Baily v. City of Philadelphia

Opinion by Mb. Justice Mitchell,

The gas works are the property of the city of Philadelphia, not as a municipality, but as a business corporation. However much the idea that the city is not required by its municipal duty to supply its citizens with light in the streets and public places, may seem to fall below the modern conception of a city, it is beyond question on settled legal principles, that in the performance of that function the city acts under authority merely and not under municipal obligation. This was the rule of the common law, and no statute in reference to the city of Philadelphia has altered it. Hence the city may change its mode of action, or cease to act altogether, in its discretion, and the discretion is purely legislative. The courts have no power to interfere unless the proposed action contravenes some express statute, or violates some binding contract. These principles are elementary and need not be enlarged upon, since they are conceded by the learned counsel for appellants, and the corollary admitted that the lease now sought to be enjoined would have been clearly within the power of the city prior to the Act of June 1, 1885, P. L. 37, commonly known as the Bullitt Bill.

The argument of the appellants is arranged under three heads, and may be conveniently considered in that order.

First, that the ordinance for the lease of the gas works is an *603 interference with the executive functions of the department of public works, and therefore within the prohibition of the act of June 1,1885. Of that act this Court has already declared that “the subject with which it deals is the administrative government of cities of the first class, and its manifest purpose was to reform existing abuses in the executive department of the only city of that class: ” Com. ex rel. v. DeCamp, 177 Pa. 112 . The particular provisions of the act which are relied on by the appellants are art. I., sec. 1, “There shall be the following executive departments: . . . . Department of Public Works;” art. IV., sec. 1, “The Department of Public Works shall be under the charge of one director who shall be the head thereof. Gas works owned and controlled by the city, the supply and distribution of gas .... the lighting of streets, alleys, and highways .... shall be under the direction, control, and administration of the Department of Public Works ; ” and art. XVI., “Councils shall by general ordinances provide for the proper and efficient conduct of the affairs of the city by the mayor and several departments, and the boards thereof; but they shall not pass any ordinances directing or interfering with the exercise of the executive functions of the mayor and departments, boards or heads or officers thereof.” These provisions do not take away nor in any degree lessen any municipal authority previously lodged in the city, still less any merely business corporate power. They merely regulate the operation of its executive and legislative functions as to such public property of the enumerated classes as the city may at any time have. The prohibition to councils in article 16 is against interference with “ the exercise of the executive functions ” of the departments. The lease or sale of the gas works is not an executive function. If it was it would belong to the director of public works as the head of the department. But no one would contend that the director has any power to make a sale or such a lease. That is a parting with the title and possession of the city, which can only be done by a legislative act. As a legislative act it is within the clear power of the city. The right to change the property which is the instrument through which the city exercises its powers, is inherent in its ownership, whether municipal or merely corporate, unless prohibited by contract or by the terms of a trust upon which it -was acquired. But to avoid *604 ¿all doubts the right of alienation is given in express words in the •charter of 1,789, all the powers granted in which were preserved by the consolidation act (Act of February 2, 1854, sec. 6, P. L. 25) and which appears to be still in force: Com. v. Walton, 182 Pa. 873 . And the right is not taken away by the act . of 1885, which, as already said, merely regulates the mode of exercise of executive, and incidentally of legislative, functions without changing the rights which appertain to those functions.

But it is urged ¡that although the city may sell and change the specific property, it cannot abdicate the function, and must • therefore substitute other property through which its control ..and operation of the franchise may be continued, and the anal- • ogy is relied on of a trustee with a power to sell, who may by virtue thereof change the subject-matter but cannot destroy the trust. This brings us back again to the preliminary question -on.which the whole case rests, whether supplying the public places and private citizens with gas for lighting purposes is a . strictly municipal function, or merely a power conferred on the city as a corporation. If the former, it is a duty as well as a power, and cannot be abandoned; if the latter, it is an authority only and may be exercised or not at the city’s option. Although the appellants start out with the concession 'that the lease in question would have been within the city’s powers prior to the act of .1885, yet the elaborate and ingenious argument for them rests upon the contention that the lighting of the city, at least since .that act, is a municipal duty, and though ■ presented in different aspects and from different points of view, the argument constantly comes back to this contention, for without it there'is confessedly no ground for the case to rest upon. But for reasons already stated, we are of opinion that the act of 1885 made .no change in the city’s municipal powers, either inherent or statutory, but merely regulated their exercise . so far as related to executive officers, and incidentally to such purpose restrained what had become legislative usurpation. Under that act, so long as the city owns and operates the gas works, it must do so through the department of public works, but there is no compulsion upon the city to continue the manufacture and sale of gas at all, or to do it through its own offi- - cers, if in its legislative .judgment it is no longer expedient to - do so.

*605 The second proposition of the appellants is that the ordinance ■ assumes in respect to the public lighting to delegate a public legislative power, and in respect to the private lighting to confer a monopoly on the grantee ; and in both cases to bind the discretion of councils for a long term of years. It is manifest that this proposition in the use of the phrase “public legislative power ” comes back, as already indicated, to the contention that public lighting is a municipal duty. It is true that it is a legislative power, in the sense that it is the exercise of the will of the owner with respect to ownership of the property. If such ownership was coupled with a municipal duty such duty could not be escaped by lease or other form of delegation. But the gas works, as already discussed, are held by the city as a business corporation. If the use of gas should be so far1 superseded as to make its manufacture and sale unprofitable, there is no compulsion on the city to continue it or to embark in any new venture for the supply of a different light. And if’ the management and operation of the works can be more profitably or more conveniently carried on by a lessee, instead of by the city’s own immediate servants, the city in making a lease is determining a business question in its legislative corporate-capacity, just as any private corporation might do, but is not delegating any municipal power, legislative or other, which involves municipal duty.

In regard to the conferring of a monopoly, the appellants cite-the provision in the lease that “the city of Philadelphia agrees-that during the term of this contract it will do nothing by ordinance or otherwise which will in any way interfere with, or limit,, restrict or imperil this exclusive right hereby vested in tbe said United Gas Improvement Company, its successors or assigns,” and claim that this creates a monopoly which is void on the-ground of public policy. To this objection it would be a sufficient answer that, as already held, the city in this matter is acting in its business, not its governmental, capacity, and the owner of business property, even though a municipal corporation, may in dealing with it make such terms as in its discretion it deems best for its interest. When the owner of a business sells it with its good-will, etc., he may agree as part of the consideration to the purchaser, not to go into the same business again as a rival, within an agreed territory or for an agreed time. The city of *606 Philadelphia selling its gas-making plant and good-will may do the same thing. Bnt in the provision of the lease now under consideration the city does not assume to grant any franchise. It could not do so if it would. What the city does is to covenant that it will do no act in derogation of the right of the lessee under the grant to operate the gas works and supply the city and the citizens with light therefrom. The franchise of the lessee to furnish light is not derived from the city but from the legislature, and whether it is exclusive or not at present, or shall be exclusive or not in the future, does not and will not depend, on the city, but on the legislature. All that the city does is to agree that it will do no act itself whereby the privileges granted by it to the lessee, and intended to be exclusive so far as it is concerned, shall be limited or interfered with. This was clearly within its powers in dealing with its business property. Whether the legislature may hereafter impose upon the city a municipal duty in regard to lighting which may conflict with its present contract is a question we need not consider until the case shall arise with proper parties in interest to such a question.

It is further argued that the lease undertakes to bind the discretion of councils for a long term of years. This again ■comes back to the contention that lighting the city is a strictly municipal or governmental function, as to which councils cannot bind their successors. But as already held the city is acting in its business capacity only, and the contract binds it in that capacity. All contracts which contemplate things to be done after the immediate present must, to that extent, bind and limit the power of the contracting party. This principle has already been adjudicated in its application to the citjr of Philadelphia and the gas works in the cases of the Western Saving Fund Society v. Phila., 31 Pa. 175 , Same v. Same, 31 Pa. 185 , and Wheeler et al. v. Phila., 77 Pa. 338 .

The last proposition of the appellants is that the ordinance impairs the obligation of the city’s contract with certain holders of its bonds. This was the ground of decision in Western Saving Fund Society v. Phila., supra. But the cases are not at all alike in the facts. In Saving Fund Society v. Phila. the ordinance of 1841 distinctly pledged the revenues of the gas works to the creditors for security of payment of the bonds, and provided *607 for the management by trustees for that purpose. The ordinance of 1868, under which Mr. Campbell, one of the complainants, is a bondholder, has no such provision. The loan was made to the city, and upon the city’s general credit, without any pledge of its revenues from the gas works or any other specified source. On the contrary the ordinance gave express notice in section 4, that the terms and provisions of the ordinance of 1841 should not apply in any way to this loan. Section 3 of the ordinance requires the retention by the trustees of the gas works of a certain per cent of the amount of the loan, annually, and its payment into the city treasury, whereupon the city undertakes to apply part of it to the payment of the interest on the loan and to pay the other part into the sinking fund. These provisions are not part of the contract between the city and the loan-holders, but are terms imposed by the city on the trustees of the gas works as conditions on which the city will raise the money for the latter’s use. Without these terms the city would have had to meet the bonds at their maturity out of general taxation, and could not have looked for repayment from the revenues of the gas works unless at the option of the trustees. By these terms the city guarded itself from this risk, and secured repayment to itself from the revenues of the department for whose use it had borrowed the money. But the requirements of this section were for the protection of the city only and involved no pledge to the loanholders. They loaned on the general credit of the city, and perhaps also on the faith of the sinking fund pledged for the payment of this and other loans. But there is no averment that the sinking fund has not been kept up by appropriation from the city treasury from time to time as required by law. Without such averment and proof it does not appear that any obligation of the loanholder’ contract has been impaired.

None of the grounds on which the court is asked to interfere . can be sustained, and the injunction was rightly refused.

Decree affirmed at costs of appellants.