220 P. 483 | Idaho | 1923
Lead Opinion
— In 1912, which was prior to the enactment of the law creating the Public Utilities Commission, the Beaver River Power Company was granted a franchise by the city of Boise to construct an electrical distribution system in the city for the purpose of supplying electrical energy to the city and its citizens, and, under the franchise, the Beaver River Power Company constructed its system at considerable expense. In consideration of the granting of this franchise by the city of Boise, the Beaver River Power Company agreed to pay the city of Boise, each year during the period of the franchise, a percentage of the gross receipts of the company from its business in Boise, and the city of Boise was given the right, at the expiration of the term of the franchise, to purchase the property installed thereunder. The term of the franchise was twenty years. The Idaho Power Company, one of the respondents herein, subsequently acquired the property of the Beaver River Power Company, including the franchise. Boise City also granted a franchise to another of the predecessors of the Idaho Power Company to construct a system for the distribution and sale of electrical energy in Boise, and, under that franchise, such a system was constructed. Prior to the commencement of these proceedings, therefore, the Idaho Power Company had and owned two franchises and two distribution systems in
The power company, being desirous of removing the duplicate and unnecessary equipment and of dispensing with the necessity of maintaining the same, commenced negotiations with Boise City looking to the cancelation of the franchise of the Beaver River Company. Early in 1920, the parties finally came to an agreement which provided that the Beaver River franchise, held by the Idaho Power Company, be repealed and canceled. At the same time, a street lighting contract was also entered into, and respondents contend that, while in form there were two separate contracts, they were the result of one common and general understanding. It is not apparent, however, that the street lighting contract has any bearing on the question at issue.
This controversy grew out of the Beaver River franchise cancelation contract. The power company filed an application with the Public Utilities Commission asking to be permitted to enter into the contracts. The commission made order No. 672, approving the two contracts. When the city council learned that the commission had made an order relating to the Beaver River franchise contract, being dissatisfied with the order, it asked for a rehearing, which was granted. Evidence was submitted by the parties, and the commission then made its order No. 750, which modified and approved order No. 672. This appeal is from order No. 672 as modified by order No. 750.
For the consideration expressed therein, the city of Boise, in the cancelation contract, agreed:
“To relieve said Company of all of its obligations under said franchise, and to permit it to abandon the same and to dismantle and remove, such as it may desire of, its said substations and distribution systems now maintained as duplicate investments.
*804 “To take formal action and pass a valid ordinance canceling and repealing Ordinances (identifying ordinances to be repealed) .... ”
The cancelation contract also furnishes the following information :
“Whereas, under and by reason of said franchise, the Company is now maintaining duplicate investments in substations and distribution systems within the corporate limits of the said City in value exceeding One Hundred Five Thousand Dollars ($105,000), the operating and investment charges of which are in excess of Twenty-five Thousand Dollars ($25,000) annually as estimated by said Company
In its order No. 672, the commission described the contract as follows:
“A contract 'by which the said City of Boise agrees to cancel and annul a certain franchise expiring in 1932, heretofore granted to the Beaver River Power Company, predecessor in interest of said Idaho Power Company, applicant herein, and to permit applicant to remove certain of its lines and equipment required to be maintained and operated by the terms of said franchise, marked Exhibit ‘B’ of the application. This contract also provides for the payment to said city by applicant of certain sums annually, in lieu of an annual franchise tax imposed by the terms of said franchise. It is shown that to comply with the provisions of said franchise requires applicant to maintain and operate duplicate equipment in the City of Boise of approximate value of $105,000, at an annual cost of about $25,000."
The order of the commission then goes on to say:
“The commission feels that this duplication should be eliminated, not only in the interest of the City of Boise, but also because the saving of $25,000 in operating expenses will be reflected over. applicant’s entire system, and therefore finds that said second contract should be approved. However, the Commission will not permit the payments as set forth in said contract, in lieu of the franchise tax payments, to be charged into the general operating expenses of the*805 Idaho Power Company, applicant herein, as such payments inure to the City of Boise alone, but so long as such payments are made, will require applicant to pro rate same among its patrons within the City of Boise, and collect same from them.”
After ordering that the franchise cancelation agreement “be and the same hereby is approved,” the commission made that portion of its order No. 672 about which the city complains, viz.:
“It is further ordered, that until all payments under this contract have been met and complied with, the Idaho Power Company shall add to the charge for service rendered in January of each year to each patron within the corporate limits of the City of Boise, in proportion to the amount of service rendered such patron, an amount sufficient to aggregate in total the amount to be paid to the City of Boise under such contract during such year, under such a statement as to clearly indicate to the patron the cause of .such charge.”
As a result of a rehearing on the question, the commission, by its order No. 750, modified the foregoing order No. 672 as follows:
“It is therefore ordered, that the Idaho Power Company be, and it is hereby required to prepare and to file with the Commission as of the day when this order shall become effective, such rates, fares and charges for its service as shall serve to offset any preference or advantage which may at such time exist in favor of the city of Boise and against other localities by reason of the franchise granted to the Beaver River Power Company on February 20, 1912, or by reason of the proposed contract for the cancellation of said franchise, and that Order No. 672 be and the same is modified in accordance herewith.”
Under the assignments of error, the power of the commission to mate these orders is questioned. The attorney general appeared on behalf of the commission, as was his duty and right, and argued that, in view of order No. 750, directing the power company to file with the commission such rates
It will not be seriously disputed, we believe, that the law of this state prohibits the creation or the existence of any preference, advantage or discrimination, either in favor of or against any person or corporation, as to rates, facilities, service or charges; and any unreasonable difference as to rates, facilities, service or charges is prohibited, as to localities or classes of service. The law has also conferred very
To sustain its contentions, the power company places great reliance upon the decision of this court in the case of Sandpoint Water & Light Co. v. City of Sandpoint, supra. In that case, the city of Sandpoint had granted a franchise to the water company to construct a water system. A schedule of rates was fixed in the franchise, and the city was to be furnished with water, without cost, for street sprinkling and fire purposes. The commission made an order directing that the city pay the water company, at a rate fixed in the order, ior water for street sprinkling and fire purposes. The commission also directed that the city transfer the fire hydrants to the company and receive a certain sum therefor, to be paid in watei’, the city having paid for the fire hydrants when the system was originally constructed. In this court, the city questioned the power of the commission to make the order, and contended that the order was invalid in that it resulted in the impairment of the obligation of the contract between the city and the water company, and this court said:
“In granting a franchise by which rates are fixed or determined, a municipal corporation is not exercising its own powers, but is exercising only such powers as have been conferred upon it by the state. These powers may be withdrawn at any time. A municipality has no vested right to the continued exercise of such powers, nor can it obtain a vested right in any contract entered into or property acquired through the exercise of such powers as against the right of the state, its creator, to assume complete control of its affairs. (19 R. C. L. 730, 731; 28 Cyc. 282 et seq.; Collingswood Sewerage Co. v. Borough of Collingswood, 91 N. J. L. 20, 102 Atl. 901.) ”
“We express no opinion as to the validity of the order of the commission directing the transfer of the hydrants by the city to the appellant, as this question is not within the issues raised by the pleadings.”
In the Sandpoint case, the court was discussing “a franchise by which rates are fixed or determined,” and this court held that the city of Sandpoint had no right to continue to exercise the power to fix and determine rates, although it had lawfully exercised that power prior to the passage of the public utilities law. The court also said that a municipality could not obtain a vested right in any contract entered into or property acquired through the exercise of power to fix and determine rates as against the right of the state to fix and determine rates. But that decision was limited to contracts or franchises which fixed and determined rates. The court expressly refused to pass upon the validity of that portion of the order directing the city to transfer its water hydrants to the water company, and this fact indicates that the court did not want to be understood as holding that the commission had the power to make that portion of its order.
Conceding, however, for the purpose of the argument, that the Beaver Eiver franchise was such in its nature and terms as to come within the power and jurisdiction of the commission, under the authority of the Sandpoint case, to fix and determine rates, and that the commission, upon a proper hearing, would have been justified in preventing the collection by the power company from its users, and the payment to the municipality, of the agreed percentage of the power company’s gross revenue from the city, such, however, was not the case before the commission, and that is not the case now before this court. We have here, as the commission had before it, a contract, the terms of which are entirely different from the provisions of the franchise. It is a new contract. It was solemnly executed by the authorized rep
It is well settled in this state, under the authority of the Sandpoint decision, that any of the provisions of the franchise, even though valid and enforceable at the time of the granting of the franchise, in conflict with the power of the state as expressed in the utilities law, became valueless and unenforceable upon the enactment of such law. However, the inclusion within the terms of a franchise- of an invalid provision did not necessarily render invalid all other provisions of the franchise. Provisions of the franchise not in conflict with the utilities law were not affected by the enactment of the utilities law. The important question, therefore, is to determine whether or not any right reserved to the city in the franchise which the city has contracted to surrender remained valuable and enforceable upon the passage of the utilities law. Under the facts in this case, we cannot see how the naked right reserved to the city to purchase the Beaver River equipment upon the termination of the period of the franchise, -upon the passage of the utilities law, constituted any preference or advantage in favor
In the case of Chicago v. O’Connell, 278 Ill. 591, 116 N. E. 210, 8 A. L. R. 916, the Illinois supreme court had before it a question somewhat similar to that here under discussion, and said:
“Appellees contend, however, that the settlement ordinances and the unification ordinance, having been accepted and acted upon by the railway companies, constitute binding contracts between the city and the railway companies, and that their obligation cannot be impaired by any act of the legislature or by any order of the State Public Utilities Commission. Appellees’ contention is undoubtedly sound so far as the contracts relate to matters which do not affect the public safety, welfare, comfort or convenience. Thus, the grant of the right to the railway companies to construct and operate street railways in the city, the agreement to divide the net receipts between the railway companies and the city and the option given to the city to purchase the railway properties at a certain price are all matters which do not affect the public safety, welfare, comfort or convenience, because it is immaterial to the public what person*811 or corporation operates the street railways or what disposition is made of the profits, and over those matters neither the State nor the State Public Utilities Commission has any control by virtue of the police power.....”
As a matter of fact, the lighting contract hereinbefore referred to, which was entered into by the city and the power company at the same time as the cancelation contract, contained a provision giving the city of Boise the right to purchase the equipment to be erected under that- contract at a valuation to be fixed by the utilities commission. If the right vested in Boise City to purchase the Beaver River equipment became void and unenforceable upon the passage of the utilities law, why does the power company continue to make such unlawful and unenforceable agreements, and why was such an agreement approved by the utilities commission, in the lighting contract, in orders 672 and 750? The naked right to purchase the Beaver River equipment upon the termination of the franchise was a valid, valuable property right, and it did not constitute an advantage or preference so as to render it invalid upon the passage of the utilities law of this state.
Even though the right to purchase the Beaver River system at the end of the period of the franchise did not constitute such an advantage or discrimination as is prohibited by the utilities law, did the fact that it later became necessary, under the franchise, to expend approximately $25,000 per year to maintain equipment in Boise, which became duplicate and unnecessary 'because of the consolidation of the two systems, constitute such an advantage or discrimination, under the utilities law, as to make void the provision of the franchise giving Boise City the right to purchase the Beaver River equipment? The fact that the power company had duplicate and unnecessary equipment in Boise was not due to the Beaver River franchise. Boise City was not responsible for it. It was the result of the consolidation of the two systems, for which the power company alone was responsible. The power company, after its purchase of the Beaver River system and its consolidation with the other
Concluding, as we have, therefore, that Boise City was in nowise responsible for the duplicate equipment, that it was neither provided for in the franchise nor contemplated by the parties at the time of the granting of the franchise, but that it resulted from the consolidation of the two systems, on account of which the power company alone is chargeable, it follows that, under the public utilities law,
The commission seemed to be impressed with the importance of the idea that the consideration of the cancelation agreement merely constituted the payment to the city, under a different name, of the percentage of the gross revenue provided in the original franchise. The fact that the sum finally agreed upon as the consideration of the cancelation agreement appears to be approximately the same in amount as the estimated balance that was to have been paid to the city under the franchise is not important as we view the case. The principle involved would be the same if the consideration to be paid the city had been $100,000 or $500 or any other sum. As to the manner in which the amount of the consideration came to be agreed upon, Mayor Eagleson testified:
‘1Q. In arriving at this amount you estimated what amount the franchise would be if continued as at present ?
“A. Yes, sir.
“Q. And agreed on that amount?
“A. That was the lowest figure we talked of. We had other things in mind and talked over but we generally came down to the franchise. Mr. Putnam came up to the franchise tax from the $14,000 offer to $35,600, and we came down from ours to that thing as a basis.”
The estimated amount the city expected to' receive under the provisions of the franchise naturally furnished a basis for negotiation between the parties. However, they finally agreed that the power company would pay the city $35,594.73 in consideration of the surrender by the city of its rights under the franchise.
When the power company purchased the system and franchise of the Beaver River Company, it not only purchased certain equipment which, because of the consolidation of the
“Our province and duty go no further than to see that the cost of these benefits does not fall on those who receive no benefit from them.....’’
With this conclusion of the commission, this court is in full accord. But how does it especially benefit a user of electricity in Boise that the power company has a full and complete title to the Beaver River property, rather than a title burdened as hereinbefore pointed out, or that the power company be enabled to remove duplicate equipment from Boise and sell or use the same in some other section of the state ?
The orders of the commission, in effect, informed the city that the purposes of the cancelation agreement met with the approval of the commission, but that, it being inequitable and unfair for the power company to collect revenue from its users throughout its entire territory with which to pay the city of Boise the consideration for the cancelation agree
In the cancelation contract, the city of Boise surrendered at least one valuable property right, viz., the right to purchase the Beaver River equipment; and the surrender of this right was sufficient to support the consideration therein agreed to be paid to the city by the power company. The cancelation contract was entered into willingly by the power company; in fact, the record shows that the power company was the moving spirit in securing the execution of the contract, which it has tried so ably to have rendered ineffective. The contract is in writing. There can be no doubt as to its terms and meaning. No valid reason has been furnished this court which would justify relieving the Idaho Power Company of the obligation which it willingly assumed. It necessarily follows, therefore, that the orders of the commission directing that consideration of the cancelation contract be collected in any manner, either directly or indirectly, from any customers of the Idaho Power Company in the city of Boise, are beyond the power of the commission, and are void. Such orders, to the extent above set forth, are reversed and set aside.
Appellant will recover its costs.
Concurrence Opinion
Concurring Specially. — The opinion assumes the validity of the contract canceling the Beaver River Company franchise because appellant had the right to sell and respondent power company had the right to buy, a re
The validity of the contract is not expressly before us for decision, no appeal having been taken from the order of the Public Utilities Commission which approves it, and the question not being within the issues. In the briefs certain questions are raised arguendo touching the validity of the contract. These questions should be passed upon when, if ever, they are directly raised in an appropriate proceeding. They should not be passed on, even inferentially, unless it is necessary to do so. I do not think it is for this reason. If the contract be invalid, the result is the same. If respondent company be not bound to pay the consideration to appellant by reason of invalidity of the contract, it certainly cannot do so and then charge it back to the consumers.
In any event the commission erred in making the orders appealed from. I concur in the conclusion reached.
