Hatcher v. Ky. & W. Va. Power Co., Inc.

• Decision Date: 21 November 1939
• Citation: 280 Ky. 583
• Court: Supreme Court of Kentucky
• Parties: Hatcher et al. v. Kentucky & West Virginia Power Co., Inc., et al.

280 Ky. 583

Hatcher et al. v. Kentucky & West Virginia Power Co., Inc., et al.

Court of Appeals of Kentucky.

November 21, 1939.

1. Electricity. — The sale of an electric light and power franchise by four members of the city council was not void as being made arbitrarily without consulting mayor or city attorney, where ordinance directing sale of franchise was not passed until after repeated public discussions during the course of which the mayor and city attorney criticized the proposed ordinance and sale.

2. Electricity. — The sale of an electric light and power franchise was not void as not being properly advertised, where ordinance relating to sale required that sales should be advertised for 15 days and sale was advertised in three successive issues of county paper on April 5, 12 and 19, and franchise was sold on April 20.

3. Time. — In computing time, one of the terminal days is included, and the other excluded.

4. Municipal Corporations. — In granting franchises for the public benefit, a city council acts in a legislative capacity.

5. Municipal Corporations. — In exercise of city council's power to grant franchise for public benefit, a discretion is vested which cannot be taken away by the courts.

6. Municipal Corporations. — Under Constitution, after sale of franchise, city council cannot arbitrarily or corruptly reject all bids and thereby escape the obligation to award franchise to highest and best bidder (Constitution, sec. 164).

7. Municipal Corporations. — Where city council's rejection of all bids on sale of franchise is attacked in the courts, presumption will be indulged that counsel has not abused its discretion but has acted reasonably and in good faith for the public benefit (Constitution, sec. 164).

8. Municipal Corporations. — Where city council, after sale of franchise, rejects all bids, person questioning council's discretion must allege and prove facts showing that council acted arbitrarily or corruptly and was therefore guilty of clear abuse of discretion.

9. Electricity. — The rejection of highest bid for light and power franchise was not arbitrary, and hence sale of franchise to second highest bidder was not void, where highest bidder was without experience in producing and furnishing electric energy and was insolvent and without the means of installing plant were his bid accepted (Constitution, sec. 164).

10. Electricity. — Citizens and taxpayers seeking cancellation and sale of electric light and power franchise to second highest bidder after rejection of highest bid could not assert that highest bidder's legal rights were not respected (Constitution, sec. 164).

11. Municipal Corporations. — The purpose of constitutional provision relating to sale of franchise was to protect municipality against loss of valuable rights in granting of franchises and privileges, and, by sale of franchise, after due advertisement to highest and best bidder, to protest rights of citizens to receive value of privilege to be granted away and to prevent their councils from granting valuable privileges to favorites without sufficient consideration (Constitution, sec. 164).

12. Franchises. — The granting of franchises is the exercise of legislative function of sovereignty.

13. Constitutional Law. — The state's sovereign power to grant franchises may, by constitutional or legislative provisions, be delegated to local political subdivisions such as municipalities.

14. Municipal Corporations. — A municipality is not prevented from granting a public service franchise before expiration of a similar franchise then in operation (Constitution, secs. 163, 164).

15. Municipal Corporations. — The statute providing for sale of a franchise by a municipality on expiration of prior franchise, though mandatory in other provisions, is merely directory as to time (Ky. Stats., sec. 2741m-1).

16. Electricity. — The sale of 20-year electric light and power franchise was valid, notwithstanding that power company to which sale was made was the owner at the time of an existing, similar franchise which did not expire for more than four years thereafter (Ky. Stats., sec. 2741m-1; Constitution, secs. 163, 164).

Appeal from Pike Circuit Court.

A.S. Ratliff for appellants.

Harman, Francis & Hobson and Henry J. Scott for appellees.

Before R. Monroe Fields, Judge.

OPINION OF THE COURT BY JUDGE PERRY.

Affirming.

This action was instituted by the appellants, James Hatcher and other named citizens and taxpayers of the city of Pikeville, against the appellees, Kentucky & West Virginia Power Company, Incorporated, and the city of Pikeville, attacking the validity and seeking the cancellation of the electric light and power franchise granted the power company in April, 1934, as the highest and best bidder therefor in the sum of $4,600.

The complained of proceedings of the city council, leading up to the sale of the light and power franchise in question, are, as disclosed by the record, as follows:

On April 3, 1934, the council of the city of Pikeville passed a resolution directing the sale of a new electric light and power franchise in the city and providing for its sale at a public bidding. The city clerk was further directed, before making said sale, to advertise it by printed or public notices for not less than fifteen days next preceding the sale and in two issues of the Pike County News next before the date of sale. Further, an ordinance was introduced, entitled, "an ordinance granting the right, privilege, franchise and authority to construct, maintain and operate in, above, under, across and along the streets, thoroughfares * * * of the City of Pikeville lines for the distribution of electric energy" and asked that said ordinance be read and laid over, which was done in open council without any action then had on same.

Pursuant to the direction of the resolution, a copy of the ordinance or resolution proposing said franchise sale was posted on April 5, 1934, and a sale made thereof on April 20, 1934, when the clerk, as also directed, made a report of his actions in respect to the sale of the franchise to the mayor and city council, advising that he, as directed in the resolution of the council, after duly advertising the proposed sale by notices published in three consecutive issues of the Pike County News, namely, April 5th, 12th and 19th, and posted at five conspicuous places about the town of Pikeville, did on April 20th, at the front door of the town hall, offer for sale a franchise for the use of the public streets for the distribution of light and power to the inhabitants and consumers of the city of Pikeville, as set out in the resolution; that thereupon the Kentucky & West Virginia Power Company, Incorporated, by R.A. Hodges, its district manager, presented a certificate from the city treasurer evidencing Hodges' deposit with him of the sum of $2,500, as a condition of his bidding at the sale and that thereupon the said power company, by the said Hodges, and also one Sidney Trivette, proceeded to bid at said sale; that Sidney Trivette having bid the sum of $4,700 for the franchise, he was declared by the clerk to be the highest bidder and was asked for payment of said sum, but that he has not tendered same to date; that appellee, the said power company, bid the sum of $4,600 and delivered to the clerk a cashier's check on the Pikeville National Bank, in the amount of its bid. To the report, he also attached and made a part of it a copy of the notice of the sale, the written bid of the power company, the certificate of the city treasurer referred to and the cashier's check for $4,600.

Thereupon, the city council met and rejected Trivette's bid of $4,700 and accepted that of the power company of $4,600 and on May 1st passed an ordinance accepting same and approving said sale and entered into a contract with the power company, granting it the right and privilege to use its streets, etc., as therein provided and conveyed by the sale of said franchise.

Thereupon, this suit was filed by the appellants, citizens and taxpayers of the city of Pikeville, against the city and the power company, grantee of the franchise, wherein they set out several reasons which they claimed rendered the ordinance and sale of the franchise thereunder irregular and void, among which were: (1) that the sale was made arbitrarily by four members of the council, without consulting with the mayor or city attorney; (2) that the sale was prematurely had; (3) that the bid of the highest bidder was summarily and arbitrarily rejected, without consideration by the council; and (4) that the said sale to the power company was void, for the reason that it was the owner at that time of an existing, similar franchise, which did not expire for more than four years thereafter.

Issues were joined by responsive pleadings filed and voluminous proof was taken. The case being submitted thereon, the court adjudged that plaintiffs had not shown themselves entitled by the pleadings and proof to the relief sought, and further held that the attacked franchise, so granted by the city, was a valid and subsisting franchise and that the city council did not exceed its powers in granting same, upon the ground, mainly and most insistently argued, that the Kentucky & West Virginia Power Company, Incorporated, was on May 1, 1934, the owner of a similar franchise which did not expire until February, 1939, and adjudged that plaintiffs' petition be dismissed. To such ruling, the plaintiffs objected and excepted and prayed an appeal, which was granted and is now before us.

We deem it unnecessary to more than cursorily mention the first three of the four grounds argued and relied upon for reversal of the judgment, both because they appear practically abandoned by the appellants and further because it is our conclusion that the same are clearly without merit.

However, as to the first of these objections, it is made clear by the record that the sale of the...