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U.S. Supreme Court

Freeport Water Co. v. Freeport City, 180 U.S. 587 (1901)

Freeport Water Company v. Freeport City

No. 349

Submitted October 31, 1900

Decided March 25, 1901

180 U.S. 587


The water company was a corporation organized under general statutes of Illinois, as was also the city. In June, 1882, the government of the city gave the water company an exclusive right to supply the city with water for thirty years, reserving the right of purchasing the works erected for that purpose, and if this right were not exercised, the rights of the company were to be extended for a further term. Provision was made for the erection of hydrants by the company for which fixed rentals were to be charged, and the city was given rights in a part of them. Further provisions were made for the payment of water rates by consumers. In 1896, an ordinance was passed by the city reducing the rentals of the hydrants and rates to consumers to take effect from the date of its passage. At the time when the grant of 1882 was made, a statute passed in 1872 was in force in Illinois authorizing cities and villages to chanrobles.com-red

Page 180 U. S. 588

contract with incorporated companies for a supply of water for a public use for a period not exceeding thirty years. Held that the power so conferred by the statute of 1872 in force in 1882 could, without straining, be construed as distributive; that the city council was authorized to contract with any person or corporation to construct and maintain waterworks at such rates as might be fixed by ordinance and for a period not exceeding thirty years; that the words "fixed by ordinance" might be construed to mean by ordinance once for all to endure during the whole period of thirty years, or by ordinance from time to time as might be deemed necessary, and that, of the two constructions, that must be adopted which is most favorable to the public, not that one which would so tie the hands of the council that the rates could not be adjusted as justice to both parties might require at a particular time.

This is an action of assumpsit brought by the plaintiff in error against the defendant in error in the Circuit Court of Stephenson County, State of Illinois, for the price of water delivered by plaintiff in error to defendant in error between January 1, 1896, and July 1, 1896.

The cause of action was based upon a contract arising from an ordinance passed by defendant empowering the plaintiff to construct certain waterworks in the City of Freeport and the renting from the plaintiff by the City of certain fire hydrants.

To the defenses of a subsequent ordinance reducing the rental of such hydrants, it was replied that the latter ordinance impaired the obligation of the first ordinance as a contract, and therefore violated the Constitution of the United States.

The case was presented upon a demurrer to the pleas of the defendant. The demurrer was overruled by the circuit court, and, the plaintiff electing to stand by its demurrer, judgment was entered for the defendant for costs. On appeal to the supreme court, the judgment was affirmed, 186 Ill. 179, and to that action this writ of error is directed.

The facts presented by the pleadings are as follows:

The plaintiff is a corporation organized and existing under the general laws of the state, and the defendant is a municipal corporation organized under the general act of the state entitled "An Act to Provide for the Incorporation of Cities and Villages," approved April 10, 1872, and in force July 1, 1872, and the acts amendatory thereof.

That on the 6th of June, 1882, defendant enacted an ordinance chanrobles.com-red

Page 180 U. S. 589

giving and granting to Nathan Shelton or his assigns the exclusive right and privilege, for the term of thirty years from the first of July, 1882, to supply the City of Freeport and its citizens with water suitable for domestic and manufacturing purposes. The city reserved the right of purchasing the works at the end of thirty years. If such right should not be exercised, the rights and privileges of the plaintiff were to be extended for a further period of twenty-five years. There were the usual provisions for the use of the streets, the character of the works and appliances, the quality of the water, and provision was made for the extension of the system as the growth of the city and its needs might require.

Section 7 of the ordinance was as follows:

"The said Nathan Shelton or his assigns shall erect double nozzle fire hydrants upon all mains ordered laid by said city council in said city at the rate of not less than ten to each mile of said mains, and shall erect said fire hydrants whenever and wherever said city council shall direct. And said city shall pay to said Nathan Shelton or his assigns as an annual rental for the first one hundred of said hydrants the sum of one hundred dollars each, for all said hydrants over one hundred and up to one hundred and fifty an annual rental of eighty dollars each, and for all of said hydrants over one hundred and fifty an annual rental of fifty dollars each, which said rentals shall be payable semiannually on the 15th days of January and July in each year, and the pay of each hydrant shall commence when each hydrant is actually ready for use and the city officially notified thereof, and shall continue during the full term specified in this ordinance, unless said city shall sooner become the owner of said waterworks as hereinbefore provided, in which event said rental shall cease. The pay of any hydrant shall cease whenever any hydrant is out of repair, or unfit for use, or incapable of throwing a stream as provided for in this ordinance."

The city was given the right to use water free of charge from the hydrants on streets curbed and guttered, for flushing and washing the gutters, and from any hydrant, upon giving notice, for flushing any and all sewers; also water free of charge for the use of the fire department and for the city hall, public chanrobles.com-red

Page 180 U. S. 590

offices, public schools, churches, and for four public drinking fountains if the city should erect the same.

Maximum rates to consumers were fixed for purposes which were especially enumerated, and it was provided that

"rents for other purposes not herein named will be fixed by meter measurement, as may be agreed upon between the consumer and the water company, not exceeding the following rates."

The rates were specified.

Section 13 was as follows:

"This ordinance shall become binding as a contract between the City of Freeport, Illinois, and Nathan Shelton or his assigns, upon the filing with the city clerk of a written acceptance thereof by Nathan Shelton or his assigns, provided the same shall be done within thirty days from the passage and publication of this ordinance, and this ordinance when so accepted shall not be altered, amended, or changed in any way without the concurrence and consent of both parties thereto and interested therein, or their successors or assigns."

On June 27, 1882, Shelton filed a written acceptance of the terms and conditions of the ordinance. On August 8, 1882, he assigned all his rights to plaintiff, of which defendant had notice. Plaintiff has complied with all things required of Shelton or of it, has constructed 121 hydrants as required by section 7 and as ordered by defendant, which were in operation on January 1, 1896, and defendant paid all rentals which became due January 1, 1896, and that there was due for rentals subsequent to that date, and up to the 15th of July, 1896, the sum of $5,840.

The pleas of the defendant in substance alleged that it was a municipal corporation organized under the general laws of the state for the incorporation of cities and villages, and that, in pursuance of the statutes of the state relating to waterworks, it passed the ordinance of June 6, 1882.

It was alleged in plea No. 1 that the water rates fixed by such ordinance

"were then unjust, unreasonable, and oppressive to the citizens and taxpayers of said city, and so remained and continued to be unjust, unreasonable, and oppressive from said enactment thereof up and until the subsequent action of the council of said city had in relation thereto. . . ."

This chanrobles.com-red

Page 180 U. S. 591

charge was substantially repeated in the other pleas, and it was alleged that the new rates were just and reasonable. The ordinance of February 11, 1896, was set out in full. The following is all that is necessary to be quoted:

"SEC. 1. That the Freeport Water Company, a corporation, now furnishing to the City of Freeport and its inhabitants water for fire protection, domestic uses, and manufacturing purposes, and other uses and purposes, shall be entitled to charge and receive therefor, and for the use of water meters, the rates and prices hereinafter fixed and no more."

"Fire Protection and Public Uses"

"SEC. 2. Said corporation shall be entitled to charge and receive from the City of Freeport for all water furnished for fire protection and other public uses and purposes as hereinafter defined and enumerated an annual rental or rate of fifty dollars ($50.00) for each double nozzle fire hydrant now in use in the said City of Freeport, or any that may be ordered hereafter by the City Council of the City of Freeport, such rental to be payable in semi-annual installments on the fifteenth (15th) day of January and July, provided that it shall be shown by a certificate signed by the committee on water, city engineer, and chief of fire department that test of the works of said corporation has been made within six (6) months, and that such works have been in such condition as to furnish at all times and for any length of time a fire pressure sufficient to throw six (6) fire streams from six (6) hydrants chosen by the committee on water, each through fifty (50) feet of two and one-half inch hose and one-inch nozzle from each hydrant so chosen to a height of one hundred (100) feet, or maintain its equivalent in pressure at the nozzles of the hydrants. Where the works of said corporation are not shown to be maintained in condition to furnish such fire pressure, the rental shall be one-half the amount hereinbefore fixed. The above rate and rental shall be in full payment for all water furnished as follows: for fire protection, including the furnishing and setting of fire hydrants for all water used by the fire department in extinguishing fires and in practice, for all water used by the committee on water

Page 180 U. S. 592

for cleaning, washing, flushing gutters and sewers, in said city, and for all water used for the city hall, fire and police stations, and other city offices, for drinking fountain in park when desired, and for all public schools and churches in the city."

The ordinance further established in detail maximum rates for water to be furnished for domestic and manufacturing uses and other uses when furnished without meter; also rates when furnished or measured by meter. There was a penalty provided for charging greater rates than those established.

The ordinance was to take effect from the date of its passage, and the right of further regulation was reserved.

The rates established by the ordinance of February 11, 1896, were considerably less than those established by the ordinance of June, 1882.

The assignment of error presented the contentions in various ways that the ordinance of February 11, 1896, and the statutes in pursuance of which it was claimed to have been passed, violated the Constitution of the United States in that the ordinance and statutes impaired the obligation of the contract made by the ordinances of June, 1882, with plaintiff, and deprived it of its property without due process of law.

The statutes of the states which are urged as applicable to the contentions of the parties are cited in the margin. [Footnote 1]