187-191 intentionally omitted] Mr. Justice Lurton delivered the opinion of the court:

This is a bill seeking the specific performance by the city of Omaha of a contract for the purchase and sale of the system of waterworks owned by the appellee company. The waterworks plant in question was constructed in pursuance of legislative authority and municipal ordinance, which need not be considered, for neither party questions the sufficiency of either. The 14th section of the ordinance of 1880, under which the waterworks were constructed by the predecessor of the appellee, was in these words:

'The city of Omaha shall have the right at any time after the expiration of twenty years to purchase the said waterworks at an appraised valuation, which shall be ascertained by the estimate of three engineers, one to be selected by the city council, one by the waterworks company, and these two to select the third: Provided, That nothing shall be paid for the unexpired franchise of said company.'

In 1903 the city elected to exercise this option, and a board of appraisers was appointed, one by each of the parties and a third by the two so selected. This board of appraisers organized and proceeded to take evidence, and, after considering the matter for about three years, made an appraisement, fixing the value of the system at $6,263,295.49. The appraiser appointed by the city did not concur. The city rejected the award. Whereupon the company filed this bill, which, upon final hearing, was dismissed upon the sole ground of misconduct of the appraisers, other objections not being passed upon. Upon appeal, this decree was reversed and the cause remanded for a decree in pursuance of the opinion of the appellate court. 89 C. C. A. 205, 162 Fed. 232, 15 A. & E. Ann. Cas. 498.

The case is here upon a writ of certiorari allowed at a former term.

Three major objections have been urged against the appraisement. First, that it was not concurred in by all; second, that the appraisers heard certain evidence without notice or giving the city an opportunity to hear or rebut; and, third, that the property valued includes a distributing system beyond the corporate limits of Omaha, by which certain suburban villages are supplied, and that to that extent the city made no contract to buy, and, if it did, had no power to do so.

These in their order:

1. The only matter to be determined was the value of the waterworks system, which had long served the public. Its construction had been authorized by legislative enactment under which the municipal ordinance was passed. One section of this ordinance provided that the city, at the end of twenty years, might, at its election, purchase the works at a value to be determined by appraisers. The contention is that the refusal of one of the appraisers to concur in the valuation fixed by the majority defeated the appraisal. The matter in question was in no proper sense an arbitration. The contract was in all of its terms agreed upon. One party was to sell and the other to buy, at a valuation determined by the board of appraisers, and unanimity was not stipulated for. Unanimity was hardly to be expected in a board made up as this was When a matter of purely private concern is submitted to the determination of either arbitrators or appraisers, the rule seems to be that there must be unanimity of conclusion by such board, unless otherwise indicated by the terms of the submission. Hobson v. M'Arthur, 16 Pet. 182, 192, 10 L. ed. 930, 933; Green v. Miller, 6 Johns. 39, 5 Am. Dec. 184; Wheeling Gas Co. v. Wheeling, 8 W. Va. 320, 351, et seq. The rule is, however, otherwise when the submission is one which concerns the public. In such submissions, whether it be the arbitration of a difference or the ascertainment of a value, a majority may act, unless otherwise indicated by the agreement for submission. Why this distinction should exist is not altogether clear. In both instances the persons to whom the submission is made are acting under a power and must stay within it. The reason probably lies in the fact that public affairs are controlled by majorities, and, by analogy, a majority should control when the submission is a matter which concerns the public. But whatever the reason, so are the authorities. Colombia v. Cauca Co. 190 U. S. 524, 47 L. ed. 1159, 23 Sup. Ct. Rep. 704; People ex rel. Washington v. Nichols, 52 N. Y. 478, 11 Am. Rep. 734; Wheeling Gas Co. v. Wheeling, 8 W. Va. 320; Grindley v. Barker, 1 Bos. & P. 229.

The construction and acquisition of a system of water supply and distribution was a public municipal function. The Nebraska legislature, in 1903, went so far as to require municipal ownership of a water supply system in the city of Omaha, and that this should be accomplished either by construction or by the purchase of the existing system. The city, in compliance with and in the exercise of the power conferred when the existing plant was constructed, elected to purchase the existing system under the ordinance of 1880 and the power therein reserved. That in such circumstances the determination of the price to be paid by a submission was a matter of public concern, is too clear for argument. The cases cited above cover the point. The appraisal was not therefore defeated because not concurred in by all.

The distinction suggested by counsel, that the authority for the submission must come from the public, if there be anything of substance in it, does not prevent the operation of the rule here, for the purchase upon a valuation settled by appraisers was in the ordinance of the city, in pursuance of legislative authority, and, in a very true sense, was an authority to submit to appraisers which came from the public.

2. The next objection is that the appraisers heard evidence in the absence of the city and without opportunity to reply, and that this was such misconduct as to vitiate the valuation. As already hinted, this was not a board of arbitrators. An arbitration implies a difference, a dispute, and involves ordinarily a hearing and all thereby implied. The right to notice of hearings, to produce evidence and cross-examine that produced, is implied when the matter to be decided is one of dispute and difference. But when, as here, the parties had agreed that one should sell and the other buy a specific thing, and the price should be a valuation fixed by persons agreed upon, it cannot be said that there was any dispute or difference. Such an arrangement precludes or prevents difference, and is not intended to settle any which has arisen. This seems to be the distinction between an arbitration and an appraisement, though the first term is often used when the other is more appropriate.

Counsel have cited and pressed upon us the case of Continental Ins. Co. v. Garrett, 60 C. C. A. 395, 125 Fed. 589, as a case where an appraisement of a fire loss was set aside because evidence was heard in the absence of the parties. But that was a case where the full amount of the insurance was claimed as the extent of the loss. This was denied. It was therefore a plain case of the submission of a dispute or difference which had to be adjusted. The rule applicable to a judicial proceeding therefore applied. It was in fact an arbitration, though the arbitrators were called appraisers. The dispute concerned the thing which had been destroyed, the value of something which was not to be inspected and valued from observation, because it was not in existence. Evidence was therefore essential to show what had been destroyed as well as its value. The case is wholly unlike the one here presented.

In Collins v. Collins, 26 Beav. 306, where there was a contract for the sale of a brewery at a price to be fixed by persons called arbitrators, one chosen by each party and a third by these two, before entering upon valua- tion, it was ruled that they were not arbitrators, but appraisers, and the master of the rolls, Sir John Romilly, said:

'But I do not think that, in this particular case, the fixing of the price of the property is an arbitration, in the proper sense of the term. An arbitration is a reference to the decision of one or more persons, either with or without an umpire, of some matter or matters in difference between the parties. It is very true that in one sense it must be implied that although there is no existing difference, still that a difference may arise between the parties; yet I think the distinction between an existing difference and one which may arise is a material one, and one which has been properly relied upon in the ease, If nothing has been upon in the case. If nothing has been purchaser between themselves, it can hardly purchaser between themselves, it can hardly them. It might be that if the purchaser knew the price required by the seller, there would be no difference, and that he would be willing to give it. It may well be that if the vendor knew the price which the purchaser would give, there would be no difference, and that he would accept it. It may well be that the decision of a particular valuer appointed might fix the price and might be equally satisfactory to both; so that it can hardly be said that there is a difference between them. Undoubtedly, as a general rule, the seller wants to get the highest price for his property, and the purchaser wishes to give the lowest, and in that sense it may be said that an expected difference between the parties is to be implied in every case; but unless a difference has actually arisen, it does not appear to me to be an arbitration.' Undoubtedly, if two...