San Antonio v. Guadalupe-Blanco River , 191 S.W.2d 118 ( 1945 )

To at once concrete the controlling differences that give rise to the dissent, they are thus set out, under enumeration:

(1) The evident inability of the parties themselves to agree on what were the facts leading up to and through this trial in court has apparently alike affected the members of this reviewing tribunal. Appellants, as self-styled, that is, the City and its two Boards of Trustees, termed by it "The Board" and "The Board of Mortgage Trustees", respectively, the former being, however, only its agent, and the latter its assignee, have plainly, as the record shows, mistaken, misconstrued, and misapplied the conclusively-established and determinative facts underlying the whole controversy; in consequence, they have founded their attacks on the judgment rendered upon erroneous assumptions of things that do not exist as facts.

In demonstration of that — as well as in support of these succeeding conclusions, in limine, there is appended hereto as permeating part hereof, marked "Exhibit A", a summary of what are asserted to have been such actual facts, from the inception of this enterprise in 1941, following the order of the United States Securities and Exchange Commission directing the Holding Company thereof to dispose of the San Antonio Public Service Company's stock, up to and through the execution and delivery between these litigating parties of the lease-contract here involved, to-wit: Exhibit A.

(2) The lease-contract between the City and the appellees, of October 24, 1942, the effort to cancel which constitutes the sole objective of the City's suit, on the principal ground that it was void as being beyond the power of the City to make, has heretofore been held by the San Antonio Court of Civil Appeals, in Guadalupe-Blanco River Authority v. Tuttle, Tex. Civ. App. 171 S.W.2d 520, writ of error dismissed for want of merit, 141 Tex. 523, 174 S.W.2d 589, to be legal and valid in all respects. That judgment, although rendered by a divided court, has not been authoritatively overruled, both the Court of Civil Appeals and the Supreme Court therein holding, however, that the one necessary issue on that appeal, as presented, was whether or not such "Board of Trustees" had the right to bring the suit as an independent party thereto; they both held it did not have, since it was, at most, a mere agent for the City.

Thus a direct conflict as to the validity of the contract in suit has been created between the holding of this court and that of the San Antonio Court of Civil Appeals.

(3) As thus finally determined in the Tuttle case, that Board of Trustees had then and has now no standing as the independent party it still assumes to be in this cause — its position being solely that of an impotent agent of the City.

The same status, it is thought, should be given the other Board, that is, the "Board of Mortgage Trustees", composed of one foreign corporate and one individual member, since both also were the mere creatures or alter egos of the City, being named by it as the assignees of its revenue bonds, with which the lease-contract had to do; hence they, too, were only aid-societies for the City. The individual had no power under the "Indenture", and the Bank had no permit to do business in Texas, hence neither was entitled to any independent or affirmative relief. Article 1536, R.C.S. 1925, Vernon's Ann.Civ.St. art. 1536; 11 Tex.Jur., 171, §§ 497 and 195; Pratt-Hewit Oil Corp. v. Hewit, 122 Tex. 38, 52 S.W.2d 64; Texas P. Ry. Co. v. Davis, 93 Tex. 378, 54 S.W. 381; Real Estate-Land Co. v. Dildy, Tex. Civ. App. 92 S.W.2d 318.

(4) So that, the City's suit herein, under correct appraisement of the undisputed facts so underlying and constituting the basis of its institution and prosecution, would appear to have been nothing more nor less than a belated and seemingly barefaced effort on its part (seeking to retain all benefits while renouncing all obligations thereunder) to repudiate its solemn contract with the appellees, entered into and carried out, up to that moment by the acknowledgment of both sides thereto, in good faith, without a claim by either of any invalidity therein. (See 171 S.W.2d 520, 525, and 174 S.W.2d 589).

Courts of equity will not order cancellation in such circumstances; Lasater v. Premont, Tex. Civ. App. 209 S.W. 753 (writ of error refused); Monroe v. Buchanan, 27 Tex. 241; Doty v. Barnard, 92 Tex. 104, 47 S.W. 712.

(5) The gravamen of this tardy litigious claim for invalidity — that the enterprise so forming the sole subject-matter of the lease-contract, was originally entered upon by virtue of the authority of R.S. Articles 1111-1118, inclusive, Vernon's Ann.Civ.St. arts. 1111-1118, and thereafter pursued as being in compliance therewith until it was so belatedly discovered by the City that such undertaking was — instead — in violation of those articles, in that the City had never possessed the power under those statutes to so proceed — is a mistaken application of the public policy declared therein to facts like these; that is, they plainly have to do only with electric lighting and power plants already existent, but did and do not in any way curtail or prevent the exercise of the City's otherwise existing power under them, as well as under other applicable state statutes and its own charter provisions, to buy and pay for such electrical properties as it so contracted to do in this instance.

"The decisions referred to by the appellants, such as City of Houston v. Allred, 123 Tex. 334, 71 S.W.2d 251; City of Houston v. Mann, 139 Tex. 640,164 S.W.2d 548; City of Dayton v. Allred, 123 Tex. 60, 68 S.W.2d 172; Radford v. City of Cross Plains, 126 Tex. 153, 86 S.W.2d 204; Waterbury v. City of Laredo, 68 Tex. 565, 5 S.W. 81; and Moore v. Gordon, Tex. Civ. App. 122 S.W.2d 239, are good law, but they pertain to attempted incumbrance of property already owned by a city." [Brief, page 168.] Whereas this contract dealt only with property thereafter to be acquired. Charter of the City of San Antonio, § 97; City of Austin v. McCall, 95 Tex. 565, 68 S.W. 791; McQuillin, Municipal Corporations, 2d Ed., vol. 3, pp. 1001, 2; City of Wichita Falls v. Bruner, Tex. Civ. App. 165 S.W.2d 480, writ refused.

In other words, "The River Authorities do not `claim under the title of the City', but the parties, the City and Guadalupe Authority, expressly contracted that the properties covered by the Contract would be acquired by the City, subject to the outstanding property rights recognized by the Contract to be in Guadalupe Authority." [Brief, page 172.]

(6) While, as indicated, R.S. Articles 1111-1118 did not forbid nor deny to a City full power to make and carry out such a contract as this one, neither has any other law or authoritative court-holding been pointed out that does; on the contrary, as recited, the very question upon this contract — it is submitted — has been correctly determined adversely to the City by the San Antonio Court of Civil Appeals in the Tuttle case, which holding is at least persuasive upon this court.

(7) Still, were it otherwise, and could it even be said that the attacked contract was ultra vires its powers, the City — by every rule of res judicata, and the binding character of both private and quasi-public contracts, as well as the judgments of courts of record thereon, especially against the collateral attack made here — is estopped, at this late date, to assert or interpose any such claim of immunity. See authorities next cited, infra, under paragraph (8).

(8) Indeed, the City, in this special instance, was acting strictly in its proprietary rather than in its governmental capacity, hence in the courts of the state, to which it so took recourse in the effort to nullify its contract, it had no more rights nor privileges than any other individual or private litigant; City of Crosbyton v. Texas-New Mexico, etc., Tex. Civ. App. 157 S.W.2d 418, writ refused; City of San Angelo v. Deutsch, 126 Tex. 532, 91 S.W.2d 308.

Certainly, as such a suitor, it could be estopped the same as any other in like surroundings, even by an agreement which it had originally had no legal power to make, where, as abundantly shown here, it had, in proceedings to carry out the same, so misled the opposing parties and the courts to which it later appealed, that it could neither return the advantages it had received from the formers' performance, nor undo the dislocations and implications its contrary attitude had brought upon those courts. Security Trust Co. v. Lipscomb County, 142 Tex. 572,180 S.W.2d 151; City of San Angelo v. Deutsch, 126 Tex. 532, 91 S.W.2d 308; Smith v. Chipley, 118 Tex. 415, 16 S.W.2d 269; Hitchcock v. Galveston,96 U.S. 341, 24 L. Ed. 659; City of Galveston v. Loonie, 54 Tex. 517; Bond v. Terrell, 82 Tex. 309, 18 S.W. 691.

(9) The indisputable proof — the recitations of the lease-contract itself — show that the City acquired the properties of the Public Service Company subject to then admittedly-outstanding claims, titles, and rights therein of the Blanco Authority; wherefore, those properties not only never became any part of the City's electric system, but that contract itself, in essence, being executory in nature, was clearly not only subject to sale by it in whole or in part, without the necessity of a vote of the people thereon, but also constituted a part of the purchase money paid by the City for the properties; therefore, R.S. Articles 1111-1118 not only did not forbid such acquisition by the City without a popular vote, but contained no limitation at all against it. Guadalupe-Blanco River Authority v. Tuttle, Tex. Civ. App. 171 S.W.2d 520; McQuillin Municipal Corporation, 2d Ed., vol. 3, p. 1034; DeMotte v. Valparaiso, 161 Md. 319, 67 N.E. 985, 66 L.R.A. 117; 38 Am.Jur. 257; Wilder v. American Produce Co.,138 Tex. 519, 160 S.W.2d 519.

(10) Especially is it herein held that the City was, first, estopped by its contract along with its performative action thereunder, and, second, by its compromise agreement with all parties concerned, inclusive of the San Antonio Public Service Company — then owner of all the properties involved — and that court itself, which culminated in the settlement and dismissal of cause No. 3569, in the district court of Comal County.

That judgment of dismissal unlocked the log-jam of litigation and legal impasse the parties had brought upon themselves, in effect dissipated all their differences, and bound them all, including their privies in both contract and estate. It originated out of, was based upon the lease-contract, was not appealed from, and therefore became — as between all such enumerated parties thereto — a final judicial determination not only of the validity of the contract itself, but also that all matters contemplated in their agreement, in response to which it was rendered, had been fully settled. The suit at bar was not one to set aside that judgment — contrarily, it was at most only a belated collateral attack thereon, in a new pleading challenging the validity of the lease-contract, filed by the City in a different district court of Texas, on October 27 of 1943, immediately after the Supreme Court had finally decided Guadalupe v. Tuttle, 174 S.W.2d 589, supra.

Moreover, that judgment on its face thus recited that such parties were before the court and had then and there so agreed:

"* * * and the defendants having also appeared, and all parties having agreed in open court that the order prayed for by the plaintiff should be entered." Stephenson v. Gaines, Tex.Com.App., 298 S.W. 401; Security Trust Co. v. Lipscomb County, 142 Tex. 572, 180 S.W.2d 151; State v. Cloudt, Tex. Civ. App. 84 S.W. 415; Turman v. Turman, 123 Tex. 1,64 S.W.2d 137; Provines v. Bell, Tex. Civ. App. 83 S.W.2d 1050, writ dismissed; Herman, Estoppel and Res Judicata, vol. 1, p. 296; Freeman on Judgments, 5th Ed., vol. 1, p. 665, and vol. 2, p. 1596; Ellis v. Mills,28 Tex. 584; Crawford v. McDonald, 88 Tex. 626, 33 S.W. 325; Cano v. Cuellar, Tex. Civ. App. 95 S.W.2d 155, writ refused; Pope v. Powers,132 Tex. 80, 120 S.W.2d 432; Smith v. Cook, Tex. Civ. App. 126 S.W.2d 1049, writ dismissed; Cook v. Burnley, 45 Tex. 97; Davis v. Schaffner,3 Tex. Civ. App. 122, 22 S.W. 822.

(11) None of appellants' other asserted grounds for invalidity of the contract are considered to have been sustainable in the given state of this record. Especially without merit was its charge that it had been induced to enter into the contract by fraudulent misrepresentations, since its evidence wholly failed to raise an issue of fact upon any such question.

It is the same with reference to its complaint that the transaction was an unconscionable one, since the undisputed evidence — in fact the City's own admission — showed that at the date of this trial it had been making, as a result of this contract, more than $2,000,000 net profit per year, when it had never spent $1 of its money, nor pledged its credit for any amount whatever, to obtain such benefits.

Nor, finally, did the contract unreasonably restrict the area to be served by the City, nor create a monopoly in the appellee-Authorities.

EXHIBIT A. Condensed, and copied with approval, from appellee Lower Colorado Authority's brief, by W. S. Gideon, filed in Court of Civil Appeals April 22, 1945.

"Summary of Facts from Beginning in 1941 through Oct. 24, 1942.

"(a) In 1941 the Securities and Exchange Commission of the United States ordered the Holding Company of San Antonio Public Service Company to dispose of its properties. A representative of the Guadalupe Authority went to the Mayor of the City in 1941 and suggested that the City and the Authorities, one or more of them, see about buying these properties. The Mayor told him that the City was not in the mind to purchase it; that the City was not utility minded. So the Authorities proceeded to investigate the possibility on their own account. It developed that the properties of the Company must be sold as a unit, so the Colorado Authority withdrew, because of a limited bonding capacity. The Colorado Authority informed Guadalupe Authority that it would be glad to cooperate with said Authority in the future, if it was found to the best interest of the public.

"(b) The interest of the Colorado Authority was three-fold. First, by having a joint operation of the Comal Steam Plant with the hydro properties of the Authority, an additional block of power, estimated at 40,000 kilowatt, would immediately be made available for the War effort. It is from the sale of this additional power that the `profits' which will be realized by the two Authorities, will come; and these `profits' won't be made, except that there be joint operation of the said properties. Second, to have and operate a steam plant in conjunction with hydro plants, results in greater efficiency and thereby greater benefits to the public. Third, the Authority owned electric properties in Kerr County and served the City of Fredericksburg. It did not own transmission lines to these two points.

"(c) The Guadalupe Authority had proceeded to negotiate for the properties during the spring of 1942, after being informed by the Mayor of the City that the City was not interested in the properties.

"On May 11, 1942, the Guadalupe Authority, having reached an agreement with the representatives of the Holding Company as to price of the Public Service Company's properties, adopted a plan of procedure whereby the electric properties of the Public Service Company would be acquired and the benefits derived therefrom given to the public throughout the Guadalupe River Valley in the form of flood control and conservation of water for irrigation. The plan was filed with the Board of Water Engineers of Texas.

"(d) The City filed a protest with said Board of Water Engineers on May 29, 1942.

"(e) The Board of Water Engineers heard the protest of the City and after full hearing, duly approved the plan. The City filed a suit in a district court of Travis County, seeking to set aside this order of the Board of Water Engineers. Upon hearing, the district court dismissed the suit. The City appealed from the order of dismissal, and after the Contract of October 24, 1942, it abandoned its appeal.

"(f) The President of the Holding Company, upon being contacted by the City, told the Mayor that the City was too late; that the Holding Company had received a satisfactory offer from the Guadalupe Authority. Thereupon the Mayor of the City told the President of the Holding Company that the City was going to file a condemnation suit to prevent the sale going through to Guadalupe Authority.

"(g) The suit to block the trade negotiated by Guadalupe Authority was filed by the City on June 9, 1942, the following day; another suit designed to block the trade of Guadalupe Authority, such suit being the contest of the action of the Board of Water Engineers approving the plan of acquisition of said properties filed with said Board by the Guadalupe Authority, was likewise filed by the City on June 9, 1942, the following day. These two suits were the first suits filed by anyone in connection with the subject matter. Later many other suits were filed; but the City filed the first two suits for the admitted purpose of trying to block the trade already made with the Guadalupe Authority.

"(h) Then on June 15, 1942, the City entered into a contract with bankers and brokers whereby said parties agreed to assist the City in blocking the trade of `other interests'.

"(i) Thereafter, without any reason being announced then or since, the Holding Company, on July 9, notified the Guadalupe Authority that it was backing out on its trade. On the following day the Guadalupe Authority found that it was necessary to institute suits to protect the trade it had already made. In addition to electric properties, the Public Service Company owned two hydro plants and water rights on the Comal and Guadalupe Rivers, the acquisition of which was practically essential to any water control and conservation program of the Guadalupe Authority. The people in the nine counties outside of Bexar County had no agency except the Guadalupe Authority, to represent them and seek to retain for their benefit, and the benefit of said area, some of the profits that would be realized from operating the electric properties in the nine counties outside of Bexar County. The Guadalupe Authority Board authorized the filing of two condemnation suits, one in Hays County and one in Comal County. They were filed on July 10, 1942.

"(j) On July 13, 1942, the Guadalupe Authority, for the very purpose of trying to have determined whether it, or the City, had the prior and superior right to acquire the properties, all or any part, brought a suit in the District Court of Comal County, being cause No. 3569. Then on July 10, 1942, the City filed another condemnation suit in Comal County, alleging it couldn't agree with the Public Service Company as to price. On the day before the City had signed a letter of purchase with the Holding Company, which letter purported to grant to the City the option until December 1, 1942, to purchase all the outstanding common stock of the Public Service Company. The City also agreed that the revenue bonds it proposed to issue would be delivered by October 26, 1942.

"(k) The petition in its suit No. 3569 set forth in brief the claims of the Guadalupe Authority; it alleged that the City was likewise claiming rights of acquisition; it alleged that the Authority's rights were prior and superior to those of the City; and plaintiff prayed for temporary injunction, and permanent injunction, establishing the prior and superior rights of the Guadalupe Authority, and for all other relief, general and special, at law and in equity.

"(1) On the 7th day of August, 1942, nearly one month after the Guadalupe Authority filed said suit in the District Court of Comal County, the Public Service Company filed a suit in the District Court of Bexar County, alleging that the claim of the Guadalupe Authority constituted a cloud on the title of its properties, preventing it from disposing of same; it alleged that both the City and the Authority were asserting superior rights of acquisition, and prayed that the cloud on the title be cancelled, and that the court determine which had the superior right. It was a similar suit to the one already on file in Comal County, and it involved identically the same property, and the same issues in general.

"(m) Having successfully blocked the efforts of Guadalupe Authority to get the prior-right question decided, the City set out to seek a compromise of this litigation.

"(n) As a result of its desire to compromise, it was agreed that the City would acquire, subject to certain titles and rights recognized to be in the Guadalupe Authority, specified properties of the San Antonio Public Service Company. The contract of October 24, 1942, which the City now seeks to repudiate, embodied the compromise agreement. Upon its execution, duly authorized by Ordinance, and delivery by the City, Guadalupe Authority agreed to dismiss the pending litigation, including cause No. 3569, in the District Court of Comal County. The Judge of the District Court of Comal County was informed that the parties were contemplating a settlement and compromise of the litigation, and particularly of the issues involved in cause No. 3569; he was informed that if the settlement was consummated, he would be presented with an agreed order of dismissal in cause No. 3569. The settlement was consummated, the Judge was presented with the agreed order of dismissal, he entered the order, which recited that the Guadalupe Authority, the City and its officials, and the Public Service Company, had all appeared in open court and agreed to the order of dismissal. Said Cause No. 3569 involved identically the same property, and additional property, as is involved in the contract of October 24, 1942; and the District Court of Comal County, by virtue of said cause No. 3569, had jurisdiction of the subject-matter of and jurisdiction of the parties to the Contract of October 24, 1942, which Contract was executed in settlement of the issues involved in said cause No. 3569.

"(o) After the order of dismissal was entered, the City represented to the Attorney General of Texas that the matters in dispute and involved in litigation between the City and Guadalupe Authority had been settled; and the City signed and presented to the Attorney General a No-Litigation Certificate, in order to get the Attorney General to approve the bonds being issued by the City.

"(p) The Contract was thus made and entered into with full knowledge on the part of the prospective buyers of all the revenue bonds the City proposed to issue. A syndicate of bankers was going to purchase all of said bonds. So far as the record discloses, said parties still own and hold all of said bonds. A representative of said prospective buyers was present when the proposed Contract was discussed on October 22, 1942, and the final clauses agreed upon. The bankers would not buy the bonds until the Contract was signed and delivered and the pending suits were dismissed.

"(q) Said bankers were present at the closing on October 24, 1942, when the Contract was signed and delivered, before the bankers were called upon to purchase the bonds. After the execution and delivery of the Contract and the dismissal of said suits, Mayor Quin announced that he was ready to sign or had signed and was ready to deliver the certificate that no litigation was pending, and the Assistant Attorney General announced that the opinion of the Attorney General on the proposed revenue bonds would be released; and then either Mr. Matter or Mr. Mayland announced that the opinion of Chapman Cutler approving the bonds was ready to be released, and after all these announcements, made at the closing, at which time and places there was present: (1) Mr. Glow, representing the Mortgage Trustees, (2) two members of the law firm of Chapman Cutler, which firm is representing the Mortgage Trustees in this suit, (3) the Mayor and other representatives of the City, (4) the attorney now representing the Board of Trustees; (5) representatives of the parties, who proposed to purchase and later did purchase the bonds of the City; (6) representatives of the Guadalupe Authority; and (7) representatives of the Colorado Authority; then and not until then, were the bonds sold and delivered and the deed from the Public Service Company delivered to the City."