Leonard v. City of Metropolis

• Citation: 278 Ill. 287,115 N.E. 813
• Decision Date: 19 April 1917
• Docket Number: No. 11274.,11274.
• Parties: LEONARD v. CITY OF METROPOLIS.
• Court: Supreme Court of Illinois

278 Ill. 287

115 N.E. 813

LEONARD

v.CITY OF METROPOLIS.

No. 11274.

Supreme Court of Illinois.

April 19, 1917.

Appeal from Circuit Court, Massac County; Julius Kern, Judge.

Injunction by C. C. Leonard against the City of Metropolis. Demurrer to bill sustained, bill dismissed, and plaintiff appeals. Reversed and remanded, with directions.

W. L. Krone, of Metropolis, for appellant.

Roy R. Helm, City Atty., and H. A. Evans, both of Metropolis, for appellee.

FARMER, J.

C. C. Leonard, appellant, a resident taxpayer of the city of Metropolis, Ill., filed his bill in the circuit court of Massac county, seeking to enjoin said city of Metropolis and its officers from issuing $82,000 in public utility certificates and securing the payment of the same by a mortgage on its present light and water plant and on contemplated extensions and additions thereto.

The bill alleged the city of Metropolis is, and since 1892 has been, the owner of and operating its light and water plant, furnishing water, light, and power to itself, its citizens, and patrons at rates prescribed by ordinance; that the reasonable present value of said plant is $100,000; that said plant was originally constructed by George C. Morgan at a cost of $41,000, who laid water mains and pipes, and erected electric right poles and strung wires thereon, through the streets and alleys of said city; that said Morgan sold bonds to the extent of $41,000, the payment of which, with interest thereon for 20 years, was secured by mortgage on the said property, rights, privileges, and franchises; that after the completion of the plant and sale of the bonds the city purchased said plant of Morgan, paying him $10,000 therefor, and assuming the payment of said bonds and interest.The bill avers that of the $41,000 of bonds issued $22,000 have been paid, leaving $19,000 unpaid; that prior to October 31, 1916, the total amount of indebtedness of said city, exclusive of the $19,000 unpaid bonds standing against the light and water plant, was $57,800, being more than 5 per cent. of $943,277, the assessed value of all taxable property in said city; that prior to October 31, 1916, said city, being desirous of extending and enlarging its light and water plant and installing new machinery, did on October 2, 1916, by its council adopt an ordinance providing for such extension and enlargement, and authorized the city, subject to the approval of its electors, to issue and dispose of public utility certificates in accordance with an act entitled ‘An act to authorize cities to acquire, construct, own, and to lease or operate public utilities and to provide the means therefor,’ approved June 26, 1913, in force July 1, 1913 (Hurd's Stat. 1916, p. 2049), in the amount of $82,000, to run for 20 years and bear 5 per cent. interest per annum. The bill avers that out of the $82,000 to be so raised the $19,000 outstanding bonds were to be paid and the remainder used in extending the water and light plant and purchasing new machinery; that at an election held October 31, 1916, the electors of said city adopted the ordinance and authorized the city council to issue said certificates. The bill avers that after the city acquired the light and water plant from Morgan it adopted an ordinance creating a light and water fund, and ordered all money arising from the sale of service of said plant placed in the water and light fund, to be used in paying the current or running expenses of said plant, and the balance or net profits remaining to be sued for the payment and cancellation of the bonds outstanding against said plant; that the net annual earnings of said plant amount to $3,000, and with the extensions and additions proposed will amount to $9,000 annually. The bill avers that notwithstanding the city is in debt beyond the constitutional limitation it intends to issue said $82,000 public utility certificates under authority of the act of June 26, 1913, and the ordinance passed in pursuance thereto, and that said act, in so far as it authorizes the issue of public utility certificates, secured by a mortgage on city property, in excess of the amount limited by the Constitution, is void, and asks that the city and its officers be enjoined from issuing said certificates. The trial court sustained a demurrer to the bill, and, appellant electing to stand by his bill, the same was dismissed for want of equity. This appeal follows.

The act of June 26, 1913, known as the Municipal Ownership Act, gives cities the power to acquire, construct, own, and operate public utilities. The act provides or enumerates the means by which cities may procure the funds with which to purchase and acquire such utilities. Section 8 of the act authorizes the borrowing of money and the issuing of negotiable bonds therefor, pledging the faith and credit of the city. Section 10 authorizes the securing of money by special assessment. Section 9 authorizes or prescribes the means here sought to be employed, and reads as follows:

‘For the purpose of acquiring any such public utility or the property necessary or appropriate for the operation thereof, or any part thereof, either by purchase, condemnation or construction, any city may issue and dispose of interest-bearing certificates, hereinafter called public utility certificates, which shall, under no circumstances, be or become an obligation or liability of the city or payable out of any general fund thereof, but shall be payable solely out of the revenues or income to be derived from the public utility property for the acquisition of which they were issued. Such certificates shall not be issued and secured on any public utility property in an amount in excess of the cost to the city of such property as hereinbefore provided and ten per cent. of such cost in addition thereto. In order to secure the payment of any such public utility certificates and the interest thereon, the city may convey, by way of mortgage or deed of trust, any or all of the public utility property acquired or to be acquired through the issue thereof.’

The demurrer to the bill of complaint admitted the city to now be in debt to an amount beyond the constitutional limitation, and the sole question here presented and argued is whether the issuance of the public utility certificates, to be secured by a mortgage on the...