Court Opinion

ID: 9672400
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:54:06.892013+00
Date Added: 2024-06-11T18:16:15.679443
License: Public Domain

DISSENTING OPINION
STEAKLEY, Justice.
I am unable to agree with the philosophy of the majority opinion or with its limita-*818tive approach. I would resolve the matter by application of the important and recognized principle that succeeding governing boards of municipal corporations should not be permanently disabled from exercising discretion for the public good in contracts of this nature; and that such contractual obligations to which the municipality was bound by prior governing boards should not be enforceable beyond a period of reasonable performance. As I see it, public policy requires that relief be available in the situation here presented; otherwise the City is bound indefinitely — so long as there is a State of Texas and a City of Big Spring— to subsidize state — not city — services, regardless of the extent and seriousness of its financial loss in so doing. The matter is of such moment to me that I shall write at some length.
The City of Big Spring, Texas, a Home Rule city, by a contract executed in 1937 with the Board of Control of the State of Texas, agreed to furnish water to a newly-established and soon to be constructed State hospital at a rate of ten cents per 1,000 gallons not to exceed 300,000 gallons per day. The contract recited: “This agreement with reference to the furnishing of water by the City to said hospital shall continue in full force and effect and is not subject to being revoked as long as the State of Texas shall in good faith maintain and operate said hospital on said site.”
The Legislature in 1961 adopted a resolution authorizing the Board for Texas State Hospitals and Specials Schools to renegotiate the contract,1 but the Attorney General ruled that renegotiation could be had only upon the basis of a new and adequate consideration moving to the State. In 1962 the Legislature authorized the City of Big Spring to institute a declaratory judgment suit against the State Board of Control, the Board of Texas State Hospitals and Special Schools and the Attorney General of Texas.2 Pursuant thereto this suit was filed by the City of Big Spring in 1964 seeking judgment declaring that the 1937 contract is subject to renegotiation as to the rates to be charged for water furnished by the City to the State hospital and that the City is no longer under legal obligation to supply water to the hospital at the rate of ten cents per thousand gallons, or at any rate less than the actual cost of the water to the City of Big Spring.
The material facts are undisputed. The hospital was duly constructed and has been continuously maintained and operated by the State. Its monthly pay roll is $91,-000.00. The City has furnished water to the hospital at all times in accordance with the contract, with the State paying ten cents per 1,000 gallons therefor. The evidence establishes that the average cost of the water to the City for the years 1953-64 was 16.5 cents per 1,000 gallons; that during the years 1960-64 the average cost of the treatment and distribution of water by the City was 17.25 cents per 1,000 gallons; and that during the years 1960-64 the cost to the City for water purchased, treated and delivered to the hospital was 33.75 cents per 1,000 gallons. The water furnished the hospital and the loss therefrom to the City for the immediate past four years was shown to be as follows: 53,260,000 gallons in 1960, with a loss of $12,625.25; 49,807,-000 gallons in 1961, with a loss of $11,829.-16; 50,652,100 gallons in 1962, with a loss of $12,029.87; and 49,373,000 gallons for the year 1963, with a loss of $11,726.09. The total financial loss to the City for these four years was $48,210.37 and it is a reasonable conclusion from the evidence that such will continue at least to the extent of the pattern shown for the past years.
In Stevenson v. City of Abilene, 67 S.W.2d 645 (Tex.Civ.App.1934, writ ref.), the court considered a contract in which it was assumed that the City had agreed to perpetually furnish irrigation water. The Court, speaking through Chief Justice *819Hickman, later Chief Justice of this Court, said:
“In operating the sewerage system, the city is exercising a governmental power. In doing so it must be left free to use its discretion in determining how best to serve its inhabitants. A contract which would have the effect of disabling it from fully exercising that power, and which would have the effect of preventing it from controlling its affairs in the future in the way it might deem best, would be void. A city has not the power to enter into a contract binding it perpetually to maintain an existing septic tank for the purpose of furnishing waste water to an individual for irrigation purposes. It must be left free to make such changes in its system as it, in its discretion, deems to be for the public good. City of Brenham v. Brenham Water Co., 67 Tex. 542, 4 S.W. 143; City of Paris v. Sturgeon, 50 Tex.Civ.App. 519, 110 S.W. 459; City of Uvalde v. Uvalde Electric & Ice Co. (Tex.Com.App.), 250 S.W. 140; Ennis Water Works v. City of Ennis, 105 Tex. 63, 144 S.W. 930; City of Sweetwater v. Hamner (Tex.Civ.App.), 259 S.W. 191; City of Fort Worth v. First Baptist Church (Tex.Civ.App.), 268 S.W. 1016.”
On motion for rehearing the Court took notice of an assignment that it erred in the statement: “In operating the sewerage system, the city is exercising a governmental power.” With reference thereto the Court said that the language was unnecessary “because the same conclusion would have been reached had we regarded this power as municipal or proprietary, rather than governmental.”
In City of Fort Worth v. First Baptist Church, 268 S.W. 1016 (Tex.Civ.App.1924), the court terminated the further obligations of the City under a contract in which the City agreed to furnish water to the church at no cost and without limitation in point of time, the water to be used in a swimming pool owned by the church which the citizens of Fort Worth could use without charge. In the course of its opinion the court remarked that “If the contract has been observed for a reasonable time, the city then may thereafter certainly at its will declare the contract at an end.” See Sturgeon v. City of Paris, 58 Tex.Civ.App. 102,122 S.W. 967 (1909, writ ref.), holding that the city had the legal right to rescind an agreement to furnish water for a term which was indefinite and dependent upon the will of the consumer.
Other jurisdictions recognize the rule that municipal corporations are not legally bound to their proprietary contracts beyond a reasonable term of years in the absence of express statutory authority. See Borough of West Caldwell v. Borough of Caldwell, 26 N.J. 9,138 A.2d 402 (1957): “The corollary theorem is that a municipality cannot bind itself by a perpetual contract, or a contract of unreasonable duration, unless by legislative sanction”; Hoskins v. City of Orlando, 51 F.2d 901 (5th Cir. 1951): “In the absence of express statutory permission, municipalities, even in their proprietary functions, may contract only for a reasonable time”; Eastern Illinois State Normal School v. City of Charleston, 271 Ill. 602, 111 N.E. 573, L.R.A.1916D, 991 (1916) : “ * * * it cannot be said that the city of Charleston, without legislative authority, could agree to furnish water to the complainant or any body else for 50 years for $5 whether the exercise of the power was in its nature private or governmental”; Plant Food Co. v. City of Charlotte, 214 N.C. 518, 199 S.E. 712 (1938):
“In the administration of its proprietary affairs the commissioners or councilmen of the town may make reasonable contracts binding upon their successors running through a term of years.
“The line between powers classified as governmental and those classified as proprietary is none too sharply drawn, and is subject to a change of front as society advances and conceptions of the functions of a government are modified under its insistent demands. * * *
*820“The true test is whether the contract itself deprives a governing body, or its successors, of a discretion which public policy demands should be left unimpaired.”
See also Hargett v. Kentucky State Fair Board, 309 Ky. 132, 216 S.W.2d 912 (1949); City of North Newton v. Reiger, 152 Kan. 434, 103 P.2d 873 (1940); City of Augusta v. Richmond County, 178 Ga. 400, 173 S.E. 140 (1934). And compare Reed v. City of Anoka, 85 Minn. 294, 88 N.W. 981 (1902), where the court speaks of a thirty-one year contract as not prima facie void but subject to a showing of unreasonableness or unfairness; and Borough of Caldwell v. Borough of West Caldwell, 26 N.J. 9, 138 A.2d 402 (1957), where it was held:
“The bilateral contract of service that thereby came into being did not expressly delimit the time of its duration. But on well settled principles the agreement is not for that reason illusory, as too uncertain and indefinite for enforcement. The term of service may well be fixed by implication. Here, West Caldwell had rendered an executed consideration for the option, and to hold that the agreement is terminable at will would plainly subvert the evident reason and spirit of the contractual arrangement. The much more probable hypothesis is that the parties had in view continued performance for a reasonable time; and implications from the special circumstances and the relations of the parties are frequently read into the integration to serve the reasonably apparent design and to avoid injustice so obvious as to exclude it as an element of conscious intention.”
The philosophy of these decisions rests in considerations of public policy which require that governing boards of municipal corporations not be encumbered indefinitely or for an unreasonable period of time in the exercise of discretion in public matters and in the administration of governmental affairs. Such contracts should not be binding beyond a period of reasonable performance, particularly where, as here, the contract in effect subsidizes state — not municipal — services for an indeterminative time at the option of the State no matter how great the financial loss to the City in the past years and in the years to come.
The specific prayer of the City in its suit for declaratory judgment is for a judicial declaration that the contract between it and the State of Texas is now subject to renegotiation to the limited extent of the rates to be charged for the water and that the City is under no further obligation to supply water to the hospital at the contract rate of 10 cents per 1,000 gallons or at any rate less than the actual cost of the water. The City did not seek a declaration either that the contract was void at inception or that it was at all times terminable at the will of the City. The City would be entitled to relief if the contract were void or terminable at will, and quite understandably the City- argues such propositions in support of its case. But all that is necessary to the actual relief sought is a declaration that the contract in the respects put before the court is subject to renegotiation. It is my view that the contract in question is not binding beyond a period of reasonable performance, and that performance by the City of Big Spring for twenty-nine years meets this requirement.
I would reverse the judgments below and grant relief to the City of Big Spring consistent with the views expressed above.
NORVELL and HAMILTON, JJ., join in this dissent.

. Acts 1961, 57th Leg., R.S., p. 1249.

. Acts 1962, 57th Leg., 3rd C.S., p. 233.