Twohy Bros. Co. v. Ochoco Irr. Dist., Crook County

• Decision Date: 12 June 1923
• Citation: 216 P. 189,108 Or. 1
• Parties: TWOHY BROS. CO. v. OCHOCO IRR. DIST., CROOK COUNTY, ET AL.
• Court: Oregon Supreme Court

216 P. 189

108 Or. 1

TWOHY BROS. CO. v. OCHOCO IRR. DIST., CROOK COUNTY, ET AL.

Supreme Court of Oregon

June 12, 1923

In Banc.

Appeal from Circuit Court, Multnomah County; Robert Tucker, Judge.

On petition for rehearing. Affirmed.

For former opinion, see 210 P. 873.

E. B. Seabrook, of Portland (James G. Wilson and Malarkey, Seabrook & Dibble, all of Portland, on the brief) for appellant.

John K Kollock and Wallace McCamant, both of Portland (McCamant &amp Thompson, of Portland, on the brief), for respondent Ochoco Irr. Dist.

McCOURT J.

Counsel for plaintiff presented a petition for rehearing, in which they confidently urged that a municipal corporation, when acting in its proprietary capacity, is liable upon implied contract for benefits received in the performance of a contract entered into in violation of statutory restrictions upon its power to contract, contrary to the general rule which prevails in respect to such corporations in the exercise of governmental powers.

In view of the large sum involved in this controversy and the public importance of the question suggested by plaintiff's contention, a rehearing was granted. The argument upon rehearing was confined to the proposition above stated.

Plaintiff does not claim that the defendant Irrigation District has power to contract for the construction of irrigation works otherwise than by letting the contract to the lowest responsible bidder, after advertising for bids as prescribed and required by the statute under which such irrigation district was created. They concede that the contract under which plaintiff herein furnished the services for which recovery is sought is void because of noncompliance with those statutory requirements. That the statutory requirements mentioned were mandatory and essential to the jurisdiction and power of the district to contract for such construction, as declared in the former decision herein, (210 P. 873), is not questioned. Nor is the general rule challenged which was applied in that decision, to the effect that no implied liability can arise against a municipality or other public corporation for benefits received under an express contract, which was within the power of the corporation to make, but which was entered into without observing mandatory legal requirements, specifically regulating the mode in which the power to make the particular contract might be exercised.

The claim of plaintiff is that the doctrine last stated has no application where the corporation is acting in its private or proprietary capacity. Plaintiff says that when a municipal corporation engages in an enterprise within the scope of its granted powers, which might be, and frequently is, conducted by a private citizen or a private corporation, it becomes liable for property or benefits received from another upon implied contract, precisely in the same manner and to the same extent as a private individual or a private corporation, and this irrespective of express limitations upon its power to create the same liability by express contract; that, from the obligation to do justice, which rests equally upon all persons, whether natural or artificial, the law in such cases implies a promise to pay for services rendered to it by another and accepted by the municipality, even where the charter or enabling act of the corporation prohibits it from incurring liability for such services, except in a specified mode.

While the statement of plaintiff's contentions appears to carry its own refutation, yet the great earnestness with which it was pressed upon us, and the persuasive quality of the forceful and able argument employed by counsel in presenting it, calls for a serious and careful examination of the authorities touching upon the question raised by these contentions.

The construction, operation, and maintenance of waterworks, gas works, or electric lighting plants by a city for the benefit or convenience of its inhabitants constitutes the exercise of private and proprietary powers. Esberg Cigar Co. v. Portland, 34 Or. 282, 55 P. 961, 43 L. R. A. 445, 75 Am. St. Rep. 651, where nearly all of the more important decisions are cited; Tone v. Tillamook City, 58 Or. 382, 114 P. 938; Pacific Paper Co. v. Portland, 68 Or. 120, 135 P. 871; Coleman v. La Grande, 73 Or. 521, 144 P. 468.

In Esberg Cigar Co. v. Portland, supra, the court quoted with approval from the case of Western Saving Fund Society v. City of Philadelphia, 31 Pa. 183, 72 Am. Dec. 730, as follows:

"The supply of gaslight is no more a duty of sovereignty than the supply of water. Both these objects may be accomplished through the agency of individuals or private corporations, and in very many instances they are accomplished by those means. If this power is granted to a borough or a city, it is a special private franchise, made as well for the private emolument and advantage of the city as for the public good. The whole investment is the private property of the city, as much so as the lands and houses belonging to it. Blending the two powers in one grant, does not destroy the clear and well-settled distinction, and the process of separation is not rendered impossible by the confusion. In separating them, regard must be had to the object of the legislature in conferring them. If granted for public purposes exclusively, they belong to the corporate body in its public, political, or municipal character. But if the grant was for purposes of private advantage and emolument, though the public may derive a common benefit therefrom, the corporation quoad hoc is to be regarded as a private company. It stands on the same footing as would any individual or body of persons, upon whom the like special franchises had been conferred."

The acts performed, and the duties discharged, by an irrigation district, in constructing an irrigation works for supplying water for irrigation to the landowners of the district, so closely resemble the powers exerted by a city in providing a water system that it necessarily follows that an irrigation district, in constructing its irrigation system, is exercising a private or proprietary power. In doing so, however, it does not lose "its distinctive municipal character." Lehigh Water Company's Appeal, 102 Pa. 515, 528. Its acts and duties are public, at least in the sense that they are performed by public officers for the benefit of that portion of the public within its limits.

An irrigation district, in common with other municipal corporations, derives all of its power, of whatever character, from the statute under or by which it is created. The Supreme Court of the United States, commenting upon the nature of an irrigation district organized under the Wright Act of California (St. 1887, p. 29, as amended), said:

"It is created for a public purpose, and it rests in the discretion of the Legislature when to create it, and with what powers to endow it." Fallbrook Irr. Dist. v. Bradley, 164 U.S. 112, 17 S.Ct. 56, 41 L.Ed. 369 .

Like other public corporations the governing act of an irrigation district is a public statute, and every one dealing with the corporation is charged with notice of the extent of its powers, and the legislative limitations and restrictions upon the exercise thereof. It follows that the principle that a municipal corporation has no powers, either governmental or proprietary, except those granted to it by the Legislature, either expressly or by clear implication, applies with full force to irrigation districts. Stimson v. Alessandro Irr. Dist., 135 Cal. 389, 67 P. 496, 1034. As was said by Mr. Chief Justice Marshall in a great leading case:

"The act of incorporation is to them an enabling act; it gives them all the power they possess; it enables them to contract, and when it prescribes to them a mode of contracting, they must observe that mode, or the instrument no more creates a contract than if the body had never been incorporated." Head v. Providence Ins. Co., 2 Cranch, 127, 2 L.Ed. 229.

The courts, with great frequency, have been called upon to consider the question of the implied liability of municipal or public corporations for benefits received. The cases in which the question has arisen are so numerous that it is impracticable to cite them in an opinion. They are nearly all collected and classified under pertinent headnotes to the following selected cases: 27 L. R. A. (N. S.) 1117, 1125; 39 L. R. A. (N. S.) 43; 41 L. R. A. (N. S.) 473; 46 L. R. A. (N. S.) 921; L. R. A. 1915A, 990, 1023.

In determining whether a claim for services or materials furnished may be enforced against a municipal corporation on the ground of implied liability, the cases gathered in the foregoing notes, with but few exceptions, attach no importance to the distinction between the governmental and proprietary powers of a municipal corporation. Those cases include the decisions cited by plaintiff.

Proprietary powers granted to a municipal corporation by an enabling act are interpreted and construed by the same rules that are applied by the courts in determining the meaning and effect of a like grant of political or governmental power, and with identically the same result. In either case, when the mode of the exercise of the power is prescribed, and the same is a condition precedent to the exercise of the particular power, the mode becomes the measure of the power, and any essential deviation therefrom renders the act void and ineffectual.

"Aside from the mode designated, there is a want of all power on the subject." Zottman v. San Francisco, 20 Cal. 96, 81 Am. Dec. 96.

A grant of power, whether private or public in its nature, the exercise of which is restricted and limited to a specified mode, is uniformly construed by the courts to exclude the exercise of...