RIGHTS OF WATER COMPANIES.
A DECISION was recently handed down by the Supreme Court of Pennsylvania which may have an important bearing upon the relations existing between boroughs and water and gas companies. The case was that of the Gas and Water Company of Downington against the borough of Downington, Pa. The company had filed a bill in the Common Pleas of Chester county to restrain the borough from constructing water works. The demurrer to the bill raised the single question whether the exclusive authority conferred upon the water company by the act of 1867 incorporating it was exclusive against the borough. The lower court decided that it was not, and dismissed the bill. The Supreme court, in reversing this decision, expressed the opinion that the injunction asked for by the water company should have been granted, and remanded the case for further proceedings.
The opinion recites that the borough of Downington was incorporated under the general borough law act of 1851, and that it was empowered “ to provide a supply of water for the use of its inhabitants.” It did not exercise this power, and the Downington Gas and Water Company was incorporated. The act conferred upon it exclusive privileges, and these were continued when, at a subsequent date, the company was reorganized and accepted the provisions of article 16 of the constitution and complied with the requirements of the act of May 25,1878. The court holds that the borough is a mere agency of the State for governmental purposes; that its charter was not a ’’contract within the protection of the prohibition against laws impairing the obligation of contract, and it had no vested right to its powers and franchises. . . . The legislature had the right to take away the right of the borough to construct water works and to confer it upon another. It exercised this power by creating a corporation and conferring upon it a power which it had previously conferred upon the borough. The water company accepted the grant of power which the borough had failed to execute, together with its privileges, and made expenditures and completed the works.” The court says the exclusive privilege granted was the inducement for the expenditure of the money involved.
“ The purpose was to protect the company and secure it in the exclusive enjoyment of its franchise, not for all time and against all parties; for the borough could at any time elect under legislation to which the charter was expressly made subject to purchase the works.”
According to this dictum, a borough which fails to exercise its powers at a time when it would involve heavy expenditures and light returns cannot enter the field after it has been cultivated by private capital and made profitable.
Another point which will be of interest to all similar corporations incorporated under special acts, is the statement of the court that
“the exclusive right and privilegesconferred upon the original by its charter . . . were not affected by its acceptance of the provisions of article to of the consitution.