City of Owensboro v. Evansville & Ohio Val. Transit Co.
| Decision Date | 12 December 1969 |
| Citation | 448 S.W.2d 375 |
| Parties | CITY OF OWENSBORO, Kentucky, Appellant, v. EVANSVILLE & OHIO VALLEY TRANSIT COMPANY, etc. d/b/a Owensboro City Transit, Appellee. |
| Court | United States State Supreme Court — District of Kentucky |
Gilliam & Moore, Hugh D. Moore, Owensboro, for appellant.
William L. Wilson and George S. Wilson, III, Wilson & Wilson, Owensboro, for appellee.
CULLEN, Commissioner.
In this declaratory judgment action brought by the City of Owensboro against the Evansville & Ohio Valley Transit Company the circuit court entered judgment upholding the validity of a contract between the city and the transit company under which the city agreed to subsidize the operation of a city bus system by the transit company. The city has appealed, asserting various grounds on which it claims the contract is invalid.
The appellee filed a motion to dismiss the appeal on the ground that the appellant had designated only a partial record and had not filed a statement of points, CR 75.01, 75.04. The motion was overruled, but the appellee undertook to file a renewed motion on the same ground, which was passed to the merits. The designation of record designated 'the entire record herein, excepting only the briefs of the Appellant and the Appellee herein filed in the record.' We overruled the original motion because it was our opinion that the exclusion of the briefs from the designation did not mean that the designation was of less than the 'complete record' within the meaning of CR 75.04. We continue to adhere to that view and we hereby overrule the renewed motion. This brings us to the merits.
Early in March 1966 the then holder of the city bus franchise in Owensboro ceased operations, leaving the city temporarily without any bus service. In the latter part of March the city officials prevailed upon the appellee herein, Evansville & Ohio Valley Transit Company, to provide interim bus service pending the granting of a new franchise. On March 25 advertisement was made for a new franchise. Bids were received from the appellee and from another company. The city found the appellee's bid to be the better and on April 15 awarded the franchise to the appellee. The franchise was for a term of 10 years. It required the transit company to furnish 'reasonable, adequate and efficient motor bus service,' charging 'only reasonable rates,' and to provide 'attractive, safe and comfortable vehicles.' The franchise document recited the payment of a consideration of $25 by the transit company to the city. Following the granting of the franchise the transit company continued the operation which it previously had commenced on an interim basis.
On April 27, 12 days after the franchise was granted, the mayor and the city clerk of Owensboro entered into a contract in the name of the city, with the transit company, which recited that the transit company was entitled to a net annual profit equal to five percent of its gross revenues, after payment of operating expenses including all taxes, and which obligated the city to pay out of its funds such amount as necessary to achieve such a profit. The only specific obligation imposed on the transit company, under its contract, was 'to immediately establish and maintain a motor bus transportation system in the City of Owensboro and to provide safe, adequate and comfortable buses for use by the public.' The contract recited that the franchise theretofore granted to the transit company was made a part of the contract; however, whereas the franchise specified a fixed term of 10 years, the contract provided for an initial term of only three years, with the option in the transit company to renew for two additional three-year periods and one one-year period.
On May 27 the board of commissioners adopted a resolution reciting that the mayor and city clerk 'are hereby authorized' to execute on behalf of the city the contract which theretofore had been executed on April 27.
From April 27 through December 30, 1966, the city paid $17,099.17 to the transit company under the subsidy contract. In January 1967 the board of commissioners decided that it would no longer honor the contract. The transit company nevertheless continued to operate and to send bills to the city for subsidy payments, which bills, by the end of March 1968, amounted to $36,353.86. In April 1968 the transit company announced to the city that it would terminate bus service unless the city made the subsidy payments. The city then brought the instant action seeking a declaration of rights. The complaint, in the name of the city, was signed by the city attorney. Numerous grounds of invalidity of the contract were alleged, but as hereinbefore stated, the circuit court adjudged that the contract was valid in all respects.
The initial contention of the city, on this appeal, is that the contract in question is invalid because it was let without bids in violation of KRS 89.590(2). That statute requires, as to cities such as Owensboro, that before the city shall enter into any contract involving the expenditure of more than $1,000 the board of commissioners shall by resolution specify the nature of the work to be contracted for; the city manager shall advertise for and receive bids for the work; and the contract shall be let by the board of commissioners to the lowest responsible bidder. Admittedly the contract in issue contemplated the expenditure of much more than $1,000, and admittedly there was no advertisement for or receipt of bids. Thus, prima facie, there was a plain violation of the statute.
The appellee argues that the contract was simply an amendment of the previously granted franchise, and under a line of decisions of this court a franchise may be amended without advertising for bids. The cases relied on include Scott v. Cincinnati, N. & C. Ry., 268 Ky. 383, 105 S.W.2d 169; Union Light, Heat & Power Co. v. Covington, 246 Ky. 663, 55 S.W.2d 667; and Russell v. Kentucky Utilities Company, 231 Ky. 820, 22 S.W.2d 289, 66 A.L.R. 1238. The cited cases stand for the proposition that, without advertising, a franchise may be amended as to regulatory details upon a change of conditions.
In the instant case there was no change of conditions. The record shows that before the franchise was granted the city officials and representatives of the transit...
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