In Error to the District Court of the United States for the District of Oregon; Robert S. Bean, Judge.

Action by the Salem Water, Right & Power Company against the City of Salem, Walter E. Keyes, its Mayor, and C. O. Rice, Treasurer. Judgment for plaintiff, and defendants bring error.

This is an action by the Salem Water, Light & Power Company to recover for fire hydrant service furnished to the municipality. The water company’s demand is based upon a hydrant charge fixed by an order of the Public Service Commission of Oregon, published in August, 1914, and not upon a lower maximum rate named in the franchise granted by the city to the water company in 1891.

The city of Salem, in Oregon, was incorporated by legislative act in 1862 under a constitutional provision (section 2, art. 11, of the Constitution of Oregon) which authorized corporations to be formed under general laws, and not by special laws, except for municipal purposes, and also provided that all laws passed pursuant to the section could be amended or repealed, but not so as to impair or destroy any vested corporate rights. The act of incorporation (Special Laws of Oregon, 1802, p. 3) under which Ordinance No. 207, enacted in April, 1891, the franchise ordinance here involved, was passed, has these provisions:

“Sec. 6. The mayor and aldermen shall comprise the common council of said city, and at any meeting shall have exclusive power—

“To provide for lighting the streets and furnishing the city and the inhabitants thereof with gas or other light, and with pure and wholesome water, and for such purposes may construct such water, gas or other works, within or without the city limits, as may be necessary or convenient therefor: Provided, that the council may grant and allow the use of the streets and alleys of the city to any person, company or corporation who may desire to establish works for supplying the city and the inhabitants thereof with such water or light upon such terms and conditions as the council may prescribe.

“26. * * * To permit and regulate the use of the streets, alleys and public grounds of the city for laying down and repairing gas and water mains, for building and repairing sewers and the erection of gas or other lights; to preserve the streets, alleys, side and cross walks, bridges and public grounds from injury, and prevent the unlawful use of the same, and to regulate their use, to fix the maximum rate of wharfage, rates for gas or other lights, for carrying passengers on street railways, and water rates.”

In section 4 of the Ordinance No. 207 it was provided that the Salem Water Company shall not charge at any time “higher rates for water than is customarily allowed for water in towns or cities of like population on the Pacific Coast; but the Salem Water Company, its successors or assigns, shall not at any time charge more than one dollar and eighty-two cents ($1.82) per month for each hydrant or cistern actually supplied. And the right is hereby reserved by the city of Salem to continue or discontinue to connect or disconnect any or all hydrants or cisterns connected, or which may hereafter be connected with said works; and the city of Salem shall not p-ay for said hydrants or cisterns while the same are disconnected or discontinued.”

In May, 1913, the city filed a complaint with the Public Service Commission of the state of Oregon against the water company, wherein the city set forth that the water company as a public utility was subject to the provisions of chapter 279 of the Laws of Oregon of 1911, and that the distributing system of the water company was inadequate to supply the demands of the residents of the city, and that the water supply was inadequate, and that the rates charged were unequal; wherefore the city prayed that the commission should make such orders as were necessary for extending the distributing mains and that the rates of the water company should be adjusted and equalized, “so that the same shall be uniform and equal and that said rates may be reduced so that the charges may return to the defendant [water company] a reasonable return upon its investment.”

After filing the complaint with the Public Service Commission, and about March, 1914, the city council adopted a resolution (No-. 1294) in substance as follows: That the Commission, in adjusting the rates of the water company for the city on the private users, take into consideration the price “at which the hydrants should be charged to make an equitable rate for 'the private user, and, if the rate now charged the city for hydrants by the water company is too high or too low, that it be adjusted accordingly.”

After public hearing about August 19, 1914, the commission found that the rate of $1.82 charged by the water company to the city for its fire hydrants put an undue burden upon the other users of water, and that the city should pay to the water company $2.50 per hydrant per month for all hydrants to which water was furnished by the water company, the new rate to be effective October 1, 1914. Thereafter the water company furnished to the city and to the fire hydrants water, and the city accepted the service without dissent. Bills for water are payable in advance, but the city has refused to pay for the service, and there is a large amount claimed to be due.

The city, in its answer, sets up that the Public Service Commission was created in 1911, and subsequent to the acts of incorporation of the water company and to the various amendments to the act creating the city of Salem, and subsequent to the amendment to section 2 of article 11 of the Constitution of Oregon, as amended in November, 1910, and subsequent to the adoption of section la of article 4 of the Constitution of Oregon, and to certain legislative enactments which need not be here fully cited. One of the amendments of 1903 added a new subdivision to section 6, and provided that the mayor and aldermen, comprising the common council, should have exclusive power (subdivision 41): To license, regulate, and tax water and power companies, and to fix the maximum rates to be charged by any person, company, or corporation for water or power supplied by such person or company to private or public consumers within the city.

Tiie city alleges that the charges ma.de by the water company for supplying water to the inhabitants of the city were unreasonable, unjust, and unequal as between different patrons and consumers, and alleges that to secure an appraisement of the value of the property and equipment, and for the purpose ®f having a determination by the Public Service Commission whether or not the city was charging its patrons unjust tariffs for the private use of water, the city filed a complaint with the Public Service Commission, and later the resolution hereinbefore referred to was passed. It is admitted that the city has declined to accept the orders of the Public Service Commission in so far as they increased the rates for water service for hydrants.