Held, the repealing ordinance violated section 10, art. 1, of the constitution, which prohibits the passage of a law impairing the obligation of contracts, and the fourteenth amendment to the constitution, which forbids the taking of property without due process of law.

5. SAME-CONSTITUTIONAL LAW.

An ordinance of a city passed under the legislative authority of a state is a law of that state, within the meaning of that term in the constitution and statutes of the United States.

6: SAME-GRANT FOR PRIVATE USE.

A grant by a city of rights and privileges in its streets, parks, public grounds, or water system for private use, that is to say, a grant from which neither the city, its citizens, nor the public receive any consideration or derive any benefit,-is beyond the powers of the municipality, and void.

7. SAME-GRANT FOR PUBLIC PURPOSES.

A city has authority, under its general powers, to grant to private parties for public purposes reasonable rights and privileges in its water system, its streets, its public grounds, and its other public utilities, provided that such grant and its exercise do not materially impair the usefulness of these utilities for the public purposes for which they were acquired or dedicated.

8. SAME.

The ordinance of September, 1898, was not for purely private use, but for the public purposes of procuring an enlargement of the water system of the city, of obtaining the use of electric lights for the municipality, and of securing conduits and poles to carry its wires.

The Colorado statute (3 Mills' Ann. St. p. 1144) which provides that the city councils of cities in that state shall have power to erect waterworks, gas works, or electric light works, or to authorize their erection by others, only when such works shall be erected or authorized pursuant to a favorable vote of the taxpayers of the cities, applies only to works erected by the cities themselves or by others under contracts with or for the cities. It has no application to such works erected by private parties for their

own use.

10. SAME-POWERS.

A city has two classes of powers, the one legislative, public, governmental, in the exercise of which it acts as a sovereign and governs its people, the other proprietary, quasi private, business, conferred upon it for the private advantage of its inhabitants and itself.

11. SAME-EXERCISE OF ITS BUSINESS POWERS.

In contracting for the enlargement of its water system, for electric lights for municipal use, and for the use of conduits and poles to carry its wires, a municipality is exercising its proprietary or business powers, is subject to the same rules of law that govern the agreements of private corporations, and its contracts bind its successive sets of officers. 12. SAME-CONTROL OF PUBLIC UTILITIES.

The water system and the other public utilities of a city are held by the municipality and its officers in trust for the public purposes for which they were acquired and dedicated. The city and its officers may not renounce this trust, disable themselves from discharging it, or so divert or impair the public utilities that they become inadequate to accomplish the public purposes for which they were created.

13. SAME-UTILITIES CREATED FOR PUBLIC PURPOSES.

A city and its officers have the authority, and it is their duty, to apply the surplus power and use of public utilities for the benefit of the munic ipality and its citizens, provided such application does not materially impair their usefulness for the public purposes for which they were created. 14. SAME.

A city council has authority, under its general powers, to lease to private parties the use of the water flowing through its water system to

enable them to generate power to create electricity, where such lease does not impair the usefulness of the water or the system for the municipal purposes for which they were obtained by the city.

15. CONTRACTS EQUITY.

DELAY IN PERFORMANCE FORFEITURE ENFORCEMENT IN

A court of equity will not enforce a forfeiture of the rights and privileges of the grantees in a contract for their failure to complete their performance of it in time, where the party seeking the forfeiture was guilty of the first breach of the agreement, and failed to pay installments due under it while the work was in progress until compelled to do so by judg ments of the courts, and had persistently endeavored to revoke and annul the grant, while the grantees were vigorously prosecuting their part of the work under it, which they had, within the time limited by the agreement, substantially performed, although they had not completely finished it. (Syllabus by the Court.)

Appeal from the Circuit Court of the United States for the District of Colorado.

Guy Le R. Stevick and Charles J. Hughes, Jr. (Henry M. Blackmer and Henry McAllister, Jr., on the brief), for appellant.

W. S. Morris and R. E. Lewis (J. W. Ady, on the brief), for appellee. Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN, Circuit Judge. This is an appeal from a decree dismissing the bill of the Pikes Peak Power Company, a corporation, upon the merits at the final hearing. The suit which culminated in that decree arose in this way: For many years the city of Colorado Springs, the appellee, has derived its supply of water from watersheds on the slopes of Pikes Peak some 19 miles from the city, and more than 6,000 feet above the level of the sea. The city owns more than 4,000 acres of land on these slopes, and it collects the water from rains and melting snows into reservoirs in the mountains, and by open flumes and iron pipes conducts it thence to the city, where it is distributed for the usual municipal purposes. The population and business of the city had so increased in 1895 that the supply of water which it had theretofore drawn from the eastern slopes of Pikes Peak was inadequate, and the city concluded to increase it by deriving an additional store from the western slopes of the mountain. The means devised to accomplish this purpose consisted of a reservoir on West Beaver creek for the collection of the water on the western slopes, and a tunnel at an elevation of about 11,500 feet above the level of the sea, about 6,400 feet in length, through one of the spurs of the mountain, to conduct the water to Middle Beaver creek on the easterly side of the peak, whence it would flow into the flumes and water pipes of the city. Thereupon, on December 27, 1895, Wilson & Jackson, a partnership composed of Charles H. Wilson and George W. Jackson, made a contract with the city to bore this tunnel on or before September 27, 1897. They entered upon the undertaking, but it proved to be far more difficult and expensive than any of the parties had anticipated. A slide of loose rock, or a cave-in, was encountered on the line of the tunnel, which proved an insuperable obstacle to its construction on that line, and compelled the contractors to drive the tunnel on a detour more than 350 feet in length,

while the distance on the line of the tunnel from the point of departure from it to that of the return to it was only about 130 feet. The high altitude at which the tunnel was located, the difficulty of transporting fuel, tools, and materials to that height, and developing power to drive and complete it, made its cost several times its contract price. As these obstacles developed, the city aided the contractors by a gift of $11,500, and by extending the time for the completion of the work until September 27, 1898. George W. Jackson became the successor of Wilson & Jackson, borrowed money, and apparently prosecuted the work of driving the tunnel to the best of his ability; but the undertaking became so expensive, and the amount of his indebtedness so great, that he was financially unable to carry it on without further assistance, and in the early days of September, 1898, it was evident that he could not complete it in the time or on the terms specified in the original contract, and its extension, and that he could not complete it in any way unless he could acquire some rights or privileges upon which he could get credit and borrow money to continue the work. While the contract price of the tunnel was only about $90,000, it had then cost more than twice that amount, and, if he had then abandoned it, it would have cost the city more than $100,000 to complete it. In driving the tunnel, Jackson had used electrical power, which he had created on the side of the mountain at an electrical plant of 200 horse power by the use of the water flowing down the mountain side which was subsequently led into the water system of the city of Colorado Springs, and distributed to its inhabitants. In this way he had learned that it was practicable to use this water for the development of electrical power without wasting or polluting it. In this state of the case, the city of Colorado Springs, by the passage of an ordinance on September 8, 1898, which was accepted by Jackson on September 10, 1898, made a grant to and an agreement with him which provided that the respective parties thereto should derive the following considerations or benefits therefrom: The city granted to Jackson, his associates or assigns, for the term of 25 years from September 8, 1898: (1) The right and privilege of laying, maintaining, and operating such conduits, cables, and wires in the streets and alleys within the fire limits of the city, and of erecting, maintaining, and operating such poles and wires in the streets and alleys of the city outside its fire limits as should be necessary for the transmission and sale to the city and its inhabitants of electricity for the development of electrical power, and the right and privilege of renting space in the conduits. (2) The right and privilege of constructing, maintaining, and operating at suitable places on the lands of the city and through the lands, rights of way, streams, reservoirs, flumes, ditches, pipe lines, and conduits of the water system of the city, dams, reservoirs, pipe lines, conduits, power houses, plants, poles, wires, and cables for the transfer and transmission of electrical power, together with the right to use from such lands such earth, stones, and dead timber as might be needed to construct such power houses, reservoirs, plants, and dams. (3) The right to divert and use for the generation of electrical power all the water of any streams, ditches, flumes, pipe lines, conduits,

and reservoirs of the city on condition that all water so diverted should be returned to the water system of the city unimpaired; that the use thereof under the contract should not diminish the flow of nor pollute the water; that the city should determine what constituted waste and pollution; that Jackson, his associates and assigns, should do nothing which would interfere with the successful operation of the city's system of waterworks; that the work under the contract in the city should be done under the supervision of the city, and that the city reserved its right to exercise its police power over the conduits, poles, and wires provided for by the contract. The consideration or the benefits which Jackson, his associates or assigns, agreed by this contract to bestow upon the city in return for this grant were: (1) The completion of the tunnel on or before December 8, 1899, on the terms specified in the original contract of 1895. (2) The necessary space in all the conduits they should lay, and on all the poles they should erect, for the telegraph and telephone wires of the city, and freedom of access and facilities for placing and removing them equal to those which Jackson and his associates or assigns should enjoy. (3) During the time between one year after the completion of the tunnel and September 9, 1923, such electric lights as should be necessary for lighting the public buildings of the city, not exceeding 5 arc lights of 2,000 candle power and 200 incandescent lights of 16 candle power; and such electrical power as should be necessary for municipal purposes, not exceeding 50 horse power, free of cost; and such arc lights of 2,000 candle power as should be necessary for lighting the streets, alleys, and public grounds of the city for $5.50 per light per month. (4) On September 9, 1923, any electrical plant to furnish these lights and this power and any transforming station, wires, cables, and other improvements which Jackson, his associates or assigns, shall have then constructed, strung, or made for the purpose of transforming and delivering the electricity necessary to furnish these lights and this power, and a 20-inch water pipe line from Lake Moraine to some point in the town of Manitou. On the faith and credit of this contract Jackson borrowed of various parties more than $80,000, pledged his rights and privileges under the ordirance to secure his debts for this amount, and proceeded with the construction of the tunnel. He organized the Pikes Peak Power Company, the appellant, and on January 16, 1899, assigned to it all his rights and privileges under his contract for stock in that corporation, which he pledged to secure the money he had borrowed. In this state of the facts, after Jackson had borrowed this money, and proceeded on the faith of the contract with the work of driving the tunnel through the mountain, and on February 23, 1899, the city passed an ordinance, which, by its terms, repealed the ordinance of September 8, 1898. Thereupon, on May 3, 1899, the Pikes Peak Power Company exhibited its bill in the circuit court, in which, and in' an amendment to it, which it subsequently made, it set forth the foregoing facts, and prayed that the repealing ordinance might be adjudged void as violative of the constitution of the United States, and that the city might be enjoined from interfering with the exercise by the power company of the rights and privileges granted to Jackson

44 C.C.A.-22

and his assigns by the ordinance of September 8, 1898. The city answered the amended bill. Its answer was that no rights and priv ileges were granted to Jackson, his associates and assigns, for various reasons, the chief of which was that the city of Colorado Springs had no power to make the contract, or to vest in any one the rights and privileges bestowed by the ordinance of September 8, 1898. On this ground the circuit court dismissed the bill at the final hearing, and this appeal challenges that ruling.

At the opening of the investigation of this case we are confronted with the claim of counsel for the appellee that this court is without jurisdiction to review the decree below, because this is a case in which the law of a state is claimed to be in contravention of the constitution of the United States. The foundation of the suit is that the city of Colorado Springs passed an ordinance which, by its terms, repealed an earlier ordinance, and thereby annulled a contract between it and the appellant, and took away the property rights of the latter without due process of law, in violation of section 10, art. 1, of, and of the fourteenth amendment to, the constitution of the United States. The answer of the city to this claim was that, while there was a contract in form, there never was any agreement in law, because the city had no power to make the contract which it assumed to effect. This defense was sustained by the court below. The appellant now insists that that court was in error because it did not hold that the city of Colorado Springs had lawful authority to make the contract, and because it did not also hold that its repealing ordinance was violative of the constitution. In this way it may be seen that this case is one in which a law of a state (for an ordinance of a city passed under the legislative authority of a state is such a law within the meaning of the federal constitution and statutes,-City of Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed. 341) is claimed to be in contravention of the constitution of the United States, and that the suit involves the question whether or not this repealing ordinance is so violative of the constitution, together with other questions which must be considered and determined before the whole case can be decided. Section 5 of the act of March 3, 1891 (26 Stat. 826, c. 517), declares that appeals may be taken to the supreme court "(6) in any case in which the constitution or law of a state is claimed to be in contravention of the constitution of the United States." Section 6 provides that in cases other than those named in section 5 the circuit courts of appeals may exercise appellate jurisdiction unless otherwise provided by law. These provisions of the organic law of this court have seemed plain to us, and we have accordingly frequently held that the supreme court had exclusive jurisdiction, and that this court had no jurisdiction to review a judgment or decree in any case which was controlled by the question whether or not the constitution or law of a state was in contravention of the constitution of the United States. Merritt v. Barge Co.. 75 Fed. 813, 815, 21 C. C. A. 525, 526, 40 U. S. App. 127, 129; Hastings v. Ames, 68 Fed. 726, 728, 15 C. C. A. 628, 630, 32 U. S. App. 485, 488; Railway Co. v. Evans, 58 Fed. 433, 434, 7 C. C. A. 290, 292, 19 U. S. App. 233, 235; Pauley Jail Bldg. & Mfg. Co. v. Crawford Co., 84 Fed.