Ogden City v. Bear Lake & River Waterworks & Irrigation Co.

76 P. 1069, 28 Utah 25, 1904 Utah LEXIS 54

• Court: Utah Supreme Court
• Decided: May 28, 1904
• Docket: No. 1501
• Status: Published

Opinion

McCARTY, J.,

after making the foregoing statement of facts, delivered the opinion of the court.

While it is charged and alleged in the complaint, in general terms, that the contract entered into between Bothwell and Ogden City for the construction of the new waterworks system was fraudulent and collusive, and entered into for the purpose of sequestrating and forever destroying the waterworks system then owned by the city, there was not one scintilla of evidence offered to support these sweeping allegations; and there is absolutely nothing in the record that even suggests that any member of the city council or other officer of the city was guilty of fraud, or that the contract was procured" through fraud or collusion, but, on the contrary, the record shows that the mayor and members of the'city council acted honestly, and’did only what they considered to be for the best interests of the city and the inhabitants thereof. In fact, appellant does not claim anywhere in its elaborate printed argument that any official who was in any way instrumental in having the contract entered into was actuated in what he did in the premises by any but the best of motives. Counsel for appellant, in their brief, say: “It is the contention •of plaintiff that this contract is void for the reason, first, that it was beyond the power of the city to make such a contract, that the terms of said contract were ultra vires and that it is fraudulent; [and second] that neither the city nor its officials had power to lease or turn over its water system as was agreed to be done in said contract, and finally carried out by subsequent acts and resolutions.” And they further say that “the right of the city to have made a proper contract for the construction of waterworks at the time it attempted to do so with Mr. Bothwell is not questioned.” And again: “It is not contended that if the city had made a proper and legal contract, under the method provided by law, with Bothwell, for the construction of waterworks, that the contract would have been ultra vires or invalid.” But they contend that the consideration given by the city was illegal, and that the formal methods required by law were not observed and followed by the city in making the contract.

The record in this case shows conclusively that, at the time the contract referred to was made, Ogden City was in need of more water, and a larger and better sys-tern of waterworks. Not only was tire water owned and controlled by the city insufficient to meet the demands made on it by the people who were entitled to its nse, but the system of reservoirs and pipes was too small to carry a plentiful supply of water, even if there had been an abundance of it. And there is evidence in the record that tends to show that the system itself had about, outlived its usefulness. F. J. Kiesel, who was mayor of Ogden City at the time the contract was entered into, testified on this point as follows: “It was a matter of notoriety prior to 1889 that the water system and water supply were inadequate and insufficient. . . . My understanding was that the system was giving out generally everywhere, and that it had about done its work, and it was necessary to put in a new system. It was reported from the water committee and from the water master that the system was giving out everywhere.” Appellant does not contend but what the conditions were such as to demand of the city government immediate action on its part to provide a more liberal supply of water for the city and the inhabitants. Neither does it contend that the concessions made by the city to defendant company are disproportionate to the benefits received.

Counsel for appellant have devoted much space in their brief to the discussion of the proposition involving the right of the city to sell, transfer, and turn over to defendant company the “old waterworks system.” "While the record discloses that the defendant company took possession temporarily of the old system during the time it was laying the pipes and putting in the new system, yet it did so only for the purpose of furnishing water to the city and its inhabitants until the water was turned into and delivered through the new system. And during this time defendant company operated and kept the old system in repair without cost or expense to the city, and delivered the water free. Niels Knudsen, a witness for appellant, testified, in part, as follows: “While I was working for the city in April or May, 1890, for eight or nine months, I collected money for the city for water rates. The water rates were payable sis months in advance. The Bear Late & River Waterworks & Irrigation Company, so far as I know, did not collect a dollar of water rates while they were operating the old water system. They had me rnn the old system until they had the new system ready to turn the water into it. And they were having me and paying me to look after it until the new system was ready to receive the water. When the water was turned into the new system, the old water system was abandoned. About a year after the old system was abandoned, it was dug up in different places of the city. The hydrants were taken off the old system when it was abandoned. . . . They were dead property and of no service whatever. . . . I do not know whether the people I saw digging were working for the city or not. They were not working for the new company. ’ ’ There is an abundance of evidence in the record to the effect that the city and the people generally, by permission of the city authorities, “dismantled and destroyed” the old waterworks system after it was abandoned, and not the defendant company, as alleged in plaintiff’s complaint. The finding of the trial court on this issue, which was in favor of respondents, is supported by a great preponderance of the evidence, and cannot be disturbed. Therefore the question as to whether it was a wise and proper thing for the city to abandon the old waterworks system, and permit it to be dismantled and destroyed, or whether the city authorities were derelict in their duty respecting the disposition made of it, is unimportant to the determination of this case, as it does not appear that defendants, or their predecessors in interest, had anything to do with it after the water was turned off and it was abandoned by the city.

The resolution adopted and passed by the city council of Ogden City, October 24, 1890, authorizing the defendants to take possession of the old waterworks system, so far as material here, is as follows: “Be it resolved by the city council of Ogden City that the city water and system be turned over to the Bear Lake & River'Waterworks & Irrigation Company on October 27,. 1890, under the terms of the contract with them. ’ ’ The contract referred to in the resolution is the Bothwell contract, a portion of which is set out in the foregoing statement of facts. By an examination of the contract, it will be seen that it provides that an entire new system of waterworks should be put in, which was done. It also provides that, in consideration of the benefits- and advantages to be gained by the city and the inhabitants thereof by the construction of the new system, and secured to them by the terms of the contract, the said Bothwell was granted the use of the streets for the purpose of laying water pipes for the system, and that the city would lease to him for an annual rental of $1 the water right owned by it.

And we have observed, the record shows that the defendants took only temporary possession of the old waterworks system, and were in no way responsible for its destruction. Therefore the important and controlling question in the ease is, did the city council exceed its authority in leasing and turning over to defendants the water right owned by the city, with which the city and the inhabitants thereof were furnished with water-through the old waterworks system, and was the act ultra vires¶

Section 1, subd. 14, art. 4, c. 48, p. 116, Sess. Laws-Utah 1888, provides that the city council shall have power, among other things, -“to construct and maintain 1 waterworks . . . or to authorize the construction and maintenance of the same by others.” It will’ ' thus be seen that the power to contract for the construction of a waterworks system was expressly given Ogden City by the provisions of the foregoing legislative enactment. But complaint is made that this power was irregularly exercised, in that the contract was made in pursuance of a resolution passed by the city council, and not by ordinance. The making of the contract was. an exercise of the business powers and functions of the municipality, and was not in any sense legislative in character; and it is settled by the great weight of authority that where a municipal corporation, in the exercise of its business powers, makes an authorized contract, it has the same rights and remedies, and the obligations imposed thereby are the same as those accorded to and incurred by individuals. 1 Dillon, Mun. Corp. (4 Ed.), 472. In the case of Illinois Trust & Sav. Bank v. City, 76 Fed. 282, 22 C. C. A. 181, 34 L. R. A. 518, Sanborn, J., speaking for the court says: “A city has two classes of powers — the one legislative, public, governmental, in the exercise of which it is a sovereignty and governs its people; the other proprietary, quasi private, conferred upon it not for the purpose of governing its people, but for private advantage of the inhabitants of the cit,y, and of the city itself as a legal personality. In the exercise of the powers of the former class, it is governed by the rule here invoked. In their exercise it is ruling its people, and is bound to transmit its powers of government to its successive sets of officers unimpaired. But in the exercise of the powers of the latter class it is controlled by no such rule, because it is acting and contracting for the private benefit of itself and its inhabitants, and it may exercise the business powers conferred upon it in the same way, and in their exercise it is to be governed by the same rules that govern a private individual or corporation. Dill. Mun. Corp. (3 Ed.), sec. 66, and cases cited in note; Safety Insulated Wire & Cable Co. v. City of Baltimore, 13 C. C. A. 375, 377, 378, 66 Fed. 140, 143, 144; San Francisco Gras Co. v. City of San Francisco, 9 Cal. 453, 468, 469; Com. v. City of Philadelphia, 132 Pa. 288, 19 Atl. 136; New Orleans Graslight Co. v. City of New Orleans, 42 La. Ann. 188, 192, 7 South. 559, 560; Tacoma Hotel Co. v. Tacoma Light & Water Company, 3 Wash. St. 316, 28 Pac. 516, 519, 14 L. R. A. 669, 28 Am. St. Rep. 35; Wagner v. City of Rock Island, 146 Ill. 139, 154, 155, 34 N. E. 545, 548, 549, 21 L. R. A. 519; City of Vincennes v. Citizens’ Gaslight Co., 132 Ind. 114, 126, 31 N. E. 573, 577, 16 L. R. A. 485; City of Indianapolis v. Indianapolis Gaslight and Coke Co., 66 Ind. 396, 403; Read v. Atlantic City, 49 N. J. Law 558, 9 Atl. 759. In contracting for waterworks to supply itself and its inhabitants with water, the city i-s not exercising its governmental or legislative powers, but its business or proprietary powers. The purpose of such a contract is not to govern its inhabitants, but to obtain a private benefit for the city itself and its denizens. ’ ’

Ogden City, having, under and by virtue of the provisions of the contract, permitted the construction of the 2 waterworks, and for more than six years availed itself of the benefits and advantages derived from the system and having assessed and collected an annual tax thereon, and stood by and permitted the present owner to acquire title to the property without asserting any claim or title in the municipality to the same cannot now be heard to question the validity of the instrument, and avoid the obligations imposed by its terms, and thereby be permitted to, in effect, confiscate property, the assessed value of which the record shows to be $225,000. “A corporation is estopped to deny its liability under a contract on the ground that the officers were not technically authorized to make it, or that its own proceedings in the premises were irregular, when the contract was within the scope of its powers, was entered into by proper officers, and has been recognized by the corporate city. ’ ’ Reese, Ultra Vires, 51, and cases cited in note. In the case of Ogden City v. Weaver, 108 Fed. 564, 47 C. C. A. 485, the validity of this same contract was incidentally involved, and in the course of the opinion the court said: “But even if the bill of exceptions did disclose a distinct ruling upon the first of the above objections, we should be of the opinion that it was untenable, inasmuch as the statute of Utah did not, in terms, provide such agreements as the one here involved should be executed in pursuance of an ordinance, and not otherwise, and inasmuch as the contract appears to Pave .been spread at large upon the records of. the city, and to have been treated by it as valid for a period of years. Under such- circumstances, the fact that the council approved the contract, and authorized its execution by a resolution, and not by ordinance, cannot be regarded as affecting its validity after the lapse of time.”

Appellant insists that the contract is void because a part of the consideration therefor was the leasing by the 3 city of its water right, which had been dedicated to a public use, to Bothwell, for an annual rental of $1. By an examination of the contract, it. will be seen that the real and true consideration for this lease was the construction of an entirely new water system; the furnishing to the city of a plentiful supply of water free for public parks, for lawns and grounds around the public buildings, and for sewerage purposes; also for improved fire protection; and an additional supply of water to the inhabitants of the city at a less rate than had theretofore existed. While the record does not disclose the exact quantity of water furnished to the city free under the lease, yet it is evident from the numerous public uses made' of the water that the city used,, without cost or expense of any kind on its part, a quantity equal to, or greater than, that leased to defendants. The payment of the nominal money consideration of $1 provided for in the lease was evidently exacted as an annual acknowledgment of the city’s title on the part of the lessee, and, as stated, not the real or true consideration. And further, the water has not been diverted from the uses to which it was dedicated. The only change made is that it is being distributed" by a private corporation instead of a public corporation.

In view of the conditions that existed and con- • fronted Ogden City at the time the lease was made, we are of the opinion that the city council not only acted 4 within its authorized powers in authorizing its execution and afterwards ratifying it, but that, under the circumstances, those powers were wisely exercised, for it is apparent that, after the city had decided to abandon its old waterworks system, it was necessary to make some disposition of its water right; otherwise, in course of time, it would be lost by nonuse. Los Angeles City Water Co. v. City, (C. C.) 88 Fed. 720. Not only are the interests of Ogden City provided for and guarded by the terms of the contract, but the city is given the option to purchase at any time the entire system, at its original cost of construction. In the meantime the city is being furnished free with a plentiful supply of water for all public purposes, except fire hydants, and it is not claimed that the rates charged for these are unreasonable, and the inhabitants are receiving a, more liberal supply than they did under the old system, and at rates thirty per cent lower than those fixed by the city under said system. Under these circumstances, to hold the contract void because of some informality in its execution, and turn over to Ogden City this water system, which the record shows the predecessors in interest of defendant company, relying upon the terms of 5 the contract and the good faith of the city; constructed at a cost of many thousands of 'dollars, would, in effect, as hereinbefore stated, be a confiscation of the property, and in direct violation of section 22, art. 1, Constitution of Utah, which provides that “personal property shall not be taken or damaged for public use without just compensation.” Plaintiff not only asks the court to enter a decree confiscating this property to it without any compensation whatever to the owner thereof, but demands a money judgment against such owner (defendant company) for the sum of $150,000. We venture to say a parallel to such a decree, based upon a similar state of facts, cannot be found in the history of American jurisprudence.

The judgment of the district court is affirmed, with costs.

BASKIN, C. J., and BARTCH, J., concur.