In re Guilford Water Co.'s Serv. Rates

• Decision Date: 01 December 1919
• Parties: In re GUILFORD WATER CO.'S SERVICE RATES.
• Court: Maine Supreme Court

108 A. 446

In re GUILFORD WATER CO.'S SERVICE RATES.

Supreme Judicial Court of Maine.

Dec. 1, 1919.

Exceptions from Supreme Judicial Court, Piscataquis County.

Petition of the Guilford Water Company to the Public Utilities Commission to approve and allow a revision of rates. The town of Guilford and individual citizens thereof remonstrated. There was an order of the Utilities Commission granting an increase of rates, and the town brings exceptions. One exception sustained, and one overruled.

Argued before CORNISH, C. J., and SPEAR, HANSON, PHILBROOK, DUNN, MORRILL, WILSON, and DEASY, JJ.

J. S. Williams, of Guilford, for Guilford Water Co.

Hudson & Hudson, of Guilford, for Town of Guilford.

DUNN, J. The corporation of the Guilford Water Company owes its existence to a charter specially granted in the year of 1909. Priv. & Sp. Laws, c. 226. Its powers were broadened by an act of 1911. Priv. & Sp. Laws, c. 249. So far as relevant to the issues of this case, the original grant of authority limited the company to conveying to and supplying the inhabitants of the town of Guilford "with water for all domestic, sanitary, municipal, and commercial purposes." The town was empowered "to contract with said corporation for a supply of water for fire or other purposes for a term of years, and at the expiration of such contract to renew or change the same."

On August 10, 1910, the water company and the town entered into a written agreement, whereby the company obligated itself, for the period of 20 years then next ensuing, to construct, maintain, and operate a system of waterworks, for the purposes, in brief:

(a) Of constantly providing, at hydrants in certain of the public streets in Guilford, enough water for the protection of property against loss or damage by fire.

(b) Of furnishing to the inhabitants of Guilford dwelling in the village "a sufficient supply of pure water for domestic purposes on the following terms and rates: Six dollars per year for the first faucet for each family. * * *"

When that agreement was made, the works of the Guilford Company already were in process of construction. About two months later, by promotion of the contractor installing the Guilford system, a corporation was formed under the provisions of the general incorporation statute, to supply water to the nearby village of Sangerville, in the town of that name. For convenience, this corporation, organized as the Sangerville Water Supply Company, will be referred to as the Sangerville Company. Its main extends to the standpipe of the Guilford Company. From the beginning (though for a time going beyond the extent of rightful corporate power), the two companies have functioned successively in providing public service in Sangerville—the one collect ing and furnishing a supply of water, and the other distributing and selling it. For the supply the Guilford Company invariably has charged the Sangerville Company $300 a year.

In 1911, the Guilford Water district was chartered by the Legislature to acquire by purchase the property owned by the Guilford Water Company, and used by the latter in supplying water to Guilford. Priv. & Sp. Laws 1911, c. 201. The charter imposed that the district assume and carry out all then existing authorized contracts of the Guilford Company, and extended permission to furnish water to the Sangerville Company at a rental proportional within defined limits, to the number of faucets and hydrants in the respective towns. The district never was organized. At the same session, the Legislature invested the Guilford Company with right to supply water to the Sangerville Company "according to the terms and conditions set out in the charter of the Guilford water district." Priv. & Sp. Laws 1911, c. 249.

After supplying water, in conformity to its contract with Guilford, for a period extending over somewhat more than one-third of the stated term, the Guilford Company petitioned the Public Utilities Commission to approve and allow a revision of rates, uniformly increasing the annual charge for the "first faucet" from $6 to $S. The town of Guilford, and individual citizens of that town, remonstrated that such increase palpably would be in violation of a valid contract. They eon-tended that the commission could neither order nor permit it. Moreover, they argued that the amount of the rental or charge against the Sangerville Company should be made greater. Following hearing, and upon extensive investigation, the Utilities Commission granted an increase of faucet rate, less in amount than applied for. Willi regard to the charge for the Sangerville supply, the Commission held that, though inadequacy of compensation was manifest, yet it was powerless to regulate what sum the one company rightly should pay to the other. The case is here on exceptions by the town of Guilford. Renewing its attack, the town emphatically asserts: (1) That in view of the contract the commission cannot, either directly or by acquiescence, sanction any change in the rates therein set out; (2) that the commission had plenary power to determine what quantity of money should be paid by the Sangerville Company to the Guilford Company for water to be supplied the former by the bitter.

That the state, as an attribute of sovereignty, is endowed with authority to regulate the rates of charges of public utilities, is past dispute. Munn v. Illinois. 94 U. S. 113, 24 L. Ed. 77; Home Teleph. & Teleg. Co. v. Los Angeles, 211 U. S. 205. 29 Sup. Ct. 50, 53 L. Ed. 176; Minnesota Rate Cases. 230 U. S. 352, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18. It acts, in such connection, either immediately through legislative act or mediately through a subordinate body, in the exercise of the police powers; those powers which "are nothing more or less than the powers of government inherent in every sovereignty, * * * the power to govern men and things." License Cases, 5 How. 583, 12 L. Ed. 250; Veazie v. Mayo, 45 Me. 500; B. & M. R, R. Co. v. County Com'rs, 79 Me. 386, 10 Atl. 113; Skowhegan v. Heselton, 117 Me. 17, 102 Atl. 772. That there is a power, which has never been surrendered by the states, in virtue of which they may, within certain limits, control everything within their respective territories, and upon the proper exercise of which, under some circumstances, may depend the public health, the public morals, or the public safety, is conceded in all the cases. New Orleans Gaslight Co. v. Louisiana Light & Heat Producing & Mfg. Co., 115 U, S. 650, 6 Sup. Ct. 252, 29 L. Ed. 510. Regulation in such cases is not an unwarranted interference with the right of contract which the constitutional guaranty of liberty includes. Private contracts, concerning property rights, are inviolable. Const. U. S. art. 1, § 10; Const, of Maine, art. 1, § 11. The constitutional inhibitions do not go to contracts touching governmental functions. Stone v. Mississippi, 101 U. S. 814, 25 L. Ed. 1079. No obligation of a contract can extend to the defeat of legitimate governmental power. Legal Tender Cases, 12 Wall. 457, 20 L. Ed. 287; Stone v. Mississippi, supra; Butchers' Union Co. v. Cresent City Co., 111 U. S. 746, 4 Sup. Ct. 652, 28 L. Ed. 585; Chicago, Burlington and Quincy R. Co. v. Nebraska, 170 U. S. 57, 18 Sup. Ct. 513, 42 L. Ed. 948. Contract rights, which affect the public safety and welfare, must yield to that which is essential to the general good. Union Dry Goods Co. v. Georgia Public Service Corp., 248 U. S. 372, 39 Sup. Ct. 117, 63 L. Ed. 309. In Atlantic Coast Line R. R. Co. v. Goldsboro, 232 U. S. 548, 34 Sup. Ct. 364, 58 L. Ed. 721, it is said:

"Neither the 'contract' clause nor the 'due process' clause has the effect of overriding the power of the state to establish all regulations that are reasonably necessary to secure the health, safety, good order, comfort, or general welfare of the community; that this power can neither be abdicated nor bargained away, and is inalienable even by express grant; and that all contract and property rights are held subject to its fair exercise."

The Legislature, in the exercise of the police power, is unrestricted by the provisions of contracts between individuals or corporations, or between individuals and municipal corporations. Manigault v. Springs, 199 U. S. 473, 26 Sup. Ct. 127, 50 L. Ed. 274.

The rule is general that every contract touching matters within the police power must be held to have been entered into with the distinct understanding that the continuing supremacy of the state, if exerted for the common good and welfare, can modify the contract when and as the benefit of that interest properly may require. While not competent for the state entirely to abandon the highly important governmental function of regulating public service rates, nevertheless it temporarily may suspend exercise of the power. It has been settled that a state may authorize one of its municipalities to establish, by an inviolable contract, the rates to be charged, for a definite term, not unreasonable in point of time, by a public utility. Home Teleph. & Teleg. Co. v. Los Angeles, supra; Detroit v. Detroit Citizens' Street Ry. Co., 184 U. S. 368, 382, 22 Sup. Ct. 410, 46 L. Ed. 592; Vicksburg v. Vicksburg Waterworks Co., 206 U. S. 496, 508, 27 Sup. Ct. 762, 51 L. Ed. 1155; Minneapolis v. Minneapolis Street Ry. Co., 215 U. S. 417, 30 Sup. Ct. 118, 54 L. Ed. 259. But the authority to make such contract must be expressly and specifically bestowed. It is beyond the recognized general powers of a municipal corporation to make that kind of a contract. Doubts must be resolved in favor of the continuance of the governmental prerogative of regulating rates and charges. Railroad Commission Cases, 116 U. S. 307, 325, 6 Sup. Ct. 334, 388, 1191, 29 L. Ed. 636; Freeport Water Co. v. Freeport, 180 U. S. 587, 21 Sup. Ct. 493, 45 L. Ed. 679; Rogers Park Water Co. v. Fergus, 180 U. S. 624, 21 Sup. Ct. 490, 45 L. Ed. 702; Knoxville...