Skaneateles Water Works Co. v. Skaneateles

Background

A private water company incorporated in 1887 asked village officials for permission to organize and then built a system and signed a five-year contract to supply the village beginning February 1, 1891. That written contract expired in February 1896. The village adopted an ordinance in 1896 to erect and operate its own waterworks under a state law enacted in 1875. The company sued, claiming that its incorporation and earlier dealings implied a promise that the village would not build its own plant unless it bought or condemned (forced-purchased) the company’s property. The New York Court of Appeals rejected that claim and the case reached this Court on federal constitutional grounds.

Reasoning

The Court focused on whether any constitutional right had been denied. It explained that incorporation under the 1873 statute did not give a private company an eternal exclusive right to use streets or to supply the village. The statute of 1875 expressly let villages build their own works and allowed, but did not require, the taking of an existing private plant. Contracts were limited by statute to five years unless longer was approved by voters, so the expired five-year contract could not create a perpetual franchise. The Court held there was no implied contract, no taking of property without due process, and no denial of equal protection.

Real world impact

The decision means villages in similar situations may choose to build municipal water systems even when private companies previously supplied water. A drop in a private company’s business value from municipal competition is not automatically a constitutional taking that requires compensation. The judgment of the state court was affirmed.