Eaton v. Shiawassee County

• Decision Date: 08 December 1914
• Docket Number: 2503.
• Citation: 218 F. 588
• Parties: EATON v. SHIAWASSEE COUNTY.
• Court: U.S. Court of Appeals — Sixth Circuit

218 F. 588

EATON v. SHIAWASSEE COUNTY.

No. 2503.

United States Court of Appeals, Sixth Circuit.

December 8, 1914

In 1903 the county of Shiawassee, Mich., needed a new courthouse, and the voters of the county, at an election duly held authorized the board of supervisors to issue county bonds and borrow $75,000 for that purpose. This was done, the contract let, and the courthouse built the construction running over a period of two years. By reason of additions and changes authorized by the board, but not by the voters, the total cost was more than $125,000. In 1904 and 1905 the board borrowed from Hugh McCurdy $30,000. Certainly a part, and perhaps all, of this loan was directly or indirectly devoted to meeting the deficiency in the courthouse transaction. Such parts, if any, of the loan as were not so used were employed to pay current county expenses. Efforts to induce the voters to authorize a further bond issue to meet this and other loans having failed, and the county being either unwilling or unable to make payment Mr. McCurdy's administrator brought this suit against the county. It was not based upon the contract, but was an action for the recovery of plaintiff's money had and received by defendant and used for its benefit. The three $10,000 notes which had been given to Mr. McCurdy were exhibited with the declaration, not as contracts, but as evidence of the amounts received. Upon the trial, a verdict for defendant was directed, and the administrator brings this writ of error.

The Michigan Constitution of 1850, in force until 1909, provided as follows:

'Each organized county shall be a body corporate, with such powers and immunities as shall be established by law. ' Article 10, Sec. 1.

'A board of supervisors, consisting of one from each organized township, shall be established in each county, with such powers as shall be prescribed by law. ' Article 10, Sec. 6.

'The board of supervisors of any county may borrow or raise by tax $1,000 for constructing or repairing public buildings, highways or bridges; but no greater sum shall be borrowed or raised by tax for such purpose in any one year, unless authorized by a majority of the electors of such county voting thereon. ' Article 10, Sec. 9.

The Michigan statutes regarding counties and boards of supervisors, after imposing upon the counties the duty of providing suitable courthouses and keeping the same in repair, confer upon boards of supervisors the following powers, among others:

'Sixth. To cause to be erected the necessary buildings for poorhouses, jails, clerks' offices, and other county buildings, and to prescribe the time and manner of erecting the same.'

'Seventh. To borrow or raise by tax upon such county any sums of money necessary for any of the purposes mentioned in this act: Provided, that no greater sum than one thousand dollars shall be borrowed or raised by tax in any one year, for the purpose of constructing or repairing public buildings, highways, or bridges, unless authorized by a majority of the electors of such county voting therefor as hereinafter provided. ' Section 2484, C. L. Mich. 1897.

B. B. Selling, of Detroit, Mich., for plaintiff in error.

B. P. Hicks, of Durand, Mich., and J. H. Collins, of Corunna, Mich., for defendant in error.

Before WARRINGTON and DENISON, Circuit Judges, and HOLLISTER, District judge.

DENISON Circuit Judge.

1. If it is assumed that the entire $30,000 borrowed is sufficiently traced to an investment in the courthouse building, we meet the question whether it is possible for the lender to recover his money upon the theory of an implied liability or quasi contract or equitable liability, or whatever it may be called, when he cannot recover upon the contract which he actually made, because that contract was forbidden by law. Plaintiff concedes there could be no recovery on the contract. His position is that where a municipal corporation has received plaintiff's money and retains it or its benefits, and had inherent power to borrow the money from plaintiff, but only failed in some statutory step, the municipality will not be permitted to keep the benefit and refuse to pay the money. This proposition is essentially based on the difference between cases where the borrowing was ultra vires because the corporation was without power, and cases where it was ultra vires because the active agents of the corporation were without power.

In support of a right to recover in this case, plaintiff relies on Supreme Court decisions, of which Louisiana v. Wood, 102 U.S. 294, 26 L.Ed. 153, is the leading case, and on the decision of this court in Chelsea Bank v. Ironwood, 130 F. 410, 412, 66 C.C.A. 230, 232. In the opinion in the latter case, by Judge Richards, the principle of distinction is very clearly put. He says:

'This is a case for the application of the settled rule that a city may be compelled to pay back money which it has received for bonds illegally issued, when the purpose of the loan was lawful, and the creation of the debt not prohibited by law (Hitchcock v. Galveston, 96 U.S. 341, 24 L.Ed. 659; Louisiana v. Wood, 102 U.S. 294, 26 L.Ed. 153; Parkersburg v. Brown, 106 U.S. 487, 1 Sup.Ct. 442, 27 L.Ed. 238; Chapman v. Douglas County, 107 U.S. 348, 2 Sup.Ct. 62, 27 L.Ed. 378; Read v. City of Plattsmouth, 107 U.S. 568, 2 Sup.Ct. 208, 27 L.Ed. 414; Logan County Bank v. Townsend, 139 U.S. 67, 11 Sup.Ct. 496, 35 L.Ed. 107; Aldrich v. Chemical National Bank, 176 U.S. 618, 20 Sup.Ct. 498, 44 L.Ed. 611), and does not come within the exception exempting a city from liability where it has never received the benefit of the money, or the loan itself was in excess of its authority to create a debt (Litchfield v. Ballou, 114 U.S. 190, 5 Sup.Ct. 820, 29 L.Ed. 132; AEtna Life Ins. Co. v. Middleport, 124 U.S. 534, 8 Sup.Ct. 625, 31 L.Ed. 537; Hedges v. Dixon County, 150 U.S. 182, 14 Sup.Ct. 71, 37 L.Ed. 1044). This court has applied both the rule and the exception-- the former in the cases of City of Gladstone v. Throop, 71 F. 341, 18 C.C.A. 61, and Andrews v. Youngstown, 86 F. 585, 596, 30 C.C.A. 293, and the latter in the case of Travelers' Ins. Co. v. Johnson City, 99 F. 663, 40 C.C.A. 58, 49 L.R.A. 123. In the last case mentioned there is a careful review of the authorities up to that time.'

Further study of the very numerous decisions now reviewed in the briefs of counsel suggests no occasion to modify this statement; and it only remains to determine whether the present case is within the rule or within the exception as stated by Judge Richards. We may properly assume, also, for the purposes of this opinion, that plaintiff's suggested distinction is a correct one, and that we may not say that 'the loan itself was one in excess of its authority to create a debt,' unless the lack of authority pertains to the inherent powers of the municipal corporation itself, as distinguished from the delegated powers of its officers and agents. This distinction will reconcile some of the seeming conflict in the cases; some, it will not; but, unless it exists and is properly here applicable, plaintiff confessedly has no case. Plaintiff says that since the county had the right to make this loan, if authorized by vote, the lack of a vote presents a defect of the second class; the power existed, but a prescribed step in its execution has been omitted. This theory will not reach such a constitutional limitation as that herein involved. The county of Shiawassee is a municipal corporation-- a corporate entity. It is erroneous to say that this corporation has the power to make such a loan if only it proceeds in the right way, viz., by vote of the people. corporation. ^[1] The county, as an entity, has no power to compel a favorable vote of the people. The obtaining by the corporation of the right to such borrowing rests upon the discretion-- even upon the caprice-- of another body, the electors. Until that approval has been given, the...