Wapsie Power & Light Co. v. City of Tipton

• Decision Date: 18 May 1923
• Docket Number: No. 35135.,35135.
• Citation: 193 N.W. 643,197 Iowa 996
• Parties: WAPSIE POWER & LIGHT CO. v. CITY OF TIPTON, CEDAR COUNTY.
• Court: Iowa Supreme Court

197 Iowa 996

193 N.W. 643

WAPSIE POWER & LIGHT CO.

v.CITY OF TIPTON, CEDAR COUNTY.

No. 35135.

Supreme Court of Iowa.

May 18, 1923.

Appeal from District Court, Cedar County; F. O. Ellison, Judge.

Action in equity by a corporation engaged in the manufacture of electric current, to recover from a municipal corporation an amount claimed to be due for electric current furnished to said corporation and to fix a rate for the current to be furnished in the future. The relief prayed for was granted, except an allowance of interest. The defendant appeals from the decree, and the plaintiff appeals from so much thereof as denies interest for the full amount asked. The plaintiff is designated as the appellee, and the defendant as the appellant. The facts are stated in the opinion. Reversed.

Evans and De Graff, JJ., dissenting.J. C. France and Hamiel & Mather, all of Tipton, for appellant.

Chas. W. Kepler & Son, of Mt. Vernon, C. O. Boling, of Tipton, and Johnson, Donnelly & Lynch, of Cedar Rapids, for appellee.

FAVILLE, J.

On or about January 5, 1900, certain individuals were granted a franchise by the appellant to maintain and operate an electric light plant in the city of Tipton for the purpose of supplying to the city and its citizens electric light for the period of 25 years from and after said date. By the terms of the ordinance granting said franchise, the rights therein conferred were granted to the individuals named in said ordinance and “their associates, successors and assigns, incorporated or otherwise.” The said franchise ordinance provided that the city reserved the right, on January 1, 1911, or on January 1, 1916, to purchase “all the plants, works, machines, pipes, fixtures, buildings and material on hand and property in and belonging to the grantees, their associates, successors and assigns.” After said franchise had been granted to the said individuals, a corporation was organized, known as the Tipton Light & Heating Company, which succeeded to all of the rights acquired by said individuals under said franchise. Said corporation thereafter operated an electric light plant in the appellant city and furnished electric current to the inhabitants of said city, under said franchise. Some time prior to June 1, 1913, the Tipton Light & Heating Company entered into a written contract with the appellee, whereby the appellee agreed to sell to the Tipton Light & Heating Company all current required by it in the transaction of its electric light, power, and heating business, for a period of 10 years from and after June 1, 1913. The said contract provided that the light and heating company should pay for said electric current three cents per kilowatt hour, measured at 224 volts, and also provided that either party to said contract could ask for a readjustment of rates or prices at the end of the first 5-year period, provided due notice of an intention to ask for such readjustment had been given six months prior to the end of such period. The parties operated under said contract, the appellee furnishing electric current to the corporation as provided by said contract, and the latter distributing the current to the inhabitants of the city.

As provided by the terms of the franchise granting the city an option to purchase and acquire the property and plant of the light and heating company, on or about January 1, 1916, the city exercised said option and purchased the plant and equipment of the said corporation and proceeded thereafter to operate said plant as a municipally owned plant. The appellee, after the city had so taken over the plant of the corporation, continued to furnish electric current to the said city as it had previously furnished the same to the corporation under its said contract.

The city has paid to the appellee the contract price for all current that has been furnished to it by the appellee. It is the contention of the appellee that by reason of changed economic conditions the rates now provided in said contract are unremunerative and confiscatory, and appellee seeks, by this action, to recover from the appellant a fair, reasonable, remunerative, and compensatory rate for the electric current so furnished. It is stipulated that the rate fixed by the said contract “has been since December 1, 1918, at least one and thirty-five hundredths cents per kilowatt hour less than a fair, adequate and reasonable rate.”

The court, by the decree, allowed the appellee to recover the difference between the contract rate which had been paid by the city and the rate so stipulated as a fair and remunerative rate for the amount of current that had been furnished to the city from and after December 1, 1918, with interest thereon at 6 per cent. from June 1, 1922, and provided that the rate so fixed should continue until otherwise changed by the parties, or by order of court, or other proper authority.

The question of the purchase of the said plant from the private corporation that owned the same was duly submitted to the electors of the said city at a proper election, and the purchase of said plant was duly authorized by said electors.

The questions presented on this appeal, upon a last analysis, resolve themselves into two propositions: First, did the city legally purchase the rights of the private corporation in the contract which it had with the appellee; and, second, if the city did so acquire a right in said contract, can it, as a municipal corporation, enforce said contract against the appellee according to its terms, regardless of whether or not the rates fixed therein for electric current are compensatory and remunerative to the appellee.

I. The original franchise ordinance gave to the appellant the option to purchase from the light and heating company “all the plants, works, machines, pipes, fixtures, buildings and material on hand and property in and belonging to the grantees,” and their assigns under said franchise. The city exercised its option and purchased and took over all the property specified in the said ordinance. Among the things that the said corporation had “property in” and which “belonged to” it was the contract in question. It was a very material portion of the assets of the corporation which the city was acquiring by its purchase. At that time the private corporation within the city of Tipton was a going concern, holding its franchise from the city subject to the right of the city to acquire all of its property by the option provided for in the ordinance.

The election submitted to the electors the following question: “Shall the city of Tipton purchase and operate an electric light and power plant?” The city served notice on the light and heating company of its intention “to take over their entire works and property used in furnishing electric light to the city and its inhabitants under the franchise.” Appraisers were appointed, as provided in the ordinance, “to fix the value of all property” of the corporation.

After the purchase had been so made the appellee continued to furnish electric current to the city in precisely the same manner it had previously furnished it to the light and heating company, and recognized the original contract as in full force and effect in the hands of the city, and accepted payment for electric current at the contract rate. The city likewise recognized the contract as in full force and accepted and paid for the current furnished thereunder. It is obvious that the contract between appellee and the light and heating company was one of the valuable assets, and an important part of the “property” which the city was acquiring from said company. The purchase of the plant as it then existed, without the contract with the appellee and the right to secure the current which the contract required the appellee to furnish, would have been quite a futile proceeding on the part of the city. The city undertook to acquire all the “property” of the light and heating company.

[1] The term “property” is said to be nomen generalissimum and to include everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable value, or which goes to make up one's wealth or estate.

At this point we hold that the appellant purchased all the interest of the light and heating company in the contract which it had with the appellee, and in so far as it legally could, acquired all the rights which the said company had under said contract.

[2] II. It is further insisted that the specific question of purchasing the contract in question was not in terms submitted to the electors for their determination. The statute does not require that the question of acquiring an interest in a contract of the character of the one in question shall be submitted to a vote of the electors of the city. The question of purchasing the electric light plant was properly submitted. It was not necessary that the question of purchasing the contract in question, as a part of the property of said plant, should be submitted to the voters as a distinct and separate proposition.

If the city had any authority under the statutes to acquire such a contract, it did not need to submit the question of its purchase to the electors, separate and apart from the question of acquiring the plant to which it belonged.

III. Assuming, as we must, that the appellant legally became a party to the contract with the appellee, whereby the city undertook to purchase from the said corporation electric current for sale to its inhabitants, we then meet the crucial question in the case as to whether or not a contract between a municipality and a private corporation, whereby the latter undertakes to furnish to the municipality electric current at a fixed rate and for a given term of years, is valid and binding upon the parties thereto.

It is to be noticed that the contract as originally made was a contract between two private corporations....