Pilcher v. City of Dothan

The municipalities of this state are authorized to construct and operate waterworks systems to supply wholesome water for municipal purposes and for the use of their inhabitants. They may locate their plants within or without their territories; and may issue bonds to provide funds for such purposes, as well as secure the payment of the bonds by mortgage on the systems or pledge of the revenues to be derived therefrom. Code, §§ 1260, 1261, 1262; Acts Sp. Sess. 1921, pp. 6-8.

The municipal right and function to provide water systems for towns and cities is expressly recognized in the Constitution. The municipalities are invested with a discretion, to the end that this public right may be exercised and this public function performed. Where such a power is conferred on a municipality, importing the discretion requisite to its exercise, the courts are without right or authority to interfere, except for fraud or palpable abuse of the discretion thus committed. Oakley v. Atlantic City, 63 N.J. Law, 127,44 A. 651; Ryan v. Paterson, 66 N.J. Law, 533, 536, 49 A. 587; 1 McQuillin on Municipal Corporations, §§ 376-9; 3 Dillon on Municipal Corporations (5th Ed.) pp. 2114, 2115. See White v. Mayor, etc., 119 Ala. 476, 481, 23 So. 999. In determining the wisdom, propriety, and contractual elements of a proposal to electoral approval or disapproval of a bond issue for an authorized purpose, the municipal government acts in a proprietary, not a legislative, capacity. Mayor, etc., v. Birmingham Water Co., 139 Ala. 531, 36 So. 614, 101 Am. St. Rep. 49; Bessemer v. Bessemer Water Co., 152 Ala. 391, 406,44 So. 663; 1 Dillon, ubi supra, §§ 109, 110. Even when the municipal government acts in a proprietary, not legislative, capacity, it has been decided here that the courts cannot inquire into the motives of the members of the government, for the purpose of determining the validity of the government's acts, except, it is said, in cases of corruption. Cramton v. Montgomery, 171 Ala. 478, 482, 55 So. 122, reaffirming Albes v. Southern Ry., 164 Ala. 356, 365, 55 So. 327.

This rule may and does consist with that before stated, viz. that for the fraudulent exercise of a discretion reposed in a municipal government, or a palpable abuse thereof, the courts may intervene, when the jurisdiction to do so is properly invoked. It is also established here that municipal governmental action, of which a record is required to be made, cannot be shown by parol; that the records themselves (unless lost or destroyed) are the best and only evidence of such governmental action. Greenville v. Greenville Water Co.,125 Ala. 625, 643, 27 So. 764; Mobile County v. Maddox, 195 Ala. 336,338, 70 So. 259. According appropriate effect to the rules just stated, the only source of information to determine whether a municipal government has fraudulently exercised or palpably abused its discretion, otherwise than as the result of corruption, is the records and proceedings of the governmental body, whose exercise of discretion is the object of attack. Manifestly members of such bodies are not competent to testify in definition or explanation of the purposes or motives that induced their participation in the action under inquiry.

Bad faith is synonymous with fraud. 6 C. J. pp. 880, 881; Morton Bliss v. Railway Co., 79 Ala. 590, 617. Error or mistake of judgment, in the exercise of a discretionary power, is not the equivalent of bad faith or fraud. In such circumstances, error or mistake of judgment consists with honest intention, or freedom from unworthy or unlawful motive or design. If honest intention or freedom from unworthy motive or design characterize the act of exercising a discretionary power, neither bad faith nor fraud is imputable.

The abuse of discretion, justifying interference with the exercise of a discretionary power, "implies not merely an error of judgment, but perversity of will, passion, or moral delinquency." Williams v. Board of Education, 79 Kan. 202,99 P. 216, 22 L.R.A. (N.S.), 584; Citizens' R. Co. v. Heath,29 Ind. App. 395, 62 N.E. 107, 111; 1 C. J. pp. 372, 373. As recited in the statement of the case, the bill's design is to bring into question the good faith of the city government in the premises — this upon the theory that the act of the city government of Dothan in the premises was colorable only; that the purpose, a pretense only, was and is to avoid the already practically attained debt limit (Const. § 225), through a perversion of the discretion to provide and operate a water system, indebtednesses for which are excepted by section 225 from its debt limit restraint; and that the real, primary, major object sought by the city government is to create a water power at Chalker's Bluff to generate electric energy for sale to private consumers.

It is not even intimated that the price to be paid for the contemplated development will exceed its legitimate cost. Other than as the stated averments import, no fraud, actual or legal, nor abuse of discretion by the city government, is asserted. The issue which, in the absence of special demurrer, we treat (for the occasion only) as tendered by the bill's averments — supplemented, with perhaps undue favor to complainant, by the exhibit of plans, specifications, and explanatory reports — is not referable to the municipal power, in the abstract, to maintain and operate a water system. On the contrary, the attack upon this municipal action arises from, is alone predicated of, the collateral, yet important, consideration projected by the provision of section 225 of the Constitution excepting bond issues to provide "waterworks" from the debt limit therein prescribed. The contracted character of the issue tendered may be better defined by the observation that, if Dothan had been financially able to pay, in cash, the cost of the proposed development, there could be no legal objection based on section 225 of the Constitution to the execution of the design, whatever might be the excess energy, over present, or prospective needs, the hydroelectric plant would produce. The effort to impeach the good faith of the city government in the premises is, in effect, grounded in these averments of fact, associated with or amplified by the pleader's express allegation of his conclusion adverse to the good faith of the city government in the action taken, viz.: (a) That the proposed hydroelectric plant will generate practically eight times the energy necessary, now or hereafter, efficiently to operate Dothan's waterworks system; (b) that the larger excess power generated or subject to employment will be sold for commercial purposes; and (c) that the cost of the contemplated plant, with transmission lines — a sum substantially equal to the amount of the proposed bond issue — will very greatly exceed the moderate cost of the energy (electrically generated by the present steam plant) to operate the water system at this or any other time. Consistent with the principles earlier stated in this opinion, the pleader's conclusion, denying the good faith of the city government in the premises, is to be measured by the facts to which it is referable for support.

Aside from the debt limit provisions of the Constitution, there is, so far as we can discover, no restriction in our laws upon the municipality with respect to the cost or magnitude of an authorized municipal improvement or facility. That is left to the validly exercised discretion of the local government. This view is sanctioned by the fact that section 225 of the Constitution exempts "schoolhouses, waterworks and sewers" from the restraint imposed upon indebtedness ("obligations") by that section of the organic law. A fraudulent or grossly abusive exercise of the discretion in this respect could be thwarted by the courts (Avery v. Job, 25 Or. 512, 524, 525, 36 P. 293) — an invalidating circumstance, not averred or inferably suggested in the bill, the value of the proposed plant and transmission lines being substantially equivalent to the cost thereof under the plans and specifications made by the engineers. Hence neither the mere magnitude of the development nor the mere cost of it contributes anything toward impeaching the good faith of the city government in the premises.

Analogous support for this conclusion is afforded by Spaulding v. Lowell, 23 Pick. (Mass.) 71, 80, Shaw, C. J., writing, and by Kaukauna Co. v. Green Bay, etc., Canal,142 U.S. 254, 273-276, 12 Sup. Ct. 173, 35 L.Ed. 1004. In the Spaulding-Lowell Case the primary question was whether the city had power, inferentially, not expressly, granted, to construct and maintain a "market house." The power was affirmed, and the means to provide a market house was held to be a lawful charge assessable upon the inhabitants of the municipality. A comparatively large sum was appropriated and applied to the purchase of a lot and the building of a two-story house, the first floor being devoted to market house purposes, and the second in part only (at the time of completion) to a seat for a municipal court, which, prior thereto, had been housed elsewhere at an annual municipal expense of $100. Lowell had, previously, a "commodious town house." The cost of the market house was $46,000. Later the county's courts occupied two-thirds of the second story of the structure. Among other things, it was contended for the plaintiff (taxpayer) that "the size of the market house erected by the defendants was extravagant and disproportionate to the population of the town," viz. 17,000 at the time. In reference to the contention indicated the court said:

"It was further contended, in the present case, that even if the town had authority to assess money for building a market house, yet that it would not justify the present tax, because a part of the building was appropriated to other subjects. If this had been a colorable act, under the pretense of exercising a legal power, looking to other and distinct objects beyond the scope of the principal one, it might be treated as the abuse of power, and a nullity. But we perceive no evidence to justify such a conclusion, in the present case. The building of a market house was the principal and leading object, and every thing else seems to have been incidental and subordinate. We cannot therefore say that it was such an excess of authority as to invalidate the acts, which they might rightfully do. As to the size and other circumstances of the building, if the accomplishment of the object was within the scope of the corporate powers of the town, the corporation itself was theproper judge of the fitness of the building for its objects,and it is not competent in this suit to inquire whether it wasa larger and more expensive building, than the exigencies ofthe city required." (Italics supplied.)

As appears, the court there affirmed, without qualification, that the discretion as to size and cost of the building was not subject to inquiry in that action, an action to recover taxes paid; that, if the scheme had been wholly void, the plaintiff would have been entitled to recover. It is evident, therefore, that the court found no warrant in the "size" and "expense" of the structure, even when contrasted with previous conditions, to conclude that fraud or abuse of discretion characterized the action of the municipal government in the premises.

In Kaukauna Co. v. Green Bay, etc., Canal, supra, a material question was the right, under eminent domain, to appropriate private property for the public use involved in the improvement of navigation by dams and canals, the legislation by the state (Wisconsin) retaining the right to surplus water or water power created by the improvement contemplated, with a view to the sale or lease of such excess water or water power for private consumption or use. This retention of control and right over and in the excess water or water power by the state gave rise to a question having features common, in a degree at least, to that now under consideration. The court, after citing several adjudications, approved the principle and pronouncement in Spaulding v. Lowell, supra, and then made observations that are pertinent to the inquiry of good faith in the exercise of a vested discretion, and persuasive in the circumstances with which this court is now concerned. It was said:

"The true distinction seems to be between cases where the dam is erected for the express or apparent purpose of obtaining a water power to lease to private individuals, or where in building a dam for a public improvement, a wholly unnecessary excess of water is created, and cases where the surplus is a mere incident to the public improvement and a reasonable provision for securing an adequate supply of water at all times for such improvement."

After stating that no claim was made that the "water power was created for" commercial purposes, or that the structure was designed unreasonably to create an unnecessary head of water for the purposes of navigation at all seasons of the year, the court concluded as follows:

"So long as the dam was erected for the bona fide purpose of furnishing an adequate supply of water for the canal, and not a colorable device for creating a water power, the agents of the state are entitled to great latitude of discretion in regard to the height of the dam and the head of water to be created, and while the surplus in this case may be unnecessarily large, there does not seem to have been any bad faith or abuse of discretion on the part of those charged with the construction of the improvement. Courts should not scan too jealously their conduct in this connection, if there be no reason to doubt that they were animated solely by a desire to promote the public interests, nor can they undertake to measure with nicety the exact amount of water required for the purposes of the public improvement. Under the circumstances of this case, we think it within the power of the state to retain within its immediate control such surplus as might incidentally be created by the erection of the dam."

It is further insisted that the hydroelectric plant will generate a very large excess of energy over present or future needs of the municipality in the operation of the water system, and that the municipal design is to sell such excess for private employment and municipal gain. The averments of the bill are that the maximum energy required at this time is 550 horse power, now furnished by electricity generated by the steam plant, and that about 900 horse power is the maximum of any future requirement to operate the water system, however enlarged or expanded. That the city government has committed to it the discretion to choose or to change the character or source of energy to operate the water system cannot be questioned. The extent the government may go in exercising its discretion in respect of better service or more economical operation of the water system, or in reasonably anticipating the future requirements of a water system for a municipality that has already rapidly increased in population and material growth (a circumstance of which judicial notice is taken — Wight v. Wolff, 112 Ga. 169, 37 S.E. 395, 396; Clifton Iron Co. v. Dye, 87 Ala. 468, 471, 6 So. 192), is only limited by the exaction of good faith, to avoid fraud or palpable abuse of its discretion in the premises. Authorities supra.

When good faith in the exercise of a discretion of this character and in these circumstances is manifested, or when fraud or abuse of such discretion is shown, are necessarily chiefly matters of opinion, at least until the circumstances disclose such a departure from reason and relation as to shock the judgment, to indicate an improper motive. In so far as the amount of electric energy to be developed by this improvement — 4,000 horse power — is a factor, it cannot be affirmed that bad faith or abuse of discretion characterized the city government's determination to construct a plant capable of generating that amount of energy. The excess over present needs is great; but, notwithstanding the pleader's prophecy that never more than 900 horse power will be required to operate any water system Dothan may maintain, who can affirm, with reasonable confidence, that in the prospective growth and development of Dothan much more energy may not be required efficiently to serve its water system? In the Kaukauna Case the court, while admitting the creation of an "unnecessarily large" surplus of water or water power, declined to attribute to the authorities any bad faith or abuse of discretion in the premises. Given a purpose to substitute electric power generated through water power for that generated by steam, it may well be that principles of economy require the creation of a water head greater than the minimum possible of creation at the same site. The cost, as well as the uncertainty of a constant supply, of fuel for the generation of steam, are factors that might reasonably contribute to the city government's determination in the premises. Again, the largely automatic character of the process of generating energy through a hydroelectric plant is likewise a consideration to which a government might attach influence in adopting that means for energizing its utilities.

The point, among those before enumerated, more positively asserted as evidencing the perversion of the discretion in question, is that the municipality's major purpose and objective is to commercialize the excess energy for the financial benefit of the city. In McDonald v. Ward, 201 Ala. 245,246, 247, 77 So. 835, this court adopted the pertinent doctrine of Bates v. Bassett, 60 Vt. 530, 15 A. 200, 1 L.R.A. 166, and Overall v. Madisonville, 102 S.W. 278, 31 Ky. Law Rep. 278, 12 L.R.A. (N.S.) 433. The effect of that decision and of those just noted is that, if the primary purpose of the municipal government in exercising its discretion is to serve an authorized municipal purpose, the incidental excess product of the operation may be lawfully sold for private consumption. The converse, as a primary purpose, would require that the scheme be condemned as an abuse of discretion. The measure of the excess to be produced may, if great enough, afford indicia of abuse or of bad faith in the exercise of the discretion. What that measure of excess product should be to invite or justify the imputation of bad faith or abuse in exercising a committed discretion is not susceptible of definition. Treating an inquiry of like nature, it was said in U.S. v. Chandler, 229 U.S. 53, 73, 33 Sup. Ct. 667, 676 (57 L.Ed. 1063):

"If the primary purpose is legitimate, we can see no sound objection to leasing any excess of power over the needs of the government."

Manifestly the merely consequential creation of an excess does not indicate the entertainment of an illegal purpose, and, as pronounced in the Kaukauna Case, the creation of an "unnecessarily large" surplus does not justify a conclusion that bad faith or abuse of discretion characterizes the action of those in whom the discretion is reposed. The excess of electric energy to be produced by the plant at Chalker's Bluff is large, we may say unnecessarily large, when measured by present municipal needs. The municipality may, however, anticipate future expansion and increasing requirements in providing for energy to operate its water system that, presumably, must keep pace with the expanding necessities of a rapidly growing community. Those now charged with the duty and invested with the discretionary power to provide a water system may look forward to conditions that coming years may create, and build now to meet the anticipated requirements of that time. Invested with a sound discretion in the premises — a discretion that includes provision for a water system to serve in years to come — it cannot be affirmed, of or from the fact that a large surplus energy will be created by this development to be sold for private consumption, that the primary purpose inspiring this undertaking is not to improve the municipal water system through more economical, steadier, and greater motive power, nor that bad faith or abuse of the discretion reposed characterized the city government's action in the premises.

Stress is laid in the brief for appellant upon the provisions of section 225 of the Constitution stipulating that the "proceeds of all obligations issued as herein provided" shall not be used for any other purpose than that for which they were issued. The whole object of this provision was to assure faithful devotion of the "proceeds" of the obligations to the purpose or object of their issuance. This provision is only operative upon the "proceeds" resulting from the effective issuance of the obligations contemplated. It is a limitation on the power of disbursement or application, not upon the power to create "obligations" for an authorized purpose — in this instance to improve a waterworks system.

The separate elements, indicating the bill's theory that the scheme is a manifestation of a bad faith or abuse of discretion in the premises, have been separately considered. In combination they likewise fail to support or justify the charge of bad faith or abuse of discretion asserted in the bill. Presumably the city government intended and intends, in this matter, to observe, in good faith, the Constitution and laws of the state. That presumption is not dissipated by the averments of the bill. Bad faith cannot be imputed without substantial reason. The indebtedness to be incurred is to be devoted to a public, not a private, purpose, and the surplus of valuable energy, above the requirements of the water system, to be created is to be conserved from waste by sale of it to moderate the public burden that the construction of the hydroelectric plant must entail.

The bill is without equity, as the court below decided. Since a bill without equity will not support a temporary injunction or invite its issuance, the court likewise correctly refused the temporary injunction prayed.

The decree in both cases is affirmed.

Affirmed.

All the Justices concur.