Hamilton Gaslight Coke Company v. Hamilton/Opinion of the Court

The plaintiff's first contention is that there is no statute of Ohio authorizing any city, in which there are already gas works in full and complete operation, to erect gas works, or to levy a tax for that purpose. If this were conceded, we should feel obliged-the plaintiff and defendant both being corporations of Ohio-to reverse the judgment, and remand the cause with directions to dismiss the suit for want of jurisdiction in the circuit court. The jurisdiction of that court can be sustained only upon the theory that the suit is one arising under the constitution of the United States. But the suit would not be of that character if regarded as one in which the plaintiff merely sought protection against the violation of the alleged contract by an ordinance to which the state has not, in any form, given or attempted to give the force of law. A municipal ordinance, not passed under supposed legislative authority, cannot be regarded as a law of the state, within the meaning of the constitutional prohibition against state laws impairing the obligations of contracts. Murray v. Charleston, 96 U.S. 432, 440; Williams v. Bruffy, Id. 176, 183; Water Co. v. Easton, 121 U.S. 388, 192, 7 Sup. Ct. Rep. 916; New Orleans Water Works v. Louisiana Sugar Co., 125 U.S. 18, 31, 38, 8 Sup. Ct. Rep. 741. A suit to prevent the enforcement of such an ordinance would not, therefore, be one arising under the constitution of the United States. We sustain the jurisdiction of the circuit court because it appears that the defendant grounded its right to enact the ordinance in question, and to maintain and erect gas works of its own, upon that section of the Municipal Code of Ohio, adopted in 1869, (now section 2486 of the Revised Statutes,) providing that the city council of any city or village should have power, whenever it was deemed expedient and for the public good, to erect gas works at the expense of the corporation, or to purchase gas works already erected therein; which section, the plaintiff contends, if construed as conferring the authority claimed, impaired the obligation of its contract previously made with the state and the city.

What, then, we must inquire, is the scope and effect of section 2486? This precise question has been determined by the supreme court of Ohio in State v. City of Hamilton, 47 Ohio St. 52, 23 N. E. Rep. 935, which was an action brought in the name of the state to determine whether the city had authority to erect its own gas works. It was there contended, both by the attorney general and the Hamilton Gaslight & Coke Company, that by sections 2480 and 2482 of the Revised Statutes (which are the same as sections 31 and 32 of the act of March 11, 1853) the legislature specified the conditions under which the council might build gas works; that, in the absence of those conditions, the city was without power to do what it proposed to do; and that such an expression of the legislative will excluded the right of the city to erect gas works under any circumstances. But the court said: 'Those two sections designate what refusal or neglect on the part of gas companies to meet the requirements of law would work a forfeiture of their rights under their charter, and authorize the council to lay pipes, and erect gas works, and exclude a gas company already in operation from occupying any streets not already furnished with gas pipes of such companies: but such authority is very different from the general power conferred upon the council by section 2486 to construct gas works without reference to the manner in which the existing company may use its franchise.' 'Section 2486,' the court proceeds, 'in plain language gives the power to the council either to erect gas works, or to purchase such works already erected. The authority granted is not coupled with any conditions or contingency, but is to be exercised when the council may deem it expedient and for the public good. The language is free from ambiguity. The discretionary power would hardly seem consistent with the limitation sought to be imposed, that the council can build gas works only where there are no gas works in the municipality, or where gas companies, already organized, refuse or neglect to comply with the requirements of the law as to lighting or laying pipes, or negiect to furnish gas to citizens. The interest of the city may demand that a gas company established and doing business, although complying with all statutes and ordinances, should not continue to enjoy exclusive possession of the field of operation.' Again: 'In its present form, section 2486 was passed many years after the two sections which are reproduced in section 2480 and section 2482. Between the earlier and later statutory provisions we discover no repugnaney, and the canons of statutory construction do not require that either should prevail over the other. The authority given to municipalities by the later section is distinct from and independent of the power granted by the two antecedent sections.'

Accepting, as we do, this decision of the highest court of the state as correctly interpreting the legislative will, and, therefore, assuming that the legislature intended by section 2486 to confer authority upon the city of Hamilton to erect gas works at its expense, whenever deemed by it expedient or for the public good to do so, the next contention of the plaintiff is that such legislation is within the constitutional inhibition of state laws impairing the obligations of contracts. This view is inadmissible. The statutes in force when the plaintiff became a corporation did not compel the city to use the gaslight furnished by the plaintiff. The city was empowered to contract with the company for lighting streets, lanes, squares, and public places within its limits, but it was under no legal obligation to make a contract of that character, although it could regulate by ordinance the price to be charged for gaslight supplied by the plaintiff and used by the city or its inhabitants. It may be that the stockholders of the plaintiff supposed, at the time it became incorporated, and when they made their original investment, that the city would never do what evidently is contemplated by the ordinance of 1889. And it may be that the erection and maintenance of gas works by the city at the public expense, and in competition with the plaintiff, will ultimately impair, if not destroy, the value of the plaintiff's works for the purposes for which they were established. But such considerations cannot control the determination of the legal rights of the parties. As said by this court in Curtis v. Whitney, 13 Wall. 68, 70: 'Nor does every statute which affects the value of a contract impair its obligation. It is one of the contingencies to which parties look now in making a large class of contracts, that they may be affected in many ways by state and national legislation.' If parties wish to guard against contingencies of that kind they must do so by such clear and explicit language as will take their contracts out of the established rule that public grants, susceptible of two constructions, must receive the one most favorable to the public. Upon this ground it was held in Stein v. Bienville Water Supply Co., 141 U.S. 67, 81, 11 Sup. Ct. Rep. 892, that 'we are forbidden to hold that a grant, under legislative authority, of an exclusive privilege, for a term of years, of supplying a municipal corporation and its people with water drawn by means of a system of water works from a particular stream or river, prevents the state from granting to other persons the privilege of supplying, during the same period, the same corporation and people with water drawn in like manner from a different stream or river.' What was said in Turnpike Co. v. State, 3 Wall. 210, 213, is quite applicable to the present case. The state of Maryland incorporated a company with power to construct a turnpike between Baltimore and Washington; and subsequently incorporated a railroad company, with authority to construct a railroad between the same cities, the line of which ran near to and parallel with the turnpike. One of the questions in the case was whether the last act impaired the obligation of the contract with the turnpike company, it appearing that the construction of the railroad had rendered it impracticable for the company, out of its diminished income, to maintain the turnpike in proper order. This court said: 'The difficulty of the argument in behalf of the turnpike company, and which lies at the foundation of the defense, is that there is no contract in the charter of the turnpike company that prohibited the legislature from authorizing the construction of the rival railroad. No exclusive privileges had been conferred upon it, either in express terms or by necessary implication; and hence, whatever may have been the general injurious effects and consequences to the company from the construction and operation of the rival road, they are simply misfortunes which may excite our sympathies, but are not the subject of legal redress.' So, it may be said, in the present case, neither the statutes under which the plaintiff became a corporation, nor in any contract it had with the city, after January 1, 1889, was there any provision that prevented the state from giving the city authority to erect and maintain gas works at its own expense, or that prevented the city from executing the power granted by the section of the Code of 1869 to which we have referred.

This conclusion is required by other considerations. By the constitution of Ohio, adopted in 1851, it was declared that 'no special privileges or immunities shall ever be granted, that may not be altered, revoked, or repealed by the general assembly;' that 'the general assembly shall pass no special act conferring corporate powers;' and that 'corporations may be formed under general laws, but all such laws may, from time to time, be altered or repealed.' Const. Ohio, § 2, art. 1; sections 1, 2, art. 13. If the statute under which the plaintiff became incorporated be construed as giving it the exclusive privilege, so long as it met the requirements of law, of supplying gaslight to the city of Hamilton and its inhabitants by means of pipes laid in the public ways, there is no escape from the conclusion that such a grant, as respects, at least, its exclusive character, was subject to the power of the legislature, reserved by the state constitution, of altering or revoking it. This reservation of power to alter or revoke a grant of special privileges necessarily became a part of the charter of every corporation formed under the general statute providing for the formation of corporations. A legislative grant to a corporation of special privileges, if not forbidden by the constitution, may be a contract; but where one of the conditions of the grant is that the legislature may alter or revoke it, a law altering or revoking, or which has the effect to alter or revoke, the exclusive character of such privileges, cannot be regarded as one impairing the obligation of the contract, whatever may be the motive of the legislature, or however harshly such legislation may operate, in the particular case, upon the corporation or parties affected by it. The corporation, by accepting the grant subject to the legislative power so reserved by the constitution, must be held to have assented to such reservation. These views are supported by the decisions of this court. In Greenwood v. Freight Co., 105 U.S. 13, 17, the question was as to the scope and effect of a clause in a general statute of Massachusetts, providing that every act of incorporation passed after a named day 'shall be subject to amendment, alteration, or repeal, at the pleasure of the legislature.' This court, referring to that clause, said: 'Such an act may be amended; that is, it may be changed by additions to its terms, or by qualifications of the same. It may be altered by the same power, and it may be repealed. What is it, may be repealed? It is the act of incorporation. It is this organic law on which the corporate existence of the company depends, which may be repealed, so that it shall cease to be a law; or the legislature may adopt the milder course of amending the law in matters which need amendment, or altering it when it needs substantial change. All this may be done at the pleasure of the legislature. That body need give no reason for its action in the matter. The validity of such action does not depend on the necessity for it, or on the soundness of the reasons which prompted it.' The words, 'at the pleasure of the legislature,' are not in the clauses of the constitution of Ohio, or in the statutes to which we have referred. But the general reservation of the power to alter, revoke, or repeal a grant of special privileges necessarily implies that the power may be exerted at the pleasure of the legislature.

We perceive no error in the record in respect to the federal question involved, and the judgment must be affirmed.

It is so ordered.