Sandpoint Water & Light Co. v. City of Sandpoint

• Decision Date: 28 June 1918
• Citation: 173 P. 972,31 Idaho 498
• Parties: SANDPOINT WATER & LIGHT COMPANY, LTD., a Corporation, Appellant, v. CITY OF SANDPOINT, a Municipal Corporation, Respondent
• Court: Idaho Supreme Court

173 P. 972

31 Idaho 498

SANDPOINT WATER & LIGHT COMPANY, LTD., a Corporation, Appellant, v. CITY OF SANDPOINT, a Municipal Corporation, Respondent

Supreme Court of Idaho

June 28, 1918

POLICE POWER-PUBLIC UTILITIES-MUNICIPAL CORPORATIONS-IMPAIRMENT OF CONTRACTS.

1. Power to supervise and regulate rates or charges for services rendered by public utilities is an inherent function of government, the existence of which does not depend upon its exercise by the state at any particular time.

2. In the absence of constitutional limitations the right of the state to regulate rates may be suspended for a limited time by a valid contract authorized by the supreme legislative branch of the government, but when reliance is made upon such a contract it must appear that the authority was granted in clear and unmistakable language, free from any doubt as to the delegation of authority.

3. In this state no authority exists to enter into contracts which will in any manner abridge the power of the state to regulate rates of public utilities.

4. A municipal corporation of the state cannot question the right of the state to exercise its police power in the regulation of rates on the ground that by so doing it would impair the obligation of a contract.

[As to validity of statute conferring upon public service commission power to fix rates for public service corporations, see note in Ann.Cas. 1917C, 57]

APPEAL from the District Court of the Eighth Judicial District, for Bonner County. Hon. R. N. Dunn, Judge.

Action to recover water rentals. Judgment for defendant. Reversed.

Judgment reversed. Costs awarded to appellant.

A. H Conner and Herman H. Taylor, for Appellant.

Franchise ordinances between municipalities and public utilities do not come within the contract clause of the constitution of the United States, and do not abrogate or prevent the exercise by the state of its police power in any manner it may consider just and proper. (Idaho Power & Light Co. v Blomquist, 26 Idaho 222, Ann. Cas. 1916E, 282, 141 P 1083; State v. Superior Court, 67 Wash. 37, Ann. Cas. 1913D, 78, and notes, 120 P. 861, L. R. A. 1915C, 287; City of Woodburn v. Public Service Commission, 82 Ore. 114, Ann. Cas. 1917E, 996, 161 P. 391, L. R. A. 1917C, 98.)

The constitutional provision does not apply to municipal contracts affecting the safety and welfare of the public. (2 McQuillin on Municipal Corporations, sec. 753, p. 1632, and cases cited; Knox v. Lee (Legal Tender Cases), 12 Wall. (U.S.) 457, 550, 20 L.Ed. 287, 312.)

E. W. Wheelan and Peter Johnson, for Respondent.

The law in force at the time of the making of a contract and in any manner affecting it enters into and becomes a part of the contract, and cannot be repealed or altered so as to affect the obligation of the contract or to impair rights vested under those laws. (Fletcher v. Peck, 10 U.S. (6 Cranch) 87, 3 L.Ed. 162; Trustees of Bishop's Fund v. Rider, 13 Conn. 87; New Jersey v. Wilson, 7 Cranch (U.S.), 164, 3 L.Ed. 303; Howard v. Jones, 50 Ala. 67, 69; Watson v. Rose's Exrs., 51 Ala. 292, 300; English v. Oliver, 28 Ark. 317, 334; Columbus County Commrs. v. King, 13 Fla. 451, 474; State v. Walsh, 31 Neb. 469, 476, 48 N.W. 263, 265; Munday v. Assessors of City of Rahway, 43 N.J.L. 338, 340; Moore v. State, 43 N.J.L. 203, 217, 39 Am. Rep. 558, 570; Homestead Cases, 22 Gratt. (Va.) 266, 287, 288, 12 Am. Rep. 507, 514, 515; United States v. Quincy, 4 Wall. 535, 549, 18 L.Ed. 403, 408; Pond on Public Utilities, secs. 91-98.)

"The rules applicable to legislative franchises which constitute contracts, are alike applicable to ordinances granting franchises which are 'laws' and which, upon acceptance by the grantee, constitute contracts. No subsequent ordinance which constitutes a law can impair their obligations." (2 McQuillin on Municipal Corporations, sec. 759; 12 R. C. L. p. 179; State v. Real Estate Bank, 5 Ark. 595, 41 Am. Dec. 109; Peterson v. Tacoma Ry. & Power Co., 60 Wash. 406, 140 Am. St. 936, 111 P. 338; People v. State Board of Tax Commrs., 174 N.Y. 417, 105 Am. St. 674, 67 N.E. 69, 63 L. R. A. 884; City of Indianapolis v. Indianapolis GasLight & Coke Co., 66 Ind. 396.)

RICE, J. Budge, C. J., and Morgan, J., concur.

OPINION

RICE, J.

In the month of January, 1904, the respondent city granted appellant's predecessors a franchise for the construction and operation of a water system in the city of Sandpoint. This franchise was subsequently assigned to appellant, and since the assignment appellant has continuously exercised the rights acquired thereunder. A schedule of rates was fixed in the franchise for various classes of private consumers, but a further provision was contained therein whereby the grantee was to furnish water to the city free of charge for street sprinkling and to the extent of its means in case of fire or other great necessity. In February, 1914, the respondent city commenced a proceeding before the public utilities commission for the purpose of readjusting the water rates charged by appellant in the city of Sandpoint. On October 2, 1915, the commission entered its order, which by its terms became effective November 1, 1915. In this order the rates to be charged for services rendered by the water company to private consumers were determined, and it was also ordered that water should no longer be furnished to the city of Sandpoint for street sprinkling or fire protection free of cost, and a rate of $ 4.25 per month per hydrant for fire protection and five cents per thousand gallons for street sprinkling was fixed. When the water system was constructed the city furnished and paid for the water hydrants as provided for in the franchise. The commission by its order directed the city to transfer the fire hydrants to appellant, and directed appellant to credit the city with the value thereof as fixed by the commission. The appellant furnished the city with water for seventy-four hydrants at all times subsequent to the taking effect of the said order, and credited the city with the value of the hydrants as so established. After the water rentals for the hydrants exceeded the amount which had been credited to the city for hydrants, bills for water were presented to the city and were paid for several months. The city, however, refused to pay the bills for water for the months of October and November, 1916, and thereupon this action was commenced by appellant to recover the same.

The issue raised by the answer relates to the authority of the utilities commission to revoke the right of the city to receive water free of charge under the franchise, and to fix a hydrant rental or a rate for street sprinkling. A trial was had before the court without a jury, findings of fact and conclusions of law were made and judgment entered in favor of the city. The appeal is from the judgment.

The court found that the franchise granted by the respondent to appellant's predecessors, with the acceptance thereof, constituted a contract, and that the contract remains in full force and effect; also that the order of the public utilities commission requiring the city to pay the water company the sum of $ 4.25 per each calendar month for water furnished each hydrant, and in attempting and purporting to compel the respondent to pay appellant for street sprinkling and fire protection, was null and void and of no force or effect.

It is held uniformly and universally that the power to supervise and regulate rates or charges for services rendered by public utilities is an inherent function of government, and occupies a large place within the domain of the police powers of the state. The existence of this power does not depend at all upon the question as to whether or not it is being exercised by the state at any particular time. (Idaho Power & L. Co. v. Blomquist, 26 Idaho 222, Ann. Cas. 1916E, 282, 141 P. 1083; City of Woodburn v. Public Service Commission, 82 Ore. 114, Ann. Cas. 1917E, 996, 161 P. 391, L. R. A. 1917C, 98; State v. Superior Court, 67 Wash. 37, Ann. Cas. 1913D, 78, 120 P. 861, L. R. A. 1915C, 287; Winfield v. Public Service Commission (Ind.), 187 Ind. 53, 118 N.E. 531; City of Manitowoc v. Manitowoc & N. T. Co., 145 Wis. 13, 140 Am. St. 1056, 129 N.W. 925; Home Tel. & Tel. Co. v. City of Los Angeles, 211 U.S. 265, 29 S.Ct. 50, 53 L.Ed. 176; Milwaukee Elec. Ry. & L. Co. v. Railroad Commission, 238 U.S. 174, 238 U.S. 174, 35 S.Ct. 820, 59 L.Ed. 1254; City of Benwood v. Public Service Commission, 75 W.Va. 127, 83 S.E. 295, L. R. A. 1915C, 261.) Such power is properly exercised through a commission created by the legislature. (Idaho, P. & L. Co. v. Blomquist, supra.)

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