Kentucky-Tennessee Light & Power Co. v. City of Paris, Tenn.

• Decision Date: 08 April 1931
• Docket Number: No. 5635,5636.,5635
• Parties: KENTUCKY-TENNESSEE LIGHT & POWER CO. v. CITY OF PARIS, TENN. CULLEY v. KENTUCKY-TENNESSEE LIGHT & POWER CO.
• Court: U.S. Court of Appeals — Sixth Circuit

48 F.2d 795 (1931)

KENTUCKY-TENNESSEE LIGHT & POWER CO. v. CITY OF PARIS, TENN.

CULLEY v. KENTUCKY-TENNESSEE LIGHT & POWER CO.

Nos. 5635, 5636.

Circuit Court of Appeals, Sixth Circuit.

April 8, 1931.

COPYRIGHT MATERIAL OMITTED

William Marshall Bullitt and J. E. Tarrant, both of Louisville, Ky. (Bruce & Bullitt, of Louisville, Ky., and J. W. Van Dyke, of Paris, Tenn., on the brief), for Kentucky-Tennessee Light & Power Co.

R. L. McReynolds, of Clarksville, Tenn., and Y. Q. Caldwell, Jr., of Paris, Tenn., for W. Y. Morris and others.

Before DENISON, MOORMAN, and HICKS, Circuit Judges.

DENISON, Circuit Judge.

The city of Paris, Tenn. — hereafter called the city — owned and operated electric light and water plants, with the necessary distribution systems, for supplying itself and its citizens. Its governing body decided to sell the combined plant for private operation. Byrd, purporting to act in his own interest, but with the declared intention of making a transfer to an operating company, negotiated and closed a contract which gave him a lease, an operating franchise, and a contract to buy. Later, he made such transfer, and, with the consent of the city, the Kentucky-Tennessee Light & Power Company — hereafter called the company — was substituted for Byrd and took over the plants and began operations. This was in January, 1926, and it continued operating and performing its obligations under the contract until June 9, 1928. On that date, the city commenced this suit by filing a bill in a state chancery court. The bill claimed that the contract had been obtained through fraud and asked its cancellation. The case was removed to the court below, and heard in open court. The trial judge found the existence of sufficient ground to justify the city in claiming a rescission, and made a decree accordingly; but directed that the city, as a condition of the rescission, should repay to the company various items expended by it in additions, improvements, purchase price installments, and other matters, of which the city would get the benefit upon rescission. The company appealed, and what was called a cross-appeal was taken by Culley et al., who had assumed to intervene as plaintiffs. The city did not appeal. The company complained, both because a rescission had been ordered and because, if there were to be a rescission, there should have been larger repayments. The cross-appellants complained because any repayment had been directed.

It is plain that the so-called cross-appeal must be dismissed. The issue joined between the city and the company came on for hearing on the day fixed. On that day, Culley and three others filed in the court what they called an amended bill, consisting of seven paragraphs to be added to the original bill. It was signed by the solicitors for complainants, and alleged that Culley and three others were citizens, residents, and taxpayers in the city, "and that, in such capacity, they stand in danger of having their taxes materially increased, and will suffer financial loss unless the relief sought in this bill is obtained, and that they are, for that reason, interested in the matters in this bill alleged and entitled to the relief herein prayed. Therefore, they ask to be made parties complainant to the said bill." Doubtless the complainant, the city, should be considered as consenting to this amendment and (in effect) intervention; but the record shows no notice to defendant, nor was any order made by the court. The amendment was an attempt to make new parties complainant, bring in new interests, and perhaps avoid defenses that might be good against complainant. Defendant was entitled to notice before the amendment could be permitted; but, even with notice, the amendment could not have been allowed. Such a suit by taxpayers, even though not controlled expressly by general equity rule 27 (28 USCA § 723), is by the general principles of equity permitted only when the municipal corporation has refused to act in disaffirmance of the contract of which the taxpayers complain. Here the taxpayers purported merely to be joining in claiming the same rights which the city was already claiming in their behalf, and they were plainly not entitled to sue. City of Princeton v. Princeton Co., 166 Ky. 730, 744, 179 S. W. 1074. The defendant was under no obligation to have them dismissed from the record as parties, because they never had been admitted. They had no status which entitled them to appeal from the decree, and their appeal is dismissed.

It should be noted that this dismissal is, in view of our later conclusions, of little practical importance. The only position taken by cross-appellants in their brief, as filed, is that the contract of lease and sale was so ultra vires as to be void and incapable of ratification, or as not to justify requiring restoration as a condition of rescission; and these questions are necessarily involved in passing upon the appeal of the company.

A question of practice should be noticed. After the cause was at issue, it was by the clerk put upon the trial calendar for the next term, and was called for trial on the second day. Defendant then requested a postponement, both because its leading counsel was otherwise engaged and because the practice did not permit so summary a setting. So far as the application depended upon the absence of one of the counsel and appealed to the discretion of the court, involving several considerations, we cannot say that the discretion was abused. We are not referred to any general equity rule or to any special equity rule of this district which we think governed the situation. The matter of setting for trial was therefore to be disposed of by the court in any reasonable way; and, since the trial was to be in open court, as in a suit at law, it was natural and reasonable to apply the special law rule, said to have been long recognized in this district, and which directly authorized the course taken. The objection made is that the time provided by general equity rule 47 (28 USCA § 723) for taking depositions had not expired, and so the setting was premature. We think the rule should not be so applied. It applies only to cases where the court has made an order permitting depositions to be taken; and here there had been no such order. There are statutes authorizing depositions; but we know of none fixing a minimum time limit therefor.

Coming first to the question of power: We think the power was clear. Whether the construction and operation of municipal water and light plants to furnish water and light to the citizens should be considered as an exercise of the governmental power, or as the doing of business in a proprietary capacity, no one doubts that the General Assembly could, by express words, grant to the municipality the right to sell or convey such a plant. The city charter is found in a special or private law, which is chapter 528 of the Private Acts of 1921. One of the granted powers is that the city "may purchase and hold property, real and personal, within and beyond the limits of the City for * * *, the erection and extension of water works, electric lights, parks and for any other corporate purpose and shall have power to sell, convey and do such acts relating to same as natural persons." Section 4. We pass by all questions as to whether this power supported the contract which was made with the company, because we find that, in 1927, the General Assembly ratified this contract, by chapter 661 of the Private Acts for that year (volume 2, p. 2105). The act provided "that all sales, leases, rentals or other dispositions of municipally owned water, electric or other utilities, for consideration, heretofore bargained, sold and conveyed, leased or rented by municipalities in the State of Tennessee in counties of a population * * * not less than 27,151, and not over 27,170 * * * according to the last Federal Census * * * shall be, and are, hereby validated as legal and binding transactions."

The city of Paris is in Henry county, and the population of that county, by the census referred to, was 27,151. This particular contract was therefore within the ratification.

It is probably, on its face, clear enough that this ratifying act picked out five particular counties in the state, within each of which was a city which had made such contracts, classifying and describing these counties by population. Whatever might be thought of the political desirability of identifying cities in this way, such considerations are for the Legislature. Tennessee has a constitutional provision (section 8, art. 11) against class legislation, but permits classification of counties by population for some purposes and not for others. In any view, this statute is no more obnoxious than if it named and applied only to the city of Paris; and, since charters are granted by special act, they may be...