San Diego Land & Town Co. v. City of National City

• Decision Date: 04 May 1896
• Docket Number: 648.
• Court: U.S. District Court — Southern District of California
• Parties: SAN DIEGO LAND & TOWN CO. v. CITY OF NATIONAL CITY et al.

74 F. 79

SAN DIEGO LAND & TOWN CO. v. CITY OF NATIONAL CITY et al.

No. 648.

United States Circuit Court, S.D. California.

May 4, 1896

Works &amp Works, for plaintiff.

Gibson & Titus, for defendants.

ROSS Circuit Judge.

The municipality as 'The City of National City' having through its board of trustees, established by ordinance the rates at which the complainant corporation should furnish the city and its inhabitants with water for domestic purposes and purposes of irrigation, for the year commencing July 1, 1895 and ending July 1, 1896, the complainant commenced this suit for the purpose of obtaining a decree of this court adjudging that the provisions of the constitution and laws of the state of California pursuant to which the proceedings by the board of trustees of the defendant corporation fixing the rates were had, be declared to be in violation of the fourteenth amendment to the constitution of the United States, and that the rates so established be, on that ground, annulled, or, in the event the court shall determine that the provisions of the constitution and laws of the state of California do not contravene the constitution of the United States, then that the rates fixed by the board of trustees of the defendant corporation be decreed to be arbitrary, unreasonable, and unjust, and for that reason void, and their enforcement enjoined, and that the board of trustees be ordered and required to adopt a new and reasonable rate of charge, and that it be decreed that the complainant corporation is entitled to charge and collect for 'water rights,' at reasonable rates, as a condition upon which it will furnish water to the inhabitants of the municipality for the purposes of irrigation, independent of the rates fixed by the board of trustees for water sold and furnished by the company.

The complainant is a corporation organized and existing under and by virtue of the laws of the state of Kansas, for the purpose of acquiring property rights and transacting business in the state of California, subject, of course, to the constitution and laws of that state, one provision of whose constitution is that 'no corporation organized outside the limits of the state shall be allowed to transact business within the state on more favorable conditions than are prescribed by law to similar corporations organized under the laws of this state. ' Const. Cal. art. 12, Sec. 15. The provisions of the constitution and laws of California which the complainant seeks to avoid as being in contravention of the constitution of the United States are the provisions of section 1 of article 14 of the constitution of 1879, and provisions enacted by the legislature of the state pursuant thereto. The constitutional provision is as follows:

'The use of all water now appropriated, or that may hereafter be appropriated, for sale, rental, or distribution, is hereby declared to be a public use, and subject to the regulation and control of the state, in the manner to be prescribed by law; provided, that the rates or compensation to be collected by any person, company, or corporation in this state for the use of water supplied to any city and county, or city or town, or the inhabitants thereof, shall be fixed, annually, by the board of supervisors, or city and county, or city or town, by ordinance or otherwise, in the manner that other ordinances or legislative acts or resolutions are passed by such body, and shall continue in force for one year, and no longer. Such ordinances or resolutions shall be passed in the month of February of each year, and take effect on the first day of July thereafter. Any board or body failing to pass the necessary ordinances or resolutions fixing water-rates, where necessary, within such time, shall be subject to peremptory process to compel action at the suit of any party interested, and shall be liable to such further processes and penalties as the legislature may prescribe. Any person, company, or corporation collecting water-rates in any city and county, or city or town in this state, otherwise than as so established, shall forfeit the franchises and water-works of such person, company, or corporation to the city and county, or city or town, where the same are collected, for the public use.'

In Spring Valley Waterworks v. City of San Francisco, 82 Cal. 286, 22 P. 910, 1046, the supreme court of California held that this provision of the constitution of the state did not contemplate or require notice to be given to persons or corporations to be affected by the fixing of the water rates to be charged by them. Whether that provision of the constitution of California, as thus construed by the highest court of the state, would deny to a person or corporation supplying the people of a municipality with water acquired prior to the adoption of the provision the protection secured by the constitution of the United States, need not be decided or considered. In the present case the complainant came into the state of California, and acquired the water and water rights which form the basis of its suit under and by virtue of laws passed pursuant to that provision of the constitution of the state which it now seeks to assail as being contrary to the provisions of the constitution of the United States. To permit the complainant to do this would, in effect, be to permit it to rely upon the constitution and laws of California as a valid basis for the acquisition of its asserted rights, and at the same time to treat as void the same provisions, where they impose a burden in connection with those rights. The complainant cannot be permitted to thus blow hot and cold in the same breath. If it was not willing to subject itself to the burden imposed by the constitution and laws of California upon all persons and corporations appropriating water in the state for distribution and sale, it should not have come, as it did, into the state, and availed itself of the rights of appropriation conferred by the same constitution and laws. Taking those benefits it assumed the corresponding burden, and will not be heard to assert the one and repudiate the other. This view does not, however, preclude the complainant from questioning the reasonableness of the rates established by the municipal authorities, for the power to regulate and fix is not the power to take without just compensation. To compel the complainant to supply the people of the municipality with water acquired by it without just compensation would manifestly be nothing short of confiscation. To what extent municipal authorities may go in that direction, without reaching the prohibited point, has never yet been definitely fixed by judicial decision, but that the power has a limit has been decided. Thus, in Reagan v. Trust Co., 154 U.S. 362-399, 14 Sup.Ct. 1047, the supreme court said: 'It is within the scope of judicial power, and a part of judicial duty, to restrain anything which, in the form of a regulation of rates, operates to deny to the owners of the property invested in the business of transportation that equal protection which is the constitutional right of all owners of other property. There is nothing new or strange in this. It has always been a part of the judicial function to determine whether the act of one party (whether that party be a single individual, an organized body, or the public as a whole) operates to divest the other party of any rights of person or property. In every constitution is the guaranty against the taking of private property for public use without just compensation. The equal protection of the laws which, by the fourteenth amendment, no state can deny to the individual, forbids legislation, in whatever form it may be enacted, by which the property of one individual is, without compensation, wrested from him for the benefit of another or of the public. This, as has been often observed, is a government of law, and not a government of men; and it must never be forgotten that under such a government, with its constitutional limitations and guaranties, the forms of law and the machinery of government, with all their reach and power, must, in their actual workings, stop on the hither side of the unnecessary and uncompensated taking or destruction of any private property, legally acquired and legally held.'

In the same case the court said that:

'It is unnecessary to decide, and we do not wish to be understood as laying down as an absolute rule, that in every case a failure to produce some profit to those who have invested their money in the building of a road is conclusive that the tariff is unjust and unreasonable. And yet justice demands that every one should receive some compensation for the use of his money or property, if it be possible without prejudice to the rights of others.'

In the subsequent case of Ames v. Railway Co., 64 F. 165, 177, Mr. Justice Brewer, sitting in the circuit court, and having under consideration an act of the legislature of Nebraska prescribing the maximum rates for transportation of freight by railroads within that state, said:

'What is the test by which the reasonableness of rates is determined? This is not yet fully settled. Indeed, it is doubtful whether any single rule can be laid down, applicable to all cases. If it be said that the rates must be such as to secure to the owners a reasonable per cent. on the money invested, it will be remembered that many things have happened to make the investment far in excess of the actual value of the property,-- injudicious contracts, poor engineering, unusually high cost of material, rascality on the part of those engaged in the construction or management of the property. These and many other things, as is well known, are factors which have largely entered into the investments with

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