Mobile Electric Co. v. City of Mobile

Decision Date09 May 1918
Docket Number1 Div. 38
Citation79 So. 39,201 Ala. 607
PartiesMOBILE ELECTRIC CO. v. CITY OF MOBILE.
CourtAlabama Supreme Court

Appeal from Circuit Court, Mobile County; Claude A. Grayson, Judge.

Bill by the City of Mobile against the Mobile Electric Company to enjoin respondent, its officers, employés, etc., first, from establishing and adopting a schedule of rates for currency supplied the city of Mobile and from charging the general customers of respondent in the city of Mobile for electric current an amount in excess of the rate specified in the contract of December 31, 1906, as amended, and from cutting off current from those who failed to pay the amount in excess of the rates specified. From a decree overruling demurrers to the bill, respondent appeals. Affirmed.

Inge &amp Kilborn and Harry T. Smith & Caffey, all of Mobile, for appellant.

Robert H. Smith, of Mobile, for appellee.

ANDERSON C.J.

While the city of Mobile had the authority, under its charter powers, given by the Act of 1900-01, p. 2342, to contract with the respondent corporation for supplying lights for public purposes, it may be conceded that it had no authority thereunder to contract for supplying lights to the citizens and that the part of the contract as dealt with supplying lights to the citizens was ultra vires the municipality and void. The original contract however, was modified, and executed as changed or modified after the enactment of section 1260 of the Code of 1907, and the new or modified contract was authorized by said statute.

The doctrine is well established that acts ultra vires a corporation, as distinguished from those ultra vires the agents, cannot be ratified, but we think that the contract made in 1910 was more than a mere ratification of the old contract. It involved a change in the original contract and there was a reexecution of same as changed, and, while the change may have been slight, it was deemed of importance to the contracting parties and produced benefits or detriment to the one or the other. "An agreement, when changed by mutual consent of the parties, becomes a new agreement, which takes the place of the old and consists of the new terms and as much of the old agreement as the parties have agreed shall remain unchanged." 13 Corpus Juris, p. 595, § 615; Shriner v. Craft, 166 Ala. 146, 51 So. 884, 28 L.R.A. (N.S.) 450, 139 Am.St.Rep. 19; Elliott on Contr. vol 3, §§ 1859 and 1987.

Section 1260 of the Code of 1907, among other things, authorizes the municipality to contract for furnishing electricity to the city or town, and statutes quite similar to this one have heretofore been construed as authorizing a municipality to contract for water for its inhabitants for a fixed and reasonable period, and such contracts are protected under the inviolable contract clauses of the Constitution, state and federal. Bessemer Water Co. v. Bessemer, 152 Ala. 391, 44 So. 663; Mitchell v. Gadsden, 145 Ala. 137, 40 So. 350; Weller v. Gadsden, 141 Ala. 642, 37 So. 682, 3 Ann.Cas. 981; Freeport Water Co. v. Freeport, 180 U.S. 587, 21 Sup.Ct. 493, 45 L.Ed. 679; Los Angeles v. Los Angeles Water Co., 177 U.S. 558, 20 Sup.Ct. 736, 44 L.Ed. 886.

The appellant contends that while the word "perpetualy" means forever or eternal, it also means continually, uninterrupted, etc., and that as a holding that the word "perpetually" as used in the contract meant forever would render it void, it should be so interpreted as to render the contract legal in its entirety, and that the word as used meant that the rate should be maintained continuously and uninterruptedly during the 10-year period of the contract, and not that the rate was to be maintained for all time.

The contract in question first provides for furnishing the city certain lamps and current to light the same, "for the term of 10 years, beginning on the 1st day of November, 1907, and ending with the 31st day of October, 1917"; second, to light the market house of the city of Mobile "during the term of this contract"; third, to furnish certain electric current on the 24-hour incandescent circuit on a meter basis, "during the life of this contract." It will be observed that in dealing with what is to be furnished the city for public purposes, that is, arc lamps lighting the market house and the current on the incandescent circuit, the period is specifically fixed for the 10-year term of the contract. But when dealing with maximum rates for supplying the citizens, we find no specifications limiting the period to 10 years, or during the term of the contract. This clause of the contract provides:

"In further consideration of the said payments by the said city of Mobile, the Mobile Electric Company does hereby agree to the establishment of the following maximum rates for the sale and distribution of electricity ever a system of poles and wires throughout the city of Mobile to remain in force perpetually."

Therefore, in dealing with the service to be given the city for public lights the time limit is fixed as 10 years, or during the life of the contract, but in dealing with the rate for furnishing the inhabitants with electricity it is to be maintained, not for 10 years, but "perpetually." It is true that following the schedule of rates there is a clause in the contract providing for a discount in the following language:

"A discount of 2 cents per K.W.H. to be allowed on the above rates if bills are paid within 10 days after the said bills have been rendered, except that during the 10 years of this contract the rate mentioned above from 0 to 50 shall be 10 cents per K.W.H. less a discount of 3 cents per K.W.H. if paid within ten days after the rendering of the bill therefor."

This was in no sense a limitation on the time for maintaining the rate and supplying the lights, but merely a provision for a discount of 3 cents as to a certain item during the limited period of 10 years, referring, of course, to the 10-year period for service to the city, indicating that the discount should be but 2 cents thereafter as to the entire schedule. It did not limit the maintenance of the rate to 10 years, or terminate the entire contract in 10 years, but applied the 10-year period only to the exception by allowing a 3-cent discount as to a certain item. It is manifest that the words used, "except during the 10 years of this contract," were intended to except the discount rate as to a certain item from a longer term and carved out a 10-year period from this longer term. We are of the opinion that the contract negatives any intention of limiting the period of maintaining rates to the citizens to the 10-year period applicable to the service to the city, and that the parties thereto contemplated that the rate should continue "perpetually," or so long as they could lawfully contract for the maintenance of same.

The statute (section 1260 of the Code of 1907) authorized the contract in question, and provides no limitation upon the duration of same, though it is the policy of the law to declare contracts of this character unenforceable for an indefinite time and unreasonable period, upon the theory that, while there may be no statutory inhibition, the municipality cannot, in the exercise of its delegated contractual right, perpetually or for an unreasonable time fasten upon the taxpayers and inhabitants rates and obligations that cannot be changed or regulated during reasonable intervals so as to meet changed conditions and thereby void extortion and oppression. McQuillin on Mun Corp., pp. 3718, 3719; Home Tel. Co. v. Los Angeles, 211 U.S. 265, 29 Sup.Ct. 50, 53 L.Ed. 176; Bessemer v. Bessemer Water Works, supra. Such contracts are not specially prohibited or made void in toto by any statute of this state, but are deemed invalid under the policy...

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