City of La Crosse v. La Crosse Gas & Elec. Co.

• Decision Date: 15 March 1911
• Court: Wisconsin Supreme Court
• Parties: CITY OF LA CROSSE v. LA CROSSE GAS & ELECTRIC CO.

145 Wis. 408

130 N.W. 530

CITY OF LA CROSSE

v.LA CROSSE GAS & ELECTRIC CO.

Supreme Court of Wisconsin.

March 14, 1911.

Dissenting Opinion March 15, 1911.

Syllabus by the Judge.

A public franchise, burdened with a public revenue feature, is not grantable by a state agency in the absence of express or unmistakable legislative authority to impose such a burden.

Mere authority to a municipality, as in section 1780b of the statutes of 1898 for the holder of a state franchise to exercise it within the corporate limits of a city by consent of and in the manner agreed upon therewith, does not include power to such city to exact as a condition of such exercise payment of an excise tax in addition to all other taxes.

Section 1780b, St. 1898, expresses no more than that the municipality may impose reasonable burdens.

Municipalities do not possess power to license occupations and exact compensation for the purpose of obtaining public revenue, in the absence of unmistakable granted authority to that effect.

The mere power to exclude a corporation from exercising a franchise in a municipality does not include power to allow such exercise on condition of submitting to a special taxation burden.

Laws should be strictly construed to avoid reading therefrom a special tax burden feature.

A law authorizing a municipality to grant to a corporation the privilege to exercise its public utility franchise therein “upon such terms and subject to such rules and regulations and the payment of such license fees as the common council may prescribe” authorizes such use to be conditioned upon prescribed rates for service.

Such feature as that mentioned ingrafted upon a corporate railway franchise by the state, or an authorized state agency, inheres therein and is subject to the reserved power to alter or amend.

Power to a municipal or quasi public corporation to make contracts affecting public interests, acting in the mere business capacity to deal with proprietary matters, is not to be inferred by doubtful construction.

The condition of a corporate public utility franchise which inheres in the privilege as distinguished from mere contracts which the corporation may make, are subject to the provisions of the public utility law that all charges shall be just and reasonable.

A corporate franchise is one thing, a mere privilege not corporate, which may be granted without condition and become mere property--be sold and pass from one to another as other property may--is a far different thing.

The purpose of the public utility law of 1907 (Laws 1907, c. 499) was to ultimately secure uniformity in public utility franchises--past as well as future grants--to the end that patrons might obtain service on a plane of equality and at the lowest price practicable--producers and consumers being compelled to deal justly with each other and both deal justly with the public as a whole.

The indeterminate permit of the public utility law, is a public privilege emanating direct from the state to own, operate, manage or control any plant or equipment, or any part of a plant or equipment within the state for the production, transmission, delivery or furnishing of heat, light, water, power either directly or indirectly to or for the public, and is perpetual and exclusive, subject to the conditions of the public utility law. State of Wisconsin ex rel. Kenosha Gas & Electric Co. v. Kenosha Electric Ry. Co., 129 N. W. 600.

The scope of the privilege which springs into existence by operation of law by surrender of a franchise under the act of 1907 is the same as that of the one surrendered, divorced, however, from all the old conditions, and conditioned, only, upon the provisions of such act.

The idea of the act of 1907 was that old franchises, with their peculiar burdens, should be treated as entireties, and that the surrender, in form of the principal thing should operate as an extinguishment of all incidents inhering therein, and that the thing taken back should be an exact equivalent as to the privilege feature but as to incidents and duration should be referable to the public utility law.

The surrender of a public utility franchise operates as a waiver by the corporation of all executory features of existing contracts regarding service charges by the public utility law.

The feature of the public utility law rendering nonenforceable existing contracts relating to any charge or service regulated thereby in case of conversion of an old into a new franchise by a surrender of the former, by necessary implication, renders nonenforceable obligations of the corporation incurred as a condition of the old franchise and substitutes therefor the obligations and conditions of such law.

The foregoing covers such special conditions of an old franchise as that of payment to the municipality of compensation as a consideration of the privilege, but not mere business contracts between the corporation and individuals as in case of Superior v. Douglas County Tel. Co., 141 Wis. 363, 122 N. W. 1023.

To carry out the legislative idea of our system securing justice between municipalities, public utility corporations and their patrons, future original franchises were treated in one group, franchises given for old grants in another--the new creations in either case to be indeterminate permits with uniform characteristics--with municipal power to deal with the owner in any case or with the owner of an old franchise referable solely to the public utility law.

Appeal from Circuit Court, La Crosse County; E. C. Higbee, Judge.

Action by the City of La Crosse against the La Crosse Gas & Electric Company. Judgment for defendant, and plaintiff appeals. Affirmed.

Barnes, J., dissenting.

These are the facts stated in the complaint material for consideration:

Defendant is and was during all the times which concern this case, a public utility corporation in the city of La Crosse, Wis., engaged in the generation, distribution and sale of electric current therein for public and private purposes, using the streets and public places to that end. The terms of the franchise under which defendant used such streets and public places required it to pay into the treasury of the city 2 per cent. of its gross earnings in addition to such other taxes as are provided by law. November 8, 1909, the franchise required defendant to give plaintiff a statement showing the amount of its gross earnings for the previous year. It neglected and refused to do so or to afford plaintiff opportunity by examination of its books to determine such amount. Wherefore plaintiff is unable to state the sum or arrive thereat without an accounting.

There was an appropriate prayer.

Defendant answered, among other things, that pursuant to chapter 499, Laws of 1907 (section 1797m77 Stats.) it duly surrendered the franchise referred to in the complaint and received in lieu thereof an indeterminate permit as provided in said section, and that since July 22, 1908, it has conducted its business thereunder instead of the old franchise, which period includes the time covered by plaintiff's demand.

In addition to the foregoing defendant counterclaimed that November 8, 1908, it gave plaintiff a statement of its gross earnings for the previous year, but protested against being charged 2 per cent. thereof, except to the aforesaid date of surrender, but plaintiff refused to accept less than the full year's tax, wherefore defendant December 23, 1908, paid the same protesting, however, that it included an overpayment to the extent of $731.91.

Plaintiff demurred to the defense for insufficiency and likewise to the counterclaim. Both demurrers were overruled. Plaintiff appealed.

John F. Doherty, for appellant.

Woodward & Lees, for respondent.

MARSHALL, J. (after stating the facts as above).

Sections 940b to 940j of the Statutes of 1898 relating to the sale of franchises by cities and villages has no bearing here other than, perhaps, as indicating legislative conception of the clearness required in conferring power on a municipality to regulate occupations for the purpose of public revenue. In that respect the difference between such sections and the one important to this case is quite striking as we shall see. While that circumstance may have been given rather too great significance in deciding the case below, as counsel for appellant suggests, the reasoning of the circuit judge by no means is illogical. The learned judge did not refer to such sections as indicating that the appellant did not possess competency to condition exercise of respondent's franchise upon its paying a license tax in any other sense than that no such power was inferable from the mere existence of the municipal corporation with ordinary powers, and that no such authority was within the letter of the legislative language upon which appellant relied for its competency to act as a legislative agency. The suggestion of counsel that such sections rather tend to show the contrary of the circuit judge's conclusion, overlooks the fact that the question is not whether a municipality might have the competency claimed, but whether appellant was afforded such competency by the written law depended on.

Unlike grants made under section 940b and its associate sections, where they are made wholly by the state agency method and with the plainest of authority as to dealing with the matter on a public revenue basis, the franchise in this case came directly from the state under section 1780b of the Statutes. There was no municipal interference in the matter permissible, except such as was authorized by the words, “Any corporation,” etc., “* * * may with the consent of and in the manner agreed upon with the authorities of any city or village use any street, etc. * * *” It is not perceived how power to attach to a state franchise a public revenue condition can be gathered from the quoted language under the rules governing the subject. Under such rules and the precedents, such language...