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Nordine v. Illinois Power Co.

JUNE 8, 1964.

FRITZ

v.

NORDINE, ET AL., PLAINTIFFS-APPELLANTS,

v.

ILLINOIS POWER COMPANY, A CORPORATION, CITY OF BLOOMINGTON, ILLINOIS, A MUNICIPAL CORPORATION, BOB MCGRAW, ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of McLean County; the Hon. R. BURNELL PHILLIPS, Judge, presiding. Reversed and remanded.

SMITH, J.

Rehearing denied June 8, 1964.

April 17, 1964. Supplemental opinion,

The crux of this case, as raised by the complaint and motion to dismiss, is whether or not a municipality operating a municipal electric utility by authority of an initiating referendum may terminate that activity and sell the entire utility by sale of personal property and real estate under sections 11-76.1 and 11-76.4 of the Municipal Code. The case was originally appealed to the Supreme Court and, by it, transferred to us. Plaintiffs are citizens, taxpayers, and patrons of the utility and filed their suit to avoid the sale of the utility to defendant, Illinois Power Company. Defendants' motion to strike the complaint was allowed, plaintiffs elected to stand on their complaint, and an appropriate judgment in bar of the action was entered by the circuit court of McLean County. Plaintiffs appealed.

In this state of the record, the factual setting for this litigation must be found in the pleadings and the exhibits attached. It appears from Count I that the municipal utility serves about 2,200 people; furnishes street lighting; furnishes electricity for municipal buildings and for water pumping; is in competition with the Illinois Power Company, and operates at an annual profit. Undisputed original authority to operate was grounded on three elections held in 1930, 1940, and 1949. In 1956, specific authority to sell to the defendant company was sought by referendum and defeated at the polls. On August 13, 1962, the power company submitted to the city council an offer to purchase the entire municipal utility conditioning the acceptance thereof and the sale upon an absence of a referendum. On September 20, 1962, the city council accepted the proposal by ordinance and directed the sale of the personal property. On the same day, the city council passed an ordinance directing that the real estate be advertised for bids on October 22, 1962. Count I charges that the city was obliged to continue the operation of the utility until such obligation was withdrawn, revoked, or terminated by an appropriate vote of the electorate or by act of the legislature. The usual allegations for equitable jurisdiction based on irreparable harm and absence of remedy at law are asserted.

Count II charges that, the utility was acquired, owned and operated in trust for the taxpayers, consumers, and electors of the city; the purported sale of the personal property and of the real estate is a sham and a subterfuge and is, in fact, a sale of the entire utility; the finding by the city council that the personal property and the real estate is no longer necessary or useful to the city is unreasonable, arbitrary, and an abuse of discretion in that 2,200 consumers are served; city electrical needs for public buildings, etc. are supplied; such findings are contrary to an ordinance of 1958 authorizing a bond issue and establishing the useful life of the utility at 30 years; the utility is operating at a profit; and the defendants knew, or should have known, the voters desired a referendum, and petitions containing some 4,400 signatures were in circulation.

Count III is a supplemental complaint incorporating by reference Counts I and II, and alleging that the sale was consummated on or about November 1, 1962; a bill of sale was delivered; a deed was delivered; the consideration of $2,500,000 was paid and is now held by the city in a special fund without designation; and that the power company is now operating the utility. It prays that the bill of sale, the deed, and the transfer be set aside, and the parties and the property be restored to their former status.

The personal property of the utility was sold separately for $2,250,000 plus the payment by the purchaser of the outstanding municipal electric bonds in the aggregate sum of $540,000. Other provisions of this sale are unimportant and need not here be recited. The real estate was sold separately after due advertisement for $250,000. It should be here noted that hereafter the city will pay to the defendant rates comparable with those charged other specified cities in the area for power used in street lighting, pumping and other municipal uses.

Defendants filed their motion to strike the several counts of the complaint as amended and to dismiss the suit for want of equity assigning among other reasons the following: (a) that many allegations are mere conclusions of the pleader, (b) that the city is not obligated to continue its electric utility until such obligation is withdrawn or revoked by referendum or withdrawn by act of the legislature, (c) that the authority to sell is found in sections 11-76.1 and 11-76.4 of the Municipal Code, (d) that an election under the public policy statute of this state would not be binding on the city council and (e) that plaintiffs, as taxpayers, electors and consumers, have no standing to interfere with the discretionary power of the city officials to sell and dispose of the property.

Plaintiffs contend that municipal performance in the electric utility field conceived through referendum can only be terminated and interred by referendum of like dignity, or by specific legislative authority without referendum. In the alternative, if the authority to terminate does exist, the manner of its exercise in the instant case was improper, illegal and fraudulent, as a matter of law. In either event, it is said, the transaction is illegal and void.

All parties, including Illinois Municipal Utilities Association as amicus curiae, agree that there is no statute dealing specifically with the discontinuance or sale of a municipal electric utility. All parties agree the City of Bloomington was engaged in a proprietary, rather than a governmental function. The power company contends the sale here consummated finds its vitality and legality in Ill Rev Stats 1961, chap 24, as follows:

"par. 11-76.1. Any city or village incorporated under any general or special law which acquires or holds any real estate for any purpose whatsoever . . . has the power to lease the real estate for any term not exceeding 99 years, and to convey the real estate when in the opinion of the corporate authorities, the real estate is no longer necessary, appropriate, required for the use of, profitable to, or for the best interests of the city or village. This power shall be exercised by an ordinance passed by three-fourths of all the corporate authorities of the city or village, at any regular meeting or at any special meeting called for that purpose. . ."

"par. 11-76.4. Whenever a city or village incorporated under any general or special law, other than a city or village of 500,000 or more population, owns any personal property which in the opinion of three-fourths of all the corporate authorities, is no longer necessary or useful to, or for the best interests of the city or village, such a majority of all the corporate authorities, at any regular meeting or at any special meeting called for that purpose, (1) by ordinance may authorize the sale of that personal property in such manner as they may designate, with or without advertising the sale. . . ."

The Supreme Court has stated that the use of the words "for any purpose whatsoever" in par 11-76.1 is sufficient to express an intention to include lands owned outright whether devoted to public or private uses, but is insufficient to embrace lands held under an express trust created by a settlor. City of Aurora ex rel. Egan v. Y.M.C.A., 9 Ill.2d 286, 137 N.E.2d 347. The property here in question is patently not held under an express trust created by a settlor, and cases in other jurisdictions discussing governmental or proprietary functions in the sale of property are neither persuasive nor controlling. If, therefore, the statutory provisions above cited do not complement each other to authorize the sale of a going electric utility, then there is neither statutory authority nor case law in this state specifically authorizing the sale of a municipal electric ...


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