Town Of Victoria v. Ice

• Decision Date: 21 September 1922
• Citation: 114 S.E. 92
• Court: Virginia Supreme Court
• Parties: TOWN OF VICTORIA. v. VICTORIA ICE, LIGHT & POWER CO.*

114 S.E. 92

TOWN OF VICTORIA.

v.VICTORIA ICE, LIGHT & POWER CO.^*

Supreme Court of Appeals of Virginia.

Sept. 21, 1922.

Sims, J., and Kelly, P., dissenting.

Appeal from State Corporation Commission.

Proceedings by the Town of Victoria against the Victoria Ice, Light & Power Company before the State Corporation Commission. From an order of the Commission assuming jurisdiction and authorizing increased rates for electric current, the Town of Victoria appeals. Affirmed.

N. S. Turnbull, Jr., of Victoria, for appellant.

Geo. E. Allen, of Victoria, and E. Randolph Williams, of Richmond, for appellee.

PRENTIS, J. The town of Victoria complains of orders of the State Corporation Commission of January 3 and January 27, 1921, by which it assumed jurisdiction and authorized the Victoria Ice, Light & Power Company, Inc., to charge consumers in the town rates for electric current furnished them in excess of the maximum rates specified in the ordinance of January 27, 1914. which granted the company the right to con-struct, maintain, and operate its lines under, upon, along, and across the streets, alleys, avenues, bridges, and public grounds within the limits of the town for the purpose of transmitting electricity to consumers of light, heat, and power. The company is a public service corporation, vested with the rights and charged with the duties of such corporations.

The town, by plea and answer, denied the jurisdiction of the Commission, upon the ground that the company is operating under a franchise ordinance adopted and accepted before the 1914 acts (Code, §§ 4054 and 4064) became effective, which by contract irrevocably limits the maximum rates to be charged by the company, so that they can only be increased by consent of the town.

The Commission recognized the rule laid down by this court in Virginia Western Power Co. v. Clifton Forge, 125 Va. 469, 99 S. E. 723, 9 A. L. R. 1148, holding that the Commission has no jurisdiction in such cases, but nevertheless took jurisdiction in this case upon the ground that (under Const. §§ 124, 125) the franchise granted by the town here is invalid because it was not adopted by a vote of three-fourths of all of the members elected to the council.

For the reasons indicated in an opinion this day handed down in the case of Town of Victoria v. Victoria Ice, Light & Power Co. (Va.) 114 S. E. 89, from the circuit court of Lunenburg county, we are of the opinion that the franchise is valid and effective.

The town then challenges the validity of the order increasing the rates to consumers, upon the ground that the ordinance constitutes a contract with the company limiting the rates to be charged, which is inviolable, and confidently relies upon Virginia Western Power Co. v. Clifton Forge, supra, which sustains that view, while the company is here claiming that, notwithstanding the ruling in that case, the ordinance here involved does not constitute such a contract as to rates, and that by the express provisions of the act of 1914 (Code, §§ 4054, 4064 to 4073, inclusive, as amended) the Commission has been vested with plenary power to regulate and prescribe just and reasonable rates, notwithstanding such ordinance. This then raises the ultimate and decisive question in the case.

Under well-established rules, unless section 125 of the Constitution and the corresponding statute, Code, § 3016, confer such unlimited power upon the town to enter in to an inviolable contract establishing the rates specified therein, then clearly that power does not exist.¹ Whether we refer to this provision or to the statute, the language to be construed is identical. Of course, the statute must be construed as subordinate to the other pertinent sections of the Constitution inconsistent therewith. For instance, in section 156c this appears, referring to the State Corporation Commission:

"The Commission may be vested with such additional powers, and charged with such other duties (not inconsistent with this Constitution) as may be prescribed by law, in connection with the visitation, regulation or control of corporations, or with the prescribing and enforcing of rates and charges to be observed in the conduct of any business where the state has the right to prescribe the rates and charges in connection therewith."

This section, unless otherwise qualified, manifestly authorizes the General Assembly to vest the Commission with plenary power to prescribe and enforce rates and charges of all public service corporations, because unquestionably the state has the right to vest the Commission with power to prescribe the rates to be charged in connection with the business of such corporations. This general power, then, can only be limited by a specific contract duly made with some pub-lic service corporation by the state or under its express authority.

The case has this feature, that opposing counsel rely upon the same general propositions of law which are generally accepted, and which have so recently been examined and restated by this court both in the Virginia Western Power Co. Case and in City of Richmond v. Chesapeake & P. Telephone Co., 127 Va. 612, 105 S. E. 127.

We feel impelled to re-examine the precise conclusion reached in the Virginia Western Power Co. Case, and this makes it necessary to restate that conclusion.

It is expressly there held that municipalities in this state have no power, either under the Constitution or general statutes, to prescribe rates (as distinguished from the power to contract therefor) to be charged by any public service corporation; As to contracts, it is there held to be equally well settled that, for the very reason that a contract regulating rates, in its effect, extinguishes pro tanto an undoubted power of government, therefore its existence as well as the authority to make it must clearly and unmistakably appear; and that all doubts must be resolved in favor of the continuance of the power is likewise distinctly and unequivocally recognized in that case—citing Home Telephone & Telegraph Co. v. Los Angeles, 211 U. S. 265, 29 Sup. Ct. 50, 53 L. Ed. 182. Then, citing a number of other cases in which it has been held that certain municipalities have no such contractual power, the opinion proceeds thus:

"It appears in various ways in these causes that the municipalities either were not vested with the power to contract, or, if so, were not vested with that power unlimited. And in the cases of the latter character the limitation on such power, consisting in the reservation of the right of future exercise of the power of regulation, is disclosed in various ways, as where a general state statute providing for the exercise of the continuing power of regulation was in force at the time of the grant of the municipal power in question, or where it otherwise appears that such reservation of such continuing power was made. None of these cases controverts the well-established rule of law above adverted to, namely, that if the municipality which grants a franchise, such as those involved in the cases before us, has expressly conferred upon it by statute the unlimited power to contract with the grantee of the franchise on the subject of fixing the rates which may be charged for public service rendered thereunder during the franchise period, and the municipality does so contract, and the franchise is accepted by the grantee of it, and the grantee acts under it, the contract is irrevocable during its life without the assent of the municipality, as well as of the holder of the franchise, to a change in rates, and the rates cannot be changed in violation of the franchise provisions by the consent of only one party to the franchise contract."

The opinion then holds that Const. § 124, ² does not confer such power to contract as to rates, and that, unless conferred by some other provision or statute, the power does not exist; that, notwithstanding the control of the municipalities over their streets under that section, the power to regulate rates is held to be reserved in the state, which may be infused with life by appropriate legislation, and in such case the initial rates fixed by the franchise as the condition of the consent of the municipality to the occupation of its streets—

"will be taken to have been fixed subject to the reserved power of the state to regulate the rates in the future as the public welfare may demand, and that status will be taken to be so understood by the grantee as well as the grantor of the franchise."

It then proceeds to hold that the statute (Code, § 3016), which is substantially identical with Const. § 125, and based thereon, does confer this unlimited power to enter into inviolable contracts, saying this:

"We see that that section of the Constitution expressly provides that, while nothing therein 'contained shall be construed as preventing the General Assembly from prescribing additional restrictions on the powers of cities and towns in granting franchises * * *' (italics supplied), every franchise, such as those involved in the cases before us, 'shall * * * make * * * provision to secure efficiency of public service at reasonable rates, * * * ' and we see that that is a power to contract as to the rates during the whole franchise period. And no limitation whatever is placed on such power to contract, except that the franchise period is limited so that it may not exceed 30 years, and that the franchise shall be offered for sale after due advertisement, bids therefor to be received publicly in a manner to be provided for by law. There is no question raised in the cases before us but that such requirements were all fulfilled in the granting of the franchises in question. And we see from the reading of the whole of this section that it plainly expresses the intention that, in the absence of such 'other restrictions (on their powers) as may be imposed by law, ' municipalities are intended by this section to be clothed by the Legislature with the unlimited power to...