Hill v. Elizabeth City

• Decision Date: 10 March 1924
• Docket Number: 2212.
• Parties: HILL et al. v. ELIZABETH CITY et al.
• Court: U.S. Court of Appeals — Fourth Circuit

298 F. 67

HILL et al. v. ELIZABETH CITY et al.

No. 2212.

United States Court of Appeals, Fourth Circuit.

March 10, 1924

W. M Maloy, of Baltimore, Md. (Maloy, Brady, Howell & Yost, of Baltimore, Md., and Aydlett & Simpson, of Elizabeth City N.C., on the brief), for appellants.

P. W McMullan and J. Kenyon Wilson, both of Elizabeth City, N.C (J. B. Leigh and Thompson & Wilson, all of Elizabeth City, N.C., on the brief), for appellees.

Before WOODS and ROSE, Circuit Judges, and WEBB, District Judge.

WOODS Circuit Judge.

The plaintiffs are bondholders of the Electric Light Company of Elizabeth City, N.C., and of Elizabeth City Water & Power Company. The prayer of the complaint is for an injunction to restrain the municipality of Elizabeth City from issuing bonds or using the proceeds of bonds for the construction of a municipal light, water, and sewer system. The legal ground upon which the right to injunction is placed is that the construction and operation of a municipal system of water, light, and sewerage will impair the plaintiffs' contract rights, will deprive them of their property without due process of law, and will deprive them of the equal protection of the law. These legal wrongs, it is asserted, will result because the operation by the municipality of a plant supplying these utilities will make the contracts and franchises of the corporations whose bonds the plaintiffs hold of little, if any, value. The appeal is from a decree of the District Court dismissing the complaint for failure to state a cause of action.

The various franchises and contracts relied on by the plaintiffs are set out in the complaint and in the opinion of the District Court. Stripped of all detail, the following statement seems to be sufficient to make clear the legal issues involved. The public service corporations, whose bonds the plaintiffs hold, by franchise and contract acquired the right to supply electric lights, water, and sewerage to the municipality and inhabitants of Elizabeth City, and under these franchises and contracts constructed and operated their plants. None of the grants, however, were exclusive of the right of the city to construct and operate public utilities. Indeed, the state Constitution forbade the grant of an exclusive right. Thrift v. Elizabeth City, 122 N.C. 31, 30 S.E. 349, 44 L.R.A. 427. The last of these franchises and contracts expired by their own terms in 1917. Thereafter the service was continued by the corporations, and accepted and paid for by the city and its inhabitants, without specific agreement as to the time for which the service should be rendered and accepted. While this arrangement was in operation, the city council passed two ordinances, under legislative authority conferred by the Municipal Finance Acts of 1919 and 1921 (C.S.N.C. §§ 2918-2969; Pub. Laws N.C. 1921 (Ex. Sess.), c. 106); one ordinance looking to the issue of bonds to the amount of $550,000 for an electric, water, light, and power system, and the other to the issue of bonds to the amount of $250,000 for a sewerage system. Negotiations for the sale to the city of the light, water, and sewer systems of the public service corporations failed, because the parties were unable to agree on the price. Evidently the loss to the light and power companies will be very great, if the city carries out is plan of constructing a system of public utilities.

The continuation of the service of the light and water company and the acceptance of it by the city after the expiration of the express contracts implied a contract of indefinite duration, terminable upon reasonable notice, either by the city or by the company, at such time and under such circumstances as may be consistent with the duty both owe to the inhabitants of the city. Denver v. Denver Union Water Co., 246 U.S. 178, 190, 38 Sup.Ct. 278, 62 L.Ed. 649. A long time must pass before the municipal system will be in operation, and there is nothing before us warranting a conclusion that the municipality will not give due notice to the public service corporations that their service is no longer desired.

This indefinite renewal of the contracts did not confer any right on the operating public service corporations to enjoin the city from constructing its own plant. The general rule is indisputable that the franchise to a private...