State ex rel. Northwestern National Bank v. Dickerman

Pemberton, C. J.

Thе appellant contends that the warrant in controversy is not in legal form. This contention is based upon the fact that the warrant is signed by the chairman and clerk of the board of trustees of the school district in their official capacity, and not by all or a maj ority of the trustees. It is not disputed that the trustees properly audited the claim for which this warrant was issued. For the purpose of raising funds, and for the issuing and sale of bonds to raise funds for the building of school houses, etc., each school district is declared by the law of this state to be a body corporate. (Comp. St. div. 5, § 1953.) Throughout the schоol law the trustees are designated the' ‘ ‘Board of School Trustees.5 ’ Section 1951 provides that, when bonds are issued by a school district, ‘ ‘they shall bear the signature of the chairman of the board of trustees, and shall be countersigned by the clerk. ’ ’ From a consideration of the school law of the state, we are of opinion that the warrant is in such form as is contemplated in such cases. We are unable to see that the defendant could have been in any way liable to injury by paying the warrant on account of the form thereof.

The appellant assigns as error the order оf the court striking out those parts of his answer noted in the statement. The portions of the answer stricken out set out with great particularity, and at great length, the entire history of the bonds in the sum of $80,000, issued by the trustees of the district, the sale thereof to relator, as noted in the statement, the contract оf the relator to advance money to the trustees for the purpose of building school houses, the contract with the builders for the erection of a school house, the drawing of warrants in payment for l,abor and material employed and used in the construction of said school housе, the payment of said warrants by the treasurer with funds advanced by relator, the doubts that existed as to the validity of the bonds, the institution and result of the suit to test the validity thereof, and the issuing of new bonds by said district in the sum of §90,000 in lieu of those which were declared to be invalid. Bu; in all this showing we are unable to discover any аllegations of fact establishing or tending to establish bad faith or fraud on the part of the trustees and the relator in any of these transactions. There does not appear a single allegation in the answer stricken out that is inconsistent with good faith and fair dealing between the trustees and the relator.

It is true that defendant alleged in his answer, which was-stricken out, on information and belief, that relator procured and induced the trustees to sell it these bonds at private sale, for the purpose of procuring them at a less price than other investors would have paid for the samе if valid, for the purpose of defrauding the district. But this allegation, on information and belief, must be construed in the light of the other allegations in the pleadings. It is not denied that these ‍‌​‌​‌‌‌‌​‌​​​‌‌‌‌‌‌‌‌​​‌​‌‌‌​​​‌‌‌​‌‌​​​​​‌​‌​‌‌‍bonds were first advertised for public sale; that the bids were all rejected, as shown by defendant’s answer. It is further shown by the answer stricken out that relator, in its private bid for these bonds, agreed to take them at par, with an added premium of §6 833.33. These allegations of the answer are absolutely contradictory of and inconsistent with the allegation of fraud made therein on information and belief. We see no-error in the action of the'court in this regard.

The appellant contends that the school district did not be come indebted to or liable to repay the relator the money ad vanced by it to pay warrants issued for the construction of a school building in said district under the contract entered into with relator. This contention proceeds, and is sought to be maintained, upon the theory that the trustees had no authority in law to enter into such contract with relator; that said contract is for that reason void, and, being void, the relator is not entitled to recover the amount advanced thereunder.

Thе doctrine here contended for by appellant is fully discussed, and a great many authorities collected, in Brown v. City of Atchison, 39 Kan. 37, 17 Pac. 465. In this case the court says : ‘£ From the authorities we think the following principle may be educed : Where a contract has been entered into in good faith between a corpоration, public or private, and an individual person, and the contract is void in whole or in part, because of a want of power on the part of the corporation to make it or enter into it in the manner in which the corporation enters into it, but the contract is not immoral, inequitаble, or unjust, ‍‌​‌​‌‌‌‌​‌​​​‌‌‌‌‌‌‌‌​​‌​‌‌‌​​​‌‌‌​‌‌​​​​​‌​‌​‌‌‍and the contract is performed in whole or in part by and on the part of one of the parties, and the other party receives benefits by reason of such performance over and above any equivalent rendered in return, and these benefits are such as one pаrty may lawfully render and the other party lawfully receive, the party receiving such benefits will be required to do equity towards the other party, by either rescinding the contract and placing the other party in statu guo, or by accounting to the other party for all benefits received for which no equivalеnt has been rendered in return; and all this should be done as nearly in accordance with the terms of the contract as the law and equity will permit. ’ ’

In Morawetz on Private Corporations (section 689) this doctrine is thus stated : £ 1 After a contract entered into by a corporation has been perfоrmed by either of the contracting parties, the fact that the making of the contract involved an unauthorized exercise of corporate power on the part of the company will not constitute a defense to an action brought by the party having performed the contrаct to recover compensation for a breach of the contract by the other party. ’ ’ In section 721 the same author says : ££The general rule is that, if an agreement is legally void and unenforcable by reason of some statutory or common-law prohibition, either party to the аgreement who has received anything from the other party,' and has failed to perform the agreement on his part, must account to the latter for what has been so received. Under these circumstances, the courts will grant relief irrespective of the invalid agreement, unless it involves some positive immorality, or there are other reasons of public policy why the courts should refuse to grant any relief in the case. ’ ’

In Pimental v. San Francisco, 21 Cal. 352, the city had received money from the unauthorized sale of land, and refused to refund the same. In speaking of the rights of the purchaser to recover money paid for said lands at said void sales, Mr. Chief Justice Field says : £ ‘ This alleged want of privity, as we understand it, amounts to this : That, inasmuch as the mayor and land committee had no authority to make the sale, they had no authority to pay the money which they received from the bidders into the treasury of the city, аnd therefore no obligation can be fastened from such unauthorized act upon the city. The position thus restricted in its statement is undoubtedly correct, but the facts of ‍‌​‌​‌‌‌‌​‌​​​‌‌‌‌‌‌‌‌​​‌​‌‌‌​​​‌‌‌​‌‌​​​​​‌​‌​‌‌‍the case go beyond this statement. They show an appropriation of the proceeds, and the liability of the city arises from the use of the moneys or her refusal to refund them after their receipt. The city is not exempted from the common obligation to do justice, which binds individuals. Such obligation rests upon all persons, whether natural or artificial. If the city obtain the money of another by mistake, or without authority of lаw, it is her duty to refund it, from this general obligation. If she obtain other property, which does not belong to her, it is her duty to restore it, or, if used, to render an equivalent therefor, from the like obligation. (Argenti v. San Frcmcisco, 16 Cal. 282.) The legal liability springs from the moral duty to make restitution; and we do not appreciate the morality which dеnies in such cases any rights to the individual whose money or other property has been thus appropriated. The law countenances no such wretched ethics. Its command always is to. do justice. ’ ’ From these authorities it seems clear .that if, in making the contract under discussion, the trustees exсeeded their authority, still there was created thereby a liability to refund the money advanced by relator under and in pursuance of said contract. The most, we think, that can be said in this case, is that there was an imperfect or defective attempt to comply with the law on the part of the trustees in the issuing of the bonds of the district. They had the authority under the law to issue them for the purpose for which they were issued, but failed to give a sufficient notice of the purpose and conditions thereof in providing for the election to authorize their issuance. Nor is any bad faith or fraud alleged in the issuance of said bonds. If the bonds had been declared void, we think it could hardly be contended that the contract with relator to advance money on them as security, for the building of the school house, would have been considered void for want of authority in the trustees to make the same. And, besides, the contract, so far as relator is concerned, has been fully executed, and we think the doctrine of ultra vires can be invoked with less force here than in cases of executory contracts. The school district secured the benefit of relator’s money, advanced in goоd faith; and we think it would be a most inequitable and unjust holding to say that the district assumed no liability on account thereof, and that relator is left without a remedy, under the circumstances of this case.

The appellant finally contends that the relator is not entitled to recover in the proceeding, undеr the provisions of an act of the legislature, entitled: “An act to authorize the board of school trustees of any school district of Montana to repay from the proceeds of the sale of bonds any money heretofore loaned or advanced to it for the erectiоn of a school house or school houses in such school ‍‌​‌​‌‌‌‌​‌​​​‌‌‌‌‌‌‌‌​​‌​‌‌‌​​​‌‌‌​‌‌​​​​​‌​‌​‌‌‍district, ’ ’ approved February 18, 1895. This act is as follows: “Whenever heretofore money has been loaned or advanced to the board of school trustees of any school district for the erection of a school house or school houses therein by any person or corporation, in reliance upon the proceeds of the sale of bonds for the payment of the same, the issuance of which bonds had been voted for by a majority of the electors of such district, voting at an election held fоr the purpose of authorizing the issuance of the same for the erection of a school house or school houses, which said money has been used by such board of school trustees in the erection of a school house or school houses in such district, but which bonds when issued have beеn adjudged and held to be void or invalid by the supreme court of the state, the money so loaned or advanced may be repaid, together with interest thereon covering the period for which interest has not been paid at the rate specified in said bonds so held to be void; said payment to be made by the board of school trustees to the person or corporation who or which had loaned or advanced the same, from the proceeds of the sale of any bonds thereafter issued for the purpose of building one or more school houses in said district, or for any other school purpose. ’ ’

The appellant insists that this law is in conflict with section 3, art. XIII, and section 13, art. XV of the constitution of the state. Section 3, art. XIII, is as follows: “All moneys borrowed by, or in behalf of the state, or any county, city, town, municipality, or other subdivision of the state, shall be used only for the purpose specified in the law authorizing the loan.” Section 13, art. XV, is as follows: ‘ The legislative assembly shall pass no law for the benefit of a railroad or other corporation, or any individual or association of individuals, retrospective in its operation, or which imposes on the people of any county or municipal subdivison of the state a new liability in respect to transactions or considerations already passed.” We think that it is clearly shown that the money advanced by relator was used ‘ ‘for the purpose specified in the law authorizing the loan,” as required by section 3, art. XIII, of the constitution. The law authorized the loan of money for the purpose of building a school house in the district. The relator advanced the money for that purpose on the bonds conditionally sold to it by the trustees, and it is not disputed that the trustees used the money for thаt purpose only.

The appellant contends that the law of February 18, 1895, is retrospective, and is therefore within the inhibition of section 13, art. XV, supra. We think this law did not impose upon the school district “a new liability in respect to transactions or considerations already passed, ’ ’ such as is prohibited by this section of the constitution. We-have already held that a liability existed on the part of the district to refund the money advanced by relator. This liability existed ‍‌​‌​‌‌‌‌​‌​​​‌‌‌‌‌‌‌‌​​‌​‌‌‌​​​‌‌‌​‌‌​​​​​‌​‌​‌‌‍prior to the passage of the law under discussion. The law imposed no new liability or burden upon the district. The law was intended to give a remedy, if remedy were wanting before its enactment. We think the lеgislature had the power to enact the law, and that the law does not conflict with the constitution of the state.

In New Orleans v. Clark, 95 U. S. 644, a case involving the constitutionality of such legislation, the court says: “The constitution of Louisiana of 1868, which provides that no retroactive law shall be passed, does not forbid such legislation. A law requiring a municipal corporation to pay a demand which is without legal obligation, but which is equitable and just in itself, being founded upon a valuable consideration received by the corporation, is not a retroactive law; no more than an appropriatiоn act providing for the payment of a pre-existing claim. The constitutional inhibition does not apply to legislation recognizing or affirming the binding obligation of the state,- or of any of its subordinate agencies, with respect to past transactions. It is designed to prevent retrospective lеgislation injuriously affecting individuals, and thus protect vested rights from invasion.5 ’ See, also, Read v. City of Plattsmouth, 107 U. S. 568, 2 Sup. Ct. 208; Louisiana v. Wood, 102 U. S. 294.

We have carefully considered all the assignments of error presented in this case. We have been unable to discover any reason or law to support the contention of appellant that relator is without right or remedy in this case.

The judgment of the court is. affirmed.

Affirmed.

De Witt and Hunt, JJ.. concur.

Case Details

Case Name: State ex rel. Northwestern National Bank v. Dickerman

Court Name: Montana Supreme Court

Date Published: Jun 10, 1895

Citation: 40 P. 698

Court Abbreviation: Mont.