City of LaGrange v. Troup County Elec. Membership Corp., A91A0142

• Decision Date: 25 June 1991
• Docket Number: No. A91A0142,A91A0142
• Citation: 408 S.E.2d 708,200 Ga.App. 418
• Parties: , 127 P.U.R.4th 189, Util. L. Rep. P 26,112 CITY OF LaGRANGE v. TROUP COUNTY ELECTRIC MEMBERSHIP CORPORATION.
• Court: Georgia Court of Appeals

Page 708

408 S.E.2d 708

200 Ga.App. 418, 127 P.U.R.4th 189, Util.

L. Rep. P 26,112

CITY OF LaGRANGE v. TROUP COUNTY ELECTRIC MEMBERSHIP CORPORATION.

No. A91A0142.

Court of Appeals of Georgia.

June 25, 1991.

Reconsideration Denied July 12, 1991.

Certiorari Denied Sept. 13, 1991.

Hurt, Richardson, Garner, Todd & Cadenhead, L. Clifford Adams, Jr., Atlanta, Lewis & Taylor, James R. Lewis, La Grange, for appellant.

Paul, Hastings, Janofsky & Walker, James A. Orr, Kathy R. Bess, Atlanta, Wyatt, Wyatt & Solomon, Charles E. Solomon, Jr., La Grange, for appellee.

POPE, Judge.

Plaintiff/appellant City of LaGrange, Georgia, appeals the trial court's grant of defendant/appellee Troup County Electric Membership Corporation's (Troup EMC) motion for summary judgment and the trial court's denial of its motion for summary judgment.

Both the City and Troup EMC are electrical suppliers within the meaning of the Georgia Territorial Electric Service Act (the Act), OCGA § 46-3-1 et seq. The City is the primary supplier of electrical services within the corporate limits of LaGrange, and Troup EMC is a secondary supplier of electrical services there, as those terms are defined in the Act. OCGA § 46-3-3.

On or about December 23, 1975, the Mayor and the City Council of the City of LaGrange adopted the ordinance in question, which is currently codified as Section 30-1-17(E) of the Code of the City of LaGrange. Section 30-1-17 classifies all businesses, professions, trades or callings for license and tax purposes and imposes a certain license fee or tax on all such businesses, professions, trades or callings. Subsection (E) currently provides as follows: "Electric services--Establishments engaged in the generation, transmission and/or distribution of electric energy for sale to premises in the city shall pay an amount equal to four (4) per cent of the gross sales of electricity to all customers serviced by each supplier within the corporate limits of the city for the preceding calendar year, as provided in and authorized by the Georgia Territorial Electric Service Act (Georgia Laws 1973, page 200, as amended)." ¹

Shortly before adopting the ordinance, the City entered into a franchise agreement with Georgia Power Company, the only other secondary supplier of electricity within the corporate limits of LaGrange, in which Georgia Power agreed to pay four percent of the gross sales of electricity to all of its customers to the City as a franchise fee beginning in March 1976. The City requested payment of the fee authorized by the ordinance from Troup EMC by letter dated January 8, 1976. After several letters between counsel for the parties, the City was informed that Troup EMC refused to pay the fee. The undisputed evidence shows that while there was limited oral discussion about this fee between the Manager of Troup EMC and the City Manager thereafter, the City did not make additional formal demands. Troup EMC maintains that the fee is not authorized by the Act, as the ordinance purports on its face, and that the City has no authority to collect such fees from it. In its amended complaint, the City sought $235,398.71, plus interest thereon, from Troup EMC as fees due from 1979 through 1987.

1. The City contends that the trial court erred in concluding that in order for the City to collect a franchise fee from Troup EMC there must be a franchise agreement or contract between the parties and that there was no express or implied agreement to that effect between the parties. In support of its argument the City relies upon this court's decision in Tri-State Elec., etc., v. City of Blue Ridge, 88 Ga.App. 717, 77 S.E.2d 547 (1953) and asserts that the trial court's distinction between a "franchise fee or tax" and a "license fee or tax" is unjustified.

The terms "franchise" and "license" are not synonymous, and therefore, the trial court properly distinguished between those rights and obligations derived from a franchise and those stemming from a license. "A franchise is a contract creating property rights. City of Summerville v. Georgia Power Co., 205 Ga. 843(1) [1949]; Atlantic C.L.R. Co. v. Southern R. Co., 214 Ga. 178(2) [1958]." (Emphasis supplied.) Macon Ambulance Serv. v. Snow Properties, 218 Ga. 262, 265(2), 127 S.E.2d 598 (1962). As the trial court correctly found, public utilities typically seek franchise rights from the governing authority in the area in which it seeks to provide services to use the streets and public ways for the purposes of rendering utility services. See OCGA § 36-34-2(7).

" 'A license is a right granted by some competent authority to do an act which, without such authority, would be illegal.' [Cits.] The words 'license' and 'permit' are often used synonymously. [Cits.] Where, pursuant to the police power, a license is granted, it is not a contract and it may be abrogated. [Cit.]" (Emphasis supplied.) Arlington Cemetery Corp. v. Bindig, 212 Ga. 698, 702-703(2), 95 S.E.2d 378 (1956). Thus, in order for a city to collect a franchise fee there must be a contractual relationship between the city and the party from whom the fee is sought, but a city can collect a license fee pursuant to its general police powers.

With these distinctions in mind, we will next examine the City's authority to collect the fees contemplated by the ordinance in question. As the trial court correctly found, both OCGA § 36-34-2(7) and Section 5.21 of the Charter of the City of LaGrange empower the City to grant franchises for the use of City streets and public ways. Furthermore, the ordinance on its face purports to be authorized by the Act, as well. A review of the Act reveals that the only provision that could authorize the imposition of such a fee is OCGA § 46-3-14(b), which provides in pertinent part: "No municipality may, by unreasonably withholding or conditioning right of way easements or franchises, defeat, impair, or interfere with the rights and restrictions applying to electric suppliers therein as provided for in this part. Rather, any secondary supplier within a municipality existing on March 29, 1973, and any electric supplier other than the primary supplier within any geographic area thereafter annexed to such municipality, shall pay the municipality for street franchise rights a sum of money calculated and payable in the same manner and on the same basis as is utilized with respect to the payment, if any, by the primary supplier (other than the municipality itself) for the same or substantially identical rights." (Emphasis supplied.) As the trial court also correctly held, the authority to enter into such agreements does not mean that there is a franchise agreement between the City and Troup EMC.

Assuming arguendo, that the fee in question is a franchise fee as authorized by the Act, the trial court correctly inquired as to whether a contract, either express or implied, existed between the parties since a franchise is a contract creating property rights. The City does not contend that it has an express agreement with Troup EMC, but only that there is an implied franchise agreement between the City and Troup EMC resulting from Troup EMC's acceptance of the privilege of using the City's streets after the enactment of the ordinance. We agree with the trial court that no contract has been created by implication in this case.

The City's ability to enter into franchise agreements is contained in Section 5.21 of its charter. That section provides, in pertinent part, as follows: "The mayor and council shall have the authority to exercise control over the use of the streets of the City of LaGrange. The power is hereby conferred upon the mayor and council to grant franchises for the use of said city's streets and alleys, for the purposes of ... electric companies.... The mayor and council shall determine the duration, provisions, terms, whether the same shall be exclusive or non-exclusive, and the consideration of such franchises; provided, however, that no franchise shall be granted for a period in excess of twenty (20) years and no franchise shall be granted unless the City receives just and adequate compensation therefore." (Italics omitted.) As the trial court correctly found, this section requires that before a franchise can be granted by the City, the City must not only receive compensation from the party but also must set forth specific terms and conditions pursuant to which the franchise is granted. These requirements found in the City's charter for a valid franchise agreement belie the City's position that a contract with Troup EMC was created by implication.

Furthermore, the undisputed evidence illustrates that Troup EMC never gave the City any reason to anticipate that it would receive compensation for allowing Troup EMC to use its streets and alleys. The City promptly informed Troup EMC that it had passed the ordinance in question and that it sought payment of the fee from Troup EMC. Troup EMC at all pertinent times disputed the City's right to collect such a fee from it. " '(T)he law will not imply a promise to pay for services contrary to the intention of the parties. There can be no recovery for services rendered voluntarily and with no expectation at the time of the rendition that they will be compensated.... Under such circumstances no obligation ... is incurred. A subsequent change of intention by the parties performing the services does not alter the rule.' (Citations and punctuation omitted.) Addison v. Southern R. Co., 108 Ga.App. 314, 315-316 [1963]." Smith Dev. v. Flood, 198 Ga.App. 817, 820-821, 403 S.E.2d 249 (1991). The City could have sought to enjoin the activities of Troup EMC until their dispute concerning the franchise agreement could be resolved. The City, however, did not seek to avail itself of that remedy. Troup EMC could have reasonably assumed from the City's conduct of simply allowing it to continue using city streets and alleys after it had refused payment of the fee,...