1882, entered into an agreement or contract which is the foundation of this suit.

By that agreement the Water Company stipulated (omitting many minor details): That it would erect and establish on the land acquired by the city a system of waterworks, with reservoir and all necessary mains, pipes, hydrants, machinery, buildings and other appurtenances and incidents sufficient to supply the city with water to be taken from the Tennessee River at the site purchased by the city for that purpose-the waterworks and fixtures throughout to be of first-class materials, capable of furnishing 2,000,000 gallons of water every twenty-four hours and affording an uninterrupted daily supply to the city of such quantity as might be required, not exceeding the amount above specified, and the reservoir to be built on a specified site, and to have a capacity of 3,200,000 gallons of water. The company was to furnish water free of charge (except the rental of hydrants) from hydrants for the sprinkling of streets and flushing of gutters and sewers along, on or under such streets as were curbed, guttered or sewered; also, free of charge, water for all purposes of the fire department and for supplying the city hall buildings, office and prison. It was to purchase at the price of $7,800 the property then already acquired by the city for the purpose of erecting waterworks, including lands, plans, specifications, drawings, maps, etc., and to pay therefor within thirty days from the execution of the agreement and before the construction of said works. It engaged to supply private consumers with water at a rate not to exceed five cents per hundred gallons, the cost of introducing from the mains, and the cost of meter when used, to be borne by such private parties. The work of construction was to be commenced within thirty days from the execution of the agreement, and the works to be completed, ready for use, within twelve months thereafter. The company was to maintain the waterworks stipulated to be built. by it in such condition as would enable it to comply with its undertakings for the period of thirty years from January 1, 1883, unless the city should become the owner of the same

within that period. At its own expense it was to establish with the waterworks a system of telegraphic fire alarms of such quality and efficiency as those in general use in cities, consisting of two alarm boxes in each of the (then) eight wards of the city, with proper telegraphic connections with a central station.

In consideration of the promises and undertakings by the Water Company, as set out in the above agreement, the city covenanted and agreed, among other things, "not to grant to any other person or corporation, any contract or privilege to furnish water to the city of Knoxville, or the privilege of erecting upon the public streets, lanes, or alleys or other public grounds for the purpose of furnishing said city or the inhabitants thereof with water for the full period of thirty years from the first day of August, A. D. 1883, provided the company comply with the requirements and obligations imposed and assumed by them under and by virtue of this agreement;" also, "to pay to said company for rent of the seventy-five hydrants hereinbefore stipulated to be erected fifty dollars each per annum, payable in quarterly instalments on the last day of each quarter, beginning on the day upon which the city shall commence receiving a supply of water from said works, and for any additional hydrants erected for the use of the city it will pay in the same manner at the rate of not more than fifty dollars each per Recognizing the benefit and advantage accruing to it and to its citizens from the construction of the waterworks and the erection of hydrants, the city also covenanted and agreed with the Water Company "to pay, in addition to the annual rent of fifty dollars, as herein before provided, and as an additional annual rent for the said seventy-five hydrants, a sum equal to that which, under the laws of the State and the ordinances and resolutions of the city, would be annually assessed as taxes for city purposes and uses on property of the same kind, quantity and value as that owned by the said Water Company within the corporate limits of the city of Knoxville: Provided, that the said additional annual rental shall only

annum.

be paid for the term of five years next following first of August, 1894, and no longer."

It was further mutually agreed and understood between the parties that at the expiration of fifteen years from the time fixed for the completion of the waterworks the city should have the right, upon giving one year's notice of such purpose and intention, to purchase from the company the waterworks provided for, and all the property, rights, franchises and privileges thereto belonging; by negotiations, if the terms could in that way be agreed upon, or if not then at any time for a consideration to be fixed and determined by appraisers; and if not purchased at the end of fifteen years, the waterworks plant, franchises, rights, privileges, etc., could be purchased by the city upon the same terms and conditions and in the same way at the expiration of each and every year thereafter. But in no case was such right of purchase to exist or be exercised unless due notice thereof was given one year before the expiration of the period aforesaid or either of them. If the parties differed as to price, the matter, the agreement provided, was to be determined by appraisers designated in a particular way, and whose award should be final and conclusive. It was further stipulated that the Water Company should not transfer, set over or assign the agreement for the construction of the waterworks to any company, corporation or individual whatsoever.

By an ordinance adopted October 20, 1899, the city consented to the consolidation of the Knoxville Water Company and the Lonsdale-Beaumont Water Company, and made certain changes both in the contract between the latter company and the town of West Knoxville and in the above agreement of 1882. It is not necessary to set out these changes.

We come now to the act of the Tennessee Legislature of February 2, 1903, passed avowedly for the purpose of enabling the city to exercise the option it had under the agreement of 1882 and the ordinance of 1899 to purchase and acquire the plant and property of the Water Company and maintain it for the benefit of its people. To that end the act authorized the city

to issue bonds to an amount sufficient for that purpose, upon the agreed valuation of the parties, or in default of same, upon a valuation to be ascertained and fixed by appraisers, and to such additional amount as would be necessary in making additions to the plant, including real estate required for such additions. It was, however, provided that bonds should not be issued unless approved by the assent of two-thirds of the qualified voters of the city, expressed at an election duly held to ascertain their wishes. The execution of the provisions of the act was committed to a Waterworks Commission, to be created by the City Council, and to have the power to make all contracts for the maintenance and extension of the plant.

Subsequently, the Legislature passed the act of April 3, 1903 (also amending the above act of February 2, 1903), whereby the city was authorized to acquire, own and operate a system of waterworks, either by purchase or construction, and for that purpose power was given to issue interest-bearing coupon bonds to an amount not exceeding $750,000 under the restrictions named in the act. The act created a Waterworks Commission of five members, to be elected by the City Council, and to have the entire supervision, under prescribed restrictions, of the purchase or construction, operation and maintenance of any system of waterworks established under the sanction of the act. The act embodied, among others, a provision authorizing and directing the Commissioners to obtain from the Water Company a written proposition for the sale of its plant, franchises, etc., to the city of Knoxville, giving the price and terms of payment, together with the opinion of competent, disinterested experts as to the cost and present value of the plant; the commission to secure plans, specifications and estimates of the cost of the construction of a new system of waterworks, and to report all matters to the City Council for its consideration, but not to close any contract for the purchase or construction of waterworks until it had been duly authorized to do so by the City Council after the proposition shall have been ratified by a vote of the people.

If the city determined to construct, equip and maintain its own system of waterworks, then for the purpose of securing sites for pumping stations and other necessary purposes, including the laying of mains and water pipes and sites for reservoirs and filtering galleries, extensions, improvements and alterations, it was given the right of condemnation of grounds within and without its corporate limits.

There is no need to refer to other provisions of the agreement of 1882. But it may be said in this connection that an election was held on the second day of July, 1903; and the City Council-having express authority to declare the result of the election-declared, by ordinance, that 1,818 votes had been cast in favor of, and only 239 votes against, an issue of bonds for the construction by the city of a system of waterworks. It may be also stated, in this connection, that after the passage of the two acts of 1903, and before the above election, some correspondence ensued between the Water Commission and the Water Company in reference to the purchase of the latter's plant. But the parties failed to agree as to the mode of ascertaining the value of the company's plant, and negotiations ceased. It is not important to inquire which side, if either, was to blame in this matter. Suffice it to say that the City Council, on or about May 20, 1904, conceived and was about to enter a plan of establishing a system of city waterworks wholly independent of, and in competition with, that maintained by the Water Company.

The present suit was brought upon the theory that the legislative enactments of 1903 were laws impairing the obligations of the contract of 1882 between the Water Company and the city, as well as upon the theory that the maintenance by the city of a system of waterworks in competition with those of the Water Company would inevitably destroy the value of the latter's property, and be a taking, under the sanction of the State, of the company's property for public use without compensation, in violation of the due process of law enjoined by the Fourteenth Amendment.