City of Marshall v. Kalman
| Decision Date | 03 November 1922 |
| Docket Number | 22,805 |
| Citation | 190 N.W. 597,153 Minn. 320 |
| Parties | CITY OF MARSHALL v. CHARLES O. KALMAN AND OTHERS |
| Court | Minnesota Supreme Court |
Action in the district court for Lyon county to recover $36,000 for breach of contract. Defendant's demurrer to the complaint was overruled by Olsen, J. From the order overruling their demurrer, defendants appealed. Affirmed.
Consideration for contract -- Bailey v. Austrian distinguished.
1. If by accepting an offer to sell, the buyer has fettered his freedom to buy from whomever he pleases, or if, by the contract of sale, the seller has restricted his freedom to sell to others, there is a sufficient consideration for the contract. Bailey v. Austrian, 19 Minn. 535 distinguished.
Part performance of executory contract of sale warrants enforcement of unexecuted part.
2. The partial performance of an executory contract of sale is a sufficient consideration to support all its provisions and to warrant the enforcement of the unexecuted portions thereof.
Municipal contract for sale of certificates of indebtedness enforceable without compliance with section 1856.
3. A contract by a city for the sale of its certificates of indebtedness to be issued under chapter 65, Laws 1919, is enforceable, although the sale is to be made without complying with the requirements of section 1856, G.S. 1913. Such a contract is not void as one ultra vires in the primary sense of that term.
Contractor with city estopped after part performance of contract.
4. The other party to such a contract, after enjoying the benefits of the partial performance thereof by the city, is estopped from asserting that the city had no power to enter into the contract.
Contract construed to include certificates of two years.
5. Construing the contract in question, it is held that it embraces street improvement work done by the city and certificates of indebtedness issued in the years 1919 and 1920.
Contract did not require a violation of the statute.
6. The contract provided that the certificates should mature in each year from 2 to 10 or 20 years. Chapter 65 provides that such certificates shall be paid in annual installments extending over a period not exceeding 20 years. Held that it was within the power of the city to comply with the terms of the contract without violating the statute.
Breach occurred before exercise of option given to the plaintiff.
7. Defendants' refusal to perform the contract gave rise to a present cause of action, although by the terms of the contract the city was given a choice between two alternatives when it issued the certificates and had not made a choice before bringing the action.
Demurrer to complaint should be overruled if cause of action is stated.
8. A complaint is not demurrable because damages are claimed which may not be recoverable, for it, on any view of the facts pleaded, a cause of action is stated, a demurrer should be overruled.
Moore, Oppenheimer, Peterson & Dickson, for appellants.
James H. Hall and Denegre, McDermott, Stearns & Weeks, for respondent.
Appeal from an order overruling a demurrer to the complaint interposed on the ground that the facts stated do not constitute a cause of action, the court having duly certified that the demurrer raised important and doubtful questions.
The action was brought to recover damages for the breach of a contract to purchase or find purchasers for certificates of indebtedness issued by plaintiff pursuant to chapter 65, p. 62, Laws 1919. On December 26, 1918, defendant presented a communication to the city council, reading as follows:
On May 19, 1919, defendants presented a second communication to the council reading in part as follows:
"We have carried out the first steps in the contract entered into with you on December 28th, 1918, and have prepared and secured the enactment of Chapter No. 65, General Laws of Minnesota 1919, enabling you to construct a large amount of paving without the inconvenience and expense of an election. * * * We now offer to alter said contract in the following particulars:
(1) We will pay you par and accrued interest from date of issue to date of delivery, for certificates issued under the above law and give you the choice of two arrangements as follows:
(a) Maturities to be in substantially equal amounts each year from 2 to 10 years or to 20 years if the Council elects and interest rate 5 1/2%, we to reduce our allowance for outlays and services from $750.00 to $600.00 paying the costs of blank certificates or bonds, attorney services, etc., out of said allowance.
(b) We will guarantee you a purchaser at a price of at least par and accrued interest for said certificates or bonds bearing five per cent interest and maturing in equal annual installments from 2 to 10 years, you to allow us for outlays and services in connection therewith, when and as said certificates are taken up and paid for, two per cent of the face value of all certificates issued, we to pay all costs of blank certificates, attorney services, etc., out of said allowance.
(2) Our obligation hereunder to cease November 1, 1920, but we are to have the option thereafter to consummate such purchase and guaranties good to such date as the City may be ready to complete same.
(3) Our obligation hereunder (and option) to be limited to an aggregate of $400,000, but it is understood that all paving work of the City will be done under this agreement up to said limits."
Each proposal was duly accepted, and during the year 1919, pursuant to the determination of the council in March and June of that year, certain streets were paved at an expense of $185,000. To meet the expense, certificates of indebtedness were issued under the authority granted by chapter 65. There were two issues, one of $125,000, authorized October 6, 1919, and the other of $60,000, authorized December 15, 1919. Defendants procured a purchaser for both issues on the terms specified in their proposal. Plaintiff paid defendants $2,500 after the first issue was sold, and $1,200 after the sale of the second issue. It also paid them $600 to cover the cost of blank certificates and attorneys' fees as stipulated in the second proposal.
On January 19, 1920, the council determined to pave other streets, and on March 1, 1920, entered into a contract for such paving. The contract price exceeded $298,000. Defendants were notified of the making of the contract and that the city would look to them to finance the project under the terms of their proposal of May 19. On April 3, 1920, defendants informed plaintiff's officers that they would neither purchase nor find a purchaser for the new certificates.
The complaint, after setting out these facts, alleged that plaintiff was ready, willing and able to issue certificates upon the terms and conditions specified in the proposal of May 19 and had so notified defendants, but they at all times refused to purchase or find a purchaser for such certificates. Allegations followed relating solely to damages, which were laid at $36,000.
1. Defendants urge that there was no valid executory contract because the city was under no obligation to do any paving and because it might have sold the certificates to any one without incurring liability to defendants, and hence, under the doctrine of Bailey v. Austrian, 19 Minn. 465 (535), the contract was not enforceable. This court has often considered and distinguished Bailey v. Austrian. 1 Notes on Minn. Rep. 807; Minneapolis Mill Co. v. Goodnow, 40 Minn. 497, 42 N.W. 356, 4 L.R.A. 202; Staples v. O'Neal, 64 Minn. 27, 65 N.W. 1083; Ames-Brooks Co. v. Aetna Ins. Co. 83 Minn. 346, 86 N.W. 344; Lapham v. Flint, 86 Minn. 376, 90 N.W. 780; Stauff v. Bingenheimer, 94 Minn. 309, 102 N.W. 694; Rotzien-Furber L. Co. v. Franson, 123 Minn. 122, 143 N.W. 253; Scott v. T.W. Stevenson Co. 130 Minn. 151, 153 N.W. 316. The case has been discussed in other jurisdictions. No exception can be taken to the statement of the abstract legal principle set forth in the opinion. But it is not a legal formula to be blindly applied to every contract which seems on its face to lack mutuality of obligation. Bailey v. Austrian was considered in Nat. Furnace Co. v. Keystone Mnfg. Co. 110 Ill. 427, where it was said that the decision turned on the use of the word "want" in the contract; and in Hickey v. O'Brien, 123 Mich. 611, 82 N.W. 241, 49 L.R.A. 594, 81 Am. St. 227, the same view was expressed. Dean Lawson, writing on contracts (9 Cyc. 330), says that Bailey v. Austrian was practically overruled by Ames-Brooks Co. v. Aetna Ins. Co. supra.
One test of the applicability of Bailey v. Austrian to such a contract as we have here is whether the buyer has so bound himself that he has lost the right to buy from whomsoever he pleases. If his freedom to contract has been fettered by the acceptance of the seller's proposal, a binding contract results. Nat. Furnace Co. v. Keystone Mnfg. Co. supra; Hickey v. O'Brien, supra; Conley Camera Co. v. Multiscope & Film Co. 216 F. 892, 133 C.C.A. 96.
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