City of Niles v. Mich. Gas & Elec. Co.

• Decision Date: 30 October 1935
• Docket Number: April Term.,No. 96,96
• Citation: 262 N.W. 900,273 Mich. 255
• Parties: CITY OF NILES v. MICHIGAN GAS & ELECTRIC CO.
• Court: Michigan Supreme Court

273 Mich. 255

262 N.W. 900

CITY OF NILES

v.MICHIGAN GAS & ELECTRIC CO.

No. 96, April Term.

Supreme Court of Michigan.

Oct. 30, 1935.

Action by the City of Niles, a municipal corporation of the State of Michigan, against the Michigan Gas & Electric Company. From a decree for the plaintiff, the defendant appeals.

Decree reversed, and bill dismissed.

NORTH, J., and POTTER, C. J., dissenting.Appeal from Circuit Court, Berrien County, in Chancery; Charles B. Collingwood, Judge.

Argued before the Entire Bench.

Burns & Hadsell, of Niles, and Sherman T. Handy, of Lansing (Ralph D. Stevenson, of Chicago, Ill., of counsel), for appellant.

Casper R. Grathwohl, of Niles, for appellee.

FEAD, Justice.

April 7, 1913, the city of Niles adopted an ordinance granting a 30-year franchise to Niles Gas Light Company, assignor of defendant, to manufacture and sell gas to the city and its inhabitants and to use streets and public grounds generally therefor. The ordinance was approved by vote of the electors. Section 6 provides: ‘Said company, its successors, lessee or assigns may charge for manufactured gas sold and distributed in said city the sum of One ($1.00) Dollar per thousand cubic feet (1,000), during the life of this ordinance. * * *’

The franchise was formally accepted by the light company.

April 8, 1918, and again on August 31, 1920, the city council adopted an ordinance authorizing increase in the price which could be charged for gas. August 8, 1932, the council adopted a resolution authorizing a sliding price scale for gas, partly in excess of $1 per thousand feet. The ordinances contained reference to the original ordinance of 1913, but the resolution did not. Neither ordinance nor the resolution was submitted to popular vote.

This action is brought by the city to set aside as illegal the subsequent ordinances and resolution, to restore the rate in the original ordinance of 1913, and enjoin the defendant from discontinuing service on refusal to pay a greater rate. Plaintiff had decree.

Niles is a city of the fourth class. When the original franchise was granted, Act No. 215, c. 28, Pub. Acts 1895, the Fourth Class Cities Act was in force. It provides, Comp. Laws 1929, § 2107: ‘Sec. 8. The council may contract from year to year or for a period of time not exceeding ten (10) years with any person or persons, or with any duly authorized corporation, for the supplying of such city or the inhabitants thereof, or both, with gas, electric or other lights upon such terms and conditions as may be agreed; and may grant to such person, persons or corporation the right to the use of the streets, alleys, wharves and public grounds of such city as shall be necessary to enable such person, persons or corporation to construct and operate proper works for the supplying of such light upon such terms and conditions as shall be specified in such contract.’

Defendant contends the rate provision of the ordinance of 1913 became ineffective at the end of ten years, if it was not void ab initio, because it was in contravention of the statute, and the council had power to newly contract as to rates thereafter.

Plaintiff contends that the statute, section 2107, was repealed by Act No. 259, Pub. Acts 1905 (Comp. Laws 1929, § 2218). The latter, however, was purely a validating act legalizing prior franchises and contracts and had no other effect upon Act No. 215.

Plaintiff also contends the statute did not apply to franchises, or, if it did, it was repealed by the Constitution of 1908, which provides in article 8:

‘Nor shall may city or village acquire any public utility or grant any public utility franchise which is not subject to revocation at the will of the city or village, unless such proposition shall have first received the affirmative vote of three-fifths of the electors of such city or village voting thereon at a regular or special municipal election; and upon such proposition women taxpayers having the qualifications of male electors shall be entitled to vote.’ Section 25.

‘The right of all cities, villages and townships to the reasonable control of their streets, alleys and public places is hereby reserved to such cities, villages and townships.’ Section 28.

‘No franchise or license shall be granted by any municipality of this state for a longer period than thirty years.’ Section 29.

A franchise is a contract. Otsego v. Allegan County Gas Co., 203 Mich. 283, 168 N. W. 968. The statute makes no distinction between franchises and other forms of contract in establishing the ten-year limit of time. It restricts the power to contract, whatever the form of its exercise.

Except in certain specific respects, the Constitution of 1908 did not divest the Legislature of jurisdiction over municipalities, and they still must find their powers in statute, either directly or by charter authorized by general law. City of Kalamazoo v. Titus, 208 Mich. 252, 265, 175 N. W. 480; Constitutional Debates, p. 1432. Having no home rule charter, Niles is governed by the statute. Act No. 215, supra.

The words in sections 25 and 29 of article 8 of the Constitution are words of limitation, not of grant of power. They restrict both the Legislature in authorizing and the municipality in granting franchises, but only in the respect of the maximum term of the franchise and its revocability.

Section 25 does not vest power to grant franchises in the electors. It has the definite purpose and effect of transferring to the electors a power over franchises which was theretofore exercised by the common council. Prior to 1908 the common council, under authority of statute or charter, could and did grant irrevocable franchises without popular vote. Section 25 withdrew from the Legislature and council the power to give irrevocability to franchises and vested it in the people. The Legislature still may authorize the common council to grant a franchise. Such franchise will be valid but revocable at will of the municipality unless approved by popular vote. The people, therefore, add nothing to it except the element of irrevocability. The constitutional convention so intended and understood the effect of section 25. Debates, p. 1325 et seq., Address, p. 1432. Consequently, popular vote can cure no statutory defects in the franchise itself.

The Constitution, Schedule, § 1, provides that statutes not repugnant to the Constitution should remain in force until they are altered, repealed, or expire by their own limitations. Sections 25 and 29 leave section 2107 undisturbed except by adding a condition as to limit of the franchise and method of imparting irrevocability to it. We find no repugnancy working repeal.

Power of control over streets, alleys, and public places, granted by Constitution, art. 8, § 28, carries with it an authority over public utility rates by municipalities, as a condition of the use of streets, alleys, and public places by the utility. But the nature of the power must be appreciated in considering its effect to repeal section 2107.

Primarily the authority to fix rates for public utilities is a governmental power vested in the Legislature. The Legislature may delegate it to municipalities, but only in express terms, or by necessary implication. Section 28 does not delegate such power to cities and villages. City of Kalamazoo v. Kalamazoo Circuit Judge, 200 Mich. 146, 147, 161, 166 N. W. 998.

The authority of municipalities over rates, resulting from section 28, is a wholly different power. From the fact of control of streets, whether under statute or Constitution, there arises an implied power to fix reasonable rates as a condition of the use of the streets. This, in turn, carries the power to contract for rates, at least for a reasonable time. Boerth v. Detroit City Gas Co., 152 Mich. 654, 116 N. W. 628, 18 L. R. A. (N. S.) 1197;Lenawee County Gas & Electric Co. v. City of Adrian, 209 Mich. 52, 176 N. W. 590, 10 A. L. R. 1328;City of Saginaw v. Consumers' Power Co., 213 Mich. 460, 182 N. W. 146;Otsego v. Allegan County Gas Co., 203 Mich. 283, 168 N. W. 968. Such implied power of municipality to fix or contract for rates is inoperative when the Legislature exercises its reserved governmental power over them. Traverse City v. Citizens' Telephone Co., 185 Mich. 373, 161 N. W. 983. A grant of power to the municipality to fix rates is an exercise of the reserved paramount power of the state by the Legislature, Village of Plainwell v. Eesley Light & Power Co., 214 Mich. 461, 183 N. W. 66, and supersedes the implied power.

Under its powers implied from section 28, then, the city, if there were no statute, could not make an irrevocable thirty-year contract for rates even by vote of the electors. Such contract would be subject to annulment by legislative exercise of the superior power.

The municipal control of streets and other public places under the statute, section 2107, was, as to the matter before us, as broad as that granted by section 28 of article 8 of the Constitution. The implied power to fix or contract for rates under the one was not different from that under the other. There was no conflict between them which resulted in a repeal of the statute.

Section 2107 was a legislative exercise and delegation of reserved governmental power to contract for rates and defined the conditions under which the municipality could use the delegated power. It superseded the implied authority and limited the jurisdiction of the municipality to contract. No irrevocable contract for rates, by franchise or otherwise, could have been made for more than ten years. Consequently, at the expiration of that period the common council had power to make new contract for rates.

We have no decisions of our court in direct point. However, the limitation of ten years has been recognized by municipalities in the drafting of franchises and was before the court in City of Saginaw v. Consumers' Power Co., 213 Mich. 460, 182 N. W. 146;Village of Plainwell v. Eesley Light & Power...