Puget Sound Power & Light Co. v. City of Seattle

• Decision Date: 23 April 1921
• Docket Number: 235.
• Citation: 271 F. 958
• Court: U.S. District Court — Western District of Washington
• Parties: PUGET SOUND POWER & LIGHT CO. v. CITY OF SEATTLE et al.

271 F. 958

PUGET SOUND POWER & LIGHT CO. v. CITY OF SEATTLE et al.

No. 235.

United States District Court, W.D. Washington, Northern Division.

April 23, 1921

James B. Howe, Hugh A. Tait, and John H. Powell, all of Seattle Wash., for complainant.

Walter F. Meier, Corp. Counsel, and Thomas J. L. Kennedy, Robert H Evans, and Charles T. Donworth, Asst. Corp. Counsels, all of Seattle, Wash., for defendants.

CUSHMAN District Judge.

Complainant a Massachusetts corporation, sues the defendant city, its comptroller and treasurer. The matter is now before the court upon defendants' motion to dismiss the bill upon the ground that the complainant is not entitled to equitable relief.

The bill avers that complainant was the owner of and operated a street car system in the city of Seattle; that, in 1918 during the war, complainant was pressed by the government and the city to make additions to its system which it had not the means of making; that in September, 1918, the city offered complainant $15,000,000 in utility bonds for the property, which it accepted; that, after the enactment of an ordinance authorizing the purchase and issuance of such bonds, a taxpayers' suit was brought in the state court to test the validity of the purchase and the proposed bonds. The particular attack being made was that the general revenues of the city would have to meet the charges of operation and maintenance if the gross receipts from the operation of the street car system proved insufficient to meet the bonds, interest, and other charges. In both the lower and Supreme Court the bonds were held valid. Twichell v. Seattle, 106 Wash. 32, 179 P. 127.

That, at the date of this decision, the street car property was still in the possession of the complainant, being subject to outstanding mortgages, which complainant was obligated to discharge; that complainant transferred the property, as agreed, the trust companies holding the mortgages released them, and received the bonds as security, substituted for the released mortgages; that $15,000,000 of complainant's notes so secured mature June 1, 1921; that the interest on the utility bonds of the city is to be applied to the payment of the interest on such notes; that, since such transfer of the property, the city has been in possession and operation of the street car system transferred, receiving therefrom approximately gross revenues of $18,000 per day.

That Ordinance No. 39025, authorizing the utility bonds, provides that--

'Sec. 5. * * * The city treasurer of the city of Seattle shall, semiannually, one calendar month prior to the date upon which any interest, or principal and interest, shall become due, set aside and pay into such fund from the gross revenues of the entire municipal street railway system of the city of Seattle, now belonging to it, including the additions, betterments and extensions herein provided for, and any street railway property which it may hereafter acquire, with the equipment thereof, a sum equivalent to the amount of interest so falling due, upon all bonds issued hereunder, and then outstanding, and annually one calendar month prior to the first day of March in each and every year, beginning with the year 1922, and to and including the year 1938, the sum of eight hundred thirty-three thousand dollars ($833,000), and one calendar month prior to the first day of March, 1939, the sum of eight hundred thirty-nine thousand dollars, ($839,000), as the principal of such bonds falls due, and until all of such bonds with interest thereon be fully paid, and such fixed amounts out of such gross revenues are hereby pledged to such semiannual payments of principal, and shall constitute a charge upon such gross revenues superior to all charges whatsoever, including charges for maintenance and operation, save and except the charges upon such revenues heretofore created for the payment of principal and interest of one hundred thousand dollars ($100,000), Seattle Municipal Street Railway Bonds, 1917, authorized by Ordinance No. 37851, as amended by Ordinance No. 37923; and save and except the charges upon such revenues heretofore created for the payment of principal and interest of five hundred fifty thousand dollars ($550,000), 'Railway Extension Bonds, Series A, 1918,' authorized by Ordinance No. 38666, and save and except the charges upon such revenues sufficient to pay warrants drawn upon the city railway fund of the city of Seattle issued prior to the taking effect of this ordinance.'

That, between the 31st of March, 1919, and the 17th day of February, 1921 (the bill of complaint herein having been filed February 21, 1921), the city received in gross revenues from the operation of the purchased property upwards of $7,000,000, being more than enough to pay all charges prior to complainant's, the interest on the utility bonds and even several installments of the principal--

'But, notwithstanding such fact, such gross revenue has been applied to the building of an extension and to the payment of the cost of maintenance and the operation of the municipal street railway system of the city. On the 1st day of March, 1921, six months' interest on the issue of $15,000,000 of utility bonds will be due and payable and by the terms of the ordinance authorizing such bonds the city is obligated, in case the gross revenues derived from the operation of the system were sufficient, to pay into the special fund created by such ordinance the sum of $375,000, but such sum has not yet been paid into such special fund although the gross revenues received by the city from the municipal street railway system were more than sufficient to pay all prior charges and to pay such interest, and to pay the amount of such interest into such special fund 30 days prior to the 1st day of March, 1921; but the mayor of the city has recommended that instead of the gross revenues derived from such system being paid into such special fund the same should be diverted and in part applied to the payment of interest on $790,000 of utility bonds issued under Ordinance No. 39492, entitled, * * * which last-named bonds are expressly made subordinate to the $15,000,000 issue of bonds hereinbefore mentioned, and which $790,000 issue of utility bonds were sold by the city in the public bond market after it had operated the property for five months or more.'

The bill further avers that certain named parties have combined to have a suit instituted to have the $15,000,000 bond issue decreed payable only out of the net revenues of the property and to enjoin the payment of interest due March 1, 1921, and the principal until after the payment of maintenance and operation charges, and that the mayor of the city has been carrying on a campaign for the purpose of intimidating certain city officers and bringing about the default in the payment of the interest on such bonds and their repudiation; that the persons so combining have, with other persons, instituted a suit in the state court to subordinate the payment of interest and principal to claims that are subordinate to the bonds; that complainant is not a party to those suits, but such persons may attempt to involve complainant in such suits in order to prevent its being heard in this court; and further that--

'If, by reason of the efforts of the mayor and certain other persons who have combined with him to bring about a default in the payment of interest on the fifteen million dollar issue of bonds, which interest is payable on the 1st day of March, 1921, a default should occur in the payment of such interest, the entire issue of $15,000,000 of bonds will be known as a defaulted issue, and bonds which the company now has deposited with the trustees hereinbefore named, as collateral security, will be depreciated millions of dollars and the company may be placed in a position where it will be unable to have such trustees sell such bonds prior to the 1st day of June, 1921, and apply the proceeds upon the notes secured thereby, and the company will suffer great and irreparable injury and damage exceeding in value the sum of $3,000 exclusive of interest and costs and exceeding many millions of dollars, as well as the injury and damage which will be immediately caused by the nonpayment of the $375,000 of interest on such bonds, which interest is payable March 1, 1921. If the city treasurer places in the special fund the gross revenues from the municipal street railway system, which should have been placed in such fund on the 29th or 30th of January, 1921, or if he should place in such fund the gross revenues of the municipal street railway system received during the month of February, 1921, there would be sufficient funds to pay such interest on the 1st day of March, 1921.'

Complainant avers that this will result in irreparable injury to it; that its only remedy is by injunction, forbidding the diversion of the gross revenues from the special fund and commanding their payment into such fund. Complainant asks for a temporary and permanent injunction in accordance with the averments made, for specific performance, and specially prays:

' * * * That in the event any attempt should be made by any taxpayer to sue it in the superior court of the state of Washington or in any other court than the District Court of the United States for the Western District of Washington, it shall be granted leave to amend this complaint so as to enjoin all persons so attempting to sue it from suing it in such manner as to divest this court of complete jurisdiction of the rights which the plaintiff has to assert against the city and its officers; and that the plaintiff have such other and further relief as the equities of the case may require, and to your honors may seem meet.'

A restraining order...