Antigo Water Co. v. City of Antigo , 144 Wis. 156 ( 1910 )

Siebeckeb, J.

The first question raised presents the inquiry: Is ordinance No. 44 void because Mr. .Humphrey was a stockholder of the Antigo Water Company and a member of the common council of the city of Antigo at the time this ordinance was adopted? The city charter of Antigo-(subch. XIV, ch. 173, Laws of 1887) provides:

“See. 10. No member of the common council shall be a party to, or interested in any job or contract with the city, or any department thereof; and any contract in which such member may be so interested, shall be null and void.”

It is undisputed that Mr. Humphrey was a stockholder of the water company, one of its directors and its president, and a member of the common council on March 12, 1891, the date of the adoption of ordinance No. 44. It also appears that the water company was then in default under the original ordinance No. 30-|, providing for the construction of the waterworks, in that the plaintiff had failed to erect a completed plant within the time prescribed. The city was adverse to accepting the waterworks plant under these circumstances unless the plaintiff would agree to amendments to the original ordinance in the respects above set forth, which amendments are embodied in ordinance No. 44. It is to be noted that ordinance No. 44 embodies the terms and conditions constituting the agreements between the parties respecting the furnishing of water for city purposes and the compensation plaintiff was to receive therefor. It therefore contains the contract obligations of the city, imposed and assumed through the adoption of this ordinance by the common council, for it was therein provided that the city was to pay the plaintiff hydrant rentals upon the terms and at the cost therein specified. These contract obligations are manifestly such as are within the contemplation of the above quoted sec. 10, subeh. XIV, of the city charter, which makes a contract null and void if any member of the common council be interested in it at the time of its adoption.

It is an admitted fact that Mr. Humphrey, at the time of the adoption of this ordinance, owned a substantial amount of the stock of the water company. Hoes this fact make him interested in the contract with the city within the contemplation of the foregoing charter provision ? This provision was undoubtedly intended to embrace in its application to the government of the city, through its authorized agents and the members of its governing body, the general and well recognized principle of law that no man can faithfully serve two masters whose interests are in conflict. The law forbidding such persons from contracting with the municipality rests upon grounds of public policy. It is designed to prevent fraud and wrong dealing with public affairs and hence it prohibits such trustees from contracting with themselves. Such prohibitions have been held to embrace contracts by corporations where it appeared that the municipal officers and agents owned stock of such corporations. As stated in Hardy v. Gainesville, 121 Ga. 327, 48 S. E. 921:

“A stockholder in a private corporation clearly has an interest in its contracts; and if the city cannot make the contract with the officer himself, it cannot make, it with a corporation in which such officer is a stockholder.”

Authorities to the same effect are: San Diego v. S. D. & L. A. R. Co. 44 Cal. 106; Dwight v. Palmer, 14 Ill. 295; Goodrich v. Waterville, 88 Me. 39, 33 Atl. 659; Santa Ana W. Co. v. San Buenaventura, 65 Fed. 323.

The charter-provision declares such contracts wholly null and void. We are persuaded that ordinance No. 44 never had any validity because Mr. Humphrey was a member of the council when it was adopted and was interested in the contract by reason of being a stockholder of the plaintiff company.

Since, then, such contract was absolutely void, is the city estopped from asserting its invalidity after receiving and accepting the public service for the city as therein provided for over seventeen years? The appellant strenuously contends, that the city is estopped from denying its validity under the circumstances shown, because it insisted on the agreements embodied in ordinance No. 44 before accepting the waterworks theretofore constructed as required by the original ordinance, and because it has accepted and paid for the public service provided in the amending ordinance throughout all these years, has claimed to act under such ordinance in all matters pertaining to the maintenance and extension of the system and the furnishing of water for the city and its inhabitants, and that it thereby induced the plaintiff to maintain and operate its plant pursuant thereto and to furnish the city the service thereby required. Two important facts must be kept in the foreground in considering whether an estoppel has been shown. First, that most of the acts of the city upon which appellant relies to work an estoppel were acts required of it under the conditions of ordinance No. 30^, which for the purposes of this case is deemed to be valid; and, secondly, that appellant must be presumed to know the law as well as the city, and that the law made ordinance No. 44 lyill and void on account of Mr. Humphrey’s interest in the contract. Under such circumstances the observations of the court in Swan v. Scott, 11 Serg. & R. 155, are illuminating and of force:

“The test, whether a demand connected with an illegal transaction is capable of being enforced at law, is, whether the-plaintiff requires the aid of the illegal transaction to establish his case. If a plaintiff cannot open his case, without showing that he has broken the law, a court will not assist him, whatever his claim in justice may be upon the defendant.”

Since, then, the law implies that plaintiff’s officers and agents had knowledge of the invalidity of ordinance No. 44, these considerations are applicable here, and plaintiff cannot under the circumstances be heard to say that it acted in perfectly good faith in erecting and maintaining the waterworks and in relying on the conduct of the city in affirmance of the validity of the ordinance when it was supplied with water for public purposes. Then again, the additional service provided under this ordinance to that required by the original ordinance? No. 30£, under which the parties must be held to have proceeded, embraces only a small part of the service rendered for the city and hence is of slight operative weight in establishing an estoppel. In the light of these circumstances, the facts shown, in our opinion, do not estop the city from asserting the? invalidity of ordinance No. 44, and the plaintiff’s rights m its dealings with the city must rest on the terms and conditions of the original ordinance No. 30-|, adopted June 12:, 1890. Ashland v. C. & N. W. R. Go. 105 Wis. 398, 80 N. W. 1101; Ashland v. N. P. R. Co. 119 Wis. 204, 96 N. W. 688; Appleton W. Co. v. Appleton, 132 Wis. 563, 113 N. W. 44; McMillan v. Fond du Lac, 139 Wis. 367, 120 N. W. 240.

It is further averred that, since the plaintiff has furnished water service for city hydrants, the compensation provided therefor has been earned and the city is obligated to pay it. The ordinance provides (sec. 12) that:

“In case a test as pi’escribed in sec. 6 [sec. 5] should at any time be demanded by the city council and it should be found that such test cannot be satisfactorily made owing to a deficiency in said system, then the city of Antigo shall be free from obligation to pay the hydrant rental from ten days after date of such trial to such time as a test can be successfully made as above.”

We find no such uncertainties and ambiguities in the language and meaning of these words as are suggested in appellant’s behalf. The context and words clearly indicate that whenever the city demands that the waterworks system be tested, and it is found that owing to a deficiency in the system .•such test cannot be satisfactorily made as prescribed by sec. 5, then the city is “free from obligation to pay hydrant rental from ten days” thereafter. The context of this provision is plain and clearly expresses the obvious intention of the parties, to the effect that from ten days after subjecting the system to such a test showing a deficiency in the system to meet the calls of the test agreed upon, then the city is freed from the obligation of paying hydrant rental. The legal effect of this condition respecting the sufficiency of the system imposed on plaintiff the duty of furnishing a plant to meet ■the requirements of this test in order to entitle it to charge the specified hydrant rental. Hence, if it failed in performing the contract in this respect, no rental was earned by it. It therefore devolved on the plaintiff to show that the system complied with the test to entitle it to recover. This being the •contractual relation between the parties, no question of forfeiture of hydrant rentals earned by the plaintiff and due from tbe city can arise in tbis action. Performance by the plaintiff is therefore a condition precedent to its right to re■cover the rent demanded. Kaukauna E. L. Co. v. Kaukauna, 114 Wis. 327, 89 N. W. 542.

It is, however, asserted that the record does not sustain the finding of the jury to the effect that plaintiff’s waterworks system was not sufficient on June 27,1908, to comply with the test required under the ordinance. The trial court, in passing on the sufficiency of the evidence adduced, held that the evidence was sufficient to sustain the jury’s findings upon the issues submitted to them. A reading of the evidence in the case leads us to the same conclusion. It is too voluminous to justify a statement of the material parts and a discussion thereof at this time. The quantum of proof submitted on the ultimate facts found by the jury abundantly sustains the verdict in all of its phases and hence it must stand as found by the jury. The verdict embraces the issues of fact and is properly framed to call for their determination by the jury.

The objection to the effect that the questions submitted were indefinite and uncertain is not well taken. The form and context of the questions are plain, direct, and clearly cover the disputed questions of fact at issue..

The claim that there must have been an unusual discharge of water through the service connections during the progress of the test on June 27, 1908, which plaintiff could not reasonably have anticipated, and hence that this test is not binding on it, is not well founded. The agreements of the parties contemplated that the test should be made under the ordinary operating conditions of the plant, and there is nothing to indicate that the operating conditions were not the usual ones under the pressure required to make the test.

Nor is the claim that an accidental disability in the gallery was the cause of the failure of the test sustained, for it appeared that this condition had nothing to do with the water supply during the first several hours of the test, when, as shown by the -evidence, the system did not furnish a pressure-so as to comply with the prescribed test. That the water supply is an essential factor in providing and maintaining a sufficient plant is self-evident from the nature of plaintiff’s undertaking to furnish a sufficient waterworks system. Unless plaintiff provided the necessary supply of water to fulfil the contractual obligations imposed by the ordinance, it cannot be-said to have performed its part in furnishing the system provided for, and default in this respect is an omission on its part, to perform the contract.

It is contended that the court erred in refusing to instruct the jury, as requested, respecting the burden of proof as to the-issues submitted to the jury, and in the instructions given. These objections all go to the point as to whether or not the-burden of proof rested on the plaintiff to show that the system as maintained and operated complied with the conditions of' the contract and as to whether or not the rentals sued for were-earned while the system had the -efficiency required by the terms of the ordinance. The issues involved in the case must-be looked into to ascertain on whom the burden of proof in respect thereto rested. The plaintiff alleges a claim for rent-due for services rendered under the contract provisions of the ordinance. The defendant denies liability, alleging that the-service was not rendered as provided in the contract, and therefore that nothing ever became due therefor under the contract. The situation thus presented casts the burden of proof on plaintiff of establishing its claim throughout the trial by a preponderance of the evidence. The argument that this rule does not apply because it devolved on the defendant to show under the contract provisions wherein the system was insufficient in order to be relieved from its obligations to pay hydrant rentals, rests upon an erroneous view of the terms of' the agreement. As above indicated, the general rule as to liability under contracts applies here, namely, that one party to-a contract cannot demand recovery on an agreement until he shows performance thereof on. his part. And so here, the plaintiff must show performance of its undertaking in order to establish a right to recover these rentals. This required it to show that the service for which payment is sought to be enforced was furnished by a waterworks system which had the efficiency required by the ordinance. The evidence shows that such was not the case for the period covered by the claims-herein in litigation. The trial court properly instructed the jury respecting the burden of proof in the case.

We find no prejudicial error in the record. The issues-were fully and correctly submitted to the jury and the court-awarded the proper judgment in the case.

By the Court — Judgment affirmed.

MARSHALL, J., dissents. BarNES, J., took no part.