Otter Tail Power Co. v. Clark

• Decision Date: 19 March 1930
• Docket Number: No. 5681.,5681.
• Citation: Otter Tail Power Co. v. Clark, 59 N.D. 320, 229 N.W. 915 (N.D. 1930)
• Parties: OTTER TAIL POWER CO. v. CLARK.
• Court: North Dakota Supreme Court

59 N.D. 320

229 N.W. 915

OTTER TAIL POWER CO.

v.CLARK.

No. 5681.

Supreme Court of North Dakota.

March 19, 1930.

Syllabus by the Court.

In the instant case the plaintiff and defendant entered into a written agreement whereby the defendant gave plaintiff an option to purchase an electric distribution system in the city of Ashley. The plaintiff exercised the option and paid the purchase price agreed upon, and the defendant executed and delivered a bill of sale warranting the present right to sell, and quiet enjoyment of the property by the plaintiff. Later, upon discovering that the sale had been made without the defendant having obtained authorization from the board of railroad commissioners (as required by the Public Utilities Act), and upon defendant's refusal to make application to the board of railroad commissioners for such authorization, the plaintiff instituted this action to compel defendant to perform his contract by making application to the board of railroad commissioners for authority to make the sale. The plaintiff is in possession of and operating the property. For reasons stated in the opinion it is held:

That the property was not transferred by the defendant to the plaintiff for security purposes, but the plaintiff paid the purchase price and received the bill of sale with the understanding that the defendant had the right to sell and that the plaintiff would become the absolute owner of the property.

That the agreements between the plaintiff and the defendant were at no time rescinded.

That the provision of the Public Utilities Act (Laws 1919, c. 192, § 21) that “no public utility shall hereafter sell * * * or otherwise dispose of * * * the whole or any part of its franchise, works or system, necessary or useful in the performance of its duties to the public * * * without first having secured from the [Board of Railroad] Commissioners an order authorizing it to do so,” does not inhibit the parties from entering into preliminary negotiations looking toward a sale and agreeing upon the terms of a proposed sale. But no sale, binding upon the public, can be made until it is authorized by the board of railroad commissioners.

That in determining whether a proposed sale shall or shall not be authorized the board of railroad commissioners is not concerned with the rights or interests of the vendor and vendee, but is concerned solely with whether the proposed sale or transfer will or will not injuriously affect the rights of the public.

That under the above-quoted provision of the Public Utilities Act the primary duty to make application to the board of railroad commissioners to sell or dispose of a public utility property rests upon the vendor, but the jurisdiction of the board of railroad commissioners to make an order authorizing a proposed sale is not dependent upon the filing of an application signed by the vendor. And, where the owner of a public utility property has entered into a contract to sell the same to another, which contract, in order to become effective, is wanting only the approval of the board of railroad commissioners, the vendee in such contract is vested with sufficientinterest to make application to the board of railroad commissioners for an order authorizing the sale to be made.

That while, under the facts in this case, a decree for specific performance should not be entered, the trial court was correct in entering a decree enjoining the defendant from interfering with plaintiff's possession of the property.

Appeal from District Court, Richland County; McKenna, Judge.

Action by the Otter Tail Power Company against R. S. Clark. From the judgment, defendant appeals.

Affirmed.

Lauder, Heder & Lauder, of Wahpeton, for appellant.

N. F. Field & Cyrus A. Field, of Fergus Falls, Minn., and Divet, Shure, Murphy & Thorp, of Fargo, for respondent.

CHRISTIANSON, J.

This action involves an electric distribution system in the city of Ashley in this state. For some time prior to January, 1925, the defendant, Clark, owned and operated an electric light plant in the city of Ashley. On January 7, 1925, he entered into a written agreement with the plaintiff wherein he granted to the plaintiff a sixty-day option to purchase, and agreed to sell to it, the distributing systen and generating plant in the city of Ashley for the sum of $23,000. On February 25, 1925, the former agreement was supplemented and modified by another written agreement, under the terms of which the option granted to the plaintiff to purchase was extended for an additional period of thirty days. In this latter agreement some of the property covered by the first was omitted, and the purchase price was reduced to $21,500. The agreement further provided that, if the plaintiff exercised the option, an agreement should be entered into between the plaintiff and the defendant whereby the defendant should lease the property from the plaintiff for a period not to exceed eighteen months at an annual rental of 10 per cent. of $21,500, such rental to be paid in equal monthly installments. It further provided that, if it became necessary for plaintiff to make additions and extensions to the distribution system, the defendant should pay an additional annual rental of 10 per cent. of the actual cost of such additions and extensions-such payments to be made in the same manner as the other rental stipulated. On or about March 20, 1925, the plaintiff elected to exercise its option, and paid to the defendant the full amount of the purchase price, namely, $21,500. On that same day the defendant executed and delivered to the plaintiff a bill of sale. The bill of sale acknowledged the receipt of the sum of $21,500, and purported to transfer to the plaintiff the property described in the second option contract, and warranted to defend the same against all persons. On that same day the plaintiff and defendant entered into a written lease whereby the property described in the bill of sale was leased to the defendant upon the terms stipulated in the second option contract. Such lease was further supplemented and extended by a written agreement dated August 20, 1926, whereby the property was leased to the defendant for an additional six-month period, or until April 1, 1927.

The defendant operated the property under the leases and paid the plaintiff company the stipulated rentals. He remained in possession of the property until June, 1927, when the plaintiff took possession, and it has retained possession since that time. The evidence discloses, however, that some time before the plaintiff took possession some disagreement had arisen between the parties. The plaintiff had entered into an agreement to sell its distributing system at Ashley to the Northern Power & Light Company, and during the negotiations and arrangements for a transfer of the property it came to the knowledge of the plaintiff that the defendant Clark had at no time made application to the board of railroad commissioners for authority to sell and transfer the property which he purported to sell and transfer to the plaintiff by the bill of sale. The plaintiff thereupon requested the defendant to join it in an application to the board of railroad commissioners for permission to sell and transfer the property to the plaintiff. The defendant refused to do so, and the plaintiff thereupon, on February 21, 1927, filed an application with the said board of railroad commissioners asking approval of the transfer and sale. On March 7, 1927, a hearing was had upon such application, at which both the plaintiff and the defendant appeared. The defendant opposed the application. A hearing was had, witnesses were examined, and counsel heard. On March 19, 1927, the board of railroad commissioners dismissed the application of the plaintiff on the grounds: (1) That the defendant, Clark, the seller, had not joined in the application, and (2) that the application sought the ratification of a completed sale or transfer. In the meantime the defendant, Clark, had instituted an action in the district court of McIntosh county wherein he claimed to be the owner of the property in question, and asked that the plaintiff and certain others named as defendants be enjoined from interfering with defendant's possession and enjoyment of the property. An application for a temporary injunction was made and heard on March 29, 1927, before the same judge who tried the present action. The application was denied. No appeal was taken, and the action was subsequently dismissed without trial.

After the plaintiff had taken possession of the property, it instituted this action. The complaint sets forth in detail the above-stated facts. The prayer for relief is that the defendant be required to perform his contracts by making application to the board of railroad commissioners for approval of the sale of the properties in question; and that, upon such sale being approved, he further be required to execute and deliver a new bill of sale to the plaintiff; also that the plaintiff have such other and further relief as to the court may seem just and equitable. The case came on for trial in February, 1928. Upon the trial, the defendant interposed an answer wherein he asserted that the decision of the board of railroad commissioners finding the bill of sale to be void had become final and conclusive. He further asserted that he had entered into an agreement with the plaintiff, on or about August 24, 1926, whereby the former transactions had been rescinded, and whereby it had been agreed that the plaintiff should return the property to the defendant, and the defendant should return to the plaintiff the purchase price, namely, $21,500, and in addition thereto pay the plaintiff any sum it had expended in additional equipment, and that defendant should have a period of six months to raise the money and make the payments. The issues thus raised came on for trial. A great deal of evidence was adduced. The trial court held that the...