The City of Tallahassee has never been under obligation to take
electric lighting from the Capital City Light and Fuel Company.
There has been no impairment of any contract between the city
and the plaintiff in error or its predecessor, and the city has the
right to avail itself of the privileges granted by the acts of 1897
and 1899, so far as regards the electric lighting of the city.
The plaintiff in error, being the plaintiff below, brings this
case here by writ of error to the Supreme Court of the State of
Florida for the purpose of reviewing a judgment of that court
affirming the judgment of the Circuit Court of the Second Judicial
District of that state dismissing plaintiff's bill of complaint
against the defendant with costs.
The bill shows that the Tallahassee Gas & Electric Light
Company was incorporated pursuant to the laws of the state December
20, 1887, for the purpose, as stated in its articles of
association, of constructing, maintaining, and operating gas works
and electric light works in the City of Tallahassee, and for the
manufacture of gas for light and fuel or for the purpose
Page 186 U. S. 402
of disposing of or dealing in coal or wood for fuel, and in
maintaining and operating electric light machinery for supplying
lights in the city, or for manufacturing or dealing in any and all
manner of artificial light or heat within that city. After its
incorporation, the company applied to the city council for the
franchise of constructing gas and electric light works in the city
for the purposes declared in its charter, and, pursuant to such
application, an ordinance of the city council was duly passed on
January 4, 1888, the first section of which authorized the
company
"to construct gas and electric light works in the City of
Tallahassee, and for that purpose that the said company shall have
the right to lay their pipes in any and all streets in said city
and in the alleys and lots of the same, and to erect such lamp
posts or poles or towers as may be necessary or essential for
furnishing gas or electric lights in said City of Tallahassee, and
to this end the Tallahassee Gas & Electric Light Company are
authorized to make such excavations or erect such structures,
poles, or towers, and run wires thereto along the streets of said
city, as may be necessary or essential. . . ."
Provision was also made in the ordinance as to the manner of
excavating the streets, constructing the works, and as to the
quality and price of the gas to be furnished and the time within
which the gas works should be completed and the plant put in
operation. It was also provided that the company should file a
written acceptance of the ordinance, whereupon the same should
become binding upon both parties.
Section 7 of the ordinance provided for the completion of the
gas works and for operating the same within a short time, stated
therein, and ended with the following provision:
"And the said Tallahassee Gas & Electric Light Company shall
put in and operate electric lights as soon as sufficient consumers
can be secured to pay eight percent interest per annum on the
additional capital required to purchase the machinery for and put
in practical operation the said electric lights."
Sections 10 and 11 of the ordinance read as follows:
"SEC. 10. That the said City of Tallahassee, in consideration of
the foregoing requirements' being complied with on the part
Page 186 U. S. 403
of the said Tallahassee Gas & Electric light Company, their
associates, successors, and assigns, shall and hereby obligates
itself to take all gas which it may wish to use in lighting its
streets or buildings from said company at a price of not more than
one and one-half dollars ($1.50) per one thousand feet for such as
may be used in public buildings used exclusively by said city, and
at a price of not more than ($30) thirty dollars per annum for each
street lamp as hereinbefore provided for in section six of this
ordinance for the period of twenty-five consecutive years from the
completion of said gas works:
Provided, That nothing
herein shall be construed as an obligation on the part of the said
City of Tallahassee to take any gas from said company."
"SEC. 11. That the privileges and licenses herein and hereby
granted shall be exclusive in and to said Tallahassee Gas &
Electric Light Company, their associates, successors, and assigns,
for and during the term of twenty-five years."
After the adoption of the ordinance, the company filed its
acceptance thereof and proceeded to the construction of its gas
works, which it completed, and thereafter furnished gas without any
complaint until November 8, 1893, when a receiver was appointed,
and subsequently its property sold under a foreclosure decree. It
was bid in by William A. Rawls, and a deed made to him. Thereafter,
and on March 19, 1894, the plaintiff in error was incorporated, and
the property conveyed to it by Rawls. It was stated in the articles
of incorporation that the general nature of the business of the
company to be transacted by it was
"to acquire, construct, improve, maintain, and operate gas works
and electric light works in and adjacent to the City of
Tallahassee, in Leon County, State of Florida, and to manufacture
gas for light and fuel; to dispose of and deal in coal or wood for
fuel; to construct, maintain, and operate electric light machinery
for supplying lights in and about the said city, or for
manufacturing and dealing in any and all manner of artificial light
or heat within or adjacent to said city."
The company was incorporated for the purpose of operating under
the terms and provisions of the ordinance of the city above
mentioned, the property purchased by Rawls, which he
Page 186 U. S. 404
had purchased for the purpose of transferring to the company,
and in pursuance of such purpose, the property was made over to the
company, which entered into the possession and assumed the
management and control thereof, and continued the manufacture of
gas for the purpose of supplying the city and its inhabitants with
light and heat, and it has since coming into the possession of the
property enlarged and extended its plant, and met the increased
demands of the city and its inhabitants, the city having ever since
recognized, treated, and dealt with the company as the lawful
successor of the Tallahassee Gas & Electric Light Company and
the legal assignee of all the rights, franchises, privileges, and
contracts created and conferred on that company by the ordinance of
the City of Tallahassee.
The legislature, on June 5, 1897, passed an act, chapter 4600 of
the Laws of Florida, entitled
"An Act to Enable Cities and Towns to Manufacture and Distribute
Gas and Electricity, and to Construct, Purchase, Lease, and
Establish and Maintain within Its Limits One or More Plants for the
Manufacture and Distribution of Gas and Electricity for Furnishing
Light for Municipal Use, and for the Use of Such of Its Inhabitants
as May Require and Pay for the Same as Herein Provided."
Thereafter, and on May 27, 1899, the legislature of the state
passed another act, to enable the City of Tallahassee to exercise
the powers provided by the act of 1897, above mentioned. This act
of 1899 granted to the city the right to construct and maintain its
own electric light plant upon complying with certain conditions
specified in the act. These conditions the city proceeded to comply
with, and passed a resolution to build and operate an electric
light plant of its own, which was ratified at an election by the
people of the city, and the city council was about to proceed to
carry out the plan for the erection and operation of such electric
lighting plant to light the city under the provisions of the act of
1899, when this suit was commenced.
The plaintiff duly protested at each step against the action of
the city council for the erection and operation of such a plant,
and claimed that it would be a violation and impairment of the
contract which it held with the city, and would very greatly
injure, if not ruin, the plaintiff in error. It was also stated
Page 186 U. S. 405
that there has never been a time since the establishment of the
gas works in that city that the plaintiff in error, or its
predecessor, could have procured sufficient consumers to pay eight
percent per annum on the additional capital required to purchase
the machinery for and put into practical operation an electric
lighting system therein. The bill prayed that the city and its
officers might be enjoined from establishing and maintaining an
electric plant, and from furnishing electric light to the
inhabitants of the city during the balance of the period of
twenty-five years for which the exclusive franchise of constructing
gas and electric works in that city, and for using the streets
thereof for that purpose, and for furnishing gas and electric light
to the inhabitants of the city was granted, to-wit, until the year
1913. The bill also prayed that the city should be enjoined from
making or entering into any contract or from performing any
contract with any corporation or firm for furnishing electric
lighting and other machinery, and that the city should be enjoined
from issuing its bonds for the payment of any such plant.
This bill was demurred to for want of equity in that it showed
no facts entitling complainant to relief against the defendant as
to the matters contained in it. The demurrer was sustained and the
complainant's bill dismissed, and the judgment entered thereon was
affirmed by the Supreme Court of Florida. 28 So. 810.
MR. JUSTICE PECKHAM, after making the foregoing statement of
facts, delivered the opinion of the Court.
The plaintiff in error claims that, under the city ordinance, it
has a valid contract for the exclusive use of the streets of the
City of Tallahassee for the purpose of furnishing both gas and
electric light, and that the subsequent acts of the legislature
providing for the erection and operation by the city of an
Page 186 U. S. 406
electric light plant impair the obligation of its contract, and
are therefore void.
As the case involves the provision of the federal Constitution
which prohibits the states from passing any law impairing the
obligation of a contract, and as the state court has given effect
to subsequent legislation which, it is claimed, results in the
impairment of the obligation of plaintiff's contract with the city,
we are bound to determine for ourselves as to the existence and
meaning of the alleged contract in order to determine the question
whether subsequent legislation has impaired the obligation
thereof.
Plaintiff in error claims the exclusive right to use the streets
and furnish both gas and electric lights by virtue of section 11 of
the ordinance of the city council, referred to in the foregoing
statement of facts, and by virtue of the provisions of section 38
of the general corporation Act of August 8, 1868. We concur in
substance in the opinion of the state court of Florida, wherein it
stated as follows:
"A careful reading of the ordinance passed in 1888 will show
that the city is under no obligation whatever to the appellant or
its predecessor company to light the streets and public buildings
of the city with either gas or electricity manufactured by said
companies. Nothing is said in the ordinance about lighting the
streets or public buildings with electricity manufactured by the
company. In respect to gas, the city was not required to use any at
all, but it obligated itself to take all gas that it might wish to
use in lighting its streets and buildings from the company at
prices not to exceed the amounts named for a certain term of years.
There is no contract therefore between the city and the company
that the latter shall have the right to furnish the city for
lighting its streets and public buildings, all or any, electricity
used for that purpose, not is there any stipulation in the
ordinance that the city will use nothing but gas, nor that the city
will not own or operate an electric light plant for supplying the
city and its inhabitants with light. If the city is debarred from
erecting an electric light plant by the ordinance passed by it, it
is because that ordinance legally grants the company the exclusive
privilege and license to use
Page 186 U. S. 407
the streets, alleys, and lots of the city for the purpose of
constructing and operating a plant and its instrumentalities for
furnishing electric lights in the city."
The general law of Florida for the incorporation of municipal
corporations, passed August 6, 1868, while empowering a city to
provide for lighting its streets, and giving to it the power to
regulate and control the use of its public streets, gives the city
no power to grant an exclusive use of its streets to any person or
corporation for the purpose of lighting the city or for providing
light to its citizens. The power to obtain such exclusive use of
the streets of the city, if not granted by the municipal
corporation act of 1868, is said to be found in the general act
passed August 8, 1868, or two days subsequently to the above act,
and known as chapter 1639 of the Laws of Florida, providing for the
incorporation of corporations other than those of a municipal
character. Section 38 of such act reads as follows:
"Any corporation organized and put into successful operation
under this chapter shall have exclusive privileges for the purposes
of its creation for the term of twenty years from the date the
corporation commenced to carry out in good faith the terms of its
articles of incorporation:
Provided, however, That this
investment shall not so operate as to divest any future legislature
of those powers of government which are inherent and essential
attributes of sovereignty, to-wit, the power to create revenue for
public purposes, to provide for the common defense, to provide safe
and convenient ways for the public necessity and convenience, and
to take private property for the public use, and the like."
The defendant in error contends that the proper construction of
that section does not authorize the exclusive use of the public
streets of the city for lighting purposes even if consented to by
the city; that it cannot reasonably be supposed that the
legislature, while omitting to give to cities the power of granting
exclusive privileges in its streets for lighting or any other
purpose, would at the same time, by another act, grant to a private
corporation incorporated thereunder, the right to the exclusive
possession of the streets thereof for the purpose of executing
the
Page 186 U. S. 408
business for which it was incorporated; that, if it were
intended that the city should have power to grant such exclusive
use it would have been stated in the act providing for the
incorporation of cities, and, if it were not so intended, it cannot
be implied from the language of the section above quoted, found in
an act referring to corporations other than municipal. The two
acts, it is said must be reconciled, and it can be done by
excepting from the application of the 38th section the right to an
exclusive use of the public streets of a city for any purpose. The
plaintiff in error concedes that the city has full control and
management of its streets, and that the plaintiff could not use the
streets for the purpose of laying its pipes, etc., therein without
the consent of the city. But it urges that, having secured such
consent, it is authorized to maintain the exclusive use by reason
of the 38th section above quoted, even if the city had no right to
grant it under the act providing for the incorporation of cities.
This question, while stated, was not decided by the court below,
and we do not find it necessary to decide it ourselves.
The ordinance adopted by the city council has reference to two
absolutely separate and distinct privileges, although they are
contained in one and the same ordinance. One privilege is to use
the streets of the city for the purpose of laying down gas mains
and other pipes, to distribute gas throughout the city, and to
supply consumers with that article. The other is the right to the
use of the streets of the city for the purpose of erecting poles
and other things to convey the electricity necessary for lighting
purposes. These two privileges are as absolutely separate and
distinct as is a privilege to convey by railroad from that, by
steamboat or by stage coach. It is seen by the terms of the
ordinance that it was not contemplated that these different
privileges and plants should be availed of and constructed at the
same time, but, on the contrary, the gas plant was to be
constructed at once, while the obligation to construct the other
was left in abeyance and not to be entered upon until consumers
enough could be secured to pay eight percent per annum on the
additional capital required to purchase the machinery for and put
in practical operation the
Page 186 U. S. 409
lighting by electricity. The two grants might therefore have
been in two separate ordinances and given to separate persons,
firms, or corporations. The operation of one would not interfere
with that of the other, except, perhaps, on a question of financial
success, but so far as the character of the two grants is
concerned, each one is wholly separate and distinct from the
other.
The city has never been under any obligation to take electric
lighting from the corporation, even after the plant had been
erected and was in operation. The exclusive character of the
privilege, assuming it to exist by virtue of section 38 of the
corporation law, already referred to, does not commence until the
company has begun to do the thing required by the ordinance, as the
consideration for the grant of the privilege. Nothing has been done
by the plaintiff in error towards commencing work looking to the
erection and operation of the electric plant. Upon this subject the
Supreme Court of Florida stated as follows:
"It appears from the pleadings that neither the Tallahassee Gas
& Electric Light Company, nor the appellant company, ever
established an electric light plant in the City of Tallahassee in
pursuance of the authority conferred upon either of them. From the
organization of the first company up to the time the gas plant was
sold at judicial sale about six years had elapsed, and from the
time of the judicial sale to the time the city began proceedings to
enable it to establish an electric light plant about six years more
elapsed. During all this period of time neither company attempted
to construct an electric light plant as authorized by its charter.
In the meantime, that provision in the general incorporation law
relating to exclusive privileges had been repealed by the
legislature of 1891, and an act passed in 1897 specially
authorizing cities and towns to establish gas and electric light
plants to supply themselves and their citizens with light, and
still later, in 1899, special legislative authority was given the
City of Tallahassee to establish an electric light plant. Neither
the Tallahassee Gas & Electric Light Company, nor appellant
company, has acquired any vested right to erect an electric light
plant by the investment of any money in any such
Page 186 U. S. 410
plant, and the question arises as to whether or not any
constitutional right has been impaired by the repeal of the statute
granting the alleged exclusive privilege and by the legislation
authorizing the city to do that which is a public benefit, and that
which for some twelve years the companies have neglected to do as
authorized by their charters and the city ordinance. We are unable
to see that any vested right of either company, so far as the
establishment of an electric light plant is concerned, is impaired
by the legislation which authorized the city to do that which it
now proposes to do. In the first place, the statute, properly
construed, does not grant the exclusive privilege in respect to the
electric light plant as claimed. A grant of exclusive privileges to
appellant's predecessor would be the grant of a franchise from the
state, the possession of which would enable it to obtain a
practical monopoly of the gas and electric light business in
Tallahassee for the term specified. All such grants are strictly
construed against the grantee, and nothing passes thereby but such
as is clearly intended.
Saginaw Gaslight Company v.
Saginaw, 28 F. 529;
Florida, Atlantic & Gulf Central
Railroad Company v. Pensacola & Georgia &c. Company,
10 Fla. 145. Under the express language of this statute, the
exclusive privilege did not attach until the corporation was not
only organized, but put into successful operation, and the
privileges were to attach for twenty years from the time the
corporation commenced to carry out in good faith the terms of its
articles of incorporation. The condition upon which attached the
exclusive privilege, so far as the electric light plant was
concerned, has never been performed, for the company has never been
put into successful operation, so far as that branch of its
business is concerned, nor has it ever commenced to carry out in
good faith the terms of its articles of incorporation in regard to
erecting an electric light plant. The first company never acquired
the right to the exclusive privilege mentioned in the statute,
because it failed to perform the condition precedent, and therefore
it had no exclusive privilege to transfer to appellant company, so
far as the electric light plant is concerned. In the next place,
even if an exclusive privilege of
Page 186 U. S. 411
this nature, tending to establish a monopoly, was granted
without such express condition precedent as we find in our statute,
such grant does not become a contract or a vested right so as to be
protected by the Constitution of the state or the United States,
until the company has, to say the least, begun to do the thing
required by the charter as the consideration for the grant of such
privilege.
Pearsall v. Great Northern Railway Company,
161 U. S.
646;
Louisville & Nashville Railroad Company v.
Kentucky, 161 U. S. 677.
See also
Chincleclamouche Lumber & Boom Co. v. Commonwealth, 100
Pa. 438."
"
* * * *"
"Our attention is called to that clause in the seventh section
of the city ordinance which required the company to put in electric
lights only when sufficient consumers could be secured to pay eight
percent interest per annum on the additional capital required to
purchase the machinery and put in successful operation electric
lights. It would appear from this clause that from the beginning,
the company only intended to avail itself immediately of that
provision of its charter authorizing it to erect a gas plant and to
use the other power granted by its charter, together with the city
ordinance, to shut out competition in its business from electric
light companies, intending only to put in an electric light plant
whenever that plant could be made to secure it an annual profit on
its investment in that plant of eight percent. It is quite apparent
that the legislature never intended to secure to it any such right,
but, on the contrary, intended the privilege to extend only so far
as to secure the company from competition in matters wherein it has
complied with its charter by being put into successful operation.
We have seen that the city had no authority to grant exclusive
privileges to use its streets for the purpose of furnishing light
from gas and electricity, but, even if it did have such power, it
could not confer such exclusive right and at the same time defer
construction of the plant until such time as it could be made to
pay eight percent upon the investment. The effect of such a
provision in an ordinance like the one we are considering is that
the city will not permit any other person or corporation to use its
streets for the public purpose of furnishing electric lights
Page 186 U. S. 412
for twenty-five years, but at the same time will not require the
person or corporation to whom the exclusive privilege is granted to
furnish such lights until such time as it can make an annual profit
of eight percent on its investment. The city has no such power over
its streets, which are held by it in trust for the public benefit,
Florida Central & Peninsular Railroad Company v. Ocala
Street & Suburban Railroad Company, 39 Fla. 306;
Gonzalez v. Sullivan, 16 Fla. 791, 820, and even if it
did, so long as the grantee failed to invest money in a plant, the
ordinance could be repealed or modified, being without
consideration."
"We have not overlooked the fact that the first company
performed its charter powers in part by erecting and operating a
gas plant, and as to that plant, and the business connected
therewith, it may have possessed exclusive privileges under statute
which could not be impaired by subsequent legislation, and it may
be that such privileges passed to appellant through the judicial
sale. As to that we express no opinion. But while the purpose of
erecting both plants would be the same, in that they would both
furnish light to the city and its people, yet they furnish a
different light and require separate and different plants and
instrumentalities for their operation. We think they are so
distinct in character as to amount to separate undertakings, and
they are so treated in the articles of association of both
companies, and in the ordinance. Power to operate the one would not
include power to operate the other, and permission to use the
streets for one would not include permission to use them for the
other.
Newport v. Newport Light Company, 89 Ky. 454. The
exclusive privileges as to the electric light plant could not have
operated as a consideration for erecting the gas plant, for such
privileges under the statute were to attach to the electric light
business only when that plant was put in."
We concur in the result arrived at in the foregoing extract from
the opinion of the state court, and, in common with that court, we
hold that there has been no impairment of any contract between the
city and the plaintiff in error or its predecessor, and that the
city has the right to avail itself of the privileges
Page 186 U. S. 413
granted by the acts of 1897 and 1899 of the legislature already
mentioned, so far as regards the electric lighting of the city.
The judgment is therefore
Affirmed.
