Missouri Public Service Co. v. City of Concordia

• Citation: 8 F. Supp. 1
• Decision Date: 19 September 1934
• Docket Number: No. 2445.,2445.
• Court: U.S. District Court — Western District of Missouri
• Parties: MISSOURI PUBLIC SERVICE CO. v. CITY OF CONCORDIA, MO., et al.

8 F. Supp. 1

MISSOURI PUBLIC SERVICE CO. v. CITY OF CONCORDIA, MO., et al.

No. 2445.

District Court, W. D. Missouri, W. D.

September 19, 1934.

A. Z. Patterson and D. C. Chastain (of Sparrow, Patterson, Chastain & Graves), both of Kansas City, Mo., for plaintiff.

Ike Skelton, of Lexington, Mo., for defendants City and Board of Aldermen.

Roy McKittrick, Atty. Gen., for defendant Smith, State Auditor.

REEVES, District Judge.

The motion of the defendants to dismiss alleges as grounds, "Because said bill does not state any matter of equity entitling plaintiff to the relief prayed for, nor are the facts as stated sufficient to entitle plaintiff to any relief against these defendants."

The bill filed by plaintiff avers substantially that it is engaged in generating, transmitting, distributing, and supplying electricity to cities, towns, and sundry counties in the state of Missouri and the inhabitants of said state. For that purpose it owns and operates many distributing systems within the state. For these purposes, "it has been authorized by the State of Missouri, through orders and certificates of convenience and necessity issued by the Public Service Commission of said State, to construct, own, operate and maintain its plants, facilities and systems in each of the municipalities in which it renders service, and in the districts and territory adjacent to such municipalities, and it possesses valid and lawful operating rights in said municipalities and territories. All of the property owned and business done by the plaintiff is wholly within the State of Missouri, and it is not engaged in interstate business."

These averments are followed by appropriate allegations that it is carrying on its business at Concordia in the state of Missouri, and that it has a valuable plant and operating facilities at that place. These are followed by averments to the effect that the city of Concordia, through its officials, has planned the construction of a municipal plant for performing the same service as that now being performed and rendered by plaintiff.

In order to finance the project undertaken by the city, and as a necessary part of the plan to carry out such objective and project, an arrangement has been made with the Administrator of the Federal Emergency Administration of Public Works at Washington, D. C., for the advancement of funds in the sum of $47,000. Of this amount $30,000 is upon the basis of a loan and $17,000 is a gift. This is a necessary part of the financial arrangement perfected by the city in order to carry out its project.

The plaintiff challenges the validity of such arrangement, as well as directing a challenge against other portions of the financial plans adopted by the city for the construction of a municipally owned plant.

The parties in their briefs have limited the questions to be considered to that of the financial aid about to be extended by the Federal Emergency Administration of Public Works.

Plaintiff alleges in its bill that it has an interest, both as a franchise holder and as a taxpayer, in what it alleges to be an unlawful undertaking by the defendants, and that the construction of a municipally owned plant under such circumstances would be violative of its rights under the Fourteenth Amendment to the Constitution of the United States, and that, moreover, the aid about to be granted by the United States government, through the Federal Emergency Administration of Public Works is illegal, unconstitutional, and void as beyond the national power under the Constitution.

Other matters will be discussed in the course of this memorandum opinion.

1. At the outset, the defendants challenge the jurisdiction of this court upon the ground that no federal question is involved.

The defendants particularly say that the plaintiff merely states a conclusion when it says that "it possesses valid and lawful operating rights in said municipalities and territories."

The plaintiff's bill contains far broader allegations than that mentioned by counsel for the defendants.

In the case of Frost v. Corporation Commissioner of Oklahoma, 278 U. S. 515, loc. cit. 519 and 520, 49 S. Ct. 235, 237, 73 L. Ed. 483, it was held that operators of cotton gins, which had been declared public utilities by the laws of Oklahoma, owned a valuable franchise where such operators held permits from the corporation commissioner of the state. The court said: "It follows that the right to operate a gin and to collect tolls therefor, as provided by the Oklahoma statute, is not a mere license, but a franchise, granted by the state in consideration of the performance of a public service, and as such it constitutes a property right within the protection of the Fourteenth Amendment."

It would follow that, upon the clear and explicit allegations of the bill in this case, the plaintiff has and enjoys a property right within the city of Concordia, and that such property right is within the protection of the Fourteenth Amendment. If, therefore, the defendants are about to act in such manner as to take such property without due process of law, the plaintiff is entitled to the protection of the federal court under constitutional warrant.

2. The next question, challenging in its nature, is the right of the Congress to grant aid to projects of the character sought to be constructed and carried out by the defendants.

This question brings into review the National Industrial Recovery Act, approved June 16, 1933 (48 Stat. 195), and particularly title 2 thereof, relating to the subject of "Public Works and Construction Projects." The Industrial Recovery Act was predicated upon the power of the Congress to regulate interstate commerce. Section 8 of article 1 of the National Constitution confers upon the Congress power "to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."

By the first section, title 1 of the Industrial Recovery Act (15 USCA § 701), it is declared that: "A national emergency productive of widespread unemployment and disorganization of industry, which burdens interstate and foreign commerce, affects the public welfare, and undermines the standards of living of the American people, is hereby declared to exist. It is hereby declared to be the policy of Congress to remove obstructions to the free flow of interstate and foreign commerce which tend to diminish the amount thereof."

It will be thus seen that the Congress, realizing the limitations of its power, undertook to justify its enactment as an emergency measure under the granted power to regulate commerce among the states.

In relation to public works and construction projects, section 201 (a) thereof (40 USCA § 401 (a), the following postulate was laid down by the Congress: "To effectuate the purposes of this chapter, the President is hereby authorized to create a Federal Emergency Administration of Public Works, all the powers of which shall be exercised by a Federal Emergency Administrator of Public Works (hereafter referred to as the `Administrator')."

It was provided by section 202 of said act (40 USCA § 402) that: "The Administrator, under the direction of the President, shall prepare a comprehensive program of public works, which shall include among other things the following: (a) Construction, repair, and improvement of * * * public buildings, and any publicly owned instrumentalities and facilities."

Then, by section 203 (40 USCA § 403), it was provided: "With a view to increasing employment quickly * * * the President is authorized and empowered, through the Administrator * * * (1) to construct, finance, or aid in the construction or financing of any public-works project included in the program prepared pursuant to section 202 section 402; (2) upon such terms as the President shall prescribe, to make grants to States, municipalities, or other public bodies for the construction, repair, or improvement of any such project, but no such grant shall be in excess of 30 per centum of the cost of the labor and materials employed upon such project."

The defendants, pursuant to the foregoing provisions, and by reason of the power and authority there attempted to be conveyed, made arrangements with the Administrator of Public Works for financial aid to enable them to construct an electric plant for the city.

The question is: Did the Congress have such power under the commerce clause of the Constitution, and did it attempt to exercise such power?

Clearly the allegations of the bill are such as to indicate that interstate commerce is neither affected directly nor indirectly by the project. The plaintiff is not engaged in interstate commerce, but wholly and exclusively in the generation and distribution of electrical energy within the state of Missouri.

For the purposes of this motion, the...