Summary
In Lake Shore Power Co. v. Village of Edgerton et al., 1932, 43 Ohio App. 545, 184 N.E. 37, 39, the village granted an electric power franchise and reserved the right to repurchase, the purchase price to be fixed by agreement, or, if unable to agree, by three persons, one selected by the village, one by the company, and a third by the common pleas judge.
Summary of this case from Hammond v. RingstadOpinion
Decided June 30, 1932.
Municipal corporations — Purchase of electric light plant upon expiration of private franchise — Village board of trustees unnecessary before property purchased — Section 4357, General Code — Certificate of fiscal officer not required, when — Section 5625-33 (d), General Code — Electric company cannot question validity of bond proceedings, in injunction case — Sections 2293-2, 2293-12 and 2293-20, General Code — Bonds not invalid because sinking fund trustees purchased portion of issue — Specific performance of franchise contract for purchase at price fixed by appraisement.
1. Village about to purchase electric light plant need not create board of trustees to manage plant before purchase is made (Section 4357, General Code).
2. Village about to purchase electric light plant need not file certificate that amount required to meet contract has been lawfully appropriated and is in treasury, until purchase price is determined according to law (Section 5625-33 (d), General Code).
3. Electric company could not, in injunction to enjoin village from purchasing light plant, question validity of bonds issued therefor by village (Sections 2293-2, 2293-12, 2293-20 and 4517, General Code).
4. Village's bonds to purchase light plant held not illegal because sinking fund trustees purchased two $500 bonds and sold remaining, amounting to $19,000, to two individuals, and placed proceeds in light fund (Section 4517, General Code).
5. Village held entitled to specific performance of franchise contract giving village right to purchase electric light plant for price to be fixed by parties or by "appraisement."
APPEAL: Court of Appeals for Williams county.
Mr. A.L. Gebhard and Messrs. Tracy, Chapman Welles, for plaintiff.
Mr. C.L. Newcomer, for defendants.
This cause comes into this court on appeal, and is an action by The Lake Shore Power Company for injunction against the village of Edgerton to restrain proceedings by the village to acquire the electric light plant owned by the plaintiff in Edgerton through the exercise of an option reserved by the village in an ordinance passed in 1921 granting a 25-year franchise to the Central Light Power Company. The franchise ordinance gave the village the right to purchase the electric light plant from the Central Light Power Company, and provided that the purchase price should be fixed by agreement, if such agreement could be made, and, if not, then by three persons, one of whom should be selected by the village, one by the company, and the third by the common pleas judge of Williams county, Ohio. The Central Light Power Company accepted the ordinance and served the inhabitants of the village with electricity until April, 1924, when it sold its property and franchise to the plaintiff, the Lake Shore Power Company, and since the sale the plaintiff has served the inhabitants of the village in this capacity under the franchise. The council of the village of Edgerton, beginning on November 19, 1930, passed resolutions by which it elected to exercise the option to purchase the plant, and sought to agree upon a price therefor, and demanded that, upon failure of the parties to reach an agreement, the price be fixed in the manner provided in the franchise ordinance.
On or about February 2, 1931, the Lake Shore Power Company filed this suit in the court of common pleas seeking an order restraining the village of Edgerton and others from taking any further action or proceedings under the ordinances theretofore passed, and a preliminary injunction was granted as prayed for in the petition. The village of Edgerton filed a cross-petition by which it seeks specific performance of the contract. Since the commencement of the action, the council of the village has adopted legislation submitting to the electors the approval of the issue of $20,000 worth of bonds, and the levy of a tax to pay the same, for the purpose of providing funds for the purchase of the electric light plant. At the November election, 1931, the electors of the village, by a vote of more than two to one, approved the issue of bonds and the levying of taxes for the payment thereof. The bonds have been sold, and the funds are now in the treasury of the village, and the clerk of the village has filed a certificate showing that the funds are on deposit to meet the purchase price.
The contentions of plaintiff are stated as follows in its brief:
"1. At the time the ordinance of November 19, 1930 was passed and at the later time when the ordinance of January 7, 1931 was passed, there was not existing in the village of Edgerton a board of trustees of public affairs as required by General Code, Sec. 4357, et seq.
"2. At the time the ordinance of November 19, 1930 was passed, by which the village attempted to exercise the option to purchase the property, there was not attached to nor submitted with the ordinance a certificate of the fiscal officer of the village that the amount required to meet the contract had been lawfully appropriated for such purpose and was in the treasury, or in the process of collection to the credit of the appropriate fund, free from previous encumbrance as required by General Code, Section 5625-33 (d).
"3. The bond issue ordinance is illegal and void in that —
"(a) The purpose is dual, contrary to General Code Sections 2293-2, 2293-20;
"(b) The bond maturities are not in substantially equal installments, in violation of General Code Section 2293-12;
"(c) The bond maturities are premature, in violation of General Code Section 2293-12.
"4. The attempted sale of the bonds is illegal and void, in violation of General Code Section 4517.
"It is the further contention of The Lake Shore Power Company that the village of Edgerton is not entitled to the relief asked for in its cross-petition because an arbitration agreement is not subject to specific performance."
As to the first of these contentions, it is our judgment that under Section 4357, General Code, it is not necessary for a village to create a board of trustees of public affairs to manage an electric light plant, which is about to be purchased, before the purchase has actually been made. It is true that in the instant case it appears that such a board has since been created, but it has nothing to do because the electric light plant has not yet in fact been purchased and the amount of the purchase price has not yet been fixed. This contention is not well founded.
The second contention is that the certificate required by Section 5625-33 (d) was not filed at the time the village attempted to exercise the option to purchase the property. It is our judgment that it was not necessary to file it at that time, but that it would be a compliance with the law to do so when the parties agree upon the purchase price, or when it is fixed by the three appraisers, or is otherwise determined according to law. It would seem that the law does not contemplate the filing of such a certificate before the amount to be paid out of the treasury is determined.
The third contention is that the ordinance is illegal and void because it does not comply with Sections 2293-2, 2293-12, and 2293-20, General Code. The validity of the bonds is a question that can arise only between the holders thereof and the village should the latter fail to make payment thereof as they become due according to their tenor. At that time they may be in the hands of bona fide purchasers for value. This suit is not brought by the plaintiff as a taxpayer, and, even if it were, it would be unavailing, for the question cannot be raised in this suit.
The fourth contention is that the attempted sale of bonds is illegal and void in violation of Section 4517, General Code. It seems that the bonds were first offered to the sinking fund trustees, and that they purchased two of the $500 bonds out of the funds on hand, and that the balance of the bonds, amounting to $19,000, were sold to two individuals and the proceeds placed in the electric light fund. We are unable to state that the action of the sinking fund trustees and the method of selling the bonds were not subtantially in accordance with the statute. However that may be, the plaintiff cannot raise the question in this suit, for reasons already stated in answer to the third contention of the plaintiff.
It remains to consider whether the village of Edgerton is entitled to specific performance of the contract. A distinction is made in the cases between arbitration of disputes and the determination of the value of property by appraisement. In our judgment the provision in the franchise ordinance is one for the determination of price by valuers rather than of a dispute by arbitration. It is fundamental that a contract for the sale of real estate at a price to be determined by persons to be appointed as therein specified cannot be specifically enforced in a court of equity until the price has been fixed in the method provided, or in some other way sanctioned by a court. Pomeroy's Specific Performance of Contracts (3d Ed.), Section 149. A different rule prevails, however, where the provision for fixing the purchase price by appraisement is merely auxiliary, or collateral, or incidental, to the main purpose and object of the contract. The tendency of American and English authorities is to construe contracts so that the agreement as to the fixing of a price by appraisers will be auxiliary or incidental to the main contract, unless such construction will do violence to the language. The authorities upon this proposition are collected in Pomeroy on Specific Performance of Contracts (3d Ed.), Sections 151 and 309.
It has been held that, where a municipality grants a franchise to a company that operates an electric light or waterworks plant, and as a part of the franchise ordinance the municipality reserves an option to purchase the plant at a price to be agreed upon by the parties, or in the event of failure to agree, at a price to be fixed by valuers or appraisers named as in the franchise ordinance provided, the contract may be specifically enforced upon the exercise of the option of purchase by the municipality. Moreover, where the parties fail to agree and either party refuses to join in appointing appraisers, a court of equity will grant specific performance. 25 Ruling Case Law, 301, Section 114; Town of Bristol v. Bristol Warren Water Works, 19 R.I. 413, 34 A. 359, 32 L.R.A., 740; Castle Creek Water Co. v. City of Aspen (C.C.A.), 146 F., 8, 8 Ann. Cas., 660. We especially call attention to the annotation to the latter case. In City of Andalusia v. Alabama Utilities Co., 222 Ala. 689, 133 So. 899, the holding is to the contrary, but by a divided court, and there is a dissenting opinion which asserts the rule laid down.
The three cases just cited are the only ones found which involve an option similar to the one in the instant case, but there are other authorities in which the same principle is applied to a different state of facts. Pomeroy on Specific Performance of Contracts, supra. Not only does the modern trend of authority sustain the judicial enforcement of provisions for the fixing of a purchase price by appraisers upon the failure to agree in all cases where such an agreement is subsidiary to the main contract, but the authorities put especial emphasis upon the importance of specifically enforcing the agreement when the parties cannot be placed in statu quo. In the instant case the parties would not be restored to their original position if specific performance should be denied. It may be assumed that, when the municipality entered into the contract which resulted in the acceptance of the franchise ordinance, it gave the public utility company a franchise on better terms than if the option had not been included therein, and, if specific performance is denied in the instant case, the plaintiff could continue to exercise its rights under the main contract and at the same time refuse to carry out its obligations under the subsidiary agreement. The option contract is not only ancillary and incidental to the main contract, but the parties cannot be placed in statu quo.
The prayer of the petition will be denied, and that of the cross-petition for specific performance will be granted.
Decree accordingly.
LLOYD and RICHARDS, JJ., concur.