Quarles v. City of Appleton

• Citation: 299 F. 508
• Decision Date: 30 April 1924
• Docket Number: 3217.,3216
• Parties: QUARLES v. CITY OF APPLETON (two cases).
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

299 F. 508

QUARLES v. CITY OF APPLETON (two cases).

Nos. 3216, 3217.

United States Court of Appeals, Seventh Circuit.

April 30, 1924

Elijah N. Zoline, of New York City, for plaintiff in error and appellant.

Jerome R. North, of Green Bay, Wis., for defendant in error and appellee.

Plaintiff brought this action to recover for water and water service by it furnished to defendant for a period beginning November 1 1904, and ending November 30, 1911. This period is by the declaration divided into two terms, the first from November 1, 1904, to January 30, 1908, covered by the first cause of action. Subsequently by stipulation the complaint was amended, and a second count was included. The amount demanded is $170,000, with interest, less admitted payments of $56,428.33. The disputes arose over transactions between Appleton Waterworks Company and defendant, dating back to November 4, 1881, when the city passed an ordinance, a 20-year franchise, by the terms of which plaintiff agreed to supply water and defendant to pay therefor, a stipulated price. At the expiration of this agreement, both parties were dissatisfied, and no new contract was made.

Present differences arise over the inability of the parties to agree upon any basis whereby the city may discharge its obligation for the water service and fire protection rendered. The positions of the city and defendant have been frequently changed; the plaintiff first asserting that it was not bound by the price fixed in the original franchise, and the city asserting the contrary. Subsequently the city asserted its liability was the reasonable value of the service rendered while plaintiff demanded a fixed price by it claimed. Later plaintiff again asserted its right to recover on the basis of quantum meruit, and defendant denied any and all liability.

Certain important occurrences demand special reference. When it was discovered that plaintiff and defendant were unable to agree either to extend the old contract or upon a new one plaintiff offered to sell its property for a stipulated sum, or to make a new contract upon specified terms respecting payment for service. Defendant declined to accept the proposal, and passed various resolutions declaring its determination to acquire its own waterworks plant, and also consented 'that said company may continue to operate the system of waterworks on the terms and the conditions of its present franchise and contract, but that this consent shall not be deemed to be a renewal of said franchise and contract, or a new franchise and contract. ' This proposal was in turn rejected by plaintiff.

Further negotiations of a similar character were carried on; plaintiff insisting that its service was rendered pursuant to its offer to furnish fire protection and water at a stipulated price per hydrant rental, and defendant asserting that it would pay only the price fixed in the expired franchise until it was able to construct its own plant. Plaintiff presented claims to the city, based upon its alleged contract, and defendant allowed them in part on its theory. Plaintiff appealed from the disallowance of its claim (as required under the charter of the city of Appleton) to the state circuit court, and, as other bills became due, claims were likewise presented and disallowed, or allowed in part, and appeals taken. By stipulation these various appeals were consolidated and tried, with the result that judgment was rendered in plaintiff's favor for the reasonable value of the services rendered.

From this judgment an appeal was taken, and an opinion rendered (Appleton Waterworks Co. v. Appleton, 132 Wis. 563, 113 N.W. 44), which has assumed a large importance in the disposition of the present action. Defendant relies upon it to support the judgment, and it is evident that the District Judge was governed largely by it in the disposition of the case. Plaintiff admits that it is conclusive upon all of the claims by it presented up to November, 1904, and its present action is restricted to the sums by it claimed from such date to the date when the city finally took over the property.

A second date of importance in the history of this controversy is December 30, 1905, at which time the city brought suit to restrain the company from discontinuing service by it threatened in case its demand for payment was not met. In this complaint the city alleged: 'The plaintiff is ready and willing, and now offers, to pay to the defendant a reasonable and just compensation for any and all service it has heretofore or may hereafter render to plaintiff for a proper and efficient supply of water through its waterworks system, and has been ready and willing and has offered and tendered to the defendant during all time past as well as in the present to pay and render to the defendant a fair and just compensation for all service in the supply of water for public uses, but that defendant has refused to accept the same;' and it obtained an injunction restraining plaintiff from discontinuing the service.

Plaintiff thereupon answered, asserting: 'In its answer the water company set up the ordinance 1881, attaching a copy as an exhibit, and alleging that the same constituted a contract, that said contract expired on November 4, 1901, that the compensation named therein was inadequate, but that nevertheless the company had for a time after the expiration of the contract continued to serve the city and accept the same amount. It then alleged the sending of the communication of February 20, 1904, giving notice that it would charge $1,500 per month; that no response had been made thereto; the presentation of bills at the rate of $1,500 per month; the allowance by the city of $1,019 per month, conditioned upon acceptance thereof in full payment; the pendency of the appeals from the action of the common council; that the company could not accept the amounts appropriated without waiving its claim to a larger amount; that the city refused its consent to acceptance without such waiver; and that the company had been at all times and was ready to furnish service to the city and its inhabitants at reasonable rates.'

Upon motion to dissolve the injunction, the court required the city to pay to the company $800 per month and continued the injunction, but provided that such payment was without prejudice to the rights of either party. Thereafter for several years these payments were made but without prejudice to either side to assert or dispute other liability. In January, 1908, a receiver was appointed for the Appleton Waterworks Company by the District Court of the United States for the Eastern District of Wisconsin, and the present plaintiff is a successor to the receiver thus appointed. The order appointing the receiver contained provision for the continued operation of the plant.

The injunctional order above referred to remained in force until November 30, 1907, and in the meantime the Public Utilities Act (Laws 1907, c. 499) for the state of Wisconsin took effect (July 11, 1907), and the water company filed with the Railroad Commission of Wisconsin a declaration surrendering its franchise and accepting an 'indeterminate permit' under the provisions of this act. This was done pursuant to an understanding between the parties that, if such 'indeterminate permit' was obtained, the city would proceed under the act to acquire plaintiff's property. It attempted so to do, and submitted to the voters a bond issue or other necessary question, and the proposition lost; the vote being a tie. Thereupon the city council directed its legal department to proceed before the commission to demand improvements in the plant, and the water company made a request for a determination of a reasonable rate.

No decision was ever announced by the commission as to a reasonable rate, though several years elapsed, but on May 14, 1910, over two years later, an order was entered declaring the plant and service inadequate, and directing improvements to be made. Thereafter application was made to the judge of the court below for an order fixing the rate of compensation, but the parties entered into further negotiations for settlement through purchase of the plant, and this application was never pressed to a final disposition.

In September, 1910, the city again instituted proceedings before the Wisconsin Commission to purchase the plant as provided for in the Public Utility Act. The commission filed its determination and fixed compensation on December 8, 1910. The city was without cash with which to pay for the property, and though it immediately demanded possession, such request was referred by the receiver to the court, and an order entered directing plaintiff not to turn over the plant until payment was made.

January 4, 1911, the city council passed a resolution refusing to make any further payments for service and to hold the receiver liable as trespasser on the streets. November 29, 1911, the city filed a petition in the lower court, praying that the receiver be directed to turn over the plant upon the payment of the amount fixed by the commission, and an order was so entered. Thereupon the city paid the price fixed by the Wisconsin Commission, and possession was delivered to the city. No payment was ever made by the city for the service rendered from December 8, 1910, to December 1, 1911.

Upon the trial a jury was waived, many of the facts were stipulated, each side presented proposed findings, and the court made certain findings and conclusions favorable to defendant, and judgment was rendered dismissing the complaint. From this judgment an appeal was taken, and a writ of error was also prosecuted.

Before EVANS and PAGE, Circuit Judges, and LINDLEY, District Judge.

EVAN A EVANS, Circuit Judge (after stating...