In this action the plaintiff sues in its own right, and not as a taxpayer of the village.
The legal questions involved are of great general importance and affect a very large amount of invested capital.
The argument, as set forth in the able briefs of counsel on both sides, has taken a wide range, but in my opinion there is one controlling question that is decisive of this case.
In order to state this question intelligently, a reference to the legal situation is important.
In 1873, the legislature enacted the general law for the formation of water companies. (Laws 1873, chap. 737.) That act has been amended from time to time (particularly Laws 1885, chap. 422).
The policy of this legislation has a most important bearing on the question under consideration. While the statute of 1873 is in form a general law authorizing the formation of water companies, it contains a limitation that permits the organization of a corporation thereunder only when the local authorities of the village interested have given their consent.
In 1875 (Chap. 181), the legislature passed a law authorizing the villages of the state to furnish the municipalities and their inhabitants with pure and wholesome water.
This statute provides, in detail, how a village may organize and conduct a corporation and water system of its own.
It further provides (§ 29) that if it shall become or be *Page 172 deemed necessary by the board of water commissioners, they may institute condemnation proceedings to acquire the rights, privileges, grants and properties of an existing corporation.
This is optional with the village authorities only, and the existing company has no power to compel the water commissioners to purchase or condemn its rights and property.
In 1887 the trustees of the village of Skaneateles, as authorized by the act of 1873, as amended, granted to the plaintiff company the consent or franchise to perfect its organization and supply the village and its inhabitants with water.
In 1889 the works were completed and the plaintiff entered upon the performance of its corporate duties.
In 1896 proceedings were instituted which resulted in the village of Skaneateles availing itself of the provisions of the act of 1875 (Chap. 181), and it is now conducting a corporation and water system of its own.
The municipal company failed to avail itself of the right to acquire the property of the old company under condemnation proceedings. In this case, as in many others, the old company has ceased to pay expenses, and it is only a question of time when its bonds and stock will be worthless. Before considering the legal position of the village under the state of facts disclosed by this record, it may be well to inquire as to the legitimate risks assumed by the incorporators of the plaintiff at the outset.
I am of the opinion that the plaintiff did not acquire an exclusive right, under the act of 1873, to supply water to the village of Skaneateles and its inhabitants. (Matter of City ofBrooklyn, 143 N.Y. 596.) I think the plaintiff took the risk of the village authorities, at any future time, granting permission to private parties to form another water company and allowing it to furnish water to the municipality for public use as well as to the inhabitants.
If there is no exclusive right in the plaintiff, and if the village is free to permit the formation of as many corporations by private parties as they deem proper, we have a situation where the freest competition is permitted and no monopoly exists. *Page 173
All who embark in business ventures are bound to consider in advance that their investment of capital is subject to the peril of close and oftentimes successful competition. The vice of monopoly is that it escapes competition to the detriment of the consumer.
We come then to the controlling question in this case. Is it competent for the legislature to authorize a village to organize a water company of its own to furnish water for private and public use when its trustees have previously granted a consent, or franchise, for a private corporation to do the same thing, without requiring the village either by purchase, or condemnation proceedings, to acquire the rights and property of the old company?
I am of opinion that the legislature has no such power, and the act of 1875 is, in that respect, unconstitutional as depriving the plaintiff of property without just compensation or due process of law and denying to it the equal protection of the laws.
It seems very clear that a municipal corporation, standing in the position of the village of Skaneateles in this record, cannot engage in the business of furnishing water to itself and its inhabitants and drive the corporation that was organized by its consent to do the same business, into bankruptcy.
If this was accomplished by fair and legal competition that would be the end of the matter, as no valid objection could be made. The foundation of the argument to the contrary is that the municipality does not stand on an equal footing with the old company and invite it to fair and open competition.
In the first place it controls its own patronage as to furnishing water for public use, which is a considerable source of revenue to the existing company.
The latter, if competing with a new private company in this regard, would have an equal opportunity of obtaining the contract from the village as it would go to the lowest bidder, but not so where the latter organizes a company.
Again, the village has the power to impose a tax upon the *Page 174 property of the existing company as a taxpayer to raise a fund to build the plant of the municipal corporation and to make good from time to time any deficit in the conduct of its business.
Furthermore, the village has the power to establish a scale of rates for the use of water, and also rates for fire protection to be assessed on all real property abutting on the mains or within two hundred feet of the hydrants, the owners and occupants of which do not use the water for domestic or manufacturing purposes. (Laws 1889, chap. 507, as amended by Laws 1893, chap. 662.) Any patrons the old company retains will be driven at once into the municipal company by this tax. This assessment of rates for fire protection was properly designed to compel the non-consumer to contribute for benefits and protection enjoyed, but it will incidentally require the patrons of the old company to associate them selves with its municipal successor.
In view of the facts as stated, it is obvious that the municipal water company is in no legal sense the ordinary competitor of the old company, but is armed with powers that will inevitably drive the latter from the field, and its bondholders and stockholders be subjected to a total loss of all capital invested. This is not competition — it is annihilation.
As before stated, this litigation affects a very large amount of invested capital, aside from the case at bar, and the question is whether a court of equity is powerless to prevent the utter destruction of this property, or can it invoke legal principles which will do justice between the parties.
It seems to me that there is but one course to be pursued; the property of the old company should be purchased by private contract or condemned under the statute before the municipal water company is permitted to begin work on its plant.
When the town of New Lots was annexed to the city of Brooklyn, the latter was prohibited from supplying water to the territory included in the town until the expiration of the charter of the water company, or until the city should purchase *Page 175 or acquire its property. (Laws of 1886, chap. 335, § 4.) The course suggested is the only one that can even approximate justice in the situation now presented. The old company, with a large bonded indebtedness that has been increased by reason of losses incurred during the early years of the venture, is sure to suffer financially even after a fair and honest condemnation proceeding.
In the case before us the old company first undertook the task of supplying a country village with water and encountered the usual experience of the few taking it and the many refusing it. The general, popular appreciation of the fact that a water company offers for a comparatively small sum of money an abundant supply of pure and wholesome water for domestic and sanitary purposes, is a matter of slow growth in a small country village, and the capitalists who embark in the enterprise suffer losses at the outset.
It is simple and obvious justice that the municipal corporation before availing itself of the work and losses of the pioneer company, should acquire its property by purchase or condemnation proceedings. To hold that one of the powers the legislature has placed in the hands of the village, by which the plaintiff has been partially destroyed, is unconstitutional, avails nothing when others equally potent are allowed to stand to the utter destruction of the old company.
There is nothing in precedent, as I read the cases, to prevent a court of equity from granting relief in that large class of cases, of which this is one.
I vote for reversal.
All concur with PARKER, Ch. J., for affirmance, except BARTLETT, J., who reads dissenting opinion, and HAIGHT, J., not voting.
Judgment affirmed. *Page 176