313 Mass. 257 | Mass. | 1943
This is an action of contract brought by the plaintiff city against Charles It. Flood, its former treasurer, and the surety on Flood’s official bond, which was given on February 8, 1935, to assure the faithful performance of Flood’s official duties as treasurer of the city. G. L. (Ter. Ed.) c. 41, § 35 (see now St. 1939, c. 109, § 1), § 109A; c. 4, § 7, Thirty-fourth.
The alleged breach consisted of the payment by Flood of payrolls of the plaintiff’s street department for the weeks ending October 5, 12, and 19 of the year 1935, to which payrolls there was not attached any affidavit of the plaintiff’s superintendent of streets, and for the payment of which no warrant had been issued by the city auditor as required by G. L. (Ter. Ed.) c. 41, §§ 41, 52.
The original answers of the parties contained a general denial, and allegations that the payments involved were made in good faith to men properly hired who had done work for the city entitling them to the compensation paid, and were paid out of sufficient unencumbered appropriations; that the want of approval by the auditor or of oath by the head of the department was a purely technical omission not affecting the substantive right of the employees concerned to receive the money paid them; and that the payments by the defendant Flood discharged valid obliga
Thereafter the case came on for trial in the court below and was referred to an auditor. The material findings of the auditor follow: On February 9, 1934 (1935?), the defendant-Flood was the duly qualified city treasurer. For the three weeks in question Flood paid out by cash or checks payrolls of the street department aggregating $61,845.91. Checks that had not been cashed were outstanding to the amount of $241.60, leaving a balance of $61,604.31 (the sum sought to be recovered by the plaintiff together with interest). Of this sum $18,067.20 was paid to duly qualified permanent and temporary employees. The balance of $43,537.11 was paid to persons whose employment was in violation of the civil service rules. All the employees had been paid the prevailing wage rates for the work actually performed, and the city had received full value and benefit from the work equal to the amount paid in wages therefor, and the employees illegally employed were hired personally or expressly or impliedly by authorization of the superintendent of streets. “The defendants in no manner requested or influenced the employment of the temporary men.” By order of the city council transfers of certain sums were made to the credit of street maintenance, which, taking into consideration certain items that had been improperly
In concluding his report the auditor found (1) that if employment “without strict compliance with the civil service rules . . . was illegal to the degree that the value and benefits to the city . . . cannot be established as a defence ‘in equity and good conscience’” under G. L. (Ter. Ed.) c. 235, § 10, execution should be awarded the plaintiff in the sum of $43,537.11 with interest from September 10, 1936; (2) that if, on the contrary, that defence was open to the defendants, execution should be awarded the plaintiff in the sum of $1,475.64; and (3) that if “the court finds that the city . . . obtained good and sufficient value for the three October payroll expenditures, that adequate appropriations were available, and the defendants are not chargeable with the neglect to comply with the civil
Upon the coming in of the auditor’s report the plaintiff filed a motion that the report be recommitted for the purpose of having findings alleged to have been made on inadmissible evidence or based on erroneous opinion of law struck out. The auditor had appended to his report certain evidence that was admitted by him over the objection of either the plaintiff or the defendants. The motion just referred to was denied “but without prejudice to the right of the plaintiff to raise the same questions as to the admissibility of evidence before the trial justice.” The plaintiff excepted to this action. We perceive no error therein. The case thereafter proceeded to trial by agreement of the parties, before a judge in the Superior Court sitting without a jury. At the outset of the trial the defendants consented to entry of judgment for the plaintiff in the penal sum of the bond and interest, and the judge ordered that judgment be entered accordingly for $92,449.58. The case was then heard before the judge without a jury, with relation to the amount for which executions should issue (G. L. [Ter. Ed.] c. 235, § 10), upon the auditor’s report and other evidence, all the parties having reserved the right to introduce further evidence.
The plaintiff moved to strike from the report all findings relative to the value or benefit of work performed in return for the payments in question, and to “unmade” transfers from the macadam sidewalk appropriation to street maintenance appropriation, and objected to their admission in evidence. The motion was denied subject to the plaintiff’s exception. During the course of the trial the defendants introduced evidence tending to show that no notice was ever sent by the commissioner of civil service to any office of the plaintiff that certain persons were illegally employed and should not be paid, and to show that certain items charged to the street maintenance appropriation should have been charged to the macadam sidewalk appropriation. This evidence was admitted subject to the plaintiff’s exceptions. The plaintiff introduced evidence to the
After hearing, the judge filed a “Statement of Findings and Rulings.” Therein the judge adopted the facts found by the auditor as true, and found that the facts set forth in the evidence offered at the hearing before him were true. He also found that from the sum of $61,845.91, unlawfully expended by the defendant Flood, the defendants were entitled to have deducted $241.60 represented by uncashed checks, $15,959.46 paid in wages to permanent employees of the street department, $1,692.81 paid to duly authorized temporary employees, and $414.93 paid to persons eligible for temporary employment; that certain persons had not been employed in strict compliance with the civil service requirements; that their employment was illegal for that reason and created no liability on the plaintiff’s part to pay compensation therefor; and that therefore the defendants were not entitled “in equity and good conscience” to deduct the $43,537.11 so paid to those persons. The judge further found, if material, that there were sufficient funds in the combined appropriations allotted to the street department to pay the entire sums spent by the defendant Flood; and that proper bookkeeping would have added to the appropriation for street maintenance $2,982.02 in addition to the sum of $9,120.96 as found by the auditor, so that no deficit in that appropriation would have been made to appear. The judge ordered that execution issue for the sum of $43,537.11, with interest from September 10, 1936.
The plaintiff seasonably made forty-seven requests for rulings, of which twenty-five were denied by the judge, subject to the plaintiff’s exceptions. Because of the result reached by the judge and the view that we take of the case,
The statutory provisions with which the defendant Flood was found not to have complied, so far as material, follow: “No treasurer or other fiscal officer of any city other than Boston shall pay any salary or compensation to any person in the service or employment of the city unless the pay roll, bill or account for such salary or compensation shall be sworn to by the head of the department or the person immediately responsible for the appointment, employment, promotion or transfer of the persons named therein.” G. L. (Ter. Ed.) c. 41, § 41. “The auditor or officer having similar duties in cities . . . shall approve the payment of all bills or pay rolls of all departments before they are paid by the treasurer.” G. L. (Ter. Ed.) c. 41, § 52.
General Laws (Ter. Ed.) c. 235, § 10, relative to “Amount
The plaintiff contends that it was adjudged by this court when the present case was here before (304 Mass. 153), that no evidence of value or benefit received by the plaintiff for work done by persons illegally paid by the defendant Flood is admissible in this action; in brief, that it has already been decided that the defendants are liable to the plaintiff for all funds illegally disbursed without regard to whom the payments were made.
When the case was here before it was in its first phase, that is, on the action on the bond under G. L. (Ter. Ed.) c. 235, § 9. The precise question for determination was whether the judge erred in striking from the defendants’ answers the allegations to which we have already referred, and the court held that the allegations in question, if proved, would not prevent judgment for the plaintiff in the penal sum of the bond, if the breach alleged should be proved. That of course is provided in § 9. See Merrill v. Mclntire, 13 Gray, 157, 166, 167. Continuing, however, we said that those "allegations could affect only the amount ‘due and payable in equity and good conscience for the breach of the condition’ for which the court ‘shall award an execution.’ § 10”; and that "Even upon that issue we think those allegations immaterial.” (304 Mass. 153, 155.) That was so, since in the proceeding to determine for what amount execution should issue no pleadings are necessary. Hatch v. Attleborough, 97 Mass. 533, 538. Although the question of damages was not then before us, Graham v. Middleby, 185 Mass. 349, 355; Hudson v. Miles, 185 Mass. 582, 588; Austin v. Moore, 7 Met. 116, 124, nevertheless the question was argued by the parties and, responding, we said, in substance, that, assuming that upon the facts alleged persons paid by Flood, had they not been paid, could have recovered what was due them by action against the plaintiff
We deem it necessary, in view of what we have just said, to determine whether the ruling of the judge to the effect that in equity and good conscience the defendants may deduct from the total sum paid in violation of G. L. (Ter. Ed.) c. 41, §§ 41, 52, the amount paid to persons legally employed by the city was correct. In other jurisdictions varying views have been announced. A Michigan statute required that all disbursements of school moneys should be made by an order drawn on the assessor by the director and countersigned by the moderator, and that all moneys belonging to a school district should be paid by the town treasurer to the assessor on warrants drawn by the director and countersigned by the moderator. In People v. Bender, 36 Mich. 195, the respondent treasurer paid over school district money to the assessor without a warrant, and the assessor in turn used the money to pay a school teacher who had a valid contract with the school district. The assessor, however, had not received the required order from the moderator. In that case it was held that “funds once in the hands of the town treasurer must in law be regarded as continuing in his official custody until lawfully drawn
A second rule announced in some jurisdictions is that, as the defendants here contend, so long as the municipality has received the benefits of the expenditure and full value therefor (which was found as a fact in the present case) the city has sustained no loss, and therefore, in equity and good conscience, execution should issue for nominal damages only. Miller v. Jackson Township, 178 Ind. 503. That case was a suit in equity on the bond of a former trustee of the township who had paid out moneys for services and purchases under contracts which the court held were utterly void. A majority of the court, however, conceding that those to whom the payments were made could not have recovered in case of nonpayment from the city, nevertheless held that the proceeding was one cognizable under the principles of equity jurisprudence, that the remedies and relief afforded thereunder should be applied, and that the taxpayers, having received the benefit of the expenditures, could not “come into a court of equity with hands laden with the fruits of the trustee’s purchases, while they pray a decree for the restoration of the purchase price thereof” (page 524) and, in substance, that there was thus an equitable defence. Two judges, however, dissented because they did not concur in the reasoning of the majority, pointing out that the Indiana statute, which declares that such expenditures “shall be deemed by the board a balance of such fund unexpended in the hands of the trustee, for which he shall be liable upon his bond,” had been repealed by judicial fiat, and that the opinion of the majority resulted in the anomaly that the furnishers of labor and ma
A third rule is succinctly stated and applied in Commonwealth v. McCormack, 177 Ky. 474. It is to the effect that moneys disbursed in an unlawful manner by the wrongdoing official are paid out at his peril; that he, together with his sureties, shall be liable to the extent of the loss caused to the municipality; that, however, where the payments are made in a manner violating the procedure prescribed by statute, but in discharge of valid obligations of the municipality, since no loss has been suffered by it, no recovery shall be had; but that where money thus illegally paid has been expended in satisfaction of contracts which created no liability on the part of the municipality but were void, the official and his sureties are bound to make good the sums so paid, notwithstanding that full value was received through the materials and services furnished, and that such payments may be truly accounted as a loss to the municipality since it was under no obligation to make them. In the case just cited the collection and disbursements of the funds in question were improper and illegal because performed without compliance with the provisions of the governing statute. It was there held, however, that unless the funds were devoted to an illegal purpose the Commonwealth was not entitled after disbursement to recover from an officer the funds he may thus have expended; and that, the funds in question having been devoted to the purposes for which they were appropriated, and the State having received the benefits contemplated from that expenditure, the funds so disbursed could not be recovered from the official even though he might have failed to observe the strict letter of the law with reference to the manner of their disbursement. There was a demurrer to the count in the plaintiff’s declaration whereunder recovery was sought for such disbursements and the count was held bad. The same rule has been announced in Flowers v. Logan County, 138 Ky. 59; Prince
We do not concur in the first rule to which we have referred above. It seems to us not to be in accord with the weight of authority, in that no effect is given thereby to the considerations of good conscience, considered in most jurisdictions that have discussed the subject matter, and embodied in our G. L. (Ter. Ed.) c. 235, § 10. Under the first rule the municipality is permitted to profit out of the wrongdoing of its official. In other words, he is subject to a penalty. The damages awarded under such rule are punitive. In this ' Commonwealth exemplary damages are not allowed unless authorized by statute. Ellis v. Brockton Publishing Co. 198 Mass. 538, 543, 544. Boott Mills v. Boston & Maine Railroad, 218 Mass. 582, 589. Genga v. Director General of Railroads, 243 Mass. 101, 109. This principle is recognized in Savage v. Neal, 151 Tenn. 70, 74, where the court held that the statutes under which the bonds sued upon had been given were not to be treated as penalty statutes. It is recognized in effect by
We are not in accord with the second rule discussed above. It appears to be based upon the premise that where a city has received full value through labor or services performed under void contracts it has suffered no loss. We think this proposition is fallacious in two respects — first, because it does not follow that, because a void contract has been entered into and labor and services constituting full value for the money paid have been performed, it was beneficial to the city to have the contract made in the first place. Sound fiscal and economic policy might indicate that the community would have been better off had the work not been performed. In the second place, we are of opinion that if because of its inherent illegality the contract was void and unenforceable and no liability was created on the part of the city to pay for the materials and labor furnished in connection with the work performed, it cannot properly be held that the city has sustained no loss by the payment for that for which as matter of law it was not obliged to pay and for which it could not pay properly. To adopt such a rule would be to break down the public policy of the Commonwealth with relation to municipal finance. Such a rule would encourage public officials to enter into any kind of illegal contract on behalf of the city, secure in the knowledge that so long as the labor performed or the materials supplied were of the value of the price paid therefor they, the officials, would not be held liable in the absence of fraud or bad faith.
We are of opinion that the third rule set forth above
Applying the third rule to the facts in the case at bar, we are of opinion that in equity and good conscience the defendants should be allowed to deduct from the total payments made by the defendant Flood, the amount paid by him in satisfaction of valid obligations of the plaintiff to its employees who were legally employed, and who, if they had not been paid, could have enforced payment by the city. The approval of the payrolls by the superintendent of streets under oath and the certificate of the auditor provided for in G. L. (Ter. Ed.) c. 41, §§ 41, 52, were not conditions precedent to the obligation of the city to pay their wages. Godfrey Coal Co. v. Gray, 296 Mass. 323, 325. Willar v. Commonwealth, 297 Mass. 527, 529. Lowell v. Massachusetts Bonding & Ins. Co. 304 Mass. 153, 155, 156. See Barnard v. Lynn, 295 Mass. 144, 146. It follows from what has been said that the ruling of the judge, that the deductions just referred to should be allowed, was right, and that the plaintiff’s exceptions thereto must be overruled. It also follows that the ruling of the judge, that the defendants cannot make any deductions from the amount paid by Flood to the persons who were illegally employed, was right.
The defendants, however, have argued that under G. L.
There was no prejudicial error in the denial of the defendants’ motion that the findings of the auditor relative to the reserve ordinance be struck out, nor in the denial of their request for a ruling that this ordinance had no effect on the issues of the case. The finding of the judge that there were sufficient funds in the several combined appropriations allotted to the street department to pay the expenditures complained of by the plaintiff, and his conclusion that the defendants could deduct the amount paid by them to those legally employed, indicate that the judge was not influenced by the evidence with relation to the breaking down of the budget and reserve system, for which, as found by the auditor and the judge, the defendants were in no way responsible.
The plaintiff was not prejudiced by the admission of evidence tending to show, as found by the judge, that under proper bookkeeping entries no deficit in the appropriation for street maintenance was created by the payments made by Flood, nor by the evidence relating to the transfer of funds. The plaintiff prevailed with relation to payments made to those found to have been illegally employed. In the matter of those legally employed, even if a deficit had been created by the payments made to them, in fact even had no appropriation been made for their compensation, had they not been paid, they could have enforced payment by the plaintiff. Barnard v. Lynn, 295 Mass. 144. Forbes v. Woburn, 306 Mass. 67. Callahan v. Woburn, 306 Mass. 265, 267.
The defendants’ exceptions to the admission of evidence tending to show, as found by the judge, that certain persons to whom Flood had made payments were illegally employed in violation of the civil service laws, are overruled. The evidence was competent upon the question as to the amount for which execution should issue, just as was the evidence introduced by the defendants, to their advantage,
In so far as we have decided herein that the judge did not err in allowing the defendants for payments made by Flood irregularly but in satisfaction of valid obligations of the city, this opinion is that of a majority of the court.
Plaintiff’s exceptions overruled.
Defendants’ exceptions overruled.
G. L. (Ter Ed.) c. 31, § 38: “If, in the opinion of the commissioner, a person is appointed or employed in the classified public service in violation of any provision of this chapter or any rule of the board, the commissioner shall, after written notice mailed to the appointing or employing officers, and to such person, notify in writing the treasurer, auditor or other officer whose duty it is to pay the salary or compensation of such person, or to authorize the drawing, signing or issuing of the warrant therefor; and the payment of any salary or compensation to such person shall cease at the expiration of one week after the mailing of the notice to such treasurer, auditor or other officer, and no such officer shall pay any salary or compensation to such person, or draw, sign or issue, or authorize the drawing, signing or issuing of any warrant therefor, until the legality of such appointment or employment is duly established.”