B-77359, JUN. 10, 1964

B-77359: Jun 10, 1964

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IT BEING UNDERSTOOD THAT THE SAID GRANTOR (THE CITY) * * * WILL CARE FOR THE PRESENT AND FUTURE REQUIREMENTS OF THE SAID GRANTEE AND THAT THE SAID $10. 000 GALLONS RESULTING FROM AN INCREASE IN POPULATIONS OF BOTH THE CITY AND THE VA HOSPITAL IT WAS STATED: "* * * IT IS READILY APPARENT THAT IF SAID AGREEMENT MAY BE AMENDED TO PROVIDE FOR ADDITIONAL PAYMENTS BY THE GOVERNMENT WHENEVER THERE IS AN INCREASE IN THE AMOUNT OF SEWAGE GENERATED AT THE VETERANS' HOSPITAL. WHILE IT WAS RECOGNIZED THAT BECAUSE OF THE OBJECTIONS THAT MIGHT BE MADE TO THE EXISTING AGREEMENT FROM THE STANDPOINT OF BOTH PARTIES THERETO AMENDMENT OR REPLACEMENT OF SUCH AGREEMENT MIGHT BE IN THE BEST INTERESTS OF THE GOVERNMENT IT WAS POINTED OUT.

B-77359, JUN. 10, 1964

TO ADMINISTRATOR OF VETERANS AFFAIRS, VETERANS ADMINISTRATION:

YOUR LETTER OF MAY 15, 1964, REQUESTS TO BE ADVISED AS TO WHETHER THE DECISION OF FEBRUARY 24, 1955, B-15556, (34 COMP. GEN. 398), TO YOUR PREDECESSOR, AFFORDS A PROPER LEGAL BASIS FOR AMENDING OR CANCELLING THE EXISTING AGREEMENT WITH THE CITY OF HOT SPRINGS, SOUTH DAKOTA, FOR FURNISHING SEWAGE DISPOSAL FOR THE VA HOSPITAL AT THAT PLACE.

UNDER THE INVOLVED CONTRACT ENTERED INTO ON NOVEMBER 20, 1934, THE CITY IN CONSIDERATION OF THE PAYMENT OF $10,000 BY THE GOVERNMENT, GRANTED THE GOVERNMENT FOREVER THE FREE USE OF A SEWER FROM THE HOSPITAL TO THE SEWAGE DISPOSAL PLANT AND SYSTEM THEN UNDER CONSTRUCTION AT AN ENTIRE COST OF $42,200 AND AGREED FOREVER THEREAFTER TO:

"* * * MAINTAIN SUCH CONNECTION WITH THE SEWER LINE OF THE SAID GRANTEE (THE GOVERNMENT) AS MAY BE REASONABLE AND PROPER. IT BEING UNDERSTOOD THAT THE SAID GRANTOR (THE CITY) * * * WILL CARE FOR THE PRESENT AND FUTURE REQUIREMENTS OF THE SAID GRANTEE AND THAT THE SAID $10,000 PAID BY THE SAID GRANTEE SHALL CONSTITUTE A FULL AND FINAL PAYMENT FOR SUCH SERVICES.'

AS INDICATED IN YOUR LETTER IN THE PRIOR DECISION OF AUGUST 3, 1948, IN RESPONSE TO THE REQUEST AS TO THE PROPRIETY OF AMENDING OR CANCELLING THE CONTRACT BECAUSE OF AN INCREASE IN THE DAILY VOLUME OF SEWAGE FROM 200,000 GALLONS TO 500,000 GALLONS RESULTING FROM AN INCREASE IN POPULATIONS OF BOTH THE CITY AND THE VA HOSPITAL IT WAS STATED:

"* * * IT IS READILY APPARENT THAT IF SAID AGREEMENT MAY BE AMENDED TO PROVIDE FOR ADDITIONAL PAYMENTS BY THE GOVERNMENT WHENEVER THERE IS AN INCREASE IN THE AMOUNT OF SEWAGE GENERATED AT THE VETERANS' HOSPITAL, THE OBLIGATION OF THE CITY BECOMES NO OBLIGATION AT ALL.'

WHILE IT WAS RECOGNIZED THAT BECAUSE OF THE OBJECTIONS THAT MIGHT BE MADE TO THE EXISTING AGREEMENT FROM THE STANDPOINT OF BOTH PARTIES THERETO AMENDMENT OR REPLACEMENT OF SUCH AGREEMENT MIGHT BE IN THE BEST INTERESTS OF THE GOVERNMENT IT WAS POINTED OUT, HOWEVER, THAT ON THE BASIS OF THE THEN CURRENT RECORD AND IN THE ABSENCE OF INFORMATION AS TO THE TERMS OF THE PROPOSED AMENDMENT OR REPLACING AGREEMENT A DEFINITE DECISION IN THE MATTER COULD NOT BE RENDERED AT THAT TIME.

YOU NOW STATE THAT THE MAYOR OF HOT SPRINGS HAS REQUESTED THROUGH THE OFFICE OF SENATOR MCGOVERN THAT THE CONTRACT BE TERMINATED AND THAT A NEW CONTRACT CALLING FOR YEARLY PAYMENT FOR SEWAGE BE NEGOTIATED FOR THE STATED REASON THAT SINCE THE DATE OF THE CONTRACT THE SEWAGE TREATMENT PLANT HAS BEEN EXPANDED AT A COST OF MORE THAN $90,000 AND THAT THE CITY IS FACED WITH ANOTHER REBUILDING PROJECT AT A COST IN EXCESS OF $100,000.

IN SUPPORT OF THE MAYOR'S REQUEST FOR TERMINATION OF THE PRESENT CONTRACT YOU REFER TO AND QUOTE FROM OUR DECISION REPORTED IN 34 COMP. GEN. 398 INVOLVING A SITUATION SIMILAR TO THE PRESENT MATTER. IN THE CITED DECISION IT WAS STATED THAT IT IS A WELL-ESTABLISHED RULE OF LAW THAT CONTRACTS OF A MUNICIPAL CORPORATION MADE TO CONTINUE FOR AN UNLIMITED TIME IF CONSTRUED TO CONTINUE IN PERPETUO, ARE INVALID AND THAT A MUNICIPAL CONTRACT FOR AN INDEFINITE TIME HAS BEEN CONSTRUED AS CONTINUING IN FORCE FOR A REASONABLE TIME ONLY, AND HAS BEEN SUSTAINED ON THAT BASIS.

IN REGARD TO THE FOREGOING, IT MAY BE STATED THAT GENERALLY THE FACT THAT A CITY'S CONTRACT IS BY ITS TERMS PERPETUAL DOES NOT MAKE IT VOID AS AGAINST PUBLIC POLICY WHERE IT IS MADE PURSUANT TO STATUTORY AUTHORITY DELEGATED TO THE MUNICIPALITIES AND THE STATUTE CONTAINS NO LIMITATION WITH RESPECT TO LENGTH OF TIME FOR WHICH AN AGREEMENT MAY BE MADE. MCQUILLIN, SEC. 29.102 WILMINGTON PARKING AUTHORITY V. RANKEN, 105 A.2ND 614, 634.

THE CITY OF HOT SPRINGS, SOUTH DAKOTA, IS A MUNICIPAL CORPORATION. UNDER THE LAWS OF SOUTH DAKOTA EVERY MUNICIPALITY IS VESTED WITH CERTAIN POWERS WHICH INCLUDE AMONG OTHERS THE POWER TO ESTABLISH AND CONSTRUCT MAIN, TRUNK, AND SERVICE SEWERS, AND SEPTIC OR SEWAGE TREATMENT PLANTS, DRAINS AND MANHOLES; TO REGULATE AND PROVIDE FOR THE LAYING OF WATER MAINS, TRUNK OR SERVICE SEWERS AND TO CONTRACT FOR THE PRIVILEGES OF CONNECTING TO THE MUNICIPALITY'S TREATMENT OR SEPTIC PLANT FOR THE TREATMENT AND DISPOSAL OF SEWAGE. SDC 45.0201 AND 45.1811. IN CONSTRUING THE FOREGOING STATUTES AND CERTAIN OTHERS INCIDENTAL THERETO THE SUPREME COURT OF SOUTH DAKOTA IN ERICKSEN V. CITY OF SIOUX, 14 N.W.2D 88, 95 STATED:

"BY THE STATUTES HEREINBEFORE QUOTED THE GOVERNING BODY OF THE CITY IS VESTED WITH THE POLICE POWER TO PRESERVE THE PUBLIC HEALTH AND WELFARE AND THE PROPER DISPOSITION OF SEWAGE IS ESSENTIAL TO THIS PUBLIC HEALTH AND WELFARE. WHERE, AS HERE, THE STATUTE EXPRESSLY CONFERS UPON THE CITY THE POWER TO REGULATE THE USE OF SEWERS, AND NEITHER DEFINES THE LIMITS OF THAT POWER NOR PRESCRIBES THE MANNER OF ITS EXERCISE, THE CITY IS NECESSARILY INVESTED WITH THE POWER TO EXERCISE ITS DISCRETION, AND THE COURTS WILL NOT INTERFERE WITH SUCH ACTION UNLESS IT APPEARS TO BE UNREASONABLE OR ARBITRARY. TOWN OF COLTON V. SOUTH DAKOTA CENTRAL LAND CO. 25 S.D. 309, 126 N.W. 507, 28 L.R.A., N.S., 122; CITY OF MOBRIDGE V. BROWN, 39 S.D. 270, 164 N.W. 94.

"HOWEVER, THE COURTS WILL ALWAYS INTERFERE TO KEEP MUNICIPAL AUTHORITIES WITHIN THE LAW AND WILL INTERPOSE TO PREVENT ANY ACTION WHICH IS ULTRA VIRES BECAUSE OF SOME LACK OF ANTECEDENT LEGISLATIVE AUTHORITY. MCQUILLIN, MUNICIPAL CORPORATIONS, 2D ED. REV., SEC. 391, AT P. 1087.'

THE COURT STATED THAT THE ONLY PRIVILEGE WHICH A CITY CAN GRANT TO A PERSON OR A FIRM WITHIN THE CITY LIMITS IS A LICENSE OR PERMIT TO MAKE PROPER CONNECTION AND EMPTY SEWAGE INTO THE SYSTEM, THERE TO RECEIVE SUCH TREATMENT AND DISPOSAL AS THE CITY MAY FROM TIME TO TIME PROVIDE AND THEN CONCLUDED BY STATING:

"IN SHORT, A PERMIT OR LICENSE TO MAKE A SEWER CONNECTION GRANTED BY A CITY MEANS ONLY THAT THE LICENSEE IS PERMITTED TO EMPTY ITS SEWAGE INTO THE SYSTEM SO LONG AS THE SYSTEM WILL TAKE CARE OF IT AND THE CITY AUTHORITIES PERMIT. IN THE EXERCISE OF ITS DISCRETION, WHICH THE COURTS WILL NOT INTERFERE WITH UNLESS THE ACTION IS CLEARLY UNREASONABLE AND ARBITRARY, THE GOVERNING BOARD OF THE CITY MAY GRANT AND REVOKE LICENSES OR PERMITS AS MAY BE WARRANTED BY THE CAPACITY AND ABILITY OF THE SEWERS AND DISPOSAL PLANT TO DISPOSE OF THE SAME, AND AS THE PUBLIC INTEREST MAY REQUIRE.'

AS INDICATED ABOVE, IN THE PRESENT CASE THE GOVERNMENT CONTRIBUTED ALMOST ONE-FOURTH OF THE COST FOR THE CONSTRUCTION OF THE DISPOSAL PLANT. THAT REGARD, IN THE ERICKSEN CASE, THE PERMITTEE WHO HAD BEEN GRANTED AN UNLIMITED RIGHT, BY CONTRACT TO CONNECT WITH THE DEFENDANT'S SEWAGE MAINS HAD PAID PART OF THE COST OF THE EQUIPMENT USED IN THE DISPOSAL PLANT AND HAD EXPENDED CONSIDERABLE MONEY TO MAKE CONNECTION WITH THE CITY'S MAINS. THE COURT IN HOLDING THAT SUCH EXPENDITURES GAVE THE PERMITTEE NO VESTED RIGHT STATED:

"THE CONTRACT BETWEEN THE CITY AND THE COMPANY SEEMS TO TREAT THE SEWAGE DISPOSAL PLANT AS PROPERTY SUBJECT TO JOINT CONTROL, A SORT OF PARTNERSHIP AFFAIR, TO BE SUPERVISED BY ENGINEERS PAID BY AND OWING ALLEGIANCE TO BOTH PARTIES. THE LAW DOES NOT AUTHORIZE SUCH. THE PLANT BELONGS TO THE CITY. THE CITY CANNOT PART WITH ANY OF ITS CONTROL THEREOF, NOR SHOULD IT SHARE THE ALLEGIANCE OF ANY OF ITS EMPLOYEES. THE COMPANY IS NOT COMPELLED TO USE IT. IT MAY USE IT ONLY BY PERMIT FROM THE GOVERNING BOARD OF THE CITY. IF THE COMPANY WISHES TO USE THE CITY PLANT, IT MUST CONFORM TO THE REQUIREMENTS WHICH THE GOVERNING BOARD MAY LAWFULLY IMPOSE.'

UNDER THE RULES STATED IN THE ERICKSON CASE WE CONCLUDE ON THE BASIS STATEMENTS REPORTED TO HAVE BEEN MADE BY THE MAYOR OF HOT SPRINGS THAT THE PRESENT CONTRACT MAY BE AMENDED OR CANCELLED AND A NEW AGREEMENT, PROSPECTIVE IN EFFECT, FOR DISPOSAL OF SEWAGE FROM THE VA HOSPITAL MAY BE ENTERED INTO WITH THE CITY AT RATES NOT TO EXCEED RATES CHARGED FOR SIMILAR SERVICE.