Spring Valley v. Schottler

• Decision Date: 04 February 1884
• Docket Number: WATER-WORKS
• Citation: 110 U.S. 347,28 L.Ed. 173,4 S.Ct. 48
• Parties: SPRING VALLEY v. SCHOTTLER and others
• Court: U.S. Supreme Court

110 U.S. 347

4 S.Ct. 48

28 L.Ed. 173

SPRING VALLEY WATER-WORKS v. SCHOTTLER and others.

February 4, 1884.

Chas. N. Fox, Francis G. Newlands, Geo. F. Edmunds, and Richard Crowley, for plaintiffs in error.

A. L. Rhodes and Alfred Barston, for defendant in error.

WAITE, C. J.

Article 4, § 31, of the constitution of California, adopted in 1849, is as follows: 'Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes. All general laws and special acts passed pursuant to this section may be altered from time to time, or repealed.'

Acts were passed by the legislature under this authority on the fourteenth of April, 1853, and the thirtieth of April, 1855, providing for the formation of corporations for certain purposes, and on the twenty-second of April, 1858, these acts were extended so as to include the formation of corporations for the purpose of supplying cities, counties, and towns with water. Under this exten- sion water companies were empowered to acquire lands and waters for their works by purchase and condemnation, and, subject to the reasonable direction of the public authorities, to use streets, ways, alleys, and public roads for laying their pipes, but it was expressly provided, by an amendment enacted in 1861, 'that all canals, reservoirs, ditches, pipes, aqueducts, and all conduits * * * shall be used exclusively for the purpose of supplying any city or county, or any cities or towns, in this state, or the inhabitants thereof, with pure, fresh water.'

Section 4 is as follows: 'Sec. 4. All corporations formed under the provisions of this act, or claiming any of the privileges of the same, shall furnish pure, fresh water to the inhabitants of such city and county, or city or town, for family uses, so long as the supply permits, at reasonable rates, and without distinction of persons, upon proper demand therefor, and shall furnish water, to the extent of their means, to such city and county, or city or town, in case of fire or other great necessity, free of charge. And the rates to be charged for water shall be determined by a board of commissioners, to be selected as follows: Two by such city and county, or city or town, authorities, and two by the water company; and in case that four cannot agree to the valuation, then, in that case, the four shall choose a fifth person, and he shall become a member of said board; if the four commissioners cannot agree upon a fifth, then the sheriff of the county shall appoint such fifth person. The decision of a majority of said board shall determine the rates to be charged for water for one year, and until new rates shall be established. The board of supervisors, or the proper city or town authorities, may prescribe such other proper rules relating to the delivery of water, not inconsistent with this act and the laws and constitution of this state.'

The Spring Valley Water-works Company was formed under this act on the nineteenth of June, 1858, and since that time has expended a very large amount of money in the erection of extensive and substantial works for the supply of the city and county of San Francisco with water. In January, 1878, the board of supervisors of the city and county appointed Isaac B. Friedlander and H. B. Williams, and the company appointed W. F. Babcock and Charles Webb Howard, and these four afterwards appointed Jerome Lincoln, to constitute a board of commissioners to determine, under the provisions of section 4, the rates to be charged by the company for water. This board met and fixed a tariff of rates to go into effect on the first of June 1878. In July of the same year, Friedlander, one of the commissioners appointed by the supervisors, died. By his death a vacancy was created in the board which has never been filled.

In 1879 the people of California adopted a new constitution, which went into effect on the first of January, 1880. Article 14, §§ 1, 2, of this constitution, are as follows:

'ARTICLE 14.

'Water and Water Rights.

'Section 1. The uses of all water now appropriated, or that may hereafter be appropriated, for sale, rental, or distribution, is hereby declared to be a public use, and subject to the regulation and control of the state in the manner to be prescribed by law: provided, that the rates or compensation to be collected by any person, company, or corporation in this state for the use of water supplied to any city and county, or city or town, or the inhabitants thereof, shall be fixed annually by the board of supervisors, or city and county, or city or town council, or other governing body of such city and county, or city or town, by ordinance or otherwise, in the manner that other ordinances or legislative acts or resolutions are passed by such body, and shall continue in force for one year and no longer. Such ordinances or resolutions shall be passed in the month of February of each year, and take effect on the first day of July thereafter. Any board or body failing to pass the necessary ordinances or resolutions fixing water rates where necessary, within such time, shall be subject to peremptory process to compel action at the suit of any party interested, and shall be liable to such further processes and penalties as the legislature may prescribe. Any person, company, or corporation collecting water rates in any city and county, or city or town, in this state, otherwise than as so established shall forfeit the franchises and water works of such person, company, or corporation to the city and county, or city or town where the same are collected for the public use.

'Sec. 2. The right to collect rates or compensation for the use of water supplied to any county, city and county or town, or the inhabitants thereof, is a franchise, and cannot be exercised except by authority of and in the manner prescribed by law.'

Under this provision of the constitution, and the legislation based thereon, the board of supervisors claim the right and power to fix the rates to be charged by the company for water, and refuse to appoint a member to fill the vacancy in the board of commissioners occasioned by the death of the former incumbent. This suit was begun in the supreme court of the state for a writ of mandamus, requiring the board of supervisors to take action in the matter and fill the vacancy. The court, on final hearing, refused the writ and dismissed the petition. This writ of error was brought by the company to review that judgment.

The general question involved in this case is whether water companies in California, formed under the act of 1858, before the adoption of the constitution of 1879, have a right which the state is prohibited by the constitution of the United States from impairing or taking away, to charge their customers such prices for water as may from time to time be fixed by a commission made up of two persons selected by the company, two by the public authorities of the locality, and, if need be, a fifth selected by the other four, or by the sheriff of the county. The Spring Valley Company claims no rights of this character that may not also be claimed by every other company formed under the same act. That the companies must sell at reasonable prices all the water they are able to furnish consumers, and that the prices fixed for the time being by the honest judgment of such a commission as was specially provided for in the act, must be deemed reasonable, both by the company and the public, is not denied. The dispute is as to the power of the state, under the prohibitions of the constitution of the United States, to substitute for this commission another, selected without the co-operation of the company, or some other tribunal of a different character, like the municipal authorities of the locality. The Spring Valley Company claims that it has, under its charter, a right to the maintenance of the commission which was created by the requisite appointments in 1878, and the object of this suit is to compel the board of supervisors to perpetuate that commission by filling the vacancy that exists in its membership. So that the whole controversy here is as to the right of water companies that availed themselves of the privileges of the act of 1858 to secure a virtual monopoly of trade in water at a particular place, to demand the appointment of the commission provided for in that act, notwithstanding the constitution of 1879 and the legislation under it.

The Spring Valley Company is an artificial being, created by or under the authority of the legislature of California. The people of the state, when they first established their government, provided in express terms that corporations, other than for municipal purposes, should not be formed except under general laws, subject at all times to alteration or repeal. The reservation of power to alter or repeal the charters of corporations was not new, for almost immediately after the judgment of this court in the Dartmouth College Case, (Dartmouth College v. Woodward, 4 Wheat. 518,) the states, many of them, in granting charters, acted on the suggestion of Mr. Justice STORY in his concurring opinion (page 712) and inserted provisions by which such authority was expressly retained. Even before this decision it was intimated by the supreme judicial court of Massachusetts, in Wales v. Stetson, 2 Mass. 143, that such a reservation would save to the state its power of control. In California the constitution put this reservation into every charter, and consequently this company was from the moment of its creation subject to the legislative power of alteration, and, if deemed expedient, of absolute extinguishment as a corporate body.

Water for domestic uses was difficult to be got in some parts of the state. Large amounts of money were needed to secure a sufficient supply for the inhabitants in many localities, and as a means of combining capital for such purposes the act of 1858 was passed. Other statutes...