Case Name: CITY OF NILES v. MICHIGAN GAS & ELECTRIC CO.
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1935-10-30
Citations: 273 Mich. 255
Docket Number: Docket No. 96, Calendar No. 38,267
Parties: CITY OF NILES v. MICHIGAN GAS & ELECTRIC CO.
Judges: Wiest, Butzel, Bushnell, and Edward M. Sharpe, JJ., concurred with Fead, J.
Reporter: Michigan Reports
Volume: 273
Pages: 255–275

Head Matter:
CITY OF NILES v. MICHIGAN GAS & ELECTRIC CO.
1. Municipal Corporations — Franchises—Validating Statute.
Statute legalizing prior franchises and contracts of fourth class cities as to supplying gas and electricity to such cities and inhabitants held, not to repeal previous statute permitting such cities to contract for the supply of gas and electricity to cities and inhabitants (1 Comp. Laws 1929, §§ 2107, 2218).
2. Franchises — Contracts.
A franchise is a contract.
3. Municipal Corporations — Statutes—Contracts-—Gas—Electricity.
Statute granting fourth class city power to contract for supplying gas and electricity to city and its inhabitants limits period for which such contract may be made to not exceeding 10 years ■ regardless of how the power may be exercised (1 Comp. Laws 1929, §2107).
4. Same — Charters—Statutes—Legislature—Constitution.
Municipalities must find their powers in statute, either directly or by charter authorized by general law, except as the Constitution has specifically divested the legislature of jurisdiction over them.
5. Same — Franchises—-Revocability—Maximum Term.
Constitutional provisions that municipality could not acquire a public utility nor grant an irrevocable franchise for one without three-fifths vote of the electors and restricting duration of franchise to not more than 30 years held, limitations on power restricting legislature in authorizing a municipality in granting franchises only in the respect of revocability and maximum term (Const. 1908, art. 8, §§25, 29).
6. Same — Common Council — Electors — Revocability op Franchises.
Constitutonal provision as to public utility franchises held, to effect transfer of power to make franchises irrevocable from common council to electors but still to permit legislature to authorize common council to grant revocable franchises (Const. 1908, art. 8, §25).
7. Same — Franchises—Electors.
Popular vote can cure no statutory defects in public utility franchise granted by a municipality (Const. 1908, art. 8, § 25).
8. Same — -Franchises—Statutes—Constitutional Law.
• Statute authorizing common council of fourth class city to grant franchises for furnishing gas and electricity held, not so repugnant as to be repealed by subsequently adopted Constitution limiting maximum term and method of imparting irrevocability to such a franchise (Const. 1908, art. 8, §§ 25, 29; sched. §1; 1 Comp. Laws 1929, §2107).
9. Same — Public Utilities — Rates—Delegation op Powers.
Primary authority in legislature to fix rates for public utilities may be delegated to municipalities in express terms or by necessary implication but constitutional provision reserving control of streets and publie places to respective municipalities and requiring their consent before use thereof by utility is not such a delegation of power; (Const. 1908, art. 8, § 28).
10. Same — Control op Streets — -Public Utility Rates — Legislature — Constitutional Law.
Power of control over1 streets and public places granted by Constitution of 1908, art. 8, § 28, carries with it an authority over publie utility rates by municipalities as a condition of the use of such places by the utility and such power in the municipality, whether conferred by Constitution or statute carries with it power to contract for rates at least for a reasonable ' time; but such power is inoperative when the legislature exercises its reserved governmental power over rates (1 Comp. Laws 1929, §2107).
11. Same — Implied Powers — Public Utility Rates — Legislature.
A grant of power to municipality to fix rates for a publie utility is an exercise of the reserved paramount powér of the State by the legislature and supersedes the implied power of a municipality to do so in its reserved control over streets and public places (Const. 1908, art. 8, § 28; 1 Comp. Laws 1929, § 2107).
12. Same — Public Utility Rates — Legislature.
Constitutional provision giving municipality implied power to control public utility rates by reserving to it control of streets and publie places would not empower it to make an irrevocable 30-year contract for rates even by vote of the electors, since such contract would be subject to annulment by legislative exercise of the superior power of the State over utility rates (Const. 1908, art. 8, §28).
13. Same — Public Utility Rates — Statutes — Constitutional Law.
Statute granting control to fourth class city of streets and other publie places, insofar as it impliedly permitted contracts as to rates with public utilities, held, not repealed by subsequently adopted Constitution granting equally broad power to municipality (Const. 1908, art. 8, § 28; 1 Comp. Laws 1929, § 2107).
14. Same — Statutes-—Constitutional Law — Franchises.
Statute authorizing fourth class cities to contract for supplying gas and electricity for period of not to exceed 10 years and permit utility to use streets and public places superseded cities’ implied authority so to do under constitutional provision and constituted a legislative exercise and delegation of reserved governmental power prohibiting such cities from making franchises for such purpose for more than 10 years, thereupon leaving common council free to make new contract for rates at expiration of that time (Const. 1908, art. 8, §28; 1 Comp. Laws 1929, §2107).
15. Same — Agent on State in Granting Franchises.
Granting a franchise is an exercise of the sovereign power of the State, vested in the legislature, but delegable to municipalities and, when so delegated, the municipality exercises it as agent of the State and upon the conditions prescribed by law.
16. Constitutional Law — Legislature ■ — -Delegated Powers — Municipal Corporations — Franchises.
Constitutional provisions changing method of conferring irrevocability on public utility franchise by municipality and prescribing maximum term thereof, adopted after passage of statute delegating to municipalities power to grant franchises did not withdraw such power to delegate from legislature but merely established limitations on such delegable power to grant franchises (Const. 1908, art. 8, §§ 25, 29; 1 Comp. Laws 1929, §2107).
17. Municipal Corporations — Constitutional Law — Public Utilities — -Rates.
Constitutional provision reserving reasonable control over streets and public places in the several municipalities held, not a grant to them of the sovereign power to fix public utility rates (Const. 1908, art. 8, §28).
18. Same — Delegated Powers — Gas and Electric Rates.
Power delegated to fourth class city by legislature to fix rates for supplying gas and electricity therein which confined power to contract therefor' to 10 years was an exercise by the legislature of the sovereign power of the State to fix such rates and city, as an agent, cannot enlarge its authority by incorporation of a 30-year contract in franchise granted utility for use of its streets (Const. 1908, art. 8, .§§25, 28, 29; 1 Comp. Laws 1929, §2107).
19. Same — Authority.
A city cannot exceed its charter powers and confer prohibited authority upon itself by a particular method of usurpation.
20. Same — Gas Rates — Contracts—Ultra Vires.
Unless an instrument between a fourth class city and utility, purporting to fix rates for supplying gas to city and its inhabitants for period of 30 years is binding on the legislature it is merely a private contract, not a franchise, and, as a private contract, is wholly ultra vires beyond 10-year period because prohibited by superior legislative authority (1 Comp. Laws 1929, §2107).
21. Same — Fourth Class Cities — Common Council — Electors.
• Fourth class city common council and electors each • exercise part or whole of municipal powers when, and only when, it is so provided by law and each has only such powers as are so eonfererd.
22. Same — Franchises—Gas Rates — Common Council.
Ordinance granting utility a franchise to manufacture and sell gas to fourth class city and its inhabitants and use streets and public places therefor and purporting to fix rates for period of 30 years, which was approved by electors held, not to fix rates beyond 10-year period allowed by - statute and, thereafter, common council has authority to contract for change of rates (1 Comp. Laws 1929, §2107).
Potter, C. J., and North, J., dissenting.
Appeal from Berrien; Collingwood (Charles B.), J., presiding.
Submitted April 11, 1935.
(Docket No. 96, Calendar No. 38,267.)
Decided October 30, 1935.
Rehearing denied December 10, 1935.
Bill by City of Niles, a municipal corporation, against Michigan Gas & Electric Company, a corporation, to declare certain gas rates valid, enjoin charge of greater amount and for other relief. Decree for plaintiff. Defendant appeals.
Reversed, and bill dismissed.
Casper R. Grathwohl, for plaintiff.
Burns d Hardsell and Sherman T. Handy (Ralph D. Stevenson, of counsel), for defendant.

Opinion:
Fead, J.
April 7, 1913, the city of Niles adopted an ordinance granting a 30-year franchise to Niles Cas Light Company, assignor of defendant, to manufacture and sell gas to the city and its inhabitants and to use streets and public grounds generally therefor. The ordinance was approved by vote of the electors. Section 6 provides:
"Said company, its successors, lessees or assigns may charge for manufactured gas sold and distributed in said city the sum of one dollar per thousand cubic feet during the life of this ordinance."
The franchise was formally accepted by the Light Company.
April 8, 1918, and again on August 31, 1920, the city council adopted an ordinance authorizing increase in the price which could be charged for gas. August 8, 1932, the council adopted a resolution authorizing a sliding price scale for gas, partly in excess of one dollar per thousand feet. The ordinances contained reference to the original ordinance of 1913, but the resolution did not. Neither ordinance nor the resolution was submitted to popular vote.
This action is brought by the city to set aside as illegal the subsequent ordinances and resolution, to restore the rate in the original ordinance of 1913, and enjoin the defendant from discontinuing service on refusal to pay a greater rate. Plaintiff had decree.
Niles is a city of the fourth class. When the original franchise was granted, Act No. 215, Pub. Acts 1895 the fourth class cities act, was in force. It provides, 1 Comp. Laws 1929, § 2107:
"Sec. 8. The council may contract from year to year or for a period of time not exceeding ten years with any person or persons, or with any duly authorized corporation, for the supplying of such city or the inhabitants thereof, or both, with gas, electric or other lights upon such terms and conditions as may be agreed; and may grant to such person, persons or corporation the right to the use of the streets, alleys, wharves and public grounds of such city as shall be necessary to enable such person, persons or corporation to construct and operate proper works for the supplying of such light upon such terms and conditions as shall be specified in such contract."
Defendant contends the rate provision of the ordinance of 1913 became ineffective at the end of 10 years, if it was not void ah initio, because it was in contravention of the statute, and the council had power to newly contract as to rates thereafter.
Plaintiff contends that the statute (1 Comp. Laws 1929, § 2107), was repealed by Act No. 259, Pub. Acts 1905 (1 Comp. Laws 1929, § 2218). The latter, however, was purely a validating act legalizing prior franchises and contracts and had no other effect upon Act No. 215, Pub. Acts 1895.
Plaintiff also contends the statute did not apply to franchises or, if it did, it was repealed by the Constitution of 1908, which provides in article 8:
"Nor shall any city or village acquire any public utility or grant any public utility franchise which is not subject to revocation at the will of the city or village, unless such proposition shall have first received the affirmative vote of three-fifths of the electors of such, city or village voting thereon at a regular or special municipal election.; and upon such proposition women taxpayers having the qualifications of male ' electors shall be entitled to vote." Section 25.
"The right of all cities, villages and townships to the reasonable control of their streets, alleys and public places is' hereby reserved to such cities, villages and townships." Section 28.'
"No franchise or license shall he granted by any municipality of this State for a longer period than thirty years." Section 29.
A franchise is a contract. Village of Otsego v. Allegan County Gas Co., 203 Mich. 283. The statute makes no distinction between franchises and other forms of contract in establishing the 10-year limit of time. It restricts the power to contract, whatever the form of its exercise.
Except in certain specific respects, the Constitution of 1908 did not divest the legislature of jurisdiction over municipalities and they still must find their powers in statute, either directly or by charter authorized by general law. City of Kalamazoo v. Titus, 208 Mich. 252, 265; 2 Constitutional Debates, p. 1432. Having no home rule charter, Niles is governed by the statute. Act No. 215, Pub. Acts 1895.
The words in sections 25 and 29 of article 8 of the Constitution are words of limitation, not of grant of power. They restrict both the legislature in authorizing, and the municipality in granting, franchises but only in the respect of the maximum term of the franchise and its revocability.
Section 25 does not vest power to grant franchises in the electors. It has the definite purpose, and effect of transferring to the electors a power over franchises which was theretofore exercised by the common council. Prior to 1908 the common council, under authority of statute or charter, could and did grant irrevocable franchises without popular vote. Section 25 withdrew from the legislature and council the power to give irrevocability to franchises and vested it in the people. The legislature still may authorize the common council to grant a franchise. Such franchise will be valid but revocable at will of the municipality unless approved by popular vote, The people therefore add nothing to it except the element of irrevocability. The constitutional convention so intended and understood the effect of section 25. 2 Constitutional Debates, p. 1325 et seq., Address, p. 1432. Consequently, popular vote can cure no statutory defects in the franchise itself.
The Constitution, schedule, § 1, provides that statutes not repugnant to the Constitution should remain in force until they are altered, repealed or expire by their own limitations. Sections 25 and 29 leave 1 Comp. Laws 1929', § 2107, undisturbed except by adding a condition as to limit of the franchise and method of imparting irrevocability to it. We find no repugnancy working repeal.
Power of control over streets, alleys and public places, granted by Constitution, art. 8, § 28, carries with it an authority over public utility rates by municipalities, as a condition of the use of streets, alleys and public places by the utility. But the nature of the power must be appreciated in considering its effect to repeal section 2107.
Primarily the authority to fix rates for public utilities is a governmental power vested in the legislature. The legislature may delegate it to municipalities but only in express terms or by necessary implication. Section 28 does not delegate such power to cities and villages. City of Kalamazoo v. Kalamazoo Circuit Judge, 200 Mich. 146, 161.
The authority of municipalities over rates, resulting from section 28, is a wholly different power. From the fact of control of streets, whether under statute or Constitution, there arises an implied power to fix reasonable rates as a condition of the use of tlie streets. This, in turn, carries the power to contract for rates, at least for a reasonable time. Boerth v. Detroit City Gas Co., 152 Mich. 654 (18 L. R. A. [N. S.] 1197); Lenawee County Gas & Electric Co. v. City of Adrian, 209 Mich. 52 (10 A. L. R. 1328); City of Saginaw v. Consumers' Power Co., 213 Mich. 460; Village of Otsego v. Allegan County Gas Co., supra. Such implied power of municipality to fix or contract for rates is inoperative when the legislature exercises its reserved governmental power over them. City of Traverse City v. Citizens' Telephone Co., 195 Mich. 373. A grant of power to the municipality to fix rates is an exercise of the reserved paramount power of the State by the legislature. Village of Plainwell v. Eesley Light & Power Co., 214 Mich. 461, and supersedes the implied power.
Under its powers implied from section 28, then, the city, if there were no statute, could not make an irrevocable 30-year contract for rates even by vote of the electors. Such contract would be subject to annulment by legislative exercise of the superior power.
The municipal control of streets and other public .places under the statute, 1 Comp. Laws 1929, § 2107, was, as to the matter before us, as broad as that granted by section 28 of article 8 of the Constitution. The implied power to fix or contract for rates under .the one was not different from that under the other. There was no conflict between them which resulted in a repeal of the statute.
Section 2107 was a-legislative exercise and delegation of reserved governmental power to contract for rates and defined the conditions under which the municipality could use the delegated power. It superseded the implied authority and limited the jurisdiction of the municipality to contract. No irrevocable .contract for rates, by franchise or otherwise, could have been made for more than 10 years. Consequently at the expiration of that period the common council had power to make new contract for rates.
We have no decisions of our court in direct point. However, the limitation of 10 years has been recognized by municipalities in the drafting of franchises and was before the court in City of Saginaw v. Consumers' Power Co., supra; Village of Plainwell v. Lesley Light & Power Co., supra.
I cannot concur in the reasoning of Mr. Justice North's opinion, presented after the above was written. It treats an express constitutional limitation of power as an express constitutional grant of power. Reference to other provisions of the Constitution demonstrates the ability and intention of the framers to express grants of power in apt affirmative languageand there is no justification for a construction that, concealed in express prohibitory- words denying- power, they intended to grant it.
' The grant of a franchise is an' exercise of the sovereign' power of the State, vested in the legislature. The power may be delegated to municipalities but, when so delegated, the municipality exercises it as agent of the State and upon the conditions prescribed by law. 26 C. J. pp. 1013, 1024 et seq.; 12 R. C. L. p. 186. Sections 25 and 29 do not purport to withdraw from the legislature its sovereign power over franchises and confer it upon municipalities. They do no more than establish limits of time and conditions of irrevocability of such franchises as the legislature may delegate to municipalities the power to grant.
Nor, under the cases above cited, particularly City of Kalamazoo v. Kalamazoo Circuit Judge, supra, cited by Mr. Justice North, does section 28 grant to municipalities the sovereign power to fix public utility rates. Section 2107 was an exercise by the legislature of such sovereign power, delegated to fourth class cities but confined to the power to contract for 10 years and no longer. The contract may be, but need not be, attached to a franchise. Its inclusion in a franchise cannot enlarge the delegated authority. A city cannot exceed its charter powers and confer prohibited authority upon itself by a particular method of usurpation.
Moreover, unless the cited cases dealing with section 28 be overruled, Mr. Justice North's opinion would result in the anomalous situation that the contract rates are binding on the city and the utility for the full 30 years but are not binding on the legislature beyond the 10-year period authorized by it. But this is hardly tenable because, unless binding on the legislature, the instrument is merely a private contract, not a franchise. If it is merely a private contract between the city and the utility, it is wholly ultra vires beyond the 10-year period because prohibited by the superior legislative authority.
An attempt to differentiate between the common council and the council and the electors, as constituting a city or village, in finding municipal powers is futile. Each exercises part or the whole of the municipal powers when, and only when, it is so provided by law. Each has only such powers as are so conferred. Under 1 Comp. Laws 1929, § 1902, governing fourth class cities:
"The legislative authority of cities incorporated under this act shall be vested in a council consisting of the mayor, two aldermen elected from each ward and the city clerk. ' '
In section 2107 the whole of the municipal power to contract for gas rates was vested in the council.
To avoid misunderstanding, we hold only that the rates provided in the franchise ordinance of 1913 were not fixed beyond the 10-year period allowed try statute, and that the common council of plaintiff city had authority thereafter to contract for a change of rates. Possible rights and remedies resulting from the ruling must be left to further consideration.
Decree reversed and bill dismissed, with costs.
Wiest, Butzel, Bushnell, and Edward M. Sharpe, JJ., concurred with Fead, J.