m Hi; amimimumimi. >w A TREATISE ON THE LAW OF PUBLIC UTILITIES OPERATING IN CITIES AND TOWNS BY OSCAR L. POND, A.M., LL.B., PH.D. [COLUMBIA] Member of the Indianapolis Bar Author of "Municipal Control of Public Utilities" INDIANAPOLIS THE BOBBS-MERRILL COMPANY PUBLISHERS l-^ ^^.f1 fofe Copyright, 191 3 By Oscar L. Pond TO FRANK J. GOODNOW, LL.D. EATON PROFESSOR OF ADMINISTRATIVE LAW AND MUNICIPAL SCIENCE COLUMBIA UNIVERSITY ^1 TABLE OF CONTENTS. CHAPTER I.— INTRODUCTION. CHAPTER II.— THE TWO CAPACITIES OF MUNICIPAL. COR- PORATIONS. SECrriON. PAGE. 1. Powers of municipal corporations 13 2. Classification of powers 13 3. Public and governmental powers 14 4. No liability for governmental powers 16 5. Limitation of governmental powers 18 6. Proprietary business powers 20 7. Liability of municipality 21 8. Powers and liability determined by capacity 23 9. Municipal public utilities a business concern 23 CHAPTER III.— CONSTRUCTION OF MUNICIPAL CHARTERS. 10. Reasonable construction 27 11. Power and discretion lionited only by fraud or abuse 27 12. Power by implication 31 13. Liberal construction 33 14. Limitations of fraud and ultra vires 36 15. Power to dispose of surplus capacity 38 CHAPTER IV.— WHAT ARE MUNICIPAL PURPOSES WITHIN THE MEANING OF THE CONSTITUTION. 16. Providing municipal public utilities discretionary 45 17. Powers of municipal corporations fixed by construction 46 18. Liberal construction of "municipal purposes." 46 19. Municipal public utilities as "municipal purposes." 47 20. Water-works a municipal purpose 48 21. Electric light plant 49 22. Brooklyn bridge 50 23. Rapid transit system 50 24. Public memorial monument 52 25. Power to lease municipal rapid transit system 52 26. Natural gas plant 54 V VI TABLE OF CONTENTS. SECTION. PAGE. 27. Convention hall 56 28. Public wharves 57 CHAPTER v.— THE IMPLIED POWERS OF MUNICIPAL COR- PORATIONS. 29. Power to provide municipal public utilities generally im- plied 60 30. Best Interests of municipality the test 60 31. Only general powers expressly given by statute 61 32. Statutory power to provide municipal public utilities con- stitutional 61 33. Electric light plant 62 34. Steam railroad the exception 63 35. Three grounds for doctrine of implied powers 63 36. The police power; the general welfare; municipal purpose. 64 37. Increase of sphere of municipal activity 64 38. Power and duty to provide municipal public utilities 65 39. Electric light plant by virtue of police power 66 40. Sewer system provided under police power 68 41. Water- works and electric lighting 69 42. The general welfare clause of municipal charters 70 43. Rapid transit systems as modern conveniences 71 44. Modern municipal public utilities practical necessities 73 45. Water-works the oldest and /most necessary utility 75 46. Supply of municipal public utilities for private use 77 47. Joint public and private service 'more economical 78 48. Ice from municipal water-works, an economy and necessity 78 49. Right to supply private service by implication denied 80 50. Electric light service one of the most modern 81 51. Detailed statutory provisions of Massachusetts strictly con- strued 84 52. The rule in Illinois 86 53. The New Jersey decision 87 54. The California rule stated 87 55. Municipality limited to enterprise of public nature 90 56. Taxation only for public purposes 91 57. Municipal public utilities public and natural monopolies.. 91 58. Private enterprises controlled by competition 92 59. Municipality can not erect opera house 93 60. Brick making a private business 94 61. Sale of coal and wood not a municipal or public purpose.. 94 62. Muncipality can not assist private enterprise 95 63. Municipal plumbing not incidental to its water-works 98 TABLE OF CONTENTS. Vll SLCTION. PAGE. 64. Municipal coliseum authorized by constitution — "home rule" 99 CHAPTER VI.— THE CONSTITUTIONAL LIMITATION OF MUNI- CIPAL INDEBTEDNESS. 65. Municipal indebtedness 101 66. A precaution against improvidence 102 67. Distribution of cost of municipal public utilities 103 68. Indebtedness defined and distinguished 103 69. Expense of plant and of necessary service distinguished. .105 70. Instalment payment purchase 107 71. Purchase of encumbered property 107 72. Contract obligations payable in future 109 73. Encumbering property before sale to municipality 110 74. Debts payable out of special fund 110 75. Bonds payable from revenue of plant Ill 76. "Mueller law" certificates 112 77. Purchase-price payable only out of revenue of plant 113 78. Payment same as by "special assessments" 114 79. Park-land purchase certificates 114 80. Option agreements of purchase 115 81. Option to purchase water-works 116 82. Purchase of water-works by piecemeal 117 83. Debt accrues as service is furnished under serial con- tracts 118 84. Necessary service payable from current revenue 119 85. Debt only created when service furnished 120 86. Current service payable out of current revenue 121 CHAPTER VII.— THE FRANCHISE. 87. Grant by state of charter right to be a corporation 123 88. Special franchise right to use streets and operate municipal public utility 124 89. Power to grant special franchise delegated to municipality. 124 90. Power of municipality subordinate to state 125 91. Municipal regulation by franchise provisions 126 92. The franchise a contract 127 93. Franchise grants on acceptance become contracts 127 94. Rights subject to public regulation and control 128 95. Franchise rights available to inhabitants 128 96. Franchise confers special privilege 129 97. Conditions of special franchise imposed by municipality binding 131 98. Inhabitants may enforce franchise provisions 133 Vlll TABLE OF CONTENTS. SECTION. PAGE. 99. Special franchise necessary to use of general franchise 134 100. Franchise rights of inhabitant and nonresident distin- guished 135 101. State control of municipal franchise grants 136 102. Power of municipality to regulate 137 103. Franchise rights follow growth of municipality 139 104. Rights not expressly granted are reserved to municipality. .142 105. Duty of municipality in granting franchises 143 106. General and special franchise defined 144 107. Franchise rights protected by court of equity 144 108. All franchise rights subject to exercise of police power... 145 109. Franchise grants for ber 'ifit of inhabitants primarily 146 110. Granting franchise is public and governmental 147 111. Municipal conditions must be reasonable and not arbitrary. 148 112. State interest and regulation controls municipal 149 113. Municipal regulation once provided is final and binding. . .151 114. Municipal consent when accepted creates binding contract. 152 115. Vested interests and contract rights not subject to impair- ment by later constitutional provisions 153 116. Franchise rights may be modified by mutual agreements. .155 CHAPTER VIII.— NO EXCLUSIVE FRANCHISE UNDER IMPLIED POWER. 117. All power of municipality derived from state 156 118. No implied power in municipality to grant exclusive franchises 157 119. Franchises not exclusive to avoid monopolies 157 120. Duration of franchise 158 121. The control of competition 158 122. Competitor not excluded by unauthorized exclusive fran- chises 160 123. Power to grant franchises strictly construed 161 124. Monopolies held contrary to public interest 161 125. Strict construction of statutory authority excludes implica- tion 162 126. Conditional grants of exclusive franchises construed strictly 163 127. The municipality an agent of the state 164 128. Constitutional provision limits grant by state 166 129. Municipal control of streets impaired by exclusive fran- chises 168 130. Exclusive franchise prevents municipal control 169 131. Exclusive franchise held unnecessary 170 TABLE OF CONTENTS. IX CHAPTER IX.— NO EXCLUSIVE FRANCHISE BY IMPLICATION. SECTION. PAGE. 132. Strict construction of special franchise grants 172 133. Contract of franchise can not be impaired 172 134. Franchise not exclusive subject to competition 173 135. Power of competition to destroy franchise rights 174 136. Municipality not excluded unless franchise exclusive 175 137. Street railway limited to streets actually occupied 176 138. No sale of franchise to highest bidder which defeats com- petition 177 139. Strict construction as to subject-matter of franchise 178 140. Rigid enforcement of conditions of grant 179 141. Rights of street railway excl'Jsive where installed 180 142. Franchise grants subject to those already issued 181 143. Franchise not exclusive excludes all without franchise. . .183 CHAPTER X.— CONTRACTS OF MUNICIPAL CORPORATIONS FOR PUBLIC UTILITY SERVICE. 144. Power of municipal authorities to contract 186 145. Contract for service not exclusive by implication 187 146. Contract not exclusive of competition or municipality. . .188 147. Wide discretion of municipal authorities 188 148. Exclusive contract for reasonable period 189 149. Contracts with municipal and private parties distinguished. 189 150. Power of municipality detenmined by necessity 191 151. Exclusive contract formerly denied validity 193 152. Right to regulate rates to be conserved 194 153. Contract executed by municipality as business concern. . .195 154. Contract for excessive period void 196 155. Contract with duration not fixed is optional, not perpetual. 197 156. Municipal contract not exclusive unless expressly made so. 198 157. Impairment of franchise rights by competition not pro- hibited 198 158. Contract not exclusive to preserve competition 199 159. Contract for division of territory among competitors void. 200 160. Exclusiveness of franchise may be waived 201 161. Contract limiting service to exclude competition void 202 162. Contract for unnecessary service unreasonable and in- valid 204 163. Perpetual contract void 204 164. Contract tending to exclude municipality strictly con- strued 205 165. Municipality may exclude itself expressly 206 166. Municipality excluded by exclusive contract 207 X TABLE OF CONTENTS. CHAPTER XL— DURATION OF FRANCHISE. SECTION. PAGE. 167. State can grant perpetual franchise if constitutional 209 168. Municipal franchise not perpetual under implied power... 210 169. Construction against perpetual franchises 210 170. Duration of municipal grants limited to retain control. . .211 171. Duration not expressly fixed varies 212 172. Duration fixed by discretion of municipality 212 173. Duration of franchises defined 213 174. General or special franchise of state may be perpetual. . .214 175. Power of state and municipality to grant perpetual fran- chise distinguished 217 176. Perpetual franchise generally also exclusive 218 177. Duration of franchise limited to life of grantor 219 178. Duration limited to life of grantee to retain continuous control 221 179. Duration of franchise strictly construed against grantee. .222 ISO. Duration of life of grantee similar to grant of life estate.. 223 181. Duration of franchise and service contract same 225 182. Duration of franchise not fixed, optional \228 183. Franchise for excessive period entirely void 229 184. Perpetual franchise upheld as such for reasonable time.. 230 185. Franchise limited to life of easement in street 282 186. Perpetual franchise under New York decisions 233 187. Duration of franchise limited by statute in New York 237 188. Duration of franchise of state on acceptance perpetual. .. .239 189. Whether unlimited franchise is property and perpetual 240 CHAPTER XII.— FRANCHISE RIGHTS AVAILABLE TO INHABI- TANTS OF MUNICIPALITIES. 190. The obligation of the municipal franchise 242 191. The duty imposed by acceptance of franchise 243 192. Municipal public utilities affected with public interest 243 193. Regulation and control of municipal public utilities 244 194. Municipal control in interest and for benefit of public 244 195. Limitations imposed to conserve municipal control 245 196. Rights of inhabitants the real parties in interest 246 197. Individual inhabitant's rights 246 198. Right of consumer failing to secure proper service 248 199. Franchise rights available to individual customer 249 200. Nature of duty to provide service defined 250 201. Customer may enjoin diversion of necessary supply 251 202. Customer entitled to service under most favorable condi- tions 252 203. Rights of abutting property owner 253 TABLE OF CONTENTS. XI SKtTlON. PAGB* 204. Liability of municipal public utility for shade trees 254 205. Right of customer to enjoin collection of excessive rate.. 254 206. Regulations inconsistent with franchise invalid 255 207. Liability in damages for failure to furnish adequate ser- vice 256 CHAPTER XIIL— NO DISCRIMINATION IN SERVICE. 208. Impartial service the measure of the obligation 258 209. Municipal public utilities natural monopolies 259 210. Requirement of uniform service takes the place of com- petition 260 211. Enforcement of rights by individual customer imprac- ticable 260 212. Public regulation and control of business of public nature. 261 213. Discrimination based on reasonable classification 261 214. Individual may enforce uniform telephone service 268 215. Municipal public utility must serve public granting it fran- chise 265 216. Uniform service to all of class and of similar classes 265 217. Contract for exclusive telephone service invalid 266 218. Value of service to customer no valid basis for rate clas- sification 267 219. Reasonable regulations for securing payment for service.. 268 220. Discontinuing service for nonpayment 269 221. Discrimination by rebates illegal 269 222. Rates for service not taxes need not be uniform under con- stitution 270 223. Discrimination in favor of public or charity 271 224. Inadequate supply no justification for discrimination 273 225. Rule necessary to protect poorer classes especially 275 226. Suburban customer may be classified as such 275 227. Quantity of service as basis of classification 276 228. Classification between old and new subscribers invalid. . .277 229. Nature of use of gas service not proper basis of classifi- cation 277 CHAPTER XIV.— LIABILITY OF WATER-WORKS COMPANIES FOR FIRE LOSS. 230. The consumer the real party Interested 2S0 231. The inhabitant may enforce franchise rights 280 232. Franchise or contract for benefit of inhabitants 281 233. Liability to consumer for fire loss from failure of water supply 283 234. Recovery denied for duty governmental 283 ? Is Xll TABLE OF CONTENTS. SECTION. 235. Right of municipality to recover for loss 284 236. Expediency of rule refusing recovery 285 237. Liability to customer for negligence 287 238. Recovery by consumer in contract or for negligence 288 239. Recovery by consumer as taxpayer 290 240. Customer not municipality real party in interest to con- tract 291 241. Customer party to contract may recover 292 242. Water-works company not insurer 293 243. Duty under franchise to supply virater 294 244. Owner of property only party who can sue for loss 295 245. Beneficiary of contract may sue for its breach 296 246. Consideration furnished by beneficiary 297 247. Liability for fire loss contemplated by contract 298 248. Contract expressly assumes risk of fire loss 299 249. Reasons for denying recovery stated 300 250. Recovery held not in contemplation of parties 301 251. Recovery denied for want of privity between parties 302 252. No recovery not expressly provided for in contract 303 253. Duty governmental and no liability 304 254. Water-works company subrogated for municipality 305 255. Recovery denied, although expressly stipulated by contract. 306 256. No recovery contemplated in fixing rates 307 257. Impracticable to permit recovery 308 258. Liability would require prohibitive rates 309 259. Contract only with municipality to furnish water for fire protection 310 260. Express contract for water service for fire protection neces- sary 311 261. Rates for service indicates no liability for fire loss con- templated 312 262. Interest of taxpayer and consumer in contract only inci- dental 313 263. Recovery only by party to contract expressly stipulated. . .314 CHAPTER XV.— NEGLIGENCE OF MUNICIPAL PUBLIC UTILITIES. 264. General liability for negligence 317 265. Municipality liable for negligence except act governmental . 318 266. Municipality not liable in providing fire protection 321 267. Municipality liable in furnishing water privately 322 268. The two capacities of municipal corporations 323 269. Liability under municipal ownership 324 270. Liability under commission 325 271. Municipality liable for damage from broken water main., 326 TABLE OF CONTENTS. ^m SECTION. PAGE. 272. Municipality liable for water- works same as for streets 327 273. No liability under statute where duty partly governmental. 327 274. No liability for public duty which is not commercial enter- prise 328 275. Liability for negligent maintenance of water-works prop- erty 329 276. Liable only for ordinary use of water 330 CHAPTER XVL— MUNICIPAL PUBLIC UTILITY SYSTEMS AS ADDITIONAL SERVITUDES. 277. Equipment of municipal public utilities in highways 3:i3 278. Public purposes for which highways dedicated 333 279. Purposes include communication and transportation 334 280. Purposes not limited to those contemplated at dedication. .335 281. Equipment for local service no additional servitude 335 282. Street railways and pipe lines local not additional servi- tudes 336 283. Interurban railway system 337 284. Tendency to extend municipal utility service 337 285. Streets and other highways not distinguished 338 286. Expedient to encourage extensions 338 287. Decisions conflicting 339 288. Communication by wire in lieu of travel 340 289. Public use not additional servitude 343 290. Public rights paramount after dedication 344 291. Public entitled to underground use of streets 345 292. Travel in streets relieved by telephone 345 293. Lighting system no additional servitude 347 294. Modern improvements included in "public purpose" 348 295. Necessary underground conduits included 349 296. Streets and other highways formerly distinguished 350 297. Distinction no longer obtains 351 298. Steam, street and interurban railways distinguished 353 299. Interurban railway no additional servitude 354 300. Telephone lines additional servitudes in Illinois 355 301. Light being necessity is not additional servitude 356 302. Telephone system held additional servitude in New York.. 357 303. Street railway system held additional servitude in New York 358 304. Underground rapid transit system additional 359 305. Telegraph and telephone compared 360 306. Telephone new method of subjecting streets to old use 361 307. Use for public and private service distinguished 362 308. Nature of use generally not distinguished 363 309. Street and rural highway not distinguished for telephone. 364 XIV TABLE OF CONTENTS. SECTION. PAGE. 310. Tendency of decisions progressive and practicable 366 311. Modern inventions for or in lieu of travel included in pub- lic purposes 368 312. Conservative decisions find additional servitudes 368 313. Original dedication made the test 370 314. Ownership of fee in street not considered 372 315. Interurban in rural highway held additional servitude 373 CHAPTER XVII.— EXEMPTION FROM TAXATION OF PROP- ERTY SUPPLYING MUNICIPAL PUBLIC UTILITIES. 316. Municipal ownership facilitated by tax exemption 376 317. Power to tax under federal constitution 376 318. Taxation under state constitutions 376 319. Municipal property used for governmental and private purposes 377 320. Public governmental property not taxed 377 321. Municipal public utility property of municipality 378 322. Public purpose entitles such property to exemption 378 323. Power to produce revenue not the proper test 379 324. Nature of purpose not changed by income received 380 325. "Municipal purpose" defined 381 326. Present use must be public 382 327. Water-works a public purpose 382 328. Purchased by taxation and under eminent domain 383 329. Property beyond limits of municipality may be taxed 384 330. Such property only taxable by statutory provisions 385 331. Property exempt for ownership and purpose public 387 332. Payment for service same as payment of taxes 388 333. Kentucky rule as to municipal property 388 334. Distinction between public and governmental property in- valid 389 335. Municipal water-works under Kentucky rule 389 336. Limitation denying right to sell for nonpayment of taxes. 392 337. Statute taxing property producing income in Pennsylvania. 395 338. Property providing private service taxed in Vermont 396 339. Property of private parties taxable 397 340. Contract of municipality to exempt such property from taxation 397 341. Contract treated as payment for public service 398 342. Consideration of such contract must be reasonable 399 343. Contract not in effect an exemption 400 344. Strict construction denies validity of agreement 401 345. Practical statement of the rule 402 TABLE OF CONTENTS. XV CHAPTER XVIII.— SALE OF PROPERTY PROVIDING MUNICI- PAL PUBLIC UTILITIES. SECriO.V. PAGE. 346. Municipal control by limitation on alienation 403 347. Attitude of courts on municipal control and ownership. . .404 348. Trust property devoted to public use can not be sold with- out statutory authority 404 349. Duty to render service personal 405 350. Alienation of property permitted in public interest 406 351. Municipal water-works public property like parks 408 352. Municipality trustee for public of its water and light plant. 409 353. Transfer of property by lease must be authorized by stat- ute 410 354. Duty to serve public can not be evaded by alienation 411 355. Municipal ownership conserved for public interest 412 356. Public interest and private gain antagonistic 413 357. Abanctoned property may be alienated by municipality 414 358. Pipe lines on failure of gas may be alienated in public interest 414 359. Transfer to municipality favored in interest of public 416 360. Municipal option to purchase provided in franchise 417 361. Legislative authority must be express to permit transfer. .417 362. Franchise personal to grantee and not transferable 418 363. Combination agreements defeating competition are invalid. 419 364. Contracts fixing rates or combining competitors invalid. . .420 365. Stock control of competing concerns invalid 421 366. Forced sales of such property also prohibited 422 367. Right of alienation expressly given by statute valid 423 CHAPTER XIX.— RIGHTS ON EXPIRATION OR FORFEITURE OF FRANCHISE. 368. Property not forfeited with franchise 424 369. Right to retake possession coupled with property 425 370. Practical disposition of property on expiration of fran- chise 425 371. Property and franchise rights may be forfeited by agree- ment 426 372. Forfeiture for nonuser after reasonable time 427 373. Nonuser resulting in forfeiture reopens field 429 374. Trespasser If necessary franchise not secured 430 375. Franchise rights must be accepted in reasonable time 431 376. Acceptance of franchise and rendering service necessary. 432 377. Forfeiture follows failure to perform if statute self-execut- ing 433 378. Forfeiture waived and substantial performance sufficient. .434 379. Provisions of municipal franchise modified by agreement. .436 XVI TABLE OF CONTENTS. SECTION. PAGE. 380. Title to property not affected by expiration of franchise. . .437 381. Right to retake property necessary to enjoy its ownership. 438 382. Plant should not be dismantled but transferred 440 383. Franchise renewed or plant purchased by municipality 441 384. Right to remove equipment on forfeiture 442 385. Trespasser on expiration regardless of investment in Ohio. 444 386. Impracticable to treat as trespassers on expiration of fran- chise 445 387. Agreement express for revocation and removal 446 388. Municipality must purchase or renew if franchise requires. 447 CHAPTER XX.— STREET AND HIGHWAY PRIVILEGES OF MUNICIPAL PUBLIC UTILITIES. 389. The street the key to regulation 449 390. Streets for use and benefit of public 450 391. Duty and opportunity of municipal officers to conserve pub- lic interest 450 392. Control of streets delegated to municipality 451 393. Municipal consent to use of streets conditioned on service. 451 394. Power delegated to municipality legislative 452 395. All rights subject to exercise of police power 452 396. Equipment in streets subject to removal or change 453 397. Street privileges and police power defined 454 398. Public control of streets and franchises complete 455 399. Municipal control of streets delegated by state 457 400. Power must be expressly or clearly delegated 458 401. Delegated power may be revoked or modified by state 460 402. Streets dedicated in trust for benefit of public 461 403. Title to street in municipality trustee for public 462 404. Municipal consent condition precedent 463 405. No exclusive use unless expressly provided 463 406. No power to alienate or obstruct streets implied 464 407. Telephone and telegraph not limited by local control 465 408. Municipal control limited to municipality 466 409. Power to grant perpetual franchise not implied 467 410. Change of street grade requiring relocation of pipes valid. 469 411. Sewer systems paramount to public utility pipes 471 412. Arbitrary exercise of police power not sustained 472 413. Municipality can not barter away right to exercise police power 473 CHAPTER XXI.— THE RIGHT TO FIX RATES. 414. Property devoted to public use subject to public regulation and control 476 TABLE OF CONTENTS. XVll SECTION. PAGE. 415. Control of state over its corporations 477 416. Regulation of rates for municipal public utilities 478 417. Competition not sufficient regulation 478 418. Delegation of power of regulation must be clearly intended 479 419. Power of municipal regulation governmental, continuous and personal 479 420. Municipal regulation from control of its streets 480 421. Control as condition of granting municipal consent or franchise 480 422. Power of municipal regulation plenary and complete 481 423. Municipal ordinance fixing rate is binding 483 424. Rate regulation suspended by contract fixing rate 484 425. Municipal officers competent to fix rates and disinterested. 485 426. Express contract for reasonable period fixing rates is valid. 486 427. Power to contract gives power to fix rates until revoked. . .487 428. Power to grant municipal franchise rights on conditions construed liberally 487 429. Individual inhabitant can enforce franchise rights 488 430. Municipal grant of monopoly rights may be conditioned on control 489 431. Acceptance of municipal consent on conditions creates binding contract 489 432. Service must be provided according to terms of contract. .490 433. Failure of municipality to provide rate in franchise 491 434. Regulation of streets not authority to regulate rates dur- ing franchise 493 435. Power of municipality to regulate rates not provided in franchise — Police regulations 494 436. Power to contract and to regulate distinguished 497 437. Rates fixed by agreement of parties binding 498 438. Limitation of police power 504 CHAPTER XXIL— RATES MUST BE REASONABLE. 439. Reasonable rates the ultimate object 506 440. Fixing rates legislative and administrative 507 441. Rates should vary with changed conditions 507 442. Reasonableness of rate a judicial question 508 443. No return on investment guaranteed 509 444. Value of service a test of reasonableness 509 445. Rates for future fixed by contract or legislature not by courts 511 446. Rate presumed reasonable 512 447. Reasonableness of rate question of fact 513 448. Limitation of reasonableness 515 449. Question of reasonableness raised by either party 515 XVlll TABLE OF CONTENTS. SECTION. PAGE. 450. Discretion of parties fixing rates respected unless abused.. 517 451. Municipal public utility fixing rates must be reasonable. .518 452. Cost of service includes measuring it for customer 518 453. Reasonable value of service determines the rate 520 454. Risk of investment assumed by owner 521 CHAPTER XXIII.— WHAT CONSTITUTES REASONABLE RATES. 455. Reasonable rate question of fact varying with conditions. .524 456. Elements to be considered in fixing rates 525 457. Antagonistic interest of parties and sliding scale of rates.. 526 458. Element of risk of investment affecting rates 526 459. Expense of maintenance and operation 527 460. Physical depreciation and obsolescence 527 461. No element of good will unless competition in field 528 462. Going concern with established income 529 463. Sliding scale — Increased earnings with decrease in rates.. 529 464. Monopoly eliminates element of risk 531 465. Rate increased with element of risk 533 466. Fixed charges and maintenance expense and dividends 534 467. Obsolescence and physical depreciation operating expense. 534 468. Functional and physical depreciation charged to operation not added to capital account 537 469. Replacements out of earnings 537 470. Account earnings rather than capital for replacement no increase 538 471. Competition affects volume and risk of business 539 472. No good will under monopoly for no choice 540 473. Established business of going concern with fixed income.. 541 474. Reproduction cost ignores going concern value 541 CHAPTER XXIV.— VALUATION OF THE INVESTMENT. 475. Basis for fixing rates and purchase-price 544 476. Fair return on reasonable value of necessary property 545 477. Four theories for ascertaining valuation 545 478. Original cost if not excessive 546 479. Reproduction less depreciation 547 480. Capitalization and investment distinguished 547 481. Power and necessity of controlling capitalization 547 482. Connection between capitalization and necessary invest- ment not always apparent 548 483. Tendency to regulate issue of stocks and bonds 549 484. Present value true test 549 485. Theories of valuation considered 551 486. Valuation as of the time question determined 553 TABLE OF CONTENTS, XIX SECTION. PAGE. 487. Present value as a going concern 553 488. Market valuation or capitalization inadequate 554 489. Present actual physical valuation as going concern 555 490. Franchise valuation — real or cost 556 491. Valuation limited to property being used for public 557 492. Rate presumed reasonable — effect of reduction on income.. 558 493. Elements of valuation as evidence of true value 558 494. Current market price and rate of interest 559 495. Net earnings rule 561 496. Limitations and additions necessary to this rule 561 497. No constitutional right to unreasonable return 562 CHAPTER XXV.— REGULATION BY MUNICIPAL CORPORA- TIONS. 498. Governmental power to regulate rates suspended by con- tract 564 499. Municipal control practical and power delegated adequate. 565 500. Tendency to increase municipal control of real party in in- terest 566 501. Persistent vigorous enforcement of franchise essential 567 502. Strict construction of contracts suspending power to regu- late 567 503. Power to regulate and to fix rates by contract distinguished. 568 504. Power to fix rates must be exercised in manner provided. .569 505. Power to regulate rates to be conserved 570 506. Rate regulation and the general welfare 570 507. Power to fix rates may be delegated to municipality 572 508. Policy of local control over purely local matters 573 509. Municipal authorities competent to fix rates for action official 574 610. Duty of municipality to prevent excessive rates 576 511. Rate subject to change by state if made without authority. 576 512. Delegated power to fix rates binding until revoked 578 513. Statutory construction of power to regulate and fix rates.. 579 514. Power to regulate rates not surrendered by implication. . .581 515. Rates fixed by contracts not clearly authorized held declar- atory only 582 516. Strict construction saves right to regulate if rate not ex- pressly covered 583 517. Right to regulate under reserved right to alter, amend or repeal 585 518. Regulation continuing and akin to police power 586 519. Liberal construction finds contract binding on rates 589 520. Delegated power to fix rates by contract or franchise limited thereby 590 XX TABLE OF CONTENTS. SECTION. PAGE. 521. Contract giving consent and fixing rates valid 591 522. Fixing maximum rates permits regulation as to reason- ableness 592 523. Fixing rates not favored — tends to create monopoly 593 CHAPTER XXVI.— REASONABLE REGULATIONS. 524. Municipal control and rental charges 594 525. Concentration of service lines and poles 595 526. Police regulations for underground conduits 596 527. Regulation and installation and supply of equipment 596 528. Meter and equipment provided with service 597 529. Expense of meter and connections met by customer, not by municipality 597 530. Franchise provisions controlling if express and consistent. 598 531. Meter as a measure prevents waste 600 532. Meter rental included in price fixed for service 602 533. Customer entitled to have service accurately measured 603 534. Municipality may tax meter rental to customer 603 535. Customers rather than taxpayers pay meter rentals 604 536. Connections with premises included in rate charge 605 537. Service connections integral part of equipment 605 538. Connections at expense of customer under municipal ownership 606 539. Liability for meter, etc., determined by provisions and con- struction of franchise 607 540. Special assessment of abutting property — Unearned incre- ment 608 541. Municipality obliged to preserve streets for travel 609 542. Police power to regulate use of street 609 543. Party line telephones may be prohibited 610 544. Unreasonable to require service for all 610 545. Municipality requiring conduits limited to reasonable ne- cessity 611 CHAPTER XXVII.— REGULATIONS FOR RENDERING TELE- PHONE SERVICE. 546. Facts peculiar to telephone service 613 547. Competition extravagant and ineffective regulation 614 548. Expense of duplication carried by customer and indefens- ible 615 549. Competition in telephone service peculiarly undesirable. . .615 550. Eflacient public regulation of telephone especially necessary. 616 551. Reqirements for physical connection of telephone plants. 617 552. Contracts restricting service in restraint of trade 617 TABLE OF CONTENTS. XXI SECTION. PAGE. 553. Contract for connected or through service 618 554. Physical connection only by contract or state requirement. 619 555. Cost and value of telephone service with increase of sub- scribers 619 556. Classification of telephone service 621 557. Physical connection by constitutional provision 622 558. Statutory and constitutional requirements upheld 624 559. Physical connection by contract available to all alike 625 560. Through telephone service peculiarly necessary 626 561. Undertaking to furnish connected service becomes general. 627 562. Holding out consolidated service establishes it perma- nently 628 563. Exclusive contract for through service upheld from neces- sity 629 564. Necessity for exclusive service question of fact 630 565. Common-law and statutory regulations distinguished 631 566. Public and private business distinguished 632 567. Necessity for state regulation to insure public complete service 633 568. Service of common carrier and telephone distinguished 634 569. Doctrine of increasing cost of service peculiar to telephone. 636 570. Value of service increases with its amount 637 571. No discrimination in rates nor limitation of service 637 CHAPTER XXVIII.— MUNICIPAL OWNERSHIP. 572. Ownership unless regulation adequate 640 573. Power of municipality to own and operate municipal pub- lic utilities 641 574. Eminent domain always available to municipality 641 575. Just compensation condition not limitation on its exercise. 643 576. Motive of municipal and private owners compared 643 577. Failure of regulation necessitates ownership by munici- pality 644 578. Tendency and attitude of courts toward municipal owner- ship 644 579. Municipal ownership and interests of public 646 580. Policy of municipal ownership legislative not judicial question 647 581. Sale to municipality without statutory authority 648 582. Extension of sphere of municipal activity necessary 649 583. Practical necessity long recognized as basis of fiaunicipal ownership 650 584. Ownership without operation permitted 651 585. Constitutionality of municipal ownership unquestioned. . .652 XXll TABLE OF CONTENTS. CHAPTER XXIX.— MUNICIPAL BUREAUS OR COMMISSIONS. SECTION. PAGE. 586. Strict enforcement of franchise and contract rights es- sential 655 587. Means of enforcing rights — Information necessary 656 588. Enforcement by legal proceedings no longer adequate 656 589. Relief by legislative enactment aside from commissions. .657 590. Popular control by public generally impracticable 658 591. Public utility commissions adequate and practically neces- sary 659 592. Relief summary, adequate and inexpensive 660 593. Matter of business administration by experts 660 594. Business of municipal public utilities and politics dis- tinguished 661 595. Concentration of power and responsibility 662 596. Commission constitutional and entirely legal 662 597. Commission a practical business necessity 664 598. Relief at hands of courts practically impossible 665 599. Reasonable rates required at common law and by statute.. 666 600. Tendency toward "home rule" of local matter 666 •601. Municipal franchise bureau or commission necessary 667 CHAPTER XXX.— STATE PUBLIC UTILITY COMMISSIONS. 602. State public utility commission necessary 668 603. State regulation supplants competition 669 604. Indeterminate franchise properly regulated 669 605. State control of capitalization and expenditures essential . 670 606. Impartial commission of experts approved by courts 670 607. Commission required by importance and complexity of duty. 671 608. Franchise provisions and matters of administration de- scribed 672 609. Monopoly under indeterminate permit 674 610. State commissions first established 675 611. Police power as basis for regulation 676 612. Scope of activity of business requires state commission. . .677 APPENDIX A. Public Service Commissions Law of New York 681 APPENDIX B. Public Utilities Law of Wisconsin 796 APPENDIX C. Public Utilities Law of Indiana 848 TABLE OF CA8ES. [Beferencea are to Sections.] Adams v. Samuel R. Bul- lock & Co., 94 Miss. 595, 95 Adams Express Co. v. Ohio, 165 U. S. 219, 585 Admiral Realty Co. v. New York, 206 N. Y. 110. 11, 13, 19, 25, 42, 43, 584 Agua Pura Co. v. Las Vegas, 10 N. Mex. 6, 422, 506, 509 Aiken v. Columbus, 167 Ind. 139, 265, 268 Aldrich v. Tripp, 11 R. I. 141, 265 Aldworth v. Lynn, 153 Mass. 53, 265 Allegheny County Light Co. V. Shadyside Electric Light Co., 37 Pa. Super Ct. 79, 213 Allen V. Clausen, 114 Wis. 244, 397, 399 Allen & C. Mfg. Co. v. Shreveport Waterworks Co., 113 La. 1091, 236 Allison V. Chester, 69 W. Va. 533, 68, 84 Alpena City Water Co. v. Alpena, 130 Mich. 518, 320 Alter V. Cincinnati, 56 Ohio St. 47, 42 Altgelt V. San Antonio. 81 Tex. 436, 320 Alton V. Illinois Transp. Co., 12 111. 38, 402 Aivord V. Syracuse, 163 N. Y. 158, 530 American Rapid Tel. Co. v. Hess, 125 N. Y. 641, 397 American Waterworks Co. V. State, 46 Nebr. 194, 197, 213 Ancrum v. Camden Water, L. & I. Co., 82 S. Car. 284, 236, 257 Anderson v. Berwyn, 135 111. App. 8, 530 Anderson v. Fuller, 51 Fla. 380, 95, 397, 413 Andreas v. Gas & Electric Co. of Bergen Co., 61 N. J. Eq. 69, 287, 307 Andrews v. National Fdry. & Pipe Works, 61 Fed. 782, 32, 38 Anoka Water Works, E. L. & P. Co. V. Anoka, 109 Fed. 580, 68, 83 Arkadelphia E. L. Co. v. Arkadelphia, 99 Ark. 178 463, 484 Armour Packing Co. v. Edi- son E. Ilium. Co., 100 N. Y. S. 605, 213 Aschoff V. Evansville, 34 Ind. App. 25, 265 Ashland v. Wheeler, 88 Wis. 607. 95, 96 Ashland St. R. Co. v. Ash- land. 78 Wis. 271. 397 TABLE OF CASES. [References are to Sections.] Atchison, &c., R. R. Co. v. Denver, &c., R. R. Co., 110 U. S. 667, 556, 565 Atchison St. R. Co. v. Nave, 38 Kans. 744, 213, 372, 397 Atlantic City Waterworks Co. V. Atlantic City, 48 N. J. L. 378, 11, 12 Attorney General v. Detroit, 150 Mich. 310, 58, 60 Attorney General v. Wal- worth L. & P. Co., 157 Mass. 86, 610 Augusta V. Mackey, 113 Ga. 64, 265 Aurora Water Co. v. Auro- ra, 129 Mo. 540, 68 Austin v. Bartholomew, 183 U. S. 698, 107 Fed. 349, 350 Austin V. Coggeshall, 12 R. I. 329, 11, 14 Austin V. Seattle, 2 Wash. 667, 68 Avery v. Job, 25 Ore. 512, 11 B Bailey v. Fayette Gas-Fuel Co., 193 Pa. 175, 213, 229 Bailey v. Philadelphia, 184 Pa. 594, 350, 367 Baker v. Grand Rapids, 142 Mich. 687, 58 Baker v. Northeast, 151 Pa. 234, 265 Baldwin v. Smith, 82 111. 162, 384 Ball V. Texarkana Water Corp., (Tex. Civ. App.) 127 S. W. 1068, 422 Baltimore v. B. Trust & G. Co., 186 U. S. 673, 108, 530 Baltimore v. Gill, 31 Md. 375, 71 Barnes v. Hill, 23 Okla. 207, 42 Barre v. Perry & Scribner, 82 Vt. 301, 173 Barsaloux v. Chicago, 245 111. 598, 141 Bartholomew v. Austin, 85 Fed. 359, 323, 341 Bartlesville E. L. & P. Co. V. Bartlesville I. R. Co., 26 Okla. 456, 136, 143 Baumgartner v. Hasty, 100 Ind. 575, 11 Beck v. Kittanning Water Co., 8 Sadler (Pa.) 237, 236 Becker v. Keokuk Water- works, 79 Iowa 419, 236 Beekman v. Third Ave. R. Co., 153 N. Y. 144, 105, 397, 400 Belding Improvement Co. v. Belding, 128 Mich. 79, 42, 47 Bell V. Plattville, 71 Wis. 139, 42 Belleville v. Citizens' Horse R. Co., 152 111. 171, 114, 372, 384 Bell, Sheriff v. Louisville Water Co., 32 Ky. Law Rep. 699 336 Bennett v. Mt. Vernon, 124 Iowa 537, 265 Bessemer v. Bessemer Waterworks, 152 Ala. 391, 463, 506 Bienville Water Supply Co. V. Mobile, 175 U. S. 109, 149 Billings Mut. Tel. Co. v. Rocky Mountain Bell Tel. Co., 155 Fed. 207, 556, 557 Birmingham v. Birming- ham W. Co., (Ala.) 42 So. 10, 197, 213, 225 Birmingham & Pratt Mines St. R. Co. V. Birming- ham St. R. Co., 79 Ala. 465, 121, 128, 142, 397, 409 TABLE OF CASES. [KefereTwea are to Sections.] Biack V. Columbia, 19 S. Car. 412. 4 Blair v. Chicago, 201 U. S. 400, 95, 173, 179, 397, 404, 422 Blanchard v. Benton, 109 111. App. 569, 49, 52 Blaschko v. Wurster, 156 N. Y. 437, 173, 187 Blondell v. Consolidated Gas Co., 89 Md. 732, 530 Blood V. Manchester Elec- tric Light Co., 68 N. H. 340, 5 Bluefield Waterworks & L Co. V. Bluefield, 69 W. Va. 1, 95, 97 Board of Rapid Transit R. Comrs., In Re, 197 N. Y. 81, 7, 265, 276, 287, 304 Board of Trade Tel. Co. v. Barnett, 107 111. 507, 287 Boerth v. Detroit City Gas Co., 152 Mich. 654, 213, 422, 428, 506, 521 Boise City Artesian Hot & Cold W. Co. V. Boise City, 123 Fed. 232, 173, 175, 372 Boise City, Idaho v. Boise Artesian H. & C. Water Co., 186 Fed. 705, 95, 173 Boise City Irrig. & Land Co. V. Clark, 131 Fed. 415, 463, 484 Boone County v. Burling- ton & M. River R. Co., 139 U. S. 693, 174 Bconton v. Boonton Water Co., 69 N. J. Eq. 23, 197, 201 Eoothe V. Fulton, 85 Mo. App. 19, 265 Boston Electric Light Co. V. Boston Terminal Co., 184 Mass. 566. 173. 185 Boston Safe Deposit & T. Co. V. Salem Water Co.. 94 Fed. 238, 236 Bothwell V. Consumers' Co., 13 Idaho 568, 444, 452, 530 Bourke v. Olcott Water Co., 84 Vt. 121, 197, 206 Bradford v. Citizens' Tel. Co., 161 Mich. 385, 213, 228, 556, 570 Bragg V. Rutland, 70 Vt. 606, 265 Erenham v. Brenham Water Co., 67 Tex. 542, 156 Brick Presbyterian Church V. New York, 5 Cow. 538, 4 Bridgeport v. Housatonuc R. Co., 15 Conn. 475, 11 Dridgeton v. Bridgeton & M. Traction Co., 62 N. J. L. 592, 530 Brink v. Grand Rapids, 144 Mich. 472, 265 Brinkmeyer v. Evansville, 29 Ind. 187, 4 Bristol V. Bristol & W. Waterworks, 23 R. I. 274, 463, 472 Britton v. Green Bay, &c., W. W. Co., 81 Wis. 48, 236, 251, 259 Bronson v. Albion Tel. Co., 67 Xebr. Ill, 287 Brooklyn, In Re, 143 N. Y. 596, 136. 149. 574 Brooklyn Union Gas Co. v. New York. 188 N. Y. 334, 444, 449 Brooks V. Brookl>-n, 146 Iowa 136, 58, 59 Broome v. Telephone Co., (N. J. Ch.) 7 Atl. 851, 287 Brown v. Atlanta, 66 Ga. 71, 265 Brown v. Radnor Tp. E. L. Co., 208 Pa. 453, 287 TABLE OF CASES. [References are to Sections.l Brown v. Salt Lake City, 3 Utah 222, 265, 267 Browne v. Boston, 179 Mass. 321, 68, 71 Brummitt v. Ogden Water- works Co., 33 Utah 289, 149, 152, 422 Brunswick & T. Water Dist. V. Maine Water Co., 99 Maine 371, 444, 454, 463, 465, 473 Brusso V. Buffalo, 90 N. Y. 679, 265 Brymer v. Butler Water Co., 179 Pa. 231, 444, 453, 463, 484, 494 Buffalo V. Buffalo Gas Co., 80 N. Y. S. 1093, 530, 531 Bullmaster v. St. Joseph, 70 Mo. App. 60, 265 Burlington v. Central Vt. R., 82 Vt. 5, 19, 28 Burlington Water Co. v. Woodward, 49 Iowa 58, 68 Burnes v. St. Joseph, 91 Mo. App. 489, 265 Burnham v. Milwaukee, 98 Wis. 128, 68 Burrall v. American Tel. & T. Co., 224 111. 266, 287, 300 Burroughs v. Cherokee, 134 Iowa 429, 95 Bush V. Artesian Hot & Cold Water Co., 4 Idaho 618, 236 Butler V. Bangor, 67 Maine 385, 265 Callen v. Columhus Edison E. L. Co., 66 Ohio St. 166, 287, 314 Calumet Service Co. v. Chil- ton, 148 Wis. 334, 608 Campbellsville Tel. v. Leb- anon, &c., Tel. Co., 118 Ky. 277, 556, 558 Canal & C. St. R. Co. v. Crescent City R. Co., 41 La. Ann. 561, 121 C;pital City Gas Co. v. Des Moines, 72 Fed. 818, 444, 506, oo>y Capital City Gaslight Co. v. Des Moines, 72 Fed. 829, 95 Capital City L. & F. Co. v. Tallahassee, 42 Fla. 462, 186 U. S. 401, 121, 136, 140 Capital City Water Co. v. Montgomery, 92 Ala. 366, 68 Capital Gas & E. L. Co. v. Gaines, 20 Ky. Law Rep. 1464, 530 Carey v. Kansas City, 187 Mo. 715, 265 Carney v. Chillicothe Water & Light Co., 76 iviO. App. 532, 451 Carpenter v. Capital B. Co., 178 111. 29, 287, 300 Carter v. Chicago, 57 111. 285, 402 Cartersville Waterworks Co. V. Cartersville, 89 Ga. 689, 320 Gary v. Blodgett, 10 Cal. App. 463, 38, 49, 54 Cater v. Northwestern Tel. Exch. Co., 60 Minn. 539, 287, 310, 397 Cedar Rapids Gaslight Co. v. Cedar Rapids, 144 Iowa 426, 223 U. S. 655, 463, 472, 484, 489 Cedar Rapids Water Co. v. Cedar Rapids, 118 Iowa 234, 199 U. S. 600, 372, 386, 472, 484, 489 TABLE OF CASES. xxvu [References are to Sections.] Central New York Tel. & T. Co. V. Averill, 199 N. Y. 128, 149, 161, 556, 571 Central Union Tel. Co. v. Fehring, 146 Ind. 1S9, 213 Central Union Tel. Co. v. State ex rel., 118 Ind. 194, 213, 214, 556 Chadwick v. Maginnes, 94 Pa. St. 117, 323, 337 Champer v. Greencastle, 138 Ind. 339, 35 Charles River Bridge v. Warren Bridge, 11 Pet. 420, 129, 135 Chas. Simon's Sons Co. v. Maryland Tel. & T. Co., 99 Md. 141, 197, 201 Charleston L. & P. Co. v. Lloyd Laundry Co., 81 S. Car. 475, 530 Cheney v. Barker, 198 Mass. 356, 287, 291 Chesapeake & P. Tel. Co. V. Mackenzie, 74 Md. 36, 287 Chicago V. Chicago & O. P. Elevated R. Co., 250 111. 486, 95, 114 Chicago V. Gunning System, 214 111. 628, 114 Chicago V. McGinn, 51 111. 266, 402 Chicago V. Rogers Park Water Co., 214 111. 212, 463 Chicago V. Rumsey, 87 111. 355, 402 Chicago V. Selz, &c., Co., 202 111. 545, 265 Chicago V. Union Bldg. Assn., 102 111. 397, 402 Chicago, &c., R. Co. v. Wellman, 143 U. S. 339, 444. 447 Chicago, &c., R. Co. v. Whiting, &c., R. Co., 139 Ind. 297, 297 Chicago City R. Co. v. People, 73 111. 541, 178 Chicago Gaslight & C. Co. V. People's Gaslight & C. Co., 121 111. 530, 149, 159 Chicago Municipal Gaslight & F. Co. V. Lake, 130 111. 42, 95, 114, 372, 376 Chicago Tel. Co. v. North- western Tel. Co., 199 111. 324, 121, 136, 142, 556 Chicago Union Traction Co. V. Chicago, 199, 111. 484, 416, 422, 484, 497, 506 Childs V. Columbia, 87 S. Car. 566, 95, 100 Chincleclamouche Lumber & Boom Co. V. Common- wealth, 100 Pa. St. 438, 140 Christensen v. Fremont, 45 Nebr. 160, 49, 50 C. H. Venner Co. v. Uroana Waterworks, 174 Fed. 348, 463, 484 Cincinnati v. Taft, 63 Ohio St. 141, 32. 34 Cincinnati, &c., R. Co. v. Clifford, 113 Ind. 460, 375 Cincinnati Gas Light & Coke Co. V. Avondale, 43 Ohio St. 257, 173, 1S4 Cincinnati, H. & D. R. Co. V. Bowling Green, 57 Ohio St. 336, 213 Cincinnati Inclined Plane R. Co. V. Cincinnati, 52 Ohio St. 609, 372, 385 Citizens' Gas & Mining Co. V. Elwood, 114 Ind. 332, 113, 121, 124, 431 TABLE OF CASES. [References are to Sections.} Citizens' Gaslight Co. v. Wakefield, 161 Mass. 432, 32, 49 Citizens' St. R. Co. v. Jones, 34 Fed. 579, 145 U. S. 633, 136, 137 City R. Co. V. Citizens' St. R. Co., 166 U. S. 557, 141 Clapp V. Spokane, 53 Fed. 515, 397 Clark V. Los Angeles, 160 Cal. 30, 49, 54 C^ark V. Louisville Water Co., 90 Ky. 515, 143 U. S. 1, 318, 321, 323, 335 Clarksburg Electric Light Co. V. Clarksburg, 47 W. Va. 739, 97, 121, 122, 397, 409 Cleveland v. Cleveland City R. Co., 194 U. S. 517, 422, 423, 506, 519 Cleveland v. Maiden Water- works Co., 69 Wash. 541 530, 538 Cleveland v. R. Co., 201 U. S. 529, 97 Cleveland City R. Co. v. Cleveland, 94 Fed. 385, 422, 506 Cleveland Electric R. Co. V. Cleveland, 204 U. S. 116, 372, 380, 381 Cleveland Gaslight & Coke Co. V. Cleveland, 71 Fed. 610, 95 Clinton-Dunn Tel. Co. v. Carolina Tel. & T. Co., (N. C.) 74 S. E. 636, 213, 556, 561 Coburn v. New Tel. Co., 156 Ind. 90, 287, 295, 397 Coffeyville Min. & Gas Co. V. Citizens' Nat. Gas & Minn. Co., 55 Kans. 173, 136 Collensworth v. New What- com, 16 Wash. 224, 265 Colorado Springs v. Colo- rado City, 42 Colo. 75, 15 Colorado Tel. Co. v. Fields, 15 N. Mex. 431, 530, 537 Columbia Ave. Sav. Fund &c., Co., V. Dawson, 130 Fed. 152, 95 Columbus Gaslight & Coke Co. V. Columbus, 50 Ohio St. 65, 397, 410 Columbus St. R. & Light Co. V. Columbus, 43 Ind. App. 265, 95 Columbus Water Co. v. Columbus, 48 Kans. 99, 11, 12 Comrs. V. McMullen, 134 111. 170, 402 Commonwealth v. Coving- ton, 32 Ky. Law Rep. 837, 336 Commonwealth v. Paducah, 31 Ky. L. 528, 323, 336 Commonwealth v. Philadel- phia, 132 Pa. St. 288, 5 Comstock V. Syracuse, 5 N. Y. S. 874, 19, 20 Connolly v. Waltham, 156 Mass. 368, 265 Connor v. Marshfield, 128 Wis. 280, 68, 81 Conrey v. Waterworks Co., 41 La. Ann. 910, 11, 13 Consolidated Electric Light Co. v. People's Electric Light & Gas Co., 94 Ala. 372, 142 Consolidated Gas Co. v. Mayor, 146 Fed. 150, 612 Consolidated Gas Co. v. New York, 157 Fed. 849, 463, 484, 494 Consumers' Gas Trust Co. V. Huntsinger, 12 Ind. App. 285, 296 TABLE OF CASES. XXIX [References are to Sections.] Contra Costa Water Co. v. Oakland, 159 Cal. 323, 463, 484 Contra Costa Water Co. v. Oakland, 165 Fed. 518, 463, 466 Cooper V. Goodland, 80 Kans. 121, 530, 533 Cosgriff V. Tri-State Tel. & T. Co., 15 N. Dak. 210, 287, 313 County of Essex v. Salem, 153 Mass. 141, 323, 326 Ccverdale v. Edwards, 155 Ind. 374, 372, 387 Covington V. Common- wealth of Kentucky, 107 Ky. 680, 173 U. S. 231, 323, 335, 336 Covington v. District of Highlands, 113 Ky. 612, 323, 336 Covington & Lexington Turnpike Road Co. v. Sandford, 164 U. S. 578 444, 446, 453 Covington Gaslight Co. v. Covington, 22 Ky. L. 796, 38 Coy V. Indianapolis Gas Co., 146 Ind. 655, 197, 207, 238, 265 Craig V. Rochester City & B. R. Co., 39 N. Y. 404, 303, 304 Crawfordsville v. Braden, 130 Ind. 149, 38, 39, 199, 432 Creston Waterworks Co. v. Creston, 101 Iowa 687, 68 Crosby v. Montgomery, 108 Ala. 498, 506 Crouch V. McKinney, 47 Tex. Civ. App. 54, 15 Crowder v. Sullivan, 128 Ind. 486. 4. 68, 85, 121, 136 Culbertson v. Fulton, 127 111. 30, 68 Culver V. Streator, 34 111. App. 77, 107 Cumberland Gaslight Co. v. West Virginia & M. Gas Co., 188 Fed. 585, 149 Cumberland Tel. & T. Co. V. Avritt, 120 Ky. 34, 287, 309 Cumberland Tel. & T. Co. V. Cartwrlght Creek Tel. Co., 32 Ky. L. 1357, 197, 556 Cumberland Tel. & T. Co. V. Evansville, 127 Fed. 187, 143 Fed. 238, 350, 354 Cumberland Tel. & T. Co. V. Hickman, 129 Ky. 220, 197, 199 Cumberland Tel. & T. Co. V. Memphis, 183 Fed. 875, 484 Cumberland Tel. & T. Co. V. Mt. Vernon, 176 Ind. 177, 372, 375 Cumberland Tel. & T. Co. V. Louisville, 187 Fed. 637, 484 Cumberland Tel. & T. Co. V. Railroad Commission, 156 Fed. 823, 463, 484 Cumberland Tel. & T. Co. V. State, 100 Miss. 102, 556, 563 Cunningham v. Cleveland, 98 Fed. 657, 68, 149, 156 Daily v. State, 51 Ohio St. 348, 287 Daramann v. St. Louis, 152 Mo. 186, 265 Danaher v. Southwestern Tel. & T. Co.. 94 Ark. 533. 197. 213 jcxx TABLE OF CASES. [References are to Sections.l Janville v. Danville Water Co., 178 111. 299, 506, 517 Danville v. Danville Water Co., 180 111. 235, 68, 213, 422, 506 Dartmouth College Case, 4 Wheat. 518, 94, 133, 188 Davenport v. Kleinschmidt, 6 Mont. 502, 68 Davis V. Clinton Water- works Co., 54 Iowa 59, 236 Davis V. Des Moines, 71 Iowa 500, 68 Davis V. Mayor, &c., 14 N. Y. 506, 400 Davoust V. Alameda, 149 Cal. 69, 265, 268 Dawson v. Dawson Water- works Co., 106 Ga. 696, 68, 86 Dayton v. Bellevue Water & Fuel Gaslight Co., 119 Ky. 714, 323, 344 Dean v. Walla Walla, 48 Wash. 75, 68 Defiance Water Co. v. Defi- ance, 90 Fed. 753, 68, 149 Deering, In Re, 93 N. Y. 361, 397 Denver v. Davis, 37 Colo. 370, 5, 9 Denver v. Hallett, 34 Colo. 393, 42, 58, 64 Denver v. New York Trust Co., 187 Fed. 890, 372, 382 Des Moines v. Des Moines Waterworks Co., 95 Iowa 348, 444, 463 Des Moines City R. Co. v. Des Moines, 151 Fed. 854, 173 Des Moines City R. Co. v. Des Moines, 90 Iowa 770, 397, 412 Des Moines Gas Co. v. Des Moines, 199 Fed. 204, 484, 488, 597 Des Moines Gas Co, v. Des Moines, 44 Iowa 505, 11 Des Moines St. R. Co. v. Des Moines Broad-Gauge St. R. Co., 73 Iowa 513, 530 Des Moines Water Co. v. Des Moines, 192 Fed. 193, 484, 489, 606 Detroit v. Board of Water Comrs., 108 Mich. 494, 223 Detroit v. Detroit Citizens' St. R. Co., 184 U. S. 368, 97, 397, 422, 424 Detroit v. Detroit City R. Co., 56 Fed. 867, 173, 181 Detroit v. Ft. Wayne & B. I. R. Co., 95 Mich. 456, 530 Detroit v. Detroit United R. (Mich.) 137 N. W. 645, 95, 372, 381 Detroit Citizens' St. R. Co. V. Detroit R., 110 Mich. 384, 171 U. S. 48, 121, 136, 397, 405 Detroit Gas Co. v. Moreton Truck & Storage Co., Ill Mich. 401, 530 Dickinson v. Boston, 188 Mass. 595, 265 Donahue v. Morgan, 24 Colo. 389, 68 Donovan v. Allert, 11 N. Dak. 289, 287, 312 Doughten v. Camden, 72 N. J. L. 451, 530 Dunbar v. American Tel. Co., 224 111. 9, 365 Dunstan v. New York, 86 N. Y. S. 562, 265 Dutton V. Aurora, 114 111. 138. 68 il. TABLE OF CASES. [References are to Sections.] Button V. Poole, 1 Ventris 318, 232 Dyer v. Newport, 123 Ky. 203, 42 E Earles v. Wells, 94 Wis. 285, 68, 71 East Moline v. Pope, 224 111. 386, 68, 75 East Ohio Gas Co. v. Akron, 81 Ohio 33, 173, 182 East Tennessee Tel. Co. v. Russellville, 106 Ky. 667, 372, 374, 397 Eaton V. Fairbury Water- works Co., 37 Nebr. 546, 236 Eaton V. Weiser, 12 Idaho 544, 265, 269 Eau Claire Water Co. v. Eau Claire, 127 Wis. 154, 38 Edgerly v. Concord, 62 N. H. 8, 265 Edson V. Olathe, 81 Kans. 328, 95, 110 Edwards v. Cheyenne, 19 Wyo. 110, 114 Pac. 677, 11, 13 Eels V. American Tel. & T. Co., 143 N. Y. 133, 287, 302, 313 Elchels V. Evansvllle St. R. Co., 78 Ind. 261, 287, 297, 397, 400, 401 Elsenmenger v. St. Paul Water Comrs. 44 Minn. 457, 265 Elizabeth City v. Banks, 150 N. Car. 407, 397. 409 Ellinwood v. Reedsburg, 91 Wis. 131, 38, 41 Ennis Waterworks v. En- nis, (Tex.) 144 S. W. 930 149 Esberg Cigar Co. v. Port- land, 34 Ore. 282, 265 Ettlinger v. New York, 109 N. Y. S. 44, 265 Evans v. Holman, 244 111. 596, 68, 73 Exchange & Bldg. Co. v. Roanoke Gas & Water Co., 90 Va. 83, 213, 530 Falmouth v. Falmouth Water Co., 180 Mass. 325, 484 Fanning v. Osborne, 102 N. Y. 441, 105, 400 Farmer & Getz v. Colum- biana County Tel. Co., 72 Ohio St. 526, 506 Farmers' Tel. Co. v. Wash- ta, (Iowa) 133 N. W. 361, 530 Farwell v. Seattle, 43 Wash. 141, 15 Faulkner v. Seattle, 19 Wash. 320, 68 Fawcett v. Mt. Airy, 134 N. Car. 125, 42, 44, 578 Fellows V. Walker, 39 Fed. 651, 32 Ferris v. Carson Water Co., 16 Nev. 44, 236 Fidelity & C. Co. v. Seattle, 16 Wash. 445, 265 Fidelity Trust & G. Co. v. Fowler Water Co., 113 Fed. 560, 68 First National Bank v. Sarlls, 129 Ind. 201, 11, 14 Fisher v. Greensboro Water- Supply Co., 128 N. Car. 375, 236, 239 Fisher v. New Bern, 140 N. Car. 506, 265 Fisher v. St. Joseph Water Co., 151 Mo. 530, 530 TABLE OF CASES. [References are to Sections.] Heilbron v. Cuthbert, 96 Ga. 312, 42, 43 Heland v. Lowell, (Mass.) 3 Allen 408, 11 Helena Waterworks Co. v. Helena, 195 U. S. 383, 164 Henderson v. Kansas City, 177 Mo. 477, 265 Henderson v. Ogden City R. Co., 7 Utah 199, 397 Henderson v. Young, 119 Ky. 224, 5, 11, 13, 265 Henderson Water Co. v. Henderson G. Schools, 151 N. Car. 171, 42 Kequembourg v. Dunkirk, 18 N. Y. St. 570, 19, 21 Hershfield v. Rocky Moun- tain Bell Tel. Co., 12 Mont. 102, 287, 310, 397 Hester v. Greenwood, 172 Ind. 279, 173 Higgins V. San Diego, 118 Cal. 524, 68 Hill V. Boston, 122 Mass. 344, 265 Hine v. Wadlington, 33 Okla. 173, 213, 463 Hobbs V. Long Distance Tel. & T. Co., 147 Ala. 393, 287, 308 Hockett V. State, 105 Ind. 250, 416 Hodges V. R. Co., 58 Md. 603, 401 Holton V. Camilla, 134 Ga. 560, 13, 38, 42, 48 Home Tel. Co. v. Carthage, 235 Mo. 644, 444, 454, 463, 484 Home Tel. Co. v. North Manchester Tel. Co., 47 Ind. App. 411, 556, 564 Home Tel. Co. v. Peoples' Tel. & T. Co., 125 Tenn. 270, 556, 565 Home Tel. Co. v, Sarcoxie Light & Tel. Co., 236 Mo. 114, 556, 567, 568 Home Tel. & T. Co. v. Los Angeles, 155 Fed. 554, 506, 514 Home Tel. & T. Co. v. Los Angeles, 211 U. S. 265, 506, 513 Hone V. Presque Isle Water Co., 104 Maine 217, 236, 258 Hoover v. Deffenbaugh, 83 Nebr. 476, 530 Horkan v. Moultrie, 136 Ga. 561, 3 Horner v. Oxford Water & Electric Co., 153 N. Car. 535, 444, 463, 506 Kourigan v. Norwich, 77 Conn. 358, 265 Hourna Lighting, &c., Co. V. Hourna, 127 La. 726, 136 House V. Houston Water- works Co., 88 Tex. 233, 236 Houston V. Houston City St. R. Co., 83 Tex. 548, 173, 182 Howell V. Millville, 60 N. J. L. 95, 49, 53 Howsmon v. Trenton Water Co., 119 Mo. 304, 236 Huffman v. Marcy Mut. Tel. Co., 143 Iowa 590, 213 Huron Waterworks v. Hu- ron, 7 S. Dak. 9, 350, 351 Hyatt V. Williams, 148 Cal. 585, 49, 54 Illinois Central R. Co. v. Chicago, 176 U. S. 646, 103, 177 Illinois Trust & Sav. Bank V. Arkansas City, 76 Fed. 271, 5, 6 TABLE OF CASES. [References are to Sections.] Illinois Trust & Sav. Bank V, Arkansas City Water Co., 67 Fed. 196, 506, 523 Indiana Natural & Illumi- nating Gas Co. V. An- thony, 26 Ind. App. 307, 213 Indiana Natural & Illumi- nating Gas Co. V. State ex rel. Ball, 158 Ind. 516, 197, 213, 530 Indiana R. Co. v. Hoffman, 161 Ind. 593, 95 Indianapolis v. Consumers' Gas Trust Co., 144 Fed. 640, 350, 358, 580 Indianapolis v. Consumers' Gas Trust Co., 140 Ind. 107, 95, 113, 199, 422, 431, 432 Indianapolis v. Indianapo- lis Gaslight & Coke Co., 66 Ind. 396, 5, 11, 95, 112 Indianapolis v. Navin, 151 Ind. 139, 422 Indianapolis St. R. Co. v. Citizens' St. R. Co., 127 Ind. 368, 95 Ingersoll v. Nassau Electric R. R. Co., 157 N. Y. 453, 388 International Lumber Co. v. American Suburbs Co., 119 Minn. 77, 372 International Water Co. v. El Paso, 51 Tex. Civ. App. 321, 530, 536 Interstate Consol. St. R. Co. V. Massachusetts, 207 U. S. 79, 95, 506 Ironton v. Kelley, 38 Ohio St. 50, 265 Ironwood Waterworks Co. V. Ironwood, 99 Mich. 454, 71 Irvin V. Rushville Co-Opera- tive Tel. Co., 161 Ind. 524, 213. 219 Irvine v. Greenwood, 89 S. Car. 511, 265, 273 Irwin V. Great Southern Tel. Co., 37 La. Ann. 63, 287 Jack V. Grangeville, 9 Idaho 291, 149 Jackson v. Anderson, 97 Miss. 1, 265 Jackson v. EUendale, 4 N. Dak. 478, 530 Jackson County Horse R. Co. V. Interstate Rapid Transit R. Co., 24 Fed. 306, 121 Jacksonville v. Jacksonville R. Co., 67 111. 540, 402 Jacksonville v. Southern Bell Tel. & T. Co., 57 Fla. 374, 506 Jacksonville Electric Light Co. V. Jacksonville, 36 Fla. 229, 19, 28 Jamaica Pond Aqueduct Co. V. Brookline, 121 Mass. 5, 397 Janeway v. Duluth, 65 Minn. 292, 11, 13 Jaynes v. Omaha St. R. Co., 53 Nebr. 631, 204, 287 Jennings v. Dark, 175 Ind. 332, 375 Johnson v. State, 113 Ind. 143, 530, 537 Johnson v. Thomson-Hous- ton Electric Co., 7 N. Y. S. 716, 287 Joilet V. Alexander, 194 111. 457, 68, 74 Joplin v. Southwest Miss- ouri Light Co., 191 U. S. 150, 121, 149 Joseph V. Joseph Water- works Co., 57 Ore. 586, 173 TABLE OF CASES. [References are to Sections.] Jiidson V. Winsted, SO Coun. 384, 265 Julia Bldg. Assn. v. Bell Tel. Co., 88 Mo. 258, 287, 292, 305 K Kankakee v. American Water Supply Co., 199 Fed. 757, 444 Keefe v. People, 37 Colo. 317, 5 Keen v. Waycross, 101 Ga. 588, 58, 63 Keene Syndicate v. Wichita Gas, Electric L. & P. Co., 69 Kans. 284, 350, 372 Kelley v. Milwaukee, 18 Wis. 85, 11 Kelly V. Minneapolis, 63 Minn. 125, 68, 79 Kelsey v. Board of Fire & Water Comrs., 113 Mich. 215, 530 Kelsey v. New York, 107 N. Y. S. 1089, 265 Kennebec Water Dist. v. Waterville, 96 Maine 234, 68 Kennebec Water Dist. v. Waterville, 97 Maine 185, 444, 463, 471 Kester v. Western Union Tel. Co., 108 Fed. 926, 2S7 Klehl V. South Bend, 76 Fed. 921, 68 Kimball v. Northeast Har- bor Water Co., 107 Maine 467, 197, 200 Kincaid v. Indianapolis Natural Gas Co., 124 Ind. 577, 287, 296 Kings County Elevated R. Co., In Re, 105 N. Y. 97, 95, 102 Kinsey v. Union Traction Co., 169 Ind. 563, 287, 298, 299 Kinsman St. R. Co. v. Broadway & U. St. R. Co., 36 Ohio St. 239, 372 Kirby v. Citizens' R. Co., 48 Md. 168, 397 Kirby v. Citizens' Tel. Co., 17 S. Dak. 362, 287, 311 Kirkwood v. Meramec High- lands Co., 94 Mo. App. 637, 121 Knappman Whiting Co. v. Middlesex Water Co., 64 N. J. L. 240, 236, 248, 260 Knoxville v. Knoxville Water Co., 212 U. S. 1, 164, 463, 468, 469, 484, 485 Knoxville v. Knoxville Wa- ter Co., 107 Tenn. 647, 422, 506, 518 Knoxville Water Co. v. Knoxville, 189 U. S. 434, 97, 422, 506, 518 Knoxville Water Co. v. Knoxville, 200 U. S. 22, 149, 164, 166 Kreigh v. Chicago, 86 111. 410, 402 Kiueger v. Wisconsin Tel. Co., 106 Wis. 96, 287 Kuehn v. Milwaukee, 92 Wis. 263, 265 Kyle V. Malin, 8 Ind. 34, 10 Lackey v. Fayetteville Water Co., 80 Ark. 108, 11 Laclede Gaslight Co. v. Gas Consumers' Assn., 127 Mo. App. 442, 530 I-a Crosse v. La Crosse Gas & E. Co., 145 Wis. 408, 607 TABLE OF CASES. [Hefercnces are to Hcctiotis.] Ladd V. Boston, 170 322, 530 Ladd V. Jones, 61 111. App. 584, 49, 52 Laighton v. Carthage, Mo., 175 Fed. 145, 372, 3S1 Lake County Water & Light Co. V. Walsh, 160 Ind. 32, 350, 352 Lake Roland Electric R. Co. V. Baltimore, 77 Md. 352, 95, 108 i..iike View v. Rose Hill Cemetery Co., 70 111. 191, 114 I^amar Water & Electric Light Co. V. Lamar, 128 Mo. 188, 140 Mo. 145, 68 Lawrence v. Fox, 20 N. Y. 268, 231 Lawrence v. Methuen, 166 Mass. 206, 42 Lee V. Mound Station, 118 111. 312, 402 Lehigh Water Company's Appeal, 102 Pa. 515, 121 U. S. 388, 32 Lenzen v. New Braunfels, 13 Tex. Civ. App. 335, 265, 272 Levis V. Newton, 75 Fed. 884, 95, 173, 184, 397 Levy V. McClellan, 196 N. Y. 178, 68, 72 Levy V. Salt Lake City, 3 Utah 63, 265 LewisviUe Natural Gas Co. V. State ex rel., 135 Ind. 49, 422, 436 Light, Heat & Water Co. v. Jackson, 73 Miss. 598, 149 Lincoln Gas & E. L. Co. v. Lincoln, 223 U. S. 349, 463, 484. 492 Linn V. Chambersburg, 160 Pa. 511, 32. 33 Little Falls Electric, &c., Co. V. Little Falls, 102 Fed. 663, 149, 153 Little Rock V. Citizens' St. R. Co., 56 Ark. 28, 397 Loan Assn. v. Topeka, 20 Wall. 655. 62 Lobdel V. Chicago, 227 111. 218, 68, 76 Lockhart v. Craig St. R. Co., 139 Pa. 419, 287 Lockwood V. Dover, 73 X. H. 209, 265 Loeber v. Butte General Electric Co., 16 Mont. 1, 287 Logan V. Pyne, 43 Iowa 524, 121, 129 Logan Natural Gas & Fuel Co. V. Chillicothe, 65 Ohio St. 186, 95 Logansport v. Dick, 70 Ind. 65, 265 Logansport & W. V. Gas Co. V. Ott, 30 Ind. App. 93, 213, 227 Logansport R. Co. v. Lo- gansport, 114 Fed. 688, 192 U. S. 604, 121, 173, 181, 397 London Mills v. White, 20S 111. 289, 95 Long v. Duluth, 49 Minn. 280, 121 Long Branch Commission V. Tintern Manor Water Co., 70 N. J. Eq. 71, 422, 430, 484, 506, 510 Long Island Water Supply Co. V. Brooklyn, 166 U. S. 685, 575 Lord V. Ekiultable Life Assur. Society. 194 N. Y. 212, 95 XXXVIU TABLE OF CASES. {References are to Sections.] Los Angeles v. Los Angeles City Water Co., 177 U. S. 558, 422, 424, 506, 514 Los Angeles City Water Co. V. Los Angeles, 88 Fed. 720, 424, 427, 506, 512 Los Angeles City Water Co. V. Los Angeles, 103 Fed. 711, 506 Los Angeles Pac. Co. v. Hubbard, 17 Cal. App. 646, 95 Los Angeles R. Co. v. Los Angeles, 152 Cal. 242, 372, 377 Louisville V. Commonwealth, 62 Ky. 295, 323, 333, 335 Louisville v. Cumberland Tel. & T. Co., 224 U. S. 649, 173, 174 Louisville v. Cumberland Tel. & T. Co., 225 U. S. 430, 444, 447, 484 Louisville v. Louisville Home Tel. Co., 149 Ky. 234, 530, 543 Louisville v. McAteer, 26 Ky. L. 425, 323, 335 Louisville & N, R. Co. v. Kentucky, 161 U. S. 677, 140 Louisville City R. Co. v. Louisville, 8 Bush 415, 397 Louisville Gas Co. v. Dul- aney, 100 Ky. 405, 451, 532, 530 Louisville Home Tel. Co. v. Louisville, 130 Ky. 611, 95, 109, 576 Louisville Trust Co. v. Cin- cinnati, 76 Fed. 296, 173, 181 Love V. Atlanta, 95 Ga. 129, 265 Love V. Holmes, 91 Miss. 535, 32 Lcvejoy v. Bessemer Water- works Co., 146 Ala. 374, 236, 251 Lowther v. Bridgeman, 57 W. Va. 306, 287, 309 Ludington Water-Supply Co. V. Ludington, IW Mich. 480, 68, 323, 343 Luther v. Wheeler, 73 S. Car. 83, 68 Lutz V. Tahlequah Water Co., 29 Okla. 171, 236, 256 Lynch v, Springfield, 174 Mass. 430, 265, 275, 276 M Macon Consol. St. R. Co. v. Macon, 112 Ga. 782, 397, 413 Madera Waterworks v. Ma- dera, 185 Fed. 281, 136 Madison v. Alton, &c., 235 111. 346, 95 Madison v. Madison G. & E. Co., 129 Wis. 249, 444, 452 Magee v. Overshiner, 150 Ind. 127, 287, 294 Maham v. Michigan Tel. Co., 132 Mich. 242, 556, 562 Maine Water Co. v. Water- ville, 93 Maine 586, 323, 342 Manhattan Trust Co. v. Dayton, 59 Fed. 327, 154 Manitowoc v. Manitowoc & North. Trac. Co., 145 Wis. 13, 506, 511 Mansfield v. Humphreys Mfg. Co., 82 Ohio St. 216, 213 Marion Electric Light, &c., Co., V. Rochester, 149 Ky. 810, 95, 197 Marshfield v. Wisconsin Tel. Co., 102 Wis. 604, 399 Mauldin v. Greenville, 33 S. Car. 1, 49, 50 TABLE OF CASES. [References are to Sections.] Maximilian v. New York, 62 N. Y. 160, 265, 276 Maxwell v. Telegraph Co., 51 W. Va. 121, 309 May V, Gothenburg, 88 Nebr. 772, 121 Mayo V. Washington, 122 N. Car. 5, 578 McAvoy V. New York, 54 How. Pr. 245, 265 McBean v. Fresno, 112 Cal. 159, 38, 40, 68 McCann v. Johnson County Tel. Co., 69 Kans. 212, 287, 310 McCarter, Atty. Gen. v. Vineland Light & Power Co., 72 N. J. Eq. 767, 350, 362 McIUhinney v. Trenton, 148 Mich. 380, 397, 406, 530, 541 McWethy v. Aurora Elec- tric Light & Power Co., 202 111. 218, 287, 300, 397 Mealey v. Hagerstown, 92 Md. 741, 19, 25 Megins v. Duluth, 97 Minn. 23, 265 Memphis v. Postal Tel. & Cable Co., 164 Fed. 600, 530 Memphis City R. Co. v. Mayor, &c., 4 Cold. 406, 99 Memphis Gaslight Co. v. Memphis, 93 Tenn. 612, 149 Mercantile Trust Co. v. Denver, 161 Fed. 769, 173, 181 Mercantile Trust & Deposit Co. V. Columbus, 161 Fed. 135, 149, 150 Meridian v. Farmers' Loan & T. Co., 143 Fed. 67, 149. 164 Merrimack River Sav. Bank V. Lowell, 152 Mass. 556, 49 Messersmith v. Buffalo, 122 N. Y. S. 918, 265, 276 Metcalf V. Seattle, 1 Wash. 297, 68 Metropolitan Tel. & T. Co. V. Col well Lead Co., 67 How. Pr. 365, 287 Metropolitan Trust Co. v. Topeka Water Co., 132 Fed. 702, 236 Middleton v. St. Augustine, 42 Fla. 287, 19, 25 Milford V. Bangor R. & Electric Co., 104 Maine 233, 236, 261 Milford V. Bangor R. & Elec. trie Co., 106 Maine 316, 236, 261 MUhau V. Sharp, 27 N. Y. 611, 397, 400, 409 Miller V. Fitchburg, 180 Mass. 32, 323, 329 Miller v. Kalamazoo, 140 Mich. 494, 265 Mills V. Chicago, 127 Fed. 731, 422, 437 Millville Gaslight Co. v. Vineland Light & Power Co., 72 N. J. Eq. 305, 136 Milwaukee v. Milwaukee County, 95 Wis. 424, 68 Milwaukee Electric R. & Light Co. V. Milwaukee, 87 Fed. 577, 484 Minneapolis v. Janney, S6 IMinn. Ill, 19 Minneapolis v. Minneapolis St. R., 215 U. S. 417, 95, 422 Minneapolis General E. Co. V. Minneapolis, 194 Fed. 215, 530, 544 Minneapolis St. R. Co. v. Minneapolis, 1S9 Fed. 445, 530 Minturn v. Larue. 23 How. 435, 129 xl TABLE OF CASES. [References are to Sections.} Missano v. New York, 160 N. Y. 123, 265 Missouri v. Bell Tel. Co., 23 Fed. 539, 127 U. S. 780, 213, 216 Mitchell V. Negaunee, 113 Mich. 359, 32 Mitchell V. Raleigh Electric Co., 129 N. Car. 166, 265 Mitchell V. Tulsa Water, &c., Co., 21 Okla. 243, 149 Moberly v. Richmond Tel. Co., 31 Ky. L. 783, 506, 522 Mobile V. Bienville Water Supply Co., 130 Ala. 379, 213 Mobile V. Stein, 54 Ala. 23, 372, 388 Monongahela City v. Mon- ongahela Electric Light Co., 3 Pa. Dist. R. 63, 397 Monongahela Water Co., In Re, 223 Pa. 323, 484 Monroe v. Detroit, M. & T. Short Line R. Co., 143 Mich. 315, 397, 530 Monroe Waterworks Co. v. Monroe, 110 Wis. 11, 323, 345 Montezuma County v. Mon- tezuma Water & Land Co., 39 Colo. 166, 463 Montgomery v. Capital City Water Co., 92 Ala. 361, 397 Montgomery Gaslight Co. v. Montgomery, 87 Ala. 245, 11 Montgomery Light & P. Co. V. Watts, 165 Ala. 370, 213, 444, 452 Montgomery Light & W. P. Co. V. Citizens' Light, H. & P. Co., 142 Ala. 462, 121, 136, 142 Mooreland Rural Tel. Co. v. Mouch, 48 Ind. App. 521, 213 Mordhurst v. Ft. Wayne & S. W. Traction Co., 163 Ind. 268, 287, 297, 299 Morristown v. East Ten- nessee Tel. Co., 115 Fed. 304, 95, 397 Morton v. New York, 140 N. Y. 207, 265 Mott V. Cherryvale Water & Mfg. Co., 48 Kans. 12, 236, 255 Mugge V. 'Tampa Waterworks Co., 52 Fla. 371, 236, 243, 262 Muncie Natural Gas Co. v. Muncie, 160 Ind. 97, 422, 437 Municipal Fuel Plants, In Re, 182 Mass. 605, 58, 61 Munn V. Illinois, 94 U. S. 113, 94, 191, 231, 414 Murphy v. Worcester Con- sol. St. R. Co., 199 Mass. 279, 95, 506 Murray v. Pocatello, 226 U. S. 318, 422, 506 N Nalle V. Austin, 85 Tex. 520, 15, 58, 62, 68 Natick Gaslight Co. v. Nat- ick, 175 Mass. 246, 173 National Foundry & Pipe Works V. Oconto Water Co., 52 Fed. 29, 121 National Tube Works v. Chamberlain, 5 Dak. 54, 42 National Waterworks Co. v. Kansas, 28 Fed. 921, 397, 411 National Waterworks Co. v. Kansas City, 62 Fed. 853, 372, 383, 463, 474, 484, 487 TABLE OF CASES. xli [Hefertnces are to Hectioms.] National Waterworks Co. v. Kansas City, 20 Mo. App. 237, 397 Nebraska Tel. Co. v. Lin- coln, 82 Nebr. 59, 323 Nebraska Tel. Co. v. State, 55 Nebr. 627, 213, 444, 448 Negley v. Henderson, 21 Ky. L. 1394, 22 Ky. L. 912, 323, 335 Nelson v. Murfreesboro, 179 Fed. 905, 149, 151 New Albany Waterworks v. Louisville Banking Co., 122 Fed. 776, 350, 353 Newburyport Water Co. v. Newburyport, 168 Mass. 541, 463 Newcastle v. Lake Erie & W. R. Co., 155 Ind. 18, 397, 401 Npw Decatur v. Berry, 90 Ala. 432, 1 Newell V. People, 7 N. Y. 9, 71 New England Tel. & T. Co. V. Boston Terminal Co., 182 Mass. 397, 173, 185, 287. 289, 397 New Hope Tel. Co. v. Con- cordia, 81 Kans. 514, 95, 111 New Memphis Gas & Light Co. V. Memphis, 72 Fed. 952, 444 Npw Orleans & N. E. R. Co. V. Meridian Waterworks Co., 72 Fed. 227, 236, 241, 260. 447 New Orleans City & L. R. Co. V. New Orleans, 44 La. Ann. 72S. 121, 138, 397 New Orleans City R. Co. v. Crescent City R. Co., 12 Fed. 308. 121 New Orleans Gaslight Co. v. Drainage Commission of New Orleans, 197 U. S. 453, 397, 411 New Orleans Gaslight Co. v. Louisiana Light, &c., Mfg. Co., 115 U. S. 650, 95, 115, 422, 424 N>w Orleans Gaslight Co. v. New Orleans, 42 La. Ann. 188, 5 New Orleans Waterworks Co. V. Rivers, 115 U. S. 674, 149, 163, 424 Newport v. Commonwealth, 106 Ky. 434, 318 Newport V. Newport Light Co., 84 Ky. 166, 38, 149 Newport v. Unity, 68 N. H. 587, 19, 323, 329 New York v. Bailey, 2 De- nio 433, 265 New York v. Bryan, 196 N. Y. 158, 95, 106 New York v. New York City R. Co., 193 N. Y. 543, New York & Q. E. L. & P. Co. V. Long Island Mach. & Mar. Const. Co., 123 App. Div. 552, New York Tel. Co. v. Siegel-Cooper Co., 202 N. Y. 502, 213. 223 Nichol V. Huntington Water Co., 53 W. Va. 348, 236. 254 Nicoll V. New York & N. J. Tel. Co., 62 N. J. L. 733. 2S7 Nicoll V. R. Co.. 12 N. Y. 121. 1S6 Niehaus Bros. Co. v. Contra Costa Water Co.. 159 Cal. no.^, 236. 252 95 530 xlii TABLE OF CASES. [References are to Sections.] Nickerson v. Bridgeport Hydraulic Co., 46 Conn. 24, 236 Noblesville v. Noblesville Gas, &., Co., 157 Ind. 162, 422, 435 Norfolk R. & Light Co. v. Corletto, 100 Va. 355, 397 Norman v. Ince, 8 Okla. 412, 265 Northwestern Tel. Exch. Co. V. Minneapolis, 81 Minn. 140, 530, 545 Norwich Gas & Electric Co. V. Norwich, 76 Conn. 565, 32 Norwich Gaslight Co. v. Norwich City Gas Co., 25 Conn. 19, 121, 128 Mfg. Co. V. New York, 206 N. Y. 221, 265, 276 Oconto City Water Supply Co. V. Oconto, 105 Wis. 76, 68 Ogden City v. Bear Lake, &c.. Waterworks Co., 16 Utah 440, 350, 355, 579 Ogden City v. Waterworks & Irr. Co., 28 Utah 25, 350, 357 Ohio ex rel. v. Tel. Co., 36 Ohio St. 296, 560 Old Colony Trust Co. v. At- lanta, 83 Fed. 39, 88 Fed. 859, 506 Omaha v. Omaha Water Co., 218 U. S. 180, 372, 463, 474 Omaha Electric Light & Power Co. v. Omaha, 172 Fed. 494, 136, 139 Omaha Electric Light & Power Co. v. Omaha, 179 Fed. 455, 173, 176 Omaha Water Co. v. Oma- ha, 147 Fed. 1, 6, 422, 426 Omaha Water Co. v. Oma- ha, 162 Fed. 225, 95 Opinion of the Justices, 150 Mass. 592, 19, 25, 32, 49, 51 Opinion of the Justices, 155 Mass. 598, 19, 25 Ottumwa V. City Water Supply Co., 119 Fed. 315, 68 Overall v. Madisonville, 125 Ky. 684, 38, 41, 68, 82 Owensboro v. Common- wealth, 105 Ky. 344, 336 Owensboro v. Cumberland Tel. & T. Co., 174 Fed. 739, 506, 508 Owensboro v. Knox's Admr., 116 Ky. 451, 265, 270 Owensboro Waterworks v, Owensboro, 29 Ky. L. 1118, 191 U. S. 358, 68, 463 Pacific Postal Tel. Cable Co. V. Irvine, 49 Fed. 113, 287 Pacific R. Co. V. Leaven- worth, 1 Dill. 393, 384 Pacific Tel. & T. Co. v. An- derson, 196 Fed. 699, 556, 568 Paducah Lumber Co. v. Paducah Water Supply Co., 89 Ky. 340, 236, 245, 260 Palatka Waterworks v. Pa- latka, 127 Fed. 161, 444, 446, 463 Palestine v. Siler, 225 111. 630, 5, 9, 49, 52, 265 Palmer v. Danville, 154 111. 156, 530 TABLE OF CASES. xliii [References are to Sections.] Palmer v. Helena, 19 Mont. 61, 68 Palmer v. Larchmont Elec- tric Co., 158 N. Y. 231, 287, 301 Paola V. Wentz, 79 Kans. 148, 110 Parfitt V. Furguson, 159 N. Y. Ill, 121 Paris V. Sturgeon, 50 Tex. Civ. App. 519. 15 Paris V. Tucker, (Tex. Civ. App.) 93 S. W. 233, 265 Parkersburg v. Brown, 106 U. S. 487, 58, 62 Parkersburg Gas Co. v. Parkersburg, 30 W. Va. 435, 121, 131 Parkhurst v. Salem, 23 Ore. 371, 121 Parsons v. Van Wyck, 67 N. Y. S. 1054, 19, 24 Peabody v. Westerly Water- works, 20 R. I. 176, 68 Pearsall v. R. Co., 161 U. S. 646, 140 Peck V. Schenectady Rail- way Co., 170 N. Y. 298, 303, 304 Penley v. Auburn, 85 Maine 278, 3 People V. Albion Water- works Co., 121 N. Y. S. 660, 213 People V. Barnard, 110 N. Y. 548, 397, 530 People V. Blocki, 203 III. 363, 114 People V. Broadway R. Co., 126 N. Y. 29, 372, 373 People V. Chicago, 256 111. 558, 3 People V. Eaton, 100 Mich. 208. 287, 305 People V. Kerr, 27 N. Y. 188, 400 People V. O'Brien, 111 N. Y. 1, 173, 186, 187, 372, 388 People V. Walsh, 96 111. 253, 402 People ex rel. v. Assessors of Brooklyn, 111 N. Y. 505, 320, 323, 324 People ex rel. v. Hess, 157 N. Y. 42, 323, 328 People ex rel. Binghamp- ton Light, &c., Co., v. Stevens, 203 N. Y. 7, 463, 467, 484 People ex rel. Brooklyn Heights R. Co. v. State Board of Tax Comrs., 127 N. Y. S. 825, 463, 467 People ex rel. Central Park, &c., R. Co. V. Wilcox, 194 N. Y. 383, 95, 444 Ppople ex rel. Chicago v. Chicago Tel. Co., 220 111. 238, 95, 103, 173, 177, 397 People ex rel. Fitzhenry v. Union Gas & Electric Co., 254 111. 395, 95, 350, 365 People ex rel. Jackson v. Suburban R. Co., 178 111. 594, 95 People ex rel. Jamaica Water Supply Co. v. State Board of Tax Comrs., 196 N. Y. 39, 484, 496 People ex rel. Johnson v. Barrows, 124 N. Y. S. 270, 213 People ex rel. Johnson v. Earl, 42 Colo. 238, 95 People ex rel. Manhattan R. Co. V. Woodbury, 203 N. Y. 231, 484, 495 People ex rel. Metropolitan St. R. V. State Board, 174 N. Y. 417, 95 xli TABLE OF CASES. f [References are to Sections.] People ex rel. Murphy v. Kelly, 76 N. Y. 475, 19, 22, 583 P'-ople ex rel. Queens Coun- ty Water Co. v. Wood- bury, 202 N. Y. 619, 463, 468 People ex rel. Rockwell v. Chicago Tel. Co., 243 111. 121, 95 People ex rel Schallberg v. Central Union Tel. Co., 232 111. 260, 173, 178 People ex rel. Schwon v. Chicago & A. R. Co., 253 111. 191, 68, 74 Pnople ex rel. Third Ave. R. Co. V. State Board of Tax Comrs., 198 N. Y. 608, 463, 484 People ex rel. Woodhaven Gaslight Co. v. Deehan, 153 N. Y. 528, 95, 103, 173, 186, 187 People's Electric L. & P. Co. V. Capital Gas & E. L. Co., 116 Ky. 76, 149 People's Gaslight & Coke Co. V. Chicago, 194 U. S., 1, 95, 444, 506 People's Passenger R. Co. v. Memphis, (Tenn.) 16 S. W. 973, 95, 99 People's Passenger R. Co. v. Memphis City R. Co., 10 Wall. 38, 99 Peoria R. Co. v. Peoria R. Terminal Co., 252 111. 73, 95, 136, 141 Pereria v. Wallace, 129 Cal. 397, 121, 136, 138 Perrigo v. Milwaukee, 92 Wis. 236, 68, 80 Pettengill v. Yonkers, 116 N. Y. 558, 265 Phoenix v. Gannon, 195 N. Y. 471, 95, 105, 397 Phoenix Water Co. v. Phoe- nix, 9 Ariz. 430 149 Pierce v. Drew, 136 Mass. 75, 287, 288, 305 Pikes' Peak Power Co. v. Colorado Springs, 105 Fed. 1, 15, 397 Pioneer Tel. & T. Co. v. Westenhaver, 29 Okla. 429, 463, 474, 484 Piper V. Madison, 140 Wis. 311, 265, 276 Pittsburg, C, C. & St. L. R. Co. V. Muncie & Portland T. Co., 174 Ind. 167, 287, 299 Pittsburg, &c., R. Co. v. Crown Point, 146 Ind. 421, 11 Planters' Oil Mill v. Monroe Waterworks & Light Co., 52 La. Ann. 1243,' 236, 246 Piatt V. San Francisco, 158 Cal. 74, 95 Plattsburgh, In Re, 157 N. Y. 84, 68 Plattsmouth v. Nebraska Tel. Co., SO Nebr. 460, 204 Pocatello V. Murray, 173 Fed. 382, 444, 445 Pocatello V. Murray, 21 Idaho 180, 463, 484, 497 Pond V. New Rochelle Water Co., 183 N. Y. 330 197, 205, 231, 232, 249, 422, 429 Port Jervis Water Co. v. Port Jervis, 151 N. Y. Ill, 5, 68 Portland v. Portland Water Co., 67 Maine 135, 320 Portland Nat. Gas Co. v. State ex rel., 135 Ind. 54, 197 TABLE OF CASES. xlv [References are to Heel ions.] Port of Mobile v. Louis- ville & N. R. Co., 84 Ala. 115, 189 Portsmouth, B. & S. Water Co. V. Portsmouth, 112 Va. 158, 95, 98 Posey V. North Birming- ham, 154 Ala. 511, 49 Postal Cable Tel. Co. v. Cumberland Tel. & T. Co., 177 Fed. 726, 197, 213, 218, 463 Postal Tel. Cable Co. v. Chicopee, 207 Mass. 341, 530 Postal Tel. Cable Co. v. Eaton, 170 111. 513, 287, 300 Postal Tel. Cable Co. v. Southern R. Co., 89 Fed. 190, 287 Postal Tel. Cable Co. v. Taylor, 192 U. S. 64, 530 Potter V. Collis, 156 N. Y. 16, 121 Powell V. Duluth, 91 Minn. 53, 530 Powell V. Duluth, 92 Minn. 53, 213 Powers V. Fall River, 16S Mass. 60, 265 President & Trustees. &c., V. Southern Wisconsin P. Co., 149 Wis. 168, 218, 221 Preston v. Board of Water Comrs., 117 Mich. 589, 213, 223 Prince v. Quincy, 105 111. 138, 68 Prince v. Quincy, 12S, 111. 443, 68 Pryor, In Re, 55 Kans. 724. 422, 433 Public Service Commission V. Westchester St. R. Co., 206 N. Y. 209, 116 Public Service Corp. v. Am. Lighting Co., 6< N. J. Eq. 122, 506, 522 Public Works Co. v. Old Town, 102 Maine 306, 530 Puget Sound Electric R. v. R. Commission, 65 Wash. 75, 463, 484 Pullman v. New York, 54 Barb. 169, 42 Quill v. New York, 55 N. Y. S. 889, 265 Quincy v. Jones, 76 111. 231, 402 R. Commission of Louisi- ana V. Cumberland Tel. & T. Co., 212 U. S. 414, 463, 470, 556, 569 R Co. V. Mayor, &c., 45 Ga. 602, 401 Rasch V. Nassau Electric R. Co., 198 N. Y. 385, 287, 303 Ratcliff V. Wichita Union Stockyards Co., 74 Kans. 1, 416 Read v. Atlantic City, 49 N. J. L. 558, 5 Reagan v. Farmers Loan & Trust Co., 154 U. S. 362, 445, 596 Reed v. Anoka, 85 Minn. I 294. 173 I Reed v. Syracuse, 83 Nebr. : 713, 265 Redlands. L. & C. Domestic \ Water Co. v. Redlands, i 121 Cal. 365, 484 ! Revere Water Co. v. Win- j throp. 192 Mass. 455, 207 U. S. 604, 149, 157 xlvi TABLE OF CASES. [References are to Sections.] Reynolds v. Waterville, 92 Maine 292, 68, 70, 71 Rhobidas v. Concord, 70 N. H. 90, 265 Rice V. Detroit, &c., R., 122 Mich, 677, 197, 202 Rice V. St Louis, 165 Mo. 636, 265 Richardson Gas & Oil Co. v. Altoona, 79 Kans. 466, 149 Richmond v. Richmond Nat- ural Gas Co., 168 Ind. 82, 422, 437, 506, 520 Richmond Natural Gas Co. V. Clawson, 155 Ind. 659, 213 Richmond, &c., R. Co. v. Brown, 97 Va. 26, 98 Risley v. Utica, 179 Fed. 875, 149, 155 Risser v. Hoyt, 53 Mich. 185, 372 Riverside & A. R. Co. v. Riverside, 118 Fed. 736, 15 Roanoke Gas Co. v. Roan- oke, 88 Va. 810, 397, 413, 530, 542 Robbins v. Bangor R. & E. Co., 100 Maine 496, 530 Robinson v. Mayor, 34 Am. Dec. 625, 184 Rochester v. Coe, 49 N. Y. S. 502, 320 Rochester v. Rush, 80 N. Y. 302, 323, 328 Rochester Tel. Co. v. Ross, 195 N. Y. 429, 197 Rockebrandt v. Madison, 9 Ind. App. 227, 11 Rockland Water Co. v. Rockland, 83 Maine 267, 397 Rogers v. Wickliffe, 29 Ky. L. 587, 15 Rogers Park Water Co. v. Fergus, 178 111. 571, 180 U. S. 624, 506, 516 Rome v. Cabot, 28 Ga. 50, 42 Rumsey v. Philadelphia, 171 Pa. 63, 265 Rushville v. Rushville Nat- ural Gas Co., 164 Ind. 162, 422, 437 Rbshville Gas Co. v. Rush- ville, 212 Ind. 206, 38 Russell V. Chicago & Mil- waukee Electric R. Co., 205 111. 155, 300 Ryan v. Louisville, 133 Ky. 714, 323, 336 Safety Insulated Wire & Cable Co. v. Baltmore, 66 Fed. 140, 5 Saginaw Gaslight Co. v. Saginaw, 28 Fed. 529, 140, 149 St. Clair County Turnpike Co. V. Illinois, 96 U. S. 63, 173, 180, 181, 186 St. Clair County Turnpike Co. V. People, »2 111. 174, 178 St. Germain v. Fall River, 177 Mass. 550, 265 St. Louis V. Belle Tel. Co., 96 Mo. 623, 422, 434, 506 St. Louis V. Boffinger, 19 Mo. 15, 11 St. Louis V. St. Louis Gas- light Co., 70 Mo. 69, 149, 160 St. Louis V. Western Union Tel. Co., 149 U. S. 465, 530 St. Louis & C. R. Co. V. Postal Tel. Co., 173 111. 508, 149 St. Louis Brewing Assn. v. St. Louis, 140 Mo. 419, 213, 530 TABLE OF CASES. xlvii [References are to Sections.] St. Tammany Waterworks Co. V. New Orleans Water Works Co., 120 U. S. 64, 95, 424 Salt Creek Valley Turnpike Co. V. Parks, 50 Ohio St. 568, 372 Sammons v. Kearney P. & I. Co., 77 Nebr. 580, 7 San Antonio v. San Anto- nio St. R. Co., 15 Tex. Civ. App. 1, 397 San Diego Land & Town Co. V. Jasper, 189 U. S. 439, 110 Fed. 702, 463, 484, 491 San Diego Land & Town Co. V. National City, 174 U. S. 739, 422, 424, 444, 446, 463, 476, 484, 491, 494, 506, 507 San Diego Water Co. v. San Diego, 118 Cal. 556, 444, 463, 484 San Francisco Gas Co. v. San Francisco, 9 Cal. 453, 5, 265 Sapulpa V. Sapulpa Oil & Gas Co., 22 Okla. 347, 136 Saratoga Springs v. Sara- toga Gas, &c., Co., 190 N. Y. 562, 191 N. Y. 123, 598 Schaaf v. Cleveland, M. & S. II. Co., 66 Ohio St. 215, 287, 314 Schnell v. Rock Island, 232 III. 89, 68, 75 Scott V. La Porte, 162 Ind. 34, 15 Scranton G. & W. Co. v. Scranton, 214 Pa. 5So, 397 Sears v. Crocker, 184 Mass. 586, 287, 290 Seattle v. Columbia & P. S. R. Co., 6 Wash. 379, 173, 189, 397 Secor V. Lord, 42 N. Y. 525, 232 Selectmen of Amesbury v. Citizens' Electric St. R. Co., 199 Mass. 394, 95 Seward v. Rochester, 109 N. Y. 166, 265 Seymour v. Tacoma, 6 Wash. 427, 68 Shaw Stocking Co. v. Low- ell, 199 Mass. 118, 530, 534 Sheehan v. Boston, 171 Mass. 296, 265 Shelbyville Water Co. v. People, 140 111. 545, 323 Sheward v. Citizens' Water Co., 90 Cal. 635, 530 Shreveport Traction Co. ,v. Kansas City, &c., R. Co., 119 La. 759, 397 Shreveport Traction Co. v. Shreveport, 122 La. 1, 95 Silkman v. Board of Water Comrs., of Yonkers, 152 N. Y. 327, 213, 227, 463, 484 Sioux Falls v. Farmers' Loan & Trust Co., 136 Fed. 721, 173 Skaneateles Waterworks Co. V. Skaneateles, 161 N. Y. 154, 184 U. S. 354, 95, 104 Sh>baugh v. Omaha Electric Light & P. Co., 87 Nebr. 805, 197, 204 Smith v. Birmingham Water- works Co., 104 Alf.. 315, 530, 533 Smith v. Capital Gas Co., 132 Cal. 209, 530 Smith V. Dedham, 144 Mass. 177, 68 Smith V. Goldsboro. 121 N. Car. 350, 287 :lviii TABLE OF CASES. [References are to Sections.] Smith V. Madison, 7 Ind. 86, 10 Smith V. McDowell, 148 111. 51, 397, 402 Smith V. Nashville, 88 Tenn. 464, 42, 45, 323, 332 Smith V. Newbern, 70 N. Car. 14, 1 Smith V. Philadelphia, 81 Pa. 38, 265 Smith V. Seattle, 25 Wash. 300, 530 Smith V. Westerly, 19 R. I. 437, 121, 123 Smyth V. Ames, 169 U. S. 466, 416, 454, 463, 465, 484, 493, 494 Snell V. Clinton Electric Light, Heat & Power Co., 196 111. 626, 213 Siiouffer V. Cedar Rapids, & M. C. R. Co., 118 Iowa 287, 4 Somerset v. Smith, 105 Ky. 678, 154, 173, 183 Somerville v. Waltham, 170 Mass. 160, 323, 325 Scuth Buffalo R. Co. v. Kirkover, 176 N. Y. 301, 303 South Carolina v. United States, 199 U. S. 437, 317, 323 South McAlester - Euf aula Tel. Co. V. State, 25 Okla. 524, 506 South Pasadena v. Los Angeles Terminal R. Co., 109 Cal. 315, 397, 408, 612 South Pasadena v. Pasadena L. & W. Co., 152 Cal. 579, 350, 361 Southeast v. New York, 89 N. Y. S. 630, 265 Souther v. Gloucester, 187 Mass. 552, 197, 213, 226 Souther Iron Co. v. Laclede Power Co., 109 Mo. App. 353, 530 Southern Bell Tel. Co. v. Francis, 109 Ala. 224, 287 Southern Bell Tel. & T. Co. V. Harrisonburg, 111 Va. 494, 323 Southern Bell Tel. & T. Co. V. Mobile, 162 Fed. 523, 95 Southwestern Tel. & T. Co. V. Luckett, (Tex.) 127 S. W. 856, 213 Southwestern Tel. & T. Co. V. Wayne, 86 Ark. 548, 11 Spaulding v. Lowell, 23 Pick. (Mass.) 71, 1, 11, 15, 49 Spaulding v. Peabody, 153 Mass. 129, 44, 49, 51 Spokane v. Colby, 16 Wash. 610, 287 Springfield v. Postal Tel.- Cable Co., 253 111. 346, 530 Springfield Fire & Marine Ins. Co. V. Keeseville, 148 N. Y. 46, 3 Spring Valley Water Co. v. ! San Francisco, 165 Fed. 1 667, 444, 447, 453, 484, 490, 506 Spring Valley Waterworks V. San Francisco, 124 Fed. 574, 444, 463, 484, 488 Spring Valley Waterworks V. San Francisco, 192 Fed. 137, 444, 453, 463, 484 Spring Valley Waterworks V. San Francisco, 82 Cal. 286, 530 Spring Valley Waterworks V. Schottler, 110 U. S. 347, 416, 422, 425, 463, 506, 509 Springville v. Fullmer, 7 Utah 450, 38 TABLE OF CASES, xlix [References are to Sections.] Stack V. East St. Louis, 85 111. 377, 402 Stanislaus County v. San Joaquin & K. R. C. & L Co., 192 U. S. 201, 463, 4S4 Stanley v. Davenport, 54 Iowa 463, 397, 403 State V. Barnes, 22 Okla. 191, 19, 27 State V. Columbus Gaslight & Coke Co., 34 Ohio St. 573, 530 State V. Consumers' Gas Trust Co., 157 Ind. 345, 197, 213, 224 State V. Graeme, 130 Mo. App. 138, 197, 203 State V. Harrison, 46 N. J. L. 79, 154 State V. Jacksonville St. R. Co., 29 Fla. 590, 397, 401 State V. Kenosha Electric R. Co., 145 Wis. 337, 609 State V. Lawrence, 79 Kans. 234, 42 State V. Madison St. 11. Co., 72 Wis. 612, 399 State V. Nebraska Tel. Co., 17 Nebr. 126, 213, 556 State V. Noyes, 47 Maine 189, • 189 State V. Portage City Water Co., 107 Wis. 441, 399 Slate V. Portland Gen. El. Co., 52 Ore. 502, 350, 361 State V. Sedalia Gaslight Co., 44 Mo. App. 501, 530 State ex rel. v. Allen, 178 Mo. 555, 19 State ex rel. v. Toledo, 48 Ohio St. 112, 19, 26, 32, 323, 330 State ex rel., &c., v. Daw- son, 16 Ind. 40, 375 State ex rel. Atty. Gen. v. Cincinnati Gaslight & Coke Co., 18 Ohio St. 262, 129, 149, 151, 444 State ex rel. Ellis v. Tampa Waterworks Co., 56 Fla. 858, 95 State ex rel. Ferguson v. Birmingham Waterworks Co., 164 Ala. 586, 213, 222 State ex rel. Garner v. Missouri & K. Tel. Co., 189 Mo. 83, 422, 434, 506 State ex rel. Goodwine v. Cadwallader, 172 Ind. 619, 556, 559, 560, 566, 568 State ex rel. Gwynn v. Citi- zens' Tel. Co., 61 S. Car. 83, 213, 217 State ex rel. Hallauer v. Gosnell, 116 Wis. 606, 530, 539, 463 State ex rel. Hallett v. Seattle Lighting Co., 60 i Wash. 81, 530 State ex rel. Hamilton Gas & Coke Co. v. Hamilton, 47 Ohio St. 52, 149 State ex rel. Latshaw v. Board of Water & Light Comrs., 105 Minn. 472, 213, 220 State ex rel. Mason v. Con- sumers' Power Co., 119 Minn. 225, 213 State ex rel. McClaugherty V. Bluefleld W. & I. Co., 67 W. Va. 285, 530 State ex rel. Means v. Hi- awatha, 53 Kans. 477, 11 State ex rel. Milsted v. Butte City Water Co., 18 Mont. 199, 197 State ex rel. Port Townsend I V. Clausen, 40 Wash. 95, 68 TABLE OF CASES. [References are to Sections.} State ex rel. St. Louis v. Laclede Gaslight Co., 102 Mo. 472, 422, 438 State ex rel. St. Louis Un- derground Service Co. v. Murphy, 134 Mo. 548, 397, 530 State ex rel. St. Paul v. Min- nesnta Transfer R. Co., 80 Minn. 108, 173 State ex rel. Sheets v. Toledo Home Tel. Co., 72 OhiO St. 60, 506 State ex rel. Smythe v. Mil- waukee Independent Tel. Co., 133 Wis. 588, 397, 506 State ex rel. Snyder v. Port- land Natural Gas & Oil Co., 153 Ind. 483, 213 State ex rel. South Bend v. Mountain Spring Co., 56 Wash. 176, 213 State ex rel. Tarr v. Crete, 32 Nebr. 568, 68 State ex rel. Webster v. Su- perior Court of King Co., 67 Wash. 37, 611 State ex rel. Weise v. Seda- 11a Gaslight Co., 34 Mo. App. 501, 451 State ex rel. Wisconsin Tel. Co. V. Sheboygan, 111 Wis. 23, 399, 422, 435 State (Hudson Tel. Co.) v. Jersey City, 49 N. J. L. 303, 173. 188 State Journal Printing Co. V. Madison, 148 Wis. 396, 265, 271 State, Trenton Horse R. Co. V. Trenton, 53 N. J. L. 132, 397, 413 State, Water Comrs. of Jer- sey City V. Gaffney, 34 N. J. L. 131, 325, 329 Stedman v. Berlin, 97 Wis. 505, 68 Stein V. McGrath, 128 Ala. 175, 372 Stevens v. Muskegon, 111 Mich. 72, 95, 107 Stewart v. Ashtabula, 98 Fed. 516, 107 Fed. 857, 372 Stillwater Water Co. v. Still- water, 50 Minn. 498, 397 Stites V. Norton. 125 Ky. 672, 506 Stock V. Boston, 149 Mass. 410, 265 Stockwell V. Rutland, 75 Vt. 76, 265 Stoddard v. Winchester, 157 Mass. 567, 265 Stone V. Farmers Loan & Trust Co., 116 U. S. 307, 596 Stowers v. Postal Tel. Cable Co., 68 Miss. 559, 287 Suburban Electric L. & P. Co. V. East Orange Tp., 59 N. J. Eq. 563, 173, 188 Sullivan v. Bailey, 125 Mich. 104, 173, 181 Sumner County v. Welling- ton, 66 Kans. 590, 323, 331 Sun Printing & Publishing Assn. V. New York, 152 N. Y. 257, 11, 13, 19, 23, 25, 42, 43, i,86, 582, 585 Superior v. Douglas County Tel. Co., 141 Wis. 363, 95 Sutherland-Innes Co. v. Evart, 86 Fed. 597, 58 Swanberg v. New York City, 123 App. Div. 774, 530 S'^'anson v. Ottumwa, 118 Iowa 161, 68 Swanton v. Highgate, 81 Vt. 152, 323, 338 TABLE OF CASES. [References are to Sections.] Syracuse Water Co. v. Syra- cuse, 116 N. Y. 167, 154 U. S. 519, 121, 130 Tacoma Gas & Electric Co. V. Tacoma, 14 Wash. 288, 422, 438 Tacoma Hotel Co. v. Tacoma Light & Water Co., 3 Wash. St. 316, 5 Taggart v. Newport St. R. Co., 16 R. 1. 668, 287 Tampa v. Kaunitz, 39 Fla. 683, 323, 344 Tarver v. Dalton, 134 Ga. 462, 323 Taylor v. Carondelet, 22 Mo. 110, 11 Taylor v. Public Service Corp., 75 N. J. Eq. 371, 287, 307 Telegraph Co. v. Smith (Md.) 18 Atl. 910, 287 Terrell v. Louisville Water Co., 127 Ky. 77, 265, 266 Terry v. New York, 8 Bosw. 504, 265 Texarkana v. Southwestern Tel. & T. Co., 48 Tex. Civ. App. 16, 397, 407, 612 The Maggie P, 25 Fed. 202, 4, 15 Tbeis V. Spokane Falls Gas- light Co., 49 Wash. 477, 350, 363 Theobold v. R. Co., 66 Miss. 279, 293 Thomas v. Grand Junction, 13 Colo. App. SO, 11, 13, 149 Thompson v. San Francisco Gas & Electric Co., IS Cal. App. 30, 213 Thompson v. Schenectady R. Co., 124 Fed. 274, 372, 379 Thomson - Houston Electric Co. v. Newton, 42 Fed. 723, 42 Thrift V. Elizabeth City, 122 N. Car. 31 121, 124 Tillamook Water Co. v. Til- lamook City, 139 Fed. 405, 149 Tillamook Water Co. v. Til- lamook City, 150 led. 117, 149 Toledo V. Hosier, 54 Ohio 418, 323, 330 Toledo V. Yeager, 8 Ohio C. C. 318, 323, 330 Toledo Consolidated St. R. Co. V. Toledo Electric St. R. Co., 50 Ohio St. 603, 372 Topeka Water Co. v. Whit- ing, 58 Kans. 639, 265 Toll Roads Co. v. People, 22 Colo. 429, 181 Torrent v. Muskegon, 47 Mich. 115, 11. 12 Townsend v. Boston, 187 Mass. 283, 19, 25 Trammell v. Russellville, 34 I Ark. 105, 107 Truesdale v. Newport, 28 Ky. L. 840, 173 Tulsa St. R. Co. v. Okla- homa Union Traction Co., 27 Okla. 339, 136, 143 Twitchell v. Spokane, 55 Wash. 86 444, 450 Ukiah City v. TJklah Water & Improvement Co., 142 Cal. 173, 236, 260, 261, 263 Underground R. R. v. New York, 116 Fed. 952, 193 U. 8. 416, 585 lii TABLE OF CASES. [References are to Sections.] United States v. New Orleans, 98 U. S. 381, 7 United States v. Sault Ste. Marie, 137 Fed. 258, 3 United States Tel. Co. v. Central Union Tel. Co., 171 Fed. 130. 556, 560, 568 Valparaiso v. Gardner, 97 Ind. 1, 11, 68 Vanderburg v. Kansas City, Mo., Gas Co., 126 Mo. App. 600, 95, 213 Vicksburg v. Vicksburg Wa- terworks Co., 202 U. S. 453, 149, 166 Vicksburg v. Vicksburg Wa- terworks Co., 206 U. S. 496, 11, 513 Vicksburg Waterworks Co. V. Vicksburg, 185 U. S. 65, 163 Vilas V. Manila, 220 U. S. 345, 174 Vincennes v. Citizens' Gas Light Co., 132 Ind. 114, 5, 11, 13, 149 Vinton-Roanoke Water Co. V. Roanoke, 110 Va. 661, 98 Voss V. Waterloo Water Co., 163 Ind. 69, 68, 69 W Wabaska Electric Co. v. Wy- more, 60 Nebr. 199, 422, 433 Wadsworth v. Concord, 133 N. Car. 587, 42 Wagner v. Bristol Belt Line R. Co., 108 Va. 594, 287 Wagner v. Rock Island, 146 111. 139, 5, 9, 213, 530 Wainwright v. Queens Coun- ty Water Co., 28 N. Y. S. 987, 236, 249 Wakefield v. Theresa, 125 App. Div. 38, 372, 388 Walker v. Cincinnati, 21 Ohio St. 14, 32, 34 Walla Walla v. Walla Walla Water Co., 172 U. S. 1, 68, 86, 149, 156, 163, 165, 424 Wannamaker v. Rochester, 44 N. Y. St. 45, 265 Warren v. Chicago, 118 111. 329, 11, 42 Washburn Waterworks Co. V. Washburn, 129 Wis. 73, 397, 530 Washington v. Washington Water Co., 70 N. J. Eq. 254, 213 Water Comrs. v. Hudson, 13 N. J. Eq. 420, 397 Water, Light & Gas Co. v. Hutchinson, 144 Fed. 256, 207 U. S. 385, 121, 125, 149 Waterbury v. Laredo, 68 Tex. 565, 11, 14 Watson V. Neeham, 161 Mass. 404, 265 Wayland v. Comrs. of Mid- dlesex Co., 4 Gray (Mass.) 500, 323, 327 Weld V. Gas & Electric Light Comrs., 197 Mass. 556, 610 Wellston V. Morgan, 59 Ohio St. 147, 154, 173, 184, 372 Welsh V. Rutland, 56 Vt. 228, 265 West Hartford v. Board of Water Comrs., 44 Conn. 360, 323, 330 Westerly Waterworks v. Westerly, 75 Fed. 181, 121, 126 Western P. & S. Co. v. Citi- zens' St. R. Co., 128 Ind. 531, 113, 431 TABLE OF CASES. liii [References are to SectiOTis.] Western Savings Fund So- ciety V. Philadelphia, 31 Pa. 1S3. 265 Western Union Tel. Co. v. American Union Tel. Co., 65 Ga. 160, 149, 158 Western Union Tel. Co. v. Chicago & Paducah R. Co., 86 111. 246, 149, 556 Western Union Tel. Co. v. Richmond, 224 U. S. 160, 530 Western Union Tel. Co. v. Williams, 86 Va. 696, 287 Westfield Gas & Milling Co. V. Mendenhall, 142 Ind. 538, 197, 199, 422, 432 Westminster Water Co. v. Westminster, 98 Md. 551, 149, 163 Wheeler v. Cincinnati, 19 Ohio St. 19, 4 WTieeler v. Philadelphia, 77 Pa. 338, 7 Wheeling & E. G. R. Co. v. Triadelphia, 58 W. Va. 487, 97, 372, 878 Wheelock v. Lowell, 196 Mass. 220, 15 Wichita v. Old Colony Trust Co., 132 Fed. 641, 95, 112 Wilcox V. McClellan, 185 N. Y. 9, 95 Wilkins v. Rutland, 61 Vt. 336, 265 Wilkinson v. Light, Heat & Water Co., 78 Miss. 389, 236 Willcox V. Consolidated Gas Co., 212 U. S. 19, 463, 464, 472, 484, 486, 488, 489 Williams v. Mutual Gas Co., 52 Mich. 499. 213 Wilson V. Mitchell, 17 S. Dak. 515, 265 Wilson V. Tallahassee Wa- terworks Co., 47 Fla. 351, 213, 444, 451 Wiltse V. Red Wing, 99 Minn. 255, 265, 275 Winchester v. Redmond, 93 Va. 711, 11, 14 Windsor v. Des Moines, 110 Iowa 175, 68 Winona v. Botzet, 169 Fed. 321, 265, 275 Winston v. Spokane, 12 Wash. 524, 68, 77 Woodbridge v. Duluth, 57 Minn. 256, 68 Woodbury v. Tampa Water- works Co., 57 Fla. 243, 236, 242 Worden v. New Bedford, 131 Mass. 23, 15 Weight V. Glen Tel. Co., 95 N. Y. S. 101, 213 V.'right V. Glen Tel. Co., 99 X. Y. S. 85, 95, 102 Wyandotte v. Corrigan, 35 Kans. 21, 397 Wyandotte Electric Light Co. V. Wyandotte, 124 Mich. 43, 173, 180 Yancey v. Batesville Tel. Co., 81 Ark. 486, 213 Yates V. Van De Bogert, 56 X. Y. 526, 186 Yazoo City v. Birchett, 89 Miss. 700, 265 Yik Hon v. Spring Valley Waterworks, 65 Cal. 619, 265 York Tel. Co. v. Keesey, 5 Pa. Dist. R. 366, 287 Ysleta V. Babbitt, 8 Tex. Civ. App. 432, 265 liv TABLE OF CASES. [References are to Sections.] Zanesville v. Zanesville Gas- light Co., 47 Ohio 1, 416, 422, 506 Zanesville v. Zanesville Tel. & T. Co., 64 Ohio 67, 95, 101, 422 TABLE OF CASES-SUPPLEMENTARY Appleton Waterworks Co. V. Railroad Commission, (Wis.) 142 N. W. 476, 463, 484 Asbury v. Albemarle, (N. C.) 78 S. E. 146, 11 Attorney General v. Haver- hill Gaslight Co., (Mass.) 101 N. E. 1061, 350 Baum V. Somerville Water Co., (N. J.) 87 Atl. 140, 236 Bell V. David City, (Neb.) 142 N. W. 523, 15, 136 Birmingham R., Light & Power Co. v. Smyer, (Ala.) 61 So. 354, 287 Board of Water Commis- sioners, In re, (Conn.) 87 Atl. 870, 3, 19 Boise Artesian H. & C. Water Co. v. Boise City, U. S. Adv. Sh. Aug. 1, 1913, p. 997, 173 Brownwood v. Brown Tel. & T. Co., (Tex.) 157 S. W. 1163, 506 California-Oregon Power Co. V. Grants Pass, 203 Fed. 173, 506 Carson v. Ft. Smith Light & Traction Co., (Ark.) 158 S. W. 129, 197 ■Charleston Consol. R., etc. Co, V. Charleston, 92 S. C. 127, 95, 397, 422 Clairton Steel Co. v. Manu- facturers' Light & Heat Co., (Pa.) 87 Atl. 998, 213 Cumberland Tel. & T. Co. v. Brandon, (Ky.) 157 S. W. 1119, 556 Cumberland Tel. & T. Co. v. Memphis, 200 Fed. 657, 506 Davis V. Rockport, (Mass.) 100 N. E. 612, 5, 15 De Motte v. Valparaiso, 161 Ind. 319, 350 Denver v. Mercantile Trust Co., 201 Fed. 790, 173 Denver v. New York Trust Co., 229 U. S. 123, 372 Detroit United R. v. De- troit, 229 U. S. 39, 173, 372 Dolan V. Puget Sound Trac- tion, Light «S; Power Co., (Wash.) 130 Pac. 353, Egan V. San Francisco, (Cal.) 133 Pac. 294, Emporia v. Emporia Tel. Co., 88 Kans. 443, 422 Fall River Gas Works Co. V. Board of G. & E. L. Comrs., (Mass.) 102 N. E. 475, 484 Ft. Smith Light & Traction Co. V. Ft. Smith, 202 Fed. 581, 422, 506 95 38 TABLE OF CASES. Iv [References are to Sections.'] Glenwood Springs v. Glen- wood Light & W. Co., 202 Fed. 678, 136 Grand Trunk W. R. Co. v. South Bend, 227 U. S. 544, 96, 530 Greensburg Borough v. Westmorland Water Co., (Pa.) 87 Atl. 995, 350 Gregg V. Laird, (Md.) 87 Atl. 1111, 422 Hall V. Passaic Water Co., (N. J.) 85 Atl. 349, 236 Hoffman v. Mitchell, 201 Fed. 506, 397 Hopper V. Willcox, (N. Y.) 140 N. Y. S. 277, 463, 484 Joplin V. Wheeler, (Mo.) 158 S. W. 942, 506, 530 Krom V. Antigo Gas Co., (Wis.) 140 N. W. 41, 236 Madera Waterworks v. Ma- dera, 228 U. S. 454, 136 Milwaukee Electric R. & L. Co. V. Railroad Commis- sion, (Wis.) 142 N. W. 491, 95, 506 Minden-Edison Light & Power Co. v. Minden, (Neb.) 142 N. W. 673, 136 Montgomery v. Greene, (Ala.) 60 So. 900, 213 New Hartford Water Co. v. Village Water Co., (Conn.) 87 Atl. 358, 136 New York Electric Lines Co., In re, 201 N. Y. 321, 95 Old Colony Trust Co. v. qmaha, U. S. Adv. Sh. Aug. 1, 1913, p. 967, 173 Owensboro v. Cumberland Tel. & T. Co., U. S. Adv. Sh. Aug. 1, 1913, p. 988, 173 People ex. rel. Delaware & H. Co. V. Stevens, 197 N. Y. 1, 484 People ex rel. Kings County Lighting Co. v. Willcox, (N. Y.) 141 N. Y. S. 677, 463, 484 People ex rel. New York Edison Co. v. Willcox, 207 N. Y. 86, 422, 612 People ex rel. New York Electric Lines Co. v. Elli- son, 188 N. Y. 523, 530 People ex rel. New York Tel. Co. v. Public Service Commission, (N. Y.) 141 N. Y. S. 1018, 213 People ex rel. Third Ave. R. Co. V. Public Service Commission, 203 N. Y. 299, 95, 484 People ex rel. Westchester St. R. Co. V. Public Serv- ice Commission, (N. Y.) 143 N. Y. S. 148, 95, 484 Piatt, ex parte, (Okla.) 134 Pac. 53, 95 Pioneer Tel. & T. Co. v. State, (Okla.) 134 Pac. 398, 556 Pocatello V. Murry, 206 Fed. 72, 95, 372, 530 Public Service Gas Co. v. Board of Public Utility Comrs., (N. J.) 87 Atl. 651, 463, 484 Russell, ex parte, 163 Cal. 668, 95. 397. 422. 506 St. Mary's v. Hope Natural Gas Co., (W. Va.) 76 S. E. 841, 96, 422 St. Paul Realty & Assets Co. V. Tri-State Tel. & T. Co., (Minn.) 142 N. W. S07. 197 Ivi TABLE OF CASES. [References are to Sections.'\ Shawnee Gas & Electric Co. V. Corporation Commis- sion, (Okla.) 130 Pac. 127, 422 Simpson v. Shepard, 229 U. S. — , 463, 484 Southwestern Tel. & T. Co. V. State, (Tex. Civ. App.) " 150 S. W. 604, 556 State ex rel. Atty. Gen. v. Wyandotte County Gas Co., 88 Kans. 165, 422 State ex rel. County Atty. v. Des Moines City R. Co., (Iowa) 140 N. W. 437 173 State ex rel. St. Paul v. St. Paul City R. Co., (Minn.) 142 N. W. 136, 213, 530 State ex rel. W. J. Arm- strong Co. V. Waseca, (Minn.) 142 N. W. 319, 197, 213 Union Trust & Savings ±5ank V. Kinloch Long- Distance Tel. Co., 258 111. 202, 556 United States Tel. Co. v. Central Union Tel. Co., 202 Fed. 66, 556 Washington-Oregon Corp. v. Chehalis, 202 Fed. 591, 136 Wood V. New York Interur- ban Water Co., (N. Y.) 142 N. Y. S. 626, 197 THE LAW OF PUBLIC UTILITIES CHAPTER I. INTRODUCTION. One of the most marked characteristics of modern civilization is the unparalleled growth and develop- ment of municipal activity, which has been both ex- tensive and intensive. Municipalities have increased not only in number but also in size. Municipal problems are becoming of vital personal interest to greater and still greater numbers of persons, and their solution, which is constantly becoming more diffi- cult and more necessary, will directly affect the larger and more influential portion of our population. The solution of many of these problems lies in the extension of the sphere of municipal activity. At one time the municipal corporation like the government as a whole was regarded as an organization which should preserve order and, within the limits of the law which it was its duty to enforce, permit the greatest possible freedom of action to the individual from whose unlimited initiative and energetic activity it was be- lieved the community as a whole would derive the utmost advantage. Unlimited or insufficiently regulated individual ac- tivity, however, resulted in such evils that it was found necessary to resort more and more to the repressive activity of the municipal as well as the state govern- ment. At first such governmental restraints in many 1— Pub. Ut. I 2 PUBLIC UTILITIES. instances were regarded as inconsistent with the indi- vidual rights guaranteed by our constitutions. But when those who thought that their constitutional rights were being violated through the increase in the activity of governmental authority appealed to the courts it was decided that all individuals held their rights sub- ject to the regulatory power of the municipality and the state. The courts elaborated what they called the police power. Through the exercise of this power the community within the provisions of the constitution could protect itself against any undue emphasis by the individual on what he regarded as his constitutional rights. More recently, however, it has become evident that due consideration for the rights of the community and adequate protection of the public welfare can not be secured through mere repressive governmental action but that the only way in which the greatest present advantage and prospective advancement of the interests of the public as a whole can be secured is through the positive action of our governmental agencies making greater opportunities more uniformly available to all the people to improve their material as well as their moral conditions. As the problems of our modern civ- ilization are most acute in the complex conditions which are to be found in our cities, this necessity for the ex- tension of the sphere of governmental activity has nat- urally assumed the form of a demand for the municipal ownership and operation of what have come to be known as municipal public utilities or their adequate regulation and control. But just as when the necessity for the extension of repressive governmental activity became apparent it was alleged that such action was prohibited by our constitutional provisions protecting private rights, so it is now claimed that the system of municipal govern- INTRODUCTION. 3 ment provided for in our constitutions and in our law of municipal corporations is distinctly governmental in its character and purpose, and that the city, as w^e knovv^ it, may not enter into the proprietary field of private business. In this connection it has been said that the city in our system is organized for govern- ment and not for profit, and that its activity should be confined to those functions w^hich will not be under- taken by private effort because their pursuit is un- profitable; and that remunerative enterprises should be left to private capital which will undertake all that is necessary and execute them better than the city can be expected to do. This treatise on the law of municipal public utili- ties attempts to ascertain both the nature of the mu- nicipal corporation as expressed in the law and in the construction which the courts have given to the pow- ers conferred upon the municipality by the state, to discover what limitations are placed on municipal activity by our constitutions, as construed by the courts; and how far the judicial construction of the law with regard to the taxation and sale of municipal public utilities facilitates or impedes the cities in the discharge of these new duties imposed by the owner- ship, operation or proper regulation and control of mu- nicipal public utilities, which they are being called upon to assume; and also to ascertain what are the most efB- cient methods of regulation and control available to the state or municipality over the operation by private capital of municipal public utilities. As in the past the courts developed the idea of a repressive police power whose exercise was found necessary and not inconsistent with constitutional pri- vate rights, so they have now elaborated the doctrine of the implied powers of municipal corporations through whose application the cities are recognized as t 4 PUBLIC UTILITIES. possessing powers which at one time were denied them, and by which they are permitted to keep abreast af the times and adjust themselves to current economic and social conditions. Municipal ownership and operation is regarded by the courts as quite consistent with our constitutional system. There is no constitutional objection to the grant by the legislature of the widest powers relative to the municipal ownership and operation of municipal public utilities. And it is submitted that the only alternative to municipal ownership and operation of municipal public utilities is their adequate regulation and control by the municipality or by a state or munici- pal commission acting under authority conferred upon it by the state. Under efficient and intelligent regulation and control of the service furnished by municipal public utilities and of the rates received therefor, the neces- sity for municipal ownership or operation as a means of regulation and control, which in most cases is the controlling motive, it is believed would virtually dis- appear, although the power of municipalities to own and operate their municipal public utilities should al- ways remain available. The courts in their consideration of the powers possessed by municipal corporations have generally adopted the principle of liberal construction where its adoption was necessary to permit these corporations to extend their sphere of activity in order to render to their inhabitants the services so necessary in modern urban life, and with this purpose in view they have developed the idea of powers implied from the very nature of such corporations as organs for social serv- ice. With the idea that municipal corporations, which have entered into what is often called the field of private business, are really discharging a service which INTRODUCTION. 5 is just as public in character as the preservation of the peace, the care of the public health and safety or the care of the poor, the courts have consistently refused to make any distinction between the property used for these so-called commercial purposes and that used for governmental purposes by denying that one class of property is to be taxed any more than the other or is to be governed by any more liberal law as to its sale or alienation. Of course the courts do not take the view that it is not subject to taxation or alienation but merely that as property devoted to a public service it is untaxable and inalienable in the absence of statu- tory provisions to that effect. With the idea that municipal public utilities are public in their service and purpose whether in public or in private hands, the courts have assumed that the interests of the public must first be considered in their decisions as to the powers held and conferred by mu- nicipal corporations in their grant to private corpora- tions of these public utility franchises. Believing whether mistakenly or not that much advantage will accrue to the public from competition in the operation of municipal public utilities, the courts have not fav- ored exclusive franchises and have refused to recognize the power of municipal corporations in the absence of statutory authority to grant exclusive franchises or to imply that a franchise was exclusive where any other reasonable construction was possible in case it was found that the municipality granting the franchise had the legal right to make it exclusive. Because competition alone fails to secure adequate service at reasonable rates in an industry which is na- turally monopolistic in character, all the courts have agreed that the legislature has the power of controlling the service and of regulating the rates that may be charged by these municipal public utilities. At the 6 PUBLIC UTILITIES. same time, either because they feared too drastic action by municipal corporations or because of a reluct- ance to abandon the rule of strict construction of mu- nicipal charters, they have denied that the municipal corporation has the right, in the absence of a statutory provision to that effect, to regulate these rates except where it had reserved to itself such power to regulate in the franchise at the time of its grant. In laying down these rules the courts have been strongly influenced by the feeling that the controlling motive of the private companies was the pecuniary advantage of their stockholders, and that unless checked this motive might result to the public disad- vantage. On the other hand they have frequently called attention to the fact that the motive actuating municipal corporations was public service rather than private advantage. They have therefore recognized that in the absence of legislative authorization a pri- vate company operating a public utility may sell its plant to a municipal corporation, although a munici- pal corporation may not reverse the process. And while the courts have naturally not been called upon to decide as to the expediency or the policy of munici- pal ownership and operation of municipal public utili- ties, since the decision of this matter in concrete cases is a legislative or administrative question of business policy for the municipality concerned to decide for itself within the limits of the statutes rather than a judicial one, the courts in a number of instances have ^ indicated that the trend of modern thought is favor- | able to municipal ownership and operation. 1 The efficient and impartial enforcement of the j rights of the municipality and its inhabitants in order ) to obtain adequate service at fair uniform rates is quite | as essential as, if indeed it is not more necessary than, f providing the necessary power and authority in the INTRODUCTION. 7 municipality in the first instance to insure such service for itself and its citizens. The strict persistent en- forcement of the law and the franchise or contract rights available to the municipality is generally found necessary to secure satisfactory service at a fair uni- form rate. The public utility commission is the latest form of securing the necessary intelligent regulation and con- trol and is attended with the least possible expenditure of money and time necessary to secure the desired re- sults. A public utility commission established by the state or a municipal commission or bureau created pur- suant to authority conferred upon the municipality by the state for that purpose is a permanent administra- tive body of trained experts whose services are always available for the purpose of investigating and adjusting the conflicting rights and liabilities that are necessarily constantly arising between the opposing parties in- volved in furnishing and using any municipal public utility service. The members of such a commission are not only specially trained for this service, but they give it their exclusive attention, and the information secured in connection with the investigations and adjustments made in the course of a few years furnishes, at a com- paratively nominal expense, the necessary technical data in detail which, when properly classified by the commission, constitute the basis for the investigation and adjustment of any question arising as to any par- ticular municipal public utility. The fact that a franchise is not self-enforcing and that statutory provisions for the regulation of munici- pal public utility service are not self-executing fur- nishes ample justification for a public utility commis- sion. Being a matter of business administration the commission which is composed of trained business experts along this particular line not only furnishes 8 PUBLIC UTILITIES. the best and most efficient method for regulating the business but also, by separating it from other munici- pal affairs and political considerations, relieves it of the greatest practical difficulty which now generally at- tends the administration of such business matters by the ordinary municipal officer who is selected by a po- litical party, and because of the manner of his selection and the short term of his service can not be nor be- come an expert on the subject. With the business of municipal public utihties placed in the hands of such a non-partisan permanent commission of capable men specially trained for ren- dering such service, these very important and exten- sive business interests, in which every inhabitant of the municipality as well as the municipality itself is vitally interested, would be separated from political matters and party politics which are now all too often controlled by and in the interest of those in charge of the municipal public utilities. Whether other mu- nicipal affairs are matters of business rather than politics, there can be no question but that all matters of municipal public utilities are business questions and not political ones which accordingly can only be prop- erly disposed of in a business way and by men espe- cially informed and experienced in such affairs rather than by municipal officers selected by political parties for a short term of service. There is no more justi- fication for expecting satisfactory and efficient admin- istration of municipal public utility affairs at the hands of municipal officers who are thus selected at such frequent intervals than would be the case in the affairs of any large business concern. Both alike require capable experienced men specially trained and per- manently in charge of the regulation or administration of such concerns. As municipalities show greater ability to conduct I INTRODUCTION. 9 their own municipal and business affairs there is a general tendency to permit them to do so. This is evidenced by recent constitutional provisions in a number of states granting what is commonly known as^ "home rule" for municipalities. The first duty of the municipality toward properly disposing of its municipal affairs so far at least as they are concerned with municipal public utilities is the creation of a franchise bureau or a municipal public utility com- mission for the purpose of securing complete and accurate information concerning the franchise or con- tract provisions of its municipal public utilities and all other information in regard to their investment, main- tenance and operation; and whether there be a state public utility commission or not, each municipality has problems peculiar to itself and should have complete and accurate information in regard to all its munici- pal public utilities as well as an administrative body composed of capable experienced men able to cope with those in charge of the affairs of the municipal public utility itself in the interest of the public. Such a bureau or commission should investigate and advise the municipal authorities on all questions of franchise rights and attend to their enforcement constantly and consistently as well as to the service rendered by the company and determine the reason- ableness of the rate received by it for the service, for it is evident that, in a business of such magnitude with as many details of administration and technical ques- tions involved as are common to the affairs of munici- pal public utilities, the municipality and its inhabi- tants can only be in position to secure and know that they are receiving proper service at a fair uniform rate by the employment of such men as are capable of investigating such questions equally with the of- ficers of the municipal public utility itself. lO PUBLIC UTILITIES. While the municipal commission, bureau or other administrative department of the municipality is of great value, the expense of maintaining one properly- equipped and sufficient in itself would be prohibitive to all but the large municipalities. This fact makes neces- sary state public utility commissions. Many municipal public utilities are becoming interurban in their scope and are no longer local to the particular municipality whose jurisdiction accordingly is not sufficiently com- prehensive to provide the necessary regulation and control. Where several municipalities are alike inter- ested in the control and operation of the same munici- pal public utility, it is evident that the control which they would thus exercise independently of each other, being naturally local in each instance, could not be uniform. Each municipality is necessarily limited to its own territory so that the only method by which to secure adequate regulation is through a state public utility commission. The information necessary and the data essential to insure a comprehensive regulation of the service and a fair uniform rate can be secured to the best advantage by the state in connection with a public utility commis- sion of trained experts on the subject. They in turn can serve similar departments of the municipalities of the state in an advisory capacity, and each supplement- ing the other, can secure the best results at the least expense. The theory of the regulation of municipal public utilities by the state through such a commission is to avoid competition which is now generally recog- nized as a needless economic waste and an entirely in- sufficient method of securing the necessary regulation and control. Under this method the state through its commission takes the place of competition and furnishes the regulation which competition can not give, and at the same time avoids the expense of duplication in the INTRODUCTION. II investment and operation of competing municipal pub- lic utilities. On the other hand the municipal public utility, operating under what the public utilities law of Wis- consin — aptly designates the "intermediate permit," is protected against competition and a possible loss of its plant occurring at the expiration of the fran- chise. Under this law the public utility commission determines in the first instance whether public con- venience and necessity demands municipal public util- ity service where such a company proposes to install its plant and furnish such service, and only after a determination of this question in the affirmative and the granting of its consent by the commission may the municipal public utility plant be installed; thus avoid- ing needless competition by legalizing a monopoly. The consideration, however, for such franchises and exclusive privileges is that they shall be constantly and completely under the regulation and control of the state through its public utility commission. This control covers the question of the capitaliza- tion of the municipal public utility so that the amount of stock and bonds issued by such a company is de- termined by the public utility commission which also supervises the construction of the plant, thus insuring the expenditure on the plant of all funds received from the sale of such stock and bonds as well as limiting such expenditure and preventing extravagance or un- necessary construction. This control over the capital- ization and issue of stocks and bonds of the municipal public utility by the state not only protects the con- sumer of the service by securing a fair rate, but also the investor in the public utility securities. It insures on the one hand proper service at a reasonable rate as determined by the actual cost and on the other a fair return on the investment actually put into the business. 12 PUBLIC UTILITIES. By such regulation capitalization and investment coin- cide which simpHfies the matter of rate regulation as well as that of making investments in the securities of such companies and preventing fluctuation in their values. The law of municipal public utilities, which it is the purpose of this treatise to expound fully and impartially, has been enunciated and developed chiefly by the decisions of our courts of record. While these decisions are very numerous and exceedingly practical they are comparatively recent. This fact together with the fact that the decisions are frequently con- flicting and the subject rapidly developing constitutes at once the reason and the justification for making the gist of the decisions the basis and the authority for this treatise. This method of treating the subject has been employed to make the work more authorita- tive and of greater practical value to every one inter- ested in this very important subject. CHAPTER II. THE TWO CAPACITIES OF MUNICIPAL COR- PORATIONS. Section. 1. Powers of municipal corporations. 2. Classification of powers. 3. Public and governmental powers. 4. No liability for governmental powers. 5. Limitation of governmental powers. 6. Proprietary business powers. 7. Liability of municipality. 8. Powers and liability determined by capacity. 9. Municipal public utilities a business concern. § I. Powers of Municipal Corporations. — Munici- pal corporations, like all others, are creatures of statu- tory origin and possess only the powers granted to them by the legislature. These powers consist of those granted in express words; those necessarily or fairly implied in or incident to the powers expressly granted; and those essential to the declared objects and pur- poses of the corporation — not simply convenient, but indispensable.^ § 2. Classification of Powers. — The powers with which municipal corporations are endowed by the legislature creating them are divided into two main classes so that municipal corporations act in two dis- tinct capacities. The one is governmental, legislative or public; the other is proprietary, commercial and in this sense quasi private. In the former capacity the municipal corporation in exercising its governmental or public power acts as an agent of the state which iNew Decatur v. Berry, 90 Ala. 432, 7 So. 838, 24 Am. St 827; Spaulding v. Lowell. 23 Pick. (Mass.) 71; Smith v. Newbern, 70 N. C. 14, 16 Am. Rep. 766; Dillon Mun. Corp., § 237 and cases cited. 13 § 3 PUBLIC UTILITIES. I4 creates it in preserving the public peace, administering justice and in attending to the public health, providing fire protection and in the carrying on of the public educational system for the general good and the public welfare. § 3. Public and governmental pov^^ers. — Over all these public and governmental powders exercised by the municipal corporation in its capacity as an agent of the state the authority of the state is by virtue of the very nature of the relation essentially supreme and unHmited in the absence of constitutional limitations. The officers of the municipal corporation are trustees for the public whose powers are wholly delegated to them by the sovereign and strictly limited by the statutes granting them so that such officers can not circumscribe the legislative powers of their successors by making contracts for the discharge of a purely public governmental duty. Such governmental func- tions and public powers must be left free and un- trammeled so that they may be exercised at any and all times for the benefit and to the best advantage of the citizens as conditiong change and emergencies arise. A municipality can not abridge its legislative governmental power by contract, nor is it liable for the negligence of its officers or agents in the perform- ance of such corporate duties or for their failure to exercise such corporate powers.^ In the case of Penley v. Auburn, 85 Maine 278, 27 Atl. 158, 21 L. R. A. 657, the court held invalid a 2 Penley v. Auburn, 85 Maine 278, 27 Atl. 158, 21 L. R. A. 657; Hamilton v. Shelby ville, 6 Ind. App. 538, 33 N. E. 1007; Springfield Fire & Marine Ins. Co. v. Keeseville, 148 N. Y. 46, 42 N. E. 405, 30 L. R. A. 660, 51 Am. St. 667; Horkan v. Moultrie, 136 Ga. 561, 71 S. E. 785; People v. Chicago, 256 111. 558, 100 N. E. 194; United States V. Sault Ste. Marie, 137 Fed. 258; Asbury v. Albemarle, (N. C.) 78 S. E. 146, Board of Water Commissioners, In re, (Conn.) 87 Atl. 870. 15 CAPACITIES OF MUNICIPALITIES. § 3 covenant of the city to open a certain street and main- tain it in that condition permanently, expressing its decision to the effect that such a covenant was void, being beyond the powder of the city to make, by saying "No case has been cited that holds a municipal cor- poration liable to an individual, on its covenant to per- form a municipal duty required of it by law." The case of Hamilton v. Shelbyville, 6 Ind. App. 538, 33 N. E. 1007, in holding a covenant of the city to provide drainage for a private individual void ex- presses the principle as follows: "The city has no power to make a contract obligating itself to furnish or provide drainage for plaintiff's lands. In providing drainage for lands within or adjoining its corporate limits, it exercises governmental functions. When it accomplishes this end, its powers in this respect cease. In doing that, it might incidentally drain the lands of the plaintiff, but it could not contract to furnish drainage for plaintiff's lands in the future. Such con- tract is beyond the scope and purpose of the city's existence. The future requirements of the city may demand that the drain be abandoned or filled up and discontinued." In the case of Springfield Fire & Marine Ins. Co. V. Keeseville, 148 N. Y. 46, 30 L. R. A. 660, 51 Am. St. 667, 42 N. E. 405, where the court refused to hold the defendant city liable for the destruction of a house by fire due to the alleged negligence of said city in operating its water-works system the court said: "When we find that the power conferred has relation to public purposes and is for the public good, it is to be classified as governmental in its nature, and it ap- pertains to the corporation in its political character. But when it relates to the accomplishment of private corporate purposes, in which the public is only in- directly concerned, it is private in its nature and the § 4 PUBLIC UTILITIES. l6 municipal corporation, in respect to its exercise, is regarded as a legal individual. In the former case, the corporation is exempt from all liability, whether for nonuser or misuser; while in the latter case, it may be held to that degree of responsibility which would attach to an ordinary private corporation." § 4. No liability for governmental powers. — The manner as well as the extent to which it may be proper for the municipal corporation to exercise these public governmental powers, within the limitations fixed by the law creating them, are necessarily in- trusted to the will and judgment of the municipal authorities to whom they are delegated, and such authorities are permitted and expected to exercise their discretion in such matters. Because these powers are public and governmental in their nature and the duties imposed by them are executed by the authori- ties in the exercise of their discretion, the municipal corporation is not liable for a failure to perform such duties nor for the erroneous exercise of such powers. A municipal corporation, for example, can not make a contract with the owner of a building to put out a fire therein and then require him to pay for such service, nor can it expose itself to liability if it fails to put out the fire with regard to which it has at- tempted to make the contract.^ | The case of the Brick Presbyterian Church v. New York, 5 Cow. (N. Y.) 538, illustrates this principle t and states the reason for this rule of law. The action ) in the case was for a breach of covenant for the quiet f sBrinkmeyer v. Evansville, 29 Ind. 187; Black v. Columbia, \ 19 S. Car. 412, 45 Am. Rep. 785; Wheeler v. Cincinnati, 19 Ohio ' St. 19, 2 Am. Rep. 368; The Maggie P, 25 Fed. 202; Brick Presby- ' terian Church v. New York, 5 Cow. (N. Y.) 538; Crowder v. Sulli- van, 128 Ind. 486, 28 N. E. 94, 13 L. R. A. 647; Snouffer v. Cedar ' Rapids, &c. R. Co., 118 Iowa 287, 92 N. W. 79. 17 CAPACITIES OF MUNICIPALITIES. § 4 enjoyment of the premises which the defendant city- had leased to the plaintiff for church and cemetery- purposes. After making the lease and pursuant to a statute the city by ordinance prohibited the further use of the premises for a cemetery. In refusing relief to the plaintiff for the reason that the city had no power to limit its legislative discretion by covenant the court said : "Sixty years ago, when the lease was made, the .premises were beyond the inhabitated parts of the city. They were a common, and bounded on one side by a vineyard. Now they are in the very heart of the city. When the defendant covenanted that the lessees might enjoy the premises for the pur- poses of burying their dead, it never entered into the contemplation of either party, that the health of the city might require the suspension or abolition of that right." In the case of Crowder v. Sullivan, 128 Ind. 486, 28 N. E. 94, 13 L. R. A. 647, the court states this principle of the inability of the municipal corporation to contract with reference to its public or govern- mental duty by saying: "A private corporation that obtains a license to use the streets of a municipality takes it subject to the power of a municipality to enact a general ordinance; for a governmental power such as that exercised in enacting police regulations can not be surrendered or bartered away even by express contract." Again in the case of Snouffer v. Cedar Rapids, &c. R. Co., 118 Iowa 287, 92 N. W. 79, the court expresses this well-established legal principle to the effect that, "in the absence of statutory author- ity, a contract or agreement, whether in the form of an ordinance or otherwise, which directly or indirectly surrenders or materially restricts the exercise of a governmental or legislative function or power, may at 2— Pub. Ut. ♦ § 5 PUBLIC UTILITIES. l8 any time be terminated or annulled by the munici- J pality." -* § 5. Limitation of governmental powers. — The powers of the municipal corporation in its capacity as an agent of the state are well defined and strictly limited by the statutory provisions granting them. There is little or no opportunity here for invoking the doctrine of liberal construction nor for extending its sphere of activity by the doctrine of implied powers. It is the duties of the sovereign that are to be per- formed in the manner provided by law and its interests alone are to be considered. On the other hand, the municipal corporation in its private proprietary and essentially business or com- mercial aspect acts as a property owner and the pro- prietor of a business enterprise for the private advan- tage of the city and its citizens as a distinct legal personality and may exercise its business powers very much in the same way as a private individual or cor- poration. In the erection and operation of gas works, electric light plants, water-works and the like, as well as in contracting for such service and in attending to matters of local interest merely for the special benefit and advantage of the city and its citizens, a municipal corporation acts as a business concern.* This principle of the liability of the municipal cor- poration on its contracts made pursuant to the power and authority conferred upon it by the state is well illustrated and accurately stated in the case of Illinois 4 Henderson v. Young, 119 Ky. 224, 26 Ky. L. 1152, 83 S. W. 583; Port Jervis Water Co. v. Port Jervis, 151 N. Y. Ill, 45 N. E. 388; Indianapolis v. Indianapolis Gas Co., 66 Ind. 396; Blood v. Manchester Electric Light Co., 68 N. H. 340, 39 Atl. 335; Palestine V. Siler, 225 111. 630, 80 N. E. 345; Denver v. Davis, 37 Colo. 370, 86 Pac. 1027, 6 L. R. A. (N. S.) 1013; Keefe v. People, 37 Colo. 317, 87 Pac. 791; Davis v. Rockport (Mass.), 100 N. E. 612. f i 19 CAPACITIES OF MUNICIPALITIES. § 5 Trust and Sav. Bank v. Arkansas City, 76 Fed. 271, 34 L. R. A. 518, decided in 1896. In holding the defend- ant city hable for the payment of rentals for water service furnished by a private corporation, and ac- cepted and used by the city for many years in accord- ance w^ith a contract formally executed by the parties, the court expressed the rule of liability in the follow- ing pertinent words: "A city has two classes of powers; the one legislative, public, governmental, in the exercise of which it is a sovereignty and governs its people; the other, proprietary, quasi private, con- ferred upon it, not for the purpose of governing its people, but for the private advantage of the inhabi- tants of the city and of the city itself as a legal per- sonality. In the exercise of the powers of the former class it is governed by the rule here invoked. In their exercise it is ruling its people and is bound to transmit its powers of government to its successive sets of of^cers unimpaired. But in the exercise of the powers of the latter class it is controlled by no such rule, because it is acting and contracting for the private benefit of itself and its inhabitants, and it may exercise the business powers conferred upon it in the same way, and in their exercise it is to be governed by the same rules that govern a private individual or cor- poration. Dillon Mun. Corp., § 109, and cases cited in the note; Safety Insulated Wire & Cable Co. v. Balti- more, 66 Fed. 140; San Francisco Gas Co. v. San Francisco. 9 Cal. 453; Commonwealth v. Philadelphia, 132 Pa. St. 288, 19 Atl. 136; New Orleans Gaslight Co. V. New Orleans, 42 La. Ann. 188, 7 So. 559; Tacoma Hotel Co. v. Tacoma Light & Water Co., 3 Wash. St. 316, 28 Pac. 516; Wagner v. Rock Island, 146 111. 139, 34 N. E. 545, 21 L. R. A. 519; Vincennes V. Citizens' Gaslight Co.. 132 Ind. 114, 31 N. E. 573; Indianapolis v. Indianapolis Gaslight & Coke Co., 66 § 6 PUBLIC UTILITIES. 20 Ind. 396; Read v. Atlantic City, 49 N. J. L. 558, 9 Atl. 759. In contracting for water-works to supply itself and its inhabitants with water, the city is not exercising its governmental or legislative powers, but its business or proprietary powers. The purpose of such a contract is not to govern its inhabitants, but to obtain a private benefit for the city itself and its denizens." § 6. Proprietary business powers. — The munici- pal corporation in contracting for the construction or purchase of plants providing such public utilities as gas, water or electric light, while acting within the scope of their authority as conferred upon them by statutory enactment, either expressly or by necessary implication, is not exercising its governmental func- tions but is acting in its private business capacity for its own special benefit and the advantage of its citizens and is liable in the same way and to the same extent as a private individual or corporation. The case of Omaha Water Co. v. Omaha, 147 Fed. i, decided in 1906, furnishes an excellent statement and a pertinent application of this principle. In holding the defendant city liable under its contract to purchase the property of the water-works company made pursuant to proper legislative authority and by the exercise of the option to purchase provided for in the franchise granted by the city to the plaintiff, the court says: "A city has two classes of powers, the one legislative or govern- mental, by virtue of which it controls its people as their sovereign, the other proprietary or business, by means of which it acts and contracts for the private advan- tage of the inhabitants of the city and of the city itself. In the exercise of powers which are strictly govern- mental or legislative the of^cers of a city are trustees for the public and they may make no grant or contract 21 CAPACITIES OF MUNICIPALITIES. § 7 which will bind the municipality beyond the terms of their office because they may not lawfully circum- scribe the legislative powers of their successors. But in the exercise of the business powers of a city, the municipality and its officers are controlled by no such rule and they may lawfully exercise these powers in the same way and in their exercise the city will be governed by the same rules which control a private in- dividual or a business corporation under like circum- stances. In contracting for the construction or pur- chase of water-works to supply itself and its inhabi- tants with water a city is not exercising its govern- mental or legislative, but is using its business or proprietary powers. The purpose of such a contract is not to govern its inhabitants, but to obtain a private benefit for the city and for its denizens. Illinois Trust & Sav. Bank v. Arkansas City, 22 C. C. A. 171, 182, and cases there cited, 76 Fed. 271, 292, 34 L. R. A. 518." § 7. Liability of municipality. — The distinction be- tween the two capacities in which municipal corpora- tions act — the one in which, as an arm of sovereignty or an agent of the state, it is charged with legislative and governmental powers; and the other in which it is a property holder conducting a business enterprise for the private advantage of the city and its citizens — is well stated in the case of Sammons v. Kearney Power &c. Co.. jy Nebr. 580, no N. W. 308, decided in 1906, where the court said: "A municipal corpora- tion is an instrumentality of the state for the better administration of government in matters of local con- cern. United States v. New Orleans, 98 U. S. 381. The main purpose of its creation is the exercise of certain governmental functions within a defined area. While it has the power to make contracts and transact I § 7 PUBLIC UTILITIES. 22 Other business not strictly governmental in character, such powers are incidental or auxiliary to its main purpose. ... In the case at bar we are dealing with an irrigation company — a quasi public corpora- tion. It is also a governmental agency, but its main purpose is the administration of a public utility. To the extent of its capacity it is bound to furnish water from its canal to persons desiring to use it on equal terms and without discrimination. In this respect it stands on the same footing as a railroad company." That the city of New York in the erection and operation of its rapid transit subway system acts in the capacity of a private business concern rather than as a governmental agency and is accordingly liable in damages to abutting property owners is decided in the case of In re Board of Rapid Transit R. Comrs., 197 N. Y. 81, 90 N. E. 456, 36 L. R. A. (N. S.) 647, 18 Ann. Cas. 366, where the court said: "In other words, the subway is a business enterprise of the city, through which money may be made or lost, the same as if it were owned by an ordinary railroad corporation. It was built by and belongs to the city as a proprietor, not as a sovereign. . . . Such a use was not within the contemplation of the original owner of the land when he parted with the title thereto for a street, or gave a perpetual right of way over the same for the purpose of a street." This principle holding a municipal corporation liable as a private individual or business concern under its contract in the purchase and operation of gas works for the debts contracted in that connection was clearly established by the early case, which has long been a leading one on the subject, of Wheeler v. Philadelphia, y'j Pa. St. 338, decided in 1875, where the court used the following language : "The most that can be urged is, that the city is acting in a double capacity; in the 23 CAPACITIES OF MUNICIPALITIES. § 8 one, exercising rights of sovereignty, in the other, performing the functions of a private corporation in the manufacture and sale of gas. . . . While it is no part of the ordinary and necessary duties of a municipal corporation to supply its citizens v^ith gas and v^ater, it is nevertheless true that it may lav^fully do so . . . Aside from the trustees, and they amount to nothing in our v\qw of the case, the gas works may be considered as property belonging to the city, and operated, not for the purpose of speculation, but to promote the comfort of the whole body of the people. As their original acquisition and subsequent use were lawful, debts contracted therefor must be paid by the city." § 8. Powers and liability determined by capacity. — This distinction of the two capacities of municipal corporations must necessarily be made and kept in mind not only in defining and fixing the nature and extent of the power of the municipal corporation but also in determining its liability, whether for the neg- ligence of its officers or duly authorized agents acting as such or with reference to its contracts duly executed within the scope of its authority. In its private or business capacity since the powers conferred are for the special benefit and advantage of the municipal corporation as such and which are only incidentally concerned with the general government of the state, the municipal corporation is generally regarded as having the same powers and being subject to the same liabilities as in the case of a private corporation or individual. § g. Municipal public utilities a business concern. — Under this distinction it follows that the municipal corporation in the construction and operation of its own water-works has the same powers which a pri- § 8 PUBLIC UTILITIES. 24 vate corporation would have and enjoy in the same connection on the theory that it is acting in a private business capacity rather than in the exercise of its pub- lic governmental functions, v^hich is well illustrated by the case of Wagner v. Rock Island, 146 111. 139, 34 N. E. 545, 21 L. R. A. 519, decided in 1893, where the court observed: ''The business, being one which is impressed with a public use, may, where proper legis- lative authority is given, be carried on directly by the municipal corporation, or it may be carried on by a private corporation acting under a proper franchise granted to it for that purpose. But, when a municipal corporation undertakes to construct and operate water- works, it does so in the exercise of its private, and not of its governmental, functions. ... In separating the two powers — public and private — regard must be had to the object of the legislature in conferring them. If granted for public purposes exclusively, they belong to the corporate body in its public, political, or munic- ipal character; but if the grant was for purposes of private advantages and emolument, though the public may derive a common benefit therefrom, the corpora- tion, quo ad hoc, is to be regarded as a private company ... Its power to build and maintain water-works, and furnish water to its inhabitants for a consideration, is derived from, and is governed solely by, the state ; and even though the intention of the city and its officers may have been to furnish water to the people of the city at the mere cost of maintaining and operating the works, and to charge no rates that would result in accumulating a surplus revenue, the city is not bound to persist in that policy, but is at liberty, at any time, to abandon it, and im- pose reasonable rates and charges, although by so doing a revenue may be realized." To the effect that the municipal corporation, while 25 CAPACITIES OF MUNICIPALITIES. § 8 acting in the discharge of its private business func- tions, is liable for the negligence of its officers to the same extent and for the same reason that determines the liability of a private concern is illustrated by the case of Denver v. Davis, 37 Colo. 370, 86 Pac. 1027, 6 L. R. A. (N. S.) 1013, decided in 1906, where the court says: "In the discharge of its functions a municipality is called upon to perform duties of two classes, the one political and governmental in its char- acter, and the other private and corporate. . . . The rule which determines the liability or non-liability of a municipality in cases of this nature is the char- acter of the duty performed, rather than the depart- ment, officer, or agent of the corporation by whom the duty is performed. . . . Nevertheless, it does not follow that the municipality is relieved from liabil- ity for the negligence or carelessness of such officer, in the performance of duties imposed upon him by the municipality which are not of a public govern- mental character. . . . The overwhelming weight of authority is to the effect that the superintendence and care of the streets and alleys of a city, and all that directly pertains thereto, are peculiarly in the class of municipal duties, for the negligence of which the city, in its corporate character, is liable. . . . The record before us warrants the conclusion that in this case the city was acting in its private and cor- porate capacity, through its health commissioner, for the convenience and benefit of its inhabitants, and not as an agent of the state." This principle is expressed by the court in the case of Palestine v. Siler, 225 111. 630, 80 N. E. 345, decided in 1907, as follows: "We have accordingly held that where a municipality acts in the dual capacity of fur- nishing water, gas or other commodity, both for pub- lic and private use. under authority of law, it stands § 8 PUBLIC UTILITIES. 26 Upon the same footing as would a private corporation or individual and is alike liable for its neglect or wrongful acts." Having in mind then this distinction of the two capacities in which a municipal corporation may act — the one governmental and public in which as an arm of sovereignty or an agent of the state it is charged with legislative and governmental powers, and the other in which it is a property holder and a business proprietor conducting enterprises or con- tracting for their service from another for the private advantage of the city and its citizens — it is apparent that this treatise on municipal public utilities is pri- marily concerned with the municipal corporation act- ing in the latter capacity as a business concern. CHAPTER III. CONSTRUCTION OF MUNICIPAL CHARTERS. Section. 10. Reasonable construction. 11. Power and discretion limited only by fraud or abuse. 12. Power by implication. 13. Liberal construction. 14. Limitations of fraud and ultra vires. 15. Power to dispose of surplus capacity. § 10. Reasonable construction. — In construing mu- nicipal charters only such strictness is observed as gives effect to every power clearly intended to be conferred on the municipal corporation and every power necessarily implied in order to permit of the complete exercise of the powers granted. While the sphere of their activity is necessarily confined to the limits prescribed by the law creating them, within these limits their action is favored by the courts, and powers intended to be conferred will not be de- feated or impaired by a strict construction of the char- ter of the municipal corporation to which such powers are granted.^ § II. Power and discretion limited only by fraud or abuse. — The rule of law is well established that the discretion of municipal corporations, within the sphere of their powers and particularly their private powers, is absolute and not subject to judicial control, except in cases where fraud is found or where the power or discretion is being grossly abused to the oppression of 1 Smith V. Madison, 7 Ind. 86; Kyle v. Malin, S Ind. 34. 27 § II PUBLIC UTILITIES. 28 the citizen. In its private commercial capacity while acting primarily as a business concern, the powers conferred on a municipal corporation are for its own special benefit and advantage. The interest of the state is secondary and incidental, for the main purpose is to benefit the particular locality incorporated by increasing the opportunities and extending the advan- tages of its citizens. Recognizing this to be the princi- pal object in the creation of such corporations and the sole purpose of endowing them with such commercial and proprietary powers as permit them and their citizens to enjoy the benefits of municipal public utili- ties, the courts permit and favor the exercise of the fullest discretion in the enjoyment and administration of such powers which are consistent with the general object of their grant and the best interests of all par- ties concerned who are intended to be benefited by such advantages. The discretion of municipal corporations in the exercise of their powers is as wide as that enjoyed by the general government and is to be exercised in accordance with the judgment of the authorities in charge of the municipal corporation as to the neces- sity or expediency of each particular subject when it arises. The legislature is one of the co-ordinate branches of our state government and within its sphere is supreme and so is the municipal corporation within its prescribed limits, whether in the sphere of legislation or in the exercise of discretion with ref- erence to its proprietary interests. The judiciary has little more right or power to interfere with the acts of one than of the other. In all cases where the municipal corporation or its authorized agents or officers act within their powers or exercise discretion granted them expressly or by necessary implication in order to give effect to powers expressly granted, 29 CONSTRUCTION OF CHARTERS. § II the courts will not interfere unless fraud is found or the power or discretion vested in them is being grossly- abused by their action,^ 2 ALABAMA. — Montgomery Gaslight Co. v. Montgomery, 87 Ala. 245, 6 So. 113, 4 L. R. A. 616. ARKANSAS.— Lackey v. Fayettevllle Water Co., 80 Ark. 108, 96 S. W. 622; Southwestern Tel. & T. Co. v. Wayne, 86 Ark. 548, 111 S. W. 987. COLORADO.— Thomas v. Grand Junction, 13 Colo. App. 80, 56 Pac. 665. CONNECTICUT.— Bridgeport v. Housatonuc R. Co., 15 Conn. 475. FEDERAL.— Ft. Scott v. Eads Brokerage Co., 117 Fed. 51. ILLINOIS.— Warren v. Chicago, 118 111. 329, 11 N. E. 218. INDIANA.— Baumgartner v. Hasty, 100 Ind. 575, 50 Am. R. 830; Indianapolis v. Indianapolis Gaslight, &c., Co., 66 Ind. 396; First Nat. Bank v. Sarlls, 129 Ind. 201, 28 N. E. 434, 13 L. R. A. 481; Pittsburgh, etc. Ry. v. Crown Point, 146 Ind. 421, 45 N. E. 587, 35 L. R. A. 684; Rockebrandt v. Madison, 9 Ind. App. 227, 36 N. E. 444; Valparaiso v. Gardner, 97 Ind. 1, 49 Am. Rep. 416; Vincennes v. Gaslight Co., 132 Ind. 114, 31 N. E. 573. IOWA.— Des Moines Gas Co. v. Des Moines, 44 Iowa 505, 24 Am. Rep. 756. KANSAS.— Columbus Water Co. v. Columbus, 48 Kans. 99, 28 Pac. 1097, 15 L. R. A. 354; State ex rel. Means v. Hiawatha, 53 Kans. 477, 36 Pac. 1119. KENTUCKY.— Henderson v. Young, 119 Ky. 224, 26 Ky. L. 1152, 83 S. W. 583. LOUISIANA.— Conrey v. Waterworks Co., 41 La. Ann. 910. MASSACHUSETTS.— Spaulding v. Lowell, 23 Pick. (Mass.) 71. MICHIGAN.— Torrent v. Muskegon, 47 Mich. 115, 10 N. W. 132, 41 Am. Rep. 715. MINNESOTA.— Janeway v. Duluth, 65 Minn. 292, 68 N. W. 2l. MISSOURI.— Fruin-Bambrick Const. Co. v. St. Louis Shovel Co., 211 Mo. 524, 111 S. W. 86. NEW JERSEY.— Atlantic City Waterworks Co. v. Atlantic City, 48 N. J. L. 378, 6 Atl. 24. NEW YORK.— Admiral Realty Co. v. New York, 206 N. Y. 110, 99 N. E. 241; Gamble v. Watkins, 7 Hun (N. Y.) 448; Sun Printing & Publishing Assn. v. New York, 8 App. Div. (N. Y.) 230, 152 N. Y. 257, 46 N. E. 499, 37 L. R. A. 788. NORTH CAROLINA.— Asbury v. Albemarle (N. C), 7S S. E. 146. OREGON.— Avery v. Job, 25 Ore. 512, 36 Pac. 293. RHODE ISLAND.— Austin v. Coggeshall, 12 R. I. 329, 34 Am. Rep. 648. TEXAS.— Waterbury v. Laredo, 68 Tex. 565, 5 S. W. 81. §11 PUBLIC UTILITIES. 30 That the power of municipal corporations of a business character vests in the corporations the neces- sary control and discretion with regard to their action or power to provide or contract with another for their supply of water is well expressed by the early leading case of Des Moines Gas Co. v. Des Moines, 44 Iowa 505, 24 Am. Rep. 756, decided in 1876, as follows: "Within the sphere of their delegated powers munici- pal corporations have as absolute control as the gen- eral assembly would have if it never had delegated such powers and exercised them by its own laws. Taylor v. Carondelet, 22 Mo. no; Heland v. Lowell, 3 Allen (Mass.) 408. . . . The discretion of such corporations within the sphere of their powers is as wide as that possessed by the government of the state. St. Louis V. Bofifinger, 19 Mo. 15. And discretionary powers are to be exercised according to their judg- ment as to the necessity or expediency of any given measure. Kelley v. Milwaukee, 18 Wis. 85. . . . The fact that the ordinance sought to be enjoined amounts to a contract with another gas company by no means deprives it of its legislative character. These cor- porations must be permitted to promote the welfare of the inhabitants thereof in their own way, so far as the form their respective ordinances shall assume is concerned. Suppose the city had determined to put in gas works, to be owned and controlled by the city, and thereby supply the public lamps and buildings with gas, and by ordinance so provided; could such an ordinance be enjoined, or would this have been right- ful legislation? And because the city chose by ordi- UNITED STATES.— Vicksburg v. Vicksburg Waterworks Co., 206 U. S. 496, 51 L. ed. 1155. VIRGINIA.— Winchester v. Redmond, 93 Va. 711, 25 S. E. 1001, 57 Am. St. 822. WYOMING.— Edwards v. Cheyenne, 19 Wyo. 110, 114 Pac. 677. 31 CONSTRUCTION OF CHARTERS. § 12 nance to contract with some one to do the same thing, does that make it wrongful?" § 12. Power by implication. — In the construction of municipal charters for the purpose of defining and fixing the nature and extent of the powers of munici- palities, whether express or implied, the court con- cedes to them a wide discretion, as is shown by the case of Torrent v. Muskegon, 47 Mich. 115, 10 N. W. 132, 41 Am. Rep. 715, decided in 1881, in which the court refused to enjoin the carrying out of a contract for the building of the city hall and said: "But in saying this, we do not assume that it belongs to this court, or any other, to dictate to the city how it shall spend its money. The council must use its own dis- cretion where it will save and where it will spend; and the case must be a very clear one, and the subterfuge very plain, before that discretion can be regarded as having been exceeded so as to show an excess of power under a pretense of keeping within it. It is not the business of courts to act as city regulators, and unless the authority of the representatives of the citizens has been exceeded, their action can not be interfered with merely because it may not seem to other persons to be as wise as it might be. If cities were new inventions, it might with some plausibility be claimed that the terms of their char- ters, as expressed, must be the literal and precise limits of their powers. But cities and kindred munici- palities are the oldest of all existing forms of govern- ment, and every city charter must be rationally construed as intended to create a corporation which shall resemble in its essential character the class into which it is introduced. There are many flourishing cities whose charters are very short and simple docu- ments. . . . But if we were to assume that there § 12 PUBLIC UTILITIES. 32 is nothing left to implication, we should find the longest of them too imperfect to make city action possible." In the case of Atlantic City Waterworks Co. v. Atlantic City, 48 N. J. L. 378, 6 Atl. 24, where the ac- tion was to recover for water furnished the defendant city under a contract made with ample legislative au- thority, the court permitted a recovery although it was urged by way of defense that the contract was perpetual in form and void because beyond the power of the city to make. In holding that it had no power to circumscribe the grant in question the court ob- served that if the ordinance warranting the making of this contract was an act of gross indiscretion, this court could have adjudged it invalid by force of its prerogative to supervise corporations of this class. In the case of Columbus Water Co. v. Columbus, 48 Kans. 99, 28 Pac. 1097, 15 L. R. A. 354, decided in 1892, the defense to an action for water furnished the defendant city being its inability to make an exclusive contract for such service, the court in permitting recovery, observed : "Neither would we apply the rule with the same strictness to municipal corporations that should govern private corporations organized for gain. Courts should be governed by the conditions and circumstances surrounding municipalities, and re- gard them as branches of the sovereign government. When improved methods are offered, which will give to the city better facilities in the way of water, lights and travel, or in any other manner give to its inhabi- tants increased safety and protection, the governing power of the city should be free to act, but until such time comes courts should not set aside contracts which have been, in part at least, executed, unless for some good cause." 33 CONSTRUCTION OF CHARTERS. § I3 § 13. Liberal construction. — That the courts favor a Hberal construction of the private or proprietary- powers granted a municipal corporation is well illus- trated by the case of the Sun Printing & Publishing Assn. V. New York, 8 App. Div. (N. Y.) 230, 152 N. Y. 257, 46 N. E. 499, 37 L. R. A. 788, decided in 1896, which was sustained and reinforced in its application by the case of Admiral Realty Co. v. New York, 206 N. Y. no, 99 N. E. 241, decided June 29, 1912, both of which cases permit the city of New York to build, maintain and operate or lease its underground rapid transit system. The progressive spirit of the decision in extending the sphere of municipal activity to meet the needs and contribute to the convenience of the citizens is as interesting and striking an example of the desire of the court to keep abreast of our civilization as it is a practical illustration of the necessity of their doing so if municipal corporations and their rapidly increas- ing population are to be permitted to have and enjoy the modern conveniences and more recent inventions. In the course of its decision the court observed that: "In considering this question it must be premised that cities are not limited to providing for the strict neces- sities of their citizens. Under legislative authority, they may minister to their comfort, health, pleasure, or education. . . To hold that the legislature of this state, acting as the parens patriae, may employ for the relief or welfare of the inhabitants of the cities of the state only those methods and agencies which have proved adequate in the past would be a narrow and dangerous interpretation to put upon the funda- mental law. No such interpretation has thus far been placed upon the organic law by the courts of this state. Whenever the question has been considered, it has been universally treated in the broadest spirit. . . . The true test is that which requires that the work shall 3— Pub. ut. § 13 PUBLIC UTILITIES. 34 be essentially public and for the general good of all the inhabitants of the city. It must not be under- taken merely for gain or for private objects. Gain or loss may incidentally follow, but the purpose must be primarily to satisfy the need or contribute to the con- venience of the people of the city at large. Within that sphere of action, novelty should impose no veto. Should some inventive genius bye and bye create a system for supplying us with pure air, will the repre- sentatives of the people be powerless to utilize it in the great cities of the state, however extreme the want and dangerous the delay? Will it then be said that pure air is not as important as pure water and clear light? We apprehend not." A further interesting illustration of the spirit of progress which induced the court to recognize the increasing demands and opportunities which come with the progress of civilization in its tendency to change what were at one time regarded as luxuries into necessities is furnished by the case of Holton v. Camilla, 134 Ga. 560, 68 S. E. 472, 31 L. R. A. (N. S.) 116, 20 Am. & Eng. Ann. Gas. 199, where the court held that: "If a city has the right to furnish heat to its inhabitants because conducive to their health, comfort and convenience, we see no reason why they should not be permitted to furnish ice." This court accordingly held that the city had the power in con- nection with its water-works system to furnish ice with which to cool the water as demanded by the climate of certain seasons of the year in that locality in the interest not only of the convenience and com- fort of the citizens but for sanitary reasons in the preservation of their health. These principles are well expressed in the case of Thomas v. Grand Junction, 13 Colo. App. 80, 56 Pac. 665, where it is said: "The whole spirit of the law is 35 CONSTRUCTION OF CHARTERS. §13 SO far as possible to permit under reasonable restric- tions the privilege of self-government. In fact, that it was the intent of the legislature in its grant of pow^ers to municipal corporations to give them the fullest power and utmost freedom of action with ref- erence specially and exceptionally to the securing of such a water supply as might be deemed needful, is clearly manifest from the very terms of the act." In the case of Vincennes v. Citizens' Gas Light Co., 132 Ind. 114, 31 N. E. 573, this rule of law is laid down as follows: "The making of contracts for the supply of gas or water is a matter, delegated to the governing power of municipalities, to be exercised according to their own discretion; and in the absence of fraud, while acting within the authority delegated to them, their action is not subject to review by the courts. The length of time for which they shall bind their towns or cities depends upon so many circum- stances and conditions as to situation, cost of supply and future prospects, that the courts can interfere only in extreme cases and upon reasonable application." In Conrey.v. Water-works Co., 41 La. Ann. 910, the court said: "If the city had the power to make the contract, and confined herself within the limits of the power, the quantity and kind of water, the price, etc., were matters within the legislative discretion of the city council, and unless there is fraud in the exe- cution of the contract, courts will not inquire into this discretion." Again in the case of Janeway v. Duluth, 65 Minn. 292, 68 N. W. 24, the court said: "Whether or not a new water plant is necessary is a legislative question and not a judicial one. The court can not substitute its judgment for that of the city council and the voters of the city." The case of Henderson v. Young, 119 Ky. 224, 26 Ky. L. 1 152, 83 S. W. 583, also contains a good § 14 PUBLIC UTILITIES. 36 Statement of this principle as well as the reason on which it is founded: "In the management and opera- tion of its electric light plant a city is not exercising its governmental or legislative powers, but its business powers, and may conduct it in the maner which promises the greatest benefit to the city and its inhab- itants in the judgment of the city council; and it is not within the province of the court to interfere with the reasonable discretion of the council in such mat- ters." In Edwards v. Cheyenne, 19 Wyo. no, 114 Pac. 677, decided in 191 1, the court says: "As a municipal corporation may lawfully extend its system of water- works and provide additional reservoir facilities for the purpose not only of increasing its water supply, but as well for the purpose of improving the method of caring for and distributing the same, and whether, when, and in what manner it shall so do are matters exclusively within its discretion, when properly exer- cised and in good faith, and may further dispose of any excess of water supplied by the system for other than purely municipal uses, it follows that a bare allegation that a contract by which the municipality has engaged to supply water from such system of water-works is ultra vires and unlawful is insufBcient to justify a court of equity in avoiding it, or in re- straining the work of constructing the system or the acquiring or taking of land for that purpose." § 14. Limitations of fraud and ultra vires. — But unless expressly authorized by statute municipal cor- porations have no authority to furnish entertainment for guests of the corporation at the public expense. In doing this without such authority the courts are of the opinion that there is an abuse of discretion, and that expenses are incurred which the citizens should 37 CONSTRUCTION OF CHARTERS. § I4 not be made to pay. This rule is well stated in the case of Gamble v. Watkins, 7 Hun (N. Y.) 448, which was an action to recover for meals and lodging, fur- nished in entertaining a party of representatives of the press, that had been authorized by a resolution of the board of trustees of said village. In refusing recovery the court said: "We think that the defendant had no power to appropriate money for the entertainment of a company of editors visiting the place. This is not a duty for which the municipality was created. It is said that the expenditure has been repaid by the effect on the village of subsequent editorial puffs. But it is not proper for village trustees to hire editors to praise the attractions of the place. If it had been shown that the editors were paupers, then, under the duty of a village to take care of the poor, there might have been some propriety in keeping them from starv- ing." Again in the case of Austin v. Coggeshall, 12 R. I. 329, 34 Am. Rep. 648, the court permanently restrained the payment by the city treasurer of an account incurred in entertaining officers of certain British ships of war while in Newport harbor. "The defense would be more meritorious if the persons in whose behalf it is interposed had any claim on the city for value received. But they have none. The city neither danced at the ball nor feasted at the banquet. It got nothing substantial out of them. . . . It is well settled that a municipal corporation, when sued directly on a contract which it is incapable of making, can not be estopped from taking advantage of its incapacity because the party suing has acted on the contract in good faith." These cases then will serve to illustrate the limita- tions which the courts place on the discretion of the municipality in cases of its abuse in order to protect the citizens. In refusing recover\' for services to the §15 PUBLIC UTILITIES. 38 city, rendered in good faith, the court shows how far it will go to protect the citizens against an abuse of power by their servants, the municipal authorities, and invokes the well accepted rule of law which requires the individual to know the extent of the authority possessed by the municipality in contracting with it. And as it is axiomatic that fraud vitiates everything it touches, it follows that where fraud is found the courts will not respect the discretionary rights of municipal corporations.^ § 15. Power to dispose of surplus capacity. — That the attitude of our courts favors the fair exercise of the discretion vested in municipal corporations in connection with powers granted to them, and that such corporations are not limited strictly to their actual needs and demands at any particular time, but that municipalities may by way of anticipation determine their capacity and build for the future, is well estab- lished. If the municipal corporation owns buildings and equipment and has employed men to discharge its duties which do not require the entire service of such properties or men, it may contract for their use for private purposes. The courts generally permit this temporary diversion of forces, lawfully employed by the city for public service, to the performance of pri- vate work under contract, but only to the extent that there is a surplus of such forces. This privilege of subletting such excess properties or the use of its sur- plus forces is granted by the courts in the absence of any express statutory authority for the practical pur- pose of saving the loss that would result from their nonuser. But authority must always be found in the 3 Ft. Scott V. Eads Brokerage Co., 117 Fed. 51 ; Waterbury v. Laredo, 68 Tex. 565, 5 S. W. 81; First Nat. Bank v. Sarlls, 129 Ind. 201, 28 N. E. 434, 13 L. R. A. 481; Winchester v. Redmond, 93 Va. 711, 25 S. E. 1001, 57 Am. St. 822. 39 CONSTRUCTION OF CHARTERS. §15 first instance for the employment of these forces and the acquirement of the equipment for serving the pub- he so that their use for private purposes is only tem- porary and incidental. A municipal corporation, hav- ing in its public buildings rooms which the court held it had the authority to build looking to the future growth and the consequent increased demands for ad- ditional rooms, which were not needed for the time being for public purposes, is not obliged to let them stand idle but may realize a revenue by renting them for private purposes.* An interesting illustration and statement of this principle is furnished by the case of The Maggie P, 25 Fed. 202, decided in 1885, which was an action for breach of contract in failing to pump water out of a sunken boat and to raise it that was made by the city of St. Louis which had control of its levies and harbor and was bound to keep its wharf free from wrecks. While observing that a city could not make a con- tract for the discharge of a purely public duty, the court held this contract valid and the city liable for its breach in the following language: "At the same time, when it has in its possession instrumentalities, * COLORADO.— Colorado Springs v. Colorado City, 42 Colo. 75, 94 Pac. 316. FEDERAL.— Pikes Peak Power Co. v. Colorado Springs, 105 Fed. 1; Riverside, &c., R. Co. v. Riverside, 118 Fed. 736; The Maggie P. 25 Fed. 202. INDIANA.— Scott V. La Porte, 162 Ind. 34, 6S N. E. 278. KENTUCKY.— Rogers v. Wickliffe, 29 Ky. L. 587, 94 S. W. 24. MARYLAND.— Gottlieb-Knabe & Co. v. Macklin, 109 Md. 429, 71 Atl. 949, 31 L. R. A. (N. S.) 580. MASSACHUSETTS.— French v. Quincy. 3 Allen (Mass.) 9; George v. School District, 6 Mete. (Mass.) 497; Wheelock v. Lowell, 196 Mass. 220, 81 N. E. 977; Worden v. New Bedford, 131 Mass. 23, 41 Am. Rep. 185; Davis v. Rockport, (Mass.) 100 N. E. 612. NEBRASKA.— Bell v. David City (Neb.), 142 N. Y. 523. TEXAS.— Crouch v. McKinney, 47 Tex. Civ. App. 54, 104 S. W. 618; Paris v. Sturgeon, 50 Texas Civ. App. 519, 110 S. W. 459. WASHINGTON.— Farwell v. Seattle, 43 Wash. 141, 86 Pac. 217. § 15 PUBLIC UTILITIES. 4O and hires employes for the purpose of discharging some public duty, I see no reason why, when the exi- gencies of public duties do not require the use of those instrumentalities and employes, it may not make a valid contract to use them in private service. Thus, take the fire department. The city, having its engines and firemen, might make a valid contract with me to pump water out of a cellar, and compel me to pay for this service. . . . And, generally speaking, when public duty does not interfere with private service a city may make a valid contract for the use of its in- strumentalities in the latter. Now, pumping water out of a sunken boat and raising it is a matter of principally private interest to the owner of the boat. . . . It is also true that there is no authority in any ordinance, etc., specifically empowering any officer of the city to contract for doing this kind of service. But I do not think that is very material, because the testimony shows that the city, through its officers, has been in the habit of making these contracts and receiving compensation therefor; and having made that a business, etc., it does not lie in its mouth to say now that there was no officer authorized by ordinance to make this kind of a contract." The case of Pikes Peak Power Co. v. Colorado Springs, 105 Fed. i, offers a good statement of this rule of law, together with the reason upon which it is founded: "But it is equally true that municipalities and their officers have the power and use of all public utilities under their control for the benefit of their cities and citizens, provided always that such applica- tion does not materially impair the usefulness of these facilities for the purpose for which they were pri- marily created. . . . Where a city has had legis- lative authority to erect a dam for the purpose of pro- 41 CONSTRUCTION OF CHARTERS. §15 viding water-works for the city, it might lawfully lease for private purpose any excess of water not re- quired for its water-works. This is a just and reason- able rule. It is a rule not inconsistent with any prin- ciple of law or equity and in accord with that good sense and good business principles which recognize as a public good the growth of two blades of grass where but one grew before, and the conversion of waste to use." The case of George v. School District, 6 Mete. (Mass.) 497, decided in 1843, questioned the authority to erect a second story for a hall over the public school room which was to be for the occasional use of the school. In upholding the contract, however, the court observed: "This also was matter of expediency. If the district considered that a hall, or the occasional use of a hall, would be beneficial to the school, we think it was within their power to provide for it, as incidental to the general power to provide a school house. Spaulding v. Lowell, 23 Pick. (Mass.) 71." The same principle is sustained by the Supreme Court of Massachusetts in the recent case of Wheelock V. Lowell, 196 Mass. 220, 81 N. E. 977, decided in 1907, permitting certain private uses to be made of a town hall which had been erected with proper au- thority as an assembly for the inhabitants, the court saying: "The reported facts show a substantial use of Huntington Hall for political rallies, conventions and other public meetings of citizens, although from time to time it had been rented for purposes of amuse- ment and instruction. That the building has been also let for private uses, when not required for public needs, does not affect the general legal purpose." This principle together with its practical applica- tion and the reason upon which it is founded is well defined by the case of Riverside, &c. R. Co. v. River- § 15 PUBLIC UTILITIES. 42 side, ii8 Fed. 736, decided in 1902, where the defend- ant city had contracted with the plaintiff railway com- pany for the sale of its surplus electrical power. In sustaining such contract the court said: "The power contracted to be furnished to complainant by said city was, at the date of the contract, surplus power, that is to say, power received by said city under its contract with the Redlands Electric Light and Power Com- pany, and not required by users of Hght or power other than complainant. . . . Complainant is not in default upon its contract, but defendants have threatened to, and, unless restrained by this court, will sever the connection between its wires and the Red- lands' wires, and cut off the Redlands' electricity from complainant, and by so doing, prevent the running of complainant's cars and the operation of its street railway. ... It was under the conditions above named that the city entered into its contract with the complainant, and, bearing in mind that the acquisi- tion, construction, maintenance, and operation of street railways are among the declared purposes of the city's organization, the conclusion seems to be unavoidable that said contract was within the scope of the city's powers, and its obligations can not be terminated or changed by any subsequent increase in the demand for electrical lighting." In the case of Crouch v. McKinney, 47 Tex. Civ. App. 54, 104 S. W. 518, decided in 1907, the city, hav- ing established an electric light plant the capacity of which for the time being was greater than necessary for the lighting of its streets, was permitted to sell the excess or surplus in supplying lights to individual citi- zens for their private use, the court observing that: "When the city has a surplus of power, after discharg- ing its duty to the public, there seems to be no question of its authority to sell the excess to private citizens. 43 CONSTRUCTION OF CHARTERS. § I5 Nalle V. Austin, 21 S. W. 380." The case of Colorado Springs v. Colorado City, 42 Colo. 75, 94 Pac. 316, decided in 1908, permitted the city to dispose of its excess supply of water, and having made a contract to do so, the city was held liable to the faithful per- formance of such contract and it was not permitted to set up the plea of lack of authority by way of defense. The limitations placed upon this rule by the courts is suggested by the case of Gottlieb-Knabe & Co. v. Macklin, 109 Md. 429, 71 Atl. 949, 31 L. R. A. (N. S.) 580, decided in 1909, where the court said: "This is not the case of a municipal corporation perverting the functions of government by deliberately and indefi- nitely engaging in business for profit, and entering into competition with its taxpayers, from whom it exacts a license which it does not itself pay. It is but the temporary, casual, and incidental use of unused public property, done in the practice of a public econ- omy to avoid loss of revenue upon such unused public property, and to lighten thereby the general burden of taxation." In the case of Farwell v. Seattle, 43 Wash. 141, 86 Pac. 217, decided in 1906, an injunction was granted to prevent the defendant city from contracting to fur- nish water to the adjoining city of Ballard for the reason that the authority of the city was limited to its own territory and that power would not be implied permitting it to supply neighboring cities with water. It does not appear from the case that the contract was for temporary service or that it was limited to the surplus water of the city so that the case serves as an illustration of the proper limitation of the principle in question. The court expressed its decision in the fol- lowing language : "It thus appears from the foregoing that the power conferred upon the city by the legisla- §15 PUBLIC UTILITIES. 44 ture and also by the city charter is Hmited to the ownership and operation of the water-works for the purpose of supplying the city 'and its inhabitants with water.' A municipal corporation is limited in its powers to those granted in express words or to those necessarily or fairly implied in or incident to the powers expressly granted, and also to those essential to the declared objects and purposes of the corpora- tion. It is a general principle that a municipal cor- poration can not usually exercise its powers beyond its own limits, and if in any case it has authority to do so, it must be derived from some statute which expressly or impHedly permits it. The doctrine of ultra vires is applied with greater strictness to municipal bodies than to private corporations. . . . Tested by the above-mentioned principles and by the statutory and charter authority above quoted, the power of the city of Seattle to furnish water from its own plant is limited to the city itself and its own inhabitants." CHAPTER IV. WHAT ARE MUNICIPAL PURPOSES WITHIN THE MEANING OF THE CONSTITUTION. Section. 16. Providing municipal public utilities discretionary. 17. Powers of municipal corporations fixed by construction. 18. Liberal construction of "municipal purposes." 19. Municipal public utilities as "municipal purposes." 20. Water-works a municipal purpose. 21. Electric light plant. 22. Brooklyn bridge. 23. Rapid transit system. 24. Public memorial monument. 25. Power to lease municipal rapid transit system. 26. Natural gas plant. 27. Convention hall. 28. Public wharves. § 1 6. Providing municipal public utilities discre- tionary. — All the functions and powers belonging to municipal corporations which are not governmental and public are strictly municipal and proprietary. Within this latter class of functions and belonging to the private business capacity of municipal corpora- tions are municipal public utilities. The powers granted and the duties consequently imposed upon municipal corporations with reference to their munici- pal public utilities are discretionary and not imperative in their nature because the providing of such public utilities is a matter resting in the discretion of the municipal corporation, and unless such discretion is grossly abused, its exercise will not be interfered with by the courts. 45 § 17 PUBLIC UTILITIES. 46 § 17. Powers of municipal corporations fixed by construction. — Such powers, indeed, are granted by the legislature of the state for the special use and private advantage of the municipal corporation. In granting and regulating these powers the legislature in turn is subject to the limitations of both the federal and state constitutions, and the attitude of our courts in their construction of these constitutional limitations on the powers vested in municipalities by statutory enactment with reference to the ownership and opera- tion of municipal public utilities largely determines the scope of the power of such municipal corporations in the matter of providing themselves and their citizens with the advantages of municipal public utilities. The important and ever increasing line of decisions defin- ing the constitutional limitations of municipal corpora- tions in this connection and fixing the nature and extent of their power determines what are municipal purposes within the meaning of the constitution. § 18. Liberal construction of "municipal pur- poses." — The judicial construction of the term "mu- nicipal purpose" in this connection is essential in determining the extent of the powers of municipal corporations expressly granted by statute, and in defining these statutory powers with reference to the question as to whether they are concerned with munic- ipal purposes within the meaning of the constitution and in fixing the extent to which the people may be taxed for the purpose of providing these municipal public utilities. And while any abuse of authority which would result in the imposition of taxation without right has always been jealously guarded against by our courts as a violation of one of the very first and most fundamental of the principles of our government since the day of Magna Charta, the 47 MUNICIPAL PURPOSES. § I9 courts have been liberal in extending the meaning of the term "municipal purpose" so as to permit our municipalities promptly to take advantage of new in- ventions and modern conveniences for their private benefit and the advantage of their citizens. § 19. Municipal public utilities as "municipal pur- poses." — While the intention of the legislature as ex- pressed in the statute is effective only when within the scope of the constitutional limitation, in deter- mining what may be granted by the statute not in- consistent with the constitution, the courts have generally been favorable to the granting of the power and upheld the statutes providing for municipal public utilities. In defining the extent of the power of the municipal corporation to provide itself with municipal public utilities it is accordingly necessary to determine what public utilities, provided for by statute, are in- cluded within "municipal pwirposes."^ ' CONNECTICUT.— Board of Water Commissioners (Conn.), 87 Atl. 870. FLORIDA.— Jacksonville Electric Light Co. v. Jacksonville, 36 Fla. 229, 18 So. 677, 30 L. R. A. 540, 51 Am. St. 24; Middleton v. St. Augustine, 42 Fla. 287. MARYLAND.— Mealey v. Hagerstown, 92 Md. 741, 48 Atl. 746. MASSACHUSETTS.— Opinion of the Justices, 150 Mass. 592, 24 N. E. 1084, 8 L. R. A. 487; Opinion of the Justices, 155 Mass. 598, 30 N. E. 1142, 15 L. R. A. 809; Townsend v. Boston, 187 Mass. 283, 72 N. E. 991. MINNESOTA.— Minneapolis v. Janney, 86 Minn. Ill, 90 N. W. 312. MISSISSIPPI.— Hazelhurst v. Mayes, 84 Miss. 7, 36 So. 33, 64 L. R. A. 805. MISSOURI.— State ex rel. v. Allen, 178 Mo. 555, 77 S. W. 868. NORTH CAROLINA.— Greensboro v. Scott, 138 N. C. 181, 50 S. E. 589. NEW HAMPSHIRE.— Newport v. Unity, 68 N. H. 587, 44 Atl. 704, 73 Am. St. 626. NEW YORK.— Admiral Realty Co. v. New York, 206 N. Y. 110, 99 N. E. 241; Comstock v. Syracuse, 5 N. Y. S. 874; Hequembourg v. Dunkirk, 49 Hun (N. Y.) 550, 2 N. Y. S. 447, 18 N. Y. St 570; Parsons § 20 PUBLIC UTILITIES. 48 § 20. Water-works a municipal purpose. — In the case of Comstock v. Syracuse, 5 N. Y. S. 874, decided in 1889, the court defines the term "city or municipal purpose" in connection with its holding that the city may provide its inhabitants with water, supported by the following practical argument: "It has already been suggested that paramount to all single require- ments which the wants of a city demand is that of an abundant supply of pure and wholesome water. The health and Hfe of the citizens are involved in this, and the prosperity of the city and the safety of its property are dependent upon it. In the light of its importance we have in this state invested private corporations, created for the purpose of furnishing water to villages and cities, with the extraordinary power of the exer- cise of eminent domain, although the same is created for and looks only to securing to its promoters in- dividual profit alone. I am not aware that this power is invested in any purely private corporation, except organized for the purpose named. While it is true that a city may, if it so elect, rely upon the efforts of individuals and companies for its water supply, whether it shall do so is a matter of discretion on its part. The necessities of the case, however, are so great, and the welfare of the people so much involved in the furnishing and maintenance of a reliable and continuous service, that prudence would seem to dic- V. Van Wyck, 56 App. Div. 32y, 67 N. Y. S. 1054; People ex rel. Mur- phy V. Kelly, 76 N. Y. 475; Sun Printing & Publishing Assn. v. New York, 8 App. Div. (N. Y.) 230, 152 N. Y. 257, 46 N. E. 499, 37 L. R. A. 788. OHIO.— State ex rel. v. Toledo, 48 Ohio St. 112, 26 N. E. 1061, 11 L. R. A. 729. OKLAHOMA.— State v. Barnes, 22 Okla. 191, 97 Pac. 997. UNITED STATES.— Hamilton Gaslight & Coke Co. v. Hamilton, 146 U. S. 258, 36 L. ed. 963. . VERMONT.— Burlington v. Central Vermont R. Co., 82 Vt. 5, 71 Atl. 826. 49 MUNICIPAL PURPOSES. § 21 tate that satisfactory results will be made more secure where the city assumes this important duty, and at- tends to its performance. In the light of these sug- gestions I find no difficulty in concluding that a sup- ply of water for city purposes, as well as for the use of its inhabitants, is a city enterprise, and peculiarly for a city purpose; nor are we without authority upon this subject." § 21. Electric light plant. — The case of Hequem- bourg V. Dunkirk, 2 N. Y. S. 447, 18 N. Y. St. 570, 49 Hun (N. Y.) 550, decided in 1888, was an action to enjoin the defendant city from constructing an electric light plant. The question decided by this case is whether the issuing of bonds to establish an electric light system for the purpose of supplying the said city and its inhabitants with electricity is in vio- lation of article 8, section 11 of the Constitution, which provides that "no county, city, town or village shall hereafter give any money, . . . nor shall any such county, city, town or village be allowed to incur any indebtedness, except for county, city, town or village purposes." In refusing to enjoin the erec- tion of the plant the court held that furnishing elec- tricity for the private use of the citizens was the performance of a municipal purpose when done in connection with the ownership and operation of the plant for supplying the public needs of the city, saying in part: "We think it may safely be assumed that the lighting of the streets and public places is one of the duties devolving upon the municipal government, and is a city purpose within the provisions of the constitution. What is and what is not a municipal purpose is, in many cases, doubtful and uncertain, and it is the duty of the courts in such cases to give weight to the legislative determination and not to 4— Pub. Ut. § 22 PUBLIC UTILITIES. 50 annul its acts, unless it clearly appears that the act was not authorized. ... If we are correct in this view, we fail to see why gas or electric light works may not be sanctioned on the same theory. The lighting of the streets by gas involves the necessity of laying mains through the streets, with which the lamps may be supplied with gas; and, in lighting by electricity, the stringing of wires or the laying of conduits, through which the electricity may be con- veyed. Light in dwellings is as important and essen- tial as upon the streets, and promotes the general comfort, safety and welfare of the inhabitants ; and when it is supplied in connection with that which is furnished by the municipality, under its duty to the public, we think it may be regarded as an incident thereto, and one of the purposes for which the munici- pality may properly contract." § 22. Brooklyn bridge. — The case of People ex rel. Murphy v. Kelly, 76 N. Y. 475, decided in 1879, is a leading one and indicates the liberal policy of the courts in this connection to be one of long standing. In the course of its decision, finding that the cities concerned had the power to erect the Brooklyn bridge, the court said: "Having nothing to say about the wisdom of the legislation under consideration, I am confident in the conclusion that the construction of this bridge is a city purpose of each city, and that each city can incur debt for the same, and that the act of 1875 ^s not in conflict with any provisions of the constitution." § 23. Rapid transit system. — The case of Sun Printing & Publishing Assn. v. New York, 8 App. Div. (N. Y.) 230, 152 N. Y. 257, 46 N. E. 499, 37 L. R. A. 788, decided in 1897, is of special interest as 51 MUNICIPAL PURPOSES. § 23 showing the attitude of the court with reference to the increasing and elastic powers belonging to municipal corporations. The court defined its position on the question clearly and frankly as follows : "The ques- tion is then raised whether a rapid transit railroad, wholly within the limits of a city, is a city purpose. . . . In considering this question it must be pre- mised that cities are not limited to providing for the strict necessities of their citizens. Under legislative authority, they may minister to their comfort, health, pleasure, or education. ... To hold that the legislature of this state, acting as the parens patriae, may employ for the relief or welfare of the inhabi- tants of the cities of the state only those methods and agencies which have proved adequate in the past would be a narrow and dangerous interpretation to put upon the fundamental law. No such interpreta- tion has thus far been placed upon the organic law by the courts of this state. Whenever the question has been considered, it has been universally treated in the broadest spirit. . . . The true test is that w^hich requires that the work shall be essentially public and for the general good of all the inhabitants of the city. It must not be undertaken merely for gain or for private objects. Gain or loss may inci- dentally follow, but the purpose must be primarily to satisfy the need or contribute to the convenience of the people of the city at large. Within that sphere of action, novelty should impose no veto. Should some inventive genius bye and bye create a system for supplying us with pure air, will the representatives of the people be powerless to utilize it in the great cities of the state, however extreme the want and dangerous the delay? Will it then be said that pure air is not so important as pure water and clear light? ^^'e apprehend not." § 24 PUBLIC UTILITIES. 52 § 24. Public memorial monument. — The New York Supreme Court in 1900 reiterated its favorable attitude toward the increase of the sphere of munici- pal activity in the case of Parsons v. Van Wyck, 56 App. Div. (N. Y.) 329, 67 N. Y. S. 1054. In this case it refused relief in an action brought by a tax- payer to restrain an alleged unlawful expenditure of municipal funds by the defendants, who were members of the Soldiers' and Sailors' Memorial Arch Com- mission of the city of New York provided for by chapter 522 of the Laws of 1893, and were engaged in erecting a proposed memorial monument in River- side Park near Eighty-ninth street. The court stated its decision after referring to other similar cases by saying, "In the same liberal spirit, we think the erec- tion of a beautiful monument or memorial is serving a public purpose." § 25. Power to lease municipal rapid transit sys- tem. — The case of Admiral Realty Co. v. New York, 206 N. Y. no, 99 N. E. 241, decided June 29.' 1912, expressly sustains the case of Sun Printing & Pub- lishing Assn. V. New York, supra, and extends the application of the principle which permitted the build- ing and leasing for operation of the rapid transit system belonging to New York City to the leasing and operation of such a system in connection with that belonging to a private concern for the purpose of securing a unified system of transportation through- out the city. The practical advantage to the citizens of such an arrangement was considered by the court in deciding that such a construction and manner of operating the transit system was a municipal purpose within the meaning of the Constitution of New York, and that the agreement for jointly operating the two systems, one owned by the city and the other by 53 MUNICIPAL PURPOSES. § 2$ private capital, was in the interest of economy and for the convenience of the citizens, for in the course of its decision, the court said: "The question is whether the municipahty, instead of building subways at an enormous expense over the entire territory, may build them in part of it, and then make a contract for their operation with the owner of the privately owned system, under which -the latter agrees to operate its system in conjunction with the subways, and subject to a single fare. It seems to me that it may thus do; and that the statement of the proposition very largely supplies the argument in its favor." In the case of Townsend v. Boston, 187 Mass. 283, 72 N. E. 991, decided in 1905, the Supreme Court of Massachusetts recognized as constitutional and held to be valid a statute under which the city of Boston owned and operated a certain ferry. The case was an action in tort for personal injuries sustained by the plaintiff to the action while a passenger on a ferry boat which the defendant city owned and was operat- ing. In the Opinion of the Justices, 150 Mass. 592, 24 N. E. 1084, 8 L. R. A. 487, as given in 1890, in reply to certain questions submitted to the court by the legislature, it is held that, if the legislature be of the opinion that the general welfare and convenience of the inhabitants of municipalities will be promoted by giving the cities the power of furnishing them with gas or electricity for light, such power may be so conferred within the constitution. In the course of its opinion the court said that: "The statutes are well known which authorize cities and towns to maintain water-works for supplying their inhabitants with water, and the constitutionality of these statutes has not been doubted." The court defines the limitation to be placed on this power in Opinion of the Justices, § 26 PUBLIC UTILITIES. 54 155 Mass. 598, 30 N. E. 1 142, 15 L. R. A. 209, decided in 1892, in refusing the right of the legislature within the constitution to confer on municipalities the power to purchase and to furnish coal and wood for fuel to its inhabitants because the carrying on of such a business for the public benefit could not be regarded as a public or municipal service. The case of Middleton v. St. Augustine, 42 Fla. 287, decided in 1900, holds that under the Constitu- tion of that state the legislature can authorize munici- pal corporations to erect and own electric light plants for supplying lights to their citizens and to issue bonds for such purpose, either with or without the sanction of its individual citizens or taxpayers because the purpose is municipal. The case of Mealey v. Hagerstown, 92 Md. 741, 48 Atl. 746, decided in 1901, states this well estab- lished rule of law as follows: "It [the defendant city] is certainly authorized to provide for lighting the streets and other public places within the corporate limits. We do not understand it to be seriously ques- tioned that it can furnish light to its citizens, if the act of 1900 is valid. There are many cases which establish the right of a municipality, owning its plant for lighting, to provide light to its citizens just as it may supply them with water, if the legislature so authorizes." § 26. Natural gas plant. — The case of State ex rel V. Toledo, 48 Ohio St. 112, 26 N. E. 1061, 11 L. R. A. 729, decided in 1891, is of special interest be- cause it refused to enjoin the defendant city from supplying natural gas for its public use and the pri- vate use of its inhabitants. The very clear and common-sense reasoning of the court follows: "Tax- ation implies an imposition for a public use. . . . 55 MUNICIPAL PURPOSES. § 26 But what are public purposes is a question that must be left to the legislature, to be decided upon its own judgment and discretion. Water, light and heat are objects of prime necessity. Their use is general and universal. It is now well settled that the legislature in the exercise of its constitutional power may au- thorize cities to appropriate real estate for water- works, etc. What we have said in reference to water-works is for the most part applicable to the erecting and maintaining of natural or artificial gas works. Heat being an agent or principle indispensable to the health, comfort and convenience of every inhabitant of our cities, we do not see why, through the medium of natural gas, it may not be as much a public service to furnish it to the citizens as to furnish water. It is sufficient if every inhabitant who is so situated that he can use it, has the same right to use it as the other inhabitants. The establishment of natural gas works by municipal corporations, with the imposition of taxes to pay the cost thereof, may be a new object of municipal policy; but in deciding whether in a given case the object for which taxes are assessed is a public or a private purpose, we can not leave out of view the progress of society, the change of manners and customs and the development and growth of new wants, natural and artificial, which may from time to time call for a new exercise of legislative power; and in deciding whether such taxes shall be levied for the new purposes that have arisen we should not, we think, be bound by an inexorable rule that would embrace only those objects for which taxes have been customarily and by long course of legislation levied." The validity of this Ohio Statute giving municipal corporations the power to supply their inhabitants with gas was sustained by the Supreme Court of the United States, in the case of § 27 PUBLIC UTILITIES. 56 Hamilton Gaslight & Coke Co. v. Hamilton, 146 U. S. 258, 36 L. ed. 963. § 27. Convention hall. — The case of State v. Barnes, 22. Okla. 191, 97 Pac. 997, decided in 1908, reflects the spirit of the court of the state of Oklahoma and illustrates the comprehensive scope of its consti- tution in sustaining the power of the city to erect a convention hall on the ground that it is a public build- ing to be used to accommodate any public gathering of the people of the city, the court saying: "Such act of the legislature is a contemporaneous legislative construction of said section 27 of article 10 of the Constitution of this state, and clearly declares it to be the judgment of the legislative department of the state that the term 'public utilities,' as used in that section of the constitution, includes convention halls. If the court had reason to doubt that a convention hall of the character, and constructed for the purpose and controlled in the manner, of the one in the case at bar is to be a public utility within the meaning of said section of the constitution, such act of the legisla- ture would be persuasive upon this court. In a govern- ment where the right of public assembly for the re- dress of grievances is guaranteed to the people, where the policies of government are in a great measure determined at pubhc gatherings of the people in political conventions, where the lecture platform has become so important a factor in public education, and where people frequently assemble for the purpose of discussing and devising ways and means of promoting their varied interests, a place in large cities where such gatherings may be had under comfortable hy- gienic conditions is not only a public convenience, but a public necessity." 57 MUNICIPAL PURPOSES. § 28 § 28. Public wharves. — In the case of Burhngton V. Cent. Vt. R. Co., 82 Vt. 5, 71 Atl. 826, decided in 1909, in upholding the right of the municipahty to construct pubHc wharves on navigable waters because the purpose is municipal, while recognizing that no valid law can be passed to raise a tax unless the pur- pose for which it is collected is a public or municipal one, the court said that "What is a municipal purpose within that meaning is a question for the legislature to decide, and concerning which it has a large discretion, which the courts can control only, if at all, in very exceptional cases." In sustaining the power of the city to furnish its inhabitants with electric light because such action would be for their best interests and because it would be a municipal purpose, the Supreme Court of Florida in Jacksonville Electric Light Co. v. Jacksonville, 36 Fla. 229, 18 So. 677, 30 L. R. A. 540, 51 Am. St. 24, decided in 1895, expressed this well established prin- ciple by saying: "The grant of power to the city of Jacksonville to provide for lighting the city by gas or other illuminating material, or in any other manner, is clear and explicit, and carries with it the power of the choice of means to accomplish the end. Should this power be construed into a right to light the streets and public places of the city, but not to supply the inhabitants thereof with light for use in their private houses? . . . We are of the opinion that a fair construction of the grant 'to provide for lighting the city by gas or other illuminating material, or in any other manner,' will authorize the erection and main- tenance of an electric light plant, not only for lighting the streets and public places of the city, but also for supplying in connection therewith, electric light for the inhabitants of the city in their private houses. The power given is to light the city, and the connection § 28 PUBLIC UTILITIES. 58 indicates that the legislature was conferring powers for the benefit of the people generally of the city. . . . That supplying the inhabitants of a city with electric light is such a municipal purpose as will authorize its delegation by the legislature to municipal bodies is sustained by all the authorities we have found. To the extent of supplying light to the inhabitants of a city for use in their private houses, we discover noth- ing that can not, in the light of the decisions, be called a municipal purpose." CHAPTER V. THE IMPLIED POWERS OF MUNICIPAL CORPORATIONS. Section. 29. Power to provide municipal public utilities generally implied, 30. Best interests of municipality the test. 31. Only general powers expressly given by statute. 32. Statutory power to provide municipal public utilities consti- tutional. 33. Electric light plant. 34. Steam railroad the exception. 35. Three grounds for doctrine of implied powers. 36. The police power; the general welfare; municipal purpose. 37. Increase of sphere of municipal activity. 38. Power and duty to provide municipal public utilities. 39. Electric light plant by virtue of police power. 40. Sewer system provided under police power. .41. Water-works and electric lighting. 42. The general welfare clause of municipal charters. 43. Rapid transit systems as modern conveniences. 44. Modern municipal public utilities practical necessities. 45. Water-works the oldest and most necessary utility. 46. Supply of municipal public utilities for private use. 47. Joint public and private service more economical. 48. Ice from municipal water-works, an economy and necessity. 49. Right to supply private service by implication denied. 50. Electric light service one ot most modern. 51. Detailed statutory provisions of Massachusetts strictly con- strued. 52. The rule in Illinois. 53. The New Jersey decision. 54. The California rule stated. 55. Municipality limited to enterprises of public nature. 56. Taxation only for public purposes. 57. Municipal public utilities public and natural monopolies. 58. Private enterprises controlled by competition. 59. Municipality can not erect opera house. 60. Brick making a private business. 59 § 29 PUBLIC UTILITIES. 60 Section. 61. Sale of coal and wood not a municipal or public purpose. 62. Municipality can not assist private enterprises. 63. Municipal plumbing not incidental to its water-works. 64. Municipal coliseum authorized by constitution — "home rule." § 29. Power to provide municipal public utilities generally implied. — The principle of the implied pow- ers of municipal corporations to provide themselves with municipal public utilities is generally recognized by our courts. Through their liberal recognition of the existence of implied powers more than in any other way they have given full effect to the purpose, and practical recognition to the commercial objects, for which municipal corporations are established. The field is naturally a fertile one for judicial legislation and construction, and it has been fully developed by our courts in giving effect to the powers necessary to a full enjoyment and a complete realization of the advantages of such corporations, to the end that the greatest public good might be attained. Decisions giving the most complete freedom of activity to municipalities, consistent with their best interests and not derogatory of specific statutory regulations, repre- sent the great weight of authority. It is only a few of our courts that refuse the right of municipal cor- porations to keep abreast of the times and to conduct their affairs to their best advantage and for the great- est benefit of their citizens. § 30. Best interests of municipality the test. — In view of the fact that practically the sole purpose of such corporations in their capacity as business con- cerns is to benefit the people who inhabit them and thus constitute their stockholders, so to speak, it is submitted that the present advantage of their citi- zens and the prospective advancement of these or- 6l IMPLIED POWERS. § 3I ganizations should be the test of the control exercised over them by the legislature and the courts. The only- other party even remotely concerned is that of the state and its interests in such matters are identical with those of the city. Since the interests of the two parties involved is the same it is only reasonable to suppose that the one party, in legislating for the other, intends always to accomplish the greatest good for the greatest number concerned. §31. Only general powers expressly given by statute. — Because of the many details in administra- tion and the varying circumstances and changing con- ditions of the different cities, only general legislation with reference to them is advisable or possible. This necessitates the exercise of much judgment and of many implied powers by the cities, in whose officers must be vested a wide discretion. And in construing such general statutes in a particular case regard must be had for the facts and circumstances of the case in hand so that the general law as applied will give the best results. It is in determining the legislative in- tent and in giving such intention the most favorable practical application to the particular city of which it will admit, that the courts take the opportunity to advance the interests by extending the scope of the activity of such municipality as its welfare requires. And it is submitted that for these practical reasons the authorities with very few exceptions favor a de- cided increase of the sphere of municipal activity because the best interests of these corporations de- mand it. § 32. Statutory power to provide municipal public utilities constitutional. — In addition to the powers, found in municipal corporations under the construction § 33 PUBLIC UTILITIES. 62 of the term "municipal purpose" as used in our con- stitutions, to own and operate or provide themselves with municipal public utilities, which has already been discussed, statutes expressly providing that munici- palities may furnish such public utilities as electric light, water and gas for the private use of their citizens and themselves are universally upheld by all our courts as constitutional.^ § 33. Electric light plant. — In the case of Linn v. Chambersburg, i6o Pa. 511, 28 Atl. 842, 25 L. R. A. 217, decided in 1894, the court says: "The power of the legislature to authorize municipal corporations to supply gas and water for municipal purposes, and for the use and benefit of such of their inhabitants as wish to use them and are willing to pay therefor at reasonable rates, has never been seriously questioned. In view of the fact that electricity is so rapidly com- ing into general use for illuminating streets, pubHc and private buildings, dwellings, etc., why should there be any doubt as to the power to authorize such cor- porations to manufacture and supply it in like manner as artificial gas has been manufactured and supplied? 1 CONNECTICUT.— Norwich Gas & Electric Co. v. Norwich, 76 Conn. 565, 57 Atl. 746. FEDERAL.— Andrews v. Nat. Foundry & Pipe Works, 61 Fed. 782; Fellows v. Walker, 39 Fed. 651. MASSACHUSETTS.— Citizens' Gaslight Co. v. Wakefield, 161 Mass. 432, 37 N. E. 444, 31 L. R. A. 457; Opinion of the Justices, 150 Mass. 592, 24 N. E. 1084, 8 L. R. A. 487. MICHIGAN.— Mitchell v. Negauhee, 113 Mich. 359, 71 N. W. 646, 38 L. R. A. 157, 67 Am. St. 468. MISSISSIPPI.— Love v. Homes, 91 Miss. 535, 44 So. 835. OHIO.— Cincinnati v. Taft, 63 Ohio St. 141, 58 N. E. 63; State €X rel. V. Toledo, 48 Ohio St. 112, 26 N. E. 1061, 11 L. R. A. 729; Walker v. Cincinnati, 21 Ohio St. 14, 8 Am. Rep. 24. PENNSYLVANIA.— Lehigh Water Co.'s Appeal, 102 Pa. 515, 121 U. S. 388, 30 L. ed. 1059; Linn v. Chambersburg, 160 Pa. 511, 2S Atl. 842, 25 L. R. A. 217. 63 IMPLIED POWERS. § 34 It is a mistake to assume that municipal corporations should not keep abreast with the progress and im- provements of the age." § 34. Steam railroad the exception. — The case of Walker v. Cincinnati, 21 Ohio St. 14, 8 Am. Rep. 24, decided in 1871, in sustaining as constitutional and upholding in all respects a statute expressly giving authority to a certain class of municipal corporations including the city of Cincinnati, to own and operate a railroad, furnishes a striking and unusual illustration of the extent of the powers of municipalities when expressly conferred by statute. Acting under such authority the city of Cincinnati was permitted to build, maintain and operate a steam railway known as the Cincinnati Southern Railway, which extended for many miles out of the city of Cincinnati. The case is unique, however, in sustaining the power of the mu- nicipal corporation to own, maintain and operate a steam railway extending for many miles beyond the city in question; and while the case has failed to receive the approval of other decisions referring to it, the case of Cincinnati v. Taft, 63 Ohio St. 141, 58 N. E. 63, decided in 1900, indicates that the decision remains the law of that case although the courts have refused to extend its application or to follow it in other sim- ilar proposed undertakings. § 35. Three grounds for doctrine of implied pow- ers. — Under the doctrine of the implied powers of municipal corporations the decisions extending their sphere of activity are based on one of three grounds. The first which is probably the most frequently in- voked is that of the police power, whose application in this connection, as well as in others, is an excellent illustration of the pertinent remark by one of our § 36 PUBLIC UTILITIES. 64 courts that, "it may be said that it is known when and where it [the poHce power] begins, but not when and where it terminates."^ Another basis for these decisions which has been frequently given is that of the general welfare clause found in many city charters. This is often mentioned in connection with the third reason with which it is closely allied — that the purpose is public or municipal. §36. The police power; the general welfare; mu- nicipal purpose. — All three of these are sound reasons for the decisions of our courts, recognizing in munici- pal corporations additional powers to those expressly granted on the theory that they are entitled to exer- cise powers "necessarily or fairly implied in or inci- dent to powers expressly granted, or those essential to the declared objects and purposes of the corpora- tion." It may seem that the police power is the least germane and definite because of its elasticity and of the very wide application which it is given as the rea- son for some decisions upon almost all subjects. It is, however, a valid basis for these decisions, for the furnishing of water, light, gas, and such public utilities to the individual inhabitants of cities concerns the protection of their health, life and property, which constitutes a duty of the municipality to its citizens. But naturally the general welfare clause of the charter or the fact that the purpose is a necessary or munici- pal one furnishes a basis for this line of decisions that is more peculiarly applicable than that of the police power. ^ § 37. Increase of sphere of municipal activity. — Further the power of the municipality to provide 2 Champer v. Greencastle, 138 Ind. 339, 35 N. E. 14, 24 L. R. A. 768, 46 Am. St. 390. 3 Dillon Mun. Corp., §§ 1293 et seq. and cases cited. 65 IMPLIED POWERS. § 38 these public utilities for the private use of its citizens is implied from the power to furnish such utilities for use upon its streets and in other public places in the absence of any express legislative authority by most of our courts. There are a few decisions it is true which refuse the city the right so to extend its sphere of activity and usefulness for the advantage of its citizens. The great weight of authority, however, and certainly the better reason permits this extension of power and favors an increase of the sphere of municipal activity. § 38. Power and duty to provide municipal public utilities. — The rule of law is well established to the effect that a city, in erecting gas, water or electric light plants, is not limited to providing the service of such utilities for use only upon the streets and in other public places of the city, but that it may in connection therewith furnish the same for the private use of its citizens. Some of our courts have even held that it is the duty of the municipality not only to light its streets and public places, but to furnish its inhabitants with the means of obtaining light at their own ex- pense.* In the case of Covington Gaslight Co. v. Coving- ton, 22 Ky. L. 796, 58 S. W. 805, decided in 1900, the court says: "It seems to us that, under these pro- visions in appellee's charter, it was not only its right, but it was its pkin duty, to provide for the lighting of the streets, public places, and buildings, and to fur- * Newport v. Newport Light Co., S4 Ky. 166, 8 Ky. L. 22, 21 S. W. 645; Covington Gaslight Co. v. Covington. 22 Ky. L. 796, 58 S. W. 805; Springville v. Fullmer, 7 Utah 450, 27 Pac. 577; Andrews V. National Foundry & Pipe Works, 61 Fed. 782. 5— Pub. Ut. § 39 PUBLIC UTILITIES. 66 nish light to the citizens of the community in the best, cheapest and most approved manner." The duty of the municipal corporation to furnish the conveniences of municipal public utilities is ex- pressed by the court in the case of Springville v. Full- mer, 7 Utah 450, 27 Pac. 577, decided in 1891, as fol- lov^s: "And having the power it was the duty of the plaintiff to use it so far as the health, safety, con- venience and good of its inhabitants demanded." In view of some diversity of opinion of the courts and the recent date of the decisions which make it impossible to speak of the doctrine defining the limits of this principle as finally accepted by all our courts, it has been thought best to set out somewhat at length some of the decisions together with the grounds upon which they are based to show the authority for the position taken by our courts favoring an increase of the sphere of municipal activity.^ § 39. Electric light plant by virtue of police power. • — ^The case of Crawfordsville v. Braden, 130 Ind. 149, 28 N. E. 849, 14 L. R. A. 268, 38 Am. St. 214, decided in 1891, is a leading one and has been frequently cited with approval. The court states the question for decision as follows: "Has a municipal corporation in 5 CALIFORNIA.— Gary v. Blodgett, 10 Cal. App. 463, 102 Pac. 668; McBean v. Fresno, 112 Cal. 159, 44 Pac. 358, 31 L. R. A. 794, 53 Am. St. 191; Egan v. City and County of San Francisco (Cal.), 133 Pac. 294. GEORGIA.— Holton v. Camilla, 134 Ga. 560, 68 S. E. 472, 31 L. R. A. (N. S.) 116, 20 Am. & Eng. Ann. Cas. 199. INDIANA.— Crawfordsville v. Braden, 130 Ind. 149, 28 N. E. 849, 14 L. R. A. 268, 30 Am. St. 214; Rushville Gas Co. v. Rushville, 121 Ind. 226, 23 N. E. 72, 6 L. R. A. 315, 16 Am. St. 388. KENTUCKY.— Overall v. Madisonville, 125 Ky. 684, 102 S. W. 278, 12 L. R. A. (N. S.) 433. WISCONSIN.— Eau Claire Water Co. v. Eau Claire, 127 Wis. 154, 106 N. W. 679, 112 N. W. 458; Ellinwood v. Reedsburg, 91 Wis. 131, 64 N. W. 88& 6y IMPLIED POWERS. § 39 this state the power to erect, maintain, and operate the necessary buildings, machinery and appliances to light its streets, alleys and other public places with the electric light, and at the same time and in con- nection therewith to supply electricity to its inhabi- tants for the lighting of their residences and places of business?" The only statutory authority in point pro- vided: "That the common council of any city in this state incorporated either under the general act for the incorporation of cities or under a special charter, and the board of trustees of all incorporated towns of this state, shall have the power to light the streets, alleys, and other public places of such city and town with the electric light, or other form of light, and to contract with any individual or corporation for light- ing such streets, alleys, and other public places with the electric light, or other forms of light, on such terms, and for such time, not exceeding ten years as may be agreed upon."* In holding that the city might furnish electricity to its inhabitants the court said: "Among the implied powers possessed by municipal corporations is the power to enact and enforce reasonable by-laws and ordinances for the protection of health, life and prop- erty. . . . The corporation possessing, as it does, the power to generate and distribute through its lim- its, electricity for the lighting of its streets and other public places, we can see no good reason why it may not also, at the same time, furnish it to the inhabitants to light their residences and places of business. To do so, is in our opinion, a legitimate exercise of the police power for the preservation of property and health. It is averred in the complaint that the light which the city proposes to furnish for individual use is the incandescent light. Here again is a fact of «Act3 of Indiana, 1883, p. 85. § 40 PUBLIC UTILITIES. 68 which we are authorized to take judicial knowledge. A light thus produced is safer to property, and more conducive to health than the ordinary light. Pro- duced by the heating of a filament of carbon to the point of incandescence in a vacuum, there is nothing to set property on fire, or to consume the oxygen in the surrounding air, and thus render it less capable of sustaining life and preserving health." The court reached its decision notwithstanding the existence of a provision in the statutes authorizing the grant to any corporation of the right to erect and maintain in the streets the necessary poles and appliances for the purpose of supplying the electric or other light to the inhabitants. This decision is the leading one on the subject that is expressly put on the ground of the police power, and the reasoning of the court in doing so has met somewhat ingenious and novel when made, is now with approval by all the decisions which accept the doctrine of implied powers in this connection. The argument of the court is convincing, and although well recognized and has been advanced in later cases following this decision. It will also be noted that these cases are concerned with electric lighting which is not so essentially a matter of public health as the furnishing of a water supply or a sewerage system, and which is of course a more modern public utility. § 40. Sewer system provided under police power. — The police power serves as a more natural support to the decision of the case of McBean v. Fresno, 112 Cal. 159, 44 Pac. 358, 31 L. R. A. 794, 53 Am. St. 191, where the action was to recover the contract price for services rendered in disposing of sewage for the de- fendant city. The court said in the course of its decision that, "proper sewers are in this day so essen- 69 IMPLIED POWERS. § 4I tial to the hygiene and sanitation of a municipality that a court would not look to see whether a power to construct and maintain them had been granted by the charter, but rather only to see whether, by possibility, the power had been expressly denied." § 41. Water-works and electric lighting. — And to the same effect is Ellinwood v. Reedsburg, 91 Wis. 131, 64 N. W. 885, where the court says: "It is not neces- sary to seek for an express delegation of power to the city to build a water-works and electric lighting plant in order to determine whether such power exists, for the general power in respect to police regulations, the preservation of the public health, and the general welfare includes the power to use the usual means of carrying out such powers, which includes municipal water and lighting services." The case of Overall v. Madisonville, 125 Ky. 684, IC2 S. W. 278, 12 L. R. A. (N. S.) 433, decided in 1907, furnishes a quaint historical statement and illustration of the power of municipal corporations to provide themselves with the conveniences of municipal public utilities and shows that such power has practically always been regarded as belonging to such corpora- tions. In the course of its decision the court says: "Public ownership of public utilities has been a politi- cal as well as a legal question for quite a while. It seems to have been a political question long before its legality was doubted. We read that Hezekiah, king of Judea, established and maintained by public au- thority a city water-works plant in the city of David. 2 Kings, c. 20, verse 20. And who has not heard of the public baths of ancient Rome? The public lighting of the streets of cities is of modern origin yet the necessity for lighting in a city is scarcely less now than its necessity for water. ... A good light is the § 42 PUBLIC UTILITIES. 7O equivalent of a good policeman in preventing certain forms of crime. It is therefore universally held now that it is clearly within the police power of cities, even without express authority, to provide public lighting of their streets at the public expense." § 42. The general welfare clause of municipal charters. — The promptness with which our courts ex- tended the power of municipalities to include the employment of the modern agency of electricity for private purposes, after the advantages of using it for public lighting had been demonstrated, is the best evidence that they desire to extend the sphere of usefulness of our cities whenever the opportunity is given. The courts are of the opinion that it is not only within the power of the cities but that it is their duty to keep themselves free to accept for their own use and to provide for their inhabitants new inventions and superior agencies as they arise, and that cities are not to be restricted to the providing for the strict necessities of their citizens but that they may also minister to their comfort and pleasure. The courts have not hesitated to find power by implication in the municipality to furnish its inhabitants with electric light and other such public utilities not only on the ground of the police power, as we have just seen, but for the reason that to do so is properly included in the general welfare clause commonly found in municipal charters or for the reason that the purpose is public or one of necessity.'^ 7 COLORADO.— Denver v. Hallett, 34 Colo. 393, 83 Pac. 1066. DAKOTA.— National Tube Works v. Chamberlain, 5 Dak. 54, 37 N. W. 761. FEDERAL.— Thomson-Houston Electric Co. v. Newton, 42 Fed. 723. GEORGIA.— Heilbron v. Cuthbert, 96 Ga. 312, 23 S. E. 206; 71 IMPLIED POWERS. § 43 § 43. Rapid transit systems as modern conveni- ences. — In the case of Sun Printing & Publishing Assn. V. New York, 8 App. Div. (N. Y.) 230, 152 N. Y. 257, 46 N. E. 499, 37 L. R. A. 788, decided in 1897, the court, in answering the question in the affirmative whether a rapid transit railroad wholly within the limits of the city is a city purpose, said: "That cities are not limited to providing for the strict necessities of their citizens. Under legislative authority they may minister to their comfort, health, pleasure or educa- tion. ... To hold that the legislature of this state, acting as the parens patriae, may employ for the relief or welfare of the inhabitants of the cities of the state only those methods and agencies which have proved adequate in the past would be a narrow and dangerous interpretation to put upon the fundamental Holton V. Camilla, 134 Ga. 560, 68 S. E. 472, 31 L. R. A. (N. S.) 116, 20 Am. & Eng. Ann. Cas. 199; Rome v. Cabot, 28 Ga. 50. ILLINOIS.— Fox V. Kendall, 97 111. 72; Warren v. Chicago, 118 111. 329, 11 N. E. 218. KANSAS.— State v. Lawrence, 79 Kas. 234, 100 Pac. 485. MASSACHUSETTS.— Lawrence v. Meltmen, 166 Mass. 206, 44 N. E. 247. MICHIGAN.— Belding Improvement Co. v. Belding, 128 Mich. 79, 87 N. W. 113. NORTH CAROLINA.— Fawcett v. Mt. Airy, 134 N. Car. 125, 45 S. E. 1029, 63 L. R. A. 870, 101 Am. St. 825; Greensboro v. Scott, 138 N. Car. 181, 50 S. E. 589; Henderson Water Co. v. Henderson P. Schools, 151 N. Car. 171, 65 S. E. 927.; Wadsworth v. Concord, 133 N. Car. 587, 45 S. E. 948. NEW YORK.— Admiral Realty Co. v. New York, 206 N. Y. 110, 99 N. E. 241; Pullman v. New York, 54 Barb. 169; Sun Printing & Publishing Assn. v. New York, 8 App. Div. 230, 152 N. Y. 257, 46 N. E. 499, 37 L. R. A. 788. OHIO.— Alter v. Cincinnati, 56 Ohio St. 47, 46 N. E. 69. OKLAHOMA.— Barnes v. Hill, 23 Okla. 207, 99 Pac. 927. TENNESSEE.— Smith v. Nashville, 88 Tenn. 464, 12 S. W. 924, 7 L. R. A. 469. WISCONSIN.— Bell v. Plattville, 71 Wis. 139, 36 N. W. 831. § 43 PUBLIC UTILITIES. ^2 law. No such interpretation has thus far been placed upon the organic law by the courts of this state." In sustaining the decision of this case and in up- holding the power of the city not only to build, main- tain and operate or lease a rapid transit system in the city of New York, but in holding that such city had the power to lease its subway to be operated in connec- tion with a privately owned system for the purpose of securing more convenient service by a more compre- hensive transfer system, the court in Admiral Realty Co. V. New York, 206 N. Y. no, 99 N. E. 241, de- cided June 29, 1912, said: "The question is whether the municipality, instead of building subways at an enormous expense over the entire territory, may build them in part of it and then make a contract for their operation with the owner of the privately owned system, under which the latter agrees to operate its system in conjunction with the subways, and subject to a single fare. It seems to me that it may thus do; and that the statement of the proposition very largely supplies the argument in its favor." The decision in the case of Heilbron v. Cuthbert, 96 Ga. 312, 23 S. E. 206, rendered in 1895, is placed expressly on the general welfare clause of the charter. The court finds that: "Under the 9th section of the charter of the city of Cuthbert [Acts of 1859, Georgia, p. 149] the mayor and council of that city have au- thority to 'contract and be contracted with; sue and be sued; . . . and do all things for the benefit of the city, and all things not in violation of the con- stitution and laws of this state.' It is apparent, there- fore, that the 'general welfare clause' in this charter is very broad and liberal in its terms. That the erec- tion and maintenance of water-works and of an electric light plant would result in benefit to the city, is ob- vious. It was insisted, however, that in order to I'l 73 IMPLIED POWERS. § 44 authorize a municipal corporation to contract a debt for improvements of this kind, the power to do so must be expressly conferred by the charter. We do not concur in this view." While there is no ex- press statement made in this case to the effect that the inhabitants as well as the city were to be sup- plied with water and electricity, this would seem to have been intended, from a remark found in connec- tion with the statements of the facts of the case that, "this ordinance further provides that all rev- enue arising from the operation of the water-works and light plant should be applied first to the expense of their operation, etc." § 44. Modern municipal public utilities practi- cal necessities. — Among the more recent cases per- mitting cities to provide their citizens with electric light in their private capacity in the absence of any express legislative authority is that of Fawcett v. Mt. Airy, 134 N. Car. 125, 45 S. E. 1029, 63 L. R. A. 870, loi Am. St. 825, decided in 1903. This case ar- gues the question in issue at length, and indicates the favorable attitude which is taken toward increasing the opportunities for cities to serve their citizens with the comforts and pleasures as well as the necessities of life. It also shows that our courts recognize the fact that with the advance of civilization, the increase of population and its congestion in municipalities, making competition more keen and living conditions more strenuous, what were at one time regarded as luxuries become comforts and are later looked upon as necessities. The case also criticises the decision of the Massachusetts court in the case of Spaulding v. Peabody, 153 Mass. 129, 26 N. E. 421, 10 L. R. A. 397, for refusing to imply this power in munici- palities to provide their citizens with these public § 44 PUBLIC UTILITIES. 74 Utilities although it had held the purchase of town clocks, scales, etc., to be a necessary expense. Be- cause of its importance, we quote from the decision at length. "Whether a city or town has the right to incur an indebtedness for the erection and operation of plants for the supply of water and electric light for municipal use, and to sell to its inhabitants, as a necessary municipal expense, is the question again presented to us for decision. Indebtedness incurred by a city or town for a supply of water stands on the same footing as indebtedness incurred for lighting purposes, and if such indebtedness be a necessary ex- pense, then whether or not a municipality may incur it does not depend upon the approval of the propo- sition by a majority of the qualified voters of the municipality. ... It is almost impossible to de- fine, in legal phraseology, the meaning of the words 'necessary expense,' as applied to the wants of a city or town government. A precise line can not be drawn between what are and what are not such expenses. The consequence is that, as municipalities grow in wealth and population, as civilization advances with the habits and customs of necessary changes, the aid of the courts is constantly invoked to make de- cisions on this subject. In the nature of things it could not be otherwise; and it is not to be expected, in the changed conditions which occur in the lives of progressive people, that things deemed unnecessary in the government of municipal corporations in one age should be so considered for all future time. In the efforts of the courts to check extravagance and to prevent corruption in the government of towns and cities, the judicial branch of the government has probably stood by former decisions from too conserv- ative a standpoint, and thereby obstructed the ad- vance of business ideas which would be most bene- 75 IMPLIED POWERS. § 45 ficial if put into operation; and this conservatism of the courts, outgrown by the march of progress sometimes appears at a serious disadvantage . . . and certainly expenses incurred for water and Hght are more necessary than those for a market house, clocks, and scales. The words 'necessary expense,' then, must mean such expenses as are or may be in- curred in the establishing and procuring of those things without which the peace and order of the community, its moral interests, and the protection of its property and that of the property and persons of its inhabitants, would seriously suffer considerable damage. ... If the matter of lighting is a necessary expense, then how and in what manner the city shall furnish such lighting is with the author- ities of the city or town to determine. . . . Our conclusion, then, is that an expense incurred by a city or town for the purpose of building and operating plants to furnish water and lights is a necessary expense." § 45. Water-works the oldest and most neces- sary utility. — The provision of an adequate water supply for the use of the city and its inhabitants is directly concerned with the public health in addition to being a municipal purpose and for the general welfare. This public utility has always been recog- nized as necessary for the public health and conven- ience, and the authorities agree that the municipality should provide a water supply for protection against fire. That an adequate supply of pure water for the citizens of a large city is a necessity which can be provided only by a responsible public or quasi- public corporation is generally admitted. As com- pared with electricity, the question of a water supply is much older and the law, permitting cities to furn- § 45 PUBLIC UTILITIES. 76 ish water from their own plant to their citizens along with providing for the public wants, has be- come firmly established. In practice it seems to have been very generally assumed that the erection and operation of a water-works system is a munici- pal purpose and that the city is expected to furnish it for private use along with attending to the pub- lic demand. The courts have recognized the econ- omy of doing this as well as the fact that it tends to the protection of health, life, and property, and is therefore a legitimate exercise of the police power. A good case expressing the law of this subject is that of Smith v. Nashville, 88 Tenn. 464, 12 S. W. 924, 7 L. R. A. 469, where the only statute in point gave the mayor and city council the power "to pro- vide the city with water by water-works, within or beyond the boundaries of the city, and to provide for the prevention and extinguishment of fires, and to organize and establish fire companies." In the course of its well reasoned decision the court says: "It is seen at once that the water-works are corporate prop- erty; that is not denied. The debate is with respect to the nature of the use. As to that, for the sake of convenience we divide all the purposes for which the city furnishes water into three classes: (i) to ex- tinguish fires and sprinkle the streets; (2) to supply citizens of the city; (3) to supply persons and fac- tories adjacent to but beyond the corporate limits. If the business were confined to the first class, there would be no ground to base a discussion upon, so clearly would the use be exclusively for public advan- tage. We think there can be but little more doubt about the second class, especially in view of certain words in the city charter, to which we will advert presently. Nothing should be of greater concern to a municipal corporation than the preservation of the yj IMPLIED POWERS. § 46 good health of the inhabitants; nothing can be more conducive to that end than a regular and sufficient supply of wholesome water, which common observa- tion teaches all men can be furnished, in a populous city, only through the instrumentality of well equip- ped water-works. Hence for a city to meet such a demand is to perform a public act and confer a public blessing. It is not a strictly governmental or munici- pal function, which every municipality is under legal obligation to assume and perform, but it is very close akin to it, and should always be recognized as within the scope of its authority, unless excluded by positive law. Here the first clause [of the statute quoted supra], 'to provide the city with water by water- works' is very broad and comprehensive, and was obviously intended to authorize the corporation to furnish the inhabitants of the city with water. Having accepted the charter and undertaken to exercise this authority in the manner detailed by the witness, it can not be held that the city, in doing so, is engaging in a private enterprise or performing a municipal func- tion for a private end." § 46. Supply of municipal public utilities for pri- vate use. — These authorities, then, \\\\\ serve to sup- port the principle so far as it is based on the doctrine of implied powers that our courts, for one or more of the three valid reasons above given, permit municipal corporations in connection with supplying their public wants for gas, water and electric light services to fur- nish these utilities for the private use of their inhabi- tants. This privilege is found by implication, it is to be noted, only in case it is to be exercised in connection with supplying the public wants ; and while most of our courts do not expressly give as a reason for their hold- ings the economy of such an arrangement, it is sub- §47 PUBLIC UTILITIES. 78 mitted that this is a controlHng idea underlying their decisions, and it is expressly given in some of them. § 47. Joint public and private service more eco- nomical. — In the case of Belding Improvement Co. v. Belding, 128 Mich. 79, 87 N. W. 113, decided in 1901, the court recognizes the practical economy of per- mitting the city to extend the service of public utilities to its citizens for the purpose of securing revenue with which to maintain its public utility plant and provide itself with such conveniences; nor does the court admit the contention made that to find such power to render private service to the individual citizen by implication is either unconstitutional or unauthorized although no authority may be expressly given. In its decision the court says: "It is also contended that this act is unconstitutional, because, by providing that cities may do commercial lighting when they erect municipal plants, it is made broader than its title. We think that commercial lighting may be essential to make a mu- nicipal plant self-sustaining, and that a provision for it might, perhaps, be within a reasonable construction of such a title. But we find it unnecessary to decide this question, for the reason that such provision might be eliminated, and leave a valid title." § 48. Ice from municipal water-works, an economy and necessity. — The case of Holton v. Camilla, 134 Ga. 560, 68 S. E. 472, 31 L. R. A. (N. S.) 116, 20 Am. & Eng. Ann. Cas. 199, decided in 1910, furnishes an equally clear decision of progressive judicial interpre- tation of the powers vested in municipal corporations. The decision may be justified by its practical result in securing adequate ice service which is so essentially necessary, under the particular climatic conditions, to the maintenance of the health of the individual and 79 IMPLIED POWERS. § 48 good general sanitary conditions in the city. In per- mitting the city to furnish ice to the inhabitants in connection with the operation of its water-works and electric light system by which the water so furnished would be rendered palatable and healthful, the court seems to have advanced to the position without the support of any authority directly in point. The deci- sion permitting the city to furnish ice in connection with its water-works system was evidently occasioned in part at least by the economy of such an arrange- ment as well as the argument in favor of its being in the interest of the health and sanitation and the gen- eral comfort of the citizens. The language of the decision and the reasons upon which it is based are suflficiently interesting to justify the following ex- tract : "If a city has the right to furnish heat to its inhabitants, because conducive to their health, comfort, and convenience, we see no reason why they should not be permitted to furnish ice. The object in bring- ing, by means of a water-works system, water in pipes from a distance, for use in supplying the needs of a city, is not alone to obtain a sufficient quantity, but also to secure that which is freer from impurities than it is possible to obtain in the city itself. If, in the hot season of the year, the inhabitants of the city must, for sanitary reasons, relinquish the cool draught from the well, because, as has been demonstrated, wells of pure water can not be maintained in populous com- munities, surely the city would have the right, were it practicable, to cool the water which it delivers through pipes as a substitute, and which ofttimes is scarcely drinkable in its heated condition. If not practicable to cool it in the pipes, and if it be necessary to the welfare, comfort, and convenience of the inhabitants that its temperature be lowered before being used for drinking purposes, why can not the city provide for § 49 PUBLIC UTILITIES. 8o the delivery of a part of it in a frozen condition, to be used in cooling such part of the balance as is used for drinking purposes? Is the difference between water in a liquid and in a frozen condition a radical one? Upon what principle could the doctrine rest that liquid water may be dehvered by the city to its inhabitants by flowage through pipes, but that water in frozen blocks can not be delivered by wagons or otherwise? If the city has the right to furnish its inhabitants with water in a liquid form, we fail to see any reason why it can not furnish it to them in a frozen condition. . . . And if the furnishing of ice to its inhabitants is conducive generally to their health, comfort, and convenience, it is certainly being furnished for a munic- ipal or public purpose. . . . Why, then, in the ex- ercise of its police power, may not a city guard against impurities in the ice as well as the water used by its inhabitants?"^ § 49. Right to supply private service by implica- tion denied. — A few courts take issue with this prin- ciple of law which is well established by the great weight of authority and hold that, while the power to light the streets and public places of a city by elec- tricity authorizes the erection and maintenance of a plant for that purpose, it may not be used for supply- ing light to private individuals. These adverse deci- sions are generally confined to the matter of fur- nishing electric light, which, of course, is compara- tively a very modern public utility, and some of them, at least, can be distinguished from those already dis- 8 Quoting Pond on Municipal Control of Public Utilities, p. 28; 1 Cooley on Taxation, p. 217 and 10 Am. & Eng. Enc. Law, 2d ed., p. 865. 8 1 IMPLIED POWERS. § 50 cussed and shown not to be actually conflicting au- thorities.' § 50. Electric light service one of most modem. — One of the leading cases which is apparently opposed to the principle in question is that of Mauldin v. Green- ville, 33 S. Car. I, II S. E. 434, 8 L. R. A. 291, decided in 1890, in which the court granted an injunction pre- venting the defendant city from purchasing and oper- ating an electric light plant, so far as it was con- cerned with supplying private residences. The court admits that there is no power expressly given the city to provide itself with light for public purposes. This decision, therefore, can not be said to oppose the doc- trine that where a city has the power expressly given to furnish light for city use it may as incidental to such use and in connection therewith extend the ser- vice to private parties. That is to say, in this case the statute fails to grant power in the city to furnish light for any purpose and in any way, so that the court is • ALABAMA.— Posey v. North Birmingham, 154 Ala. 511, 45 So. 663, 15 L. R. A. (U. S.) 711. CALIFORNIA.— Gary v. Blodgett, 10 Cal. App. 463, 102 Pac. 668; Clark v. Los Angeles, 160 Cal. 30, 116 Pac. 722; Hyatt v. Wil- liams, 14S Cal. 585, 84 Pac. 41. ILLINOIS.— Blanchard v. Benton, 109 111. App. 569; Ladd v. Jones, 61 111. App. 584; Palestine v. Slier, 225 111. 630, 80 N. E. 345. KENTUCKY.— Dyer v. Newport, 123 Ky. 203, 29 Ky. L. 656, 94 S. W. 25. MASSACHUSETTS.— Citizens' Gaslight Co. v. Wakefield, 161 Mass. 432, 37 N. E. 444, 31 L. R. A. 457; Merrimack River Savings Bank v. Lowell, 152 Mass. 556, 25 N. E. 469; Opinion of the Justi- ces, 150 Mass. 592, 24 N. E. 1084, 8 L. R. A. 487; Spaulding v. Lowell, 23 Pick. (Mass.) 71; Spaulding v. Peabody, 153 Mass. 129, 26 N. E. 421, 10 L. R. A. 397. NEBRASKA.— Christensen v. Fremont, 45 Nebr. 160, 63 N. W. 364. NEW JERSEY.— Howell v. Mlllville, 60 N. J. L. 95, 36 Atl. 691. SOUTH CAROLINA.— Mauldin v. Greenville, 33 S. Car. 1, 11 S. E. 434. 8 L. R. A. 291. 6— Pub. Ut. § 50 PUBLIC UTILITIES. ' 82 not passing on the question under discussion in the former cases. In this case the court expressed itself as follows: "Clearly, the charter does not give the power to purchase this plant in express words. It does not so give even the power to light the city, but we assume that this latter power may be fairly implied from the grant of the police power. . . . This seems to be a new question. It strikes us as remarkable that, in the multitude of cases cited by the distinguished coun- sel who argued the case, there should not be in one of them the least reference to this precise point. We have made diligent search, and have not been able to find one. We must decide it, but without any help from authorities. The city has the express power to own property, and it also has the implied right to light the city. Do these powers necessarily imply the right to make the city the owner of the plant and a manu- facturer of electricity? It is quite certain that such power is not 'essential' to the declared objects and purposes of the corporation. . . . But considering that some discretion, as to the mode and manner, should be allowed the municipality, in carrying out the conceded power to light the streets of the city, we hold that the purchase of the plant was not ultra vires and void, so far as it was designed to produce electricity suitable for and used in lighting the streets and public buildings of the city. But we can not so hold as to the purchase of so much of that plant as furnished the incandescent light for use in the interior of private residences and places of business, which can not be properly included within the power to light the streets of the city. ... As we understand it, all the powers given to the city council were for the sole and exclusive purpose of government, and not to 83 IMPLIED POWERS. § 50 enter into private business of any kind, outside of the scope of the city government." This case, then, in refusing the right of the city to accommodate its citizens v^^ith modern lighting service for their private use was confessedly decided without the aid of authorities and at most involves the con- struction of powers existing by implication only to provide for public lighting. While the spirit of the case is hostile it can not be said to be an authority in conflict with the line of decisions above discussed, for they involve the extension of the authority expressly given the city to provide these public utilities for its own wants, and together therewith those of its citizens who desire to avail themselves of the opportunity and are willing to pay therefor. It is further submitted that the decision is not sound and that the court was in error in saying that "all the powers given to the city council were for the sole and exclusive purpose of government." There can be no question under the law that the powers of municipalities are much broader than this, as common observation shows must be the case in practice. In referring to this case the court of Nebraska in Christensen v. Fremont, 45 Nebr. 160, 63 N. W. 364, decided in 1895, said, "that while the power to light the streets authorize the erection and maintenance of a plant for lighting the streets, it does not authorize one for supplying light to private buildings." The court then goes on to admit that "the act of 1889 . . . extends the grant of power to the purpose in ques- tion." saying: "We have, thus, elaborated on the grant of powers because the conclusions reached con- vince us that in the absence of the act of 1889 the city could not have devoted any revenue to the pur- pose of maintaining a plant to furnish light for private consumers." This case, then, is not an authority in §51 PUBLIC UTILITIES. 84 conflict with the principle under discussion for the reason that the decision was made six years after the passage of an act expressly permitting the city to serve its inhabitants with electric light, which act was recognized by the decision as having this effect on the case. These expressions of the court on the subject are mere dicta, having no force of law whatever and were not necessary or proper in the decision, for they are directly contrary to what the court admits to be the law. § 51. Detailed statutory provisions of Massachu- setts strictly construed. — In the case of Spaulding v. Peabody, 153 Mass. 129, 26 N. E. 421, 10 L. R. A. 397, decided in 1891, the court denies the defendant the right to furnish light to its inhabitants in the absence of any express statutory power in connection with supplying the streets and public places of the city. The court in this case fails to follow its earlier deci- sions holding that the providing of clocks, scales and the like is a public purpose and within the inherent power of cities. It can hardly be successfully main- tained that supplying light and heat by the municipal- ity for the private wants of citizens in connection with its plant for supplying the public needs is any less a public purpose than the providing of town clocks, scales, and pumps, nor that the convenience and com- fort of its citizens would require the one and not the other. In fact, experience shows that in crowded city life electric light and gas as well as a wholesome supply of water in private houses and places of busi- ness are practically necessities, and there can be no doubt that the adequate supply of such public utilities tends very materially to the preservation of public health and peace and to the protection of property. This court had found that the supply of water by a 85 IMPLIED POWERS. §51 water-works system is a public purpose and also had conceded that the legislature has unquestioned power to permit cities to provide gas or electric light for the private use of its citizens.^" In refusing to find such power by implication the court says: "It is wholly for the legislature to deter- mine, within the limitations of the constitution, the powers which towns shall possess, and when it appears that the custom of the legislature has been specifically to define from time to time the purposes for which towns may raise money by the taxation of their in- habitants, and when the legislature can at any time grant additional powers if they are deemed necessary, a somewhat strict construction of existing statutes seems reasonable, and in accordance with the pre- sumed intention of the legislature. . . . The subject of constructing and maintaining gas or electric works for the manufacture of gas or electricity and the distribution thereof through the streets of towns and cities, for the purpose of furnishing light is one of too much importance to be attached as a mere incident to the power given to erect and maintain street lamps, and we think that if the legislature had intended that towns generally should have authority to erect and maintain such works, the authority would have been plainly expressed in the statutes." In connection with this clearly defined position of the Massachusetts court it should be said that the towns of New England are peculiar in that power must be given them expressly and that money can be raised by taxation only for purposes expressed in the statute or incidental to such purposes. With this in mind it will be seen that the case just mentioned is not applicable to, or binding on, our courts generally 10 Opinion of the Justices, 150 Mass. 592. 24 N. E. 10S4, 8 L. R. A. 487. § 52 PUBLIC UTILITIES. 86 for an examination of our city charters will disclose no attempt at such detailed legislation as was found bind- ing on this particular court. It is of interest to note that after this decision was handed down, January 12, 1891, the legislature promptly acted upon the suggestion made in the case, and passed a general act, which was approved June 4, 1891, giving any city or town the power to con- struct, purchase or lease, and maintain within its lim- its one or more plants for the manufacture and dis- tribution of gas or electricity for furnishing light for the municipal use, or light, heat or power, except for the operation of electric cars, for the use of its in- habitants. This act was passed pursuant to the Opin- ion of the Justices, 150 Mass. 592, 24 N. E. 1084, 8 L. R. A. 487, rendered May 27, 1890, in which the court, in response to the question propounded to it by the legislature, stated that it was within the province of that body to confer upon towns and cities the power to manufacture and distribute gas or elec- tricity for the use of their inhabitants. § 52. The rule in Illinois. — The Appellate Court of Illinois in Ladd v. Jones, 61 111. App. 584, decided in 1895, in refusing recovery for electric lighting fur- nished under an ordinance by the plaintiff city to one of its inhabitants for private use, took the position that such city acted without authority in furnishing the light because such power had not been expressly granted to it, and expressed itself to the effect that, "powers granted to cities and villages by legislative grant must be strictly construed." It is to be re- gretted that the case is not discussed more at length so that the reason for the decision might more clearly appear, and also that this case has not been passed upon by the Supreme Court of the state. In the case 87 IMPLIED POWERS. § 53 of Blanchard v. Benton, 109 111. App. 569, this same court in 1903 indicates that it is still of the opinion expressed in the former case, with which the Supreme Court of Illinois seems inclined to agree." § 53. The New Jersey decision. — The Supreme Court of New Jersey in Howell v. Millville, 60 N. J. L. 95, 36 Atl. 691, decided in 1896, even denies that an act "authorizing the lighting of public streets, and places in the cities, towns, townships, boroughs, and villages of the state and to erect and maintain the proper appliances, etc.," gives the power to a munici- pality to erect and maintain an electric light plant to light its streets. It is submitted that in view of this express statute the case in refusing to find authority for the city to erect and maintain an electric light plant, for supplying the public wants, is unsound in its reasoning and so narrow in its construction as not only to fail to give effect to the intention of the legis- lature, but virtually to annul the enactment. The case is unsupported by authorities and does not represent the attitude of our courts outside of the particular jurisdiction. § 54. The California rule stated. — The California case of Hyatt v. Williams, 148 Cal. 585, 84 Pac. 41, also refuses to accept the doctrine of implied powers in this connection. It says: "The terms of the express grant of the power to provide light for the public purposes named do not indicate any intention to give the distinct and larger power to establish a plant for furnishing light for private use to all the inhabitants of the city who may desire it, and no such intention can be imputed to the framers of the charter from the language there employed. . . The question " Palestine v. Siler, 225 111. 630, 80 N. E. 345. § 54 PUBLIC UTILITIES. 88 whether or not, if the city had erected or should erect a plant to supply electric light for the public streets, public places, and public buildings, it would have power to distribute any surplus thereof to the inhabi- tants for private use does not arise in the case." In the course of this rather arbitrary decision the court unfortunately speaks only very briefly of the reasons for holding that the power of the municipality must be so limited; and no case is discussed or even cited and no authority whatever is referred to except the general definition of the powers of municipal corpora- tions formulated by Judge Dillon over forty years before and probably twenty years before electricity was thought of for lighting purposes as it is now en- joyed. The case of Gary v. Blodgett, lo Cal. App. 463, 102 Pac. 668, very materially limits, if it does not practi- cally reverse, the case of Hyatt v. Williams, supra. The decision, however, is based upon a statute which immediately followed and was probably the result of the decision in the Hyatt case. The General Laws of Galifornia, 1906, p. 898, provide that "the board of trustees of said city shall have power ... to acquire, construct, repair and manage pumps, aque- ducts, reservoirs, or other works necessary or proper for supplying water for the use of such city or the inhabitants ... to acquire, own, construct, main- tain and operate . . . gas and other works for light and heat." In holding that the city had the power to furnish electric light to the inhabitants as well as to itself, although there was no express pro- vision for furnishing light for the inhabitants the court said: "It seems clear, though, to us that in the grant of power to cities of the sixth class, if not explicitly expressed, it is at least necessarily implied, that the municipality shall have the authority to furnish the 89 IMPLIED POWERS. § 54 inhabitants for private use as well as the general public with electric light. In the grant there is no specification as to the purposes for which the light is to be furnished, and therefore we think no purpose for which such works are usually designed and oper- ated was excluded from the contemplation of the legislature in the enactment of the statute. Indeed, it would be a strained and unnatural construction of the language used to hold that the works were to be devoted simply to corporate uses. When the city is expressly authorized 'to acquire, own, construct, main- tain and operate . . . gas and other works for light and heat,' the incidents of such ownership and right of operation necessarily follows. Appellant's view derogates from the ordinary meaning of the terms used and writes into the statute a restriction of the use, which we have no right to assume was in the mind of the legislature. If the same grant were made to an individual, no one, of course, would con- tend for such a limitation; but it is sought here because of the idea that it is hardly within the legitimate func- tions of a municipality to furnish light to its inhabi- tants. But the modern decisions recognize this as a public use and not outside of the usual range and scope of municipal authority." The case of Clark v. Los Angeles, i6o Cal. 30, 116 Pac. 722, decided by the Supreme Court of California May 31, 191 1, was practically identical in its decision with the facts and the legal principle involved in the case of Cary v. Blodgett, supra. In holding that the city undoubtedly had the power and should be per- mitted to supply its inhabitants as well as itself with light, the court said: "It is difficult to perceive how the power to supply electricity to the inhabitants of the city for their private use could be conferred in clearer or more appropriate terms. There seems to § 55 PUBLIC UTILITIES. 90 be no foundation for the argument that the power of the city to procure or produce water, gas or elec- tricity, and supply it to the inhabitants is limited by this provision to the procuring of these substances for public uses alone, such as the watering of public streets, the flushing of public sewers, the lighting of public streets and buildings, or the running of eleva- tors in public buildings and heating the rooms therein. The statement of the proposition, in connection with the provision above quoted, is a sufBcient refutation of it." The court recognized the case of Gary v. Blodgett, supra, as being in effect identical with the case in question, and as a petition for its rehearing was re- fused by the Supreme Court, that court held the decision in the Gary case as practically a decision by the Supreme Court itself to the effect that "the stat- ute giving power to cities of the sixth class 'to acquire, own, construct, maintain and operate street railways, telephone and telegraph lines, gas and other works, for light and heat' (§ 862, St. 1906, p. 898, Mun. Cor. Act), authorized such cities to erect and operate an electric light plant, and thereby supply the inhabitants of the city with electricity for private use." § 55. Municipality limited to enterprises of public nature. — By way of further illustration and definition of the powers of municipal corporations to own and operate municipal public utilities, it may be helpful to discuss at this point the right of such corporations to engage in enterprises ordinarily regarded as being exclusively of a private nature and which are generally carried on by private concerns operating at least theoretically under the natural law of competition. The power of municipal corporations to engage in any business enterprise requiring revenue derived from 91 IMPLIED POWERS. § 56 taxation for its maintenance is limited by the consti- tution, as has been seen, to those undertakings which are pubHc or municipal in their nature or such as are regarded as necessary or incidental to the purposes for which such corporations were created. § 56. Taxation only for public purposes. — Taxation which takes the private property of the party paying the tax for a private use and for the benefit and sup- port of an individual manufacturer or to engage in the sale of coal, wood or such like material for fuel which is distinctly a private enterprise would clearly be con- trary to the rule that taxes can only be levied for pub- lic purposes and within the inhibition of the constitu- tion limiting the power of municipal corporations to municipal or public objects. It is therefore beyond the authority of the municipal corporation to assist or engage in the manufacturing business or in the sale of commodities which are and can be easily conducted by private business concerns in competition with each other, which serves sufficiently to regulate them. § 57. Municipal public utilities public and natural monopolies. — The nature of the business of such pri- vate enterprises and the way in which their products are distributed make it unnecessary as well as inex- pedient that it be conducted as a single enterprise for the entire municipality. The distribution of such municipal public utilities as light, heat, transportation and the improved methods of communication are natural monopolies, and in the interest of economy and from the nature of the product and the manner of its distribution, one system serving the entire munic- ipality is the most advantageous manner of furnishing the city and its inhabitants with such public utilities. Being a monopoly in its very nature and because the § 58 PUBLIC UTILITIE3. g2 service of distribution must be comprehensive and should be coextensive with the city, no opportunity is left for regulation by competition, for the customer has no choice and individually practically no voice in the matter of the service which he receives. This makes governmental regulation necessary and fur- nishes the occasion for permitting municipal corpora- tions to own and operate or otherwise control munici- pal public utilities, § 58. Private enterprises controlled by compsti- tion. — There is no occasion for such regulation or control over private business concerns engaged in individual enterprises, which operate singly and are naturally controlled by competition between the dif- ferent business concerns providing the same com- modity; and the courts have accordingly refused to sustain the attempts of municipalities to conduct a brick making business or to engage in the sale of coal and wood as fuel or to assist private manufacturing concerns for the purpose of increasing the general business interests and the prosperity of the particular municipality; and while, as we have already found, the municipal corporation will be permitted to use to the best advantage or to dispose of any surplus en- ergy or capacity, which it may not need at the time for its own use, the courts will not permit the erection by a municipality of a building or the acquirement of a power plant primarily for private use and only incidentally for municipal purposes. To be valid its chief use must be municipal and the disposition to private ends merely incidental. As this principle constitutes a well defined limitation on the power of municipal corporations in this connection, although its application has to do with enterprises of a private i'J DURATION OF FRANCHISE. § 187 service in connection with such growth. The IlHnois decisions as heretofore shown are not inconsistent with this principle, but involve the converse of this proposi- tion, for they hold that the franchise granted to any particular municipal public utility extends with the growth of the city, thus making one integral and harmonious system with the same rights and condi- tions provided in a common franchise. These author- ities only show the necessity of holding that the ter- ritory annexed by the growth of the municipality becomes an integral part of it with the necessary re- sult that the municipal corporation annexed is termi- nated as an independent municipality, consolidated and merged in the municipal corporation to which it is annexed, and that with the termination of its ex- istence as an independent legal entity its franchise rights granted for an indeterminate period also ter- minate, and that in lieu of this there are substituted the franchise rights and conditions of the annexing municipality. § 187. Duration of franchise limited by statute in New York. — The case of Blaschko v. Wurster, 156 N. Y. 437, 51 N. E. 303, decided by the New York Supreme Court ten years after its decision in the case of People V. O'Brien, supra, and the year following that, in the case of People v. Deehan, supra, indicates the change made by the legislature in this jurisdiction limiting the power of the municipality to the granting of franchises for periods not to exceed twenty-five years. This action of the legislature goes to confirm the other decisions, and in effect to establish the rule generally that the municipality can not grant a per- petual franchise unless given the power to do so ex- pressly and that such a franchise is contrary to public policy and against the general welfare. This decision § 187 PUBLIC UTILITIES. 238 of the highest court of New York in harmony with the general rule of strict construction holds that a charter granted in perpetuity in face of the limitation of twenty-five years placed on the power of New York City in its charter to make such a grant is void in its entirety. In the course of its decision the court says: "The new charter was approved on the 4th day of May, 1897, before the resolution granting the fran- chise in question was passed. Section 73 of this stat- ute is as follows : *Sec. 73. After the approval of this act no franchise or right to use the streets, avenues, parkways or highways of the city shall be granted by the municipal assembly to any person or corporation for a longer period than twenty-five years.' . . . And the granting of street franchises to railroads by the municipal assembly for more than twenty-five years is one of these forbidden acts. . . . What the rail- road asked, and what the aldermen voted, was the right in perpetuity. . . . The city authorities had the power to make the grant for twenty-five years, but that was not the power that the railroad called into action, that the aldermen exercised, or the court restrained, but the unlimited power invoked and claimed independent of the new charter. . We should construe the official act which the court restrained ac- cording to the spirit and intention with which it was performed, and in the sense in which it was viewed and understood by the court when the injunction was granted. So, we are inclined to hold that the consent, so far as it was given, was not a valid exercise of the power to grant consents for twenty-five years, and therefore the second question should be answered in the negative." This decision therefore in construing the provisions of the charter granted New York City in 1897 harmonizes that jurisdiction with the general rule. 239 DURATION OF FRANCHISE. § 1 88 § 1 88. Duration of franchise of state on acceptance perpetual. — The case of Suburban Electric L. & P. Co. V. East Orange Township, 59 N. J. Eq. 563, 41 Atl. 865, decided in 1898, in denying the right of the township to rescind the privilege granted by it per- mitting the stringing of wires, in the exercise of which rights the public utility was installed and an extended investment made, held that the right having been acted upon, although only a license, could not be re- voked at the pleasure of the party granting it. After expressly recognizing that the right was ultimately granted by the state, the court held that it must be regarded as a grant in perpetuity, which, of course, was within the power of the state to make, for as the court says: "Moreover, the complainant's right to string the wires does not depend alone, if at all, upon the consent of the municipal authorities; it relates back to the legislative authority to string and maintain the wires upon certain conditions. No time is fixed by the legislative authority for the continuance of the exercise of the franchise, and the grant must be pre- sumed to be perpetual, subject, it may be, as it prob- ably is, to the right of the legislature to exercise upon it its police powers from time to time, as it in its wis- dom may see fit." The same court in the case of State (Hudson Tel. Co.) V. Jersey City, 49 N. J. L. 303. 8 Atl. 123, decided in 1887, however, after an expenditure of a substantial sum by a municipal public utility in connection with the instalation of its plant held that the special fran- chise privilege granted by the municipality could not then be revoked for the reason that the franchise could only be repealed by the legislature. In the course of its decisions the court said: "I am of the opinion that, as a general rule, a designation of streets by a city gives the company an irrevocable right to use the § 189 PUBLIC UTILITIES. 24O Streets so designated for the purposes indicated in the statute. Certainly, after the expenditure of money in the erection of poles made in reliance upon the munic- ipal designation, the company obtains a vested right, of which they can not be stripped by a subsequent revocation of such designation. The notion that a corporation which, under provisions similar to the present act, has, upon the strength of a permission to use a certain route, spent thousands of dollars in lay- ing railway tracks or subterranean cables, or in erect- ing posts and stretching wires, is at the mercy of the city authorities continually and entirely, is not to be entertained for a moment. A view that the rights of the corporation are of so unsubstantial a character is opposed to all judicial sentiment, from the Dartmouth College Case, 4 Wheat. 518, to the present time. . . . No provision is contained in the act under which the prosecutors were incorporated which confers upon a municipality the power to revoke a permission once granted. The grant of the franchise to this company was subject only to repeal or alteration by the legis- lature; and, when that corporation had acquired vested rights in the mode designated by their charter, it cer- tainly was not in the power of a common council to strip them of any right so acquired." § 189. Whether unlimited municipal franchise is property and perpetual. — The case of Seattle v. Colum- bia & P. S. R. Co., 6 Wash. 379, 33 Pac. 1048, de- cided in 1893, seems to hold that the franchise granted by a municipality being property is perpetual unless limited in the grant. The court, however, recog- nizes the possible necessity of the municipality exer- cising control in spite of such franchise and suggests that it may do so by the exercise of the right of emi- nent domain. In the course of its decision the court 241 DURATION OF FRANCHISE. § 1 89 says: "The property was the franchise — the right to use the street for the purpose of constructing and operating tracks thereon. , . . Property rights ac- quired under and by virtue of franchises thus granted are perpetual, unless otherwise limited in the grant; and there was no limit in this instance, and such fran- chises are not void in consequence thereof. There is no sound reason why a municipal corporation may not bind itself in this particular, as well as an indi- vidual may. On the contrary, well-recognized prin- ciples of justice require that it should be so bound, to the end that property rights may be made stable and certain; and the municipality is sufficiently pro- tected under such circumstances; for should it become necessary to thereafter undo the work, and terminate the rights granted, and to take the property of the corporation acquired in pursuance and by virtue there- of, it may do so under the exercise of the power of eminent domain upon making compensation; and this is a sufficient protection for the rights of the city, and one which at the same time affords protection to the rights of the respondents. State v. Noyes, 47 Me. 189; Port of Mobile v. Louisville & N. R. Co., 84 Ala. 115, 4 South. Rep. 106." 16— Pub. ut. CHAPTER XII. FRANCHISE RIGHTS AVAILABLE TO INHAB- ITANTS OF MUNICIPALITIES. Section. 190. The obligation of the municipal franchise. 191. The duty imposed by acceptance of franchise. 192. Municipal public utilities affected with public interest. 193. Regulation and control of municipal public utilities. 194. Municipal control in interest and for benefit of public. 195. Limitations imposed to conserve municipal control. 196. Rights of inhabitants the real parties in interest. 197. Individual inhabitant's rights. 198. Right of consumer failing to secure proper service. 199. Franchise rights available to individual customer. 20C Nature of duty to provide service defined. 201. Customer may enjoin diversion of necessary supply. 202. Customer entitled to service under most favorable conditions. 203. Rights of abutting property owner. 204. Liability of municipal public utility for shade trees. 205. Right of customer to enjoin collection of excessive rate. 206. Regulations inconsistent with franchise invalid. 207. Liability in damages for failure to furnish adequate service. § I go. The obligation of the municipal franchise. — ^A consideration for the granting of the special fran- .chise rights, which permit of the furnishing of munic- ipal pubHc utilities for municipal purposes and for the use of the inhabitants of the municipality, is the duty, thereby assumed and imposed, of rendering proper public utility service to the municipality and its in- habitants. Such franchise rights and special privileges belong to and may be enjoyed only by those to whom they are specially granted by the state or by its agent, the municipality, under authority creating the agency 242 243 FRANCHISE RIGHTS. § IQI and conferring the power to grant the special fran- chise privileges. § 191. The duty imposed by acceptance of fran- chise. — This duty of the municipal public utility to serve the public in accordance with the terms and conditions of the franchise, granting it the right to furnish pul)lic utility service, and the public regula- tion and control which are the means provided for securing the performance of the duty, due the munici- pality and its inhabitants, are imposed by virtue of the principle which has been established in our juris- prudence for centuries and is clearly stated and ap- plied to our modern industrial conditions in the case of Munn V. People of Illinois, 94 U. S. 113, 24 L. ed. yj. The old English Common Law established as one of its first and most fundamental principles that "when private property is affected with a public interest it ceases to be private only and becomes subject to pub- lic regulation and control." As the court in the Munn case so well expressed it, "Property does become clothed with a public interest when used in a manner to make it of public consequence, and affect the com- munity 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, so long as he maintains the use, he must submit to the control." § 192. Municipal public utilities affected with pub- lic interest. — Under this principle which has been es- tablished for the past three centuries, at least since the day of Lord Chief Justice Hale, who enunciated it, all public service corporations by virtue of the fact §193 PUBLIC UTILITIES. 244 that they are pubHc rather than private corporations, organized for the purpose of serving the public in that capacity and having been granted the special franchise privileges of doing so in accordance with the terms of the grant, have been subjected to the con- trol and regulation of the pubhc in the interest of the public for the purpose of securing to the pubhc the performance of the duties connected with rendering the service undertaken by the incorporation of the company and the acceptance of the special franchise privileges. § 193. Regulation and control of municipal public utilities. — The power conferred upon the municipality of granting the use of its streets to the municipal pub- hc utility for the purpose of permitting it to furnish its public utility service and of imposing the condi- tions under which the streets may be used for render- ing the service is to secure proper municipal regula- tion and control of such service. And when the mu- nicipal public utility receives its charter from the state granting it the right to be a body corporate and ac- cepts the special franchise rights conferred by the municipality permitting it to own and operate its pub- lic utility system, by virtue of the acceptance of such special privileges and as a consideration for them, the municipal public utility undertakes and is in duty bound to provide adequate service to all of its cus- tomers; and, for the purpose of seeing that it does so, is subjected to regulation and control at the hands of the state and by other agencies created for that purpose, including the municipahty. § 194. Municipal control in interest and for bene- fit of public. — The franchise rights are granted not as a special privilege in the interest and for the peculiar benefit of the public service corporation, but such 245 FRANCHISE RIGHTS. § I95 rights are granted by the public generally to whom they belong for the special benefit and advantage of the public and the individual members composing it. These special benefits conferred in the franchise grants carry with them the duty and burden of rendering adequate service to the public on reasonable terms and conditions; and one of the chief duties of the municipal authorities is to require such service in the interest of the municipality and its inhabitants. The power of regulation and control is vested in them for this purpose exclusively, and not for the purpose of being surrendered or bartered away; and, that this power may be conserved in the municipality, the law has provided many checks and restrictions, including those already discussed, limiting the power of the municipality to incur only a fixed indebtedness; to make contracts and grant franchises only which are not exclusive unless the municipality be clearly em- powered to make them exclusive, and then only in such cases where it is clearly apparent that the inten- tion was to make the contract or franchise exclusive; and further to make a contract or grant a franchise only for a reasonable period and not in perpetuity unless the power and the intention is clearly apparent that they continue perpetually. § 195. Limitations imposed to conserve municipal control. — Further restrictions, to be noted later in this discussion, which are imposed for the purpose of conserving the power of regulation and control in the public and especially in the municipality as the means of securing eflficient service on reasonable terms are the limitations placed on the public service corpora- tion to assign its franchise rights, to lease or sell its property, or in any way to hamper or disable itself from performing its duty to the public in rendering § 196 PUBLIC UTILITIES, 246 proper service — all of which are for the purpose of protecting the interests of the public and its members in securing the performance of the obligations due it from the public service corporations. § 196. Rights of inhabitants the real parties in interest. — The rights thus created and the consequent duties imposed on the public service corporation are generally available to the inhabitants of the munici- pality as w^ell as to the municipality itself; indeed, they are the real parties in interest for w^hom is made the contract, which results from the acceptance of the franchise by the public service corporation. These rights will be enforced by the courts on the petition of the individual inhabitant or the municipality that is denied adequate service on reasonable conditions by means of a mandamus proceeding, or by a writ of injunction where the service is about to be discontin- ued. Public utility service, whether rendered by a pri- vate corporation or the municipality itself, must be provided to all who apply and are willing to pay for it under such terms and conditions as may be reason- ably imposed. § 197. Individual inhabitant's rights. — Each inhab- itant, whether an owner or a tenant of property, should have the right to contract for service in his own name within reason, although naturally where there are a large number of tenants of a transient nature occupying only one or two rooms of a large building, a reasonable regulation may permit the com- pany to contract only with the party owning or con- trolling the entire structure. These are matters of administration and are determined by a practical appli- cation of what is just and reasonable under the circum- stances of the particular case where an established practice or general custom is generally controlling. 247 FRANCHISE RIGHTS. § I97 Where, however, the corporation providing the ser- vice receives an application for its service and the cus- tomer complies with the reasonable rules and regula- tions on his part a contract results which requires that adequate service be rendered in accordance with the prevailing terms and conditions; and as before sug- gested, default on the part of the municipal public utility gives a right of action in the form of mandamus or injunction, and where special injury results from such failure, the party suffering the injury may recover compensation in damages/ 'ALABAMA. — Birmingham v. Birmingham Water Co. (Ala.), 42 So. 10. ARKANSAS.— Danaher v. Southwestern Tel. & T. Co., 94 Ark. 533, 127 S. W. 963; Carson v. Ft. Smith Light & Traction Co., (Ark.), 158 S. W. 129. FEDERAL.— Postal Cable Tel. Co. v. Cumberland Tel. & T. Co., 177 Fed. 726. GEORGIA.— Freeman v. Macon Gas Light & W. Co., 126 Ga. 843, 56 S. E. 61, 7 L. R. A. (N. S.) 917. INDIANA.— Coy v. Indianapolis Gas Co., 146 Ind. 655, 46 N. E. 17, 36 L. R. A. 535; Indiana Natural & Illuminating Gas Co. v. State ex rel., 158 Ind. 516, 63 N. E. 220, 57 L. R. A. 761; Portland Natural Gas Co. V. State ex rel., 135 Ind. 54, 34 N. E. 818, 21 L. R. A. 639; State V. Consumers' Gas Trust Co., 157 Ind. 345, 61 N. E. 674, 55 L. R. A. 245; Westfield Gas & Milling Co. v. Mendenhall, 142 Ind. 538, 41 N. E. 1033. KENTUCKY.— Cumberland Tel. & T. Co. v. Cartwright Creek Tel. Co., 32 Ky. L. 1357, 108 S. W. 875; Cumberland Tel. & T. Co. v. Hickman, 129 Ky. 220, 111 S. W. 311; Georgetown v. Georgetown Water, &c., Co., 134 Ky. 608, 121 S. W. 428, 24 L. R. A. (N. S.) 303; Marion Electric Light, &c., Co. v. Rochester, 149 Ky. 810, 149 S. W. 977. MAINE.— Kimball v. Northeast Harbor Water Co., 107 Maine 467, 78 Atl. 865. 32 L. R. A. (N. S.) 805. MARYLAND.— Chas. Simon's Sons Co. v. Maryland Tel. & T. Co., 99 Md. 141, 57 Atl. 193, 63 L. R. A. 727. MASSACHUSETTS.- Souther v. Gloucester, 187 Mass. 552, 73 N. E. 558. 69 L. R. A. 309. MICHIGAN.— Rice v. Detroit, &c., R., 122 Mich. 677, 81 N. W. 927, 48 L. R. A. 84. MINNESOTA.— State ex rel. W. J. Armstrong Co. v. Waseca, (Minn.), 142 N. W. 319; St. Paul Realty & Assets Co. v. TrI-Stat© T. & T. Co. (Minn.), 142 N. W. 807. § 198 PUBLIC UTILITIES. 248 § 198. Right of consumer failing to secure proper service. — The general principle permitting recovery for a failure to render proper service by the individual customer is v^ell expressed in the case of Freeman v. Macon Gas Light & W. Co., 126 Ga. 843, 56 S. E. 61, 7 L. R. A. (N. S.) 917, decided in 1906, where the court says: "In the present case, it affirmatively ap- pears that the contract relied on by the plaintiff was made in pursuance of express authority conferred by the legislature upon the municipality to grant a fran- chise upon certain terms, one of which was that pri- vate consumers should be furnished water at rates to be fixed by the city in the contract with the Macon Gas Light & Water Company. The water company, by entering into the contract which the general as- sembly authorized the city to make with that company, accepted the privilege of supplying the citizens of that city, as such, with water upon certain terms, and became a public service corporation with an express statutory duty to perform. This duty the company owed to every private consumer of water, independ- ently of any contract duty it owed to the municipality itself, considered as a municipal corporation engaged in the discharge of governmental functions. For a MISSOURI.— state v. Graeme, 130 Mo. App. 138, 108 S. W. 1131. MONTANA.— State ex rel. Milsted v. Butte City Water Co., 18 Mont. 199, 44 Pac. 966, 32 L. R. A. 697, 56 Am. St. 574. NEBRASKA.— American Waterworks Co. v. State, 46 Nebr. 194, 64 N. W. 711; Slabaugli v. Omaha Electric Light & P. Co., 87 Nebr. 805, 128 N. W. 505, 30 L. R. A. (N. S.) 1084. NEW JERSEY.— Boonton v. Boonton Water Co., 69 N. J. Eq. 23, 61 Atl. 390. NEW YORK.— Pond v. New Rochelle Water Co., 183 N. Y. 330, 76 N. E. 211, 1 L. R. A. (N. S.) 961; Rochester Tel. Co. v. Ross, 195 N. Y. 429, 88 N. E. 793; Wood v. New York Interurban Water Co., 142 N. Y. S. 626. VERMONT.— Bourke v. Olcott Water Co., 84 Vt. 121, 78 Atl. 715y- 33 L. R. A. (N. S.) 1015. 249 FRANCHISE RIGHTS. § 199 breach of this statutory duty, the company could be held liable in tort by the aggrieved member of the public, though he was no party to the contract be- tween the city and the water company." § 199. Franchise rights available to individual cus- tomer. — That the contract resulting from the accept- ance of the franchise granted by the municipality creates rights which become available to the individ- ual customer receiving such service who may insist on the service being rendered in accordance with the rights thus fixed and determined is the effect of the decision in the case of Westfield Gas & Milling Co. v. Mendenhall, 142 Ind. 538, 41 N. E. 1033, decided in 1895, as follows: "By an act of the legislature ap- proved March 7, 1887 (Acts 1887, p. 36; Rev. St. 1894, § 4306), incorporated towns and cities are empowered to enact a general ordinance to reasonably regulate the supply, distribution, and consumption of natural gas within their respective corporate limits, and to require a fee of the persons or companies for the use of the streets granted to them by these municipalities. . . The town had the right, in granting the use of its streets, to impose such reasonable requirements, terms, regulations, and conditions therein upon those accepting the privileges and benefits of the grant as its own prudence and discretion might dictate, so as not to restrict, however, the town in its legitimate ex- ercise of legislative powers. The authority to pre- scribe such terms and conditions, if not expressly conferred by the act of 1887, ^nay at least be reason- ably inferred therefrom, in order that the full force and effect may be given to the power expressly granted. Crawfordsville v. Braden, 130 Ind. 149, 28 N. E. 849; Indianapolis v. Consumers' Gas Trust Co., 140 Ind. 107, 39 N. E. 433, and authorities there § 200 PUBLIC UTILITIES. 25O cited. . . . Having accepted the franchise granted by the ordinance, and agreed to be bound by the ex- press terms as to the price of gas, and having engaged in the exercise of the privileges under the grant, and so continuing to do, it is now precluded from suc- cessfully refusing to discharge its obligations to the inhabitants of the town who desire to use its fuel upon the ground that they refuse to pay a price there- for in excess of the maximum rate fixed by the ordi- nance. The town could not, by its subsequent action, impair or restrict the rights granted to, accepted, and exercised by appellant. Neither will the latter be permitted, under the circumstances, to decline to com- ply with the terms or conditions assumed, by which it is expressly obligated." This principle is well stated in the case of Cumber- land Tel. & T. Co. V. Hickman, 129 Ky. 220, iii S. W. 311, decided in 1908, where in holding that having accepted the contract and enjoyed the privileges granted by the franchise the company will not be permitted to repudiate any of its terms, the court said: "In this case, a part of the consideration for the grant of the franchise, there is a contract of the grantee to furnish certain classes of persons certain valuable priv- ileges. The contract was made for their benefit, and based upon a valuable consideration. They may sue in their behalf, and one or more may sue for all, or the city might have maintained the suit, as it was the party with whom the contract was made." § 200. Nature of duty to provide service defined. — By way of defining the nature of the public utility service which the company is obliged to render under its franchise, the court in the case of Kimball v. North- east Harbor Water Co., 107 Maine 467, 78 Atl. 865, 32 L. R. A. (N. S.) 805, decided in 191 1, in holding that 251 FRANCHISE RIGHTS. § 201 the use of water for operating- an elevator in a hotel was a "domestic purpose" and that the company was accordingly bound to furnish service for that use, said: "It is not the manner of the use, but its purpose, which is the determining test. Is it to be used for the neces- sity, cleanliness, health, comfort or convenience of the house and its appurtenances or of the household? If so, it is a domestic purpose. And it can make no difference whether it be a private home or a hotel, which in this sense is but a large household, a tem- porary home for a greater number of people. An ele- vator in a private house is a convenience; in a hotel is almost, if not quite, a necessity. It promotes the personal comfort of the proprietor, his family, servants and guests. It is a domestic labor-saving device, and the use of water in propelling such elevator would cer- tainly seem to be embraced in the term 'domestic' " § 201. Customer may enjoin diversion of necessary supply. — By way of a further definition of the nature of the service to which the customer is entitled and as a practical application of the principle permitting him to enjoin action on the part of the public service corporation which would have the effect of interfering with the service it is bound to render, the case of Boonton v. Boonton Water Co., 69 N. J. Eq. 23, 61 Atl. 390, decided in 1904, holds that such a customer may enjoin the company from furnishing water for the supply of railway locomotives and for the genera- tion of motive power because such use would disable the company from furnishing an adequate supply for domestic and other purposes for which the plant was established and the franchise granted. Although the court indicated that if a supply adequate for both domestic purposes and for the creation of motor power and for locomotives could be secured it would not en- § 202 PUBLIC UTILITIES. 252 join the company from furnishing its service for the other purposes because in that event it would not inter- fere w^ith the furnishing of adequate service for the former purpose. In the course of its decision the court observed: "In short, I think the words 'business and factory use' are confined to domestic uses as found in factories and places of business, namely, drinking, washing, flushing waterclosets, and the like. It would be quite impracticable to make a list, and annex it to the contract, of all the different kinds of factories and places of business that might need water, and I am therefore of the opinion that those expressions do not help the defendant, and that the defendant has no right to use any of its water for the supply of the engines of the railway company or the motors that drive the printing presses, or the ventilating fans, or "•ny other mechanical purposes, or the washing of hats — I had some doubts of that at first, but reflection has removed it — so long as there shall be any deficiency of water in the higher parts of the town." The decision in the case of Chas. Simon's Sons Co. v. Maryland Tel. & T. Co., 99 Md. 141, 57 Atl. 193, 63 L. R. A. "^2.^, decided in 1904, observes with pro- priety that "It can not be here objected by the ap- pellee that the regulation contained in the ordinance here in question as to rates of charge was not a rea- sonable one. The time to have urged such a consid- eration was before it accepted the ordinance and availed of the privileges it acquired thereunder." § 202. Customer entitled to service under most favorable conditions. — An interesting practical illustra- tion of the right of the customer to receive service under the most favorable conditions provided for in the franchise is furnished by the case of Rice v. Detroit, &c., R., 122 Mich. 677, 81 N. W. 927, 48 L. R. A. 84, 253 FRANCHISE RIGHTS. § 203 decided in 1900, where the conductor in charge of defendant's car, not having a supply of tickets, exacted a larger cash fare than the price of the ticket of which the court said: "We have, then, a case in which de- fendant is operating under a franchise imposing a duty to sell five tickets for fifty cents, good between the city hall, Detroit, and any point in the village of Dearborn. The franchise further provided, 'AH such tickets shall be kept for sale upon each and every car operated by it.' . . . The franchise is in the nature of a contract, and imposes obligations upon the com- pany which those having occasion to ride from Dear- born to Detroit have a right to enforce." § 203. Rights of abutting property owner. — The right of the abutting property owner to recover dam- ages for the removal of shade trees by a public utility providing telephone service is determined by the case of State V. Graeme, 130 Mo. App. 138, 108 S. W. 113 1, decided in 1908, which in accordance with the general rule holds that the public utility as well as the public generally only enjoy an easement in the use of the street for the purpose of transportation and com- munication but that the title and the right to use and enjoy the property subject to this easement belongs to the abutting property owner which permits him to maintain shade trees, for as the court said: "The telephone company occupied the street as a mere licensee. Watson, the owner of the abutting lot, owned the fee to the center of the street, subject to the easement of the town of Republic, and had a right to plant the trees inside the curb line and thus occupy the street jointly with the town, subject, of course, to the right of the town to remove the trees should they incommode the public in the use of the street. The right of the telephone company to occupy the street § 204 PUBLIC UTILITIES. 254 with its poles and wires was therefore subordinate to the right of Watson, the property owner to have the trees in the street; that is, if to construct or maintain its line the telephone company should be obliged to remove or damage the trees, it would be bound to respond to Watson in damages." § 204. Liability of municipal public utility for shade trees. — The liability of a public utility company to pay for the loss resulting from the trimming of shade trees although authority to trim them where necessary had been granted is defined in the case of Slabaugh v. Omaha Electric Light & P. Co., 87 Nebr. 805, 128 N. W. 505, 30 L. R. A. (N. S.) 1084, decided in 1910, where the court says: "The city of Omaha holds title to its streets and alleys in trust for the bene- fit of the public. Jaynes v. Omaha Street R. Co., 53 Nebr. 631, 39 L. R. A. 751, 74 N. W. 67. The city council had authority to grant the defendant's assignor a right of way over the streets and alleys in the city for the construction and maintenance of the poles and wires in question; and the use of those streets for that purpose is a public use. Plattsmouth v. Nebraska Teleph. Co., 80 Nebr. 460, 14 L. R. A. (N. S.) 654, 127 Am. St. R. 779, 114 N. W. 588. If the defendant had the right under its franchise to trim the plaintiff's trees, but in the exercise of that authority it damaged her property, it should respond in damages under sec- tion 21 of article i of the constitution, which reads: 'The property of no person shall be taken or damaged for public use without just compensation therefor.' " § 205. Right of customer to enjoin collection of excessive rate. — The case of Pond v. New Rochelle Water Co., 183 N. Y. 330, 76 N. E. 211, i L. R. A. (N. S.) 961, decided in 1906, furnishes a recent state- 255 FRANCHISE RIGHTS. § 206 ment of the principle defining the rights of customers to receive service strictly in accordance with the terms and conditions provided in the franchise. In this decision the court used the following language: "The plaintiff, a resident of the village of Pelham Manor, Westchester county, and a customer of the defendant water company furnishing the village with its supply of water, seeks in this action a permanent injunction restraining the company from enforcing collection of a water rate in excess of the amount fixed by the existing contract with the village. ... In the case before us we have a municipality entering into a contract for the benefit of its inhabitants, the object being to supply them with pure and wholesome water at reasonable rates. ... In the case before us the municipality sought to protect its inhabitants, who were at the time of the execution of the contract consumers of water, and those who might thereafter become so, from extortion by a corporation having granted to it a valuable franchise extending over a long period of time. We are of opinion that the com- plaint states a good cause of action." § 206. Regulations inconsistent with franchise in- valid. — That the rights as defined in the franchise can not be modified by the by-laws of the public service corporation, and that so far as such by-laws are incon- sistent with the provisions of the franchise they will be held void and of no effect is well expressed in the decision of the case of Bourke v. Olcott Water Co., 84 Vt. 121, 78 Atl. 715, 33 L. R. A. (N. S.) 1015, decided in 1911, where the right of the tenant to con- tract in his own name for the service was upheld in the face of a rule of the company providing that all bills for its service must be paid by the owner of the premises, for as the court says: "By section 13 of the § 207 PUBLIC UTILITIES. 256 company's charter it is provided that 'every person' living w^ithin the territorial limits of the village of Wilder 'shall be entitled to have and use an ample supply of water from the mains of said company, by paying a reasonable compensation therefor.' . . . It is insisted on the part of the orators, however, that this rule is not only unreasonable, but repugnant to the charter provision just quoted. We need not stop to consider whether the rule is reasonable or other- wise, for we deem it to be in manifest conflict with this provision of the charter, and it follows that it can not be enforced. The comprehensive language used plainly indicates an intention on the part of the legislature to require the company to supply all who called for water, provided they paid." § 207. Liability in damages for failure to furnish adequate service. — The public service corporation, in failing or refusing to furnish adequate service to a customer in accordance with the contract for such service and under the duty imposed in the franchise granting it the privilege to render the service, is liable in damages for an injury to such a customer resulting from such breach of contract or failure to perform such duties. In recognizing that a public service cor- poration occupying the streets of the municipality by virtue of a franchise granted for that purpose may not at its pleasure give or withdraw the service at its disposal which may be necessary for the comfort, health and even Hfe of the inhabitants, but that it must render such service impartially, the court in the case of Coy v. IndianapoHs Gas Co., 146 Ind. 655, 46 N. E. 17, 36 L. R. A. 535, decided in 1897, holds the public service corporation liable in damages for the death of a customer's children which resulted directly from its failure to supply the natural gas required to 257 FRANCHISE RIGHTS. § 20/ provide the necessary heat for his home, for as the court said: "The agreement so entered into did not in any manner absolve appellee from the duty assumed under its franchise, but rather, by its terms, fixed the character and scope of the duty so assumed. Even without and before the contract, it was the duty of the company to attach its mains to appellant's house pipe, on being requested to do so by him, and on his com- pliance with the reasonable conditions imposed by the company. Nor would it be enough to make such connections without also supplying the gas therefor. . . . The failure of duty on the part of the com- pany, as alleged in the complaint, is a tort, even though the complaint also shows a failure to comply with the contract. The contract was but a statement of the reasonable conditions under which the company was required to perform its duty. The authorities show that in such a case the action may be on con- tract or in tort, the necessary statement of facts being substantially the same in either case. The failure to perform such a contract is in itself a tort. The action in this case is therefore in tort." 17— Pub. ut. CHAPTER XIII. NO DISCRIMINATION IN SERVICE. Section. 208. Impartial service the measure of the obligation. 209. Municipal public utilities natural monopolies. 210. Requirement of uniform service takes the place of competition. 211. Enforcement of rights by individual customer impracticable. 212. Public regulation and control of business of public nature. 213. Discrimination based on reasonable classification. 214. Individual may enforce uniform telephone service. 215. Municipal public utility must serve public granting it fran- chise. 216. Uniform service to all of class and of similar classes. 217. Contract for exclusive telephone service invalid. 218. Value of service to customer no valid basis for rate classifi- cation. 219. Reasonable regulations for securing payment for service. 220. Discontinuing service for nonpayment. 221. Discrimination by rebates illegal. 222. Rates for service not taxes need not be uniform under con- stitution. 223. Discrimination in favor of public or charity. 224. Inadequate supply no justification for discrimination. 225. Rule necessary to protect poorer classes especially. 226. Suburban customer may be classified as such. 227. Quantity of service as basis of classification. 228. Classification between old and new subscribers invalid. 229. Nature of use of gas service not proper basis of classification. § 2o8. Impartial service the measure of the obli- gation. — That there shall be no discrimination in the municipal public utility service furnished by the cor- poration enjoying the special privilege of rendering such service is a vrell estabhshed principle, the rigid enforcement of which in practice is essentially neces- sary to secure adequate service for all under reason- able terms and conditions, which belongs as of right to all the inhabitants of the municipality as well as to the 258 259 NO DISCRIxMINATION IN SERVICE. § 209 municipality itself. Impartial service to all customers similarly situated is the measure and means of secur- ing them in their franchise rights, which, as already shown, belong to the individual inhabitant of the municipality by virtue of the municipal public utility having accepted the franchise, the obligation of which to the municipality and its inhabitants constitutes the consideration for the special privileges granted in the franchise to the corporation permitting it to fur- nish municipal public utility service. § 209. Municipal public utilities natural monopo- lies. — Because of the very nature of the service ren- dered each customer can not provide it for himself, nor purchase it independently of the others, nor from whom he pleases or with whom he might prefer to deal. The distribution of the municipal public utility service must necessarily be made from a single source, or at the most a very few sources. While a person desiring to purchase his fuel supply in the form of coal or wood may generally deal with any one of a number of independent concerns engaged in that line of business, the prospective customer, desiring heat or light in the form of gas or electricity, or practically any municipal public utility service, including water, transportation, and communication, is limited in his purchase to a single market; and this must be so because of the nature of the manufacture and dis- tribution as well as the extent of the investment necessary to provide any municipal public utility ser- vice. In other words, the furnishing of municipal public utility service is a natural monopoly which is never accompanied by competitive conditions in theory and seldom so in practice; because the extent of the investment necessary to provide such service is so great and the occupation of the streets in some cases § 2IO PUBLIC UTILITIES. 260 is necessarily so exclusive that only a single source of supply is available, and this from the economic point of view should always be the case. § 210. Requirement of uniform service takes the place of competition. — Since, therefore, there is gen- erally no control from the force of competition as all customers are obliged to secure their supply from a common source, the regulation and control which ex- perience has shown is always necessary to secure uniformly adequate service on reasonable conditions require the strict enforcement of the rule prohibiting discrimination between customers similarly situated in the common interest of all parties concerned including the corporation providing the service itself. For it is apparent that any special concession which the cor- poration makes necessarily reduces its revenue to that extent, which loss must either be borne by the company itself or by other customers in receiving less satisfactory service or service on less favorable terms. §211. Enforcement of rights by individual cus- tomer impracticable. — While the authorities, to be noted and discussed, establishing this principle and de- fining what constitutes illegal discrimination and in what cases discrimination is permitted because condi- tions are different, hold that the individual customer may enforce this right in cases of discrimination against him, it is apparent that the expense and effort necessary to secure his rights in this way in many cases are prohibitive and in others the delay, pending the enforcement of the right by legal action, neces- sarily causes great inconvenience. Experience has accordingly demonstrated the desirability of the public securing these rights to the individual customer and itself through administrative action by the state or 26l NO DISCRIMINATION IN SERVICE. § 212 the municipal authorities or by some agency created by the state for that purpose, all of which will be dis- cussed at length later. § 212. Public regulation and control of business of public nature. — The rule prohibiting discrimination in service which was recognized and enforced by the common law, and now universally by statutory enact- ments, provides that persons, either natural or cor- porate, which are engaged in conducting a business which is public in its character or impressed with a public interest, or which is monopolistic in its nature, can not arbitrarily select their patrons or distinguish in the service they render them; but that they must serve impartially and on equal terms and conditions all persons without discrimination. The duty of the public service corporation toward the customer and that of the customer toward the corporation is recipro- cal, and the rules and regulations defining their re- spective rights and obligations must be reasonable and just to both parties; and the service must be rendered without discrimination or partiality. § 213. Discrimination based on reasonable classi- fication. — Where the location of the prospective cus- tomer is unusual and the conditions of furnishing him service peculiar because of the distance he is removed from the center or thickly populated district of the municipality and because of the sparsely settled condi- tion of his own neighborhood, it is only reasonable that the public service corporation, providing him with its service, be permitted to impose other and difTerent conditions from those applicable to a customer cen- trally located in the thickly populated district of the municipality. There can be no absolute right to be supplied with the conveniences of municipal public utilities for the service furnished is necessarily limited §213 PUBLIC UTILITIES. 262 to the ordinary uses for which it is adopted and to the locaHty where it is offered. And while the public service corporation can not act arbitrarily or discrimi- nate among its customers, present or prospective, where similarly situated, by way of favoring one cus- tomer of a class or one class over others, a distinction may be made between different customers or classes of customers on account of location, amount of con- sumption, or such other material conditions which dis- tinguish them from each other or from other classes. The extension of the service with the growth of the municipality and as a means of encouraging its growth, however, is a matter of special importance and peculiar interest to the public, and should be, and usually is, expressly provided for in the franchise.^ 'ALABAJVIA. — Birmingham v. Birmingham W. Co. (Ala.), 42 So. 10; Mobile v. Bienville Water Supply Co., 130 Ala. 379, 30 So. 445; Montgomery Light & P. Co. v. Watts, 165 Ala. 370, 51 So. 725, 26 L. R. A. (N. S.) 1109; State ex rel. Ferguson v. Birmingham Waterworks Co., 164 Ala., 586, 51 So. 354, 27 L. R. A. (N. S.) 674; Montgomery v. Greene (Ala.), 60 So. 900. ARKANSAS.— Danaher v. Southwestern Tel. & T. Co., 94 Ark. 533, 127 S. W. 963; Yancey v. Batesville Tel. Co., 81 Ark. 486, 99 S. W. 679. CALIFORNIA.— Thompson v. San Francisco Gas & Electric Co., 18 Cal". App. 30, 121 Pac. 937. FEDERAL.— Missouri v. Bell Tel. Co., 23 Fed. 539, 127 U. S. 780, 32 L. ed. 328; Postal Cable Tel. Co. v. Cumberland Tel. & T. Co., 177 Fed. 726. FLORIDA.— Wilson v. Tallahassee Waterworks Co., 47 Fla. 351, 36 So. 63. IDAHO.— Hatch v. Consumers' Co., 17 Idaho 204, 104 Pac. 670, 40 L. R. A. (N. S.) 263. ILLINOIS.— Danville v. Danville Water Co., 180 111. 235, 54 N. E. 224; Snell v. Clinton Electric Light, Heat & Power Co., 196 111. 626, 63 N. E. 1082, 58 L. R. A. 284, 89 Am. St. 341; Wagner v. Rock Island, 146 111. 139, 34 N. E. 545, 21 L. R. A. 519. INDIANA.— Central Union Tel. Co. v. Fehring, 146 Ind. 189, 45 N. E. 64; Central Union Tel. Co. v. State ex rel., 118 Ind. 194, 19 N. E. 604, 10 Am. St. 114; Indiana Natural & Illuminating Gas Co. v. Anthony, 26 Ind. App. 307, 58 N. E. 868; Indiana Natural 263 NO DISCRIMINATION IN SERVICE. §214 § 214. Individual may enforce uniform telephone service. — In sustaining an action of mandamus brought by an inhabitant to secure telephone service at the rate fixed by the statute, the court in the case of Central Union Tel. Co. v. State ex rel., ii8 Ind. 194, 19 N. E. & Illuminating Gas Co. v. State ex rel. Ball, 158 Ind. 516, 63 N. E. 220, 57 L. R. A. 761; Irvin v. Rushville Co-Operative Tel. Co., 161 Ind. 524, 69 N. E. 258; Logansport & W. V. Gas Co. v. Ott, 30 Ind. App. 93, 65 N. E. 549; Mooreland Rural Tel. Co. v. Mouch, 48 Ind. App. 521, 96 N. E. 193; Richmond Natural Gas. Co. v. Clawson, 155 Ind. 659, 58 N. E. 1049, 51 L. R. A. 744; State v. Consumers' Gas Trust Co., 157 Ind. 345, 61 N. E. 674, 55 L. R. A. 245; State ex rel. Snyder v. Portland Natural Gas & Oil Co., 153 Ind. 483, 53 N. E. 1089, 74 Am. St. 314. IOWA.— Huffman v. Marcy Mut. Tel. Co., 143 Iowa 590, 121 N. W. 1033, 23 L. R. A. (N. S.) 1010. KANSAS.— Atchison St. R. Co. v. Nave, 38 Kans. 744, 17 Pac. 587. MASSACHUSETTS.— Souther v. Gloucester, 187 Mass. 552, 73 N. E. 558, 69 L. R. A. 309. MICHIGAN.— Boerth v. Detroit City Gas Co., 152 Mich. 654, 116 N. W. 628, 18 L. R. A. (N. S.) 1197; Bradford v. Citizens' Tel. Co., 161 Mich. 385, 126 N. W. 444; Preston v. Board of Water Comrs., 117 Mich. 589, 76 N. W. 92; Williams v. Mutual Gas Co., 52 Mich. 499, 18 N. W. 236, 50 Am. Rep. 266. MINNESOTA.— Gordon v. Doran, 100 Minn. 343, 111 N. W. 272, 8 L. R. A. (N. S.) 1049; Powell v. Duluth, 92 Minn. 53, 97 N. W. 450; State ex rel. Latshaw v. Board of Water & Light Comrs., 105 Minn. 472, 117 N. W. 827, 127 Am. St. 581; State ex rel. Mason v. Con- sumers' Power Co., 119 Minn. 225, 137 N. W. 1104, State ex rel. City of St. Paul V. St. Paul City Ry. Co. (Minn.), 142 N. W. 136; State ex rel. W. J. Armstrong Co. v. Waseca (Minn.), 142 N. W. 319. MISSOURI.— St. Louis Brewing Assn. v. St. Louis, 140 Mo. 419, 37 S. W. 525, 41 S. W. 911; Vanderberg v. Kansas City, Mo., Gas. Co., 126 Mo. App. 600, 105 S. W. 17. NEBRASKA.— American Waterworks Co. v. State, 46 Nebr. 194, 64 N. W. 711, 30 L. R. A. 447, 50 Am. St. 610; Nebraska Tel. Co. v. State, 55 Nebr. 627, 76 N. W. 171, 45 L. R. A. 113; State v. Nebraska Tel. Co., 17 Nebr. 126, 22 N. W. 237, 52 Am. Rep. 404. NEW JERSEY.— Washington v. Washington Water Co., 70 N. J. Eq. 254, 62 Atl. 390. NEW YORK.— Armour Packing Co. v. Edison Electric Ilium. Co., 100 N. Y. S. 605; Graver v. Edison Electric Illuminating Co., 126 App. Div. 371, 110 N. Y. S. 603; New York Tel. Co. v. Siegel- Cooper Co., 202 N. Y. 502, 96 N. E. 109, 36 L. R. A. (N. S.) 560; § 214 PUBLIC UTILITIES. 264 604, 10 Am. St. 114, decided in 1889, expressed this principle in the following language : "It has been held universally by the courts, considering its use and pur- pose, to be an instrument of commerce and a common carrier of news, the same as the telegraph, and by reason of being a common carrier, it is subject to proper obligations and to conduct its business in a manner conductive to the public benefit, and to be controlled by law. . . . Any person or corporation engaged in telephone business, operating telephone lines, furnishing telephonic connections, facilities and services to business houses, persons and companies, and discriminating against any person or company, People V. Albion Waterworks Co., 121 N. Y. S. 660; People ex rel. Johnson v. Barrows, 124 N. Y. S. 270; Silkman v. Board of Water Comrs. of Yonkers, 152 N. Y. 327, 46 N. E. 612, 37 L. R. A. 827, 71 Hun (N. Y.) 37; Wright v. Glen Tel. Co., 95 N. Y. S. 101, 48 Misc. Rep. 192; People ex rel. New York Tel. Co. v. Public Service Com- mission (N. Y.), 141 N. Y. S. 1018. NORTH CAROLINA.— Clinton-Dunn Tel. Co. v. Carolina Tel. & T. Co., — N. Car. — 74 S. E. 636; Griffin v. Goldsboro Water Co., 122 N. Car. 206, 30 S. E. 319, 41 L. R. A. 240. OHIO.— Cincinnati, H. & D. R. Co. v. Bowling Green, 57 Ohio St. 336, 49 N. E. 121, 41 L. R. A. 422; Mansfield v. Humphreys Mfg. Co., 82 Ohio St. 216, 92 N. E. 233, 31 L. R. A. (N. S.) 301. OKLAHOMA.— Hine v. Wadlington, 33 Okla. 173, 124 Pac. 299. OREGON.— Haugen v. Albina Light & Water Co., 21 Ore. 411, 28 Pac. 244, 14 L. R. A. 424. PENNSYLVANIA.— Allegheny County Light Co. v. Shadyside Electric Light Co., 37 Pa. Super. Ct. 79; Bailey v, Fayette Gas-Fuel Co. 193 Pa. 175, 44 Atl. 251; Clairton Steel Co. v. Manufacturers' L. & H. Co. (Pa.), 87 Atl. 998. SOUTH CAROLINA.— State ex rel. Gwynn v. Citizens' Tel. Co., 61 S. Car. 83, 39 S. E. 257, 55 L. R. A. 139, 85 Am. St. 870. TEXAS.— Southwestern Tel. & T. Co. v. Luckett (Tex.), 127 S. W. 856. VIRGINIA.— Exchange & Bldg. Co. v. Roanoke Gas & Water Co., 90 Va. 83, 17 S. E. 789. WASHINGTON.— State ex rel. South Bend v. Mountain Spring Co., 56 Wash. 176, 105 Pac. 243, 34 L. R. A. (N. S.) 196. WISCONSIN.— President and Trustees, &c., v. Southern Wis- consin Power Co., 149 Wis. 168, 135 N. W. 499. 265 NO DISCRIMINATION IN SERVICE. §215 can be compelled by mandate, on the petition of such person or company discriminated against, to furnish to the petitioner a like service as furnished to others." § 215. Municipal public utility must serve public granting it franchise. — The case of Hatch v. Con- sumers' Co., 17 Idaho 204, 104 Pac. 670, 40 L. R. A. (N. S.) 263, decided in 1909, furnishes the following excellent statement of this rule: "In the first place, the defendant is a creature of the laws of this state created for a special purpose of a public character. It is not permitted like a private p^rty to charge what- ever it pleases or to serve those only whom it may choose to serve. It must, on the contrary, serve the inhabitants of the municipality from which it receives a franchise for a reasonable uniform compensation to be established in conformity with law (§ 2839, Rev. Codes), and it must serve all persons without distinc- tion or discrimination who pay the rates established and comply with the reasonable rules and regulations of the company." § 216. Uniform service to all of class and of simi- lar classes. — By way of defining the conditions which determine the class and fix the terms of service ac- cordingly the case of Missouri v. Bell Tel. Co., 23 Fed. 539, decided in 1885, ''^ an early decision prohibiting a telephone company from limiting its service to one telegraph company or to any particular line of busi- ness. In holding that having established a telephone system it must serve all classes of business including any telegraph company that applied for service in the same way and without discrimination, the court said: "A telephonic system is simply a system for the trans- mission of intelligence and news. It is, perhaps, in a limited sense, and yet in a strict sense, a common car- § 217 PUBLIC UTILITIES. 266 rier. It must be equal in its dealings with all. It may not say to the lawyers of St. Louis, 'my license is to establish a telephonic system open to the doctors and the merchants, but shutting out you gentlemen of the bar.' The moment it establishes a telephonic system here, it is bound to deal equally with all citi- zens in every department of business; and the moment it opened its telephonic system to one telegraph com- pany that moment it put itself in a position where it was bound to open its system to any other telegraph company tendering equal pay for equal service." §217. Contract for exclusive telephone service invalid. — The case of State ex rel. Gwynn v. Citizens' Tel. Co., 61 S. Car. 83, 39 S. E. 257, 55 L. R. A. 139, 85 Am. St. 870, decided in 1901, with reference to this point, states the general rule requiring the same ser- vice to be rendered to all members of any particular class; and in refusing to sustain the condition upon which such service was to be rendered — that the cus- tomer would use that service to the exclusion of simi- lar service offered by a competing public service corporation — the court said: "When therefore, the relator applied to the respondent to replace the tele- phone instruments in his grocery store and in his resi- dence, from whence they had been removed by the defendant company but a few days before, the re- spondent was, in our opinion, bound to comply with such demand, under the obligations to the public which it had assumed. The reason given for its refusal — that the relator refused to agree that he would use respondent's telephone system exclusively — was not sufficient to relieve it from its obligation to serve the public, of which the relator was one, without any discrimination whatsoever; and especially is this so when it was admitted that the respondent was, at 267 NO DISCRIMINATION IN SERVICE. § 2l8 the time, affording to one person, at least, who was engaged in the same business as that of the relator, whose place of business was on the same street of the same city, the same facilities which the relator de- manded, without requiring any such stipulation as that required of the relator, but who was, in fact, using both telephone systems." § 218. Value of service to customer no valid basis for rate classification. — Nor is there any justification for making a greater charge for municipal public utility service to a particular customer on account of the greater value to him of such service or the greater profit that would probably accrue to him than to some other customer. The public service corporation is not permitted to discriminate against a competitor in its service because, having undertaken to render such service to the public generally, it can not refuse to serve all, even including its competitors, without dis- crimination, for as the court in the case of Postal Cable Tel. Co. v. Cumberland Tel. & T. Co., 177 Fed. 726, decided in 1910, observes: "A telephone com- pany, which is often described as a common carrier of news, is engaged in a quasi public service, affected with a public interest, for which it is endowed with some of the sovereign powers of the state, and as such is held to the obligation of an impartial and undis- criminating service to the public upon common-law principles. . . . This common-law obligation of equal and undiscriminating service clearly requires that the same charges shall be made to all persons for the rendering of similar service. ... It is clear that a greater charge is not justified against the telegraph company merely on account of the greater profit which it may receive from the telephone service than other business patrons. . . . But, even if the § 219 PUBLIC UTILITIES. 268 defendant were engaged to any material extent in the telegraph business in addition to its telephone busi- ness, I am of opinion that its obligations in respect to its telephone business must be determined with ref- erence to that business alone, and that it has not the right to discriminate in charges for telephone service, merely because it may also be engaged in another branch of business which it desires to protect by such discrimination." § 219. Reasonable regulations for securing pay- ment for service. — As the privilege of providing public utility service includes the right to collect a reasonable charge therefor, the corporation rendering the service is permitted in its own protection to require charges for such service to be paid in advance or where it is impossible to determine in advance the amount of the charges because they depend on the extent of the service used, the corporation may by reasonable regu- lations require the securing of the payment for such service by a cash deposit in advance, or in some such manner insure the making of the payment and thus avoid the loss due to failure to pay or the expense of making collection, all of which, if sustained, would ultimately be shifted to the customers who did pay with the effect of increasing the amount of their pay- ment to the extent of such loss. The case of Irvin V. Rushville Co-Operative Tel. Co., i6i Ind. 524, 69 N. E. 258, decided in 1903, furnishes a good statement of this rule together with the reason upon which it is based as follows: "Considering the quasi public functions of corporations like the one at bar — cor- porations whose first duty is to the public whom they serve — we think that their revenues should not be depleted by the furnishing of service to individuals who refuse to pay because they are asserting col- 269 NO DISCRIMINATION IN SERVICE. § 220 lateral demands against it. . . . It can maintain an efficient service only through prompt payment of its dues and tolls, and because of that fact it may use the summary remedy of denying service for nonpay- ment. It can not be said it may be denied the benefit of this rule because a patron claims the company is indebted to him. It can not be required to stop and adjudicate claims held against it. The law compels it to furnish service. A patron may take service or not, as he chooses. It must furnish efficient service to all alike who are alike situated, and must not dis- criminate in favor of or against any one." § 220. Discontinuing service for nonpayment. — As a necessary consequence of this rule it follows that a customer who is in default for the payment of his service and who fails to pay for the service already rendered can not complain if the service is discon- tinued pending his payment for that already received. This is recognized as a convenient means of making collection, for as the court in the case of State ex rel. Latshaw v. Board of Water & Light Comrs., 105 Minn. 472, 117 N. W. 827, 127 Am. St. 581, decided in 1908, says: "Both on reason and authoritity the method of collection here in issue was reasonable and proper. With unusual unanimity, such regulations have been sustained alike where there is statutory au- thority and where there is not. . The im- position of a fifteen-cent penalty or discount and of certain costs and expenses of shutting off the gas and turning it on as parts of the arrearage charged relator does not entitle relator to the mandamus he seeks." § 221. Discrimination by rebates illegal. — The re- cent case of President and Trustees. &c., v. Southern Wisconsin Power Co.. 149 Wis. 168. 135 N. W. 499, § 222 PUBLIC UTILITIES. 27O decided in 1912, furnishes an interesting illustration of the fact that discrimination in charges by way of rebates for such service is an evil practice of long standing vv^hich has continued down to current times. In holding invalid an agreement to give rebates for services rendered although it was outstanding when legislative action was enacted against the continuance of such a practice, the court said: "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 con- sumer 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. . . . 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 un- lawful contract, it can no more profit thereby than could any other purchaser of current from the de- fendant." § 222. Rates for service not taxes need not be uniform under constitution. — The rates charged for public utility service, however, are not taxes within the meaning of those constitutional provisions re- quiring uniformity of taxation, so that absolute uni- formity of rates to customers is not required by such constitutional or statutory provisions; but in the ab- 271 NO DISCRIMINATION IN SERVICE. § 22T, sence of a statute to the contrary some courts, includ- ing that in the case of State ex rel. Ferguson v. Birm- ingham Waterworks Co., 164 Ala. 586, 51 So. 354, 27 L. R. A. (N. S.) 674, decided in 1910, have held that any material reduction below the prevailing rate which was supposed to be a reasonable one would indicate that the prevailing rate was excessive and that it should be reduced accordingly, for as the court in the above case says: "And it must serve all with equal facilities and without discrimination. In this case no complaint is made that relator is discriminated against in respect to facilities furnished in the way of getting a supply of water, but only in respect to the price charged. It would seem that, if the rate granted to favored customers is less than the reasonable rate the company may lawfully demand from all consumers on a basis of uniformity, as on the allegations of the petition we must assume to be the case, the consequent discrimination is enjoyed by those having the favored rate at the expense of the company, and does not im- pinge upon any right of consumers generally, for they are receiving all they are entitled to have in any event. Griffin v. Goldsboro Water Co., supra. The granting of a rate to any considerable number of consumers more favorable to them than the rate fixed for con- sumers generally, in the absence of possible peculiar circumstances of justification, would be evidential that the general rate is unreasonably high, which would call for municipal or legislative revision to be enacted in a due observance of constitutional limitations. But we do not see our way clear to a holding that, when- ever a water company makes a concession to a con- sumer, it thereby fixes a new schedule of rates for all its consumers." § 223. Discrimination in favor of public or charity. — A discrimination in rates by way of a reduction for § 223 PUBLIC UTILITIES. 2/2 the services rendered for public purposes as well as services rendered charitable institutions in the absence of a statute expressly prohibiting such concessions has been sustained by a number of our courts. Indeed it is not uncommon to provide for free water service for use of the public in connection with the fire depart- ment, the parks and similar uses which is treated sim- ply as a part of the consideration for the franchise privileges granted by the municipality receiving such service. As the court in the case of Preston v. Board of Water Comrs., 117 Mich. 589, 76 N. W. 92, decided in 1898, expresses it: "The record also shows, as will appear more fully later, the rates fixed are equitable and reasonable. It has already appeared that the free use of water given is only to institutions in which the city and all its citizens are interested, and, where a par- tial rate is charged, the recipient is a charitable insti- tution or an educational institution in the mainten- ance of which the public is more or less interested. . . . The board is very properly given wide dis- cretion in the management of the water plant. Detroit V. Board of Water Comrs., 108 Mich. 494, 66 N. W. 377. There is nothing in the record to show they have abused this discretion in fixing the rates. We think it is not accurate to speak of these rates as taxes. All property except that which is exempt by law is sub- ject to the payment of taxes, but the use of water is not compulsory. . . . When property has paid its proportion of the taxes growing out of fire protection and other uses in which property and the public in general has an interest, it has discharged its share of the burden." For the same reason concessions have been per- mitted to charitable institutions because their service is of a public nature and for the public good. A good 273 N^ DISCRIMINATION IN SERVICE. § 224 Statement of the principle permitting this discrimina- tion is furnished in the case of New York Tel. Co. V. Siegel-Cooper Co., 202 N. Y. 502, 96 N. E. 109, 36 L. R. A. (N. S.) 560, decided in 1911, as follows: "The parties expressly stipulated that the charitable institutions in question are performing services of special benefit to the community as a whole, are worthy of charitable assistance, and have long been accustomed to receive contributions from members of the general public. They further stipulated that the discount to the city of New York was allowed on account of its intimate relation to the plaintiff, through its control of streets and its power of regulation, 'as a contribution to the expense and cost of the govern- ment of the city of New York.' The plaintiff received from the city for a small consideration a franchise of immense value, without which it could not carry on its business at all. While under no legal obligation to discriminate in favor of the city, there is a strong equitable obligation to do so, founded on benefits received, and supported by custom." § 224. Inadequate supply no justification for dis- crimination. — In the case of State v. Consumers' Gas Trust Co., 157 Ind. 345, 61 N. E. 674, 55 L. R. A. 245. decided in 1901, the defense to an action of mandamus by an inhabitant who had been denied public utility service was that the company was organized as a voluntary enterprise in the general interest of the peo- ple of Indianapolis and that its purpose was not the making of money but to furnish gas to consumers in that city at the lowest possible rate; that the amount of gas available was insufficient to supply the custom- ers which the company then had; and that the effect of extending service to the party demanding it in this case would be a further reduction in the already in- 18— Pub. Ut § 224 PUBLIC UTILITIES. 2/4 sufficient supply. In holding this defense insufficient for the reason that the right to receive the service belongs in common to all living on the streets where the service was furnished the court said that the com- pany could not exercise its rights and furnish service for the benefit of any class or of any part of the public less than the whole residing within the range of its service, for the undertaking of the company was with the state and the extraordinary powers including those of eminent domain were granted in consideration of its undertaking to serve the entire community with the convenience of natural gas and not to render a service for the benefit of a few or to favorites, but that the service was a convenience available equally to every citizen similarly situated who might wish to avail himself of the privilege and was prepared to receive it, for as the court said: "The appellee is a corpora- tion authorized by the legislature to exercise the right of eminent domain (Acts 1889, p. 22), and licensed by the city of Indianapolis to lay pipe lines through its streets and alleys for the transportation and distribu- tion of natural gas to its customers. These rights, which involve an element of sovereignty, and which can exist only by grant from the public, are rooted in the principle that their existence will bestow a benefit upon that part of the public in whose behalf the grant is made, and the benefit received by the citizen is the adequate consideration for the right and convenience surrendered by him. The grant thus resting upon a public and reciprocal relation imposes upon the ap- pellee the legal obligation to serve all the members of the public contributing to its asserted right impar- tially, and to permit all such to use gas who have made the necessary arrangements to receive it and apply therefor, and who pay, or offer to pay, the price, 275 NO DISCRIMINATION IN SERVICE. § 22$ and abide the reasonable rule and regulations of the company." § 225. Rule necessary to protect poorer classes especially. — As the case of Birmingham v. Birmingham A\'ater Co. (Ala.), 42 So. lo, decided in 1906. ex- presses the reason for this rule : "Were the law other- wise, the municipal authorities might by collusion with the water company and acting in the interest of the more wealthy and influential class of citizens, make a contract, by the provisions of which the water tax would fall more lightly upon the wealthy and influen- tial, at the expense of being very burdensome upon the poorer or less fortunate class of citizens." § 226. Suburban customer may be classified as such. — That the applicant for service located in the suburbs or outlying districts of the municipality may be placed in a separate class and subjected to different charges and conditions because of the distance he re- sides from the thickly populated district and of the sparsely settled condition of his neighborhood requir- ing a relatively greater expenditure and smaller return for the service rendered than in the more thickly, cen- trally located districts of the municipality is decided in the case of Souther v. Gloucester, 187 Mass. 552, 73 N. E. 558, 69 L. R. A. 309, decided in 1905, where the court says: "The special cost of extending the system to the 'outlying section' in question; the fact that, even if water is wanted there for less than a year as a rule, the interest on the cost of the necessary special construction and on the construction of the works as a whole runs throughout the year; and the fact, if it is a fact, that there are but few persons who take water in this section, compared with the cost of ex- tending the water system to it — are all of them mat- § 22/ PUBLIC UTILITIES. 276 ters which can be taken into account in fixing a rea- sonable rate. . . . The plaintiffs, in any event, can not complain that some discrimination is made between them and water takers in the heart of the city, and they have gone no further than that in their proof in the case at bar. There is not enough here to enable us to say that, provided some discrimination can be made, the discrimination made is too great." § 227. Quantity of service as basis of classifica- tion. — Some of our cases have permitted the public service corporation to make a reduction in its charges for service to a particular class of large consumers because of their capacity requiring an unusual amount of service or because of the nature of the use made of the service and the conditions upon which it is fur- nished. The case of Logansport & W. V. Gas Co. v. Ott, 30 Ind. App. 93, 65 N. E. 549, sustained a uni- form reduction in the charge for gas service rendered laundries in a certain municipality. The service, how- ever, was conditioned that it might be discontinued without notice at any time in the event of an insuf- ficient supply. There being nothing in the franchise prohibiting such a special agreement being made, the court recognized that it was virtually an arrangement for disposing of the surplus supply by wholesale which might be on hand at any time and upheld the agree- ment. The case of Silkman v. Yonkers, 152 N. Y. 327, 46 N. E. 612, 37 L. R. A. 827, 71 Hun 37, decided in 1897, sustained a graduated scale of charges for water service depending upon the quantity consumed as provided in the statute, the court saying: "Surely, it can not be said to be unreasonable to provide less rates where a large amount of water is used than where a small quantity is consumed. That principle is usu- 277 NO DISCRIMINATION IN SERVICE. § 228 ally present in all contracts or established rents of that character. It will be found in contracts and charges relating to electric lights, gas, private water com- panies, and the like, and is a business principle of general application. We find in the rates as they were established nothing unreasonable, or that would in any way justify a court in interfering with them." § 228. Classification between old and new sub- scribers invalid. — The case of Bradford v. Citizens' Tel. Co., 161 Mich. 385, 126 N. W. 444, decided in 1910, in recognizing the increasing cost of operating a larger telephone exchange held, however, that the charge to customers who became subscribers to the service after a particular date could not be greater than to the old subscribers because all were to be served with identically the same service and with the same fixtures, the court saying: "While it is probably true that the cost of operating a telephone exchange increases with the increased volume of business, it is equally true that the whole body of subscribers, whether new or old, makes. the added expense, and reaps the added benefit. A telephone exchange with 1.000 members is manifestly more valuable to every subscriber than one with 100 members, but it is equally valuable to each member in the same class, and its value to the subscriber does not depend, in any degree, upon whether he is a new subscriber or an old one. It is difficult to understand why new subscribers should pay any more for the right to talk to old mem- bers than the latter do for the right to talk to new ones." § 229. Nature of use of gas service not proper basis of classification. — Nor can the use to which the service is to be put be taken as the basis for dis- §229 PUBLIC UTILITIES. 278 criminating in the charges for such service so that whether gas be used for light or heat the charge must remain the same, although the substitute in the one case might be more expensive than in the other, for as is said in the case of Bailey v, Fayette Gas-Fuel Co., 193 Pa. 175, 44 Atl. 251, decided in 1899, "It is not claimed that there is any difference in the cost of the product of the company, the expense of supplying it at the point of delivery, or its value to the company in the increase of business or other wrays. . . . The real argument seeks to justify the difference in price solely by the value of the gas to the consumer as measured by what he would have to pay for a substitute for one purpose or the other if he could not get the gas. This is a wholly inadmissible basis of discrimination." CHAPTER XIV. LIABILITY OF WATER-WORKS COMPANIES FOR FIRE LOSS. Section. 230. The consumer the real party interested. 231. The inhabitant may enforce franchise rights. 232. Franchise or contract for benefit of inhabitants. 233. Liability to consumer for fire loss from failure of water supply. 234. Recovery denied for duty governmental. 235. Right of municipality to recover for loss. 236. E.\pediency of rule refusing recovery. 237. Liability to customer for negligence. 238. Recovery by consumer in contract or for negligence. 239. Recovery by consumer as taxpayer. 240. Customer not municipality real party in interest to contract 241. Customer party to contract may recover. 242. Water-works company not insurer. 243. Duty under franchise to supply water. 244. Owner of property only party who can sue for loss. 245. Beneficiary of contract may sue for its breach. 246. Consideration furnished by beneficiary. 247. Liability for fire loss contemplated by contract. 248. Contract expressly assumes risk of fire loss. 249. Reasons for denying recovery stated. 250. Recovery held not in contemplation of parties. 251. Recovery denied for want of privity between parties. 252. No recovery not expressly provided for in contract. 253. Duty governmental and no liability. 254. Water-works company subrogated for municipality. 255. Recovery denied, although expressly stipulated by contract. 256. No recovery contemplated in fixing rates. 257. Impracticable to permit recovery. 258. Liability would require prohibitive rates. 259. Contract only with municipality to furnish water for Are protection. 260. Express contract for water service for fire protection neces- sary. 279 § 230 PUBLIC UTILITIES. 28O Section. 261. Rate for service indicates no liability for fire loss contem- plated. 262. Interest of taxpayer and consumer in contract only incidental. 263. Recovery only by party to contract expressly stipulated. § 230. The consumer the real party interested. — As a general rule the rights created by the acceptance of the franchise and the undertaking of the municipal public utility to provide its service to all on the same conditions, which is the consideration for the grant of the franchise rights, as has already been shown, belong to the inhabitants of the municipal corporation as well as to the corporation itself. The right of the inhabitants to receive proper service in accordance with the stipulations of the franchise on reasonable terms and conditions is generally recognized and may be enforced by the individual in his own name by vir- tue of the fact that he is an inhabitant of the munici- pality. Indeed, the inhabitant generally is the real party in interest and together with the corporation providing municipal public utility service is generally the only party really and ultimately interested in the matter; for except as to the public service rendered the municipality itself, its only interest is in seeing that the provisions of the franchise are performed and the rights of its inhabitants are secured in accordance with its terms. § 231. The inhabitant may enforce franchise rights. — With reference to the nature of the duty of public service corporations so well enunciated in the case of Munn v. People of Illinois, 94 U. S. 113, 24 L. ed. JJ, the fact that the service is rendered to the public subjects it to public regulation and control in the interest of the public and for the benefit of any member thereof which may be especially affected or directly interested. This principle, therefore, is fully 28l LIABILITY OF WATER COMPANIES. § 232 applicable to corporations providing municipal public utility service, and the case of Pond v. New Rochelle Water Co., 183 N. Y. 330, 76 N. E. 211, i L. R. A. (N. S.) 961, decided in 1906, furnishes an important deci- sion in this connection, for it applies this principle to the matter of providing water service for the pur- pose of determining the rights of the individual in- habitants, who are or desire to become customers of such service, to secure the same by an action in their own name in accordance with this principle which is best stated in the early case, that has long since be- come a leading one, of Lawrence v. Fox, 20 N. Y. 268. § 232. Franchise or contract for benefit of inhabi- tants. — In that case there was an amount of money due Lawrence from one Holly, and in consideration of a loan from Holly to Fox, he agreed to pay this debt of Holly to Lawrence; and upon this agreement, al- though he had nothing to do with the execution of the contract, Lawrence was permitted to recover against Fox because the agreement was made for his benefit. This case has been generally recognized wherever fol- lowed as deciding that "an agreement made on a valid consideration by one with another, to pay money to a third, can be enforced by a third in his own name. Nor need the third person be privy to the considera- tion," according to Secor v. Lord, 42 N. Y. 525; "nor need he be named especially as the person to whom the money is to be paid." And as the court in this case of Pond v. New Rochelle Water Co., supra, says: "The general principle that, if one person contracts for the benefit of a third person, such person may maintain an action on the agreement, has been applied since early in the seventeenth century in a large num- ber of cases; the facts in each case differing to some § 232 PUBLIC UTILITIES. 282 extent. The leading case in England is Dutton v. Poole, I Ventris 318, decided in the reign of Charles II. , . . The court said: Tt might have been another case if the money had been to have been paid to a stranger; but there is such a nearness of relation between the father and the child, 'tis a kind of debt to the child to be provided for, that the plaintiff is plainly concerned.' ... In the case before us we have a municipality entering into a contract for the benefit of its inhabitants, the object being to supply them with pure and wholesome water at reasonable rates. While there is not presented a domestic rela- tion like that of father and child or husband and wife, yet it can not be said that this contract was made for the benefit of a stranger. In the case before us the municipality sought to protect its inhabitants who were at the time of the execution of the contract con- sumers of water, and those who might thereafter become so, from extortion by a corporation having granted to it a valuable franchise extending over a long period of time. We are of opinion that the complaint states a good cause of action." The decision of this case that the individual inhabi- tant of the municipality could in his own name com- pel the furnishing of a water supply to himself in accordance with the stipulations of the contract and at the rates therein fixed clearly establishes the prin- ciple, which is generally recognized by the courts, that such franchise rights are available to the inhabi- tants of the municipality as well as to the municipality itself, and that the individual inhabitants may enforce such rights by a proper action as an individual for the reason that they were created for his own benefit as, well as for the advantage of the municipality and because he is the real party in interest. 28^ LIABILITY OF WATER COMPANIES. § 233 § 233. Liability to consumer for fire loss from failure of water supply. — The question, however, of the liability of the public service corporation for loss from fire due to its failure to provide an adequate water supply for the municipality and its inhabitants, which makes this chapter necessary, is one which has occasioned much discussion and debate, and upon the decision of which our courts have expressly disagreed. A majority of the decisions on this point have held that there is no liability against the corporation fur- nishing water service to a municipality and its inhabi- tants in accordance with the franchise for damages to the inhabitant whose property is destroyed by fire be- cause of the failure of the company to furnish an ade- quate supply of its service in accordance with its un- dertaking in the franchise. Many of the decisions to this effect are predicated upon the statement that the contract is one between the corporation furnishing the water and the municipality and that there is no privy of contract between the corporation and the individual inhabitant. Although payment for the water-works plant and the water furnished is often made in part from funds raised by taxing the individual inhabitant and property owner of the municipality, he is denied recovery for the loss of his property from fire due to the failure of the water company to furnish an ade- quate supply of water, although this would have ex- tinguished the fire and although this service was pro- vided for in the franchise and was contemplated by all parties and expressly paid for. § 234. Recovery denied for duty governmental. — Some of the cases denying liability are based on the proposition that in contracting for water service for fire protection a municipality acts in its governmental capacity so that when the municipality itself furnishes § 235 PUBLIC UTILITIES. 284 water for such purpose, it could not be held liable to the citizen for a failure to furnish an adequate supply of water any more than for a failure to supply ade- quate service through its fire department; and because the municipality could not be held liable for the per- formance or failure to perform a governmental duty, the private corporation under contract with the mu- nicipality to provide water service is no more liable than the municipahty itself. While the courts gener- ally hold that the municipality is not liable to perform a governmental duty and that its furnishing of protec- tion against fire is the performance of such a duty, which the municipality may or may not undertake and for the performance of which it can not be held liable to the individual citizen or property owner, the courts are by no means agreed that a private corpora- tion under a franchise obligation to provide a water supply to the municipality and its inhabitants for all purposes is not Hable for a failure to provide service for protection against fire equally with its failure to provide adequate service for any other purpose stipu- lated in the franchise. § 235. Right of municipality to recover for loss. — The power of the municipality to recover from the corporation, under contract to provide a water sup- ply, for its failure to render adequate service as re- quired by its contract or franchise has only been de- cided in a few cases. This liability is generally held to depend upon the nature of the franchise or contract entered into between the municipality and the com- pany undertaking to furnish a water supply; and where the corporation merely undertakes to establish its plant and furnish a water supply without any ex- press stipulation for service as a protection from fire loss, recovery for such loss, when sustained by the mu- 285 LIABILITY OF WATER COMPANIES. § 236 nicipality, has been denied by an application of the principle, established in a majority of the cases with reference to loss sustained by the individual inhabitant, that unless the liability for fire loss is expressly stip- ulated for, it was not contemplated by the parties nor intended to be covered by their contract. This neces- sarily raises the question of the construction of the contract for the purpose of determining the intention of the parties to it on a point which is not stipulated in express terms and conditions; and as in the case of loss by the individual inhabitant the authorities are not agreed as to the right of the municipality to re- cover. § 236. Expediency of rule refusing recovery. — It is apparent, however, that the position, frequently main- tained in the case of the loss by the individual, that no recovery can be had because there is a lack of privity of contract is not available as a defense to an action by the municipality itself which is a party to the con- tract. Naturally the increased risk to the corporation of holding it liable for such loss might result in such an increased charge for the seryice as to make such a provision inexpedient because of the increase in the rate and the enhanced cost to the municipality. How- ever, a construction of the contract or franchise which refuses to find a right in the municipality to recover for the loss of its property due to an inadequate water supply, as provided for in the contract or franchise, is inconsistent with the principle of strict construction in favor of the municipality and of the doctrine of the implied powers of municipal corporations, which, as has already been shown, is so well established and generally accepted by the great weight of authority. The question, however, is one of construction and the decisions vary in accordance with the different inter- § 236 PUBLIC UTILITIES. 286 pretations and the varying provisions of the franchises and contracts of municipalities for water service.^ 1 ALABAMA.— Lovejoy v. Bessemer Waterworks Co., 146 Ala. 374, 41 So. 76, 6 L. R. A. (N. S.) 429. CALIFORNIA.— Niehaus Bros. Co. v. Contra Costa Water Co., 159 Cal. 305, 113 Pac. 375, 36 L. R. A. (N. S.) 1045; Ukiah City v. Ukiah Water & Improvement Co., 142 Cal. 173, 75 Pac. 773, 64 L. R. A. 231, 100 Am. St. 107. CONNECTICUT.— Nickerson v. Bridgeport Hydraulic Co., 46 Conn. 24, 33 Am. Rep. 1. FEDERAL.— Boston Safe-Deposit & T. Co. v. Salem Water Co., 94 Fed. 238; Guardian Trust & Deposit Co. v. Greensboro Water Supply Co., 115 Fed. 184; Metropolitan Trust Co. v. Topeka Water Co., 132 Fed. 702; New Orleans & N. E. R. Co. v. Meridian Water- works Co., 72 Fed. 227. FLORIDA.— Mugge v. Tampa Waterworks Co., 52 Fla. 371, 42 So. 81, 6 L. R. A. (N. S.) 1171, 120 Am. St. 207; Woodbury v. Tampa W^aterworks Co., 57 Fla. 243, 49 So. 556, 21 L. R. A. (N. S.) 1034. GEORGIA.— Fowler v. Athens City Waterworks Co., 83 Ga. 219, 9 S. E. 673, 20 Am. St. 313. IDAHO.— Bush V. Artesian Hot & Cold Water Co., 4 Idaho 618. 43 Pac. 69, 95 Am. St. 161. ILLINOIS.— Galena v. Galena Water Co., 132 111. App. 332; Galena V. Galena Water Co., 229 111. 128, 82 N. E. 421. INDIANA.— Fitch v. Seymour Water Co., 139 Ind. 214, 37 N. E. 982, 47 Am. St. 258. IOWA.— Becker v. Keokuk Waterworks, 79 Iowa 419, 44 N. W. 694, 18 Am. St. 377; Davis v. Clinton Waterworks Co., 54 Iowa 59, 6 N. W. 126, 37 Am. Rep. 185. KANSAS.— Mott V. Cherry vale Water & Mfg. Co., 48 Kans. 12, 28 Pac. 989, 15 L. R. A. 375, 30 Am. St. 267. KENTUCKY.— Graves County Water Co. v. Ligon, 112 Ky. 775, 23 Ky. L. 2149, 66 S. W. 725; Paducah Lumber Co. v. Paducah Water Supply Co., 89 Ky. 340, 12 S. W. 554, 7 L. R. A. 77, 25 Am. St. 536. LOUISIANA.— Allen & C. Mfg. Co. v. Shreveport Waterworks Co., 113 La. 1091, 37 So. 980, 68 L. R. A. 650, 104 Am. St. 525; Planters' Oil Mill v. Monroe Waterworks & Light Co., 52 La. Ann. 1243, 27 So. 684. MAINE.— Hone v. Presque Isle Water Co., 104 Maine 217, 71 Atl. 769, 21 L. R. A. (N. S.) 1021; Milford v. Bangor R. & Electric Co., 104 Maine 233, 71 Atl. 759, 30 L. R. A. (N. S.) 531; Milford v. Bangor R. & Electric Co., 106 Maine 316, 76 Atl. 696, 30 L. R. A. (N. S.) 526. MISSISSIPPI.— Wilkinson v. Light, Heat & Water Co., 78 Miss. 389, 28 So. 877. MISSOURI.— Howsmon v. Trenton Water Co., 119 Mo. 304, 24 S. W. 784, 23 L. R. A. 146, 41 Am. St. 654. 287 LIABILITY OF WATER COMPANIES, § 237 § 237. Liability to customer for negligence. — A number of well reasoned decisions from some of our strongest jurisdictions, including that of the United States Supreme Court, refuse to distinguish between the rights provided for in the franchise or contract in general, which all courts recognize as being available to the individual inhabitant, and the right to an ade- quate water supply for protection against fire, and hold that there is a liability to the individual inhabitant, who is a consumer of water service, for loss from fire due to an inadequate water supply for the same reason NEBRASKA.— Eaton v. Fairbury Waterworks Co., 37 Nebr. 546, 56 N. W. 201, 21 L. R. A. 653, 40 Am. St. 510. NEVADA.— Ferris v. Carson Water Co., 16 Nev. 44, 40 Am. Rep. 488. NEW JERSEY.— Knappman Whiting Co. v. Middlesex Water Co., 64 N. J. L. 240, 45 Atl. 692, 49 L. R. A. 572, 81 Am. St. 467; Hall V. Passaic Water Co. (N. J.), 85 Atl. 349; Baum v. Somerville Water Co. (N. J.), 87 Atl. 140. NEW YORK.— Wainwright v. Queens County Water Co., 28 N. Y. S. 987, 78 Hun (N. Y.) 146. NORTH CAROLINA.— Fisher v. Greensboro Water-Supply Co., 128 N. Car. 375, 38 S. E. 912; Gorrell v. Greensboro Water-Supply Co., 124 N. Car. 328, 32 S. E. 720, 46 L. R. A. 513, 70 Am. St. 598. OKLAHOMA.— Lutz v. Tahlequah Water Co., 29 Okla. 171, 118 Pac. 128, 36 L. R. A. (N. S.) 568. PENNSYLVANIA.— Beck v. Kittanning Water Co., 8 Sadler (Pa.) 237, 11 Atl. 300. SOUTH CAROLINA.— Ancrum v. Camden Water, L. & I. Co., 82 S. Car. 284, 64 S. E. 151, 21 L. R. A. (N. S.) 1029. TENNESSEE.— Foster v. Lookout Water Co., 3 Lea (Tenn.) 42; Harris & Cole Bros. v. Columbia Water & Light Co., 114 Tenn. 328, 85 S. W. 897. TEXAS.— House v. Houston Waterworks Co., 88 Tex. 233, 31 S. W. 179, 28 L. R. A. 532. UNITED STATES.— German Alliance Ins. Co. v. Home Water Supply Co., 226 U. S. 220, 57 L. ed. — ; 42 L. R. A. (N. S.) 1000; Guardian Trust & Deposit Co. v. Fisher, 200 U. S. 57, 50 L. ed. 367. WEST VIRGINIA.— Nichol v. HuntlngOn Water Co., 53 W. Va. 348, 44 S. E. 290. WISCONSIN.— Britton v. Green Bay, &c., W. W. Co., 81 Wis 48, 51 N. W. 84, 29 Am. St. 856; Krom v. Antigo Gas Co. (Wis.). 140 N. W. 41. § 238 PUBLIC UTILITIES. 288 and to the same extent that there is a Hability for the failure to perform any other pubHc utility service; for as the court in the case of Guardian Trust & Deposit Co. V. Fisher, 200 U. S. 57, 50 L. ed. 367, decided in 1906, says: "It may also be true that no citizen is a party to such a contract, and has no contractual or other right to recover for the failure of the company to act; but, if the company proceeds under its con- tract, constructs and operates its plant, it enters upon a public calling. It occupies the streets of the city, acquires rights and privileges peculiar to itself. It invites the citizens, and if they avail themselves of its conveniences, and omit making other and personal ar- rangements for a supply of water, then the company owes a duty to them in the discharge of its public call- ing, and a neglect by it in the discharge of the obliga- tions imposed by its charter, or by contract with the city, may be regarded as a breach of absolute duty, and recovery may be had for such neglect. The action, however, is not one for breach of contract, but for negligence in the discharge of such duty to the public, and is an action for a tort. . . . Even if the water company was under no contract obligations to con- struct water-works in the city or to supply the citizens with water, yet, having undertaken to do so, it comes under an implied obligation to use reasonable care; and if, through its negligence, injury results to an in- dividual, it becomes liable to him for the damages re- sulting therefrom, and the action to recover is for a tort, and not for breach of contract." § 238. Recovery by consumer in contract or for negligence. — In recognizing the generally accepted rule that the special rights and privileges granted the cor- poration permitting it to render public utility service are in consideration that such service will be rendered 289 LIABILITY OF WATER COMPANIES. § 238 adequately and to all without discrimination in ac- cordance with the conditions stipulated in the fran- chise the court in the case of Guardian Trust & De- posit Co. V. Greensboro Water Supply Co., 115 Fed. 184, decided in 1902, held that one of the duties of a water company was to furnish an adequate supply of water for fire protection and said, as did the Supreme Court of the United States, that recovery could be had for such failure in tort based on its failure to per- form its obligation to the public generally, including the individual inhabitants and property owners who constituted its customers, the court saying: "The Greensboro Water Supply Company, as has been seen, was under the obligation of a contract to furnish a full supply of water to the city and its inhabitants for sundry purposes, including that of fire. And under this obligation it was its duty to do so whenever needed. Besides this — indeed, to facilitate the per- formance of this obligation and in consideration of this obligation — it was clothed with valuable fran- chises, under which it used the streets of the city in laying its mains. Under its obligations, it was to fur- nish the city and its citizens with one of the necessaries of life, and was. bound to furnish all that desired it, who paid the price imposed. It served the public, and to this extent was a quasi public corporation, bound to the discharge of a public duty. Griffin v. Water Co., 122 N. Car. 206, 30 S. E. 319, 41 L. R. A. 240; Coy v. Gas Co. (Ind. Sup.), 36 L. R. A. 535 (s. c. 46 N. E. 17). So it was the duty of the water company to fur- nish the water for fire — a duty arising out of an ex- press contract, and out of the franchises granted to it for the purposes of public utility and need. It did not fulfill this duty. . . . The only question is, will an action, as for a tort, lie against a defendant who has negligently performed an express contract? We have 19— Pub. Ut. § 239 PUBLIC UTILITIES. 29O seen that, in entering into this contract, the water company assumed a duty to the pubHc. Mr. Chitty, quoted, supra, says that, under circumstances like these, the plaintiff may proceed either ex contractu or ex delicto. In other words, the negligence in not performing a contract of this character, whereby prop- erty has been injured, is a tort, as well as a breach of contract, and that on such a tort action will lie." § 239. Recovery by consumer as taxpayer. — These cases just mentioned base the liability on the broadest possible ground permitting a recovery in tort by an action of any property owner who has contracted for a water supply and they do not limit the liability to such as was contemplated by the parties when the con- tract was made, but base it on the general undertaking in connection with the franchise grant itself to furnish adequate service in accordance with its terms. The case of Fisher v. Greensboro Water-Supply Co., 128 N. Car. 375, 38 S. E. 912, decided in 1901, is a recent decision of the Supreme Court of North Carolina, from whose jurisdiction the former cases were appealed, which permits recovery for fire loss due to an inade- quate water supply at the hands of an inhabitant be- cause he is a taxpayer and a property owner of the municipality whose property was destroyed. In the course of its decision the court said: "The plaintiff alleges that defendant had obligated itself (among other things) to furnish to the city of Greensboro an ample supply of water, and the necessary machinery, engines, appliances, etc., for protection against fire; that he, an inhabitant and taxpayer of said city, owned the Benbow House, a four-story hotel, there situate, which was burned in June, 1899, and 'that the defend- ant company was culpably negligent and wilfully care- less of its duty and obligations, both to the city of 291 LIABILITY OF WATER COMPANIES. § 24O Greensboro and its inhabitants, under the said con- tract, and by virtue, also, of the duties, obligations, and responsibilities which it assum'ed when it under- took to supply water to the city of Greensboro and its inhabitants for a stipulated price, which was paid to it by the said city, and derived by said city from taxation on the inhabitants thereof, and particularly on the plaintiff, a property owner, as aforesaid, and a tax- payer in the said city of Greensboro.' . . . We think the plaintiff was entitled to judgment as prayed for. There was an express and legal obligation upon the part of the defendant to provide and furnish ample protection against fires, and a breach of that obliga- tion, and a consequential damage to the plaintiff." § 240. Customer not municipality real party in in- terest to contract. — The same court in the case of Gor- rell V. Greensboro Water-Supply Co., 124 N. Car. 328, 12 S. E. 720, 46 L. R. A. 513, 70 Am. St. 598, decided in 1899, in permitting a recovery for loss from fire due to an inadequate water supply, while admitting that the individual sustaining the loss was not a party to the franchise contract nor privy to that contract, rec- ognized that he was really the party for whom the contract was made and the service provided, while the municipality was simply the nominal party acting in effect for its inhabitants who were the real parties interested and the beneficiaries of the contract, whose money collected by way of taxation and for water rentals met the expense and paid for the service, and in the course of the decision said: "It is true, the plaintiff is neither a party nor privy to the contract, but it is impossible to read the same without seeing that, in warp and woof, in thread and filling, the object is the comfort, ease, and security from fire of the peo- ple, the citizens of Greensboro. This is alleged by the § 241 PUBLIC UTILITIES. 292 eleventh paragraph of the complaint, and is admitted by the demurrer. The benefit to the nominal contract- ing party, the city of Greensboro, as a corporation, is small in comparison, and, taken alone, would never have justified the grants, concessions, privileges, bene- fits, and payments made to the water company. Upon the face of the contract, the principal beneficiaries of the contract in contemplation of both parties thereto were the water company on the one hand and the in- dividual citizens of Greensboro on the other. The citizens were to pay the taxes to fulfill the money con- sideration named, and furnishing the individual citi- zens with adequate supply of water, and the protec- tion of their property from fire, was the largest duty assumed by the company. One not a party or privy to a contract, but who is a beneficiary thereof, is en- titled to maintain an action for its breach." § 241. Customer party to contract may recover. — While the customer for water service necessarily as- sumes the risk of loss in case the fire can not be ex- tinguished with such a water supply as is provided for in the franchise, the court in the case of New Orleans & N. E. R. Co. V. Meridian Waterworks Co., 72 Fed. 227, decided in 1896, holds that the customer does not take the additional risk of loss from fire due to a fail- ure to furnish the supply of water provided for in the franchise and that where the loss is due to this failure the recovery can be had against the water- works company for its failure to furnish the supply called for by the franchise. The court says : "But the breach upon which the pleadings herein show this action to be founded occurred when the defendant failed to furnish plaintiff's servants with an adequate supply of water, at not less than sixty pounds pressure, as contracted for; so that such servants might, with 293 LIABILITY OF WATER COMPANIES. § 242 the use of water under that pressure, have done all that was practicable to save plaintiff's property. The defendant agreed to furnish that pressure of water, as the plaintiff alleges, for fire purposes; and plaintiff took on itself the risk as to the effectiveness or suffi- ciency of water at such a pressure to extinguish such fires as might threaten said company's buildings. . . . But the plaintiff had contracted for an adequate sup- ply of water at such pressure, and, when the emer- gency came, the railway company was entitled, under a reasonable condition of things, to the use of water at that pressure, to aid its servants, to that extent, to extinguish the fire. Under the pleadings, plaintiff's evidence, not objectionable under the well-established rules as to the admissibility of evidence, applicable under such a state of case, might have authorized a recovery of damages." § 242. Water-works company not insurer. — The decision in the case of Woodbury v. Tampa Water- works Co., 57 Fla. 243, 49 So. 556, 21 L. R. A. (N. S.) 1034, decided in 1909, is similar to the one last referred to in holding that the law does not require the water company to become an insurer of all the property for which it contracts to furnish water service, but that the party whose property is destroyed because of the failure to furnish the service contracted for is the party really affected by the failure, because it resulted in his loss, for which he is allowed a recovery, based on the relation of a customer thus established between himself and the company undertaking to furnish the service, for as the court says: "The duty the defend- ant owed to the plaintiff by virtue of the public service engaged in by the defendant was to supply the hy- drants near the plaintiff's property with water as legally required ; such water to be used by others in S 243 PUBLIC UTILITIES. 294 extinguishing fire on the plaintiff's premises. The law imposes upon the defendant no duty to insure the property or to extinguish fires. The plaintiff has no right of action for a failure of the defendant to furnish water where the plaintiff's property was not located, if such failure was not a proximate cause of the burn- ing of the plaintiff's property. . . . The failure of the defendant to furnish water where the fire existed before reaching the plaintiff's property does not ap- pear to be the agency that proximately caused the fire to destroy the plaintiff's house. . . . The de- fendant was not responsible for starting the fire, and was under no duty to the plaintiff to extinguish it where it started; but the primary duty of the de- fendant to the plaintiff was to supply water as law- fully required for extinguishing the fire when it reached plaintiff's property. ... If the defendant is respon- sible for the destruction of the plaintiff's property, there is liability; and there can be no doubt that the plaintiff, whose property was destroyed, is the real party in interest, and is the proper plaintiff here. . . . When a public-service corporation, chartered for the purposes, exercises franchises, and actually undertakes, for a compensation paid from a special tax levy, to render the public service of supplying to a city and its inhabitants water adequate for all purposes, includ- ing fire protection to the property of the city and its inhabitants, a relation between the corporation and the individual property holder is thereby established, which, by implication of law, imposes reciprocal duties and obligations upon the parties." § 243. Duty under franchise to supply water. — That recovery can be had for negligence in failing to discharge the duty of furnishing an adequate service, which is a consideration for the granting to the com- 295 LIABILITY OF WATER COMPANIES. § 244 pany of its franchise privileges is the effect of the de- cision in the case of Mugge v. Tampa Waterworks Co., 52 Fla. 371, 42 So. 81, 6 L. R. A. (N. S.) 1171, 120 Am. St. 207, decided in 1906, as stated in the fol- lowing language: "We are of opinion that the de- fendant in error, enjoying, as it does, extensive fran- chises and privileges under its contract, such as the exclusive right to furnish water to the city and its in- habitants for thirty years, the right to have special taxes levied on the property of the citizen for its bene- fit, the right to use the streets with its mains and hy- drants, the right to charge tolls and regulate the use of water, not to mention others, has assumed the pub- lic duty of furnishing water for extinguishing fires, according to the terms of its contract, and that for negligence in the discharge of this duty, whereby the fire department, adequately equipped and prepared, was not furnished with water according to the contract, and the property of the property owner was, on ac- count of such negligence in furnishing water, destroy- ed, it is liable to him for the damages suffered in an action of tort." § 244. Owner of property only party who can sue for loss. — While recognizing that the municipal cor- poration is never held liable to the owner for the loss of his property from fire because this is regarded as a governmental duty of the municipality which it may or may not perform as it prefers and that the munici- pality can not recover against the water company for a loss from fire sustained by the individual inhabitant because it is not the party in interest which sustains the loss, a recovery by the inhabitant himself against the company is permitted and constitutes the only means by which a recovery can be had; for as the court in the case of Graves County Water Co. v. § 245 PUBLIC UTILITIES. 296 Ligon, 112 Ky. 775, 23 Ky. L. 2149, 66 S. W. 725, de- cided in 1902, says: "On July 30, 1891, the city of Mayfield made an ordinance providing for a supply of water and for electric lights for the city, by which it granted to appellant the franchise of supplying the city and its inhabitants with water and electric lights for a period of 25 years, appellant to keep a sufficiency of engine and boiler power, so that, if one engine or pump should get out of fix, there would be others which might be used for pumping water; all mains to be of suitable size, and to furnish an abundant supply of water. . . . On June 26, 1901, a fire began in a house in the city, which spread to and burned appel- lees' house from the want of water in the hydrants, there not being sufficient pressure to throw a stream of any size more than from two to five feet. There was no water in the tower, and the firemen were un- able to get water to check the fire. By reason of this the fire spread to appellees' property and destroyed it. . . . It is universally held that the city is not liable to the property owner for the loss of his prop- erty. It is equally clear that the city can not sue the water company and recover damages for the loss of private property. The result is that, if the owner can not himself sue for the loss of his property, he is with- out redress, although his property has been destroyed by the breach of a contract made for his benefit by the city. We are not prepared to so hold." § 245. Beneficiary of contract may sue for its breach. — The same court in the case of Paducah Lum- ber Co. V. Paducah Water Supply Co., 89 Ky., 340, 12 S. W. 554, 7 L. R. A. yj, 25 Am. St. 536, decided in 1889, in sustaining a recovery for such a loss due to the failure of the water company applies the principle enunciated in the case of Lawrence v. Fox, supra, and 297 LIABILITY OF WATER COMPANIES. § 246 generally accepted by most of our courts that a con- tract made for the benefit of a third person based on a good consideration is available to that third person, although the consideration did not pass directly from him to the party liable on the contract. To refuse re- covery and hold otherwise, the court observes would render the agreement meaningless and of no effect for any purpose, for as the court says: "'But, we think, if there be in fact consideration for a promise or en- gagement made for the benefit of the person who sues, it is not essential for it to have passed directly from him to the person sued. . . . For this court has held the doctrine well settled that a party for whose benefit a contract is evidently made may sue thereon in his own name, though the engagement be not di- rectly to or with him. . . . And it being alleged in the petition, and also, in effect, provided in the ordi- nance of the city council that contains the terms and conditions of the contract, that it was made for the benefit of the inhabitants, it seems to us that, if ap- pellee can be made answerable in damages at all, it is liable to appellant upon the facts stated in the peti- tion. ... It seems, if the contract before us is not to be treated as meaningless and totally ineffectual for every purpose, the parties to it must be regarded as having contemplated and assented to the conse- quences of nonperformance, as well as the profit and advantage of performance, and consequently appellee is liable in this case for such damages as its failure or refusal to perform may have caused to appellant." § 246. Consideration furnished by beneficiary. — After indicating that the funds used in the payment of the water service come directly from the customers and that the franchise rights are provided for their especial benefit, the court in the case of Planters' Oil § 247 PUBLIC UTILITIES. 298 Mill V. Monroe Waterworks & Light Co., 52 La. Ann. 1243, 27 So. 684, decided in 1900, says: "Municipali- ties are the people acting in their corporate capacity. It was the people's money that was paid the water company. It was for the benefit of the people that the promise was made on part of the company to supply water for extinguishing fires. Ostr. Ins. § 383. If it were to the pubHc that the promise of the contract was made, then it was to 'the public as composed of individual persons.' The municipality was but the agent of the public as thus composed. Its acts in the matter of the contract under consideration were chiefly fiduciary. The beneficiaries are the corpora- tors. It will not do to say the water company owes them no duty. While not deciding or intending to decide outright that plaintiff is entitled to recover against the water company on account of the contract made by the latter with the city of Monroe, we are yet of the opinion that, taking the allegations of the petition as true for the purpose of the trial of the exception, a sufficient legal cause of action against the company is disclosed to send the case to trial on its merits." § 247. Liability for fire loss contemplated by con- tract. — Because the contract itself provided for water service as a fire protection and the parties to the agree- ment understood that any damages resulting by fire loss from a failure to render adequate service would constitute a material breach of that contract, recovery for such damages was sustained in the case of Harris & Cole Bros. v. Columbia Water & Light Co., 114 Tenn. 328, 85 S. W. 897, decided in 1905, where the court spoke as follows: "The bill distinctly avers that the defendant contracted to supply at all times an amount of water ample to extinguish fires, and failed 299 LIABILITY OF WATER COMPANIES. § 248 to do SO, and that this failure was the occasion of the loss sustained by complainants. The failure to fur- nish water did not occasion the fire, but it is averred that it did bring about the loss resulting from the fire. To prevent this loss by supplying a quantity of water sufificient to extinguish any fire which might occur was within the letter of the contract. . . . It is true that, where an action is brought to recover for a breach of a contract, 'the contract itself must give the meas- ure of damages,' yet, in the light of the averments of the bill in this case, it was clearly within the contem- plation of the parties to this contract that, if it was breached by defendants, then it should furnish full in- demnity of the damages resulting from the breach." § 248. Contract expressly assumes risk of fire loss. — In an opinion basing recovery expressly on contract, the court in the case of Knappman Whiting Co. v. Mid- dlesex Water Co., 64 N. J. L. 240, 45 Atl. 692, 59 L. R. A. 572, 81 Am. St. 467, decided in 1900, sustained a re- covery for loss due to fire from a failure to furnish an adequate water supply, for as the court said: "The principle underlying all these cases is that where the contract is express, as it is in this case — to furnish water, with a pressure sufficient for fire purposes — to do a thing not unlawful, the contractor must per- form it; and if, by some unforeseen accident, the per- formance is prevented, he must pay damages for not doing it. . . . The water company expressly con- tracted to supply water for fire purposes. The com- pany failed to do so, and the premises of the defendant took fire, occasioning a considerable loss. Assuming that this result was due to the breaking of the pipes, without any fault on the part of the water company, we have a loss to be borne by one party or the other. In such a condition of affairs, to adopt the language § 249 PUBLIC UTILITIES. 3OO of Mr. Justice Whelpley, 'Where one of two innocent persons must sustain a loss, the law casts it upon him who has agreed to sustain it, or, rather, the law leaves it where the agreement of the parties has put it.' " § 249. Reasons for denying recovery stated. — In opposition to the principle which the above cases enunciate and support, the following cases, including that of Wainwright v. Queens County Water Co., 28 N. Y. S. 987, 78 Hun 146, decided in 1894, hold that the public service corporation providing the water supply to a city and its inhabitants is not liable to the individual customer and property owner whose prop- erty is destroyed by fire because of an inadequate water supply, due to its failure to provide water serv- ice in accordance with the provisions of the franchise. While these decisions do not agree as to the reason for so holding, the position taken by most of them is that such a liability was not in the minds of the parties to the agreement and that they did not contemplate that such a loss when sustained in this matter should be borne by the corporation failing to furnish ade- quate service; that the corporation is not an insurer nor was it intended by the parties that it should be held liable to that extent; that in case the munici- pality undertook to provide a water supply for fire protection, it would not be liable for a failure to fur- nish an adequate service for this purpose because the action would be governmental rather than proprietary, and that therefore the private concern should not be held liable; and finally that there is no privy of con- tract or consideration between the individual customer and property owner and the corporation undertaking to furnish water service to himself and the other in- habitants of the municipality as well as the municipal- ity itself. The New York case just mentioned in re- 301 LIABILITY OF WATER COMPANIES. § 25O fusing to find a liability for the destruction of property by fire because of an inadequate water supply is ma- terially limited in its effect, if in fact it is not over- ruled, by the more recent case of Pond v. New Ro- chelle Water Co., supra, which has already been dis- cussed. The question of the rights and liabilities of the parties to the contract is determined by the con- struction of its terms and conditions with a view of ascertaining the intention of the parties to it, and as this intention with reference to the liability in question is not expressed, the matter is left open to judicial conjecture; and has become a very much disputed question of fact, upon which the courts have taken diametrically opposite positions. § 250. Recovery held not in contemplation of par- ties. — The following language in the decision of the Wainwright case indicates that the court believed that the liability was not covered by the contract nor con- templated by the parties to it, which, of course, is directly in conflict, both as to the decision and the reason upon which it is based, with the Knappman Whiting Co. case just discussed: "I do not see that the relation of the individual taxpayer to the company that agrees to supply water is any different than it is towards the person who sells the fire engine or the hose to the fire district. The power of the district to contract in all cases is the same, and derived from the statute. But if, from the bursting of a defective hose or the breaking down of a defective engine, the extin- guishment of a fire was made impossible, the owner of the destroyed property would have no right of ac- tion against the vendor of those appliances. Privity of contract is an essential element to an action founded on a breach of contract, and, whether the action for damages resulting from the breach be in form on § 251 PUBLIC UTILITIES. 302 contract or for a wrong, it can only be maintained by a party to the contract." § 251. Recovery denied for want of privity be- tween parties. — That the weight of authority is against recovery on this HabiHty for the reason that there is a want of privity between the customer and property owner sustaining the loss and the corporation under- taking to furnish the service is accurately stated in the case of Lovejoy v. Bessemer Waterworks Co., 146 Ala. 374, 41 So. 76, 6 L. R. A. (N. S.) 429, decided in 1906, where a large number of authorities to this ef- fect are cited. After expressly recognizing "that the absence of a remedy by suit for damages for a failure by a water company to furnish water for fire pur- poses, according to its contract with a city, leaves the subject 'in an extremely unsatisfactory position,' " the court in this case reiterates the suggestion made in the annotator's note to Britton v. Green Bay & Ft. H. Waterworks Co., 29 Am. St. 856, 863, that " 'the only security would seem to be in legislation, or in the in- corporation of some suitable provision in future con- tracts of this description, wherever the taxpayers de- sire to reserve a personal remedy against the water company.' " The court in the course of its decision says: "The overwhelming weight of authority is against the right of the plaintiff to maintain this ac- tion. The reason why he may not do so is that there is a want of privity between him and the defendant which disables him either from suing for a breach of the contract or for the breach of duty growing out of the contract. ... It was furthermore shown that in the cases where an action had been sustained, when instituted by a third party upon a contract for his ben- efit, there had been a debt or duty owing by the prom- isee to the party claiming the right to sue upon the 303 LIABILITY OF WATER COMPANIES. § 252 promise. It is not claimed that the city of Bessemer owed any duty to the plaintiff to furnish water for the extinguishment of fire, or that an action could have been maintained against the city for a failure in that regard. ... It suffices for all practical purposes of this case to say that our own decisions, in which the opinions were written by as able judges as ever occu- pied this bench, and in which there was no dissent, have rested the conclusion in similar cases involving public contracts upon the declaration that there was a want of privity." § 252. No recovery not expressly provided for in contract. — In denying liability because it was not ex- pressly provided for in the contract which the court assumed indicated that the liability was not contem- plated by the parties, the recent decision in the case of Niehaus Bros. Co. v. Contra Costa Water Co., 159 Cal. 305, 113 Pac. 375, 36 L. R. A. (N. S.) 1045, de- cided in 1911, says that the payment made for water service only includes water as a commodity and that the consideration would not be adequate to cover the liability for fire loss, the court saying: "While it is to be presumed that the rates established by a munic- ipal ordinance are fair and reasonable, this presump- tion only applies as far as such rates fix the compen- sation to be paid the company for furnishing water to consumers as a commodity. They are not fixed as a consideration under which the company obligates itself to furnish water for the extinguishment of fires, with a corresponding liability for failure to do so. And it is from the fact that under the ordinary rela- tion of public service corporation and consumer that the only duty of the company is to furnish water as a commodity, and not for the purpose of extinguish- ing fire, that liability for damages for failure to supply § 253 PUBLIC UTILITIES. 304 it for the latter purpose can only be created by ex- press contract. . . . The authorities deny the Ha- bility, on the ground that there is no privity of con- tract between property owners and the water com- pany." § 253. Duty governmental and no liability. — Be- cause the municipality in providing water service for fire protection by way of contracting with a private corporation for water supply was regarded as acting in its governmental capacity for the general welfare and in the discharge of a purely public governmental duty for which it could not be held liable in any event, whether it attempted to perform the duty and failed or did not even make the attempt, a private corpora- tion undertaking to furnish the service in place of the municipality itself occupied the position enjoyed by the city and could not be held liable to the individual property owner sustaining a loss by fire due to a fail- ure to provide water service in accordance with the contract, for as the court in the case of Fitch v. Sey- mour Water Co., 139 Ind., 214, 37 N. E. 982, 47 Am. St. 258, decided in 1894, said: "Under the statute the city had a right to enact an ordinance for protection against fire, but it was not bound to do so. In enact- ing the ordinance, the municipality moved in its gov- ernmental capacity, in the general interests of the community. As a means to obtain its object, the city contracted with the company for a water supply. The ordinance, therefore, in so far as the inhabitants of the city and public interests generally were concerned, was a governmental measure, which the city might take or not take, as seemed best; and no Hability ex- isted against the city for a failure to enact the ordi- nance, or for a failure to see that it was duly enforced. There could, then, be no public duty, under the ordi- 305 LIABILITY OF WATER COMPANIES. § 254 nance, the violation of which would render the city, or those appointed to carry out the provisions of the ordinance, liable to any one who might suffer. . . . But, while the inhabitants were interested in the con- tract made for their benefit, we do not think that this interest was such as gave the inhabitants the right to sue for its enforcement, or for damages occasioned by a failure to enforce it. . . . There being no ground for recovery, treating the action as one ex contractu, is it better founded treating it as one ex delicto? We think not. The violation of a contract entered into with the public, the breach being by mere omission or nonfeasance, is no tort, direct or indirect, to the private property of an individual, though he be a member of the community, and a taxpayer to the government. Unless made so by statute, a city is not liable for failing to protect the inhabitants against the destruction of property by fire." § 254. Water-works company subrogated for mu- nicipality. — The more recent case of Nichol v. Hun- tington Water Co., 53 W. Va. 348, 44 S. E. 290, de- cided in 1903, "holds that a municipal corporation is not bound to furnish protection from fire, and that, when authorized so to do by legislative act, it has discretion to omit the exercise of that power, and there is no duty resting upon it which may form the basis of a contract between the corporation and the citizen who owns property. This is the position taken by the great majority of the courts which have passed upon the question. This principle governs also the relation of a private or quasi public corporation to- ward the citizens and property owners of the city in which, under a contract wnth the city, it undertakes to furnish water for protection against fire, in consid- ao— Pub. ut. § 255 PUBLIC UTILITIES. 306 eration of the payment by the city of an annual rental." § 255. Recovery denied, although expressly stipu- lated by contract. — In the case of Mott v. Cherryvale Water & Mfg. Co., 48 Kans. 12, 28 Pac. 989, 15 L. R. A- 375> 30 Am. St. 267, decided in 1892, the defendant water company, in accordance with the ordinance, undertook "that it would pay all damages that might accrue to any citizen of the city by reason of a failure on the part of defendant to supply a sufificient amount of water, or a failure to supply the same at the proper time, or by reason of any negligence of the defend- ant." In spite of this express undertaking the court decided that as the city is not liable for the failure of the company to furnish an adequate water service or for the performance of the conditions of the contract, the water company is not liable on such a contract, for the contract is between the city and the water company. This case is a striking illustration of a contract upon which no recovery can be had by the municipality which is a party to it because its prop- erty is not destroyed, nor by the customer and indi- vidual property owner who pays for water service and whose property is destroyed, which contract was en- tered into by parties competent to make it and for a valid consideration, which expressly provides for the supplying of a sufficient amount of water and for a liability for the failure to furnish such a supply. In the course of its decision the court says: "Under the powers conferred by the statute upon cities in this state a city making a contract with a water company to furnish water for fires, etc., is not liable to its citi- zens or residents on account of the failure of the com- pany to furnish water or to perform the conditions of the contract. If a city is not liable to its citizens 307 LIABILITY OF WATER COMPANIES. § 256 or residents, the water company is not liable to such citizens or residents upon a contract between it and the city. The contract, in such a case, is between the city and the water company only. . . . This action is not based upon a breach of a statutory duty, but upon the failure of the water and manufacturing com- pany to comply with a contract made with the city of Ottawa." § 256. No recovery contemplated in fixing rates. — The recent case of Lutz v. Tahlequah Water Co., 29 Okla. 171, 118 Pac. 128, 36 L. R. A. (N. S.) 568, decided in 1911, refuses recovery for the equitable rea- son stated that the large investment necessary to estab- lish a water plant had been made with the understand- ing, from the majority of the cases, that it would not be subjected to this liability. Nor is this an unrea- sonable application of the doctrine of stare decisis, which, while most frequently applied to the law affect- ing title to real estate and for the purpose of protect- ing and conserving vested interests, is also fairly ap- plicable to the case in point, for when such an invest- ment has been made on this understanding of the prin- ciple and the rates for the service have been fixed without including this liability as an obligation in con- nection with the service, it would obviously be a hard- ship and the taking of an unfair advantage to subject the company to such a liability, for as the court in the case observes: "From the foregoing it will be seen that we are unable to concur with the counsel in his strictures upon following the weight of authority in this case. Nor in so doing do we feel that an injus- tice is being done the litigants, but rather that the contract made and the obligations created by the law, which existed before and at the time of the occurrence out of which this controversy has arisen, are being § 257 PUBLIC UTILITIES. 308 observed and carried out. When the water company came to estabHsh itself at Tahlequah, and when the parties invested their funds therein and took upon themselves the burdens involved, it must be assumed from the character of the project and the large in- vestment necessarily involved that they were aware that the great weight of judicial opinion in the United States was that, in the event of a failure on the part of the company to supply water on the occasion of the destruction of some taxpayer's property, that it would not be liable to him for the damages. ... In fol- lowing in this case, as we do, that which is the set- tled judgment of very nearly all courts of last resort, English, Federal, and state, we do so with the abid- ing conviction that it is the law, and is correctly de- clared." § 257. Impracticable to permit recovery. — This point is brought out to better advantage in the rea- soning of the court in the case of Ancrum v. Camden Water, L. & I. Co., 82 S. Car. 284, 64 S. E. 151, 21 L. R. A. (N. S.) 1029, decided in 1909, where the court held that the liabilities of the parties are limited by the express terms of the contract; and as the de- fendant company did not contract expressly to pay the losses by fire, although they might have been pre- vented if it had not neglected to furnish an adequate supply of water, it was accordingly not liable for such losses, for as the court says: "There is, at least, a strong presumption against a municipality undertak- ing to pay for such indemnity from the public rev- enue. . . . That a water company, assuming such liabilities, would have to demand very large compen- sation to have any profit, or even to save itself from bankruptcy, is most obvious. When it is asserted that a city has undertaken to pay for such indemnity 309 LIABILITY OF WATER COMPANIES. § 258 to its individual inhabitants, and that the water com- pany has assumed it, the contract rehed on ought to show clearly that such payment by the city and in- demnity by the water company were intended. The contract now under consideration contains no direct undertaking to respond to the individual inhabitant for fire loss." § 258. Liability would require prohibitive rates. — Because the liability for loss by fire would be so great a burden to the corporation undertaking to furnish water service that it would make the rates for such service for its ordinary use as a commodity excessive and to many prohibitive, the court in the case of Hone V. Presque Isle Water Co., 104 Maine 217, 71 Atl. 769, 21 L. R. A. (N. S.) 1021, decided in 1908, refuses to permit recovery on such a liability, for as the court said: "If now, instead of maintaining a system of waterworks of its own for the purpose of supplying water for the extinguishment of fires, a municipal cor- poration contracts with a water company to furnish water for that purpose, the numerous decisions of the courts of last resort in other states and in the Federal courts, as before indicated, are practically unanimous in holding that the water company is not liable to the individual owner of property which has been destroyed by fire by reason of the company's failure to furnish an adequate supply of water to extinguish fires. . . . But the proposition advanced by the plaintiffs would require water companies to assume, to some extent, the responsibility of insurers; and it does not satisfac- torily appear that such a doctrine would be more in harmony with considerations of public policy, or more consonant with reason and justice, than the estab- lished rule. Ample opportunities are already afforded for all property owners to obtain insurance against S 259 PUBLIC UTILITIES. 3 10 losses by fire, and the assumption of such risks by water companies, even in a modified degree, would result in double insurance, and largely increase water rates." § 259. Contract only with municipality to furnish water for fire protection. — The court in the case of Britton v. Green Bay, &c., W. W. Co., 8i Wis. 48, 51 N. W. 84, 29 Am. St. 856, decided in 1892, refuses recovery in a similar case because there was no con- tractual relation between the parties, and as the mu- nicipality could not be held liable on a similar under- taking, the corporation agreeing to render service under a contract with the municipality is not liable, for the duty to furnish fire protection still remained with the municipality and could not be shifted, and the only liabiHty of the water company under its con- tract was with the city, for as the court said: "It is not that the company shall supply the city and the inhabitants thereof with water jointly and for the same purposes and uses. The city and the inhabitants are by this general language joined together, but it is followed by distributive uses and purposes appropriate to each — to the city for public uses and consumption and for putting out fires, and to the inhabitants for private use and consumption, . . . This is in ac- cordance with the gravamen of the complaint, that the defendant company neglected to furnish the city water to put out the fire that consumed the plaintiff's property, and that the fire department of said city would have extinguished and prevented the spread of the fire but for the negligence and carelessness of the defendant. It is too plain for argument that the plaintiff has no contractual relations with the defend- ant in respect to being supplied with water to be used in putting out this fire. . . . This courf has held 311 LIABILITY OF WATER COMPANIES. § 260 that the city itself would not be liable in such a case, even on the strength of its duty to the public. Hayes V. Oshkosh, 33 Wis. 314, 14 Am. Rep. 760. Could the defendant have reasonably supposed that by this con- tract with the city it was contracting with or incur- ring liability to each one of its inhabitants, and that it might be sued by each one individually and sep- arately? If one enters into a contract with another, must he look to see who else might possibly in some way be remotely interested in it and injured by its breach? There would be no end to such a liability. . . . Is it a hardship that the plaintiff can not re- cover in such a case? So it is in case the city is sued for the neglect of its duty in not furnishing the neces- sary machinery for putting out fires. It is no greater hardship in one case than in the other. The duty of furnishing water and using it to put out fires still re- mains in the city. That duty has not been, if it could be, transferred to the company. The company is bound only by its contract, and liable to the city alone, as the other contracting party, on the contract." § 260. Express contract for water service for fire protection necessary. — The court in the case of Ukiah City V. Ukiah Water & Improvement Co., 142 Cal. 173' 75 P^c. 773, 64 L. R. A. 231, 100 Am. St. 107, decided in 1904, recognized that where the corporation contracted expressly for the furnishing of water serv- ice for fire protection either with an individual prop- erty owner or the municipality itself, it would be held liable for failure to furnish such service where this resulted in a fire loss, but held, however, that a con- tract must expressly provide for this service, the court saying: "Doubtless a water company may so bind itself by contract with a person to furnish him water for the extinguishment of fires as to render itself lia- § 26l PUBLIC UTILITIES. 312 ble for the value of property of such person destroyed by fire by reason of its failure to furnish him a suffi- cient supply of water. See N. O. & N. E. R. R. Co. V. Water Works Co., y2. Fed. 227; Knappman Co. v. Water Co. (N. J. Err. & App.), 45 Atl. 692, 49 L. R. A. 572, 25 Am. St. 536; Paducah L. Co. v. Water Supply Co., 89 Ky. 340, 12 S. W. 554, 13 S. W. 249, 7 L. R. A. yj. It may be assumed here that it is within the power of a municipality, as a property owner, to enter into such a contract with a water com- pany for the protection of the property which it owns as a legal individual; but it certainly needs something more than evidence showing an accepted service for general fire purposes to establish such a contract, and the evidence here shows nothing more." § 261. Rate for service indicates no liability for fire loss contemplated. — Another practical application of this rule based on the reason that such a liability was not contemplated by the parties in making the con- tract is furnished by the case of Milford v. Bangor R. & Electric Co., 106 Maine 316, 76 Atl. 696, 30 L. R. A. (N. S.) 526, decided in 1909, where the court re- fused to sustain the liability in favor of the munici- pality for loss of its own property by saying: "It certainly can not be reasonably claimed that, for the moderate consideration received by a water company under such a contract as the one actually made in the case at bar, it was within the contemplation of both parties that the water company had undertaken to make good the loss which would result from the de- struction of the plaintiffs' property by fire. It is the opinion of the court that the legal effect of the con- tract in this case can not be distinguished in any es- sential particular from that considered in Ukiah City V. Ukiah Water & Improvement Co., supra, and that 313 LIABILITY OF WATER COMPANIES. § 262 the verdict of the jury in this case, being against the law, can not be sustained." This same court, however, in a former opinion of the case of Milford v. Bangor R. & Electric Co., 104 Maine, 233, 71 Atl. 759, 30 L. R. A. (N. S.) 531, de- cided in 1908, said: "But the demurrer admits the truth of the plaintiffs' allegations that the defendant 'wrongfully, carelessly and negligently suffered and allowed the mains, pipes, and hydrants to be destitute of any current of water of sufficient pressure, force, and volume to be of any value or utility in extinguish- ing said fire, or any fire.' And the plaintiffs aver that the 'sole cause of the said loss and damage was the wrongful neglect of duty of said defendant.' . . . The conclusion is irresistible that, upon proof of the facts stated in the declaration, the defendant would be liable to the plaintiffs, in an appropriate action, for the damages caused by its negligence, in failing to perform a duty arising from its contractual relations with the plaintiffs." § 262. Interest of taxpayer and consumer in con- tract only incidental. — The last decision and one of the strongest expressions of the rule denying recovery to an insurance company which, having paid the loss, was subrogated in the place of the owner in an action for damages due to a fire loss against the water-works company failing to furnish an adequate water supply, is furnished in the case of German Alliance Ins. Co. V. Home Water Supply Co., 226 U. S. 220 57 L. ed. — decided December 2, 1912, where the court said: "From them it appears that the majority of Amer- ican courts hold that the taxpayer has no direct in- terest in such agreements, and therefore can not sue ex contractu. Neither can he sue in tort, be- cause in the absence of a contract obligation to § 263 PUBLIC UTILITIES. 3I4 him, the water company owes him no duty for the breach of which he can maintain an action ex deHcto. A different conclusion is reached by the Supreme Courts of three states, in cases cited and discussed in Mugge v. Tampa Waterworks Co., 52 Fla. 371, 6 L. R. A. (N. S.) 1 171, 120 Am. St. 207, 42 So. 81. They hold that such a contract is for the benefit of taxpayers, who may sue either for its breach, or for a violation of the public duty which was thereby as- sumed. . . . Here the city was under no obliga- tion to furnish the manufacturing company with fire protection, and this agreement was not made to pay a debt or discharge a duty to the Spartan Mills, but, like other municipal contracts, was made by Spartan- burg in its corporate capacity, for its corporate ad- vantage, and for the benefit of the inhabitants col- lectively. The interest which each taxpayer had therein was indirect — that incidental benefit only which every citizen has in the performance of every other contract made by and with the government under which he lives, but for the breach of which he has no private right of action." § 263. Recovery only by party to contract ex- pressly stipulated. — Where the contract therefore is made directly with the party suffering the loss from fire due to an inadequate water service, and where it expressly covers liability for such loss, and is not merely an agreement in general terms to furnish water for general fire purposes, there may be recovery for such loss by the party sustaining it, whether an individual inhabitant or the municipality itself, be- cause the parties to the agreement intended their con- tract to cover such a liability. In the case of Galena V. Galena Water Co., 132 111. App. 332, the action was brought by the municipality and the school directors 315 LIABILITY OF WATER COMPANIES. § 263 of a school district within the municipality to recover damages for the loss from fire sustained by the school building, due to a negligent breach of the contract by the defendant to furnish proper water protection. The second section of the ordinance providing for the water supply from the defendant company to the mu- nicipality and its inhabitants provided that "the water supplied by said works shall be good, clear water, of sufificient quantity for all domestic, fire and manufac- turing purposes within said city and suitable for those purposes," and a later section specifically provided for the pressure and capacity of the service and for the erection of a water standpipe and other fixtures nec- essary to secure such pressure as a protection against loss by fire. It was alleged in the case that the pro- tection from fire loss furnished by the fire department was adequate, but that the fire could not be extin- guished because of the failure of the defendant to fur- nish a sufficient supply of water for that purpose in accordance with the provision of its undertaking as stipulated in the ordinance. In the course of its opin- ion the court observed: "If, as alleged in the decla- ration, the water company failed to perform these pro- visions of the contract, and if that failure caused a loss by fire to property owned by the city, we see no good reason why the water company should not be respon- sible to the city, one of the parties to the contract, for the proximate results of such breach of contract." In this case on appeal to the Supreme Court of Illinois, as reported in 229 111. 128, 82 N. E, 421, de- cided in 1907, the court observed that: "Only one state, California (Town of Ukiah City v. Ukiah Water & Improvement Co., 142 Cal. 173, 75 Pac. 773. 64 L. R. A. 233. 100 Am. St. 107), has passed upon the right of a city to maintain an action against a private party or corporation with whom it has contracted for the I 263 PUBLIC UTILITIES. 316 construction and operation of water-works for the city and its inhabitants, to recover of the water company for a destruction of the city's property caused by a failure of the water company to furnish a sufficient supply of water." The court, however, did not decide the case on its merits for the reason that there was a misjoinder of the municipality and the school direct- ors, it appearing that the title to the building was owned by the municipality and only controlled and managed by the school directors, who were accord- ingly improperly joined as parties plaintiff in the case. CHAPTER XV. NEGLIGENCE OF MUNICIPAL PUBLIC UTILITIES. Section. 264. General liability for negligence. 265. Municipality liable for negligence except where act govern- mental. 266. Municipality not liable in providing fire protection. 267. Municipality liable in furnishing water privately. 26S. The two capacities of municipal corporations. 269. Liability under municipal ownership. 270. Liability under commission. 271. Municipality liable for damage from broken water main. 272. Municipality liable for water-works same as for streets. 273. No liability under statute where duty partly governmental. 274. No liability for public duty which is not commercial enter- prise. 275. Liability for negligent maintenance of water-works property. 276. Liable only for ordinary use of water. § 264. General liability for negligence. — With the exception of that class of cases concerned with the furnishing of a water supply for protection against fire loss, which is discussed in the preceding chapter, corporations providing municipal public utility service, including municipal corporations, are liable for injuries sustained from negligence in the operation of their plant in furnishing such service; and all such corpora- tions, including municipalities, are liable for their neg- ligence to the same extent and for the same reason that any individual or corporation is liable for injuries resulting from negligence except in those cases where the municipal corporation acts in its public govern- mental capacity. This distinction between the capac- 317 § 265 PUBLIC UTILITIES. 318 ity of a municipal corporation, while acting in its pub- lic or governmental capacity on the one hand, and in its private proprietary and commercial capacity on the other, which was discussed at the beginning of this treatise, must be kept in mind in this connection in order to determine the nature and the extent of the liability of the municipality for negligence. § 265. Municipality liable for negligence except where act governmental. — In the preservation of the public peace, the administration of justice, in attending to the public health and education and in providing protection against fire, the municipality acts as an agent of the state in the exercise of its public govern- mental power and is subject to the absolute control of the state and is not liable for injuries or loss sustained resulting from its negligence in the performance of such duties nor for its failure to perform them. In the erection and operation of gas works, water-works, electric light plants — in fact, in the providing of any municipal public utility service for the special benefit and advantage of the municipality and its citizens, the municipal corporation acts as a business concern and is liable in the same way and to the same extent as a private individual or corporation in rendering such service. Although the question of the liability of mu- nicipal corporations for the negligent operation of their municipal public utility plants has not been di- rectly decided in many cases, it is well established that in the ownership and operation of such systems and in the providing of their service for the individual inhabitants as well as for municipal purposes, the municipality is not performing a public governmental duty, but is acting in its private business capacity in the carrying on of a business enterprise for the bene- fit of its inhabitants and for profit and service to it- 319 NEGLIGENCE. §265 self, and is subject to the same liability as a private undertaking organized for the purpose.^ 1 CALIFORNIA.— Davoust v. Alameda, 149 Cal. 69, 84 Pac. 760, Cal. 453; Yik Hon v. Spring Valley Waterworks, 65 Cal. 619, 4 Pac. 5 L. R. A. (N. S.) 536; San Francisco Gas Co. v. San Francisco, 9 666. CONNECTICUT.— Hourigan v. Norwich, 77 Conn. 358, 59 All. 487; Judson v. Winsted, 80 Conn. 384, 68 Atl. 999, 15 L. R. A. (N. S.) 91. FEDERAL.— Guardian Trust & Deposit Co. v. Greensboro Water Supply Co., 115 Fed. 184; Winona v. Botzet, 169 Fed. 321, 23 L. R. A. (N. S.) 204. GEORGIA.— Augusta v. Mackey, 113 Ga. 64, 38 S. E. 339; Brown V. Atlanta, 66 Ga. 71; Freeman v. Macon Gas Light & W. Co., 126 Ga. 843, 56 S. E. 61, 7 L. R. A. (N. S.) 917; Love v. Atlanta, 95 Ga. 129, 22 S. E. 29, 51 Am. St. 64. IDAHO.— Eaton v. Weiser, 12 Idaho 544, 86 Pac. 541, 118 Am. St. 225. ILLINOIS.— Chicago v. Selz, &c., Co., 202 111. 545, 67 N. E. 386; Palestine v. Siler, 225 111. 630, 80 N. E. 345. INDIANA.— Aiken v. Columbus, 167 Ind. 139, 78 N. E. 657, 12 L. R. A. (N. S.) 416; Aschoff v. Evansville, 34 Ind. App. 25, 72 N. E. 279; Coy v. Indianapolis Gas Co., 146 Ind. 655, 46 N. E. 17, 36 L. R. A. 535; Fitch v. Seymour Water Co., 139 Ind. 214, 37 N. E. 9S2, 47 Am. St. 258; Ft. Wayne v. Christie, 156 Ind. 172, 59 N. E. 385; Ft. Wayne v. Patterson, 25 Ind. App. 547, 58 N. E. 747; Logansport v. Dick, 70 Ind. 65, 36 Am. Rep. 166. IOWA.— Bennett v. Mt. Vernon, 124 Iowa 537, 100 N. W. 349. KANSAS.— Topeka Water Co. v. Whiting, 58 Kans. 639, 50 Pac. 877, 39 L. R. A. 90. KENTUCKY.— Henderson v. Young, 119 Ky. 224, 26 Ky. L. 1152, S3 S. W. 583; Owensboro v. Knox's Admr., 116 Ky. 451, 25 Ky. L. 680, 76 S. W. 191; Terrell v. Louisville Water Co., 127 Ky. 77, 105 S. W. 100. MAINE.— Butler v. Bangor, 67 Maine 3S5. MASSACHUSETTS.— Aldworth v. Lynn, 153 ]Mass. 53, 26 N. E. 229, 10 L. R. A. 210; Connolly v. Waltham, 156 Mass. 368, 31 N. E. 302; Dickinson v. Boston, ISS Mass. 595, 75 N. E. 68, 1 L. R. A. (N. S.) 664; Fox v. Chelsea, 171 Mass. 297, 50 N. E. 622; Griffin v. Lawrence, 135 Mass. 365; Haley v. Boston, 191 Mass. 291, 77 N. E. 888, 5 L. R. A. (N. S.) 1005; Hand v. Brookline, 126 Mass. 324; Hill V. Boston, 122 Mass. 344, 23 Am. Rep. 332; Lynch v. Springfield, 174 Mass. 430, 54 N. E. 871; Powers v. Fall River, 168 Mass. 60, 46 N. E. 408; St. Germain v. Fall River, 177 Mass. 550, 59 N. E. 447; Sheehan V. Boston, 171 Mass. 296, 50 N. E. 543; Stock v. Boston, 149 Mass, § 265 PUBLIC UTILITIES. ^20 As Stated by the court in the case of Yazoo City V. Birchett, 89 Miss. 700, 42 So. 569, decided in 1906, "When a city embarks in the management of any 410, 21 N. E. 871, 14 Am. St. 430; Stoddard v. Winchester, 157 Mass. 567, 32 N. B. 948; Watson v. Neeham, 161 Mass. 404, 37 N. E. 204, 24 L. R. A. 287. MICHIGAN.— Brink v. Grand Rapids, 144 Mich. 472, 108 N. W. 430; Miller v. Kalamazoo, 140 Mich. 494, 103 N. W. 845. MINNESOTA.— Eisenmenger v. St. Paul Water Comrs., 44 Minn. 457, 47 N. W. 156; Megins v. Duluth, 97 Minn. 23, 106 N. W. 89; Wiltse V. Red Wing, 99 Minn. 255, 109 N. W. 114. MISSISSIPPI.— Jackson v. Anderson, 97 Miss. 1, 51 So. 896; Yazoo City v. Birchett, 89 Miss. 700, 42 So. 569. MISSOURI.— Boothe v. Fulton, 85 Mo. App. 19; Bullmaster v. St. Joseph, 70 Mo. App. 60; Burnes v. St. Joseph, 91 Mo. App. 489; Carey v. Kansas City, 187 Mo. 715, 86 S. W. 438, 70 L. R. A, 65; Dammann v. St. Louis, 152 Mo. 186, 53 S. W. 932; Henderson v. Kansas City, 177 Mo. 477, 76 S. W. 1045; Rice v. St. Louis, 165 Mo. 636, 65 S. W. 1002. NEBRASKA.— Reed v. Syracuse, 83 Nebr. 713, 120 N. W. 180. NEW HAMPSHIRE.— Edgerly v. Concord, 62 N. H. 8; Grimes V. Keene, 52 N. H. 330: Gross v. Portsmouth, 68 N. H. 266, 33 Atl. 256, 73 Am. St. 586; Lockwood v. Dover, 73 N. H. 209, 61 Atl. 32; Rhobidas v. Concord, 70 N. H. 90, 47 Atl. 82, 51 L. R. A. 381, 85 Am. St. 604. NEW YORK.— Board of Rapid Transit R. Comrs., In re, 197 N. Y. 81, 90 N. E. 456, 36 L. R. A. (N. S.) 647, 18 Ann. Cas. 366; Brusso V. Buffalo, 90 N. Y. 679; Dunstan v. New York, 91 App. Div. 355, 86 N. Y. S. 562; Ettlinger v. New York, 58 Misc. Rep. 229, 109 N. Y. S. 44; Kelsey v. New York, 123 App. Div. 381, 107 N. Y. S.'1089; Max- milian v. New York, 62 N. Y. 160, 20 Am. Rep. 468; McAvoy v. New York, 54 How, Pr. 245; Messersmith v. Buffalo, 138 App. Div. 427, 122 N. Y. S. 918; Missano v. New York, 160 N. Y. 123, 54 N. E. 744; Morton v. New York, 140 N. Y. 207, 35 N. E. 490, 22 L. R. A. 241; New York v. Bailey, 2 Denio 433; Oakes Mfg. Co. v. New York, 206 N. Y. 221, 749; 99 N. E. 540, 100 N. E. 414, 42 L. R. A. (N. S.) 286; Pettengill v. Yonkers, 116 N. Y. 558, 22 N. E. 1095, 15 Am. St. 442; Quill V. New York, 36 App. Div. 476, 55 N. Y. S. 889; Seward v. Rochester, 109 N. Y. 166, 16 N. E. 348; Southeast v. New York, 96 App. Div. 598, 89 N. Y. S. 630; Terry v. New York, 8 Bosw. 504; Wannamaker v. Rochester, 44 N. Y. St. 45, 17 N. Y. S. 321. NORTH CAROLINA.— Fisher v. New Bern, 140 N. Car. 506, 53 S. E. 342, 5 L. R. A. (N. S.) 542; Mitchell v. Raleigh Electric Co., 129 N. Car. 166, 39 S. E. 801, 55 L. R. A. 398, 85 Am. St. 735. OHIO.— Ironton v. Kelley, 38 Ohio St. 50. 321 NEGLIGENCE. § 266 Utility for profit, it is liable, or not liable, by precisely the same rules applicable to private corporations or individuals conducting such enterprises." § 266. Municipality not liable in providing fire pro- tection. — The distinction which it is necessary to make in determining the liability of the municipality in this connection between the two capacities of municipal corporations is well pointed out in the case of Terrell V. Louisville Water Co., 127 Ky. yy, 105 S. W. 100, decided in 1907, where the court, in holding that the furnishing of fire protection only and the operation OKLAHOMA.— Norman v. Ince, 8 Okla. 412, 58 Pac. 632. OREGON.— Esberg Cigar Co. v. Portland, 34 Ore. 282, 55 Pac. 961, 43 L. R. A. 435. PENNSYLVANIA.— Baker v. North East, 151 Pa. 234, 24 Atl. 1079; Glase v. Philadelphia, 169 Pa. 489, 32 Atl. 600; Rumsey v. Philadelphia, 171 Pa. 63, 32 Atl. 1133; Smith v. Philadelphia, 81 Pa. 38, 22 Am. Rep. 731; Western Savings Fund Society v. Philadelphia, 31 Pa. 183, 72 Am. Dec. 730. RHODE ISLAND.— Aldrich v. Tripp, 11 R. I. 141, 23 Am. Rep. 434. SOUTH CAROLINA.— Irvine v. Greenwood, 89 S. Car. 511, 72 S. E. 22S. 36 L. R. A. (N. S.) 363. SOUTH DAKOTA.— Wilson v. Mitchell, 17 S. Dak. 515, <»7 N. W. 741, 65 L. R. A. 168, 106 Am. St. 784. TEXAS.— Lenzen v. New Braunfels, 13 Tex. Civ. App. 335, 35 S. W. 341; Paris v. Tucker (Tex. Civ. App.) 93 S. W. 233; Ysleta v. Babbitt, 8 Tex. Civ. App. 432, 28 S. W. 702. UNITED STATES.— Guardian Trust & Deposit Co. v. Fisher, 200 U. S. 57, 50 L. ed. 367. UTAH.— Brown v. Salt Lake City, 33 Utah 222, 93 Pac. 570, 14 L. R. A. (N. S.) 619; Levy v. Salt Lake City, 3 Utah 63, 1 Pac. 160. VERMONT.— Bragg v. Ruthland, 70 Vt. 606, 41 Atl. 578; Stock- well V. Ruthland, 75 Vt. 76, 53 Atl. 132; Welsh v. Ruthland, 56 Vt. 228, 48 Am. Rep. 762; Wilkins v. Rutland, 61 Vt. 336, 17 Atl. 735. WASHINGTON.— Collensworth v. New Whatcom, 16 Wash. 224, 17 Pac. 439; Fidelity & C. Co. v. Seattle, 16 Wash. 445, 47 Pac. 963. WISCONSIN.— Kuehn v. Milwaukee, 92 Wis. 263, 65 N. W. 1030; Piper V. Madison, 140 Wis. 311, 122 N. W. 730, 25 L. R. A. (N. S.) 239, 133 Am. St. 107S; State Journal Printing Co. v. Madison, 148 Wis. 396, 134 N. W. 909. 21— Pub. Ut. § 267 PUBLIC UTILITIES. 322 of its fire department is the discharge of a public gov- ernmental duty for which the municipality is not liable in damages in case of negligence, says : "In furnish- ing to its citizens fire protection, the city is discharg- ing a governmental function. It is weW settled that the city is not responsible in damages for the negli- gence of its firemen. The same principle must apply to the other agencies employed by the city as part of its fire department. The city is not responsible to a property owner if one of its fire engines is by negli- gence allowed to get out of repair, and by this means his property is lost. The thing that was out of re- pair here was a valve at one place, and at another the top of the cistern was so covered up with snow and ice that it took the firemen some ten minutes to locate and open it. In building these cisterns the city acted in a governmental capacity, and it is no more liable to the property owner for their being out of order than it would be if the fire chief had been negligent in responding promptly to the alarm, or in his efforts to put out the fire after he arrived on the scene." § 267. Municipality liable in furnishing water pri- vately. — Where, however, the municipality undertakes to provide water service or any other municipal public utility to the individual inhabitants for their private domestic use, although this service is furnished in con- nection with the providing of a public service and the performance of a governmental duty, the municipality becomes liable for negligence in providing service for the private domestic purposes for the reason that in doing so it acts in the same capacity as the private corporation or individual undertaking to render such service for the purpose of realizing a revenue or some special benefit or advantage for itself and its inhab- itants. As the court in the case of Brown v. Salt Lake 323 NEGLIGENCE. § 268 City, 33 Utah 222, 93 Pac. 570, 14 L. R. A. (N. S.) 619, decided in 1908, says: "It may be conceded, for the purposes of this discussion, that, in so far as the <:ity provides apparatus and water for fire protection, it acts in a governmental capacity. The city, how- ever, was not required to assume the duty of furnish- ing its inhabitants water for all uses and purposes. When it acquired property, and constructed the sys- tem of waterworks for that purpose, however, it did so voluntarily, and with a view of deriving revenue therefrom. It therefore acquired, owned, and con- ducted its water system and the property connected therewith, except as stated above, as any other private corporation or owner would, and is liable in like man- ner and to the same extent as such owners would be." § 268. The two capacities of municipal corpora- tions. — The case of Aiken v. Columbus, 167 Ind. 139, 78 N. E. 657, 12 L. R. A. (N. S.) 416, decided in 1906, makes this distinction between the two capacities of municipal corporations and indicates the liability of municipalities in furnishing electric light for private domestic purposes as follows: "Speaking in general terms, it may be said that the duties which municipal- ities perform with respect to the public health, chari- ties, and schools, in the protection of property against fire, and in the maintenance of the peace, are ordinarily regarded as performed as representatives of the gen- eral public; and in such cases cities and towns enjoy the same immunity from actions ex delicto as does the state. . . Coming to the purpose for which the power to erect an electric light plant was granted, it must be admitted that public lighting serves a gov- ernmental purpose, at least in an incidental way, in that it is a check upon crime and immorality; but the element of local convenience to the inhabitants, and § 269 PUBLIC UTILITIES. 324 the extent to which such hghts protect the municipal treasury against damage suits, because of streets which have become temporarily or permanently unsafe, af- ford a very clear basis for the assertion that such lights are a municipal utility. , . . We are satisfied that we are within the authorities in holding, as we do, that a city or town is answerable ex delicto for any- direct invasion of the rights of third persons in the management of its public-lighting system." In one of the leading cases distinguishing between the two capacities of municipal corporations and de- fining the liability of the municipality as determined by this distinction, the court permitted recovery for the negligent killing of a party by the municipality in connection with the operation of its electric light plant, which was used to light the city and to provide light to its inhabitants for domestic purposes. As the court in this case of Davoust v. Alemeda, 149 Cal. 69, 84 Pac. 760, 5 L. R. A. (N. S.) 536, decided in 1906, said: "Such a corporation (i. e., municipal), however, has a double character — governmental, and also proprie- tary and private — and, when acting in the latter capac- ity, its liabilities arising out of either contract or tort are the same as those of natural persons or private corporations. . . . And that the respondent, in maintaining and operating its electric plant, was ex- ercising, not its governmental functions, but its pro- prietary and private rights, is entirely clear. The authorities uniformly hold that the duties arising from the operation of gas works, electric works, water- works, and such like public utilities, are of the private nature which is required to make municipal corpora- tions liable for damages caused by negligence therein." § 269. Liability under municipal ownership. — ^That the municipality is liable for negligence because in 325 NEGLIGENCE. § 2/0 the management of its property which is used for its own benefit or profit it is exercising its proprietary and business functions for the purpose of realizing a profit from the service rendered was decided in 1906, also in the case of Eaton v. Weiser, 12 Idaho 544, 86 Pac. 541, 118 Am. St. 225, where the court said: "The city was engaged in a private enterprise, namely, that of manufacturing and selling electric light to its in- habitants. Such an engagement or enterprise is not one of the public governmental duties of municipali- ties. Municipal ownership in the usual and common acceptation of that term must of necessity carry with it the same duty, responsibility, and liabilities that are imposed upon and attach to private owners of similar enterprises. If the city owns and operates an electric light system, and sells light to its inhabitants, there is no reason why it should not be held to the same responsibility for injuries received on account of its negligent conduct of the business as would a private individual be who might be running an opposition plant in the same municipality and selling light to the citizens thereof. There is abundant authority to be found in the books in support of this position." § 270. Liability under commission. — Nor is the municipality any less liable in case the service is fur- nished through a commission created by the state as the means of providing the service by the municipality because the commission as an instrumentality of the state is acting in its ministerial or corporate character in the management of property used for its own bene- fit and discharging powers and duties voluntarily as- sumed for its own advantage. And while the munici- pality in providing itself with electric light for the purpose of illuminating its streets and other public places is generally regarded as performing a govern- § 271 PUBLIC UTILITIES. 326 mental duty in the exercise of its police power, if in addition thereto it also provides service for private and domestic uses, the municipality to that extent stands on the same footing as w^ould any private in- dividual or corporation in the exercise of similar fran- chise rights and in the performance of like duties, for as the court in the case of Owensboro v. Knox's Admr., ii6 Ky. 451, 25 Ky. L. 680, 76 S. W. 191, decided in 1903, says: "The city, as a body corporate, has become the ovv^ner and operator of a plant for the gen- eration and distribution of a most subtle and danger- ous agency. The degree of care, prudence, and over- sight required of it in the operation of the plant ought to be the same as if it were operated by an individual. The law, in allowing damages for a neglect of such duties, is not primarily to punish the negligent opera- tor, but to protect and to compensate the injured per- son. If the corporation, whether municipal or pri- vate, embarks in a business so menacing to life and safety, it ought to use that degree of care that is commensurate with the danger it creates." § 271. Municipality liable for damage from broken water main. — In the case of State Journal Printing Co. V. Madison, 148 Wis. 396, 134 N. W. 909, decided in 1912, where the action was for damages resulting from water escaping from a broken main in the water system of the defendant city, which inundated the cellar of the plaintiff, the court permitted a recovery for the damages for the reason that: "In furnishing water to private consumers, the city is acting in a private business capacity, and not in its governmental capacity, and it is bound to exercise ordinary care, namely, that reasonable degree of care in view of the dangers involved which the great mass of ordinarily prudent persons engaged in the same or similar busi- 327 NEGLIGENCE. § 272 ness would and do exercise under like circumstances. For any failure to exercise this degree of care prox- imately causing injury to another, the city is liable to the same extent that a private person or a corpora- tion operating a water-works system is liable; no more and no less." § 272. Municipality liable for water-works same as for streets. — The case of Lenzen v. New Braunfels, 13 Tex. Civ. App. 335, 35 S. W. 341, decided in 1896, holds the municipality liable for negligence in the op- eration of a water-works system for the same reason that liability is established against it in the mainte- nance of its streets and sewers and other like under- takings because this is concerned with a business un- dertaking on the part of the municipality, and as the court says: "It is admitted, with only a few excep- tions, that a municipal corporation that engages in a business for its gain and advantage, although the pub- lic are served in its performance, will be held liable, as an individual, for its actionable negligence in the conduct of its business. This is even admitted in those courts that adopt the extreme rule of the limited liability of municipal corporations. There can be no question, under the averments, but that these works are a business concern carried on by the city. It is as much so as any work or enterprise that a city may engage in." § 273. No liability under statute where duty partly governmental. — The case of Irvine v. Green- wood, 89 S. C. 511, 72 S. E. 228, 36 L. R. A. (N. S.) 363. decided in 191 1, seems to be contrary to the gen- eral rule in that the court refuses to make the distinc- tion between the public governmental function and the private business capacity of the municipality in pro- § 274 PUBLIC UTILITIES. 328 viding municipal public utility service. This decision, however, is based upon the peculiar statutory provi- sion, for as the court says: "Having in view the doc- trine long ago laid down by the courts of this state, that municipal corporations are liable for torts only when made so by legislative enactment, the general assembly has by law expressed its will as to the extent of the liability of such corporations for torts. The courts are therefore bound to restrict the liabiHty to the terms of the statute; and the statute authorizes no distinction between governmental and public du- ties, and supposed private municipal enterprises. . . . The lighting of the streets of a city is universally rec- ognized as a public and governmental function. It can not alter the case that the same plant which sup- plied electricity for the street light also supplied the electricity for the lights in private dwelHngs and busi- ness houses." § 274. No liability for public duty which is not commercial enterprise. — By way of further illustrating the distinction between the two capacities of municipal corporations in another connection the case of Haley v. Boston, 191 Mass. 291, yy N. E. 888, 5 L. R. A. (N. S.) 1005, decided in 1906, furnishes a different application of this principle of municipal liability in connection with an injury sustained by the negligence of the municipality in collecting ashes from its citi- zens for profit. In refusing recovery for such an in- jury because the work which was being performed by the municipahty was of a public nature the court said: "The general rule is well settled in this common- wealth that a city or town which Voluntarily under- takes work of a commercial character, from which it seeks to derive revenue or other special advantage, is liable like a private employer for the negligence 329 NEGLIGENCE. § 275 of its servants or agents who are engaged therein. . . . But these exceptions never had been held in this commonw^ealth to affect the general rule that a city or town is not to be held to any liability for the negligence of persons employed by it in work merely of a public character required or authorized to be done and undertaken without compensation in the performance of a public duty. ... It becomes material, then, to determine what is the character of this work of removing ashes from dwelling houses; and it seems to us to be work of a public nature. It is provided by statute that a town may contract for the disposal of its garbage, refuse, and offal. . . . In this case it appears that at the time of the accident the cart in question was removing only dwelling house ashes." § 275. Liability for negligent maintenance of water-works property. — As furnishing a still different distinction of the capacities of municipal corporations and the liability depending thereon, the case of Win- ona V. Botzet, 169 Fed. 321, 23 L. R. A. (N. S.) 204, decided in 1909, is of value. The decision which states the necessary facts is in the following language: "The duty was imposed upon the city to exercise care to render this highway reasonably safe for travelers, and it blew a whistle within no feet of it, which made it unsafe for travelers, and which constituted a public nuisance within the express terms and plain meaning of this statute. ... A city has two classes of powers — the one, legislative, public, in the exercise of which it acts as a political subdivision and delegate of the state and governs its people; the other, private, corporate business, in the exercise of which it acts for the advantage of the inhabitants of the city and of itself as a legal personality. . . . But for damages § 276 PUBLIC UTILITIES. 33O caused by the wrongful acts and omissions of its offi- cers and agents within the scope of their authority in the exercise of its powers of the latter class, such as its power to build and maintain bridges, streets, and highways, the power to construct and keep in repair sewers . . . and the power to build, main- tain, and operate water-works to furnish water to the city and to its inhabitants for compensation (Wiltse V. Red Wing, 99 Minn. 255, 260, 109 N. W. 114; Lynch v. Springfield, 174 Mass. 430, 54 N. E. 871), the city is liable to the same extent as a private in- dividual or corporation under like circumstances. The power of a city to construct and operate water-works is not a political or governmental, but a private or cor- porate, power, granted and exercised, not to enable it to control its people, but to authorize it to furnish to itself and its inhabitants water for their private advantage." § 276. Liable only for ordinary use of water. — This distinction between the two capacities of municipal corporations which determines their liability for negli- gence and indicates a further practical limitation of such a liability is well defined in the recent case of Oakes Mfg. Co. v. New York, 206 N. Y. 221, 99 N. E. 540, 100 N, E. 414, decided October i, 1912, where the court denied recovery for negligence against the de- fendant for furnishing water to the plaintiff that was im- pure, because the plaintiff knew of its impurity which only affected its use for manufacturing purposes, which was a peculiar one, and because the supply was health- ful and satisfactory for ordinary domestic uses. In the course of its opinion the court said: "But in the present case, when in accordance with the powers conferred on it the city undertook to maintain a municipal water system and to supply to private con- 331 NEGLIGENCE. §276 sumers at a fixed compensation, it was not acting in such [governmental] capacity as above stated. It entered on an enterprise which involved the ordinary- incidents of a business wherein was sold that which people desired to buy which might become a source of profit, and under these circumstances it became liable for breach of contract or for negligence as the proprietor of a private business might become. Max- milian v. Mayor, &c. of N. Y., 62 N. Y. 160, 20 Am. Rep. 468; Matter of Rapid Transit Commissioners, 197 N. Y. 81, 90 N. E. 456, 36 L. R. A. (N. S.) 647, 18 Ann. Cas. 366; Messersmith v. Buffalo, 138 App. Div. 427, 122 N. Y. S. 918; Piper v. Madison, 140 Wis. 311, 122 N. W. 730, 25 L. R. A. (N. S.) 239, 133 Am. St. 1078; Lynch v. Springfield, 174 Mass. 430, 54 N. E. 871. . . . There was no contract between the defendant and the plaintiff, whereby the former undertook to supply proper water and of which it made a breach for which recovery can now be had. Moreover, this is an action of negligence and not for breach of contract. Plaintiflf is not entitled to recover on account of the impure water which has been sup- plied to it within the principles of those cases which recognize the rule of liability where a municipality negligently supplies impure water to a consumer who in ignorance of its quality uses the same and sufifers. In this case it appears without dispute that the plain- tiflf understood the character of the water which was being supplied to it, and it could not voluntarily use it with knowledge of its impurities and then recover damages because of them." CHAPTER XVI. MUNICIPAL PUBLIC UTILITY SYSTEMS AS ADDITIONAL SERVITUDES. Section. 277. Equipment of municipal public utilities in highways. 278. Public purposes for which highways dedicated. 279. Purposes include communication and transportation. 280. Purposes not limited to those contemplated at dedication. 281. Equipment for local service no additional servitude. 282. Street railways and pipe lines local not additional servitude? 283. Interurban railway system. 284. Tendency to extend municipal utility service. 285. Streets and other highways not distinguished. 286. Expedient to encourage extensions. 287. Decisions conflicting. 288. Communication by wire in lieu of travel. 289. Public use not additional servitude. 290. Public rights paramount after dedication. 291. Public entitled to underground use of streets. 292. Travel in streets relieved by telephone. 293. Lighting system no additional servitude. 294. Modern improvements included in "public purpose." 295. Necessary underground conduits included. 296. Streets and other highways formerly distinguished. 297. Distinction no longer obtains. 298. Steam, street and interurban railways distinguished. 299. Interurban railway no additional servitude. 300. Telephone lines additional servitudes in Illinois. 301. Light being necessity is not additional servitude. 302. Telephone system held additional servitude in New York. 303. Street railway system held additional servitude in New York. 304. Underground rapid transit system additional. 305. Telegraph and telephone compared. 306. Telephone new method of subjecting streets to old use. 307. Use for public and private service distinguished. 308. Nature of use generally not distinguished. 309. Street and rural highway not distinguished for telephone. 310. Tendency of decisions progressive and practicable. 332 333 ADDITIONAL SERVITUDES. § 277 Section. 311. Modern inventions for or in lieu of travel included in public purposes. 312. Conservative decisions find additional servitudes. 313. Original dedication made the test. 314. Ownership of fee in street not considered. 315. Interurban in rural highway held additional servitude. § 277. Equipment of municipal public utilities in highways. — The courts are not agreed as to whether an additional servitude or burden is imposed upon the abutting property owners by placing the equipment of municipal public utility plants in the streets or other highways. In different jurisdictions the courts have taken diametrically opposite positions in determining whether the installation of poles, wires, pipe lines and tracks along the streets or highways amounts to such a taking or damaging of the property of the abutting owner as to entitle him to compensation under the constitution for the reason that a servitude is created in addition to those contemplated or included in the original grant or dedication for the use of the pubHc. The courts are agreed that by the exercise of the right of eminent domain the municipal public utility may acquire such rights in the streets and highways which would permit the installation and operation of its plant for the purpose of furnishing its service because the use is a public one. The controversy, however, arises in determining whether, within the constitutional provision prohibiting the taking or dam- aging of property for public use without just com- pensation to the owner, the municipal public utility may install its system and use the streets and high- ways without payment to the owner of the abutting property. § 278. Public purposes for which highways dedi- cated. — The determination of this question by the § 279 PUBLIC UTILITIES. 334 courts in diametrically opposite ways results from their different definitions of what is included in the "public purposes" for which the streets and highways are dedicated. Those courts holding that the pur- poses covered by the dedication are only the right of the public actually to pass over and along the territory- included within the limits of the street or highway in the exercise of their right of locomotion and transpor- tation in a physical tangible manner decide that the installation of poles, wires, and pipe lines for the trans- portation of heat, light and the communication of intelligence by wire constitutes an additional servitude or burden for which, under the constitutional guaranty, the abutting property owner is entitled to be com- pensated. This is the conservative position which is taken by several jurisdictions of well-recognized au- thority and is based on a strict literal definition of the purposes and uses for which the streets and high- ways are dedicated. § 279. Purposes include communication and trans- portation. — The increasing weight of authority, how- ever, and it would seem the more progressive reason- ing, of the remaining jurisdictions define the purposes for which the streets and highways are dedicated so as to comprehend not only those actually in the minds of the parties at the time of the dedication and for actual physical travel and transportation, but also in- sist that, on acquiring the use of the streets and highways for public purposes and in the payment made to the abutting property owner, the public has the right to use the territory thus acquired in any manner and for any purpose necessary for its travel and trans- portation as well as for the additional purposes of communication and of furnishing the public with the 335 ADDITIONAL SERVITUDES. § 280 conveniences of public utilities as afforded by modern invention; thereby permitting more of the pubHc to have and enjoy the benefits and advantages of munici- pal public utilities as they may be or become available. § 280. Purposes not limited to those contemplated at dedication. — These courts refuse to be limited to the purposes originally contemplated at the dedication or to admit that locomotion is the only use intended to be made of the streets and highways, but insist that such uses include any and all improved methods for the transmission of intelligence as well as for actual travel, for which the messages sent by wire serves as a substitute with the net result of very materially relieving the actual travel and transportation in the street and highway. For the reason therefore that any such additional uses which take advantage of new methods that may be devised or invented for trans- portation or communication are properly included in the dedication of the street or highway to the public use, for all of which the abutting property owner receives payment at the time of the dedication, and for the further reason that the substitution of such improved methods of communication as the telegraph or telephone as well as the enjoyment of any other modern municipal public utility service actually re- lieves the street and highway from traffic and ma- terially increases and makes more available the ad- vantages of living in our present-day municipalities, the increasing weight of authority refuses to find that an additional servitude is created by virtue of the in- stallation of the necessary equipment for the operation of the municipal public utility system. § 281. Equipment for local service no additional servitude, — In determining for what uses the streets § 282 PUBLIC UTILITIES. 336 and highways are dedicated to the pubHc with the view of deciding whether an additional servitude is created by the installation of any particular munici- pal pubHc utility, one of the most important factors is the nature and extent of the service rendered or the locality served. Where the service rendered is en- tirely, or for the most part, local so that the adjoining property owners and other inhabitants living adjacent to the street or highway constitute the class or the majority of the customers served, the courts for that reason are inclined to hold that no additional servitude or burden is imposed by the installation of the equip- ment necessary to render such service. § 282. Street railways and pipe lines local not addi- tional servitudes. — Under this distinction, as will ap- pear in a number of the cases hereafter noted for the purpose of discussing this principle of additional servi- tudes, the courts have generally refused to find that the operation of a street railway system rendering local service or the laying of pipe lines for the purpose of providing municipal public utiHty service to the inhabitants of the municipality creates any additional servitude or burden; and that the adjoining property owner can only recover for any special damages actu- ally sustained by him as distinguished from other neighboring property owners. For the reason that the purpose is a public and a necessary one, the courts refuse to hold that the installation of the necessary equipment to furnish a lighting system for the purpose of lighting the streets and highways is an additional servitude, although several hold that, where the service is provided for private purposes, an additional servitude is created for which the abutting property owner is entitled to be compensated. 337 ADDITIONAL SERVITUDES. § 283 § 283. Interurban railway system. — The interur- ban system of transportation necessitates making the distinction between local service and foreign or non- resident service with the effect in the more conserva- tive jurisdictions that the installation of such a system is held to constitute an additional servitude for the reason that the service rendered is not primarily, nor for the most part, local. An increasing number of courts of the more progressive jurisdictions, however, insist that no additional servitude is created in the use of the street or highway by the interurban system for the reason that the dedication was not merely for local use, but that the system of highways, including the streets, is under the control of the state and is dedicated for the general use of all the people of the state; that the establishing of better facilities of com- munication between the urban and rural population is for their mutual advantage and that, as they together constitute the public for whose use and general wel- fare highways are dedicated and communication estab- lished, the use is not merely local but general in scope. But as the steam railway provides almost exclusively for through rather than local traf^c and also creates a more serious burden and exclusive use of the land which it occupies, the courts agree in holding that such a user constitutes an additional servitude. § 284. Tendency to extend municipal utility ser- vice. — For the reason that the street as well as the interurban electric system facilities travel and because the telephone and telegraph system facilitates com- munication by wire, thereby dispensing with the neces- sity of travel, and because it is desirable that such other municipal public utility plants as furnish water, heat and light be placed within the reach of all, the tendency of the authorities seems to be to encourage 22— Pub. ut. § 285 PUBLIC UTILITIES. 338 the extension of these conveniences not only to the inhabitants of the municipality but also to the rural population by defining the term "public use," for which the highway is dedicated, so comprehensively as to permit of the installation of the different systems fur- nishing these utilities without any payment as for an additional servitude. § 285. Streets and other highways not distin- guished. — Other authorities, however, still require pay- ment to be made for such uses of the highway on the theory that they do constitute additional servitudes that were not contemplated at the time of the dedica- tion nor fairly included within the purposes of the dedication. The distinction which was formerly made between the street and the rural highway as to the uses for which they were respectively dedicated no longer obtains as a general principle, and some of the leading cases which find that the installation of the equipment necessary to furnish the public utility ser- vice constitutes an additional servitude admit that there is no reason for distinguishing between the mu- nicipal and the rural highway. Nor is the distinction now recognized which formerly obtained between the use of the street where the fee is in the municipality and where it remains in the abutting property owner because the ownership of the fee does not change or necessarily affect the purposes for which the streets or highways are dedicated. § 286. Expedient to encourage extensions. — Fin- ally as our general highway system is provided and controlled by the state in the general interest and for the benefit of its population at large for the purpose of transportation and communication, it would seem that from a practical standpoint any reasonable use 339 ADDITIONAL SERVITUDES. § 287 of the highway should be permitted which is public in its nature and has for its purpose the extension of one or more of the modern conveniences afforded by- municipal public utilities to the public or a larger part of it, and, as it is to the general interest of the public that these conveniences be extended, public policy or the general welfare would justify the courts in holding that not only is no additional servitude thereby created, but rather that additional facilities are afforded to the abutting property owner and the public except in those cases where there is no local benefit or advantage to the abutting property owner because the service is not local, in which cases because of such fact the courts very properly find that an addi- tional servitude is imposed for which compensation should be made. § 287. Decisions conflicting. — However, as before stated, the authorities are by no means agreed as to what constitutes an additional servitude in connection with the establishment and operation of municipal public utilities, and because of this conflict in the authorities they are referred to and discussed at length for the purpose of indicating and explaining as far as possible the attitude of the different courts on this important phase of the law and its practical applica- tion concerning municipal public utilities.^ 1 ALABAMA.— Hobbs v. Long Distance Tel. & T. Co., 147 Ala. 393, 41 So. 1003, 7 L. R. A. (N. S.) 87; Southern Bell Tel. Co. v. Francis, 109 Ala. 224, 19 So. 1, 31 L. R. A. 193, 55 Am. St. 930; Birm- ingham Ry. Light & Power Co. v. Smyer (Ala.), 61 So. 354. CALIFORNIA.— Gurnsey v. Northern California Power Co., 160 Cal. 699, 117 Pac. 906, 36 L. R. A. (N. S.) 185. FEDERAL.— Kester v. Western Union Tel. Co., 108 Fed. 926; Pacific Postal Tel. Cable Co. v. Irvine, 49 Fed. 113; Postal Tel. Cable Co. v. Southern R. Co., 89 Fed. 190. ILLINOIS.— Board of Trade Tel. Co. v. Barnett, 107 111. 507, 47 Am. Rep. 453; Burrall v. American Tel. & T. Co., 224 111. 266, 79 N. E. 705; Carpenter v. Capital Electric Co., 178 111. 29. 52 N. E. 973, § 288 PUBLIC UTILITIES. 340 § 288. Communication by wire in lieu of travel. — Many decisions hold that no additional servitude is 43 L. R. A. 645. 69 Am. St. 286; McWethy v. Aurora Electric Light & Power Co., 202 III. 218, 67 N. E. 9; Postal Tel. Cable Co. v. Eaton, 170 111. 513, 49 N. E. 365, 39 L. R. A. 722, 62 Am. St. 390. INDIANA.— Coburn v. New Tel. Co., 156 Ind. 90, 59 N. E. 324, 52 L. R. A. 671; Eichels v. Evansville St. R. Co., 78 Ind. 261, 41 Am. Rep. 561; Kincaid v. Indianapolis Natural Gas Co., 124 Ind. 577, 24 N. E. 1066, 8 L. R. A. 602, 19 Am. St. 113; Kinsey \r. Union Traction Co., 169 Ind. 563, 81 N. E. 922; Magee v. Overshiner, 150 Ind. 127, 49 N. E. 951, 40 L. R. A. 370, 60 L. R. A. 426, 65 Am. St. 358; Mordhurst V. Ft. Wayne & S. W. Traction Co., 163 Ind. 268, 71 N. E. 642, 66 L. R. A. 105, 103 Am. St. 222; Pittsburg, C, C. & St. L. R. Co. v. Muncie & Portland T. Co., 174 Ind. 167, 91 N. E. 600. KANSAS.— McCann v. Johnson County Tel. Co., 69 Kans. 212, 76 Pac. 870. KENTUCKY.— Cumberland Tel. & T. Co. v. Avritt, 120 Ky. 34, 85 S. W. 204. LOUISIANA.— Irwin v. Great Southern Tel. Co., 37 La. Ann. 63. MARYLAND.— Chesapeake & P. Tel. Co. v. Mackenzie, 74 Md. 36, 21 Atl. 690, 28 Am. St. 219; Telegraph Co. v. Smith (Md.), 18 Atl. 910, 7 L. R. A. 200. MASSACHUSETTS.— Cheney v. Barker, 198 Mass. 356, 84 N. E. 492; New England Tel. & T. Co. v. Boston Terminal Co., 182 Mass. 397, 65 N. E. 835; Pierce v. Drew, 136 Mass. 75, 49 Am. Rep. 7; Sears V. Crocker, 184 Mass. 586, 69 N. E. 327, 100 Am. St. 577. MICHIGAN.— People v. Eaton, 100 Mich. 208, 59 N. W. 145, 24 L. R. A. 721. MINNESOTA.— Cater v. Northwestern Tel. Exch. Co., 60 Minn. 539, 63 N. W. Ill, 28 L. R. A. 310, 51 Am. St. 543. MISSISSIPPI.— Gulf Coast Ice Mfg. Co. v. Bowers, 80 Miss. 570, 32 So. 113; Stowers v. Postal Tel. Cable Co., 68 Miss. 559, 9 So. 356, 12 L. R. A. S64, 24 Am. St. 290. MISSOURI.— Julia Bldg. Assn. v. Bell Tel. Co., 88 Mo. 258, 57 Am. Rep. 398. MONTANA.— Hershfield v. Rocky Mountain Bell Tel. Co., 12 Mont. 102, 29 Pac. 883; Loeber v. Butte General Electric Co., 16 Mont. 1, 39 Pac. 912, 50 Am. St. 468. NEBRASKA.— Bronson v. Albion Tel. Co., 67 Nebr. Ill, 93 N. W. 201, 60 L. R. A. 426; Jaynes v. Railroad Co., 53 Nebr. 631, 74 N. W. 67, 39 L. R. A. 751. NEW JERSEY.— Andreas v. Gas & Electric Co., 61 N. J. Eq. 69, 47 Atl. 555; Broome v. Telephone Co. (N. J. Ch.), 7 Atl. 851; French V. Robb, 67 N. J. L. 260, 51 Atl. 509, 57 L. R. A. 956, 91 Am. St. 433; Halsey v. Railway Co., 47 N. J. Eq. 380, 20 Atl. 859; NicoU v. New I 341 ADDITIONAL SERVITUDES. § 288 created by the installation of the equipment of poles and wires necessary in the communication of intelli- gence by wire for the reason that the highway is dedi- cated for the purpose of transportation and conveyance of passengers and property and also for the transmis- sion of intelligence, and that communication either by travel or message in lieu thereof is a proper use of the York & X. J. Tel. Co., 62 X. J. L. 733, 42 Atl. 583, 72 Am. St. 666; Taylor v. Public Service Corp., 75 N. J. Eq. 371, 73 Atl. 118. NEW YORK.— Board of Rapid Transit R. Comrs., In re, 197 N. Y. 81, 90 N. E. 456, 36 L. R. A. (N. S.) 647, 18 Ann. Cas. 366; Eels V. American Tel. & T. Co., 143 N. Y. 133, 38 N. E. 202, 25 L. R. A. 640; Johnson v. Thomson-Houston Electric Co., 7 N. Y. S. 716, 54 Hun (N. Y.) 469; Metropolitan Tel. & T. Co. v. Colwell Lead Co., 67 How. Pr. 365; Palmer v. Larchmont Electric Co., 158 N. Y. 231, 52 N. E. 1092, 43 L. R. A. 672; Rasch v. Nassau Electric R. Co., 198 N. Y. 385, 91 N. E. 785. NORTH CAROLINA.— Smith v. Goldsboro, 121 N. Car. 350, 28 S. E. 479. NORTH DAKOTA.— Cosgriff v. Tri-State Tel. & T. Co., 15 N. Dak. 210, 107 N. W. 525, 5 L. R. A. (N. S.) 1142; Donovan v. AUert, 11 N. Dak. 289, 91 N. W. 441, 58 L. R. A. 775. OHIO.— Callen v. Columbus Edison Electric Light Co., 66 Ohio St. 166, 64 N. E. 141, 58 L. R. A. 7S2; Daily v. State, 51 Ohio St. 348, 37 N. E. 710, 24 L. R. A. 724, 46 Am. St. 578; Schaaf v. Cleveland, M. & S. R. Co., 66 Ohio St. 215, 64 N. E. 145. PEXXSYLVANIA.— Brown v. Radnor Tp. Electric Light Co., 208 Pa. 453, 57 Atl. 904; Lockhart v. Craig Street R. Co., 139 Pa. 419, 21 Atl. 26; York Tel. Co. v. Keesey, 5 Pa. Dist. R. 366. RHODE ISLAND.- Taggart v. Xewport Street R. Co., 16 R. I. 668, 19 Atl. 326, 7 L. R. A. 205. SOUTH DAKOTA.— Kirby v. Citizens' Tel. Co., 17 S. Dak. 362, 97 N. W. 3. TENNESSEE.— Frazier v. East Tennessee Tel. Co., 115 Tenn. 416, 90 S. W. 620, 3 L. R. A. (N. S.) 323, 112 Am. St. 856. VIRGINIA.— Wagner v. Bristol Belt Line R. Co., 108 Va. 594, 62 S. E. 391; Western Union Tel. Co. v. Williams, 86 Va. 696, 11 S. E. 106, 8 L. R. A. 429, 19 Am. St. 908. WASHINGTON.— Spokane v. Colby, 16 Wash. 610, 48 Pac. 248. WEST VIRGINIA.— Lowther v. Bridgeman, 57 W. Va. 306, 50 S. E. 410. WISCONSIN.— Krueger v. Wisconsin Tel. Co., 106 Wis. 96, 81 N. W. 1041, 50 L. R. A. 298. § 288 PUBLIC UTILITIES. 342 highway because both are public and the object to be accompHshed in either is identical, the only ground of distinction being the method by which the object is accomplished. A number of the courts therefore al- most from the very beginning of the use of the tele- graph and telephone have held that this did not con- stitute an additional servitude on the highway, but that it was merely a better and more modern method of communication, the use of which in the public in- terest should be extended and encouraged and not handicapped by a payment as for an additional servi- tude for permission to install the necessary equip- ment. The Supreme Court of Massachusetts as early as 1883 in the case of Pierce v. Drew, 136 Mass. 75, 49 Am. Rep. 7, which has since become a leading one, enunciated this principle concerning the law of mu- nicipal public utilities and gave it application in this connection for the practical reason, as the court said, that: "When the land was taken for a highway, that which was taken was not merely the privilege of trav- eling over it in the then known vehicles, or of using it in the then known methods, for either the convey- ance of property or transmission of intelligence. . . . The discovery of the telegraph developed a new and valuable mode of communicating intelli- gence. Its use is certainly similar to, if not identical with, that public use of transmitting information for which the highway was originally taken, even if the means adopted are quite different from the post-boy or the mail-coach. It is a newly discovered method of exercising the old public easement, and all appropriate methods must have been deemed to have been paid for when the road was laid out. . . . We are therefore of opinion that the use of a portion of a highway for the public use of companies organized under the laws of the state for the transmission of 343 ADDITIONAL SERVITUDES. § 289 intelligence by electricity, and subject to the super- vision of the local municipal authorities, which has been permitted by the legislature, is a public use similar to that for which the highway was originally taken, or to which it was originally devoted, and that the owner of the fee is entitled to no further com- pensation." § 289. Public use not additional servitude. — Twenty years later this same court in the case of New England Tel. & T. Co. v. Boston Terminal Co., 182 Mass. 397, 65 N. E. 835, reiterated this principle and extended its application to practically all municipal public utilities including those installed beneath the surface of the ground as well as those above or upon its surface. In holding that full payment is made to the abutting property owner at the time the street is dedicated covering practically all public uses to which it may be subjected in connection with the operation of any municipal public utility available at the time of such dedication or which may be invented in the future, the court said: "In this commonwealth, on the laying out and construction of a highway or public street, the fee of the land remains in the landowner, and the public acquire an easement in the street for travel. This easement is held to include every kind of travel and communication for the movement or trans- portation of persons or property which is reasonable and proper in the use of a public street. It includes the use of all kinds of vehicles which can be intro- duced with a reasonable regard for the safety and convenience of the public, and every reasonable means of transportation, transmission, and movement be- neath the surface of the ground, as well as upon or above it. Accordingly it has been held that the public easement which is paid for in assessing damages to § 290 PUBLIC UTILITIES. 344 the owner includes the use of the street for horse cars and electric cars, for wires of telegraph, telephone, and electric lighting companies, and for water pipes, gas pipes, sewers, and such other similar arrangements for communication or transportation as further in- vention may make desirable." § 290. Public rights paramount after dedication. — The practical attitude and the progressive spirit of this court, which has been followed by many others, are indicated in its decision in the case of Sears v. Crocker, 184 Mass. 586, 69 N. E. 327, 100 Am. St. 577, decided in 1904, where the court held that abut- ting property owners are "bound to withdraw from occupation of streets above or below the surface when- ever the public needs the occupied space for travel" for the reason that "the necessary requirements of the public for travel were all paid for when the land was taken, whatever they may be, and whether the particulars of them were foreseen or not," for as the court says : "It is now a fact of common knowledge that the streets of those parts of Boston which are most crowded are entirely inadequate to accommodate the public travel in a reasonably satisfactory way if the surface alone is used. Our system, which leaves to the landowner the use of a street above or below or on the surface, so far as he can use it without interference with the rights of the public, is just and right, but the public rights in these lands are plainly paramount, and they include, as they ought to include, the power to appropriate the streets above or below the surface as well as upon it in any way that is not unreasonable, in reference either to the acts of all who have occasion to travel or to use the effect upon the property of abutters." 345 ADDITIONAL SERVITUDES. § 29 1 § 291. Public entitled to underground use of streets. — This court further extends the appHcation of this principle in the case of Cheney v. Barker, 198 Mass. 356, 84 N. E. 492, decided in 1908, by refusing to find that the laying of pipe lines through and under a public street imposes an additional servitude for which the abutting property owner is entitled to com- pensation for it is a reasonable use required by public necessity and convenience to which the public is en- titled without further payment for the reason that, as the court says : "The landowners get the full value of their land in such cases, if there is any injustice it is not they who suffer it. . . . The same doctrine has been applied to such underground uses of the pub- lic streets as the laying of common sewers, main drains, water pipes, conduits, subways, and gas mains, either by private companies or by officers acting for the public. . . . We can not doubt the power of the legislature to authorize the laying of lines of gas pipes under the surface of the pubHc streets without providing any compensation for the owners of the fee in the soil of those streets. . . . Our roads or public ways are established for the common good and for the use and benefit of all the inhabitants of the commonwealth. The mere fact that the burden of their construction and maintenance has to a large extent been put upon the cities and towns in which they are situated gives to those cities or towns or to their inhabitants no peculiar privileges in such ways." § 292. Travel in streets relieved by telephone. — The Supreme Court of Missouri in the case of Julia Bldg. Assn. V. Bell Tel. Co., 88 Mo. 258, 57 Am. Rep. 398, decided in 1885, furnishes an early authority which has long since been regarded as also a leading one indicating the favorable attitude of that jurisdic- § 291 PUBLIC UTILITIES. 346 tion in encouraging the extension of municipal public utility service by holding that the installation of the necessary equipment to render such service does not constitute an additional servitude or burden for which payment must be made. This case probably furnishes the strongest argument in support of the more pro- gressive authorities to this effect in the following lan- guage: "These streets are required by the public to promote trade and facilitate communications in the daily transaction of business between the citizens of one part of the city with those of another, as well as to accommodate the public at large in these respects. If a citizen living or doing business on one end of Sixth street wishes to communicate with a citizen living and doing business on the other end, or at any intermediate point he is entitled to use the street, either on foot, on horseback, or in a carriage, or other vehicle in bearing his message. The defendants in this case propose to use the street by making the tele- phone poles and wires the messenger to bear such communications instantaneously and with more dis- patch than in any of the above methods, or any other known method of bearing oral communications. Not only would such communications be borne with more dispatch, but to the extent of the number of com- munications daily transmitted by it, the street would be relieved of that number of footmen, horsemen or carriages. If a thousand messages were daily trans- mitted by means of telephone poles, wires and other appliances used in telephoning, the street through these means would serve the same purpose, which would otherwise require its use either by a thousand foot- men, horsemen or carriages to effectuate the same purpose. In this view of it the erection of telephone poles and wires for transmission of oral messages, so far from imposing a new and additional servitude, 347 ADDITIONAL SERVITUDES. § 293 would, to the extent of each message transmitted, re- lieve the street of a servitude or use by a footman, horseman or carriage." § 293, Lighting system no additional servitude. — That the use for which streets and highways are dedicated is enhanced and extended by their being properly lighted is the effect of the decision in the case of Gulf Coast Ice Mfg. Co. v. Bowers, 80 Miss. 570, 32 So. 113, decided in 1902, where the court in per- mitting the erection of the necessary equipment for the purpose of lighting the streets observed that of necessity the easements in the use of the streets of the municipality are greater than in that of other highways and that the interest of the public rather than of the abutting property owner must determine the extent of the reasonable uses to which the streets may be subjected, and held that no additional servi- tude was created, for as the court says: "While the lighting of the streets of a city may be a great con- venience to the traveling public, especially under some conditions, the poles, wires, and other necessary appli- ances for so doing are often a positive inconvenience to the abutting landowner, considered merely as such. But the proprietary rights of the landowner, whether the fee or a mere easement thereon be in the public (Theobold v. Railway Co., 66 Miss. 279, 6 So. 230. 4 L. R. A. 735, 14 Am. St. R. 564), are greatly modified by the rights of the public, which is entitled to a free passage over the streets, and to the benefit of lights constructed and operated for that end. And if a town or city may light its streets, as being an object for which the street is opened, without paying the abutting property owner damages for the erection of needed appliances therefor, it must follow that the § 294 PUBLIC UTILITIES. 348 municipal authorities may authorize some other per- son to furnish such lights." § 294. Modem inprovements included in "public purpose." — The rapid growth of municipalities result- ing in the constant extension of their limits into what had been rural districts, thereby converting country highways into municipal streets furnishes a positive practical reason for the courts refusing to limit the uses of the streets and other highways to those con- templated by the parties at the time of the dedication. It is obvious that such a rule would not only prohibit the growth of municipalities and the extension of their territorial limits, but that it would impede progress resulting from new inventions and modern improvements which advancing civilization affords. The term "public uses" for which the streets and high- ways are dedicated therefore are not only such uses as walking, riding or traveling in vehicles drawn by animals, but also such methods of travel and com- munication as is afforded by the street car operated by electricity, the automobile and such other methods of travel and communication in addition to, or by way of substitution for those in vogue at the time of the dedication as may result from future invention and further progress; all of which both reason and neces- sity require shall be recognized and accepted as proper and reasonable uses of the street for transportation and communication, for as the Supreme Court of In- diana in the case of Magee v. Overshiner, 150 Ind. 127, 49 N. E. 951, 40 L. R. A. 370, 60 L. R. A. 426, 65 Am. St. 358, decided in 1898, says: "If this were not true, the way originally dedicated for a suburban highway, but by the growth of population becoming a city street, or the dedication of a village or town street afterwards becoming the principal thoroughfare of a great city, 349 ADDITIONAL SERVITUDES. § 295 would be limited to the uses in vogue at the time and suited to the country road or the village or town street; and the growth of population, the advancement of commerce, and the increase in inventions for the aid of mankind would be required to adjust themselves to the conditions existing at the time of the dedica- tion, and with reference to the uses then actually- contemplated." Concluding its opinion, which fur- nishes an excellent discussion of the authorities on this point and a practical disposition of the matter, to the effect that the use of the streets for the equipment of a telephone system does not constitute an additional servitude for which the abutting property owner is entitled to compensation, the court says: "The tele- graph, however, has never been employed as a means of intraurban communication. It requires skilled per- sons to receive the messages, and then they are to be carried to the persons for whom they are intended by just such means and uses of the streets as would other written communications. The telephone is par- ticularly useful in communications between the people within a city, and it can be used for that purpose directly, and by persons without special skill. It is more clearly a substitute for the old methods of the communication of messages between persons within the city than the telegraph." § 295. Necessary underground conduits included. — In holding that the construction in the street of a conduit for telephone cables and wires for the use of the public in communicating by electricity is a use of the street entirely consistent with the purposes of its dedication and does not constitute an additional servitude, the same court in the case of Coburn v. New Tel. Co.. 156 Ind. 90, 59 N. E. 324. 52 L. R. A. 671, decided in 1901, says: "The general doctrine of these § 296 PUBLIC UTILITIES. 35O cases is that in locating, marking, and dedicating streets in plats of land for urban residences, the pur- pose of the dedication, in the absence of controlling language, is conclusively presumed to be for the ac- commodation of pubhc travel, traffic, and communi- cation. Anything w^hich reasonably facilitates these ends is, therefore, consistent with the dedication. . . . Whenever the necessity exists, any use of the street by reasonable structures and devices, above or below the surface, which will enable the citizens to communicate without actual travel upon the streets, and which does not materially obstruct the ingress and egress and light and air of abutting property, is within the contemplated purpose of the dedication, and not a new burden upon the fee." § 296. Streets and other highways formerly dis- tinguished. — By way of illustration of the distinction in the nature and extent of the servitude in the street and country highway respectively which was fre- quently made by the earlier decisions, the case of Kincaid v. Indianapolis Natural Gas Co., 124 Ind. 577, 24 N. E. 1066, 8 L. R. A. 602, 19 Am. St. 113, decided in 1890, is of interest although it can not be said to represent the current authority nor the prevailing tendency of the decisions in making such distinction. In permitting a recovery of damages for the invasion of the rights of the abutting property owner from the laying of gas pipe lines in the country highway, this court made a strict literal construction and a conserva- tive application of the principle under discussion. In the course of its opinion the court said: "The rule declared by our own cases is in harmony with the very ancient and well-settled rule that the public ac- quires, except in cases where the seizure of the fee is authorized, nothing more than a right to pass and re- 351 ADDITIONAL SERVITUDES. § 297 pass, and the great weight of authority sustains the doctrine laid down by our decisions. There is an essential distinction between urban and suburban highways, and the rights of abutters are much more Hmited in the case of urban streets than they are in the case of suburban ways. . . . The authorities, although not very numerous, are harmonious upon the question that laying gas pipes in a suburban road is the imposition of an additional burden, and that compensation must be made to the owner." This case was followed in Consumers Gas Trust Co. v. Huntsinger, 12 Ind. App. 285, 40 N. E. 34, decided in 1895. § 297. Distinction no longer obtains. — The case of Mordhurst v. Ft. Wayne & S. W. Traction Co., 163 Ind. 268, 71 N. E. 642, 66 L. R. A. 105, 103 Am. St. 222, decided in 1904, furnishes a progressive decision which is abreast of any of the recent cases and ma- terially modifies the rule of the Kincaid case decided by the same court. While conceding that the abutting property owner is entitled to recover any actual spe- cial damages sustained by reason of the construction and operation of the interurban electric traction line, this court distinguished such a use of the street from that of the steam railway and refused to find that it constituted an additional servitude, for as the court observes in the course of its well reasoned opinion: "It is apparent that every objection founded upon in- jury to his property rights which the plaintiff can justly urge against the use by the defendant of Fulton street in front of plaintiff's lots would apply with equal force to the use of that thoroughfare by an electric street railroad constructed and operated wholly within the city limits. But this court has held that such a street railroad is not an additional burden upon the street, S 297 PUBLIC UTILITIES. 352 and that the owners of abutting real estate are not entitled to compensation on account of such appro- priation and use. Eichels v. Evansville Street R. Co., y2> Ind. 261, 41 Am. R. 561, Chicago, &c., R. Co. v. Whiting, &c., R. Co., 139 Ind. 297, 38 N. E. 604, 26 L. R. A. 337, 47 Am. St. R. 264. ... A street platted or otherwise laid out in a city or town of this state is thereby dedicated to the use of the public, and not exclusively to the use of abutting property, or to the convenience or profit of any or all of the inhabi- tants of the particular municipality. It forms a part of the great system of highways of the state, and its use for intercommunication with other neighborhoods, towns, and cities is one of its most important purposes. In many respects it is governed by the general laws regulating public ways. Discriminations in the terms and conditions on which it could be used in favor of the abutting lot owners, the residents on the particu- lar street, or the inhabitants of the city, and against nonresidents, could not be tolerated. The dedication of a street must be presumed to have been made, not for such purposes and uses only as were known to the landowner and platter at the time of such dedica- tion, but for all public purposes, present and prospec- tive, consistent with its character as a public highway, and not actually detrimental to the abutting real estate. . . . Rapid and cheap transportation of passengers, light express and mail matter, between neighboring towns and cities may be quite as neces- sary and as largely conducive to the general welfare of the places so connected and their inhabitants as the like conveniences within the town or city. Where such transportation is furnished by an interurban electric railroad operated under the conditions and restrictions contained in the agreement between the appellee and the city of Ft. Wayne, we do not think T,^^ ADDITIONAL SERVITUDES. § 298 the construction and operation of such a railroad in such a manner constitutes an additional servitude upon the street which entitles abutting property own- ers to compensation." § 298. Steam, street and interurban railways dis- tinguished. — This decision is limited, however, by that of the same court in the case of Kinsey v. Union Trac- tion Co., 169 Ind. 563, 81 N. E. 922, decided in 1907, which is also concerned with the maintenance and operation of an interurban electric traction line. And while the court in this case also expressly refused to find that such a user constituted an additional ser- vitude it upheld the right of the abutting property owner to recover any special damages actually sus- tained in connection with the operation of such an electric line. The distinction in the two cases is based upon the difference in the nature and extent of the business and in the manner of the operation of the different lines; it appearing that the latter case in many respects was fairly comparable to that of the steam railway rather than the ordinary street railway, for as the court said: 'Tt is shown to frequently run passenger trains composed of three large cars, and to run daily freight trains of a like number of heavy cars. It is neither a street railroad in fact, nor is it in any sense shown to be operated for street purposes. To further emphasize, we have, under the facts, a railroad which in no sense is operated to promote the utility of the public streets of the city of Indianapolis. It is not merely engaged in doing business between the latter city and its suburbs. It is not an extension of a city street railway over inter- vening territory between neighboring cities or towns, carrying passengers and light freight ; but it is abso- lutely an independent railway, engaged in a general 23— Pub. Vi. S 299 PUBLIC UTILITIES. 354 passenger and freight traffic between distant cities and communities. Its cars are not light and small when compared with those of the ordinary steam roads. As a result of its operation, the usual dis- comforts and annoyances due to the operation of the ordinary steam roads are present, viz., loud noises, dirt, and dust, shaking or vibrations of the ground, and other annoyances or detriments which afifect the owners of abutting property situated on the streets over which the road is operated. There is also the presence of danger or peril which continually menace the safety of persons using the public street." § 299. Interurban railway no additional servitude. — This same court, again, in the recent case of Pittsburg, C, C. & St. L. R. Co. v. Muncie & Portland T. Co., 174 Ind. 167, 91 N. E. 600, decided in 1910, involving the same question decided that such a user did not constitute an additional servitude, although it appeared that not only passengers but baggage, ex- press, freight and the United States mail was carried by the defendant company, for as the court said : "It is not necessary for us to review said cases cited by appellant, for the reason that this court, after a careful consideration of all the authorities, has held otherwise; that the same is not such an additional burden and servitude upon the street as to require an assessment and payment of compensation to the abutting lot own- ers or other owners of the fee in the street as a condi- tion precedent to the occupancy and use of the street by said interurban company, or for which such owners of the fee in the street are entitled to recover damages. Kinsey v. Union Traction Company, 169 Ind. 563, 601- 634, 81 N. E. 922; Mordhurst v. Ft. Wayne, &c., Co., 163 Ind. 268, 71 N. E. 642, 66 L. R. A. 105. 103 Am. St. Rep. 222." 355 ADDITIONAL SERVITUDES. § 3OO § 300. Telephone lines additional servitudes in Illinois. — Although the Supreme Court of Illinois in the case of McW'ethy v. Aurora Electric Light & Power Co., 202 111. 218, 67 N. E. 9, decided in 1903, observed that: "Since the discovery and use of elec- tricity for lighting purposes, it has generally, if not universally, been held that, the fee to public streets being in a municipality, with general power to regu- late the use of the same, such municipality may law- fully authorize private corporations or individuals to erect electric light poles on its streets, and stretch wires upon them, in order to provide lights for its own use and that of its citizens, provided that in doing so they do not materially obstruct the ordinary use of the streets for public travel." this same court in the case of Burrall v. American Tel. & T. Co., 224 111. 266, 79 N. E. 705, decided in 1906, that the equip- ment necessary to operate a telephone line in the streets constituted an additional servitude. In the course of its opinion, which is directly contrary to the authorities above considered, the court said: "A telephone line in a public highway is an additional burden upon the fee, for which the owner of the fee is entitled to compensation. Postal Telegraph Co. v. Eaton. 170 111. 513, 49 N. E. 365, 39 L. R. A. 722, 62 Am. St. R. 390. The maintenance and user of the telephone line, and the addition of new crossarms, wires, and insulators, constitute a continuing trespass, which equity has jurisdiction to prevent by injunction. Carpenter v. Capital Electric Co., 178 111. 29, 52 N. E. 973, 43 L. R. A. 645, 69 Am. St. R. 286; Russell v. Chicago & Milwaukee Electric Railway Co., 205 111. 155, 68 N. E. 727. The jurisdiction of equity is not denied, and there is no pretense that the defendant had any right to appropriate the property of the com- plainant to its own use without compensation. The § 30I PUBLIC UTILITIES. 356 sole claim made in support of the decree is that the complainant stood by and permitted defendant to con- struct the line and has not interfered with it since, and therefore she is not entitled to an injunction. The fact that a large number of long distance tele- phone messages are sent over this line daily, and therefore it would be convenient for the public to have the defendant occupy complainant's land, is of no importance whatever. If the land is needed for a pub- lic use, the law provides a way for acquiring it, and the constitution prohibits its appropriation for such a use without compensation. It was stipulated that, if the defendant can not go across this land, it will have to go around it, and, of course, that would be so whether the parties stipulated the fact or not; but the defendant can procure the right to impose the addi- tional burden on the fee by proper proceedings under the law of eminent domain." § 301. Light being necessity is not additional servitude. — The Supreme Court of New York in the case of Palmer v. Larchmont Electric Co., 158 N. Y. 231, 52 N. E. 1092, 43 L. R. A. 672, decided in 1899, held that the erection of poles and wires in the high- way for the purpose of lighting them by electricity does not constitute an additional servitude. In the course of this very practical decision, which clearly represents the law on this phase of the subject, the court recognized that the extent of the easement of user in the street is determined by the necessities of the public for whom they are maintained, for as the court says : "In the darkness of the night, in crowded thoroughfares, light is an important aid, largely tend- ing to promote the convenience, as well as the safety, of the traveling public. It is not only one of the uses to which the public ways may be devoted, but, in the 357 ADDITIONAL SERVITUDES. § 302 case of crowded thoroughfares, a duty devolves upon the municipahty of supplying it. In such cases it is one of the burdens upon the fee which must be borne as an incident to the public right of traveling over the way, and is deemed one of the uses for which the land was taken as a public highway. . Light may not be necessary in an ordinary country highway, and yet there may be country roads in which the travel is so great as to make light a necessity in order to avoid collisions and injuries in the nighttime." § 302. Telephone system held additional servitude in New York. — This court, however, in the earlier case of Eels v. American Tel. & T. Co., 143 N. Y. 133, 38 N. E. 202, 25 L. R. A. 640, decided in 1894 that the construction in the country highway of the poles and wires necessary to maintain and operate a tele- phone and telegraph system constitutes an additional servitude for which the abutting property owner is entitled to compensation for the reason that this use is entirely different from that of actual travel by the pub- lic. In the course of this opinion which is contrary to the prevailing current line of decisions the court says: "We think neither the state nor its corporation can appropriate any portion of the public highway perma- nently to its own special, continuous, and exclusive use by setting up poles therein, although the purpose to which they are to be applied is to string wires thereon, and thus to transmit messages for all the public at a reasonable compensation. It may be at once admitted that the purpose is a public one, although for the pri- vate gain of a corporation; but the constitution pro- vides that private property shall not be taken for public use without compensation to the owner. It is not a mere difference in the kind of vehicle, or in their number or capacity, or in the manner, method, § 303 PUBLIC UTILITIES. 358 or means of locomotion. All these might be varied, increased as to number, capacity, or form, altered as to means or rapidity of locomotion, or transformed in their nature and character, and still the use of the highway might be substantially the same — a highway for passage and motion of some sort. Here, however, in the use of the highway by the defendant is the fact of permanent and exclusive appropriation and posses- sion, a fact which is, as it seems to us, wholly at war with that of the legitimate public easement in a high- way. ... It has the power to take the land upon making compensation, and hence the refusal of an owner will not stop the proposed undertaking." § 303. Street railway system held additional servi- tude in New York. — This same court, in the recent case of Rasch v, Nassau Electric R. Co., 198 N. Y. 385, 91 N. E. 785, decided in 1910, held that the equip- ment necessary to the operation of a street railway is not included in the use to which the street was dedi- cated and therefore constituted an additional servitude for which the abutting property owner is entitled to be compensated. Although this decision follows the ear- lier authorities of this jurisdiction, they stand practi- cally alone, for it has been generally held that the street railway system regardless of its motive power does not constitute an additional servitude in the street because it serves a purpose peculiar to the use of the street for which it was dedicated and as a result of the improved methods it aids very materially in facilitating actual transportation. That the case truly represents the New York jurisdiction, however, ap- pears from the following extract: "But the rights of the plaintiff in this case rest on a different foundation. She is the owner of the fee subject to the public ease- ment. It was held by this court over forty years ago 359 ADDITIONAL SERVITUDES. § 304 in Craig v. Rochester City & B. Railroad Company, 39 N, Y. 404, and reiterated seven years ago in Peck v. Schenectady Railway Company, 170 N. Y. 298, 63 N. E. 357, that a street railroad is not a street use, but an additional burden placed on the land for which the owner of the fee is entitled to compensation. , . . For the first time the question was squarely presented to this court in South Buffalo Railway Company v. Kirkover, 176 N. Y. 301, 68 N. E. 366, and it was held: 'Where land is acquired by a railroad company with- out the consent of the owner, he is entitled to recover the market value of the premises actually taken, and also any damages resulting to the residue, including those which will be sustained by reason of the use to which the portion taken is to be put by the company.' " § 304. Underground rapid transit system addi- tional. — In the case of In re Board of Rapid Transit R. Comrs., 197 N. Y. 81, 90 N. E. 456, 36 L. R. A. (N. S.) 647, 18 Ann. Cas. 366, decided in 1909, the Supreme Court of New York held that the construction of a subway beneath the streets of New York City and the operation of an electric street railway system therein constituted an additional servitude, for as the court said : "The subway occupies a part of the street which, although beneath the surface, might, by proper construction and change of grade, be used for ordinary highway purposes, and traveled upon freely, without license or recompense, by persons using their own vehicles or their own methods of transportation. The occupation by the subway and its trains of cars is exclusive, for no one may enter either without pay- ment of fare. Highways are free and open to all the people ; the subway is not. Highways are for the exclusive use of none ; the subway is for the exclusive use of one. Highways are for travel by means under § 305 PUBLIC UTILITIES. 360 the exclusive control of the traveler; the subway is for travel by means under the exclusive control of its owner or operator. . , . When, however, the con- struction is not for a street use, even if it is for a public use, liability to the owner of the fee attaches to a city the same as to a railroad corporation. From the Craig Case in 1868, to the Peck Case in 1902, with the long line of cases intervening, the position of this court has been uniform and consistent in maintaining that surface structures and superstructures are an additional burden on the fee of the street. Craig v. Rochester City & Brighton R. R. Co., 39 N. Y. 404; Peck v. Schenectady R. Co., 170 N. Y. 298, 63 N. E. 357. It follows as a logical sequence that a substruc- ture, with the physical characteristics and conse- quences of that under consideration, must be governed by the same principle, so that a railroad constructed beneath the surface of a street is a new burden, not contemplated by the original owner of the land when it was devoted to use as a street." § 305. Telegraph and telephone compared. — While a number of cases decide and many more contain dicta to the effect that the telegraph constitutes an additional servitude because it does not furnish local service and is not adapted to the personal use of the abutting property owner as is the telephone, the deci- sion in the case of People v. Eaton, 100 Mich. 208, 59 N. W. 145, 24 L. R. A. 721, decided in 1894, classi- fies the telegraph with the telephone in holding that the necessary equipment of neither constitutes an addi- tional servitude. The progressive tendency of this decision is indicated in the following language: "These telegraph construction acts have been in force in this state for many years, and this is the first time in the history of the state, so far as I have discovered, where 361 ADDITIONAL SERVITUDES. § 306 it has been claimed that the placing of such poles in the highway is an additional servitude. We are aware that in some states the doctrine is laid down that the placing of such poles creates additional servitude upon the fee, but there are many cases holding the other way. Pierce v. Drew, 136 Mass. 75, 49 Am. R. 7, and Julia Bldg. Asso. v. Bell Telph. Co., 88 Mo. 258, 57 Am. R. 398, hold that additional servitude is not cre- ated, and, we think, upon better reasoning. . . . It would be a great calamity to the state if, in the development of the means of rapid travel, and the transmission of intelligence by telegraph or telephone communication, parties engaged in such enterprises were compelled to take condemnation proceedings before a single track could be laid, or a pole set." § 306. Telephone new method of subjecting streets to old use. — In holding that where land is dedicated for street purposes this includes any use devoted to the service of the public whether beneath or above as well as upon the surface of the street including communication by telephone, which is but a new and improved method of affecting this purpose and not a new burden or servitude upon the fee of the abutting owner, the court in the case of Frazier v. East Tennessee Tel. Co., 115 Tenn. 416, 90 S. W. 620, 3 L. R. A. (N. S.) 323, 112 Am. St. 856, decided in 1906, supports its decision by the following argument: "On the other side, it is said that in the widest, and, like- wise, the most correct, sense, a street is a means of intercommunication between the people of a city, for traffic, and for the conduct of personal and social inter- course, and also for the convenient use of dwellings and business houses abutting thereon; that its pri- mary purpose is for passage, it is true, but that such passage need not be, alone, that of people, animals, or § 307 PUBLIC UTILITIES. 362 wheeled conveyances, or of things that run upon the ground; that a message sent through the air upon electric wires, over the street, takes the place of one sent by man or boy walking, or upon horseback, or conveyed by a vehicle, along the street; that not only is the same service performed by the telephone, but in a manner far better, and more quickly; that, if the thousands of messages which go over such wires in a single day had to be conveyed by men or vehicles, or both, the streets would be far more thronged than they now are, and hence rendered less comfortable, and less safe for use, and that in the course of a few months, or a year's time, the difference in the wear and tear of the streets would be very perceptible, because of such increased use; that the telephone is therefore but an improved method of subjecting the streets of a city to an old use, and that the poles and wires are just as necessary adjuncts to this new method as are the poles and wires of a street railway or an electric light plant, erected in substantially the same manner, and no more obstructive." § 307. Use for public and private service distin- guished. — The difference in the service rendered whether public or private which is the point of dis- tinction in some of the decisions which hold that the equipment of the municipal public utility providing private rather than public service constitutes an addi- tional servitude because of that fact is' illustrated by the Supreme Court of New Jersey in the case of Tay- lor V. Public Service Corporation, 75 N. J. Eq. 371, 73 Atl. 118, decided in 1909, where the court says: "If, therefore, the defendants, by virtue of their contract and the proceedings of the municipality, had a right, as against the municipality, to erect these poles for the purposes of public lighting, the complainant, or any 363 ADDITIONAL SERVITUDES. § 308 landowner similarly situated, could not prevent the placing of the poles, or their being used, for the pur- poses of public lighting. But if the company was in this position, and used the poles for stringing wires for private lighting, the landowner, with respect to whose land no consent in writing had been given, had the right, by ejectment or by resort to equity, to re- strain such misuse. French v. Robb, 67 N. J. L. 260, 51 Atl. 509, 57 L. R. A. 956, 91 Am. St. R. 433; An- dreas V. Gas & Electric Co. of Bergen County, 61 N. J. Eq. 69, 47 Atl. 555." § 308. Nature of use generally not distinguished. — This distinction, however, does not generally obtain and seems not to be in harmony with the present tendency of the later decisions. It is repudiated ex- pressly by the Supreme Court of Alabama in the recent case of Hobbs v. Long Distance Tel. & T. Co., 147 Ala. 393, 41 So. 1003, 7 L. R. A. (N. S.) 87, de- cided in 1906, where the court also refuses to distin- guish between urban and rural highways in the follow- ing vigorous language along these very progressive lines: "So, on the subject of erection of poles for electric lighting, on streets, after some contrary de- cisions, the evident necessity is so great that it has come to be generally understood that it is not an additional burden, though there still remains, in the decisions and text writers, the impression that it is saved by the fact that the light companies generally light the streets as well as private dwellings. . . . Our conclusion is that the public roads, when dedi- cated, were dedicated, not merely for travel on foot, or on animals, or in vehicles, but for locomotion by any means that should be afterwards discovered, and for communication between the citizens of the country, by carriers, on foot, or riding, or by any other means § 309 PUBLIC UTILITIES. 364 that might be found suitable and best. The mails could be sent over them in any way that was found most expeditious. If it had been found advisable to send the mails in metal boxes swung on wires far above the heads of the people, in place of in stages and by carriers, no one would have supposed it was an additional burden upon the abutting owner. So, if it is found better to string wires high above the roads and convey messages by that mysterious some- thing which is in the atmosphere and which seems to be as exhaustless as the bounties of Providence, it is accompHshing one of the great purposes for which public roads are dedicated. Some of the cases have drawn a distinction between urban and suburban roads, but in regard to wires and posts there would be more reason for declaring them burdensome in a city (where they accumulate in such numbers as to inter- fere with the operation of engines in extinguishing fire) than in the county where there are but few and far away from houses. . . . The qualification which we make is that, if the abutting owner shows that there will be actual and substantial injury to his property, he is entitled to compensation." § 309. Street and rural highway not distinguished for telephone. — A number of recent cases also refuse to make the distinction, which was at one time made by several jurisdictions, between the nature and ex- tent of the easement of the use of municipal and rural highways. A further characteristic opinion to this effect is furnished in the case of Lowther v. Bridge- man, 57 W. Va. 306, 50 S. E. 410, decided in 1905, where the court in refusing to find that an additional servitude is created in the erection of the necessary equipment for the operation of a telephone system along the country highway says: "The cases which 365 ADDITIONAL SERVITUDES. § 309 hold that there is no new or additional servitude fur- ther hold that the use of the public highv^ay for tele- graph or telephone lines must be reasonable. Our case of Maxwell v. Telegraph Co., 51 W. Va. 121, 41 S. E. 125, is in line with the cases holding that there is no additional servitude by the placing of tele- phone poles and wires for a telephone for public use along the public highway. Judge Dent, in delivering the opinion of the court, says: 'Telephone poles are not things of beauty, yet their utility is so great that their ugliness must be endured until human invention has discovered some more tasteful substitute for them. The public can well afford to surrender a reasonable portion of the public easement in its highways to a public utility of such vastly increasing importance. As the owner of the fee in such highway loses nothing thereby, he has no grounds of complaint. It puts no additional burden on the fee, but it is a burden alone upon the permanent easement to which it is appurte- nant and subservient.' This case is binding authority on this court, and necessarily brings us to the con- clusion that there is no additional servitude by the reasonable use of a public highway for the purpose of placing telephone poles and wires for public use along it. We are aware that some authorities make a distinction here between a street of a town or city, and a county road in the country, but we see no sound reason for the distinction." A well expressed recent decision to the same eflfect is that of Cumberland Tel. & T. Co. v. Avritt, 120 Ky. 34. 85 S. W. 204, decided in 1905, where the court says: "There is no sound distinction between urban and rural highways as to the purposes for which they may be used. Public highways are designed as avenues of communication, and a telephone line along a country road is no more an additional servitude than a telephone § 3IO PUBLIC UTILITIES. 366 line along a railroad right of way. No use of the high- way can be made which practically subverts its use by the public in the ordinary way, nor may it be used for any purpose not public. The wires of a telephone company are no less immovable, than the rails of the railroad, and they are no more a burden to the ad- joining property than the rails. The great weight of authority is to the effect that a telephone line on a public highway is not an additional servitude in those states maintaining the Kentucky rule that a railway is not an additional servitude." § 310. Tendency of decisions progressive and prac- ticable. — A further case to this effect which is fre- quently cited as authority and generally recognized as a leading one is that of Cater v. Northwestern Tel. Exch. Co., 60 Minn. 539, 63 N. W. iii, 28 L. R. A. 310, 51 Am. St. R. 543, decided in 1895, where the court in holding that any use of the highway whether for travel or communication of intelligence by the methods known at the time of the dedication or by new ones are all included within the purposes of the dedication and impose no additional servitude pro- vided, of course, that they do not unreasonably im- pair the special easements of access, light and air be- longing to the abutting property owners, for as the court says: "It seems to us that a limitation of the public easement in highways to travel and the trans- portation of persons and property in movable vehicles is too narrow. In our judgment public highways, whether urban or rural, are designed as avenues of communication; and, if the original conception of a highway was limited to travel and transportation of property in movable vehicles, it was because these were the only modes of communication then known; that as civilization advanced, and new and improved 367 ADDITIONAL SERVITUDES. §3^0 methods of communication and transportation were developed, these are all in aid of and within the gen- eral purpose for which highways are designed." The decision in the case of Hershfield v. Rocky- Mountain Bell Tel. Co., 12 Mont. 102, 29 Pac. 883, de- cided in 1892, furnishes a further excellent statement of this principle, together with the practical reason upon which it is based in the following language: "In this view (and it seems to be very practical), the telephone pole would in fact facilitate passage upon the street, for it would constantly keep out of it a hundred or perhaps a thousand-fold more of incum- brance than it brings in, by enabling persons to com- municate without physically passing through the streets to meet one another. We think that to use the street in a reasonable manner, and to a reasonable extent, for this purpose, is just and proper, and is within the uses to which the street may lawfully be put, when such use is sanctioned by the public through its duly authorized municipal agents." The Supreme Court of Kansas in the case of Mc- Cann v. Johnson County Tel, Co., 69 Kans. 212, 76 Pac. 870, decided in 1904, shows itself to be abreast of the times in permitting the use of the streets to facilitate travel or the communication of intelligence by any modern method of travel and communication which may be invented, for as the court says: "The purpose of the highway is the controlling factor. It is variously defined or held to be for passage, travel, traffic, transportation, transmission, and communica- tion. It is a thoroughfare by which people in different places may reach and communicate with each other. The use is not to be measured by the means employed by our ancestors, nor by the conditions which existed when highways were first devised. The design of a highway is broad and elastic enough to include the §311 PUBLIC UTILITIES. 368 newest and best facilities of travel and communication which the genius of man can invent and supply. . . . The messages transmitted over the line are a sub- stitute for the messengers who formerly passed over the highway, and thus to a great extent relieve it from the burdens and wear of travel. No modern invention has contributed more to commercial and social inter- course than the telephone." §311. Modern inventions for or in lieu of travel included in public purposes. — A recent decision by the Supreme Court of South Dakota in the case of Kirby V. Citizens' Tel. Co., 17 S. Dak. 362, 97 N. W. 3, de- cided in 1903, gives effect to this comprehensive defi- nition of the uses to which the streets are dedicated so as to include the more modern methods and later in- ventions, all of which tend to faciHtate travel and com- munication, for as the court says: "The streets of a city are now used for many purposes unknown in for- mer times. A century ago or less there was practi- cally no use of the streets for sewers, laying of water and gas pipes and operating street railways, but with the advance of civilization and the improved condi- tions of society these uses have become a necessity, and recognized by the courts, and quite generally held as not adding any new servitude to the abutting fee owner for which he is entitled to compensation. The telephone is but a step in advance of former methods of conveying intelligence and information, and is a substitute for the messenger and carrier of former times." § 312. Conservative decisions find additional servi- tudes. — The following cases are given to illustrate the attitude of those courts which hold that an additional servitude or burden is created in the construction of 369 ADDITIONAL SERVITUDES. §311 such wires and poles along streets and public high- ways as are necessary to provide electric light and communication by wire and at the same time to point out that even the jurisdictions so holding are now of the opinion that there is no reason for distinguishing between the urban and rural highway nor between those cases where the fee is in the abutting property owner or the public. These cases therefore are con- sistent with the current authorities generally except as to there being an additional servitude created and this point of distinction is due to the difference in the definition of the uses for which the streets and high- ways are dedicated. The following cases holding that such uses are limited to actual travel are consistent in deciding that the erection of poles and the stringing of wires constitute an additional servitude because this does not provide a method of travel, but to a degree interferes with the exercise of that right in so far as they may constitute an obstruction to any particular method of travel or transportation that may be em- ployed, and is accordingly inconsistent with the use for public travel for which the particular highway is dedicated and is therefore an additional burden or servitude not included within the purposes of the dedi- cation. This is the conservative theory, and is, of course, contrary to the position taken by the more progressive and increasing number of jurisdictions in holding that the highways are dedicated for the use of the public in communication as well as for actual travel and transportation, and that any method by which the public may substitute communication for transportation and thereby avoid the necessity of ac- tual travel is a legitimate use of the highway and does not constitute an additional servitude on it because in effect it necessarily reduces travel and facilitates com- munication. 24— Pub. ut. § 313 PUBLIC UTILITIES. 370 u. This conservative position is well stated by the Supreme Court of North Dakota in the case of Don-, ovan V. Allert, ii N. Dak. 289, 91 N. W. 441, 58 L. R. A. 775, decided in 1902, w^here the court says: "The primary use of a street or highway is confined to travel or transportation. Whatever the means used, the object to be attained is passage over the territory embraced within the limits of the street. Whether as a pedestrian, or on a bicycle, or in a vehicle drawn by horses or other animals, or in a vehicle propelled by electricity, or in a car drawn by horses or moved by electricity, the object to be gained is moving from place to place. The same idea is expressed by courts and text writers, that 'motion is the primary idea of the use of the street.' , . . Neither the city council nor the legislature could deprive the plaintiff of com- pensation for his property rights in such lot, if the telephone poles set thereon are not a use of the street, within the purposes for which the easement was orig- inally conveyed to the public." § 313. Original dedication made the test. — This same court in the case of CosgrifT v. Tri-State Tel. & T. Co., 15 N. D. 210, 107 N. W. 525, 5 L. R. A. (N. S.) 1 142, decided in 1906, extends its decision in the Donovan case by holding that the erection of poles and wires for a telephone system in a country high- way constitutes an additional servitude as well as in the streets of the municipality, although, as before suggested, the case refuses to make any distinction on this point between the street and rural highway as follows : "The rights of a landowner whose land abuts upon a rural highway are not inferior to those of one whose land abuts upon the streets of a city. This is conceded. Indeed, it has been often held that the rights of the owner of land abutting upon the T^yi ADDITIONAL SERVITUDES. § 313 Streets of a city are more restricted. This distinction, which is sometimes made, rests upon an alleged dif- ference in the purpose of the original dedication. Eels V. American Telephone & Telegraph Co., 143 N. Y. 133, 25 L. R. A. 640, 38 N. E. 202; Croswell, Elec- tricity, §§ 117, 126. The underlying principle which must govern is the same, however, in either case. The proposed use must be within the purpose of the orig- inal dedication. If it is not, it constitutes an addi- tional servitude, whether it be of a street or rural highway. . . . Some courts have held that the primary and original purpose of the dedication of a street or highway includes the transmission of intel- ligence as well as public travel. These cases have the merit of being logical in their conclusion, for, adopting the view, which in our opinion is erroneous, that a street or highway is dedicated for use, both for travel and the transmission of intelligence, it follows necessarily that the maintenance of a telephone is not a new use, and this would also be true of any and all new modes of communication which ingenuity may devise." A decision to this same effect is furnished by the Supreme Court of California in the recent case of Gurnsey v. Northern California Power Co., 160 Cal. 699. 117 Pac. 906, 36 L. R. A. (N. S.) 185, decided in 191 1, which is based on the theory that the use of such a highway for the transmission of electric light for private purposes is "for a purpose not incidental to the use of such highway [and] is inconsistent with the dedication of the highway and the use of the pub- lic. It constituted an additional servitude upon the land of the plaintiff beyond the purpose of the dedica- tion, and was an invasion of his property rights there- in, for which he was entitled to redress." Because the abutting property owner had permitted the erection §314 PUBLIC UTILITIES. 372- of the poles and wires, however, he was restricted in his recovery to the damages which he sustained and was not permitted to require their removal. This as the court said "is based mainly on the great prin- ciple of public policy, under which the rights of the citizen are sometimes abridged in the interest of the public welfare." § 314. Ownership of fee in street not considered. — Decisions to the same effect by the Supreme Court of Ohio are furnished in the companion cases of Cal- len V. Columbus Edison Electric Light Co., 66 Ohio St. 1 66, 64 N. E. 141, 58 L. R. A. 782, and Schaaf v. Cleveland, M. & S. R. Co., 66 Ohio St. 215, 64 N. E. 145, both of which were decided April 22, 1902. While the Callen case held that the construction in the streets of the necessary poles and wires for furnishing electric lighting for private use constitutes an addi- tional servitude, the case refuses to make any distinc- tion between the rural highway and the street which to this extent is in harmony with the prevailing rule. In the course of its decision the court says: "It would seem to follow from the foregoing that, for practical purposes, there is no substantial difference in the right of the owner of lands abutting upon a country high- way in such highway, and that of the owner of a lot abutting on a city street in such street. In the one case, where the fee is in the landowner, his rights in and over the streets are in their nature legal, while, if the fee be in the public, the lawful rights of the abut- ting owners are in their nature equitable easements. In both situations the right of the public is for road or street purposes, and is necessarily limited to such control as is necessary to accomplish those purposes. . . . The electric lighting by defendant is not of the streets and for the city. It is wholly for private T^yi ADDITIONAL SERVITUDES. §315 use. Hence, it is a private purpose, and is not a street purpose, in any aspect of it. Its use of these streets is not such as was contemplated by the original dedi- cation. On the contrary, the maintenance of its struc- tures devolves new burdens upon the land — burdens calculated to materially impair the rights of the owner in the street." § 315. Interurban in rural highway held additional servitude. — This same court in the Schaaf case de- cided that the interurban railway operating at the side of the country highway immediately adjacent to the fields of the abutting property owner constitutes an additional servitude not covered by the dedication in that it interferes with his right of access from the highway to his fields. The same wires and poles were used for the additional purpose of conveying electricity for light, power and heat to private consumers for profit, which the court held constituted an additional servitude in that it created a further interference with the property rights of the abutting owner. The deci- sion is supported by the following argument which is characteristic of the cases holding that such uses con- stitute additional servitudes: 'Tn our opinion, the construction and operation of the railroad, as author- ized and proposed, must necessarily constitute a .-seri- ous obstruction to the plaintiffs' use of the public highway as a means of access to their farms, and an additional burden on the highway, not contemplated in its originally intended uses. The whole burden of the railway, with all of its authorized appurte- nances, is thrown entirely upon the side of the public road next to the plaintiffs' lands, and between them and the traveled part of the roadway. The nature of that burden is not different in any material respect from that imposed by the construction and operation §315 PUBLIC UTILITIES. 374 of a Steam railroad. The difference, if any, is merely in the degree of the burden, and not in its character, and can scarcely be less in any degree. . . . And in addition to this, the company is given authority to erect and maintain on the same side of the public roadway, and next to the plaintiffs' lands, all poles, which are of large dimensions, and all wires and other appliances, necessary to enable it to operate an elec- tric plant for supplying light, power, and heat to con- sumers, for profit. . . . All things considered, it is reasonably certain, from the facts found, that the prac- tical operation of such a road, within its capacity, must necessarily produce annoyance and inconvenience to the plaintiffs, and interfere with their property rights as abutting owners, of the same general character that result from the operation of steam railroads, and be- come an additional burden on the public highway, and taking of the plaintiffs' property, in the same sense. . . . And it is obvious, also, that within this rule the construction and operation of an electric plant, with its appliances, in connection with such railway, and on the same side of the traveled public roadway, for supplying heat, power, and Hght to consumers for profit, constitutes another and additional burden, which is an invasion of the plaintiff's property rights." CHAPTER XVII. EXEMPTION FROM TAXATION OF PROP- ERTY SUPPLYING MUNICIPAL PUBLIC UTILITIES. Section. 316. Municipal ownership facilitated by tax exemption. 317. Power to tax under federal constitution. 31S. Taxation under state constitutions. 319. Municipal property used for governmental and private pur- poses. 320. Public governmental property not taxed. 321. Municipal public utility property of municipality. 322. Public purpose entitles such property to exemption. 323. Power to produce revenue not the proper test. 324. Nature of purpose not changed by income received. 325. "Municipal purpose" defined. 326. Present use must be public. 327. Water-works a public purpose. 328. Purchased by taxation and under eminent domain. 329. Property beyond limits of municipality may be taxed. 330. Such property only taxable by statutory provisions. 331. Property exempt for ownership and purpose public. 332. Payment for service same as payment of taxes. 833. Kentucky rule as to municipal property. 334. Distinction between public and governmental property invalid. 335. Municipal water-works under Kentucky rule. 336. Limitation denying right to sell for nonpayment of taxes. 337. Statute taxing property producing income in Pennsylvania. 338. Property providing private service taxed In Vermont. 339. Property of private parties taxable. 340. Contract of municipality to exempt such property from tax- ation. 341. Contract treated as payment for public service. 342. Consideration of such contract must be reasonable. 343. Contract not in effect an exemption. 344. Strict construction denies validity of agreement. 345. Practical statement of the rule. 375 § 3l6 PUBLIC UTILITIES. 376 § 316, Municipal ownership facilitated by tax ex- emption. — The facility with which a municipal corpo- ration may increase its sphere of activity by assuming the operation of its own pubHc utilities is largely af- fected by the attitude of the government towards the property devoted to these purposes as expressed in the law with regard to its taxation. For even where taxes are imposed with the single idea of securing revenue, which, of course, is usually the case, a mu- nicipality, whose municipal public utility plants are not subject to either federal, state, or local taxation, can perform the desired service much more easily than it could were such property subject to taxation. The attitude of the courts with regard to the taxation of such municipal property, therefore, has an important bearing on the subject under consideration. §317. Power to tax under federal constitution. — This subject will be treated from the point of view of constitutional power and from that of judicial con- struction of existing statutes. Since the decision of the United States Supreme Court in the case of South Carolina v. United States, 199 U. S. 437, 50 L. ed. 261, it must be accepted as the law that the United States government has the power to tax all business under- takings of municipal corporations. In this case it was held that the state dispensaries for the sale of liquor were subject to the tax imposed by the law of con- gress taxing the sale of liquor. § 318. Taxation under state constitutions. — There is also no doubt as to the power of the states under the ordinary state constitutions to tax the property of municipal corporations. But generally such consti- tutional provisions do not require the taxation of even what is regarded as the private property of municipal 377 EXEMPTION FROM TAXATION. §319 corporations. The court of Kentucky, however, until recently, has taken the other view of the constitution of that state. ^ § 319. Municipal property used for governmental and private purposes. — When we consider the law as laid down by the courts in the absence of pertinent constitutional provisions, we must distinguish between the property of municipal corporations which is used for a distinctly governmental purpose and that which is used in connection with the operation by such cor- porations of a municipal public utility. § 320. Public governmental property not taxed. — The rule of law is universally accepted by all our courts to the effect that public property and the instru- mentalities of government, whether pertaining to the federal, state, or municipal government, which are held for public or governmental purposes, are not, in the absence of a statute to that effect, subject to tax- ation. Although this immunity from taxation is gen- erally confirmed expressly by constitutional provisions or statutory grants it is based on one of the most fundamental principles of government and good busi- ness usages and, in the absence of any express provi- sion, is implied by our courts from the necessity of preventing the functions and activities of government from being interfered with or impeded. This principle is strictly adhered to for the further practical purpose of avoiding the useless and inconsistent formality of permitting the government to tax itself to pay itself money which could only be finally secured by other taxation." 1 Clark V. Lousiville Water Co., 90 Ky. 515, 14 S. W. 602, 143 U. S. 1, 36 L. ed. 55; Newport v. Commonwealth, 106 Ky. 434, 50 S. W. 845, 45 L. R. A. 518. 2 People ex. rel. v. Assesors of Brooklyn, 111 N. Y. 505, 19 N. § 321 PUBLIC UTILITIES. 378 It is evident that no benefit could accrue from such a proceeding except to the taxing officers whose com- pensation would simply add so much more to the net amount necessary to be raised for the support of the government.* § 321. Municipal public utility property of munici- pality. — While the authorities are uniform in exempt- ing from taxation by implication property held and used by the municipality for public and governmental purposes, all the courts can not be said to be of the opinion that property of municipal corporations which is used by them in their private business capacity in furnishing such public utilities as gas, water, and elec- tric light is entitled to such exemption. In fact, as has been said, the court of one jurisdiction formerly held a statute expressly exempting such property from tax- ation to be unconstitutional.* § 322. Public purpose entitles such property to exemption. — It is submitted, however, that, if within the meaning of the constitution, the providing of these utilities is a public purpose and the property so used is devoted to a public trust, for the acquisition of which money may be raised by taxation because the purpose is a public or municipal one, the property so acquired and used should be entitled to exemption from taxation the same as other municipal property. As a matter of reason if the purpose is such a E. 90; Alpena City Water Co. v. Alpena, 130 Mich. 518, 90 N. W. 323; Altgelt v. San Antonio, 81 Tex. 436, 17 S. W. 75, 13 L. R. A. 383; Cartersville Water-works Co. v. Cartersville, 81 Ga. 689, 16 S. E. 70; Portland v. Portland Water Co., 67 Maine 135; Rochester v. Coe, 49 N. Y. S. 502. 3 Cooley, Taxation, p. 263, and cases cited. 4 Clark V. Louisville Water Co., 90 Ky. 515, 14 S. W. 502, 143 U. S. 1, 36 L. ed. 55. 379 EXEMPTION FROM TAXATION. § 323 municipal one, that these plants of the city providing public utilities may be acquired and maintained by taxation, it remains public or municipal from the point of view of the lav^ of taxation, and as a practical busi- ness principle the taxing of such property which is acquired and maintained wholly at the public expense by taxation, except as revenue may be derived from its use and operation, is simply taxing the property of the city for its own support with the necessary re- sult that nothing of any net value to the city is ac- quired to offset the expense of such taxation. K § 323- Power to produce revenue not the proper test. — Nor should the fact that revenue may be de- rived from the operation of such plants by the city change the principle of their exemption from taxation, for in no sense can that fact alter the nature of the use to which such property is put nor the purpose ac- complished by such use. And this is the test of its being a proper subject of support by taxation and of exemption from taxation. That revenue may be real- ized from such plants, tending to make them self- supporting, is no reason for subjecting them to the payment by taxation for their own support and that of the government to which they belong. This inci- dental matter of revenue does not change the nature of the use or purpose of such property from a public one and for municipal purposes generally, to one that is wholly private and that is conducted for the sole purpose of pecuniary profit rather than for the gen- eral welfare, and so liable to taxation, as it contended in some of the cases to which reference will be made." 5 CONNECTICUT.— West Hartford v. Board of Water Comrs., 44 Conn. 360. FEDERAL.— Bartholomew v. Austin, S5 Fed. 359. FLORIDA.— Tampa v. Kaunltz, 39 Fla. 683, 23 So. 416. § 324 PUBLIC UTILITIES. 380 § 324. Nature o£ purpose not changed by income received. — That pubhc property yielding revenue is not a proper subject for taxation on that account is well illustrated in the case of People ex rel. v. Asses- sors of Brooklyn, iii N. Y. 505, 19 N. E. 90, where GEORGIA.— Tarver v. Dalton, 134 Ga. 462, 67 S. E. 929, 29 L. R. A. (N. S.) 183. ILLINOIS.— Shelbyville Water Co. v. People, 140 111. 545, 30 N. E. 678, 16 L. R. A. 505. KANSAS.— Sumner Co. v. Wellington, 66 Kans. 590, 72 Pac. 216, 60 L. R. A. 850. KENTUCKY.- Clark v. Louisville Water Co., 90 Ky. 515, 14 S. W. 502, 143 U. S. 1, 36 L. ed. 55; Commonwealth v. Paducah, 31 Ky. L. 528, 102 S. W. 882; Covington v. Commonwealth, 107 Ky. 680, 39 S. W. 836, 173 U. S. 231, 43 L. ed. 679; Covington v. District of Highlands, 113 Ky. 612, 24 Ky. L. 433, 68 S. W. 669, 110 S. W. 338; Dayton v. Bellevue Water & Fuel Gaslight Co., 119 Ky. 714, 24 Ky. L. 194, 68 S. W. 142; Frankfort v. Commonwealth, 29 Ky. L. 699, 94 S. W. 648; Louisville v. Commonwealth, 62 Ky. 295, 1 Duv. 295, 85 Am. Dec. 624; Louisville v. McAteer, 26 Ky. L. 425, 81 S. W. 698, 1 L. R. A. (N. S.) 766; Negley v. Henderson, 21 Ky. L. 1394, 22 Ky. L. 912, 55 S. W. 554, 59 S. W. 19; Ryan v. Louisville, 133 Ky. 714, 118 S. W. 992. MAINE.— Maine Water Co. v. Waterville, 93 Maine 586, 45 Atl. 830, '49 L. R. A. 294. MASSACHUSETTS.— County of Essex v. Salem, 153 Mass. 141, 26 N. E. 431; Miller v. Fitchburg, 180 Mass. 32, 61 N. E. 277; Somer- ville V. Waltham, 170 Mass. 160, 48 N. E. 1092; Wayland v. County Comrs., 4 Gray (Mass.) 500. MICHIGAN.— Ludington Water-Supply Co. v. Ludington, 119 Mich. 480, 78 N. W. 558. NEBRASKA.— Nebraska Tel. Co. v. Lincoln, 82 Nebr. 59, 117 N. W. 284, 28 L. R. A. (N. S.) 221. NEW HAMPSHIRE.— Newport v. Unity, 68 N. H. 587, 44 Atl. 704, 73 Am. St. 626. NEW JERSEY.— State, Water Comrs. of Jersey City v. Gaffney, 34 N. J. L. 131. NEW YORK. — People ex rel. v. Assessors of Brooklyn, 111 N. y. 505, 19 N. E. 90; People ex rel. v. Hess, 157 N. Y. 42, 51 N. E. 410; Rochester v. Rush, 80 N. Y. 302. OHIO.— State ex rel v. Toledo, 48 Ohio St. 112, 26 N. E. 1061, 11 L. R. A. 729; Toledo v. Hosier, 54 Ohio 418, 43 N. E. 583; Toledo V. Yeager, 8 Ohio C. C. 318. PENNSYLVANIA.— Chadwick v. Maginnes, 94 Pa. St. 117. 381 EXEMPTION FROM TAXATION. § 325 the court passed upon the matter of the right of the defendant city to tax property within its Hmits be- longing to the city of New York and used by such city for a landing place for its ferry which was being operated between the two cities. The reasoning of the court in refusing such right of taxation follows: "We think the landing place was not taxable, upon the principle that property used for public purposes, is not a taxable subject, within the purview of the tax laws, unless specially included. . . . There would be manifest incongruity in subjecting to taxation for public purposes property dedicated to or acquired un- der legislative authority for public and governmental use. . . . The fact that the city of New York op- erates the ferry through lessees, and derives its rev- enue from the rental, and not from the operation of the ferry by its immediate agents and servants does not make the franchise or the landing taxable. . . . The tax is imposed on the land as the property of the city, and not on the lessees in respect of their in- terest." § 325. "Municipal purpose" defined. — To this same effect is the case of Somerville v. Waltham, 170 Mass. 160, 48 N. E. 1092, which is of interest for the further reason that it assists in defining the scope of the term "municipal purpose" in connection with this matter of taxation. The court said: "There is nothing in our TENNESSEE.— Smith v. Nashville, 88 Tenn. 464, 12 S. W. 924, 7 L. R. A. 469. UNITED STATES.— South Carolina v. United States, 199 U. S. 437, 50 L. ed. 261. VERMONT.— Swanton v. Highgate, 81 Vt. 152, 69 All. 667. 16 L. R. A. (N. S.) 867. VIRGINIA.— Southern Bell Tel. & T. Co. v. Harrisonburg. Ill Va. 494. 69 S. E. 348, 31 L. R. A. (N. S.) 327. WISCONSIN.- Monroe Waterworks Co. v. Monroe, 110 Wis. 11, 85 N. W. 685. § 326 PUBLIC UTILITIES. 382 Statutes to prevent a city or town from acquiring by- purchase land in another city or town for municipal purposes, if it is necessary or expedient for the inter- ests of its inhabitants to do so. . . . While there is no specific exemption from taxation in Pub. st. c. ii, § 5, of the property of counties or municipal corpora- tions, yet it is well settled that such property, when appropriated to public uses, is exempt from taxation. . . . As the land in question was purchased for the purpose of obtaining therefrom gravel for the con- struction and repair of streets in the plaintiff city, and has since been used for that purpose, we have no doubt that it is appropriated to public use, and is exempt from taxation." § 326. Present use must be public. — That property which had been purchased for the purpose of some time being used for enlarging the jail in a certain town, but which had not been actually appropriated to that purpose and was being rented to private par- ties, will not be held exempt from taxation by impli- cation, because it is not devoted to a public use, was held in the case of County of Essex v. Salem, 153 Mass. 141, 26 N. E. 431. In this case the court stated this limitation on the general principal as follows: "We are of the opinion that, in the absence of any express exemption of the property of counties from taxation, an exemption can be implied only when the property is actually appropriated to public use." § 327. Water-works a public purpose. — With ref- erence, especially to the matter of the exemption from taxation of municipal property devoted to the supply- ing of such public utilities as gas, water, and electric light for the city and its citizens, the following cases are discussed to illustrate the principle of law involved. 383 EXEMPTION FROM TAXATION. § 328 The case of Wayland v. County Commissioners, 4 Gray (Mass.) 500, in 1855, decided that lands taken by the city of Boston under an act, Statutes, Massa- chusetts, 1846, c. 167, for supplying that city with water, were not liable to taxation within such city. The court indicated its position by saying: "Regard- ing this land as taken and holden for the public use, and the buildings erected upon it as necessarily inci- dent to such use, they are both to be held public works, and as such exempted from taxation. It can only be on the ground that this land was taken for public uses, that the exercise of the right of emi- nent domain by the government can be justified. . . . It would be difScult, we think, to find any class of cases in which the right of eminent domain is more justly or wisely exercised than in provisions to supply our crowded towns and cities with pure water — pro- visions equally necessary to the health and safety of the people." § 328. Purchased by taxation and under eminent domain. — This principle, which is firmly established in the law and supported by good sense and good busi- ness principles, was clearly enunciated by the court of New York, in 1880. in the case of Rochester v. Rush, 80 N. Y. 302, as follows: "The property as- sessed forms a part of a system of water-works, im- posed upon the city of Rochester by direct legislative enactment . . . for the use of its inhabitants, and the extinguishment of fires . . . and the work un- dertaken in pursuance of its directions must be re- garded as executed for the public good, and the prop- erty therefore held for public purposes. It is itself the result or product of taxation. It stands in the place of the money so raised, and therefore can not be taken or diminished by taxation. This is clearly § 329 PUBLIC UTILITIES. 384 SO Upon principle, but it is also well settled by au- thority. ... I am unable to perceive that in any sense the water-works can be regarded as the private property of the city as distinguished from property held by it for public use. These considerations lead to the opinion that the property was not taxable, and that the proceedings on the part of the assessors of the town of Rush, in regard thereto, can not be sus- tained." This case is in harmony with the great weight of authority on this subject and its reasoning has com- mended itself to almost all our courts. In so far, how- ever, as the court refused the right of one municipality to tax the property of another within its limits, al- though devoted to such a public use as the furnishing of water to its inhabitants, the law of this jurisdiction has been changed expressly by statute as appears from the case of People ex rel. v. Hess, 157 N. Y. 42, 51 N. E. 410, which decided in 1898 that the property belonging to the water-works system of the relator, the city of Amsterdam, located in the town of Perth, was subject to taxation. The court explains its deci- sion by saying: "It is conceded that prior to this statute, chapter 908 of the laws of 1896, the property assessed was not liable to taxation, as it was held by a municipal corporation for public use. This exemp- tion rested on no statutory provision, but upon a principle of the common law supported by numerous cases in England and this country. We are of the opinion the Tax Law of 1896 has changed this rule and that property held by a municipal corporation for public use, but located beyond the boundaries of the municipality is subject to general taxation." § 329. Property beyond limits of municipality may be taxed. — This limitation on the immunitv from 385 EXEMPTION FROM TAXATION. § 33O taxation of municipal water-works property as made expressly by statute was fully accepted as binding on the court. The right of the legislature to tax such property of the municipality has not been doubted, although the expediency of doing so for the general purposes of taxation may be open to question. Where a large portion of such property is within the limits of another town or city the courts, under statutory provision for doing so, concede that the latter taxing district is entitled to revenue from such property in the form of taxes and the cases of Newport v. Unity, 68 N. H. 587, 44 Atl. 704, 73 Am. St. 626, and Miller V. Fitchburg, 180 Mass. 32, 61 N. E. 277, so hold. This same limitation would seem to have been in- tended by the statute of New Jersey and accepted by the court in its decision of this question in State, Water Commissioners of Jersey City v. Gaffney, 34 N. J, L. 131. The statute in question provided that: "All real estate belonging to the mayor and common council of Jersey City, and held within the county of Hudson for purposes connected with the works for supplying said city with water shall hereafter be ex- empt from taxation." In holding such property with- in said county not liable for taxation the court said: "It is true that the property was not in actual use when the assessment was made, but there was then no indication of any abandonment of the purpose to use it for a reservoir; on the contrary, it is clear that it was held for that necessary purpose, and without being used for any other." § 330. Such property only taxable by statutory provisions. — The general exemption of such property without any limitation as to location was allowed as early as 1877 in the case of West Hartford v. Board of Water Commissioners, 44 Conn. 360, and this rule 25— Pub. ut. § 330 PUBLIC UTILITIES. 386 seems to prevail still in the particular jurisdiction. The action arose out of an attempt on the part of the plaintiff municipality to tax that part of the water- works property of the city of Hartford which was within the territory of the former city. In refusing this right the court said: "The [defendant] Board of Water Commissioners were authorized by the legis- lature to purchase and hold land in the town of West Hartford for the purpose of storing and carrying it thence to the city of Hartford for the use of its in- habitants. . . . Money in the keeping of a munici- pality as the result of the exercise of its power of tax- ation, for one public use, is not to be made to pay tribute to another public use. It has ceased to be taxable property in any legislative or judicial sense. The introduction of a supply of water for the preser- vation of the health of its inhabitants by the city of Hartford is unquestionably . . . for the public good in the judicial sense of that term; not, indeed, as the discharge of one of the few governmental duties imposed upon it, but as ranking next in order. . . . Besides the fact that rents at the present time are sufficient to pay the annual charges may be only a fortunate occurrence; this state of things may not continue [and does not make its property subject to taxation]." The same principle was established by the court of Ohio, in 1894, in the case of Toledo v. Yeager, 8 Ohio C. C. R. 318, as applied to a municipal gas plant. The constitution of that state provided that, "public property used exclusively for any public purpose may by general laws be exempted from taxation." After finding the use of this p^'operty to be public on the authority of the deci'/ion of the case of State ex rel. v. Toledo, 48 Ohio St. J 12, 26 N. E. 1061, 11 L. R. A. 729, the court held that under this case the legisla- 387 EXEMPTION FROM TAXATION. § 33 1 ture had the authority to exempt this property from taxation and that it had done so. The court con- cluded its decision by saying: "The evidence shows this property to be devoted to the very purposes which are named in the statute, and which the Supreme Court has declared to be public purposes." These decisions were sustained and this principle was given application in exempting from taxation municipal prop- erty used to supply natural gas to the municipality and its inhabitants by this court in the later case of Toledo v. Hosier, 54 Ohio 418, 43 N. E. 583, where the court said: "The constitutional restriction upon the power to exempt property from taxation requires that the exempted property must be used exclusively for a public purpose. That the property in question is so used is determined in State v. City of Toledo, 48 Ohio St. 112, 26 N. E. 1061." §331. Property exempt for owrnership and pur- pose public. — In 1903 this principle of exemption was clearly and fully enunciated by the court of Kansas in the case of Sumner Co. v. Wellington. 66 Kans. 590, 72 Pac. 216, 60 L. R. A. 850, where the following language was used: "The supplying of water to the inhabitants, while not strictly a governmental func- tion, so much affects the health and welfare of the people as to be closely akin to it. . . . The owner- ship and the purpose being public, there are good rea- sons why the property should be exempted from tax- ation. . . . The statute makes public ownership of property the ground of immunity from taxation, and as the plant in question is absolutely owned by the city, it is strictly within the terms of that exemption. The fact that, in establishing and carrying on a sys- tem of water-works, the city furnishes water to citi- zens and consumers for rental charges, does not make § 332 PUBLIC UTILITIES. 388 it a mere business enterprise nor does it affect the exemption. The earnings derived from the water fur- nished for domestic use and to consumers is, as we have seen, paid into the city treasury, and used in carrying on the city government and thus inures to the benefit of the people of the municipaHty." § 332. Payment for service same as payment of taxes. — To the same effect is the case of Smith v. Nashville, 88 Tenn. 464, 12 S. W. 924, 7 L. R. A. 469, where the court in upholding the exemption of the property of the municipal water-works from taxation said : "To provide the city with water-works is very broad and comprehensive and was obviously intended to authorize the corporation to furnish the inhabitants of the city with water. Having accepted the charter, and undertaken to exercise this authority in the mat- ter detailed by the witness, it can not be held that the city in doing so is engaging in a private enterprise, or performing a municipal function for a private end. It is the use of corporate property for corporate pur- poses in the sense of the Revenue Law of 1877. It can make no difference whether the water be furnished the inhabitants as a gratuity or for a recompense, the sum raised in the latter case being reasonable and applied for legitimate purposes. So raising a fund to help defray the expense of operating the water-works, and to keep down the interest of the city's indebted- ness, incurred in the construction thereof, is no more engaging in business for gain and profit than would be the assessment and collection of taxes for that or any other legitimate object. To the extent that money is realized by sale of water, if it be so termed, the ne- cessity of laying taxes in the usual way is diminished." § 333. Kentucky rule as to municipal property. — This sound, legal and business principle exempting 389 EXEMPTION FROM TAXATION. § 334 from taxation municipal property devoted to the pub- lic use of supplying the city and its inhabitants with municipal public utilities has been denied application and refuted as unsound by decisions of the court of Kentucky. The case of Louisville v. Commonwealth, 62 Ky. 295, I Duv. 295, 85 Am. Dec. 624, decided in 1864, shows the attitude of that court to be a peculiar one. In the course of its decision on this subject of tax exemption the court defined its position by say- ing: "Whatever property, such as courthouses, pris- ons, and the like, which becomes necessary or useful to the administration of the municipal government, and is devoted to that use, is exempt from state taxa- tion; but whatever is not so used, but is owned and used" by Louisville in its social or commercial capacity as a private corporation, and for its own profit, such as vacant lots, market houses, fire engines, and the like, is subject to taxation." § 334. Distinction between public and govern- mental property invalid. — That this should not be the law is beyond question for the application of such a rule might result in the total destruction of cities by doing away with their fire departments in permitting their sale for nonpayment of taxes. The position of this court can not be defended from the standpoint of law or reason and its practical application would be highly dangerous. Speaking of this decision. Judge Cooley. in his excellent work on Taxation, says, page 267: "But this, unless confined to the case of special assessments, would seem to be limiting the implied exemption unreasonably, and certainly more than other cases limit it." § 335. Municipal water-works under Kentucky rule. — This same court in 1890, in the case of Clark § 335 PUBLIC UTILITIES. 39O V. Louisville Water Co., 90 Ky. 515, 14 S. W. 502, 143 U. S. I, 36 L. ed, 53, held unconstitutional a stat- ute of that state exempting from taxation all of the property of the defendant company, the entire stock of which was owned by the city of Louisville. The court found that, "the first section of our Bill of Rights provided that 'no man or set of men are entitled to exclusive, separate public emoluments or privileges from the community but in consideration of public service.' We think it evident that the furnishing of water by the company to the city for fire protection free of charge was not what induced the passage of the act. . . . The reason which induced the at- tempted granting of the exemption must, therefore, have been, as indeed the act recites, that the sinking fund of the city, or, in other words, the city itself, owned all the water company stock. The question, therefore, is, did the fact that the sinking fund, or, in other words, the city, owned the water company stock, constitute a valid consideration for the exemption? A municipal corporation has a double character. In one it acts strictly in its governmental capacity. In the other for the profit or convenience of its citizens. Considered in the latter light, it occupies the attitude of a private corporation merely, while in the former it is an arm of the state government or a part of its political power. . . . The property necessary to the exercise of those duties which are strictly govern- mental is exempt from taxation, but this is not so of that which is held by the municipality for the comfort of its citizens, individually or collectively, or for money-making purposes merely. . . . The fact that the furnishing of water may incidentally protect from fire the public buildings of the state will not support the exemption." 391 EXEMPTION FROM TAXATION. § 335 The law of this case is followed and extended to a general application of this rule denying the right of exemption to such property in the case of Covington V. Commonwealth, 107 Ky. 680, 39 S. W. 836, 173 U. S. 231, 43 L. ed. 679, decided in 1897. This decision was affirmed in 1900 in Negley v. Henderson, 22 Ky. L. 912, 21 Ky. L. 1394, 59 S. W. 19, 55 S. W. 554. And while on appeal the judgment of this first-men- tioned case was not reversed, the Supreme Court of the United States said: "However much we may doubt the soundness of any interpretation of the state constitution implying that lands and buildings are not public property used for public purposes when owned and used under legislative authority by a municipal corporation, one of the instrumentalities or agencies of the state, for the purpose, and only for the purpose, of supplying that corporation and its people with water, and when the net revenue from such property must be applied in the improvement of public ways, we must assume, in conformity with the judgment of the highest court of Kentucky, that section 170 of the constitution of that commonwealth can not be con- strued as exempting the lands in question from taxa- tion. In other words, we must assume that the phrase 'public purposes' in that section means 'governmental purposes,' and that the property here taxed is not held by the city of Covington for such purposes, but only for the' 'profit or convenience' of its inhabitants, and is liable to taxation, at the will of the legislature, un- less, at the time of the adoption of the constitution of Kentucky, it was exempt from taxation in virtue of some contract, the obligation of which is protected by the Constitution of the United States." This court reaffirmed and continued to follow the Clark case in Louisville v. McAteer, 26 Ky. L. 425, 81 S. W. 698, I L. R. A. (N. S.) 766, decided in 1904, § 336 PUBLIC UTILITIES. 392 although it expressly appeared that "the city owns all its stock, or did own all but one or two shares for the years in question," and that "the plan is and has been to operate the plant so as to place the price of water to consumers at the lowest possible figure," for as the court said: "Property owned by or on behalf of the public, but not used for public purposes, is not ex- empt. . . . But although its stock is owned by the city, and the property is used in supplying the citizens water, the water-works are not 'used for public pur- poses,' within the meaning of section 170, supra, and are subject to taxation for state and county purposes. Louisville v. Com., i Duv. 295, 85 Am. Dec. 624; Neg- ley V. Henderson, 21 Ky. L. Rep. 1394, 55 S. W. 554, 22 Ky. L. Rep. 912, 59 S. W. 19; Clark v. Louisville Water Co., 90 Ky. 522, 14 S. W. 502. . . . Only those who consume its water pay for it. Many thou- sands of citizens who are taxpayers do not patronize the water company at all, but depend for their water supply on private wells and cisterns, or upon the pub- lic wells. If the water company is compelled to pay a municipal tax, it must collect the money with which to pay it, not by taxation, but from its water rates — from its customers. This will result in those who use that water paying a slightly increased rate for it." § 336. Limitation denying right to sell for non- payment of taxes. — It should be noted, however, that this court in Covington v. District of Highlands, 113 Ky. 612, 68 S. W. 669, 24 Ky. L. 433, no S. W. 338, in following the law enunciated in the Clark case, supra, denied the right to sell the municipal water-works property for nonpayment of taxes assessed against it; but provided in case of failure to make such payment, a receiver for the property might be appointed to col- lect funds with which to make such payment. While 393 EXEMPTION FROM TAXATION. § 336 this may indicate the desire of this court to show some consideration for the preservation of the integrity of such a system, in the interest of the public which is absolutely dependent upon its continued operation, it is submitted that the effect of a receiver in the great majority of cases would be fatal to the successful con- tinuation of such a system, and would result in its final dissolution and destruction. In reversing the case of Covington v. Common- wealth, 107 Ky. 680, 39 S. W. 836, 173 U. S. 231, 43 L. ed. 679, and the subsequent cases which followed the rule therein announced, this court in the case of Frankfort v. Commonwealth, 29 Ky. L. 699, 94 S. W. 648, decided in 1906, said: "If each municipality in its prescribed sphere is imperium in imperio and ad- ministers the law for Kentucky, it is difficult to under- stand why it should be required to pay taxes to the state and county on property held for public purposes, any more than the city should require the county and state to pay taxes on property held by them situated within the municipality. . . . This being true, it would seem that, when taxes can be levied and col- lected for public purposes only, then the property acquired, with the taxes thus levied and collected, should be regarded as acquired and used for public purposes. Municipalities have no funds except those arising from the levy and collection of taxes. They are necessarily levied and collected for public pur- poses. The property which they are authorized to ac- quire of necessity must have been acquired with the money derived from the levy and collection of taxes and must necessarily be regarded and acquired for public purposes. "The legislature authorizes municipalities to levy and collect taxes for the purpose of building and main- taining water-works and lighting plants. They are § 336 PUBLIC UTILITIES. 394 acquired for public purposes and maintained for public purposes. They are paid for with money that arises from the levy and collection of taxes which can only be levied and collected for public purposes. . . . Therefore the legislature has recognized water-works and lighting plants as public necessities. . . "We rather base our conclusion upon the fact that the municipality, by reason of its agency of the state government, is required to look after the health of its citizens, and it supplies water to them for compensa- tion as the best means of accomplishing that purpose, and that any excess of income over the expenses of maintaining the water-works goes, not to the munici- pality in its private capacity, but to it in its public capacity, for the relief of the citizens of public bur- dens." This decision was affirmed in 1907 in Common- wealth V. Paducah, 31 Ky. L. 528, 102 S. W. 882. And finally this court, in 1909, in the case of Ryan v. Lou- isville, 133 Ky. 714, 118 S. W. 992, said: *Tn the case of Bell, Sheriff, v. Louisville Water Company, 106 S. W. 862, this court held that the same property was subject to taxation because the title was at that time vested in a corporation known as the Louisville Water Company, although the whole of the capital stock of that company was owned by the city of Lou- isville. Immediately following the decision in that case, the water company paid all taxes then due or claimed, together with the interest and penalties re- sulting from their previous nonpayment. Since that time, however, and prior to September i, 1908, the entire water-works plant, its franchise, and effects were transferred and conveyed by the Louisville Water Company to the appellee city of Louisville, and the title thereto, at the time it would have been assessed 395 EXEMPTION FROM TAXATION. § 337 by appellant but for the injunction preventing its as- sessment, was vested in the city of Louisville. . . . "Conceding the transfer of the property to the city to be valid, does that relieve it from the burden of taxation? The question must be given an affirmative answer, unless this court should conclude to overrule numerous recent cases, in which it was held that such property can not be taxed, because relieved of that burden by section 170 of the constitution, which de- clares: 'There shall be exempt from taxation public property used for public purposes'. As the city of Louisville is but a political subdivision of the state, and may under its charter own and maintain, for the health, safety, and comfort of its inhabitants, the sys- tem of water-works to which it has legally acquired title, such use of the property, being a use for public or governmental purposes exclusively, exempts it from taxation. This conclusion is so well supported by the subjoined list of authorities that further discussion of the matter would be a work of supererogation. Com- monwealth V. City of Covington (Ky.), 107 S. W. 231, 14 L. R. A. (N. S.) 1214; City of Frankfort v. Com- monwealth (Ky.). 94 S. W. 648; City of Owensboro V. Commonwealth, 105 Ky. 344, 49 S. W. 320, 44 L. R. A. 202; City of Covington v. District of Highlands (Ky.), iioS. W. 338." § 337. Statute taxing property producing income in Pennsylvania. — The court of Pennsylvania, as early as 1880, in the case of Chadwick v. Maginnes, 94 Pa. St. 117, denied the right of a municipal water-works plant to exemption from taxation under a statute sub- jecting to taxation all property not expressly exempt, and especially property from which any income on revenue is derived. In this decision the court found that: "While the plaintiffs in error are in one sense § T,2>^ PUBLIC UTILITIES. 396 a public corporation, the profits and benefits enure specially to the citizens of the South Ward, even to the extent it may be of relieving them from municipal taxes. Surely it was never intended that such a cor- poration should be exempt from all taxation, while others are compelled to bear their share of the public burden." While the law of this case is unsound under practically all the authorities, we have found it is the legislature rather than the court that is responsible for the inconsistent position taken by this case. In providing that all property not expressly exempt and especially that from which any revenue is derived should be taxable, it is submitted that an erroneous distinction was made for the classification, for, under the argument advanced earlier in this discussion and by the cases cited, the fact that revenue is realized from municipal property is not a sound basis for sub- jecting it to taxation. § 338. Property providing private service taxed in Vermont. — The court of Vermont, however, in the case of Swanton v. Highgate, 8i Vt. 152, 69 Atl. 667, 16 L. R. A. (N. S.) 867, also decided in 1908, contrary to the general rule, that under the statutes of that state municipal property located in different taxing districts and supplying light for public and private use was not exempt, for in furnishing the private supply the use was not public within the meaning of the par- ticular statutory provision. In the course of this un- usual decision the court said : "The plaintiff claims that said property was exempt from taxation because used for a public use within the meaning of the statute exempting property thus used. The property was then used, and is still used, to light the plaintiff's streets, to supply its inhabitants and their public build- ings with lights, to light the streets and supply the 397 EXEMPTION FROM TAXATION. § 339 inhabitants and the piibHc buildings of that part of the physical village of Swanton that is without the corporate limits of the plaintiff, and within the town of Swanton, and, in like manner to light the streets and supply the inhabitants of the villages of Highgate Center and Highgate Falls in the town of Highgate. . . . The rest of the property was put to a mixed use, partly public and partly private, with no way of telling how much was put to either use, and therefore the whole was taxable." § 339- Property of private parties taxable. — Where the property providing municipal public utilities is private and not owned by the municipality itself it can not be exempt from taxation, because it is not public property, being used for a public or municipal purpose, but it is private property invested for profit. An agreement of a municipality with the municipal public utility owned and controlled by private capital exempting its property from taxation as such is in- valid for the reason that it is beyond the power of the municipality to exempt such property from taxa- tion, unless power to do so has been clearly and ex- pressly conferred on the municipality by the legisla- ture, acting within constitutional authority. § 340. Contract of municipality to exempt such property from taxation. — As the municipality can not exempt this class of property from taxation, because it is private and invested for profit, either gratuitously or for an adequate consideration, the courts will set aside as ultra vires any such attempt on the part of the municipality. The courts, however, are not agreed as to the effect and validity of an agreement made by the municipality with the public service corpora- tion to pay as a consideration for the municipal pub- § 341 PUBLIC UTILITIES. 398 lie Utility service rendered it the amount of municipal taxes or to reimburse or forego the collections of such municipal taxes to the extent of the value of the mu- nicipal public utility service furnished. The decisions refusing to uphold such an agreement are based on a strict technical construction of the contract, which often does in words provide for exempting such prop- erty from taxation, or of an agreement waiving the collection of such taxes in the amount and to the ex- tent that the municipal public utility service is fur- nished. § 341. Contract treated as payment for public serv- ice. — Since the municipality can not actually make such exemptions or waive the collection of such taxes the courts refusing to uphold such an agreement are supported by the authorities generally, in a strict lit- eral construction of the principle prohibiting the mu- nicipality from doing so. On the other hand, a num- ber of decisions give force and effect to such an agree- ment and uphold rights of the parties to it where the consideration is a fair and adequate one on the ground that it is practical and in effect only an agreement of the municipality to pay a fair charge for the service rendered it by placing such amount to the credit of the taxes assessed against the corporation providing it with such service; so that while the express agree- ment may provide for certain exemption from taxation in effect it only amounts to the municipality retaining the money due for the service instead of paying it to the public service corporation and then collecting it back as taxes. The practical aspect of this principle is well stated by the court in the case of Bartholmew v. Austin, 85 Fed. 359, decided in 1898, where the court said: "We do not construe the contract as granting an exemption 399 EXEMPTION FROM TAXATION. § 342 from taxation. 'Exemption' means free from liability, from duty, from service. It is a grace, a favor, an immunity; taken out from under the general rule, not to be like others who are not exempt, to receive, and not make a return. This being the meaning of the term, the transaction presented in section ii is not an exemption from taxation. The city needed the water for the several purposes named. To supply it re- quired time, expense, and labor. These things were of value. The taxes to be levied were to be legal obli- gations for money. The obligations were of value. On a comparing of values, the parties being compe- tent to contract, it was concluded that the values were equal, and the one should be offset by the other. There is no claim that the one value was not as great as the other. No imposition on the one hand, nor favoritism on the other, can be inferred. . . , Even if section ii should be construed as granting an ex- emption from taxation, and therefore void, the contract is not necessarily and thereby void, and for water actually furnished by the City Water Company, under section ii, a recovery may be had on a quantum valebant." § 342. Consideration of such contract must be rea- sonable. — The same principle is differently expressed and illustrated by another practical decision by the court in the case of Maine Water Co. v. Waterville, 93 Maine 586. 45 Atl. 830, 49 L. R. A. 294, decided in 1900, where the court in upholding such an agree- ment says: "But what we hold is that a municipality may, for a reasonably adequate consideration, in the way of service rendered to it for municipal purposes, agree to make compensation therefor, for a term of years not unreasonably long, either in whole or in part, by reimbursing the company, in whole or in part, § 343 PUBLIC UTILITIES. 4OO the amount that the company performing the service may be obliged to pay as taxes assessed upon its prop- erty. We think that this conclusion is sustained both by reason and the weight of authority. . . . We are therefore forced to the conclusion, from the value of the water service that has been actually furnished — than which no better evidence could be produced — that the contract when made was fair and reasonable; that the city thereby received an amply adequate con- sideration for its agreement, and has since received a fair equivalent for its payments; and that the contract was not intended as the cover of an illegal attempt to exempt the company's property from taxation." § 343* Contract not in effect an exemption. — That such an agreement does not in effect amount to an exemption of the property from taxation follows nec- essarily from the fact that the value of the service rendered is equal to the amount of the taxes credited to the account of the corporation furnishing the serv- ice for, as the court says in the case of Ludington Water-Supply Co. v. Ludington, 119 Mich, 480, 78 N. W. 558, decided in 1899: "The contract does not pur- port to provide that the property of plaintiff shall not be assessed. Its terms indicate that it was intended by both parties that it would be assessed, and that the plaintiff would pay the taxes on the property up to a certain amount, and the defendant all in excess, as a part of the consideration for the supply of water. The city no more exempts the property of the plain- tiff from taxation by such an agreement than does the mortgagor who agrees to pay the taxes levied against the mortgaged property exempt the mortgaged prop- erty from taxation. Possibly neither possesses the power to exempt property from taxation. Certainly, neither has done it. . . . We do hold that an agree- 40I EXEMPTION FROM TAXATION. § 344 ment to pay a portion of the taxes which may be as- sessed against plaintiff, made upon good considera- tion, is not an exemption from taxation in any proper legal sense." § 344. Strict construction denies validity of agree- ment. — The case of Dayton v. Bellevue Water & Fuel Gaslight Co., 119 Ky. 714, 24 Ky. L. 194, 68 S. W. 142, decided in 1902, refuses to uphold an agreement ex- empting the property of the defendant company from municipal taxes for a fixed period by a strict literal construction of the principle, universally established, that the municipality has no such power unless clearly and expressly conferred upon it in accordance with constitutional provisions to that effect. In the course of this decision the court says: "The city also agreed that the property used in the construction of the works should be exempt from all city taxes, and that the contract should be in force for a period of twenty-five years from the date thereof. . . . It is clear from this case that the general assembly could not have authorized the city of Dayton to have exempted the property of appellee from taxation. But there is noth- ing in the act empowering the board of council of Dayton to contract for water for fire and domestic purposes which authorized them, either expressly or by implication, to exempt appellee's property from taxation. But it is urged that this provision of the contract is not really an exemption from taxation, but a part of the consideration which entered into the con- tract between the parties, and is, for this reason, not in conflict with either the letter or spirit of the con- stitution. This proposition we think unsound." A decision to the same effect was rendered by the Supreme Court of Florida in the case of Tampa v. Kaunitz. 39 Fla. 683, 2^ So. 416, in 1898, the court 26— Pub. ut. § 345 PUBLIC UTILITIES. 402 saying: "We have not been cited to any statute of this state authorizing the city to exempt this species of property from taxation, nor to make a contract so to do. Without vaHd legislative authority, no city or tow^n has pov^er to bind itself, by contract, either to forbear to impose taxes on particular property, or to impose them only under given limitations, or on cer- tain given conditions. Black, Tax Titles, § 63 ; Cooley, Tax'n, p. 200; I Blackw., Tax Titles, §§ no, 117." § 345. Practical statement of the rule. — The Su- preme Court of Wisconsin, moreover, in the recent case of Monroe Waterworks Co. v. Monroe, no Wis. II, 85 N. W. 685, decided in 1901, furnishes a compre- hensive statement of this principle from the practical viewpoint, as follows: "Where, however, the agree- ment is express, and the intention evident, to exempt property and release it from tax burdens, it is void, and will not be enforced. . . . The rule is equally well established that it is competent for a city and a company to agree that, as the price of services to be rendered, the city will pay a sum equal to the amount of municipal taxes to be levied. Of course, it must appear that the sum so stipulated to be paid is a fair and just allowance to compensate for the actual value of the services to be rendered, and that the stipulation is bona fide, and not in the nature of an evasion of the law against exemption from taxes." CHAPTER XVIII. SALE OF PROPERTY PROVIDING MUNICIPAL PUBLIC UTILITIES. Section. 346. Municipal control by limitation on alienation. 347. Attitude of courts on municipal control and ownership. 348. Trust property devoted to public use can not be sold without statutory authority. 349. Duty to render service personal. 350. Alienation of property permitted in public interest. 351. Municipal water-works public property like parks. 352. Municipality trustee for public of its water and light plant. 353. Transfer of property by lease must be authorized by statute. 354. Duty to serve public can not be evaded by alienation. 355. Municipal ownership conserved for public interest. 356. Public interest and private gain antagonistic. 357. Abandoned property may be alienated by municipality. 358. Pipe lines on failure of gas may be alienated in public in- terest. 359. Transfer to municipality favored in interest of public. 360. Municipal option to purchase provided in franchise. 361. Legislative authority must be express to permit transfer. 362. Franchise personal to grantee and not transferable. 363. Combination agreements defeating competition are invalid. 364. Contracts fixing rates or combining competitors invalid. 365. Stock control of competing concerns invalid. 366. Forced sales of such property also prohibited. 367. Right of alienation expressly given by statute valid. § 346. Municipal control by limitation on aliena- tion. — The ease with which municipal corporations may themselves provide municipal public utilities or control them in the hands of private capital depends, in an inverse ratio, upon the power which corporations providing such utilities have to alienate their property. For experience has shown that in almost all cases pri- vate corporations stand ready to take over the opera- tion of municipal public utilities where municipal cor- 403 § 347 PUBLIC UTILITIES. 404 porations are becoming embarrassed or are reported to have made a failure of their operation. Indeed, it has frequently been charged that influences have been brought to bear to secure an inefficient operation by- municipal corporations of such public utilities with the purpose in view of cultivating among the people a feeling hostile to municipal and favorable to private operation. And obviously the power of municipal reg- ulation and control over the privately owned munici- pal public utility is greatly enhanced by limitations placed on the power of such corporations to sell and convey their property which is useful and necessary in providing its public utility service. § 347. Attitude of courts on municipal control and ownership. — The attitude of the courts in regard to the power of municipal corporations to dispose of mu- nicipal public utility plants has therefore an important bearing on the question of the attitude of the courts toward an increase in the sphere of municipal activity in the matter of the ownership or control of municipal public utilities. § 348. Trust property devoted to public use can not be sold without statutory authority. — The supply- ing of municipalities and their citizens with such pub- lic utilities as gas, water, electric light, transportation and communication for public and private use by the municipal corporation or by private capital is the per- formance of a public duty, and the property so used is charged with a public trust and is devoted to a pub- lic purpose. Such property is dedicated irrevocably to the performance of this trust due the public and for its benefit and that of the inhabitants of the munici- pality. It is a fundamental principle that the trustee can not disable itself from performing the trust by disposing of the property or means necessary to carry 405 SALE OF PROPERTY. § 349 out the purposes of the trust relation without express authority from the party creating the trust or direct- ing its administration. The power does not inhere in the trustee to defeat the carrying out of the trust by disposing of the trust property. The interests of the beneficiaries under the trust are guarded against any loss on this account and conserved by the courts hold- ing that such property can not be disposed of by the municipality or other corporation owning it unless under authority conferred specially by statute. The state alone, which attends to the matter of creating these trusts as well as to the selection of the trustees, has the power to provide for their destruction by sale or for their diversion as to trustees by lease or assign- ment. Having the sole power to create, the state alone has the ability to provide for a change of trustee or a winding-up of the trust entirely; so that in the absence of express legislative authority the courts re- fuse to imply the right in the municipal or other cor- poration, after having accepted the trust, to renounce its duties thereunder or to dispose of the trust prop- erty and thus defeat the further carrying out of the trust. Such corporation must continue to perform the duties to the public after having once assumed the trust and undertaken to serve the public needs and those of the inhabitants. Dillon, Alun. Corp. §§ 991, 1 102, and cases cited. § 349. Duty to render service personal. — When the power to own and operate such plants for supplying public utilities has been granted to and accepted by any corporation, a franchise is conferred upon it for the purpose of securing some advantage to the public and for the benefit of the inhabitants in their private capacity. Such beneficiaries have the right to com- plain in case of its relinquishment. This rule is based § 350 PUBLIC UTILITIES. 406 on the general principle of trusts as well as upon the rule that quasi-public corporations are formed in order to serve the public. The duty imposed is a personal one and the right to perform it, together with the special privileges pertaining thereto, is granted per- sonally as a franchise, on condition that the grantee continue in personal control of such power and in the performance of its duties. The carrying out of the duties of serving the public under such a franchise is regarded as of special importance and the obligation is recognized as being peculiarly personal. Having selected a particular corporation which is responsible and capable of executing the duties of the trust to the public for which are granted special privileges, amount- ing in most cases practically to a monopoly, the law does not permit it to transfer its rights and the ac- companying duties to another party which may or may not be responsible and capable of adequately serving the municipality and its inhabitants. § 350. Alienation of property permitted in public interest. — If at any time it may appear that the in- terests of the beneficiaries could be best served by some party other than the original grantee, the state which granted the franchise may in its discretion per- mit such change of grantees, but this must be pro- vided for expressly by the statute. This rule of law is adhered to strictly because it is believed that the interests of the public are thereby best conserved. For observation and experience seems to indicate that the interests of the public are not paramount as to private parties who engage in furnishing these public utilities. The desire for dividends too often seems to predominate over that of serving the best interests of the public except in an increasing number of instances where fortunately the two purposes are regarded as 407 SALE OF PROPERTY. § 350 consistent and identical. However, in many cases the motive of immediate profit controls, which fact re- quires very extensive control to be exercised over private grantees of such franchises or, in lieu thereof, where there is not sufficient control to insure that the public will be served adequately and at fair cost for the service, it becomes necessary that the public serve itself directly or that it have the control which accom- panies ownership, while the actual operation is pro- vided for by a leasing of the plant owned by the city. This matter, however, is reserved for later discussion and an examination of the authorities for the forego- ing statements will now be attempted/ 1 CALIFORNIA.— South Pasadena v. Pasadena Land & Water Co., 152 Cal. 579, 93 Pac. 490. FEDERAL.— Austin v. Bartholomew, 107 Fed. 349, 1S3 U. S. 698, 46 L. ed. 395; Cumberland Tel. & T. Co. v. Evansville, 127 Fed. 187, 143 Fed. 238; Indianapolis v. Consumers' Gas Trust Co., 144 Fed. 640; New Albany Waterworks v. Louisville Banking Co., 122 Fed. 776. ILLINOIS. — People ex rel. Fitzhenry v. Union Gas & Electric Co., 254 111. 395, 98 N. E. 768. INDIANA.— Lake County Water & Light Co. v. Walsh, 160 Ind. 32, 65 N. E. 530, 98 Am. St. 264; De Motte v. Valparaiso, 161 Ind. 319, 67 N. E. 985. KANSAS.— Keene Syndicate v. Wichita Gas, Electric Light & Power Co., 69 Kans. 284, 76 Pac. 834, 67 L. R. A. 61, 105 Am. St. 164. MASSACHUSETTS.— Attorney General v. Haverhill Gaslight Co. (Mass.), 101 N. E. 1061. NEW JERSEY.— McCarter Atty. Gen. v. Vineland Light & Power Co., 72 N. J. Eq. 767, 70 Atl. 177. OREGON.— State v. Portland General Electric Co., 52 Ore. 502, 95 Pac. 722. PENNSYLVANIA.— Bailey v. Philadelphia, 1S4 Pa. 594, 39 Atl. 494, 39 L. R. A. 837, 63 Am. St 812; Greensburg Borough v. West- morland Water Co., (Pa.), 87 Atl. 995. SOUTH DAKOTA.— Huron Waterworks Co. v. Huron, 7 S. Dak. 9, 62 N. W. 975, 30 L. R. A. 848. 58 Am. St. 817. UNITED STATES.— Gibbs v. Consolidated Gas Co. of Baltimore, 130 U. S. 396, 32 L. ed. 979. UT.A.H.— Ogden City v. Bear Lake. &c.. Waterworks Co., 16 Utah 440, 52 Pac. 697, 41 L. R. A. 305; Ogden City v. Waterworks & Irr. Co., 28 Utah. 25. 76 Pac. 1069. §351 PUBLIC UTILITIES. 408 §351. Municipal water-works public property like parks. — The case of Huron Waterworks Co. v. Huron, 7 S. Dak. 9, 62 N. W. 975, 30 L. R. A. 848, 58 Am. St. 817, decided in 1895, was an action to have an at- tempted sale of the water-works plant of the respon- dent city to the appellant, a private corporation, de- clared void. Before such attempted sale the plant had been owned and operated by the city for supply- ing its public wants and for domestic purposes. The question decided in the negative by this case is as to whether the council of the city of Huron possesses the power, unaided by the state legislature, to sell and transfer the Huron water-works system to the appel- lant. In addition to the power given the city ex- pressly by statute to construct and maintain water- works, the only statutory authority granted pro- vides, "that the city of Huron . . . shall have power to make all contracts necessary to the exercise of its corporate powers, to purchase, hold, lease, transfer, and convey real and personal property for the use of the city . . . and to exercise all the rights and privileges pertaining to a municipal corporation." In the course of its convincing opinion setting aside the attempted sale as unauthorized, the court, after citing and discussing at length a number of leading authorities, expressed itself as follows: ""Having, as we think, established the proposition that the water-works of a city when constructed and owned by the city, are to be regarded the same as other city property held for public use, and therefore charged and clothed with a public trust, it would seem to fol- low that such property can not be sold and conveyed by the mayor and common council of the city unless under special authority conferred upon them to so sell WASHINGTON.— Theis v. Spokane Falls Gaslight Co., 49 Wash. 477, 95 Pac. 1074. 409 SALE OF PROPERTY. § 352 and convey the same by the legislative power of the state. . . . From this examination of the author- ities we conclude that there is no distinction between the nature of water-works property owned and held by the city, and public parks, squares, wharves, quar- ries, hospitals, cemeteries, city halls, courthouses, fire engines, and apparatus, and other property owned and held by the city for public use. All such property is held by the municipality as a trustee in trust for the use and benefit of the citizens of the municipality, and it can not be sold or disposed of by the common coun- cil of the city, except under the authority of the state legislature. . . . But such property is so owned and held by the municipality as the trustee of the citizens of the municipality, for the use and benefit of such citizens. It has been acquired by the corporation at the expense of the taxpayers of the city, for their use and benefit, and the law will not permit the cor- poration to divest itself of the trust, nor to deprive the citizens of their just rights as beneficiaries in the same." § 352. Municipality trustee for public of its water and light plant. — The case of Lake County Water & Light Co. V. Walsh, i6o Ind. 32, 65 N. E. 530, 98 Am. St. 264, decided in 1902, was an action to have set aside as fraudulent a deed of conveyance of the water and light plant of the city of East Chicago by said city to the appellant, a private corporation. In grant- ing the relief asked for the court said in part: "It seems clear, upon the soundest reasoning and from the g^eat weight of authority, that property held and used by a city for public purposes is held in trust for the inhabitants, and can not be sold or disposed of unless the city is specially authorized by the legislature to make such sale or disposition and thereby determine §£-353 PUBLIC UTILITIES. 4IO the trust. . . . The remaining question is whether water-works and an electric Hght plant constructed or purchased by the city and maintained by it for the dxtinguishment of fires, for domestic purposes, for lighting the streets, and for use in the houses of the inhabitants of the city are to be regarded as property devoted to a public use. . . . The right to fur- nish water for protection against fire, to clean the streets, to flush sewers, and for the supply of the ihhabitants, and the right to light the streets and public places, and to furnish gas or electricity to the inhabitants, are among the implied and inherent pow- efrs of a municipal corporation for the protection of the lives, health, and property of the inhabitants of the c^ty; and, as to the lighting, as a check on immorality. "tJnquestionably these are public purposes. . . . In our opinion water-works and electric light plants held, owned, and maintained by cities . . . must be regarded as property held in trust for a public use. Nor do we think they lose that character by reason of the fact that water and light are supplied to the in- habitants for domestic purposes, and that rentals and charges are paid for the same." ' §353- Transfer of property by lease must be au- thorized by statute. — In the case of New Albany Water- works V. Louisville Banking Co., 122 Fed. 776, decided ib 1903, the court refused the right to the plaintifif, a private corporation, in the absence of express statutory authority, to lease to another like corporation the prop- erty, franchise and contracts of its water-works sys- tem, with which it was supplying water to a munici- pality and its inhabitants. The case is mentioned in this connection for the reason that the court indicated tifat' it is beyond the power of a municipality to Validate such a lease by its consenting thereto. The 411 SALE OF PROPERTY. §354 court said: "The final contention in aid of the lease rests on the alleged assent thereto on the part of the city of New Albany. . . . The corporation is created by the state, and not by the municipality. While the latter may grant privileges to the corpora- tion which are within their respective powers de- rived from the state, it can confer no authority upon the corporation to transcend those powers. The ordi- nance, therefore, is without force as authority for the lease." § 354. Duty to serve public can not be evaded by alienation. — This court in the same year in the case of Cumberland Tel. & T. Co. v. Evansville, 127 Fed. 187, refused the right of such a corporation to sell its property to another in the following emphatic lan- guage : "The statute under which the Evansville Telephone Exchange was incorporated does not ex- pressly authorize corporations organized under it to sell all their property. Nor is there any implied power granted to do this. The first section authorizes 'any number of persons to form themselves into a cor- poration for the purpose of establishing, maintaining and operating' — not for selling and disposing of — 'telephones, telephone lines and telephone exchanges'; and the articles of association of the Evansville Tele- phone Exchange were prepared pursuant to this au- thority. There is neither express power given by the statute, nor can there be worked out of it any implied power to do that which will make it impossible for the corporation to do the thing for which it was organized. A quasi public corporation can not disable itself for the performance of its functions by the sale and transfer of all its property without legislative au- thority. . . . The Evansville Telephone Exchange was authorized and empowered to establish and main- § 355 PUBLIC UTILITIES. 412 tain its telephone system, not to sell it; to accomplish the object of its incorporation, not to defeat it; to acquire the means to enable it to perform its duties to the public as a corporation, not to disable itself from performing those duties. The attempted sale of all of its property and franchises was ultra vires, and con- trary to public policy, and therefore null and void." § 355. Municipal ownership conserved for public interest. — The case of Ogden City v. Bear Lake, &c., Waterworks Co., i6 Utah 440, 52 Pac. 697, 41 L. R. A. 305, decided in 1898, was an action to set aside a lease of the water-works plant while owned and operated by the plaintiff city, made by such city to the defendant, a private corporation. In finding such lease to have been made without authority and to be therefore void, the court used the following language : "Ogden City was a public corporation, and its au- thority was limited to such powers as were expressly granted by statute, and such as might be necessary to those expressly given. Undoubtedly, water dis- tributed to a city and its inhabitants is devoted to a public use, and the entire system, whether consisting of reservoirs, conduits, pipes, or other means used to accomplish the delivery is also dedicated to the same use. The control and management of property dedi- cated to the use of the people of a city is given for their benefit, not for the individual benefit of the public authorities. . . . They can not deprive the public of the benefit of property rights or powers affected with a public use by conveying or leasing it to others, unless their charter specially authorizes it, though such other corporation or person may undertake to give the public the use of it for compensation deemed reasonable. . . . When property whose use is devoted to the public is conveyed or leased to private 413 SALE OF PROPERTY. § 356 corporations, tliough a contract may require its use to be given to the public for a reasonable remunera- tion, the public, to a great extent, loses its control over it, and any net income realized goes into the hands and pockets of private parties. In fact, such parties can not give the use of their property to the public for the actual cost of it, and the actual expense of the business, as in this case. They must have profits, and it is to the interest of such parties to make the profits or net income as large as public officials w^ill consent to make it. The people usually get fleeced when the city places its water-works in the hands of private parties. Public-spirited men are not at all times free from the undue influence of self-interest. Their dis- position to favor the public is not equal to their incli- nations to favor themselves." § 356. Public interest and private gain antago- nistic. — This case has been quoted from at length not only for its clear enunciation of the principle of law at issue but especially for its discussion of the reasons for the decision and for the practical attitude which the court takes in dealing with the situation. That private gain is the controlling motive where such pub- lic utility services are rendered by private capital is natural and inevitable and this court seems of the opin- ion that municipal ownership and operation are neces- sary to secure proper service at reasonable and uni- form rates to the public and the individual inhabitant. The case also takes the position, although not neces- sary to the decision, that since the public use of the property and the duty to the public are the grounds for the principle of law laid down, where the property of the city is not necessary or no longer suitable for such use, it may be disposed of by the city. And it is submitted this is a practical limitation on the § 357 PUBLIC UTILITIES. 414 general doctrine denying to the city the right by im- pHcation to sell or lease its property acquired and used for public purposes. § 357. Abandoned property may be alienated by municipality. — In the case of Ogden City v. Water- works & Irr. Co., 28 Utah 25, 76 Pac. 1069, decided in 1904, the same court passed directly upon the question of the exception to the general principle under dis- cussion in holding to be valid a lease made by the plaintiff city to the defendant of its water-works plant which was about to be abandoned by said city and was no longer capable of meeting the public and pri- vate demands made on such a plant. The decision gives the authority of law to the dictum found in the earlier case referred to as decided by this court, and is to be commended for its highly practical treatment of the situation. After finding the system to have been insufficient the court adds that, "there is evidence in the record that tends to show that the system itself had about outlived its usefulness. ... In view of the conditions that existed and confronted Ogden City at the time the lease was made, we are of the opinion that the city council not only acted within its author- ized powers in authorizing its execution and after- wards ratifying it, but that, under the circumstances, those powers were wisely exercised, for it is apparent that, after the city had decided to abandon its old water-works system, it was necessary to make some disposition of its water right; otherwise, in course of time, it would be lost by nonuser." § 358. Pipe lines on failure of gas may be alienated in public interest. — This situation as to the disposition of property, owned for the purpose of serving the pub- lic and having become wholly unfit for the further 415 SALE OF PROPERTY. § 358 giving of such service, is even more strikingly found in the case of IndianapoHs v. Consumers' Gas Trust Co., 144 Fed. 640, decided in February, 1906. The decision of this case held valid a certain option given the appellant city by the respondent for the sale "df its gas plant with which it had supplied the inhabi- tants of the said city with natural gas. This optian to purchase had been given the city as a condition of the granting of the franchise to the respondent com- pany when the plant was originally installed and the city had given notice according to its terms of its elec- tion to exercise its rights to purchase the plant und€r such option. At the time this action arose to enfotoe such sale the supply of natural gas had failed, so that this gas plant was not furnishing gas nor had it b^en in position to do so for several years. To have held that such a sale was ultra vires because the company owed the duty of furnishing gas to the public would have been an unwarranted misapplication of a w€!ll recognized principle of law and a complete perversion of the purpose intended to be accomplished thereby-, namely the protection of the public interests as againfet those of private parties. In the nature of thingsi'dt was impossible for the company to continue to supply the public so as to that purpose the plant was m^fe junk. By purchasing the plant under its option the object of the city was to make possible the installatidn of an eflficient artificial gas plant for the accommoda- tion of the inhabitants of such city at a reasonable rate. The court by Grosscup, J., said: "The thing enjoined by the court below [which is reversed hef^i] was not the construction or operation of a municif)kl natural gas plant. The thing enjoined was the pur- chase of dead mains and pipes — a purchase in the promotion of a purpose to construct and establish § 359 PUBLIC UTILITIES. 416 works that would distribute artificial gas — just such a public work as the statutes admittedly allow." § 359- Transfer to municipality favored in interest of public. — While this idle condition of the property was recognized by the court and must have had a material, practical effect upon its decision, the ground expressly given is the expiration of the franchise by the election of the city to purchase the plant according to its option, which the court found to be a valid con- dition to the granting of such franchise. The court took occasion to draw the distinction between this agreement to sell a public service plant to a munici- pality and agreements to sell to other parties, saying: "Examination of the numerous authorities cited for and against the contention of ultra vires reveals no case involving a provision of like character with this option clause, nor one in reference to a right to trans- fer the corporate property to a municipality under any circumstances. In none of the citations, state or gen- eral, are there any reasons stated that seem inconsis- tent with the proposition that a corporation, engaged in a service of public utility, may contract for a sale to the municipality of all of its property therein, either through a condition accepted in the franchise from the city, or through subsequent arrangement. The ques- tion whether municipal ownership is favorable to the public interest, is neither involved in, nor open to, judicial inquiry. Assuming that such ownership is authorized, and is contemplated or demanded by the municipality, we are convinced that this proviso, treated alone as a contract of sale on the part of the gas company, is not within the inhibition of the rule — ■ not ultra vires. The public policy which is mentioned in the cases cited, is opposed to an implication of charter power to turn over its property to another 417 SALE OF PROPERTY. §360 and 'abnegate the performance of its duties to the pubHc,' has no appHcation to the transfer to the public — the municipahty — of property used in pubHc ser- vice." The United States Supreme Court refused to reconsider this decision on a writ of certiorari, October 29, 1906, thereby sustaining it as rendered. § 360. Municipal option to purchase provided in franchise. — This distinction is supported by the com- mon observation, made by this court, which is here recognized and given the effect of law, that the public interests in public utility plants are so much more secure when controlled by public than by private capi- tal that an agreement of a public or quasi public cor- poration to sell to the one may be allowed, in the ab- sence of express statutory authority, while the law refuses to permit such an agreement to stand when made with private parties. This must be the chief consideration for upholding the options to purchase such plants, which are now so commonly taken by the municipality when granting franchises. And such a precaution is a very wise one for the city to take, for it provides the opportunity for the municipality at any time to take over such property and control it absolutely for the public benefit. And while experi- ence shows that this action is sometimes necessary the fact that it can be done so summarily acts as an important factor in forcing public consideration into the service rendered by the private concern. § 361. Legislative authority must be express to permit transfer. — The Supreme Court of California in the recent case of South Pasadena v. Pasadena Land & Water Co., 152 Cal. 579, 93 Pac. 490. decided in 1908, furnishes a terse statement of the principle which is generally accepted by the courts that any corpora- 27— Pub. ut. § 362 PUBLIC UTILITIES. 418 tion, whether municipal or private, engaged in the fur- nishing of municipal public utility service can not sell and transfer to private capital its property devoted to that purpose without legislative authority and that any attempted transfer of such property which is not so authorized is void and of no effect. This court says: "The respondent is a quasi public corporation, engaged in supplying water for public use. This is admitted and it is conceded that corporations of that character can not, without legislative sanction, trans- fer to another the entire property devoted to such service and the business of carrying it on. This appears to be settled by the authorities." As such a corporation can not sell its property necessary to provide such service because the effect of doing so would be to disable it from rendering the service, it necessarily follows, and is so held by the courts, that it can not transfer or in any manner dis- pose of its franchise rights to use the streets and other public places to furnish such service without legis- lative authority. This is decided in the case of State V. Portland General Electric Co., 52 Ore. 502, 95 Pac. 722, decided in 1908, as follows: "The corporation can not absolve itself from the performance of its obligations without the consent of the legislature. . . . It may be considered as settled that a corpora- tion can not lose or alien any franchise or any prop- erty necessary to perform its obligations and duties to the state without legislative authority." § 362. Franchise personal to grantee and not trans- ferable. — That the franchise rights of such a corpora- tion to use the streets and highways to furnish munici- pal public utility service can not be transferred with- out express legislative authority is due to the fact that such rights are special privileges accorded to the 419 SALE OF PROPERTY. § 363 particular grantees receiving them and are in that sense and for that reason personal, which limits their exercise to the parties to whom they are granted. This principle is well expressed in the case of McCar- ter Atty. Gen. v. Vineland Light & Power Co., 72 N. J. Eq. 767, 70 Atl. 177, decided in 1909, where the court enjoined the extension of gas mains by the purchaser of a gas plant at a receiver's sale, because the right to make such extensions and to operate the plant was limited to the parties originally receiving the grant of this privilege, and the legislature having given no authority to transfer them, the purchaser at the re- ceiver's sale did not acquire these franchise rights. In the course of its opinion the court said: "The rule must be considered settled that no person or corpora- tion can acquire a right to make a special or excep- tional use of a public highway, not common to all the citizens of the state, except by grant from the sover- eign power. We think the defendant company had acquired no right to make the extensions enjoined, because it had no grant from the state. We have pointed out that it was organized under the general corporation act, and claims its right to use the streets as lessee of the franchise of the Vineland Gaslight Company acquired by the latter company by P. L. 1870, p. 577. Although, technically speaking, fran- chises are property, they are property of a peculiar character, arising only from legislative grant, and are not subject to sale and transfer without the authority of the legislature. We find no legislative authority for the conveyance of the franchise by Forrum to Hol- brook, from the latter of whom the defendant claims title." § 363. Combination agreements defeating compe- tition are invalid. — Furthermore the courts will not § 364 PUBLIC UTILITIES. 42O permit such a corporation to disable itself from serv- ing the public adequately and on reasonable terms and conditions by combining with a competing corporation rendering similar service for the natural effect of such a combination, in the absence of proper regulation and control, is to destroy competition and enhance the cost of the service or impair its efficiency; although where there is adequate regulation and control of the service and its cost, such a combination can be justified and has been permitted by the courts, for the reason that a more comprehensive and systematic service can be secured in this way, and, in most cases at least, at an actual reduction of the operating expenses. The Supreme Court of Washington in the case of Theis v. Spokane Falls Gaslight Co., 49 Wash. 477, 95 Pac. 1074, decided in 1908, in the course of its decision on this point, says : "A corporation can not combine with itself, nor can it combine with another without co-operation on the part of that other. By the enact- ment of the ordinance giving the Union company au- thority to combine with the Spokane company, the city authorized the latter to enter and be a party to such combination, or at least estopped itself from asserting a forfeiture on account thereof. . . . We think the old company had authority to purchase from the new any gas it deemed necessary or advisable, so long as it did not pay too much therefor, and there is no question of that kind here." § 364. Contracts fixing rates or combining com- petitors invalid. — The Supreme Court of the United States in the case of Gibbs v. Consolidated Gas Co. of Baltimore, 130 U. S. 396, 32 L. ed. 979, decided in 1889, furnishes an excellent statement of the rule as well as the reason upon which it is based refusing the right of municipal public utilities to combine or. 421 SALE OF PROPERTY. § 365 by agreement without legislative consent, to withdraw or abandon its service to the public. That such would be inimical to the public interests is recognized by the court, and for this reason the principle denying the right by combination or otherwise to abandon the service to the public is not permitted by any of our decisions, for as the court in this case says: "It will be perceived that this was an agreement for the aban- donment by one of the companies of the discharge of its duties to the public, and that the price of gas as fixed thereby should not be changed except that in case of competition, the rate might be lowered by one, but not below a certain specified rate, without the consent of the other. . . . The supplying of illuminating gas is a business of a public nature to meet a public neces- sity. It is not a business like that of an ordinary corporation engaged in the manufacture of articles that may be furnished by individual effort. . . . Innumerable cases, however, might be cited to sustain the proposition that combinations among those en- gaged in business impressed with a public or quasi public character, w^hich are manifestly prejudicial to the public interest, can not be upheld. ... It is also too well settled to admit of doubt that a cor- poration can not disable itself by contract from per- forming the public duties which it has undertaken, and by agreement compel itself to make public ac- commodation or convenience subservient to its private interests." § 365. Stock control of competing concerns in- valid. — Nor will the courts permit the combination of competing municipal public utilities to be brought about indirectly or under cover by the purchase of a controlling interest in the one by the other because the purpose and effect of such a purchase would be to § 366 PUBLIC UTILITIES. 422 destroy competition with the natural result that the public interest would suffer by the exaction of a higher rate for the service rendered or by the rendi- tion of less adequate service, for as the Supreme Court of Illinois in the recent case of People ex rel. Fitz- henry v. Union Gas & Electric Co., 254 111. 395, 98 N. E. 768, decided in 1912, says: "To sustain appellant's position would be, in effect, to hold that one public service corporation might, by contract with a com- peting public service corporation, divest the compet- ing corporation of the power to exercise its franchise and by tying up its stock prevent such competing corporation from again engaging in business. . . . It seems plain that in seeking to invest itself not only with the street rights of but also the control over the two existing companies, its object was to suppress competition. This court held, in Dunbar v. American Telephone Co., 224 111. 9, 79 N. E. 423, 115 Am. St. R. 132, 8 Am. Cas. 57, that one corporation can not own stock in another corporation, and an attempt to do so, by purchasing in the name of another or having the legal title held in the name of another for the benefit of the purchasing corporation, is contrary to law and the public policy of this state." § 366. Forced sales of such property also pro- hibited. — These cases, then, will serve to show the general rule of law, together with the practicable limitation placed thereon by our courts, which refuses to find power in such corporations by implication to sell the property used in serving the public, except in those cases of municipal corporations when the public interest no longer necessitates its continued holding. And it should be noted, also, that the rule is not limited to cases of voluntary sales but that such prop- erty when used for public purposes is not subject to 423 SALE OF PROPERTY. § 367 forced sales on execution. Dillon, Mun. Corp., § 991, 5 Am. & Eng. Ency. Law, 1068, and cases cited. The case of Sun Printing & Publishing Assn. v. Mayor, 152 N. Y. 257, 46 N. E. 499. 37 L- R- A- 788, 8 App. Div. (N. Y.) 230, is an interesting illustration of the principle that the municipality, when expressly au- thorized, may lease such a public utility as a rapid transit system owned by the city to private parties for operation. § 367. Right of alienation expressly given by stat- ute vaHd. — In the case of Bailey v. Philadelphia, 184 Pa. 594, 39 Atl. 494, 39 L. R. A. 837, 63 Am. St. 812, decided in 1898, the Supreme Court of Pennsylvania pretended to find by implication the power in the municipality to lease its gas works on the theory that the city owned such property as a business corpora- tion, and from this fact concluded that the city is not required by its municipal duty under the statute to supply its citizens with gas for lighting. The court, however, finds that "the right of alienation is given in express words in the charter." In so far as the actual decision of the case goes, in finding express statutory authority for the lease it is in full accord with the authorities, but the spirit of the case as shown by an extended argument which is obiter dictum is an unauthorized attempt to support the proposition that the municipality has inherent power to lease or dis- pose entirely of its gas plant and that it is under no duty to serve the public with such a public utility beyond its own pleasure. This doctrine, which the case suggested, is not supported by the authorities but is directly contrary thereto, and its adoption would be dangerous to the public welfare, nor does it seem to have been followed bv anv of our courts. CHAPTER XIX. RIGHTS ON EXPIRATION OR FORFEITURE OF FRANCHISE. Section. 368. Property not forfeited with franchise. 369. Right to retake possession coupled with property. 370. Practical disposition of property on expiration of franchise. 371. Property and franchise rights may be forfeited by agreement. 372. Forfeiture for nonuser after reasonable time. 373. Nonuser resulting in forfeiture reopens field. 374. Trespasser if necessary franchise not secured. 375. Franchise rights must be accepted in reasonable time. 376. Acceptance of franchise and rendering services necessary. 377. Forfeiture follows failure to perform if statute self-executing. 378. Forfeiture waived and substantial performance sufficient. 379. Provisions of municipal franchise modified by agreement. 380. Title to property not affected by expiration of franchise. 381. Right to retake property necessary to enjoy its ownership. 382. Plant should not be dismantled but transferred. 383. Franchise renewed or plant purchased by municipality. 384. Right to remove equipment on forfeiture. 385. Trespasser on expiration regardless of investment in Ohio. 386. Impracticable to treat as trespassers on expiration of fran- chise. 387. Agreement express for revocation and removal. 388. Municipality must purchase or renew if franchise requires. § 368. Property not forfeited with franchise. — When the special franchise privileges of occupying the streets, highways and other public places have expired or become forfeited, the municipal public util- ity is not by virtue of that fact deprived of its prop- erty nor can such property be confiscated, nor does it escheat to the state or to the particular municipality. On the expiration of such franchise rights or at their forfeiture the property rights of the municipal public 424 425 FRANCHISE EXPIRATION FORFEITURE. § 369 Utility to whom they were granted are not then and thereby terminated. The rights of the municipal pub- lic utility to its property have coupled with them the additional right or privilege of entering upon the streets for the purpose of taking possession and re- moving the property within such time after the termi- nation of the franchise as may be reasonably necessary for doing so. § 369. Right to retake possession coupled with property. — Indeed it is to the interest of the munici- pality and its inhabitants that the property of the municipal public utility remain in position for a time at least after its franchise rights terminate for the pur- pose of continuing its service until service is provided by another or until another franchise can be agreed up- on between the municipality and the corporation fur- nishing the service. Naturally the rendering of the service until the termination of the franchise requires the occupation of the streets with the necessary equip- ment during the entire period and as this can not be interfered with nor removed without interrupting the service due the municipality and its inhabitants until after the expiration of the franchise period, it is neces- sary to allow a reasonable period after the expiration of the franchise within which such equipment may be removed or another franchise agreement entered into. § 370. Practical disposition of property on expira- tion of franchise. — Where under the terms of the fran- chise the municipality has the right to purchase the property at a fixed period, the title does not pass to the municipality at the time fixed unless the city exercises its right to purchase and pays or tenders the reasonable value of the plant or the particular amount if it has been fixed and determined in the franchise. §371 PUBLIC UTILITIES. 426 And in case the municipality does not exercise its right to purchase but permits the municipal public utility to continue to furnish the service, it can scarcely be regarded as a trespasser although some of the cases have so held. The expiration of the franchise termi- nates the contractual relation created by it so that neither party can be compelled without its consent to renew the contract nor required to furnish or accept service beyond a reasonable time within which other arrangements for service may be made. The right of the corporation providing the service to remove its equipment is unquestioned and the enjoyment of this right requires the holding that it is coupled with an in- terest permitting the owner of the property to enter upon the streets of the municipality for the purpose of removing its plant and equipment. This necessarily re- sults in an extravagant waste of property due to the ex- cessive cost of removing the property as well as the consequent expense of repairing the streets and the de- preciated value of the property when removed. As all this expense must be charged to the cost of service by the municipal public utility rendering it, the interest of the public obviously demands that such expense be avoided by the continued use of the plant under a renewal of the franchise or a purchase by the munici- pality or other capital. § 371. Property and franchise rights may be for- feited by agreement. — The parties to the agreement contained in the franchise, however, may by express stipulation provide that the franchise privileges shall terminate in case the municipal public utility service is not furnished within a fixed period or in accord- ance with stipulated conditions. The municipality may take the precaution of securing the performance of the service to be rendered by such provisions and 4-27 FRANCHISE EXPIRATION FORFEITURE. § 372 the terms of some franchise grants expressly stipu- late that the property as well as the franchise rights of the corporation shall be forfeited to the municipality in the event of the failure to render the service within a fixed time or in accordance with the stipulated con- ditions. In the absence, however, of such express stipulation the right of the municipal public utility to its property is not affected by the expiration or forfeiture of the franchise privileges any more than the property of any corporation is forfeited on the expiration of the term of its corporate existence. The property of the corporation belongs to it separate and independent of its special franchise rights by which the municipality grants its consent to the fur- nishing of the service by the corporation and to the use of its highways for that purpose. The work- ing of a forfeiture of such rights in this connection as in cases of forfeiture generally is not favored by our courts and franchise rights will not be forfeited except in cases clearly justifying it. § 372. Forfeiture for nonuser after reasonable time. — Where, however, the municipal public utility fails or refuses for an unreasonable time to install its plant and provide service, the courts will not hesitate to declare their special franchise privileges to be for- feited on account of their nonuser. Where the fran- chise expressly stipulates as a condition precedent to its use and enjoyment that the municipal public utility plant shall be installed and the service begun by a certain time or within a fixed period after the granting of the franchise rights and as a condition precedent to their enjoyment, the courts will declare such rights to be forfeited in case of a failure on the part of the municipal public utility to comply with such express stipulations in the franchise, and on the request of ^27^ PUBLIC UTILITIES. 428 the municipality will enjoin any attempt on the part of the municipal public utility thereafter to install its system and render service. Such a holding by the courts is not unreasonable because it is only giving effect to the stipulations expressly made in the con- tract or construing its terms in a reasonable, practical manner in the interest of the municipality and its in- habitants. So long as any part of the franchise re- mains outstanding it necessarily interferes with, if it does not prevent, the granting of the same or similar franchise rights to another corporation through which the service might be secured in case it is not furnished under the franchise first granted which necessitates the decree of the court forfeiting the first franchise in the event its privileges are not exercised and the service furnished under and by virtue of its provi- sions.^ 1 ALABAMA.— Mobile v. Stein, 54 Ala. 23; Stein v. McGrath, 128 Ala. 175, 30 So. 792. CALIFORNIA.— Los Angeles R. Co. v. Los Angeles, 152 Cal. 242, 92 Pac. 490. FEDERAL.— Boise City Artesian Hot & Cold Water Co. v. Boise City, 123 Fed. 232; Denver v. New York Trust Co., 187 Fed. 890, 229 U. S. 123; Laighton v. Carthage, Mo., 175 Fed. 145: National Waterworks Co. v. Kansas City, 62 Fed. 853, 27 L. R. A. 827; Stewart v. Ashtabula, 98 Fed. 516, 107 Fed. 857; Thompson v. Schenectady R. Co., 124 Fed. 274; Pocatello v. Murry, 206 Fed. 72. ILLINOIS.— Belleville v. Citizens' Horse R. Co., 152 111. 171, 38 N. E. 584, 26 L. R. A. 681; Chicago Municipal Gas-Light & Fuel Co. V. Lake, 130 111. 42, 22 N. E. 616. INDIANA.— Coverdale v. Edwards, 155 Ind. 374, 58 N. E. 495; Cumberland Tel. & T. Co. v. Mt. Vernon, 176 Ind. 177, 94 N. E. 714. IOWA.— Cedar Rapids Water Co. v. Cedar Rapids, 118 Iowa 234, 91 N. W. 1081, 199 U. S. 600, 50 L. ed. 327. KANSAS.— Atchison St. R. Co. v. Nave, 38 Kans. 744, 17 Pac. 587; Keene Syndicate v. Wichita Gas, &c., Co., 69 Kans. 284, 76 Pac. 834, 67 L. R. A. 61, 105 Am. St. 164. KENTUCKY.— East Tennessee Tel. Co. v. Russellville, 106 Ky. 667, 21 Ky. L. 305, 51 S. W. 308. MICHIGAN.— Detroit v. Detroit United Ry. (Mich.) 137 N. W. 645, 229 U. S. 39; Risser v. Hoyt, 53 Mich. 185, 18 N. W. 611. 429 FRANCHISE — EXPIRATION FORFEITURE. § 373 § 373. Nonuser resulting in forfeiture reopens field. — The Supreme Court of New York in the case of People V. Broadway R. Co., 126 N. Y. 29, 26 N. E. 961, decided in 1891, furnishes a good statement of this rule and indicates the disadvantage under which the public would labor in the event the court had refused to declare the franchise forfeited for nonuser. In this case the defendant had failed for a period of twelve years to install and operate any of its street raihvay system and had defaulted in doing so for a much longer period as to a large part of its system. In declaring the franchise rights forfeited on account of nonuser for such an unreasonable period in order to permit the municipality to grant similar franchise rights to other parties who would provide the neces- sary service, the court said: "But even if it were absolutely certain that the defendant could have made no profit by building the roads to the extent which we have above indicated, yet that is no answer to the proposition that it is the duty of the defendant to MINNESOTA. — International Lumber Co. v. American Sub- urb Co., 119 Minn. 77, 137 N. W. 395. NEW YORK.— People v. Broadway R. Co., 126 N. Y. 29, 26 N. E. 961; People v. O'Brien, 111 N. Y. 1, 18 N. E. 692, 2 L. R. A. 255, 7 Am. St. 684; Wakefield v. Theresa, 125 N. Y. App. Div. 38. OHIO.— Cincinnati Inclined Plane R. Co. v. Cincinnati, 52 Ohio St. 609, 44 N. E. 327; Hamilton, fee. Traction Co. v. Hamilton & L. Electric Transit Co., 69 Ohio St. 402, 69 N. E. 991; Kinsman Street R. Co. V. Broadway & U. Street R. Co., 36 Ohio St. 239; Salt Creek Valley Turnpike Co. v. Parks, 50 Ohio St. 568, 35 N. E. 304, 28 L. R. A. 769; Toledo Consolidated Street R. Co. v. Toledo Electric Street R. Co., 50 Ohio St. 603, 36 N. E. 312; Wcllston v. Morgan, 59 Ohio St. 147, 52 N. E. 127. UNITED STATES.— Cleveland Electric R. Co. v. Cleveland, 204 U. S. 116, 51 L, ed. 399. 137 Fed. Ill; Omaha v. Omaha Water Co., 218 U. S. 180, 54 L. ed. 991; Detroit United Ry. v. Detroit, 229 U. S. 39, 57 L. ed. — ; Denver v. New York Trust Co., 229 U. S. 123, 57 L. ed. — . WEST VIRGINIA.— Wheeling & E. G. R. Co. v. Triadelphia. 58 W. Va. 487, 52 S. E. 499, 4 L. R. A. (N. S.) 321. § 374 PUBLIC UTILITIES. 43O build them. It applied for this act, and accepted the franchise, and thus took upon itself the obligation and burden to exercise the franchises for the public bene- fit. If these routes could not presently be made profit- able for railroad purposes, it should not have applied for the act; or, the act having been passed, it should not have accepted the franchises. . , . The power of the court to declare the franchises of the defendant forfeited for nonuser is undoubted. . . . This defendant should not stand in the streets of Brooklyn claiming franchises which for many years it refused to use, and thus bar out other railroads which might be constructed for public convenience and accommoda- tion. If these franchises are of no value, it is not harmed by the judgment of the special term. If they are valuable, and of growing worth, it should have discharged its duty to the public by using them." § 374. Trespasser if necessary franchise not se- cured. — That a municipal public utility which takes possession of the streets and other public places of the municipality without the consent of the proper authorities first secured permitting it to do so is a mere trespasser and has no more rights than a wrong- doer who takes possession of the land of another with- out his consent is the effect of the decision in the case of East Tennessee Tel. Co. v. Russellville, io6 Ky. 667, 21 Ky. L. R. 305, 51 S. W. 308, decided in 1899, where the court, in holding that in such a case the municipality is not liable for refusing to grant the necessary franchise rights to permit the municipal public utility to install its plant and furnish service where it had begun to do so under a grant made without authority, said: "At that time the council- men of that city had no legislative authority, express or implied, which authorized them to grant such a 431 FRANCHISE EXPIRATION FORFEITURE. §375 privilege to him. He enjoyed no charter privilege which conferred upon him the right to occupy the streets and alleys of that city for the purposes stated. The date of the grant of the privilege shows that it was before the adoption of the present constitution. . . . It will be seen from this section of the con- stitution that no authority is vested anywhere to au- thorize any telephone company to construct its line on or across the streets and alleys or the public grounds of a city or town, except with the consent of the proper legislative bodies or boards of such city or town. No such authority was obtained by Clark or the telephone company, and it necessarily follows that they had no right to enter upon the streets and alleys of the city for the purposes stated. To hold otherwise would be to utterly ignore and disregard the organic law of the state." § 375- Franchise rights must be accepted in rea- sonable time. — The granting of a franchise includes its acceptance by the grantee before it constitutes a contract and becomes a property right or interest vested in the grantee. Where therefore the offer of the municipality to grant the necessary franchise privi- leges to install and operate a municipal public utility is not properly accepted within a reasonable time by the grantee, no contract is created and no interest becomes vested because the franchise never became effective for it was never accepted by the party to whom the municipality offered to grant it. This is the effect of the recent decision in the case of Cumber- land Tel. & T. Co. v. Mt. Vernon, 176 Ind. 177, 94 N. E. 714. decided in 1911, where the Supreme Court of Indiana said: "Unless the ordinance in question was accepted by the American company before it executed the assignment, evidenced either by express words or § 37^ PUBLIC UTILITIES. 432 by some act or conduct on its part, the ordinance was nothing more than a mere proposition, and could con-, fer no right nor impose any obHgation on the com- pany. Cincinnati, &c. R. Co. v. Clifford (1888) 113 Ind. 460, 15 N. E. 524; State ex rel., &c. v, Dawson (1861) 16 Ind. 40; Jennings v. Dark (1910) (Ind.) 92 N. E. 779; Abbott, Municipal Corporations, section 901. . . . During the period from February 20, 1899, to February 5, 1906, the American Telephone & Telegraph Company never made any attempt to con- struct or operate a telephone system in the city, and its only connection with the ordinance, as shown by the record, was the presence of one of its agents at the meeting of the council which adopted the ordi- nance, and the request by the agent that it should be passed. It is not shown that this agent was authorized by the company to accept the terms and conditions of the ordinance. The court would not have been warranted in inferring from the facts disclosed by the evidence that the ordinance was ever accepted." § 376. Acceptance of franchise and rendering serv- ice necessary. — In refusing to enjoin the defendant city from preventing the plaintiff corporation render- ing the municipal public utility service from installing its equipment in its streets because of its failure to do so within the time stipulated, the Supreme Court of Illinois in the case of Chicago Municipal Gas-Light & Fuel Co. V. Lake, 130 111. 42, 22 N. E. 616, decided in 1889, in holding that it was not a sufficient perform- ance of its stipulation to this effect to secure an assign- ment of a short-time lease from another municipal public utility which gave no assurance for the giving of its service permanently, said: "The company, by this acceptance of the ordinance, undertook to per- form a service for the public benefit of the town and 433 FRANCHISE EXPIRATION FORFEITURE. ^ 377 its inhabitants, in furnishing them with gas for illumi- nating and heating purposes; and it expressly con- tracted to commence furnishing gas to the town with- in one year from the date of the passage of the ordi- nance. ... It was not the spirit and true intent of the ordinance of March 25, 1884, that the gas com- pany should get the assignment of a short and merely- provisional lease of gas works, and thereby fulfill the bare letter of its contract by commencing within the year to deliver gas to the town of Lake, without making any provision for the continuance of such service. It would be inequitable and unjust, upon so uncertain a term of its future gas service, to compel the town, against its will, to permit appellant to dig up and obstruct its public streets and highways, and oc- cupy and use them, for the purpose of laying and maintaining therein its gas mains and gas pipes. It is settled doctrine that the courts will interfere by in- junction with the acts of a municipal corporation, in respect to matters which are by the law placed within the power and left to the discretion of the corporation, only in a case of clear and undoubted right; and such a case, in our opinion, is not shown in the record now before us. We are unable to say that the decree of the circuit court refusing the injunction, and dis- missing the bill, was erroneous." § 377. Forfeiture follows failure to perform if statute self-executing. — That a judgment of forfeiture is not necessary where it is expressly provided for in the statute, which is self-executing and which fur- nishes a complete justification for the municipality in refusing to permit a municipal public utility to install its equipment after having failed for four years beyond the stipulated time to build its plant and provide its service, is the effect of the decision in 28— Pub. ut § 37^ PUBLIC UTILITIES. 434 the case of Los Angeles R. Co. v. Los Angeles, 152 Cal. 242, 92 Pac. 490, decided in 1907, where the court said: "One of the express conditions contained in the ordinance granting the franchise was the following: 'If said road is not fully completed and in operation within said time, then this franchise shall be forfeited as to the portion thereof uncompleted.' . . . The ordinance provides that in case of a failure to complete the work within the time limited the franchise shall be forfeited, but, if this provision is not self-executing, it is not in conflict with a provision of the statute which is self-executing. ... A judgment declar- ing and enforcing a forfeiture does nothing more than work a forfeiture, and when a breach of condition works a forfeiture, there is no office for a judgment to perform, except, perhaps, to supply conclusive evidence of the fact — evidence which may in certain contin- gencies be useful, though not for all purposes essen- tial, ... It follows from this conclusion that the plaintiff, having forfeited its right to use or occupy the street which it had left vacant for four years after the expiration of the time limited for the completion of its road, had no more right to lay its track there than one who had never been granted a right of way, and the city was clearly within its right in preventing the trespass. . . . The plaintiff was not in pos- session. It was attempting unlawfully to take pos- session, and the city was merely resisting an unlawful entry upon a street which its duty to the public re- quired it to keep clear of unauthorized obstructions." § 378. Forfeiture waived and substantial perform- ance sufficient. — Where, however, the municipality for a number of years acquiesced in the default of the municipal public utility, which if taken advantage of at the time could have been declared a forfeiture of 435 FRANCHISE — EXPIRATION — FORFEITURE. § 378 its franchise rights, the municipality is not entitled to a decree of forfeiture after there has been a substan- tial, although tardy, compliance with the provisions of the franchise. After the franchise provisions have been substantially complied w^ith and a large invest- ment made for the purpose of carrying out the obli- gations imposed by the franchise, the municipality can not then secure a forfeiture of the franchise rights, for as the Supreme Court of West Virginia in the case of Wheeling & E. G. R. Co. v. Triadelphia, 58 W. Va. 487, 52 S. E. 499, 4 L, R. A. (N. S.) 321, decided in 1905, says: "Having thus determined that there was, on the face of the contract, cause for forfeiture, it remains to be determined whether such steps were taken by the council as to work, in law, a forfeiture. . . . In August, 1901, after four or five years of acquiescence, the council took steps to forfeit by serv- ice of notice. Then before the expiration of the time allowed there was a partial compliance with the re- quirements of the notice — a substantial compliance with its requirements. In view of the long acqui- escense of the authorities of the town, the railway com- pany may well have supposed, and no doubt did sup- pose, that no action to forfeit the franchise would be taken under these circumstances. . . . Willing- ness and desire to comply strictly with all its cove- nants is plainly expressed by the railway company in its bill, and was verbally communicated to the town authorities immediately after the forfeiture was de- clared, when the ink on the repealing ordinance was hardly dry. As to the ability of the company to make full compliance, there is no question. Under these circumstances, is it equitable and just to the com- pany, or promotive of the' public interests, to destroy this railway? It represents an investment of thou- sands of dollars and affords means of convenient and § 379 PUBLIC UTILITIES. 436 rapid travel and transportation for the people of the town and the general public. Why so great a punish- ment for such slight cause? It is unprecedented so far as the authorities examined disclose. If the injury- could not be remedied, or the railway company stood defiant, refusing to perform, the case would wear a different aspect; but it does not. It is willing to per- form to the letter — to pay the last farthing." § 379. Provisions of municipal franchise modified by agreement. — That a part of the service which a municipal public utility is rendering may be abandoned and the street in which such service is discontinued vacated by it with the consent of the municipality follows from the fact that the parties who entered into the franchise agreement may modify its terms by mutual agreement without the consent of the state, for the reason that the franchise grant to be modified is the special privilege of using the streets of the mu- nicipality and is not concerned with the general fran- chise rights granted by the state permitting it to exist as a corporation. This generally accepted rule to- gether with the distinction between the special fran- chise rights granted by the municipality and the general franchise rights granted by the state is well expressed in the case of Thompson v. Schenectady R. Co., 124 Fed. 274, decided in 1903 where the court upheld the right of the defendant company to abandon its service and remove its equipment on a certain street. In the course of its decision to this effect, the court said: "The point that the right to run over a portion of Washington avenue could not be aban- doned without the consent of the state is not well taken. Counsel have fallen into error as to the mean- ing of the word 'franchise.' It may be true that a corporation can not abandon its franchise — can not 437 FRANCHISE — EXPIRATION FORFEITURE. § 380 commit suicide — without the consent of its creator, the state. But 'franchise,' i. e., the right to exist and perform certain acts, is a thing distinct from the prop- erty rights which the corporation when created may- acquire from individuals. ... In this case the property owners who granted rights of way by con- sents which were subsequently mutually abandoned are seeking to have such abandonment adhered to. The 'franchise,' the charter granted by the state, is one thing; the property rights, including rights of way which the chartered body may acquire from private individuals, is quite another. These latter may be lost by acts of the corporation, and the approval of the state is not necessary." § 380. Title to property not affected by expiration of franchise. — For the purpose of determining the nature of the property rights and the manner of their exercise belonging to the municipal public utility at the termination of the franchise period the recent case of Cleveland Electric R. Co. v. Cleveland, 204 U. S. 116, 51 L. ed. 399, decided in 1907, is in point for the court restrained the city of Cleveland from permitting another corporation by ordinance from taking over the property of the plaintiff and operating it from the expiration of the franchise period upon the payment of an amount to be agreed upon or fixed by the court. In the course of its opinion by way of defining the rights of the plaintiff company, the court said: "The defendant insists that, upon the termination of the grant to the Garden street branch, the rails, polls, and other appliances for operating that road, and then remaining on the various streets, became the property of the city or at least that the city had the right to take possession of the streets and of the rails, tracks, etc., therein existing. We agree with the court below § 381 PUBLIC UTILITIES. 438 in the opinion that the title to the property remains in the railroad company which had been operating the road, and we are of opinion that The Forest City Railway Company had no rights in the streets, so far as to affect the right of the complainant to its property then existing in such streets." § 381. Right to retake property necessary to en- joy its ownership. — An excellent statement of the prop- erty rights as well as the relation existing between the parties on the expiration of the franchise period is furnished by the case of Laighton v. Carthage, Mo., 175 Fed. 145, decided in 1909, where the court recog- nized the necessity of permitting the municipal public utility to go upon the streets and make such excava- tions as are necessary to remove its property. While this right of removal is necessary to the proper enjoyment of its property rights, its exercise is neces- sarily attended with much difficulty and expense on account of which it is generally avoided by a sale of the entire municipal public utility system to the mu- nicipality or another corporation or by a renewal of the franchise between the original parties to it. In the course of its decision defining the property rights and the relation at the expiration of the franchise, the court in following the Cleveland Electric Ry. Co. case said: "When the franchise contract between the water company and the city expired by limitation, the right of the company to operate its plant and use the streets of the city therefor ceased, and with it the right of the city to demand the service. The relation between them was contractual, so that when the con- tract ended either was at liberty to go its way, Neither could compel the other against its consent to do busi- ness with it. By consent the company continued to furnish water supply, and the city continued to take it 439 FRANCHISE EXPIRATION — FORFEITURE. § 381 as theretofore. The law is well settled that, under such tacit arrangement, while so acting the water company was rendering a service to the public, and, therefore, during such service it became subject and amenable to the obligations growing out of such assumed quasi public service, to the extent that it was required to supply water adequate, to its reason- able capacity, and at reasonable rates, and to this ex- tent became subject to the jurisdiction and super- vision of the courts to enforce such implied under- taking. . . . The right of the complainant at the termination of the contract to enter upon the streets of the city to remove its plant, without let or hin- drance, does not admit of debate. Cleveland Electric Railway Co. v. Cleveland, 204 U. S. 116, 51 L. ed. 399. . . . The right to enter upon the streets of the city for the purpose of excavating and removing the water plant, pipes, hydrants, and other equipments, inheres in the very right of ownership of the property, as, other- wise, the right of ownership could not be exerted." A current decision as to the rights of the parties on the expiration of the franchise which the court held terminated their contractual relation and the special privilege of the municipal public utility to the use of the streets with the result that the defendant became a trespasser is furnished in the case of Detroit v. De- troit United R. (Mich.), 137 N. W. 645, decided Octo- ber I, 1912, where the court said: "From this deter- mination it does not follow that any rights of owner- ship in and to its property in the public streets used in the maintenance and operation of its railway are taken from it. On the contrary, it is the settled law that, after the expiration of a franchise of a street railway company, such property belongs to it. Cleve- land V. Cleveland Electric Railway, supra. Such own- ership necessarily carries with it the right of removal, § 382 PUBLIC UTILITIES. 44O and no arbitrary power is given to the complainant or should be given to it to proceed at once by force to effect such removal. Defendant is entitled to and should be given notice to remove its property within a reasonable time." § 382. Plant should not be dismantled but trans- ferred. — The large investment necessary to the in- stallation of the ordinary municipal public utility plant should be conserved in the interest of the public and not destroyed at the expiration of the franchise period, for otherwise the public is required to pay not only the value of the service rendered, but is also obliged to pay the value of the plant itself, for its removal at the ex- piration of the franchise results in the great waste due to the inevitable depreciation attending thereon. There- fore, unless the plant is disposed of as installed and as a going concern, the expense attendant upon its actual physical removal is necessarily borne by the patrons of its service to whom it is shifted in fixing the cost of the service. The recent decision in the case of Denver v. New York Trust Co., 187 Fed. 890, decided in 1911, considers this practical phase of the question in determining the property rights of the mu- nicipal public utility on the expiration of its franchise and argues in favor of the plant being taken over by the party who is to render the service after the ex- piration of the franchise, thus avoiding the necessity of removing the equipment and the consequent loss resulting therefrom. In the course of its opinion, the court says : "When a water company assumes the duty of supplying a rapidly growing city and its in- habitants with water for a period of twenty years, necessarily involving the expenditure of large sums of money, it is but natural that some consideration would be given by the parties to the status of the company and its property at the end of the period. A 441 FRANCHISE EXPIRATION FORFEITURE. § 383 business of that character can not be conducted from hand to mouth Hke that of a green-grocer, but pro- vision for the pubHc needs must be made many years in advance of actual demand, at least for an adequate w^ater supply. There must be a large investment against future requirements. . . . Much of the in- vestment made under such conditions naturally re- mains unreturned at the end of the franchise period. It would be a grevious burden upon the inhabitants of a city if a water company exacted such rates as would yield a reasonable return and in addition thereto such part of the investment as, at the end of the fran- chise term, would reduce it to the value of an idle plant. No community would tolerate such charges, and in practice they are rarely if ever made. . . . Here, the contract was that when the twenty-year period expired, if the city did not by ordinance grant the company a renewal embracing an obligation on its part to accept hydrant service as before and pay for the same at the reduced rate, it would take over the entire business by buying the property. . . . Though the time is past there has been nether renewal by ordinance nor purchase. . . . The case as pre- sented in the pleadings and affidavits seems to be well within the settled principles which determine the impairment of the obligation of contracts by subse- quent legislation and the right to protection there- from by appeal to a court of equity." Reversed on different interpretation of franchise in 229 U. S. — . § 383. Franchise renewed or plant purchased by municipality. — That the property of the municipal pub- lic utility does not in any sense belong to the munici- pality on the expiration of the franchise period is decided in the case of National Waterworks Co. v. Kansas City, 62 Fed. 853, 27 L. R. A. 827, decided § 384 PUBLIC UTILITIES. 442 in 1894, where the franchise provided for the purchase of the plant at the expiration of the franchise period in case the grant was not renewed. In holding that as the grant had not been renewed at the expiration of the period fixed in the ordinance and that in this event the city according to the terms of the franchise was obhged to purchase the plant at its present "fair and equitable value," the court said: "We dissent in toto from the claim of the city that at the lapse of the twenty years the title to this property, with the right of possession, passed absolutely to it, without any pay- ment or tender of payment, leaving only to the com- pany the right to secure compensation by agreement or litigation, as best it could. . . . Now, the famil- iar and ordinary law of business transactions is that he who parts with title receives, at the time, payment. In other words, payment of price and transfer of prop- erty are contemporaneous and concurrent acts. When it is affirmed that a contract made by a municipality contemplates that he whose money builds and con- structs, and therefore establishes title to, property, shall surrender his title and possession without pay- ment, or even the amount thereof determined, the language compelling such a construction must be clear and imperative. There is no such language in either the act or the ordinance." § 384. Right to remove equipment on forfeiture. — Where, however, as in the case of Belleville v. Citi- zens' Horse R. Co., 152 111. 171, 38 N. E. 584, 26 L. R. A. 681, decided in 1894, it was expressly stipulated in the contract that if the grantee of the franchise failed to install its plant and furnish its service in ac- cordance with the stipulations in the franchise agree- ment that the municipality should have the power to revoke the consent it had given for the occupation 443 FRANCHISE — EXPIRATION FORFEITURE. § 384 and use of its streets for the purpose of installing and operating the street railway by the defendant, the default in the performance of the obligations thus assumed by the defendant justified the municipality in repealing the ordinance granting its consent. The passing of such a repealing ordinance constituted an election on the part of the municipality to avoid the contract and revoke the grant of the special privilege contained in the franchise which had the eflPect of terminating the contractual relation between the par- ties. In sustaining the petition of the city for the right to remove the equipment of the defendant com- pany from the streets of the municipality after such default on the part of the defendant company, which the court held had the effect of abrogating its rights to use the streets, and the passage of the repealing ordinance terminating the franchise rights, the court in defining the rights of the defendant to its property held that while the equipment belonged to the defend- ant company, the municipality had the right to require its removal from its streets although it could not for- feit the property in doing so, for as the court said: "Of course, section 3 of the repealing ordinance was void. The city had no authority, without the judg- ment of a court, to forfeit to its own use the tracks, switches, and turnouts of the railway company. Bald- win V. Smith, 82 111. 162. But there was no attempt to enforce it. . . . The case of Pacific R. Co. v. Leavenworth, i Dill. 393. Fed. Cas. No. 10,649, 's very like this. There an ordinance and contract, special in their terms, were construed to give the city a right to re-enter and take possession of the street, and remove the railroad track on the failure of the com- pany to comply with the conditions of the ordinance granting to it the right of way. Dillon, J., in dispos- ing of the case, said: T refuse the instruction, on the § 385 PUBLIC UTILITIES. 444 ground that the company is in default, and the city is only pursuing a remedy which is given to it by the contract of the parties.' " § 385. Trespasser on expiration regardless of in- vestment in Ohio. — The Supreme Court of Ohio in the case of Cincinnati Inclined Plane R. Co. v. Cin- cinnati, 52 Ohio St. 609, 44 N. E. 327, decided in 1894, furnishes an extreme decision to the effect that upon the expiration of the franchise period the municipal public utility company on remaining in the streets becomes a trespasser whose rights are in no way increased or changed by the fact that it made a large investment in substituting electricity as its motive power. In holding that there was no renewal of the franchise by the making of this additional investment because it was not properly authorized, the court said: "It is a sufficient answer to this claim to say that these expenditures were not authorized by both boards, in whom was vested jurisdiction to make renewals. But, if they had been so authorized, what amount of expenditure should a court hold was necessary to con- stitute a renewal? And how are we to determine from the amount of expenditures the time for which such renewal was made — for one year, or for twenty-five years? And suppose a street railway had no grant in the beginning; what amount of expenditure would be sufficient to give them an implied grant? . . . The defendant, therefore, during that period of time, was a mere trespasser upon the streets, and did not occupy them by virtue of any contract between it and the city; and it is only by virtue of a contract, express or implied, that it could be made liable for license fees." It will be noted, however, that in face of the court's holding the municipal public utility to be a trespasser, it provided that the decree enjoin- 445 FRANCHISE EXPIRATION FORFEITURE. § 386 ing its further use of the streets in the operation of its plant should not be effective until the expiration of a six months' period within which it might apply to the municipality for a new grant permitting it to main- tain and operate its plant. § 386. Impracticable to treat as trespassers on ex- piration of franchise. — The leading case on this sub- ject which seems fairly to represent the current au- thority is that of Cedar Rapids Water Co. v. Cedar Rapids, 118 Iowa, 234, 91 N. W. 1081, 199 U. S. 600, 50 L, ed. 327, decided in 1902, in which the duration of the franchise was limited expressly to the period of twenty-five years in accordance with the statutory provision limiting the power of the municipality to grant such a franchise. In the course of its opinion holding that "the money and labor expended in con- structing, maintaining, and operating the works must be held to have been expended with reference to the term for which it held a valid grant," the court said: "Neither can there be any such acquiescence or waiver by the city as will prevent or estop it from denying the validity of an act beyond the scope of its munici- pal powers. A different rule sometimes obtains when the power to contract exists, but has been defectively or irregularly executed; but, if the authority to do the act or make the contract is expressly withheld or denied by law, that fact may always be set up as a defense to an action brought thereon." After deciding that the duration of the franchise was limited to the period expressly stipulated by its terms and could not be prolonged by the acquiescence or waiver of the municipality, the court then proceeds to determine the relation of the parties to each other and the nature of the property rights of the municipal public utility. On this point the court decides that on the termination of § 387 PUBLIC UTILITIES. 446 the franchise period the municipal public utility does not become a trespasser which is a reasonable and practically a necessary limitation on the doctrine of the Cincinnati Inclined Plane Ry. Co. case, for as the court says : "It had been engaged in the performance of a work of public utility. That service was of a na- ture which, of necessity, required the occupation of the streets with pipes buried in the soil, with connec- tions therefrom of more or less permanent character to the buildings and premises of patrons. These im- provements could not be removed, nor to any extent interfered with, during the term of the franchise, with- out interrupting the service the plaintiff was bound to render; and it must be presumed it was contemplated by the parties that the company should remain in pos- session such reasonable length of time after the expi- ration of the term as might be necessary to negotiate an extension or renewal of the franchise, or, in default thereof, to close out its business without unnecessary sacrifice. Moreover, the city, by continued acceptance of the water service, and by assuming to regulate the rates thereof, gives implied consent to the present possession of the streets and operation of the works until such time as it shall by reasonable notice see fit to terminate the plaintiff's tenure of the privilege." § 387. Agreement express for revocation and re- moval. — Where, however, the franchise expressly stip- ulates that the municipality shall have the right to re- voke the grant of the special privilege and also require the removal of the equipment from its streets under certain conditions expressly made in the franchise, the municipality may exercise such rights and remove such equipment, for as the court in the case of Coverdale v. Edwards, 155 Ind. 374, 58 N. E. 495, decided in 1900. says: "The control of streets, as well as of all ( 447 FRANCHISE — EXPIRATION — FORFEITURE. § 388 Other public highways, is primarily in the legislature. But the legislature has delegated to municipalities the exclusive control of their streets and alleys. . . . That license [of appellee] contained this provision: 'The said council hereby reserve the right to revoke this grant, and demand that the poles be removed, and remove the same if necessary'. The language is clear and the meaning unmistakable. The grant was a bare license, revocable without cause at the will of the council. If the licensee, at the revocation of the grant, should not remove the poles on demand, the council might cause their removal." § 388. Municipality must purchase or renew if franchise requires. — The Supreme Court of Alabama, as early as 1875, i" ^he case of Mobile v. Stein, 54 Ala. 23, in defining the nature and extent of the property rights of the owner of a municipal public utility on the expiration of its franchise said: "No one can doubt that it belongs to Stein, the appellee, and that the city of Mobile can acquire it only by a purchase ac- cording to the terms of the agreement and charter. The fact that the grant is for a term of years only, and after that may be terminated by the purchase of the city, does not afTect the question under consid- eration. Most grants of privileges from a political body are for a limited period." The recent case of Wakefield v. Theresa, 125 N. Y. App. Div. 38, decided in 1908, in sustaining an injunc- tion restraining the defendant city from removing or requiring the plaintiff, operating a municipal public utility plant, to remove its wires, poles, and other electrical appliances used by it to furnish electric light- ing in the defendant city at the expiration of the orig- inal franchise period for the reason that the munici- pality desired to install its own plant, the court, in § 388 PUBLIC UTILITIES. 448 holding that it must either purchase the plant of the plaintiff or renew its franchise as contemplated by the parties in the original grant, said : "In reliance on the contract the plaintiffs and their predecessors in interest expended money in erecting, extending and operating the plant, and the privilege granted to use the streets became a valuable property right of which the owners can not be deprived, unless there has been a forfeiture on their part, or unless the plant has be- come a nuisance. (People v. O'Brien, in N. Y. i; Ingersoll v. Nassau Electric R. R. Co., 157 N. Y. 453.) . . . The contract contemplated the extension of the franchise beyond the five-year period, unless the municipality elected to purchase the appliances. , . . The real animus of the attempt to remove the plain- tiffs' plant apparently is to get rid of a competitor to the new municipal lighting system. It may be desira- ble for the new plant to have all the business of the village, yet the plaintiffs are in the streets by warrant of the village authorities and have been many years operating their plant. The intention of the defendant to destroy their property unless removed within thirty days in order to be justified must be founded upon a manifest disregard of the agreement in important par- ticulars, and the evidence presented does not call for so drastic and summary a remedy." I CHAPTER XX. STREET AND HIGHWAY PRIVILEGES OF MUNICIPAL PUBLIC UTILITIES. Section. 389. The street the key to regulation. 390. Streets for use and benefit of public. 391. Duty and opportunity of municipal oflBcers to conserve public interest. 392. Control of streets delegated to municipality. 393. Municipal consent to use of streets conditioned on service. 394. Power delegated to municipality legislative. 395. All rights subject to exercise of police power. 396. Equipment in streets subject to removal or change. 397. Street privileges and police power defined. 398. Public control of streets and franchises complete. 399. Municipal control of streets delegated by state. 400. Power mu3t be expressly or clearly delegated. 401. Delegated power may be revoked or modified by state. 402. Streets dedicated in trust for benefit of public. 403. Title to street in municipality trustee for public. 404. Municipal consent condition precedent. 405. No exclusive use unless expressly provided. 406. No power to alienate or obstruct streets implied. 407. Telephone and telegraph not limited by local control. 408. Municipal control limited to municipality. 409. Power to grant perpetual franchise not implied. 410. Change of street grade requiring relocation of pipes valid. 411. Sewer systems paramount to public utility pipes. 412. Arbitrary exercise of police power not sustained. 413. Municipality can not barter away right to exercise police power. § 389. The street the key to regulation. — The mu- nicipal public utility must have the use of the streets and other highways, which accordingly constitute the key or tangible means by which to regulate and con- trol the service furnished by the municipal public 29— Pub. ut. 449 § 390 PUBLIC UTILITIES. 45O Utility. As the occupation and use of the streets and highways is essential in the furnishing of municipal public utility service, the terms and conditions upon which the privilege of such use and occupation are afforded can stipulate and determine the nature, ex- tent and cost of the service to the public. § 390. Streets for use and benefit of public. — The control of the streets and highways is in the state in trust for the public for whose use and convenience they are dedicated as a means of transportation and communication, thereby affording to the public the means by which they may go from place to place, communicate with each other and enjoy such other conveniences as the various kinds of service provided by municipal public utilities afford. As the streets and highways are dedicated exclusively for the use and convenience of the public generally, it follows that the legislature acting for the state, or any municipal agency to which this power may have been delegated, should make no grant which will materially interfere with the uses for which the streets and highways are dedicated. § 391. Duty and opportunity of municipal officers to conserve public interest. — The interest of the public is paramount and the duty of the legislature or its duly authorized agent in granting the various special fran- chise privileges necessary to the installation and opera- tion of the different municipal public utilities is pri- marily to the public. The state or the municipality acting for it has not only the opportunity, but the tluty, to make all such grants in the interest of the public and for its benefit and advantage. The fact that the granting of such special franchise privileges be- comes a contract on their acceptance by the particular 451 STREETS AND HIGHWAYS. §39-2 municipal public utility to which they are granted makes it essential that the proper regulation and con- trol of the service to be rendered to the public shall be provided for as a condition of the grant itself. The means of control thus afforded are as adequate as they are convenient of exercise to secure and protect the interests of the public absolutely and for all time. Un- less, however, such control is provided for at the time and as a condition of the granting of the special privi- lege of using the streets and highways, the most con- venient if not the only adequate method of securing such control for the time being at least is dissipated and the welfare of the public during the life of the grant is thereby practically if not entirely lost and destroyed. § 392. Control of streets delegated to municipality. — As the control of all highways, including streets, is exercised primarily by the state through its legislature and secondarily in part or entirely by municipal cor- porations, the municipality itself, having been created by the state, has only such power of control over its streets as has been delegated to it as a creature and an agent of the state. The municipality, however, generally has delegated to it very extensive if not practically absolute control over its streets and is accordingly the agency whose duty it is to conserve and protect the interest of the public by proper regu- lation and control of the use of its streets by municipal public utilities. § 393. Municipal consent to use of streets condi- tioned on service. — The granting to the municipal pub- lic utility of the special franchise rights to the use of the streets affords the proper occasion for regulating the municipal public utility service to be rendered. § 394 PUBLIC UTILITIES. 452 Upon the municipality therefore primarily rests the obligations to the pubHc of maintaining the streets for the use of the public in the condition which best serves the interest of the public. The municipal corporation is therefore constituted the trustee of the people gen- erally for this purpose, and whether the title to the street be in the municipality as trustee for the people or in the abutting property owner, in either event the public is the beneficiary and is entitled absolutely to first consideration in the regulation of the use of the street. While, however, the primary use of the street is for the transportation and communication of the public, as has been shown in a former chapter, the rights of the abutting property owner entitles him to compensation whenever the street is subjected to ad- ditional servitudes. § 394. Power delegated to municipality legislative. — The power delegated to the municipality to control and regulate the use of its streets is legislative and political in its nature and must not be limited so as to prevent its use for the best interests of the general public in accordance with the requirements of future conditions. The statutory authority vesting this power of control in the municipality determines the extent to which it may by contract or otherwise authorize a necessary use of the street by the municipal public utility which may to this degree interfere with its use by the public for travel. Any material permanent in- terference with the uses for which the street is dedi- cated, however, would be unauthorized and invalid, although expressly granted by the municipality, and in some instances, even by the state itself. § 395. All rights subject to exercise of police power. — While the municipality may exercise the power I I 4 453 STREETS AND HIGHWAYS. § 396 vested in it to attach such conditions and restrictions to its grants of special franchise privileges for the use and benefit of municipal public utilities as seem nec- essary and for the best interests of the municipality within the statutory authoriJ:y, neither the municipality nor the state may surrender the control of the streets necessary to the proper exercise of the police power. All franchise rights and special privileges, including vested interests and contract rights which are pro- tected from impairment by the constitution are granted and held subject to the proper exercise of the police power by the state or the municipality in all cases re- quiring its exercise in the interest of the public health and the general welfare. Indeed, the rule is unques- tioned and of general application that the reasonable and necessary exercise of the police power can not be surrendered or abridged by contract at the hands of the municipality or even the state itself. The exercise of this right being a governmental function concerned with the public health, peace, and general welfare can not be alienated or delegated, and all special franchise rights to the use of the streets are subject to the rea- sonable and necessary exercise of the police power as applied and enforced by statutory enactment or mu- nicipal ordinance authorized by statute. § 396. Equipment in streets subject to removal or change. — As one of the chief uses of the streets is for public travel, the city in conserving this use for the general public may require municipal public util- ities having special franchises to remove their equip- ment and readjust their appliances whenever this is required by the municipality, making necessary im- provements in a reasonable manner, such as changing the grade of its streets or installing a sewer system or effecting any other improvement in the interests of § 397 PUBLIC UTILITIES. 454 the general welfare and the public health. The nature and extent of the police power, however, in its very- nature can only be fixed and defined in a general way except as the particular question is disposed of by the case in which it arises. The municipality, however, in the exercise of this power may not arbitrarily inter- fere with the property rights of the municipal public utility by unreasonably requiring the absolute removal or relocation of its equipment where the benefit to be derived would not justify the cost and inconvenience of the change in location or the complete removal of the equipment. § 397. Street privileges and police power defined. — In order to determine the extent of the police power belonging to the municipality and the cases in which its exercise is justified, a number of decisions are con- sidered later on in this discussion. In the first in- stance, however, the larger and more fundamental question of the control of the streets vested in the state and the municipality respectively, and the man- ner in which this control may be exercised, and the purposes for which it may be employed in the interest of the public will be illustrated and explained by ref- erence to the decisions concerned with this question in its several aspects.^ 1 ALABAMA.— Birmingham & Pratt Mines St. R. Co. v. Birming- ham St. R. Co., 79 Ala. 465, 58 Am. Rep. 615; Gadsden v. Mitchell, 145 Ala. 137, 40 So. 557, 6 L. R. A. (N. S.) 781; Montgomery v. Capi- tal City Water Co., 92 Ala. 361, 9 So. 339. ARKANSAS.— Little Rock v. Citizens' St. R. Co., 56 Aik. 28, 19 S. W. 17. CALIFORNIA.— South Pasadena v. Los Angeles Terminal R. Co., 109 Cal. 315, 41 Pac. 1093; Ex parte Russell. 163 Cal. 668. 126 Pac. 875. FEDERAL.— Clapp v. Spokane, 53 Fed. 515; Grand Rapids E. L. & P. Co. V. Grand Rapids E. E., &c., Co., 33 Fed. 659; Levis v. Newton, 75 Fed. 884; Logansport R. Co. v. Logansport, 114 Fed. 688, 192 U. S. 604, 48 L. ed. 504: Morristown v. East Tenn. Tel. Co., 115 455 STREETS AND HIGHWAYS. § 398 § 398. Public control of streets and franchises com- plete. — The case of Grand Rapids E. L. & P. Co. v. Grand Rapids E. E., L., &c., Co., 33 Fed. 659, decided Fed. 304; National Water- Works Co. v. Kansas, 2S Fed. 921; Pikes Peak Power Co. v. Colorado Springs, 105 Fed. 1; Hoffman v. Mitchell, 201 Fed. 506. FLORIDA.— Anderson v. Fuller, 51 Fla. 380, 41 So. 684, 6 L. R. A. (N. S.) 1026; State v. Jacksonville St. R. Co., 29 Fla. 590, 10 So. 590. GEORGIA.— Macon Consol. St. R. Co. v. Macon, 112 Ga. 782, 38 S. E. 60. ILLINOIS.— McWethy v. Aurora Electric Light & Power Co., 202 111. 218, 67 N. E. 9; People ex rel. Chicago v. Chicago Tel. Co., 220 111. 238, 77 N. E. 245; Smith v. McDowell, 148 111. 51, 35 N. E. 141, 22 L. R. A. 393. INDIANA.— Coburn v. New Tel. Co., 156 Ind. 90, 59 N. E. 324, 52 L. R. A. 671, Eichels v. Evansville St. R. Co., 78 Ind. 261, 41 Am. Rep. 561; Newcastle v. Lake Erie & W. R. Co., 155 Ind. 18, 57 N. E. 516. IOWA.— Des Moines City R. Co. v. Des Moines, 90 Iowa 770, 58 N. W. 906, 26 L. R. A. 767; Stanley v. Davenport, 54 Iowa 463, 2 N. W. 1064, 37 Am. Rep. 216. KANSAS.— Atchison St. R. Co. v. Nave, 38 Kans. 744, 17 Pac. 587; Wyandotte v. Corrigan, 35 Kans. 21, 10 Pac. 99. KENTUCKY.— East Tennessee Tel. Co. v. Russelville, 106 Ky. 667, 21 Ky. L. 305, 51 S. W. 308; Louisville City R. Co. v. Louisville, 8 Bush 415. LOUISIANA.— New Orleans City & L. R. Co. v. New Orleans, 44 La. Ann. 728, 11 So. 78; Shreveport Traction Co. v. Kansas City, &c., R. Co., 119 La. 759, 44 So. 457. MAINE.— Rockland Water Co. v. Rockland, 83 Maine 267, 22 Atl. 166. MARYLAND.— Kirby v. Citizens' R. Co., 48 Md. 168, 30 Am. Rep. 455. MASSACHUSETTS.— Jamaica Pond Aqueduct Co. v. Brookline. 121 Mass. 5; New England Tel. & T. Co. v. Boston Terminal Co., 182 Mass. 397, 65 N. E. 835. MICHIGAN.— Mclllhinney v. Trenton, 148 Mich. 380, 111 N. W. 1083; Monroe v. Detroit, M. & T. Short Line R. Co.. 143 Mich. 315. 106 N. W. 704. MINNESOTA.— Cater v. Northwestern Tel. Exch. Co., 60 Minn. 539, 63 N. W. Ill, 28 L. R. A. 310, 51 Am. St. 543; Stillwater Water Co. V. Stillwater. 50 Minn. 498, 52 N. W. 893. MISSOURI —National Waterworks Co. v. Kansas City. 20 Mo. App. 237; State ex rel. St. Louis Underground Service Co. v. Murphy, 134 Mo. 548, 31 S. W. 784, 34 L. R. A. 369, 56 Am. St. 515. § 398 PUBLIC UTILITIES. 456 in 1888, furnishes a clear and comprehensive state- ment to the effect that primarily the control of all streets and highways belongs absolutely to the state which holds it in trust for the use and benefit of the MONTANA.— Herslifield v. Rocky Mountain Bell Tel. Co., 12 Mont. 102, 29 Pac. 883. NEW JERSEY.— State; Trenton Horse R. Co. v. Trenton, 53 N. J. L. 132, 20 Atl. 1076, 11 L. R. A. 410; Water Comrs. v. Hudson, 13 N. J. Eq. 420. NEW YORK.— American Rapid Tel. Co. v. Hess, 125 N. Y. 641, 26 N. E. 919, 13 L. R. A. 454, 21 Am. St. 764; Beekman v. Third Ave. R. Co., 153 N. Y. 144, 47 N. E. 277; Deering, In re, 93 N. Y. 361; Milhau V. Sharp, 17 Barb. 435, 28 Barb, 228, 9 How. Pr. 102; People V. Barnard, 110 N. Y. 548, 18 N. E. 354; Phoenix v. Gannon, 195 N. Y. 471, 88 N. E. 1066. NORTH CAROLINA.— Elizabeth City v. Banks, 150 N. Car. 407, 64 S. E. 189. OHIO.— Columbus Gaslight & Coke Co. v. Columbus, 50 Ohio St. 65, 33 N. E. 292, 19 L. R. A. 510, 40 Am. St. 648. PENNSYLVANIA.— Frankford, &c., R. Co. v. Philadelphia, 58 Pa. 119, 98 Am. Dec. 242; Monongahela City v. Monongahela Electric Light Co., 3 Pa. Dist. R. 63; Scranton Gas & W. Co. v. Scranton. 214 Pa. 586, 64 Atl. 84, 6 L. R. A. (N. S.) 1033. SOUTH CAROLINA.— Charleston Consol. Ry. & Light Co. v. Charleston, 92 S. Car. 127, 75 S. E. 390. TEXAS. — San Antonio v. San Antonio St. R. Co., 15 Tex. Civ. App. 1, 39 S. W. 136; Texarkana v. Southwestern Tel. & T. Co.. 48 Texas Civ. App. 16, 106 S. W. 915. UNITED STATES.— Blair v. Chicago, 201 U. S. 400, 50 L. ed. 801; Detroit v. Detroit Citizens' St. R. Co., 184 U. S. 368, 46 L. ed. 592; Detroit Citizens' St. R. Co. v. Detroit R., 171 U. S. 48, 43 L. ed. 67; New Orleans Gaslight Co. v. Drainage Commission of New Orleans. 197 U. S. 453, 49 L. ed. 831. UTAH.— Henderson v. Ogden City R. Co., 7 Utah 199, 26 Pac. 286. VIRGINIA.— Norfolk R. & Light Co. v. Corletto, 100 Va. 355. 41 S. E. 740; Roanoke Gas Co. v. Roanoke, 88 Va. 810, 14 S. E. 665. WASHINGTON.— Seattle v. Columbia, &c., R. Co., 6 Wash. 379, 33 Pac. 1048. WEST VIRGINIA.— Clarksburg Electric Light Co. v. Clarksburg, 47 W. Va. 739, 35 S. E. 994, 50 L. R. A. 142. WISCONSIN.— Allen v. Clausen, 114 Wis. 244, 90 N. W. 181; Ashland St. R. Co. v. Ashland, 78 Wis. 271, 47 N. W. 619; State ex rel. Smythe v. Milwaukee Independent Tel. Co., 133 Wis. 588, 114 N. W. 108; Washburn Waterworks Co. v. Washburn, 129 Wis. 73, 108 N. W. 194. 457 STREETS AND HIGHWAYS. § 399 public, for as the court says: "'The legislature of the state represents the public at large, and has full and paramount authority over all public ways and public places.' *To the commonwealth here,' says Chief Justice Gibson, 'as to the king of England, be- longs the franchise of any highway as a trustee of the public; and streets regulated and repaired by the au- thority of a municipal corporation are as much high- ways as are rivers, railroads, canals, or public roads laid out by the authority of the quarter sessions.' 2 Dill. Mun. Corp. (3d ed.) §656. 'As the highways of a state, including streets in cities, are under the para- mount and priinary control of the legislature, and as all municipal powers are derived from the legislature, it follows that the authority of municipalities over streets, and the uses to which they may be put, de- pends entirely upon their charters or legislative enact- ments applicable to them.' 2 Dill. Mun. Corp. (3d ed.) § 680. It is also well settled that the right to use the streets and other public thoroughfares of a city for the purpose of placing therein or thereon pipes, mains, wires, and poles for the distribution of gas, water, or electric lights for public and private use, is not an ordinary business in which any one may engage, but is a franchise belonging to the government, the privilege of exercising which can only be granted by the state or by the municipal government of the city, acting under legislative authority." § 399. Municipal control of streets delegated by state. — Having absolute control of the streets and highways, the state may grant the right to use them to municipal public utilities, either directly or through its agent, the municipality. As the court expresses it in the case of Allen v. Clausen. 114 A\'is. 244, 90 N. W. 181, decided in 1902: "That the highways of the state are under the control of the general state gov- § 400 PUBLIC UTILITIES. 458 ernment, and that the right to use the same for tele- graphs, telephones, water pipes or street railways is by franchise emanating from the state, is declared in many of the foregoing decisions; also in State v. Mad- ison St. Ry. Co., 72 Wis. 612, 40 N. W. 487, i L. R. A. 771 ; City of Marshfield v. Wisconsin Tel. Co., 102 Wis. 604, 78 N. W. 735, 44 L. R. A. 565; State v. Portage City Water Co., 107 Wis. 441, 83 N. W. 697; State V. Sheboygan, iii Wis. 23, 86 N. W. 657; 3 Cook, Corp. § 913. As a corollary, it results that the municipal corporations have power to make such grants only by delegation from the state." § 400. Power must be expressly or clearly dele- gated. — Where the state has delegated certain author- ity to the municipality to grant franchise privileges to the municipal public utility and to regulate and control the streets, the municipal corporation has only such power in these respects as are clearly conferred upon it by the statute and any grant of the municipality not covered by the authority delegated to it is void for want of authority in the municipality to make, for as the court in the case of Beekman v. Third Ave. R. Co., 153 N. Y. 144, 47 N. E. 277, decided in 1897, says: "The authority to make use of the public streets of a city for railroad purposes primarily resides in the state, and is a part of the sovereign power; and the right or privilege of constructing and operating rail- roads in the streets, which, for convenience, is called a 'franchise,' must always proceed from that source, whatever may be the agencies through which it is con- ferred. The use or occupation of the streets for such purposes, without the grant or permission of the state through the legislature, constitutes a nuisance, which may be restrained by individuals injuriously affected thereby. Fanning v. Osborne, 102 N. Y. 441, 7 N. E. 459 STREETS AND HIGHWAYS. § 4OO 307. The city authorities have no power to grant the right except in so far as they may be authorized by the legislature, and then only in the manner and upon the conditions prescribed by the statute. Davis v. Mayor, &c., 14 N. Y. 506; Milhau v. Sharp, 27 N. Y. 611; People V. Kerr, id. 188. . . . The legislature, however, in virtue of its general power over municipal- ities, may regulate the mode and manner in which such consent shall be given by the authorities having the control of the street, and may prescribe the conditions upon which it may be given, and all these matters have been regulated by statute." An early decision defining the manner in which franchise rights to use the streets may be conferred by the municipality only on authority delegated to it expressly or by necessary implication is that of Eich- els V. Evansville St. R. Co., 78 Ind. 261, 41 Am. Rep. 561, decided in 1881, where the court held that the power to confer the necessary franchise rights to in- stall and operate a street railway system is not covered by the ordinary general powers provided in the char- ter of the municipality, but that being an extraordi- nary power it must be expressly conferred; for as the court says: "Such an authority must, it is true, be conferred by statute, but it is not indispensably essen- tial that the grant should be stated in express words. If it is conferred by necessary implication, it will be upheld and enforced. But the grant must be conferred either by express words or be necessarily implied. Without such a grant the public streets can not be used by a railroad corporation for the transportation of passengers for hire. The right to so use the streets is a franchise, and such a franchise as can only exist by force of a legislative grant. The power to grant franchises is a high legislative trust." § 401 PUBLIC UTILITIES. 460 § 401. Delegated power may be revoked or modi- fied by state. — From the fact that all control over streets is vested in the state, it necessarily follows that any power delegated by it to the municipality may be modified or withdrawn by the state and that it may grant franchise rights to the use of the streets of any municipality, although it may have delegated the right to make such grants to the municipality except in cases of constitutional provision to the contrary or where such action would result in the impairment of contract rights prohibited by the constitution, for as the court in the case of Newcastle v. Lake Erie & W. R. Co., 155 Ind. 18, 57 N. E. 516, decided in 1900, says: 'The control of streets, as well as of all other public highways, is primarily in the legislature. But the legislature has delegated to municipalities the ex- clusive control of their streets and alleys. As the leg- islature gave, so that body may take away or modify, the power. There is no doubt of the legislature's au- thority to grant railroad companies the right to lay their tracks longitudinally upon the streets of a munici- pality without its consent or over its objection." A recent decision of the Supreme Court of Florida to the same effect is furnished in the case of State v. Jacksonville St. R. Co., 29 Fla. 590, 10 So. 590, decided in 1892, where the court held that the right to control the use of streets belongs primarily to the state, and it may delegate it to the municipality, but this must be done expressly by statute before the municipal corporation has the power to grant such franchise rights and that such delegation of power does not in itself prevent the granting of similar rights by the state itself, for as the court says: "The legislature has undoubtedly supervision and control of highways and streets, and may authorize the construction of a railroad, operated either by steam or animal power, 461 STREETS AND HIGHWAYS. § 402 across or along them. This results from the dominant power which the state possesses over all its highways; and it may be done without the consent of municipal authorities. 2 Dill. Mun. Corp. § 656; Elliott, Roads & S. pp. 562; Pierce, R. R. p. 246; Lawson, Rights, Rem. & Pr. § 4003; Eichels v. Railway Co., 78 Ind. 261; Railroad Co. v. Mayor, &c., 45 Ga. 602; Hodges V. Railway Co., 58 Md. 603." § 402. Streets dedicated in trust for benefit of pub- lic. — The fiduciary obligation imposed upon the state or its agency, the municipality, to regulate and control the use of streets and highways in the interest and for the benefit of the public and the right of the state at any time to revoke the exercise of any power that it may have delegated to the municipality in this respect is well stated in the recent case of Smith v. McDowell, 148 111. 51, 35 N. E. 141, 22 L. R. A. 393, decided in 1893, where the court says: "By the platting of the village, the streets, in their entire width and length, were dedicated to the use of the public as streets. The village thereby became seised in fee of the streets and alleys, for the use of the local and general public, holding them in trust for such uses and purposes, and none other. Alton v. Illinois Transp. Co., 12 111. 38; Carter v. Chicago, 57 111. 285; Chicago v. McGinn, 51 111. 266; Jacksonville v. Jacksonville Ry. Co., 67 111. 540; Quincy v. Jones, 76 111. 231; Kreigh v. Chicago, 86 111. 410; Stack v. East St. Louis, 85 111. 377; Lee v. Town of Mound Station, 118 111. 312, 8 N. E. 759. These municipal corporations are instrumentalities of the state, exercising such powers as are conferred up- on them in the government of the municipality. Their power is measured by the legislative grant, and they can exercise such powers only as are expressly granted or are necessarily implied from the powers expressly § 403 PUBLIC UTILITIES. 462 conferred. The legislature, representing the great body of the people of the state, when no private right is invaded or trust violated (Jacksonville v. Jackson- ville Ry. Co., supra), may repeal the law^ creating them, or exercise such control in respect of the streets, alleys, and public grounds v^ithin the municipalities of the state as it shall deem for the interest of the people of the state. Dill. Mun. Corp. § 541 ; Chicago v. Rum- sey, 87 111. 355; People v. Walsh, 96 111. 253; Chicago V. Union Bldg. Assn., 102 111. 397; Commissioners v. McMullen, 134 111. 170, 25 N. E. (i'jdr § 403. Title to street in municipality trustee for public. — Although the fee of the street may be in the municipality, it does not own the fee in the street ab- solutely, but holds it as trustee for the benefit of the public, although the funds of the municipality may have been used in the purchase of the street in the ex- ercise of the power of eminent domain; nor does the municipality have the power, unless clearly authorized by statute, to grant such franchise rights to the use of the streets for private purposes, for as the court in the case of Stanley v. Davenport, 54 Iowa, 463, 2 N. W. 1064, 37 Am. Rep. 216, decided in 1880, says: "The fee of the streets is in the city, and yet it is held in trust for the use and benefit of the public. The city does not have the authority to sell and convey the title held by it or authorize the streets to be used for private purposes. Nor can it without legislative au- thority grant the use of a street for a public purpose, which renders it dangerous for the public to travel over it in any other manner. The power partakes of that of eminent domain, which, under our government, can only be granted by the law-making power of the state. Streets and highways are under the exclusive control of the general assembly. It matters not if the 463 STREETS AND HIGHWAYS. § 404 fee of the streets is in the city, it has no authority to control or grant rights and privileges thereto or there- on, unless it has been so authorized. The power and authority of the city is contained in its charter and bounded thereby. It has no other or different control of the streets than is prescribed in the charter or the general statutes of the state." § 404. Municipal consent condition precedent. — Where, however, the right to control the use of the streets is delegated absolutely to the municipality, it may provide its own terms and conditions in connec- tion with the granting of any franchise privileges for their use. Having the sole control, together with the absolute right to stipulate the conditions upon which the use of the streets may be enjoyed, the municipality has the power to prevent their use by municipal public utilities, and unless its authority is modified or re- voked, may in efifect annul and render void the grant- ing by the state of the franchise right to be a public service corporation by preventing it from exercising its rights as such to install and operate a municipal public utility system within such a municipality, for as the United States Supreme Court said in the case of Blair v. Chicago, 201 U. S. 400, 50 L. ed. 801, de- cided in 1906: "What, then, was conferred in the franchise granted by the state? It was the right to be a corporation for the period named, and to acquire from the city the right to use the streets upon contract terms and conditions to be agreed upon. The fran- chise conferred by the state is of no practical value until supplemented by the consent and authority of the council of the city." § 405. No exclusive use unless expressly provided. — That the general power to grant such franchise § 406 PUBLIC UTILITIES. 464 rights to the use of its streets as delegated to munici- palities does not give the municipality the right to grant exclusive franchise rights in the use of its streets is the general rule w^hich is well stated by the United States Supreme Court in the case of Detroit Citizens' St. R. Co. V. Detroit R., 171 U. S. 48, 43 L. ed. 67, decided in 1898, as follovvrs: "That such power must be given in language explicit and express, or neces- sarily to be implied from other powers, is now firmly fixed. There were many reasons which urged to this — reasons which flow from the nature of the municipal trusty even from the nature of the legislative trust, and those which, without the clearest intention, explicitly declared, insistently forbid that the future should be committed and bound by the conditions of the present time, and functions delegated for public purposes be paralyzed in their exercise by the existence of exclu- sive privileges." § 406. No power to alienate or obstruct streets implied. — A striking illustration of the limitation placed on the power of municipal corporations to grant spe- cial rights to the use of their streets is furnished in the case of Mclllhinney v. Trenton, 148 Mich. 380, iii N. W. 1083, decided in 1907, where the court held that unless the municipality was clearly authorized by the legislature it had no power to grant any right to the use of its streets which would interfere with their use by the general public for travel and that any attempt to obstruct them by the erection of municipal build- ings or other like structures was entirely unauthorized. In the course of this opinion the court said: "Munici- pal corporations, notwithstanding their broad and com- prehensive powers, have no right, unless authorized by the legislature, to alienate their streets or devote them to the uses inconsistent with the rights of the 465 STREETS AND HIGHWAYS. § 407 general public and the abutting landowners. The municipality holds the streets and power to regu- late and control them in trust for the public, and can not put them to any use inconsistent with street pur- poses. Thus cities have no right to use their streets for the erection of municipal buildings or works, and it has been held that placing of a standpipe in a public street, the fee of which was in the municipality, was an unlawful use of the street." § 407. Telephone and telegraph not limited by lo- cal control. — That the best interests of the general public may be better conserved and more comprehen- sively considered by the state retaining control rather than delegating it to its different municipalities in the case of such municipal public utilities as the telephone and telegraph where the field of operation extends beyond any particular municipality and is accordingly not local, but may be even interstate in its operations, and may pass through the streets of many municipali- ties is well indicated by the case of Texarkana v. Southwestern Tel. & T. Co., 48 Tex. Civ. App. 16, 106 S. W. 915, decided in 1907, where the court says: "The public highways of the state, including even the streets and alleys within incorporated towns and cities, belong to the state, and the supreme power to regu- late and control them is lodged with the people through their representatives — the legislature. What- ever power of control is lodged in the city council is delegated by the legislature. When we consider the nature of the business of telegraph and telephone lines in this busy commercial age, we have a most cogent reason for the legislature declining to commit to the arbitrary control of the municipalities throughout the state the use by such companies of the public streets and alleys. These companies are not primarily of 30— Pub. Ut. § 408 PUBLIC UTILITIES. 466 local concern, affecting only the inhabitants of the towns and cities through which they pass, but they essentially concern the public at large, in that they furnish quick and cheap means of communication be- tween all points throughout the country, by which a very large percentage of the business of the country is transacted. In other words, the business is such a one as calls for the exercise of state regulation rather than the delegated power of municipal control." § 408. Municipal control limited to municipality. — The control of its streets vested in the municipality is naturally limited to the territory included within the municipality and where the service extends be- yond its territory, it has no power to regulate any public utility service, and as the service rendered is not local so that the inhabitants of the municipality are not alone concerned it should not be subject to its sole regulation and control. This principle is further illustrated and established by the case of South Pasa- dena V. Los Angeles Terminal R. Co., 109 Cal. 315, 41 Pac. 1093, decided in 1895, where the plaintiff city attempted to limit the charges for the services ren- dered by the defendant beyond its own territory, which the court held to be an unreasonable and unauthorized interference with the right of other municipalities and the territory intervening between them that received the service afforded by the particular municipal public utility system. In holding the attempt to so regulate the service void, the court said: "A municipal ordi- nance must consist with the general powers and pur- poses of the corporation; must harmonize with the general laws of the state, the municipal charter, and the principles of the common law. One of the limita- tions upon such ordinances is that they can have no extraterritorial force unless by express permission of 467 STREETS AND HIGHWAYS. § 409 the sovereign power. In the nature of things, this must be so unless intolerable confusion and evil is to result; and the constitution of the state, recognizing the necessity for such a restriction, has provided (arti- cle II, section ii), that 'any county, city, etc., may make and enforce within its limits all such local, . . . and other regulations as are not in conflict with gen- eral laws.' Here was a road lying partly within the confines of at least three municipalities — Los Angeles, South Pasadena, and Pasadena. Conceding the right of plaintiff to impose a limitation on the charges to be made for passage between stations within its limits and stations elsewhere, then the other cities named have, or might have, the same right." § 409. Power to grant perpetual franchise not im- plied. — The early case of Milhau v. Sharp, 17 Barb. 435, 28 Barb. 228, 9 How. Prac. 102, decided in 1854, enunciated the principle which is of general application that the power which may be delegated to the munici- pality to regulate from time to time the rates to be charged by certain municipal public utilities in con- nection with the grant of such franchise privileges in the use of its streets does not include the power to surrender and absolutely barter away its control of this matter by the grant of a perpetual and irrevocable right of way to a particular municipal public utility, for as the court said: "Instead of regulating the use of the street, the use itself, to the extent specified in the resolution, is granted to the associates of the Broadway Railroad. For what has been deemed an adequate consideration, the corporation has assumed to surrender a portion of their municipal authority, and has, in legal effect, agreed with the defendants that, so far as they may have occasion to use Broad- way, for the purpose of constructing and operating § 409 PUBLIC UTILITIES. 468 their railroad, the right to regulate and control the use of that street shall not be exercised. That the powers of the corporation may be surrendered, I do not deny; but I think it can only be done by authority of the legislature." That the power to grant such extended and mate- rial franchise rights without express statutory author- ity does not vest in the municipality by a mere dele- gation of the right to control its streets is decided by the court in the case of Clarksburg Electric Light Co. V. Clarksburg, 47 W. Va. 739, 35 S. E. 994, 50 L. R. A. 142, decided in 1900, as follows: "Surely, we can not say, contrary to the drift of all the law of the country, that the mere power to control streets and light the same carries with it by implication the enor- mous power to tie the hands of an important munici- pality for many years, or that such a power is indis- pensable or necessary to enable the municipality to carry out its legitimate functions." The case of Elizabeth City v. Banks, 150 N. Car. 407, 64 S. E. 189, decided in 1909, further states the general rule that authority must be specially delegated to the municipality before it can grant special fran- chise rights to municipal public utilities as follows: "In the absence of any express grant of power in the charter, it would be difficult if we adhere to the canons of construction of corporate charters to find it by im- plication. It will hardly be contended that the laying of gas pipes for the purpose of furnishing light, fuel, and power to the citizens by a private business enter- prise is essential to, or implied in, the power to regu- late and control the use of the streets. As we have seen, the courts have not found the power except as an express grant from the sovereign." It necessarily follows that, where because of con- stitutional limitations, the state itself has not the 469 STREETS AND HIGHWAYS. § 4IO power to grant a particular franchise right which is exclusive and perpetual in its terms, the municipality likewise has no such power, for as the court in the case of Birmingham & Pratt Mines St. R. Co. v. Bir- mingham St. R. Co., 79 Ala. 465, 58 Am. Rep. 615, decided in 1885, says: "The exclusive right of the appellee to the privilege claimed, in our opinion, can not be sustained. The general assembly would itself have no power under the constitution to make such a grant. A fortiori, a mere municipality would have no such power." § 410. Change of street grade requiring relocation of pipes valid. — The proper exercise of the police power permits the municipality as well as the state indepen- dently of any franchise grants or statutory authority that may be conferred either upon the public service corporation or the municipality to protect the interests of the public in the reasonable use and enjoyment of streets and highways for which they were dedicated and in the interest of the public to conserve the public health and the general welfare and convenience of the people. Under the rule which is universally accepted, the municipality has not the power to abridge or sur- render its right to perform its duties to the public, especially in maintaining its streets for the advantage of the public as a means of transportation and com- munication and the municipal officers can not bind their successors in the proper discharge of such duties because such powers are legislative and can not be abridged. The court in the case of Columbus Gas- light & Coke Co. V. Columbus, 50 Ohio St. 65, 33 N. E. 292, 19 L. R. A. 510, 40 Am. St. 648. decided in 1893, in upholding the right of the municipality to change the grade of its streets without bearing the expense thereby occasioned the plaintiff corporation § 410 PUBLIC UTILITIES. 470 in the relocation of its pipes said: "It would follow from this that in prescribing regulations, or annexing conditions, by the city, to the exercise by a gas com- pany of a right in a street to enjoy the same for this secondary use, the council has not the authority to cede away nor bargain away the right of the city to perform its public duties, especially as to a primary use of its streets, nor to abridge the capacity of its successors to discharge those duties, unless some ex- press provision of statute is found to that effect, and that is not claimed. . . . An ordinance to grant an exclusive right or a perpetual right to occupy a par- ticular part of the street would be an attempt to bind succeeding councils as to their exercise of legislative power, and would, for reasons stated, be ineffectual. The grant by the city must be interpreted in the light of the right and duty of the city to regrade, whenever in its judgment the public interest demands; and whatever easement the gas company can receive, it must accept and enjoy in common with equivalent rights which have been or may be acquired by other public agencies — rights of a like secondary character; and all must give way to the paramount duty of the city to care for the streets, and keep them open, in repair, and convenient for the general public. This duty would be seriously interfered with if the city could not change the grade of its streets save upon the condition that it should make compensation to every gas company, and water company, and telephone company, and electric light company, and street rail- way company, for inconvenience and expense thereby occasioned. All such agencies must be held to take their grants from the city upon the condition, implied where not expressed, that the city reserves the full and unconditional power to make any reasonable change of grade or other improvement in its streets." 471 STREETS AND HIGHWAYS. §411 §411. Sewer systems paramount to public utility pipes. — That the power of the municipality to install a sewer system in the interest of its public health is paramount to the speci.il franchise rights of a munici- pal public utility, which was required to remove cer- tain pipe lines in order to permit of the installation of the sewer system, is the effect of the decision in the case of National Water-Works Co. v. Kansas, 28 Fed. 921, decided in 1886, where the court said: "Sewerage is a matter unquestionably affecting largely the public health, and no municipality can make a contract divest- ing or abridging its full control over such matters. The contract between the plaintiff and the defendant must be interpreted in the light of this well- established rule; and, so interpreted, the plaintiff took its right to lay its pipes in the streets of the city sub- ject to the paramount and inalienable right of the city to construct sewers therein whenever and wherever, in its judgment, the public interest demand. Laying its pipes subject to this right of the city, it has no cause of action if, in consequence of the exercise of this right, it is compelled to relay its pipes." That the exercise of the police power in the inter- est of the public health by the municipality, although it interferes with the private rights of individuals or municipal public utilities will be justified if reasonable and not arbitrary is the effect of the decision of the United States Supreme Court in the case of New Or- leans Gaslight Co. v. Drainage Commission of New Orleans, 197 U. S. 453, 49 L. ed. 831, decided in 1905, where the court said: "It is admitted that in the ex- ercise of this power there has been no more interfer- ence with the property of the gas company than has been necessary to the carrying out of the drainage plan. There is no showing that the value of the prop- erty of the gas company has been depreciated, nor § 412 PUBLIC UTILITIES. 472 that it has suffered any deprivation further than the expense which was rendered necessary by the chang- ing of the location of the pipes to accommodate the work of the drainage commission. The poHce power, in so far as its exercise is essential to the health of the community, it has been held can not be contracted away. ... In the exercise of the police power of the state, for a purpose highly necessary in the pro- motion of the public health, it has become necessary to change the location of the pipes of the gas company so as to accommodate them to the new public work. In complying with this requirement at its own ex- pense, none of the property of the gas company has been taken, and the injury sustained is damnum absque injuria." § 412. Arbitrary exercise of police power not sus- tained. — Where the sewer system can be installed along the side of the street equally well and at prac- tically the same cost, thereby avoiding the necessity of requiring the removal of tracks and other equip- ment of the municipal public utility, the municipality in the exercise of the police power is not justified in insisting on the sewer system being placed in the cen- ter of the street, for as the court says in the case of Des Moines City R. Co. v. Des Moines, 90 Iowa, 770, 58 N. W. 906, 26 L. R. A. 767, decided in 1894: "The evidence shows clearly that the sewer can be placed outside of the line of the railway without impairing, in any respect, the efficiency of the sewer system, and that sanitary considerations do not require that it be placed in the center of the street. . . . The evidence shows that the expense of constructing the sewer at the side of the street need not be materially, if any, greater than to place it in the center. We are of the opinion that the reasons for placing it in the center 473 STREETS AND HIGHWAYS. §413 of the street are not of sufficient importance to impose upon the plaintiff the burden of removing its track, and to expose the patrons of this line to the inconven- ience and danger which would be caused by such a removal. In other words, we think the demand of the city is unreasonable." § 413. Municipcdity can not barter away right to exercise police power. — That the city can not bind itself by contract, however, not to act in the interest of the general public and for the public health is well expressed in the case of Macon Consol. St. R. Co. v. Macon, 112 Ga. 782, 38 S. E. 60, decided in 1901, where the court said: "This agreement is an attempt on the part of the mayor and council to tie their hands as well as those of their successors with respect to a matter of great public interest. It is, in effect, a con- tract on their part that they will not in the future, no matter how much the public convenience or safety may demand it, attempt to regulate the location of the tracks of this company in this street. We are clear that this can not be done. Municipal corpora- tions 'may make authorized contracts, but they have no power, as a party, to make contracts or pass by- laws which shall cede away, control, or embarrass their legislative or governmental powers, or which shall disable them from performing their public du- ties.'" The right to exercise the police power is a contin- uing one and may be invoked at any time that the public health or convenience requires it, and can not be contracted away by the municipality even for a valuable consideration, for as the court in the case of Roanoke Gas Co. v. Roanoke. 88 Va. 810, 14 S. E. 665, decided in 1892, says: "Thus, in express terms, the legislature conferred upon the corporate authori- § 413 PUBLIC UTILITIES. 474 ties of the city of Roanoke the most ample powers to grade and otherwise improve its streets, from time to time, as in its judgment and discretion was required for the safety and convenience of the pubHc. The powers thus delegated are continuing and inalienable. It is therefore undeniable that, though a city may have agreed for a valuable consideration to allow a com- pany to lay gas or water pipes in its streets, yet if, in the exercise of its authority to lower the grade of and to remove obstructions from its streets, the pipes should become exposed, so as to obstruct the public in the safe and convenient passage along them, the municipal authorities may of right either require such company to remove, or they, by their servants, may remove, them as obstructions and nuisances." The case of State; Trenton Horse R. Co. v. Tren- ton, 53 N. J. 132, 20 Atl. 1076, II L. R. A. 410, decided in 1890, furnishes an interesting distinction between the right of the municipality to exercise the police power over private individuals and corporations, for the reason that the corporation being a creature of the state sometimes has conferred upon it by its charter, rights not possessed by the individual which the mu- nicipality must respect, for as the court says: "It is indeed true that the power of police regulation by municipal corporations of corporations is restrained within narrower limits than its power over persons. This difference does not arise from any lack of power in the legislature to exert directly or to delegate to municipalities the power to exert the same control over each. It springs out of the circumstance that corporations, as the creatures of legislation, have often accompanying the grant of its franchise a grant of special powers and privileges, coupled with limitations upon the right of municipal interference. The munici- pal legislation can not by any regulation of its own 475 STREETS AND HIGHWAYS. § 413 abridge the privilege thus conferred, or infringe upon the limitations thus prescribed. This is so because the act of incorporation is a law of the state, and because any by-law which runs counter to any law, whether organic or legislative, is void. The power to regulate still exists, but in these instances the legislature itself chooses to directly exercise the power or to fix the limits within which it may be exercised by cities." That the municipality is not bound by its agree- ment to pay the cost of removing or relocating the equipment of a municipal public utility in connection with the change in grade of its streets or the installa- tion of its sewer system because this expense must be borne by the municipal public utility itself is expressed in the case of Anderson v. Fuller, 51 Fla. 380, 41 So. 684, 6 L. R. A. (N. S.) 1026, decided in 1906, where the court says: "The city of Tampa was, therefore, not authorized directly or indirectly to burden itself or its citizens with the cost of removing and replacing of the water pipes, gas pipes, telegraph, telephone, and electric light poles, drains, conduits, or railway tracks that might necessarily have been interfered with in laying its sewers in the streets." CHAPTER XXI. THE RIGHT TO FIX RATES. Section. 414. Property devoted to public use subject to public regulation and control. 415. Control of state over its corporations. 416. Regulation of rates for municipal public utilities. 417. Competition not sufficient regulation. 418. Delegation of power of regulation must be clearly intended. 419. Power of municipal regulation governmental, continuous and personal. 420. Municipal regulation from control of its streets. 421. Control as condition of granting municipal consent or fran- chise. 422. Power of municipal regulation plenary and complete. 423. Municipal ordinance fixing rate is binding. 424. Rate regulation suspended by contract fixing rate. 425. Municipal officers competent to fix rates and disinterested. 426. Express contract for reasonable period fixing rates is valid. 427. Power to contract gives power to fix rates until revoked. 428. Power to grant municipal franchise rights on conditions con- strued liberally. 429. Individual inhabitant can enforce franchise rights. 430. Municipal grant of monopoly rights may be conditioned on control. 431. Acceptance of municipal consent on conditions creates bind- ing contract. 432. Service must be provided according to terms of contract. 433. Failure of municipality to provide rate in franchise. 434. Regulation of streets not authority to regulate rates during franchise. 435. Power of municipality to regulate rates not provided in fran- chise — police regulations. 436. Power to contract and to regulate distinguished. 437. Rates fixed by agreement of parties binding. 438. Limitation of police power. § 414. Property devoted to public use subject to public regulation and control. — The rule of law is now universally accepted that when private property is de- 476 477 RIGHT TO FIX RATES. §415 voted to a public use it is subject to public regulation and control. In recognition of this doctrine and as furnishing a forceful definition and a current applica- tion of it to modern industrial conditions for the pur- pose of controlling public service corporations provid- ing any public utility service, the leading and most important case is that of Munn v. Illinois, 94 U. S. 113, 24 L. ed. 'jy. Under this decision property is clothed with a public interest and devoted to a public use when used in a manner to make it of public con- sequence, and to afifect the entire community, so that when one devotes property to a use in which the pub- lic has an interest, he virtually grants to the public an interest in that use, and submits it to public regu- lation and control for the common good to the extent of the interest so granted. §415. Control of state over its corporations. — It is evident that when the state in the exercise of its sovereign power grants a charter, conferring the privi- lege of existing and operating as a legal entity upon the united interests of a number of individuals and constituting them a body corporate, such a grant of special rights and privileges can be made subject to such conditions and regulations as the state may see fit to impose within constitutional limitations. Being the creature of statutory origin, the corporation pos- sesses only the powers given by such origin upon the conditions stipulated by the state; and where the power to alter, amend or repeal is reserved in connec- tion with the granting of the charter, such power may be exercised at any time thereafter without impairing the obligation of contracts, prohibited by our federal constitution, because the contract resulting from the acceptance of the franchise is made subject to such modification or rescission. § 41 6 PUBLIC UTILITIES. 478 § 416. Regulation of rates for municipal public utilities. — As stated by the Supreme Court of Indiana in the case of Hockett v. State, 105 Ind. 250, 5 N. E. 178, 55 Am. Rep. 201, "The power of a state legisla- ture to prescribe the maximum charges which a tele- phone company may make for services rendered, facilities afforded, or articles of property furnished for use in its business, is plenary and complete." In- deed, it is settled beyond question that in the absence of any express constitutional reservation, such corpo- rations as furnish municipal public utilities are so af- fected by a public use as to be subject to legislative regulation and control, within constitutional limita- tions, which clearly and necessarily includes the right to fix or regulate the rates which may be charged for their services.^ §417. Competition not sufficient regulation. — While holding that competition as an agency of con- trol and regulation has great value in securing the public advantage and conserving the public interests in those cases where municipal public utilities are operated by private capital, the courts have at the same time felt that it is unwise to depend upon this means of control alone. They have therefore endeav- ored to secure to municipal corporations the right to regulate and control the service rendered at the hands of private capital where the exercise of such a right would be consistent with the private property and contract rights guaranteed by the constitution and with the general principles of the laws defining and regulating the powers of municipal corporations. 1 Spring Valley Water Works v. Schottler, 110 U. S. 347, 28 L. ed. 173; Smyth v. Ames, 169 U. S, 466, 42 L. ed. 819; Zanesville v. Zanesville Gas-Light Co., 47 Ohio 1, 23 N. E. 55; Chicago Union Traction Co. v. Chicago, 199 111. 484, 65 N. E. 451, 59 L. R. A. 631; Ratcliff V. Wichita Union Stock Yds. Co., 74 Kans. 1, 86 Pac. 150, •6 L. R. A. (N. S.) 834. 479 RIGHT TO FIX RATES. § 418 § 418. Delegation of power of regulation must be clearly intended. — The power of the state to regulate municipal public utilities, which includes the power to fix and control the maximum rates that they may charge for their service, however, is a sovereign power which our courts hold can be delegated to municipal corporations only in express terms or by clear or nec- essary implication. While the legislature has the right to fix the price at which gas, water, electric lights or any other municipal public utility service shall be supplied by one who enjoys the special privilege of providing such service by reason of the grant of spe- cial franchise rights to that effect, the courts will not presume that such a right is vested in the municipality unless it has been granted by the legislature expressly or by clear implication. The right, however, may be delegated by the state to municipalities or other agen- cies or commissions in the absence of a constitutional limitation to that effect and except as to vested in- terests and valid outstanding contract rights. § 419. Power of municipal regulation governmen- tal, continuous and personal. — The power of regulat- ing rates is public and governmental in its nature, and in its operation and effect is intended to redound to the benefit and advantage of the municipality and its inhabitants who receive the municipal public utility service; and the duty of regulating the service and fixing the rates when delegated to the municipality is personal and fiduciary in its nature so that it can not be surrendered or bartered away by a transfer to an- other or by a contract suspending its exercise for an unnecessary or an unreasonable period. Indeed, the power is a continuing one and is not exhausted by its exercise, although a certain rate may be fixed for a reasonable period which would constitute the estab- lished rate for such period, and unless or until a rate § 420 PUBLIC UTILITIES. 480 is prescribed by the state or an agency to which this power may have been delegated the municipal public utility may fix its own rates for its service. § 420. Municipal regulation from control of its streets. — Where the state has not delegated its right to regulate the rates for municipal public utility serv- ice to the municipality, but has conferred upon it full power of control over its streets and authority permit- ting it to provide for municipal public utility service for itself and its inhabitants, it has been decided in a number of cases of well recognized authority that, in connection with the granting of the special privilege to install and operate a plant providing municipal pub- lic utility service in its streets, the municipality has the power to fix and control the rates by making this a specification of the contract in which it grants to the municipal public utility the special privilege of using the streets and furnishing service to the munici- pality and its inhabitants. When the municipality has conferred upon it the power to grant the use of its streets on such terms and conditions as it might im- pose, it is only reasonable to hold, as a number of courts have decided, that it was the intention of the legislature to confer upon the municipality the neces- sary power to protect its interests and to conserve the rights of its inhabitants. § 421. Control as condition of granting municipal consent or franchise. — In regulating the service to be provided by the municipal public utility and the rates to be charged for it, it is of the utmost importance to the public and to the consumer of the service that the necessary provisions be made to secure adequate service at reasonable rates as a condition of the con- sent granted by the municipality to the uge of its 481 RIGHT TO FIX RATES. § 422 Streets and to the providing by the municipal pubHc utility of its service. So that the city has ample power to regulate the service and control the rates of municipal public utilities in its ov^n interest and that of its inhabitants either by making the necessary provisions for doing so in connection with the grant- ing of its franchise as such under the express author- ity delegated to it by the state to fix the rates and con- trol the service to be furnished or, if there is no ex- press authority delegated to it by the state to do this, the municipality may make such provisions as are nec- essary to regulate the service and fix the rates by provisions to that effect in the contract granting its consent to the municipal public utility to use its streets and to supply its service within the municipality. Hav- ing granted the franchise in the one instance or made these stipulations, conditions to the giving of its con- sent to the use of its streets in the other case, and the municipal public utility corporation having accepted the franchise or agreed to the conditions and having installed its plant and begun to furnish its service, the municipality has thereby fixed the rates or reserved to itself the power to control them and to regulate the service of any particular municipal public utility. § 422. Power of municipal regulation plenary and complete. — That the municipality acting under au- thority expressly or by clear intention conferred upon it by the state to regulate and control the service of municipal public utilities and the rates to be charged for it has the power and the responsibility of protect- ing itself and its inhabitants by providing for adequate service at reasonable rates in connection with its grant of the special franchise by virtue of which the munici- pal public utility acquires the right to install its sys- tem in the streets of the municipality and to supply 31— Pub. I't. § 422 PUBLIC UTILITIES. 482 its service is the generally accepted rule as stated and illustrated in the following leading cases on this sub- ject.=^ CALIFORNIA.— Ex parte Russell, 163 Cal. 668, 126 Pac. 875. FEDERAL.— Cleveland City R. Co. v. Cleveland, 94 Fed. 385; Los Angeles City Water Co. v. Los Angeles, 88 Fed. 720; Mills v. Chi- cago, 127 Fed. 731; Omaha Water Co. v. Omaha, 147 Fed. 1; Ft. Smith Light & Traction Co. v. Ft. Smith, 202 Fed. 581. FLORIDA.— Gainesville Gas & Electric P. Co. v. Gainesville, 63 Fla. 425, 57 So. 785, 62 So. 919. ILLINOIS.— Chicago Union Traction Co. v. Chicago, 199 111. 484, 65 N. E. 451, 59 L. R. A. 631; Danville v. Danville Water Co., 180 111. 235, 54 N. E. 224. INDIANA.— Indianapolis v. Consumers' Gas Trust Co., 140 Ind. 107, 39 N. E. 433; Indianapolis v. Navin, 151 Ind. 139, 47 N. E. 525, 41 L. R. A. 337; Lewisville Natural Gas Co. v. State ex rel., 135 Ind. 49, 34 N. E. 702, 21 L. R. A. 734; Muncie Natural Gas Co. v. Muncie, 160 Ind. 97, 66 N. E. 436, 60 L. R. A. 822; Noblesville v. Noblesville Gas, &c., Co., 157 Ind. 162, 60 N. E. 1032; Richmond v. Richmond Natural Gas Co., 168 Ind. 82, 79 N. E. 1031; Rushville v. Rushville Natural Gas Co., 164 Ind. 162, 73 N. E. 87; Westfield Gas & Milling Co. V. Mendenhall, 142 Ind. 538, 41 N. E. 1033. KANSAS.— Pryor, In re, 55 Kans. 724, 41 Pac. 958, 29 L. R. A. 398, 49 Am. St. 280; Emporia v. Emporia Tel. Co. 88 Kans. 443, 129 Pac. 187; 133 Pac. 858; State ex rel. Atty. Gen. v. Wyandotte County Gas. Co. 88 Kans. 165, 127 Pac. 639. MARYLAND.— Gregg v. Laird (Md.), 87 Atl. 1111. MICHIGAN.— Boerth v. Detroit City Gas Co., 152 Mich. 654, 116 N. W. 628, 18 L. R. A. (N. S.) 1197. MISSOURI.— St. Louis v. Bell Tel. Co., 96 Mo. 623, 10 S. W. 197; State ex rel. Garner v. Missouri & K. Tel. Co., 189 Mo. 83, 88 S. W. 41; State ex rel. St. Louis v. Laclede Gaslight Co., 102 Mo. 472, 14 S. W. 974, 22 Am. St. 789. NEBRASKA.— W^abaska Electric Co. v. Wymore, 60 Nebr. 199, 82 N. W. 626. NEW MEXICO.— Agua Pura Co. v. Las Vegas, 10 N. Mex. 6, 60 Pac. 208, 50 L. R. A. 224. NEW JERSEY.— Long Branch Commission v. Tintern Manor Water Co., 70 N. J. Eq. 71, 62 Atl. 474. NEW YORK.— Pond v. New Rochelle Water Co., 183 N. Y. 330, 76 N. E. 211, 1 L. R. A. (N. S.) 961; People ex rel. New York Edison Co. v. Willcox, 207 N. Y. 86, 100 N. E. 705. OHIO.— Zanesville v. Zanesville Gas-Light Co., 47 Ohio 1, 23 N. E. 55; Zanesville v. Zanesville Tel. & T. Co., 64 Ohio 67, 59 N. E. 781. OKLAHOMA.— Shawnee Gas & Electric Co. v. Corporation Com- mission (Okla.), 130 Pac. 127. 483 RIGHT TO FIX RATES. § 423 § 423. Municipal ordinance fixing rate is binding. — In the case of Cleveland v. Cleveland City R. Co., 194 U. S. 517, 48 L. ed. 1 102, decided in 1904, under the statutory authority conferred upon the plaintiff city to contract for street railway service, the court in holding the municipality had the power to fix the rate for such service by ordinance which on acceptance by the municipal public utility became a contract said: "In reason, the conclusion that contracts were engen- dered would seem to result from the fact that the pro- visions as to rates of fare were fixed in ordinances for a stated time and no reservation was made of a right to alter; that by those ordinances existing rights of the corporations were surrendered, benefits were con- ferred upon the public, and obligations were imposed upon the corporations to continue those benefits dur- ing the stipulated time." SOUTH CAROLINA.— Charleston Consol. Ry. &c. Co. v. Charles- ton, 92 S. Car. 127, 75 S. E. 390. TENNESSEE.— Knoxville v. Knoxville Water Co., 107 Tenn. 647, 64 S. W. 1075, 61 L. R. A. 888. TEXAS.— Ball V. Texarkana Water Corp., — Tex. Civ. App. — , 127 S. W. 1068. UNITED STATES.— Blair v. Chicago, 201 U. S. 400, 50 L. ed. 801; Cleveland v. Cleveland City R. Co., 194 U. S. 517, 48 L. ed. 1102; Detroit v. Detroit Citizens' St. R. Co., 184 U. S. 368, 46 L. ed. 592; Knoxville Water Co. v. Knoxville, 189 U. S. 434, 47 L. ed. 887; Los Angeles v. Los Angeles City Water Co., 177 U. S. 55S, 44 L. ed. 886; Murray v. Pocatello, 226 U. S. 318, 57 L. ed.; New Orleans Gas- light Co. v. Louisiana Light, &c., Mfg. Co., 115 U. S. 650, 29 L. ed. 516; San Diego Land & Town Co. v. National City, 174 U. S. 739, 43 L. ed. 1154; Spring Valley Waterworks v. Schottler, 110 U. S. 347, 28 L. ed. 173; Minneapolis v. Minneapolis Street Ry. Co., 215 U. S. 417, 54 L. ed. 259. UTAH.— Brummitt v. Ogden Waterworks Co., 33 Utah 2S9. 93 Pac. 828. WASHINGTON.— Tacoma Gas & Electric Co. v. Tacoma, 14 Wash. 288, 44 Pac. 655. WEST VIRGINIA.— St. Mary's v. Hope Natural Gas Co. (W. Va.), 76 S. E. 841. WISCONSIN.— State ex rel. Wisconsin Tel. Co. v. Sheboygan, 111 Wis. 23, 86 N. W. 657. § 424 PUBLIC UTILITIES. 484 § 424. Rate regulation suspended by contract fix- ing rate. — The same court in the case of Detroit v. Detroit Citizens' St. R. Co., 184 U. S. 368, 46 L. ed. 592, decided in 1902, in a similar case said: "It may be conceded that clear authority from the legislature is needed to enable the city to make a contract or agreement like the ordinance in question, including rates of fare. But there can be no question in this court as to the competency of a state legislature, unless prohibited by constitutional provisions, to au- thorize a municipal corporation to contract with a street railway company as to the rates of fare, and so to bind during the specified period any future common council from altering or in any way interfering with such contract. New Orleans Gaslight Co. v. Louisiana Light, &c., Co., 115 U. S. 650, 29 L. ed. 516; New Orleans Waterworks Co. v. Rivers, 115 U. S. 683, 29 L. ed. 525; St. Tammany Waterworks Co. v. New Orleans Waterworks Co., 120 U. S. 64, 30 L. ed. 563; Walla Walla v. Walla Walla Water Co., 172 U. S. i, 43 L. ed. 34; Los Angeles v. Los Angeles City Water Co., 177 U. S. 558, 44 L. ed. 886; Freeport Water Co. V. Freeport, 180 U. S. 587, 45 L. ed. 679. The con- tract once having been made, the power of the city over the subject, so far as altering the rates of fare or other matters properly involved in and being a part of the contract is suspended for the period of the run- ning of the contract." The same court in the case of San Diego Land & Town Co. V. National City, 174 U. S. 739, 43 L. ed. 1154, decided in 1899, observed: "That it was com- petent for the state of California to declare that the use of all water appropriated for sale, rental, or dis- tribution should be a public use, and subject to public regulation and control, and that it could confer upon the proper municipal corporation power to fix the 485 RIGHT TO FIX RATES. § 425 rates of compensation to be collected for the use of water supplied to any city, county, or town, or to the inhabitants thereof, is not disputed, and is not, as we think, to be doubted." § 425. Municipal officers competent to fix rates and disinterested, — The case of Spring Valley Water Works V. Schottler, no U. S. 347, 28 L. ed. 173, de- cided in 1884, is a leading one to the same effect and is also of interest in this connection in deciding that the municipal officers of any particular municipality are not incompetent to fix the rates for municipal pub- lic utility service to be furnished within its limits, al- though the municipality is an interested party in the matter because it is a logical and necessary part of their official duty. The court says: "Long before the constitution of 1879 was adopted in California, statutes had been passed in many of the states requir- ing water companies, gas companies, and other com- panies of like character, to supply their customers at prices to be fixed by the municipal authorities of the locality; and, as an independent proposition, we see no reason why such a regulation is not within the scope of legislative power, unless prohibited by con- stitutional limitations or valid contract obligations. Whether expedient or not, is a question for the legis- lature, not the courts. 'Tt is said, however, that appointing municipal offi- cers to fix prices between the seller and the buyers is, in effect, appointing the buyers themselves, since the buyers elect the officers, and that this is a viola- tion of the principle that no man shall be a judge in his own case. But the officers here selected are the governing board of the municipality, and they are to act in their official capacity as such a board when performing the duty which has been imposed upon § 4^6 PUBLIC UTILITIES. 486 them. Their general duty is, within the limit of their powers, to administer the local government, and, in so doing, to provide that all shall so conduct them- selves and so use their own property as not unneces- sarily to injure others. They are elected by the peo- ple for that purpose, and whatever is within the just scope of the purpose may properly be intrusted to them at the discretion of the legislature." § 426. Express contract for reasonable period fix- ing rates is valid. — Where the municipality has power expressly conferred upon it to contract for municipal public utility service, the municipality in the exercise of such a right for the purpose of securing the desired service by agreeing on a fixed rate for a reasonable period may thereby suspend its right to regulate the rates further during that period; provided, however, the agreement to that effect is made expressly, for as the court in the case of Omaha Water Co. v. Omaha, 147 Fed. I, decided in 1906, says: "The making of a contract for the construction and operation of water- works wherein the parties agree what rates may be collected by the owner of the works from private con- sumers during a reasonable term of years is the exer- cise of one of the business powers of the corporation. The purpose of such a contract is not to regulate rates, for there are no rates to regulate. It is to procure water and to get rates for the city and for its inhab- itants. Hence, it is that the legislature of a state, unless prohibited by its constitution, may empower a city to suspend by contract, and a city may suspend in that way during a reasonable term of years its power to change or regulate the rates which an indi- vidual or corporation may collect of private consumers, . . . An agreement for such a suspension will not be raised by mere implication. Where the meaning 487 RIGHT TO FIX RATES. § 427 of a grant or contract regarding such a suspension or regarding any public franchise or privilege is ambig- uous or doubtful, it will be construed favorably to the rights of the public. Where the grant or the contract is clear and plain it will be protected and enforced." § 427. Power to contract gives power to fix rates until revoked. — That the power conferred upon the municipality to supply itself with the service of any particular municipal public utility includes the power to agree upon a rate by contract and that such power being delegated by statutory authority may be revoked at the will of the legislature is the effect of the deci- sion in the case of Los Angeles City Water Co. v. Los Angeles, 88 Fed. 720, decided in 1898, where the court says: "In procuring water, or any other commodity, by purchase, one of the first things to be considered and agreed upon is the matter of price. Therefore, to hold that general power, without limitation, in a municipal corporation, to supply the city with water, does not include power to agree upon price, it seems to me, would be a solecism. . . . This delegation of power to the city was not, of course, a relinquish- ment by the legislature of its control over the subject. The legislature could at any time revoke the power delegated to the city, and provide directly, through agencies of its own selection, for supplying the city with water, provided such revocation or provision should not impair any previously vested rights." § 428. Power to grant municipal franchise rights on conditions construed liberally. — Under the author- ity conferred upon the municipality to impose such terms and conditions as it sees fit in granting its con- sent to the use of its streets for a municipal public utility, the courts are very liberal in permitting such § 429 PUBLIC UTILITIES. 488 municipalities to impose conditions practically with- out limitation so far as they are not in conflict with other statutory or constitutional provisions. The power to fix rates for the service to be rendered has been frequently held to be properly included within such authority, for as the court in the case of Boerth V. Detroit City Gas Co., 152 Mich. 654, 116 N. W. 628, 18 L. R. A. (N. S.) 1197, decided in 1908, said: "It may be said then, that, in order to safeguard the rights of its inhabitants who use gas, it is not only reasonable that the city should have this power to fix rates, but it is highly expedient — indeed, it is nec- essary — that it should possess that power. . . . The power to prescribe rates by contract — and that is the power which was exercised in this case — is a very different power from the legislative power regulating rates." § 429, Individual inhabitant can enforce franchise rights. — The Supreme Court of New York in the case of Pond V. New Rochelle Water Co., 183 N. Y. 330, y6 N. E. 211, I L. R. A. (N. S.) 961, decided in 1906, held that the individual inhabitant has the right in his own name to compel the municipal public utility to provide him service .at the rate fixed in the franchise which stipulated the rate to be charged for the service rendered to the individual inhabitant as well as to the municipality itself. In the course of its opinion the court said: 'Tn the case before us we have a munici- pality entering into a contract for the benefit of its inhabitants, the object being to supply them with pure and wholesome water at reasonable rates. . . . The municipality sought to protect its inhabitants, who were at the time of the execution of the contract con- sumers of water, and those who might thereafter be- come so, from extortion by a corporation having 489 RIGHT TO FIX RATES. § 43O granted to it a valuable franchise extending over a long period of time. We are of opinion that the com- plaint states a good cause of action." § 430. Municipal grant of monopoly rights may be conditioned on control. — That no such statutory authority is necessary to give the municipality power to fix the rates and regulate the service to be ren- dered, but that it may make such provisions condi- tions precedent to the granting of its consent to the use of its streets and to the furnishing of service to its inhabitants by any particular municipal public util- ity, is a well established principle which must be in- voked to secure the necessary protection in those municipalities where the express authority to fix rates has not been conferred, for as the court in the case of Long Branch Commission v. Tintern Manor Water Co., 70 N. J. Eq. 71, 62 Atl. 474, decided in 1905, said: "But, independent of such statutory provision, I think it is the province and the duty of the municipality, whenever opportunity offers, to exercise its power in the protection of its inhabitants against extortion, and to secure them a supply of water and of gas from corporations, assuming to furnish those commodities, at reasonable rates. The water company is exercising a public franchise, which, from its nature and mode of exercise, is necessarily, during its continuance, a prac- tical monopoly, and it follows beyond all question that its charges for its supply must be reasonable. And it would be strange, indeed, if the municipal govern- ment, which, so to speak, imposes this monopoly upon its citizens, were powerless to protect them against unreasonable charges." §431. Acceptance of municipal consent on condi- tions creates binding contract. — Where the municipal- § 432 PUBLIC UTILITIES. 49O ity has the right to withhold its consent or extend it at will it has ample power to make all necessary pro- visions for securing adequate service at reasonable rates, for as the court in the case of Indianapolis v. Consumers' Gas Trust Co., 140 Ind. 107, 39 N. E. 433, decided in 1895, says: "It was within its discretion to give or not to give its consent, and it had the right to withhold it from all gas companies. Gas & Min. Co. V. Town of Elwood, 114 Ind. 332, 16 N. E. 624. It was not limited alone to the granting of this fran- chise, but it had the right to prescribe and impose terms and conditions. Dill. Mun. Corp. § 706; 2 Wood, Ry. Law, p. 986; EUiott, Roads & S. p. 565. When these terms and conditions proposed by appel- lant were accepted by the appellee, and complied with, it became a binding contract. Western P. & S. Co. V. Citizens' St. R. Co., 128 Ind. 531, 26 N. E. 188, and 28 N. E. 88." § 432. Service must be provided according to terms of contract. — After the municipal public utility has accepted the consent of the municipality on the conditions specified and instaled its service, the con- tract is consummated, and where the conditions pro- vide for the fixing of the rate it is a material part of the contract and absolutely binding on the municipal public utility, for as the court in the case of Westfield Gas & Mining Co. v. Mendenhall, 142 Ind. 538, 41 N. E. 1033, says : "The town had the right, in granting the use of its streets, to impose such reasonable re- quirements, terms, regulations, and conditions therein upon those accepting the privileges and benefits of the grant as its own prudence and discretion might dic- tate, so as not to restrict, however, the town in its legitimate exercise of legislative powers. The author- ity to prescribe such terms and conditions, if not ex- 491 RIGHT TO FIX RATES. § 433 pressly conferred by the act of 1887, may at least be reasonably inferred therefrom, in order that the full force and effect may be given to the power expressly granted. City of Crawfordsville v. Braden, 130 Ind. 149, 28 N. E. 849; City of Indianapolis v. Consumers' Gas Trust Co., 140 Ind., 107, 39 N. E. 433, and author- ities there cited. . . . Having accepted the fran- chise granted by the ordinance, and agreed to be bound by the express terms as to the price of gas, and having engaged in the exercise of the privileges under the grant, and so continuing to do, it is now precluded from successfully refusing to discharge its obligations to the inhabitants of the town who desire to use its fuel upon the ground that they refuse to pay a price therefor in excess of the maximum rate fixed by the ordinance. The town could not, by its subsequent action, impair or restrict the rights granted to, ac- cepted, and exercised by appellant. Neither will the latter be permitted, under the circumstances, to de- cline to comply with the terms or conditions as- sumed, by which it is expressly obligated." § 433. Failure of municipality to provide rate in franchise. — The case of In re Pryor, 55 Kans. 724, 41 Pac. 958, 29 L. R. A. 398, 49 Am. St. 280, decided in 1895, suggests the practical importance of this prin- ciple. Nine years after granting a franchise to erect and maintain a gas system within its limits, without having made any provision as to the rates to be charged for the supply of such gas for domestic pur- poses, upon which grant gas works were duly in- stalled, the city of lola, Kansas, passed an ordinance fixing the maximum rates to be charged for such service at much less than those theretofore charged. In denying the validity of this ordinance attempting to fix the rates for such service the court said: "The § 433 PUBLIC UTILITIES. 492 act providing for the organization and government of cities of the third class [to which lola belonged], contains no express grant of power to fix or regulate the prices of gas, water or any other article of neces- sity or luxury. . . . Certainly there is no express authority conferred upon the municipal authorities by this section to regulate the price of gas or water [providing general powers in corporations to provide cities with gas or water 'with the consent of the mu- nicipal authorities thereof, and under such regulations as they may prescribe.'] Whether they might as a condition of their consent, provide that gas or water should be furnished to the city or to its inhabitants at not exceeding certain prescribed rates, we do not now inquire. Consent was granted by ordinance No. 268, to the lola Gas and Coal Company, its successors and assigns [of whom petitioner is assignee] without annexing any condition as to rates. ... In certain cases the state may fix and regulate the prices of com- modities and the compensation for services, but this is a sovereign power, which may not be delegated to cities or subordinate subdivisions of the state, except in express terms or by necessary implication. No such power is expressly conferred upon the cities of the third class, and we do not think the right can be implied from any express provision, unless possibly that in the grant of consent to any person or corpora- tion so to use the streets and public grounds of the city a condition might be imposed as to the maximum rates to be charged. The case of Wabaska Electric Co. v. Wymore, 60 Neb. 199, 82 N. W. 626, decided in 1900, was an action to restrain the enforcement of an ordinance reducing rates for electric light furnished by the plaintiff under a franchise from the defendant city, which failed to stipulate the rates to be charged, where the court said: 493 RIGHT TO FIX RATES. § 434 "In dealing with this feature of the case it is not neces- sary to determine whether the city was authorized by its charter, as it existed in 1889, to grant any person, company or corporation, an exclusive franchise for the erection and operation of an electric light plant. The plant has come into being; it is now established, and the owner thereof has the right to furnish light to its private customers on such terms as may be mutually satisfactory to the parties concerned. The defendant has plainly no power or authority to regu- late the plaintiff's charges for lights furnished to the inhabitants of Wymore. The legislature has, of course, the right to fix the price at which gas or electric lights shall be supplied by one who enjoys a monopoly of the business by reason of having an exclusive fran- chise ; and such right may be delegated to the gov- erning body of a public or municipal corporation. But the power of regulating the charges for electric lights is not found among the grant of powers contained in defendant's charter. There is no such authority given, either expressly or by implication and, therefore, it does not exist." § 434. Regulation of streets not authority to regu- late rates during franchise. — The same principle is equally well established and applicable to the giving of telephone service in municipalities, which has prac- tically all of the elements of a natural monopoly. In the early case of St. Louis v. Bell Tel. Co., 96 Mo. 623, 10 S. W. 197, decided in 1888, the court laid down this rule of law as follows: "This was a prosecution against the Bell Telephone Company of ^lissouri for the violation of an ordinance, which provides that the annual charge for the use of the telephone in the city of St. Louis shall not exceed fifty dol- lars. . . . The important question, then, is whether § 435 PUBLIC UTILITIES. 494 the city of St. Louis has the power to enact the ordinance in question, ... If the city has such power it must be found in a reasonable and fair construction of its charter. . . . That the com- pany is subject to reasonable regulations prescribed by the city, as to planting its poles and stringing its wires and the like, is obvious. Such regulations have been obeyed by this defendant. Conceding all this, we are at a loss to see what this power to regulate the use of the streets has to do with the power to fix telephone charges. The power to regulate the charges for telephone service is neither included in nor incidental to the power to regulate the use of streets, and the ordinance can not be upheld, on any such ground. . . . The power to regulate, it may be conceded, gives the city the right to make police regulations as to the mode in which the designated employment shall be exercised. But taking these charter provisions together, we think it would be going to an extreme length to say that they confer upon the city the power to fix telephone rates. . . . We conclude that the city has no power to pass the ordi- nance in question by reason of any of the charter powers before considered. . . . To say that under this general power [of the general welfare clause] the city may fix rates for telephone services would be going entirely too far." This principle was fully af- firmed by the same court in 1905 in State ex rel. Garner v. Missouri & K. Tel. Co., 189 Mo. 83, 88 S. W. 41- § 435- Power of municipality to regulate rates not provided in franchise — Police regulations. — This same principle with reference to the power of cities to regu- late the rates for telephone service only in those cases where the right to do so has been expressly conferred 495 RIGHT TO FIX RATES. § 435 upon the municipality or can be necessarily implied from some express grant by the state, is clearly stated, to- gether with the reason on which the rule of law is based in the case of State ex rel. Wisconsin Tel. Co. v. Sheboygan, iii Wis. 23, 86 N. W. 657, decided in 1901. In the course of its opinion the court said: "Whatever power a municipality possesses over the wires and poles of a telephone company in its streets must be granted it by the legislature — 2 Dillon, Mun. Corp., § 698. The charter of the city of Sheboygan empowers it to enact proper ordinances and regula- tions for the government and good order of the city for the benefit of trade and commerce for the sup- pression of vice and the prevention of crime, to prevent the incumbering of streets, to provide for the removal of obstructions therein, to regulate the manner of using streets, and to protect them from injury. As we have already seen, this grant of power does not authorize the city to wholly prevent the relator from doing business within its limits. No express authority is given the city to regulate charges for telephone service, nor is there any express grant of power, from which such authority can necessarily be implied. . . . The power to regulate charges was not in- cluded in or incidental to the power to regulate the manner of using streets. There is not the remotest relation between them. The attempt of the city to justify its position on that ground must fail. . . . Neither does the power come to the city under the general authority to pass ordinances for the govern- ment and good order of the city and for the benefit of trade and commerce. To say that under this gen- eral power the city may fix rates for telephone service would be going entirely too far." The Supreme Court of Indiana in a series of recent § 435 PUBLIC UTILITIES. 496 decisions has, firmly established in that state this prin- ciple as to the municipal regulation of rates for public utilities in connection with the matter of supplying natural gas to the inhabitants of municipalities. The first case of Lewisville Natural Gas Co. v. State ex rel., 135 Ind. 49, 34 N. E. 702, 21 L. R. A. 734, decided in 1893, was a mandamus action to compel the appellant company to furnish gas at the price fixed by an ordinance of the town of Lewisville by the terms of which the said company was required to furnish gas at a lower price than it had been charg- ing for such service. In deciding the question of the power of said town so to fix the price at which the appellant should supply the citizens with gas, the court said: "It is not contended that the general statute upon the subject of incorporating towns confers upon towns, when incorporated, the power to regulate the price at which natural gas shall be sold. It is con- tended, however, that such power is conferred by an act of the general assembly, approved March 7, 1887. That act is as follows: 'Section i. Be it enacted, etc.. That the boards of trustees of towns, and the common councils of cities, in this state, shall have power to provide by ordinance, reasonable regulations for the safe supply, distribution and consumption of natural gas within the respective limits of such towns and cities, and to require persons or companies to whom the privileges of using the streets and alleys of such towns and cities is granted for the supply and distribution of such gas to pay a reasonable license, for such franchise and privilege.' . . . There is not a word or a syllable to be found in this act indi- cating that the general assembly had in view any other purpose than that of securing the safe supply and use of natural gas. To secure the safe supply and use of natural gas is one thing and to fix the price at 497 RIGHT TO FIX RATES. § 436 which gas shall be supplied is another and quite dif- ferent thing. In our opinion it was not the intention of the general assembly to confer, by the act above set out, the power to regulate the price at which natural gas should be furnished. . . . The trustees of the town of Lewisville having no power to regulate the price at which natural gas should be furnished, the ordinance in question, purporting to do so is void upon its face." The decision of this case was expressly affirmed by the same court in Noblesville v. Noblesville Gas, &c., Co., 157 Ind. 162, 60 N. E. 1032, decided in 1901, where the court said: "It will be doing violence to the rules of statutory construction to hold that under the law of 1887 [quoted supra] the power of a city, when not reserved in granting a franchise, to prescribe the prices chargeable by its licensee to consumers of its gas, is free from fair and reasonable doubt." § 436. Power to contract and to regulate distin- guished. — In this case the appellee company had in- stituted an action to enjoin the appellant city from enforcing an ordinance regulating the rates to be charged consumers of natural gas. It appeared that the franchise originally granted said company gave no exclusive right and fixed no time for its continuance and imposed no restrictions upon the price to be charged for gas either by express stipulation or a reservation to fix or control prices thereafter. The or- dinance passed by the city later, however, fixed the maximum rates in particular cases that might be charged by any one accepting its provisions, which the appellee company did expressly in writing duly filed with the common council of said city. In decid- ing the case on this point in favor of the city the court said: "That the city had no power to regulate the 32— Pub. Ut § 437 PUBLIC UTILITIES. 498 rates of its licensee makes no difference. It had the power to contract. And the power to regulate as a governmental function, and the power to contract for the same end, are quite different things. One requires the consent only of one body, the other the consent of two. In this instance the city acted in the exercise of its power to contract, and it is therefore entitled to the benefits of its bargain. There is no merit in appellee's contention that the ordinance of 1888 fails for want of consideration. Appellee's original fran- chise of 1886 was without restriction as to rates; and it could have continued to enjoy its franchise and fix its own rates (if reasonable) if it had chosen to do so. By the ordinance of 1888 the city in effect proposed that any person, firm or corporation, including appel- lee, desiring the use of its streets and alleys as a means of marketing natural gas, might have the same, by undertaking to abide by and perform all the conditions set forth, including the limitation upon prices for gas. Appellee was not required to accept the new proposi- tion. It might have gone on without a contract for chargeable rates, and taken its chances of legal inter- ference, or it might free itself of uncertainty by ac- cepting the certainty of contract. It chose the latter course, accepted the ordinance, and for the first time had a contract and a legal authorization to charge the price specified in the ordinance contract. This was a sufficient consideration." § 437. Rates fixed by agreement of parties bind- ing. — This contractual power of municipalities to im- pose regulations in the matter of rates to be charged for gas when the company agrees to accept the same, and by so doing enters into a contract of its own motion, is further defined and established in the case of Muncie Natural Gas Co. v. Muncie, 160 Ind. 97, 66 499 RIGHT TO FIX RATES. § 437 N. E. 436, 60 L. R. A. 822, decided in 1903. This was an action to restrain the violation of a contract under which the appellant company was given authority by the respondent city to maintain and operate a natural gas system in said city and to supply gas at not to exceed the maximum rates stipulated in said contract. To the defense of said company that such contract was ultra vires the city and therefore void because no power was vested in it to enter into such a contract fixing the rates to be charged its inhabitants for gas, the court held that, since the company had continued to use the streets of said city for the dis- tribution of natural gas to private consumers by vir- tue of such contract, it was not within the power of the company to deny the right of the city to enter into such a contract. But in the course of its opinion the court expressed the belief that there was no lack of power in the city to make such a contract, saying: "Natural gas is a public utility that can not be obtained by the citizens of a municipality generally, except as it is conducted in pipes along the public ways of the city. The grant of exclusive power to the common council over such ways comprehends the right to permit gas companies to use the streets. If the common council may per- mit a natural gas company to use the streets without any condition annexed, except such as the law at- taches, it is not perceived why, as in this case, in making provision for supplying natural gas to all of the inhabitants of the city, it may not protect such inhabitants against extortion by providing that the company shall not charge in excess of certain prices for its service. ... It was not limited alone to the granting of this franchise, but it had the right to prescribe and impose terms and conditions. When § 437 PUBLIC UTILITIES. 5OO these terms and conditions . . . were accepted . . . it became a binding contract." To what extent the city has power to insist on stipulations, regulating rates or fixing the maximum price which might be charged by a company for its gas, in negotiating a contract for the granting of a franchise to such a company when it refuses to accept such stipulations and be bound in the matter of rates, this case does not decide. And while the expressions in the opinion above set out would indicate that the attitude of the court favors the holding that such power belongs to the municipality even when no ex- press authority has been delegated to it to fix rates, this position was not necessary to the decision of the case and so can not be regarded as having the au- thority of law. While there is good reason for holding the city to have the power to prohibit the charging of excessive rates in connection with the granting of its franchise just as the courts will enjoin the company from making extortionate charges for its service, it is submitted the city can not from time to time regu- late the rates to be charged under the mere general authority to regulate the use of its streets. To permit them to do so would have the effect of denying the validity of the well established principle that such power belongs to the city only when the grant of it is found to have been made by the legislature ex- pressly or by necessary implication. The court limits the application of its remarks, however, by saying that "municipalities can not, under existing legislation, ex- ercise the legislative power to fix rates in any case." This principle is further discussed and its applica- tion more clearly defined in the case of Rushville V. Rushville Natural Gas Co., 164 Ind. 162, 73 N. E. Sy, which was decided in 1905. The appellee in this case was in occupation of the streets and public places 50I RIGHT TO FIX RATES. § 43" of the city of Rushville and was supplying its inhabi- tants with natural gas, under a franchise granted for that purpose by an ordinance of said city passed in July, 1889, known as No. 26, which imposed no re- strictions or limitations upon said appellee with respect to the rate to be charged consumers for such gas, or as to the method by which the price should be ascertained and fixed. In August, 1890, the appellant city duly passed another ordinance, known as No. 30, granting generally to any corporation, firm, company or individ- ual a franchise to supply said city and its inhabitants with natural gas upon compliance with certain terms and conditions. And in May, 1899, said city passed a third ordinance known as No. y^, amending said ordinance No. 30 by providing for the use of meters for the measurement of the gas consumed and limit- ing the charge therefor to fifteen cents per thousand feet. The action in the case was brought by the ap- pellant to enjoin the appellee from increasing its rates and charging consumers of natural gas in excess of the maximum price fixed by the provisions of said ordinances Nos. 30 and J^i- The court stated the principle in question in the following decisive lan- guage : "Appellee accepted the provisions of this ordinance [No. 26], adjudged and conceded to be valid, and con- structed its plant at a cost of $100,000, to fulfill the purpose of its creation. The acceptance by appellee of the privileges granted by appellant in this ordinance constituted a contract equally binding upon both par- ties, and when acted upon rights became vested, and its provisions became secure against impairment by any subsequent municipal action. . . . This ordi- nance did not prescribe any limits as to charges for gas, or reserve to the city the right thereafter so to do. No alteration of or addition to the terms of the S 437 PUBLIC UTILITIES. 502 contract thus formed could be made afterwards by either party without the consent of the other. . . . It is now the settled law of this state that, under such circumstances as shown here, cities have no authority or power by subsequent ordinance or action, to impose any additional restrictions regulating the price to be charged for gas furnished under such contract." The case of Richmond v. Richmond Natural Gas Co., 168 Ind. 82, 79 N. E. 1031, decided in 1907, which was an injunction to prevent the defendant company from charging a greater rate than that provided in an ordinance which the plaintiff city had passed after the defendant had installed its plant under a franchise which did not attempt to fix or control the rate to be charged and, as the state had not expressly delegated to the municipality the power to fix or regulate the rates, the court in refusing to sustain the injunction held the ordinance attempting to fix the rate invalid because beyond the power of the city and because it was an unconstitutional attempt to impair the prop- erty rights of the defendant company. This case repre- sents a practice all too common and shows the folly of the municipal corporation in failing to regulate and fix the rate in connection with the grant of its con- sent to the municipal public utility to use its streets. In the course of its opinion the court said: "Where a franchise to supply gas is granted without restriction as to prices, accepted, and acted upon, cities incor- porated under the general law of this state had no authority prior to 1905, by subsequent ordinance or action, to impose additional provisions regulating prices to be charged for gas furnished under the orig- inal franchise. . . . The general assembly of 1905, in revising the statutes governing cities and towns, conferred upon cities the following among other pow- ers : '(36) To license and regulate the supply, distri- 503 RIGHT TO FIX RATES. § 437 bution and consumption of artificial and natural gas, electricity, heat and water, and to fix by contract or franchise the prices thereof, etc' . . . The stat- ute relied upon purports to empower a city of the class to which appellant belongs to fix prices only 'by contract or franchise.' When the manner in which a delegated power is to be exercised is prescribed, it must be substantially followed. . . . The ordi- nance under consideration is without any of these char- acteristics. It neither grants a new right, nor con- firms or extends an existing one, but merely seeks to impose special restrictions upon an existing right to the use of the streets and alleys of the city. . . . In the absence of charter authority or other statutory or constitutional provisions, delegating the power in express terms or by necessary implication, it is the rule that a municipal corporation has no power to fix by ordinance the price at which a gas company shall supply its customers. 20 Cyc. 1166, and cases there cited. In this case it appears that the attempted regulation of prices was not done by contract, or in connection with the granting or acceptance of a fran- chise, and the legislature has not delegated to appel- lant, whatever authority to regulate prices of gas it may possess in the premises, to be exercised in any other manner. It follows that the ordinance relied upon is invalid as against appellee." The case of Mills v. Chicago, 127 Fed. 731, decided in 1904, was an action to restrain the enforcement of an ordinance of the defendant city forbidding manu- facturers from demanding more than seventy-five cents per thousand cubic feet for gas served to its cus- tomers, which was a marked reduction from the pre- vailing price of gas. In refusing to find such power in the city to regulate the rate of gas supply the court said: "No one has pretended that the regulation of § 43^ PUBLIC UTILITIES. 504 the price of gas is essential to the specific object for which the city of Chicago was created. . . . It is plain to me that the sixty-sixth section, while granting power to regulate the police of the city or village, can not be enlarged to include power to regu- late the price of gas. . . . The mere laying of gas pipe, and the installation of gas plants, together with their repair, are the subject-matter of a power widely separable in circumstance from the power to deal with the rates at which gas shall be manufactured and sold. The first belongs naturally to the city whose streets are to be occupied, for it is related intimately with the supervision of streets; the latter, with equal rea- son, is foreign naturally to the city, . . . Until there is legislation, more unmistakable than the lan- guage used in this section, to indicate a purpose to grant the city power to fix rates, I shall not hold that such was the legislative intent. Unquestionably the power resides somewhere in the state, but until con- sciously delegated to some other body, it remains in the state's general repository of power, the general assembly of the state." § 438. Limitation of police power. — And finally the case of State ex rel. St. Louis v. Laclede Gas Light Co., 102 Mo. 472, 14 S. W. 974, 22 Am. St. 789, decided in 1890, was a mandamus action to compel the respondent company to comply with an ordinance of the relator city and supply gas to consumers at not to exceed ninety-five cents per thousand cubic feet, being a reduction from one dollar and twenty-five cents per thousand. In denying such power in the city by virtue of the police power vested therein, the court expressed its opinion in the following clear language: "It is not open to doubt or dispute that this power to make and vend gas carries with it as an inevitable incident 505 RIGHT TO FIX RATES. § 438 the right to fix the price of the gas thus made and sold. ... So that, by the terms of the charter of the respondent company its right to fix the price of its product was as much a part of its charter as if it had been in terms set forth in section 5 of the original act of incorporation. But, if a price had thus been set forth, no one familiar with constitutional principles but would at once deny that the right to contract for the sale of gas at such price could any- wise be impaired. . . . But certainly there is a limit in this regard over which legislatures and mu- nicipalities can not pass; they can not, in the exercise of assumed police powers, violate charter contracts and overthrow vested rights. On this subject Judge Cooley aptly says: 'The limit to the exercise of the police power in these cases must be this: The regula- tions must have reference to the comfort, safety or welfare of society; they must not be in conflict with any of the provisions of the charter; and they must not. under pretense of regulation, take from the cor- poration any of the essential rights and privileges which the charter confers. In short, they must be police regulations in fact, and not amendment of the charter in curtailment of the corporate franchise.' '" 8 Cooley, Constitutional Limitations, 5th ed. 712. See also Tacoma Gas and Electric Co. v. Tacoma, 14 Wash. 288, 44 Pa. 655. CHAPTER XXII. RATES MUST BE REASONABLE. Section. 439. Reasonable rates the ultimate object. 440. Fixing rates legislative and administrative. 441. Rates should vary with changed conditions. 442. Reasonableness of rate a judicial question. 443. No return on investment guaranteed. 444. Value of service a test of reasonableness. 445. Rates for future fixed by contract or legislature not by courts. 446. Rate presumed reasonable. 447. Reasonableness of rate question of fact. 448. Limitation of reasonableness. 449. Question of reasonableness raised by either party. 450. Discretion of parties fixing rates respected unless abused. 451. Municipal public utility fixing rates must be reasonable. 452. Cost of service includes measuring it for customer. 453. Reasonable value of service determines the rate. 454. Risk of investment assumed by owner. § 439. Reasonable rates the ultimate object. — ^The rates which municipal public utilities receive for their service must be reasonable, w^hether fixed by the state itself or by some agency duly authorized by the state such as municipalities or public utility commissions, or where the rates have not been fixed by either of these authorities the municipal public utility has fixed the rate itself. The fixing of the proper rate and securing adequate service constitutes at once the crux and the conclusion of this whole matter concerning municipal public utilities and their service. The rate is the most fundamental question of the entire sub- ject because it controls the means by which the mu- nicipal public utility is established and maintained and 506 507 REASONABLE RATES. § 44O naturally and necessarily, where the means are in- adequate or insufficient, the service is impaired or destroyed. On the other hand where the rate received by the municipal public utility for its service is exorbitant and in excess of its value, the customer receiving the service is imposed upon by being forced to pay in excess of the value he receives. The control of these opposing forces and conflicting interests and the right to fix the rates in such cases, as has been seen, is in the state. § 440. Fixing rates legislative and administrative. — The fixing of such rates by the state or its duly authorized agency, the municipality or the commis- sion, is a legislative or administrative matter and not a judicial one, the proper determination of which by the authorities necessarily involves the exercise of their best judgment and discretion. As this matter determines the means and directly affects the motive for furnishing such service, it is the point of greatest contest and the occasion for most of the controversies in the matter of municipal public utilities. §441. Rates should vary with changed conditions. — As each municipal public utility system individually has conditions peculiar to itself, the determination of the proper rate for such service is necessarily confined to the facts of the particular case in question and while a number of general principles governing the matter are well established, their proper application in any particular case is modified and controlled by the particular facts of the case in question. There are so many changing circumstances currently affecting the cost of supply, the nature and extent of the service, the prospects for its being permanent or becoming § 442 PUBLIC UTILITIES. 508 more profitable by the demand increasing while the cost is decreased by inventions and more improved methods of supply and distribution that the matter of fixing the rates fairly is as difficult of accomplish- ment as it is necessary that the entire matter be placed in the hands of competent authorities with power to regulate and change with the varying con- ditions. The regulation of rates being legislative and governmental in its nature and for the benefit of the consumers of the service is necessarily continu- ing for the right to modify or change the rate should always be available to the authorities in charge of the matter in the interest of the public as well as for the sake of doing justice between the parties. § 442. Reasonableness of rate a judicial question. — Although the fixing of rates is a legislative and governmental matter over which the state has com- plete control, it has no power to fix rates that are un- reasonable or to regulate them arbitrarily. The deter- mination that any particular rate, whether fixed by the authority of the state or by the municipal public utility itself, is fair and reasonable is a judicial question over which the courts have complete control. And while the schedule of rates fixed by the state or an agency to whom this power has been delegated is presumed to be fair and reasonable so that the burden of prov- ing that it is arbitrary and unreasonable is on the mu- nicipal public utility making the claim, the state has not the power under the guise of regulation to destroy or confiscate the property of the corporation providing the service; and where the rate fixed has the effect of depriving the company of the right to realize a rea- sonable return on its investment, the courts will not hesitate to set aside such a schedule of rates as un- reasonable and in effect a taking of the right to the il 509 REASONABLE RATES. § 443 use of its property as well as of the property itself without due process of law. The term "regulation" implies a fair investigation and a full consideration of all the facts affecting the matter upon which such a rate of return should be al- lowed as will permit of the continued existence of the municipal public utility and the furnishing of adequate service as well as a reasonable return on the necessary investment. The court, however, is restricted to the question of determining whether any particular rate already fixed is reasonable or otherwise and can not itself fix such a rate because this power inheres en- tirely in the legislative department of the state. § 443. No return on investment guaranteed. — No particular return, however, is guaranteed to the mu- nicipal public utility on its investment which it made voluntarily and of its own accord, it thereby neces- sarily assuming the risk of the investment being a profitable and successful one. For such an undertak- ing has no absolute right to be assured of the security and success of its investment any more than that of a purely private enterprise, although as in such a business a failure to realize a fair return on the investment would finally result in its dissolution and the discontinuance of the service rendered. It is a general rule that the return is limited to the necessary investment and does not cover property acquired by the company which is not reasonably necessary to the service presently or prospectively; and mistakes in the business judgment of the management in charge of the enterprise must be met by the parties making the investment and not by the consumers of its service. § 444. Value of service a test of reasonableness. — While the interests of the owners of the property §444 PUBLIC UTILITIES. 5IO are to be considered they are not entitled to a greater return than it can normally earn under proper manage- ment. In other words as between the two parties, the public or the consumer has the right to receive the service at its fair value or for what it is worth. The customer has the right to demand that no more shall be exacted from him for such service than the reason- able value of the service, and should not be subjected to the payment of unreasonable rates simply that stockholders may earn dividends. If such a corpora- tion can not maintain and operate its plants so as to pay satisfactory dividends on all its outstanding stock, this is a failure which the constitution does not re- quire to be remedied by imposing unjust burdens upon the public.^ The following cases are referred to by way of illustrating the rule and its application that fixing rates is a legislative matter and the determination as to whether the rates when fixed are reasonable is judicial; and also that no particular return is guaran- teed such a corporation on its investment but that the value of the service is a test of the rate to be charged for it." 1 Covington and Lexington Turnpike Co. v. Sandford, 164 U. S. 578, 41 L. ed. 560. 2 ALABAMA.— Montgomery Light & Power Co. v. Watts, 165 Ala. 370, 51 So. 725, 26 L. R. A. (N. S.) 1109. CALIFORNIA.— San Diego Water Co. v. San Diego, 118 Cal. 556, 50 Pac. 633, 38 L. R. A. 460, 62 Am. St. 261. FEDERAL.— Capital City Gasligtit Co. v. Des Moines, 72 Fed. 829; Kankakee v. American Water Supply Co., 199 Fed. 757; New Memphis Gas & Light Co. v. City of Memphis, 72 Fed. 952; Palatka Waterworks v. Palatka, 127 Fed. 161; Pocatello v. Murray, 173 Fed. 382; Spring Valley Water Co. v. San Francisco, 165 Fed. 667; Spring Valley Waterworks v. San Francisco, 124 Fed. 574; Spring Valley Waterworks v. San Francisco, 192 Fed. 137. FLORIDA.— Wilson v. Tallahassee Waterworks Co., 47 Fla. 351, 36 So. 63. 511 REASONABLE RATES. §445 § 445. Rates for future fixed by contract or legis- lature not by courts. — The application of this principle to the question of providing service by municipal pub- lic utilities is made in the case of Pocatello v. Murray, 173 Fed. 382, decided in 1909, where the court says: "But I am further of the opinion that even if it should be conceded that the statute of Idaho above referred to is applicable to the contract under v^hich the defend- ant is supplying water to the city of Pocatello, and so prescribes the method by which that city may change the schedule of water rates named in the ordinance, IDAHO.— Bothwell v. Consumers' Co., 13 Idaho 568, 92 Pac. 533, 24 L. R. A. (N. S.) 485. IOWA.— Des Moines v. Des Moines Waterworks Co., 95 Iowa 348, 64 N. W. 269. MAINE.— Brunswick & T. Water Dist. v. Maine Water Co., 99 Maine 371, 59 Atl. 537; Kennebec Water Dist. v. Waterville, 97 Maine 185, 54 Atl. 6, 60 L. R. A. 856. MISSOURI.— Home Tel. Co. v. Carthage, 235 Mo. 644, 139 S. W. 547. NEBRASKA.— Nebraska Tel. Co. v. State, 55 Nebr. 627, 76 N. W. 171, 45 L. R. A. 113. NEW YORK.— Brooklyn Union Gas Co. v. New York, 188 N. Y. 334, 100 N. Y. S. 570, 81 N. E. 141, 15 L. R. A. (N. S.) 763; People ex rel. Central Park, &c., R. Co. v. Wilcox, 194 N. Y. 383, 87 N. E. 517. NORTH CAROLINA.— Griffin v. Goldsboro Water Co., 122 N. Car. 206, 30 S. E. 319, 41 L. R. A. 240; Horner v. Oxford Water & Electric Co., 153 N. Car. 535, 69 S. E. 607. OHIO.— State ex rel. Atty. Gen. v. Cincinnati, &c., Co., IS Ohio St. 262. PENNSYLVANIA.— Brymer v. Butler Water Co., 179 Pa. 231, 36 Atl. 249. 36 L. R. A. 260. UNITED STATES.— Chicago, &c., R. Co. v. Wellman, 143 U. S. 339, 36 L. ed. 176; Louisville v. Cumberland Tel. & T. Co., 225 U. S. 430, 56 L. ed. 1151; People's Gaslight & Coke Co. v. Chicago, 194 U. S. 1, 48 L. ed. 851; Reagan v. Farmers Loan & Trust Co., 154 U. S. 362, 38 L. ed. 1014; San Diego Land & Town Co. v. National City, 174 U. S. 739, 43 L. ed. 1154. WASHINGTON.— Twitchell v. Spokane, 55 Wash. 86, 104 Pac. 150, 24 L. R. A. (N. S.) 290. WISCONSIN.— Madison v. Madison Gas & Electric Co., 129 Wia. 249, 108 N. W. 65, 8 L. R. A. (N. S.) 529, 116 Am. St. 944. §446 PUBLIC UTILITIES. 512 this court would still be without jurisdiction to fix and promulgate the water rates and charges, which the defendant shall have the right to collect, during the next three years, under his franchise. The fixing of such rates, when not a matter of contract, 'is a legis- lative or administrative, rather than a judicial func- tion.' Reagan v. Farmers' Loan & Trust Co., 154 U. S- 397, 38 L. ed. 1014." § 446. Rate presumed reasonable. — That reason- ableness is a judicial limitation which is placed upon the right of the legislature to fix rates is well ex- pressed in the case of Palatka Waterworks v. Palatka, 127 Fed. 161, decided in 1903, although the court also observes that any rate so fixed should not be set aside by the court as unreasonable unless it is such without question, in which case, however, the courts will act for the purpose of protecting the property rights of the municipal public utility, for as the court in this case says : "Conceding the legislative right to regu- late the charges to be made by the complainant for water, such regulation must be within reasonable lim- its. It could not lawfully go to the extent of depriving the complainant of all income from its investment, and in effect confiscate its property. The power to regu- late could not legally be used as the power to destroy. The question of the reasonableness of such regulations is one for judicial examination and determination. Covington Road Co. v. Sandford, 164 U. S. 578, 41 L. ed. 560. But the judiciary ought not to interfere with rates established under legislative sanction, where the legislature has the right to act, unless they are plainly and palpably so unreasonable as to make their enforcement equivalent to depriving the complainant of reasonable returns on its investment; but judicial interference is proper when the case shows an attack 5^3 REASONABLE RATES. § 447 Upon the rights of property, under the guise of regu- lating, which will make the plaintiff's property value- less in his hands, by annulling or making inoperative existing contracts. San Diego Land Co. v. National City, 174 U. S. 739, 43 L. ed. 1154; Covington Road Co. V. Sandford, supra." The leading case of San Diego Land & Town Co. V. National City, 174 U. S. 739, 43 L. ed. 1154, decided in 1899, in defining what constitutes reasonable rates also observes on the point in question, "that the judiciary ought not to interfere with the collection of rates established under legislative sanction, unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without such compensation, as, under all the circumstances, is just, both to the owners and to the public." § 447. Reasonableness of rate question of fact. — Where there is a question of fact as to whether the rate in the particular case is a proper one the court will indulge the presumption in favor of the rate so fixed and refuse to interfere with it, for as the Supreme Court of the United States, in the recent case of Louisville v. Cumberland Tel. & T. Co., 225 U. S. 430, 56 L. ed. 1 151, decided June 7, 1912, observes: "But when it is remembered what clear evidence the court requires before it declares legislation otherwise valid void on this ground, and when it is considered how speculative every figure is that we have set down with delusive exactness, we are of opinion that the result is too near the dividing line not to make actual experiment necessary." "The extent of judicial interference is protection against unreasonable rates." Chicago, &:c.. R. Co. v. \\'ellman, 143 U. S. 339. 36 L. ed. '76. 33 -Pub. ut» §447 PUBLIC UTILITIES. 514 The case of New Memphis Gas & Light Co. v. Memphis, ^2 Fed. 952, decided in 1896, furnishes an accurate statement in forceful language which stands unchallenged to the effect that: "The question of the reasonableness of a rate of charge is eminently a ques- tion for judicial investigation, requiring due process of law for its determination. And to deprive a com- pany of the power of charging reasonable rates for the manufacture and sale of gas is to deprive it of the use of its property, and, in effect, of the property itself, without the due process of law. . . . And the very use of the term 'regulation' implies that an investigation shall be made; that an opportunity to present the facts shall be furnished; that, when the facts are established, they shall, by the regulating power, be given due consideration; and that such action as shall be taken in view of these facts, thus ascertained, shall be just and reasonable, and such as enables the company to maintain its existence, to pre- serve the property invested from destruction, and to receive, on the capital actually and bona fide invested in the plant, a remuneration or dividend corresponding in amount to the ruling rates of interest." The duty devolving upon the court of deciding between the contending parties only as to whether a particular rate already fixed is fair and equitable is well expressed in the case of Spring Valley Water- works Co. V. San Francisco, 165 Fed. 667, decided in 1908, as follows: "If the supervisors have the power, and it is their duty to prescribe just and reasonable rates, and the court has the power to decide whether such rates are reasonable, and to annul ordinances in which the rates prescribed are unjust and unreason- able, it must follow that 'the court has no power,' as Judge Morrow says in Spring Valley Waterworks v. San Francisco, infra, 'to diminish the measure of what 515 REASONABLE RATES. § 448 is just compensation in any degree.' The court must ascertain the fact; ascertain whether the ordinance crosses the line which separates that which is just and reasonable from that which is unjust and unreasonable, and so declare." § 448. Limitation of reasonableness. — That the court can not fix the rate itself, however, but is lim- ited in its jurisdiction in determining whether a rate when fixed is reasonable and proper is the generally accepted rule as expressed in the case of Nebraska Tel. Co. V. State, 55 Nebr. 627, 76 N. W. 171, 45 L. R. A. 113, decided in 1898, as follows: "Here the court de- termines that the respondent shall perform for the relator a specific service for three months for a specific sum of money. This, in effect, was a determination by the court that three dollars per month was a rea- sonable compensation for the service required to be rendered by the respondent, and a fixing of the com- pensation for such service at that price for the future. We think the history of the legislation of the entire country shows that the power to determine what com- pensation public service corporations may demand for their services is a legislative function, and not a judi- cial one." § 449. Question of reasonableness raised by either party. — The presumption in favor of the rate, when fixed by the state or its duly authorized agency, the municipality, being a reasonable one is not only bind- ing on the company furnishing the service but also on the customer who is accordingly liable to pay for the service furnished him at a rate not in excess of the one so fixed. No matter how unreasonably high such rates may be the case of Brooklyn Union Gas Co. v. New York, 188 N. Y. 334. 81 N. E. 141, 100 N. Y. §449 PUBLIC UTILITIES. 516 S. 570, 15 L. R. A. (N. S.) 763, decided in 1907, holds that no constitutional right of the customer is thereby- invaded because he is under no obligation to purchase the service and that he must seek his relief in case the rate is excessive at the hands of the legislature and not through the courts, for as the court says: "What- ever price the legislature permitted the plaintiff to charge must be deemed to be reasonable and hence a charge of any sum below the maximum of $1.25 must be deemed and taken to be a reasonable charge. When the price of a commodity is established by lav^, it is not competent for the party purchasing it to re- sist payment on the ground that the law has permitted the seller to make an unreasonable charge. Hence, when the plaintiff furnished and the defendant received and used the gas, the latter was precluded by statute from raising any controversy such as this with respect to the reasonableness of the charge. In other words, the charge must, in view of the statute be deemed reasonable." The case of Griffin v. Goldsboro Water Co., 122 N. Car. 206, 30 S. E. 319, 41 L. R. A. 240, decided in 1898, however, disagrees with this principle with some degree of reason, for if the municipal public utility has the right to attack a rate on the theory that it is inadequate it is argued relief should be equally avail- able to the customer against excessive rates, and in the absence of a contract by competent parties fixing rates there is no reason why an excessive as well as an inadequate rate should not be set aside. The rea- son given for the decision in this case is not entirely satisfying, however, because it holds that the munici- pal public utility is bound by the rate as fixed and at the same time permits the customer to have it set aside as excessive. In the course of its opinion the court says: "While the defendant can not charge more than 51/ REASONABLE RATES. §450 the rates stipulated in the ordinance granting it the franchise, because granted upon that condition, those rates are not binding upon consumers who have a right to the protection of the courts against unreason- able charges. . . . Singularly enough, it appears incidentally in the evidence furnished by the defendant that, in the towns in North Carolina which do not own their waterworks, the maximum rates charged con- sumers are from fifty to three hundred per cent, more than the maximum rates charged consumers in Wilson, Winston, and Asheville, the only towns which own their water-works." The difference between these two cases seems to be one of form or procedure, however, rather than of law, for both recognize the right of the customer to raise the question, although the former one insists that his relief must come through the legislature which alone has the power to fix the rate and not through the courts which can only determine their reasonableness. § 450. Discretion of parties fixing rates respected unless abused. — The fixing of rates by the state or its duly authorized agent necessarily involves the exer- cise of discretion on the part of the authorities, and unless there is an abuse of this discretion so that the rate fixed is clearly unreasonable, the courts will refuse to set it aside as such, for as the court in the case of Twitchell v. Spokane, 55 Wash. 86, 104 Pac. 150, 24 L. R. A. (N. S.) 290, decided in 1909, says: "Some reasonable discretion must abide in the officers whose duty it is to fix such rates, and, unless the courts can say from all the circumstances that the rate fixed is an excessive one and disproportionate to the service rendered, the judgment of the officers fixing the rate §451 PUBLIC UTILITIES. 518 must stand. The rate charged by the city seems reasonable for the service rendered." §451. Municipal public utility fixing rates must be reasonable. — Where the rates have not been fixed by the state or any authority acting for it, the mu- nicipal public utility having the right to furnish the service by virtue of that fact has the right to fix the charge for its service, although of course the reason- ableness of the charge when fixed is a question for the courts to determine, and where they are excessive they will be set aside by the courts the same as where the state authority fails to fix the proper rate. As the court in the case of Wilson v. Tallahassee Water- works Co., 47 Fla. 351, 36 So. 63, decided in 1904, says: "Not being included within those cases for which rates are prescribed, the company may fix rates (Carney v. ChilHcothe Water & Light Company, 76 Mo. App. 532), and the fixing of a minimum charge for service to small consumers in excess of the ordi- nary price of the quantity of water consumed by them is not in itself unreasonable. State ex rel. Weise v. Sedalia Gaslight Company, 34 Mo. App. 501. See, also, Louisville Gas Co. v. Dulaney (Ky.), 38 S. W. 703, 36 L. R. A. 125." § 452. Cost of service includes measuring it for customer. — The duty devolves upon the municipal public utility of measuring the service furnished the customer in order to determine the amount due from him, and where the rate to be paid for the service is fixed and defined, the expense of measuring the service furnished can not be charged to the customer in the form of meter rentals or as a fixed minimum charge per month, for as the court in the case of Montgomery Light & P. Co. v. Watts, 165 Ala. 370, 519 REASONABLE RATES. § 452 51 So. 725, 26 L. R. A. (N. S.) 1 109, decided in 1910, says: "The agreement of the company is to furnish gas at so much per cubic foot, and that must neces- sarily mean that all the means and instrumentalities necessary to furnish it at those rates shall be provided by the company. It may adopt any means, suitable and accurate, for ascertaining the number of feet consumed, and the customer can not direct or provide what means shall be used; his only concern being that he receives the service, and is not charged more than the rate fixed by law or the contract." As the duty of fixing the rate as well as determin- ing the amount of the service at its own expense, where the rate has not been fixed by the state, devolves upon the municipal public utility, the court will compel the furnishing of such service at the rate fixed, for as the court in the case of Bothwell v. Consumers' Co., 13 Idaho 568, 92 Pac. 533, 24 L. R. A. (N. S.) 485, de- cided in 1907, says: "We have failed, however, to find a single case where a company had fixed its own rates, and the individual had offered to pay such rates, that a court has refused to allow him to pay that rate or refused to compel the company to supply him with water upon the tender of such rate. . . . The duty of action in the matter of establishing rates rests on the company, and not primarily on the consumer, and the company will not be allowed to plead its own negligence and laches to justify and excuse its refusal to furnish water to one residing within the franchise limit." The duty of furnishing service at reasonable rates, including that of fixing the rates where the state or its agent has not done so devolves upon the municipal public utility by implication from its acceptance of the franchise to furnish service, as does also its undertak- ing to exact only a reasonable charge for the service § 453 PUBLIC UTILITIES. 52O rendered, for as the court in the case of Madison v. Madison Gas & Electric Co., 129 Wis. 249, 108 N. W. 65, 8 L. R. A. (N. S.) 529, 116 Am. St. 944, decided in 1906, says: "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 munici- pal corporation, is of a public nature. It is in char- acter a public business, and, like that of common car- riers, warehousemen, and other enterprises, in which the community has an interest different from what it has in private enterprises. . . . The right to con- duct 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. One of the conditions for the exercise of the privilege of conducting a gas business, under legislative grant, is that, in the absence of leg- islative prescription restricting the rate of compensa- tion for the service furnished, the grant carries by im- plication the obligation to furnish it at a reasonable price." § 453. Reasonable value of service determines the rate. — That the public can not be required to pay a rate, however unreasonable, in order that the munici- pal public utility may be able to realize a reasonable return on its investment, because no return is guaran- teed any such investment any more than in the case of a private enterprise and that the rate must be fixed in the light of the value of the service is stated in the case of Spring Valley Waterworks v. San Francisco, 192 Fed. 137, decided in 191 1, to the effect that: "The public has a right to demand that no more shall be exacted than the services rendered are reasonably worth. The public can not be subjected to unreason- able rates, in order simply that stockholders may earn 521 REASONABLE RATES. §454 dividends. Covington & Lexington T. R. Co. v. Sand- ford, 164 U. S. 578, 41 L. ed. 560; Spring Valley Water Co. V. San Francisco (C. C), 165 Fed. 667." The case of Brymer v. Butler Water Co., 179 Pa. 231, 36 Atl. 249, 36 L. R. A. 260, decided in 1897, in effect enunciates the same principle as the rule con- trolling the question of rates by saying: "Then the interests of the owners of the property are to be con- sidered. They are entitled to a rate of return, if their property will earn it, not less than the legal rate of interest." § 454. Risk of investment assumed by owner. — That the municipal public utility necessarily assumes the risk of the investment which it makes and is not guaranteed a fixed return upon it and can not require its customers to pay for the service furnished at a rate which will assure the success of the investment where the service provided far exceeds the demand for it is well stated and illustrated in the case of Bruns- wick & T. Water Dist. v. Maine Water Co., 99 Maine 371, 59 Atl. 537, decided in 1904, where the court says: "A public service property may or may not have a value independent of the amount of rates which for the time being may be reasonably charged. A public service company may, under some circumstances, be required to perform its service at rates prohibitive of a fair return to its stockholders, considering their property as an investment merely. Smyth v. Ames, 169 U. S. 466, 42 L. ed. 819. It is true that the fair value of the property used is the basis of calculation as to reasonableness of rates, but, as was pointed out in the Waterville case, this is not the only element of calculation. There are others; as, for instance, the risks of the incipient enterprise on the one hand, and whether all the property used is reasonably necessary 9 454 PUBLIC UTILITIES. 522 to the service, and whether as a structure it is unrea- sonably expensive, on the other. For a simple illus- tration, suppose that a 500 horsepower engine was used for pumping when a 100 horsepower engine would do as well. As property to be fairly valued, the large engine might be more valuable than the smaller one, yet it could not be said that it would be reason- able to compel the public to pay rates based upon the value of the unnecessarily expensive engine. Rates must be reasonable to both, and, if they can not be to both, they must be to the customer. . . . We understand the purport of this request to be that a public service company can not lawfully charge, in any event, more than the services are reasonably worth to the public as individuals, even if the charge so limited would fail to produce a fair return to the company upon the value of its property or investment. Such, we think, is the law. . . . The company en- gages in a voluntary enterprise. It is not compelled, at the outset, to enter into the undertaking. It must enter, if at all, subject to the contingencies of the busi- ness, and subject to the rule that its rates must not exceed the value of the services rendered to its cus- tomers. ... In the aspect now being considered, the worth of a water service to its customers does not mean what it would cost some one individual, or some few individuals, to supply themselves, for one may be blessed with a spring, and another may have a good well. It means the worth to the individuals in a com- munity taken as a whole." After an excellent summary of the items to be con- sidered in fixing the rate and determining whether it is a proper one, the court in the case of Home Tel. Co. V. Carthage, 235 Mo. 644, 139 S. W. 547, decided in 191 1, adds: "And in passing upon the question, the fact should not be overlooked that no return what- 523 REASONABLE RATES. § 454 ever is guaranteed to the owner of the public utility. Upon that score it occupies no better ground than the owner of capital invested in a private enterprise. It follows that unless the maximum rate be placed at such a figure as is above the average rate of return upon reasonably safe investments in private ventures, capital will naturally turn to channels in which no maximum limit as to the return exists." CHAPTER XXIII. WHAT CONSTITUTES REASONABLE RATES. Section. 455. Reasonable rate question of fact varying with conditions. 456. Elements to be considered in fixing rates. 457. Antagonistic interest of parties and sliding scale of rates. 458. Element of risk of investment affecting rates. 459. Expense of maintenance and operation. 460. Physical depreciation and obsolescence. 461. No element of good will unless competition in field. 462. Going concern with established income. 463. Sliding scale — Increased earnings with decrease in rates. 464. Monopoly eliminates element of risk. 465. Rate increased with element of risk. 466. Fixed charges and maintenance expense and dividends. 467. Obsolescence and physical depreciation operating expense. 468. Functional and physical depreciation charged to operation not added to capital account. 469. Replacements out of earnings. 470. Account earnings rather than capital for replacement no in- crease. 471. Competition affects volume and risk of business. 472. No good will under monopoly for no choice. 473. Established business of going concern with fixed income. 474. Reproduction cost ignores going concern value. § 455. Reasonable rate question of fact varying with conditions. — The question of what constitutes a rea- sonable rate in any case is necessarily determined and controlled by the facts of the particular case, some of which are peculiar to it, and so it is impossible to lay down rules of general application which will entirely solve the question in all cases. Because of the many items and changing conditions affecting each case, some of which always distinguish it from every other, the solution of the question as to what constitutes 524 525 REASONABLE RATES. § 456 reasonable rates is exceedingly difficult, and only gen- eral principles, which are fairly and equally applicable to all cases so far as they have facts in common, can be established and employed for the determination of the rate in any particular case. § 456. Elements to be considered in fixing rates. — The result reached by the application of the well- established general rule that the municipal public util- ity is entitled to a reasonable return on the fair value of its investment is necessarily affected by a consid- eration of the nature and extent of the element of risk or hazard involved in each particular investment, whether the corporation is secured as a monopoly or whether there is competition presently or prospective- ly in the field, the expense of operation and mainte- nance, including functional depreciation or obsoles- cence, and that due to the ordinary wear and tear of operation, commonly known as physical depreciation. All of these items covering the investment and the cost of maintenance and operation must be given full consideration in determining a rate for the service, which will provide fair earnings and proper returns on the investment. In ascertaining the value of the service to the customer, which is the economic point of view, or its cost to the municipal public utility, which is the legal attitude in the solution of the prob- lem, all these questions must be fully and fairly con- sidered, as well as those of the effect of improving the service or reducing the rate as a means of increasing the volume of the business and the amount of the net income realized from it, besides the expenditure nec- essary to establish the business as a going concern with the largest possible number of customers receiv- ing satisfactory service. § 457 PUBLIC UTILITIES. 526 § 457. Antagonistic interest of parties and sliding scale of rates. — The question of what is a fair or proper rate or what constitutes a reasonable return on the fair value of the investment can only be determined after an accurate valuation of the investment has been made and the cost of operation and maintenance, including the various forms of depreciation and any other legiti- mate items of expense necessary to provide satisfac- tory service, has been determined with a view of as- certaining what at a given rate would be the net earn- ings of the company. The interest of the two parties, the producer and the consumer, are naturally always antagonistic, but it may be possible to harmonize them to a degree by an application of the so-called sliding scale of rates which permits the municipal public utility to realize an increasing return on its invest- ment in proportion to the decreasing rate of its service on the condition that the standard of the service remain fixed and the company be required to main- tain service up to that standard. § 458. Element of risk of investment affecting rates. — The element of risk or hazard involved in the investment necessary to maintain a municipal public utility and furnish its service is properly considered in fixing the rate of return on the investment because the element of uncertainty not only as to the return from the investment, but as to the security of the investment itself justifies an increasing return in pro- portion to the risk involved in the investment neces- sarily made to conduct the enterprise. This fact is recognized in the making of investments generally, for the rate of return decreases with the element of risk so that the return realized on government bonds or other equally good securities is a minimum rate while the possible returns of a pioneer investment, 527 REASONABLE RATES. § 459 which must necessarily look to future development for the most of its business upon which to realize profits, or where the undertaking must develop its own trade and attract customers to it, is necessarily and properly above that received on a staple investment. This added inducement of a possible increased rate of return is necessary to induce capital to enter hazardous enterprises or attempt to develop a business in pioneer fields or to establish or develop an industry new to any particular locality. § 459. Expense of maintenance and operation. — It is axiomatic that the expense of operation and main- tenance which is always required to furnish efficient service must be met out of the proceeds received for the service rendered, because this expense is necessary and must be met as a condition precedent to the con- tinued maintenance of the business and its operation necessary to furnish its service. Where this element is not properly recognized the service necessarily suf- fers and the plant depreciates with the result that in a comparatively short period the service becomes unsat- isfactory and entirely insufficient. § 460. Physical depreciation and obsolescence. — The item of functional depreciation or obsolescence is equally important with that of ordinary physical de- preciation which is common to the operation of all municipal public utilities, for the replacing of machin- ery and other equipment of the modern plant em- ploying electricity or some other recently discovered force, upon which the element of invention and im- provement is so frequently making such decided changes in the manner of operating and providing service, necessitates the abandonment of the machinery and other equipment then on hand for the new inven- § 461 PUBLIC UTILITIES. 528 tion or discovery of a different force or an improved method of utilizing that already discovered. In order to furnish the best service the most approved methods, machinery and equipment available at any particular time are necessary, and this requires that the equip- ment then on hand, no matter how^ recently acquired nor how perfect its condition which has become obso- lete, be abandoned. Adequate service means the best that is available furnished under the latest and most approved methods. In such cases it is necessary to replace equipment, not when that on hand is worn out and no longer capable of serving the purpose for which it was acquired, but at any time that a better and more improved instrument for furnishing the service is placed on the market, and this necessarily results in consigning the former equipment to the scrap heap as though it were entirely worn out. The loss therefore due to functional depreciation, as well as to ordinary physical depreciation, must be considered an expense of operation. This item, however, must be charged to the expense of operation rather than added to the capitalization upon which dividends are expected, be- cause it is a current expense incurred in connection with operation and not a new increased investment of capital in the business. § 461, No element of good will unless competition in field. — Where the element of competition is lacking so that the municipal public utility enjoys the privilege of furnishing all the service due to the fact that it has an actual monopoly of the field, the stability of the investment, as well as the probability of perma- nently realizing profits, justifies a reduction of the rate in the form of regulation, as compared with a case where there is competition in the field, for this necessarily restricts the volume of the business and 529 REASONABLE RATES. § 462 injects an element of risk and uncertainty in the ques- tion. Where the degree of uncertainty is controlled by the difference between the two cases — one where the franchise is practically exclusive for the time being and the other where it is legally or actually so, and the company enjoys an actual monopoly of the busi- ness, the element of good will is not properly included, because its customers are retained by compulsion, as they are obliged to accept service from the particular municipal public utility or. go without. As the element of good will necessarily involves the right of the cus- tomer to choose, where there is no such right because the municipal public utility enjoys a monopoly of the business, this element should be disregarded. § 462. Going concern v^dth established income. — The fact that the municipal public utility is a going concern and has an established business with the nec- essary connections made to furnish its service and is actually furnishing satisfactory service to its cus- tomers is an element properly included in the invest- ment in fixing the rate for the service. The fact that the company is a going concern in full operation, not only with the capacity to furnish service and to enjoy the value received therefor, but that it is a system actu- ally supplying service and enjoying a fixed income from the earnings of such service is an important and essential feature which is properly included as an ex- penditure of such a business in determining by a valu- ation the amount of the investment on which the com- pany is entitled to receive a reasonable income. § 463. Sliding scale — Increased earnings with de- crease in rates. — The fixed rate can be reduced with- out materially affecting the net income by improving the service and extending the field to which the service is furnished because a reduction in the rates as well as 34— Pub. ut. § 463 PUBLIC UTILITIES. 53O the improvement and extension of the service will naturally result in increasing the volume of the busi- ness with the effect of increasing the net income sufifi- ciently to permit of a reduction in the rates without actually decreasing the income, unless it be in the case of the municipal pubhc utility providing telephone service where the increase in the volume of the busi- ness seems not to be attended with the ordinary rela- tive decrease in the cost of the service or the expense of operating the system. Recognition of this fact is the basis of the so-called sliding scale, whereby the income which the municipal public utility is permitted to earn is increased as the rate charged for the service rendered is decreased. That the desire for increasing the amount of the income, which under this system automatically decreases the rate received for the serv- ice, may not result in decreasing the standard and quality of the service and such depreciation of the plant as ultimately to result in its destruction, the application of the sliding scale as a method of regulat- ing rates must be accompanied by a definite standard of service and a strict requirement that the service be kept up to the standard. With this safeguard, how- ever, the plan in certain cases is advantageous in that it furnishes a motive for the municipal public utility voluntarily to reduce its rates which is naturally ac- companied by an increase in the volume of its business and so by a net increase in its income.^ 1 ALABAMA. — Bessemer v. Bessemer Waterworks, 152 Ala. 391, 44 So. 663. ARKANSAS.— Arkadelphia E. L. Co. v. Arkadelphia, 99 Ark. 178, 137 S. W. 1093. CALIFORNIA.— Contra Costa Water Co. v. Oakland, 159 Cal. 323, 113 Pac. 668; San Diego Water Co. v. San Diego, 118 Cal. 556, 50 Pac. 633, 38 L. R. A. 460, 62 Am. St. 261. COLORADO.— Montezuma County v. Montezuma Water & Land Co., 39 Colo. 166, 89 Pac. 794. FEDERAL.— Boise City Irrig. & Land Co. v. Clark, 131 Fed. 415; 531 REASONABLE RATES. §464 § 464. Monopoly eliminates element of risk. — That the element of risk is properly and necessarily included in the determination of the proper rate which the municipal public utility should receive for its service is a commonplace in business and a well recognized C. H. Venner Co. v. Urbana Waterworks, 174 Fed. 348; Consolidated Gas Co. V. New York, 157 Fed. 849; Contra Costa Water Co. v. Oak- land, 165 Fed. 518; Cumberland Tel. & T. Co. v. Railroad Commis- sion, 156 Fed. 823; National Waterworks Co. v. Kansas City, 62 Fed. 853, 27 L. R. A. 827; Owensboro v. Cumberland Tel. & T. Co., 174 Fed. 739; Palatka Waterworks v. Palatka, 127 Fed. 161; Postal Cable Tel. Co. V. Cumberland Tel. & T. Co., 177 Fed. 726; Spring Valley Waterworks v. San Francisco, 124 Fed. 574; Spring Valley Water- works V. San Francisco, 192 Fed. 137. IDAHO.— Pocatello v. Murray, 21 Idaho 180, 120 Pac. 812. ILLINOIS.— Chicago v. Rogers Park Water Co., 214 111. 212, 73 N. E. 375. IOWA.— Cedar Rapids Gaslight Co. v. Cedar Rapids, 144 Iowa 426, 120 N. W. 966, 138 Am. St. 299, 223 U. S. 655, 56 L. ed. 594; Des Moines v. Des Moines Waterworks Co., 95 Iowa 34S, 64 N. W. 269. KANSAS.— Galena Water Co. v. Galena, 74 Kans. 644, 87 Pac. 735. MAINE.— Brunswick & T. Water Dist. v. Maine Water Co., 99 Maine 371, 59 Atl. 537; Kennebec Water Dist. v. Waterville, 97 Maine 185, 54 Atl. 6, 60 L. R. A. 856. MASSACHUSETTS.— Gloucester Water-Supply Co. v. Gloucester, 179 Mass. 365, 60 N. E. 977; Newburyport Water Co. v. Newburyport, 16S Mass. 541, 47 N. E. 533. MISSOURI.— Home Tel. Co. v. Carthage, 235 Mo. 644. 130 S. W. 547. NEW JERSEY.— Public Service Gas Co. v. Board of Public Utility Commissioners (N. J.), 87 Atl. 651. NEW YORK.— People ex rel. Binghampton Light. &c., Co. v. Stevens, 203 N. Y. 7, 96 N. E. 114; People ex rel. Brooklyn Heights R. Co. V. State Board of Tax Comrs., 127 N. Y. S. 825; People ex rel. Queens Co. Water Co. v. Woodbury, 202 N. Y. 619, 123 N. Y. S. 599, 96 N. E. 1127; People ex rel. Third Ave. R. Co. v. State Board of Tax Comrs., 198 N. Y. 60S, 120 N. Y. S. 52S, 92 N. E. 109S; Silkman v. Board of Water Comrs. of Yonkers, 152 N. Y. 327. 46 N. E. 612. 37 L. R. A. 827. 71 Hun (N. Y.) 37; People ex rel. King's County Light- ing Co. V. Willcox, (N. Y.), 141 N. Y. Supp. 677; Hopper v. Willcox (N. Y.). 140 N. Y. S. 277. NORTH CAROLINA.— Horner v. Oxford Water & Electric Co.. 153 N. Car. 535, 69 S. E. 607. § 464 PUBLIC UTILITIES. 532 legal principal. The amount allowed on account of this element, however, is naturally determined by the extent of the risk in the case, and where the business is so well established that it enjoys practically a mo- nopoly of the field, this element of security almost en- tirely eliminates that of the risk or hazard, for as the court in the case of Willcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382, decided in 1909, says: "The less risk, the less right to any unusual returns upon the investments. One who invests his money in a business of a somewhat hazardous character is very properly held to have the right to a larger return, without legislative interference, than can be obtained from an investment in government bonds or other per- fectly safe security. . . . In an investment in a gas company, such as complainant's, the risk is reduced almost to a minimum. It is a corporation which, in OKLAHOMA.— Hine v. Wadlington, 33 Okla. 173, 124 Pac. 299; Pioneer Tel. & T. Co. v. Westenhaver, 29 Okla. 429, 118 Pac. 354, 38 L. R. A. (N. S.) 1209. PENNSYLVANIA.— Brymer v. Butler Water Co., 179 Pa. 231, 36 All. 249, 36 L. R. A. 260. RHODE ISLAND.— Bristol v. Bristol & W. Waterworks, 23 R. I. 274, 49 Atl. 974. UNITED STATES.— Knoxville v. Knoxville Water Co., 212 U. S. 1, 53 L. ed. 371; Lincoln Gas & E. L. Co. v. Lincoln, 223 U. S. 349, 56 L. ed. 466; Omaha v. Omaha Water Co., 218 U. S. 180, 54 L. ed. 991; Railroad Commission of La. v. Cumberland Tel. & T. Co., 212 U. S. 414, 53 L. ed. 577; San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 47 L. ed. 892; San Diego Land & Town Co. v. National City, 174 U. S. 739, 43 L. ed. 1154; Smyth v. Ames, 169 U. S. 466, 42 L. ed. 819; Spring Valley Waterworks v. Schottler, 110 U. S. 347, 28 L. ed. 173; Stanislaus County v. San Joaquin & K. R. C. & I. Co., 192 U. S. 201, 48 L. ed. 406; Willcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382; Simpson v. Shephard, 229 U. S. — , 33 Sup. Ct. Rep. 729. WASHINGTON.— Puget Sound Electric R. v. Railroad Commis- sion, 65 Wash. 75, 117 Pac. 739. WISCONSIN.— State ex rel. Hallauer v. Gosnell, 116 Wis. 606, 93 N. W. 542, 61 L. R. A. 33; Appleton Waterworks Co. v. Railroad Commission (Wis.), 142 N. W. 476. 533 REASONABLE RATES. § 465 fact, as the court below remarks, monopolizes the gas service of the largest city in America, and is secure against competition under the circumstances in which it is placed, because it is a proposition almost un- thinkable that the city of New York would, for pur- poses of making competition, permit the streets of the city to be again torn up in order to allow the mains of another company to be laid all through them to supply gas which the present company can ade- quately supply." § 465. Rate increased with element of risk. — The court in the case of Brunswick & T. Water Dist. v. Maine Water Co., 99 Maine 371, 59 Atl. 537, decided in 1904, recognizes this as an element in determining the proper rate and indicates that the rate of return should increase as the element of risk increases, for as the court says : "A public service company may, under some circumstances, be required to perform its service at rates prohibitive of a fair return to its stock- holders, considering their property as an investment merely. Smyth v. Ames, 169 U. S. 466, 42 L. ed. 819. It is true that the fair value of the property used is the basis of calculation as to reasonableness of rates, but, as was pointed out in the Waterville case, this is not the only element of calculation. There are others; as, for instance, the risks of the incipient enterprise on the one hand, and whether all the property used is reasonably necessary to the service, and whether as a structure it is unreasonably expensive, on the other. . . . An equivalent to the prevailing rate of in- terest might be a reasonable return, and it might not. It might be too high or it might be too low. It might be reasonable, owing to peculiar hazards or difficulties in one place to receive greater returns there than it would in another upon the same investment. Then, § 466 PUBLIC UTILITIES. 534 their reasonableness relates to both the company and the customer. Rates must be reasonable to both, and, if they can not be to both, they must be to the cus- tomer. . . . We understand the purport of this re- quest to be that a public service company can not lawfully charge, in any event, more than the services are reasonably worth to the public as individuals, even if a charge so limited would fail to produce a fair return to the company upon the value of its property or in- vestment. Such, we think, is the law. . . . The company engages in a voluntary enterprise. It is not compelled, at the outset, to enter into the undertaking. It must enter, if at all, subject to the contingencies of the business, and subject to the rule that its rates must not exceed the value of the services rendered to its customers." § 466. Fixed charges and maintenance expense and dividends. — That the necessary expenses of main- tenance and operation must be met out of the proceeds received from the service of the municipal public utility is an absolute necessity which the courts have never questioned. As the court in the case of Contra Costa Water Co. v. Oakland, 165 Fed. 518, decided in 1904, says: "The complainant undoubtedly has the right to receive from water rates an income which will enable it to pay its actual operating expenses, its taxes, its interest on its bonded or other indebted- ness so far as that indebtedness represents money properly expended in or upon its property, and to pay a reasonable dividend on its stock so far as the stock represents money actually received and so invested, and in addition thereto to receive a sum sufficient to cover the annual depreciation of its plant." § 467. Obsolescence and physical depreciation op- erating expense. — There are two kinds of depreciation. 535 REASONABLE RATES. § 467 that due to the ordinary physical wear of operation and functional depreciation which results from the necessary replacement of equipment before it is worn out by invention and improved appliances which ren- der more efficient and satisfactory service. The ex- pense of depreciation, whether ordinary and physical or functional, due to the machinery, although not worn out, becoming obsolete by reason of further invention is equally chargeable to maintenance and the expense of operation, for as the court in the case of People ex rel. Brooklyn Heights R. Co. v. State Board of Tax Comrs., 127 N. Y. S. 825, decided in 1910, in fixing the valuation of a municipal public utility plant for the sake of taxation said : "As surely as humanity travels to the grave, the machinery and equipment of a public service corporation travel toward the scrap pile. The plant and structures depreciate in less degree, but as certainly. This is ordinary depreciation. But another form of depreciation in the case of properties here be- ing valued takes place. The machinery or equipment, while still capable of years of service, becomes in- adequate to do the work demanded — not only by the corporation, but by the law itself. In the case par- ticularly of electrical machinery, the type becomes obsolete by reason of invention, and increasing public demands frequently require in aid of safe and adequate service that the obsolete appliance or equipment give way to the new. . . This would appear to be a legislative recognition of the systems adopted provid- ing for the charge, out of income, of items for obso- lescence and inadequacy, upon a plan which apparently according to the state was reasonably capable of as- certainment from the experience of the corporation itself. The policy of the state today, so reflected by statute, is in favor of these charges out of earnings. . . . The corporations must provide under the pres- § 467 PUBLIC UTILITIES. 536 ent statute safe and adequate service. Upon this the statute is insistent, and the highest power has been conferred upon the commission to see that this pro- vision of the lav^ is comphed with. To provide safe and adequate service is not to maintain old and obso- lete cars, even though by constant repair they may be kept from dissolution. It is to keep in touch with the times, and to displace obsolete or inadequate appli- ances or structures with new and approved appliances. These expenditures come suddenly in some cases — in others their approach may be apprehended." The same court in the case of People ex rel. Bing- hampton Light, &c., Co. v. Stevens, 203 N. Y. 7, 96 N. E. 114, decided in 1911, recognized the same prin- ciple in holding that: "A reasonable consideration of the interests of a corporation and the ultimate good of its stock and bondholders, and a regard for the in- vesting public and that fair dealing which should be observed in all business transactions, require that ma- chines and tools paid for and charged to capital ac- count, but which necessarily become obsolete or wholly worn out within a period of years after the same are purchased or installed, should be renewed or replaced by setting aside from time to time an adequate amount in the nature of a sinking fund or that by some other system of financing the corporation put upon the pur- chaser from the corporation the expense not alone of the daily maintenance of the plant, but a just propor- tion of the expense of renewing and replacing that part of the plant which, although not daily consumed, must necessarily be practically consumed within a given time. If that is not done, and renewals and replacements are continually added to the capital ac- count, the capital account must necessarily become more and more out of proportion to the real value of the property of the corporation." 537 REASONABLE RATES. § 468 § 468. Functional and physical depreciation charged to operation not added to capital account. — The same court in the case of People ex rel. Queens Co. Water Co. V. Woodbury, 202 N. Y. 619, 96 N. E. 1127, 123 N. Y. S. 599, decided in 1910, recognized and gave expression to this principle by saying that: "So long as depreciation of property is a proper factor to take into account in determining the net earnings, I can not see why the rule should not be applied as well to functional as to physical depreciation. In both cases the property becomes valueless, because no longer capable of being applied to the purposes for which it was designed. It would be a false system of account- ing which did not take into consideration the destruc- tion of the value of property, from whatever cause, so long as that cause is in constant operation and can be foreseen with reasonable certainty. A loss due to functional depreciation is incurred in the operation of the business, and therefore should be charged as an expense of operation. City of Knoxville v. Knoxville Water Company, 212 U. S. i, 53 L. ed. 371. Machin- ery which today is sufficient for its purpose may be- come scrap iron through the development of inven- tions, and so pipes and mains sufficient for a system of water supply as it now exists may become valueless through changes in the conditions under which it is used." § 469. Replacements out of earnings. — The Su- preme Court of the United States has recognized this principle in the case of Knoxville v. Knoxville Water Co.. 212 U. S. I, 53 L. ed. 371, decided in 1909, by holding that : "The cost of reproduction is one way of ascertaining the present value of a plant like that of a water company, but that test would lead to ob- viously incorrect results if the cost of reproduction is § 470 PUBLIC UTILITIES. 538 not diminished by the depreciation which has come from age and use. . . . It is not easy to fix at any given time the amount of depreciation of a plant whose component parts are of different ages, with different expectations of Hfe. But it is clear that some sub- stantial allowance for depreciation ought to have been made in this case. . . . Before coming to the question of profit at all the company is entitled to earn a sufficient sum annually to provide not only for current repairs, but for making good the depreciation and replacing the parts of the property when they come to the end of their life. The company is not bound to see its property gradually waste, without making provision out of earnings for its replacement. It is entitled to see that from earnings the value of the property invested is kept unimpaired, so that, at the end of any given term of years, the original in- vestment remains as it was at the beginning." § 470. Account earnings rather than capital for replacement no increase. — That the expense due to depreciation, however, should not be added or charged to the account of capital because it involves the mere replacement of equipment which is concerned with the expense of operation and maintenance rather than with the permanent investment upon which returns by way of dividends are payable is the effect of the decision in the case of Railroad Commission of La. v. Cumberland Tel. & T. Co., 212 U. S. 414, 53 L. ed. 577, decided in 1909, where the court says: "It was obligatory upon the complainant to show that no part of the money raised to pay for depreciation was added to capital, upon which a return was to be made to stockholders in the way of dividends for the future. . . . If that were allowable, it would be collecting money to pay for depreciation of the property, and, 539 REASONABLE RATES. § 47I having collected it, to use it in another way, upon which the complainant would obtain a return and dis- tribute it to its stockholders. ... In these cases [gas, water, transportation, etc.], increased profits might be the result of decreased rates. But with tele- phone companies, as shown by the testimony of the president of the complainant, the reduction in toll rates does not bring an increased demand except upon the condition of corresponding increase in expenses." § 471. Competition affects volume and risk of business. — That the rate received for service rendered is properly regulated with reference to the question as to whether the municipal public utility enjoys a monopoly of the business or is obliged to meet com- petitive conditions is a well-established legal and busi- ness principle, for it necessarily affects the volume of the business available to the municipal public utility and also determines the element of risk or uncertainty in the future prospects of the business, for as the court in the case of Kennebec Water Dist. v. Waterville, 97 Maine 185, 54 Atl. 6, 60 L. R. A. 856, decided in 1902, says: "The elemental principles thus far noted may be summarized as, on the one hand, the right of the company to derive a fair income, based upon the fair value of the property at the time it is being used for the public, taking into account the cost of maintenance or depreciation, and current operating expenses; and, on the other hand, the right of the public to have no more exacted than the services in themselves are worth. . . . And we say that the fact that the com- pany was doing its business without competition may and should be considered by the appraisers when they are valuing the property of the defendant as a going concern. That fact is one of the characteristics of the going business, and may enhance its value. We § 472 PUBLIC UTILITIES. 54O are considering now only the legal situation of the company. There is a difference between a franchise which is practically exclusive and one which is actu- ally exclusive, as there is a difference between uncer- tainty and certainty. The distinction is vital in prin- ciple, and it may be important in fixing value." § 472. No good v^ll under monopoly for no choice. — Where the element of monopoly exists, that of good will should not be included, because there is no choice left the customer who must resort to the one source of supply for the service, for as the court in the case of Cedar Rapids Gaslight Co. v. Cedar Rapids, 144 Iowa, 426, 120 N. W. 966, 138 Am. St. 299, 223 U. S. 655, 56 L. ed. 594, decided in 1909, says: "Save as above indicated, the element of value designated a *going concern' is but another name for 'good will,' which is not to be taken into account in a case like this, where the company is granted a monopoly. Cedar Rapids Water Company v. City of Cedar Rapids, 118 Iowa 234, 91 N. W. 1081 ; Willcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382." The same principle is recognized and given expres- sion in the case of Bristol v. Bristol & W. Waterworks, 23 R. I. 274, 49 Atl. 974, decided in 1901, where the court says: "The subject of this sale consists of — first, certain material things, the value of which is to be determined by the cost of reproduction, less depre- ciation; and, second, the right to use them in a certain business, without competition, for a certain time, the value of which right is to be determined by the prob- able profit of such use. The fact that the plant is a running plant, and the probable retention of custom- ers, which is what is meant by 'good will,' are elements which are included in the valuation of the franchise. A monopoly has no good will, for its customers are 541 REASONABLE RATES. § 473 retained by compulsion, not by their voluntary choice." § 473. Established business of going concern with fixed income. — That the value of the plant on which a return may be properly expected is enhanced by the fact that the system is a going concern in actual op- eration is a further business principle to which the courts have given full effect because the actual value of such a business is naturally and properly enhanced by the fact that it not only represents a fixed property investment, but that it is a practical operating business furnishing service and enjoying the income received for the service. As the court in the case of Bruns- wick & T. Water Dist. v. Maine Water Co., 99 Maine 371, 59 Atl. 537, decided in 1904, so well expressed it: "We speak sometimes of a going concern value as if it is or could be separate and distinct from structure value — so much for structure and so much for going concern. But this is not an accurate statement. The going concern part of it has no existence except as a characteristic of the structure. If no structure, no going concern. If a structure in use, it is a structure whose value is affected by the fact that it is in use. There is only one value. It is the value of the struc- ture as being used. That is all there is of it." § 474. Reproduction cost ignores going concern value. — This principle, together with its application, is well illustrated by the decision of the case of Na- tional Waterworks Co. v. Kansas City, 62 Fed. 853, 2^ L. R. A. 827, decided in 1894, where the court says: "The original cost of the construction can not control, for 'original cost' and 'present value' are not equiva- lent terms. Nor would the mere cost of reproducing the waterworks plant be a fair test, because that does § 474 PUBLIC UTILITIES. 542 not take into account the value which flows from the established connections between the pipes and the buildings of the city. It is obvious that the mere cost of purchasing the land, constructing the buildings, putting in the machinery, and laying the pipes in the streets — in other words, the cost of reproduction — does not give the value of the property as it is today. A completed system of water-works, such as the com- pany has, without a single connection between the pipes in the streets and the buildings of the city, would be a property of much less value than that system connected, as it is, with so many buildings, and earn- ing, in consequence thereof, the money which it does earn. The fact that it is a system in operation, not only with a capacity to supply the city, but actually supplying many buildings in the city — not only with a capacity to earn, but actually earning — makes it true that 'the fair and equitable value' is something in excess of the cost of reproduction." The Supreme Court of the United States in its decision of the case of Omaha v. Omaha Water Co., 218 U. S. 180, 54 L. ed. 991, decided in 1910, ex- pressed the principle forcefully and convincingly in saying that: "The option to purchase excluded any value on account of unexpired franchise; but it did not limit the value to the bare bones of the plant, its physical properties, such as its lands, its machinery, its water pipes or settling reservoirs, nor to what it would take to reproduce each of its physical features. The value in equity and justice must include whatever is contributed by the fact of the connection of the items making a complete and operating plant. The difference between a dead plant and a live one is a real value, and is independent of any franchise to go on, or any mere good will as between such a plant and its customers." 543 REASONABLE RATES. § 474 That this principle is generally recognized is ex- pressly indicated by the decision in the case of Pioneer Tel. & T. Co. V. Westenhaver, 29 Okla, 429, 118 Pac. 354. 38 L. R. A. (N. S.) 1209, decided in 191 1, where the court says: "There is no contention that any value on account of unexpired franchise or for good will should be added to the reproductive value, in or- der to ascertain the present value; but it is contended that, by reason of the fact that appellant's plant has an established system of operation, has at present customers sufficient in number to pay the operating expenses and annual depreciation and some profit, it has a value beyond the mere cost of reproducing the plant. This element of value contended for has been generally referred to by the authorities as 'the going concern value' or 'going value.' . . . These cases, so far as we have been able to examine them, uni- formly hold that, in the absence of a provision in the franchise to the contrary, the going concern element of value must be considered in ascertaining the fair value of the plant." CHAPTER XXIV. VALUATION OF THE INVESTMENT. Section. 475. Basis for fixing rates and purchase price. 476. Fair return on reasonable value of necessary property. 477. Four theories for ascertaining valuation. 478. Original cost if not excessive. 479. Reproduction less depreciation. 480. Capitalization and investment distinguished. 481. Power and necessity of controlling capitalization. 482. Connection between capitalization and necessary investment not always apparent. 483. Tendency to regulate issue of stocks and bonds. 484. Present value true test. 485. Theories of valuation considered. 486. Valuation as of the time question determined. 487. Present value as a going concern. 488. Market valuation or capitalization inadequate. 489. Present actual physical valuation as going concern. 490. Franchise valuation — Real or cost. 491. Valuation limited to property being used for public. 492. Rate presumed reasonable — Effect of reduction on income. 493. Elements of valuation as evidence of true value. 494. Current market price and rate of interest. 495. Net earnings rule. 496. Limitations and additions necessary to this rule. 497. No constitutional right to unreasonable return. § 475. Basis for fixing rates and purchase price. — The determination of the reasonable value of its prop- erty at the time it is being used for the public, upon which the municipal public utility is entitled to a fair return, is the ultimate and most difficult question. This constitutes the basis for fixing the rates which the municipal public utility may receive for its service and is the amount to which it is entitled in the case of its purchase by the municipal corporation in the ex- 544 545 VALUATION. § 476 ercise of its right of eminent domain or of its option or contract to purchase which is commonly stipulated for in the special franchise or contract granting con- sent to the use of its streets for the purpose of instal- ing and operating the municipal public utility and pro- viding service to the municipality and its inhabitants. § 476. Fair return on reasonable value of neces- sary property. — The v^ell-established rule of law is unquestioned that "what the company is entitled to demand, in order that it may have just compensation, is a fair return upon the reasonable value of the prop- erty at the time it is being used for the public."^ The determination of the proper basis for ascertaining the reasonable value of the property used and useful in rendering its service is the final and most difficult matter for solution in the complex and as yet not fully developed field of the law of municipal public utilities. § 477. Four theories for ascertaining valuation. — This general legal principle is as firmly established and fully accepted as the results of its practical appli- cation are uncertain and difficult of solution in deter- mining what specific rate should be fixed in the par- ticular case. In addition to the net earnings rule, there are four different theories for the determination of what constitutes a reasonable rate under the facts of any particular case. These theories are generally de- fined by terms which indicate the method of ascertain- ing what would be a fair return on the reasonable value of the property, and are thus expressed — orig- inal cost; cost of reproduction; outstanding capitaliza- tion, and present value. Since the authorities are not agreed as to the proper theory for determining rates nor as to the manner of applying the legal principle 1 San Diego Land & Town Co. v. National City. 174 U. S. 739. 43 L. ed. 1154. 35— Pub. Ui. § 47^ PUBLIC UTILITIES. 546 established for that purpose, it is impossible that they should agree on what constitutes a reasonable rate in any case or that a decision in any state should control in other states, although the facts of the case may be similar or even identical because the courts are not agreed as to the proper theory to be applied for the solution of the question. § 478. Original cost if not excessive. — The appli- cation of the theory of original cost is attended with many practical difficulties, for in attempting to ascer- tain the actual original cost in many cases the records available on this point are neither accurate nor com- plete. The solution of the further question under this theory of original cost, which is naturally attended with difficulty, is the determination of the honesty and necessity of such expenditures and whether the con- tract price as paid was exorbitant or fraudulent, for in many cases the contractor has been paid in part at least in stocks and bonds of the municipal public utility on a valuation which was far from par and probably no nearer their actual value at the time of their issue and acceptance by the contractor. As the application of this theory necessarily requires a determination of what was the actual and fair original cost, it could not be followed in a case where the capacity of the plant was unreasonably excessive or the amount which had been expended in its equipment or for a site was much greater than necessary to provide the required service, for such excess could not be fairly included in determining the proper valuation as the basis for fixing a reasonable rate for the service, although in anticipation of increased demands for its service the municipal public utility is entitled to provide reason- able additional capacity over the actual present de- mands of its service in order to avoid the expense of 547 VALUATION. § 479 increasing its capacity to furnish the additional service by rebuilding or materially extending its plant. § 479. Reproduction less depreciation. — The adop- tion of the theory of reproduction is attended with practically all the difficulties of that of original cost, and the application of either must be attended with a reduction of the amount of the depreciation which the plant has sustained, except so far as its parts may have been repaired or replaced; nor does the theory of the original cost or the cost of reproduction take into account a valuation of the plant as a going concern with an established income. § 480. Capitalization and investment distinguished. — The theory of outstanding capitalization is not sat- isfactory because experience has shown that in many cases it has very little, if any, relation to the actual value of the investment. Fortunately for the con- sumer, the courts are practically agreed that the out- standing capitalization or the amount of stock and bonds issued is neither a fair test of the capital actu- ally invested in the business nor a reliable measure by which to estimate the reasonable value of the prop- erty used and useful in rendering the service; and many cases have expressly stated that there is little if any logical connection between the actual value of the investment and the par or even market value of the stock and bonds issued by the company, which the courts have said only constitutes evidence of the his- tory of the development of the business and are val- uable chiefly for that purpose. § 481. Power and necessity of controlling capitali- zation. — The state which creates the municipal public utility and supervises its operation directly or through its agency, the municipality or commission, unques- § 482 PUBLIC UTILITIES. 548 tionably has the power to regulate and control the issue of its stock, bonds and other liabilities upon which a fair return for the service rendered may prop- erly be expected. This matter is so easy of control in the hands of the state that its flagrant abuse in so many cases by the issue of almost unlimited quantities of watered stock is as difficult to understand as it is easy to correct or prevent. That the state has this power is beyond question, and while some of the courts may seem inclined to sustain a rate which will permit of a return on such stock after it has been issued and purchased by third parties, there can be no question as to the opportunity or the duty of the state to pre- vent its issue in the first instance in the interest and for the protection of the public which pays for the service as well as purchases the securities. § 482. Connection between capitalization and nec- essary investment not always apparent. — It is the rea- sonable value of the property which is being used for the public in rendering the service upon which the municipal public utility is entitled to a fair return so that the capitalization or the amount of stock and bonds outstanding is not the proper basis for fixing the rate, for frequently it is not even a fair criterion of the actual investment necessary to render the serv- ice. Indeed, so great has become the discrepancy between capitalization and actual value that there seems to be no logical connection between the two; nor does a rate which fails to give a reasonable re- turn upon all the outstanding stock and bonds of the municipal public utility so far as such capitalization exceeds the actual value of the investment constitute a taking of property without due process, nor does it amount to confiscation because it is the real and not the nominal paper valuation that determines the 549 VALUATION. § 483 amount of the investment upon vvhich the municipal pubhc utiHty is entitled to a return. The purpose and effect of an inflated capitalization in practice, however, is obvious because of the fact that it often receives full recognition in fixing the rate, and so long as this is the case it will furnish the necessary motive for the reorganization of municipal public utilities and their consolidation as well as for the organization of hold- ing companies, and such legal formalities as present practical opportunity for increasing the apparent in- vestment by multiplying and supplementing the capi- talization as evidenced by the aggregate amount of stock and bond issues for which these legal formalities furnish the occasion. § 483. Tendency to regulate issue of stocks and bonds. — There is an increasing tendency, however, to regulate the issue of stocks and bonds and a few of the states have clearly demonstrated that it is a sim- ple matter indeed to prevent the issue of more stock or the creation of a greater bonded indebtedness than the value represented by it and received for it. When capitalization is an accurate valuation of the invest- ment of a municipal public utility, the matter of its regulation is greatly simplified and the determination of the proper rate for the service rendered is greatly facilitated. § 484. Present value true test. — While all accurate available evidence of the original cost, as well as the cost of reproduction is desirable and helpful in deter- mining the extent of the actual investment necessary to render the service in any particular case, neither these nor the amount of capitalization are conclusive. The present market value of the plant or its worth as a going concern is the ultimate practical basis for determining the value of the investment upon which § 484 PUBLIC UTILITIES. 55O to fix a rate which will produce a fair return. The investment is the actual market value of the property which is being used for the public and is useful or necessary at the time to render the service which, as a going concern, includes the right of being a body corporate as well as the special privilege of using the streets and other public places of the municipality which is necessary for rendering the service; and as these special franchise privileges are necessary to the operation of the municipal public utility, the actual legitimate expense of securing them is a proper ele- ment of the investment, although on the other hand, as the courts have observed, where this privilege is given outright by the municipality it is difficult for the municipal public utility to justify its action in placing a high valuation on its franchise for the purpose of determining the amount of the investment upon which the inhabitants of the municipality, who have already given the privilege, should be required to pay at an increased rate for the service which it receives. By way of defining the well-estabHshed rule that "what the company is entitled to demand, in order that it may have just compensation, is a fair return upon the reasonable value of the property at the time it is being used for the public," and of determining its practical application as the means of ascertaining the proper valuation upon which to fix the rate for the service rendered, the following cases are furnished as the basis for the solution of the question so far as it has been settled by our courts.^ 2 ARKANSAS.— Arkadelphia Electric Light Co. v. Arkadelphia, 99 Ark. 178, 137 S. W. 1093. CALIFORNIA.— Contra Costa Water Co. v. Oakland, 159 Cal. 323, 113 Pac. 668; Redlands, L. & C. Domestic Water Co. v. Redlands, 121 Cal. 365, 53 Pac. 843; San Diego Water Co. v. San Diego, 118 Cal. 556, 50 Pac. 633, 38 L. R. A. 460, 62 Am. St. 261. FEDERAL.— Boise City Irrig. & Land Co. v. Clark, 131 Fed. 415; C. H. Venner Co. v. Urbana Waterworks, 174 Fed. 348; Consolidated 551 VALUATION. §485 § 485. Theories of valuation considered. — The Su- preme Court of the United States in the case of Knox- ville V. Knoxville Water Co., 212 U. S. i, 53 L. ed. 371, decided in 1909, after observing that "regulation of pubHc service corporations which perform their duties under conditions of necessary monopoly will Gas Co. V. New York, 157 Fed. 849; Cumberland Tel. & T. Co. v. Louisville, 187 Fed. 637; Cumberland Tel. & T. Co. v. Memphis, 183 Fed. 875; Cumberland Tel. & T. Co. v. Railroad Commission, 156 Fed. 823; Des Moines Gas Co. v. Des Moines, 199 Fed. 204; Des Moines Water Co. v. Des Moines, 192 Fed. 193; Milwaukee Electric R. & Light Co. V. Milwaukee, 87 Fed. 577; National Waterworks Co. V. Kansas City, 62 Fed. 853, 27 L. R. A. 827; Spring Valley Water Co. V. San Francisco, 165 Fed. 667; Spring Valley Waterworks v. San Francisco, 124 Fed. 574; Spring Valley Waterworks v. San Francisco, 192 Fed. 137. IDAHO.— Pocatello v. Murray, 21 Idaho 180, 120 Pac. 812. ILLINOIS.— Chicago Union Traction Co. v. Chicago, 199 111. 484, 65 N. E. 451. 59 L. R. A. 631. IOWA.— Cedar Rapids Gaslight Co. v. Cedar Rapids, 144 Iowa 426, 120 N. W. 966, 138 Am. St. 299, 223 U. S. 655, 56 L. ed. 594; Cedar Rapids Water Co. v. Cedar Rapids, 118 Iowa 234, 91 N. W. 1081, 199 U. S. 600, 50 L. ed. 327. MASSACHUSETTS.— Falmouth v. Falmouth Water Co., 180 Mass. 325, 62 N. E. 255; Fall River Gas Works v. Board of G. & E. L. Comrs. (Mass.), 102 N. E. 475. MISSOURI.— Home Tel. Co. v. Carthage, 235 Mo. 644, 139 S. W. 547. NEW JERSEY.— Long Branch Commission v. Tintern Manor Water Co., 70 N. J. Eq. 71, 62 Atl. 474; Public Service Gas Co. v. Board of Public Utility Commissioners (N. J.), S7 Atl. 651. NEW YORK.— People ex rel. Jamaica Water Supply Co. v. State Board of Tax Comrs., 196 N. Y. 39, 89 N. E. 581; People ex rel. Man- hattan R. Co. V. Woodbury, 203 N. Y. 231, 96 N. E. 420; People ex rel. Third Ave. R. Co. v. State Board of Tax Comrs., 19S N. Y. 608, 120 N. Y. S. 528, 92 N. E. 1098; Silkman v. Board of Water Comrs. of Yonkers, 152 N. Y. 327, 46 N. E. 612, 37 L. R. A. 827, 71 Hun (N. Y.) 37; People ex rel. Delaware & H. Co. v. Stevens, 197 N. Y. 1, 90 N. E. 60: People ex rel. Binghanipton, &c. Co. v. Stevens, 203 N. Y. 7, 96 N. E. 114; Hopper v. Willcox (N. Y.), 140 N. Y. S. 277; People ex rel. King's County Lighting Co. v. Willcox (N. Y.), 141 N. Y. S. 677; People ex rel. Third Ave. Ry. Co. v. Public Service Commission, 203 N. Y. 299, 96 N. E. 1011; People ex rel. West- chester St. Ry. Co. V. Public Service Commission (N. Y.). 143 N. Y. S. 148. § 485 PUBLIC UTILITIES. 552 occur with greater and greater frequency as time goes on," defined this rule and indicated the manner of its appHcation as follows: "The cost of reproduction is one way of ascertaining the present value of a plant like that of a water company, but that test would lead to obviously incorrect results if the cost of reproduc- tion is not diminished by the depreciation which has come from age and use. . . . It is not easy to fix at any given time the amount of depreciation of a plant whose component parts are of different ages, with different expectations of life. But it is clear that some substantial allowance for depreciation ought to have been made in this case. . . . Counsel for the company urge rather faintly that the capitalization of the company ought to have some influence in the case in determining the valuation of the property. It is a sufificient answer to this contention that the capitaliza- tion is shown to be considerably in excess of any valu- ation testified to by any witness, or which can be arrived at by any process of reasoning, . . . Bonds and preferred and common stock issued under such OKLAHOMA.— Pioneer Tel. & T. Co. v. Westenhaver, 29 Okla. 429, 118 Pac. 354, 38 L. R. A. (N. S.) 1209. PENNSYLVANIA.— Brymer v. Butler Water Co., 179 Pa. 231. 36 Atl. 249, 36 L. R. A. 260; Monongahela Water Co., In re, 223 Pa. 323, 72 Atl. 625. UNITED STATES.— Knoxville v. Knoxville Water Co., 212 U. S. 1, 53 L. ed. 371; Lincoln Gas & E. L. Co. v. Lincoln, 223 U. S. 349, 56 L. ed. 466; Louisville v. Cumberland Tel. & T. Co., 225 U. S. 430, 56 L. ed. 1151; San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 47 L. ed. 892, 110 Fed. 702; San Diego Land & Town Co. v. National City, 174 U. S. 739, 43 L. ed. 1154; Smyth v. Ames, 169 U. S. 466, 42 L. ed. 819; Stanislaus County v. San Joaquin & K. R. C. & I. Co., 192 U. S. 201, 48 L. ed. 406; Willcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382; Simpson v. Shepard, 229 U. S. — , 33 Sup. Ct. Rep. 729. WASHINGTON.— Puget Sound Electric R. Co. v. Railroad Com- mission, 65 Wash. 75, 117 Pac. 739. WISCONSIN.— Appleton Waterworks Co. v. Railroad Commis- sion (Wis.), 142 N. W. 476. 553 VALUATION. § 486 conditions afford neither measure of nor guide to, the value of the property. . . . Before coming to the question of profit at all the company is entitled to earn a sufficient sum annually to provide not only for current repairs, but for making good the depreciation and replacing the parts of the property when they come to the end of their life. The company is not bound to see its property gradually v^aste, without making provision out of earnings for its replacement. It is entitled to see that from earnings the value of the property invested is kept unimpaired, so that, at the end of any given term of years, the original invest- ment remains as it was at the beginning." § 486. Valuation as of the time question deter- mined. — The same court in the case of Willcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382, de- cided in 1909, that the value of the property is to be determined as of the time when the inquiry is made regarding the rates, for as the court said: "There must be a fair return upon the reasonable value of the property at the time it is being used for the public. . . . But, where the rate complained of shows, in any event, a very narrow line of division between pos- sible confiscation and proper regulation ... a court of equity ought not to interfere by injunction before a fair trial has been made of continuing the business under that rate, and thus eliminating, as far as is possible, the doubt arising from opinions as op- posed to facts." § 487. Present value as a going concern. — The case of National Waterworks Co. v. Kansas City, 62 Fed. 853, 2^ L. R. A. 827, decided in 1894, furnishes an early decision to the effect that capitalization of the earnings, the original cost of construction or the cost of reconstruction are neither a fair nor an accu- rate test of the valuation of the investment, for as the § 488 PUBLIC UTILITIES. 554 court says : "Capitalization of the earnings will not, because that implies a continuance of earnings, and a continuance of earnings rests upon a franchise to op- erate the water-works. The original cost of the con- struction can not control, for 'original cost' and 'pres- ent value' are not equivalent terms. Nor would the mere cost of reproducing the water-works plant be a fair test, because that does not take into account the value which flows from the established connections between the pipes and the buildings of the city. It is obvious that the mere cost of purchasing the land, constructing the buildings, putting in the machinery, and laying the pipes in the streets — in other words, the cost of reproduction — does not give the value of the property as it is today. A completed system of water-works, such as the company has, without a single connection between the pipes in the streets and the buildings of the city, would be a property of much less value than that system connected, as it is, with so many buildings, and earning, in consequence there- of, the money which it does earn. The fact that it is a system in operation, not only with a capacity to supply the city, but actually supplying many buildings in the city — not only with a capacity to earn, but actually earning — makes it true that 'the fair and equitable value' is something in excess of the cost of reproduction." § 488. Market valuation or capitalization inade- quate. — That neither the capitalization nor the stock market valuation which fluctuates and is directly affect- ed by rate regulation are proper measures of the actual valuation of the investment is indicated by the court in the case of Spring Valley Waterworks v. San Fran- cisco, 124 Fed. 574, decided in 1903, as follows: "It is probably true that only a small part of the capital 555 VALUATION. § 489 Stock could be bought at this price. It is also true that the stock market is not always a safe guide to values. It may be influenced by considerations that do not affect the real value of the property, and in the present case it is alleged in the bill of complaint that the action of the board of supervisors in passing ordi- nances reducing water rates has caused the reduction in the value of the stock." One of the most recent and comprehensive deci- sions on this point is found in the case of Des Moines Gas Co. V. Des Moines, 199 Fed. 204, decided Aug. 21, 1912, where the court says: "The 'good will' and that which the corporation enjoys as being the only source from which gas can be obtained is not an ele- ment of value on which profits should be earned in estimating whether the rates are remunerative or con- fiscatory. Willcox V. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382. All concede that the present value is the basis on which returns are to be estimated." § 489. Present actual physical valuation as going concern. — The recent case of Des Moines Water Co. V. Des Moines, 192 Fed. 193, decided in 191 1, furnishes a practical decision of this point where the court says: "What is the value of the plant today? There must be a reasonable rate of interest or dividends allowed on the value of the plant. If a concern is not profit- able, the investors must lose their money. If the plant is a profitable one, then such profits can not ex- ceed a reasonable rate of interest or dividend. . . . There can be no true test, other than the physical valuation, and to such physical valuation there may be added certain other items." That the true valuation is the actual present value of the investment of the municipal public utility as a going concern is the effect of the decision in the case § 490 PUBLIC UTILITIES. 556 of Cedar Rapids Gaslight Co. v. Cedar Rapids, 144 Iowa, 426, 120 N. W. 966, 138 Am. St. R. 299, 223 U. S. 655, 56 L. ed. 594, decided in 1909, for as the court says: "As said, the value of the system as completed, earning a present income, is the criterion. In so far as influenced by income, however, the com- putation necessarily must be made on the basis of reasonable charges, for whatever is exacted for a pub- lic service in excess of this is to be regarded as un- lawful. Save as above indicated, the element of value designated a 'going concern' is but another name for 'good will,' which is not to be taken into account in a case like this, where the company is granted a monopoly. Cedar Rapids Water Company v. City of Cedar Rapids, 118 Iowa 234, 91 N. W. 1081, 199 U. S. 600, 50 L. ed. 327; Willcox v. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382. ... In ascertaining values in this way, the worth of a new plant of equal capacity, efBciency, and durability, with proper dis- counts for defects in the old and depreciation for use, should be the measure of value rather than the cost of exact duplication." § 490. Franchise valuation — Real or cost. — ^That the franchise and special privileges necessary to own and operate the municipal public utility are properly included in the true valuation of its actual investment which is the basis for fixing the rates to be charged for the service rendered is well expressed in the case of Spring Valley Waterworks Co. v. San Francisco, 165 Fed. 667, decided in 1908, where the court says: ^'He is entitled to a fair return, not always upon the cost of the property, because it may have cost too much ; not always upon the outstanding indebtedness, because it may be in excess of the real value of the property; not always upon the total amount invested, 557 VALUATION. § 491 because some portion of that which is acquired by the investment may be neither necessary nor presently useful for the public service; but upon the fair present value of that which is used for the public benefit, hav- ing due regard always to the reasonable value of the service rendered. . . . The idea that a valuable franchise could be taken in condemnation proceedings, without compensation, would not be tolerated for an instant; and to permit such a franchise to be taken without consideration, indirectly, by means of rate regulation, is equally obnoxious to the federal consti- tution. ... It would seem from this that Spring Valley revenues have never been adequate to yield anything in excess of a fair return upon the capital actually put into the plant. There has been no in- come which might be credited as earnings to the fran- chise in addition to and above what is apparently a scant reward for actual capital invested. The condi- tions thus disclosed do not necessarily predicate un- fair action by the board of supervisors. It may be that the water company itself has been extravagant, or that its investments have been larger than the needs of San Francisco demanded." §491. Valuation limited to property being used for public. — By way of determining the proper rate on the "value of the property actually used and useful" in furnishing the service the court in the case of San Diego Land & Town Co. v. Jasper, 189 U. S. 439, no Fed. 702, 47 L. ed. 892, decided in 1903, said: "It no longer is open to dispute that under the con- stitution 'what the company is entitled to demand, in order that it may have just compensation, is a fair return upon the reasonable value of the property at the time it is being used for the public' San Diego Land & Town Co. v. National City, 174 U. S. 739, § 492 PUBLIC UTILITIES. 558 43 L. ed. 1 154. That is decided, and is decided as against the contention that you are to take the actual cost of the plant, annual depreciation, etc., and to allow a fair profit on that footing over and above ex- penses. We see no reason to doubt that the California statute means the same thing." § 492. Rate presumed reasonable — Effect of re- duction on income. — After observing that the court will always presume in favor of the sufficiency of the rate as prescribed to produce a fair return upon the value of the property necessary to furnish the service, the court in the case of Lincoln Gas & E. L. Co. v. Lincoln, 223 U. S. 349, 56 L. ed. 466, decided Feb- ruary 19, 1912, by way of a summary of the practical rules for determining the proper rate observed that: "In this, as in every other legislative rate case, there are presented three questions of prime importance: First, the present reasonable value of the company's plant engaged in the regulated business; second, what will be the probable effect of the reduced rate upon the future net income from the property engaged in serving the public; and, third, in ascertaining the prob- able net income under the reduced rates prescribed, what deduction, if any, should be made from the gross receipts as a fund to preserve the property from future depreciation." § 493. Elements of valuation as evidence of true value. — The leading case on this question of deter- mining the proper rate is that of Smyth v. Ames, 169 U. S. 466, 42 L. ed. 819, decided in 1898, where the court after recognizing the difficulty of the question expressed the rule by saying: "We hold, however, that the basis of all calculations as to the reasonable- ness of rates to be charged by a corporation main- taining a highway under legislative sanction must be 559 VALUATION. § 494 the fair value of the property being used by it for the convenience of the pubHc. And, in order to ascertain that value, the original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present, as compared with the original cost of construction, the probable earning capacity of the property under par- ticular rates prescribed by statute, and the sum re- quired to meet operating expenses, are all matters for consideration, and are to be given such wreight as may be just and right in each case. We do not say that there may not be other matters to be regarded in estimating the value of the property. What the company is entitled to ask is a fair return upon the value of that which it employs for the public con- venience. On the other hand, what the public is en- titled to demand is that no more be exacted from it for the use of a public highway than the services ren- dered by it are reasonably worth." § 494. Current market price and rate of interest. — That the valuation should be made contemporaneous with the fixing of the rate and that the proper test in determining the value is the market price of the prop- erty upon which the current rate of interest is com- monly regarded as a fair return and a proper basis for fixing the rate is the effect of the decision in the case of Consolidated Gas Co. v. New York, 157 Fed. 849, decided in 1907, where the court said: "As to the realty, the values assigned are those of the time of inquiry; not cost when the land was acquired for the purposes of manufacture, and not the cost to the complainant of so much as it acquired when organ- ized in 1884, as a consolidation of several other gas manufacturing corporations. What the court should ascertain is the 'fair value of the property be- § 494 PUBLIC UTILITIES. 560 ing used' (Smyth v. Ames, 169 U. S. at page 546) ; the 'present' as compared with 'original' cost; what complainant 'employs for the public convenience' (169 U. S. at page 547) ; and it is also the 'value of the property at the time it is being used' (San Diego Land Co. v. National City, 174 U. S. at page 757). . , . The value of the investment of any manufac- turer in plant, factory, or goods, or all three, is what his possessions would sell for upon a fair transfer from a willing vendor to a willing buyer, and it can make no difference that such value is affected by the efforts of himself or others, by whim or fashion, or (what is really the same thing) by the advance of land values in the opinion of the buying public. . . . Indeed, the causes of either appreciation or deprecia- tion are alike unimportant, if the fact of value be con- ceded or proved; but that ultimate inquiry is often- times so difficult that original cost and reasons for changes in value become legitimate subjects of inves- tigation, as checks upon expert estimates or book- keeping inaccurate and perhaps intentionally mislead- ing." A further definition of the rule by which to deter- mine the proper rate for municipal public utility serv- ice is furnished by the leading case of Brymer v. Butler Water Co., 179 Pa. 231, 36 Atl. 249, 36 L. R. A. 260, decided in 1897, as follows : "Ordinarily, that is a reasonable charge or system of charges which yields a fair return upon the investment. Fixed charges and the costs of maintenance and operation must first be provided for. Then the interests of the owners of the property are to be considered. They are entitled to a rate of return, if their property will earn it, not less than the legal rate of interest; and a system of charges that yields no more income than is fairly required to maintain the plant, pay fixed charges and operating expenses, provide a suitable sinking 561 VALUATION. § 495 fund for the payment of debts, and pay a fair profit to the owners of the property, can not be said to be unreasonable." § 495. Net earnings rule. — The definition and the practical application of the so-called net earnings rule is furnished by a series of decisions of the Supreme Court of New York in connection with the subject of the taxation of the franchise of the municipal public utility. A brief summary of this rule is furnished in the case of People ex rel. Manhattan R. Co. v. Wood- bury, 203 N. Y. 231, 96 N. E. 420, decided in 191 1, as follows: "The rule, in brief, is to ascertain the gross earnings of the corporation, and then deduct the op- erating expenses, together with the annual taxes paid. From the remainder, there should also be deducted a fair and reasonable return on that portion of the cap- ital of the corporation which is invested in tangible property, the result becoming the net earnings con- tributable to the special franchise, which, when cap- italized at a rate which I shall hereafter consider, becomes the value of the intangible property of the special franchise." § 496. Limitations and additions necessary to this rule. — A good definition, as well as a necessary limi- tation on the practical application of this rule, is fur- nished by the court in the case of People ex rel. Jamaica Water Supply Co. v. State Board of Tax Comrs., 196 N. Y. 39, 89 N. E. 581, decided in 1909, as follows: "The net earnings rule contemplates a valuation upon the basis of the net earnings of the corporation which are attributable to its enjoyment of the special franchise. The method is thus applied: (i) Ascertain the gross earnings. (2) Deduct the operat- ing expenses. (3) Deduct a fair and reasonable re- 36— Pub. ut § 497 PUBLIC UTILITIES. 562 turn on that portion of the capital of the corporation which is invested in tangible property. The resulting balance gives the earnings attributable to the special franchise. If this balance be capitalized at a fair rate, we have the value of the special franchise. No corporation would be regarded as well conducted which did not make some provision for the necessity of ultimately replacing the property thus suffering deterioration; and we can not see why an allowance for this purpose should not be made out of the gross earnings in order to ascertain the true earning capac- ity. . . . While evidence as to what constitutes a fair and reasonable rate of return in the business of a corporation was received in this Consolidated Gas Co. case, 157 Fed. 849, 869, and may properly be taken by the court in certiorari proceedings under the tax law if parties see fit to offer it, the court may, in the absence of such evidence, adopt six per cent, as a fair rate for the purpose of calculating the value of a spe- cial franchise under the net earnings rule. In valuing the tangible property of the relator, the land occupied by a portion of the plant was an important element to be considered. The referee allowed a return only upon the original cost of such land ($25,162.01), in- stead of upon its present value ($71,018.28)." § 497. No constitutional right to unreasonable re- turn. — The court in the case of City of Pocatello v. Murray, 21 Idaho 180, 120 Pac. 812, decided January 18, 1912, expressed the constitutional principle in- volved in the question of rate regulation by saying: "He has no vested right to charge an unreasonable or an unconscionable rate while exercising a franchise to serve a public use. To deprive a person engaged in such a public service of the power to charge and col- lect an unreasonable, extortionate, or unconscionable 563 VALUATION. § 497 rate deprives him of no right, natural or acquired, and can not be the impairment of a contract within the purview and meaning of section 10, art. i, of the federal constitution, nor is it depriving him of property without due process of law, in violation of the four- teenth amendment." A further accurate expression of the constitutional phase of the question is furnished in the case of Chi- cago Union Traction Co. v. Chicago, 199 111. 484, 65 N. E. 451, 59 L. R. A. 631, decided in 1902, where the court says: "It is only where rates are made so un- reasonable as to make the enforcement of the law establishing them equivalent to taking property for public use without just compensation that the federal courts hold that the corporation has been deprived of its property without due process of law, and has been denied the equal protection of the laws." CHAPTER XXV. REGULATION BY MUNICIPAL CORPORA- TIONS, Section. 498. Governmental power to regulate rates suspended by contract. 499. Municipal control practical and power delegated adequate. 500. Tendency to increase municipal control of real party in in- terest. 501. Persistent vigorous enforcement of franchise essential. 502. Strict construction of contracts suspending power to regulate. 503. Power to regulate and to fix rates by contract distinguished. 504. Power to fix rates must be exercised in manner provided. 505. Power to regulate rates to be conserved. 506. Rate regulation and the general welfare. 507. Power to fix rates may be delegated to municipality. 508. Policy of local control over purely local matters. 509. Municipal authorities competent to fix rates for action official. 510. Duty of municipality to prevent excessive rates. 511. Rate subject to change by state if made without authority. 512. Delegated power to fix rate binding until revoked. 513. Statutory construction of power to regulate and fix rates. 514. Power to regulate rates not surrendered by implication. 515. Rates fixed by contracts not clearly authorized held declara- tory only. 516. Strict construction saves right to regulate if rate not expressly covered. 517. Right to regulate under reserved right to alter, amend or repeal. 518. Regulation continuing and akin to police power. 519. Liberal construction finds contract binding on rates. 520. Delegated power to fix rates by contract or franchise limited thereby. 521. Contract giving consent and fixing rates valid. 522. Fixing maximum rates permits regulation as to reasonableness. 523. Fixing rates not favored— Tends to create monopoly. § 498. Governmental power to regulate rates sus- pended by contract. — The power to control the mu- 564 565 MUNICIPAL REGULATION. § 499 nicipal public utility, to regulate its service and to fix the rate therefor is essentially a power of government, the importance of which is becoming more generally recognized, is legislative or administrative in its char- acter, continuing in its nature and capable of being delegated to the municipality. When acting under such delegated authority the municipality has the power to fix the rate which may be charged for the service rendered by any municipal public utility by contract for a definite period of time which is not so unreasonable in its extent nor as to its terms and con- ditions as to constitute a clear abuse of such delegated authority amounting to fraud. The efifect of such a contract made in the exercise of duly authorized power is to suspend the exercise by the government of the power to fix and regulate rates; and because of this effect the authority and the intention to make such a contract must be clearly apparent in order to preclude the state from regulating the rates. § 499. Municipal control practical and power dele- gated adequate. — Because of the great variety and varying conditions under which different municipalities provide for municipal public utility service a general statute of the state attempting to regulate the service and fix the rate at which it should be furnished could hardly be drawn which would be fairly and satisfac- torily adaptable to the conditions of all municipal cor- porations in the state. As a matter of convenience and practical necessity the exercise of this power to fix rates and to permit of their modification to meet changing conditions with greater flexibility and with more specific reference to the conditions peculiar to any particular municipality has often been delegated by the states by express statutory enactment to the municipal corporations themselves. Acting under such § 500 PUBLIC UTILITIES. 566 delegated authority or that conferred upon the mu- nicipaHty to give its consent to the maintenance and operation of the municipal pubHc utiHty as the special franchise privilege permitting the furnishing of service upon such terms and conditions as the municipality sees fit to impose, the municipal corporation has the power of regulating the service and fixing the rates to be charged by any particular municipal public util- ity. Where the municipality has the right to grant the necessary franchise to the municipal public utility permitting it to furnish its service, it may also protect itself and its inhabitants from unreasonable charges or inadequate service, and the very important duty devolves upon the municipal authorities in granting the special franchise privilege to the municipal public utility of exercising this pow^er vested in the munici- pality and of safeguarding and protecting the public interest and that of the individual customer. § 500. Tendency to increase municipal control o£ real party in interest. — The power to regulate the service of municipal public utilities and to fix its rates is being confej-red upon municipalities with greater frequency not only for the reason that this permits of its more convenient exercise, but because of the more extensive acceptance of the doctrine of the right of the municipality to exercise home rule in strictly local matters. Being of peculiar interest to the municipality affected, this plan naturally secures the necessary at- tention to insure proper regulation and control. The necessity for regulation due to the fact that the busi- ness is both a public one and a natural monopoly is as imperative as the recognition of the right to regu- late, for no matter how completely the principles of regulation may be established and the rules for arriv- ing at the proper rate determined, unless the power 567 MUNICIPAL REGULATION. § 5OI to apply these principles of regulation and exercise the rules for ascertaining and imposing the proper rate is conferred upon an efficient responsible body that will conscientiously at all times attend to their proper enforcement, the attention necessary to secure ade- quate service at reasonable rates will fail of realization in practice. § 501. Persistent vigorous enforcement of franchise essential. — The strict enforcement of the franchise rights and the uncompromising application of the prin- ciples defining what constitutes adequate service and reasonable rates are as essential as that the proper franchise be drawn and the correct principles of regu- lation be established. The strict persistent enforce- ment of the franchise rights and the accepted princi- ples for the regulation of the service are among the most important duties devolving upon the municipal authorities, for the municipality, as well as for the municipal public utility itself, because both the con- sumer and the producer are interested in and directly affected by the proper determination of what consti- tutes adequate service and reasonable rates as well as in the proper enforcement of these rights. § 502. Strict construction of contracts suspending power to regulate. — In the interest of the public, the statutory grants to municipalities of the right to make long-time contracts for public utility service binding on the public and to fix the rate to be charged for the service are not favored because they tend to sus- pend the right to regulate the service and to modify the rates as changing conditions permit or justify, which, but for the existence of such a contract, is always available, so that such statutory grants as well as the contracts made pursuant to their provisions § 503 PUBLIC UTILITIES. 568 are strictly construed. And only in those cases where the right absolutely to fix rates is conferred upon the municipality will the state be held to have relinquished its power to enact further laws and continue to regu- late the rates so that where no sufficient authority has been given to the municipality to make such a contract and thus to suspend the right to adjust rates for the period fixed by its terms, the right of the state to interfere for the purpose of regulating the service and modifying the rates in the interest of the public is not abrogated. In such cases the contract of the municipality for the service of municipal public utilities is made and held subject to the right of the state to exercise its paramount authority by virtue of its governmental power to fix rates. Where this power has not been surrendered by the state it is in effect only suspended by the making of such a contract by the municipality until action is taken by the state, just as state legislation is superseded by congressional reg- ulation of interstate commerce or of any matter over which the federal government also has jurisdiction. § 503. Power to regulate and to fix rates by con- tract distinguished. — As the legislature has the power to delegate authority to the municipality to regulate service and to fix rates, it also has the power to revoke such authority and to regulate directly or through another agency or commission, and only in those cases where the authority delegated to the municipality clearly confers upon it the power to agree upon a fixed rate for a definite period which the municipality clearly does by contract, is the state precluded at any time from regulating the service and readjusting the rates. On the other hand where the state has clearly author- ized the municipality to contract for the service of municipal public utilities and to fix the rate for a definite period, the contract of the municipality made 569 MUNICIPAL REGULATION. § 504 pursuant to such authority can not be set aside by the state. The authority to regulate the service and the rate to be charged for it when conferred upon the municipahty enables it to exercise the governmental pov^er of regulating charges as well as the service, but does not authorize it to enter into a contract to abandon the governmental power itself. The authority to exercise the governmental power of regulation and to determine from time to time what constitutes rea- sonable rates does not authorize the municipality to contract for service and to fix a definite rate which can not be readjusted from time to time as changing conditions, including the cost of the service, would justify. § 504. Power to fix rates must be exercised in manner provided. — And where the right conferred upon the municipality to fix the rates for the service furnished by municipal public utilities is to be exer- cised in a certain manner as by contract or franchise, the municipality can not exercise the power in any other manner; and in such cases an ordinance attempt- ing to regulate or readjust rates in any other way than that provided by the statutory provision would be clearly invalid and of no effect with reference to a municipal public utility which had already received a franchise from the municipality which did not fix the rate or retain in the municipality the power to regulate it. The power to prescribe rates by contract or to specify them in a franchise is very different from the legislative or governmental power to regulate rates from time to time, nor does the power to regulate the manner of constructing the municipal public utility plant in the streets of the municipality include the authority by which the municipality may fix the rates to be charged for it. § 505 PUBLIC UTILITIES. 57O § 505. Power to regulate rates to be conserved. — Where, therefore, a contract is entered into between a miinicipaHty and a municipal public utility for the providing of its service at a fixed rate and the munici- pality has not been clearly authorized to make such a contract, it only constitutes a declaration of a rea- sonable rate which may be modified by action of the state or the municipality pursuant to authority con- ferred upon it for this purpose by the state. The power conferred upon the municipality by the state to contract for municipal public utility service does not necessarily include the power to fix the rates for the service for the entire period of the contract; and where authority to fix rates for a fixed period is not clearly conferred upon the municipality, its contract attempt- ing to do so is not binding and the rates so fixed may be readjusted and another rate fixed, provided it is a reasonable one. It is often expedient for the munici- pality not to fix a definite rate, but to leave the matter open so that it may be determined from time to time as the increase of business or any other factor by reducing the cost of the service enables the company to reduce the rate. The right to regulate rates should remain open and always be a continuing one and not be exhausted by its exercise in the first or any subse- quent instance; for it is in the interest of the pubHc as well as of justice that this right be exercised from time to time whenever necessary to prevent the ex- istence of inadequate rates or extortion on the part of the municipal public utility. § 506. Rate regulation and the general welfare. — Indeed, this matter of determining the proper rate for the necessary service of such public utilities as water, light and transportation so intimately affects the health, welfare and comfort of the citizens as to bring it within the scope of the police power of the 571 MUNICIPAL REGULATION. § 506 city, because if the rates are unreasonably high they will be prohibitive to a certain class which will be de- nied or seriously restricted in the enjoyment of an adequate water service which in turn might seriously impair their health, and by unduly restricting the service of other necessary utilities, would materially interfere with the comfort and welfare of the citizens and especially the poorer and more dependent classes. This power to regulate the service and the rate to be charged for it in connection with its police and other general powers reserved to the municipality is a con- tinuing one, and while it may not be exercised arbi- trarily and unreasonably to the oppression of the mu- nicipal public utility, justice and the interests of all parties in the end require that the right of regulation remain free and untrammeled so that it may be exer- cised at any time when the interests of the public or the company demand it because of changed conditions controlling the cost of furnishing the service, for it is well established that the law assures a reasonable rate even against governmental regulation/ 1 ALABAMA.— Bessemer v. Bessemer Waterworks, 152 Ala. 391, 44 So. 663; Crosby v. Montgomery, lOS Ala. 49^:, IS So. 723. CALIFORNIA.— Ex parte Russell, 163 Cal. 668, 126 Pac. 875. FEDERAL.— Capital City Gas Co. v. Des Moines, 72 Fed. 818; Cleveland City R. Co. v. Cleveland, 94 Fed. 3S5; Home Tel. & T. Co. V. Los Angeles, 155 Fed. 554; Illinois Trust & Sav. Bank v. Arkansas City Water Co., 67 Fed. 196; Los Angeles City Water Co. v. Los An- geles, 88 Fed. 720; Los Angeles City Water Co. v. Los Angeles, 103 Fed. 711; Old Colony Trust Co. v. Atlanta, 83 Fed. 39, 88 Fed. 859; Owensboro v. Cumberland Tel. & T. Co., 174 Fed. 739; Spring Valley Water Co. v. San Francisco, 165 Fed. 667; California-Oregon Power Co. V. Grants Pass. 203 Fed. 173; Cumberland Telephone & Tel. Co. V. Memphis. 200 Fed. 657; Ft. Smith Light & Traction Co. v. Ft. Smith, 202 Fed. 581. FLORIDA.— Gainesville Gas & Electric P. Co. v. Gainesville, 63 Fla. 425, 58 So. 785, 62 So. 919; Jacksonville v. Southern Bell Tel. & T. Co., 57 Fla. 374, 49 So. 509. ILLINOIS.— Chicago Union Traction Co. v. Chicago, 199 111. 484, 65 N. E. 451, 59 L. R. A. 631; Danville v. Danville Water Co., 17S 111. 299, 53 N. E. 118, 69 Am. St. 304; Danville v. Danville Water Co., 180 § 507 PUBLIC UTILITIES. 5/2 § 507. Power to fix rates may be delegated to 111. 235, 54 N. E. 224; Rogers Park Water Co. v. Fergus, 178 111. 571, 53 N. E. 363, 180 U. S. 624, 45 L. ed. 702. INDIANA.— Richmond v. Richmond Natural Gas Co., 168 Ind. 82, 79 N. E. 1031. KENTUCKY.— Moberly v. Richmond Tel. Co., 31 Ky. L. 783, 103 S. W. 714; Stites v. Norton, 125 Ky. 672, 101 S. W. 1189. MASSACHUSETTS.— Murphy v. Worcester Consol. St. R. Co., 199 Mass. 279, 85 N. E. 507. MICHIGAN.— Boerth v. Detroit City Gas Co., 152 Mich. 654, 116 N. W. 628, 18 L. R. A. (N. S.) 1197. MISSOURI.— St. Louis v. Bell Tel. Co., 96 Mo. 623, 10 S. W. 197; State ex rel. Garner v. Missouri & K. Tel. Co., 189 Mo. 83, 88 S. W. 41; Joplin v. Wheeler (Mo.), 158 S. W. 924. NEW JERSEY.— Long Branch Commission v. Tintern Manor Water Co., 70 N. J. Eq. 71, 62 Atl. 474; Public Service Corp. v. Ameri- can Lighting Co., 67 N. J. Eq. 122, 57 Atl. 482. NEW MEXICO.— Agua Pura Co. v. Las Vegas, 10 N. Mex. 6, 60 Pac. 208, 50 L. R. A. 224. NEW YORK.— People ex rel. v. Willcox (N. Y.), 100 N. E. 705. NORTH CAROLINA.— Horner v. Oxford Water & Electric Co., 153 N. Car. 535, 69 S. E. 607. OHIO.— Farmer & Getz v. Columbiana County Tel. Co., 72 Ohio St. 526, 74 N. E. 1078; State ex rel. Sheets v. Toledo Home Tel. Co., 72 Ohio St. 60, 74 N. E. 162; Zanesville v. Zanesville Gas-Light Co., 47 Ohio 1. 23 N. E. 55. OKLAHOMA.— South McAlester-Eufaula Tel. Co. v. State, 25 Okla. 524, 106 Pac. 962. TENNESSEE.- Knoxville v. Knoxville Water Co., 107 Tenn. 647, 64 S. W. 1075, 61 L. R. A. 888. TEXAS.— Brownwood v. Brown Tel. & T. Co. (Tex.), 157 S. W. 1163. UNITED STATES.— Cleveland v. Cleveland City R. Co., 194 U. S. 517, 48 L. ed. 1102; Home Tel. & T. Co. v. Los Angeles, 211 U. S. 265, 53 L. ed. 176; Interstate Consol. St. R. Co. v. Massachusetts, 207 U. S. 79, 52 L. ed. Ill; Knoxville Water Co. v. Knoxville, 189 U. S. 434, 47 L. ed. 887; Los Angeles v. Los Angeles City Water Co., 177 U. S. 558, 44 L. ed. 886; Murray v. Pocatello, 226 U. S. 318, 57 ed.; People's Gaslight & Coke Co. v. Chicago, 194 U. S. 1, 28 L. ed. 851; San Diego Land & Town Co. v. National City, 174 U. S. 739, 43 L. ed. 1154, 74 Fed. 79; Spring Valley Waterworks v. Schottler, 110 U. S. 347. 28 L. ed. 173. WISCONSIN.— Manitowoc v. Manitowoc & Northern Traction Co., 145 Wis. 13, 129 N. W. 925; State ex rel. Smythe v. Milwaukee Independent Tel. Co., 133 Wis. 588, 114 N. W. 108; Milwaukee Elec- tric Ry. & L. Co. V. Railroad Commission (Wis.), 142 N. W. 491. 573 MUNICIPAL REGULATION. § 508 municipality. — A leading case dealing with the ques- tion of the regulation by the municipality acting under authority delegated to it by the state of the municipal public utility service and the determination of what constitutes a reasonable rate, together with the fixing of the rate determined upon by the municipality, is that of San Diego Land & Town Co. v. National City, 174 U. S. 739, 74 Fed. 79, 43 L. ed. 1154, decided in 1899. In the course of its opinion the court said: "That it was competent for the state of California to declare that the use of all water appropriated for sale, rental or distribution should be a public use, and sub- ject to public regulation and control, and that it could confer upon the proper municipal corporation power to fix the rates of compensation to be collected for the use of water supplied to any city, county or town, or to the inhabitants thereof, is not disputed, and is not, as we think, to be doubted." § 508. Policy of local control over purely local matters. — Under the power delegated to the munici- pality by the state to regulate the use of its streets and the service rendered by the municipal public util- ity, the municipality as the local agency of the state enjoys extensive power of regulation and control by virtue of which the responsibility of securing for itself and its inhabitants adequate service at reasonable rates is imposed upon it, for as the court in the case of Owensboro v. Cumberland Tel. & T, Co., 174 Fed. 739. decided in 1909, says: "That power to permit the use of highways and streets for such purposes must reside somewhere is obvious. Primarily, it resides in the legislature of each state, but, as is well known, is almost universally delegated to the municipality con- cerned. Reasons of convenience, as well as theories of local rule in strictly local matters, lead us to expect that the local government has the power to regulate § 509 PUBLIC UTILITIES. 574 the use of its own streets. ... If, then, such a use is within the general objects and purposes to be served by the power of opening and maintaining pub- lic streets, why is the grant of a right to so use the public streets an act beyond the powers of the munici- pal legislature? What power is delegated by the ex- press power to 'regulate' the streets and alleys of the city? Manifestly, something was meant by the power to 'regulate.' The word 'regulate' imports the power to control the use of the streets, and is indeed a word of wider import than 'control' or the power to 'con- sent' to an easement of way." § 509. Municipal authorities competent to fix rates for action official. — The leading case of Spring Valley .Water Works v. Schottler, no U. S. 347, 28 L. ed. 173, decided in 1884, indicates that for many years the right has commonly been conferred upon municipali- ties to control the service and to regulate the rates of municipal public utilities and that the municipal officers are competent to exercise such right, although the municipality receiving the service is a party to the relation, because their action is official, for as the court says : "Long before the constitution of 1879 was adopted in California, statutes had been passed in many of the states requiring water companies, gas companies and other companies of like character, to supply their customers at prices to be fixed by the municipal authorities of the locality; and, as an inde- pendent proposition, we see no reason why such a regulation is not within the scope of legislative power, unless prohibited by constitutional limitations or valid contract obligations. Whether expedient or not is a question for the legislature, not the courts. It is said, however, that appointing municipal officers to fix prices between the seller and the buyers is, in efifect. t 575 MUNICIPAL REGULATION. § 509 appointing the buyers themselves, since the buyers elect the officers, and that this is a violation of the principle that no man shall be a judge in his own case. But the officers here selected are the governing board of the municipality, and they are to act in their official capacity as such a board when performing the duty which has been imposed upon them. Their general duty is, within the limit of their powers, to administer the local government and, in so doing, to provide that all shall so conduct themselves and so use their own property as not unnecessarily to injure others. They are elected by the people for that purpose, and what- ever is within the just scope of the purpose may prop- erly be intrusted to them at the discretion of the leg- islature." This well-established principle of the right of mu- nicipal officers, under proper authority to exercise the power of regulating the rates to be charged for mu- nicipal public utility service, has never been questioned except by the court in the case of Agua Pura Co. v. Las Vegas, lo N. Mex. 6, 60 Pac. 208, 50 L. R. A. 224, decided in 1900, which evidently overlooked the deci- sion in the case of Spring Valley Water Works v. Schottler, supra, as well as a number of decisions sustaining it, for in the course of its opinion, denying the power of the legislature to delegate the right to regulate rates to a municipality, which is generally permitted, the court said: "Among the numerous cases involving this question of regulation, in various forms, which have been arising under the state and federal courts, we have been referred to none, nor are we aware of any such, in which a delegation by the legislature of power to regulate rates, in matters of this and similar nature, to a subordinate authority, which was itself interested as a purchaser or consumer, has been upheld." §510 PUBLIC UTILITIES. S7^ § 510. Duty of municipality to prevent excessive rates. — Indeed, some of our courts have decided that in the absence of statutory authority it is the duty of the municipality to protect its inhabitants in the mat- ter of municipal public utility service by requiring that such service be rendered at reasonable rates, for as the court in the case of Long Branch Commission V. Tintern Manor Water Co., 70 N. J. Eq. 71, 62 Atl. 474, decided in 1905, says: "But, independent of such statutory provision, I think it is the province and the duty of the municipality, whenever opportunity offers, to exercise its power in the protection of its inhabitants against extortion, and to secure them a supply of water and of gas from corporations, assuming to fur- nish those commodities, at reasonable rates. The water company is exercising a public franchise, which, from its nature and mode of exercise, is necessarily, during its continuance, a practical monopoly, and it follows beyond all question that its charges for its supply must be reasonable. And it would be strange indeed if the municipal government, which, so to speak, imposes this monopoly upon its citizens, were power- less to protect them against unreasonable charges." §511. Rate subject to change by state if made without authority. — Where the municipal public utility is required to secure consent of the municipality be- fore instaling its plant and furnishing its service, the municipality having the power to grant its consent on such reasonable conditions as it sees fit, may stipulate as to the rates to be charged for the service rendered. Unless, however, the municipality is specifically em- powered to fix the rate for the service rendered by contract and thereby suspend the exercise of the gov- ernmental power to regulate rates during the period of the contract, the rates so fixed may be changed 577 MUNICIPAL REGULATION. §511 by the state in the exercise of its governmental power of regulation, and the contract of the municipality fix- ing the rates without authority conferred upon it by the state continues only until suspended by action on the part of the state or a commission selected by it to fix another and different rate, for as the court in the case of Manitowoc v, Manitowoc & Northern Traction Co., 145 Wis. 13, 129 N. W. 925, decided in 1910, says: "Inasmuch as the city might on any terms refuse its consent to the use of its streets by interurban cars, we see no reason why it might not exact any condition it saw fit, provided they were not unlawful in them- selves, and as to the parties to the contract there was nothing unlawful about the condition we are consid- ering. . . . That the legislature of the state might expressly empower cities to make such contracts as the one in question is well settled. In passing such an ordinance as we have before us, a city, proceeding under a grant of power specifically conferred, acts as the agent of the state, and the public is concluded by the contract during its life, and its obligations could not be impaired by subsequent legislative actions, un- less it were held that the ordinance was part of the charter of the railway company and subject to amend- ment or repeal under section i of article 11 of our constitution. Otherwise, a state may, in matter of proprietary rights, exclude itself and authorize its mu- nicipal corporations to exclude themselves from the right of regulating rates. . . . Statutes granting to the cities the right to make long-time contracts bind- ing on the public, and fixing a rate to be charged by a public service corporation, are not looked upon with favor, and will be strictly construed. It is only where the right is very clearly conferred that the state will be held to have relinquished its power to enact laws regulating tolls. . . . No specific authority having 37— Pub. Ut. §512 PUBLIC UTILITIES. 578 been conferred on the city to enter into the contract in question, the right of the state to interfere when- ever the pubhc weal demanded was not abrogated. The contract remained vaHd between the parties to it until such time as the state saw fit to exercise its paramount authority, and no longer. To this extent and to this extent only is the contract before us a valid subsisting obligation. It would be unreasonable to hold that by enacting section 1862 or section 1863, St. 1898, the state intended to surrender its govern- mental power of fixing rates. That power was only suspended until such time as the state saw fit to act. . . . The railroad commission has made no deter- mination in the case before us; at least, if it has, it is no part of the record. Until that determination is made, the contract is in force. When it is made, the contract is superseded, if the rate is changed." § 512. Delegated power to fix rate binding until revoked. — Where, however, the state does confer au- thority upon the municipality by clearly empowering it to contract for the service of municipal public util- ities and to fix the rate for the service, such a contract when executed pursuant to the authority so delegated to the municipality is a valid obligation which can not be impaired by action on the part of the state in chang- ing the rate fixed in such a contract, although the au- thority may be revoked at any time by a repeal of the statute granting it, which would terminate the power of the city to contract for such service at a fixed rate, for as the court in the case of Los Angeles City Water Co. v. Los Angeles, 88 Fed. 720, decided in 1898, says: "The power of the city of Los Angeles to agree upon water rates, I think, is fairly implied in the power 'to provide for supplying the city with water,' and therefore falls within the second class of 579 MUNICIPAL REGULATION. §513 powers enumerated by Judge Dillon. . . . This delegation of power to the city was not, of course, a relinquishment by the legislature of its control over the subject. The legislature could at any time revoke the power delegated to the city, and provide directly, through agencies of its own selection, for supplying the city with water, provided such revocation or pro- vision should not impair any previously vested rights." § 513. Statutory construction of power to regulate and fix rates. — The courts, however, are not agreed in their interpretation of the statutory enactments con- ferring upon municipalities the power to regulate and determine the service and the rates of municipal public utilities with regard to the expression necessary to confer power on the municipality to fix the rates in connection with contracting for the service. "The power to fix and determine the charges" for such service does not give the municipality the right to contract for the service at a fixed price, but only to regulate the rate from time to time; it is conceded, however, that the municipal authorities are competent, although the municipality is an interested party, to regulate the rates, for as the Supreme Court of the United States in the case of Home Tel. & T. Co. v. Los Angeles, 211 U. S. 265, 53 L. ed. 176, decided in 1908, says: "The power to fix, subject to constitu- tional limits, the charges of such a business as the fur- nishing to the public of telephone service, is among the powers of government, is legislative in its char- acter, continuing in its nature, and capable of being vested in a municipal corporation. ... It has been settled by this court that the state may authorize one of its municipal corporations to establish, by an in- violable contract, the rates to be charged by a public service corporation [or natural person] for a definite §513 PUBLIC UTILITIES. 580 term, not grossly unreasonable in point of time, and that the effect of such a contract is to suspend, during the life of the contract the governmental power of fixing and regulating the rates. Detroit v. Detroit Citizens' Street R. Co., 184 U. S. 368, 46 L. ed. 592; Vicksburg v. Vicksburg Waterworks Co., 206 U. S. 496, 51 L. ed. II 55. But for the very reason that such a contract has the effect of extinguishing pro tanto an undoubted power of government, both its existence and the authority to make it must clearly and unmis- takably appear, and all doubts must be resolved in favor of the continuance of the power. . . . The facts in this case, which seem to us material upon the questions of the authority of the city to contract for rates to be maintained during the term of the franchise, are as follows: The charter gave to the council the power 'by ordinance ... to regulate telephone service and the use of telephones within the city, . . . and to fix and determine the charges for telephones and tele- phone service and connections.' This is an ample authority to exercise the governmental power of reg- ulating charges, but it is no authority to enter into a contract to abandon the governmental power itself. It speaks in words appropriate to describe the author- ity to exercise the governmental power, but entirely unfitted to describe the authority to contract. It au- thorizes command, but not agreement. Doubtless, an agreement as to rates might be authorized by the legislature to be made by ordinance. But the ordi- nance here described was not an ordinance to agree upon the charges, but an ordinance *to fix and deter- mine the charges.' It authorizes the exercise of the governmental power and nothing else. . . . The appellant further insists that the city council is not an impartial tribunal, because, in effect, it is a judge in its own case. It is too late, however, after the many 581 MUNICIPAL REGULATION. § 514 decisions of this court which have either decided or recognized that the governing body of a city may be authorized to exercise the rate-making function, to ask for a reconsideration of that proposition." § 514. Power to regulate rates not surrendered by implication. — In construing this same expression of the power conferred upon the municipality "to fix and determine" the rate received for the service under a contract entered into by the defendant city for a term of fifty years, the court in the case of Home Tel. & T. Co. V. Los Angeles, 155 Fed. 554, decided in 1892, held that as the intention of the city to abandon its right to regulate the matter by fixing the rate from time to time during the period of the contract did not clearly appear, the municipality was not precluded from doing so by virtue of the contract, for as the court said: "Is it true that, by the provisions of said section of said ordinance, the city of Los Angeles abandoned, for fifty years, its right to reasonably limit plaintiff's charges for telephone service? Can it be said that the abandonment of the power in question has been 'shown by clear and unambiguous language, which will admit of no reasonable construction con- sistent with the reservation of the power'? Certainly there is no express abandonment, and the circum- stances of this case, particularly the long period of fifty years, forbid an implication of that sort. I do not mean to assert that, if a contract unequivocally abandoned a legislative power for fifty years, the dura- tion of the abandonment would itself avoid the con- tract ; but what I do say is that such a long period is a strong, if not conclusive, reason why an abandon- ment should not be implied." A further decision to the eflfect that the power of the municipality to regulate rates is a continuing one, § 515 PUBLIC UTILITIES. 582 and that the right to exercise it at any time can not be surrendered by an agreement except in the case of a contract clearly and expressly so providing, pursuant to legislative authority clearly and unequivocally con- ferring such power upon the municipality and that even then this right of the municipality has sometimes been questioned, is furnished by the case of Los An- geles V. Los Angeles City Water Co., 177 U. S. 558, 44 L. ed. 886, decided in 1900, vv^here the court said: "It is not denied that the city had power to regulate rates. Indeed, it is insisted that it was so constantly its duty that it could not be contracted away. It was not a power, therefore, necessary to be granted by the contract, and the distinction between the proprietary right and the municipal right, made by appellants, would have been idle to observe. To have limited the right of regulation to the city in one capacity, and left it unrestrained in the other, would have been use- less, and such intention can not be attributed to the parties. We think, therefore, the power to regulate rates was an existent power, not granted by the con- tract, but reserved from it, with a single limitation — the limitation that it should not be exercised to reduce rates below what was then charged. Undoubtedly there was a contractual element; it was not, however, in granting the power of regulation, but in the limita- tion upon it." § 515. Rates fixed by contracts not clearly author- ized held declaratory only. — Under the authority con- ferred upon the municipality by the state to make a contract for the service of a municipal public utility to be furnished to itself and to its inhabitants, the municipality has not by virtue of this fact nor by im- plication, authority to fix the rate on making the con- tract to be received for such service during the entire 583 MUNICIPAL REGULATION. §5l6 period covered by the contract, but such rate is only a declaration of what the municipality at the time agreed was a reasonable one. Such a stipulation does not preclude the municipality or the state from raising the question as to the reasonableness of the rate and readjusting it at any time so long as the rate fixed is reasonable. § 516. Strict construction saves right to regulate if rate not expressly covered. — This matter of the con- struction of the statutory enactments authorizing mu- nicipalities to regulate and control the service of mu- nicipal public utilities and their charges is one about which the courts are not agreed, so that different results are reached by the decisions in the different jurisdictions, not only where the statutory enactments are different, but also by a different construction based upon practically the same statutory provisions. There is a series of decisions by the Supreme Court of Illi- nois to the effect that the power of the municipality to regulate the rates is a governmental one which is continuing in its nature and which is not exhausted by a stipulation in its contract executed pursuant to statutory authority conferred upon the municipality to contract for such a service without clearly or expressly stipulating for the power to fix upon a rate for the contract period. These decisions of the Supreme Court of Illinois to the effect that an ordinance granting the necessary consent of the city to the use of its streets by the municipal corporation and contracting for its service for a period of years, although it contained a schedule of rates to be charged, does not bind the city to those rates for the entire contract period, but is at the most a declaration of what constitutes a reasonable rate at the time the ordinance was enacted were sustained §5l6 PUBLIC UTILITIES. 584 by the Supreme Court of the United States on the ground that the nature and the extent of the power delegated to the municipality was uncertain and that as the statutory enactment was ambiguous it should be construed in favor of the public by reserving to the municipality the continued right to regulate the rates and readjust them from time to time as conditions changed, for as the court in the case of Rogers Park Water Co. v. Fergus, 178 111. 571, 53 N. E. 363, which was sustained by the Supreme Court of the United States as reported in 180 U. S. 624, 45 L. ed. 702, said: "We do not think the adoption of the alleged ordi- nance by the village of Rogers Park, and the accept- ance and fulfillment of the conditions thereof by the appellant company, vested it, as with a property right, with the power to demand that the rates named in the ordinance should remain fixed and unchanged for the period in which it was licensed to occupy the streets of the village, or that the ordinance and its acceptance constituted a contract, or that any contract obligations arose by reason thereof. . . . The power possessed by the state to enforce the duty might be properly exercised by establishing a scale of rates and prices to be demanded by the company from the inhabitants of the village, and this power, and that mode of exer- cising it, were delegated by the state to the village by section i, article 10, chapter 24, of our statutes (i Starr & C. Ann. St. 1896, p. 785). The village exer- cised the power by incorporating in the ordinance a scale of prices as being just and reasonable maximum rates to be paid to the company by the consumer of water. This provision of the ordinance had no effect to establish a contract between the appellant company and the village that the individual inhabitants of the village should and would pay such rates for the period of thirty years, or any fixed period of time, but was 585 MUNICIPAL REGULATION. §517 simply a declaration on the part of the village that such rates were reasonable. ... A rate or price reasonable and just when fixed may, in the future, become so unreasonably high that the exaction of such rate or price is but an extortion. The duty of the cor- poration does not, however, change, but remains the same; that is, to exact only reasonable compensation. The power of the state to enforce that duty is not exhausted by its exercise in the first or any subse- quent instance, but is continuous, and may be exerted from time to time, whenever necessary, to prevent extortion by the agency created by the state to serve the public." §517. Right to regulate under reserved right to alter, amend or repeal. — This line of authorities per- mitting the municipality to regulate and readjust rates from time to time after having made a contract for the service of the municipal public utility for a fixed period without authority clearly conferred upon it by the state to fix the rate for the entire period of the contract is based on the right commonly reserved by the state or its agency to alter, amend or repeal its grants of franchise rights, for as the court in the case of Danville v. Danville Water Co., 178 111. 299, 53 N. E. 118, 69 Am. St. 304, decided in 1899, says: "The authority 'to contract for a supply of water for public use for a period not exceeding thirty years, does not necessarily imply that the price of the supply should be fixed for the entire period. ... In section i of article 10 of the city and village act, approved April 10, 1872. in force July i, 1872, it is provided as fol- lows: 'The city council . . . shall have the power to provide for a supply of water ... by the con- struction and regulation of . . . water-works, and to borrow money therefor, and to authorize any per- §5l8 PUBLIC UTILITIES. 586 son or private corporation to construct and maintain the same at such rates as may be fixed by ordinance, and for a period not exceeding thirty years.' . . . The meaning of this language is not that the water- works are to be maintained at such established rate as may be fixed by one ordinance for a period not exceeding thirty years. The clause 'for a period not exceeding thirty years' qualifies the words 'construct and maintain the same,' but does not qualify the words 'at such rates as may be fixed by ordinance.' In other words, the city council may authorize a private cor- poration to construct and maintain water-works for a period not exceeding thirty years, and they may au- thorize a private corporation to construct and maintain the water-works at such rates as may from time to time be fixed by ordinance. The evident meaning of section i is that there was to be reserved to the city council the power to fix the rates by ordinance at such figures as should be fair and reasonable. . . . The price to be paid for water should be left to be determined from time to time, inasmuch as the growth of the city will enable the company to furnish water at much less cost than when the water-works were first established." § 518. Regulation continuing and akin to police power. — The question of the power vested in munici- palities to determine the rate to be charged for the service rendered and of the construction of the stat- utory enactments conferring the power of regulation upon municipalities by the state is a subject upon which the courts are not agreed. Because it is a question of statutory construction as well as of statu- tory expression and because it is important that the regulation of the rates remain continually in the mu- nicipality, the decisions favor a strict construction and 587 MUNICIPAL REGULATION. §518 deny the right of the municipality to preclude itself from the exercise of its right to regulate rates from time to time unless it has clearly done so under ample authority conferred upon it by the state for that pur- pose, for as the court in the case of Knoxville v. Knox- ville Water Co., 107 Tenn. 647, 64 S. W. 1075, 61 L. R. A. 888, decided in 1901, says: "Under the cases we have cited, and others that might be collated, it is, we think, apparent that the authorities are not agreed as to whether the state can by legislative grant em- power a municipality to enter into an irrevocable and perpetual contract with a water company or other private or quasi public corporation for a system of water-works and a supply of water, and whether such company can by legislative grant be removed from the supervision of the police power of the municipality, yet we think there is no question but that, in order to do so, the legislative grant must be unquestionable, and admit of no other construction, but must be plain, positive and unequivocal. If the municipality has no such power under legislative grant, it can make no such contract; nor can it waive its police powers, or refuse to exercise them, when the good of the citizens of the municipality demands. . . . While the rate to be paid for water is not so palpably a regulation within the police supervision of a city as is the purity and supply of the water furnished, yet the rate of charge is a matter which afifects the health, welfare and comfort of the city, since, if rates are unreason- ably high, they will prove a restriction upon the use of water which may seriously impair the health and interfere with the comfort and welfare of the people — especially the poorer classes, who by reason of high prices may be cut off from the benefit of the water partially or altogether. . . . The language of the city charter in the present case is not that the corpo- §5l8 PUBLIC UTILITIES. 588 rate authorities shall have power by ordinance to fix, but to regulate, the price of water to be supplied by- such company, and in the same connection the full police and general powers of the corporation are re- served to it. We are of opinion that the right to regulate rates was not exhausted by an agreement at any particular time upon a schedule of prices, but it is a continuing right, under the terms of the charter, but not to be exercised arbitrarily and unreasonably." In sustaining this decision the Supreme Court of the United States in the case of Knoxville Water Co. V. Knoxville, 189 U. S. 434, 47 L. ed. 887, decided in 1903, by way of construing the right of this municipal public utility, said: "The water company was incor- porated in Tennessee in 1882 to construct water-works in or near Knoxville, with power to contract with the city and inhabitants for the supply of water, and to 'charge such prices for the same as may be agreed upon between said company and said parties.' This incorporation was under a general act which provides as follows: 'And this [act] is in no way to interfere with or impair the police or general powers of the corporate authorities of such city, town or village, and such corporate authorities shall have power by ordinance to regulate the price of water supplied by such company.' . . . 'Said company will supply private consumers with water at a rate not to exceed five cents per 100 gallons,' subject to an immaterial proviso. These are the words relied on by the com- pany. They are assumed to contain an impHed under- taking on the part of the city not to interfere with the company in establishing rates within the contract lim- its. ... In the present case it seems to us impos- sible to suppose that any power to contract which the city may have had was intended to be exercised in such a way as to displace the municipal power ex- 589 MUNICIPAL REGULATION. § 519 pressly reserved or given by the general law under which the water company was created. It would re- quire stronger words than those used here to raise the question whether, under the statutes in force, the city could do it if it tried. The contracts fixing prices authorized by the statute were contracts between the company and its customers, not, as in the case of the railway company, a single contract between the com- pany and the city, and were subject to the power to regulate them given to the city by the same statute." § 519. Liberal construction finds contract binding on rates. — Where, however, a more liberal construc- tion is given of the power conferred upon the munici- pality to regulate the service, a number of jurisdic- tions hold that where the municipal public utility accepts and acts upon an ordinance permitting it to install its plant and furnish its service a contract is entered into which is binding upon both parties with reference to the rates fixed by its terms as well as to the other items of the contract, for as the court in the case of Cleveland v. Cleveland City R. Co., 194 U. S. 517, 48 L. ed. 1102, decided in 1904, says: "The ques- tion for decision, then, is, did the consolidated ordi- nance of February, 1885, and the ordinance thereafter passed and accepted, already referred to, constitute binding contracts in respect to the rates of fare to be thereafter exacted upon the consolidated and extended lines of the complainant? That in the courts of Ohio the acceptance of an ordinance of the character of those just referred to is deemed to create a binding contract is settled. ... In reason, the conclusion that contracts were engendered would seem to result from the fact that the provisions as to rates of fare were fixed in ordinances for a stated time and no reservation was made of a right to alter; that by those § 520 PUBLIC UTILITIES. 59O ordinances existing rights of the corporations were surrendered, benefits were conferred upon the pubHc, and obligations were imposed upon the corporations to continue those benefits during the stipulated time." § 520. Delegated power to fix rates by contract or franchise limited thereby. — Where the authority to regulate the service and fix the rates to be charged for it is conferred on the municipality with a provision that the rates shall be fixed by contract or in the fran- chise, the municipality which makes a contract for such service or grants a franchise permitting the mu- nicipal public utility to install its plant and furnish its service without fixing the rates to be charged, may not thereafter by ordinance regulate the rates, for as the court in the case of Richmond v. Richmond Natural Gas Co., 168 Ind. 82, 79 N. E. 103 1, decided in 1907, says: "Where a franchise to supply gas is granted without restriction as to prices, accepted, and acted upon, cities incorporated under the general law of this state had no authority prior to 1905 by subsequent ordinance or action, to impose additional provisions regulating prices to be charged for gas furnished under the original franchise. . . . The general as- sembly of 1905, in revising the statutes governing cities and towns, conferred upon cities the following among other powers: '(36) To license and regulate the supply, distribution and consumption of artificial and natural gas, electricity, heat and water, and to fix by contract or franchise the prices thereof,' etc. . . . The statute relied upon purports to empower a city of the class to which appellant belongs to fix prices only *by contract or franchise.' When the manner in which a delegated power is to be exercised is pre- scribed, it must be substantially followed. . . . The ordinance under consideration is without any of these 591 MUNICIPAL REGULATION. § 521 characteristics. It neither grants a new right, nor confirms or extends an existing one, but merely seeks to impose special restrictions upon an existing right to the use of the streets and alleys of the city. . . . In the absence of charter authority or other statutory or constitutional provisions, delegating the power in express terms or by necessary implication, it is the rule that a municipal corporation has no power to fix by ordinance the price at which a gas company shall supply its customers. 20 Cyc. 1166, and cases there cited. In this case it appears that the attempted reg- ulation of prices was not done by contract, or in con- nection with the granting or acceptance of a franchise, and the legislature has not delegated to appellant, whatever authority to regulate prices of gas it may possess in the premises, to be exercised in any other manner." § 521. Contract giving consent and fixing rates valid. — Many cases sustain the right of the city to stipulate, as a condition of the granting of its consent to the municipal public utility instaling its plant and rendering its service, where such consent is made nec- essary by statutory provisions, a specific rate which may not be exceeded for the service to be furnished by the municipal public utility, which after accepting the grant of the consent by the city on such condition is thereby precluded from charging rates in excess of those so fixed, for as the court in the case of Boerth v. Detroit City Gas Co., 152 Mich. 654, 116 N. W. 628, 18 L. R. A. (N. S.) 1197, decided in 1908, says: "The city may refuse to grant that consent. It is clear, too, that it may attach conditions to its consent. . . . . There is no doubt that the municipality may determine for what length of time a gas company may use its streets for carrying gas. It had. there- § 522 PUBLIC UTILITIES. 592 fore, authority — an authority exercised in this case — to determine that the gas company should use the streets for a period of thirty years for the purpose of supplying its inhabitants with gas. ... It may be said then, that, in order to safeguard the rights of its inhabitants who use gas, it is not only reasonable that the city should have this power to fix rates, but is it highly expedient — indeed, it is necessary — that it should possess that power. . . . The power to pre- scribe rates by contract — and that is the power which was exercised in this case — is a very different power from the legislative power regulating rates." § 522. Fixing maximum rates permits regulation as to reasonableness. — While the city may thus protect itself from exorbitant rates by fixing the maximum to be charged in the franchise granting its consent to the municipal public utility, decisions to this effect have held that this does not preclude a determination as to the reasonableness of the rate fixed and its reduction in case it is unreasonable and excessive, for as the court in the case of Moberly v. Richmond Tel. Co., 31 Ky. L. 783, 103 S. W. 714, decided in 1907, says: "The city may annex any lawful condition to the exercise of the franchise, which becomes a part of the contract under which it is thenceforth used. And we think it was competent for the city to provide, as a condition of the franchise, that the rates to citizens should not exceed the schedule fixed in the ordinance, or any future ordinance." Such provisions are regarded as precautions in the interest of the public and only as a means for securing adequate service at reasonable rates, which right the courts agree should always be available, for as the court in the case of Public Service Corp. v. American Lighting Co., 67 N. J. Eq. 122, 57 Atl. 482, decided 593 MUNICIPAL REGULATION. § 523 in 1904, says: "The fundamental and cardinal prin- ciple being that all corporations enjoying a franchise of this character, and the complete or partial monop- oly resulting therefrom, are bound to serve the public upon reasonable terms and upon reasonable rates, so that neither the public is at the mercy of the corpora- tions enjoying the franchise nor are the corporations at the mercy of the public. Their dealings must all be subject to the test of reasonableness on both sides." § 523. Fixing rates not favored — Tends to create monopoly. — The legal principle denying the munici- pality the power to preclude itself from regulating the rate to be charged for municipal public utility service from time to time by a contract to that effect in the absence of clear authority conferred upon it by the state, and the attitude of the courts in construing strictly the grant of such authority and the provisions of such a contract with reference to the question of rates has been the one generally accepted by the courts for many years, for as the court in the case of Illinois Trust & Sav. Bank v. Arkansas City Water Co., 6y Fed. 196, decided in 1895, says: "The right to furnish water for public and domestic use within a city is a public service, and of such high consequence to the public that it should at all times remain open to the control of the city council for the benefit of the public. The contract here insisted upon would place the mat- ter beyond control of the council for a long period of time. This is in the nature of an attempt to create a monopoly — a power which the city council never possesses, unless it is delegated in clear, unmistakable terms." 38— Pub. ut. CHAPTER XXVL REASONABLE REGULATIONS. Section. 524. Municipal control and rental charges. 525. Concentration of service lines and poles. 526. Police regulations for underground conduits. 527. Regulation of installation and supply of equipment. 528. Meter and equipment provided with service. 529. Expense of meter and connections met by customer, not by municipality. 530. Franchise provisions controlling if express and consistent. 531. Meter as a measure prevents waste. 532. Meter rental included in price fixed for service. 533. Customer entitled to have service accurately measured. 534. Municipality may tax meter rental to customer. 535. Customers rather than taxpayers pay meter rentals. 536. Connections with premises included in rate charge. 537. Service connections integral part of equipment. 538. Connections at expense of customer under municipal owner- ship. 539. Liability for meter, etc., determined by provisions and con- struction of franchise. 540. Special assesment of abutting property — Unearned increment. 541. Municipality obliged to preserve streets for travel. 542. Police power to regulate use of street. 543. Party line telephones may be prohibited. 544. Unreasonable to require service for all. 545. Municipality requiring conduits limited to reasonable neces- sity. § 524. Municipal control and rental charges. — In the exercise of its right to make reasonable regula- tions for the municipal public utility, the municipality is permitted to control the manner in which the neces- sary equipment of such a system is installed so that it will not unreasonably obstruct the streets and other 594 595 REASONABLE REGULATIONS. § 525 public places of the municipality nor interfere with the operation of its fire department nor obstruct the en- joyment by its inhabitants of their right to light, air and access to their places of business or residences any more than is necessary for the proper installation of the particular system of any municipal public utility. In the exercise of its police power and of its control over the streets and other public places as well as of its statutory rights conferred upon it by the state or expressly reserved in its ordinances as conditions upon which it gave its consent to the use of its streets by the municipal public utility, the municipal corporation has the power to fix the location and control the man- ner of the installation by the municipal public utility of its equipment and to require the payment of a rea- sonable charge in the nature of a rental for the exclu- sive use of those parts of the street occupied by its poles, wires and other equipment or the payment of a special tax in the nature of a license fee for the erec- tion and maintenance throughout the streets or the municipality of the necessary equipment to render municipal public utility service. § 525. Concentration of service lines and poles. — The municipality may also require that its own wires and other equipment necessary to the operation of its fire, police and other departments be accommodated by the poles and conduits belonging to the equipment of the municipal public utility as a condition of the granting to it of the franchise rights permitting it to maintain and operate its system and furnish its service. Indeed, the municipality may require that the same equipment of poles and conduits be used by all similar municipal public utilities on reasonable compensation being paid for them so far as their use by another company does not actually interfere with or interrupt § 526 PUBLIC UTILITIES. 596 the service rendered by the municipal public utility which installed the equipment for its own use. § 526. Police regulations for underground con- duits. — Such a requirement comes within the proper exercise of the police power in preventing the useless duplication of equipment and the undue interference with the operation of the municipal fire department and the unnecessary obstruction of the view and inter- ference with the right to light and access of the indi- vidual citizen and property owner, and for the same reason the municipality may require the municipal public utility to remove its overhead wires and place them in conduits beneath the surface. As the duty devolves on the municipality of regulating and con- trolling the streets in trust for the public, it can not devote them to any other inconsistent use, such as the erection in them of municipal buildings or other prop- erty of the municipality. § 527. Regulation of installation and supply of equipment. — In the exercise of its police power and in the performance of its duty to maintain the streets for the use of the public as a means of transportation and communication, for which they were originally dedicated and primarily intended, the municipality may require the municipal public utility instaling its tracks and other equipment necessary to operate a street car system to lay but one track in certain por- tions of a street, although the franchise originally per- mitted the laying of a double track where its terms were modified to this effect within a reasonable time after the franchise was adopted. The municipality may also provide that the municipal public utility in the operation of its street car system may not attempt to carry more than a certain number of passengers in 597 REASONABLE REGULATIONS. § 528 its cars and that sufficient equipment be furnished for the accommodation of the public as a condition of the fundamental requirement that the public be served adequately as well as at a reasonable rate. § 528. Meter and equipment provided with service. — Where the municipal public utility is required to furnish its service at a fixed rate, a number of deci- sions have held that it must provide the necessary meters or other equipment at its own expense for the purpose of measuring the service rendered, although other cases, especially where the municipality is fur- nishing the municipal public utility service, have held that the customer may be required to pay the expense of putting in the service pipes and a reasonable rental for the use of the meter which not only measures the service rendered, but tends to prevent the extravagant use or needless waste of the service. As the meter is the only best known method of determining the amount of service the customer receives, its use redounds to his own advantage over the payment of a flat rate for the service by which the careful and conservative cus- tomer is obliged to pay the same as the extravagant and careless one. § 529. Expense of meter and connections met by customer, not by municipality. — In case the munici- pality furnishes the municipal public utility service the meter rental as well as the expense of instaling the service, and even the main pipes, is perhaps more equitably imposed upon the customer or the abutting property owner who receives the service or whose property is enhanced by the fact that it is available rather than upon the taxpayer or all the inhabitants, some of whom do not receive the service nor derive § 530 PUBLIC UTILITIES. 598 any benefit from it as abutting property owners, except that as citizens they are at least indirectly benefited from the public water supply and the services of the fire department as well as from the fact that the streets and public places of the city are lighted as a form of police protection. Although each inhabitant generally has the right to contract directly for munici- pal public utility service, this does not require that the municipal public utility shall install as many individual service pipes for any structure as there may be rooms or tenants occupying but one or two rooms, because the expense of doing so would make the requirement an unreasonable one in view of the alternative which is equally available that single service be furnished the structure and its owner distribute the expense among his tenants. § 530. Franchise provisions controlling if express and consistent. — Whether the expense of connecting the premises with the street main can reasonably be imposed upon the consumer is determined by the pro- visions of the franchise or the terms of the contract of the municipal public utility providing the service, although where this item is not expressly stipulated for and the municipal public utility undertakes to ren- der service at a fixed rate it is generally held liable for the cost of instaling all the equipment necessary to furnish the service within that rate, including the service pipes, meters and the Hke. Where, however, the municipality furnishes the municipal public utility service or the ordinance specifies that such expenses as meters and connecting the main with the premises shall be borne by the customer, he is required to in- stall the service connections and such equipment and keep them in repair at his own expense, unless this is 599 REASONABLE REGULATIONS. § 53a contrary to the contract or inconsistent with statutory- regulations.^ 1 ALABAMA.— Smith v. Birmingham Waterworks Co., 104 Ala. 315, 16 So. 123. CALIFORNIA.— Sheward v. Citizens' Water Co., 90 Cal. 635; Smith V. Capital Gas Co., 132 Cal. 209; Spring Valley Water Works V. San Francisco, 82 Cal. 286. FEDERAL.— Memphis v. Postal Tel. & Cable Co., 164 Fed. 600; Minneapolis General E. Co. v. Minneapolis, 194 Fed. 215; Minneapolis St. R. Co. V. Minneapolis, 189 Fed. 445; Pocatello v. Murry, 20& Fed. 72. IDAHO.— Bothwell v. Consumers' Co., 13 Idaho 568, 92 Pac. 533, 24 L. R. A. (N. S.) 485. ILLINOIS. — Anderson v. Berwyn, 135 111. App. 8; Palmer v. Dan- ville, 154 111. 156, 38 N. E. 1067; Springfield v. Postal Tel-Cable Co., 253 111. 346, 97 N. E. 672; Wagner v. Rock Island, 146 111. 139, 34 N. E. 545. 21 L. R. A. 519. INDIANA.— Indiana Natural & Illuminating Gas Co. v. State ex rel. Ball, 158 Ind. 516, 63 N. E. 220, 57 L. R. A. 761; Johnson v. State, 113 Ind. 143. 15 N. E. 215. IOWA.— Des Moines St. R. Co. v. Des Moines Broad-Guage St. R. Co., 73 Iowa 513, 33 N. W. 610; Farmers' Tel. Co. v. Washta, — Iowa — , 133 N. W. 361. KANSAS.— Cooper v. Goodland, 80 Kans. 121, 102 Pac. 244, 23 L. R. A. (N. S.) 410. KENTUCKY.— Capital Gas & E. L. Co. v. Gaines, 20 Ky. Law Rep. 1464, 49 S. W. 462; Louisville v. Louisville Home Tel. Co., 149 Ky. 234, 148 S. W. 13; Louisville Gas Co. v. Dulaney, 100 Ky. 405, 18 Ky. L. 849, 38 S. W. 703, 36 L. R. A. 125. MAINE.— Public Works Co. v. Old Town, 102 Maine 306; Rob- bins V. Bangor R. & E. Co., 100 Maine 496. MARYLAND.— Blondell v. Consolidated Gas Co., 89 Md. 732. MASSACHUSETTS.— Ladd v. Boston, 170 Mass. 322; Postal Tel. Cable Co. v. Chicopee, 207 Mass. 341, 93 N. E. 927; Shaw Stocking Co. v. Lowell, 199 Mass. 118, 85 N. E. 90, 18 L. R. A. (N. S.) 746. MICHIGAN.— Detroit v. Ft. W^ayne & B. I. R. Co., 95 Mich. 456. 54 N. W. 958, 20 L. R. A. 79; Detroit Gas Co. v. Moreton Truck & Storage Co., Ill Mich. 401; Goebel v. Grosse Pointe Waterworks, 126 Mich. 307; Kelsey v. Board of Fire & Water Comrs., 113 Mich. 215, 71 N. W. 589, 37 L. R. A. 675; Mclllhinney v. Trenton, 148 Mich. 380, 111 N. W. 1083; Monroe v. Detroit, M. & T. Short Line R. Co., 143 Mich. 315, 106 N. W. 704. MINNESOTA.— Northwestern Tel. Exch. Co. v. Minneapolis, 81 Minn. 140, S3 N. W. 527, 86 N. W. 69, 53 L. R. A. 175; Powell v. Duluth, 91 Minn. 53; State ex rel. City of St. Paul v. St. Paul City Ry. Co. (Minn.), 142 N. W. 136. § 53 1 PUBLIC UTILITIES. 6oO § 531. Meter as a measure prevents waste. — The municipal public utility being engaged in business of a public nature in return for the special privileges granted it is bound to serve any member of the public who makes proper application for service in accord- MISSOURI.— Fisher v. St. Joseph Water Co., 151 Mo. 530, 132 S. W. 288; Laclede Gas Light Co. v. Gas Consumers' Assn., 127 Mo. App. 442; St. Louis Brewing Assn. v. St. Louis, 140 Mo. 419, 37 S. W. 525, 41 S. W. 911; Southern Iron Co. v. Laclede Power Co., 109 Mo. App. 353; State v. Sedalia Gas Light Co., 34 Mo. App. 501; State ex rel. St. Louis Underground Service Co. v. Murphy, 134 Mo. 548, 31 S. W. 784, 34 L. R. A. 369, 56 Am. St. 515; Joplin v. Wheeler (Mo.), 158 S. W. 924. NEBRASKA.— Hoover v. Deffenbaugh, 83 Nebr. 476, 119 N. W. 1130. NEW JERSEY.— Bridgeton v. Bridgeton & M. Traction Co., 62 N. J. L. 592, 43 Atl. 715, 45 L. R. A. 837; Doughten v. Camden, 72 N. J. L. 451, 63 Atl. 170, 3 L. R. A. (N. S.) 817. NEW YORK.— Alvord v. Syracuse, 163 N. Y. 158, 57 N. E. 310; Buffalo V. Buffalo Gas Co., 80 N. Y. S. 1093, 81 App. Div. 505; For- tescue V. Kings County Lighting Co., 128 App. Div. 826; New York & Q. E. L. & P. Co. V. Long Island Mach. &c.. Const. Co., 123 App. Div. 552; People v. Barnard, 110 N. Y. 548, 18 N. E. 354; Swanberg V. New York City, 123 App. Div. 774; People ex rel. New York Elec- tric lines Co. v. Ellison, 188 N. Y. 523, 81 N. E. 447. NEW MEXICO.— Colorado Tel. Co. v. Fields, 15 N. Mex. 431, 110 Pac. 571, 30 L. R. A. (N. S.) 1088. NORTH CAROLINA.— Griffin v. Goldsboro Water Co., 122 N. Car. 206, 30 S. E. 319, 41 L. R. A. 240. NORTH DAKOTA.— Jackson v. Ellendale, 4 N. Dak. 478, 61 N. W. 1030. OHIO.— State v. Columbus Gas Light & Coke Co., 34 Ohio St. 573. SOUTH CAROLINA.— Charleston L. & P. Co. v. Lloyd Laundry Co., 81 S. Car. 475. TEXAS.— International Water Co. v. El Paso, 51 Tex. Civ. App. 321, 112 S. W. 816. UNITED STATES.— Baltimore v. Baltimore Trust & G. Co., 166 U. S. 673, 41 L. ed. 1160; Postal Tel-Cable Co. v. Taylor, 192 U. S. 64, 48 L. ed. 342; St. Louis v. Western Union Tel. Co., 149 U. S. 465, 37 L. ed. 810; Western Union Tel. Co. v. Richmond, 224 U. S. 160, 56 L. ed. 710; Grand Trunk W. R. Co. v. South Bend, 227 U. S. 544, 57 L. ed. — . VIRGINIA.— Exchange & B. Co. v. Roanoke Gas & Water Co., 90 Va. 83; Roanoke Gas Co. v. Roanoke, 88 Va. 810, 14 S. E. 665. WASHINGTON.— Cleveland v. Maiden Waterworks Co., 69 6oi REASONABLE REGULATIONS. § 53^ ance with reasonable rules and regulations. The meter is the most efficient method yet devised for accurately measuring the quantity of such municipal public utility service as gas, water and electricity. The meter also prevents the extravagant use or need- less waste of such service which frequently occurs where the flat rate is the method employed for deter- mining the amount due for the service. Because the meter is a useful, if not indeed an essential part of the municipal public utility equipment, the company may be required to furnish it at its own expense, and where this is expressly stipulated or where a maxi- mum charge for the service is fixed, the courts have held that the company may not collect a rental for the use of its meters in addition to the maximum rate allowed it for the service, for as the court in the case of Buffalo V. Buffalo Gas Co., 80 N. Y. S. 1093, de- cided in 1903, says: "Not only is the consumer en- titled to be protected against imposition by some safe method of measuring the quantity which he uses, but it is essential and necessary for the gas company itself that such measurement and test should be accu- rate. Having in mind these facts, the law in question in effect provides that the consumer shall be supplied with a meter, and that the same shall not only be furnished by the company without charge, but that it shall be inspected by officials designated for that purpose. The object of these provisions is very plain. They contemplate that the gas company desiring to Wash. 541, 125 Pac. 769; Smith v. Seattle, 25 Wash. 300, 165 Pac. 612; State ex rel. Hallett v. Seattle Lighting Co., 60 Wash. 81, 110 Pac. 799. 30 L. R. A. (N. S.) 492. WEST VIRGINIA.— State ex rel. McClaugherty v. Bluefleld, W. & I. Co., 67 W. Va. 285, 68 S. E. 28, 32 L. R. A. (N. S.) 229. WISCONSIN.— Gleason v. Waukesha County, 103 Wis. 225, 79 N. W. 249; State ex rel. Hallauer v. Gosnell, 116 Wis. 606. 93 N. W. 542, 61 L. R. A. 33; Washburn Waterworks Co. v. Washburn, 129 Wis. 73, 108 N. W. 194. § 532 PUBLIC UTILITIES. 602 engage in such business shall not take advantage of its customers, either by supplying an untrue meter or by making them pay for the ordinary method of determining what has been consumed. We think such provisions are clearly within the power conferred upon the legislature to enact those laws for the public and general welfare which are ordinarily known as police regulations." § 532. Meter rental included in price fixed for service. — The company may not collect a rental for the use of its meters where it is charging the maxi- mum rate specified for its service, because if it did so it would exceed the amount allowed it and also be- cause it is its duty in connection with providing its service to measure the amount of the service furnished and render a statement of the account as the basis of payment for the customer, for as the court in the case of Louisville Gas Co. v. Dulaney, 100 Ky. 405, 18 Ky. Law R. 849, 38 S. W. 703, 36 L. R. A. 125, de- cided in 1897, says: "While the consumer may cause it to be inspected, and may test the accuracy of its work, his concern is only to ascertain and pay for what gas he has consumed, and he can not be called on to pay for the apparatus used in its measurement, any more than he can be made to pay for the machinery used in its manufacture. He is required to pay the legal rate for the quantity consumed, and this quantity must be ascertained by the company by some correct method. The company can only charge for the quan- tity it actually furnishes, and to ascertain what it fur- nishes it must measure it. How, the consumer does not care, so it is measured correctly. The appellees therefore are entitled to have their gas furnished to them already measured, and for it, so measured, they can be made to pay at the price of $1.35 per 1,000 feet, and no more. If the price of gas were unre- 603 REASONABLE REGULATIONS. § 533 stricted in the organic law of the corporation, the rule charging a higher price to small consumers might be upheld." § 533- Customer entitled to have service accurate- ly measured. — The courts will enjoin the municipal public utility from discontinuing its service on the refusal of the customer to pay an arbitrary amount fixed by the municipal public utility without accurately determining the amount of the service by the use of the meter, for as the court in the case of Smith v. Birmingham Waterworks Co., 104 Ala. 315, 16 So. 123, decided in 1894, says: "In all cases where the defendant has the right to charge for water by meas- urement, and demand pay for water furnished, it is incumbent on the respondent to furnish meters. There is no authority given to the respondent to refuse to furnish meters, and fix an arbitrary price, where water is to be paid for by measurement, and, unless payment is made according to such arbitrary rate, to cut off the supply of water. The damage in such a case would be irreparable, and a court of equity would not hesitate to interfere by injunction." § 534. Municipality may tax meter rental to cus- tomer. — ^^■here, however, the municipality itself is furnishing the municipal public utility service, it may provide that the expense of the meter shall be paid by the customer, where this is not in conflict with any regulation by the state, for as the court in the case of Shaw Stocking Co. v. Lowell, 199 Mass. 118, 85 N. E. 90. 18 L. R. A. (N. S.) 746. decided in 1908, says: "The principal object of the defendant's water board in requiring fire-service pipes to be metered is to prevent the surreptitious or careless withdrawal of water through such pipes for other purposes than the extinguishment of fires; another object is to procure § 535 PUBLIC UTILITIES. 604 the measurement by meter of all water consumed for any purpose in order to check wastage and to require each taker to pay for the exact quantity of water fur- nished to him. The requirement is well adapted to aid in accomplishing these objects; and this is none the less so, although its operation sometimes may be circumvented by some fraudulent device. The regu- lation must be regarded as reasonable, unless some of the plaintiff's specific objections to it can be sus- tained." § 535- Customers rather than taxpayers pay meter rentals. — It has been decided that the customer is the proper party to pay for the meter where the munici- pality furnishes the service for the further reason that in case the municipality furnished the meters, the expense of doing so would be met by all the tax- payers, some of whom would not be consumers of the service, for as the court in the case of Cooper v. Good- land, 80 Kans. 121, 102 Pac. 244, 23 L. R. A. (N. S.) 410, decided in 1909, says : "It is evident that the only fair basis of fixing the amount which the individual customer should contribute for the benefit individually received is by measuring the water he gets. The water meter is the instrument for this purpose, and the question is whether it is reasonable to require each consumer of water to pay for his individual meter, instead of all the taxpayers of the city paying for all the meters used. As is commonly the case, it may be in Goodland that some of the taxpayers of the city are not so located that they can, and they do not, in fact, use water from the public water-works. If this be true, it seems very reasonable that they should be relieved of any contribution to pay for the meters of those who do use the water, and very rea- sonable that the consumers of water should pay for 605 REASONABLE REGULATIONS. § 536 the meters of which they alone, as individuals, get the benefit." § 536. Connections with premises included in rate charge. — On the theory that the duty of furnishing its service at not to exceed a fixed rate, includes the expense necessary completely to furnish service, the courts have held that in the absence of any express stipulation on the point, the expense of connecting the premises of the customer with the municipal pub- lic utility system must be borne by the company rather than by the customer, for as the court in the case of International Water Co. v. El Paso, 51 Tex. Civ. App. 321, 112 S. W. 816, decided in 1908, says: "The contract nowhere provides that the consumer shall pay for such work, but the only basis for any charge to the consumer is found in the rate fixed by said pro- vision. We think the failure to provide that the con- sumer should pay said rates, and also the cost of making the connection with his property, rather indi; cates that he was not to bear the cost of the latter. However, if said provision be taken as indicating by inference that the consumer was to bear such cost, the contract in other respects is repugnant to giving it that construction. Primarily, the duty to furnish water to property owners on streets containing mains carried with it the duty to do and perform what was necessary to be done to place the company in position to furnish the property with water. It could not do this without connection to the property lines." § 537- Service connections integral part of equip- ment. — The municipal public utility should install the necessary service connections at its own expense be- cause it is a part of its equipment and because it only has the right to the use of the streets and the neces- § 53^ PUBLIC UTILITIES. 6o6 sary control over its equipment to make the connec- tions, for as the court in the case of Colorado Tel. Co. V. Fields, 15 N. Mex. 431, no Pac. 571, 30 L. R. A. (N. S.) 1088, decided in 1910, says: "Appellant seems to justify the charges for installation and re- moval on the ground that they are made in pursuance of a reasonable regulation on their part. We can not understand, how^ever, that a regulation can under any circumstances be adopted by a public service corpora- tion which v^ill result in increasing a rental charge above what has been fixed by contract as a maximum charge. This was attempted in Johnson v. State, 113 Ind. 143, 15 N. E. 215, and it was held to be invalid. And the obligation to furnish telephone service at not to exceed a specified rental charge certainly must in- clude the installation of a usable appliance connected with a system." § 538. Connections at expense of customer under municipal ownership. — Where the service is being ren- dered by the municipality, however, as in the case of the installation of the meter the expense of instal- ing and maintaining the service pipe or other equip- ment to connect the premises with the municipal pub- lic utility system may be imposed upon the customer as a reasonable regulation which has the effect of re- ducing the investment in the municipal public utility plant and of permitting a lower rate to be charged for its system because of such reduction in the investment and in the expense of maintenance and operation, for as the court in Cleveland v. Maiden Waterworks Co., 69 Wash. 541, 125 Pac. 769, decided August 20, 1912, says: "If the company only lays its mains in the streets, it will, as a matter of course, have less money invested than if it carries its pipes to the property line of each individual consumer, and will be com- 607 REASONABLE REGULATIONS. § 539 pelled to charge less in the former case than in the latter; and, if there be no contract or statutory or municipal regulation in the way, a regulation requir- ing the property owner to defray the expense of pip- ing and conducting the water from the main to his property line, and in addition to pay a reasonable monthly charge for the use of the water, would not seem unreasonable, provided the two charges com- bined be but a reasonable charge for the services ren- dered. But this case is controlled by the franchise ordinance, which requires the company to furnish water to users and consumers at certain fixed rates; and we are of opinion that it is not so furnished, within the meaning of the ordinance, unless it is deliv- ered to the consumer at his property line." § 539. Liability for meter, etc., determined by pro- visions and construction of franchise. — The determi- nation as to which party shall bear these expenses is largely a question of the construction of the ordinance or franchise provision, and because it is a matter of construction and the language used in different cases varies, the cases do not agree in requiring the com- pany or the customer to bear the expense, each of whom derives special benefit, for as the court in the case of State ex rel. Hallauer v. Gosnell, ii6 Wis. 606, 93 N. W. 542, 61 L. R. A. 33, decided in 1903, says: "It is a matter of common knowledge that the use of meters has a double purpose, and that the dominant one, as regards the party furnishing the opportunity to take water, is to prevent useless consumption there- of. Secondary to that, and more for the benefit of the consumer than the party responsible for keeping up an adequate supply of water under proper pressure, is the measurement of the water. The consumer is burdened with the expense of providing a meter and § 540 PUBLIC UTILITIES. 6o8 keeping it in repair, but has the countervailing advan- tage, by the exercise of prudence in the use of the water, of paying only for the amount actually taken from the public supply, which, in most cases, by rea- sonable attention, can be made much less than what he would be required to pay by the schedule of rates where meters are not used. . . . The whole scheme of the charter is that the consumer shall bear all of the expense necessary to enable him to take water from the public supply. The service pipe, laid in the street from its connection with the water main to the curb stop, under the scheme of the charter, is re- quired to be put in by the consumer or the owner of the property to be served." § 540. Special assessment of abutting property — Unearned increment. — Some of the courts have per- mitted the expense of instaling the necessary equip- ment of municipal public utilities to be placed upon the abutting property owner as a special tax for the increased value thereby given the land. Indeed, the doctrine known as the unearned increment theory of taxation, whereby land is required to repay in part at least the benefits received by it because of such improvements, has been logically and forcefully ap- plied, for as the court in the case of Gleason v. Wau- kesha County, 103 Wis. 225, 79 N. W. 249, decided in 1899, says: "It is generally considered that prop- erty fronting on a street is increased in value by the laying of water, gas and sewer pipes, at least to the extent of the actual cost thereof, and municipal regu- lations are largely based on that theory, and are uni- versally sustained by the courts so far as the burden imposed upon abutting property does not substantially exceed the benefits thereto. Such improvements, and the incidental duties in regard to them, public and 6og REASONABLE REGULATIONS. § 54I private, are classed with sidewalks and pavements. The law is too well settled on this subject to warrant any extended discussion of it here." § 541. Municipality obliged to preserve streets for travel. — The nature of the tenure of the municipality in its streets and of its duty to maintain them free of obstructions for transportation and communication of the public is well stated by the court in the case of Mclllhinney v. Trenton, 148 Mich. 380, iii N. W. 1083, decided in 1907, as follows: "Municipal cor- porations, notwithstanding their broad and compre- hensive powers have no right, unless authorized by the legislature, to alienate their streets or devote them to the uses inconsistent with the rights of the general public and the abutting landowners. . . . The municipality holds the streets and power to regulate and control them in trust for the public, and can not put them to any use inconsistent with street purposes. Thus cities have no right to use their streets for the erection of municipal buildings or works, and it has been held that placing of a standpipe in a public street, the fee of which was in the municipality, was an unlawful use of the street." § 542. Police power to regulate use of street. — The extent of the police power as authority for the municipality in changing the grade or otherwise im- proving its streets in the interest of the public to require municipal public utilities to remove or relocate their equipment at their own expense is indicated in the decision of Roanoke Gas Co. v. Roanoke, 88 Va. 810, 14 S. E. 665, decided in 1892, where the court says: "Thus, in express terms, the legislature con- ferred upon the corporate authorities of the city of Roanoke the most ample powers to grade and other- 39— Pub. ut. § 543 PUBLIC UTILITIES. 6lO wise improve its streets, from time to time, as in its judgment and discretion was required for the safety and convenience of the public. The powers thus dele- gated are continuing and inalienable. It is therefore undeniable that, though a city may have agreed for a valuable consideration to allow a company to lay gas or water pipes in its streets, yet if, in the exercise of its authority to lower the grade of and to remove obstructions from its streets, the pipes should become exposed, so as to obstruct the public in the safe and convenient passage along them, the municipal author- ities may of right either require such company to remove, or they, by their servants, may remove, them as obstructions and nuisances." § 543. Party line telephones may be prohibited. — ^That a condition of the franchise prohibiting party line telephone service is valid, and a reasonable reg- ulation is indicated by the case of Louisville v. Louis- ville Home Tel. Co., 149 Ky. 234, 148 S. W. 13, decided June 21, 1912, where the court says: "In the instant case the language of the ordinance, under which ap- pellee acquired its franchise, expressly declares in plain, unambiguous terms that 'there shall be no party lines constructed or maintained by the owner or com- pany operating such telephone system or plant.' . . . The condition is therefore a part of its contract with the city; and if the city insists upon its compliance with that condition appellee can be compelled by the courts to do so, even if the result should be the loss to it of the profits it has been accustomed to realize from its business." § 544. Unreasonable to require service for all. — That an ordinance requiring every municipal public utility to furnish electrical service to any citizen within f 6ll REASONABLE REGULATIONS. §545 the city on demand, regardless of his location, is un- reasonable, is the effect of the decision in Minneapolis General E. Co. v. Minneapolis, 194 Fed. 215, decided in 191 1, for as the court says: "There is nothing in that section of the ordinance or in any other part of the ordinance, which limits the operation of the first sec- tion to those parts of the city to which the conduits or lines of the company are now extended. It appears that there are large districts in the city where these conduits do not reach, and that they are sparsely populated districts. If that section is to be given its plain meaning, it indicates that any person in the extreme borders of the city can make a demand upon the company for installation of its service, although he may be miles from any conduit or line. It would then be its duty to obtain an order from the city coun- cil to extend its lines to that section, and the com- pany would be compelled to comply with this demand under the penalty provided by the ordinance." § 545. Municipality requiring conduits limited to reasonable necessity. — The limitation of reasonable- ness placed on the right of the municipality to exercise its police power in the regulation of its municipal public utilities is well illustrated in the case of North- western Tel. Exch. Co. v. Minneapolis, 81 ]\Iinn. 140, 83 N. W. 527, 86 N. W. 69, 53 L. R. A. 175, decided in 1900, where the court refused to sustain the re- quirement of the municipality that all telephone wires be placed underground in conduits, for this was un- necessary and an unreasonable requirement in the sparsely settled suburban districts of the city. As the court expressed it : "The addition of ten times the area through which underground conduits must be constructed at an enormous additional expense, with- out necessity, is violative of the contract entered into § 545 PUBLIC UTILITIES. 6l2 between the city and the plaintiff in the ordinance under which the system was estabHshed. The require- ments imposed by the later ordinance upon the com- pany to build such conduits through ungraded streets in suburban parts of the city and in the open country, is clearly, upon its face, unreasonable, and the claim to exercise such right on the part of the common council of the city at their 'will and mere motion' can not be sustained in the reasonable exercise of the police power, or upon any theory that is consistent with the acquired and vested rights which the plaintiff enjoys under the constitution and the laws. . . . In a proper case, where the city exercises its power of control in the regulation of the use of the streets by the plaintiff, based upon necessity and the interests of the public, that power will be sustained. Beyond that limit it can not go. ... A city has the right to enact reasonable ordinances, and to enforce them; but it is the conservator, not the autocrat, of the police power. . . . It is not to be doubted that the city council has the plenary power to extend the sub- surface district wherever, in the exercise of a fair dis- cretion, it decides that public interests require it to be done." CHAPTER XXVII. REGULATIONS FOR RENDERING TELE- PHONE SERVICE. Sectiox. 546. Facts peculiar to telephone service. 547. Competition extravagant and ineffective regulation. 548. Expense of duplication carried by customer and indefensible. 549. Competition in telephone service peculiarly undesirable. 550. Efficient public regulation of telephone especially necessary. 551. Requirements for physical connection of telephone plants. 552. Contracts restricting service in restraint of trade. 553. Contract for connected or through service. 554. Physical connection only by contract or state requirement. 555. Cost and value of telephone service with increase of sub- scribers. 556. Classification of telephone service. 557. Physical connection by constitutional provision. 558. Statutory and constitutional requirements upheld. 559. Physical connection by contract available to all alike. 560. Through telephone service peculiarly necessary. 561. Undertaking to furnish connected service becomes general. 562. Holding out consolidated service establishes it permanently. 563. Exclusive contract for through service upheld from necessity. 564. Necessity for exclusive service question of fact. 565. Common-law and statutory regulations distinguished. 566. Public and private business distinguished. 567. Necessity for state regulation to insure public complete service. 568. Service of common carrier and telephone distinguished. 569. Doctrine of increasing cost of service peculiar to telephone. 570. Value of service increases with its amount. 571. No discrimination in rates nor limitation of service. § 546. Facts peculiar to telephone service. — The furnishing of telephone service may be distinguished from providing that of any other municipal public utility, and by virtue of this fact it is governed by laws, some' of which are peculiar to itself. A cus- 613 § 547 PUBLIC UTILITIES. 614 tomer of a municipal public utility providing water, gas, light, heat or power may as a general rule be furnished with adequate and complete service by the particular municipal public utility with which he con- tracts, although there may be a duplication of such service available by the existence of another similar municipal public utility rendering the same kind of service alongside and parallel with the competing company with which the particular customer has con- tracted for his service. In the case of the municipal public utility furnishing telephone service, however, in a field where a competing company is also provid- ing such service, neither company alone and inde- pendent of the other can furnish adequate or complete service unless, which practically never occurs, both companies have identically the same list of customers, except where the competing companies make physical connection of their equipment by the use of a common switchboard, which gives and receives messages from all customers of either company. § 547. Competition extravagant and ineffective regulation. — The universal objection to competition of municipal public utility systems is the economic one of the unnecessary duplication of the investment and the expense of maintenance and operation of two parallel systems where one could render adequate service at practically one-half the cost of installation, mainte- nance and even of operation in at least some cases where the cost of the material is only nominal; as for example, the furnishing of a water supply, where there is practically an unlimited free source of supply avail- able. Nor is this economic objection overcome or even met by the legal theory which until recently pre- vailed as the sole controlling reason for the supposed advantages arising from competitive conditions as the 6l5 TELEPHONE SERVICE. § 548 proper means of regulating the service rendered or the rate charged for it, for it is now very generally- recognized that in case of municipal public utilities which are natural monopolies, competition is at once an expensive and absolutely ineffective ultimate method of regulating either the rates or the service of the modern municipal public utility. § 548. Expense of duplication carried by customer and indefensible. — Indeed, as the rates received from the service rendered must carry the investment and meet the expense of furnishing the service, it inevita- bly follows that in case there is a duplication of mu- nicipal public utilities rendering similar service along parallel lines the rate must be materially higher in order to secure the same return on the investment as in the case where a single municipal public utility furnishes all the service. Accordingly, since compe- tition ultimately fails to control the service rendered by municipal public utilities, because they are natural monopolies, and as it inevitably must increase rather than decrease the rate in order to give the same return upon the investment, there remains neither the eco- nomic nor the legal justification for a duplication in the service of municipal public utilities. As the force of competition is no longer recognized as effective in controlling the service and regulating the rates of municipal public utilities, the authorities agree that the necessity for public regulation and control is abso- lute and undisputed, for in its absence, experience and common observation have too often indicated for there to remain room to doubt, that the service is sub- jected to all the charges that the trafific will bear. § 549. Competition in telephone service peculiarly undesirable. — For all these reasons as well as for the § 550 PUBLIC UTILITIES. 6l6 additional one before suggested, that neither of the dupHcated municipal public utility systems rendering telephone service can in the very nature of things render service that is either adequate or complete, it follows that competition as a means of regulating telephone service or controlling its rates results in more inconvenience and expense and is the least justi- fiable of all existing forms of municipal public utihty service, and conversely that the need of public regu- lation and control by impartial experts in this case of the telephone is greater than any other. § 550. Efficient public regulation of telephone es- pecially necessary. — Intelligent control of the munici- pal public utility furnishing telephone service by the public is peculiarly necessary for the additional reason that this business is the most complex and least under- stood of any of the municipal public utilities, and the expectation of the public in the past that this form of municipal public utility would regulate itself and take care of the interests of the public, or that any attempt on the part of the public without the assistance of technical unprejudiced experts of the subject to under- stand this form of municipal public utility business or fairly to regulate its service and determine the rea- sonable rate to be charged for it must inevitably fail. The many failures to understand and fairly regulate the service of this municipal public utility without the help of trained experts furnishes the best argument and the most convincing illustration that the question of regulating all municipal public utilities and of deter- mining what is a reasonable rate to be charged for their service can only be fairly and satisfactorily deter- mined by an administrative body or commission of unbiased trained experts. 6l7 TELEPHONE SERVICE. § 55 1 § 551. Requirements for physical connection of telephone plants. — The fact that, where there is a duplication of municipal public utilities rendering tele- phone service in the same locality, neither indepen- dently of the other can furnish complete service has resulted in some of the states requiring such compa- nies to make physical connection of their plants and to serve impartially the customers of either municipal public utility by the installation of a common switch- board or trunk line between the exchanges of the duplicating companies upon payment of a reasonable amount to be fixed by assessment. Decisions in other states, where this requirement is not made by virtue of a constitutional provision or statutory enactment, have held that while at common law such an action can not be required, if by agreement between the com- peting companies such a connection is made, the ad- vantage resulting from the connection or the use of a common switchboard or trunk line between the ex- changes of the different municipal public utilities be- comes available to all the members of the public who are customers of telephone service on the theory that the agreement of the municipal public utilities in mak- ing such a physical connection between their systems constitutes a declaration of their intention to waive the common-law right of operating their plants inde- pendently and subjects their property to the additional burden of serving all the public who desire telephone service. § 552. Contracts restricting service in restraint of trade. — This doctrine is peculiar to municipal public utilities furnishing telephone service which makes their control all the more complex, and while the courts have held that the state may require such mu- nicipal public utilities physically to connect their plants § 553 PUBLIC UTILITIES. 6l8 or having voluntarily agreed to do so for some of their customers that they are obliged to extend the same privilege to all, the decisions are not agreed as to the extent of the obligation assumed by the com- panies in making such an agreement nor as to how far it becomes available to other similar and com- peting municipal public utilities and to their customers and the public generally. Some of the courts have upheld an agreement by a municipal public utiHty rendering only local service to furnish all of its long distance service to a particular municipal public utility rendering that service because such an agreement seemed to the court necessary to secure long distance service for such customers, while other courts, it would seem, with better reason, have insisted that such local customers should not be precluded from the enjoyment of all long distance service that might be or become available and that when the local com- pany undertook to furnish long distance service and the long distance company undertook to accommodate the local customers they thereby relinquished their right to operate independently and subjected their plants respectively to the use of all customers, whether they agreed to use the one long distance company exclusively or patronized all such companies indis- criminately. § 553- Contract for connected or through service. — As there seems no legal reason for making the dis- tinction between local and long distance telephone service, the decisions holding that where by virtue of an agreement between the companies furnishing local and long distance service they are connected for the purpose of giving consolidated local and long distance service, this service becomes available to all, it neces- 6l9 TELEPHONE SERVICE. § 554 sarily follows that where by agreement of the compa- nies furnishing local and long distance service respec- tively to consolidate their service that such service also becomes available to the public generally and that the particular company rendering the long distance service, which is a party to the consolidating contract, is not permitted to deny service to a customer of the local company who may also avail himself of the long distance service rendered by a company in competition with the former one. For if this is not the correct rule a municipal public utility furnishing a service which is public in its nature and a natural monopoly can compel a customer present or prospective to limit his service to the particular company and thereby preclude him from enjoying other similar service that is available, all of which is necessary to furnish him with complete and adequate service. § 554. Physical connection only by contract or state requirement. — The courts are agreed that in the absence of a contract between competing or connect- ing companies for the physical connection of their telephone plants or of a constitutional or statutory requirement that such plants be connected for the purpose of exchanging service, such companies can not be required to make a physical connection of their plants by the use of a common switchboard or trunk line between their exchanges, although the few deci- sions on this point suggest that the power resides in the state to make and enforce such a requirement in the form of a regulation of the service. § 555- Cost and value of telephone service with increase of subscribers. — The question of what consti- tutes a reasonable rate for telephone service is ren- § 555 PUBLIC UTILITIES. 620 dered more complex than in the case of most other municipal pubHc utihties because of the different classes of service rendered and especially for the rea- son that unlike other municipal public utilities, in the case of telephone service the theory obtains that a decrease in the rate resulting in an increase in the volume of the business will not yield increased profits proportionally, because the increase in the volume of business secured is accompanied by a corresponding increase in the operating expenses. The fact is ad- mitted that the value is determined by the extent of the telephone service furnished, which depends directly upon the number of customers served by the particu- lar telephone system, for connection with all sub- scribers is available to each customer by virtue of the fact merely that the others are customers which in other municipal public utilities is an element of no consequence because the nature and extent of the service received by each customer is individual and independent of the others, the number of which does not increase the value of the service furnished the individual customer. It is evident that a telephone exchange with a thousand subscribers is more valua- ble to each of the thousand subscribers than one with a hundred subscribers would be to each individually, and this fact of the increase in the value of the service with the increase in the number of customers served, together with the fact, if it be a fact, that the expense of operation, especially that of maintaining and operat- ing the switchboard, increases correspondingly with the increase in the number of the subscribers to the service, makes it evident that the determination of the proper rate for telephone service requires that these two elements, which seem to be peculiar features of telephone service, be considered in addition to other 621 TELEPHONE SERVICE. § 556 features which are common to the service of all mu- nicipal public utilities. § 556. Classification of telephone service. — The rule prohibiting discrimination in the service and the rates charged for it, however, is applicable to the furnishing of telephone service to the same extent and for the same reasons that it is applied to the fur- nishing of service by other municipal public utilities, although this service may be classified as resident or business, single or party line, and with reference to the distance the subscribers are located from the ex- change, and different charges may be made for the various classes of service in proportion to the differ- ence in the value of the service or the cost of furnish- ing it. The classification, however, must be a reason- able one and a different rate can be made only where the value of the service or the cost of furnishing it justifies it, and such a company would not be permit- ted to distinguish between old and new subscribers as such by requiring a higher rate of all parties who become subscribers after a certain time than parties who are then subscribers are required to pay. Nor can the municipal public utility furnishing telephone service require that its customers use the service of any particular system exclusively because the value of the telephone service and the conditions upon which the franchise is granted permitting such service to be furnished are the facilities which it will afford of com- municating with the largest possible number of peo- ple. The telephone company will not be permitted to restrict its customers in the enjoyment of this serv- ice to its own system. This is a well-established legal principle, although the reason generally assigned for refusing this restriction, that it tends to stifle com- petition, is being more generally recognized as of § 557 PUBLIC UTILITIES. 622 doubtful value and consequently the greater necessity for public regulation and control is becoming more generally admitted/ § 557. Physical connection by constitutional pro- vision. — The giving of telephone service is recognized as being public in its nature and an actual necessity to 1 FEDERAL.— Billings Mut. Tel. Co. v. Rocky Mountain Bell Tel. Co., 155 Fed. 207; Pacific Tel. & T. Co. v. Anderson, 196 Fed. 699; United States Tel. Co. v. Central Union Tel. Co., 171 Fed. 130; United States Telephone Co. v. Central Union Tel. Co., 202 Fed. 66. ILLINOIS.- Chicago Tel. Co. v. Northwestern Tel. Co., 199 111. 324, 65 N. E. 329; Western Union Tel. Co. v. Chicago & Paducah R. Co., 86 111., 246, 29 Am. Rep. 28; Union Trust & Savings Bank v. Kinlock Long Distance T. Co., 258 111. 202, 101 N. E. 535. INDIANA.— Central Union Tel. Co. v. State ex rel., 118 Ind. 194, 19 N. E. 604, 10 Am. St. 114; Home Tel. Co. v. North Manchester Tel. Co., 47 Ind. App. 411, 92 N. E. 558; State ex rel. Goodwine v. Cad- wallader, 172 Ind. 619, 87 N. E. 644, 89 N. E. 319. KENTUCKY.— Campbellsville Tel. Co. v. Lebanon, &c., Tel. Co., 118 Ky. 277, 26 Ky. L. 127, 80 S. W. 1114, 84 S. W. 518; Cumberland Tel. & T. Co. V. Cartwrighl Creek Tel. Co., 32 Ky. L. 1357, 108 S. W. 875; Cumberland Tel. & T. Co. v. Brandon (Ky.), 157 S. W. 1119. MICHIGAN.— Bradford v. Citizens' Tel. Co., 161 Mich. 385, 126 N. W. 444; Mahan v. Michigan Tel. Co., 13^ Mich. 242, 93 N. W. 629. MISSISSIPPI.— Cumberland Tel. & T. Co. v. State, 100 Miss. 102, 54 So. 670, 39 L. R. A. (N. S.) 277. MISSOURI.— Home Tel. Co. v. Sarcoxie Light & Tel. Co., 236 Mo. 114, 129 S. W. 108, 141 S. W. 845, 36 L. R. A. (N. S.) 124. NEBRASKA.— State v. Nebraska Tel. Co., 17 Nebr. 126, 22 N. W. 237, 52 Am. Rep. 404. NEW YORK.— Central New York Tel. & T. Co. v. Averill, 199 N. Y. 128, 92 N. E. 206, 32 L. R. A. (N. S.) 494. NORTH CAROLINA.— Clinton-Dunn Tel. Co. v. Carolina Tel. & T. Co., — N. Car. — 74 S. E. 636. OKLAHOMA.— Pioneer Tel. & Tel. Co. v. State (Okla.), 134 Pac. 398. SOUTH CAROLINA.— Gwynn v. Citizens' Tel. Co., 69 S. Car. 434, 48 S. E. 460. TENNESSEE.— Home Tel. Co. v. People's Tel. & T. Co., 125 Tenn. 270, 141 S. W. 845, 43 L. R. A. (N. S.) 845. TEXAS.— Southwestern Tel. & T. Co. v. State, (Tex. Civ. App.) 150 S. W. 604. UNITED STATES.— Atchison, &c., R. R. Co. v. Denver, &c., R. R. Co., 110 U. S. 667, 28 L. ed. 291; Railroad Commission of La. v. Cumberland Tel. & T. Co., 212 U. S. 414, 53 L. ed. 577. 623 TELEPHONE SERVICE. § 55/ modern business methods, so that the municipal pubHc utiHty undertaking to furnish such service is obUged to serve all w^ho apply and are willing to pay for it under such reasonable rules and regulations as may be required. The value of the service depends directly upon the number of subscribers to the service who may be reached by it, and where there are two or more telephone companies in the same locality, com- plete service can only be had by a physical connection of the different plants or the use of a common switch- board, unless every subscriber for telephone service is a customer of each of the plants in the locality which furnishes such service. To avoid the expense and inconvenience of requiring every party who de- sires the telephone from contracting with all the com- panies which have undertaken to furnish it, in order to secure complete service, a few of the states by way of regulating the furnishing of such service by virtue of a constitutional provision require the physical connection of the different telephone systems and the exchange of service between their subscribers so that a subscriber to either company may reach all the sub- scribers of that or any other company available in the particular locality, which is a convenience to which they are entitled under the constitution of the state of Montana, for as the court in the case of Billings Mut. Tel. Co. V. Rocky Mountain Bell Tel. Co., 155 Fed. 207, decided in 1907, says: "It is clear that plain- tiff has a right, under the constitution of the state [section 14, article 15], to connect its telephone line with defendant's. ... I think that the use that may be acquired by the plaintiff company is such as is practicable by a connection like that had in the every day service with defendant's own connections. This is feasible by a plan of trunking between the exchanges, where the respective switch or toll boards are maintained. The defendant company would then § 55^ PUBLIC UTILITIES. 624 receive the business from the plaintiff as it now re- ceives business coming from one of its own sub- scribers. ... In other words, where two compa- nies owning different Hnes of telephones in Montana can not agree upon the compensation for the privilege of connection and use, the law of Montana obliges the one to submit to connection with the other, and [upon payment of damages to be assessed], to accept a patronage, and to submit to a necessary use that it might not wish to accept or allow, and probably could not be compelled to accept or allow, were it not for the provisions of the constitution and laws of the state." § 558. Statutory and constitutional requirements upheld. — That a similar regulation is made of munici- pal public utilities undertaking to render telephone service in the state of Kentucky by virtue of a consti- tutional provision of that state is indicated by the case of Campbellsville Tel. Co. v. Lebanon, &c., Tel. Co., 118 Ky. 277, 26 Ky. L. 127, 80 S. W. 11 14, 84 S. W. 518, decided in 1904, where the court sustained an action in mandamus to compel the defendant company to receive messages over its wires which connected with those of the plaintiff by virtue of an agreement between them to that effect which was also required of them by virtue of the constitutional provision so long as they maintained their telephone systems and operated their exchanges, for as the court said : "In addition, all telephone companies operating exchanges in different towns or cities in this state are required by the constitution of this commonwealth to receive and transmit messages between their users. The section of the constitution implies that such con- nections shall not only be made, and the service al- lowed, but that they shall, be maintained and continued. . . . We conclude that this contract was not deter- 625 TELEPHONE SERVICE. § 559 minable at the will of either of the parties to it, but that it must continue during the corporate existence of the two companies." Wisconsin has statutory provisions for physical connection between telephone lines to be made under the direction of the railway commission — sec. 1797 m- 4, ch. 499, acts 1907. Cf. p. 798. Physical connection of continuous telephone lines for through service may be had under statutory provisions of Indiana — sec. 8, Public Utilities Law, ch. 76, acts 1913, Cf. p. 853. To the same efifect is sec. 40, Public Utilities Act of Cali- fornia, ch. 14, acts 191 1, effective March 23, 1912. § 559. Physical connection by contract available to all alike. — While under the common law in the ab- sence of constitutional or statutory provision of the state requiring competing companies to make physical connection of their plants and exchange service be- tween them, they can not be required to do so, if such connection is voluntarily made by virtue of a con- tract between them, the public thereby acquires an interest in the connected service which becomes avail- able to all subscribers of telephone service, for as the court in the case of State ex rel. Goodwine v. Cadwal- lader, 172 Ind. 619, 87 N. E. 644, 89 N. E. 319, decided in 1909, says: "A telephone company doing a general telephone business is a common carrier of news. . . . This duty does not amount to an absolute requirement that one company or individual shall furnish the patrons of another the use of its or his exchange and lines, unless it has been voluntarily undertaken, so that he or it may not afterward discriminate in classifica- tion. . . . Such physical connection can not be required as of right, but if such connection is volun- tarily made, as is here alleged to be Hie case by con- tract, so that the public acquires an interest in its con- 40— Pub. ut § 560 PUBLIC UTILITIES. 626 tinuance, the act of the parties in making such con- nection is equivalent to a declaration of a purpose to waive the primary right of independence, and it im- poses upon the property such a public status that it may not be disregarded. . . . We think it certain that the property of each of the parties is impressed with such a public interest that, neither can disregard it [the agreement for physical connection]. If service is furnished to one, another in the same town or city is entitled to the same service, not upon the ground of a primary right, but because, having elected to furnish service to one, the same obligation arises in favor of all others like situated." § 560. Through telephone service peculiarly nec- essary. — After recognizing the necessity for through service in the operation of telephone plants because the conversation can not be relayed as in the case of a telegram or as passengers can change cars or be transferred from one railroad to another for the rea- son that the act of speaking over a telephone is single and instantaneous, the court in the case of United States Telephone Co. v. Central Union Tel. Co., 171 Fed. 130, decided in 1909, in refusing to recognize the validity of a contract beween a municipal public utility rendering local telephone service and one ren- dering long distance telephone service, by which for a long period of years the latter company would enjoy the exclusive service from the local plant, for the rea- son that this would restrict the customer of the local service to the use of one long distance company as well as tend to stifle competition, said: "But we have a very different situation where, as in this case, a local company, assuming that it can not be compelled to make or permit a connection with a long distance com- pany, does in fact permit it. If the local company (i2J TELEPHONE SERVICE. § 56I extends the use of its lines to long distance service, does it make the long distance service any the less of a public character than its local service? Assuming that it had a right to remain independent of and iso- lated from long distance business, does it not give up that right of local independence and isolation when it takes on long distance business? And if, in respect to long distance business, it has granted the right of con- nection to one long distance company, can it, either under the common law or the statutes of Ohio, deny to one long distance company the right and privilege which it has "granted to another? It seems to me that to put this question is to answer it. To this effect is Ohio ex rel. v. Telephone Company, 36 Ohio St. 296, 38 Am. R. 583. The courts have had great difficulty in getting away from the proposition which I have suggested in the discussion under the head immediately preceding this. They have had difficulty in escaping the conclusion that a local company must permit con- nection to be made with other exchanges, whether it desires to do so or not. But they have found them- selves compelled to come to the conclusion that where two companies have permitted a connection to be made between their exchanges, without having fixed by contract any period of termination, no disconnection of the systems can be permitted except such as arises out of the total retirement from business by one or the other company. State v. Cadwallader (Ind.), 87 N. E. 644." § 561. Undertaking to furnish connected service becomes general. — The recent decision in the case of Clinton-Dunn Tel. Co. v. Carolina Tel. & T. Co., — N. C. — , 74 S. E. 636, decided April 17, 1912, sus- tains the principle that having agreed to connect their telephone systems and to give exchange service, the § 562 PUBLIC UTILITIES. 62S companies are thereby precluded from disconnecting their plants and are obliged to furnish all with ex- change service who are or become customers of either company. In the course of its opinion the court said: "In the absence of constitutional or statutory require- ment, this obligation to afford service at reasonable rates and without discrimination to all who will 'pay the charges and abide by the reasonable regulations of the company' does not as a rule extend to making physical connection with the company's lines, but there is high authority for the position that, when such physical connection has been voluntarily made, under a fair and workable arrangement and guaranteed by contract and the continuous line has come to be patronized and established as a great public conven- ience, such connection shall not in breach of the agree- ment be severed by one of the parties. In that case the public is held to have such an interest in the ar- rangement that its rights must receive due considera- tion." § 562. Holding out consolidated service establishes it permanently. — This principle is sustained in the case of Mahan v. Michigan Tel. Co., 132 Mich. 242, 93 N. W. 629, decided in 1903, where the competing plants were bought by the same party and their ex- changes connected. In refusing the right to discon- nect the service and in holding that the connection between the exchanges once having been made be- came constantly available to the public the court said: "Users of the Detroit Telephone Company accepted this service and paid for the same for a period of some- thing like a year and a half. We are of the opinion that the furnishing of the service by the respondent, the Michigan company, and the acceptance thereof by the subscribers to the Detroit company, if it did not 629 TELEPHONE SERVICE, § 563 constitute a new implied contract between the Mich- igan company and said subscribers, at least furnishes a construction of the terms of the ordinance by the parties themselves which the respondent, the Mich- igan Telephone Company, is not now at liberty to repudiate." § 563. Exclusive contract for through service up- held from necessity. — The case of Cumberland Tel. & T. Co. V. State, loo Miss. 102, 54 So. 670, 39 L. R. A. (N. S.) 277, decided in 191 1, sustains a contract be- tween a municipal public utility rendering local tele- phone service and one rendering long distance service for the exclusive service of the latter company as well as the agreement to the effect that the local company would not extend its lines so as to conflict with the business of the long distance company. This decision is opposed to those already mentioned so far as it up- holds the contract for exclusive service, the practical justification for the decision apparently being that it was necessary in order to secure long distance service for the customers of the local company. The question as to the necessity of the contract, however, would seem a debatable one, as the long distance company had already established itself in the territory of the local company and in its own interest would probably have received long distance service from the cus- tomers of the local company in the absence of an ex- clusive contract for that service on finding that it was impossible to secure such a contract. The reason given for the decision is neither convincing nor in harmony with what seems to be the prevailing rule regulating the furnishing of such municipal public utility service. In the course of its opinion the court said : "The contract on the part of the Oxford system to give its long distance messages to the Cumberland § 564 PUBLIC UTILITIES. 63O exclusively, for the period of the contract was not in violation of the law. It was based upon a valuable consideration to both systems, and was not inimical to the public interest in any way." § 564. Necessity for exclusive service question of fact. — A decision similar in its effect to this, although not to the same degree objectionable is found in the case of Home Tel. Co. v. North Manchester Tel. Co., 47 Ind. App. 411, 92 N. E. 558, decided in 1910, where the court upholds a contract for the exclusive service of all outgoing messages to points reached by the long distance company in question for the reason that such an agreement was necessary to secure long distance service, although the contract did not exclude the local company from receiving incoming messages over other long distance lines or sending messages over other lines to points not served by the former long distance company. In .the course of its opinion the court said: "The contract in question does not pro- vide against connections being made with appellant's switchboard by other companies or receipt of messages therefrom, and therefore it can not be said that it was a violation of the agreement to permit the Commercial Telephone Company to connect therewith, and thereby transmit messages to appellant. The contract does, however, provide that all of the toll business originat- ing in or through the appellant company for trans- mission to points on appellee's lines should be given to appellee. . . . But the rule is that all contracts in restraint of trade are not necessarily invalid where such restraint is only partial, incidental or minor to the main object sought to be obtained which is for the public good. . . . It is found by the court that the contract in question was entered into for the pur- pose of establishing a competitive long distance tele- 631 TELEPHONE SERVICE. §5^5 phone system in the locaHties reached; that such a mutual agreement was essential to the existence of such a system. The main purpose of the combination was therefore not to restrain trade, but to extend it; the restraint in effect, if any, being only incidental and minor." § 565. Common-law and statutory regulations dis- tinguished. — That relief of this nature is available by constitutional or statutory provision requiring it is suggested in practically all the decisions from the early one of Atchison, &c., R. R. Co. v. Denver, &c., R. R. Co., no U. S. 667, 28 L. ed. 291, decided in 1884, where the court in the case of a common carrier says that as the one corporation is not bound to carry be- yond its own line, if it contracts to do so under the common law it has the right to select the company in connection with which it would carry out the con- tract for through service, the court adding, however, that : "Such matters are and always have been proper subjects for legislative consideration, unless prevented by some charter contract; but, as a general rule, reme- dies for injustice of that kind can only be obtained from the legislature." The courts are agreed that in the absence of a stat- utory or constitutional provision requiring the making of physical connection between telephone plants or of their voluntarily agreeing to do so that the customers of either have not the right to require exchange serv- ice with the customers of the other, for as the court in the case of Home Telephone Co. v. People's Tel. & T. Co., 125 Tenn. 270, 141 S. W. 845, decided in 191 1, says: "Telephone and telegraph companies are com- mon carriers of intelligence, and must give the same service on the same terms to all who apply therefor, without partiality or unreasonable discrimination. But § 566 PUBLIC UTILITIES. 632 this does not mean that a telephone company is bound to permit another telephone company to make a physical connection with its lines for the purpose of using them as its own subscribers use them. There is a wide difference between a telephone company's transmitting to any point on its line equally and in- discriminately the messages of all companies that offer them and are willing to pay the same fare for the same service, and admitting such outside companies or their patrons to the same use of its lines that its own patrons are entitled to." § 566. Public and private business distinguished. — This court also takes exception to the position of the Supreme Court of Indiana in the decision of State ex rel. Goodwine v. Cadwallader, 172 Ind. 619, 87 N. E. 644, 89 N. E. 319, already referred to, in requiring that competing companies which have agreed to con- nect their service shall continue to give such service so long as they maintained their exchanges. In holding that this is an undue interference with the right to contract, the court fails to recognize the difference between the exercise of this right with respect to private business and those concerned with the giving of service to the public, for the municipal public utility undertaking to serve the public in a particular way is generally held liable to serve all without distinction so long as it undertakes to render public service. In the course of its opinion, criticising the decision of the Supreme Court of Indiana to this effect, the court says: "Such a rule, while in terms asserting the inde- pendent right of contract, denies its existence in fact. Moreover, it enables one company to take the property of another for public use without compensation, and •deprives the latter company of its property without 633 TELEPHONE SERVICE. § 567 due process of law, in violation of the constitution of this state and of the United States." § 567. Necessity for state regulation to insure pub- lic complete service. — A strong statement of the com- mon-law rule denying the right to require physical connection between telephone plants and of the conse- quent necessity for state regulation in this respect if the public is to have the advantage of complete service is furnished in the recent case of Home Tel. Co. v. Sarcoxie Light & Tel. Co., 236 Mo. 114, 139 S. W. 108, 36 L. R. A. (N. S.) 124, decided in 191 1, where the court said: "It must be borne in mind that, as to business coming from the Bell Company to the Sarcoxie Company, the Bell Company is in the atti- tude of an individual, with no less nor more rights. The individual in the town can compel the Sarcoxie Company, upon tender of proper charges, to extend its services by phone to his place of business or resi- dence. The corporation can do the same thing, but not more. The individual can not build a line of his own and demand physical connection; neither can the corporation. If the Bell Company at Sarcoxie de- manded of the local Sarcoxie Company that it place a phone in its place of business, such would be within the rights guaranteed by the statute. If it went to the Sarcoxie Company and tendered the proper fee, and said it wanted to talk over their line, such would be within the statute; but if it demanded that a physical connection be made between the two lines, so that its customers could talk over the lines of the Sarcoxie Company, that is an entirely different question. With its customers the Bell Company is doing in a way a private business. This private business it can not foist upon a competing line, save and except as an individual could go to such competing line and de- § 568 PUBLIC UTILITIES. 634 mand service. In other words, one telephone com- pany, without the consent of the other, can not take charge of and use the instrumentahties of such other company by compeUing physical connection therewith. The statute in question never so contemplated." § 568. Service of common carrier and telephone distinguished. — A further recent decision on this phase of the question is furnished in the case of Pacific Tel. & T. Co. v. Anderson, 196 Fed. 699, de- cided February 13, 1912, where the court upheld an exclusive contract between municipal public utilities rendering telephone service and denied this right to make physical connection with the plants belonging to the parties to the contract to any other company or individual, in the absence of a constitutional or statutory provision requiring that such connection be made. The tendency of this decision is not in har- mony with the case of United States Tel. Co. v. Cen- tral Union Tel. Co., 171 Fed. 130, and other cases which have already been discussed. As the decision is based on reasoning by analogy to the case of agree- ments for through service commonly entered into between connecting rather than competing railroads, the decision fails to distinguish between the nature of the service rendered in the two cases, for while complete through service may be provided by a con- tract between such common carriers, such service is not furnished by a contract between two telephone companies which are either competing or connecting because only subscribers to their telephone service are included by virtue of such an exclusive contract, and they are excluded from all other service. The federal decision in the case of the United States Telephone Co. is based upon statutory provi- sions in Ohio, which the court found clearly prohib- 635 TELEPHONE SERVICE. § 568 ited the making of exclusive contracts for such service because their tendency was to stifle competition, while in the Pacific Telephone Co. case, as indicated by the decision, the state of Washington had enacted no such statutory provisions, but instead had provided that the matter of requiring physical connection be- tween telephone companies for the sake of securing through service be placed in the hands of its public service commission with power to require such con- nection to be made where in its opinion such connec- tion should be established. In the course of its opin- ion the court said: "All the authorities agree that at common law each telephone company is indepen- dent of all other telephone companies, save for the duty to receive and forward to any point on its Hne messages received from such other company or com- panies; and hence, that it is not bound to accord to any such outside organization or its patrons connec- tions with its switchboard on an equality with its own patrons; that such connection is a privilege to be ac- corded only as the result of private contract or in obedience to some constitutional or statutory provi- sion. State V. Cadwallader, 172 Ind. 619. 87 N. E. 644, 89 N. E. 319; Home Telephone Co. v. Sarcoxie Light & Telephone Co., 141 S. W. 845, decided De- cember 16, 191 1, by the Supreme Court of Tennessee. I do not understand that this rule is questioned by the defendants, but they earnestly maintain that, because the Anderson Company made physical connection with the complainant company, it was bound by the com- mon law to grant the same privileges to any other individual or company on the same terms and condi- tions. I can not concede that such is the rule of the common law. . . . Where a public service corpora- tion enters into private contracts with others in fur- therance of its business. I find no warrant for holding § 569 PUBLIC UTILITIES. 636 that its public duties are in all cases extended to the full scope of the private contract. . . . The defend- ant companies had therefore no right to demand a physical connection with the Anderson line simply because that right had been accorded to another, and they certainly have no such rights under the statute of this state, for that statute vests the power and dis- cretion to direct physical connection in the public service commission. Laws Wash. 1911, p. 585, §73." § 569. Doctrine of increasing cost of service pe- culiar to telephone. — The doctrine which is claimed to have application peculiarly to the case of the mu- nicipal public utility rendering telephone service to the effect that the expense of operation increases correspondingly with the increase of business and that the general rule applicable to other municipal public utilities where the volume of the service and the con- sequent profits of the company may be increased by decreasing the rates for the service is recognized by the decision of the Supreme Court of the United States in the case of Railroad Commission of La. v. Cumberland Tel. & T. Co., 212 U. S. 414, 53 L. ed. 577, decided in 1909, as follows: "If higher rates have been in operation, and the result has shown that they were only reasonable and fair rates, it would, in such a business as this, follow, with considerable certainty, that, with lower rates, the profits would be decreased and become unreasonably low. We say this because the evidence shows that, in the case of telephone companies, the general result of a reduction of rates in some other kinds of business does not al- ways follow — namely, that there would be an increased demand, which could be supplied at a proportionately less cost than the original business. Such, it is ad- mitted, would be the case generally in regard to water 637 TELEPHONE SERVICE. § 57O companies, gas companies, railroad companies, and perhaps some others, where the rate is a reasonable one. ... In these cases increased profits might be the result of decreased rates. But with telephone companies, as shown by the testimony of the president of the complainant, the reduction in toll rates does not bring an increased demand, except upon the condition of corresponding increase in expenses." § 570. Value of service increases with its amount. — A further pertinent decision on this point illustrating the reason for the doctrine which seems peculiar to the case of the municipal public utility rendering tele- phone service is furnished in the case of Bradford V. Citizens' Tel. Co., i6i Mich. 385, 126 N. W. 444, decided in 1910, where the court in refusing to permit the company to distinguish between the rates charged old and new subscribers for the same service stated that : "While it is probably true that the cost of operating a telephone exchange increases with the in- creased volume of business, it is equally true that the whole body of subscribers, whether new or old, makes the added expense, and reaps the added benefit. A telephone exchange with 1,000 members is manifestly more valuable to every subscriber than one with 100 members, but it is equally valuable to each member in the same class, and its value to the subscriber does not depend, in any degree, upon whether he is a new subscriber or an old one. It is difficult to understand why new subscribers should pay any more for the right to talk to old members than the latter do for the right to talk to new ones." § 571. No discrimination in rates nor limitation of service. — The rule refusing the right to discriminate in rates for the same service, although permitting the § 571 PUBLIC UTILITIES. 638 municipal public utility to classify the telephone serv- ice rendered along reasonable lines is as well estab- lished as to the giving of telephone service as that of any other municipal public utility. Nor should a con- tract for telephone service discriminate as to the class or number of persons to be served by a contract to take service exclusively of one company, for as the court in the case of Central New York Tel. & T. Co. V. Averill, 199 N. Y. 128, 92 N. E. 206, 32 L. R. A. (N. S.) 494, decided in 1910, says: "It is manifest that the exclusive clause is a contract in restraint of trade. It prevents any one in the Yates Hotel from having telephone communication with customers of other telephone companies than the plaintiff. It pre- vents the persons served by such other companies from having telephonic communication with the Yates Hotel. It likewise destroys competition by shutting out all rivals of the plaintiff. . . . The feature 01 the modern telephone system which constitutes its public value and affects it with a public interest is its ability to bring each customer into vocal communica- tion with hundreds and oftentimes thousands of others. This makes it an instrument of great public conven- ience and utility, the usefulness of the service offered by each company being directly proportionate to the number of persons who can be reached thereby. The franchise having been granted because of this very element — that is to say, the capacity to serve the com- munity so generally by serving so large a number of individuals constituting the community — it can not be tolerated that any grantee of the franchise shall exer- cise it in such a way as to lessen the value of the telephone as an instrumentality of service to the pub- lic. If a telephone company may contract for the exclusion of any other telephone service from the premises of its customers, it may thus deprive all those 639 TELEPHONE SERVICE. § 57 1 customers of telephone communication with every person who takes telephone service from rival con- cerns, and thus prevent just what all telephone fran- chises are designed to promote — that is, the availa- bility to every member of the community who desires it, and can afford to pay for it, of the most extensive telephone service attainable. . . . It is sometimes argued that the presence of two telephone systems in a given district is a disadvantage to the community, which is best served by one system reaching all sub- scribers; but one system will never be made to reach all subscribers as cheaply as would otherwise be the case if the possibility of competition is destroyed." CHAPTER XXVIII. MUNICIPAL OWNERSHIP. Section. 572. Ownership unless regulation adequate. 573. Power of municipality to own and operate municipal public utilities. 574. Eminent domain always available to municipality. 575. Just compensation condition not limitation on its exercise. 576. Motive of municipal and private owners compared. 577. Failure of regulation necessitates ownership by municipality. 578. Tendency and attitude of courts toward municipal ownership. 579. Municipal ownership and interests of public. 580. Policy of municipal ownership legislative not judicial question. 581. Sale to municipality without statutory authority. 582. Extension of sphere of municipal activity necessary. 583. Practical necessity long recognized as basis of municipal ownership. 584. Ownership without operation permitted. 585. Constitutionality of municipal ownership unquestioned. § 572. Ownership unless regulation adequate. — The only alternative or preventive of municipal ow^ner- ship of municipal public utilities is their adequate reg- ulation and control by the municipaHty or by a state or municipal commission acting under authority con- ferred upon it for that purpose by the state. With an efficient regulation and control of the service fur- nished by municipal public utiHties and the rates charged for it, the necessity for municipal ov^nership as a means of regulation and control in the majority of cases at least would disappear, although the power of the municipality to own and operate its municipal public utilities should always be available. This posi- tion of the municipality is necessary to put it on an 640 641 MUNICIPAL OWNERSHIP. § 573 equality with the municipal public utility and to en- able it properly to conserve its interests and secure for its inhabitants at all times efficient service at reason- able rates. § 573- Power of municipality to own and operate municipal public utilities. — In addition to the right now commonly belonging to the municipality to pur- chase and operate any municipal public utility by vir- tue of an express reservation in the franchise or con- tract of the municipality^ or pursuant to statutory authority expressly granted or necessarily implied^ which has already been discussed in another connec- tion, it may generally do so by the exercise of the right of eminent domain. Although the municipal public utility belonging to private capital serves a public purpose and performs a public duty, it is not by virtue of that fact exempt from the exercise of this right of eminent domain belonging to the municipality or other agency of the state when acting under proper statutory authority, for the state and its agency, the municipality or commission, when authorized for that purpose may at any time exercise the power of emi- nent domain over private property within its jurisdic- tion. § 574. Eminent domain always available to mu- nicipality. — The rule of law is well established that the legislative authorities of the state or the municipal- ity can not by contract or legislative enactment surren- der or barter away their right to exercise the power of eminent domain nor can they preclude their successors from doing so. The exercise by the state or the mu- nicipality pursuant to authority delegated to it by the 1 Chapter 7. 2 Chapters 4 and 5. 41— Pub. Ut. § 574 PUBLIC UTILITIES. 642 State of the right to take title to property for a public purpose on paying just compensation for it is always available. Nor is the exercise of this right Hmited to the taking of property which is devoted to private purposes only, but property which is being used for pubHc purposes as well may be taken in this way by the state or the municipality which holds it for a more general disinterested purpose, subject to a larger scope and for the benefit and general welfare of the entire public; as the court in the case of In re City of Brook- lyn, 143 N. Y. 596, 38 N. E. 983, 26 L. R. A. 270, decided in 1894, so well expressed it: "While the purpose of the water-works company was public in its nature, it can not be said to be strictly identical with the municipal purpose. A municipal corporation is a public and governmental agency. It holds prop- erty for the general benefit, with a larger scope of use. When acquired by the municipaHty of the city of Brooklyn, the appellant's property would become a part of a general system, under a single manage- ment, and conducted essentially as a public work. If, in order the better to subserve the public use, the appropriation of private property is necessary, even though it be already devoted to a similar use, the right to make it is incident to the legislative power, and it is necessary for the general good that the right be conceded. All property within the state is subject to the right of the legislature to appropriate it for a necessary and reasonable public use, upon a just com- pensation being provided to be made therefor, and there can be no distinction in favor of corporations whose franchises and operations impart to them a quasi public character. We think it very apparent that the public use to which the appellant's property is to be devoted by the provisions of the act does differ, and that it is of a higher and wider scope." 643 MUNICIPAL OWNERSHIP. § 575 § 575- Just compensation condition not limitation on its exercise. — In this same case on appeal to the Supreme Court of the United States under title of Long Island Water Supply Co. v. Brooklyn, i66 U. S. 685, 41 L. ed. 1 165, decided in 1897, that tribunal said: "All private property is held subject to the demands of a public use. The constitutional guaranty of just compensation is not a limitation of the power to take, but only a condition of its exercise. Whenever public uses require, the government may appropriate any private property on the payment of just compensation. That the supply of water to a city is a public purpose can not be doubted, and hence the condemnation of a water-supply system must be recognized as within the unquestioned limits of the power of eminent do- main. . . . The state, which, in the first place, has the power to construct a water-supply system and charge individuals for the use of the water, may con- demn a system already constructed, and continue to make such charge. This is not turning property from one private corporation to another, but taking prop- erty from a private corporation and vesting the title in some municipal corporation for the public use. It is not essential to a public use that it be absolutely free and without any charge to any one." § 576, Motive of municipal and private ov^oiers compared. — The reason for this principle permitting the state or the municipality to acquire the private property of the municipal public utility, although it is serving a public purpose is indicated by the fact that the motive and purpose of the municipality or the state is to secure adequate and efficient municipal pub- lic utility service for its citizens at the most reason- able possible rate which is in sharp contrast to the very natural attitude of the privately owned municipal § 577 PUBLIC UTILITIES. 644 public utility in its desire to receive the greatest pos- sible return on its investment for which it renders such municipal public utility service as seems expedient for securing such returns or may be required of it, for as the court in the case of Louisville Home Tel. Co. v. Louisville, 130 Ky. 611, 113 S. W. 855, decided in 1908, expresses it: "From this view^ of the subject it v^ill readily be seen that the primary object a city would have, in contracting for or procuring the service of such utilities, is not the revenue to be obtained for the city, but the securing of good and efficient service, and upon such terms as will, in the judgment of the city's governing body, promote the greatest good, not alone to those who use the utility, the telephone for instance, but to the entire community, including the city government." § 577. Failure of regulation necessitates ownership by municipality. — The practical justification for mu- nicipal ownership of municipal public utilities is the failure commonly experienced under any other form of regulation and control to secure satisfactory service at a fair uniform rate. Naturally the purpose and the chief motive of the privately owned municipal public utility is to secure the largest possible return on its investment, while the motive of the municipality in furnishing such service by its own plant is not pri- marily selfish or mercenary beyond the point of mak- ing the business self-sustaining, its chief object being rather to furnish efficient comprehensive service to its inhabitants at cost. § 578. Tendency and attitude of courts toward municipal ownership. — In the case of Mayo v. Town of Washington, 122 N. Car. 5, 29 S. E. 343, 40 L. R. A. 163, decided in 1898, Clark, J., in a dissenting opin- 645 MUNICIPAL OWNERSHIP. § 578 ion which is later expressly upheld by the same court in the case of Fawcett v. Mt. Airy, 134 N. Car. 125, 45 S. E. 1029, 63 L. R. A. 870, Id Am. St. 825, in speaking of the attitude of the court toward the policy of municipal ownership and of the tendency of such ownersliip to become more fully established in prac- tice, says: "It would seem, however, that city owner- ship of water as well as electric lighting plants is a matter vesced in the discretion of the city government. Light and water, sewerage and sanitation, paving and fire protection are necessities, and are objects to be obtained by municipal organization. . . . There is an unmistakable trend the world over toward mu- nicipal ownership of lighting, water-works, and even (to some extent) street railways. Judge Dillon refers to this, and intimates that it is commended by wisdom and sound policy. Dill. Mun. Corp., §691, note i. In Germany two-thirds of the cities own their electric lighting and car plants, and the proportion is increas- ing. The same is true of the other countries of con- tinental Europe, there being a great increase in mu- nicipal ownership since Judge Dillon wrote. In Great Britain and Ireland 203 cities and towns, being in fact every city of any importance save five, own their lighting plants, not only for their own corporate uses, but for furnishing light to citizens, and the average price of gas furnished to the citizen, with a profit, too, to the municipalities is fifty-four cents per thousand. In this country, too. a large number of cities own their gas plants. ... A large and increasing num- ber of cities and towns (already over 200) in the United States, own their electric lighting plants, with the result that the cost to the municipalities, from official reports, is less than one-third of the average cost in cities buying their lights from private compa- nies. The number of cities in this country owning § 579 PUBLIC UTILITIES. 646 their water-works is 1690 out of a total of 3196 hav- ing- water supply; and municipal ownership is steadily increasing. In the fifty largest cities in the Union, nineteen have recently changed from private owner- ship to municipal ownership, leaving only nine of the fifty which are still dependent for their water supply on private companies. . . . The general movement of the age in which we live is towards the ownership and operation of these franchises by the people of towns and cities, for themselves, through the agency of their municipal corporations, as one of the recog- nized and chief purposes of town and city charters." This decision has been quoted from at length for its statistical value especially, and for its conclusions which seem to be based upon an extensive investiga- tion of the question. The facts speak for themselves and indicate that the municipal ownership of the plants providing these public utilities in towns and cities was widely established at the time of the writing of this opinion, and that the tendency as indicated by such facts is toward a rapid increase of such owner- ship. In the decisions of the courts in connection with this subject no suggestion is found indicative of any- thing but the utmost confidence in the principles in- volved, nor are any reasons assigned for denying their broadest application in practice. And the attitude of the courts on such a subject, it is believed, gives the most conservative and accurate indication of the ten- dency of the times and of the probable solution of the question. § 579. Municipal ownership and interests o£ public. — That the public interests are best conserved by mu- nicipal ownership is fully recognized and characteris- tically expressed by the court in the case of Ogden I 647 MUNICIPAL OWNERSHIP. § 580 City V. Bear Lake, &c., Waterworks Co., i6 Utah 440, 52 Pac. 697, 41 L. R. A. 305, to the effect that, "the people usually get fleeced when the city places its waterworks in the hands of private parties. Public- spirited men are not at all times free from the undue influence of self-interest." But whether the munici- pality finds that the amount of control necessary in any case requires the municipal ownership of the plants which provide it and its citizens with these public utilities, or only the ownership without the operation by the public, or merely the statutory reg- ulation of private plants, it is submitted on the author- ities herein given that the attitude of our courts favors a decided increase in the sphere of municipal activity. § 580. Policy of municipal ownership legislative not judicial question. — The policy of municipal owner- ship and the expediency of its adoption in any partic- ular case is a legislative or business question which the municipal authorities must decide in the course of their administration of the municipal affairs within the authority conferred upon the city. It is not a judicial question nor will the courts review the wis- dom or expediency of the adoption of the policy of municipal ownership, but will confine themselves to the question of the authority of the municipality to do so. In sustaining an option of the appellant munici- pality to purchase the property and franchise rights of a municipal public utility and in upholding the transfer of its option to another municipal pubHc utility where the effect of exercising and transferring the option was intended for the public benefit, the court in the case of Indianapolis v. Consumers' Gas Trust Co., 144 Fed. 640, decided in 1906, said: "In none of the citations, state or general, are there any reasons stated that seem inconsistent \vith the prop- § 581 PUBLIC UTILITIES. 648 osition that a corporation, engaged in a service of public utility, may contract for a sale to the munici- pality of all of its property therein, either through a condition accepted in the franchise from the city, or through subsequent arrangement. The question whether municipal ownership is favorable to the pub- He interest, is neither involved in, nor open to, judicial inquiry. Assuming that such ownership is authorized, and is contemplated or demanded by the municipality, we are convinced that this proviso, treated alone as a contract of sale on the part of the gas company, is not within the inhibition of the rule — not ultra vires. The public policy which is mentioned in the cases cited, as opposed to an implication of charter power to turn over its property to another and 'ab- negate the performance of its duties to the public,' has no application to the transfer to the public — the municipahty — of property used in public service." The United States Supreme Court sustained this decision by refusing to consider it on a writ of certiorari, October 29, 1906. § 581. Sale to municipality without statutory au- thority. — This distinction is supported by the common observation, made by this court, which is here recog- nized and given the effect of law, that the public in- terests in public utility plants are so much more secure when controlled by public than by private capital that an agreement of a public or quasi-public corporation to sell to the one may be allowed, in the absence of express statutory authority, while the law refuses to permit such an agreement to stand when made with private parties. This must be the chief consideration for upholding the options to purchase such plants, which are now so commonly taken by the municipality when granting franchises. And such a precaution is 649 MUNICIPAL OWNERSHIP. § 582 a very wise one for the city to take, for it provides the opportunity for the municipality at any time to take over such property and control it absolutely for the public benefit. And while experience shows that this action is often necessary, the fact that it can be done so summarily acts as an important factor in forcing public consideration into the service rendered by the private concern. § 582, Extension of sphere of municipal activity necessary. — The power of the municipality to own and operate its municipal public utilities as well as the favorable attitude of the courts in extending the sphere of municipal activity in this connection is well illustrated by decisions from the Supreme Court of New York. In the case of Sun Printing & Publishing Assn. v. New York, 152 N. Y. 257, 46 N. E. 499, 8 App. Div. (N. Y.) 230, 37 L. R. A. 788, decided in 1897, where the action was to restrain the defendants from constructing a rapid transit system for the city of New York pursuant to statutory provisions to that effect, the court upheld the constitutionality of the statute and the right of the city pursuant to its pro- visions to construct such a rapid transit system for the reason that it was a "city purpose" properly included within the terms of the constitution providing that "nor shall any such county, city, town or village be allowed to incur any indebtedness except for county, city, town or village purposes." In this liberal con- struction of the power of the municipality the court was evidently influenced by the fact that the munici- pality had failed in its attempt to induce private cap- ital to undertake the construction and operation of such a rapid transit system which the court found to be absolutely necessary for the common good and the general welfare of the inhabitants of the defendant § 583 PUBLIC UTILITIES. 65O municipality. In providing for the construction of such a system by the municipaHty itself the statute stipulated that if the system should be constructed at the expense of the municipality it should "be deemed to be a part of the public streets and highways of said city." § 583. Practical necessity long recognized as basis of municipal ownership. — In the course of its opinion following the decision of the case of People ex rel. Murphy v. Kelly, 76 N. Y. 475, in sustaining the power of the cities of New York and Brooklyn to construct the Brooklyn bridge connecting their respective ter- ritory at their joint expense, which this court at that early date held to be a city purpose, the court in the case in question recognizing the practical phases of the matter said: "The situation, however, in the city of New York, is most peculiar. A long, narrow island lies between two rivers, so narrow in places that there are practically but two or three streets through which the masses must reach its business center. The population of the city during the last half century has increased from three hundred thou- sand to over a million and a half of people. The travel upon its existing railroads during the last twenty years has increased from 150,000,000 in 1874 to up- wards of 448,000,000 in 1894. It was conceded upon the argument that the crowded and congested condi- tion of the travel upon the streets in the city renders the proposed structure necessary. These considera- tions have induced us to give to the provisions of the act a most liberal construction. The commissioners located the road, and tried to induce private capital to construct and operate it. In this they have failed, and the situation is such that the city must itself construct the road, or go without it. Here we have ? 651 MUNICIPAL OWNERSHIP. , § 584 a demand for a great public highway, which private enterprise and capital will not construct. It is neces- sary for the welfare of the people, and is required by them. It is public in character, and is authorized by the legislature. Our conclusion is that, under the circumstances and situation here presented, the pro- posed road may properly be held to be 'for a city purpose,' and that the acts are not in contravention of the provisions of the constitution." § 584. Ownership without operation permitted. — This case was expressly sustained and the principle extended in its application in the case of Admiral Realty Co. v. New York, 206 N. Y. no, 99 N. E. 241, decided June 29, 1912, where the court permitted the municipality not only to construct at its own expense a rapid transit system, but to lease it to private capital to be operated in connection with a system owned by the lessee for the purpose of securing a uniform con- tinuous system of transfers for its inhabitants. In the course of this very practical and progressive deci- sion the court said: "The question whether the city may make this arrangement with the Interborough Company seems to resolve itself into the fundamental inquiry whether a municipality, having made a con- tract, may subsequently bargain, under full legislative authority, for a modification of that contract, so that it will be adjustable to altered and then existing cir- cumstances, paying an adequate consideration, either for what the other party gives up, or for what it secures under the modifications. It seems to me obvious that a municipality has such power. For if it be once decided that the municipality has the right to bargain with the Interborough Company for a modification of the latter's lease of the old sub- ways, so as to bring them into a unified system of § 585 PUBLIC UTILITIES. ' 652 transportation with the new ones, the consideration to be paid for such modification, in the absence of fraud or collusion, which is not charged, rests in the discretion and judgment of the public officials; and certainly, as observed before, it is not objectionable that, instead of burdening the municipality with more rapid and oppressive methods of payment, it is pro- vided that this consideration shall be paid from year to year out of the earnings of the railroads. . . . The city will own all the subways which are to be operated together. It is true that at present the Inter- borough Company has a separate interest in some of them as lessee. But by the proposed contract this lease is to be modified and superseded by a new agree- ment, whereby the city becomes reinvested with a substantial control thereof, and relets them, in con- nection with its new subways, under one contract for operation as a single and entire system. . . . And the question is whether the municipality, instead of building subways at an enormous expense over the entire territory, may build them in part of it, and then make a contract for their operation with the owner of the privately owned system, under which the latter agrees to operate its system in conjunction with the subways, and subject to a single fare. It seems to me that it may thus do; and that the state- ment of the proposition very largely supplies the argument in its favor." § 585. Constitutionality of municipal ownership unquestioned. — The constitutionality of the statutory enactments of New York just discussed and the right of New York City pursuant to such statutory enact- ments to construct, maintain and operate a rapid transit system on the theory that it is a necessary municipal purpose is expressly sustained and approved 653 MUNICIPAL OWNERSHIP. § 585 by the court in the case of Underground R. R. v. New York, 116 Fed. 952, decided in 1902, where the court said: "The acts of defendants commissioners, under the rapid transit act, can not be construed to confer upon complainant any right or authority to construct an underground railroad specifically mentioned in the act. By the provisions of the rapid transit act, the privilege and franchise is to be sold at public auction to a corporation organized and existing under that act. The averred unconstitutionality of the rapid transit act and the invalidity of the contract entered into by the defendants for the many reasons assigned in the bill seem to be sufficiently answered by the decision of the court of appeals of the state of New York in Sun Printing & Publishing Assn. v. City of New York, 152 N. Y. 257, 46 N. E. 499, 37 L. R. A. 788. The constitutionality of the rapid transit act is there established. The decision, being that of the highest tribunal of the state, is controlling upon this court. Adams Express Co. v. Ohio. 165 U. S. 219, 41 L. ed. 683. It falls within the general rule that the construction of the state courts of last resort of state constitutions and statutes will ordinarily be accepted by the courts of the United States as con- trolling. ... As before stated, the act in terms authorizes the rapid transit board to contract 'with any person, firm or corporation which in the opinion of the board shall be best qualified to fulfill and carry out such contract, for the construction of such road or roads upon the routes and in accordance with the plans and specifications so adopted, for such sum or sums of money, to be raised and paid out of the treasury of said city, as hereinafter provided, and on such terms and conditions not inconsistent with the aforesaid plans and specifications as said board shall determine to be best for the public interest.' Section § 585 PUBLIC UTILITIES. 654 34. No particular person, class of persons, or corpora- tion is excluded from the privilege of contracting for the construction and operation of the proposed rail- road. All may compete." This decision was sustained on appeal by the Supreme Court of the United States in 193 U. S. 416, 48 L. ed. 733. 1 CHAPTER XXIX. MUNICIPAL BUREAUS OR COMMISSIONS. Section. 5S6. Strict enforcement of franchise and contract rights essentiaL 587. Means of enforcing rights — Information necessary. 588. Enforcement by legal proceedings no longer adequate. 589. Relief by legislative enactment aside from commissions. 690. Popular control by public generally impracticable. 591. Public utility commissions adequate and practically necessary, 592. Relief summary, adequate and inexpensive. 593. Matter of business administration by experts. 594. Business of municipal public utilities and politics distinguished. 595. Concentration of power and responsibility. 596. Commission constitutional and entirely legal. 597. Commission a practical business necessity. 598. Relief at hands of courts practically impossible. 599. Reasonable rates required at common law and by statute. 600. Tendency toward "home rule" of local matter. 601. Municipal franchise bureau or commission necessary. § 586. Strict enforcement of franchise and contract rights essential. — Consistent and intelligent enforce- ment of franchise rights and of the power to regulate and control the municipal public utility is of equal importance to securing the proper franchise provisions and the necessary statutory authority to permit the municipality to regulate and control the municipal public utility. The fearless and persistent enforcement by the municipality of its rights in securing ade- quate and complete service from the municipal public utility at a fair and uniform rate is just as essential, if not even more necessary, than providing the neces- sary power and authority for giving the municipality the right to require such service for itself and its inhab- 655 § 5^7 PUBLIC UTILITIES. 656 itants and to control the rates of the municipal public utility. The strict and impartial enforcement of the law and of the franchise or contract rights available to the municipality is essentially necessary if it is to receive satisfactory service at a fair uniform rate. § 587. Means of enforcing rights — Information necessary. — The methods or means by which such powers may be enforced and the rights conferred thereby secured are by legal proceedings, legislative enactment, action by the people themselves or by public utility commissions. Regardless of the means employed it is always first necessary to have com- plete and accurate information as to the power of the municipality to regulate the giving of the service and the rates by virtue of its franchise or contract rights or statutory provisions; and next to determine the extent and the necessity of the investment of the municipal public utility to give the desired service as well as the expense of its maintenance and operation, the schedule of rates and other rules and regulations for furnishing the service and all matters connected with the operation of the plant and the administration of the affairs of the municipal public utility, including a complete understanding of the system of accounting and of all merger or consolidation agreements; and finally a uniform scientific system of accounting is essential as the basis for determining the amount of the investment and of a reasonable capitalization and rate of return for it. § 588. Enforcement by legal proceedings no longer adequate. — The enforcement of all these rights for the purpose of securing the service to which the mu- nicipality and its inhabitants are entitled at a fair uniform rate by a resort to legal proceedings has 657 MUNICIPAL BUREAUS. § 589 until recently been practically the only efficient method available. Although the relief secured in this way has generally been efficient it has necessarily been attended by large expenditures of money, and in many cases final relief has been very much delayed while in the meantime all parties interested have been subjected to much inconvenience and expense. Relief at the hands of the courts is in a sense only retroactive and personal, being limited to past transactions and to the parties to the action and is not comprehensive of all parties interested. The nature and the extent of the investigation necessary to the decision of matters con- nected with the giving of satisfactory service at the proper rate makes relief at the hands of the court practically impossible because of the large and con- stantly increasing number of such cases arising and of the already overcrowded dockets of our courts. Adequate regulation must anticipate future con- ditions and provide present and prospective relief rather than the adjustment of the rights of parties based on past transactions. The expense of time and money necessary to secure relief in such cases at the hands of the courts is prohibitive to most consumers of such service whose interest alone does not justify their expenditure of the necessary time and money to secure the relief to which they are entitled. This method is extravagant to the municipal public utility itself as well as to the customer, and it is now gen- erally conceded by all concerned to be inadequate for their needs. § 589. Relief by legislative enactment aside from commissions. — Relief by legislative enactment, as dis- tinguished from the delegation by the state to the municipality or a public utility commission, can not in its very nature be satisfactory or sufficient because of 42— Pub. ut. § 590 PUBLIC UTILITIES. 658 the infrequency of the sessions of the legislature and of the increasing demands upon the limited time avail- able for its action. Nor can such a method suffice for the further reason that general legislation with refer- ence to municipal public utilities involving so many- details and having so many circumstances peculiar to each particular case can not fairly or completely regu- late the matter. The details of administration and the varying conditions prevailing in different localities renders general legislation on such matters entirely in- sufficient, necessitating their delegation to local au- thority or to a commission w^hich can always enter- tain a complaint and grant summary relief; for as the court in the case of Capital City Gas Co. v. Des Moines, 72 Fed. 818, says: "Necessarily, and because of the great variety and large number of differing circumstances which enter into the local situations of the cities in the state, a general statute, fixing the price of gas, could scarcely be so drawn as satisfac- torily to adapt itself to each city; and therefore, for convenience of exercise of power to fix rates, as well, perhaps, as to permit the rates to be fixed with greater flexibility, and with more special reference in what local situations might require, the general assembly delegated this power to fix these rates to the several municipal corporations, to be exercised through their respective city councils. That this delegation was a valid exercise of legislative power is conceded by council herein." § 590. Popular control by public generally imprac- ticable. — That general legislation is entirely inade- quate as a method of regulating and controlling mu- nicipal public utilities is evidenced by the common practice of delegating a constantly increasing portion of these affairs to the particular municipality or to a 659 MUNICIPAL BUREAUS. § 59I specially constituted commission created for that purpose and equipped with the necessary technical knowledge and comparative information to make a prompt and accurate investigation and disposition of the questions as they arise. That the people themselves as citizens of the state or inhabitants of the particular municipality will not give the matter the necessary attention, and because of their lack of organization and of technical information and practical experience, that they could not attend to it satisfactorily if they would is proven conclusively by experience and common observation. Responsibility of this sort must be personalized in order to get the neces- sary attention and the business of the modern municipal public utility is entirely too elaborate and technical in its nature for every one to investigate and understand sufficiently to insure accuracy and fairness in the dis- position of the matter. In the very nature of the questions involved and in the light of past experience it must be self-evident that popular control of munici- pal public utilities by all who may be interested in either receiving or furnishing the service can not suc- ceed but that the matter must be placed in the hands of trained unbiased experts of the same ability and in- tegrity as those in charge of the municipal public util- ity itself. § 591. Public utility commissions adequate and practically necessary. — The public utility commission is the latest and apparently the ultimate form of secur- ing adequate and intelligent regulation and is attended with the least possible expenditure of money and time necessary to secure the desired results. A public util- ity commission established by the state or a municipal commission or bureau created pursuant to authority conferred upon the municipality by the state for that § 592 PUBLIC UTILITIES. 66c purpose is a permanent administrative body of trained experts whose services are always available for the purpose of investigating and adjusting the conflicting rights and liabilities that are necessarily constantly arising between the opposing parties involved in fur- nishing and using any municipal public utility service. The members of such a commission are not only spe- cially trained for this service but they give it their exclusive attention, and the information secured in connection with the investigations and adjustments made in the course of a few years furnishes the neces- sary technical data in detail which, when properly classified by the commission, constitutes the basis for the investigation and adjustment of any question aris- ing in any particular municipal public utility at a com- paratively nominal expense. § 592. Relief summary, adequate and inexpensive. — With the information secured as the result of the investigations and adjustments made by the com- mission and classified it is possible to make the proper disposition of any case promptly when it arises in the light of the information which the commission already has on hand at a relatively slight expense and much more expeditiously than by resort to the courts. It is a question of business administration rather than a judicial one whose adjustment requires not only ac- curate technical information but the enforcement of the rights of the particular case as well as all similar ones arising any time thereafter in order that the rights belonging respectively to each party may be always secured. § 593. Matter of business administration by ex- perts. — The fact that a franchise is not self-enforcing and that statutory provisions for the regulation of 66l MUNICIPAL BUREAUS. § 594 municipal public utility service are not self-executing furnishes ample justification for a public utility com- mission. Being a matter of business administration the commission which is composed of trained business experts along this particular line not only furnishes the best and most efficient method for regulating the busi- ness but also by separating it from other municipal affairs and political considerations thereby relieves it of the greatest practical difficulty which now generally attends the administration of such business matters by the ordinary municipal officer who is selected by a political party, and because of the manner of his selection and the short term of his service can not be nor become an expert on the subject. § 594. Business of municipal public utilities and pohtics distinguished. — With the business of municipal public utilities placed in the hands of such a non-parti- san permanent commission of capable men specially trained for rendering such service, these very im- portant and extensive business interests, in which every inhabitant of the municipality as well as the municipality itself is vitally interested, would be sepa- rated from political matters and party politics which are now all too often controlled by and in the interest of those in charge of the municipal public utilities. Whether other municipal affairs are matters of busi- ness rather than politics, there can be no question but that all matters of municipal public utilities are busi- ness questions and not political ones which accordingly can only be properly disposed of in a business way and by men especially informed and experienced in such affairs rather than by municipal officers selected by political parties for a short term of service. There is no more justification for expecting satisfactory and efficient administration of municipal public utility af- fairs at the hands of municipal officers who are thus § 595 PUBLIC UTILITIES. 662r selected at such frequent intervals than would be the case in the affairs of any large business concern, for both alike require capable experienced men specially- trained and permanently in charge of the regulation or administration of such concerns. § 595- Concentration of power and responsibility. — The most convenient and efficient method of regu- lating and controlling municipal public utility services is by an administrative body having all the necessary power to regulate the service with that duty and re- sponsibility imposed by the grant of such power. The nature and extent of the power which such a com- mission or bureau has depends entirely upon the statutory provisions creating it, and while such power may be merely advisory the situation generally re- quires authority to dictate and enforce as well as to advise. § 596. Commission constitutional and entirely legal. — That an administrative body in the form of a commission or bureau is constitutional and a practical business necessity has been fully recognized by all the courts which have been called upon to construe such statutory enactments, and in their decisions they have fully recognized the necessity for such administrative bodies. Among the first of these decisions to conceive the necessity for such a method of regulating the modern municipal public utility service is the case of Stone v. Farmers Loan and Trust Co., 116 U. S. 307, 29 L. cd. 636, commonly known as the Railroad Commission Cases, where the right to regulate the furnishing of such service and to fix the reasonable rate for it through a commission created by the state for that purpose is fully and frankly recognized and approved: 663 MUNICIPAL BUREAUS. § 596 The same court in the case of Reagan v. Farmers Loan and Trust Co., 154 U. S. 362, 38 L. ed. 1014. decided in 1894, supplementing the decision of this court in the railroad commission cases spoke as fol- lows: "Passing from the question of jurisdiction to the act itself, there can be no doubt of the general power of a state to regulate the fares and freights which may be charged and received by railroad or other carriers, and that this regulation can be carried on by means of a commission. Such a commission is merely an administrative board created by the state for carrying into effect the will of the state as ex- pressed by its legislation. Stone v. Farmers Loan & T. Co. (Railroad Commission Cases) 116 U. S. 307, 29 L. ed. 636. No valid objection, therefore, can be made on account of the general features of this act; those by which the state has created the railroad com- mission and entrusted it with the duty of prescribing rates of fares and freights as well as other regula- tions for the management of the railroads of the state. . . . It is doubtless true, as a general proposition, that the formation of a tariff of charges for the trans- portation by a common carrier of persons or property is a legislative or administrative rather than a judicial function. Yet it has always been recognized that, if a carrier attempted to charge a shipper an unreason- able sum, the courts had jurisdiction to inquire into that matter and to award to the shipper any amount exacted from him in excess of a reasonable rate, and also in a reverse case to render judgment in favor of the carrier for the amount found to be a reasonable charge. The province of the courts is not changed, nor the limit of judicial inquiry altered, because the legislature instead of the carrier prescribes the rates. The courts are not authorized to revise or change the body of rates imposed by a legislature or a commis- § 597 PUBLIC UTILITIES. 664 sion; they do not determine whether one rate is pre- ferable to another, or what under all circumstances would be fair and reasonable as between the carriers and the shippers; they do not engage in any mere ad- ministrative work; but still there can be 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 prac- tical destruction to rights of property, and if found so to be, to restrain its operation." § 597- Commission a practical business necessity. — The necessity for such a commission in order to secure the proper regulation and control of municipal public utilities is frankly recognized and accurately ex- pressed in the very practical recent decision of Des Moines Gas Co. v. Des Moines, 199 Fed. 204, decided Aug. 21, 1912, where the court says: "This litigation has cost both the gas company and city extravagantly large sums, most of which can not be taxed as costs, nor recovered back by the party successful in the end. Much of this kind of litigation, and practically all of the expense, would be avoided if Iowa, like so many of the other, including some neighboring, states, had an impartial and city nonresident commission or tribunal, with power to fix these rates at a public hear- ing, all interested parties present, with the tribunal selecting its own engineers, auditors, and accountants. Too often we have selfish, partisan, prejudiced, and unreliable experts engaged for weeks at a time, at $100 or more and expenses per day, exaggerating their importance, and making the successful party in fact a loser. With all of our boasted advancement, Iowa is a laggard in this matter, and will continue as such until these rate makings are taken from the power 665 MUNICIPAL BUREAUS. § 598 of city councils. Appeals to the courts will seldom be taken from the findings of such a tribunal." § 598. Relief at hands of courts practically im- possible. — That the courts can not give adequate relief in the increasing number of cases involving so many details of business administration in connection with furnishing municipal public utility service and that the commission is absolutely essential and much better fitted for giving the relief is indicated in the case of Saratoga Springs v. Saratoga Gas, &c., Co., 190 N. Y. 562, 191 N. V. 123, 83 N. E. 693, 18 L. R. A. (N. S.) 713, decided in 1908, where the court says: "That the most appropriate method (speaking from a prac- tical, not necessarily constitutional, point of view) is the creation of a commission or body of experts to determine the particular rates, has been said several times in the opinions rendered by the Supreme Court of the United States in the various railroad commis- sion cases and in those of state courts. While no con- sideration of convenience or of supposed necessity would justify us in ignoring any constitutional man- date or limitation, it must be remembered that we have no express constitutional provision on the subject, and that it is sought to condemn the legislation before us solely by extending the principle that the legisla- ture can not delegate legislative powers, a principle which, though unquestionably true, is, as we have seen, true only within limits to a point that would render efficient legislation on the subject impracticable. It can not be said, to use the language of Justice Harlan, that in any real sense the legislature has delegated its power to the commission. The statute is complete. The legislature, not the commission, has enacted that there shall be maximum rates for the charges of the gas and electric light companies, and § 599 PUBLIC UTILITIES. 666 that light shall be furnished to consumers at those rates, and has provided the penalty for extorting greater charges for service. What is intrusted to the commission is the duty of investigating the facts, and, after a public hearing, of ascertaining and determining what is a reasonable maximum rate. I can not see how the duty intrusted to the commission in this case differs in principle from that imposed on the President to determine that duties were reciprocally unequal or on the Secretary of the Treasury to determine what was inferior tea. § 599. Reasonable rates required at common law and by statute. — The statute provides that the com- mission shall fix the rate within the limits prescribed by law. This includes both statute and common law. There may have been companies which had franchises immune from invasion by which they were authorized to charge specific rates. The common law prescribes the rule that the rate shall be reasonable, and I think, even without special mention, the statute would neces- sarily imply the same limitation. But it is said that, granting this, 'reasonable' is really no standard, but a mere generality. Again, we are of a different opinion. Indeed, if the statute assumed to fix any other stand- ard for rates than that they should be reasonable, we think it would be much more open to attack than in its present form. . . . Any other standard, unless 'a mere generality,' would surely be challenged as arbitrary." § 600. Tendency toward "home rule" of local mat- ter. — As municipalities show greater ability to con- duct their own municipal and business affairs there is a general tendency to permit them to do so. This is evidenced by recent constitutional provisions in a 66/ MUNICIPAL BUREAUS. § 6oi number of states granting what is commonly known as "home rule" for municipalities. The first duty of the municipality toward properly disposing of its mu- nicipal affairs so far at least as they are concerned with municipal public utilities is the creation of a franchise bureau or a municipal public utility commis- sion for the purpose of securing complete and accurate information concerning the franchise or contract pro- visions of its municipal public utilities and all other information in regard to their investment, maintenance and operation; and whether there be a state public utility commission or not, each municipality has prob- lems peculiar to itself and should have complete and accurate information in regard to all its municipal public utilities as well as an administrative body com- posed of capable experienced men able to cope with those in charge of the affairs of the municipal public utility itself in the interest of the public. § 60 1. Municipal franchise bureau or commission necessary. — Such a bureau or commission should in- vestigate and advise the municipal authorities on all questions of franchise rights and attend to their en- forcement constantly and consistently as well as to the service rendered by the company and the reason- ableness of the rate received by it for the service, for it is evident that, in a business of such magnitude with as many details of administration and technical ques- tions involved as are common to the affairs of munici- pal public utilities, the municipality and its inhabitants can only be in position to secure and know that they are receiving proper service at a fair uniform rate by the employment of such men as are capable of in- vestigating such questions equally with the ofTicers of the municipal public utility itself. CHAPTER XXX. STATE PUBLIC UTILITY COMMISSIONS. Section. 602. State public utility commission necessary. 603. State regulation supplants competition. 604. Indeterminate franchise properly regulated. 605. State control of capitalization and expenditures essential. 606. Impartial commission of experts approved by courts. 607. Commission required by importance and complexity of duty. 608. Franchise provisions and matters of administration described. 609. Monopoly under indeterminate permit. 610. State commissions first established. 611. Police power as basis for regulation. €12. Scope of activity of business requires state commission. § 6o2. State public utility commission necessary. — While the municipal commission, bureau or other administrative department of the municipality is of great value, the expense of maintaining a properly equipped commission is prohibitive to all but the large municipalities and makes necessary state public utility commissions. Many municipal public utilities are becoming interurban in their scope and are no longer local to the particular municipality whose juris- diction accordingly is not sufficiently comprehensive to provide the necessary regulation and control. Where several municipalities are alike interested in the con- trol and operation of the same municipal public utility, it is evident that the control which they would thus exercise independently of each other, being naturally local in each instance, could not be uniform. Each municipality is necessarily limited to its own territory so that the only method by which to secure a uniform 668 669 STATE COMMISSIONS. § 603 regulation would be at the hands of the state or through a state public utility commission. § 603. State regulation supplants competition. — The extent of the information necessary and the scope of the data essential to a comprehensive regulation of service at a fair uniform rate can be secured to the best advantage by the state in connection with a public utility commission of trained experts on the subject. They in turn can serve similar departments of the mu- nicipalities of the state in an advisory capacity, and each supplementing the other, can secure the best re- sults at the least expense. The theory of the regula- tion of municipal public utilities by the state through such a commission is to avoid competition which is now generally recognized as a needless economic waste and an entirely insufficient method of securing the necessary regulation and control. Under this method the state through its commission takes the place of competition and furnishes the regulation which competition can not give, and at the same time avoids the expense of duplication in the investment and operation of competing municipal public utilities. § 604. Indeterminate franchise properly regulated. — On the other hand the municipal public utility operating under what the public utilities law of Wis- consin aptly designates the indeterminate franchise which protects the municipal public utility against competition and a total loss which may occur at the expiration of the franchise. Under this law the public utility commission determines in the first instance whether public convenience and necessity demand municipal public utility service where such a company proposes to install its plant and furnish such service, and only after a determination of this question in the § 605 PUBLIC UTILITIES. 67O affirmative and the granting of its consent by the commission may the municipal public utility plant be installed, thus avoiding needless competition by legal- izing a monopoly. The consideration, however, for such franchises and exclusive privileges is that they shall be constantly and completely under the regula- tion and control of the state through its public utiHty commission. § 605. State control of capitalization and expendi- tures essential. — This control covers the question of the capitalization of the municipal public utility so that the amount of stock and bonds issued by such a company is determined by the public utility commis- sion which also supervises the construction of the plant, thus insuring the expenditure on the plant of all funds received from the sale of such stock and bonds as well as limiting such expenditure and preventing extravagance or unnecessary construction. This con- trol over the capitalization and issue of stocks and bonds of the municipal public utility by the state not only protects the consumer of the service in a fair rate but also the investor in the pubHc utility securi- ties, insuring on the one hand proper service at a rea- sonable rate as determined by the actual cost and on the other a fair return on the investment actually put into the business. By such regulation capitalization and investment coincide which simplifies the matter of rate regulation as well as that of making invest- ments in the securities of such companies and pre- venting fluctuation in their values. § 606. Impartial commission of experts approved by courts. — ^The courts have been among the first and most ardent supporters of this form of regulation be- cause it is practicable, inexpensive and at the same 671 STATE COMMISSIONS. § 607 time efficient and summary. That the present unbusi- ness-Hke method of placing the control of municipal public utilities in themselves or what is practically too often the same thing in the politician who determines the personnel of the municipal authorities must be remedied by the creation of municipal public utility commissions is well expressed in the case of Des Moines Water Co. v. Des Moines, 192 Fed. 193, de- cided in 191 1, where the court says: "The present ex- pensive chaos should be brought to an end. It is known by all informed men that city councils neces- sarily adopt rates with but little or no investigation as to what rates ought to be fixed. The result is that we have ordinances fixing rates based upon but little intelligent effort for the ascertainment of the facts. Some of the states, like New York, Massachusetts, and Wisconsin, have state commissions of competent men, who give public hearings, and who do nothing behind doors, nor in secrecy — a commission with no member interested as a taxpayer of the city, and with no member subject to influences other than the ascer- tainment of the truth and the facts. Rates are thus fixed with which most fair-minded people are ready to acquiesce. It is strange that we have no such legis- lation and no such commissions in Iowa." § 607. Commission required by importance and complexity of duty. — The complexity of the question and the importance of its proper solution by the public utility commission which is the only available method that is practical and sufficient is indicated in the case of La Crosse v. La Crosse Gas & Electric Co., 145 Wis. 408, 130 N. W. 530, decided in 1911, where the court says: "It is useless to extend this opinion further for the purpose of picturing the situation dealt with by the legislature. The magnitude of the task was § 6o8 PUBLIC UTILITIES. 6/2 great. Few, if any, greater have been dealt with in | our legislative history. The result stands significant '' as a monument to legislative wisdom. That such a complicated situation has been met by written law in such a way as to avoid successful attack up to this time on the vahdity of the law or any part of it, and ^ avoid attack at all either upon the law or its admin- w istration, except in a very few instances, and secure optional submission by many owners of old franchises to a displacement of their privileges, is quite a marvel. . . . Doubtless, we reiterate, it was thought that sound policy required old franchises with their mul- tiplicity of differences to be brought under one system so that the things formerly privileged might continue to be so but solely under conditions and limitations referable to a single standard, to wit, the public utility law, with its administrative board to dominate the situation as between the owners of privileges and the public, to the end that each might be coerced, if need be, to deal justly with the other, accomplishing an era of fair exchange of equivalents involving service being furnished customers of the best character and at the lowest price practicable and without discrimination, and rendition therefor of such just and reasonable compensation as under the circumstances of each sit- uation would enable performance of the mutual obli- gations practicable." § 608. Franchise provisions and matters of ad- ministration described. — One of the best arguments in favor of the state public utility commission which at the same time describes in detail the nature of the indeterminate franchise and the reason for its adoption is furnished in the case of Calumet Service Co. v. Chil- ton, 148 Wis. 334, 135 N. W. 131, decided Feb. 20, 1912, where the court says: "So the findings are 673 STATE COMMISSIONS. § 6o8 amply sustained that the electric company, December 21, 1907, acquired an indeterminate permit. The sur- render proceedings in form and substance were with- out infirmity; the company had all the essentials of capacity to make the exchange — (a) it was a public utility; (b) it was a duly organized corporation under the laws of this state; (c) it had a 'license, permit or franchise' to do public utility business in the city of Chilton; and (d) it was operating under such 'license, permit or franchise.' . . . The findings are to the effect that only the privilege feature of the old fran- chise survived the surrender for its equivalent emanat- ing directly from the state; that all the conditions and limitations of the old one and all contract fea- tures between the city and the owners of the privilege inherent in the grant, were extinguished by the sur- render and superseded by the 'conditions and limita- tions' of the public utility law. ... In other words, the idea is that the grantee, under state control, and subject to prescribed limitations and supervision, shall have a 'monopoly,' as it has been several times called by the railroad commission, in its administra- tive work, and by this court, within the field covered by the privilege, as to rendering the particular public utility service, whether directly or indirectly, to or for the public. We should say, in passing, that the term 'monopoly' as thus used is to be taken in the sense of a mere exclusive privilege granted for a consideration equivalent; monopoly only in the sense that the field of activity is reserved to the grantee — the mere ele- ment of exclusiveness. . . . The evident intention of the legislature, expressed in unambiguous language, when read in the light of the situation dealt with, was . . . to substitute a new situation, all looking to unity, in practical effect, of a multitude of diverse units corresponding to the many outstanding franchises, 43— Pub. ut. § 609 PUBLIC UTILITIES. 674 and others in prospect, harmonizing them by making them referable to a single standard, to wit, the public utility law, and to an ultimate single control, to wit, control by the trained impartial state commission, so as to effect the one supreme purpose, i. e., "the best service practicable at reasonable cost to consumers in all cases and as near a uniform rate for service as varying circumstances and conditions would permit — a condition as near the ideal probably as could be at- tained." § 609. Monopoly under indeterminate permit. — This case supplements that of State v. Kenosha Elec- tric R. Co., 145 Wis. 337, 129 N. W. 600, decided in 1911, which furnishes a further statement and expla- nation of the indeterminate franchise plan as provided for in the public utilities law of Wisconsin, where the court said: "The intent was to give the holder of an indeterminate permit, within the scope thereof, a monopoly, so long as the convenience and necessities of the public should be reasonably satisfied, yet to se- cure to the public the benefit of the monopoly in excess of a fair return upon the investment, under proper administration, by insuring to the consumers the best practicable service at the lowest practicable cost, and to that end prohibit, conditionally, the grant- ing of just such franchises as the one challenged in this case in the circumstances under which the ordi- nance of June 7, 1909, was passed. . . . Here the legislature provided, in effect, that in case of there existing under an indeterminate permit, a right of a corporation to enjoy such privileges as are involved in this case, no other permit or franchise shall be granted to any one to invade, in whole or in part, the same field, except upon a specified condition involving the ascertainment of a fact. . . . The mere adminis- fi 675 STATE COMMISSIONS. § 6lO trative labor of ascertaining the fact, is not legislative power at all in the undelegable sense. Such adminis- trative feature does not involve any element of ex- pediency or legislative discretion, but only the judg- ment and discretion which any person or body com- monly exercises to ascertain whether a given situation satisfied the calls of a rule prescribed by higher au- thority to a lower for guidance and enforcement." § 6 10. State commissions first established. — Mass- achusetts was the first state to adopt this commission form of regulation for municipal public utilities as a substitution for the control by competition which must always be insufficient and unsatisfactory in the case of such natural monopolies, for as the court in Weld v. Gas & Electric Light Comrs., 197 Mass. 556, 84 N. E. lOi, decided in 1908, says: "In the first place, in reference to this department of public service, we have adopted, in this state, legislative regulation and con- trol as our reliance against the evil effects of monop- oly, rather than competitive action between two or more corporations, where such competition will greatly increase the aggregate cost of supplying the needs of the public, and perhaps cause other serious inconveni- ences. . . . The state, through the regularly con- stituted authorities, has taken complete control of these corporations so far as is necessary to prevent the abuses of monopoly. Our statutes are founded on the assumption that, to have two or more competing companies running lines of gas pipe and conduits for electric wires through the same streets would often greatly increase the necessary cost of furnishing light, as well as cause great inconvenience to the public and to individuals from the unnecessary digging up of the streets from time to time, and the interference with pavements, street railway tracks, water pipes and §6ll PUBLIC UTILITIES. d'J^i Other structures. Attorney General v. Walworth Light and Power Co., 157 Mass. 87, 31 N. E. 482, 16 L. R. A. 398. In reference to some kinds of public service, and under some conditions, it is thought by many that regulation by the state is better than com- petition." This principle was established and fully recognized as constitutional and practical in this jurisdiction as indicated in the case of Attorney General ex rel. v. Walworth L. & P. Co., 157 Mass. 86, 31 N. E. 482, 16 L. R. A. 398, decided in 1892, where the court says: "The legislature may think that a business like that of transmitting electricity through the streets of a city has got to be transacted by a regulated monopoly, and that a free competition between as many com- panies and persons as may be minded to put up wires in the streets, and to try their luck is impracticable. Without wasting time upon useless generalities about the construction of statutes, it is enough to say that the statute before us had that consideration in view, and must be construed accordingly." §611. Police power as basis for regulation. — That the police power constitutes the basis for state regula- tion which when properly availed of may avoid the necessity for ownership by the municipality or the state is indicated in the case of State ex rel. Webster V. Superior Court of King County, 67 Wash. 37, 120 Pac. 861, decided Jan. 27, 1912, where the court says: "In its search for remedies and while seriously con- sidering municipal, state, or government ownership, the public, by reference to the police power of the state, has almost unwittingly — unwittingly in the sense that it is not generally appreciated — solved the prob- lem, and has by the application of fundamental as well as established relative propositions of law gained every 677 STATE COMMISSIONS. § 6l2 advantage of ownership without assuming its burdens. From the time it was held to be within the pohce power of the state to control public service corpora- tions to the extent of fixing rates, the natural se- quences of that holding have followed with a rapidity which may seem to those who have been wedded to the theory that the government could not interfere in the use, or limit the earnings, of property devoted to public service and which was not put to an unlaw- ful use, to be alarming." § 612. Scope of activity of business requires state commission. — That many municipal public utilities are interurban or even interstate in their operations there- by necessitating either state or interstate rather than municipal regulation is well expressed in the case of Texarkana v. Southwestern Tel. & T. Co., 48 Tex. Civ. App. 16, 106 S. W. 915, decided in 1907, where the court says: "When we consider the nature of the business of telegraph and telephone lines in this busy commercial age, we have a most cogent reason for the legislature declining to commit to the arbitrary con- trol of the municipalities throughout the state the use by such companies of the public streets and alleys. These companies are not primarily of local concern, affecting only the inhabitants of the towns and cities through which they pass, but they essentially concern the public at large, in that they furnish quick and cheap means of communication between all points throughout the country, by which a very large per- centage of the business of the country is transacted. In other words, the business is such a one as calls for the exercise of state regulation rather than the dele- gated power of municipal control." The necessity for state regulation in the interest of the public and especially of the consumer of the § 6l2 PUBLIC UTILITIES. 678" service and of such a method of regulation as the one proposed to insure it being fair and reasonable is indi- cated by the case of Consolidated Gas Co. v. Mayor^ 146 Fed. 150, decided in 1906, where the court says: "A corporation which undertakes, for its own emolu- ment, to supply gas to the inhabitants of a municipal- ity, under charters and franchises from the state which allow it to embark in such industry, and invite its stockholders to invest their money therein, is engaged in what is called a 'public service' or a 'public utility,' and therefore is under the supervision, inquisition, and regulation of the state as to the manner in which it •conducts its business. If, untrammeled by competi- tion it charges a price far above all reasonable cost to the helpless consumer, who must pay that price or go without, while it receives an exorbitant return on such of its property as is invested in the enterprise, the state may step in and reduce that price to such sum as will, taking everything into consideration, be a rea- sonable return upon what has been adventured [in the adventure] in the enterprise on the faith of the state's franchises. No one disputes this proposition. But in fixing such price the state should itself be fair and reasonable — should certainly stop short of confisca- tion." That the municipality has not the necessary juris- diction to regulate the public utility which operates beyond its territory and within that of several munici- palities, none of which has the ability nor the capacity adequately to regulate and control the service and the rate to be charged for it is held in the case of South Pasadena v. Los Angeles Terminal R. Co., 109 Cal. 315, 41 Pac. 1093, decided in 1895, where the court says: "One of the limitations upon such ordinances is that they can have no extra territorial force unless by express permission of the sovereign power. In the 679 STATE COMMISSIONS. § 6l2 nature of things, this must be so unless intolerable con- fusion and evil is to result; and the constitution of the state, recognizing the necessity for such a restriction, has provided (article II, section ii) that 'any county, city, etc., may make and enforce within its limits all such local, . . . and other regulations as are not in conflict w^ith general laws.' Here was a road lying partly within the confines of at least three municipali- ties — Los Angeles, South Pasadena, and Pasadena. Conceding the right of plaintiff to impose a limitation on the charges to be made for passage between sta- tions within its limits and stations elsewhere, then the other cities named have, or might have, the same right." The purposes of public utility commissions are thus defined in a very recent case: "That law was enacted in response to a pronounced and insistent pub- lic opinion, and was a radical and important modifica- tion of the relations and policy of the people toward the corporations, which are its subjects. Its para- mount purpose was to protect and enforce the rights of the public. It made the commissions the guardians of the public by enabling them to prevent the issue of stock and bonds for other than statutory purposes, or in appreciable and unfair excess of the value of the assets securing them, and to prevent, also, unneeded or extortionate competition, or indifferent and unac- commodating methods of operation, or oppressive or discriminating charges or rates. It provided for a reg- ulation and control which were intended to prevent, on the one hand, the evils of an unrestricted right of competition, and, on the other hand, the abuses of monopoly."^ ' People ex rel. New York Edison Co. v. Willcox, 207 X. Y. 86, 100 N. E. 705. APPENDIX A. THE PUBLIC SERVICE COMMISSIONS LAW OF NEW YORK. As Revised and Amended to Close of Legislature of 1912. Article I. Public service commissions; general provisions (§§ 1-24). II. Provisions relating to railroads, street railroads and common carriers (§§ 25-40). III. Provisions relating to the powers of the commissions in respect to railroads, street railroads and common car- riers (§§45-59). IV. Provisions relating to gas and electric corporations; reg- ulation of price of gas and electricity (§§ 64-77). V. Provisions relating to telegraph and telephone lines and to telephone and telegraph corporations (§§ 90-103). VI. Commissions and offices abolished; saving clause; repeal (§§ 120-127). ARTICLE I. Public Service Commissions; General Provisions. Section 1. 2. 10. Short title. Definitions. Public service districts. Commissions established; appointment; removal; terms of office. Jurisdiction of commissions. Counsel to the commissions. Secretary to the commissions. Additional officers and employees. Oath of office; eligibility of commissioners and officers. Offices of commissions; meetings; official seal; sta- tionery. Quorum; powers of a commissioner. Counsel to the commissions; duties. 681 682 PUBLIC UTILITIES. 13. Salaries and expenses. 14. Payment of salaries and expenses. 15. Certain acts prohibited. 16. Reports of commissions. 17. Certified copies of papers filed to be evidence. 18. Fees to be charged and collected by the commissions. 19. Attendance of witnesses and their fees. 20. Practice before the commissions; immunity of witnesses. 21. Court proceedings; preference. 22. Rehearing before commission. 23. Service and effect of orders. 24. Actions to recover penalties or forfeitures. Section i. Short title. This chapter shall be known as the "Public Service Commissions Law," and shall apply to the public services herein described and to the commissions hereby created. § 2. Definitions, i. The term "commission," when used in this chapter, means either public service commission hereby created, which by the terms of this chapter is vested with the power or charged with the duty in question. 2. The term "commissioner," when used in this chapter, means one of the members of such commis- sion. 3. The term "corporation," when used in this chapter, includes a corporation, company, association and joint-stock association. 4. The word "person," when used in this chapter, includes an individual, and a firm or copartnership. 5. The term "street railroad," when used in this chapter, includes every railroad by whatsoever power operated, or any extension or extensions, branch or branches thereof, for public use in the conveyance of persons or property for compensation, being mainly upon, along, above or below any street, avenue, road, highway, bridge or public place in any city, village or town, and including all equipment, switches, spurs, NEW YORK LAW. 683 tracks, right of trackage, subways, tunnels, stations terminals and terminal facilities of every kind used, operated or owned by or in connection with any such street railroad; but the said term "street railroad," when used in this chapter, shall not include a railroad constituting or used as part of a trunk line railroad system. 6. The term "railroad," when used in this chap- ter, includes every railroad, other than a street rail- road, by whatsoever power operated for public use in the conveyance of persons or property for compen- sation, with all bridges, ferries, tunnels, equipment, switches, spurs, tracks, stations and terminal facilities of every kind used, operated or owned by or in con- nection with any such railroad. 7. The term "street railroad corporation," when used in this chapter, includes every corporation, com- pany, association, joint-stock association, partnership and person, their lessees, trustees or receivers ap- pointed by any court whatsoever, owning, operating or managing any street railroad or any cars or other equipment used thereon or in connection therewith. 8. The term "railroad corporation," when used in this chapter, includes every corporation, company, association, joint-stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever, owning, operating or manag- ing any railroad or any cars or other equipment used thereon or in connection therewith. 9. The term "common carrier," when used in this chapter, includes all railroad corporations, street rail- road corporations, express companies, car companies, sleeping-car companies, freight companies, freight-line companies, and every corporation, company, associa- tion, joint-stock association, partnership and person, their lessees, trustees or receivers appointed by any 684 PUBLIC UTILITIES. court whatsoever, owning, operating or managing any- such agency for public use in the conveyance of per- sons, or property within this state; but the said term common carrier when used in this chapter shall not include an express company unless the same is oper- ated wholly or in part upon, or in connection with a railroad or street railroad. 10. The term "gas plant," when used in this chap- ter, includes all real estate, fixtures and personal prop- erty operated, owned, used or to be used for or in connection with or to facilitate the manufacture, dis- tribution, sale or furnishing of gas (natural or manu- factured) for light, heat or power. 11. The term "gas corporation," when used in this chapter, includes every corporation, company, as- sociation, joint-stock association, partnership and per- -son, their lessees, trustees or receivers appointed by any court whatsoever, owning, operating or managing any gas plant except where gas is made or produced and distributed by the maker on or through private property solely for its own use or the use of its ten- ants and not for sale to others. 12. The term "electric plant," when used in this chapter, includes all real estate, fixtures and personal property operated, owned, used or to be used for or in connection with or to facilitate the generation, transmission, distribution, sale or furnishing of elec- tricity for light, heat or power; and any conduits, ducts or other devices, materials, apparatus or property for containing, holding or carrying conductors used or to be used for the transmission of electricity for light, heat or power. 13. The term "electrical corporation," when used in this chapter, includes every corporation, company, association, joint-stock association, partnership and person, their lessees, trustees or receivers appointed by NEW YORK LAW. 685 any court whatsoever (other than a railroad or street railroad corporation generating electricity solely for railroad or street railroad purposes or for the use of its tenants and not for sale to others) owning, operat- ing or managing any electric plant except where elec- tricity is generated or distributed by the producer solely on or through private property for railroad or street railroad purposes or for its own use or the use of its tenants and not for sale to others. 14. The term "transportation of property," when used in this chapter, includes any service in connec- tion with the receiving, delivery, elevation, transfer in transit, ventilation, refrigeration, icing, storage and handling of the property transported. 15. The term "line," when used in this chapter, includes "route." 16. The term "municipality," when used in this chapter, includes a city, village, town or lighting dis- trict, organized as provided by a general or special act. 17. The term "telephone corporation," when used in this chapter, includes every corporation, company, association, joint-stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever, owning, operating or manag- ing any telephone line or part of telephone line used in the conduct of the business of affording telephonic communication for hire; excepting, however, any cor- poration, company, association, joint-stock association, partnership or person, their lessees, trustees or re- ceivers having property actually used in the public service within the state of a value not exceeding ten thousand dollars, or which do not operate the business of affording telephonic communication for profit. 18. The term "telephone line," when used in this chapter, includes conduits, ducts, poles, wires, cables, 686 PUBLIC UTILITIES. cross-arms, receivers, transmitters, instruments, ma- chines, appliances and all devices, real estate, ease- ments, apparatus, property and routes used, operated or owned by any telephone corporation to facilitate the business of affording telephonic communication. 19. The term "telegraph corporation," when used in this chapter, includes every corporation, company, association, joint-stock association, partnership and person, their lessees, trustees or receivers, appointed by any court whatsoever, owning, operating or manag- ing any telegraph line or part of telegraph line used in the conduct of the business of affording for hire communication by telegraph. 20. The term "telegraph line," when used in this chapter, includes conduits, ducts, poles, wires, cables, cross-arms, instruments, machines, appliances and all devices, real estate, easements, apparatus, property and routes used, operated or owned by any telegraph corporation to facilitate the business of affording communication by telegraph. § 3. Public service districts. There are hereby created two public service districts, to be known as the first district and the second district. The first district shall include the counties of New York, Kings, Queens and Richmond. The second district shall include all other counties of the state. § 4. Commissions established ; appointment ; re- moval; terms of office. There shall be a public service commission for each district, and each commission shall possess the powers and duties hereinafter speci- fied, and also all powers necessary or proper to enable it to carry out the purposes of this chapter. The commission of the first district shall consist of five [Subdivisions 17, 18, 19 and 20 added by ch. 673, L. 1910.] NEW YORK LAW. 687 members and the commission of the second district shall consist of five members, to be appointed by the governor, by and with the advice and consent of the senate, one of whom designated by the governor shall, during his term of office, be the .chairman of the com- mission of which he is a member. Each commissioner shall be a resident of the district for which he is ap- pointed. The governor may remove any commissioner for inefficiency, neglect of duty or misconduct in office, giving to him a copy of the charges against him, and an opportunity of being publicly heard in person or by counsel in his own defense, upon not less than ten days' notice. If such commissioner shall be removed the governor shall file in the office of the secretary of state a complete statement of all charges made against such commissioner, and his findings thereon, together with a complete record of the proceedings. Of the members of the commission in each district first appointed hereunder, one shall hold office until February first, nineteen hundred and nine, one until February first, nineteen hundred and ten, one until February first, nineteen hundred and eleven, one until February first, nineteen hundred and twelve, and one until February first, nineteen hundred and thirteen; the term of office of each commissioner so appointed shall begin on the first day of July, nineteen hundred and seven. Upon the expiration of each of such terms, the term of office of each commissioner thereafter appointed shall be five years from the first of Feb- ruary. Vacancies shall be filled by appointment for the unexpired term. § 5. Jurisdiction of commissions, i. The juris- diction, supervision, powers and duties of the public 688 PUBLIC UTILITIES. service commission in the first district shall extend under this chapter: a. To railroads and street railroads lying exclu- sively within that district, and to the persons or cor- porations owning, leasing or operating the same; b. To street railroads any portion of whose lines lies within that district, to all transportation of persons or property thereon within that district or from a point within either district to a point within the other dis- trict, and to the persons or corporations owning, op- erating or leasing the said street railroads; provided, however, that the commission for the second district shall have jurisdiction over such portion of the lines of said street railroads as lies within the second district, and over the persons or corporations owning, operat- ing or leasing the same, so far as concerns the con- struction, maintenance, stationary equipment, terminal facilities, stations, and local transportation facilities of said street railroads within the second district; c. To such portion of the lines of any other rail- road as lies within that district, and to the person or corporation owning, leasing or operating the same, so far as concerns the construction, maintenance, station- ary equipment, terminal facilities, stations and local transportation facilities, and local transportation of per- sons or property within that district; d. To any common carrier other than a railroad corporation or street railroad corporation operating or doing business within that district, so far as con- cerns operations exclusively within that district; e. To the manufacture, sale or distribution of gas and electricity for light, heat or power in the first district, to gas plants and to electric plants therein, and to the persons or corporations owning, leasing or operating the same. 2. And in addition thereto, the commission in the NEW YORK LAW 689 first district shall have and exercise all powers here- tofore conferred upon the board of rapid transit rail- road commissioners under chapter four of the laws of eighteen hundred and ninety-one, entitled "An act to provide for rapid transit railways in cities of over one million inhabitants," and the acts amendatory thereof, together with such other and necessary powers as may be requisite to the efficient performance of the duties imposed upon said board by said act. 3. All jurisdiction, supervision, powers and duties under this chapter not specifically granted to the pub- lic service commission of the first district shall be vested in, and be exercised by, the public service com- mission of the second district, including the regulation and control of all transportation of persons or prop- erty, and the instrumentalities connected with such transportation, on any railroad other than a street rail- road from a point within either district to a point within the other district. 4. A corporation or person owning or holding a majority of the stock of a common carrier, gas cor- poration or electrical corporation subject to the juris- diction of the commission shall be subject to the super- vision of the same commission in respect of the rela- tions between such common carrier, gas corporation or electrical corporation and such owners or holders of a majority of the stock thereof in so far as such relations arise from or by reason of such ownership or holding of stock thereof or the receipt or holding of any money or property thereof or from or by rea- son of any contract between them; and in respect of such relations shall in like manner and to the same extent as such common carrier, gas corporation or electrical corporation be subject to examination of accounts, records and memoranda, and shall furnish such reports and information as the commission shall 44— Pub. UL 690 PUBLIC UTILITIES. from time to time direct and require, and shall be subject to like penalties for default therein. 5. The jurisdiction, supervision, powers and du- ties of the public service commission in the second district shall extend, under this chapter, to every tele- phone line which lies wholly within the state of New York and that part within the state of New York of every telephone line which lies partly within and partly without the state of New York and to the persons or corporations owning, leasing or operating any such telephone line. 6. The jurisdiction, supervision, powers and duties of the public service commission in the second district shall extend, under this chapter, to every telegraph line which lies wholly within the state of New York and that part within the state of New York of every telegraph line which lies partly within and partly with- out the state of New York and to the persons or cor- porations owning, leasing or operating any such tele- graph line. 7. Corporations formed to acquire property or to transact business which would be subject to the pro- visions of this chapter, and corporations possessing franchises for any of the purposes contemplated by this chapter, shall be deemed to be subject to the provi- sions of this chapter although no property may have been acquired, business transacted or franchises ex- ercised. § 6. Counsel to the commissions. Each commis- sion shall appoint as counsel to the commission an attorney and counselor-at-law of the state of New York, who shall hold office during the pleasure of the commission. Each counsel to the commission shall, subject to the approval of the commission, have the [Subdivisions 5, 6 and 7 added by ch. 673, L. 1910.] NEW YORK LAW. 69 1 power to appoint, and at pleasure remove, attorneys and counselors-at-law, to assist him in the perform- ance of his duties, and also to employ and remove stenographers and process-servers. § 7. Secretary to the commissions. Each commis- sion shall have a secretary to be appointed by it and to hold office during its pleasure. It shall be the duty of the secretary to keep a full and true record of all proceedings of the commission, of all books, maps, documents and papers ordered filed by the commis- sion and of all orders made by a commissioner and of all orders made by the commission or approved and confirmed by it and ordered filed, and he shall be re- sponsible to the commission for the safe custody and preservation of all such documents at its office. Under the direction of the commission the secretary shall have general charge of its office, superintend its cleri- cal business and perform such other duties as the com- mission may prescribe. He shall have power and authority to administer oaths in all parts of the state, so far as the exercise of such power is properly inci- dental to the performance of his duty or that of the commission. The secretary shall designate, from time to time, one of the clerks appointed by the commis- sion to perform the duties of secretary during his ab- sence and, during such time, the clerk so designated shall at the office possess the powers of the secretary of the commission. § 8. Additional officers and employees. Each commission shall have power to employ, during its pleasure, such officers, clerks, inspectors, experts and employees as it may deem to be necessary to carry out the provisions of this chapter, or to perform the 692 PUBLIC UTILITIES. duties and exercise the powers conferred by law upon the commission. § 9. Oath of office ; eligibility of commissioners and officers. Each commissioner and each person ap- pointed to office by a commission or by counsel to a commission shall, before entering upon the duties of his office, take and subscribe the constitutional oath of office. The oaths of office other than those of a commissioner, the counsel and secretary shall be filed in the office of the commission. No person shall be eligible for appointment or shall hold the office of com- missioner or be appointed by a commission or by counsel to a commission to, or hold, any office or position under a commission, who holds any official relation to any person or corporation subject to the supervision of either commission, or who owns stock or bonds of any such corporation. § ID. Offices of commissions; meetings; official seal; stationery, etc. i. The principal office of the commission of the first district shall be in the borough of Manhattan, city of New York; and the office of the second district shall be in the city of Albany, in rooms designated by the trustees of public buildings. Each commission shall hold stated meetings at least once a month during the year at its office. Each shall have an official seal to be furnished and prepared by the secretary of state as provided by law. The offices shall be supplied with all necessary books, maps, charts, stationery, office furniture, telephone and tele- graph connections and all other necessary appliances, to be paid for in the same manner as other expenses authorized by this chapter. 2. The offices of each commission shall be open for business between the hours of eight o'clock in NEW YORK LAW. 693 the morning and eleven o'clock at night every day in the year, and one or more responsible persons, to be designated by the commission or by the secretary under the 'direction of the commission, shall be on duty at all times in immediate charge thereof. §11. Quorum ; powers of a commissioner. A ma- jority of the commissioners shall constitute a quorum for the transaction of any business, for the perform- ance of any duty or for the exercise of any power of the commission, and may hold meetings of the com- mission at any time or place within the state. Any investigation, inquiry or hearing which either commis- sion has power to undertake or to hold may be under- taken or held by or before any commissioner. All investigations, inquiries, hearings and decisions of a commissioner shall be and be deemed to be the in- vestigations, inquiries, hearings and decisions of the commission and every order made by a commissioner, when approved and confirmed by the commission and ordered filed in its office, shall be and be deemed to be the order of the commission. § 12. Counsel to the commissions; duties. It shall be the duty of counsel to a commission to represent and appear for the people of the state of New York and the commission in all actions and proceedings involving any question under this chapter, or within the jurisdiction of the commission under the railroad law, or under or in reference to any act or order of the commission, and, if directed to do so by the com- mission, to intervene, if possible, in any action or proceeding in which any such question is involved; to commence and prosecute all actions and proceedings directed or authorized by the commission, and to ex- pedite in every way possible final determination of all 694 PUBLIC UTILITIES. such actions and proceedings; to advise the commis- sion and each commissioner when so requested in re- gard to all matters in connection with the powers and duties of the commission and of the members thereof, and generally to perform all duties and services as at- torney and counsel to the commission which the com- mission may reasonably require of him. § 13. Salaries and expenses. The annual salary of each commissioner shall be fifteen thousand dollars ($15,000). The annual salary of counsel to a commis- sion shall be ten thousand dollars ($10,000). The annual salary of a secretary to a commission shall be six thousand dollars ($6,000). All officers, clerks, in- spectors, experts and employees of a commission, and all persons appointed by the counsel to a commission, shall receive the compensation fixed by the commis- sion. The commissioners, counsel to the commission and the secretary, and their of^cers, clerks, inspectors, experts and other employees, shall have reimbursed to them all actual and necessary traveling and other expenses and disbursements incurred or made by them in the discharge of their official duties. § 14. Payment of salaries and expenses, i. The salaries of the commissioners, the counsel to the com- mission, and the secretary to the commission in the first district shall be audited and allowed by the state comptroller, and paid monthly by the state treasurer upon the order of the comptroller out of the funds provided therefor. All other salaries and expenses of the commission of the first district shall be audited and paid as follows: The board of estimate and appor- tionment of the city of New York, or other board or public body on which is imposed the duty and in which is vested the power of making appropriations NEW YORK LAW. 695 of public moneys for the purposes of the city govern- ment shall, from time to time, on requisition duly made by the public service commission of the first district, appropriate such sum or sums of money as may be requisite and necessary to enable it to do and perform, or cause to be done and performed, the du- ties in this or in any other act prescribed, and to pro- vide for the expenses and the compensation of the employees of such commission, and such appropriation shall be made forthwith upon presentation of a requisi- tion from the said commission, which shall state the purposes for which such moneys are required by it. In case the said board of estimate and apportionment, or such other board or public body, fail to appropriate such amount as the said commission deems requisite and necessary, the said commission may apply to the appellate division of the supreme court in the first department, on notice to the board of estimate and apportionment or such other board or public body aforesaid, to determine what amount shall be appro- priated for the purposes so required and the decision of said appellate division shall be final and conclusive; and the city shall not be liable for any indebtedness incurred by the said commission in excess of such appropriation or appropriations. It shall be the duty of the auditor and comptroller of said city, after such appropriation shall have been duly made, to audit and pay the proper expenses and compensation of the employees of said commission other than its counsel and secretary, upon vouchers therefor, to be furnished by said commission, which payments shall be made in like manner as payments are now made by the auditor, comptroller or other public officers of claims against and demands upon such city; and for the pur- pose of providing funds with which to pay the said sums, the comptroller or other chief financial officer 696 PUBLIC UTILITIES. of said city, is hereby authorized and directed to issue and sell revenue bonds of such city in anticipation of receipt of taxes and out of the proceeds of such bonds to make the payments in this section required to be made. The amount necessary to pay the principal and interest of such bonds shall be included in the esti- mates of moneys necessary to be raised by taxation to carry on the business of said city, and shall be made a part of the tax levy for the year next follow^ing the year in which such appropriations are made. The said comptroller shall pay the proper salaries and the ex- penses of the said commission upon its requisition, for the remainder of the fiscal year after July first, nine- teen hundred and seven, from any funds that may have been heretofore appropriated for the board of rapid transit railroad commissioners, which appropriation is hereby transferred to the credit of the public service commission of the first district. In case the said ap- propriation shall not be sufficient to meet such salaries and expenses, the comptroller of said city is hereby authorized and directed to issue and sell revenue bonds of said city, in anticipation of receipt of taxes, as here- inbefore provided. 2. All salaries and expenses of the commission in the second district shall be audited and allowed by the state comptroller and paid monthly by the state treasurer upon the order of the comptroller, out of the funds provided therefor. § 15. Certain acts prohibited. Every commis- sioner, counsel to a commission, the secretary of a commission, and every person employed or appointed to office, either by a commission, or by the counsel to a commission, is hereby forbidden and prohibited to solicit, suggest, request or recommend, directly or indirectly, to any corporation or person subject to the NEW YORK LAW. 697 supervision of either commission, or to any officer, attorney, agent or employee thereof, the appointment of any person to any office, place, position or employ- ment. And every such corporation and person, and every officer, attorney, agent and employee thereof, is hereby forbidden and prohibited to offer to any com- missioner, to counsel to a commission, to the secretary thereof, or to any person employed by a commission or by the counsel to a commission, any office, place, appointment or position, or to offer or give to any commissioner, to counsel to a commission, to the sec- retary thereof, or to any officer employed or appointed to office by the commission or by the counsel to the commission, any free pass or transportation or any reduction in fare to which the public generally are not entitled or free carriage for property or any present, gift or gratuity of any kind. If any commissioner, counsel to a commission, the secretary thereof or any person employed or appointed to office by a com- mission or by counsel to a commission, shall violate any provision of this section he shall be removed from the office held by him. Every commissioner, counsel to the commission, the secretary thereof and every person employed or appointed to office by the com- mission or by counsel to the commission, shall be and be deemed to be a public officer. § 16. Reports of commissions, i. All proceed- ings of each commission and all documents and records in its possession shall be public records, and each commission shall make an annual report to the legis- lature on or before the second Monday of January in each year, which shall contain copies of all orders issued by it, and any information in the possession of the commission which it shall deem of value to the legislature and the people of the state. Five hundred 698 PUBLIC UTILITIES. copies of each report, together with abstracts of the reports to such commission of corporations and per- sons subject to its supervision, in addition to the regu- lar number prescribed by law, shall be printed as a public document of the state, bound in cloth, for the use of the commissioners and to be distributed by them in their discretion to corporations and persons interested therein. 2. Either commission shall conduct a hearing and take testimony relative to any pending legislation with respect to any person, corporation or matter within the jurisdiction of the commission, if requested to do so by the legislature or by either branch thereof or by a standing committee of either branch thereof or by the governor or by any such person or corporation, and shall report its conclusions to the legislature. The commission may also recommend the enactment of such legislation with respect to any matter within its jurisdiction as it deems wise or necessary in the public interest. § 17. Certified copies of papers filed to be evi- dence. Copies of all official documents and orders filed or deposited according to law in the office of either commission, certified by a commissioner or by the secretary of the commission to be true copies of the originals, under the official seal of the commission, shall be evidence in like manner as the originals. § 18. Fees to be charged and collected by the com- missions. Each commission shall charge and collect the following fees : For copies of papers and records not required to be certified or otherwise authenticated by the commission, ten cents for each folio; for cer- tified copies of official documents and orders filed in its office, fifteen cents for each folio, and one dollar for NEW YORK LAW. 699 every certificate under seal affixed thereto; for certi- fying a copy of any report made by a corporation to the commission, two dollars; for each certified copy of the annual report of the commission, one dollar and fifty cents; for certified copies of evidence and pro- ceedings before the commission, fifteen cents for each folio. No fees shall be charged or collected for copies of papers, records or official documents, furnished to public officers for use in their official capacity, or for the annual reports of the commission in the ordinary course of distribution, but the commission may fix reasonable charges for publications issued under its authority. All fees charged and collected by the com- mission of the first district shall belong to the city of New York, and shall be paid monthly, accompanied by a detailed statement thereof, into the treasury of the city to the credit of the general fund, and all fees charged and collected by the commission of the sec- ond district shall belong to the people of the state, and shall be paid monthly, accompanied by a detailed statement thereof, into the treasury of the state to the credit of the general fund. § 19. Attendance of witnesses and their fees. I. All subpcenas shall be signed and issued by a commissioner or by the secretary of a commission and may be served by any person of full age. The fees of witnesses required to attend before a commission, or a commissioner, shall be two dollars for each day's attendance, and five cents for every mile of travel by the nearest generally traveled route in going to and from the place where attendance of the witness is required, such fees to be paid when the witness is excused from further attendance; and the disburse- ments made in the payment of such fees shall be audited and paid in the first district in the same man- 7CX> PUBLIC UTILITIES. ner provided for the payment of expenses of the com- mission. Whenever a subpoena is issued at the in- stance of a complainant, respondent, or other party to any proceeding before the commission, the cost of service thereof and the fee of the witness shall be borne by the party at whose instance the witness is summoned. A subpoena issued as aforesaid shall be served in the same manner as a subpoena issued out of a court of record. 2. If a person subpoenaed to attend before a commission or a commissioner fails to obey the com- mand of such subpoena, without reasonable cause, or if a person in attendance before a commission or com- missioner shall, without reasonable cause, refuse to be sworn or to be examined or to answer a question or to produce a book or papers, when ordered so to do by the commission, or a commissioner, or to sub- scribe and swear to his deposition after it has been correctly reduced to writing, he shall be guilty of a misdemeanor and may be prosecuted therefor in any court of competent criminal jurisdiction. If a person in attendance before a commission or a commissioner refuses without reasonable cause to be examined or to answer a legal and pertinent question or produce a book or paper, when ordered so to do by a commission or a commissioner, the commission may apply to any justice of the supreme court upon proof by affidavit of the facts for an order returnable in not less than two nor more than five days directing such person to show cause before the justice who made the order, or any other justice of the supreme court, why he should not be committed to jail; upon the return of such order the justice before whom the matter shall come on for hearing shall examine under oath such person whose testimony may be relevant, and such person shall be given an opportunity to be heard; and NEW YORK LAW. 7OI if the justice shall determine that such person has re- fused without reasonable cause or legal excuse to be examined, or to answer a legal and pertinent question, or to produce a book or paper which he was ordered to bring, he may forthwith, by warrant, commit the offender to jail, there to remain until he submits to do the act which he was so required to do or is dis- charged according to law. § 20. Practice before the commissions ; immunity of witnesses. All hearings before a commission or a commissioner shall be governed by rules to be adopted and prescribed by the commission. And in all inves- tigations, inquiries or hearings the commission or a commissioner shall not be bound by the technical rules of evidence. No person shall be excused from testifying or from producing any books or papers in any investigation or inquiry by or upon any hearing before a commission or any commissioner, when or- dered to do so by the commission, upon the ground that the testimony or evidence, books or documents required of him may tend to incriminate him or sub- ject him to penalty or forfeiture, but no person shall be prosecuted, punished or subjected to any penalty or forfeiture for or on account of any act, transaction, matter or thing concerning which he shall under oath have testified or produced documentary evidence; pro- vided, however, that no person so testifying shall be exempt from prosecution or punishment for any per- jury committed by him in his testimony. Nothing herein contained is intended to give, or shall be con- strued as in any manner giving unto any corporation immunity of any kind. §21. Court proceedings; preferences. All actions and proceedings under this chapter, and all actions 702 PUBLIC UTILITIES. and proceedings commenced or prosecuted by order of either commission, and all actions and proceedings to which either commission or the people of the state of New York may be parties, and in which any ques- tion arises under this chapter, or under the railroad law, or under or concerning any order or action of the commission, shall be preferred over all other civil causes except election causes in all courts of the state of New York and shall be heard and determined in preference to all other civil business pending therein excepting election causes, irrespective of position on the calendar. The same preference shall be granted upon application of counsel to the commission in any action or proceeding in which he may be allowed to intervene. § 22. Rehearing before commission. After an or- der has been made by a commission any corporation or person interested therein shall have the right to ap- ply for a rehearing in respect to any matter determined therein, and the commission shall grant and hold such a rehearing if in its judgment sufficient reason therefor be made to appear; if a rehearing shall be granted, the same shall be determined by the commis- sion within thirty days after the same shall be finally submitted. An application for such a rehearing shall not excuse any corporation or person from complying with or obeying any order or any requirement of any order of the commission, or operate in any manner to stay or postpone the enforcement thereof except as the commission may by order direct. If, after such rehearing and a consideration of the facts, including those arising since the making of the order, the com- mission shall be of opinion that the original order or any part thereof is in any respect unjust or unwar- ranted, or should be changed, the commission may i NEW YORK LAW. 703 abrogate or change the same. An order made after any such rehearing abrogating or changing the original order shall have the same force and effect as an orig- inal order but shall not affect any right or the enforce- ment of any right arising from or by virtue of the original order. § 2-^. Service and effect of orders. Every order of a commission shall be served upon every person or cor- poration to be affected thereby, either by personal de- livery of a certified copy thereof, or by mailing a cer- tified copy thereof, in a sealed package with postage prepaid, to the person to be affected thereby or, in the case of a corporation, to any officer or agent thereof upon whom a summons may be served in accordance with the provisions of the code of civil procedure. It shall be the duty of every person and corporation to notify the commission forthwith, in writing, of the receipt of the certified copy of every order so served, and in the case of a corporation such notification must be signed and acknowledged by a person or officer duly authorized by the corporation to admit such service. Within a time specified in the order of the commission every person and corporation upon whom it is served must if so required in the order notify the commission in like manner whether the terms of the order are accepted and will be obeyed. Every order of a commission shall take effect at a time therein specified and shall continue in force either for a period which may be designated therein or until changed or abrogated by the commission, unless such order be authorized by this chapter or any other act or be in violation of a provision of the constitution of the state or of the United States. § 24. Actions to recover penalties or forfeitures. 704 PUBLIC UTILITIES. An action to recover a penalty or a forfeiture under this chapter or to enforce the powers of the commis- sion under the railroad law may be brought in any court of competent jurisdiction in this state in the name of the people of the state of New York, and shall be commenced and prosecuted to final judgment by counsel to the commission. In any such action all penalties and forfeitures incurred up to the time of commencing the same may be sued for and recovered therein, and the commencement of an action to recover a penalty or forfeiture shall not be, or be held to be, a waiver of the right to recover any other penalty or forfeiture ; if the defendant in such action shall prove that during any portion of the time for which it is sought to recover penalties or forfeitures for a viola- tion of an order of the commission the defendant was actually and in good faith prosecuting a suit, action or proceeding in the courts to set aside such order, the court shall remit the penalties or forfeitures incurred during the pendency of such suit, action or proceeding. All moneys recovered in any such action, together with the costs thereof, shall be paid into the state treasury to the credit of the general fund. Any such action may be compromised or discontinued on application of the commission upon such terms as the court shall approve and order. NEW YORK LAW. 705 ARTICLE II. Provisions Relating to Railroads, Street Railroads and Common Carriers. Section 25. Application of article. 26. Adequate service; just and reasonable *changes. 27. Switch and side-track connections; powers of commis- sions. 28. Tariff schedules; publication. 29. Changes in schedule; notice required. 30. Concurrence in joint tariffs; contracts, agreements or arrangements between any carriers. 31. Unjust discrimination. 32. Unreasonable preference. 33. Transportation prohibited until publication of schedules; rates as fixed to be charged; passes prohibited. 34. False billing, et cetera, by carrier or shipper. 35. Discrimination prohibited; connecting lines. 36. Long and short haul. 37. Distribution of cars. 38. Liability for damage to property in transit. 39. Continuous carriage. 40. Liability for loss or damage by violation of this chapter. § 25. Application of article. The provisions of this article shall apply to the transportation of pas- sengers or property from one point to another within the state of New York, and to any common carrier performing such service. § 26. Safe and adequate service ; just and reason- able charges. Every corporation, person or common carrier performing a service designated in the preced- ing section, shall furnish, with respect thereto, such service and facilities as shall be safe and adequate and in all respects just and reasonable. All charges made • So in original. 45— Pub. Ut. 706 PUBLIC UTILITIES. or demanded by any such corporation, person or com- mon carrier for the transportation of passengers or property or for any service rendered or to be rendered in connection therewith, as defined in section two of this chapter, shall be just and reasonable and not more than allowed by law or by order of the commission having jurisdiction and made as authorized by this chapter. Every unjust or unreasonable charge made or demanded for any such service or transportation of passengers or property or in connection therewith or in excess of that allowed by law or by order of the commission is prohibited. § 27. Switch and side-track connections ; powers of commissions, i. A railroad corporation, upon the application of any shipper tendering traffic for transportation, shall construct, maintain and operate upon reasonable terms a switch connection or connec- tions with a lateral line of railroad or private side- track owned, operated or controlled by such shipper, and shall, upon the application of any shipper, provide upon its own property a side-track and switch con- nection with its line of railroad, whenever such side- track and switch connection is reasonably practicable, can be put in with safety and the business therefor is sufficient to justify the same. 2. If any. railroad corporation shall fail to install or operate any such switch connection with a lateral line of railroad or any such side-track and switch con- nection as aforesaid, after written application therefor has been made to it, any corporation or person inter- ested may present the facts to the commission having jurisdiction by written petition, and the commission shall investigate the matter stated in such petition, and give such hearing thereon as it may deem necessary or proper. If the commission be of opinion that it is NEW YORK LAW. 707 safe and practicable to have a connection, substantially as prayed for, established or maintained, and that the business to be done thereon justifies the construction and maintenance thereof, it shall make an order direct- ing the construction and establishment thereof, speci- fying the reasonable compensation to be paid for the construction, establishment and maintenance thereof, and may in like manner upon the application of the railroad corporation order the discontinuance of such switch connection. §28. Tariff schedules; publication. Every com- mon carrier shall file with the commission having juris- diction and shall print and keep open to public in- spection schedules showing the rates, fares and charges for the transportation of passengers and property within the state between each point upon its route and all other points thereon; and between each point upon its route and all points upon every route leased, op- erated or controlled by it; and between each point on its route or upon any route leased, operated or con- trolled by it and all points upon the route of any other common carrier, whenever a through route and joint rate shall have been established or ordered between any two such points. If no joint rate over a through route has been established, the several carriers in such through route shall file, print and keep open to public inspection, as aforesaid, the separately established rates, fares and charges applied to the through trans- portation. The schedules printed as aforesaid shall plainly state the places between which property and passengers will be carried, and shall also contain the classification of passengers or property in force, and shall also state separately all terminal charges, storage charges, icing charges, and all other charges which the commission may require to be stated, all privileges 708 PUBLIC UTILITIES. or facilities granted or allowed, and any rules or regu- lations which may in anywise change, affect or deter- mine any part or the aggregate of, such aforesaid rates, fares and charges, or the value of the service rendered to the passenger, shipper or consignee. Such schedules shall be plainly printed in large type, and a copy thereof shall be kept by every such carrier read- ily accessible to and for convenient inspection by the public in every station or office of such carrier where passengers or property are respectively received for transportation, when such station or office is in charge of an agent, and in every station or office of such car- rier where passenger tickets for transportation or tick- ets covering sleeping or parlor car or other train ac- commodation are sold or bills of lading or receipts for property are issued. All or any of such schedules kept as aforesaid shall be immediately produced by such carrier for inspection upon the demand of any person. A notice printed in bold type and stating that such schedules are on file with the agent and open to in- spection by any person and that the agent will assist any such person to determine from such schedules any transportation rates or fares or rules or regulations which are in force shall be kept posted by the carrier in two public and conspicuous places in every such station or office. The form of every such schedule shall be prescribed by the commission and shall con- form in the case of railroad corporations as nearly as may be to the form of schedule required by the inter- state commerce commission under an act of congress entitled "An act to regulate commerce," approved Feb- ruary fourth, eighteen hundred and eighty-seven and the acts amendatory thereof and supplementary there- to. Where any similar schedule is required by law to be filed with both commissions they shall agree upon an identical form for such schedule. The commission NEW YORK LAW. 709 shall have power, from time to time, in its discretion, to determine and prescribe by order such changes in the form of such schedules as may be found expedient, and to modify the requirements of this section in respect to publishing, posting and filing of schedules either in particular instances or by general order ap- plicable to special or peculiar circumstances or condi- tions. § 29. Changes in schedule ; notice required. Un- less the commission otherwise orders no change shall be made in any rate, fare or charge, or joint rate, fare or charge, which shall have been filed and published by a common carrier in compliance with the require- ments of this chapter, except after thirty days' notice to the commission and publication for thirty days as required by section twenty-eight of this chapter, which shall plainly state the changes proposed to be made in the schedule then in force, and the time when the changed rate, fare or charge will go into effect; and all proposed changes shall be shown by printing, filing and publishing new schedules or shall be plainly indi- cated upon the schedules in force at the time and kept open to public inspection. The commission, for good cause shown, may allow changes in rates without re- quiring the thirty days' notice and publication herein provided for, by duly filing and publishing in such man- ner as it may direct an order specifying the change so made and the time when it shall take effect; all such changes shall be immediately indicated upon its sche- dules by the common carrier. § 30. Concurrence in joint tariffs; contracts, agree- ments or arrangements between any carriers, i. The names of the several carriers which are parties to any joint tariff shall be specified therein, and each of the 7IO PUBLIC UTILITIES. parties thereto, other than the one filing the same, shall file with the commission such evidence of con- currence therein or acceptance thereof as may be re- quired or approved by the commission; and where such evidence of concurrence or acceptance is filed, it shall not be necessary for the carriers filing the same also to file copies of the tariffs in which they are named as parties. 2. Every common carrier shall file with the com- mission sworn copies of every contract, agreement or arrangement with any other common carrier or com- mon carriers relating in any way to the transportation of passengers or property. § 31. Unjust discrimination. No common carrier shall, directly or indirectly, by any special rate, rebate, drawback, or other device or method, charge, demand, collect or receive from any person or corporation a greater or less compensation for any service rendered or to be rendered in the transportation of passengers or property, except as authorized in this chapter, than it charges, demands, collects or receives from any other person or corporation for doing a like and con- temporaneous service in the transportation of a like kind of traffic under the same or substantially similar circumstances and conditions. § 32. Unreasonable preference. No common car- rier shall make or give any undue or unreasonable preference or advantage to any person or corporation or to any locality or to any particular description of traffic in any respect whatsoever, or subject any par- ticular person or corporation or locality or any particu- lar description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever. NEW YORK LAW. 7II § 33. Transportation prohibited until publication of schedules; rates as fixed to be charged; passes pro- hibited. I. No common carrier subject to the pro- vision of this chapter shall after the first day of No- vember, nineteen hundred and seven, engage or par- ticipate in the transportation of passengers or prop- erty, between points within the state, until its sche- dules of rates, fares and charges shall have been filed and published in accordance with the provisions of this chapter. No common carrier shall charge, de- mand, collect or receive a greater or less or different compensation for transportation of passengers or prop- erty, or for any service in connection therewith, than the rates, fares and charges applicable to such trans- portation as specified in its schedules filed and in eflPect at the time; nor shall any such carrier refund or remit in any manner or by any device any portion of the rates, fares or charges so specified, nor extend to any shipper or person any privileges or facilities in the transportation of passengers or property except such as are regularly and uniformly extended to all persons and corporations under like circumstances. 2. No common carrier subject to the provisions of this chapter shall, directly or indirectly, issue or give any free ticket, free pass or free transportation for passengers or property between points within this state, except to its officers, employees, agents, pen- sioners, surgeons, physicians, attorneys-at-law, and their families; to ministers of religion, officers and employees of railroad young men's christian associa- tions, inmates of hospitals, charitable and eleemosy- nary institutions and persons exclusively engaged in charitable and eleemosynary work; and to indigent, destitute and homeless persons and to such persons when transported by charitable societies or hospitals, and the necessary agents employed in such transpor- 712 PUBLIC UTILITIES. tation; to inmates of the national homes or state homes for disabled volunteer soldiers and of soldiers' and sailors' homes, including those about to enter and those returning home after discharge, and boards of managers of such homes; to necessary caretakers of property in transit; to employees of sleeping-car com- panies, express companies, telegraph and telephone companies doing business along the line of the issuing carrier; to railway mail service employees, post-office inspectors, customs inspectors and immigration in- spectors; to newsboys on trains, baggage agents, wit- nesses attending any legal investigation or proceeding in which the common carrier is interested, persons in- jured in accidents or wrecks and physicians and nurses attending such persons; to the carriage free or at re- duced rates of persons or property for the United States, state or municipal governments, or of property to or from fairs and expositions for exhibit thereat. 3. Nothing in this chapter shall be construed to prohibit the interchange of free or reduced transpor- tation between common carriers of or for their officers, agents, employees, attorneys and surgeons, and their famihes, nor to prohibit any common carrier from carrying passengers or property free, with the object of providing relief in cases of general epidemic, pes- tilence or other calamitous visitation; nor to prohibit any common carrier from transporting persons or property as incident to or connected with contracts for construction, operation or maintenance, and to the extent only that such free transportation is provided for in the contract for such work, nor to prevent any common carrier from transporting children under five years of age free. Provided further, that nothing in this chapter shall prevent the issuance of mileage, ex- cursion, school or family commutation, commutation passenger tickets, half fare tickets for the transporta- NEW YORK LAW. 713 tion of children under twelve years of age, or any- other form of reduced rate passenger tickets, or joint interchangeable mileage tickets, with special privileges as to the amount of free baggage that may be carried under mileage tickets of one thousand miles or more. But before any common carrier subject to the pro- vision of this chapter shall issue any such mileage, excursion, school or family commutation, commuta- tion, half fare, or any other form of reduced rate pas- senger tickets, or joint interchangeable mileage ticket, with special privileges as aforesaid, it shall file with the commission copies of the tariffs of rates, fares or charges on which such tickets are to be based, to- gether with the specifications of the amount of free baggage permitted to be carried under such joint interchangeable mileage ticket, in the same manner as common carriers are required to do with regard to other rates by this chapter. Nor shall anything in this chapter prevent the issuance of passenger trans- portation in exchange for advertising space in news- papers at full rates. 4. Nothing in this section or in any other provi- sion of law shall be deemed to limit the power of the commission to require the sale of, and upon investiga- tion prescribe reasonable and just fares as the maxi- mum to be charged for, commutation, school or fam- ily commutation, mileage tickets over railroads or street railroads, joint interchangeable mileage tickets, round trip excursion tickets, or any other form of re- duced rate passenger tickets over such railroads or street railroads; provided that all special round trip excursion tickets, the sale of which is limited to less than thirty days, except round trip excursion tickets to the State Fair and return during the holding there- [Thus amended by ch. 546, L. 1911.] 714 PUBLIC UTILITIES. of, shall be deemed exempt from such regulation by the commission. § 34. False billing, et cetera, by carrier or shipper. No common carrier or any ofBcer or agent thereof or any person acting for or employed by it, shall assist, suffer or permit any person or corporation to obtain transportation for any passenger or property between points within this state at less than the rates then established and in force in accordance with the sche- dules filed and published in accordance with the pro- visions of this chapter, by means of false billing, false classification, false weight or weighing, or false report of weight, or by any other device or means. No per- son, corporation or any officer, agent or employee of a corporation, who shall deliver property for transporta- tion within the state to a common carrier, shall seek to obtain or obtain such transportation for such prop- erty at less than the rates then established and in force therefor, as aforesaid, by false billing, false or incor- rect classification, false weight or weighing, false repre- sentation of the contents of a package, or false report or statement of weight, or by any other device or means, whether with or without the consent or conniv- ance of the common carrier, or any of its officers, agents or employees. §35. Discrimination prohibited; connecting lines. Every common carrier is required to afford all reason- able, proper and equal facilities for the interchange of passenger and property traffic between the lines owned, operated, controlled or leased by it and the lines of every other common carrier, and for the prompt transfer of passengers and for the prompt rcr [Thus amended by ch. 546, L. 1911.] NEW YORK LAW. 715 ceipt and forwarding of property to and from its said lines; and no common carrier shall in any manner dis- criminate in respect to rates, fares or charges or in respect to any service or in respect to any charges or facilities for any such transfer in receiving or forward- ing between any two or more other common carriers or between passengers or property destined to points upon the lines of any two or more other common car- riers or in any respect with reference to passengers or property transferred or received from any two or more other common carriers. This section shall not be con- strued to require a common carrier to permit or allow any other common carrier to use its tracks or terminal facilities. Every common carrier, as such, is required to receive from every other common carrier, at a con- necting point, freight cars of proper standard, and haul the same through to destination, if the destination be upon a line owned, operated or controlled by such common carrier, or if the destination be upon a line of some other common carrier, to haul any car so delivered through to the connecting point upon the line owned, operated, controlled or leased by it, by way of route over which such car is billed, and there to deliver the same to the next connecting carrier. Nothing in this section shall be construed as in any- wise limiting or modifying the duty of a common car- rier to establish joint rates, fares and charges for the transportation of passengers and property over the lines owned, operated, controlled and leased by it and the lines of other common carriers, nor as in any man- ner limiting or modifying the power of the commis- sion to require the establishment of such joint rates, fares and charges. A railroad corporation and a street railroad corporation shall not be required to inter- change cars except on such terms and conditions as the commission may direct. 7l6 PUBLIC UTILITIES. § 36. Long and short haul. No common carrier, subject to the provisions of this chapter, shall charge or receive any greater compensation in the aggregate for the transportation of passengers or of a like kind ^ of property, under substantially similar circumstances W and conditions, for a shorter than for a longer distance over the same line in the same direction, the shorter being included within the longer distance; but this shall not be construed as authorizing any such com- mon carrier to charge and receive as great a compen- sation for a shorter as for a longer distance of haul. Upon appHcation of a common carrier the commission may by order authorize it to charge less for longer than for shorter distances for the transportation of passengers or property in special cases after investi- gation by the commission, but the order must specify and prescribe the extent to which the common carrier making such application is relieved from the opera- tion of this section, and only to the extent so specified and prescribed shall any common carrier be relieved from the operation and requirements of this section. § 37. Distribution of cars. i. Every railroad cor- poration or other common carrier engaged in the trans- portation of property shall, upon reasonable notice, furnish to all persons and corporations who may apply therefor, and offer property for transportation, suf- ficient and suitable cars for the transportation of such property in car-load lots. Every railroad corporation and street railroad corporation shall have sufficient cars and motive power to meet all requirements for the transportation of passengers and property which may reasonably be anticipated, unless relieved there- from by order of the commission. In case, at any par- ticular time, a common carrier has not sufficient cars to meet all requirements for the transportation of NEW YORK LAW. 717 property in car-load lots, all cars available to it for such purposes shall be distributed among the several appli- cants therefor, without discrimination between ship- pers, localities or competitive or non-competitive points, but preference may always be given in the sup- ply of cars for shipment of live-stock or perishable property. 2. The commission shall have power to make, and by order shall make, reasonable regulations for the furnishing and distribution of freight cars to shippers, for the switching of the same, for the loading and unloading thereof, for demurrage charges in respect thereto, and for the weighing of cars and property offered for shipment or transported by any common carrier. § 38. Liability for damage to property in transit. Every common carrier and every railroad corporation and street railroad corporation shall, upon demand, issue either a receipt or bill of lading for all property delivered to it for transportation. No contract, stipu- lation or clause in any receipt or bill of lading shall exempt or be held to exempt any common carrier, railroad corporation or street railroad corporation from any liability for loss, damage or injury caused by it to property from the time of its delivery for transportation until the same shall have been received at its destination and a reasonable time shall have elapsed after notice to consignee of such arrival to permit of the removal of such property. Every common carrier, railroad corporation and street rail- road corporation shall be liable for all loss, damage or injury to property caused by delay in transit due to negligence while the same is being carried by it, but in any action to recover for damages sustained by delay in transit the burden of proof shall be upon the 7l8 PUBLIC UTILITIES. defendant to show that such delay was not due to negligence. Every common carrier and railroad cor- poration shall be liable for loss, damage and injury to property carried as baggage up to the full value and regardless of the character thereof, but the value in excess of one hundred and fifty dollars shall be stated upon delivery to the carrier, and a written receipt stating the value shall be issued by the carrier, who may make a reasonable charge for the assumption of such liability in excess of one hundred and fifty dollars and for the carriage of baggage exceeding one hundred and fifty pounds in weight upon a single ticket. Nothing in this section shall deprive any holder of such receipt or bill of lading of any remedy or right of action which he has under existing law. § 39. Continuous carriage. No common carrier shall enter into or become a party to any combination, contract, agreement or understanding, written or oral, express or implied, to prevent by any arrangement or by change of arrangement of time schedule, by car- riage in different cars or by any other means or device whatsoever the carriage of property from being con- tinuous from the place of shipment to the place of destination. No breakage of bulk, stoppage or inter- ruption of carriage made by any common carrier shall prevent the carriage of property from being treated as one continuous carriage from the place of shipment to the place of destination. Nor shall any such break- age of bulk, stoppage or interruption of carriage be made or permitted by any common carrier except it be done in good faith for a necessary purpose without intention to avoid or unnecessarily interrupt or delay the continuous carriage of such property or to evade any of the provisions of law, of this chapter or of an order of the commission. NEW YORK LAW. 7I9 § 40. Liability for loss or damage caused by vio- lation of this chapter. In case a common carrier shall do, cause to be done or permit to be done any act, matter or thing prohibited, forbidden or declared to be unlawful, or shall omit to do any act, matter or thing required to be done, either by any law of the state of New York, by this chapter or by an order of the commission, such common carrier shall be liable to the persons or corporations affected thereby for all loss, damage or injury caused thereby or resulting therefrom, and in case of recovery, if the court shall find that such act or omission was wilful, it may in its discretion fix a reasonable counsel or attorney's fee, which fee shall be taxed and collected as part of the costs in the case. An action to recover for such loss, damage or injury may be brought in any court of competent jurisdiction by any such person or cor- poration. 720 PUBLIC UTILITIES. ARTICLE III. Provisions Relating to the Powers of the Commissions in Respect to Common Carriers, Railroads and Street Railroads. Section 45. General powers and duties of commissions in respect to common carriers, railroads and street railroads. 46. Reports of common carriers, railroad corporations and street railroad corporations. 47. Investigation of accidents. 48. Investigations by commission. 49. Rates and service to be fixed by the commissions. 50. Power of commissions to order repairs or changes. 51. Power of commissions to order changes in time sched- ules; running of additional cars and trains. 52. Uniform system of accounts; access to accounts, et cet- era; forfeitures. 53. Franchises and privileges. 54. Transfer of franchises or stocks. 55. Approval of issues of stock, bonds and other forms of In- debtedness. 55-a. Reorganizations. 56. Forfeiture; penalties. 57. Summary proceedings. 58. Penalties for other than common carriers. 59. Duties of commissions as to interstate traffic. § 45. General powers and duties of commissions in respect to common carriers, railroads and street railroads, i. Each commission and each commis- sioner shall have power and authority to administer oaths, in all parts of the state, to witnesses sum- moned to testify in any inquiry, investigation, hearing or proceeding; and also to administer oaths in all parts of the state whenever the exercise of such power is incidentally necessary or proper to enable the com- mission or a commissioner to perform a duty or to exercise a power. f NEW YORK LAW. 72 1 2. Each commission shall have the general super- vision of all common carriers, railroads, street rail- roads, railroad corporations and street railroad cor- porations within its jurisdiction as hereinbefore de- fined, and shall have power to and shall examine the same and keep informed as to their general condition, their capitalization, their franchises and the manner in which their lines and property, owned, leased, con- trolled or operated, are managed, conducted and op- erated, not only with respect to the adequacy, security and accommodation afforded by their service, but also with respect to their compliance with all provisions of law, orders of the commission and charter require- ments. Each commission shall have power, either through its members or responsible engineers or in- spectors duly authorized by it, to enter in or upon and to inspect the property, equipment, buildings, plants, factories, power-houses and offices of any of such corporations or persons, including the right for such inspection purpose to ride upon any freight locomotive or train or any passenger locomotive or train while in service; and to have upon reasonable notice the use of an inspection locomotive or special locomotive and inspection car for a physical inspection once annually of all the lines and stations of each com- mon carrier under its supervision; and to the extent that such facilities for inspection involve transporta- tion each commissioner and each such employee shall pay the published one-way fare established by the common carrier for the transportation of persons by regular passenger trains over the distance covered by such inspection. The cost of such transportation, if the commission so elects, may be paid upon bill rendered to the commission after the transportation has been furnished and the amount thereof ascertained. 3. Each commission and each commissioner shall 46— Pub. Ut. 722 PUBLIC UTILITIES. have power to examine all books, contracts, records, documents and papers of any person or corporation subject to its supervision, and by subpoena duces tecum to compel production thereof. In lieu of requiring production of originals by subpoena duces tecum, the commission or any commissioner may require sworn copies of any such books, records, contracts, docu- ments and papers or parts thereof to be filed with it. § 46. Reports of common carriers, railroad cor- porations and street railroad corporations, i. Every common carrier, railroad corporation and street rail- road corporation shall file an annual report with the commission verified by the oath of the president, treasurer, general manager or receiver, if any, of such corporation, or by the person required to file the same. The verification shall be made by said official holding office at the time of the filing of the said report, and if not made upon the knowledge of the person verifying the same shall set forth the sources of his information and the grounds of his belief as to any matters not stated to be verified upon his knowl- edge. The commission shall prescribe the form of such reports and the character of the information to be contained therein, and may from time to time make such changes and such additions in regard to form and contents thereof as it may deem proper, and on or before June thirtieth in each year shall furnish a blank form for such annual reports to every such corporation and person. The contents of such report and the form thereof shall conform in the case of rail- road corporations as nearly as may be to that required of common carriers under the provisions of the act of congress entitled "An act to regulate commerce," approved February fourth, eighteen hundred and eighty-seven, and the acts amendatory thereof and NEW YORK LAW. 723 supplementary thereto. The commission may require such report to contain information in relation to rates or regulations concerning fares or freights, agreements or contracts affecting the same, so far as such rates or regulations pertain to transportation within the state. When the report of any such corporation or person is defective, or believed to be erroneous, the commission shall notify the corporation or person to amend the same within a time prescribed by the com- mission. The originals of the reports, subscribed and sworn to as prescribed by law, shall be preserved in the office of the commission. The commission may also require such corporations and persons to file periodic reports in the form, covering the period and at the time prescribed by the commission. The com- mission may require of any such corporation or person specific answers to questions upon which the commis- sion may need information. The annual report re- quired to be filed by a common carrier, railroad or street railroad corporation shall be so filed on or before the thirtieth day of September in each year. The commission may extend the time for making and filing such report for a period not exceeding sixty days. If such corporation or person shall fail to make and file the annual report within the time above specified or within the time as extended by the commission, or shall fail to amend such report within such reasonable time as may be prescribed by the commission, or shall fail to make specific answer to any question, or shall fail to make the periodic reports when required by the commission as herein provided, within the time and in the form prescribed by the commission for the making and filing of any such report or answer, such corporation or person shall forfeit to the state the sum of one hundred dollars for each and every day it shall continue to be in default with respect to such 7^4 PUBLIC UTILITIES. annual report, amendment, answer or periodic report. Such forfeiture shall be recovered in an action brought by the commission in the name of the people of the state of New York. The amount recovered in any- such action shall be paid into the state treasury and credited to the general fund. Any railroad corpora- tion or common carrier other than a street railroad corporation operating partly within the second district and partly within the first district shall report to the commission of the second district; but the commission of the first district may, upon reasonable notice, require a special report from such railroad corporation or com- mon carrier. Any street railroad corporation operat- ing partly within the first district and partly within the second district shall report to the commission of the first district; but the commission of the second dis- trict may, upon reasonable notice, require a special report from such street railroad corporation. § 47. Investigation of accidents. Each commis- sion shall investigate the cause of all accidents on any railroad or street railroad within its district which re- sult in loss of life or injury to persons or property, and which in its judgment shall require investigation. Every common carrier, railroad corporation and street railroad corporation is hereby required to give imme- diate notice to the commission of every accident hap- pening upon any line of railroad or street railroad owned, operated, controlled or leased by it, within the territory over which such commission has juris- diction in such manner as the commission may direct. Such notice shall not be admitted as evidence or used for any purpose against such common carrier, railroad corporation or street railroad corporation giving such notice in any suit or action for damages growing out of any matter mentioned in said notice. NEW YORK LAW. 725 § 48. Investigations by commission, i . Each commission may, of its own motion, investigate or make inquiry, in a manner to be determined by it, as to any act or thing done or omitted to be done by any common carrier, railroad corporation or street railroad corporation, subject to its supervision, and the com- mission must make such inquiry in regard to any act or thing done or omitted to be done by any such common carrier, railroad corporation or street rail- road corporation in violation of any provision of law or in violation of any order of the commission. 2. Complaints may be made to the proper com- mission by any person or corporation aggrieved, by petition or complaint in writing setting forth any thing or act done or omitted to be done by any common carrier, railroad corporation or street railroad corpo- ration in violation, or claimed to be in violation, of any provision of law or of the terms and conditions of its franchise or charter or of any order of the com- mission. Upon the presentation of such a complaint the commission shall cause a copy thereof to be for- warded to the person or corporation complained of, which may be accompanied by an order, directed to such person or corporation, requiring that the matters complained of be satisfied, or that the charges be answered in writing within a time to be specified by the commission. If the person or corporation com- plained of shall make reparation for any injury alleged and shall cease to commit, or to permit, the violation of law, franchise or order charged in the complaint, and shall notify the commission of that fact before the time allowed for answer, the commission need take no further action upon the charges. If, however, the charges contained in such petition be not thu? satisfied, and it shall appear to the commission that there are reasonable grounds therefor, it shall inves- ^26 PUBLIC UTILITIES. tigate such charges in such manner and by such means as it shall deem proper, and take such action within its powers as the facts justify. 3. Whenever either commission shall investigate any matter complained of by any person or corpora- tion aggrieved by any act or omission of a common carrier, railroad corporation or street railroad corpo- ration under this section it shall be its duty to make and file an order either dismissing the petition or complaint or directing the common carrier, railroad corporation or street railroad corporation complained of to satisfy the cause of complaint in whole or to the extent which the commission may specify and require. § 49. Rates and service to be fixed by the com- mission. I. Whenever either commission shall be of opinion, after a hearing had upon its own motion or upon a complaint, that the rates, fares or charges de- manded, exacted, charged or collected by any common carrier, railroad corporation or street railroad corpo- ration subject to its jurisdiction for the transportation of persons or property within the state, or that the regulations or practices of such common carrier, rail- road corporation or street railroad corporation affect- ing such rates are unjust, unreasonable, unjustly dis- criminatory or unduly preferential, or in anywise in violation of any provision of law, or that the maxi- mum rates, fares or charges, chargeable by any such common carrier, railroad or street railroad corpora- tion are insufficient to yield reasonable compensation for the service rendered, and are unjust and unrea- sonable, the commission shall with due regard among other things to a reasonable average return upon the value of the property actually used in the public service and to the necessity of making reservation out of in- come for surplus and contingencies, determine the just NEW YORK LAW. 727 and reasonable rates, fares and charges to be thereafter observed and in force as the maximum to be charged for the service to be performed, notwithstanding that a higher rate, fare or charge has been heretofore au- thorized by statute, and shall fix the same by order to be served upon all common carriers, railroad cor- porations or street railroad corporations by whom such rates, fares and charges are thereafter to be observed. \\'henever either commission shall be of the opinion, after a hearing had upon its own motion, or upon a complaint, that the rates, fares or charges demanded, exacted, charged or collected by any common carrier, railroad corporation or street railroad corporation sub- ject to its jurisdiction for excursion, school or family commutation, commutation passenger tickets, half fare tickets for the transportation of children under six years of age, or any other form of reduced rate tickets for the transportation of persons within the state, or joint interchangeable mileage tickets, with special privileges as to the amount of free baggage that may be carried under mileage tickets of one thousand miles or more within the state, or that the regulations or practices of such common carrier, rail- road corporation or street railroad corporation affect- ing such rates are unjust, unreasonable, unjustly dis- criminatory or unduly preferential, or in anywise in violation of any provision of law, or that the maxi- mum rates, fares or charges collected or charged for any of such forms of reduced fare passenger trans- portation tickets by any such common carrier, rail- road or street railroad corporation are insufficient to yield reasonable compensation for the service ren- dered, and are unjust and unreasonable, and whenever the commission shall be of the opinion, after a hearing had upon its own motion or upon a complaint, and upon investigation, that the sale of any form or forms 728 PUBLIC UTILITIES. of reduced fare passenger ticket heretofore sold or used upon any railroad or street railroad within the state of New York, the use or sale of which ticket or tickets has been discontinued within five years prior to the time this act takes effect, will be just and reasonable and not in violation of any provision of this act or other provision of law, the commission shall, with due regard, among other things, to a rea- sonable average return upon the value of the prop- erty actually used in the public service and to the necessity of making reservation out of income for surplus and contingencies, determine the just and reasonable rates, fares and charges to be thereafter observed and enforced as the maximum to be charged for such mileage, excursion, school or family com- mutation, commutation, half fare or any other form of reduced rate tickets for the transportation of per- sons, or joint interchangeable mileage tickets with special privileges as aforesaid, and shall order the sale and use thereof to be restored, of any of the kinds of tickets herein specified or any other form of re- duced rate ticket for the transportation of persons within the state, upon any railroad or street railroad within this state, upon which railroad or street rail- road any such form of ticket or tickets for the trans- portation of persons within the state, have, within five years prior to the time this act takes effect, been sold or used, and shall determine and prescribe the rea- sonable and just rates, fares and charges to be there- after observed and enforced as the maximum to be charged for any of such form of ticket or tickets for the transportation of persons within the state, all of which acts fixing such rates, fares and charges or requiring the restoration of, sale and use of any of such forms of ticket or tickets, shall be by order to be served upon all common carriers, railroad corporations NEW YORK LAW. 729 and street railroad corporations by whom such rate, fares and charges or restoration of, sale or use of, such ticket or tickets are thereafter to be observed. 2. Whenever the commission shall be of opinion, after a hearing, had upon its own motion or upon complaint, that the regulations, practices, equipment, appliances, or service of any such common carriers, railroad corporation or street railroad corporation in respect to transportation of persons or property within the state are unjust, unreasonable, unsafe, improper or inadequate, the commission shall determine the just, reasonable, safe, adequate and proper regulations, practices, equipment, appliances and service thereafter to be in force, to be observed and to be used in such transportation of persons and property and so fix and prescribe the same by order to be served upon every common carrier, railroad corporation and street rail- road corporation to be bound thereby; and thereafter it shall be the duty of every common carrier, railroad corporation and street railroad corporation to observe and obey each and every requirement of every such order so served upon it, and to do everything neces- sary or proper in order to secure absolute compliance with and observance of every such order by all of its officers, agents and employees. 3. The commission shall have power by order to require any two or more common carriers, railroad corporations or street railroad corporations, whose lines, owned, operated, controlled or leased, form a continuous or connecting line of transportation or could be made to do so by the construction and main- tenance of switch connection or interchange track at connecting points, or by transfer of property or pas- sengers at connecting points, to establish through [Thus amended by ch. 546, L. 1911.] 730 PUBLIC UTILITIES. routes and joint rates, fares and charges for the trans- portation of passengers and property within the state as the commission may, by its order, designate; and in case such through routes and joint rates be not established by the common carriers, railroad corpora- tions and street railroad corporations named in any such order within the time therein specified, the com- mission shall establish just and reasonable rates, £ai,cj» and charges to be charged for such through transpor- tation, and declare the portion thereof to which each common carrier, railroad corporation or street railroad corporation affected thereby shall be entitled and the manner in which the same shall be paid and secured; and the commission shall also have power in the same proceeding, or in a separate proceeding involving any rates, fares or charges, to prescribe joint rates and fares and charges as the maximum to be exacted for the transportation by them of passengers and prop- erty within the state, and to require such common carriers, railroad corporations and street railroad cor- porations affected thereby to make within a specified time an agreement between them as to the portion of such joint rates, fares or charges to which each of them shall be entitled; and in case such agreement be not so made within the time so specified the commis- sion may declare by supplemental order the portion thereof to which each common carrier, railroad cor- poration or street railroad corporation affected there- by shall be entitled and the manner in which the same shall be paid and secured; such supplemental order shall take effect as part of the original order from the time such supplemental order shall become effec- tive. 4. If the commission shall be of the opinion that through cars for the transportation of property should be operated over the tracks of said common carriers. NEW YORK LAW. . 73 1 railroad corporations and street railroad corporations and that switch connection or interchange track at a connecting point, if not already existing, should be constructed and maintained by such common carriers, railroad corporations and street railroad corporations, to the end that property may be carried without change of cars, the commission shall have power after a hearing to require by order said common carriers, railroad corporations and street railroad corporations to receive from each other and transport for each other such cars over each other's tracks by way of such switch connection or interchange track, and if no such switch connection or interchange track exist to construct and maintain said switch connection or in- terchange track, and to make within a specified time not less than thirty days an agreement between them as to the terms of such receipt and transportation of cars, and if so required as to the division of the ex- pense of such construction and maintenance of switch connection or interchange track; and in case such agreement be not so made within the time so speci- fied, the commission shall after a hearing declare by supplemental order the terms and conditions upon which such cars shall be received and transported, and if so required the portion of such expense to which each common carrier or corporation affected thereby shall be entitled and the manner in which any sums of money to which any such common carrier or cor- poration is entitled shall be paid and secured, and such supplemental order shall take effect as part of the original order from the time such supplemental order shall become effective. Nothing in this subdivision shall be construed to require a through route between railroad corporations and street railroad corporations between points reached by such railroad corporations. 5. Whenever the case shall relate to a joint rate, 732 PUBLIC UTILITIES. fare or charge, or a through route composed of a street railroad wholly in the second district and a street rail- road wholly in the first district, or partly in the first and partly in the second district, the proceeding shall be deemed pending before both commissions. In such case and in every other case arising under this chapter wherein it appears to both commissions that separate jurisdiction has not been conferred, a joint hearing shall be fixed and had by members of both commis- sions, and the determination shall be by joint order, which shall be effective when concurred in by not less than three members of each commission, anything in this chapter to the contrary notwithstanding. In any such case the proceeding may be instituted by or be- fore either commission and the entry and service of preliminary orders may be by such commission. 6. Whenever the commission shall be of the opin- ion after a hearing that the practices and service and the rules and regulations affecting the same of any street railroad corporation which is within its juris- diction are as to transportation upon the street sur- face railroads of said corporation by use of transfers given to each passenger paying one single fare unjust I and unreasonable either as to persons transported | upon said street surface railroads or as to any such | street railroad corporation, the commission shall de- ^ termine and prescribe by order the just and reasonable m service and rules and regulations affecting the same ™ thereafter to be maintained and observed by said street railroad corporation (a) as to the distance over which a passenger shall by such transfer be transported by it upon said street surface railroads for a single fare; (b) the number of successive transfers to be given by it to a passenger paying one single fare for transportation over said street surface railroads; and (c) as to the prompt use by each passenger of such I NEW YORK LAW. 733 transfer given him for one single fare paid by him in making his continuous trip over said street surface railroads. And it shall thereupon be the duty of every such street railroad corporation to obey each require- ment of every such order served upon it and to do everything necessary and proper in order to secure compliance with and observance of every such order by all of its officers, agents and employees. But nothing herein contained shall affect or modify the terms of a certain contract bearing date January first, eighteen hundred and ninety-two, entered into by and between the city of Buffalo and the various street surface railroad corporations therein named in said contract. 7. Until and except as the public service commis- sion shall otherwise prescribe as to any street rail- road corporation or corporations pursuant to the pro- visions of this chapter, every street surface railroad corporation entering into a contract with another such corporation as provided in section seventy-eight of the railroad law shall carry or permit any other party thereto to carry between any two points on the rail- roads or portions thereof embraced in such contract any passenger desiring to make one continuous trip between such points for one single fare, not higher than the fare lawfully chargeable by either of such corporations for an adult passenger. Every such cor- poration shall upon demand, and without extra charge, give to each passenger paying one single fare a trans- fer entitling such passenger to one continuous trip to any point or portion of any railroad embraced in such contract, to the end that public convenience may be promoted by the operation of the railroads embraced in such contract substantially as a single railroad with a single rate of fare. For every refusal to comply with the requirements of this subdivision the corpo- 734 PUBLIC UTILITIES. ration so refusing shall forfeit fifty dollars to the ag- grieved party. The provisions of this subdivision shall only apply to railroads wholly within the limits of any one incorporated city or village. 8. No passenger joint rate, fare, charge, through route or transfer shall be required between any rapid transit railroad and any other rapid transit railroad or any railroad operated as a street surface railroad, nor between a street surface railroad and any railroad operated wholly by steam, or any railroad operated a distance of over fifty miles partly by steam and partly by electricity. § 50. Power of commissions to order repairs or changes. If in the judgment of the commission hav- ing jurisdiction, additional tracks, switches, terminals or terminal facilities, stations, motive power, or any other property, construction, apparatus, equipment, facilities or device for use by any common carrier, railroad corporation or street railroad corporation in or in connection with the transportation of passengers or property ought reasonably to be provided, or any repairs or improvements to or changes in any thereof in use ought reasonably to be made, or any additions or changes in construction should reasonably be made thereto in order to promote the security or conveni- ence of the public or employees, or in order to secure adequate service or facilities for the transportation of passengers or property, the commission shall, after a hearing either on its own motion or after complaint, make and serve an order directing such repairs, im- provements, changes or additions to be made within a reasonable time and in a manner to be specified therein, and every common carrier, railroad corpora- tion and street railroad corporation is hereby required and directed to make all repairs, improvements, NEW YORK LAW. 735 changes and additions required of it by any order of the commission served upon it. If any repairs, improvements, changes or additions which the com- mission has determined to order require joint action by two or more of said corporations, the commission shall, before entry and service of order, notify the said corporations that such repairs, improvements, changes or additions will be required and that the same shall be made at their joint cost, and thereupon the said corporations shall have thirty days or such longer time as the commission may grant within which to agree upon the part or division of cost of such repairs, improvements, changes or additions which each shall bear. If at the expiration of such time such corporations shall fail to file with the commission a statement that an agreement has been made for a division or apportionment of such repairs, improve- ments, changes or additions the commission shall have authority, after further hearing, to fix in its order the proportion of such cost or expense to be borne by each corporation and the manner in which the same shall be paid and secured. But this section shall not be construed to authorize the commission to require two or more railroad corporations to unite in the erection of a union station. § 51 Power of commissions to order changes in time schedules; running of additional cars and trains. If, in the judgment of the commission having juris- diction, any railroad corporation or street railroad corporation does not run trains enough or cars enough or possess or operate motive power enough, reason- ably to accommodate the traffic, passenger and freight, transported by or offered for transportation to it, or does not run its trains or cars with sufficient fre- quency or at reasonable or proper time having regard 736 PUBLIC UTILITIES. to safety, or does not run any train or trains, car or cars, upon a reasonable time schedule for the run, the commission shall, after a hearing either on its own motion or after complaint, have power to make an order directing any such railroad corporation or street railroad corporation to increase the number of its trains or of its cars or its motive power or to change the time for starting its trains or cars or to change the time schedule for the run of any train or car or make any other suitable order that the commission may determine reasonably necessary to accommodate and transport the traffic, passenger or freight, trans- ported or offered for transportation. § 52. Uniform system of accounts; access to ac- counts, et cetera; forfeitures. Each commission may, whenever it deems advisable, establish a system of accounts to be used by railroad and street railroad cor- porations or other common carriers which are subject to its supervision, or may classify the said corporations and other carriers and prescribe a system of accounts for each class, and may prescribe the manner in which such accounts shall be kept. It may also in its dis- cretion prescribe the forms of accounts, records and memoranda to be kept by such corporations, including the accounts, records and memoranda of the move- ment of traf^c as well as the receipts and expenditures of moneys. Notice of alterations by the commission in the required method or form of keeping a system of accounts shall be given to such persons or corpora- tions by the commission at least six months before the same are to take effect. The system of accounts established by the commission and the forms of ac- counts, records and memoranda prescribed by it as provided above shall conform in the case of railroad corporations as nearly as may be to those from time NEW YORK LAW. 737 to time established and prescribed by the interstate commerce commission under the provisions of the act of congress entitled "An act to regulate commerce" approved February fourth, eighteen hundred and eighty-seven, and the acts amendatory thereof or sup- plementary thereto. The commission shall at all times have access to all accounts, records and memoranda kept by railroad and street railroad corporations and by common carriers, and may designate any of its officers or employees who shall thereupon have au- thority under the order of the commission to inspect and examine any and all accounts, records and memo- randa kept by such corporations. The commission may, after hearing, prescribe by order the accounts in which particular outlays and receipts shall be entered, charged or credited. Where the commission has pre- scribed the forms of accounts, records and memoranda to be kept by such corporations it shall be unlawful for them to keep any other accounts, records or memo- randa than those so prescribed, or those prescribed by or under authority of the United States. Any employee or agent of the commission who divulges any fact or information which may come to his knowl- edge during the course of any such inspection or ex- amination except in so far as he may be directed by the commission, or by a court or judge thereof, or au- thorized by law, shall be guilty of a misdemeanor. § 53. Franchises and privileges. Without first having obtained the permission and approval of the proper commission no railroad corporation, street rail- road corporation or common carrier shall begin the construction of a railroad or street railroad, or any extension thereof, for which prior to the time when this act becomes a law a certificate of public con- venience and necessity shall not have been granted by 47— Pub. Ut. 738 PUBLIC UTILITIES. the board of railroad commissioners or where prior to said time said corporation or common carrier shall not have become entitled by virtue of its compliance with the provisions of the railroad law to begin such construction; nor, except as above provided in this section, shall any such corporation or common carrier exercise any franchise or right under any provision of the railroad law, or of any other law, not heretofore lawfully exercised, without first having obtained the permission and approval of the proper commission. The commission within whose district such construc- tion is to be made, or within whose district such fran- chise or right is to be exercised, shall have power to grant the permission and approval herein specified whenever it shall after due hearing determine that such construction or such exercise of the franchise or privilege is necessary or convenient for the public service. And if such construction is to be made, or such franchise to be exercised in both districts, the approval of both commissions shall be secured. § 54. Transfer of franchises or stocks, i. No franchise nor any right to or under any franchise, to own or operate a railroad or street railroad shall be assigned, transferred or leased, nor shall any contract 1 or agreement with reference to or affecting any such franchise or right be valid or of any force or effect whatsoever, unless the assignment, transfer, lease, contract or agreement shall have been approved by the proper commission. The permission and approval of the commission, to the exercise of a franchise under section fifty-three, or to the assignment, transfer or lease of a franchise under this section shall not be con- strued to revive or validate any lapsed or invalid fran- chise, or to enlarge or add to the powers and privileges NEW YORK LAW. 739 contained in the grant of any franchise, or to waive any forfeiture. 2. No railroad corporation, street railroad cor- poration, or electrical corporation, domestic or foreign, shall hereafter purchase or acquire, take or hold, any part of the capital stock of any railroad corporation or street railroad corporation or other common car- rier organized or existing under or by virtue of the laws of this state, unless authorized so to do by the commission empowered by this act to give such con- sent; and save where stock shall be transferred or held for the purpose of collateral security only with the consent of the commission empowered by this chapter to give such consent, no stock corporation of any description, domestic or foreign, other than a rail- road corporation, street railroad corporation, or elec- trical corporation, shall purchase or acquire, take, or hold, more than ten per centum of the total capital stock issued by any railroad corporation or street railroad corporation or other common carrier organ- ized or existing under or by virtue of the laws of this state, except that a corporation now lawfully holding a majority of the capital stock of any railroad corpora- tion or street railroad corporation may with the con- sent of the commission acquire and hold the remainder of the capital stock of such railroad corporation or street railroad corporation or any portion thereof. Nothing herein contained shall be construed to pre- vent the holding of stock heretofore lawfully acquired, or to prevent, upon the surrender or exchange of said stock pursuant to a reorganization plan, the purchase, acquisition, taking or holding of a proportionate amount of stock of any new corporation organized to take over, at foreclosure or other sale, the property of any corporation whose stock has been thus surrend- ered or exchanged. Every contract, assignment, trans- 740 PUBLIC UTILITIES. fer or agreement for transfer of any stock by or through any person or corporation to any corporation, in violation of any provision of this chapter, shall be void and of no effect, and no such transfer or assign- ment shall be made upon the books of any such rail- road corporation or street railroad corporation, or shall be recognized as effective for any purpose. The power conferred by this section to approve or disap- prove a transaction relating to franchises, rights or stock of any railroad corporation or street railroad corporation, or other common carrier, shall be exer- cised by the commission which is authorized by this chapter to approve the issue of stock by such railroad corporation or street railroad corporation. § 55- Approval of issues of stock, bonds and other forms of indebtedness. A common carrier, railroad corporation or street railroad corporation organized or existing, or hereafter incorporated, under or by virtue of the laws of the state of New York, may issue stocks, bonds, notes or other evidence of indebtedness payable at periods of more than twelve months after the date thereof, when necessary for the acquisition of property, the construction, completion, extension or improvement of its facilities, or for the improvement or maintenance of its service or for the discharge or lawful refunding of its obligations or for the reim- bursement of moneys actually expended from income, or from any other moneys in the treasury of the cor- poration not secured by or obtained from the issue of stocks, bonds, notes or other evidence of indebtedness of such corporation, within five years next prior to the filing of an application with the proper commission for the required authorization, for any of the aforesaid [Thus amended by ch. 788, L. 1911.] NEW YORK LAW. 74I purposes except maintenance of service and except replacements in cases where the appHcant shall have kept its accounts and vouchers of such expenditure in such manner as to enable the commission to ascertain the amount of moneys so expended and the purposes for which such expenditure was made, provided and not otherwise that there shall have been secured from the proper commission an order authorizing sucli issue, and the amount thereof and stating the purposes to which the issue or proceeds thereof are to be ap- plied, and that, in the opinion of the commission, the money, property or labor to be procured or paid for by the issue of such stock, bonds, notes or other evidence of indebtedness is or has been reasonably required for the purposes specified in the order, and that except as otherwise permitted in the order in the case of bonds, notes, and other evidence of indebtedness, such pur- poses are not, in whole or in part, reasonably charge- able to operating expenses or to income; but this pro- vision shall not apply to any lawful issue of stock, to the lawful execution and delivery of any mortgage or to the lawful issue of bonds thereunder, which shall have been duly approved by the board of railroad com- missioners before July first, nineteen hundred and seven. Nothing herein contained shall prohibit the commission from giving its consent to the issue of bonds, notes or other evidence of indebtedness for the reimbursement of moneys heretofore actually expended from income for any of the aforesaid purposes, except maintenance of service and replacements, prior to five years next preceding the filing of an application there- for, if in the judgment of the commission such consent should be granted; provided application for such con- sent shall be made prior to January first, nineteen hun- dred and twelve. For the purpose of enabling it to determine whether it should issue such an order, the 742 PUBLIC UTILITIES. commission shall make such inquiry or investigation^ hold such hearings and examine such witnesses, books, papers, documents or contracts as it may deem of importance in enabling it to reach a determination. Such corporation shall not without the consent of the commission apply said issue or any proceeds thereof to any purpose not specified in such order. Such common carrier, railroad corporation or street railroad corporation may issue notes, for proper corporate purposes and not in violation of any provision of this chapter or any other act, payable at periods of not more than twelve months without such consent, but no such notes shall, in whole or in part, directly or indirectly be refunded, by any issue of stock or bonds or by any evidence of indebtedness running for more m than twelve months without the consent of the proper * commission. Provided, however, that the commission shall have no power to authorize the capitalization of any franchise to be a corporation or to authorize the capitalization of any franchise or the right to own, operate or enjoy any franchise whatsoever in excess of the amount (exclusive of any tax or annual charge) actually paid to the state or to a political subdivision thereof as the consideration for the grant of such fran- chise or right; nor shall the capital stock of a corpora- tion formed by the merger or consolidation of two or more other corporations, exceed the sum of the capital stock of the corporations so consolidated, at the par value thereof, or such sum and any additional sum actually paid in cash; nor shall any contract for con- solidation or lease be capitalized in the stock of any corporation whatever; nor shall any corporation here- after issue any bonds against or as a lien upon any contract for consolidation or merger. Whenever it shall happen that any railroad corporation shall own or operate its lines in both districts it shall, under this NEW YORK LAW. 743 section, apply to the commission of the second district. Whenever it shall happen that any street railroad cor- poration shall own or operate its lines in both dis- tricts, it shall, under this section, apply to the com- mission of the first district. Any other common car- rier not operating exclusively in the first district shall apply to the commission of the second district. § 55-a. Reorganizations, i. Reorganizations of railroad corporations, street railroad corporations and common carriers pursuant to sections nine and ten of the stock corporation law and such other laws as may be enacted from time to time shall be subject to the supervision and control of the proper commission and no such reorganization shall be had without the au- thorization of such commission. 2. Upon all such reorganizations the amount of capitalization, including therein all stocks and bonds and other evidence of indebtedness, shall be such as is authorized by the commission which, in making its determination, shall not exceed the fair value of the property involved, taking into consideration its original cost of construction, duplication cost, present condition, earning power at reasonable rates and all other rele- vant matters and any additional sum or sums as shall be actually paid in cash, provided, however, that the commission may make due allowance for discount of bonds. Any reorganization agreement before it be- comes effective shall be amended so that the amount of capitalization shall conform to the amount author- ized by the commission. §56. Forfeiture; penalties, i. Every common carrier, railroad corporation and street railroad cor- [Added by ch. 289, L. 1912.] 744 PUBLIC UTILITIES. poration and all officers, and agents of any common carrier, railroad corporation or street railroad corpora- tion shall obey, observe and comply with every order made by the commission, under authority of this chap- ter so long as the same shall be and remain in force. Any common carrier, railroad corporation or street railroad corporation which shall violate any provision of this chapter, or which fails, omits or neglects to obey, observe or comply with any order or any direc- tion or requirement of the commission, shall forfeit to the people of the state of New York not to exceed the sum of five thousand dollars for each and every offense; every violation of any such order or direction or requirement, or of this chapter, shall be a separate and distinct offense, and, in case of a continuing vio- lation, every day's continuance thereof shall be and be deemed to be a separate and distinct offense. 2. Every officer and agent of any such common carrier or corporation who shall violate, or who pro- cures, aids or abets any violation by any such common carrier or corporation of, any provision of this chapter, or who shall fail to obey, observe and comply with any order of the commission or any provision of an order of the commission, or who procures, aids or abets any such common carrier or corporation in its failure to obey, observe and comply with any such or- der or provision, shall be guilty of a misdemeanor. § 57. Summary proceedings. Whenever either commission shall be of opinion that a common carrier, railroad corporation or street railroad corporation sub- ject to its supervision is failing or omitting or about to fail or omit to do anything required of it by law or by order of the commission, or is doing anything or about to do anything or permitting anything or about to permit anything to be done, contrary to or in vio- I NEW YORK LAW. 745 lation of law or of any order of the commission, it shall direct counsel to the commission to commence an action or proceeding in the supreme court of the state of New York in the name of the commission for the purpose of having such violation or threatened viola- tions stopped and prevented either by mandamus or injunctions. Counsel to the commission shall there- upon begin such action or proceeding by a petition to the supreme court alleging the violation complained of and praying for appropriate relief by way of man- damus or injunction. It shall thereupon be the duty of the court to specify the time, not exceeding twenty days after service of a copy of the petition, within which the common carrier, railroad corporation or street railroad corporation complained of must answer the petition. In case of default in answer or after answer, the court shall immediately inquire into the facts and circumstances in such manner as the court shall direct without other or formal pleadings, and without respect to any technical requirement. Such other persons or corporations as the court shall deem necessary or proper to join as parties in order to make its order, judgment or writs effective, may be joined as parties upon application of counsel to the commission. The final judgment in any such action or proceeding shall either dismiss the action or proceeding or direct that a wrU of mandamus or an injunction or both issue as prayed for in the petition or in such modified or other form as the court may determine will afford appropriate relief. § 58. Penalties for other than common carriers. I. Any corporation, other than a common carrier, railroad corporation or street railroad corporation, which shall violate any provision of this chapter, or shall fail to obey, observe and comply with every 746 PUBLIC UTILITIES. order made by the commission under authority of this chapter so long as the same shall be and remain in force, shall forfeit to the people of the state of New York a sum not exceeding one thousand dollars for each and every offense; every such violation shall be a separate and distinct offense, and the penalty or forfeiture thereof shall be recovered in an action as provided in section twenty-four of this chapter. 2. Every person who, either individually or acting as an officer or agent of a corporation other than a common carrier, railroad corporation or street rail- road corporation, shall violate any provision of this chapter, or fail to obey, observe or comply with any order made by the commission under this chapter so long as the same shall be or remain in force, or who shall procure, aid or abet any such corporation in its violation of this chapter, or in its failure to obey, ob- serve or comply with any such order, shall be guilty of a misdemeanor. 3. In construing and enforcing the provisions of this chapter relating to forfeitures and penalties the act of any director, officer or other person acting for or employed by any common carrier, railroad corpo- ration, street railroad corporation or corporation, act- ing within the scope of his official duties or employ- ment, shall be in every case and be deemed to be the act of such common carrier, railroad corporation, street railroad corporation or corporation. § 59. Duties of commissions as to interstate traf- fic. Either commission may investigate interstate freight or passenger rates or interstate freight or pas- senger service on railroads within the state, and when such rates are, in the opinion of either commission, excessive or discriminatory or are levied or laid in violation of the act of congress entitled "An act to NEW YORK LAW. 747 regulate commerce," approved February fourth, eigh- teen hundred and eighty-seven, and the acts amenda- tory thereof and supplementary thereto, or in con- flict with the rulings, orders or regulations of the in- terstate commerce commission, the commission may apply by petition to the interstate commerce commis- sion for relief or may present to the interstate com- merce commission all facts coming to its knowledge, as to violations of the rulings, orders, or regulations of that commission or as to violations of the said act to regulate commerce or acts amendatory thereof or supplementary thereto. 748 PUBLIC UTILITIES. ARTICLE IV. Provisions Relating to Gas Corporations and Electri- cal Corporations; Regulation of Price of Gas and Electricity. Section 64. Application of article. 65. Safe and adequate service; just and reasonable charges; unjust discrimination; unreasonable preference. 66. General powers of commissions in respect to gas and electricity. 67. Inspection of gas and electric meters. 68. Approval of incorporation and franchises; certificate. 69. Approval of issue of stock, bonds and other forms of indebtedness. 69-a. Reorganizations. 70. Approval of transfer of franchise. 71. Complaints as to quality and price of gas and electricity; investigation by commission; forms of complaints. 72. Notice and hearing; order fixing price of gas or elec- tricity, or requiring improvements. 73. Forfeiture for noncompliance with order. 74. Summary proceedings. 75. Defense in case of excessive charge for gas or electricity. 76. Jurisdiction. 77. Powers of local oflBcers. § 64. Application of article. This article shall ap- ply to the manufacture and furnishing of gas for light, heat or power and the furnishing of natural gas for light, heat or power, and the generation, furnishing and transmission of electricity for light, heat or power. §65. Safe and adequate service; just and reason- able charges; unjust discrimination; unreasonable pref- ence. i. Every gas corporation, every electrical cor- poration and every municipality shall furnish and pro- vide such service, instrumentalities and facilities as shall be safe and adequate and in all respects just and NEW YORK LAW. 749 reasonable. All charges made or demanded by any such gas corporation, electrical corporation or mu- nicipality for gas, electricity or any service rendered or to be rendered, shall be just and reasonable and not more than allowed by law or by order of the commis- sion having jurisdiction. Every unjust or unreasonable charge made or demanded for gas, electricity or any such service, or in connection therewith, or in excess of that allowed by law or by the order of the commis- sion is prohibited. 2. No gas corporation, electrical corporation or mu- nicipality shall directly or indirectly, by any special rate, rebate, drawback or other device or method, charge, demand, collect or receive from any person or corpo- ration a greater or less compensation for gas or elec- tricity or for any service rendered or to be rendered or in connection therewith, except as authorized in this chapter, than it charges, demands, collects or receives from any other person or corporation for doing a like and contemporaneous service with respect thereto un- der the same or substantially similar circumstances or conditions. 3. No gas corporation, electrical corporation or municipality shall make or grant any undue or unrea- sonable preference or advantage to any person, cor- poration or locality, or to any particular description of service in any respect whatsoever, or subject any particular person, corporation or locality or any par- ticular description of service to any undue or unrea- sonable prejudice or disadvantage in any respect what- soever. 4. Nothing in this chapter shall be taken to pro- hibit a gas corporation or electrical corporation from establishing a sliding scale for a fixed period for the automatic adjustment of charges for gas, electricity or any service rendered or to be rendered and the divi- 750 PUBLIC UTILITIES. dends to be paid to stockholders of such gas corpora- tion or electrical corporation, provided that the shding scale shall first have been filed with and approved by the proper commission; but nothing in this subdivision shall operate to prevent the commission after the ex- piration of such fixed period from fixing proper, just and reasonable rates and charges to be made for ser- vice as authorized in this article. § 66. General powers of commissions in respect to gas and electricity. Each commission shall within its jurisdiction: 1. Have general supervision of all gas corpora- tions and electrical corporations having authority un- der any general or special law or under any charter or franchise to lay down, erect or maintain wires, pipes, conduits, ducts or other fixtures in, over or under the streets, highways and public places of any municipality, for the purpose of furnishing or dis- tributing gas or of furnishing or transmitting electri- city for light, heat or power, or maintaining under- ground conduits or ducts for electrical conductors, and all gas plants and electric plants owned, leased or operated by any gas corporation or electrical corpo- ration. 2. Investigate and ascertain, from time to time, the quality of gas supplied by persons, corporations and municipalities; examine or investigate the methods employed by such persons, corporations and munici- palities in manufacturing, distributing and supplying gas or electricity for light, heat or power and in trans- mitting the same, and have power to order such reasonable improvements as will best promote the public interest, preserve the public health and protect those using such gas or electricity and those employed in the manufacture and distribution thereof, and have NEW YORK LAW. 75I power to order reasonable improvements and exten- sions of the works, wires, poles, lines, conduits, ducts and other reasonable devices, apparatus and property of gas corporations, electrical corporations and mu- nicipalities. 3. Have power by order to fix from time to time standards for the measurement of the purity or illumi- nating power of gas to be manufactured, distributed or sold by persons, corporations or municipalities for lighting, heating or power purposes, and to prescribe from time to time the efficiency of the electric supply system, of the current supplied and of the lamps fur- nished by the persons, corporations or municipalities generating and selling electric current, and by order to require the gas so manufactured, distributed or sold to equal the standards so fixed by it, and to prescribe from time to time the reasonable minimum and maxi- mum pressure at which gas shall be delivered by said persons, corporations or municipalities. For the pur- pose of determining whether the gas manufactured, distributed or sold by such persons, corporations or municipalities for lighting, heating or power purposes conforms to the standards of illuminating power, pur- ity and pressure, and for the purpose of determining whether the efficiency of the electric supply system, of the current supplied and of the lamps furnished conforms to the orders issued by the commission, the commission shall have power, of its own motion, to examine and investigate the plants and methods em- ployed in manufacturing, delivering and supplying gas or electricity, and shall have access through its mem- bers or persons employed and authorized by it to make such examinations and investigations to all parts of the manufacturing plants owned, used or operated for the manufacture, transmission or distribution of gas or electricity by any such person, corporation or 752 PUBLIC UTILITIES. municipality. Any employee or agent of the commis- sion who divulges any fact or information which may come to his knowledge during the course of any such inspection or examination, except in so far as he may be directed by the commission, or by a court or judge thereof, or authorized by law, shall be guilty of a misdemeanor. 4. Have power, in its discretion, to prescribe uni- form methods of keeping accounts, records and books, to be observed by gas corporations and electrical cor- porations and by municipalities engaged in the manu- facture, sale and distribution of gas and electricity for light, heat or power. It may also in its discretion pre- scribe, by order, forms of accounts, records and memo- randa to be kept by such persons, corporations and municipalities. Notice of alterations by the commis- sion in the required method or form of keeping a sys- tem of accounts shall be given to such persons or cor- porations by the commission at least six months be- fore the same shall take effect. Any other and addi- tional forms of accounts, records and memoranda kept by such corporation shall be subject to examination by the commission. 5. Examine all persons, corporations and munici- palities under its supervision and keep informed as to the methods, practices, regulations and property em- ployed by them in the transaction of their business. Whenever the commission shall be of opinion, after a hearing had upon its own motion or upon complaint, that the rates or charges or the acts or regulations of any such person, corporation or municipality are unjust, unreasonable, unjustly discriminatory or un- duly preferential or in anywise in violation of any provision of law, the commission shall determine and prescribe the just and reasonable rates and charges thereafter to be in force for the service to be furnished NEW YORK LAW. 753 notwithstanding that a higher rate or charge has here- tofore been authorized by statute, and the just and rea- sonable acts and regulations to be done and observed; and whenever the commission shall be of opinion, after a hearing had upon its own motion or upon com- plaint, that the property, equipment or appliances of any such person, corporation or municipality are un- safe, inefficient or inadequate, the commission shall determine and prescribe the safe, efficient and adequate property, equipment and appliances thereafter to be used, maintained and operated for the security and accommodation of the public and in compliance with the provisions of law and of their franchises and char- ters. 6. Require every person and corporation under its supervision and it shall be the duty of every such person and corporation to file with the commission an annual report, verified by the oath of the president, treasurer, general manager or receiver, if any, thereof. The verification shall be made by said official holding office at the time of the filing of said report, and if not made upon the knowledge of the person verifying the same shall set forth the sources of his information and the grounds of his belief as to any matters not stated to be verified upon his knowledge. The report shall show in detail (a) the amount of its authorized capital stock and the amount thereof issued and out- standing; (b) the amount of its authorized bonded indebtedness and the amount of its bonds and other forms of evidence of indebtedness issued and outstand- ing; (c) its receipts and expenditures during the pre- ceding year; (d) the amount paid as dividends upon its stock and as interest upon its bonds; (e) the names of its officers and the aggregate amount paid as salaries to them and the amount paid as wages to its em- ployees; (f) the location of its plant or plants and sys- 48— Pub. Ut. 754 PUBLIC UTILITIES. tern, with a full description of its property and fran- chises, stating in detail how each franchise stated to be owned was acquired; and (g) such other facts per- taining to the operation and maintenance of the plant and system, and the affairs of such person or corpo- ration as may be required by the commission. Such reports shall be in the form, cover the period and be filed at the time prescribed by the commission. The commission may, from time to time, make changes and additions in such forms. When any such report is defective or believed to be erroneous, the commis- sion shall notify the person, corporation or municipal- ity making such report to amend the same within a time prescribed by the commission. Any such person or corporation or municipality which shall neglect to make any such report or which shall fail to correct any such report within the time prescribed by the commission shall be liable to a penalty of one hundred dollars and an additional penalty of one hundred dol- lars for each day after the prescribed time for which it shall neglect to file or correct the same, to be sued for in the name of the people of the state of New York. The amount recovered in any such action shall be paid into the state treasury and be credited to the general fund. The commission may extend the time prescribed for cause shown. 7. Require each municipality engaged in operat- ing any works or systems for the manufacture and supplying of gas or electricity to make an annual re- port to the commission, verified by the oath of the general manager or superintendent thereof, showing in detail, (a) the amount of its authorized bonded indebtedness and the amount of its bonds and other forms of evidence of indebtedness issued and out- standing for lighting purposes; (b) its receipts and ex- penditures during the preceding year; (c) the amount NEW YORK LAW. 755 paid as interest upon its bonds and upon other forms of evidence of indebtedness; (d) the name of and the amount paid to each person receiving a yearly or monthly salary, and the amount paid as wages to em- ployees; (e) the location of its plant and system with a full description of the property; and (f) such other facts pertaining to the operation and maintenance of the plant and system as may be required by the com- mission. Such report shall be in the form, cover the period and be filed at the time prescribed by the com- mission. 8. Have power, either through its members or inspectors or employees duly authorized by it, to enter in or upon and to inspect the property, buildings, plants, factories, power houses, ducts, conduits and offices of any of such corporations, persons or munici- palities. 9. Have power to examine the accounts, books, contracts, records, documents and papers of any such corporation, person or municipality, and have power, after hearing, to prescribe by order the accounts in which particular outlays and receipts shall be entered, charged or credited. 10. Have power to compel, by subpoena duces tecum, the production of any accounts, books, con- tracts, records, documents, memoranda and papers. In lieu of requiring production of originals by subpoena duces tecum the commission or any commissioner may require sworn copies of any such books, records, con- tracts, documents and papers, or parts thereof, to be filed with it. The commission may require of all such corporations, persons or municipalities, specific an- swers to questions upon which the commission may need information, and may also require such corpora- tions, persons or municipalities to file periodic reports in the form, covering the period and filed at the time 756 PUBLIC UTILITIES. prescribed by the commission. If such corporation, person or municipahty shall fail to make specific an- swer to any question or shall fail to make a periodic report when required by the commission as herein pro- vided within the time and in the form prescribed by the commission for the making and filing of any such report or answer, such corporation, person or the of- ficer of the municipality shall forfeit to the state the sum of one hundred dollars for each and every day it shall continue to be in default with respect to such report or answer. Such forfeiture shall be recovered in an action brought by the commission in the name of the people of the state of New York. The amount recovered in any such action shall be paid into the state treasury and be credited to the general fund. 11. Have power in all parts of the state, either as a commission or through its members, to subpoena witnesses, take testimony and administer oaths to witnesses in any proceeding or examination instituted before it, or conducted by it in reference to any matter within its jurisdiction under this article. 12. Have power to require every gas corporation, electrical corporation and municipality to file with the commission and to print and keep open to public inspection schedules showing all rates and charges made, established or enforced or to be charged or en- forced, all forms of contract or agreement and all rules and regulations relating to rates, charges or service used or to be used, and all general privileges and facilities granted or allowed by such gas corpora- tion, electrical corporation or municipality; but this subdivision shall not apply to state, municipal or fed- eral contracts. Unless the commission otherwise or- ders, no change shall be made in any rate or charge, or in any form of contract or agreement or any rule or regulation relating to any rate, charge or service, or NEW YORK LAW. 757 in any general privilege or facility, which shall have been filed and published by a gas corporation, an elec- trical corporation or municipality in compliance with an order of the commission, except after thirty days' notice to the commission and publication for thirty days as required by order of the commission, which shall plainly state the changes proposed to be made in the schedule then in force and the time when the change will go into effect. The commission for good cause shown may allow changes without requiring the thirty days' notice under such conditions as it may prescribe. No corporation or municipality shall charge, demand, collect or receive a greater or less or different compensation for any service rendered or to be ren- dered than the rates and charges applicable to such services as specified in its schedule filed and in effect at the time; nor shall any corporation or municipality refund or remit in any manner or by any device any portion of the rates or charges so specified, nor to extend to any person or corporation any form of con- tract or agreement, or any rule or regulation, or any privilege or facility, except such as are regularly and uniformly extended to all persons and corporations under like circumstances. The commission shall have power to prescribe the form of every such schedule, and from time to time prescribe by order such changes in the form thereof as may be deemed wise. The com- mission shall also have power to establish such rules and regulations to carry into effect the provisions of this subdivision as it may deem necessary, and to modify or amend such rules or regulations frorii time to time. 13. In case any electrical corporation or gas cor- poration is engaged in carrying on any business other than owning, operating or managing a gas plant or an electric plant, which other business is not otherwise 758 PUBLIC UTILITIES. subject to the jurisdiction of the commission, and is so conducted that its operations are to be substantially kept separate and apart from the owning, operating, managing or controlling of such gas plant or electric plant, said corporation in respect of such other busi- ness shall not be subject to any of the provisions of this chapter and shall not be required to procure the assent or authorization of the commission to any act in such other business or to make any report in respect thereof. But this subdivision shall not restrict or Hmit the powers of the commission in respect to the owning, operating, managing or controlling by such corpora- tion of such gas plant or electric plant, and said pow- ers shall include also the right to inquire as to, and prescribe the apportionment of, capitalization, earn- ings, debts and expenses fairly and justly to be awarded to or borne by the ownership, operation, management or control of such gas plant or electric plant as distinguished from such other business. In any such case if the owning, operating, managing or controlling of such gas plant or electric plant by any such corporation is wholly subsidiary and incidental to the other business carried on by it and is incon- siderable in amount and not general in its character, the commission may by general rules exempt such corporation from making full reports and from the keeping of accounts as to such subsidiary and inci- dental business. § 67. Inspection of gas and electric meters. I. Each commission shall appoint inspectors of gas meters whose duty it shall be when required by the commission to inspect, examine, prove and ascertain the accuracy of any and all gas meters used or in- tended to be used for measuring or ascertaining the quantity of gas for light, heat or power furnished by NEW YORK LAW. 759 any person, corporation or municipality to or for the use of any person or persons and when found to be or made to be correct, the inspector shall seal all such meters and each of them with some suitable device, which device shall be recorded in the office of the secretary of state. 2. No corporation, person or municipality shall furnish, set or put in use any gas meter which shall not have been inspected, proved and sealed by an in- spector of the commission. 3. Each commission shall appoint inspectors of electric meters whose duty it shall be, when required by the commission, to inspect, examine and ascertain the accuracy of any and all electric meters used or intended to be used for measuring and ascertaining the quantity of electric current furnished for light, heat or power by any person, corporation or munici- pality to or for the use of any person or corporation, and to inspect, examine and ascertain the accuracy of all apparatus for testing and proving the accuracy of electric meters, and when found to be or made to be correct the inspector shall stamp or mark all such meters and apparatus with some suitable device, which device shall be recorded in the of^ce of the secretary of state. No corporation, person or municipality shall furnish, set or put in use any electric meter the type of which shall not have been approved by the com- mission. 4. Every gas corporation, electrical corporation and municipality shall provide, repair and maintain such suitable premises and apparatus and facilities as may be required and approved by the commission for testing and proving the accuracy of gas and elec- tric meters furnished for use by it. and by which apparatus every meter may be tested. 5. If any consumer to whom a meter has been fur- 760 PUBLIC UTILITIES. nished shall request the commission in writing to in- spect such meter, the commission shall have the same inspected and tested; if the same on being so tested shall be found to be more than four per centum if an electric meter, or more than two per centum if a gas meter, defective or incorrect to the prejudice of the consumer, the expense of such inspection and test shall be borne by the corporation or municipality; if the same on being so tested shall be found to be cor- rect within the limits of error prescribed by the pro- visions of this subdivision, the expense of such inspec- tion and test shall be borne by the consumer. 6. The commission shall prescribe such rules and regulations to carry into effect the provisions of this section as it may deem necessary, and shall fix uniform reasonable charges for the inspection and testing of meters upon complaint. § 68. Approval of incorporation and franchises; certificate. No gas corporation or electrical corpora- tion shall begin construction of a gas plant or electric plant without first having obtained the permission and approval of the commission of each district within which any part of the work of construction is to be performed. No such corporation shall exercise any right or privilege under any franchise hereafter granted, or under any franchise heretofore granted but not heretofore actually exercised, or the exercise of which shall have been suspended for more than one year, without first having obtained the permission and approval of the proper commission. Before such cer- tificate shall be issued a certified copy of the charter of such corporations shall be filed in the office of the commission, together with a verified statement of the president and secretary of the corporation, showing that it has received the required consent of the proper NEW YORK LAW. 761 municipal authorities. The commission within whose district such construction is to be made, or within whose district such right, privilege or franchise is to be exercised, shall have power to grant the permis- sion and approval herein specified whenever it shall after due hearing determine that such construction or such exercise of the right, privilege or franchise is necessary or convenient for the public service. No municipality shall build, maintain and operate for other than municipal purposes any works or sys- tems for the manufacture and supplying of gas or elec- tricity for lighting purposes without a certificate of authority granted by the commission. If the certifi- cate of authority is refused, no further proceedings shall be taken by such municipality before the com- mission, but a new application may be made therefor after one year from the date of such refusal. § 69. Approval of issues of stock, bonds and other forms of indebtedness. A gas corporation or elec- trical corporation organized or existing, or hereafter incorporated, under or by virtue of the laws of the state of New York, may issue stocks, bonds, notes or other evidence of indebtedness payable at periods of more than twelve months after the date thereof, when necessary for the acquisition of property, the construction, completion, extension or improvement of its plant or distributing system, or for the improve- ment or maintenance of its service or for the discharge or lawful refunding of its obligations or for the reim- bursement of moneys actually expended from income, or from any other moneys in the treasury of the cor- poration not secured or obtained from the issue of stocks, bonds, notes or other evidence of indebtedness of such corporation, within five years next prior to the filing of an application with the proper commission for 762 PUBLIC UTILITIES. the required authorization, for any of the aforesaid purposes except maintenance of service and except replacements in cases where the appHcant shall have kept its accounts and vouchers of such expenditure in such manner as to enable the commission to ascer- tain the amount of moneys so expended and the pur- poses for which such expenditure was made; provided and not otherwise that there shall have been secured from the proper commission an order authorizing such issue, and the amount thereof, and stating the purposes to which the issue or proceeds thereof are to be ap- plied, and that, in the opinion of the commission, the money, property or labor to be procured or paid for by the issue of such stock, bonds, notes or other evi- dence of indebtedness is or has been reasonably re- quired for the purposes specified in the order, and that except as otherwise permitted in the order in the case of bonds, notes and other evidence of indebted- ness, such purposes are not in whole or in part reason- ably chargeable to operating expenses or to income. Nothing herein contained shall prohibit the commis- sion from giving its consent to the issue of bonds, notes or other evidence of indebtedness for the reim- bursement of moneys heretofore actually expended from income for any of the aforesaid purposes, except maintenance of service and replacements, prior to five years next preceding the filing of an application there- for, if in the judgment of the commission such con- sent should be granted; provided application for such consent shall be made prior to January first, nineteen hundred and twelve. For the purpose of enabling it to determine whether it should issue such an order, the commission shall make such inquiry or investiga- tion, hold such hearings and examine such witnesses, books, papers, documents or contracts as it may deem of importance in enabling it to reach a determination. NEW YORK LAW. 763 Such corporation shall not without the consent of the commission apply said issue or any proceeds thereof to any purpose not specified in such order. Such gas corporation or electrical corporation may issue notes, for proper corporate purposes and not in violation of any provision of this or of any other act, payable at periods of not more than twelve months without such consent; but no such notes shall, in whole or in part, directly or indirectly be refunded by any issue of stock or bonds or by any evidence of indebtedness running for more than twelve months without the consent of the proper commission. Provided, however, that the commission shall have no power to authorize the capi- talization of any franchise or the right to own, operate or enjoy any franchise whatsoever in excess of the amount (exclusive of any tax or annual charge) actu- ally paid to the state or to any political subdivision thereof as the consideration for the grant of such franchise or right. Nor shall the capital stock of a corporation formed by the merger or consolidation of two or more other corporations, exceed the sum of the capital stock of the corporation, so consolidated, at the par value thereof, or such sum and any additional sum actually paid in cash ; nor shall any contract for consolidation or lease be capitalized in the stock of any corporation whatever; nor shall an)- corporation hereafter issue any bonds against or as a lien upon any contract for consolidation or merger. § 69-a. Reorganizations, i. Reorganizations of gas corporations and electrical corporations pursuant to sections nine and ten of the stock corporation law and such other statutes as may be enacted from time to time shall be subject to the supervision and control of the proper commission, and no such reorganization 764 PUBLIC UTILITIES. shall be had without the authorization of such com- mission. 2. Upon all such reorganizations the amount of capitalization, including therein all stocks and bonds and other evidence of indebtedness, shall be such as is authorized by the commission, which, in making its determination shall not exceed the fair value of the property involved, taking into consideration its original cost of construction, duplication cost, present condi- tion, earning power at reasonable rates and all other relevant matters and any additional sum or sums as shall be actually paid in cash, provided, however, that the commission may make due allowance for discount of bonds. Any reorganization agreement before it be- comes effective shall be amended so that the amount of capitalization shall conform to the amount au- thorized by the commission. § 70. Approval of transfer of franchise. No gas corporation or electrical corporation shall transfer or lease its franchise, works or system or any part of such franchise, works or system to any other person or corporation or contract for the operation of its works and system, without the written consent of the proper commission. The permission and approval of the com- mission, to the exercise of a franchise under section sixty-eight of this chapter, or to the assignment, trans- fer or lease of a franchise under this section shall not be construed to revive or validate any lapsed or in- valid franchise or to enlarge or add to the powers and privileges contained in the grant of any franchise or to waive any forfeiture. No such corporation shall directly or indirectly acquire the stock or bonds of any other corporation incorporated for, or engaged in, [Added by ch. 289, L. 1912.] NEW YORK LAW. 765 the same or a similar business, or proposing to operate or operating under a franchise from the same or any- other municipahty, neither shall any street railroad corporation acquire the stock or bonds of any electrical corporation, unless authorized so to do by the com- mission. Save where stock shall be transferred or held for the purpose of collateral security only with the consent of the commission empowered by this chapter to give such consent, no stock corporation of any de- scription, domestic or foreign, other than a gas cor- poration or electrical corporation or street railroad corporation, shall purchase or acquire, take or hold, more than ten per centum of the total capital stock issued by any gas corporation or electrical corporation organized or existing under or by virtue of the laws of this state, except that a corporation now lawfully holding a majority of the capital stock of any gas corporation or electrical corporation may with the consent of the commission acquire and hold the re- mainder of the capital stock of such gas corporation or electrical corporation or any portion thereof. Noth- ing herein contained shall be construed to prevent the holding of stock heretofore lawfully acquired, or to prevent, upon the surrender or exchange of said stock pursuant to a reorganization plan, the purchase, acqui- sition, taking or holding of a proportionate amount of stock of any new corporation organized to take over, at foreclosure or other sale, the property of any corporation whose stock has been thus surrend- ered or exchanged. Every contract, assignment, trans- fer or agreement for transfer of any stock by or through any person or corporation to any corporation, in violation of any provision of this chapter shall be void and of no efTect, and no such transfer or assign- [Thus amended by ch. 788, L. 1911.] 766 PUBLIC UTILITIES. ment shall be made upon the books of any such gas corporation, or electrical corporation, or shall be recog- nized as effective for any purpose. §71. Complaints as to quality and price of gas and electricity; investigation by commission; forms of complaints. Upon the complaint in writing of the mayor of a city, the trustees of a village or the town board of a town in which a person or corporation is authorized to manufacture, sell or supply gas or elec- tricity for heat, light or power, or upon the complaint in writing of not less than one hundred customers or purchasers of such gas or electricity in cities of the first or second class, or of not less than fifty in cities of the third class, or of not less than twenty-five else- where, or upon complaint of a gas corporation or electrical corporation supplying said gas or electricity, as to the illuminating power, purity, pressure or price of gas, the efficiency of the electric incandescent lamp supply, the voltage of the current supplied for hght, heat or power, or price of electricity sold and delivered in such municipality, the proper commission shall investigate as to the cause for such complaint. When such complaint is made, the commission may, by its agents, examiners and inspectors, inspect the works, system, plant, devices, appliances and methods used by such person or corporation in manufacturing, transmitting and supplying such gas or electricity, and may examine or cause to be examined the books and papers of such person or corporation pertaining to the manufacture, sale, transmitting and supplying of such gas or electricity. The form and contents of complaints made as provided in this section shall be prescribed by the commission. Such complaints shall be signed by the officers, or by the customers, pur- chasers or subscribers making them, who must add to NEW YORK LAW. 767 their signatures their places of residence, by street and number, if any. § 72. Notice and hearing ; order fixing price of gas or electricity, or requiring improvement. Before pro- ceeding under a complaint presented as provided in section seventy-one, the commission shall cause notice of such complaint, and the purpose thereof, to be served upon the person or corporation affected there- by. Such person or corporation shall have an oppor- tunity to be heard in respect to the matters com- plained of at a time and place to be specified in such notice. An investigation may be instituted by the commission as to any matter of which complaint may be made, as provided in section seventy-one of this chapter, or to enable it to ascertain the facts requisite to the exercise of any power conferred upon it. After a hearing and after such an investigation as shall have been made by the commission or its officers, agents, examiners or inspectors, the commission within law- ful limits may, by order, fix the maximum price of gas or electricity not exceeding that fixed by statute to be charged by such corporation or person, for the service to be furnished; and may order such improvement in the manufacture, distribution or supply of gas, in the manufacture, transmission or supply of electricity, or in the methods employed by such person or corpora- tion, as will in its judgment be adequate, just and reasonable. The price fixed by the commission under this section or under subdivision five of section thirty- six shall be the maximum price to be charged by such person, corporation or municipality for gas or elec- tricity for the service to be furnished within the terri- tory and for a period to be fixed by the commission in the order, not exceeding three years except in the case of a sliding scale, and thereafter until the com- 768 PUBLIC UTILITIES. mission shall, upon its own motion or upon the com- plaint of any corporation, person or municipality in- terested, fix a higher or lower maximum price of gas or electricity to be thereafter charged. In determin- ing the price to be charged for gas or electricity the commission may consider all facts which in its judg- ment have any bearing upon a proper determination of the question although not set forth in the complaint and not within the allegations contained therein, with due regard among other things to a reasonable average return upon capital actually expended and to the ne- cessity of making reservations out of income for sur- plus and contingencies, § 73. Forfeiture for noncompliance with order. Every gas corporation and electrical corporation and the officers, agents and employees thereof shall obey, observe and comply with every order made by the commission under authority of this chapter so long as the same shall be and remain in force. Any such person or corporation, or any officer, agent or employee thereof, who knowingly fails or neglects to obey or comply with such order, or any provision of this chap- ter, shall forfeit to the state of New York not to ex- ceed the sum of one thousand dollars for each ofifense. Every distinct violation of any such order or of this chapter shall be a separate and distinct offense, and in case of a continuing violation each day shall be deemed a separate and distinct ofifense. § 74. Summary proceedings. Whenever either commission shall be of opinion that a gas corporation, electrical corporation or municipality within its juris- diction is failing or omitting or about to fail or omit to do anything required of it by law or by order of the commission or is doing anything or about to do any- NEW YORK LAW. 769 thing or permitting anything or about to permit any- thing to be done, contrary to or in violation of law or of any order of the commission, it shall direct counsel to the commission to commence an action or proceed- ing in the supreme court of the state of New York in the name of the commission for the purpose of having such violations or threatened violations stopped and prevented either by mandamus or injunction. Counsel to the commission shall thereupon begin such action or proceeding by a petition to the supreme court alleging the violation complained of and praying for appropriate relief by way of mandamus or injunction. It shall thereupon be the duty of the court to specify the time not exceeding twenty days after service of a copy of the petition within which the gas corporation, electrical corporation or municipality complained of must answer the petition. In case of default in answer or after answer, the court shall immediately inquire into the facts and circumstances in such manner as the court shall direct without other or formal plead- ings, and without respect to any technical requirement. Such other persons or corporations, as it shall seem to the court necessary or proper to join as parties in order to make its order, judgment or writs effective, may be joined as parties upon application of counsel to the commission. The final judgment in any such action or proceeding shall either dismiss the action or proceeding or direct that a writ of mandamus or an injunction or both issue as prayed for in the petition or in such modified or other form as the court may determine will aft'ord appropriate relief. § 75. Defense in case of excessive charges for gas or electricity. If it be alleged and established in an action brought in any court for the collection of any charge for gas or electricity, that a price has been 49— Pub. Ut. 'J'JQ PUBLIC UTILITIES. demanded in excess of that fixed by the commission or by statute in the municipahty wherein the action arose, no recovery shall be had therein, but the fact that such excessive charges have been made shall be a complete defense to such action. § 76. Jurisdiction. The words "proper commis- sion," when used in this article, mean the commission of the district within which the person or corporation affected supplies or proposes to supply the whole or the greater part of the service rendered by it. But nothing herein contained shall be construed to deprive the commission of either district of the power of super- vision and regulation within its district. And either commission shall have power to enter and inspect the plant of such corporation, wherever situated. § "jj. Powers of local ofificers. If in any city of the first or second class there now exists or shall here- after be created a board, body or officer having juris- diction of matters pertaining to gas or electric serv- ice, such board, body or ofiEicer shall have and may exercise such power, jurisdiction and authority in en- forcing the laws of the state and the orders, rules and regulations of the commission as may be prescribed by statute or by the commission. NEW YORK LAW. 77I ARTICLE v.* Provisions Relating to Telegraph and Telephone Lines and to Telephone and Telegraph Corporations. Section 90. Application of article. 91. Adequate service; just and reasonable charges; unjust discrimination; unreasonable preference. 92. Rate schedules. 93. Liability for loss or damage caused by violation of this chapter. 94. General powers and duties of commission in respect to telegraph corporations and telephone corporations. 95. Reports of telegraph corporations and telephone cor- porations. 96. Investigations by commission. 97. Rates, rentals and service. 98. Powers of commission to order repairs or changes. 99. Franchises and privileges. 100. Transfer and ownership of stocks. 101. Approval of issues of stocks, bonds and other forms of indebtedness. 101-a. Reorganization. 102. Forfeitures; penalties. 103. Summary proceedings. § 90. Application of article. The provision of this article shall apply to communication by telegraph or telephone between one point and another within the state of New York and to every telegraph corporation and telephone corporation. §91. Adequate service; just and reasonable charges; unjust discrimination; unreasonable prefer- ence. I. Every telegraph corporation and every tele- phone corporation shall furnish and provide with re- * Article V Inserted by eh. 673, L. 1910. By same chapter former Article V was renumbered Article VI and sections 80 to 87 inclusive renumbered respectively 120 to 127 inclusive. 'J']2 PUBLIC UTILITIES. spect to its business such instrumentalities and facili- ties as shall be adequate and in all respects just and reasonable. All charges made or demanded by any telegraph corporation or telephone corporation for any service rendered or to be rendered in connection therewith shall be just and reasonable and not more than allowed by law or by order of the commission. Every unjust or unreasonable charge made or de- manded for any such service or in connection there- with or in excess of that allowed by law or by order of the commission is prohibited and declared to be unlaw- ful. 2. No telegraph corporation or telephone corpo- ration shall directly or indirectly or by any special rate, rebate, drawback or other device or method charge, demand, collect or receive from any person or corpo- ration a greater or less compensation for any service rendered or to be rendered with respect to communi- cation by telegraph or telephone or in connection therewith, except as authorized in this chapter, than it charges, demands, collects or receives from any other person or corporation for doing a like and contem- poraneous service with respect to communication by telegraph or telephone under the same or substantially the same circumstances and conditions. 3. No telegraph corporation or telephone corpora- tion shall make or give any undue or unreasonable preference or advantage to any person, corporation or locality, or subject any particular person, corporation or locality to any undue or unreasonable prejudice or disadvantage in any respect whatsoever. 4. Nothing in this chapter shall be construed to prevent any telegraph corporation or telephone cor- poration from continuing to furnish the use of its lines, equipment or service under any contract or con- tracts in force at the date this article takes effect or NEW YORK LAW. 773 upon the taking effect of any schedule or schedules of rates subsequently filed with the commission, as hereinafter provided, at the rate or rates fixed in such contract or contracts; provided, however, that when any such contract or contracts are or become termin- able by notice, the commission shall have power, in its discretion, to direct by order that such contract or contracts shall be terminated by the telegraph corpora- tion or telephone corporation party thereto, and there- upon such contract or contracts shall be terminated by such telegraph corporation or telephone corporation as and when directed by such order. §92. Rate schedules, i. Every telegraph corpo- ration and every telephone corporation shall print and file with the commission schedules showing all rates, rentals and charges for service of each and every kind by or over its line between points in this state and be- tween each point upon its line and all points upon every line leased or operated by it and between each point upon its line or upon any line leased or operated by it and all points upon the line of any other tele- graph or telephone corporation whenever a through service or joint rate shall have been established be- tween any two points. If no joint rate over a through line has been established the several corporations in such through line shall file with the commission the separately established rates and charges applicable where through service is afforded. Such schedule shall plainly state the places between which telephone or telegraph service, or both, will be rendered and shall also state separately all charges and all privileges or facilities granted or allowed and any rules or regula- tions or forms of contract which may in any wise change, affect or determine any or the aggregate of the rates, rentals or charges for the service rendered. 774 PUBLIC UTILITIES. Such schedule shall be plainly printed and kept open to public inspection. The commission shall have the power to prescribe the form of every such schedule and may from time to time prescribe, by order, changes in the form thereof. The commission shall also have power to establish rules and regulations for keeping such schedules open to public inspection and may from time to time modify the same. Every tele- graph corporation and telephone corporation shall file with the commission as and when required by it a copy of any contract, agreement or arrangement in writing with any other telegraph corporation or tele- phone corporation or with any other corporation, asso- ciation or person relating in any way to the construc- tion, maintenance or use of a telegraph line or tele- phone line or service by or rates and charges over or upon any such telegraph line or telephone line. 2. Unless the commission otherwise orders no change shall be made in any rate, charge or rental, or joint rate, charge or rental which shall have been filed by a telegraph corporation or telephone corporation in compliance with the requirements of this chapter, except after thirty days' notice to the commission, which notice shall plainly state the changes proposed to be made in the schedule then in force and the time when the changed rate, charge or rental shall go into effect ; and all proposed changes shall be shown by filing new schedules or shall be plainly indicated upon the schedules filed and in force at the time and kept open to public inspection. The commission, for good cause shown, may allow changes in rates, charges or rentals without requiring the thirty days' notice, under such conditions as it may prescribe ; all such changes shall be immediately indicated upon its schedules by such telegraph corporation or telephone corporation. No telegraph corporation or telephone corporation NEW YORK LAW. 775 shall charge, demand, collect or receive a different compensation for any service rendered or to be ren- dered than the charge applicable to such service as specified in its schedule on file and in effect at that time. Nor shall any telegraph corporation or tele- phone corporation refund or remit directly or indi- rectly any portion of the rate or charge so specified, nor extend to any person or corporation any form of contract or agreement, or any rule or regulation, or any privilege or facility, except such as are specified in its schedule filed and in effect at the time and regu- larly and uniformly extended to all persons and cor- porations under like circumstances for the like or sub- stantially similar service. 3. No telegraph corporation or telephone corpora- tion subject to the provisions of this chapter shall, directly or indirectly, give any free or reduced service, or any free pass or frank for the transmission of mes- sages by either telephone or telegraph between points within this state, except to its officers, employees, agents, pensioners, surgeons, physicians, attorneys-at- law and their families; to persons or corporations ex- clusively engaged in charitable and eleemosynary work and ministers of religions; to officers and employees of other telegraph corporations and telephone corpo- rations, railroad corporations and street railroad cor- porations. But this subdivision shall not apply to state, municipal or federal contracts. § 93. Liability for loss or damage caused by viola- tion of this chapter. In case any telegraph corpora- tion or telephone corporation shall do or cause to be done or permit to be done any act, matter or thing prohibited, forbidden or declared to be unlawful, or [Thus amended by ch. 124, L. 1911.] yyd PUBLIC utilities. shall omit to do any act, matter or other thing re- quired to be done, either by law of the state of New- York by this chapter or by any order of the commis- sion, such telegraph corporation or telephone corpora- tion shall be liable to the person or corporation affected thereby for all loss, damage or injury caused thereby or resulting therefrom and in case of recovery if the court shall find that such an act or omission was wil- ful it may in its discretion fix a reasonable counsel or attorney's fee, which fee shall be taxed and collected as a part of the costs in the action. An action to re- cover for such loss, damage or injury may be brought in any court of competent jurisdiction by any such person or corporation. § 94. General powers and duties of commission in respect to telegraph corporations and telephone corpo- rations. I. The commission and each commissioner shall have power and authority to administer oaths in all parts of the state to witnesses summoned to testify in any inquiry, investigation, hearing, or proceeding, and also to administer oaths in all parts of the state whenever the exercise of such power is incidentally necessary or proper to enable the commission or a commissioner to perform a duty or to exercise a power. 2. The commission shall have general supervision of all telegraph corporations, telephone corporations and telegraph lines and telephone lines within its jurisdiction as hereinbefore defined and shall have power to and shall examine the same and keep in- formed as to their general condition, their capitaliza- tion, their franchises and the manner in which their lines and property are leased, operated or managed, conducted and operated with respect to the adequacy of and accommodation afforded by their service and also with respect to the safety and security of their NEW YORK LAW. ']^^ lines and property, and with respect to their compli- ance with all provisions of law, orders of the commis- sion, franchises and charter requirements. The com- mission shall have power either through its members or inspectors or employees duly authorized by it to enter in or upon and to inspect the property, equip- ment, buildings, plants, factories, offices, apparatus, machines, devices and lines of any telegraph corpora- tion or telephone corporation. 3. The commission and each commissioner shall have power to examine all books, contracts, records, documents and papers of any telegraph corporation or telephone corporation and by subpoena duces tecum to compel the production thereof, or of duly verified copies of the same or of any of them. § 95. Reports of telegraph corporations and tele- phone corporations, i. Every telegraph corporation and every telephone corporation shall file with the commission an annual report at a time and covering the yearly period fixed by the commission. Such annual report shall be verified by the oath of the presi- dent, treasurer, general manager or receiver of any of such corporations, or by the person required to file the same. Verification shall be made by the official hold- ing office at the time of the filing of said report, and if not made upon the knowledge of the person verify- ing the same shall set forth in general terms the sources of his information and the grounds for his be- lief as to any matters not stated to be verified on his knowledge. The commission shall prescribe the form of such reports and the character of the information to be contained therein and may, from time to time, make such changes and additions in regard to form and contents thereof as it may deem proper, and shall furnish a blank form for such annual reports to every yy^ PUBLIC UTILITIES. telegraph corporation and every telephone corporation required to make the same. When the report of any telegraph corporation or telephone corporation is de- fective or erroneous the commission shall notify the corporation to amend the same within a time pre- scribed by the commission. The said reports shall be preserved in the office of the commission. The com- mission may require of any telegraph corporation or telephone corporation specific answ^ers to questions upon which the commission may desire information. If any telegraph corporation or telephone corporation shall fail to make and file its annual report as and when required or within such extended time as the commis- sion may allow or shall fail to make specific answers to any question within the period specified by the com- mission for the making and filing of such answers, such corporation shall forfeit to the state the sum of one hundred dollars for each and every day it shall continue to be in default with respect to such report or answer. Such forfeiture shall be recovered in an action brought by the commission in the name of the people of the state of New York. The amount re- covered in any such action shall be paid into the state treasury and shall be credited to the general fund. The commission may, when it deems it advisable, ex- empt any telegraph corporation or telephone corpora- tion from the necessity of filing annual reports until the further order of the commission. 2. The commission may establish a system of accounts to be used by telegraph corporations and tele- phone corporations, which are subject to its jurisdic- tion, and are required to make annual reports to it or classify the said corporations, and prescribe a sys- tem of accounts for each class and may prescribe the manner in which such accounts shall be kept. It may also, in its discretion prescribe the form of records to NEW YORK LAW. 779 be kept by such corporation. Notice of alterations by the commission in the required method or form of keeping accounts shall be given to such corporations by the commission at least six months before the same are to take effect. The commission shall at all times have access to all accounts, records and memoranda kept by telegraph corporations and telephone corpora- tions, and may designate any of its officers or em- ployees who shall thereupon be authorized under the order of the commission to inspect and examine any and all accounts, records and memoranda kept by any such corporation; and the commission may, after hearing, prescribe by order, the accounts in which particular outlays and receipts shall be entered, charged or credited. Any employee or agent of the commis- sion who divulges any fact or information which may come to his knowledge during the course of any such inspection or examination except in so far as he may be directed by the commission or by a court or judge thereof, or authorized by law, shall be guilty of a misdemeanor. Any provision of law prohibiting the disclosure of the contents of telegraph messages or the contents or substance of telephone communica- tions shall not be deemed to prohibit the disclosure of any matter in accordance with the provisions of this chapter. §96. Investigations by commission. i. The commission may of its own motion investigate or make inquiry in a manner to be determined by it as to any act done or omitted to be done by any telegraph cor- poration or telephone corporation and the commission must make such inquiry in regard to any act done or omitted to be done by any telegraph corporation or telephone corporation in violation of any provisions of law or in violation of anv order of the commission. 780 PUBLIC UTILITIES. 2. Complaints may be made to the commission by any person or corporation aggrieved, by petition or complaint in writing, setting forth any act done or omitted to be done by any telegraph corporation or telephone corporation alleged to be in violation of the terms or conditions of its franchise or charter or of any order of the commission. Upon the presenta- tion of such a complaint the commission shall cause a copy thereof to be forwarded to the person or corpora- tion complained of which may be accompanied by an order directed to such person or corporation requiring that the matters complained of be satisfied or that the charges be answered in writing within a time to be. specified by the commission. If the person or cor- poration complained of shall make reparation for any injury alleged and shall cease to commit or permit the violation of law, franchise, charter or order charged in the complaint, if any there be, and shall notify the commission of that fact before the time allowed for answer, the commission need take no further action upon the charges. If, however, the charges contained in such petition be not thus satisfied and it shall ap- ■ pear to the commission that there are reasonable f grounds therefor, it shall investigate such charges in | such manner and by such means as it shall deem proper and take such action within its powers as the * facts in its judgment justify. 3. Whenever the commission shall investigate any matter complained of by any person or corporation aggrieved by any act or omission of a telegraph cor- poration or telephone corporation under this section, it shall be its duty within sixty days after final sub- mission to make and file an order either dismissing the petition or complaint or directing the telegraph corporation or telephone corporation complained of to NEW YORK LAW. 78 1 satisfy the cause of complaint in whole or to the extent which the commission may specify and require. § 97. Rates, rentals and service, i. Whenever the commission shall be of opinion, after a hearing, had upon its own motion or upon a complaint that the rates, charges, tolls or rentals demanded, exacted, charged or collected by any telegraph corporation or telephone corporation subject to its jurisdiction for the transmission of messages or communications by tele- graph or telephone or for the rental or use of any telegraph line, telephone line or any telegraph instru- ment, wire, appliances, apparatus or device or any telephone receiver, transmitter, instrument, wire, cable, apparatus, conduit, machine, appliance or device or any telephone extension or extension system or that the rules, regulations or practices of any telegraph corporation or telephone corporation affecting such rates, charges, rentals or service are unjust, unreason- able or unjustly discriminatory or unduly preferential or in any wise in violation of law, or that the maxi- mum rates, charges or rentals chargeable by any such telegraph corporation or telephone corporation are insuf^cient to yield reasonable compensation for the service rendered, the commission shall with due re- gard, among other things, to a reasonable average re- turn upon the value of the property actually used in the public service and of the necessity of making reservation out of income for surplus and contingen- cies determine the just and reasonable rates, charges and rentals to be thereafter observed and in force as the maximum to be charged, demanded, exacted or collected for the performance or rendering of the serv- ice specified and shall fix the same by order to be served upon all telegraph corporations and telephone corporations by which sucli rates, charges and rentals 782 PUBLIC UTILITIES. are thereafter to be observed, and thereafter no in- crease in any rate, charge or rental so fixed shall be made without the consent of the commission. 2. Whenever the commission shall be of the opin- ion, after a hearing had upon its own motion or upon complaint that the rules, regulations or practices of any telegraph corporation or telephone corporation are unjust or unreasonable or that the equipment or serv- ice of any telegraph corporation or telephone corpora- tion is inadequate, inefBcient, improper or insufficient, the commission shall determine the just, reasonable, adequate, efficient and proper regulations, practices, equipment and service thereafter to be installed, to be observed and used, and to fix and prescribe the same by order to be served upon every telegraph corporation and telephone corporation to be bound thereby and thereafter it shall be the duty of every telegraph cor- poration and telephone corporation to which such order is directed to obey each and every such order so served upon it and to do everything necessary or proper in order to secure compliance with and observance of every such order by all its officers, agents and em- ployees according to its true intent and meaning. Nothing contained in this chapter shall be construed as giving to the commission power to make any order, direction or requirement requiring any telegraph cor- poration or telephone corporation to perform any act which is unjust or unreasonable or in violation of any law of this state or of the United States not incon- sistent with the provisions of this chapter. 3. The commission shall have power by order to require any two or more telegraph corporations whose lines form a continuous line of communication, or could be made to do so by the construction and maintenance of suitable connections or transfer of messages at common points, between different localities NEW YORK LAW. 783 which are not reached by the line o{ either company alone, to establish through lines within the state be- tween two or more such localities and joint rates or charges for service by or over said lines as the com- mission may by its order prescribe and in case such through lines and joint rates be not established by the corporations named in any such order within the time therein specified, the commission shall have power by order to establish the same and to fix the just and reasonable rates and charges to be charged for such through service and to declare the portion thereof to which each of the corporations affected thereby shall be entitled and the manner in which the same shall be secured and paid. § 98. Power of commission to order repairs or changes. Whenever the commission shall be of opin- ion, after a hearing had upon its own motion, or upon a complaint, that repairs or improvements to or changes in any telegraph line or any telephone line ought reasonably to be made, or that any additions should reasonably be made thereto, in order to pro- mote the convenience of the public or employees, or in order to secure adequate service or facilities for telegraphic or telephonic communications, the com- mission shall make and serve an order directing that such repairs, improvements, changes or additions be made within a reasonable time and in a manner to be specified therein and every telegraph corporation and telephone corporation is hereby required and directed to make all repairs, improvements, changes and addi- tions required of it by any order of the commission served upon it. §99. Franchises and privileges, i. No telegraph corporation or telephone corporation hereafter formed 784 PUBLIC UTILITIES. shall begin construction of its telegraph line or tele- phone line without first having obtained the permission and approval of the commission and its certificate of public convenience and necessity, after a hearing had upon such notice as the commission may prescribe. Before any such certificate shall be issued there must be filed in the office of the commission by the appli- cant therefor a verified statement showing that the required consent of the proper municipal authorities has been obtained. 2. No franchise or any right to or under any franchise to own or operate a telegraph line or tele- phone line shall be assigned, transferred or leased, nor shall any contract or agreement hereafter made with reference to or affecting any such franchise or right be valid or of any force or effect whatever unless the assignment, transfer, lease, contract or agreement shall have been approved by the commission. No franchise or right to or under any franchise to own or operate a telegraph line or telephone line shall be assigned, transferred or leased to or owned or operated by any foreign corporation. 3. The approval of the commission to the exercise of a franchise or to the assignment, transfer or lease of a franchise shall not be construed to revive or val- idate any lapsed or invalid franchise or to enlarge or add to the powers and privileges contained in the grant of any franchise or to waive any forfeiture. § 100. Transfer and ownership of stock. Save where stock shall be transferred or held for the pur- pose of collateral security, no stock corporation, do- mestic or foreign, other than a telegraph corporation or telephone corporation, shall, without the consent of the commission, purchase or acquire, take or hold more than ten per centum of the total capital stock I NEW YORK LAW. 785 issued by any telegraph corporation or telephone cor- poration organized or existing under or by virtue of the laws of this state, except that a corporation now lawfully holding a majority of the capital stock of any telegraph corporation or telephone corporation may, without the consent of the commission, acquire and hold the remainder of the capital stock of such tele- graph corporation or telephone corporation, or any portion thereof. Nothing herein contained shall be construed to prevent the holding of stock heretofore lawfully acquired, or to prevent, upon the surrender or exchange of said stock pursuant to a reorganization plan, the purchase, acquisition, taking or holding of a proportionate amount of stock of any new corporation organized to take over, at foreclosure or other sale the property of any corporation whose stock has been thus surrendered or exchanged. Every contract, as- signment, transfer or agreement for transfer of any stock by or through any person or corporation to any corporation in violation of any provision of this chap- ter shall be void and of no elTect, and no such transfer or assignment shall be made upon the books of any such telegraph corporation or telephone corporation, or shall be recognized as effective for any purpose. §101. Approval of issues of stock, bonds and other forms of indebtedness, i. A telegraph or tele- phone corporation may when authorized by order of the commission and not otherwise, issue stock, bonds, notes or other evidence of indebtedness payable at periods of more than twelve months after the date thereof when necessary for the acquisition of prop- erty, the construction, completion, extension or im- provement of its facilities or the improvement or main- tenance of its service within the state, or for the dis- charge or lawful refunding of its obligations, or reim- 50— Pub. Ut. 786 PUBLIC UTILITIES. bursement of moneys actually expended from the in- come from any source, within five years next prior to the filing of the application therefor, or for any of such purposes, provided, however, that no order shall be granted authorizing such issue for reimbursement of moneys expended from income for betterments or replacements unless the applicant shall have kept its accounts and vouchers of such expenditures in such manner as to enable the commission to ascertain the amount of moneys so expended and the purposes for which such expenditures were made. The commis- sion may by order authorize the issue of bonds, notes or other evidence of indebtedness for the reimburse- ment of moneys heretofore actually expended from in- come for any of the purposes herein specified, except maintenance of service or replacements prior to five years next preceding the filing of the application there- for, provided such application be made prior to Jan- uary first, nineteen hundred and twelve. The order of the commission shall fix the amount of any such issue and the purposes to which it or its proceeds are to be applied and recite that in the opinion of the commission the money, property or labor procured or to be procured or paid for by such issue or its pro- ceeds has been or is reasonably required for the pur- poses specified in the order, and that such purposes are in no part reasonably chargeable to operating expenses or to income except in the case of bonds, notes or other evidence of indebtedness as may be permitted in the order. For the purpose of enabling the commission to determine whether it should issue such an order the commission shall make such in- quiry or investigation, hold such hearings and examine such witnesses, books, papers, documents or contracts as it may determine of importance in enabling it to reach a determination. No such corporation shall, NEW YORK LAW. 787 without the consent of the commission, apply any- such issue or its proceeds to any purpose not specified in the order. Such telegraph corporation or telephone corporation may issue notes for proper corporate purposes and not in violation of any provision of this chapter or of any other act, payable at periods of not more than twelve months, without the consent of the commission; but no such note shall, in whole or in part, directly or indirectly, be refunded by any issue of stocks or bonds, or by any evidence of indebtedness running for more than twelve months, without the consent of the commission. No telegraph corporation or telephone corporation shall be required, however, to apply to the commission for authority to issue stocks, bonds, notes or other evidence of indebtedness except for the acquisition of property, the construction, completion, extension or improvement of its facilities, or the improvement or maintenance of its service within the state, or the discharge or refunding of obli- gations, or reimbursement of moneys actually ex- pended for such purposes. The commission shall have no power to authorize the capitalization of any fran- chise or right to be a corporation, or to authorize the capitalization of any franchise or the right to own, operate or enjoy any franchise whatsoever in excess of the amount (exclusive of any tax or annual charge) actually paid to the state or any political subdivision thereof, as the consideration of the grant of such franchise or right, nor shall the corporate stock of the corporation formed by the merger or consolidation of two or more other corporations exceed the sum of the capital stock of the corporation so consolidated, at the par value thereof, or such sum and any additional sum actually paid in cash ; nor shall any contract for consolidation or lease be capitalized in the stock of any corporation whatever; nor shall any corporation 788 PUBLIC UTILITIES. hereafter issue any bonds against or as a lien upon any contract for consolidation or merger. § loi-a. Reorganization. i. Reorganization of telegraph and telephone corporations pursuant to sec- tions nine and ten of the stock corporation law and such other laws as may be enacted from time to time shall be subject to the supervision and control of the proper commission and no such reorganization shall be had without the authorization of such commission. 2. Upon all such reorganizations the amount of capitalization, including therein all stocks and bonds and other evidence of indebtedness, shall be such as is authorized by the commission, which, in making its determination shall not exceed the fair value of the property involved, taking into consideration its orig- inal cost of construction, duplication cost, present con- dition, earning power at reasonable rates and all other relevant matters and any additional sum or sums as shall be actually paid in cash, provided, however, that the commission may make due allowance for discount of bonds. Any reorganization agreement before it be- comes effective shall be amended so that the amount of capitalization shall conform to the amount au- thorized by the commission. § I02. Forfeiture; penalties. i. Every telegraph corporation and every telephone corporation, and all ofTficers, agents and employees of any telegraph cor- poration or telephone corporation shall obey, observe and comply with every order, direction or requirement made by the commission, under authority of this ar- ticle, so long as the same shall be and remain in force. Any telegraph corporation or any telephone corpora- [Added by ch. 289, L. 1912.] NEW YORK LAW. 789 tion which shall violate any provision of this article, or which fails, omits or neglects to obey, observe or comply with any order or any direction or require- ment of the commission, shall forfeit to the people of the state of New York, not to exceed the sum of one thousand dollars for each and every ofifense ; every violation of any such order or direction or require- ment, or of this article, shall be a separate and distinct ofifense, and, in case of a continuing violation, every day's continuance thereof shall be and be deemed to be a separate and distinct offense. 2. An action to recover a penalty or forfeiture un- der this article may be brought at any time within one year after the cause of action accrues, in any court of competent jurisdiction in this state, in the name of the people of the state of New York, on the relation of the commission, and shall be commenced and prose- cuted to final judgment by counsel to the commission. In any such action all penalties and forfeitures incurred up to the time of commencing the same may be sued for and recovered therein, and the commencement of an action to recover a penalty or forfeiture shall not be, or be held to be, a waiver of the right to recover any other penalty or forfeiture; if the defendant in such action shall prove that during any portion of the time for which it is sought to recover penalties or forfeitures for a violation of an order of the commis- sion, the defendant was actually and in good faith prosecuting a suit, action or proceeding in the courts to set aside such order, the court shall remit the pen- alties or forfeitures incurred during the pendency of such suit, action or proceeding. All moneys recovered in any such action, together with the costs thereof, shall be paid into the state treasury to the credit of the general fund. 790 PUBLIC UTILITIES. § 103. Summary proceedings. Whenever the com- mission shall be of the opinion that a telegraph cor- poration or telephone corporation subject to its super- vision is failing or omitting or about to fail or omit to do anything required of it by law^ or by order, direct- tion or requirement of the commission authorized by this chapter, or is doing anything or about to do any- thing or permitting anything or about to permit any- thing to be done, contrary to or in violation of law, or of any order, direction or requirement of the com- mission authorized by this chapter, it shall direct counsel to the commission to commence an action or proceeding in the supreme court of the state of New York in the name of the people of the state of New York on the relation of the commission for the purpose of having such violation or threatened violations stop- ped and prevented, either by mandamus or injunction. Counsel to the commission shall thereupon begin such action or proceeding by a petition to the supreme court alleging the violation complained of and praying for appropriate relief by way of mandamus or injunc- tion. It shall thereupon be the duty of the court to specify the time, not exceeding twenty days after service of a copy of the petition, within which the telegraph corporation or telephone corporation com- plained of must answer the petition. In case of default in answer or after answer, the court shall immediately inquire into the facts and circumstances in such man- ner as the court shall direct without other or formal pleadings, and without respect to any technical re- quirement. Such other persons or corporations as the court shall deem necessary or proper to join as parties in order to make its order, judgment or writs effective may be joined as parties. The final judgment in any such action or proceeding shall either dismiss the NEW YORK LAW. 791 action or proceeding or direct that a writ of mandamus or an injunction, or both, issue as prayed for in the petition or in such modified or other form as the court may determine will afford appropriate relief. 792 PUBLIC UTILITIES. ARTICLE VI. Commissions and Offices Abolished; Saving Clause; Repeal. Section 120. Board of Railroad Commissioners abolished; effect there- of. 121. Commission of gas and electricity abolished; effect thereof. 122. Inspector of gas meters abolished; effect thereof. 123. Board of rapid transit railroad commissioners abolished; effect thereof, effect thereof. 124. Transfer of records. 125. Pending actions and proceedings. 126. Construction. 127. Repeal. § I20. Board of railroad commissioners abolished; effect thereof. On and after July first, nineteen hun- dred and seven, the board of railroad commissioners shall be abolished. All the powers and duties of such board conferred and imposed by any statute of this state shall thereupon be exercised and performed by the public service commissions. § 121. Commission of gas and electricity abol- ished; effect thereof. On and after July first, nineteen hundred and seven, the commission of gas and elec- tricity shall be abolished. All the powers and duties of such commission conferred and imposed by any statute of this state shall be exercised and performed by the public service commissions. § 122. Inspector of gas meters abolished; effect thereof. On and after July first, nineteen hundred and seven, the offices of inspector and deputy inspec- • 7 1 NEW YORK LAW. 793 tors of gas meters shall be abolished. All the powers and duties of such inspector conferred and imposed by any statute of this state shall be exercised and per- formed by the public service commission. But any meter inspected, proved and sealed, by the said in- spector of gas meters, prior to July first, nineteen hundred and seven, shall be deemed to have been in- spected by the commission. § 123. Board of rapid transit railroad commission- ers aboHshed; effect thereof. On and after July first, nineteen hundred and seven, the board of rapid transit railroad commissioners shall be abolished. All the powers and duties of such board conferred and im- posed by any statute of this state shall thereupon be exercised and performed by the public service com- mission of the first district. § 124. Transfer of records, i. The board of railroad commissioners, the commission of gas and electricity, and the inspector of gas meters, shall trans- fer and deliver to the public service commission of the second district all books, maps, papers and records of whatever description, in their possession on July first, nineteen hundred and seven; and the said com- mission is authorized to take possession of all such books, maps, papers and records. 2. The board of rapid transit railroad commis- sioners shall transfer and deliver to the public service commission of the first district all contracts, books, maps, plans, papers and records of whatever descrip- tion, in their possession on July first, nineteen hun- dred and seven; and the said commission is authorized to take possession of all such contracts, books, maps, plans, papers and records. The said commission may also, at its pleasure, retain in its employment any per- 794 PUBLIC UTILITIES. son or persons then employed by the said board of rapid transit railroad commissioners, and all said per- sons shall be eligible for transfer and appointment to positions under the public service commission of the first district. 3. The public service commission of the second district may transfer to the public service commission of the first district any of the said books, maps, papers and records which relate to any corporation, person or matter vs^ithin the jurisdiction of the public service commission of the first district. § 125. Pending actions and proceedings. This chapter shall not affect pending actions or proceedings, civil or criminal, brought by or against the board of railroad commissioners or the commission of gas and electricity, or the board of rapid transit railroad com- missioners, but the same may be prosecuted or de- fended in the name of the public service commission, provided the subject-matter thereof is within the statutory jurisdiction of such commission. Any inves- tigation, examination or proceeding undertaken, com- menced or instituted by the said boards or commission or either of them prior to July first, nineteen hundred and seven, may be conducted and continued to a final determination by the proper public service commis- sion in the same manner, under the same terms and conditions, and with the same effect as though such boards or commission had not been abolished. § 126. Construction. Wherever the terms board of railroad commissioners, or commission of gas and electricity or inspector of gas meters or board of rapid transit railroad commissioners occur in any law, con- tract or document or whenever in any law, contract or document reference is made to such boards, com- NEW YORK LAW. 795 mission or inspector, such terms or reference shall be deemed to refer to and include the public service com- missions as established by this chapter, so far as such law, contract or document pertains to matters which are within the jurisdiction of the said public service commissions. § 127. Repeal. Of the laws enumerated in the schedule hereto annexed, that portion specified in the last column is hereby repealed. All other acts and parts of acts otherwise in conflict with this act are hereby repealed. 796 PUBLIC UTILITIES. APPENDIX B. PUBLIC UTILITIES LAW OF WISCONSIN. Sections 1797m — i to 1797m — 109. Public Utilities Law; definition; public utility. Sec- tion 1797m — I. I. The term "public utility" as used in this act shall mean and embrace every corporation, company, individual, association of individuals, their lessees, trustees, or receivers appointed by any court whatsoever, and every town, village, or city that now or hereafter may own, operate, manage, or control any plant or equipment or any part of a plant or equip- ment within the state, for the conveyance of telephone messages or for the production, transmission, deliv- ery, or furnishing of heat, light, water, or power either directly or indirectly to or for the public, or that now or hereafter may own, operate, manage, or control any toll bridge wJiolly within the state. Ch. 499, 1907; ch. 48, 1911. Municipal council. 2. The term "municipal coun- cil" as used in this act shall mean and embrace the common council, the board of aldermen, the board of trustees, the town or village board, or any other governing body of any town, village or city wherein the property of the public utility or any part thereof is located. Municipality. 3. The term "municipality" as used in this act shall mean any town, village or city Parts in italics are amendments of 1911. WISCONSIN LAW. 797 wherein property of a public utility or any part thereof is located. Service. 4. The term ''service" is used in this act in its broadest and most inclusive sense. Indeterminate permit. 5. The term "indetermi- nate permit" as used in this act shall mean and em- brace every grant, directly or indirectly from the state, to any corporation, company, individual, asso- ciation of individuals, their lessees, trustees or receiv- ers appointed by any court whatsoever, of power, right or privilege to own, operate, manage or control any plant or equipment or any part of the plant or equipment within this state for the production, trans- mission, delivery or furnishing of heat, light, water or power, either directly or indirectly, to or for the public, which shall continue in force until such time as the municipality shall exercise its option to pur- chase as provided in this act or until it shall be other- wise terminated according to law. Commission. 6. The term "commission" as used in this act shall mean the railroad commission of Wis- consin. Ch. 499, 1907. Railroad commission's powers. Section 1797m — 2. The railroad commission of Wisconsin is vested with power and jurisdiction to supervise and regulate every public utility in this state and to do all things neces- sary and convenient in the exercise of such power and jurisdiction. Ch. 499, 1907. Utility charges to be reasonable and just. Sec- tion 1797m — 3. Every public utility is required to furnish reasonably adequate service and facilities. The 798 PUBLIC UTILITIES. charge made by any public utility for any heat, light, water or power produced, transmitted, delivered or furnished or any telephone message conveyed or for any service rendered or to be rendered in connec- tion therewith shall be reasonable and just, and every unjust or unreasonable charge for such service is pro- hibited and declared unlawful. Ch. 499, 1907. Facilities to be granted other utilities; physical connection between telephone lines; petition to com- mission. Section 1797m — 4. i. Every public utility, and every person, association or corporation having conduits, subways, poles or other equipment on, over or under any street or highway, shall for a reasonable compensation, permit the use of the same by any public utility, whenever public convenience and neces- sity require such use, and such use will not result in irreparable injury to the owner or other users of such equipment, nor in any substantial detriment to the service to be rendered by such owners or other users, and every utility for the conveyance of telephone messages shall permit a physical connection or connections to he made, and telephone service to he furnished hetween any telephone system operated hy it, and the telephone toll line operated hy another such public utility, or hetween its toll line and the telephone system of another such pvhlic utility, or hetween its toll line and the toll line of another such public utility, or hetween its telephone system and the telephone system of another such public utility, whenever public convenience and necessity require such physical connection or connections, and such physical connection or connections will not result in irreparable injury to the owners or other users of the facilities of such public utilities, nor in any substantial detriment to the service to be rendered hy su^h public utilities. The term "physical WISCONSIN LAW. 799 connection," as used in this section, shall mean such number of trunk lines or complete wire circuits and connections as may be required to furnish reasonably adequate telephone service between such public utilities. 2. In case of failure to agree upon such use or the condition or compensation for such use, or in case of failure to agree upon such physical connection or connec- tions, or the terms and conditions upon which the same shall be made, any pubHc utiHty or any person, association or corporations interested may apply to the commis- sion, and if after investigation the commission shall ascertain that public convenience and necessity require such use or such physical connection or connections, and that * * * such use or such physical connection or connections would not result in irreparable injury to the owner or other users of such equipment or of the facilities of such public utilities, nor in any substantial detriment to the service to be rendered by such owner or such public utilities or other users of such equipment or facilities, it shall by order direct that such use be permitted and prescribe reasonable conditions and compensation for such joint use, and that such physical connection or connections be made, and determine how and within what time such connection or connections shall be made, and by whom the expense of making and maintaining such connection or connections shall be paid. 3. Such use so ordered shall be permitted and such physical connection or connections so ordered shall be made, and such conditions and compensation so prescribed for such use and such terms and conditions, upon which such physical connection or connections shall be made, so determined, shall be the lawful conditions and com- pensation for such use, and the lawful terms and conditions upon which such physical connection or connections shall be made, to be observed, followed and paid, subject to recourse to the courts upon the complaint of any in- 800 PUBLIC UTILITIES. terested party, as provided in sections i797ni — 64 to 1797m — 73, inclusive, and such section so far as ap- plicable shall apply to any action arising on such complaint so made. Any such order of the commis- sion may be from time to time revised by the commis- sion upon application of any interested party or upon its own motion. Ch. 499, 1907; ch. 546, 191 1. Utility property; valuation. Section 1797m — 5. The commission shall value all the property of every public utility actually used and useful for the con- venience of the public. In making such valuation the commission may avail itself of any information in possession of the state board of assessment. Ch. 499, 1907. Valuation; commission's hearing and report. Sec- tion 1797m — 6. I. Before final determination of such value the commission shall, after notice to the public utility, hold a public hearing as to such valuation in the manner prescribed for hearing in sections 1797m — 45 to 1797m — 55 inclusive, and the provisions of such sections so far as applicable shall apply to such hear- ing. 2. The commission shall within five days after such valuation is determined serve a statement thereof upon the public utility interested, and shall file a like statement with the clerk of every municipality in which any part of the plant or equipment of such public utility is located. €h. 499, 1907. Re-valuation. Section 1797m — 7. The commis- sion may at any time on its own initiative make a re- valuation of such property. Ch. 499, 1907. WISCONSIN LAW. 8oi Uniform accounting by utilities; other business separate. Section 1797m — 8. i. Every public utility shall keep and render to the commission in the man- ner and form prescribed by the commission uniform accounts of all business transacted. 2. Every public utility engaged directly or indi- rectly in any other business than that of production, transmission or furnishing of heat, light, water or power or the conveyance of telephone messages shall, if required by the commission, keep and render sepa- rately to the -commission in like manner and form the accounts of all such other business, in which case all the provisions of this act shall apply with like force and effect to the books, accounts, papers and records of such other business. Ch. 499, 1907. Forms of book-keeping; prescription. Section 1797m — 9. The commission shall prescribe the forms of all books, accounts, papers and records required to be kept, and every public utility is required to keep and render its books, accounts, papers and records accurately and faithfully in the manner and form pre- scribed by the commission and to comply with all directions of the commission relating to such books, accounts, papers and records. Ch. 499, 1907. Blanks. Section 1797m — 10. The commission shall cause to be prepared suitable blanks for carrying out the purposes of this act, and shall, when necessary, furnish such blanks to each public utility. Ch. 499, 1907. No other books. Section 1797m — 11. No public utility shall keep any other books, accounts, papers or 61— Pub. Ut 802 PUBLIC UTILITIES. records of the business transacted than those pre- scribed or approved by the commission. Ch. 499, 1907. Office; records; removal from state. Section 1797m — 12. Each pubhc utiUty shall have an office in one of the tow^ns, villages or cities in this state in which its property or some part thereof is located, and shall keep in said office all such books, accounts, papers and records as shall be required by the commission to be kept within the state. No books, accounts, papers or records required by the commission to be kept within the state shall be at any time removed from the state, except upon such conditions as may be prescribed by the commission. Ch. 499, 1907. Annual balance sheet; filing. Section 1797m — 13. The account shall be closed annually on the 30th day of June and a balance sheet of that date promptly taken therefrom. On or before the first day of August following, such balance sheet together with such other information as the commission shall prescribe, verified by an officer of the public utihty, shall be filed with the commission. Ch. 499, 1907. Audit and inspection. Section 1797m — 14. i. The commission shall provide for the examination and audit of all accounts, and all items shall be allocated to the accounts in the manner prescribed by the commis- sion. 2. The agents, accountants or examiners employed by the commission shall have authority under the direction of the commission to inspect and examine WISCONSIN LAW. 803 any and all books, accounts, papers, records and memo- randa kept by such public utilities. Ch. 499, 1907. Depreciation accounts; rates; funds; rules. Sec- tion 1797m — 15. I. Every public utility shall carry a proper and adequate depreciation account whenever the commission after investigation shall determine that such depreciation account can be reasonably re- quired. The commission shall ascertain and determine what are the proper and adequate rates of depreciation of the several classes of property of each public utility. The rates shall be such as will provide the amounts required over and above the expense of maintenance, to keep such property in a state of efficiency corre- sponding to the progress of the industry. Each public utility shall conform its depreciation accounts to such rates so ascertained and determined by the commis- sion. The commission may make changes in such rates of depreciation from time to time as it may find to be necessary. 2. The commission shall also prescribe rules, regulations, and forms of accounts regarding such depreciation which the public utility is required to carry into effect. 3. The commission shall provide for such depre- ciation in fixing the rates, tolls and charges to be paid by the public. 4. All moneys thus provided for shall be set aside out of the earnings and carried in a depreciation fund. The moneys in this fund may be expended in new constructions, extensions or additions to the property of such public utility, or invested, and if invested the income from the investments shall also be carried in the depreciation fund. This fund and the proceeds 804 PUBLIC UTILITIES. thereof shall be used for no other purpose than as provided in this section and for depreciation. Ch. 499, 1907. New constructions; accounting. Section 1797m — 16. The commission shall keep itself informed of all new construction, extensions and additions to the property of such pubhc utilities and shall prescribe the necessary forms, regulations and instructions to the officers and employees of such public utilities for the keeping of construction accounts, which shall clearly distinguish all operating expenses and new con- struction. Ch. 499, 1907. Profit-sharing and sliding scales; commission's ap- proval. Section 1797m — 17. i. Nothing in this act shall be taken to prohibit a public utiHty from enter- ing into any reasonable arrangement with its custom- ers or consumers or with its employees, for the division or distribution of its surplus profits, or providing for a sliding scale of charges, or, other financial device that may be practicable and advantageous to the parties interested. No such arrangement or device shall be lawful until it shall be found by the commis- sion, after investigation, to be reasonable and just and not inconsistent with the purposes of this act. Such arrangement shall be under the supervision and regu- lation of the commission. 2. The commission shall ascertain, determine and order such rates, charges and regulations as may be necessary to give effect to such arrangement, but the right and power to make such other and further changes in rates, charges and regulations as the com- mission may ascertain and determine to be necessary and reasonable and the right to revoke its approval and amend or rescind all orders relative thereto is WISCONSIN LAW. 805 reserved and vested in the commission notwithstand- ing any such arrangement and mutual agreement. Ch. 499, 1907. Report by utilities; items. Section 1797m — 18. Each public utility shall furnish to the commission in such form and at such times as the commission shall require, such accounts, reports and information as shall show in itemized detail: (i) the depreciation per unit, (2) the salaries and wages separately per unit, (3) legal expenses per unit, (4) taxes and rentals separately per unit, (5) the quantity and value of material used per unit, (6) the receipts from residuals, by-products, services or other sales separately per unit, (7) the total and net cost per unit, (8) the gross and net profit per unit, (9) the dividends and interest per unit, (10) surplus or reserve per unit, (11) the prices per unit paid by consumers; and in addition such other items, v^hether of a nature similar to those hereinbefore enumerated or otherwise, as the commis- sion may prescribe in order to show completely and in detail the entire operation of the public utility in furnishing the unit of its product or service to the public. Ch. 499, 1907. Commission's reports, annual and other; values shown. Section 1797m — 19. i. The commission shall publish annual reports showing its proceedings and showing in tabular form the details per unit as provided in section 1797m — 18 for all the public utili- ties of each kind in the state, and such monthly or occasional report, as it may deem advisable. 2. The commission shall also publish in its annual reports the value of all the property actually used and useful for the convenience of the public and the value of the physical property actually used and useful for 8o6 PUBLIC UTILITIES. the convenience of the public, of every pubHc utility as to w^hose rates, charges, service or regulations and hearing has been held by the commission under section 1797m — 45 and 1797m — 46 or the value of whose prop- erty has been ascertained by it under section 1797m — 5- Ch. 499, 1907. Commission's records public. Section 1797m — 20. All facts and information in the possession of the com- mission shall be public and all reports, records, files, books, accounts, papers and memoranda of every na- ture w^hatsoever in their possession shall be open to inspection by the public at all reasonable times except as provided in section 1797m — 21. €h. 499, 1907. Temporary secrecy. Section 1797m — 21. i. Whenever the commission shall determine it to be necessary in the interest of the public to w^ithhold from the public any facts or information in its posses- sion, such facts may be withheld for such period after the acquisition thereof not exceeding ninety days as the commission may determine. 2. No facts or information shall be withheld by the commission from the public for a longer period than ninety days nor be so withheld for any reason whatsoever other than in the interest of the public. Ch. 499, 1907. Units of product or service. Section 1797m — 22. The commission shall ascertain and prescribe for each kind of public utility suitable and convenient standard commercial units of product or service. These shall be lawful units for the purposes of this act. Ch. 499, 1907. WISCONSIN LAW. 807 Standard measurements; accurate appliances. Sec- tion 1797m — 23. I. The commission shall ascertain and fix adequate and servicable standards for the measurement of quality, pressure, initial voltage or other condition pertaining to the supply of the prod- uct or service rendered by any public utility and pre- scribe reasonable regulations for examination and testing of such product or service and for the measure- ment thereof. 2. It shall establish reasonable rules, regulations, specifications and standards to secure the accuracy of all meters and appliances for measurements, and every public utility is required to carry into effect all orders issued by the commission relative thereto. 3. Nothing contained in this section shall limit in any manner any powers or authority vested in mu- nicipal corporations as provided in section 1797m — 87. Ch. 499, 1907. Measuring instruments; testing; fees. Section 1797m — 24. I. The commission shall provide for the examination and testing of any and all appliances used for the measuring of any product or service of a public utility. 2. Any consumer or user may have any such appliance tested upon payment of the fees fixed by the commission. 3. The commission shall declare and establish reasonable fees to be paid for testing such appliances on the request of the consumers or users, the fee to be paid by the consumer or user at the time of his request, but to be paid by the public utility and repaid to the consumer or user if the appliance be found defective or incorrect to the disadvantage of the con- sumer or user. Ch. 499, 1907. 8o8 PUBLIC UTILITIES. Public equipment for tests. Section 1797m — 25 The commission may purchase such materials, appa- ratus and standard measuring instruments for such examinations and tests as it may deem necessary. Ch. 499, 1907. Entry upon premises. Section 1797m — 26. The commission, its agents, experts or examiners, shall have power to enter upon any premises occupied by any public utility for the purpose of making the ex- aminations and tests provided in this act and to set up and use on such premises any apparatus and appli- ances and occupy reasonable space therefor, Ch. 499, 1907. Rate schedules; publicity. Section 1797m — 27. Ev- ery public utility shall file with the commission within the 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 con- trolled or operated by it. The rates, tolls and charges shown on such schedules shall not exceed the rates, tolls and charges in force April i, 1907. Ch. 499, 1907. Rules and regulations; publicity. Section 1797m — 28. Every public utility shall file with and as a part of such schedule all rules and regulations that in any manner afifect the rates charged or to be charged for any service. Ch. 499, 1907. Files accessible to public. Section 1797m — 29. A copy of so much of said schedules as the commission shall deem necessary for the use of the public shall WISCONSIN LAW. 809 be printed in plain type, and kept on file in every station or office of such public utility where payments are made by the consumers or users, open to the pub- lic, in such form and place as to be readily accessible to the public and as can be conveniently inspected. Ch. 499, 1907. Joint rates; publicity. Section 1797m — 30. i. Where a schedule of joint rates or charge is or may be in force between two or more public utilities, such schedules shall in like manner be printed and filed with the commission, and so much thereof as the com- mission shall deem necessary for the use of the public, shall be filed in every such station or office as pro- vided in section 1797m — 29. 2. Whenever two or more 'public utilities for the con- veyance of telephone messages are engaged in furnishing joint telephone service to the public, or shall be required to furnish such service as provided in section 1797m — Jf, and shall refuse or neglect to establish joint toll or tolls, the commission may after notice and a public hearing, as pro- vided in sections 17977)1 — j^Jf and 1797m — Ji.5, fix and estab- lish, by order, such joint toll or tolls, and if the public utili- ties party thereto shall fail to agree upon the apportionment thereof within twenty days after the service of such order, the commission may, upon a like hearing, issue a supple- mental order declaring the apportionment of such joint toll or tolls, and the same shall take effect of its own force as part of the original order. Ch. 499, 1907; ch. 546, 191 1. Changes of rates; ten days' notice. Section 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 sched- ules, or by filing new schedules in lieu thereof ten 8lO PUBLIC UTILITIES. days prior to the time the same are to take effect; provided, that the commission, upon application of any public utility, may prescribe a less time within which a reduction may be made. Ch. 499, 1907. Revised schedules; publicity. Section 1797m — 32, Copies of all new schedules shall be filed as herein- before provided in every station and office of such public utility where payments are made by consumers or users ten days prior to the time the same are to take effect, unless the commission shall prescribe a less time. Ch. 499, 1907. Unlawful rates. Section 1797m — 33. It shall be unlawful for any public utility to charge, demand, col- lect or receive a greater or less compensation for any service performed by it within the 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. Ch. 499, 1907. Schedules; forms prescribed. Section 1797m — 34. The commission may prescribe such changes in the form in which the schedules are issued by any public utility as may be found to be expedient. Ch. 499, 1907. Classification of utility service. Section 1797m — 35. The commission shall provide for a comprehen- sive classification of service for each public utility and such classification may take into account the quantity WISCONSIN LAW. 8ll used, the time when used, the purpose for which used, and any other reasonable consideration. Each pubhc utiHty is required to conform its schedules of rates, tolls and charges to such classification. Ch. 499, 1907. Commission's rules of procedure. Section 1797m — 36. The commission shall have power to adopt reasonable and proper rules and regulations relative to all inspections, tests, audits and investigations and to adopt and publish reasonable and proper rules to govern its proceedings and to regulate the mode and manner of all investigations and hearings of public utilities and other parties before it. All hearings shall be open to the public. Ch. 499, 1907. Business management; inquiries. Section 1797m — 37. The commission shall have authority to inquire into the management of the business of all public utilities and -shall keep itself informed as to the man- ner and method in which the same is conducted, and shall have the right to obtain from any public utility all necessary information to enable the commission to perform its duties. Ch. 499, 1907. Books subject to inspection. Section 1797m — 38. I. The commission or any commissioner or any per- son or persons employed by the commission for that purpose shall, upon demand, have the right to inspect the books, accounts, papers, records and memoranda of any public utility and to examine, under oath, any officer, agent or employee of such public utility in relation to its business and affairs. 2. Any person other than one of said commission- 8l2 PUBLIC UTILITIES. ers, who shall make such demand shall produce his authority to make such inspection. Ch. 499, 1907. Production of records and papers; judicial process. Section 1797m — 39. i. The commission may require, by order or subpoena to be served on any public util- ity in the same manner that a summons is served in a civil action in the circuit court, the production within this state at such time and place as it may designate, of any books, accounts, papers, or records kept by said public utility in any office or place without the state of Wisconsin, or verified copies in lieu thereof, if the commission shall so order, in order that an examina- tion thereof may be made by the commission or under its direction. 2. Any public utility failing or refusing to comply with any such order or subpoena shall, for each day it shall so fail or refuse, forfeit and pay into the state treasury a sum of not less than fifty dollars nor more than five hundred dollars. Ch. 499, 1907. Commission's employees. Section 1797m — 40. The commission is authorized to employ such engi- neers, examiners, experts, clerks, accountants and other assistants as it may deem necessary, at such rates of compensation as it may determine upon. Ch. 499, 1907. Agents; powers. Section 1797m — 41. i. For the purpose of making any investigation with regard to any public utility the commission shall have power to appoint, by an order in writing, an agent whose duties shall be prescribed in such order. 2. In the discharge of his duties such agent shall WISCONSIN LAW. 813 have every power whatsoever of an inquisitorial na- ture granted in this act to the commission and the same powers as a court commissioner with regard to the taking of depositions; and all powers granted by law to a court commissioner relative to depositions are hereby granted to such agent. 3. The commission may conduct any number of such investigations contemporaneously through dif- ferent agents and may delegate to such agent the taking of all testimony bearing upon any investigation or hearing. The decision of the commission shall be based upon its examination of all testimony and rec- ords. The recommendations made by such agents shall be advisory only and shall not preclude the tak- ing of further testimony if the commission so order no further investigation. Ch. 499, 1907. Utilities to comply vnth commission's request. Section 1797m — 42. i. Every public utility shall fur- nish to the commission all information required by it to carry into effect the provisions of this act, and shall make specific answers to all questions submitted by the commission. 2. Any public utility receiving from the commis- sion any blanks with directions to fill the same, shall cause the same to be properly filled out so as to answer fully and correctly each question therein propounded, and in case it is unable to answer any question, it shall give a good and sufficient reason for such failure; and said answer shall be verified under oath by the president, secretary, superintendent or general manager of such public utility and returned to the commission at its office within the period fixed by the commission. 3. Whenever required by the commission, every 8l4 PUBLIC UTILITIES. public utility shall deliver to the commission, any or all maps, profiles, contracts, reports of engineers and all documents, books, accounts, papers and records or copies of any or all of the same, with a complete inventory of all its property, in such form as the com- mission may direct. Ch. 499, 1907. Complaint by consumers. Section 1797m — 43. Up- on a complaint made against any public utility by any mercantile, agricultural or manufacturing society or by any body politic or municipal organization or by any twenty-five persons, firms, corporations or associa- tions, that any of the rates, tolls, charges or schedules or any joint rate or rates are in any respect unreason- able or unjustly discriminatory, or that any regulation, measurement, practice or act whatsoever affecting or relating to the production, transmission, delivery or furnishing of heat, light or power or any service in connection therewith or the conveyance of any tele- phone message or any service in connection therewith is in any respect unreasonable, insufificient or unjustly discriminatory, or that any service is inadequate or can not be obtained, the commission shall proceed, with or without notice, to make such investigation as it may deem necessary or convenient. But no order affecting said rates, tolls, charges, schedules, regula- tions, measurements, practice or act complained of shall be entered by the commission without a formal public hearing. Ch. 499, 1907. Hearing. Section 1797m — 44. The commission shall, prior to such formal hearing, notify the public utility complained of that a complaint has been made, and ten days after such notice has been given the WISCONSIN LAW. 815 commission may proceed to set a time and place for a hearing and an investigation as hereinafter provided. Ch. 499, 1907. Notice of hearing. Section 1797m — 45. The com- mission shall give the public utility and the complain- ant, if any, ten days' notice of the time and place when and where such hearing and investigation will be held and such matters considered and determined. Both the public utility and complainant shall be en- titled to be heard and shall have process to enforce the attendance of witnesses. Ch. 499, 1907. Commission to fix rates and regulations. Section 1797m — 46. I. If upon such investigation the rates, tolls, charges, schedules, or joint rates, shall be found to be unjust, unreasonable, insufficient or unjustly dis- criminatory or to be preferential or otherwise in vio- lation of any of the provisions of this act, the com- mission shall have power to fix and order substituted therefor such rate or rates, tolls, charges or schedules as shall be just and reasonable. 2. If upon such investigation it shall be found that any regulation, measurement, practice, act, or service complained of is unjust, unreasonable, insuf- ficient, preferential, unjustly discriminatory or other- wise in violation of any of the provisions of this act, or if it be found that any service is inadequate or that any reasonable service can not be obtained, the com- mission shall have power to substitute therfefor such other regulations, measurements, practices, service or acts and to make such order respecting, and such changes in such regulations, measurements, practices, service or acts as shall be just and reasonable. Ch. 499, 1907. 8l6 PUBLIC UTILITIES. Costs of investigation. Section 1797m — 47. If upon such investigation it shall be found that any rate, toll, charge, schedule or joint rate or rates is unjust, unreasonable, insufficient or unjustly discriminatory or preferential or otherwise in violation of any of the provisions of this act, or that any regulation, practice, act or service complained of is unjust, unreasonable, insufficient, preferential or otherwise in violation of any of the provisions of this act, or if it be found that any service is inadequate or that any reasonable service can not be obtained, the public utility found to be at fault shall pay the expenses incurred by the commis- sion upon such investigation. Ch. 499, 1907. Separate rate hearings; absence of direct damage. Section 1797m — 48. The commission may, in its dis- cretion, when complaint is made of more than one rate or charge, order separate hearings thereon, and may consider and determine the several matters com- plained of separately and at such times as it may pre- scribe. No complaint shall at any time be dismissed because of the absence of direct damage to the com- plainant. Ch. 499, 1907. Summary investigations. Section 1797m — 49. Whenever the commission shall beUeve that any rate or charge may be unreasonable or unjustly discrimi- natory or that any service is inadequate or can not be obtained or that an investigation of any matter relat- ing to any public utility should for any reason be made, it may on its own motion, summarily investi- gate the same with or without notice. Ch. 499, 1907. Formal hearings. Section 1797m — 50. If, after WISCONSIN LAW. 817 making such investigation, the commission becomes satisfied that sufficient grounds exist to warrant a formal hearing being ordered as to the matters so investigated, it shall furnish such public utility inter- ested a statement notifying the public utility of the matters under investigation. Ten days after such notice has been given the commission may proceed to set a time and place for a hearing and an investi- gation as hereinbefore provided. Ch. 499, 1907. Notices; procedure. Section 1797m — 51. Notice of the time and place for such hearing shall be given to the public utility and to such other interested per- sons as the commission shall deem necessary as pro- vided in section 1797m — 45, and thereafter proceeding shall be had and conducted in reference to the matter investigated in like manner as though complaint had been filed with the commission relative to the matter investigated, and the same order or orders may be made in reference thereto as if such investigation had been made on complaint. Ch. 499, 1907. Utilities may complain. Section 1797m — 52. Any public utility may make complaint as to any matter affecting its own product or service with like effect as though made by any mercantile, agricultural or manufacturing society, body politic or municipal organ- ization or by any twenty-five persons, firms, corpora- tions or associations. Ch. 499. 1907. Witness; evidence; proceedings for contempt. Sec- tion 1797m — 53. I. Each of the commissioners and every agent provided for in section 1797m — 41 of this act for the purposes mentioned in this act. shall have 52— Pub. Ut 8i8 PUBLIC UTILITIES. power to administer oaths, certify to official acts, issue subpoenas, compel the attendance of witnesses and the production of books, accounts, papers, records, docu- ments and testimony. 2. In case of disobedience on the part of any person or persons to comply with any order of the commission or any commissioner or any subpoena or, on the refusal of any witness to testify to any matter regarding which he may be lawfully interrogated be- fore the commission or its agent authorized as pro- vided in section 1797m — 41, it shall be the duty of the circuit court of any county or the judge thereof, on application of a commissioner to compel obedience by attachment proceedings for contempt as in the case of disobedience of the requirements of a subpcena is- sued from such court or a refusal to testify therein, Ch. 499, 1907. Witness fees and mileage. Section 1797m — 54. I. Each witness who shall appear before the com- mission or its agent by its order, shall receive for his attendance the fees and mileage now provided for witnesses in civil cases in courts of record, which shall be audited and paid by the state in the same manner as other expenses are audited and paid, upon the presentation of proper vouchers sworn to by such witnesses and approved by the chairman of the com- mission. 2. No witness subpoenaed at the instance of par- ties other than the commission shall be entitled to compensation from the state for attendance or travel unless the commission shall certify that his testimony was material to the matter investigated. Ch. 499, 1907. Depositions. Section 1797m — 55. The commis- sion or any party may, in any investigation, cause the WISCONSIN LAW. 819 depositions of witnesses residing within or without the state to be taken in the manner prescribed by law for Hke depositions in civil actions in circuit courts. Ch. 499, 1907. Stenographic records. Section 1797m — 56. A full and complete record shall be kept of all proceedings had before the commission or its agent on any formal investigation had and all testimony shall be taken down by the stenographer appointed by the commission. Ch. 499, 1907. Transcript of testimony; filing. Section 1797m — 57. Whenever any complaint is served upon the commission under the provisions of section 1797m — 64 of this act, the commission shall, before said action is reached for trial, cause a certified transcript of all proceedings had and testimony taken upon such in- vestigation to be filed with the clerk of the circuit court of the county where the action is pending. Ch. 499, 1907. Admissibility of evidence. Section 1797m — 58. A transcribed copy of the evidence and proceedings or any specific part thereof, on any investigation taken by the stenographer appointed by the commission, being certified by such stenographer to be a true and correct transcript in longhand of all testimony on the investigation or of a particular witness, or of other specific part thereof, carefully compared by him with his original notes, and to be a correct statement of the evidence and proceedings had on such investigation so purporting to be taken and transcribed, shall be received in evidence with the same effect as if such re- porter were present and testified to the fact so certi- fied. Ch. 499. 1907. 820 PUBLIC UTILITIES, Free transcripts for parties. Section 1797m — 59. A copy of such transcript shall be furnished on demand free of cost to any party to such investigations. Ch, 499, 1907. Commission to determine rates and regulations; costs; orders, service and effect. Section 1797m — 60. I. Whenever, upon an investigation made under the provisions of this act, the commission shall find any existing rates, tolls, charges, schedules or joint rate or rates to be unjust, unreasonable, insufficient or un- justly discriminatory or to be preferential or other- wise in violation of any of the provisions of this act, the commission shall determine and by order fix rea- sonable rates, tolls, charges, schedules or joint rates to be imposed, observed and followed in the future in lieu of those found to be unjust, unreasonable, insuf- ficient or unjustly discriminatory or preferential or otherwise in violation of any of the provisions of this act. 2. Whenever, upon an investigation made under the provisions of this act, the commission shall find any regulations, measurements, practices, acts or serv- ice to be unjust, unreasonable, insufficient, preferen- tial, unjustly discriminatory or otherwise in violation of any of the provisions of this act; or shall find that any service is inadequate or that any service which can be reasonably demanded can not be obtained, the commission shall determine and declare and by order fix reasonable measurements, regulations, acts, prac- tices or service to be furnished, imposed, observed and followed in the future in lieu of those found to be un- just, unreasonable, insufficient, preferential, unjustly discriminatory, inadequate or otherwise in violation of this act as the case may be, and shall make such other WISCONSIN LAW. 821 order respecting such measurement, regulation, act, practice or service as shall be just and reasonable. 3. Whenever, upon an investigation made under the provisions of this act, the commission shall find that any rate, toll, charge, schedule or joint rate or rates is unjust, unreasonable, insufficient or unjustly discriminatory or preferential or otherwise in violation of any of the provisions of this act, or that any meas- urement, regulation, practice, act or service com- plained of is unjust, unreasonable, insufficient, prefer- ential, unjustly discriminatory or otherwise in violation of any of the provisions of this act, or it shall find that any service is inadequate or that any service which can reasonably be demanded can not be obtained, the commission shall ascertain and declare and by order fix the expenses incurred by the commission upon such investigation and shall by such order direct such public utility to pay the state treasurer within twenty days thereafter such expenses so incurred. 4. The commission shall cause a certified copy of all such orders to be delivered to an officer or agent of the public utility aflfected thereby, and all such orders shall of their own force take effect and become operative twenty days after service thereof, unless a different time be provided by said order. Ch. 499, 1907. Utilities to conform. Section 1797m — 61. All pub- lic utilities to which the order applies shall make such changes in their schedules on file as may be necessary to make the same conform to said order, and no changes shall thereafter be made by any public utility in any such rates, tolls or charges, or in any joint rate or rates, without the approval of the commission. Certified copies of all other orders of the commission shall be delivered to the public utility affected thereby 822 PUBLIC UTILITIES. in like manner, and the same shall take effect within such time thereafter as the commission shall prescribe. Ch. 499, 1907. Commission may change orders. Section 1797m — 62. The commission may at any time, upon notice to the public utility and after opportunity to be heard as provided in section 1797m — 45, rescind, alter or amend any order fixing any rate or rates, tolls, charges or schedules, or any other order made by the commis- sion, and certified copies of the same shall be served and take effect as herein provided for original orders, Ch. 499, 1907. Findings prima facie lawful and reasonable. Sec- tion 1797m — 63. All rates, tolls, charges, schedules, and joint rates fixed by the commission shall be in force and shall be prima facie lawful, and all regula- tions, practices and services prescribed by the com- mission shall be in force and shall be prima facie rea- sonable until finally found otherwise in an action brought for that purpose pursuant to the provisions of section 1797m — 64. Ch. 499, 1907. Action to set aside; precedence on calendar. Sec- tion 1797m — 64. I. Any public utility and any per- son or corporation in interest being dissatisfied with any order of the commission fixing any rate or rates, tolls, charges, schedules, joint rate or rates or any or- der fixing any regulations, practices, act or service may commence an action in the circuit court for Dane county against the commission as defendant to vacate and set aside any such order on the ground that the rate or rates, tolls, charges, schedules, joint rate or rates, fixed in such order is unlawful, or that any such regulation, practice, act or service fixed in such order WISCONSIN LAW. 823 is unreasonable, in which action the complaint shall be served with the summons. 2. The answer of the commission to the complaint shall be served and filed within ten days after service of the complaint, whereupon said action shall be at issue and stand ready for trial upon ten days' notice to either party. 3. All such actions shall have precedence over any civil cause of a different nature pending in such court, and the circuit court shall always be deemed open for the trial thereof, and the same shall be tried and de- termined as other civil actions. Ch. 499, 1907. Appeals and actions to set aside; limitation ninety days. Section 1797m — 65. Every proceeding, action or suit to set aside, vacate or amend any determination or order of the commission or to enjoin the enforce- ment thereof or to prevent in any way such order or determination from becoming effective, shall be com- menced, and every appeal to the courts or right or recourse to the courts shall be taken or exercised within ninety days after the entry or rendition of such order or determination, and the right to commence any such action, proceeding or suit, or to take or exer- cise any such appeal or right of recourse to the courts, shall terminate absolutely at the end of such ninety days after such entry or rendition thereof. Ch. 499, 1907. Injunctions issuing. Section 1797m — 66. No in- junction shall issue suspending or staying any order of the commission, except upon application to the circuit court or presiding judge thereof, notice to the com- mission, and hearing. Ch. 499, 1907. 824 PUBLIC UTILITIES. New evidence upon trial; transmission to commis- sion; stay of proceedings. Section 1797m — 67. i. If, upon the trial of such action, evidence shall be in- troduced by the plaintiff which is found by the court to be different from that offered upon the hearing before the commission or its authorized agent, or additional thereto, the court before proceeding to render judgment unless the parties to such action stip- ulate in writing to the contrary, shall transmit a copy of such evidence to the commission and shall stay fur- ther proceedings in said action for fifteen days from the date of such transmission. Ch. 499, 1907. Reconsideration by commission. 2. Upon the re- ceipt of such evidence the commission shall consider the same and may alter, modify, amend or rescind its order relating to such rate or rates, tolls, charges, schedules, joint rate or rates, regulations, practice, act or service complained of in said action, and shall re- port its action thereon to said court within ten days from the receipt of such evidence. Ch. 499, 1907. Supplemental findings; procedure by court. Sec- tion 1797m — 68. I. If the commission shall rescind its order complained of, the action shall be dismissed; if it shall alter, modify or amend the same, such al- tered, modified or amended order shall take the place of the original order complained of, and judgment shall be rendered thereon as though made by the com- mission in the first instance. 2. If the original order shall not be rescinded or changed by the commission judgment shall be ren- dered upon such original order. Ch. 499, 1907. WISCONSIN LAW. 825 Appeal to supreme court. Section 1797m — 69. Either party to said action, within sixty days after service of a copy of the order or judgment of the cir- cuit court, may appeal to the supreme court. Where an appeal is taken the cause shall, on the return of the papers to the supreme court, be immediately placed on the state calendar of the then pending term and shall be assigned and brought to a hearing in the same manner as other causes on the state calendar. Ch. 499, 1907. Burden of proof. Section 1797m — 70. In all trials, actions, and proceedings arising under the provisions of this act or growing out of the exercise of the au- thority and powers granted herein to the commission, the burden of proof shall be upon the party adverse to such commission or seeking to set aside any determi- nation, requirement, direction or order of said com- mission to show by clear and satisfactory evidence that the determination, requirement, direction or order of the commission complained of is unreasonable or un- lawful as the case may be. Ch. 499, 1907. Court procedure and officers. Section 1797m — 71. In all actions and proceedings in court arising under this act all processes shall be served and the practice and rules of evidence shall be the same as in civil actions, except as otherwise herein provided. Every sheriff or other officer empowered to execute civil pro- cesses shall execute any process issued under the pro- visions of this act and shall receive such compensation therefor as may be prescribed by law for similar serv- ices. Ch. 499, 1907. Incriminating evidence. Section 1797m — 72. No 826 PUBLIC UTILITIES. person shall be excused from testifying or from pro- ducing books, accounts and papers in any proceeding based upon or growing out of any violation of the pro- visions of this act on the ground or for the reason that the testimony or evidence, documentary or otherwise, required by him may tend to incriminate him or sub- ject him to penalty or forfeiture ; but no person having so testified shall be prosecuted or subjected to any penalty or forfeiture for or on account of any trans- mission, matter or thing concerning which he may have testified or produced any documentary evidence; provided, that no person so testifying shall be ex- empted from prosecution or punishment for perjury in so testifying. Ch. 499, 1907. Distribution of orders. Section 1797m — 73. Upon application of any person the commission shall furnish certified copies, under the seal of the commission, of any order made by it, which shall be prima facie evi- dence of the facts stated therein. Ch. 499, 1907. * Competition of utilities; indeterminate permits. Section 1797m — 74. i. No license, permit or fran- chise shall be granted to any person, copartnership or corporation to own, operate, manage or control any plant or equipment for the production, transmission, * Ch. 14, 1911. Section 1. All licenses, permits and franchises to own, operate, manage or control any plant or equipment for the pro- duction, transmission, delivery or furnishing of heat, light, water or power in any municipality, heretofore granted or attempted to be granted to any public utility by or by virtue of any ordinance pend- ing or under consideration in the municipal council of any munici- pality at the time of the obtaining of an indeterminate permit by any other public utility operating therein, are hereby validated and con- firmed and shall not be affected by the provisions of subsection 1 of section 1797m— 74 of the statutes. WISCONSIN LAW, 827 delivery or furnishing of heat, Hght, water or power in any municipality, where there is in operation under an indeterminate permit, as provided in this act, a public utility engaged in similar service, and no tele- phone exchange for furnishing local service to subscribers within any village or city slwll be installed in such village or city by any public utility, other than those already fur- nishing such telephone service therein, where there is in operation in such village or city a public utility engaged in similar service, without first securing from the com- mission a declaration after a public hearing of all par- ties interested, that public convenience and necessity require such second public utility. This subsection shall not prevent or impose any condition upon the extension of any telephone line from any town into or through any city or village for the purpose of connecting with any telephone exchange in such city or village or connecting with any other telephone line or system. Any puhlic utility operating any telephone exchange in any city or village shall, on demand, extend its lines to the limits of such city or village for the purposes mentioned and subject to the conditions and re- quirements prescnbed in sections 1797m — Jf and 1797m —SO: Ch. 499, 1907; ch. 546, 191 1. 2. Any existing permit, license or franchise which shall contain any term whatsoever interfering with the existence of such second public utility is hereby amended in such a manner as to permit such munici- pality to grant an indeterminate permit for the opera- tion of such second public utility pursuant to the pro- visions of this act. Ch. 499, 1907. 3. No municipality shall hereafter construct any such plant or equipment where there is in operation under an indeterminate permit as provided in this act, 828 PUBLIC UTILITIES. in such municipality a public utility engaged in simi- lar service, without first securing from the commission a declaration, after a public hearing of all parties in- terested, that public convenience and necessity require such municipal public utility. But nothing in this sec- tion shall be construed as preventing a municipality acquiring any existing plant by purchase or by con- demnation as hereinafter provided. Ch. 499, 1907. 4. Nothing in this section shall be construed so as to prevent the granting of an indeterminate permit or the construction of a municipal plant where the existing public utility is operating without an inde- terminate permit as provided in this act. Ch. 499, 1907. Foreign utilities excluded. Section 1797m — 75. No license, permit or franchise to own, operate, man- age or control any plant or equipment for the pro- duction, transmission, delivery or furnishing of heat, light, water or power shall be hereafter granted, or transferred except to a corporation duly organized under the laws of the state of Wisconsin. Ch. 499, 1907. Grants hereafter to be indeterminate; municipal acquisition. Section 1797m — 76. Every license, per- mit or franchise hereafter granted to any public utility shall have the effect of an indeterminate permit sub- ject to the provisions of this act, and subject to the provision that the municipality in which the major part of its property is situate may purchase the property of such pubHc utility actually used and useful for the convenience of the public at any time as provided herein paying therefor just compensation to be deter- mined by the commission and according to the terms WISCONSIN LAW, 829 and conditions fixed by said commission. Any such municipality is authorized to purchase such property and every such pubhc utiHty is required to sell such property at the value and according to the terms and conditions determined by the commission as herein provided. Ch. 499, 1907. *Indeterminate permit. Section 1797m — -jy. Every license permit, or franchise granted prior to July 11, 1901 , hy the state or by the common council, the hoard of alder- men, the hoard of trustees, the town or village hoard, or any other governing hody of any town, village, or city, to any corporation, company, individual, association of indi- viduals, their lessees, trustees, or receivers appointed hy any court ivhatsoever, authorizing and empowering such grantee or grantees to own, operate, manage, or control any plant or equipment, or any part _ of a plant or equipment within this state, for the conveyance of telephone messages, or for the production, transmission, delivery, or furnishing of heat, light, water, or power, either directly or indirectly, to or for the public, is so altered and amended as to constitute and to be an "indeterminate permit" within the terms and mean- ing of sections lldlm — 1, to 1797m — 108, inclusive, of the •Ch. 217, 1911. Section 1. No franchise heretofore surrendered by any corporation of this state in the manner and within the time pro- vided by section 1797m— 77, and no indeterminate permit based there- on, shall be declared invalid by reason of any defect, irregularity or invalidity In such franchise whatsoever, provided that such fran- chises shall not have been obtained by fraud, bribery or corrupt prac- tices; that when such franchise was granted no officer of the munici- pality granting the same was directly or indirectly interested in such franchise or in the corporation obtaining same; and that the cor- poration having the same shall have prior to the surrendering of said franchise in good faith purchased or constructed any street or inter- urban railway, water works, gas or electric light plant, or other pub- lic utility or any part thereof by such franchise authorized; and sub- ject to the foregoing exceptions, every such franchise and permit Is hereby legalized and confirmed. n 830 PUBLIC UTILITIES. statutes of 1898, and subject to all the terms, provisions, conditions, and limitations of said sections 1797m — 1 to 1797m — 108, inclusive, and shall have the same force and effect as a license, permit, or franchise granted after July 11, 1907, to any public utility embraced in and subject to the provisions of said sections 1797m — 1 to 1797m — 108, inclusive, except as provided by section 1797m — 80. Ch. 499, 1907; ch. 180, 1909; ch. 596, 1911. Future grants; acceptance; implied consent and waiver. Section 1797m — 78. Any public utility ac- cepting or operating under any license, permit or fran- chise hereafter granted shall, by acceptance of any such indeterminate permit be deemed to have consented to a future purchase of its property actually used and useful for the convenience of the public by the mu- nicipality in which the major part of it is situate for the compensation and under the terms and conditions determined by the commission, and shall thereby be deemed to have waived the right of requiring the necessity of such taking to be established by the ver- dict of a jury, and to have waived all other remedies and rights relative to condemnation, except such rights and remedies as are provided in this act. Ch. 499, 1907. Municipalities; powers; acquiring and operating plants. Section 1797m — 79. i. Any municipality shall have the power, subject to the provisions of this act, to construct and operate a plant and equipment or any part thereof for the production, transmission, delivery or furnishing of heat, light, water or power. 2. Any municipality shall have the power, subject to the provisions of this act, to purchase by an agree- ment with any public utility any part of any plant, provided, that such purchase and the terms thereof WISCONSIN LAW. 83! shall be approved by the commission after a hearing as provided in sections 1797m — 81 and 1797m — 82. 3. Any municipality shall have the power, subject to the provisions of this act to acquire by condemna- tion the property of any public utility actually used and useful for the convenience of the public then operating under a license, permit or franchise existing at the time this act takes effect, or operating in such municipality without any permit or franchise. 4. Any municipality shall have the power, subject to the provisions of this act, to acquire by purchase as provided in this act, the property of any public utility actually used and useful for the convenience of the public operating under any indeterminate per- mit as provided herein. Ch. 499, 1907. ^Existing plants; action by municipalities to ac- quire. Section 1797m — 80. If the municipality shall have determined to acquire an existing plant then operated under * * * an indeterminate permit pro- vided in section 1797m — 77, by a vote of a majority of the electors voting thereon at any general, municipal, or special election at which the question of the pur- chase of such plant shall have been submitted, such * Ch. 12, 1911. Section 1. Whenever the railroad commission has under the provisions of sections 1797m— 80 to 17S7m— S6 of the stat- utes, fixed, determined and certified just compensation to be paid for the taking of the property of a public utility by the municipality, and has proceeded as provided by law in all particulars except that such fixing, determination and certification have not been completed with- in the time provided for by such sections, the just compensation fixed, determined, and certified by such railroad commission shall nevertheless be deemed to be the just compensation that shall be paid by such municipality to the public utility for the acquisition of such property, and such fixing, determination and certification shall have the same force and effect as though they had been done and com- pleted within the time provided for by law. 832 PUBLIC UTILITIES. municipality shall bring an action in the circuit court against the public utility as defendant praying the court for an adjudication as to the necessity of such taking by the municipality, by which action the complaint shall be served with the summons. The public utiHty shall serve and file its answer to such complaint within ten days after the service thereof, whereupon such action shall be at issue and stand ready for trial upon ten days' notice by either party. Unless the parties thereto waive a jury, the question as to the necessity of the taking of such property by the municipality shall be as speedily as possible submitted to a jury. Ch. 499, 1907; ch. 213, 1909; ch. 596, 191 1. Indeterminate permit; notice. Section 1797m — 81. If the municipality shall have determined to acquire an existing plant in the manner provided in the preceding section, and the public utility owning such plant shall have consented to the taking over of such plant by the municipality by acceptance of an indeterminate permit as provided herein, or, in case such public utility shall not have waived or consented to such taking, if the jury shall have found that a necessity exists for the taking of such plant, then the municipality shall give speedy notice of such determination and of such con- sent or such verdict of a jury to the public utility and to the commission. Ch. 499, 1907; ch. 213, 1909. Compensation to be determined by commission; notice. Section 1797m — 82. The commission shall thereupon proceed to set a time and place for a public hearing upon the matters of the just compensation to be paid for the taking of the property of such public utility actually v^ed and useful for the convenience of the public, and of all other terms and conditions of the purchase, and WISCONSIN LAW. 833 sale, and shall give to the municipality and the public utility interested, not less tlian thirty days notice of the time and place when and where such hearing will he Iveld, and such matters considered and determined, and sJiaU give like notice to all bondholders, mortgagees, lienors, and all ether persons having or claiming to Imve any interest in such public utility, by publication of such notice once a week for not less than three successive weeks in at least one news- paper of general circulation printed in the English language and published in the county in which such public utility is located, which publication shall be caused to be made by the municipality. Within a reasonable time, not exceeding one year, after the time fixed for such hearing in such notice, the commission shall, by order, fix and determine and certify to the municipal council, to the public utility and to any bondholder, mortgagee, lienor or other creditor appearing upon such hearing, just compensation to be paid for the taking of the property of such public util- ity actually used and useful for the convenience of the public and all other terms and all conditions of sale and purchase which it shall ascertain to be reasonable. The compensation and other terms and the conditions of sale and purchase thus certified by the commission shall constitute the compensation and terms and con- ditions to be paid, followed, and observed in the purchase of such plant from such public utility. Upon the filing of such certificate with the clerk of such municipality the exclusive use of the property taken shall vest in such municipality. Ch. 499, 1907; ch. 662, 1911. Appeal. Section 1797m — 83. Any public utility or the municipality or any bondholder, mortgagee, liencr or other creditor of the public utility, being dissatisfied with such order, may commence and prosecute an action in the circuit court to alter or amend such order 53— Pub. Ut. 834 PUBLIC UTILITIES. or any part thereof, as provided in sections 1797m — 64 to 1797m — 773 inclusive, and said sections so far as applicable shall apply to such action. Ch. 499, 1907; ch. 662, 191 1. If decision affirmed. Section 1797m — 84. If the plaintiff shall not establish to the full satisfaction of the court that the compensation fixed and determined in such order is unlawful or that some of the terms or conditions fixed and determined therein are in some particulars unreasonable, the compensation, terms and conditions fixed in said order shall be the compensa- tion, terms and conditions to be paid, followed and observed in the purchase of said plant from such pub- lic utility. Ch. 499, 1907. If decision for utility. Section 1797m — 85. If the plaintiff shall estabHsh to the full satisfaction of the court and the court shall adjudge that such compen- sation is unlawful or that some of such terms or con- ditions are unreasonable, the court shall remand the same to the commission with such findings of fact and conclusions of law as shall set forth in detail the reasons for such judgment and the specific particulars in which such order of the commission is adjudged to be unreasonable or unlawful. Ch. 499, 1907. Reconsideration of compensation. Section 1797m — 86. I. If the compensation fixed by the previous order of the commission be adjudged to be unlawful, the commission shall forthwith proceed to set a re- hearing for the re-determination of such compensation as in the first instance. 2. The commission shall forthwith otherwise alter and amend such previous order with or without a re- WISCONSIN LAW. 835 hearing as it may deem necessary so that the same shall be reasonable and lawful in every particular. Ch. 499, 1907. Power of councils to regulate utilities; appeal. Section 1797m — 87. Every municipal council shall have power: (i.) To determine by contract, ordi- nance or otherwise the quality and character of each kind of product or service to be furnished or rendered by any public utility furnishing any product or service within said municipality and all other terms and con- ditions not inconsistent with this act upon which such public utility may be permitted to occupy the streets, highways or other public property within such mu- nicipality and such contract, ordinance or other deter- mination of such municipality shall be in force and prima facie reasonable. Upon complaint made by such public utility or by any qualified complainant as pro- vided in section 1797m — 43, the commission shall set a hearing as provided in sections 1797m — 45 and 1797m — 46 and if it shall find such contract, ordinance or other determination to be unreasonable, such con- tract, ordinance or other determination shall be void. (2.) To require of any public utility by ordinance or otherwise such additions and extensions to its physi- cal plant within said municipality as shall be reason- able and necessary in the interest of the public, and to designate the location and nature of all such additions and extensions, the time within which they must be completed and all conditions under which they must be constructed subject to review by the commission as provided in subdivision i of this section. (3.) To provide for a penalty for non-compliance with the provisions of any ordinance or resolution adopted pursuant to the provisions hereof. (4.) The power and authority granted in this sec- 836 PUBLIC UTILITIES. tion shall exist and be vested in said municipalities anything in this act to the contrary notwithstanding. Ch. 499, 1907. Franks and privileges to political committees and candidates; penalty. Section 1797m — 88. (i.) No public utility or any agent or officer thereof, or any agent or officer of any municipality constituting a pubhc utility as defined in this act shall offer or give for any purpose to any political committee or any member or employee thereof, to any candidate for or incumbent of, any office or position under the consti- tution or laws or under any ordinance of any munici- pality of this state, or to any person at the request, or for the advantage of all or any of them, any frank or any privilege withheld from any person for any prod- uct or service produced, transmitted, delivered, fur- nished or rendered, or to be produced, transmitted, delivered, furnished or rendered by any public utility, or the conveyance of any telephone message or com- munication or any free product or service whatsoever. (2.) No political committee and no member or employee thereof, no candidate for and no incumbent of any office or position under the constitution or laws or under any ordinance of any town or municipality of this state, shall ask for or accept from any public utility or any agent or officer thereof, or any agent or officer of any municipality constituting a public utihty as defined in this act, or use in any manner or for any purpose any frank or privilege withheld from any person, for any product or service produced, trans- mitted, dehvered, furnished or rendered or to be pro- duced, transmitted, delivered, furnished or rendered by any public utility, or the conveyance of any tele- phone message or communication. (3.) Any violation of any of the provisions of WISCONSIN LAW. 837 this section shall be punished by imprisonment in the state prison not more than five years nor less than one year or by fine not exceeding one thousand dol- lars nor less than two hundred dollars. Ch. 499, 1907. Unjust discrimination; definition and penalty. Sec- tion 1797m — 89. I. If any public utility or any agent or officer thereof, or an officer of any municipality constituting a public utility as defined in this act 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 com- pensation 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 or the conveyance of telephone mes- sages or for any service in connection therewith than that prescribed in the published schedules or tariffs then in force or establish as provided herein, or than it charges, demands, collects or receives from any other person, firm or corporation for a like and con- temporaneous service, such public utility shall be deemed guilty of unjust discrimination which is hereby prohibited and declared to be unlawful, and upon conviction thereof shall forfeit and pay into the state treasury not less than one hundred dollars nor more than one thousand dollars for each offense; and such agent or officer so offending shall be deemed guilty of a misdemeanor and upon conviction thereof shall be punished by a fine of not less than fifty dollars nor more than one hundred dollars for each offense. Ch. 499, 1907. Facilities in exchange for less compensation, pro- hibited; exceptions. Section 1797m — 90. It shall be unlawful for any public utility to demand, charge, col- 838 PUBLIC UTILITIES. lect or receive from any person, firm or corporation less compensation for any service rendered or to be rendered by said public utility in consideration of the furnishing by said person, firm or corporation of any part of the facilities incident thereto; provided nothing herein shall be construed as prohibiting any public utility from renting any facilities incident to the production, transmission, delivery or furnishing of heat, light, water or pov^^er or the conveyance of telephone messages and paying a reasonable rental therefor, or as requiring any public utility to furnish any part of such appliances which are situated in and upon the premises of any consumer or user, except telephone station equipment upon the subscribers' premises, and unless otherwise ordered by the com- mission meters and appliances for measurements of any product or service. Ch. 499, 1907; ch. 213, 1909. Discriminations; undue preference; penalty. Sec- tion 1797m — 91. If any public utility make or give any undue or unreasonable preference or advantage to any particular person, firm or corporation or shall subject any particular person, firm or corporation to any undue or unreasonable prejudice or disadvantage in any respect whatsoever, such public utility shall be deemed guilty of unjust discrimination which is here- by prohibited and declared unlawful. Exceptions. The furnishing by any public utility, of any product or service at the rates and upon the terms and conditions provided for in any existing con- tract executed prior to April i, 1907, shall not consti- tute a discrimination within the meaning specified. Any person, firm or corporation violating the provi- sions of this section shall be deemed guilty of a mis- demeanor and on conviction thereof shall be punished WISCONSIN LAW. 839 by a line of not less than lifty dollars nor more than one thousand dollars for each offense. Ch. 499, 1907. Rebates, concessions and discriminations; penalty. Section 1797m — 92. It shall be unlawful for any per- son, 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 the conveying of tele- phone messages within this state, or for any service in connection therewith whereby any such service shall, by any device whatsoever, or otherwise, be rendered free or at a 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. Any person, firm or corpora- tion violating the provisions of this section shall be deemed guilty of a misdemeanor and on conviction thereof shall be punished by a fine of not less than fifty dollars nor more than one thousand dollars for each offense. Ch. 499, 1907. Utilities, liability for damages. Section 1797m — 93. If any public utility shall do or cause to be done or permit to be done any matter, act or thing in this act prohibited or declared to be unlawful, or shall omit to do any act, matter or thing required to be done by it, such public utility shall be liable to the person, firm or corporation injured thereby in treble the amount of damages sustained in consequence of such violation ; provided, that any recovery as in this sec- tion provided, shall in no manner affect a recovery by the state of the penalty prescribed for such violation. Ch. 499. 1907. 840 PUBLIC UTILITIES. Information, papers and accounting; delinquency penal. Section 1797m — 94. Any officer, agent or em- ployee of any public utility or of any municipality constituting a public utility as defined in this act who shall fail or refuse to fill out and return any blanks as required by this act, or shall fail or refuse to answer any question therein propounded, or shall knowingly or wilfully give a false answer to any such question or shall evade the answer to any such question where the fact inquired of is within his knowledge or who shall, upon proper demand, fail or refuse to exhibit to the commission or any commissioner or any person authorized to examine the same, any book, paper, account, record, or memoranda of such public utility which is in his possession or under his control or who shall fail to properly use and keep his system of ac- count, record, or memoranda of such pubHc utility which is in his possession or under his control or who shall fail to properly use and keep his system of ac- counting or any part thereof as prescribed by the commission, or who shall refuse to do any act or thing in connection with such system of accounting when so directed by the commission or its authorized repre- sentative, shall be deemed guilty of a misdemeanor and upon conviction thereof shall be punished by a fine of not less than one thousand dollars for each offense. (2.) And a penalty of not less than five hundred dollars nor more than one thousand dollars shall be recovered from the public utility for each such of- fense when such officer, agent or employee acted in obedience to the direction, instruction or request of such public utility or any general officer thereof. Ch. 499, 1907. Violations in general, penalty; utility responsible for agents. Section 1797m — 95. i. If any public WISCONSIN LAW. 84I Utility shall violate any provisions of this act, or shall do any act herein prohibited or shall fail or refuse to perform any duty enjoined upon it for which a penalty has not been provided, or shall fail, neglect or refuse to obey any lawful requirement or order made by the commission or the municipal council or any judgment or decree made by any court upon its application, for every such violation, failure or refusal such pub- lic utility shall forfeit and pay into the treasury a sum not less than one hundred dollars nor more than one thousand dollars for each offense. 2. In construing and enforcing the provisions of this section the act, omission or failure of any officer, agent or other person acting for or employed by any public utility acting within the scope of his employ- ment shall in every case be deemed to be the act, omission or failure of such public utility. Ch. 499, 1907. Municipal officers; delinquency, penalty. Section 1797m — 96. If any officer of any town, village or city constituting a public utility as defined in this act shall do or cause to be done or permit to be done any mat- ter, act or thing in this act prohibited or declared to be unlawful, or shall omit, fail, neglect or refuse to do any act, matter or thing required by this act of such officer to be done, or shall omit, fail, neglect or refuse to perform any duty enjoined upon him and relating directly or indirectly to the enforcement of this act, or shall omit, fail, neglect or refuse to obey any lawful requirement or order made by the commission or any judgment or decree made by the court upon its appli- cation, for every such violation, failure or refusal such officer shall be deemed guilty of a misdemeanor and upon conviction thereof shall be punished by a fine of 842 PUBLIC UTILITIES. not less than fifty dollars nor more than five hundred dollars. Ch. 499, 1907. Interference with commission's equipment; penalty. Section 1797m — 97. i. Any person who shall de- stroy, injure or interfere with any apparatus or appli- ance owned or operated by or in charge of the com- mission or its agent shall be deemed guilty of a mis- demeanor and upon conviction shall be punished by fine not exceeding one hundred dollars or imprison- ment for a period not exceeding thirty days or both. 2. Any public utility permitting the destruction, injury to, or interference with, any such apparatus or appliance, shall forfeit a sum not exceeding one thou- sand dollars for each offense. Ch. 499, 1907. What constitutes a separate and distinct violation. Section 1797m — 98. Every day during which any public utility or any officer, agent or employee thereof shall fail to observe and comply with any order or di- rection of the commission or to perform any duty enjoined by this act shall constitute a separate and distinct violation of such order or direction or of this act as the case may be. Ch. 499, 1907. Temporary alteration or suspension of rates. Sec- tion 1797m — 99. I. The commission shall have power, when deemed by it necessary to prevent injury to the business or interests of the people or any public utility of this state in case of any emergency to be judged of by the commission, to temporarily alter, amend, or with the consent of the public utility con- cerned, suspend any existing rates, schedules and order WISCONSIN LAW. 843 relating to or affecting any public utility or part of any public utility in this state. 2. Such rates so made by the commission shall apply to one or more of the public utilities in this state or to any portion thereof as may be directed by the commission, and shall take effect at such time and remain in force for such length of time as may be pre- scribed by the commission. Ch. 499, 1907. Permanent rate regulation. Section 1797m — 100. Whenever, after hearing and investigation as pro- vided in this act, the commission shall find that any rate, toll, charge, regulation or practice for, in, or affecting or relating to the production, transmission, delivery or furnishing of heat, light, water or power or the conveying of any telephone message or any service in connection therewith not hereinbefore spe- cifically designated, is unreasonable or unjustly dis- criminatory, it shall have the power to regulate the same as provided in section 1797m — 43 to 1797m — 51 and 1797m — 60 to 1797m — 62, inclusive. Ch. 499, 1907. Accidents resulting in death; utility to report; in- vestigation. Section 1797m — loi. i. Every public utility shall, whenever an accident attended with loss of human life occurs within this state upon its premises or directly or indirectly arising from or connected with its maintenance or operation, give immediate notice thereof to the commission. 2. In the event of any such accident the commis- sion, if it deem public interest require it, shall cause an investigation to be made forthwith, which inves- tigation shall be held in the locality of the accident, unless for greater convenience of those concerned it $44 PUBLIC UTILITIES. shall order such investigation to be held at some other place; and said investigation may be adjourned from place to place as may be found necessary and convenient. The commission shall seasonably notify the public utility of the time and place of the inves- tigation. Ch. 499, 1907. Enforcement, aid; attorney general's duty; prose- cutions; court jurisdiction. Section 1797m — 102. i. The commission shall inquire into any neglect or vio- lation of the laws of this state by any public utility doing business therein, or by the officers, agents or employees thereof or by any person operating the plant of any public utility, and shall have the power and it shall be its duty to enforce the provisions of this act as well as all other laws relating to public utilities, and to report all violations thereof to the attorney general. 2. Upon the request of the commission it shall be the duty of the attorney general or the district attorney of the proper county to aid in any investiga- tion, hearing or trial had under the provisions of this act, and to institute and prosecute all necessary actions * or proceedings for the enforcement of this act and of all other laws of this state relating to public utilities and for the punishment of all violations thereof. 3. Any forfeiture or penalty herein provided shall he recovered and suit therein shall be brought in the name of the state of Wisconsin in the circuit court for Dane county. Complaint for the collection of any such forfeiture may be made by the commission or any member thereof, and when so made the action so commenced shall be prosecuted by the attorney gen- eral. 4. The commission shall have authority to employ WISCONSIN LAW. 845 counsel in an}' proceeding, investigation, hearing or trial. Ch. 499, 1907. Commission's acts; technical omissions. Section 1797m — 103. A substantial compliance with the re- quirements of this act shall be sufficient to give effect to all the rules, orders, acts and regulations of the commission and they shall not be declared inoperative, illegal or void for any omission of a technical nature in respect thereto. Ch. 499, 1907. Other rights of action; penalties cumulative. Sec- tion 1797m — 104. This act shall not have the effect to release or waive any right of action by the state or by any person for any right, penalty or forfeiture which may have arisen or which may hereafter arise, under any law of this state, and all penalties and for- feitures accruing under this act shall be cumulative and a suit for any recovery of one shall not be a bar to the recovery of any other penalty. Ch. 499, 1907. Rates of April, 1907, to govern; reports; proceed- ings to change. Section 1797m — 105. i. Unless the commission shall otherwise order, it shall be unlawful for any public utility within this state to demand, col- lect or receive a greater compensation for any service than the charge fixed on the lowest schedules of rates for the same service on the first day of April, 1907. 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. 846 PUBLIC UTILITIES. 3. Any public utility desiring to advance or dis- continue any such rate or rates may make application to the commission in writing stating the advance in or discontinuation of the rate or rates desired, giving the reasons for such advance or discontinuation. 4. Upon receiving such application the commis- sion shall fix a time and place for hearing and give such notice to interested parties as it shall deem proper and reasonable. If, after such hearing and investiga- tion, the commission shall find that the change or discontinuation applied for is reasonable, fair and just, it shall grant the application either in whole or in part. 5. Any public utility being dissatisfied with any order of the commission made under the provisions of this section may commence an action against it in the circuit court in the manner provided in sections 1797m — 64 to 1797m — 73, inclusive, of this act, which action shall be tried and determined in the same manner as is provided in said sections. Ch. 499, 1907. Employees of commission. Section 1797m — 106. The employment of agents, experts, engineers, ac- countants, examiners or assistants by the commission as provided in this act, and the payment of their com- pensation and traveling and other expenses, shall be under the provisions of section i, chapter 362, of the laws of 1905, and acts amendatory thereof. Appropriation. Section 1797m — 107. A sum suffi- cient to carry out the provisions of this act is ap- propriated out of any money in the state treasury not otherwise appropriated. Ch. 499, 1907; ch. 450, 1909. Conflicting laws repealed. Section 1797m — 108. All acts and parts of acts conflicting with the pro- WISCONSIN LAW. 847 visions of this act are repealed in so far as they are inconsistent herewith. Ch. 499, 1907. *Repeal. Section 925 — 97a, statutes of 1898, chap- ter 389, laws of 1905, and chapter 459, laws of 1905, are repealed. Ch. 499, 1907. Railroad commission: notices; certification. Sec- tion 1797m — 109. Whenever the Railroad Commis- sion of Wisconsin is required to issue notices of inves- tigations, notices of hearing or to certify to copies of the records of the Commission, such notices of certifi- cation may be issued by any member of the Commis- sion or by the Secretary of the Commission. All acts or parts of acts conflicting with any pro- visions of this act are repealed in so far as they are inconsistent therewith. Ch. 248, 1909. *Not included in section. 848 PUBLIC UTILITIES. APPENDIX C. PUBLIC UTILITIES LAW OF INDIANA. CHAPTER 76, ACTS 1913. Approved, March 4, 1913. § I. Definitions. — Be it enacted by the General As- sembly of the State of Indiana, That the term "public utility" as used in this act shall mean and embrace every corporation, company, individual, association of individuals, their lessees, trustees or receivers appoint- ed by any court w^hatsoever, and every city or town, that now or hereafter may own, operate, manage or control any street railway or interurban railway or any plant or equipment within the state for the conveyance- of telegraph or telephone messages, or for the produc- tion, transmission, delivery or furnishing of heat, light, water or power, or for the furnishing of elevator or warehouse service either directly or indirectly to or for the public. The term "municipal council" as used in this act shall mean and embrace the common council, the board of trustees, or any other governing body of any town or city wherein the property of the public utility or any part thereof is located. The term "municipality" as used in this act shall mean any city or town wherein property of a public utility or any part thereof is located. The term "rate" as used in this act shall mean and include every individual or joint rate, fare, toll, charge. INDIANA LAW. 849- rental or other compensation of any public utility or any two or more such individual or joint rates, fares, tolls, charges, rentals or other compensations of any public utility or any schedule or tariff thereof. The term "service" is used in this act in its broadest and most inclusive sense and includes not only the use or accommodation afforded consumers or patrons, but also any product or commodity furnished by any pub- lic utility and the plant, equipment, apparatus, appli- ances, property and facility employed by any public utility in performing any service or in furnishing any product or commodity and devoted to the purposes in which such public utility is engaged and to the use and accommodation of the public. The term "commission" used in this act shall mean the public service commission of Indiana hereby cre- ated. The term "indeterminate permit" as used in this act shall mean and include every grant, directly or indi- rectly, from the state to any corporation, company, in- dividual, association of individuals, their lessees, trus- tees or receivers appointed by any court whatsoever, of power, right or privilege to own, operate, manage or control any plant or equipment, or any part of a plant or equipment, within this state, for the produc- tion, transmission, delivery or furnishing of heat, light, water or power, either directly or indirectly, to or for the public, or for the transportation by a street railway or interurban of passengers or property between points within this state, or for the furnishing of facilities for the transmission of intelligence by electricity between points within this state, which shall continue in force un- til such time as the municipality shall exercise its option to purchase, as provided in tliis act, or until it shall be otherwise terminated according to law. This act shall 54— Pub. Ut. 850 PUBLIC UTILITIES. he commonly known and referred to as the "Shively-Spencer Utility Cornmission Act." § 2. Public service commission. — The public serv- ice commission of Indiana shall consist of five (5) members, not more than three (3) of whom shall be members of the same political party, appointed by the governor for a term of four (4) years. The members of the railroad commission of Indiana are hereby con- tinued in office as members of the public service com- mission until the expiration of the terms for v^hich they were appointed, and until their successors are ap- pointed and qualified. In the first instance one of the additional members shall be appointed for two (2) years and one for four (4) years, and until their suc- cessors are appointed and qualified. Thereafter, the members shall be appointed for four (4) years, and until their successors are appointed and qualified. The governor may fill any vacancies occurring in the board for the unexpired term. Any member of the commis- sion may be removed by the governor for incompe- tency, neglect of duty or misconduct in office after no- tice and a hearing. No member of the commission, the general counsel or any person appointed to any position or employed in any capacity by the commis- sion shall have any official or professional relation or connection with or hold any stock or securities or have any pecuniary interest in any public utility operating in the State of Indiana. § 3. Counsel for commission. — The governor shall appoint a general counsel for the commission who shall also serve as counsel to the governor. The term of office of such counsel shall be four (4) years and he may be removed by the governor for cause. The gen- eral counsel shall advise the commission in legal mat- INDIANA LAW. 85 1 ters arising in the discharge of their duties and shall represent the commission in all suits to which the com- mission may be a party. The attorney-general shall give legal aid to the gen- eral counsel whenever requested by the governor or the commission. The general counsel shall have the right to call upon the prosecuting attorney of any county or the legal officers of any city to assist in the prosecution of any case in which the commission may be interested, and it shall be the duty of the prosecut- ing attorney or any legal officer of the city to give such assistance as may be required by the commission, under the direction of the general counsel. The commission may employ other counsel to represent the commission in any case to which the commission may be a party whenever the interests of the public may require such employment. § 4. Public service commission including railroad commission. — The rights, powers and duties conferred by law on the railroad commission of Indiana are con- tinued in full force and are hereby transferred to the public service commission hereby created and shall be held and exercised by them under the laws heretofore in force, and the railroad commission of Indiana is hereby abolished. This act shall not affect pending actions or proceedings brought by or against the peo- ple of the State of Indiana, or the railroad commission of Indiana, or by any other person, firm or corporation under the provisions of the acts establishing or con- ferring power on the railroad commission of Indiana, but the same may be prosecuted and defended in the name of the public service commission with the same effect as though this act had not been passed. Any investigation, hearing or examination undertaken, com- menced, instituted or prosecuted prior to the taking 852 PUBLIC UTILITIES. effect of this act may be conducted and continued to a final determination in the same manner and with the same effect as if this act had not been passed: Pro- vided, That nothing in this act shall be construed so as to repeal any part of the act under authority of which said railroad commission of Indiana was authorized or of any act amendatory or supplemental thereto, con- ferring power on the railroad commission except such as are in direct conflict herewith, it being the intent of this act to substitute the public service commission of Indiana for the railroad commission of Indiana. § 5. Organization. — The commission shall organize within thirty (30) days after their appointment by electing one (i) of their number as chairman and shall select a secretary and a chief clerk. A majority shall constitute a quorum, but on the order of the commis- sion any one member of the commission may conduct a hearing or investigation and take the evidence therein, and report the same to the commission for its consid- eration and action. The salary of each member of the commission shall be six thousand dollars ($6,000.00) ; of the general counsel, six thousand dollars ($6,000.00) ; of the secretary, three thousand six hundred dollars ($3,600.00), and of the clerk, three thousand dollars ($3,000.00). Each member of the commission shall give bond in the sum of ten thousand dollars ($10,- 000.00) for the faithful performance of his duties. The commission shall formulate rules necessary to carry out the provisions of this act. § 6. Assistants. — The commission is authorized, with the advice and consent of the governor, to em- ploy such counsel or attorneys, engineers, examiners, experts, clerks, accountants and other assistants as it INDIANA LAW. 853 may deem necessary, at such rates of compensation as it may determine upon. § 7. Adequate service and reasonable charges. — Every pubhc utihty is required to furnish reasonably adequate service and facilities. The charge made by any public utility for any service rendered or to be rendered either directly or in connection therewith shall be reasonable and just, and every unjust or unrea- sonable charge for such service is prohibited and de- clared unlawful; Provided, That nothing in this act con- tained shall authorize any public utility during the re- mainder of the term of any grant or franchise under which it may be acting at the time this act takes ef- fect to charge for any service in such grant or fran- chise contracted, exceeding the maximum rate or rates therefor, if any, that may be fixed in such grant or franchise. § 8. Facilities in common — Physical connection be- tween telephone plants — Petition to commission. — (a) Every public utility, and every person, association or corporation having tracks, conduits, subways, poles or other equipment on, over or under any street or high- way shall for a reasonable compensation permit the use of the same by any public utility whenever public con- venience and necessity require such use, and sucii use will not result in irreparable injury to the owner or other users of such equipment, nor in any substantial detriment to the service to be rendered by such owners or other users. Every public utility for the convey- ance of telephone messages shall permit a physical con- nection or connections to be made, and telephone serv- ice to be furnished, between any telephone system op- erated by it, and the telephone toll line operated by another such public utility or between its toll line and 854 PUBLIC UTILITIES. the telephone system of another such pubHc utiHty, or between its toll line and the toll line of another such public utility, or between its telephone system and the telephone system of another such public utility, when- ever public convenience and necessity require such physical connection or connections and such physical connection or connections will not result in irreparable injury to the owners or other users of the facilities of such public utilities, nor in any substantial detriment to the service to be rendered by such public utilities. The term "physical connection" as used in this section shall mean such number of trunk lines or complete wire circuits and connections as may be required to furnish reasonably adequate telephone service between such public utilities. (b) In case of failure to agree upon such use or the conditions or compensation for such use, or in case of failure to agree upon such physical connection, or con- nections, or the terms and conditions upon which the same shall be made, any public utility or any person, association or corporation interested may apply to the commission and if after investigation the commission shall ascertain that public convenience and necessity require such use or such physical connections, and that such use or such physical connection or connections would not result in irreparable injury to the owner or other users of such equipment or of the facilities of such public utilities, nor in any substantial detriment to the service to be rendered by such owner or such public utilities or other users of such equipment or facilities, it shall by order direct that such use be per- mitted and prescribe reasonable conditions and com- pensation for such joint use and that such physical connection or connections be made and determine how and within what time such connection or connections INDIANA LAW. 855 shall be made, and by whom the expense of making and maintaining such connection or connections shall be paid. (c) Such use so ordered shall be permitted and such physical connection or connections so ordered shall be made and such conditions and compensation so prescribed for such use and such terms and condi- tions upon which such physical connection or connec- tions shall be made, so determined, shall be lawful conditions and compensation for such use, and the law- ful terms and conditions upon which such physical con- nection or connections shall be made, to be observed, followed and paid, subject to recourse to the courts upon the complaint of any interested party as provided in sections seventy-eight (78) to eighty-six (86) in- clusive, and such sections, so far as applicable, shall apply to any action arising on such complaint so made. Any such order of the commission may be from time to time revised by the commission upon application of any interested party or upon its own motion. §9. Valuation of investment. — The commission shall value all the property of every public utility ac- tually used and useful for the convenience of the pub- lic. As one of the elements in such valuation, the com- mission shall give weight to the reasonable cost of bringing the property to its then state of efficiency. In making such valuation, the commission may avail itself of any information in possession of the state board of tax commissioners or of any local authorities. The commission may accept any valuation of the physical property made by the interstate commerce commission of any public utility, subject to the provi- sions of this act. § 10. Public hearing on valuation. — Before final de- termination of such value, the commission shall, after 856 PUBLIC UTILITIES. notice to the public utility, hold a public hearing as to such valuation in the manner prescribed for a hearing in sections fifty-seven (57) to seventy-one (71) inclu- sive, and the provisions of such sections so far as ap- plicable shall apply to such hearing. § II. Report and statement of valuation. — The commission shall, v^ithin five (5) days after such valua- tion is determined, serve a statement thereof upon the public utility interested, and shall file a like statement with the clerk of every municipality in which any part of the plant or equipment of such public utility is lo- cated. § 12. Revaluation. — The commission may at any time on its own initiative make a revaluation of such property. § 13. Uniform system of accounting. — Every pub- lic utility shall keep and render to the commission, in the manner and form prescribed by the commission, uniform accounts of all business transacted. In formu- lating a system of accounting for any class of public utilities the commission shall consider any system of accounting established by any federal law, commission or department and any system authorized by a na- tional association of such utilities. § 14. Subsidiary business — System of accounting. — Every public utility engaged directly or indirectly in any other or subsidiary business shall, if ordered by the commission, keep and render separately to the com- mission in like manner and form, the accounts of all such business, in which case all the provisions of this act shall apply with like force and effect to the books, accounts, papers and records of such other business: INDIANA LAW. 857 Provided, Every public utility may, with the consent of the commission and the proper local authorities, fur- nish to all patrons or persons applying therefor any service, product or commodity, which it creates as a necessary incident and subsidiary to its main or pri- mary business. No such consent shall be granted ex- cept as provided in section ninety-seven (97) of this act and every such subsidiary business shall be subject to all the provisions of this act. § 15. Prescribed forms of keeping books, accounts and records. — The commission shall prescribe the forms of all books, accounts, papers and records required to be kept, and every public utility is required to keep and render its books, accounts, papers and records ac- curately and faithfully in the manner and form pre- scribed by the commission and to comply with all di- rections of the commission relating to such books, ac- counts, papers and records. §16. Blanks furnished. — The commission shall cause to be prepared suitable blanks for carrying out the purposes of this act and shall, when necessary, fur- nish such blanks to each public utility. § 17. Only books, accounts and records prescribed to be kept. — Xo public utility shall keep any other books, accounts, papers or records of the business transacted than those prescribed or approved by the commission, unless required by other public authority. § 18. Office for records — Removal from state — Res- ident officials. — Each public utility shall have an office in one of the towns or cities in this state in which its property or some part thereof is located, and shall keep in said office all books, accounts, papers and records as 858 PUBLIC UTILITIES. shall be required by the commission to be kept within the State. No books, accounts, papers or records re- quired by the commission to be kept within the state shall be at any time removed from this State, except upon such conditions as may be prescribed by the com- mission. Every executive and general officer and a majority in number of the board of directors of each and every company or association organized under the laws of the State of Indiana and coming under the pro- visions of this act shall be a bona fide resident and cit- izen of the State of Indiana while acting as such officer or director. § 19. Balance sheets to be filed annually. — The ac- counts shall be closed annually on the 30th day of June, and a balance sheet of that date promptly taken there- from. On or before the ist day of August following, such balance sheet, together with such other informa- tion as the commission shall prescribe, verified by an officer of the public utility, shall be filed with the com- mission. § 20. Accounts examined and audited. — The com- mission shall provide for the examination and audit of all accounts, and all items shall be allocated to the ac- counts in the manner prescribed by the commission. § 21. Audit and inspection. — ^The agents, account- ants or examiners employed by the commission shall have authority under the direction of the commission to inspect and examine any and all books, accounts, papers, records and memoranda kept by such public utility. § 22. Depreciation account and plant efficiency. — Every public utility shall carry a proper and adequate INDIANA LAW. 859 depreciation account whenever the commission after investigation shall determine that such depreciation ac- count can be reasonably required. The commission shall from time to time ascertain and determine what are the proper and adequate rates of depreciation of the several classes of property of each public utility. The rates shall be such as will provide the amounts required over and above the expense of maintenance to keep such property in a state of efficiency corre- sponding to the progress of the industry. Each public utility shall conform its depreciation accounts to such rates so ascertained and determined by the commission. The commission may make changes in such rates of depreciation from time to time as it may find necessary. §23. Depreciation regulations. — The commission shall also prescribe rules, regulations and forms of ac- counts regarding such depreciation, which the public utility is required to carry into effect. § 24. Rates to cover depreciation. — The commis- sion shall provide for such depreciation in fixing the rates, tolls and charges to be paid by the public. § 25. Depreciation fund. — All money thus provided for shall be set aside out of the earnings and carried in a depreciation fund. The moneys in this fund may be expended for new constructions, extensions or addi- tions to the property of such public utility or invested, and if invested, the income from the investment shall also be carried in the depreciation fund. This fund and the proceeds thereof shall be used for no other pur- poses than as provided in this section and for deprecia- tion. But in no event shall the moneys expended from the fund for new constructions, extensions or additions to the property be credited to or considered a part of 86o PUBLIC UTILITIES. the capital account of any public utility, but shall al- ways be charged against the depreciation fund. § 26. Construction account. — The commission shall keep itself informed of all new construction, extensions and additions to the property of such public utility and shall prescribe the necessary forms, regulations and in- structions to the officers and employes of such public utility for the keeping of construction accounts which shall clearly distinguish all operating expenses and new construction. § 2j. Sliding scale of rates on approval of commis- sion. — Nothing in this act shall be taken to prohibit a public utility from entering into any reasonable ar- rangement with its customers or consumers or with its employes, or with any municipality in which any of its property is located, for the division or distribution of its surplus profits or providing for a sliding scale of charges or other financial device that may be practica- ble and advantageous to the parties interested. No such arrangement or device shall be lawful until it shall be found by the commission, after investigation, to be reasonable and just and not inconsistent with the pur- pose of this act. Such arrangement shall be under the supervision and regulation of the commission. § 28. Rate regulations subject to change. — The commission shall ascertain, determine and order such rates, charges and regulations as may be necessary to give effect to such arrangement, but the right and power to make such other and further changes in rates, charges and regulations as the commission may ascer- tain and determine to be necessary and reasonable and the right to revoke its approval and amend or rescind all orders relative thereto is reserved and vested in the INDIANA LAW. 86l commission, notwithstanding any such arrangement and mutual agreement. § 29. Itemized detailed report. — Each public utility shall furnish to the commission, in such form and at such time as the commission shall require, such ac- counts, reports and information as will show in item- ized detail: (i) The depreciation per unit, (2) the salaries and wages separately per unit, (3) legal ex- penses per unit, (4) taxes and rentals separately per unit, (5) the quantity and value of material used per unit, (6) the receipts from residuals, by-products, serv- ices or other sales, separately per unit, (7) the total and net cost per unit, (8) the gross and net profit per unit, (9) the dividends and interest per unit, (10) sur- plus or reserve per unit, (11) the prices per unit paid by consumer, and in addition such other items, whether of a nature similar to those hereinbefore enumerated or otherwise as the commission may prescribe in order to show completely and in detail the entire operation of the public utility in furnishing the unit of its product or service for the public. § 30. Annual report of commission. — The commis- sion shall publish annual reports showing its proceed- ings and showing in tabular form the details per unit as provided in section 29 for all the public utilities of each kind in the state and such monthly or occasional reports as it may deem advisable. The cost of printing all such reports shall be paid by the board of public printing, binding and stationery. § 31. Report of valuations of investments. — The commission shall also publish in its annual reports the value of all the property actually used and useful for the convenience of the public, and the value of the 862 PUBLIC UTILITIES. physical property actually used and useful for the con- venience of the public, of every public utility the value of whose property has been ascertained by it under sections 9 to 11. § 32. Reports and records public property. — All facts and information in the possession of the commis- sion shall be public and all reports, records, files, books, accounts, papers and memoranda of every nature what- soever in their possession shall be open to inspection by the public at all reasonable times, except as pro- vided in section 33. § 33. Temporary secrecy for public benefit. — When- ever the commission shall determine it to be necessary in the interest of the public to withhold from the pub- lic any facts or information in its possession, such facts may be withheld for such period after the acquisition thereof, not exceeding ninety days, as the commission may determine. § 34. Limitations on secrecy of commission data. — No facts or information shall be withheld by the com- mission from the public for a longer period than ninety days, nor be so withheld for any reason whatsoever other than the interest of the public. § 35. Prescribed units of product or service. — The commission shall ascertain and prescribe for each kind of public utility suitable and convenient standard com- mercial units of product or service. These shall be lawful units for the purpose of this act. § 36. Standard measurements of service. — The com- mission shall ascertain and fix adequate and serviceable standards for the measurement of quality, pressure, in- I INDIANA LAW. 863 itial voltage, or other conditions pertaining to the sup- ply of the product or service rendered by any public utility and prescribe reasonable regulations for exami- nations and testing of such product or service and for the measurement thereof. § 37. Reasonable regulations for accuracy. — The commission shall establish reasonable rules, regula- tions, specifications and standards to secure the accu- racy of all meters and appliances for measurements, and every public utility is required to carry into effect all orders issued by the commission relative thereto. Nothing contained in this section shall limit in any manner any powers or authority vested in municipal corporations as provided in section no. § 38. Measuring appliances tested for accuracy. — The commission shall provide for the examination and testing of any and all appliances used for the measur- ing of any product or service of a public utility. Any consumer or user may have any such appliance tested upon payment of the fees fixed by the commission. The commission shall declare and establish reasonable fees to be paid for testing such appliances on the re- quest of the consumers or users, the fee to be paid by the consumer or user at the time of his request, but to be paid by the public utility and repaid to the con- sumer or user if the appliance or rate be found unrea- sonably defective or incorrect to the disadvantage of the consumer or user. § 39. Public measuring appliances. — The commis- sion may purchase such material, apparatus and stand- ard measuring instruments for such examinations and tests as it may deem necessary. 864 PUBLIC UTILITIES. § 40. Right to enter premises to make tests. — The commission, its agents, experts or examiners shall have power to enter upon any premises occupied by any public utihty for the purpose of making the examina- tions and tests provided in this act and to set up and use on such premises any apparatus and appliances and occupy reasonable space therefor. § 41. Schedules of rates to be public. — Every pub- lic utility shall file v^ith the commission, within a time 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 enforced at the time for any service performed by it within the State, or for any service in connection therewith, or per- formed by any public utility controlled or operated by it. The rates, tolls and charges shown on such sched- ules shall not exceed without the consent of the com- mission the rates, tolls and charges in force January i, 1913- § 42. Rate rulings and regulations to be filed. — Every public utility shall file with and as a part of such schedule all rules and regulations that in any man- ner affect the rates charged or to be charged for any service. § 43. Schedules of rates to be printed and posted. — A copy of so much of said schedule as the commis- sion shall deem necessary for the use of the public shall be printed in plain type, and kept on file in every sta- tion or office of such public utility where payments are made by the consumers or users, open to the pubhc in such form and place as to be readily accessible to the public and as can be conveniently inspected. INDIANA LAW. 865 § 44. Schedules of joint rates to be public. — Where a schedule of joint rates or charges is or may be in force between two or more public utilities, such sched- ules shall in like manner be printed and filed with the commission and so much thereof as the commission shall deem necessary for the use of the public, shall be filed in every such station or ofBce as provided in sec- tions 41 and 43. § 45. Changes of rates on notice and approval of commission. — No change shall thereafter be made in any schedule, including schedules of joint rates, except upon thirty days' notice to the commission and ap- proval by the commission and all such changes shall be plainly indicated upon existing schedules or by filing new schedules in Heu thereof thirty days prior to the time the same are to take effect: Provided, That the commission, upon application of any public utility, may prescribe a less time within which a reduction may be made. § 46. Revised schedules to be pubhc. — Copies of all new schedules shall be filed as hereinbefore pro- vided in every station or ofhce of such public utility where payments are made by consumers or users ten days prior to the time the same are to take effect, un- less the commission shall prescribe a less time. § 47. Discrimination in rates unlawful. — It shall be unlawful for any public utility to charge, demand, col- lect or receive a greater or less compensation for any service performed by it within the 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 rates, tolls or charges not specified in such 55— Pub. Ut 866 PUBLIC UTILITIES. schedule. The rates, tolls and charges named therein shall be the lawful rates, tolls and charges unless the same are changed as provided in this act. § 48. Forms of schedules subject to change. — ^The commission may prescribe such changes in the form in which the schedules are issued by any public utility as may be found to be expedient. § 49. Classification of service. — The commission shall provide for a comprehensive classification of such service for each public utility and such classification may take into account the quantity used, the time when used, the purpose for which used and other reasonable consideration. Each public utility is required to con- form its schedules of rates, tolls and charges to such classification. § 50. Reasonable rules — Publicity of proceedings. — The commission shall have power to adopt reasonable and proper rules and regulations relative to all inspec- tions, tests, audits and investigations and to adopt and publish reasonable and proper rules to govern its pro- ceedings, and to regulate the mode and manner of all investigations of public utilities and other parties be- fore it. All hearings shall be open to the public. § 51. Inquiries into business methods. — The com- mission shall have authority to inquire into the man- agement of the business of all public utilities, and shall keep itself informed as to the manner and method in which the same is conducted and shall have the right to obtain from any public utility all necessary informa- tion to enable the commission to perform its duties. § 52. Books and records subject to inspection — Ex- amination of officials. — The commission or any com- INDIANA LAW. 867 missioner when authorized by the commission or any person or persons employed by the commission for that purpose, shall upon demand have the right to inspect the books, accounts, papers, records and memoranda of any public utility and to examine, under oath, any officer, agent or employe of such public utility in rela- tion to its business and affairs. Any person other than one of said commissioners who shall make such de- mand shall produce his authority to make such inspec- tion. § 53. Production of papers and records by judicial process. — The commission may require by order or subpoena to be served on any public utility in the same manner that a summons is served in a civil action in the circuit court, the production within the State at such time and place as it may designate, of any books, accounts, papers or records kept by said public utility in any office or place without the State of Indiana, or verified copies in lieu thereof, if the commission shall so order, in order that an examination thereof may be made by the commission or under its direction. Any public utility failing or refusing, after reasonable writ- ten notice, to comply with any such order or subpoena shall, for each day it shall so fail or refuse, forfeit and pay into the state treasury a sum of not less than fifty dollars nor more than five hundred dollars. § 54. Powers of agents to investigate. — For the purpose of making any investigation with regard to any public utility the commission shall have power to appoint by an order in writing an agent, whose duties shall be prescribed in such order. In the discharge of his duties such agent shall have every power whatso- ever of an inquisitorial nature granted in this act to the commission. The commission mav conduct any num- 868 PUBLIC UTILITIES. ber of such investigations contemporaneously through different agents; and may delegate to such agent the taking of all testimony bearing upon any investigation or hearing. The decision of the commission shall be based upon its examination of all testimony and rec- ords. The recommendations made by such agents shall be advisory only, and shall not preclude the taking of further testimony if the commission so order, nor fur- ther investigation, § 55. Duty to furnish information. — Every public utility shall furnish to the commission all information required by it to carry into effect the provisions of this act, and shall make specific answers to all questions submitted by the commission. § 56. Information under oath. — Any public utility receiving from the commission any blanks writh direc- tions to fill the same shall cause the same to be prop- erly filled out so as to answer fully and correctly each question, therein propounded, and in case it is unable to answer any question, it shall give a good and suffi- cient reason for such failure, and said answers shall be verified under oath, by the president, secretary, super- intendent or general manager or person in charge of such public utility and returned to the commission at its office within the period fixed by the commission. Whenever required by the commission, every public utility shall deliver to the commission for examination any or all maps, profiles, contracts, reports of engineer and all documents, books, accounts, papers and records or copies of any or all of the same with a complete in- ventory of all its property in such form as the com- mission may direct. § 57. Complaints by customers to be investigated. — Upon a complaint made against any public utility by INDIANA LAW. 869 any mercantile, agricultural or manufacturing society or by any body politic or municipal organization or by ten persons, firms, corporations or associations, or ten complainants of all or any of the aforementioned classes, or by any public utility, that any of the rates, tolls, charges or schedules or any joint rate or rates in which such petitioner is directly interested are in any respect unreasonable or unjustly discriminatory, or that any regulation, measurement, practice or act whatso- ever affecting or relating to the service of any public utility or any service in connection therewith is in any respect unreasonable, unsafe, insufficient or unjustly ■discriminatory or that any service is inadequate or can not be obtained, the commission shall proceed, with or without notice, to make such investigation as it may deem necessary or convenient. But no order affecting said rates, tolls, charges, schedules, regulations, meas- urements, practice or act complained of, shall be en- tered by the commission without a formal public hear- ing. § 58. Hearing on complaint and notice. — The com- mission shall, prior to such formal hearing, notify the public utility complained of that a complaint has been made, and ten days after such notice has been given the commission may proceed to set a time and place for a hearing and an investigation as hereinafter pro- vided. § 59. Notice and opportunity to be heard. — The commission shall give the public utility and the com- plainant, if any, ten days' notice of the time and place when and where such hearing and investigation will be held and such matters considered and determined. Both the public utility and complainant shall be en- titled to be heard and shall have process to enforce the attendance of witnesses. 870 PUBLIC UTILITIES. § 60. Separate hearings — Damage to complainant unnecessary. — The commission may, in its discretion, when complaint is made of more than one rate or charge, order separate hearings thereon, and may con- sider and determine the several matters complained of separately and at such times as it may prescribe. No complaint shall at any time be dismissed because of the absence of direct damage to the complainant. §61. Investigation of commission on own motion. — Whenever the commission shall believe that any rate or charge may be unreasonable or unjustly discrimina- tory or that any service is inadequate, or can not be obtained or that an investigation of any matters relat- ing to any public utility should for any reasons be made, it may on its motion summarily investigate the same with or without notice. § 62. Hearing on motion of commissioner. — If, after making iuch investigation, the commission becomes sat- isfied that sufficient grounds exist to warrant a formal hearing being ordered as to the matters so investigated, it shall furnish such public utility interested a state- ment notifying the public utility of the matters under investigation. Ten days after such notice has been given the commission may proceed to set a time and place for a hearing and an investigation as hereinbe- fore provided. § 63. Notice and hearing as on complaint. — Notice of the time and place for such hearing shall be given to the public utility and to such other interested per- sons as the commission shall deem necessary as pro- vided in section 59, and thereafter proceedings shall be had and conducted in reference to the matter inves- tigated in like manner as though complaint had been INDIANA LAW. 87I filed with the commission relative to the matter inves- tigated, and the same order or orders may be made in reference thereto as if such investigations had been made on complaint. § 64. Complaint of public utility. — Any public util- ity may make complaint as to any matter affecting its own rates or service with like effect as though made by any mercantile, agricultural or manufacturing so- ciety, body politic or municipal organization or by ten persons, firms, corporations or associations. § 65. Power to examine under oath and compel at- tendance of witnesses. — Each of the commissioners and every agent provided for in this act shall have power to administer oaths, certify to official acts, issue sub- poenas, compel the attendance of witnesses and the production of books, accounts, papers, records, docu- ments and testimony. In case of disobedience on the part of any person or persons to comply with any or- der of the commission or any commissioner or any sub- poena, or on the refusal of any witness to testify to any matter regarding which he may be lawfully inter- rogated before the commission or its authorized agent, it shall be the duty of the circuit or superior court of any county or the judge therof, on application of a commissioner, to compel the obedience to the require- ments of a subpoena issued from such court or a refusal to testify therein. § 66. Witness fees and mileage. — Each witness who shall appear before the commission or its agent by its order shall receive for his attendance the fees and mileage now provided for witnesses in civil cases in courts of record which shall be audited and paid by the State, in the same manner as other expenses are 872 PUBLIC UTILITIES. audited and paid, upon the presentation of proper vouchers sworn to by such witnesses and approved by the chairman of the commission. No witness sub- poenaed at the instance of parties other than the com- mission shall be entitled to compensation from the State for attendance or travel unless the commission shall certify that his testimony was material to the matter investigated. § 67. Depositions of nonresidents. — The commis- sion or any party may, in any investigation, cause the depositions of witnesses residing without the State to be taken in the manner prescribed by law for like depo- sitions in civil actions in circuit courts. § 68. Records of stenographer of all proceedings. — A record shall be kept of all proceedings had before the commission or its agent or any formal investigation had and all testimony shall be taken down by the ste- nographer appointed by the commission. § 69. Transcript of proceedings and testimony. — Whenever any action is commenced against the com- mission under the provisions of sections 78 to 86 of this act, the commission shall, before said action is reached for trial, cause a certified transcript of all pro- ceedings had and testimony taken upon such investiga- tion to be filed with the clerk of the circuit or superior court of the county where the action is pending. § 70. Verified transcript admissible in evidence. — A transcript copy of the evidence and proceedings, or any specific part thereof, on any investigation taken by the stenographer appointed by the commission, being certified under oath by such stenographer to be a true and correct transcript of all the testimony on the inves- I INDIANA LAW. 873 tigation of a particular witness, or of other specific part thereof, carefully prepared by him from his original notes, and to be a correct statement of the evidence and proceedings had on such investigations so purport- ing to be taken and transcribed, shall be received in evidence with the same effect as if such reporter were present and testified to the fact so certified. § 71. Copy of transcript to parties to investigation. — A copy of such transcript shall be furnished on terms fixed by the commission to any party to such investiga- tion. § y2. Commission to fix and determine rates. — Whenever, upon an investigation, the commission shall find any rates, tolls, charges, schedules or joint rate or rates to be unjust, unreasonable, insufficient or unjustly discriminatory or to be preferential, or otherwise in violation of any of the provisions of this act, the com- mission shall determine and by order fix just and rea- sonable rates, tolls, charges, schedules or joint rates to be imposed, observed and followed in the future in lieu of those found to be unjust, unreasonable, insufficient or unjustly discriminatory or preferential or otherwise in violation of any of the provisions of this act. § 73. Reasonable regulations and requirements. — Whenever, upon investigation made under the provi- sions of this act, the commission shall find any regula- tions, measurements, practices, acts or service to be unjust, unreasonable, unwholesome, unsanitary, unsafe, insufficient, preferential, unjustly discriminatory or otherwise in violation of any of the provisions of this act ; or shall find that any service is inadequate or that any service which can be reasonably demanded can not be obtained, the commission shall determine and 874 PUBLIC UTILITIES declare and by order fix just and reasonable measure- ments, regulations, acts, practices or service to be fur- nished, imposed, observed and follow^ed in the future in lieu of those found to be unjust, unreasonable, unwhole- some, unsanitary, unsafe, insufficient, preferential, un- justly discriminatory, inadequate or otherwise in viola- tion of this act, as the case may be, and shall make such other order respecting such measurement, regu- lation, act, practice or service as shall be just and rea- sonable. § 74. Costs of investigation — Orders effective. — Whenever upon an investigation made under the pro- visions of this act the commission shall find that any rate, toll, charge, schedule or joint rate or rates is un- just, unreasonable, insufficient or unjustly discrimina- tory or preferential or otherwise in violation of any of the provisions of this act, or that any measurement, regulation, practice, act or service complained of is un- just, unreasonable, unwholesome, unsanitary, unsafe, insufficient, preferential, unjustly discriminatory or otherwise in violation of any of the provisions of this act, or it shall find that any service is inadequate or that any service which can reasonably be demanded can not be obtained, the commission shall ascertain and declare and by order fix the expenses incurred by the commission upon such investigation and shall, by such order, direct such public utility to pay to the state treasurer, within twenty days thereafter, such expenses so incurred. The commission shall cause a certified copy of all such orders to be delivered to an officer or agent of the public utility affected thereby, and all such orders shall, of their own force, take effect and become operative twenty (20) days after service thereof unless a different time be provided in said order. INDIANA LAW. 875 § 75. Orders binding on all and subject to change only on approval. — All public utilities to which the or- der applies shall make such changes in their schedule on file as may be necessary to make the same conform to said order, and no change shall thereafter be made by any public utility in any such rates, tolls or charges, or any joint rate or rates, without the approval of the commission. Certified copies of all other orders of the commission shall be delivered to the public utility af- fected thereby in like manner and the same shall take effect within such time thereafter as the commission shall prescribe. § 76. Orders subject to change by commission on notice and hearing. — The commission may at any time, upon notice to the public utility and after opportunity to be heard as provided in sections 57 to 71, rescind, alter or amend any order fixing any rate or rates, tolls, charges or schedules, or any other order made by the commission, and certified copies of the same shall be served and take effect as herein provided for original orders. § yy. Rates and regulations presumed reasonable until decided otherwise. — All rates, tolls, charges. schedules and joint rates fixed by the commission shall be in force and be prima facie lawful, and all regu- lations, practices and services prescribed by the com- mission shall be in force and shall be prima facie rea- sonable unless finally found otherwise in an action brought for that purpose pursuant to the provisions of sections 78 to 85. § 78. Action to set aside to be advanced for trial. — Any public utility and any person or corporation in interest being dissatisfied with any order of the com- 876 PUBLIC UTILITIES. mission fixing any rate or rates, tolls, charges, sched- ules, joint rate or rates, or any order fixing any regu- lations, practices, act or service may commence an ac- tion in the circuit or superior court of any county in which such order of the commission is operative against the commission as defendant to vacate or set aside, any such order or enjoin the enforcement thereof on the ground that the rate or rates, tolls, charges, schedules, joint rate or rates fixed in such order is in- sufficient, unreasonable or unlaw^ful, or that any such regulation, practice, act or service fixed in such order is insufficient, unreasonable or unlaw^ful, in which ac- tion a copy of the complaint shall be served with the summons. The answer of the commission to the com- plaint shall be filed within ten (10) days after service of summons. All such actions shall have precedence over any civil case of a different nature pending in any such court, and the circuit court or superior court shall always be deemed open for the trial thereof, and the same shall be tried and determined as other civil actions. § 79. Appeals from commission to be filed within sixty days. — Every proceeding, action or suit to set aside or vacate any determination or order of the com- mission or to enjoin the enforcement thereof, or to pre- vent in any way such order or determination from be- coming effective, shall be commenced and every right of recourse to the courts shall be exercised within sixty (60) days after the entry or rendition of such or- der or determination, and the right to commence any such action, proceeding or suit or to exercise any right of recourse to the courts, shall terminate absolutely at the end of such sixty (60) days after such entry or rendition thereof: Provided, That if a rehearing has been petitioned for and granted the right of recourse INDIANA LAW. 877 to the courts shall terminate thirty (30) days after the final determination by the commission after such rehearing. § 80. Injunction only on notice and hearing. — No injunction shall issue suspending or staying any order of the commission, except upon application to the cir- cuit or superior court of any county in which such or- der is operative, or judge thereof, notice to the com- mission and hearing. §81. New evidence to commission — Stay of pro- ceedings. — If, upon the trial of such action, evidence shall be introduced by the plaintiff which is found by the court to be difTerent from that offered upon the hearing before the commission, or its authorized agent, or additional thereto, the court, before proceeding to render judgment, unless the parties to such action stip- ulate in writing to the contrary, shall transmit a copy of such evidence to the commission and shall stay fur- ther proceedings in said action for fifteen (15) days from the date of such transmission. Upon the receipt of such evidence, the commission shall consider the same and may alter, modify, amend or rescind its order relating to such rate or rates, tolls, charges, schedules, joint rate or rates, regulations, practice, act or services complained of in said action, and shall report its action thereon to said court within ten (10) days from the receipt of such evidence. § 82. Supplemental findings of commission and ac- tion of court. — If the commission shall rescind its order complained of, the action shall be dismissed; if it shall alter, modify or amend the same, such altered, modified or amended order shall take the place of the original order complained of, and judgment shall be rendered 8yS PUBLIC UTILITIES. thereon as though made by the commission in the first instance. If the original order shall not be rescinded or changed by the commission, judgment shall be ren- dered upon such original order. § 83. Appeal to Supreme Court within sixty days to be advanced for trial. — Either party to said action, within sixty (60) days after service of a copy of the order or judgment of the circuit or superior court, or within such further time as the Supreme Court may grant, may appeal to the Supreme Court. Where an appeal is taken the cause shall, on the return of the papers to the Supreme Court, be immediately placed on the advance docket of the then pending term, and shall be assigned and brought to a hearing in the same manner as other causes on the advance docket. The Supreme Court shall have the right to transfer any of such appeals to the appellate court of Indiana for deci- sion, and said court is given power and jurisdiction to determine any of such appeals so transferred. § 84. Burden of proof. — In all trials, actions and proceedings arising under the provisions of this act or growing out of the exercise of the authority and pow- ers granted herein to the commission, the burden of proof shall be upon the party adverse to such commis- sion or seeking to set aside any determination, require- ment, direction or order of said commission, to show that the determination, requirement, direction or order of the commission complained of is unreasonable or un- lawful as the case may be. § 85. Court proceedings to be followed. — In all ac- tions and proceedings in court arising under this act all processes shall be served and the practice and rules of evidence shall be the same as in civil action, except as INDIANA LAW. 879 Otherwise herein provided. Every sheriff or other of- ficer empowered to execute civil processes shall exe- cute any process issued under the provisions of this act and shall receive such compensation therefor as may be prescribed by law for similar services. § 86. Incriminating evidence — Witnesses. — No per- son shall be excused from testifying or from producing books, accounts and papers in any proceeding based upon or growing out of any violation of the provisions of this act on the ground or for the reason that the testimony or evidence, documentary or otherwise, re- quired of him would incriminate him or subject him to penalty or forfeiture; but no person having so testified shall be prosecuted or subjected to any penalty or for- feiture for or on account of any transaction, matter or thing concerning which he may have testified or pro- duced any documentary evidence : Provided, That no person testifying shall be exempted from prosecution or punishment for perjury in so testifying. § 87. Certified copies of orders. — Upon application of any person the commission shall furnish certified copies, under the seal of the commission, of any order made by it, which shall be prima facie evidence of the facts stated therein. § 88. Issue of stocks, bonds, etc., limited to neces- sity. — No public utility shall hereafter issue for any purposes connected with or relating to any part of its business, any stocks, certificates of stock, bonds, notes or other evidences of indebtedness, payable at periods of more than twelve months, to an amount exceeding that which may from time to time be reasonably nec- essary, determined as herein provided, for the purpose for which such issue of stock, certificates of stock, 880 PUBLIC UTILITIES. bonds, notes or other evidences of indebtedness may- be authorized. § 89. Capitalization — Adequate consideration for stocks and bonds. — No pubhc utility shall issue any stock or certificate of stock, except in consideration of money or of labor or property at its true money value as found and determined by the commission actually received by it. No stock or certificate of stock shall be sold at a discount or premium without the approval of the commission, and if sold at a discount, the com- mission shall make a record thereof and give such publicity of the fact as it may deem necessary, at the expense of the utility. No public utility shall issue any bonds, notes or other evidences of indebtedness, except for money or labor or property estimated at its true money-value as found and determined by the commission actually received by it equal to a sum to be approved by the commission not less than seventy- five per cent. (75%) of the face value thereof: Pro- vided, That any bonds, notes or other evidences of in- debtedness authorized prior to February i, 1913, but not issued, and bearing interest not to exceed four per centum per annum, may, with the approval of the com- mission, be issued for a price not less than sixty-five per centum of the par value thereof : Provided further, however, That no bonds, notes or other evidences of indebtedness of any such public utility issued for the purpose of refunding, retiring or discharging any of its bonds, notes or other evidences of indebtedness shall be issued without the consent of the commission to pay, refund, retire or discharge any discount paid or incurred after February i, 1913, by such public utility upon or in connection with the issuance of bonds, notes or other evidences of indebtedness to be refunded, retired or dis- charged. The amount of bonds, notes and other evi- INDIANA LAW. 88l dences of indebtedness which any pubhc utility may issue shall bear a reasonable proportion to the amount of stock and certificates of stock issued by such utility, due consideration being given to the nature of the busi- ness in which the corporation is engaged, its credit, future prospects and earnings, the effect which such issue will have upon the management and efficient op- eration of the public utility by reason of the relative amount of financial interest which the stockholders will have in the corporation and the circumstances sur- rounding the operation and business of the corporation. § 90. Purposes for which stock, bonds, etc., may be issued. — A public utility as defined in section one (i) of this act may, with the approval of the commis- sion, issue stock, certificates of stock, bonds, notes or other evidences of indebtedness, payable at periods of more than twelve (12) months after the date thereof, when necessary for the acquisition of property, the con- struction, completion, extension or improvement of its facilities, plant or distributing system, or for the im- provement of its service, or for the discharge or lawful refunding of its obligations, or for the reimbursement of moneys actually expended from income, or from any other moneys in the treasury of the public utility for such purposes, not secured or obtained from the issue of stocks, bonds, notes or other evidences of indebted- ness of such public utility within five (5) years next prior to the filing of an application with the commis- sion for the required authorization for any of the afore- said purposes in cases where the applicant shall have kept its accounts and vouchers of such expenditure in such manner as to enable the commission to ascertain the amount of moneys so expended and the purposes for which such expenditure was made. 56— Pub. Ut S82 PUBLIC UTILITIES. § 91, Proceedings and statement before issue. — Whenever a public utility desires to issue stocks, cer- tificates of stock, bonds, notes or other evidences of indebtedness, payable in more than one (i) year from date, with respect to the public utility owned or op- erated by it, it shall file with the commission a state- ment verified by its president and secretary, or two (2) of its incorporators or owners if it have no such officers, setting forth (a) the amount and character of the securities proposed to be issued, (b) the purposes for which they are to be issued, (c) the description and estimated value of any property to be acquired through the said issue, (d) the amount of cash to be received for said securities, (e) the financial condition of the public utility and its previous operations so far as rele- vant. For the purposes of enabling it to determine whether the proposed issue complies with the provi- sions of this act, the commission shall make such in- quiry or investigation, hold such hearing, and examine such witnesses, books, papers, documents or contracts, as it may deem of importance in enabling it to reach a determination. § 92. Commission's certificate — Capitalization — Franchises and considerations. — If the commission shall determine that such proposed issue complies with the provisions of this act, such authority shall thereupon be granted, and it shall issue to the public utility a cer- tificate of authority stating: (a) the amount of such stocks, certificates of stock, bonds, notes or other evi- dences of indebtedness, reasonably necessary for the purposes for which they are to be issued, and the char- acter of the same; (b) the purposes for which they are to be issued and the property or services to be acquired thereby valued in detail. Such public utiHty shall not apply the proceeds of such stock, bonds, notes or other INDIANA LAW. 883 evidences of indebtedness as aforesaid, to any purposes not specified in such certificate, nor issue such stock, bonds, notes or other evidences of indebtedness, in greater amounts than specified in such certificate. Nothing herein contained shall prohibit the commission from giving its consent to the issue of bonds, notes or other evidences of indebtedness for the reimbursement of moneys heretofore actually expended from income for any of the purposes specified in section ninety (90) if in the judgment of the commission such consent should be granted: Provided, Application for such consent shall be made prior to January i, 1915. For the purpose of enabling it to determine whether it should issue such an order, the commission shall make such inquiry or investigation, hold such hearings and examine such witnesses, books, papers, documents or contracts as it may deem of importance in enabling it to reach a determination. The commission shall have power to impose such conditions upon a public utility in issuing of securities as it may deem reason- able. Such public utilities shall not, without the con- sent of the commission, apply said issue or any pro- ceeds thereof to any purpose not specified in such or- der. Any public utility may issue notes, for proper purposes and not in violation of any provisions of this act or of any other act, not to exceed 10 per cent, of the capital stock of said public utility, payable at peri- ods of not more than twelve (12) months without such consent; but no such notes shall, in whole or in part, ■directly or indirectly, be refunded by any issue of stocks or bonds or by any evidence of indebtedness running for more than twelve (12) months without the consent of the commission: Provided, however. That the commission shall have no power to authorize the capitalization of any franchise to be a corporation or to authorize the capitalization of any franchise or the 884 PUBLIC UTILITIES. right to own, operate or enjoy any franchise whatso- ever in excess of the amount (exclusive of any tax or annual charge) actually paid to the State or to any political subdivision thereof as the consideration for the grant of such franchise or right. The capitahzation of a corporation formed by the merger or consolidation of two (2) or more corporations shall be subject to the approval of the commission, but in no event shall such capitalization exceed the sum of the capital stock of the corporations so consolidated, at the par value there- of, or such sums and any additional sum actually paid in cash; nor shall any contract for consolidation or lease be capitalized in the stock of any corporation whatever; nor shall any corporation hereafter issue any bonds against or as a lien upon any contract for consolidation or merger. § 93. State does not guarantee securities issued un- der this law. — No provision of this act and no deed or act done or performed under or in connection there- with, shall be held or construed to obligate the State of Indiana to pay or guarantee in any manner what- soever, any stock or stock certificate or bond, note or other evidence of indebtedness authorized, issued or executed under the provisions of this act. § 94. Reorganization required on forced sale — Val- uation by commission limits capitalization. — Any per- son or association of persons other than an existing public service corporation, which shall have, or may have hereafter become the owner or assignee of the rights, powers, privileges and franchises of any public utility created or organized, by or under the law of this state, by purchase under a mortgage sale, sale in bankrupt proceedings, or sale under any judgment, or- der, decree or proceedings of any court in this state,. INDIANA LAW. 885 including the courts of the United States sitting herein, shall, within sixty (60) days after such purchase or as- signment, organize anew by filing articles of incorpora- tion as provided by law, and thereupon shall have the rights, privileges and franchises which such utility had, or was entitled to have at the time of such purchase and sale. The new corporation may issue stock, cer- tificates of stock, bonds, notes or other evidences of in- debtedness for the property of the former corporation thus acquired, in an amount not to exceed the true value of such property, as found and determined by the commission, in accordance with the provisions hereof. § 95. Sale, transfer or consolidations only on ap- proval of commission. — No public utility as defined in section one (i) of this act shall transfer or lease its franchise, works or system or any part of such fran- chise, works or system to any other person or corpora- tion or contract for the operation of its works or sys- tem, without the written consent of the commission after a hearing. The permission and "approval of the commission to the assignment, transfer or lease of a franchise under this section shall not be construed to revive or validate any lapsed or invalid franchise or to enlarge or add to the powers and privileges contained in the grant of any franchise or to waive any forfeit- ure. No such corporation shall directly or indirectly acquire the stock or bonds of any other corporation incorporated for or engaged in the same or a similar business, or purporting to operate or operating under a franchise from the same or any other municipality unless authorized so to do by the commission. Save where stock shall be transferred or held for the pur- pose of collateral security, only with the consent of the commission empowered by this act to give such con- sent, shall a corporation foreign or domestic operating 886 PUBLIC UTILITIES. a public utility purchase or acquire, take or hold more than ten per centum (io%) of the total capital stock issued by a corporation doing the same or a similar business: Provided, That a corporation now lawfully holding a majority of the capital stock of any corpora- tion operating a public utility may, without the consent of the commission, acquire and hold the remainder of the capital stock of such corporation or any portion thereof. Nothing herein contained shall be construed to pre- vent the holding of stock heretofore lawfully acquired or to prevent upon the surrender or exchange of said stock pursuant to a reorganization plan, the purchase, acquisition, taking or holding of a proportionate amount of stock of any new corporation organized to take over at foreclosure or other sale, the property of any corporation whose stock has been thus surrendered or exchanged. Every contract, assignment, transfer or agreement for transfer of stock, by or through any per- son or corporation to any corporation, in violation of any provision of this section shall be void and of no effect and no such transfer or assignment shall be made upon the books of any such corporation or be recog- nized effective for any purpose. § 955^. Mergers of like concerns and contracts for sale or lease on approval of commission. — That with the consent and approval of the commission, but not otherwise, any two or more public utilities, furnishing a like service or product and doing business in the same municipality or locality within this state, or any two or more public utilities whose lines intersect or parallel each other within this state may be merged and may enter into contracts with each other that will enable such public utilities to operate their lines or plants in connection with each other; and any public utility may INDIANA LAW. 887 also, with the consent of the holders of three-fourths of the capital stock outstanding, purchase or lease the property, plant or business, or any part thereof, of any other such public utility at a price and on terms fixed by the commission. Any such public utility may, with the consent of three-fourths of the holders of the out- standing stock, sell or lease its property or business or any part thereof to any other such public utility at a price and on terms fixed by the commission upon pay- ing in cash to nonconsenting stockholders the appraised value of their stock as fixed by the commission. § 96. Fee for certificate for issue of securities. — The commission shall charge every public ntilitv re- ceiving permission under this act for the issue of stocks, bonds or other securities an amount equal to fifteen cents ($0.15) for every hundred dollars of such securi- ties authorized by the commission and the same shall be paid into the state treasury- before any such securi- ties shall be issued. Money accruing from charges made by the commis- sion is hereby appropriated to the commission for the use of the commission in defraying expenses under the provisions of this act. v? 97. Competition — Certificate of public conven- ience — Indeterminate permit. — No license, permit or franchise shall be granted to any person, copartnership or corporation to own. operate, manage or control any plant or equipment of any public utility in any munici- pality where there is in operation a public utility en- gaged in similar service under a license, franchise or permit without first securing from the commission a declaration after a public hearing of all parties inter- ested, that public convenience and necessity require such second public utility. Any existing permit, license 888 PUBLIC UTILITIES. or franchise which shall contain any term whatsoever interfering with the existence of a second public utility is hereby declared to be against public policy and is hereby amended in such manner as to permit a munici- pality to grant a license, franchise or permit for the operation of such second public utility pursuant to the provisions of this act. § 98. Plants of municipality — Condemnation of pur- chase. — No municipality shall hereafter construct any such plant or equipment where there is in operation in such municipality a public utility engaged in similar service under an indeterminate permit as provided in this act without first securing from the commission a declaration after a pubHc hearing of all parties inter- ested, that public convenience and necessity require such municipal utility. But nothing in this section shall be construed as preventing a municipality acquir- ing any existing plant by purchase or by condemnation as hereinafter provided. § 99. Foreign concerns to be excluded. — No li- cense, permit or franchise to own, operate, manage or control any plant or equipment of any public utility shall be hereafter granted or transferred except to a corporation duly organized under the laws of the State of Indiana, or to a citizen of such state. § 100. Indeterminate permits — Revocable by com- mission — Purchase by municipality. — Every license, permit or franchise hereafter granted to any public utility shall have the effect of an indeterminate permit subject to the provisions of this act, and subject to the provision that the license, franchise or permit may be revoked by the commission for cause or that the mu- nicipality in which the major part of its property is INDIANA LAW. 889 situated may purchase the property of such pubhc utility actually used and useful for the convenience of the public at any time as provided herein, paying there- for the then value of such property as determined by the commission and according to the terms and condi- tions fixed by said commission, subject to all the pro- visions as to hearings and appeals set out in section one hundred and five (105) and section one hundred and six (106) hereof. Any such municipality is authorized to purchase such property and every such public utility is required to sell such property at the value and ac- cording to the terms and conditions determined by the commission as herein provided. If this act should be repealed or annulled, then all such indeterminate fran- chises, permits or grants shall cease and become inop- erative, and in place thereof such utility shall be rein- stated in the possession and enjoyment of the license, permit or franchise surrendered by such utility at the time of the issue of the indeterminate franchise, permit or grant; but in no event shall such reinstated license, permit or franchise be terminated within a less period than five (5) years from the date of the repeal or an- nulment of this act. §101. Exchange of outstanding franchises for in- determinate permits. — Any public utility operating un- der an existing license, permit or franchise shall, upon filing at any time prior to the expiration of such li- cense, permit or franchise and prior to July i, 1915, w^ith the clerk of the municipality which granted such franchise and with the commission, a written declara- tion, legally executed, that it surrenders such license, permit or franchise, receive by operation of law, in lieu thereof, an indeterminate permit as provided in this act; and such public utility shall hold such permit un- der all the terms, conditions and limitations of this act. 890 PUBLIC UTILITIES. § 102. Acceptance of indeterminate permit consti- tutes consent to purchase by municipality. — Any public utility accepting or operating under any indeterminate license, permit or franchise hereafter granted shall by acceptance of any such indeterminate license, permit or franchise be deemed to have consented to a future pur- chase of its property by the municipahty in which the major part of it is situate at the value and under the terms and conditions determined by the commission as provided in this act, and shall thereby be deemed to have waived the right of requiring the necessity of such taking to be established by the verdict of a jury, and to have waived all other remedies and rights rela- tive to condemnation, except such rights and remedies as are provided in this act and shall have been deemed to have consented to the revocation of its license, per- mit or franchise by the commission for cause. § 103. Municipal ownership and operation — Sale or lease by municipality. — Any municipality shall have the power, subject to the provisions of this act, to construct and operate a pubHc utiHty or any part thereof. Any municipahty shall have the power, subject to the pro- visions of this act, to purchase by an agreement with any public utihty any part of any plant, provided that such purchase and the terms thereof shall be approved by the commission after a hearing as provided in this act. Any municipality shall have the power, subject to the provisions of this act, to acquire by condemna- tion the property of any public utiHty actually used and useful for the convenience of the public then operating under a license, permit or franchise existing at the time this act takes effect or operating in such municipality without any permit or franchise. Any municipality owning or operating a public utiHty shall not sell or INDIANA LAW. 89 1 lease the same without the approval of the commission after a hearing. § 104. Legal proceedings for purchase by munici- pality. — If the municipality shall have determined to acquire an existing plant then operating under a li- cense, permit or franchise existing at the time this act takes effect, such municipality shall bring an action in the circuit court of the county where such utility has its principal place of business against the public utility as defendant praying the court for an adjudication as to the necessity of such taking by the municipality. The public utility shall file its answer to such complaint within ten (lo) days. Unless the parties thereto waive a jury, the question as to the necessity of the taking of such property by the municipality shall be as speedily as possible submitted to a jury. § 105. Compensation determined by commission after public hearing and notice. — The commission siiall thereupon proceed to set a time and place for a public hearing upon the matters of the just compensation to be paid for the taking of the property of such public utility actually used and useful for the convenience of the public, and of all other terms and conditions of the purchase and sale and shall give to the municipality and the public utility interested, not less than thirty (30) days' notice of the time and place when and where such hearing will be held, and such matters considered and determined, and shall give like notice to all bond- holders, mortgagees, lienors and all other persons hav- ing or claiming to have any interest in such public utility by publication of such notice, once a week for not less than three (3) successive weeks, in at least one (i) newspaper of general circulation printed in the English language and published in the county in which 892 PUBLIC UTILITIES. such public utility is located, which publication shall be caused to be made by the municipality. Within a rea- sonable time, not exceeding one (i) year after the time fixed for such hearing in such notice, the commission shall, by order, fix and determine and certify to the municipal council, to the public utility and to any bond- holder, mortgagee, lienor or other creditor appearing upon such hearing, just compensation to be paid for the taking of the property of such public utility actually used and useful for the convenience of the public and all other terms and all conditions of sale and purchase which it shall ascertain to be reasonable, allowing not exceeding one hundred and twenty (120) days for the payment of such compensation. The compensation and other terms and conditions of sale and purchase thus certified by the commission shall constitute the com- pensation and terms and conditions to be paid, followed and observed in the purchase of such plant from such public utility. Upon the filing of such certificate with the clerk of such municipality and payment of the com- pensation fixed the exclusive use of the property taken shall vest in such municipality. § 106. Appeal — Compensation determined by cir- cuit court. — Any public utility or the municipality or any bondholder, mortgagee, lienor or other creditor of the public utility, being dissatisfied with such order, may commence and prosecute an action in the circuit or superior court and thereafter may appeal to the Supreme Court to vacate or set aside such order or any part thereof, as provided in sections 78 to 86, in- clusive, and said sections, so far as applicable, shall apply to such action. In all such appeals to the circuit court, the question of compensation shall be tried and fixed by the court without a jury. INDIANA LAW. 893 § 107. Order sustained by court binding. — If the plaintiff shall not establish to the full satisfaction of the court that the compensation fixed and determined in such order is unlawful or that some of the terms or conditions fixed and determined therein are in some particulars unreasonable, the compensation, terms and conditions fixed in said order shall be the compensa- tion, terms and conditions to be paid, followed and ob- served in the purchase of said plant from such public utility. § 108. Order reversed by court remanded to com- mission. — If the plaintiff shall establish to the satisfac- tion of the court, and the court shall adjudge that such compensation is unlawful or that some of such terms or conditions are unreasonable, the court shall remand the same to the commission with such findings of facts and conclusions of law as shall set forth in detail the reasons for such judgment and the specific particulars in which such order of the commission is adjudged to be unreasonable or unlawful. § 109. Reconsideration and modification of order by commission. — If the compensation fixed by the previous order of the commission be adjudged to be unlawful, the commission shall forthwith proceed to set a re- hearing for the redetermination of such compensation as in the first instance. The commission shall forthwith otherwise alter and amend such previous order with or without a rehearing, as it may deem necessary, so that the same shall be reasonable and lawful in every par- ticular. §110. Power of municipal councils to regulate sub- ject to review by commission. — Every municipal coun- cil shall have power, (a) to determine by contract, or- 894 PUBLIC UTILITIES. dinance or otherwise the quality and character of each kind of product or service to be furnished or rendered by any pubHc utility furnishing any product of service within said municipality and all other terms and con- ditions not inconsistent with this act upon which such public utility may be permitted to occupy the streets, highways or other public property within such munici- pality, and such contract, ordinance or other determi- nation of such municipality shall be in force and prima facie reasonable. Upon complaint made by such public utility or by any qualified complainant as provided in section 57 the commission shall set a hearing as pro- vided in sections 57 to 71, and if it shall find such con- tract, ordinance or other determination to be unreason- able, such contract, ordinance or other determination shall be void, (b) To require of any public utility by ordinance or otherwise such additions and extensions to its physical plant within said municipality as shall be reasonable and necessary in the interest of the pub- lic, and to designate the location and nature of all such additions and extensions, the time within which they must be completed and all conditions under which they must be constructed subject to review by the commis- sion as provided in subdivision (a) of this section, (c) To provide for a penalty for noncompliance with the provisions of any ordinance or resolution adopted pur- suant to the provisions hereof, (d) The power and .authority granted in this section shall exist and be vested in said municipalities, anything in this act to the contrary notwithstanding: Provided, however, When- ever after a request by petition in writing of any pub- lic utility, the city or other political subdivision or other body, having jurisdiction of the matter, shall re- fuse or fail for a period of thirty (30) days, to give or grant to such public utility permission and authority to construct, maintain and operate any additional con- INDIANA LAW. 895 striiction, equipment or facility reasonably necessary for the transaction of the business of such public utility, and for the public convenience or interest, then such public utility may file a petition with said commission for such right and permission, which petition shall state with particularity the construction, equipment or other facility desired to be constructed and operated, and show a reasonable public necessity therefor, and also the failure or refusal of such city, political subdivision or other body to give or grant such right or permis- sion; and the commission shall thereupon give notice of the pendency of such petition, together with a copy thereof, to such city or other political subdivision or body of the time and place of hearing of the matter set forth in such petition; and such commission shall have power to hear and determine such matters and to give or grant such right and permission and to impose such conditions in relation thereto as the necessity of such public utility and the public convenience and in- terest may reasonably require. § III. No franks, privileges or anything of value to political committees or candidates — Penalty. — No public utility or any agent or officer thereof, or any agent or officer of any municipality constituting a pub- lic utility as defined in this act, shall offer or give for any purpose to any political committee or any member or employe thereof, candidate for, or incumbent of any office or position under the constitution or laws or under any ordinance of any municipality of this State, or to any person at the request, or for the advantage of all or any of them, any frank or any privilege or thing of value withheld from any person for any prod- uct or service produced, transmitted, delivered, fur- nished or rendered, or to be produced, transmitted, de- livered, furnished or rendered by any public utility or isgb PUBLIC UTILITIES. any free product or service whatsoever. No political committee and no member or employe thereof, no can- didate for and no incumbent of any office or position under the constitution or Islws or under any ordinance of any town or municipality in this State, shall ask for or accept from any public utility, or any agent or officer thereof, or any agent or officer of any municipality constituting a public utility as defined in this act, or use in any manner or for any purpose any frank or privilege withheld from any person, for any product or service produced, transmitted, delivered, furnished or rendered, or to be produced, transmitted, delivered, fur- nished or rendered by any public utility. Any violation of any of the provisions of this section shall be pun- ished by imprisonment in the state prison not more than five (5) years nor less than one (i) year or by fine not exceeding one thousand dollars ($1,000.00) nor less than two hundred dollars ($200.00). § 112. No discrimination in rates — Penalty. — If any public utility or any agent or officer thereof, or any officer of any municipality constituting a public utility as defined in this act shall, directly or indirectly, by any device whatsoever, charge, demand, collect or re- ceive from any person, firm or corporation a greater or less compensation for any service rendered or to be rendered or for any service in connection therewith than that prescribed in the published schedules or tar- iffs then in force or established as provided herein, or than it charges, demands, collects or receives from any other person, firm or corporation for a like and con- temporaneous service, such public utility shall be deemed guilty of unjust discrimination which is hereby prohibited and declared to be unlawful, and upon con- viction thereof shall forfeit and pay into the state treasury not less than one hundred dollars ($100.00), INDIANA LAW. 897 nor more than one thousand dollars ($1,000.00), for each offense; and such agent or officer so offending shall be deemed guilty of a misdemeanor and upon con- viction thereof shall be punished by a fine of not less than one hundred dollars ($100.00) nor more than one thousand dollars ($1,000.00) for each offense, or im- prisonment in the state prison for not less than one year. § 113. Discrimination in rates — Consideration for rental of facilities. — It shall be unlawful for any public utility to demand, charge, collect or receive from any person, firm or corporation less compensation for any service rendered or to be rendered by said public utility in consideration of the furnishing by said person, firm or corporation of any part of the facilities incident thereto: Provided. Nothing herein shall be construed as prohibiting any public utility from renting any facil- ities, incident to its business. §114. Discrimination and preferences — Penalty — Exceptions. — If any public utility make or give any undue or unreasonable preference or advantage to any particular person, firm or corporation, or shall subject any particular person, firm or corporation to any undue or unreasonable prejudice or disadvantage in any re- spect whatsoever, such public utility shall be deemed guilty of unjust discrimination which is hereby prohib- ited and declared unlawful. Any person, firm or cor- poration violating the provisions of this section shall be deemed guilty of a misdemeanor, and upon convic- tion thereof shall be punished by a fine of not less than fifty dollars ($50.00), nor more than one thousand dol- lars ($1,000.00), for each offense. Nothing in this act shall prevent a public utility from furnishing free or reduced service to any of its employes nor prevent a 57— Pub. Ut. OpO PUBLIC UTILITIES. Street railway or interurban railway from granting free or reduced transportation to any persons as provided by law for railroads and other common carriers. § 115. Rebates, concessions or discriminations — Penalty. — 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 any public utility or for any service in connection therewith, whereby any such service shall, by any device whatsoever, be ren- dered free or at a 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. Any person, firm or cor- poration violating the provisions of this section shall be deemed guilty of a misdemeanor and on conviction thereof shall be punished by a fine of not less than fifty dollars ($50.00) nor more than one thousand dollars ($1,000.00) for each offense. § 116. Liability of public utility for damages to party injured due to violation of this law. — If any pub- lic utility shall do or cause to be done or permit to be done any matter, act or thing in this act prohibited or declared to be unlawful, or shall omit to do any act, matter or thing required to be done by this act, such public utility shall be liable to the person, firm or cor- poration injured thereby in the amount of damages sus- tained in consequence of such violation: Provided, That any recovery as in this section provided shall in no manner affect a recovery by the State of the penalty prescribed for such violation. § 117. Information, papers or records and account- ing to be furnished commission — Penalty. — Any officer, INDIANA LAW. 899 agent or employe of any public utility or of any mu- nicipality constituting a public utility as defined in this act who shall fail or refuse to fill out and return any blanks as required by said act, or shall fail or refuse to answer any question therein propounded, or shall knowingly or wilfully give a false answer to any such question or shall evade the answer to any such question where the fact inquired of is within his knowledge or who shall, upon proper demand, fail or refuse to exhibit to the commission or any commissioner or any person authorized to examine the same, any book, paper, ac- count, record or memoranda of such public utility which is in his possession or under his control or who shall fail to keep his system of accounting, or any part thereof, which shall be required by the commission, or who shall refuse to do any act or thing in connection with such system of accounting when so directed by the commission or its authorized representative, shall be deemed guilty of a misdemeanor and upon convic- tion thereof shall be punished by a fine of not less than one thousand dollars ($1,000.00) for each offense. And a penalty of not less than five hundred dollars ($500.00) nor more than one thousand dollars ($1,000.00) shall be recovered from the public utility for each such of- fense when such officer, agent or employe acted in obedience to the direction, instruction or request of such public utility or any general officer thereof. § 1 1 8. Violations and penalties in general — Agency. If any public utility shall violate any provision of this act, or shall do any act herein prohibited or shall fail or refuse to perform any duty enjoined upon it, for which a penalty has not been provided, or shall fail, neglect or refuse to obey any lawful requirement or order made by the commission or the municipal council or any judgment or decree made by any court upon its 900 PUBLIC UTILITIES. application, for every such violation, failure or refusal, such public utility shall forfeit and pay into the treasury a sum not less than one hundred dollars ($100.00) nor more than one thousand dollars ($1,000.00) for each such offense. In construing and enforcing the provi- sions of this section, the act, omission or failure of any officer, agent or other person acting for or employed by any public utility acting within the scope of his em- ployment shall in every case be deemed to be the act, omission or failure of such public utility. § 119. Delinquency of municipal ofHcers — Penalty. — If any officer of any town or city constituting a pub- lic utility, as defined in this act, shall do or cause to be done or permit to be done any matter, act or thing in this act prohibited or declared to be unlawful, or shall omit, fail or neglect or refuse to do any act, matter or thing required by this act of such officer to be done, or shall omit, fail, neglect or refuse to perform any duty enjoined upon him and relating directly or indi- rectly to the enforcement of this act, or shall omit, fail, neglect or refuse to obey any lawful requirement or order made by the commission or any judgment or de- cree made by the court upon its application, for every such violation, failure or refusal, such officer shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punished by a fine of not less than fifty dollars ($50.00) nor more than five hundred dol- lars ($500.00). § 120. Interference or injury of equipment of com- mission prohibited — Penalty. — Any person who shall destroy, injure or interfere with any apparatus or ap- pliance owned or operated by or in charge of the com- mission or its agent shall be deemed guilty of a mis- demeanor, and upon conviction shall be punished by a INDIANA LAW. 9OI fine not exceeding one hundred dollars ($100.00) or imprisonment for a period not exceeding thirty (30) days, or both. Any public utility permitting the de- struction, injury to, or interference with any such ap- paratus or appliance shall forfeit a sum not exceeding one thousand dollars ($1,000.00) for each offense. § 121. Separate and distinct violations — Daily. — Every day during which any public utility or any offi- cer, agent or employe thereof shall fail to observe and comply with any order or direction of the commission, or to perform any duty enjoined by this act, shall con- stitute a separate and distinct violation of such order or direction of this act, as the case may be. § 122. Temporary alteration or suspension of rates by commission in emergencies. — The commission shall have power, when deemed by it necessary, to prevent injury to the business or interests of the people, or any public utility of this State, in case of any emergency to be judged of by the commission, to temporarily alter, amend or with the consent of the public utility con- cerned, suspend any existing rates, schedules and order relating to or affecting any public utility or part of any public utility in this State. Such rates so made by the commission shall apply to one (i) or more of the public utilities in this State or to any portion thereof as may be directed by the commission, and shall take effect at such time and remain in force for such length of time as may be prescribed by the commission. § 123. Notice of fatal accidents— Investigation by commission. — Every public utility shall, whenever an accident attended with loss of human life occurs within this State upon its premises, or directly or indirectly arising: from or connected with its maintenance or op- 902 PUBLIC UTILITIES. eration, give immediate notice thereof to the commis- sion. In the event of any such accident, the commis- sion, if it deem the pubHc interest require it, shall cause an investigation to be made forthwith, w^hich investi- gation shall be held in the locality of the accident un- less, for greater convenience of those concerned, it shall order such investigation to be held at some other place; and said investigation may be adjourned from, place to place as may be found necessary and conven- ient. The commission shall give due notice to the pub- lic utility of the time and place of the investigation. § 124. Enforcement of law by commission — Recov- ery of forfeiture and penalties. — The commission shall inquire into any neglect or violation of the laws of this State or the ordinances of any city or town by any public utility doing business therein, or by the officers, agents or employes thereof or by any person operating the plant of any public utility, and shall have the power, and it shall be its duty, to enforce the provisions of this act, as well as all other laws, relating to public utilities. Any forfeiture or penalty herein provided shall be recovered and suit therein shall be brought in the name of the State of Indiana in the circuit or superior court where the public utility has its principal place of business. Complaint for the collection of any such forfeiture may be made by the commission or any member thereof, and when so made the action so com- menced shall be prosecuted by the general counsel. § 125. Substantial compliance sufficient to make orders effective. — A substantial compliance with the re- quirements of this act shall be sufficient to give effect to all the rules, orders, acts and regulations of the com- mission and they shall not be declared inoperative, il- INDIANA LAW. 903 legal or void for any omission of a technical nature in respect thereto. § 126. Penalties and forfeitures supplementary cind cumulative. — This act shall not have the efTect to re- lease or waive any right of action by the State or by any person for any right, penalty or forfeiture which may have arisen or which may hereafter arise, under any law of this State; and all penalties and forfeitures accruing under this act shall be cumulative and a suit for any recovery of one shall not be a bar to the re- covery of any other penalty. § 127. Traveling expenses of members and em- ployes of commission paid by state on itemized verified statement. — The members of said commission, its sec- retary and clerk, and such other person as it may ap- point or employ as provided in this act, shall be en- titled to receive from the State their actual necessary traveling expenses, which shall include the cost of transportation, hotel, telegraph and telephone bills while traveling on the business of the commission, which amount shall be paid by the treasurer of state on warrants of the auditor of state, upon an itemized statement thereof, sworn to by the party who incurred such expense in traveling, and after the same shall have been approved by the commission. § 128. Appropriation annual. — A sum sutticiont to carry out the provisions of this act is appropriated an- nually, out of any money in the state treasury not other- wise appropriated, not exceeding seventy-five thousand dollars ($75,000.00). The sum of twenty-five thousand dollars ($25,000.00) is hereby appropriated for the pe- riod from April i, 1913, to September 30, 1913. 904 PUBLIC UTILITIES. § 129. When act effective. — This act shall take ef- fect and be in force from and after May i, 1913. § 130. Acts in conflict repealed. — All acts and parts of acts conflicting with the provisions of this act are repealed in so far as they are inconsistent herewith. § 131. Any invalid provisions not to affect others. — In case any of the provisions of this act shall be held invalid, such fact shall not operate to make invalid any other part of this act, and the parts of this act not ad- judged to be invalid shall be observed and enforced the same as though the invalid part or parts had not been enacted. INDEX [References are to Sections.] ABANDONMENT OF SERVICE, agreement of parties, 379. ABUSE OF DISCRETION, limitation of regulation, 450. ABUTTING PROPERTY OWNERS, additional servitudes of municipal public utility plants, 277, 283, 285, 289, 291, 293, 298, 300, 302-304, 307, 312-315. duty of municipal public utility, 203, 204. special assessment for municipal public utilities, 540. ACCEPTANCE OF FRANCHISES, municipal public utilities, 375, 376, 377. necessary, 108. ACCESS, LIGHT AND AIR PRIVILEGES, inhabitants of municipality, 524, 526. ACTION BY THE PEOPLE, enforcement of franchises requires system and information, 590, 593, 600. franchise and contract rights enforced, 587, 590, 594, 600. ACTIVITY OF MUNICIPAL CORPORATIONS, Inhabitants of municipal corporations unrestrained. pa«:e 1. ADDITIONAL SERVITUDES, defined. 277-315. eminent domain. 277. 300. municipal public utility plants, 277, 279-315. ADEQUATE REGULATION AND CONTROL, alternative and preventive of municipal ownership. 572. 576-579. state public utility commission. 607-610, 612. ADEQUATE SERVICE AT UNIFORM RATES, secured by public utility commission. 608-610, 612. go6 INDEX. [References are to Sections.} AGENCY, municipality of state, 88, 90, 96, 97, 101, 127, 128, 134, 135, 190, 193, 265, 270, 275, 390-392, 398-400, 402, 439-441, 481, 573-575. ALIENATION OF PROPERTY, providing municipal public utilities, 346-367. ALIENATION OR OBSTRUCTION OP STREETS, power of municipality, 406. ATTITUDE OF COURTS, construction of municipal purposes, 19. extension of municipal public utilities, 284-286, 288-297, 301, 305, 306, 308-311. increase of sphere of municipal activity, page 3, §§ 13, 18, 23, 24, 29, 31, 33, 35, 37, 38, 43, 44, 49, 51-65, 64, 316, 346-348, 352, 355, 356, 359-361, 428, 578-585. municipal ownership, page 6, §§ 75, 119, 121, 346-348, 352, 355, 356, 359-361, 449. municipal public utilities, 19. power of municipality to grant franchises, 428, 430, 431. public utility commissions, 606-610, 612. AUCTION, municipal franchise rights, 105, 138. AUTHORITY TO ALIENATE MUNICIPAL PUBLIC UTILITY PROPERTY, statutory, 348, 350-354, 361, 362, 367. BENEFICIARIES OF MUNICIPAL FRANCHISES, inhabitants of municipality, 191-196, 199, 201, 205. BENEFICIARY, municipal consent in street franchise, 106. BRICK-MAKING, contract of municipality, 60. BROOKLYN BRIDGE, municipal purpose, 22. BUSINESS POWERS, municipal corporations, 5, 6, 7, 9. INDEX. 907 [References are to Sections. \ C CAPACITY OF MUNICIPAL PUBLIC UTILITIES, limitation of demand, 454. CAPITALIZATION, coinciding with investment, page 12. economy and' efficiency, pages 11, 12. fair dealing, pages 11, 12. general welfare, pages 11, 12. regulated for customer and investor, pages 11, 12. state control, 481, 482, 483. CAPITALIZATION AND EXPENDITURES OF MUNICIPAL PUB- LIC UTILITIES, state regulation and control, 605. CAPITALIZATION AND INVESTMENT, distinguished, 480-483, 485, 488, 493, 496. CAPITALIZATION OF MUNICIPAL PUBLIC UTILITIES, regulation by public utility commission, pages 11, 12. CEMETERY, contract of municipality, 4. CHARGES, See Rates. CHARITIES, rate concessions for service, 223. CHARTER RIGHTS. protected against undue exercise of police power, 438. CHARTERS, franchises, 87, 88, 133, 134, 135. CHARTERS OF MUNICIPAL CORPORATIONS, construction. 10, 12, 64. CITIES AND TOWNS, See Municipal Corporations. CLASSIFICATION. municipal public utility service. 213, 216, 218 229. telephone service, 556. 570, 571. COAL AND WOOD, contract of municipality, 61. 908 INDEX. [References are to Sections.] COLISEUM, contract of municipality, 64. municipal purpose, 64. COMMERCIAL ENTERPRISES CONTROLLED BY COMPETITION, municipal purposes and natural monopolies the limitation of municipalities, 55-63. COMPETITION, contract to defeat void unless necessary, 157, 158, 159, 161, 163. extravagant and inefficient means of regulation, pages 10, 11. franchise not exclusive by implication, page 5. good will, 461, 471, 472. inadequate and expensive means of regulation, 603-610, 612. municipal public utilities, 118, 119, 121, 122, 209, 210, 212, 217. not excluded by implication, 104, 105, 132, 135-137, 139, 142, 157, 158. public regulation and control, 209-213, 215-218, 221, 222, 225. public utility commission supplants, pages 10, 11. rates of municipal public utilities, 456, 458, 461, 464, 471-473. regulation and control inadequate for natural monopoly, pages 5, 6. regulation and control insufficient, 417, 430. regulation of private business, 55, 58, 60, 61, 63. supplanted by state regulation, 603-610, 612. telephone service extravagant and unsatisfactory, 546-549, 557, 568. COMPETITION IN TELEPHONE SERVICE, unsound economically and practically, 547, 548, 549. COMPETITION OF MUNICIPAL CORPORATION AND INDI- VIDUAL, natural monopolies the limitation, 55-63. COMPETITION OF MUNICIPAL PUBLIC UTILITIES, contracts to destroy invalid, 363, 364, 365. COMPETITIVE FRANCHISES AND FRANCHISE CONTRACTS, distinguished under constitution, 134-136, 146, 157, 164. CONDITIONAL FRANCHISES, construed strictly, 126. strictly construed and enforced, 139, 140, 141, 142. CONSENT OF MUNICIPAL CORPORATIONS, limitation of reasonableness. 111, 112, 113, 114. INDEX. 909 [References are to Sections.] CONSENT OF MUNICIPAL CORPORATIONS— OonfifHj«d. municipal public utility grants, 89-93, 95, 97-99, 105, 106, 113, 114. public convenience the limitation, page 11. rate regulation on grant of street privileges, 420-438. rate regulation remains open, 515-518, 521-523. rates of municipal public utilities, 499, 500, 503-506, 508, 510-512, 515-523. regulation of municipal public utilities, 393, 395-398, 404-406, 408-413. street franchises, 389-393, 404, 405, 406, 408. streets, 524-527, 536, 537, 540-542, 545. CONSERVATION OF PROPERTY, municipal public utilities, 382, 383, 388. CONSTITUTIONAL GUARANTY OF JUST COMPENSATION, condition of right to exercise eminent domain, 575. CONSTITUTIONAL LIMITATION, attempts to evade. 67. convention hall of municipal public utility, 27. franchise of municipality and state, 128. improvidence of municipality, 66, 68. municipal indebtedness, 65, 66. municipal Indebtedness defined, 66, 68. powers of municipality, 17. state franchises, 167. CONSTITUTIONAL PROVISIONS, franchise rights contracts, 89, 90, 92, 93, 95, 97, 98, 112, 113. "home rule" for municipality, page 9, §§ 64, 600. Increase of sphere of municipal activity, page 2. municipal ownership, page 4, §§ 574-576, 578, 580-585. physical connection of telephone plants, 551, 554, 557, 55S, 565. police power, page 2. taxation of property of municipalities, 316, 317, 318, 319. CONSTITUTIONAL PROVISIONS PROTECTING VESTED IN- TERESTS, limitation on rates, 497. CONSTRUCTION, municipal charters. 10, 12, 64. private proprietary powers. 13. CONSTRUCTION OF MI^NICIPAL FRANCHISES, duration varies and Is discretlonan'. 170-173, 175-1S2. 1S4, 186. 910 INDEX. [References are to Sections.] CONSTRUCTION OF MUNICIPAL FRANCHISES— Confirmed. not exclusive by implication, 104, 132, 133, 136, 137, 139, 140. strictly against grantee, 104, 132, 133, 136, 137, 139, 140. CONSUMERS OF SERVICE, protection of state control of capitalization, 605. CONSUMERS OF WATER SERVICE, fire loss recovery, 231-233, 237-241, 247, 248, 260, 262, 263. CONTRACT AND FRANCHISE RIGHTS, expense of maintenance and operation, 587. necessary investment, 587. necessary preliminary information, 587. CONTRACT FOR EXCLUSIVE SERVICE, monopolistic and void, 159, 161. CONTRACT FOR EXCLUSIVE TELEPHONE SERVICE, limitation of necessity, 563, 564. CONTRACT FOR WATER, inhabitants real party interested, 230-233, 237-241, 243-248. municipal corporations, 5. CONTRACT OF MUNICIPALITY FOR EXEMPTION, strictly construed invalid, 344, 345. CONTRACT RIGHTS, protected by federal constitution against state constitution, 115. strict enforcement necessary, 586-601. CONTRACTS, beneficiary may recover, 231, 232, 235, 259. business powers of municipality, 6. general or special franchises, 87, 88, 92, 93, 95. municipal franchises, 133, 134, 135, 137, 140, 142. municipal water-works, 6. private proprietary powers, 5, 6. protected against undue exercise of police power, 438. public powers of municipality, 5. rate regulation suspended, 424, 426, 436, 437. CONTRACTS AND VESTED INTERESTS, constitutional protection, 115, 116. CONTRACTS FOR MUNICIPAL PUBLIC UTILITY SERVICE, discretion of municipal officers, 144, 147, 148, 150, 151, 162, 163. duration of contract, 144, 148, 150-155, 162, 163, 166. exemption from taxation by municipality, 332, 340-345. INDEX. 911 [References are to Sections.] CONTRACTS FOR TELEPHONE SERVICE, exclusive service in restraint of trade, 552, 560, 563, 564, 571. CONTRACTS FOR WATER-WORKS SERVICE, inhabitants of municipality not parties, 236, 249-252, 259, 262, 263. recovery in contract, 249, 250, 252, 255, 256, 25S-261, 263. CONTRACTS OF MUNICIPAL CORPORATIONS, anticipation of future needs, 15. drainage of private land, 3. enforcement of rights essential for adequate service, page 7. fire loss, 3. gas works, 11. lease for cemetery purposes, 4. leasing of vacant rooms, 15. leasing or sale of excess capacity, 58, 62. limitation, 15. maintenance of street perpetually, 3. obstructions in streets, 541. power to fix rates, 426, 427, 428, 433. proprietary or commercial, 3. public entertainment, 14. rate fixed for reasonable period, 426, 427, 428. rate regulation distinguished, 433, 434, 435, 436. rate regulation on grant of street privileges, 420-438. surplus electric power, 15. surplus water supply, 15. suspending rate regulation strictly construed, 498, 502-505, 511, 513-518, 520, 523. water supply, 11, 12. CONTRACTS OF MUNICIPAL PUBLIC UTILITIES, acceptance of municipal consent, 431, 432. 436, 437. dividing territory void as defeating competition. 159. 160, 161. CONTROL OF MUNICIPAL CORPORATIONS, streets, 524-527. 536, 537, 540-542. 545. CONVENTION HALL, municipal purpose, 27. CORPORATIONS, franchise right granted by state, 87. COST OF SERVICE, See Rate:s. classification, 226, 228. reasonableness of rates, 446. 447, 4.')1, 452, 454. 456. 912 INDEX. [References are to Sections.} COST OP TELEPHONE SERVICE, increased by competition, 547, 548, 549. increases with number of subscribers, 555, 570, 569. COURTS, arbitrator of street rights, 101. attitude to municipal and private ownership, page 6. attitude to municipal ownership favorable, page 6. attitude toward municipal ownership and control, page 3 decisions on municipal public utilities recent, page 12. liberal construction of powers of municipality, page 4. municipal ownership, 578-585. municipal public utilities modern, page 12. public utility commissions, 606, 607, 608, 609, 610, 612. reasonableness of rates, determine, 442, 444-451. CURRENT REVENUE PAYMENTS, municipal public utilities, 68, 69, 75, 83, 84, 86. CUSTOMER OF MUNICIPAL PUBLIC UTILITIES, measurement of service, 533, 539. DECISIONS ON MUNICIPAL PUBLIC UTILITIES, basis of treatise, page 12. recent and frequently conflicting, page 12. DEDICATION, streets and highways to public, 89. DEPRECIATION OR OBSOLESCENCE, effect of invention and improvements, 460, 467, 468. operation not capital account, 467, 468, 469, 470. rates, 456, 460, 466-470. DISCRETION OP MUNICIPAL CORPORATIONS, limitation, 16. limited by fraud or abuse, 11. municipal bridges, 22. municipal electric light plant, 21. municipal public utilities, 16, 31, 350, 355-360. municipal water-works, 20. rapid transit system or pure air, 23. contract for municipal public utility service, 144, 147, 148, 150, 151, 162, 163. defined, 15. INDEX. 913 [Referejices are to Sections.] DISCRETION OP MUNICIPAL CORPORATIONS— <7ontifi««d. duration of franchise, 172, 17S, 179, 180, 1S2. fixing rates of municipal public utilities, 440, 441, 450. franchise of municipal public utilities, 127. limitation of power to fix rates, 450. limited by fraud or abuse, 13, 144, 147, 14S, 162, 163. DISCRIMINATIONS, rates municipal public utilities, 210, 212, 213, 215, 218. 219, 221. 222, 223, 225-229. service of municipal public utilities, 208-229. telephone service, 551-554, 557, 559-562. DISCRIMINATIONS IN SERVICE, inadequate supply no justification, 224, 225. reasonable classifications, 213, 216, 218-229. DISTRIBUTION OF COST, municipal public utilities. 67. streets, boulevards and public buildings, 67. DIVISION OF TERRITORY. contract void as destroying competition, 159, 160, 161. DOCTRINE OF INCREASING COST OF SERVICE, telephones, 569, 570. DRAINAGE, contract of municipality, 3. DUPLICATED TELEPHONE SERVICE. extravagant and unsatisfactory. 546-549. 557. 56S. inadequate or incomplete, 546-549, 557, 568. DURATION OF CONTRACTS, municipal public utility service, 144, 148, 150-155, 162, 163. 166. DURATION OF FRANCHISES, discretion of municipality, 127, 128. limited to life of grantor, 103. municipal public utilities, 120. power of municipality to fix, 90. power of state to make perpetual. 167. 174, 175. 1S8. waiver or acquiescence. 378. 386. DURATION OF MUNICIPAL FRANCHISES. not perpetual by implication. 168, 169, 170, 172, 175-182. 184, 185. 58— Pub. Ut. 914 INDEX. [References are to Sections.1 DUTY OF MUNICIPAL, OFFICERS, municipal public utilities, pages 7, 8, 9. street franchises of municipal public utilities, 391-394, 402, 403, 404, 409, 410, 413. E EARNINGS OF MUNICIPAL, PUBLIC UTILITIES, replacements and depreciation, 469, 470, 472. ECONOMY OF MUNICIPAL CORPORATIONS, contract for surplus power or water, 15. public and private supply of municipal public utilities, 45, 46, 47, 48, 57. ELECTRIC LIGHT PLANTS, contract of municipality, 5. implied power of municipality, 39, 44. municipal purpose, 21, 28. no additional servitudes, 293, 301. power of municipality, 33. power of municipality to furnish public supply, 49-54. public convenience, 44, 49, 50, 51, 53, 54. EMINENT DOMAIN, available to municipality or state at all times, 573, 574, 575. municipal corporations, 189, 403. municipal ownership, 573, 574, 575. municipal public utilities public purposes, 327, 328. municipal public utility plants, 277, 300. municipal public utility service, 224. valuation of municipal public utilities, 475. ENFORCEMENT OF FRANCHISE RIGHTS, duty of municipality, 500, 501, 510, 518, 521-523. EQUIPMENT OF MUNICIPAL CORPORATIONS, municipal public utilities, 525, 526, 529, 530, 534, 535, 538. EQUIPMENT OF MUNICIPAL PUBLIC UTILITIES, additional servitude to abutting property owner, 277, 283, 285, 289-291, 293, 298, 300, 302-304, 307, 312-315. concentrated to one system, 525, 527. municipal regulation and control, 524-545. municipal regulations must be reasonable, 524-527, 541-545. removal on forfeiture or expiration of franchise, 384, 385, 386 387, 388. streets, 524-527, 536, 537, 540-542, 545. underground conduits, 525, 526, 545. INDEX. [References are to Sectiona.} 915 EXCESS ELECTRIC POWER, contract of municipality, 15. EXCESS WATER SUPPLY, contract of municipality, 13, 15. EXCESSIVE CONTRACT, void as tending to monopoly, 154, 162. EXCLUSIVE FRANCHISES, express authority necessary, 405, 409. indeterminate under state regulation, 604, 608, 609. necessity the limitation, 131. EXCLUSIVE SERVICE, contract creating monopoly void, 159, 161. monopolistic, 217. EXEMPTION FROM TAXATION, consideration must be reasonable, 342. contract for service not an exemption, 341, 342, 345. contract of municipality, 332, 340-345. municipal property providing municipal public utilities, 316, 319, 321-345. municipal purposes of municipal public utilities, 325. property of municipality producing revenue, 323, 324, 331, 332, 333, 337, 338. public purposes of municipal public utilities, 321, 322, 324- 327, 331. two capacities of municipality, 333-339. EXPENDITURES OF MUNICIPAL PUBLIC UTILITIES, controlled by state, 605. EXPIRATION OF FRANCHISES, property of municipal public utilities, 368-371, 380, 3S3, 385, 386, 387. EXPIRATION OR FORFEITURE OF FRANCHISES, property of municipal public utilities, 36S-38S. rights and relation of parties, 368-372, 376, 380-384, 386-388. FACTS, reasonableness of rates, 455. 9l6 INDEX. [References are to Sections.] FIRE LOSS, recovery by consumers of water service, 231-233, 237-241, 247, 248, 260, 262, 263. water-works, 230-263. FIRE LOSS OF WATER- WORKS, contract expressly covering, 248, 252, 255, 259, 260, 263. FIRE PROTECTION, liability of municipality, 266. FIRES, contract of municipality, 3, 4. FORCED SALE ON EXECUTION, municipal public utility property, 366. FORFEITURE FOR NON-USER, franchises of municipal public utilities, 372, 373, 375, 377. makes field available for other franchises, 372, 373. FORFEITURE OF FRANCHISES, property of municipal public utilities, 368, 372, 373, 377, 378, 384. waived on substantial performance, 378. FRANCHISE AND CONTRACT RIGHTS ENFORCED, action by the people, 587, 590, 594, 600. legal proceedings, 587, 588, 597, 598. legislative enactments, 587, 589, 593. public utility commissions, 587, 591-597, 600, 601. FRANCHISE AND PROPERTY RIGHTS, distinguished, 368, 371, 379, 380, 382-386, 388. FRANCHISE CONTRACTS, competitive franchises distinguished, 134, 146, 157, 164. FRANCHISE RIGHTS, municipal corporations duty to enforce, 500, 501, 510, 518, 521- 523. strict enforcement necessary, 586-601. FRANCHISES, acceptance and installment of plant, 108. co-extensive with city limits, 103. consent of municipality to use of streets, 389-393, 404-406, 408. constitutional protection against impairment, 115. contracts, 87, 88, 92, 93, 95-97, 107, 112, 133-135, 137, 140, 142. contracts protected by equity, 107, 133, 134. INDEX. 917 [References are to Sections.] FRANCHISES— Continued. classified. 87, 88, 106. defined, 87, 88, 106. duration, 120. duration fixed by municipality, 90. duty of municipality in granting, 105. duty of municipal public utility not to discriminate, 210-213, 215, 222-225, 227. enforced by municipal franchise bureau, 600, 601. enforcement of rights essential for adequate service, page 7. granted only for public convenience, 604, 608, 609, 610. indeterminate, defined and discussed, page 11. indeterminate, exclusive and properly regulated, page 11. limitation on sale as property, 361, 362. limited to life of grantor, 103. municipal commissions or bureaus business necessity, pages 7- 10. municipal corporations duty to enforce, 500, 501, 510, 518, 521- 523. municipal grant public and governmental, 109, 110. municipal public utilities and public welfare, page 5. not exclusive by implication, 104. not exclusive under implied power or by implication, page 5. not perpetual by implication, 168, 169, 170, 172, 175-182, 184, 185. options of municipality to purchase, 358, 359, 360, 362. police power a limitation, 102, lOS. power of municipality liberally construed, 428, 430, 431. property of municipal public utilities on expiration or for- feiture, 368-388. public welfare, page 5. rate regulation of municipality, page 6. reasonable regulations limited by provisions, 530, 535, 536, 539, 543-545. revocable before acceptance or operation, 108. rights available to inhabitants, 95-98, 100, 109, 116, 190-207. sale to highest bidder, 105, 138. special and general distinguished, 379. special rights of municipal public utilities to uso of streets, 88, 89, 91, 92, 93. special rights to be a body corporate, 87. strictly construed against grantee, 104, 132, 133, i;56, 137, 139. 140. FRANCHISES OF MUNICIPAL CORPORATIONS, limited to easement of municipality, 185. 9l8 INDEX. [References are to Sections.'] FRANCHISES OF MUNICIPAL CORPORATIONS— C7o». 4=^4 920 INDEX. [References are to Sections.] H "HOME RULE" FOR MUNICIPAL CORPORATIONS, constitutional provisions, page 9, § 600. constitutional provisions and statutory grants, 64. modern tendency, page 9. municipal public utilities, page 9, § 600, 601. rate regulation of municipality, 508, 509. ICE AND WATER- WORKS, contract of municipality, 13. power of municipality, 48. IMPLIED POWERS, municipal corporations, 12, 30. IMPLIED POWERS OP MUNICIPAL CORPORATIONS, can not alienate or obstruct streets, 406. construction by courts, pages 4, 29. electric light plant, 39, 44. franchise not exclusive by implication, 132, 136, 137, 139, 140. franchise not perpetual, 128. ice and water-works, 48. increase of sphere of municipal activity, page 4. limitation of statutory provisions and necessity, 29. municipal public utilities, 29. municipal purpose, police power and general welfare, 35, 36. no exclusive franchises, 117, 118, 121-125. perpetual franchises of municipal public utilities, 168-170, 172, 175-182, 184, 185. public necessity and convenience, 42, 44. public supply of electric light, the limitation, 49-54. water-works, 45. IMPROVIDENCE OF MUNICIPAL CORPORATIONS, constitutional limitation, 66, 68. INADEQUATE SUPPLY OF SERVICE, discrimination not justifiable, 224, 225. INCREASE OF SPHERE OF MUNICIPAL ACTIVITY, attitude of courts, 578-585. attitude of courts favorable for public welfare, page 4. constitutional provisions, page 2. implied power, page 4. marked characteristic of modem civilization, page 1. INDEX. 921 [References are to Hcctiona.] INCREASE OF SPHERE OF MUNICIPAL ACTIVITIES— €onttn««d. municipal ownership of municipal public utilities, page 2. municipal regulation and control, page 2. regulation of rates and service, 508, 509. solution of municipal problems, pages 1, 2. INCREASING COST OF SERVICE, telephones, 569, 570. "INDETERMINATE FRANCHISE," defined and discussed, page 11. exclusive and duration indefinite, 604, 608, 609. exclusive privilege under proper regulation, page 11. legalized monopoly, page 11, §§ 604, 60S, 609. limited by public convenience, page 11. INHABITANTS OF MUNICIPAL, CORPORATIONS, activity unrestricted by municipality, page 1. beneficiaries municipal public utilities, 348, 349, 350, 351, 352. beneficiaries of municipal franchises, 191-196, 199, 201, 205. beneficiaries rate regulations, 422, 429. discrimination in service of municipal public utilities, 208-222, 224-229. enforcement of discrimination by Impracticable, 211. enforcement of rights necessary to secure adequate service, pages 6-12. franchise rights available, 95-98, 100, 106, 109, 116, 190-207. Increase of sphere of municipal activity, page 4. municipal public utilities, pages 1, 8, 9, 12. positive action of municipality, page 2. rates of municipal public utilities. 449, 465. real party in interest for water-works service, 230 233, 237- 241, 243-248. repressive activity of municipality, page 2. right of access, light and air, 524, 526. right to municipal public utility service limited, 544. INJUNCTION, franchise rights protected. 107, 110. INSURER, water-works company not liable, 242. 249. INVENTION OR IMPROVED METHODS. depreciation or obsolescence. 460, 467, 468. INVESTMENT, coinciding with capitalization, page 12. protection of state control of capitalization, 605. 922 INDEX. [References are to Sections.} INVESTMENT— Con