Mitchell v. City of Mobile

• Citation: 244 Ala. 442,13 So.2d 664
• Decision Date: 13 May 1943
• Docket Number: 1 Div. 178.
• Parties: MITCHELL v. CITY OF MOBILE.
• Court: Supreme Court of Alabama

13 So.2d 664

244 Ala. 442

MITCHELL v. CITY OF MOBILE.

1 Div. 178.

Supreme Court of Alabama

May 13, 1943

Rehearing Denied June 10, 1943. [Copyrighted Material Omitted]

Wm. G. Caffey, of Mobile, for appellant.

Harry Seale and Robt. H. Smith, both of Mobile, for appellee.

BOULDIN, Justice.

The City of Mobile sued Joe Mitchell, appellant, on common counts to recover unpaid bills alleged to be due for water and sanitary sewer service, through a municipally owned waterworks and sanitary sewer system. The unpaid bills were for the period from February 1, 1936, to June 24, 1938.

Defendant interposed several special pleas, in bar, which, broadly speaking, challenged the validity of the rate-making ordinances on the ground that the rates were excessive and unreasonable.

Quoting from accurate statement in appellant's brief: "Plea 2 as amended averred that the plaintiff acquired its water-works system under Local Acts 1898-99 pages 16-18 19-21, that this Act limited the rates chargeable for water to rates sufficient only to pay the expense of operating the water-works system and interest on any bonds issued to provide such system, but that the rates imposed and applicable during the period from February 1, 1936 to June 24, 1938, were unreasonably greater than were necessary to defray the expense of operating said water works system and to pay the interest on bonds issued for its acquisition and were so greatly excessive that the revenue derived therefrom during the period involved in this suit exceeded by thousands of dollars the amount necessary to defray the expense of operation of the system and interest on outstanding bonds."

Amended plea 12 was to like effect touching sewer rates. Apt demurrers to these pleas were overruled. The evidence without conflict, supported their averments of fact.

The construction of the legislative acts mentioned in these pleas is fully discussed in briefs, and is so vital to a right decision touching the legal rights of the parties, we deal first with that question.

Two companion acts, passed at same session, approved on the same date, dealing with a common subject matter, appear in Local Acts 1898, page 16 and page 19, respectively. One act deals specially with the issuance of bonds of the City of Mobile pursuant to election theretofore held, in the sum of $500,000, to acquire a water-works system by construction or purchase, and $250,000 for a sanitary sewer system, and to mortgage such systems as security for the bonds. The other act deals specially with the construction or otherwise acquiring and operating such waterworks and sewer systems.

Section 3 of this act reads: "That the said mayor and general council shall and it is hereby invested with full authority and power to make all proper regulations for preserving, maintaining, and operating such water works and sewerage systems when established, and to collect such rates for waters supplied for the use of said sewerage system as shall be sufficient to pay the interest on any bonds issued by said city for the purpose of providing said water works and sewerage systems, and the expenses necessary for operating the same, and to collect the dues for water so supplied and used and for the use of said sewerage system, and to apply the same to the payment of such interest, provided, that such rates shall not exceed the usual and customary rates charged by other cities, similarly situated, for like service."

Without question these acts are in pari materia, to be treated as if embodied in one act.

Quite clearly, we think, the above authorization to fix water rates and sewer rates, to provide funds necessary for servicing the bonded indebtedness, is no limitation on the lawful rates; but, on the contrary, looks to rendering these enterprises self-liquidating projects in so far as reasonable rates would provide such funds, and thus relieve the taxpayers of the burden of such indebtedness. The sole limitation upon rates appears in these words: "such rates shall not exceed the usual and customary rates charged by other cities, similarly situated, for like service." Neither this provision, nor other law in Alabama, forbids the city or town fixing rates upon municipal utilities on the same basis permitted to privately owned utilities.

Our general statutes vest in cities exclusive authority in the fixation of rates for city-owned utilities. Title 37, § 334, Code of 1940; Title 48, § 18, Code of 1940; Culpepper v. Phenix City, 216 Ala. 318, 113 So. 56.

While in the ownership and operation of a utility, the city is engaged in a proprietary enterprise; in prescribing lawful rates, the governing body acts in a legislative capacity. In both capacities, the governing body is the chosen agency of the people of the city and subject to their control through democratic processes.

The income from city-owned utilities is not limited to outlays for operation, maintenance, and extensions and other purposes for which they are ear-marked. Reasonable rates may be charged after the bonds for which they are ear-marked are fully paid. The income derived from reasonable rates, not ear-marked, becomes a part of the general revenues of the city, usable for general municipal purposes, unless forbidden by statute. Chamberlain v. Board of Commissioners, 243 Ala. 662, 11 So.2d 724. This is not to say rates may be fixed so as to burden utility customers with the costs of city government, public improvements, etc., thus discriminating against them; in effect imposing upon them unfair tax burdens.

Charges for municipal utility service have relation to the benefits received; and because of such benefits rates may be fixed to bring in a reasonable profit on the investment, based on the value of the plant as defined by law. 5 McQuillin Mun.Corp. 64, § 1948; 43 Am.Jur. 645, § 104; also p. 643, § 102; Benson v. City of Andalusia, 240 Ala. 99, 195 So. 443. The fact that the city authorities, having regard for the financial condition of the city, fixed these utilities rates with a view to transferring the surplus income to the general fund to help meet city obligations, and that substantial surplus funds were so transferred during the period here involved, did not render the utility rates excessive nor otherwise unlawful.

That is not the test. Were the rates unreasonably high as measured by the standard defined by law?

No evidence was offered touching the usual rates charged in other cities under like conditions; nor was there any evidence of the value of the plants during this period. Pleas raising these issues were not proven. The evidence disclosed that in addition to the plants constructed under the Acts of 1898, the city had purchased another plant from a private utility company, and made extensions through the years.

In view of our construction of the Acts of 1898, it is...