Court Opinion

ID: 7054725
Source: CourtListenerOpinion
Date Created: 2022-07-24 07:04:48.872508+00
Date Added: 2024-06-11T16:11:55.110966
License: Public Domain

*51On Petition for Rehearing.
Gillett, C. J.
Appellees have petitioned for a rehearing herein, and their counsel have filed able briefs in support of the petition. Their first complaint is that the case was decided upon a ground not formally urged by appellants’ counsel. We are not advised of the absence of any averment in the complaint, or of any defect of proof, which would render the conclusion reached inadmissible, assuming its abstract correctness. The matter of fact on which our decision was based stood out upon the face'of the proceedings, without and beyond dispute, and the only real difference between the position of the court and that of appellants’ counsel was that we held that certain elements in the transaction constituted an unauthorized undertaking to stand sponsor for the success of the enterprise, while they contended that the transaction amounted to the creating of a debt. Having reached the conclusion we did as to the nature of the transaction, it was proper to consider as to the power of the municipality in the premises, and, if it were found that there was a want of power to enter into" the contract, it was our duty not to permit ourselves to drift along the current of argument found in the briefs until we were confronted with the constitutional question. In the case of Big Creek Stone Co., v. Seward, 144 Ind. 205, where the cause had been reversed for a defect in the complaint not pointed out by the counsel who prosecuted the appeal, it was said on rehearing: “When an error is presented by the record, the case is decided upon the record and not upon the argument of counsel.”
Our attention has been called by appellees’ counsel to a number of sections of the statutes which it is claimed contain grants of power sufficiently broad, to authorize a city to buy water for its use and for that of its inhabitants. We have no disposition to take issue with counsel' on the points thus made, since they are not involved in the ques*52tion in hand. Our decision rests upon the proposition that it is not competent for a city, in contracting for a supply of water for its use and also for that of the private water consumers therein, to hind itself for a term of years to buy, at a fixed price, at least a certain number of gallons per month.
The statement in the opinion that the court judicially knew that the city of Laporte would be compelled to sell a large part of the thirty million gallons of water that it had contracted to buy each month, had reference, not to the needs of the city and its inhabitants, but to that of the city proper; and the purpose of the statement was to guard against the inference that we were holding that the authorities might not determine the quantity of water that the city would consume for its own purposes. We were endeavoring to show by such statement that the purchase was for the use of private consumers as well — a use that, while it might exceed the amount the city had to sell, might also be much less, depending upon the population of the city in the future, the necessities of the private consumers, and their disposition to extend or refuse their patronage to the city in the matter of the purchase of water. But the observation as to our judicial knowledge was really unnecessary, since, as before shown, the title of the grant recited that the water was to be furnished “to the city of Laporte and its inhabitants.”
As the opinion affirmatively discloses, what was therein said as to the want of power in a municipality to tax for a private purpose had no reference to the power of the city to make a contract which would secure to it and its inhabitants the means of obtaining a sufficient supply of wholesome water, but to the attempted equipping of a private corporation with a credit by a means unauthorized by law. Since the case turns on this proposition, we shall examine it somewhat more at length; first considering the matter as one of statutory interpretation and construction.
*53As said by Judge Dillon in bis authoritative work on municipal corporations (4th ed., §39) : “When it is remembered that the charter of such a corporation is its constitution, and gives to it all the powers it possesses (unless other statutes are applicable to it), its careful study, in any given case, is indispensable to an understanding of the nature and extent of the powers it confers, the duties it enjoins, and liabilities it creates. The construction of its various provisions, and the determination of the relation which these bear' to the general statutes of the state — how far the charter controls, or how far it is controlled by other legislation, are often among the most difficult problems which perplex the lawyer and the judge. The study of a question of corporation law begins with the charter; but it must oftentimes be pursued into the constitution, the general statutes and legislative policy of the state, and after this into the broad field of general jurisprudence.”
The express or direct powers of the city relative to the obtaining of a supply of water, so far as our examination has revealed, seem to relate to the constructing and establishing of water-works by the city, or to authorizing a private corporation so to do. We do not mean to intimate that the above courses are the limit of the powers of cities of the general class in obtaining water. To do so would be to leave out of account the implications which may flow from some of the more general grants of authority. Just the precise breadth of the legislative grant to cities of the general class' in the matter of obtaining water need not now be determined, but obstacles and difficulties in exercising powers fairly to be implied can not operate to enlarge the authority as applied to a particular instance. Grand Rapids, etc., Power Co. v. Grand Rapids, etc., Gas Co., 33 Fed. 659.
As to the question whether a city can contract to buy a definite quantity of water at a fixed price, to be furnished for its use and that of its inhabitants during a term of *54years, it is first to be considered that such a course has no direct authorization. The maxim, expressio uni/u,s est exclusio alterius has been frequently applied in the 'construction of grants of power to corporations, municipal and private. First Presbyterian Church v. City of Ft. Wayne, 36 Ind. 338, 10 Am. Rep. 35; English v. Smock, 34 Ind. 115, 7 Am. Rep. 215; Gas Light, etc., Co. v. City of New Albany, 156 Ind. 406; Mayor, etc., v. Ray, 19 Wall. 475, 22 L. Ed. 164; People, ex rel., v. Utica Ins. Co., 15 Johns. 358, 383, 8 Am. Dec. 243; New York, etc., Ins. Co. v. Ely, 2 Cow. 678; City of Ft. Scott v. Eads Brokerage, Co., 117 Fed. 51, 54 C. C. A. 437; Farmers Nat. Bank v. School District, 6 Dak. 255, 42 N. W. 767. And see City of Logansport v. Dykeman, 116 Ind. 15; Woodford v. Hamilton, 139 Ind. 481; Broom’s Legal Maxims (7th Am. ed.), *664. This rule, however, is not necessarily to be applied to the extinguishment of powers implied from general grants, in cases where the specific provision is but a grant of discretionary authority, that, upon the whole, does not appear to have been intended to exclude a power to be implied from a more general grant. Clark v. City of South Bend, 85 Ind. 276, 44 Am. Rep. 13. Whether the general grant is to be treated as limited by the direct legislation, may depend upon a number of considerations as to whether the express power is couched in such terms as to make it fairly inferable that the statute was intended to establish the only method, whether such power seems reasonably adequate to meet the ■ necessities of cities generally, upon the language of the general grant from which another method is sought to be implied, and upon the consideration as to whether the latter method is reasonable and fairly calculated to attain an authorized municipal end. See 20 Am. & Eng. Ency. Law (2d ed.), 1142. Mr. Tiedeman says: “Express provisions of charter or statute modify the inherent or conferred general power to contract, and consequently deserve the carefulest consideration, in *55determining the scope of the general powers. And, furthermore, too much emphasis can not be given to the rule, that any power to contract, whether conferred upon or inherent in a corporation, does not authorize the making of every sort of contract; but of such only as are fit, usual and necessary, to enable the corporation to carry into effect the purposes for which it was chartered.” Tiedeman, Mim. Corp., §163.
Section 3616 Burns 1901, which is sometimes,referred to as the equivalent of a general welfare clause, seems to be designed to enlarge the legislative powers of cities, rather than their contractual powers, except as the contractual element may exist in general ordinances, the provisions of which have been accepted by third persons. See Citizens Gas, etc., Co. v. Town of Elwood, 114 Ind. 332. But ordinances. passed under a general welfare clause must be reasonable, and not out of accord with the charter and recognized municipal usage. As to the question whether the power to obtain water for the use of the city and its inhabitants can be implied, we should approach the question with the supposition that the legislature had not intended to deny to the cities of the State enough power to meet adequately the demand for an element so essential to the well-being of a municipality as water. "We only refer to the grant of express powers as evincing the fact that the agreement under consideration does not amount to the same thing, in its essence, but involves a wide and unnecessary departure therefrom. In this connection, it is material to consider the matter of usage. Suppose that the city were authorized, under one or more of its grants of power, to purchase water; is it not still to be implied that it is not authorized to buy in a manner wholly contrary to general municipal practice? In Grant, Corp., 41, it is stated: “A settled usage will even go a great way to control the words of a charter.” Judge Dillon, writing more at length upon the subject, *56says: “General and. long-continued usage is not without its importance, and usage of this character may be resorted to in aid of a proper construction of the charter or statute, but no further. If the language be uncertain or doubtful, a uniform, long-established, and unquestioned usage will be regarded by the courts in determining the mode in which powers may be exercised, and to a reasonable extent in determining the scope of the powers themselves.” Dillon, Mun. Corp. (4th ed.), §93. See, also, Rex v. Mayor, etc., 1 Mau. & Sel. 101; Frazier v. Warfield, 13 Md. 279, 303; Opinion of the Justices, 155 Mass. 598, 30 N. E. 1142, 15 L. R. A. 809; 20 Am. & Eng. Ency. Law (2d ed.), 1141.
Counsel for appellees assert that we are not authorized to review the acts of the common council of Laporte on the ground that they are unreasonable. While this may be true when the council is acting within its chartered authority, yet the limitation must exist that a contract must involve a method that is directly and immediately appropriate to the attainment of proper municipal purpose, if the right is asserted as an implied power, for otherwise the implication fails. Many illustrations under indefinite grants of power might be used in support of this — as that a municipal corporation can not become a surety, that it can not expend money for objects foreign to the purposes of its organization, that it can buy property only for municipal requirements, and can not issue commercial paper. “The power to make contracts, and to sue and be sued thereon, is usually conferred, in general terms, in the incorporating act. But where the power is conferred in this manner it is not to be construed as authorizing the making of contracts of all descriptions, but only such as are necessary and usual, fit and proper, to enable the corporation to secure or to carry into effect the purposes for which it was created.” Dillon, Mun. Corp. (4th ed.), §443. And see City of LaFayette v. Cox, 5 Ind. 38; Eichles v. Evans *57ville St. R. Co., 78 Ind. 261, 41 Am. Rep. 561. Even the legislature can not authorize a municipality to purchase property as a mere matter of convenience to its inhabitants.
In Opinion, of the Justices, 155 Mass. 598, 30 N. E. 1142, 15 L. R. A. 809, the constitutional authority of the legislature to authorize cities and towns to purchase coal and wood for the purpose of resale was denied, on the ground that the conducting of such a business was not a public service which could be authorized by the legislature. The court distinguished its earlier opinion to the legislature (Opinion of the Justices, 150 Mass. 592, 24 N. E. 1084, 8 L. R. A. 487), in which it was held that that body might a-uthorize municipalities to erect gas and electric light works, on the grorind that such undertakings were of a public character, since it would not be practicable for the inhabitants of cities and towns to furnish gas or electric light for themselves.'
For its own use a city might perhaps contract to take a fixed quantity of water, since the extent of its use might be fairly capable of ascertainment. But how is it to bo reasonably approximated in advance how much water the inhabitants of a city will buy? If the calculation as to the needs of the city and its inhabitants has been too liberal, must the city nevertheless pay for water that can not be used? If a city admits to its streets a corporation organized to furnish water, to supply that element to the inhabitants, it may fix maximum rates for the latter’s benefit, but the city is not at any loss if patronage is refused. It is true that a lack of patronage might occasion a loss ¿f the city were the .owner of the works, but in the latter instance, besides having express legislative authority for the undertaking, it would, as owner, have the chance of profit as compensation for such chance of loss. It would bo one proposition if the city had made a contract to pay a reasonable hydrant rental, and to pay for such water *58as it sold to its inhabitants, but it is a very different proposition for a city to throw itself into the breach by undertaking to furnish a market for thirty million gallons of water a month whether it shall be able to sell the overplus or not. This is the matter that we especially had in mind in asserting in the principal opinion that the transaction was'an assumed underwriting of a financial project by a municipal corporation on behalf of a private corporation.
Counsel for appellants suggest that oiir statement that by means of said contract the Laporte Water Supply Company would be able to retire its bonded indebtedness of $65,000 is too far within the bounds of truth to convey an adequate idea of the possibilities of the transaction. They suggest that the aggregate of these instalments for the whole period of twenty-one years is $226,000, and that the instalments for seventeen years, the period required for thé maturity of all the bonds, would amount to $183,-600. Of course it is possible to make out too good a case. It is evident that if the city retires the bonds as they mature, which will require, with interest, if paid at maturity, $95,975, it will be the owner of the plant. If, however, the city should default, and the property should be lost through foreclosure, then the municipality would be burdened for a term of years with the duty (the contract being enforceable) of raising, by such means as possible, the sum of $10,800 a year for water purchased by it. If it be said that the transaction is shown by the evidence to be one that the city, if it faithfully applies the revenue derived from water rentals, may reasonably expect to be able to meet, the answer is that the city can not, without legislative authority, enter into speculative transactions. This is no less than a contract in the nature of a surety-ship — “a contract which carries with it a lesion by its very nature.” Dillon, Mun. Corp. (4th ed.), §471; Louisiana State Bank v. Orleans Nav. Co., 3 La. Ann. 294; *59Greenville Water-Works Co. v. City of Greenville (Miss.), 7 South. 409.
A further objection to the undertaking under consideration is that it savors of monopoly. It has been many times held, in language strongly evincing the prejudice of the courts against monopolistic agreements, that it is not competent for a city to grant the exclusive right to furnish light or water to its inhabitants. Indianapolis Cable St. R. Co. v. Citizens St. R. Co., 127 Ind. 370, 8 L. R. A. 539; Westfield Gas, etc., Co. v. Mendenhall, 142 Ind. 538; Crowder v. Town of Sullivan, 128 Ind. 486, 13 L. R. A. 647; Citizens Gas, etc., Co. v. Town of Elwood, 114 Ind. 332; .Washington Toll Bridge Co. v. Commissioners, etc., 81 N. C. 491; Thrift v. Elizabeth City, 122 N. C. 31, 30 S. E. 349, 44 L. R. A. 427; Altgelt v. City of San Antonio, 81 Tex. 436, 17 S. W. 75, 13 L. R. A. 383; City of Brenham v. Brenham Water Co., 67 Tex. 542, 4 S. W. 143; Birmingham, etc., St. R. Co. v. Birmingham, St. R. Co., 79 Ala. 479, 58 Am. Rep., 615; Norwich, etc., Co. v. Norwich City Gas Co., 25 Conn. 19. Here we find that the city has entered into an undertaking which, if held valid, would morally coerce it to refuse to permit competition so long as any doubt existed as to whether, notwithstanding competition, it could dispose of the excess of water over and above its own needs. If a city has become a part stockholder in a water-works plant, as provided by statute, it may, if it owns a majority of the stock, so regulate water rents as to make them reasonable, and, if it loses such property by foreclosure, it may still invite competition for the supply of its inhabitants; but here, without legislative authority, the contract purports inexorably to bind the city to pay three cents for each thousand gallons of water furnished and to take thirty million gallons of water per month for the term of twenty-one years; and if the corporation passes into other hands the city must *60continué, as a defensive measure, under all probable circumstances, to deny to its people for the entire period the right to test the market by inviting terms less burdensome than the city is required to exact to make itself whole.
We think that appellants were entitled to maintain injunction. It was the only prompt, direct, and efficacious remedy to prevent the consummation of an ultra vires act, which contingently threatened appellants as taxpayers. The jurisdiction of equity over cases of this general nature is a growing one in code states, where law and equity are administered in the same court. We think, too that injunction can be maintained on a principle analogous to that involved in a stockholder’s bill. Dillon, Mun. Corp. (4th ed.), §§908-916. See Adams v. City of Shelbyville, 154 Ind. 467, 49 L. R. A. 797, 77 Am. St. 484, and cases cited.
We have given a very careful consideration to the learned briefs submitted on behalf of appellees’ counsel, but their arguments have not led us to doubt the correctness of our original opinion.
The petition for a rehearing is overruled.