McGuinn v. City of High Point

217 N.C. 449

• Court: Supreme Court of North Carolina
• Decided: April 17, 1940
• Status: Published

Opinion

Stacy, C. J.

At tbe threshold of the case, it may be well to recall that a municipality is limited in its authority .to venture upon an enterprise such as here contemplated. Its powers are different from those usually granted to a public-service corporation, for it serves a single community while the latter may serve many. Nevertheless, the authority of a municipality is generally ample for its own purposes. Lutterloh v. Fayetteville, 149 N. C., 65, 62 S. E., 758; George v. Asheville, 80 Fed. (2d), 50, 103 A. L. R., 568.

Further, by way of preliminary observation, it may be noted that where the parties agree to waive a jury trial and submit the whole controversy to the court for final determination, both as to the law and the facts, the findings of fact made by the court pursuant to such agreement have the force and effect of a verdict, and they are conclusive on appeal if supported by any competent evidence. Cobb v. Cobb, 211 N. C., 146, 189 S. E., 479; Crews v. Crews, 210 N. C., 217, 186 S. E., 156; Marshall v. Bank, 206 N. C., 466, 174 S. E., 314; Roebuck v. Surety Co., 200 N. C., 196, 156 S. E., 531. The correctness of the findings may be challenged in the same way as the verdict of a jury. Assurance Society v. Lazarus, 207 N. C., 63, 175 S. E., 705. The rule is applicable on the final hearing in injunction proceedings. Power Co. v. Power Co., 171 N. C., 248, 88 S. E., 349. The only modification or departure from this practice will be found in those cases, formerly cognizable exclusively in equity, which are submitted on written and documentary proofs. Worthy v. Shields, 90 N. C., 192. The trial court determines the facts upon contradictory evidence or upon evidence permitting different inferences, as we are not authorized to find the facts in such cases. White v. White, 179 N. C., 592, 103 S. E., 216. The rule is otherwise in injunction proceedings when the appeal is from the preliminary hearing, for the findings then are only for the purpose of the interlocutory order, and they are made by the judge without any waiver or consent of the parties. Mewborn v. Kinston, 199 N. C., 72, 154 S. E., 76.

First. The initial question for decision is whether the city of High Point exceeded its authority in agreeing to abide by all the conditions imposed in the license issued by the Federal Power Commission for the construction, operation and maintenance of the hydroelectric project here challenged. The record would seem to require an affirmative answer.

It is the position of the plaintiffs that the functions of the Federal Power Commission and those of the city of High Point are not only separate and distinct, but that they are also different in scope and purpose, if not in character and kind; that the one derives its authority from the Congress; the other from the State Legislature; that the one deals with national issues; the other with local matters. And while in certain instances, it is conceded the activities of the latter may properly complement those of the former, it is asserted that on the present record, a case of complete domination and control on the part of the Federal Power Commission is presented. The plaintiffs challenge the right of a municipality to assume such a role of subjectivity in the absence of legislative sanction, express or implied. Madry v. Scotland Neck, 214 N. C., 461, 199 S. E., 618; Coburn v. Comrs., 191 N. C., 68, 131 S. E., 372; Henderson v. Wilmington, ib., 269, 132 S. E., 25; Weith v. Wilmington, 68 N. C., 24. They say that the city of High Point is clothed with no authority and charged with no duty in connection with interstate or foreign commerce, City of Chicago v. Law, 144 Ill., 569, 33 N. E., 855; that it is not primarily interested in the promotion of navigation or in the protection of fish life in the waters of the Yadkin River, desirable as these may be; that its obligations are exclusively to the residents, citizens and taxpayers of High Point, and that therefore the acceptance of the Federal license goes beyond the reach of the defendant’s authority and may even be incompatible with its duties as a municipality. Johnson v. Comrs., 192 N. C., 561, 135 S. E., 618; Asbury v. Albemarle, 162 N. C., 247, 78 S. E., 146; Trenton v. New Jersey, 262 U. S., 182; Northern B. & L. Assn. v. Cleary, 296 U. S., 315, 100 A. L. R., 1403; Worchester v. Worchester Street Ry. Co., 196 U. S., 539; Becker v. La Crosse, 99 Wis., 414, 67 Am. St. Rep., 874.

The cases of Klein v. City of Louisville, 6 S. W. (2d), 1104, and Haeussler v. City of St. Louis, 205 Mo., 656, 103 S. W., 1034, cited and relied upon by the defendants, are sought to be distinguished on the ground that there specific or implied legislative authority for what was done — bridges constructed over navigable streams forming state boundaries — while no such authority appears here. Likewise, it is pointed out that-in State ex rel. Gummer v. Pace, 164 So. (Fla.), 723, cited by the defendants, there was legislation with reference to the navigable waters there involved.

The arguments of the plaintiffs prevailed in the court below and they have been pressed with vigor here. They appear to be sound and worthy of acceptation. Kennerly v. Dallas, 215 N. C., 532, 2 S. E. (2d), 538. A municipality is not permitted to travel beyond the scope of its charter or in excess of the powers granted to it by the General Assembly.

In this view of the matter, the navigability or nonnavigability of' the Yadkin-Pee Dee River may be put- aside as an incidental issue in the case. Ashwander v. Valley Authority, 297 U. S., 288. However, it appears from the determinations made by the trial court that the Yadkin-Pee Dee River is a nonnavigable stream in North Carolina, and that the construction, maintenance and operation of the’ proposed hydroelectric plant and system would not materially or appreciably affect navigation or the movement of-interstate or foreign-commerce. ' Upon these‘findings; which are amply supported by the evidence and predicated upon a number of prior adjudications, it would seem that the Federal Power Commission is without jurisdiction in the premises, and that its license should be regarded as gratuitous, especially in the extent to which it goes. Smith v. Ingram, 29 N. C., 175; S. v. Glen, 52 N. C., 321; Cornelius v. Glen, ib., 512; Dunlap v. Light Co., 212 N. C., 814, 195 S. E., 43; U. S. v. Rio Grande Irr. Co., 174 U. S., 690; U. S. v. Appalachian Electric Power Co., 107 P. (2d), 769.

In this latter circumstance, the defendants say on brief that the license of the Federal Power Commission should be treated as a nullity, being void ab initio, and that they should be permitted to proceed as if the license had not been issued. The record fails to present such a case. It is alleged in the answer that application was duly made to the Federal Power Commission for the license in question; that the city has a right to proceed under it, and that it intends to do so. Upon this theory the case was heard in the court below. Indeed, without questioning the authority of the Federal Power Commission, the defendants have apparently agreed to make its license an integral part of the undertaking as presently contemplated. U. S. v. Butler, 297 U. S., 1. The record contains no disclaimer of its obligations on the part of the defendants, but rather an insistence upon their legality and a determination to abide by them. The case is controlled by the transcript on appeal, S. v. Dee, 214 N. C., 509, 199 S. E., 730, except in situations similar to the one hereafter considered in section three. Berrier v. Comrs. of Davidson County, 186 N. C., 564, 120 S. E., 328.

Moreover, the Federal Power Commission is not a party to the proceeding, and the validity of its license is not an issue in the case. The inquiry goes only to the authority of the city of High Point to agree to abide by its terms and conditions, and thus to embark upon the enterprise practically as an adjunct of the Federal agency and primarily for purposes of national concern. On the record as presented, the project and the Federal license are inseparably connected. Covington v. Threadgill, 88 N. C., 186; Hazelton v. Sheckels, 202 U. S., 71; McMullen v. Hoffman, 174 U. S., 639. A municipality is confined to the circumference of its powers. Briggs v. Raleigh, 195 N. C., 223, 141 S. E., 597.

Second. The next question is whether the proposed revenue bonds would constitute a general indebtedness of the city of High Point. This was the subject of considerable discussion on the first appeal in the Williamson case, 213 N. C., 96, 195 S. E., 90, which need not be repeated here.

Since that decision, the General Assembly has by general enactment, ch. 2, Public Laws, Extra Session, 1938, authorized the municipalities of the State to construct, improve and extend “revenue-producing undertakings” of various kinds, including hydroelectric plants or systems, and to finance them with funds derived from the sale of revenue bonds, payable solely out of the revenues of the undertaking. The statute is denominated the “Revenue Bond Act of 1938,” and it sets out in detail the terms and conditions under which such revenue bonds may be issued and prescribes the remedies afforded the bondholders. Compulsory exercise of the taxing power is specifically withheld as a means of enforcing liability on any covenant or bond of the municipality given or issued in connection with the undertaking. The remedies of mandamus, mandatory injunction and receivership are alone designated as available to the creditors. George v. Asheville, supra. This act ex proprio vigore enters into and becomes a part of the bonds issued under its provisions. Bank v. Bryson City, 213 N. C., 165, 195 S. E., 398. The power to borrow money or to deliver bonds under the act is prohibited after 31 December, 1940, except in furtherance of a contract or agreement theretofore entered into by the municipality.

In addition to the benefits of this act, it is the contention of the defendants that by resolution of the city council embodying similar provisions, revenue bonds of like character may be issued under the city charter or the Revenue Bond Act of 1935, ch. 473, Public Laws 1935, and that the bonds here challenged come within the authorization of either or both statutes. Ve had occasion to consider the limitations of the Revenue Bond Act of 1935 in the Williamson case, supra.

One of the ends sought to be accomplished by the amendatory and supplemental resolution of 20 March, 1939, as we understand it, was to make sure the terms and conditions of the bonds proposed to be issued by the city of High Point would not exceed the provisions approved in Brockenbrough v. Comrs., 134 N. C., 1, 46 S. E., 28, as coming within the special-fund doctrine and to remove them, beyond all peradventure, from the category of general indebtedness. In this endeavor the defendants have called to their aid provisions of the Revenue Bond Act of 1938. Taken in connection with the further resolution of the board of power commissioners adopted 7 November, 1939, it would seem that as the bonds are to be “payable solely out of the revenues of the system,” they might well be held as coming within the special-fund doctrine, .and not as general obligations of the municipality importing liability to taxation. Gill v. Charlotte, 213 N. C., 160, 195 S. E., 368; Hall v. Redd, 196 N. C., 622, 146 S. E., 583. See 16 N. C. L., 346. The bonds themselves are to contain specific provision to this effect, and, hence, the bondholders will be put on notice that they have no right to compel the levy of any tax to enforce payment of principal or interest. Ward v. City of Chicago, 342 Ill., 167.

The stipulation that the city will not purchase, for resale through its presently owned electric distribution system, electric energy from any source other than the proposed system, when and so long as energy from the system is available, comes well within the special-fund doctrine, for the energy so taken and used is to be paid for solely out of the gross revenues of the presently owned electric distribution system and is to be considered simply as an expense of operating this latter system. Holmes v. Fayetteville, 197 N. C., 740, 150 S. E., 624; Plant Food Go. v. Charlotte, 214 N. C., 518, 199 S. E., 712; Allison v. Chester, 72 S. E. (W. Va.), 472.

The further stipulation that if the city shall, from time to time, voluntarily elect to take electric energy from the system for its own use, it will pay to the special account an amount equal to the cost of furnishing the electric energy so taken — in no event to exceed a fair and reasonable amount for such energy' — -is not a covenant importing liability to taxation available to the bondholders, but rather an assurance or undertaking on the part of the city to pay for such energy as a necessary municipal expense out of current revenues, for the service rendered, and is not to be regarded as payment on the cost of the enterprise. Walla Walla v. Walla Walla Water Co., 172 U. S., 1; Pennington v. Town of Sumner, 222 Iowa, 1005, 270 N. W., 629; Reconstruction Finance Corp. v. City of Richmond, 249 Ky., 787; Annotation, 103 A. L. R., 1160. The provision is not that the city shall pay for such energy, if, as and when taken, at the regular rate so as perhaps to include a profit, but the amount to be paid into the special account is limited to an amount equal to the cost of furnishing the electric energy so taken, and in no event to exceed a fair and reasonable amount for such energy. The stipulation is specifically authorized by the Revenue Bond Act of 1938. Wells v. Housing Authority, 213 N. C., 744, 197 S. E., 693. Its purpose is to guard against any outlet for “free service.” Georgia v. Regents of University System, 179 Ga., 210, 175 S. E., 567; Keller v. State Board of Education, 236 Ala., 400, 183 So., 268.

The authorities from other jurisdictions cited by plaintiffs, which in tendency seem to point in another direction, are grounded on different factual bases and are therefore distinguishable. To point out these differences in detail, however, would require an unnecessary amount of differentiation with no commensurate benefit to be derived from the undertaking. Suffice it to say they are not controlling.

It -should be observed that what is here said in respect of the liability arising from the issuance of the proposed revenue bonds has no reference to the obligations sought to be assumed by the city in agreeing to abide by all the conditions imposed in the license issued by the Federal Power Commission. These obligations arise out of matters dehors the revenue bond resolutions and hence they -stand on a different footing. Being ultra vires, or beyond the city’s reach, they have been disregarded in the consideration of the second question presented by the appeal.

Third. The questions arising from the court’s determination that the costs of the undertaking will exceed the aggregate amount of the Federal grant and the proceeds of the revenue bonds and that the city’s agreement to complete the project within a given time constitutes a binding obligation importing general liability, apparently have been rendered moot by the resolution of the board of power commissioners adopted 7 November, 1939, in which it is provided that the city “assumes no obligation to expend in the construction of the project any funds except funds received by way of loan and grant” from the Federal Government. The terms of this resolution have been accepted and approved by the Federal Emergency Administration of Public Works. See Gulf, Col. & S. F. Ry. v. Dennis, 224 U. S., 503, and Patterson v. Alabama, 294 U. S., 600; Wilson v. Comrs., 193 N. C., 386; 137 S. E., 151.

Fourth. The question that remains is whether the city of High Point can lawfully proceed with the undertaking without first obtaining a certificate of convenience and necessity from the Public Utilities Commissioner of the State of North Carolina. The trial court answered in the negative and we approve.

It is provided by the Bevenue Bond Act of 1938 (ratified 13 August, 1938) that no municipality, “proceeding under this act,” shall construct any gas or electric system without having first obtained a certificate of convenience and necessity from the Public Utilities Commissioner, “except that this requirement for a certificate of convenience and necessity shall not apply to any such undertaking defined in this proviso which has been authorized, or the bonds for which have been authorized, by any general, special or local law heretofore enacted.”

It is the position of the defendants that they come within the exception to the proviso, above quoted, because the undertaking here challenged was authorized by the resolution of the council of the city of High Point on 27 April, 1938, which was more than three months prior to the ratification of the Bevenue Bond Act of 1938. Conceding some attenuate ground for the contention, it is not believed the defendants would want to risk the success of their undertaking alone upon the resolution of 27 April, 1938. They deemed it “advisable to amend and supplement said resolution” by the resolutions of 20 March, 1939, which have been regarded as essential to the project. Indeed, these later resolutions apparently wrought substantial changes in the enterprise. It is not thought that the exception to the proviso in the statute was intended to cover a situation similar to the one here presented. The reason for the requirement, as well as the applicable rule of strict construction, Piedmont and Northern Ry. Co. v. U. S., 30 Fed. (2d), 421, would seem to suggest a contrary intent on tbe part of the lawmaking body. In this respect, we agree with the ruling of the trial court. Alabama Power Co. v. City of Scottsboro, 190 So. (Ala.), 412.

It results, therefore, from what is said above, that with the modifications suggested, the judgment should be upheld. On the facts established by the record, the correct conclusion seems to have been reached.

Modified and affirmed.