Voss v. Waterloo Water Company

• Decision Date: 03 June 1904
• Docket Number: 19,918
• Citation: 71 N.E. 208,163 Ind. 69
• Parties: Voss et al. v. Waterloo Water Company et al
• Court: Indiana Supreme Court

71 N.E. 208

163 Ind. 69

Voss et al. v. Waterloo Water Company et al

No. 19,918

Supreme Court of Indiana

June 3, 1904

From DeKalb Circuit Court; W. M. Brown, Special Judge.

Action by Charles Voss and others against the Waterloo Water Company and others for an injunction. From a decree for defendants plaintiffs appeal.

Reversed.

C. M Phillips and P. V. Hoffman, for appellants.

W. H Leas, Allen Zollars, F. E. Zollars and C. H. Worden, for appellees.

OPINION

Monks, J.

Appellants, resident taxpayers of the town of Waterloo, brought this action to enjoin the board of trustees of said town from issuing the bonds of said town to pay for the stock in the Waterloo Water Company, and all appellees from taking any steps to establish or construct a water and light plant in said town, and from making any contracts concerning the same. A trial of said cause resulted in a special finding and conclusions of law thereon and final judgment in favor of appellees.

It appears from this special finding: That the assessed valuation of the property in the town of Waterloo for "state and county taxes" in 1901 was $ 385,000; the population was 1,244, and the indebtedness of said town was $ 1,600. Said town could not construct a water-works and electric light plant for the town, for the reason that said town had not sufficient money for that purpose, and could not borrow the money to construct the same without creating an indebtedness exceeding the constitutional limit, all of which was known to appellees; that the board of trustees of the town of Waterloo, desiring to secure for said town and the inhabitants thereof a supply of water and electric light for lighting the streets of said town, consulted with the president of the Olds Construction Company of Ft. Wayne, Indiana, which company was engaged in the business of erecting water and light plants for cities and towns and private corporations, in regard to the way to procure the same. He represented to said board of trustees that a combined water and light plant could be put up for said town for about $ 21,000, using the grounds and buildings of the town hall and fire engine room belonging to said town for the location of said plant. He also suggested to said board that a company be organized in which the town should take stock to an amount not exceeding the constitutional limit; that said company should issue its negotiable bonds in the sum of $ 17,000, with six per cent. interest, running a series of years; that said town should levy and collect electric light and water-works taxes as provided by law, and pay the same to a trustee for the bondholders, and that a part of the moneys so paid to such trustee should be used in paying the interest on said bonds, and the balance should constitute a sinking fund for the payment of said bonds; that by such stock subscription and the payment of said bonds by the application of said taxes to interest and sinking fund the town would eventually become the owner of said plant. Said board of trustees instructed the president of said construction company to have prepared a set of plans and specifications for such water and light plant as might be suited to the needs of said town, for which the town was to pay him $ 100. Said plans and specifications were afterwards prepared by the president of said construction company, and approved by said board of trustees, and filed in the office of the clerk of said town. No notice was given in any newspaper of the letting of the contract to construct said plant, but on September 2, 1901, the clerk of said town, pursuant to the direction of said board of trustees, sent out to certain companies, firms, and persons engaged in the construction of water and light plants for towns the following which had been prepared by the president of said construction company: "Notice. The town of Waterloo, Indiana, desires to secure the erection of a water-works and electric light plant, and to that end will grant a franchise to the party or parties whose proposition seems to the town board to be most favorable to the interest of the town. In order that all proposals may be on the same basis as to size, kind, quality and quantity of material, machinery, etc., the town board has adopted plans and specifications which are on file at the office of the town clerk, Waterloo, Indiana. Each proposal must state specifically the cost of the plant completed ready for operation in accordance with the plans and specifications and must be accompanied by a general outline of the franchise required by the bidder. The franchise must provide for the purchase or lease of the plant by the town at any time after its completion. Propositions must be in the hands of the clerk before 7 o'clock Monday evening, September 16, 1901, at which time the town board will meet to consider and take action upon them. All propositions must be accompanied by a certified check in the sum of $ 500, payable to the order of the town treasurer to be forfeited to the town of Waterloo in case the bidder fails or refuses promptly to submit a franchise and proceed with the erection of the plant. Stephen A. Bowman, town clerk."

On September 16, 1901, said board of trustees received two bids for the construction of said plant, and said board awarded the contract to the Olds Construction Company, whose bid was as follows: "Ft. Wayne, Indiana, September 16, 1901. To the Honorable Board of Trustees, Town of Waterloo, Indiana. Gentlemen: If granted a franchise to be drawn in the form usual in such cases, we will construct in the town of Waterloo, a water-works and electric light plant in strict accordance with the plans and specifications now on file in the office of the town clerk, and under your supervision and to your approval, for the sum of $ 21,795. It is understood and agreed that the town board shall lease or sell sufficient ground for the boiler house and space in the town hall for the machinery as shown in the drawings now on file. And the town shall rent not less than fourteen hydrants and twenty-three arc lights for the term and at the price stipulated in the franchise. The town shall also subscribe $ 6,000 to the capital stock of the company which shall come into possession of the plant. Very truly yours." Signed by the Olds Construction Company.

At the time of awarding said contract said board of trustees directed the president of said construction company to have a company incorporated and ordinances prepared for the purpose of carrying out the plans he had explained to said board, as heretofore stated. Thereafter, said president caused duplicate articles of incorporation of the Waterloo Water Company to be prepared, signed, acknowledged, and filed as provided in § 5051 Burns 1901, § 3851 R. S. 1881 and Horner 1901. The capital stock was fixed at the sum of $ 25,000, divided into 1,000 shares of $ 25 each. The object of said corporation, as set forth in the articles of association, was to "manufacture power to furnish to the town of Waterloo, DeKalb county, in the State of Indiana, and its citizens, good and wholesome water; also electric light for both public and private use, and to own and hold the machinery, lands, tenements, easements, franchises, conduits, mains, plants, posts, poles, wires, and all other necessary appliances for supplying the same to said town." Said articles of association were so filed on September 20, 1901, and were signed and acknowledged by three persons who were named as the directors of said corporation for the first year, and each, immediately after filing said articles, subscribed for one share of stock in said corporation. One of the signers of said articles of association was, when he signed the same, and still is, a director, the president and general manager of the Olds Construction Company, and one of said signers was then, and ever since has been, a director and the vice-president of said construction company, and the other was then, and still is, the attorney for said construction company. On September 20, 1901, said board of trustees passed three ordinances, numbered five, six, and seven, to carry out the plan outlined by the president of said construction company. The first ordinance, known as "ordinance No. 5," granted to the Waterloo Water Company a franchise for fifty years "to erect, establish, construct, maintain, and operate within said town a system of water-works, according to such plans and specifications as may be adopted by said water company with the approval of the board of trustees of said town," and to use the streets, alleys, parks, and public grounds of said town for the purpose of constructing, operating, and maintaining within said town said system of water-works for furnishing water to said town and its inhabitants, provided that the construction, erection, equipment, and operation of said system of water-works shall be under the supervision of the board of trustees of said town and its engineer, or any agent appointed by it; provided further that such grant if accepted should be irrevocable, subject only to the right of said town to purchase said system of water-works at any time at a price not to exceed the cost of construction and cost of additions thereto. In case the Waterloo Water Company, its successors or assigns, shall have issued any bonds for the construction, extension, or equipment of said system of water-works, and secured the same by mortgage on said plant and franchise, the lien of such mortgage shall not be affected by such purchase, but if said town shall become the owner of said system of water-works by purchase, as provided in this ordinance, the right or title of said town shall be subject to full payment of said bonds and the lien of said mortgage, and also to the payment of...