Camden v. Arkansas Light & Power Company

• Decision Date: 27 September 1920
• Docket Number: 139
• Citation: 224 S.W. 444,145 Ark. 205
• Parties: CAMDEN v. ARKANSAS LIGHT & POWER COMPANY
• Court: Arkansas Supreme Court

224 S.W. 444

145 Ark. 205

CAMDEN v. ARKANSAS LIGHT & POWER COMPANY

No. 139

Supreme Court of Arkansas

September 27, 1920

Appeal from Ouachita Chancery Court; James M. Barker, Chancellor affirmed.

Decree affirmed.

H. P Smead, for appellant.

Act 571, Acts 1919, is unconstitutional as impairing the obligation of a contract. 115 Ark. 437.

Contracts between a municipality and an individual are in the same category as those between individuals. Lonoke v. Bransford 141 Ark. 18. See, also, 26 U.S. (Law. Ed.), p. 395; 54 Id. 144. Although a municipal corporation is a creature of the Legislature, and the Legislature may amend or repeal its charter at will, it can not interfere with a contract already entered into or impair its obligation. This is sustained by the decisions of our State and United States Supreme Courts, too numerous to cite.

Hamilton Moses, for appellee.

1. Municipalities in the granting of franchises are not specifically empowered with authority to make contract rates in derogation of the rights of the State. Kirby's Digest §§ 6468-9, 5445. A municipal corporation has no powers except those expressly conferred by the Legislature or those necessarily or fairly implied as incident or essential thereto. 133 Ark. 334; 121 Id. 606; 116 Id. 125. See, also, 248 Ill. 264; 93 N.E. 274; 211 U.S. 265; 219 Id. 467. A city has no power to regulate rates for utilities without special legislative authority. Winchester v. Winchester Water Works Co., 251 U.S. 192; 88 S.W. 41; 49 So. Rep. 509; 34 N.E. 702; 127 F. 731; 86 N.Y. 657; 109 A. 210.

2. In granting franchises, municipalities act as agents of the State, and they may exercise only those powers specifically delegated to them by the State or those necessarily implied. 118 N.E. 529-533; 194 U.S. 517; 196 Id. 48; 95 Id. 644; 208 Id. 192.

3. The power to fix rates is inherent in the State, and in the exercise of its police power it may delegate this authority to a Corporation Commission. 199 U.S. 473; 232 Id. 548; 209 Id. 249; 170 Id. 571; 219 Id. 549; 173 P. 1178; 161 Id. 391; 214 S.W. 71; 117 P. 361; 173 Id. 799; 83 So. Rep. 295; 173 P. 556; 105 A. 210; 173 P. 973; 141 Id. 1083; 120 Id. 61. Public service commissions may be authorized to change franchise rates. 125 N.E. 374; 121 N.E. 777. See, also, 204 S.W. 467; 207 Id. 799; 163 S.W. 257; 129 N.W. 125; 105 A. 551; 170 U.S. 571; 219 Id. 549; 250 Id. 394; 248 Id. 296, 372.

Many cases sustain the right of the Legislature to confer upon the corporation the right to change franchise rates. 130 N.W. 530; 45 N.W. 145; 99 A. 395; 155 N.W. 948; 255 F. 295; 104 A. 839; 219 S.W. 380; 187 P. 1082; 177 N.W. 306.

OPINION

HUMPHREYS, J.

Appellant instituted suit in the Ouachita Chancery Court to enjoin appellee from putting into effect a schedule of rates for water, power and electricity established by the Arkansas Corporation Commission in excess of the maximum rates fixed for patrons for a period of twenty-five years in the franchises granted appellee by appellant on October 19, 1914. The bill in substance alleged that act 571 of the Acts of the General Assembly of Arkansas of 1919, under which said rates were raised, is void, as impairing the obligation of contracts, in violation of section 17, article 2, of the Constitution of Arkansas, and section 10, article 1, of the Constitution of the United States.

Appellee filed a demurrer to the bill on the grounds, first, that the act in question provided a complete remedy by contest of rates before, and an appeal from, the commission to the courts, which remedy was adopted and being prosecuted by appellant; second, that the facts set out in the bill were insufficient to constitute a cause of action.

The court sustained the demurrer on the latter ground, and, upon appellant's refusal to plead further, dismissed the bill, from which an appeal has been duly prosecuted to this court.

It is suggested by appellee that appellant has a complete remedy under the act to prevent the imposition of an unreasonable schedule of rates, which is true if the act is valid, but no provision is made in the act for attacking its validity. This proceeding is an attack upon the constitutionality of the act, in so far as it empowers the Arkansas Corporation Commission to modify contract rates existing between municipalities and public utilities, and was instituted in the proper court.

The correctness of the decree is challenged by appellant on the ground that act 571 of the General Assembly of 1919, conferring power on the Arkansas Corporation Commission to change the franchise rates for water, power and electricity existing between municipalities and public utilities, is repugnant to the provisions of the State and Federal Constitutions, prohibiting the passage of any law impairing the obligation of contracts. The power to change existing franchise rates between municipal corporations and public utilities is found in section 8 of said act, and reads as follows: "Commission Authorized to Establish Rates. The commission shall have the power, after reasonable notice and after full and complete hearing, to enforce, originate and establish, modify, change, adjust and promulgate tariffs, rates, joint rates, tolls and schedules for all public service corporations; and whenever the commission shall, after notice and hearing, find any existing rates, tolls, tariffs, joint rates or schedules unjust, unreasonable, insufficient or unjustly discriminatory or otherwise in violation of any of the provisions of the law, the commission shall, by an order, fix reasonable rates, joint rates, tariffs, tolls, charges or schedules to be followed in the future in lieu of those found to be unjust, unreasonable, insufficient or unjustly discriminatory, inadequate or otherwise in violation of any of the provisions of this law."

The policy of the act was to create one regulatory agency to establish just and reasonable rates that public service utilities might charge the public for such service and to change unjust and unreasonable franchise rates existing between individuals or municipalities and such utilities. The questions are, Can the State withdraw this power from the municipalities of the State and transfer it to another agency; and, can it empower the new agency to change the franchise rates theretofore agreed upon between the municipalities and public utilities? These questions are answered in the affirmative by the decided weight of authority. The judicial opinions bearing upon the questions by the highest State and National tribunals are based upon the reserved or sovereign police power of the States. It was said by the Supreme Court of the United States in Atlantic Coast Line Railroad Co. v. Goldsboro, 232 U.S. 548, 58 L.Ed. 721, 34 S.Ct. 364, that, "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 contract and property rights are held subject to its fair exercise." The same doctrine was enunciated in Manigault v. Springs, 199 U.S. 473, 50 L.Ed. 274, 26 S.Ct. 127; Hudson County Water Co. v. McCarter, 209 U.S. 349, 52 L.Ed. 828, 28 S.Ct. 529; Chicago, B. & Q. Ry. Co. v. Nebraska, 170 U.S. 57, 42 L.Ed. 948, 18 S.Ct. 513; Chicago, B. & Q. Ry. Co. v. McGuire, 219 U.S. 549, 55 L.Ed. 328, 31 S.Ct. 259; Pawhuska v. Pawhuska Oil & Gas Co., 250 U.S. 394, 63 L.Ed. 1054, 39 S.Ct. 526; Englewood v. Denver, 248 U.S. 294, 63 L.Ed. 253, 39 S.Ct. 100; Union Dry Goods Co. v. Public Service Commission, 248 U.S. 372, 63 L.Ed. 309, 39 S.Ct. 117.

In support of the same doctrine a few excerpts from State courts are incorporated herein. It was said by the Supreme Court of Oregon in City of Portland v. Public Service Commission of Oregon, 173 P. 1178, that: "All authority whatever possessed by cities and towns emanated from the State. * * * The State, operating through its legislative assembly, or directly by its people, exercising the initiative, is still paramount in the matter of making laws. It can delegate authority to its subordinate governmental agencies, and it can revoke it. Moreover, all that is done under the appointment is subject to the ever-present and all-pervading principle that for the public good a State may control all stipulations for public service. Substantially this is a condition of every such agreement." And again, the same court, in Woodburn v. Public Service Commission, 161 P. 391, said: "If the franchise is deemed to be a contract between the city and telephone company, then the mere fact that it was made prior to the enactment of the public utility statute and before the State attempted to regulate the rates, does not debar the State from increasing the rates fixed in the contract between the parties, for the reason that the law wrote into it a stipulation by the city that the State could, at any time, exercise its police power and change the rates; and therefore, when the State does exercise its police power, it does not work an impairment of any obligation of the contract. The immediate parties to the franchise must contract with reference to the right of the government to exercise its inherent authority."

In the recent case of City of Memphis v Enloe, 214 S.W. 71, the Supreme Court of Tennessee...