Ginsberg v. Kentucky Utilities Co.

• Decision Date: 07 May 1935
• Citation: 260 Ky. 60,83 S.W.2d 497
• Parties: GINSBERG, Mayor, et al. v. KENTUCKY UTILITIES CO. et al. (two cases).
• Court: Kentucky Court of Appeals

83 S.W.2d 497

260 Ky. 60

GINSBERG, Mayor, et al. v. KENTUCKY UTILITIES CO. et al. (two cases).

Court of Appeals of Kentucky

May 7, 1935

As Modified on Denial of Rehearing June 18, 1935.

Appeal from Circuit Court, Bell County.

Suit by the Kentucky Utilities Company and others against Ike Ginsberg, mayor, and others. From a judgment for plaintiffs and from a judgment in contempt proceedings against the defendants, the defendants appeal.

Reversed with directions.

See also, 255 Ky. 148, 72 S.W.2d 738.

Arthur Rhorer, of Middlesboro, and Low & Bryant, of Pineville, for appellants.

W. E Cabell and J. E. Sampson, both of Middlesboro, N. R Patterson, of Pineville, and Gordon, Laurent & Ogden, of Louisville, for appellees.

CREAL Commissioner.

Middlesboro is a city of the third class and has for some years been operating under the commission form of government. On July 27, 1932, the board of commissioners of the city, pursuant to chapter 119, Acts of 1932 (Kentucky Statutes 1933 Supp., §§ 3480d-1 to 3480d-22), enacted an ordinance providing for the construction of a municipally owned electrical generating plant and distribution system to be financed by the sale of 6 per cent. bonds in the sum of $300,000, which were not to be a direct obligation of the city, but were to be retired by net revenues derived from the operation of the plant.

There was no petition presented to the board protesting against the ordinance or asking for a referendum vote as provided by law in the event it was not repealed, and it therefore became effective and final at the expiration of ten days after its passage. Kentucky Statutes, § 3480b-23. Because of the general business depression, the city was unable to find a market for its bonds or to secure funds to finance the project until February, 1934, when an application of the city to the United States through its Public Works Administration received favorable consideration. Under an agreement entered into, the federal government proposed to furnish for the purposes indicated the sum of $328,000, 30 per cent. of which was to be a gift and the balance to be evidenced by bonds bearing 4 per cent. interest, which were to be retired through a course of years out of the net revenues of the plant. On February 6, 1934, the city commissioners passed on its first reading an ordinance entitled: "An ordinance approving a loan agreement between the City of Middlesboro, Bell County, Kentucky, and the United States of America, Covering a Federal loan and grant in the aggregate amount of $328,000.00, for the purpose of financing the construction of a municipal electric power plant and distribution system, and declaring an emergency."

This ordinance was finally passed and adopted on February 13, 1934. It provided that the city should accept the loan agreement drawn up by the federal authorities for the financing of the project by the United States. On the day of the final passage of the loan agreement ordinance, a petition signed by voters of the city equal in number to over 58 per cent. of the total vote cast at the last regular election for mayor was presented to and filed with the board of commissioners, protesting against the passage of the ordinance, requesting that it be reconsidered and repealed, but if that be not done, then that the board of commissioners submit to the voters the question as to whether the ordinance should go into effect. The petition, omitting signatures and certificate regarding genuineness of signatures, reads:

"To the Board of Commissioners of the City of Middlesboro, Kentucky:

"Each of the undersigned does hereby represent that he is a citizen and a legally qualified voter of the City of Middlesboro, Kentucky, and that he resides at the address set opposite his signature hereto.

"As such citizens and legally qualified voters of said City of Middlesboro, Kentucky, we do hereby protest against the passage of an ordinance entitled:

"'An ordinance approving a loan agreement between the City of Middlesboro, Bell County, Kentucky, and the United States of America, covering a federal loan and grant in the aggregate amount of three hundred twenty-eight thousand (328,000) dollars for the purpose of financing the construction of a municipal electric power plant and distribution system, and declaring an emergency,' which ordinance was introduced and passed on its first reading February 6th, 1934, and by the terms of which ordinance the City of Middlesboro, Kentucky, agrees to and accepts the loan agreement therein set forth, and by the terms of which ordinance the Mayor and City Clerk of said City are authorized to execute said loan agreement on behalf of the city and to deliver the same after such execution to the Federal Emergency Administration of Public Works.

"We do further request that said ordinance be reconsidered by the Board of Commissioners and repealed; and if the same shall not be so repealed, the Board of Commissioners submit to the voters of the whole city, in the manner and form provided by law, the question as to whether said ordinance shall go into effect."

The board of commissioners failed to take any action as requested by the petition and the Kentucky Utilities Company, as a taxpayer of the city, and J. M. Hurst and J. H. Woodson, as citizens and taxpayers thereof, instituted this action seeking to enjoin the mayor and the board from carrying into execution the loan agreement.

The motion for a temporary injunction in the lower court was overruled, whereupon a motion for such injunction was made before Judge Dietzman and was granted in conformity with an opinion rendered by him and concurred in by all the members of the court except Judge Thomas who was absent. This opinion is found in 255 Ky. 148, 72 S.W.2d 738, 745. The motion for an injunction reads: "Plaintiffs, Kentucky Utilities Company, J. H. Woodson and J. M. Hurst, move the Court for an order granting a temporary injunction against the defendants, Ike Ginsberg, H. B. Stallard and John Burch, constituting the Mayor and Board of Commissioners of the City of Middlesboro, and City of Middlesboro, Kentucky, enjoining and restraining them from taking any step to carry out or perform any of the terms, provisions or conditions set out in the loan agreement referred to in the petition."

The opinion rendered by Judge Dietzman contained an exhaustive statement of the facts and proceedings up to that time. It also makes reference to the material conditions and provisions in the loan agreement which is set forth at length in the ordinance complained of and also states in substance that plaintiffs in their petition, as amended, pitch their cause of action (1) on the ground that the ordinance in question was subject to a referendum in accordance with the provisions of sections 3480b-23 to 3480b-26, inclusive, of the Statutes, and until the ordinance was approved by the voters at a referendum election as provided by these sections, the loan agreement could not be carried into execution, and (2) that the loan agreement is itself invalid for many alleged reasons, and among others assigned is that its terms prevent free, open, and unrestricted competitive bidding as required by law.

The order entered by Judge Dietzman reads: "It is, therefore, my order that a temporary injunction issue herein, enjoining until further orders of court the defendants from taking any steps to carry out or to perform any of the terms, provisions, or conditions set out in the loan agreement ordinance of February, 1934, unless and until a referendum according to the Statutes in such cases made and provided shall have been held and a majority of the voters voting thereon have voted in favor of such ordinance. The plaintiff will execute bond conditioned according to law before the clerk of the Bell circuit court in the sum of $1,000."

The prayer of plaintiffs' petition in substance is (1) that they be granted a writ of mandamus against the board of commissioners to reconsider the ordinance finally passed and adopted on February 12, approving the loan agreement and repeal same; but that if the ordinance be not repealed, that the board be required to submit to the voters of the city in the...