Johnson City v. Milligan Utility Dist.

Decision Date01 July 1954
PartiesJOHNSON CITY v. MILLIGAN UTILITY DISTRICT et al.
CourtTennessee Court of Appeals

George F. Brandt, William F. Guinn, Simmonds & Bowman and Cox, Epps, Miller & Weller, Johnson City, and Robert M. May, Jonesboro, for appellant Johnson City.

Shull & Wall, Elizabethton, and Frank Bryant, Johnson City, for appellee Milligan Utility Dist.

White, Gullett, Farrell & Phillips, Nashville, for appellees Bondholders of Milligan Utility Dist.

McAMIS, Presiding Judge.

The City of Johnson City instituted this suit against the Milligan Utility District and its vendors, James A. Pouder and wife, seeking a decree enjoining the District from taking possession of a six inch water line located in a public highway in Carter County and to have a declaration of the city's rights. After the issues between the original parties had been formed by their pleadings, certain bondholders of the District became parties by intervening petition. From a decree dismissing its bill the City of Johnson City has appealed.

The City of Johnson City, a municipal corporation with situs in Washington County, was empowered by Chapter 121, Acts of 1909, to acquire and operate a water system within its corporate limits and adjacent territory. Its claim to the water line here involved and the right to sell water to inhabitants of Carter County served by the line are predicated upon adverse possession and upon the terms of a resolution of its governing body adopted August 26, 1927, by which it agreed with Lee F. Miller and John W. Williams that, if they would install a line through their proposed sub-division located outside the corporate limits of the City on the Milligan Highway in Carter County, the city would furnish water within the area. The line was installed without expense to the city by Miller and Williams in 1928 and the city furnished water through it to inhabitants of the area until after this case was appealed to this Court when the line was cut by the District upon refusal of a member of the Court to stay such action pending the appeal.

The Milligan Utility District was organized under the provisions of what is known as The Utility District Act of 1937, 1950 Code Supp., Section 3695.26 et seq. After newspaper publication of notice as provided by the Act, a hearing was held before the County Judge of Carter County June 5, 1951, which resulted in a decree of that date (1) adjudging that the public convenience and necessity required the creation of a district to furnish water to an area in Carter County embracing the area then being served through the line here in question by the city, (2) creating the Milligan Utility District and (3) purporting to grant to it an exclusive franchise for the area described in the petition. Although the responsible officials of the city had general knowledge that a district was proposed for the area being served by the line, it is not shown that it had actual knowledge or notice, other than the newspaper notice referred to, that a hearing was to be held. It was not represented at the hearing; nor did it appeal as authorized by the Act.

Two questions are involved: (1) Title to the line and (2) the right to serve the water needs of the area. We consider first the question of title to the line noting that the city, through originally basing its claim to title or an option to acquire title upon the terms of the resolution and upon adverse possession for more than 20 years, now takes the position that the question of the naked legal title is immaterial because irrespective of the question of title the resolution gave the city the perpetual right to use, supervise and control it.

The record shows that Miller and Williams expended nearly $10,000 in constructing the line and that upon its completion they were indebted to the American Cast Iron Pipe Company for pipe in the amount of $1,900. Being unable to pay due to the onset of the depression, on February 19, 1931, they executed a deed of trust on the line, then installed in the ground along the state highway right of way through the Miller and Williams sub-division. The deed of trust was later foreclosed and, on April 5, 1932, the Trustee conveyed the line to American Cast Iron Pipe Company. On October 30, 1943, the Pipe Company conveyed the line by quit-claim deed to James A. Pouder and wife and they, in turn, in 1951, for a consideration of more than $40,000, executed a quit-claim deed to the District. All of these instruments were duly recorded in the office of the Register of Deeds for Carter County.

The city has not assigned error on the Chancellor's finding that the foregoing instruments constitute the recorded chain of title of the District. It insists, however, that each of these instruments conveyed notice of its claim or, at least, was sufficient to put a purchaser upon inquiry which, under our decisions, is the equivalent of actual notice. It also insists that its possession and use of the line throughout the period of these conveyances constituted constructive notice of its rights.

As bearing on the efficacy of the notice conveyed by the instruments appearing in the chain of title of the District, we quote, as typical of the others, the pertinent language of the deed of trust from Miller and Williams to the Pipe Company:

'* * * our six-inch water-pipe line, connected with the regular system of Johnson City, Tenn. * * * on what is known as United States Highway No. 11-E * * * together with all rights, interests and equities, of every kind and description, which the first parties have in and to a contract or ordinance with the City of Johnson City, permitting the installation and maintenance of said system, and regulating the flow of water therein and thereto.' (Italics ours.)

The city's briefs seem to go on the assumption that 'together with' is synonymous with 'subject to' and a number of authorities, notably Texas Company v. Aycock, 190 Tenn. 16, 227 S.W.2d 41, 45, 17 A.L.R.2d 322, are cited holding similar language sufficient to put a purchaser upon inquiry. Opposing counsel insist, on the other hand, that there is nothing in the language of any of these instruments suggesting that Miller and Williams 'had ever conveyed any property rights in their pipe line to the City.'

In Texas Company v. Aycock, supra, the reference in the chain of title showed that the land was 'encumbered' by a lease to the Texas Company. Though the lease was unrecorded this was held sufficient to constitute the equivalent of actual notice. The Court, speaking through Mr. Justice Tomlinson, said:

'Since Aycock and wife were given actual written notice (the deed) by the owners that the land they owned and purported to convey to Aycock and wife was enumbered by a lease to The Texas Company, they, the Aycocks, were put upon inquiry as to what were the provisions of that lease, and as to whether it contained the commonly occurring option to purchase clause.'

In that case the plain and unmistakable import of the language of the deed was that another instrument, in derogation of the title, was outstanding. The words 'together with' suggest, to the contrary, that the instrument in question not only does not impair the title but confers additional rights having no connection with the title. The natural inference from the contract or ordinance considered and construed as a whole in so far as revealed by the deed is that it was a benefit and not a burden to the owner of the line. In the context in which it is mentioned, we do not think giving the city the right to regulate the flow of water to and within the pipe can reasonably be construed as conferring upon it the right to use the line for its own purposes over the objection of the owner. Only by so construing the reference to the ordinance can the present case be brought within the Aycock case or any of the other cases cited in the briefs involving adverse claims or encumbrances.

A reference which upon its face is of such doubtful meaning cannot constitute 'actual notice', Code Section 7665, or, as said in the Aycock case, the...

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3 cases
  • Coastal States Gas Transmission Co., Inc. v. Alabama Public Service Com'n
    • United States
    • Alabama Supreme Court
    • April 8, 1988
    ...certain actions of a city did not make it a public utility, the Court of Appeals of Tennessee in Johnson City v. Milligan Utility District, 38 Tenn.App. 520, 531, 276 S.W.2d 748, 753 (1954), described a public "Whether a business operation may be classed as that of a public utility is contr......
  • State ex rel. North Carolina Utilities Commission v. New Hope Road Water Co.
    • United States
    • North Carolina Supreme Court
    • March 19, 1958
    ...or system is a public utility is whether or not the public may enjoy it of right or by permission only (Johnson City v. Milligan Utility District, 38 Tenn.App. 520, 276 S.W.2d 748; Junction Water Co. v. Riddle, 108 N.J.Eq. 523, 155 A. 887; Richardson v. Railroad Commission, 191 Cal. 716, 21......
  • Northern Natural Gas Company v. Roth Packing Company
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • October 25, 1963
    ...gas to one outside the city. Oklahoma Natural Gas Co. v. Scott (In re Vance), 115 Okl. 8, 241 P. 164. In Johnson City v. Milligan Utility District, 38 Tenn.App. 520, 276 S.W.2d 748, the court held that the city acted under a private contract and not as a public utility in serving customers ......

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