Sault Ste. Marie City Commission v. Sault Ste. Marie City Attorney

21 N.W.2d 906, 313 Mich. 644
CourtMichigan Supreme Court
DecidedMarch 4, 1946
DocketCalendar No. 43,120.
StatusPublished
Cited by16 cases

This text of 21 N.W.2d 906 (Sault Ste. Marie City Commission v. Sault Ste. Marie City Attorney) is published on Counsel Stack Legal Research, covering Michigan Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sault Ste. Marie City Commission v. Sault Ste. Marie City Attorney, 21 N.W.2d 906, 313 Mich. 644 (Mich. 1946).

Opinion

Starr, J.

On June 9, 1945, plaintiff commissioners of the city of Sault Ste. Marie, a municipal corporation organized and existing under the home-rule act, * filed petition in this Court for a writ of mandamus to compel defendant, city attorney, to approve certain contracts relating to the acquisition *648 by the city of an electric-light plant and system, the issuance of revenue bonds, and the purchase of electricity. In response to an order to show cause defendant answered, admitting the facts set forth in the petition, but denying plaintiffs’ right to the writ on the ground that the proposed contracts and issuance of bonds would be illegal. The present proceedings are for the purpose of determining the legality of said contracts and revenue bonds.

From the petition it appears that the Edison Sault Electric Company (herein referred to as the Edison company) now furnishes electricity to the city and its inhabitants and also to other muúi'cipalities and consumers in territory outside the city. The company owns a generating plant and distribution system „in the city and also a distribution system outside the city, but operates the plant only as a “stand-by” and obtains the principal amount of its electricity from its operation, under lease, of a hydroelectric plant owned by the United States of America. All the common stock of the Edison company is owned by the American States Utilities Corporation, a Maryland corporation, and the Federal securities and exchange commission has ordered it to dispose of its interest in the Edison Company within a limited time. In their petition plaintiffs allege that the city desires' to purchase the generating plant and distribution system located within its corporate limits but that the American States corporation will not sell the properties of the Edison company in parcels. They further allege that said corporation will sell the properties of the Edison company only in their entirety through a sale of the common stock of that company. However, it appears that the city cpuld not own and operate the entire properties of the Edison company, because such operation would result in the *649 city’s selling and delivering electricity without its corporate limits in an amount in-excess of 25 per cent, of that furnished within its limits, in violation of Constitution of 1908, art. 8, § 23, as amended in 1944. *

Plaintiff commissioners allege that in pursuance of a negotiated plan for the city to acquire the generating plant and distribution system located within its corporate limits, they unanimously adopted a resolution on May 25, 1945, which provided in part:

“Section 1. That the city shall enter into a-contract with American States Utilities-Corporation in the following form and that the mayor and city clerk are hereby authorized, directed and instructed, in behalf of the city of Sault Ste. Marie, to execute such contract: * * *

“ ‘American States Utilities Corporation: * * *

“ ‘The city of Sault Ste. Marie, Michigan, hereby offers to* purchase from you all the issued and outstanding common stock of Edison Sault Electric Company (hereinafter referred to as “the company”), consisting of 34,400 shares, for the sum of $1,500,000, provided however, that the city shall not be under obligation to consummate the transaction if the appraisal of the properties of the company which is now being made for the city by R. W. Beck So Company does not, when completed, recommend the purchase of the said stock at said price.

“ ‘It is understood that payment for such stock is to be made by the city through the delivery to you of its mortgage revenue bonds in the above *650 amount (if and when the issuance of such bonds is properly authorized by a sufficient majority of the qualified electors of said city), which bonds shall be dated July 1, 1945, shall bear interest at the rate of three per cent, per annum. [Provisions relative to the maturity and redemption of said bonds.] * * *

“ ‘Said bonds are to be secured by mortgage on the electric system acquired by the city, which mortgage shall contain the customary provisions and shall be satisfactory to you, and said bonds when tendered to you for delivery are to be accompanied by the legal opinion of Messrs. Chapman and Cutler of Chicago, Illinois, approving the legality of said bonds and approving the provisions of said mortgage. [Provisions relative to the determination of the company’s net-eurrent-asset position at the time of closing the deal.] * * *

“ ‘Tour acceptance of this proposal shall be considered to constitute this proposal and your acceptance a contract between you and the city of Sault Ste. Marie.’ [Blanks for signatures of parties and for the city attorney’s approval of contract.] * * *

“Sec. 2. That when there shall be submitted to the city of Sault Ste. Marie by a solvent and responsible corporation authorized to operate utility properties in the State of Michigan, a proposal covering substantially the following points, the mayor and city clerk are hereby authorized in behalf of the city of Sault Ste. Marie to accept such proposal, but subject to ratification of the details thereof by resolution to be adopted by the commission:

“1. The corporation is to purchase from Edison Sault Electric Company at the time of closing, the properties of Edison Sault Electric Company lying outside the city limits of Sault Ste. Marie which are not desired to be owned and operated by the city.

“2. The corporation is to pay therefor the sum of $1,000,000, which sum is to be paid the city in cash at the time of closing and is to be used in retiring the outstanding mortgage indebtedness” [of *651 the Edison Company] ‘ ‘which presently constitutes an encumbrance against the property.

“3. The corporation is to lease from the United States of America and is to operate for a period of not less than 25 years, the hydroelectric plant which now supplies most of the electricity distributed over the system of Edison Sault Electric Company.

“4. The corporation is to agree to sell electricity at wholesale to the city for said 25-year period, and the city is to agree to purchase from the corporation during such period all electricity which is distributed by the city over its distribution system except such electricity as may be necessarily generated by the city’s steam stand-by plant as an incident to the maintenance of said stand-by plant in a ‘ready to serve condition.’ Payment by the city for the electricity so purchased shall be made from the revenues derived by the city from the resale of such electricity, and the city shall be under no obligation to pay for such electricity from any other funds.

“5. Electricity so sold the city by the corporation is to be at a price acceptable to the city.

“6. The corporation is, as a part of its agreement with the city, to enter into such arrangement with the city for the operation by the city of the city’s steam stand-by plant as will assure the use of said plant to the best mutual advantage of the city and the corporation.

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Bluebook (online)
21 N.W.2d 906, 313 Mich. 644, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sault-ste-marie-city-commission-v-sault-ste-marie-city-attorney-mich-1946.