Mercantile Trust & Deposit Co. v. Columbus Waterworks Co.

Citations

• 130 F. 180
• 1903 U.S. App. LEXIS 5256

Syllabus

<p>1. Federal Courts — Following State Decisions — Contract Creating Municipal Indebtedness.</p> <p>A federal court will follow the law as established by the Supreme Court of the United States, that a contract by a city to pay an annual rental to a water company does not create an indebtedness of the city, within the meaning of a provision of the state Constitution which would render such an indebtedness illegal, where at the time of the making of the contract in dispute the law of the state had not been settled otherwise by its Supreme Court, although that court may have subsequently declared such contracts invalid.</p> <p>2. Municipal Corporations — Contract with Water Company — Impairment.</p> <p>A city, having power under the law of the state to provide for a supply of water for its inhabitants and for fire protection, may grant a franchise to a water company to use its streets, and may make a valid contract with such company for a supply of water for fire purposes- for a term of years; and where it has made such grant and contract, and the company has acted thereon by constructing a system of waterworks, it cannot impair the same by directly revoking the grant, or indirectly by constructing works of its own and entering into competition with the company during the term; nor are the rights of the city in that respect enlarged by the fact that it undertook to grant an exclusive franchise, which it had no power to do.</p> <p>3. Same — Preliminary Injunction.</p> <p>Although it appears that a water company has not in all respects met the requirements of its contract with a city, a preliminary injunction will be granted, at suit of its bondholders, to restrain the city from proceeding with the construction of waterworks to be operated in competition with those of the company until the rights of the parties can be determined on a final hearing, where such action by the city would be in violation of its contract with the company, and would, to a large extent, destroy