Board of Lights & Waterworks v. Niller

Hines, J. The failure of a party excepting to an auditor’s report on matters of fact, or on matters of law depending for decision upon the evidence, to set forth, in connection with each exception of law of fact,' the evidence necessary to be considered in passing thereon, or point out the same by appropriate reference, or to attach as exhibits to his exceptions those portions of the evidence relied on to support the exceptions, is sufficient reason, in an equity case, for refusing to approve the exceptions of fact and for overruling the exceptions of law. Armstrong v. Am. Nat. Bank, 149 Ga. 165 (99 S. E. 884). The exceptions of law and fact to the report of the auditor in this ease comply with the above requirement. William Niller as trustee and the Board of Lights and Waterworks of the City of Marietta entered into a contract by which the former agreed to sell to the latter, for the sum of $15,000, all of the electric-lighting and power business then operated by said trustee, including all outstanding contracts and franchises then enjoyed by such trustee'or before that time owned and enjoyed by the Kennesaw Paper Co., and the good-will of said trustee and said Kennesaw Paper Co. in respect to said electric-lighting and power business in and around the City of Marietta, but not including any of the physical assets, cash on hand, bills, notes, and accounts receivable, or any other choses in action or contracts, except contracts made, with customers for furnishing electric light and power. Said board agreed to assume and carry out all legal contracts then existing between said trustee or the Kennesaw Paper Co. and any of its patrons for the furnishing of electric light and power as long as such contracts continued to be a legal obligation on either of said parties. The trustee agreed id completely dismantle said equipment, removing all poles, wires, and other -operating equipment from the streets, al — 298 — leys, and by-places in the City of Marietta, except the line from the paper-mill owned by said trustee or from such other general station as he might establish to the paper-plant connected with the waterworks system owned and operated by the trustee for the purpose of supplying light and power in the operation of said waterworks plant and the mill property. Said trustee further agreed that neither he nor any successor of his or the Kennesaw Paper Co. would at any time thereafter, provided the board complied with its agreements under said contract, operate any electric-light and power plant in the City of Marietta or the County of Cobb; and further agreed that he or his successor as such trustee would, upon the final payment of all of the purchase-money provided in said agreement to he paid,' make an absolute and unconditional conveyance to said board of all the property contracted to be sold. It was not shwn that the trustee had made an absolute and unconditional conveyance to said board of the property contracted to he sold; and no offer so to do was alleged or proved. The franchise under which said trustee was operating his light and power plant in the City of Marietta was not an exclusive one, and the grant thereof by the city did not inhibit the latter from building and operating a similar plant in said city. Before said agreement was made the board had built and was operating a light and power plant within said city; and the competition between the municipal plant and the plant of said trustee was feharp. The trustee sold to said board certain physical properties of his plant, consisting of transformers, meters, and wires, for which he was paid by the board $1500, being 50 per cent, of the then existing market value of such material. Certain witnesses testified that in their opinion the value of the franchise, the good-will of customers, the agreement of the trustee to discontinue his business and never again operate in Marietta, and the right of the board to buy the physical properties of the-trustee at half price, was $15,000. The trustee dismantled his plant. Thereafter the receipts of the board from the operation of its plant were largely increased, due to the elimination of the competition of the plant of the trustee. The auditor found as’ a matter of fact that the value of these intangible assets amounted to $15,000, and as a matter of law that the plaintiff was entitled to recover the sum of $12,000, with interest. To these — 299 — findings the board filed their exceptions, which we:$e overruled by the court. As the board had received none of the physical assets of the trustee for which he had not been paid, and as the board was not authorized to purchase the above intangible assets (Brumby v. Board of Lights and Waterworks, 147 Ga. 592, 95 S. E. 7), and as the trustee was not to make an absolute and unconditional conveyance of the above properties until the final payment of all the purchase-money, the law under such circumstances does not raise an implied promise on the part of the board to pay for such intangible assets. So the court erred in not sustaining the above exceptions of law and fact taken by the board to the findings of the auditor. One Brumby, a citizen and taxapayer of Marietta, filed his equitable petition against said board, said trustee, and E. P. Dobbs,- to enjoin the payment of the notes given to the trustee in. part payment for the intangible assets referred to in the last paragraph, and the note given by the board to Dobbs for the sum of $3000 with which the board paid the initial payment on the purchase-price of said assets, on the grounds, that the board was without authority at law to make said contract for the purchase-money of said assets, and to create the indebtedness represented by said notes; and because said indebtedness was created without the sanction of a popular vote, in violation of the constitutional provision governing the creation of said debt by said city. This court held that said contract was illegal, and that the payment of said notes should be enjoined. Brumby v. Board of Lights and Waterworks, supra. Thereafter the defendants amended their answers to the petition, and set up the same facts in substance as are now alleged in their petitions in the cases now under consideration. In his amendment Dobbs alleged: “Whilst this defendant insists . . that said contract was legal and binding, he alleges and charges that, whatever view the court might take of the validity of the contract, but considering, as plaintiff alleges, that in such ease the city board got from this defendant $3000 and used it for a purpose within its corporate powers and spent it for the betterment of its plant, . . this defendant should not be deprived of his money.” He further alleged: “ The said city board obtained the money of this defendant and ap — 300 — plied it to the furtherance and enlargement of a lawful corporate public utility, which said utility the city board now has and owns and operates for the use and benefit of the City of Marietta, her citizens and taxpayers, . . partly paid for with this defendant’s money, . . and in equity and good conscience the said city board should be permitted to refund to .and make full compensation to. this defendant of the money so had and received, and not be allowed to replenish its treasury to the loss, damage, hurt 'and injury of this defendant, who advanced to the said city board his money in good faith. . . For the reasons herein set out this defendant prays that the relief asked for by the plaintiff be denied, and that the petition be dismissed.” The trustee alleged in his amendment that the board had “ actually taken and 'received the transfer of the business, the franchises, and contracts owed by this defendant as a going concern,” and “ this defendant having, in good faith and in compliance with the terms and provisions of the contract between him and said board, dismantled his plant, taken down the poles, wires, and other equipment, and discontinued the business conducted by him, so that the sale of this business to said board should in no wise be limited or interfered with, the said board should be permitted to pay the obligation assumed by it in connection with such purchase, or at least to pay the purchase-price in whatever form such obligation may be said to exist; and the injunction prayed for should be denied, or so modified that the board should be permitted and directed to pay the purchase-price or to restore the parties to their original status, regardless of whether the court believes the notes outstanding are valid or not or could be enforced or not.” To these amendments to the answers of the defendants the plaintiffs demurred. The court sustained the demurrers. In the judgments sustaining the demurrers it was provided that “this .order is .without prejudice to any right that the defendant may have, if any he has, for restitution from the Board of 'Lights & Waterworks.” To the judgments sustaining the demurrers to. their amendments to their answers, the defendants excepted and took their cases' to this court, where the judgments of the court below were affirmed. Dobbs v. Brumby, 150 Ga. 599 (104 S. E. 440). The judgment of -this court was made the judgment of the lower court. To the petitions in the present .cases the board — 301 — pleaded the former judgments in bar of the present actions. The auditor held that the issues in the Brumby case and in the present cases were not the'same; and that the' judgments rendered in the former case would not adjudicate the matters involved in the present suits. • The issues raised by the demurrers to the amendments to answers of the defendants in the Brumby case, supra, were in substance the same as those involved in the instant cases; and the judgments in the former case, in effect, held that the plaintiffs' were not entitled to recover either on the express contracts set up in the petition or upon implied promises set up in these amendments to the answers of the defendants, to pay for the property purchased from the defendant trustee, and used by the board for the benefit of the 'City of Marietta and of its inhabitants, and to pay Dobbs for money borrowed by the board to pay for property purchased by the board from the trustee, and used by the city in the operation of its plant. In these amendments the defendants set up the same rights which they seek to set up and enforce in the cases now under consideration; and Dobbs expressly prayed that the board “be permitted to refund to and make full compensation to this defendant of the money so had and received,” and Niller as trustee asked that “the injunction prayed for should be denied, or so modified that the board should be permitted and directed to pay the purchase-price or restore the parties to their original status, regardless of whether the court believes the notes outstanding are valid or not or could be enforced or not.” It thus appears that the plaintiffs sought to enforce the same rights which they now assert. In sustaining the demurrers to these amendments to their answers in the Brumby suit, the court necessarily decided that these plaintiffs were not entitled to maintain actions for money had and received against the board. The provisions in each of these judgments that it was “without prejudice to any right that the defendant may have, if any he has, for restitution from the Board of Lights & Waterworks,” only reserved the right of each defendant, if any such right he has, to maintain an action against this board for restitution, which right we have undertaken to show does not exist in the first place, and the actions of the plaintiffs were not for restitution. — 302 — The rulings herein made do not conflict with the principle announced in Butts County v. Jackson Banking Co., 129 Ga. 801 (60 S. E. 149, 15 L. R. A. (N. S.) 567, 121 Am. St. R. 244), and similar cases, in which it was held that where money obtained by counties and municipalities, under express contracts which were void and unenforceable, was applied to the pa3rment of lawful demands against the counties or municipalities, the latter would be “liable for'money had and received by them and applied to their authorized objects, although the contract by which the money was obtained was unauthorized by law.” In the instant cases this court held that this board was not authorized to purchase these properties of the trustee, even if the board had the money on hand with which to pay for them in full (Brumby v. Board of Lights and Waterworks, supra); and this ruling being right, the board could not pay out the money of the city, either on the express contract or an implied contract, to effectuate unauthorized objects and purposes. As to the money borrowed from Dobbs, it was used to carry out the same unauthorized objects and purposes, and was not applied to any lawful demand against the board, and was used in discharging a debt for which the board and city were not in any way liable. In Chapman v. County of Douglas, 107 U. S. 348 (2 Sup. Ct. 62, 27 L. ed. 378), the owner of lands conveyed them to Douglas County for a poor-farm, and the county took possession of the lands and used them for that purpose. In pursuance of the purchase, the county made one payment on the purchase-price, and for the remainder of the purchase-money gave its notes, secured by mortgage, payable in one, two, three, and four years. The county had no authority to buy these lands on credit and to give its notes for the unpaid purchase-money secured by mortgage. Holders- of these notes filed a bill praying for a reconveyance and an accounting, or, should the county elect to retain the lands, then for a decree for the value of them. The Supreme Court of the United States said: “ As the agreement between the parties has failed by reason of the legal disability of the county to perform its part, according to its conditions, the right of the vendor to rescind the contract and to a restitution of its title would seem to be as clear as it would be just.” The differences between that case and the ones at bar are twofold: First, these cases are not for rescission and resti — 303 — tution, but to compel the board to pay for the properties purchased. Second, in that case the county was authorized to purchase a farm for the maintenance' of the poor, though not authorized to buy it on credit. In the cases under consideration, this board was without authority to buy these properties either for cash or on credit. In Peed v. McCrary, 94 Ga. 487 (21 S. E. 232), it was held: “Where the money of a lender has actually been applied to the legitimate uses of a county, that is, to objects to which county revenue may rightly be devoted, it is lawful to repay the loan out of the county treasury when funds for the purpose are on hand.” In that case,the money borrowed was devoted to objects to which the county money could be rightly applied. In the cases at bar, the municipal funds could not lawfully be applied to the objects for which they are sought to be made liable. The same distinction can be drawn between other cases relied upon by counsel for the plaintiffs; and thus distinguished they do not conflict with the rulings now made by this court. In a few days after the trustee received the notes given by the Board of Lights and Waterworks for the purchase of the properties which the trustee agreed to sell to said board, said trustee sold the same for their full value to the Trust Company of Georgia, and now has no further interest whatsoever in said promissory notes. By the sale of said notes any right of the trustee to maintain an action to recover the value of the property which he contracted to sell to said board passed to his assignee of said notes. Parkersburg v. Brown, 106 U. S. 487 (1 Sup. Ct. 442, 27 L. ed. 238). This being so, Niller, as trustee, failed to make out a case which entitled him to recover; and the court erred in not sustaining the exception, both of law and fact, of the defendant to the finding of the auditor that the board was indebted in the sum of $12,000 to said trustee. Whenever a municipality or one of its subsidiary or auxiliary commissions undertakes to contract a debt in violation of art. 7, sec. 7, par. 1, of the constitution of this State (Civil Code (1910), § 6563), such contract is prohibited, and is void and unenforceable under said provision of the constitution. Under this stringent provision, when property is received under such contract the law does not raise an implied undertaking on the — 304 — part of such municipality or commission to pay therefor, as the enforcement of such implied undertaking would enable the city and the purchaser to evade this constitutional provision and would in effect render the same nugatory and void. McCrary Co. v. Glennville, 149 Ga. 431 (100 S. E. 362); Dobbs v. Brumby, supra. Judgments reversed. All the Justices concur, except Bussell, C. J., who dissents from the judgment in No. 3220, and Atldnson, .J., who dissents from both judgments.