Muskegon Traction & Lighting Co. v. City of Muskegon

Brooke, J. (after stating the facts). Appellant states the vital questions presented as follows: “(1) The character and validity of the so-called lighting plant sinking fund attempted to be created by the council of said city. “(2) Whether the above-quoted section 42 of title 7 of the charter of said city is null and void as against the rights and franchises of complainant, in that said section — 336 — is in violation of section 1 of article 14 of the Constitution of the United States, for the reason that at the time of the granting of the aforesaid franchises now owned hy complainant, and in reliance upon which it has made large expenditures, there was no authority of law and no provision in the then charter of said city of Muskegon authorizing it to purchase, or to construct and to operate and maintain an electric or other lighting plant, for the purpose of supplying the city and the inhabitants thereof with proper lights, for municipal, domestic, and other purposes, and such right cannot be lawfully conferred upon said city so long as the franchises of complainant remain in force.” Under the first subdivision we understand complainant’s position to be that the action of defendant in creating or attempting to create a sinking fund should be held to be nugatory for three different reasons: First. Because the action of the council in creating the sinking fund was not taken seasonably. The statute provides : “That in case such plant shall be established, there shall, at the time of the establishing thereof, be created a sinking fund,” etc. Complainant urges that: “ The entire scheme of the council for the establishment of a municipal lighting plant, including the creation of a sinking fund and. the proposed issue of bonds, should have been submitted to the qualified electors of said city for their ratification or rejection.” We search the charter in vain to find language requiring the sinking fund to be created in advance of the election. It cannot be said, as contended by counsel for complainant, that the plant was established by the affirmative vote of the people upon the bonding proposition alone, that was one of the necessary statutory steps in the proceeding, but we think it clear that the plant was not established in any legal sense until August 15, 1910, upon which date the council, after reciting the preliminary steps, definitely authorized the issuance of the bonds, and — 337 — provided for the sale thereof. Upon the same day the resolution creating the sinking fund was passed. This was, in our opinion, the earliest moment at which this action could legally have been taken. The electors, in voting upon the proposition, could not have been misled, for the resolution of March 7,1910, providing for the election, fully advised them of every fact material to the issue. No reason, therefore, exists for holding that the action of the council in providing for the sinking fund was taken too late. It might, indeed, be urged that the action was taken too early, upon the theory that in using the words, “at the time of the establishing thereof,” the legislature had reference rather to the physical act of creation than to the legal step necessarily preliminary thereto. “ To establish ” means “ to originate and secure the permanent existence of; to found; to institute; to create and regulate; to make stable and firm.” We are of opinion that the legislature used the word “establish” in this statute to characterize a legal, rather than a physical, act. The case of Ketchum v. City of Buffalo, 14 N. Y. 356, cited and relied upon by complainant, has been examined, but it does not, in our opinion, militate against our present holding. Second. It is next urged that, in providing for the payment into the fund of the full amount of $75,000, the council has acted illegally, in that it has ignored the earning power of the money in the fund from time to time. Complainant shows that if the payments are made into the fund, as provided by the resolution creating it, and the money is kept invested at 4 per cent, per annum compounded until the last bond is paid, there will remain in the fund after such payment the sum of $32,707.33. It is therefore claimed by complainant that the council acted unlawfully in calling upon the taxpayers to raise that sum in excess of the amount needed to retire the bonds at maturity. This contention assumes that two things will occur, neither one of which is likely to happen. In the — 338 — first place, it assumes that the custodians of the sinking fund will be able to invest the money at 4 per cent. This, it seems to us, is an assumption wholly unwarranted. The first consideration involved in the care of such a fund is the absolute security of the principal. While the earning capacity of the fund should not be ignored (Commissioners v. Walker, 6 How. [Miss.] 143 [38 Am. Dec. 433]; Sinking Fund Cases, 99 U. S. 725), it can only be realized upon under such limitations as eliminate entirely the element of speculation. This necessarily involves investment in securities bearing a low rate of interest, and it is conceivable that during a portion of the time, perhaps even during all the time, such might not be available. Again, it assumed that payments will be made into the fund after it has reached a sum adequate for the retirement of all the bonds. We can scarcely conceive of such a course being taken. The law provides: “Such sinking fund shall be kept inviolate and used for the payment of the principal of said bonded debt and for no other purpose.” It is not to be supposed that the city, through its responsible officers, would continue to tax itself for money to put into a fund already sufficient to meet the purpose of its creation, and particularly is this true when we consider that the excess fund so created cannot be devoted to any other purpose. Third. The use of the words “not less ” occurring in the resolution creating the fund is criticised. It is urged that under this resolution payments may be made into the fund largely in excess of $4,000 per annum, the sum named in the resolution. What we have said in answer to the second objection is pertinent here. Counsel for complainant neglect to'point out any possible reason, and we are able to apprehend [none, why the defendant city should tax itself to create a fund largely in excess of any demands which can be made upon it, when the law distinctly points out the only use to which the fund may be devoted. — 339 — Again, it is claimed that, in providing for the sinking fund, this resolution should have determined a “certain fixed amount” to be taken from the revenue received from the users of such lights, and a “certain amount ” to be paid from the contingent fund of the city. Instead of doing this, the resolution provides for the payment of not less than $4,000 annually into the fund from both sources. We must assume that the legislature did not intend to require an impossible thing to be done. In advance of the installation and actual operation of the plant, the council can have no information as to the number of users of the lights or the approximate .'revenue to be derived therefrom. It must be borne in mind that complainant now has in operation a completely equipped and extensive plant which is giving service to the individual consumers as well as to the city. How many of these will patronize the municipal plant in preference to that of complainant can be known only by experience. Aside from these considerations, we are of opinion that the charter itself does not bear the construction contended for by complainant. It evidently means that, with the necessary information in hand, the council shall, from time to time, fix the several sums to be taken from each source. We now come to the consideration of the claim of the complainant that the charter provision under consideration is unconstitutional and void, and against the vested rights of the complainant. This claim was not urged in the court below, and was not there-passed upon. It is, however, fully urged here. It seems to be the contention of complainant that, because the ordinance permitting it to use the streets, alleys, and public places in the defendant city under certain restrictions, was approved May 8, 1900, and has still nearly 19 years to run, therefore the city is precluded from undertaking the erection of a municipal plant which will become a competitor with complainant for business. To agree with this position would be to hold that, in passing the ordinance in question, the defendant city had placed itself in the hands of ■ a monopoly for — 340 — the period during which the ordinance is operative. We cannot so hold. It would, we think, scarcely be contended that the city might not license another competing company to use its streets, etc., for the purpose of furnishing a necessity to the inhabitants thereof. Detroit, etc., R. Co. v. Railway, 171 U. S. 48 (18 Sup. Ct. 732); City of Joplin v. Light Co., 191 U. S. 150 (24 Sup. Ct. 43); Knoxville Water Co. v. Knoxville, 200 U. S. 22 (28 Sup. Ct. 224). If it may do this, why may it not itself engage in such competition ? Sections 23 and 24 of article 8 of the Constitution of 1909 clearly clothe cities and villages with the necessary authority to engage in such enterprises under the restrictions there imposed. But it is said by complainant: “ It does not appear to be seemly that there should exist a condition of affairs which is certain to bring about competition between the city and private parties, bringing loss to all concerned, without profit or advantage to the city or anybody else.” The “certainty of loss to all concerned” apprehended by complainant rests solely upon supposition. There is no evidence to support the prediction. But, even if it were conclusively proven that this undertaking would result in loss to the city as well as to complainant, the courts would be powerlesB to restrain the city from its proposed course. Its power is complete and undoubted, its electors are dealing with their own money, and, if they choose to invest it in losing enterprises, so long as they comply with the law, it is their own concern. See Hamilton Gaslight & Coke Co. v. City of Hamilton, 146 U. S. 258 (13 Sup. Ct. 90);. Knoxville Water Co. v. Knoxville, supra. We are of opinion that the learned circuit judge reached a proper conclusion. The judgment is affirmed. Ostrander, C. J., and Bird, Steere, Moore, MoAlvay, Blair, and Stone, JJ., concurred.