City of Princeton v. Princeton Electric Light & Power Co.

• Decision Date: 17 November 1915
• Citation: 166 Ky. 730,179 S.W. 1074
• Parties: CITY OF PRINCETON ET AL. v. PRINCETON ELECTRIC LIGHT & POWER CO.
• Court: Kentucky Court of Appeals

179 S.W. 1074

166 Ky. 730

CITY OF PRINCETON ET AL. v. PRINCETON ELECTRIC LIGHT & POWER CO.

Court of Appeals of Kentucky.

November 17, 1915

Appeal from Circuit Court, Caldwell County.

Action by the City of Princeton and others against the Princeton Electric Light & Power Company, in which R. W. Lisanby petitioned to be made a party plaintiff. There was a judgment rejecting the petition of R. W. Lisanby and for defendant and the city and R. W. Lisanby appeal. Reversed in part affirmed in part, and remanded, with directions.

R. W Lisanby and S. Hodge, both of Princeton, for appellants.

Selden Y. Trimble, of Hopkinsville, John C. Gates, of Princeton, and Trimble & Bell, of Hopkinsville, for appellee.

HURT J.

Princeton is a city of the fourth class. On the 8th day of October, 1896, the council of the city adopted a resolution directing its clerk to cause advertisement to be made for sealed bids for the sale of a franchise to furnish the city with electric lights for a period of 10 years, the bids to be received on the 22d day of October thereafter. The bid of Eddins and Boyce was accepted, and it was thereafter granted to them by an ordinance, which we assume was duly adopted. On account of the conclusions we have reached, and which will be apparent from what is hereinafter said, it is not necessary to consider the various reasons which are urged by appellants, contending that the ordinance which granted the franchise is void.

The appellants contend that this franchise, if valid, expired on the 1st day of January, 1907, and the appellee contends that it did not expire until the 1st day of January, 1917, and this is the only question which we deem necessary to be determined with reference to the alleged franchise. The resolution directing the clerk to advertise for sale the franchise described it as a "franchise for furnishing the city with electric lights for a period of 10 years." The preamble of the ordinance which granted the franchise recited that the clerk had been directed to advertise for a sale of the franchise for 10 years, and that he had acted in accordance with the direction. The first clause of the ordinance is as follows:

"The said J. T. Eddins and R. B. Boyce are hereby granted the exclusive right or franchise to manufacture and sell electric light within the corporate limits of the city of Princeton, Ky. for public, private, and commercial use, for and during the period of 10 years, from and after January 1, 1897."

The foregoing seems to definitely fix the time of the expiration of the franchise. However, section 11 of the ordinance granting the franchise provides that, if the grantees desire to sell or transfer it before the time of its expiration, the appellant city shall have the first right to purchase it, and that it shall be sold or transferred only after the city has received notice and refused to purchase it, within a reasonable time, at a sum equal to any bona fide offer that may be made for it by another. Section 12 of the ordinance provides that upon the expiration of the franchise the city shall have the option of purchasing the electric light plant, and all poles, wires, tools, machinery, or appurtenances belonging thereto, at a price to be agreed upon by the city and the grantees, or their successors, and in the event of a disagreement the price to be determined by appraisers. Section 13 provides that, upon the expiration of the franchise and the failure or refusal of the city to purchase the plant, if the city should determine to grant another franchise, the grantees shall have an option upon it, provided they will accept it upon such reasonable terms as may be named by the city. By other provisions of the ordinance it was provided that the grantees of the franchise should not sell, assign, or transfer it to a corporation, nor operate it as the agents of any corporation or a corporation, and that the failure or refusal of the grantees to comply with any of the conditions or requirements of the ordinance should have the effect to annul the ordinance and to forfeit the franchise.

In the year 1904, however, the grantees of the franchise and others organized a corporation and the plant and franchise were transferred to it. Thereafter, in the latter part of the year 1906 (the date does not definitely appear), the council of appellant city adopted an ordinance, in which it was recited that the franchise theretofore granted to Eddins and Boyce would expire on January 1, 1907, and that the city had failed to exercise its option to purchase the plant and fixtures on or before the expiration of it, and that Eddins and Boyce had transferred their plant and franchise to the appellee, and after said recitations, by its terms, undertook to grant appellee the exclusive right to manufacture electric light and electric power, or either, for public or commercial use, within the corporate limits of the city, for and during the 10 years from and after January 1, 1907, in consideration of the acceptance and compliance with all the conditions thereinafter set out in the ordinance. The attempted sale of this franchise was never advertised at all, nor was it offered for sale publicly, nor bids received for it. No attempt was made to comply with the requirements of section 164 of the Constitution. Under the above-recited arrangements the appellee now contends that it has a valid franchise, and is now operating under same, and that all these transactions and stipulations amount to having received a valid franchise under the ordinance of 1906 to operate in the city from January 1, 1897, until January 1, 1917. We cannot agree to the soundness of this contention. Section 164 of the Constitution provides as follows:

"No county, city, town, taxing district or other municipality shall be authorized or permitted to grant any franchise or privilege, or make any contract in reference thereto, for a term exceeding twenty years. Before granting such franchise or privilege for a term of years, such municipality shall first, after due advertisement, receive bids therefor publicly, and award the same to the highest and best bidder; but it shall have the right to reject any or all bids. * * *"

The purpose of "due advertisement" provided for is to give information to all who may desire to become purchasers of the franchise, and to enable them to make bids therefor, and to secure the municipalities against the loss of valuable rights for mere paltry considerations. It is to give information to all, who have an interest in the privileges to be sold, of what is proposed to be done, that citizens of a municipality may protect their rights in such matters in any proper way that necessity may create. The sale to the highest and best bidder is to enable the municipality to receive the value of the privilege to be granted away, and to prevent municipal councils from granting valuable rights and privileges to favorites without any sufficient consideration. It follows, as a natural sequence, that the only thing which can be lawfully sold is the thing which has been advertised for sale.

A city council, after having advertised the sale of a franchise, with the right to exercise it for 10 years, could not receive a bid and grant a valid franchise to exercise the privilege designated for 15 or any other number of years. To attempt to do so would be the attempt to grant the right to exercise the privilege without due advertisement, as required by the Constitution. Where the council advertised to sell a franchise for 10 years, a stipulation in the ordinance granting the franchise for ten years, providing that at the expiration of the 10 years the grantee should have the right to have granted to him another franchise, which the city might conclude to create and sell at that time, is invalid.

A reading of the ordinance granting the franchise from January 1, 1897, until January 1, 1907, and the ordinance granting a franchise to be exercised from January 1, 1907, until January 1, 1917, conclusively shows that neither the council of the city nor the appellee construed or understood the first-named ordinance as granting a franchise for any longer period than until January 1, 1907. At the time of the adoption of the last-named ordinance, a resolution of the council is as follows:

"By ordinance, the Princeton Electric Light & Power Company was granted an extension of 10 years from January 1, 1907, on their franchise, by unanimous vote of the council."

Section 1 of the ordinance recites:

"That whereas, the franchise heretofore granted by the city of Princeton to J. T. Eddins and R. B. Boyce * * * to manufacture and sell electric light within the corporate limits of the city of Princeton will expire January 1, 1907," etc.

In the same section of the ordinance are the words:

"Are hereby granted the exclusive right to manufacture and sell electric light and electric power, or either, for public or commercial use, * * * for and during the ten years from and after January 1, 1907," etc.

Pending the negotiations for the attempted granting of the franchise, the proceedings of the council show the report of a committee, which recommended--

"letting another franchise for 10 years from January 1, 1907, when old electric or present franchise expires," and, further, the appointment of a committee, "with authority to close contract for lights and extend franchise for 10 years from expiration of present one, with said electric light company."

All of this makes exceedingly plain the construction put upon the proceedings by the parties themselves, at the time, as to number of years the franchise granted in 1896 was to extend, and when it should expire.

Further the alleged franchise from 1907 until 1917 is materially different, both as...