State v. Atl. City

• Decision Date: 15 June 1887
• Citation: 9 A. 759,49 N.J.L. 558
• Parties: STATE (READ, Prosecutor,) v. ATLANTIC CITY and others.
• Court: New Jersey Supreme Court

9 A. 759

49 N.J.L. 558

STATE (READ, Prosecutor,)

v. ATLANTIC CITY and others.

Supreme Court of New Jersey.

June 15, 1887.

(Syllabus by the Court.)

Certiorari bringing up proceedings of Atlantic City, and a contract between said city and the Atlantic City Water-Works Company. The facts appear in the opinion.

Mr. Potter, for prosecutor.

S. H. Gray and P. L. Voorhees, for defendants.

MAGIE, J. Two ordinances of Atlantic City have been brought here by this writ. The first, entitled "An ordinance to provide a supply of water for Atlantic City," was approved October 21, 1880. It purported to give authority to J. M. W. and others, or to such company as they might form under the laws of New Jersey, to lay pipes in the highways to conduct water to various parts of the city. The grant was upon conditions, one of which required the grantees to furnish water to the city in various ways. The ordinance contained an agreement on the part of the city to pay the grantees, on the performance of the conditions, the annual sum of $50 for each hydrant placed as thereby required. The grant was declared to be subject to the act, entitled "An act for the construction, maintenance, and operation of water-works for the purpose of supplying cities, towns, and villages of the state with water," approved April 21, 1876. Revision, 1365.

The other ordinance was supplemental to an amendatory of the former, and was approved November 19, 1880. By its provisions the grant was made to inure to the benefit of the Atlantic City Water-Works Company. The number of hydrants to be placed and paid for was thereby largely increased, and it was provided that the property and franchises of the company were to be exempted from municipal taxation. By the terms of these ordinances, articles of agreement were to be executed between the city and the company, and the return shows such articles, dated November 23, 1880, whereby the company accepted the grants on the conditions contained in the ordinances, and the city covenanted to perform the stipulations made therein on its part. The ease shows that on October 25, 1880, J. M. W. and others filed in the office of the secretary of state articles of association for the purpose of becoming incorporated under the abovementioned act of April 21, 1876, by the name of the Atlantic City Water-Works Company. The existence of the company was therein fixed at 99 years. To these articles was appended the ordinance of October 21, 1880, with the apparent design of conforming to the requirements of sections 2 and 3 of said act.

Whether the ordinances and contract fix any limit to the mutual obligations of the parties has been questioned. It is sufficient, for the purposes of this case, to say that they may continue for the corporate existence of the company.

When the cause was moved, defendants objected to the consideration of the reasons, on the ground that prosecutor's delay in suing out this writ had barred him from this relief. They showed by affidavits that the company (which was one of the defendants) had expended large sums in the erection of their works, and had performed the contract on their part so far as permitted. They moved to dismiss the certiorari as improvidently granted. Counsel were heard on this motion, and also on the merits. In considering the objection urged on the ground of prosecutor's laches, the following facts are to be taken into account: The ordinances passed and the contract was made in 1880. The certiorari was allowed June 23, 1886. On March 18, 1881, an information was filed in the court of chancery, in the name of the attorney general, on the relation of prosecutor and others, against the company and others, for the purpose of setting aside the ordinances and contract on the ground of fraud. That proceeding was pending until July 17, 1885, when the information was dismissed. On May 24, 1882, both ordinances were repealed. The works were constructed, and the water turned on June 19, 1882. Notwithstanding the city repudiated its obligations, no step to enforce them was taken by the company until August 6, 1885, when it brought an action against the city to recover the payment called for by the contract. A demurrer was interposed to the declaration; but, being overruled, leave to plead was obtained. Before plea filed under such leave, this writ was applied for and allowed. Since allowance, it seems to have been prosecuted with reasonable diligence.

The question presented, therefore, is whether, under these circumstances, the writ ought to have been allowed. If it ought not to have been allowed, it must now be dismissed. It has not been contended that the allowance of the writ was prohibited by any statute. The contention is that the facts bring the application for this writ within principles which, in our practice, required its denial. In determining this question, the grounds on which prosecutor attacks the proceedings are to be taken into account. The main ground is that the city lacked power to take these proceedings. He stands, not on mere irregularities, but on a substantial objection. His claim is that he, as a taxpayer, is to be burdened by obligations of the city entered into without authority. There are cases in this court, and in the court of errors, permitting a review by certiorari of municipal proceedings which have imposed a burden on citizens, on their application within a reasonable time after it became certain they were to be thus burdened. State v. Newark, 30 N. J. Law, 303; State v. Hudson, 29 N. J. Law, 475. But it must be considered as completely settled in this state that, when the proceedings of a municipal corporation have contemplated and resulted in the expenditure of public money, objections, even when founded on lack of authority, must be made promptly. An application to review such proceedings by certiorari must be made within a reasonable time, or it must be denied. State v. Hudson, 29 N. J. Law, 115; State v. Water Com'r, 30 N. J. Law, 247; State v. Paterson, 36 N. J. Law, 159; State v. Trenton, Id. 499; State v. Perth Amboy, 38 N. J. Law, 425. The same principle has been applied to cases where money has been expended in enterprises of a quasi public nature, and where, under cover of a proceeding of a public nature, individuals have been led to expend money. Haines v. Campion, 18 N. J. Law, 49; State v. Blake, 35 N. J. Law, 208; Bowne v. Logan, 43 N. J. Law, 421.

The case in hand presents no feature requiring the application of these principles. There has been no expenditure of public money, and none was contemplated. The enterprise, though of public utility, has yet nothing of a public or even quasi public nature. The company with which the contract was made, was a private corporation, organized and investing its capital for purposes of gain. The contract with the city relates to a supply of water for public purposes, but it differs in no respect from any contract the company might make with a private individual for the supply of water at a specified price. The company expended its money in erecting its works in the expectation of reaping a reward through the compensation it should receive for supplying water, under this and other similar contracts. But it had no right to rely on this contract if the city had no authority to make it. Whoever deals with a corporation is, in general, presumed to know the extent of its powers. It is true that corporations maybe estopped from setting up the defense of ultra vires against their obligations. Thus, when a municipal corporation had power to borrow money if certain facts existed, and the legislature had manifested an intention to invest certain officials or agents with authority to determine the existence of such facts, and they have solemnly asserted their existence, then the corporation has been held to be estopped from contesting its obligations, on the ground the facts did not exist, when in the hands of those who loaned thereon in good faith and without knowledge of the lack of power. Mutual Ben. Life Ins. Co. v. Elizabeth, 42 N. J. Law, 235. But no such estoppel can be claimed in this case.

Nor can such an estoppel be claimed in view of the fact that the effective objection to these proceedings is (as will be seen) that thereby the city is burdened with a liability in excess of the limit fixed by its charter. After that limit of indebtedness has been reached, the city's power to incur debts has ceased or been suspended. Whether or not that limit has been reached is a fact on which the subsequent authority depends. But there is nothing in the legislation affecting the city indicating an intent to clothe its officers with authority to determine whether or not the limit has been reached. If there did appear such a legislative intent, it is obvious that the restriction to a fixed limit would be futile, if the mere act of the city officers in incurring additional indebtedness is to be accepted as an assertion that the limit had not been reached, and an estoppel on the city from contesting that fact. Where bonds issued by a city in excess of the limit of indebtedness prescribed by the constitution made no mention, directly or indirectly, of the amount of the city's indebtedness, it was held by the supreme court of the United States that even a bona fide holder of them could not recover thereon. Whether, if the bonds had contained recitals which could be interpreted as assertions by the municipal authorities that the bonds, with the city's previous indebtedness, did not exceed the constitutional limit, the city would have been estopped from contesting them, was left an open question, and the case was carefully distinguished from the many cases in the federal courts, which have established doctrines similar to those enunciated in Mutual Benefit Life Ins. Co. v. Elizabeth, ubi supra; Buchanan v. Litchfield, 102 U. S. 278. A similar view has been elsewhere taken. Law v. People, 87 Ill. 385; French v....