Andrews v. National Foundry & Pipe Works, Ltd.

WOODS, Circuit Judge

(after stating the facts). Without regard to the question whether the Oconto Water Company received its franchises directly from the state, or indirectly through the city of Oconto, by force of the ordinance which purported to grant them, we are'of opinion that the mortgage in question may be upheld. The appellants, it is not disputed, advanced large sums of money to the water company in the belief that they were receiving a valid security; and, while they are presumed to have known the law, it is not to be presumed, if there' is reasonable escape from it, that either party to the transaction intended a vain thing. “Interpretatio facienda est ut res magis valeat quam pereat;” and other familiar maxims lend support to the requirement that a contract or deed shall be so construed as to have effect rather than so as to be made void. By the literal terms of the mortgage and of the decree of foreclosure, upon which the title of the appellants depends, there was a conveyance , or assignment of “all the rights, privileges, immunities, franchises, and powers, of whatever name or nature, which were granted in and by that certain ordinance,” etc., and if, upon a proper interpretation of the statutes touching the question, no mortgagable right, privilege, or franchise was granted in or by the ordinance, as distinguished from a direct grant by the state, then by a strict construction the mortgage was, as it was held to be, ineffective and meaningless. But not by the words alone should a writing be interpreted. “The rule is to regard the intention, rather than the words;” and here the evident intention, deducible from the whole instrument, was to mortgage the rights and franchises which the ordinance granted in terms, or which it purported to convey. The resolution whereby the water company declared its acceptance of the ordinance, and “of the'franchise thereby granted,” shows that both parties entertained an equally broad aud generous view of the powers of the common council of the city in the premises; and, when the deed of trust came to be drawn, it: was only natural that for certainty of description reference should be made to the ordinance by which the rights of the company were defined, and, as the parties supposed, were granted. And even if this supposition was mistaken, must it he held that the entire purpose of the parties failed and that notwithstanding the covenant of the water company that it was “the owner- and holder,” and had “good right and lawful authority” to make transfer and sale “of said rights, privileges, immunities, franchises, and powers,” “in ilie manner aforesaid,” yet the instrument is a total nullity? Indeed, why should it not be beld that by that covenant the water company is estopped to deny that its franchises were granted by the ordinance? Or must it be said that the covenant covers only rights and franchises which were granted by ■the ordinance, and, like the; granting clause, is itself void because no franchise came to the company in that way? It would seem more reasonable, the ordinance having been made a part of the deed by reference, as if copied into it, to treat the covenant as covering the rights and privileges named in the ordinance, whether derived from one source or another. To say the least, upon the whole instrument, it is only reasonable .and in accord with the canons of construction to read the expression, “which were granted,” etc., as if it were, “which in terms were granted unto the said Oconto Water Company in and by that certain ordinance,” etc. The added words are fairly implied, and the addition, without doing violence to any part: of the writing, gives effect alike to the words of grant and covenant, and accomplishes the evident purpose for which the deed was executed.

But, if compelled to put upon its terms a strict and literal construction, we should still consider the mortgage valid, because we are not able to agree that the Oconto Water Company, by force of the ordinance, received no right, privilege;, or franchise which, was capable of being mortgaged, and which could be properly described as granted in or by the ordinance. While “it is essential to the character of a franchise,” as was held in Bank v. Earle, 13 Pet. 595, “that it should be a grant from the sovereign authority, and in this country no franchise can be held which is not derived from a law of the state,” and while the right to the use; of the public streets of a city by a gas company or water company, for the purpose of laying down its pipes, is generally considered to be such a franchise, it is well settled that the legislature of a state may confer the power to grant such franchises upon municipal corporations; though, when so granted, they are, nevertheless, to be regarded as derived from the state. The question here, therefore, is not whether the franchises of the Oconto Water Company were obtained from the state; they necessarily came, directly or indirectly, from that source. It is whether or not the common council of Oconto had been given the power to grant such franchises, and in this instance did grant those named in its ordinance. Without that ordinance, it is clear the water company could not lawfully have laid its pipes in the streets of the city, nor have put into practical effect its “franchise to operate the plant,”—if it can be said to have had such franchise, by reason merely of its act of incorporation, and before the ordinance was passed. The city of Oconto, by its own charter, had the power, and therefore was under the duty, of caring for the public health. That power it could employ in any reasonable way; if it chose, for instance, by contracting for a water supply through pipes laid in the streets. The making of such a contract would, of necessity, carry with it the right, on the part of the contractor, to- lay the pipes and to operate the plant. Such right is a franchise, and, the making of the contract operating by necessary implication as. a grant of the privilege or franchise, the power given to make the contract was power to grant the franchise. But, besides the power to provide for the health of its inhabitants, the city of Oconto had the express power, apparently not brought to the attention of the court below, “to provide for the erection of waterworks for the supply of water to the inhabitants of the city.” We do not agree with the suggestion of counsel that by this provision the city had no right to contract for a supply of water, and was authorized only to construct and operate a plant of its own. The authority extended to any reasonable method; . and it follows that, before the Oconto Water Company was incorporated, the city of Oconto', by its own charter, had power, from the state, to grant franchises like those in question to any person or body capable of receiving them. By its act of incorporation the Oconto Water Company came into being, endowed, not with the right to establish and operate waterworks in Oconto, but with capacity to receive and exercise that right or privilege upon such terms as the city, should consent to grant-. But, though capable of receiving, it could acquire no complete or effective right or franchise without the consent, and there is no impropriety, legal or verbal, in saying without the grant, of the city. The ultimate source of such franchises in all cases being the state, the difference between a municipal power to grant them and authority to contract for or to consent to the exercise .of them is a difference of words rather than of substance. The language of the court of appeals of New York in the case of People v. O’Brien, 111 N. Y. 1, 18 N. E. 692, is pertinent. Speaking of the Broadway Surface Railroad Company, the court said:

“On May 13, 1881, that company filed articles of association and became incorporated as a street railroad company under the provisions of chapter 252 of the Laws of 1881, a general act passed to authorize the formation of such corporations, pursuant to the mode introduced by the amendment to the constitution of 1871. By such incorporation the company became an artificial being, endowed with capacity to acquire and hold such rights and property, both real and personal, as were necessary to enable it to transact the business for which it was created, and allowed to mortgage its franchises as security for loans made to it, but haying no present authority to construct or operate a railroad upon the streets of any municipality. This right, under the constitution, could be acquired only from the city authorities, and they could grant or refuse it at their pleasure. The constitution not only made the consent of the municipal authorities indispensable to the creation of such a right, but, by implication, conferred authority upon them to grant the consent, npon such terms and conditions as they chose to impose, and npon the corporation the right to acquire it by purchase.”

So, here, not by reason of a constitutional provision, hut by statute, the ultimate efficient right could be acquired only by act and consent of the city authorities, which they could grant or refuse at their pleasure. •

Whether or not, and to what extent, the mortgage of the franchises covers the plant of the company, need not now be considered.

The objection is made that, the statute authorizes an appeal only from an “interlocutory order” of injunction granted “upon a hearing in equity;” that the order in this case was a preliminary one, made npon a prima facie showing, and is not appealable; hut we concur in the opinion of the court of appeals for (he first circuit that the statute was intruded to extend the right of appeal “to all that class of interlocutory orders or decrees [of injunction] which interfere with the possession of property or operate in the restraint of trade.” Richmond v. Atwood, 5 U. S. App. 151, 2 C. C. A. 596, and 52 Fed. 10. The order granting an injunction should be set aside, and it is so ordered.