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down in the streets of the city 12 miles of iron pipes of sufficient capacity to supply the inhabitants with water for domestic purposes: to extend the pipes as fast as the citizens would agree to take sufficient water to pay 10 per cent upon the cost of such extension; to erect one hydrant, as protection against fire, at one corner of each crossing of streets where pipes were or might be laid; to erect an ornamental fountain on the public plaza at a cost not exceeding $1,000; to construct and erect, within two years, such reservoirs, machinery, ditches, and flumes as would secure the inhabitants with a constant supply of water for domestic purposes; to furnish water free of charge for the public schoolhouses, hospitals, and jails; to keep in repair all of said improvements, at the cost and expense of the parties of the second part, for said term of thirty years, and to return said waterworks to said party of the first part at the expiration of said term, in good order and condition, reasonable wear and damage of the elements excepted, upon payment to said parties of the value of the aforesaid improvements, to be ascertained as provided for in the contract; to give a bond in the sum of $20,000 for the performance of said contract, and to pay all state and county taxes assessed upon the waterworks during the period of thirty years.

[561] *And as the circuit found:

"Griffin, Beaudry, and Lazard applied for and procured said contract on behalf and for the benefit of themselves and other persons, with the intention of forming a corporation to carry out said contract, and afterwards, about the middle or latter part of August, 1868, themselves and said other persons being the incorporators, organized, under the laws of the state of California, the Los Angeles City Water Company, for the of supplying the inhabitants of said city with water for domestic purposes, etc., under the terms of said contract, and assigned all their rights and franchises under said contract to said company by a written instrument dated June the 12th, 1869, and recorded in the office of the recorder of said county of Los Angeles, June the 15th, 1869.

purpose

"On April the 2d, 1870, the legislature of California passed an act hereinafter set forth, in terins ratifying and confirming said

contract.

water

"Griffin, Beaudry, and Lazard did nothing personally in carrying out said contract or constructing or maintaining said works, but said company, after it was organized, took possession of said waterworks, and has performed all of the above-mentioned obligations of said contract, except the one providing for the return of the waterworks at expiration of lease, and in such performance has laid 320 miles of pipe, erected over 500 hydrants for protection against fire, and constructed 6 reservoirs, with an aggregate capacity of nearly sixty-six millions of gallons, and is now, as it has been at all times since the contract was made, furnishing the city of Los Angeles with water for the extinguishment of fires and for the public schools, hospitals, and jails in said

city free of charge. The aforesaid extensions of the water works were rendered necessary by the growth of said city, whose population in 1868 was between 5,000 and 6,000, and is now about 103,000.

"During the whole of the year 1868 the territorial limits of the city of Los Angeles were as follows: Four square leagues in a square form, the center of which was the cen. ter of the old pueblo plaza.

"About 1872 the limits were extended 420 yards south of *the former south boundary [562] and within the past three years, and prior to July, 1897, the limits were further extended so as to take in between 10 and 15 square miles of additional adjoining territory. Immediately after the extension of the said limits, the Los Angeles City Water Company began to extend its pipes over the said addition to the city as the same was settled up and improved, and ever since has been, and is now, furnishing water to the people in said district added to the original territory of the city, and, upon the demands of the city council, erected fire hydrants within the said additional territory and furnished water free of charge, and has in all respects continued to lay pipes, erect fire hydrants, and furnish the inhabitants with water for domestic uses in like manner as it has conducted the same business within the original limits of the city as established by the act incorporating it, and so with the more recent extension of the city limits, to wit, those made within the last three years, the company has also extended its pipes in portions of those limits and furnished water in the same way.

"The quantity of water required to supPly the domestic wants of the people of said city is 1 inch of water, measured under a 4inch pressure, to every 100 inhabitants. To meet the increased demands upon it for water under said contract, said company has, among other things, purchased the system known as the 'Beaudry System of WaterWorks,' and also certain water rights in the Arroyo Seco, and conducted water from the Arroyo Seco into the city on the east side of the Los Angeles river, and has been furnish. ing the inhabitants of that portion of the city with water from said system, and also acquired the stock of the corporation known as the East Side Spring Water Company,the same mentioned in paragraph 10 of the complaint.

"In the growth of the city its settlement extended to localities of higher elevation than those occupied by its inhabitants at the time of said contract, and the point origi nally selected for the diversion of the water of the Los Angeles river for supplying the city and its inhabitants, as in said contract provided, was so located in said river that it was impracticable to there maintain dams[563] and diversion works that would not occasionally be swept away or rendered useless by floods; and the surface water of the river after severe storms became muddy and unfit for supplying the inhabitants with water for domestic uses; and in the year 1889 the Crystal Springs Land & Water Company

said resolution, except 10 inches after the 20th day of October, 1896.

"On October the 19th, 1896, the city attorney, in writing, notified the Los Angeles City Water Company and the Crystal Springs Land & Water Company of said resolution, and demanded compliance therewith, delivering a copy of said resolution to each of said companies. Neither of them ever attorned to said city for said water or any part thereof, or ever agreed to pay any rental for the same. After the passage of said resolution and ever since said notification,

made excavations in the places referred to in
the bill of complaint, and laid the pipes
therein as alleged, and the water that has
been used by the Los Angeles City Water
Company for supplying the city with water,
as provided in said contract, has ever since
been obtained from that source, except that
from time to time a further supply of water
has been taken from the Los Angeles river
in order to supply said inhabitants, which
diversions have been at or near the place
where the said underground pipes are laid,
and that by these means the water can be de-
livered to the higher elevations, and the un-up to the present time, the Los Angeles City
derground waters, as to quality and amount,
are thus protected against the influences of
floods.

"The Los Angeles City Water Company ever since its incorporation has taken more than 10 inches of water, measured under a 4-inch pressure, from the Los Angeles river, and the amount taken has increased with the increase of the population of the city and the demands of the municipality itself for water for extinguishing fires and the other public purposes referred to in the said contract, and the amount has increased until now it requires from 1,000 to 1,500 inches of water, measured under a 4-inch pressure, for such purposes, and during the summer season the amount of water used by the Los Angeles City Water Company for the purposes aforesaid runs from 1,000 to 1,500 inches under a 4-inch pressure, inclusive of the water obtained by the underground excavations, which latter furnish from 650 to 690 inches, measured under a 4-inch pressure.

Water Company has continually taken from the Los Angeles river, at a point above the northern boundary of said city, for the purposes of distribution and selling the same in said city, a quantity of water varying from 400 to 1,000 inches, measured under a 4-inch pressure.

"On the 19th day of April, 1870, the common council of the city of Los Angeles accepted, and the mayor approved, the following report:

To the Honorable the Mayor and Common Council of the City of Los Angeles and the Los Angeles City Water Company: "The undersigned commissioners, duly appointed on behalf of your honorable bodies [565| to adjust, fix, and establish the rates and charges of the Los Angeles City Water Company (a corporation duly incorporated under the laws of the state of California for the purpose of supplying the inhabitants of Los Angeles City with pure, fresh water), respectfully report that they have established water rates and charges for domestic purposes, taking as a guide, as near as can be, the charges and rates for domestic purposes charged in July, 1868; that your committee have also fixed the rates and charges for other reasonable objects and purposes, and report as follows, to wit:'

The city of Los Angeles has always had flowing in the Los Angeles River, at the point from which said Los Angeles City Water Company has always diverted water from said river, a quantity of water sufficient to have supplied said Los Angeles City Water Company with all the water required to supply said city and its inhabitants with water "(Then follow the rates agreed upon.) [564]for domestic purposes and *municipal uses, "The commissioners referred to in said reand has never objected, up to October 20, port had been previously selected, two by the 1896, to said Los Angeles City Water Com-city and two by the Los Angeles City Water pany taking as much water from said river Company. as it might require for said uses, and during all of said period said city has never objected to said company's taking from the surface stream of said river at said point as much water as said company needed for said

uses.

"In June, 1871, the city council, on a report of a committee constituted similarly to the one above mentioned, established the same rates as those established in April, 1870.

"On the 13th of August, 1874, a committee "On October the 19th, 1896, the council of constituted in the same manner and for the the city of Los Angeles adopted a resolution tioned reported that they had established same purposes as the committee already menrequiring the Los Angeles City Water Comwater rates and charges for domestic purpany to pay to the city of Los Angeles an amount of money equal to 40 per cent of the poses, taking as a guide, as near as possible, gross rates received by said company from reasonable objects and purposes charged in the charges and rates for domestic and other the consumers of water as rental for all July, 1868. The report was adopted and a water taken by said company from the Los committee appointed in conjunction with the Angeles river, and before the 21st day of city attorney to draft an ordinance embodyOctober, 1896, to attorn to the city of Losing the rates fixed in said report, and thereAngeles, as tenant of said city, for all of the water so taken from said river, and to agree to pay said rental to said city, and, in case of failure to attorn and agree to pay said rental, to refrain from diverting, taking, or interfering with any of the water mentioned in

after, on August the 20th, 1874, an ordinance
so drawn was adopted by the council of said
city, and the rates established by said ordi-
nance were the same as those established in
1870 and 1871.

"Since and including the year 1880 the

city council of the city of Los Angeles has in February of each year passed an ordinance fixing the rates to be charged by all corporations and persons within said city supplying water to the inhabitants thereof, to be in force for one year from and including July the 1st, which rates have been less than the rates charged in 1870, as contained in the ordinance hereinbefore mentioned, and the Los Angeles City Water Company has collected the rates thus fixed by the city of Los [566]Angeles, and no more, but in the year 1896 the council of the city of Los Angeles passed an ordinance fixing the rates to be charged for water for the year commencing July the 1st, 1896, and ending June 30, 1897, at less than they had ever been fixed before, and a suit was then brought by the complainants herein in this court against the city of Los Angeles to set aside the said ordinance; and in February of the year 1897 the city of Los Angeles passed the ordinance which is assailed in this suit, making a still further reduction in the rates.

"The action of the Los Angeles City Water Company in collecting the rates fixed by said several ordinances constitutes the only acquiescence (if it be an acquiescence) in the action of said council.

"If the rates established in 1870 were collected for the year beginning July the 1st, 1897, and ending June the 30th, 1898, the revenues received by the Los Angeles City Water Company from said rates would be more than $50,000 in excess of the amount which would be received under the rates named in the ordinance of February, 1897.

"In January, 1882, the Los Angeles City Water Company furnished to the council of the city of Los Angeles a statement of its transactions for the preceding year, protesting at the same time against the establishment of any rates less than those which were in force at the date of the lease hereinbefore mentioned, to wit. July the 22d, 1868.

"In January, 1883, said company again furnished said council with a statement showing the names of the consumers of water, the rates paid during the year preceding the date of the statement, and also an itemized statement of the expenditures made for supplying water during the year preceding, but expressly denying any legal right on the part of the council to demand said statement or to fix any rates less than those which were in force in July, 1868.

"Similar statements, accompanied by similar protests, were made annually thereafter up to and including the year 1889, and since that time unverified statements or reports showing its receipts and expenditures have been made by said company to the city council each year.

[567] *"Article 14 of the present Constitution of California, adopted in 1879, is as follows: 'ARTICLE XIV.

66 "Water and Water Rights. "Section 1. The use of all water now appropriated, or that may hereafter be appropriated, for sale, rental, or distribution, is hereby declared to be a public use, and subject to the regulation and control of the

state in the manner to be prescribed by law: Provided, that the rates or compensation to be collected by any person, company, or corporation in this state for the use of water supplied to any city and county, or city or town, or the inhabitants thereof, shall be fixed annually by the board of supervisors, or city and county, or city or town council, or other governing body of such city and county, or city or town, by ordinance or otherwise, in the manner that other ordinances or legislative acts or resolutions are passed by such body, and shall continue in force for one year, and no longer. Such ordinances or resolutions shall be passed in the month of February of each year, and take effect on the 1st day of July thereafter. Any board or body failing to pass the necessary ordinances or resolutions fixing water rates, where necessary, within such time, shall be subject to peremptory process to compel action at the suit of any party interested, and shall be liable to such further processes and penalties as the legislature may prescribe. Any person, company, or corporation collecting water rates in any city and county, or city or town in this state, otherwise than as so established, shall forfeit the franchises and waterworks of such person, company, or corporation to the city and county, or city or town, where the same are collected, for the public use.

"Sec. 2. The right to collect rates or compensation for the use of water supplied to any county, city and county, or town, or the inhabitants thereof, is a franchise, and cannot be exercised except by authority of and in the manner prescribed by law.'

"To carry out these provisions of the Constitution, the legislature of California passed an act entitled 'Act to Enable the Board [568] of Supervisors, Town Council, Board of Aldermen,' etc., which was approved March the 7th, 1881. Stat. Cal. 1881, p. 54.

"In the year 1888 the electors of the city of Los Angeles, pursuant to provisions of the Constitution of said state authorizing them so to do, adopted a charter for said city, which charter was, under the provisions of said Constitution, submitted to the legislature of said state for its approval, ratification, and adoption, and the said charter was, on the 31st day of January, 1889, adopted by said legislature, and thereupon became and ever since has been the charter of the said city of Los Angeles; and by the said charter it is provided, in § 193 as follows:

""The rates of compensation for use of water to be collected by any person, company, or corporation in said city shall be fixed annually by ordinance, and shall continue in force for one year, and no longer. Such ordinance shall be passed in the month of February of each year, and take effect on the 1st day of July thereafter. Should the council fail to pass the necessary ordinance fixing the water rates within the time hereinbefore prescribed, it shall be subject to peremptory processes to compel action at the suit of any party interested.' Stat. 1889, p.

503.

"The ordinance of 1897 now sought to be

annulled was passed pursuant to the forego- and expectation that the license will not be ing constitutional and statutory provisions." countermanded. [88 Fed. Rep. 723.]

A decree was entered for complainants (appellees), adjudging that that part of the contract entered into between the city of Los Angeles and Griffin, Beaudry, and Lazard, in so far as said contract provides that the city shall not reduce the water rates below those charged on the date of said contract, is valid, and that the ordinance of February 23, 1897, reduced the water rates below those so charged, and "impaired the obligation of such contract, and said ordinance is null and void; and it is further ordered, adjudged, and decreed that the said ordinance be, and the same is, hereby vacated and set aside and held for naught."

From the judgment this appeal is taken. The assignments of error present the contentions discussed in the opinion.

Mr. S. O. Houghton submitted the cause for appellants. Mr. Walter F. Haas and Messrs. Lee & Scott were with him on the brief.

Complainants have been guilty of such acquiescence in the action of the council as to estop them from maintaining the present suit; and even if this be not so, their laches in not sooner seeking an injunction against infringement of their rights is fatal.

Smith v. Clay, 2 Ambl. 645; Pom. Eq. Jur. §§ 817, 418, 419; Beach, Modern Eq. Jur. §§ 17, 18; Penn Mut. L. Ins. Co. v. Austin, 168 U. S. 685, 42 L. ed. 626, 18 Sup. Ct. Rep. 223.

If the company had a valid contract it should have gone on and collected the rates authorized by that instrument. Its remedy was to disregard the ordinance. Austin v. Austin City Cemetery Asso. 87 Tex. 330, 28 S. W. 528.

Injunction is not the proper remedy, as there is an adequate remedy at law against any attempt to enforce the ordinance if in

valid.

Emerson v. Bergin, 76 Cal. 201, 18 Pac. 264; Potter v. Mercer, 53 Cal. 673; Washburne, Real Prop. marg. pp. 400 et seq. p. 727 (star p. 560).

A license with respect to real property can be revoked even after the licensee has incurred expense on the faith thereof.

Morse v. Copeland, 2 Gray, 302; Wood v. Edes, 2 Allen, 578; Mason v. Holt, 1 Allen, 45; Houston v. Laffee, 46 N. H. 505; Crosdale v. Lanigan, 129 N. Y. 604, 29 N. E. 824; Hathaway v. Yakima Water, Light, & Power Co. 14 Wash. 469, 44 Pac. 896; Wheeler v. St. Joseph Stockyards & Terminal Co. 66 Mo. App. 260; Jensen v. Hunter (Cal.) 41 Pac. 14.

It is only in exceptional cases that an es toppel can be invoked against a municipal corporation.

44.

Sacramento v. Clunie, 120 Cal. 29, 52 Pac.

Messrs. John Garber and S. M. White submitted the cause for appellees. Mr. J. S. Chapman and Messrs. White & Monroe were with them on the brief.

The city is estopped from challenging the authority of this contract, in view of the various acts of the legislature and the acceptance of the charters by the city, and of the various city ordinances and the entire conduct of both parties.

Illinois Trust & Sav. Bank v. Arkansas City, 40 U. S. App. 257, 76 Fed. Rep. 271, 22 C. C. A. 171, 34 L. R. A. 518.

Where a contract is uncertain and indefinite,-as this one certainly is, with reference to the amount of water to be taken,the courts will accept the interpretation that the conduct of the parties has put upon it.

Central Trust Co. v. Wabash, St. L. & P. R. Co. 34 Fed. Rep. 255; McNeil v. Shirley, 33 Cal. 206; Hill v. McKay, 94 Cal. 20, 29 Pac. 406; Mulford v. Le Franc, 26 Cal. 103; Pico v. Coleman, 47 Cal. 65; Truett v. Ad

Spring Valley Waterworks v. Bartlett, gams, 66 Cal. 218, 5 Pac. 96; Yocco v. ConSawy. 555, 16 Fed. Rep. 615; Alpers v. Sanroy, 104 Cal. 468, 38 Pac. 107; Long-Bell Lumber Co. v. Stump, 57 U. S. App. 546, 86 Francisco, 32 Fed. Rep. 503; Murphy v. East Portland, 42 Fed. Rep. 308; Stevens v. Fed. Rep. 578, 30 C. C. A. 260. St. Mary's Training School, 144 Ill. 336, 18 L. R. A. 832, 32 N. E. 962.

The constitutional provision with regard to incurring a forfeiture by charging higher rates than those fixed by the council cannot apply here.

Los Angeles v. Los Angeles City Water Co. 124 Cal. 385, 57 Pac. 216; Los Angeles v. Los Angeles City Waterworks Co. 49 Cal. 638.

The rule that the interpretation placed by parties on a contract controls does not apply to acts of authorities of municipal corporations.

National Waterworks Co. v. School Dist. No. 7, 4 McCrary, 198, 48 Fed. Rep. 523.

A license is never irrevocable where it appears to be intended to continue during the pleasure of the licensor, and the licensee cannot make the license irrevocable by imprudently expending money upon the hope

The city, having allowed the water company for nearly thirty years to divert more than 10 inches of water under a 4-inch pressure, and to expend vast sums of money upon the faith of the continuance of the right to take such water, could not withdraw its consent within the period of the contract.

Los Angeles v. Los Angeles City Water Co. 124 Cal. 368, 57 Pac. 210, 571.

The prohibition in the contract against taking more than 10 inches of water does not mean 10 inches of water measured under a 4-inch pressure.

Dougherty v. Haggin, 56 Cal. 522.

The validity of the contract has frequently been recognized by the California supreme court.

Los Angeles v. Los Angeles City Waterworks Co. 49 Cal. 638; Los Angeles v. Los Angeles City Water Co. 61 Cal. 65; Los Angeles Water Co. v. Los Angeles, 55 Cal. 176;

Los Angeles v. Los Angeles City Water Co. | part, or their assigns, provided that they
124 Cal. 368, 57 Pac. 210, 571.
shall not so reduce such water rates, or se
fix the price thereof, to be less than those
now charged by the parties of the second part
for water."

The legislative act ratifying the contract, passed after the company was incorporated and after the assignment to it, does not come within the principle of San Francisco v. Spring Valley Waterworks, 48 Cal. 493.

Santa Ana Water Co. v. San Buenaventura, 56 Fed. Rep. 348; People ex rel. Atty. Gen. v. Stanford, 77 Cal. 371, 2 L. R. A. 92, 18 Pac. 85, 19 Pac. 693.

The legislature may confer powers upon,
or grant privileges to, private corporations
by special act.

California State Teleg. Co. v. Alta Teleg.
Co. 22 Cal. 398.

[569] *Mr. Justice McKenna, after stating the case, delivered the opinion of the court:

The municipal powers of the city provided in the act of incorporation, among others, were: "To make by-laws or ordinances, to make regulations to prevent and extinguish fires, to provide for supplying the city with water." It is not denied that the city had power to regulate rates. Indeed, it is insisted that it was so constantly its duty that it could not be contracted away. It was not a power, therefore, necessary to be granted by the contract, and the distinction between the proprietary right and the municipal right, made by appellants, would have been idle to observe. To have limited the right of regulation to the city in one capacity, and left it unrestrained in the other, would have been useless, and such intention cannot be attributed to the parties. We think, therefore, the power to regulate rates was an existent power, not granted by the contract, but reserved from it, with a single limitation,— the limitation that it should not be exercised to reduce rates below what was then charged. Undoubtedly there was a contractual element; it was not, however, in granting the power of regulation, but in the limitation upon it. Whether the limitation was and is valid is another consideration. 2. The city did not have the power to bind the state.

The circuit court decided that the provision of the contract executed by the city and Griffin, Beaudry, and Lazard constituted a contract, and the ordinance of the city regulating the rates of appellees impaired it. Against this conclusion the appellant contends: (1) The contract only purports to bind the city in its corporate capacity, the city as landlord and owner, and not as a governmental agent of the state; (2) the city did not have power to bind the state; (3) the provision of the contract, restraining the city from granting any other franchise, if it created an exclusive franchise, invalidated the whole contract; (4) the act of 1870, purporting to ratify the contract of 1868, is unconstitutional and void; (5) the water company has no power under its char- This contention as expressed is very comter to collect water rates, except as pre- prehensive, and seems to deny the compescribed by the Constitution and statutes of tency of the state to give the city the power the state; (6) By acquiescing in the regula- to bind it. We do not, however, understand tions of rates ever since 1880 the company counsel as so contending, nor could they. is estopped from claiming equitable relief, Walla Walla v. Walla Walla Water Co. 172 and is guilty of laches; (7) water rates es- U. S. 1, 43 L. ed. 341, 19 Sup. Ct. Rep. 77. tablished by the ordinance are not shown to See also People v. Stephens, 62 Cal. 209. We be lower than those charged in 1868, or if understand the argument to be that the lower, that the revenue of the company is re- power, if not expressly given will not be preduced; (8) if the ordinance is invalid, it is sumed unless necessarily or fairly implied void on its face, and there is therefore no in or incident to other powers expressly given, cloud on the company's title; (9) the com--not simply convenient, but indispensablo[571) pany violated the contract by taking water from the Los Angeles river, and therefore is not entitled to specific performance.

We will consider these contentions in their order.

1. The contract only purports to bind the city in its corporate capacity, the city as landlord and owner, and not as governmental agent of the state.

The argument to support the contention, succinctly stated, is that the right to regulate rates came from the contract, not from the law. In other words, it was reserved from the contract, and was a virtual granting back by the lessees of the proprietary [570]*right which would have otherwise passed by the lease, leaving, however, all municipal powers intact.

The provision of the contract is as follows: "Always provided that the mayor and common council of said city shall have, and do reserve, the right to regulate the water rates charged by said parties of the second 892

to them. In other words, the rule of strict construction is invoked against the grant of such power to the city.

The rule is familiar. It has often been announced by this court, and quite lately in Detroit Citizens' Street R. Co. v. Detroit R. Co. 171 U. S. 48, 43 L. ed. 67, 18 Sup. Ct. Rep. 732.

The effect of the rule in the case at bar we are not required to determine if the act of 1870 ratifying the contract is valid.

It reads as follows:

"An Act to Ratify Certain Acts and Ordinances of the Mayor and Common Council of the City of Los Angeles.

"The people of the state of California, rep. resented in senate and assembly, do enact as follows:

"Sec. 1. The following acts, contracts, and ordinances of the mayor and common council of the city of Los Angeles are hereby ratified and confirmed: The contract and lease for the care and maintenance of the Los An

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