Maffit v. City of Decatur

• Decision Date: 16 June 1926
• Docket Number: No. 16378.,16378.
• Citation: Maffit v. City of Decatur, 322 Ill. 82, 152 N.E. 602 (Ill. 1926)
• Parties: MAFFIT v. CITY OF DECATUR et al.
• Court: Illinois Supreme Court

322 Ill. 82

152 N.E. 602

MAFFIT

v.CITY OF DECATUR et al.

No. 16378.

Supreme Court of Illinois.

June 16, 1926.

Bill by Robert U. Maffit against the City of Decatur and another. From decree dismissing the bill, complainant appeals.

Affirmed.Appeal from Circuit Court, Macon County; James S. Baldwin, judge.

F. R. Wiley, H. H. Morey, W. K. Whitfield, Jesse L. Deck, and W. Thomas Coleman, all of Decatur, for appellant.

Lee Boland, Corporation Counsel, Ralph J. Monroe, C. A. McMillen, and R. P. Vail, all of Decatur, for appellees.

DE YOUNG, J.

Robert U. Maffit, a resident and taxpayer of the city of Decatur, on behalf of himself and other taxpayers, filed an amended bill in the circuit court of Macon county against the city of Decatur and the Decatur Water Supply Company, a corporation. The bill sought to have a certain contract dated April 4, 1921, entered into by the two defendants, declared void and the carrying out of its provisions enjoined. Separate answers were filed by the defendants, admitting the execution of the contract, averring its validity, and denying the right to the relief prayed. The Decatur Water Supply Company's answer replied seriatim to certain interrogatories propounded by the amended bill. The cause was referred to a master in chancery, who heard the evidence and filed a report recommending the dismissal of the amended bill for want of equity. The complainant ant the water supply company filed objections to the master's report. These objections were overruled and ordered to stand as exceptions. The circuit court overruled the exceptions,approved the master's report, and entered a decree dismissing the bill for want of equity at the costs of the complainant. He prosecutes this appeal from that decree.

On April 4, 1921, the city of Decatur had about 44,000 inhabitants. The city is under the commission plan of municipal government. Its source of water supply is the Sangamon river, which flows past the city to the east and south. Before the contract in question was executed, the city owned a water supply system which comprised a pumping station, filtration plant, water mains, and a dam in the river by which water was stored for the city's use. The system was worth approximately $1,000,000. The number of water consumers increased about 300 annually, and the dam was too small to impound sufficient water to meet the growing demands of the city. The construction of a new and larger dam across the river-one that would impound the water to a height of 610 feet above the sea level-was begun July 1, 1920, and completed about September 15, 1921. The new dam cost the city $807,683.56. Its cost was defrayed, in part, by the issuance of $601,000 in bonds. The city's total indebtedness on April 4, 1921, including these bonds, was $863,000. The assessed valuation of all property within the city, at the time, was $16,479,320, 5 per cent. of which, the maximum indebtedness permitted by the Constitution, was $823,966. There existed, however, a sinking fund created for the sole purpose of discharging pro tanto the city's bonded indebtedness. On April 4, 1921, this fund consisted of $75,975.10 in cash and $21,535.41 in securities, and it was augmented by $49,200 of the annual tax levy, a considerable portion of which had been collected. The sinking fund, apart from the tax levy, amounted to $97,510.51 on the day in question.

The construction of the new dam was only a partial solution of the city's problem. The completed dam, it was discovered, would impound water to such a height that [322 Ill. 85]3,300 acres of land would be inundated and a considerable portion of the land would have to be cleared before it could be used for a reservoir. Changes in the locations of certain roads and bridges above the dam, the raising of their grades, and the construction of new bridges would also be made necessary. Before the dam could be made effective, the city would have to acquire the right to inundate the land and make the consequent changes and improvements. It was admitted that $1,000,000 would be required for these purposes, but the city had neither the money nor the credit to raise that sum. Ways and means to consummate the plan were discussed by city officers and public spirited citizens and organizations of Decatur. It was found that the city could not finance the project, and it was determined that it would have to be done by individuals or a private corporation. Accordingly, the Decatur Water Supply Company, a domestic corporation, was organized. Its charter was granted on February 2, 1921. The objects for which it was formed, among others, were to acquire land for a reservoir for the storage of water; to construct and maintain such a reservoir; to operate a system of waterworks; and to supply water to the city of Decatur and adjacent towns and villages and their inhabitants. The corporation's duration was fixed at 50 years. Its capital stock was divided into 99,900 shares of preferred stock of the par value of $10 per share, or $999.000 in the aggregate, and 100 shares of common stock without a par value. The charter provides that whenever cumulative dividends at 7 per cent. annually have been fully paid, the preferred stock may be retired at par by giving the holder 15 days' notice by publication and mailing; that after two years no earnings available for the payment of dividends shall be disbursed for capital expenditures, but must be used to pay dividends on or to retire preferred stock; that all sums realized from the sale of capital assets after that period shall likewise be applied to the retirement of preferred stock; and that whenever all the preferred stock shall have been retired and the company's debts, except current expenses, fully paid, then, upon the assumption of the current expenses by the city of Decatur and the payment by it of $1,000 to be distributed among the holders of the common stock, the corporation shall convey all of its assets to the city and be dissolved.

On February 28, 1921, the council of the city of Decatur passed an ordinance embodying the provisions and authorizing the execution on the part of the city of a contract with the water supply company. Shortly thereafter the company publicly offered its preferred stock for sale. An advertisement of the stock which appeared in the Decatur Herald of March 9, 1921, contained the following table:

Preferred Stock 7% Nontaxable.

$1,000,000 authorized for sale and will be sold this week.

A real investment for real people.

We borrow a million dollars from ourselves and pay it back in 16 years. See how it works out.

+------------------------------------------------------------------+
                ¦      ¦    ¦    ¦        ¦Taxes  ¦Expenses     ¦        ¦Principal¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦      ¦    ¦    ¦Income  ¦of all ¦and          ¦Interest¦Paid     ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦      ¦    ¦    ¦        ¦Kinds  ¦Contingencies¦        ¦         ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦End of¦1st ¦year¦$135,000¦$20,000¦$5,000       ¦$70,000 ¦$30,000  ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦2nd ¦“   ¦135,000 ¦20,000 ¦5,000        ¦67,900  ¦42,100   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦3rd ¦“   ¦135,000 ¦20,000 ¦5,000        ¦64,953  ¦45,047   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦4th ¦“   ¦135,000 ¦20,000 ¦5,000        ¦61,800  ¦48,200   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦5th ¦“   ¦135,000 ¦20,000 ¦5,000        ¦58,425  ¦51,575   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦6th ¦“   ¦135,000 ¦20,000 ¦5,000        ¦54,816  ¦55,184   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦7th ¦“   ¦135,000 ¦20,000 ¦5,000        ¦50,953  ¦63,180   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦8th ¦“   ¦135,000 ¦20,000 ¦5,000        ¦46,720  ¦63,180   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦9th ¦“   ¦135,000 ¦20,000 ¦5,000        ¦42,397  ¦67,603   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦10th¦“   ¦135,000 ¦20,000 ¦5,000        ¦37,665  ¦72,335   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦11th¦“   ¦135,000 ¦20,000 ¦5,000        ¦32,601  ¦77,399   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦12th¦“   ¦135,000 ¦20,000 ¦5,000        ¦27,183  ¦82,817   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦13th¦“   ¦135,000 ¦20,000 ¦5,000        ¦21,386  ¦88,614   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦14th¦“   ¦135,000 ¦20,000 ¦5,000        ¦15,183  ¦94,317   ¦
                +------+----+----+--------+-------+-------------+--------+---------¦
                ¦“     ¦15th¦“   ¦135,000 ¦20,000 ¦5,000        ¦8,546   ¦101,454  ¦
                +------------------------------------------------------------------+
                

Balance to be paid during 16th year, $20,628.

Then the completed improvement will be presented to the city.

Subscriptions rapidly followed, and all the preferred stock was sold within a few days.

The contract between the city and the water supply company was dated and executed on April 4, 1921. It recited the city's possession of the waterworks, the inadequacy of its water supply, the construction of the new dam across the Sangamon river, the authorization of a bond issue for the dam's construction, the uselessness of the dam without acquiring lands for a reservoir and altering roads and building bridges, and the city's lack of the funds and credit required for those purposes. The contract also recited the existence of the water supply company, its financial ability to acquire the lands to be flooded and to make...