Missoula Street Railway Co. v. City of Missoula

MR. CHIEF JUSTICE BRANTLY

delivered the opinion of the court.

This action was brought by the plaintiff to recover the sum of $5,507.13, alleged to be due from the defendant upon two express contracts, under the terms of which the defendant agreed to pay to plaintiff the cost of moving and relaying its tracks on two of defendant’s streets. The complaint declares upon these contracts in separate counts. The court below sustained a general demurrer to each of them. Plaintiff having declined to amend, judgment was rendered dismissing the action. In all *93 essential particulars, the contracts are identical. The same objection is urged to both. A statement of the circumstances out of which the second grew will therefore be sufficient to present the question which it is necessary to examine and determine.

The fifth section of the franchise granted by the defendant to the plaintiff, and under which it constructed and is operating its railway, reserves to the defendant, and to persons, companies and corporations having authority from the defendant to use the streets, the right to take up the plaintiff’s tracks and move the rails for the purpose of laying or repairing water and gas pipe, electric wires, sewer-pipe, etc., or for any purpose that may be deemed necessary by the city council, without liability to the plaintiff for interruption of its business, “provided, however, that such work shall be done without any unnecessary delay, and that whenever the said rails or tracks are taken up or removed, the same shall, upon completion of said work, be relaid by the person, company or corporation taking up or removing the same, as soon as possible, and replaced in as good condition as the same were in prior to the taking up and removal thereof.” During the year 1911 it became of public concern that a sewer be constructed by the defendant along Cedar street. This rendered it necessary that plaintiff’s tracks be removed until the work could be completed. Thereupon “it was agreed by the defendant, acting through its mayor and city council, that, if plaintiff would remove its said track and line and replace the same and keep an account of the actual cost thereof and present a bill for same, the city would pay the cost of the removal and replacement of the tracks aforesaid.” The plaintiff removed and replaced its tracks, expending in that behalf a total of $2,716.65. The plaintiff also removed and replaced its tracks on Higgins avenue to permit a line of sewer to be laid therein, at a total cost of $2,790.38. When bills for these amounts were presented to the council, payment was -refused. The special ground of refusal does not appear; but the following are urged in justification of it: (1) That it was not competent for the city council, when it granted the franchise to plaintiff, to relieve it of the burden of the expense incident to the removal and re *94 placement of its tracks whenever this became necessary in order to enable the city to install a sewer or to construct any other improvement along a street upon which the tracks had been laid, in that, by so doing, the city council undertook to abridge the police power of the city; and (2) that the contracts are void because it is apparent that they were entered into without observance by the city council of the requirements prescribed by the statute, and therefore no liability was cast by them upon the city.

Counsel for plaintiff contend: (1) That the franchise is a contract between the plaintiff and the city, and that, though it may be repudiated by the city at any time by legislative action, until this is done it is binding upon both parties; (2) that, since the contracts have been executed, the city is estopped to question its liability under them; and (3) that in any event the city will be required, upon the principle of equitable estoppel, to pay the reasonable value of the work.

For present purposes it may be conceded that the city council did not exceed its power by incorporating in the franchise the provision found in section 5 thereof. We incline to the view that it did not. The purpose of it was to adjust the mutual rights and obligations of the parties with reference to the expense which it was anticipated would be necessary for someone to bear when the city came to install its sewer system or otherwise to improve the streets, and to settle definitely all questions as to who should bear the loss incident to the interruption of plaintiff’s business pending the installment of any improvement in course of construction. The adjustment of such questions, it would seem, has no direct connection with the safety and welfare of the public, but is connected rather with the fiscal policy of the city. So regarded, it does not fall within the governmental functions of the municipality, but rather within what are termed its private functions, in the exercise of which it is free to contract at its discretion; it not being prohibited from doing so by the law of its creation or the general law of the state. But be this as it may, if, in incorporating in the franchise the provision in question, the council exceeded its power, *95 the plaintiff has no claim against the city. From this point of view, the burden of expense and loss incident to the removal, and replacement of its tracks and the interruption of its business must be borne by plaintiff. If the council did not exceed its power, the plaintiff still cannot recover on the contracts, because, assuming that they were entered into by the city in strict conformity with the law in other respects, they are void because they were let to the plaintiff in total disregard of the statute requiring such contracts to be let to the lowest responsible bidder.

Assuming that the plaintiff was freed, by the terms of the franchise, from any duty to remove and replace its tracks, when [1] they were removed by the city, the expense of the work required fell upon the city as a part of the expense of installing the lines of sewer. The.plaintiff, in contracting to do this part of the work occupied the same relation to the city as any other person who might have contracted to' do it. Section 3259 of the Revised Codes provides: “The city or town council has power: * * * (63) To make any and all contracts necessary to carry into effect the powers granted by this title and to provide for the manner of executing the same. Section 3278 declares: “All contracts for work, or for supplies, or material, for which must be paid a sum exceeding two hundred and fifty ($250) dollars, must be let to the lowest, responsible bidder, under such regulations as the council may prescribe. * * * ” The mode of exercising the power granted by the former section is subject to the limitation prescribed by the latter. Some of the courts hold that such a limitation is directory; but by the great weight of authority it is held to be exclusive and to apply to all municipal bodies. It falls within the general rule that, when the legislature has prescribed the mode by which a given power is to be exercised by a municipality, this mode must be pursued. It is the measure of power on that subject; and any attempt to pursue any other mode fails to bind the municipality at all. Contracts entered into in disregard of the limitation are void. Similar provisions have frequently been examined by this court, with the result that the rule, as above stated, has *96 become firmly established as the rule of decision in this jurisdiction. (Davenport v. Kleinschmidt, 6 Mont. 502 , 13 Pac. 249 ; Lebcher v. Board of Commrs., 9 Mont. 315 , 23 Pac. 713 ; State ex rel. Lambert v. Coad, 23 Mont. 131 , 57 Pac. 1092 ; Williams v . Commissioners, 28 Mont. 360 , 72 Pac. 755 ; McGillie v. Corby, 37 Mont. 249 , 95 Pac. 1063 , 17 L. R. A., n. s., 1263; Carlson v. City of Helena, 39 Mont. 82 , 17 Ann. Cas. 1233, 102 Pac. 39 ; Morse v. Granite County, 44 Mont. 78 , 119 Pac. 286 .) .ány further discussion of it would serve no useful purpose. Tested by it, the contracts are void and cannot furnish the basis of recovery.

In support of their last contention, counsel for plaintiff cite several cases which, in effect, hold that it is only when the subject matter of the contract is entirely outside of the scope of the corporate powers, or the contract is clearly prohibited, that the municipality will be permitted to escape liability; and [2] they insist that, notwithstanding the contracts in question are void, the plaintiff upon equitable grounds ought to be permitted to recover the reasonable value of such benefits as have been received by the defendant. As already observed, the complaint declares upon the contracts according to their express terms. It is therefore doubtful whether its allegations are sufficient to support a judgment for the reasonable value of the work done. But assuming that they are sufficient, still we do not think the plaintiff entitled to recover. The result of such a holding would establish a rule which would abolish completely all limitation upon the power of the council to bind the city, and thus defeat the very purpose had in view by the legislature in enacting the statute, viz., to promote economy and to protect the taxpayers from fraud and favoritism on the part of the council or the officers of the city. The equitable doctrine of estoppel can have no application to such a case. In entering into the contracts, the plaintiff was dealing with an artificial person, a creature of the law, whose authority to contract is conferred and limited by law. The facts were all known to it. There was no misrepresentation made to it. It knew the extent of the power of the council and how it must be exercised. It *97 dealt with the council at its own peril. (Lebcher v. Board of Commissioners, supra; State ex rel. Stuewe v. Hindson, 44 Mont. 429 , 120 Pac. 485 ; State ex rel. Lambert v. Coad, supra.) If, when it began to work, the contracts were illegal, it knew it. It did the work with full knowledge of this fact. It was therefore not misled, and is not now in a position to allege that the defendant is estopped to question its own liability.

In Zottman v. San Francisco, 20 Cal. 96 , 81 Am. Dec. 96 , in considering the question involved here, Mr. Justice Field said: “To the application of the doctrine of liability upon an implied contract, where work is performed by one, the benefit of which is received by another, there must not only be no restrictions imposed by the law upon the party sought to be charged against making, in direct terms, a similar contract to that which is implied, but the party must also be in a situation where he is entirely free to elect whether he will or will not accept of the work, and where such election will or may influence the conduct of the other party with reference to the work itself. The mere retention and use of the benefit resulting from the work, where no such power or freedom of election exists, or where the election cannot influence the conduct of the other party with reference to the work performed, does not. constitute such evidence of acceptance that the law will imply therefrom a promise of payment. ” We are aware that in subsequent cases the supreme court of California has apparently departed to some extent, if not entirely, from the rule applied in this case, notably in Sacramento County v. Southern Pac. Co., 127 Cal. 217 , 59 Pac. 568, 825 , City of San Diego v. Higgins, 115 Cal. 170 , 46 Pac. 923 , and Contra Costa Water Co. v. Breed, 139 Cal. 432 , 73 Pac. 189 . In these cases the court applied to the contracts of a municipality the principle of estoppel under the rules which are applicable to contracts between natural persons and private corporations, but, as was remarked by Chief Justice Beatty in his dissenting opinion in Sacramento County v. Southern Pac. Co.: “This doctrine sweeps away at once all limitations upon the power of the board, for it can readily be seen that the contractor *98 must always have it in his power to commence work just as soon as he has induced the board to enter into a contract in defiance of the regulations intended to govern their action; and it is also apparent that the board, which desires to make contracts in disregard of the law, will have the same motive to allow the commencement of work that they have to enter into the illegal contract. ’ ’ These cases are distinguished in their facts from the ease at bar; but the rule contended for by plaintiff’s counsel is recognized in all of them.

It may well be said that, in eases in which the municipality has acquired property which is still in specie, it may not be allowed to retain it and at the same time refuse to pay its reasonable value. In such a case, however, its liability would rest upon different principles. The contract being void, the title to the property would not vest under it, and the seller would be in a position to reclaim it, or, if restoration of it should be refused, to recover the reasonable value, of it. But even in such a case the liability would not arise out of the contract. The rule declared in the Zottman Case was expressly recognized by this court in State ex rel. Lambert v. Coad, supra, in announcing the following conclusion: “Nor do we think the defendant is precluded from asserting the illegality of the action of the board in defense of his action in refusing plaintiff access to the records for the purpose of indexing them. The board’s action in letting the contract was simply void for want of compliance with the law. Under the authorities cited, the execution of such a com tract, or payment for work done under it, will be enjoined at the instance of a taxpayer; and when mandamus is resorted to to compel recognition of it by thé auditing officer, whose duty it is to audit the accounts of the municipality and pay them, no relief will be granted.”

For these reasons, we think the action of the court in sustaining the demurrer was correct. The judgment is accordingly affirmed.

Affirmed.

Mr. Justice Holloway and Mr. Justice Sanner concur.