Municipal Sec. Co. v. Baker County

• Decision Date: 17 June 1901
• Citation: Municipal Sec. Co. v. Baker County, 65 P. 369, 39 Or. 396 (Or. 1901)
• Parties: MUNICIPAL SECURITY CO. v. BAKER COUNTY et al.
• Court: Oregon Supreme Court

65 P. 369

39 Or. 396

MUNICIPAL SECURITY CO. v. BAKER COUNTY et al.

Supreme Court of Oregon

June 17, 1901

Appeal from circuit court, Baker county; Robert Eakin, Judge.

Action by the Municipal Security Company against Baker county and others. From an order sustaining a demurrer to the complaint plaintiff appeals. Reversed.

This is a suit by the Municipal Security Company, a private corporation, of Portland, Me., against Baker county and its judge and commissioners, to rescind the sale of certain personal and real property, to establish a trust therein, and to compel the county to deliver the former and to convey an undivided interest in the latter to the plaintiff. The facts as detailed by the complaint, are that on July 13, 1891, G.D Barnard & Co. delivered to said county certain shelving now in the vaults of its court house, for which it issued to them a county warrant for the sum of $542.90; that on August 17 1891, George M. Chambers, being the owner of 160 acres of land in said county, executed thereto a warranty deed thereof, receiving therefor, with others, 12 county warrants of the denomination of $100 each and 1 of $50, and said premises have been and are now used by the county as a poor farm; that the county orders so issued, having been presented to the said treasurer for payment at the time they were severally issued, and indorsed by him "Not paid for want of funds," were thereupon assigned to the plaintiff, which is now the owner thereof; that C.H. Stuller and others, in a suit against said county and its judge, commissioners, sheriff, and treasurer, secured a decree enjoining the payment of plaintiff's and other warrants, on the ground that they had been voluntarily issued after the constitutional limit of the county's indebtedness had been reached; but the plaintiff, not having been a party to that suit and therefore not being bound by the decree rendered therein, instituted a suit to relieve its warrants from the effect thereof, and, a trial being had, the suit was dismissed, and the decree affirmed on appeal. Municipal Security Co. v. Baker County, 33 Or. 338, 54 P. 174. It is further alleged, in effect, that the sales so consummated by Barnard & Co. and Chambers were made in good faith, and that they and the plaintiff, relying upon the validity of the county warrants issued in consideration thereof, made no claim to the property so sold until after the decree was affirmed in the suit heretofore instituted by the plaintiff, which believed that said warrants would be paid in their regular order, but that no fund has ever been raised out of which any part thereof could be paid; that for five years prior to the commencement of this suit said county has leased the land so conveyed to it by Chambers, receiving therefor the annual rental of $150, and that the use of said shelving since the decree was rendered in the Stuller Case is of the reasonable value of $50 per year; that, said warrants having been held invalid, the plaintiff tenders them to the county and prays a decree for said shelving and the undivided five-eighths of said real estate. A demurrer to the separate causes of suit having been sustained on the ground, inter alia, that the complaint did not state facts sufficient to constitute a cause of suit, and the plaintiff declining to plead further, the suit was dismissed; and hence this appeal.

Samuel White, Dist. Atty., and F.M. Saxton, for respondents.

MOORE J. (after stating the facts).

The trial court, in rendering the decree complained of, held, as we understand, that the statute of limitations had run against the right to recover the shelving, and that the demand for a reconveyance of the land could not be split up assuming that the remaining warrants issued for the purchase price were outstanding; but, if paid, that section 9 of article 11 of the organic law of the state prohibited the county from becoming a tenant in common in respect to the ownership of the land. When the constitutional limit of a county's indebtedness has been reached, its capacity to make contracts is suspended, and remains dormant until its voluntary obligations are reduced below the prescribed limit. Any voluntary agreement entered into by a county, involving it with liabilities after the boundary of its power to make contracts has been reached, is ultra vires, and the receipt of benefits by it affords no ground for invoking even an implied liability to pay any compensation therefor. Municipal Security Co. v. Baker County, supra. Notwithstanding the incapacity of a municipal corporation, under such circumstances, renders its contracts unenforceable, those who have parted with their property in dealing with it during its interval of quiescence are not wholly remediless; for, when such property can be identified, the party entitled thereto may recover it by placing the other in statu quo,--the rule being that neither party will be heard to allege the invalidity of a transaction which is simply ultra vires, while holding the fruits thereof. Manchester & L.R. Co. v. Concord R. Co. (N.H.) 20 A. 383, 9 L.R.A. 689, 49 Am.St.Rep. 582. Thus, in Chapman v. Douglas Co., 107 U.S. 348, 2 Sup.Ct. 62, 27 L.Ed. 378, the plaintiff executed to the defendant a warranty deed of two tracts of land, containing 10 and 160 acres, respectively, in consideration of $2,000 in county orders and four promissory notes, of $1,500 each, payable in one, two, three, and four years, respectively, issued in the name of the county by its commissioners, who in the same manner purported to execute a mortgage on the premises to secure the payment thereof. The county took immediate possession of the real property, which it used as a poor farm, expending in the improvement thereof the sum of $30,000; but the title to the smaller tract failed. The notes and mortgage having been assigned, the holder thereof commenced a suit in the state court to foreclose the same; but a demurrer, interposed on the ground that the notes and mortgage were void ab initio for want of authority to execute them, having been sustained, the suit was dismissed without prejudice, and a similar suit, instituted in the circuit court of the United States for the district of Nebraska, was dismissed in the same manner for a like reason. Thereupon Chapman was joined with the holder of the notes and mortgage, for the benefit of the latter, in a suit in said circuit court to rescind the contract of sale and to recover the land, and it was held that, as the notes and mortgage were invalid for want of authority to execute them, the holder thereof was entitled to the relief demanded, upon the surrender of the void securities, and decreed that the county execute a deed to the premises, unless within a reasonable time it paid the amount found to be due, making a proper allowance for the failure of the title to a part of the land. Mr. Justice Matthews, speaking for the court in rendering the decision, says: "The conveyance by Chapman to the county of Douglas passed the legal title, but upon a condition in the contract which it was impossible in law for the county to perform. There resulted, therefore, to the grantor the right to rescind the agreement upon which the deed was made, and thus to convert the county into a trustee, by construction of law, of the title for his benefit, according to the often-repeated rule, as stated by Hill, Trustees, 144, that 'whenever the circumstances of a transaction are such that the person who takes the legal estate in property cannot also enjoy the beneficial interest, without necessarily...