Virginia-Western Power Co. v. City of Clifton Forge

125 Va. 469 | Va. | 1919

Sims, J.,

after making1 the foregoing statement, delivered the following opinion of the court:

The assignments of error raise the questions which will be passed upon in their order as considered below.

The controlling question in the cases before us is this—

[1] 1. Were the municipalities (the defendants in error), in the granting of the franchises involved in these cases, expressly vested at the time of the granting thereof with unlimited, authority to contract with the grantee of such franchises on the subject of fixing the rates' which might be charged for the services rendered the public thereunder during the whole of the franchise periods?

If so, because of article 1, section 10 of the Constitution of the United States, which prevents the impairment of the obligation of contracts, it is firmly settled that the rates as fixed in the franchises are irrevocable during the franchise periods, without the consent of the municipality, as well as of the holder of the franchise, to a change. Detroit v. Detroit, etc., R. Co., 184 U. S. 368, 22 Sup. Ct. 410, 46 L. Ed. 592; New Orleans Gaslight Co. v. Louisiana Light, etc., Co., 115 U. S. 650, 6 Sup. Ct. 252, 29 L. Ed. 516; New Orleans Waterworks Co. v. Rivers, 115 U. S. 674, 6 Sup. Ct. 273, 29 L. Ed. 525; St. Tammany Waterworks Co. v. New Orleans Waterworks Co., 120 U. S. 64, 7 Sup. Ct. 405, 30 L. Ed. 563; Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed. 341; Cleveland v. Cleveland, etc., R. Co., 194 U. S. 517, 24 Sup. Ct. 756, 48 L. Ed. 1102; Cleveland v. Cleveland, etc., R. Co., 201 U. S. 529, 26 Sup. Ct. 513, 50 L. Ed. 854; Los Angeles v. Los Angeles City Water Co., 177 U. S. 558, 20 Sup. Ct. 736, 44 L. Ed. 886; Omaha Water Co. v. City of Omaha, 77 C. C. A. 267, 147 Fed. 1, 12 L. R. A. (N. S.) 736, 8 Ann. Cas. 614; Boerth v. Detroit, etc., Gas Co., 152 Mich. 654, 116 N. W. 628, 18 L. R. A. (N. S.) 1197; Pacific Railroad Co. v. Leavenworth, 1 Dill. 393, Fed. Cas. No. 10649; Northern, etc., R. Co. v. Baltimore, 21 Md. 93; Clarksburg Electric Light Co. v. City of Clarksburg, 47 W. Va. 739, 35 S. E. 994, 50 L. R. A. 142, and note; Louisville Home Tel. Co. v. City of Louisville, 130 Ky. 611, 113 S. W. 855, 859; Trustees, etc., v. Jessup, 162 N. Y. 122, 56 N. E. 538; McQuillin on Mun. Corp., sections 1733, 1738-9; Columbus Ry., etc., Co. v. Columbus, 249 U. S. 416, 39 Sup. Ct. 349, 63 L. Ed. —.

As said by the Supreme Court in the case of Detroit v. Detroit, etc., R. Co., supra (184 U. S. 368, 22 Sup. Ct. 410, 46 L. Ed. 592), on the subject of the authority of municipalities to make an irrevocable franchise contract fixing rates of charges of a street railway company: “* * . * there can be no question in this court of the competency of a State legislature, unless prohibited by constitutional provisions, to authorize a municipal corporation to contract’ with a street railway company as to the rates of fare and so to bind during the specified period any future common council from altering or in any way interfering with such contract.” Citing a number of the above-cited Supreme Court cases.

■ In New Orleans Waterworks Co. v. Rivers, supra (115 U. S. 674, 6 Sup. Ct. 273, 29 L. Ed. 525), it was held that a franchise allowing the company to fix water rates, but subject to the condition that its net profits should not exceed a certain per cént, was a contract protected by the Federal Constitution, which the State itself could not impair by revoking it, even though the revocation was attempted by th¿ State Constitution adopted after the grant of’the'fran■chise and its acceptance by the grantee Óf it and action-by the latter thereunder in performance of the contract. To the same effect are the cases of St. Tammany Waterworks Co. v. New Orleans Waterworks Co., supra (120 U. S. 64, 7 Sup. Ct. 405, 30 L. Ed. 563), and New Orleans Gaslight Co. v. Louisiana Light, etc., Co., supra (115 U. S. 650, 6 Sup. Ct. 252, 29 L. Ed. 516).

[2] As said in Walla Walla v. Walla Walla Waterworks Co., supra (172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed., at p. 345) :

“* * * this court has too often decided for the rule to be now questioned that the grant of a right to supply gas or water to a municipality and its inhabitants through pipes and mains laid in the streets, upon condition of the performance of its service by the grantee, is the grant of a franchise vested in the State, in consideration of the performance of a public service, and, after performance by the grantee, is a contract protected by the Constitution of the United States against State legislation to impair it.1" Citing a number of cases.

And it is true, as also said in substance in the case last cited, that the principle involved is the same whether the franchise is granted directly by the State or by a municipality authorized by the State to do so, provided the authority is expressly conferred upon the municipality.

It is said, in substance, in Los Angeles v. Los Angeles City Water Co., supra (77 U. S. 558, 20 Sup. Ct. 736, 44 L. Ed., at p. 892) : It cannot be contended that it is not competent for the State to give municipalities the power to bind the State, so that such a contract cannot be revoked by the State after it has been entered into by the municipality by granting the franchise and the grantee thereof has accepted and entered upon part performance of the contract under the franchise.

As said by the Supreme Court in the very recent case of Columbus Ry., etc., Co. v. Columbus, supra (249 U. S. at p. 419, 39 Sup. Ct. 349, 63 L. Ed. —) : “That a city acting under State authority may, in matters of proprietary right, make binding contracts of the nature contained in these ordinances, is well established by the adjudications of this court.”

And, as is said by the Supreme Court in Home Teleph. and Teleg. Co. v. Los Angeles, 211 U. S. 265, 29 Sup. Ct. 50, 53 L. Ed. 176: “It has been settled by this court that the State may authorize one of its municipal corporations to establish, by an inviolable contract, the rates to be charged by a public service corporation (or natural person) for a definite term * * * and that the effect of such a contract is to suspend, during the life of the contract, the governmental power of fixing and regulating rates,” citing cases.

[3, 4] It is true that the power to fix and regulate rates of charges for a public service, just as is the power to tax or to exempt from taxation, is a police power, which is an attribute of sovereignty inherent in the State. And the rule is inflexible that municipalities have no inherent powers in such matters. In matters concerning the police power, municipalities cannot exceed the authority delegated to them. They can exercise such power only when they have been authorized so to do by the State, by constitutional ordinance or statutory enactment, and even then only to the extent they may be thus expressly authorized. Especially is the power to regulate such rates considered, normally, to be a continuing power to meet changing conditions of the future which cannot be foreseen. A wise public policy requires that such power should, as a rule, be reserved unfettered that it may be exercised in adjusting rates from time to time as may be fair and reasonable in the interest of the public amidst varying conditions as they arise. The longer the future period to be covered, the more imperative the need for such a safeguard, for the human vision of coming events is not far-reaching. For short periods the fixing of rates by contract may be for the best interest of the public, but that method is not favored in the law. For this reason the abrogation of such continuing power is never to be presumed. The purpose on the part of the State to abrogate it or to authorize a municipality to abrogate it, even for a.limited time, as for a term of years which may be covered by a franchise, is never to be assumed, for that is an extinguishment pro tanto of such continuing power of government. A franchise contract which fixes irrevocably such rates as we are considering for the period covered by the franchise, unless a change thereof is consented to both by the grantor and grantee or holder of the franchise, does extinguish such governmental power pro tanto. And, as is said by the Supreme Court in Home Teleph. and Teleg. Co. v. Los Angeles, supra (211 U. S. 265, 29 Sup. Ct. 50, 53 L. Ed. at p. 182) : “* * * for the very reason that such a contract has the effect of extinguishing pro tanto an undoubted power of government, both its existence and the authority to make it must clearly and unmistakably appear, arid all doubts must be resolved in favor of the continuance of the power.” Citing numerous cases.

The authorities cited and relied on by the plaintiff in error, the said company, are very numerous, but they have all been carefully considered, and the holding of none of them goes beyond what is said in thé next preceding paragraph. They cover cases arising under many different statutory provisions, so many indeed as to render it impracticable to discuss such cases in detail in this opinion' with any profit, since the distinguishing features of the various statutes would have to be developed in order to'render such discussion at all helpful to a clearer view of the issués involved. Those authorities are as follows: Milwaukee Elec. R. & L. Co. v. Railroad Com., 238 U. S. 179, 180, 35 Sup. Ct. 820, 59 L. Ed. 1260; City of Woodburn v. Public Serv. Com., 82 Or. 114, 161 Pac. 391, 393, L. R. A. 1917 C, 98 ; Benwood v. Public Serv. Com., 75 W. Va. 127, 83 S. E. 295, L. R. A. 1915 C, 261; Home Teleph. & Teleg. Co. v. Los Angeles, supra (211 U. S. 271, 273, 29 Sup. Ct. 50, 53 L. Ed. 182); City of Manitowoc v. Manitowoc, etc., R. Co., 145 Wis. 13, 129 N. W. 925, 930; Louisville & Nashville R. Co. v. Mottley, 219 U. S. 467, 31 Sup. Ct. 265, 55 L. Ed. 297, 34 L. R. A. (N. S.) 671; Union Dry Goods Co. v. Georgia Pub. Serv. Com., 142 Ga. 841, 83 S. E. 946, L. R. A. 1916 E, 358; Yeatman v. Towers, 126 Md. 513, 95 Atl. 158; Minneapolis, etc., Ry. Co. v. Menasha W. W. Co., 159 Wis. 130, 150 N. W. 411, L. R. A. 1915 F, 732; State v. Superior Court, 67 Wash. 37, 120 Pac. 861, L. R. A. 1915 C, 287, Ann. Cas. 1913 D, 78; Union Dry Goods Co. v. Georgia Pub. Serv. Com., 249 U. S. 116, 39 Sup. Ct. 117, 63 L. Ed. —; Atlantic, etc., Ry. Co. v. Board of Pub. Utility Com’rs (N. J.), 104 Atl. 218; City of Portland v. Pub. Serv. Com., 89 Or. 325, 173 Pac. 1178; State ex rel., City of Seattle v. Pub. Serv. Com., 103 Wash. 72, 173 Pac. 737; City of Monroe v. Detroit, etc., Ry., 187 Mich. 364, 153 N. W. 669; Traverse City v. Mich. R. R. Com., 202 Mich. 575, 168 N. W. 481; Sandpoint Water & Light Co. v. Sandpoint, 31 Idaho 498, 173 Pac. 972, L. R. A. 1918 F, 1106; State ex rel., City of Billings v. Billings Gas Co. (Mont.), 173 Pac. 799; State v. Pub. Serv. Com. (Mo.), 205 S. W. 36; Salt Lake City v. Utah Light & Trac. Co. (Utah), 173 Pac. 556; and People ex rel. Village of Glen Falls v. Pub. Serv. Com., 225 N. Y. 216, 121 N. E. 777. 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.

Most of the cases last above cited involve merely the construction of municipal charters or other statutory authority of the municipalities to make the contract as to rates in question; and in them the contract as made is either in terms not irrevocable during its life or the municipality has not been plainly authorized to make such a contract. Another circumstance may be mentioned in connection with these cases, namely: all of them deal with statutory authority where there is no constitutional provision expressly authorizing municipal action or expressly contemplating legislative enactment authorizing municipal action in the premises.

In the cases before us there is no question but that the contract as to rates as made by the franchises mentioned in the statement preceding this opinion are in their terms irrevocable during the life of such franchises, respectively.

We come, then, to consider whether the constitutional and statutory provisions quoted in the statement preceding this opinion expressly conferred- upon the municipalities, which are the defendants in error, the authority to make the contracts involved in these cases as binding contracts during the periods in which they purport to be binding?

Since there is no conflict between the statutes, sections 1033-d, 1033-e and 1033-f, above cited and quoted, and sections 124 and 125 of the Constitution of this State, it is unnecessary for us to determine whether such constitutional provisions alone are sufficient to expressly confer the authority in question. We, in truth, have merely to consider whether such statutes expressly confer such authority. But in construing such statutes, the fact that such constitutional provisions not only permit, but in effect are mandatory in their requirement that the legislature must enact said sections 1033-e and 1033-f, or at least some statute on the subject, so as to carry section 125 of the Constitution into effect, is illuminating upon the question we have under consideration. For we have here not merely legislative expression on the subject, but also constitutional expression.

[5, 6] Now section 124 of the Constitution, and the statute (sec. 1033-d) in the same language, undoubtedly confer upon municipalities the absolute power to prevent public utility corporations, such as the plaintiff in error company, from doing business within the municipality, by refusal of the consent mentioned therein. This power is absolute because no limitation is imposed upon it. Consequently the municipality may impose any condition it chooses upon its consent aforesaid, however unreasonable. It results from this that suqh power includes the power in municipalities to make a stipulation as to what the rate charges of the utility corporation shall be during the whole franchise period, as a condition upon which the consent aforesaid is given. Manitowoc v. Manitowoc, etc., R. Co., supra (145 Wis. 13, 129 N. W. 925, 140 Am. St. Rep. 1056) ; Salt Lake City v. Utah L. & T. Co. (Utah), 173 Pac. 556; City of Detroit v. Railway Co.. 95 Mich. 456, 54 N. W. 958, 10 L. R. A. 79, 35 Am. St. Rep. 580; Galveston, etc., R. Co. v. Galveston, 90 Tex. 398, 39 S. W. 96, 36 L. R. A. 33; Pacific R. Co. v. Leavensworth, supra (1 Dill. 393, Fed. Cas. No. 10649); Atchison S. R. Co. v. Nave, 38 Kan. 744, 17 Pac. 587, 5 Am. St. Rep. 800; Northern, etc., R. Co. v. Baltimore, supra (21 Md. 93); Indianapolis, etc., R. Co. v. Lawrenceburg, 34 Ind. 304; Indianola v. Railway Co., 56 Tex. 594; City of Monroe v. Railway Co., 143 Mich. 315, 106 N. W. 704; People v. Barnard, 110 N. Y. 548, 18 N. E. 354; Selectmen v. Worcester, etc., Ry. Co., 199 Mass. 279, 85 N. E. 507; Omaha Water Co. v. City of Omaha, supra, 147 Fed. 1, 77 C. C. A. 267, 12 L. R. A. (N. S.) 736, 8 Ann. Cas. 614; Walla Walla v. Walla Walla Water Co., supra (172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed. 341); Vicksburg v. Vicksburg Waterworks Co., 202 U. S. 453, 26 Sup. Ct. 660, 50 L. Ed. 1102, 6 Ann. Cas. 253. That this was the intended effect of section 124 of our Constitution is placed beyond all question by a reading of the debates on such section in the constitutional convention prior to its adoption. 2 Debates Const. Convention, 1901-2, pp. 1960-1985. And such section of the Constitution is self-executory and needed no subsequent legislation to put it into effect. Moreover, it constitutes a limitation upon the legislative power and no subsequent legislation could take away or impair the absolute power aforesaid thus vested in municipalities. But such a power is not necessarily to be regarded as a power of contract. It is a power to impose conditions upon a consent of municipalities which they have the absolute right to withhold altogether or to grant subject to such conditions as they may arbitrarily impose, but it is not, strictly speaking, a power to contract. And, in view of the fundamental considerations aforesaid involved whenever the police power of the State is being surrendered, on principle, and in accordance with the greater weight of authority (Pond on Public Utilities, sections 510 to 523; Manitowoc v. Manitowoc, etc., R. Co., supra (145 Wis. 13, 129 N. W. 925, 140 Am. St. Rep. 1056), it does not follow that because the power- aforesaid has been thus conferred upon municipalities to make a stipulation as to what the rate charges aforesaid shall be as a condition upon which its consent aforesaid is given, that such stipulation shall be regarded as a contract which shall, as such, control the amount of such charges for the future after the consent aforesaid is given and the public service is being performed. The contrary seems to be the prevailing view taken by the best-considered authorities, and that we think is the true view, unless a municipal power to contract is plainly expressed as conferred- by some other constitutional ordinance or legislative enactment on the subject. And, in the absence of such other plain expression, the continuing power of the State to supervise and regulate such rate charges for the future, to the end that they may be kept reasonable and just under changing conditions, will not be held to have been surrendered. Such continuing power, in such case, will be held to be reserved by the State; whether dormant or already conferred for its exercise upon some governmental agency of the State is immaterial. If dormant, it may, nevertheless, be infused with life by appropriate legislation and put into operation at any time in the future. And, in such case, the initial rates fixed by the franchise as a condition upon the municipal consent aforesaid, 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 have been so understood by the grantee as well as the grantor of the franchise. Therefore, upon the question before us of whether the State irrevocably surrendered its power of future regulation of the rates named in the particular franchises involved, we must look to constitutional and legislative expressions on the subject other than those above considered.

The provision of the charter of the town of Lexington quoted in the statement preceding this opinion goes no farther than section 124 of the Constitution and section 1083-d of the statute law aforesaid.

[7] Section 156(b) of the Constitution, referred to and in part quoted from in the statement preceding this opinion, does not ex proprio vigore have the effect of conferring on municipalities the authority to fix rates by contract. And the saving provision therein to the effect that nothing in such section shall impair the right which may theretofore have been or might thereafter be “conferred by law upon the authorities of any city, town or county to prescribe rules, regulations or rates of charge to be observed by any public service corporation in connection with any service performed by it under a municipal or county franchise * * *,” etc., has reference, we think, to the authority to regulate rates, etc., and not to the fixing of rates irrevocably by contract.

[8] The general power of regulating rates of public utility companies was dormant in this State (Commonwealth v. Va. P. & P. Co., 11 Va. Law Reg. 744, State Corp. Com. Rep. for 1905, p. 152) until the act of 1914 (Acts 1914, p. 673) above mentioned. There may be some charters of municipalities in the State granting such supervisory power or restricting the municipal power to contract aforesaid. If so, the charters of the defendants in error are not among them. There has been no general statute enacted conferring such supervisory power upon municipalities, or restricting the municipal power to contract aforesaid.

So we see, that neither under section 156(b), nor under any statute enacted in pursuancé thereof, was the contract power conferred upon the municipalities (the defendants in error) of which we are in search.

[9] We come next to consider section 156(c) of the Constitution, which is quoted in the statement preceding this opinion. That section merely authorizes the legislature to confer upon the State Corporation Commission the jurisdiction to regulate such rates as aforesaid (along with 'other powers of regulation not material to be mentioned) “which the State has the right to prescribe” (i. e., to regulate) such rates.

It was under this section of the Constitution that said statute of 1914 was enacted. When the State first undertook to put into active eifect its dormant power of regulation of rates aforesaid, it imposed the duty of its exercise upon the State Corporation Commission. And the commission has undoubted jurisdiction and authority under such constitutional and statutory provisions to exercise such supervisory power of regulation as to all such rates as have not been irrevocably fixed by franchise contracts such as aforesaid. But we do not find that such section of the Constitution or statute law confers the municipal power of contract of which we are in quest.

[10] We have now, however, to consider section 125 of the Constitution quoted in the statement preceding this opinion. 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 thirty 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 contract by. the franchise with the grantee thereof on the subject of fixing the rates which may be charged for services rendered the public, thereunder during the whole franchise period.

; It is true that this section of the Constitution is not self-executory. It needs subsequent legislation to put into effect the power conferred upon municipalities of making the franchise contracts. Such legislation might, prior to the action of the municipalities, which are the defendants in error, in granting the franchises in question before us, have prescribed some limitations on the aforesaid power-to contract; consisting of restrictions upon their power to make the franchise contracts binding during the whole franchise period, as is in effect provided in the section of the Constitution under consideration might be done; but we see, when we examine the statutes, that they did not impose any such limitation. On the contrary, sections 1033-e and 1033-f, in their provisions, quoted in the statement preceding this opinion,. make it plain that the unlimited power to make such binding contracts during the whole franchise period is thereby expressly conferred upon the municipalities. So expressly are they authorized to make unlimited contmcts and so binding are the contracts as such that the courts mentioned in section 1033-f are given jurisdiction by mandamus “to enforce compliance by said cities and touMs and by. all grantees of franchises * * '* with all the terms and contracts arid obligations of either party, as contained- in franchises.>> (Italics supplied.) The latter section of the statute further recognizes the binding nature of the franchise contract aforesaid, especially as to rates, during -the whole of the franchise period, unless, of course, it is modified by the consent of both parties thereto, of the municipality as well as of the grantee or holder of the franchise; but puts a restriction even upon the exercise on the part of the municipality of its consent to a modification of the terms of -the contract by making the provision quoted in the statement preceding this opinion, to the effect that no such consent as may result in allowing “an increase in the charge to be made * * * for the use by the public of the benefits of such franchise” shall be given until after certain public advertisement is made.

The case of Commonwealth v. Richmond, etc., Railroad Co., 115 Va. 756, 80 S. E. 796, involved such a modification of the original franchise provisions, and this court regarded the franchise as a contract with respect to the street railway rates. It is true that the question we have under consideration was not directly involved in that case, but it is mentioned because much discussed in argument before us in the instant cases. Further:

As the Constitution and statute law stood, at the time the franchise contracts in question were entered into, the provisions of such contract and the bond required, as set forth in the statemént preceding this opinion, were alone relied upon to fix during the life of the franchises the rates aforesaid. No provision was made by law restricting the power of the municipalities to an initial fixing of such rates subject to future regulation thereof. And no such provision even yet exists in our statute law, although it might be enacted, as aforesaid. The power is still left vested in municipalities to irrevocably fix such rates-by franchise contract during the life of the contract.

‘ We conclude, therefore, that the statute law, in existence when and under which the franchisés involved in the cases before us were granted, expressly delegated to the municipalities the unlimited authority to contract with the grantee of such franchises on the subject of fixing the rates of charges, aforesaid, thereunder during the whole of the franchise periods.

[11] This conclusion is controlling of our decision of the cases before us for the reasons which are expressed by the Supreme Court in the case of Columbus Ry., etc., Co. v. Columbus, supra (249 U. S. at p. 421, 39 Sup. Ct. 349, 63 L. Ed. —), as follows: “* * * if a party charges himself with an obligation possible to be performed, he must abide by it unless performance is rendered impossible by the act of God, the law or the other party. Unforeseen difficulties will not excuse performance. When parties have made no provisions for a dispensation, the terms of the contract will prevail.” Citing numerous cases.

In the cases before us, inadequacy of the rates to enable appellant to render efficient service, due to unforeseen change in economic conditions, is urged in argument as the gravamen of the appellant’s complaint upon the facts. Such precisely was the case last cited; and the court in that case said: “It may be, and taking the allegations of the bill to be true, it undoubtedly is, a case of a hard bargain. But equity does not relieve from hard bargains simply because they are such.” That statement is equally true of the jurisdiction of the State Corporation Commission in the cases before us. The franchises involved in the cases before us being contracts duly authorized as aforesaid, their provisions fixing the rates are binding during the franchise periods, unless and until they are modified by consent of both parties, the municipalities and the holder of the franchises, the former acting in that behalf in accordance with the permissive provisions of the statute on the subject aforesaid.

[12] 2. It is urged, however, for the plaintiff in error that any police power delegated to municipal corporations may be revoked at pleasure by the legislature, although the power be no longer executory and that acts done thereunder by the municipality may be set aside or confirmed at will; and the cases of City of Richmond v. R. & D. R. R. Co., 62 Va. (21 Gratt.) 604, 617, and Supervisors v. Luck, 80 Va. 223, are cited in support of such position. In the former case the power in question was the power to tax, which was delegated to the city in its charter, and such power, as involved in that case, was revoked before it was exercised. In the latter case the power in question was that of bridge commissioners and a board of supervisors to continue to exercise powers conferred by a statute after it was amended and virtually repealed by a subsequent statute. The only question involved was the authority for future action. This authority was held to have been revoked by the later statute. This also is a case, therefore, where the power of authority in question was revoked before it was exercised. The validity of no contract made under the prior existing authority was involved.

There is, of course, no question but that powers which are conferred upon municipalities by the legislature may be by the legislature revoked at any time; but such revocation can affect only the validity of future action of the municipalities under the revoked authority.

On principle, contracts made by municipalities under delegated authority cannot differ from contracts made by any other agent upon the question of the effect of the revocation of the authority of the agent. The revocation of the authority comes too late to affect contracts previously made in accordance with the authority. The revocation can affect only the authority of the agent to make contracts thereafter as binding on the principal. And so we find the authorities hold. Pond on Public Utilities, sec. 512.

8. In the case of People, ex rel., W. S. Street Ry. Co. v. Barnard (1888), 110 N. Y. 548, 18 N. E. 354, the conclusion was reached that the general statute law of the State on the subject of the granting and sale of franchises by municipalities to street railway companies conferred on the municipalities the power of making contracts in the granting of such franchises. That conclusion was there reached by a consideration of the general statute law in the light of the constitutional provision on the subject. However, the constitutional provision involved in that case was confined to a prohibition of the legislature from granting the right to lay down railroad tracks without the consent of the local authorities and certain land owners; and the general statute law involved, while similar in some respects to the Virginia statute law on the subject, nowhere contained any express mention of rates of charges, except in the provision that: “The legislature expressly reserves the right to regulate and reduce the rate of fare on such railroad or railway.” Laws N. Y. 1886, c. 642, §1. The case does not involve the question of whether the fate contract was irrevocable during the life of the franchise. Therefore, we do not consider that case as an authority to support the conclusion we have reached above, but we mention it as it has been much discussed in the briefs before us. Indeed, if the statute law of Virginia were no more specific on the subject in the direction of an express grant of the power of ir-fevocable contract by the municipality than is the statute law of New York involved in the case mentioned, we would have come to a different conclusion from that which we have reached. See also, Quinby, etc., v. Pub. Serv. Com. (1918), 223 N. Y. 244, 119 N. E. 433; and People v. Pub. Serv. Com. (N. Y. 1919), 121 N. E. 777.

4. We should perhaps especially mention the case of Freeport Water Co. v. City of Freeport, 180 U. S. 587, 21 Sup.Ct. 493, 45 L. Ed. 679, which is not cited or relied on by counsel for the plaintiff in error, but which is frequently referred to in the authorities whieh are above cited as relied on by the plaintiff in error company. As that case is '^sometimes quoted from,'it would seem as if it were in conflict with the other Supreme Court cases cited above and with our conclusion on the subject of when a municipality is authorized to make by the grant of a franchise an irrevocable contract during the life of the franchise. In that case the charter of the city authorized it “to contract for a supply of water for public use for a period not exceeding thirty years,” and it was held that such language did not in that case confer the unlimited power to make an irrevocable contract during such period; but such holding was reached by the majority opinion on the ground that the city was incorporated under the general incorporation act of Illinois, of which section 9, Hurd’s R. S. Ill. 1917, c. 32, provided that: “The General Assembly shall at all times have power to prescribe such regulations and provisions as it may deem advisable, which regulations and provisions shall be binding on any and all corporations formed under the provisions of this act * * *and the Supreme Court of the State had decided that the provisions of such section 9 entered into and formed a part of the charter of the city and that the continuing power of regulation was thereby reserved to the legislature of the State. There is nothing in the holding of the majority opinion in that case, therefore, which is in conflict with the settled rule on the subject, or with our conclusion thereon aforesaid. There was also a minority opinion delivered in that case by Mr. Justice White (afterwards and now the chief justice), in which Justices Brewer, Brown and Peckham concurred, taking the view that said section 9 applied only to private, not to municipal, corporations and, hence, that the unlimited power to contract with respect to rates was conferred on the city by its charter. Thus the minority opinion makes it still more clear that our conclusion aforesaid is sound.

[13] 5. The authorities recognize no difference in the power of a municipality by franchise provisions to make a contract binding on public utility companies with respect to rates to be charged the consuming public within the municipal limits from those with respect to rates to be charged the municipality itself for' light or water service to it, or the like, for its streets, public buildings, etc. The municipality is regarded, for the most part, as acting in the exercise of its business powers in making both of such character of contracts. As said in Illinois Trust & Savings Bank v. Arkansas City, 76 Fed. 271, 22 C. C. A. 171, 34 L. R. A. 518: “A city has two classes of powers — one legislative, public, governmental, in the exercise of which it is a sovereignty and governs its people; the other proprietary, quasi private, conferred upon it, not for the purpose of governing its people, but for the private advantage of the inhabitants of the city and of the city itself as a legal personality. In the exercise of the powers of the former class * * * it is ruling its people and is bound to transmit its powers of government to its successive sets of officers unimpaired. But in the exercise of the powers of the latter class it is controlled by no such rule, because it is acting and contracting for the private benefit of itself and its inhabitants and may exercise the business powers conferred upon it in the same way, and in their exercise it is to be governed by the same rules that govern a private individual or corporation.” Citing authorities. “In contracting for waterworks to supply itself and its inhabitants with water, the city is not exercising its governmental or legislative powers, but its business or proprietary powers. The purpose of such a contract is not to govern its inhabitants but to obtain a private benefit for the city itself and its denizens.” Citing authorities. See, to same effect, 4 McQuillin on Mun. Corp., sec. 1738. So far as the public within'its limits are concerned, in making such business contracts as to rates of charges to them for public service, municipalities act as trustees for the public. 12 R. C. L., sec. 15, pp. 189-190.

[14] 6. However, this must not be taken to mean that municipalities exercise any inherent powers in such matters. For the fundamental, far-reaching and important reasons of public policy above indicated, the municipal authority to make such contracts as are under consideration, although they are business contracts, must be expressly con-terred by constitutional or legislative authority; otherwise, they will not have the irrevocable feature aforesaid. But, as we have seen, such municipal authority was expressly conferred, in the cases before us, by the legislative enactment aforesaid.

7. The plaintiff in error company, however, earnestly relies upon section 164 of the Virginia Constitution of 1902 to sustain its position that the police power of the State to regulate the rates in question was not and could not have been vested in municipalities by the statute law of Virginia aforesaid, so as to authorize them to make contracts surrendering such continuing dormant power residing in the State in its sovereign capacity, without violation of such constitutional provision. Such section of the Constitution is as follows:

[15] “Sec." 164. Right of regulation and control of common carriers and public service corporations never surrendered or abridged. — The right of the Commonwealth, through such instrumentalities as it may select, to prescribe and define the public duties of all common carriers and public service corporations, to-regulate and control them in the performance of their public duties, and to fix and limit their charges therefor, shall never be surrendered or abridged.”

As above seen, by the Constitution of 1902 and the legislation up to that time, and indeed since, until the statute of 1914, aforesaid, no provision was made for the exercise of the power of regulation of rates of charge of such corporations as is the plaintiff in error. Section 164 of the Constitution, therefore, has reference to the theretofore unex-ercised and dormant power of the State to regulate rates. But the surrender or abridgement of the power to which it refers is, of course, not such a surrender or abridgement thereof as was expressly permitted and contemplated by other sections of the same Constitution. And section 125 of the same Constitution, as we have seen, expressly permits and contemplates that the legislature, until such time as it shall itself curtail the powers of municipalities to make the binding contracts aforesaid in granting franchises, should enact the statute law aforesaid which, to the extent that the authority thereby conferred upon municipalities may have been exercised prior to such curtailment of municipal powers, did result in a surrender and abridgement of the police power in question pro tanto. Such abridgement and surrender of such power being so expressly permitted and contemplated by the last-named section of the Constitution, cannot be considered as prohibited by said section 164 thereof. Both sections must be construed together, and, when so construed, section 164 cannot be held to prohibit what the preceding section 125 expressly permits to be and expressly contemplates may be done.

8. It is contended by the defendants in error that it appears from the concluding provision of section 8 of the statute of 1914, aforesaid, which is quoted in the statement preceding this opinion, that said sections 1033-e and 1033-f of Pollard’s Code of Virginia are therein referred to, and that the 1914 statute was not intended to, and does not in fact, confer jurisdiction upon the State Corporation Commission to regulate rates which have been fixed by the provisions of charters granted under such sections of Pollard’s Code.

The question is not free from difficulty. In view, however, of the conclusions above reached, we shall not enter upon a consideration of that question.

For the foregoing reasons we find no error in the orders of the State Corporation Commission under review, save to the extent that they, without any investigation or consideration thereof, refuse approval of the rates filed with the commission by the plaintiff in error which apply to services within the respective corporate limits of the defendants in error which are not attempted to be fixed or affected by the franchises involved in these cases. As to. the latter rates," the commission has jurisdiction under the statute of 1914, aforesaid, and it should assume such jurisdiction, make the investigation and otherwise act with respect thereto in accordance with the provisions of the 1914 statute. With a provision in our order to such effect, the orders of the commission under review will be affirmed.

Affirmed.

Case Details

Case Name: Virginia-Western Power Co. v. City of Clifton Forge

Court Name: Supreme Court of Virginia

Date Published: Jun 12, 1919

Citation: 125 Va. 469

Court Abbreviation: Va.