291 N.W. 709 | Neb. | 1940
Lead Opinion
This is an original action in mandamus. The relator is the Consumers Public Power District, of Columbus, Nebraska, and such relator prays that an alternative writ of mandamus should issue, requiring its own secretary, in accordance with a resolution duly passed, to sign, execute and deliver a memorandum of agreement, exhibit C, dated November 20, 1939, which is supplementary to a memorandum of agreement, dated September 6, 1939, marked exhibit B, also attached to the petition, which the secretary has duly signed. The sole question at issue is whether this supplementary agreement, which the secretary refuses to sign, is valid.
The relator is organized under Senate File 310, ch. 86, Laws 1933, as amended, and found in sections 70-701 to 70-719, Comp. St. Supp. 1939, being an act relating to irrigation, and also to the generation, distribution, transmission, sale, and purchase of electric energy for lighting, heating, power, and other purposes, and to provide for the creation and incorporation of public power districts.
The relator, Consumers Public Power District, was organized August 5, 1939, the electors of said relator district being exactly the same as electors of the city of Columbus.
The application for mandamus was filed January 2, 1940, by the Consumers Public Power District against Walter A. Boettcher, its secretary, and sets out, in brief, the following facts: That the Consumers Public Power 'Dis
On December 28, 1939, Walter A. Boettcher, respondent, filed a showing in this court in opposition to the proposed mandamus writ, which sets out: (1) That the questions involved are of great public interest, and important, and should be speedily decided; (2) that in order to inform the court upon the proposed issues the respondent attaches a copy of the answer which the respondent will file if the court takes jurisdiction of the case, wherefore the respondent prays that, if this court takes jurisdiction, he may be permitted to file his answer and be given opportunity to be heard by written briefs and oral argument.
The answer attached to the showing by the respondent
The respondent in his answer further alleges that he would be subject to personal liability in a large and unknown amount if he executed and delivered the proposed contract, which is ultra vires, illegal and void as against public policy for the reasons hereinabove set out. Wherefore, respondent prays that the court may deny the issuance
It is necessary to call attention to a few points in exhibit A, the printed lease of 41 pages, which lease recites the property owned by the Northwestern Public Service Company in the counties of Butler, Colfax, Merrick and Platte, which properties are said to have an agreed value of $1,259,000; that all of said properties are specifically described as to real estate and personal property in exhibit A, attached to said lease. It was provided in paragraph 4 that the lease and none of its provisions should become effective until a new valid 25-year franchise was granted to the Northwestern Public Service Company by the city of Columbus in substantially the form set out; that the Central National Bank of Columbus is appointed trustee, and may appoint such bonded employees or agents as are satisfactory to both parties; that the monthly income shall be disbursed by the trustee on the 15th of each month by paying, first, to Guy C. Myers, $524.58 each month for 60 months, and to the company $7,327.47 each month for 60 months and $7,852.05 each month thereafter for the use of the properties.
In this printed lease, exhibit A, paragraph 8 provides that the title to everything, including additions, replacements, and improvements, shall at all times remain in the Northwestern Public Service Company unless and until the district shall have paid in full and in cash the sum of $1,259,000, with 5 per cent, interest, at which time the title shall be conveyed to the district.
Paragraph 14 provides .that, on the other hand, the Consumers Public Power District holds the company harmless of all liability after date possession is given.
The ones who drafted this lease did not overlook the fact that the cities have had in Nebraska the right to acquire such electric light properties by eminent domain, and therefore provided in paragraph 16: “It is agreed that this lease agreement shall not and cannot prevent condemnation proceedings of part or all of the leased properties by any of the
Paragraph 21 gives the district the right at any time during the term of the lease to purchase the leased properties at a price of $1,259,000, with interest at 5 per cent, from the date possession of the leased premises was delivered to the district.
Paragraph 22 states that, when the full purchase price, with interest at 5 per cent., is paid in ca'sh, the company agrees to sell and convey to the district, its successors or assigns, for the sum of $10, all of the leased properties, with improvements and additions thereto, together with a release of the trust indenture, dated January 1, 1927, and given to the Equitable Trust Company of New York and another as trustees, to secure first mortgage gold bonds in the amount of $7,758,500, which bonds are due January 1, 1957.
Paragraph 39 provides that the district shall comply with the provisions of Legislative Bill No. 168, 1939 session, and shall annually pay out of its revenues to the state, counties, cities, villages and school districts in which the leased properties are located, in lieu of taxes, a sum equal to the amount that was received during the year immediately preceding the purchase of said property by said district.
Exhibit B, attached to said petition, is the agreement of September 6, 1939, between the Consumers Public Power District and the city of Columbus, and provides as follows: That at a meeting of the mayor and council on August 21, 1939, with the officers of the district, it was agreed that, in the event the Consumers Public Power District acquired said properties, it would, upon the payment of the indebtedness of the district incurred in such purchase, transfer and convey to the city that portion of said properties of the
“1. In the event District makes default in any of its obligations under said lease, which is not cured within the period specified in said lease, City, as assignee of District, shall have the concurrent right to purchase the properties referred to in said lease in accordance with the provisions thereof.
“2. City shall also have the right to acquire the distribution system within the Corporate limits of the City of Columbus. at any time upon payment by it of the proportionate unpaid balance of the purchase price of said distribution system under said lease, in which event District shall convey to City all of its right, title and interest in and to said properties.
“3. Upon payment of the indebtedness of District incurred in such purchase, District shall upon affirmative request of the Columbus City Council transfer and convey to City that portion of said Columbus Division, consisting of the distribution system within the corporate limits of City, for a consideration of One Dollar ($1.00).”
Exhibit C, attached to the petition, is the vital memorandum of agreement between the Consumers Public Power District and the city of Columbus to modify and clarify paragraph 2 of the agreement hereinabove set out. It provides that, if the district buys the properties leased from the Northwestern Public Service Company, the city of Columbus agrees to buy from the district, and the district agrees to sell to the city, all of the properties used in the distribution of electric energy to consumers, both wholesale and retail, located within the city of Columbus, upon condition that the city shall pay to the district an amount which would reduce the unpaid portion of the indebtedness incurred in the purchase by the district of said properties, or the amount of bonds then outstanding, to an amount such that the revenues of that portion of the properties remaining in the possession of the district would be sufficient to pay the
In Drummond v. City of Columbus, 136 Neb. 87, 285 N. W. 109, it was held by this court under section 18-1601, Comp. St. Supp. 1939, that a city election, held in Columbus to purchase a portion of this same public utility, was void. The ballot failed to state clearly the substance of the proposition submitted to the voters, who were thereby misled as to the material questions of fact upon which they were voting. It now appears that there were continued negotiations respecting the purchase of the Northwestern Public Service Company’s plant in the city of Columbus, and finally a price of $1,259,000 was agreed upon, and all of the details relating to the purchase of this private power company’s property had been worked out prior to the organization of the Consumers Public Power District in the case at bar.
Many questions are raised by the record set out in this case. It may be questioned whether the present city council has the right to bind future city councils by the agreement, which can run as long as 25 years.
Could the city contract to buy this electric system when the formula in reality fixes no definite price to be paid and the statute requires that the price shall be fair and reasonable? The price to be paid under the formula depending upon the amount of bonds outstanding and the allocation of earnings.
Can the present city council of Columbus surrender its clear statutory power to purchase this electric system by the exercise of its power of eminent domain and fixing its value by a court of condemnation?
As to the first question above, the general rule seems to be that, as to-the binding effect of legal contracts extending beyond the terms of officers acting for the municipality, there exists a clear distinction between governmental and
“If the contract in question is valid, it constitutes a bargaining away of a right given to the city, to be constantly exercised for the welfare of the city. It is difficult to see what changes the future may demand and require.” Connersville Hydraulic Co. v. City of Connersville, 95 Ind. App. 234, 173 N. E. 641.
It has been very evident that cities have been greatly handicapped by limitations upon the power to borrow, imposed by constitutional and statutory provisions, which have proved to be serious obstacles in securing the share of millions of dollars being expended by the federal government. An effective method of avoiding constitutional limitations has been the revenue bond, which is a negotiable obligation, payable entirely from revenues of a public utility constructed with the proceeds. Courts have held that a revenue bond does not come within constitutional provisions limiting the amount of indebtedness. 10 So. Cal. Law Review, 333 (March, 1937) ; 22 Cornell Law Quarterly, 64 (Dec. 1936).
The most comprehensive discussion of revenue bond financing which has come to our attention is that written by E. H. Foley, Jr., general counsel of the Federal Emergency Administration, and found in 35 Mich. Law Review, 1-43,
England and Scotland used revenue bonds for public financing much earlier than did the United States. The Leith Dock Commission, Clyde Navigation Trust, Dundee Harbor Commission, and Glasgow Harbor Commission all issued revenue bonds as early as 1817. 12 Ind. Law Journal, 266 (April, 1937).
When municipal revenue bonds are issued, provisions of the Constitution and statutory law in force when they are issued become part of the bondholders’ contract in all respects, in the same manner as the statutory law becomes a part of the contract evidenced by a municipal tax obligation. Brewer v. City of Point Pleasant, 114 W. Va. 572, 172 S. E. 717.
The law in reference to a city acquiring an electric light and power plant is found in sections 19-701 to 19-707, Comp. St. 1929. It provides briefly that, whenever the electors of a city vote to acquire an electric system located within said city, or partly within and partly without, even though its franchise may not have expired, the city shall have the power and authority, by an exercise of the power of eminent domain, to appropriate and acquire, for public use of such city, such electric system. If 60 per cent, of the votes cast at the special election are in favor of the purchase thereof, the city council shall certify such result immediately to the supreme court, which court shall within 30 days appoint three district judges of the state to constitute a court of condemnation, and such court shall find the value of the system by taking evidence of witnesses, and has the power to require the production of all books and papers and everything deemed necessary for a full investigation and ascertainment of the value of said system. Upon the fixing of the value of such system by said court of condemnation, appeals may be taken, and upon final judgment being pronounced said city shall have the power to issue and sell bonds to pay the amount of the value and judgment without a vote of the people.
There can be no question but that the legislature antici
This law, which has been in effect since 1919, provides that a city of the first or second class may acquire private property for public utilities by eminent domain and a court of condemnation, as set out in sections 19-701 to 19-707, Comp. St. 1929, and -we are now faced with the recent law enacted in 1933, and amended in 1937 and 1939, which provides that a public power district may be organized in a municipality according to the plan followed in the organization of the Consumers Public Power District of the city of Columbus, and that such public power district may purchase private corporations engaged in public utility business, and may finance such purchase by the issuance of revenue bonds, hypothecating its revenue, incomes, receipts or profits to pay either the federal government or others to whom it owes for the purchase of such systems, and in this section 70-712, Comp. St. Supp. 1939, a complete and detailed plan has been set out by our legislature, whereby such public power district may sell to any city any electric systems which it has so purchased when and if the board of directors of such public power district and the city shall agree upon such terms as each may deem fair and reasonable. Such section further provides that, if the public power district and the city fail to agree, the city shall purchase from the public power district through the provision for acquiring the same through eminent domain.
We are, therefore, faced with the fact that the legislature in 1933 provided an alternative method to be used only in case a city desired to purchase a public utility system of a public power district, in which case alone the terms of such purchase could be arrived at by the agreement of the parties. There is no indication that the latter statute repealed the former by implication, but there is clear evidence that the subsequent legislation is not inconsistent with the former, because, in case of a failure to agree upon the
We reach the conclusion that there is no conflict between the two statutes, but the last one gives the right to a city, when buying a system from a public power district, to reach the terms of the sale by agreement, and not by condemnation, and if this should be considered as a conflict between the two methods provided by these laws the earlier enactment must give way to that extent to the later, but in this case it is better to take the position that the later act is simply cumulative, and gives a new method for doing the same thing. 1 Lewis’ Sutherland, Statutory Construction (2d ed.) 461, sec. 247, and 540, sec. 280.
In the brief of the respondent it is insisted that Grantham v. City of Chadron, 20 Fed. (2d) 40, is directly in point, and adds: “A careful search of the authorities has failed to disclose any other case where the facts are close to the case at bar and where the same question of law was directly involved, and relator cites none in its brief. It is therefore contended that the above cited case is entitled to great respect and persuasive force as an authority which might be followed by this court in this case upon the fundamental question of whether the statutory right to condemn at fair and reasonable value can be contracted away for all future time either by providing a fixed price which is mandatory or by making a formula which will do the same thing or at least is not based on the then fair and reasonable value standard.”
We will, therefore, examine with care this Grantham case. It was decided by the circuit court of appeals of the eighth circuit in 1927. It was appealed from the United States district court of Nebraska, J. W. Woodrough, judge. The city of Chadron, Nebraska, proceeded by regular ordinance to make appropriations for a right of way for a pipe line for a water system under the law now known as sections 16-601 and 16-602, Comp. St. 1929. In the condemnation proceedings the appraisers awarded $600 as the
It is our understanding that all the authorities agree with this Grantham decision that municipal and water supply systems, being entirely in the interest of public health and safety, are handled by the city under its police power. 11 Am. Jur. 1020, sec. 271. But, on the contrary, it is held that the purchase of an electric light and power system is not entered into by virtue of the governmental functions of the city, or under its police power, but is entered into as an ordinary business enterprise. This court has recently held in City of Curtis v. Maywood Light Co., 137 Neb. 119, 288 N. W. 503, that the business of operating a municipal light plant is wholly outside the governmental powers and
The case of City of Omaha v. Omaha Water Co., 218 U. S. 180, 30 S. Ct. 615, is in point in the discussion of the proper elements to consider in arriving at the price to be paid. The ordinance of 1880, giving the privately owned water company a franchise, provided that the city might buy it at any time after the expiration of 20 years at an appraised valuation ascertained by three engineers, the majority of whom fixed the value of the system at $6,263,295.49. Justice Lurton said: “There is not the slightest evidence in the record of partiality, bad motive or misconduct affecting the action of the board. Its members appear to have been gentlemen of high character professionally and otherwise. * * * In the absence of any evidence of. actual bad faith we do not hesitate about agreeing with the circuit court of appeals in the conclusion that there was no such misconduct as to vitiate the valuation.” It was held that the legislature may authorize a city to purchase a water system to extend beyond the limits of the city, and to' supply water to adjacent sections. A transaction of great magnitude will not be defeated because of minor obstacles.
Cities of the first and second class have the power, after an affirmative vote of their electors, to acquire electric light and power plants located in or partly within their corporate limits by eminent domain. Comp. St. 1929, sec. 19-701. Under this act, the municipality was required to pay the amount found due by the condemnation court.
Under section 18-1601, Comp. St. Supp. 1939, a city may purchase electric light systems when authorized by a vote of the electors, and pay for the same only by revenue bonds payable out of the earnings of the plant.
In the case at bar, the Consumers Public Power District was created by virtue of Senate File 310, Laws 1933, as later amended, and found as sections 70-701 to 70-719, Comp. St. Supp. 1939, which law permits a city to buy an electric system from a public power district, at a price to
The crux of the case at bar is found in the single-page memorandum of agreement, attached to the petition as exhibit C, which memorandum the secretary of the power district refuses to sign, and the purpose of this action being to compel him to sign it, we will examine it with some care. This agreement, exhibit C, instead of giving the city an option to purchase from the power district, provides that, in the event the district buys and pays the full purchase price to the Northwestern Public Service Company, then the city agrees to buy from the district that part of the distribution system located within the corporate limits of Columbus by giving notice 90 days prior to the time of taking over the title, and, further, by the city paying to the district in cash an amount which, if applied by the district in the payment of its indebtedness to the Northwestern Public Service Company, will reduce the unpaid portion of such indebtedness, or the amount of such bonds then outstanding, to an amount such that the revenues of that portion of the properties outside of the city of Columbus will be sufficient to pay the balance due for principal and interest on such indebtedness or all debt service charges on such bonds outstanding according to their terms as the same shall fall due, and all other pledges, liens, charges, and expenses whatsoever theretofore incurred and payable from said revenues prior to the payment of said amount.
It will be seen by a careful examination that this supplemental memorandum of agreement, exhibit C, changes entirely the simple procedure by which the Consumers Public Power District purchases the property in the Columbus division from the Northwestern Public Service Company, and pays for the same by revenue bonds, which are a first lien upon the income of the utility, and when
According to the agreement, the city of Columbus does not agree to buy the property at some time in the future, at a fair and reasonable price to be determined by a court of condemnation at that time, nor does the city agree that, when it does take over the plant now being operated by the power district, it will pay for the same only by revenue bonds issued against the earnings thereof, as provided in section 70-712, Comp. St. Supp. 1939, but, on the other hand, exhibit C obligates the city to pay an amount to be computed at the time the city takes it over, under the terms of a very intricate and complicated formula.
The purpose of this formula appears to the court to bind the city to make full and complete payment according to the terms of the lease-purchase agreement between the Northwestern Public Service Company and the public power district, not out of income of the plant and liquidation of revenue bonds, but to pay everything then due according to the original contract.
By this purchase, under such an involved formula, it appears that the court is called upon to approve and confirm a plan by which the city of Columbus guarantees the purchase price, not out of revenues of the plant, but by an obligation which courts might enforce the city to pay by judgment levies to be paid by the taxpayers. In our opinion, if this is the purpose and effect of the formula, as we believe it is, it is invalid and void.
Writ denied.
Dissenting Opinion
dissenting.
Under section 70-712, Comp. St. Supp. 1939, a city has the right to purchase, and a public power district is re
So far as the facts in this case are concerned, it is unnecessary to decide whether the purchase must be a present one, or whether an agreement may validly be made to purchase at some future time, definite or indefinite. No such situation is here involved. The city did not enter into a contract to purchase; all that the contract and modification agreement did was to give it an option or right to purchase in a particular manner and on a particular basis. It was not obligated to take over the distribution system on this basis, since it was not required to. exercise its option. Its option right could obviously not be a purchase, if it was never exercised. So long as it was not a purchase, the city had the right at any time to enter into further negotiations on any otlier basis, and, if it failed to. agree with the district on price and terms, to resort to condemnation.
The majority opinion is predicated upon the view that the contract and modification agreement did not constitute a mere option. On that point, however, I cannot see how there can be any sound disagreement. The brief of respondent and that filed by various city attorneys as amid curias, recognize it as such. While the modification agreement recites that the city hereby agrees to buy from the district, and the district hereby agrees to sell to the city, it provides further that such agreement is subject to and upon the condition that the city must give 90 days’ notice to the district of its intention to acquire the facilities. In addition, the modification agreement leaves in full force the third paragraph of the original agreement, which provides: “Upon payment of the indebtedness of District incurred in such purchase, District shall upon affirmative request of the Columbus City Council transfer and convey to City that portion of Columbus Division,
The result of this view is to preserve to the city whatever benefits may exist in its favor under the option agreement and to have future city authorities free to exercise it, if they determine, on the basis of the price formula, before the option is exercised, that it is to the advantage of the city at any time to do so.
This is where the agreement of the parties leaves them, whether it accomplishes what they had in mind or not. The city is entitled to have saved to it whatever advantage there is in the contract, and the objections made by respondent are not valid against such an analysis. In this situation, and without consideration of the propriety of the form of the remedy, as to which no question is raised, a writ of mandamus should be granted.
