Oconto City Water Supply Co. v. City of Oconto

80 N.W. 1113, 105 Wis. 76, 1899 Wisc. LEXIS 350

Opinion

Bardeen, J.

The issues involved in these two actions are so closely allied that they will be disposed of by one opin ion. The paramount question in both cases is whether the contract between the plaintiff and the city is valid or invalid. The city insists that it is invalid for two reasons: first, because it required the city to levy a greater tax for the purpose of paying hydrant rentals than it was authorized to levy for all current expenses; and, second, because of the charter limitation and the actual necessities of the city, a contract running for thirty years was unreasonable.

1. The city was incorporated by ch. 449, P. & L. Laws of 1869.. By subd. 11, sec. 3, subch. IV, the city was authorized “ to make and* establish public pounds, pumps, wells,, cisterns and reservoirs, and to provide for the erection of waterworks for the supply of water to the inhabitants.” This provision is also contained in the amended charter (ch. 56, Laws of 1882). It will be observed that this provision-gives no direct authority to the city to enter into a contract with a private corporation for the purpose of securing a water supply. For some years prior to the revision of 1878, the law penpitted private corporations, organized for the purpose of manufacturing gas, to contract with cities for lighting purposes, and allowed them the privilege of laying pipes in the streets. The law passed into the revision of 1878 as sec. 1780. By ch. 211, Laws of 1879, this section was-amended by adding thereto the following: “ And any corporation formed for the purpose of constructing and operating waterworks in any city or village in this state, may make and enter into any contract with such city or village to supply such city or village with, water for fire and other-purposes, upon such terms and conditions as may be agreed upon, and may, by the consent of and in the manner agreed upon with the proper authorities of such city or village, use any street, alley, lane, park or public grounds for laying water pipes therein, provided, no permanent injury shall be done to the same; and any such city or village may, by contract duly executed by the proper authorities, acquire the right to use the water supplied by such corporation, or such portion thereof as it maj’' desire, upon such terms and conditions as may be agreed upon by such corporation and the authorities of such city or village.”

The provision now appears in Stats. 1898 as sec. 1780». It conflicts with no provision of the city charter, in direct terms. It grants express powers to private corporations of the kind mentioned, not only to make contracts, but also to use public streets and grounds. Any city or village not theretofore possessing it was granted authority to contract for water “for fire and other purposes,” upon" such terms as. could be agreed upon. That such powers existed under defendant’s charter admits of considerable doubt. In Ellinwood v. Reedsburg, 91 Wis. 131, it was said that the general powers in respect to police regulations, the preservation of public health, and the general welfare included the power to use the usual means of carrying out such powers, and that the corporation might properly erect waterworks, and issue its bonds to pay therefor. No case has been cited, and none has been found, which holds that, under such general grants of power, the city may contract with a private corporation, and authorize it to u'se the streets for its purpose. So while, under its charter, the city might erect its own system, it admits of very grave doubt whether it might grant corporate franchises to a private corporation for that purpose. Whatever doubt there may have been in this respect is resolved into a certainty by the statute quoted, which not only clothes the city with plenary powers in that regard, but also invests the waterworks corporation with authority to occupy the streets, provided no permanent injury was done to the same. Thus, the city became vested with a power it did not possess to a certainty, and which is not in any way affected by the fact that the city charter was amended and re-enacted in 1882. The charter provisions referred to existed in the original act of incorporation, and were simply carried into the charter of 1882 without change. This effected no change in the law, as will be noted by reference to Glentz v. State, 38 Wis. 549, and cases cited. . There being nothing repugnant to the law of 1879 found in the new charter, no good reason can be advanced why this law did not have complete application to the city of Oconto when the contract in question was entered into. The authority to make this contract seems clear and beyond question.

We have now reached a point where it becomes necessary to consider what effect, if any, this grant of power has upon the charter limitation as to taxation. . The court has found that the annual revenue of the city, from all sources other than taxes, and applicable to the payment of the hydrant rental mentioned in the complaint, if the city has not the power to raise money sufficient for such payments by taxation, is and has been, since the date of the contract, more than $6,000. This finding has not been successfully challenged, and this fact might render it unnecessary to determine the question above suggested. But it is claimed that the necessities of the city from time to time in the past have required a levy of an amount, with the hydrant rent, in excess of the charter limitation of one per cent., and therefore it is insisted that the contract is unreasonable and void, because it appropriates such a large portion of the city’s revenues for so long a time. A further argument is that the hydrant rental is a current expense. The charter limit for current expenses is one half of one per cent. The valuation in the city for 1898 was only about $980,000. The entire amount the city could raise for all purposes, aside from schools, bridges, and debts, is about $9,800, and hence the city cannot carry out the contract. These conditions have developed in recent years. At the time the contract was made, the city’s valuation was nearly $1,300,000. That the contract may be burdensome is no reason why it should be declared void. The city has waited nearly eight years be fore making a complaint. It raised no question as to plaintiffs performance, so that there are no equitable considerations involved. Its chief terror seems to be in the supposed fact that the charter limitation as to taxation is being exceeded. The legislature is the fountain of the power of taxation. It may exercise it itself or delegate it. It expressly delegated the power to the city of Oconto to raise taxes for certain purposes, not to exceed the limit stated. Ten years later it expressly authorized the city to make a contract for a water supply on such terms as could be agreed upon. At the time the city was incorporated the plan of providing a system of waterworks for small municipalities was little thought of. Fifteen years later the idea developed to such an extent that such plants were common, even among the villages of the state. Now, the proposition is familiar and fundamental that,' when authority is given to do a thing, it carries with it, by implication, authority to use the necessary means by which it may be done. This was recognized in Mills v. Gleason, 11 Wis. 470, and is the principle which'underlies Ellinwood v. Reedsburg, 91 Wis. 131. Whether special authority to a municipality to do an act will impliedly repeal, yro tanto, existing charter limitations upon the rate of taxation, is a question upon which the authorities are not in accord. Its determination involves a consideration of all the circumstances, and a construction of the two statutes. In the Beedsburg Case it was said that providing for fire protection was essentially a work of public utility, and comes within objects for the attainment of which municipal governments exist as much as anything which can be suggested. We then have this condition of things: The city of Oconto has a charter limitation which permits it to raise by taxation one half of one per cent, for current expenses. Provision for fire protection is a current expense. As the defendant contends, the ordinary expenses of the city demand the greater part, if not all, of the funds the city can raise under this limitation. We have an express grant of power from tlie legislature to the city to enter into a contract with a private corporation for fire protection and water supply. The necessity for fire protection is admitted. The power to secure it is granted, but no express provision is given by which this power may be exercised. We believe the true rule to be that when the legislature confers authority upon a municipal body having power to levy taxes to contract a debt for some specific object, and makes no special provision for its payment, the very act of conferring the power to create the liability by implication clothes the municipal authorities with power to levy the necessary tax to discharge it. Peoria, D. & E. R. Co. v. People ex rel. Scott, 116 Ill. 401; Loan Asso. v. Topeka, 20 Wall. 655; U. S. v. New Orleans, 98 U. S. 381; Comm. ex rel. Armstrong v. Allegheny Co. Comm’rs, 37 Pa. St. 277; Lowell v. Boston, 111 Mass. 460; 4 Myer, Fed. Dec. § 1163; Ralls Co. Ct. v. U. S. 105 U. S. 733. See State ex rel. Hasbrouck v. Milwaukee, 25 Wis. 122; Dillon, Mun. Corp. § 741.

There are decisions holding to the point of absolute strictness that the power to tax must be granted in terms, but we are satisfied that the rule stated is more in consonance with reason and justice, and will not lead to harmful results. How, then, does the power to contract affect the charter limitation ? This limitation was inserted in the original charter in 1869, when the city was in its infancy, when the means for fire protection were meager, and when the necessities of the city were comparatively few. As the city developed, and its necessities increased, the legislature saw fit to invest it with authority to contract for fire protection. If the contention of defendant is true, we have a grant of power, without any means to exercise it, because the city is prohibited from raising sufficient taxes to pay for its exercise. The current revenues were needed for other necessary purposes. No such absurd result could have been intended by the legis lature. In view of the circumstances, we are forced to the conclusion that, when power to contract was given, power to carry out the contract was also given by implication to the extent of raising taxes for that purpose beyond the charter limitation.

But it is said that this would be in violation of sec. 3, art. XI, of the constitution, which makes it the duty of the legislature to organize cities, and to restrict their power of taxation so as to prevent abuse in taxation. This raises the vexed question of the right of the courts to interfere with legislative action under this provision. In Foster v. Kenosha, 12 Wis. 616, this court held that, when a municipal corporation was created without express restriction upon its power to levy taxes, it could exercise that power only for legitimate municipal purposes, the power of the corporation in that respect being limited by the object and purpose of its creation, and that the legislature could not confer an unlimited power to levy taxes aside from and above what was necessary and proper for legitimate municipal purposes; and it was there said: “To prevent all misapprehension, however, we will say that we do not suppose an act of the legislature creating a municipal corporation, but imposing no restriction upon the power of such corporation to levy taxes and borrow money, would necessarily be void for that reason. In such a case, the city authorities would only have power to levy taxes and raise money to support the local government and for proper municipal purposes. And, although the wants of municipal corporations are great, they are not unlimited. The corporation could undoubtedly raise all the revenues sufficient for strictly municipal expenditures, but could not raise any and all moneys for every purpose which might promote the common interest of the city.” In Dean v. Borchsenius, 30 Wis. 236, the court discussed the difficulty of imposing a percentage limit for street improvements. It was held that it was an almost impossible duty to perform, and, while not so stated, the conclusion is natural, from the discussion, that; if there was a restriction on the power and not upon the amount to be raised by taxation, the court could not interfere. Many cases have arisen in other states with similar constitutional provisions, .relating to the powers and duties of the court in cases where no 'restrictions have been imposed by the legislature. The matter is thus summed up in Cooley, Const. Lim. 637: “These requirements, however, impose an obligation upon the legislature which only its sense of duty can compel it to perform. It is evident that, if the legislature fails to enact restrictive legislation, the courts have no power to compel such action. Whether, in any case, a charter of incorporation could be held void on the ground that it conferred unlimited powers of taxation is a question that could not well arise, as a charter is probably never granted which does not impose some restrictions; and, when that is the case, it must be inferred that those were all the restrictions the legislature deemed important, and that, therefore, the constitutional duty of the legislature has been performed.” For a discussion of the conclusions- stated, see the following cases: Bank of Rome v. Rome, 18 N. Y. 38; People ex rel. Drake v. Mahaney, 13 Mich. 481; Hines v. Leavenworth, 3 Kan. 186; Hill v. Higdon,, 5 Ohio St. 243; Maloy v. Marietta, 11 Ohio St. 636. The power granted by ch. 211, Laws of 1819, is for a strictly municipal purpose. It would have been better and safer had it contained some restriction other than as to the purpose for which it was to be exercised. But so long as the purpose is expressed, and that being a purely municipal purpose, and the indebtedness attacked does not exceed the constitutional limit of five per cent., this court does not feel at liberty to interfere with legislative discretion, however much we may deprecate this kind of legislation.

2. The argument that the contract is void, because it is unreasonable, is built largely upon the assumed fact that, a very large portion of tbe city’s revenues have been devoted to this one purpose. It being determined that the charter limitations do not stand in the way of carrying out the contract, much of this argument is without foundation. The length of time .the contract is to run is not so great that we can say, as a matter of law, it is unreasonable.

3. The right to maintain the suit in equity is challenged-because the plaintiff has an adequate remedy at law. The plaintiff insists upon the right to maintain the action on the ground that the rental fund is a trust fund, and that equity will enforce provision and payment, and prevent diversion. There can be no doubt about the proposition that the fund,, when raised, is a trust fund, and equity will, in a proper case, interfere to prevent its diversion. This is the tenor of a great many cases cited by respondent’s counsel, and m> discussion of that fact is necessary. The .duty of the city to keep and apply the money raised to the purposes specified in the contract is not disputed. But the contract does, not create a trust, within the ordinary legal meaning of that word. The money, when raised, is a trust fund, in the sense that it cannot be diverted to other uses or purposes; but it by no means follows that, because it is alleged that there is an intention on the part of the city to divert this fund, equity will step in to enforce the whole contract. It' will prevent the threatened diversion, but otherwise the party must be left to his remedy.at law. This is the holding in Maenhaut v. New Orleans, 3 Woods, 1, and Heine v. Levee Comm’rs, 19 Wall. 655, which we readily approve. The plaintiff alleges an intent to divert. The city enters, an express denial. No proof on the question is offered. The court finds all the allegations of the complaint to be true. The defendant excepts to the findings. Under these circumstances, the findings cannot be sustained. It is true that the city denied the validity of the contract, but that fact will not support an inference of intent to divert the money. The plaintiff had a complete and adequate remedy at law, .so far as any fact is shown. It might, as it did, commence its action at law, and have the validity of its contract determined. Then, if the city refuses to make the proper levy, mandamus afforded it a complete and adequate remedy. The cases cited in 19 Wall. 655, amply support this conclusion, .and nothing more remains to be said.

4. Some stress was laid upon ch. 361, Laws of 1897, as having removed all charter limitations on the amount of taxes that could be levied to pay the rentals. We have purposely omitted considering the legal effect of this legislation, because it raises questions quite difficult of determination, and not necessary to the decision of this case.

By the Oourt. — In the equity suit the judgment of the circuit court is reversed, and the cause is remanded with directions to dismiss the complaint. In the action at law the judgment of the circuit court is affirmed.