Mills v. Gleason

By the Court, Paine, J. In the case of Clark vs. The City of Janesville, the majority of the court held that the charter of that city was a public, and therefore a general law, with — 490 — in the meaning of the constitutional provision, that no general law should be in force till published. The charter of the city of Madison was not published until after the issue of the bonds, whose validity is questioned in this suit, and the case would, therefore, be governed by that decision, unless, as is claimed on the other side, the city, after it did acquire an existence as such, by the publication of the charter, did some act ratifying the issue of the bonds, so as to bind itself. This ground of objection is one of a technical character, and although it must prevail where the case comes within it, yet a stronger case could not well be presented, for applying the doctrine that a subsequent ratification will render valid, acts that in point of strict law were unauthorized when they were done. This is. a familiar rule in the case of individuals. If a man without any authority assumes to act as the agent of another, although the act, as to the other is of no validity, yet if he subsequently ratifies it, and adopts it, and receives the benefit of it, he is as much bound as though he had authorized it in the first instance, And we think this principle applicable to this case. Here every thing was done necessary to authorize the issuing of the bonds, except the publication of the charter, all the parties, however, supposing it to be in force. If, after it was in force, the city received the proceeds, and appropriated them to its use, and recognized the validity ,of these bonds, we could not well imagine a case more fit for the application of this rule-And we think the following authorities fully justify its application : Charitable Society vs. Episcopal Church in Dedham' 1 Pick., 372; Edwards vs. The Grand Junction Railway Co., 7 Sim., 85, Goodey vs. Railway Company, 16 E. L. and Eq., 596. In the last case the Master of the Rolls, referring to the previous cases, says that they “ establish 'the principle that whenever a third party enters into a contract, with the plaintiff, and the defendant takes the benefit of it, he is bound to — 491 — give the plaintiff the advantage he has contracted for.” Upon looking into the cases it will be seen that the rule was established upon these facts. The projectors of a railway company had made contracts prior to its organization, which the company when organized received the benefit of; and it was held that they thereby became bound by the contract. The facts in this case are similar in character, or, if any thing, stronger in favor of the rule, for here the parties all acted in the full belief that the charter was in force. It appears from the evidence that the proceeds of the bonds went into the treasury of the- city, and were expended by it, and that after the charter was in force, their validity was recognized by levying a tax for the payment of the interest. We think this ratifies them, and binds the city, provided it would have been bound, if the charter had been in force at the time they were issued. . But it is claimed that the city had no power to make this loan, or issue its bonds therefor. There is no special act and no provision in its charter expressly authorizing it, and it was said that without this, the power to borrow money did not exist, and could not be claimed as incidental to the execution of the general powers granted by the charter. The charter does confer the power to purchase fire apparatus, cemetery grounds, etc., to establish markets, and to do many other things, for the execution of which, money would be necessary as a means.. It would seem, therefore, that in the absence of any restriction, the power to borrow money would pass as an incident to the execution of these general powers, according to the well settled rule that corporations may resort to the usual and convenient means of executing the powers granted; for certanly no means is more usual for the execution of such objects, than that of borrowing money. But an argument against the right is derived from the practice which has prevailed to a considerable extent, of obtaining special — 492 — acts of the legislature, authorizing the procurement of loans by municipal corporations, and the issuing of bonds or other securities in payment. We are not aware to what extent, if any, this practice has prevailed in this state, as to loans for purposes clearly municipal, and authorized by the charter; but it seems to have been resorted to sometimes, even in such cases, in other states. The argument drawn from the assumption on the part of the legislature of the necessity of such acts, is one always entitled to consideration, and sometimes of much weight, though never conclusive; and we think, owing to the peculiar nature of the subject matter, that in cases involving a loan by corporations, it is of less force than in almost any other, for capital is of a timid jealous disposition. It delights in certainty, and is alarmed by doubts. It has been held with great strictness, that corporations can exercise no powers except those granted by their charter. When, therefore, the charter does not expressly give the power of borrowing money, even though it grants powers to which this might be claimed as incident, yet there is room for doubt, a chance for an argument, and that being so, it might, as a matter of policy, facilitate the loan by removing all uncertainty by an express act of the legislature. And the fact that such acts have been passed, being then clearly necessary, when these corporations have been authorized to issue bonds in aid of purposes outside of their charters, may have had a tendency to induce a resort to the same practice when the bonds were issued for some purpose authorized by the charter, though in that case such legislation may not have been necessary. For these reasons we think there is nothing in this practice sufficient to overthrow the general rule, that in the absence of restrictions, a corporation authorized to contract debts and to execute undertakings requiring money, may borrow money — 493 — for those, purposes, and issue its bonds or other obligations therefor. This question is alluded to in Ketchum vs. the city of Buffalo, 4th Kern., 356, and the court held that the fact that in several other instances, the legislature had expressly granted power to corporations to “ purchase market lots,” did not justify the conclusion that the city of BufFalo could not exercise the power as incidental to the general power of establishing a market. The court held that under that general power, it might purchase the lot on credit, and issue its bonds in payment. And, after carefully considering the suggestions made by the learned judge who delivered the opinion, we fail to perceive any substantial distinction, so far as the question of power is concerned, between the method there adopted and that adopted by the city of Madison in this case. True, it is there suggested that the question whether the city of Buffalo could have borrowed the money and paid for the lot, and issued its bond for the money, was a different question, though at first view “ they might seem identical.” But on examining the points of distinction stated, we think they do not affect the question of power, but simply go to show that the one method of exercising it may afford less facility for a misapplication of the funds than the other. Thus it was said that if the money was borrowed to build a market, it might be used to build a theatre, whereas if the contract were directly for the market, and the bond given in payment, it would ensure the application of the fund to its legitimate object. This might be a good reason why the legislature should restrict the corporation to the one method of accomplishing the object; but when the power is granted without restriction as to the means, it does not, in our opinion, justify a court in saying that while the corporation has the power of using one means, it has not that of using another, though equally direct and well adapted to the accomplishment of the object, — 494 — provided the funds are honestly applied; merely because it may afford greater facility for a misapplication. They might undoubtedly be misapplied in either case. Thus, what should prevent the city of Buffalo, having purchased a lot for a market, and given its bonds for it, from erecting a theatre instead of a market on the lot, if it was to be assumed that it was willing to pervert its funds and its credit to unauthorized purposes ? Or, having purchased materials for a market, it might out of them erect a theatre. Or, having given its bond for the purchase of a lot, and the erection of a market, and then having raised by taxation the money to pay the bond, it might use the money to build the theatre, leaving the bond unpaid. This opportunity of misapplying the funds must exist under any method of executing the powers of a corporation. If one affords greater facility for it than another, the remedy is in restrictions by the legislature, and the selections of honest and capable agents by the people. But it affords no ground for a court to say that as a mere question of power, the corporation may not adopt the one method as well as the other ; and it being established that a corporation may purchase upon credit such things as are necessary for the execution of its powers, we think it follows necessarily that it may borrow the money to pay for them, as that is one mode of purchasing upon credit. Nor is the power of taxation conferred by the charier to be deemed to exclude the power of borrowing money. The case just referred to is an authority against such a proposition. It holds that, notwithstanding the power of taxation, the corporation may resort to its credit, not only for its ordinary-current expenses, but for objects of a permanent character. The case of Clark vs. School District, 3 R. I., 199, is also in point. It was there held that a school district might borrow money to pay debts contracted for the erection of a school-house, and give its note therefor, and that its power of taxation was — 495 — not to be construed as forbidding it to borrow money for a legitimate purpose. Beers vs. Phœnix Glass Co., 14 Barb., 358, and Mead vs. Keeler, 24 Barb., 29, are also direct authorities in favor of the power of a corporation to borrow money, as incidental to the execution of its other powers. It was said on the argument, that it did not appear that the moneys received were all applied to municipal purposes. It does not appear how they were all applied, but we apprehend it would not be incumbent on the lender to show that they were properly applied. If the city had power to borrow money for legitimate purposes, a misapplication of the funds after they were obtained would not invalidate the contract. In Bigelow vs. the City of Perth Amboy, Dutch., 297, the city had purchased a quantity Of flag-stone, for paving streets, and it was claimed that the charter had not been complied with, in respect to the proceedings preliminary to the paving by the city. But the court held that to be a question between the city and the lot owners, and they add: “ But as between the creditors of the city and the corporation, the only question is whether the city agents, the mayor and council, had the power of purchasing the material in question. How the material was used, or whether it was used at all, is to creditor a matter of total indifference.” So in a recent case in England, Eastern Counties R. R. Co. vs. Hawkes, 38 E. L. & E., 8, it was held that where the charter allowed the company to purchase lands for extraordinary purposes, a person contracting to sell them land was not bound to see that it was strictly required for such purposes, and that if he acted in good faith, without knowing of any intention to misapply the funds of the company, he might enforce the contract. The principle of that decision would seem to warrant the proposition, that where a corporation has power to borrow myney, a lender, acting in good faith, and supposing it to be — 496 — borrowed for legitimate purposes, might recover, even though the corporation intended to devote it to objects unauthorized. And it would certainly sustain the position, that where it was borrowed for lawful objects, no subsequent misapplication of the funds could affect the rights of the lender, about which there is, in fact, no room even for the shadow of a doubt. f But it was objected that the tax was not levied by a two-thirds vote, as the charter requires. It was levied by a two-thirds vote of the aldermen, but not of the council, including the mayor. The charter provides that the “Common Council shall consist of the mayor and aldermen, &c. It provides that a vote to levy a tax shall be passed by two-thirds of the “members elect,” and it is said that the mayor should be counted in making up the number, of which the two-thirds is requisite. But we think this provision relates to the aider-men only. They are elected as members of the council, and as nothing else; they act and vote on all questions; while the mayor, although he is made by the charter one of the constituent parts of the council, yet he is so in the same sense that the Vice.President is a part of the United States Senate, or the Lieutenant Governor a part of the Senate of the State. We think he was not intended to be counted, in the provision for a two-thirds vote. It is also objected that the assessors did not meet for the purpose of hearing objections, as required by the charter. We are unable to say from the evidence that this objection is true in point of fact. It appears from the evidence on both sides that the assessors did meet, and the most that can be said is, that it does not appear that they were all present at any one time. We shall not attempt to determine what would be the effect of an entire omission of this meeting by the assessors. It is undoubtedly a matter of much difficulty both upon principle and upon authority, to determine with what degree of strictness the directions of the statute in re — 497 — gard to taxation must be followed, in order to prevent the entire tax from being illegal. On the one hand it is the evil of illegal and oppressive taxation upon the citizen; and on the other, the danger of defeating entirely the collection of the public revenue, by the neglect or omissions of the officers to whom it is entrusted. Perhaps the only method of solving the difficulty would be to hold that no objection which did not go to the very ground work of the tax, so as to affect materially its principle, and show it must necessarily be illegal, ought to have the effect of rendering the whole invalid; and there are some authorities, which even hold that such an objection would not; though in the case of Weeks vs. Milwaukee, 10 Wis., 240, this court gave it that effect. But when the objection is a mere non-compliance with some direction of the statute, notwithstanding which the tax may have been entirely just or equal, it ought not to have that effect. If it did, the collection of taxes would be rendered practically impossible. In such cases the remedy must be for each one to obtain such special relief as the laws may furnish on showing the omission, and that he was aggrieved by it. And this disposes of the objection now under consideration, and also of the one that the tax list was not returned to the county treasurer within the time required" by law. Neither of them necessarily impeach the justice of the tax, and there is nothing in the case to show that the complainant was especially aggrieved by either. And we do not think he can sustain a suit in equity to enjoin the collection of a tax legal and just in itself, merely on account of such irregularities. We will notice but one other objection, which might properly have been noticed before. It is said that the cemetery • bonds were issued in violation of law. And it appears that by sec. 3, chap. 104, Private and Local Laws of 1857, the city was prohibited from issuing, selling or disposing of any bonds, except those specially authorized for the enlargement. — 498 — of the capítol. It might be here noticed that this statute turns the argument to be derived from the understanding of the legislature, in favor of the existence of the power previously. For passing the act to prohibit it, implies that without such act the city had the power. The same thing is necessarily implied in that provision of the constitution which requires the legislature to <£ restrict” the power of municipal corporations “ to contract debts, borrow money, loan their credit,” &c. But the answer to this objection, that this act made the issuing of the cemetery bonds illegal, is this: It appears from the case that the city had previously purchased the lot and contracted for that mode of payment. The act of the legislature then could not impair the obligation of that contract, or defeat the party’s right to its specific performance. The judgment of the county court must be reversed and the cause remanded, with directions that the complaint be dismissed.