Janes v. City of Racine

155 Wis. 1 | Wis. | 1913

ViNJE, J.

Briefly summarized, the material contentions of appellants are: (1) The provisions of ch. 665, Laws of 1907, should have been complied with in acquiring the plant and in submitting the question of the purchase thereof to the voters; (2) the question of acquiring the plant was improperly submitted to the voters, because (a) the city clerk had no authority to frame the question to be submitted, and (b) the question as framed was misleading; (3) the vote was illegal because voting machines were used; (4) the city should have provided a fund for the payment of' the plant before the vote to purchase was taken; (5) the city’s constitutional limit of indebtedness was or will be exceeded by tbe purchase; (6) tbe city bas not and cannot comply with tbe constitutional requirement that before or at tbe time of incurring any indebtedness it shall provide for tbe collection of a direct annual tax sufficient to pay tbe same as therein provided; and (I) tbe city, by reason of ordering extensions to be made to tbe plant after it voted to purchase tbe same, is estopped from further prosecuting tbe proceedings.

1. Was it necessary to comply with tbe requirements of tbe provisions of cb. 665, Laws of 1907, in acquiring tbe plant and in submitting the question of tbe purchase thereof to tbe voters ? If it was, then tbe. proper proceedings weie not taken, for cb. 665 requires that tbe resolution or ordinance authorizing tbe construction or acquisition of a plant shall prescribe tbe parts of tbe expense of such acquisition or purchase to be paid out of the general fund of tbe city, or from tbe proceeds of bonds issued pursuant to law, or from tbe proceeds of mortgage certificates, as therein provided. Sec. 927- — 12, Stats. 1911. It also requires that tbe notice of election for tbe acquisition or purchase of the plant shall state, among other things, tbe proposed manner of payment for tbe same. Sec. 927 — 14, Stats. 1911. And sec. 927— 15 thereof provides that the form of tbe question submitted to tbe voters shall be substantially as follows: “Shall (designate plant, equipment or part thereof) be acquired or constructed and mortgage certificates ( (and) (or) bonds) be issued therefor? Yes □ No It will be observed from these requirements of cb. 665 and tbe proceedings taken by tbe city as set' out in tbe statement of facts that cb. 665 was not complied with. Cb. 665 was approved July 16, 1907, and published tbe next day. Tbe general Public Utility Law (cb. 499, Laws of 1907) was approved July 9, 1907, and published July 11, 1907. It is claimed by appellants that these two laws furnish but a single complete method of acquiring public utilities by cities, and that they supplement each other. jThe respondents claim that they are independent .acts'and that proceedings may be had under the one or the otfyer as they may apply to the situation confronting cities in the acquisition or construction of public utilities. Ch. 499, Laws of ,1907, is the general Public Utility Act and is found in tíre Statutes of 1911 in ch. 87, entitled “Railroads,” constituting secs. 1797m,' — 1 to 1797m — 109, inclusive, while, ch. 665, Laws of 1907, is found in ch. 41 thereof, entitled “General Provisions Relating to Municipalities, Including Cities of Both Classes,” and! constitutes secs. 927 — 11 to 927 — 19, inclusive.

The provisions for acquiring a public utility under the general acts-are found in secs. 1797m,T — 80 to 1797m — 86,. with a curative provision added in 1911 as sec. 1797m— 86m. They nowhere require, either in the resolution or ordinance of the council, in the notice of election, or in the-.question submitted, that the manner of providing the fund shall be specified. It is obvious that if ch. 665 applies to the-acquisition of a public utility -under secs. 1797m — 80 to-1797m — 86, inclusive, it must be reasonably adapted to> apply'to and meet the situations therein contemplated. For it is impossible to believe that the legislature, having under consideration both these acts at the-same time and intending them to be supplementary to eaqh othér, should include provisions in ch. 665 that could not reasonably be complied with in the acquisition of a public utility under the general act. And yet, if the acts are supplementary, that is just what the legislature did. By the general act the railroad commission must fix the amount of property to be purchased, the price thereof, and the terms and 'conditions of the payment. See. 1797m — 82. Until this is. done the city cannot know .what amount of money it must pay for the plant nor the .terms and conditions of the payment. Such determination cannot be made by the railroad commission until after the city is required to act both by its. council and its electors. It would therefore be unreasonable to require the city council and the voters to determine what part of the expense should be paid out of the general fund, what part from the proceeds of bonds, and what part from the proceeds of mortgage certificates, before they knew the amount to be raised. True, the word “part” denotes proportion or ratio merely and not absolute amount. But it does not seem reasonable to require a city to determine in what proportion it will raise funds before it knows the amount of funds to be raised. Moreover, the railroad commission must fix the terms and conditions of the sale, and they may be important factors in properly determining how the funds shall be provided. But that ch. 665 contemplated that the amount of money to be raised was known before the city was required to act, and that the amount of each part should be specified in the resolution, or ordinance, notice of election, and question to be submitted to the voters, is rendered almost certain by the language of sec. 927 — 17, which requires the mayor and clerk of the city, in case mortgage certificates are called for in the ordinance or resolution, notice of election, and question submitted to the voters, to issue mortgage certificates “for the purpose-and to the amount stated.” The words amount stated can refer only to the amount stated in such ordinance or resolution, notice of election, and question submitted to the voters.

Ch. 665 furnishes in itself a complete procedure for acquiring a public utility in cases where it is applicable, and so does the general Public Utility Act. Neither refers to the other. Each uses expressions equivalent to “as herein provided,” and does not seem to contemplate the aid of supplementary statutes in completing the proceeding. The language of sec. 1797m — 81 t'o the effect that if the city shall have determined to acquire an existing plant “in the manner provided in the preceding section,” clearly indicates that no other procedure than that contained in the section referred to was in the legislative mind. So the language in sec. 927 — 11 that any city may construct or acquire a plant “as herein provided,” and that it' must comply with certain specified requisites before it does so “under this section,” elea-rly indicates that ch. 665 was ■ considered complete and independent by the legislature. •' It required the question of purchase to be submitted to the-voters. The Public Utility Law as first enacted did not so require, but was amended in 1911 so as to require it. No'reference in such amendment was made to ch. 665, and If-all proceedings had to comply with the latter no amendment was necessary.

• A careful study of ch. 665Teads to the conclusion that the primary purpose of its enactment was to enable cities to construct or purchase plants by the issue of mortgage certificates. Bonds and cash were also included to make-it more elastic. It seems peculiarly adapted to the construction or acquisition of plants under sub. 1 and 2 of see. 1797m — 79, which pro-wide for the construction, equipment, and operation of a plant by a municipality, and the purchase of any part of any plant by_an agreement with a public utility, respectively. Both deal with situations where, the amount to be raised can be definitely ascertained. The procedure of the general Public Utility Act seems more applicable to the acquisition of a plant under sub. 3 and 4 of said see.'1797m — 79, which provide, respectively, for the acquisition of a plant by condemnation and by purchase pursuant, .to .the Public Utility Law, where the amount to be raised cannot be definitely ascertained until long after the municipality is required to vote on the subject.

The conclusion reached is that the city properly began proceedings under the general Public Utility Law, and that it was not necessary to comply with thé provisions of ch. 665, as that is an independent act. - ¡ -

2. Was the question of acquiring' the plant improperly submitted to the voters ? The city council passed a resolution providing for the submission to the voters of the question of “purchasing the Racine Water Company plant.” It appears that the city council did not determine in what particular form the question should be submitted to the voters, nor direct the city clerk to prepare the question. The latter, however, prepared a notice of election announcing that the question, “Shall the city of Racine purchase its water works,” would be voted upon at the ensuing spring election, .and such was the form of the question voted upon.

Appellants claim (a) that the city clerk had no right to determine the form of the question, that being the duty of the council, and (b) that the form of the question was misleading, and was not equivalent to a vote upon the question of whether the city should purchase the Racine Water Company’s plant. It is needless to consider or determine the power of the city clerk, in the absence of any directions from the council, to prepare the form of the question, for it appears that on the 2d day of May, 1911, the council passed a resolution reciting that the city of Racine by a vote of the majority of the electors voting thereon had determined to purchase the Racine water works plant. The passage of such a resolution with knowledge of all the facts was a ratification of the city clerk’s acts in preparing the question for the voters. What the council could do in the first instance respecting this matter it could subsequently ratify.

The claim that the voters were misled by the form of the question is not well founded. The evidence fails to disclose that there was more than one water works plant in Racine, and in view of the public discussion of the question previous to election of the purchase of the Racine Water Company’s plant, as found by the court, it must be apparent that such plant was meant and understood by the question “Shall the city of Racine purchase its water works ?” No voter was misled. There was only one plant subject to purchase, and that was the one in fact voted for, namely, the Racine Water Company’s plant.

In State ex rel. Elliott v. Kelly, 154 Wis. 482, 143 N. W. 153, it was held, tbat a vote for the office of “chamber of commerce” was a vote for the office of “superintendent of trade and commerce,” because the voters were not misled by the difference in terms. IJhe reasons for'holding that no one was misled are much stronger in this base.

3. The question of whether or not votes cast by means of voting machines are votes “by ballot” within the meaning of sec. 3, art. Ill, of the constitution, • which requires that “All votes "shall be given by ballot except for such township officers as may by law be directed to be otherwise chosen,” is an interesting one. The Massachusetts court divided on it. See Opinion of Justices, 178 Mass. 605, 60 N. E. 129. Their constitution, fiowqver, requires that the voting, there construed, should be by “written vote.” Michigan, in Henderson v. Saginaw Elec. Comm’rs, 160 Mich. 36, 124 N. W. 1105; Illinois, in Lynch v. Malley, 215 Ill. 574, 74 N. E. 723; and Minnesota, in Elwell v. Comstock, 99 Minn. 261, 109 N. W. 113, 698, have held votes by; voting machines valid under constitutional provisions similar to orrr own, while Ohio, in State ex rel. Karlinger v. Board, 80 Ohio St. 471, 89 N. E. 33, and reaffirmed in State ex rel. Weinberger v. Miller, 87 Ohio St. 12, 99 N. E. 1078, held them void.

We deem it unnecessary To decide the question in this case, for the reason that it was entirely within the discretion of the legislature to grant to or withhold from the electors the right to vote on the subject of the construction or acquisition by a municipality of water works. Having granted the. right, it could attach to it the reasonable condition that the vote should be in the form prescribed by statute. Secs. 44 — 1 to 44 — 18, Stats. 1911, provide for the use of voting machines. It does not appear that any of the requirements therein contained were violated. Hence it must be held that a valid vote was had on the question of the purchase of the plant.

4. The contention that sec. 13, art. I, of the constitution, providing that “the property of no person shall be taken for public use without just compensation therefor,” required the city to provide a fund for the payment of the plant before voting to purchase, is untenable for two reasons. In the first place, conceding for the purposes of the argument that the taking of the vote was an election to condemn, the rule that a fund must be provided beforehand for the payment of the property taken does not apply to municipal corporations, because it has been held that the taxable property of the municipality constitutes a sufficient pledge or fund for the making of the just compensation contemplated by the constitution. Smeaton v. Martin, 57 Wis. 364, 15 N. W. 403; Smith v. Gould, 59 Wis. 631, 18 N. W. 457; State v. Hogue, 71 Wis. 384, 36 N. W. 860; Kimberly & C. Co. v. Hewitt, 79 Wis. 334, 48 N. W. 373; State ex rel. Burbank v. Superior, 81 Wis. 649, 51 N. W. 1014; Haubner v. Milwaukee, 124 Wis. 153, 167, 101 N. W. 930, 102 N. W. 578. That the taxable property of the municipality is liable for any valid debt created by it is guaranteed by the mandate of the constitution itself requiring the levy of a direct annual tax sufficient to pay the principal and interest within twenty years. Sec. 3, art. XI.

In the second place, the acquisition of the plant by the city is not a condemnation but a purchase under the terms and conditions prescribed by the Public Utility Law. Sec. 1797m — 78 provides:

“Any public utility accepting or operating under any license, permit or franchise hereafter granted shall, by acceptance of any such indeterminate permit, be deemed to have consented to a future purchase of its property actually used and useful for the convenience of the public by the municipality in which the major part of it is situate for the compensation and under the terms and conditions determined by the commission, and shall thereby be deemed to have waived the right of requiring the necessity of such taking to be established by the verdict -of a jury, and to have waived all other remedies and rights relative to condemnation, except such rights and remedies as are provided in secs. 1797m — 1 to- 1797m — 109, inclusive.”

By accepting the indeterminate permit the Racine Water Company stipulated to sell its property to the city under the terms and conditions contained in the Public Utility Act as supplemented and safeguarded' T>y the constitution of the state. This it was competent to do, and this it did by accepting an indeterminate permit. We are therefore called upon only to see that the provisions of such act and of the constitution are complied with in the making of the purchase.

5. Appellants claim that two constitutional provisions, found in sec. 3, art. XI, incapacitate the city from making thé" purchase. The first reads:. “No . . . city . . . shall be allowed to become indebted in any manner or for any purpose to any amount, including existing indebtedness, in the aggregate exceeding five per -centum on the value of the taxable property therein, to be ascertained by the last assessment for state and county taxes previous to the incurring of such indebtedness.” The second provides: “Any . . . city . . . incurring any indebtedness as aforesaid shall, before or at the time of doing so, provide for the collection of a direct annual tax sufficient to pay the interest on such- debt as it falls due, and also to pay and discharge- the principal thereof within twenty years from the time of contracting the same.” Their claim is that when the city voted to purchase the plant on April 4, 1911, it incurred the indebtedness within the meaning of the first constitutional provision above quoted, though the amount of the indebtedness remained to be determined later by the railroad commission. At the time the vote was taken .the previous assessment of the city was $24,464,231; its indebtedness was $664,000. The tentative value of the plant was fixed at $775,000. If the tentative value of the plant be taken as the amount of the debt, then that amount, added to the indebtedness of the city, would exceed five per centum of the assessed valuation by over $200,000, and the city could not lawfully make the purchase if the debt is held to be incurred when the city votes to buy.

The method of acquiring a public utility under the statute is a complex one. Between the time the option to purchase is exercised by the city and the time it takes actual possession of the acquired utility a considerable period of time must necessarily elapse and much work must be done by the railroad commission. It is given a year in the first instance within which to complete its labors after notice is served upon it by the city. Sec. 1197m — 82. The proceeding is sui generis, and but little aid can be had from adjudicated cases in determining when, under the provisions of the statute, the city incurs the indebtedness within the meaning of the constitutional provision first above referred to. It is evident that at the time the vote is taken to acquire the plant only a rough guess or estimate can be made of the total amount that may finally have to be paid therefor, because, pursuant to the law, the railroad commission must determine the quantum of property to be taken, the price to be paid therefor, and the terms and conditions' under which the purchase price shall be paid. And sec. 1797m — 82 says: “The compensation and other terms and the conditions of sale and purchase thus certified by the commission shall constitute the compensation and terms and conditions to be paid, followed, and observed in the purchase of such plant from such public utilityand further, “Upon the filing of such certificate [containing the price and terms of sale] with the clerk of such municipality the exclusive use of the property taken shall vest in such municipality.” It is evident from this language of the statute that up to the time the certificate is filed the public utility exercises full control over its property the same as it did before the city elected to purchase. The statute nowhere prescribes when the title to the property shall vest in the municipality. But it is evident from the provisions of the act taken collectively as well as from specific language in particular sections that the transaction for; the purchase of the plant is not deemed complete in all its essential details until the railroad commission files its certificate.' _ Then the exclusive use of the plant is transferred -to the municipality, and if payment is not then made-interest must be allowed in order that the purchase price shall constitute just compensation. Appleton W. W. Co. v. Railroad Commission, 154 Wis. 121, 142 N. W. 476. Up to that time the public utility exercises full control over its property the same as it did before the city elected to purchase. It is true that in the Appleton Gase, supra, the court said; “The moment the municipality exercises its option to purchase the. plant of a public utility operating under such a permit [an indeterminate one] the life of such permit is terminated, and henceforth the same possesses no more value than a franchise for a definite term of years upon the expiration of the term.” But that was stated with reference to the question of whether or not the public utility should be allowed compensation for the alleged value of the indeterminate permit. It was not thereby intended to determine or fix the precise time the city incurred a debt in the purchase of a public utility. The language used was apt and appropriate to the subject then discussed by the court, but it has little relevancy to .the question now under consideration.

■ In a case where the probable'value of the plant intended to be purchased, together with the indebtedness of the city, approximates or slightly exceeds.the constitutional amount of indebtedness a city may incur, it can never be accurately determined until the railroad commission files its certificate whether or not the five per centum limit of indebtedness is exceeded. To hold that the amount of the purchase price when ascertained by the railroad commission relates back and constitutes an indebtedness from the time the vote is taken might in many cases result in invalidating obligations apparently lawfully incurred by the city during the interval that elapses between the time the vote is taken and the time the railroad commission fixes the amount of the purchase price. Moreover, it would r4sult in holding the city presently indebted for a plant which is still being operated by a public utility, and which in all probability will continue to be so operated for a considerable length of time, the profits of which operation will accrue to the public utility. On the other hand, if it be held that the indebtedness is incurred, and the obligation to pay becomes fixed, when the certificate is filed, and when the exclusive use of the property, and presumably the title also, vests ir£ the municipality, then it can always be ascertained with exactness at the time the debt is incurred whether or not the constitutional provision above referred to is violated. Upon reflection it becomes plain that the amount of the debt must be ascertainable at the time the constitution requires- the municipality to determine whether it has exceeded its constitutional limit of indebtedness, and that is at the time the debt is incurred.

In Crogster v. Bayfield Co. 99 Wis. 1, 17, 74 N. W. 635, 77 N. W. 167, the court says :

“The limit of such indebtedness, as fixed in the constitutional provision in question, is 'five per centum on the value of the taxable property’ in the county, 'to be ascertained by the last assessment for state and county taxes previous to the incurring of such indebtedness.’ The manifest purpose of ascertaining such value of the taxable property in the county by such 'last- assessment’ previous to the incurring of such indebtedness was to enable all parties to know in advance whether the debt so contracted was within or exceeded the constitutional limit. In the language of Mr. Justice Lama.b, speaking for the whole court, in one of the cases cited: 'In this case the standard .of validity is created by the constitution. In that standard two factors are to be considered,— one the amount of the assessed value, and the other the ratio between tbat assessed -value and the debt proposed.’ Lake Co. v. Graham, 130 U. S. 683, 684, 9 Sup. Ct. 654. . . . As indicated in that opinion, the two standards of validity created by the constitution, to wit, the amount of such assessed value and the ratio ^twcen that Value and the debt proposed,’ are indispensable requisites, and must always be kept in mind in determining the validity of any such contract.” Page 11.

In no case can the ratio between the assessed valuation and the indebtedness of the city, including the proposed debt, be determined until the qmount of the proposed debt is known. Therefore it must be held that .within the meaning of the constitution a debt is not incurred until its amount is ascertainable. Because until such amount is ascertainable it is impossible to apply the test required by the constitution, namely, the ratio between the. indebtedness of the city and the last assessed valuation. -It cannot be that such a test was intended to be appliéd before it was possible to do so. The constitution evidently contemplates that there should be a definite debt to which the test can be applied, and if there is no such definite debt it cannot be a debt within the meaning of the constitution. It is merely a debt in fieri. By a debt incurred the constitution means a debt whose ratio to the limit of indebtedness can be ascertained at the time it is incurred. At least it' must follow that where the constitutional test cannot be applied" it cannot be said the constitution is violated.

Our attention is called by appellants to a number of cases, some arising under statutory provisions and some under contracts, wherein it has been held that when a municipality agrees or contracts or elects under a statute to do a certain thing calling for the payment of money, an indebtedness is then" incurred. Such cases are of little value in determining when a city incurs an indebtedness under the proceedings of the Public Utility Act. As before stated, the transactions involved are many and are necessarily separated by long intervals of time, and it seems more logical and more in consonance with the legislative intent to hold that such indebtedness arises when the amount and terms thereof become fixed and the exclusive use of the property vests in the municipality, than to say that it is incurred at the initial step of the proceedings and long before the transactions are fully and finally consummated.

The case of Crogster v. Bayfield Co. 99 Wis. 1, 74 N. W. 635, 77 N. W. 167, is relied upon as authority for the proposition that the debt is incurred when the vote to purchase is taken. It will be seen in the Grogsier Case that the county voted to issue $240,000 of bonds to aid in the building oí a railroad. If both parties fulfilled their contract, the exact amount of the indebtedness was known when the vote was taken and the debt was held to be incurred. Not so in the instant case. Besides, 'in the Grogsier Case the statutory provisions were different. That statute (sec. 945, R. S. 1878) expressly provided for the execution by the railroad company under its seal of a definite proposition in writing to be by it' delivered to the municipality.. All the terms and conditions were fixed. The next section provided two different ways in which the definite proposition might be accepted by the municipality “so as to become mutually obligatory;” one by signature, the other by an election. No matter in which way it was accepted, the statute declared that if accepted “then such proposition shall be deemed obligatory as a mutual agreement.” We have no such statute under consideration in the present case. Quite the contrary appears, as has been indicated. The final consummation of the proceedings is not reached till the railroad commission files its certificate. Then the terms and the mutual agreement become fixed, then the public utility furnishes the consideration for the debt, and then the debt is created within the meaning of the constitution. Merrill R. & L. Co. v. Merrill, 80 Wis. 358, 49 N. W. 965; Walla Walla v. Walla Walla W. Co. 172 U. S. 1, 19 Sup. Ct. 77. Tbe last assessment previous to tbe filing of sueb certificate will govern. Since tbe assessment of 1912 was over $50,000,000, it must be presumed that tbe city will not exceed its constitutional limit of indebtedness in purchasing tbe plant. ,

6. Can tbe constitutional provision requiring tbe city to provide for tbe collection of 'a direct annual tax to pay tbe indebtedness created by tbe purchase of tbe plant be complied with under tbe provisions of thp statute ? 'It is true tbe act nowhere contains any specific direction for its being done, nor any provision for doing it." There was no necessity for tbe statute providing that it should be done, for tbe constitutional requirement is paramount and must be read into tbe law, whether expressed therein or not. It would certainly, however, have been appropriate for tbe legislature to have provided in specific terms for tbe opportunity of tbe city to do so. Whether such omission was due to an oversight or to tbe fact that the legislature considered that by intrusting tbe proceedings to such an important state agency as tbe railroad commission ample opportunity would by it be given tbe city to' comply with the constitution, is immaterial. Under tbe law as it stands it becomes the duty of tbe railroad commission, after it has determined1 the amount of tbe purchase price and tbe terms and conditions of the sale, to notify tbe city of tbe result of its action and to give it a reasonable time after such notice and before tbe certificate is filed to make provision for tbe collection of the direct annual tax required by tbe constitution. And upon such notice it likewise becomes tbe duty of tbe city, within a reasonable time, to comply with the constitutional provisions. And if, in view of the terms and conditions of sale imposed by tbe railroad commission, it becomes necessary to issue bonds to procure tbe purchase price, it can do so without any further vote of tbe electors. Their vote to purchase tbe plant must be held to include a vote to raise money by tbe issuance of bonds if that method be deemed necessary or expedient by the city council.

1. No estoppel against the city to consummate the proceedings arises from the fact that it ordered extensions to the system after voting to purchase the plant. Public health and convenience, as well as the statute, require that such a public utility shall give adequate service. And such service must continue during the interval that elapses between the time the city elects to purchase and the time the transactions are finally concluded by the filing of the certificate. Up to that time the plant and property belong to the public utility, and the city must pay for the plant as it exists at the time it is turned over to it, so no injustice is done the utility by requiring it to continue to give adequate service during’ the time the proceedings are pending.

By the Court. — Judgment affirmed on both appeals.

Case Details

Case Name: Janes v. City of Racine

Court Name: Wisconsin Supreme Court

Date Published: Oct 28, 1913

Citation: 155 Wis. 1

Court Abbreviation: Wis.