Board of Directors of Northern Wasco County People's Utility District v. Kelly ( 1943 )

The foundation of the "People's Utility District Law" is in Ore. Const. Art. XI, Sec. 12, a constitutional amendment approved by vote of the people in 1930. This constitutional amendment provides that:

"People's utility districts may be created of territory, contiguous or otherwise, within one or more counties, and may consist of an incorporated municipality, or municipalities, with or without unincorporated territory, for the purpose of supplying water for domestic and municipal purposes; for the development of water power and/or electric energy; and for the distribution, disposal and sale of water, water power and electric energy. * * *" (Italics ours).

It was not self-executing as it contained a specific provision that:

"The legislative assembly shall and the people may provide any legislation, that may be necessary, in addition to existing laws, to carry out the provisions of this section."

Pursuant to this mandate of the people, the legislature, in 1931, enacted a broad and comprehensive utility act providing among other things the manner and method of creating people's utility districts and enumerating the powers thereof. In Sec. 12 of this original enactment it was provided that:

"* * * * * Such districts shall not be formed unless a majority of the voters in both said municipality and in said parcel of territory shall vote in favor of the formation of said utility district."

Soon thereafter an attempt was made to create a people's utility district in Tillamook county. The over-all vote was favorable to the creation of the district but two of the small municipalities within the proposed district voted adversely. As a result of such adverse vote, the project was defeated by reason of the above statutory restriction.

The legislature, by Ch. 272, Laws of Oregon for 1933, remedied this defect in the utility law by eliminating the above-quoted part of Sec. 12 of the original act. The intention of the legislature to remove such restriction in the formation of utility districts was further evidenced in the 1933 amendment of Sec. 3 of the original act by adding thereto the following:

"Petitions asking that an election be held to determine whether or not a district shall be created shall set forth and particularly describe the boundaries of the proposed peoples' utility district, and shall state that in the event the people within any one or more municipalities or parcels of territory within said proposed district shall vote against the formation of such district, then, and in that event, that portion of said district which voted in favor of the organization of a peoples' utility district, may, upon the recommendation of the commission, be organized into a peoples' utility district. * * * * * * * When a majority of all votes cast at an election within the boundaries of any proposed district, to determine whether or not such district shall be formed, shall be in favor of forming such district, said district shall be created; provided, that when any municipality and/or separate parcel of territory voting at said election shall cast a majority vote against the formation of such district, said municipality and/or separate parcel of territory shall not be included in the formation of any district that may be formed as a result of said election; provided further, that if the commission shall so recommend, the municipalities and/or separate parcels of territory which voted in favor of the formation of the proposed district at said election may be formed into a district with reformed boundaries in agreement with the recommendation of the commission * * * * *."

The above has been codified as a part of § 114-203, O.C.L.A. The people's utility district law was amended in 1937 (Ch. 276, Laws of Oregon for 1937) and in 1939 (Ch. 387, Laws of Oregon for 1939) but no changes were made as to the formation of utility districts. It is significant that, in the recent legislature (1943), while the instant case was pending before this court for decision, Senate Bill No. 304 was introduced providing for an amendment of § 114-203, O.C.L.A., by striking therefrom the provisions of the 1933 amendment above set forth relative to the formation of utility districts. The effect of the proposed 1943 amendment would be to revive the original enactment of 1931 relative to the formation of people's utility districts. The bill failed to pass. The legislature thus refused to restrict the method provided for the formation of utility districts and thereby emasculate the people's utility district law. What the legislature has refused to do by statutory enactment, this court should not do by judicial construction.

An election on August 15, 1939, resulted in an over-all vote in favor of the creation of the Northern Wasco Peoples' Utility District. There was an adverse vote, however, in two municipalities, Dufur and Mosier, which were included in the proposed district. After excluding Dufur and Mosier, by reason of such adverse vote, it was deemed by the hydroelectric commission feasible and conducive to the public welfare that the district be created with reformed boundaries. The final report of the commission showed that the total users of electricity within the corporate limits of Dufur and Mosier constituted approximately seven per cent of the total users of electricity within the proposed district and that they used less than three per cent of the kilowatt hours sold within such area.

After the proclamation of the commission on August 22, 1939, declaring the district duly incorporated, the board of directors commenced to function; taxes were levied and collected; indebtedness incurred; and the people at an election authorized the board to issue and sell bonds aggregating $475,000, for the purpose of acquiring an electric distribution system. No objection was made to the validity of the organization of the district or to any of its activities until more than two years after it commenced to operate. When the district instituted this proceeding for the purpose of having a judicial determination of the validity of the bond issue above mentioned, the defendants — including the Pacific Power Light Company, a private utility corporation in the business of selling and distributing electricity within the boundaries of the proposed district — filed their answer challenging the validity of the district and asserting that all of its transactions are null and void.

Appellants do not contend that the district was not organized in compliance with the provisions of the statute. There is no objection to the form or regularity of the proceedings for the formation of the district or of the bond issue, based upon failure to follow the method provided therefor by the utility district law. Neither do appellants urge in their briefs that such act has been improperly construed by this court. Appellants' basic contention is that there can be no valid utility district created, notwithstanding a favorable over-all vote of the people, unless a majority of the voters in every municipality or "parcel of territory" included within the boundaries of the proposed district vote in favor of its formation. In support thereof, appellants rely chiefly upon the following propositions of law:

(1) Under Art. IV, Sec. 1a and Art. XI, Sec. 2, of the Constitution of Oregon, the power to create municipal corporations is lodged exclusively in the voters residing within the limits of the proposed district.

(2) The determination of boundaries of people's utility districts is a legislative function and cannot be delegated to any administrative board or agency. In other words, the power of determining boundaries of utility districts is vested only in the people who reside in and are voters of the proposed district.

(3) The hydroelectric commission has no power to create a public utility district under the provisions of Sec. 114-203, O.C.L.A., or any other provision of the utility district act, and the attempt by it to do so in the instant case is null and void.

(4) An administrative agency must base its action upon properly conducted hearings and after making findings.

It is conceded that all of the above propositions of law were decided adversely to appellants in Ravlin, et al. v. Hood RiverPeoples' Utility District, et al., 165 Or. 490, 106 P.2d 157, a decision rendered by this court without dissent on October 8, 1940. There is not a single authority, involving the precise point under consideration, contrary to the Ravlin case. ClamRiver Electric Co. v. Public Service Commission, 225 Wis. 198,274 N.W. 140, supports it. It is also in keeping with the opinion of the Attorney-General of this state (Opinion of Attorney-General, 1936-1938, p. 684), and the construction of the act by the hydroelectric commission for the past ten years.

As pointed out in the Ravlin case, it is wholly impracticable for the legislature to determine the boundaries of utility districts. Hence, the commission, with certain restrictions, was vested with discretion in determining the boundaries thereof. The use of the word "recommendation" is unfortunate, but when considered in the light of the context of the act, it clearly appears that the legislature must have intended it to be synonymous with "approval". If it has not been used in that sense, it is absolutely meaningless.

It is assumed by appellants — and there is some loose language in In re People's Utility District, 160 Or. 530,86 P.2d 460, tending to sustain their contention — that a utility district is strictly a municipal corporation and, therefore, can be created only like cities subject to the Home Rule amendments of the constitution (Art. IV, Sec. 1a and Art. XI, Sec. 2, Const. Ore.). The above decision, however, when considered in its entirety, does not offer much comfort to appellants, as the court in such case said:

"The proceedings for the organization of the Tillamook People's Utility District were in conformity to the act providing for the creation and organization of such a district. Indeed, it would seem that the only way a municipality or quasi municipality, like the utility district under consideration, can be formed in the state of Oregon is under a general law, such as the People's Utility District Act. Art. XI, section 2, of the constitution of Oregon, provides that corporations shall be formed under general laws, but shall not be created by the legislative assembly by special laws, and that the legal voters of every city and town are granted power to enact and amend their municipal charter.

"Under the constitution of the state of Oregon, the legislature may enact general laws providing for the organization of municipal corporations, or the creation and organization of utility districts, and it may provide the conditions under which such municipality or quasi municipality may be created and leave to some officer or official body the duty of determining whether the prescribed terms and conditions exist, and, when found to exist, the law directs the creation of the municipality or utility district."

People's utility districts are quasi municipal corporations. While they have some of the attributes of a true municipal corporation, they have no specific charter and are created by a general legislative enactment as an agency of the state for some particular purpose: Central Pacific Co. v. Ager, 144 Or. 527,25 P.2d 927; Greig v. Owyhee Irr. Dist. et al., 102 Or. 265,202 P. 222; Fallbrook Irr. Dist. v. Bradley, 164 U.S. 112,41 L. Ed. 369, 17 S. Ct. 56; 14 C.J. 78. Utility districts are constituted by the legislature to exercise, in a prescribed area, a limited number of corporate functions in order to effectuate a legislative policy, but they are lacking in many of the essential characteristics of true municipal corporations. Such districts are in the same classification as irrigation, drainage, and school districts, but not cities.

This court, in Re Harper Irr. Dist., 108 Or. 598,216 P. 1020, speaking through Mr. Justice McCOURT, said:

"It is within the power of the legislature to create an irrigation district, and in the act creating the same, describe the boundaries of the district, the water supply and irrigation system by which the land shall be irrigated, designate the land which will be benefited by such irrigation, and the method of calculating and apportioning such benefits, or it may provide that the formation of such irrigation district shall be accomplished by procedure before some designated tribunal, and vest such tribunal with jurisdiction and power to determine any or all of the questions of fact essential to the organization of the same: * * * *."

In 14 C.J. 94, the rule is thus stated:

"Except in so far as they may be restrained by constitutional provisions, the legislatures of the several states, as the depositaries of the sovereign legislative power, have the inherent power to create corporations and to determine and prescribe the mode of incorporation, the purposes for which corporations shall be created, the powers which shall be conferred upon them, and the conditions under which they may be exercised."

In School District No. 35 v. Holden, 78 Or. 267, 151 P. 702, it was claimed that a change in the boundaries of a school district could be accomplished only through the initiative power described in Art. IV, § 1a, and Art. XI, § 2, of the Oregon Constitution, but the court held that the legislature, through general laws, could provide for the creation of such quasi municipal corporations and that there was no infringement upon the constitution. If it is not an unlawful delegation of legislative authority to vest a boundary board with the power to change the boundaries of school districts, it is difficult to understand why such authority conferred upon a commission to change boundaries in public utility districts would be an improper delegation of a legislative function.

That such quasi municipal corporations can be created by general legislative enactments without transgressing the Home Rule Amendments of the constitution, see: State v. Mehaffey (Klamath Drainage District), 82 Or. 683, 162 P. 1068; Rose v.Port of Portland, 82 Or. 541, 162 P. 498; School District No.35 v. Holden, supra; Central Pacific v. Ager (Klamath Irrigation District), 144 Or. 527, 25 P.2d 927; Greig v.Owyhee Irr. Dist., supra. Even true municipal corporations, like cities, are not free from control by the legislature through general laws. As said in Burton v. Gibbons, 148 Or. 370,36 P.2d 786:

"* * * the power of the legislature to enact a general law applicable alike to all cities is paramount and supreme over any conflicting charter provision or ordinance of any municipality, city or town. * * *" Citing numerous authorities from other jurisdictions.

Art. IV, Sec. 1a and Art. XI, Sec. 2, Const. Ore., so far as is material herein, provide:

Art. IV, Sec. 1a:

"* * * The initiative and referendum powers reserved to the people by the constitution, are hereby further reserved to the legal voters of every municipality and district, as to all local, special, and municipal legislation, of every character, in or for their respective municipalities and districts. The manner of exercising said powers shall be prescribed by general laws, except that cities and towns may provide for the manner of exercising the initiative and referendum powers as to their municipal legislation. * * *"

Art. XI, Sec. 2:

"Corporations may be formed under general laws, but shall not be created by the legislative assembly by special laws. The legislative assembly shall not enact, amend, or repeal any charter or act of incorporation for any municipality, city, or town. The legal voters of every city and town are hereby granted power to enact and amend their municipal charter, subject to the constitution and criminal laws of the State of Oregon."

The above constitutional amendments have no application to the organization of people's utility districts. Such quasi municipal corporations are brought into existence by legislative enactment under and by virtue of Art. XI, Sec. 12 of the constitution. The creation of public utility districts is specifically authorized by Art. XI, Sec. 12. The method of such creation is not provided therein, but there is a clear mandate that "the legislative assembly shall" enact the necessary laws to accomplish the purpose of the amendment. If Art. IV, Sec. 1a, and Art. XI, Sec. 2, are construed to prohibit the legislature from organizing public utility districts, then there will be the anomalous situation of a conflict of constitutional amendments. Having in mind the historical background of the Home Rule amendments and the evils sought to be remedied, it is reasonably certain that such amendments were never intended to restrict the organization of such quasi municipal corporations by the legislature.

Did the legislature abdicate or surrender its sovereign power by delegating to the hydroelectric commission the right, with certain restrictions, to determine the boundaries of a proposed district? Otherwise stated, has there been an unlawful delegation of a legislative function? This question was answered contrary to the contention of appellants in In re People's UtilityDistrict, supra, and in Ravlin, et al. v. Hood River People'sUtility District, et al., supra. True, in the first case, the determination of boundaries by the commission was before the election, but it was nevertheless a restriction upon the right of the people to create utility districts as the sponsors of the proposed district were bound to adopt the boundaries as approved or "recommended" by the commission, or abandon the project. If it was not an unlawful delegation of legislative authority — and the court so held — to permit the commission to determine the boundaries of a district before an election, how does it, on principle, become an unlawful delegation of such authority when the commission thus acts after an election? The commission in determining the boundaries of a proposed district, whether acting before or after an election, must be guided by the statutory standard of whether the creation of the district would be feasible or "conducive to the public welfare." Obviously, it is not practicable for the legislature to determine such matters and it is, therefore, necessary to confer authority upon some administrative agency.

That the standard fixed by the legislature for the guidance of the commission is sufficiently definite is settled by the overwhelming weight of modern authority: Savage v. Martin,161 Or. 660, 91 P.2d 273, and numerous authorities cited therein;Livesay v. DeArmond, 131 Or. 563, 284 P. 166, 68 A.L.R. 422; Clam River Elec. Co. v. Public Service Commission, supra; 11 Am. Jur. (Constitutional law) 945, 960. The hydroelectric commission in fixing boundaries was not exercising a legislative function but merely doing that which was necessary to accomplish the purpose of the law enacted by the legislature.

Relative to the failure to conduct a hearing after election or to make findings, it may be said that the utility district law of this state does not so require. In In re People's UtilityDistrict, supra, this court said:

"Laws providing for the creation of municipal corporations need not make provisions for hearings on boundaries and benefits in order to be valid."

Where the statute does not require findings, none are necessary:Pacific States Box Basket Co. v. White, 296 U.S. 176,80 L. Ed. 138, 56 S. Ct. 159, 101 A.L.R. 853. See 49 Harvard L. Rev. 827. The Wisconsin utility law required findings (Clam RiverElec. Co. v. Public Service Commission, supra).

For these reasons I concur in the result of the well-considered majority opinion affirming the decree of the circuit court.