City of Campbell, Mo. v. Arkansas-Missouri Power Co.

• Decision Date: 19 February 1932
• Docket Number: No. 9188.,9188.
• Citation: 55 F.2d 560
• Parties: CITY OF CAMPBELL, MO., et al. v. ARKANSAS-MISSOURI POWER CO.
• Court: U.S. Court of Appeals — Eighth Circuit

55 F.2d 560 (1932)

CITY OF CAMPBELL, MO., et al. v. ARKANSAS-MISSOURI POWER CO.

No. 9188.

Circuit Court of Appeals, Eighth Circuit.

January 7, 1932.

Rehearing Denied February 19, 1932.

Frank H. Sullivan, of St. Louis, Mo. (James C. Jones, Lon O. Hocker, and Willard A. McCaleb, all of St. Louis, Mo., on the brief), for appellant Fairbanks, Morse & Co.

John H. Bradley, of Kennett, Mo., and C. D. Bray, of Campbell, Mo., for appellants City of Campbell and its officers.

D. C. Chastain, of Butler, Mo., T. R. Ely, of Kennett, Mo., and Gardner Smith and A. Z. Patterson, both of Kansas City, Mo., on the brief), for appellee.

Before VAN VALKENBURGH, BOOTH, and GARDNER, Circuit Judges.

GARDNER, Circuit Judge.

In this case, appellee as plaintiff brought suit to enjoin the city of Campbell, a Missouri city of the fourth class, its executive officers, and Fairbanks, Morse & Co., a corporation, from carrying out the provisions of a certain contract which the city had previously entered into with Fairbanks, Morse & Co. for the purchase of certain machinery for a municipal light plant, and to restrain the city from operating such a plant in competition with the appellee, because of the alleged illegality of that contract. The parties will be referred to as they appeared in the lower court.

Plaintiff is an electric power company engaged in the generation of electricity and the transmission of electric current into various municipalities for sale for private and public use. It is the owner of a franchise granting it the right to construct and operate an electric light plant and distribution system within the city of Campbell. This franchise was granted in January, 1915, for a period or term of twenty years. Pursuant to the authority of this franchise, it has erected an electric lighting system, which it owned and was operating at the time of the commencement of this suit. The plant has a value in excess of $113,000. On May 12, 1925, the city entered into a contract with plaintiff for lighting its streets for a period of ten years, so that the franchise and this lighting contract would expire in the year 1935. After entering into this street lighting contract in 1925, plaintiff, for the purpose of carrying it out, expended some $17,000 in improvements, changes, and betterments. On February 11, 1930, pursuant to an ordinance duly passed, a special election was held in the city on a proposal to "issue bonds to the amount of $20,000 for the purpose of creating an electric light plant to be exclusively owned by said city." At this election the proposal was carried, bonds were duly authorized by proper ordinance in the sum of $20,000, and in due course were issued and sold. On April 8, 1930, the city passed an ordinance providing for the making of a contract between the city and Fairbanks, Morse & Co. for the purchase from that company of certain machinery for the contemplated plant for the sum and price of $62,366.40. This purchase price was to be paid in seventy-two monthly installments of $866.20 each; each installment being evidenced by an instrument called a pledge order, and each, omitting the payment date and formal matters, being in the following words:

"Treasurer of Said City.

"Pay to the order of Fairbanks, Morse & Co., Inc., Eight Hundred Sixty-six and 20/100 Dollars for payment on contract of April 12, 1930, out of the Light and Power Fund with interest at six per cent. (6%) per annum from maturity until paid. This is not a general obligation of the said City, but is a special obligation payable only out of the net revenues of the Light and Power plant of the City of Campbell, Missouri, in accordance with the provisions of said contract. This order is one of a series of seventy-two orders of even date.

"R. M. Jones, Mayor. "Attest "Seal. D. A. Snider, City Clerk."

The ordinance authorizing the purchase of the machinery contained provisions that the contract "shall not constitute a general obligation of the city, but shall be made to Fairbanks, Morse & Company, a corporation, only, from the net income of the City's electric light and power plant after paying the necessary operating expenses of said plant, and from no other fund, asset or property whatsoever of the City of Campbell, Missouri, which fund is hereby set aside for said purpose and no other; and said fund is hereby pledged as security for payments to be made under said contract." The contract as executed provided that the obligation to pay the deferred installments of the purchase price should not be general obligations of the city, but only special obligations payable from the net revenues of the light and power plant. Net revenues were defined as the balance of the gross receipts of the municipality's light and power plant after the payment of the legitimate and necessary expenses of the operation of the plant, plus interest on the $20,000 light bond issue. It contained a further provision that: "The municipality agrees to adopt resolutions providing for the creation of a special fund into which all receipts for the product or service of said plant shall be deposited and to credit such fund at the regular established rates for all product or service of said plant used by the city or any department thereof for any and all public purposes." (Italics ours.)

From the proceeds of the sale of the $20,000 bond issue, the city constructed and installed a distribution system consisting of poles, wires, lights, and so forth, and also constructed a power house and engine foundations. The defendant Fairbanks, Morse & Co. made delivery of the machinery covered by its contract, which was installed in the power house and upon the foundations constructed by the city, and the plant was put in operation by the city in November, 1930, and was in operation at the time of the trial of this cause in the lower court.

The lower court held that the contract between the city and Fairbanks, Morse & Co. was invalid, on the ground that there was thereby created an indebtedness exceeding that allowed by the Missouri Constitution, and entered decree in favor of the plaintiff.

On this appeal, defendants contend: (1) That the plaintiff had no right to maintain this suit; and (2) that the court erred in holding that the contract between the city and Fairbanks, Morse & Co. created an indebtedness within the inhibition of the Missouri Constitution. The parties are agreed that if the contract involved created an indebtedness in the amount named as the consideration therefor, that such indebtedness was in excess of that which the city could lawfully incur under the inhibition of the Missouri Constitution against the creating of indebtedness.

It is urged that, inasmuch as the plaintiff's franchise was not an exclusive one, it had no right to maintain this suit for injunctional relief. The plaintiff, however, had a franchise under which it was entitled to maintain and operate its lighting system in the city of Campbell, and it also had a contract with the city for street lighting. The fact alone that the plaintiff had this franchise would, of course, not prevent the city from erecting and maintaining a municipal light plant, if, in doing so, it did not exceed its power and authority. As the owner of this franchise, however, the plaintiff was entitled to relief against the illegal acts of others who might assume to exercise the privilege conferred upon it by its franchise. A franchise is property, and, as such, is under the protection of the law, and without express words it is exclusive as against all persons acting without legal sanction. True, plaintiff's franchise was not...