Huntington Water Corp. v. City of Huntington

Decision Date20 November 1934
Docket Number8033,8080.
Citation177 S.E. 290,115 W.Va. 531
CourtWest Virginia Supreme Court

Submitted November 1, 1934.

Syllabus by the Court.

1. Under Code 1931, 11-8-13, the validity of a municipal contract to purchase water for a period of years is ordinarily tested by the cost of the service for the first year.

2. All general legal principles affecting contracts enter by implication into and form a part of every contract, as fully as if specifically expressed therein.

3. A franchise contract between a municipality and a water company is made subject to the inherent power of the Legislature to supervise and regulate.

4. A change in the original rates of a franchise contract made by the Public Service Commission, acting under the authority of the Legislature, does not impair the obligation of the contract.

5. The constitutional limitation of levies does not impair obligations legally contracted prior to the limitation.

No 8033.

Error to Circuit Court, Cabell County.

Action by the Huntington Water Corporation against the City of Huntington. Judgment for plaintiff, and defendant brings error. In the Supreme Court of Appeals, the Huntington Water Corporation filed original petition for mandamus against the City of Huntington.

Judgment affirmed, and writ of mandamus granted.

Fitzpatrick Brown & Davis, of Huntington, and Clarence H. Dickey, for Huntington Water Corporation.

Okey P Keadle, of Huntington, for City of Huntington.


Huntington Water Corporation, a public utility, seeks to recover of the city of Huntington certain delinquent rentals for municipal water service. The case was submitted to the court in lieu of a jury and a judgment rendered in favor of the plaintiff for $125,954.07. A writ of error was granted the city.

By mesne assignments the plaintiff is the owner of three waterworks franchises. One was issued by the city in 1886 one by the town of Guyandotte in 1888, and the other by the town of Central City in 1888. The three franchises are couched in similar terms, and both towns are now included within the defendant's present incorporation. So the three franchises may be treated as one. In granting the 1886 franchise, the defendant ordained that the grantee should establish 84 fire hydrants primarily and such additional fire hydrants later as the city should require. The city was to pay $3,000 annually for the 84 hydrants and $40 annually for each additional hydrant. In consideration of the franchise, the grantee was to supply water free of charge to certain city buildings. The franchise was to exist for an initial period of thirty years. But the franchise gave the city certain optional rights to purchase the water system and provided that, if those rights were not exercised within thirty years, the franchise should be extended automatically for a further period of thirty years. The option was not exercised, and the franchise is still operative.

In 1921, the Public Service Commission ordered the plaintiff to discontinue free water service to the city buildings, and prescribed a charge therefor. Since then, the defendant has paid for such service the sum of $20,644.54, which it would have applied herein as an offset. The growth of the defendant since 1886 has required the installation of many additional fire hydrants; there being now a total of 845 fire hydrants in use. Under the franchise rates, the hydrants would now be costing defendant about $38,000 annually. Instead, in 1923, the commission changed somewhat the franchise "set-up" of the city rates (allowed an additional charge per lineal foot for pipe lines thereafter installed), whereby the water service is now costing the city about $78,462.48 annually. The city met all water service charges against it until May 1, 1932. For the fiscal year of 1932-33, the city failed to pay a balance of $46,862.48 on water service charges. On September 30, 1933, the city notified the plaintiff that it was without funds to meet the demands of its several utilities, and could not legally incur any indebtedness for utility service. By reason of the constitutional amendment limiting levies, effective January 1, 1933, the city could not levy sufficient taxes within the limitation to meet its current expenditures. So no payments were made on water service charges for 1933-1934, except a few small ones.

Counsel for the defendant presents the following points in his brief:

"1. That plaintiff cannot recover herein because of the provisions of chapter 11, article 8, sections 12 and 13 of the Code of West Virginia;

2. That as to the increase in rates granted plaintiff by the Public Service Commission, defendant was prevented by the Tax Limitation Amendment from laying levies with which to pay said rates after first paying for essential governmental services;

3. That the provisions of section 10 of the franchise relating to free water were in lieu of a franchise tax which the city would have had the right to impose on plaintiff at the time of the execution of the franchise, and that therefore defendant is entitled to the offset claimed."

All of the above points as applied by counsel relate to one matter, i. e., the changes in rates made by the Public Service Commission; for which reason, doubtless, the argument of counsel does not follow closely his points as numbered. But, for convenience, we will adopt his enumeration in considering his positions.

First. Code 1931, 11-8-12, requires funds derived from taxation to be expended only for the purposes for which levied. Code 1931, 11-8-13, following, makes unlawful the contract of any fiscal body which involves the levies of future years. Counsel for the city takes the sole position under his first point that the parties to the franchise in 1886 contemplated that the growth of the city would require additions to the water system and correspondingly greater payments for water service, but that the parties could not have contemplated that the rates then agreed upon by them would later be more than doubled by a commission not even in existence at that time, and that a fair test of the validity of the contract would be the city's ability in 1886 to have paid for the service then at the present rates. Those rates were imposed in 1923 and were justified by conditions as of that date. The taxable value of property within the city had then increased greatly since 1886. The city's ability to pay for water service in 1923 had increased in proportion to the increase in valuation. The test proposed by counsel fails because it would be manifestly unfair to measure the city's ability to pay the 1923 rates by the low taxable valuation of 1886. Moreover, this court is committed to the rule that the validity of a municipal contract to purchase water for a period of years is ordinarily tested by the cost of the service for the first year. Allison v. City of...

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