Consolidated Water Co. v. Babcock

• Decision Date: 10 August 1896
• Docket Number: 667.
• Citation: 76 F. 243
• Court: U.S. District Court — Southern District of California
• Parties: CONSOLIDATED WATER CO. v. BABCOCK et al.

76 F. 243

CONSOLIDATED WATER CO. v. BABCOCK et al.

No. 667.

United States Circuit Court, S.D. California.

August 10, 1896

Works &amp Works and Trippet & Neale, for complainant.

James A. Gibson, W. J. Hunsaker, T. A. Lewis, and H. E. Doolittle for defendants.

WELLBORN District Judge.

This is a suit by the Consolidated Water Company, a corporation created under the laws of West Virginia, against the city of San Diego, a municipal corporation of California, its auditor and treasurer, the members of its common council, the Southern California Mountain Water Company, also a California corporation, and E. S. Babcock, a citizen of California, for a decree of this court that the making of a certain proposition by the city of San Diego to the defendant the Southern California Mountain Water Company, for the sale to said city of a water supply, and the construction, in connection therewith, of a distributing system for said city the acceptance of said proposition, and all proceedings of said common council relative thereto, were the result of bribery and fraud, as in the bill set forth; that neither the said city of San Diego nor the Southern California Mountain Water Company has power or authority to enter into said proposed contract; and that any such contract, if made, will be void; and that the defendants and each of them be enjoined from proceeding further under said proposition and its acceptance; and, especially, that they and each of them be enjoined from entering into said proposed contract, or any contract of similar import, and from the submission of the question of issuing bonds of said city to carry out any such contract, and from issuing or disposing of any such bonds or their proceeds if voted; and for general relief.

The matters alleged in the bill, and which, for the purposes of the present hearing, must be accepted as facts, are these The San Diego Water Company is a California corporation, and owns a certain water-distributing system and pumping plant in said city. The San Diego Flume Company is also a California corporation, and the owner of certain water rights and a flume line. These two corporations, by agreement between themselves, are now furnishing water, from and by means of their respective properties, to said city and its inhabitants. Complainant was organized for the purpose, among others, of acquiring the stock and bonds of the two last-named corporations, and consolidating their properties under one management, and now owns all of the bonds of said water company, amounting to $1,000,000, and all its stock, except 25 shares, of $100 each, and all of the bonds of said flume company, amounting to $663,000, except $25,000 thereof, and all the stock of said last-named company, except 60 shares. The Mount Tecarte Land & Water Company was duly organized as a corporation under the laws of the state of California, with defendant E. S. Babcock as its president. The Southern California Mountain Water Company, also a California corporation, and of which said Babcock is president, was organized March 9, 1895, and has acquired all the water rights, reservoir sites, and other property owned or claimed by said Mount Tecarte Company. In the year 1891 said common council began, and has since continuously been, negotiating with the Mount Tecarte Land & Water Company, the Southern California Mountain Water Company, the San Diego Water Company, the San Diego Flume Company, and other corporations and persons, for a supply of water and distributing system for said city and its inhabitants. Defendant Babcock and the Mount Tecarte Land & Water Company employed one C. E. Mayne to bribe and otherwise illegally and corruptly influence members of said common council to support any proposition made by the Mount Tecarte Land & Water Company, and, pursuant to such employment, Mayne furnished money to and bribed certain members of said common council; and said Southern California Mountain Water Company, organized by Babcock and those associated with him in the Mount Tecarte Company, for the purpose of acquiring the properties of the Mount Tecarte Company, and to continue the negotiations, propositions, and offers to furnish to said city its water supply and distributing system, together with said Babcock and his agents, still has under their pay and corrupt influence said members of the city council, who have supported, and will, on account of such influence, continue to support, the proposition of said company to furnish said city with water, and its distributing system. On July 16, 1895, said common council invited propositions for a distributing system and water supply for the city, and, in response thereto, the San Diego Water Company, San Diego Flume Company, and the defendant Southern California Mountain Water Company filed bids, respectively, all of which bids were referred to a joint committee of said common council, of which committee the chairman and other members were bribed and under the corrupt influence of defendants Babcock and the Southern California Mountain Water Company. The chairman and other members of said committee, in fraudulent conspiracy with Babcock and the Southern California Mountain Water Company, by false and fraudulent means, defeated and caused to be rejected the bids of the said flume company and of the San Diego Water Company, and, in further pursuance of said fraudulent conspiracy, secretly prepared a proposition to said Southern California Mountain Water Company for the purchase by said city from said company of the Upper Otay reservoir and dam, together with conduit of 1,000 inches capacity from said reservoir and dam to said city and other water rights, said city to pay therefor $1,075,000 of 5 per cent. 40-year bonds, and also for the construction within said city, by the said Southern California Mountain Water Company, at a cost of $500,000, in 5 per cent. 40-year bonds, of a distributing system of cast-iron pipe of double the capacity of the San Diego Water Company's distributing system, the construction of the said distributing system conditioned, however, upon the failure of said city to purchase from the San Diego Water Company its distributing system for $500,000. Said proposition was accepted, and thereafter a proposition made by said council to said San Diego Water Company to purchase its distributing system and other property for the said sum of $500,000; but said last proposition was refused, the same not having been made in good faith, as said common council knew that the said sum was much less than the value of said property. At the same meeting at which said resolution making said offer was adopted, said council also adopted a report of said water committee in favor of entering into the aforesaid contract with said Southern California Mountain Water Company, without waiting for an acceptance or rejection of said offer to said San Diego Water Company. Afterwards other propositions were made for a distributing system and water supply by the said San Diego Water Company and San Diego Flume Company, which were by the said council referred to said joint water committee; but said committee reported in favor of placing the same on file, and also reported again in favor of entering into said contract with said Southern California Mountain Water Company, which report was by said council adopted. This report would not have been adopted but for the fact that the chairman of said committee and other members thereof and certain other members of said council were under the corrupt influence of said Babcock and said Southern California Mountain Water Company, and had been bribed by them to support said proposition. Babcock, acting for himself and for said Southern California Mountain Water Company, has entered into contracts and agreements with other persons, citizens and electors of said city of San Diego, to pay them sums of money or bonds of said city, contingent upon said city making said contract with said company, by which said persons are to corrupt and illegally influence members of said common council and voters at the polls in case the question of issuing bonds for the purpose of carrying out said contract is submitted to a vote of the people. Unless restrained by this court, said Babcock and said Southern California Mountain Water Company will continue to corruptly and illegally influence and bribe members of said common council and electors of said city, and thereby said proposed contract between said city and said Southern California Mountain Water Company will be entered into, and bonds of said city for the said sum of $1,575,000 will be voted and issued by the officers of said city, and said bonds or the proceeds thereof be delivered to the said last-named water company, and a new distributing system for the delivery of water to said city and its inhabitants be put in, and the distributing system, plant, and water rights of the San Diego Water Company thereby confiscated and rendered worthless, and the security of complainant for the bonds of said last-named company held and owned by it be thereby rendered worthless and of no value.

Defendants have demurred to the bill, and the following are the grounds of the demurrer, as therein stated:

'(1) That it appears by complainant's own showing from the said bill of complaint that the said complainant is not entitled to the relief prayed for in said bill of complaint against the defendants here demurring, or any one of them. (2) That it appears from said bill of complaint that there are divers other persons who are necessary parties to the said bill of complaint, but who are not made parties thereto; that, in particular, it appears from the said bill of complaint that the San Diego Water Company and the San Diego Flume Company, both

...