Title: Anderson v. City of Hankinson

State: north-dakota

Issuer: North Dakota Supreme Court

Document:

157 N.W.2d 833 (1968) Roy P. ANDERSON, in Behalf of himself and all other persons similarly situated who come and join in this action, Plaintiff and Respondent, v. CITY OF HANKINSON, North Dakota, a body corporate, Hankinson City Council of Hankinson, North Dakota, and Odin J. Wold, as County Auditor of Richland County, North Dakota, Defendants, City of Hankinson, North Dakota, a body corporate, and Hankinson City Council of Hankinson, North Dakota, Appellants. Civ. No. 8400. Supreme Court of North Dakota. April 3, 1968. *834 Pringle, Herigstad, Meschke, Loder, Mahoney & Purdy, Minot, for appellants. Bayard Lewis, Wahpeton, for respondents. EUGENE A. BURDICK, District Judge. This is a civil action brought by the plaintiff and respondent Roy P. Anderson in behalf of himself and all other persons similarly situated,[1] as a class action against the defendants and appellants, City of Hankinson, North Dakota, a body corporate, hereinafter referred to as the City, the City Council of Hankinson, and Odin J. Wold as County Auditor of Richland County, to restrain and enjoin the defendants from: The District Court of Richland County issued a temporary restraining order August 16, 1966, a temporary injunction October 14, 1966, and entered judgment for a permanent injunction January 26, 1967, granting the relief requested by the plaintiff. The defendants, City of Hankinson and Hankinson City Council, appealed from the judgment and demanded a trial de novo in this court. On October 7, 1963, the City Council of Hankinson, conformable to the Revenue Bond Law Chapter 40-35, N.D.C.C., adopted a resolution of necessity in which it determined that it was "* * * necessary and expedient for the City of Hankinson to erect a new electric distribution system in the City * * * and to operate such system"; and "* * * to borrow money and issue the negotiable revenue bonds of the City in the amount of not to exceed $190,000 for the purpose of providing money * * *" for such undertaking. The resolution also directed that the question of issuing such bonds be submitted to a vote of the electors of the City as required by Section 40-35-06, N.D.C.C. The question was submitted to the electors of the City and was approved by the required majority of the qualified electors voting on the question. *835 Thereupon, officials of the City negotiated with the R.S.R. Rural Electric Cooperative of Milnor, Central Power Cooperative of Velva, the Bureau of Reclamation of the Department of the Interior, and Otter Tail Power Company, for the purchase and delivery of electrical energy to the City. Otter Tail Power Company owns, maintains and operates an electric distribution system for the sale of electric energy at retail in the City and owns and maintains a transmission line from Forman, North Dakota, to Hankinson. Forman is 39 miles from Hankinson. The Bureau of Reclamation, R.S.R. Rural Electric Cooperative and Central Power Cooperative have electric transmission terminals at Forman, but no transmission lines to Hankinson, and all are willing to sell electric energy to the City at Forman, provided the City makes its own arrangements for wheeling the power from Forman to Hankinson. In negotiations with Otter Tail Power Company, the City requested the Company (1) to wheel electric power supplied by another over its transmission lines from Forman to Hankinson, or (2) to provide electric energy at wholesale cost to the City. The Company declined both alternatives. The revenue bonds proposed to be issued by the City have no market until prospective purchasers can be reasonably assured that the City has a dependable source of electric energy and that facilities are available to deliver it to the City's distribution system. In order to implement the resolution of necessity and to render saleable the proposed revenue bonds, the City Council employed attorney Alfred A. Thompson as special counsel, effective February 13, 1965, to assist the City in obtaining a source of electrical transmission or electrical power, and specifically to compel Otter Tail Power Company to provide transmission service to the City or in the alternative to sell at wholesale electric power to the City. The City had no independent source of electric power of its own. Acting in behalf of the City, attorney Thompson filed a complaint with the Public Service Commission of North Dakota, for the purpose of obtaining an order from the Commission requiring the respondent Otter Tail Power Company to provide wheeling service at a reasonable rate over its transmission lines extending from Forman to Hankinson. Upon hearing this complaint, the Public Service Commission, on December 30, 1966, issued its order declining to entertain the complaint upon the ground that it lacked jurisdiction over the question, sustaining the respondent's contention that the relief sought was a matter for determination by the Federal Power Commission. No appeal was taken from this order, but there is some indication in the record that the Public Service Commission intended to take further testimony in the matter. The record also shows that the City has initiated proceedings before the Federal Power Commission seeking the same relief the City sought from the Public Service Commission. The status of these various remedial proceedings is obscure in the light of the fact that attorney Thompson construed the restraining and injunctional orders of the District Court as a prohibition against the City "from doing anything further in its search for municipal power", and as terminating his service as special counsel. Following the approval by the voters of the resolution of necessity, the City expended from its general funds for "Feasibility Municipal Power", $1,814.63 for the year ending June 30, 1964, and $2,336.57 for the year ending June 30, 1965; budgeted $3,000.00 for the year ending June 30, 1966, and proposed a budget of $5,000.00 for the year ending June 30, 1967; all of which moneys were expended or to be expended "for the purpose of forcing Otter Tail Power Company, a corporation, either to sell to the City of Hankinson, North Dakota, power at wholesale or to wheel power from a source outside of said city to the City of Hankinson, which said city intends to purchase from another source." The plaintiff contends *836 and the trial court held that taxes, levies and expenditures and those proposed for such purposes are beyond the powers of the governing body of the City, and in particular, that they violate the provisions of Section 40-35-03, N.D.C.C. Section 40-35-03, N.D.C.C., so far as pertinent, reads as follows: Section 40-35-02, N.D.C.C., so far as pertinent, reads as follows: The respondent contends that the moneys expended and to be expended by the City from its general funds for engineering services and special legal services in connection with the proposed undertaking violates the last sentence of Section 40-35-03, N.D.C.C. in that (1) the obligation to pay for such services constitutes the incurring of a "debt on the general credit of the municipality" and (2) such items are includable in the cost of the undertaking under the provisions of Section 40-35-05, N.D.C.C. to be paid from the proceeds of the sale of revenue bonds. Section 40-35-05, N.D.C.C., reads as follows: The expenditures made and to be made by the City, to which the respondents object, were not within the purview of the Revenue Bond Law, Chapter 40-35, N.D.C. C., for the reason that the undertaking proposed and authorized was limited to the erection and operation of an electrical distribution system in the municipality and did not involve the generation, production, or transmission of electric energy. Accordingly, the expenditures in question do not in this case constitute "debt on the general credit of the municipality" within the prohibitory provision of the last clause of Section 40-35-03, N.D.C.C., and are not a part of the cost of the undertaking within the purview of Section 40-35-05, N.D.C.C. Section 40-05-05, N.D.C.C., (before amendment in 1967) governs the expenditures under consideration. This section reads as follows: This general power conferred upon the City, pursuant to Section 40-05-05, N. D.C.C., (amended by Chapter 323 S.L.1967 without change of powers) necessarily includes the implied power to engage preliminary engineering services and legal services to explore the ultimate feasibility of the undertaking, and in particular the legal duty of Otter Tail Power Company, a public utility, to provide as a common carrier transmission service of other electric energy available to the City in the area or to furnish electric energy at wholesale cost to the municipality. Fradet v. City of Southwest Fargo, 79 N.D. 799, 59 N.W.2d 871; Megarry Bros. v. City of St. Thomas, 66 N.W.2d 704 (N.D.). The official actions taken by the board in authorizing the expenditures in question from the general funds of the *838 City were proper exercises of this contractual power. In considering the ultimate feasibility of the undertaking, the City deemed it appropriate to engage special counsel to explore the legal duty of Otter Tail Power Company to provide as a common carrier transmission service to the City or to furnish electric energy at wholesale cost to the City. Appellants contend, inter alia, that this was an abuse of discretion. Section 40-20-02, N.D.C.C., reads as follows: Clearly, under this section the City had express authority to employ special counsel. In view of the developments in the proceedings instituted by the special counsel in behalf of the City, the decision to appoint special counsel was clearly not an abuse of discretion. The City is entitled to have determined the unresolved legal issues presented and to pursue every remedy available to it. Whether the City will ultimately prevail is wholly beside the point. If the City is successful in its efforts either to require Otter Tail Power Company to render common carrier service or to furnish electric energy at wholesale cost to the City, the objectives of its resolution of necessity will likely be achieved. The permanent injunction, of course, effectively prevents the City from implementing its resolution and must be dissolved. The Judgment of the District Court is reversed, the permanent injunction is dissolved, and the action is dismissed. TEIGEN, C. J., and STRUTZ, ERICKSTAD and PAULSON, JJ., concur. KNUDSON, J., deeming himself disqualified, did not participate; Honorable EUGENE A. BURDICK, one of the Judges of the Fifth Judicial District, sitting in his stead. [1] Following the commencement of the action, 32 other taxpayers of the City of Hankinson joined in the action as parties plaintiff.