Opinion
Rehearing Denied Dec. 1, 1977.
Fred P. Bamberger and Jeffrey R. Kinney, Evansville, for appellant; Bamberger, Foreman, Oswalds&sHahn, Evansville, of counsel.
Theo. L. Sendak, Atty. Gen., Michael G. Jaimet, Susan J. Davis, Deputy Attys. Gen., Indianapolis, for appellee.
LYBROOK, Judge.
Plaintiff-appellant, Southern Indiana Gas and Electric Company (SIGECO) brings this appeal as a result of the denial of its request for a preliminary injunction against the defendant-appellee, Indiana State Highway Commission (Commission) and certain of its agents. The desired injunction was to enjoin the commission from interfering with SIGECO's use of the right-of-ways adjoining state highways and to prevent the arrest of SIGECO's agents and employees who used these right-of-ways. SIGECO contends that the arrest herein involved was effected under color of state law, and was in violation of SIGECO's statutory, contractual and constitutional rights.
The facts relevant to the case at bar reveal that SIGECO was the successor to the Public Utilities Corporation, which was organized in 1912.
Prior to June, 1917, SIGECO was operating under franchises granted it by the individual counties and municipalities for which it provided service. In June of 1917, SIGECO surrendered its individual franchises in exchange for an indeterminate permit issued by the Public Service Commission of Indiana. This exchange occurred pursuant to IC 1971, 8-1-7-1 (Burns Code Ed.) and Chapter 76, Section 101 of the Acts of 1913. SIGECO has continued and is continuing to operate under the control of the Public Service Commission of Indiana, as provided for by the above acts.
It is the policy of the Indiana State Highway Commission to require an application for, and the issuance of, a permit prior to allowing any routine maintenance or construction to be performed on any state highway. This procedure is required pursuant to IC 1971, 8-13-2-9 (Burns Code Ed.) when taken in connection with IC 1971, 8-13-4-3 (Burns Code Ed.).
During March of 1976, SIGECO was in the process of constructing new power transmission lines in Gibson County in order to provide electricity to a new customer, and improve service to its existing customers. As the project proceeded, the construction reached the right-of-way of State Highway 64 near its intersection with State Highway 57.
On April 5, 1976, defendant Robert Cornelison, acting on behalf of the State Highway Commission, executed an Affidavit of Probable Cause which served as the basis for the warrant issued by the Gibson Circuit Court for the arrest of Tom Edwards. Edwards was identified as the agent of SIGECO who was supervising construction at the above mentioned site.
Edwards was subsequently arrested at the construction site and construction was halted.
On April 27, 1976, SIGECO filed a complaint requesting a temporary injunction, a declaratory judgment, a temporary restraining order, and a permanent injunction to prevent the further arrest or threatened arrest of any of SIGECO's agents or employees. SIGECO also requested that the State Highway Commission be permanently prevented from requiring it to obtain a permit prior to SIGECO's construction along a state highway right-of-way.
Following a hearing on the above issues, and a denial of the requested injunctions, SIGECO brings this appeal presenting the following issues for review:
(1) Does the State Highway Commission have the power and authority to require SIGECO to obtain a permit to use the State Highway system for maintenance and construction of public utility facilities?
(2) Are the requirements of the permit, as presently written, a violation of statutory law and an unconscionable contract?
(3) Did the trial court err in its conclusion of law that the denial of the preliminary injunction did not substantially impair SIGECO's rights and duties as a public utility company?
I.
It is SIGECO's contention that the commission does not have the authority to require certain public utilities to obtain a permit to use state highway right-of-ways. This argument is based on three separate and distinct contentions. SIGECO asserts that it has contractual rights to occupy the right-of-ways. It also contends that the commission's permit procedure is a violation of statutes of the Indiana Legislature; and finally that the commission's actions are in violation of the United States Constitution, art. 1, § 10.
All three contentions, as to the lack of authority argument, are tied to the history, development and growth of public utilities in the State of Indiana. In the late 19th and early 20th centuries the companies which functioned as public utilities were granted franchises by the county commissioners and the local municipal officials. These contracts, generally very long-term, created specific rights and duties which included the use of streets and highways to provide utility service to the public.
Due to the unmanageability of that system, the Indiana Legislature enacted a program whereby the companies could surrender their individual franchises and obtain indeterminate permits to operate as a public utility. The companies were to submit to the control of the Public Service Commission and in exchange maintain their previous rights.
In 1917 SIGECO participated in this exchange program and thus received an indeterminate permit to operate as a utility in this state. It is this exchange which SIGECO uses as its basis for a contractual right to use the state highway right-of-ways, citing as authority Central Union Tel. Co. v. Indianapolis Tel. Co. (1920), 189 Ind. 210, 126 N.E. 628, wherein the Supreme Court of Indiana addressed a somewhat similar problem dealing with franchise and contractual rights and said:
"It is well-settled law that, when a right is granted to a corporation or an individual to supply gas or water, or to perform some other public service of a like nature to a municipality and its inhabitants, and to occupy the streets and public places of the city with instrumentalities employed for such purposes, such grant constitutes a franchise right which can be derived only from the state.
Where the power to make such grants is conferred by the Legislature of a state on its municipalities, any grant made in pursuance of such authority is binding on the municipality and on the state as well after it has been accepted and performed by the grantee. It confers on the grantee the right to occupy the streets of the city with its instrumentalities for the purpose of furnishing the service specified for the period of time fixed, unless the right so conferred is forfeited by some conduct on the part of the grantee. Such right is conferred in consideration of the undertaking on the part of the grantee to perform a public service for the period fixed. After the grantee has accepted it and entered on its performance, it is held to be a contract, protected by the Constitution of the United States against the state legislation to impair it." (Citations omitted.)
A study of the cases indicates that the exchange of the franchises for the indeterminate permits has previously been held to create contractual rights in favor of the utilities surrendering those franchises. So. Ind. Gass&sElect. Co. v. City of Booneville (1939), 215 Ind. 552, 20 N.E.2d 648; Public Service Co. v. City of Lebanon (1942), 221 Ind. 78, 46 N.E.2d 480.
The Highway Commission contends that the rights are vested in the utility companies, but that those rights are subject to the police powers of the state. It is those police powers which the Highway Commission asserts they are exercising to promote the health and safety of the public and thus the permit procedure should be continued.
It is the Commission's position that the permits are being used to gather and dispense information and to require the applicants to conform to minimum standards of safety in the warning and protection of the motoring public. The Commission further contends that the permit procedure is essential in order for the Commission to keep abreast of the use of the highways and be able to assure that the above mentioned standards are being employed by the utilities.
The permit procedure is specifically authorized by IC 1971, 8-13-4-3 (Burns Code Ed.) where it states:
"8-13-4-3 (36-2903). Openings and obstructions in streets Permit Violation Penalty for violation. No opening shall be made in any highway in the state highway system, or in the right-of-way of any such highway, or in the roadway of any street of any city or town over which such highway is routed, the maintenance of which street the state highway commission is charged with by law, nor shall any structure or obstruction be placed in any such highway or roadway of any such street without the consent of the state highway commission. No such highway or roadway of such street shall be dug up for laying or placing any pipe, sewer, pole, wire, conduit, track, railway or for any other purpose, and no trees shall be removed from the right-of-way of any such highway, without the written permit of the state highway commission, and then only in accordance with the regulations of said commission, and the work shall be done under the supervision and to the satisfaction of said commission, and the entire expense of restoring such highway or street in as good condition as before shall be paid by the person or corporation to whom such permit is given, and said commission is authorized to require, before the granting of such permit, that a sufficient bond be given, or cash deposit made with said commission to insure the restoration of such highway or street. In granting any such permit the commission shall be authorized to designate the place in such street, highway or the right-of-way thereof where any such pipe, sewer, pole, wire, conduit, track, railway or other device or thing shall be constructed. Any person or corporation violating any of the provisions of this section shall be guilty of a misdemeanor, and upon conviction shall be subject to a fine of not less than ten dollars ($10.00), nor more than one hundred dollars ($100). Any corporation which by its agents or employees shall violate any of the provisions of this section may be prosecuted therefor in the same manner as such a corporation may be proceeded against for obstructing a public highway. (Acts 1937, ch. 256, § 3, p. 1199.)"
While that statute appears to be quite specific in showing the legislative intent, IC 1971, 8-13-2-9 (Burns Code Ed.) casts a shadow over the above apparent legislative intent by saying:
"8-13-2-9 (36-2952). Regulations Adoption by department. The department (commission) may adopt regulations regulating the rights of access, air, light or view whenever the same may be done without impairing the rights of any property owners under the constitution of the state of Indiana. Whenever such regulation would constitute the taking of property or a property right of any owner the same shall be acquired by purchase, donation or condemnation as provided by law.
Whenever the United States government or a department thereof adopts a regulation affecting any highway in the state of Indiana, which was constructed or reconstructed with the use of federal funds, or which it is proposed to be so constructed or reconstructed, the commission is empowered to adopt such regulation as applied to such highways.
The commission shall have the right and power to make reasonable regulations for the installation, construction, maintenance, repair, renewal, relocation and removal of tracks, pipes, mains, conduits, cables, wires, towers, poles and other equipment and appliances on state highways, subject to the rights of public utilities now vested in them by law." (Emphasis added.)
It is this niche which SIGECO contends specifically exempts it from the control of Commission in a permit procedure.
SIGECO further asserts that IC 1971, 8-20-1-28 (Burns Code Ed.) specifically authorizes its use of the highway right-of-ways.
"8-20-1-28 (36-1705). Poles and wires. Corporations now formed or which may hereafter be organized for the purpose of constructing, operating and maintaining telephone lines and telephone exchanges, or for the purpose of generating and distributing electricity for light, heat or power, are authorized to set and maintain their poles, posts, piers, abutments, wires and other appliances or fixtures upon, along, under and across any of the public roads, highways and waters of this state outside of cities and incorporated towns; and individuals owning telephone lines or lines for the transmission of electricity are hereby given the same authority: Provided, That the same shall be erected and maintained in such manner as not to incommode the public in the use of such roads, highways and waters: Provided further, That no trees shall be cut along such roads or highways without the consent of the abutting property-owners: Provided, also, That no pole or appliance shall be so located as to interfere with the ingress or egress from any premises on said road, highway, or waters: Provided, further, That nothing herein contained shall be construed as depriving the county commissioners of any county of the power to require the relocation of any such pole, poles, or appliances which may affect the proper uses of such highway for public travel, for drainage or for the concurrent use of other telephone lines or lines conducting electricity. The location and setting of said poles shall be under the supervision of the board of commissioners of the county. (Acts 1905, ch. 167, § 38, p. 521; 1911, ch. 161, § 1, p. 421.)"
SIGECO links the above statutory and constitutional rights arguments into a cogent challenge to the constitutionality of the permit procedure.
We must agree that the permit procedure has violated the United States Constitution, art. 1, § 10, and art. 1, § 24, of the Indiana Constitution, by impairing the contractual rights previously granted to the utilities.
This decision is strongly supported by the decision of the Indiana Supreme Court in the case of City of Indianapolis v. Consumers Gas Trust Company (1895), 140 Ind. 107, 39 N.E. 433. The factual settings and theories of the respective parties in the City of Indianapolis case were strikingly similar to those in the case at bar. The City had enacted an ordinance which created certain contractual rights in favor of Consumers Gas, and among these rights was permission to use the City's streets for the purpose of distributing gas. Approximately three years later the city enacted a second ordinance which required the utility to obtain the common council's permission prior to making any opening in the streets of the city. The court there held that a permit or consent procedure could not be allowed as it would impair the contractual rights previously vested. This is so because the right to consent also implies the right to refuse, and thus completely prohibits the utilities' use of the highways.
This inherent right to refuse to issue a permit, even though not exercised, entails an implicit constitutional violation and cannot be allowed.
The Commission contends that a permit has never been denied to a qualified applicant and that the procedure is used to gather information and promote the public safety and welfare. While this may well be true, we cannot agree that the permit is a valid exercise of the State's police power as the Commission would have us believe.
This is especially true when, as here, the permit procedure involved purports to require indemnification of the State by all permittees. An attachment to the Commission's application for a permit reads as follows:
"SPECIAL PROVISIONS
THE APPLICANT AGREES TO INDEMNIFY, DEFEND, EXCULPATE, AND HOLD HARMLESS THE STATE OF INDIANA, ITS OFFICIALS AND EMPLOYEES from any liability due to loss, damage, injuries, or other casualties of whatsoever kind, or by whomsoever caused, to the person or property of anyone on or off the right-of-way arising out of, or resulting from the issuance of this permit or the work connected therewith, or from the installation, existence, use, maintenance, condition, repairs, alteration, or removal of any equipment or material, whether due in whole or in part to the negligent acts or omissions (1) of the State, its officials, agents, or employees; or (2) of the applicant, his agents or employees, or other persons engaged in the performance of the work, or (3) the joint negligence of any of them; including any claims arising out of the Workmen's Compensation Act or any other law, ordinance, order, or decree. The applicant also agrees to pay all reasonable expenses and attorneys' fees incurred by or imposed on the State in connection herewith in the event that the applicant shall default under the provisions of the paragraph."
The clear implication of this language, and this permit procedure in general, is that a permit will be denied to an applicant who refuses to agree to the above provisions. Since we can find no legal basis for the Commission's indemnification requirement, surely SIGECO cannot be compelled through the Commission's permit procedure to accept such terms.
By this decision we are not holding that utilities are not subject to the regulation of the Commission. We are holding that the permit procedure is unconstitutional and beyond the permissive limits of an exercise of police power because of a permit procedure's inherent right to refuse to grant the permit.
We further wish to emphasize that SIGECO's use of the state highways is subject to reasonable regulation by the Commission in the form of regulatory rules and not in the form of permits. The procedure for adopting and enacting administrative regulations in this state will clearly allow any reasonable regulations to be promulgated for control and regulation of the state's highways. These regulations would be a valid exercise of the state's police power if the safety and welfare of the public were being protected. This could even include a brief, temporary or partial impairment of SIGECO's contractual rights, Lutz v. New Albany City Plan Comm. (1951), 230 Ind. 74, 101 N.E.2d 187, if the immediate needs of the public demanded.
We find additional support for our holding in two cases from foreign jurisdictions which have faced analogous problems. In Louisvilles&sN. R. Co. v. Railroad Commission of Tennessee (1884), 19 F. 679 (M.D.Tenn.), it was stated:
". . . The legislature, however, cannot, under the pretense of regulation, deprive a corporation of any of its essential rights and privileges. In other words, the rules prescribed and the power exerted must be within the police power in fact, and not covert amendments to their charters in curtailment of their corporate franchises. Nor can the legislature, in the exercise of this power, make any regulation in contravention of the state or national constitution. Every statute which invades vested rights, inflicts punishment or takes private property otherwise than by due process of law, impairs the obligation of valid contracts, or denies to any one or more persons the equal protection of the law, are unconstitutional and invalid." (Emphasis supplied.)
Secondly the case of State ex rel. Wells v. Western Union Telegraph Co. (1928), 96 Fla. 392, 118 So. 478 stated:
"It is well settled that corporations performing a public or quasi public service may under the police power of the state be regulated in the interest of public convenience and necessity. Such regulation must, however, bear reference to the comfort, safety, and welfare of society; it must not conflict with the provisions of the corporate charter, or under the guise of regulation take from the corporation any of the essential rights and privileges which its charter confers. They must be police regulations in fact, and not amendments of the charter in curtailment of its corporate franchise. Cooley's Constitutional Limitations (6th Ed.) 810."
In light of the above precedents, we hold that the permit procedure is a violation of the United States Constitution and the Indiana Constitution, and cannot be permitted to continue. The injunction should have been issued. The judgment of the trial court is hereby reversed for further action not inconsistent with the opinion.
Further support for our decision is found in United States Trust Company of New York v. New Jersey (1977), 431 U.S. 1, 97 S.Ct. 1505, 52 L.Ed.2d 92, where the Supreme Court held that New Jersey's unilateral modification of its contractual rights and liabilities vis a vis bondholders, holding rights under prior statutes, violated art. 1, § 10 of the United States Constitution.
IIs&sIII
In light of our disposition as to Issue I, we deem it unnecessary to discuss further Issues II and III.
Reversed and remanded for further action not inconsistent with this opinion.
ROBERTSON, C. J., and LOWDERMILK, J., concur.