Kelly v. Consolidated Gas Electric Light & Power Co.

⁵²⁵ Sloan, J., delivered the opinion of the Court. On April 13th, 1927, the Northern Maryland Power Company, a Maryland corporation, and twenty-one residents of the city of Havre de Grace, Maryland, purchasers and consumers of electricity in that city, filed their bill of complaint in the Circuit Court No. 2 of Baltimore City, against the Consolidated Gas Electric Light and Power Company of Maryland, also a Maryland corporation, praying the court to1 restrain and enjoin the defendant, now the appellee in the appeal before us, from constructing its electric lines along and upon the streets of Havre de Grace without first having obtained an order of the Public Service Commission of Maryland permitting and approving such construction; and to restrain and enjoin the appellee from exercising any right or privilege under the franchise granted to it on March 7th, 1927, by the Mayor and City Council of Havre de Grace, authorizing it to use the streets of Havre de Grace for the purpose of erecting thereon and therein its electric lines, without first having obtained an order by the Public Service Commission of Maryland permitting and approving the exercise of such right or privilege; and to restrain and enjoin the construction and extension of its electric lines from Short Lane, in the second election district of Harford County, to1 or in the direction of the city of Havre de Grace; without first having obtained a<n order from the Public Service Commission of Maryland permitting and approving such construction. The oourt below dismissed the bill of complaint, and from this order the appeal is taken. On the 4th day of April, 1899, the Mayor and City Council of Havre de Grace passed am ordinance entitled “An ordinance granting to John H. Reckord, his successors and assigns, the exclusive right to erect and maintain poles and wires upon the streets, lanes and alleys of the city of Havre de Grace for the purpose of furnishing electric current for light, heat, and power, etc., for public and private use and for the regulations governing the same,” the first paragraph of the ordinance concluding, “and the privilege hereby granted is granted exclusively for a period of twenty-five years, ⁵²⁶ unless terminated as hereinafter provided,” the only conditions as to termination being that the plant should be installed ready to supply electric light on or before May 1st, 1900, or a failure to1 operate for a continuous period of six months or more.

Ever since the installation of his plant, Reckord and his assigns have operated in Havre de Grace. It appears from the testimony that in the summer of 1900 Reckord’s electric light plant and system in Havre de Grace was transferred to the Havre de Grace Electric Company. The only record evidence of this transfer is a deed frotar John H. Reckord and wife to the Havre de Grace Electric Company, made and executed July 13th, 1900, conveying the parcel of land upon which the plant was located. Ordinance No. Ill of the town of Havre de Grace, approved March 2nd, 1903, provided for the exeeutiota of a contract, between the Mayor and City Council of Havre de Grace and the Havre de Grace Electric Company of Harford Conmty, for lighting the streets', lanes, and alleys of Havre de Grace by electricity, and also re-enacted and confirmed Ordinance No. 147 of the Mayor and City Ootancil of Havre de Grace, approved April 4th, 1899; the ordinance reciting in its preamble that by an amendment the charter of Havre de Grace, contained in section 152 of chapter 127 of the Acts of Assembly of 1902, express power and authority was given the Mayor and City Council to contract for the lighting of the city by electricity.

The proposed agreement was incorporated in the ordinance No. 171. By this agreement the Havre de Grace Electric Company agreed “to furnish for the term of twenty years, beginning on the 1st day of December, 1899, and ending on the 30th day of November in the year 1919, electric current for the purpose of lighting the streets, lanes, and alleys of the city of Havre de Grace with electric lights * * *.” The contract also provided that “after the expiration of the term of this contract the party of the second part shall have a right to renew this contract for an additional period not exceeding twenty years, at the prices and upon the terms and, conditions herein set forth.” By Ordinance No. 277, approved Eebruary 10th, 1920, another ⁵²⁷ agreement was entered into' between tbe Havre de Grace Electric Company and the city of Havre de Grace for the furnishing of street lights for the period of three years, beginning the first day of December, 1919, with the right to. an additional period of two years from and after the first day of December, 1922. On August 16th, 1926, by Ordinance No. 234, the Mayor and City Cotmcil of Havre de Grace entered into1 a contract with the Northern Maryland Power Company, the appellant, for the installation on Union Avenue and Commerce Street of a post type, or “white way” system of lighting, to continue for a period of ten years, with the provision for a refund of $850 per year for the unexpired portion of said ten-year period in case the city should decide to discontinue the use of said system. By Ordinance No. 310, passed by tbe Mayor and City Council of Havre de Grace on April 21st, 1927, Ordinances Nos. 147, 171 and 277 were repealed.

By resolution of the Mayor and City Council of Havre de Grace, passed at a meeting held on January 3rd. 1927, the city clerk of Havre de Grace was instructed to notify the Northern Maryland Power Company that from and after the 30th day of June, 1927, its services to the city would be discontinued for all purposes, and “that the Mayor and City Council of Havre de Grace negotiate with the Baltimore Gas and Electric Company (meaning the appellee), to furnish electric current to the city of Havre de Grace and its citizens for such purposes as may be desired, subject to the approval of the Public Service Commission of Maryland as to service and rates.” The Havre de Grace Electric Company of Harford County was incorporated under the general laws of the State of Maryland on June 19th, 1900, the object and purposes for which incorporation was sought, among other things, being “for the transaction of any business in which electricity, over or through wires, may he applied to any useful purposes; the articles, conditions and provisions under which this corporation is formed are those applicable to corporations formed under tbe general corporation laws of tbe state of Maryland,” and “the operations of said corporation are to ⁵²⁸ be carried on in and beyond tbe state of Maryland, and its principal office is to be located at Havre de Grace in Harford County in said state.” The time of the existence of said corporation was fixed in its charter at forty years, which has since been made perpetual by the general laws of this state. By agreement of consolidation made on April 20th, 1927, the Havre de Grace Electric Company of Harford County and three other electric light and power companies were consolidated under the general laws of the state under the name of the Northern Maryland Power Company, and the latter succeeded to all the rights, powers and franchises of the constituent corporations. It is contended by the appellee that the Northern Maryland Power Company has no standing in this court because, so far as the city of Havre de Grace is concerned, it has no existence; that its franchises there have expired and that it is in effect a trespasser. The Northern Maryland Power Company contends that it had, through the franchise granted to Keckord on April 4th, 1899, an exclusive franchise for the period of twenty-five years (if the city of Havre de Grace had the authority to grant an exclusive franchise), and thereafter, a perpetual franchise, without any other conditions than those recited in Ordinance No. 147; and they cite, as authority for this contention, Des Moines City Ry.

Co. v. Des Moines, 151 Fed. 854 . The Des Moines case was appealed to the Hnited States Supreme Court and reversed on jurisdictional grounds, the Supreme Court suggesting that the right of the city of Des Moines to oust the railway was the proper subject of a direct proceeding by the city to determine the question ( 214 U. S. 179 , 53 L. Ed. 958 ). The appellee is not in a position to dispute, under its own claim of a state-wide franchise, the right of the appellant, the Northern Company, to exercise the charter rights of the Havre de Grace Electric Company in Havre de Grace, as conferred by section 337 of article 23 of the Code of 1924, this provision having been in effect when the Havre de Grace Electric Company was chartered in June, 1900, nearly two years before the charter of the city of Havre de Grace ⁵²⁹ was amended by the Act of 1902, chapter 127. Reckord had his plant in operation December 1st, 1899, sold it to the Havre de Grace Company in July, 1900, and it has ever since been operated by it and its assigns.

In New York, N. H. & H. R. Co. v. Deisler, 253 Mass. 178 , the court said: “The plaintiff may maintain its suit for an injunction. It has a franchise right to transport passengers between the points named. That right carries with it heavy obligations to the public. Although, that franchise right is not exclusive against other grants authorized by the Legislature, it is exclusive against one conducting competition, as is the defendant, without a franchise or license and contrary to law.” Dillon on Municipal Corporations (5th Ed.), sec. 1244; 29 L. R. A.

(N. S.) 77; Citizens Electric Illuminating Co. v. Lackawanna and Wyoming Valley Power Co., 255 Pa. 145 . The Korthorn Maryland Power Company has a plant and system now operating in Havre de Grace, with sufficient apparent show of interest and value for us to hold, until and unless otherwise decided in a direct proceeding by the city of Havre de Grace, that it has a right to maintain this suit. The appellee was incorporated by an agreement of consolidation of several electric light corporations under the provisions of what are now sections 38 et seq., of article 23, of the Code of 1924. The first of the constituent corporations was the Brush Electric Company of Baltimore City, incorporated under the General.

Laws, on March 4th, 1882, (amended Acts 1890, ch. 233), the incorporators reciting in their certificate of incorporation that “the operations of said corporation are to be carried on in the City of Baltimore and in the counties of the State of Maryland.” The next of the corporations formed under the General Laws was the International Telegraph District and Construction Company of Baltimore City, to operate telegraph lines in the State of Maryland, September 23rd, 1884, the certificate of incorporation having been amended December 14th, 1888, by adding, “that said corporation shall also be a corporation for the transaction of any business in which electricity over or through wires may be applied to any useful purpose.” The ⁵³⁰ next constituent, “The Southern Electric Company of Baltimore,” was incorporated under the General Laws February 20th, 1889, the operations to be carried on in the State of Maryland and other states in the Union. The name of the Southern Company was changed to the Maryland Electric Company on May 6th, 1890. The Wenstrom Electric Company of Baltimore City was incorporated under the General Laws October 2nd, 1893, the operations “to be carried on in the State of Maryland and in other states and countries.” On December 23rd, 1895, the Edison Electric Illuminating Company of Baltimore City was formed-under section 29, article 23, of the Code of 1888, by the consolidation of the International Telegraph District and Construction Company and the Maryland Electric Company, for the purpose of doing a general electrical business, “also the transaction of any business in which electricity over or through wires may be applied to any useful purpose,” and “shall be entitled to all rights, privileges and franchises” of the constituent companies. Both of the corporations combined as the Edison Company come under class 11, article 23, Code of 1888 (class 13, article 23, Code of 1904), by the terms of their charters, and were not in practical operation or had not constructed their lines in the city of Baltimore prior to the date of the approval of Acts 1886, ch. 161.

By agreement of May 6th, 1899, “The United Electric Light and Power Company” was formed for the same purposes by the consolidation of the Edison and Brush companies, and by agreement of February 14th, 1905, the Consolidated Gas, Electric Light and Power Company was formed by the consolidation of the United Electric Light and Power Company and the Wenstrom Electric Company. This case is based on the claim of the appellee that, under its several charters and each of them, it has the right to extend its operations over the State of Maryland wherever and whenever it pleases it so to do, and that it had a right to extend its operations in April, 1927, into the city of Havre de Grace, without the consent of the municipal authorities of that city, and without the approval of the Public ⁵³¹ Service Commission of Maryland, under what it calls its “state-wide franchise” under section 337 of article 23 of the Code of 1924, which is as follows: “Any of the corporations formed under class 13, section 28, of this article, as codified by the Code of 1904, shall have the power which is conferred upon telegraph companies by section 295” (the right to construct lines on and along streets, highways, etc.), with the proviso that all corporations incorporated under class 13, and all corporations incorporated or to be incorporated under the Act of 1908, shall obtain the assent and approval of the Mayor and Council of Baltimore before using the streets of Baltimore City. This was section 366 of chapter 240 of the Acts of 1908, and is an amendment of chapter 161 of the Acts of 1886 (Code of 1888, art. 23, sec. 254), which required a special grant from the Legislature, as well as the assent of the Mayor and City Council of Baltimore, before use of the streets of Baltimore by an electric company. By Acts 1902, ch. 127, the charter of Havre de Grace was amended by the addition of the following provision: “Ho use shall be made of the streets of said city by any individual or corporation for the purpose of a railroad, tramway, telegraph line, telephone line, electric light or power lines, electric subways, or gas or water conduits, without the consent of the Mayor and City Council, and subject to such franchise tax and regulations as they may by ordinance prescribe,” and this was re-enacted by chapter 482 of the Acts of 1924-, and designated as section 308 of article 13 of the Public Local Laws.

This is the act which the appellee contends impairs the obligation of its contract with the State in the exercise of its state-wide franchise under its several charters. So far as the appellee is concerned, and in fact every other public utility in Maryland which had not theretofore acquired rights and franchises and exercised them within the corporate limits of Havre de Grace, the Acts 1902, ch. 127, was an amendment of their charters, if granted subsequent to the Constitutions of 1851 or 1867, o'r the Act of 1868. The appellee does not pretend that in 1902 it had entered ⁵³² the city of Havre de Grace, or had contemplated or thought of' extending its operations to that place, o'r anywhere in Harford County. The appellee, except through its predecessors or constituent companies, had not come into' existence.

At that time its operations were being conducted in a very limited way by the respective companies, which were more or less in competition, supplying only Baltimore and small areas of Howard, Anne Arundel, and Baltimore Counties, lying contiguous to Baltimore City. It is no answer now that it has large power houses and that it can draw on the supply of the hydro-electric plant at Holtwood on the Susquehanna for power, as the Northern Company and other electric companies may. It is the status of the appellee in 1902, when the charter of Havre de Grace was amended, that becomes in our opinion as controlling factor in this case. Did that act impair the obligation of the appellee’s contract, and did the Legislature by that act amend, as to Havre de Grace, the charter or charters of the appellee, and did the Legislature have the right so to' do ?

In our opinion the appellee’s charter was so amended, and the Legislature^ under its reserve constitutional and statutory powers, had the po*wer to make such an amendment. It is provided by section 48 of article 3 of the Maryland Constitution that “corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes, and except in cases where no general laws exist, providing for the creation of corporations of the same general character as the corporation proposed to be created; and any act of incorporation passed in violation of this section shall be void. All charters granted or adopted in pursuance of this section, and all charters heretofore granted and created subject to repeal or modification may be altered from time to time or be repealed,” and by section 136 of article 23 of the Code of 1924 (Acts 1868, ch. 471), it was provided that “every corporation formed under the provisions of this article shall be subject to any and all provisions and regulations which may hereafter by any change in ⁵³³ or amendments of the laws of this State, be made applicable to such corporation.” This is not the first time the question of the right of the Legislature to repeal or amend a charter has been before this court. Our present view of the situation befóte us was very clearly and forcibly expressed by Judge McSherry in Jackson v. Walsh, 75 Md. 304, 311 , where he said: “When the charter was granted by the Legislature the Constitution of 1851 was in force.

By section 47 of article 3 of that Constitution it was provided that ‘corporations may be formed under general laws, but shall not be created by special Act except for municipal purposes, and in cases where; in the judgment of the Legislature, the object of the corporation cannot be attained under general laws. All laws and special acts pursuant to this section may be altered from time to time, or repealed.’ This provision was designed to be, and so far as language could make it so, was a clear and explicit limitation upon the power of the General Assembly to pass thereafter any act of incorporation not subject to repeal or amendment by legislative authority. Upon the adoption of that Constitution, every charter thereafter granted, even though it contained no reservation of the right to repeal or alter it, was subject to the paramount provision of the organic law, which was binding on the Legislature and the corporation alike. The right of the state to repeal or alter an act of incorporation was the express condition upon which the grant was made in every instance after the adoptioii of the Constitution of 1851, and an acceptance of the grant was an unequivocal, as it was as irrevocable, acceptance of that condition.

This right could have been no more effective had it been written in the charter in the very words of the Constitution itself; and its exercise by the Legislature cannot, when it invades no vested right of property, be successfully resisted in the courts as an infringement of a, contract, because the constitutional provision is a term or stipulation embodied in the contract to which the State and the incorporators are equally parties. But it is needless to pursue the subject further, for it has been distinctly, and we had sup ⁵³⁴ posed finally, settled by this Court in State v. R. R. Co., 44 Md. 164 ; Amer. Coal Co. v. Consol. Coal Co., 46 Md. 22 ; Sprigg v. Telegraph Co., 46 Md. 77 ; Appeal Tax Court v. R. R. Co., 50 Md. 419 ; and by the Supreme Court of the United States in Shields v. Ohio, 95 U. S. 324 ; Sinking Fund Cases, 99 U. S. 720 .” The appellee’s contention that the Act of 1902, amending the charter of Havre de Grace, is an invasion of its charter rights and privileges, and that it now has over the entire State of Maryland an irrepealable, unamendable franchise, is based on the decision of the Supreme Court in Russell v. Sebastian, 233 U. S. 195 .

In that case a gas company was organized under the laws of California in 1909 and shortly thereafter bought another company’s plant, etc., which it proceeded to extend and enlarge over additional streets in the city of Los Angeles. When the charter was granted, section 19 of article 11 of the Constitution of California provided that in any city where there were no public works owned by the municipality for supplying the same with artificial light, any corporation duly incorporated for such purposes, under such general regulations as the city should prescribe, should “have the privilege of using the public streets and thoroughfares thereof * * * so1 far as may be necessary for introducing into and supplying such city and its inhabitants either with gas or other illuminating light.” This provision of the Constitution was amended October 10th, 1911, one of its provisions being: “Persons and 'corporations may establish and operate works for supplying the inhabitants with such services, upon such cofiditions and under such regulations as the municipality may prescribe under its organic law.” On October 26th, 1911, the city council of Los Angeles adopted an ordinance that no one should exercise any franchise or privilege to lay or maintain pipes in the streets for conveying gas, etc., withofit having obtained.a grant from the city, and on Eebruary 12th, 1912, passed an ordinance that it should be unlawful for any person to make any excavation in a street without written permission from the board of public works. An employee of the gas company, who' was exea ⁵³⁵ vating in. a street of Los Angeles, was arrested, and by habeas corpus his release was sought. From the refusal of the California courts, an appeal was taken to the United States Supreme Court on the alleged violation, by the city of article 1, section 10, of the Federal Constitution, and of the Fourteenth Amendment.

In that case the court said: “Tho service was a community service. Incident to the undertaking in response to the state’s offer was the obligation to provide facilities that were reasonably adequate.” “As to the question of fact, the present case presents no controversy. It was averred and not denied that the works of the gas company were established and operated with the intent to furnish gas throughout the city, wherever needed, and that this enterprise had been diligently prosecuted; that a large investment had been made in a plant which was adequate to supply a much greater territory than that reached by tho distributing mains when the amendment of 1911 was adopted; that the expense of this installation made it impossible to supply at a profit the limited territory contiguous to the streets then actually occupied by the company, and that if it were confined in its service to that territory it would sustain a constant loss. The company, by its investment, had irrevocably committed itself to the undertaking, and the acceptance of the offer of the right to lay its pipes so far as necessary to serve the municipality was complete.” When the constituent companies of the appellee wrote their charters, they designated the State of Maryland as the place where the operations were to be carried on.

There is no claim made that in 1902 or in 1910, when the Public Service Law was passed, that they were serving any territory except the city of Baltimore and some contiguous territory in Baltimore, Anne Arundel and Howard Counties, or that they were adequately equipped or financed to take over tho electric light and power business of the state. They were local, in the sense that all other electric light companies in the state, and there were many of them, were local. The contention is now, that if an electric utility corporation obtains a charter from the State and begins operations, no matter how ⁵³⁶ small, then, by the authority of the decision of the Supreme Court in Bussell v. Sebastian, supra, it has an irrepealable, unamendahle charter or franchise to extend its operations over the entire state, whenever and wherever it pleases, reservations by State Constitution and laws to the contrary notwithstanding. Our construction of the decision in Russell v. Sebastian is that the court held the constitutional provision of 1911, which was adopted after the charter and commencement of operations of the gas company, had no retroactive effect on prior franchises which were not subject to repeal or