City of Madison v. Madison Gas & Electric Co.

The following opinion was filed June 21, 1906: Siebeckee, J. The nature and the purpose of this action must be determined from the facts shown in the affidavit filed, under sec. 4096, Stats. 1898, in the proceeding for the examination of the parties before trial. This examination is demanded for the purpose of enabling plaintiffs to frame their complaint. The affidavit states the general nature and objects of the action as well as the points upon which discovery is desired. It appears that the action is planted in equity, and is one seeking to enjoin the gas company and its officers and agents from demanding or exacting from its customers unreasonable and excessive rates for gas to he furnished to them, and to compel it to furnish a good quality and a sufficient quantity of its commodities at reasonable rates, without unjust discrimination, and to establish a uniform schedule of prices for them. There is no dispute as to the nature of the business conducted by the gas company, and there is no dispute but that it has acquired rights and privileges to conduct the business of furnishing gas and electricity to the city of Madison and its inhabitants, and that it may, for this purpose, occupy the streets and alleys of the city with pipes and poles, electric wires, and such other appliances as — 261 — are appropriate and necessary for tbe maintenance and conduct of its enterprise. From tbe nature and object of tbe action and tbe relief demanded it is obvious that plaintiffs are prosecuting it as one in equity to restrain tbe gas company from continuing to furnish these commodities to its customers at tbe prices it has charged and is now charging for them, upon tbe ground that such charges are unreasonably high and are unauthorized by tbe franchise it exercises, and result in an excess and abuse of tbe rights and privileges granted it, under which it devoted its property to a use in which the public have an interest. The right to relief by injunction, to restrain acts in excess and abuse of corporate franchises and privileges, is recognized in the law and has been enforced by the courts of this state in appropriate cases. The presentation of the grounds of this jurisdiction contained in the opinion in Att’y Gen. v. Railroad Cos. 35 Wis. 425, is so complete and sufficient that nothing additional can now be said on the subject. The remedy was therein applied in an action by the attorney general, acting for the state, to restrain the railroad companies from exacting tolls for the carriage of passengers and freight in excess of the maximum rates established by acts of the legislature. It is there stated: “The equitable jurisdiction precludes the objection that there is an adequate remedy at law. It admits the remedy at law, but administers its own remedy in preference, when the state seeks it in preference. It seems to proceed on the presumption tkaf it may better serve the public interest to restrain a corporation, than to punish it by penal remedies or to forfeit its charter, and that, in that view, the proper officers of the state should have an election of remedies.” Page 524. The following cases are cited in addition to those cited by the court in ifs opinion: Comm. v. P. & C. R. Co. 24 Pa. St. 159; Att’y Gen. v. Jamaica Pond A. Corp. 133 Mass. 361; Stockton v. Cent. R. Co. 50 N. J. Eq. 52, 24 Atl. 964; 5 Pom. — 262 — Eq. Jur. (Eq. Rem.) § 302, and cases cited in notes. Tbe court also asserts tbat “tbe custom of courts of equity to interfere in sucb cases, at tbe suit of private parties, for private injuries, is quite old,” and tbat “it seems to bave grown up out of tbe ancient jurisdiction to restrain waste and nuisance,” and declares tbat tbe jurisdiction in favor of both tbe public and private persons is well established, “one on behalf of tbe state, for public wrong, and tbe other on behalf of private persons, for private wrong, arising from an excess or abuse of corporate franchises.” 35 Wis. 528, 529. Tbe equitable jurisdiction “of private suits to restrain private wrongs arising from” sucb excess or abuse of corporate powers, which was then recognized as firmly established by both tbe English and American eases, has been so extensively applied tbat it cannot now be regarded as open to question. Among specific applications of tbe jurisdiction to cases pertaining to acts of corporations engaged in tbe business of furnishing gas and electricity to a city and its inhabitants are tbe following: Gas Light Co. v. Zanesville, 47 Ohio St. 35, 23 N. E. 60. This was an action by tbe city, in its proprietary capacity, to enforce its right to bave gas furnished by tbe gas company in compliance with tbe terms of an ordinance prescribing fixed rates. The case of Muncie Nat. Gas Co. v. Muncie, 160 Ind. 97, 66 N. E. 436, was an action in equity by tbe city against tbe gas company to enforce obedience to an ordinance prescribing tbe rates and tbe conditions upon which gas was to be furnished to tbe inhabitants of the city. In Louisville Gas Co. v. Dulaney, 100 Ky. 405, 38 S. W. 703, equitable relief by injunction was awarded to prevent a threatened violation of franchise obligations by way of overcharges for gas. Among other cases wherein equity has exercised jurisdiction in similar cases to restrain corporations from committing acts, resulting in private injury, in excess or violation of franchise rights and obligations, are tbe following: Seattle G. & E. Co. v. Citizens’ L. & P. Co. 123 Fed. — 263 — 588; People's Gas Co. v. Tyner, 131 Ind. 277, 31 N. E. 59; Hudson River Tel. Co. v. Watervliet T. & R. Co. 135 N. Y. 393, 32 N. E. 148; Pennsylvania R. Co's App. 115 Pa. St. 514, 5 Atl. 872; Shamokin v. Shamokin & Mt. C. E. R. Co. 196 Pa. St. 166, 46 Atl. 382; Ernst v. New Orleans W. W. Co. 39 La. Ann. 550, 2 South. 415; 5 Pom. Eq. Jut. (Eq. Bern.) §§ 301-304; Coast Co. v. Spring Lake, 58 N. J. Eq. 586, 47 Atl. 1131, 51 L. R. A. 657, and note; Bienville W. S. Co. v. Mobile, 112 Ala. 260, 20 South. 742; Indianapolis Cable St. R. Co. v. Citizens St. R. Co. 127 Ind. 369, 24 N. E. 1054, 26 N. E. 893; Sickles v. Manhattan G. Co. 64 How. Pr. 33. In the following cases this equitable remedy was employed by the courts of this state upon analogous grounds: Jamestown v. C., B. & N. R. Co. 69 Wis. 648, 34 N. W. 728; Oshkosh v. M. & L. W. R. Co. 74 Wis. 534, 43 N. W. 489. The defendants aver that it is not within the power of the court to remedy the wrongs complained of through its equitable jurisdiction, and therefore ask for the dismissal of the case. As before stated, plaintiffs seek preventive relief against acts of the gas company, alleged to constitute an excess and abuse of the privileges and franchises granted for conducting its business of furnishing gas and electricity to the city of Madison and its inhabitants. The business of supplying gas and electricity to meet the demands of the inhabitants of a community, under grant of the state or of a municipal corporation, is of a public nature. It is, in character, a public business and like that of common carriers, warehousemen, and other enterprises in which the community has an interest different from what it has in private enterprises devoted to manufacturing and merchandising the common articles of trade. This view was expressed'by this court in the early case of Shepard v. Milwaukee G. L. Co. 6 Wis. 539, which is well supported by the decisions of various courts. Gibbs v. Consolidated Gas Co. 130 U. S. 396, 9 Sup. Ct. 553; New Or — 264 — leans Gas Co. v. Louisiana L. Co. 115 U. S. 650, 6 Sup. Ct. 252. In Louisville Gas Co. v. Citizens’ Gas Co. 115 U. S. 683, 6 Sup. Ct. 265, it is said: “Sucb a business is not like that of an ordinary corporation engaged in the manufacture of articles that may be quite as indispensable to some persons as are gas lights. The former articles may be supplied by individual effort, and with their supply the government has no such concern that it can grant an exclusive right to engage in their manufacture and sale. But as the distribution of gas in thickly populated districts is, for the reasons stated in the other case, a matter of which the public may assume control, services rendered in supplying it for public and private use constitute, in our opinion, such public services as, under the constitution of Kentucky, authorized the legislature to grant to the defendant the exclusive privilege in question.” St. Louis v. St. Louis G. Co. 70 Mo. 69; Chicago G. & C. Co. v. Peoples G. & C. Co. 121 Ill. 530, 13 N. E. 169; 20 Cyc., Gas, 1154 et seq. The right to regulate these enterprises and the property employed in them rests upon grounds which are exhaustively examined and fully elaborated in Munn v. Illinois, 94 U. S. 113, and the views therein expressed have been accepted by the courts of this country whenever they have been called upon to pass on the question. It is there stated that, when we look to the common law for the right of the state to regulate these public undertakings, it is found “that, when private property is affected with a public interest, it ceases to be juris privati only.” “Property does become clothed with a public interest when used in a manner to make it of public consequence and affect the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use; but, as long as he maintains the use, he must submit to the control.” Att’y Gen. v. Railroad Cos. 35 Wis. 425. — 265 — The right to conduct such, a business under grant from a municipality in no way affects its character, and such a grant is deemed to be one from the state through one of its municipal agencies. New Orleans v. Clark, 95 U. S. 644, and cases cited; Hamilton G. & C. Co. v. Hamilton, 146 U. S. 258, 13 Sup. Ct. 90; Wright v. Nagle, 101 U. S. 791. One of the conditions for the exercise of the privilege of conducting a gas business, under legislative grant, is that, in the absence of legislative prescription restricting the rate of compensation for the service furnished, the grant carries by implication the obligation to furnish it at a reasonable price. ■Such obligation is implied by law and is incurred by acceptance of the franchise and privilege. This is the declared rule of law as established by the adjudications. See the following cases in support of the rule: Att’y Gen. v. Railroad Cos. 35 Wis. 425; Shepard v. Milwaukee G. L. Co. 6 Wis. 539; Capital City G. Co. v. Des Moines, 72 Fed. 829; Spring Valley W. W. v. Schottler, 110 U. S. 347, 4 Sup. Ct. 48; Dow v. Beidelman, 125 U. S. 680, 8 Sup. Ct. 1028; Chicago, M. & St. P. R. Co. v. Minnesota, 134 U. S. 418, 10 Sup. Ct. 462; Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418; Cotting v. Kansas City S. Y. Co. 183 U. S. 79, 22 Sup. Ct. 30; Lumbard v. Stearns, 4 Cush. 60; People v. Budd, 117 N. T. 1, 22 N. E. 670, 682; Clark v. State, 142 N. Y. 101, 36 N. E. 817. Within this principle, so established, rests the right of the state to prescribe the charge to be made for a public service, if, under the facts and circumstances, it be a sum sufficient to afford a reasonable compensation. This power of the state is in its nature legislative, and has always been exercised either directly by the legislative branch ■of the government or by delegation of it to municipal corporations or some other appropriate agency. Whether existing or prescribed rates and charges for a public service afford a reasonable compensation is a judicial question. In the very nature of the right to regulate these matters between the pub266 lie and those engaged in performing the service, it must follow that courts cannot prescribe a schedule of rates and charges as the prescribed quantum of compensation which is to be awarded for future services, because it is the legislative prerogative to make and prescribe the rules which shall regulate the relations between persons and their acts as they arise in the affairs of life. When, however, such rules have' been enacted as law, then the judiciary is vested with the-authority to construe and apply them to the affairs they were intended to regulate and control. These two functions are recognized as distinct and separate in the fundamental organization of our government, and the prerogatives and powers of the one department of government are not to be encroached upon or curtailed by the other. In Reagan v. Farmers' L. & T. Co. 154 U. S. 362, 14 Sup. Ct. 1047, the court, in speaking of the power to fix the compensation for a public service, says: “The courts are not authorized to revise or change the body of rates imposed by a legislature or a commission. They do-not determine whether one rate is preferable to another, or Avhat under all the circumstances would be fair and reasonable as between the carrier and the shipper. They do not engage in any mere administrative work. But still there can. bé no doubt of their power and duty to inquire whether a body of rates prescribed by a legislature or a commission is unjust and unreasonable and such as to work a practical destruction to rights of property, and, if found so to be, to restrain its operation.” In the Express Cases, 117 U. S. 1, 6 Sup. Ct. 542, wherein the trial court had fixed and regulated the terms and prescribed what it deemed reasonable charges upon which the railroad and express companies should do their public business, it was held: “In this way, as it seems to us, The court has made an arrangement for the business intercourse of these companies such as, in its opinion, they ought to have made for themselves.’ The regulation of matters of this kind is legislative-in its character, not judicial.” — 267 — And in Atchison, T. & S. F. R. Co. v. D. & N. O. R. Co.. 110 U. S. 667, 682, 4 Snp. Ct. 192, it is observed: “A court of chancery is not, any more than is a court of law, clothed with legislative power. It may enforce, in its own appropriate way, the specific performance of an existing-legal obligation arising out of contract, law, or usage, but it cannot create the obligation.” These and other cases serve to define the limits of the judicial power in dealing with the subject of enforcing the obligation as to reasonable compensation for the performance of' a public service like those involved in this action. The decisions upon the subject make it obvious that the power to prescribe what the charges shall be for services rendered in. the conduct of a business impressed with a public interest is vested in the legislature, and must be exercised by it directly or through some appropriate agency. Winchester & L. T. R. Co. v. Croxton, 98 Ky. 739, 34 S. W. 518, 33 L. R. A. 177, and cases cited in editor’s note; Ruggles v. People, 91 Ill. 256; Sternberg v. State, 36 Neb. 307, 54 N. W. 553; Olmsted v. Proprietors, 47 N. J. Law, 311; Cincinnati, H. & D. R. Co. v. Bowling Green, 57 Ohio St. 336, 49 N. E. 121; Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418; Nebraska Tel. Co. v. State, 55 Neb. 627, 76 N. W. 171; W. U. Tel. Co. v. Myatt, 98 Fed. 335; So. Pac. Co. v. Colo. F. & I. Co. 101 Fed. 779, 42 C. C. A. 12. The validity of such legislation may become a question of judicial inquiry if it’ fails to provide reasonable compensation for the use of the property devoted to such public purpose. If rates are prescribed which are too low to compensate for the service rendered, an enforcement of them would result in taking property employed in the business for a public use without just compensation. The-propriety of such legislation must be judicially determined under the constitutional guarantees that “the property of no person shall be taken for public use without just compensation” and that no one shall be deprived of his property without due process of law. Stone v. Farmers’ L. & T. Co. 116 — 268 — U. S. 307, 6 Sup. Ct. 334, 388, 1191; Chicago, M. & St. P. R. Co. v. Minnesota, 134 U. S. 418, 10 Sup. Ct. 462, and other cases cited therein. But it is insisted by respondents that, since the gas company is obligated to furnish gas to the city and its inhabitants at a reasonable price, the court has jurisdiction to determine what, under the existing facts and circumstances, is a reasonable charge, and to enforce it as the measure of future service under like conditions. No doubt the court can ascertain, within its judicial function and whenever the question is necessarily involved in any controversy to which the gas company is a party, what is a reasonable charge for gas furnished. This, however, as already shown, is the extent to which the court can go.' Whatever might be determined to be a reasonable charge, under the facts and circumstances adduced in such an inquiry, cannot be enforced as a fixed charge for the service for any purpose other than to determine the particular controversy between the parties and their privies. If it were attempted to enforce it as a prescribed future charge, it would, in an indirect way, usurp the legislative prerogative of prescribing by rule the compensation for a future public service. This, as we have seen, the courts cannot do. This question arose directly in the case of the Interstate Comm. Comm. v. C., N. O. & T. P. R. Co. 167 U. S. 479, 499, 17 Sup. Ct. 900, wherein the commission had determined what were reasonable rates for transportation charges upon railroads between certain fixed points, and had applied to the court for their future enforcement. It is there observed: “It is one thing to inquire whether the rates which have been charged and collected are reasonable — that is a judicial act; but an entirely different thing to prescribe rates which shall be charged in the future — that is a legislative actand the court cites cases in support of the doctrine, and concludes (167 U. S. 511, 17 Sup. Ct. 905) that, since Congress had not conferred the legislative power of prescribing — 269 — rates on the commission, “it did not intend to secure the same result indirectly by empowering that tribunal to determine what in reference to the past wab reasonable and just, . . . and then enable it to obtain from the courts a peremptory order that in the future the railroad' companies should follow the rates thus determined to have been in the past reasonable and just.” These principles are applicable to the case before us, and must be held to rule it. Nothing'has been done by the state, either directly, or indirectly through the city of Madison as one of its agencies, to prescribe a rate at which the gas company is to furnish gas to the city and its inhabitants. True, the gas company is obligated to furnish the commodity at a reasonable rate, but no power exists in the court to prescribe as a fixed charge for such service in the future what it may find to have been a reasonable rate for the service theretofore furnished. The relief demanded, compelling the gas company to furnish gas to its customers at a reasonable rate in the future, must be secured, either directly or through an appropriate agency, by legislative action, prescribing rates or charges which shall be reasonable for the service. We discover no other object in this action, nor do the facts presented, upon which equitable relief is sought, afford any basis for any other equitable relief to remedy the wrongs complained of. Upon these considerations it must follow that the court erred in denying defendants’ motion for dismissal of the action. By the Court. — The order appealed from is reversed, and the cause remanded with directions that the court enter an order dismissing the action and granting costs to the defendants. A motion for a rehearing was denied October 9, 1906.