City of Niles v. Michigan Gas & Electric Co.

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] April 7, 1913, the city of Niles adopted an ordinance granting a 30-year franchise to Niles Gas Light Company, assignor of defendant, to manufacture and sell gas to the city and its inhabitants and to use streets and public grounds generally therefor. The ordinance was approved by vote of the electors. Section 6 provides:

"Said company, its successors, lessees or assigns may charge for manufactured gas sold and distributed in said city the sum of one dollar per thousand cubic feet during the life of this ordinance."

The franchise was formally accepted by the Light Company.

April 8, 1918, and again on August 31, 1920, the city council adopted an ordinance authorizing increase in the price which could be charged for gas. August 8, 1932, the council adopted a resolution authorizing a sliding price scale for gas, partly in excess of one dollar per thousand feet. The ordinances contained reference to the original ordinance of 1913, but the resolution did not. Neither ordinance nor the resolution was submitted to popular vote.

This action is brought by the city to set aside as illegal the subsequent ordinances and resolution, to restore the rate in the original ordinance of 1913, and enjoin the defendant from discontinuing service on refusal to pay a greater rate. Plaintiff had decree.

Niles is a city of the fourth class. When the original franchise was granted, Act No. 215, Pub. Acts 1895 the fourth class cities act, was in force. It provides, 1 Comp. Laws 1929, § 2107:

"SEC. 8. The council may contract from year to year or for a period of time not exceeding ten years with any person or persons, or with any duly authorized corporation, for the supplying of such city or the inhabitants thereof, or both, with gas, electric or other lights upon such terms and conditions as may be agreed; and may grant to such person, persons or corporation the right to the use of the streets, alleys, wharves and public grounds of such city as shall be necessary to enable such person, persons or corporation to construct and operate proper works for the supplying of such light upon such terms and conditions as shall be specified in such contract."

Defendant contends the rate provision of the ordinance of 1913 became ineffective at the end of 10 years, if it was not void ab initio, because it was in contravention of the statute, and the council had power to newly contract as to rates thereafter.

Plaintiff contends that the statute (1 Comp. Laws 1929, § 2107), was repealed by Act No. 259, Pub. Acts 1905 (1 Comp. Laws 1929, § 2218). The latter, however, was purely a validating act legalizing prior franchises and contracts and had no other effect upon Act No. 215, Pub. Acts 1895.

Plaintiff also contends the statute did not apply to franchises or, if it did, it was repealed by the Constitution of 1908, which provides in article 8:

Nor shall any city or village acquire any public utility or grant any public utility franchise which is not subject to revocation at the will of the city or village, unless such proposition shall have first received the affirmative vote of three-fifths of the electors of such city or village voting thereon at a regular or special municipal election; and upon such proposition women taxpayers having the qualifications of male electors shall be entitled to vote." Section 25.

"The right of all cities, villages and townships to the reasonable control of their streets, alleys and public places is hereby reserved to such cities, villages and townships." Section 28.

"No franchise or license shall be granted by any municipality of this State for a longer period than thirty years." Section 29.

A franchise is a contract. Village of Otsego v. AlleganCounty Gas Co., 203 Mich. 283. The statute makes no distinction between franchises and other forms of contract in establishing the 10-year limit of time. It restricts the power to contract, whatever the form of its exercise.

Except in certain specific respects, the Constitution of 1908 did not divest the legislature of jurisdiction over municipalities and they still must find their powers in statute, either directly or by charter authorized by general law. City of Kalamazoo v. Titus, 208 Mich. 252, 265; 2 Constitutional Debates, p. 1432. Having no home rule charter, Niles is governed by the statute. Act No. 215, Pub. Acts 1895.

The words in sections 25 and 29 of article 8 of the Constitution are words of limitation, not of grant of power. They restrict both the legislature in authorizing, and the municipality in granting, franchises but only in the respect of the maximum term of the franchise and its revocability.

Section 25 does not vest power to grant franchises in the electors. It has the definite purpose and effect of transferring to the electors a power over franchises which was theretofore exercised by the common council. Prior to 1908 the common council, under authority of statute or charter, could and did grant irrevocable franchises without popular vote. Section 25 withdrew from the legislature and council the power to give irrevocability to franchises and vested it in the people. The legislature still may authorize the common council to grant a franchise. Such franchise will be valid but revocable at will of the municipality unless approved by popular vote. The people therefore add nothing to it except the element of irrevocability. The constitutional convention so intended and understood the effect of section 25. 2 Constitutional Debates, p. 1325 et seq., Address, p. 1432. Consequently, popular vote can cure no statutory defects in the franchise itself.

The Constitution, schedule, § 1, provides that statutes not repugnant to the Constitution should remain in force until they are altered, repealed or expire by their own limitations. Sections 25 and 29 leave 1 Comp. Laws 1929, § 2107, undisturbed except by adding a condition as to limit of the franchise and method of imparting irrevocability to it. We find no repugnancy working repeal.

Power of control over streets, alleys and public places, granted by Constitution, art. 8, § 28, carries with it an authority over public utility rates by municipalities, as a condition of the use of streets, alleys and public places by the utility. But the nature of the power must be appreciated in considering its effect to repeal section 2107.

Primarily the authority to fix rates for public utilities is a governmental power vested in the legislature. The legislature may delegate it to municipalities but only in express terms or by necessary implication. Section 28 does not delegate such power to cities and villages. City of Kalamazoo v. KalamazooCircuit Judge, 200 Mich. 146, 161.

The authority of municipalities over rates, resulting from section 28, is a wholly different power. From the fact of control of streets, whether under statute or Constitution, there arises an implied power to fix reasonable rates as a condition of the use of the streets. This, in turn, carries the power to contract for rates, at least for a reasonable time.Boerth v. Detroit City Gas Co., 152 Mich. 654 (18 L.R.A. [N. S.] 1197); Lenawee County Gas Electric Co. v.City of Adrian, 209 Mich. 52 (10 A.L.R. 1328); City ofSaginaw v. Consumers' Power Co., 213 Mich. 460; Village ofOtsego v. Allegan County Gas Co., supra. Such implied power of municipality to fix or contract for rates is inoperative when the legislature exercises its reserved governmental power over them. City of Traverse City v. Citizens' Telephone Co.,195 Mich. 373. A grant of power to the municipality to fix rates is an exercise of the reserved paramount power of the State by the legislature. Village of Plainwell v. Eesley Light Power Co.,214 Mich. 461, and supersedes the implied power.

Under its powers implied from section 28, then, the city, if there were no statute, could not make an irrevocable 30-year contract for rates even by vote of the electors. Such contract would be subject to annulment by legislative exercise of the superior power.

The municipal control of streets and other public places under the statute, 1 Comp. Laws 1929, § 2107, was, as to the matter before us, as broad as that granted by section 28 of article 8 of the Constitution. The implied power to fix or contract for rates under the one was not different from that under the other. There was no conflict between them which resulted in a repeal of the statute.

Section 2107 was a legislative exercise and delegation of reserved governmental power to contract for rates and defined the conditions under which the municipality could use the delegated power. It superseded the implied authority and limited the jurisdiction of the municipality to contract. No irrevocable contract for rates, by franchise or otherwise, could have been made for more than 10 years. Consequently at the expiration of that period the common council had power to make new contract for rates.

We have no decisions of our court in direct point. However, the limitation of 10 years has been recognized by municipalities in the drafting of franchises and was before the court in City of Saginaw v. Consumers' Power Co., supra;Village of Plainwell v. Eesley Light Power Co., supra.

I cannot concur in the reasoning of Mr. Justice NORTH'S opinion, presented after the above was written. It treats an express constitutional limitation of power as an express constitutional grant of power. Reference to other provisions of the Constitution demonstrates the ability and intention of the framers to express grants of power in apt affirmative language; and there is no justification for a construction that, concealed in express prohibitory words denying power, they intended to grant it.

The grant of a franchise is an exercise of the sovereign power of the State, vested in the legislature. The power may be delegated to municipalities but, when so delegated, the municipality exercises it as agent of the State and upon the conditions prescribed by law. 26 C. J. pp. 1013, 1024 et seq.; 12 R. C. L. p. 186. Sections 25 and 29 do not purport to withdraw from the legislature its sovereign power over franchises and confer it upon municipalities. They do no more than establish limits of time and conditions of irrevocability of such franchises as the legislature may delegate to municipalities the power to grant.

Nor, under the cases above cited, particularly City ofKalamazoo v. Kalamazoo Circuit Judge, supra, cited by Mr. Justice NORTH, does section 28 grant to municipalities the sovereign power to fix public utility rates. Section 2107 was an exercise by the legislature of such sovereign power, delegated to fourth class cities but confined to the power to contract for 10 years and no longer. The contract may be, but need not be, attached to a franchise. Its inclusion in a franchise cannot enlarge the delegated authority. A city cannot exceed its charter powers and confer prohibited authority upon itself by a particular method of usurpation.

Moreover, unless the cited cases dealing with section 28 be overruled, Mr. Justice NORTH'S opinion would result in the anomalous situation that the contract rates are binding on the city and the utility for the full 30 years but are not binding on the legislature beyond the 10-year period authorized by it. But this is hardly tenable because, unless binding on the legislature, the instrument is merely a private contract, not a franchise. If it is merely a private contract between the city and the utility, it is wholly ultra vires beyond the 10-year period because prohibited by the superior legislative authority.

An attempt to differentiate between the common council and the council and the electors, as constituting a city or village, in finding municipal powers is futile. Each exercises part or the whole of the municipal powers when, and only when, it is so provided by law. Each has only such powers as are so conferred. Under 1 Comp. Laws 1929, § 1902, governing fourth class cities:

"The legislative authority of cities incorporated under this act shall be vested in a council consisting of the mayor, two aldermen elected from each ward and the city clerk."

In section 2107 the whole of the municipal power to contract for gas rates was vested in the council.

To avoid misunderstanding, we hold only that the rates provided in the franchise ordinance of 1913 were not fixed beyond the 10-year period allowed by statute, and that the common council of plaintiff city had authority thereafter to contract for a change of rates. Possible rights and remedies resulting from the ruling must be left to further consideration.

Decree reversed and bill dismissed, with costs.

WIEST, BUTZEL, BUSHNELL, and EDWARD M. SHARPE, JJ., concurred with FEAD, J.