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CITY AND COUNTY DENVER v. NEW YORK TRUST COMPANY. CITY AND COUNTY DENVER V. DENVER UNION WATER COMPANY ET AL.

decided: May 26, 1913.

CITY AND COUNTY OF DENVER
v.
NEW YORK TRUST COMPANY.

CITY AND COUNTY OF DENVER
v.
DENVER UNION WATER COMPANY ET AL.



CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.

Author: Van Devanter

[ 229 U.S. Page 125]

 MR. JUSTICE VAN DEVANTER delivered the opinion of the court.

This suit presents a threefold controversy, to which the New York Trust Company (a New York corporation), the City and County of Denver (a municipal corporation in Colorado), and the Denver Union Water Company (a Colorado corporation) are the principal parties. They are respectively the successors of similar corporation whose acts, together with their own, created the situation out of which the controversy arose, but it will be convenient to treat them as if they were the original participants in all those acts. Although formerly controlled by a charter enacted by the legislature of the State, the city, in pursuance of an amendment of the state constitution, came in 1904 to be governed by a charter framed and adopted by the people of the city and over which they possessed an exclusive power of alteration and amendment. Laws 1889, p. 124; Laws 1893, p. 131; Const., Art. 20, Rev. Stat. 1908, p. 55.

By the charter from the state legislature (Laws 1889) the city was given power (§ 9) "to construct or purchase

[ 229 U.S. Page 126]

     water works for the use of the city" and generally to do whatever was "needful . . . in order to supply the city with water for fire, irrigating, domestic and other purposes," subject to the qualification (§ 12) that "all franchises or privileges" granted by the city should "be limited to twenty years from the granting of the same" April 10, 1890, while that charter was in force, the city, by an ordinance designated as No. 44 and duly accepted by the water company, granted to the latter, its successors and assigns, the right and privilege of laying down, continuing and maintaining pipes and other apparatus for the conveyance and distribution of water along and through designated streets, alleys and public places of the city, "to such extent as the city may lawfully grant the same" and subject to termination as therein provided. The ordinance contained various provisions regulatory of the right and privilege so granted, the duty of the water company to supply water for private use and for fire and other public purposes, the rates to be charged private users, and the hydrant rentals to be paid by the city. There were also the following sections:

"SEC. 11. At the expiration of the period of twenty years from and after the date of the passage and approval of the ordinance, in case the city shall then elect so to do, the said works may be purchased by the said city, and in case the parties can not agree, after such election, upon the price to be paid by the city for the water works of the said company, its successors and assigns, then their fair cash value shall be determined by arbitration, by five disinterested persons, none of whom shall be residents of Denver, two of them to be chosen by the city, two by the company, and the fifth by the four first chosen, and in case of failure on the part of the company to name arbitrators for the period of thirty days after the city shall have named arbitrators and notified the company so to do, the city may apply to any court having equity

[ 229 U.S. Page 127]

     jurisdiction in the county in which the city of Denver shall then be situated for the appointment of two persons of the qualifications aforesaid as such arbitrators, and the court may thereupon appoint two persons, who shall act with the same force and effect as if appointed by the company, and the decision of a majority of said board shall be final and binding upon both parties, and upon the payment, or tender of payment, by said city the said company shall convey to said city all of its property, real or personal, easements, rights and privileges, and thereafter all franchises, rights and privileges which have been at any time theretofore granted said company, its successors or assigns, and which it may then possess, shall cease and be at an end.

"SEC. 12. At the expiration of the said period of twenty years the said city may, at its election, renew the contracts hereby made, by ordinance to that effect, for a like period of twenty years, but at a price for hydrant rental 10 per cent. less than mentioned in section 10 hereof, for the period remaining after the ten years after May 1st, 1891, and for successive periods of twenty years at the price last aforesaid, as often and as long as the city may choose. This section is conditioned, however, upon the full performance by the city of the provisions of section 2 hereof.

"SEC. 19. This ordinance, when the same shall be in writing accepted by The Denver Water Company, becomes a contract between the city of Denver and the said The Denver Water Company, its successors and assigns, and the same shall as to every provision herein contained as fully bind and inure to the benefit of the successors and assigns of the said The Denver Water Company as to the said company. And it is expressly understood that by the acceptance of this ordinance the said The Denver Water Company loses no rights in regard to the occupation of the streets, alleys and public places, or as to the rights of any other person or persons thereto which it now

[ 229 U.S. Page 128]

     possesses, but the same are hereby recognized and confirmed and are to be deemed independent of and not merged in any grant in this ordinance elsewhere contained.

"SEC. 20. All mains, pipes, valves and other apparatus now owned by said The Denver Water Company, and composing its plant, and all such mains, pipes, valves, hydrants and other apparatus as said The Denver Water Company, its successors or assigns, shall hereafter lay down or set in or upon any of the streets, alleys or other public places within said city shall be and remain the sole and absolute property of said The Denver Water Company, its successors and assigns, and the said The Denver Water Company, its successors or assigns, shall forever be considered and entitled to be in possession thereof, except in case of purchase by said city under the terms of this ordinance, or some agreement between said city and said company, its successors or assigns, when all rights of whatsoever nature of said company, its successors or assigns, in and to the subject-matter hereof shall vest in said city.

"SEC. 21. While the consideration for the respective agreements of the city and the company are upon each side the several agreements of the other, all of the several grants, contracts and agreements in this ordinance contained are to be deemed independent agreements with the same force and effect as if each section of this ordinance was contained in a separate ordinance by itself."

By a written contract made in 1870 the city had granted to the water company a sole and exclusive right to lay pipes within the city for use in the distribution and sale of water, but that contract had been expressly annulled by another made in 1874, whereby the city granted to the company a right of like character expressly limited to a period of seventeen years from May 1 of that year. What was said in §§ 19 and 20 of the ordinance of 1890 about rights and a water plant already possessed by the water

[ 229 U.S. Page 129]

     company had reference to the rights then held and the plant then operated under the 17-year contract, which was within a year of expiration, and to some other rights mentioned in the record and equally without material bearing here.

By an amendment of the state constitution in 1902 -- it being the amendment under which the home-rule charter was framed and adopted two years later -- the city was empowered to construct, purchase, maintain and operate water works for the use of itself and its inhabitants, and to issue bonds, after an approving vote of the taxpaying electors, in any amount necessary to carry out that power; and this amendment declared that "No franchise relating to any street, alley, or public place of the said city and county shall be granted except upon the vote of the qualified taxpaying electors." Article XX, §§ 1 and 4.

October 2, 1907, about two and one-half years before the expiration of the 20-year period specified in the ordinance of 1890, the city adopted and the water company accepted an ordinance designated as No. 163, providing, first, for an immediate appraisement, by appraisers selected conformably to § 11 of the ordinance of 1890, of the fair cash value of all the property of the water company and its auxiliary companies then used in supplying the city and its inhabitants with water; second, for the immediate fixing by the appraisers of a schedule of reasonable rates for water for private and public purposes for a further period of 20 years; third, that the decision of any three of the appraisers should be binding as to the questions submitted to them for determination; fourth, for the submission to the electors of the city, at a single special election, of the questions (a) whether the city should purchase the property at the value fixed by such appraisement, and (b) whether a new contract or franchise should be granted to the water company for a further period of 20 years on the basis of the rates fixed by the

[ 229 U.S. Page 130]

     appraisers; fifth, for carrying into effect either of said propositions if approved by the electors; and, sixth, that if the electors should "refuse to accept either proposition" no prejudice should result to the rights of either party under the ordinance of 1890, but such rights should remain as if the ordinance of 1907 had not been adopted or accepted. That ordinance recited that the water company would agree with the city to put in new temporary rates to be charged private consumers of water after November 1, 1907, for the remainder of the term specified in the then existing contract or ordinance of 1890, "in the event that the city . . . shall not at said election . . . determine to purchas said plant or to extend or renew said contract for a furtherip iod of twenty years."

March 20, 1909, the appraisers, acting under the ordinance of 1907, appraised the property at $14,400,000, but they failed to fix the schedule of rates which was to be a part of the proposition to renew the existing contract or franchise of 1890 for a further period of 20 years, and this failure operated, without fault on the part of the city or the water company, to prevent any further action under the ordinance of 1907, which called for the submission of both propositions at a single special election.

May 17, 1910, over a month after the expiration of the 20-year period specified in the ordinance of 1890, the people of the city amended its charter by adding a new section, known as § 264a. Briefly described, this amendment created a public utilities commission, named its first members and transferred to it the authority theretofore given to the board of public works as to all public utilities; particularly invested it with large powers in respect of the construction, acquisition, maintenance and operation of a water plant; declared that the city should never exercise any ...


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