This is a writ of error to the highest court of Kentucky. The general question to be determined is whether certain legislation of that common wealth is in conflict with the clause of the national constitution which forbids a state to pass any law impairing the obligation of contracts. The appellant, the Louisville Gas Company, contends that its charter, granting certain exclusive rights and privileges, constituted, within the meaning of that constitution, a contract, the obligation of which has been impaired by the charter subsequently granted to the appellee, the Citizens' Gas-light Company. The court of appeals of Kentucky sustained as constitutional the legislation under the authority of which the latter company is exercising the rights, privileges, and franchises conferred by its charter.
By an act of the general assembly of Kentucky, approved February 15, 1838, (Sess. Acts 1837-38, p. 206,) the Louisville Gas & Water Company was created a corporation, to continue for the term of 30 years from January 1, 1839. It was made its duty, within three years after its organization, to establish in Louisville a gas manufactory of sufficient extent and capacity to supply that city and its people with such public and private lights as might from time to time be required, and within five years after the establishment of its gas-works, to erect and establish water-works sufficient to supply the city with water for the extinguishment of fires, for the cleansing and sprinkling of streets and alleys, and for all manufacturing and domestic purposes; to which end it might lay down and extend pipes through any of the streets and alleys of the city, the company being responsible to the city for any damages resulting therefrom. The act imposed a limit upon the price to be charged for gas-lights used by the city, and gave the latter the right to subscribe for 4,000 shares in the company, payment for one-half of which could be made in city coupon bonds for $200,000, redeemable at any time within three years after the expiration of the company's charter. It was made a fundamental condition that, upon the termination of the company's charter, the city at its election could take the gas and water works at a fair estimate of what they would cost and be worth at that time, to be ascertained by the judgment of competent engineers, selected by the parties, or, in case they disagreed, by the Louisville chancery court. Under this charter the company proceeded at once to erect gas-works, including suitable buildings and machinery. It supplied itself with all necessary apparatus, laid down mains and pipes, and erected lamp-posts, for the purpose of lighting the streets. It supplied gas for the public buildings and for street lights, as well as for domestic purposes. And it continued to do so during the term of its original charter.