Johnston v. City of Stuart

• Decision Date: 24 June 1929
• Docket Number: No. 39343.,39343.
• Citation: 226 N.W. 164
• Parties: JOHNSTON v. CITY OF STUART ET AL.
• Court: Iowa Supreme Court

226 N.W. 164

JOHNSTON

v.CITY OF STUART ET AL.^a1

No. 39343.

Supreme Court of Iowa.

June 24, 1929.

Appeal from District Court, Guthrie County; W. S. Cooper, Judge.

Action in equity to enjoin the carrying out of a contract for the purchase of electric light and water equipment for the use of the defendant city. Decree dismissing the petition, and the plaintiff appeals. Affirmed.Harry D. Byers, of Adair, Batschelet & Vincent, of Guthrie Center, and Hughes, Taylor, O'Brien & Faville, of Des Moines, for appellant.

Carl P. Knox, of Stuart, and Clark, Byers & Brunk, of Des Moines, for appellees.

STEVENS, J.

On May 4, 1927, appellee entered into a contract in writing with Fairbanks, Morse & Co., a corporation, for the purchase and installation in its privately owned electric light and water plants of the following machinery and materials: “One (1) 180 HP Type ‘Y’ Style ‘VA’ Special Electric and one (1) 120 HP Type ‘Y’ Style ‘VA’ Special Electric Diesel Oil Engines, with standard equipment for running water cooling and direct connection to Alternators.”

The ordinance of the appellee city and the written contract with Fairbanks, Morse & Co. provided that payment for the machinery and materials purchased would be made only out of the net income of the plants, and that the contract price of $36,000 should in no sense be a general obligation of the city. The appellant is a taxpayer in the city of Stuart, and brings this action to restrain the carrying out of the terms and provisions of the contract by the municipality.

Three distinct propositions are alleged and relied upon by appellant. These grounds are: (a) That the contract in question was entered into in violation of, and contrary to, the express provisions and requirements of sections 351 and 352 of chapter 23, Code 1927, relating to public contracts and bonds of municipalities; (b) that the alleged debt exceeds the limit of indebtedness allowed by the Constitution of Iowa; and (c) that appellee has no authority to pledge the net income from the light and water plants for the purpose of paying for the machinery and materials involved. Our discussion of this case will be limited strictly to these propositions.

[1] It is conceded that, if appellee city of Stuart has not already exceeded its constitutional limit of indebtedness, the present contract, if it constitutes a general obligation of the city, will carry its indebtedness beyond that limit. The city of Stuart now has a bonded indebtedness for the balance of the cost of its electric light and water plants. These plants were installed many years ago, and it is not seriously claimed by appellant that the equipment purchased is not essential to the efficient operation of the plants. A building intended to house the machinery was erected by the city at a maximum cost of less than $5,000. This expenditure is not involved in this litigation. It is not claimed by appellee that any attempt was made by it to comply with chapter 23, Code 1927 (sections 351-367), or any other provision of the so-called Budget Law. Sections 351 and 352 of the Code of 1927 are as follows:

“351. The words ‘public improvement’ as used in this chapter shall mean any building or other construction work to be paid for in whole or in part by the use of funds of any municipality.

The word ‘municipality’ as used in this chapter shall mean county, except in the exercise of its power to make contracts for primary road improvements, city, including those acting under special charter, town, township, school district, state fair board, state board of education, and state board of control.

352. Before any municipality shall enter into any contract for any public improvement to cost five thousand dollars or more, the governing body proposing to make such contract shall adopt proposed plans and specifications and proposed form of contract therefor, fix a time and place for hearing thereon at such municipality affected thereby or other nearby convenient place, and give notice thereof by publication in at least one newspaper of general circulation in such municipality at least ten days before said hearing.”

The first proposition urged by appellant calls for an interpretation of the foregoing sections of the statute and of other provisions of chapter 23. If the foregoing provisions of the statute are applicable to the transaction in controversy, then it would seem to be clear that the contract is wholly void, and its consummation on the part of the city may be permanently enjoined at the suit of an interested person. The term “public improvement” is defined by section 351 as any “building” or “other construction work” to be paid for, in whole or part, by the use of any funds of a municipality. Does the improvement attempted in this case come within the foregoing definitions? If so, then, before a contract may be legally entered into by a municipality for a public improvement to cost $5,000 or more, the governing board of such municipality shall adopt plans and specifications for the proposed improvement and fix a time and place for hearing at or near such municipality, and publish notice thereof in at least one newspaper of general circulation therein for at least 10 days before such hearing. Notice having been given, any person interested may appear and file objections to the proposed plans, specifications, or contract for, or cost of, such improvement. Section 353, Code 1927. In case of an adverse decision by the governing board, the objector may appeal and have a hearing on the proposal before the budget director. In case such an appeal is taken, the governing body shall forthwith certify and submit to the director for examination and review the following matters:

“1. A copy of the plans and specifications for such improvement.

2. A copy of the proposed contract.

3. An estimate of the cost of such improvement.

4. A report of the kind and amount of security proposed to be given for the faithful performance of the contract and the cost of such security.

5. A copy of the objections, if any, which have been urged by any taxpayer against the proposed plans, specifications, or contract, or the cost of such improvement.

6. A separate estimate of the architect's or engineer's fees and cost of supervision.

7. A statement of the taxable value of the property within the municipality proposing to make such improvement.

8. A statement of the several rates of levy of taxes in such municipality for each fund.

9. A detailed statement of the bonded and other indebtedness of such municipality.”

Section 355, Code 1927.

Thereupon it becomes the duty of the budget director to fix a time and place of hearing on the appeal. The scope of the review and character of the decision to be rendered by the budget director are set forth in section 357 as follows:

“* * * The director shall certify his decision to the body proposing to enter into such contract, whereupon the municipality shall advertise for bids and let the contract subject to the approval of the director who shall at once render his final decision thereon and transmit the same to the municipality.”

We come now to consider what seems to us the vital question in the case, namely: Do the machinery and material purchased of Fairbanks, Morse & Co. come within the definitionof “any building” or “other construction work,” as set forth in section 351, Code 1927?

We have quoted the foregoing purely procedural statutes substantially in full, in the belief that they may tend, to some extent, to throw light upon the question of the legislative intent. Manifestly the machinery and equipment do not come within the term “any building.” The building necessary to house the machinery was erected and completed independent of the transaction with Fairbanks, Morse & Co., so that we are not concerned in any particular with the building. The construction work required in this instance is whatever skill and industry is essential to the installation of the machinery in the building prepared for its reception. The contract provides that the seller will furnish a competent engineer at $15 per day to superintend the erection and test of the machinery and to do all work requiring skilled labor. For these services the appellee city is required to pay. The engines are constructed and were to be tested in the seller's factory at Detroit.

Before entering into any contract for any municipal improvement to cost $5,000 or more, the governing body thereof must adopt proposed plans and specifications and a proposed form of contract. The improvement contemplated is one to be paid for in whole or in part by the use of municipal “funds.” In case objections are filed to the proposed improvement by the requisite number of citizens, and an appeal is taken to the budget director, the information required by section 355 must be certified to him. This includes a copy of the plans and specifications for the improvement, an estimate of the cost thereof, a report of the kind and amount of security proposed to be given for the faithful performance of the contract, a separate estimate of the architect's and engineer's fees and cost of supervision, a statement of the taxable value of the property within the municipality, of the several rates of levy of taxes therein for each fund, together with a detailed statement of the bonded and other indebtedness of such municipality. Upon final hearing before the budget director, that officer shall certify his decision to the municipality, which shall advertise for bids and let the contract subject to the approval of the director. The scope of the hearing before the director includes an examination of the record,...