Tennessee Elec. Power Co. v. City of Chattanooga

• Court: Tennessee Supreme Court
• Writing for the Court: DeHAVEN, Justice.
• Citation: Tennessee Elec. Power Co. v. City of Chattanooga, 172 Tenn. 505, 114 S.W.2d 441 (Tenn. 1937)
• Decision Date: 27 March 1937
• Parties: TENNESSEE ELECTRIC POWER CO. v. CITY OF CHATTANOOGA et al.

114 S.W.2d 441

172 Tenn. 505

TENNESSEE ELECTRIC POWER CO. v. CITY OF CHATTANOOGA et al.

Supreme Court of Tennessee.

March 27, 1937

Appeal from Chancery Court, Hamilton County; J. L. Foust Chancellor.

Suit by the Tennessee Electric Power Company, as a taxpayer and as the holder of a nonexclusive franchise, against the City of Chattanooga and others, to enjoin construction of a municipal electric plant and distribution system and issuance of bonds. From a decree denying the injunction and dismissing the bill complainant appeals.

Affirmed.

Brown & Spurlock, L. N. Spears, and Frazier & Roberts, all of Chattanooga, and Thomas H. Malone and Trabue, Hume & Armistead, all of Nashville, for appellant.

Phil B Whitaker, Will F. Chamlee, and J. W. Anderson, all of Chattanooga, for appellees.

DeHAVEN Justice.

Complainant, Tennessee Electric Power Company, as a taxpayer and as the holder of a nonexclusive franchise, seeks by its bill herein to enjoin the City of Chattanooga, and the other named defendants, from constructing a municipal electric plant and distribution system, and from issuing the bonds of the municipality for such purpose.

The cause was heard by the chancellor upon the application of complainant for a temporary injunction, as prayed in its bill, and the answer of defendants. From the decree denying the injunction and dismissing the bill complainant has appealed to this court and assigned errors.

It is insisted by complainant that chapter 455, Private Acts 1935, is unconstitutional and void for a number of reasons. It is under the authority of this act that the City of Chattanooga is preparing to issue its bonds for the construction of a municipal electric plant and distribution system.

It is insisted that the act here in question is unconstitutional in vesting in the Electric Power Board the sole determination as to whether the bonds shall be issued, and whether a tax shall be levied for their payment, in violation of article 2, § 29, of the Constitution of the State of Tennessee, which, in its material parts, is as follows:

"The General Assembly shall have power to authorize the several counties and incorporated towns in this State, to impose taxes for county and corporation purposes respectively, in such manner as shall be prescribed by law."

The act, section 7, creates a board to be known as the "Electric Power Board of Chattanooga," composed of five members named in the act for fixed terms of office. The board is given the right to name their successors, subject, however, to confirmation by the Mayor and Board of Commissioners of the City of Chattanooga.

Section 2 of the act authorizes the city to construct or otherwise acquire and operate an electric power plant and distribution system and to sell electric current for any purpose whatever, within the corporate limits of the city and the territory adjacent thereto. Section 3 authorizes the city to issue and sell its bonds in an amount not exceeding $8,000,000 for the purpose of financing the undertaking. The first part of section 4 of the act provides for the denominations of the bonds; that the bonds shall be serial, maturing in such amounts and at such times not less than three nor more than thirty years from date of issuance as the Board of Commissioners may determine, and shall bear interest at the rate of not more than 6 per cent. per annum. It is further provided in section 4 as follows:

"Said bonds shall be issued from time to time in such amounts, and shall bear dates, as the Electric Power Board hereinafter created shall direct; and it shall be the duty of the Mayor and Board of Commissioners of the City to provide by resolution or ordinance for the issuance of said bonds as directed by said Electric Power Board. Said bonds shall be Known as Electric Power Bonds of the City of Chattanooga and they may be issued either as direct and general obligations of the city, payable out of its general income and revenue, or at the election and subject to the determination of said Power Board they may be made payable only out of the revenue from said power plant and distribution system. In case the bonds are issued as general obligations of the City, it shall be the duty of the governing board of said City to levy a tax each year over and above the taxes levied for general municipal purposes, to pay the interest and principal of said bonds as they mature."

The Power Board, under the act, is given full control over the erection, maintenance, and operation of the power plant and distribution system, and the collection of all revenues arising from the operation thereof. The Power Board, thus informed of the needs and requirements of the power plant and distribution system, would be in a position to know whether or not its financial status would justify the issuance of bonds payable out of revenues derived from the operation of the plant. The act, therefore, provides, as appears above, that "at the election and subject to the determination of said Power Board they [the bonds] may be made payable only out of the revenue from said power plant and distribution system." The city "may" make the bonds so payable, but is put under no compulsion to do so. The authority of the city to issue its general liability bonds is unimpaired by the provision that at the election of the Power Board bonds may be issued by the city payable out of the revenues of the power plant. The power to make the bonds payable out of the revenues of the electric plant is, in effect, made dependent on the ability of the plant to stand the charge. The determination of the Power Board that the bonds may be made so payable amounts to nothing more than the finding of a fact.

The authority to issue and sell the bonds authorized by the act is conferred exclusively upon the City of Chattanooga and not upon the Power Board. The city is authorized, but not compelled, to build or buy a power plant. If it elects to do so, "it is hereby authorized, in its corporate capacity, to issue and sell its bonds *** in an amount not exceeding Eight Million ($8,000,000.00) Dollars." Section 3. The Board of Commissioners of the city determines the maturity of the bonds and the rate of interest they shall bear. To avoid the harm that might arise from the issuance and sale of bonds in excess of the financial needs of the Power Board, the act provides: "Said bonds shall be issued from time to time in such amounts, and shall bear dates, as the Electric Power Board hereinafter created shall direct." Section 4. The legislative intent was that bonds should be issued and sold as and when needed by the Power Board in the performance of its work. When the need is determined by the Power Board, it is then the duty of the city to issue the amount of bonds requested by the board.

The act does not, as is asserted, vest in the Power Board the sole determination as to whether the bonds shall be issued. On the contrary, this power is vested by the act in the City of Chattanooga. The fact that the bonds are to be issued in installments, or blocks, as directed by the Power Board, cannot be construed as conferring upon it the sole determination as to whether the bonds shall be issued. Having conferred the sole power to determine whether the bonds shall be issued on the city, in plain and unmistakable terms, it cannot be supposed that the Legislature intended by the clause last above quoted to confer this right upon the Power Board. A construction will be avoided, if possible, that would render one section of the act repugnant to another. Wilcox v. State, 50 Tenn. 110, 3 Heisk. 110. Or one that would produce an absurd result. West v. State, 140 Tenn. 358, 204 S.W. 994.

It is contended that the act confers upon the Power Board the authority to levy a tax. The provision in the act is: "In case the bonds are issued as general obligations of the City, it shall be the duty of the governing board of said City to levy a tax, *** to pay the interest and principal of said bonds." Nowhere in the act is authority conferred upon the Power Board to levy a tax. It is argued, however, that the fact the bonds are to be issued, from time to time, by the city, as directed by the Power Board, compels the levy of a tax. The case of Mayor and City Council of Nashville v. Hagan, 68 Tenn. 495, 9 Baxt. 495, is relied on. In that case the waterworks committee of the City of Nashville, without power to make a contract for a new and expensive improvement, undertook to bind the city for payment of the same. The court said:

"The power to make such a contract, being equivalent in general to the power to levy and disburse taxes, must be exercised in the same manner and by the same authority, that is, by a corporate act. The city government may, by general laws and ordinances, modify this rule and give to the committees power to make contracts in some instances."

The ordinance proved on the trial, however, permitted the waterworks committee to make only necessary expenditures in case of emergency. The court held, therefore, that the committee was without power to make the contract. In the instant cause the Power Board, by express legislative authority, is empowered to make all contracts necessary to the construction of the power plant, and the city is expressly authorized to issue its bonds for the payment of the cost of the same. Had the committee in the Hagan Case supra, had the proper legal authority to contract for the new improvement, a different result would have been reached in the case. Under the act here in question, we do not think that because the bonds are to be issued by the city, from time to time, as directed by the Power Board, the board thereby determines that a tax shall be levied. The city, under the act, is empowered to...