City of Belfast v. Belfast Water Co.

• Decision Date: 28 September 1916
• Parties: CITY OF BELFAST v. BELFAST WATER CO.
• Court: Maine Supreme Court

98 A. 738

CITY OF BELFAST

v. BELFAST WATER CO.

Supreme Judicial Court of Maine.

Sept. 28, 1916.

Report from Supreme Judicial Court, Waldo County, in Equity.

Bill by the City of Belfast against the Belfast Water Company. Case reported. Bill sustained, and permanent injunction awarded.

Argued before SAVAGE, C. J., and CORNISH, KING, BIRD, and HALEY, JJ.

Carleton Doak, City Sol., and Robert F. Dunton, both of Belfast, for plaintiff. Harvey D. Eaton, of Waterville, and H. C. Buzzell, of Belfast, for defendant.

SAVAGE, C. J. In 1886, two men, who will be called the promoters, entered into a written contract with the city of Belfast. The contract contained these provisions, among others: The promoters agreed to construct in Belfast a complete system of water works for the extinguishment of fires, and for domestic, manufacturing, and other purposes. They agreed to place in the system 45 hydrants, and more, if desired by the city. The city agreed to pay, for not exceeding 50 hydrants in number, set upon pipe described in the construction plan, an annual rent of $000. For additional hydrants set upon new pipe the promoters were to receive $40 each annually. It was agreed by the promoters that at the expiration of 20 years from the time water was first let into the pipes the payment of rent for each and all hydrants should cease, and that at all times thereafter they would furnish water for the hydrants free to the city.

The promoters further agreed to supply all water for sprinkling streets and flushing gutters, and for all buildings within the limits supplied by its pipes, used by the city for municipal and school purposes, including the public library and a city hospital, and for four drinking troughs or fountains for man and beast, and for two ornamental fountains, for such sums annually as the city should assess taxes upon the franchise and works of the water system.

Further, the promoters agreed to sell and convey the system to the city at any time for such price as might be agreed upon, or, in case of failure to agree, for such price as might be determined by commissioners in a manner prescribed by the contract.

The city agreed that the promoters should have the privilege and right to supply water for domestic and other purposes, and should be authorized to dig up the ways and streets for the purpose of laying pipes, and for doing such other work as might be necessary in the operation of the waterworks.

It was agreed that such of the agreements and stipulations in the contract as the city might not then have the power to make without authority of the Legislature were not to be binding until such authority was granted by a charter satisfactory to the city, to be procured by the promoters.

In accordance with the contract, the promoters procured a charter from the Legislature by which they and one other were incorporated under the name of the Belfast Water Company, the defendant in this case. Chapter 94, P. & S. Laws of 1887. The chartered purpose of the corporation was to furnish water to the people of Belfast for domestic and other uses, and to the city of Belfast for the extinguishment of fires and other public uses. Among other things, the corporation was empowered to dig up the streets for the purpose of laying its pipes, and to fix and collect water rates. The charter provided that, after the corporation should commence receiving pay for water supplied by it, it should be bound to furnish, at a reasonable rate, water for the inhabitants of the city for said uses, and to the city in its corporate capacity for public uses. The charter authorized the city to contract with the corporation for water for public uses, on such terms as the parties might agree upon, including the remission of taxes upon the real estate, fixtures, and plant of the corporation.

The Belfast Water Company, in 1887, constructed its waterworks in Belfast. The contract between the promoters and the city was not assigned by the promoters to the water company. And no new contract was made by the city with the defendant company, as was authorized by the company's charter. But December 1, 1887, the defendant notified the city of the completion of its works in this language:

"The works of the Belfast Water Company, so far as they relate to the fire service, contracted for with the city are now ready for use, and we have the honor of turning over to the city the hydrant wrenches, and the use of the hydrants for fire service, in accordance with the terms of said contract."

And from that time until recently both parties have conducted themselves in apparent recognition of the contract with the promoters. The company has set the hydrants and furnished water, and the city has paid the agreed hydrant rental, amounting to between $30,000 and $40,000. And the company has brought divers suits to enforce contract rights. The compensation for the use of water for sprinkling and other public uses mentioned in the contract, except for hydrants, has been paid by the remission of taxes as the contract provided.

In January, 1916, the defendant, being advised, as it says, that the contract between the promoters, or the company itself, and the city was illegal, and that it was wrong for it to be performed further, notified the city that from and after April 1, 1916, it should refuse to recognize it as of binding force, and should thereafter refuse to perform thereunder. It also notified the city that unless arrangements were made by the city to pay a fair compensation for all hydrants in use, it would, after April 1st, cease to maintain said hydrants or permit their use by the city.

Thereupon this bill was brought, setting forth the essential facts, and praying that the defendant be enjoined from preventing the plaintiff's use of the hydrants, and that it be commanded to maintain the hydrants and to furnish an adequate supply of water therefor. The case comes before us on report.

In argument, the defendant does not question the conclusion that the promoters' contract has been impliedly adopted by both parties, nor that the defendant is bound by the engagements entered into by its promoters as far as they were legal. It is settled that if a corporation expressly or impliedly adopts the contract made by its promoters, and obtains its benefits, it must take it with its obligations and burdens. It must do what the promoters agreed to do. Bobbins v. Railway & Electric Co., 100 Me. 496, 62 Atl. 136, 1 L. R. A. (N. S.) 963.

But the defendant contends that the contract is illegal, null, and void for three reasons:

(1) That it "ignores the right of the state to regulate and control the terms and conditions of service by fixing terms and conditions unalterably for all time;" (2) that it "ignores the principle that utilities must serve all alike on fair terms, by a provision that a large and important part of the service shall be rendered without compensation for all time after the expiration of twenty years;" and (3) that it "ignores the right of the state to levy taxes upon a just and reasonable basis by fixing for all time certain public services as the measure of all taxation of the company's property."

For these reasons the defendant claims that it is under no duty or obligation to furnish water to the city, and that it has a legal right to discontinue the water service to the city, unless and until the city will make arrangements to pay fair compensation.

The city takes issue with the defendant on all these propositions. But it contends, also, that the defendant is now estopped from denying the validity of the contract which it adopted, and the benefits of which it has received. It is also urged that if the contract was ultra vires, it was so only as to the city, and that the question of ultra vires, and the contention that the contract was against public policy, can be raised only by the municipality affected, and not by the other contracting party.

It has been repeatedly held, and we think with good reason, that when a party has accepted the benefits of a contract, not contra bonos mores, he should not be permitted to question the validity of it; that he is estopped. Ft. Worth City Co. v. Smith Bridge Co., 151 U. S. 294, 14 Sup. Ct. 339, 38 L. Ed. 167; Richardson v. Welch, 47 Mich. 309, 11 N. W. 172; Doane v. Lake Street, etc., R. R. Co., 165 Ill. 510, 46 N. E. 520, 36 L. R. A. 97, 56 Am. St. Rep. 265; Collins v. Cobe, 202 Ill. 469, 66 N. E. 1079; State v. Germania Bank, 90 Minn. 150, 95 N. W. 1116; Gibbs v. Craig, 58 N. J. Law, 661, 33 Atl. 1052; Flower v. Barnekoff, 20 Or. 132, 25 Pac. 370, 11 L. R. A. 149; Dyer v. Walker, 40 Pa. 157; 2 Pars. on Contracts, 961. And in Joy v. St. Louis, 138 U. S. 1, 11 Sup. Ct. 243, 34 L. Ed. 843, where a railroad company was in the enjoyment of a right of way through a park, and had received the benefit of a large sum of money expended by the park commissioners, under an agreement with them, the court said that, without offering to return the property obtained by virtue of the agreement, it could not be heard to allege that the agreement was against the policy of the law.

Again, while it is true that in general the courts will refuse to enforce contracts contra bonos mores, there is good reason for saying that the defense of ultra vires can be made only by the party whose acts, or the acts of whose agents, are claimed to be ultra vires. The ultra vires contract of a municipality is a legal wrong. The party that is wronged may be relieved. The other contracting party is not wronged in the eye of the law. And it would seem that it cannot seek to be relieved from a contract with which the other party is content. We have found no case where the other contracting party has been relieved, and no case where it has sought to be relieved, from a contract ultra vires a municipality. Ultra vires is properly a defensive proposition. It is a defense to an action seeking to enforce a contract. In every case, we...