Consolidated Water Co. v. City of San Diego

• Decision Date: 15 August 1898
• Citation: 89 F. 272
• Court: U.S. District Court — Southern District of California
• Parties: CONSOLIDATED WATER CO. v. CITY OF SAN DIEGO et al.

89 F. 272

CONSOLIDATED WATER CO. v. CITY OF SAN DIEGO et al.

United States Circuit Court, S.D. California.

August 15, 1898

Works Works & Ingle and Works & Lee, for complainant.

H. E Doolittle, for defendants.

ROSS Circuit Judge.

The complainant, a corporation of West Virginia, brings this suit as the owner and holder of certain bonds issued by the San Diego Water Company, and secured by a mortgage executed by that company upon the water and water plant with and by which it supplies the city of San Diego and its inhabitants with water for domestic and other purposes. The bill alleges that the property thus mortgaged is the only property owned by the mortgagor out of which the bonds, together with the 5 per cent. interest that they bear, can be paid. Its revenue comes solely from the consumers of the water. The city, through its municipal authorities, having established an ordinance fixing the rates at which such water should be so furnished, the object of the bill is to obtain the judgment of this court declaring that the rates thereby established are so unreasonably low as to amount to a practical taking of the property securing the complainant's bonds without just compensation, contrary to the provisions of the constitution of the United States. The ordinance thus attacked was enacted, according to the bill, on the 25th day of February 1898, and under the provisions of the constitution of the state of California, and of a state statute passed pursuant thereto, went into effect July 1, 1898, to expire by limitation June 30, 1899. The defendants to the bill are the city of San Diego, its municipal authorities, and the San Diego Water Company.

One of the points made in support of the demurrer to the bill is that, inasmuch as the San Diego Water Company is not a party complainant, and as there is nothing in the bill in respect to any refusal on its part, upon the request of the complainant or otherwise, to in any manner contest the validity of the ordinance in question the bill fails to disclose capacity in the complainant to sue. It is sought to liken the position of the holder of the bonds of a corporation secured by its mortgage, in this respect, to that of one of its stockholders. Before a stockholder is permitted to institute and conduct in his own name a litigation founded on a right of action existing in the corporation, and in which the corporation itself is the appropriate plaintiff, he must show, in addition to other necessary grievances, 'that he has exhausted all the means within his reach to obtain from the corporation itself the redress of his grievances, or action in conformity to his wishes. He must make an earnest, not a simulated, effort with the managing body of the corporation to induce remedial action on their part, and this must be made apparent to the court. If time permits, or has permitted, he must show, if he fails...