Court Opinion

ID: 8199723
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:23:25.664129+00
Date Added: 2024-06-11T16:40:52.924376
License: Public Domain

On rehearing:

Roy R. Stauff of Milwaukee, for the respondents city of Wauwatosa and Fred Prudisch.
For the respondent Federal Paving Corporation there were briefs by Bender, Trump & McIntyre of Milwaukee, attorneys, and E. L. McIntyre of Milwaukee and Roberts, Roe & Boardman of Madison of counsel, and oral argument by Mr. McIntyre and Mr. W. Wade Boardman.
A brief was also filed by Lyel N. Jenkins, city attorney of Stevens Point, as amicus curies.
The following opinion was filed June 21, 1938:
Per Curiam
(on rehearing). A motion for rehearing was granted in this case and the matter has been reargued and reconsidered. Upon such reconsideration the court is of the view that-it was in error in affirming the judgment of the circuit court. In its opinion the court said:
“In our opinion, the action of the board of public works in advertising for proposals for less than two full weeks before opening the bids must be considered, under all of the circumstances of this equitable action, as amounting tO' a substantial compliance with the statute.”
This is not a correct statement oí the law and is withdrawn. It should have been stated that there was sufficient compliance with the law so that no. substantial injury was done to the taxpayers of the municipality, and therefore they were not entitled upon equitable considerations to enjoin the payment of the contract price. Upon reconsideration the court is, however, of the opinion that as restated, it is erroneous for the following reasons:
The applicable sections of the statutes are set out in the original opinion. In addition tO' those set out in the original opinion, sec. 62.15 (1) provides:
“All public work, the estimated cost of which shall exceed five hundred dollars, shall be let by contract to- the lowest *561responsible bidder; all other public work shall be let as'the council may direct. . .
The substance of sec. 62.15 has been embodied in our statutes for a great many years and has been before this court for consideration in numerous cases. The first question to be determined in the disposition of this matter is whether the contract when executed and delivered was void. Upon this question this court has in various actions spoken in plain and unambiguous terms. In Dean v. Charlton (1869), 23 Wis. 590, an attempt was made to sustain a contract for a patented article on the ground that advertising for bids would be a futile thing as there could be but one bidder.
It was argued therefore that the city of Madison did not need to advertise for bids. The court said (p. 604) :
“The power to contract for the lighting of the streets of the city was assumed, in that case [The Harlem Gas Co. v. The Mayor, etc. 33 N. Y. 309] to be one of the general powers of a municipal corporation. . . . But here the question is quite different. It is not necessary to inquire whether the city of Madison, by virtue of its existence as a municipal corporation, would have had the power to contract for paving its streets with the Nicholson pavement, at the expense of the city, after discovering that the provisions of the charter enabling it to cause its streets to' be paved at the expense of the lots were inapplicable for that purpose. . . . It seeks here to charge the expense upon the lots, arid this it has no general power to do by virtue of its mere existence as a municipal corporation; but, if done at all,, it cari only be done under the statutory authority in its chapter,,: and by corfrplying substantially, if not strictly, with all''its requirements.”
In Neacy v. Milwaukee (1920), 171 Wis. 311, 321, 176 N. W. 871, there was a failure to comply with the charter provisions of the city of Milwaukee with respect to letting a contract to the lowest bidder. The court said, citing cases:
“It is well settled that contracts binding a municipality can be culminated only in the manner prescribed by the char*562ter, and municipal officers must follow the prescribed procedure step by step.”
See the following cases: Ricketson v. Milwaukee (1900), 105 Wis. 591, 81 N. W. 864; Chippewa Bridge Co. v. Durand (1904), 122 Wis. 85, 99 N. W. 603; Cawker v. Milwaukee (1907), 133 Wis. 35, 38, 113 N. W. 417; White Construction Co. v. Beloit (1922), 178 Wis. 335, 338, 190 N. W. 195; Wagner v. Milwaukee (1928), 196 Wis. 328, 220 N. W. 207; Coyle v. Richter (1931), 203 Wis. 590, 234 N. W. 906; Journal Printing Co. v. Racine (1933), 210 Wis. 222, 246 N. W. 425; Shulse v. Mayville (1937), 223 Wis. 624, 271 N. W. 643; Victora v. Muscoda (decided May 17, 1938), ante, p. 455, 279 N. W. 663.
Upon the authority of these cases it is held that a municipality has no power to make contracts for public improvements unless it proceeds in the manner prescribed by law, and that a contract entered into' without complying with the charter provisions is void. The contract being void in its inception, the next question for consideration is whether the fact that it has been completely executed on the part of the contractor gives it vitality as a contract. In Cawker v. Milwaukee, supra, that question was presented to the court. The court said (p. 38) :
“In a general taxpayer’s action to prevent the unlawful diversion of general city funds the relief sought is for the benefit of the whole body oí taxpayers, none of whom in that capacity has received any special benefit. Some may have known of the improvement and others may not. To hold the whole body of taxpayers estopped from questioning the validity of a void contract and preventing the payment of public moneys in discharge thereof because the contractor has done his work would substantially emasculate the principle that general taxpayers may by action in equity set aside unlawful contracts and restrain public officers from paying out public funds in discharge of work done under such con*563tracts. . . . The power to successfully maintain such an action has never been limited to cases where the work has not yet been done, and, if it were, there would be few cases where unfaithful public officials and designing contractors could be prevented from despoiling the public treasury.”
In White Construction Co. v. Beloit, supra, the validity of a paving contract which was not countersigned by the comptroller as required by sec. 62.15 (12) was under consideration, and it was held that although the work had been fully performed and the plaintiff had received the full contract price for the work and labor done and materials furnished, the contract was void. The court said (p. 338) :
“The city may enter into' a valid contract in the way specified by law and not otherwise. This is a limitation upon the right of a city to contract which the legislature has the right to create and we are not disposed to construe it away.”
There are other cases to the same effect. It is considered that a contract void in its inception is not validated by performance and remains a void contract.
■ Commencing with Frederick v. Douglas County (1897), 96 Wis. 411, 71 N. W. 798, there are decisions which hold that, although the contract is illegal, if the money has been paid, a court of equity will not decree its repayment into' the public treasury upon a showing of entire good faith. It is argued with considerable force that there is no real distinction to be made with respect to preventing the payment of money on an illegal contract and its recovery where it has been paid out under an illegal contract. It has not been held in any case so far that equitable considerations will prevent a taxpayer from enjoining payment of public funds'out of the public treasury upon an illegal contract.
In Ellefson v. Smith (1924), 182 Wis. 398, 401, 196 N. W. 834, in which a judgment of the circuit court denied the right of plaintiff to maintain an action for the recovery *564for the benefit of the public treasury of money paid out on an illegal contract, the court said:
“If the action was to restrain execution of the contract or payment thereunder, the action would lie. [Citing cases.]”
In the Ellefson Case prior decisions of the court are reviewed, and the conclusions there stated were arrived at after full deliberation and it is apparent that the court by denying recovery in that case had no intention of impairing the right of a taxpayer to prevent payment of funds out of the public treasury on an illegal contract.
If the court were to hold that a failure to comply with the statute in one material respect did not render the contract void, the question would then arise, Supposing it had been violated in more than one respect what would the situation be? It is not supposed that failure to comply with every incidental provision of sec. 62.15 would invalidate the contract. However, a failure to comply with those provisions which are essential to the accomplishment of the legislative purpose are in a different category. The provisions of sec. 62.15 have been developed out of years of experience in the management and regulation of municipal affairs. As has been repeatedly said, the obvious purpose of the section is to. prevent fraud, favoritism, imposition, and improvidence. With respect to the advertisement for bids the legislative scheme commits to the municipality a considerable measure of discretion. The board of public works determines the length of time which in its judgment the advertisement for bids should run, but that time must be “not less than once a week for two successive weeks.” It may be as much longer as the board of public works in its discretion may determine. If as argued in this case it is held that because it does not affirmatively appear that any taxpayer has sustained a loss or has been injured by the failure to *565advertise for the minimum length of time prescribed, payment should not be enjoined, the court in every case where the provisions of the statute are disregarded will be called upon to determine whether or not substantial injury has been sustained. No one will know in such cases whether the contract is valid or void until the matter has been settled by the courts. The conditions under which a municipality may contract will then be fixed not by the legislature but by the court. Whether a court of equity will exercise its powers in cases where the money has been paid out is quite a different question than whether the court should exercise its powers to prevent payment. In the first case the court determines upon what consideration its equitable powers should be exercised. That is a judicial question. In the second case the question is whether a valid mandate of the legislature shall be upheld. That is a matter not committed to' the discretion of the court. While the financial result to the municipality would be the same if the right of recovery was granted and the cases would thus be more nearly parallel, the distinction between the two cases has been drawn in the law and maintained for forty years.
It is considered that the established rule should not be departed from in this case. The question of whether the defendant, Federal Paving Company, would be entitled to recover the amount of the benefits which the city of Wau-watosa has received on the theory of unjust enrichment is a question which was not presented by the pleadings, was not litigated upon the trial, and has not been .considered in this court. If such right exists it will not be foreclosed by a decree in this case enjoining the defendant city from paying out public funds upon a void contract. In that form of action such rights and equities as the contractor has can be worked out and determined. Shulse v. Mayville, supra.
*566The former mandate of this court is vacated. The judgment of the court below is reversed, and the cause remanded with directions to the trial court to enter judgment in accordance with this opinion.
Wickhem, J., dissents.
A motion for a rehearing was denied, with $25 costs, on September 13, 1938.