Spring Valley Water Works v. Board of Supervisors

McKee, J.: . The Spring Valley Water Company was organized June 19, 1858, under an Act of the Legislature passed April 22, 1858. (Stat. 1858, p. 218.) Object of its incorporation was, according to its certificate of incorporation, "to introduce into the City and County of San Francisco pure fresh water, for the purpose of furnishing it to the city and its inhabitants; and, in connection therewith, to transact all such business as might be necessary, proper and consistent with the laws and Constitution of the State of California.” In January, 1878—nearly twenty years after its incorporation— it seems to have availed itself of the provisions of Sec — 4 — tion 4 of the Act of its incorporation, to appoint two Commissioners, who, with two others appointed by the Board of Supervisors of the city and county, selected a fifth, and these constituted a Board of Commissioners, whose duty it was, under the act of incorporation, to fix the rates to he charged by the company for water supplied to consumers. After its organization, the Board fixed a tariff of rates, to take effect June 1, 1878, and to remain in force for one year, and until new rates were established. In July, 1878, a vacancy occurred in the Board by the death of one of its members, who had been appointed by the Board of Supervisors. The vacancy has never been filled, and now—nearly three years after the vacancy''occurred—■ the company applies for a writ of mandate to compel the Board of Supervisors to appoint -a new Commissioner. Mandamus lies only when there is a clear legal right to have a specific thing done by a public tribunal, or officer, upon whom the law has imposed the duty of doing it. Under its charter the company had a right to have water rates fixed by a Board of Commissioners, and the duty of appointing two of them was imposed by the law upon the Board of Supervisors. But the law which imposed that duty was changed by Section 1 of Article xiv. of the Constitution, which provides that “ the rates of 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 and 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.”- And by Section 1, Article xxii., of the Constitution it was ordained “ that the provisions of all laws which are inconsistent with this Constitution shall cease upon the adoption thereof, except that all laws which are inconsistent with such provisions of the Constitution as require legislation to enforce them, shall remain in full force until July 1,1880, unless sooner altered or repealed by the Legislature.” Section 1, Article xiv., of the Constitution has been en — 5 — forced by appropriate legislation. It has, therefore, struck null that provision of Section 4 of the Act under which the company organized, for the appointment of Commissioners and the determination of water rates by the Board of such Commissioners. Water rates must be fixed by the Board of Supervisors, pursuant to the provisions of the Act of 1881 (Stat. 1881, p. 54), and not by a Board of Commissioners appointed under the Act of 1858, unless it be that the first section of Article xiv. of the Constitution contravenes the tenth section of Article i. of the Constitution of the United States, which prohibits a State from impairing the obligation of a contract; and that is the ground taken by the company. The Act of 1858, under which the company organized, is its charter, and it may be conceded that the charter of a corporation, when accepted by the corporators, is a contract between them and the State, that the powers, privileges, and franchises granted shall not be restrained, controlled, or destroyed without their consent. (Dartmouth College Case, 4 Wheat. 709; Pennsylvania College Cases, 13 Wall. 190.) That must be so, unless it has been otherwise provided in the contract itself. But the company obtained its charter under a section of the Constitution of 1849 (Const. 1849, § 31, Art. xii.), which authorized the formation of corporations under general laws, and reserved to the State the power of altering such laws from time to time, or repealing them. As part of the organic law of the State, this provision entered into the contract between the company and the State, and when the corporation accepted the charter of the company, under the general law of 1858, they consented to take it subject to the exercise of the powers reserved to the State. As a creature of the State, it was bound by any laws passed by its creator in the exercise of powers, inherent or reserved. “ But,” as has been said by the Supreme Court of the United States, “ the power of alteration and amendment is not without limit; the alterations must be reasonable; they must be made in good faith, and be consistent with the scope and object of the act of incorporation. Sheer oppression and wrong caii not be inflicted under the guise of amendment or alteration. Beyond the sphere of the reserved powers, the vested rights of property of corporations, in such cases are surrounded by the — 6 — same sanctions,and are as inviolable as in other cases. (Shields v. Ohio, 95 U. S. 325.) The question therefore remains, whether, in ordaining that • the Board of Supervisors shall annually fix the rate to be charged by the company for water furnished to consumers, the State has in any way impaired the charter of the corporation, or destroyed or impaired any vested right or property acquired under it. By the charter there was granted to the company the right or franchise of distributing water through its pipes or mains •to any part of the city, and selling it to consumers at prices to be fixed by public agents. Assuming that non-interference with the rights of the grant, or of property acquired under it and the appointment of agents to establish the rates between the company and the public, were obligations which were binding upon the' State, and that the company, on its part, came under an obligation to furnish water to the city of San Francisco, in case of great necessity, “ free of charge,” and to^the inhabitants thereof at prices to be established by public agents, there was such a contract between the company and the State as could not be violated by either of the parties to it. But it will be observed that neither the power of fixing water rates, nor of appointing the agents for that purpose, was granted to the company. If it was within the power of the State to delegate either of those powers to a corporation or individual; it was not done by any of the laws under which the company was incorporated. A privilege was given to the company to participate, to a certain extent, in the selection of the agents who were to constitute the Board for determining the rates; but the privilege was subordinate to the powers reserved by the State for regulating, between the corporation and the public, the use of water furnished to the public by the appointment of agents to fix the rate to be charged for it; and the company, under its contract with the State held the privilege, subject at all times to any laws which might be passed by the State in the exercise of its powers of regulation and appointment. Such powers were not granted to the company. They could not have been granted. As governmental powers, if was not •in the power of the Legislature to bargain thorn away to cor — 7 — porations' or individuals. “Such powers,” says Mr. Green-leaf, in his edition of ‘ Cruise on Real Property,’ vol. 2, p. 67, “ are intrusted to the Legislature to be exercised, not to be bartered away; and it is indispensable that each Legislature should assemble with the same measure of sovereign power which was held by its predecessors. Any act of the Legislature disabling itself from the future exercise of powers intrusted to it for the public good must be void, being in effect a covenant to desert its paramount duty of the whole people.” In exercising the powers of regulating the use of property of a corporation which has been devoted to public use, and the appointment of agents for the performance of a duty between the corporation and the public, the State- may allow the corporation to participate in the selection of the agents, or it may select any of the corporators of the corporation to act in connection with other agents. But in so doing, it , does it ex mera gratia. By making such appointments the State does not incur any obligation to continue them, nor does the mode of appointing agents. It may change the mode by which appointments shall be made. It may discharge at any time those who have been appointed, and appoint others in any mode it sees fit. The power of the State over its agents or officers is unlimited, except by constitutional limitations. In the absence of any constitutional prohibition, or affirmative provision, fixing the term of office of any officer, or his compensation, the Legislature may change such term or compensation even while the officer is in office. (People ex rel. Dickinson v. Banvard, 27 Cal. 470; In re Bulger, 45 id. 553.) Changing the agents by which a thing is to be done, which a corporation is entitled to have done, does not interfere with the enjoyment of the right itself. The right still exists, and is recognized and protected by law, although a different agency may be appointed for the performance of the duty upon which the right rests. The change in the agency does not diminish the duty, nor impair the right. In the constitutional amendment there was, therefore, no diminution of the duty assumed by the State, and no interference with the rights of the company under its charter. A privilege of participating in the selection of agents for the performance of a public duty be — 8 — tween it and the public has been taken away; but that privilege was in no sense a part of the contract between it and the State. The State was not under any obligation to continue it, or to make it co-existent with the grant of the charter. As a mere privilege, the company held it subject to the retained powers of the State, in the exercise of which, it was liable at any time, to be modified or annulled. By the constitutional amendment the State has annulled it; but in doing so, it has not interfered with the charter of the company, or disturbed any rights of property acquired under it, or obstructed the company in the enjoyment- of any of those rights. The rights and duties of the company and of the State, arising out of the charter, are left intact and unimpaired. No property, tangible, or intangible, of the company has been interfered with. The water which it is engaged as a business in selling to the public is regarded and protected by law as its property; but, as property, which has been devoted to the use of the public, it is subject to the regulation and control of the State; and the State, while it has sanctioned the use, has a duty to discharge to the public by regulating the use, as well as the powers and privileges of the corporation incidental to the use. These things are not of the contract; they appertain to the sovereignty of the State, and can not be bargained away. “ All property,” says Mr. Chief Justice Waite, “ which is affected with a public interest ceases to be a juris privati only, and becomes subject to regulation for public benefit; and property is affected with a public interest whenever it is devoted to such use as to make it of public consequence and to directly affect the community at large." (Munn v. Illinois, 94 U. S. 126.) It is this use of property invested in a public business, and the powers and duties of a corporation incidental to it, which, in its relations to the public, are always subject to the regulation of the State. Every corporation, when it accepts its charter, consents to this regulation hy the State; and the power of the State to regulate the use may be exercised to almost any extent to carry into effect the original purposes of the grant, and to protect the rights of the public and of the corporators, or to promote due administration of the affairs — 9 — of the corporation. (Miller v. The State, 15 Wall. 478; Holyoke Water Co. v. Lyman, id. 511.) Whence it results, that when the State, by the constitutional amendment of 1879, took away from the petitioner the privilege of participating in the selection of public agents to perform the duty, under its charter, of fixing water rates between it and the public, it did not interfere with any of the vested rights of the company, and the exercise of its power in that respect can not be regarded as an unconstitutional act within the prohibition of the Federal Constitution. The application of the petitioner is therefore denied. Sharpstein, J., concurred.