City of Watertown, S.D., v. Eastern Dakota Electric Co.

• Decision Date: 19 February 1924
• Docket Number: 6329.
• Citation: 296 F. 832
• Parties: CITY OF WATERTOWN, S.D., v. EASTERN DAKOTA ELECTRIC CO.
• Court: U.S. Court of Appeals — Eighth Circuit

296 F. 832

CITY OF WATERTOWN, S.D., v. EASTERN DAKOTA ELECTRIC CO.

No. 6329.

United States Court of Appeals, Eighth Circuit.

February 19, 1924

A. L Sherin, of Watertown, S.D. (E. D. Barron and G. J. Danforth both of Sioux Falls, S.D., on the brief), for appellant.

James G. McFarland, of Watertown, S.D. (Frank S. Kremer, of Watertown, S.D., and Charles O. Bailey and John H. Voorhees both of Sioux Falls, S.D., on the brief), for appellee.

Before SANBORN, Circuit Judge, and TRIEBER and MUNGER, District judges.

TRIEBER District Judge.

This is an appeal from an interlocutory order vacating a temporary restraining order granted on an ex parte application. The pleadings are somewhat voluminous, but as the order appealed from is based on defendant's plea of res judicata, it is only necessary to state such parts of the pleadings as apply to this plea.

The parties will be referred to as they appeared in the court below, the city as the plaintiff and the electric company as the defendant. On September 28, 1909, the plaintiff, then incorporated under a special charter, granted to William J Ferris and associates the right and privilege to erect, maintain, and operate for the period of 20 years an electric lighting and power plant in that city. This was done by ordinance No. 219. This franchise was transferred by them to the Watertown Light & Power Company, a corporation formed for the purpose of operating an electric plant, hereafter referred to as the light and power company, and by that company later transferred to the defendant, the appellee herein. Neither the special charter under which the city was incorporated, nor the ordinance granting the franchise, contained any provision giving the city the power to change the rates to be charged by the company furnishing the electricity fixed by the ordinance granting the franchise, unless the contention of counsel for plaintiff is sustained that sections 5 and 9 of Ordinance No. 219 vest that power in the city.

These sections read:

'Sec. 5. The grantee herein shall maintain purely up to date work and furnish electric current for light, heat, power or other purposes for twenty-four (24) hours each and every day continuously for seven (7) days a week under reasonable regulations, to be approved by the city council of said city, to all citizens who desire it, and are willing to pay therefor at the regular prices, but the grantee shall not be required to extend its mains more than eight hundred feet (800) to reach any one consumer, nor shall the grantees be obliged to render services to any person who may be indebted to said grantee for current furnished in any sum, until such indebtedness shall be paid.'

'Sec. 9. The grantees, their heirs and assigns, shall have the right to make such rules and regulations, not in conflict herewith, with the laws of the state of South Dakota, or public policy, as may be necessary for the sale of current and the proper conduct of said business, subject to the consent and approval of the city council of said city.'

Another provision in that ordinance necessary to refer to is section 7, which reads:

'Sec. 7. The grantee shall have the right to charge a maximum rate of fifteen cents per kilowatt hour for electricity furnished consumers connected to its system, but said grantee shall have the right to charge for such electricity, a less rate or rates consistent with the uses for which it may be put, and to enable said grantee to successfully compete with like systems of work or other agencies employed in lighting, heating, or other uses to which electricity may be put.'

The plea of res judicata is based upon the following facts:

On May 1, 1918, defendant's grantor the light and power company, without the consent, approval, or submission to the city council of the plaintiff, raised the schedule of rates for electricity above the rates then in force, but within the maximum limits set out in Ordinance No. 219. Before then the city had surrendered its special charter and was incorporated under the general laws of the state. Thereupon the city instituted an action against the light and power company in a circuit court of the state of South Dakota, to enjoin said company from putting the proposed schedule of rates into effect unless presented to and approved by its city council. With some few allegations set out in the complaint in this action, which will be referred to later, the complaint in that case and the one in this are practically identical, and the relief asked in each case is the same.

The additional allegations in the complaint in this action necessary to refer to are that by an ordinance passed by the city council on February 6, 1922, entitled No. B 90, the rates to be charged by the defendant were established, but the defendant refused to comply with them. It is also charged that the rates established by the defendant are lower than those provided by Ordinance B 90; that the object of the defendant in reducing its rates is for the unlawful purpose of preventing the city from operating the municipal electric lighting plant it had erected and put in operation. It is charged that defendant's new rates are insufficient to pay for the operating expenses of the plant and cannot enable it to earn any return whatever on its investment; that by reducing its rates so low, the municipal plant will have to reduce its charges to the same rates or lose all its customers, and to do so would result in its entire loss and confiscation; that defendant's reduction of rates is unfair competition and should be enjoined.

In the former action the defendant, the light and power company demurred to the...