78 S.W.2d 431 (Mo. 1934), Sager v. City of Stanberry
| Citation | 78 S.W.2d 431, 336 Mo. 213 |
| Opinion Judge | FERGUSON |
| Party Name | Amanda Sager, Administratrix of the Estate of W. F. Sager, A. D. McGinnis, A. R. Perry, William Hale, S.W. Wheeler, H. B. Sorenson, A. G. Heyde, George W. Allen, James Wilson and Missouri Service Company, a Corporation, Appellants, v. The City of Stanberry, a Municipal Corporation of Gentry County, Claude L. Enyart, Mayor of said City of Stanberry, |
| Attorney | R. B. Caldwell, H. M. Noble and McCune, Caldwell & Downing for appellants. William S. Hogsett, Ralph E. Murray and Hogsett, Smith, Murray & Trippe for respondents. |
| Judge Panel | Ferguson, C. Sturgis and Hyde, CC., concur. Sturgis and Hyde, CC., concur. |
| Case Date | December 21, 1934 |
| Court | Missouri Supreme Court |
Page 431
Rehearing Denied December 21, 1934.
Appeal from Daviess Circuit Court; Hon. Ira D. Beals, Judge.
Reversed and remanded.
(1) The contract between the city of Stanberry and Fidelity National Company for sale of the $ 40,000 electric light plant bond issue was illegal and void because wrongfully brought about and executed through conspiracy and fraud of Fulton Iron Works Company, Fidelity National Company and the city of Stanberry, and because such bonds were in fact sold at less than par, as provided by law. Sec. 7220, R. S. 1929; State ex rel. City of Centralia v. Wilder, 211 Mo. 305, 109 S.W. 574; Kansas City v. Hyde, 196 Mo. 498, 96 S.W. 201; Hight v. Harrisonville, 328 Mo. 549, 41 S.W.2d 155; Lucas v. City of Nampa, 41 Idaho 35, 238 P. 288; Spear v. City of Bremerton, 90 Wash. 507, 156 P. 825; Bay City v. Lumbermen's State Bank, 193 Mich. 533, 160 N.W. 425; Franklin Ave. German Savs. Bank v. Board of Education, 75 Mo. 408; Uhler v. Olympia, 87 Wash. 1, 151 P. 117; Duff v. Knott County, 238 Ky. 71, 36 S.W.2d 870; Bower v. City of Bainbridge, 168 Ga. 616, 148 S.E. 517. (2) The contract between the city of Stanberry and Fulton Iron Works Company was illegal and void because fraudulently and wrongfully entered into in violation of law and as part of the scheme or conspiracy to effect a sale of the $ 40,000 bond issue ostensibly at par, but in reality at less than par. Sec. 7659, R. S. 1929; Secs. 46, 47, Art. IV, Const. of Mo.; St. Louis v. Atlantic Quarry & Const. Co., 244 Mo. 479, 148 S.W. 948. (3) The contract between the city of Stanberry and Fulton Iron Works Company is illegal and void for the reason that it created an obligation and indebtedness of said city in excess of the income and revenue provided by said city for that year and three years thereafter without the consent of two-thirds of the voters thereof voting on such proposition. Sec. 12, Art. X, Const. of Mo. The contract created a debt in that it required payments from the use of distribution system and power plant paid for by taxation and not from earnings of the engines alone. Sec. 6834, R. S. 1929; Bell v. Fayette, 28 S.W.2d 356; City of Campbell v. Arkansas-Missouri Power Co., 55 F.2d 560. The contract created a debt in that it specifically required the city to pay for all city used current, insurance coverage, taxes and other expense from funds raised by taxation or from a fund which must be replenished by taxation. Hight v. Harrisonville, 328 Mo. 549, 41 S.W.2d 155; Hagler v. Salem, 62 S.W.2d 751; City of Campbell v. Arkansas-Missouri Power Co., 55 F.2d 560. The contract was not a lease, but in fact a purchase agrement creating a debt for the full amount thereof. Walla Walla v. Walla Walla Water Co., 172 U.S. 1, 43 L.Ed. 341; Garrett v. Swanton, 13 P.2d 725; McCrary Co. v. Glennville, 149 Ga. 431, 100 S.E. 362; Williams v. City of Emmett, 6 P.2d 475; Baltimore & O. S.W. Ry. Co. v. People, 200 Ill. 541, 66 N.E. 148; Hively v. School City of Nappanee, 169 N.E. 51; Voss v. Waterloo Water Co., 163 Ind. 69, 71 N.E. 208; Windsor v. Des Moines, 110 Iowa 175, 81 N.W. 476; Hall v. Cedar Rapids, 115 Iowa 199, 88 N.W. 448; Jones v. Rutherford, 225 Ky. 773, 10 S.W.2d 296; Wilder v. Murphy, 56 N.D. 436, 218 N.W. 156; Brewster v. Deshutes County, 1 P.2d 607; Spilman v. Parkersburg, 35 W.Va. 605, 14 S.E. 279; Crogster v. Bayfield County, 99 Wis. 1, 74 N.W. 635, 71 A. L. R. 1318; Hight v. Harrisonville, 328 Mo. 549, 41 S.W.2d 155; Hagler v. Salem, 62 S.W.2d 751; State ex rel. Christian County v. Gordon, 265 Mo. 181, 176 S.W. 1; Trask v. Livingston County, 210 Mo. 582, 109 S.W. 656; Book v. Earl, 87 Mo. 246; Anderson v. Ripley County, 181 Mo. 46, 80 S.W. 263. The income and revenue provided for 1929 and the three years thereafter would be exceeded by the full amount of the purchase price, by the payment required to be made in any one year, or even by payments required to be made for city used current, insurance and taxes. Sec. 11, Art. X, Const. of Mo.; Anderson v. Ripley County, 181 Mo. 46, 80 S.W. 263; Sec. 12, Art. X, Const. of Mo.
(1) The contract between the city of Stanberry and Fidelity National Company for sale of the $ 40,000 electric light plant bond issue was legal and valid and was not wrongful in any particular. R. S. 1929, sec. 7220; Duff v. Knott County, 238 Ky. 71, 36 S.W.2d 870. (2) The contract between the city of Stanberry and Fulton Iron Works did not create any indebtedness of the city in any one year in excess of the income and revenue provided for such year. Sec. 12, Art. X, Const. of Mo.; State ex rel. Smith v. Neosho, 203 Mo. 40; Saleno v. Neosho, 127 Mo. 627; Lamar Water & Light Co. v. Lamar, 128 Mo. 188; Neosho City Water Co. v. Neosho 136 Mo. 498; Lamar Water & Light Co. v. Lamar, 140 Mo. 145; Webb City & Carterville Water Works Co. v. Carterville, 142 Mo. 101. (3) The contract between the city of Stanberry and Fulton Iron Works did not create an indebtedness in excess of the limitations permitted to said city by Sections 12 and 12A of Article X of the Constitution of Missouri. State ex rel. Smith v. Neosho, 203 Mo. 40; Bell v. Fayette, 28 S.W.2d 356; Barnes v. Lehi City, 297 P. 878; Bowling Green v. Kirby, 295 S.W. 1005; Franklin Trust Co. v. Loveland, 3 F.2d 114; Shields v. Loveland, 218 P. 913; Searle v. Town of Haxtun, 271 P. 629; Twitchell v. Seattle, 179 P. 127; Shelton v. Los Angeles, 275 P. 421; Johnston v. City of Stewart, 226 N.W. 164; Lang v. City of Cavalier, 228 N.W. 819; Carr v. Fenstermacher, 228 N.W. 114; Butler v. Ashland, 232 P. 655; Larimer v. Fort Collins, 189 P. 929; City of Dawson v. Bolton, 143 S.E. 119; Uhler v. Olympia, 151 P. 117; Kline v. Louisville, 6 S.W.2d 1104; Griffin v. Tacoma, 142 P. 467; Pawhuska v. Pawhuska Oil Co., 248 P. 336; Kasch v. Miller, 104 Ohio St. 281, 135 N.E. 813; Kansas City v. Ward, 134 Mo. 185; Briggs v. Greenville County, 135 S.E. 153; Wright v. Hardwick, 152 Ga. 302, 109 S.E. 903; Kansas City v. Bacon, 147 Mo. 282; Henderson v. City of Enterprise, 80 So. 115; Maffitt v. Decatur, 322 Ill. 82, 152 N.E. 602; Fox v. Bicknell, 141 N.E. 222; Walsh v. Cleveland, 271 F. 705; Winston v. Spokane, 41 P. 888; Brockenbrough v. Board of Water Commissioners, 46 S.E. 28, 134 N.C. 1; Quill v. Indianapolis, 23 N.E. 788; Kelly v. Minneapolis, 65 N.W. 115; Vallelly v. Park Commissioners, 111 N.W. 615; Corhran v. Mayor and Council of Middleton, 125 A. 459; Overall v. Madisonville, 102 S.W. 278; Burlington Water Co. v. Woodward, 49 Iowa 58; Klamath Falls v. Sachs, 57 P. 336.
OPINION
Page 432
[336 Mo. 216] This is a suit in equity brought by certain residents and taxpayers of the city of Stanberry to enjoin a sale by the city of Stanberry to the defendant Fidelity National Company of a bond issue of the city of Stanberry in the amount of $ 40,000, duly voted and authorized "for the purpose of providing funds for the erection or purchase of a municipal electric lighting system for said city" and also to enjoin and restrain the carrying out of a contract entered into between the city of Stanberry and the defendant Fulton Iron Works Company for the "lease" or purchase of Diesel engines and generating equipment by the city from that company. The trial court found for defendants, denied the relief prayed and dismissed the petition. Plaintiffs have appealed.
Stanberry is a city of the fourth class having a population of approximately two thousand. The construction of a municipal electrical plant and system for the city of Stanberry being deemed desirable a special election was held in March, 1928, at which bonds of the city in the amount of $ 40,000 were authorized for the purpose of "erecting or purchasing a municipal electric lighting system for said city." The amount of the indebtedness so authorized was well within the debt limitations fixed by Sections 12 and 12a of Article 10 of our State Constitution and the validity of the bond issue is not questioned. However, this sum of $ 40,000 was not sufficient to meet the cost of a complete electrical plant or system. As the entire amount ($ 40,000) to be realized from the sale of bonds would be required for the construction of a complete distribution system including "a white way," and a building to house the generating plant no funds were available for the purchase of generating equipment. The plan devised and undertaken contemplated the purchase of two Diesel engines and other necessary equipment for the generating plant under a contract providing for the payment of the purchase price thereof in deferred monthly installments out of the net earnings or receipts of the system. The specifications called for two 200 horse power Diesel engines. Bids covering the two engines, generators and accessories were received and that of the defendant Fulton Company accepted. The bonds were sold to the defendant Fidelity National Company at $ 98.18 per $ 100 par value but certain taxpayers instituted [336 Mo. 217] a suit to enjoin the sale because the bonds had been sold for less than par (Sec. 7220, R....
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