John G. North, for complainant.
W. A. Purington, for defendants.

WELLBORN, District Judge. Complainant and the city of Riverside are corporations organized and existing under the laws of California, the latter being a municipal corporation of the sixth class. The other defendants are also citizens of said state.

On December 6, 1895, said city, as party of the first part, and the Redlands Electric Light & Power Company, as party of the second part, entered into a contract, whereby they agreed, among other things, quoting from the contract:

"That the said party of the second part will furnish and deliver to sald party of the first part, at the shafts of one or more generators set up in the power house of said party of the second part, near Redlands, county of San Bernardino, state of California, sufficient developed water power to operate and transmit to the substation of the said party of the first part, to be located at any point within the corporate limits of the city of Riverside, • electricity to the extent of two hundred (200) horse power measured at said substation, for a period of twelve (12) years from and after the date hereof, at the rate of thirty-six dollars ($36) per year for so much developed water power delivered as aforesaid as shall be sufficient to generate and transmit electricity to the extent of one (1) horse power measured at the said substation of said party of the first part, payable in equal monthly installments, at the end of each and every month during said term, the said water power so furnished to be a twenty-four (24) hours' continuous service. The said party of the first part also agrees, for the same consideration, to erect, construct, and acquire the necessary generators, line, and substation for the transmission and reception of the electricity from the power house of the said party of the second part, near Redlands, to such substation within the corporate limits of the city of Riverside, consisting of the necessary poles, wires, transformers, generators, and other apparatus, and within such time as it will be possible so to do, having regard to all necessary legal steps to be taken; provided the said party of the first part shall not be held to pay any sum whatever under this agreement for the time necessarily occupied in the construction, erection, and acquisition of the poles, wires, transformers, and other apparatus above mentioned."

Said city had the right, at the end of 12 years, to renew the agreement for a period of 10 years longer, at the highest rate of payment named for the original term, and upon the expiration of 22 years to again renew it for a further period of 10 years at the rate of payment fixed for the second period.

About the month of October, 1896, the transmission line named in said contract was completed, and the Redlands Electric Light & Power Company began to supply said city with power under said. contract, and ever since the last-named date has continued, and still continues, to furnish the same, and said contract at all times since has been, and still is, in full force and effect.

On September 14, 1897, said city entered into a contract with the complainant to furnish it a maximum of 80 horse power between 6 a. m. and 5 p. m., and 40 horse power between 5 p. m. and midnight, of each day during the months of October, November, December, January, February, and March, and 80 horse power between the hours of 6 a. m. and 6 p. m., and 40 horse power between 6 p. m. 118 F.-47

and midnight, of each day during the remaining months of the year; and complainant was to pay for the power so furnished $500 per year for the first three years, $1,500 per year for the next two years, $2,400 per year for the following three years, and thereafter $2,700 per year until the termination of the Redlands contract, including its two extensions of 10 years each. The life of said contract is made dependent upon the continued receipt of power by the city of Riverside under the Redlands contract, which latter contract is referred to in the former and made a part thereof.

The power contracted to be furnished to complainant by said city was, at the date of the contract, surplus power, that is to say, power received by said city under its contract with the Redlands Electric Light & Power Company, and not required by users of light or power other than complainant. Complainant was induced by its contract with said city to construct nine miles of street railway in said city, at a cost of more than $100,000, and in April, 1898, began to use, and ever since has used, and is now using, the power obtained under said contract with said city in the operation of said railway, and its right to said use will continue until the termination of the city's contract with the Redlands Company, and complainant has no other source of power than that obtained through its contract with said city, and there is no other electrical machinery, generator, or plant in said city, or within any reasonable distance thereof, from which complainant can obtain electric power to operate said railway. The power furnished to said city under its contract above-mentioned with the Redlands Electric Light & Power Company is used to generate electricity by means of a generator in the power house of said Redlands Company, the said electricity so generated and furnished to said city being conveyed to it over the transmission line above mentioned, constructed by said city, and extending from the power house of the Redlands Company to, and entering the power house and substation of said city within, the corporate limits thereof. A part of said electricity and electrical power so generated and conveyed to the said power house and substation is directed and conducted by said defendants into and through the machinery and over the conductors and feeder wires of complainant to its said street railway and the trolley wires and cars operated thereupon. The Redlands contract, dated December 6, 1895, with its original term of 12 years, and its two extensions of 10 years each, will expire December 6, 1927, and the aggregate of the payments to be made by complainant under its contract with the city of Riverside, counting from April, 1898, when complainant began to use the power, to December 6, 1927, the end of the Redlands contract, a period of 29 years and 8 months, will be $70,000.

Complainant is not in default upon its contract, but defendants have threatened to, and, unless restrained by this court, will sever the connection between its wires and the Redlands wires, and cut off the Redlands electricity from complainant, and by so doing prevent the running of complainant's cars and the operation of its street railway. Said city, by its board of trustees, on October 22, 1901, passed the following resolutions:

"Whereas, the city of Riverside, on the 14th day of September, 1897, entered into a contract with the Riverside and Arlington Railroad Company, agreeing to furnish said railway with electric power at a stipulated price, and

"Whereas, according to a report of the superintendent of the city electric light plant, made to this board on September 18, 1901, and a second report dated October 5, 1901, it appears that the said price is considerably below the actual cost to the city of the said power, resulting in great loss to this city, which loss continues throughout the entire term of said contract; and "Whereas, the city attorney has advised this board, in a written opinion filed recently, that the said contract is illegal and void, and in conflict with the constitution of the state of California, if said power is furnished at less than the cost of production, unless the city is to supply said power out of surplus power otherwise unused; and

"Whereas, it appears that the said power now sold to said railway company is not surplus power, but is the regular current for which this city has a good market at a price affording a profit over and above the cost of production, to supply which, delivered, the city is compelled to generate a large portion of its power by steam at an increased cost; therefore be it

"Resolved, that the Riverside and Arlington Railway Company is hereby notified that the price charged them since January 1, 1901, and to be hereafter charged, shall be the actual cost of production of said current, and that if said company shall not notify this board on or before November 5, 1901, that they will accept and pay for said power at said rate, dating from January 1, 1901, that the board will shut off said company from receiving electric current after said date, November 5, 1901. And further

"Resolved, that if it is the wish of said company to have the court's opinion on the validity of said contract, that the board is willing to continue furnishing said power during the pendency of any action brought to test said contract, provided that said action is prosecuted with reasonable diligence, and provided that the power so furnished is paid for at the price herein established, and that if said contract is held binding on the city that the city will refund to said company the excess of money so paid over and above the amount due under the said contract."

The foregoing are the material facts as they appear, either expressly or by necessary implication, upon the face of the bill.

The defendants have interposed a demurrer, assigning therein, for causes, that the court has no jurisdiction, and that the bill is without equity, and, in their briefs, urge, under the former cause, that the bill neither shows a federal question nor a matter of adequate value in dispute, and, under the latter, that the contract between complainant and the city of Riverside is ultra vires and void. These grounds of demurrer will be noticed in the order of their statement.

I. The allegations of the bill, on which complainant relies for a federal question, are, in brief, that complainant has a contract with the city of Riverside, by and under which the latter agreed to furnish, and since April, 1898, has furnished, and is now furnishing, the former with electrical power to operate its street railroad within the limits of said city, and that said city, by the resolutions afore'said, has repudiated said contract, and by said resolutions and otherwise threatens to, and will, unless judicially restrained, shut off from complainant the electrical power to which complainant, under said contract, is entitled, which resolutions and threatened action, the bill alleges, will, if consummated, impair the obligation of said contract, and deprive complainant of its property without due process of law, and, therefore, contravenes section 10 of article 1 of the constitution of the United States, and section 1 of the 14th amendment to said

constitution. It is not essential to federal jurisdiction, under said constitutional provisions, that there should really be a valid contract, or that the impairment or deprivation complained of should really be effected through legislation or other action of the state, but it is sufficient if these grounds of suit are claimed in good faith and not frivolously. City R. Co. v. Citizens' St. R. Co., 166 U. S. 558, 17 Sup. Ct. 653, 41 L. Ed. 1114; Illinois Cent. R. Co. v. City of Chicago, 176 U. S. 646, 20 Sup. Ct. 509, 44 L. Ed. 622; Yazoo & M. V. R. Co. v. Adams, 180 U. S. 1, 21 Sup. Ct. 240, 45 L. Ed. 395; Illinois Cent. R. Co. v. Adams, 180 U. S. 28, 21 Sup. Ct. 251, 45 L. Ed. 410; Penn Mut. Life Ins. Co. v. City of Austin, 168 U. S. 685, 18 Sup. Ct. 223, 42 L. Ed. 626; Hamilton Gaslight & Coke Co. v. City of Hamilton, 146 U. S. 258, 13 Sup. Ct. 90, 36 L. Ed. 963; Michigan Tel. Co. v. City of Charlotte (C. C.) 93 Fed. 13; Vicksburg Waterworks Co. v. City of Vicksburg (decided April 7, 1902) 22 Sup. Ct. 585, 46 L. Ed. 808. It is true an earlier decision of the supreme court, cited in defendants' brief (City of New Orleans v. New Orleans Waterworks Co., 142 U. S. 79, 12 Sup. Ct. 142, 35 L. Ed. 943), while recognizing the sufficiency of a bona fide claim of impairment or deprivation through legislation or other action of the state, seems to require (Justice Harlan dissenting) a valid contract for jurisdictional purposes. The last requirement, however, is not found in subsequent cases, while, as shown below, two of them expressly, and others in effect, hold that a bona fide claim of contract is sufficient. In City R. Co. v. Citizens' St. R. Co., supra, the court, through Justice Brown, who also wrote the opinion in City of New Orleans v. New Orleans Waterworks Co., supra, says:

"All that is necessary to establish the jurisdiction of the court is to show that the complainant had, or claimed in good faith to have, a contract with the city, which the latter had attempted to impair."

In Illinois Cent. R. Co. v. City of Chicago, supra, federal jurisdiction was sustained, and yet the court held, upon the merits, that the contractual obligation which it was claimed had been impaired did not exist. This last case, therefore, necessarily determines that the rule concerning the sufficiency for jurisdictional purposes of a bona fide claim of a federal question includes the validity of the contract as well as its impairment,-in other words, that the contract need not really be valid nor impaired, provided its validity and impairment are claimed in good faith, and the claims are not frivolous. In Yazoo & M. V. R. Co. v. Adams, supra, the supreme court entertained jurisdiction of the case, yet held, solely upon a construction of state laws, that there was no such contract as the one which it was claimed had been impaired, saying at page 15, 180 U. S., and page 245, 21 Sup. Ct., 45 L. Ed. 395,-the opinion again being by Justice Brown: "As we have often held that, where an impairment of a contract by state legislation is charged, the existence or nonexistence of the contract is a federal question, it is impossible to escape the conclusion that the foundation of the whole case was whether there was really a contract which had been impaired, and that this was necessary to the determination of the case. As already stated this was a federal question, and the fact that the supreme court did not in terms discuss the contract clause of the constitution does not oust our jurisdiction."

In the yet later case of Illinois Cent. R. Co. v. Adams, supra, the supreme court upheld the jurisdiction of the circuit court, without passing upon the existence or validity of the contract which it was alleged had been impaired by state legislation. In Vicksburg Waterworks Co. v. City of Vicksburg, supra, which is the latest case on the subject, the court held that there was a federal question, and said: "The objection urged in the brief of the appellee to the validity of the contract, because it undertakes to bind the city for a period of thirty years, because an attempt to barter away the legislative power of the city authorities, and because creating an indebtedness in excess of the charter limits, are those that were considered at length in the similar cases of City of Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed. 341, and City of Los Angeles v. Los Angeles City Water Co., 177 U. S. 558, 20 Sup. Ct. 736, 44 L. Ed. 886, and were in those cases held to be untenable. However, we do not wish to be understood as now determining such questions in the present case, for we are only considering whether or not the circuit court had jurisdiction to consider them."

The circumstance upon which both parties, as well as the authorities they cite (Illinois Trust & Savings Bank v. Arkansas City, 22 C. C. A. 171, 76 Fed 271, 34 L. R. A. 518; Pikes Peak Power Co. v. City of Colorado Springs, 44 C. C. A. 333, 105 Fed. 11; City of Walla Walla v. Walla Walla Water Co., supra; Little Falls Electric & Water Co. v. City of Little Falls (C. C.) 102 Fed. 663; and Iron Mountain R. Co. of Memphis v. City of Memphis, 37 Č. C. A. 410, 96 Fed. 113), are agreed, that the city of Riverside, in entering into its contract with complainant, acted in a quasi private capacity, is unimportant in determining the question whether or not the threatened impairment and deprivation, which complainant seeks to enjoin, are imputable to the state. The making of a contract by a municipality for or concerning a public utility may be the exercise of a proprietary function, but, when the contract has been made, its repudiation by the legislative body of the municipality, and forcible divestiture of the contractual rights, by direction of said body and through the superior physical power which the municipality wields, are surely something more than the mere acts of a private person. The declaration of the resolutions, already quoted, that, unless complainant accepted the interpretation placed upon said contract by the city of Riverside, the latter would shut off from the former the electric current it was then receiving, obviously implied that the executive authorities and agencies of the city, which unquestionably are governmental, would, so far as necessary, be employed to carry out said purpose, and therefore said resolutions and the illegal action they threaten, even if they fall short, which, however, I do not decide, of legislation, within the meaning of article 1 of section 10 of the constitution of the United States, are yet imputable to the state under section I of the 14th amendment to said constitution. In Chicago, B. & Q. R. Co. v. City of Chicago, 166 U. S. 226, 17 Sup. Ct. 581, 41 L. Ed. 978, Mr. Justice Harlan, speaking for the court, said:

"But it must be observed that the prohibitions of the amendment refer to all the instrumentalities of the state,-to its legislative, executive, and judicial authorities, and, therefore, whoever by virtue of public position under a state government deprives another of any right protected by that amendment against deprivation by the state, 'violates the constitutional inhibition; and,