Pocahontas v. Central Power and Light Company

• Citation: 244 S.W. 712,152 Ark. 276
• Decision Date: 27 February 1922
• Docket Number: 187
• Parties: POCAHONTAS v. CENTRAL POWER AND LIGHT COMPANY
• Court: Supreme Court of Arkansas

244 S.W. 712

152 Ark. 276

POCAHONTAS v. CENTRAL POWER AND LIGHT COMPANY

No. 187

Supreme Court of Arkansas

February 27, 1922

Appeal from Randolph Circuit Court; Dene H. Coleman, Judge on exchange; reversed.

STATEMENT OF FACTS.

The Central Power & Light Company brought this suit in the circuit court under the statute against the mayor and common council of the town of Pocahontas to review and set aside an order made by them prescribing the rates for electric current for light and other purposes, to consumers in the town of Pocahontas, and to enjoin them from putting into effect said rates.

L. R Martin and other consumers of electricity in the town of Pocahontas were made parties defendants to the action because they had brought a suit in the chancery court against the Central Power & Light Company to restrain it from putting in force a schedule of increased rates.

On the third day of December, 1912, the town of Pocahontas, by an ordinance, granted to W. H. Skinner the exclusive right to operate and furnish electric lights to said town and the inhabitants thereof for a period of twenty-five years. W. H Skinner accepted the franchise granted by said ordinance and transferred his rights thereunder to the Central Power & Light Company, a corporation, which succeeded to his rights in the premises.

The Central Power & Light Company applied to the Arkansas Corporation Commission for an increase of rates for furnishing electric light to the town of Pocahontas and its inhabitants. The Arkansas Corporation Commission at first granted to said Central Power & Light Company an increase of rates, but no surrender of franchise was offered by said company, or demanded by said Arkansas Corporation Commission.

On application of the town of Pocahontas, the Arkansas Corporation Commission set aside its order and granted a re-hearing in the matter. Pending the rehearing, the act of the Legislature of 1919, creating the Arkansas Corporation Commission, was repealed and an act passed creating the present Railroad Commission. The latter act was approved February 15, 1921, and under it municipalities were granted the power to fix the rates to be charged by public utility companies operating in their limits, under certain conditions which are prescribed and provided for in the act. When the Arkansas Corporation Commission set aside its order granting to said Central Power & Light Company the right to increase its rates, it provided that the company might continue the new rates in force for a period of six months upon executing a bond provided for by the statute.

On April 4, 1921, the town council of Pocahontas passed a resolution fixing the rates to be charged by said Central Light & Power Company at the amount authorized by the franchise under which it operated. This was the amount which the company had charged prior to the order made by the Arkansas Corporation Commission. The company appeared and opposed the change of rates by the town council.

The Central Power & Light Company then appealed to the circuit court, and, hearing the proof, the circuit court found that the Central Power & Light Company was entitled to an increase of rates, and the court fixed the amount of the increase. The court found that the Central Power & Light Company never surrendered its rights under its franchise to the Arkansas Corporation Commission. The court further found that the Arkansas Corporation Commission had never issued to the Central Power & Light Company an indeterminate permit, as provided by the act creating said commission.

A judgment was rendered accordingly, and to reverse that judgment the town of Pocahontas has duly prosecuted an appeal to this court.

Judgment reversed, and cause remanded. Motion denied.

Schoonover & Jackson and Pope & Bowers, for appellants.

The franchise granted by the town of Pocahontas to W. H. Skinner and accepted by him, constituted a contract, and was binding on both parties. 141 Ark. 18; 80 Ark. 108; 211 S.W. 664; 101 Ark. 223; McQuillan on Municipal Corporations, vol. 4, par 1672.

A contract once entered into cannot be changed except by consent of parties, and neither can that change be affected by legislative enactment.

There was no legal or sufficient proof to show that the rates fixed were unreasonable.

A city council, in the exercise of its legislative power in granting a water and light franchise, is vested with a discretion which can be controlled by the courts only after abuse. 138 Ark. 390.

Ponder & Gibson, for appellee.

Defendant waived its rights under section 23 of act 124 of the Acts of 1921. Contractual conditions are subject to waiver and estoppel. 28 Cyc. 683; 131 Mich. 52; 99 A.D. 588. A contract may be modified or a waiver of conditions can be made by a municipal corporation. 122 F. 332; 1 Dillon on Municipal Corporations (4th Ed.) sec. 451; 21 N.Y. 199. Contracts between municipalities and public utilities are governed by the same rules of law as those governing contracts between private corporations and individuals. 28 Cyc. 679; 138 Ark. 394. A contract between a municipality and a public service company may be modified by mutual consent. McQuillan on Mun. Corp., vol. 4, par. 1717; 101 Ark. 223.

The construction placed upon section 23 of the act is not the proper one. 101 Ark. 204.

A statute should be construed so as to best answer the intention the maker had in view. 3 Ark. 285. See also on the Construction of Statutes, 5 Ark. 536; 13 Ark. 52; 25 Ark. 101; 27 Ark. 419; 76 Ark. 303; 31 Ark. 119; 115 Ark. 194; 120 Ark. 510; 102 Ark. 205; 82 Ark. 392; 186 S.W. 604; 124 Ark. 20; 124 Ark. 475.

The act was legal and binding. 145 Ark. 205; 54 Ark. 112.

All contracts made by municipalities and utilities are made subject to regulation under the police power. 141 Ark. 18.

Rates fixed by the city council are presumed to be reasonable. 54 Ark. 112.

The plaintiff is entitled to a reasonable return on the value of its property devoted to public use. 212 U.S. 19; 141 Ark. 25; 104 Ark. 227; 105 Wis. 651; 138 Ark. 394; 145 Ark. 205.

OPINION

HART, J., (after stating the facts).

This is an appeal from a judgment of the circuit court under a holding that the electric light rates established by the town of Pocahontas under the provisions of act No. 124 of the General Assembly of 1921, after due notice to the Central Power & Light Company, are unreasonable and confiscatory, and approving the rate named by said Central Power & Light Company and put in force by it in furnishing electricity to consumers in the town of Pocahontas.

The Arkansas Corporation Commission was abolished by the act in question, and jurisdiction was conferred upon municipal councils to regulate the rates of public utilities operating within the limits of such municipalities. General Acts of 1921, p. 177.

We will first review the general principles of law governing cases like the present one. It is elementary law that when a municipal corporation by an ordinance gives its consent to a public service corporation to enter the municipality and furnish electricity or gas to consumers upon terms and conditions which are accepted in writing by the public service company, such action by both parties constitutes a contract, and the rights of the parties thereunder are to be determined by the contract itself.

It is equally well settled that while franchise rate contracts as between the parties themselves are binding, still the right to regulate the rates of public service corporations is a governmental power vested in the State in its sovereign capacity. The reason that the regulation of such rates is an attribute of sovereignty is that such regulation is for the purpose of promoting the health, comfort, safety, and welfare of society and is therefore an exercise of the police power. The State may exercise the power directly or through a commission created by it; or the State may delegate such power to a municipality. The right of the State to regulate the rates of public service corporations by compulsion under the police power, should not be confused with the right of a city to exercise its contractual power to agree with a public service company upon the terms of a franchise or a change of rates under it.

This distinction has been recognized by this court in its various decisions on the subject. In Ark. Light & Power Company v. Cooley, 138 Ark. 390, 211 S.W. 664, it was held that a franchise granted by a city council to a public service company to supply water and light to the city and its inhabitants at certain rates, when accepted, becomes a contract between the municipality and the public service company, and the terms and conditions therein are binding on the municipality and company.

The court further held that a franchise granted by a city to a public service corporation to furnish water and electric lights to consumers in the city, being a contract between the city and the corporation, may be modified by an ordinance raising the water and light rates, when accepted by the corporation.

Again, in Lonoke v. Bransford, 141 Ark. 18, 216 S.W. 38, the court held that contracts between municipal corporations and public utilities are placed in the same category with contracts between individuals, and that the enforcement thereof can not be interrupted upon the grounds that they will result in the bankruptcy of the utilities, any more than the enforcement of contracts by individuals could be rescinded on such grounds.

The court further held that the only remedy for such a condition was a modification of the rates by mutual consent, and that under the statute then existing a municipal corporation only had the power to revise downward rates established in a franchise without the consent of the public...