Hill v. Elizabeth City

• Decision Date: 20 June 1923
• Docket Number: 110.
• Parties: HILL et al. v. ELIZABETH CITY et al.
• Court: U.S. Court of Appeals — Fourth Circuit

291 F. 194

HILL et al. v. ELIZABETH CITY et al.

No. 110.

United States District Court, E.D. North Carolina.

June 20, 1923

William M. Maloy, of Baltimore, Md., and Aydlett & Simpson, of Elizabeth City, N.C., for plaintiffs.

Meekins & McMullan and Thompson & Wilson, all of Elizabeth City N.C., for defendants.

CONNOR District Judge.

The case was submitted upon motion by defendants to dismiss the plaintiffs' bill under the provisions of Equity Rule 29 226 U.S. 656, 33 S.Ct. xxvi.

The bill discloses the following facts:

Plaintiffs Hill, Crook, and Evans allege that they are citizens and residents of the state of Maryland and owners of certain bonds issued by the Electric Light Company, of the value of $3,000, and the corporate plaintiffs, Safe Deposit & Trust Company, of Baltimore, and the Baltimore Trust Company, of Baltimore, Md., allege that they own, as trustees, a number of bonds issued by said Electric Light Company, a corporation chartered and organized under and pursuant to the laws of North Carolina, aggregating in value more than $3,000. That the authorized capital stock of said company is $100,000 divided into 1,000 shares of $100, all of which is outstanding. That out of an authorized issue of $200,000 there is outstanding bonds of said company $184,000 bearing date August 1, 1903, and running 30 years, bearing interest at the rate of 5 per cent. That the real and personal property of said Electric Light Company has been conveyed to the plaintiff Safe Deposit & Trust Company, of Baltimore trustee for the security of the payment of the interest annually, and at maturity the principal of said bonds. That there were also deposited with the trustee, as further security for the payment of said bonds, $75,000 out of a total of $100,000, of first mortgage, 30-year, 5 per cent. bonds of the Elizabeth City Water & Power Company, a corporation organized under the laws of North Carolina, and 200 shares of the par value of $100 each (total authorized issue of 1,000 shares, of which 725 shares are outstanding), of the said Water & Power Company. That the Elizabeth City Sewerage Company is a corporation chartered and organized under the laws of North Carolina.

The defendant city of Elizabeth City is a municipal corporation chartered and organized under the laws of North Carolina. The other defendants are the mayor and members of the board of aldermen of said city, citizens and residents of the state of North Carolina.

On September 1, 1902, an ordinance was adopted by the board of aldermen of said city granting to C. M. Ferebee, or his assigns, a franchise for the period of 60 years, to furnish light and gas to the town of Elizabeth City and to the inhabitants thereof; to construct and operate plants and works therefor, together with the privilege of using the streets and public grounds of the corporation necessary for the construction and service of said light and gas system.

The ordinance recites:

'That the board of town aldermen of the corporation of Elizabeth City are desirous of securing cheap and efficient light of said town and its inhabitants, and gas, both for illuminating and for fuel, for private and public use.'

The right is granted the said Ferebee to use the streets and grounds of said city to enable him to construct and maintain poles, lines, and other necessary structures for the ends and purposes set forth in said ordinance.

The privilege is granted said Ferebee, or his assigns, to contract with said town or city and its inhabitants for a supply of light and gas, to charge such sums of money therefor as may be agreed upon by the parties to such contracts, and to collect therefor. The corporation of Elizabeth City is also authorized to contract with the said Ferebee, or his assigns, for light and gas upon such terms as it may see fit.

On October 6, 1902, an ordinance was enacted by the board of aldermen of the corporation of said city, in which it was recited that--

'The board of town aldermen of the corporation of Elizabeth City, North Carolina, are keenly sensible of the advantage, importance and necessity of an adequate supply of pure, potable and wholesome water, both for public and private uses in the town, etc. In consideration of the premises and the health and convenience of the residents, inhabitants and citizens of the town and the mutual benefit to the property and owners thereof, in the enhanced value of the real estate within the corporation by the introduction and establishment of said improvements, therein and in consideration of the additional expense of a larger and more efficient power plant necessary to supply the said water, a franchise is granted to said C. M. Ferebee, or his assigns, for a period of sixty years to supply and furnish, within the corporate limits of said town and within whatever additions may, at any time, be annexed to said corporate limits, water and sewerage to the corporation and to the residents, citizens and inhabitants thereof, and to corporations, companies and individuals therein, desiring the same and to charge and collect therefor, and to construct, operate and maintain sewerage and waterworks therein. The right is granted to said Ferebee to use the streets, etc., of said town, by laying pipes, mains, sewers, etc., necessary for furnishing water and sewerage to the town and its inhabitants.'

On the 25th day of February, 1903, the Electric Light Company of Elizabeth City was chartered and organized under and pursuant to the laws of the state of North Carolina, with an authorized capital of $100,000, which has been subscribed and stock issued therefor.

Said corporation, in accordance with the provisions of its charter, on August 1, 1903, made an issue of $184,000 (out of an authorized issue of $200,000) first mortgage, 30-year, 5 per cent. bonds, and for the purpose of securing the payment of the principal and interest thereof executed a mortgage on all of its property, real and personal, to plaintiff Safe Deposit & Trust Company, of Baltimore, Md., a corporation chartered and organized under and pursuant to the laws of Maryland.

The Elizabeth City Water & Power Company was chartered and organized under and pursuant to the laws of North Carolina, February 25, 1903, and at the same time the Elizabeth City Sewerage Company was chartered and organized under and pursuant to the laws of North Carolina.

C. M. Ferebee thereafter assigned said franchises to the Elizabeth City Electric Light (and Power) Company and the Elizabeth City Water & Power Company and the Sewerage Company. The board of commissioners of Elizabeth City, by an ordinance duly passed on the . . . day of . . ., 1903, ratified and confirmed the said assignment.

The General Assembly of North Carolina at its session of 1903 (Priv. Laws, c. 99), passed an act authorizing Elizabeth City to contract with C. M. Ferebee, or his assigns, to furnish to said corporation electric light, gas, water, and sanitary sewerage for such time, not exceeding 30 years, for such consideration as to each of the board of town aldermen may deem just and expedient. The said city was also, by said act, authorized to pledge the credit of the said corporation to pay any and all installments which should accrue under and by virtue of such contracts, etc., and to levy taxes to raise funds to meet said installments, etc. The board of aldermen were authorized and directed, before entering into such contracts, to submit to the qualified voters of said city, at an election to be held for such purpose, the question whether said contracts should be made.

The board of aldermen of said town, pursuant to the authority vested in them by the said act of February 18, 1903, submitted to the qualified voters of Elizabeth City the question of ratification of the contracts proposed by the Electric Light Company, the Water & Power Company, and the Sewerage Company, at which election a majority of said voters ratified said contracts, which were thereafter on June 1, 1903, executed by the board of aldermen and the said corporations. Said contracts were to be and remain in force for 10 years from the date thereof.

Plaintiffs allege that, pursuant to, and in accordance with, the terms and provisions of said acts of the General Assembly, and the said contracts, the Elizabeth City Electric Company, and the Water & Power Company, and the Sewerage Company, proceeded to construct, erect, and have at all times maintained, plants, machinery, power houses, poles, wires, mains, and all other necessary appliances for furnishing the city and its inhabitants electric lights, water, and sewerage.

'That at the time of the original investment, Elizabeth City was not a community that could yield immediate and certain returns on the necessary capital and expenditures, but the companies had faith in the city and its future and were willing to render the service which would help to realize that growth of the city and development of its industrial and commercial enterprises which they foresaw and believed; that for 18 years, the three utility companies have served without a single dividend to its stockholders and without a dollar in salary to its officers. That the Electric Light Company's plant is of the best machinery and equipment that money can buy and is as economically operated as any plant of its capacity in North Carolina. * * * That from time to time there have been replacements and renewals of parts of the plant and large expenditures by reason of the wiring difficulties from the frequent breaking of large limbs on the many trees that line the streets of Elizabeth City. That the present facilities of the Electric Light Company are modern adequate and efficient, and capable of providing two and one-half times the current that ...