Court Opinion

ID: 9641946
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:43:56.135219+00
Date Added: 2024-06-11T09:48:52.729342
License: Public Domain

LEWIS, Circuit Judge,
(concurring specially).
I agree to what has been said, except the parts relative to appellant’s right to compete with the city, and believe that constitutes another independent ground which requires reversal.
The bill, dismissed on motions of defendants, alleges that the city had granted appellant the right and franchise to engage in the business of furnishing electric current to its inhabitants and the public and to occupy the streets and public places of the city for that purpose; that in carrying on its business it had been and was furnishing for a consideration and at a profit electric current to the city, among others, and that it had been and was furnishing power and light to the city’s water works, pumping plant, sewage disposal plant, city hall, memorial hall, city park, and the city system of white-way street lights, and had expended large sums of money ánd made large investments in establishing the facilities and equipment in the city for the purpose of rendering itself able to furnish said service to the city and to the public; that it is the only producer or distributor of electricity operating in the city and available to supply the needs of the citj' with such service; that its service is and at all times has been adequate and satisfactory, and there have been no complaints or proceedings of any sort instituted on account of any claimed inadequacy or insufficiency with respect thereto; that it has expended large sums of money and made large investments in establishing its facilities and equipment and pays . taxes thereon; that the city now threatens to acquire and install electric generating and distributing machinery and equipment in order to be able to withdraw and discontinue its patronage and business with appellant by itself furnishing power and light to its water works pumping plant, sewage disposal plant, and to itself light the city hall, memorial hall, city park and system of white-way street lighting, and its intentions in this respect are manifested by its resolu- ' tions and applications which it has made to the Federal Emergency Administration of Public Works for a loan of money to it by the United States and a grant of a sum of money from the United States pursuant to title 2, National Industrial Recovery Act (48 Stat. 200-210, 40 USCA § 401 et seq.) to finance and carry out its intention; that its services have been dependable, adequate and satisfactory and its rates reasonable, and it is at all times subject to state regulatory power of the Corporation Commission of Kansas to insure that its. service will continue to be adequate, satisfactory, and its rates reasonable. It is further alleged that the threatened acts, if carried out by the city, would be to the great damage of appellant and without lawful right on the part of defendant. Other allegations of the bill admitted by the demurrer, allegations in a supplement to the bill, and resolutions of the city commissioners, all appearing in the record, disclose in more detail the proposed action to be taken by defendants. The purpose of the proposed project seems to be to equip the city’s water works plant with electric pumping facilities, and in doing so the city commissioners appear to have concluded to make the equipment of sufficient capacity to also light the city hall, memorial hall, city park, and the so-called white-way street lights. These allegations with exhibits and the reasonable inferences to be drawn therefrom seem to me to threaten unlawful and injurious conduct to appellant on the part of the city.
It is admitted that the franchise granted to appellant is not an exclusive one. The *45city is at liberty to install an electric lighting plant that can supply the needs of the city and of its inhabitants, or either of them, but even then appellant would have the right of competition with the city. The relations between appellant and the city under appellant’s franchise are contractual, and the proposed action of the city threatens to arbitrarily withdraw from appellant that right of competition as to the city’s needs. This to me seems to be a threatened breach of contract. In City of Walla Walla v. Walla Walla Water Co., 172 U. S. 1, at page 9, 19 S. Ct. 77, 81, 43 L. Ed. 341, the court said: “But it is sufficient for the purposes .of this case to say that this court has too often decided, for the rule to be now questioned, that the grant of a right to supply gas or water to a municipality and its inhabitants through pipes and mains'laid in the streets, upon condition of the performance of its service by the grantee, is the grant of a franchise vested in the state in consideration of the performance of a public service, and, after performance by the grantee, is a contract protected by the constitution of the United States against state legislation to impair it.”
Cooley’s Constitutional Limitations (5th Ed.) p. 337, reads thus:
“Those charters of incorporation, however, which are granted, not as a part of the machinery of the government, for the private benefit or purposes of the corpora-tors, stand upon a different footing, and are held to be contracts between the legislature and the corporators, having for their consideration the liabilities and duties which the corporators assume by accepting them; and the grant of the franchise can no more be resumed by the legislature, or its benefits diminished or impaired without the consent of the grantees, than any other grant of property or valuable thing, unless the right to do so is reserved in the charter itself.”
Fletcher Cyc. Corporations, vol. 2, closes discussion of the subject with section 1185, thus: “The effect of granting a franchise to use streets to a public service company may be briefly summarized as follows : * * * 3. The franchise is a contract within the constitutional provision prohibiting the impairment of contracts, * * This right of competition under circumstances such as we have here is recognized in Knoxville Water Co. v. Knoxville, 200 U. S. 22, 26 S. Ct. 224, 50 L. Ed. 353, and in City of Joplin v. Southwest Missouri Light Co., 191' U. S, 150, 24 S. Ct. 43, 48 L. Ed. 127.
The Kansas statute in broad terms (Rev. St. 1923, 12 — 841) authorized the grant to appellant, and in like broad terms (12 — 842) it authorized the city to purchase or construct electric light, power and heating plants for the purpose of supplying the city and its inhabitants, but there is no statute as to appellant’s rights under the conditions which the city threatens to bring about.
The consideration for the grant to appellant was that appellant on the one hand should make the necessary outlay to furnish the service at reasonable rates, which appellant has done, and that the city and its inhabitants who might desire to use the service would pay appellant reasonable compensation therefor. These are the qualities of a contract, which the city and its commissioners threaten to break in part only, that is, to exclude appellant from competition with it in furnishing light for city buildings, public grounds and part of the streets.