Superior Water, Light Power Co v. City of Superior

• Decision Date: 12 November 1923
• Docket Number: No. 57,57
• Citation: 44 S.Ct. 82,263 U.S. 125,68 L.Ed. 204
• Parties: SUPERIOR WATER, LIGHT & POWER CO. v. CITY OF SUPERIOR et al
• Court: U.S. Supreme Court

263 U.S. 125

44 S.Ct. 82

68 L.Ed. 204

SUPERIOR WATER, LIGHT & POWER CO.

v CITY OF SUPERIOR et al.

No. 57.

Argued Oct. 9, 1923.

Decided Nov. 12, 1923.

Mr. Frank B. Kellogg, of St. Paul, Minn., for plaintiff in error.

Messrs.

Louis Hanitch and T. L. McIntosh, both of Superior, Wis., for defendants in error.

Mr. Justice McREYNOLDS delivered the opinion of the Court.

Since 1848 the Constitution of Wisconsin has contained the following clause:

Article XI, § 1: 'Corporations without banking powers or privileges may be formed under general laws, but shall not be created by special act, except for municipal purposes, and in cases where, in the judgment of the Legislature, the objects of the corporation cannot be attained under general laws. All general laws or special acts enacted under the provisions of this section may be altered or repealed by the Legislature at any time after their passage.'

Chapter 359, Private and Local Laws of Wisconsin of 1866, incorporated plaintiff in error's predecessor, the Superior Water Works Company, and empowered it to make——

'any agreements, contracts, grants and leases for the sale, use and distribution of water as may be agreed upon between said company and any person or persons, associations and corporations, and with the town of Superior, or neighboring towns; or the said company itself may take and use the surplus water for manufacturing or other purposes; which said agreements, contracts, grants and leases shall be valid and effectual in law.'

On October 15, 1887, in order to provide fire protection and secure pure and wholesome water, and in consideration of benefits to accrue therefrom, the village of Superior, a municipal corporation, by ordinance, granted to Superior Water Works Company, its successors and assigns, for a period of 30 years, the privilege of establishing, maintaining, and operating a complete system of waterworks. The ordinance specified the duties and obligations of the parties, and, among other things, provided that the village would abstain for 30 years from granting the right to lay water pipes in its streets to any other party and that the main source of water should be Superior Bay; but if the village at its expense should secure an indefeasible right to lay pipes across Minnesota Point in the state of Minnesota, etc., the company would take water from Lake Superior, and further that——

'at the expiration of the said thirty years, should the said village refuse to grant to the said Superior Waterworks Company, its successors or assigns, the right to continue and maintain said system of water works for another term of thirty years, upon the said terms and conditions as may exist between the said village or city and the said Superior Waterworks Company, at the expiration of the first thirty years, in and upon the public grounds and streets of the said village and to supply the said village and the inhabitants thereof with water on reasonable terms, then and in such case, the village shall purchase from said Superior Waterworks Company, its successors or assigns, said system of water works and the property connected therewith, at a fair valuation as provided for in section XIII.'

Section XIII provided for arbitrators to determine the actual value of the plant, exclusive of privileges granted by the village, not to exceed what it would cost to construct the same, etc. Section XIV:

'Within thirty days after the passage of this ordinance said Superior Waterworks Company may file with the village clerk its acceptance thereof, duly acknowledged before some authorized officer and from and after the filing of said acceptance this ordinance shall have the effect of and be a contract between the village of Superior and the Superior Waterworks Company and shall be the measure of the rights and liabilities of said village as well as of said company, and in case such acceptance is not so made and filed within thirty days after the passage of this ordinance, the village board shall have the right to repeal the same.'

The corporation accepted the ordinance, constructed the plant and many extensions, spent large sums in connection therewith, and long continued to operate it.

In March, 1889, the territory constituting the village of Superior was incorporated as the city of Superior. The charter declared that——

'All franchises heretofore granted, or contracts entered into, by the village of Superior, shall continue and remain in force in accordance with the terms thereof, as if the same had been granted or entered into by said city of Superior.' Chapter 152, p. 432, Laws 1889.

It further empowered the city——

'to provide for the purchase, construction, maintenance and operation of waterworks for the supply of water to the inhabitants of the city, and to supply such city with water for fire protection and other purposes; and to secure the erection of waterworks, said city may, by contract or ordinance, grant to any person, persons, company or corporation, the full right and privilege to build and own such waterworks, and to maintain, operate and regulate the same; and in doing so, to use the streets, alleys and bridges of the city in laying and maintaining the necessary pipe lines and hydrants for such term of years and on such conditions as may be prescribed by such ordinance or contract; and may also, by contract or ordinance, provide for supplying from such waterworks, the city with water for flre protection and for other purposes, and also the inhabitants thereof with water for such term of years, for such price, in such manner, and subject to such limitations as may be fixed by said contract or ordinance.' Chapter 152, pp. 369, 370.

October 1, 1889, with the express assent of the Superior Waterworks Company and in consideration of the waiver of certain rights by the latter, the city of Superior amended section XIII Ordinance of October 15, 1887, so as to provide that, if purchased, the price to be paid for the waterworks plant should be ascertained by capitalizing the net earnings of the preceding year at 5 per centum.¹ Sections II and III of this ordinance follow:

'Section II. This ordinance is passed upon the consideration to the city of Superior that the said city is hereby released and relieved from the duty, cost and expense of procuring, for said Superior Waterworks Company, the valid and indefeasible right to extend and lay its pipes across the bay of Superior and across Minnesota Point, to the shores of, and into Lake Superior, as provided in section II of said ordinance number one of the General Ordinances of the village of Superior and that all that part of said section No. II, commencing with the word 'provided' in the twentieth line thereof, down to and including the word 'completed' in the sixty-second line thereof is hereby repealed. And this said ordinance is passed upon the further consideration to the city of Superior, that by the acceptance hereof the said Superior Waterworks Company binds itself, its successors and assigns, to obtain at its own expense an adequate supply of good and wholesome water for domestic and public purposes from said Lake Superior and to furnish the same to the inhabitants of said city and to said city as provided in said ordinance number one as hereby amended within two years from the acceptance of this ordinance by said Superior Waterworks Company.

'Section III. This ordinance is passed with the consent of the Superior Waterworks Company and upon filing a written acceptance by it with the city clerk of the said city of Superior the said ordinance with all other ordinances of said city or the village of Superior granting to the said Superior Waterworks Company any rights or franchises shall be and become and is hereby made a binding contract as so amended and modified.'

In compliance with the foregoint ordinance and agreement the supply lines of the water system were extended across Minnesota Point, in the state of Minnsota, and into Lake Superior. The company also acquired a parcel of land on that point and there installed wells, machinery and equipemtn which became an essential part of the system.

On November 1, 1889, the Superior Waterworks Company sold and transferred its plant with all appurtenant rights and privileges to plaintiff in error, the Superior Water, Light & Power Company. Three ordinances amended the grant of 1887 (in ways not now necessary to detail) in 1889, 1896, and 1899. Two of these provided for and received express acceptance by plaintiff in error.

In 1907 the Wisconsin Legislature enacted the Public Utility Law (chapter 499, Laws 1907; Sections 1797m—1 to 1797m—109, Wis. Stat. 1919), which created the Railroad Commission a regulatory body, and authorized public utilities to surrender existing franchises and accept in lieu thereof 'indeterminate permits.' Chapter 596, Laws 1911, repealed the optional feature of the statute of 1907 and directed that every license, permit or franchise granted by the state or by any town, village or city to any corporation authorizing the latter to operate a plant for furnishing heat, light, water or power, etc., etc.——

'is so altered and amended as to constitute and to be an 'indeterminate permit' within the terms and meaning of sections 1797m—1 to 1797m—108, inclusive of the statutes, * * * and subject to all the terms, provisions, conditions, and limitations of said sections 1797m—1 to 1797m—108, inclusive and shall have the same force and effect as a license, permit, or franchise granted after July 11, 1907, to any public utility embraced in and subject to the provisions of said sections 1797m—1 to 1797m—108, inclusive, except as provided by section 1797m—80.'

One of the provisions to which reference is made gives the municipality the right to purchase upon terms to be fixed by the State Railroad Commission.

The statute (section 1797m—1) declares the term——

"indeterminate permit' * * * shall mean and embrace every grant, directly...