Van Eaton v. Town of Sidney

• Citation: 231 N.W. 475,211 Iowa 986
• Decision Date: 23 June 1930
• Docket Number: 40022
• Parties: J. J. VAN EATON et al., Appellees, v. TOWN OF SIDNEY et al., Appellants
• Court: United States State Supreme Court of Iowa

231 N.W. 475

211 Iowa 986

J. J. VAN EATON et al., Appellees, v. TOWN OF SIDNEY et al., Appellants

No. 40022

Supreme Court of Iowa, Des Moines

June 23, 1930

REHEARING DENIED FEBRUARY 10, 1931.

Appeal from Fremont District Court.--W. C. RATCLIFF, Judge.

An action to set aside and declare void a contract between the town of Sidney and Fairbanks Morse & Company for the purchase of engines and machinery for an electric light plant, and asking that the town and its officers be enjoined from issuing pledge orders payable out of the net revenue of said plant in payment therefor, under said contract. From a decree in favor of the plaintiffs the defendants appeal.

Affirmed.

Thornell Thornell & Adams and Clark, Byers & Brunk, for appellants.

Cook & Cook, George A. Lee, and Tinley, Mitchell, Ross & Mitchell for appellees.

ALBERT, J. EVANS, FAVILLE, DE GRAFF, KINDIG, WAGNER, and GRIMM, JJ., concur. STEVENS, J., takes no part.

OPINION

ALBERT, J.

At an election duly held on January 9, 1928 (all preceding requirements of the statute having been complied with), a proposition was submitted to the voters of the town of Sidney, Iowa, the substance of which was, Shall the town of Sidney establish, erect, extend, purchase, maintain, and operate an electric light plant, providing and on condition that the funds and money necessary therefor shall not be raised by a bond issue or by taxes or by any kind of assessment or levy against the property taxable in and by the town of Sidney? And further providing that the same should be financed by some company, corporation, or concern other than the town of Sidney, on the express agreement and understanding that the town should not be liable or obligated in any way for such funds, except that it should pledge, as security for the payment of said funds and moneys, all transmission lines, poles, the power plant, and all apparatus, engines, and equipment, and should also pledge, as security for payment of said funds and moneys, the net income from said plant and from the sale of electricity, after the payment of all expenses, repairs, and upkeep, and the setting aside of a fund of at least $ 500 a year for maintenance. The result of this election was a vote of 194 in favor of said proposition and 47 against.

On February 10th following, the town council passed a resolution to enter into a contract with the Fairbanks Morse Company, to purchase certain machinery for a municipal electric light and power plant; and the town then proposed to construct and maintain a plant sufficient to meet the needs of the town, consisting of a site, plant, building, and certain machinery and equipment necessary to the proper construction and operation of said electric light and power plant and distribution system, as per certain specifications prepared by the Municipal Utilities Company of Des Moines, Iowa.

On February 10, 1928, the town of Sidney entered into a written contract with Fairbanks Morse Company to purchase certain engines and electrical equipment in the sum of $ 53,460, to be paid in 120 pledge orders, payable in consecutive monthly payments, said orders varying in amount. The contract further provided that such orders were not to be the general obligations of the town, but special obligations, payable only from the revenues of the light and power plant, as provided in appropriation ordinance of said town of Sidney, said orders to bear 6 per cent interest.

It further provided that the title and ownership to the machinery and material therein specified should remain in the company until final payment had been made, and, in the event that pledge orders were taken at any time, representing deferred payments for any sum that might be due, the title to the machinery and material should not pass until said pledge orders so given, or extensions thereof, were fully paid in money and satisfied, and, in default of any payments, the Fairbanks Morse Company "shall have the right to take possession of said machinery or materials, wherever found, without process of law * * * and shall sell the same and account for the proceeds thereof and retain so much of the proceeds of such sale as are necessary to satisfy any balance due * * * together with cost of such removal and sale, and any excess shall be paid to the purchaser." It further provided that the purchaser should pay all freight or other charges on said machinery, and should insure such machinery against damages by fire in insurance companies satisfactory to the Fairbanks Morse Company, and continue such insurance in force until the amount due should be fully paid, the loss, if any, being made payable to the Fairbanks Morse Company. In case of failure to procure such insurance, the Fairbanks Morse Company was entitled to obtain the same at the town's expense. The town was to make good any loss to the Fairbanks Morse Company by reason of any damages to machinery or material caused by fire, carelessness, or other injuries.

On February 20, 1928, the town of Sidney passed an ordinance, the material part of which is that, to pay the interest on and the principal of a series of orders to be issued to the said Fairbanks Morse Company of Omaha, Nebraska, in payment for machinery, there is appropriated and set aside monthly from all sums of money received from the operation of the electric light plant of said town, when completed, over and above the actual operating expenses thereof, such sums of money as will create a fund sufficient to pay the interest on and the principal of said orders. Such fund shall be used to pay the interest on and the principal of said orders, monthly, as same mature, and for no other purpose. The aforesaid orders and interest thereon are not a general obligation of the said town, but a special obligation payable only out of said fund created from the earnings of said plant, which are hereby pledged as security for the payment of said obligations.

The lower court held this contract void, and granted the prayer of plaintiffs' petition asking that the defendants be enjoined from issuing these pledge orders.

The first question urged on our attention is that this contract is invalid because there was no power in the city to make such a contract.

Regardless of what the law may be in other states, it is settled in this state that a municipality has no inherent power to make a contract of this kind. A municipality is wholly a creature of the legislature, and possesses only such powers as are conferred upon it by the legislature: that is, (1) such powers as are granted in express words; or (2) those necessarily or fairly implied in or incident to the powers expressly conferred; or (3) those necessarily essential to the identical objects and purposes of the corporation, as by statute provided, and not those which are simply convenient. 1 Dillon on Municipal Corporations (5th Ed.), Section 237; Clark v. City of Des Moines, 19 Iowa 199; City of Clinton v. Cedar Rapids & M. R. R. Co., 24 Iowa 455; Heins v. Lincoln, 102 Iowa 69, 71 N.W. 189; State ex rel. White v. Barker, 116 Iowa 96, 89 N.W. 204; State ex rel. County Attorney v. Des Moines C. R. Co., 159 Iowa 259, 140 N.W. 437; Merrill v. Monticello, 138 U.S. 673 (34 L.Ed. 1069, 11 S.Ct. 441).

In City of Clinton v. Cedar Rapids & M. R. R. Co., supra, Judge Dillon wrote:

"Municipal corporations owe their origin to, and derive their powers and rights wholly from, the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so it may destroy. If it may destroy, it may abridge and control. Unless there is some constitutional limitation on the right, the legislature might, by a single act, if we can suppose it capable of so great a folly and so great a wrong, sweep from existence all of the municipal corporations in the state, and the corporation could not prevent it. We know of no limitation on the right so far as the corporations themselves are concerned. They are, so to phrase it, the mere tenants at will of the legislature. This plenary power on the part of the legislature over public corporations, saving vested rights of property and of creditors, is a doctrine so well settled that it is unnecessary to refer to more than a few cases asserting it."

In State ex rel. County Attorney v. Des Moines C. R. Co., supra, this court cited Grand Rapids E. L. & P. Co. v. Grand Rapids E. E. L. & F. G. Co., 33 F. 659, where it is said:

"It is too well settled to need the citation of authorities in its support that municipal corporations, which are mere political agencies of the government, forming but parts of the machinery employed in carrying on the affairs of the state, possess and can exercise only such powers as are 'granted in express words, or those necessarily or fairly implied in or incident to the powers expressly conferred, or those essential to the declared objects and purposes of the corporations, not simply convenient, but indispensable.

When the legislature attempts to make a grant of power to a municipality and the same is doubtful or uncertain, all doubts and uncertainties are resolved against the municipality. Clark v. City of Des Moines, supra. All powers conferred are to be strictly construed, and in case of reasonable doubt, the power should be denied. Clark, Dodge & Co. v. City of Davenport, 14 Iowa 494; Clark v. City of Des Moines, supra; City of Keokuk v. Scroggs, 39 Iowa 447; Brooks v Incorporated Town of Brooklyn, 146 Iowa 136, 124 N.W. 868; State ex rel. County Attorney v. Des Moines C. R. Co., supra; City of Chicago v. M. & M. Hotel Co., 248 Ill. 264 (93 N.E. 753); City of South Bend v. Chicago, S. B. & N. I. R. Co., 179 Ind. 455 (101 N.E. 628); People ex rel. Iddings v. Dreher, 302 Ill. 50 (134 N.E. 22); People ex rel....