City Nat. Bank of Fort Smith v. Inc.

• Decision Date: 14 October 1924
• Docket Number: Case Number: 13329
• Citation: 104 Okla. 161,1924 OK 898,230 P. 894
• Parties: CITY NAT. BANK OF FORT SMITH, ARK., v. INCORPORATED TOWN OF KIOWA et al.
• Court: Oklahoma Supreme Court

1924 OK 898

230 P. 894

104 Okla. 161

CITY NAT. BANK OF FORT SMITH, ARK., v. INCORPORATED TOWN OF KIOWA et al.

Case Number: 13329

Supreme Court of Oklahoma

Decided: October 14, 1924

Syllabus

¶0 1. Municipal Corporations -- Authority of Officers--Limit of Powers.

In this state the officers of municipal corporations have only such powers and can exercise such authority only as are expressly granted by law, or necessarily to be inferred as incidental to the exercise of those expressly granted.

2. Same--Municipal Powers--Constitutional Provision.

Section 6, article 18 of the Constitution is a grant of power to municipal corporations in furtherance of the public policy of the state, and is not intended as an extension of the powers of municipal officers in the discharge of their official duties.

3. Same--Municipal Property--Kind and Character--Conveyances--Statute.

Properly owned and controlled by municipal corporations is of two kinds and characters, viz.: (a) That which is owned by and devoted to the use of the municipality as a corporate entity; (b) that which is owned by the municipality but dedicated to the use, service, and benefit of its inhabitants. Property of the first class, by the second subdivision of section 4762, Comp. Stat. 1921, may be sold and conveyed by municipal authorities. Property of the second class, acquired by virtue of sec. 27, art. 10, Const., may not be so conveyed free from the public use for which it was acquired and to which it has been actually dedicated, so long as it is suitable or adequate for that purpose and its use has not been abandoned.

4. Same--Franchise -- Referendum -- Contract--Extent of Authority.

Where the voters of a municipality are asked to give their assent to the conveyance of a municipally owned water and light plant, and to grant a franchise to the purchaser, under the referendum provisions of sections 5 (a) and 5 (b), art. 18, Const., the extent of the authority thus granted to the municipal officers is limited by the terms of the proposal and of the franchise ordinance so submitted at the election held for that purpose.

5. Same.

In such case the proposal, the franchise ordinance, and the conveyances thereafter made pursuant to the authority so granted constitute one entire contract and must be considered and construed together in determining the extent of the authority granted to the municipal officers by the people under such referendum.

6. Same--Terms of Ordinance--Written Acceptance--Notice to Purchasers.

Where by the terms of such ordinance the franchise holder is expressly limited to one method of thereafter conveying such property, viz., with the burden of its public use, and such ordinance is accepted in writing the record of all these matters being shown and referred to in the instruments of conveyance, the limitation on the power to convey is binding on the franchise holder and constitutes notice to all persons claiming under it adversely to the reserved rights in the public use of the property.

7. Same--Public Utilities--Public Policy--Constitutional Provisions.

The public policy of this state forbids that public utilities shall be willfully destroyed, or that public funds shall be diverted from the purposes for which they are voted, and where a waterworks and electric light system have been constructed from the proceeds of a bond issue authorized by section 27 art. 10 Const., public policy likewise forbids that private rights shall be acquired therein the enforcement of which would have that result.

James B. McDonough for plaintiff In error.

Guy L. Andrews, for defendants in error.

LOGSDON, C.

¶1 There are 16 assignments of error in the petition in error, but these are reduced to and covered by nine propositions in the brief and argument of plaintiff. As stated by plaintiff at page 37 of its brief:

"The principal questions arising on the record relate to (1) the power of the Town of Kiowa to sell its water and light plant to the Kiowa Ice, Light & Water Company; (2) the right of the latter company to mortgage all the property to E. G. Burnley for the purpose of securing said Burnley for the money advanced to said company by said Burnley; (3) the validity of the collateral notes and mortgages heretofore described; (4) the plaintiff had nothing whatever to do with any of the proceedings before the Corporation Commission; (5) the notes and mortgages were in due form and valid and binding; the plaintiff was entitled to a decree for the full amount of the indebtedness against Burnley and the Kiowa Ice Light & Water Company and also to foreclose the lien of the mortgages; (6) the plaintiff was entitled to a decree for an attorney's fee as prayed in the petition; (7) the Town of Kiowa is estopped to deny the relief for which plaintiff prays, and estopped to deny the validity of its own contract and its own ordinances; (8) the Corporation Commission had not power to impair the obligation of the contracts in said notes and mortgages: (9) and finally the said Corporation Commission could not deprive the plaintiff of its property without due process of law, in violation of section 1 of the Fourteenth Amendment to the Constitution of the United States."

¶2 At page 39 the first proposition relied on for reversal is thus stated:

"The Incorporated Town of Kiowa had the power and right to make the contract with Milo T. Crane and E. G. Burnley, and also the power to convey the water and light plant to the Kiowa Ice, Light & Water Company."

¶3 Manifestly the second statement in this proposition is the keystone in the arch of plaintiff's argument. The correctness of the first statement does not include or establish the correctness of the second statement as a necessary corollary, but the correctness of the second statement may include the correctness of the first statement and render available the arguments made under the other eight propositions. If the second statement is found to be incorrect then the first statement becomes wholly immaterial, and the arguments under the other eight propositions become futile because the basis for their support has fallen. Because of the manifest importance of this second statement, and the dependence of all other propositions on its correctness, it will be first considered.

"The Incorporated Town of Kiowa had * * * the power to convey the water and light plant to the Kiowa Ice, Light & Water Company."

¶4 That this is the pivotal question in the case, and so regarded by plaintiff, is shown by the language used in opening its argument. A quotation is made from the decision of the trial court as follows:

"In my opinion, the statutes of this state do not authorize a municipality to sell a water works system. I think that a municipality can sell property that has not been dedicated to public use, although it may have been purchased for the purpose of using it in a water works system, or property that has been abandoned for public use."

¶5 Concerning this plaintiff says:

"An erroneous opinion by the learned trial judge on this question caused him to fall into reversible error on the entire case."

¶6 In reaching a correct conclusion on the question here presented certain constitutional and statutory provisions are to be considered, and in their consideration their previous interpretation and application by this court should be adhered to where possible and apposite. Plaintiff relies on section 6, art. 18, Const., as authorizing a municipal corporation to exercise the same rights and powers, and as imposing on it the same legal and moral duties, as those pertaining to an individual. (Brief p. 44.) That section reads

"Every municipal corporation within this state shall have the right to engage in any business or enterprise which may be engaged in by a person, firm, or corporation by virtue of a franchise from said corporation."

¶7 Article 18 comprehends the entire constitutional scheme for the delegation of powers to and the limitation of authority of municipal corporations, and is readily susceptible of four subdivisions. Section 6 is a part of the fourth subdivision and must be considered in connection with its correlated sections. These relate to the granting, extension, and renewal of franchises, limit their duration to 25 years, and prohibit the granting of exclusive franchises. When considered in connection with its context it is evident that this section does not justify the broad interpretation sought to be placed on it. It only authorizes municipal corporations to do those things which they might by franchise authorize persons, firms, and corporations to do. No one would seriously contend that a franchise might be granted for the business of selling public utilities, as that term is used in section 27, art. 10, Const. That section 6 is a grant of power to municipalities in furtherance of the public policy of the state is the effect of the holding of this court in Oklahoma City v. Oklahoma Ry. Co., 20 Okla. 1, 93 P. 48. Therefore, since section 6, art. 18, Const., is a grant of power to municipalities in furtherance of public policy, and since the impairment or destruction of public service, or the diversion of public funds to purposes other than those for which they are voted, are clearly obnoxious to the public policy of the state, authority of the incorporated town of Kiowa to sell its water and light plant must be found, if it exists, in the language of some express statute. It is well settled that municipal corporations possess only such powers as are expressly granted. O'Neil Engineering Co. v. Incorporated Town of Ryan, 32 Okla. 738, 124 P. 19; In re Town of Afton, 43 Okla. 720, 144 P. 184; Town of New Butler v. Tucker, 54 Okla. 182, 153 P. 628; City of Enid v. Warner-Quinlan Asphalt Co., 62 Okla. 139, 161 P. 1092. In Dillon on Municipal Corporations (4th Ed.) vol. 1, p. 145, the rule followed in the above cases is thus stated:

"It is a general and undisputed proposition of law that a municipal corporation possesses and

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