City of Trenton v. New Jersey/Opinion of the Court
The state of New Jersey recovered judgment against the city of Trenton for $14,310, in an action brought in the state Supreme Court. The judgment was affirmed by the Court of Errors and Appeals, and is here on writ of error.

The state's right to recover depends upon the validity of an act of the Legislature (chapter 252, Laws of 1907). The city asserts that this act offends against the contract clause of the Constitution of the United States, and that it takes property owned by the city in its private or proprietary capacity for public use without just compensation and without due process of law, in violation of the Fourteenth Amendment. The act provides that:

'Every municipality, corporation or private person now      diverting the waters of streams or lakes with outlets for the      purpose of a public water supply shall make annual payments      on the first day of May to the state treasurer for all such      water hereafter diverted in excess of the amount now being      legally diverted: Provided, however, no payment shall be      required until such legal diversion shall exceed a total      amount equal to one hundred (100) gallons daily per capita for each inhabitant of the      municipality or municipalities supplied, as shown by the      census of one thousand nine hundred and five.' Section 8.

The city claims the right to take from the Delaware river all the water that it requires, without limitation as to quantity and without license fee for any part thereof, and that such right was acquired by the president and directors of the Trenton Waterworks (hereinafter called the water company) by grant direct from the state March 24, 1852, and that the city acquired this right by purchase from the water company. Briefly, the basis of the city's claim is as follows:

By an act of February 29, 1804, the president and directors of the Trenton Waterworks were created a body politic and corporate. They and their successors and assigns were made capable of disposing of water to such as might apply for the same for such annual rent and under such restrictions as they might think proper, and they were authorized to lay and extend their water mains through the streets of the city. Certain springs constituted the company's source of supply, and by reason of increase of population ceased to be adequate. March 24, 1852 (P. L. p. 289), a supplement to the above-mentioned act was passed, by which the company was authorized to take the water required either in whole or in part from the Delaware river. Later, March 2, 1855 (P. L. p. 141), an act was passed, authorizing the city to purchase the whole or a majority of the shares of the capital stock of the water company, and the city purchased all of the stock. Thereafter an act of March 1, 1859 (P. L. p. 38), required the company to convey unto 'the inhabitants of the city of Trenton' all the real estate, works and property and all the corporate powers, franchises and privileges of the company, and this conveyance was duly made.

If the provision of the act of 1907 imposing the license fee is valid as against the city, the judgment is right. The Court of Errors and Appeals held that it was valid, that the state under its police power might impose a license fee as specified in the act, and that this does not deprive the city of any contractual or property right.

The stat  undoubtedly has power, and it is its duty, to control and conserve the use of its water resources for the benefit of all its inhabitants, and the act of 1907 was passed pursuant to the policy of the state to prevent waste and to economize its water resources. Decision of the Court of Errors and Appeals in this case, 117 Atl. 158; McCarter v. Hudson Water Co., 70 N. J. Eq. 695, 701, 702, 14 L. R. A. (N. S.) 197, 118 Am. St. Rep. 754, 10 Ann. Cas. 116, £affirmed by this court in 209 U.S. 349, 355, 28 Sup. Ct. 529, 52 L. Ed. 828, 14 Ann. Cas. 560; Collingswood v. Water-Supply Commission, 84 N. J. Law, 104, 110, 86 Atl. 660; Cobb v. Davenport, 32 N. J. Law, 369, 378. The only way the city could acquire the right to take the water of the Delaware river was by grant from the state or by authorized purchase or condemnation from one to whom the right had been granted by the state. State v. Jersey City, 94 N. J. Law, 431, 433, 111 Atl. 544, 19 A. L. R. 646. The power to determine the conditions upon which waters may be so diverted is a legislative function. The state may grant or withhold the privilege as it sees fit. Assuming in favor of the city, that its grantor received a perpetual right, unburdened by license fee or other charge, to divert all the water required for the use of the city and its inhabitants, does it follow that the state as against the city is bound by contract and is without power to impose a license fee as provided in the act?

The relations existing between the state and the water company were not the same as those between the state and the city. The company was organized and carried on its business for pecuniary profit. Its rights and property were privately owned and therefore safeguarded by the constitutional provisions here sought to be invoked by the city against the legislation of the state. The city is a political subdivision of the state, created as a convenient agency for the exercise of such of the governmental powers of the state as may be intrusted to it. The diversion of waters from the sources of supply for the use of the inhabitants of the state is a proper and legitimate function of the state. This function may be left to private enterprise, subject to regulation by the state; it may be performed directly; or it may be delegated to bodies politic created for that purpose, or to the municipalities of the state. Power to own, maintain and operate public utilities, such as waterworks, gas and electric plants, street railway systems, public markets, and the like is frequently conferred by the states upon their cities and other political subdivisions. For the purpose of carrying on such activities, they are given power to hold and manage personal and real property.

As said by this court, speaking through Mr. Justice Moody, in Hunter v. Pittsburgh, 207 U.S. 161, 178, 179, 28 Sup. Ct. 40, 46 (52 L. Ed. 151):

'The number, nature and duration of the powers conferred upon      these corporations and the territory over which they shall be      exercised rests in the absolute discretion of the state.      Neither their charters, nor any law conferring governmental      powers or vesting in them property to be used for      governmental purposes, or authorizing them to hold or manage      such property, or exempting them from taxation upon it,      constitutes a contract with the state, within the meaning of      the federal Constitution. The state, therefore, as its      pleasure may modify or withdraw all such powers, may take      without compensation such property, hold it itself, or vest      it in other agencies, expand or contract the territorial      area, united the whole or a part of it with another      municipality, repeal the charter and destroy the corporation.      All this may be done, conditionally or unconditionally, with      or without the consent of the citizens, or even against their      protest. In all these respects the state is supreme and its      legislative body, conforming its action to the state      Constitution, may do as it will, unrestrained by any provision of the      Constitution of the United State . * * * The power is in the      state and those who legislate for the state are alone      responsible for any unjust or oppressive exercise of it.'

In New Jersey it has been held that within the limits prescribed by the state Constitution, the Legislature may delegate to municipalities such portion of political power as they may deem expedient, withholding other powers, and may withdraw any part of that which has been delegated. Van Cleve v. Passaic Valley Sewerage Commissioners, 71 N. J. Law, 183, 198, 58 Atl. 571.

In the absence of state constitutional provisions safeguarding it to them, municipalities have no inherent right of self-government which is beyond the legislative control of the state.  A municipality is merely a department of the state, and the state may withhold, grant or withdraw powers and privileges as it sees fit. However great or small its sphere of action, it remains the creature of the state exercising and holding powers and privileges subject to the sovereign will. See Barnes v. District of Columbia, 91 U.S. 540, 544, 545, 23 L. Ed. 440.

In Mt. Pleasant v. Beckwith, 100 U.S. 514, 524, 525 (25 L. Ed. 699), it was held that where a municipal corporation is legislated out of existence and its territory annexed to other corporations, the latter, unless the Legislature otherwise provides, becomes entitled to all its property and immunities. In the opinion it is said (100 U.S. 524, 525, 25 L. Ed. 699):

'Institutions of the kind, whether called cities, towns, or      counties, are the auxiliaries of the state in the important      business of municipal rule; but they cannot have the least      pretension to sustain their privileges or their existence      upon anything like a contract between themselves and the      Legislature of the state, because there is not and cannot be any reciprocity of stipulation between the      parties, and for the further reason that their objects and      duties are utterly incompatible with everything partaking of      the nature of compact.'

The power of the state, unrestrained by the contract clause or the Fourteenth Amendment, over the rights and property of cities held and used for 'governmental purposes' cannot be questioned. In Hunter v. Pittsburgh, 207 U.S. 179, 28 Sup. Ct. 40, 52 L. Ed. 151, reference is made to the distinction between property owned by municipal corporations in their public and governmental capacity and that owned by them in their private or proprietary capacity, and decisions of this court which mention that distinction are referred to.  In none of these cases was any power, right, or property of a city or other political subdivision held to be protected by the Contract Clause or the Fourteenth Amendment. This court has never held that these subdivisions may invoke such restraints upon the power of the state. 

In East Hartford v. Hartford Bridge Co., 10 How. 511, 533, 534, 536, 13 L. Ed. 518, it appeared that for many years a franchise to operate a ferry over the Connecticut river belonged to the town of Hartford, that upon the incorporation of East Hartford the Legislature granted to it one-half of the ferry during the pleasure of the General Assembly, and that subsequently, after the building of a bridge across the river, the Legislature discontinued the ferry. It was held that this was not inconsistent with the contract clause of the federal Constitution. The reasons given in the opinion (10 How. 533, 534, 13 L. Ed. 518) support the contention of the state here made that the city cannot possess a contract with the state which may not be changed or regulated by state legislation.

In Worcester v. Street Railway Co., 196 U.S. 539, 548, 25 Sup. Ct. 327, 49 L. Ed. 591, it was held that the obligation of the street railway company to the city to pave and repair streets occupied by it, based on accepted conditions of a municipal ordinance granting right of location, is not private property beyond the legislative control of the state, and that state legislation taxing the company, and there y relieving it from its obligation to the city to pave and repair such streets, was not void as violating the contract clause of the federal Constitution. In the opinion it is said (196 U.S. 548, 549, 25 Sup. Ct. 327, 329, 49 L. Ed. 591):

'The question then arising is whether the Legislature, in the      exercise of its general legislative power, could abrogate the      provisions of the contract between the city and the railroad      company with the assent of the latter, and provide another      and a different method for the paving and repairing of the      streets through which the tracks of the railroad company were      laid under the permit of their extended location. We have no      doubt that the Legislature of the commonwealth had that      power. A municipal corporation is simply a political      subdivision of the state, and exists by virtue of the      exercise of the power of the state through its legislative      department. The Legislature could at any time terminate the      existence of the corporation itself, and provide other and      different means for the government of the district comprised      within the limits of the former city. The city is the creature of the state'      citing East Hartford v. Hartford Bridge Co., 10 How. 511,      533, 534, 13 L. Ed. 518; United States v. Railroad Co., 17      Wall. 322, 329, 21 L. Ed. 597; New Orleans v. Clark, 95 U.S.      644, 654, 24 L. Ed. 521; Commissioners of Laramie County v.      Commissioners of Albany County et al., 92 U.S. 307, 23 L.      Ed. 552; Commissioners v. Lucas, 93 U.S. 108, 114, 23 L. Ed.      822.

In Pawhuska v. Pawhuska Oil Co., 250 U.S. 394, 399, 39 Sup. Ct. 526, 63 L. Ed. 1054, it was held that a legislative grant to a city of the power to regulate rates to be charged to the city and its inhabitants by a gas company might be withdrawn by the state from the city and conferred upon a commission, and that thereby no question was presented under the contract clause of the federal Constitution. In the opinion, after a statement of the issue, it is said (250 U.S. 397, 398, 39 Sup. Ct. 527, 528, 63 L. Ed. 1054):

'Thus the whole controversy is as to which of two existing      agencies or arms of the state government is authorized for      the time being to exercise in the public interest a      particular power, obviously governmental, subject to which      the franchise confessedly was granted. In this no question      under the contract clause of the Constitution of the United      States is involved, but only a question of local law, the      decision of which by the Supreme Court of the state is final.      * * * In New Orleans v. New Orleans Waterworks Co., 142 U.S.      79, where a city, relying on the contract clause, sought a      review by this court of a judgment of a state court      sustaining a statute so modifying the franchise of a      waterworks company as to require the city to pay for water      used for municipal purposes, to which it theretofore was      entitled without charge, the writ of error was dismissed on      the ground that no question of impairment within the meaning      of the contract clause was involved.' 

The distinction between the municipality as an agent of the state for governmental purposes and as an organization to care for local needs in a private or proprietary capacity has been applied in various branches of the law of municipal corporations. The most numerous illustrations are found in cases involving the question of liability for negligent acts or omissions of its officers and agents. See Harris v. District of Columbia, 256 U.S. 650, 41 Sup. Ct. 610, 65 L. Ed. 1146, 14 A. L. R. 1471, and cases cited. It has been held that municipalities are not liable for such acts and omissions in the exercise of the police power, or in the performance of such municipal faculties as the erection and maintenance of a city hall and courthouse, the portection of the city's inhabitants against disease and unsanitary conditions, the care of the sick, the operation of fire departments, the inspection of steam boilers, the promotion of education and the administration of public charities. On the other  and, they have been held liable when such acts or omissions occur in the exercise of the power to build and maintain bridges, streets and highways, and waterworks, construct sewers, collect refuse and care for the dump where it is deposited.  Recovery is denied where the act or omission occurs in the exercise of what are deemed to be governmental powers, and is permitted if it occurs in a proprietary capacity. The basis of the distinction is difficult to state, and there is no established rule for the determination of what belongs to the one or the other class. It originated with the courts. Generally it is applied to escape difficulties, in order that injustice may not result from the recognition of technical defenses based upon the governmental character of such corporations.  But such distinction furnishes no ground for the application of constitutional restraints here sought to be invoked by the city of Trenton against the state of New Jersey. They do not apply as against the state in favor of its own municipalities. We hold that the city cannot invoke these provisions of the federal Constitution against the imposition of the license fee or charge for diversion of water specified in the state law here in question. In view of former opinions of this court, no substantial federal question is presented. Pawhuska v. Pawhuska Oil Co., supra, and cases cited. 

The writ of error is dismissed. 

Notes