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PPEAL by defendant from a judgment |

A it

The gist of each count of the complaint


County in plaintiff's favor in a suit to re- the plaintiff and defendant, and punitive cover damages for breach of a contract to damages are not recoverable for a breach supply water by meter measurement. Re- of contract in this respect, there being a versed.

plain distinction between damages arising The facts are stated in the opinion. from tort and those arising ex contractu.

Messrs. John London and Henry Fitts, Birmingham Waterworks Co. v. Keiley, for appellant:

2 Ala. App. 628, 56 So. 838; Sutherland, The contract is unenforceable.

Damages, ss 393, 1095; Alabama G. S. R. Brown v. Birmingham Waterworks Co. Co. v. Arnold, 84 Ala. 159, 5 Am. St. Rep. 169 Ala. 230, 52 So. 915; State ex rel. 354, 4 So. 359; Patterson v. South & North Ferguson v. Birmingham Waterworks Co. Ala. R. Co. 89 Ala. 318, 7 So. 437, 11 Am. 164 Ala. 586, 27 L.R.A. (N.S.) 674, 137 Am. Neg. Cas. 71; Richmond & D. R. Co. v. St. Rep. 69, 51 So. 354, 20 Ann. Cas. 951. Vance, 93 Ala. 144, 30 Am. St. Rep. 41, 9

The true construction of the special con- So. 574; Alabama G. S. R. Co. v. Hill, 93 tract is that plaintiff thereby agreed to pay Ala. 514, 30 Am. St. Rep. 65, 9 So. 722; for water consumed according to meter Floyd v. Hamilton, 33 Ala. 235; Alabama measurement and without regard to wheth G. S. R. Co. v. Frazier, 93 Ala. 45, 30 Am. er the amount thus to become due was St. Rep. 28, 9 So. 303, 8 Am. Neg. Cas. 17; more or less than the amount which she Birmingham R. Light & P. Co. v. Drennen, would have had to pay under the flat rate. 175 Ala. 338, 57 So. 879, Ann. Cas. 1914C,

Birmingham v. Birmingham Waterworks 1037; Highland Ave. & Belt R. Co. v. RobCo. Ala. -, 42 So. 10.

inson, 125 Ala. 483, 28 So. 28; Inman v. mingham Waterworks Co. 27 L.R.A. (N.S.), itself in accord with the general rule as 674.

stated in the earlier note, that a corporaFor the effect of contracts with patrons tion or municipality authorized to supply to preclude regulation of rates of public water or light to inhabitants of a service corporations, see note to Pinney & nicipality may not discriminate as to the B. Co. v. Los Angeles Gas & Electric Co. rates charged; at least, among consumers L.R.A.1915C, 282.

of the same class. In BIRMINGHAM WATERWORKS Co. v. In Montgomery v. Greene, 180 Ala. 322, Brown, the court expressly overrules its 60 So. 900, the court recognized the general former decision in the same case, reported rule as above stated and applied it in a as Brown v. Birmingham Waterworks Co. case where a city charged a higher rate for 169 Ala. 230, 52 So. 915, so far as it held water to persons residing outside the city that the water company might discriminate proper, but within the police limits of the as to the rates charged its consumers as city, than was charged to the inhabitants long as the favorable rate was given to the of the city itself, holding that such higher consumer at the expense of the company, charge was an unlawful discrimination, and and did not impinge upon any rights of distinguishing the Ferguson Case on the other consumers, and in effect overrules ground that in that case there was simply State ex rel. Ferguson v. Birmingham a rate extended to a few persons more Waterworks Co. supra, where the rule favorable than the general rate, which was which is disapproved in the present case maximum fixed by the contract, whereas in was first stated.

the case at bar a greater rate was charged The position taken in the overruled cases to a few than was charged to the public seems to be, in effect, that a corporation generally. supplying the inhabitants of a city with And in the later case of Montgomery v. water could discriminate by furnishing Greene, Ala. 65 So. 783, arising water to some of its consumers at a rate out of the same controversy, the court held less than the maximum permitted to be that a municipality undertaking to supply charged by ordinance, on the theory that water to its inhabitants stands in no difthe other consumers were not injured, in- ferent relation as to the right to discrimiasmuch as they were not required to pay a nate as to rates than does a private corhigher rate than the company was per- poration. mitted by law to charge. The fallacy of In Pinney & B. Co. v. Los Angeles Gas & this reasoning, aside from the advantage Electric Corp. 168 Cal. 12, L.R.A.1915C, which the consumer receiving a lesser rate 282, 141 Pac. 620, involving the right of a might acquire over consumers who were municipality to regulate the rate charged compelled to pay a higher rate, lies in the by a public service corporation as affected fact that, by granting the lesser rates to by contracts between the corporation and certain customers, the company to that customers already in force, the court, in extent reduces its earning power and there response to the contention that the only fore undermines the basis for a future gen- reasonable use of the police power in the eral reduction of rates beneficial to all con- matter of rate fixing is to establish the sumers; and in adopting the rule that no maximum charge which the public utility discrimination is permissible the court puts may make in leaving it open to the utility Ball, 65 Iowa, 543, 22 N. W. 666; Lienkauf | this suit. Brown v. Birmingham Watery. Morris, 66 Ala. 416; Wilkinson v. works Co. 169 Ala. 230, 52 So. 915. Searey, 76 Ala. 176; Birmingham Water- One of the principal questions presented works Co. v. Wilson, 2 Ala. App. 581, 56 on this appeal is whether this court, on the So. 760; Remington v. Kirby, 120 N. C. first appeal, was correct in upholding the 320, 26 S. E. 917; Walker v. Fuller, 29 contract as valid. For this reason, as well Ark. 448; Gwynn v. Citizens' Teleph. Co. as on account of the importance of this 69 S. C. 434, 67 L.R.A. 111, 104 Am. case, the record has been carefully examined St. Rep. 819, 48 S. E. 460; Gerkins v. in consultation by the full bench, and this Kentucky Salt Co. 23 Ky. L. Rep. 2415, 67 opinion is written for the purpose of exS. W. 821, 22 Mor. Min. Rep. 189; Pratt pressing the views of those members of v. Pond, 42 Conn. 318; Beveridge v. Raw- the court who appear as concurring in the son, 51 Ill. 504; Garrett v. Sewell, 108 opinion. Ala. 521, 18 So. 737; Snedecor v. Pope, (1) In the case of Smith v. Birmingham 143 Ala. 275, 39 So. 318.

Waterworks Co. 104 Ala. 315, 16 So. 123, Messrs. A. G. Smith and E. D. Smith this court said: “The only cases in which for appellee.

water furnished to the 'inhabitants' is not

to be charged for by measurement are speciDe Graffenried, J., delivered the opin- fied in the first part of § 12, supra, and ion of the court:

include only dwellings,' and then for This is the second appeal in this case. 'water-closets' and 'bath tubs' for private On the first appeal this court upheld, as families. For these the contract fixes a valid, the contract which is the basis of 'definite amount for water furnished withto fix by agreement a less charge for an in- walter v. Jones, 141 Mo. App. 299, 125 S. dividual consumer, said: “The untenable-W. 1169. ness of this position, however, must become A contract between a municipality and apparent when a moment’s consideration is an electric company by which the electric given to the fact that one of the primary company agreed to furnish electricity for and most important objects to be attained lighting purposes to all of the public buildby rate regulation is the prevention of dis-ings of the municipality in exchange for crimination. It must be quite clear that to the privilege of maintaining its lines on the hold that the rate-fixing power goes no city streets, although lawful when made, farther than to name an amount beyond became unlawful upon the passage of a which a charge may not be made, leaves the statute which prohibited the making or utmost room for abuse by way of favoritism giving, directly or indirectly, any undue or and discrimination within that limit. It, unreasonable preference or advantage to is, in practical effect, a denial of the exist- any corporation or to any locality. Public ence of the rate-fixing power itself.” Service Electric Co. v. Public Utility Comrs.

In Economic Gas Co. v. Los Angeles, 168 N. J. L. —, P. U. R. 1915C, 229, 93 Atl. Cal. 448, 143 Pac. 717, it is held that an

707. ordinance which provides that it shall be Legislative authority given to a munici. unlawful to charge any person any rate pality engaged in furnishing water to its greater or less than that demanded of an- inhabitants "to

and collect from other for the same service, and which pro- time to time a water rent of sufficient hibits the collection by rebate, drawback, amount, in such manner as they may deem or other device of compensation for gas most equitable, upon all tenements and greater or less than or different from the premises supplied with water," must be rate fixed by the ordinance, prohibited a taken as meaning the power to fix general gas company from granting a discount to rates which shall be assessed equally upon consumers who paid their bills before a cer- all water takers of a given kind, and does tain date. (As to right of public service not give the board having control of such corporation to exact a penalty or added matter power to tie the hands of a city amount for delay in payment, see notes to for a period of years by special contracts State ex rel. MacMahon v. Independent entered into with individual customers. Teleph, Co. 31 L.R.A. (N.S.) 329, and Ford Lake Shore & M. S. R. Co. v. Elyria, 22 v. Vicksburg Waterworks Co. 43 L.R.A. Ohio C. C. 449. (N.S.) 63.)

In Kilbourn City v. Southern Wisconsin An ordinance of a city engaged in the Power Co. 149 Wis. 168, 135 N. W. 499, business of providing electric light to its an arrangement between the city and a citizens, which provides for the payment power company by which, ostensibly, the of a penalty of 50 cents in addition to any power company paid for certain privileges bills which may be in arrear as a condition in the city and the city paid for electrical of having electric service reinstated when current furnished to it by the power comit has been discontinued because of failure pany, but in reality the arrangement was to pay the charges, where no charge is made a subterfuge to enable the city to receive for turning on and off the current to cus- its electrical current free of charge, in tomers who are not in arrears, is discrimi- evasion of the public utility law which native and unlawful. State ex rel. She-' made it unlawful for a public utility to de



out regard to measurement. We would company for water furnished to residences, not be understood as holding that the desig- and while undoubtedly that rate may be nated classes could abuse the privileges by lawfully reduced, no reduction can be upunnecessary extravagence waste of held which is not operative alike upon all water; but for the use of water in reason who occupy the same class, and which is able quantities, sufficient without incon- discriminatory in its character. Birmingvenient economy for the purposes men ham Waterworks Co. v. Birmingham, tioned, the rates are fixed.”

Ala. —, 42 So. 10; Birmingham WaterThe above opinion was rendered by a works Co. v. Truss, 135 Ala. 530, 33 So. court which is regarded by the profession 657; Mobile v. Bienville Water Supply Co. as one of exceptional ability, and since the 130 Ala. 384, 30 So. 445. rendition of that opinion this court has not In the above case of Birmingham Water-except in the opinion rendered on the works Co. v. Birmingham, supra, this court, first appeal in this case-upheld as legal | in holding that the city court of Birmingany contract covering rates for water fur. ham, sitting in equity, erred in sustaining nished by the water company to residences the demurrer to paragraph J of the bill of in the city of Birmingham which did not complaint in that case, in reality declared conform to the ordinance contract made by that contracts containing stipulations simithe water company with the city of Birm-lar to those contained in the contract now ingham as construed in the above case. under consideration were illegal. On the The flat rate provided in said ordinance former appeal in this case this court, in contract for residences is the maximum the effort to sustain the contract now unrate which can be charged by the water I der consideration, said: “The second propmand, collect, or receive any rate, toll, or crimination. People v. Albion Waterworks charge not specified in the schedule of rates Co. 140 App. Div. 646, 125 N. Y. Supp. 589. required to be filed, was held to be invalid, Likewise in Steinman v. Edison Electric the court saying that the village was one Illuminating Co. 43 Pa. Super. Ct. 77, a of the patrons of the defendant, and that division of the customers of an electric comit was entitled to receive the same consid. pany into two classes, consisting, first, of eration in the matter of rates and charges those whose business required the consumpthat any other person was entitled to re- tion of not less than a fixed amount of elecceive; no less, no more.

tric current annually, and who would agree A customer of a water company which to bind themselves by a contract extending supplies water to the public is entitled to over a period of years to purchase their enjoin it from cutting off his supply be entire supply of current from the company, cause of his refusal to pay water rates and the second to embrace all those whose which were unreasonable, because discrimi-l consumption of electric current was smaller natory as compared with rates charged to than the amount so fixed, and who remained others similarly situated. Ball v. Texar- at liberty to buy or not buy from the dekana Water Corp. – Tex. Civ. App. -, 127 fendant, as inclination or business advan. S. W. 1068.

tage might direct, giving to the former But a public service corporation may law. class a lower rate per unit, was held not to fully classify its patrons and charge dif- be an unlawful discrimination. ferent rates for each character of service, The fact that a water company has grantprovided the classification is not un just and ed a lower rate than that which it was the rate does not given an undue or un legally entitled to charge by its charter reasonable preference or advantage to or to a certain customer is not a defense to a make an unfair discrimination among its suit for water furnished to another compatrons and consumers, under the same or pany. Paris Mountain Water Co. v. Cam. substantially similar circumstances and con- perdown Mills, 98 S. C. 304, 82 S. E. 417. ditions. Elk Hotel Co. v. United Fuel Gas In State ex rel. Raymond Light & Water Co. W. Va. L.R.A.—, 83 S. E, 922. Co. v. Public Service Commission, Wash.

So a lower rate for natural gas, given to 145 Pac. 215, a contract between cerhotels which installed boilers, than that tain mills which had conveyed a water given to other hotels where boilers were not plant to a water company, part of the coninstalled, but open grates and stoves used, sideration being that the water company the agreement with the former class of agreed to furnish water to the mills free of hotels being that the special service for charge for forty-nine years, was held not to boilers might be cut off at any time that be void, but one which the public service the gas was needed to supply the demand commission could order terminated by the for domestic use and use in hotels having water company in case such contract inter. only the stove and grate service, was not fered with the proper service of the com. unlawfully discriminatory. Ibid.

pany to the public generally, such contract And the fact that a water company to be terminated by an agreement between charges a state institution located outside the parties or by proper proceedings in of the municipality a higher rate than it which damages would be awarded to the charges to consumers in the municipality mill companies.

R. L. S. does not necessarily show unlawful dig. I

osition is that a condition could arise, this court said that the “Birmingham under the provisions of said contract where Waterworks Company had a right to cona greater charge could be made by defend-tract with an individual to furnish water ant than that provided by the maximum at a less rate than the maximum rate fixed rate; that is, that the rate provided for by said franchise contract, and less than in the contract for water in excess of 3,333 that charged other individuals for similar gallons per month is such that the excess service so long as the discrimination is encould be large enough to make the rate joyed by those having the favored rate at greater than the maximum rate fixed by the expense of the company, and does not the franchise contract. We think it suffi- impinge upon any rights of other consumcient answer to this argument to say that ers.'' the parties contracted with full knowledge This statement was based upon some exof what the franchise contract provided, as pressions which are to be found in State well as the law, and what limitations the ex rel. Ferguson V. Birmingham Watersame imposed, and that a proper construc- works Co. 164 Ala. 586, 27 L.R.A.(N.S.) tion of the contract between appellant and 674, 137 Am. St. Rep. 69, 51 So. 354, appellee would be that there was implied 20 Ann. Cas. 951. In that case there was the following: ‘Provided, that the charge a petition for a writ of mandamus, wherefor water shall in no case be greater than in it was claimed that the company hal the maximum provided by said franchise entered into contracts with some consumers contract, and, provided further, that it similarly situated with the relator, by shall not be greater than what is a reason- which it had undertaken to furnish to them able charge.'

water at a rate less than the maximum The contract which is made the basis of charges allowed by the ordinance contract. this suit contains plain provisions to pay | The relator did not claim that he was for all water in excess of 3,333 gallons per charged more than the maximum rate, nor month “by the regular schedule of meter that he was charged more than a reasonrates, which are made a part of this appli-able price for the water furnished him, cation and agreement." In other words, but he contended that he was entitled to the contract now under consideration con- receive water at the most favorable rate tains, as already stated, provisions sub- furnished to any others similarly situated. stantially identical with those which were upon these allegations of the petition for described in paragraph J of the bill of com- the writ of mandamus this court held that plaint' considered in Birmingham Water- | the relator was not entitled to the writ. works Co. v. Birmingham, supra, and which In the opinion in that case this court, were in that case, in effect, condemned as after declaring that “the business of a illegal. We find nothing in this record in company furnishing water to the public is dicating that since the rendition of the naturally monopolistic, and, being given the opinion in Smith v. Birmingham Water power of eminent domain to serve the needs works Co. supra, the water company has of the public more effectually, must serve surrendered the right to exact the flat all consumers with equal facilities without rates which are provided in the ordinance discrimination,” indicated that a contract contract for residences in the city of Bir- made by the Birmingham Waterworks Commingham, or that any other rate has been pany with a favored customer at a rate legally provided for such residences, and, less than the rate fixed for residences, etc., this being true, these rates are, in so far by the ordinance contract as construed in as the evidence in this record discloses, Smith v. Birmingham Waterworks Comthe only rates which the water company has pany, supra, and at rate less than that the right to offer to, or exact of, its custom- charged its other customers, might, under ers in the city of Birmingham. Ibid.; certain circumstances, be upheld. Birmingham Waterworks Co. v. Birming- This case of State ex rel. Ferguson v. Birham, supra; Birmingham Waterworks Co. mingham Waterworks Co. supra, is reported v. Truss, 135 Ala. 530, 33 So. 657; Besse- in 164 Ala. 586, 27 L.R.A.(N.S.) 674, 137

Bessemer City Waterworks, 152 Am. St. Rep. 69, 51 So. 354, 20 Ann. Cas. Ala. 391, 44 So. 663; Crosby v. Mont. 951, and in a note to that case (27 L.R.A. gomery, 108 Ala. 498, 18 So. 723: 3 Dill. (N.S.) page 674) we find the following: Mun. Corp. 5th ed. p. 2236, § 1326. In “It may be stated as a general proposition fact, the contract now under consideration that a corporation or municipality authoris a contract which this court in Smith ized to supply water or light to the inhabit. v. Birmingham Waterworks Co. supra, ex- ants of a municipality may not discriminate pressly declared the waterworks company as to the rates charged, at least among had no authority, under its ordinance con

those of the same class." tract, to make with its customers.

Cited, as sustaining the above proposi(2) In the opinion on the first appeal I tion, we find in this note the following



cases: Danville v. Danville Water Co. I thorities which are pertinent to the sub180 Ill. 235, 54 N. E. 224; State ex rel. ject now in hand. That the members of Latshaw v. Water & Light Comrs. 105 the public are entitled under the law to Minn. 472, 127 Am. St. Rep. 581, 117 receive uniformity of treatment at the N. W. 827; Griffin v. Goldsboro Water Co. hands of public service corporations, and 122 N. C. 206, 41 L.R.A. 240, 30 S. E. 319; that contracts not partaking of a private Armour Packing Co. v. Edison Electric Il- nature, between public service corporations luminating Co. 115 App. Div. 51, 100 N. and some members of the public, whereby Y. Supp. 605; Cincinnati, H. & D. R. Co. special privileges are obtained which are v. Bowling Green, 57 Ohio St. 336, 41 L.R.A. not commendable as matter of right by all 422, 49 N. E. 121 ; Mobile v. Bienville other members of the public of the same Water Supply Co. 130 Ala. 379, 30 So. 445; class, will not be upheld, have become truSnell v. Clinton Electric Lig'it, Heat & isms of the law; and the trend of modern P. Co. 196 III. 626, 58 L.R.A. 284, 89 Am. legislation, state and Federal, in so far as St. Rep. 341, 63 N. E. 1082.

public service corporations are concerned, When the city of Birmingham made its has been largely to that important end. contract with the waterworks company it That one member of the public of a particuintended—and the contract so provides- lar class shall not be accorded the same that there should not be any discrimina- identical treatment that is accorded to antion made by the waterworks company in other member of the public of the same the matter of supplying water to the in- class, by a public service corporation, is not habitants of the city of the same class. only not in harmony with an enlightened The maximum rates provided for residences sense of right and fair play, but is opare specific and certain. Stability and posed to the true reasons upon which such equality of rates on the part of a public corporations are given their franchises service corporation are more important than and permitted to exist. Indeed, whenever reduced rates. It was the fact that with | inequality in such treatment is attempted out a contract fixing the rates for water by a public service corporation, dissatisfacthere would probably be instability and tion is the necessary result, and this disinequality of rates, and out of this instabil. satisfaction ultimately finds expression in ity and inequality, unjust discrimination, unpleasant and expensive litigation. and other unlawful practices with refer- The city of Birmingham, when it made ence to such rates, the city of Birmingham the contract with the waterworks company exacted the contract with appellant, and which was construed by this court in Smith by that contract fixed a definite, uniform, v. Birmingham Waterworks Co. 104 Ala. maximum rate for residences in said city. 315, 16 So. 123, was acting for all of the The law must see that all citizens of the inhabitants of the municipality. While in same class receive the same treatment at State ex rel. Ferguson v. Birmingham Waterthe hands of public service corporations, works Co. supra, this court stated that, and the spirit which controlled the city of under certain conditions, the Birmingham Birmingham in exacting this contract from Waterworks Company might vary the terms the waterworks company was the same of the contract which it made with the city spirit which actuated the Congress of the for the benefit of some favored customer, United States in its legislation with refer- the authorities cited in the note to that ence to tariffs for freight transported by case, as it appears in 27 L.R.A. (N.S.) carriers engaged in interstate commerce. 674, will show with what sparingness the On that subject we quote the following courts of last resort are willing to uphold from Poor v. Chicago, B. & Q. R. Co. 12 contracts made with public service corporaInters. Com. Rep. 418: "Stability and tions which confer special favors upon inequality of rates are more important to dividuals with whom they deal as servants commercial interests than reduced rates. of the public. It was instability and inequality that were The pronouncement of the courts in the the special evils to be remedied; it was cases above cited, and the undisputed facts the possibility that one shipper, in one way in the instant case, all show the wisdom of or another, whether by mistake or other the courts in rigidly holding public service wise, could, and actually did, get a lower corporations, in their dealings with the rate than another shipper, that led to more public, to uniformity in rates. In the instringent legislation."

stant case, a contract by meter rates was The case of Louisville & N. R. Co. v. entered into. The customer complied with McMullen, 5 Ala. App. 662, 59 So. 683, the letter of her contract and tendered to in which the opinion of the court of ap- the water company the amount due under peals was prepared by the writer, deals with the terms of her contract. This amount the the many questions which are now under company refused to accept, demanding the consideration, and cites some of the au- amount which, under the flat rate, was due

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