Birge v. Town of Easton

Murphy, C. J., delivered the opinion of the Court. This appeal presents the question whether the Town of Easton (the'Town) mayiby charter.amendment authorize the acquisitiomdf.an interest in realiproperty located beyond its corporate;limits in Delaware for’use in connection with the operation ¡of iits municipally (owned electric system. The Circuit Couhtfor Talbot County; (Rasin, C. J.) by declaratory decree dated .January 10, 1975 (concluded that the Town’s adoption ;and enactment o'f ;a charter amendment authorizing :such acquisition ‘‘was .a valid exercise of the municipal home rule charter.amendment powers possessed by the .... ([Town] under the .authority of Article XI-E of the Maryland (Constitution and Article 23A of the Maryland Code (1957, 11973 Repl. tk>l.).” We ¡granted certiorari prior to decision by the Court of Special Appeals on the appeal taken to that courit :so that we could .promptly consider the significant ’issues raised in -the case.

See Maryland Code (1974) Courts.and Judicial Proceedings Article, § 12-201. The pertinent facts are these: Chapter 143 of the Acts of 1914 of the (General Assembly of Maryland authorized the Town to operate ;an electric system and to supply light, heat and power “‘to the citizens of Easton and vicinity.”' By Chapter .263 of the Acts of 1914, the Legislature created the ⁶³⁷ Easton; Utilities Commissionaire: Commission) ‘assani agency of: the; Tfown and invested its with, broad powers.,!® manage and! operate “the:: municipal1 sewerage systems andi water works; and all or any other- revenue producing; utilities which. are now owned or may be; hereafter constructed or acquired, by the-town [including; tike power];......t© make extensions, additions or - improvements to the; plants or system® . . . These provision® were codified: as Article 23i,, §>§; 222 andi 243 of;'the: Glide; of Public: Local Laws of Maryland (193® Edition); andi are: now Included' with minor revisions within Article : IW of the Charter and Glide of Easto'Hi (1S67). Pursuant to authority- granted by the; Public Service Commission of Maryland' CBSC))» the Town’s;electric system,, which includes generation, and distribution facilities, services an area of approximately 50 square miles both, within and without the-Town limits.

The Commission having determined: that need: existed to obtain a supplemental base load supply ®f electricity to enable it to service its customers adequately,, it entered- into negotiations, with the Delmarva Power &, Light Company (Delmarva), a Delaware corporation engaged in the business of producing and distributing electrical power throughout the Delmarva. peninsula. On July 10, 1973, Delmarva. offered to extend a minority ownership' interest to the Town (as a tenant in common without right of partition) in its proposed Summit Nuclear Power Plant (the Plant) located in New Castle County, Delaware. Under the terms of the proposal, Delmarva would hold the majority ownership interest; other private, municipal, and cooperative utilities located in Maryland, Pennsylvania, and Delaware, would hold minority interests; and Delmarva would operate the Plant pursuant to an “Owners Agreement.” By charter amendment resolution No. 40, which became effective July 7, 1974, the Town amended Article II, § 20 of its charter to provide: “(b) The town shall have complete power and authority to own or finance any interest in real or ⁶³⁸ personal property for use as part of or in connection with any municipally owned public utility, within or without its corporate limits or any designated service area, including, but not by way of limitation, an interest in any gas or electric plant.” The charter amendment also specified that the Town could contract with, or acquire property interests in common with, any other privately owned public utility in order to secure entitlement to a portion of the output or production of the jointly or commonly owned facilities for the benefit of the customers of the Town’s municipally owned public utilities. To finance its acquisition of an ownership interest in the Plant, the Town proposed to issue either its general obligation bonds or revenue bonds, the debt service therefor to be payable either from taxes upon real property located in the Town or from service charges imposed upon the Commission’s electric customers.

Lawrence and Burnetta Birge (the Birges), residents and property owners of the Town, and customers of the Commission, sought a declaratory decree that the Commission and Town had no legal authority, separately or together, to acquire or to finance the acquisition of any ownership interest in the Plant because: “A. Neither Article XI-E of the Maryland Constitution nor Article 23A of the Annotated Code of Maryland authorizes or empowers a municipal corporation (1) to purchase real property beyond its boundaries and in another State, or (2) to hold property jointly with a private corporation. B. The Resolution, amending the Town’s Charter, is void and invalid for the reason that a municipal corporation may not amend its Charter to permit that which is not authorized by Article XI-E of the Constitution or Article 23A of the Code. C. The Resolution, amending the Town’s Charter, is void and invalid for the reason that a municipal corporation may not amend its Charter ⁶³⁹ to authorize acts involving matters of general State concern. D. The issuance of the Town’s general obligation bonds or revenue bonds to finance the acquisition of an interest in the Plant would constitute a waste of the Town’s funds for the reason that the acquisition would be ultra vires. ” In concluding that the charter amendment was valid, the lower court said that the express grant of power to the Town and Commission to operate an electric system carried with it the implied power to acquire an ownership interest in property located beyond the corporate limits of the Town where such acquisition reasonably facilitated the distribution of electricity in the area served by the Commission.

On appeal, the Birges argue that the Town may not confer upon itself by charter amendment the power to acquire extraterritorial property because such power has not been expressly granted by Article XI-E of the Constitution of Maryland or by the General Assembly and that the charter amendment authorizing the Town to acquire extraterritorial property is void because it infringes upon a matter of general state concern. The Town and the Commission contend that the charter amendment is a local matter within the authority conferred upon municipalities by Article XI-E and by Code, Article 23A; that the express grant of power to the Town to own and to operate, through the Commission, a municipal electric utility implies the power to acquire extraterritorial property; and that a municipal corporation does not need express authority to purchase extraterritorial property. The Town of Easton, as a municipal corporation, possesses only limited powers. In McRobie v. Town of Westernport, 260 Md. 464, 466 , 272 A. 2d 655, 656 (1971), we quoted with approval from 1 J. Dillon, Municipal Corporations § 237 at 449 (5th ed. 1911), as follows: “ ‘a municipal corporation . . . can exercise the following powers, and no others: First, those ⁶⁴⁰ granted in express words; second, those necessarily or fairly implied in or incident to the powers expressly granted; third, those essential to the accomplishment of the declared objects and purposes of the corporation, — not simply convenient, but indispensable.’ ” (Emphasis in the original.) It has been held that general power vested in a municipality to own and operate a utility includes the power to serve consumers without, as well as within, its corporate limits.

Bair v. City of Westminster, 243 Md. 494, 498 , 221 A. 2d 643, 645 (1966). Because a municipality which operates a utility acts in a business or proprietary, rather than a governmental capacity, and on the same plane as any private corporation engaged in the same business, it is under a duty to furnish to all persons applying therefor the service which it offers without discrimination and at reasonable rates, where the service requested is within the reasonable range of its plant and equipment. Crisfield v. Public Service Comm., 183 Md. 179 , 36 A. 2d 705 (1944); Loan Corporation v. Baltimore, 175 Md. 676 , 3 A. 2d 747 (1939); Bair v. City of Westminster, supra; 26 Am.Jur.2d Electricity, Gas and Steam §§ 33, 36 (1966). Hence, where a municipality is expressly authorized to generate and sell electricity for private consumption, “there . . . [is] implied in the grant a duty to become equipped adequately to provide for not only the then existing demands, but also for any reasonably probable future growth or expansion in the demand of the consumers for the product supplied.” Public Service Comm’n v. Byron, 153 Md. 464, 487 , 138 A. 404, 413 (1927).

That municipal corporations possess implied power to purchase property outside their corporate limits whenever that power is necessary for the exercise of an express grant of power has been generally recognized. Thus, where municipalities have been expressly empowered to install sewers, to supply water, to operate electric plants, or to build streets, it has been held that they have implied power to purchase extraterritorial land in order to lay drainage ⁶⁴¹ pipes, secure a water supply, construct electrical generating facilities, and purchase a quarry for road building material. See, e.g., Southern Calif. Gas Co.