City of San Antonio v. Guadalupe-Blanco River Au., 11684.

• Decision Date: 29 November 1945
• Docket Number: No. 11684.,11684.
• Citation: 191 S.W.2d 118
• Parties: CITY OF SAN ANTONIO et al. v. GUADALUPE-BLANCO RIVER AUTHORITY et al.
• Court: Texas Court of Appeals

Page 118

191 S.W.2d 118

CITY OF SAN ANTONIO et al. v. GUADALUPE-BLANCO RIVER AUTHORITY et al.

No. 11684.

Court of Civil Appeals of Texas. Galveston.

November 29, 1945.

Rehearing Denied December 21, 1945.

Appeal from District Court, Harris County; Ben F. Wilson, Judge.

Consolidated suits by the City of San Antonio and others against the Guadalupe-Blanco River Authority and others for a judgment adjudging the invalidity of a certain purported contract of sale and lease, adjudging the invalidity of assignment of purported contract of sale and lease, and ordinances under which lease and assignment were executed, establishing and quieting in the City of San Antonio, against the claims of Guadalupe-Blanco River Authority and another, the title to and right of possession of property described in the purported contract of sale and lease, and enjoining interference with the city and Board of Trustees of San Antonio Electric & Gas System in the possession, management and control of the property. From a judgment against the City of San Antonio and others upholding the challenged contract of sale and lease and denying the relief sought by Harris Trust & Savings Bank of Chicago and Harold Eckhart, trustee, and denying the plea for declaratory judgment of the Board of Trustees of San Antonio Electric & Gas System, all parties against whom judgment was rendered appeal.

Judgment reversed and judgment rendered for the City of San Antonio.

T. D. Cobbs, Jr., City Atty., and Martin J. Arnold, both of San Antonio, Weaver Moore, of Houston, and Dan Moody, of Austin, for appellant City of San Antonio.

Leo Brewer, W. F. Nowlin, and W. L. Matthews, all of San Antonio, for appellant Board of Trustees of San Antonio Electric & Gas System.

Dayton Ogden, of Chicago, Ill., and C. W. Trueheart, of San Antonio (Chapman & Cutler, of Chicago, Ill., and Trueheart, McMillan & Russell, of San Antonio, of counsel), for appellants Harris Trust & Savings Bank and Harold Eckhart.

Ben H. Powell, J. A. Rauhut, and W. S. Gideon, all of Austin, for appellee Lower Colorado River Authority.

Vinson, Elkins, Weems & Francis, of Houston, D. W. Glasscock, of Austin, E. M. Cape, of San Marcos, and A. J. Wirtz, of Austin (Hart & Brown, of Austin, Fred L. Blundell, of Lockhart, and Tom G. Oliver, of San Marcos, of counsel), for appellee Guadalupe-Blanco River Authority.

MONTEITH, Chief Justice, and CODY, Justice.

Two suits were brought by the appellants herein in the district courts of Bexar County, W. B. Tuttle et al. v. City of San Antonio et al., No. F6748, in the 45th District Court, and City of San Antonio v. Lower Colorado River Authority et al., No. F11527, in the 73rd District Court. The two suits were transferred, under order of the Supreme Court and by agreement of the parties, to the 61st District Court of Harris County and consolidated. The consolidated case was repleaded and tried under docket No. 300,602, styled City of San Antonio et al. v. Guadalupe-Blanco River Authority et al.

In the consolidated suit the City of San Antonio, as plaintiff, complaining of Guadalupe-Blanco River Authority, Lower Colorado River Authority, Harris Trust and Savings Bank of Chicago, and Harold Eckhart, Board of Trustees of San Antonio Electric and Gas System, and Walter F. Napier et al., constituting the Board of Trustees of San Antonio Electric and Gas System, as defendants, sought judgment (1) adjudging the invalidity of a certain purported contract of sale and lease between the City of San Antonio and Guadalupe-Blanco River Authority and the ordinance under which it was signed; (2) adjudging the invalidity of the assignment of the purported contract of sale and lease and the ordinance under which the City joined in the execution of the instrument of assignment; (3) establishing and quieting in the City of San Antonio, against the claims of the Guadalupe-Blanco River Authority and Lower Colorado River Authority, the title to and right of possession of properties described in the purported contract of sale and lease, and (4) enjoining interference with the City of San Antonio and the Board of Trustees of San Antonio Electric & Gas System in the possession, management and control of said property.

Guadalupe-Blanco River Authority and Lower Colorado River Authority, as assignee of Guadalupe-Blanco River Authority, claiming rights under said contract of sale and lease, sought judgment upholding its validity.

Harris Trust & Savings Bank of Chicago and Harold Eckhart, Trustees under a revenue bond indenture, and Walter P. Napier, Franz Groos, W. B. Tuttle, D. F. Youngblood and Gus Mauermann, as the Board of Trustees of San Antonio Electric & Gas System, sought judgment declaring their respective rights and duties in the event the challenged contract of sale and lease was upheld.

The trial court directed a verdict in favor of the Guadalupe-Blanco River Authority and Lower Colorado River Authority and entered judgment against the City of San Antonio and all other defendants, upholding the challenged contract of sale and lease. The court denied Harris Trust & Savings Bank of Illinois and Harold Eckhart, Trustees, the relief sought, and denied the pleas for declaratory judgment of the Board of Trustees of San Antonio Electric & Gas System. All parties against whom judgment was so rendered have appealed.

In this opinion the City of San Antonio will be referred to as the City, Guadalupe-Blanco River Authority will be referred to as Blanco Authority, Lower Colorado River Authority will be referred to as Colorado Authority, Harris Trust & Savings Bank of Chicago and Harold Eckhart, as trustees, will be referred to as trustees for the bondholders, and Walter P. Napier, Franz Groos, W. B. Tuttle, D. F. Youngblood, and Gus B. Mauermann, constituting the Board of Trustees of the San Antonio Electric & Gas System, will be referred to as Board of Trustees. The lease contract which purports to grant the lessee an option to buy the leased property will be referred to as the contract of sale and lease.

This case arose out of a controversy between the City of San Antonio and the Blanco Authority and the Colorado Authority with reference to the validity of a 30-year lease and power contract, including an option to purchase the leased properties on termination of the lease, executed by the City of San Antonio and covering an electric generating plant known as the Comal plant, located in New Braunfels, Tex., and appurtenant properties. The contract of lease in question was executed on October 24, 1942, simultaneously with the acquisition by the City of the electric utility system serving the City. The electric utility system, including the properties made the subject of the lease contract, had been purchased by the City in pursuance of the powers conferred on it by Articles 1111-1118, Revised Civil Statutes, Vernon's Ann.Civ.St. arts. 1111-1118. An indenture was executed by the City, delivered and effective with the acquisition by the City of the Electric utility system conveying to the trustees for the bondholders all property acquired by the City from the Public Service Company, pledging the properties of the system and its revenues to secure the payment of the revenue bonds executed by the City, as the purchase price for the utility properties. The indenture required the City to operate and maintain the utility plant as a self-liquidating project and to apply the revenues derived therefrom to the payment of the purchase money revenue bonds which were issued in acquiring the system.

Prior to the date of the purchase of said properties by the City, the City and surrounding territory were served with gas and electricity by San Antonio Public Service Company, a private utility corporation. The Comal plant was the larger of two generating stations belonging to the utility company. It was utilized by the Company for serving the City of San Antonio with electricity. The Comal plant was located at New Braunfels, thirty miles from San Antonio on account of the abundant water supply, which greatly increased the efficiency of the system. This plant was shown to be a necessary and indispensable part of the City's electric system.

Prior to November, 1941, the Securities & Exchange Commission under Public Utilities Holding Company Act, had instructed the American Light & Traction Company, the owner of the common stock of the San Antonio Public Service Company, to dispose of its holdings in the San Antonio Company.

The Blanco Authority, which was created by the State Legislature in 1935 as a conservation and reclamation district under Section 59 of Article XVI of the Constitution, Vernon's Ann. St., acting through A. J. Wirtz and W. D. Glasscock, its authorized agents, had entered into negotiations with American Light & Traction Company to acquire the properties of the San Antonio Public Service Company in the latter part of 1941. In the process of these negotiations they met with and disclosed to the mayor of the City of San Antonio and certain of the city commissioners that the Blanco Authority purposed to purchase the assets of the San Antonio Public Service Company. They proposed to the City that, in the event the Blanco Authority was successful in purchasing the assets of the Utility Company, it sell the City the electric distribution system and that the City buy its electricity from the Blanco Authority. This proposal was refused by the City. Later, on May 27, 1942, the city commissioners adopted a resolution authorizing the mayor to enter into negotiations for the purchase by the City of the gas and electric properties of San Antonio Public Service Company.

On June 8, 1942, the mayor and commissioners of the City of San Antonio adopted an ordinance authorizing the purchase or condemnation of the properties of the San Antonio Public Service Company, and on June 9, 1942, the City filed its petition in condemnation in the county court of Bexar County, seeking to condemn...