Case Name: El Dorado v. Coats
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1927-10-31
Citations: 175 Ark. 289
Docket Number: 
Parties: El Dorado v. Coats.
Judges: Justices Wood,- Smith and Kirby dissent.
Reporter: Arkansas Reports
Volume: 175
Pages: 289–300

Head Matter:
El Dorado v. Coats.
Opinion delivered October 31, 1927.
Jeff Davis, J. G. Rap «dale, Pace Davis, Robinson, House S Moses and Powell, Smeatl S Knox, for appellant.
Mal tony, Yocum £ Saye, Marsh, McKay é Marlin and tí. E. Gamer, for appellee.
Neill Bohlinger, amicus curiae.

Opinion:
Ponder, Special Judge,,
(after stating the facts): The appellees, W. M. Coats, receiver, El Dorado Gas Company and Central States Gas & Electric Company, claim that the latter company has the exclusive right of supplying the city of El Dorado and its inhabitants gas for domestic and commercial purposes. That this exclusive right and privilege is given and granted to it by virtue of a certain ordinance passed by the city council on March 21, 1921, under which J. W. Atkins, his successor and assigns, were given this franchise, and that Atkins organized the El Dorado Gas Company, and transferred to it this franchise. That, although the word "exclusive" does not appear in the ordinance, still by reason of certain provisions in the ordinance by which the city was to receive two per cent, of the gross revenues from the business each month, and was to keep one well in reserve for the benefit of the city and its consumers, by implication it was intended and did operate to make an exclusive franchise, under the law. That the first ordinance granting a franchise to Atkins and his successors made a contract between him and the city, and that the same cannot be impaired or broken by the passage of the ordinance on the 6th day of January, 1927, and that this last ordinance and franchise are void.
By its complaint filed in equity the plaintiffs asked that the defendant corporation may be perpetually enjoined from building its gas and pipe lines in the city of El Dorado, and furnishing gas to the inhabitants of said city, and from enjoying the rights and benefits given it by reason of the franchise granted, notwithstanding such right had been granted by the council' of said city, under the powers given to it by the Legislature of this State. Both plaintiff and the defendant corporations derive their franchises and authority from the council, acting in its sovereign capacity. In this country, as in England, every grant from the sovereign power is to be construed strictly against the grantee and in favor of the city or government. The rights of the public are therefore not to be presumed to have been surrendered to a corporation, except so far-as the intention to surrender them appears in the charter. Inland Fisheries Commrs. v. Holyoke Water Power Co., 104 Mass. 450, 6 Am. Rep. 247; Newton v. Mahoning County, 100 U. S. 548, 25 L. ed. 710; Bradley v. South Car. Phosphate & P. R. Min. Co., 1 Hughes 72, Fed. Cas. No. 1, 787.
The plaintiff claims there was a contract between it and the city of El Dorado which secured to it the exclusive right to furnish gas to said city. The court says, in Tucker v. Ferguson, 22 Wall. (89 U. S.) 527, 22 L. ed. 805: "But the contract must be shown to exist. There is no presumption in its favor. Every reasonable doubt should be resolved against it. Where it exists, it is to be rigidly scrutinized, and never permitted to extend, either in scope or duration, beyond what the terms of the concession clearly require."
A 'State or council ought never to be presumed to surrender this power, because the whole community have an interest in preserving it undiminished; and when a corporation alleges that the State or council has surrendered its power of improvement and public accommodation, abandonment ought not to be presumed in a case in which the deliberate purpose of the State or council does not appear. Charles River Bridge Co. v. Warren Bridge, 11 Pet. 420, 9 L. ed. 773; Northwestern Fertilizing Co. v. Hydepark, 97 U. S. 666, 24 L. ed. 1036; Union Bridge Co. v. Spaulding, 63 N. H. 298.
The contention of the appellees is that the franchise granted by the. ordinance in March, 1921, to Atkins and his assigns, together with what was done under the same, constituted a contract which is binding on the council and the city, and that the subsequent franchise granted to the appellant company impairs the obligation of this contract.
Unquestionably tbe State or the council, in the exercise of its sovereignty, may contract like an individual, and be bound accordingly.
This court is committed to the doctrine that, where rights are granted by ordinance, and a franchise given, it creates and makes a contract between the city and the party or corporation to whom it is granted. City of Mena v. Tomlinson, 118 Ark. 166, 175 S. W. 1187; Ark. Light & Power Co. v. Cooley, 138 Ark. 390, 211 S. W. 664; Pocahontas v. Central Power & Light Co., 152 Ark. 276, 244 S. W. 712; El Dorado v. Citizens' Light & Power Co., 158 Ark. 550, 250 S. W. 882; Natural Gas & Fuel Co. v. Norphlet Gas & Water Co., 173 Ark. 174, 294 S. W. 52. These decisions and others of this court have created fixed property rights in this State, and it is not the purpose of this decision to modify or overrule these cases and the rules of law therein announced. But they all distinguish themselves from the case at bar, for they were not exclusive contracts, or exclusive franchises, and herein lies the line of demarcation. This distinguishes contracts of a private nature from public contracts, and the rule of interpretation is different.
In-the case of Little Rock Ry. & Elec. Co. v. Dowell, 101 Ark. 223, 142 S. W. 165, Ann. Cas. 1913D 1086, Chief Justice McCulloch said:
' ' A city council acts in a legislative capacity in exercising the powers conferred upon it to grant franchises for the public benefit. The power thus conferred upon a city council by the lawmakers is coequal with the power in this respect of the Legislature itself, and in the exercise of the power of discretion, is vested with power which cannot be taken away by the courts. To proceed upon any other theory would be to substitute the judgment and discretion of the courts for the judgment of the city council, with whom the lawmakers have seen fit to lodge this power."
In the case of El Dorado v. Citizens' Light & Power Co., 158 Ark. 550, 250 S. W. 882, Chief Justice McCulloch, again speaking for the court, said:
"The council of the city of El Dorado passed an ordinance, granting a franchise to Rowland and other citizens to construct and operate a system for furnishing light and water in the city, and the franchisé was subsequently assigned to the Citizens' Light & Power Company. Prior to that time a franchise for similar purposes, not exclusive, had been granted to the Arkansas Light & Power Company, and that company is operating in the city. ' '
The italicized words, "not exclusive," clearly shows that it was not an exclusive contract. The ordinance granting the franchise alone making the contract, the question therefore to be determined in cases of this kind, when the legislative interference is claimed, is whether such interference impairs the obligation of the contract, for there may be legislation such as to injuriously affect the interest of those with whom such contracts exist, and yet impair no obligation of contracts. Thus it has been held that, when a State confers no exclusive privileges to one company it impairs no contract by granting a franchise to a second one, with powers and privileges which necessarily produce injurious effects and consequences to the first. Washington & B. Turnpike Co. v. Maryland, 3 Wall. (70 U. S.) 210, 18 L. ed. 180.
The misfortunes which follow in such cases, as the court aptly remarks in that case, "may excite our sympathies, but are not the subject of legal redress."
Such was the doctrine laid down in Charles River Bridge v. Warren, 11 Pet. (36 U. S.) 527, 9 L. ed. 773, and which from that day to this has been sustained by the courts of last resort in this country. Tuckahoe Canal Co. v. Tuckahoe & James River Canal Co., 11 Leigh (Va.) 42, 36 Am. Dec. 374; Leigh Water Co. v. Easton, 121 U. S. 391, 7 S. Ct. 916, 30 L. ed. 1059.
In considering the question whether the council has transcended its power by the ordinance granting the appellant compány the right and privileges contained in the franchise, it becomes necessary to construe the legislative act of the council and the ordinance under which the ap polices assert üioir claim of ail exclusive right. For, notwithstanding the ordinance granting to appellees the franchise became a contract, founded upon mutual consid.erations, yet, if no exclusive right was conferred, then the second ordinance, which granted the franchise of the same rights to the appellant company, is valid because no obligation of contract was impaired. Nor will equity interfere by injunction to restrain the operation of a person or a corporation, claiming the right to exercise a similar franchise under the legislative authority conferred by the council. High on Injunctions., § 902.
Under the rule of law herein announced, the appellees did not have an exclusive contract or franchise.
This doctrine is vital to the public welfare.
Mr. Justice Clifford, in Holyoke Water Co. v. Leyman, 15 Wall. (82 U. S.) 512, 21 L. ed. 133, remarks:
"That repeated decisions of this court have established the rule that, whenever privileges are granted to a corporation, and the grant comes under revision in the coixrts, such privileges are to be strictly construed against the corporation and in favor of the public; and that nothing passes but what is granted in clear and explicit terms. Whatever is not unequivocally granted in such ordinance is taken to have been withheld."
The samé rule is followed in 12 K C. L., pp. 18(5 to 198.
The only other question to he determined is the construction to he given to § 7492 of C. & M. Digest. We are of the opinion that, under the language of this section, the council may have granted to the appellees an exclusive franchise or not, as in their judgment seemed best. Not having granted such a franchise, there is nothing in this section that makes it exclusive.
For the reason given this cause is reversed, and remanded with directions to dismiss the complaint of the appellees, because the same does not state a cause of action, and for want of equity, and that the restraining order granted herein shall be dissolved.
Judge McHaney, being disqualified, did not participate in the proceeding.
Justices Wood,- Smith and Kirby dissent.