Tuttle Bros. & Bruce v. City of Cedar Rapids

SANBORN, Circuit Judge. This is an appeal from a decree which sustained a demurrer to and dismissed the bill exhibited by H. O. Tut-tle, R. B. Tuttle, and George Q. Bruce, partners as Tuttle Bros. & Bruce, to avoid a contract between them and the city of Cedar Rapids, [87] and to enjoin the Cedar Rapids Savings Bank and J. M. Dimviddie, its cashier, from paying to the city the sum of $2,250, which by the terms of the contract it was entitled to receive from them. The bill disclosed these material facts: The complainants purchased a tract of land within the limits of the city of Cedar Rapids, platted it into lots, blocks, and streets, filed it with the city recorder, whose duties were those of the clerk of the city, and requested that the plat be considered and approved by the city council, and that the latter direct the mayor and recorder to certify the council's approval thereof, so that the plat could be recorded and lots could be sold according to it. Under the statutes of Iowa it was the legal duty of the city to approve this plat and to certify its approval to the recorder. Code Iowa 1891, § 916; Giltner v. City of Albia, 128 Iowa, 658, 105 N. W. 194. The city council refused to approve and certify the plat, so that it could be recorded, and the complainants brought an action for a mandamus to compel it to do so. While this action was pending the complainants and the city entered into a written agreement to the effect that the Savings Bank, which was authorized to collect the selling price of the lots in the addition, should pay to the city $2,250 out of the first moneys which it received from such sales that should belong to the complainants, and that the city (1) would approve and certify the plat; (2) would accept the dedication of the streets, avenues, and alleys shown thereon; and (3) would establish grades of these streets, avenues, and alleys; would, within a reasonable time, expend the $2,250 in grading; and would grade at its own expense the streets, avenues, and alleys portrayed by the plat. When the bill was filed the Savings Bank had collected from the sales of the lots $2,250, which belonged to the complainant, the city had approved and certified the plat, but it had not performed its contract in any other respect. Counsel for the complainants insist that the contract here in question is voidable, and that its performance should be enjoined, because, as they aver, it was without consideration. To the answer that one covenant or promise is a lawful consideration for another, and that for the covenant of the complainants to cause the $2,250 to be paid to the city the latter agreed (1) to approve and certify the plat, (2) to accept the dedication of the streets and alleys shown thereon, and (3) to expend the $2,250 in grading and to grade the streets and alleys, they reply that the first covenant of the city provided no consideration for the agreement, because it was the duty of the city to approve and certify the plat without compensation, that it refused to do so until it extorted from the complainants their agreement to pay it this $2,250, and that these acts rendered the entire contract immoral, illegal, and against public policy, and that as to the other covenants of the city it had no lawful authority to make them. It was undoubtedly the duty of the city to accept and certify the plat, and if its covenant to do so had been the only consideration for the agreement there is no doubt that it would be without consideration and void. But the city owed the plaintiffs no duty to accept the streets and alleys, to grade them, or to expend the $2,250 in the work of grading them (Code Iowa 1897, § 751); and its covenants to do these tilings provided ample consideration to sustain the agreement, unless they were ultra vires. [88] The city had express authority to establish, improve, and repair streets and alleys within its limits. Section 751, supra. Why was not this power ample to warrant it in making the covenants in question? Counsel answer: Because the city had the discretion to accept the dedication of and to grade the streets and alleys, or to refuse to do so, and an agreement so to do deprived it of that discretion, and was, therefore, beyond its powers; and they cite Stewart v. City of Council Bluffs, 50 Iowa, 668, 670, in support of this position, where an agreement of a city to build a ditch was stricken down upon the ground that a city may not deprive itself by such a contract of the future right to exercise this discretion. But that decision does not seem to have been followed or cited in subsequent cases. It is unique, does not commend itself to our judgment, and in the opinion upon which it rests the court conceded that the city had power to make an agreement with the contractor that he should grade one of its streets for it, and that if the city subsequently abandoned the improvement, and thus prevented the performance of the contract, it must respond in damages to the contractor for its breach of the agreement. If a city has power to make a binding contract, solvable in damages, that a third party shall grade one of its streets and it will pay him therefor, it is difficult to perceive why it has not equal power to agree to grade such a street itself in consideration of payment therefor by another. The truth is that a city has two classes of powers — the one legislative or governmental, by which it controls its people as their sovereign; the other proprietary or business, by means of which it acts and contracts for the private advantage of the inhabitants of the city and of the city itself. In the exercise of powers which are strictly governmental or legislative the officers of a city are trustees for the public, and they may make no grant or contract which will bind the municipality beyond the terms of their offices, because they may not lawfully circumscribe the legislative powers of their successors. But in the exercise of the business powers of a city the municipality and its officers are controlled by no such rule, and they may lawfully exercise these powers in the same way, and in their exercise the city will be governed by the same rules, which control a private individual or a business corporation under like circumstances. In contracting to accept the dedication of streets and alleys, to establish their grades, and to grade them, a city is exercising, not its governmental or proprietary, but its business powers. The purpose of such contracts is not to govern the inhabitants of the city, but to secure a private benefit for the city and its people. The grant to this city of the power to accept the dedication of, to improve, and to repair the streets and alleys, within its limits gave it plenary power to make the covenants in question in this case, or any other reasonable agreements relating to these subjects. Illinois Trust & Savings Bank v. City of Arkansas City, 76 Fed. 271, 281, 282, 22 C. C. A. 171, 181, 182, 34 L. R. A. 518, and cases there cited; Omaha Water Company v. City of Omaha, 147 Fed. 1, 5, 77 C. C. A. 267, 271, 12 L. R. A. (N. S.) 736; Pike’s Peak Power Co. v. City of Colorado Springs, 105 Fed. 1, 11, 44 C. C. A. 333, 343. There was nothing evil in itself or against public policy in the agreement. Concede that the.city’s refusal to approve and certify the plat [89] was a breach of its duty. Nevertheless its agreement to discharge that duty, and to do other acts which it was empowered, but was not required by the law, to perform, was not violative of any public policy or of any moral or civil law. The result is that by the contract in hand the city gave three covenants, one of which was valueless and two of which were legal and valuable, for tlic plaintiffs’ promise that the $3,250 should be paid to the city; the plaintiffs were not induced to make this agreement by fraud, mistake, or accident; they knew it was the duty of the city to accept and certify the plat without compensation when they signed the contract; the covenants to accept and grade the streets and alleys constituted ample consideration for the plaintiffs’ undertaking; and there is no equitable ground upon which a decree to avoid this contract or to enjoin its performance can lawfully stand. The decree which dismissed the bill must accordingly be affirmed, and it is so ordered.