Joplin v. Southwest Missouri Light Company/Opinion of the Court

The foundation of the suit is that the ordinances of March, 1899, and the acts and conduct of the city in entering into competition with the complainant (appellee) impair the obligation of the contract impliedly arising from the ordinance of October 7, 1891, and the acceptance thereof by appellee. In other words, it is contended that under the statute of the state, which we have quoted, the city was given the power to construct an electical plant and erect poles, etc., to 'supply private lights for the use of the inhabitants of the city,' or it could grant that right 'to any person or persons or corporation' upon such terms as might be prescribed by ordinance. It chose the latter, and granted to the assignors of appellee the right given by the statute, and expressed it to be 'in consideration of the benefits to be derived therefrom.' And it is hence contended that thereby the city contracted not to build works of its own, and that by doing so it violated § 10 of article 1 of the Constitution of the United States, which provides that no state shall pass any law impairing the obligation of a contract, and also violated that clause of the 14th Amendment of that instrument, which provides that no state shall deprive any person of property without due process of law.

It is by implication from the statute and the ordinance passed under it, not from the explicit expression of either, that the conclusion is deduced that the city is precluded from erecting its own lighting plant, and yet it is conceded that the grant to the appellee is not exclusive. That is, it is conceded the city has not exhausted its power under the statute by the grant held by appellee, but may make another to some other person than the appellee. In other words, that the city may make a competitor to appellee, but cannot itself become such competitor. The strength of the argument urged to support the distinction is in the consideration that competition by the city would be more effective than competition by private persons or corporations-indeed, might be destructive. The city, it is further urged, could be indifferent to profits, and could tax its competitor to compensate losses. But this is speculation and it may be opposed by speculation, and there are, besides, countervailing considerations. The limitation contended for is upon a governmental agency, and restraints upon that must not be readily implied. The appellee concedes, as we have seen, that it has no exclusive right, and yet contends for a limitation upon the city which might give it (the appellee) a practical monopoly. Others may not seek to compete with it, and if the city cannot, the city is left with a useless potentiality, while the appellee exercises and enjoys a practically exclusive right. There are presumptions, we repeat, against the granting of exclusive rights, and against limitations upon the powers of government.

Many cases illustrate this principle, and some of them were decided in response to contentions similar to those made in the case at bar. In Skaneateles Waterworks Co. v. Skaneateles, 184 U.S. 354, 46 L. ed. 585, 22 Sup. Ct. Rep. 400, the village of Skaneateles, under statutes of the state of New York, granted to the water company the right to construct waterworks, and contracted with it to supply water to the village and its inhabitants for the period of five years. At the expiration of the term of the contract some difference arose about the terms of its continuance, and the village constructed an independent system of waterworks. A suit was brought by the water company to restrain the further construction of the works and their operation, and the company contended that under the statute of the state by which the village granted to the company its franchises, the village had the election to construct works, or confer such power upon a private company like the water company, and having elected the latter, it impliedly contracted not to construct works of its own. In reply to this contention this court said, by Mr. Justice Peckham:

'There is no implied contract in an ordinary grant of a franchise, such as this, that the grantor will never do any act by which the value of the franchise granted may in the future be reduced. Such a contract would be altogether too far-reaching and important in its possible consequences in the way of limitation of the powers of a municipality, even in matters not immediately connected with water, to be left to implication. We think none such arises from the facts detailed.'

It is true there was an element in that case which is not in the case at bar. The village of Skaneateles had entered into a contract with the water company to take water from the company. This contract had expired before the city constructed its works. It was not that contract, however, which was alleged to have been impaired, but that which the water company claimed to have been implied by reason of its organization and incorporation, and in pursuance of the application made to, and with the consent of, the village authorities. The ultimate reliance, therefore, of the water company was that from the grant to it the village impliedly contracted not to construct works of its own. The similarity of the contention with that in the case at bar is apparent.

In Bienville Water Supply Co. v. Mobile, 175 U.S. 109, 44 L. ed. 92, 20 Sup. Ct. Rep. 40, 186 U.S. 212, 46 L. ed. 1132, 22 Sup. Ct. Rep. 820, it was again decided that the granting of franchises to private persons to construct waterworks in a city does not preclude the city from afterwards erecting such works, and supplying its inhabitants with water.

Walla Walla v. Walla Walla Water Co. 172 U.S. 1, 43 L. ed. 341, 19 Sup. Ct. Rep. 77, is not in opposition to these views. The city of Walla Walla was, by the statute incorporating it, empowered to erect waterworks or to authorize the erection of the same. In pursuance of this power it granted a franchise to the Walla Walla company, and contracted to take water from the company, reserving the right to avoid the contract under certain contingencies. But it was provided that: 'Until such contract shall have been so avoided, the city of Walla Walla shall not erect, maintain, or become interested in any waterworks except the ones herein referred to, save as hereinafter specified.' The contract was in force at the time the suit was brought, and the water company had substantially complied with all of its terms and conditions. The contract passed upon, therefore, was expressed and explicit. The power to make it was sustained. In the case at bar, restraint upon the power of the appellant city is claimed to be implied by the grant to the appellee. We think, for the reasons stated and upon the authorities cited, such restraint cannot be implied.

Decree Reversed and case remanded with directions to dismiss the bill.