Eau Claire Dells Improvement Co. v. City of Eau Claire

172 Wis. 240

• Court: Wisconsin Supreme Court
• Decided: September 25, 1920
• Status: Published

Opinion

The following opinion was filed July \7\ 1920:

Vinje, J.

The city has twelve assignments of error, but they may all be grouped into three main divisions, as many of them relate to the question of estoppel or‘ waiver, and others become immaterial if the facts found by the trial1 court are sustained. We shall spend no time discussing the attack upon the findings of fact further than to state they are well sustained by the evidence and must stand- as verities in treating the legal questions arising therefrom.

The city claims the trial court erred in finding and adjudging (1) that the contract of 1877 was and is a valid and subsisting contract; (2) that the city has waived the right to enforce and has become estopped to assert the forfeiture clause of the contract, if valid; and (3) in restraining the city from inducing or influencing state officials or' inducing or influencing any other persons to complain of or interfere with the uses of the dam sanctioned by the court.

In spite of the fact that the city executed'the contract, which both parties agree was tantamount to the execution of a lease as therein provided, over forty years ago, has received the rent thereunder and all the benefits of the contract for that period, it now seeks to invalidate it and receive’ the further benefits of acquiring the dam and all the waterpower properties ■ connected therewith free of charge because it did not have the legal capacity to execute the contract. This claim, though highly’repellent to a court of equity, must nevertheless be met as a question of law. ■ It is claimed there is no authority given the city to lease the dam itself; that the provisión in sec. 3 authorizing the city to lease any surplus water’power for manufacturing purposes and to “let, lea'se, and rent any .of the piers, booms, or other structures which may be constructed or erected under the provisions of this act,” does not include the dam. Plaintiffs argue that the dam is a structure and is therefore specifically included in the term “other structures.” They also claim that there is no necessity for direct legislative authority to lease the dam, and this claim appeals more strongly to us. The main.purpose of ch. 231, Laws 1876, was to provide a waterworks system for the city. State v. Eau Claire, 40 Wis. 533. In operating a waterworks system a city acts in a proprietary and not in a governmental capacity. Piper v. Madison, 140 Wis. 311, 122 N. W. 730; State Journal P. Co. v. Madison, 148 Wis. 396, 134 N. W. 909; Nemet v. Kenosha, 169 Wis. 379, 172 N. W. 711. Acting in a proprietary capacity it may, generally speaking, exercise such powers as a private concern engaged in a like business may exercise; for in their business matters municipal corporations are governed by very much the same rules as private corporations. Schneider v. Menasha, 118 Wis. 298, 305, 95 N. W. 94; Omaha W. Co. v. Omaha, 147 Fed. 1, 77 C. C. A. 267, 12 L. R. A. n. s. 736; Biddeford v. Yates, 104 Me. 506, 72 Atl. 335; Little Falls E. & W. Co. v. Little Falls, 102 Fed. 663. Therefore, wholly irrespective of direct legislative authority, the city could contract to have another do 'that which it could do in its proprietary capacity; namely’ build and operate the dam for waterworks purposes. Not having the funds itself, it could lawfully contract with the Improvement Company to furnish the same and secure the latter for its reimbursement by a lease of the dam and so much of the water power as the city did not need for its purposes.

It was specially authorized to lease the excess water power for manufacturing purposes. This provision of the act was nó doubt induced by the fact that' such leasing, except as an ■incident to a municipal purpose, is not within the scope of a municipality. Attorney General v. Eau Claire, 37 Wis. 400. So, also, special provision was made for authority to lease such piers, booms, and other structures as shall be sufficient for protecting and preserving the navigability of the river. If the dam was constructéd, these would be a necessary incident thereto in order to preserve the public right of navigation, and so special grant to transmit the discharge of such public duties to lessees was secured. It follows that no duties devolving upon the city have been unlawfully delegated to the Improvement Company, and that it had authority to lease the dam.

It is next urged that the city had no right to lease the dam for ninety-nine years and thus to deprive. itself of the use of the excess water power and other rights incident to the operation and control of the dam. Two considerations minimize the effect of this claim. The first is that, as already pointed out, only proprietary and not public rights are parted with; and the second and main one is that the chief purpose of the authority given the city to build and maintain the dam was to enable it to operate a municipal waterworks system. This purpose the contract carefully guards by reserving to the city so much water power as' may be necessary to operate its waterworks. Since its waterworks system was installed it has had such power. No complaint is made and sustained that sufficient power has not been furnished it in the past or that it will not be furnished in future. This being the main purpose and this having been secured, and being made safe by the forfeiture clause in the contract, it is not so material what becomes of the incidents of the legislative grant, namely, the use of the excess power. It may be from the present viewpoint, more than forty years 'after the contract has been in effect, that it could be said the city made an improvident contract." But it'cannot be said that good judgment would havé so pronounced at the time it was made. But be that as it may, it was entered into in good faith, without fraud, in furtherance of the legislative purpose, and in a proprietary capacity. In such capacity it is deemed competent for a municipality as well as for a private individual to make a valid improvident contract.

While leases for ninety-nine years were not common in this state, or perhaps in the United States, at the time this léase was made, they have become much more so and have uniformly been sustained so far as mere duration of time is concerned'. Our court held that trustees could make a valid lease for ninety-nine years though it far exceeded the trust period and was tantamount to a conveyance so far as the re-mainderman was concerned. Upham v. Plankinton, 152 Wis. 275, 140 N. W. 5. In Bailey v. Philadelphia, 184 Pa. St. 594, 39 Atl. 494, a city’s lease of its gas plant for a long term of years was upheld, and in Little Falls E. & W. Co. v. Little Falls, 102 Fed. 663, a lease of thirty years for supplying the city with water was sustained.

Sec. 9 of the act of 1876' provides that the common council of the city of Eau Claire■ “may issue the bonds of said city for the purpose of constructing the waterworks authorized by this act, not exceeding-one hundred thousand dollars in amount, at such times as it may determine.” The city did issue bonds in the amount of $95,000 which it turned over to the Improvement Company as part payment for the construction of the dam and which netted the Improvement Company $81,000. ' It is argued it was' the legislative intent fhat the total expenditure by the city- in cash or otherwise was limited to $i00,000, and since the amount of the bonds given the Improvement Company plus the value of the excess power for ninety-nine years greatly exceeded $100,000, the city has passed the limit fixed' by the legislature for the construction' of the dam. In view of the actual situation confronting the city and the legislature, it 'is not reasonable to believe that it was the legislative intent that no more than $100,000 should be spent in building the dam. The dam and works necessarily connected therewith to preserve navigation cost approximately $300,000. It was built by the Improvement Company for itself shortly after the act was passed, and there is no evidence that such cost was not a necessary and reasonable one. In view of that, we think the legislative intent was. to limit the bonded indebtedness of the city on account of the dam to $100,000, but not to limit the cost of the dam to such sum.

Sec. 10 of the act of 1876 provides that “All moneys which shall be received for the lease of water-power flowage, . . . water rents, piers and booms, and any other source or sources arising from any of the works authorized by this act, shall be applied to the purpose of keeping said works in repair, payment of the interest upon the bonds . . . and for creating a sinking, fund for the ultimate redemption thereof.” The contract, it is claimed, violates this provision of the act because it does not produce the revenue contemplated and that which is produced is not applied to the uses prescribed. It must be admitted that the language of the section is more compatible with a situation where the city operates the dam than with one where it leases it. But it is not inconsistent with a lease thereof. In so far as the rentals from the dam and works are concerned, they go to keep the same in repair, for that is a duty charged upon the Improvement Company by the contract. 'If the city has not applied water rents to the required purpose that is no concern of plaintiffs and cannot, therefore, invalidate their contract with the city, for they have nothing to do with the application of the water rentals. If the city has failed to apply them as the act provides, it cannot charge its default up to plaintiffs. □

The last attack made upon the contract is that certain aldermen who voted for the contract were interested i'n the Improvement Company. The court found this not to be the fact, and the evidence sustains the finding and that disposes of the question.

Perhaps the stress of the case rests upon the question whether the trial court erred in finding that the city by its conduct had waived the forfeiture clause as to breaches already incurred and was estopped from asserting-the same. It is conceded by the plaintiffs that the raising of the dam eight feet by the use of flash-boards, the closing up of the chute, and the use of the lock for a paper mill, constituted a breach of the contract, but it is claimed the city has waived such breach, and that owing to the reliance of plaintiffs upon such waiver and other conduct of the city and the irreparable injury that would now result to plaintiffs by reason of having expended large sums of money on the strength of the city’s Conduct and waiver, the city is estopped from asserting the forfeiture clause of the contract. Waiver is generally defined as the voluntary relinquishment of a known right, and it may be a defense though no detriment to the adverse party is shown. In estoppel in pais the element of loss or detriment to the adverse party- must appear. In asserting an estoppel the existence of the truth of the fact complained of is not denied,'but the right of the other'party to complain thereof is denied because the previous conduct of such party has caused the party asserting the estoppel in good faith to change his position in such a way that loss woti-ld ensue to him if the estoppel cannot be effectively interposed. Conduct may be positive- or negative. Thus silence, where there is a duty to speak, may constitute an estoppel in pais. 10 Ruling Case Law, 706. ' So, also, the fact that some one else may have a right to complain is immaterial. The question is, Can the party against whom,the estoppel is asserted complain ? ' In the case at bar the conduct of the city for mgmy years was relied upon "by plaintiffs, and because of such conduct they made valuable improvements that would inure to the benefit of the city if its position is well taken. It would therefore seem to be a case where, estoppel rather than waiver or acquiescence covers the whole case. In other words, if the conclusions of- the trial court are correct, the city by its conduct induced plaintiffs to change their position to their loss unless such conduct can be asserted by way of estoppel.

The gist of the argument of the city is to the effect that, since the acts complained of were forbidden by the legislative enactment authorizing the city to build the dam, the city by waiver or conduct could not validate such acts; that they were and remain invalid in spite of anything the city said or did or can say or do now. They were prohibited by the legislature, therefore the city had no power to authorize them in the first instance, and. having no power to authorize them, it has no power to ratify them because the power to ratify presumes the power to perform the act ratified. If estoppel cannot be successfully asserted by plaintiffs unless they can justify their acts under the law of 1876, then the logic is good. But the estoppel invoked has no relation to the legislative act. It rests upon the contract made between the parties. Such contract could have been made without a forfeiture clause at all. In that event no forfeiture could be asserted by the city, though it might perhaps be by the state. But the state is not a party to this action, and ■no right that it may have in reference to the subject matter can be affected by the decision herein. The estoppel invoked is against the contract provision and not against the legislative franchise. The gravamen of plaintiffs’ case is to restrain the city from enforcing the forfeiture clause of the contract because of its conduct. And the sole question now for decision is, Has the city estopped itself from enforcing the forfeiture feature of its contract? As to that it is immaterial, as before stated, that some one else may have a right to complain. In solving this question the same rules and principles apply that would apply if all the acts complained of were lawful but were within the forfeiture clause. Plaintiffs are not seeking to have their acts legalized by or through the conduct of the city, for this they cannot do. But they are saying to the city that, Be our acts lawful or unlawful, you have no right to complain thereof, because you have not only silently acquiesced therein with knowledge of all the facts, but you have actively encouraged'and permitted us to make these valuable-improvements, and you are therefore estopped to forfeit the contract through conduct permitted and encouraged by you and resulting indirectly to your benefit through building up your city as a manufacturing center and adding hundreds of thousands of dollars to your tax roll.

Upon the former appeal (134 Wis. 548, 115 N. W. 155) it was decided that the assertion of the forfeiture rested upon contractual rights between the parties. Bearing this in mind, and bearing in mind that the contractual rights spring from a proprietary and not from a governmental exercise of municipal power, it follows that estoppel can be urged against the city upon the same grounds and sustained by the same proof that is essential against a private person. Kneeland, v. Gilman, 24 Wis. 39; Houfe v. Fulton, 34 Wis. 608; Lawrence v. American W. P. Co. 144 Wis. 556, 128 N. W. 440; Beadles v. Smyser, 209 U. S. 393, 28 Sup. Ct. 522, 52 L. Ed. 849; Fredonia v. Fredonia N. G. L. Co. 84 Misc. 150, 145 N. Y. Supp. 820; 19 Ruling Case Law, 1002 et seq. In Houfe v. Fulton, 34 Wis. 608, 618, the court said concerning a municipal corporation:

“It is now well settled that as to matters within the scope of their powers and the powers of their officers, such corporations. may be estopped upon the same principles and under the same circumstances as natural persons.”

This was said in a case where a town was held estopped to deny the existence of a highway and related, therefore, to a governmental function. Whether this doctrine has been limited by Ashland v. C. & N. W. R. Co. 105 Wis. 398, 81 N. W. 1101, by requiring clearer proof of estoppel in case of the exercise of governmental powers, need not now be discussed,' for it is certain that it has not been limited as to estoppel against municipal corporations in the exercise of their proprietary powers.

It should also be borne in mind that under the evidence in this case and the facts found by the court to the effect that' the navigability of the Chippewa river has not been materially affected or diminished by the acts of plaintiffs, nor has any person suffered damage thereby, such acts are not unlawful and do not per se constitute a nuisance though without legislative permission. A. C. Conn Co. v. Little Suamico L. M. Co. 74 Wis. 652, 43 N. W. 660; Charnley v. Shawano W. P. & R. I. Co. 109 Wis. 563, 85 N. W. 507; Allaby v. Mauston E. S. Co. 135 Wis. 345, 116 N. W. 4.

Bearing these principles and facts in mind, let us briefly examine the salient conduct of the city tending to sustain the finding of estoppel. First and foremost is the fact that every change made by plaintiffs in the use of the dam was known to the city at the time or shortly after it was made, and no protest was made until about 1905 or 1906, some ten years after the last radical change was made by closing up the lock and building the pulp mill therein. The building of such mill, the court finds, was done by reason of the consent and encouragement of individual aldermen and the unofficial action of the common council. The flash-boards had been maintained for over twenty years and at the present height for a number of years before this action was begun; and since 1909 the city’s waterworks superintendent had insisted upon having a head of twenty-six feet, which could be had only by the use of flash-boards, as the city well knew. The evidence also discloses at least fourteen acts or declarations of the common council or of the mayor encouraging the development of the water power of the dam; the giving of bonuses aggregating over $50,000 to factories using power; the giving of bonuses to factory employees; the remission of taxes on manufacturing plants using power from the dam. These acts and declarations began as early as 1880 and continued until 1896. The city had also in 1905 joined with.the plaintiffs in attempting to secure legislation permitting a thirty-two foot head, thus evincing the fact that it was interested in and desired the use of all the power that could be developed from the dam.

In view of the fact that the uses complained of have not affected the navigability of the river for such purposes as it is practically navigable; that they have not injured the city or third parties; that the city, from the very inception of the completion of the dam until a short time before this action was begun, not only silently permitted the uses complained of but actively encouraged them; that in reliance upon such permission and encouragement by the city plaintiffs have in good faith spent hundreds of thousands of dollars in improvements that would inure to the benefit of the city if it could insist upon the forfeiture, it is deemed that the trial court reached the correct conclusion when it restrained the city from now enforcing the forfeiture.

The court also enjoined the city “from inducing 'or influencing state officials or any other persons to complain of or interfere with such uses,” referring to the use of eight-foot flash-boards, the use of the lock for pulp-mill purposes, and the closing up of the log chute. In so doing we think the court erred, not perhaps because of lack of power so to do, but because not essential to the protection of plaintiffs’ rights and because of a needlessly harsh inhibition upon public officials. If the facts be as the court found them and as we deem them to be from the evidence, the uses complained of do not harm the state or any one. If they do not m fact harm the state, it is not to be assumed that it will arbitrarily destroy valuable property belonging to its citizens and from which it and its municipalities derive substantial taxes just because technically it may háve the power so to do — a question not here decided. This court will assume that if the state is ever called upon to act in this matter it will not only act lawfully but also equitably as to all parties concerned. On the other hand, if it can be shown that the uses complained of are detrimental to the state, then the privilege, if not the duty, of any citizen to call such detrimental uses to the attention of the state should not be withheld.

Upon the city’s appeal the amended judgment is modified by striking out from paragraph 12 thereof the words “and from inducing or influencing state officials or any other persons to complain of or to interfere with such uses,” and as so modified is affirmed.

The plaintiffs appeal from that part of the judgment found in paragraphs 11 and 12 estopping the city from complaining of the uses therein mentioned "so long as to each of said practices as the state shall not actually compel the discontinuance of the flashr-hoards and the opening of said lock and log chute,” as expressed in paragraph 11, and "so long as to each of said uses as the state shall not actually compel the discontinuance of the same,” as expressed in paragraph 12 thereof, because it limited the binding effect of the estoppel to the time when the state may successfully act, thus permitting the city, in that event, to enforce a forfeiture for past breaches. We think the court erred in so limiting the effect of the estoppel, and the paragraphs above quoted will be stricken out and the following paragraph inserted in the place of each: “provided, however, that in the event the state can and shall hereafter lawfully direct or require the discontinuance of such uses, or any of them, then the injunction herein granted shall not be held to restrain the city of Eau Claire from declaring a forfeiture in case they or any of them are continued beyond the time then lawfully fixed for their discontinuance.” This will protect plaintiffs against a forfeiture for all breaches prior to the time fixed by the state, if it can and shall lawfully fix a time, for a change in the use of the dam and works, and will leave the city in a position to protect its interests as they may hereinafter be affected by state action. As so modified the judgment is affirmed.

By the Court. — Judgment modified as expressed in the opinion herein, and as so modified is affirmed, with costs to plaintiffs.

A. motion for a rehearing was denied, with $25 costs, on September 25, 1920.