Candler v. City of Asheville

• Decision Date: 10 January 1958
• Docket Number: No. 93,93
• Citation: 101 S.E.2d 470,247 N.C. 398
• Parties: Coke CANDLER, Harry P. Mitchell and John C. Vance, Members of the Board of County Commissioners of Buncombe County and ex officio trustees of South Buncombe Water and Watershed District, of Swannanoa Sanitary Sewer District, of Beaverdam Water and Sewer District, of Caney Valley Sanitary Sewer District, of Hazel Ward Water and Watershed District, of Venable Sanitary District, in behalfoof all water consumers of Buncombe County whose property is connected to any of the water mains of any of said Districts; P. Morton Keary, Tom Cole, Frank Lowe, Mrs. Nell Busch, Hoyt Spivey and W. E. Creasman, Water Consumers in the abovenamed Districts whose properties are connected to water mains of said Districts, in their own behalf and in behalf of all residents of Buncombe County whose properties are connected to any of the water mains of the aforementioned Districts, v. CITY OF ASHEVILLE, a Municipal Corporation.
• Court: North Carolina Supreme Court

Page 470

101 S.E.2d 470

247 N.C. 398

Coke CANDLER, Harry P. Mitchell and John C. Vance, Members

of the Board of County Commissioners of Buncombe County and

ex officio trustees of South Buncombe Water and Watershed

District, of Swannanoa Sanitary Sewer District, of Beaverdam

Water and Sewer District, of Caney Valley Sanitary Sewer

District, of Hazel Ward Water and Watershed District, of

Venable Sanitary District, in behalfoof all water consumers

of Buncombe County whose property is connected to any of the

water mains of any of said Districts; P. Morton Keary, Tom

Cole, Frank Lowe, Mrs. Nell Busch, Hoyt Spivey and W. E.

Creasman, Water Consumers in the abovenamed Districts whose

properties are connected to water mains of said Districts,

in their own behalf and in behalf of all residents of

Buncombe County whose properties are connected to any of the

water mains of the aforementioned Districts, v. CITY OF ASHEVILLE, a Municipal Corporation.

No. 93

Supreme Court of North Carolina.

Jan. 10, 1958

Ward & Bennett, Roy A. Taylor, William M. Styles, Ssheville, for plaintiffappellants.

Robert W. Wells, Charles N. Malone, Frank M. Parker, Asheville, for defendant-appellee.

DENNY, Justice.

The numerous exceptions and assignments of error preserved and brought forward on this appeal, in our opinion, present only three questions which require our consideration and determination. (1) Did the trial court err in holding that Chapter 399 of the 1933 Public-Local Laws of North Carolina is unconstitutional and contrary to Section 17, Article I, of the Constitution of North Carolina, and the Fourteenth Amendment to the Constitution of the United States? (2) Did the trial court err in holding that the defendant City of Asheville is not estopped to assert the invalidity or unconstitutionality of the above Act? (3) Did the trial court err in holding that Ordinance No. 383, enacted by the City Council of the City of Asheville, on 11 August 1955, is lawful and valid and in full force and effect?

The correctness of the ruling of the court below on the first question posed, turns on whether or not the General Assembly has the power to prohibit a municipality from selling water to consumers residing outside its corporate limits at a higher rate than the rate fixed for consumers of water who reside within its corporate limits, where such outside consumers reside in a water or water and sewer district in which the taxpayers of the district have constructed the water or water and sewer facilities and are maintaining them out of ad valorem taxes levied on the real and personal property in the district.

A municipal corporation in this State has a dual capacity. One is governmental or political, and the other is proprietary or quasi-private. Asbury v. Town of Albemarle, 162 N.C. 247, 78 S.E. 146, 44 L.R.A.,N.S., 1189; Holmes v. City of Fayetteville, 197 N.C. 740, 150 S.E. 624; Millar v. Town of Wilson, 222 N.C. 340, 23 S.E.2d 42; Nash v. Town of Tarboro, 227 N.C. 283, 42 S.E.2d 209; Rhodes v. City of Asheville, 230 N.C. 134, 52 S.E.2d 371.

A municipality acting in its governmental capacity is an agency of the State for the better government of those residing within its corporate limits, and while public utilities, like water and lights, are now held to be a necessary minicipal expense, Fawcett v. Mt. Airy, 134 N.C. 125, 45 S.E. 1029, 63 L.R.A. 870, even so, they are not provided by a municipality in its political or governmental capacity, except insofar as they may furnish water for extinguishing fires and for other municipal purposes, Harrington v. Town of Greenville, 159 N.C. 632, 75 S.E. 849; Howland v. City of Asheville, 174 N.C. 749, 94 S.E. 524, L.R.A.1918B, 728; Klassette v. Liggett Drug Co., 227 N.C. 353, 42 S.E.2d 411; and provide electric energy for lighting streets, Baker v. City of Lumberton, 239 N.C. 401, 79 S.E.2d 886; or for the operation of traffic light signals, Hamilton v. Town of Hamlet, 238 N.C. 741, 78 S.E.2d 770, or other municipal purposes, but, in its proprietary capacity it acts exclusively in a private or quasi-private capacity for its own benefit.

'In matters purely governmental in character, it is conceded that the municipality is under the absolute control of the legislative power; but, as to its private or proprierary functions, the Legislature is under the same constitutional restraints that are placed upon it in respect of private corporations.' Asbury v. Town of Albemarle, supra [162 N.C. 247, 78 S.E. 149]. No one challenges the power of the State to fix rates for private utilities or for utilities operated in a proprietary capacity by a municipality.

In this State, the power to regulate and to establish the rates to be charged by intrastate railroads, motor vehicle carriers of passengers and freight, power companies, etc., has been delegated to the North Carolina Utilities Commission. However, the right to establish rates for municipally owned electric light plants, water, or water and sewer systems, has never been given to the Utilities Commission.

In State ex rel. Utilities Commission v. State, 239 N.C. 333, 80 S.E.2d 133, 140, this Court, speaking through Barnhill, J., later C. J., said: 'This right to grant franchises to public service corporations and to fix or approve the rates to be charged by them for the services rendered the public rests in the Legislature. The General Assembly may act directly or it may delegate its authority to an administrative agency or commission of its own creation. However, no Act undertaking to delegate the rate-making function of the Legislature is valid unless the General Assembly prescribes rules and standards to guide the legislative agency in exercising the delegated authority. Motsinger v. Perryman, 218 N.C. 15, 9 S.E.2d 511; State v. Harris, 216 N.C. 746, 6 S.E.2d 854, 128 A.L.R. 658; Hamlet Hospital & Training School for Nurses v. Joint Committee, 234 N.C. 673, concurring opinion at page 684, 68 S.E.2d 862; Carolina-Virginia Coastal Highway v. Coastal Turnpike Authority, 237 N.C. 52, 74 S.E.2d 310.'

In 43 Am.Jur., Public Utilities and Services, section 83, page 624, et seq., it is said: 'In accordance with its right to regulate and control public utilities, a state may, under its police power and within constitutional limitations, regulate and prescribe reasonable rates at which charges may be made by public utilities for their services to the public. The function of rate making is purely legislative in character, whether it is exercised directly by the legislature itself by the enacting of a law fixing rates or by the granting of a charter wherein the rates are regulated, or is exercised by some subordinate administrative or municipal body to whom the power of fixing rates has been delegated; in any of such cases, the completed act derives its authority from the legislature and must be regarded as an exercise of the legislative power.'

In the last cited authority, section 94, page 636, we find this statement: 'The well recognized general rule is that when a governmental body has the power to regulate the rates for charges for services by public utilities to consumers, that power includes the power to fix any maximum rate which is fair and just to the consumer if it will also produce a proper return to the public utility.'

It is clear that the power to establish rates is a governmental function and not a proprietary one. It is likewise clearly established in this jurisdiction that municipalities 'are creatures of the Legislature, public in their nature, subject to its control, and have only such powers as it may confer. These powers may be changed, modified, diminished, or enlarged, and, subject to the constitutional limitations, conferred at the legislative will. There is no contract between the state and the public that a municipal charter shall not at all times be subject to the direction and control of the body by which it is granted.' Holmes v. City of Fayetteville, supra [197 N.C. 740, 150 S.E. 628].

In the case of St. Joseph Stock Yards Co. v. United States, 298 U.S. 38, 56 S.Ct. 720, 725, 80 L.Ed. 1033, in speaking for the Court, Chief Justice Hughes said: 'The fixing of rates is a legislative act. In determining the scope of judicial review of that act, there is a distinction between action within the sphere of legislative authority and action which transcends the limits of legislative power. Exercising its rate-making authority, the Legislature has a broad discretion. It may exercise that authority directly, or throgh the agency it creates or appoints to act for that purpose in accordance with appropriate standards. The court does not sit as a board of revision to substiute its judgment for that of the Legislature or its agents as to matters within the province of either. * * * When the Legislature itself acts within the broad field of legislative discretion, its determinations are conclusive. When the Legislature appoints an agent to act within the sphere of legislative authority, it may endow the agent with power to make findings of fact which are conclusive, provided the requirements of due process which are especially applicable to such an agency are met, as in according a fair hearing, and acting upon evidence and not arbitrarily.'

Likewise, in City of Seymour v. Texas Electric Service Co., 5 Cir., 66 F.2d 814, 817 (certiorari denied 290 U.S. 685, 54 S.Ct. 121, 78 L.Ed. 590), it is said: '* * * In owning and operating a utility plant a city acts not in a governmental but in a proprietary capacity, (but) when the council, exerting the power to regulate, comes to fix rates it represents not the city, as proprietor, but the state, as regulator. It exerts not the contractual power of the city, but the sovereign power of the state.' See also Shirk v. Lancaster City, 313 Pa. 158, 169 A. 577, 90 A.L.R. 688.

The legislature has authorized a municipal corporation that owns a waterworks system to furnish water to any person, firm, or...