Milligan v. City of Miles City

MR. CHIEF JUSTICE BRANTLY delivered the opinion of the court. Since the year 1896 the defendant city had been the owner of a steam electric light and power plant which has capacity sufficient to produce the current necessary to light the public buildings, streets and alleys of the city and to furnish light and power for private use by its inhabitants. The funds necessary to install the plant — $30,000—were derived from a sale of bonds issued by the city. The revenues derived from the sale of current have always been kept separate from the general revenues of the city, in what is designated as the electric light and power fund. Except as noted hereafter, they have been devoted to the maintenance of the plant and the appliances for distribution of the current, to the payment of accruing interest on the bonds, and to they accumulation of a sinking fund for their redemption at maturity. There is now in the fund the sum of $18,000. The power station is situated on Fort Street between Seventh and Eighth Streets, which intersect Main Street to the north at right angles. The city hall is situated on Eighth Street, somewhat less — 380 — than a block south of Main Street. During the year 1914, desiring to heat the city hall, and deeming it practicable to accomplish this by making use of the exhaust or waste steam at the plant, the city council caused the installment of a main steam-pipe line from the plant along Eighth Street, with the appliances necessary to divert the steam into the main, and'thence into the building. This main, as then installed, extends beyond the city’s property north to the middle of Main Street, and is of capacity sufficient to conduct all the steam wasted at the plant. The expense of installment was paid out of the light and power fund. During the following winter season the steam not required to heat the city hall was furnished for private use to persons owning buildings abutting on Eighth Street. At the time this was done it was the intention of the council at some future time, if the initial installment proved effective, to cause the main to be extended east along Main Street to the city library, which occupies a corner at the intersection of Main and Tenth Streets, and also to the west to Fifth Street. By this extension the council proposed to furnish heat to the library building, and incidentally to the owners of business buildings abutting on Main Street at reasonable rates, expecting thus to increase the efficiency of the light and power plant by making the waste steam a source of profit to the city. At a regular meeting of the council held on May 27, 1915, a committee having had the question of extension under consideration, reported the result of its investigations and recommended that the projected extension be made. The report was adopted, and thereafter contracts were regularly let for materials and labor necessary to effect the extension. The contracts contemplate an expenditure of $10,600 out oí the light and power fund to be replaced by the revenues derived from the sale of steam. The plaintiff, a resident of the city and a taxpayer, thereupon brought this action to restrain the prosecution of the work under the contracts. Upon the filing of the complaint, and without notice, the court issued an injunction pendente lite. The defendants thereafter, upon a showing of facts by affidavits and — 381 — oral testimony, moved for a dissolution. The motion having been denied, the defendants have appealed. The trial judge made no findings of fact. As appears from his memorandum opinion found in the record, he devoted his attention to two questions of law only, regarding the solution of these as determinative of the rights involved, viz., whether the plaintiff may maintain the action, and whether the defendant city has the authority, under any circumstances, to install the proposed improvement. The questions of fact whether the proposed improvement will be practicable, and whether, in view of the amount of expenditure, it will prove profitable, seem to have been wholly lost sight of. Counsel have not discussed these questions in their briefs. On the contrary, though a considerable amount of evidence was introduced at the hearing on the motion to dissolve, counsel have assumed not only that the extension will prove effective, but also that it will be a source of profit. We shall therefore not stop to examine the evidence, but adopt the assumption of the trial court and counsel, and determine only the questions submitted, leaving it to the trial court to determine the questions of fact upon the final hearing on the merits. 1. Counsel for the defendants seriously contend that the [1, 2] appellant cannot maintain this action, for the reason that the proposed expenditure will not affect the taxpayers of the city generally, but only the city in the exercise of its business powers, and the users of electric light and power. We cannot appreciate the distinction counsel endeavor to make between taxpayers of the city, as such, and those taxpayers who use light and power. The light and power plant was installed at the expense of all the taxpayers of the city, the necessary funds having been realized by a sale of its bonds. These are liabilities of the corporation to the discharge of which all the taxpayers must contribute, directly or indirectly. The plant is their property. The revenues derived from the sale of its product belong to them, because, though kept separate from the revenues derived from general taxation, they are part of the p ublic moneys. — 382 — The rule'is well settled that, in the absence of legislation restricting the right to interfere to some public officer, the courts will, upon the application of one or more of the individual taxpayers, interfere by appropriate process to prevent an unlawful expenditure of public money by the officers of the corporation or the incurring of an obligation which -will render such expenditure necessary. There never has been any such restrictive legislation in this jurisdiction, and from an early date in the history of the state the right of the taxpayer to maintain an action to prevent or restrain misuse of corporate power has been recognized and enforced. (Chumasero v. Potts, 2 Mont. 242; Davenport v. Kleinschmidt, 6 Mont. 502, 13 Pac. 249; Id., 8 Mont. 467, 20 Pac. 823; State v. Board of Commissioners, etc., 21 Mont. 469, 54 Pac. 939; Buck v. Fitzgerald, 21 Mont. 482, 54 Pac. 942; State ex rel. Bean v. Lyons, 37 Mont. 354, 96 Pac. 922; Carlson v. City of Helena, 39 Mont. 82, 17 Ann. Cas. 1233, 102 Pac. 39; State ex rel. Stuewe v. Hindson, 44 Mont. 429, 120 Pac. 485.) The conclusion that the plaintiff may maintain the action was therefore correct. 2. The rule of construction applicable to the charter of a municipal corporation or the statute authorizing its creation is stated by Mr. Dillon as follows: “It is a general and undisputed proposition of. law that a municipal corporation possesses and can exercise the following powers, and no others: First, those granted in express words; second, those necessarily or fairly implied in or incident to the powers expressly granted; third, those essential to the accomplishment of the declared objects and purposes of the corporation, not simply convenient, but indispensable. Any fair, reasonable, substantial doubt concerning the existence of power is resolved by the courts against the corporation, and the power is denied. Of every municipal corporation the charter or statute by which it is created „is its organic Act. Neither the corporation nor its officers can do any act, or make any contract, or incur any liability, not authorized thereby or by some legislative Act applicable thereto. All acts beyond the scope of the powers granted are void.” (1 Dillon, Mun. — 383 — Corp. (5th ed.), sec. 237.) The rule as thus stated has been approved and applied by this court in many cases. (Davenport v. Kleinschmidt, supra; State ex rel. Quintin v. Edwards, 40 Mont. 287, 20 Ann. Cas. 239, 106 Pac. 695; Helena Light & Ry. Co. v. City of Helena, 47 Mont. 18, 130 Pac. 446; Shapard v. City of Missoula, 49 Mont. 269, 141 Pac. 544.) “The reason for the rule is that it must be presumed that the state has granted in clear and unmistakable terms all that it intended to grant at all.” (State ex rel. Quintin v. Edwards, supra.) It is true, as counsel for the defendants argue, that the powers granted to a municipality are to be distinguished into two classes [3] —the first including those which are legislative, public or governmental, and import sovereignty; the second those which are proprietary or quasi private, conferred for the private advantage of the inhabitants and of the city itself as a legal person. (State ex rel. Gt. Falls W. W. v. City of Great Falls, 19 Mont. 518, 49 Pac. 15; Illinois Trust & Savings Bank v. City of Arkansas City, 76 Fed. 271, 22 C. C. A. 171, 34 L. R. A. 518.) Nevertheless the statute is the measure of the power granted, whether the particular power in question is assignable to the one class or the other. The inquiry must always be in this class of cases: (1) Whether there is an express grant; (2) whether there is a grant by necessary implication; or (3) whether the power in question is indispensable to the accomplishment of the object of the corporation. Now, it is conceded by counsel on both sides — and rightfully [4] so, we think — that a city has the power, under the general law relating to cities and towns, to install at public expense a lighting plant to supply light, not only for its public buildings and streets, but also for use by its inhabitants. Section 3259, Revised Codes, provides: “The city or town council has power: 1. To make and pass all-by-laws, ordinances, orders and resolutions not repugnant to the Constitution of the United States, or of the state of Montana, or of the provisions of this title, necessary for the government or management of the affairs of a city or town, for the execution of the powers vested in the body corpo — 384 — rate, and for carrying into effect the provisions of this title. * # 5. To build or hire all necessary buildings for the use of the city or town, and to heat and light the same. * * * 7. To provide for lighting and cleaning the streets, alleys, and avenues. # # * 64. To contract an indebtedness on behalf of a city or town, upon the credit thereof, by borrowing money or issuing bonds for the following purposes, to-wit: erection of public buildings, construction of sewers, bridges, waterworks, lighting plants,” etc. A reading of these provisions together leads to the conclusion that it was the purpose of the legislature to enable a city or town to establish and maintain at public expense a lighting system to supply the needs of its inhabitants, just as it was the purpose to enable it to make suitable provision to serve their convenience and secure their health and comfort by providing bridges, sewers, and a water supply; for it is clear that in providing for bridges, sewers, and a water supply, it had in mind the inhabitants of the municipality as a whole. Therefore, under the rule of construction applicable which is expressed in the maxim noscitur a sociis, the provision for lighting plants must be given the same scope. But, as we have said, it is not controverted that the city has ample power in this behalf. The theory adopted by the trial court and urged here by counsel for plaintiff is that the city has [5] no power to expend any portion of the surplus in the light and power fund, even though the expenditure will turn to profitable use what has heretofore been a total loss, because the statute does not so expressly declare, or, in any event, because the installment of the improvement is not indispensable to the well-being of the city. A brief consideration of the subject will demonstrate that this theory is not correct. When a city is engaged in operating a municipal plant under an authority granted by the general law, it acts in a proprietary or business capacity. In this behalf it stands upon the same footing as a private individual or a business corporation similarly situated. (McQuillin, Mun. Corp., sec. 1801; Dillon, Mun. Corp. (5th ed.), sec. 1303; Helena Consol. Water Co. v. Steele, 20 Mont. 1, 37 L. R. A. 412, 49 Pac. — 385 — 382; City of Henderson v. Young, 119 Ky. 224, 83 S. W. 583; Omaha Water Co. v. Omaha, 147 Fed. 1, 77 C. C. A. 267, 8 Ann. Cas. 614, 12 L. R. A. (n. s.) 736; Davoust v. City of Alameda, 149 Cal. 69, 9 Ann. Cas. 847, 5 L. R. A. (n. s.) 536, 84 Pac. 760; Western Sav. Fund Soc. v. Philadelphia, 31 Pa. 175, 72 Am. Dec. 730; Indianapolis v. Indianapolis Gas L. etc. Co., 66 Ind. 396.) This proposition being conceded, as it must be, it logically follows that the city may install the necessary fixtures and appliances and conduct its operations as does a private corporation engaged in the same kind of business. Common prudence requires that it anticipate the probable growth of population and increasing future needs; that it take note, from time to time, of changing conditions, and adopt improved devices in order to bring and keep the plant up to the highest degree of efficiency; that it make such disposition of any surplus or by-product as will promote economy in its operation and gain for the people the greatest possible return for the capital invested — in short, that it do anything that an intelligent business man or corporation, guided by the dictates of prudence and experience, would do under the same circumstances. A private corporation having a franchise to supply the inhabitants of a city with water would be guilty of want of prudence and foresight if it should obtain a supply sufficient for present needs only, without regard to a probable increase in population and hence to a growing demand upon it. So it would be chargeable with a lack of business capacity if in the meantime it should permit the surplus to go to waste, instead of selling or leasing it for some other profitable use. The same holds true of a corporation organized to supply light. It would be short-sighted indeed if it limited the capacity of its plant to actual present necessities. It is a matter of common knowledge that gas companies have several by-products. A neglect by such a company to turn these by-products to profitable use by selling them, and, if necessary to enable it to do so, to incur the preliminary expense required for that purpose, would exhibit lack of business capacity. These remarks are applicable — 386 — to a city which under authority of law engages in the same kind of an enterprise. It holds the property represented by the investment, in trust for its citizens. The law which enables it to assume this trust by necessáry implication confers the power upon it and its officers to execute it, and thereby imposes upon them the duty to gain the greatest benefit to the taxpayers. If it has a present surplus of water or current, the dictates of common business prudence require that such surplus be sold, and the proceeds devoted to public use, until the increasing demands of the people absorb it. (Pikes Peak Power Co. v. Colorado Springs, 105 Fed. 1, 44 C. C. A. 333.) So of the surplus and by-products of city gasworks. To say that a city may not turn the waste or exhaust steam from its electric light plant to profitable use is to say that, though the legislature has empowered it to install and' operate a light plant, it has withheld from it the power to operate it upon intelligent and economic principles. This cannot be so. On the contrary, the grant of power to install and operate necessarily implies all the incidental power to do anything that any business man or corporation ought to do. The statute does not in terms confer the power upon the city to install and operate a heating plant, except for its public buildings. For present purposes it may be conceded that it would not be lawful for a city to install a steam-heating plant to supply its inhabitants or for the defendant city to manufacture steam at its lighting plant for that purpose. This consideration by no means carries with it the conclusion that it may not sell its waste steam, and, if it cannot do so otherwise, may not at public expense lay the mains or conduits necessary to convey it to places where there is a demand for its use, and there install the appliances necessary to enable it to meet the demand. On the contrary, we think it not only has the power, but it is its duty, to do so, provided this is practicable and will prove a source of profit, and provided the expenditure required will not create an indebtedness or permanently impair the income derived from the plant. — 387 — The order is reversed, and the cause is remanded, with directions to the district court to proceed in accordance with the conclusions stated in this opinion. Reversed and remanded. Mr. Justice Sanner and Mr. Justice Holloway concur.