Full opinion text
LINDLEY, District Judge. Plaintiff sues to enjoin the city of Centralia, a municipal corporation, and its officials 'and the Federal Administrator of Public Works from erecting a proposed municipally owned electric public utility; from issuing and selling certificates in order to raise funds to pay therefor; from performing a contract between the Administrator and the city whereby the former agrees to grant to the city a part of the cost of the said structure and to loan to the city, by purchase of said certificates, the balance, and from carrying out any proposed action in connection with said construction. The case is submitted upon bill and answer. . Plaintiff, is a public utility corporation, organized under the laws of the state of Illinois, owning and operating generating stations, transmission lines and distribution systems in the city and other communities, all interconnected. The system operates in an extensive territory, wholly within lili-, nois, under the direction and control of the State Commerce Commission. The city has issued and plaintiff owns a franchise to conduct its business, and plaintiff’s investment in the city, exclusive of generating and transmission facilities, has a value of more than $150,000. It is a taxpayer of the United States, the state, the counties wherein its property is located and the city, and the owner of valuable properties subject to taxation by the official bodies aforesaid. On December. 1, 1933, the city council adopted a resolution directing the mayor to apply to the Federal Emergency Administration of Public Works for a loan of $428,-000 and a gift or grant of $147,000 for the purpose of financing the construction of a municipally owned public utility. Plaintiff protested before the State Advisory Board. It offered to present facts showing why, as it says, the application should not be approved, but no hearing was had, and plaintiff thereupon filed with the Administration a written protest. That body thereafter duly approved the application. On November 30, 1934, the city passed an ordinance authorizing the sale of public utility certificates in the amount of $477,-000, to defray the cost of such utility, authorizing operation of the same and enumerating certain conditions and provisions with regard thereto. An election was held, at which the voters approved the ordinance for construction and operation of the utility and the issuance and sale of certificates. The city and the Administration then entered into a contract, under which the city agrees to construct the utility and the Administrator to advance to the city the sum of $477,000 for the purpose of financing the construction to be financed by certificates for said amount. Thirty per cent, of these the Administrator proposes to cancel, thereby working a grant or gift to the city of so much of the cost. Plaintiff contends that what has transpired and what is about to occur is illegal and violates the constitutional rights of the plaintiff under the Constitution of the state of Illinois and that of the United States; that the proposed loan and gift are not authorized by the national act; that the result will be, not to relieve unemployment, but rather to contribute to increase thereof; that interstate commerce is not involved; that the acts performed and proposed to be performed are in violation of the Fifth, Tenth, and Fourteenth Amendments to the Constitution of the United States, and deprive plaintiff of its property without due process of law; that the Constitution does not authorize the federal government to make a loan, gift, or grant of public funds to the city for the purpose of constructing the utility, the effect of which will be to duplicate and to destroy the value of existing adequate facilities; that to approve such action will bring about an unlawful delegation of legislative power' by the Congress to the President and to the Administrator; that the project is entirely local in character and not related to the general welfare of the United States; that the ordinance is void under the Constitution of Illinois; that the ordinance does not sufficiently describe the proposed work as required by state statute; that the effect of the contract and ordinance is to increase the indebtedness of the city beyond its constitutional and statutory limits; that by its action the city attempts to contract away its governmental functions in violation of the Constitution, public policy, and statutes of Illinois; and that the Municipal Ownership Act is unconstitutional for the reason that its title is not sufficiently broad to cover the legislation, as required by the Constitution of Illinois. It is the contention of plaintiff that its properties, franchise, and business will suffer irreparable injury as result of the aforesaid alleged illegal action of defendants, and that it will thereby be subjected to ruinous competition or compelled to abandon and thereby lose its property. Defendants contend that plaintiff is not qualified to question in this action the constitutionality of the acts of Congress involved or of the statutes of the state; that title 2 of the National Industrial Recovery Act (section 201 et seq. [40 USCA § 401 et seq.]) is constitutional and involves no wrongful delegation of legislative power; that the project is not in violation of the Fifth, Tenth, or Fourteenth Amendments; that the purpose of the Administrator was to increase employment; and that the project is justified under the general welfare clause of the United States Constitution; and denies specifically illegality in anything heretofore done or proposed to be done. In support of the proposition that plaintiff has no right to maintain this suit, defendants cite many cases, in all of which the courts relied upon the generally well-recognized principle that one who attacks the constitutionality of a statute or the legality of acts must show that he is within the class of persons with respect to whom the law is unconstitutional or the acts illegal, and that the defects complained of injure him. The soundness of this doctrine is not to be disputed. However, in the present instance, it is obvious that plaintiff is within the qualified class of persons. It is a taxpayer and a franchise holder, and the alleged unconstitutional and illegal acts bring upon it irreparable damages as such. The Circuit Court of Appeals for the Eighth Circuit in the case of City of Campbell, Mo., et al. v. Arkansas-Missouri Power Co. (C. C. A.) 55 F.(2d) 560, 562, dealt with precisely this question. The language there used is pertinent here: “It is urged that, inasmuch as the plaintiff’s franchise was not an exclusive one, it had no right to maintain this suit for injunctional relief. The plaintiff, however, had a franchise under which it was entitled to maintain and operate its lighting system in the city of Campbell, and it also had a contract with the city for street lighting. The fact alone that the plaintiff had this franchise would, of course, not prevent the city from erecting and maintaining a municipal light plant, if, in doing so, it did not exceed its power and authority. As the owner of this franchise, however, the plaintiff was entitled to relief against the illegal acts of others who might assume to exercise the privilege conferred upon it by its franchise. A franchise is property, and, as such, is under the protection of the law, and without express words it is exclusive as against all persons acting without legal sanction. True, plaintiff’s franchise was not exclusive in the sense that the city might not grant similar right to another, yet it was exclusive against any one who assumed to exercise the privilege granted the plaintiff, in the absence of authority or in defiance of law. * * * We are clear that the plaintiff, as the holder of this franchise to maintain and operate the plant in defendant city, was entitled to protection against all illegal competition.” This case was later followed by Oklahoma Utilities Co. v. City of Hominy (D. C.) 2 F. Supp. 849, and to the same effect is Duke Power Co. v. Greenwood County (D. C.) 10 F. Supp. 854 at page 862. Cases relied upon by the Court of Appeals in Campbell v. Arkansas-Missouri Power Co., supra, are there collected. See, also, Bartlesville Elec. L. & P. Co. v. Bartlesville R. Co., 26 Okl. 453, 109 P. 228, 29 L. R. A. (N. S.) 77; 2 Pomeroy’s Equitable Remedies, § 583 et seq.-; 5 Pomeroy’s Eq. Jurisprudence (2d Ed.) §§ 583 and 584; Frost v. Corporation Commission, 278 U. S. 515, 49 S. Ct. 235, 73 L. Ed. 483. In Springfield Gas & Electric Co. v. Springfield, 292 Ill. 236, 126 N. E. 739, 741, 18 A. L. R. 929, the privately owned utility sued to enjoin the Springfield Gas & Electric Company, owner of a municipal plant, from engaging in what was alleged to be illegal competition. The court sustained the jurisdiction, saying: “We are disposed to agree with the .proposition of appellant that a private corporation lawfully operating a public utility may have an injunction against another private corporation operating without authority of law a similar utility which competes with and injures the former’s business.” Since a city conducts a municipal public utility in the capacity of a business proprietor, the language and reasoning of this case are directly applicable to the case at bar. In Callaghan & Co. v. Smith, 304 Ill. 532, 136 N. E. 748, 750, one publishing company sued to enjoin another from publishing a compilation of the state laws under what was said to be an unconstitutional statute. There-the court said: “* * * If the act in question is, in accordance with the theory of the bill, an unconstitutional grant of special privilege to Smith in the conduct of that business which will cause injury to the business of the appellant, the latter’s only remedy is an injunction against the use of the privilege. If the exercise of the unlawful privilege will injure the appellant’s business, the nature of the injury is such that no argument is necessary to show the inadequacy of any action at law for damages. The remedy by injunction against the enforcement of an unlawful ordinance or an unconstitutional law has often been recognized where a special injury to the complainant has been shown and there is no adequate remedy at law.” See, also, Cicero Lumber Co. v. Town of Cicero, 176 Ill. 9, 51 N. E. 758, 42 L. R. A. 696, 68 Am. St. Rep. 155; Illinois Power & Light Corp. v. Consolidated Coal Co., 251 Ill. App. 49. I agree that one who has a franchise has a right to complain of the acts of others, who in violation of the Constitution and the law, would enter into competition with him. Plaintiff has no right to complain because the city of. Centraba determines to construct a municipally owned public utility. The statutes authorize such action, if the proceedings be in accord with the Municipal Ownership Act, and the mere fact that such legal competition by a municipally owned plant may destroy plaintiff’s business furnishes no ground for complaint. Joplin v. Southwest Mo. Light Co., 191 U. S. 150, 24 S. Ct. 43, 48 L. Ed. 127; Skaneateles Waterworks Co. v. Skaneateles, 184 U. S. 354, 22 S. Ct. 400, 46 L. Ed. 585; Madera Water Works v. Madera, 228 U. S. 454, 33 S. Ct. 571, 57 L. Ed. 915. But tfie situation here goes far beyond that just mentioned, for it is complained that the competition which will develop is not tO' arise from an authorized municipal act, but is to owe its existence to and grow entirely out of illegal and unconstitutional acts. Plaintiff is not bound to suffer unheard from illegal municipal action; it is of such action that it now complains. What is said is sufficient to distinguish the cases relied upon by defendants. Thus, in New Orleans, M. & T. R. Co. v. Ellerman, 105 U. S. 166, 26 L. Ed. 1015, the Supreme Court said that if the competition which is complained of is not “illegal,” the plaintiff has no right to complain. In Skaneateles Waterworks Co. v. Skaneateles, 184 U. S. 354, 22 S. Ct. 400, 46 L. Ed. 585, the court merely held that lawful competition by a city did not endow the existing utility with any right to complain, and that if the municipality concluded to exercise its statutory right to enter into the municipal ownership field to the detriment of the privately owned utility, the latter’s property was not taken without due process of law. True, but if the proposed exercise of authority by the city is not within the statute under which it purports to be had or is unconstitutional, the injured party has a right to be heard in a court of equity for the purpose of affording him an adequate remedy. Plaintiff contends that in Illinois a municipality may not finance the construction of a utility by 'issuing certificates unsecured by mortgage upon tbe plant. In considering this question it is necessary to remember that municipal corporations have no inherent power as such, but are created by the Legislature, and derive their existence and all powers from the grants made by that body. City of Chicago v. Murphy, 313 Ill. 98, 144 N. E. 802; Barnard & Miller v. City of Chicago, 316 Ill. 519, 147 N. E. 384, 38 A. L. R. 1533; Crerar Clinch Coal Co. v. Chicago, 341 Ill. 471, 173 N. E. 484; City of Chicago v. Moore, 351 Ill. 510, 184 N. E. 621. It follows that municipal corporations possess and can exercise only such powers as are either mentioned in express terms or are necessarily and fairly implied in the powers expressly created or essential to the declared objects and purpose of the corporation. In the case of City of Carlyle v. Nicolay, 333 Ill. 562, 165 N. E. 211, 214, a special assessment proceedings was declared null and void for the reason that the ordinance of the city council upon which the proceedings was based, did not contain a proper enacting clause. The municipality had a perfect right to bring about the particular public improvement, provided it do so in a legal manner. Though the objection made was of no particular consequence, in so far as the objector was concerned, he was permitted to take advantage thereof. The court said: “It is a general rule that when the Legislature grants to a municipal corporation power to do any act and prescribes the manner in which the power shall be exercised, the power must he exercised in the manner stated in the grant and not otherwise.” “The powers of a municipal corporation are not enlarged by liberal construction but are strictly construed, and any ambiguity arising out of a grant of power or a reasonable doubt concerning its existence is resolved against the municipality which claims to exercise the power.” Washburn v. Forest Preserve District, 327 Ill. 479, 487, 158 N. E. 801, 804; Barnard & Miller v. City of Chicago, 316 Ill. 519, 522, 147 N. E. 384, 38 A. L. R. 1533; City of Rockford v. Nolan, 316 Ill. 60, 64, 146 N. E. 564; Aberdeen-Franklin Coal Co. v. City of Chicago, 315 Ill. 99, 100, 145 N. E. 613; Arms v. City of Chicago, 314 Ill. 316, 319, 321, 145 N. E. 407; City of Chicago v. Blair, 149 Ill. 310, 36 N. E. 829, 24 L. R. A. 412; West Chicago Park Com’rs v. Baldwin, 162 Ill. 87, 44 N. E. 404; Consumers’ Co. v. City of Chicago, 313 Ill. 408, 145 N. E. 114; Elsenau v. City of Chicago, 334 Ill. 78, 165 N. E. 129; City of Chicago v. Northern Paper Stock Co., 337 Ill. 194, 168 N. E. 884; City of Chicago v. Schultz, 341 Ill. 208, 173 N. E. 276; People ex rel. v. Marshall Field & Co., 355 Ill. 633, 189 N. E. 885. The ordinance in question here is based upon the Municipal Ownership Act of Illinois. Section 3 (Smith-Hurd Ann. St. 111. c. 111%, § 98) is as follows: “No city shall proceed to acquire or construcf any public utility under the provisions of this act until an ordinance of the city council providing therefor has been duly passed and submitted to the electors of such city and approved by a majority of those voting thereon. Such ordinance shall set forth the action proposed, shall describe the plant, equipment and property proposed to be acquired or constructed, and shall provide for the issue of bonds, mortgage certificates or special assessment bonds, as hereinafter authorized.” Thus we find early in the act what apparently is a mandatory limitation upon the city to issue securities for the purchase or-construction of a utility in only three ways, namely: by the issuance of bonds, mortgage certificates or special assessment bonds. The ordinance proposes to construct the utility “without the issuance of any bonds but by means of public utility certificates.” Thus far, it would seem that there could be no question that the city is limited in its power to issue certificates to the issuance of mortgage certificates. The real controversy is as to the construction of section 9 of the act (Smith-Hurd Ann. St. 111. c. 111%, § 104)'as follows: “For the purpose of acquiring any such public utility or the property necessary or appropriate for the operation thereof, or any part thereof, either by purchase, condemnation or construction, any city may issue and dispose of interest bearing certificates, hereinafter called public utility certificates, which shall, under no circumstances, be or become an obligation or liability of the city or payable out of any general fund thereof, but shall be payable solely out of the revenues or income to be derived from the public utility property for the acquisition of which they were issued. Such certificates shall not be issued and secured on any public utility property in an amount in excess of the cost to the city of such property as hereinbefore provided and ten (10) per cent of such cost in addition thereto. In order to secure the payment of any such public utility certificates and the interest thereon, the city may convey, by way of mortgage or deed of trust, any or all of the public utility property acquired or to be acquired through the issue thereof; which mortgage or deed of trust shall be executed in such manner as may be directed by law for the acknowledgement and recording of mortgages of real estate, and may contain such provisions and conditions not in conflict with the provisions of this act as may be deemed necessary to secure the payment of the public utility certificates described therein. Any such mortgage or deed of trust may carry the grant of a privilege or right to maintain and operate the public utility property covered thereby, for a period not exceeding twenty (20) years from and after the date such property may come into the possession of any person or corporation as the result of foreclosure proceedings; which privilege or right may fix the rates or charges which the person or corporation securing the same as the result of the foreclosure proceedings shall be entitled to charge in the operation of said property for a period not exceeding twenty (20) years. Whenever and as. often as default shall be made in the payment of any public utility, certificates issued and secured by a mortgage or deed of trust, as aforesaid, or in the payment of the interest thereon when due, and any such default shall have continued for the space of twelve (12) months after notice thereof has been given to the mayor and comptroller, it shall be lawful for any such mortgagee or trustee, upon the request of the holder or holders of a majority in amount of the certificates issued and outstanding under such mortgage or deed of trust, to declare the whole of the principal of all such certificates as may be outstanding, to be at once due and payable, and to proceed to foreclose such mortgage or deed of trust in any court of competent jurisdiction. At a foreclosure sale, the mortgagee or the holders of such certificates may become the purchaser or purchasers of the property and the rights and privileges sold, if he or they be the highest bidders. Any public utilities acquired under any such foreclosure shall be subject to regulation by the corporate authorities of the city to the same extent as if the right to construct, maintain and operate such property had been acquired through a direct grant without the intervention of foreclosure proceedings : Provided, however, that no public utility certificates shall ever be issued by any city under the provisions of this act unless and until the question of the adoption of the ordinance of the city council authorizing the issue thereof shall first have been submitted to the electors of such city and approved by a majority of the qualified voters of the city voting upon such question. The question shall be submitted in such form as the city council may bly ordinance designate.” In this section the Legislature has provided that in order to secure the payment of such public utility certificates, the city “may convey” by way of mortgage any or all of the utility property acquired or to be acquired. The act proceeds then to a definition of the mortgagor’s and mortgagee’s rights. It creates in the mortgagee a remedy, allowing, in case of default, foreclosure and purchase of the property by the mortgagee. Other sections provide that the construction may be financed by general bonds or special assessment bonds. .There is no section discussing any rights or remedies of holders of certificates unsecured by mortgage, but the act is silent as to any such security. Section 9, the only section dealing with certificates, recognizes only one class—those secured by mortgage; provides only one remedy—foreclosure of the mortgage. The Legislature, however, used the word “may” rather than “shall,” saying that the city “may convey” the property by way of mortgage. The correct construction of the act must be determined from a consideration of the entire statute, and where the intention can be collected, words may be mo'dified, altered, supplied, or disregarded, if such action is reasonably implied, so as to obviate any repugnance or inconsistency with the intention, as disclosed by the entire act. See Lewis’ Sutherland Stat. Const. (2d Ed.) vol. 2 at p. 724; Lawton v. Sweitzer, 354 Ill. 620, 188 N. E. 811. Following this rule the courts have repeatedly ruled that the word “may” means “must” or “shall” in cases where the public interest is concerned and where the public or third persons have a claim de jure that the power should be exercised. Thus, where the statute provided that a sheriff “may take bail,” it was construed to mean that he “shall” do so. Malcom v. Rogers, 5 Cow. (N. Y.) 188, 15 Am. Dec. 464, cited in Schuyler Co. v. Mercer County, 4 Gilman (9 Ill.) 20. In Brokaw v. Commissioners of Highways, 130 Ill. 482, 22 N. E. 596, 6 L. R. A. 161, the court held that a provision that the commissioner “may remove such fence” was mandatory and that the word “may” should be construed to mean “shall.” In Binder v. Laughorst, 234 Ill. 583, 586, 85 N. E. 400, the court said that the word “may,” used in the Levee Act, where it was provided that the commissioner might levy taxes, should mean “shall.” In People ex rd. v. Commissioners, 270 Ill. 141, 110 N. E. 347, the court interpreted a provision that the commissioner “may” reduce the width of a road to be mandatory. Similar instances are found in James v. Dexter, 112 Ill. 489; People v. Turnbull, 184 Ill. App. 151; People v. Elgin Home Ass’n, 359 Ill. 379, 194 N. E. 584; Chicago & A. R. Co. v. People, 163 Ill. 616, 45 N. E. 122; Grove v. Board of Supervisors, 246 Ill. App. 241. Remembering that municipal corporations have only such power as is granted to them by tlie Legislature, that that body has seen fit to provide that utility plants may be purchased or constructed under only three different methods of finance, that unsecured certificates are not included within said authorization, that the only remedy given the certificate holder is that of foreclosure of the mortgage, that (he act indicates no intention of the Legislature to grant to the municipality authority to issue certificates other than those secured by mortgage, in view of the rules governing statutory construction, the court is imperatively driven to conclude that there is no authority in a municipal corporation in Illinois to finance the construction of a utility plant, except by general bonds, special assessment bonds, or mortgage certificates. Tt is urged that no good purpose is served by such construction. To this I cannot accede; rather it seems apparent that the Legislature had a legitimate and substantial purpose. In the first place, the organization and operation of a utility, serving the residents of a city, is a private enterprise, which may or may not be a commercial success. If the venture he a failing one, default in payment follows. If the city is to finance such certificates upon a sound basis and attract prudent investors at a reasonable rate of interest, it is desirable that in case of default, these investors have an adequate remedy. Otherwise they will not purchase, and the city will be damaged by being compelled to sell its certificates on a speculative basis, at a high rate of interest. Consequently, it is a matter of protection to the city and its inhabitants and the investing public, that the utility stand as security for the obligation, and that the certificate holders have a specific remedy, least harmful to the city. The legislative recognition of this, demonstrated by making provision for a franchise to, and the rates to be charged by, the purchaser at foreclosure is demonstrative of sound legislative policy. Defendants, however, contend that the court should so construe the act as to include permission to issue certificates other than those secured by mortgage. ,, They would liave the court extend the legislative enactment to include a provision authorizing financing by unsecured certificates. This suggestion, it seems to the court, docs violence to the rule that the intention of the Legislature must be determined from consideration of the entire act and the powers of the city limited to what is contained within the same; and I do not find that tlie authorities cited controvert the soundness of this conclusion. Thus, in the City of Springfield v. Springfield R. Co., 296 Ill. 17, 129 N. E. 580, relied upon by defendants, the improvement was one proposed under the Local Improvement Act, another statute, the provisions of which differ from those of the Municipal Ownership Act. The court expressly held that the ordinance was not within the terms of the latter act, but within the former. In Huggins v. City of Pinckneyville, 239 Ill. App. 213, Merchants’ Loan & Trust Co. v. Chicago, 264 Ill. 76, 105 N. E. 726, the courts grounded their decisions upon the proposition that certain other acts of the Legislature were in pari materia with the Municipal Ownership Act and accordingly affected the power granted in the latter. I find no decisions in Illinois which persuade me that the Municipal Ownership Act should be enlarged beyond its language, to include power in the city, which I do not find implied by anything in the act. The ordinance fails to comply with the statute in another respect. The city proposes to use an electric distribution system, previously acquired at a cost of $25,000. The ordinance pledges the revenue to be derived therefrom for the payment of the cost of the new plant. By reference to the statute we find that certificates “shall be payable solely out of the revenues or income to be derived from the public utility property for the acquisition of which they were issued.” Thus the ordinance ignores a direct limitation upon the power of the city in the issuance of certificates. It would give to investors certificates payable, not only out of the revenues of the plant to be acquired with the proceeds of certificates, but, in addition, out of the revenues to be derived from the distribution system already owned and now a part of its municipal assets. This clearly is beyond the statutory power of the city. Plaintiff contends further that the facts immediately last discuss'ed, in connection with others, work an increase of the authorized indebtedness of the city beyond its constitutional and statutory limitations of 5 per cent, and 2j^ per cent, respectively. If all the contentions in this respect are correct, each of the limitations is exceeded. Consequently it is necessary to examine the various items which, it is claimed, contribute to such result. Besides the pledge of income of property already owned as an item of excess indebtedness, plaintiff contends that, the obligation of the city to electrify its waterworks plant at a cost to be paid from its corporate funds is an element contributing to an illegal excess of indebtedness. Under the terms of the ordinance and contracts, this additional equipment will likewise be used in the plant and the income therefrom becomes a part of the pledged income applicable to the payment of certificates. The city further contracts to contribute $5,000 from its corporate funds an.d to maintain the same for a period of five years. Under the ordinance, the city is bound also to extend the distribution system in and upon the public streets at its own cost, and the revenue from this extension likewise passes as security for certificates, so that income is derived in part at least from the use of the streets and alleys of the city. It is further contended that an inevitable result of the ordinance is to make the city a guarantor and general obligor of all obligations contained therein and in the contract with the Administrator. That the contract of the city to electrify its waterworks and pay therefor from its corporate funds is a general obligation within the meaning of the decisions of the Supreme Court of Illinois is too clear to require comment. The same is true with reference to the contribution of $5,000. But these two items, in themselves, do not exceed the indebtedness beyond the legal limitation. With reference to the use and extension of the distribution system belonging to the city and the pledge of the revenues therefrom, some consideration is necessary. In City of Joliet v. Alexander, 194 Ill. 457, 62 N. E. 861, the court held that certificates are a general indebtedness of the city, if the city mortgages any property in addition to that purchased or constructed with funds derived from certificates or if it pledges the income from such additional property. There the city proposed to construct a utility and to raise the money for doing so by mortgaging the existing plant and pledging the income from the entire system, both old and new. Such indebtedness, the court said, is a general indebtedness. In Lobdell v. City of Chicago, 227 Ill. 218, 81 N. E. 354, the court adhered to the same rule, saying that such obligation becomes an indebtedness, for the reason that the city will be compelled to pay it either by giving up the property or the income from the property, which it already has. The court held specifically that street railway certificates create an indebtedness against the city when secured by a mortgage or trust deed on the street railway property together with a right to operate such railway for a period of twenty years after a foreclosure sale, and the mere fact that the certificates preclude the holder from bringing an action against the city does not prevent them from creating an indebtedness against the city where property of the city other than the tangible property and its income purchased with the proceeds of sale of such certificates is pledged to secure the payment of the certificates. To the same effect are Village of East Moline et al. v. Charles H. Pope, 224 Ill. 386, 79 N. E. 587; Schnell et al. v. City of Rock Island et al., 232 Ill. 89, 83 N. E. 462, 14 L. R. A. (N. S.) 874; Leonard v. City of Metropolis, 278 Ill. 287, 115 N. E. 813. At apparent odds with these authorities is that of Ward v. City of Chicago, 342 Ill. 167, 173 N. E. 810, following Maffit v. City of Decatur, 322 Ill. 82, 152 N. E. 602. There the court was interpreting another act, dealing with cities of a population' of 500,000. The city had proposed to borrow money to extend its water and pledge the revenues from the entire system for the purpose of paying existing indebtedness and the cost of the new improvement. The court held that such was not a general indebtedness. I deem it most material that the present statute was not before the court and that there the city pledged the income from the entire plant, including extensions, not only to secure new financing, but. also to take care of existing previously created legal indebtedness. This fáct may have compelled the court to distinguish the prior cases; and I do not find any authority for the doctrine that revenues from an existing plant may be pledged in violation of the express terms of the statute for the purpose of paying only the cost of construction and operation of a new plant without making the certificates an indebtedness of the city. Such illegal act upon the part of the city is either void because contrary to statute or creates a general indebtedness. Nor do I believe that City of Jerseyville, Ill. (C. C. A.) v. Connett, 49 F.(2d) 246, of this Circuit militates against die rule. The court there dealt with a completed contract; it was not concerned with the legality of a proposed act. A similar question arose in City of Campbell v. Arkansas-Missouri Power Co. (C. C. A. 8) 55 F.(2d) 560, 563. There the city contracted for the purchase of certain equipment for a municipally owned utility, promising to pay for the same by certificates, payable out of the revenues of the plant already owned. The contract was for additional machinery and equipment to the extent of $62,000. The court held that these certiiicat.es created an obligation beyond the constitutional power of the city, saying: “The machinery sold to the city, as has been pointed out, does not constitute the entire plant which generates and distributes the electric current and produces the revenue for such service. * * * The purchase price, under the provisions of this contract, is not to come alone from the earnings of the property sold. Under such circumstances, the obligation t.o pay the income of the property other than that purchased is not different from an obligation to pay with any other funds. Bell v. City of Fayette, 325 Mo. 75, 28 S.W.(2d) 356, 360; Schnell v. City of Rock Island, 232 Ill. 89, 83 N. E. 462, 14 L. R. A. (N. S.) 874; Feil v. City of Coeur d’Alene, 23 Idaho, 32, 129 P. 643, 43 L. R. A. (N. S.) 1095; City of Ottumwa v. City Water Supply Co. (C. C. A.) 119 F. 315, 59 L. R. A. 604; Hesse v. City of Watertown, 57 S. D. 325, 232 N. W. 53; State v. McMillan, 12 N. D. 280, 96 N. W. 310; Wilder v. Murphy, 56 N. D. 436, 218 N. W. 156. * * * Notwithstanding the skillful attempt to •evade the constitutional inhibition against the creation of indebtedness, we think it clear that, the subterfuge resorted to does not have that effect, and that the lower court properly held that the contract was void. The judgment appealed from is therefore affirmed.” See, also, Hight v. City of Harrisonville, 328 Mo. 549, 41 S. W. (2d) 155. I approve the doctrine that a municipal corporation, governed by a statutory limitation upon its right to incur indebtedness, must, in determining whether that limitation has been reached, include contracts pledging the income from previously owned property as well as the income from property acquired to secure the payment of certificates issued for the acquisition of the additional property. It follows in the present case that the pledge of the city of the revenues from its existing plant or other property must be included in determining the amount of general indebtedness of the city. Under the figures submitted, in the present instance, this inclusion produces an illegal excess. Plaintiff contends further that the ordinance inevitably makes the city a guarantor of the entire obligation of the certificates and thus creates a general indebtedness as to the whole amount of the cost. Section 17 of the ordinance provides that it shall constitute a contract between the city and the holders of the certificates. Section 3 provides for certificates to the amount of $477,000 and interest. The entire revenue from operation must be deposited in a separate fund designated as an “electric fund,” and it is stipulated that there shall be separate accounts in that fund, designated as “operation and maintenance account” and “certificate account,” and that on the first day of each month, from the electric fund there shall be paid into the operating account, first, a sufficient sum to pay the expense of operation and maintenance; and, second, into the certificate account an amount equal to % of the interest due the next succeeding interest payment date, plus an amount, equal at least to Vis. of the principal of certificates becoming due on the next succeeding maturity date. Section 16 provides that while the certificates remain outstanding, the rates fixed and charged shall be such as are adequate to produce a revenue sufficient to pay the cost of operation and maintenance of the plant and principal and interest on the certificates; that there shall be charged to all consumers such rates as shall be adequate to meet the requirements, and that the city shall pay reasonable compensation for electricity furnished the city into the electric fund. Section 10 provides that until the accumulated revenues shall be equal to the principal requirements on the certificates for 24 months, there shall be an extra 20 per cent, of the requirements paid into the account and held as a reserve. If on the first of any month the amount in the electric fund is not sufficient to provide for all payments into the certificate account, the deficiency shall be paid the next month. The city agrees to perform fully all its duties under the ordinances, including the making and collecting of sufficient rates, and covenants that it will not sell, lease, mortgage, or in any manner encumber the property or pledge the revenues until the certificates have been fully paid; that it will maintain in good condition and continuously operate the utility so long as the. certificates are outstanding; that it will keep the plant insured out of the revenues from the plant. The last condition does not apply 'to the operation and maintenance funds, however. Obviously, if the city should fail to operate the plant or fail to charge and collect a sufficient amount from the operation to meet the interest and principal installments, or if it should violate any of the other covenants or provisions of the ordinance, it will have broken its contract, and for breach of its covenants the certificate holders might have a legal right of action for the resulting damages. This is persuasive that, by such provisions and covenants, the city becomes a guarantor of the certificates, thereby creating an indebtedness on the part of the city for the full amount of $477,000, far in excess of the constitutional and statutory limitation. Miller v. Buhl, 48 Idaho, 668, 284 P. 843, 72 A. L. R. 682, is authority for the doctrine that an agreement upon the part of the city to maintain adequate rates for a long period of time, sufficient to discharge an indebtedness, cannot be enforced, for the reason that it takes away from the city the right to control rates. But it seems that, under the statute of Illinois, such an ' agreement is merely a contract to do what the statute requires, and I doubt, therefore, the applicability of the doctrine to the present case. Plaintiff contends that the undertaking of the city contained in the ordinance and contract to fix rates which will produce a definite sum of money within a period of 25 years and to maintain and operate a utility for 25 years violates the Constitution of Illinois with regard to debt limitations. The theory is that such a contract becomes a general obligation of the city, and is therefore an indebtedness to be included in determining whether the limitation has been rea.ched. It is true that, so far as governmental activities are concerned, a contract to levy a certain tax or to do some specific act effectuates a general indebtedness, for such is a contract in derogation of the legislative discretion of the council and its successors. City of Springfield v. Edwards, 84 Ill. 626; City of Chicago v. McDonald, 176 Ill. 404, 52 N. E. 982; Schnell v. City of Rock Island, 232 Ill. 89, 83 N. E. 462, 14 L. R. A. (N. S.) 874. However, the Illinois limitation upon indebtedness, as 1 construe the decisions, is limited to acts of the city surrendering discretion in its governmental or legislative capacity, and does not apply to promises to perform its statutory duty in conducting a proprietary business. McQuillan, in Municipal Corporation, vol. 3, § 1356, p. 952, points out the distinction in this respect between governmental action and proprietary action. A city may, in its governmental capacity, do nothing which limits the legislative power of the successors of the existing official body, but in its contracts for public utilities, so far as private affairs are involved, rather than legislative or governmental powers, the city may bind itself beyond the term of office of the officials making the contract. Columbus Water-Works Co. v. City of Columbus, 48 Kan. 99, 28 P. 1097, 15 L. R. A. 354; City of Holton v. Kansas Power & Light Co., 135 Kan. 58, 9 P.(2d) 675; Illinois Trust & Savings Bank v. Arkansas City, 76 F. 271, 34 L. R. A. 518 (C. C. A. 8); Reed v. City of Anoka, 85 Minn. 294, 88 N. W. 981; City of Gadsden v. Mitchell, 145 Ala. 137, 40 So. 557, 6 L. R. A. (N. S.) 781, 117 Am. St. Rep. 20; Eau Claire Dells Imp. Co. v. City of Eau Claire, 172 Wis. 240, 179 N. W. 2. In City of Vincennes v. Citizens’ Gas Light Co., 132 Ind. 114, 31 N. E. 573, 577, 16 L. R. A. 485, the court said: “Whatever may be the law in other jurisdictions, this court is committed to the doctrine that a city has power to contract for a supply of gas or water for a staled period of time extending beyond the tenure of office of the individual members of the common coitncil making such contract. City of Indianapolis v. Indianapolis, etc., Co., 66 Ind. 396; City of Valparaiso v. Gardner, 97 Ind. 1 [49 Am. Rep. 416], * * * The making of contracts for the supply of gas or water is a matter delegated to the governing powers of municipalities, to be exercised according to their own discretion; and, in the absence of fraud, while acting within the authority delegated to them, their action is not subject to review by the courts.” With the reasoning of these cases, the court is in accord. The city may not contract to pay a certain rate throughout a term of years, regardless of reasonableness, for such is a surrender of its governmental power. It may, however, make a valid agreement to buy current and pay statutory “adequate” rates therefor over a long period. This conclusion is entirely applicable also to that covenant whereby the city binds itself not to sell, loan, or lease the proposed plant for 25 years. Plaintiff insists that the city has delegated its legislative and governmental functions in the fixing of rates, the making of charges and the control and management of the construction and operation of the utility. Consequently, it is necessary to observe with some care, the provisions and conditions of the contract. It provides that the determination of the Administrator of the cost of the labor and materials “shall be conclusive”; that the requisition to the government must be “satisfactory in form and substance to the Administrator”; that upon approval of the requisition, the government will take up and pay for bonds of maturities “satisfactory to the Administrator” and in such amount as will provide “in the judgment of the Administrator”, sufficient funds for the construction. The government is tinder no obligation to take up bonds beyond the amount “in the judgment of the Administrator” necessary to complete the project. It is provided that the money shall be expended for only such purposes “as shall have been approved by the Administrator”; that the work shall be accomplished in accordance with plans, drawings, specifications, and construction contracts “which shall be satisfactory to the Administrator” and under such engineering supervision and inspection “as the Administrator may require.” The city agrees to buy no material or equipment subject to any condition of sale or title “except with the written consent of the Administrator.” The Administrator is under no obligation if “in the judgment of the Administrator” the financial condition of the borrower shall have changed unfavorably in a material degree; “if the Administrator shall not be satisfied” that the borrower will be able to complete the construction for the sum borrowed “in a manner satisfactory to the Administrator”; or if “in the opinion of the Administrator,” which shall be “conclusive,” the borrower shall delay for an unreasonable time in carrying out any of the duties or obligations. It is a condition that the city must be able to complete the project in a “manner satisfactory to the Administrator”; that the “Administrator shall be satisfied” as to all legal matters and proceedings; that the ordinance shall be “satisfactory to the Administrator” ; that the city shall, “in a manner satisfactory to the Administrator,” set aside funds to electrify its waterworks pumping equipment; and that the city shall deposit $5,000 in a separate account to help in the expense of operation and maintenance. In part 2 of the contract it is provided that all work shall be done “subject to the rules and regulations adopted by the Administrator.” Thus, the Administrator is made the final exclusive judge of what shall be done in the entire construction work in the details of labor, wages, hours o'f employment, all of which may be dictated by the Administrator and as to none of which the city council reserves any discretion. The contract provides for compliance with the National Industrial Recovery Act (48 Stat. 195) and requires the contractor to comply with the Code thereunder to which he is subject. The right to cancel the contract on account of failure to comply with these provisions is reserved. No materials can be purchased or any subcontract entered into for materials or supplies, which are produced or furnished, in whole or in part, by any person who shall not certify that he has complied with the provisions of said act. In view of the fact that the Supreme Court has in the recent case of Schechter Poultry Corp. v. U. S., 55 S. Ct. 837, 79 L. Ed. 1570, 97 A. L. R. 947 (May 27, 1935) decided that the pertinent sections of the act are in violation of the Constitution, it would seem that such a condition is not valid. It is provided that the Administrator shall have the right to inspect all work as it progresses; that reports of the progress shall be given; that the approval thereof by the Administrator shall be a condition precedent to the advancement of funds; that the inspector shall be provided reasonable facilities, and that in case of dispute the government engineer “shall determine the reasonableness of the request.” No bid can be received from any subcontractor who has not filed certificate of compliance with United States Government P. W. A. No. 61. Termination of the contract is made sxxbject to approval by the government engineer or the representative of the Administrator. The contract provides further that the borrower shall receive no bid from any contractor or subcontractor who has not signed United States Government P. W. A. No. 61. The bond for the performance of the contract and the liability insurance must be “satisfactory to the Administrator.” From a perusal of the contract, it clearly appeal's that the purpose is to make the Administrator exclusive ai'biter of what is to be done and how it is done, and to grant to him all such discretion as the city has with regard to the construction of this plant, contracting therefor and letting of subcontracts. Bidders are limited to a certain specific class; the city surrenders its discretion as to the terms upon which it may contract' for labor and material. The court is not here concerned with the question of wisdom of action granting to the Administrator such exclusive power. The judiciary, in performing its functions, may not block the path laid out by the executive department because it does not approve the route, aiid I have no right or desire to attempt to extend the functions of the court beyond those which have to do solely with questiorxs of legality. It may be that each and every pi'ovision and condition provided in this contract is dictated by wise humanitarian purposes, but if illegality permeates the transaction, the court may not put the stamp of judicial approval upon the same, merely because of a desire to further humanitarian policies. Legislation and human action, whatever its economic or social value, mxxst, under our system of government, accord with the basic law of the state. Under the laws of Illinois, cities have, as we have seen, certain delegated legislative power, which they receive from the Legislature and which they exercise as creatures of the Legislature. Their authority is limited by the terms of the delegation. .Such legislative power, when delegated to a city, can in no way be redelegated by it to third persons. The city alone may exercise the delegated legislative discretion and if it sees fit not so to do, it may not give it to others. Nor, for the same rea-son, may the Legislature delegate its functions to other than its own arms. Its au-' thority over municipalities was reserved with manifold others to the state, under the Constitution of the United States. All such reserved sovereign power, lodged in' the people of the state, not granted in the Federal Constitution, remains where lodged, and no statute or resolution of the state legislative body, no declaration of the executive officers of the state, can effect a valid grant of that sovereign power to a third person, even though he be a national officer. I know of no method by which such sovereign powers, reserved as they are to the state, may be granted to the United States except by amendment to the United States Constitution, regularly adopted, whereby the people of the state grant additional power to the federal government. That the courts in Illinois and elsewhere quite generally agree that the Legislature may not make a valid delegation of discretion, vested in the Legislature and its constitutional agencies, is apparent from the analysis of the decisions. Thus, in People v. Sholem, 294 Ill. 204, 128 N. E. 377, 380, the court declared unconstitutional an act of the Legislature which gave to the fire marshal the right to declare whether a building was “legal” and what should be done with it, saying: “The fire marshal is given the power arbitrarily to determine, * * * where the line of demarkation is in any case. By his decision the property rights of individual citizens may be taken away without just compensation or due process of law, as required by the Constitution. * * * The Legislature cannot delegate to a single officer the power to arbitrarily deLermine the property rights of citizens in this manner.” • In People v. Yonker, 351 Ill. 139, 184 N. E. 228, 230, the court declared unconstitutional a statute which gave to the city clerk discretion to determine when licenses should be issued, without prescribing a standard, saying: “It is therefore left to the clerk to determine not only whether there was a compliance with the law but what the law is. * * * If [the law] leaves to a ministerial officer the definition of the thing to which the act is to be applied, * * * it is invalid 'as an unwarranted and void delegation of legislative power.” In Schireson v. Walsh, 354 Ill. 40, 187 N. E. 921, 924, the court declared unconstitutional a statute which gave to an administrative department the power to determine what constituted a prima facie case against a physician, saying: “The department * * * is not a court. It has no judicial powers. It is merely an agency of the legislative department of the state. The attempted unconstitutional delegation to it of the power to determine, in the first instance, what constitutes a prima facie case against a physician, without any legislative enactment setting forth facts constituting a cause for the revocation or suspension of the license of a licensee under that department, gives it no jurisdiction or authority.” In People v. Beekman & Co., 347 Ill. 92, 179 N. E. 435, 437, the court held unconstitutional a law which gave to the secretary of the state the power to prescribe terms of bonds not specified in the statute, saying: “Such authority, under the Constitution, cannot be delegated to that officer. * * * A law which vests an administrative officer with a discretion which is purely arbitrary and which may be exercised in the interest of a favored few is invalid.” In People v. Barnett, 344 Ill. 62, 176 N. E. 108, 110, 76 A. L. R. 1044, the court held unconstitutional a law which permitted judges to appoint jury commissioners and prescribe their duties and powers, saying: “All the legislative power inherent in the people of the state of Illinois has been vested in the General Assembly, except in those cases in which the power has by express limitation or necessary implication been withheld. Since it alone has the power, the General Assembly has also the duty, and upon it alone rests the full responsibility, of legislation. This power it may not delegate to any other officers or persons or groups of persons, or even to the whole body of the people. * * * The people, in whom it resided, have voluntarily relinquished its exercise, and have positively ordained that it shall be vested in the General Assembly. It can only be reclaimed by them, by an amendment or abolition of the constitution, for which they alone are competent. * * * ‘Under a well-balanced constitution, the legislature can no mox-e delegate its proper function than can the judiciary.’ ” In Re Opinion of the Justices of the Supreme Judicial Court of Massachusetts, 239 Mass. 606, 133 N. E. 453, 454, in deciding whether a stale could adopt as a state law a federal law, and the regulations thereunder as thereafter promulgated, the court said: “The enactment of laws is one of the high prerogatives of a sovereign power. It would be destructive of fundamental conceptions of government through republican institutions for the representatives of the people to abdicate their exclusive privilege and obligation to enact laws. * * * There are no exceptions to the principle that the General Court cannot delegate, surrender or transfer to any other power the function of enacting statutes general in their scope and operation. * * * No discussion is required to demonstrate that the Congress of the United States cannot be treated as a subsidiary board or commission by the General Court.” To the same effect is State v. Gauthier, 121 Me. 522, 118 A. 380, 26 A. L. R. 652. The Legislature of Illinois on July 5, 1933, enacted^ a law known as “Federal Aid,” by which it. gives to' municipalities the right to procure from the federal government loans for public work. See SmithITurd Ann. St. c. 29, § 25 et seq.; Cahill’s 111. Rev. St., chapter 52a, pars. 6, 7, and 8. Under section 27 (paragraph 8) the officials of a municipality are authorized to make application to procure loans and “to make any loan or enter into any contract which may be approved by the Federal Emergency Administration of Public Works or such officers and agencies empowered to act, on such terms and conditions as may be prescribed and may authorize the doing of all things and acts, and the execution of such documents and instruments, and adopt such resolutions and ordinances in connection therewith, that may be required by the Federal Emergency Administration of Public Works or such officers and agencies empowered to act to effect any sale or pledge of the warrants issued in anticipation of the collection of taxes or of the bonds of such municipalities or to procure grants in order to obtain financial aid.” Clearly the delegation of authority contemplated in this act to the Administrator to fix and control the “terms and conditions” upon which the public work of the city is to be done violates the principles laid down in the authorities quoted, and must, as it applies to the facts here involved, be held void. The same reasoning controls the limitations of cities, in delegating the discretion vested in them by the Legislature. Thus in People v. Clean Street Co., 225 Ill. 470, 80 N. E. 298, 300, 9 L. R. A. (N. S.) 455, 116 Am. St. Rep. 156, concerning a grant of special authority to private individuals for the use of the streets, the Supreme Court of Illinois said: “The control .over the streets and alleys of a city or village, under this statute, is very broad, and absolute power over them is vested in the municipality. But the authority is not vested in the mayor, chairman of the committee on finance, or commissioner of public works, but is conferred upon the legislative branch of the city government. In other words, it is vested in the city council, and can only be exercised by it through ordinances duly passed. * * * ‘The governing body of a municipal corporation is not at liberty to delegate to a committee, or an officer or agent, governmental, legislative, or discretionary functions confided to it by the Legislature of the state, in the absence of express authority for such delegation.’ ” To the same effect see Cooley’s Const. Lim. (5th Ed.) p. 249, and Dillon on Mun. Corp. (3d Ed.) §§ 96, 97. In New Orleans v. Sanford, 137 La. 628, 69 So. 35, 41, L. R. A. 1916A, 1228, discussing an ordinance which divided the city into certain health zones and gave to the health officer authority'to transfer buildings from one class to another, holding the same void, quoting from 28 Cyc. 276, the court said: “ ‘Since all governmental power is held in trust by the state for the benefit of the public, it has been generally denied that such power can be delegated by the-' state to anybody.’ * * * The board of health could not delegate to a subordinate the power to create exceptions to any rule it had established, or, which is the same thing, the power to stay the operation of any rule in cases falling within the terms of its ordinances.” In Zable v. Louisville Baptist Orphans’ Home, 92 Ky. 89, 17 S. W. 212, 213, 13 L. R. A. 668, where the ordinance delegated to an engineer the right to fix the grade of an improvement, the court said: “The council could not abdicate. its legislative power in this respect, and, leaving the matter to the judgment, or, perhaps, whim, of the city engineer or the contractor, subject the property of the abutting owner to whatever the improvement might cost. This would leave him largely at the mercy of an irresponsible, and, perhaps, interested party. The city, by its charter, has power to improve its streets as may be prescribed by ordinance. The power is a legislative one, and the kind and character of the improvement must be fixed by the city council.” See, also, McCrowel v. Bristol, 89 Va. 652, 16 S. E. 867, 20 L. R. A. 653; State v. City of Trenton, 51 N. J. Law, 498, 18 A. 116, 5 L. R. A. 352, and County Board v. Durham et al., 198 Ky. 733, 249 S. W. 1028. To the same effect are Stifel v. Hannan, 95 W. Va. 629, 123 S. E. 428, and Lawrence v. Portland, 85 Or. 586, 167 P. 587. The rule is well stated in Cooley’s Constitutional Limitations, vol. 1, 224, and 437 as follows: “Where the sovereign power of the State has located the authority, there it musí remain; and by the constitutional agency alone the laws must be made until the constitution itself is changed. The power to whose judgment, wisdom, and patriotism this high pr