Thomas v. McHugh
| Decision Date | 03 October 1934 |
| Docket Number | 6284 |
| Citation | 256 N.W. 763,65 N.D. 149 |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Ramsey County, Grimson J.
Affirmed.
L D. Gooler, for appellant.
Lawrence Murphy, Fuller & Powers, for respondents.
This is an appeal from an order of the district court of Ramsey county sustaining a demurrer to plaintiff's complaint.
The defendants demurred to the complaint upon the ground "That said complaint shows upon the face thereof that the same does not constitute or set forth a cause of action against the defendants or either of them."
On this appeal plaintiff assigns specifications of error or reasons why the demurrer to the complaint should be overruled. They are as follows:
(1) The city is without power to issue bonds payable serially over a period of years, or otherwise, to be made payable from the earnings of the utility;
(2) The city is without power to covenant and contract by resolution, ordinance or otherwise, for a pledge and appropriation of earnings of future years to the payment of the proposed bonds;
(3) The agreement to pledge and apply the earnings to the payment of the bonds violates the provisions of Laws 1933, chapter 181;
(4) The city is without power to agree to maintain rates of charge for electric current sufficient to pay and discharge the bonds at maturity;
(5) The covenant to maintain rates sufficient to pay the bonds at maturity, violates section 4609c3, 1925 Supplement to the Compiled Laws, 1913; Laws 1933, chapter 220, vesting in the board of railroad commissioners the power to review and change rates of utilities;
(6) The contract to erect the plant and commence operations thereof on completion of the proposed loan, violates the provisions of Laws 1929, chapter 198; Laws 1927, chapter 305, requiring a certificate of convenience and necessity from the board of railroad commissioners before commencement of operations by public utility;
(7) The city is without power to issue and sell bonds without first advertising the same for sale, as required by Laws 1927, chapter 196, § 17, Laws 1929, chapter 170;
(8) The issuance of the proposed bonds in this case will constitute a debt and liability of the city in violation of the Constitution, section 183, and Laws 1927, chapter 196, § 3, prescribing the limitation of indebtedness of municipalities;
(9) The threatened issuance of bonds and the making of a proposed contract to support the same violates Laws 1933, chapter 168, § 4, in that the said section provides that all proposed bond issues of any city shall, before being submitted to the city for a vote of the electors, be submitted to the board of budget review for appeal.
(10) The special election is void for the reason that the question stated upon the ballot submitted to the electors is a double question, and contains the statement of more than one proposition upon which separate elections should be held;
(11) The statutes upon which defendants maintain power to act as herein proposed are void.
The demurrer presents the legal question, whether or not a municipal corporation, such as the city of Devils Lake, can, under our laws, purchase or erect and municipally own and operate an electrical generating and distributing plant for the city's own uses, and for the convenience of its inhabitants and industries, and pay the cost of the same solely from the earnings of the plant.
As incidental to this main issue arise the further questions: (a) Whether the city can, in furtherance of such purpose, enter into a valid contract to that end, and pledge its faith and credit to the effect that it will establish a schedule of rates for electric current adequate to meet the purchase price, with the earnings assured for such purpose. (b) Whether such purchase price can be paid serially in installments extending over a period of years, with interest. (c) If such can be done under our laws, then, as peculiar to the instant case, would the indebtedness purported to be authorized by the voters in the amount of $ 400,000 be a general obligation of the city, and in excess of the constitutional debt limit? (d) Whether the proper procedure has been pursued in the premises.
The city bases its authority for purchasing or erecting an electrical plant by virtue of § 1, chapter 172, Session Laws 1929, which section reads:
"Any city, village or town is authorized and empowered to purchase, erect, operate and maintain, enlarge, improve and extend, or lease from any person, firm or corporation, . . . any electric light and power plant, site buildings and equipment thereof, or any electric distribution system and equipment thereof or any electric transmission line and equipment thereof, . . . or all or any part of (or) parts of any of such plants, systems and lines, and any interest in any such plant, systems or lines within and without the corporate limits of such city, village or town for the purpose of furnishing or procuring to be furnished electric energy for heat, light and power . . . for such city, village or town and its inhabitants and industries in the manner herein provided."
It is evident that this section gives a municipality the fundamental power to purchase, erect or lease an electrical plant.
The city contends, further, that it has authority to contract for the erection or construction of such plant, and pay for the same exclusively from the earnings, which authority is claimed by virtue of § 4 of the same chapter. We quote the section:
"Any such city, village or town may pay the cost of purchasing, erecting, enlarging, improving, extending or leasing any such plant, system or line, or any part thereof, either out of the earnings of such plant, system or line, or by issuing special assessment warrants as hereinafter provided, or by issuing bonds of such municipality hereinafter provided, or partly by such special assessment warrants and partly by such bonds, or partly out of such earnings, provided, however, that when such cost or any part thereof is to be paid out of earnings, then such cost or the part thereof which is to be paid out of earnings shall not become a general obligation of the municipality payable out of money raised through taxation, but a special obligation payable solely and exclusively out of the earnings derived from the operation of such plant, system or line."
The mayor and board of aldermen of the city of Devils Lake by resolution declared the necessity of procuring an electric plant, for the purpose of furnishing electrical energy for heat, light and power for the city, its inhabitants and industries; and further resolved that the city should issue its bonds in an amount not exceeding $ 400,000, with interest not to exceed 4 1/2 per cent per annum, which bonds should mature serially extending over a period of twenty years, to cover the purchase price; and resolved and pledged that the city would maintain adequate rates in an amount sufficient to pay the principal and interest as the same matured, payable solely from the earnings of the plant, and without any general obligation on the part of the city. They also resolved to submit the matter to the voters. Pursuant thereto a special election was held at which the proposition was submitted to the electorate and carried, more than two-thirds of the voters favoring the same. The foregoing appear as part of the allegations in the complaint.
It is contended by appellant that there is no power in the city to issue revenue bonds payable from earnings, or payable in serial denominations extending over a period of years. The statute clearly grants the authority to a municipality to purchase, erect or lease an electrical plant. The same chapter also grants the power to pay the purchase price solely from earnings. This implies that a contract may be entered into with deferred obligations, as the earnings must necessarily lie in the future, and originate from the operation of the plant. If it is conceded that the right to contract exists on the part of the municipality with reference to the subject, then it is not material what form the contract shall take, as the statute is general in its terms.
The right to procure a plant and the right to pay for the same from earnings, are rights specifically granted. Since the act does not provide a definite manner in which this grant shall be carried out, the law necessarily implies considerable latitude in the governing body, with reference to the accomplishment of the object sought.
In the case of Lang v. Cavalier, 59 N.D. 75, 228 N.W. 819, in defining grants of powers to municipalities, this court held:
As already indicated, the form of contract which the governing board of a municipality may enter into for the purpose of procuring such utility, is quite immaterial so long as it contains the essentials of a binding agreement. The fact that the...
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