President of Kilbourn City v. Southern Wisconsin Power Co.

135 N.W. 499, 149 Wis. 168, 1912 Wisc. LEXIS 126

• Court: Wisconsin Supreme Court
• Decided: April 3, 1912
• Status: Published

Opinion

BaeNes, J.

Tbe contention of tbe appellant most elaborately argued was that tbe evidence failed to support tbe findings of fact to tbe effect that tbe provisions of tbe contract by wbicb tbe plaintiff agreed to buy power at legal rates and the defendant agreed to pay the plaintiff a sum of not less than $3,500 nor more than $4,500 per year, depending on increase of population, were inserted in the contract to enable the plaintiff to obtain free power contrary to law and were adopted as a subterfuge to cover up the real purpose of enabling the plaintiff to obtain free power, and that the contract in fact was an agreement for free power to the extent of the sum agreed to be paid by defendant.

The evidence is ample to sustain these findings. A general outline of the negotiations between the parties is given in the statement of facts. It would not serve any useful purpose to recite the evidence in detail. Erom the beginning of the negotiations the plaintiff insisted on exemption from payment for such current as it might use. Strictly speaking, the earlier negotiations did not contemplate that the power should be free, in the sense that no consideration was to be paid for it, because the village was to meet the expenses of building a new plant. But the dominant idea seems to have been that it wished to avoid the payment of the usual compensation for the power used. When it broadened out its demand its purpose was to avoid paying any actual consideration for current. It demanded that a new site and a fully equipped plant be furnished it at least as good as the old one, and that it be put in running order without any expense to the village, and it wanted free power besides. The question of the competency of the parties to contract for free power seems to have arisen as early as October 17, 1908. The minutes of a meeting of the village board held on that day show that an inquiry was made by the president of the board of Mr. Upham, one of the attorneys for the village, whether in a settlement between the village and the power company the use of free power on the part of the village could be legally accepted and safeguarded, and that Mr. Upham gave as his opinion that it could. The minutes of the board under date of November 16, 1908, show that at the meeting of the board held on that date “Mr. Upbam stated that as the law would prohibit the accepting of free power, the company would have to pay so much rental and the village pay for the power used. The counsel to arrange this matter.” Mr. Swenson, president of the-power company, testified, without contradiction, that it was agreed between the attorneys that free power was illegal and therefore the rental was provided to take its place, and that such a provision was supposed “to be just a good equivalent to-what free power would amount to; in other words, we considered it an offset.” He further testified that the amount of power necessary for use would increase with the increase in. population and that the increase in rental provided for was intended to take care of that contingency. It also appears that the amount of rental provided for in the contract was about as nearly equal to the value of the power furnished as it was. practicable to estimate in advance. The value of the power supplied from November 22, 1909, to July 1, 1910, was, $1,928.08, or an average of $266.3-3 per month, which would make $3,183.96 per year, as against $3,500 rental which defendant agreed to pay plaintiff. This period took in the winter months, when undoubtedly less pumping was done than in the summer. The average monthly value of the current furnished for the four months from December 1 to March 31 was $218.62, and of the three succeeding months $330.16. This-, might be the result of a coincidence merely, but it is somewhat, suggestive of the fact that the parties made a pretty close estimate of what the current consumed would cost and accordingly fixed the rental which the defendant was obliged to pay. There are other circumstances to support the conclusions arrived at by the circuit judge, but enough has been said to demonstrate that there is plenty of evidence to sustain the findings. Indeed, it would be difficult to draw any different inference from the established facts.

Was the court right in concluding as a matter of law that. tlie contract was void because contrary to tbe provisions of our public utilities act, cb. 499, Laws of 1907 ? Tbe defendant is a public utility and subject to that law, wbicb was in force wben tbe contract was made. Such law contains tbe following provisions:

Sec. 1797m — 33. “It shall be unlawful for any public utility to charge, demand, collect or receive a greater or less compensation for any service performed by it within tbe state or for any service in connection therewith than is specified in such printed schedules, including schedules of joint rates, as may at the time be in force, or to demand, collect or receive any rate, toll or charge not specified in such schedule. The rates, tolls and charges named therein shall be the lawful rates, tolls and charges until the same are changed as provided in this act.” *

Sec. 1797m — 89. “If any public utility . . . shall, directly or indirectly, by any device whatsoever or otherwise, charge, demand, collect or receive from any person, firm or corporation a greater or less compensation for any service rendered or to be rendered by it in or affecting or relating to the production, transmission, delivery or furnishing of heat, light, water or power . . . than that prescribed in the published schedules or tariffs . . . , than it charges, demands, collects or receives from any other person, firm or corporation for a like and contemporaneous service, such public utility shall be deemed guilty of unjust discrimination which is hereby prohibited and declared to be unlawful.”

Sec. 1797m — 91. “If any public utility make or give any undue or unreasonable preference or advantage to any particular person, firm or corporation . . . such public utility shall be deemed guilty of unjust discrimination which is-hereby prohibited and declared unlawful.”

Sec. 1797m — 92. “It shall be unlawful for any person, firm or corporation knowingly to solicit, accept or receive any rebate, concession or discrimination in respect to any service' in or affecting or relating to the production, transmission, delivery or furnishing of heat, light, water or power ... or for any service in connection therewith whereby any such service-shall, by any device whatsoever, or otherwise, be rendered free, or at less rate than that named in the published schedules and tariffs in force as provided herein, or whereby any service or advantage is received other than is herein specified.”

It could hardly be claimed under these sections of the public utilities law that a utility could by resorting to any device or subterfuge make a valid agreement with a consumer to furnish the latter with free current to the amount of $3,500 per year, and the appellant does not so claim. Some of the main purposes of this law were to compel public-service corporations to file their rates so that they would be open to public inspection, to make reasonable rates of charge, and to make one consumer pay the same as another where the service was furnished under substantially similar conditions. To accomplish these results, the language used is as broad and comprehensive as it could well be made. Individual cases may arise where the legislature might possibly have made an exception had the concrete case been in mind when the act was passed. But the courts cannot write these exceptions into the law. We must enforce it as we find it. The village of Kilbourn is one of the patrons of the defendant that is entitled to receive the same consideration in the matter of rates of charge that any other patron is entitled to receive; no less, no more. By taking'advantage of a situation where it was able to force the defendant into making an unlawful contract, it can no more profit thereby than could any other purchaser of current from the defendant. It is in the same situation that any private riparian owner would be who thought he had an opportunity to drive a hard bargain.

Counsel for appellant argue that the provisions of law referred to have no application to the case, because the defendant’s plant was not completed when the contract was made and the defendant was not then a public utility, and that it is only contracts between public utilities and the public that are prohibited. We cannot adopt this view. If it is correct, then any projected railroad could, at any time before the road actually commenced to serve tbe public, enter into perpetual contracts whereby certain shippers were favored. Any new telephone or electric light or water company could make all kinds of discriminating contracts before they actually began to serve the public. It is the duty of any new utility to make its schedule of rates and file it with the railroad commission at or before the time it commences to do business. Sec. 1797™ — 33. The matter of regulating rates of charge by public-service corporations and preventing discriminations is a governmental function and one over which the legislative branch of the government has a right to legislate within constitutional lines, and any contract which runs counter to a valid law in this regard, and that was not made under direct legislative authority, becomes superseded thereby, regardless of whether it is made before or after the law is enacted. This subject was fully considered in Manitowoc v. Manitowoc & N. T. Co. 145 Wis. 13, 129 N. W. 925. Of course the defendant had the power to contract to. buy and the plaintiff the power to contract to sell the right to overflow the land of the latter, and they had the right to agree on the compensation to be paid, but they did not have the right to agree that full compensation should be made, and that in addition thereto the plaintiff should receive annually from $3,500 to $4,500 worth of free power. All subterfuges whereby one consumer is called upon to pay a greater or a lesser rate than that prescribed in the published schedule of charges, or whereby one consumer obtains a preference or advantage over another, are condemned. The scope, effect, and purpose of the law is considered at length in La Crosse v. La Crosse G. & E. Co. 145 Wis. 408, 130 N. W. 530, and it is unnecessary to elaborate or repeat what is there said. The matter of giving concessions in rates in settlement of a claim for unliquidated damages was considered in Union Pac. R. Co. v. Goodridge, 149 U. S. 680, 13 Sup. Ct. 970, and it was held that such a contract was in violation of the interstate commerce act. Other cases bolding that parties dealing witb public-service corporations must pay. the regular schedule of rates for the service performed and that these rates cannot be departed from by making a contract which recites a consideration for the departure, are Louisville & N. R. Co. v. Mottley, 219 U. S. 467, 476, 31 Sup. Ct. 265; Wight v. U. S. 167 U. S. 512, 17 Sup. Ct. 822; U. S. v. C. & A. R. Co. 148 Fed. 646; U. S. v. C., I. & L. R. Co. 163 Fed. 114; U. S. v. B. & O. R. Co. 165 Fed. 113; Interstate Comm. Comm. v. Reichmann, 145 Fed. 235; Armour P. Co. v. U. S. 209 U. S. 56, 28 Sup. Ct. 428. Through a rigid enforcement of our laws, state and national, favoritism to the few by public utilities in the matter of rates has been very largely done away with, and the courts should be sure they are right before placing an interpretation on statutes dealing with rates of charge which would encourage a return to the old order of things.

Heretofore it has been said that the court should treat this contract as it would a like contract made between the defendant and a private riparian owner. Plaintiff does not concede this to be true, because it argues that there was no right of condemnation against the village. The defendant had the right to condemn the property owned by the village. The right to condemn property devoted to one public use for a different use exists (1) where such right is expressly given by statute; (2) where it arises by necessary implication from the powers and privileges granted; and (3) where the privileges granted cannot be beneficially exercised without the taking of the property already devoted to a public use. In re Milwaukee Southern R. Co. 124 Wis. 490, 501, 102 N. W. 401. It is apparent that the privileges granted by ch. 462, Laws of 1901, could not be beneficially exercised without encroaching upon the property of the plaintiff, and the power to raise a dam to a specified height and to flood such lands as would be -overflowed thereby carried by implication the right to take the lands so flooded. This situation deprived the plaintiff of the strategic advantage of being able to prevent any occupation of its property against its will and of being able to retain the nse of it unless it could obtain whatever price it saw fit to demand as compensation therefor.

Some reference has heretofore been made to the parol evidence given by Mr. Swenson. The appellant urges that this evidence was incompetent because it tended to vary the terms of a written contract. If the testimony of Mr. Swenson were excluded from consideration, there is plenty of competent evidence to sustain'the finding of the trial court. But we do not .think the evidence was incompetent where the issue was whether a contract apparently valid on its face was in faet made in contravention of a statute of the state and for the purpose of evading such statute in fact though not in form. Lepley v. Andersen, 142 Wis. 668, 125 N. W. 433; Twentieth Century Co. v. Quilling, 130 Wis. 318, 325, 110 N. W. 174; Corbett v. Joannes, 125 Wis. 370, 104 N. W. 69.

Appellant contends that the contract has been executed on its part and that defendant has received the benefit thereof and that it is estopped from asserting its invalidity, even though it was ultra vires when made. In support of this proposition the following cases are cited: Madison v. Am. S. E. Co. 118 Wis. 480, 95 N. W. 1097; Ricketson v. Milwaukee, 105 Wis. 591, 81 N. W. 864; McElroy v. Minn. P. H. Co. 96 Wis. 317, 71 N. W. 652; John V. Farwell Co. v. Wolf, 96 Wis. 10, 70 N. W. 289, 71 N. W. 109; Lewis v. Am. S. & L. Asso. 98 Wis. 203, 73 N. W. 793; Bigelow v. C., B. & N. R. Co. 104 Wis. 109, 80 N. W. 95; Interior W. Co. v. Prasser, 108 Wis. 557, 84 N. W. 833; Security Nat. Bank v. St. Croix P. Co. 117 Wis. 211, 94 N. W. 74; Emigh v. Earling, 134 Wis. 565, 115 N. W. 128.

The rule invoked has no application to a contract made in violation of a statute and that is therefore in contravention of the lawfully declared public policy of the state. In such a -case the party who has not performed and who is sued for the breach of bis contract can avail himself of its illegality. Clarke v. Lincoln L. Co. 59 Wis. 655, 18 N. W. 492; Cohn v. Heimbauch, 86 Wis. 176, 180, 56 N. W. 638; Pearson v. Kelly, 122 Wis. 660, 100 N. W. 1064; Sentinel Co. v. A. D. Meiselbach M. W. Co. 144 Wis. 224, 128 N. W. 861; Menominee River B. Co. v. Augustus Spies L. & C. Co. 147 Wis. 559, 132 N. W. 1118.

The defendant did not file its schedule of rates with the-railroad commission until July 20, 1910. It counterclaimed for the reasonable value of the current furnished plaintiff up to June 27, 1910. The appellant contends that no recovery should be allowed because of failure of defendant to seasonably file its schedule of rates. The circuit court held that the-defendant was entitled to recover quantum meruit for the service rendered and awarded judgment in favor of the defendant for $1,928.08 for such service. The public utilities, law contains the following provisions in addition to those already referred to:

Sec. 1797m — 27. “Every public utility shall file with the-commission within a time to be fixed by the commission, schedules which shall be open to public inspection, showing all rates, tolls and charges which it has established and which are-in force at the time for any service performed by it within the state, or for any service in connection therewith or performed by any public utility controlled or operated by it. The ratas, tolls and charges shown on such schedules shall not exceed the rates, tolls and charges in force April 1, 1907.”

Sec. 1797m — 105, subd. 2. “Every public utility in this state shall, within thirty days after the passage and publication of this act, file in the office of the commission, copies of' all schedules of rates and charges including joint rates, in force on the first day of April, 1907, and all rates in force at. any time subsequent to said date.”

Sec. 1797m — 31. “No change shall thereafter be made in-any schedule, including schedules of joint rates, except upon, ten days’ notice to the commission, and all such changes shall" be plainly indicated upon existing schedules, or by filing new schedules in lieu thereof ten days prior to the time the same-are to take effect.”

Under these provisions utilities that were in operation at the time the act was passed were required to file their schedule of rates not later than thirty days after its publication. As to a public utility coming into existence after the law was passed, we think the law clearly contemplates that schedules of rates shall he fixed for the services which it proposes to render, before the services are performed, and that the schedule so fixed shall be immediately filed with the railroad commission.

Sec. 1797m — 33 makes it unlawful for a public utility "to demand, colled or receive any rate, toll or charge not specified in!’ the schedule of rates required to be filed. We are not very much impressed with the argument that this provision has reference only to such utilities as file their schedule of rates as required by law. We think the legislature has in effect said to public utilities, you must file your schedule of rates, you must charge what the schedule provides, and you may not charge anything unless you comply with the law. There is some force in the claim that this construction permits discrimination, one of the things that the statute was designed to prevent. ,While public-service corporations sometimes indulge in discriminations, their generosity seldom goes so far as to serve customers for nothing, and the legislature may well have thought that the best way to secure compliance with the law in the matter of filing schedules was to prohibit the recovery of compensation until such schedules were filed. In case there should be any disposition to take advantage of this requirement of the law, in order to discriminate between consumers, sec. 1797m — 95 provides a penalty of not less than $100 nor more than $1,000 for each violation of the law. Taking the ordinary and obvious meaning of the language used, it prohibits a recovery for any service except as such service is covered by rates filed with the railroad commission. We cannot read out of the act any different intention on the part of the legislature.

By the Gowrt. — Tbe judgment appealed from is modified by striking therefrom tbe provision that the defendant recover of the plaintiff on its counterclaim the sum of $1,928.08 with interest thereon from June 27, 1910. In all other respects the judgment is affirmed. Costs in this court are awarded against the respondent.

Maeshall and Kerwin, TT., took no part.