Bell v. Kirkland

• Decision Date: 04 October 1907
• Citation: 102 Minn. 213,113 N.W. 271
• Parties: BELL v. KIRKLAND et al. (two cases).
• Court: Minnesota Supreme Court

102 Minn. 213

113 N.W. 271

BELL

v.KIRKLAND et al. (two cases).

Supreme Court of Minnesota.

Oct. 4, 1907.

Appeal from District Court, Ramsey County; William Louis Kelly, Judge.

Action by Daniel L. Bell against Edward J. Kirkland and another. Verdict for plaintiff. From an order denying a new trial, William H. Ulmer and John Wagener appeal. Affirmed.

Syllabus by the Court

A municipal corporation let a contract for the construction of a sewer without complying with charter requirements, and without obtaining the consent of two property owners through whose lands the sewer was to pass or of the federal authorities for its outlet on government land. Plaintiff sued for the balance of an account for materials furnished the contractor on a bond given, inter alia, for the benefit of materialmen. The bondsmen interposed the defense that the contract as void because ultra vires, and that, therefore, they were not responsible on the bond. It is held:

The tendency of judicial opinion to refuse to avoid contracts made by private corporations because ultra vires does not apply equally to contracts made by municipal corporations; but to both classes of contracts that doctrine should be so administered as not to defeat the ends of justice or to work a legal wrong.

A contract ultra vires in the general and primary sense that it is wholly outside the power of the corporation to make under any circumstances is ordinarily void in toto; but whether a contract strictly within the scope of the corporation's powers, but ultra vires in the restricted or secondary sense that the power has been irregularly exercised, or that it was beyond the power of the corporation ‘in some particular or through some undisclosed circumstances,’ is wholly void or not, depends upon the circumstances of the particular case.

The contract here in issue was ultra vires in the secondary and restricted sense only.

The fact that the city had not procured right of way through all lands of private owners through which it was to pass did not invalidate the contract.

The facts that as to a small portion of the contract with the municipality only it was ultra vires in any sense, and that it had been substantially executed by the parties basing rights of action upon it, are strong, if not conclusive, considerations for refusing to hold it absolutely void.

Neither the dictates of public policy nor the analogies of the law justify holding this contract void, as between dealers, who furnished material to the contractor in reliance on the bond, and the sureties thereon, who are in a position favored by the law.

The recital in the bond of the contract as valid and subsisting prevented the sureties thereon from asserting that it was ultra vires. Lightner & Young, B. H. Schriber, and Markham & Calmenson, for appellants.

O'Brien & Albrecht, for respondent.

JAGGARD, J.

Plaintiffs and respondents brought an action against defendants and appellants to recover the unpaid balance for materials furnished to one Kirkland to be used in the construction of the ‘Somerville sewer.’ Kirkland contracted to construct the sewer, and, as principal, signed an instrument in which the appellants joined as sureties, which purported to be a bond to the city of St. Paul conditioned for the performance of the contract, and for the payment for the labor and materials furnished in its execution. The total amount of the account was $6,286.30. The balance unpaid was $2,967.55. The amount of the bond was $59,200. The present is a test case. The court found for the plaintiffs. It found as facts, inter alia, that the course of the sewer carried it under property hereinafter more fully set forth as to which the city had acquired no right by condemnation or grant. This appeal was taken from an order denying defendant's motion for a new trial.

Defendants' essential argument is that, if the contract was ultra vires and void, so also was the bond, and that the agreement was shown to have been ultra vires and void. In the first place, the agreement required the construction of a sewer through property not owned by the city. ‘The sewer provided for in the contract was a main sewer of about 4,200 feet in length. It is cut into two almost equal parts by a railroad right of way and adjoining private property for 205 feet. It is proposed to construct it to the Mississippi river as an outlet. In connection with the latter proposition, it is argued that a sewer is of no value unless continuous, or unless it has an outlet. It cannot reach the river because the last 85 feet is owned by the United States government. The result was two disjointed pieces of sewer without an outlet. The significant fact is that the ultra vires part of the contract leaves the sewer valueless. A contract to construct a useless sewer in private property is beyond the power of the city.’ The invalidity appears upon the face of the contract. In the second place, defendants' argument proceeds, the contract was not entered into in accordance with the mandatory provisions of the city charter. We have examined the record adduced in support of this contention. It may fairly be regarded as showing a failure to let the contract as required by the city charter. It is unnecessary to consider the details of this want of compliance. It was, in fact, made by the board of public works, the proper body. A valid preliminary order, a specification of the portion of its cost to be paid out of general funds and other essentials, may properly be conceded to have been wanting.

1. A proper preliminary consideration of the legal questions thus presented involves a brief reference to the attitude of the courts to the doctrine of ultra vires. That doctrine has been attacked with an earnestness amounting sometimes to asperity. ‘The doctrine of ultra vires is of very modern date and entirely the creation of the courts. There is no such thing as ultra vires in the case of a common-law corporation (Case of Sutton's Hospital, 10 Coke, 30, C.), and it is not enacted in any statute. It affords, perhaps, the most remarkable instance in the history of English jurisprudence of the making of law by the judges; and, having once been created, it is now probably saddled onto the backs of the courts, like Sinbad's ‘Old Man of the Sea’, not to be shaken off.' 6 Cent. Law Jour. 3. ‘The reasoning (on the subject) involves a strange confusion of ideas.’ 2 Morawetz, Pu. Corp. 18, § 649. Judge Seymour D. Thompson regards the modern doctrine of ultra vires as a revolt against the ancient doctrine based on a species of moral reformation. His conclusion is ‘that the doctrine of ultra vires has no proper place in the law of private corporations, except in respect of contracts which are bad in themselves, the making of which is prohibited by considerations of public morality, of justice, or of a sound public policy, and which, therefore, stand upon such a footing that neither party can be regarded as innocent or blameless in entering into them.’ 28 Am. Law Rev. 398. And see 5 Thompson, Corp. § 5969. In 9 Harv. Law Rev. p. 255, Mr. George Wharton Pepper combats-and we think successfully-the existence of any clear distinction between the principles of the earlier and of the present decisions or of inextricable confusion on the subject in the American reports. He recognizes, however, that ‘in modern times there has been a steady movement in the direction of enforcing unauthorized or prohibited contracts between the parties.’ The tendency to what Mr. Cooke, (28 Am. Law Rev. 227) calls ‘the extinction of the doctrine’ is certainly very marked. 11 Harv. Rev. 387; 14 Harv. Law Rev. 332;13 Am. Law Rev. 661. After an exhaustive discussion of relevant authorities in Re Assignment Mut. Guaranty Fire Ins. Co. v. Barker, 107 Iowa, 143, 77 N. W. 868,70 Am. St. Rep. 180, Mr. Freeman concludes: ‘After a study of the cases upon the subject, the impression is forced upon us that the doctrine of ultra vires, as applied to the contracts of private corporations, has almost lost its meaning. The undermining of the foundation upon which it has rested from its inception has proceeded simultaneously from different directions until the doctrine itself seems almost ready to fall of its own weight. The original rule that an ultra vires contract was illegal and void could give rise to no rights, nor be validated by any performance or application of the law of estoppel, has practically been erased from the law, for those courts which do not contradict it directly do so indirectly by their manner of applying it. An appeal to the public interest that private corporations should be restricted in the making of contracts to the scope of their granted powers is growing more and more ineffectual where the rights of persons innocently entering into ultra vires contracts with such corporations intervene.’ With respect to contracts by municipal corporations, one current opinion is that: ‘The contract of corporations, whether public or private, stand on the same footing with contracts of natural persons, and depend on the same circumstances for their validity and effect. The doctrine of ratification and estoppel is as applicable to corporations as to individuals.’ Argenti v. City of San Francisco, 16 Cal. 256, 277. We incline, however, to accept the views of Judge Dillon on the subject, thus summarized by counsel for the defendants: ‘The general principle of law is settled beyond controversy that the agents, officers, or even the city council of municipal corporations cannot bind the corporation by any contract which is beyond the scope of its power. * * * The history of the workings of municipal bodies has demonstrated the salutary nature of this proposition, and it is the part of true wisdom to keep the corporate wings clipped down to the lawful standard. It results from this doctrine that contracts not authorized by the charter or other legislative act, that is, not within the scope of the powers of the...