People v. . Stephens , 71 N.Y. 527 ( 1878 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] These cases received very careful consideration at the Circuit; and, on granting the motion for a nonsuit in the case of Stephens, an elaborate opinion was delivered by WESTBROOK, J., covering the numerous points which have been discussed on the present appeal. (51 How. Pr., 235.) His decision was followed by OSBORNE, J., who delivered a similar opinion in the succeeding case of The People v. Leahy et al., involving substantially the same points; and, in both cases, the conclusions reached at the Circuit were affirmed by the General Term of the third department. I do not deem it necessary now to go over the same ground which is covered by those opinions. Concurring in the result arrived at by the two learned judges before whom the actions were tried, and by the court at General Term, it is sufficient to state the point which this court deems controlling in both cases, without going into the other numerous questions which have been argued.

The bids or proposals in question in these actions were put in, and the contracts awarded and signed, in the last days of December, 1866. The grounds of these actions are, that those bids were put in pursuant to an illegal combination between a number of canal contractors, entered into on the 28th of December, 1866, for the purpose of preventing competition between themselves, the result of which was that the State was induced to contract for the work at higher prices than those for which they might have contracted, had there been fair competition; also, in the case of Lord, that bids were put in which apparently were bona fide, and competing bids, but which were not so in fact, and had been mutilated so as not to conform to the regulations, and with the intent that they should be rejected for that cause. And it is charged that the acts of the contractors to whom the contracts were awarded amounted to a false representation that the bids put in by them were bona fide bids, whereby the Contracting Board was deceived into letting the contracts to them at excessive prices.

The damages sought to be recovered are the difference between the sums paid to the contractors or their assigns for the work done under these contracts, and the actual value of the work, or the amounts which the State would have been obliged to pay for the same work had their been a fair competition, and the Contracting Board had not been deceived, as alleged, into making the contracts in controversy.

The main point upon which the defense rests is, that notwithstanding any fraud or illegal conduct, which may have led to the letting of these contracts, the State, after the discovery of the fraud, and while the contracts continued executory in whole or in part, elected to affirm them, and proceed with their performance. That it required performance by the contractors, that they performed the work, and the State regularly paid them the prices stipulated by the contracts, and by legislative action waived all questions relating to the origin of the contracts, except so far as to reserve the right, through certain officers, to annul such of the contracts as were not advantageous to the State, declaring at the same time as to such of them as might be annulled, that the contractors should nevertheless be paid all they had earned under the contracts up to the time of their annulment. If such was the policy of the Legislature, we are clearly of opinion that it is not the province of the courts to overrule it. In the case of a claim made by the Attorney-General on behalf of the State against a citizen, it is not necessary to the defense to show a technical release. It is sufficient to show that the Legislature has, in some form, expressed an intention that the claim shall not be prosecuted. No one can successfully dispute that if an act had been passed declaring in terms that the Legislature, after being informed of all the circumstances relating to the origin of these contracts, was content that the State should abide by them, and that it waived all questions as to the means by which they had been procured, and directed that the contractors should be paid the full contract-price for all work done under them, such an act would be a complete bar to these actions. It only remains to be seen whether such is the effect of the legislative action in the present case.

In construing acts of the Legislature, the language of the act, and such historical or other facts as are within the scope of judicial cognizance, are ordinarily the only guides, and particular facts or special information placed before the Legislature cannot be resorted to. But, I apprehend, that when the State comes into court as a party in a controversy with an individual, the intent of the Legislature in any action it may have taken in respect to that controversy, may be ascertained in the same manner as in a controversy between individuals, where instruments executed by either party are to be construed in the light of surrounding circumstances.

The evidence discloses that the illegal combination of contractors, in respect to the bids which were put in on the 28th day of December, 1866, became public within a few days thereafter, and that early in the session of the Legislature of 1867 it became the subject of a discussion in that body, which led to the adoption of resolutions by the Senate on the 31st day of January, concurred in by the Assembly on the 6th day of February, 1867, directing an inquiry, and appointing a joint committee to investigate matters connected with the canals. That the frauds now complained of were included in the intended investigation, is shown, not only by the evidence of what occurred at the time of the adoption of the resolutions, but by the report of the committee, which was presented to the succeeding Legislature (of 1868) at its opening, January 1, 1868, and sets forth in detail the identical frauds which are alleged in the complaints in these actions. It cannot be questioned, therefore, that as early as the beginning of 1868 the Legislature had official knowledge of all these frauds.

At the session of 1868, an act was passed authorizing the Attorney-General to bring actions to set aside contracts made in pursuance of the bids now in question, and to recover moneys paid by the State under such contracts, in excess of the fair value of the work and materials, in case it should be established that the contracts were procured fraudulently.

Under this act one action was brought by the Attorney-General, in November, 1868, against the defendants Stephens Gale, which action was pending when the act of 1870 was passed. In the meantime, the contractors had proceeded with the performance of their contracts, with the assent of the officers of the State in charge of the canals, and had been regularly paid for their work at the times and prices fixed by the contracts, and in the Stephens' case, by joint resolution of the Senate and Assembly, passed in March and April, 1867, the commissioner in charge of the eastern division of the Erie canal was directed to require the contractor to proceed with his work according to the terms of the contract.

On the 10th of March, 1870, an act was passed (Laws of 1870, chapter 55, section 3), by which the Canal Board was authorized, upon the recommendation of the Canal Commissioners, whenever they should deem it to the interest of the State, to cancel and annul any contract or contracts for repairs of the canals theretofore made, by a resolution to be entered on the minutes of the said board; and section 4 of the same act provided that every contractor whose contract should be canceled and annulled by the Canal Board, should be entitled to receive the money deposited as security for the performance of his contract, with the accumulated interest thereon, together with the money earned under such contract up to the time of the annulling thereof, and a fair compensation for the tools, materials and implements necessarily procured for the purpose of performing such contract. This act, it must be observed, was passed with full knowledge on the part of the Legislature of the means by which the contracts had been obtained, and in view of the controversy then existing in respect to such contracts; but the Legislature must have taken into consideration that, notwithstanding its knowledge of the illegal combination which had led to the awarding of the contracts, the State had required the contractors to proceed with the work, had accepted it and had gone on paying the contractors therefor, according to the terms of the contracts, and it must be assumed from the tenor of the act, that the Legislature did not deem it to the interest of the State to avail itself of the right to set up these frauds in all cases, and break up the contracts, nor to refuse payment for the work already done under those which it might elect to disaffirm. The act left it to the discretion of the Canal Commissioners and Canal Board to determine which of the contracts should be stopped, and substituted this discretion in place of the authority previously given to the Attorney-General to institute legal proceedings, and provided that even in those cases where the contracts should be annulled, payment should be made for the work so far as it had progressed, and for the implements and materials necessarily provided by the contractors. It is not sensible to suppose that there was any intention on the part of the Legislature in directing these payments to be made, to reserve the right to recover back any part of them, or of the previous payments, on the ground that the prices were excessive, and that the contracting board had been induced by fraud to to agree to them. Still less reasonable it is to suppose that they intended to reserve those rights as to the contracts which they should elect to proceed with to their completion. If it had been the intention to reopen the question of prices, the act would have provided as did that of 1868, that the contractors whose contracts should be annulled, should be paid the value of their work and materials without reference to the contracts. Instead of so providing, it directed the payment of the sums earned under the contracts, thus distinctly affirming them, and electing to abide by them so far as they had been performed, and providing for the termination of those which it was not to the interest of the State to continue.

We cannot escape the conviction that this act was intended as a final disposition of the whole matter, which had been so long agitated and discussed in the Legislature and elsewhere. The soundness or equity of the policy of the Legislature in making the disposition which they did, is not a proper subject for our consideration. If we are satisfied that it was their intention to terminate the controversy, we should not lend our aid to its revival. The State, by omitting to proceed under the act of 1870, to terminate the contracts now under consideration, and by going on and accepting the work and making the stipulated payments as they accrued, clearly manifested that it did not deem those contracts injurious to its interests, and that it elected to proceed with and abide by them, notwithstanding any objections they might have insisted upon as to the legality of their origin. Without discussing the effect of such action, under the general principles of law which would govern a similar case arising between individuals, we are of opinion that it was the intention of the Legislature to waive all questions as to the origin of the contracts which the officers vested with the discretion should thus elect to continue, as well as those which they should elect to terminate, and that that intention must be respected by the courts. The Legislature has the power to relinquish a claim of the State, or to waive its remedies for a fraud. If it chooses to do so, we cannot overrule its action, whatever opinion we may entertain of its propriety. The power and responsibility rests with it. But even were the controversy between individuals, it cannot be seriously claimed that payments voluntarily made with full knowledge of the facts could be recovered back in any form of action.

The case of Whitney v. Allaire, (4 Denio, 554); S.C. affi'd, (1 Com., 305), upon which so much reliance has been placed by the appellants, does not sustain any such doctrine. All that it holds is, that where a lessor falsely and fraudulently represents that the premises described in his contract embrace lands which they do not in fact embrace, the lessee, by taking possession of the premises actually embraced in the lease, does not preclude himself from claiming from his landlord compensation for the lands which are deficient, or what he reasonably pays to hire them.

The action of the People v. Stephens Gale, brought by the Attorney-General in November, 1868, under the act of that year, was brought to a hearing on demurrer, and decided adversely to the people in June, 1870, after the passage of the act of 1870, and the Attorney-General waived any appeal. (52 N.Y., 306.) After the termination of that action the work under the present contracts continued, and the payments thereon were regularly made by the State until their completion in 1872, and no question was raised in behalf of the State until after the completion of the contracts, when the controversy was revived by an unsuccessful attempt to appeal in the Stephens case, and by the bringing of these actions in 1873. We think that for the reasons already stated the actions cannot be maintained, and that the judgments appealed from should be affirmed, with costs.