Fitzgerald v. Walker

• Court: Arkansas Supreme Court
• Writing for the Court: MANSFIELD, J.
• Citation: Fitzgerald v. Walker, 17 S.W. 702, 55 Ark. 148 (Ark. 1891)
• Decision Date: 21 November 1891
• Parties: FITZGERALD v. WALKER

17 S.W. 702

55 Ark. 148

FITZGERALD v. WALKER

Supreme Court of Arkansas

November 21, 1891

APPEAL from Pulaski Chancery Court, DAVID W. CARROLL, Chancellor.

This was a suit brought by Edward Fitzgerald and others in the Pulaski chancery court against Walker, Rumbough and McLean as commissioners of Paving District No. 3, and the Arkansas Industrial Company, to restrain collection of the taxes levied for paving West Markham street in the city of Little Rock.

The complaint alleged that the plaintiffs were owners of real estate within the district; that the commissioners had let the contract for paving one-half mile of said street to the Arkansas Industrial Company, without advertising for bids that the commissioners agreed to pay to the company the sum of twenty-seven thousand dollars ($ 27,000) in promissory notes, signed by themselves, negotiable and payable to said company, bearing interest from their respective dates until paid, at the rate of 6 per cent. per annum; that the company paid no attention to any of the specifications of the contract, but simply dug up the street to a varying and unequal extent, and threw into it a quantity of loose boulders, filling the interstices with common earth and clay and not with sand and gravel, as provided by the contract, so that when the work was barely completed, the street had already become almost impassable; that the commissioners had accepted the work, in fraud of the rights of the taxpayers that the price agreed to be paid for said work ($ 27,000) was extravagant and wholly unreasonable, to the knowledge of the commissioners and of the company; that the county of Pulaski pays for similar work at the rate of about $ 4000 per mile which is its reasonable value, and to pay $ 27,000 for half a mile of such inferior paving would be a fraud on the tax-payers of the district; that all work done under the contract was not worth more than $ 2000, and the taxes already collected before the completion of the work were sufficient to pay that.

The complaint prayed for a cancellation of the contract and an injunction against the collection of the tax.

An amendment to the complaint alleged that the contract was void because in contravention of the constitutional provision prohibiting municipalities from issuing interest-bearing evidences of indebtedness, and because the improvement, by the terms of the contract, would cost more than 20 per cent. of the value of the property in the district, and because the contract was modified after its execution without re-advertisement for bids.

Defendants answered denying the allegations of the complaint. The court found that the street had been constructed substantially according to the contract, and that the contract was valid; but held that the contract to pay interest was void. From this decision both parties appealed.

Judgment reversed.

U. M. & G. B. Rose for appellants.

1. The contract was a fraud upon the tax-payers, because (1) the work was not done according to the contract; (2) the contract was extravagant to such a degree as to establish fraud on the part of the commissioners, or such gross negligence as is equivalent to fraud. 2 Dill. on Mun. Corp., secs. 914-19; 121 N.Y. 105; 92 id., 121; 120 Pa. 374; 19 N.J.Eq. 376.

2. The contract is entirely void because it is ultra vires. Mansf. Dig., sec. 837. The cost exceeded 20 per cent. of the value of the property in the district. This avoids the contract, and no action can be maintained upon the contract or upon a quantum meruit. 25 Ark. 267; 68 N.Y. 23; 75 id., 65; 77 id., 130; Dillon on Mun. Corp. (4th ed.), secs. 447-8-9, 451-7-8-9, 460-1-3, 134, 134a, 135-6, 136a.

3. The contract was let without advertisement. Sec. 870, Mansf. Dig.; Dill. Mun. Corp. (4th ed.), sec. 406; 75 N.Y. 65.

4. The contract is ultra vires because it stipulates that the notes shall bear interest. Art 16, sec. 1, Const.; Dillon, Mun. Corp., sec. 21.

Eben W. Kimball and W. L. Terry for appellees.

1. The questions raised by the first proposition of appellants' counsel are purely questions of fact, and the proof must be explicit, clear and conclusive. 7 Abbott, N.C. 44-5. Review the cases cited and contend that they do not sustain appellants' contention. Courts do not set aside contracts for inadequacy of consideration. See 119 N.Y. 559; 92 id., 121. The remedy for illegal assessments is pointed out in Mansf. Dig., sec. 839. A substantial compliance is sufficient to enable the contractor to recover. 92 Pa. 111; 121 Pa. 382; 19 N.J.Eq. 379, 385-6,

2. Even admitting that the contract was excessive by adding in the interest, it would only be void as to the excess. 39 Ark. 335; 3 A. & E. Enc. Law, note 1, p. 887; 77 Ala. 248; 96 U.S. 341; 5 Abb., N. C. The intention of section 837 was that property-holders should not have their property burdened beyond 20 per cent.

3. The letting was advertised. But the law does not require it. 15 Kan. 131; 53 N.Y. 400; 64 id., 409.

4. Section 1, article 16, constitution, does not apply to local improvement districts. But if it did, the stipulation for interest would be simply void. 96 U.S. 341.

5. Plaintiffs are estopped by their own conduct and laches. 130 Pa. 466; 18 Mich. 588; 50 Ark. 130.

6. They are estopped by the acceptance of the work by their own representatives, the commissioners. 29 N. J., 450; Mansf. Dig., sec. 870; 18 Mich. 515; 6 Dakota, 353-4; 94 U.S. 98.

7. The acceptance by the commissioners, if not conclusive, was prima facie evidence that the work was done according to contract, and was binding unless made through fraud or artifice. 1 Dill., Mun. Corp. (4th ed.), sec. 483; see 93 Pa. 115.

MANSFIELD, J. BATTLE, J., does not concur.

OPINION

MANSFIELD, J.

The complaint prays for the cancellation of a contract entered into for the paving of West Markham street in the city of Little Rock, and for an injunction against the collection of further assessments to pay for that work. This relief is sought on the ground of alleged fraud in making the contract and performing the work; and on the further ground that the contract was ultra vires.

I. A court of equity will not rescind a contract on the ground of fraud unless the fraud alleged is clearly established. Veazie v. Williams, 49 U.S. 134, 8 HOW 134, 12 L.Ed. 1018; Holt v. Moore, 37 Ark. 145; Toney v. McGehee, 38 Ark. 419. The contract in question was an improvident one, and the price agreed to be paid was extravagant. But the evidence fails, we think, to establish facts from which a fraudulent intent may be fairly imputed to the contracting parties. One of the circumstances relied upon to prove fraud is that the contract was let without advertisement. It appears that an advertisement was made for bids to be opened on the 25th day of October, 1887. Several bids were received before that date, and all of them were rejected on the ground that they were too high. There is no satisfactory proof that any further advertisement for bids was made before the 15th day of March, 1888, when the bid of the Industrial Company was offered and accepted. The statute providing for the assessment of property for local improvements in cities of the first class contains the following section: "The board of improvements * * * shall have control of the construction of the improvements in their districts. They may advertise for proposals for doing any work by contract; and may accept or reject any proposals." Mansf. Dig., sec. 870. The next succeeding section provides that the board may appoint agents for carrying on the work and may fix their pay. It also provides that they may buy all necessary material and implements "and may, in general, make all contracts in the prosecution of the work as may best subserve the public interest." Ib., sec. 871. These provisions, when considered in their proper relation to each other, indicate very clearly that it was not the intention of the legislature to require that all contracts for local improvements should be let by advertisement. Section 870 expressly authorizes the rejection of all proposals received upon advertisement; and section 871 provides that the work may be done under the supervision of agents appointed by the board and with materials and implements supplied by itself. The wide discretion with which the board is clothed by the statute could not be exercised if its acceptance of bids was limited to such as might be received upon advertisements inviting them. The language of section 870 is not mandatory; and we construe it as merely authorizing the board to advertise for proposals when in their judgment that mode of contracting will "best subserve" the interest of the property owners. By an agreement of counsel entered of record, all objection to the contract on the ground that it was awarded without advertisement was waived in the court below, except so far as the failure to advertise might affect the question of fraud. But we cannot see that it affects either that question or the power to make the contract complained of. As the advertisement was only authorized and not commanded by the statute, its omission was not an unlawful act, and evinced no disposition on the part of the board to proceed in an unwarranted manner. And it does not appear that either of the rejected bids received on advertisement was lower than that which was subsequently accepted.

After some progress had been made in the work, the board proposed to modify the contract by dispensing with the sand and gravel which it required should be placed between the several courses of stone, and by putting the second and third courses of stone together and covering both with a layer of screened rock. This modification was assented to by the contractor, and an order directing it was entered by the board in the...