Littleton v. Mayor of Hagerstown

Because of the long and conscientious consideration which it has had, and because of my confidence in the careful and able judge who wrote it, it is with considerable reluctance that I feel constrained by my convictions to express the following dissent from the opinion of the court in this case.

The municipality of Hagerstown was authorized by chapter 381 of the Acts of 1898, and chapter 75 of the Acts of 1900, to build and operate a plant to furnish electric current to the citizens of that city for lighting purposes, and to issue bonds therefor. The bonds were issued and the plant built, and to quote from the opinion of the lower court, which is supported by the record:

"The plant built under the authority of these acts has been in successful operation for more than twenty years, lighting the public places of the city and furnishing electric current to its citizens for light and power purposes. At the time of the establishment of this plant Hagerstown had a population of 13,000 and now has an excess of 28,000. The city has outgrown the plant and it is no longer adequate to supply its own needs and those of its customers. The location of the present plant is such that it cannot be enlarged with advantage. It desires to build a new plant on a site near a plentiful supply of water.

"Under these circumstances chapter 404 of the Acts of 1920 was passed. By its provisions the city was authorized to issue $300,000 of its bonds for the construction of a new manufacturing plant and the remodeling of its distribution system.

"On February 7th, 1923, an injunction was issued enjoining the construction of the new plant. The theory of the bill of complaint upon which the injunction issued was that the City of Hagerstown had no authority to issue its bonds nor construct its proposed plant without first having obtained a permit and certificate of authority from the Public Service Commission. The Court of Appeals passed upon this case in Littleton v.Hagerstown, 143 Md. 591. It was there held that the city was fully authorized to issue its bonds and to construct a new plant for the manufacture and distribution of electric current for municipal purposes, as well as for sale to its citizens for light and power purposes. It sustained the decree of this court, held that the permit and certificate of authority were necessary and directed that the injunction should be dissolved ``upon the granting of the permit by the Public Service Commission.'

"Thereafter application to the Public Service Commission for the permit was made and denied."

It further appears: "That the capacity of the present municipal light plant of Hagerstown is, in the judgment of the defendant, and they have been so advised by competent engineers, now inadequate to supply the electric current necessary to meet the demands of its private customers and at the same time to light the streets, avenues, alleys and public places of Hagerstown, and the location of the present plant is such that on account of an inadequate supply of water it cannot be economically enlarged. That the proposed new plant when erected is to be connected with the present plant by transmission wires, and the present plant will be used as an auxiliary to the plant until the same is in full operation and will warrant the discontinuance of the present plant and its salvaging." And it also appears that the municipality had, before the bill in this case was filed, expended thirty thousand dollars in preparing and grading a lot owned by it for the erection of the new plant, which sum will be a total loss as a result of the opinion filed in this case.

By chapter 404 of the Acts of 1920, the City of Hagerstown was authorized to issue bonds to the amount of $300,000 to build a new plant and to improve its service lines. Upon the application of certain taxpayers that issue was, as a result of an opinion of this Court in Littleton v. Hagerstown, 143 Md. 591, enjoined, unless it should be approved by the Public Service Commission. That commission, after a hearing, refused to permit the issue on the apparent ground that they apprehended that the money would be spent not only for present needs, but for future demands, and would therefore deprive the citizens of Hagerstown of certain prospective blessings which the commission anticipated would flow from the service of the Potomac Public Service Company and its subsidiary Maryland corporations, a late-comer in the Hagerstown market for electric current, if it were not interfered with by municipal competition. It therefore nullified the Act of 1920, in order that the Potomac Company might be free from apprehensions of possible competition from the municipality of Hagerstown in supplying current to the citizens thereof.

In that situation the General Assembly of Maryland, in 1924, adopted the act under consideration in this case, which repealed and re-enacted with amendments section 413A and section 447 of article 23 of the Code of P.G.L. of Md. so as to exempt from the operation of sections 445 and 448 of that article (392 and 388 of article 23 of the present Code), "such municipalities as owned, operated and maintained on and prior to the date of the creation of the Public Service Commission, and presently own, operate and maintain a gas or an electrical plant devoted in whole or in part to the supplying of the inhabitants of such municipalities with gas or electricity, for lighting or power purposes * * * the Mayor and Council of Hagerstown * * * and such municipality or municipalities having a population in excess of 20,000, and an assessable basis in excess of $15,000,000, when the majority of voters of such municipality or municipalities shall vote in favor of municipal ownership of lighting or power plant." Acts 1924, ch. 48. And at the same session chapter 380 was adopted, which supplemented the Act of 1920 authorizing the municipality to issue bonds as stated above. The City of Hagerstown having declared that it proposed to issue such bonds under the authority of those acts, certain taxpayers of that city applied to the Circuit Court for Washington County for an injunction restraining the issue, on the ground that the exemptions, provided by chapter 48 of the Acts of 1924, constituted special legislation, and were, therefore obnoxious to section 33 of article 3 of the Constitution of Maryland, and were also obnoxious to section 1 of the Fourteenth Amendment to the Federal Constitution, because they denied to the citizens of the state the equal protection of the law.

Before dealing with the precise question upon which this case turns, it may be useful to refer briefly to the history of the Public Service Law of the State and the changes effected by chapter 48 of the Acts of 1924.

The basic statute, chapter 180 of the Acts of 1910, in section 33, provided in part that: "No municipality, except the Mayor and City Council of Baltimore, shall build, maintain and operate for other than municipal purposes any works or systems for the manufacture and supplying of gas or electricity for lighting purposes without a certificate of authority granted by the commission." By chapter 445 of the Acts of 1914 a new section was added, known as 413A, now codified as section 347, C.P.G.L. of Md., which in part provided: "Every municipal corporation of the state engaged in the business of manufacturing and supplying or of supplying gas or electricity for other than municipal purposes shall be included within the terms ``Gas corporation' and ``Electrical corporation,' as defined in the next preceding section of this act, and shall be subject as other gas and electrical corporations are to the provisions of this act." If that act, to the extent of any inconsistency, repealed section 33 of the Acts of 1910, now codified as section 390 of article 23, C.P.G.L. of Md., then every municipal corporation in the state, including the City of Baltimore, supplying electric current for any other than municipal purposes, came under the jurisdiction of the Public Service Commission. If it did not repeal that section, then the statute only applied to such municipal corporations as were engaged in the business of supplying current for lighting and not to those supplying it for power purposes. But however it be construed, it is manifest that the Legislature, in terms or by necessary implication, in 1910, 1920 and 1924, attempted to classify municipal corporations, either by name, or as coming within certain designated conditions, as proper objects for exemption from the operation of certain provisions of the public service statutes, and the question and the sole question before us, is whether that was a proper and a valid classification.

In approaching that question we should not be embarrassed or affected by any spectre of municipal ownership, or by any question of enhancing the values of the securities, or of increasing the dividends of companies which have or may come into competition with the municipal plant. Desirable as it may be to improve the value of widely held securities, that ought not to be done at the expense of the taxpayers if, by doing it, those taxpayers are deprived of rights and privileges within the protection of the plain letter of the Constitution, or established law.

In the opinion of the Court, the exemption of the City of Hagerstown by name is invalid, because it is special legislation, and obnoxious to section 33, article 3, of the Maryland Constitution, and the other classifications are invalid because, among other reasons, they are but a subterfuge adopted by the Legislature to protect Hagerstown against an anticipated judicial decision declaring that it could not be exempted by name. I do not believe that any such considerations are material in considering the validity of the classifications adopted by the act, because I feel that, except for the most urgent and compelling reasons, the good faith of one branch of the State government should not be questioned by any other branch thereof, and I have been able to discover no such reasons in this case.

I will consider first that provision of the act which exempts Hagerstown by name from the operation of certain provisions of the Public Service Law. And what is said with respect to that city applies with equal force to the City of Baltimore, because, if it is true that municipal corporations, engaged in the manufacture and sale of current for other than municipal purposes, cannot be exempted from the operation of the Public Service Law, then so much of the Act of 1910 as exempts the City of Baltimore from its operation is also invalid, and the policy of that great municipality, containing more than one-half of the people of the state, in dealing with a municipal matter so peculiarly local, must always be placed in the control of a board of state officials in whose selection it has no voice, so long as that board exists.

The constitutional provision referred to above provides that "the General Assembly shall pass no special law for any case for which provision has been made by an existing public general law." That provision has been construed in a number of cases by this Court, to several of which I will refer, the effect of which has been to establish the rule that a statute dealing with a special case involving facts which differentiate it from any existing public general law is not special legislation within the meaning of the provision referred to, and whether that difference does exist is ordinarily a legislative question. The purpose and intent of the word "special," as used in that part of the Constitution, could never have been intended to embarrass and hinder the Legislature and the people of the state by preventing them from adopting legislation which in their judgment was essential to their welfare, but to prevent them from working hardship and injustice, by granting to special and selected persons privileges which were denied by the general law to others. And, therefore, where for special and adequate reasons it becomes expedient or desirable to exempt from the operation of a general law certain classes of persons who are not within the reason of the general law, such exemptions are regarded as a legitimate and proper classification and not special legislation.

These conclusions seem inevitable from the language and the decision of this Court in Baltimore v. United Rwys. Co.,126 Md. 39. The question before the Court there was whether an act exempting the United Railways and Electric Company from the immediate application of a general law imposing a "park tax" on all railways operating within the City of Baltimore was a "special tax," and therefore in conflict with the constitutional provisions referred to. There is no doubt that conditions peculiar to the United Railways Company, in reference to the subject-matter of that act, differentiated its status from that of other similar corporations in Baltimore City, and that the act itself was for the benefit of the city. Reasoning from those premises, the Court held that, although the act exempted the corporation by name from the operation of the general law, it was not special legislation, but a legitimate and proper classification. And in the course of the opinion it said: "One of the most important reasons for the provision in the Constitution against special legislation is to prevent one who has sufficient influence to secure legislation from getting an undue advantage over others. * * * Courts should not be too ready to strike down such legislation on the theory that the same thing could have been worked out under existing general laws. It is said in 6 R.C.L. 417 (section 413): ``In cases of state constitutional prohibition against the passage of special laws where a general law may be made applicable, it is a rule that the question of applicability is one for the legislature to determine, and that such a statute will not be declared unconstitutional, except where it clearly appears that the legislature was mistaken in its belief that a general law could not be made applicable.' Again, on page 419 of that volume, it is said: ``An important test in determining whether legislation is special or general is to consider not the form merely, but the substance.' * * * There is a wide difference between a special act, within the meaning of the Constitution, and an act for special purposes. * * * Over and over again has the Legislature granted special powers to corporations which were incorporated under the general laws and in many such cases no question was or could have been properly raised as to the validity of the legislation. As municipal corporations can only be chartered by special acts of the Legislature, there is much more reason for sustaining such legislation as is now before us than that affecting private corporations, and as we have already said, this act was unquestionably primarily intended for the benefit of the city."

The case of Revell v. Annapolis, 80 Md. 1, is also in point. It was held in that case that an act which provided for the construction of a school building in Annapolis, and directed the school commissioners of Anne Arundel County and the City of Annapolis to borrow money through an issue of bonds to pay for it, was not special legislation, because while under the general law the school commissioners had the power to build school houses, they had no power to issue bonds to pay for them. Just as in this case the Public Service Commission could under the general law authorize a municipality to build and operate an electric light plant, but it could not empower it to borrow money therefor. The cases of Crisfield v. Ches. P. Tel. Co.,131 Md. 444, and Westminster v. Consol. Public Utilities Company,132 Md. 374, have been cited as in conflict with the rule which I have stated, but the cases are not analogous. In those cases the court was dealing with acts conferring upon the municipalities of Crisfield and Westminster respectively the power to fix the rates of certain public service corporations, and it was held in effect that, since that power had been conferred upon the Public Service Commission for the express purpose of securing fair and just rates throughout the state, based upon the application of definite standard rules and formulas, that the acts involved in that case constituted special legislation. But giving to those cases the utmost effect they can have, they amount only to this, that the Legislature cannot give to one corporation, municipal or private, the right to fix the rates of another corporation, when that right as to all corporations has been given by a general law to a single administrative board, and they are not authority for the proposition that the Legislature may not confer upon municipal corporations the right to manufacture and sell within the corporate limits a public service at rates which in their judgment are fair and just.

It has been assumed that a municipal corporation, to the extent that it is engaged in the sale of such a commodity as electric current to others, is to that extent a mere private corporation engaged in a public service. But it is rather more than that, for even in such work, it necessarily exercises and enjoys a part of the sovereignty of the State, for otherwise it would not have the power, which it undoubtedly has, to levy taxes for the expenses incident to rendering such service. But the power to levy taxes for any such purpose could not possibly be conferred upon them by such an agency as the Public Service Commission, and, for that reason alone, the Public Service Commission Law could not apply to them in the same way and to the same extent as to private corporations, and that difference is a sufficient ground for the separate classification of municipal corporations. Other reasons are that the citizens of municipal corporations have a different interest in the earnings thereof than they would have in those of a private corporation, and that its books are public records, but the real reason for the classification is that municipal corporations are mere governmental units operated by public officials created by the people, speaking either through the Legislature or the Constitution, which may also at will be dissolved by the same power which created them.

The conclusion that such a classification is proper was reached in Barnes Laundry Co. v. Pittsburgh, 266 Pa. 36, where it was said: "The legislature, by the law we are now construing, in effect divides corporations doing public service (according to the industrial sense in which that term is used in the act) into two kinds, namely: (1) corporations other than municipal; and (2) municipal corporations. This they had the right to do in order to accomplish the purposes of the act — no matter how much, under other and different circumstances, our law makers might be prevented from compassing such a classification. When rendering the same character of service as public service companies, municipalities for many purposes must be considered and treated like private corporations (as shown by the Pennsylvania cases before cited); but, for purposes of supervision over their internal management (which the present act repeatedly treats as necessarily involved in the control of rates), it can readily be seen they may justifiably be put on a different basis from ordinary public service companies, for, though engaged in rendering the same kind of service as the latter, and entitled to derive therefrom a just gain (Jolly v.Monaca Boro., 216 Pa. 345, 348-349; Wagner v. City of RockIsland, 146 Ill. 139, 154; Farnham on Waters and Water Rights, par. 162, p. 855), municipalities are supposed to act primarily for the public good — not to earn dividends; moreover, they are financed along quite different lines from other corporations, and managed by popularly elected officers, who, as just said, are presumed to act for the public weal and, when they fail to do so, may be turned out by their constituents at stated intervals. These considerations, with others which may readily be called to mind, account for and justify the omission of municipal corporations from the general application of our Public Service Company Act."

In Springfield Gas El. Co. v. Springfield, 292 Ill. 236, the facts were these: "Appellee, the City of Springfield, owns and operates an electric light plant, produces electricity for its own use, and sells electricity not required for its purposes to private consumers at about one-half the cost for which it can be procured from other sources. Appellant is a private corporation engaged in the production and sale of electricity in the City of Springfield, and has complied with the provisions of the Public Utilities Act." The appellee had not complied in any particular with the terms of that act, and the appellant sought to have it restrained from selling electricity until it had complied therewith. The injunction was denied by the lower court and its action affirmed on appeal. The question for decision, as stated by the court, was: "Whether or not a municipality in this state, owning and operating an electric light plant for the production of electricity for its own use and also for the sale thereof to private consumers, is subject to the provisions of the act and to the supervision of the Public Utilities Commission." And that question rose out of the appellant's contention that the exemption of a municipal corporation from the general law regulating public utilities was a special law, and in conflict with a provision of the constitution of Illinois prohibiting the enactment of such a law. In dealing with the question the court in part said: "But we do not agree with the appellant's contention that exempting municipalities and public utilities owned and operated by municipalities from the provisions of the statute violates the constitution. The word ``corporation,' as used in paragraph 22 of article 4 of our constitution, does include municipal corporations. People, ex rel. Danville, v.Fox, 247 Ill. 402. But municipal corporations may form a separate and distinct class from private corporations. The constitutional provision does not mean that the same rule shall apply to every individual in the state under all circumstances, but only under substantially the same circumstances; and laws may be valid, though operating only upon particular persons or classes, if there is a valid reason for such particular operation. * * * The basis of the two statutes in question for making two distinct classes of public utilities — those owned and operated by private corporations and those owned and operated by municipalities — is the supposition that there exists some valid reason why both of them cannot or should not be subject to all the provisions of the Public Utilities act, and be regulated and rates fixed for them in accordance with the provisions of that act. If such a valid reason does exist, the legislature did not violate any constitutional provision in enacting the two separate acts, for the regulation and control of the two classes of public utilities. * * * It is clear, therefore, that the legislature acted within its constitutional rights and powers in enacting the two statutes and making different provisions in so far as the same were necessary to accomplish the purposes for which the two acts were enacted. It is equally clear that the legislature had the right and power to delegate to the municipalities the right of regulation and control of such municipally owned plants. Such right is clearly recognized not only in this state, but in other states. It might have given the Public Utilities Commission the right to fix the rates and charges of plants owned by municipalities, in accordance with the provisions of the Municipal Ownership act, as well as the right to regulate and fix charges for privately owned public utilities under the Public Utilities act, had it seen fit to do so. The fact that it has designated municipalities as the proper bodies that shall regulate and fix the rates to be charged by utilities owned by them can furnish no cause for complaint to appellant, as the rates that appellant may charge under the Public Utilities act are necessarily fixed upon a different basis, and may or may not be the same as the rates and charges that may be fixed under the Municipal Ownership act, even in the same city. * * * A law is not local or special, in a constitutional sense, if it operates in the same manner upon all persons in like circumstances. ``A law general in its character may extend only to particular classes and not be obnoxious to the provisions of the constitution if all persons of the same class are treated alike under similar circumstances and conditions. * * * A law is general, not because it embraces all the governed, but that it may from its terms, when many are embraced in its provisions, embrace all others when they occupy like positions to those who are embraced. Such a law must be based upon some substantial difference between the situation of a class or classes and another class or classes to which it does not apply.' * * * Whether or not public utilities owned by municipalities shall be placed upon a different basis from public utilities owned by private corporations, associations or persons, for regulation and for fixing their rates and charges, is a question solely for the legislature to determine, as is also the question whether or not they shall be regulated and rates fixed for them by different tribunals or by the same tribunal. There was a good and substantial reason for the legislature dividing public utilities into the two classes aforesaid, and making laws specially applicable to each of them, as aforesaid. * * * We may concede that the operation by a municipality of an electric light plant for the furnishing of light or power to private consumers, for gain, can not in any sense be the performance of a governmental function. Such established principle can furnish no reasonable basis for appellant's argument in this case, that such municipalities must be put in the same class with private corporations or persons operating public utilities, for the purpose of regulation and of fixing their rates and charges in operating such public utilities. It might just as well be argued that corporations operating steam railroads should be put in the same class, for all purposes of legislation, with corporations operating street railroads, because they both carry for hire passengers and freight of all kinds."

And in the same case, on appeal, Mr. Justice Holmes, speaking for the Supreme Court of the United States, said: "The plaintiff's argument shortly stated is that in selling electricity the city stands like any other party engaged in a commercial enterprise, and that to leave it free in the matter of charges while the plaintiff is subject to the public utilities board is to deny to the plaintiff the equal protection of the law. But we agree with the Supreme Court of the State that the difference between the two types of corporation warrants the different treatment that they have received. The private corporation, whatever its public duties, is organized for private ends, and may be presumed to intend to make whatever profit the business will allow. The municipal corporation is allowed to go into the business only on the theory that thereby the public welfare will be subserved. So far as gain is an object, it is a gain to a public body, and must be used for public ends. Those who manage the work cannot lawfully make private profit their aim, as the plaintiff's directors not only may, but must." 257 U.S. 69. See also note 18A.L.R. 946.

But as I read it, the opinion of the Court in this case does not necessarily deny the power of the Legislature to exempt municipal corporations as a class from the Public Service Law, but it holds that any act which so classifies them so long as the Public Service Law is unrepealed is a special law. But that seems to be a contradiction in terms. If the classification is proper it is not a special law, within the meaning of the constitution; if the act is a special law, the classification must be improper. That is, it would seem wholly unreasonable to hold, that the Legislature could repeal the whole Public Service Law, and then enact it as a new law exactly as it is, and it would be valid, but that because its present form is due to amendment rather than original enactment it is invalid. That seems to me to be sacrificing actual substance to false and illusory form.

And since a single municipal corporation may properly be placed by its own name in a class by itself, as was done in the Act of 1910 as well as in this act (12 C.J. 1134), provided there is a reasonable basis for the classification, in my opinion the Act of 1924 was not invalid because it made such a classification. Nor do I think any sound objection can be made to it because of the second and third classifications made by the act. Ibid.

For these reasons I do not think the appellee was required to obtain the approval of the Public Service Commission before it issued its bonds or built its plant, and no other substantial ground having been urged to the decree of the lower court, it should be affirmed.