man, 174 U. S. 639. We have seen that the state court of original jurisdiction was of opinion the suit was for lobbying services, and on that ground denied all relief. But the Supreme Court of Mississippi held that the record did not establish such a case, and we accept that view of the evidence in the

cause.

Finding in the record no error of law as to any question which may be properly reviewed by this court, the judgment of the state court is

Affirmed.

THE CHIEF JUSTICE and MR. JUSTICE WHITE Concur in the result.

KNOXVILLE WATER COMPANY v. KNOXVILLE.

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF TENNESSEE.

No. 123. Argued December 11, 12, 1905.-Decided January 2, 1906.

Where the bill properly sets forth the facts on which a corporation insists that the agreement under which it erected, and is operating, its plant constituted a contract whereby it acquired exclusive rights for a given period and that the obligation of that contract will be impaired by the threatened action of the municipality in erecting its own waterworks, the case is one arising under the Constitution of the United States and of which the proper Circuit Court can take cognizance without regard to the citizenship of the parties.

Only that which is granted in clear and explicit terms passes by a grant of property, franchises or privileges in which the Government or the public has an interest. Statutory grants of that character are to be construed strictly in favor of the public; whatever is not unequivocally granted is withheld; and nothing passes by implication.

Although the contract in this case between a waterworks company and a municipality provided that no contract or privilege would be granted to furnish water to any other person or corporation, the city was not, in the

200 U. S.

Argument for Appellant.

absence of a special stipulation to that effect, precluded from establishing its own independent system of waterworks.

THE facts are stated in the opinion.

Mr. Charles T. Cates, Jr., with whom Mr. Samuel G. Shields and Mr. R. E. L. Mountcastle were on the brief, for appellant:

The city and the Water Company both had power to enter into the contract and no other reasonable or just interpretation can be placed upon said contract than that the city thereby agreed not to erect and maintain waterworks on its own account, in competition with appellant, during the continuance of said contract.

A contract entered into within the authority of a municipal corporation receives the same construction as one entered into between individuals. The purpose of the contract was not to govern the inhabitants of the city, but to obtain a private benefit for both the city and its inhabitants, as distinguished from its governmental and legislative functions. Illinois Trust & Savings Bank v. Arkansas City, 76 Fed. Rep. 271; Cunningham v. City of Cleveland, 98 Fed. Rep. 657, 663; Western Sav. Fund Soc. v. Philadelphia, 31 Pa. St. 175; Bailey v. New York, 3 Hill (N. Y.), 531; Brumm's Appeal, 12 Atl. Rep. 855.

The interpretation placed by the lower court upon the contract cannot be sustained. Courts may acquaint themselves with the persons and circumstances that are the subjects of the written agreement, and place themselves in the situation of the parties who made the contract; view the circumstances as they viewed them, so as to judge of the meaning of the words, and of the correct application of the language to the thing described. Goddard v. Foster, 11 Wall. 123, 143; Guarantee Co. v. Bank & Trust Co., SO Fed. Rep. 766, 778.

The obligations of the parties to the contract are correlative. Though a contract may in terms bind but one party, yet the law will imply corresponding and correlative obligations, when that is necessary to carry out the intention of the parties and

prevent the contract from being ineffectual. Churchwarden v. Queen, L. R. 1 Q. B. 173; Barton v. McLean, 5 Hill (N. Y.), 256; Manistee Iron Works v. Lumber Co., 92 Wisconsin, 21; D. & H. Canal Co. v. Penn. Coal Co., 8 Wall. 288.

The use of the word "exclusive" would have added nothing to the contract.

The implied duties and obligations are as much a part of a contract as those expressed. United States v. Babbit, 1 Black, 55; Massachusetts v. Rhode Island, 12 Pet. 123; Union Depot Co. v. Chicago Ry. Co., 113 Missouri, 213; Parsons on Contracts, 8th ed., 515; Water Co. v. Los Angeles, 103 Fed. Rep. 711.

This case is governed by Water Co. v. Walla Walla, 172 U. S. 1; Water Company v. Vicksburg, 185 U. S. 65, 82; Memphis v. Water Co., 5 Heisk. (Tenn.) 495, 500; Cunningham v. Cleveland, 98 Fed. Rep. 657; and not by Stein v. Water Co., 141 U. S. 67; Gas Light Co. v. Hamilton, 146 U. S. 258; Bienville Supply Co. v. Mobile, 175 U. S. 109, and 186 U. S. 212; Water Co. v. Skaneateles, 184 U. S. 354; Joplin v. Light Co., 191 U. S. 150; Water Co. v. Helena, 195 U. S. 383.

While the actions of municipal corporations are to be held strictly within the powers expressly or by necessary implication conferred upon it, yet within those limits they are to be favored by the courts. Powers expressly granted, or necessarily implied, are not to be defeated or impaired by a stringent construction. Dill. Mun. Corp., 4th ed., § 91, note 2; Smith v. Madison, 7 Indiana, 86; Memphis v. Adams, 9 Heisk. 518; Indianapolis v. Gas Light Co., 66 Indiana, 407; White v. Meadville, 177 Pa. St. 643; Memphis Gas Co. v. Williamson, 9 Heisk. 326.

The company was obligated to comply with all the terms of the contract for thirty years and under the contract had an exclusive right in the streets for that period and the city is estopped from denying this right. San Antonio Ry. Co. v. State, 99 Texas, 520; Northern Pacific v. Washington, 152 U. S. 492; Water Co. v. Knoxville, 189 U. S. 435, both in pais; 2 Dillon,

Mun. Corp., 14th ed., §§ 463, 675; Dennis v. Rainey, 8 Baxt. 501; Memphis v. Looney, 9 Baxt. 129; Sims v. Chattanooga, 2 Lea (Tenn.), 695; Land Co. v. Jellico, 103 Tennessee, 320; Gas Light Co. v. Memphis, 93 Tennessee, 612, and by judgment Knoxville v. Water Co., 107 Tennessee, 647; S. C., 189 U. S. 434.

The contract was recognized and ratified by the legislature of the state.

Mr. John W. Green, with whom Mr. J. W. Culton was on the brief, for appellees:

This court has no jurisdiction; diverse citizenship does not exist and no constitutional rights are impaired. Gas Light Co. v. Hamilton, 146 U. S. 266; New Orleans v. Water Co., 142 U. S. 79.

The city had no power to grant an exclusive franchise. All the presumptions are against the creation of an exclusive contract and appellant has failed to distinguish the cases so holding cited in its brief, and see also Cooley's Const. Lim., 4th ed., 493; Railroad Co. v. Railway Co., 24 Fed. Rep. 306; Turnpike Co. v. Montgomery County, 100 Tennessee, 417.

The same cases hold that the public is favored by the courts where questions of this character arise, and see Stein v. Bienville Co., 141 U. S. 67. There was no legislative authority for an exclusive grant as there was in Gas Co. v. Gas Light Co., 115 U. S. 650; Water Co. v. New Orleans, 115 U. S. 674; St. Tammany Water Co. v. New Orleans, 120 U. S. 64, and Louisville Gas Co. v. Citizens' Gas Co., 115 U. S. 683; Water Co. v. Walla Walla, 172 U. S. 1.

MR. JUSTICE HARLAN delivered the opinion of the court.

This suit was brought by the Knoxville Water Company, a corporation of Tennessee, against the City of Knoxville, a municipal corporation of the same State, and against certain indi

vidual citizens of Tennessee constituting the Waterworks Commission of that city.

Are the rights which the plaintiff sought to protect secured by the Constitution of the United States in any such sense as to make the case-the parties, all, being citizens of Tennesseeone arising under that instrument and therefore one of which the Circuit Court could take original cognizance? An answer to these questions, it would seem, requires for their intelligent solution a somewhat extended statement of the facts.

The Water Company, by its charter granted in 1877, was authorized to establish waterworks of sufficient capacity to furnish the corporate authorities and inhabitants of Knoxville with water. To that end it was empowered to lay down pipes through the streets, lanes and alleys of the city; bring into the city a sufficient supply of water by means of pipes or tanks, or in any other way; construct reservoirs; supply with water the inhabitants of the city and its environs and all who may be along the lines of the company's pipes; erect hydrants or fire plugs; and contract with the inhabitants and with the corporate authorities of the city or any incorporated companies for the use of water, charging such price for the same as might be agreed upon between the company and the parties.

Prior to 1882-taking the allegations of the bill to be true, since the case went off in the Circuit Court upon demurrer to the bill-the city of Knoxville determined to establish a system of waterworks, and to that end it purchased certain real estate. But that scheme having been abandoned or having been ascertained to be unwise and impracticable at that time, the city advertised for bids and proposals by responsible parties for the erection of waterworks, which, after being built, it was to have the option of purchasing at a time to be agreed upon.

The advertisement brought two competitive propositions, one by the City Water Company and the other by the present plaintiff. The proposition of the plaintiff was accepted, and thereupon the city and the plaintiff on the first day of July,