Fitzgerald v. Walker
| Citation | 17 S.W. 702 |
| Parties | FITZGERALD <I>et al.</I> v. WALKER <I>et al.</I> |
| Decision Date | 21 November 1891 |
| Court | Supreme Court of Arkansas |
Appeal from Pulaski chancery court, DAVID W. CARROLL, Chancellor. Reversed.
Action by Edward Fitzgerald and others against C. T. Walker and others to restrain collection of taxes. From the judgment of the court below, both parties appeal.
U. M. & G. B. Rose, for appellants. Eben W. Kimball and W. L. Terry, for appellees.
The complaint prays for the cancellation of a contract entered into for the paving of West Markham street in the city of Little Rock, and for an injunction against the collection of further assessments to pay for that work. This relief is sought on the ground of alleged fraud in making the contract and performing the work, and on the further ground that the contract was ultra vires.
1. A court of equity will not rescind a contract on the ground of fraud unless the fraud alleged is clearly established. Veazie v. Williams, 8 How. 134; Holt v. Moore, 37 Ark. 145; Toney v. McGehee, 38 Ark. 419. The contract in question was an improvident one, and the price agreed to be paid was extravagant; but the evidence fails, we think, to establish facts from which a fraudulent intent may be fairly imputed to the contracting parties. One of the circumstances relied upon to prove fraud is that the contract was let without advertisement. It appears that an advertisement was made for bids to be opened on the 25th day of October, 1887. Several bids were received before that date, and all of them were rejected on the ground that they were too high. There is no satisfactory proof that any further advertisement for bids was made before the 15th day of March, 1888, when the bid of the Industrial Company was offered and accepted. The statute providing for the assessment of property for local improvements in cities of the first class contains the following section: Mansf. Dig. § 870. The next succeeding section provides that the board may appoint agents for carrying on the work, and may fix their pay. It also provides that they may buy all necessary material and implements, "and may, in general, make all such contracts in the prosecution of the work as may best subserve the public interest." Id. § 871. These provisions, when considered in their proper relation to each other, indicate very clearly that it was not the intention of the legislature to require that all contracts for local improvements should be let by advertisement. Section 870 expressly authorizes the rejection of all proposals received upon advertisement, and section 871 provides that the work may be done under the supervision of agents appointed by the board, and with materials and implements supplied by itself. The wide discretion with which the board is clothed by the statute could not be exercised if its acceptance of bids was limited to such as might be received upon advertisements inviting them. The language of section 870 is not mandatory, and we construe it as merely authorizing the board to advertise for proposals when in their judgment that mode of contracting will "best subserve" the interest of the property owners. By an agreement of counsel entered of record all objection to the contract on the ground that it was awarded without advertisement was waived in the court below, except so far as the failure to advertise might affect the question of fraud. But we cannot see that it affects either that question or the power to make the contract complained of. As the advertisement was only authorized and not commanded by the statute, its omission was not an unlawful act, and evinced no disposition on the part of the board to proceed in an unwarranted manner. And it does not appear that either of the rejected bids received on advertisement was lower than that which was subsequently accepted.
After some progress had been made in the work the board proposed to modify the contract by dispensing with the sand and gravel which it required should be placed between the several courses of stone, and by putting the second and third courses of stone together, and covering both with a layer of screened rock. This modification was assented to by the contractor, and an order directing it was entered by the board in the record of its proceeding. The conduct of the board in thus changing the requirements of the original contract is another circumstance commented upon in the argument as indicating fraud. The right to make the modification is, we think, embraced in the general power conferred by the statute in the last clause of section 871. Hastings v. Columbus, 42 Ohio St. 585. Some of the witnesses testified that the change thus made in the manner of constructing the pavement diminished the value of the work; in the opinion of others the change was beneficial; and the evidence is also conflicting as to whether it increased or diminished the cost of the work to the contractor. But there is nothing in the evidence tending to show that the modification was proposed or assented to through the influence of any improper motive, and it does not appear to us to indicate a fraudulent purpose.
In support of the charge of fraud it is also urged that the work was not done in accordance with the contract. Whether the pavement was constructed according to the terms of the modified contract is a question upon which the evidence is also conflicting. But it was the duty of the persons composing the board to pass upon the sufficiency of the work to meet the requirements of the contract. They accepted it; and, the evidence failing to show that their acceptance was the result of fraud or mistake, it is conclusive, and cannot be properly interfered with by the courts. Motz v. City of Detroit, 18 Mich. 515; In re Livingston, 121 N. Y. 94, 24 N. E. Rep. 290; Cooley, Tax'n, 671, 672; 15 Amer. & Eng. Enc. Law, 1046; Dixon v. City of Detroit, (Mich.) 49 N. W. Rep. 628; Wells v. Atlanta, 43 Ga. 67; Hovey v. Mayo, 43 Me. 322; Elliott, Roads & St. 442, 443; City of Pittsburgh v. MacConnell, 130 Pa. St. 466, 18 Atl. Rep. 645; Omaha v. Hammond, 94 U. S. 98.
While we cannot find from the evidence that the work was intentionally let at an extravagant price, it does appear that the price was largely in excess of the reasonable cost and value of the work, and it is insisted that this shows a degree of negligence equivalent to fraud on the part of the members of the board. That the contract for a local improvement may stipulate for a price so exorbitant as to constitute within itself a fraud upon the tax-payers is, we think, a proposition that admits of no question. Cooley, Tax'n, 671, 672, 773-785; 121 N. Y. 105, 24 N. E. Rep. 293; In re Orphans' Home, 92 N. Y. 116; 49 N. W. Rep. 628; Kerr, Fraud & M. 187. But, conceding that the price complained of here was so extravagant as to entitle the plaintiffs to avoid the contract on that ground, their application for relief was not timely. The contract was entered into on the 15th day of March, 1888, and the work done under it was accepted by the board on the 22d day of December of the same year. This suit was begun on the 12th day of February, 1890. The power of a court of equity to rescind a contract on the ground of fraud must be invoked within a reasonable time after the fraud is discovered, or could have been discovered by proper diligence. Bigelow, Fraud, 436, 438; Kerr, Fraud & M. 303, 305; Merritt v. Robinson, 35 Ark. 483; Bish. Cont. § 680; Herm. Estop. § 1044. The right to rescind, says Mr. Bigelow in his work on Fraud, is to be determined by the state of things at the time the contract is entered into. And Mr. Bishop says the rescission comes too late after there "has been an act of acquiescence with full knowledge of the facts." Bish. Cont. § 680. Some of the plaintiffs were among those who petitioned for the assessment which was the basis of the contract they now seek to avoid. The proceedings which followed were had under a public law of the state, and were of such nature that all persons owning property within the improvement district are charged with notice of what was done. Swift v. City of Williamsburgh, 24 Barb. 430; 2 Herm. Estop. § 1221. The members of the board were the agents of the lot-owners, and it was the privilege of the latter to have full information of all the board's official acts. No presumption can therefore be entertained that at the time the work was commenced the plaintiffs were ignorant of the price to be paid for it, or of any other circumstances affecting the validity of the contract. There is no allegation or proof that they were misled or deceived as to the labor or materials required to make the improvement; and it is not shown that any objection to the price was ever made until after the work was completed. On the contrary, the evidence shows that during the progress of the work the second annual assessment was paid, and it does not appear that any resistance was offered to its collection. Under these circumstances we think it must be held that the plaintiffs assented to the price, and that they cannot insist upon its exorbitancy now as a ground for avoiding the contract.
2. Section 1, art. 16, of the Constitution of 1874, declares that "neither the state, nor any city, county, town, or other municipality in this state, shall ever loan its credit for any purpose whatever; nor shall any county, city, town, or municipality ever issue any interest-bearing evidences of indebtedness," except such as may be authorized by law to pay for existing indebtedness. In support of the second ground of relief stated in the complaint it is argued that the board of improvement is a "municipality," within the meaning of the section quoted above, and...
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