California Water Service Co. v. City of Redding, 1308R.

• Citation: 22 F. Supp. 641
• Decision Date: 07 March 1938
• Docket Number: No. 1308R.,1308R.
• Parties: CALIFORNIA WATER SERVICE CO. et al. v. CITY OF REDDING et al.
• Court: U.S. District Court — Northern District of California

22 F. Supp. 641

CALIFORNIA WATER SERVICE CO. et al. v. CITY OF REDDING et al.^*

No. 1308R.

District Court, N. D. California, N. D.

February 26, 1938.

Rehearing Denied March 7, 1938.

Warren Olney, Jr., A. Crawford Greene, John T. Pigott, James D. Adams, and Henry D. Costigan, all of San Francisco, Cal. (Carr & Kennedy, of Redding, Cal., and McCutchen, Olney, Mannon & Greene, of San Francisco, Cal., of counsel), for plaintiffs.

W. H. Orrick and George Herrington, both of San Francisco, Cal., for defendants Banks, Huntley & Co., R. H. Moulton & Co., and Mason Bros.

Esmond Schapiro, W. H. Orrick, and George Herrington, all of San Francisco, Cal. (Orrick, Dahlquist, Neff & Herrington, of San Francisco, Cal., of counsel), for defendant Stone & Youngberg.

W. D. Tillotson, Jesse W. Carter, and Daniel S. Carlton, all of Redding, Cal. (Carter, Barrett, Finley & Carlton, of Redding, Cal., of counsel), for defendant City of Redding and officers thereof.

Before DENMAN, Circuit Judge, and ST. SURE and ROCHE, District Judges.

DENMAN, Circuit Judge.

This case is presented by a bill in equity brought by California Water Service Company, a California public service corporation, and Carlo Veglia, a taxpayer of the city of Redding, Cal., against the City of Redding and other named defendants who are officers of the city. The bill seeks temporary and permanent injunctions against the sale and disposition of bonds which have been issued by the city for the purpose of financing the construction or purchase of a municipal water distribution system.

Jurisdiction of the federal District Court with three judges sitting is properly invoked under the Act of August 24, 1937, § 3, 50 Stat. 752, 28 U.S.C.A. § 380a, on the ground that the matter in controversy exceeds $3,000, and that a question under the Federal Constitution is involved.

A temporary restraining order has been issued, and the case is now before this court on the plaintiffs' prayer for temporary injunction and on the defendants' motion to dismiss the complaint.

The complaint sets forth that plaintiffs own taxable property in the City of Redding. Plaintiff corporation owns and operates a water distribution system which supplies the inhabitants of the city with water. It does a purely intrastate business. It is alleged that the defendant city has applied for and will receive, unless restrained, a grant of money from the Public Works Administration, an agency of the United States government, under title 2 of the National Industrial Recovery Act, §§ 202, 203 (48 Stat. 195, 200, 40 U.S.C.A. §§ 402, 403); the purpose of said grant being to aid the city in the purchase or construction of a municipally-owned water distribution system.

It is alleged that the officers of the City of Redding have issued in the name of the city a number of bonds for the purpose of raising money to be combined with the grant from PWA to furnish funds for the contemplated municipal project.

The bill complains that the bonds issued by the defendant municipality are invalid and that their sale, if not enjoined by this court, will cause plaintiffs irreparable injury. Two separate causes of illegality and consequent damage to plaintiffs are alleged; one on facts claimed to violate the Federal Constitution and another on different facts claimed to be in violation of the California law.

1. The first cause claimed to entitle plaintiffs to relief is alleged to be that the proposed grant of federal funds to the City of Redding for the purpose of constructing or purchasing a municipal water plant is in violation of the Federal Constitution, in that (a) the statute authorizing it is beyond the powers of Congress and (b) unlawfully delegates legislative authority to the Public Works Administrator, an executive officer. It is also claimed that the particular proposed grant in this case is not within the terms of the National Industrial Recovery Act.

2. The second cause of action is that the bond issue here complained of is unwarranted and illegal under the Constitution and laws of the state of California. A number of facts are set forth in support of this conclusion. For reasons which will appear, infra, we do not discuss these facts, save to remark that they attempt to show invalidity of the bonds because of irregularities in the resolutions and ordinances of the city council of Redding, which resolutions and ordinances authorized the application for the PWA grant and the general election on the question of the bond issue. It is also stated that the election was not properly conducted.

The damage alleged to be threatened by the defendants' proposed acts are of three distinct sorts:

(1) Both plaintiffs allege that the bonds, if permitted to be sold, will be a charge and lien upon their property in the City of Redding, in that payment of the principal and interest on these obligations may be made from taxes on all property in the city.

(2) Plaintiff water company complains of the threatened action of the municipality in constructing a rival water distribution system which will render plaintiff's property and business useless by reason of ruinous competition.

(3) In the alternative, it is alleged, the defendant city will force plaintiff to sell to the city its water plant at a grossly inadequate and confiscatory price.

We have concluded that the complaint fails to state a ground of equity relief in this court, and that it must be dismissed and the restraining order dissolved.

On January 3, 1938, subsequent to the filing of the bill in this case, the Supreme Court delivered its opinion in the case of Alabama Power Company v. Harold Ickes, 58 S.Ct. 300, 82 L.Ed. ___. The federal question there presented was identical with the federal question sought to be raised here. It was held that a private citizen, corporate or otherwise, had no standing to complain of the receipt of moneys by a municipality from the federal government, which moneys were to be used in financing a municipal power distribution plant. It was further held that the fact that the complainant was the owner of a business which might be ruined by municipal competition made possible by a federal grant gave him no greater legal ground of complaint than it would a citizen more disinterested. It was not contested in the Alabama Power Case, and it is not contested here, that the construction, purchase, or operation of a municipal power or water plant is a lawful activity on the part of a city. Such being the case, it was held that the plaintiff had no standing to complain of this lawful activity on the ground that the money received to carry it on was granted by a party who might have had no right so to dispose of it.

The only ground urged by the plaintiffs to distinguish this case from Alabama Power Co. v. Ickes, supra, is their assertion that the proposed action of the defendants is motivated by a desire or purpose to injure or coerce the plaintiff company in the exercise of its rights. Such a...