Opinion
March 31, 1892
Sanders Bowers and Owen Morris, for plaintiff.
Fayette Marsh, for defendant.
It is the settled doctrine that if a municipal corporation has received money for an authorized purpose, derived from the issue of illegal and void bonds, and has applied it to that purpose, an action will lie as for money had and received, although the corporation had no authority to issue the bonds. Louisiana v. New Orleans, 102 U. S. 204; Chapman v. County of Douglas, 107 U. S. 348, 2 Sup. Ct. Rep. 62; Hitchcock v. Galveston, 96 U. S. 341. The contract with Lemon Co. was valid. It was within the scope of the chartered powers of the city of Stillwater. (See Judge THAYER's opinion in this case, 46 Fed. Rep. 899, citing City Charter, c. 8, § 2, etc.) The city certificates are in the hands of the payee, and contain a recital that they were issued in consideration of the performance of the Lemon Co. contract. The observation of Justice STRONG in Hitchcock v. Galveston, 96 U. S. 341, forcibly applies. In that case the city of Galveston made a contract with Hitchcock Co. to pave streets. The charter gave the city power to contract for this purpose, but the city agreed in the contract to pay for the work in negotiable city bonds, payable at a future day. There was no express power under the charter to issue bonds for this purpose. The court, inter alia, said:
"It is enough for them [the plaintiffs] that the city council have power to enter into a contract for the improvement of the sidewalks; that such contract was made with them; that under it they have proceeded to furnish material and do work, as well as assume liabilities; that the city has received and now enjoys the benefit of what they have done and furnished; that for these things the city promised to pay; and that, after having received the benefit of the contract, the city has broken it. It matters not that the promise was to pay in a manner not authorized by law. If payment cannot be made in bonds, because their issue is ultra vires, it would be sanctioning rank injustice to hold that payment need not be made at all."
There is a striking similarity in the above case and the one at bar. It is true that in the former the action was brought by a party to the contract with the city, but that fact does not change the principle involved. The demurrer interposed to the complaint in this case admits the contract made with Lemon Co., its performance by them, and that the certificates, drawing interest, and payable at a future day, were issued to plaintiff in consideration of the performance by Lemon Co. of its contract with the city. The counsel for the defendant has very forcibly presented his views, which must prevail, unless the contract with Lemon Co. was authorized under the charter. Having determined that the city could lawfully make the contract, and by the demurrer the receipt of the money being admitted, and the use of it in payment on the contract, I am constrained to overrule the demurrer, with leave to the defendant to answer in 20 days; and it is so ordered.