Oconto Electric Co. v. Peoples Land & Manuf'g Co.

161 N.W. 789, 165 Wis. 467, 1917 Wisc. LEXIS 81

• Court: Wisconsin Supreme Court
• Decided: May 15, 1917
• Status: Published

Opinion

The following opinion was filed March 13, 1917:

Siebecker, J.

The controversies presented in the two cases Rave been treated in one proceeding before the trial court and were submitted together on appeal in this court. In the quo warranto action relator assails the Oconto Company’s rights as claimed by it under an indeterminate permit granted pursuant to the Public Utility Law and seeks to Rave it annulled on the ground that the company at the time of obtaining such permit Rad no legal license, permit, or franchise from the city to exchange for such indeterminate permit, as called for by the provisions of the Public Utility Law. TRe action of the Oconto Company against the Peoples Company and the city of Oconto involves the right of both companies to conduct the business of street and commercial lighting in the city of Oconto and the validity of the street-lighting contracts of 1914 between the city and the Peoples Company dated February 25th, and a second contract between the city and the Oconto Company dated May 20tli. Upon the facts as above stated the trial court held that the two companies were holding lawful indeterminate permits and that they- have been conducting their public businesses in the city of Oconio under such permits from times prior to the commencement of these actions and that the contracts above referred to were valid obligations and binding upon all the parties. The court in an elaborate and well considered opinion states the grounds of its decision upon all of the questions determined by the judgment. We shall adopt the views of the trial court as expressed in its opinion on the litigated questions in so far 'as its conclusions harmonize with the views of this court upon the questions presented here.

On the question of the legal status of the Peoples Company the court declared:

“This company was doing commercial lighting in 1907 when the Utility Law went into effect. Under the rule of Calumet S. Co. v. Chilton, 148 Wis. 884, 347, 348, 135 N. W. 131, notwithstanding the limitations of its articles of incorporation, it was a public-service utility and a Wisconsin corporation, and the Utility Law conferred upon it the power to exercise the privileges it was at the time in fact exercising. It has continued to do such lighting up to this time, and there is no doubt that it has an indeterminate permit therefor.

“How about its power to do municipal lighting? It did not begin such lighting until two years after the Utility-Law went into effect. Such lighting was done by the Oconto Company until it was taken up by the Peoples Company, but at such time the Oconto Company had not yet taken an indeterminate permit-, so there was no need for the Peoples Company to get a certificate of convenience and necessity under sec. 1797m — 74 in order to commence such lighting. It now has an indeterminate permit for such lighting under ch. 596, Laws 1911, if a license, permit or franchise’ therefor was ‘granted’ prior to the passage of the Utility Law within the meaning of that chapter. It must be conceded, I think, that the ordinance purporting to grant a franchise to the Peoples Company was ineffectual as a legal grant because of want of power by the company under its articles of incorporation to do a lighting business. But I think that notwithstanding this, the ordinance ‘granted’ a franchise within the meaning of ch. 596. The word ‘granted’ was not used in a technical sense or a limited sense, but covered grants legally inoperative for want of corporate power of the grantee, just as the original sec. 1797m — 77, which ch. 596 amends, covered permits or licenses being exercised under void grants. The assumption of municipal lighting by- the Peoples Company seems to me referable to the ordinance, and it is therefore a ‘grant’ within the meaning of said ch. 596. Ch. 217, Laws 1911, validating franchises surrendered for an indeterminate permit notwithstanding any ‘defect, irregularity or invalidity’ therein, strengthens this view. It was the intention of both sections to validate and confirm and create into indeterminate permits all privileges of whatever sort actually being exercised in 1911 when these laws were passed, regardless of how their exercise began and no matter what they were referable to. As said in the Calumet Service Company Case (148 Wis. 367) : ‘The law must be given a reasonable, — -sensible,—construction, at all points, to the end that the legislative intent shall not fail, instead of looking with favor upon technical assaults upon it.’ ”

On the question of relator’s right to have the Oconto Company's indeterminate permit annulled the trial court correctly held :

“I am of the opinion that Mr. Holt was ‘indirectly interested’ in the franchise issued to the Oconto Company. . . . But whether the state would . . . move [to oust the company from its franchise] was for the attorney general to determine, and he determined not to bring suit but to leave the prosecution to the relator. Manifestly this suit is prosecuted, not at all in the public right, but for the personal advantage of the relator, or rather that the company in which the relator is a stockholder may acquire the Oconto Company’s business through the taking away of its franchise. The suit is only another skirmish between the embattled companies, each of which is apparently more bent on the destruction of the other than it is on its own welfare. The Peoples Company knew of the facts respecting Mr. Holt’s interest at the time the franchise was granted as well and as fully as it knew them when this suit was started. It alleged the ultimate fact as a ground of relief in the mandamus action brought by it in 1906 to compel the letting to it of a lighting contract. That Mr. Pamperin was the instigator of that action, as he now is of this, is manifest. Both actions must be considered as in reality actions of the Peoples Company. The petition in that case was verified, so that the evidentiary facts to substantiate the claim of interest were presumably as well known to the company then as they were when this action was commenced. Not only did the Peoples Company know the fact, but so did the relator herself. Seven years elapsed between the commencement of the actions. With that knowledge the relator and the Peoples Company lay by for that term and saw the Oconto Company build up its plant and business, and now, not at all for the purpose of vindicating a public right or protecting the public interest, but for the vindictive and selfish purpose of destroying a competitor and seizing its business, would have the Oconto Company’s franchise annulled. I cannot believe that the court is compelled to annul the franchise under such circumstances, especially when two successive attorneys general have declined to move in the public right. It may be further stated as additional reason for denying the relief, that the record shows that the Peoples Company has resorted to practices as contrary to fair dealing and as subversive of the public good as the conduct of Mr. Holt or the Oconto Company in connection with the granting of the franchise.”

We will consider hereinafter the rights of the Oconto Company. arising out of its commercial and street-lighting business up to August, 1909, and its commercial lighting business after the Peoples Company had secured the three-year street-lighting contract from the city in August, 1909, respecting the claims that it had abandoned or suspended the street-lighting business within the contemplation of the Utilities Act.

Was the Oconto Company at the time it applied for an indeterminate permit in December, 1909, operating a public utility as defined in such act? Notwithstanding the imperfect inception of the rights then being exercised by the com-party and which it surrendered in exchange for the indeterminate permit, they were of a nature and substance which constituted a “license, permit or franchise” exchangeable for the indeterminate permit granted by the commission under the Utility Act. As held in Calumet S. Co. v. Chillon, 148 Wis. 334, 135 N. W. 131:

“The legislature, did not rest the matter, as it might have done, by mere use of the term ‘franchise.’ The broad term was used instead, ‘license, permit or franchise,’ — in short, any public privilege of any sort to do any kind of the service mentioned within the scope of the Public Utility Law, followed by the term ‘franchise’ as a synonym for the entirety.”

And so here the Oconto Company had acquired rights in the nature of a “license, permit or franchise” by the acts of the city throughout their dealings and contracts from 1899 to the time it applied for the indeterminate permit. The facts of the case sustain the conclusion that the Oconto Company had and was operating its public utility under a “license, permit or franchise” of the city, and the surrender thereof entitled- it to an indeterminate permit in December, 1909. Since these rights are not necessarily dependent solely on the ordinance of July, 1906, it is not necessary to consider the question whether the provisions of ch. 217, Laws 1911, abrogated whatever rights the Oconto Company had under such permit, nor need we consider whether or not the provisions of this chapter were intended to affect permits in existence when it was adopted.

The trial court’s conclusion on the question of the Oconto Company’s power to do street lighting seems to be well sustained upon the grounds set forth in the opinion:

“It is claimed by the Peoples Company that it \Oconto Company] has no such power because it abandoned the field of street lighting in 1909 and has not entered it since. It is also claimed that it has ‘suspended’ the privilege of street lighting for more than a year and that under see. 1797m— 74n it has no power to resume it without a certificate of necessity and convenience.

“As to the latter point, the statute referred to should not he given a retroactive effect. The suspension covered by it should be construed to be a suspension of one year after its passage. The act, ch. 621, Laws 1913, was published July 12, 1913. The Oconto Company's bid was submitted on February 8, 1914. Since that time its 'suspension’ of street lighting has not been voluntary. And the suspension referred to by the statute must be a voluntary suspension. . . . The statute can hardly have intended to give one of two competing utilities an indeterminate permit for street lighting and to deprive the other of such permit therefor merely because the one gets from the city wherein they are situated a contract for a year’s street lighting. ... A suspension of one year under these circumstances would be an 'excusable, temporary suspension, involving no purpose to abandon.’ As further said in the Calumet Service Co. Case, p. 367, 'The law must be given a reasonable, — sensible,—construction, at all points, to the end that the legislative intent shall not fail.’

“Either the above must be the correct view or we must, as it seems to me, construe the statute as not intending to differentiate street lighting and private lighting as separate and distinct franchises, but intended to consider them both as within the single franchise of lighting. It is true that the courts have distinguished between the two kinds of lighting, in some respects, but it does not follow that they constitute distinct franchises. It is plain from sec. 1797m — 74m that the Utility Law aims to protect competing companies in their franchises. The statute by its terms applies only to companies the granting of whose franchises were pending at the time a competing company takes out or secures an indeterminate permit. But if the statute intended to protect such franchises, it certainly was contemplated that franchises already existing were protected, either by that section or otherwise.

“Considering the question as one of abandonment, irrespective of mere suspension. Abandonment means an intentional, voluntary surrender. In 1909, when the Oconto Company’s contract for street lighting was about to expire, the Peoples Company desired to enter the field — which it had never theretofore entered notwithstanding its 'grant’ in its ordinance. The council advertised for bids which were, or which the Oconto Company thought were, framed with a view to preclude it from complying with them. To satisfy the test incorporated in the advertisement would necessitate the company’s discarding its old lights and substituting new ones. There was only one lamp made which could meet the test required by the proposal for bids, and the Oconto Company on inquiry was informed and believed that it could not procure these lamps because the Peoples Company had secured the exclusive privilege of using them in Oconto. Whatever the facts may have been as to the Oconto Company’s actual ability to procure these lamps, it seems clear that it understood that- it could not get them and was thereby precluded from bidding. ... It in fact submitted no bid, but it did not intend to give up the privilege of street lighting forever or surrender the franchise it then had therefor. The contract was let for five years, and it therefore could not resume street lighting for that period. Its sale, when and shortly after the Peoples Company took over the street lighting, of its poles and lights and such other equipment for street lighting as it could not use in its commercial business, does not evidence an intent, either at the time or subsequently, to abandon the street-lighting privilege. Its equipment was liable to go entirely out of use during the term of the contract and the property thus become a total loss by keeping it, and its sale is reasonably referable to a desire to avoid loss.”

The controversy concerning the validity of the contracts made by the city with each of the companies dated respectively February 25, 1914, and May 20, 1914, was determined by the judgment.

We consider that the trial court correctly determined that ' the provisions of the city charter requiring that contracts for “work,” “including printing,” should be let to the lowest bidder in the manner contemplated by the charter provisions are not applicable to contracts for street lighting. The basis of its decision on this point is stated as follows:

“It has been held quite generally that lighting is not ‘work’ within similar provisions, for the reason that there is ordinarily but one plant in a city that can furnish such service and therefore only one concern that can bid, so that the purpose of the provision, which is to secure competition, necessarily cannot apply. Oconto contained no public-service plant for either public or private lighting in 1882, when the charter provision was adopted. At that time, if public lighting by electricity was contemplated in the future at all, it was necessarily contemplated to be furnished under ordinary conditions, and the charter provision cannot therefore have been intended to cover contracts for such lighting. It was not until 1899 that competition in electric lighting was possible. I am of the opinion that public lighting by electricity is not ‘work’ within the charter provision. There ivas therefore no necessity to advertise for bids. There being no necessity, the advertising done, like the advertising of private individuals, was nothing but an invitation to submit offers, and, like a private individual, the city was not bound to accept the lowest or any offer made in response. . . .

“But both contracts were made subject to the provisions of the Public Utility Law. The city, as well as private individuals, was subject to that law. The city, no more than a private person, could make a contract that would give to it any special privilege. Kilbourn City v. Southern Wis. P. Co. 149 Wis. 168, 185 N. W. 490. This case is to the precise point that a contract by a municipality for free public lighting is void as against the public policy of the Utilities Law, on the ground, primarily, that the law contemplates that municipalities, like- individuals, shall pay a reasonable compensation for the services received. . . .

“My view of the matter is that if the contract rate is filed with the rate commission, ... that rate is presumptively reasonable and therefore valid as long as the commission leaves it in force, and that compensation for service at the contract rate can be collected until the commission, on application or of its own initiative, fixes a different rate upon investigation and hearing. Every such contract is subject to having the rate thereof raised or lowered by the commission. Sec. 1797m. — 32 contemplates changes of rate by a utility without first procuring the approval by the commission. Sec. 1797m — 38 provides that such a rate ‘shall be the lawful rate’ until it is changed by the commission. Secs. 1797m- — 49 to 1797m — 51 empower the commission to fix rates on its own motion.”

It is claimed by the Oconto Company that the contract made between the city and the Peoples Company on February 25, 1914, is invalid. It is averred on this point that, the council meeting of February 25, 1914, at which the common council authorized the contract, was not a legal meeting of the common council. This meeting was held upon the written notice set forth in the foregoing statement of facts. The council met pursuant thereto and authorized the making of this contract. We consider that the trial court’s holding that the meeting was a legal one and that the proper steps were taken hy the common council to order this contract is correct. But we cannot agree with the trial court that the action of the officers and agents of the Peoples Company in making this contract shows that they in good faith intended to carry out the agreement and that it is a valid obligation and binding on the city. The facts pertinent to this question are as follows:

“In January, 1914, the common council advertised for bids for street lighting for a period of five years from August, 1914. At a regular meeting of the council on February 3, 1915, a bid was received from the Peoples Company at $47 per light per year for all-night and $43 for ‘moon-light’ schedule service, and one from the Oconto Company at $30 per light per year which did not designate which schedule of service it would give. The bids were referred to the committee on lights and the council by motion laid over the matter of letting the contract until the regular meeting in May, 1914. This meeting of the council was, ‘adjourned subject to the call of the mayor.’ On February 25th another meeting of the council was had, pursuant to the call of the mayor, in terms as follows: ‘The common council will meet in February adjourned meeting, Wednesday evening, February 25, 1914, at 7:30 o’clock, for the purpose of finishing business, etc.’ At this meeting a motion was made and carried to rescind the action of the council putting over the letting of the lighting contract, and it was then moved and carried to enter into a contract with the Peoples Company for a period of five years from August, 1914, at $28 per light per year for all-night every-night service. Mr. Pamperin had this contract in readiness for signatures, and it was signed the same evening. Mr. O’Kelliher was mayor of the city, was the attorney of the Peoples Company and lf"r. Pamperin generally, and was the attorney for the relatoi1 in the quo warranto action which was then pending. The relator in this action is the . wife of Mr. Pamperin, and she is the principal stockholder in the Peoples Company.

“On March 5th, before its bond to secure the performance of said contract' had been furnished, the Peoples Company applied to the railroad commission to increase the rate for the street lighting and to fix a rate for commercial lighting. The Oconto Company was made a party to this proceeding, and a'hearing was finally set for June 12, 1914.

“On May 20, 1914, after the council elected that spring had taken office, a contract with the Oconto Company was formally executed for the furnishing of street lights at $30 per light, pursuant to its bid above mentioned. This company had notified the city in April that it would furnish all-night every-night service or service on a moon-light schedule, as the city might elect.”

It is manifest from the steps taken by the mayor and the common council that the Eebruary 25, 1914, meeting was held to prevent letting of the lighting contract at the May meeting by the new council to be elected in April. The proceedings of this meeting and the active part in the transaction by Mr. Pamperin in changing the Peoples Company's bid from $47 per light to $28 per light, thereby reducing it below the $30 bid of the Oconto Company, and his action in having the contract at the reduced rate prepared before the meeting and having it signed at this meeting, and the acquiescence of the city officials in all these transactions, indicate that the main purpose of the whole transaction was to prevent acceptance of the Oconto Company's offer to furnish light at the rate of $30 per light. Coupling these acts with those of the Peoples Company's representative on March 5th, before the company furnished a bond to secure performance of this contract, by applying to the railroad commission to increase the rate for street lighting for its benefit under this contract, it is obvious that this was a scheme to secure the street-lighting contract at a price higher than the price specified in the contract or the price at which the Oconto Company offered to furnish light. The whole transaction shows an attempt to make a pretended contract for a rate per light much less than its bid, with the intent to secure a higher rate than the Oconto Compamjs bid through the action of the railroad commission. This wrongful conduct violated the transaction and justified the newly elected common council in treating the contract as void from its inception and enabled it to contract with the Oconto Company on the following 20th of May.

The conclusions from the foregoing are that the Peoples Company has no valid contract for street lighting with the city and that the city was at liberty to enter into the contract with the Oconto Company as it did on May 20, 1914. The facts and circumstances surrounding the making of this contract (Exhibit B) make it valid and obligatory upon the parties thereto. TJpon filing it with the railroad commission the rate agreed upon therein became presumptively reasonable and enforceable until a different rate is established in place thereof by the railroad commission pursuant to law.

Upon the foregoing consideration of the cases it necessarily follows that the judgment in the quo warranto action must be affirmed, and that the Peoples Company take nothing upon its appeal in the equity action; that upon the appeals of the Oconto Company and the city of Oconto the judgment in the equity action is reversed in so far as it is adjudged that the contract between the city of Oconto and the Peoples Company dated February 25, 1914, is valid, and in all other respects the judgment is affirmed.

By the Court. — The judgment appealed from in the case of the State of Wisconsin ex rel. N. E. Pamperin against the Oconto Electric Company is affirmed.

The judgment appealed from in the case of the Oconto Electric Company against the Peoples Land & Manufacturing Company and the city of Oconto is reversed in part and affirmed in part on the appeal of the Oconto Electric Company, as indicated in the opinion, and that the defendant Peoples Land & Manufacturing Company take nothing on its appeal therefrom. No costs are allowed in the equity case to either party; the Peoples Land & Manufacturing Company to pay the clerk’s fees in this court in the equity case.

A motion for a rehearing was denied, with $25 costs, on May 15, 1917.