The ultimate question in these cases is the validity of ordinance No. 402 of the city of Hutchinson, which took effect March 17, 1897, and by which the Water, Light, & Gas Company claims to have, for the period of twenty years from such date, the exclusive right and privilege of supplying the city and its inhabitants with water, and with light, heat, and power by means of electricity and gas.
On the 19th of December, 1905, the city enacted and published ordinance No. 651, granting permits to Emerson Carey and others, their successors and assigns, to construct and operate a street railway in and along the streets of the city, and to construct and operate electric and gas plants for the purposes for which electricity may be used.
These suits were brought to command the city and those claiming under ordinance No. 651, to 'desist from doing any acts or exercising any pretenses of right to act' under the ordinance which will in anywise affect the exclusive right of the Water, Light, & Gas Company 'to furnish the city and its inhabitants with electric or gas light for lighting and heating purposes or power, except for street cars and electric railways, and also from making or proceeding to make any contract for furnishing light or gas to said city and its inhabitants' until the expiration of the 'franchises and contracts' of that company.
The cases went off on demurrers to the bills. The circuit court, assuming that ordinance No. 402 was exclusive in its terms and was intended to be so by the city, held that the city did not possess the power, either inherent or under the law of its creation, to make a contract binding and exclusive of all others, and entered decrees dismissing the bills. 144 Fed. 256.
The facts are: In 1885 the city granted to the Holly Manufacturing Company, its successors and assigns, an exclusive right to build and operate waterworks for twenty years. The company erected and operated the works until the subsequent assignment of its rights.
In the same year the city granted to the Interstate Gas Company the right to erect and maintain gas works for the period of twenty-one years; and in 1886 granted to Drake and Orton the right for the period of twenty years to construct and operate an electric light plant. The latter right, and those granted to the two companies, passed by successive assignments, with the knowledge and consent of the city, to the Water, Light, & Power Company, and existed in that company at the time of the passage of ordinance No. 402.
The various companies expended in the aggregate on the construction of their plants and equipment $400,000, to secoure which the Hutchinson Water, Light, & Power Company executed a mortgage upon all the water, light, and gas rights and franchises and properties.
Subsequently, the city became financially embarrassed, so that before the year 1897 it had become indebted for hydrant rentals in the sum of $12,800 in excess of its ability to pay.
On account of this default of the city the company became embarrassed and hindered in the payment of interest on its mortgage, and its mortgage bondholders took possession of its property, and operated the plant during the year 1896 and until the readjustment of its affairs in the spring of 1897, resulting in the passage of ordinance No. 402.
By reason of its embarrassment the company found it expedient to scale down its bonded indebtedness and secure a new franchise from the city, and in ocnsideration of securing the same, and the readjustment of the contract obligations between the company and the city, the bondholders agreed to reduce and scale down their mortgage indebtedness from $400,000 to $212,500.