Opinion
March 13, 1942.
1. MUNICIPAL CORPORATIONS: Bonds: Authority Not Delegated. There was no unlawful delegation of legislative power when the city council authorized the mayor and city clerk to sell certain bonds to a designated purchaser for "not less than par and accrued interest." Their only discretion was to accept more money, and this did not render the authorization void.
2. MUNICIPAL CORPORATIONS: Bonds: Contracts: Ratification. If there was any unauthorized delegation of authority to the mayor and city clerk, the council later validly ratified their act in selling the bonds. If a city has authority to enter into a contract and attempts to do so in an irregular manner, the action may be ratified so as to render the contract legal.
3. MUNICIPAL CORPORATIONS: Bonds: Litigation as Affecting Price. The court did not err in excluding expert testimony as to the value of the bonds being in excess of their selling price, when such testimony as to value did not take into consideration the fact that a suit was pending attacking the validity of the bonds.
Considering the fact that successive suits had delayed the sale of the bonds for many years, the action of the city council cannot be condemned as unwise or arbitrary.
Appeal from Dunklin Circuit Court. — Hon. Gordon Dorris, Special Judge.
AFFIRMED.
Patterson, Chastain Smith, D.C. Chastain and Langdon R. Jones for appellants.
(1) The duty and obligation to sell the securities of a city is vested by law in the city council, and authority to sell the securities of a city cannot be delegated to the mayor and the city clerk. (a) Here the original resolution must fail because it constitutes an unlawful delegation of power to the mayor and city clerk in that the discretion as to how much premium will be required could be exercised only by the council. McQuillin on Municipal Corps., sec. 2462, n. 34; Digest, Mun. Corp., secs. 921(1), 225(2), 62, 214(5), 225(2), 284, 591, 957(2); Digest, Counties, sec. 182; 43 C.J., Mun. Corp., secs. 237-244, sec. 244, n. 34; 44 C.J., Mun. Corp., secs. 4186-4192, sec. 4186, n. 11-14; 15 C.J., Counties, Sec. 339, n. 31; 56 C.J., Schools, sec. 734, n. 94-95; Aquamsi Land Co. v. Cape Girardeau, 142 S.W.2d 332; Edwards v. Kirkwood, 147 Mo. App. 599, 127 S.W. 378; Town of Trenton v. Clayton, 50 Mo. App. 535; Blair v. City of Waco, 75 F. 800; Elyria Gas Co. v. Elyria, 57 Ohio St. 374, 49 N.E. 335; Jones v. Veltmann, 171 S.W. 287; St. Louis v. Russell, 22 S.W. 470; St. Louis v. Clemens, 43 Mo. 395; Brown v. Newberryport, 209 Mass. 259, 95 N.E. 504; State ex rel. v. Hauser, 163 Ind. 155. (b) The power of sale of municipal securities is a discretionary or legislative function and such powers are vested exclusively in the governing board of the city. In the case of cities of the third class such powers are vested in the council of the city. The only statutory restriction placed upon the discretionary power of the city council in this regard is that such securities cannot be sold for less than par. Secs. 6949, 7371, R.S. 1939. (c) All of the facts concerning the wrongful delegation of powers of sale by the city council to its officers appear of record on the minutes of the city clerk, and constitute a definite link in the chain of title purportedly acquired by the purchaser. The purchaser took the city's bonds with full knowledge of all facts and information of record affecting the validity of the sale of such bonds, and is, therefore, in no wise a purchaser without notice. Greene County v. Shortell, 116 Ky. 108, 75 S.W. 251; State ex rel. Harrington v. City of Pompano, 180 So. 610; State ex rel. Ackerman v. City of Carlsbad, 39 N.M. 352, 47 P.2d 865. (2) The court erred in permitting the defendants to offer in evidence the nunc pro tunc proceedings of the city council under date of April 8, 1941, wherein such nunc pro tunc proceedings purported to amend and correct the proceedings of the city council of March 22 and March 28, 1941, and such record of April 8, 1941, should have been excluded by the court, and the court further erred in taking into consideration in rendering its judgment and decree the record of the city council made on April 8, 1941. (a) The city council, when its acts are questioned by suit, cannot by its own order alter or modify the existing minutes of its proceedings antedating the filing of said suit, and attempted nunc pro tunc amendments are incompetent and inadmissible in evidence. The only remedy whereby such records may be modified or amended, if inaccurate, is a proceeding for a nunc pro tunc amendment in a court having jurisdiction of the subject matter, and after hearing is had upon the question of whether or not the minutes as originally written are true and correct. No such proceedings were had in the case at bar, and, therefore, the attempted nunc pro tunc corrections of the clerk's minutes are wholly unavailing and ineffective. Steiger v. Ste. Genevieve, 141 S.W.2d 233; California Implement Co. v. Moran, 128 Cal. 373, 60 P. 969; State ex rel. Owen, Atty. Gen., v. Schotten, 165 Wis. 88, 160 N.W. 1066, 3 A.L.R. 1306; McQuillin on Municipal Corps., sec. 656; 43 C.J., Mun. Corp., sec. 795, p. 517, n. 53-61; 19 R.C.L., Mun. Corp., sec. 202; 3 A.L.R. l.c. 1308. (b) The city introduced evidence to contradict written record of the proceedings of the council relating to the sale of its bonds. Such evidence is wholly inadmissible because the same is in direct conflict with the records of the city and is not intended merely to supply missing records. Likewise, parol evidence contradictory to the record is insufficient to sustain nunc pro tunc proceedings for the amendment or correction of the city records when such evidence is contradictory to the existing record. Peter v. Kaufman, 327 Mo. 915, 38 S.W.2d 1062; State ex inf. Mansur v. McKown, 315 Mo. 1336, 290 S.W. 123; Bonsack Pearce, Inc., v. School Dist. of Marceline, 226 Mo. App. 1238, 49 S.W.2d 1085; Tucker v. McKay, 131 Mo. App. 728, 111 S.W. 867; Watts v. Levee Dist. No. 1 of Miss. County, 164 Mo. App. 263, 145 S.W. 129; City of New Franklin v. Edwards, 23 S.W.2d 235; State ex rel. Barkwell v. Trimble, 309 Mo. 546, 274 S.W. 683; City of Brunswick v. Scott, 219 Mo. App. 45, 275 S.W. 994; Lebanon L. M. Water Co. v. Lebanon, 163 Mo. 254, 63 S.W. 811; Huntersville v. Eatherton, 182 S.W. 767; Hoskins v. Pittman, 16 S.W. 1052, 229 Ky. 260; Jeffers v. Wharton, 197 So. 352, 358. (3) The attempted sale by the mayor and the clerk being invalid in the first instance, the same is not subject to subsequent ratification and approval by the governing board of the city, and, therefore, the attempted approval and confirmation of the report of the mayor and the city clerk filed with the council on March 28th is wholly unavailing and ineffectual to make valid the sale in question. General Mfg. Co. v. Portageville, 28 S.W.2d 119; Likes v. Rolla, 184 Mo. App. 296, 167 S.W. 645; Dearmont v. Mound City, 278 S.W. 802; Miller v. Alsbaugh, 2 S.W.2d 208. (a) Under Sec. 3349, R.S. Mo. 1939 (Mo. St. Ann., p. 1827, sec. 2962), a city contract must be made by its "agents authorized by law and duly appointed and authorized in writing . . .," and hence the mayor cannot make a contract on behalf of the city unless he is authorized by ordinance or resolution to make that particular contract. Atwill v. Richmond, 132 S.W.2d 672; General Mfg. Co. v. Portageville, 28 S.W.2d 119; Eureka Fire Hose Mfg. Co. v. Portageville, 106 S.W.2d 513; Lively v. Webb City, 106 S.W.2d 517; Iowa B. C. Co. v. Marceline, 255 S.W. 577. (b) And, since under Section 3349, city contracts must be "made upon a consideration wholly to be performed or executed subsequent to the making of the contract . . .," where a contract is made by the mayor without proper authorization and performed then the contract cannot be authorized or ratified by subsequent action of the council. Likes v. Rolla, 184 Mo. App. 296, 167 S.W. 645; Dearmont v. Mound City, 278 S.W. 802. (4) The court erred in excluding the testimony of expert witnesses as to the value of the bonds involved at the date of the purported sale by the mayor and city clerk to Baum-Bernheimer. 22 C.J., sec. 684, p. 582; Matthews v. Ry. Co., 142 Mo. l.c. 666; Harris v. Ry. Co., 115 Mo. App. l.c. 533; Fry v. Estes, 52 Mo. App. l.c. 5; State v. Reid, 185 N.E. 449, 86 A.L.R. l.c. 1448.
Elbert L. Ford, Arthur U. Goodman, Jr., and Robert B. Fizzell for respondents; Bowersock, Fizzell Rhodes of counsel.
(1) The action of the city council in authorizing and ratifying the sale and delivery of the city's bonds as shown by the minutes of March 22, 1941, and March 28, 1941, without considering the corrected minutes approved by the council on April 8, 1941, was legal and did not involve the delegation of legislative power by the council. The minutes of the council meetings are sufficiently complete. Haskins v. De Soto, 35 S.W.2d 964; Morrow v. Pike County, 189 Mo. 610, 88 S.W. 99. Action taken by the city council on March 22, 1941, authorizing the sale of bonds, did not involve the delegation of legislative power. Frantz v. Jacob, 88 Ky. 525, 11 S.W. 564; Hunter v. Louisville, 208 Ky. 326, 271 S.W. 690. The action taken by the city council on March 28, 1941, operated as a ratification or final approval of the sale and delivery of the bonds. State ex rel. Carthage v. Cowgill Hill Milling Co., 156 Mo. 620, 57 S.W. 1008; Devers v. Howard, 88 Mo. App. 253; City of Unionville v. Martin, 95 Mo. App. 28, 68 S.W. 605; 1 McQuillin, Municipal Corps. (2d Ed. Revised 1940), sec. 399, p. 1114; 3 McQuillin, Municipal Corps. (2d Ed.), sec. 1358, pp. 561-562. (2) The nunc pro tunc proceedings of the city council had on April 8, 1941, correcting the minutes of March 22, 1941, establish that the council itself, on March 22, 1941, authorized the sale of the city's bonds at par and accrued interest and authorized the mayor and city clerk to execute a contract covering such sale. 2 McQuillin, Municipal Corps. (2 Ed. Revised 1939), sec. 656, pp. 642-645; State ex rel. School District v. Hackmann, 277 Mo. 56, 209 S.W. 92; Peter v. Kaufmann, 327 Mo. 915, 38 S.W.2d 1062; Webb v. Strobach, 143 Mo. App. 459, 127 S.W. 680. (3) The lower court properly excluded certain testimony offered by the plaintiffs as to the value of the bonds of the city of Kennett because (1) all such testimony was based on assumed facts not existing in the present suit and (2) such testimony related merely to the exercise of the judgment and discretion vested in the city council and not regulated or controlled by the courts. (a) The testimony in question was based on assumed facts which did not exist in the present case and consequently such testimony was not relevant or material. (b) The testimony in question offered by the plaintiffs was not competent because it related merely to the exercise of the judgment and discretion vested in the city council and not regulated or controlled by the courts. Missouri Service Co. v. Stanberry, 341 Mo. 500, 108 S.W.2d 25; McMurray v. Kansas City, 283 Mo. 479, 223 S.W. 615; Herman v. Schulte, 166 Mo. 409; 1 McQuillin, Municipal Corps. (2 Ed. Revised 1940), sec. 390, pp. 1068-1072.
Ryland, Stinson, Mag Thomson for Baum-Bernheimer Company and First National Bank of Kansas City.
This is an appeal from a judgment dismissing plaintiffs' petition in which they sought to enjoin the city of Kennett and others from carrying out a contract and agreement concerning the sale of municipal electric light bonds in the sum of $139,000.00.
A number of taxpayers joined in the petition with the Arkansas-Missouri Power Corporation. The defendants in the case are the city of Kennett; Ben Cash, the mayor; Sam G. Fisher, the city clerk; Mrs. Nell Sexton, city treasurer; the members of the city council; Baum-Bernheimer Co., a corporation engaged in buying and selling municipal bonds; First National Bank of Kansas City, Missouri; the [783] Bank of Kennett and the Cotton Exchange Bank of Kennett. These banks were named defendants because the Bank of Kennett and the Cotton Exchange Bank had on deposit the funds the city received for the bonds and the National Bank of Kansas City had possession of the bonds as collateral on a loan from Baum-Bernheimer Company.
In the year 1933, the city of Kennett authorized the incurring of an indebtedness of $140,000.00 to build a Municipal Electric Light Plant. Lawsuits followed. [See Arkansas-Missouri Power Co. v. City of Kennett et al., 78 F.2d 911; Arkansas-Missouri Power Corp. v. City of Kennett, 113 F.2d 595; Arkansas-Missouri Power Corp. v. City of Kennett, 156 S.W.2d 913, 348 Mo. 1108.] Those interested in the history of the litigation are invited to read the above cases. The present suit involves matters which transpired in the year 1941. We may begin a discussion of the case by taking for granted that all proceedings pertaining to the bond issue were legal up to the time the city council proposed to sell the bonds, which was March 22, 1941. On that date the city council adopted the following resolution:
"Motion by A.C. Thrower, and seconded by Earl Russell, that the Mayor, Ben Cash, and the City Clerk, Sam G. Fisher, be and are authorized to sell to Baum Bernheimer Company, Kansas City, Missouri, $139,000 4% electric light bonds for not less than par and accrued interest."
At that time the city council had before it a bid of Baum-Bernheimer Company offering par and accrued interest from the date of the bonds to the date of delivery. At the bottom of the offer appears the following notation:
"Accepted This 22nd day of March, 1941. "City of Kennett, "Ben Cash, "Mayor "Sam G. Fisher, "(Seal) City Clerk."
Thereafter the mayor of the city, the city clerk, city attorney, and another took the bonds to Jefferson City and had them registered in the State Auditor's Office, whereupon the bonds were taken to Kansas City and delivered to Baum-Bernheimer Company, which company paid par and accrued interest for the bonds. Thereafter, on March 28, 1941, the mayor and the city clerk made the following report:
"Comes now Ben Cash, and Sam G. Fisher and makes the following report of the bond sale of the $139,000 Electric Light plant bonds.
"We, Ben Cash, Mayor, and Sam G. Fisher, City Clerk, of the City of Kennett, Missouri, do hereby certify that in pursuance to authority granted by the City Council under date of March 22d 1941, that we did sell to Baum-Bernheimer Company of Kansas City, Missouri, the issue of Electric Light Plant bonds in the principal amount of $139,000 of said City of Kennett; said bonds being dated March 1, 1941, 4% numbered 1 to 139, both inclusive; all of said bonds, being in the denomination of $1,000 each, the purchase price of said bonds, being for par and accrued interest to date of delivery, which was March 25, 1941.
"Ben Cash, "Mayor, "Sam G. Fisher, "City Clerk."
The city council on that day adopted the following motion:
"Comes now C.C. Redman, Councilman and makes motion that city accept report of sale of the $139,000 Electric Light Plant bonds, for approval of Council, said motion was seconded by Geo. I. Gilmore, Councilman, Whereupon Mayor Cash, put the motion and the following vote was recorded. G.I. Gilmore, A.M. Riggs, A.F. Harding, C.C. Redman, A.L. Lemonds, those voting no none. Whereupon the Mayor declared said motion duly carried and adopted."
On April 3, the plaintiffs filed the present suit. It may be noted here that the case of Arkansas-Missouri Power Corp. v. City of Kennett, 348 Mo. 1108, 156 S.W.2d 913, was then pending on appeal in this court but had not been decided.
The principal contention of appellants on this appeal is, that the sale of the bonds was void because the action of the city council, taken on March 22, with reference to the sale of the bonds constituted a delegation of authority to the mayor and city clerk to sell the bonds, and that such authority was vested solely in the city council and could not be delegated by it. We cannot agree with appellants. If only the wording of the motion of March 22, of the report of the mayor and the city clerk, and of the motion adopted by the city council accepting the report and approving the sale is to be considered, it would seem [784] that the mayor and city clerk were delegated a very limited authority. But when the actions of the city officials are considered in connection with the circumstances the only proper conclusion to be drawn is that the city council, on March 22, accepted the bid of Baum-Bernheimer Company and authorized the mayor and city clerk to deliver the bonds to that concern. Note that when the council adopted the motion of March 22, it had before it the bid of Baum-Bernheimer Company. The only function to be performed by the mayor and clerk was to have the bonds registered and delivered to the concern mentioned in the motion of the city council, purely a ministerial duty, and the only discretion left to them was to accept more money from Baum-Bernheimer Company than was mentioned in the bid. A similar situation was before the Supreme Court of Kentucky in Frantz v. Jacob, 88 Ky. 525, 11 S.W. 654, l.c. 656. Note what the court said:
"It is urged that the discretion vested in the mayor as to whether the bonds shall bear interest at 5 or 4 per cent. is a delegation of legislative power, and therefore the ordinance is void. The council had fixed the maximum rate of interest at 5 per cent., but said to the mayor; `If you can sell the bonds at a lower rate of interest it is your duty to do so.' . . .
"If the agent exceeds the authority given him by making the bonds bear a larger rate of interest than authorized by the ordinance, his act would be void: but, when he protects the interest of his principal by making a better bargain than authorized, his action is to be sustained, because it benefits the party for whom he is acting."
This holding was reaffirmed in Hunter v. City of Louisville, 208 Ky. 562, 271 S.W. 690, l.c. 692. The Supreme Court of the United States in Hitchcock v. Galveston, 96 U.S. 341, had before it the question of authority of a city council to construct sidewalks. The council had authorized the mayor and another to enter into contracts for such purposes. This was asserted to have been a delegation of authority, but at page 348 of 96 U.S. the court said:
"If the city council had lawful authority to construct the sidewalks, involved in it was the right to direct the mayor, and the chairman of the committee on streets and alleys, to make a contract on behalf of the city for doing the work. We spend no time in vindicating this proposition. It is true, the council could not delegate all the power conferred upon it by the legislature, but, like every other corporation, it could do its ministerial work by agents. Nothing more was done in this case."
That same language could be applied in the present case because the mayor and city clerk did nothing more than was directed to be done. Their actions were confirmed and approved by the city council on March 28. If a city has authority to enter into a contract and attempts to do so in an irregular manner the action may be ratified so as to render the contract legal. See State ex rel. City of Carthage v. Cowgill Hill Mill. Co., 156 Mo. 620, 57 S.W. 1008, l.c. 1011, where the court tersely stated:
"We see no reason, therefore, for holding that the proposition of Cowgill Hill, and its acceptance by the resolution of the city council, was not a valid agreement. But if the agreement lacked anything in the formality of its execution, that defect was cured by the ordinance which expressly ratified it. That a municipal corporation may ratify an act done in its name, which was within its corporate powers, but which was not done in the manner prescribed by law, is not questioned."
See also State ex rel. City of Excelsior Springs v. Smith, 82 S.W.2d 37, l.c. 42, 336 Mo. 1104, l.c. 1115, as to necessity for city to act through agents. Appellants argue that a city cannot ratify a contract, and cite among other cases, General Mfg. Co. v. City of Portageville, 28 S.W.2d 119. But in that case the court held the contract to be void because the city had no authority in the first instance to enter into the particular contract since it had no funds to pay for the property attempted to be purchased; that therefore the city could not ratify the contract. But the court in that case recognized the principle that a city may ratify a contract irregularly entered into where the city had the power to so contract. See General Mfg. Co. v. City of Portageville, 28 S.W.2d 119, l.c. 120, where the court said:
"A contract by a city made with authority, but lacking in some way in its execution, may be ratified. [State ex rel. v. Milling Co., 156 Mo. 620, 57 S.W. 1008.]"
Appellants briefed and cited many cases under the point that a city council may not delegate authority vested in it to [785] another. That may be conceded to be the law. But aside from the question of ratification it is our opinion that the sale of the bonds to Baum-Bernheimer Company was in fact made by the city council rather than by the mayor and the city clerk. The city council, after this suit was filed, by a nunc pro tunc entry, passed a number of resolutions to have the record of the city conform to what the council deemed actually occurred. Plaintiffs objected to the introduction of these records on the ground that the city council had no right to take any action after suit had been filed and the city had been served with a restraining order. Since we ruled as we did we need not discuss this question.
This leaves us with only one more question in the case. Appellants say that the trial court erred in excluding evidence of expert witnesses as to the value of the bonds at the date of the purported sale.
Appellants contend that the evidence disclosed the bonds to have been worth approximately $20,000.00 more than the city received, and therefore had the city invited bids the taxpayers would have benefited by $20,000.00. This evidence is in the record and appellants are correct when they say that this being an equity suit this court may consider such evidence in passing on the merits of the case. Without discussing the question of whether a court of equity has the authority, absent fraud, to set aside a sale of bonds for inadequacy of price, where the bonds are sold at par, let us consider the evidence offered by appellants. The experts testified that taking into consideration the circumstances, such as the financial standing of the city of Kennett, the purpose of the bond issue, the rate of interest, etc., the bonds were of the value of about $20,000.00 above par. But most of these experts were very evasive when questioned as to what effect the litigation then pending would have on the value of the bonds. One of these witnesses, however, was very frank about the matter. Note his evidence:
"We would not put out our money as long as the suit was pending. In arriving at my figures of the value of these bonds there was no consideration given to the fact that there was a pending suit."
A number of the other witnesses qualified their answer by saying that the value they placed on the bonds was on condition that a reputable law firm had given an unqualified opinion as to the validity of the bonds. No such opinion had been given in this case. The validity of the bonds was an issue in the previous suit. Note what this court said, 348 Mo. 1108, l.c. 1120, 156 S.W.2d 913, l.c. 919 (13):
"Finally, it is contended by the plaintiffs that the general conditions in the city have so changed since 1933 as to require a new submission of the bond issue proposition to the electorate."
That question was pending before this court when the sale of the bonds occurred. It is generally accepted that the public welfare may be best served by permitting competitive bids on all contracts where the taxpayers' money is to be used. However, in this case the city had waited on lawsuits over six years after the people had authorized the building of a municipal plant, and the litigation was not yet at an end. Had bids been invited, can a court say that the city would have obtained a better price? Or would more litigation have commenced before a bid could have been accepted? Under the circumstances we cannot condemn the action of the city council as unwise or arbitrary. Certainly appellants cannot take the position that the suit pending at that time, in which the appellant, Power Company, was plaintiff, was so trivial as not to affect the market value of the bonds.
The judgment of the trial court must be and is hereby affirmed. Bohling and Barrett, CC., concur.
The foregoing opinion by WESTHUES, C., is adopted as the opinion of the court. All the judges concur.