Kaukauna Electric Light Co. v. City of Kaukauna

114 Wis. 327 | Wis. | 1902

Lead Opinion

The following opinion was filed March 11, 1902:

Dodse, J.

The ordinance or contract serving as the basis of the rights of the respective parties in this case is one of a character now become very common in this state, where the city acts in a twofold capacity. First, as a governmental body exercising delegated power of the state, it confers, and limits with conditions, the privilege or franchise to use the public streets, under authority of sec. 1780b, Stats. 1898. State ex rel. Rose v. Superior Court, 105 Wis. 651, 673, 81 N. W. 1046; State ex rel. Att’y Gen. v. Portage City Water Co. 107 Wis. 441, 445, 83 N. W. 697. It is true that no sucb authority had been delegated when, in 1889, this ordinance was enacted, and it was perhaps originally void. This want of authority with reference to electric lighting companies was, however, supplied by ch. 192, Laws of 1893, which probably may be considered as ratifying the original ordinance. In addition to this function as an agent of the state, however, the city, in the same instrument or ordinance, exercises its function as a business corporation, with power to purchase, contract for, and pay for electric lights for public purposes, and to specify the conditions of such com tracfcing, — a power arising under its own charter. In the argument in this case, as in the ordinance itself, these two functions are greatly confused, and it is not always easy to separate those provisions which pertain to the one portion or the other of the instrument. In the formulation of such a document, reciprocal duties are usually imposed both upon the grantee of the franchise and upon the city. Some of these duties or conditions clearly relate exclusively to the subject of the franchise. Others with equal clearness may apply only to the contractual and commercial duty of supplying lights to: the city, to be paid for when so supplied. Other provisions, conditions, and covenants may be of a mixed character, possibly applicable to both phases, so that their disobedience would at once constitute a breach of the plaintiff’s contractual duty, which forms the basis of the city’s promise to pay, and also a breach of the conditions upon which it holds its franchise from the state to occupy the public streets.

The plaintiff’s action is predicated wholly upon the commercial contract embodied in the original ordinance and in the supplemental contract with reference to arc lights. The city’s defense thereto is breach by the plaintiff of several of the obligations which it assumed. In- dealing with this street-lighting contract, the parties stand purely and simply ■as contractors, governed by the same rules of law which gov•ern private contractors, except so far as the known situation ■of each may control the interpretation of their mutual promises. The company is to do certain things as a consideration of the city’s promise to pay, and, as in the case of any other contract, the city’s duty to pay arises only on performance of such of the undertakings of the company as can be fairly said to constitute essential consideration therefor. This consideration makes it necessary to examine the various failures of duty on the part of the plaintiff alleged and found to have occurred, in order to ascertain whether any of them were fairly germane to the contractual aspect of the ordinance, and conditions precedent to the duty of the city to perform its part of that contract.

The obligations and conditions assumed by the company, and breached by it, which the answer sets up by way of defense, are four: first, that the company has failed and refused to place underground its wires when ordered so to do by the common council; second, that it has failed and refused to paint its poles in the manner required by a city ordinance; third, that it has failed and refused, to give a new bond as demanded by the city; and, fourth, that it has failed and refused to instal incandescent street lamps when and where demanded by the council.

As to the first two of these, — the burying of the wires and the painting of the poles, — we deem it entirely clear that they have no relation to the mere commercial contract of purchase and sale of lights; that they pertain wholly to the .gift and continuance of the franchise to use the streets, if, indeed, the painting of poles can be deemed a condition of tire original Ordinance at all. They do not in any wise affect the interests of the city as a buyer of public lighting. They may affect its nnmieipal government and policy as to the care and protection of the streets, bnt in that respect they are relevant only to the propriety of the continuance of the plaintiff’s franchise to nse the streets. Hence we conclude that their performance or breach is in no wise material to the lighting contract; that, if any penalty results to the plaintiff therefrom, it is a forfeiture of its franchise, which can be enforced only at suit of the state. State ex rel. Att’y Gen. v. Madison St. R. Co. 72 Wis. 612, 40 N. W. 487; Wright v. Milwaukee E. R. & L. Co. 95 Wis. 29, 36, 69 N. W. 791. So long as the state allows that franchise to continue in existence, if the company duly performs its promise to furnish lights in the manner prescribed by the ordinance, it arouses the duty of the city to pay therefor according to its promise.

The agreement of the plaintiff to give and, whenever requested, to renew a bond conditioned to indemnify and save harmless the city from all damages which may in any way arise or grow out of the exercise by said grantee of the privileges granted, and for the faithful compliance by the company with all the terms and provisions of the ordinance, has a more complex'aspect. Damages may arise to the city both from the exercise of the franchise and from the manner of performing the lighting contract. The poles may be so placed or so out of repair as to constitute defects in the highway, and subject the city to liability, or impose upon the city otherwise unnecessary expenses in the maintenance of the streets. In this aspect it is germane alone to the franchise granted by the state, through the agency of the city. But damages may also arise from breaches in the performance of the duty to supply street lighting. The city may thereby be put to expense for purchase of lights deemed by it necessary, and otherwise suffer damage of the same character as would arise if there were purely and simply a lighting contract, disassociated from the franchise. Hence, if properly demanded, the refusal of the company to renew its bond might constitute such a breach on its part of the contract as to justify the city in terminating it, — in deeming itself unsafe to proceed therewith in the absence of this bond which the company had contracted to furnish as one of the considerations upon which it was to earn payment for lights furnished: In this aspect, however, w;e think, technically, the city has not placed the corporation in default with reference to the renewal of the bond, since it has made no sufficient demand for a new bond to protect itself against these contractual aspects of liability, within the promise of the company to supply one. The sole- demand wás by ordinance of August 1, 1899, for a bond “to indemnify the city from all loss or damage by reason of the privileges granted them under their franchise.” A bond satisfying this demand would have no bearing upon or relation to damages suffered by reason of nonperformance or misperformanee of the lighting contract, and we therefore conclude that the failure to comply therewith constitutes no defense to demand for payment. TIad the demand been as broad as the ordinance requirement, a different question would be presented.

The remaining undertaking, breach of which is alleged and found to have occurred, is as follows: Plaintiff’s assignor “hereby agrees to furnish the city of Kaukauna, for street and public lighting, incandescent electric lights, . . . of twenty-five candle power, at a cost,” etc. This agreement may also have a complex aspect, as it may well have been one of the considerations and conditions upon which the city deemed proper to grant the plaintiff the right to use the public streets for distribution of its product to its customers. Whether so or not, it very clearly must have been a most important consideration of the city’s promise to pay for street lights furnished to it. The duty of effectively .and economically lighting its streets is one of the most important which a city has to perform, and one which can be properly accomplished only by adoption of some system. While it is possible, perhaps, to make an attempt at street lighting by means of an oil lamp at one comer, a gasoline lamp at another, or gas and electric lights in alternation, such method, generally speaking, is neither practical, effective, nor economical. According to modem practice, a city seems to have but a choice between two methods of performing this duty, — either to contract with some private corporation, or to erect and operate a plant of its own. In the case of a small city, a binding acceptance of the former alternative, in practical effect, is exclusive of further consideration of a general policy. If thenceforward the city must buy of that corporation any considerable portion of its lights, it can neither buy others of any one else, nor economically supply them itself ; for the whole field of such a city is ordinarily none too large to warrant installation of a plant, either by private capital-or by the city, and, after the final surrender of a part of such field to one, supply of light to the remainder by another can only be accomplished at such expense as to make the attempt impracticable. In view of these considerations, it is not open to doubt that the parties understood and intended by their contract that the city must be dependent on the plaintiff for all electric lighting which it, as the custodian and guardian of the public welfare, should deem necessary ; hence that the plaintiff bound itself to furnish all so necessary, at least within reasonable requirements. A construction that the company was to furnish only so many lights and at such places as it chose must proceed upon the assumption that the city intended to abrogate its power to perform its public duty, — an assumption not to be adopted except in an entirely clear case. Nor can it be doubted that this agreement by the plaintiff to furnish such lights as the city might, in reason', deem necessary and demand, lay at the very foundation of the promise by the latter to pay the price therefor. If the city must buy of the company those lights already installed, it cannot practically or economically obtain elsewhere others which it may deem necessary; while, on the other hand, if absolved from duty to purchase any from plaintiff, it is much more feasible for the city either to offer a contract to other parties, or to erect a plant of its own. It is not conceivable that the parties in a contract like this intended or understood merely that the furnishing of each lamp should be the sole consideration of the promise to pay the contract price thereof. That would not accomplish at all its main purpose, namely, to supply the city with a system of 'electric street lighting to satisfy the needs of the public. To this end, the placing of lamps when and where needed is quite as essential as supplying an electric current to those which are placed, and is quite as surely the consideration 'of the promise to pay. It is, too, quite incapable of compensation in damages or by deduction; for no one can tell how much the contract price was enhanced in consideration of the duty to instal lights where demanded, and the injury to the city cannot be measured by money.

Thus the plaintiff stands before the court convicted of failure to perform the service which the parties agreed should arouse the duty of defendant to make the payments sought to be enforced. Generally speaking, no rule of law is more elementary or better settled than that one cannot recover the contract price when he has not performed the precedent contract consideration material to the contract purpose, and not measurable in damages. Ellen v. Topp, 20 Law J. Exch. 241; Graves v. Legg, 23 Law J. Exch. 228; Robinson v. Brooks (C. C.) 40 Fed. 525; Davis v. Hubbard, 41 Wis. 408; John Pritzlaff H. Co. v. Berghoefer, 103 Wis. 359, 364, 79 N. W. 564; Coorsen v. Ziehl, 103 Wis. 381, 384, 79 N. W. 562. This rule has its modifications, arising out of conduct of the defendant upon which can be predicated an assumption of acceptance, consent, or waiver. When this exists, so that the plaintiff has parted with its property or service upon tbe justifiable belief that it is voluntarily received by the defendant as satisfying the contract, the latter will not be permitted to defend on the ground of imperfections or differences which it might have detected and made basis of refusal before receiving the benefit or permitting plaintiff to suffer the loss. Locke v. Williamson, 40 Wis. 377; Monroe Water Works Co. v. Monroe, 110 Wis. 11, 21, 85 N. W. 685; Bostwick v. Mut. L. Ins. Co. 89 N. W. 538.¹ This case is, however, barren of any such circumstances. The city waited a reasonable time (some three months) after demanding the additional lights, until plaintiff’s purpose not to furnish them became clear, paid for the lights actually furnished meanwhile, and then notified plaintiff that it would no longer accept or pay for lights furnished by it. It did not accept any further service. True, street lights continued to bum, but not with the city’s consent, and without any power on its part to prevent them. Clearly, therefore, the plaintiff has not performed the lighting contract on its part during the period covered by the bills sued on, and the city has not accepted or voluntarily received any of the benefits thereunder, upon which its promise to pay depends; and a complete defense was set up and proved against the plaintiff’s cause of action at law, so that it was-not entitled to recover, and judgment dismissing the complaint would have been proper.

The defendant in this case further contends that by reason of plaintiff’s breach the principal purpose of the lighting-contract had been defeated, and the plaintiff had conclusively declared its purpose not to be bound thereby as to one-of the essential elements, whereby the city had a right to, and did, treat the contract as abandoned, and finally terminated it by its resolution and notice of November 7, 1899. The right of one party to terminate a continuing contract upon substantial breach of its essential elements by the oilier, often inaccurately called “rescission,” is one which has been treated in cases without number, both English and American, and with extreme refinement and technicality. Many of those cases are collated in a note to Lake Shore & M. S. R. Co. v. Richards, 30 L. R. A. 33 (152 Ill. 59, 38 N. E. 773) ; and the subject has been treated in Norrington v. Wright, 115 U. S. 188, 6 Sup. Ct. 12; Farmers’ L. & T. Co. v. Galesburg, 133 U. S. 156, 10 Sup. Ct. 316; School Hist. v. Hayne, 46 Wis. 511, 1 N. W. 170; Hoffman v. King, 70 Wis. 372, 36 N. W. 25; Walsh v. Myers, 92 Wis. 397, 402, 66 N. W. 250. We do not, however, find it necessary to decide whether defendant has effectively terminated the contract in question, so that, should plaintiff, after the notice of termination, instal the additional lamps, it would be too late. We' think defendant is foreclosed from such contention by reason of its course in this litigation, of which we shall speak later.

It appears from the foregoing that the plaintiff, by reason of nonperformance of the lighting contract on its part, was not entitled to recover at all upon its cause of action; hence, of course, a judgment allowing recovery upon certain conditions cannot prejudice the .rights of the appellant. If not entitled to recover, it cannot be injured by placing conditions upon the privilege of recovery. So, as to that part of the judgment which provides that, upon burying wires and giving new bond within four months after notice of the entry of judgment, it may recover the sum sued for, without interest and without costs, the appellant has no just ground of complaint; and, were that all of the judgment, we should feel bound to affirm. But that is not all of the judgment.- There is in addition a mandatory decree for specific performance of two of the duties assumed by the plaintiff under the ordinance, namely, the duty to bury that part of its wires specified in the ordinance of October 3, 1899, and to give a bond, not in accordance with the demand of the resolution of August 1, 1899, but in complete accordance with the original franchise ordinance. We have already pointed out that the burying of the wires and the giving of a bond conditioned as demanded on August 1, 1899, are neither at all germane to the electric lighting contract upon which the suit is brought.

It is an interesting question whether a city, having secured for the benefit of its citizens, constituting a part of the public, certain agreements as a condition of the granting of a franchise on behalf of the state, may maintain an action in a court of equity for specific enforcement of those agreements. The subject is learnedly discussed, and an affirmative conclusion reached, in Burlington v. Burlington Water Co. 86 Iowa, 266, 53 N. W. 246; and mandamus was sustained in State ex rel. Wis. Tel. Co. v. Janesville St. R. Co. 87 Wis. 72, 57 N. W. 970. But in this case an obstacle lies at the threshold of considering and deciding that question. That relief is sought, not by an original suit in equity, but by way of counterclaim to a simple action at law for the recovery of money upon a contract which happens to be contained in the same writing as that which grants the franchise and imposes the conditions upon it. As we have already said, breaches of the conditions which relate only to the franchise can constitute no defense against the duty of the city to pay for the electric light which it agreed to purchase. They affect only the right of the plaintiff to continue to use the public streets for carrying on its business of manufacturing and selling such light, and so long as the state chooses to allow that franchise to continue, and the contracting company does furnish the lights as agreed, the duty of the city to pay therefor is not diminished or in any wise affected by the breaches of those conditions or agreements, unless, indeed, there should thereby arise a money injury to the city, for which it might be entitled to bring suit, and therefore might counterclaim to diminish or defeat the plaintiff’s money recovery. From the earliest adoption of our Code authorizing counterclaims, it has been held, in pursuance of former New York decisions inhering in the statute when adopted by us, that a demand may be pleaded as counterclaim only when, if established, it would in some way qualify or defeat the judgment to which the plaintiff would otherwise be entitled. Dietrich v. Koch, 35 Wis. 618; Heckman v. Swartz, 55 Wis. 173, 12 N. W. 439; Weatherby v. Meiklejohn, 56 Wis. 73, 13 N. W. 697. Now, here it is apparent that quality does not exist. It is entirely consistent that the plaintiff, if it had fulfilled its lighting contract, might be entitled to recover the full contract price, and yet be under an obligation to perform certain of the other conditions contained in the same ordinance, pertaining to the franchise aspect thereof. If it were conceded, that the defendant city might maintain a bill in equity to specifically enforce the contract to bury wires, that would in no wise defeat or qualify the right of the plaintiff to its money judgment. Hence it seems clear that, as to the two conditions or agreements made the subject of a decree of specific performance in this action, the defendant could not interpose a counterclaim for such result, even if it might maintain an independent suit for the same relief. So far, therefore, as the judgment before us contains a mandatory decree requiring the plaintiff, absolutely and not in the alternative, to bury wires and give bond, it is erroneous; to the hurt of the plaintiff. Hence, we conclude the judgment must be modified by eliminating that portion decreeing specific performance of these obligations.

In sustaining the rest of the judgment, which gives plaintiff a money recovery on conditions, when it is entitled to no recovery at all, a word of explanation or interpretation seems necessary. In the counterclaim the defendant sets up past breaches, and threatened continuance of breaches, of the contract, including those which we have held not germane to the cause of action stated in the complaint, and also the refusal to instal lights, which we have held to be germane. It substantially offered that, if the court concluded that the contract had not been effectively terminated and rescinded, the city was willing to continue it upon condition that all of the refusals to abide its terms were abandoned by the plaintiff, and to pay such sum as it ought to pay for any lights which had been furnished. It prayed variety of equitable relief, in the form of in; unction, both prohibitory and mandatory, and in the form of specific performance. The glaring error in the judgment, which we have already pointed out, was the granting of absolute specific performance of duties having no relation to the cause of action stated in the complaint. The refusal of some form of equitable relief with reference to the failure of the plaintiff to instal additional street lights, if erroneous, was prejudicial only to the defendant; hence not to be supplied upon the plaintiff’s appeal. We must, however, construe the judgment as taking the defendant at its word, and decreeing that the rescission or termination of the contract, if accomplished, is abandoned by the city; that tire contract stands in full force against both parties; that plaintiff, not being legally entitled to recover any sum upon the street-lighting contract, should yet recover a somewhat arbitrary sum when and if it repaired certain omissions; and that its failure to repair such past omissions shall merely result in loss of the specified money recovery. Thus viewed, the judgment, at worst, erroneously denied only rights claimed by the defendant, except as it decreed specific performance. Its spirit was to relieve against the rescission claimed by the defendant, whom we consider to have assented thereto by not appealing. Its plan, also, was to allow plaintiff a reasonable opportunity after its rights were determined to perform the conditions whereby it should earn the money recovery. Rut those rights never have been correctly determined; hence we deem it but equitable that the appellant should still have the four months, after final entry of corrected judgment, to perform the conditions imposed. We therefore shall reverse and remand with directions to enter a new judgment omitting the erroneous portion, instead of modifying the judgment here as of its original date.

By the Gourt. — The judgment is reversed, and the cause remanded with directions to enter judgment to the same effect as before, excepting the positive command therein contained for specific performance of certain contract provisions.

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Concurrence Opinion

BaedeeN, J.

I fully concur in the result reached in this case. It was not found necessary to determine whether the action taken by the city was effectual to constitute a rescission of its lighting contract. It attempted not only to rescind the contract for lighting, but also to put an end to its franchise to use the streets. As regards its attempt to oust the company of its franchise rights, granted to it by the city as the agent of the state, its action is held nugatory. That power rests in the state alone. The city claimed the right to rescind the lighting contract. That right is said to have been based upon the refusal of the company to instal some half a dozen incandescent lights ordered by the city. This refusal arose from a claim by the company that the second contract superseded the first, to the extent that further incandescent lights could not be required by the city. There was no claim that the company had abandoned its contracts, or was seeking to avoid their obligations, only in the respect just mentioned. The dispute was bond fide, and the claim of the company had some elements of plausibility. In such a case I very much doubt the power of either party to effectually terminate the contract by a mere declaration to that effect. But even if that power exists, under the facts here presented, the court should be slow to uphold it. The language of the supreme court of the United States in Rutland Marble Co. v. Ripley, 10 Wall. 339, is quite applicable:

“That one party to an executory contract, partly executed, has violated his engagements, is generally no sufficient reason for a decree by a court of equity, at the suit of the other party, that the contract shall be annulled.”

See Lundahl v. Hansen, 147 Ill. 504, 35 N. E. 741; Minah C. M. Co. v. Briscoe (C. C.) 47 Fed. 276. Again:

“It is not every partial neglect or refusal to comply with some of the terms of a contract by one party which will entitle the other to abandon the contract at once. In order to justify an abandonment of it, and of the proper remedy growing out of it, the failure of the opposite party must be a total one. The object of the contract must have been de feated or rendered unattainable by the misconduct or default.” Selby v. Hutchinson, 9 Ill. 319.

Another element entering into the question of rescission is that the party rescinding must, so far as possible, put the opposite party in his original position. In continuing contracts this is frequently impossible, and hence the courts, when there are bona fide disputes; often say that the injured party must come into court before the rescission can become effectual. A declaration of rescission may become the basis for the court to declare it, but it is not always the case that the party himself has the right of absolute rescission. The courts recognize the distinction between executed and execu-tory or continuing contracts in this regard, and it is one, I think, the city should have in mind in its future dealings with the company. The right of rescission at law usually rests_upon such a refusal of the one party to perform as entitles the other to believe the contract has been abandoned. Such was the case of School Dist. v. Hayne, 46 Wis. 511, 1 N. W. 170. When the matter gets into a court of equity, the court may or may not decree a rescission, according to the equity of the case, and may even relieve from forfeiture when the justice of the ease demands, as in Gates v. Parmly, 93 Wis. 294, 66 N. W. 253, 67 N. W. 739. While the default of the company may be, as held in this case, sufficient to prevent a recovery of periodical payments due on the contract, it does not necessarily follow that the city may consider the contract at an end. If its remedy at law is not deemed adequate, its rights may be protected and enforced in the forum of equity, either by a decree of rescission or specific performance.

Maeshall, J. I concur in the foregoing opinion by Mr. Justice BardeeN.

Both parties moved for a rehearing. The motions were denied May 13, 1902.