Capital Bank of St. Paul v. School District No. 53

• Decision Date: 29 November 1890
• Citation: 48 N.W. 363,1 N.D. 479
• Court: North Dakota Supreme Court

48 N.W. 363

1 N.D. 479

CAPITAL BANK OF ST. PAUL, Plaintiff and Appellant, v. SCHOOL DISTRICT No. 53, Barnes County, D. T., Defendant and Respondent

Supreme Court of North Dakota

November 29, 1890

APPEAL from district court, Stutsman county; Hon. RODERICK ROSE Judge.

Affirmed.

White & Hewit and Bartlett Tripp, for appellant.

Mr Tripp argued as follows: The court below directed the verdict as appears from the abstract upon the ground that "the district exceeded its authority in issuing orders for a greater amount than could be raised by the levy of a tax in one year," and was governed no doubt by the language of the supreme court of Dakota Territory in Farmers & Merchants Nat. Bank v. School District No. 53, 42 N.W 767. One of the essential distinctions between that case and the case at bar, which seems to have been overlooked by the lower court, or which was deemed by it not to apply, was "that the inhabitants of the district did not direct the making of or make the contract, and had never in any way ratified the acts of the school board in issuing such warrants." In this case we say there was evidence of ratification on the part of the inhabitants of the district of the acts of the board. The court below seems to have been of the opinion that such evidence was immaterial, the inference being from the act of directing the verdict, that the learned judge was of the opinion that the district could not ratify such unauthorized acts of the board; that the district could not do indirectly what it had not power to do directly. We think the court below has misconstrued and extended the meaning of the language used by the court in Farmers & Merchants Nat. Bank v. School District No. 53 supra. It is true that a hasty reading of this decision alone would seem to give the impression that the court intended to hold in all cases, where the warrants or orders exceeded the amount of the tax levy of that year, they were absolutely void. This the court did not and could not intend to hold. The language of the court must be applied to the facts of that case. What was in fact determined in that case and how far it is authority in the case at bar can best be determined by an examination of the companion case submitted with it at the same time and the opinion in which is written by the same judge, to-wit: The Capital Bank of St. Paul v. School District No. 85, 42 N. W. R. 774. In this last case the supreme court says: "they expended more than could legally have been collected by tax on the property of the district in one year;" yet affirms a judgment against the district for the full amount of the warrants and interest, while in the case against district 53, where the board had done the same thing, the court holds the warrants void, and affirms a judgment in favor of the district. The only difference between the two cases so far as this question is involved was, that in the former case the action of the board was ratified, in the latter it was not. The courts in such case, because of the action of the inhabitants in ratifying such contract, will construe it as one to be paid out of the revenues from year to year to be obtained under the statutes providing for and limiting taxation. The territorial supreme court reached the conclusion that the district may make a contract--at least by ratification--incurring a liability greater than can be provided for by the taxation of the year in which it is made. Applying the results of that decision to the facts of this case it is decisive of it. We say there was abundant evidence tending to show that the district had ratified the acts of the district board in building this house and issuing these orders. See, also, Sullivan v. School District 39, 18 Pac. R. (Kans.) 287; Everts v. District Township Rose Grove, 41 N.W. 478; Andrews et al v. School District No. 4, 33 N.W. 217; Sherman et al v. Fitch, 98 Mass. 59; City of Conyers v. Kirk et al, 3 S.E. (Ga.) 442; Fisher et al v. Inhab. School District No. 17, 58 Mass. 496; Keyser v. School District, 35 N.H. 477; Kimball v. School District, 28 Vt. 8; Jordan v. School District, 33 Me. 170; Coney v. Somerset, 44 N.Y.S. 445; Banks v. Albany, 92 N.Y. 363; Read v. Plattsmouth, 107 U.S. 568; Corwin v. Wallace, 17 Iowa 374; Humphrey v. Association, 50 Iowa 607; Pinches v. Church, 55 Ct. 183; Brown v. Atchison, 17 Pa. 465.

Again, the school district having accepted the fruits of the contract, and thereby having made the contract its own, will not be heard to say that it had no power to make such contract and is not bound thereby. Corporations neither private nor municipal are longer permitted to use the doctrine of ultra vires as a sword, but only as a shield in defense of their corporate rights. I think it may be safely said from a review of the modern decisions of the courts that the line of distinction is now well drawn between contracts made without of in excess of authority, and those declared to be illegal or expressly prohibited by statute. The doctrine of ultra vires was at first permitted to be set up by or against corporations upon the theory that public policy demanded that these artificial persons should be kept strictly within the limits of the powers granted them; it was soon found however that this rule worked a great hardship to parties dealing with such persons in ignorance of their chartered powers, and that the interests of the people would be best subserved by estopping them from denying their power or the authority of their agents to make such contracts, the same as in case of individuals, leaving the government to withdraw or annual their charter in case of its violation, and no good reason would seem to exist why a corporation should be permitted to say that its agent, who made the contract had no authority so to do, while it knowingly and willingly accepts its results and retains its proceeds, while an individual, who under such circumstances has ratified the unauthorized act of his agent is held liable as principal to the same extent as if it had been made by himself. I think the courts have so far receded from the position originally taken on this question that it may be safely said they are quite unanimous now in not permitting a corporation, which has received and retained the benefit of an unauthorized contract, unless it be a contract malum in se, to retain the benefits of such contract and successfully interpose the plea of ultra vires; and I may further say with equal safety that the great weight of authority now denies to the corporation, in case of an executed contract which is neither malum in se nor malum prohibitum, the right to retain its proceeds and interpose this plea when sued upon the contract, and that the few remaining courts which still deny the right to sue upon the contract permit a recovery as for money had and received or some similar action. Bank of Augusta v. Earle 13, Pet. 519; Zabriskie v. Ry. Co. 23 How. 391; Ry. Co. v. McCarthy, 96 U.S. 258; Hitchcock v. Galveston, 96 U.S. 341; Gold Mining Co. v. Nat. Bk., 96 U.S. 640; Nat. Bk. v. Matthews, 98 U.S. 621. The great majority of the state courts are now in line with the decisions of the Supreme Court of the U.S. at least so far as contracts made without authority merely, are concerned. Perkins v. Ry. Co., 47 Me. 575; Ossipee Mfg. Co. v. County, 54 N.H. 295; Ry. Co. v. Proctor, 29 Vt. 93; Dill v. Wareham, 7 Metc. 438; Monumental Nat. Bank v. Globe Works, 101 Mass. 57; Attleborough Nat. Bank v. Rogers, 125 Mass. 339; Phil. Loan Co. v. Towner, 13 Ct. 249; Hood v. Ry. Co., 22 Ct. 1; Converse v. Railway Co., 33 Ct. 166; Silver Lake Bank v. North, 4 John. Ch. 370; Third Av. Savings Bank v, Dimock, 24 N.J.Eq. 26; Allegheny City v. McClurken, 14 Pa.St. 81; Penn. Del. etc. Co. v. Dandridge, 8 Gill & J., 248; Boyce v. Trustees M. E. Church, 46 Md. 359; Bank v. Hammond, 1 Rich, Law, 281; City Fire Ins. Co. v. Carrugi, 41 Ga. 660; Screven Hose Co. v. Philpot 53 Ga. 625; Hazlehurst v. Savannah R. R. Co., 43 Ga. 13; So. Life Ins. Co. v. Lanier, 5 Fla, 110.

Upon the right to recover in this action for money lent and advanced, see Bicknell Adm'r v. Widner, 73 Ind. 501; Tracy v. Talmage, 14 N.Y. 162; Custer v. Leavitt, 15, N. Y. 9.

F. H. Remington, John S. Watson and C. M. Hertig for respondent.

Mr. Remington argued: If the district had not the power to make, or to direct the making of the contract, it is obvious that it had not power to ratify. Hodges v. City of Buffalo, 2 Denio 110; 1 Dillon, Mun. Cor. § 463, 3d Ed. This will undoubtedly be conceded.

The supreme court of the territory expressly held in the case of F. & M. Nat. Bank v. School District 53, supra, that neither the school board nor the school district had power to incur the indebtedness, because it exceeded the maximum of taxes that could be levied and collected in any one year. The decision in the companion case, Capital Bank v. School District 85, 42 N.W. 774, is in entire harmony with that view. The latter case simply holds that inasmuch as the taxes which could have been levied between the date of the warrants and the date of ratification would have been sufficient to pay the warrants, the district at the date of ratification had the power to ratify. No such facts appear in the case at bar. Not only are the Dakota cases against the power of the voters of the district to make or authorize the contract that was made, but the cases of Kane v. School District No. 3, 52 Wis. 502, and School District v. Stough, 4 Neb. 357, also hold the same doctrine.

The statement of appellant's counsel as to the progressive limitation of the doctrine of ultra vires is true as to private but not as to public corporations. Zottman v. San Francisco, 20 Cal. 96; Clark v. City, 19 Iowa 199; Mayor v. Ray, 19 Wall. 468; Dillon on Mun. Cor. ...