Court Opinion

ID: 6907921
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:03:38.83157+00
Date Added: 2024-06-11T16:06:25.636847
License: Public Domain

On Rehearing.
(216 Pac. 189.)
For appellant there was a brief over the names of Mr. James G. Wilson and Messrs. Malarkey, Searbrook & Dibble, with an oral argument by Mr. E. B. Seabrook.
For respondent Ochoco Irrigation District there was a brief over the names of Mr. John K. Kollock and Messrs. McCamant & Thompson, with oral arguments by Mr. Kollock and Mr. Wallace McCamant.
McCOURT, J.
Counsel for plaintiff presented a petition for rehearing, in which they confidently urged that a municipal corporation, when acting in its proprietary capacity, is liable upon implied contract, for benefits received in the performance of a contract entered into in violation of statutory restrictions upon its power to contract, contrary to the general rule which prevails in respect to such corporations in the exercise of governmental powers.
In view of the large sum involved in this controversy and the public importance of the question suggested by plaintiff’s contention, a rehearing was granted. The argument upon rehearing was confined to the proposition above stated.
Plaintiff does not claim that the defendant irrigation district has power to contract for the construction of irrigation works, otherwise than by letting the contract to the lowest responsible bidder, after advertising for bids as prescribed and required by the statute under which such irrigation district was created. They concede that the contract under which *39plaintiff herein furnished the services for which recovery is sought, is void because of noncompliance with those statutory requirements.
That the statutory requirements mentioned were mandatory and essential to the jurisdiction and power of the district to contract for such construction, as declared in the former decision herein (210 Pac. 873), is not questioned. Nor is the general rule challenged, which was applied in that decision, to the effect that no implied liability can arise against a municipality or other public corporation for benefits received under an express contract, which was within the power of the corporation to make, but which was entered into without observing mandatory legal requirements, specifically regulating the mode in which the power to make the particular contract might be exercised.
The claim of plaintiff is that the doctrine last stated has no application where the corporation is acting in its private or proprietary capacity. Plaintiff says that when a municipal corporation engages in an enterprise within the scope of its granted powers, which might be, and frequently is, conducted by a private citizen or a private corporation, it becomes liable for property or benefits received from another upon implied contract, precisely in the same manner and to the same extent as a private individual or a private corporation, and this irrespective of express limitations upon its power to create the same liability by express contract; that from the obligation to do justice, which rests equally upon all persons, whether natural or artificial, the law in such cases implies a promise to pay for services rendered to it by another and accepted by the municipality, even where the charter or enabling act of the corporation *40prohibits it from incurring liability for such services, except in a specified mode.
While the statement of plaintiff’s contentions appears to carry its own refutation, yet the great earnestness with which it was pressed upon us, and the persuasive quality of the forceful and able argument employed by counsel in presenting it, calls for a serious and careful examination of the authorities touching upon the question raised by those contentions.
The construction, operation and maintenance of waterworks, gas works or electric lighting plants by a city for the benefit or convenience of its inhabitants, constitutes the exercise of private and proprietary powers: Esterg Cigar Co. v. Portland, 34 Or. 282 (55 Pac. 961, 75 Am. St. Rep. 651, 43 L. R. A. 445), where nearly all of the more important decisions are cited; Tone v. Tillamook City, 58 Or. 382 (114 Pac. 938); Pacific Paper Co. v. Portland, 68 Or. 120 (135 Pac. 871); Coleman v. La Grande, 73 Or. 521 (144 Pac. 468).
In Esterg Cigar Co. v. Portland, supra, the court quoted with approval from the case of Western Saving Fund Society v. City of Philadelphia, 31 Pa. 183 (72 Am. Dec. 730), as follows:
“ ‘The supply of gas light is no more a duty of sovereignty than the supply of water. Both these objects may be accomplished through the agency of individuals or private corporations, and in very many instances they are accomplished by those means. If this power is granted to a borough or a city, it is a special private franchise, made as well for the private emolument and advantage of the city as for the public good. The whole investment is the private property of the city, as much so as the lands and houses belonging to it. Blending the two powers in one grant does not destroy the clear and well-settled *41distinction, and the process of separation is not rendered impossible by the confusion. In separating them, regard must be had to the object of the legislature in conferring them. If granted for public purposes exclusively, they belong to the corporate body in its public, political, or municipal character. But if the grant was for purposes of private advantage and emolument, though the public may derive a common benefit therefrom, the corporation quoad hoc is to be regarded as a private company. It stands on the'same footing as would any individual or body of persons upon whom the like special franchises had been conferred.’ ”
The acts performed, and the duties discharged, by an irrigation district, in constructing an irrigation works for supplying water for irrigation to the land owners of the district, so closely resemble the powers exerted by a city in providing a water system, that it necessarily follows that an irrigation district, in constructing its irrigation system, is exercising a private or proprietary power. In doing so, however, it does not lose “its distinctive municipal character.” Lehigh Water Company’s Appeal, 102 Pa. St. 515, 528. Its acts and duties are public, at least in the sense that they are performed by public officers for the benefit of that portion of the public within its limits.
An irrigation district, in common with other municipal corporations, derives all of its power, of whatever character, from the statute under, or by which, it is created. The Supreme Court of the United States, commenting upon the nature of an irrigation district organized under the Wright Act of California, said:
“It is created for a public purpose, and it rests in the discretion of the legislature when to create it, and with what powers to endow it.” Fallbrook Irr. *42Dist. v. Bradley, 164 U. S. 112 (41 L. Ed. 369, 17 Sup. Ct. Rep. 56).
Like other public corporations, the governing act of an irrigation district is a public statute, and everyone dealing with the corporation, is charged with notice of the extent of its powers and the legislative limitations and restrictions upon the exercise thereof. It follows that the principle that a municipal corporation has no powers, either governmental or proprietary, except those granted to it by the legislature, either expressly or by clear implication, applies with full force to irrigation districts: Stimson v. Alessandro Irr. Dist., 135 Cal. 389 (67 Pac. 496). As was said by Mr. Chief Justice Marshall in a great leading case—
“The act of incorporation is to them an enabling act; it gives them all the power they possess; it enables them to contract, and when it prescribes to them a mode of contracting, they must observe that mode, or the instrument no more creates a contract than if the body had never been incorporated.” Head & Amory v. Providence Ins. Co., 2 Cranch (U. S.), 127 (2 L. Ed. 229).
The courts, with great frequency, have been called upon to consider the question of the implied liability of mmiicipal or public corporations for benefits received. The cases in which the question has arisen are so numerous that it is impracticable to cite them in an opinion. They are nearly all collected and classified under pertinent headnotes to the following selected cases: 27 L. R. A. (N. S.) 1117, 1125; 39 L. R. A. (N. S.) 43; 41 L. R. A. (N. S.) 473; 46 L. R. A. (N. S.) 921; L. R. A. 1915A, 990, 1023.
In determining whether a claim for services' or materials furnished may be enforced against a municipal corporation on the ground of implied liability, *43the cases gathered in the foregoing notes, with hut few exceptions, attach no importance to the distinction between the governmental and proprietary powers of a municipal corporation. Those cases include the decisions cited by plaintiff.
Proprietary powers granted to a municipal corporation by an enabling act are interpreted and construed by the same rules that are applied by the courts in determining the meaning and effect of a like grant of political or governmental power, and with identically the same result. In either case, when the mode of the exercise of the power is prescribed, and the same is a condition precedent to the exercise of the particular power, the mode becomes the measure of the power, and any essential deviation therefrom renders the act void and ineffectual. “Aside from the mode designated, there is a want of all power on the subject.” Zottman v. San Francisco, 20 Cal. 96 (81 Am. Dec. 96).
A grant of power, whether private or public in its nature, the exercise of which is restricted and limited to a specified mode, is uniformly construed by the courts to exclude the exercise of the power in any other manner, and to inhibit the municipality from any exercise of the power except as provided by the statute. The position thus taken by the courts leads to the further conclusion that the law will not sanction a claim founded upon conduct which it has prohibited, and accordingly, it is held that the municipality is not liable either on the theory of ratification, estoppel or implied contract, where benefits have been received by the corporation upon a contract entered into or executed in defiance of the restrictions of the statute: McQuillin on Municipal Corporations, § 1181; Brady v. Mayor, etc., 16 How. Pr. (N. Y.) 432; *44Zottman v. San Francisco, supra; Burril v. Boston, 2 Cliff. 590, 596 (Fed. Cas. No. 2198); Astoria v. American La France Fire Engine Co., 225 Fed. 21 (139 C. C. A. 80); McCracken v. San Francisco, 16 Cal. 591; Philadelphia Co. v. Pittsburg, 253 Pa. 147 (97 Atl. 1083); Peterson v. Mayor, etc., 17 N. Y. 449, 454; Paul v. City of Seattle, 40 Wash. 294 (82 Pac. 601); Niles Water Works v. Niles, 59 Mich. 311 (26 N. W. 525); Atlantic City Water Works Co. v. Reed, 50 N. J. Law, 665 (15 Atl. 10); Louisville v. Parsons, 150 Ky. 420 (150 S. W. 498); Beach on Public Corporations, § 542.
Beach on Public Corporations, discussing powers of municipal corporations, the exercise of which are restricted to a specified mode by legislative enactment, says:
■ • “The powers of a municipal corporation, whether regarded as political or g’overnmental, or those of a mere private corporation, can be exercised only in conformity with the provisions of its charter. The legislature can impose such restrictions as it thinks proper * * . All contracts made by a municipal corporation must conform to the mode prescribed in its charter for making contracts. The provisions of a statute authorizing an act by a municipal corporation must be strictly followed.” Section 542.
In the case of City of Astoria v. American La France Fire Engine Co., supra, Judge Budkin, speaking for the court, said:
“Nor is there any material distinction in this connection between the powers of a municipal corporation when acting in its political and governmental capacity and when acting with reference to its private property as claimed by the defendant in error. The city charter prescribed the mode in which the power to provide engines and other apparatus for the department should be exercised, and that mode must be fol*45lowed whether the power be deemed governmental or proprietary. * * There is no merit in the claim that the city is estopped. To so hold would, in a large measure, abrogate the city charter. If the contract was void when made, it is still void unless ratified by competent authority, and there has been no such ratification.”
Mr. Chief Justice Field, in the case of McCracken v. San Francisco, 16 Cal. 591, 621, disposed of the question here under consideration, in the following language:
“The distinction taken between the powers of a municipal corporation, when acting in its political and governmental character, and when acting with reference to its private property, has no application to the questions involved in the case at bar. Its powers, whether regarded as political or governmental, or those of a mere private corporation, could be exercised only in conformity with the provisions of the charter. The legislature could impose such restrictions as it thought proper; and it saw proper to require the formalities of legislation for the disposition of the city property, as it did for the imposition of taxes, the regulation of the Fire Department, and matters connected with the general welfare of the city.”
In the case of Philadelphia Co. v. Pittsburg, supra, growing out of a contract between the company and the city for the supplying of gas for a municipal hospital, which contract was not entered into in accordance with a statute requiring bids, the court said:
“Section 11 provides, inter alia, as follows:
“All contracts relating to city affairs shall be let to the lowest responsible bidder, after reasonable notice.’ * *
“We have uniformly held in numerous decisions, and it may now be regarded as a general rule in this state, that where the charter act of a city pre*46scribes tbe method or formal mode of making municipal contracts, it must be observed, and if not executed in conformity therewith a contract is not enforceable against the municipality. We have held that such requirements in the organic law of a city are mandatory, and that liability on a municipal contract can only be imposed by a compliance with the method prescribed by statute. See Addie v. Pittsburgh, 85 Penn. 379; Hepburn v. Philadelphia, 149 Penn. 335 (24 Atl. 279); McManus v. Philadelphia, 201 Penn. 619 (51 Atl. 320); Smart v. Philadelphia, 205 Penn. 329 (54 Atl. 1025); Press Publishing Co. v. Pittsburgh, 207 Penn. 623 (57 Atl. 75), and Carpenter v. Teadon Boro, 208 Penn. 396 (57 Atl. 837, 838). In the last cited case it was said (p. 399): ‘The authority of a municipal body to legislate or to contract is conferred by the law-making' power of the state, hence it must be exercised in the manner provided in the statute conferring it. A municipal corporation is simply the agent or instrumentality of the state to administer local government and to exercise certain powers and perform certain duties within defined territorial limits in conformity with the method and to the extent delegated in the legislation creating and applicable to the corporation. Its contractual powers are derived from the same source and are circumscribed by the same limitations.’
“In Hepburn v. Philadelphia, 149 Penn. 335 (24 Atl. 279), Steeeett, J., discussing’ the provisions of the city charter relating to municipal contracts, says (p. 339):
“These dear and explicit requirements of the city’s organic law are not merely directory. On principle, as well as authority, they are mandatory. To hold otherwise would defeat the very object that the legislature had in view in thus specifically prescribing the manner in which all contracts relating to city affairs shall be executed and expose the public funds to raids of every conceivable form.’ ”
The case of Peterson v. Mayor, etc., supra, related to the construction of a public market in the City of *47New York. Referring to the general doctrine of implied liability, as applied to municipal corporations, the court said:
“In applying it to a particular case, care must be taken that other principles of the law are not violated. For instance, no sort of ratification can make good an act without the scope of the corporate authority. So where the charter or a statute binding upon the corporation, has committed a class of acts to particular officers or agents, other than the general governing body, or where it has prescribed certain formalities as conditions to the performance of any description of corporate business, the proper functionaries must act, and the designated forms must be observed, and generally no act of recognition can supply a defect in these respects.”
Counsel for plaintiff cite numerous decisions in which the distinction between the governmental and proprietary powers of municipal corporations was noted and discussed by the courts. Among the cases cited are several which present in one form or another, the question of how far property or contract rights, acquired by a municipality in the discharge of private functions, may be controlled or affected by federal authority or subsequent legislation. Most of the cases so cited, however, are like the leading-case of Esberg Cigar Co. v. Portland, supra, and are based upon negligence; in their decisions, the courts recognize the dual powers of municipal corporations, and give effect thereto in determining the liability of the corporation for the negligent acts of its agents or officers. The point under consideration here is not discussed in any of the cases above referred to, and the decisions therein shed no light upon the question we are considering.
*48Counsel also cites and relies upon the following decisions: Audit Co. v. Louisville, 185 Fed. 349 (107 C. C. A. 467): Illinois Trust & Savings Bank v. Arkansas City, 76 Fed. 271 (34 L. R. A. 518, 22 C. C. A. 171); Omaha Water Co. v. Omaha, 156 Fed. 922, 928 (85 C. C. A. 54); Des Moines v. Welsbach Street Lighting Co., 188 Fed. 907 (110 C. C. A. 540).
The case of Audit Co. v. Louisville, supra, was an action brought to recover compensation for appraising the property of a-system of waterworks, owned and controlled by the city. A contract with the Audit Company for making the appraisement, was entered into by the mayor and a commission under the authority of a resolution of the city council, instead of by an ordinance, as required by the state Constitution. The contract was declared void and recovery denied by the United States District Court. Upon review, the Circuit Court of Appeals in its decision, alluded to the private character of the powers employed by the municipality in respect to its system of waterworks, and said:
‘ ‘ The general rule is -well established that, where a city is exercising governmental powers, it is closely limited, and clear authority for each such action must be found in the controlling general or special law of the state, but that, when it is exercising the rights of a proprietor in the management of its property, its council and officers resemble the directors and officers of a private corporation, and, in large degree, the powers of these agents and the responsibility of the city for their acts are governed by the rules applicable to private corporations.”
The court, however, did not base its decision upon the foregoing statement, but held that the constitutional restrictions requiring an ordinance as a condition precedent to the exercise of the power of the *49council to contract, did not apply, as the employment in fact was in the nature of clerical assistance essential to carrying out an authorized duty. The court also held that the transaction had been formally ratified by the council, and allowed plaintiff to recover.
At the same time that the Audit Company was employed, and by the same resolution* an engineer was hired to examine, and render an opinion upon, the water system from an engineering view. The engineer sued the city in the state courts, where recovery was denied: City of Louisville v. Parsons, 150 Ky. 420 (150 S. W. 498). In response to the contention we are considering, the Supreme Court of Kentucky said:
“But while it is true that municipal corporations are generally treated as having a dual character, one governmental, the- other private, in one capacity exercising governmental functions, and in other performing duties that appertain to the private affairs of the people of the city in their collective capacity ' as individuals, it is also true that all courts recognize the difficulty of describing, with any degree of accuracy, the line that separates the acts of the city in its governmental and in its private character; and it is not necessary that we should attempt it here. Whatever attitude the city occupied in its dealings with the water company, or in the employment of appellee and others to investigate and report on its condition, the council could not put aside and disregard substantial provisions of the charter from which the city derives all its authority to act in any manner or in any capacity, and which control the council in all that it may attempt to do. If the city has a dual character, and if the council in one state of case is dispensing a part of the governmental power vested in the city, and in another state of case performing duties that appertain to the affairs of the city as a private or business corporation, this difference does *50not have the effect of releasing it from the limitations and directions imposed by the charter, or give it a free hand to .act as it pleases when its acts may happen to fall within the scope of what is called the private or business affairs of the city. * # The limitations and directions of the charter should be and are equally as binding on the city and its council when it acts in one capacity as in the other. What it directs the council to do in a certain manner must be done in that manner.”
Illinois Trust & Savings Bank v. Arkansas City, supra, was a suit brought upon a claim for rental of water works constructed by a corporation, and accepted and used by the city. One defense interposed by the city, was that the ordinance authorizing the contract was not legally adopted. Mr. Justice San-born, in the course of his opinion, said:
“The legislature granted to the city full power and authority to contract for the construction of these waterworks, and it nowhere prescribed the mode by which the city should authorize or make the con-' tract. ’ ’
In view of that statement, the case is without value as an authority upon the question under discussion.
Omaha Water Co. v. Omaha, supra, was an action against the city for rent of water hydrants. The refusal of the city to pay the claim of plaintiff was based upon alleged violation of the contract of the water company. No question of the power of the city to make the contract or of violation of charter or statutory restrictions upon that power, was involved. While the fact that the city acted in a proprietary capacity in respect to the subject of the litigation, was mentioned in the opinion, it did not influence the decision.
*51Des Moines v. Welsbach Street Lighting Co., supra, was an action to recover the contract price of lighting materials, furnished the city for its street lighting system. The action was resisted on the ground that the contract was invalid, for the reason that it was entered into without first advertising for bids, in compliance with charter provisions (probably directory). This may be said to be the only decision which appears to support plaintiff’s contention. The court said:
“A business contract, which is within the scope of the powers of the city to make but illegal because entered into in an irregular manner, when fully executed by one party and the city has accepted and received the full benefit of the contract and cannot restore what it has received, is enforceable, the city being estopped to assert the irregular execution when the ends of justice would thereby be defeated.”
The court cited cases from Illinois and Nebraska, two of the very few jurisdictions, where the rule of implied liability which prevails as to private corporations, is enforced against municipal corporations in whatever capacity they are acting and in spite of express restrictions upon their power to contract. The court cited only one case in which the distinction between proprietary and governmental powers, was mentioned, and in that case, the decision was not rested upon the distinction: Bell v. Kirkland, 102 Minn. 213 (113 N. W. 271, 120 Am. St. Rep. 621, 13 L. R. A. (N. S.) 793).
Plaintiff relies heavily on the case of Tone v. Tillamook City, 58 Or. 382 (114 Pac. 938). The important differences between that case and the instant case, were clearly pointed out by Mr. Justice Brown in our former opinion. While nothing need be added to what was there stated, Dillon on Munici*52pal Corporations (5 ed.), § 793, may be cited with profit where the author, citing numerous authorities, says:
“Thus it is obvious that an implied promise cannot be raised against a corporation, where by its charter it can only contract in a prescribed way, except it be a promise for money received or property appropriated under the contract.”
It is clear that plaintiff’s contention finds no substantial support in the authorities. Our own decisions are in harmony with those of the great majority of jurisdictions.
It is thoroughly established that the plenary authority of the legislature to effectually restrict and limit the exercise of municipal power, extends to all municipal powers granted by it, whether public or government, proprietary or private.
The courts declare with great unanimity, that the element of hardship in cases such as this, cannot be permitted to abrogate or annul positive statutory restrictions upon the powers of public officers. As a guide to the determination of cases where statutory restrictions upon the power to contract have been ignored, and liability of the municipal corporation is sought to be enforced'upon the grounds of implied contract, estoppel or ratification, an able text-writer prescribes the following formula:
“ * * the question will generally be best determined by ascertaining whether the particular case at bar is of such a nature that a decision in favor of the contracting party will invalidate the precautions imposed by the legislature. If so, the restriction should be enforced; if, on the other hand, the case is such that a decision in favor of the plaintiff will not affect the general policy of the charter or other legislation as evidenced by the restrictions therein *53defined, and will also satisfy the natural laws of justice and equity, then the corporation may be safely held liable.” Beach on Public Corporations, §243.
This is not a case where the municipality had a choice of two methods of contracting — one in which it was required to advertise for bids before letting the contract, and the other where it might let the contract without such advertisement or other precedent procedure, nor is it a case where an attempt in good faith was made to pursue the mode prescribed by the statute, which attempt failed because of some irregularity. In such cases an implied liability to pay for services may arise. But where mandatory statutory requirements are entirely ignored, as in the instant case, no recovery is permitted. “The law never implies an obligation to do that which it forbids a party to agree to do.” Brady v. The Mayor, 16 How. Pr. (N. Y.) 432.
Mr. Justice Brown clearly pointed out in the former decision herein, that it was incumbent upon the directors of defendant irrigation district to advertise for bids for the construction of an irrigation works, before they were qualified to exercise either the power to contract for such construction or the power to construct the works under their own superintendence, and that the mode prescribed by the statute was exclusive, mandatory and jurisdictional.
Defendant irrigation district is declared by the statute to be a municipal corporation; it is endowed by the statute with the governmental powers of taxation and eminent domain, as well as with the proprietary power of constructing, operating and maintaining an irrigation system for the advantage and convenience of its constituents; its officers are public *54officers, charged with public duties: Fallbrook Irr. Dist. v. Bradley, Supra; Re Madera Irr. Dist. Bonds, 92 Cal. 296 (28 Pac. 272, 675, 27 Am. St. Rep. 106, 14 L. R. A. 755); People v. Selma Irr. Dist., 98 Cal. 206 (32 Pac. 1047). An implied obligation against the irrigation district cannot be based on the acts of such officers, which are contrary to duty or contrary to law.
To allow plaintiff to recover in this case would set at naught express mandatory provisions of the statute, the observance of which were vitally essential to the authority of defendant to- incur the liability sought to be enforced. As stated in the above formula, such a decision would “invalidate the precautions imposed by the legislature.”
It is not intended by this or the former decision herein, to determine the rights or liabilities of the parties in respect to the seizure and use by defendant, of the machinery, tools, equipment and supplies of plaintiff, which it was alleged in the amended complaint was threatened, and in answer and reply as having taken place subsequent to the commencement of this suit.
The plea of plaintiff that the aforesaid appropriation and use of its property by defendant estopped the latter from asserting the invalidity of the contract in suit, was made for the first time in plaintiff’s reply. It could not be made in the complaint, for the reason that the property was not taken or used by defendant until after the commencement of this suit. As previously shown herein, plaintiff’s claim of estoppel is untenable.
The absence from plaintiff’s complaint of any allegation of appropriation, detention or use of its property by defendant, or of the value or description *55of such, property or of damages for its detention, renders the complaint wholly insufficient upon that aspect of the case, and furnishes no basis upon which a court might award the ordinary legal remedy of a return of the property and damages for its detention and use, even though it were otherwise proper to award that relief in this proceeding
We adhere to our former decision, and confirm the same. Former Opinion Sustained.
Burnett, J., not sitting.