CITY OF LIVINGSTON et al. v. MONIDAH TRUST, 261 F. 966

MORROW, Circuit Judge (after stating the facts as above). The parties will be designated as in the court below. It is contended by the defendants that the lower court erred in refusing to stay proceedings in this case pending the disposition of the case of Livingston Waterworks Co. v. City of Livingston et al., No. 4393 in the state court.

The action in this court is between citizens of different states, the amount involved is jurisdictional and sufficient, and the case is of such a nature that the decree will not interfere with the jurisdiction of the state court over the property upon which the judgment of the state court would operate. In Doane v. California Land Co., 243 Fed. 67—70, 155 C. C. A. 597, 600, this court held under the authority of McClellan v. Carland, 217 U. S. 268-282, 30 Sup. Ct. 501, 505, 54 L.

Ed. 762, that: “ ‘The rule Is well recognized that the pendency of an action in the state court Is no bar to proceedings concerning the same matter in the federal court having jurisdiction, for both the state and federal courts have certain, concurrent jurisdiction over such controversies, and when they arise between citizens of different states the federal jurisdiction may be invoked, and the cause carried to judgment, notwithstanding a state court may also have taken jurisdiction of the same case.’ McClellan v. Carland, 217 U. S. 268-282, 30 Sup. Ct. 501, 505, 54 L. Ed. 762; Falls City Const. Co. v.

Monroe County (D. C.) 208 Fed. 482-483; Wolf v. District Court, 235 Fed. 69-74, 148 C. C. A. 563.” It is also contended by the defendants that the jurisdiction of the lower court in this case was fraudulently invoked for the reason, that the conveyance by the Livingston Waterworks to the plaintiff wascolorable and made for the sole purpose of conferring jurisdiction in the federal court in this case. This question was also involved in Doane v. California Land Co., supra. On this question we held, under the authority of Lehigh Mining & Manufacturing Co. v. Kelly, 160 U. S. 327, 16 Sup. Ct. 307, 40 L.

Ed. 444, that: “The privilege of a grantee or purchaser of property, being a citizen of one of the states, to invoke the jurisdiction of a Circuit Court of the United States for the protection of his rights as against a citizen of another state — the value of the matter in dispute being sufficient for the purpose — cannot be affected or impaired merely because of the motive that induced his grantor to convey, or his vendee [vendor] to sell and deliver, the property, provided such conveyance or such sale and delivery was a real transaction by which the title passed without the grantor or vendor reserving or having any right or power to compel or require a reconveyance or return to him of the property in question.” Thefe is no evidence in this case that the title passed to the plaintiff with any reservation whatever on the part of the grantors or vendors that there should be a reconveyance or return of the property conveyed.

We are of the opinion that the District Court properly exercised jurisdiction in the case. It is next contended that Ordinance No. 24 was a contract for only 20 years, and expired on July 1, 1910. The plaintiff admits the expiration of the'contract, but not the expiration of the franchise. It is contended by the plaintiff that, as the grant of tire franchise was not limited in its duration either by the grant itself or by the Jaw of the state; it was made perpetual. In support of this contention the plaintiff cites the case of Owensboro v. Cumberland Telephone & Telegraph Co., 230 U. S. 58, 33 Sup. Ct. 988, 57 L.

Ed. 1389, where the Supreme Court held that:: ‘‘Tile grant by ordinance to an incorporated telephone company, its successors and assigns, of the right to occupy the streets and alleys of a city with its poles and wires for the necessary conduct of a public telephone business, is a grant of a property right in perpetuity, unless limited in duration by the grant itself or as a consequence of some limitation imposed by the general law of the state, or by the corporate powers of the city making the grant [citing a number of cases].

If there be authority to make the grant and it contains no limitation or qualification as to duration, the plainest principles of justice and right demand that it shall not be cut down, in the absence of some controlling principle of public policy. This conclusion- finds support from a consideration of the public and permanent character of the business such companies conduct and the large investment which is generally contemplated.

If the grant be accepted and the contemplated expenditure made, the right cannot be destroyed by legislative enactment or city ordinance based upon legislative p'ower, without violating the prohibitions placed in the Constitution for the protection of property rights.” But in New York Electric Lines v. Empire City Subway, 235 U. S. 179-194, 35 Sup. Ct. 72, 59 L. Ed. 184, L. R. A. 1918E, 874, Ann. Cas. 1915A, 906, the Supreme Court refers to the tacit conditions' annexed to grants of franchises and that they may be lost by misuser or nonuser.

But in such a case there must be proceedings by the state for a forfeiture.- Whether the state should proceed directly by quo warranto, or whether it should authorize the municipality to pass a resolution or ordinance of repeal or revocation, leaving the propriety of its course to be determined in an appropriate legal proceeding in which the default of the grantee may be adjudicated, was a question of state law with which the court was not concerned in that case.

In the present case the defendants allege in their answer to the second amended complaint, by way of a counterclaim, that on the 25th of March, 1918, a resolution was passed and adopted by the city coun.cil of Tivingston, and approved by the mayor of said city, declaring forfeited and terminated the said alleged privilege and franchise under said Ordinances Nos. 24 and 25 for, among other things, failure of performance by the plaintiff and its predecessors in interest and failure to do equity.

It is not alleged that this resolution was authorized by the state, which alone could authorize proceedings for a forfeiture of a franchise of this character. Without such authority the action of the city council and mayor in passing the resolution was no defense to this action, and the court was right in excluding tire evidence of this counterclaim. The defendants contend that it was determined by the Supreme Court'of the state in the case referred to as the “Specific Performance Case” (Livingston Waterworks Co. v. City of Livingston et al. [No. 3720] 53 Mont. 1, 162 Pac. 381, L. R.

A. 1917D, 1074) that the plaintiff had no franchise, but that question was not involved in this case.

What the court had before it was the terms of the contract set forth in Ordinances Nos. 24 and 25, and the determination of the Court was that it was the settled law of the state of Montana that an agreement to enter into an agreement upon terms to be afterwards settled between the parties could not as a general rule be enforced; that the construction placed upon the ordinances by the grantees that the renewal of the contract implied that the terms should remain unchanged and the contract was to continue for another period of 20 years, subject only to an adjustment of rates did not avoid the difficulty since under such construction the clear contemplation of the contract and its acceptance would be that the grantees had the exclusive right to supply the municipal needs of the city for water for the period of 40 years subject only to an adjustment of rates at the end of 20 years; that as such a contract was not within the power of the city the court would not assume without convincing reasons that any such contract was intended.

The court points out that the contract comprehended other things besides rates and prices, as, for example, conditions of quality, quantity, distribution, pressure, in short the elements that go to make up “service supposed in 1889 to be adequate to the needs of the city for 20 years, but which the experience of that time might demonstrate to be either inadequate or unnecessary.” The court was therefore of the opinion that the words “renew the contract” did not mean an extension of the same contract for the additional period, subject only to a rate adjustment; that they were used to signify that, in case the city did not purchase the plant, there should be further contractual relations between the parties for an additional period of 20 years touching the same subject-matter, and having in view the same general purposes, but with such differences in terms — with all the word implies — as the experience of 20 years might lead the parties to insist upon.

If this

interpretation was correct, the court was of the opinion that the judgment of the lower court was proper. But, assuming that the renewal contract referred only to rates or prices, the court held that it could not be specifically enforced, since its terms were such as the parties themselves should fix, andjthey could not be made certain by means provided or contemplated by the contract itself.

The court concludes its opinion as follows: “The appellant fTávingston Waterworks Company] is simply left without a contract, and relegated to its rights and duties as a public utility, just as any water company is whose contract has expired.

It must rest content in the fact that, possessing the only source of supply in Livingston, it may continue to furnish that city and its inhabitants with all the water needed by them npon a fair and reasonable basis — at least until competition, lawfully established, shall compel it to share the field.” Plainly, neither the franchise nor its duration was involved in that case. All the court did was to recognize its existence and continuance, and this is all we have properly before us in this case.

The franchise granted the plaintiff’s predecessor in interest, and claimed by it in Ordinances Nos. 24 and 25, has not been forfeited by any authorized legal proceedings, and was not in issue in this case. With respect to the hydrants, pipes, and mains claimed by the plaintiff as part of its water system, no forfeiture to the defendants has been shown, and no acquisition of title by the defendants appears in the evidence. The ownership of that property, therefore, continues in the plaintiff.

The exclusion of the judgment roll in the “specific performance case” and of the remittitur from the Supreme Court of the state in that case was therefore correct. The exclusion of evidence tending to show grounds of forfeiture of the franchise because of the quality of the water supplied from the Yellowstone river and its quantity for fire protection was also correct. This evidence might be relevant and material in proceedings for forfeiture, but not in this case.

Our construction of that portion of the decree of the District Court “that the right, privilege, easement, and franchise so granted is perpetual,” is that the franchise., though perpetual, is always subject by appropriate remedy to forfeiture for misuser or nonuser, and we read the decree as in harmony with such limitations. They are the “tacit conditions” annexed to the grant. New- York Electric Lines Co. v. Empire City Subway Co., supra. The decree is therefore affirmed.