Luxora v. Jonesboro, Lake City & Eastern Railroad

McCulloch, J. The town council of the incorporated town of Luxora, as an inducement to the Jonesboro, Lake City & Eastern Railroad Company to build its road into the town and establish a depot therein, by ordinance appropriated the sum of '$1,000 to be paid to said company on condition that it should execute a bond as a guaranty that it would perform the conditions of said ordinance. A warrant was drawn on the treasurer of the town for said amount payable to the- railroad company, the indemnity bond was executed and the money paid over to'the company on the warrant, and the railroad company complied with the terms of the ordinance by building its road into the town. The town instituted this action at law to recover the money paid to the railroad company. It must be conceded that the appropriation of money by the town council for the purpose named was in direct conflict with the Constitution of the State which provides that “no county, city or town or other municipal corporation shall become a stockholder in any -company, association or corporation or appropriate money for or loan its credit to any -corporation, association, institution or individual.” Section 5, art. 12, Const. 1874; Russell v. Tate, 52 Ark. 541; Newport v. Railway Company, 58 Ark. 270. . The ordinance was absolutely void, and could not be ratified by acceptance of benefit thereunder by the town, as it was concerning a matter entirely beyond the scope of corporate power. Newport v. Railway Company, supra. It is only where the power is exceeded in the method of its exercise, or where the power -has been exercised by some unauthorized officer or agent, that a public corporation can ratify the unauthorized act. Book v. Polk, 81 Ark. 244; Texarkana v. Friedell, 82 Ark. 531; Hitchcock v. Galveston, 96 U. S. 341; Dillon on Mun. Corp. (4th Ed.) § 463; 20 Am. & Eng. Enc. Law, p. 1181. The only remaining question is whether the municipal corporation can recover back the money unlawfully paid out. As we have already said, the appropriation of the money by the officers .-of the town was unauthorized and unlawful, and the municipality could not and did not, by acceptance of whatever benefit accrued-by building the railroad into the town, ratify the act. It is not estopped to deny -the validity -of the appropriation of funds by the officers. That being true, there can be no ■principle involved which forbids the recovery ■ of -the money unlawfully paid out by the officers of the town and received by the railroad -company. We find the law -on this subject to be correctly stated in a similar -case by the Supreme Court of Minnesota as follows: “As a general rule, when an individual -or private corporation pays money voluntarily with full knowledge of the facts, and without fraud or mistake, it can not be recovered back, though there was n-o obligation to pay. To give effect to the payment, however, it must be the act of the individual or corporation; and in this case the payment was not the act of the corporation. It had no authority to make it; no one of the officers, nor all of them together, had authority to make it. The case stands in law as it would had some person, not connected with the city government, taken the money from its treasury and paid it to defendants. It may be different in a case where the payment is for a. legitimate purpose, within the power conferred on the municipal corporation, and is made by an officer, or upon the direction of an officer, who has authority to determine whether some condition precedent to the authority of the paying officer to pay has been complied with. As the corporation had no authority to pay the money, the payment was not a corporate act, and consequently there is no basis for the doctrine of voluntary payment.” City of Chaska v. Hedman, 53 Minn. 525. The plaintiff’s remedy at law for the recovery of the money illegally paid was complete, and the case should not have been transferred to equity. This was done on the defendant’s motion and over the plaintiff’s objection. Reversed and remanded with directions to remand the case to the circuit court for further proceedings not inconsistent with this opinion.