Court Opinion

ID: 3497168
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:04:48.359039+00
Date Added: 2024-06-11T13:54:56.775150
License: Public Domain

The charter of the city of Grand Rapids provides:
"(a) The city manager shall have charge of the administration of municipal affairs under the direction and supervision of the city commission.
"(d) Except as herein otherwise provided, he shall appoint and may remove all subordinate officers and employees of the city."
Louis Boynton is an officer or employee in the office of the city manager and is intrusted with executive powers and duties.
In 1933 the city commission "recommended" that the city manager employ delinquent taxpayers on public works and permit them to work out their taxes. Boynton had full charge of the employment.
In 1934 the city commission adopted a resolution.
"Report of the committee on service and the city manager relative to the subject of maintenance of the boulevards and parks during the summer months we recommend that provided the labor involved cannot be secured as a welfare relief project that same be secured by the employment of taxpayers who are delinquent in their 1929 and 1930 taxes and extending only to the amount of said delinquency and that the matter of giving out such work to these taxpayers be handled by the city manager."
Although a new city manager had been installed, Boynton continued in full charge of employment under the resolution. The taxpayers were hired by him and performed ordinary manual labor for the *Page 268 
city. There is no suggestion in the record that the work was "relief or made work" or was other than labor which the city needed and otherwise would have been obliged to pay for in money.
In the summer of 1934 plaintiff worked out his own taxes. He discovered that a tenant of a man too old to labor was working out his landlord's taxes. This gave him the idea of hiring men to work out taxes of the State Savings Association, his mortgagee, and getting credit on his debt to it. He propounded the proposition to Boynton, who agreed it was lawful. He submitted the matter to the association, whose taxes on a number of parcels of land were in arrears, and it acquiesced.
The application for the employment was made by the association, indorsed with the name of plaintiff in order to identify it, filed in the city manager's office and approved by Boynton in the city manager's name. The city was paying $.387 per hour. If a man worked a whole week for the city the association would receive credit for $18.55, and credit like amount to Skutt. Skutt hired men to do the work under the association's application and paid them $3 in cash and $6 in second-hand goods per week, thus making a profit of about $9 per week per man.
Under the arrangement some $1,200 were earned, credited by the city to the State Savings Association's taxes and credit in turn given by the association to Skutt on his mortgage. Thereafter some $1,010 were earned. About that time the city manager suspended the whole practice of employing taxpayers to work out taxes because of liability of the city in case any of them were injured. Skutt offered to provide compensation insurance for his men but the city refused to continue the work and denied the *Page 269 
association credit of the $1,010 for work already performed.
The State Savings Association is willing to credit the amount to Skutt on his mortgage if the city credits it the amount on its taxes, but not otherwise. The bill was filed to compel both credits to be made. The city defends principally upon the ground of lack of authority in Boynton to make the arrangement for the labor and upon the claim that it was ultra vires and against public policy.
The modus operandi under the resolution was that payrolls for the work were made up by the superintendent of parks, approved by the city manager and city commission, checks issued and turned into the city tax title office, receipts given to taxpayers, report made to the city commission, quitclaim deeds ordered by the commission and deeds issued by the mayor. The authority of the city commission so to provide for the payment of taxes by means of labor which the city has the power to hire and pay for is not denied. See Veldman v. City of Grand Rapids,ante, 100. The routine was followed as to the $1,200 of work done upon the application of the State Savings Association and a number of deeds issued to it.
The resolution of the city commission did not exclude corporate taxpayers from its benefits. Until the work was stopped, no one thought it did. Discrimination between classes of taxpayers ought not to be read into the resolution. Moreover, in the exercise of discretion conferred upon him, the city manager, through Boynton, authorized the State Savings Association to pay its taxes by labor. The city manager and city commission did not take the stand and testify that they did not know that the association was operating under the resolution. In *Page 270 
the absence of such denial, the least we can infer is that they knew of the fact and approved the construction of the resolution that a corporation could work out its taxes. The alternative is that the city manager and city commission must be convicted of a profound ignorance of the records of the city manager, of matters passing under their notice and of city affairs. The presumption is that officers are doing their duty.
A corporation would have to work out its taxes by hiring men to perform the labor. The city commission could not have been so naive as to think that a corporation would pay its men at the same rate as the city wage and without profit to itself. There would be no object to a corporation in such a proceeding as it might as well pay its taxes directly. The matter of some profit to a corporation cannot be said to have been wholly beyond the contemplation of the city. The fact that the association permitted Skutt to make the profit does not change the effect of the resolution.
Boynton's authority to exercise the powers of the city manager in connection with the employment is not denied by testimony. He was in charge of the work, so held out to the public, his acts were treated by the city manager as his own acts, by the city commission as the city manager's acts, the city had the benefit of the transaction and cannot put plaintiffs in statu quo.
In view of the above circumstances, it is too late to deny Boynton's authority and the validity of the arrangement with the State Savings Association unless it was wholly ultra vires
or against public policy and beyond the power of even the commission to approve. A. J. Smith Construction Co. v. City ofMarine City, 267 Mich. 367. *Page 271 
The claim of ultra vires and public policy has no other foundation than the fact that Skutt paid his men less than the city agreed to pay for their labor.
To avoid misunderstanding, perhaps it should be mentioned that we recognize the rule that fraud, collusion, corruption or concealment may avoid any public contract otherwise lawful. No such infirmity appears in this case. Wholly aside from what the other city officers actually knew, or ought to have known, or must be held to have known, it is undisputed that, in about a week after the arrangement and before any work was done upon the claim in controversy, Skutt frankly informed Boynton, the superintendent of parks and the city attorney of the details of his arrangement, including the wage he was paying his men. None of them suggested any legal or moral defect in the arrangement. He did not come into contact with the city manager or city commission until the work was stopped.
The city urges that the fact that Skutt was making a profit on the labor amounts to an appropriation of public moneys to private benefit and made the arrangement ultra vires. The principle and supporting authorities are sound but inapplicable. The public money was appropriated to pay for labor for the city, to the value of such labor and no more, a proper public charge. The contention would mean that no person lawfully could furnish labor or material to a city at a profit to himself.
It is said the arrangement was contrary to public policy in that it had a tendency to injure public service. However, after citing authorities to the rule, counsel neglected to indicate in what manner public service was or could have been injured, — it appearing that the men hired by Skutt rendered full value *Page 272 
to the city and that it is the business of the city officers to require full value.
It is suggested that approval of the instant arrangement would open the door to fraud as permitting officers to farm out city work to favorites. This assumes, without support in the record, that the city manager may not contract for labor on public works. Upon the same argument, any city contract is against public policy because it is open to fraud. It is the presence, not the possibility, of fraud which invalidates an agreement within the power of the city. The suggestion is no more reason for holding the present arrangement void as against public policy than for the same ruling upon any other contract which is entered into in good faith, without fraud, concealment, collusion or corruption, and under which the city receives full value.
It may be confessed that the case arouses an indignant desire to refuse Skutt the whole benefit of the wide disparity in wages. But legal rights do not rest upon such emotions. The unfairness is to his men, who are not here complaining. Perhaps, if the facts were disclosed, they are satisfied with their bargain. It is not unlawful to make a profit on labor or goods. Reduced to essentials, the proposition is that the city has received the full benefit of labor equal in value to the amount it agreed to credit the State Savings Association for such labor. In common honesty, it should carry out its bargain.
Decree should be reversed and one should be entered requiring the city to credit the earned amount upon the association's taxes and the association to credit plaintiffs upon their mortgage. Plaintiffs should have costs.
POTTER, J., concurred with FEAD, J. *Page 273