Memphis Electric Light, Heat & Power Co. v. City of Memphis

BLAIR, J. Appellant is a corporation operating an electric light plant in respondent city and brought this suit to enjoin the city, the mayor, city clerk and city council from issuing and selling bonds voted in 1916 for the purpose of erecting a municipal light plant. Appellant originally acquired a franchise granted to one Craig and operated under it until its expiration in 1912. In that year a new twenty-year franchise was granted appellant, and it extended its lines and replaced some poles, incurring some expense in so doing. The 1912 franchise ordinance recited the expiration of the former franchise and. that appellant sought a renewal and provided that “in consideration of the benefits that will accrue to the city of Memphis” the city granted appellant a franchise to operate its plant for an additional period of twenty years; granted the usual privileges as to the use of streets and alleys, but specifically provided that “this ordinance shall not be construed as being an exclusive franchise;” reserved to the city the right to purchase appellant’s plant at any time it desired, and, in case it desired to purchase, provided for an appraisement of the property by disinterested persons, subject to rejection by either party and re-appraisment by a like method, such second appraisement to be final. Rates of charges were specified in the ordinance, but no agreement on the city’s part to patronize appellant appears in the ordinance or elsewhere in the record. It is in evidence the city continuously, from the adoption of the franchise ordinance until the filing of this suit, procured appellant to furnish lights, paying monthly for the service rendered. Appellant’s contention is that the franchise -excludes the city from installing a municipal plant, and that to suffer it to do so is to permit the impairment of the franchise contract and to take appellant’s property without due process of law. The argument advanced is, in substance, (1) that the exclusion of the city from competition with appellant is implied from the fact that appellant’s franchise would be valueless unless the city is so excluded; and (2) that the reservation by the city of [492] a right to purchase appellant’s plant implies" an obligation to do so in case the city desires to acquire a plant of its own during the life of appellant’s franchise. Injunction. I. A city invested with the power to do so and having entered into a contract with a light company whereby it agrees not to erect or acquire a competing plant may be enjoined from violating such contraet [Walla Walla v. Walla Walla Water Co., 172 U. S. 1; Vicksburg v. Waterworks Co., 202 U. S. 453.] Implied Contract. ' II. The power of respondent city to erect a light plant is one given it for the benefit of the public. The Supreme Court of the United States holds that “government, possessing powers that affect the public interests, and having entered into a contract involving such interests, is not, by means merely of implications or presumptions, to be disarmed of powers necessary to accomplish the objects of its existence ; that any ambiguity in the terms of such a contraet ‘must operate against the adventurers and in favor of the public, and the plaintiffs can claim nothing that is not clearly given by the act;’ that ‘it can never be assumed that the government intended to diminish its power of accomplishing the end for which it was created;’ and that those who insist that the government has surrendered any of its powers.or agreed that they may be diminished, must find clear warrant for such a contention before it can be heeded. ‘Grants of franchises and special privileges are always to be construed most strongly against the donee, and in favor of the public.’ ” [Water Co. v. Knoxville, 200 U. S. l. c. 33.] The court added that it had never departed from or modified these principles, and held that they were fully applicable “to ordinances and contracts by municipal corporations in respect of matters that concern the public.” The decision from which we have just quoted was one rendered in a case in which a waterworks company attempted to enjoin the city of Knoxville from erecting [493] a municipal plant during the life of a franchise previously granted the company hy the city. That franchise, like the one in this ease, gave the city the right to purchase the company’s plant, if it so desired. In that case, as in tins, it was argued that the company “could not possibly have believed that the city would establish waterworks to be operated in competition with its system, for such competition would be ruinous to the water company, as its projectors, on a moment’s reflection, could have perceived when the agreement of 1882 was made.” The court responded to this argument by saying: “On the other hand, the city may with reason say that, having once thought of having its own waterworks, the failure to insert in that agreement a provision precluding it, in all circumstances and during a long period, from having its own separate system, shows that it was not its purpose so to restrict the exercise of its powers, but to remain absolutely free to act as changed circumstances or the public exigences might demand.” In Vicksburg v. Water Works Co., supra, the court re-affirmed the rule that franchise contracts are “to be most strongly construed in favor of the public, and that where the privilege claimed is doubtful nothing is to be taken by mere implication as against public rights. This rule has been applied to a series of contracts in waterworks and lighting cases, and we have no disposition to detract from its force and effect.” The franchise involved in this ease expressly provides that it is not to be construed as exclusive. It contains no language expressly prohibiting the city from exercising its power to construct and operate a lighting plant during the franchise term. It simply grants to appellant the right to operate its plant during twenty years. Had appellant desired to exclude the city from competition with it, assuming the city is empowered to contract to abstain from such competition, it should have sought a franchise plainly effecting that result. The contract it secured does not do so and, whatever the effect upon appellant may be, of competition with a muni [494] cipal plant, we cannot now add to the franchise stipula-' tions the parties did not insert when they framed it. The argument that the city’s right to purchase raises an obligation to do so in case the city is to acquire a plant at all during the franchise term is clearly untenable. That provision of the franchise merely gives the city an option it may or may not exercise as it sees fit. There is nothing in the language of this section of the franchise ordinance which hints at any obligation upon the part of the city to purchase or at ■ any restriction upon the city’s power to erect a plant of its own. - The cases chiefly relied upon by appellant, are the Walla Walla and Vicksburg cases, already cited. In the former there was in the franchise granted a specific provision that until certain conditions had been met (and they concededly had not been met) “the city of Walla Walla shall not erect, maintain or become interested in any waterworks except the ones herein referred to, save as hereinafter specified.” In the Vicksburg case, the court based its decision upon the ground that “the city provided and the company has accepted a grant which says in plain and apt words that it shall have an exclusive right, a sole and undivided privilege.” As pointed out, the court in the Vicksburg case re-afSrmed the doctrine concerning the construction of franchises with respect to limitations upon the powers of a city. It is apparent these decisions cannot aid appellant. In Joplin v. Light Co., 191 U. S. l. c. 158, a case very like the one at bar, the franchise was held not to prevent the construction of a municipal plant, and the Walla Walla case distinguished on the ground we have stated. Appellant’s franchise contains nothing excluding the city’s power to construct a plant of its own. No such exclusion can be implied. No rights of appellant are infringed by the city’s doing that which the contract between it and appellant left it free to do. [495] Judgment. All concur, Bond, P. J., in the result. [494] III. It is said the trial court erred in failing to “construe” the franchise in its judgment. The judgment rendered is necessarily the result of a construction [495] such as we have given the franchise. That construction is inevitably involved in the finding against appepan^ without regard to appellant’s right to sue to construe the franchise, we think the construction implied by the judgment meéts all.the requirements of the case. The' judgment is affirmed.