Illinois Power & Light Corp. v. City of Centralia, Ill.

• Decision Date: 01 August 1935
• Docket Number: No. 768-D.,768-D.
• Citation: 11 F. Supp. 874
• Parties: ILLINOIS POWER & LIGHT CORPORATION v. CITY OF CENTRALIA, ILL., et al.
• Court: U.S. District Court — Eastern District of Illinois

11 F. Supp. 874

ILLINOIS POWER & LIGHT CORPORATION v. CITY OF CENTRALIA, ILL., et al.

No. 768-D.

District Court, E. D. Illinois.

August 1, 1935.

COPYRIGHT MATERIAL OMITTED

Henry T. Hunt, Sp. Asst. Atty. Gen., for Mr. Ickes.

John L. Dryer and M. J. Brown, both of Hillsboro, Ill., and June C. Smith and Chas. Wham, both of Centralia, Ill., for plaintiff.

L. H. Jonas, City Atty., of Centralia, Ill., and Poppenhusen, Johnston, Thompson & Raymond, of Chicago, Ill., for city of Centralia.

LINDLEY, District Judge.

Plaintiff sues to enjoin the city of Centralia, a municipal corporation, and its officials and the Federal Administrator of Public Works from erecting a proposed municipally owned electric public utility; from issuing and selling certificates in order to raise funds to pay therefor; from performing a contract between the Administrator and the city whereby the former agrees to grant to the city a part of the cost of the said structure and to loan to the city, by purchase of said certificates, the balance, and from carrying out any proposed action in connection with said construction. The case is submitted upon bill and answer.

Plaintiff is a public utility corporation, organized under the laws of the state of Illinois, owning and operating generating stations, transmission lines and distribution systems in the city and other communities, all interconnected. The system operates in an extensive territory, wholly within Illinois, under the direction and control of the State Commerce Commission. The city has issued and plaintiff owns a franchise to conduct its business, and plaintiff's investment in the city, exclusive of generating and transmission facilities, has a value of more than $150,000. It is a taxpayer of the United States, the state, the counties wherein its property is located and the city, and the owner of valuable properties subject to taxation by the official bodies aforesaid.

On December 1, 1933, the city council adopted a resolution directing the mayor to apply to the Federal Emergency Administration of Public Works for a loan of $428,000 and a gift or grant of $147,000 for the purpose of financing the construction of a municipally owned public utility. Plaintiff protested before the State Advisory Board. It offered to present facts showing why, as it says, the application should not be approved, but no hearing was had, and plaintiff thereupon filed with the Administration a written protest. That body thereafter duly approved the application.

On November 30, 1934, the city passed an ordinance authorizing the sale of public utility certificates in the amount of $477,000, to defray the cost of such utility, authorizing operation of the same and enumerating certain conditions and provisions with regard thereto. An election was held, at which the voters approved the ordinance for construction and operation of the utility and the issuance and sale of certificates. The city and the Administration then entered into a contract, under which the city agrees to construct the utility and the Administrator to advance to the city the sum of $477,000 for the purpose of financing the construction to be financed by certificates for said amount. Thirty per cent. of these the Administrator proposes to cancel, thereby working a grant or gift to the city of so much of the cost.

Plaintiff contends that what has transpired and what is about to occur is illegal and violates the constitutional rights of the plaintiff under the Constitution of the state of Illinois and that of the United States; that the proposed loan and gift are not authorized by the national act; that the result will be, not to relieve unemployment, but rather to contribute to increase thereof; that interstate commerce is not involved; that the acts performed and proposed to be performed are in violation of the Fifth, Tenth, and Fourteenth Amendments to the Constitution of the United States, and deprive plaintiff of its property without due process of law; that the Constitution does not authorize the federal government to make a loan, gift, or grant of public funds to the city for the purpose of constructing the utility, the effect of which will be to duplicate and to destroy the value of existing adequate facilities; that to approve such action will bring about an unlawful delegation of legislative power by the Congress to the President and to the Administrator; that the project is entirely local in character and not related to the general welfare of the United States; that the ordinance is void under the Constitution of Illinois; that the ordinance does not sufficiently describe the proposed work as required by state statute; that the effect of the contract and ordinance is to increase the indebtedness of the city beyond its constitutional and statutory limits; that by its action the city attempts to contract away its governmental functions in violation of the Constitution, public policy, and statutes of Illinois; and that the Municipal Ownership Act is unconstitutional for the reason that its title is not sufficiently broad to cover the legislation, as required by the Constitution of Illinois.

It is the contention of plaintiff that its properties, franchise, and business will suffer irreparable injury as result of the aforesaid alleged illegal action of defendants, and that it will thereby be subjected to ruinous competition or compelled to abandon and thereby lose its property.

Defendants contend that plaintiff is not qualified to question in this action the constitutionality of the acts of Congress involved or of the statutes of the state; that title 2 of the National Industrial Recovery Act (section 201 et seq. 40 USCA § 401 et seq.) is constitutional and involves no wrongful delegation of legislative power; that the project is not in violation of the Fifth, Tenth, or Fourteenth Amendments; that the purpose of the Administrator was to increase employment; and that the project is justified under the general welfare clause of the United States Constitution; and denies specifically illegality in anything heretofore done or proposed to be done.

In support of the proposition that plaintiff has no right to maintain this suit, defendants cite many cases, in all of which the courts relied upon the generally well-recognized principle that one who attacks the constitutionality of a statute or the legality of acts must show that he is within the class of persons with respect to whom the law is unconstitutional or the acts illegal, and that the defects complained of injure him. The soundness of this doctrine is not to be disputed.

However, in the present instance, it is obvious that plaintiff is within the qualified class of persons. It is a taxpayer and a franchise holder, and the alleged unconstitutional and illegal acts bring upon it irreparable damages as such. The Circuit Court of Appeals for the Eighth Circuit in the case of City of Campbell, Mo., et al. v. Arkansas-Missouri Power Co. (C. C. A.) 55 F.(2d) 560, 562, dealt with precisely this question. The language there used is pertinent here: "It is urged that, inasmuch as the plaintiff's franchise was not an exclusive one, it had no right to maintain this suit for injunctional relief. The plaintiff, however, had a franchise under which it was entitled to maintain and operate its lighting system in the city of Campbell, and it also had a contract with the city for street lighting. The fact alone that the plaintiff had this franchise would, of course, not prevent the city from erecting and maintaining a municipal light plant, if, in doing so, it did not exceed its power and authority. As the owner of this franchise, however, the plaintiff was entitled to relief against the illegal acts of others who might assume to exercise the privilege conferred upon it by its franchise. A franchise is property, and, as such, is under the protection of the law, and without express words it is exclusive as against all persons acting without legal sanction. True, plaintiff's franchise was not exclusive in the sense that the city might not grant similar right to another, yet it was exclusive against any one who assumed to exercise the privilege granted the plaintiff, in the absence of authority or in defiance of law. * * * We are clear that the plaintiff, as the holder of this franchise to maintain and operate the plant in defendant city, was entitled to protection against all illegal competition."

This case was later followed by Oklahoma Utilities Co. v. City of Hominy (D. C.) 2 F. Supp. 849, and to the same effect is Duke Power Co. v. Greenwood County (D. C.) 10 F. Supp. 854 at page 862. Cases relied upon by the Court of Appeals in Campbell v. Arkansas-Missouri Power Co., supra, are there collected. See, also, Bartlesville Elec. L. & P. Co. v. Bartlesville R. Co., 26 Okl. 453, 109 P. 228, 29 L. R. A. (N. S.) 77; 2 Pomeroy's Equitable Remedies, § 583 et seq.; 5 Pomeroy's Eq. Jurisprudence (2d Ed.) §§ 583 and 584; Frost v. Corporation Commission, 278 U. S. 515, 49 S. Ct. 235, 73 L. Ed. 483.

In Springfield Gas & Electric Co. v. Springfield, 292 Ill. 236, 126 N. E. 739, 741, 18 A. L. R. 929, the privately owned utility sued to enjoin the Springfield Gas & Electric Company, owner of a municipal plant, from engaging in what was alleged to be illegal competition. The court sustained the jurisdiction, saying: "We are disposed to agree with the proposition of appellant that a private corporation lawfully operating a public utility may have an injunction against another private corporation operating without authority of law a similar utility which competes with and injures the former's business." Since a city conducts a municipal public utility in the capacity of a business proprietor, the language and reasoning of this case are directly applicable to the case at bar.

In Callaghan & Co. v. Smith, 304 Ill. 532, 136 N. E. 748, 750, one publishing company sued to enjoin another from publishing a compilation...