Homebuilders Ass'n of Greater Kansas City v. Kansas City, 53693

• Decision Date: 09 September 1968
• Docket Number: No. 53693,53693
• Parties: HOMEBUILDERS ASSOCIATION OF GREATER KANSAS CITY et al., Plaintiffs-Respondents, v. KANSAS CITY, Missouri, Defendant-Appellant.
• Court: Missouri Supreme Court

Page 111

431 S.W.2d 111

HOMEBUILDERS ASSOCIATION OF GREATER KANSAS CITY et al Plaintiffs-Respondents, v. KANSAS CITY, Missouri, Defendant-Appellant.

No. 53693.

Supreme Court of Missouri, En Banc.

Sept. 9, 1968.

Kenneth M. Myers, James E. Grier, Kansas City, for respondents, Brewer & Myers, Kansas City, of counsel.

Herbert C. Hoffman, City Counselor, Carrol C. Kennett, Assoc. City Counselor, Kansas City, for appellant.

FINCH, Judge.

This is an appeal by Kansas City, defendant herein, from an adverse judgment by the Circuit Court on the first three counts of a declaratory judgment action involving contracts between the city and various contractors or builders or their assignees for extension of water mains of the city water system of Kansas City.

The petition contained twenty-one counts, but the court's judgment decided only the first three counts. ¹ An order was made pursuant to Supreme Court Rule 82.06, V.A.M.R., that the judgment on the first three counts was designated as a final judgment for purposes of appeal under § 512.020. ² Action on Counts IV through XXI was reserved pending disposition of this appeal. This procedure is permissible. State ex rel. State Highway Commission v. Hammel, Mo., 290 S.W.2d 113(10).

The question presented is whether ninety-four contracts entered into by plaintiffs or their assigns and Kansas City, by its director of the water department, are valid and enforceable obligations. These contracts covered extension of water mains for which plaintiffs furnished the money and were to receive a refund of their advances in the manner and from the source specified in the various contracts.

Count I involves contracts executed prior to June 20, 1958. Count II involves contracts executed between June 20, 1958, and April 13, 1962. Count III involves contracts executed subsequent to April 13, 1962. Each count sought a declaration that the contracts involved therein are valid and enforceable and that the plaintiffs are entitled to refunds thereunder. Refunds claimed on Count III alone total $541,499.24, less refunds received of $86,789.08, which gives us jurisdiction.

Kansas City is a constitutional charter city. Such cities are authorized by § 91.600 to own and operate a waterworks system. Kansas City provided for such a system in its charter. The charter sections dealing therewith, and with which we are concerned, are as follows:

'Sec. 44. Powers and duties. The director of the water department shall be a person trained and experienced in the operation and management of public utilities. He shall have power to lay water pipes and equipment along streets, public highways, alleys or parts thereof, or other places, and to supply water and other services to the city, its inhabitants or to any person, firm or corporation within or without the corporate limits of the city, or within or without the State of Missouri, under such terms and conditions as may be prescribed by ordinance. The council shall prescribe and the director of the water department shall enforce just and reasonable rules and regulations, methods and practices, governing the furnishing of water service and the collection of all charges therefor.

'Sec. 45. Extension of mains. The council may, upon recommendation of the director of the water department, establish such rules regarding the extension of water mains as will insure the greatest benefit to the city. Whenever just and reasonable, property owners may be required to make adequate guarantees or to pay such sums as will cover the cost of unprofitable water main extensions.'

'Sec. 48. Rates. It shall be the duty of the council by ordinance, upon recommendation of the director of the water department, from time to time, to fix, establish and alter prices and rates to be paid for the use of water. Water rates shall be so fixed as will produce at least sufficient revenue to pay all operating expenses, the interest on all bonds, issued and outstanding, for waterworks purposes, all maintenance and repair charges, and all costs due to obsolescence or other causes. All revenue and income derived from the waterworks, after paying all operating expenses, all maintenance and repair charges, and all costs due to obsolescence or other causes shall be first applied to payment of interest on bonds, outstanding for waterworks purposes, in so far as may be necessary, and the balance thereof shall go to a sinking fund which shall be established to meet the principal of said bonds, or for enlargements, extensions and betterments as the council may by ordinance provide. If deemed advisable by the council, upon recommendation of the director of the water department, water rates may be so fixed by ordinance as to produce sufficient revenue to pay for all enlargements, extensions and betterments of the works, in addition to all operating expenses, interest on all bonds issued or hereafter to be issued and outstanding for waterworks purposes, and the costs of all maintenance and repairs, and costs due to obsolescence or other causes.'

The contracts involved in Count I were signed on behalf of the city by the director of the water department. During the period in which these contracts were executed, there was no city ordinance authorizing the director to make such contracts. If he had authority therefor, it must be derived from language in the charter. It will be observed, however, that Sec. 44 of the charter, in prescribing the duties of the director, says that 'he shall have power to lay water pipes * * * under such terms and conditions as may be prescribed by ordinance'. Again, in Sec. 45 of the charter, it is provided that 'the council may, upon recommendation of the director of the water department, establish such rules regarding the extension of water mains as will insure the greatest benefit to the city'. Clearly, the charter contemplates and requires action by the council in the form of an ordinance to authorize the director to contract for the extension of water mains. That authority did not exist when the contracts sued on in Count I were executed. Under the doctrine enunciated in Lively v. Webb City, Mo.App., 106 S.W.2d 517, these contracts were not valid and binding obligations of Kansas City. The trial court erred in holding that the contracts referred to in Count I are valid and enforceable contracts.

The contracts involved in Count II were executed by the director of the water department pursuant to authority given in Ordinance No. 22809, enacted June 20, 1958, and contracts involved in Count III were executed by said director pursuant to authority of Ordinance No. 27276, enacted April 13, 1962. Both ordinances expressly authorized the director to contract for water main extensions. Ordinance No. 22809 required the contracting applicant to deposit with the city an amount equalling the estimated cost of the water main extension, after which the city would construct the extension either by contract or by force account, using its own personnel. Ordinance No. 27276 provided for the same procedure or, in the alternative, permitted the director of the water department, in his discretion, to allow an applicant to construct the water main extension. Under both ordinances the applicant was entitled to a refund of the amount deposited or expended, but both contemplated that the refund payments should come solely from revenue derived from the extensions to be installed. Ordinance No. 22809 and contracts executed thereunder provided for a schedule of repayments but provided...