Semmes v. Mayor of Columbus

By the Court.

McDonald, J.

delivering the opinion.

The first error assigned by complainants’ Counsel is, that the Judge called the defendants out of their county, and required them to argue the motion to dissolve the injunction in Talbot County.

[1.] The parties, complainant and defendant, resided in Muscogee County, and the cause was pending in that county. The Chancellor may order an injunction, instantly, on the ex parte showing of the complainant; and the exigency of the case-.frequently requires that he should do it. But the 'Writ of injunction is a strong process, and the party against whom it is granted should be allowed an early opportunity to move to set it aside. The 4th rule in Equity enables him to •do it.

[2.] Mx parte injunctions, in Georgia, are always granted •on terms, because they are subject to the operation of that rule-; and the terms prescribed by it are as binding as if they were incorporated in the sanction of tbe Judge.

The hearing of a motion to dissolve an injunction, is no more the trial of the case, than the hearing of an application for an injunction; and the argument may be heard at Chambers.

[3.] That several of the defendants had not answered the bill, was no sufficient objection to hearing the argument and •determining the motion to dissolve the injunction. The remedy sought by the bill, was against the Mayor and Council ■of the City of Columbus. If there was equity in the bill warranting the interposition of a Court of Chancery, it was •against the mayor and council; and the city council had answered under its corporate seal, and the mayor, who, it is apparent, from the bill and the amended bill, was more conversant with the facts charged than any one else, had answered under his oath. No decree for a perpetual injunction would .go against the defendants who had not answered, nor could their answers, however made, have the slightest influence unJer the allegations of complainants, against the defendant, the Mayor and Council of the City of Columbus.' The defendants against whom the complainants claimed the equity, if any, had answered; and if the answers were full and denied the equity, the injunction ought to be dissolved. The Court, therefore, committed no error in refusing to postpone the argument, and in dissolving the injunction without the answers ■of the other defendants.

[4.] The amendment of an injunction bill, unless allowed by the Chancellor without prejudice to the injunction, displaces the injunction. In this case, the motion to amend the bill was allowed, but the Court refused to grant it as asked for, to-wit: that the injunction should not be dissolved until the answers of the defendants Avere filed to the bill as amended ; and the Court, after alloAving the amendment, ordered the injunction to be dissolved.

The party might have amended his bill as a matter of right, and to have refused it would possibly have been error in the Court; but the allowance of an amendment by the ■Court which the complainant could have made, as a matter of .right, does not necessarily operate as a continuance of the injunction until ansAYcr. On a motion to dissolve an injunction, on the ground that there is no equity in the bill, the facts alleged in the bill must be taken as true; and AYhen the .motion is predicated on the denial of the equity by the an.swer, the ansAver is to be considered as true.

If the motion be resisted, on the ground that the complainant has amended his bill, alleging uoay facts which have not been answered, the Chancellor, (AYaiving the effect of the ¡amendment as a dissolution of the injunction,) will extend his •consideration to the amendment bill, to the manner and substance of the allegations therein, and determine whether they afford sufficient grounds for retaining the injunction, if it ought otherwise to be dissolved. The Court, therefore, committed no error in deciding on the motion to dissolve, before .¡defendants answered the amended bill.

. Rid the Court err .in dissolving the injunction, on the grounds taken in the motion ?

It is insisted' by Counsel for plaintiffs in error, that the Acts of 1845 and 1853, inhibit the mayor and council from making contracts of the description and magnitude of that made for the sale of the rail road stock, and in the mariner in which that was made.

Let us, for a moment, examine the power of the mayor and council to make contracts, and then look to the Acts of 1845 and 1853, and see how far they control it. By the 12th section of the Act of 1853, the mayor and members of council arc vested with special powers to make all contracts, in their •corporate capacity, which they may deem necessary for the welfare of the city.

[5.] The power conferred by that Act to contract, has no limit. It is full; and they are vested with the largest discretionary powers. The Act of 1845 declares, t! that no vote, resolution or order of said mayor and council, for the payment of money, or for the performance of any act or measure involving an amount exceeding the sum of three hundred dollars, except the regular and current expenses of the city, shall ho of force and effect, unless it he by the act of a majority of the whole board, at two successive meetings thereof; which said vote, resolution or order, shall he published in one or more of the public Gazettes of Columbus, between the first and second passage.” (Acts of 1845, p. 67, Sect. 7.) This Act goes to the extent, and no further, to prevent the mayor and council from embarking the money or credit of the city, exceeding the amount of three hundred dollars in new enterprizes, except the current expenses of the city, without giving notice to the people and re-affirming the measure after notice, by a vote of a majority of the whole boai’d. It has no reference to a case where the money or credit of tlio city is already committed. It has no reference to the application of money or assets to the payment of debts; for they create an obligation, that the resolutions of the corporation,. whether adopted voluntarily or by the counsel of tbe people, cannot lawfully resist. It only has reference to. Such eases of projected expenditures of money, as it might be supposed an interested constituency would desire to make their wishes known upon.

It seems that the subscription for the stock in the Muscogee Rail Road, was made, and the city bonds were issued in payment, after the passage of the Act we have been considering ; and it is to be presumed that the matter was submitted to the citizens, in conformity to the Act; and if so, the subscription, so far as that objection is concerned, creates an obligation to pay; and the obligation to pay _ is a sufficient authority to pay, without new votes, resolutions or orders.

The Act of 1853, page 242, is more explicit than that of 1845. It is declared by that Act, to be unlawful for the Mayor and Council of the City of Columbus to loan the credit of said city, contracting debts, issuing the bonds of the city, or using, in any way, the funds of said city, beyond the sum of ten thousand dollars, for the purpose of being expended, or otherwise applied, beyond the corporate limits of said city, or in aid of any rail road company, or any other project foreign to the government of said city, without first passing,, by a majority of said mayor and council, a resolution to such effect. This resolution is to bo published and submitted to the voters of the city; and if it be approved by a majority of those who vote on it, it is to be again submitted tc the mayor and council; and if it be again approved by them, it becomes a binding ordinance of the city.

The sale of the rail road stock does not fall within the prohibitions of this Act. It is not the loan of the credit of the City of Columbus; it is not the contracting of a debt; it is not issuing the bonds of the city; it is not using the funds of the city, for the purpose of being expended or applied beyond the corporate limits of said city, or in aid of any rail road company, or any other p>roject foreign to the ordinary pxirposes of the government of said city. It was a resolution affirming an agreement for the sale of certain assets of the city, to pay the debts of the city; it was not a resolution to issue the bonds of the city, but to convert the assets of the city for the purpose of paying the bonds of the city, .which, had already been issued.

There is nothing, in either the Acts of 1845 or that of 1853, to interfere with the broad discretionary powers of the mayor and council to deal with the assets of the city, according to their best judgment, to pay its debts.

[6.] The Counsel for plaintiff in error insists, again, that the mayor and council are only trustees for the citizens, and. are bound, like all trustees, .not to sell or dispose of the property of the city at an undervalue. The mayor and council are vested, by the Act which creates them, in all matters of' contract, with special discretionary powers. They may make any contract which they may deem necessary for the welfare-of the city. They are not trustees, in the technical sense in which Courts of Equity regard that term. Courts of Chancery, from their inherent jurisdiction, have assumed the control over trustees in the discharge of their duties. {Sill on Trustees, 42.) But these are trustees against whom the only remedy is in a Court of Chancery. The mayor and council, if trustees,.do not belong to that class.

Executors and administrators, factors and agents are, in one sense, trustees. They all have the property of others in their possession, and are bound to fairness and honesty in dealing with it; but Courts of Chancery have never assumed to control them in the discharge of their duties. Nor have they ever assumed control over corporations. They make an exception where corporations hold to charitable uses. They have disclaimed jurisdiction where an officer had misapplied the corporate property to purposes not corporate. (2 Johns. Chan. Rep. 384.) In the case of The Mayoralty of Colchester vs. Lawton, the Lord Chancellor held, that there was no instance of a trust attaching upon the misapplication of funds by corporations, except in the case of corporations holding to charitable uses.” (Cited in the above case from 1 Veasey & Beame, 226.) The bill in this case cannot be sustained, therefore, against the defendants, on the ground,, simply, that the mayor and council are trustees. ’

[7.] In the case of trusts cognizable in a Court of Equity only, if the trustees have a discretionary power, to be exercised according to their judgment, a Court of Equity will not. interfere to control the trustees acting dona fide in the exercise of their discretion. (Hill on Trustees, 488.) There are-cases which might seem to conflict with this rule, but' 'it will be found, when examined, that they do not clash with it.. In the case of Cloud vs. Martin, (1 Dev. & Bat. Law, 397,) the testator directed that his grand-son should be raised and' taken care of, at the direction and care of his son, J M and-should be instructed in the English, Latin and Greek languages, and he appointed J M one of his executors. The Court put its decision in that ease, it is true, upon its power to control a trustee in the exercise of a discretionary power, ■ holding that such jurisdiction was established. That is true,, if such trusts as the above are to be considered trusts, in which the trustees have discretionary powers. I respectfully insist, however, that that was not the description of trust created by the testator’s will. The will imposed two duties on J. M. in regard to the rearing and education of the testator’s grand-son — the one as executor and the other as trustee. The raising, and taking care, and education of the grand-son, was no part of the duty of J M as executor. By proving the will, however, he accepted the independent trust which the will created for that purpose. As executor, he was bound to furnish the funds from the testator’s estate, to carry out the trust. The will of the testator was positive and direct, as to the trust. There was no discretion with J M in regard to that. The grand-son of testator was to be raised and taken care of, and to be instructed .in the English, Latin and Greek languages. The raising and taking care of the grandson was to be at the direction and care of his son. This provision of the will constituted J M the trustee for the specified purpose.

If J M had not been executor and had manifested his acceptance of the trust for the grand-son, by receiving funds from the executor for the purpose of carrying it out, and had refused to apply the funds and direct the raising and taking care of the grand-son, it would have been the ordinary-case of a trustee accepting a special trust for an infant, and! refusing to execute it. The Court will, in such case, compel the trustee to discharge a duty which, while trustee,, he has-no discretion to refuse.

In Frouty vs. Frouty, (1 Bailey’s Equity, 518,) Judge O’Neall lays down the true rule: “ In the execution of a. general power, there can be no rule but the discretion of the party to whom it is confided. In a limited one, the limitations contained in it constitute the rule by which it is to be executed. In the former, no Court can undertake to control that which the party creating the power intended to leave to the honesty, discretion and good faith of the person to whom he confided it.” But none of these cases have reference to corporations, or the persons who constitute the body corporate. The mayor and council have authority to pass bylaws for the good of the city. They must exercise their-judgment, and what Court can control them ? They have - power to make such contracts as they may deem necessary for the welfare of the city, and what Court has the right to' supervise and control their judgment ? Where the corporation have the power of doing an act or not, at their discretion, the Court will never interfere with the lawful exercise • of the discretion. (Grant on Corp. 281, note u.)

[8.] Where a body has a discretion conveyed to them, an = erroneous exercise of that discretion, however plain the miscarriage may be, and however injurious its consequences, they shall not answer for it to the party. (Ghant on Cor. 252, note r.)

It often happens that the ordinances and contracts of municipal corporations, however fairly and honestly passed or made, not only do not meet the approval of all the citizens, but are censured and condemned by a part of them; and yet,. such disapproval, however plausibly sustained, would not jus-* tify the Court in interfering with the legitimate exercise of the functions of the body. It will be remarked, that the suit against the defendants in this case, is not for a fraudulent breach of duty. It is against the corporate body, and not against individuals, for a breach of trust. It is to enjoin the corporation from executing a contract which it had made, and in regard to which it had a discretion — and which discretion, it is not charged, has been fraudulently used. It is in- ■ sisted that the facts alleged by complainants, exhibit the 'transaction in such a light as to call on the Court to prevent the execution of the contract. Before the Court can interfere, it must infer fraud — a charge that the complainants have no where made directly. The Court is not prepared to say, that in making the sale of the stock, there was either an • abuse or fraudulent use of discretionary power by the mayor and council. If the mayor, Williams, without authority, and without consultation with the committee on finance, did •enter into a contract with Patton & Mustian, to sell them nearly all the stock owned by the city; and if the contract was signed, and the committee did not know it until it was submitted to the board, and it was submitted to the council; and if a postponement was refused by a majority of the board, who directed the committee to consummate the contract, there is nothing in all this to impugn the honesty of the transaction. From William’s acknowledged want of authority to make the contract, he submitted it to the council. If he had made the contract with authority, it would have been complete and perfect without the ratification of the council. Facts and circumstances are charged by complainants, which, it is argued, impeach the fairness of the contract. We do not draw that inference from them. That the agreement was privately made, and without notice, is no evidence of fraud. Some of the most prudent and judicious men in the country) ¡sensible that frauds are often committed at public sales of .property, in making their wills, direct their executors to make .private sales. Combinations are very apt to be formed where the sale is public, the value of the property great and the competition is likely to be inconsiderable. The mayor and council, it is probable, subserved the best interests of the city •by selling the stock privately.

[9.] That the stock was sold for less than its value, and 'below’what others would have given for it on the same terms and conditions, is a general charge, and taken alone, is not ■entitled to'much influence in determining the moral character of the contract. But it is elsewhere stated, specially, that -other gentlemen, who are named, offered $87 per share for ■the stock during that week, and before the finance committee had carried out the details and accepted the securities of Patton & Mustian. These charges, general and special, constitute the strength of the objection to the contract based upon the inadequacy of the consideration. The price offered amounted, in the aggregate, to $156.600. It was sold for $151.000. The difference is not so great as to produce, on any mind, the impression that there was fraud, or the sale would not have been made. “ Unless the inadequacy of price is such as shocks the conscience and amounts, in itself, to. conclusive and decisive evidence of fraud in the transaction, it is not, of itself, a sufficient ground for refusing a specific-performance.” Coles vs. Trecothick, (9 Vesey, 246.)

The allegation, that the stock was quoted, in the Savannah papers at $90 per share, is not an allegation that it was worth that sum. Indeed, the complainants, if it is to be presumed they offered for it what they considered its value, did not believe it to be worth the quotation price.

That Williams, on being informed of the price at which it was quoted, proposed to sell, and an agreement was drawn •¡up, reported to and ratified by the council, does not impeach the transaction. If necessary to effect a sale, it was a propitious time to offer it. If the market became excited, or the stock ¡¡ad been advanced by the alleged recent arrangement with the Central and South-Western Rail Road companies, it presented a better opportunity for effecting the sale of so large an amount of stock. Without it it might have been impossible to have sold the stock at the price given for it.

That a motion to postpone action on the contract was voted down by the council, and the contract was immediately ratified, must be regarded as the decided judgment of the council, that the contract ivas advantageous to the city, unless impure'motives for official conduct be imputed to them.

It is not pretended, in the record, that they had a personal interest in the subject, different from that which was common to all the citizens of Columbus. It would be rash to presume that those who voted against the ratification, voted under the influence of sinister purposes ; and yet, they have no higher claim to exemption from censorious imputations, than those ■members of council had who voted for the ratification.

But little effect can be given to the charge, that Williams, had induced some of the members of council, and especially the committee on finance, to believe that authority had been given to him to sell the stock, and that they voted for the ratification under that belief. The proceedings of council, on ■the report of the mayor, showed that no authority had been given to sell the stock. A sale under authority, needs no ratification to give it validity. But if it is to be understood •that the authority extended to making a contract subject to ratification and no further, which was equivalent to authority to make a proposition only to sell, then the refusal to ratify would have been no repudiation of the act of the mayor or action of the council giving such qualified authority. The proposed purchaser could not have been misled; and the rejection of a contract made with such a qualification, could not have given rise to complaint. The delicacy of the members of council, therefore, whose votes were controlled by the alleged consideration, was unnecessary. If a Court of Equity, then, had jurisdiction to interfere in such a case, the charges taken separately, suggest no sufficient ground for interfering by injunction; and taken collectively, they do not make out a case of suspicion of wrong, injustice or fraud against the corporate authorities.

Talcing the answers of defendants in reply to the charges, ■and it is difficult to determine how the city could have been relieved from its imminent embarrassment without applying ■the stock to the payment of the debt incurred by its.subscription.

As the answer of the city council is under the corporate seal only, and not sworn to by any member, we will refer to the sworn answer of the mayor only. No part of the large ■city debt created by the subscription for the stock had been paid. The first instalment of $25,000 was to become due in July, 1855. In April before, a sale of stock was ordered to meet this payment. An offer was had for $15,000 only, and that at $80 per share. Not being able to sell stock, a loan waá resorted to, and the mayor and committee on finance were authorized to borrow $30,000 on the best terms they could.

They borrowed, on mayor’s draft and some of the committee’s indorsement, and on pledge of 700 shares of stock, $30,000, with power to the lender to sell in thirty days, on default. They expected, after the payment of the July instalment, to sell stock and pay the borrowed money; but there being no demand for the stock, they could not sell, and had to resort to a second loan to pay the first. They borrowed in New York, at 90 days, $31,000, and pledged, as security, 1000 shares of the stock. They endeavored to sell in Charleston, and failed. The $31,000 borrowed in New York, was to be paid 27th December, and another instalment of $25,000, would become due in July. The mayor considered it best to sell all the stock and pay the entire debt, and made the agreement, accordingly, with Mustian & Patton, without consultation with any person whatever. He made no contract, (and did not attempt to make one,) binding on the city. What he did, was submitted to the council and ratified by it. If the stock sold had depreciated after the sale, and the city had been subjected to heavy losses, and the inhabitants to taxation, because of the failure to sell, the conduct of the mayor and council, in losing so favorable an opportunity to relieve the city, might have been the subject of animadversion. If the stock has appreciated* and the purchasers are likely to make something, even if it be considerable, that cannot be admitted, in Equity, as a ground of relief against a contract untainted with fraud. Suppose there was folly or want of judgment in the mayor and council in making the contract, if there was no fraud, it is binding. (8 Price’s Repts. 620.)

But what benefit is to accrue to the complainants, if the defendants are enjoined?

[10.] What certain advantage is to enure to the citizens of Columbus ? The complainants are not pledged to take the stock at the $87 per share offered; they do not ask it. In fact, the parties who made the offer, are not all complainants. They make no deposit of the money necessary for the-relief of the city; nor do they exhibit the securities that they would offer for the unpaid balance, and tender them in a manner to enable the council or the Court to judge of them. In sales by masters, in Chancery, which are sales by the Court of Chancery, the biddings may be opened for suificient reasons; but whenever that is done, a deposit must be made of an amount exceeding that for which the sale was made. The Court will not interfere unless some beneficial object is to be accomplished by it. But the sale opposed in this case, is not a sale by a Court of Chancery; it is a sale by one party to another, each party having the power and right to contract, and no complaint made by either party to the contract of fraud or unfairness; and, so far as the record speaks, there is no ground of complaint of one party against the other. That the complainants are property holders in the City of Columbus, under the facts in the record, does not place them in a higher position, as suitors in a Court of Chancery, than that of the parties.

They are willing to forego their rights as citizens and property holders, provided they can be allowed to partake of the profits of a contract, to prevent the execution of which their bill is filed, on the basis of probable injury to them as. property' owners in the city.

• Whether the injunction shall be held up, is a matter of sound, legal discretion with the Chancellor. He has considered it his duty to dissolve it. We are not prepared to say that he ought not to • have dissolved it. His judgment is. therefore affirmed.