Hagler v. City of Salem, 30790.

Citation62 S.W.2d 751
Decision Date03 August 1933
Docket NumberNo. 30790.,30790.
PartiesJ.W. HAGLER, Appellant, v. CITY OF SALEM, GEORGE H. SLAWSON, Mayor, T.F. KEY, JOSEPH NORTON, ARCH REDWINE, E.E. MARTIN, Members of the Board of Aldermen, GEO, REDWINE, Treasurer; FAIRBANKS, MORSE & COMPANY, a Corporation of the State of Illinois.
CourtUnited States State Supreme Court of Missouri

Appeal from Howell Circuit Court. Hon. W.H.D. Green, Judge.

REVERSED AND REMANDED (with directions).

Wm. P. Elmer for appellant.

(1) The contract sought to be enjoined is in violation of Sections 12 and 12A. Article 10, of the Constitution in that: (a) The debt contracted exceeded the limitations fixed by said sections. (b) The debt was created for an electric light plant owned by the city and company and was not the exclusive property of the city as required by Section 12A. (2) This case is practically in point with the Harrisonville case recently decided by this court, so counsel cite such case as final authority on the questions presented. Hight v. City of Harrisonville, 41 S.W. (2d) 155; Bell v. City of Fayette, 28 S.W. (2d) 357; City of Campbell v. Arkansas-Missouri Power Co., 55 Fed. (2d) 560. (3) Plaintiff has a right to maintain this suit as his interest as a taxpayer is directly or indirectly affected. Rutherford v. Tayler, 38 Mo. 315; Carson v. Sullivan, 284 Mo. 353; Sec. 1419, R.S. 1929.

E.W. Bennett, Jones, Hocker, Sullivan & Gladney and Willard A. McCaleb for respondents.

(1) The city had ample power to make the contract, and it is not invalid because the company reserved title to the machinery sold as security for the purchase price. Bell v. City of Fayette, 28 S.W. (2d) 356; Hight v. City of Harrisonville, 41 S.W. (2d) 155; State ex rel. v. Neosho, 203 Mo. 40; R.S. 1929, secs. 7028, 7641, 7682; State ex rel. v. Hackman 273 Mo. 670; Evans v. McFarland, 186 Mo. 703; Lang v. City of Cavalier, 228 N.W. 819; Johnson v. City of Stuart, 226 N.W. 164; Carr v. Fenstermacher, 228 N.W. 114. (2) A contract to pay the purchase price of a municipally owned plant does not create a municipal indebtedness within constitutional limitations. State ex rel. v. Neosho, 203 Mo. 40; Bell v. City of Fayette, 28 S.W. (2d) 356; Hight v. City of Harrisonville, 41 S.W. (2d) 155. (3) The fact that the obligation is payable out of the income of a preexisting plant does not change the rule. Bell v. City of Fayette, supra; Hight v. City of Harrisonville, supra; Shelton v. Los Angeles, 275 Pac. 421; Shields v. City of Loveland, 218 Pac. 913; Searle v. Town of Haxtun, 271 Pac. 629; Johnson v. City of Stuart, 226 N.W. 164; Bowling Green v. Kirby, 295 S.W. 1004; Jones v. City of Corbin, 13 S.W. (2d) 1013; Carr v. Fenstermacher, 228 N.W. 114; Brackenbrough v. Board of Commissioners, 46 S.E. 228; Lang v. City of Cavalier, 228 N.W. 819; McClain v. Regents University, 65 Pac. 412; Sowell v. Griffin, 294 S.W. 521; Barnes v. Lehi City, 279 Pac. 878; Winston v. Spokane, 41 Pac. 888; Faulkner v. Seattle, 53 Pac. 365; Griffin v. Tacoma, 95 Pac. 1107; Twichel v. Seattle, 179 Pac. 127; Butler v. Ashland, 232 Pac. 655; Ward v. Chicago, 173 N.E. 810; Maffitt v. Decatur, 152 N.E. 602. (4) Obligations to pay for municipal services rendered over a term of years are not within the constitutional provisions. Saleno v. Neosho, 127 Mo. 627; Lamar Water & Light Co. v. Lamar, 128 Mo. 188, 140 Mo. 145; Neosho City Water Co. v. Neosho, 136 Mo. 498; Chicago v. Galpin, 103 Ill. 399. (a) The case of Hight v. City of Harrisonville, 41 S.W. (2d) 155, is not controlling on this question because of a difference in facts. (b) The provision of the contract requiring the city to contribute to the light fund for services to itself is separable. Sexton v. North Mo. Central Ry. Co., 194 S.W. 1083; State ex inf. Chaney v. West Mo. Power Co., 313 Mo. 283; Gelpeke v. City of Dubuque, 1 Wall. 221; Ill. Trust & Savings Bank v. Arkansas City, 76 Fed. 271 (8). (5) The contract is valid as to miscellaneous objections raised against it. (a) Tort liability is not within constitutional limitations, State ex rel. v. Neosho, 203 Mo. 40. (b) Purely contingent obligations are not debts, Saleno v. Neosho, 127 Mo. 627; Lamar Water & Light Co. v. Lamar, 128 Mo. 188, 140 Mo. 145.

FERGUSON, C.

The plaintiff, as a citizen and taxpayer of the city of Salem, brought this suit seeking to have declared invalid, and to enjoin the performance of, a contract entered into between said city and Fairbanks, Morse and Company, a corporation, whereby the city of Salem undertook to purchase from that company two engines and other equipment and machinery for use in a municipal electric plant.

Salem is a city of the fourth class. On April 2, 1929, at a special election, duly called and held, a proposition was submitted to, and adopted and approved by, the voters of Salem "to increase the indebtedness of said city in the sum of twenty-five thousand ($25,000) dollars for the purpose of erecting and constructing an electric light plant and to authorize the Board of Aldermen to borrow the said sum for this purpose and issue bonds therefor." The bonds were duly issued and sold. Including these bonds the bonded indebtedness of the city then aggregated $125,000. The assessed valuation of taxable property within the city for the year 1928 was $1,290,936, and for the year 1927, $1,275,365. Thus the bonded indebtedness closely approached the maximum amount permitted. [Constitution of Missouri. Art. 10, Secs. 12 and 78A.] The entire proceeds of the twenty-five thousand dollar bond issue were used in the purchase of a site and the erection thereon of a building to house the electrical machinery and appliances and the construction of a distribution system. By authority of an ordinance duly enacted by the board of aldermen a contract of date of June 1, 1929, was made and entered into between the city and Fairbanks, Morse and Company whereby the city purchased from that company two complete engine and alternator units and auxiliary equipment for use in such electrical plant to be delivered and installed within the time and in the manner specified in the contract. The contract provides for certain tests and makes certain guarantees as to performance, material and workmanship. The contract then fixes the purchase price of the machinery at $60,944.40, which the city agrees to pay in the following manner:

"In seventy-two equal monthly payments of $846.45, with interest, the first payment being due 60 days from date of complete installation of said machinery and equipment.

"All deferred payments are to be evidenced by pledge orders of the Municipality payable to the order of the Company, dated and delivered as of the date of completion of installation, and shall bear interest form said date at the rate of six per cent per annum.

"It is agreed that the obligation to pay the deferred installments of said purchase price and said pledge orders issued in evidence thereof is no general obligation of the said Municipality payable from taxes or its general funds but only special obligation payable from the net revenues of the electric light and power plant of the Municipality. `Net revenues,' shall be deemed to represent the balance of the gross receipts of the Municipality's electric light and power plant after the payment solely of the legitimate and necessary expenses of the operation of said plant. The Municipality covenants to operate said plant in an efficient and economic manner, and to maintain rates for the product or service of said plant which will produce sufficient revenue to provide for the payments called for by this contract so far as it may be permitted to do so by law.

"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."

The contract contains the following proviso as to title and ownership of the machinery:

"That the title and ownership of the machinery or materials herein specified shall remain in the Company until final payment therefor has been made in full as above provided, and in the event that pledge orders are taken at any time representing deferred payments or any sum that may be due, or in the event that any judgment is taken on account of all or any part of the said sums, the title to the machinery or materials shall not pass until such pledge orders so given, or extensions thereof, or such judgment taken, are fully paid in money and satisfied. The Company shall have the right to discount or transfer any of said pledge orders, and the title or right of possession in and to said machinery or materials shall pass thereby to the legal holder of such pledge orders.

"The said machinery or materials shall be and remain strictly personal property and retain its character as such, no matter whether on permanent foundation or in what manner affixed or attached to any building or structure, or what may be the consequences of its being disturbed on such foundation, building or structure, or for what purpose the machinery or materials may be used."

A requirement for insurance against loss or damage by fire is made which together with other provisions, not deemed pertinent, we omit. Pursuant to this contract the machinery was delivered and installed and the city issued and delivered the pledge orders, provided for by the contract, payable, to the order of Fairbanks, Morse and Company, monthly, in the amounts specified in the contract. These pledge orders were drawn upon and made payable "solely from" the special fund which the contract required the city to create and maintain.

The original petition herein was filed in the Circuit Court of Dent County in July, 1929. The case went on change of venue to the Circuit Court of Howell County and there an amended petition, upon...

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