Osborne v. San Diego Land & Town Co., 178 U.S. 22 (1900)

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Filed: 1900-05-14Precedential Status: PrecedentialCitations: 178 U.S. 22Docket: 201

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178 U.S. 22
20 S.Ct. 860
44 L.Ed. 961

H. C. OSBORNE, William Knapp, A. Barber, et al., Appts.,
v.
SAN DIEGO LAND & TOWN COMPANY OF MAINE.
No. 201.
Argued March 19, 1900.
Decided May 14, 1900.
1

This is a bill in equity to review and reverse a decree entered in the United
States circuit court for the southern district of California in a suit in which
Charles D. Lanning, receiver of the San Diego Land & Town Company of
Kansas, was complainant, and appellants herein were respondents, and in which
the appellee was substituted before decree as complainant in lieu of said
Lanning.

2

The bill is extremely voluminous, reciting all the pleadings and proceedings in
the original suit.

3

The following is a condensed summary of them:

4

The bill, in addition to the incorporation of the company and the appointment of
a receiver of its assets and affairs, alleged that it was the owner of valuable
water, and water rights, reservoirs, and an entire water system for furnishing
water to consumers, and that it had a franchise for impounding, sale, and
disposition of the waters owned and stored by it to the respondents and other
consumers, and to the city of National City and its inhabitants.

5

The company's supply of water came from the Sweetwater river, a small stream
about 5 miles from the city of National City, and its means of distributing the
water, which were described, could supply but a limited amount of territory,
consisting of farming lands within and outside of said city, and in part of the
residence portion of the city.

6

The company in procuring the water and its distributing system had expended
up to January 1, 1896, the sum of $1,022,473.54, which was reasonably
necessary for the purposes.

7

By the said expenditure it had procured and owned, 'subject to the public use
and the regulation thereof by law,' water and water rights, a reservoir site, and a
reservoir of the capacity of six thousand million gallons, and had constructed
mains necessary to supply the defendants and their lands, and had constructed
and put in the mains and pipes necessary therefor, and was at the time
mentioned in the bill furnishing the defendants and each of them with water.

8

The defendants are the owners respectively of tracts of land under the system of
the company, most of them of only a few acres each, and each became the
owner of a water right to a part of the water of the company necessary to
irrigate his tract of land, and became liable to pay for a yearly rental such as the
company was entitled to charge and collect.

9

The annual expense of the system and its operation, including interest on its
bonds, and excluding the natural and necessary depreciation, was $33,034.77,
and to pay this expense and income of 6 per cent on the amount invested on the
1st of January, 1896, it was necessary that the rates for waterbe fixed to realize
$119,791.66.

10

The amount realized outside of the city of National City for that year was about
$15,000, and no more than that sum could be probably realized for the year
ending January 1, 1897.

11

The mains and pipes were perishable, and required to be replaced at least once
in sixteen years, and required frequent repairs.

12

To acquire the water and construct the system, the company was compelled to
borrow $300,000, and to pay interest in the sum of $21,000 annually, which
must be realized from the sale of its water, and was part of its operating
expenses, and the share of its revenues which should be raised in the city of
National City was about one third, and the amount which could be raised from
said city at the rates which prevailed under the ordinance mentioned in the bill
was about $10,715 per annum, and no more.

13

The value of its water franchises and system was $1,100,000.

14

No other person or corporation was furnishing water to defendants, nor was
there any other system by which they could be furnished, but the franchises and
the rights of the company were not exclusive.

15

The city of National City was a municipal corporation of California, of the
sixth class, and the board of trustees thereof claiming to act under the
Constitution and laws of the state, passed an ordinance fixing the rates to be
charged for water sold and furnished by the company to consumers of the city.

16

The company commenced to furnish water in the year 1887, and was informed
by its engineer that its system and supply of water would furnish to consumers
sufficient to irrigate 20,000 acres, and in addition what would be necessary for
domestic use inside and outside of said city. The company was unfamiliar with
the operation of the plant and system constructed and the cost of operating and
maintaining them, and relying upon the estimates of the engineer, and believing
that an annual rate of $3.50 per acre would be sufficient, fixed the rate at such
sum, and had charged it until January 1, 1896, but instead of being able to
supply sufficient water to irrigate 20,000 acres, it had been demonstrated by
actual experience that the system would not supply sufficient to irrigate, to
exceed 7,000 acres, together with water demanded for domestic use, and it was
believed not to exceed 6,000 acres, although there were about 10,000 acres
under the system susceptible of irrigation.

17

At the rate of $3.50 per acre, even if all the lands of the system should be
supplied with water and the rates in National City should be maintained, the
company would not be able to pay operating expenses and maintain its plant,
and the money invested in it would be lost, and the company would be
compelled to furnish water at a loss, as it had been furnishing water at a loss,
and its system had been going gradually to decay consequent upon the want of
revenue and means to replace the same.

18

To pay cost of operating and maintaining its system and a reasonable interest it
was necessary to charge $7 for irrigation purposes, and said sum was a
reasonable rate for consumers to pay, and the smallest amount for which the
company could furnish water without loss.

19

By the laws of California the board of supervisors might upon petition of
twenty-five inhabitants and taxpayers of the county fix the yearly rental for
water, but no such petition had been presented or rates fixed in the case of the
company.

20

For the reasons above stated the company gave notice to the defendant that on
January 1, 1896, it would establish a rental of $7 per acre.

21

The defendants and each of them refused to pay such sum, and maintain that
neither the company nor its receiver had the power to increase the rental, and
that the former rate must be and remain the rental until the board of supervisors
establish one as provided by law.

22

The increase of the rental was absolutely necessary to maintain and operate the
plant.

23

To enforce the rental the complainant caused the water to be shut off the
premises ofea ch of the defendants, and each of them threatened and would,
unless restrained by the court from doing so, commence a suit in the superior
court of San Diego county, California, to compel complainant to turn on and
furnish water again, claiming the use for $3.50 per acre, and for damages. The
rights of the defendants and the determination of the question of the right of the
company would affect all in the same way and extent, except the quantity of
land owned by the several defendants was different.

24

The bringing of said suits would involve complainant in a multiplicity of suits,
would hinder him in the operation of the property of the company and the
settlement of its debts and obligations, and the questions involved could better
be settled in one suit.

25

The increase in rates would add to the revenue of the company with the amount
of land now under irrigation, not less than $14,000 per annum, and upon the
whole of the land which could be irrigated not less than $20,000 per annum.

26

There were allegations of the legal character of certain of the defendants, and
the bill concluded with the following prayer:

27

'Wherefore your orator prays your honors to grant to him the writ of injunction
against the defendants and each of them, enjoining them from prosecuting in
the state courts or elsewhere separate actions against your orator or said land
and town company; that said defendants and each of them be required to appear
in this suit and set up any claims they may have against the right of your orator
or said company to increase the rental for water furnished by said company, as
aforesaid, and that it be finally decreed by this court that your orator, as such
receiver, and said company have the right to increase the amount of its rentals
to any reasonable sum, and that the sum of $7 per acre per annum is a
reasonable rental to be charged, and that the defendants and each of them be
required to pay said rate as a condition upon which water shall be furnished to
them, and that your orator shall have generally such other and further relief as
the nature of his case may require.'

28

The answer was very long and somewhat confused by repetitions. The
substance of it is given in the opinion of the circuit court. 76 Fed. Rep. 319.

29

It is sufficient for the purpose to say that its allegations and defenses were
based on the claim that the supply and system of the company were subject 'to
the water rights, easements in, and servitudes upon said reservoir and system,
and to all other rights acquired by these defendants therein . . . and annexed to
the respective parcels of lands of these defendants. And also each such water
right and easement was in freehold and was a freehold servitude imposed upon
said water system for the benefit of the land to which it was appurtenant, and
that all claims and demands of said company for the price or compensation
therefor had been paid or otherwise satisfied by purchase or otherwise, as in the
bill of complaint alleged.' And such rights extended to and included the right to
have the company maintain that system efficiently to conduct the water to the
premises of each of the defendants for irrigation, and other uses, at 'the annual
rates to be deemed and accepted as the legally established rates therefor under
the facts hereinafter set forth.'

30

These facts were, besides those stated in the opinion, that each defendant and
all of them paid the full amount demanded by the company as the price of the
perpetual easement of water supply from the system granted and annexed to
their lands, and that they were forever discharged from the payment of any
further sum to apply on the principal of or as income upon the cost or value of
the system or debt incurred for its construction or the value of their respective
water rights. And that in these respects the company had put all lands on an
equal footing, and they had remained on the same footing for more than five
years, and in many cases had changed hands; that the value of the water rights
had for more thn five years entered into the market value of the lands and the
price paid to their vendors by the defendants, who were their successors in title,
and they were induced to purchase, improve, and settle upon their respective
parcels on account of the rate of $3.50 per acre per annum, and it entered into
and became a material element of their value.

31

That by the Constitution of the state of 1879, it is provided in article 14, § 1,
among other things, as follows, to wit:

32

'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.'

33

'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.'

34

And in pursuance of the provision the legislature passed an act approved March
12, 1885, entitled 'An Act to Regulate and Control the Sale, Rental, and
Distribution of Appropriated Water in the State Other than in Ann City, City
and County, or Town Therein, and to Secure the Rights of Way for the
Conveyance of Such Water to the Places of Use.' The act provided that the sale
and distribution of appropriated water was a public use, and the right to collect
compensation therefor a franchise, and, except when furnished by a city or
town, should be regulated and controlled by the board of supervisors of the
counties of the state in the manner prescribed, and that the board might
establish different rates as the case might be, and different rates for the several
different uses, such as mining, irrigating, etc., for which the water should be
applied, and the rates fixed should be binding and conclusive for a year, until
established anew or abrogated. And it was provided that until the boards of
supervisors establish rates, the rates 'actually established and collected . . .
should be deemed and accepted as the legally established rates.'

35

That the rate of $3.50 per acre was the only actual rate for irrigation which had
ever been established and collected by the company or its receiver, or assented
to by consumers.

36

That they each had since January 1, 1896, paid the rate of $3.50 per acre to the
complainant as receiver, and were willing and offered to pay the same as long
as it should be legally established. And it was averred that in so far as the act of
1885 purported to prohibit the company from the sale of servitudes in freehold
upon its system, or to contract respecting the same, or to receive full
compensation from any consumer therefor who was willing to contract for the
same, and to prescribe that such easement should be used only upon the terms
and conditions that the owners render net annual receipts and profits upon the
value thereof in perpetuity, or to prohibit contracts respecting the annual
receipts, or to extinguish and satisfy the right of the company to such net
annual receipts, the same was unconstitutional and void, and in conflict with
the Fourteenth Amendment of the Constitution of the United States, and § 1,
article 9, of the Constitution of the state.

37

That the liability of the defendants to pay rates was several, not joint, and that
certain of the defendants were not residents of the state, certain others not
residents of the county of San Diego, and others were school districts, and that
none of them were competent to make petition to the board of supervisors, as
required in the act of 1885, and said act, as far as it purported to authorize the
company to increase the rates of $3.50 per acre, was in violation of the
Fourteenth Amendment of the Constitution of the United States, and deprived
each of them of his or her property without due process of law, and to each of
them the equal protection of the laws.

38

That in so far as the statute of 1885 purported to ath orize the company to shut
off water from the lands of defendants or to increase the rate without consent of
the defendants, or to permit its collection without giving the defendants a
standing in court to contest the reasonableness of the increase, was also in
violation of said Fourteenth Amendment. And, also, that the complainant, by
shutting off water, violated that amendment.

39

The bill of review then averred that there were exceptions taken to the answer
on the ground that it did not set forth or discover relative and material matters
of fact tending to show that the bill was not true or in confession or avoidance
thereof, but instead set forth immaterial and irrelevant matter.

40

Each exception was specific, but altogether they went to the whole answer
except its admissions and certain of its denials.

41

It was prayed that the defendants be compelled to amend the answer, and to put
in a full and sufficient one.

42

The exceptions coming on to be heard, they were sustained—the defendants
excepted.

43

By order of the court, on motion of complainant, Charles D. Lanning was
discharged as receiver, and the San Diego Land & Town Company of Maine
was substituted as complainant—defendants excepted.

44

A notice was given of a motion to be made that the bill in the suit be taken pro
confesso, and a decree of the court be taken accordingly, on the ground that the
exceptions to the answer had been sustained and no amended answer had been
filed within the time allowed.

45

The motion came on to be heard, and, pending its hearing, the defendants gave
notice of a motion to dismiss the suit on the ground that the receiver had been
discharged, the property had been sold under foreclosure, and had passed into
the hands of another corporation; that the San Diego Land & Town Company of
Maine was not the successor of the receiver, and had no interest or right to
prosecute the action, and that the board of supervisors of San Diego county had
fixed the rates of the company.

46

The two motions came on to be heard on the 2d of January, 1898, and the
motion to dismiss was denied, and the motion that the bill be taken pro
confesso against all the defendants was granted, and a decree ordered to be
entered according to the opinion of the court. The defendants excepted.

47

The bill of review further averred that the court caused to be entered, greatly to
the prejudice of the orators, its decree which was set out at length. It further
averred that the defendants had paid the costs adjudged against them, and
detailed at length their exceptions to the ruling of the court. The exceptions
reasserted the materiality and sufficiency of the averments of the answer,
contended that the court misapprehended them, and erroneously treated and
considered the exceptions as raising for discussion the merits of the case, and
by expunging the answer from the records deprived the defendants of the right
to have the merits of their defenses on their face regularly determined upon the
setting of the cause for hearing on bill and answer or upon issues raised and
proofs made.

48

The bill of review asserted further errors against the decree in that it denied the
rights alleged in the answer of defendants, and so construed and enforced the
Constitution and statutes of the state as to violate § 1, art. 14, of the
Constitution of the United States, in that it maintained the company and the
receiver in increasing the rate, and the condition of nonpayment the right to
shut off the water from the lands of the defendants, and thereby deprived them
of the equal protection of the laws and of their property without due process of
law. And further, because it was an exercise of judicial power to the same end,
and to the deprivation of the right of contract without due process of law. Also
denied to the state a republican form of government, guaranteed by § 4, art. 4,
of the Constitution of the United States, in that, as enforced and applied, the
state assumed the absolute control of all water appropriatd and all works for its
distribution, abolished capacity to acquire property, rights, and servitudes in
such water and waterworks absolutely, or with ownership of lands for
irrigation, or free from the perpetual obligation to pay net revenue of not less
than 6 nor more than 18 per cent per annum upon the cost or value of the water
system; and abolished the right or capacity to ascertain, fix, or define, by
contract or convention, the rate of compensation to be paid by any consumer for
the supply of water for irrigation of land.

49

Error was also asserted in the decree in that it was in favor of the San Diego
Land & Town Company, of Maine, although it had not become a party to the
cause, by supplemental bill or otherwise, and because what interest it had did
not appear, nor was its claim to any interest set forth, so that the defendant
could answer or plead thereto. Also, error in that the court had no jurisdiction to
entertain the cause or make any decree on the merits, and error in not
dismissing the suit after the discharge of Lanning, the receiver and complainant.

50

The bill concluded with the following prayer:

51

'Wherefore, as said errors appear on the face of the record, and are greatly
prejudicial to complainants and their rights in the premises, complainants pray
that said decree may be reviewed, reversed, and set aside, and no further
proceedings taken therein; and to that end complainants pray process by
subpoena against the San Diego Land & Town Company, of Maine, requiring it
to appear and answer hereunto, and show cause, if it may, why said decree
should not be reviewed, reversed, and set aside, and such further orders and
decrees be made as to the court may seem just, including the restoration to your
orators of the sum of money paid under said decree, as aforesaid.'

52

The defendant (appellee) moved the court to strike the bill from the files and
dismiss the suit.

53

The motion was denied. The water company then demurred to the bill on the
grounds that it appeared therefrom that there was no error in the proceeding and
decision in Lanning v. Osborne appearing on the face of the record or
otherwise; that complainants were not entitled to the relief prayed for, or any
relief; that no error appeared in said suit which could be relieved by a bill of
review or a bill in the nature of a bill of review; that the remedy of
complainants was by appeal.

54

The demurrer was sustained with leave to complainants to amend the bill in ten
days.

55

The complainants elected to stand on their bill, and decree was entered on the
demurrer as follows:

56

'It is therefore considered and decreed by the court that the plaintiffs take
nothing by their bill herein; that said bill be, and the same is hereby, dismissed,
and that the defendant have and recover of and from the plaintiffs its costs in
this behalf laid out and expended, taxed at $20.50.'

57

The case was then brought here.

58

Messrs. Alfred Haines, C. H. Ripley, M. L. Ward, and George Fuller for
appellants.

59

Messrs. John D. Works, Lewis R. Works, Bradner W. Lee, and Charles D.
Lanning for appellees.

60

Messrs. John Garber and Frank H. Short filed a brief as amici curiae.

61

Mr. Justice McKenna, after making the above statement, delivered the opinion
of the court:

62

One of the grounds of demurrer to the bill was that it appeared from the
complainants' own showing that their remedy was by appeal and not by bill of
review. It is not pressed with much earnestness here, and is clearly untenable.
Whiting v. Bank of United States, 13 Pet. 6, 10 L. ed. 33; Putnam v. Day, 22
Wall. 60, 22 L. ed. 764; Buffington v. Harvey, 95 U. S. 99, 24 L. ed. 381;
Ensminger v. Powers, 108 U. S. 292, 27 L. ed. 732, 2 Sup. Ct. Rep. 642;
Willamette Iron Bridge Co. v. Hatch, 125 U. S. 1, 31 L. ed. 629, 8 Sup. Ct.
Rep. 811; Story, Eq. Pl. 10th ed. §§ 403 et seq.

63

The principal contention of the appellants is that the water rights are easements
in the real estate constituting the water system. In other words (as described by
appellants), 'incorporeal interests in the corporeal property of a water system
annexed to lands irrigated by that system.' Being such, the corporation may sell
them, the landowner may contract for them— may buy them outright ad free
himself wholly from annual rates, or may stipulate for a particular rate. In other
words, that the water right is an interest in the system, paid for with the land, or
by the stipulated rate, and not subject to any rate or to increase beyond the
stipulated rate, according to the varying expenses or valuations of the system.

64

It is claimed to be property, and the right to sell and to buy it is asserted
respectively for the owner of the system and the consumers of its waters, and
that the Constitution and laws of the state of California do not prohibit this, or if
they can be construed to do so violate the Fourteenth Amendment of the
Constitution of the United States by depriving appellants of their property
without due process of law, and violate also certain provisions of the
Constitution of the state of California.

65

It is further contended by appellants that conceding a contract cannot be made
between 'water corporations' and their customers for a particular rate which will
preclude regulation by the state, that until such regulation the parties—
company and consumers—may contract. And, further, that the rate of $3.50 per
acre per annum was the rate charged and collected by the company, and
therefore became the rate established by law by virtue of a provision in § 5 of
the statute of 1885, hereafter quoted.

66

It is also contended that the answer in the original suit averred the rate of $3.50
per acre per annum was a reasonable rate, and denied that the increased rate of
$7.00 per acre was reasonable, and that on the issue thus raised, the defendants
there, complainants in the bill of review, were entitled to a hearing.

67

The charge of error in the decrees is based on their adjudging against these
contentions.

68

Opposing the contentions of appellants, the appellee makes a distinction
between the facilities for the use and the right to use the water of its system and
the actual use of it. The compensation for the former, appellee concedes, may
be the subject of contract; the rate for the latter, it contends, is subject to
regulation by law, but, until so regulated, may be established by the water
companies.

69

The circuit court did not accept the distinction made by appellee. It did not
accept the view contended for by appellants. It held, interpreting the
Constitution and laws of the state, that the appropriation and disposition of
water was a public use, the right to collect tolls or compensation for it a
franchise, subject to regulation and control in the manner prescribed by law,
and that such tolls and compensation could not be fixed by the contract of the
parties.

70

If the contention of the appellee is justified, that the contracts between it and
the appellants gave it the right to establish the rates, the controversy is
narrowed and simplified, and we are relieved from deciding the many
interesting and difficult questions pressed by appellants for judgment.

71

There was some difference in the way the water rights of the defendants arose,
but they are assimilated in the same legal right by the allegation in the original
answer that the company did 'not make or claim any distinction in respect of the
character and quality of the water right, or of the annual rates actually
established or collected for irrigation.'

72

It is only necessary, therefore, to say in description that some of the lands were
purchased before 1892, and up to that date there was no express or separate
grant of 'water rights.' Some were purchased after 1892, and as to them there
was a specific sale of the appurtenant water right. The contracts in both cases
contained an agreement to sell certain described real estate, 'together with a
water right to one acre foot of water per annum for each and every of said
above-described real estate, to be delivered by the party of the first part through
its pipes and flumes at a point—said water to be used exclusively on said real
estate, and not to be diverted therefrom. Provided, that the party of the first part
may change the place of delivery ofsa id water, so long as the same is near the
highest point of said land. For which land and water right the party of the
second part agrees to pay the sum of—dollars.'

73

The contracts also contained the following provisions:

74

'And the party of the second part further agrees and binds—self,—heirs,
executors, and assigns to pay the regular annual water rates allowed by law and
charged by the party of the first part for water covered by said water rights,
whether said water is used or not, and to pay for all water used on said land for
domestic purposes, monthly, under such rules and regulations for the delivery
of water to consumers, as the party of the first part may from time to time
make.'

75

Other lands (about 900 acres) described in the answer as 'lying outside of
National City' were derived, not from the company, but water rights were
attached to them on the same basis as to the lands sold by the company up to
1892. After that date the company refused to furnish water, except upon the
payment of a sum in gross for the water right over and above the uniform
annual rate established and collected, or in lieu thereof 6 per cent annual
interest upon the company's estimate of the value of such right. The price was
first fixed at $50, afterwards at $100, and the contract in addition providing for
the sale of the water right contained the following provision:

76

'In consideration of the foregoing stipulations and agreements, the party of the
second part agrees and binds—self, heirs, executors, and assigns, to pay the
sums above specified promptly as the sums, and each of them, falls due, and
that—will in all things comply with and perform the terms and conditions of
this agreementon—part to be performed, and that—and they will promptly pay
all annual water rates and charges for the water to which—is entitled under and
by virtue of this agreement, at rates fixed by the party of the first part as
allowed by law, and at the times, in the manner, and according to the rules and
regulations made and adopted by the party of the first part, the annual rental for
the amount of water to which the party of the second part is entitled under this
contract, to be paid whether the same is used or not, and also to pay for all
water used by—on said land for domestic purposes at the rates fixed by the
party of the first part and allowed by law.'

77

Under the same form of contract water rights were attached to about 400 acres
of land belonging to other defendants.

78

To lands which lay in what is designated Ex-Mission the contracts contained
the following provision:

79

'The parties of the first part will make application for the use of the water upon
the form provided by the party of the second part for that purpose, and pay for
the use of the water at the current rates as may be enforced from time to time
for supplying lands in National Ranch, and subject to the same general rules
and regulations.'

80

J. M. Ballow, one of the defendants, claimed his water right under a contract
which provided as follows:

81

'Provided, that said party of the second part shall make application in the form
provided by the company, for the use of the water, and use the same under the
same restrictions and conditions, and to pay said party of the first part the
current rate therefor, as established, for Chula Vista; provided, said restrictions
and conditions are not inconsistent with the water right hereby granted to said
party of the second part.'

82

The rates in Chula Vista were governed by the general contract.

83

It is apparent that the contracts in all things substantial to the controversy are
similar. They provide for the payment of a certain sum for land and water
rights, or for water rights alone, and all for the payment of annual rates besides.
And provide directly or by reference that the annual rates shall 'be fixed by the
party of the first part (the company), as allowed by law,' to be paid whether the
water is used or not. Water used for domestic purposes is also to be paid for
'atth e rates fixed by the party of the first part and allowed by law.'

84

These provisions do not leave much room for construction. For irrigation
purposes and for domestic purposes the rental of water is to be paid at rates
'fixed' by the company. The only qualification is 'as allowed by law.' What this
means we shall presently consider; but whatever it means, it does not sustain
appellant's contention that the rate of $3.50 per acre per annum was
irrevocable, secured to them free from the power of variation by the company
or by law. It is not important to consider, therefore, whether, under the
Constitution and laws of the state, they could contract with the company for the
price of a water right. If the contract, they plead, gives to the company the
power to fix the annual rate, the only inquiry which need be, is whether the
power has been exercised 'as allowed by law.' What this means can be the only
controversy.

85

The appellee concedes the power of the regulations of rates by the board of
supervisors, but claims that until the power is exercised the right to fix the rates
rests with it, and that those fixed by it are 'allowed by law.' The appellants
contend that the power of the board of supervisors is only a power to fix
maximum rates, and below them the right of the parties to contract is
unrestrained (a view sufficiently discussed already), and that until the board
shall act 'the statute itself fixes the standard of maximum rates, as being the
'actual rates established and collected by the corporation,' and forbids the
corporation to exceed such maximum.'

86

The contention is claimed to be based on § 5 and § 8 of the act of 1885. Section
5 vests the power to fix rates in the board of supervisors, and provides 'when so
fixed by such board shall be binding and conclusive for not less than one year
next after their establishment, and until established anew or abrogated by such
board of supervisors as hereinafter provided.' And then follows the provision
upon which appellants especially rely:

87

'And until such rates shall be so established, . . . or after they shall have been
abrogated by such board of supervisors, as in this act provided, the actual rates
established and collected by each of the persons, companies, associations, and
corporations now furnishing, or that shall hereafter furnish, appropriated waters
for sale, rental, or distribution to the inhabitants of any of the counties of this
state, shall be deemed and accepted as the legally established rates thereof.'

88

Section 8 provides that those furnishing water 'shall so sell, rent, or distribute
such waters at rates not exceeding the established rates fixed and regulated
therefor by the boards of supervisors of such counties, or as fixed and
established by such person, company, or association, or corporation, as
provided in this act.'

89

The deduction which appellants make is that when the company once fixes the
rates they must remain so fixed, and if changed by supervisorial action recur
upon the cessation of that action—inevitable always through every change of
condition; if excessive, to forever remain so; if deficient, to forever remain so.

90

The argument urged to support this is that one of the ordinary meanings of the
word 'actual' is 'existing at the time.' 'And if (to quote counsel) the
lexicographer be consulted to define the word 'established' he will give its
meaning substantially, as does the Century Dictionary, to be 'to make stable;
firm or sure; appoint; ordain; settle or fix unalterably." To illustrate the
immutability which one of its senses conveys, counsel quote with apologetic
reverence an illustration, which they say is often found in standard dictionaries:
'I will establish my covenant with him for an everlasting covenant.' Gen. xvii:
19.

91

We are not impressed with the aptness of the illustration to the case at bar.

92

Covenants formed and promulgated by a divine wisdom and foresight can have
the attribute of immutability, and their language may be used and interpreted to
express it. um an regulations are for the most part occasional and temporary.
Besides, one definition of a word does not express its whole meaning or
necessarily determine the intention of its use. If so, interpretation would not be
difficult, and the application of the language of a law or contract would be as
unerring as easy.

93

'Actual,' of course, means existent, but it does not preclude change. Nor does
the word 'establish' convey the idea of permanency. As used in the statute, it
has no such meaning. The power of the board of supervisors is not exhausted by
one exercise, nor has its result unalterable fixity. It is beyond change only for a
year. The language of the statute is 'at any time after the establishment of such
water rates by any board of supervisors of this state the same may be
established anew or abrogated in whole or in part by such board, to take effect
at not less than one year next after such first establishment. . . .'

94

It is manifest to construe the word 'establish' to mean 'to fix unalterably' would
throw the powers of the board of supervisors into confusion and contradiction.

95

To say that the rates are unalterable for a year would prove nothing. Such effect
comes, not from the use of the word 'establish,' but from other words, and, but
for them, rates established might 'be established anew' as often as the board of
supervisors might choose. Nor can it be said that the word means one thing
when applied to the power of the board of supervisors, and another thing when
applied to the power of the company. To say so is to abandon the argument.
That depends upon the meaning of the word 'establish' to be 'to fix
unalterably,'—to mean of itself, and in its use, permanence and unchangeability.
If it does not mean that of itself, there is an end of the argument, for there is
nothing in the act or its purpose which would give it such meaning when
expressing the power of the company, and something else when expressing the
power of the board of supervisors. The purpose of the act rejects such view. Its
purpose is regulation, deliberate and judicial and periodical regulation by a
selected tribunal, and we cannot believe that the legislature intends by an
absolute and peremptory provision to fix rates upon the water companies
unalterable by them, no matter what change in conditions might supervene.
Against rates which may become unreasonably high, the statute gives relief to
consumers through petition to the board of supervisors. Rates which may
become unreasonably low, it surely does not intend to impose on the companies
forever, except as relief may come from the voluntary justice of its customers
or by a violation of the statute and appeal to the courts. There is nothing in the
act to indicate such purpose, nor does it need to have such purpose. Its
dominant idea is the regulation of rates by law, not commanded to be exercised
by the governing bodies as a voluntary duty as establishing rates in cities and
towns, but exercised when invoked by petition. Until the necessity of that, what
more natural and just than to leave the right with the water companies and
recognize it as legal. This is the meaning, we think, of the provisions of §§ 5
and 8, supra. To so interpret them makes the scheme of regulation complete
adequate, without being meddlesome or oppressive. The power of regulation is
asserted and provided for, and ready to be exercised to correct abuse, and who
doubts but that its exercise would be invoked.

96

The appellants assign many errors upon the action of the circuit court in
sustaining the exceptions to the answer made in the original suit. It would
extend the opinion to too great length to consider them separately. They are
reduced to and depend upon the claim that they constituted a submission of the
case on bill and answer, and if the latter traversed any material allegation of the
bill it could not be taken pro confesso, and a decree entered upon it would be
erroneous. (Re Sanford Fork & Tool Co. 160 U. S. 247, 40 L. ed. 14 , 16 Sup.
Ct. Rep. 291).

97

The application of the principle is claimed upon the ground that the answer
denies that the rate of $3.50 per acre per annum is unreasonable or that the
increased rate of $7.00 per acre is reasonable.

98

The circuit court held that issue was not open to its decision. It said that if the
rates established by the board of supervisors were unreasonable they could only
be annulled. In no case would the court fix them. 'Therefore,' it was further
said, 'it is not for the court in the present case to go into the question of
reasonableness of the rates established by the complainant, and which it seeks
to enforce. If unreasonable, and the consumers are for that reason dissatisfied
therewith, resort must first be had to the body designated by the law to fix
proper rates, to wit, the board of supervisors of San Diego county.'

99

We concur in this view, and finding no error in the decree in is offirmed.

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