Court Opinion

ID: 3963641
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:23:36.916175+00
Date Added: 2024-06-11T07:43:32.795143
License: Public Domain

Two suits were brought by the appellants herein in the district courts of Bexar County, W. B. Tuttle et al. v. City of San Antonio et al., No. F6748, in the 45th District Court, and City of San Antonio v. Lower Colorado River Authority et al., No. F11527, in the 73rd District Court. The two suits were transferred, under order of the Supreme Court and by agreement of the parties, to the 61st District Court of Harris County and consolidated. The consolidated case was repleaded and tried under docket No. 300,602, styled City of San Antonio et al. v. Guadalupe-Blanco River Authority et al.
In the consolidated suit the City of San Antonio, as plaintiff, complaining of Guadalupe-Blanco River Authority, Lower Colorado River Authority, Harris Trust and Savings Bank of Chicago, and Harold Eckhart, Board of Trustees of San Antonio Electric and Gas System, and Walter F. Napier et al., constituting the Board of Trustees of San Antonio Electric and Gas System, as defendants, sought judgment (1) adjudging the invalidity of a certain purported contract of sale and lease between the City of San Antonio and Guadalupe-Blanco River Authority and the ordinance under which it was signed; (2) adjudging the invalidity of the assignment of the purported contract of sale and lease and the ordinance under which the City joined in the execution of the instrument of assignment; (3) establishing and quieting in the City of San Antonio, against the claims of the Guadalupe-Blanco River Authority and Lower Colorado River Authority, the title to and right of possession of properties described in the purported contract of sale and lease, and (4) enjoining interference with the City of San Antonio and the Board of Trustees of San Antonio Electric  Gas System in the possession, management and control of said property.
Guadalupe-Blanco River Authority and Lower Colorado River Authority, as assignee of Guadalupe-Blanco River Authority, claiming rights under said contract of sale and lease, sought judgment upholding its validity.
Harris Trust  Savings Bank of Chicago and Harold Eckhart, Trustees under a revenue bond indenture, and Walter P. Napier, Franz Groos, W. B. Tuttle, D. F. Youngblood and Gus Mauermann, as the Board of Trustees of San Antonio Electric  Gas System, sought judgment declaring their respective rights and duties in the event the challenged contract of sale and lease was upheld.
The trial court directed a verdict in favor of the Guadalupe-Blanco River Authority and Lower Colorado River Authority and entered judgment against the City of San Antonio and all other defendants, upholding the challenged contract of sale and lease. The court denied Harris Trust 
Savings Bank of Illinois and Harold Eckhart, Trustees, the relief sought, and denied the pleas for *Page 120 
declaratory judgment of the Board of Trustees of San Antonio Electric 
Gas System. All parties against whom judgment was so rendered have appealed.
In this opinion the City of San Antonio will be referred to as the City, Guadalupe-Blanco River Authority will be referred to as Blanco Authority, Lower Colorado River Authority will be referred to as Colorado Authority, Harris Trust  Savings Bank of Chicago and Harold Eckhart, as trustees, will be referred to as trustees for the bondholders, and Walter P. Napier, Franz Groos, W. B. Tuttle, D. F. Youngblood, and Gus B. Mauermann, constituting the Board of Trustees of the San Antonio Electric  Gas System, will be referred to as Board of Trustees. The lease contract which purports to grant the lessee an option to buy the leased property will be referred to as the contract of sale and lease.
This case arose out of a controversy between the City of San Antonio and the Blanco Authority and the Colorado Authority with reference to the validity of a 30-year lease and power contract, including an option to purchase the leased properties on termination of the lease, executed by the City of San Antonio and covering an electric generating plant known as the Comal plant, located in New Braunfels, Tex., and appurtenant properties. The contract of lease in question was executed on October 24, 1942, simultaneously with the acquisition by the City of the electric utility system serving the City. The electric utility system, including the properties made the subject of the lease contract, had been purchased by the City in pursuance of the powers conferred on it by Articles 1111-1118, Revised Civil Statutes, Vernon's Ann.Civ.St. arts. 1111-1118. An indenture was executed by the City, delivered and effective with the acquisition by the City of the Electric utility system conveying to the trustees for the bondholders all property acquired by the City from the Public Service Company, pledging the properties of the system and its revenues to secure the payment of the revenue bonds executed by the City, as the purchase price for the utility properties. The indenture required the City to operate and maintain the utility plant as a self-liquidating project and to apply the revenues derived therefrom to the payment of the purchase money revenue bonds which were issued in acquiring the system.
Prior to the date of the purchase of said properties by the City, the City and surrounding territory were served with gas and electricity by San Antonio Public Service Company, a private utility corporation. The Comal plant was the larger of two generating stations belonging to the utility company. It was utilized by the Company for serving the City of San Antonio with electricity. The Comal plant was located at New Braunfels, thirty miles from San Antonio on account of the abundant water supply, which greatly increased the efficiency of the system. This plant was shown to be a necessary and indispensable part of the City's electric system.
Prior to November, 1941, the Securities  Exchange Commission under Public Utilities Holding Company Act, had instructed the American Light Traction Company, the owner of the common stock of the San Antonio Public Service Company, to dispose of its holdings in the San Antonio Company.
The Blanco Authority, which was created by the State Legislature in 1935 as a conservation and reclamation district under Section 59 of Article XVI of the Constitution, Vernon's Ann. St., acting through A. J. Wirtz and W. D. Glasscock, its authorized agents, had entered into negotiations with American Light  Traction Company to acquire the properties of the San Antonio Public Service Company in the latter part of 1941. In the process of these negotiations they met with and disclosed to the mayor of the City of San Antonio and certain of the city commissioners that the Blanco Authority purposed to purchase the assets of the San Antonio Public Service Company. They proposed to the City that, in the event the Blanco Authority was successful in purchasing the assets of the Utility Company, it sell the City the electric distribution system and that the City buy its electricity from the Blanco Authority. This proposal was refused by the City. Later, on May 27, 1942, the city commissioners adopted a resolution authorizing the mayor to enter into negotiations for the purchase by the City of the gas and electric properties of San Antonio Public Service Company.
On June 8, 1942, the mayor and commissioners of the City of San Antonio adopted an ordinance authorizing the purchase or condemnation of the properties of the San *Page 121 
Antonio Public Service Company, and on June 9, 1942, the City filed its petition in condemnation in the county court of Bexar County, seeking to condemn all of the electric, gas and bus transportation properties of the Public Service Company. On June 15, 1942, the City entered into a contract with a group of investment bankers by the terms of which the bankers agreed to employ engineers to make a report of the value of the properties and an estimate of earnings of the Utility Company, and to employ attorneys to prepare the necessary papers for the issuance of revenue bonds. The contract for the sale of said revenue bonds provided for delivery by October 26, 1942. On July 8, 1942, the City of San Antonio entered into a contract with American Light  Traction Company providing for the purchase of the common stock of San Antonio Public Service Company. The contract was to expire on December 1, 1942. On July 9, 1942, the president of American Light  Traction Company advised A. J. Wirtz, the Agent of Blanco Authority, that he had entered into a contract for the sale of said properties to the City of San Antonio. On July 10, 1942, Blanco Authority, through its agents, filed two condemnation suits, one in Comal County seeking to condemn the Comal Plant, and another in Hays County seeking to condemn all of the properties of the company in San Antonio and elsewhere. On July 10, 1942, the City filed a condemnation proceeding in Comal County seeking to condemn the Comal plant and other properties in that county. On July 13, 1942, Blanco Authority filed a suit in the district court of Comal County in which they sought an injunction enjoining the City from prosecuting or colluding with the San Antonio Public Service Company in the entry of judgments of condemnation in above suits. These suits were later dismissed. On October 7, 1942, San Antonio Public Service Company filed a suit to remove cloud from title cast by the Blanco Authority condemnation proceeding.
On July 10, 1942, the Board of Commissioners of the City of San Antonio had issued notice in pursuance of the Bond and Warrant Law of intention of adopting ordinance on July 25, 1942, providing for the purchase, in accordance with Article 1111 et seq., Vernon's Ann.Civil Statutes, of all of the electric and gas properties of the San Antonio Public Service Company and, in pursuance of said notice, on July 25, 1942, the Board of Commissioners adopted an ordinance authorizing the purchase of said gas and electric properties and providing for the issuance of $35,000,000 of revenue bonds in pursuance of said Articles 1111 et seq. The ordinance provided that the City should acquire the entire electric and power system and the gas distribution system serving the City. It provided for the issuance of revenue bonds under authority of Article 1111 to be used in acquiring said properties and pledged the properties and the revenues therefrom to secure the payment of said bonds to a group of investment bankers who had previously contracted to purchase said revenue bonds.
Later the governing body of the City of San Antonio entered into negotiations with the agents of Blanco Authority for the purpose of securing the dismissal of Blanco Authority's litigation with the City. As a result of these negotiations it was agreed that the Blanco Authority would dismiss these proceedings and that the City would lease the Comal plant and its appurtenances to the Blanco Authority with option to purchase.
On October 24, 1942, the gas and electric properties of the San Antonio Public Service Company, including the properties made the subject of the contract of sale and lease, were deeded by general warranty deed by the Trustees in Dissolution of San Antonio Public Service Company to the City; electric and gas revenue bonds in the amount of $33,950,000 out of the authorized issue of $35,000,000 were delivered to the purchasers of the bonds in accordance with the sales agreement previously made with the investment bankers who were the best bidders for the bonds. An indenture agreement had been executed and acknowledged by the mayor of San Antonio on October 9, 1942, and by the trustees of the bondholders on October 13, 1942. It provided that all properties acquired by the City and used or useful to the operation of the City's electric light and power plant should be held in trust for Harris Trust  Savings Bank and Harold Eckhart, as trustees for the bond holders, to secure payment of the bonds and performance of the obligations of the indenture, and that all revenues of every nature received through the operation of the system should *Page 122 
be deposited in a named fund to be applied to certain express purposes, including the payment of expenses of operation and maintenance of the system, the payment of interest on the bonds, and the establishment of a reserve fund for renewals, extensions and replacements.
The contract for the lease and sale of the Comal plant and the assignment thereof to the Colorado Authority were executed on October 24, 1942. It included an option to purchase the Comal plant and its appurtenances at the expiration of the lease, and specifically provided that it was inferior and subordinate to all of the terms of the indenture securing the revenue bonds. Upon delivery of the contract of sale and lease, the Blanco Authority dismissed its two condemnation proceedings and its injunction suit.
If, as we believe, the lease-option contract from the City to Blanco Authority was not merely voidable, but void, many of the propositions urged by the parties to this appeal pass out of the case.
Appellants contend that the contract of lease and option to sell the properties acquired by the City from the San Antonio Public Service Company, including the Comal plant, were void under the provisions of Arts. 1111-1118, Vernon's Ann. Civil Statutes, which provided a means whereby a city may acquire and operate an electric utility system as a self-liquidating project to be paid for out of the revenues of the system, in that (1) it violated Art. 1112, which prohibits the sale or encumbrance of a light or natural gas system acquired in accordance with the provisions of said Art. 1111 for more than $5000, except for purchase money or existing indebtedness lawfully created, until such sale or encumbrance is authorized by a majority vote of the qualified voters of such city or town; (2) in that the lease contract constitutes an attempt to divert a part of the revenues of the City's electric system, in violation of Art. 1113, which provides that no part of the income of any such system shall ever be used to pay any other debt, expense or obligation of such city until the indebtedness so secured has been finally paid; (3) in that such lease contract attempts to set over to Blanco Authority and its assignee, Colorado Authority, for a period of 30 years, essential parts of the system together with all revenues derived from the operation of such parts of the system; (4) in that such contract violates said Art. 1115, which provides that the management and control of any such system during the time that it is encumbered for one of the purposes named in said Art. 1111, shall be in the hands of city council or in the hands of a board of trustees, and that the lease contract attempts to surrender to Blanco Authority and its assignee, Colorado Authority, for a term of 30 years, possession, use and control of essential parts of the system.
Based on these contentions, the controlling issues presented in the appeal are: (1) Whether the proceedings for the acquisition by the City of San Antonio of the properties of the San Antonio Public Service Company were in the exercise of the powers granted by said Arts. 1111-1118; and (2) whether the contract to lease, including the option to purchase the Comal plant, by the Blanco Authority violated the provisions of said Arts. 1111-1118.
The applicable portions of said Articles, with supplied emphasis on pertinent wording, read:
Art. 1111: "All cities and towns including Home Rule Cities operating under this title shall have power to build and purchase, to mortgage and encumber their light systems, water systems, sewer systems, or sanitary disposal equipment and appliances, or natural gas systems, parks, and/or swimming pools, either, or all, and the franchise and income thereof and everything pertaining thereto acquired or to be acquired and to evidence the obligation therefor by the issuance of bonds, notes, or warrants, and to secure the payment of funds to purchase same; or to purchase additional water powers, riparian rights, or to build, improve, enlarge, extend or repair such systems, or any one of them, including the purchase of equipment and appliances for the sanitary disposal of excreta and offal, and as additional security therefor, by the terms of such encumbrance, may grant to the purchaser under sale or foreclosure thereunder, a franchise to operate the systems and properties so purchased for a term of not over twenty (20) years after purchase, subject to all laws regulating same then in force. No such obligation of any such systems shall ever be a debt of such city or town, but solely a charge upon the properties of the system so encumbered, and shall never be reckoned in determining the power of any such city or town to issue any bonds for any purpose authorized by law." *Page 123 
Art. 1112. "No such light, water, sewer, or natural gas systems, parks and/or swimming pools, shall ever be sold until such sale is authorizedby a majority vote of the qualified voters of such city or town; norshall same be encumbered for more than Five Thousand ($5,000.00) Dollars,except for purchase money, or to refund any existing indebtednesslawfully created, until authorized in like manner. Such vote in either case shall be ascertained at an election, which election shall be held and notice thereof given as is provided in the case of the issuance of municipal bonds by such cities and towns. [As amended] Acts 1927, 40th Leg., p. 276, ch. 194; Acts 1932, 42nd Leg., 3rd C.S., p. 96, ch. 32; Acts 1933, 43rd Leg., p. 320, ch. 122."
Art. 1113. "Whenever the income of any light, water, sewer, or natural gas systems, parks and/or swimming pools, shall be encumbered under this law, the expense of operation and maintenance, including all salaries, labor, materials, interest, repairs and extensions necessary to render efficient service and every proper item of expense shall always be a first lien and charge against such incomes. Provided, that only such repairs and extensions, as in the judgment of the governing body of such city or town, are necessary to keep the plant or utility in operation and render adequate service to such city or town and the inhabitants thereof, or such as might be necessary to meet such physical accident or condition which would otherwise impair the original securities, shall be a lien prior to any existing lien. * * * There shall be charged and collected for such services a sufficient rate to pay all operating, maintenance, depreciation, replacement, betterment and interest charged, and for interest and sinking fund sufficient to pay any bonds issued to purchase, construct or improve any such systems or any outstanding indebtedness against same. No part of the income of any such system shall ever be used to pay any other debt, expense, or obligation of such city or town, * * * until the indebtedness so secured shall have been finally paid. * * *"
Art. 1114. "Every contract, bond, note or other evidence of indebtedness issued or included under this law contain this clause: `The holder hereof shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation.' Where bonds are issued hereunder they may be presented to the Attorney General for his approval as is provided for the approval of municipal bonds issued by such cities or towns. In such case, the bonds shall be registered by the State Comptroller as in the case of other municipal bonds. [As amended] Acts 1933, 43rd Leg., p. 320, ch. 122."
Art. 1114a. "Projects financed in accordance with this law are hereby declared to be self liquidating in character and supported by charge other than by taxation. Acts 1933, 43rd Leg., p. 320, ch. 122."
Art. 1114c. "The actions of all cities and towns and of all officials in passing ordinances, adopting resolutions, executing securities and delivering securities to accomplish the objects permitted under this Act are hereby expressly authorized and validated in like manner as if this law had been effective at the time of such actions, subject to the provisions of Section 5."
Art. 1115 "The management and control of any such system or systemsduring the time they are encumbered, may by the terms of Suchencumbrance, be placed in the hands of the city council of such town, ormay be placed in the hands of a board of trustees to be named in suchencumbrance, consisting of not more than five members, one of whom shallbe the mayor of such city or town. The compensation for such trustees shall be fixed by such contract, but shall never exceed five per cent of the gross receipts of such system in any one year. The terms of office of such board of trustees, their powers and duties, the manner of exercising same, the election of their successors, and all matters pertaining to their organization and duties may be specified in such contract of encumbrance. In all matters where such contract is silent, the laws and rules governing the council of such city or town shall govern said board of trustees so far as applicable."
Art. 1116. "The city council or board of trustees having such management and control shall have the power to make rules and regulations governing the furnishing of service to patrons and for the payment of the same, and providing for the discontinuance of such service failing to pay therefor when due until payment is made. The city council shall have power to provide penalties for the violation of such rules and regulations and for the use of such service without the consent or knowledge of the authorities in charge thereof, and to provide penalties for all interference, trespassing or injury to any such systems, *Page 124 
appliances or premises on which same may be located."
Art. 1118. "No collection fees shall accrue, and no foreclosure proceedings shall be begun in any court or through any trustee, and no option to mature any part of such obligation because of default in payment of any installment of principal or interest shall be exercised until ninety days written notice shall be given to each member of the city council of such city or town and to each member of such board of trustees, if any, that payment has been demanded and default made, which notice shall date from the sending of a prepaid registered letter to each person to be notified, addressed to them at the post office in such city or town. If the installments of principal and interest then due shall be paid before the expiration of said ninety days, together with the interest prescribed in such contract, not exceeding ten per cent per annum, from the date of default until the date of payment, it shall have like effect as if paid on the date the same was originally due."
It is undisputed that the City of San Antonio was operating under a Home Rule charter. As above stated, the properties of the San Antonio Public Service Company were purchased by the issuance of bonds by the City and that an indenture was issued to secure the holders of said bonds in their payment. It is undisputed that the lease contract in question, including the option to purchase in favor of Blanco Authority, was not authorized by a majority vote of the qualified voters of the City of San Antonio.
It is, we think, the settled law of this state that the lease and option contract in question to the Blanco Authority constitutes an encumbrance on the City's electric system. In the case of City of Dayton v. Allred, 123 Tex. 60, 68 S.W.2d 172, it was held, under a parallel state of facts, that a mortgage on the income of the Waterworks plant of the City of Dayton constituted a burden or charge upon the City's utility system, and that it was an encumbrance on the plant, and the proposition not having been submitted to a vote of the qualified voters of the city, the bonds not having been issued for purchase money thereof, was in violation of said Art. 1112 and was void. The rule announced in the City of Dayton v. Allred, supra, is followed in the case of Radford v. City of Cross Plains, 126 Tex. 153, 86 S.W.2d 204.
It is undisputed in the record that the fee simple title to the various properties which are described in the general warranty deed from the San Antonio Public Service Company to the City of San Antonio, including the Comal plant, was vested in the San Antonio Public Service Company prior to the transfer of these properties to the City. There was nothing in the deed from the Utility Company to the City to limit the estate thereby conveyed. The city on the face of the deed acquired the fee simple estate in the Comal plant. Art. 1291.
In the event the City acquired the property conveyed to it by the San Antonio Public Service Company, which included the Comal plant, pursuant to said Arts. 1111-1118, the contract of purchase under which the properties were acquired embraced the provisions of said Arts. 1111-1118 just as surely and completely as though they were written into the deed of conveyance, as a part of its terms. Andrus v. Crystal City Co., Tex. Civ. App. 253 S.W. 557 affirmed, Tex.Com.App., 265 S.W. 550; Empire Gas Fuel Co. v. State, 121 Tex. 138, 47 S.W.2d 265; Stanolind Oil Gas Co. v. Terrell, Tex. Civ. App. 183 S.W.2d 743, writ denied. Therefore, though the City acquired the fee simple title to the properties, the power of its governing body to sell or lease said property was strictly limited by the provisions of said articles.
By the terms of said Art. 1112, before any part of a municipal light plant purchased pursuant to said Art. 1111, can be sold by a municipality, the sale must be authorized by a majority vote of the qualified voters of the city. Said article provides that such municipal light plant shall not be encumbered for more than $5,000, except for purchase money, without like authorization. It is undisputed in the record that the lease and option to buy the Comal plant which was given the Blanco Authority by the governing body of the City of San Antonio was not authorized by a majority vote of the qualified voters of the City. In the absence of such authority there can be no authority for leasing said property for a period of 30 years with an option to purchase said property, under the rule announced under the City of Dayton v. Allred, supra, which holds unequivocally that a lease of property is an encumbrance thereof within the meaning of said Art. 1112. It follows that, upon its face, the lease-option contract was void. *Page 125 
Without taking up, severally, each of the three other contentions of appellants which we have enumerated above, concluding with No. 4, what has just been said sustains equally all of these contentions.
Appellees base their contention that Art. 1112 has no application to the lease-option contract given by the governing body of the City of San Antonio to the Blanco Authority on the ground that the Comal plant formed no part of the municipal plant at the time the deed to the properties was delivered to the City. They contend that the Comal, plant was not purchased as a part of the municipal plant, and that the lease contract with the option to buy clearly indicated that the Comal plant was never a part of the properties purchased. They urge that, before the deed was delivered, it was agreed between the City and the Blanco Authority that the Comal plant formed no part of the municipal plant, and that it should not be acquired by the City as such except as a conduit to subject it to the lease-option contract in favor of Blanco Authority.
Another pillar on which they base their contention that Art. 1112 has no application to the lease of the Comal plant by the governing body of the City to the Blanco Authority, is the claim that the City never in fact acquired the title to the Comal plant, and hence the limitation embodied in Art. 1112 was not violated. Their basis for this contention is the fact that, in contemplation of law, the deed, indenture, and the lease-option contract were delivered so as to constitute them different parts of the same transaction, and that the different instruments must be construed together to reconcile them and make the provisions of each instrument valid. If it were possible to read out of the deed the provisions of Arts. 1111-1118, pursuant to which the City necessarily acquired the utility properties under the deed, it would be unnecessary to hold that title to the Comal plant never vested in the City in order to sustain appellees' contention. The contention of appellees cannot, we think, be sustained.
There is no doubt but that a sui juris person can bind himself by contract before he acquires land that, when he acquires title thereto, such land will become subject in his hands to a written contract of lease with option to purchase the fee upon the termination of the lease. The reason for this is that a natural person, sui juris, has the unquestioned power after he acquires land to lease it, with an option in the lessee to purchase upon the expiration of the lease. But a city purchasing property under said Arts. 1111-1118 must act through a governing body with powers limited by said articles. The governing body cannot circumvent the limitations upon its power to bind the City, by making an agreement prior to the acquisition of property which will bind such property which the City is to acquire, where said governing body lacked power to make such a contract binding on such property after the City acquired it without complying with the provisions of the articles pursuant to which the properties were acquired.
The Comal plant was, as a matter of law, acquired under Arts. 1111-1118, and said Comal plant was, in our opinion, as a matter of law, acquired as and for the City's municipal electric system. We hold that, as a matter of law, the lease-option contract was void.
Appellees urge that the City is estopped from questioning the validity of the lease-option contract on principles of res judicata, and judicial and equitable estoppel. The basis for their claim is that the Blanco Authority had certain priority rights to acquire the Comal plant which antedated the deed from the San Antonio Public Service Company to the City. The claimed priority rights are:
1. The approval by the Board of Water Engineers of the State of a plan of development on the Guadalupe River which included the acquisition of the Public Service Company's properties.
2. The filing of condemnation proceedings by the Blanco Authority on July 10, 1942.
3. That the Comal plant was located in the district of said Authority.
4. Res judicata based upon the dismissal of the various suits by the Authority against the City.
Appellees do not claim that they had any vested right in the Comal plant prior to the execution of the lease contract. In support of their claim of possessing prior right to acquire a vested right in the Comal plant, appellees rely on such cases as City of Galena Park v. City of Houston, Tex. Civ. App. 133 S.W.2d 162, (writ refused). The City of Houston, in the exercise of its legislative power, extended its boundaries to include a strip of land 5,000 feet wide along Buffalo Bayou for several miles, the strip *Page 126 
having the Bayou as its center. Subsequently the City of Galena Park, in the exercise of its legislative power, attempted to annex a portion of the strip which Houston had annexed. The City of Houston acquired no property rights by extending the area in which it exercised its govermental powers, and in so extending the territory over which it had authority to exercise governmental power, it acquired no right of action or equity which, if pursued to judgment, would become a vested property right. We think the case is not in point.
No doubt in a proper case, with respect to private property which is subject to condemnation for a public use, the first litigant who files a proper suit acquires the prior right to condemn the property. But we think we need not stop to inquire who first filed condemnation proceedings, or whether property which had already been appropriated to the use for which it was sought to be condemned, was subject to condemnation, or whether the Blanco Authority had filed a suit which could result in divesting the Public Service Company of the title to its properties, and vesting title in itself. The most that the Blanco Authority could claim, by reason of having dismissed such a suit upon the agreement of the City to make the lease contract agreement, is that the City is estopped to deny the validity of said lease-contract agreement made by its governing body. It is elementary that a City cannot be estopped by an agreement which its governing body had no legal power to make.
The City was not barred by res judicata to assert the invalidity of the lease contract by reason of the dismissal of any of the Blanco Authority's suits, for the reason that its validity was not an issue therein. Moore v. Snowball, 98 Tex. 16, 81 S.W. 5, 66 L.R.A. 745, 107 Am. St. Rep. 596. The City was not estopped by such dismissal, the dismissals were made on agreement of counsel, and merely showed the suits were dismissed. "* * * to operate as an estoppel against a party to a judgment, the decision must be of a fact directly involved in and necessary to the determination of the issue presented to the court." State v. O'Connor, 96 Tex. 484, 492, 73 S.W. 1041, 74 S.W. 899.
The case of Security Trust Co. v. Lipscomb County, 142 Tex. 572,180 S.W.2d 151, does not apply here. The question of the validity of the lease contract was never put in issue in any suit before, and the jurisdiction of no court, prior to this suit, has ever attached wherein it was attempted to decide whether same was valid, — either to decide same rightly or wrongly.
If we are correct in our conclusion that the attempted lease and option contract executed by the governing body of the City was void under Arts. 1111-1118, no purpose would be served in discussing other grounds upon which the City urges relief there against.
The court below should have instructed the jury to return a verdict in favor of the City and against the appellees, and rendered judgment that the purported contract of sale and lease between the City and the Blanco Authority was void; and rendered judgment that the assignment thereof, and the ordinance under which the City joined in the execution of said assignment, was void, and further rendered judgment that the City is entitled to enjoy the right of possession of the Comal plant free from any interference by the Blanco Authority and the Colorado Authority.
The Board of Trustees for the Bondholders sought a judgment declaratory of their rights and duties only in event the sale and lease contract was upheld as valid. It follows that their request for such judgment passes out of the case.
The judgment of the trial court is reversed and judgment is here rendered for the City as above indicated.
Reversed and rendered.