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East St. Louis v. Union Electric Co.

OPINION FILED MAY 18, 1967.

THE CITY OF EAST ST. LOUIS, APPELLEE,

v.

UNION ELECTRIC COMPANY, APPELLANT.



APPEAL from the Circuit Court of St. Clair County; the Hon. RICHARD T. CARTER, Judge, presiding.

MR. JUSTICE WARD DELIVERED THE OPINION OF THE COURT:

Rehearing denied September 27, 1967.

The plaintiff, the city of East St. Louis, (hereafter called the City) filed suit for a declaratory judgment in the circuit court of St. Clair County and asked that the court declare that the defendant, Union Electric Company, (hereafter called the Company) was obligated to the City under the terms of a franchise ordinance and did not have the right to deduct moneys paid to the City under a utility tax ordinance from monies otherwise due the City under the franchise ordinance.

The court entered judgment for the City. A constitutional question is concerned in this appeal by the Company.

On November 30, 1948, the city of East St. Louis passed ordinance No. 3193, the franchise ordinance. This ordinance granted to the defendant "* * * the right to construct, maintain and operate an electric distribution and transmission system in the streets, alleys and all other public places in the city of East St. Louis * * *." As consideration for the franchise to be granted, the ordinance provided that the Company would pay to the City $18,500 within five days after the ordinance became effective, and $25,000 for the year 1949. For the years 1950 through 1979 the ordinance provided that the Company would pay the City annually an amount by which "* * * 2% of the gross revenue up to but not in excess of $500,000.00 from the sale by Company in the preceding calendar year to all customers in the City of East St. Louis (except the City of East St. Louis and other municipalities, political subdivisions and municipal or governmental agencies) of electric energy for use in the City of East St. Louis; 1 1/2% on the gross revenue from all such sales in excess of $500,000.00 and up to but not in excess of $1,000,000.00; 1% on the gross revenue from all such sales in excess of $1,000,000.00 and up to but not in excess of $1,500,000.00, and 1/2% on the gross revenue from all such sales in excess of $1,500,000.00, shall exceed the aggregate amount of all payments made by Company to the City of East St. Louis, or which accrued and for which Company became liable, during the preceding calendar year, for or on account of permit and inspection fees, or any other fees, licenses, charges, taxes or other exactions of whatsoever kind or character not in derogation of the rights, franchise, permission and authority hereby granted (except general taxes on tangible property) imposed by any valid ordinance of the City of East St. Louis."

On December 2, 1948, the Company filed with the City its written acceptance of the terms, provisions and conditions of the franchise ordinance. This formed a contract which by section 9 of the ordinance would be in effect until December 31, 1979.

Thereafter, the Company fully satisfied its liability under the terms of the franchise ordinance for each calendar year up to and including 1959. However, since 1960 the Company has not made any payments to the City pursuant to the franchise ordinance. The Company has denied that it has incurred any liability under the terms of the franchise ordinance since the enactment by the City of the utility tax ordinance (No. 3698) on June 15, 1960, pursuant to authority granted to the City by the legislature in section 8-11-2 of the Illinois Municipal Code. (Ill. Rev. Stat. 1965, chap. 24, par. 8-11-2.) This utility tax ordinance provides in pertinent part that a tax be imposed on all persons engaged in certain designated occupations or privileges, including "Persons engaged in the business of distributing, supplying, furnishing, or selling electricity for use consumption within the corporate limits of the City of East St. Louis, Illinois, and not for resale, at the rate of 4.48% of the gross receipts therefrom."

In addition, section 36 of the Public Utilities Act (Ill. Rev. Stat. 1965, chap. 111 2/3, par. 36) provides in paragraph (a) that whenever a tax is imposed on a public utility by a municipality pursuant to section 8-11-2 of the Illinois Municipal Code, such utility may bill its customers "* * * an additional charge equal to the sum of (1) an amount equal to such municipal tax, or any part thereof, (2) 3% of such tax, or any part thereof, as the case may be, to cover costs of accounting, * * *." Paragraph (a) of the Act also requires that the additional charge be separately stated on the utility bill of each customer.

For the year 1960 and each subsequent year the Company has paid to the City the amounts due under the terms of the utility tax ordinance, and the Company has billed its customers a separate, additional charge equal to the utility tax required to be paid, plus 3 percent of such tax to cover accounting costs. The Company does not question the validity of the utility tax ordinance. However, the Company does contend that the payments it makes under the terms of the utility tax ordinance qualify under section 6(B)(b) of the franchise ordinance as "* * * taxes * * * imposed by any valid ordinance of the City of East St. Louis," so as to permit such utility tax payments to be deducted from any liability the Company may have to the City under the franchise ordinance and this according to the express provisions of the franchise ordinance.

Thus, the Company argues that in 1960 and thereafter to date it has had no financial obligation to the City under the provisions of the franchise ordinance, because its payments pursuant to the utility tax ordinance for these years have exceeded the total of the concerned percentages of the Company's gross revenues from the sale of electric energy calculated under section 6(B) (a) of the franchise ordinance. The Company argues that the language of the franchise ordinance in expressing the intent of the parties is clear and does not require construction. Further, the Company contends that section 3 of the utility tax ordinance unconstitutionally impairs the Company's contract with the City under the franchise ordinance by providing that such utility tax "* * * shall be in addition to the payment of money, * * * as compensation for the use of its streets, alleys, or other public places, or installation and maintenance therein, thereon, or thereunder of poles, wires, pipes or other equipment used in the operation of the taxpayers' business."

The City argues that the payments made to it by the Company under the utility tax ordinance are not "taxes" within the intendment of section 6(B) (b) of the franchise ordinance. The rationale of this position is that the utility tax is in reality an assessment against the electrical consumers and not against the Company, since the charge is authorized to be made against the consumers, the charge is in fact made against and actually paid by the consumers, and the Company receives and retains 3% of the tax monies received to cover its costs of collection.

Basically, these arguments were addressed to the trial court by the City and the Company. The court ruled for the City on the basis of the intent of the parties as expressed in the franchise ordinance. The court inter alia observed that there was no dispute that the utility tax was passed on to its consumers by the Company and that the additional charge it imposed on its consumers was sufficient to cover its accounting expenses. The court found also there was no dispute that the amount the Company received from its consumers was equal to or in excess of the amount the Company paid the City under the utilities tax ordinance.

It will be useful in considering the problem presented to review briefly certain rules of construction. We observe that the same rules which govern the construction of statutes are to be applied in construing municipal ordinances. (Village of Park Forest v. Wojciechowski, 29 Ill.2d 435; Dean Milk Co. v. City of Chicago, 385 Ill. 565.) The primary purpose of the construction of ordinances is to determine the intent of the lawmaking body as revealed by the language used. (Reitman v. Village of River Forest, 9 Ill.2d 448; City of Nameoki v. City of Granite City, 408 Ill. 33.) And a construction leading to an absurd result will be avoided, if possible. (Harrison v. People ex rel. Boetter, 195 Ill. 466; People ex rel. Barrett v. Thillens, 400 Ill. 224.) Whenever a word or phrase used in an ordinance becomes an issue in a legal proceeding its strict meaning is not as important as the sense in which it was used by the lawmaking body, (Jennings v. Calumet National Bank, 348 Ill. 108; Du Bois v. Gibbons, 2 Ill.2d 392) and "A statute or ordinance must receive a sensible construction, even though such construction qualifies the universality of its language." City of Elmhurst v. Buettgen, 394 Ill. 248, 253.

We deem that the only reasonable interpretation to be made of the two ordinances in conjunction requires that the Company's liability under the franchise ordinance be determined under the terms of such ordinance without regard to any payments the Company may have ...


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