THOMPSON
HOUSTON" -ELECTRIC
00.·:11. ,CITY,! OF NEWTON.
723
the deed exclude the idea that it was kept alive against Mrs;:Otd and complainant, or either ofthem, but are consistent with the claim that it was continued as an account showing the cost to the bank of the property. Certain it is, also, that if the account showed an existing indebted. ness against complainant, it showed precisely the same thing in respect to Mrs. Ord; and that would prove tooinuch for complainant's case, which concedes that Mrs. Ord's indebtedness was paid by the conveyance in question and his assumption of the debt. It is incredible that any sane bankers would have allowed so large ,a debt to stand until it was barred over and over again by the statute of limitations, and that, too, without even ever demanding payment of interest or principal; and it is asking too much of a court to believe that the complainant ever understood that Lazard Freres would permit him. to owe them so many thousand dollars without a scratch of his pen to show for it, and without ever calling upon him for interest or principal during a11the years that have since elapsed. I think the case is without any merit on complainant's part, and, accordingly. there· will be a decree dismissing the bill, and awarding 'CXOSB-complainant the relief demanded in the costs.
TuOJrlPSON HOUSTON ELECTaIC
Co. ". CITY
OF NEWTON et
al.
(m,.ctl:tt Ooun. So D l IfYWa, a.D..June 24, 1890.) L l[umCIP.lL CoUPORATIONs-I'uBLW IMPROVEMENTs-ELECTRIC. LIGHT. Under Acts 22d Gen. Assem. Iowa, C. 11, which authorizes cities to establish and maintain electric light plants when the majority of the voters of the city shall by vote approve the s.ame, a city, may erect an ,electric plant for the purpose of fqrnishing light to its inhabitants 'in their stores and houses, as well as for lighting the streets and pUblic places of the. city. · 2. SAME. The actioJ1. of a city in authorizing a private corporation to erect an electric plant for the purpose of lighting the city, without any g'rant of exclusive rights, does not deprive the city of the right, under said statute, to erect plant itself for the same purpose. 8. S.un-BoNDs-SUBMISSION TO VOTE. ' Where it is intended to pay for said plant by the issuance and sale of city bonds, it is proper to submit to vote the entire matter of erecting the plant and issuing the bonds in one proposition.
Under thlLt provision of said Mt which provides that the city council may orper the submission of the question of electric lighting to a vote, or that the mayor may do so upon petition of a certain number of tax-payers, the adoption of an ordinance . providing for the erection of an electric plant is not a condition precedent to tbe . . submission of the question. . . 6. SJ.ME-CONSTITUTI01UL LIMIT Ol':DEBT. Where,at the time the issuance of city bonds is authorizEld by vote, the issuaT;lce of such bonds would the city debt beyond the constitutional limit, but the bonds are not issued until libe debt has been so reduced that their issuance does not bring it beyond such limit, the bonds are not void, since no debt is created till the bonds are issued. .
"
SAME-ORDINANCE.
5.
SAME-b.rUNCTJON.
a tu;-plloy6r.
The fact'tba't city bonds wll1'8sold and delivered before the ordinance providing for them took effeot iaao,ground for e1\joinini their ,,pa1,ment IIot suit. r# . . . . '
724 In Equity.
"'FEDERAL REPORTER,vOl.
42. E. J. Salmon and
H. S. Winslow and Clark Varn'um, for complainant. J. G. Day, for defendants.
Oiunotion for injunction.
SHIRAS, J. From tneallegations of the bill filed in this cause, it apis a corporation created under the laws of pears that the the state ,of Connecticut, and is engaged in the business of erecting and operating electric light plants, and furnishing electric power; that by a contract entered, into with the city of Newton, Iowa, it obtained the right to erect and maintain an electric light plant in said city, and did so erect and maintain the same, and furnished lights .to .private citizens, and a]ao,by contract with. the city authorities, furnished lightsJor the streets' of said city,--:-the latter contract terminating, January alld public 23,1890; that, its agreement,with the city, the complainant has expended, $20,000 in the erection of said electric light plant, and is .Pl1epared and is able to furnish all the electric light, both IlTC, lJ.t\(l incandes\leI\t, .needed for; lighting the streets; and public places QfJpecity, and to S\1Pply the wants of the pe()pleof said city, which has a population of about 3,000, and is what is termed in the of Iowa a city of the second class; that said city is now proposing to erect and maintain an electric light plant with which to light not only the streets and public places of the city, but also to furnish to the inhabitants.1ight for prtvate use;, that it is the purpose of the city to issue municipal bohdi3to the'amo'Ul'lt'(jf $14,OOOt'or the erection of such electric light plant, and to tax the property in said city, including that owned by'complainant, fOf the purpose afpaying the interest and principal of said, bonds; and that the right to erect such electric plant and issue such bonds is claimed under a vote had at the annual city election, held March 30, 1890. An injunction is sought against, the etectipn,Of such ahd' against' the issuance of the bonds for suchpurposej the bHl thus presenting two general grounds, upon which is basfld the relief sQught. ,.By Assem. Iowa, it was enacted that cities sholtld have to establish and 'maintain electric light plants, Or to authorize the erection of the same, "but no such works shall be erected or authorized until a majority of the voters of the city or town, at a: general or special election, by vote, approve the sar;rJe;" and by sectio,n 3 of the act it was provided that the city should have power to issue honds electric plailts, subject to the restriction for'thejmrpose of' that. the total amountofjndebtednessJor all purposes should not exceed 5 per:certt. of the assessed value of the within thecit,Y. The theory of the complainant is that under this statute the city had theoption given it in regard to electricplant'l, and that it could originaUyllave erected the Same by vote of the. people, but, having elected to authorize private, parties so to do, it is estopped· from afterwards entering the field as a competitor; tbat while the complainant has not an :exclWlive right under its agreement with the city, ,and ohject to "tbe"bityautllorizing other private companies or 'persons to: ,and
THOMPSON HOUSToN ELECTRIC CO. fl. CITY of NEWTON.
725
maintain electric plants in the city, yet complainant has the right to enjoin the city from undertaking the work, because the city can, through the exercise of its taxing power over the property in the city, including that owned by complai-nant, raise money for the running of the plant, instead of being compelled to provide the same by charging for the use of the light, and thus the city can practically drive complainant out of the field,and destroy the value of its plant, which was erected in the city by an agreement with the municipal authorities. There is great force in the suggestion thus made. It is doubtl.ess true that, if the city .enters the field by the erection of its own plant, it will have an advantage over the complainant; yet it does not follow that the court can interpose and restrain the city from erecting the contemplated plant. As already stated, the city did not grant any exclusive rights to complainant; and the latter, when it erected its plant, took the chance as to future competition. All that is now shown is tbatthe city proposes to erect an electric plant, and to raise the money for so doing by the issu. anceof bonds in the sum of $14,000. The statute confers tIJe right so to do upon the city; and lean see no ground justifying the court in in"" terposing by injunction, and preventing the city from establishing its proposed plant. The suggestion that the city may use its taxing power so as to prevent complainant from fair competiti9n on its part is a sug-. gestiononly I and not the averment of a fact. The city may establish such rates for the lights furnished by it as to enable the complainant to fail:ly compete therewith. If it do so, and theeity can supply its citizens at a lower rate, are not the latter entitled to the· benefit thereof? It is entirely possible that the proposed action of the city may cause loss to the complainant. But there is no ground justifying .action by the court short ofholding that, by the mere action of the city in authorizing the complainant to establish its plant without any grant -of exclusive rights, the city thereby deprived itself of the right to erect an electric plant for the benefit of its citizens. and this extreme groUnd I am not prepared to take. It is also urged that the city has only the authority to erect an electric plant for the purpose of lighting the streets and public places of the city, .and-is not authorized to furnish lights for use in the houses and stores ·of its citizens. The act of the general assembly giving the right to cities to erect, or to authorize the erection of electric plants, makes no distinction between lights used for public or private purposes; and the right .of the city in the erection of its own plant is not limited in any other way than iii! the right of a company authorized by the city to erect the the uniform rule that a city, in erecting gas-works. plant. ,or water-works, is not limited to furnishing gas or water for U88 only up-on the streets and other public places of the city, but may furnish the Bame for private uSe; and the statutes of Iowa now place electric light plants in the eame category· . The nex:t ground relied on in support of the .right to an injunction is that the qllestion of establishing the electric plant was not properly Jillitte<lt<>; of city, a.nd that the authority '
726,
FEDERAL REPORTER,
vol. 42.
not exist in the city authorities tc:h,mdertake its erection. The statute requires the question of erecti1'lgart plant to be submitted to the voters. It appears that February lO, 1890, the city council passed a resolution to the effect that, in liticordance with sEiction 4, c. 11, of the Lam of the 22d General Assembly of the of Towa, there be of said city at the next general elecsubmitted to the qualified tioh, on the first Monday in March, 1890, the proposition to issue the of the city of Newton; Iowa, to'the amount of not to exceed $14,OOO,or' eo much thereof as in the judgmelit of said city council may be needed, to be used :for the construction of an fllectric light plant to supply light for the city of Newton and its inhabitants. Certain petitions, signed by 25 or more resident tax-payers in each ward of'the city, were presentedto the mayor thereof, requesting him to Bubmit at the next general' eleCtion the question whether an electric light' plant shall be established in said cityby the municipality, in pursuance of chapter 11 of the Acts of the 22d General Assembly, to be owned and operated by said city, 8I1dthat, if it be be determined by a majority of the votes cast that such plant be establishoo, the! bonds of the city be issued to the amount of $15,000, or so much thereof as in the judgmE'nt of the city council should be needed fofsuch work. Thereupon the mayor issued,his proclamation addressed to the eleotal's of the city of Newton, and reciting the resolution adopted by the council; and the presentation of the petitions aforesaid, and notifying said electors that at the coming generalelection the question as set oufinthe resolution, of the city council woUld be submitted to them,andcol1til1uing: such proposition-that is to say, that an electric plant be established by said city to supply light for said mutJt6ipality and the inhabitants thereof, amI to providefot the payment of the :saineby their issuing bonds of ,said: city in an IImollnt .of· not -to excel'd fourteen thousand dollars, or so mucq 1\8 in the said may be needed for which sJJ,all.beli'r iuterest at.tbe rate of not exceedsuch ing six per Cent. pel' ann'um, interest to be payalJleannllally; and which bonds shall be redeemable in ten years, and pa.rable in twenty years-shall have balluts either written or printed, andshllll be in the following form, · For electriclig'ht plant, 'aud those opposeU to said proposition shall have ballots eitht'r written or and in the following form, 'Against light plant.
The form of the ballots is inexact accordance with the requirements of section 4 Of the act of the twenty-second general assembly. The objection urged to the resolution of thecburicil,the petitions of the tax-payers, and the mayor iathat the propositidnsubmitted to the voters embraced two matters: (1): S'houldthe city erect all electric light plant? '(2) Should the city issue bonos in the sum of $14,000 or less to pay therefor, running 20 that these two matters should either have been ·lIubrnitted at 'two different elections" or in two separate propositions at the same election, so that each elector could have voted as he pleasedon'each proposition, BY' reference to thenct of the twentysecond general assembly, it Wi1lbe l3eenthat it ptovides that cities may erect, or the erection of, electric light plants, provided· the elect-
THOMPSON HOtTBT,ON ELECTRIC CO. r.CITY' OF NEWTON.
727
,ors so determine, ana that the cities may issue bonds for that purpose; and then, when providing for the election, it prescribes the form of the ballot to be used. When the, electorsofa city are called upon to Note upon the question· of the erection of an electric plant, it is of the higheElt importance for them to know what provision is to be made for payment 'of the expense of such erection; and it seems to me that the true wishes of the voters can be ,better ascertained by submitting to them the terms .upon which the council expect to be able to erect the plant, than by submitting the single question of erecting or not erecting. Voters are not .prepared to vote understandingly upon such a question unless they know how it is proposed to raise the funds needed in the erection of tbeplant. The proclamation of the mayor submitted to the voters the exact propositionthat they were called upon:to decide, and in a way that could not mislead anyone who, would take the trouble to read the proclamation; :and, while it may be true that. some voters might wish to vote for the erection of an electric plant,but agamst the issuance of bonds for that purpose, and that they did not. have the chance to express their. wishes is this particular, yet such fact cannot invalidate the election; that was held. The question the citycouncU wished to ,have .decided, was not as to the abstract views oithe tax-payers upon the question of the erection t)f electric plants, without rep;ard to the ,manner of paying the cost thereof, but upon the one form oftheproposition,-whether the voters favored the erection of such plant by,the city when to do so the city would he ,required to issue bonds to an amount not exceeding $14,000. I cannot see that substantial objectioR be taken to the form of proposition submitted; .and, the majority ,of the voters having cast their ballots in favor of the erection of the electric plant,.it must be htlld that thereby the city was authorized to ,ull.dertake the erection of the plant, and to issue bonds for that purpose. !tis furtber urged tbat the city cannot preperly undertake the erection of the plant except by the adopt.ion. of an ordinance providing therefor; a resolution to that ,effect being insufficient. The statute of Iowa ereatingmunicipal corporations does not make clear when the municipaJaetionshould be by ordinance, as distinguished from a resolution. If the passage of an ordinance is needed to authorize the city to enter upon the work of erecting and maintaining an electric plant, .such oourse is still open to the city. ' I do not think the adoption of an ordinance was neces.aary to authorize the submission of the question to a vGteof the electors. The statute provides that, the couucil may order the submission of the question to a vote, Or that the' mayor ,may order the, ,submission upon petitiop of the requisite number of tax-payers; and this precludes the idea of the necessity of.adopting an ordinance as an essential ,uisiteto submittiQg the matter to the electors. It is the action of the voters under the provisions, of the statp,te that authorizes the city authorities to undertake the ere.ctionof the plant; and, even though there J:naybe force in the suggestion that an. ordinance specifically providing fpr tlJ,eerection thereof ought to be paslS6d,ldo not see that thefaet that such .ordinance' has not yet been adopted calls for action on the part of .t,he-QOJUt:by,way ofinjunction. '" , :
can,
728
FEDERAL REPORTEIl,
voI.42.
It is also averred in the hill that the issuance of $14,000 in honds will increase the indebtedness of the city over the constitutional limit of 5 per cent. upon the taxable value of the property within the limits of the city. According to the showing made in the affidavits submitted by complainant; the indebtedness at the time the vote was taken was such that the issuance of $14,000 in bonds would carry the amount due somewhat over the 5 per cent. limitation; but, as appears from the affidavits submitted on behalf of the city, before the city in fact issued its bonds the indebtedness had been reduced by payments thereon so that the addition of the $14,000 to the amount existing at the date of the bonds did not reach the constitutional limit. The vote of the electors did not create an existing indebtedness. It authorized the city to undertake the erection of an electric plant. The city authorities, in carrying on this work, are subject to the constitutional limitation; but no deht was created until the bonds were issued and sold, and at that time the indebtedness was not increased over the limitationrby the sale of bonde. . It further appears that on the 28th of April, 1890, the city council passed an ordinance reciting the result of the election. on the question of the erection Of an electric plant, and providing that the mayor and city clerk are authorized and directed to tssue bonds of the city in the sum of $14,000, 20 thereof to be of the ,denomination of $500 each, and 20 of $200 each, to be used as needed, in the erection of the electric plant. Thereupon a contract for the sale thereof was made with the Citizens' National Bank of Des Moines, whereby the bank agreed to take from the city its bonds to the amount of $14;000, paying 'par therefor, but the bank preferred to take bonds of 81,000 each rather than in smaller amounts; and thereupon the city council amended the ordinance Of April 28th by passing on the 23d of May, 1890, a substitute for the first section, wherein it was provided that 14 bonds of $1,000 each should be issued. The amendedordiz:lance took effect JUlle 2d. On the 31st of May the city authorities delivered to ,bank 14 bonds for $1,000 each, and received the pay therefor in accordance with the previons agreement entered into with the bank; the bonds thus delivered bearing date June 2d. It is now urged that the bonds were in fact issued and deliv!Jred before the ordinance authorizing the issuance thereof took effect; and therefore the bank, which has been made a party defendant, should be enjoined from selling the bonds, and that they should he declared void. The facts do not present a case of lin issuance of bonds tainted with fraud or illegality in the purpose of their issue, wherein it might be necessary, for the protection of the city or its tax-payers, that an injunction should issue to prevent the bonda passing irito innocent hands. If these bonds should be delivered back·, the obligation would be upon the city to execute and deliver to the bank its bonds in the stlm of $14,000, and, while it may have been an irregularity to deliver the bonds to the bank before the amended ordinance took effect, yet it was in: fact done, and the city h8.8 received the full value therefor; and oertainlythe complainant, as a tax-payer in the city of Newton, has no ground,to invoke the action of a court ofequity, for its protection in the premises. If the delivery of the bonds before the taking effect 0:1' the amended ordinance de-
SQUAIS fl. LOOKOUT MOUNTAIN CO.
729
stroys their validity, which I do not mean to affirm, that is a legal defense thereto. If there exists gronnd for equitable interference, it would rather be in favor of the bank than of the tax-payer. Counsel have presented other points in argument, but none which call for particular remark. I find no substalJtial ground calling for the issuance of the writs of injunction prayed for; and the motion therefor is overruled, and the restraining orders heretofore granted are set aside.
SQUAm '11. LoOKOUT MOUNTAIN
Co. et ale
(CirCWU Court, E. D. Tennessee, B. D. June 17, 1890.) EQUITY PLEADING-SUITS AGAINST CORPORATIONS.
Under 'equity rule 94, which provides that every bill brought by one or more stockholders against a corporation and others, founded on rights which may properly be asserted by the corporation, must set forth with partiCUlarity the efforts of the plaintiff to secure such action as he desires on the part of the director8,and, if necessary, of the shareholders, and the causes of his failure to, obtain such action, the court has no jUrisdiction of a bill to enjoin the transfer o,f part of the stock the defendant to another corporation, which fails to set forth such effortll, though it allege that the directors of the one corporation are also directors of the other, that it would have been useless for plaintiff to demand that they would bring suit, and that plaintiff would have made such demand had he not known that they would ' refuse. Following Hawesv. ,Oakland, 104 U. S. 460.
In Equity.
On motion to dismiss the bill for want of jurisdiction.
KEY, J. The complainant lllleges that he is a stockholder in the Lookout Mountain Company; that said company was organized as 8 statutory real-estate and immigration corporation under the laws of Tennessee, with l.l.capital stock of $1,000,000, but that only $600,000 of said stock were subscribed for; that about 700 acres of land were purchased by the company upon the top and sides of Lookout mountain, valued at' $600,000. 'Books for the the subscription of stock were opened, and $600,000 ofthe stock only was authorized to be subscribed for and issued, but the remaining $400,000 of the stock has never been subscribed for or issued. It is further alleged that the individual defend· ants are seven of the nine directors of the company, and that they hold a majority of the stock of the company. Complainant avers that he is the owner of 143 shares of the stock of the company, each share being $100; that 133 of these shares were transferred to him July 14, 1887j that on the 28th of July, 1887, the other defendants, by some fraudulent and unauthorized scheme or contrivance, undertook to transfer and issue to the Chattanooga & Lookout Mountain Railway Company the $400,000 of stock in the Lookout Mountain Company which had not been subscribed fO,r. It is charged that thosedefendllnts intended at the time this stock was so issued and donated to become stockholders in theChattan90ga & Lookout Railway Company, and they did be-