Knoxville Water Company v. Mayor and Aldermen of the City of Knoxville

• Decision Date: 02 January 1906
• Docket Number: No. 123,123
• Citation: Knoxville Water Company v. Mayor and Aldermen of the City of Knoxville, 200 U.S. 22, 26 S.Ct. 224, 50 L.Ed. 353 (1906)
• Parties: KNOXVILLE WATER COMPANY, Appt. , v. MAYOR AND ALDERMEN OF THE CITY OF KNOXVILLE, et al
• Court: U.S. Supreme Court

200 U.S. 22

26 S.Ct. 224

50 L.Ed. 353

KNOXVILLE WATER COMPANY, Appt.,

v MAYOR AND ALDERMEN OF THE CITY OF KNOXVILLE, et al.

No. 123.

Argued December 11, 12, 1905.

Decided January 2, 1906.

Messrs.Charles T. Cates, Jr., R. E. L. Mountcastle, and Samuel G. Shields for appellant.

[Argument of Counsel from pages 23-25 intentionally omitted]Messrs.John W. Green and J. W. Culton for appellees.

Mr. Justice Harlandelivered the opinion of the court:

This suit was brought by the Knoxville Water Company, a corporation of Tennessee, against the city of Knoxville, a municipal corporation of the same state, and against certain individual citizens of Tennessee, constituting the waterworks commission of that city.

Are the rights which the plaintiff sought to protect secured by the Constitution of the United States in any such sense as to make the case—the parties all being citizens of Tennessee—one arising under that instrument, and therefore one of which the circuit court could take original cognizance?An answer to these questions, it would seem, requires for their intelligent solution a somewhat extended statement of the facts.

The water company, by its charter granted in 1877, was authorized to establish waterworks of sufficient capacity to furnish the corporate authorities and inhabitants of Knoxville with water.To that end it was empowered to lay down pipes through the streets, lanes, and alleys of the city; bringing into the city a sufficent supply of water by means of pipes or tanks, or in any other way; construct reservoirs; supply with water the inhabitants of the city and its environs, and all who may be along the lines of the company's pipes; erect hydrants or fire plugs; and contract with the inhabitants and with the corporate authorities of the city or any incorporated companies for the use of water, charging such price for the same as might be agreed upon between the company and the parties.

Prior to 1882,—taking the allegations of the bill to be true, since the case went off in the circuit court upon demurrer to the bill,—the city of Knoxville determined to establish a system of waterworks, and to that end it purchased certain real estate.But that scheme having been abandoned, or having been ascertained to be unwise and impracticable at that time, the city advertised for bids and proposals by responsible parties for the erection of waterworks, which, after being built, it was to have the option of purchasing at a time to be agreed upon.

The advertisement brought two competitive propositions, one by the city water company and the other by the present plaintiff.The proposition of the plaintiff was accepted, and thereupon the city and the plaintiff, on the 1st day of July 1882, entered into an agreement or contract which is the foundation of this suit.

By that agreement the water company stipulated (omitting many minor details): That it would erect and establish on the land acquired by the city a system of waterworks, with reservoir and all necessary mains, pipes, hydrants, machinery, buildings, and other appurtenances and incidents sufficient to supply the city with water to be taken from the Tennessee river at the site purchased by the city for that purpose,—the waterworks and fixtures throughout to be of first-class materials, capable of furnishing 2,000,000 gallons of water every twenty-four hours, and affording an uninterrupted daily supply to the city of such quantity as might be required, not exceeding the amount above specified, and the reservoir to be built on a specified site, and to have a capacity of 3,200,000 gallons of water.The company was to furnish water free of charge (except the rental of hydrants) from hydrants for the sprinkling of streets and flushing of gutters and sewers along, on, or under such streets as were curbed, guttered, or sewered; also, free of charge, water for all purposes of the fire department and for supplying the city hall buildings, office, and prison.It was to purchase at the price of $7,800 the property then already acquired by the city for the purpose of erecting waterworks, including lands, plans, specifications, drawings, maps, etc., and to pay therefor within thirty days from the execution of the agreement, and before the construction of said works.It engaged to supply private consumers with water at a rate not to exceed 5 cents per hundred gallons, the cost of introducing from the mains, and the cost of meter when used, to be borne by such private parties.The work of construction was to be commenced within thirty days from the execution of the agreement, and the works to be completed, ready for use, within twelve months thereafter.The company was to maintain the waterworks stipulated to be built by it in such condition as would enable it to comply with its undertakings for the period of thirty years from January 1st, 1883, unless the city should become the owner of the same within that period.At its own expense it was to establish with the waterworks a system of telegraphic fire alarms of such quality and efficiency as those in general use in cities, consisting of two alarm boxes in each of the (then) eight wards of the city, with proper telegraphic connections with a central station.

In consideration of the promises and undertakings by the water company, as set out in the above agreement, the city covenanted and agreed, among other things, 'not to grant to any other person or corporation, any contract or privilege to furnish water to the city of Knoxville, or the privilege of erecting upon the public streets, lanes, or alleys, or other public grounds, for the purpose of furnishing said city or the inhabitants thereof with water for the full period of thirty years from the 1st day of August, A.D. 1883, provided the company comply with the requirements and obligations imposed and assumed by them under and by virtue of this agreement;' also, 'to pay to said company for rent of the seventy-five hydrants hereinbefore stipulated to be erected $50 each per annum, payable in quarterly instalments on the last day of each quarter, beginning on the day upon which the city shall commence receiving a supply of water from said works, and for any additional hydrants erected for the use of the city it will pay in the same manner at the rate of not more than $50 each per annum. . . .'Recognizing the benefit and advantage accruing to it and to its citizens from the construction of the waterworks and the erection of hydrants, the city also covenanted and agreed with the water company 'to pay, in addition to the annual rent of $50, as hereinbefore provided, and as an additional annual rent for the said seventy-five hydrants, a sum equal to that which, under the laws of the state and the ordinances and resolutions of the city, would be annually assessed as taxes for city purposes and uses on property of the same kind, quantity, and value as that owned by the said water company within the corporate limits of the city of Knoxville: Provided, that the said additional annual rental shall only be paid for the term of five years next following 1st of August, 1894, and no longer.'

It was further mutually agreed and understood between the parties that at the expiration of fifteen years from the time fixed for the completion of the waterworks, the city should have the right, upon giving one year's notice of such purpose and intention, to purchase from the company the waterworks provided for, and all the property, rights, franchises, and privileges thereto belonging; by negotiations, if the terms could in that way be agreed upon, or if not, then at any time for a consideration to be fixed and determined by appraisers; and if not purchased at the end of fifteen years, the waterworks plant, franchises, rights, privileges, etc., could be purchased by the city upon the same terms and conditions, and in the same way, at the expiration of each and every year thereafter.But in no case was such right of purchase to exist or be exercised unless due notice thereof was given one year before the expiration of the period aforesaid or either of them.If the parties differed as to price, the matter, the agreement provided, was to be determined by appraisers designated in a particular way, and whose award should be final and conclusive.It was further stipulated that the water company should not transfer, set over, or assign the agreement for the construction of the waterworks to any company, corporation, or individual whatsoever.

By an ordinance adopted October 20th, 1899, the city consented to the consolidation of the Knoxville Water Company and the Lonsdale-Beaumont Water Company, and made certain changes both in the contract between the latter company and the town of West Knoxville and in the above agreement of 1882.It is not necessary to set out these changes.

We come now to the act of the Tennessee legislature of February 2d, 1903, passed avowedly for the purpose of enabling the city to exercise the option it had under the agreement of 1882 and the ordinance of 1899 to purchase and acquire the plant and property of the water company, and maintain it for the benefit of its people.To that end the act authorized the city to issue bonds to an amount sufficient for that purpose, upon the agreed valuation of the parties, or, in default of same, upon a valuation to be ascertained and fixed by appraisers, and to such additional amount as would be necessary in making additions to the plant, including real estate required for such additions.It was, however, provided that bonds should not be issued unless approved by the assent of two thirds of the qualified voters of the city, expressed at an election duly held to ascertain their wishes.The execution of the provisions of the act was committed to a waterworks commission, to be created by the city council, and to have the power to make all contracts for the maintenance and extension of the plant.

Subsequently, the...