On October 15, 1917, the prescribed thirty-year limitation expired and plaintiff in error requested the City of Superior either to grant further right to maintain the system of water works or to purchase the same as provided by the ordinance of 1887 as amended in 1889. The city failed to make the grant; denied its obligation to purchase; and took steps under provisions of §§ 1797m-1 to 1797m-109, Wisconsin Statutes, to condemn the entire plant. Thereupon plaintiff in error instituted the present cause against the city, its mayor and councilmen. The complaint sets out the foregoing facts, alleges repudiation of the obligation to purchase and the steps taken for condemnation, and asks a decree requiring the city specifically to perform its agreement, for an injunction restraining further efforts to condemn and for general relief.

The trial court overruled a general demurrer, but this action was reversed by the Supreme Court, 174 Wis. 257, which held that the Act of 1907 (c. 499) as amended in 1911 was permissible under the reserved power to alter, amend or repeal acts providing for formation or creation of corporations; and that it had substituted an "indeterminate permit " for the rights granted to the plaintiff in error by the municipality. "A new franchise was therefore granted to the defendant in lieu of its original franchise by the enactment of c. 596, Laws 1911. Thereafter its franchise was that of the indeterminate permit, and it was subject to the provisions of the public utility law. This also was its franchise on October 1, 1917, when it is claimed its original franchise expired. The public utility law had superseded everything of a franchise nature embodied in the original ordinance granted to it by the village of Superior and the subsequent and succeeding amendments thereto." And also that it was immaterial whether or not a contract between the city and the water company resulted from the clause of the original

Opinion of the Court.

263 U.S.

ordinance providing for extension of the grant or purchase after thirty years, because "even though it be considered as a contract, we think it gives rise to no obligation on the part of the city to purchase the plant according to its terms."

The court further said

"The manifest purpose of the provision was to insure the Water Company one of two things: either a renewal of its franchise for another period of thirty years or a sale of its property in case such franchise be not renewed. The franchise called for was one having the same terms and conditions as may exist between the said village or city and the said Superior Water Works Company at the expiration of the first thirty years.' The franchise which it had at that date was the indeterminate permit. That was either its franchise or it had none. That was a continuing franchise. It was indeterminate as to time. It was not limited to thirty years or any other period. Consequently there was no occasion for the city to 'grant to the said Superior Water Works Company, its successors or assigns, the right to continue and maintain said system of waterworks.' It already had that right. There was therefore no breach of this part of the alleged contract on the part of the city. Until there was a breach of this provision of the contract, no obligation on the part of the city to purchase according to the terms of the contract arose. It seems plain that the position of the Water Company is not helped by construing this provision of the ordinance as a contract made by the city in its proprietary capacity. The conditions precedent to an obligation on the part of the city to buy under the terms of the contract have not come to pass, and the city has in no manner become obligated to carry out the feature of the contract which is sought to be enforced in this action."

Considering the opinions of this court, it seems clear enough that a valid contract resulted from the dealings

between the City of Superior and plaintiff in error whereby each became obligated to do certain specified things. The company agreed to construct, maintain and operate an adequate water works system. The city obligated itself to recognize the company's exclusive right to maintain and operate the system for a definite periodthirty years; and also to purchase the entire plant at a price fixed in the manner specified if at the conclusion of such period it should refuse to grant an extension. The rights so acquired by plaintiff in error were property. Pearsall v. Great Northern Ry. Co., 161 U. S. 646; Detroit v. Detroit Citizens' St. Ry. Co., 184 U. S. 368, 384; Cleveland v. Cleveland City Ry. Co., 194 U. S. 517, 536; Vicksburg v. Vicksburg Waterworks Co., 206 U. S. 496; Louisville v. Cumberland Telephone Co., 224 U. S. 649, 664; Grand Trunk Western Ry. Co. v. South Bend, 227 U. S. 544, 556; Owensboro v. Cumberland Telephone Co., 230 U. S. 58, 73; Old Colony Trust Co. v. Omaha, 230 U. S. 100, 117; Detroit United Ry. v. Michigan, 242 U. S. 238, 253; Northern Ohio Trac. Co. v. Ohio, 245 U. S. 574, 585; Columbus Ry. & Power Co. v. Columbus, 249 U. S. 399, 407.

Concerning the relation between the parties the court below declared, "the franchise of the Water Company, which enables it to pursue its business of supplying water to the city of Superior and its inhabitants, is a contract between it and the state." But it held the legislature had power to change this contract under the reservation permitting alterations, in § 1, Art. XI, of the State Constitution, and that the Act of 1911 did modify the contract by substituting for rights thereby secured an “indeterminate permit."

Through its contract with the city the water company acquired valuable property rights. They were not directly created by any statute enacted under § 1, Art. XI, of the State Constitution, but were the outcome of agree

Opinion of the Court.

263 U.S.

ment with a fully empowered corporation. They did not arise from the mere exercise of a governmental function legislative in character, but from contract expressly authorized by the legislature. None of the decisions of the Supreme Court of Wisconsin prior to 1889 to which we have been referred 2 construes the reservation in the State Constitution as having the extraordinary scope accorded to it below; and certainly in the absence of some very clear and definite pronouncement we cannot accept the view that it then had the meaning now attributed to it.

As late as 1909, in State ex rel. Northern Pacific Ry. Co. v. Railroad Commission, 140 Wis. 145, 157, that court announced, “ The right to alter or repeal existing charters is not without limitation when the question of vested property rights under the charter is involved. The power is one of regulation and control, and does not authorize interference with property rights vested under the power granted. . The reserve power stops short of the power to divest vested property rights, and is embodied in the state constitution for the purpose of enabling the state to retain control over corporations, and must be construed in connection with the other provision of the constitution to the effect that private property shall not be taken for public use without compensation. It follows, therefore, 'that where, under power in a charter, rights have been acquired and become vested, no amendment or alteration of the charter can take away the property or rights which have become vested under a legitimate exercise of the

'Madison, Watertown & Milwaukee Plankroad Co. v. Reynolds, 3 Wis. *287; Pratt v. Brown, 3 Wis. *603; Nazro v. Merchants' Mutual Insurance Co., 14 Wis. *295; Kenosha, Rockford & Rock Island R. R. Co. v. Marsh, 17 Wis. *13; Whiting v. Sheboygan & Fond du Lac R. R. Co., 25 Wis. 167; Wisconsin v. Milwaukee Gas Light Co., 29 Wis. 454; West Wisconsin R. R. Co. v. Board of Supervisors of Trempealeau County, 35 Wis. 257; Attorney General v. Railroad. Companies, 35 Wis. 425.

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Syllabus.

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powers granted.' Commonwealth v. Essex Co., 13 Gray, 239." See also Water Power Cases, 148 Wis. 124, 136. The integrity of contracts-matter of high public concern-is guaranteed against action like that here disclosed by § 10, Art. I, of the Federal Constitution, "No State shall pass any law impairing the obligation of contracts." It was beyond the competency of the legislature to substitute an "indeterminate permit for rights acquired under a very clear contract. Vicksburg v. Vicksburg Waterworks Co., 206 U. S. 496; Detroit United Ry. v. Michigan, 242 U. S. 238, 253. The erroneous conclusion concerning this federal question led to the decree below. Accordingly it must be set aside and the cause remanded for further proceedings not inconsistent with this opinion.

Reversed.

BAKER, RECEIVER OF THE INTERNATIONAL & GREAT NORTHERN RAILWAY COMPANY, ET AL. v. DRUESEDOW, TAX COLLECTOR OF HARRIS COUNTY, TEXAS, ET AL.

ERROR AND CERTIORARI TO THE SUPREME COURT OF THE STATE OF TEXAS.

No. 12. Argued October 2, 1923-Decided November 12, 1923. 1. That the Fourteenth Amendment does not prevent a State from taxing the intangible property of a railroad, ascertaining its value by deducting the value of its physical assets from the value of its property as a whole, within the State; or from taxing railroads by other rules than those prescribed for other business concerns; or from imposing double taxation,-are propositions long settled, denial of which is frivolous. P. 140.

2. Over-assessment due to mere error of judgment is not reviewable here as a violation of due process of law. P. 141.

3. Where assessments of tangible and intangible railroad property are made independently by separate boards, but the taxes are laid on both at the same rate, collected by the same county officers, and treated by the state law as constituting together a single