Attorney General ex rel. Cook v. City of Detroit

• Decision Date: 27 November 1872
• Court: Michigan Supreme Court
• Parties: The Attorney General on the relation of Calvin A. Cook and another v. The City of Detroit and others

26 Mich. 263

The Attorney General on the relation of Calvin A. Cook and another v. The City of Detroit and others

Supreme Court of Michigan

November 27, 1872

Heard October 23, 1872

Appeal in chancery from Wayne circuit.

Decree affirmed, with costs against the relator.

L. T Griffin and George V. N. Lothrop, for the complainant, and relators.

E. W Meddaugh and J. Logan Chipman, for defendants, Hilsendegen & Dunn.

D. C Holbrook, City Counselor, for the city.

Cooley J. Graves, J., concurred in the result. Campbell, J., Christiancy, Ch. J. concurred.

OPINION

Cooley, J.:

The right of the attorney general to proceed in equity to enjoin an abuse of corporate power, consisting in the appropriation of corporate funds in a manner not justified by law, appears to me to rest in sound principle. The municipality and its citizens are not alone concerned in such an abuse; the corporate powers have been conferred by the state, with such restrictions and limitations as were thought important, some of which were imposed for the protection of the corporators against unjust and oppressive action of officials, and others from considerations of general public policy. It can never be admitted that because the corporation and its members in general, or even all of them, consent to or connive at the setting aside of these restrictions and limitations, the state, which deemed them important, shall not be at liberty to complain, for this would be to annihilate the just and necessary supremacy of the state, and to make the corporators sole judges of what franchises they should exercise, and what powers the corporation should possess over them. It is the right of the state at all times to keep the grantees of its franchises within the limits prescribed in the grant; and public policy in general requires that serious departures shall not be overlooked, even though the parties injured by the particular act do not complain; for one abuse becomes the precedent for another; and the attorney general does well to interfere when a municipality assumes to do injurious acts which the state, in conferring the power to act at all, has expressly prohibited. It is conceded that he has the right to enjoin the misappropriation of a charitable fund held by the corporation, though held for the benefit of itself or its corporators; and had the fund in this case been held by the city as a donation for the pavement of its streets under the like conditions as to contracts to those prescribed by the charter, his authority to file the bill would have been clear. But, as between such a case and one where a fund has been raised by taxation for a like purpose, I do not perceive any such distinction as would create a difference in his right to intervene; and it would seem to be equally clear where the state has allowed the fund to be raised on certain conditions only, as where an individual has given a fund on the like conditions. Every misuse of corporate authority is in a legal sense an abuse of trust; and the state as the visitor and supervisory authority and creator of the trust, is exercising no impertinent vigilance when it inquires into and seeks to check it. It must be conceded, I think, that this doctrine is not very fully settled by authority in this country, but this is perhaps because in very many cases individuals have been allowed to file bills when the question involved was one rather of public than of private concern; a practice which we are of opinion has been carried to an unwarranted extent, and which is much restricted in this state by the decision in Miller v. Grandy, 13 Mich. 540. But in England the right of the attorney general to file a bill in cases of this nature seems to be recognized; and without examining the cases in detail, where the principle seems to me so plain, I refer to Attorney General v. Brown, 1 Swanst. 265; Same v. Compton, 1 Younge & Col., 416; Same v. Andrews, 2 Mac. & Gor., 225; Same v. Eastlake, 11 Hare 205; Same v. Birmingham, Law Rep., 3 Eq. Cas., 552; Same v. Improvement Commissioners, Law Rep., 10 Eq. Cas., 152; Same v. Norwich, 16 Sim. 226; S. C. on appeal, 21 Law J. Rep. N. S. Ch., 139; Same v. Lichfield, 13 Sim. 547, as cases which recognize more or less directly this doctrine. Nor can I concur in the argument of the city counselor that, to support the suit, it must appear that the money involved is about to be appropriated to a purpose other than that for which it was raised. If there was no right to make the contract on which the money is proposed to be applied, it was an abuse of the corporate franchise to raise it at all; but when it has been received in the city treasury, any application of it upon an unlawful contract is equally a misappropriation, whether such an application had previously been contemplated or not. It is the unwarranted use of the money that justifies the interference, and the pretense upon which it was raised is not important to the question of jurisdiction.

Where, however, the attorney general is to intervene in corporate affairs on behalf of the state, the abuse should be one of a substantial nature, and not of a character merely technical or unimportant. It should appear that the public has a substantial interest in the question; the right involved should be a public right, or at least not a private right merely; the wrong done or attempted, if it consist solely in a misuse or misappropriation of funds, should be either one involving questions of public policy, or, where that is not the case, the amount involved should be something more than merely nominal; something that is not beneath the dignity of the state to take notice of and protect by such proceeding. The remedy is somewhat extraordinary, and substantial grounds ought to appear to justify a resort to it. It becomes necessary, therefore, to consider whether any such substantial grounds support it in the present case.

The wrong complained of here is a disregard of the provisions of the city charter, which require contracts to be publicly let to the lowest responsible bidder. The facts appear to be that the common council, having determined to cause St. Aubin avenue to be paved, instead of determining in advance what particular kind of pavement should be put down, and confining their invitation for proposals to that kind, caused specifications for each of several different kinds of wood and stone pavement to be prepared and filed with the controller, and then advertised that sealed proposals would be received during a time specified, for paving said avenue with either wood or stone pavement, according to the specifications thus placed on file. It further appears that in response to this advertisement no fewer than fifty-seven proposals were received from different parties, for the putting down of various kinds of wood and stone pavement, some of which were covered by patents, and others were open to be put down by any parties. The Detroit Ironizing & Paving Company submitted a proposal for putting down the Ballard patent pavement, with Medina curb stone, for twenty-four thousand four hundred and fifty-nine dollars and ninety-five cents, and Hilsendegen & Dunn proposed to do the same for twenty-four thousand six hundred and forty-two dollars and forty-six cents. These were the only bids for that kind of pavement, but there were proposals for putting down other pavements at much smaller sums. Hilsendegen & Dunn were the assignees of the Ballard patent, but the Ironizing & Paving Company tendered to the city ample indemnity against any liability to the owners of the patent in case their proposal should be accepted, and they were justified by a previous resolution of the council in supposing that such security would be regarded as sufficient. The council, however, having determined to put down the Ballard pavement, rejected the bid of the Ironizing & Paving Company, on the ground that they had no right to lay it, and therefore were not responsible bidders within the meaning of the law, and accepted the bid of Hilsendegen & Dunn, the assignees of the patent, whose right was supposed to be clear. It is a payment of moneys upon the contract with these parties which it is proposed to enjoin in this suit.

The first question involved in the merits of the suit is, whether the council were justified in proceeding in the manner mentioned to obtain proposals. It is insisted, on behalf of the attorney general, that the kind of pavement to be put down should first be determined, and that bids should be called for and competition invited for that kind alone. It is denied that wood pavement can be put in competition with stone pavement, or that two kinds of wood pavement essentially different in construction and cost, can be included in the same notice which calls only for proposals for the paving of one street. The law, it is argued, intends that the bids shall settle the right to a contract on a mere inspection of the prices named; but if the bids are not to be all directed to the same specifications, they settle nothing, and it will always be in the power of the council to reject the lowest bid on the pretense that it is for an inferior pavement, whether such is the truth or not, and to accept the bid of a party they desire to favor, on the claim that, though his bid is higher, yet it is for a better pavement, and consequently such bid is, all things considered, the most for the interest of the city, and therefore to be deemed the lowest.

It is not to be denied that there is a great deal of truth in this argument; and if such a construction of the charter as the complainant contends for, will put it out of the power of the council to practice favoritism in awarding contracts, it ought to be sustained as the one which the...