Muncie Natural Gas Co. v. City of Muncie

• Decision Date: 18 February 1903
• Docket Number: 19,805
• Parties: Muncie Natural Gas Company v. City of Muncie
• Court: Indiana Supreme Court

66 N.E. 436

160 Ind. 97

Muncie Natural Gas Company v. City of Muncie

No. 19,805

Supreme Court of Indiana

February 18, 1903

From Randolph Circuit Court; A. O. Marsh, Judge.

Suit by the city of Muncie against the Muncie Natural Gas Company. From a judgment for plaintiff, defendant appeals.

Affirmed.

James Bingham and Jesse Long, for appellant.

Frank Ellis, Rollin Warner and A. W. Brady, for appellee.

OPINION

Gillett, J.

Appellee instituted this action to restrain appellant from violating a special negative covenant, in a contract between said parties, regarding the maximum price of natural gas to be furnished by appellant to the inhabitants of said city. The amended complaint was in two paragraphs, to each of which a demurrer was overruled. Appellant answered in three paragraphs, one of which was a general denial. Demurrers were sustained to the other paragraphs of answer. Upon the request of each of the parties, the court, after a trial, made a special finding of the facts, and stated its conclusions of law thereon. A decree was rendered in favor of appellee.

So far as necessary to the consideration of this case, the facts so found specially are, in substance, as follows: On the 7th day of December, 1886, appellee passed an ordinance, that was accepted by appellant on the 21st day of December, 1886 authorizing appellant to construct and maintain a system of pipes beneath the streets and alleys of said city for the purpose of furnishing and selling natural gas to its inhabitants generally. The twelfth section of the ordinance contained the following proviso: "Provided that in no case shall the total cost to such consumers for private purposes of such gas at any time exceed three-fourths of the present current price of wood or coal for fuel, or of artificial gas for lighting; that the price of natural gas to private consumers for heating purposes shall be regulated by a schedule of prices submitted by the board of directors to the common council of said city at the beginning of each fiscal year, and that said company shall not, in any manner or for any purpose whatever, exceed the prices so submitted for that year, which schedule shall not exceed the price above stated in this section, said present price of wood being $ 2.50 per cord; of anthracite coal, $ 6 per ton; of soft coal, $ 4 per ton, and of artificial gas, $ 1.80 per thousand cubic feet." It is further found that said ordinance is still in force; that the appellant laid and still maintains the system of pipes provided for in said ordinance, and is engaged in the business of furnishing natural gas to the inhabitants of said city for heating and lighting purposes for hire; that on the 17th day of September, 1900, appellant submitted to the common council of said city a schedule, which is set out, of prices to be charged private consumers for the year beginning on the 1st day of October, 1900; that the city council investigated and considered such schedule, and, by resolution, found and declared that the prices in said schedule were excessive, and ordered and directed the appellant to submit a new schedule, which it refused to do. The findings sufficiently show that the schedule submitted provided for prices in excess of the provisions of the ordinance. It was further found by the court that since the 1st day of November, 1900, the appellant had been, and was at the time of the institution of the suit, charging the prices to consumers fixed in said schedule, under threats to discontinue the service of such consumers as refused to pay on the basis of said schedule, and that it threatens and intends to continue to charge and enforce the payment by all of its consumers of the rates set forth in said schedule. It is also found that since the 1st day of October, 1900, appellant has had more than 3,000 of said consumers in said city, who have, at great expense, fitted their residences with pipes and other fixtures to use natural gas, and that they can not procure said gas except from the appellant. It is unnecessary to set out the conclusions of law.

The first contention of appellant's counsel is that the city had no authority to enter into a contract fixing the maximum rates to be charged the inhabitants of said city, and that therefore the contract was ultra vires and void. We have to deal here with a question of ultra vires in its true sense; that is, where the act is claimed to be ultra vires the corporation itself. Municipal corporations possess and can exercise such powers only as are granted by the legislature in express words, and those necessarily or fairly implied or incident to the powers expressly granted, and those essential to the declared objects and purposes of the corporation. Dillon, Mun. Corp. (4th ed.), §§ 89, 90; Smith, Mun. Corp., 562, and cases cited; Pittsburgh, etc., R. Co. v. Town of Crown Point, 146 Ind. 421, 35 L. R. A. 684, 45 N.E. 587; Bogue v. Bennett, 156 Ind. 478, 83 Am. St. 212, 60 N.E. 143; Walker v. Towle, 156 Ind. 639, 53 L. R. A. 749, 59 N.E. 20; Lake County Water & Light Co. v. Walsh, ante, 33. As said by Mr. Dillon: "The general principle of law is settled beyond controversy, that the agents, officers, or even city council of a municipal corporation, can not bind the corporation by any contract which is beyond the scope of its powers, or entirely foreign to the purposes of the corporation, or which (not being legislatively authorized) is against public policy. This doctrine grows out of the nature of such institutions, and rests upon reasonable and solid grounds. The inhabitants are the corporators; the officers are but the public agents of the corporation. The duties and powers of the officers or public agents of the corporation are prescribed by statute or charter, which all persons not only may know, but are bound to know. The opposite doctrine would be fraught with such danger and accompanied with such abuse that it would soon end in the ruin of municipalities, or be legislatively overthrown. These considerations vindicate both the reasonableness and necessity of the rule that the corporation is bound only when its agents or officers, by whom it can alone act, if it acts at all, keep within the limits of the chartered authority of the corporation. The history of the workings of municipal bodies has demonstrated the salutary nature of this principle, and that it is the part of true wisdom to keep the corporate wings clipped down to the lawful standard." Dillon, Mun. Corp. (4th ed.), § 457. But notwithstanding this background of inhibition, we think that it may be affirmed that appellee had power to enter into the contract in question. Section 61 of the act of March 14, 1867 (Acts 1867, p. 33, § 3623 Burns 1901), provides that: "The common council shall have exclusive power over the streets, highways, alleys and bridges within such city." Natural gas is a public utility that can not be obtained by the citizens of a municipality generally, except as it is conducted in pipes along the public ways of the city. The grant of exclusive power to the common council over such ways comprehends the right to permit gas companies to use the streets. If the common council may permit a natural gas company to use the streets without any conditions annexed, except such as the law attaches, it is not perceived why, as in this case, in making provision for supplying natural gas to all of the inhabitants of the city, it may not protect such inhabitants against extortion by providing that the company shall not charge in excess of certain prices for its service. The right to annex terms by way of limitation upon the authority of the grantee in such cases has been often affirmed by this court. Western Paving, etc., Co. v. Citizens' St. R. Co., 128 Ind. 525, 10 L. R. A. 770, 25 Am. St. 462, 26 N.E. 188; City of Indianapolis v. Consumers Gas Trust Co., 140 Ind. 107, 27 L. R. A. 514, 49 Am. St. 183, 39 N.E. 433; Cambria Iron Co. v. Union Trust Co., 154 Ind. 291, 48 L. R. A. 41, 55 N.E. 745c. And see City of Noblesville v. Noblesville Gas, etc., Co., 157 Ind. 162, 169, 60 N.E. 1032.

In City of Indianapolis v. Consumers Gas Trust Co., supra, it was said: "There was no compulsion on the part of the appellant to grant the privilege to use its streets to any particular company. It was within its discretion to give or not to give its consent, and it had the right to withhold it from all gas companies. Citizens Gas, etc., Co. v. Town of Elwood, 114 Ind. 332, 16 N.E. 624. It was not limited alone to the granting of this franchise, but it had the right to prescribe and impose terms and conditions. Dillon, Mun. Corp., § 706; Wood, Rys., 2d vol., 986; Elliott, Roads and Sts., 565. When these terms and conditions, proposed by the appellant, were accepted by the appellee and complied with, it became a binding contract. Western Paving and Supply Co. v. Citizens' St. R. Co., 128 Ind. 525, 26 N.E. 188."

In Los Angeles City Water Co. v. City of Los Angeles, 88 F. 720, 731, the court said: "In procuring water, or any other commodity, by purchase, one of the first things to be considered and agreed upon is the matter of price. Therefore, to hold that general power, without limitation, in a municipal corporation, to supply the city with water, does not include power to agree upon price, it seems to me would be a solecism."

The grant in this case may be said to rest upon the business or proprietary power of the city, as distinguished from its governmental or legislative power. City of Indianapolis v. Consumers Gas Trust Co., supra; Illinois Trust, etc., Bank v. City of Arkansas City, 22 C. C. A. 171, 76 F. 271, 34 L. R. A. 518; Safety, etc., Cable Co. v. Mayor, etc., 13 C. C. A. 375, 66 F. 140; State, ex rel., v. Mayor, etc., 19 Mont. 518, 49 P. 15.

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