Opinion
Decided February 9, 1932.
Municipal corporations — Modification of street railway franchise paving obligations — Continued operation of railway constituted valid consideration — Municipality may modify franchise, without consent of railway — Statutes, conflicting with constitutional self-government and public utility contract powers, invalid — Constitutional provisions self-executing — Estoppel by promoting street improvement or not resisting assessment — Sections 3771, 3848 and 9102, General Code — Sections 3, 4 and 5, Article XVIII, Constitution.
1. Making possible continued operation of street railway system constituted valid consideration for modification by city council of railway franchise paving obligations (Sections 3771 and 9102, General Code).
2. City had authority to modify street railway franchise paving obligations without railway's consent because modification was exercise of power of local self-government (Article XVIII, Section 3, Constitution).
3. Statutes conflicting with constitutional power given municipalities to contract with public utilities for their services are invalid (Article XVIII, Sections 4 and 5, Constitution).
4. Constitutional provision giving municipalities power to contract with public utilities for their services is self-executing (Article XVIII, Section 4, Constitution).
5. Constitutional provisions prevail where statutes providing that grantee shall not be released from obligations imposed by grant for operation of street railroad conflict with constitutional powers given municipality to exercise power of local self-government and contract with public utilities for their services (Sections 3771 and 9102, General Code; Article XVIII, Sections 3 and 4, Constitution).
6. Municipality has power to modify contract with public utility for its service, where done for public convenience and welfare (Article XVIII, Section 4, Constitution).
7. If parties promoted street improvement or did not resist assessment when attempted to be enforced, estoppel arises (Section 3848, General Code).
APPEAL: Court of Appeals for Richland county.
Mr. Lewis Brucker and Mr. Van C. Cook, for plaintiffs.
Mr. William F. Black and Mr. C.H. Henkel, for defendants.
This is an action by way of appeal from a judgment and finding of the common pleas court of Richland county, Ohio; said judgment and finding in the court below being for the defendants, the city of Mansfield and others, and the petition of plaintiffs, George Ricketts and others, being dismissed.
There is no dispute concerning the following facts that appear from the record in this case:
First, that the plaintiffs are the respective owners of the lots named in the amended petition, abutting on East Fourth street in the city of Mansfield, Ohio; that in 1918 a franchise ordinance of said city, being Ordinance No. 120, passed September 16, 1918, granted a franchise to the Richland Public Service Company for a period of twenty-five years, as alleged in the amended petition, containing Section 6, as alleged, and that the Ohio Public Service Company succeeded to the rights, obligations, and liabilities under this franchise; that by the terms of said Section 6 the company was required to pay the entire cost and expense of paving such part of the street as lies between the rails and eighteen inches outside thereof, and the strip between the tracks, in switches or double track portions; that on November 8, 1926, the council of the city of Mansfield passed Ordinance No. 990, amending Section 6 of Ordinance 120, so as to read as alleged in the second defense of the answer of said defendant city; and repealing said original Section 6; that under Ordinance No. 990 the utility no longer was required to pay the entire cost of paving between the rails and eighteen inches outside, but, instead, was required to pay the cost of placing two and two-thirds feet of concrete per lineal feet of track in case any paving was done, and to make certain repairs as provided in the ordinance; that on March 1, 1927, the council passed Ordinance No. 1017, determining to proceed with the improvement; that the resolution and ordinance provided that the portion of the cost to be charged against abutting property should be assessed by the foot front; that on January 4, 1927, city council passed Resolution No. 756, declaring it necessary to improve East Fourth street by grading, repaving, widening the roadway, constructing storm water sewers, etc., as alleged in the petition; that this street improvement was made and completed about July 10, 1927, at a total cost of $30,045; that East Fourth street had previously been improved in 1901, and plaintiffs' property had been then assessed, and the abutting property owners in the instant 1927 improvement were entitled to deductions in the sum of $4,917.16; and that on August 2, 1927, the assessing ordinances were passed and the abutting property owners were assessed for the full cost provided under Ordinance No. 120, but were assessed on the basis and according to the terms of Ordinance No. 990, as hereinafter noted.
It is also admitted that the assessments were certified for collection, as alleged in the petition.
It is contended that Ordinance No. 990 was passed by the city council in good faith in order to secure a continuance of street railway service in the city and thereby promote the public convenience and welfare, and because at that time the provisions of Section 6 of Ordinance No. 120 had become so burdensome financially on the street railway company that it would cause abandonment and withdrawal of street railway service unless such action was taken. It is further contended that the city council investigated the facts and relieved the company of a part of its paving obligations for a consideration, also advantageous to the public, namely, the operation of the railway system, which otherwise might have been lost to the city.
The street railway company claims that it was actually operating at a loss and could not continue to operate unless given relief, and that full and complete data showing its finances and operating losses were given to council at this time.
It is also contended that plaintiffs petitioned for the improvement of this street, and that they appeared before council in October, 1926, asking that the improvement be made; that they received constructive notice of the relief given the railway company in Ordinance No. 990 by its publication twice in a newspaper in November, 1926, as provided by law; that the resolution of January 4, 1927, was published as provided by law; that they were personally served with notice of the passage of same in January, 1927; and that the Ordinance of March 1, 1927, was published as provided by law.
It is contended that these property owners permitted without objection the improvements to be made according to the legislation passed; that due publication that the assessments were on file was made for three consecutive weeks prior to August 2, 1927, as provided by law; that the assessments showing the proportion to be charged the properties and the railways were on file, as provided by law; that they received notice in August, 1927, as to the amounts of their assessments, and their rights to pay, and made no objection. No objections were ever made at any stage to the proceedings or to the assessments. They started making their payments in tax collection periods and paid assessments until June, 1929, before they brought this action, making payments at three half-yearly tax periods without objection. The ordinances, resolution, assessment proceedings, etc., showed the railways were assessed only as provided in Ordinance 990, and showed the share of the property assessments, yet plaintiffs made no objection.
The contention of the property owners is that the assessment made against the abutting property owners was illegal, for the reason that the city council omitted to assess certain property, to wit, the street railway company, which should have been assessed, further claiming that the release by the city council of the obligations required of the street railway was illegal and prohibited by law.
It is contended on behalf of the defendant that it is entitled to judgment in its behalf upon the following propositions of law:
(1) That the city had full power to modify the paving obligations of the utility, and Ordinance No. 990 is a valid ordinance in spite of the provisions of General Code, Sections 3771 and 9102, because the public received an advantageous and substantial consideration.
(2) That irrespective of whether there was any consideration the city had full power to take such action by virtue of Section 3, Article XVIII, of the Ohio Constitution.
(3) That full power also is granted under Sections 4 and 5 of Article XVIII of the Constitution, and that General Code, Sections 3771 and 9102, conflict therewith.
(4) That plaintiffs are estopped to maintain this action.
Concerning the modification of franchise paving obligations, we are compelled to give consideration to the proper application of Sections 3771 and 9102, General Code.
Since Ordinance No. 990 expressly repealed Section 6 of Ordinance No. 120, and modified the paving obligations of the utility, and since the utility accepted the new ordinance, No. 990, and same had gone into effect before any legislation had been passed concerning the East Fourth street improvements, it necessarily follows that plaintiffs cannot maintain their action if council had the legal right to take the action it did.
Section 3771, General Code, provides:
"No grant or renewal of a grant for the construction or operation of a street railroad, shall be valid for a greater period than twenty-five years from the date of such grant or renewal, and after such grant or renewal of a grant is made, whether by special or general ordinance, the municipality shall not, during the term of such grant or renewal, release the grantee from any obligation or liability imposed by the terms of such grant or renewal of a grant."
Section 9102, General Code, provides:
"After such grant, or the renewal of any grant has been made, by general or special ordinance, or the order of county commissioners, neither the municipality nor commissioners shall release a grantee from any obligations or liabilities imposed by the terms of the grant, or renewal of any grant, during the term for which such grant or renewal was made."
The almost identical wording of these two statutes, namely, that the grantee shall not be released from any obligations or liabilities imposed by the terms of the grant, will be noted.
An early construction of the meaning of this phrase was made in the case of Clement v. City of Cincinnati, 16 W.L.B., 355, 9 Dec. Rep., 688, proposition 1 of the syllabus being as follows:
"A modification of a contract between the city and the owner of a street railroad route, made in good faith, for the better accommodation of the public, is not void by virtue of Section 2502, Rev. Stats. [now Section 3771, General Code], as a release of the grantee of such route from an obligation, although in consideration of more rapid transportation involving greater expense a higher rate of fare is permitted."
The court, in above case, in the opinion, says:
"It is contended for plaintiff that the effect of this ordinance is to release the owner of route number ten from the obligation to carry passengers at the rates provided in the original grant. The position of defendants is that the clause of the statute just quoted was not intended to forbid a modification of the agreement between the city and the grantee of the right to operate a street railroad, but only the voluntary surrender by the city of any of the rights secured to itself or the public thereby. * * *
"In our opinion the clause of the statute in question was intended to prohibit only the giving away by the city of some right secured to it or the public by the contract under which street railroads are operated. This certainly is the ordinary import of the term 'release from liability.' It is a mere letting go or relinquishment, and where that is the manifest object of the action of the city it is void, whatever form it be made to assume. But where the manifest object of the city is to discharge its duty to the public, whose trustee it is in this regard, and its action is taken in good faith to that end, and has actually had that effect, the fact that by a strained and unnatural construction it may be said to release a street railroad company from an obligation when it merely changes the terms of the obligation, does not avoid its action. * * *
"It is not a release but a modification made in good faith for a sufficient consideration, and does not fall within the prohibition of the statute."
In State, ex rel. King, Pros. Atty., v. McClure, Receiver, 107 Ohio St. 551, 140 N.E. 487, the Supreme Court holds:
"A grant made in good faith by a board of county commissioners to an interurban company, wherein certain obligations relating to rates of fare and frequency of service imposed in a former franchise are relinquished, is not void by virtue of Section 9102, General Code, if the considerations supporting the second grant are substantial and advantageous to the public."
On page 554 in the opinion [140 N.E. 488], the court says:
"What is meant by the clause 'release the grantee from any obligations or liabilities imposed by the terms of the grant'? Evidently it was not intended to mean that an interurban company and the board of county commissioners, or a utility and a municipality, could never modify stipulations of an existing grant in case the modification should be mutually beneficial. Such a construction cannot be so narrowly applied * * * This clause means, and we think it has been so held by this court, that such obligations may not be released except for a consideration advantageous to the public. This was the effect of the holding in Clement v. City of Cincinnati. [The case hereinbefore cited.] * * * That case was inferentially approved by this court when it refused leave to file a petition in error from the superior court of Cincinnati."
And at page 555 [140 N.E. 488], the court says:
"Whether the officials of a municipality or county may release a grantee from the obligations of an existing franchise depends upon whether the public has received a substantial consideration therefor. If the public did not receive a quid pro quo, if its representatives did not act in good faith in protecting the public interest, but absolved the company from its contractual obligations without obtaining a corresponding consideration advantageous to the public, manifestly the grant would be inhibited under the section quoted."
We note that in the McClure case, supra, the second grant was made and the obligations modified when the railway represented that it was not financially able to meet the burden of paving costs under the old franchise, a situation parallel with the instant case.
Another helpful case is City of Cleveland v. Cleveland City Ry. Co., 194 U.S. 517, wherein the Supreme Court, in referring to an Ohio case (Clement v. City of Cincinnati, supra), made the following statement at page 537, [ 24 S. Ct., 756, 763, 48 L. Ed., 1102]:
"But it has been held in Ohio, on reasoning commending itself, that a modification of a contract between a municipality and the owner of a street railroad, made in good faith for the better accommodation of the public, is not void by virtue of said section 2502 of the Revised Statutes of Ohio."
Whenever in the opinion of the city council the public welfare would be promoted thereby, it may, by agreement with a street railway company, terminate a grant for any period not in excess of the limitation fixed by statute.
So, giving consideration to the foregoing holding and referring to Ordinance 990, wherein consideration is specifically mentioned, we find the following:
"Whereas said Company and its predecessors have heretofore been required to construct, maintain and keep in repair a large amount of paving on various streets in the city of Mansfield, Ohio, and
"Whereas such paving cost has become and is burdensome and if continued in the future will make impossible the operation of said street railway system and will necessitate abandonment thereof on the withdrawal of such service, and
"Whereas it is for the public convenience and welfare that such service be continued, and,
"Whereas, it is inequitable and unjust that said Company or its successors be burdened by the cost of paving, repaving or repairing other than as herein provided," etc.
Accordingly we believe that making possible the continued operation of the street railway system — where such continuance was considered by the council as impossible without such relief — was in the interest of the public convenience and welfare, was done in good faith, and constituted a valid, substantial, and advantageous consideration.
But, going further, to the question whether or not there was an actual legal consideration, we believe the city of Mansfield had authority to modify the franchise provisions without consent of the utility, because it was an exercise of the power of local self-government, as provided in Section 3 of Article XVIII of the Ohio Constitution as amended in 1912. It should be noted that the authorities hereinbefore quoted, construing Sections 3771 and 9102, General Code, were cases decided prior to the 1912 constitutional amendments.
Section 3, Article XVIII, of the Constitution, provides:
"Municipalities shall have authority to exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws."
In Village of Perrysburg v. Ridgway, 108 Ohio St. 245, 140 N.E. 595, it is held:
"Since the Constitution of 1912 became operative, all municipalities derive all their 'powers of local self-government' from the Constitution direct, by virtue of Section 3, Article XVIII, thereof.
"The power to establish, open, improve, maintain and repair public streets within the municipality, and fully control the use of them, is included within the term 'powers of local self-government.'"
The agent of power in Section 3, Article XVIII, is equally to municipalities that do adopt a charter as well as those who do not adopt a charter, the charter being only the mode provided by the Constitution for a new delegation or distribution of the power already granted in the Constitution.
"It has always been recognized, before 1912 as well as after, that matters relating to all local improvements, such as roads, streets, ditches, and the like, have been peculiarly matters of local concern and control." Village of Perrysburg v. Ridgway, 108 Ohio St. 257, 140 N.E. 598.
In case of Allion v. City of Toledo, 99 Ohio St. 416, 124 N.E. 237, 6 A.L.R., 426, it is held:
"Unless there is a clear and palpable abuse of power, a court will not substitute its judgment for legislative discretion. Local authorities are presumed to be familiar with local conditions and to know the needs of the community."
Therefore we find and believe that it is purely a matter of local concern whether a city requires the railway to pay the entire cost of paving, or only a part of the cost, or the cost only of foundations, etc.
It might be said that a more direct application in the instant case could be gathered from the utility constitutional provisions in Sections 4 and 5 of Article XVIII of the Constitution. Section 4 of Article XVIII specifically empowers the city to contract with the utility for its product, in the following language:
"Sec. 4. Any municipality may acquire, construct, own, lease and operate within or without its corporate limits, any public utility the product or service of which is or is to be supplied to the municipality or its inhabitants, and may contract with others for any such product or service."
Section 5 empowers and authorizes a referendum on such ordinances, where 10 per cent. of the electors of the city petition for same, thus furnishing an adequate remedy if the franchise provisions between the city and utility are not satisfactory to the people.
So that we find and hold that all statutes limiting or conflicting with the power given to municipalities by Section 4 of Article XVIII of the Constitution, to own, operate, and contract with public utilities, are invalid.
Section 4 of Article XVIII is self-executing, and no action of the Legislature is essential to empower a municipality and a public utility to enter into a valid contract for the product or service of the utility, and the city has plenary power to do any of the things enumerated. Dravo-Doyle Co. v. Village of Orrville, 93 Ohio St. 236, 112 N.E. 508; Link v. Public Utilities Commission, 102 Ohio St. 336, 131 N.E. 796.
Article XVIII, Section 4, of the Ohio Constitution, as amended September 3, 1912, confers complete power upon municipalities to own and operate public utilities and to contract with such utilities for product and service and to fix the rate therefor. All legislative enactments restricting, limiting, or conflicting with this power are invalid. City of Lima v. Public Utilities Commission, 100 Ohio St. 416, 126 N.E. 318.
So that we hold that, where Sections 3771 and 9102, General Code, limit or conflict with the powers given a municipality by Sections 3 and 4 of Article XVIII of the Constitution, the Constitution and not the statute must control and prevail.
We note from the record that Ordinance No. 990, modifying the franchise provisions as to paying obligations, was passed November 8, 1926, or about two months prior to the first legislation concerning the East Fourth street improvement.
No referendum proceedings were taken. The right to a referendum expired thirty days from November 8, 1926. The amended franchise was not made as a part of the instant improvement, and made no reference to it, and was in force over a month before the first improvement resolution was passed. It affected all owners of property abutting on all streets on which street cars are operated, as well as taxpayers in general, and was a matter in which all of the people of the city were interested. Thereafter the council might or might not increase the portion of paving costs to be paid by abutting owners, or respective street improvements, much as would be the situation on a street where no car line existed. But whatever improvement legislation it might thereafter pass is not material upon the question of its power to amend the franchise.
If a municipality has power to contract with a utility, it likewise has power to modify that contract or make a new contract for reasons deemed to be for the public convenience and welfare of its citizens, and there is nothing in the record before us to show that council did not act in good faith, for what it considered the best interests of the city.
As to the last defense, that of estoppel, we find from the record that the plaintiffs petitioned council for the improvement of this street and in October, 1926, sent a delegation to council to urge the same.
The record shows that the railways are not being assessed according to the former franchise. Actual and constructive notice is given of the various proceedings. Personal notice is served after the first resolution is passed, showing the properties of abutting lot owners to be assessed. These plaintiffs saw the improvement being made in front of their homes. They had an opportunity to check the assessment lists, and received personal notice of the cash payment assessments. They did not object. They made no protest. They did nothing. And they made their payments for nearly two years after the improvement was completed.
General Code, Section 3848, provides that, if any person objects to an assessment, he shall file his objections in writing with the clerk within two weeks after the expiration of such notice.
In City of Cuyahoga Falls v. Beck, 110 Ohio St. 82, at page 90, 143 N.E. 661, 663, the court says:
"It is thus evident that the notice referred to in Section 3848 is the notice provided for in Section 3895, and that the person objecting to an assessment must file his objections in writing with the clerk within two weeks after the council has published," etc.
The court further says, at page 93 [143 N.E. 664]:
"And yet the rule is generally applied that the failure of a property owner, duly notified of proposed improvement proceedings, to avail himself of the opportunity to remonstrate to the local authorities, whose duty it is to pass upon the same, will preclude him in subsequent proceedings from insisting that his property was wrongfully assessed for a portion of the cost. The rule extends, moreover, not only to objections raised to assessments upon the ground that no benefits have been conferred, but also to objections that the proceedings violate the statute.
Ellis, Ohio Municipal Code (8th Ed.), page 389, says:
"All of these sections appear to apply as well to assessments made by the foot front, or according to tax value, as when made according to benefits."
While it is perhaps true that mere silence is not sufficient for an estoppel, yet, if the parties have promoted the improvement, or have not resisted the assessment when an attempt is made to enforce it, then estoppel will arise. Lewis, Aud., v. Symmes, 61 Ohio St. 471, 56 N.E. 194, 76 Am. St. Rep., 428; City of Columbus v. Agler, 44 Ohio St. 485, 8 N.E. 302.
Therefore, for the reasons heretofore given, we find and believe that the judgment of the trial court in dismissing the petition of plaintiffs was correct, and that is the opinion of this court, reached upon the appeal of this case; so the same finding and judgment will be entered in this court as was entered in the court below.
Petition dismissed.
MONTGOMERY and SHERICK, JJ., concur.