Case ID: ohio-st_96/html/0472-01.html
Source: Caselaw Access Project
Author: {"author": "Matthias, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Butler, a Taxpayer, v. Karb, Mayor, et al.
    
      Municipal corporations — Authority to establish lighting plant, etc. —•Exercise of discretionary power—Court may not interfere, when — Section 3616, General Code—Failure of council to adopt schedule of rates—Unjust discrimination by administrative officers—May be enjoined by courts, when—Municipal law.
    
    1. Municipalities of thel state are authorized to establish, maintain and operate lighting, power and heating plants and furnish the municipality and the inhabitants thereof light, power and heat. The powers thus conferred are proprietary in their character and in the management and operation of such plant municipal officials are permitted wide discretion. Courts are without authority to interfere therewith upon complaint merely that the capacity of the plant is overtaxed and streets of the municipality are insufficiently lighted by reason of furnishing current to private consumers, and that the rates charged for current are inadequate to meet.the cost of production and transmission thereof.
    2. But where the council of any such municipality fails to adopt and usé a system or schedule of rates for current furnished private consumers as contemplated by Section 3616, General Code, but leaves the matter of rates to the administrative officers of the municipality, who arbitrarily fix and determine the rates in each case, and in so doing unjustly discriminate between citizens in the matter of rates and service, such action constitutes an abuse of corporate power which may be restrained by the court upon suit instituted by the city solicitor, or by a taxpayer if the city solicitor refuses upon written request to bring suit.
    (No. 15110
    Decided July 3, 1917.)
    Error to the Court of Appeals of Franklin county.
    The plaintiff, James M. Butler, instituted this action in the court of common pleas of Franklin county as a taxpayer and resident of the city of Columbus, and on behalf of the city, after having requested the city solicitor to bring the action, who had refused. A general demurrer to the petition 'was sustained, whereupon an amendment to the petition was filed; and subsequently a general demurrer to the petition and amendment thereto was also sustained. Upon a proceeding in error the judgment of the common pleas was affirmed by the court of appeals.
    It is set out in the petition that the defendant George J. Karb is the duly elected, qualified and acting mayor of the city of Columbus, Ohio; that the defendant Samuel A. Kinnear is the duly appointed, qualified and acting director of public service of said city; that the defendant Byron L. Barger is the duly appointed, qualified and acting director of public safety of said city; that said George J. Karb, Samuel A. Kinnear and Byron L. Barger in their respective official capacities constitute the duly qualified and now acting board of control of said city; that the defendant Harry E. Eichhorn is the duly appointed, qualified and acting superintendent of the municipal electric light plant of said city; and that the defendant H. Clayton Cain is the duly elected, qualified and now acting auditor of said city.
    The plaintiff avers in substance that the city of Columbus has constructed and is maintaining and operating a municipal electric light plant to furnish light and power for the city, and also to private consumers; that the city has expended large sums of money to build, establish and enlarge its plant; and that through its duly constituted officers, agent? and employes the city is selling current, for light and power purposes to private consumers.
    The complaint made by plaintiff in his petition and amendment thereto may be briefly stated as follows:
    That the prices charged private consumers are and for more than two years have been very substantially less than the proportionate, fair, just, reasonable, equitable and actual cost of generating and distributing the current and paying the proportionate, fair, just, reasonable, equitable and actual part of the interest on bonds issued and money used for the purpose of building, equipping and enlarging said plant; that said prices are far below any reasonable or actual cost of production, when due and proper distribution of the cost of current is made between, that used for street lighting and municipal purposes and that used for private consumers; and that by reason thereof the taxpayers of the city are paying a part of the cost of current used by private consumers, and -are required to pay substantially more taxes, and that funds of the city have been and are now being misappropriated and misapplied.
    That many streets, avenues, alleys and public places of the city are not now lighted, which for public safety and enjoyment should be lighted, which condition obtains because the plant of the city has not the capacity to furnish the current it now does to private consumers and' also furnish sufficient lights for the streets, avenues, alleys and public places of the city.
    
      That because of furnishing current to private consumers the machinery and equipment of the plant is greatly overloaded, and burdened far beyond the factor of safety, thus imperiling the public lighting system of the city, by reason of which facts the equipment of the plant is rapidly deteriorating, and depreciating greatly in excess of the standard, and the necessities, of a properly loaded plant.
    That the citizens and residents of the city are discriminated against and are denied uniform treatment; that the city through its officers and agents has at all times arbitrarily furnished and still is arbitrarily furnishing current to some consumers at rates and prices far below the cost thereof, and is abitrarily refusing to furnish at any price current to other persons living in the same locality under substantially the same circumstances and conditions ; that the city has never used and is not now using any system or schedule of rates; and that the prices charged to private consumers have been at no time either uniform or substantially uniform under the same conditions, circumstances or situations, some consumers and citizens having at all times been charged higher prices and rates than other consumers under similar conditions, circumstances and situations, without any reason or excuse therefor.
    The prayer of the petition is that the city and its officers and employes be enjoined from entering into any further contracts for the use of such current for private purposes, and also from entering into any contract for said current at a rate which will not return a fair profit over and above the cost of production and cost of distribution, including a proper interest charge upon a proper actual investment, and including also a proper depreciation of said plant, and especially from entering into any further contract with any person for the use of current for private purposes at any rate or price less or substantially less than the cost of production and the cost of distribution, including a proper interest charge on a proper actual investment, and including also a proper allowance for depreciation of said plant; that a mandatory injunction may issue requiring the city, its officials and employes to terminate contracts heretofore made for the sale of current for private use at less than the proper cost thereof, and to cease furnishing current thereunder; that they be restrained from entering into any contract for the use of current for private purposes until such use will not imperil the lighting system and will not prevent the city from extending advantages of its plant so as to light all the streets, avenues, alleys and public places which now require to be lighted, and especially from furnishing current for private use at a time when the street lighting system is in operation; that by mandatory injunction the city be compelled to extend its lighting system to those parts of the city without lights; that in the event the city be permitted to sell current for private use that the city, its officers and agents be enjoined from discriminating between or among citizens and residents, either as to price or location; and, especially, that the court order and direct the defendants to prepare and submit to the court a legal, proper, just and equitable schedule of rates for current, one that will be substantially uniform, that will not discriminate between consumers, and that will require the consumer to pay the substantial cost of production and transmission of current.
    
      Mr. James M. Butler and Mr. Max Goldsmith, for plaintiff in error.
    
      Mr. Henry L. Scarlett, city solicitor, and Mr. Wilber E. Benoy, for defendants in error.
   Matthias, J.

The plaintiff, bringing this action as a taxpayer of the city of Columbus, under favor of Section 4311 et seq., General Code, seeks to enjoin the further performance of certain alleged acts and practices of the city officials named as defendants, which acts and practices he claims constitute an abuse of corporate power and a misapplication of the funds of the municipality. This claimed abuse of power and misapplication of public funds grows out of the maintenance and operation of the municipal electric-light plant. The alleged wrongdoing upon the part of the officers of the city may, we think, with entire fairness, be concisely stated as follows :

First. Furnishing electric current to private consumers which is needed to light the streets and public ways of the city, and at such times as to result in overloading the machinery and equipment of the plant.

Second. Furnishing electric current to private consumers at less than cost.

Third. Discrimination in furnishing current to private consumers and in the rates and terms for such service.

It is asserted by the plaintiff that because of the fact that current is furnished to private consumers many streets, alleys and public places of'the city, which should be lighted for public safety and enjoyment, are not lighted, because the capacity of the plant is insufficient to furnish electric current to private consumers' and also to adequately light the streets and public places of the city, and that by reason of furnishing current to private consumers the machinery and equipment of the city’s plant is at certain hours greatly overloaded and burdened beyond the factor of safety, thus imperiling the whole lighting system of the city.

In this complaint the plaintiff assumes that the absolute duty rests upon the city officials having the care and management of its lighting plant to provide facilities for lighting from its plant all the streets and public places of the city before any current whatever may be furnished to private consumers. Such assumption wholly disregards the plain provisions of the statute containing the grant of power under which the city acts. The authority is specifically conferred upon municipalities to erect and operate electric light plants by Sections 3618 and 3939, General Code.

It may be well to suggest at this point that the issues in this case were made prior to the adoption of a charter by the city of Columbus, and we are necessarily dealing with the conditions as they then ' existed.

The former section (3618) grants power “To establish, maintain and operate municipal lighting, power and heating plants, and to furnish the municipality and the inhabitants thereof with light, power and heat, to procure everything necessary therefor, and to acquire by purchase, lease or otherwise, the necessary lands for such purpose, within and without the municipality.”

The latter section (3939) authorizes the issuance and sale of bonds for certain specified purposes, one of which is “For erecting or purchasing gas works or works for the generation and transmission of electricity, for the supplying of gas or electricity to the corporation and the inhabitants thereof.”

The authority thus conferred is not limited, nor restricted, but is broad and comprehensive. No language is used which suggests, much less requires, that all streets and public ways of a municipality shall be lighted by current from the city’s plant before current may be furnished to the inhabitants of the city for private consumption. Neither use is given preference over the other, and hence no more can it be said that the plant is overburdened by private use than by street lighting, nor can it be required that the former shall be entirely discontinued so that the latter may be enlarged and extended. As stated in 4 McQuillin on Municipal Corporations, Section 1799: “It cannot be successfully contended that so long as portions of the city remain unlighted there cannot be an excess of electricity which can be disposed of by the city to private citizens, where the city operates its own electric light plant, where no fraud is alleged on the part of the municipality.”

Under the provisions of Section 3809, General Code, the city may make a contract with a private company for lighting the streets and public places of the municipality.

A consideration of the provisions of the several sections of the statute above cited would seem to warrant the conclusion that a city may provide by private contract for lighting the streets and public places in one portion of the city and furnish the current from its own electric light plant for the public and private lighting in other portions of the city. It can readily be seen that conditions might be such as to make that plan expedient and economical.

The manner in which the authority conferred by statute is to be exercised is left to the discretion of the officials of the municipality. The general principle is well established that in. the absence of fraud or gross abuse of discretion the courts will not interfere with the discharge of such duties. It must at least appear that the public officers are transcending their powers or withholding some clear right, or perpetrating or threatening to commit a wrong, before the power of the courts may be invoked. Surely the court cannot be called upon to determine the extent to which current should be used for street lighting and what portion of the current generated may properly be furnished private consumers, nor to ascertain and fix by judicial decree the precise burden that may be placed upon the plant. A mere departure from the exercise of sound judgment does not warrant the interposition of the court and the control and guidance of its mandate.

The rule to be applied in actions such as this has been stated frequently, but probably nowhere better than in the opinion of the court in the case of Dailey v. New Haven, 60 Conn., 314, 319, where it is said: “With the exercise of discretionary powers courts, rarely and only for grave reasons, interfere. These grave reasons are found only where fraud, corruption, improper motives or influences, plain disregard of duty, gross abuse of power or violation of law, enter into and characterize the result. Difference in opinion or judgment is never a sufficient ground for interference.”

No doubt all will agree that poorly-lighted streets are a serious inconvenience to the people and materially increase the dangers of travel, and that a saving of expense by inadequately lighting the streets of a municipality is a mistaken and shortsighted economical policy. The court may not approve the policy pursued or the method or manner of operation of the city’s utility, but so long as the officials to whom the law has delegated administrative duties involving the exercise of discretion are acting within the powers conferred, and it does not appear that their conduct is fraudulent or in bad faith, their acts are not subject to judicial supervision and control.

We regard the principle to be well settled that the private and proprietary powers conferred upon a municipal corporation are to be construed with liberality to the end that the purpose of the grant may be fully accomplished. As we have' seen, the powers so conferred are broad and comprehensive, no terms being used which in the least degree circumscribe or restrict the actions of the city officials in the management and operation of its utilities. Much is left to their judgment and discretion, as indeed seems necessary; for successful and satisfactory management and operation of 3- city’s utilities could not be accomplished if they were hedged about and hampered by detailed, minute and precise regulations, directions or restrictions, either legislative or judicial. The principle to be here applied is well stated by Pond in his work on Public Utilities, Section 11, as follows:

“In its private commercial capacity while acting primarily as a business concern, the powers conferred on a municipal corporation are for its own special benefit and advantage. * * * Recognizing this to be the principal object in the creation of such corporations and the sole purpose of endowing them with such commercial and proprietary powers as permit them and their’ citizens to enjoy the benefits of municipal public utilities, the courts permit and favor the exercise of the fullest discretion in the enjoyment and administration of such powers which are consistent with the general object of their grant and the best interests of all parties concerned who are intended to be benefited by such advantages.

“The discretion of municipal corporations in the exercise of their powers is as wide as that enjoyed by the general government and is to be exercised in accordance with the judgment of the authorities in charge of the municipal corporation as to the necessity or expediency of each particular subject when it arises.”

The allegations of the petition and amendment thereto with reference to the inadequacy of the prices charged for current sold for private consumption are in very broad and general terms, the substance of the complaint in that respect being that the prices charged are too low to meet the proportionate cost of generation and transmission of current furnished private consumers, thereby entailing a loss which the taxpayers of the city are required to meet.

We think it must be conceded that the city, acting in a proprietary capacity, may exercise its powers as would an individual or private corporation. It may be that for a time the business will not be remunerative at the rates charged, yet with proper management the business may develop to a point where it will even yield a profit to the city and therefore result to “its own special benefit and advantage.”

It does not appear that the present rates are lower than are charged by a competitor, nor is it disclosed that a higher rate could be procured, nor are there any averments in the petition from which it may be inferred that in the selling of electric current at prices inadequate to meet the cost of production the officials of the city have been actuated by fraudulent or improper motives.

It is quite apparent from the pleadings that the city’s plant is used primarily for the purpose of lighting the streets and public ways of the city, the furnishing of light to private consumers being only incidental, and that at least a portion of such private service is during the day. The position of the city officials seems to be that a low price is justified in order to develop a day load and thus balance the machinery of the plant.

A more serious question is presented by the allegations of the petition and amendment thereto with reference to discrimination by those in charge of the plant in furnishing current to private consumers; and, particularly, as to the failure to have or use any system or schedule of rates for such service, and arbitrarily fixing the rate in each case. The charge made by the plaintiff in this regard is in substance that the city has never used any system or schedule of rates of any kind whatsoever either for light or power for private purposes, and that prices and rates for said current have been at no time uniform, or substantially so, under like conditions, situations and circumstances, but have been widely different and varying.

The statute conferring power upon municipalities to establish, maintain and operate municipal lighting plans, under which the city of Columbus was acting at the time this suit was instituted, and theretofore, contains no provision whatever with reference to rates or charges for current furnished to private consumers, nor does it designate any officer or body whose duty it shall be to prescribe rates for such service, but under the provisions of Section 3616, General Code, the council of the municipality is authorized to provide by ordinance or resolution for the exercise of the powers enumerated in the chapter of which that section is a part, one of which powers is the operation of an electric light plant. The authority to adopt rates for current which the municipality was empowered to furnish “the inhabitants thereof” was clearly implied, and that duty devolved upon the municipal council. It follows that the fixing of rates for current from the city’s plant by other officials or agents or employes of-the city was unwarranted.

It is averred by the plaintiff that these officers having assumed such power and' authority in the absence of a system or schedule of rates duly and properly adopted by council are using that power to discriminate between citizens with reference to furnishing the product of the city’s plant, and particularly as to rates charged therefor. That such discrimination constitutes an abuse of power there can be no question. That neither public nor private corporations may discriminate between, members of the public with reference to rates and terms of service does not longer admit of controversy. This wholesome rule, long in force, has had. frequent application, particularly to common carriers and utility companies. A municipality operating a utility is not exempt therefrom. Acting in a proprietary capacity, we have seen, it should have the freedom of action of a private utility corporation, but it is also subject to the same restrictions as to practices of discrimination in rates and service.

But it is urged that the plaintiff is not a proper party to make such complaint, and that it not appearing that he suffers any injury by reason of the wrongful practices charged, he cannot maintain the action. We think that contention is unsound. The solicitor could maintain the action under authority of the provisions of Section 4311, General Code. In such a proceeding he represents the public. If upon the request of a taxpayer the city solicitor refuses to institute the action, the taxpayer may do so by virtue of the provisions of Section 4314, General Code. He then represents the public just as would the solicitor had he exercised the power conferred upon him and brought the suit. These sections are remedial in their character and are therefore to be liberally construed and effectively applied in order to safeguard the rights of the municipality, the obvious purpose of their enactment.

For the reasons stated we are of opinion that the petition and amendment thereto state a cause of action in the respect indicated, and therefore that the court of common pleas committed error in sustaining the demurrer and the court of appeals erred in affirming that judgment.

Judgment reversed.

Nichols, C. J., Wanamaker, Newman, Jones, Johnson and Donahue, JJ., concur.