Chisholm Water Supply Co. v. City of Chisholm

• Citation: 285 N.W. 895,205 Minn. 245
• Decision Date: 05 May 1939
• Docket Number: No. 31957.,31957.
• Parties: CHISHOLM WATER SUPPLY CO. v. CITY OF CHISHOLM.
• Court: Minnesota Supreme Court

285 N.W. 895

205 Minn. 245

CHISHOLM WATER SUPPLY CO. v. CITY OF CHISHOLM.

No. 31957.

Supreme Court of Minnesota.

May 5, 1939.

Rehearing Denied June 8, 1939.

Appeal from District Court, St. Louis County; C. R. Magney, Judge.

Action by the Chisholm Water Supply Company against the City of Chisholm to recover accrued amounts with interest and attorney fees, alleged to be due for water taken by the defendant from the wells of the plaintiff. From an order denying in part and granting in part defendant's motion for amended findings and denying its motion for a new trial, the defendant appeals.

Affirmed.

Frank M. Talus, City Atty., of Chisholm, and George H. Spear, of Duluth, for appellant.

Naughtin & Henley, of Hibbing, for respondent.

GALLAGHER, Chief Justice.

Appeal from an order denying in part and granting in part defendant's motion for amended findings and denying its motion for a new trial.

The action was instituted by the Chisholm Water Supply Company, a corporation, against the city of Chisholm, a municipal corporation, to recover accrued amounts with interest and attorney's fees alleged to be due for water taken between November, 1936, and August, 1937, by defendant from the wells of plaintiff in pursuance of a certain contract entered into between the parties on November 3 1931. In its answer defendant denied the legality of the contract and asked that it be cancelled. Issues were joined by plaintiff's reply, denying the illegality of the contract, setting up waiver and ratification of all irregularities, if any existed, and estoppel to assert the same.

At the conclusion of the testimony, the trial court made findings of fact and conclusions of law, the latter being to the effect that plaintiff was entitled to judgment in the sum of $15,242.22 representing the unpaid contract price of the water and attorney's fees, less costs of beneficiation. Defendant, by a motion to amend or for a new trial, proposed that certain other findings of fact be substituted for those adopted; that the conclusions of law be amended to the effect that the contract was procured by fraud, was ultra vires, illegal and contrary to public policy; and that plaintiff be given judgment for only the reasonable value of the water. Some of the findings of fact proposed by defendant were accepted but the conclusions of law were not altered. On appeal, defendant contends that the trial court erred insofar as it failed to adopt the findings of fact and conclusions of law presented by defendant.

Since the real question to be determined is whether or not the contract in question is legally enforceable, we will accept as true those facts found by the trial court to which no specific objection is made and those offered but rejected. The paragraphs which follow until otherwise indicated represent the result of this process.

Prior to its incorporation as a city of the fourth class in 1934, defendant was a municipal corporation with a duly created Water, Light, Power and Building Commission (hereafter called the Commission). At all times here in question, it had a municipal water system including a reservoir, settling basins, a pressure tank pumps, connecting mains and a distribution system for public and private use. For many years prior to July, 1931, or thereabouts, water was obtained at the Monroe Mine and pumped through connecting mains into the reservoir owned and maintained by the village.

In May, 1930, the Commission, without public advertisement for bids as required by law, made a certain 20 year contract with one C. R. Smyth providing for the development of a water supply from wells. Smyth thereafter put down several wells and equipped them with pumps, erected pump houses, and constructed pipe lines from the wells to the reservoir. The village began to operate the plant under the 1930 contract in July, 1931, and has since continued to operate it. At about the same time, Smyth and others organized the plaintiff corporation and assigned to it the 1930 contract and the plant. From July, 1931, until the following November, water was taken by the village in pursuance of the agreement.

In August, 1931, plaintiff requested the Commission to call for bids because of some question as to the legality of the contract then in force. Pursuant to this request, a call for bids was made on the 16th of the following month, whereby it was announced that bids for the development, maintenance and furnishing of an adequate water supply would be received until October 6, 1931 (a period of 20 days); that the bidder would be expected to develop such water supply from wells, to equip them with requisite equipment and to maintain the same in serviceable condition; that a certified check in the sum of $15,000 should accompany bids. Detailed specifications, referred to in the call, substantially described the existing plant of plaintiff.

The only bid received in response to this call was that of plaintiff. This bid was in the form of a contract in practically the same terms as that entered in 1930. Two of the three members of the Commission voted in favor of accepting the offer; one voted against it. The agreement was signed in the name of the president and secretary of the Commission and acknowledged as having been done under the authority of the Commission at a regular meeting.

The terms of the contract need not be stated in detail. It is sufficient to say that it contains some provisions which are departures from the call for bids particularly in the respect that it gives plaintiff the right to terminate the contract if performance should become unprofitable.

On August 30, 1934, the contract was amended so as to provide for an additional discount of 25% for prompt payment. During the following month, defendant became incorporated into a city of the fourth class and, during the next month, adopted a home rule charter which provides, in part, that all contracts, debts and obligations created or incurred by the village of Chisholm, or its council and officers, are ratified and confirmed as the debts and obligations of the city of Chisholm.

Other relevant facts which appear undisputed in the record follow. On November 10, 1936, the Commission passed a resolution wherein it was asserted that the contract was terminated and that from that time water would be taken as if no contract existed. Upon being notified of this resolution, plaintiff wrote to defendant informing it that it would be held strictly to the terms of the contract and that any water taken was to be paid for in accordance therewith. F...