BAILY V. PHILADELPHIA.

[184 PENNSYLVANIA STATE, 594.]

A MUNICIPAL CORPORATION in supplying its citizens with light in the streets and public places, acts under authority merely, and not under municipal obligation. Hence, a city may change its mode of action or cease to act, and the courts have no power to interfere, unless the proposed action contravenes some express statute or violates some binding contract.

A MUNICIPAL CORPORATION may lease gasworks owned by it, and which it has operated for the purpose of supplying its citizens and streets and other public places with light. Its power to make such a lease is not impaired by a statute creating a department of public works in cities of the class in question, and declaring that gasworks owned and controlled by a city and the supply and distribution of gas shall be under the control of such department.

MUNICIPAL CORPORATIONS.-Gasworks when owned by a city are held by it as a business corporation, and it may hence lease them to another corporation and give the latter the right to operate them for a period of years, and may stipulate to do nothing by ordinance or otherwise during that period to interfere with, limit, restrict, or impair the rights of the lessee.

CONTRACTS, OBLIGATION OF.-Where a loan is made to a city upon its general security, and without any pledge of its revenues, from gasworks or other specified source, the fact that the trustees of the gasworks are required to pay a certain per centum of the loan annually, to be put into the city treasury, which the city undertakes to apply to the payment of the interest on the loan, and to the creation of a sinking fund, does not entitle a bondholder to enjoin a lease of its gasworks by such city. These provisions respecting this per centum, and its retention and payment into the city treasury, do not constitute any part of the contract between the municipality and the bondholder.

Suit in equity to have a lease made by the city of Philadelphia of its gasworks declared illegal and void. The plaintiffs were residents of the city and owners of real and personal property and consumers of gas therein, and one of their number was also the holder of a certificate of loan issued by the city to procure moneys for the extension of its gasworks. The city in November, 1897, acting by its common council, passed an ordinance authorizing the execution of a contract with the United Gas Improvement Company whereby the city leased to it the gasworks, street mains, and other property, real and personal, used in connection with the manufacture and distribution of gas in the city. For more than sixty years prior to the enactment of this ordinance the city had owned its gasworks and controlled and operated them not only for public lighting, but for the supply and distribution of gas to its citizens and taxpayers. Under the ordinance of December 26, 1868, authorizing a loan and the issuing of bonds to obtain moneys with which

to maintain and extend the gasworks, it was provided that the trustees should semiannually in each year, until the loan was paid, retain out of the receipts for the sale of gas and other products of the gasworks the sum of four per cent of the amount of the loan, and pay that sum to the city treasurer, who should apply three per cent thereof to the payment of interest on the loan as it fell due, and the remainder to the commissioners of the sinking fund, to be used for the ultimate payment of the loan. The trial court refused to issue an injunction, and the plaintiffs appealed.

George Tucker Bispham, Joseph L. Caven, John G. Bell, and Peter Boyd, for the appellants.

James Alcorn, assistant city solicitor, John L. Kinsey, city solicitor, and Ernest Lowengrund, for the appellees.

602 MITCHELL, J. The gasworks 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 (Public Laws, 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 gasworks is an cos 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": Commonwealth v. De Camp, 177 Pa. St. 112. The particular provisions of the act which are relied on by the appellants are: "There shall be the following executive departinents: . . . . Department of public works": Act 1895, art. 1, sec. 1, "The department of public works shall be under the charge of one director who shall be the head thereof. Gasworks 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": Act 1895, art. 4, sec. 1. "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": Act 1895, art. 16. 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 gasworks 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 04 all doubts the right of alienation is given in express words in the charter of 1789, all the powers granted in which were preserved by the consolidation act (Act, February 2, 1854, sec. 6, Public Laws, 25) and which appears to be still in force: Commonwealth v. Walton, 182 Pa. St. 373; 61 Am. St. Rep. 712. 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 analogy 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 gasworks, 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 officers, 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 gasworks, as already discussed, are held by the city as a business corporation. If the use of gas should be so far 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 the said United Gas Iraprovement 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 goodwill, 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 goodwill may do the same thing. But 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 gasworks 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