Opinion ID: 1783291
Heading Depth: 1
Heading Rank: 1

Heading: `Schedule C-1

Text: `First 1,000 Gallons at $7.50 per 1,000 Gallons `All excess over 1,000 Gallons at $.50 per 1,000 Gallons `Minimum Bill$7.50 `This rate classification and schedule is put into effect pursuant to unanimous action of the City of Monroe Utilities Commission for the reason that it is uneconomical to supply city water service beyond the geographical limits of the City of Monroe, Louisiana as an accommodation service only. `Monroe, Louisiana, April 28, 1958. `City of Monroe Utilities Commission `By------------------------------ `F. L. Smith, Chairman' A comparison of the two rate schedules discloses that for a consumption of, say 7,000 gallons of water, plaintiffs and other water customers who were purchasing their electric requirements from Louisiana Power & Light Company would be forced under Rate Schedule C-1 to pay the sum of $10.50, whereas other water customers in the area who were purchasing their electric requirements from the City of Monroe would be charged for the same amount of water used only the sum of $2.50 under Rate Schedule C. And since no commercial source of water supply was available in the area other than the waterworks system which had been taken over by defendants, the only way plaintiffs could escape payment of the increased water rate provided by Rate Schedule C-1 was to purchase their electric requirements also from defendantsat a cost greater than they were then having to pay. Plaintiffs were thus faced with the necessity of either purchasing their electricity from defendants in order to avoid the increased water rate, or paying the increased water rate as the price of exercising their right to purchase their electric requirements from the supplier of their choice. It is this coercive feature of the matter which is under attack in this suit. Defendants having insisted upon their right to enforce the rate schedule here complained of, plaintiffs brought this action for a declaratory judgment decreeing the rate complained of to be illegal and unenforceable and for a preliminary and permanent injunction to restrain defendants from putting it into effect. Plaintiffs assert that under the law a municipal corporation, when engaged in activities such as are here involved which are private or proprietary in nature, is governed by the rules applicable to any corporation or individual conducting a similar enterprise and that, having voluntarily purchased the Cruse Water System from the private operator thereof, defendants succeeded to the obligations as well as the rights of said former owner with respect to the continued operation of said system, including the obligation to continue to supply water to the customers of said system at reasonable, uniform and non-discriminatory rates. Plaintiffs point out that the increased rates to which defendants would subject them amount to several times the charge which would be made for similar service to other residents of the area who purchased their electric requirements from defendants; that said increased rates are not based on considerations of quantity, time of use, manner of service, or other matters which present a substantial basis for a rate differential, but upon a pretended classification which discriminates against plaintiffs as `non-electric power customers' and in favor of the customers of defendants' electric power plant and distribution system; that there exists in the area in which plaintiffs reside no other supplier of water from which they can procure their water requirements; that the necessary result of the enforcement of said increased rate is to coerce plaintiffs into purchasing their electric requirements from defendants in order to escape payment of an unreasonable, discriminatory and confiscatory price for their water requirements; and that as a consequence the pretended classification upon which said increased rates are predicated is arbitrary, discriminatory, unreasonable and illegal. Plaintiffs further point out that so long as the Cruse Water System in said area was being operated by the former owner thereof, such operation was subject to the regulatory and rate-fixing powers of the Louisiana Public Service Commission and said former operator had no right under the law, and made no attempt, to interfere with the freedom of choice enjoyed by his customers with respect to the purchase of any other public utility or to compel them to purchase other public services from any particular source of supply; that although defendants are not subject to the regulatory or rate-fixing powers of the Louisiana Public Service Commission, nevertheless they have no right under the Constitution and laws of the State of Louisiana and of the United States to use the newly acquired extension to their waterworks system as an instrumentality with which to coerce plaintiffs and others similarly situated into purchasing their electric requirements from defendants at a greater cost than they are now paying therefor; and that as a consequence if defendants should be permitted to maintain and enforce the arbitrary, discriminatory and illegal rates which they are proposing to charge, plaintiffs will thereby be deprived of their property without due process of law and be denied the equal protection of the laws in violation not only of the Constitution of the State of Louisiana, art. 1, § 2, L. S.A., but of the Fourteenth Amendment to the Constitution of the United States. In his reasons for judgment the learned judge of the trial court, after recounting the allegations of plaintiffs' petition, outlined the issue to be decided as follows: `The primary issue in this case is whether or not the rate classification, applicable to customers outside the city limits who purchase water only from the City and who do not purchase electricity from the City, is a lawful classification.', and concluded: `Plaintiffs' counsel argue that the effect of the classification by the Utilities Commission of the City of Monroe will be to coerce the plaintiffs into purchasing their electrical current from the City of Monroe, but the Court is of the opinion that this is not true. Even though there is no other commercial source of water in the area covered by this lawsuit, the plaintiffs could refuse to purchase water from the Utilities Commission of the City of Monroe and obtain their water from wells, which some of the people who live in this area do. Inasmuch as the plaintiffs in this case can purchase electricity from the Louisiana Power and Light Company or the Utilities Commission of the City of Monroe, and may or may not purchase their water supply from the Utilities Commission as they choose, the Court is of the opinion that the classification in this case is not unlawfully discriminatory. `Therefore the exception of no cause of action is sustained and the injunction is denied.' Although his ultimate rejection of plaintiffs' demands was thus predicated upon a sustaining of defendants' exception of no cause of action, it seems obvious from a reading of his opinion in its entirety that his conclusions were based, in part, at least, upon a consideration of the joint stipulation of fact on which the case was tried on its merits. In considering and determining the right of the defendants to enforce the water rate here complained of, it must be borne in mind that a municipal corporation has two classes of powers, one public and the other private in character. This was pointed out by our Supreme Court in the case of Hall v. City of Shreveport, 1925, 157 La. 589, 591-594, 102 So. 680, 681, in the following language: `It is well settled that the powers and obligations of municipal corporations are twofold in character: Those that are of a public nature, and those that are of a private nature. As to the first, or public character of its powers and obligations, the municipal corporation represents the state, discharging duties incumbent upon the state. As to the second, or private character of its powers and obligations, the municipal corporation represents the pecuniary and proprietary interests of individuals. In its public character, as the agent of the state, it becomes the representative of sovereignty, and is not answerable for the nonfeasance or malfeasance of its public agents. In its private or proprietary functions it is held to the same responsibility as is a private corporation. Stewart v. City of New Orleans, 9 La.Ann. 461, 61 Am.Dec. 218; Bennett v. City of New Orleans, 14 La.Ann. 120; City of New Orleans v. Kerr, 50 La.Ann. 413, 23 So. 384, 69 Am.St.Rep. 442; Davis v. New Orleans Public Belt R. R., 155 La. 504, 99 So. 419, 31 A.L.R. 1303; Solomon v. City of New Orleans, 156 La. 629, 101 So. 1.' (Emphasis supplied.) Moreover, the City of Monroe in the operation of its public utilities is in precisely the same position as a private corporation, as was also squarely held by our Supreme Court in the case of Vicksburg, S. & P. Railway Co. v. City of Monroe, 1927, 164 La. 1033, 1039-1040, 115 So. 136, 138, in this language: `It is clear, therefore, that the operation by the city of Monroe of a street railway is a private undertaking for private gain, and that the position of defendant municipality in the case at bar is the same as that of a private corporation engaged in the same business. `While, in the matters affecting the public welfare, the city of Monroe may pass all reasonable ordinances as to the regulation of railroads within its jurisdiction, under the statutes relied upon in this case, yet, quoad its private enterprise, or street railway, defendant municipality does not enjoy the status of a governmental agency, but is governed by the rules applicable to a private corporation.' (Emphasis supplied.) With respect to water customers of the Cruse Water System, the City of Monroe and its Utilities Commission, by acquiring the water system which had been serving the area in which plaintiffs reside, not only acquired the rights and assets of the previous owner thereof but succeeded to his obligations. This legal result is recognized by a majority of the authorities. For instance, in 67 C.J. 1158, verbo `Waters', Section 633, it is stated: `Where it (a municipal corporation) engages in the business of selling water for a profit, it is governed by the same rules as control an individual or business corporation under like circumstances, and is subject to the same liabilities. So, in general, a municipal corporation which purchases the assets and franchise of a water company acquires the rights and privileges of, and has no greater rights and powers than, such company; it assumes the responsibilities of, and is subject to the same obligations as, such company.' See also 94 C.J.S. Waters § 241. Likewise, in McQuillin on Municipal Corporations, Vol. IV, Section 1801, page 3862, it is stated: `Where the municipality purchases the plant of a private company, it acts thereafter in a proprietary capacity in carrying on the obligations of the quasi public company, and is under the obligation and possesses the rights of such company, and it seems that it becomes bound to supply persons outside the city limits where the private company was burdened with such duty.' In 38 Am.Jur. 259-260, verbo `Municipal Corporation,' Section 570, the rule is set forth as follows: `A municipal corporation empowered to purchase an existing public utility plant serving territory within and without the corporate limits should, it has been held, step into the shoes of the public utility and continue to furnish service not merely to inhabitants within the corporate limits, but to people outside the corporation formerly served by the utility. In the absence of express constitutional or legislative regulations, it is generally held that a municipal corporation in conducting extraterritorial activities such as public utilities is subject to the condition in force within the outside territory in which it acts.' Also see Durant v. City of Beverly Hills, 1940, 39 Cal.App.2d 133, 102 P.2d 759, and North Little Rock Water Co. v. Water Works Commission of City of Little Rock, 1940, 199 Ark. 773, 136 S.W.2d 194. The trial judge, after reviewing these authorities, conceded the correctness of this legal principle, but held the principle inapplicable to the case at bar by pointing out: `The Court concedes this principle of law to be correct. However, the rights and privileges with its attending responsibilities and obligations acquired by the municipality, is the responsibility of carrying on the service as had been carried on by the former owner. In the quotations by plaintiffs' counsel, nowhere is it said that the municipality acquiring the assets and franchises of a water company is to continue to keep in force the rates or the classification of rates made by its former owner.' However, it is not here contended that these defendants, after having acquired the assets and franchises of the Cruse Water System, were obligated to keep in force either the rates or the classification of rates which were in effect under the prior ownership. But the contention is that following their acquisition of the water distribution system which had been serving the area in which these plaintiffs reside, these defendants' rights and obligations with respect to the operation of that water system and to the water customers whom they took over must be tested by the same rules that are applicable to a private utility corporation, and this fact was recognized by the trial Judge who, following the excerpt from his reasons for judgment as just above quoted, immediately added: `It is true that the obligations of a private utility corporation is to serve its customers at reasonable and non-discriminatory rates and the question involved here is whether the rates are discriminatory.' That one of the principal obligations of a private utility corporation is to serve its customers at reasonable and non-discriminatory rates is a point on which all of the authorities are apparently in accord. For instance, in 73 C.J.S. Public Utilities § 27, p. 1048, the rule is stated thus: `A utility may charge but one rate for a particular service, and any discrimination between customers as to the rate charged for the same service under like circumstances is improper; but a utility may, without being guilty of unlawful discrimination, classify its customers on any reasonable basis and make separate rates for each class. `The fundamental theory of rate making for public utilities is that there shall be but one rate for a particular service, and a charge made to one patron or consumer different from that made to another, for the same service, under discrimination and renders the charge improper and a violation of a statutory provision against discrimination or preferences.' However, it is also true that this obligation is equally applicable to municipal utilities. For example, in McQuillin on Municipal Corporation, Vol. IV, Section 1725, page 3690, it is pointed out: `Independent of statute, contract, or municipal regulation, the rates fixed by a public service company, or a municipality owning its own plant, must be reasonable; and a municipality which owns its own plant cannot impose arbitrary charges under penalty of forfeiture of the right to use the supply.', and in an annotation appearing in 50 A.L.R. 126, dealing with `Discrimination in the Operation of a Municipal Utility', the fact that this rule generally prevails and is fully applicable to municipalities is thus set forth: `The general rule is well established that when a municipality undertakes to furnish a public service, such as the supplying of electricity, gas, or water, to consumers other than itself, it acts in its proprietary, and not in its governmental, capacity, and cannot grant free or reduced rates or otherwise make discriminations which would be unlawful if the service were rendered by an individual or private corporation; in other words, the fact that the service is by a municipal plant does not change the rule prohibiting unreasonable discrimination.' It is thus clear that these defendants' obligations to maintain uniform and non-discriminatory rates among the customers of the Cruse Water System arise not only because of the application of that principle to a municipal utility but also because of the assumption by these defendants of the corresponding which the law imposed upon the previous private operator. This principle was clearly recognized by the Supreme Court of our neighboring state of Texas in the case of City of Texarkana v. Wiggins, 1952, 151 Tex. 100, 246 S.W.2d 622, 624-625, where that court said: `The common-law rule that one engaged in rendering a service affected with a public interest or, more strictly, what has come to be known as a utility service, may not discriminate in charges or service as between persons similarly situated is of such long standing and is so well recognized that it needs no citation of authority to support it.