Court Opinion

ID: 7141016
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:29:12.618242+00
Date Added: 2024-06-11T16:14:48.289702
License: Public Domain

Dissenting Opinion by
Judge Carroll.
The opinion in this case holds that when the people of a city, through their agents, the common council, have entered into a valid and binding contract with a public service corporation by which it 'obligates itself to furnish to the people, for the term of years specified in the contract, the service contemplated, at a specified sum, that thereafter and during the life of the contract the common council and the public service corporation, without asking the advice or consent 'of the people affected, may abrogate provisions of the franchise contract beneficial to the people of the city; that they may enter into a new contract by which the public service corporation, to its own advantage and to the detriment of the people of the city, may charge much higher rates for services than it was allowed to charge under its original contract.
To this proposition I do not agree.
The facts of this case, as stated in the opinion, furnish a striking illustration of the reasons why the doctrine announced in the opinion should not prevail. *565Under the franchise contract the telephone company obligated itself to furnish to the people of Lexington for a term of years business telephones at $30 per annum and residence telephones at $18 per annum. Under the new contract made between the council and the telephone company the telephone company was allowed to charge and exact without limitation any fee it might fix and in fact did charge for business telephones $42 and for residence telephones $24. For this large increase in rates which may be further increased the company did nothing it was not required to do under the franchise contract. It surrendered no right or privilege. The right to levy this excess rate on the people of Lexington was a bonus or gift presented to the telephone company by the council without any consideration of any kind or character. The only gainer by this transaction was the company, the only loser the people.
It is a matter of vital concern to the people of a city that when public service corporations have entered into a binding contract in the manner provided in the Constitution and laws of the State, that they should be required to live up to it. It is a matter of vital concern to the people of a city that a public service corporation should not be allowed by a subsequent arrangement made between it and a municipal body to relieve itself of the burden it assumed in its original contract and put upon the people charges that they were not required to bear by the original contract. It is a matter of vital concern to the people of cities that valuable franchise rights should only be secured by public service corpoiv ations in the manner pointed out in the Constitution. It is a matter of vital concern to the people of cities that valuable contracts for a fixed time should not be subjected to alteration by every city council that may see proper to change them at the instance of and for the benefit of the public service corporation affected.
If the method authorized by this opinion is to prevail, then any public service corporation can secure from tho council, in the manner pointed out in the Constitution, a valid and valuable franchise contract, beneficial to the people of the city, and thereafter, whenever it can procure a council favorable to its interest, make, a new contract, putting on the people of the city heavier burdens than the old contract imposed.
As a further expression of my views, I cannot do better, under the limited time at my disposal, than here *566incorporate so much of my dissenting opinion in the ease of the Louisville Home Telephone Co. v. City of Louisville, 130 Ky., 611, as seems pertinent. In that case the question here presented' was involved, and I said:
/‘My position is that municipal hoards occupy a position of trust; that they are agents and servants of the people of the city, and must perform their duties with fidelity to the welfare and interest of the people they represent for the time being; that their powers are delegated and limited; that although they may enter into contracts and, in certain states of ease, cancel or modify them for a valuable and sufficient consideration, or in cases where a mutual mistake was made, or when it is for the best interest of the city, yet they cannot modify or cancel to the detriment of the people, whose agents they are, a beneficial or advantageous contract, made with an individual or corporation, solely for the advantage of such person or corporation. To sanction a power like this would be giving to municipal boards authority not granted to any other agent or trustee; and when it is attempted, the courts have the same power to interfere and control as they do in any ease where the principal or agent is exceeding his powers. And I rest my argument on the right of the court to interpose upon the ground that the council, in the enactment of so much of the ordinance as exonerated the Home Telephone Co. from, its liability and obligation, exceeded its power as much, although in a somewhat different way, as was attempted by the council that undertook to relieve the city railway company from the payment of taxes, but was prevented by this court, in the case of Louisville v. Louisville Railway Co., 111 Ky., 1.
' “When the bid for the franchise offered for sale under the ordinance of 1900 was accepted by the council, a valid and binding contract was entered into between the city and the Home Telephone Co. for a term of 20 years. This contract neither party, under the facts presented, Could modify or cancel without the consent of the other. While admitting the correctness of this proposition, it is nevertheless confidently asserted that, as any kind of a contract may be altered or annulled by the consent-of the contracting parties, so may a contract entered into by and with a municipality. Therefore, the argument is made that, as the council and the other contracting party have consented to a cancellation of the contract, the courts have no authority to inter*567fere; that the matter is entirely within the power and discretion of the council and the council is to judge unrestrained of the necessity or reason for its cancellation and its acts are final and conclusive. * * *
“I have made diligent search, but without success, to find any authority supporting the view that a city council without any valuable consideration may surrender or give away valuable property rights secured to the city under a fair contract, entered into by the contracting parties with full knowledge of existing circumstances, and the reciprocal' rights and duties assumed. City Councils are not invested with supreme power. They are not altogether above judicial control. They have large powers and extensive discretion, but these powers, and the discretion incident thereto, are delegated. They must be exercised within statutory limits, and when these limits are exceeded their action may be reviewed by the courts. That they did exceed them in this case, I have no doubt. The inhabitants of a city, although the principals, and indeed the corporation itself, are necessarily obligated to transact their business through agents appointed or selected for that purpose. And to say that these agents may cancel a contract made between the city and an individual, to the end that the individual may be benefitted by the cancellation, and the people of the city damaged by it, seems to me to be unsound in principle, and entirely beyond the scope of the authority of these municipal agents. In this case the city will secure no consideration for its agreement to relieve the Home Telephone Co. from its contract.
“It, therefore, seems plain that, if the council can cancel this contract, it has the power to cancel any contract that might be made, by a person or corporation, with the city upon any subject, however injurious to the city and the people the annulment might be. This would result, if allowable, in permitting municipal boards to destroy any advantageous contract the city might make upon the request of the other contracting party who desired to free himself from the burden or liability assumed when the contract was entered into. It would further result in permitting these boards to grant a gratuity, in the form of exonerations from assumed liabilities, to persons who had contracts with the city. If in and as part of the ordinance offering for sale a new franchise, the city council has the authority to pro*568vide that the obligations assumed under the old ordinance shall be extinguished, it would seem to follow that this result could, with as much force of reason and propriety, be arrived at, by simply adopting an ordinance striking from the old ordinance the features thereof objectionable to the Home Telephone Company. The effect would be precisely the same. If one can be done,' I see no reason why the other may not. But I doubt if the question was presented in this form if the majority of the court would have reached the conclusion that it was competent for the council to thus take away from the city, and the people of the city, valuable rights secured to them under a valuable and enforcible contract, or be willing to lay down a rule that would encourage persons to enter into a contract with a city to perform for a consideration some beneficial public service, with the hope and expectation that a more accommodating council would relieve them from the onerous features of a contract that a less agreeable body had exacted. ’ ’
It is true that the opinion of the court in this case adopts the views expressed in the Louisville Home Telephone Company case in which I dissented, and the views expressed in the subsequent case of Gathright v. H. M. Byllesby & Co., 154 Ky., 135, in the decision of which I took no part. But it goes an important step further than either of these cases. In the Louisville Home Telephone Company case the council required the telephone company to go through the form of buying a franchise before it could relieve itself of the obligations imposed by its first franchise contract. In the Gathright case it was made to appear that the change in the contract made by the council would be beneficial to the people of the city in giving them better service at lower rates than they received under the old contract, but this case is lacking in either of these partially redeeming features. In this ease the council boldly undertook by an ordinance to relieve the telephone company of its obligations to the people, and made a new contract with the telephone company that did not require it to furnish to the people any better service than it was obliged to do under its franchise contract, and yet allowed it to charge a much larger service fee. In short, the court holds that a council may at any time by an ordinance abrogate a contract and give to a public service corporation anything it wants without any regard to whether the people af*569fected will be benefitted or not. This opinion removes tbe last restraint imposed by the Constitution for the protection of the people and leaves conditions precisely as they were before its enactment.
The case of Cumberland Telephone & Telegraph Co. v. City of Hickman, 129 Ky., 220, is also cited as authority for the opinion, but I do not think the principle laid down finds any support in that case. In that case a franchise contract was made with the telephone company providing “that the rate charged each subscriber within the city should not exceed $2.50 per month.” It was also provided that work to install the plant should be begun within six months after the passage of the ordinance. The owners of the franchise were about to let it lapse by their failure to begin work upon the plant within the time specified, and they requested the city council to grant them an extension. This the city council did, but on condition “that the maximum charged, to subscribers to the system in the city should not exceed $1.50 per month for residences, $2.50 for business houses, and where one subscriber had a phone in his residence and one in his business house also the maximum charge for the two should not exceed $3.50 per month.
It will be observed that the only change made in the franchise contract in this case was in giving’ the telephone company an extension of time in which to begin work, and for this small favor the council required the telephone company to agree to a schedule of prices more favorable to the people of the city than the franchise contract was. In sustaining the validity of this action of the council, we said:
“If the ordinance granted any additional privilege in the streets and public places of the city, there would be irresistible force in appellant’s contention here; or, even if there was some material change in the terms of the grant, so as that the city was or might have been prejudiced by the fact, a very grave question would arise whether such an ordinance was not in effect the granting of a franchise without a sale. But we do not find such to be the case here. The grantee had agreed to certain conditions as part consideration for this grant. One of them, the rate of tolls, was of particular interest to the public; in other words, the city. The other condition was as to the time within which work on the plant was to be begun. The latter was not of so *570much importance to the city, except as a kind of security that the bid was in good faith. It was a condition which the city might have been justified in not exacting the penalty for its breach, if the delay had not been material. Still it was a matter of importance to the grantee, as it weakened his hold upon his franchise. We think it was competent for the city to waive the forfeiture of the franchise because the work had not been begun within six months, in consideration of a reduction of the rates by the owner of the franchise. There was a sufficient consideration moving to the city to support its waiver of the forfeiture; likewise a sufficient consideration moving to the grantee of the franchise to support his agreement to charge patrons within the city, and for whose benefit and welfare the contract had been entered into, a less rate than was originally agreed upon. In doing this, the city granted no new or different right in the use of its streets nor did it abate any of the original consideration. On the contrary, it gave only what it had originally agreed to grant, and got in exchange a better consideration. What it had given up was a right to claim a forfeiture — the giving up of which is not the granting of a franchise.”
Thus it will be seen that the slight alteration in this contract was distinctly upheld upon the ground that it was beneficial to the people of the city. There is no intimation by the court in this ease that a city- council may change a franchise contract so as to impose heavier burdens on the people of a city or so as to give a public service corporation benefits that it did not have under its original contract.