76 F. 271 (8th Cir. 1896), 672, Illinois Trust & Savings Bank v. City of Arkansas City

Docket Nº:672, 673.
Citation:76 F. 271
Party Name:ILLINOIS TRUST & SAVINGS BANK v. CITY OF ARKANSAS CITY. HOPPER v. SAME.
Case Date:September 14, 1896
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 271

76 F. 271 (8th Cir. 1896)

ILLINOIS TRUST & SAVINGS BANK

v.

CITY OF ARKANSAS CITY.

HOPPER

v.

SAME.

Nos. 672, 673.

United States Court of Appeals, Eighth Circuit.

September 14, 1896

(Syllabus by the Court.)

A city of the second class under the laws of the state of Kansas has power to contract with a private party for the construction and operation of waterworks, to agree to pay rent for the use of hydrants, and to grant to such a party the use of its streets for the purpose of laying pipes to conduct the water.

Such a city has no power to grant to a private party the exclusive right to use its streets for that purpose.

When a divisible part of a contract is ultra vires, but that part is neither malum in se nor malum prohibitum, the remainder of the contract may be enforced, unless it appears from a consideration of the entire agreement that it would not have been made independently of the part which is void.

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The invalidity of the exclusive grant by a city of the right to use its streets to conduct water to its inhabitants is no defense to an action for the rents the city promised to pay to the grantee for the use of the hydrants after the works have been constructed according to the contract, and have been accepted by the city.

No one who does not infringe or threaten to infringe the exclusiveness of such a grant can be heard to allege its invalidity, after the works have been constructed, and the contract has been substantially performed by the grantee.

The members of the legislative body of a city may not so act or contract as to deprive their successors of the unimpaired exercise of the legislative or governmental powers conferred upon the body for the purpose of ruling the inhabitants of the city.

But this rule is inapplicable to the exercise of the business or proprietary powers of the municipality, such as the power to contract for waterworks, because such powers are conferred upon the legislative body of a city for the private benefit of its inhabitants and itself as a personality, rather than to enable it to govern its citizens.

In the exercise of these business powers, a municipality is governed by the same rules as a private corporation or an individual, and it may make contracts for terms longer than the duration of the terms of office of the members of its legislative body.

Gen. St. Kan. 1889, par. 7185, grants to cities of the second class in the state of Kansas full power and authority to contract for and procure waterworks to be constructed to supply their inhabitants with water. Held, a city of that class was authorized to make a contract for the construction of waterworks, and the lease of hydrants for a term exceeding the duration of the single year during which the members of its city council held office. Held, further, the legislature intrusted the determination of the length of the term of such a contract to the discretion of the city council, and, in the absence of evidence of a gross abuse of that discretion, it is not the province of a court to declare such a contract void because its term was 21 years.

In the construction of the statutes of a state which measure the powers and liabilities of its political organizations the national courts uniformly follow the interpretation of the highest judicial tribunal of the state, where no question of general or commercial law or of right under the constitution or laws of the nation is involved.

Under paragraph 765, Gen. St. Kan. 1889, an ordinance which does not receive the votes of a majority of the members elect of a city council is defeated.

Where the statutes of a state authorize the legislative body of a municipality to act or contract, and do not require this to be done by ordinance, that body may act or contract by a vote upon a motion or by the passage of a resolution. The statutes of Kansas do not require a city council of a city of the second class to make or authorize a contract for waterworks by ordinance.

The presentation to the city council of a city in open session by a private party, who is named as grantee in a defeated ordinance upon its records, of a written acceptance of the terms of the ordinance and a bond to construct waterworks accordingly, the construction of the works and the location of the hydrants by such grantee under the direction of the

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city council, the actual acceptance and use of the works by the city when completed, and the passage by the city council of a formal resolution that the waterworks erected under the ordinance are accepted by the city, constitute a binding contract between the city and the grantee in the ordinance for the construction and operation of the waterworks according to its terms.

No one may, to the damage of another, deny the truth of representations by which he has purposely or carelessly induced that other to change his situation.

As against the bondholders who loaned their money on a mortgage of the plant and income of waterworks owned by the mortgagor, which had been built under the direction, and accepted by the formal resolution, of the city council of a city, as completed according to the terms of a defeated ordinance, upon its records, and for which the city had paid rental without protest for 14 months according to the terms of this ordinance, such city is estopped to defeat a recovery for the rents subsequently accruing according to the terms of the ordinance, either on the ground that there was no contract, or that the city had no power to contract for 21 years, or that it had no power to grant to the water company the exclusive right to use its streets for laying water pipes.

These are appeals from a decree of foreclosure of a trust deed upon the waterworks in the city of Arkansas City, in the state of Kansas. The Illinois Trust & Savings Bank, the trustee in the deed and the complainant in the foreclosure suit, appeals, because the court below adjudged by its decree that the city of Arkansas City was not bound to pay the rentals for hydrants, which it undertook to pay by the terms of the contract with the mortgagor, under which the works were constructed, and in reliance upon which the money secured by the mortgage was loaned. George E. Hopper, the receiver appointed in the foreclosure suit, appeals, because the court below adjudged by this decree that, although the city had used 179 hydrants under this contract during the receivership, it was bound to pay no rental for more than 50 thereof.

The city of Arkansas City is a city of the second class under the laws of the state of Kansas. On December 28, 1885, that city undertook to pass its Ordinance No. 27, to induce the construction of waterworks in that city, for the purpose of supplying the city and its inhabitants with water for public and domestic purposes. The statutes of the state of Kansas declare that no ordinance of such a city shall be valid unless a majority of the members elect of the city council vote in favor thereof on a call of the yeas and nays, and their vote is entered on the journal by the clerk. Gen. St. Kan. 1889, par. 765. The city council of this city consisted of eight members, but only seven were present when this ordinance was put to a vote, and only four voted in its favor. It was, however, declared adopted; was approved by the mayor; was accepted by the Interstate Gas Company, to which it granted the franchise to construct and operate the waterworks; the works were constructed under its provisions at an expense of thousands of dollars; the $150,000 secured by the trust deed was loaned by the bondholders, now represented by the bank, in reliance upon this ordinance; and the city paid the rentals it promised to pay by it until October, 1891.

The provisions of this ordinance that are material to the issues in this case are these:

By section 1 the Interstate Gas Company, its successors or assigns, are authorized to use the streets of the city to lay pipes for the conveyance of water in and through the city for the use of the city and its inhabitants.

'Sec. 2. That said Interstate Gas Company, its successors or assigns, shall have the exclusive privilege of laying down pipes for conveying water in said

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city for the use of said city and inhabitants for the term of twenty-one (21) years from the date of the passage of this ordinance; provided that the Interstate Gas Company, its successors or assigns, shall within sixty (60) days from the approval of this franchise, establish the best and most suitable place within the western portion of this city for the source of water supply, and submit this selection to the mayor and city council for their approval and have the said works completed and in successful operation within eight months of such approval, and shall keep and maintain such system of water works with all future additions and extensions in successful operation thereafter during the term of franchise, unavoidable accidents or delays consistent with ordinary precaution only excepted.

'Sec. 3. That said Interstate Gas Company, its successors or assigns, shall erect within the corporate limits of the city of Arkansas City, Kansas, a complete system of water works of sufficient capacity to furnish at all times all the water necessary for use in said city for the prompt extinguishment of fires and for sprinkling and other public and domestic purposes, and shall at all times make all additions and extensions necessitated by the increased demand.

'Sec. 4. That said Interstate Gas Company, its successors or assigns, shall at the most suitable place erect the necessary buildings and appliances for such system of water works, and shall erect and put up a stand pipe of the dimensions of ten (10) feet diameter...

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