McGuinn v. City of High Point

• Decision Date: 17 April 1940
• Docket Number: 666.
• Parties: McGUINN et al. v. CITY OF HIGH POINT et al.
• Court: North Carolina Supreme Court

8 S.E.2d 462

217 N.C. 449

McGUINN et al. v. CITY OF HIGH POINT et al.

No. 666.

Supreme Court of North Carolina

April 17, 1940

Civil action to restrain the defendants fro constructing a municipal hydroelectric plant, fully described in the pleadings, and from issuing revenue bonds to finance a part of the cost.

Following the decision in Williamson v. High Point, 213 N.C 96, 195 S.E. 90, wherein it was held that the hydroelectric system there contemplated was in excess of the defendant's authority, the Council of the City of High Point, on 27 April, 1938, adopted another resolution designed to delimit the undertaking to the periphery of its powers. (This resolution was the subject of a second appeal, reported in 214 N.C. 693, 200 S.E. 388.)

Thereafter on 2 May, 1938, the present action was instituted by J. W McGuinn, on behalf of himself and other taxpayers, to restrain the project as extra-legal. Later, on 18 May, 1938 the Duke Power Company, as taxpayer and holder and user of non-exclusive electric franchise in the City, was permitted to intervene, and to file a separate complaint, which it did.

Then on 20 March, 1939, the Council of the City of High Point adopted an amendatory and supplemental resolution with a view to meeting the requirements of the Federal Emergency Administration of Public Works for obtaining a federal grant to defray a part of the costs of the project, and providing for the issuance of revenue bonds, "payable solely out of the revenues of the system", to cover the balance. By further resolution adopted on the same day, the Council accepted from the Federal Power Commission license for the construction and operation of the project and agreed "to abide by all the provisions and conditions of the Federal Power Act [16 U.S.C.A. § 791a et seq.] and all the conditions imposed in the said license". Following the adoption of these resolutions, the Duke Power Company, by leave of court, filed an amended complaint challenging the right of the defendants to proceed in accordance with the resolutions and license.

On 11 April, 1939, a group of plaintiffs designated as "Adams-Millis Corporation and others", users and consumers of electric power in the City of High Point, instituted a separate action to enjoin the defendants from proceeding with the project, which action was later consolidated with the suit sub judice and treated as an intervention herein.

On the hearing, it was agreed by all the parties that a jury trial should be waived, and that the whole matter should be submitted to the court for final determination, both as to the law and the facts.

In summary, the essential determinations and conclusions of the court follow:

1. That the plaintiffs and interveners are taxpayers in the City of High Point with combined taxable properties situate therein of approximately $7,000,000; that the Duke Power Company is the owner and user of a non-exclusive electric franchise under which it has been doing business for a number of years, furnishing the entire electric requirements of the defendant city, its residents and industrial enterprises.

2. That the defendant, City of High Point, is a municipal corporation duly chartered under the laws of the State of North Carolina, and now owns and operates within its limits an electric distribution system, through which it distributes to the users within the city, at a large annual profit, electric current which it purchases at wholesale from the Duke Power Company, and that the remaining defendants constitute the City Council and the Board of Power Commissioners of the defendant city.

3. That the City of High Point is preparing to construct an electric power plant and system which will comprise: (a) A dam, storage reservoir and generating plant on the Yadkin River at or in the vicinity of Styer's dam site, about 25 miles from High Point, which generating plant would have three generating units with a total capacity of 21,000 kilowatts; (b) a substation at the generating plant, and a substation in the City of High Point; (c) transmission lines extending from the generating plant through the counties of Guilford, Forsyth and Davidson to the City of High Point; (d) a distribution system in the City of High Point, and (e) other structures and facilities incidental to the foregoing.

4. That the output of the proposed plant would furnish electricity to the City of High Point for municipal uses, and to consumers within the city for domestic, commercial and industrial purposes. It is to be deemed and treated as separate and distinct from the present electric distribution system of the city, and the city is to purchase its electric current from the system for resale and distribution over its present electric distribution system.

5. That the plant and system is to be built and operated by the City of High Point under a Federal power license issued 10 March, 1939, by the Federal Power Commission in which the commission retains complete control over the entire plant and system, including its construction, maintenance and operation, and extending to every facility directly or indirectly connected with the project, to all policies of management, financing, accounting, rate of return on the net investment after the first twenty years, etc.; that the city is to pay to the United States as reimbursement for the costs of administration, an annual charge based upon capacity and kilowatt hours of energy generated, obligates itself to maintain the project in a condition of repair adequate for purposes of navigation and under such rules and regulations as the Secretary of War may prescribe in the interest of navigation and such as the Secretary of Commerce may prescribe for the protection of fish life, and agrees to assume all liability for damages occasioned to the property of others by the construction, operation or maintenance of the project; that the license is to run for a period of fifty years at the expiration of which the United States is to have the optional right to take over the enterprise at a price to be fixed by the Federal Power Commission, or to transfer it to a new licensee, in either of which events the city is to make good any defect in title to any rights of user and to discharge all liens arising subsequent to the issuance of the license.

6. That the order of the Federal Power Commission granting the license is based upon its findings and conclusions that "The Yadkin River is a part of the Yadkin-Pee Dee River, an interstate waterway used and suitable for use for the transportation of persons and property in interstate or foreign commerce"; that "The interest of interstate or foreign commerce will be affected by such proposed construction"; that "The project, including the maps, plans, and specifications supplemented and revised as hereinafter provided, is best adapted to a comprehensive plan for improving or developing the Yadkin-Pee Dee River for the use or benefit of interstate or foreign commerce, for the improvement and utilization of water power development and for other beneficial public uses, including recreation purposes"; and that "The project is desirable and justified in the public interest for the purposes of improving or developing the Yadkin-Pee Dee River for the use or benefit of interstate or foreign commerce". The license recites that the Yadkin River is "A stream over which Congress has jurisdiction under its authority to regulate commerce with foreign nations and among the several states."

7. That the City of High Point has voluntarily consented to the findings and conclusions of the Federal Power Commission and has agreed "to abide by all the provisions and conditions of the Federal Power Act and all the conditions imposed in said license".

8. That the defendants hope to finance the construction of the proposed plant and system in part by a grant to be made by the Federal Emergency Administrator of Public Works in an amount not to exceed the sum of $2,921,600 and in part by the proceeds of bonds to be issued by the City under the resolution of the City Council adopted April 27, 1938, as amended by the resolution adopted March 20, 1939, which bonds in an amount not to exceed $3,571,000 will be purchased by the Federal Emergency Administration of Public Works pursuant to the offer of February 7, 1939, and accepted by resolution of the City Council adopted February 13, 1939.

9. That the proposed plant would be located on the Yadkin River approximately 313 miles upstream from the mouth of the Yadkin-Pee Dee River, and approximately 137 miles upstream from the North Carolina-South Carolina line, the distance in each case being measured as the river flows; that there are now located on the Yadkin-Pee Dee River in North Carolina and between the site of the proposed plant and the North Carolina-South Carolina state line the following power plants: the High Rock plant; with a head of 60 feet and a storage of 232,000 acre feet; the Narrows plant, with a head of 179 feet and a storage of 155,000 acre feet; the Falls plant, with a head of approximately 49 feet and a storage of 3,900 acre feet; the Norwood (Tillery) plant, with a head of 70 feet and a storage of 96,000 acre feet; and the Blewett plant, with a head of 50 feet and a storage of 22,000 acre feet.

10. That the Yadkin-Pee Dee River in North Carolina is not now, and never has been, either by itself or by uniting with other waters, capable of navigation for the movement of trade and traffic in interstate or foreign commerce; that in its natural condition and in its present condition it is now, and always has been, a non-navigable river of the State of North Carolina.

11. That the total cost of the undertaking will exceed by a million dollars the aggregate amount of the Federal grant...