Birmingham Waterworks Co. v. City of Birmingham

• Decision Date: 09 January 1913
• Docket Number: 229.
• Citation: 211 F. 497
• Parties: BIRMINGHAM WATERWORKS CO. v. CITY OF BIRMINGHAM.
• Court: U.S. District Court — Northern District of Alabama

211 F. 497

BIRMINGHAM WATERWORKS CO. v. CITY OF BIRMINGHAM.

No. 229.

United States District Court, N.D. Alabama, Southern Division.

January 9, 1913

London & Fitts, of Birmingham, Ala., and Brown, Spurlock & Brown, of Chattanooga, Tenn., for plaintiff.

M. M Ullman, Romaine Boyd, and George Huddleston, all of Birmingham, Ala., for defendant.

GRUBB District Judge.

This is an application for a temporary injunction to restrain the enforcement of an ordinance of the city of Birmingham fixing the rates to be charged by the plaintiff for water furnished the inhabitants of the defendant for consumption.

A preliminary motion has been made by the city, the effect of which is to request the District Judge to call in two Circuit Judges to hear the case with him, as provided in section 266 of the Judicial Code of the United States. The federal courts have held that an ordinance of a municipality, the constitutionality of which is assailed, is not a statute of a state within the meaning of that section, and that the section does not apply to a bill seeking an injunction to restrain the enforcement of a municipal ordinance for that reason. The motion is denied. Sperry-Hutchinson Co. v City of Tacoma (C.C.) 190 F. 682; Cumberland Telephone Co. v. Memphis (D.C.) 198 F. 955.

Coming to the merits, the ordinance of the city is asked to be restrained upon two grounds: First, that the rates fixed in it are so low as to be confiscatory, and that it violates the fourteenth amendment to the federal Constitution for that reason; second, that it impairs the obligation of a contract entered into between the city and the plaintiff on June 2 1888, and so violates section 10 of article 1 of the federal Constitution.

The first ground was not stressed upon the hearing by plaintiff's counsel, and there was no sufficient presentation of that phase of the case either in the shape of evidence or argument, to justify a ruling upon it, and its decision becomes unnecessary upon this hearing, in view of the disposition made of the application upon the other ground. The second ground is the one chiefly relied upon by the plaintiff. The position of the plaintiff upon it is that it has a valid contract with the city entered into June 2, 1888, authorizing it to charge, for the unexpired part of the 30-year term of the contract, beginning from July 1, 1888, to the inhabitants of the city, certain fixed and absolute rates therein specified for water furnished either for domestic or manufacturing purposes, and that the ordinance complained of has the effect of reducing the contract rates, and so impairs its obligation. The positions of the defendant are that the city at the time of its execution had no charter authority to make a contract establishing water rates for 30 years, that the contract of June 2, 1888, did not have the effect of fixing absolute rates, but only maximum rates, and that it was for no definite period of time so far as it related to rates. The plaintiff also relied upon a subsequent ordinance of the city, designated 97C, to which it had assented, and which was a modification of the original contract of June 2, 1888, and which established rates differing from those of the original contract, as well as from those of the ordinance complained of, and which was the result of a compromise between the parties to the original contract. The defendant's position, with respect to this subsequent ordinance, is that the charter of the city provided that such contract ordinances should be referred to a vote of the people for ratification or rejection before becoming effective; that the ordinance designated 97C was so referred, and acted upon adversely by the people, and so never became effective. The plaintiff's answer is that it is not one of the class of contracts which the law requires to be submitted to the operation of the referendum, and hence the adverse vote did not affect its validity. If held to be invalid, then the plaintiff resorts to the original contract of June 2, 1888, as being still in force.

The first question for consideration is the power possessed by the city of Birmingham in June, 1888, to make for its inhabitants a contract for a supply of water for a term of 30 years at fixed and absolute rates, during the contract period, such as is that of June 2, 1888, as it is construed by plaintiff.

Where state legislation is assailed in the federal courts, as impairing the obligation of contract in violation of section 10, article 1 of the Constitution of the United States, the determination by the state courts that there is no contractual right to be impaired is not conclusive upon the federal courts. The federal courts determine for themselves whether contractual rights exist and are impaired by the subsequent legislation. A contrary rule would render this provision of the Constitution ineffectual, since it would be in the power of the state courts to render it inapplicable in any case by determination that no contract right existed to be impaired.

However, when the state courts' construction upholds the existence of contract rights, instead of denying them, no such reason exists for not following the state decisions. The charter power of a municipal corporation under the laws of the state creating it is a matter for the state courts to determine, and the federal courts will follow their construction unless it conflicts with proper enforcement of a right under the laws of the United States.

In the case of Vicksburg v. Vicksburg Water Co., 206 U.S. 496-509, 27 Sup.Ct. 762, 766 (51 L.Ed. 1155), the Supreme Court of the United States said in a similar case to this one:

'In the cases generally in this court it will be found that, in determining the matter of contract, the local decisions have been given much weight, and ordinarily followed. As this is a Mississippi contract, and the power was exercised under an act of the Legislature of that state, we naturally look to the decisions of the courts of that state, particularly to such as had given construction to similar charters at the time the contract was made, with a view to determining the extent of the power conferred.'

Under this principle, the Alabama decisions reflecting on the power of the city to enter into the contract of June 2, 1888, should be controlling, when they uphold the power of the city to make the contract. The provisions of the charter of the city in force in June, 1888, relied upon by plaintiff in support of the authority of the city to make the contract of June 2, 1888, are the general welfare clause, and the power to make any needful provisions for the supply of the city with water, gas, and gaslights. Section 20, subds. 1, 10, Act 1880-81, p. 480.

In the case of Greenville v. Greenville Water Co., 125 Ala. 625-639, 27 So. 764, 769, the Supreme Court of Alabama said:

'A supply of water for the extinguishment of fires and other ordinary public uses is one of the necessities of a city, and under the general authority (to enact ordinances for the good order and welfare of the city) so granted the defendant had the power to make a proper contract for such supply.'

In the case of Weller v. Gadsden, 141 Ala. 642-656, 37 South 682, 684, the same court said: 'Whatever may be said as to the agreement to pay for hydrants, at a fixed price, for 30 years, * * * it is settled that under a charter, authorizing a city 'to make needful provisions to supply the city with water' * * * its authorities may make such a contract, which will be valid, if not for the whole period, at least for a reasonable length of time. We so expressly decided in the City of Greenville v. Greenville W.W. Co., 125 Ala. 625 (27 So. 764).'

In the case of Mitchell v. Gadsden, 145 Ala. 137-157, 40 So. 350, the same court, of the same contract, said:

'We hold that the city had the power and authority to enter into said contract, and adopt what was said by Judge Tyson in the cause of Weller v. City of Gadsden, 141 Ala. 642, 37 So. 682, in so far as he treats of the validity of the contract and of its several portions. The making of such a contract is not a delegation of a governmental function, but is an exercise of its business or proprietary powers (citing many cases). The charter of the city of Gadsden confers ample powers to authorize the making of this contract (Acts 1882-83, p. 290, Sec. 22). At any rate this is one of the incidental powers of a municipal corporation (1 Dillon on Mun. Corp. (4th Ed.) 146, 443, note 1; Livingston v. Pippin, 31 Ala. 542, 550, 551).'

The text of the latest edition of Dillon (3 Dillon (5th Ed.) Sec. 1302, p. 2130) asserts the principle as follows:

'Authority to a city to construct water or gas works, or to provide water or to light the city streets, whether it be derived from an express grant, or from the general power of the city in respect to police regulations, the preservation of public health and the general welfare, confers upon the municipality authority to contract with an individual or corporation for a supply of water or light. Any power which is sufficient to authorize the city to provide a supply of water or light implies, in the absence of special restriction, the power to make a proper contract with an individual or corporation therefor.'

From the authorities cited, it is clear that the charter of an Alabama municipal corporation, containing the usual general welfare provisions, and the power to adopt all needful provisions to obtain a water supply for the city, is sufficient to authorize the city to obtain a water supply by contracting, as well as by municipal ownership and operation though no specific power to obtain it by contract appears in the charter. This was the condition of defendant's charter in June, 1888, and...