Board of Trustees of Henderson Graded Schools v. City of Henderson

Adams, J. In 1892 the defendant enacted an ordinance granting to A. H. JIcNeal and others, their associates, successors and assigns, for a period of forty years an exclusive franchise to supply water to the inhabitants of the city for fire purposes and other public uses on prescribed terms. In section 9 of the ordinance it was stipulated that the grantors should furnish water free of charge to churches, public schools, and other designated institutions, “now in use or to be erected.” In 1909 the Henderson Water Company, successor of these grantees, contested the validity of this provision on several grounds, but failed to maintain its position. See Water Co. v. Trustees, 151 N. C., 171. The Water *689 Company thereafter complied with its contract in this respect until, in pursuance of a written agreement made 24 June, 1926, it surrendered its franchise and sold its property to the defendant by a deed dated 12 July, 1926. The plaintiffs contend that by virtue of its contract with the defendant it is still bound to furnish the schools with water free of charge. In determining the controversy we are concerned, not with matters which are incidental, but with those only which are raised by the appellants’ exceptions. It is first contended that the limitation in the second finding of fact that the defendant contracted with the Water Company for the purchase of its physical property is inaccurate, because the contract includes property which is incorporeal. If this is true, how is it prejudicial to the plaintiffs? The franchise of 1892. was granted by the city and was expressly surrendered to the city under the contract and deed of 1926. With its franchise surrendered the Water Company could not exercise the “exclusive right and privilege” which the ordinance conferred, and it sold its property to the defendant “free from all claims, liens, encumbrances and liability whatsoever.” The ordinance, which was contractual in its nature, was in effect repealed with the express consent of the Water Company, and is not enforceable by either party. 43 C. J., 563, sec. 888; Wood v. Seattle, 52 L. R. A., 869. This conclusion necessarily disapproves the position that the defendant is still bound to the performance of the franchise-contract executed in 1892. The plaintiffs were not parties to that contract, and the parties themselves limited the duration of the franchise to the time during which the ordinance should be in force. It is not denied that the franchise-contract was binding on the associates, successors, and assigns of the original grantees, and that its terms could be enforced so long as the contract itself continued, but the decision in Water Company v. Trustees, supra, does not profess to determine the rights either of the plaintiffs or of the parties after the surrender of the franchise and the defendant’s purchase of the property. The Water Company’s “surrender” of its franchise to the defendant was not synonymous with a transfer to its “associates, successors, and assigns.” Such a construction is altogether inconsistent with the manifest purpose and spirit of the contract and the deed which were executed in 1926. The use of the property described in these instruments and purchased by the defendant does not necessarily involve the continued use of the franchise which was surrendered, and which neither of the parties intended thereafter to exercise. Wood v. Seattle, supra, p. 391. The case of Ormond v. Ins. Co., 145 N. C., 140, cited by .the appellants, dealt *690 with the question whether an insurance policy had been relinquished or surrendered to other beneficiaries. It is not authority for the position that the assignment or transfer of a franchise-contract to the grantee’s associates, successors and assigns is synonymous with the surrender of the franchise to the body by which it was granted. The principle that a third person, even though a stranger, may enforce a promise made for his benefit is not available to the plaintiff in a contract of this character by which the franchise is surrendered and the contract is terminated by consent of the parties. In one respect, however, we think the judgment should be modified. As the defendant imposed upon the grantees of the franchise an obligation to furnish water to the schools free of charge, the plaintiffs may have permitted the use of the water by the schools on the assumption that the defendant, though not legally required to do so, would recognize the obligation. Conceding that the defendant was technically under no such obligation, we are of opinion that the ends of justice would more nearly be met by allowing a recovery only for such water as was furnished after notice was given of the defendant’s purpose to make a charge. The amount adjudged to be due from August, 1926, to August, 1927, will therefore be stricken from the judgment and as thus modified the judgment will be affirmed. Modified and affirmed.