Incorporated Town of Sibley v. Ocheyedan Elec. Co.

• Decision Date: 08 April 1922
• Docket Number: 34333
• Citation: 187 N.W. 560,194 Iowa 950
• Parties: INCORPORATED TOWN OF SIBLEY, Appellant, v. OCHEYEDAN ELECTRIC COMPANY, Appellee
• Court: Iowa Supreme Court

187 N.W. 560

194 Iowa 950

INCORPORATED TOWN OF SIBLEY, Appellant, v. OCHEYEDAN ELECTRIC COMPANY, Appellee

No. 34333

Supreme Court of Iowa, Des Moines

April 8, 1922

REHEARING DENIED DECEMBER 15, 1922.

Appeal from Osceola District Court.--C. C. BRADLEY, Judge.

ACTION at law, to recover an amount claimed to be due for electric energy furnished to the defendant by the plaintiff city. There was a contract between the parties, fixing the rate at which such energy was to be furnished. The city, by ordinance, changed said rate. The action is to recover the amount claimed to be due at the increased rate. Plaintiff was denied the relief sought, and prosecutes this appeal.

Affirmed.

Clark Dwinell & Meltzer, for appellant.

Francis & Owen, for appellee.

FAVILLE J. STEVENS, C. J., WEAVER and ARTHUR, JJ., concur. EVANS, PRESTON, and DE GRAFF, JJ., dissent.

OPINION

FAVILLE, J.

The appellant is an incorporated town, organized as a municipality under the laws of this state. The appellee is a private corporation, engaged in the business of distributing electric energy to the citizens of the town of Ocheyedan. It appears from the record that, sometime prior to the 14th of July, 1914, the appellant, by proper proceedings under the statutes of this state, established and constructed in said municipality a municipally owned electric light plant. It also appears that the incorporated towns of Ocheyedan, Harris, and Lake Park, lying some distance from Sibley, desired to obtain electric current from the said municipal plant at Sibley, for distribution to the inhabitants of the said three towns. In contemplation of supplying electric current for said outlying towns, it appears that the town of Sibley constructed the said electric light plant of larger capacity than would have been necessary for the distribution of electric current to the inhabitants of the said town of Sibley.

On or about the said 14th day of July, 1914, a written contract was duly entered into between the said incorporated town of Sibley and the appellee and the said incorporated towns of Harris and Lake Park, for the furnishing of electric current to said parties. The only party concerned in this case as appellee is the Ocheyedan Electric Company. The said contract provided that the town of Sibley should furnish electric current under the said contract for a period of twenty years from the date when current was first used under the said contract. It was provided by said contract that the said electric current "shall be metered by the incorporated town of Sibley, Osceola County, Iowa, at the present corporate limits." The said contract fixed the rate at which said electric current was to be furnished, and provided:

"This contract to furnish electricity at the rate hereinbefore specified and for the purposes hereinbefore specified, shall be continued for the full period of twenty years as hereinbefore specified."

In pursuance of said contract, electric current was furnished by the appellant to the appellee at the corporate limits of the town of Sibley, at which point the said current was taken upon a transmission line constructed by the appellee and carried for distribution to the town of Ocheyedan, as contemplated and provided in said contract. The rate fixed by the said contract was paid by the appellee and accepted by the appellant until on or about the 7th day of August, 1919, at which time the appellant adopted a city ordinance by which specific reference is made to the said contract of July 14, 1914, with the appellee, which said ordinance recited that:

"Whereas, at the time of entering into the aforementioned contracts the rate to be paid for such electric energy or current by second party was agreed upon and expressly stipulated in such contract, and whereas, the cost of producing such electric energy or current has materially increased since the dates of said several contracts, now therefore, it is hereby ordained by the council of the incorporated town of Sibley, Iowa (Section 1) that the rate of electric energy or current to be paid to said town of Sibley, by second parties under and by virtue of the terms of the aforementioned contracts, and the rate to be paid by any other town or towns similarly situated and under similar contracts which may hereafter be entered into, shall be as follows, to wit:"

Then follows a schedule fixing a substantially higher rate than was provided for in said contract.

The question for our determination in this case is whether or not the appellant has the power, under the facts disclosed, to adopt, without the consent of the appellee, said ordinance increasing the rates as fixed by the said contract, and to recover from the appellee this increased rate.

I. It is a well recognized and generally established rule that municipalities have two classes of power: one legislative, public, and governmental; the other, proprietary and quasi private. Under the former, the municipality acts as a sovereignty, and governs and controls the inhabitants of the municipality. Under the latter, the municipality acts for the private advantage of the inhabitants of the city, and to a certain extent, for the city itself. The two powers are clearly separate and distinct, and the functions of the municipality in its legislative or governmental capacity should not be confused with its functions in its proprietary capacity. These general rules are well established, and have been recognized by us. First Nat. Bank v. City of Emmetsburg, 157 Iowa 555, 138 N.W. 451; Illinois Tr. & Sav. Bank v. City of Arkansas City, 76 F. 271; Esberg Cigar Co. v. City of Portland, 34 Ore. 282 (55 P. 961); City of Winona v. Botzet, 169 F. 321; City of Henderson v. Young, 119 Ky. 224 (83 S.W. 583); Eaton v. City of Weiser, 12 Idaho 544 (86 P. 541); City of South Pasadena v. Pasadena Land & Water Co., 152 Cal. 579 (93 P. 490); Davoust v. City of Alameda, 149 Cal. 69 (84 P. 760); Marin Water & Power Co. v. Town of Sausalito, 168 Cal. 587 (143 P. 767); Pikes Peak Power Co. v. City of Colorado Springs, 105 F. 1.

The legislature of this state has conferred upon cities and towns the power to act in a proprietary capacity in respect to the establishment, maintenance, and operation of electric light plants. Said authority is found in Section 720, Code Supplement of 1913, and is as follows:

"They [cities and towns] shall have power to purchase, establish, erect, maintain and operate, within or without the corporate limits of any city or town, heating plants, waterworks, gasworks, or electric light or electric power plants, with all the necessary reservoirs, mains, filters, streams, trenches, pipes, drains, poles, wires, burners, machinery, apparatus and other requisites of said works or plants, and lease or sell the same."

Section 724, Code Supplement, 1913, is as follows:

"They shall have power, when operating such works or plants, and shall have the power to sell the products of such municipal heating plants, waterworks, gasworks or electric light or electric power plants, to any municipality, individual or private corporations outside of the city or town limits as well as to individuals or corporations within its limits, and to erect in the public highway the necessary poles upon which to construct transmission lines, and to assess from time to time, in such manner as they shall deem equitable, upon each tenement or other place supplied with water, gas, heat, light or power, reasonable rents or rates fixed by ordinance, and to levy a tax, as hereafter provided, to pay or aid in paying the expenses of running, operating, renewing, extending and repairing such works or plants owned and operated by such city or town, and the interest on any bonds issued to pay all or any part of the cost of their construction."

It must be conceded that this statute is not a model of lucidity and coherence.

Acting under these sections, the appellant established its municipal plant and made a contract to sell the products of such plant to the appellee, a private corporation outside the city or town limits. It is contended by the appellant that, under said Section 724, the power conferred upon the municipality to sell electric current to a private corporation outside the town limits was, by said section, coupled with the limitation that the city council should "assess from time to time, in such manner as they shall deem equitable, upon each tenement or other place supplied with water, gas, heat, light or power, reasonable rents or rates fixed by ordinance, and to levy a tax" to pay the expenses of the plant.

The literal language of the section does provide that the municipality, when operating its own plant, shall have the power to sell the product to private corporations outside of the city limits. It also provides that the city shall have the power to "assess from time to time, in such manner as it shall deem equitable, upon each tenement or other place supplied with water, gas, heat, light or power, reasonable rents or rates fixed by ordinance, and to levy a tax."

It is the appellant's contention that the words "other place," used in this section, are broad enough to include the "place" at the corporate limits where the electric current was delivered through meter to the transmission lines of the appellee, the private corporation outside of the city limits; and it is appellant's contention that, under said section, the city council has the right, by ordinance, to fix the rates for such current so delivered at such place.

At the outset, it must be conceded that, unless expressly conferred by the legislature, a city council has no extraterritorial powers in the exercise of its legislative or governmental functions. A municipality exercises its legislative and...