Baird v. Webster City

• Decision Date: 22 September 1964
• Docket Number: No. 51248,51248
• Citation: 256 Iowa 1097,130 N.W.2d 432
• Parties: Ray BAIRD, Gardner Naden, Larry Niebergall, Harold Leisey, W. E. Burgin and William H. Yungglas, Appellees, v. WEBSTER CITY, Iowa, J. P. Laughlin, Ivan Hargrave, Rue Shelton, Clifford Mickelson, Alberta Pappas, Councilmen, and Geo. B. Aden, City Treasurer, Appellants, and Northern Natural Gas Company, Appellee.
• Court: Iowa Supreme Court

Page 432

130 N.W.2d 432

256 Iowa 1097

Ray BAIRD, Gardner Naden, Larry Niebergall, Harold Leisey, W. E. Burgin and William H. Yungglas, Appellees, v. WEBSTER CITY, Iowa, J. P. Laughlin, Ivan Hargrave, Rue Shelton, Clifford Mickelson, Alberta Pappas, Councilmen, and Geo. B. Aden, City Treasurer, Appellants, and Northern Natural Gas Company, Appellee.

No. 51248.

Supreme Court of Iowa.

Sept. 22, 1964.

M. Gene Blackburn, City Atty., Webster City, and Alan Loth, Fort Dodge, for appellants.

Burnquist, Burnquist & McCormick, Fort Dodge, for plaintiffs-appellees.

Hemingway & Hemingway, Webster City, for Northern Natural Gas Co., appellee.

THORNTON, Justice.

Plaintiffs are taxpayers and consumers of natural gas in Webster City and bring this action for themselves and others similarly situated. Defendant Northern Natural Gas Company, hereinafter referred to as the utility, retails natural gas in Webster City. Defendant city, its council and treasurer will be referred to as the city.

In 1920 a gas works was established in Webster City by a vote of the people. In 1944 pursuant to a vote of the people the city leased the distribution system of its gas works to the utility (the fact the present utility is a successor to the original lessee is disregarded) for a term of 15 years and granted it a 25-year franchise to sell gas. The lease provided for the payment of $75,000 in annual installments of $5,000, for the conversion by the utility at its expense of the distribution system from one for manufactured gas to one to handle natural gas, and all substitutions or betterments of the system not distinguishable should be considered and held to be renewals and replacements and any extensions, improvements and additions to the leased system and distinguishable from it were to be owned by the utility. Such extensions were to consist of new mains, pipe and service connections and installed for the purpose of servicing new and additional customers and not in renewal or replacement of existing mains and pipe. The city was given an option to purchase such extensions at the end of the term by giving 12 months notice of its intention to do so. If the option was not then exercised the lease was to continue on a year to year basis not exceeding ten years with the continuing right to exercise the option. The price was the actual cost of such extensions less 2 1/2% depreciation per annum.

The lease was carried out, the utility through the years made distinguishable extensions at the underpreciated cost of a little over $477,000. The city estimated the price at $350,000.

In December, 1960, electors filed a petition with the mayor requesting an election on the question of whether the city should sell its system to the utility for at least $134,869. The trial court held this petition was superseded by the later one to extend the lease. This ruling is not questioned here.

In 1946 when natural gas was introduced there were 1,252 meters with 301 heat customers. At the end of 1962 there were 3,037 meters with 2,820 heat customers.

May 15, 1961, the council passed a resolution to terminate the lease and exercise the option on August 15, 1962, and so notified the utility. In October, 1961, and again in January, 1962, the council submitted to the voters the question of approving a contract for the purchase of natural gas for a 15-year term commencing August 16, 1962. Both times the proposal was turned down. In January, 1962, the council by ordinance set up a gas department. In March of 1962 the council by resolution transferred funds from the electric account to the gas account within the same functional fund, this action was implemented August 13, 1962, by motion to tender $350,000 to the utility in performance of the option. An attached table showed $220,000 of the $350,000 tendered was transferred from the electric to the gas account within the utility fund. It was stipulated that prior to 1951 the gas funds and other utility funds were recorded separately. After the 1951 legislation (chapter 159, 54th General Assembly; chapter 404, Code of Iowa, 1962, I.C.A.) all these funds were combined into a single fund, known as the utilities fund. For convenience the receipts from each uility were kept track of separately within that fund.

This suit was started August 9, 1962. On August 15th the city tendered its warrant drawn on the utilities fund for $350,000 to the utility in performance of the option, this was refused. On August 15, 1962, a petition by a proper number of electors was filed with the city clerk addressed to the mayor requesting a special election on the question of extending the 1944 lease with the utility until August 16, 1969. On the same date a temporary injunction was issued as prayed.

The city proposes to buy the utility's share of the gas distribution system for cash, two-thirds of which was transferred from the electric fund, and commence operating the entire system, all without any elections. Plaintiffs, with whom the utility joins, seek to enjoin such action until authorized by elections and the approval of the comptroller to transfer funds. All parties ask declaratory relief.

After trial the trial court quieted title to the original gas distribution system with indistinguishable repairs and betterments in the city and to the rest of the system in the utility subject to the city's option.

The trial court further held it was necessary for the city to hold elections on the questions of (1) operating the system, (2) purchasing the part owned by the utility, and (3) purchasing gas at wholesale for resale.

The trial court further held the mayor must call an election on the question of extending the lease. Also the acts of the city in attempting to take over the gas distribution system were invalid and enjoined it from proceeding until there was an affirmative vote by the electors on the questions of operating the entire system, purchasing the utility's portion of it, and on purchasing natural gas at wholesale with approval of the Federal Power Commission if required. After compliance the city was ordered to continue service to gas customers as rendered by the utility before.

Upon compliance with the foregoing by the city the utility was ordered to convey its part of the system and deliver possession of the entire system to the city. In the meantime the utility was ordered to remain in possession and operate under the terms of the lease and franchise and enjoined from ceasing to provide gas service until delivery of possession of the system.

Neither party complains of the quieting title. No question is raised as to the validity of the option.

The city appeals from all parts of the decree adverse to it. Plaintiffs and the utility attempt to sustain the trial court's order relative to the purchase of natural gas on the basis of the necessity of prior approval by the Federal Power Commission.

I. The city urges the powers of the city should be liberally construed to confer broad and implied powers pursuant to chapter 235 of the 60th General Assembly effective July 4, 1963, after this trial. This amendment to section 368.2, Code of Iowa, 1962, I.C.A., so provides. However it is not helpful to the city because there is no question the city of Webster City has the powers it wishes to exercise here. The questions here, as pointed out by the trial court, are ones of procedure. The questions are whether to exercise these powers it is necessary to obtain the approval or authority from the electors, and which statutes it is necessary to follow to transfer funds. In this regard chapter 235, 60th General Assembly, lines 17-21, provides:

'However, statutes which provide a manner or procedure for carrying out their provisions or exercising a given power shall be interpreted as providing the exclusive manner of procedure and shall be given substantial compliance, * * *.'

Unless otherwise required by statute, when a municipality exercises its powers to make an improvement or a contract it acts through its council by ordinance or resolution. Section 363.3 and section 368.2, Code of Iowa, 1962, I.C.A. 'Unless restrained by statute a municipality may in its discretion determine for itself the method of exercising powers conferred upon it.' City of Des Moines v. Reiter, 251 Iowa 1206, 1212, 102 N.W.2d 363, 367. Unless required by statute a popular vote is not necessary for the making of a municipal contract or a municipal improvement. Miller v. Incorporated Town of Milford, 224 Iowa 753, 768, 276 N.W. 826, 114 A.L.R. 1423; and 63 C.J.S. Municipal Corporations § 994, pp. 562-563, § 1066, p. 703.

We should point out, as the trial court did, that we are not and cannot be concerned with policy considerations or the wisdom of the actions taken or proposed, or the legislation involved. See Gade v. City of Waverly, 251 Iowa 473, 101 N.W.2d 525. Also that the people of the community are entitled to service at all times.

II. With the above in mind, we turn first to the necessity of an election to operate the system. No statute is pointed out as requiring such an election.

Section 397.1, Code of Iowa, 1958, I.C.A. (applicable to this case, the pertinent sections are the same in the 1962 code) provides:

'Cities and towns shall have the power to purchase, establish, erect, maintain, and operate * * * gasworks * * * with all the necessary reservoirs, mains, filters, streams, trenches, pipes, drains, poles, wires, burners, machinery, apparatus, and other requisites of said works or plants, and lease or sell the same.'

Section 397.4 provides: 'They may enter into contracts with persons, corporations, or municipalities for the purchase of heat, gas, water, or electric current for either light or power purposes, for the purpose of selling the same either to residents of the municipality or to others, including corporations, and shall have power to erect and maintain the necessary transmission lines therefor, either within or without...