Incorporated Town of Mapleton v. Iowa Public Service Co.

• Decision Date: 12 February 1929
• Docket Number: 39587
• Citation: 223 N.W. 476,209 Iowa 400
• Parties: INCORPORATED TOWN OF MAPLETON, Appellee, v. IOWA PUBLIC SERVICE COMPANY, Appellant
• Court: Iowa Supreme Court

223 N.W. 476

209 Iowa 400

INCORPORATED TOWN OF MAPLETON, Appellee, v. IOWA PUBLIC SERVICE COMPANY, Appellant

No. 39587

Supreme Court of Iowa, Des Moines

February 12, 1929

REHEARING DENIED DECEMBER 13, 1929.

Appeal from Monona District Court.--MILES W. NEWBY, Judge.

The defendant is a public utility corporation which owns and operates an electric light plant in the town of Mapleton. The city brings this action to enjoin the defendant from violating its ordinance fixing the rates to be charged for the service rendered. The complaint is that the defendant charges a lower rate than that fixed by the ordinance. Upon a hearing on the merits, the district court entered decree for the plaintiff, and enjoined the defendant accordingly. The defendant appeals.

Affirmed.

Price & Burnquist, for appellant.

George A. Rice and C. E. Cooper, for appellee.

EVANS J. DE GRAFF, MORLING, KINDIG, and WAGNER, JJ., concur. ALBERT, C. J., and FAVILLE, J., dissent.

OPINION

EVANS, J.

The case is the first of its kind to come before us. The plaintiff is an incorporated town. The defendant has a franchise to operate its utility therein. In February, 1928, the city council adopted an ordinance known as No. 172, which fixed a graduated scale of rates to be charged by the utility company. This ordinance provided a rate of 13 cents per kilowatt for the first 25 units, with a graduated scale at lower rates for larger quantities. For the purpose of our discussion, we need only to consider the 13-cent rate. Nor need we set forth the details of the ordinance in other respects. The defendant published a schedule of rates which it proposed to put into effect contemporaneously with the ordinance schedule, and which was lower in some of its items than the ordinance rate. The rate thus published by the defendant for the first 25 units was 12 cents per kilowatt. The demand of the plaintiff is that such item in the defendant's schedule shall be put up to 13 cents, in obedience to the ordinance. The response of the defendant is that the ordinance is void, in that it is unauthorized by the statute and forbidden by the Constitution of the United States. The dispute is concentrated upon Section 6143, Code, 1927, and the proper interpretation thereof. This is as follows:

"6143. Regulation of rates and service. They shall have power to * * * and to regulate and fix the rent or rate for water, gas, heat, light, or power; to regulate and fix the rents or rates of water, gas, heat, and electric light or power; to regulate and fix the charges for water meters, gas meters, electric light or power meters, or other device or means necessary for determining the consumption of water, gas, heat, electric light or power, and these powers shall not be abridged by ordinance, resolution, or contract."

The defendant contends for an interpretation of this section to the effect that it fixes only a maximum rate, beyond which the utility company may not go, and that it does not forbid the exaction of a lower rate than is thus fixed by the ordinance. On the other hand, the plaintiff contends for a literal interpretation of the statute, to the effect that power is conferred upon the city council to regulate and fix the rates. The defendant's argument, elaborated a little further, is that the rate fixed by the ordinance is presumptively reasonable as a maximum rate; that, if 13 cents is a reasonable rate, then any rate below 13 cents is necessarily reasonable; that the only function of the city council is to fix a reasonable rate; that, if the defendant maintains a reasonable rate, it puts itself beyond the power of interference by the plaintiff. The counter-contention of the plaintiff is that only the 13-cent rate is presumptively reasonable, and that the burden is upon the defendant to show it to be unreasonable before it can assert a right to make another rate, be it higher or lower. This will indicate the general character of the contest. The anomaly of the situation is that we have never hitherto had before us a municipality as a litigant contending for an uplift in rates, nor a public utility contending for the right to reduce them. The briefs are voluminous, and have covered the whole field of rate regulation of public utilities and of other private property affected with a public use. But in all the volume of these citations in both briefs, no hint is contained of the respective attitude of the combatants as they appear herein. As argued by the defendant, in no case that has come before us has a public utility ever been challenged in its right to lower its rates. Nor, for that matter, has a municipality ever been challenged in its right to increase the rates. One observation is as good as the other, and both of them rest upon the same reason. On the face of the record, each party appears to be contending for the privilege of generosity toward the other. Apparently, also, neither party has a grievance. The municipality offers 13 cents, and the public utility responds that 12 cents will be quite enough. If we should stop here, the proceeding would invite a dismissal, for want of subject-matter of the litigation. And this presents in a nutshell the contention of the defendant. The reader of the foregoing will naturally query: What is the matter; where is the storm area; why the tempest? Here is the rub:

The incorporated town of Mapleton owns and operates a municipal plant, in its proprietary capacity. The result is that this plaintiff, in its governmental capacity, has within it two public utilities. The question is, May they compete in rates? If so, to what extent? Does Section 6143 cease to operate in such a case? Has the city council any power of regulation, provided the battlefield is below the snow line? Has the city, in its governmental capacity, any interest to be subserved by stopping a rate war? If both competitors were of a like kind, and if the city were not the proprietor of one of them, would the city have any interest to subserve by this litigation? It is the contention of the defendant that it would not; that it is using its governmental robes as a cover for the protection of its proprietary interests; that the exercise of its power in such respect is mere favoritism, and in its own interest; that the defendant has a constitutional right to compete, and to challenge any competitor, be he man or municipality; and that there is no constitutional power in the city council or in the legislature to restrain it, if it keeps its prices below the 13-cent rate. Its further argument is that it has a right to manage its own property in accord with its own policies, subject only to a maximum rate; that Section 6143 should be so construed, in order to save its constitutionality.

The words "maximum" and "minimum" have been used in the briefs in a double or ambiguous sense, which we shall aim to avoid in this discussion. The ordinance under attack fixes a "top" rate of 13 cents for the first 25 units, and a "bottom" rate of $ 1.00 per month, to be charged where the customer uses less than $ 1.00 worth at the 13-cent rate. These two rates are referred to as the "maximum" and "minimum." Manifestly, the "bottom" rate may be a "maximum," as well as a "minimum. " Such a rate represents the "maximum" which may be charged to the "minimum" customer. Manifestly, also, the "top" rate may be both a "maximum" and a "minimum." Whether it is such or not in this case is the crux of the controversy. The defendant contends that the "top" rate is intended as a maximum only; whereas the plaintiff contends that it is both a maximum and a minimum. Both briefs apparently concede that the $ 1.00 rate is both minimum and maximum. It will be seen from the foregoing that the argument for the defendant in its various phases raises the following questions:

Does Section 6143 in terms empower the city council to fix a "top" rate which shall be both maximum and minimum? If so, is it unconstitutional?

Does the defendant have the constitutional right to compete with the municipal plant and to lower its rates for that purpose?

Has the plaintiff town, in its governmental capacity, any right or interest to restrain competition between the two public utilities so far as the question of rates is concerned?

I. The fundamental proposition in the defendant's argument is that, subject to the right of the municipality to impose upon it a reasonable maximum rate, its constitutional right, as the owner of the property, to adopt its own policies and to enforce its own methods and to compete with its competitor and to win or lose thereby is absolute. The proposition is not wholly tenable. The owner of private property voluntarily devoted to public use necessarily surrenders some of his rights, and subjects himself to reasonable municipal regulation. The major right thus surrendered by him is that of fixing the price of his service or commodity. The Constitution protects him against confiscation by guaranteeing him that the price fixed by the municipality shall not be unreasonable. The defendant recognizes that the municipality may set a maximum limitation upon it. Ordinarily that would be the only point at which the respective interests of the public utility and its patrons could clash. But the defendant contends that it still retains its constitutional right of competition by lowering its rates. The argument at this point is that, if the two competitors were to agree together not to compete, such agreement would be void, as a fraud upon the public, and as creating a monopoly. When the owner of private property devotes it to the public use, as herein, he voluntarily retires from the field of competition, so far as the question of rates is concerned. It is the public, as patron, which is interested in free...