Hasbrouck v. City of Milwaukee ( 1860 )

By the Court,

Dixoit, O. J.

The power of municipal corporations, when authorized by the legislature, to engage in works of internal improvement, such as the building of railroads, canals, harbors and the like, or to loan their credit in aid thereof, and to defray the expenses of such improvements and make good their pledges by an exercise of the power of taxing tbe persons and property of their citizens, always been sustained on the ground that such works, although they are in general operated and controlled by private corporations, are nevertheless, by reason of the fácil-7. ... . „ .. „ . . . , lties which they afford for trade, commerce, and mter-com-munication between different and distant portions of the country, indispensable to the public interests and public functions. It was originally supposed 'that they would add, and subsequent experience has demonstrated that they have added vastly and almost immeasurably, to the general business, the commercial prosperity, and the pecuniary resources of the inhabitants of the cities, towns, villages and rural districts through which they pass, and with which- they are connected. It is in view of these results, the public good thus produced, and the benefits thus conferred upon the persons and properly of all the individuals composing the community, that courts have been able to pronounce them matters of public concern, for the accomplishment of which the taxing power might lawfully be called into action. It is in this sense that they are said to fall so far within the purposes for which municipal corporations are created, that such corporations may engage in, or pledge their credit for their construction. Upon no other principle can the exercise of the power of taxation for such objects be sustained. And in doing so the courts have never, to my knowledge, extended it to cases where it was not apparent that the members of the corporation concerned would be benefited by the construction of the work contemplated. The building of the harbor at Milwaukee comes clearly within this principle, and upon it there can be no doubt that so far as the corporation has acted within the limits of the authority granted by the legislature, it is bound to a strict performance of its contracts. But whilst the power of such corporations, when authorized, thus to engage in or loan their credit for the making of such improvements, has been almost invariably upheld, it has not as yet, I believe, been adjudged in any case, that they could do so without such legislative authority. No court or writer upon the subject, so far as I know, bas ever claimed or intimated that they could do so in the absence of such authority. On the other the general expression of opinion has been that they are incompetent, by virtue of their ordinary powers, and with-1 J . .. .. out such special legislative authority, to contribute to such enterprises. Mr. Pierce, in his Treatise on American Railroad Law, recently put forth, says that no attempt on their part, without such special legislative authority, to exercise such extraordinary powers, has yet been the subject of judicial examination, and adds his opinion that it could not be sustained. In several cases which have heretofore been before this court, it has been conceded by counsel .that it could not be. In this case, the counsel for the plaintiff in error expressly waived its discussion, and virtually admitted that the rights of their client must stand or fall upon the true construction of the several acts of the legislature by which the city was permitted to engage-in the work. They rested the case upon the effect to be given to those acts and the action of the city under them. Its decision, therefore, depends upon the construction which they shall receive, and the several steps taken by the city in pursuance of them.

And here it will become more convenient for me to reverse the order of argument pursued at the bar, and of time in which the several acts were passed, and to examine the last position taken by the counsel for the plaintiff in error under the last act first, and in connection with it the authorities by which they seek to support it. It is said by them, that if it be conceded that under the two previous statutes the city was only authorized to enter into a contract for the construction of a harbor, the expense of which should not exceed $100,000, and that the municipal authorities were not, at the time they attempted to do so, empowered to make an agreement, or bind the corporation for the payment of a greater sum, the defect is cured by the operation of the act of February 23d, 1857 (chapter 66, Private Laws, 1S57), and that from and after the passage of this act, the agreement for the excess became valid and binding upon the city. To this position counsel cite several authorities, and as I am unable to agree with them, . an examination of those authorities will become necessary. In the first place, it will be observed from what has already been said, and should be borne in mind, that the subject with which we are dealing is not one of public policy merely, but of corporate power, and that the inquiry is whether, where the supposed contract of a public corporation is absolutely void for want of capacity to enter into it, a subsequent legislative ratification or recognition of it is sufficient, proprio vigore, and without any evidence that such ratification or recognition was procured at the instance or with the assent of the corporation, or that the corporation has subsequently acted upon or confirmed it, to give such contract life and validity, and make it obligatory upon the corporation. Conceding that the previous statutes did not confer upon the city the power to enter into the contract, which I shall discuss hereafter, then I understand such to be the true nature of the inquiry here presented. I do not understand that the city, by any appropriate action, petitioned or asked for the passage of the act; nor is it averred that it subsequently ratified or assented to it. On the contrary, I infer from this proceeding, that it has refused to be bound by it, or the contract to which it had reference. Under these circumstances the question is, can the legislature, by recognizing the existence of a previously void contract, and authorizing its discharge by the city, or in any other way, coerce the city against its will into a performance of it, or does the law require the assent of the city as well as of the legislature in order to make the obligation binding and efficacious ? I must say that, in my opinion, the latter act, as well as the former, is necessary for that purpose, and that without it the obligation cannot be enforced. A contract void for want of capacity in one or both of the contracting parties to enter into it, is as no contract; it is as if no attempt at ah agreement had ever been made. And to admit that the legislature, of its own choice and against the wishes of either or both of the contracting parties, can give it life and vigor, is to admit that it is within the scope of legislative authority to divest settled rights of property, and to take the property of one individual or corporation and transfer it to another. It is certainly unnecessary at this day to enter into an ment or to cite authorities to show that under a constitutional government like ours the legislature has no such power.

it is undoubtedly true that m cases like the present, where there is a strong moral but no legal obligation to pay, courts often have seized, and may again seize upon very slight circumstances of assent in order to give effect to the contract. And in this case, if it appeared that the city did by some authorized action procure the passage of the act, or had subsequently acquiesced in it by ratifying the contract, there would be little difficulty in the way of holding it bound by its terms. In such cases it is the contemporaneous or subsequent assent of the parties to be bound, coupled with the power or ability on their part to give such assent, which makes the contract obligatory. But the giving of such assent is a matter which depends upon their own free will. It is a voluntary act which they may do or not do as they see fit, and in case they think proper to withhold it, the legislature has no power to compel it. If in a transaction between private parties, a contract made by them should be declared void by the provisions of some statute, as for instance, a statute against usury, no one I think would insist that the legislature could, without the consent of the borrower, remove the infirmity and make the agreement obligatory upon him. It might change the entire policy of the state upon the subject of interest, and declare that no rate however exorbitant should avoid the security, but it could not, without the assent of the parties, interfere with past transactions. Corporations, whether public or private, are within the same rule of protection, and I can see no substantial ground for a distinction between contracts which are void for a want of capacity in one or both of the contracting parties to enter into them, and those which are void for some other cause. If the city in this instance had accepted and approved the act of the legislature, in whole or in part, there can be little doubt that to the extent of such acceptance and approval it would have become bound. The case would then have fallen within the principles of the case of the City of Bridgeport vs. The Housatonic Railroad Company, 15 Conn. R., 475, where tbe bonds of tbe city issued to aid in tbe construction 0f fke company’s road were beld valid, because tbe confirmatory resolution of tbe general assembly was afterwards ac- , ^ cepted by the freemen oí tbe city. It would also come within tbe doctrine of this court laid down in tbe recent case of Mills vs. Gleason; but until there be such acceptance I know of no authority for saying that tbe city is bound.

Tbe mistake of tbe counsel for tbe plaintiff in error consists in their supposing it to be a mere question of public policy. If it were, and tbe court were only called upon to determine what was tbe policy of tbe state with reference to allowing municipal corporations in general, and tbe corporation of Milwaukee in particular, to engage in works of that kind at tbe time tbe contract was enlarged, then I would admit that their position is supported by tbe cases of Shaw vs. Norfolk County Railroad Company, 5 Gray, 162, and Hall and others, Trustees, vs. Sullivan R. R. Co., U. S. Cir. Ct. for district of New Hampshire, reported in Pierce on American Railroad Law, page 520, note 1. In both these cases tbe question arises whether tbe instruments by which tbe railroad corporation bad attempted to transfer their franchises-were invalid upon grounds of public policy. It was insisted that as tbe franchises were created by tbe legislature for tbe public benefit, and confided to particular political persons to be exercised for that purpose, any attempt to delegate them to others was inoperative and void. In both instances tbe legislatures of tbe respective states bad, by acts passed after tbe execution of tbe conveyances, referred to and recognized them as valid. In tbe first named case tbe conveyance had been directly ratified and confirmed by statute. Tbe courts beld that such acts of recognition were conclusive upon their effect, because they showed that at tbe time they were executed, no rule of public policy was contravened. Théy acknowledged tbe power of tbe legislature to determine and control tbe policy of tbe state with regard to corporations created under its authority, and looked into tbe acts as evidence of what that policy was when tbe transfers were made. No question of corporate power was made. The policy being settled in favor of the transfers, the power to make them was conceded. But such is not the nature the transaction before us. This is not a question of conceded power and doubtful policy at the time the plan was , x changed and the contract enlarged, but the reverse. We cannot, from an examination of the statute under consideration, say, as the courts there said, that it was originally the intention of the legislature that the corporation should possess the power which it has attempted to exercise. We cannot infer from it that the legislature intended at the outset that the people or corporate authorities of Milwaukee should have the power to expand the undertaking and augment its expense at their pleasure, but rather the contrary. The more natural and truthful inference is, that, in the opinion of the legislature, they had not such power, and hence the passage of the act for the purpose of enabling the city, if it chose, to do that which under the circumstances the legislature deemed to be equitable and just. The language of the act is permissive and not compulsory. It indicates no desire on the part of the legislature, even if it possessed the power, to compel the city to issue its bonds for the completion of the harbor. The legislature simply say that the mayor and common council are authorized and empowered to issue such an amount of bonds as may be necessary to complete it, in such denominations as they may deem proper, and bearing interest at a rate not exceeding seven per cent.

It furthermore sufficiently appears in both the above named cases that the railroad companies had acted under and ratified the confirmatory statutes. In the first it is distinctly stated that the company had paid a portion of the interest which had accrued upon the bonds, for the security of which the mortgage was executed, after the passage of the statute; and in the second, although there is no separate statement of the facts, and we have only such as are to be gathered from the opinion of the court, which does not profess to give them completely and accurately, still I think it is fairly to be inferred from what is said, that the company had acted under the first statute and issued new stock in pursuance of the authority there given. So that if any doubts had ar*sen ^ose cases as to tbe power of tbe companies to mortgage tbeir francliises, there was such evidence of their subsequent assent as would have cured the defect, and they would then have been no guide for the determination of this case.

It follows from what I have already said, that in my opin - ion this is not a defect which can be reached by the retroactive power of the legislature alone. It cannot, because in so doing the legislature would interfere with vested rights of property. It would of its own mere motion create an obligation where by law none before existed; it would impose a liability against the will and without the consent of the party to be charged. This the legislature cannot do. It can only act retrospectively for the purpose of furnishing a remedy for, or removing an impediment in the way of the enforcement of some pre-existing legal or equitable right or duty, and not for the purpose of creating such right or duty. And the distinction, I think, will be found to prevail in all the cases. An examination of them will, I believe, show that such legislation has not been permitted to conclude the rights of the parties except when legal or equitable rights or obligations had grown up out of the previous lawful acts and dealings of the parties, and existed independently of the defect or irregularity complained of, and which the legislature sought to cure' or remove; and that no case can be found where it has been held that such legislative action alone was sufficient to give life and validity to supposed contracts or obligations which originated solely and exclusively in acts which it was unlawful or impossible for the parties themselves at the time to perform. Chancellor Keítt, in the first volume of his Commentaries, page 455 of the original edition, in speaking of the retroactive power of the legislature in this country, sums up the doctrine very clearly and accurately. He says: “A retrospective statute, affecting and changing vested rights, is very generally considered in this country as founded on unconstitutional principles, and consequently inoperative and void. But this doctrine is not understood to apply to remedial statutes, which may be of a retrospective nature, provided they do not impair contracts, or disturb absolute vested rights, and only go to confirm rights already existing, and in furtherance the remedy, by curing defects and adding to the means of enforcing existing obligations. Such statutes have been held valid when clearly just and reasonable, and conducive to the general welfare, even though they might operate in a degree upon existing rights, as a statute to confirm former marriages defectively celebrated, or a sale of lands defectively made or acknowledged. The legal rights affected in those cases by the statutes, were deemed to have vested subject to the equity existing against them, and which the statutes recognized and enforced. But the cases cannot be extended beyond the circumstances on which they repose, without putting in jeopardy the energy and safety of the general principle.” In this case it is impossible to say that by virtue of the supposed contract the plaintiff did or could obtain any vested rights as against the city, beyond the $100,000 which it was previously authorized to expend in the building of the harbor, for the reason that it was not in the power of the people or the corporate authorities, by any action which they could take, to lay the foundation for such rights. If the city had possessed the general authority to build.the harbor without regard to the expense, but had failed through some technical error or mistake to exercise that authority in the manner prescribed by law, the case might then have fallen within the remedial power of the legislature, but now. it does not, unless the city assents to it.

The authorities cited by the counsel for the plaintiff in error, and which may be supposed to be the strongest that can be found in support of their position, will sufficiently illustrate this rule. In Wilkinson vs. Leland, 2 Peters, 627, the executrix appointed under a will which .had been admitted to probate in the state of New Hampshire, under an order of the probate court of that state, sold and conveyed some ieal estate which had belonged to the testator, situated in the state of Ehode Island, for the payment of debts. The estate of the testator was represented to be insolvent, and was in fact nearly so, there being only some ¿615 left for distribution after appropriating the proceeds of all his ef-^ec^s’ i"ng tbe price of tbe land in question, to tbe payment of tbe debts due from bim, and deducting tbe expenses of administration. It was conceded that tbe probate court of New Hampshire bad no power to direct tbe ...... , x n , x . . . sale of lands m another state, and that the sale and conveyance were consequently inoperative and void. Tbe legislature of Rhode Island subsequently, on tbe petition of tbe executrix, ratified and confirmed tbe deed. Tbe funds realized were applied by her in discharge of tbe demands of tbe creditors. There was no pretense that tbe sale was unfair, or that any part of tbe transaction was characterized by fraud or bad faith. Tbe supreme court held that tbe act of ratification rendered tbe conveyance operative and effectual. In doing so, tbe court make tbe decision turn mainly upon tbe fact, that by tbe laws of Rhode Isl- and, as of all tbe New England states, tbe real estate of testators and intestates stands chargeable with tbe payment of their debts, upon a deficiency of assets of personal estate, and although at law tbe title is said to vest in tbe heir or de-visee immediately on tbe death of tbe ancestor or testator,' yet it does so only conditionally and subject to tbe liens or claims of creditors, for tbe satisfaction of which it is liable to be divested and sold. It is only tbe interest which is left after payment of tbe debts that goes to tbe heir or devisee. Tbe court considered tbe estate or its proceeds as belonging to tbe creditors, for whose benefit it was liable in law to be sold and conveyed. Their rights were pre-existing and legal, and tbe act of confirmation, as well as tbe sale and conveyance, were purely remedial in their nature; they aided in tbe enforcement of existing obligations, in giving tbe creditors what justly already belonged to them. It is very evident from the opinion that if there bad been no creditors, and therefore no pre-existing rights, tbe conclusion of the court must have been quite different. Tbe sale and conveyance, at .the time they were made, were not unlawful, improper or impossible in themselves. Tbe defect consisted only in tbe manner in which they were made and executed.

Tbe case of tbe Syracuse City Bank vs. Davis, 16 Barbour, 188, is similar in its character. Tbe bank lacked nothing of tbe substance of a good institution of tbe kind. It bad a sound capital and bad practically performed all tbe wbicb pertained to it, but a mistake bad occurred in tbe form of tbe proof and acknowledgment of a part of tbe subscri--i i . . , . bers to the certificate. .The objection was entirely tecbnical in its nature, and did not go to any of tbe substantial requirements of tbe law. It was a bank de facto, and tbe act wbicb it bad done was not beyond tbe legitimate scope or powers of sucb a corporation. It was not tbe case of a bank attempting to do that wbicb at tbe time no bank could do. Tbe removal of tbe obstruction was therefore a remedial act wbicb aided in tbe enforcement of a just and equitable obligation to wbicb there was otherwise no legal objection. Possessing all tbe essential qualities of a perfect institution, and tbe transaction being lawful, its contract was not a nullity, so that with tbe aid of tbe legislature it could not be enforced. It was regarded so far a complete corporation as to have tbe capacity of acquiring vested rights, though owing to a tecb-nical irregularity there was an impediment in tbe way of applying tbe remedy, wbicb tbe legislature proceeded to displace. Tbe act did not profess to create a new corporation, but to remedy tbe defects in tbe organization of one wbicb already existed. In tbe present case, if tbe statute is to be held to have any beneficial effect whatever, it must be because it gave to tbe city a power or capacity beyond what it before possessed. For if, as was contended by counsel, it bad by tbe previous acts tbe authority to. enter into a contract for tbe completion of tbe entire harbor on tbe plan last adopted and without limitation as to price, then tbe act was nugatory and useless. For then it would have bad tbe power to issue its bonds or any other evidence of indebtedness, without tbe assistance of this statute. Sucb power would have flowed from its ability to contract, and it needed not tbe action of tbe legislature to enable it to adjust or settle its liabilities in sucb form as tbe municipal authorities saw fit to adopt. See Mills vs. Gleason, supra, and Ketchum vs. The City of Buffalo, and tbe authorities there cited in tbe opinion of Weight, J. Tbe statute therefore does not operate in this case as it did in that, remedially. It was there desiSQed cure a “ive exercise of tbe power to organize a bank, a power wbicb already existed. Here it was not intended to belp out tbe operation of an existing power, but to confer one wbicb tbe corporation did not before possess. x , The distinction is between aiding the imperfect execution of an authority previously granted or act lawful in itself, and tbe granting of a new authority or attempting to relieve against an unlawful act.

It requires no effort to distinguish between this case and that of Foster vs. The Essex Bank, 16 Mass., 245. There tbe statute was clearly remedial. It provided generally that all corporations then existing or thereafter to be established, whose powers should expire at a given time, should be continued in existence as bodies corporate for three years after tbe time limited by their charters, for tbe purpose of suing and being sued, settling and closing their concerns, and dividing their capital stock; but not for continuing the business for which they were established. It is very evident that the object of the act was to save and continue the remedy upon existing obligations and not to create new ones. The same reasoning will apply to cases of marriages defectively celebrated, judgments entered on the wrong day, (10 Serg. & Eawle, 101), deeds defectively acknowledged, (16 id., 85), or remedies given where by law none before existed, (7 Watts, 300).

I therefore think that this action cannot be maintained unless, as was contended by counsel, the city had the power to enter into and bind itself by the contract under the provisions of the previous acts. If it had, then it may; for the contract was made and the work completed after their passage, but before the enactment of that which I have been considering.

I have already noticed that if by the previous acts, authority was delegated to the city to complete the harbor in the manner in which it has been done, then the last act was wholly nugatory and useless. It would be so except so far as it might be considered as a legislative interpretation of the former acts, and in that respect it would make against the construction contended for by the counsel for the plaintiff in error. It shows most indubitably that in tbe opinion of tbe legislature tbe city was limited by them to an of $100,000. This I cannot for a moment doubt is tbe true construction of those acts. It is manifest to me from their entire scope and tenor, and the language used, particularly in the first, (chapter 171, Laws of 1853), under which the enlarged power is claimed, that such was the intention of the legislature. Its language is restrictive. The mayor and common council were authorized to issue bonds of the city to an amount not exceeding fifty thousand dollars. The regulations to be observed and steps to be taken before the bonds could be issued, clearly indicate it. The assent of a majority of the legal voters was first to be'obtained. Before issuing any bonds the common council were required to submit the question of such loan to the legal voters of the city at an election to be called for that purpose, of which at least ten days’ notice was to be given, and at which election the votes should be by ballot, which should have written or printed thereon the words “for the harbor loan,” or the words “against the harbor loan;” and if a majority of the votes cast on that subject should be “for the harbor loan,” the common council should issue the bonds, but not otherwise. Why were these restrictive words used, and the authority of the mayor and council thus circumscribed, if the legislature intended, by making it their duty “ to let out the work by contract to the lowest bidder,” to abrogate the limitation and to give them authority to bind the city to any extent they saw fit? Was it not the intention to make the power to contract subservient to the general restriction previously imposed? It seems to me clear that such was the object in view. Such construction is alone in harmony with the rule that we are so to construe statutes as that all may stand and no part be defeated. It is consistent with the latter provision ■ and gives it the effect which the legislature intended, whilst the opposite construction would frustrate and render inoperative their will as plainly expressed in the former. This interpretation is strengthened by sec. 3 of article XI of the constitution, which makes it the duty of the legislature to restrict cities and villages in their power of taxation, assessment, borrowing money, contracting debts and loaning their credit, so as to prevent abuses in assessment and taxa-¿on an¿[ contracting debts by such corporations. In imposing this restriction when the city was about to engage in such an enterprise, the legislature performed a plain constitutional duty. And in doing so what more unambiguous or less doubtful method could they have adopted than that of fixing the sum which the city might expend ? Clearly none. Again, why submit the question to the will of the voters, if such submission was to have the effect of authorizing the municipal authorities to incur an indebtedness many times larger than that upon which they were called upon to express their opinion ? Was it the intention to deceive and trick upon them liabilities and burdens of which they had not the slightest intimation ? Evidently the legislature had no such design, but the intention was to allow the city to loan its credit to that amount, ¡srovided a majority of the voters gave their consent, otherwise not at all. With a majority vote against the loan, the provision in relation to letting the contracts would have remained a dead letter upon the statute book

I need not spend time upon the act of March 18th, 1856, (chapter 145, Private Laws, 1856.) It simply authorized an increase of the amount of the bonds to $100,000. No other effect was claimed for it.

I do not discuss the questions growing out of the alleged irregularities in the reletting or subsequent enlargement of the contract. The city having already exceeded the limits fixed by the two first acts, by issuing its bonds to a greater amount than they authorized, and there being no averment in the complaint that it has assented to or ratified the last, those questions become immaterial. In my judgment the judgment of the circuit court should be affirmed.

Judgment affirmed.