Potter v. Town of Greenwich

Rumset, J.: The case shows that in March, 1871, an adjudication was made, under the authority of chapter 907, Laws of 1869, by the county judge of Washington county, in which it was recited that a petition had been presented to him under the act, setting forth certain — 329 — facts required by it and asking that tbe bonds of the town may be created and issued in the manner specified in it to the amount of $40,000, and invested in the second mortgage bonds of the Greenwich and Johnsonville Railroad Company, at eighty cents on the dollar, and adjudging that the allegations in the petition are proved, and that the petitioners represent a majority of the taxpayers, and of the taxable property on the last assessment roll, and directing that the order be entered and recorded in the Washington county clerk’s office. No petition, or notice, or proof of publication was offered in evidence or proved unless by the recitals in the order, nor was there any evidence of the appointment or commissioning of. commissioners, except the parol testimony of the county judge, and no proof of the loss of any of the papers not produced, or that they ever existed, except as they were recited in the adjudication. It appears further that certain persons claiming to be commissioners under this record, signed the bonds of the town for $40,000, making them due and payable by their terms in twenty years, instead of thirty years, as required by the statute. The learned justice at Special Term finds that the commissioners intended to issue the bonds to conform to the statute, but committed the drafting of them to a scrivener, who by mistake made them read that they are payable in twenty years instead of thirty, and that the commissioners being inexperienced in such matters assumed the bonds to be correct, and inadvertmily issued them and sold them. He also found that they intended to do right, and intended to do what they did do supposing it was right. The evidence on this subject shows that the bonds were prepared for signature without-any direction or supervision of the commissioners ; that the only commissioner who was sworn on the subject, had never examined the law, nor taken any advice on it, and paid no attention to it; that he read the bonds before he signed them, and intended to execute them in the precise form in which they were executed. It was further found that the commissioners, after they had signed the bonds, left them with one Andrews, who was treasurer of the railroad company, who sold them, and with the proceeds purchased railroad bonds. The plaintiff testified that he paid cash for his bond; but there was no evidence except the — 330 — hearsay declarations of Andrews, given under objection, to show how the other bonds were sold, or that they were in fact sold, and not exchanged. No officer or taxpayer of the town, except the commissioners and Andrews, ever saw the bonds, or knew of the defect in them until after the last payment of interest by the town, which was in July, 1878. The bonds amounting to $40,000 bore interest at seven per cent. The railroad bonds amounting to $50,000 also bore interest at seven per cent. Up to 1877, the interest on the town bonds was paid by the railroad company, which paid seven per cent interest on the town bonds of $40,000 directly to the holders of them; but did not pay to the town any of the interest on its $50,000 bonds held by the town. No interest was ever paid on the difference of $10,000. The plaintiff had no communication with any of the commissioners when he bought his bond, but dealt with Mr. Andrews exclusively. The bonds, were by their terms due and payable July 1, 1891, and interest coupons were attached for each year to 1891, payable alternately on the first days of January and July in each year. Upon the trial of the issue of fact raised on the first cause of action set out in the complaint, the court held that the town never ratified the bonds; that the commissioners had no power to make the bonds payable in less than twenty years, but that the statute providing that the bonds shall be due and payable in thirty years overrides and controls the words of the bonds fixing an earlier date for their payment, and that so much of the bonds as prescribes an earlier date of payment than that fixed by statute should be corrected and conformed to the statute, and ordered judgment for that relief and for the interest unpaid. . Judgment was accordingly entered correcting plaintiff’s bond by erasing the words “ to pay on the first day of July, 1891 ” and inserting instead the words “ to pay at the expiration of thirty years from the date hereof,” and otherwise as directed in the decision, and defendant appeals. It must be taken as established in this State that everyone who deals in bonds of a town must see to it that the statute which authorizes their issue has been complied with at his peril; that the commissioners to issue the bonds not being appointed by the town are not town officers, and represent the town no farther than they — 331 — act within the statute, and that there can be no such thing as a bona fide holder of these bonds. (Cagwin v. Hancock, 84 N. Y., 532; Horton v. Town of Thompson, 71 id., 513; Angel v. Town of Hume, 17 Hun, 374.) If the courts of the United States have adjudged the law differently, their rulings are not yet controlling against the decisions of the highest court of our own State, and we ought not, as we do not desire, to follow them. Justice to all parties in these matters can best be secured by a' strict adherence to what the law has required to be done. The acts of the commissioners are binding on the town only so far as they follow the authority given to them. (Horton v. Town of Thompson, supra.) The statute here required that the bonds should become due and payable in thirty years with semi-annual interest. Unless they were so payable they are void. The commissioners cannot impose upon the town any other bonds than such as the law authorized. They are, the agents of the town only to do the acts prescribed by the statute, and in the way prescribed by it. The taxpayers .never consented to the issue of twenty-year bonds. The petition, as recited in the judgment, asked that the. bonds might be issued as specified in- the law. That required a thirty-year bond. No taxpayer consented to anything else, and as the consent of the taxpayer is the basis of the right (Horton v. Thompson, supra; People ex rel. D. W. and P. R. R. Co. v. Batchellor, 53 N. Y, 128) no other bond is valid or .binding on the town. The case of Rock Creek v. Strong (96 U. S., 271-277) was decided upon the ground that the bonds there in question were practically thirty-year bonds and within the statute. The learned justice at Special Term held that these bonds, if regarded as payable in twenty years, were not within the power of the commissioners. It was therefore necessary to correct them before they could be made a charge on the town. This having been done, it is sought to sustain it on two grounds: First. That they were made payable in twenty years by mistake. The facts in regard to the mistake I have stated in a former part of this opinion. The commissioners were not mistaken as to the law, for they paid not the slightest' attention to it. They were not mistaken as to the facts, for it appears and is undisputed that they made the bonds just as they meant to do, and signed them after reading them’ over with — 332 — out any misapprehension as to what they contained. They made no mistake whatever; they simply issued the bonds in this manner without taking the trouble to inquire whether they were valid or not. Such a mistake cannot be corrected in equity. (Lanning v. Carpenter, 48 N. Y., 408; Mowatt v. Wright, 1 Wend., 355; Hunt v. Rousmaniere, 1 Pet., 13.) The second ground on which these bonds were reformed, and the ground mainly relied on to sustain this judgment, is that by the force of the statute the bonds are payable in thirty years, and therefore the statute overrides the contract of the parties in whatever form it is put and makes these bonds payable in thirty years by its own force. In discussing this point it is necessary to keep the idea of a mistake out. of our minds, for there was no mistake, and to remember that the bonds are just what the contract of the parties intended them to be, twenty-year bonds. It is also to be remembered that the town has never ratified the act of these commissioners. Conceding that the transaction was between the plaintiff and Andrews acting as the agent of the commissioners, it was not a loan of money upon the security of a bond to be issued as provided by the statute.' The bonds were made and signed and the plaintiff bought this twenty-year bond knowing just what it was. The statute was not in the mind of either. No previous agreement had been had. The bond was there, made as they intended, and the plaintiff bought it precisely as it was. The contract was in the bond, and there was no mistake about it as long as the interest was paid. The contract they made was, not to be sure, the one they were empowered to make. The town authorized them to issue thirty-year bonds. The commissioners did not do it. They issued twenty-year bonds which were worth less than the bonds they were authorized to issue. They sold them and used the money. In doing this they were not acting as public officers. The town was acting as an individual when this contract was made for it. (People ex rel. D. W. and P. R. R. Co. v. Batchellor, 53 N. Y., 128-141, and cases cited.) The commissioners acted for the town as all other special agents do for their principals. If they go beyond the authority granted the act is not binding on the principal, in the absence of an estoppel. (Munn v. Commission Co., 15 Johns., 44; — 333 — Corn Exch. Bank v. Cumberland Coal Co., 1 Bosw., 436; Horton v. Town of Thompson, supra, 521, 522, 524; Cagwin v. Hancock, 84 N. Y., 542; Martin v. Farnsworth, 49 id., 555-558.) As we have seen, these bonds in their physical shape are void and of no force. But it is said that the statute is part of the bond and fixes its terms. If that be so no bond can be invalid for want of form, if it purports on its face to be a bond issued under the act and contains-an amount to be paid, signatures and seal, for the statute provides everything else. Nor was there any need of this suit, for the bonds are not due, and their time of payment being fixed by the statute there is no uncertainty about the rights of the parties to them. But the law and the contract are by no means the same thing. The law is the grant of power to the town and that which gives foi’ce to the contract when it is made, and at the same time it is-the limit of the authority of the special agents to bind the town. (Horton v. Town of Thompson, supra, 522, 524.) The contract,, on the contrary, is the result of the assent of the minds of the commissioners with the purchasers of the bonds. It is contained in and evidenced by the paper which they have made. The essence of the contract is the agreement of the minds of the parties. This the legislature cannot create. (People v. Batchellor, supra.) It may fix the manner in which the act shall be done, but it could not say that the act done in an entirely different manner shall operate in a way the parties have not expressed. If the parties have made the statutory contract, it is good because the law permits it and the contract has been made. If they have made a different contract, with their eyes open, the law simply says, “ that is not the thing I authorized.” It does not say, “ you have chosen to agree on some other thing, and- I will, against your protest, make your minds meet in a bargain you never made.” It is an old rule that every statute which limits a thing to be done-in a particular form, although it be in the affirmative, includes in itself a negative, viz.: that it shall not be done otherwise. (Plowd. Comm., 206.) If the statute is a part of the act, this rule is of no use, for the-act cannot be done in any other way. Indeed, if the rule contended for by the respondent be the true one, no act done under statutory-authority, with good intentions, can ever be void, for the statute334 being portion of the aet, overrides the void part and makes all good. That makes the validity of such an act depend on the intention with which it-was done. But in the absence of fraud or mistake the intention of the contract must be sought in the paper. (Pollock on Cont., 438.) Any other rule would give rise to most distressing uncertainty. Suppose we adopt the rule of the Special Term. The plantiff paid no attention to the law, but thought the bonds were good. As to him they are good because he meant right. Another purchaser knew what the law was; knew the bonds were wrong, but deliberately violated the law, and took his chances. Is the bond to be held good as to him ? If it is, what becomes of the maxim that he who comes into equity must come with clean hands ? These commissioners acted in disregard of the requirements of the law, because they did not know what it was. Suppose that after they had issued half of the bonds they had accidentally learned what the law was, but deliberately resolved to violate it? Would any part of the bonds last issued be valid? Would the validity depend upon the proof or failure to prove the guilty knowledge ? In these very bonds, suppose that in a suit by another plaintiff another commissioner should swear that he knew what the law was, but for his own reasons proposed to violate it — and Mowry was not sworn Would those bonds be held good or bad? When does the statute of limitations run against this bond? If the plaintiff should sell it, without changing its form, and should guaranty its payment, when will his liability begin? Suppose these bonds, by their terms, bore interest at four per cent, payable annually. Could any one insist that the town must pay seven per cent semi-annually ? Certainly not. And yet that is the rate the statute prescribes. JVIany other difficulties might be suggested as the result of leaving the terms of the paper and settling its validity by the varying evidence of the intention of the parties. I think the only safe rule must be to hold the party in this, as in all other cases, to his rights as fixed by the contract he has made, and to hold that where the agents of a corporation fail to pursue the strict requirements of a statutory enactment under which they are acting, the corporation is not bound, and the contract is not effective. (Smith v. Newburgh, 11 N. Y., 130, 136; Delafield v. State of Illonois, 26 Wend., 192, 221.) It cannot be claimed that the town — 335 — is estopped to urge that these bonds are void. (Town of Springport v. Teutonia Savings Bank, 84 N. Y., 403, 406; Weismer v. Village of Douglas, 64 id., 91, 105.) Neither has it ratified them. (Smith v. Newburgh, supra; Horton v. Town of Thompson, supra) The legislature has from time to time passed curative statutes by which technical defects in the exercise of statutory powers have been remedied. In 1877, it provided by chapter 320, for the cure of certain defects of the nature of that urged here, and enacted that where the time fixed for the maturity of such bonds was for a longer period than that fixed by the law, a variance of sixty days should not be regarded as ■ affecting the validity of them. If the statute is part of the bond, and overrides all provisions which contradict it, these statutes are of no force, and all the decisions as to the power of the legislature to pass them, are useless learning, because there can be no such thing as a statutory bond which contains provisions contradictory to the statute. I do not see any principle on which the judgment on the issue of fact can be sustained. No precedent is cited for it and it cannot stand. I do not mean to say that under a complaint containing proper allegations the money paid for this bond may not be recovered if it was bought of the town. That question is not here. The demurrer to the second cause of action is, I think, well taken. Towns as such have no power to contract, other than the statutes give them. (Lorillard v. Town of Monroe, 11 N. Y., 392; People ex rel. Van Keuren v. Town Auditors, 74 N. Y., 310-316.) If the right is given by a private statute it must be stated in the pleading. (Code Civ. Pro., § 530.) None such is stated. If it is given by. a public statute we must take notice of it. We know that there is no public statute which of its own force, without some action on the part of the town, authorizes it to buy railroad bonds and issue its own to pay for them. No facts are stated which show that the town had such authority. It is not even alleged that such authority existed. If proceedings were had or authority given to enable the town to issue its bonds, they must be set out in the count in question. No other count can be referred to for them. (Bliss, Code Pleadings, § 121.) 'The case of Horn v. Town of New Lots (83 N. Y., 100) does not aid the plaintiff. — 336 — It was alleged in that case that by mandate and authority of acts of the legislature which were cited, the bonds of the defendant town had been issued, and that the money of plaintiff, raised by a void tax, had been applied in payment of them. The court overruled the demurrer to the complaint there, because it appeared that the money ■ went to pay bonds legally issued by the town, and was therefore paid to its use. But in the case at bar there are no facts alleged which show the power of the town to make this contract. The demurrer does not admit the power. That is a legal conclusion from the facts. The demurrer admits the facts and takes issue on the legal conclusion. (Bliss, Code Pleadings, §§ 136, 137.) The case of Town of Wayne v. Sherwood (14 Hun, 423; S. C., 76 N. Y., 599) is in point. In that case the plaintiff alleged that the defendant’s intestate made a certain contract with it. The defendant demurred. The demurrer was sustained on the ground that, although the act was done as alleged, the town had no power to make the contract and no cause of action was stated. But if the bond is part of the second count, as is claimed, the plaintiff is no better off. If the statement in the bond must be taken as true, it is that the bond is lawfully issued and that it is valid. If the demurrer admits anything in the bond it admits that. If the bond is valid it is not due, and there can be no cause of action on it until it is due. There is no allegation that the bond is void. The complaint alleges that the supervisor refused to pay, saying that the bond was void, but that does not amount to an allegation that the bond was in fact void, or that the defendant claimed it was void, for the law does not give the supervisor the right to speak to that effect for the town. He has no more right than any other taxpayer to repudiate its lawful debts. The same considerations apply to the third cause of action. (See City of Rochester v. Town of Rush, 80 N. Y., 310, 311, 312.) For these reasons the judgment on the issue of fact must be reversed and a new trial ordered, costs to abide event; and the defendant should have judgment on the demurrers, with costs, with leave to plaintiff to amend on usual terms. — 337 — Osborn, J.: I have spent much time in the examination of this case on account of the disagreement of my associates. I am inclined to think with my Brother Learned, that if the power of the legislature to authorize towns to issue bonds to aid in the construction of railroads was before the court now as an original question, with the knowledge which they now possess of the practical workings of such' power, they would hesitate long before giving their sanction to the validity of such legislation. But it is too late now, particularly for an inferior appellate tribunal, to raise any such question, but it is well at all times to keep this fact in mind so that there shall be no extension of mischief already done, by undertaking to extend or stretch the law as already settled to meet a particular case. The bonds issued by the town of Greenwich could only be so issued by an act of the legislature. This, it is claimed, was obtained. Except for this legislative enactment no one would claim that the bonds that were in fact issued had any validity. All the officers in the town might unite in issuing bonds purporting to create an indebtedness of the town, but these would not be worth the paper they were written or printed on. Innocent purchasers might procure them, but this would create no liability on the part of the town. Even if under any circumstances such authority could be exercised by officers, this would be most clearly true, unless it could be shown ’ that the money was actually received and used by the town, and for which the town received (its taxpayers equally) full benefit by way of paying the ordinary and legitimate expenses of the town, and so-have relieved the town from the burden of taxation pro tanto. In. this case the bonds issued were void on their face. The town, its-officers or the commissioners appointed, had no authority to issue’ any such bonds. The act should be strictly construed. Upon the face of the bonds the act was referred to, and even'to an innocent purchaser the maxim “ ignorantia legis neminem exousat ” might well apply. There is nothing to show any mutual mistake of facts or even ignorance of the law in the issuance of these bonds. On the contrary, the opposite appears. I do not think the court had the power to reform the bond in suit. Such a contract, creating an indebtedness on the part of the — 338 — town, could only be valid as it was in strict conformity with the statute. Suppose the bonds through the grossest negligence had been issued by the supervisor and town clerk instead of the commissioners Appointed for that purpose, would the court reform, by allowing the parties to sign, or regarding the parties as signing, whose duty it was to sign ? As well have made these bonds payable in a thousand years or on demand, and then ask the court to reform, as to do so in this case. It is quite unlike the reformation of contracts, which parties have the legal right to make, either as they appear or as they are asked to be reformed. Nor has there been, if such a thing were possible, any ratification to preclude the defense set up on the part of the town. I think the holders of the bonds have mistaken their remedy, if any. As the only power to issue came from a legislative- enactment, and the terms of such enactment have not been followed so that the bonds are invalid, I think the remedy would be to apply to the source of power and by some act legalize the bonds already issued or authorize new bonds to be issued with which to pay these illegal bonds, and which innocent purchasers through very careless parties have obtained and for which they have parted with their money. For the reasons thus stated I concur with Mr. Justice Rumsey in a reversal and the granting of a new trial. I also agree with him as to the disposition made of the demurrer.