Case Name: SEBEWAING INDUSTRIES, INC., v. VILLAGE OF SEBEWAING
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1953-10-05
Citations: 337 Mich. 530
Docket Number: Calendar No. 45,762
Parties: SEBEWAING INDUSTRIES, INC., v. VILLAGE OF SEBEWAING.
Judges: Butzel, Carr, Bushnell, Sharpe, Boyles, and Reid, JJ., concurred with Dethmers, C. J.
Reporter: Michigan Reports
Volume: 337
Pages: 530–549

Head Matter:
SEBEWAING INDUSTRIES, INC., v. VILLAGE OF SEBEWAING.
1. Municipal Corporations—Revenue Certificates—Debt Limitations—Franchises—Foreclosure.
Proposed revenue certificates, to be issued by a village subject to the general village act without submission to voters for approval, which involved no franchise, were not secured upon the property nor the entire revenues of the utility and which did not provide for foreclosure, were not bonds authorized by the Constitution to be issuable for acquisition and operation of public utilities beyond general limit of bonded indebtedness but which w&uld include a franchise and permitted foreclosure (Const 1908, art 8, §§ 23-25, art 10, §21, as amended in 1948; CL 1948, §61.1 et seq.).
2. Same—Utility Revenue Certificates—Debt Limitations.
Proposed revenue certificates, to be issued by a village subject to the general village act without submission to voters for approval, which did not involve the general faith and credit of the village and required satisfaction of the holder’s obligation to be made solely from net revenues of the electric plant, were not obligations of the village which could be satisfied out of the general fund of the village (Const 1908, art 8, §§ 23-25; CL 1948, §§ 72.3, 72.5).
References for Points in I-Ieadnotes
[1-4, 6-8] 38 Am Jur, Municipal Corporations §§432, 559-570.
[1—4, 6-8] What are publie utilities within constitutional or statutory provisions relating to purchase, construction, or repair of same by municipal corporations. 9 ALR 1033; 35 ALR 592.
Application to permanent improvements of constitutional or statutory provision against municipality exceeding current revenue. 41 ALR 790.
Obligation for local improvements as within municipal debt limit. 33 ALR 1415.
Constitutionality and construction of statute which provides for the use of the general funds or credit of the municipality in event of default or delay in payment of, or inability to collect, or insufficiency of, special assessments for loeal improvements. 70 ALR 176; 135 ALR 1287.
'7, 8] 3S Am Jur, Municipal Corporations § 559 et seq.
'9] 50 Am Jur, Statutes §§ 244, 429.
'10,11] 50 Am Jur, Statutes § 428.
'12] 14 Am Jur, Costs § 91.
3. Same—Villages—Lighting Works—Powers of Council—Taxation—Borrowing Money.
Tlie provision of the general village act that the council may "raise and expend * * * sueh sum as it may deem advisable” for repairing, altering or extending the village lighting works, an authority to levy a tax, does not authorize the village to borrow or become obligated for the cost of purchased equipment, pledge future utility revenues for that purpose, agree to raise rates to consumers in the future, if necessary to pay the obligation, or promise not to dispose of but to keep the utility in operation and competition out of business until the equipment is paid for (CL 1948, § 72.5).
4. Same—Obligations Payable Prom Utility Revenues—Debt Limitations.
Obligations of municipal corporation, to be seeured by and payable solely from revenues of utility acquired with the proceeds of such obligations, do not constitute debts of the municipal corporation within the meaning of provision of the Constitution limiting the incurring of indebtedness, since they do not constitute charges against the general fund, or revenues to be derived from taxation (Const 1908, art 10, § 21, as amended in 1948).
5. Same—Villages—Powers—Constitutional Law—Statutes.
Villages are not autonomous entities with inherent powers but have only sueh powers as are granted by the State through constitutional provision or statutory enactment.
6. Same—-Villages—Utility Revenue Certificates—Borrowing Power.
Proposed revenue certificates to be issued by a village subject to the general village act, to purchase additional equipment for an electric plant, which did not involve the general faith and eredit of the village, involved no franchise, were not seeured upon the property nor the entire revenues of the utility and did not provide for foreclosure, were outside the contemplation of provisions of the Constitution authorizing municipalities to acquire, own and operate certain public utilities (Const 1908, art 8, §§ 23-25).
7. Same—Public Utilities—Constitutional Law—Statutes.
Provisions of the Constitution authorizing municipalities to acquire, own and operate certain public utilities are not self-oxeeuting, but require statutory implementation, particularly in the matter of restricting power to borrow money and contract debts (Const 1908, art 8, §§ 20, 23-25).
8. Same—Public Utilities—Borrowing Power.
The power of a municipality to acquire and improve its utility does not carry with it an implied power to borrow for that purpose other than by the means expressly authorized (Const 1908, art 8, §§ 20, 23-25; CL 1918, § 72.5).
9. Statutes—Construction—Express Powers.
Express mention in a statute of one thing implies the exclusion of other similar things.
10. Same—Exercise op Powers.
The mode of exercising a power granted by statute and none other must be followed when a statute creates an entity, grants it powers and prescribes the mode of their exorcise.
11. Same—Powers—Inferences.
Powers specifically conferred by statute cannot be extended by inference, the inference being that it was intended that no other or greater poiver was given than that specified.
12. Costs—Public Question—Additions to Municipally-Owned Electric Plant.
No costs are allowed in suit to enjoin a village from purchase and installation of additional equipment in a municipally-owned electric plant, a public question being involved.
Adams, J., dissenting.
Appeal from Huron; Libbers (John G.), J., presiding.
Submitted April 14, 1953.
(Calendar No. 45,762.)
Decided October 5, 1953.
Bill by Sebewaing Industries, Inc., a Michigan corporation, against Village of Sebewaing and others to restrain defendants from proceeding with or consummating contract for purchase of equipment for electric plant. Temporary injunction dismissed on motion. Plaintiff reviews by appeal in nature of mandamus.
Reversed and remanded.
Howell Van Auken and Lucking, Van Auken, Schumann & Greiner, for plaintiff.
G. W. Hatfield and Warner, Norcross $ Judd ((7. A. Bradshaw, of counsel), for defendants.
Amici Curiae:
Fairbanks-Morse Company by Miller, Canfield, Paddock é Stone.
A. C. Hoch and others by Thomas R. McAllister.

Opinion:
Adams, J.
{dissenting). This is an appeal in the nature of mandamus from an order of the circuit court for Huron county dissolving a temporary injunction issued ex parte against' the village of Sebewaing and the members of the public lighting and water commission of that village, defendants and appellees. The injunction issued upon the petition of Sebewaing Industries, Inc., appellant, restrained defendants from the purchase and installation of additional equipment in the municipally-owned electric plant until such transactions were submitted to the electors of the village for approval.
In 1911 the village, by appropriate action and under the provisions of PA 1895, No 3 (CL 1948, § 61.1 et seq. [Stat Ann § 5.1201 et seq.]), acquired a municipal electric plant. The plant has. supplied electric energy to the village and its citizens since it was acquired and it is now administered under the jurisdiction of the public lighting and water commission. In 1952 the village council decided to purchase a new generating unit to replace a much smaller one which had been unused since 1947 and, after taking bids, approved of a proposition submitted by the National Supply Company to purchase one 1136-kilowatt, 1600-horse-power diesel engine and electric generating unit, together with certain other equipment for the sum of $122,632. Of this sum, $5,632 was to be paid in cash and the balance of $117,000 in revenue certificates, the certificates to be payable with interest over a period of 14 years from net revenues of the electric system. No approval by the electors of the village was sought for either the purchase of the equipment or the issuance of revenue certificates.
Plaintiff, a taxpayer doing business in the village and a user of electric energy from the municipal system, takes the position that if the revenue certificates are issued by the municipality in payment for the equipment, they will in fact be revenue bonds illegally issued by the village because of failure to comply with provisions of PA 1895, No 3, requiring approval by a 3/5 majority of the electors of the village. It is not claimed that either the members of the village council or the members of the public lighting and water commission have acted fraudulently or with improper intent.
The village obtains its authority to own and operate a municipal electric plant from Constitution 1908, art 8, § 23, 24 and 25, as implemented by PA 1895, No 3. This act, known as the general village act, constitutes the charter of the village without amendment insofar as the present litigation is concerned.
Chapter 12, § 5, of that act (CL 1948, § 72.5 [Stat Ann § 5.1424]) reads as follows:
"After lighting works have been purchased or constructed'as aforesaid, in such village, the council may then raise and expend in making repairs or alterations, or in extending such works, such sum as it may deem advisable without submitting the question to the electors of the village: Provided, That the sum to be so raised, in any 1 year, shall be included in, and shall not increase the total amount which, by the provisions of section 1 of chapter 9 of this act, the council is authorized to raise: Provided further, That upon approval of 3/5 of the electors of such village, the council may, in lieu of raising such funds by tax, as is provided by section 1 of chapter 9, borrow money and issue bonds for such repair, alteration or extension of such lighting works, under the same provisions of section 3 as apply to the acquiring or construction of such works."
It is the plaintiff's contention that the section above quoted provides a specific and exclusive method of municipal borrowing for. the extension and alteration of the electric system, while defendants take the position that the section grants to the village council the authority to make such alterations and changes in the system as it deems advisable without submitting the matter to a vote of the electors and that the 2 provisos establish methods of raising the necessary funds which are not exclusive of other available methods. They conclude .that since neither village funds nor avails from bonds is being used to effect the purchase, they are not required to submit the matter to the electorate.
The proposed contract between the village and the National Supply Company specifically states that no indebtedness, obligation or duty created or incurred by the village thereunder shall require payment from taxes or general funds or constitute an indebtedness within the meaning of the provisions of the State Constitution governing the limits of municipal indebtedness. It further provides that the revenue certificates shall be paid from the net revenues of the utility after payment of the legitimate and necessary operations and expenses thereof, and that the village will establish and maintain utility rates which will provide sufficient • funds for such purpose. Further, the village will operate the electric plant until all obligations under the contract have been fully discharged and will prevent any competition with such municipal utility during that period. While title to the purchased equipment remains in the National Supply Company until the revenue certificates are satisfied, neither the contract nor the certificates provide any method of fore closure or enforcement of the obligation other than the right to be satisfied out of net revenue.
Under such conditions, the obligation created by the proposed contract does not pledge the general faith and credit of the village and does not create an indebtedness that is limited in amount by our State Constitution.
" 'The overwhelming weight of judicial opinion in this country is to the effect that bonds, or other forms of obligation issued by States, cities, counties, political subdivisions or public agencies by legislative sanction and authority, if such particular bonds or obligations are secured by and payable only from the 'revenues realized from a particular utility or property, acquired with the proceeds of the bonds or obligations, do not constitute debts of the particular State, political subdivision or public agency issuing them, within the definitions of "debts" as used in the constitutional provisions of the States having limitations as to the incurring of indebtedness.' " California Toll Bridge Authority v. Wentworth, 212 Cal 298, 302 (298 P 485) as quoted with approval in Attorney General, ex rel. Eaves, v. State Bridge Commission, 277 Mich 373.
There being no constitutional limitation upon the amount of the obligation to be incurred by the village, does it follow that the revenue certificates proposed by the contract can be legally issued without the approval of the electorate?
Defendants contend that no tax money or general fund money is required for the purchase, that no actual borrowing is involved and that therefore they have elected to utilize a method of financing not specifically provided by statute but not prohibited. It is their further claim that in the absence of a specific prohibition, the right to use an alternative method of financing is implied, quoting Justice Campbell as follows:
"If cities were new inventions, it might with some plausibility be claimed that the terms of their charters, as expressed, must be the literal and precise limits of their powers. * # * There are many flourishing cities whose charters are very short and simple documents. Our verbose charters, except in the limitations they impose upon municipal action, are not as judiciously framed as they might be, and create mischief by their prolixity. But if we should assume that there is nothing left to implication, we should find the longest of them too imperfect to make city action possible." Torrent v. City of Muskegon, 47 Mich 115 (41 Am Rep 715).
It becomes necessary, therefore, to determine whether the method used by the village to purchase and finance equipment falls within 1 of the methods prescribed by statute or Constitution and is governed by established procedural requirements, or is, on the other hand, a permitted alternative not specifically mentioned in either the statute or Constitution.
Constitution (1908), art 8, § 24, grants authority to cities or villages to acquire and operate public utilities and issue bonds therefor beyond the general limit of bonded indebtedness prescribed by law and then says:
"But [such bonds] shall be secured only upon the property' and revenues of such public utility, including a franchise stating the terms upon which, in case of foreclosure, the purchaser may .operate the same, which franchise shall in no case extend for a longer period than 20 years from the date of the sale of such utility and franchise on foreclosure."'
The bonds contemplated by this section of the Constitution are therefore those which are secured upon the property and revenues of the utility, including the franchise, and contemplate foreclosure in the event of default. The revenue certificates to be issued by the village of Sebewaing do not have such characteristics. They are not secured upon the property nor the entire revenues of the utility. No franchise is involved and no foreclosure is contemplated nor can be had.
"(6) It is claimed PA 1933, No 94, is invalid because violative of article 8, § 24 of the Constitution, which provides that a city may issue mortgage bonds beyond the general limit of the bonded indebtedness prescribed by law to be secured only upon the property and revenue of such public utility, including a franchise, stating the terms upon which in case of foreclosure the purchaser may operate the same, et cetera. The difficulty with this contention is that the city of Ann Arbor does not propose to issue mortgage bonds; does not propose to place a mortgage upon its sewage disposal plant; the bonds which it issues are not secured by the property of the sewage disposal plant; there can be no foreclosure under these bonds; the lien granted by the statute is solely upon the revenues to be derived from its operation." Young v. City of Ann Arbor, 267 Mich 241, 254.
Nor are the revenue certificates such evidence of indebtedness as is contemplated by chapter 12, § 5 of the general village act (CL 1948, § 72.5 [Stat Ann § 5.1424]). That section authorizes the village to borrow money or issue bonds for the repair, alteration or extension of lighting works under the provisions of chapter 12, § 3, of the same act. Section 3 (CL 1948, § 72.3 [Stat Ann § 5.1422]), after granting authority for the issuance of bonds which may exceed debt limitations, further defines such bonds as securing indebtedness "on the general .faith and credit of such village." The revenue certificates contemplated by the instant contract clearly and unequivocally state that they do not involve the general faith and credit of the village. They are not obligations of the village that may be satisfied out of any village funds, but leave the holder to an exclusive means of satisfaction out of net revenues of the utility.
" 'That bonds issued only against a fund to be created from the revenues of the system would not create a debt against the city.' " Faulkner v. City of Seattle, 19 Wash 320 (53 P 365), as quoted with approval in Young v. City of Ann Arbor, supra.
While those sections of the Constitution and statute last referred to provide for financing repairs and extension of municipal utilities by taxes or the borrowing of money through the issuance of bonds, it must be conceded that these methods of financing or paying such costs are not the only available avenues. The payment for such acquisition could be, and in the case of minor repairs would inevitably be made out of current utility revenues. In addition, more substantial sums could properly be accumulated in a depreciation fund to provide for the cost of major repairs or alterations. The establishment of a depreciation fund was considered by this Court in the case of Wolgamood v. Village of Constantine, 302 Mich 384, and the existence of such a fund acknowledged and approved but held to be not necessarily a mandatory item of municipal utility financing, at least to the extent of equaling replacement costs.
We conclude in summation that the revenue certificates which the village of Sebewaing has agreed to issue in payment for new utility equipment are not evidence of such indebtedness as is specified in constitutional limitations and that they .are not a type of obligation contemplated by sections 23, 24 and 25 of article 8 of our State Constitution (1908) nor by PA 1895, No 3, chap 12, § 5. It is our further conclusion that the methods of financing municipal utility ex tensions set forth in the Constitution and in PA 1895, No 3, are not exclusive methods of obtaining funds for such extensions and that there are other acceptable alternatives.
"We have held that the right of a city to acquire property includes the power to enter into a contract for its purchase. City of Pontiac v. Ducharme, 278 Mich 474. "We have also held that the Court will not intervene in the exercise of the granted discretion of public officials.
" 'In order to warrant the interposition of a court of equity in municipal affairs, there must be a malicious intent, capricious action or corrupt conduct, something which shows the action of the body whose acts are complained of did not arise from an exercise of judgment and discretion vested by law in them.' " Veldman v. City of Grand Rapids, 275 Mich 100, 113, as quoted with approval in Wolgamood v. Village of Constantine, supra.
Under the provisions of PA 1895, No 3, the village council had the right to extend the public utility and to expend such sums as they deemed advisable without submitting the question to the electors of the village. In the exercise of their discretion they elected to purchase certain equipment which they deemed essential to the proper operation of the utility and to pay for it in a manner not specifically spelled out by law and not prohibited. Since they were carrying out an authorized activity of the village government, this Court will not disturb their decision.
" 'Whether, under the statute, a town may adopt municipal ownership of utilities seems to be a question of policy to be determined by an election. But, having once entered into the business, as here shown, an election is not necessary for the purpose of deciding an engineering choice as to the type of equipment that shall be originally installed, or for necessary replacements because of inefficiency or obso leteness. The board of trustees of the town must, of necessity, be and they are authorized to exercise a business discretion in the management, operation, and maintenance of the utility intrusted to their care. These are affirmative duties resting upon town boards, and to that end they may do the things necessary to accomplish a complete performance of the several items of the plant in order to render to the public the service contemplated when the utility was acquired.' " Indiana Service Corp. v. Town of Warren, 206 Ind 384 (189 NE 523), as quoted with approval in Veldman v. City of Grand Rapids, 275 Mich 100, 118.
Plaintiff raises a further question as to the legality of the election in 1911 authorizing the acquisition of the electric system. We decline to pass upon that issue for the reason that it is not raised in the pleadings nor does the record show any evidence of impropriety. Plaintiff simply speculates as to the existence of error in the election because the records have not been disclosed. It is not the province of the Court to counsel with parties as to what their rights may be if undisclosed circumstances are subsequently shown to exist.
The order of the trial court dissolving the temporary injunction should be affirmed. No costs, a public question being involved.
See Const 1908, art 10, § 21, as amended in 1948.—Reporter.