Utah Power & Light Co. v. Provo City

• Decision Date: 31 December 1937
• Docket Number: 5875
• Citation: 74 P.2d 1191,94 Utah 203
• Parties: UTAH POWER & LIGHT CO. v. PROVO CITY et al. (GENERAL CONTRACTORS ASS'N OF UTAH, Intervener)
• Court: Utah Supreme Court

74 P.2d 1191

94 Utah 203

UTAH POWER & LIGHT CO. v. PROVO CITY et al. (GENERAL CONTRACTORS ASS'N OF UTAH, Intervener)

No. 5875

Supreme Court of Utah

December 31, 1937

Rehearing denied May 16, 1938.

Original prohibition proceeding by the Utah Power & Light Company against Provo City and others to prevent the defendant commissioners of Provo City from proceeding with a written contract to sell the city's bonds for the purpose of acquiring or constructing an electric light and power system for the city. The General Contractors Association of Utah intervene in support of the writ of prohibition.

WRIT DENIED.

Shirley P. Jones, George R. Corey, and Calvin Behle, all of Salt Lake City, and Geo. W. Worthen, of Provo, for plaintiff.

Elias Hansen, of Salt Lake City, Stuart P. Dobbs, of Ogden, and Geo. S. Ballif, and I. E. Brockbank, both of Provo, for defendants.

Badger Rich & Rich, of Salt Lake City, for intervener.

WOLFE Justice. HANSON, J., LARSON, Justice, concurring. MOFFAT Justice, FOLLAND, Chief Justice, dissenting.

OPINION

WOLFE, Justice.

The issues raised in this case arise from the pleadings in a suit for a writ of prohibition by the plaintiff to prevent the defendant commissioners of Provo City from proceeding with a written contract to sell the city's bonds for the purpose of acquiring or constructing an electric light and power system for the city. The General Contractors Association of Utah was permitted to intervene in support of the writ of prohibition on the ground that the required statutory provisions regarding the advertising and letting of bids had not been followed. Walter P. Whitehead, one of the commissioners of Provo City, who was opposed to the building or acquisition of the power plant, answered supporting the position of the power company.

The facts preceding the suing out of a writ of prohibition and certiorari are as follows: On August 11, 1936, two initiative petitions were filed with I. G. Bench, city recorder of Provo City (hence the joining of Mr. Bench in the petition) containing the appropriate number of signatures and properly verified. One of these petitions asked that the "Bond Ordinance" be referred, the other that the "Construction Ordinance" be referred. As provided by the initiative and referendum law, the ordinances proposed by the initiators were considered by the commissioners and by a two to one vote--Commissioner Whitehead voting in the negative--were ordained. The city commission, however, went further than this. It passed an ordinance to refer to the people of the city for their decision these bond and construction ordinances. Provision is made for such reference in the initiative and referendum law, Rev. St. 1933, 25-10-1 et seq. A special election was called for and held on October 13, 1936. The ordinances were voted on separately at said election after much discussion of them from the rostrum and among the people, through the press and by the circulation of literature. The approval of the ordinances was vigorously opposed by the plaintiff. Both ordinances were approved by narrow margins.

Briefly, the bond ordinance provided for the sale to John Nuveen & Co. of Chicago of electric power and light bonds of Provo City in the amount of $ 850,000 par value, to bear interest at 4 1/2 per cent and to be sold at par and accrued interest. The defendants contend these bonds are what are known as special revenue bonds, i. e., that only the income from the plant to be constructed from the proceeds of the bonds can be looked to for the payment of their principal and interest. Plaintiff contends that certain provisions in the contract indirectly make them a charge on the general revenue. On resolution of this issue depends the finding as to whether the special fund doctrine hereinafter considered applies if we decide to adhere to that doctrine. These provisions will be found discussed and considered in detail in the opinion of Mr. Justice LARSON.

The so-called construction ordinance provides for a contract between Provo City and the Ulen Contracting Corporation by which the latter agrees to draw plans and specifications to be approved by the city engineer for the proposed electric light and generating plant and distributing system, to supervise and direct the purchase of the necessary materials and construction of the proposed power plant and distributing system. Other and more detailed provisions of this contract are discussed and considered in the opinion of Mr. Justice LARSON. Naturally the money to pay for the construction is to come from the proceeds of the sale of the bonds or the Ulen Corporation is to take the bonds on account of payment.

It should be noted that both ordinances simply provided for an acceptance of proposals by Nuveen & Co. and the Ulen Corporation. They did not submit contracts conditionally executed to become absolute on the approval of the people. It appears to us it is important to keep this fact in mind when the opinion of Mr. Justice LARSON is read.

It is admitted that the cost of construction of this plant and distributing system could not be paid out of the anticipated general revenues which for 1936 were approximately $ 171,000. It is also admitted that, if the city took on an obligation to pay the $ 850,000 bond issue at all events, it would exceed its constitutional debt limit.

Many of the steps taken by the commissioners coincided with the procedure outlined by the so-called Granger Act, chapter 22, Laws of Utah, Second Special Session 1933. But at least two of the main provisions specified by the Granger Act were not followed, to wit, that of section 3, wherein it was required to obtain a comprehensive estimate of a competent engineer, approved by the state engineer, and that of requiring the special revenue bonds to be sold on bid only after advertisement.

The bond ordinance provides for the sale to John Nuveen & Co. of electric power and light revenue bonds of Provo City to bear interest at 4 1/2 per cent per annum. Certain provisions pertaining to how the principal and interest of these bonds were to be paid will be set out hereunder for the reason that there is a dispute as to whether they are in reality special revenue bonds. It is the defendants' contention that they are special revenue bonds, whilst plaintiff contends that they are, at least indirectly, a charge on the general funds and thus are taken out of the category of special revenue bonds.

The construction ordinance provides for a contract between Provo City and the Ulen Contracting Corporation. The latter agrees to draw plans and specifications to be approved by the city engineer for the proposed electric light plant and distributing system and for the purchase of necessary materials and construction of the plant from the proceeds derived from the sale of bonds. The purchase of materials and the construction are subject to the control of the city commission. The amount payable to the Ulen Corporation for services to be rendered is $ 65,000. In the event the bonds are not sold, the Ulen Corporation is given an option to accept the bonds in payment for its services and the cost of construction of the electric lighting plant and distribution system. For a more detailed recital of the provisions of this contract reference is made to the opinion of Mr. Justice LARSON.

The day following the election, plaintiff applied to this court for a writ prohibiting the defendants from further proceeding in the matter of executing or disposing of the proposed bonds or of proceeding with the Ulen contract. The alternative writ of prohibition was granted with a writ of certiorari in assistance thereof. The ultimate question for this court to decide is as to whether the writ of prohibition shall be dismissed or made permanent. Plaintiff sets out clearly the five propositions which it relies upon in urging that the writ be made permanent. These propositions are, without their subdivisions stated, as follows:

"I. The so-called special fund doctrine is wrong and should not be followed or adhered to in this State.

"II. The contracts and ordinance are void even under the special fund doctrine.

"III. If we are to follow the special fund doctrine in this State, the legislature has prescribed the only method by which cities may embark upon undertakings under it, which method has not been followed by the defendants in this instance.

"IV. That the defendants have not followed the other statutory method of incurring bonded indebtedness, or any other statutory requirements with reference to municipal construction.

"V. The legislature in this State has affirmatively declared the public policy of this State with reference to public utilities and public improvements. The special fund doctrine violates these principles of public policy and if adopted would judicially destroy valid legislative declarations."

The General Contractors Association of Utah, permitted to intervene, places its opposition to both purported ordinances on the ground that they are void, and sets out many reasons in support of its contention.

We shall consider in this opinion only questions I, III, and IV propounded by plaintiff. Mr. Justice LARSON in his concurring opinion has so ably covered the other questions raised by plaintiff and intervener that we see no need of touching on them here, and adopt the conclusions, in so far as hereafter qualified, reached by him in regard thereto.

We state at the outset that we adhere to the so-called special fund doctrine. That would ordinarily end any further consideration of that principle in this case, but because of plaintiff's contention that the so-called Granger Act chapter 22, Laws of Utah Second Special Session 1933, provides the only way in which electric...