City of Clovis v. Southwestern Pub. Serv. Co.

• Decision Date: 29 August 1945
• Docket Number: No. 4875.,4875.
• Citation: City of Clovis v. Southwestern Pub. Serv. Co., 49 N.M. 270, 161 P.2d 878, 1945 NMSC 30 (N.M. 1945)
• Parties: CITY OF CLOVISv.SOUTHWESTERN PUBLIC SERVICE CO.
• Court: New Mexico Supreme Court

49 N.M. 270

161 P.2d 878

CITY OF CLOVIS

v.SOUTHWESTERN PUBLIC SERVICE CO.

No. 4875.

Supreme Court of New Mexico.

Aug. 29, 1945.Rehearing Denied Oct. 3, 1945.

Appeal from District Court, Curry County; James C. Compton, Judge.

Action by the City of Clovis against the Southwestern Public Service Company arising out of a sale by plaintiff of its utility properties to New Mexico Utilities Company, the predecessor in interest and liability of defendant. From a judgment for defendant, the plaintiff appeals.

Affirmed.

Where point was waived by counsel at close of trial below, and trial court did not pass thereon, Supreme Court would also refuse to pass on the point.

[161 P.2d 879 , 49 N.M. 272]

Jas. J. McNamara, of Clovis, for appellant.

Hervey, Dow, Hill & Hinkle, of Roswell, Otto Smith, of Clovis, Ben H. Stone, of Amarillo, Tex., and Chas. C. Crenshaw, of Lubbock, Tex., for appellee.

LUJAN, Justice.

This case arises out of the sale by the City of Clovis of its utility properties to New Mexico Utilities Company, the predecessor in interest and liability of defendant-appellee. The sale was made in the Fall of 1925 and was fully executed by the City at that time.

Appellant contends, under a number of assignments, that this sale was, and is, void (1) because it is generally violative of the Constitution; (2) because at the election wherein was submitted to the electors the question of the sale of the properties, the question of the sale of the electric property and the question of the sale of the water property were not separately submitted to the voters; and (3) that interest is due the City, in any event.

The question of duality, of the sale of the properties as a unit, although argued in the briefs, will not invoke a decision for the reason, as appellee points out, and as hereinafter shown, the trial court found: ‘The plaintiff in open court expressly abandoned its contention that the election of October 6, 1925, was void because of duality.’ Appellant prays for the return of the properties, for removal of cloud from its title, and for an accounting between appellant and appellee.

Should it be found that the contract of sale is valid, appellant prays the declaratory judgment of the court that appellee is, impliedly, indebted to appellant for certain interest. This claim is based upon the fact that part of the purchase price, viz., $130,000, was payable in twenty-four annual instalments of $5,416.66, each, and that no interest has been paid thereon.

Appellee denies that the contract of sale was invalid; and it denies owing any interest on the $130,000 by reason of an express contract between the parties that no interest was to be paid thereon.

Appellee also sets up affirmative defenses which it has designated (1) Validating Act; (2) Change of Legal Position and Estoppel by Record or Judgment; (3) Laches and Estoppel; (4) Substantial Compliance; (5) Statu Quo; and (6) Limitations and Adverse Possession.

The Court made findings of fact and gave as its conclusions of law all the conclusions requested, or relied upon, by appellee, and judgment was entered dismissing the complaint. The appeal follows.

Appellant, accordingly, is in the position of having its complaint dismissed because it failed to establish any of its alleged causes of action, and for the additional reason that appellee's affirmative defenses had been fully established.

The facts are undisputed. No attack is made upon the court's findings. The only questions presented to the court below, and now to this court, are questions of law.

New Mexico Utilities Company was the predecessor in interest and liability of appellee. It was invorporated under the laws of New Mexico in 1925, and, at the times herein mentioned, owned nothing but the electric property at Portales, New Mexico. All of its stock was owned by a holding company, the Missouri Power & Light Company, of St. Louis, Missouri.

In the course of negotiations for the purchase from the City of Clovis of its electric and water utilities, the Company, on September 4, 1925, submitted its offer of purchase in writing. Along with this letter there were transmitted: (1) Proposed contract of sale; (2) from of proposed street lighting contract; (3) from of proposed water service contract; (4) form of proposed electric franchise; (5) form of proposed water franchise; (6) form of proposed pumping contract; (7) a comparative exposition of certain electric and water service rates; and (8) what is called ‘Exhibit G,’ which was a statement of the price to be paid the City for its utilities.

At this time the City of Clovis had outstanding bonds of the face value of $240,000, not yet subject to redemption, the proceeds of which had been used by the City in the construction of its water and electric utilities.

The first issue of bonds, of the face value of $75,000 was dated March 1, 1909, and was due and payable on March 1, 1939, and were redeemable after twenty years from date. The second issue was of the face value of $50,000, was dated May 1, 1918, was due and payable May 1, 1948, and was redeemable at any time after May 1, 1938. The third issue was of the face value of $115,000, was dated May 1, 1920, was due and payable May 1, 1950, and was redeemable at any time after May 1, 1940. All issues bore six per cent interest, and the ordinances in all cases provided that taxes should be levied in sufficient amount to pay interest as due, and eventually, the principal.

On September 10, 1925, the proposed contract of sale which had been submitted to the City on September 4, 1925, was signed by the Mayor and City Commissioners. The contract of sale provided that (1) the City should sell its electric and water properties to the Company and should have an option to repurchase the water property on March 1, 1929; (2) the City should grant an electric franchise to the Company; (3) the City should grant a water franchise to the Company; (4) the City should contract to purchase from the Company all the electric power and light it would need for twenty-five years; (5) the City should contract to purchase from the Company all the water it would need for twenty-five years; and (6) the City should enter into a pumping contract with the Company in 1929, if it should exercise its option to repurchase the water plant and system.

The electric franchise ordinance was passed on October 9, 1925. It is identical with the proposed electric franchise ordinance submitted by the Company on September 4, 1925, despite the fact that the minutes of the city commission of September 10, 1925, recited that certain changes in contract and franchise forms submitted were desirable, and were likely to be made.

The water franchise ordinance was passed on October 9, 1925. It is identical with the proposed water franchise ordinance submitted by the Company on September 4, 1925. The street lighting contract was executed on October 9, 1925. It is identical with the proposed street lighting contract submitted by the Company on September 4, 1925. The water service contract was executed on October 9, 1925. It is identical with the proposed water service contract submitted by the Company on September 4, 1925.

The first point relied upon by appellant is that the contract of sale is void because it contravenes Sec. 14, Art. 9 of the State Constitution in that the City lent its credit and made a donation to, and in aid of, appellee. The contract of sale between the City of Clovis and The New Mexico Utilities Company, appellee's predecessor in title, involved neither a loan of credit nor a pledge of credit, or a donation to, or in aid of, the Company. The record shows that the City of Clovis was unable to call and retire outstanding bonds in the face value of $240,000 (all of which bore 6% interest) prior to the 1st day of March, 1929, on account of the terms of said bonds.

Under the terms of the contract of sale the New Mexico Utilities Company was to pay to the City of Clovis as a part of the purchase price for such utilities the sum of $240,000 on March 1st, 1929. The New Mexico Utilities Company assumed the payment of the City's bonds in this amount, and to assure its discharge of that obligation gave to the City its non-negotiable bond secured by a deed of trust on the utilities which it was then acquiring from the City, for $240,000, bearing interest at the rate of 6% per annum, payable semi-annually and maturing on the 1st day of March, 1929.

This is one of the transactions which the City now contends amounted to a lending or pledging of credit in behalf of the New Mexico Utilities Company, and was a donation by the City on behalf of the company. The nature of this transaction partakes of none of said qualities, as we view it. We will discuss this contention under the subdivisions of (a) ‘Lending or Pledging of Credit,’ (b) ‘No Donation by the City of Clovis to New Mexico Utilities Company,’ (c) ‘Sale for Part Cash and the Balance on Terms or Credit does not Constitute a Lending or Pledging of Credit or a Donation,’ and (d) ‘Assumption by New Mexico Utilities Company of the Outstanding $240,000.00 bond issue Against the Water and Lighting Utilities did not Constitute a Lending or Pledging of Credit.’

We hold that the agreement of the New Mexico Utilities Company to pay to the City of Clovis $130,000 in twenty-four annual instalments as a part of the purchase price of its light and water system does not constitute the lending or pledging of the credit of the City of Clovis to any person for the benefit of the New Mexico Utilities Company, within the constitutional prohibition.

The debts and liabilities of the City, and the burden on its taxpayers, were not increased. By such transaction it did not thereby become surety for, or guarantee the payment of, anything for which the utilities might have been liable to third persons. The credit, the ability to pay, there involved was no more than, and involved only, the credit of the utility...