Appeal
from circuit court, Klamath county; H.K. Hanna, Judge.
Action
by the town of Klamath Falls against Lipman Sachs and others
for injunction. There was a decree for defendants, and
plaintiff appeals. Affirmed.
This is
a suit to enjoin the prosecution of an action commenced by
Lipman Sachs against the plaintiff herein to recover upon two
coupons for interest payments upon two certain bonds
purporting to have been issued by it to H.V. Gates, to
restrain the collection of such coupons, and to have the
bonds themselves declared null and void. The bonds to which
the coupons are attached are in form as follows: "For
value received, the town of Klamath Falls, in the county of
Klamath, state of Oregon, promises to pay to the bearer at
the Chase National Bank, in the city of New York, state of
New York, on the first day of September, A.D.1915, one
thousand dollars, with interest thereon at the rate of six
per cent. per annum from September 1st, A.D.1895, interest to
be paid semiannually on the first days of September and March
in each and every year thereafter, at the same place, on the
presentation and surrender of the coupons for such interest
hereto attached, as they respectively become due. Principal
and interest payable in United States gold coin of the
present standard of weight and fineness. This bond is one of
a series of ten bonds of one thousand dollars each, of like
tenor, and even date herewith, numbered consecutively from
one to ten, both numbers inclusive, issued by the town of
Klamath Falls. This bond is issued by the town of Klamath
Falls for the purpose of providing electric lights and water
for the inhabitants of said town by and under authority of an
act of the legislature of the state of Oregon, filed in the
office of the secretary of state February 6th, A.D.1893, and
entitled 'An act to incorporate the town of Klamath
Falls, Oregon,' *** and by virtue of Ordinance No. 46 of
said town of Klamath Falls, duly passed by the board of
trustees of said town on the 6th day of April, A.D. 1895
[giving the full title of the ordinance]. It is hereby
recited that all acts and things required to be done
precedent to and on the issuing of this bond have been done
and performed in regular and due manner and form as required
by law, and that the total indebtedness of said town of
Klamath Falls, including this issue of bonds, does not exceed
the limit prescribed by law; and for the prompt payment of
the principal and interest hereof at maturity the full faith
and credit of the said town of Klamath Falls are hereby
irrevocably pledged." They are duly executed, and bear
date August 7, 1895. On April 6, 1895, the plaintiff's
board of trustees adopted Ordinance No. 45, providing for
supplying the town and its inhabitants with electric lights
and power for public and private purposes, and granting H.V
Gates, his successors and assigns, a franchise and license to
construct and operate a system of electric lighting and power
works in the town, contracting with him for the rental of
electric lights for illuminating the town, and reserving an
option to purchase the same. Ordinance No. 46, adopted at the
same time, is similar in effect, except that it provides for
the construction of a water system instead, and the issuance
of the bonds in controversy. It is entitled "An
ordinance providing for the supplying of the town of Klamath
Falls, Oregon, and its inhabitants, with water for public and
private purposes, and granting H.V. Gates a franchise and
license to construct and operate a system of waterworks in
the town of Klamath Falls, Oregon, contracting with the said
H.V. Gates for the rental of fire hydrants for supplying the
town of Klamath Falls, Oregon, with water, and giving the
town of Klamath Falls, Oregon, an option to purchase said
waterworks, and providing for payment to said H.V. Gates of
ten thousand dollars in bonds of the town of Klamath Falls as
a first payment on said option to purchase the said
waterworks and for rentals of hydrants for the town of
Klamath Falls, Oregon." It provides, in substance, so
far as it is necessary to be set out for an understanding of
the opinion, as follows:
"Section
1. That H.V. Gates, his successors and assigns, are granted
the privilege for and during the term of ten years to
construct, maintain and operate a system of waterworks in the
town of Klamath Falls, for supplying the said town and
inhabitants thereof with water for public and private
purposes."
"Sec
4. That the grantee shall provide a substantial engine house
of sufficient capacity to accommodate pumps and appliances of
waterworks, and such room as may be required to accommodate
the electric plant to be operated in conjunction with said
waterworks system."
"Sec
6. That the grantee shall furnish and lay to the reservoir in
the streets of said town, at a specified depth, not less than
four thousand feet of six-inch pipe and two thousand feet of
four-inch pipe, and as much more as may be deemed necessary
shall furnish ten double hydrants, and connect the same with
the mains; also all necessary valves, special fittings, and
valve boxes required to complete the works; the mains and
fittings to be ample and capable of carrying out the
provisions and intentions of this agreement, of affording the
town where said pipes are laid first-class fire protection,
and of sustaining a pressure of one hundred and fifty pounds
to the square inch; shall furnish all mains and laterals that
may from time to time be required to supply the town or its
inhabitants with water: provided, that for each eight hundred
feet of four inch, or larger, mains ordered by the town,
there shall be one hydrant ordered, and rental paid for use
of the same.
"Sec.
7. That the grantee is to keep the fire hydrants in good
repair, protect same from freezing, and keep them ready at
all times for instant service.
"Sec.
8. That the privilege granted to and vested in the said H.V.
Gates, his successors and assigns, shall remain in full force
and effect for and during the period of ten years, but
subject to the right of purchase by the town; and the town of
Klamath Falls rents of the grantee, for the use designated,
the ten hydrants mentioned and provided for during the same
period of time from the acceptance of said waterworks."
"Sec.
10. That for and in consideration of the benefits secured to
the town of Klamath Falls by reason of the construction of
the water plant and the use of the hydrants aforesaid, the
town of Klamath Falls covenants and agrees to issue to the
grantee its bonds in the sum of ten thousand dollars, in
denominations as demanded by the said grantee, said bonds to
draw interest at the rate of six per cent. per annum, payable
semiannually, and to be delivered to said grantee upon the
completion of said water plant, and when the same has
successfully stood the required tests: provided, the said
grantee shall satisfactorily show that said works are free
from all liens, and that all labor and materials used and
furnished have been paid for.
"Sec.
11. That at the expiration of ten years from the completion
of said works, and at the end of each five years thereafter,
the town of Klamath Falls shall have the option to purchase
and own said waterworks and appurtenances and franchises upon
the following conditions, and the grantee in accepting this
ordinance expressly covenants to sell and convey to the town
the said waterworks and system as a whole: The said town of
Klamath Falls, by resolution of its board of trustees, shall
determine to purchase and own said waterworks and shall serve
a certified copy of such resolution on the grantee at least
six months before the time when the said town may exercise
such option. The sum of money that said town shall pay for
said waterworks as a whole shall be an amount which at eight
per cent. interest would produce an annual income equal to
the net income during the year previous to the serving of the
notice of resolution, with the cost price added for any
improvements or extension made during the year previous to
such notice, upon which no revenue has been derived. When
such purchase is made by the town, the franchise granted to
Gates shall terminate. If said town shall not determine to
purchase said waterworks within ten years from date of its
acceptance of said works, it shall grant to the grantee a
franchise, upon the same terms and conditions as herein
stated, reserving the option of purchase each five years. The
ten thousand dollars paid for hydrant rental shall be the
first payment upon the purchase price of said waterworks, and
it is agreed that, until such time as the town shall
purchase, it shall own an absolute right and interest in the
said waterworks and electric lights to be erected and
operated along with the water plant to the amount of ten
thousand dollars; but it is further understood that until
such time as the town shall purchase the interest of the
grantee the grantee shall have exclusive use and control of
said works in every particular, without paying to the town
any rents, profits, or revenues therefrom or therefor in any
manner whatever, except that the grantee shall not have the
power or authority to sell, mortgage, lease, or in any way
incumber the interest of the town of Klamath Falls in said
works."
"Sec.
15. That, in the event it is necessary at any future time for
the safety and welfare of the town to increase the capacity
of wells, reservoirs or machinery, it shall be done by the
grantee without any additional cost to the town, except in
the purchase of said works, according to the conditions
herein stated.
"Sec
16. That work shall be begun in a specified time, and the
system...
