City of Bisbee v. Bisbee Improvement Co.

ROSS, C. J. This case was tried in the lower court upon an agreed statement of facts, as provided in paragraph 510 of Civil Code of 1913, and is before us on appeal upon the-same statement of facts. The city of Bisbee is a municipal corporation. The appellee, Bisbee Improvement Company, is a public service127 corporation. On December 28, 1906, it owned and operated an electric light plant and power system in the city of Bis-bee and was furnishing electric lights and power to the residents of the city and its adjacent suburbs and settlements. It had been performing such public service for some time prior thereto, but just how long is not shown, and has continued such public service ever since. On December 28, 1906, the appellant city granted to the International Gas & Light Company, its successors and assigns, a franchise to maintain an electric light and power system and build pole lines and conduits along and under the public streets, highways and alleys of the city of Bisbee. The ordinance granting the franchise in dispute in section 1 provides for such grant to the International Gas & Light Company, its successors and assigns, for a period of twenty five years, with the right to enter upon and use its streets and alleys for the purpose of erecting an electric light and power system. Section 3 provides that: “The grantee of this franchise, its successors and assigns, shall have an electric system in operation in the city of Bisbee within eighteen months from the granting hereof.” Section 4 requires the grantee to execute a bond to the city in the sum of $1,000, conditioned that the grantee, its successors and assigns, shall well and truly observe, fulfill and perform each and every term and condition contained in section 3, and in case of any breach of such condition, the whole penal sum should be liquidated damages. Section 5 requires that the grantee or assigns file a written acceptance of the terms and conditions of the ordinance within twenty days after its passage. Section 6 provides the maximum amount to be charged should be twenty cents per kilowatt hour, with free lamp renewals to all consumers paying regular lighting rates, and that the grantee furnish to the city of Bisbee free of charge 225 kilowatt hours per month for lighting the city hall and other city buildings, and furnish street lighting at the rate of ten cents per kilowatt hour. The sections unnoticed have no bearing upon the questions involved. The grantee accepted the franchise and filed bond as provided in ordinance. On January 16, 1908, the latter company, without having done anything toward installing an electric system, assigned — 128 — and conveyed its rights and franchises to the Bisbee Light & Power Company. Within one week prior to the time within which the ordinance provided that the electric system should be in operation, the Bisbee Light & Power Company constructed “and in four days’ time completed an electric system within the city, . . . and therewith and therefrom furnished three consumers of electric light in the immediate vicinity of said plant with electric incandescent lights, . . . and at a point on one of the public streets of the city installed and furnished electric current for four 16-candle power electric lamps,” at an expenditure not exceeding $700. “Said system was constructed and installed for the sole purpose of complying or attempting to comply colorably or technically with the terms and provisions” of the ordinance granting the franchise. This electric system and its equipment were destroyed by fire on the fourteenth day of October, 1908, and were never rebuilt. The franchise granted to the International Gas & Light Company, its successors and assigns, together with a gas franchise, a valuable and extensive gas system, with rights appurtenant, were on June 26, 1911, at a foreclosure sale, sold, assigned and conveyed to one W. J. Ainsworth, who thereafter, on July 1, 1911, for a valuable consideration, transferred all of his title to said property to the appellee. The city took no steps or action looking toward a repeal of the ordinance granting the franchise or a cancellation or forfeiture of the franchise and privileges therein granted until the nineteenth day of July, 1911, when it first obtained knowledge of the appellee’s ownership of said franchise. Appellee completed its purchase of the franchise without any knowledge that the city questioned or intended to question the validity of the ordinance granting the franchise. At the time appellee purchased the franchise in question it knew substantially what had been done by its predecessors -under the ordinance granting the franchise, and knew the history of the ordinance from its adoption and the facts in relation to the electric system installed and its destruction by fire. Appellee, upon the completion of the purchase, assumed possession of all the property, franchises and privileges •so purchased, and proceeded by way of compliance with the — 129 — requirements and stipulations of the ordinance granting the franchise, as follows: On July 16, 1911, it published a notice in a paper of general circulation in the city of Bisbee to the effect that it had bought out the Bisbee Light & Power Company and had assumed control of the gas plant and business of the latter company. In like manner on July 19th and 20th it published notice that on and after the first day of August, 1911, free lamp renewals would be furnished by it to all of its customers paying regular lighting rates. After August 1st it furnished free lamp renewals to all its customers as advertised in said notice, and to five of its patrons before August 1st and after July 19th. The agreed statement of facts shows that since appellee acquired the franchise in dispute it has furnished customers with electricity at prices within the terms of the ordinance, and has furnished the city and offered to furnish the city electricity strictly within the terms of said ordinance, but that the city has refused to accept any deductions or free lights. On July 21st the common council of the city of Bisbee passed a resolution questioning the validity of the franchise for lack of compliance with its terms, and notified appellee of its purpose to revoke said franchise and repeal the ordinance granting the same. On the twenty-seventh day of July, and after a hearing, at which appellee was represented by its attorney, a resolution was passed by the common council of the city declaring that all and singular the rights, privileges, licenses and franchises vested or purporting to be vested in said International Gas & Light Company, its successors and assigns, and in the Bisbee Improvement Company, claiming as assignee thereof, were revoked, withdrawn and annulled, and the contract therein made or purporting to have been made by the adoption and passage of said ordinance or evidenced thereby was rescinded, annulled and abrogated. Thereafter, on August 18,1911, an ordinance was duly passed by the mayor and common council of the city of Bisbee repealing the ordinance granting the franchise to the International Gas & Light Company, its successors and assigns. The appellee continuing to exercise the rights, privileges and ■franchises granted under said ordinance, on December 20, — 130 — 1911, the city of Bisbee brought this action to obtain a judicial confirmation of the revocation and cancellation of said ordinance and the franchises thereunder. Judgment was entered in favor of the Bisbee Improvement Company, and the city prosecutes this appeal. It makes three assignments of error, but we think the point involved is well expressed in its assignment No. 2, which is as follows: “The court erred in rendering judgment in favor of the defendant Bisbee Improvement Company on the agreed statement of facts and against the plaintiff, because at the time said defendant acquired its alleged rights under Ordinance No. 102 by said purchase the same was subject to rescission, cancellation and forfeiture in suit by the plaintiff by reason of the failure of defendants ’ predecessors in interest to perform the obligations thereof in any substantial way, and, buying with full notice, and at an execution sale, it acquired only such rights as its predecessors could convey.” It will be observed from this assignment that it is the contention of the appellant that the franchise in dispute was subject to rescission, cancellation and forfeiture in a suit by it at the time that the appellee became the owner thereof. It is insisted that, because the city of Bisbee had the right and might have instituted proceedings to cancel and annul the franchise on July 1, 1911, the date of the transfer of the franchise to appellee, that right was unaffected by reason of a change of ownership. The correctness of this proposition,, it would seem, hinges upon other facts concerning which there is no dispute. It may be granted that prior to July 1, 1911, neither the grantee of the franchise nor the Bisbee Light & Power Company, its assignee, had performed the necessary acts to give ■them a vested right in the franchise. The three-light system could hardly be said to be a substantial compliance with the terms of the ordinance granting the franchise. It was, at most, only a colorable or technical compliance with the terms'of the ordinance. Besides, this system was maintained for only a short time, and was not, therefore, a fulfillment of the implied agreement that the service should be continuous. However, no complaint was ever made of the inadequacy of this lighting system; no demand was ever made for its enlargement while it was in operation; nor for its reeonstruc — 131 — tion after it was burned; no steps had been taken by the city to declare a forfeiture of the franchise. If the Bisbee Light & Power Company, the immediate predecessor of the appellee, had, prior to any action upon the part of the city to forfeit and cancel the franchise, substantially complied with all the terms of the ordinance granting the same, it would hardly be contended, we think, that notwithstanding such performance, the long and continued nonuser of the franchise prior thereto would in law authorize a forfeiture thereof. A full performance on the part of the Bisbee Light & Power Company would have the effect of wiping out and canceling all of its defaults prior thereto so as to defeat a forfeiture in its hands, and a full performance by the appellee before any action upon the part of the grantor of the franchise would likewise insure it against forfeiture. The appellee purchased the franchise on the first day of July, 1911, and immediately was in a position to perform all of the conditions of the ordinance under which the franchise was granted. It had at the time an electric light and power plant in operation in the city of Bisbee, and, before any action was taken upon the part of the appellant to revoke and declare forfeited the franchise, it had taken steps to comply with its requirements and conditions in furnishing of free renewal lamps to its patrons; to the city 225 kilowatt hours per month free for lighting its public buildings, and street lights at ten cents ' per kilowatt hour. That it measured up in capacity and in disposition to every requirement of the ordinance is not questioned, but agreed to. The statement of facts is silent as to whether the appellee prior to the purchase of this franchise was operating under any franchise at all or not. So far as we know from the record, the franchise in dispute is the only one the appellee is operating under or ever operated under; that it could have constructed its plant and operated it before the acquisition of this franchise under a mere license from the city authorities, while not probable, is entirely within possibilities. It is enough to say that the record does not affirmatively show that the appellee ever had at any time or that it now has any other franchise than this one. The situation then is that the appellee purchased the franchise for a valuable consideration, and before the repeal of the ordinance under which the franchise was granted tendered — 132 — full performance. There is no complaint of the ability of the appellee to furnish electric lighting to all consumers and to the city, nor of the kind or character of service that it offered; the sole objection apparently to its taking over the franchise being a personal one to the appellee. Of course, if the appellee had purchased the franchise and simply held it as its predecessors had done, manifesting no purpose or intention to comply with its terms and conditions, the complaint of the city would present an entirely different question; but the appellee was diligent and active, upon the acquirement of the privileges of the franchise, in the discharge of the duties and obligations that it imposed; it was doing and offering to do all that the original grantee had agreed to do or might be required to do. The appellant had granted this franchise and made it assignable. With the full knowledge of its history and all the things done under it, it failed to question its validity as a binding contract until its ownership had changed to the appellee. If the appellant had taken steps to forfeit the franchise while it belonged to the grantee or the Bisbee Light & Power Company, and the appellee had purchased with notice, then unquestionably it would occupy the same shoes as its predecessors; but, as we have seen, the city remained silent, doing nothing and saying nothing to indicate its purpose to forfeit the franchise until after the appellee acquired it. . It must be borne in mind that forfeitures are not looked upon with favor. The courts will not enforce them unless there be very strong and cogent reasons requiring it. Dillon on Municipal Corporations, fifth edition, section 1311, in discussing public utility franchises, says: “But a forfeiture will not be enforced, or the contract canceled and annulled where the failure to comply with its terms has been accidental or occasional, and reasonable cause can be shown for excusing the same, but only when it appears that, persistently and in opposition to the will of the people, there has been a continued purpose on the part of the grantee not to comply with the contract, justifying the city in accepting the grantee’s attitude as a deliberate intention to violate the contract. And, if it should appear that the grantee of the franchise may be able to comply with the contract in the — 133 — future and furnish water in accordance therewith if given reasonable time, the decree of the court may, in furtherance of justice, provide that the contract will be annulled and the franchise canceled only at a time certain, within which the grantee should be given the privilege of complying with the contract. The law does not look with favor on forfeiture, and, if another remedy is available by which the city can obtain just redress, an annulment of the contract will not be decreed.” No owner, however, of this franchise has “persistently in opposition to the will of the people” shown a purpose not to comply with the contract. There is nothing to indicate that the residents of Bisbee and the city of Bisbee itself have not at all times since the twenty-eighth day of December, 1906, been supplied with all the electricity demanded or needed. No complaint is made that anyone has suffered any injury or inconvenience by reason of the nonuser of the franchise prior to its acquisition by the appellee. It is strenuously contended by the appellant that the acts performed by the grantee of the franchise and the Bisbee Light & Power Company, its assignee, and by the appellee, all combined do not constitute a consideration for the franchise granted; that, as a matter of fact, the appellee only acquired the franchise by its purchase, and that this franchise at the time was a mere license, for the reason that none of the owners of it had theretofore done anything under it, or at least enough, to ripen it into a contract binding upon the appellant. Disregarding the three-light system, which it is stipulated was a technical compliance with the ordinance granting the franchise, and giving the facts the construction contended for by appellant, the franchise when purchased by the appellee had not been forfeited, nor had any steps been taken to forfeit it; it was then, as it had been from the beginning, a standing offer to the International Gas & Light Company, its successors and assigns, of a franchise to construct an electric light and power plant in the city of Bisbee. The appellee purchased this franchise, accepted the tendered contract, and, within thirty days thereafter, and before the ordinance granting the franchise was attempted to be repealed, performed — 134 — or tendered performance of all the terms and conditions of the franchise. It was not thereafter “a mere nnde pact, a bare promise to allow a certain thing to be done.” Pearsall v. Great Northern Ry. Co., 161 U. S. 646, 40 L. Ed. 838, 16 Sup. Ct. Rep. 705. It became an inviolable executed contract, in which the city had secured to itself and its inhabitants the full consideration contracted for. It seems to us that it is but equitable and fair that the appellee be permitted to exercise the rights and privileges conferred by reason of this franchise; it clearly appearing that the city of Bisbee and its inhabitants were at the time of the institution of this suit and for some five months prior thereto being supplied and furnished with all the electric lighting demanded and required, and it appearing that the appellee purchased said franchise for a valuable consideration and with all diligence and in good faith entered upon the performance of the conditions of said franchise. We are influenced to this conclusion for the reason that it is not shown by the statement of facts that the appellant has been or can be in any way harmed or injured if the franchise is sustained; whereas, if it should be declared forfeited, it does appear that the appellee will sustain injury and loss. Judgment affirmed. FRANKLIN, J., concurs.