Mississippi Valley Power Co. v. Board of Improve. Etc.

• Citation: 46 S.W.2d 32
• Decision Date: 25 January 1932
• Docket Number: No. 109.,109.
• Parties: MISSISSIPPI VALLEY POWER CO. v. BOARD OF IMPROVEMENT OF WATERWORKS DIST. NO. 1 OF VAN BUREN et al.
• Court: Arkansas Supreme Court

Page 32

46 S.W.2d 32

MISSISSIPPI VALLEY POWER CO. v. BOARD OF IMPROVEMENT OF WATERWORKS DIST. NO. 1 OF VAN BUREN et al.

No. 109.

Supreme Court of Arkansas.

January 25, 1932.

Rehearing Denied February 22, 1932.

Appeal from Crawford Chancery Court; Lee Seamster, Special Chancellor.

Suit by the Mississippi Valley Power Company against Board of Improvement of Waterworks District No. 1 of Van Buren and others. From a decree dismissing plaintiff's complaint, plaintiff appeals.

Affirmed.

This appeal is prosecuted from a decree dismissing appellant's complaint for want of equity.

The appellant company had a written contract with the appellee waterworks district of the city of Van Buren, to furnish electric current for a period of five years to the waterworks district to operate its pumps at a specified and designated schedule of rates, payment for the current to be made monthly. The contract contained the following clause for its extension: "This contract shall remain in force for a period of five years, and the Customer shall have the right to extend same for an additional period of five years by written notice to the Company of its intention to do so, given at least three months before the expiration thereof."

When the term of the contract expired, on October 5, 1928, the waterworks district did not give written notice or any other indication that it desired to or would exercise the option for another five-year term. Appellant power company continued to furnish current, and the district continued to pay for it until appellee district determined to buy and install Deisel engines with which to pump the supply of water, which could be done at a much lower rate than it cost the district to operate with the electric current.

The appellee notified the power company of its intention to make the installation of the different machinery for operating, and invited appellant to the meeting for ascertainment of whether the waterworks could not be operated at a greater savings under their contemplated plan than under the contract that had obtained with appellant. Appellant did not claim or assert that its contract with appellee had been extended for another five-year period, even after receiving the invitation to the meeting, which its representatives attended, after having been informed: "It was necessary for us to meet with the Board and to make an offer of a new rate or to attempt to hold the business on our present rate schedule." Appellee had been paying the power company for current during the fiscal

year ending December 31, 1930, at the rate of five and 2/10 cents per thousand gallons of water pumped, the average monthly bill being $592.59.

The representatives of Fairbanks-Morse & Co., from whom the waterworks district contemplated buying the Deisel engines for the operation of the plant, estimated the cost of pumping would be less than 2 cents per thousand gallons, less than one-half of what the district had been paying. The Fairbanks-Morse & Co. offered to install the Deisel engines for a named sum and to guarantee that the cost of pumping water with them would not exceed 2 cents per thousand gallons, and proposed that the engines should be paid for entirely out of the savings in seventy-two monthly installments of $327.32 each. This amount could be paid by the district to the Fairbanks-Morse & Co., leaving a net saving of $265.27 over the rate they had been paying. On this basis the district could save in the seventy-two months and at the same time pay the purchase price of the engines, which it would then own, something over $4,000. In other words, comparing this to the cost of service for electricity, the net saving and gain to the waterworks district at the end of six years would be the value of the engines, $23,560, plus $4,000 in money, or a total of $27,560.

The district accepted the offer, and a contract embodying its terms was prepared and executed. Under the contract all expenses of operation was first required paid from the income and the monthly installments due on the engines "* * * shall be paid only from the savings which the Waterworks Improvement District No. 1 aforesaid will effect in the cost of pumping water; which cost, prior to the installation of this equipment has been estimated, determined and agreed to be the sum of 5.2 cents per one thousand gallons, being the cost for the fiscal year ending December 31, 1930." The contract also recites the agreement to pay the sum mentioned from "the savings in the cost of pumping water as above defined does not now create and shall never be held to create any liability or general obligation upon the said District, and no taxes, general or special, shall ever be levied upon the real estate or other property in said District or hereafter within the limits of said District to pay all or any part of said sum of Twenty-three thousand five hundred sixty dollars or any interest thereon, nor shall any part of said sum ever be paid from any other funds of said District except from funds in hand representing the savings in the cost of pumping water as hereinbefore provided, and it is expressly agreed by the parties hereto that this contract does not in any manner pledge the credit of the said District to the payment of the installments provided for herein otherwise than as in this contract provided." The savings were to be kept in a separate fund, "The Pumping Station Savings Fund," by the commissioners, "which fund will be pledged to meet the installments provided for in this contract and will be used for no other purpose whatsoever." If the month's saving was not sufficient to meet the monthly installment payment as provided, the payment was to be reduced proportionately, and if thereafter an increase in the amount of savings resulted, the payment to the Fairbanks-Morse & Co. was to be proportionately increased so that the intention of the contract could be carried out. The installment payments were to be evidences in writing delivered as of the date of the completion of the installation of the engines or improvement and to bear interest at the rate of 6 per cent. per annum, and "shall recite on their face that they are to be paid only from the savings as defined in this contract." These evidences of installments were to be executed in the following form:

$327.22 Van Buren, Arkansas, ____, 1931.

"____ months after date, for value received, The Board of Commissioners of Water Improvement District No. 1, of Van Buren, Arkansas, promise to pay Fairbanks, Morse & Company, or order at St. Louis, Missouri, $327.22 with interest from maturity at the rate of six per cent (6%) per annum.

"This instrument is one of a series of 72 instruments of even date and same import.

"This is not a general obligation of Water Improvement District No. 1 of Van Buren, Arkansas, but a special obligation, payable only from that part of the income of the waterworks plant of the...