Struble v. Nelson

• Decision Date: 16 June 1944
• Docket Number: No. 33782.,33782.
• Citation: 15 N.W.2d 101,217 Minn. 610
• Parties: STRUBLE v. NELSON et al.
• Court: Minnesota Supreme Court

15 N.W.2d 101

217 Minn. 610

STRUBLE v. NELSON et al.

No. 33782.

Supreme Court of Minnesota.

June 16, 1944.

Appeal from District Court, Becker County; Anton Thompson, Judge.

Action by E. L. Struble against L. Henry Nelson and others to restrain the village council of Lake Park from issuing without submission to popular vote revenue warrants payable wholly from anticipated earnings of village waterworks to pay for installation of water filtration and softening system. From an order sustaining defendants' demurrer to the complaint, plaintiff appeals.

Affirmed.

Magnus Wefald, of Hawley, for appellant.

Henry N. Jensen, of Detroit Lakes, and Dorsey, Colman, Barker, Scott & Barber and Charles B. Howard, all of Minneapolis, for respondents.

PETERSON, Justice.

This is an appeal by plaintiff from an order sustaining defendants' demurrer to the complaint upon the ground that it does not state facts sufficient to constitute a cause of action. The facts will be stated as they appear in the complaint.

Plaintiff brings the action as a taxpayer and water user of the village of Lake Park to restrain the village council from issuing without submission to popular vote revenue warrants payable solely from anticipated earnings of the village waterworks to pay for the installation of a water filtration and softening system as an improvement of and addition thereto. The resolution authorizing the issuance of the warrants recites that the installation is necessary in order to furnish an adequate and satisfactory water supply. The warrants do not obligate the village to pay the same in any other manner than that stated. The village has no bonded indebtedness. Among other things, the village covenanted with the holders of the warrants to create and maintain a fund to be known as the "Water Plant Revenue Fund," into which all receipts from the waterworks were to be paid and out of which, after payment of the expenses of operation and maintenance, the warrants were to be paid at the times and in the manner therein set forth; to maintain the rates charged water users in force at the time the resolution was adopted until the warrants shall have been paid; to pay into the fund five dollars per hydrant annually for water used by it; and to carry insurance on the waterworks against certain specified casualties, the proceeds of which in the event of loss were to be used either to repair and restore the plant or to pay and retire the warrants. The resolution insofar as it relates to hydrant rental provides:

"* * * In order that the general inhabitants of the village shall pay for water service rendered by street sprinkling and washing and in fighting fires and not charged or paid for through the charges heretofore made, an additional charge of $5.00 per year for each fire hydrant is hereby imposed. Said charge shall be paid out of the general revenue fund of the village into the water plant revenue fund."

The plan involved the raising of cash with which to pay for the installation free from any lien by way of conditional sale, mortgage, or otherwise.

Plaintiff contends that the village council is without authority to make the improvement to the waterworks unless and until money for the purpose is available in the treasury of the village or unless the installation has been authorized by vote of the electors of the village. It has been assumed upon the argument that, if the village council has the power to issue the warrants, it also has the power to make the improvement. Plaintiff states that the only question involved is that of "the power of the village council to finance this improvement by issuing revenue bonds without an election." A further assumption has been made upon the appeal to the effect that a submission to a vote of the electors of the village is required by statute only where bonds creating a general obligation on the part of the village are to be issued and that if the warrants in question do not create such an obligation the village council has the power and authority to issue them. It is claimed that, because of the covenants which the warrants contain, they created general village obligations and consequently were in effect bonds rather than revenue warrants.

1. A municipality does not incur a general obligation or debt by purchasing property to be paid for wholly out of income or revenue to be derived from the property purchased. Williams v. Village of Kenyon, 187 Minn. 161, 244 N.W. 558. See Hendricks v. City of Minneapolis, 207 Minn. 151, 290 N.W. 428; Davies v. Village of Madelia, 205 Minn. 526, 287 N.W. 1; City of Bemidji v. Ervin, 204 Minn. 90, 282 N.W. 683; Fanning v. University of Minnesota, 183 Minn. 222, 236 N.W. 217. In the Village of Kenyon case, the purchase of equipment for a village electric plant was involved; but no distinction can be made between the purchase of an electric plant and a waterworks, because the authority to acquire both is found in Minn. St.1941, § 457.01, Mason St.1927, § 1229.

2. The point is made that the rule that an undertaking by a municipality to pay for property purchased out of income or revenue to be derived from its use applies only where the whole property is purchased and is to be paid for in that manner, and not where the purchase consists of an addition or betterment to property already owned by the municipality and the revenue or income to be derived from the property already owned and that purchased is to be used in paying for the property purchased. The authorities on this question are in conflict. The weight of authority supports the view that no general obligation or debt is incurred by a municipality by agreeing to pay for an addition or improvement to a utility plant already owned by it out of the income or revenue to be derived from the operation of the plant with the addition or improvement. City of Edwardsville v. Jenkins, 376 Ill. 327, 33 N.E.2d 598, 134 A.L.R. 891; Guthrie v. City of Mesa, 47 Ariz. 336, 56 P.2d 655; Searle v. Haxtun, 84 Colo. 494, 271 P. 629; State and Diver v. City of Miami, 113 Fla. 280, 152 So. 6; Farmers' State Bank v. City of Conrad, 100 Mont. 415, 47 P.2d 853; Underwood v. Fairbanks, Morse & Co., 205 Ind. 316, 185 N.E. 118; 38 Am.Jur., Municipal Corporations, § 474. Such an obligation does not create a lien or charge upon the waterworks system. It pledges income or revenue to be derived from the utility by the municipality in its proprietary capacity. It places the burden for paying for the improvement upon the consumer for whose benefit the utility is maintained rather than upon the taxpayer. It does not deprive the latter of anything that is his, because in theory at least the governmental expenses of the municipality should be paid out of taxes and other municipal revenues...