Western States Utilities Co. v. City of Waseca, 36341

• Decision Date: 28 May 1954
• Docket Number: No. 36341,36341
• Citation: 65 N.W.2d 255,242 Minn. 302
• Court: Minnesota Supreme Court
• Parties: , 6 P.U.R.3d 324 WESTERN STATES UTILITIES CO. exercise of the police power or of CITY OF WASECA et al.

Page 255

65 N.W.2d 255

242 Minn. 302, 6 P.U.R.3d 324

WESTERN STATES UTILITIES CO. exercise of the police power or

of

CITY OF WASECA et al.

No. 36341.

Supreme Court of Minnesota.

May 28, 1954.

Rehearing Denied July 29, 1954.

Syllabus by the Court.

1. The legislature possesses plenary power to regulate the rates charged by public service corporations under its police powers, and although this power may be delegated to municipalities by home rule charters, such delegated powers are always subject to the paramount power of the legislature and may be suspended or abrogated whenever the legislature sees fit to exercise its reserve power.

2. When the legislature delegates the power and authority to regulate rates to be charged by public service corporations, this authority, power, and duty is limited by and subject to the terms and limitations stated in the enabling legislation.

3. In the absence of express legislative authority, a Minnesota municipality cannot deprive itself by contract of any governmental powers delegated to it by the legislature for public purposes.

4. Where the legislature has delegated certain powers and duties to the governing body of a municipality, in the absence of express legislative command, regulations duly enacted pursuant thereto need not be submitted to the electorate for approval.

5. Where a portion of a municipal ordinance is held invalid, if the remainder of said ordinance is in harmony with the statute authorizing such regulatory ordinance and the ordinance is not rendered ineffective by the deletion of the offending portion, the balance of said ordinance is not vitiated but will remain in full force and effect.

6. The requirements of Minn.Const. art. 4, § 27, M.S.A., are satisfied if an act does not include legislation which by fair intendment cannot be considered germane to the subject expressed in the title.

Franklin M. Stone, Moonan, Moonan, Friedel & Senn, Waseca, Doherty, Rumble & Butler, St. Paul, for appellants.

Gallagher & Madden, Waseca, Robert J. Sheran, Miles B. Zimmerman, Mankato, Faegre & Benson, Minneapolis, for respondent.

NELSON, Justice.

This proceeding is brought under the uniform declaratory judgments act, M.S.A. c. 555. Plaintiff is a public utility corporation engaged in the business of distributing natural gas in the city of Waseca, Minnesota, a city of the fourth class operating under a home rule charter since the year 1904. Individual defendants named in the proceedings were the municipal officers of the city and members of its city council. Plaintiff, as a utilities company, operates under the terms of Waseca Ordinance No. 266, enacted by the Waseca city council April 8, 1947, and duly approved by the voters pursuant to charter requirements, which was thereafter accepted by plaintiff's predecessor in interest. We are concerned here with the provisions of Waseca City Charter, chapter X, regulating franchises and especially with § 1 thereof, which defines the power and authority of the common council in the franchise field; § 2, which states the manner in which they are granted, extended, or amended; § 8, which provides that the common council of the city shall have and possess full power and authority at all times to regulate the rates and charges of every public service and utility concern in said city operating under any franchise or privilege granted by such city and to require the same to be made and kept on a fair, reasonable, and just basis at all times; ¹ and § 10 thereof, which provides that the charter shall be a part of any franchise-ordinance. ²

The provisions of ordinance No. 266 which are material to this action are to be found in § 5, which, after stating that the net rates to be charged for gas shall at all times be fair and reasonable, sets up a schedule of rates; § 6, whereby the common council reserves the right by ordinance or resolution to change the rates; ³ § 10, which imposes a limitation on the schedule of rates; ⁴ and § 12 thereof, which provides that the provisions of chapter X of the city charter dealing with franchises are incorporated in and made a part of ordinance No. 266 to the same extent as if said chapter X had been fully set forth therein.

By resolution dated March 8, 1949, the city council permitted the gas company to continue charging the rates specified in ordinance No. 266, even though such rates exceeded those then in force in Albert Lea, Minnesota, and were therefore in violation of § 10 of said ordinance. On October 10, 1950, the city council by resolution granted an increase in rates, after reciting that the rates specified in ordinance No. 266 did not produce a fair and reasonable rate and that § 10 of said ordinance was apparently inconsistent with §§ 5 and 6 thereof and § 8 of chapter X of the city charter. On January 8, 1951, the city council passed a resolution reciting in effect that said § 10 was inconsistent with §§ 5 and 6 of the ordinance and § 8 of chapter X of the city charter and submitted to the voters the question of repealing § 10 of the ordinance and enacting in lieu thereof a provision that rates shall be 'fair, reasonable and just.' This proposed amendment was rejected by the electorate.

On June 18, 1952, plaintiff presented a petition to the city council requesting an increase in rates, alleging that the cost of gas to it as a utility buying in the open market made it impossible to realize a fair and reasonable return under the present rates. But in view of the retention of § 10 of the ordinance by the voters, the city council refused to consider the petition until plaintiff first established that the proposed increase would not fix the Waseca rates above those charged in Albert Lea for the same class of service and has since continued in its refusal to act on the petition.

Plaintiff then commenced the present action, seeking to have § 10 of ordinance No. 266 declared invalid and unconstitutional due to its inconsistency with all other charter and ordinance provisions and praying for an order directing the city council to consider plaintiff's application for a rate increase. The trial court found for plaintiff, determining and adjudging § 10 of ordinance No. 266 inconsistent with all other governing provisions and invalid and ordering the city council to consider plaintiff's application for a rate increase, pursuant to L.1919, c. 469, and the provisions of the city charter and the ordinance, insofar as those provisions are not in conflict with said statute. The court found that chapter X of the city charter and ordinance No. 266, after elimination of § 10 therefrom, were not in conflict with but governed by and subject to the provisions of L.1919, c. 469, M.S.A. §§ 454.041 to 454.043. ⁵ Defendants now appeal from the lower court's order denying their motion for amended findings or a new trial.

The issues on appeal are whether § 10 of ordinance No. 266 is valid in view of the provisions of chapter X of the home rule charter of the city of Waseca and the statutory provisions of L.1919, c. 469, and whether the plaintiff is estopped from questioning the validity of § 10 of said ordinance No. 266. Whether the city council can be ordered to entertain the plaintiff's petition for rate increases in accordance with L.1919, c. 469, depends upon the answer to the above issues which are basic in this proceeding.

1. It is well established in this state that the legislature may regulate the rates for services rendered by a business concern affected with a public interest and that the fixing of public utility rates is a legitimate legislative exercise of the police power or of its reserve power. This power is not exhausted by a single exercise thereof but is of a continuing nature and may be exercised repeatedly when the occasion requires. ⁶

L.1915, c. 152, M.S.A. § 237.01 et seq., placed all telephone companies doing business in the state under the supervision and control of the railroad and warehouse commission and provided that any telephone company holding a franchise from a municipality when the law became effective could surrender that franchise and receive in lieu thereof from the commission an indeterminate permit to occupy the streets of the municipality with its lines. In State ex rel. Tri-State Tel. & Tel. Co. v. Holm, 138 Minn. 281, 164 N.W. 989, this court held that no private proprietary right, vested in a village through a prior franchise, was impaired by such a surrender tendered pursuant to the statute. That opinion definitely established that regulation of public utilities is a proper legislative exercise of the police power. As stated by the court in that decision in a quotation from Cortelyou v. Anderson, 73 N.J.L. 427, 431, 6o A. 1095, 1097, 'the constitutional limitations which prevent the Legislature from impairing the obligation of a contract do not debar it from annulling obligations due to the public.'

Mr. Chief Justice Hughes, speaking for the court in W. B. Worthen Co. v. Thomas, 292 U.S. 426, 432, 54 S.Ct. 816, 818, 78 L.Ed. 1344, 1347, 93 A.L.R. 173, while referring to the holding in Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413, 88 A.L.R. 1481, which affirmed a decision appealed from this court, stated:

'* * * the constitutional prohibition against the impairment of the obligation of contracts did not make it impossible for the State, in the exercise of its essential reserved power, to protect the vital interests of its people. The exercise of that reserved power has repeatedly been sustained by this Court as against a literalism in the construction of the contract clause which would make it destructive of the public interest by depriving the State of its prerogative of self-protection.'

Mr. Justice Holmes, speaking for the court in Block v. Hirsh, 256 U.S. 135, 157, 41 S.Ct. 458, 460, 65 L.Ed. 865, 871, 16 A.L.R. 165, stated:

'* * * if the public interest be established the regulation of rates is one of the...