Defiance Water Company v. Defiance

On the 4th day of January, 1898, the city of Defiance, a municipal corporation of the state of Ohio, by its solicitor, filed a bill in equity against the council of the city of Defiance and the Defiance Waterworks Company, in the court of common pleas of Defiance county, Ohio, praying that future payments under an alleged contract of August 17, 1887, between the council of the city and Bullock & Company, who had subsequently assigned it to the water company, for the furnishing of water to the city for the term of thirty years from the date of the contract, be enjoined because of the invalidity of said contract, on grounds set forth. A preliminary injunction was granted. The defiance Water Company thereupon presented its petition and bond for the removal of the case to the circuit court of the United States for the northern district of Ohio, the petition alleging: 'That this is a suit of a civil nature in which there is a controversy arising under the Constitution of the United States, in this especially, that by means of it the said plaintiff seeks to abrogate the contract alleged in its suit, and to deprive this defendant of its property, the amount alleged in said plaintiff's petition to be due this defendant, under said contract, without due process of law and without trial by jury; to which end and for which purpose the said council of the said city of Defiance have colluded and conspired with the said plaintiff, and it is by their said council's procurement that the said plaintiff has brought the said suit.'

The case was removed, but on January 24, 1898, was remanded by the circuit court of the United States to the court of common pleas. On the same day the water company filed its bill in the circuit court of the United States against the city of Defiance and the council of the city of Defiance, and complained that complainant was a corporation organized under the laws of the state of Ohio for the purpose of operating waterworks in the city of Defiance, and thereby furnishing water to the city and to its citizens; that on January 4 the city brought the suit hereinbefore mentioned, and had obtained a preliminary injunction therein; that on August 17, 1887, the city of Defiance duly passed an ordinance entitled 'An Ordinance to Authorize and Provide for the Construction and Maintenance of a System of Waterworks in the City of Defiance, Defiance County, Ohio,' a copy of which ordinance was annexed. The provisions of the ordinance were then set forth, to the effect that by its terms the right and privilege for the period of thirty years thereafter was granted to Bullock & Company, their associates, successors, and assigns, to locate and operate a system of waterworks in that city, and to use the streets of the city for the purposes thereof; that the city contracted to rent of Bullock & Company a certain number of hydrants, and to pay a certain rental therefor; that the city, at the expiration of ten years, was given the right to purchase the system, or, if that was not then done, then at the expiration of five years thereafter.

It was averred that the ordinance was accepted by Bullock & Company, and the works were constructed, in the course of which Bullock & Company became indebted, and certain mortgage bonds were issued, which were outstanding and held by certain persons named; that Bullock & Company assigned all their rights and interests to the Defiance Water Company, and the water company completed the construction of the works to the entire satisfaction of the city, and the same were accepted March 5, 1889, by resolution.

The bill further averred that the city had used the hydrants and was still using them, and that it had paid all of the rentals claimed under the contract down to January 1, 1898, except the sum of $500 due in 1895, to recover which suit had been commenced. It was then alleged that the city council 'at its regular meeting, January 7th, 1896, passed an ordinance or resolution in substance rescinding and annulling said contract of the city with the Defiance Water Company, your orator, so far as it had power so to do; and providing by the terms of said ordinance or resolution, by which it should allow the bill of said water company for the rents that had accrued to them from the said city for the last half of the year 1895, that the payment of the said bill should not be 'construed or taken to be any acknowledgment of any contract between them and the said city for said water rentals, or in any manner implying any actual performance of any alleged contract, and that no further payment at the present rate be made to the said company."

The bill then stated that there was due to the water company for the last half of the year 1897 the sum of $3,142.50, less $756, which, it was subsequently said, had been paid. And it was charged, on information and belief, that the council and the several members of it had, ever since the passage of the resolution or ordinance of January 7, A. D. 1896, claimed, and repeatedly stated and given out to the public generally, that the city had no such contract as aforesaid for furnishing water to it by the water company; and that they had also passed resolutions and ordinances looking toward the construction of waterworks by the city, but nevertheless the city had given no notice of its intention to purchase, and had not offered to purchase, complainant's waterworks. And, furthermore, that many, if not all, of the members of the council combined, colluded, and confederated together and with the city solicitor, to procure him to institute the suit before mentioned, and to procure an order of injunction against themselves, the city council, prohibiting them from paying complainant the amounts due and owing. The bill then averred 'that if said order of injunction shall stand and be made perpetual the said city and council of Defiance, said defendants, will thereby deprive your orator of its property without due process of law, and by means of said order of injunction they will confiscate your orator's property and convert it to their own use, without payment therefor and without trial by jury, contrary to the provisions of the Constitution of the United States.' And it was further averred 'that the passage of said ordinance or resolution, and the attempt thereby to abrogate and annul said contract, contravenes the provisions of § 10 of article 1 of the Constitution of the United States, in this, that they are laws impairing the obligation of their said contract with your orator.'

The prayer was that an account might be taken of the amount due complainant from the city of Defiance for water rents that may have accrued to it, and that the city and the city council be decreed and ordered to allow and pay the same; that a provisional or preliminary injunction be issued to restrain defendants from appropriating and diverting the moneys in the water fund to the payment of any other indebtedness than that due complainant; and that on final hearing the council and the city be perpetually enjoined from thereafter denying the existence of the contract, and abrogating or attempting to abrogate or annul the same; and for general relief.

The bill was subsequently amended, and a supplemental bill filed.

To the bill as amended defendants demurred for want of jurisdiction, among other grounds specially assigned, and the demurrers were overruled. Complainant then filed a supplemental bill, and to the amended and supplemental bills defendants filed a joint plea, with an answer in support thereof, insisting, among other things, that the court of common pleas of Defiance county had jurisdiction in the premises, and that the circuit court had not. The plea was overruled, and defendants answered, May 1, 1899, reserving their rights under their demurrers and plea; asserting the illegality of the alleged contract; insisting that complainant's bill was an attempt to secure a removal of the case from the state court to the circuit court, which had already been determined against complainant; denying the passage of any resolution or ordinance by the city council impairing or intended to impair the obligation of any contract with complainant or its assignors; and the performance of any act, or the intention to perform any act, toward the erection or construction of waterworks by the city; and submitting that the circuit court had no jurisdiction of the subject-matter, and that it ought to refuse to further hear or consider the cause.

Defendants attached to their answer, as they did to their plea, a copy of the resolution of January 7, 1896, referred to in the bill, and also copies of sundry other ordinances or resolutions, and denied that that of January 7, 1896, or any other, had the effect, or was intended to have the effect, of impairing the obligation of the alleged contract with complainant; and insisted that if that, or any other resolution or ordinance, had the scope attributed to it, it was not lawfully passed under the statutes of Ohio; and, further, that such resolution or ordinance had been repealed by various subsequent resolutions or ordinances for the payment of rentals to complainant, copies of which were attached. Defendants disclaimed any reliance on or benefit from any or all said resolutions and ordinances as releasing or intending to release the city from the obligation of the alleged contract, or that they served any other purpose than as notice that defendants claimed the ordinance of 1887 was void and illegal from the beginning. Defendants denied combination or collusion in the institution of the suit in the state court, and averred that the city solicitor acted on his own volition.

Replication was filed, and evidence taken, and on June 17, 1901, defendants, by leave of court, filed a plea setting up the final decree of the circuit court of Defiance county, entered March 15, 1901, in the suit commenced in the court of common pleas, adjudging the alleged contract to be null and void, and perpetually enjoining the city of Defiance and the Defiance Water Company from carrying it out. Replication was filed to this plea, and a transcript of the record in the state courts was put in evidence. This showed that, after the case commenced in the court of common pleas was remanded to that court, a demurrer was filed to the petition, was sustained, and the petition dismissed, whereupon the case was carried to the circuit court of Defiance county by appeal. In that court the demurrer was overruled, the water company answered, the city replied, the case was heard on pleadings and evidence, and a final decree was rendered in favor of the city and against the water company and the city council to the effect above stated. The circuit court of the United States on hearing sustained defendants' plea and dismissed the bill. From that decree complainant prosecuted this appeal, which was argued in this court April 22, 1903. Thereafter, and on October 13, counsel for all the parties called the attention of the court to the fact that the case in the circuit court of Defiance county had been carried to the supreme court of Ohio by the water company, and that that court on June 16, 1903, had reversed the decree of said circuit court, sustained the demurrer to the petition, and directed it to be dismissed. 48 Ohio L. J. 687, 67 N. E. 1052. The supreme court held that, even if the alleged contract between the city and Bullock & Company were invalid, the cause of action to restrain its performance was barred by statute.

Messrs. Henry Newbegin, Rohert Newbegin, and Robert W. Bingham, for appellant.

Messrs. Henry B. Harris, Fred L. Hay, John P. Cameron, and William D. Hill, for appellees.

Statement by Mr. Chief Justice Fuller:

Mr. Chief Justice Fuller delivered the opinion of the court: