Clatskanie State Bank v. Rainier

Mr. Justice Burnett delivered the opinion of the court. 1, 2. City warrants are not negotiable instruments in the sense applied to unmatured commercial paper so as to cut off defenses unknown to the purchaser for value. Such drafts on the municipal treasury are prima facie valid evidence of city indebtedness, but, as against any holder, they are subject to all defenses, the same as any open account or non-negotiable paper: Goldsmith v. Baker City, 31 Or. 249 (49 Pac. 973); Frankl v. Bailey, 31 Or. 285 (50 Pac. 186); Klamath County v. Leavitt, 32 Or. 437 (52 Pac. 20). Consequently it was permissible for the court to inquire into the whole transaction between the original parties, and to determine whether the provisions of the charter designed to protect the funds of the city had been observed in the issuance of the warrant. 3. The contention of the plaintiff is that the section of the charter already quoted was observed by the Ordinance No. 115, and that this municipal legislation was broad enough to cover the act of the council in [247] passing the motion to allow the claim for extra services of the engineer. The ordinance in the first section requires the mayor and police judge to enter into a contract with Backus, engaging him to act as engineer for the city “for the current year ending the first Monday in March, 1910, and until all work then under his supervision and control and which is at that time unfinished shall have been completed.” The second section requires that “the contract shall provide for the proper inspection, in accordance with the usual customs in such cases. ” The third section contains all that is said in the ordinance about the compensation of Backus for his services to be rendered, and reads thus: “The compensation to be paid said engineer shall be 4 per cent of the cost of any and all improvements made under his supervision and inspection, the same to be paid as follows: Two per cent of the cost as is shown by the estimate shall be paid in warrants of the city when the estimate is made and plans and specifications furnished and submitted to the council, and the balance to be paid monthly as the work progresses and as nearly as can be, according to the usual customs of other cities, in like cases.” The two remaining sections provide for the appointment of another engineer in case of the death or disability of Backus, and declare an emergency, giving-immediate effect to the ordinance on its approval by the mayor. The ordinance was the measure of the authority of the city officers to contract for compensation of the engineer. True enough, the contract, which was actually signed contains a stipulation to the effect that if any contractor shall fail to complete his work within the time fixed by his agreement, then extra costs of inspection shall be paid to Backus out of the penalties the city shall collect from the contractor. This, [248] however, is not binding upon the city because of the limitation about compensation contained in the ordinance. An individual dealing with city officers must take notice of the restrictions imposed upon them by the charter and ordinances enacted in pursuance thereof. The contract cannot rise above its source, thé ordinance, in force or efficacy. It cannot provide for any compensation not authorized by the ordinance. Confessedly the claim upon which the warrant was issued was for extra pay in addition to that sanctioned by the enactment of the council passed pursuant to the charter. It amounts to a new and separate demand. for an appropriation of city funds in excess of $500, which the charter plainly says must be accomplished by ordinance. The original ordinance had spent its force when the recompense which it prescribed had been' paid. It does not constitute any authority or protection for additional payments. We do not nor cannot pass upon the wisdom or expediency of such a charter provision. We can only enforce the local organic law as we find it, Neither are we called upon in this proceeding to compel the city to reimburse the plaintiff for money it has invested in nonnegotiable paper. We must decide the case as it is laid in the pleadings. In short, the plaintiff has declared on a warrant open to all defenses arising between the original parties. The record discloses that it was issued for a claim in excess of the authorized compensation and in a manner contrary to the charter. This prevents recovery here. The judgment must be affirmed. Affirmed. Mr. Chief Justice McBride, Mr. Justice Eakin and Mr. Justice Bamsey concur.