People's Electric Light & Power Co. v. Capital Gas & Electric Light Co.

Opinion of the cottet by JUDGE SETTLE Affirming. This equitable action was instituted by tbe appellant, People’s Electric Light & Power Company, to enjoin the appellee, Capital Gas & Electric Light Company, from interfering with its alleged exclusive right to supply the city of Frankfort, its inhabitants, and consumers, with electricity for lighting and other purposes, as provided by its articles of incorporation and authorized by an ordinance of the city. The answer and counterclaim filed by appellee contains six paragraphs, and denies that appellant has or owns the exclusive right, or any right, td supply the city of Frankfort, or its inhabitants, with electricity for lighting, or any other purpose, or that the city council bad tbe power, by ordinance or otherwise, to confer upon appellant any such right, and for further defense avers in substance that it and its assignor and predecessor, tbe Southern Gasworks Company, by purchase and deed from tbe city of Frankfort, acquired title to its gasworks, mains, and pipes, and to the exclusive use of its streets and alleys, for the purpose of furnishing gas and electricity for the lighting of its streets and the use of its inhabitants, which right has been confirmed by repeated' subsequent contracts made between it and the city, and that this right is about to be interfered with by appellant, for which reason the answer asks an injunction against it. Appellant filed general demurrer to tbe answer and counterclaim, and each paragraph thereof, which was sustained to the first, second, fourth and fifth, and overruled as to the third and sixth paragraphs. Thereupon an amend — 84 — ed answer and counterclaim was filed by appellee, to which and to the several paragraphs of the original answer, as-amended, appellant again filed a general demurrer, and, the case being submitted on that demurrer, it was sustained as to the first, second, fourth, and fifth paragraphs of the answer as amended, and also as to the new paragraph added by the amended answer, to all of which appellee excepted. The cause was then submitted for trial and judgment upon the pleadings and an agreed writing containing all the evidence, documentary and otherwise, upon which the parties relied in support of their respective contentions. Whereupon the special judge, expressing his views in a well considered and ably written opinion, rendered judgment to the-effect that neither appellant nor appellee has the exclusive right to use the .streets of the city of Frankfort for the purpose of furnishing electricity to the city or its inhabitants for lighting ■ purposes, and enjoining each of them from, asserting any such exclusive right. Appellant and appellee each excepted to the judgment and’prayed an appeal to this court, and the case is now before us upon both appeals for final adjudication. . The facts presented by the pleadings 'and evidence are as follows: The city of Frankfort, by a written contract of May 30, 1882, made with the Southern Gasworks Company,, the assignor of appellee, sold to it its gasworks, which had theretofore been constructed and was then being operated under a charter from the Legislature granted the city. By the terms of this contract it granted, or attempted to grant,, to the Southern Gasworks Company, the exclusive right to the use of its streets “for the purpose of laying, repairing,, and properly operating all mains, pipes and other necessary machinery for the furnishing of all gas or other illuminating light in said city:” The consideration of this sale, as — 85 — recited in the contract, was the undertaking of the Southern Gasworks Company to execute to the city forty interest-bearing bonds of .$1,000 each, payable forty years from July 1, 18S2, with the privilege reserved of paying the bonds, or any one or more of them, before maturity. The company further undertook to improve the gasworks, extend the mains, to light a certain number of street lamps at the price named in the contract, and to furnish private consumers gas at not exceeding $2 per 1,000 cubic feet; but this maximum price was to be adjusted every five years, so as not to exceed the average price charged for gas in cities or towns of the same or a less population than Frankfort. The cpntract mentioned, and all rights incident and appertaining thereto, were assigned by the Southern Gasworks Company to the appellee, Capital Gas & Electric Light Company which became incorporated by a legislative act approved April 24, 1882, and by deed of June 27, 1S82, the city of Frankfort conveyed appellee, as assignee of the Southern Gasworks Company, all the property and rights which it had agreed theretofore to sell to the Southern Gasworks Company; it being recited in the deed that the appellee had already executed and delivered the forty bonds required of the Southern Gasworks Company by its contract with the city.- The appellee by the terms of the deed was to assume and- carry out all the undertakings of its assignor with the city. By virtue of the rights thus acquired under the contract and deed mentioned, appellee only manufactured and furnished gas for several years for the use of the city and its inhabitants; but about January 1, 1890, it constructed an electric light plant, and began for the first time to furnish electric light to the city and its inhabitants, though no contract was made by appellee with the city in reference to electric lighting until Sep — 86 — tember 18, 1893, .at which, 'time a new or supplemental contract was made between appellee and the city, under which the electric lights were to be furnished. This contract contained the statement that it was entered into at the request of the city, and because it desired a modification of the former contract. It appears that since that time various supplemental agreements have been made between the parties from time to time for the continued lighting of the streets; but neither the contract of September 18, 1893, nor any of those of subsequent date, contain any provision or agreement requiring appellee to furnish electricity to private consumers or regulating the price thereof. Appellee’s claim of the exclusive right to the use of the streets of the city for furnishing electricity to the city and its inhabitants for lighting purposes is based upon its various contracts with the city. Upon the other hand, the appellant, People’s Electric Light & Power Company, contends that it has the exclusive right to the use of the streets for the furnishing of electric lights to the city and its inhabitants by virtue of the ordinances of the general council passed July 23 and August 13, 1901, and that the franchise granted it by these ordinances was duly advertised for sale, and bids therefor were received publicly, and that the franchise was thereby awarded to it as the highest bidder. It is averred by appellants that appellee is wrongfully asserting an exclusive right or franchise to supply electricity-to the city and its inhabitants for lighting purposes, and is thereby casting such a cloud upon its title that it is being prevented from selling, pledging, or mortgaging its stock, or selling its bonds, whereby to raise the money with which to erect its plant, and it therefore — 87 — asks that appellee he enjoined from asserting the claim of exclusive right set up by it. . We think the special judge properly sustained the -appellee’s general demurrer to the extent indicated in the judgment. The first paragraph of the answer interposes the defense that appellant can not maintain the actioh to quiet its title to a franchise to light the city of Frankfort with electricity, as it is not in possession of the streets and alleys of the city, the use of which is necessary to the enjoyment of its franchise. The contention of appellant is that the cloud cast upon its’title to the franchise is preventing it from selling, pledging or mortgaging its stock, or selling its bonds, in consequence of which it has been unable to erect its electric plant, or to enjoy the franchise granted it by the city of- Frankfort. In such a state of case, injunction is the only remedy, if, as a matter of fact, appellant owns the exclusive franchise to which it lays claim. This point seems to have been well settled in Citizens’ Gaslight Company v. Louisville Gas Company, 81 Ky., 263, 5 R., 72. The second paragraph contains a plea of the statute of champerty, which has no place in a case like this.- Although it may have been.true that, at the time of the grant of the franchise from the city of Frankfort to appellant, appellee was exercising a like franchise under claim that it was exclusive, such a claim, unless true in fact, could not prevent the city from granting a similar franchise to appellant. Upon the other hand, if appellee’s franchise was exclusive, the grant of the franchise by the city to appellant was simply void. The third paragraph of the answer, by denying that the-sale of the franchise to appellant was advertised, or that bids were publicly received therefor, or that the franchise88 was sold to appellant as the highest and best bidder, raised an issue of fact upon which proof was necessary. Therefore this paragraph was properly held to be good upon demurrer. The fourth and fifth paragraphs set forth the various contracts between appellee and the city, upon which its claim to the exclusive franchise is based, and they present the contention that the grant of the franchise to appellant is void, because its effect is to impair the obligation of appellee’s contract with the city. By legislative sanction the city of Frankfort was invested with the title to its streets and alleys, and all other property of the city, including its gasworks and waterworks; all being under the exclusive control of the city council. By an act of March 28, 1872 (Laws 1871-72, p. 393, c. 899), it was provided “that the board of councilmen of the city of Frankfort be,' and they are hereby, authorized to grant, bargain, sell, and convey, to rent or lease, any .and all property, or any part thereof, belonging to said city of Frankfort, be the same lands, tenements, goods, chattels, or franchises, or immunities, on such terms, and for such sums, and at such times, as said board of councilmen shall deem for the best interest of said city of Frankfort.” We find in appellee’s charter the following provisions: “Said company shall furnish gas light or. electric light" to any person on such terms as the company and such person may agree upon, and any such contract shall be obligatory and enforceable in any proper court in this Commonwealth” —and, further, that the appellee company shall have authority “to put up lamp posts and electric lights, and that said gas and electric lights shall be furnished to the city at a reasonable price per light per annum, as may be agreed on.” It is contended for the appellee that these provisions of its charter, considered with those of the charter of the — 89 — city, conferred upon the city ample, power to grant appellee the exclusive franchise asserted by it; and it is conceded by the special judge that some of the authorities cited by counsel for appellee tend strongly to' support that contention, though he properly, as we think, declined to accept that view. We agree with him that the question of whether the city has the power to grant an exclusive franchise, such as is claimed by appellee is this case, is not before us for decision. In our opinion, it did not, by its several contracts with the city, obtain the exclusive franchise claimed for it, .even though it be conceded that the city was authorized, to grant it. The' Southern Gasworks Company, appellee’s assignor, made the original contract with the city, under which appellee claims title to the franchise asserted by it. It is clear that the charter of the Southern Gasworks Company provided only for the furnishing of gaslight. It conferred no authority to use :any light other than gaslight, and its contract with the city was to furnish only gaslight; indeed, it was unprepared to furnish any other. We therefore further agree with the special judge that the 'contract which granted, or attempted to grant, to that company the ex-elusive right to the use of the streets of the city for the purpose of supplying “gas or other illuminating light” was void as to “other illuminating light.” An examination of the charter of appellee will show ■that it did oonfer power to make and supply electricity, and to accept from the city a grant of the use of its streets for that purpose; and the city having carried out its contract with the Southern Gasworks Company, by executing a deed to appellee, as its assignee, conveying to it the gasworks, and the exclusive use of the. streets of the city for supplying “gas or other illuminating light,” it becomes im — 90 — portant to determine .the effect of that deed. It will be borne in mind that the Southern Gasworks. Company did not, in its contract with the city, undertake to erect an electric plant, or to supply electric light to, the city or its inhabitants. I.t did, however, undertake to issue |40,000 worth,of bonds, .and to improve the gasworks, extend the mains, and supply gas to the city .and other consumers at agreed prices specified in the contract. The appellee, as assignee of the Southern Gasworks Company, assumed by the deed only such obligations as. rested upon the latter; nothing more. Therefore it was under no duty to érect an electric plant, or to furnish electricity, to’ the city or its inhabitants for lighting. We do not think it was the -purpose of the city to confer 'an exclusive right upon appellee’s assignor, or upon it, to. furnish electricity for the city’s use and that of its- inhabitants, without imposing an obligation to. compel it to exercise that right. It is contended, however, by counsel for appellee, that the incorporation of such an obligation in the contract was unnecessary, as it was required by its charter to furnish electricity for lighting purposes. We-are of opinion that the provision of appellee’s charter that “said company shall furnish gas or electric light to any person on such terms a.s the company and .such person may agree upon” only ex-, pressed the duty which rests upon every corporation enjoying a public franchise to serve all alike, and does not compel the exercise of the franchise; We find that, for seven years after its right, to use the 'Streets, of the city for lighting purposes was -secured, appellee failed to use electricity for that purpose; -and this failure to exercise its electric light franchise demonstrates that it was under no obligation to do so. Furthermore, there was no- time during that seven years that it could have been compelled by the — 91 — city to furnish electric lights to- it or its inhabitants; and yet appellee insists that it had the right to prevent any other person from doing so-. We are unable to find anything in any of the contracts between the city and appellee that requires the latter to furnish electric lights for the use of the city or its inhabitants. Upon the contrary, we find in all of them that appellee has been careful not to recognize any obligation on its part to -supply electricity. There is no ground for appellee’s -contention that its alleged exclusive franchise was confirmed by its contract of 1893 made with the city of Frankfort. The language of that contract shows no purpose or attempt to -confer upon appellee any new right; and, in view of section 164 of the present Constitution, it was without authority to enlarge appellee’s rights under the first contract, except by its -becoming the highest and best bidder for the additional privilege ; and, besides, it is by no means certain that the city had the power to grant an exclusive franchise. In the case of City of Newport v. Newport Light Co., 14 R., 845, 21 S. W., 645, this court held that an exclusive gas franchise, which had been conferred by the city upon the light company, did not confer the exclusive right to supply electricity for lighting purposes, though the contract authorized the light company to -substitute electricity for gas. We do not feel called upon to consider the contention of appellant that the grant from the city to appellee is in perpetuity, and therefore void. It wias the opinion of the special judge that the grant is limited to forty years, because the bonds issued by appellee to the city, which are secured by lien on its property and franchises, were made payable in forty years. We are not disposed to question the correctness of this' conclusion; but, as the pleadings make — 92 — no issue on this question, its consideration is unnecessary. Nor -is it necessary to decide that 'the failure of. appellee to exercise its allegad exclusive franchise for several years prior to January 1, 1890, worked a forfeiture thereof, as ■such nonuser and consequent forfeiture are not pleaded by appellant. It' is , manifest that tka appellant’s franchise is not exclusive, as the language of the ordinance granting it will show. Upon the whole case,-we have found no difficulty in reaching the conclusion that neither appellant nor appellee is entitled to the exclusive franchise claimed. For the reasons herein indicated,' the judgment of the lower court is .affirmed upon both the original and cross appeal.