City of Salem v. Oregon-Washington Water Service Co.

• Decision Date: 20 June 1933
• Parties: CITY OF SALEM v. OREGON-WASHINGTON WATER SERVICE CO. et al.
• Court: Oregon Supreme Court

23 P.2d 539

144 Or. 93

CITY OF SALEM v. OREGON-WASHINGTON WATER SERVICE CO. et al.

Supreme Court of Oregon

June 20, 1933

Rehearing Denied July 18, 1933.

En Banc.

Appeal from Circuit Court, Marion County; L. G. Lewelling, Judge.

Suit by the City of Salem against the Oregon-Washington Water Service Company and others. From the decree dismissing the complaint plaintiff appeals.

Remanded with instructions.

This is an appeal from a decree of the circuit court in favor of the defendants in a proceeding under the Uniform Declaratory Judgments Act of this state (1927 Session Laws, chap. 300 codified as sections 2-1401 to 2-1416, Oregon Code 1930) to determine the validity of an enactment of the registered voters of the city of Salem, December 15, 1931, of what now appears as section 90 of the charter of that city. This enactment, if valid, authorizes the city to acquire a municipal water plant, and to issue municipal bonds to the extent of $2,500,000 for the purpose of providing funds with which to pay for the plant. The city is the sole plaintiff in this proceeding. The defendants are the Oregon-Washington Water Service Company, a Delaware corporation, which serves the city of Salem with water, Honorable I. H. Van Winkle Attorney General of this state, G. F. Hurd and Peter D'Arcy, taxpayers. To the complaint (second amended complaint) the water company interposed a demurrer on two grounds: (1) The complaint does not state facts sufficient to constitute a cause of suit; and (2) "there is a defect of parties defendant for the reason that Howard Hulsey and J. B. Protzman, who are now and for many years immediately last past have been record owners of real and personal property within defendant city, and taxpayers therein, are not made parties defendant, and for the further reason that there are now and were at the time of filing said complaint many more record owners of real and personal property within defendant city, as fully disclosed by the deed records and tax roll of Marion County, Oregon, and none of said other record owners of real and personal property within defendant city, other than defendants Oregon-Washington Water Service Company, G. F. Hurd, Peter D'Arcy and I. H. Van Winkle are made parties defendant herein." The defendants I. H. Van Winkle and G. F. Hurd, each filed demurrers on the ground that the complaint failed to state a cause of suit or action. The defendant D'Arcy apparently submitted no motion, demurrer, answer, or other pleading. The record does not disclose whether he was served with the second amended complaint. However, his name accompanied that of Hurd in the demurrer submitted by the latter, but was later stricken out. After the name of M. Clifford Moynihan, the attorney who submitted this demurrer, appears, "Attorney for defendants G. F. Hurd and Peter D'Arcy." The demurrers were sustained, and after the plaintiff had elected to stand on its second amended complaint, the court entered a decree dismissing the complaint. The plaintiff appealed. Of the defendants only the water company has appeared in the supreme Court.

Chris J. Kowitz and William H. Trindle, both of Salem, for appellant.

Allan G. Carson and Walter E. Keyes, both of Salem (Carson & Carson and Keyes & Page, all of Salem, on the brief), for respondents.

The purposes of this proceeding are to determine whether a special election held in the city of Salem December 15, 1931 was a legal election, and if so, whether a measure approved on that day by the registered voters of that city, and which now appears as section 90 of the Salem Municipal Charter, conflicts with any legislative enactment of superior authority, or any constitutional provision. For purposes of brevity we shall hereafter refer to the enactment of December 15, 1931, as section 90. Succinctly stated, those portions of it which we deem material to this controversy authorize the city of Salem to acquire, purchase, or condemn any real or personal property within or without the corporate limits of the city useful in supplying water to the city; to purchase or construct a waterworks system, or any part thereof, useful in supplying water to the city; to appraise the value of the plant of the defendant Oregon-Washington Water Service Company, both within and without the municipal boundaries; after appraisement to make an offer to that company for "the plants, property, and equipment of said Oregon-Washington Water Service Company used by it in furnishing and distributing water to the city of Salem and its inhabitants and others adjacent to said city, at a price determined by the common council"; if the offer is not accepted and the city still desires to acquire the plant, to condemn it; and if the plant of the Oregon-Washington Water Service Company is not acquired, to construct a water plant for the city. Other parts of section 90 create for the city a water commission; define the manner in which the city shall charge for water service; provide that the income from the plant shall be applied (a) toward operating expenses; (b) discharge interest accruing upon bonds issued by the city for the purpose of acquiring the plant; (c) making extensions to the plant; (d) accumulating a sinking fund for the retirement of the bonds; and (e) for the payment of all bonds as they mature. Next, section 90 authorizes the city council to issue $2,500,000 bonds and employ the proceeds toward discharging the expenses of the above program. It also provides that the covenants of the bonds shall be such "that said city of Salem shall therein and thereby be held in substance and effect to undertake and promise to pay the sum therein named, together with interest thereon, as the same becomes due and payable." Further, section 90 provides "that said common council shall, each year at the time of making the annual tax levy for city purposes, make a special levy in a sum sufficient to pay the interest due on the outstanding bonds of this issue, and to retire the principal thereof as it matures; provided, however, that such levy shall not be made when and if the income on hand derived from such water plant applicable thereto, shall be sufficient to pay such interest due on such outstanding bonds of this issue, and to retire the principal thereof as it matures." We shall not now mention other parts of section 90.

The first contention urged by the respondent (water company) is that the demurrer interposed by it on the ground that there exists a defect of parties defendant is warranted by the fact that all Salem taxpayers are not made parties defendant in this proceeding. Section 2-1411, Oregon Code 1930, provides: "When declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceeding. In any proceeding which involves the validity of a municipal ordinance or franchise, such municipality shall be made a party, and shall be entitled to be heard, and if the statute, ordinance or franchise is alleged to be unconstitutional, the attorney general of the state shall also be served with a copy of the proceeding and be entitled to be heard."

The necessity for making the water company a party defendant is obvious. Section 2-1411 also discloses the reason why the Attorney General was made a defendant. In addition to these parties, we have two taxpayers who are mentioned in the complaint as defendants. We assume that the water company is also a taxpayer. Very likely its taxes and franchise fees constitute it one of the substantial taxpayers of Salem. But the demurrer of the respondent insists that all Salem taxpayers are necessary parties defendant. The purpose of declaratory judgment proceedings, according to section 2-1412, is "to settle and to afford relief from uncertainty and insecurity with respect to rights, status and other legal relations." Section 2-1406 amplifies this statement of the purpose of the act, for it plainly indicates that the aid of the courts in the administration of the act shall be to "terminate the uncertainty or controversy giving rise to the proceeding." Professor Borchard, in 45 Harvard Law Review, 793, states the purposes of such legislation in the following language: "While by no means the only function of the declaratory judgment, one of its major purposes is to afford relief from uncertainty and insecurity. The New York Court of Appeals has remarked that 'the general purpose of the declaratory judgment is to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation, either as to present or prospective obligations.' This function was picturesquely described some years ago by Congressman Gilbert of Kentucky: 'Under the present law you take a step in the dark and then turn on the light to see if you stepped into a hole. Under the declaratory judgment law you turn on the light and then take a step."' The act itself proclaims its purpose as being remedial and enjoins upon the courts a duty to construe and administer its provisions liberally. The courts have not hesitated to assume the discretionary power vested in them by the act and have given full effect to it. 28 Yale Law Journal, 105.

When this suit was instituted the following were named parties defendant: "Oregon-Washington Water Service Company, a corporation, and all persons whomsoever who have or claim to have any interest which would be affected by the declaratory decree prayed for in this complaint." The defendants Hurd and D'Arcy were made defendants after a demurrer filed by the water company suggested the necessity of making them defendants on the theory that they, being taxpayers, had an interest in this controversy. It is...