Covington Gaslight Co. v. City of Covington

• Decision Date: 25 October 1900
• Parties: COVINGTON GASLIGHT CO. v. CITY OF COVINGTON et al. [1] SAME v. CITY OF COVINGTON.
• Court: Kentucky Court of Appeals

58 S.W. 805

COVINGTON GASLIGHT CO. v. CITY OF COVINGTON et al. ^[1]

SAME v. CITY OF COVINGTON.

Court of Appeals of Kentucky.

October 25, 1900

Appeal from circuit court, Kenton county.

"Not to be officially reported."

Actions by the Covington Gaslight Company against the city of Covington and the Suburban Electric Company and against the city of Covington for injunctions. Judgments for defendants and plaintiff appeals. One judgment reversed, and the other affirmed.

J. W Bryan, for appellant.

C.J. &amp W. W. Helm, for appellees.

BURNAM J.

On the 28th of December, 1852, the general council of the city of Covington passed an ordinance whereby there was granted to James Southgate and his associates, their successors and assigns, the exclusive privilege of laying gas pipes under the streets, lanes, alleys, etc., of the city of Covington for a period of 50 years from the date thereof, and that they should have the exclusive right of lighting the streets and furnishing the inhabitants of the city with gas. These privileges, however, were granted upon certain conditions that were specified in the ordinance. Section 7 of the ordinance is in these words: "That said city council shall have the right and privilege, by giving one year's previous notice in writing, of purchasing from Southgate and associates, their successors and assigns, all the pipes, buildings, privileges and apparatus, constituting the gas works, on the first of January, 1869, and at the expiration of each and every five years thereafter; the price or value of said gas works to be ascertained or determined by five disinterested persons, residents of Kentucky, two of whom shall be chosen by the said city council, two by said James Southgate and associates, and the fifth by the four so chosen." Southgate and his associates transferred the benefit of its contract to the appellant, who was subsequently incorporated by the legislature of Kentucky; and it has from January, 1854, continuously enjoyed and executed this agreement with appellees. On the 26th day of December, 1867, appellee the city of Covington through its city council gave notice to the appellant of the intention of the city to purchase the gas plant on the 1st day of January, 1869, under the seventh section of the agreement of 1852; and appraisers were appointed by the parties, who qualified thereunder, and fixed a basis of valuation upon the property of appellant. The city of Covington objected to the basis of valuation fixed by the valuers, because they determined that the franchise or rights of appellant under the contract made with the city for the balance of the 50 years should be taken into consideration in determining the value of the plant, and declined to proceed further with the matter. The appellant objected to this action on the part of the city, and insisted that the valuation of the plant be completed by the appraisers, and that the city should purchase it at such valuation. But the appraisers decided that the city had a right to withdraw its notice and decline to proceed further in the matter. The relations of the parties continued as they had previous to that date until the 3d day of January, 1889, when the city council, by agreement with appellant, passed an ordinance amending the original ordinance, permitting appellant to reduce the price of gas to the citizens of Covington without reducing the price of gas consumed in the public street lamps. In the original agreement it was provided that the price to the city for gas consumed in the street lamps was to be only one-half that charged to the citizens. On the 19th day of November, 1897, the general council of the city of Covington passed a resolution directing the city clerk to advertise for sealed bids for the sale of the option or privilege of the city to purchase the gas plant of appellant on the 1st day of January, 1899, in accordance with article 7 of the contract of 1852, requiring each bid to be accompanied with a bond of $40,000, conditioned that the bidder would pay the sum bid for the option, and that the city would be held harmless from all loss that might arise from the sale. It also provided that the sale should be without warranty. Then appellant instituted this action to enjoin appellee and its clerk from proceeding to sell the option under the resolution. The circuit judge granted a temporary injunction, which, upon application to a judge of this court, was dissolved, whereupon the city of Covington proceeded to sell its option to acquire the gas company's plant. Two bids were received therefor. By one the city was offered $5,150 in money for the option; and by the other the Suburban Electric Company offered to supply electric lights to the city in all of its public buildings and on certain of its streets for one year without charge, and agreed to materially reduce the price of gas to the city and to the citizens thereof until the end of the term of 50 years, which expires on the 28th day of October, 1902. The bid of the Suburban Electric Company was accepted by the city council, and a contract was made with them pursuant thereto on the 27th day of December, 1897; and they at once notified appellant of their purchase of the option, and requested that appraisers should be appointed to fix the valuation thereon. Appellants thereupon amended their petition, and made appellee the Suburban Electric Light Company the defendant, and asked that the contract assigning the option be declared void, and that appellee the Suburban Electric Company be enjoined from proceeding under it. The appellees, the city of Covington and the Suburban Electric Company, filed their separate answers and counterclaims. The city in its answer avers that the contract is of great advantage to it, in that it will decrease the price of gas to it and its inhabitants, and will enable it to change the method of lighting its streets and public buildings to a better and more improved system, and asks that the title of their vendee be quieted. And the electric company, in its separate answer, asks that the appraisers be prohibited from considering the value of appellant's contract with the city, in valuing the gas plant, and should be limited to placing the valuation upon the pipes, buildings, and apparatus of appellant. The circuit judge held that the assignment by the city of its option to purchase appellant's plant was valid, and that in estimating the value of the plant the contract with the city should not be taken into consideration. It is the contention of appellant that this judgment should be reversed, on several grounds: First. Because the option to acquire the gas plant, secured to the city by article 7 of the contract of 1852, is not such a right as can be assigned by it to a third party. Next it is contended that the city itself could not avail itself of this right to purchase, because it had exhausted its rights to do so in 1867, by its refusal to go on with the proceedings looking to its acquisition. It is also contended that the Suburban Electric Company had no power under its charter to acquire the gas plant, or to enter into any contract in relation thereto with the city of Covington. We will now consider these alleged errors:

First as to the power of the city to sell the option. The first section of the charter of cities of the second class, to which appellee belongs, provides "that such cities shall have power to acquire property for municipal purposes by...