Oklahoma Utilities Co. v. City of Hominy

• Decision Date: 25 March 1933
• Docket Number: No. 806.,806.
• Citation: 2 F. Supp. 849
• Court: U.S. District Court — Northern District of Oklahoma
• Parties: OKLAHOMA UTILITIES CO. v. CITY OF HOMINY et al.

2 F. Supp. 849

OKLAHOMA UTILITIES CO. v. CITY OF HOMINY et al.

No. 806.

District Court, N. D. Oklahoma.

March 25, 1933.

Miles & O'Brien, of Baltimore, Md., and N. E. McNeill, of Tulsa, Okl., for complainant.

G. K. Sutherland, of Hominy, Okl., Charles Dickerman Williams, of New York City, and James B. McDonough, of Ft. Smith, Ark., for defendants.

FRANKLIN E. KENNAMER, District Judge.

The complainant, Oklahoma Utilities Company, is engaged in the business of distributing and selling electric energy to the city of Hominy, state of Oklahoma, under a franchise granted its predecessor in title on March 2, 1914, by the city of Hominy for a term of twenty years from the date thereof. In its bill filed herein it seeks to enjoin and restrain the defendants, city of Hominy, a municipal corporation, and H. L. McFee, M. J. Graham, M. J. Westbrook, O. W. Fields, T. C. Dandruff, R. C. Drummond, H. C. Carpenter, and R. B. Williams, as members of the city council, and W. R. Brady, as mayor of the city of Hominy, and Melvin E. Acott, as treasurer of the city of Hominy, from interfering with its rights under its franchise by the carrying out of a proposed plan and agreement with Trans-american Construction Company a corporation, for the construction and operation of an electric generating plant and distributing system in the city of Hominy.

The bill recites that the complainant has built and developed an electric generating plant and distributing system in the city of Hominy under its franchise of a value in excess of $100,000; that it has, in good faith, under its franchise furnished electric energy to the city of Hominy and to its citizens since March 12, 1914, and is now so engaged, and that the city of Hominy annually purchases from the complainant electric current for street lighting purposes at an approximate cost of $2,500. The bill further alleges that a certain contract was made between Trans-american Construction Company and the city of Hominy through the duly designated officers of said municipality, and on November 4, 1932, was approved by the city council of Hominy under Ordinance No. 102 subject to the approval of the qualified taxpaying voters of said city. Under Ordinance No. 102 and the agreement, the Transamerican Construction Company proposed to install and erect for the city an electric generating plant and distributing system at a purported aggregate cost not to exceed the sum of $150,000. The cost to be paid in 84 equal monthly payments of $1,605, each with interest at the rate of 6 per cent. per annum, title to said property to vest and remain in the construction company until the entire purchase price had been paid. The agreement further provided that interest was to begin to accrue sixty days from the date the machinery and material were delivered and accepted and put into use. The first payment was to be made as of that date the machinery was put in use and each subsequent payment to be made on the same day of each succeeding calendar month. The agreement further provided: "The price shall be paid from net revenues of electric light and power plant and distributing system."

To evidence the monthly payments provided in the agreement, the city agreed to execute and deliver to the construction company certain negotiable instruments, termed "pledge orders," which provide, inter alia, that the promise therein to pay "is not a general obligation or liability of the City of Hominy payable or enforceable by taxes or special assessments or from money received by taxes or special assessments," but is a special and limited obligation payable as to both principal and interest from "the net revenues derived from the operation of the electric plant and distributing system."

The agreement further provided that the city should furnish without charge all necessary and suitable right of ways, permits, buildings, cranes, timber, slings, tools, heat, and light which might be necessary in the erection of the plant as well as the operating force and any and all necessary excavating.

The agreement further provided that, in the event any sum due thereunder should remain due and unpaid for sixty days from the due date thereof, the construction company should have the privilege of nominating a superintendent to be employed by the municipality to operate the utility in which the machinery and raw material sold thereunder was used so long as a default continued, or, upon the default continuing for six months, the construction company, at its option, might retake possession of the equipment described in the agreement and could remove the same, and thereupon have the right to sell and dispose of the same to the best advantage, and should account to the municipality therefor in accordance with the laws of the state of Oklahoma, rather relating to conditional sales of personal property.

The bill also alleges that by Ordinance No. 103 the defendants called a special election to be held in the city of Hominy on the 22d day of November, 1932, for the purpose of submitting to the qualified taxpaying voters of said city the proposition set forth in the election proclamation therefor. The proposition sought the approval of the voters of the agreement with Transamerican Construction Company, and, in describing the same, stated that "the Transamerican Construction Company agrees to depend for payment solely upon net revenues of the plant and forever surrenders any right to require payment by taxes or from money received by taxation."

The bill states that, after the passage of Ordinance 102 and Ordinance 103, on November 9, 1932, a resolution was passed by the city council of said municipality and was approved the same day by the mayor of the city instructing the treasurer of the city to purchase upon behalf of the city certain of the "pledge orders" numbered from 61 to 84, inclusive, aggregating $38,520, and to pay for the same when tendered to him at the par value thereof and accrued interest. The resolution further instructed the city treasurer to execute a collateral agreement between the city and the construction company requiring the city to purchase the pledge orders out of certain funds or securities in his hands solely for sinking fund purposes and to pay for the same in the manner indicated. The resolution further required that the treasurer forthwith deposit in escrow with the Exchange National Bank of Tulsa, Okl., the funds or securities in his hands solely for sinking fund purposes to guarantee the faithful performance by the city of its covenants in said collateral agreement.

Under the Ordinance 103 and the election proclamation an election was held on November 22, 1932, and by a majority vote in the election the proposition submitted in the proclamation was accepted.

The bill disclosed that thereafter and on November 25, 1932, the city council of the city of Hominy purported to enact Ordinance 104, whereby the city was authorized "to collect an annual tax in addition to other taxes required by the constitution sufficient to pay the interest on the indebtedness of the City of Hominy to the Transamerican Construction Company, and to constitute a sinking fund for the payment of the principal thereof within twenty five years," and that the same "is subject to and conditioned upon the unqualified waiver and surrender by the Transamerican Company of any and all rights to enforce the collection of said tax by any means whatsoever."

The defendants filed a motion to dismiss the bill of complaint on the grounds that this court is without jurisdiction of the controversy, and that the bill of complaint does not state facts sufficient to constitute a cause of action to entitle the complainant to the relief prayed or for any other relief.

For the purpose of determining the jurisdiction of this court, the allegations in the bill of complainant must be accepted as true. O'Keefe v. New Orleans (D. C.) 273 F. 560, affirmed in (C. C. A.) 280 F. 92; Wright v. Barnard (D. C.) 233 F. 329.

The unexpired franchise of the complainant herein is property, and any unlawful interference therewith is actionable.

In the case of Bartlesville Electric Light & Power Co. v. Bartlesville Railway Co., 26 Okl. 453, 109 P. 228, 229, 29 L. R. A. (N. S.) 77, the Supreme Court of the state of Oklahoma said: "That an injunction is the appropriate remedy to protect a party who has an exclusive franchise against continuous encroachments is well settled, and such jurisdiction rests upon the ground of its necessity to avoid a ruinous multiplicity of suits and to give adequate protection to one's property in his franchise. 2 Pomeroy's Equitable Remedies, § 583. And the same author states the general doctrine to be that, in order for the owner of a franchise to be entitled to such relief, it is not necessary that the franchise shall be an exclusive franchise in the sense that another similar franchise cannot be granted to other persons, but that, if a defendant who has no franchise is acting in violation of law, he may be restrained by the owner of a valid franchise whose rights are injured by the illegal acts of defendant and that as to the one invading his rights without authority of law the franchise is an exclusive franchise, although the owner would be entitled to no protection against one acting under a similar franchise granted by the proper officers."

The rule announced by the Supreme Court of Oklahoma applies with equal force where a municipality attempts in an unlawful and illegal manner to invade rights granted under a franchise to one in the position of this...