German Alliance Insurance Company v. Home Water Supply Company

• Decision Date: 02 December 1912
• Docket Number: No. 19,19
• Parties: GERMAN ALLIANCE INSURANCE COMPANY, Petitioner, v. HOME WATER SUPPLY COMPANY
• Court: U.S. Supreme Court

226 U.S. 220

33 S.Ct. 32

57 L.Ed. 195

GERMAN ALLIANCE INSURANCE COMPANY, Petitioner,

v HOME WATER SUPPLY COMPANY.

No. 19.

Argued April 26, 1912.

Decided December 2, 1912.

'The Spartan Mills' owned a number of houses in Spartanburg, South Carolina. They were damaged by fire on March 25, 1907. The German Alliance Company, which had insured the buildings, paid $68,000, the amount of the loss, took from the mills an assignment 'of all claims and demands against any person arising from or connected with the loss or damage,' and brought suit, in the United States court for the district of South Carolina, against the Home Water Supply Company, on the ground that the fire could easily have been extinguished and the damage prevented if the water company had complied with its contract and duty to furnish the inhabitants of the city with water for fire protection.

The complaint alleged that on February 14, 1900, the city council adopted an ordinance, ratifying a contract, previously prepared, between the city and the water company, by which the latter was empowered, for a term of thirty-three years, to lay and maintain pipes in the streets and operate waterworks with which 'to supply the city and its inhabitants with water suitable for fire, sanitary, and domestic purposes.' The city agreed to use the hydrants FOR THE EXTINGUISHMENT OF FIRES AND SPRINkling purposes only; to make good any injury which might happen to them when used by its fire department; to pay rent for said fire protection, for the term of ten years, at the rate of $40 per year for each hydrant, and annually to levy a tax sufficient to pay what should become due under the contract.

The company agreed to lay at least 6 miles of pipe, but on sixty days' notice from the city would lay additional pipes and install hydrants, not less than ten to the mile, for each of which the city was to pay $40 per year.

The company agreed to keep all hydrants supplied with water for fire protection, and to maintain a height of at least 70 feet of water in the standpipe. If any hydrant remained out of order for more than twenty-four hours, after notice, the company was to pay the city $7 per week while each hydrant was unfit for use.

It was further alleged that in 1905 and 1906 the city ordered the company to 'put in certain hydrants with connecting pipes,' 'which order, if obeyed, would have carried water protection to within about 200 feet of the building which first caught fire on March 25, 1907, instead of 650 feet, which was the distance of the nearest hydrant to the said fire on said day; that in violation of its duty and obligation to adequately protect the property from fire, and in defiance of the order of council, the defendant failed to make such extensions, and as a direct result there was no plug near enough to furnish water to extinguish said fire,—all due to the defendant's culpable and wilful negligence and disregard of duty and obligations to said city and its inhabitants.'

Other breaches were charged, in laying 4-inch instead of 6-inch pipe; in neglecting to install the electric cut-off; and 'in failing absolutely to furnish water with which to extinguish such fire and prevent its spreading to other houses.'

The defendant made no question as to the right of the insurance company to maintain the action if the Spartan Mills could have done so, but filed a general demurrer which was sustained July 14, 1908. That judgment was affirmed November 4, 1909, by the circuit court of appeals (42 L.R.A. [N.S.] 1005, 99 C. C. A. 258, 174 Fed. 764), and the case was brought here by writ of certiorari.

Messrs. Hartwell cabell and Stanyarne Wilson for petitioner.

[Argument of Counsel from pages 223-227 intentionally omitted] Messrs. I. A. Phifer, Ralph K. Carson, and Thomas Ruffin for respondent.

Mr. Justice Lamer, after making the foregoing statement of facts, delivered the opinion of the court:

In Ancrum v. Camden Water, Light, & Ice Co. 82 S. C. 284, 21 L.R.A. (N.S.) 1029, 64 S. E. 151, the supreme court of South Carolina, construing a contract much like the one here involved, held that a taxpayer could not maintain an action against a water company for damage due to its failure to furnish water as required by such an agreement with the city. The plaintiff, however, contends that although the present suit is for damage to property located in South Carolina, that decision is not of controlling authority, because it was rendered two years after this action was begun. Relying on Burgess v. Seligman, 107 U. S. 20, 27 L. ed. 359, 2 Sup. Ct. Rep. 10, it insists that when the contract was made, February, 1900, there was no settled state law on the subject, and therefore the Federal courts must decide for themselves, as matter of general law, the much controverted question as to a water company's liability to a taxpayer for failure to furnish fire protection, according to the terms of its contract with the city.

The courts have almost uniformly held that municipalities are not bound to furnish water for fire protection. Such was the unquestioned rule when they relied, as some still do, on wells and cisterns as a source of supply; nor was there any increase of liability with the gradual increase of facilities; though, with the introduction of reservoirs, standpipes, pumping stations, and steam engines, cities were frequently sued for damages resulting from an inadequate supply or insufficient pressure. But the city was under no legal obligation to furnish the water; and if it voluntarily undertook to do more than the law required, it did not thereby subject itself to a new or greater liability. It acted in a governmental capacity, and was no more responsible for failure in that respect than it would have been for failure to furnish adequate police protection.

If the common law did not impose such duty upon a public corporation, neither did it require private companies to furnish fire protection to property reached by their pipes. And there could, of course, be no liability for the breach of a common-law, statutory, or charter duty which did not exist. It is argued, however, that even if, in the first instance, the law did not oblige the company to furnish property owners with water, such a duty arose out of the public service upon which the defendant entered. But if, where it did not otherwise exist, a public duty could arise out of a private bargain, liability would be based on the failure to do or to furnish what was reasonably necessary to discharge the duty imposed. The complaint proceeds on no such theory. It makes no allegation that the defendant failed to furnish a plant of reasonable capacity, or neglected to extend the pipes where they were reasonably required. Nor is it charged that what the company actually did was harmful in itself or likely to cause injury to others, so as to bring the case within the principle applicable to the sale of unwholesome provisions, or misbranded poisons, which, in their intended use, would be injurious to purchasers from the original vendee. So that, notwithstanding numerous charges of culpable, wanton, and malicious neglect of duty, this suit—whether regarded as ex contractu or ex delicto—is for breach of the provisions of the contract of February 14, 1900, which must, therefore, be the measure of plaintiff's right and of the defendant's liability.

Whether a right of action arises out of such a contract, in favor of a taxpayer, is a matter about which there has been much discussion and some conflict in decisions. Although for nearly a century it has been common for private corporations to supply cities with water under this sort of agreement, we find no record of a suit like this prior to 1878, when the supreme court of Connecticut, in a brief decision (Nickerson v. Bridgeport Hydraulic Co. 46 Conn. 24, 33 Am. Rep. 1), held that the property owner was a stranger to the agreement with the municipality, and therefore could not maintain an action against the company for a...