City of Mobile v. Mobile Electric Co.

It is unquestionably the law that the state has the authority to fix reasonable rates to be charged by a corporation for supplying electricity to the inhabitants of a city, which supersede other rates agreed on in an existing contract made previously between the company and the consumer, and a legitimate use of this police power does not impair the obligation of a contract or deprive the consumer of property without due process within the influence of the state or federal Constitution. Union Dry Goods Co. v. Georgia Public Service Corp., 248 U.S. 372, 39 Sup. Ct. 117, 63 L.Ed. 309.

"It is settled that neither the 'contract' clause nor the 'due process' clause has the effect of overriding the power of the state to establish all regulations that are reasonably necessary to secure the health, safety, good order, comfort, or general welfare, of the community; that this power can neither be abdicated nor bargained away, and is inalienable even by express grant, and that all contracts and property rights are held subject to its fair exercise." Atlantic Coast Line v. Goldsboro, 232 U.S. 548, 34 Sup. Ct. 364, 58 L.Ed. 721.

In the instant case, however, the state has not granted to the Public Service Commission the general and unqualified power to fix and regulate the rates of electric light companies. This class of public utilities was placed under the supervision and control of said Public Service Commission by Acts 1915, p. 865; but the right to fix or regulate rates was specifically limited by the latter part of section 3 of the said act so as not to affect any subsisting rate fixed by an existing contract or any future contract which may be entered into between any municipality and a public service corporation, firm, or person.

The result is the fixation of the rate in the instant case by the Public Service Commission must depend upon the legal suspension or modification of the existing contract between the appellant and the appellee. The electric company claims that the contract was not operative as to the period dealt with by the Public Service Commission, in that it had been suspended for the period of the war and for one year after the declaration of peace. On the other hand, the city contends that the attempted modification or suspension of the contract was not legal, and was but an abortive effort upon the part of the governing board to do so, and that the said contract was in legal force and effect when the Public Service Commission acted. Generally speaking, if the mode of contract by a municipality is not prescribed by statute or charter, the municipality may make the contract in the same manner as other corporations or individuals. On the other hand, when the statute or charter prescribed a particular mode for the execution of such contracts, that mode is exclusive and must be pursued or the contract will not bind the corporation. Dillon on Munic. Corp. vol. 2, § 783, and numerous cases cited in note 1, including the case of Montgomery County v. Barber, 45 Ala. 237; McQuillin on Munic. Corp. vol. 3, § 1178, p. 2608.

Section 1183 of the Code of 1907 provides as follows:

"Contracts entered into by a municipality shall be in writing, signed and executed in the name of the city or town, by the officers authorized to make the same, and by the party contracting. In cases not otherwise directed by law or ordinance, such contracts shall be entered into and executed by the mayor in the name of the city or town, and all obligations for the payment of money by the municipality except for bonds and interest coupons, shall be attested by the clerk. This section shall not be construed to cover purchases for the ordinary needs of the municipality."

This statute provides that the contract shall be in writing, and "signed and executed in the name of the city or town" by the officer authorized to make the same, while the last part of the provision names the mayor as the officer to execute the same, except when the law or ordinance directs some other officer to do so; but in any event, whether it be executed by the mayor or some other officer named in some other law or ordinance, it shall be executed in the name of the city or town by the officer, and not in the name of the officer. It may be conceded, but which we do not decide, that the petition of the electric company and the resolution adopted and subsequently signed by the commissioners would be considered together and treated as a compliance with the requirement that the contract had to be in writing, and yet not all of the statutory requirements would be met, as the resolution was not signed in the name of the city, but merely by the commissioners purporting to act for the city; in other words, the city is not a party to the contract, and it is not a question of a defective or irregular execution of same, but a case of non est factum.

Nor can the city be estopped by a contract that it did not execute. Persons dealing with municipalities are presumed to know the law and to know the legal limitations upon the contractual power of municipalities, and cannot plead estoppel, because they could not have been misled about a thing which they know. 3 McQuillin on Munic. Corp. § 1166; East. Ill. School v. Charleston, 271 Ill. 602, 111 N.E. 573, L.R.A. 1916D, 991; State v. Helena, 24 Mont. 521, 63 P. 99,55 L.R.A. 336, 81 Am. St. Rep. 453.

The writ enjoined the said officials from holding or attempting to hold an election on June 23, 1919, or at any other time, for the purpose of voting on the rejection or adoption of an ordinance submitted to the board by a certain petition of the voters asking for an election for the purpose of rescinding the resolution previously adopted by the commission suspending the contract rate and to reinstate said contract. As the contract was never legally suspended, and the resolution attempting to do so was a nullity, an election to adopt an ordinance to reinstate said contract would be a useless and expensive performance, and there was no error in granting the injunction to this extent, as the proposed election was not of a political nature, but involved business or property rights, and the complainant, as a taxpayer, had the right to enjoin same. In fact, this feature of the injunction is not questioned in brief of appellant's counsel, as the sole ground of complaint is against so much of the injunction as prevents the city officials from accepting or creating into law the ordinance proposed by the petition, independent of an election. As the resolution of suspension was void, this appellant cannot complain of any action on the part of the city officials in attempting to repeal or rescind a void resolution, and, though the injunction was to this extent perhaps too broad, the appellant or the public have in no wise been injured thereby, as the resolution is a nullity, whether formally repealed or rescinded or not. Moreover, the assignment of error goes to error in issuing the injunction, and not to so much thereof as only enjoins the right to repeal the resolution otherwise than by an election.

The decree of the circuit court is affirmed.

Affirmed.

McCLELLAN, SAYRE, SOMERVILLE, THOMAS, and BROWN, JJ., concur.

GARDNER, J., thinks that section 1183 of the Code is purely directory, and dissents.

On Rehearing.