Sutherland-Innes Co. v. Village of Evart

• Decision Date: 05 April 1898
• Docket Number: 552.
• Citation: 86 F. 597
• Court: U.S. Court of Appeals — Sixth Circuit
• Parties: SUTHERLAND-INNES CO., Limited, v. VILLAGE OF EVART.

86 F. 597

SUTHERLAND-INNES CO., Limited, v. VILLAGE OF EVART.

No. 552.

United States Court of Appeals, Sixth Circuit.

April 5, 1898

This is an action at law against defendant in error, a municipal corporation, created under the laws of Michigan, to recover damages for the breach of a contract in failing and refusing to maintain a fire hydrant, as required by the contract sued on.The contract was between defendant in error and C. E Fenton, and subsequently assigned by Fenton to plaintiff in error, said Fenton having sold to plaintiff in error the mill property, for the benefit of which the contract was executed.It is agreed that the contract is correctly set out in the declaration, as follows: 'Whereas, Clarence E. Fenton, of Linwood, Bay county, Michigan, is the owner of a mill and the necessary machinery for the manufacture of staves and heading for slack barrels, which he proposes to move to Evart Osceola county, Michigan, on the Main Muskegon river, and to erect, equip, and operate said mill in the village of Evart aforesaid, and to employ what would be equal to fifteen men ten months in the year for the term of five years, and to produce timber for the purpose of manufacture in said mill and whereas, the village of Evart, aforesaid, and to employ what would be equal to fifteen men ten months in the year for the term of five years, and to produce timber for the purpose of manufacture in said mill; and whereas, the village of Evart, Osceola, Michigan, being desirous of obtaining the location within its boundaries of a stave and heading mill, for the purpose of giving employment in part to the citizens and creating a market for the sale of timber for the inhabitants of the surrounding county, thereby putting money in circulation by the employment of the labor and purchase of timber, and thus adding to the purchasing power of its and the surrounding country's inhabitants, thereby increasing the general prosperity of the village and its citizens: Now, therefore, it is agreed between the village of Evart, Osceola county, Michigan, of the first part, and Clarence E. Fenton, of Linwood, Bay County, Michigan, of the second part, as follows: The first agrees that it will place and maintain a fire hydrant within a reasonable distance of a mill building hereafter to be built, and furnish water for the fire protection free during the term of the operation of said mill, and will also give to the aid of said second party to in part reimburse him for the cost of tearing down and removal from Linwood, Mich., to Evart, Mich., and rebuilding and putting up the aforesaid stave and heading mill, and the machinery necessary to successfully operate the same, the sum of seventeen hundred dollars, the same to be paid as follows: Seven hundred dollars when the mill plant is completed and in operation, and one thousand dollars to be paid in a village order to be delivered to second party when said mill plant is completed and in operation, said order to be made payable on or before August 15, 1893.Said second party, in consideration of the above agreements, agrees that he will remove said mill and machinery to the village of Evart within ninety days from this date, and locate and put said mill in operation during the present year, and will manage same so as to give employment to what would equal fifteen men ten months in the year for five years from the date of putting in operation of said mill, and further agrees by himself, his heirs or assigns, to maintain, keep in repair, and operate such stave and heading mill for the manufacture of staves and heading for slack barrels, and containing all the machinery necessary to successfully manufacture the same, and will not remove from Evart, or cause the same to be done, said mill during the term of five years; and it is hereby expressly agreed and understood that, in case of default in (any) of the agreements to be performed by the second party, the first party shall be entitled to receive from the second party or his heirs, in an action for moneys had and received, a sum for the unearned time remaining after the violation of this agreement, in proportion as seventeen hundred dollars is to five years; and that the money advanced by the said village of Evart shall constitute a lien in proportion to the unearned time as against the removal of the said mill from the said village of Evart for the period of time as herein specified; and that the mill is unincumbered.' It is averred that Fenton and plaintiff in error, to whom the contract was assigned, have duly performed and contract on their part.The defendant in error paid the $1,700 bonus, and continued for a time to maintain the hydrant as stipulated, but finally ceased and failed to do so.The mill, machinery, and contents were afterwards destroyed by fire.It is alleged that the fire was promptly discovered, and could have been extinguished except for the defendant's failure to furnish fire protection by maintaining the hydrant.In consequence of this violation of the contract, $19,000 is claimed as damages for the loss.The declaration was demurred to upon the grounds, among others, that the contract sued on was void, because not authorized by the charter of the village of Evart or by the laws of Michigan, and was without consideration.The court sustained the demurrer, holding that the contract was ultra vires and without consideration.Final judgment was accordingly entered dismissing the suit, and, to review that judgment, this writ of error is brought.

S. E. Engle, for plaintiff in error.

C. H. Rose, for defendant in error.

Before TAFT and LURTON, Circuit Judges, and CLARK, District Judge.

CLARKDistrict Judge, after stating the case, .

Two questions arise on this record: First, whether or not, under the charter of the appellee or the general provisions of the Michigan statutes in relation to corporations of this class, the appellee was invested with power to make the contract here in question; and, second, whether or not this charter and the general statutes upon the subject construed as conferring power to make this contract would be valid under the constitution of Michigan.

We prefer to deal first with the question whether or not a charter or statute conferring upon the village of Evart power to make a contract like that now in question would be valid under the constitution of Michigan, for it depends upon the proper disposition of that question whether the case will require any inquiry into the question whether, upon a proper construction of the charter or laws of Michigan, the power to make this contract is conferred.It is to be observed in the outset that, as this action is one upon a specific contract to recover damages for breach of that contract, we are not concerned with the consideration of any question relating to the governmental or public duty of the appellee in regard to fire protection, nor with any question of negligence in respect of such duty.Admittedly, the only consideration which supports this contract, and the only purpose for which it was made, was the establishment and operation for the period named of the stave and heading mill, and the indirect advantages to result to the inhabitants of the village thereby.Unless that contract as made was valid, no obligation was incurred by the village of Evart, and no suit upon the contract could be maintained.It is undoubtedly true, as a general proposition, that, where the construction or validity of a state statute does not involve rights acquired upon the faith of the statute or earlier decisions, it is the duty of federal courts to accept the decisions of the highest courts of the state in regard to the construction of state statutes and the conformity of such laws to the constitution of the state, those courts being the appropriate tribunals for the determination of such questions.Sanford v. Poe,37 U.S.App. 378, 16 C.C.A. 305, and69 F. 546;Louisville Trust Co. v. City of Cincinnati,47 U.S.App. 46, 22 C.C.A. 534, and76 F. 296;Forsyth v. City of Hammond,166 U.S. 506, 17 Sup.Ct. 665;Telegraph Co. v. Poe,64 F. 9;Long Island Water-Supply Co. v. City of Brooklyn,166 U.S. 685, 17 Sup.Ct. 718;Merchants' & Manufacturers' Nat. Bank v. Pennsylvania,167 U.S. 461, 17 Sup.Ct. 829.There is nothing in this case to bring it within any of the recognized exceptions to the rule.If, then, the decisions of the highest court of the state of Michigan furnish a rule by which to dispose of the question here raised, the decisions of that court are controlling.

As counsel in the case differ as to the proper conclusion to be drawn from the decisions of the supreme court of Michigan in their application to the case at bar, it will materially aid in understanding and applying those decisions to examine and restate the generally established doctrine upon the subject.In the absence of special enabling provisions in the constitution of a state, the levy of a tax or the appropriation of revenue derived from taxation is permissible only for a public purpose or object, and legislative power is limited accordingly.And in the ordinary case of municipal obligation, in whatever form incurred, in the absence of a fund specially provided otherwise, a resort to taxation to satisfy such obligation is implied.It is upon this principle, therefore, that the power to contract on behalf of such corporation must be limited by the objects and purposes for which taxes may be laid and appropriated when collected.That this must be true in a general sense cannot admit of question, for otherwise the anomalous result would, in effect, be to recognize the power to incur the obligation while denying the only power by which the obligation could be satisfied.

In Tied.Mun.Corp. Sec. 254, it is said:

...