City of Des Moines v. City of West Des Moines

• Decision Date: 13 January 1948
• Docket Number: 47135.
• Parties: CITY OF DES MOINES v. CITY OF WEST DES MOINES.
• Court: Iowa Supreme Court

30 N.W.2d 500

239 Iowa 1

CITY OF DES MOINES v. CITY OF WEST DES MOINES.

No. 47135.

Supreme Court of Iowa

January 13, 1948

[Copyrighted Material Omitted]

F. T. VanLiew, City Sol., Paul Hewitt and Harvey Bogenrief, Asst. City Solicitors, and Hextell & Beving all of Des Moines, for appellant.

Fountain Bridges, Lundy & Stephenson, of Des Moines, for appellee.

SMITH Justice.

Section 1, Chapter 120, Acts 41st General Assembly, section 6066-a1, Code 1927, now section 392.1, Code 1946 provides:

'Section 1. Joint action cities. When the boundary limits of cities or towns join and such cities or towns are located upon or adjacent to a river or stream, which furnishes drainage for such cities or towns, or either of them, and is also the source of water supply for the inhabitants of either or all of said cities or towns, such cities or towns are authorized to contract with each other for the joint use of the sanitary sewer system of either of such cities or towns for the purpose of furnishing a joint outlet therefor and to make provision therein for the payment of an agreed consideration for such joint use including an annual charge for the same.'

The act became law April 16, 1925. On July 6, 1925, plaintiff and defendant (then known as City of Valley Junction) entered into the contract involved here. It is long and need not be set out in full. By preamble it establishes that the parties' situation exactly conforms to the requirements of the new statute; that the Raccoon River receives sewage from defendant and furnishes plaintiff's water supply; and that defendant (party of second part) desires to use plaintiff's (first party's) South West Sewer System as an outlet for its (defendant's) sanitary sewer system.

It then provides that in consideration of the payments thereinafter provided plaintiff 'does hereby grant to the party of the second part thecontinuing right to connect' its sanitary sewer system to plaintiff's South West Sewer System and to use same as an outlet, 'the connection to be made at the point where opening has heretofore been provided for' (describing location) 'in anticipation of the possible use thereof' by defendant. (Italics supplied.)

Defendant city agrees to pay $40,000 on November 1, 1925, $2,000 annually thereafter for ten years, and $2,500 annually for a second ten year period. The contract further provides that defendant city, by giving notice sixty days before the expiration of the second ten year period, 'shall have the right to extend the privileges and rights herein granted for an additional period of ten years' and pay an annual sum equal to fifty cents per capita of its population at the time of giving said notice. Times of payment during this third ten year period are fixed.

The contract then provides that defendant city 'may thereafter continue and extend the privileges and rights herein granted, in periods of ten (10) years, by giving like notice and paying a like amount per capita annually thereafter * * *'; and that 'the amounts stipulated * * * shall constitute compensation in full from party of the second part for perpetual use (optional with said second party per above stated requirements) of said South west Sewer System * * * for emptying into said sewer system all sewage and liquids accumulating in the sanitary sewer system of party of the second part, for the treatment and disposal of same.' (Italics supplied.)

The contract also contains provisions whereby plaintiff agrees to hold defendant harmless in certain contingencies and gives plaintiff the right to cancel on sixty days' notice in event of defendant's default in making timely payments (such cancellation to be effective if default be not made good during the sixty day period); or, alternately, to waive the default and sue defendant for the amount due.

Plaintiff's petition is in two counts. Count one sets out the contract, alleges it execution and the existence of the facts authorizing it under the statute that the parties have since operated under it and that defendant is claiming the contract contains an enforceable option whereby it can exercise its privilege for an additional ten years from and after June 1, 1946, by paying the annual fee equal to fifty cents per person and perpetually in ten year periods thereafter.

Plaintiff further alleges that the contract was never a binding contract for more than a year because it is in legal effect a lease and subject to the provisions of section 6580, Code 1924, now section 416.108, Code 1946, which permits leases for one year only.

Plaintiff also claims: That its council in 1925 had no power by contract to bind successor councils; that the option feature is in any event void because lacking in mutuality; that it has built a sewage disposal plant and defendant's proportionate share of the cost of operation is far in excess of what defendant proposes to pay; that the claimed perpetual option is void as against public policy; that it is unreasonable and if the population of defendant should increase materially the financial burden of enlarging the sewer facilities might well exceed plaintiff's constitutional limit of indebtedness; and that plaintiff has no speedy and adequate remedy at law.

Count two realleges all of count one and enlarges upon the cost of operation stating it is now about $1.05 per person for plaintiff's inhabitants as against only the fifty cents per person which defendant would pay under the option contract.

The prayer is in the alternative: First, that the contract be decreed void and defendant perpetually enjoined from using plaintiff's sewer facilities; or second, that defendant be required to pay a sum per person of its population equivalent to the cost to plaintiff per person.

Defendant moved to dismiss upon the ground that the petition does not state a cause of action and shows on its face the contract is valid and binding. The court sustained this motion and the plaintiff has appealed. It urges only one error but submits seven brief points which we shall discuss in their order.

I. The first point argued is to the effect (a) that unless an option is supported by a sufficient consideration it is revocable and not binding, and (b) that while good at law it may not always be enforceable in equity.

The propositions are sound and the authorities cited undoubtedly support them. But we see no applicability to the facts here. The option is a part of the contract and supported by the same consideration. Defendant has paid a total sum of $85,000 over a twenty year period. It is not for us under the terms of the contract to say there is no consideration to support the option. Undoubtedly the parties intended the cash payments to pay for both the service and the option. Citation of authorities seems unnecessary but see Larson v. Smith, 174 Iowa 619, 630, 631, 156 N.W. 813.

Furthermore plaintiff was, by the contract, getting rid of the menace to the purity of its source of water supply, a valuable consideration in itself and one suggested by the condition written into the statute. There is clear consideration for granting the option.

The answer to the second proposition is equally apparent. Conceding that all option contracts are not enforceable in equity it does not follow that a court of equity will annul such a contract merely because it would not enforce it. This is not a suit by the City of West Des Moines to enforce the contract but by plaintiff to have it declared void. If the contract is good at law certainly equity will not annul it even though it may be one not specifically enforceable. In respect to enforceability, moreover, a contract resulting from the exercise of a legal option stands on the same footing as any other contract. Its enforceability depends on the nature of the contract, not on the method by which it is consummated.

Assuming the legality of the option feature of the original contract, its exercise by defendant resulted either in an extension of the original, or the creation of a new, contract for the ten year period commencing June 1, 1946. It is not necessary to determine which. Nor is it necessary to determine whether it can be specifically enforced. If legal, equity will not declare it void.

II. Appellant further argues that the contract is unreasonable and therefore void (a) because of its perpetual character and (b) because it is a contract for public utility service and rates therefor cannot by contract be fixed for perpetually renewable ten year periods.

This assignment requires consideration not alone of the character of the service but also of the capacity in which each party contracted and the nature of the contract itself.

The authorities quite generally refuse to attempt an all-inclusive definition of the term 'public utility.' 43 Am.Jur., Public Utilities and Services, § 2; 51 C.J. 4. 'As its name indicates, the term * * * implies a public use and service to the public.' 43 Am.Jur., supra.

It would seem the business of disposing of sewage comes within the classification. See Payne v. City of Racine, 217 Wis. 550, 259 N.W. 437; Toohey v. Town of Canton, 177 Okl. 426, 60 P.2d 729; State ex rel. Edwards v. Millar, 21 Okl. 448, 96 P. 747; Town of Afton v. Gill, 57 Okl. 36, 156 P. 658. However, see, contra, Village of Ridgewood v. Hopper, 181 A. 150, 13 N.J.Misc. 775; Holland v. Heavlin, 299 Mich. 465, 300 N.W. 777.

But even though the service be impressed with a public interest the question arises, what public? It is said 'the principal determinative characteristic * * * is that of service to, or readiness to serve, an indefinite public * * * which has a legal right to demand and receive its services or commodities.' (Italics supplied.) 43 Am.Jur., supra.

Is the City of West Des Moines a part of...