Metropolitan Utilities District v. City of Omaha

• Citation: 198 N.W. 858,112 Neb. 93
• Decision Date: 30 April 1924
• Docket Number: 23252
• Parties: METROPOLITAN UTILITIES DISTRICT, APPELLEE, v. CITY OF OMAHA, APPELLANT
• Court: Supreme Court of Nebraska

198 N.W. 858

112 Neb. 93

METROPOLITAN UTILITIES DISTRICT, APPELLEE, v. CITY OF OMAHA, APPELLANT

No. 23252

Supreme Court of Nebraska

April 30, 1924

APPEAL from the district court for Douglas county: ARTHUR C WAKELEY, JUDGE. Reversed, with directions.

REVERSED.

W. C Lambert, for appellant.

John L Webster, contra.

Heard before MORRISSEY, C. J., LETTON, ROSE, DEAN, DAY and GOOD, JJ., and REDICK, District Judge.

OPINION

GOOD, J.

In this action Metropolitan Utilities District, plaintiff, seeks to recover from the city of Omaha, defendant, the cost of lowering gas and water mains and water hydrants in the city of Omaha. Defendant demurred to the petition on the ground that the statute, requiring the city to pay such cost, was in violation of section 7, art. VIII of the state Constitution. The demurrer was overruled and, defendant refusing to plead over, judgment was rendered for plaintiff. Defendant appeals.

In 1913 (Laws 1913, ch. 143) the legislature created the "Metropolitan Water District of the City of Omaha," and gave to it the "sole management and control of all waterworks property, * * * and all the powers that are now or may be granted to cities and villages by the general statutes of this state for the construction or extension of waterworks." Rev. St. 1913, sec. 4244. Section 15 of the act provided that said Metropolitan Water District "shall also lower water mains and reset hydrants at their original locations whenever necessary: Provided, that the cost thereof shall be paid by the respective municipalities whenever such pipe lowering and resetting of hydrants is made necessary because of a change in established street grades or curb lines." Rev. St. 1913, sec. 4257. At that time the Metropolitan Water District of Omaha included within its boundaries other cities and villages. The following clause, "cost thereof shall be paid by the respective municipalities," in the statute above quoted, evidently had reference to the cities and villages in the district.

In 1919 (Laws 1919, ch. 33) said section 15 was amended to read as follows: "Said district shall also lower water mains and reset hydrants at their original locations whenever necessary: Provided, that the cost thereof shall be paid by the respective municipalities. Said district shall also afford free of charge water required for public use by each of said municipalities." Comp. St. 1922, sec. 3760. The legislature in 1919, by a new act (Laws 1919, ch. 187), provided: "Whenever any metropolitan city included within a metropolitan water district shall acquire or take possession of a gas plant or electric plant supplying gas or electricity, as the case may be, said gas plant or electric plant shall be immediately taken over by said metropolitan water district, and operated by the board of directors of said metropolitan water district." Comp. St. 1922, sec. 3771. In 1921 (Laws 1921, ch. 111) the legislature changed the name of Metropolitan Water District to Metropolitan Utilities District, and further provided that said Metropolitan Utilities District should in all things and in all respects become the successor of the Metropolitan Water District and be possessed of and exercise all the powers and authority conferred upon the Metropolitan Water District as fully and effectually as though the corporate name had not been changed, and by said act it further provided that the powers of said district should extend to and apply to gas plants and other public utilities as fully and effectually as if said gas plant had been specifically named in the statute laws of the state creating or relating to metropolitan water districts. In 1912 the city of Omaha took over a waterworks system, and in 1920 it acquired, by condemnation proceedings, a gas plant, and since said dates the city has owned a waterworks system and a gas plant, which are controlled, managed and operated by the plaintiff. Plaintiff determines the rates to consumers for water and gas and collects all revenues from the sale of water, gas and its by-products.

From the allegations of the petition which are admitted, it appears that it became necessary that certain gas mains and water mains be lowered and hydrants reset, and, pursuant to the statutory provisions, the plaintiff performed this work, and now seeks to recover the cost thereof from the city. It is the defendant's contention that the statute requiring the city to pay such cost violates that part of section 7, art VIII of the Constitution, which is as follows: "The legislature shall not impose taxes upon municipal corporations, or the inhabitants or property thereof, for corporate purposes." If the defendant is required to pay the claim of plaintiff, it must do so from funds derived from taxation. The creation of a liability that can only be discharged by funds raised from taxation constitutes the imposition of a tax, within the meaning of the constitutional provision above quoted. Helena Consolidated Water Co. v. Steele, 20 Mont. 1, 49 P. 382; Campbell County v. City of Newport, 174 Ky. 712, 193 S.W. 1.

It is conceded by both plaintiff and defendant that the construction, operation or maintenance of water and gas plants by a municipal corporation is not a governmental function, but is in the nature of a private enterprise. The municipality is not required to construct, own or operate such public utilities. It may contract with private corporations or individuals to furnish such service, or it may, if it so elects, own and operate such utilities for the benefit and convenience of its inhabitants and property owners. Whatever a municipality does in the matter of engaging in the furnishing and delivery of water and gas to its inhabitants is in its proprietary or quasi-private capacity. Whatever it does under the police power is in its governmental capacity. South Carolina v. United States, 199 U.S. 437, 50 L.Ed. 261, 26 S.Ct. 110; Los Angeles Gas & Electric Co. v. City of Los Angeles, 241 F. 912, affirmed by the United States supreme court in City of Los Angeles v. Los Angeles Gas & Electric Co., 251 U.S. 32, 64 L.Ed. 121, 40 S.Ct. 76.

Plaintiff contends that the phrase, "for corporate purposes," as used in section 7, art. VIII, Const. (formerly section 7, art. IX, Const.), relates to municipal government, and that the inhibition is the imposition of taxes for the purpose of carrying out its governmental power, functions and duties, as distinguished from the obligations and duties arising from the exercise of its power to operate private or business enterprises, such as waterworks systems, gas plants, and the like; that it necessarily follows that there rests upon the city the obligation to pay for the maintenance of the plant, the cost of lowering gas and water mains and changing location of hydrants, when made necessary, and that such expenditure is not the imposition of a tax, within the meaning of the constitutional provision. It calls attention to the fact that the provision under consideration is identical with a provision of the Illinois Constitution, from which it was taken, and contends that the construction placed upon this provision by the court of last resort of that state should be followed by the courts of Nebraska. In support of its contention, the plaintiff cites the following cases from the Illinois supreme court: City of Chicago v. Manhattan Cement Co., 178 Ill. 372, 53 N.E. 68; People v. County of Williamson, 286 Ill. 44, 121 N.E. 157; City of Chicago v. Knobel, 232 Ill. 112, 83 N.E. 459; Chicago, M. & St. P. R. Co. v. Lake County, 287 Ill. 337, 122 N.E. 526.

In City of Chicago v. Manhattan Cement Co. supra, the action was to recover for the destruction of property by a mob and was brought under the mob law, which declares municipalities liable for destruction by mobs of property within its boundaries. It was held that such legislation did not contravene the constitutional provision. The ruling was put upon the ground that the legislation was an exercise of the police power of the state. In the course of the opinion, the following quotation from Cooley on Taxation was cited with approval (p. 384): "Another similar case is, where a municipal corporation is compelled, by means of taxation, to make compensation for losses sustained within its limits at the hands of mobs and rioters. It has been thought from very early times that that political division of the county which failed to exert its authority for the effectual suppression of disorder, by means whereof...