Interstate Power Co. v. Incorporated Town of McGregor
| Citation | 296 N.W. 770,230 Iowa 42 |
| Decision Date | 11 March 1941 |
| Docket Number | 45487. |
| Parties | INTERSTATE POWER CO. v. INCORPORATED TOWN OF McGREGOR et al. (SEYBERT et al., Intervenors). |
| Court | United States State Supreme Court of Iowa |
Appeal from District Court, Clayton County; T. H. Goheen, Judge.
A suit by the plaintiff and intervenors to enjoin the defendant town and its officers from entering into a contract for the construction of a municipally owned electric light and power system to be paid for solely from the net earnings thereof as provided by certain statutes. From a decree denying the relief, the plaintiff and intervenors appealed.
Affirmed.
Smith & O'Connor, of Dubuque, D. D. Murphy & Son, of Elkader and Robert Coon, of McGregor, for appellants.
Cor Van de Steeg, of Orange City, and Stipp, Perry, Bannister & Starzinger, of Des Moines, for appellees.
The determining elements of the appeal are largely factual. Referring to the matters somewhat in chronological sequence it appears that the plaintiff has been furnishing electric energy to the users thereof in the defendant town for some years under a franchise. On its expiration, the voters refused to renew the franchise, but the service has been maintained. In the fall of 1939 the defendants, by resolution, submitted to the voters of the town a proposal that the town establish and operate its own electric light or power system, to cost not to exceed $120,000, and to be paid solely and only out of the earnings thereof, without incurring any indebtedness therefor by the town. At the special election on October 12, 1939, the proposal carried by a vote of 400 to 275. During the campaign preceding the election, there was considerable activity on the platform, in the press, and by general comment, both for and against the proposal. There may have been some street talk that the adoption of the measure might be used to drive a better bargain with the power company, but there is nothing in the record to warrant any claim that the election was not fair and lawful in every respect. Keokuk Waterworks Co. v. Keokuk, 224 Iowa 718, 734, 277 N.W. 291; Abbott v. Iowa City, 224 Iowa 698, 715, 277 N.W. 437. On February 9, 1939, the voters had defeated a proposition to give a franchise to the plaintiff, and on January 15, 1941, at an election commanded by a writ of mandamus procured by the plaintiff, the voters again refused the franchise, by a majority of 157 votes.
After the election on October 12, 1939, there were some negotiations between the plaintiff and defendants with respect to a lease or sale of plaintiff's plant, or for the wholesale of electric energy to the town, but no agreement was reached. On November 3, 1939, defendants employed Mr. Van de Steeg to advise and assist them in any legal matters. On the same day, the defendants, by written contract, employed the Stanley Engineering Company, of Muscatine, Iowa, to prepare plans and specifications for the proposed improvement, and to have general supervision of its construction. A suit in equity attacking the validity of this contract was instituted by Walter Davies, one of the objectors hereinafter referred to.
The plans and specifications and form of contract were submitted by the engineer to the defendants, and filed in the office of the town clerk on March 1, 1940. The improvement was one contemplated within the provisions of 1939 Code, Sections 6134.01 to 6134.11, known as the Simmer law. As provided by Sections 6134.08, 6134.09 and 6134.10, the defendants published notice of a hearing for 10 o'clock in the forenoon of April 10, 1940, upon the plans and specifications and proposed form of contract, and any objections thereto, and forbids, and the entering into of such contracts as the town council " shall deem to be to the best interest of the municipality." The notice was published on March 7 and 14, 1940. The plaintiff, alone, on April 4, 1940, filed its petition in court, praying for an injunction against the entering into of any such contract, upon the alleged grounds that there was a failure to provide for competitive bidding, in that (1) the contract was to be let on the basis of labor and materials combined, and not separately; (2) it provided for payment on completion of the work in cash to be derived from the sale of revenue bonds issued under the Simmer Law, which are not general obligation bonds of the municipality payable by taxation, but solely by revenue from the plant, and to be a lien upon the improvement; (3) there was no provision obligating the municipality to sell the bonds at any particular time or place; (4) only those could bid who were able to purchase the bonds or accept them in lieu of cash because there was no general market for such bonds at par, at which they must be sold; and (5) if the municipality failed to sell the bonds for sufficient to pay the contractor, the municipality and all the taxpayers would be liable in damages for breach of contract.
A hearing was had on the petition on the day it was filed, at which it was stipulated by the parties that the defendants might perform all acts provided for in the published notice except that they should not sign, execute, or enter into any contract for the improvement, until the ruling of the court. No such contract was executed until after the decree, and on October 3, 1940.
The published notice, and the instructions to bidders, provided that: the maximum expenditure would be $120,000; the work would be in four sections, to wit: Section 1-Construction of power plant building, etc.; section 2-Installation of two Diesel engines with a combined horsepower capacity of not less than 650, nor more than 750, complete with electric generators, accessories, etc., and neither engine of less horsepower capacity than 300; section 3-Installation of electrical equipment within power plant consisting of switchboard, bus structure and all cable and wiring; section 4-Construction of distribution system; bidders might submit a bid on any or all of the sections, or a combined bid on all of the work; payment for the improvement to be made in cash, only out of the proceeds of the sale of electric revenue bonds bearing annual interest not exceeding 4 per cent, payable solely out of the net earnings of the plant, and without any obligation or liability on the part of the town, by taxation or otherwise, by reason of the insufficiency of the net earnings; the Council reserved the right to reject any and all bids and to enter into any contract deemed for the best interests of the town. Under the notice, instructions to bidders, plans or specifications, no particular make of Diesel engines, generators or other equipment was specified.
The hearing was had at the time and place specified. Typewritten objections consisting of an original and several carbon copies were filed with the town clerk on this date. The recited objections were (1) the plans and specifications provided that the lettings were made on a basis of materials and labor and failed to provide for competitive bidding; (2) the contract provided that payments were to be made out of revenue bonds which did not constitute a lien on any taxes of the town and were solely dependent on the physical capacity of the plant and its earning power for their payment; (3) no provision was made for the sale of the bonds prior to the letting, and since they must not be sold for less than par, the contractor might be forced to sue the town for breach of contract, or to accept the bonds in payment of the contract, which was an inhibition against free and competitive bidding; (4) that the contract with the engineering company provided for its payment out of revenue bonds, but if not, then out of the general fund of the town, thereby making the town and its property liable for an excessive taxation which otherwise might not be. Seventy-three persons, all on April 9 and 10, 1940, signed these objections. Three of these signers also signed an objection stating that the letting of the contract would create an indebtedness against the town in excess of the constitutional limitation. The objections were presented on behalf of the objectors by one of the attorneys for the plaintiff. The minutes of the meeting further show that a number of business men addressed the Council and asked that it proceed with the approval of the plans and specifications, and the opening of the bids; that there were about seventy-five bidders and materialmen present and several of them stated that they had examined the plans and specifications and form of contract and had found them to be very fair and to present a wide range of bidding; the Mayor called for other objections but none were made; representatives of two bond buyers were present and stated to the Council that they had already made a bid for the bonds on the basis of 3 1/4 per cent, and were ready to enter into a contract to purchase the bonds on that basis; some of the bidders offered to accept bonds on the same basis in payment of their contracts if they were successful bidders. A resolution was then passed adopting the plans and specifications.
The sealed bids were then opened and, with the exception of one which was not signed, were read. There were thirty-one bidders in all, not including the one whose bid was not signed. Nine of them submitted bids on section 1, either separately or combined with another section, or sections. These bids ranged from a low of $15,987 to the high bid of $20,994. There were six bidders on section 2. Four of these submitted two bids. These bids ranged from $42,142 to $50,372. On section 3 there were nine bidders, not including two others who bid on the section in combined bids. The bids of the nine ranged from $9,146 to $14,158. Fourteen bid either separately or in combination with other sections,...
To continue reading
Request your trial