Court Opinion

ID: 3506922
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:17:15.4613+00
Date Added: 2024-06-11T14:16:52.715602
License: Public Domain

1. I agree that a contractor is not entitled to retain money paid to him for performance of a contract let to him illegally in violation of charter provision requiring that bids be advertised for and that the contract be let to the lowest bidder, where the contractor did not act in "good faith." But I think, for the reasons stated in my dissent in Kotschevar v. Township of North Fork, 229 Minn. 234, 39 N.W.2d 107, that the contractor is not entitled to recover *Page 229 
at all in such cases, regardless of whether he acted in "good faith."
2. In addition, I dissent upon the further and separate ground that the doctrine that a plaintiff in pari delicto with the defendant cannot recover has no application where, prior to illegal payment, the court has acquired jurisdiction of the parties in an action for an injunction to restrain the payment and where a city sues as plaintiff to recover money paid by it illegally both in violation of law and of the judgment for the injunction.
Here, the receipts from the parking meters were turned into the city treasury, and afterward a part of them was paid to Dual. Our decision in the Coller case determined that the contract for the purchase and installation of the parking meters was illegal and enjoined performance thereof. The decision here of the majority reaffirms that Dual could not recover upon the illegal contract, and holds that, if the contract were still executory, it would not be entitled to recover in quasi contract for lack of good faith. But it holds also that the city cannot recover from Dual what it has illegally paid pending the injunction proceedings. While there are cases sustaining such a view, I think that the better rule is the one, which we have approved, that in such cases a city is entitled to recover such payments.
(a) Decision that the contractor did not act in "good faith" in effect determines that he is not entitled to retain the money paid at all. It is a case of payment of public money without any authority for so doing. It is settled law that such payments may be recovered. Burns v. Essling, 154 Minn. 304,191 N.W. 899; Id. 163 Minn. 57, 203 N.W. 605.
In Village of Fort Edward v. Fish, 156 N.Y. 363,50 N.E. 973, the court held, in a case by a village to recover money illegally paid, that there was no authority for such payment and that consequently the village was not in pari delicto with the payee. The court said (156 N.Y. 374, 375, 50 N.E. 975,976):
"* * * That doctrine applies to individuals who have power to do as they wish with their own, but it does not apply to an agent *Page 230 
of a municipal corporation, who pays out its money without power, to one who accepts it with knowledge. The statute forbade the payment from the funds of the water board, and action forbidden by statute is void. A void act is no act, and a void payment is no payment. Such a payment is not voluntarily made by the corporation, but by its agent, in excess of his authority and in defiance of its rights. It is not the act of the corporation itself, but of one, without authority, who assumed to act for it. * * * The parties were not in paridelicto, because the plaintiff did not really make the payment,but its funds were used for that purpose without itsauthority." (Italics supplied in part.)
And in City of Bangor v. Ridley, 117 Me. 297, 300,104 A. 230, 231, the court pointed out that the doctrine of denial of right of recovery to a party in pari delicto with the defendant has no application in a case where a municipality is the plaintiff, saying:
"But it may be said the city government has voluntarily paid him for his services, and as such payment was equitable, they cannot recover it back in the equitable action of money had and received. This reasoning might hold good in cases between individuals, but a municipality is a creature of the statute and can do just what the statute, and the necessary execution of the statute, permits, and cannot do what the statute inhibits. It will require no citations to show that the officers of a municipal government cannot contract to pay, expend or pay out, city funds for an illegal purpose or upon an illegal contract. It is not within the scope of their powers, and if paid the city in the proper form of action can recover it back. Otherwise municipalities might be mulcted to the verge of ruin by dishonest or incompetent officials, if having illegally paid the money out the city cannot recover it back.
"A party dealing with a municipality can reap no advantage from the fact that his illegal conduct is completed, as it is incumbent upon everyone, dealing with a municipality, to discover its authority to act, or to assume the risk upon failure so to do, and deal with it at his peril." *Page 231 
Other cases are in accord: Miller v. McKinnon, 20 Cal. 2d 83,124 P.2d 34, 140 A.L.R. 570; Miller v. City of Martinez,28 Cal. App. 2d 364, 82 P.2d 519; Chicago Park Dist. v. R. E. Herczel  Co. 298 Ill. App. 215, 18 N.E.2d 744; McNay v. Town of Lowell, 41 Ind. App. 627, 638, 84 N.E. 778, 782; see, City of Kiel v. Frank Shoe Mfg. Co. 245 Wis. 292,14 N.W.2d 164, 152 A.L.R. 691.
(b) Where injunction proceedings to enjoin performance of an illegal contract have been commenced and the defendant, pending the proceedings, performs the act sought to be enjoined, the court, as part of its power to order restoration of thestatus quo, will order the undoing of such act. Jones v. Securities  Exchange Comm. 298 U.S. 1, 56 S. Ct. 654,80 L. ed. 1015; Porter v. Lee, 328 U.S. 246, 66 S. Ct. 1096,90 L. ed. 1199; Porter v. Warner Holding Co. 328 U.S. 395,66 S. Ct. 1086, 90 L. ed. 1332; Texas  New Orleans R. Co. v. Northside Belt Ry. Co. 276 U.S. 475, 48 S. Ct. 361, 72 L. ed. 661; Werner v. Norden, 87 Colo. 339, 287 P. 644; Anderson v. W. G. Rawley Co. Ltd. 27 Haw. 150; Turney v. Shriver, 269 Ill. 164,109 N.E. 708; New Haven Clock Co. v. Kochersperger, 175 Ill. 383,51 N.E. 629; Wise v. Chandler, 270 Ky. 1, 108 S.W.2d 1024; Woodbridge Tp. v. Middlesex Water Co. (N.J. Ch.) 68 A. 464; Tucker v. Howard, 128 Mass. 361; State ex rel. Tharel v. Board of Co. Commrs. 188 Okla. 184,107 P.2d 542; 28 Am. Jur., Injunctions, § 6; see, Palmetto F. Ins. Co. v. Conn (D.C.)9 F.2d 202; Love v. A. T.  S. F. Ry. Co. (8 Cir.) 185 F. 321, affirming 174 F. 59 (certiorari denied, 220 U.S. 618,31 S. Ct. 721, 55 L. ed. 612).
In Chippewa Bridge Co. v. City of Durand, 122 Wis. 85, 106,99 N.W. 603, 610, 106 A.S.R. 931, where in a case like this the action was against the city officials and the contractors, the court said:
"In support of the judgment counsel for respondents rely in a measure upon the finding that prior to the trial of the action the defendants composing the Business Men's League had completed their contract and received the agreed amount for their work, and that the American Bridge Company had incurred considerable expense *Page 232 
in the performance of its contract. We do not perceive how what was done by the parties after the commencement of the action, whereby they will suffer loss if appellant succeeds, should have any weight in the matter. Certainly, they took their chances, in proceeding after being admonished by the commencement of the suit that the validity of their contracts would be judicially investigated. Sometimes laches on the part of a taxpayer in commencing an action of this sort materially affects the quantum or character of the relief which equity will afford him, as was the case in Frederick v. Douglas Co.,96 Wis. 411, 71 N.W. 798, supra; but the action having beenseasonably commenced for all purposes, the defendants cannot,as a rule, reasonably expect to obtain any great or lastingadvantage by accomplishing in the interim between suchcommencement and the final adjudication of the rights of theparties the thing sought to be prevented. They may proceed,there being no provisional remedy to prevent it, so as topreclude preventive relief of an effective character at theclose of the litigation, laying themselves liable, however, torestore the public money obtained by them, and to recoup theirloss, so far as practicable, by such lawful means as may beopen to them." (Italics supplied.)
In Burns v. Essling, 163 Minn. 57, 60, 203 N.W. 605, 606, we approved the rule of the Chippewa Bridge Co. case,supra, saying:
"In Chippewa Bridge Co. v. [City of Durand, * * * it was said of municipal officers who entered into a bridge contract in disregard of the provisions of the city charter, that they had no other motive than to secure a bridge for the city as cheaply as possible and that in that sense they acted in good faith.Nevertheless the court characterized them as lawbreakers,guilty of a wrongful appropriation of the people's money. Itwas said that officers who knowingly use such money contrary tolaw, but otherwise to accomplish a legitimate purpose, areguilty in a legal sense of acting in bad faith and of anactionable misappropriation of such money regardless of theirgood intentions." (Italics supplied.) *Page 233 
That is sound law and common sense, to which I think we should adhere. The majority decision departs therefrom upon the authority of a case opposed to the rule which we have thus approved.
Recovery here from Dual of money paid to it by the city is part of the restoration of the status quo. Any other view would sanction contumacious disregard of the injunction proceedings.
For the reasons stated, I think that we should affirm.