Burgin v. . Smith

PLAINTIFF'S APPEAL. This action was originally begun by R. J. Burgin, on behalf of himself and other taxpayers of McDowell County, against the board of commissioners of said county, the treasurer and sheriff of said county and B. F. Smith, trading as the B. F. Smith Fireproof Construction Company, seeking to enjoin the payment of certain notes issued (563) by the board of commissioners of said county to B. F. Smith, in the sum of $1,500 — three notes of $500 — and to enjoin the collection of a special tax levied to raise money to pay the same, the Board of Commissioners of McDowell also brought suit against B. F. Smith, the purpose of this action being to recover judgment for defective work done under the contract, hereinafter more fully recited, for improving and enlarging the courthouse in said county. In the Burgin suit the then board of commissioners (its members having been changed) answered, admitting the allegations of the complaint and praying to be made party plaintiff. This was done, it seems, without objection, and the board of commissioners took a nonsuit in the separate action instituted by it against Smith. The pleadings were reformed to meet this change of parties. In the Burgin suit the restraining order was issued and continued to the hearing of the action. The first draft of the complaint alleged that the Board of Commissioners of McDowell were authorized by Chapter 242, Laws 1901, to issue coupon bonds or county script, in an amount not exceeding $5,000, for the purpose of improving and enlarging the courthouse in Marion; that in January, 1902, the then board of county commissioners entered into a contract with the defendant, B. F. Smith, trading as the B. F. Smith Fireproof Construction Company, with the plans and specifications thereto attached, for the purposes specified in the act, and agreed to pay the said Smith the sum of $6,500 therefor, to raise which said sum the county, agreed to issue and did issue $5,000 in coupon bonds of the county, and county script in the sum of $1,500 — three notes of $500 each — payable in five years, with interest at five per cent per annum. The interest on the bonds was at the rate of six per cent and payable semiannually, evidenced by coupons attached to the bonds. The contract with Smith bound him "to well and sufficiently provide all necessary material, tools and appliances, and perform all the labor required in the proper construction, erection and completion of a new addition to the county courthouse and appurtenances for said second party (board of commissioners), including metal fixtures and appliances," to be erected, etc., according to plans and specifications on file in the office of the register of deeds of said county. The commissioners reserved the right to make changes or alterations, and the contract provided a way for determining whether the alterations increased or diminished the contract price. The work was to be completed on or before 15 July, 1902. Then the contract proceeds: "In consideration of the foregoing covenants and agreements being well and faithfully performed by said first party (Smith), the said second party agrees to pay said first party, or (564) order, the sum of $6,500, as follows: $5,000 in cash and $1,500 in three notes, of $500 each, due and payable in five years from issue, drawing interest at five per cent, the county reserving the right to redeem any or all at any interest-paying period." As the work progressed it was stipulated that seventy-five per cent of the value of material furnished for and labor performed in the construction of the said building and its appurtenances should be paid on or about the first day of each month, and the remainder upon final completion "of said building and its equipments and appurtenances, as required by said specifications." Smith was required to give bond in the sum of $6,500, and it was further stipulated that "said second party shall appoint a superintendent, or committee, qualified to judge as to the quality and character of the material and work required by this agreement, whose duty it should be to inspect and report upon the work and material during the construction of said building; and should any material be furnished therefor, or work be done thereon, which, in his or their opinion, is not in accordance with the requirements of the plans and specifications therefor, it shall be his or their duty to notify said first party thereof, in person or by "written notice"; and the contract then provides the manner of adjusting any difference on this account, including arbitration; and "upon final completion of the work embraced in this agreement, the said second party shall examine the same, and, if completed according to contract, shall immediately accept the same and make final settlement with said first party therefor." It was also stipulated that "this contract covers the work in its entirety," and contained "all the understandings and agreements had between the parties hereto in relation to the erection and completion of said building and its equipments and appurtenances and the payments therefor," etc. The work was completed and accepted on 23 June, 1902, and the board of commissioners on that day gave a statement to Smith, saying that the had executed the contract to the entire satisfaction of the board of commissioners, and the workmanship was first-class and the work was in every respect up to plans and specifications. During the progress of the work, there were some slight changes, but the cost of these was adjusted. On 20 March there arose a controversy as to whether the walls of the building were to be raised eighteen inches, and the board of commissioners requested a settlement of this matter pursuant to the terms of the contract. The defendant satisfied the board that the plans and specifications did not call for this, and the work proceeded. The (565) board of commissioners, under the provisions of the contract, appointed one Walter Graham as its superintendent of the work; then L. P. Crawford, chairman of the board; then J. G. Neal, a member of the board (who was dead at the time of the trial). The complaint alleged defective work and poor materials; that the walls were not raised to the height required, and that in a short time after the completion of the work the defects began to appear; that the acceptance was procured by the fraudulent devices and circumvention of the defendant, and the defective work so skillfully covered up and concealed that the commissioners could not discover it. The plaintiff further alleged that the three notes of $500 were void, as issued without authority and contrary to the provisions of chapter 242, Public Laws 1901, demanded their surrender and cancellation, and damages in the sum of $1,999.99 for breach of the contract. The defendant denied the allegations of the complaint, claiming that the work and materials were in accordance with the contract, denying any and all fraud, and stating that he had, upon the first notice of defective work, offered to make it good, and requested permission of the board of commissioners to make it good, and that they refused to permit him to make good the defective work. His Honor submitted issues to the jury, which, with the findings, are as follows:

1. Did the defendant fail to comply with his contract, as alleged in the complaint? Answer: Yes.

2. Did the defendant, by false and fradulent representations or by false and fradulent concealments of latent defects in the construction of the building, induces the board of commissioners to accept and approve the work and make settlement for the same? Answer: Yes.

3. Does the contract require the old walls of the building to be built higher; and, if so, did the defendant, by false and fradulent representations to the board of commissioners as to the meaning of the plans and specifications, induce the said board to abandon and waive the right to require the walls to be build higher? Answer: Yes.

4. Did the board of commissioners exceed the power and authority vested in them by law in executing the notes referred to it in the answer? Answer: No. *Page 545

5. What damage, if any, have plaintiffs sustained by the fraud of the defendant? Answer: One thousand eight hundred dollars.

6. Is the plaintiff indebted to the defendant; and, if so, in what amount? Answer: No; for the reason that the notes or script pleaded as a counterclaim were not due at the beginning of this (566) action.

Upon the verdict his Honor rendered the following judgment: "This cause having been heard before the court and jury, and the jury having found the first, second, third and fifth issues in favor of the plaintiffs, as set out in the record: It is now, in motion of W. T. Morgan, Avery Erwin and Avery Avery, counsel for the plaintiffs, considered and adjudged that the plaintiff Board of County Commissioners of McDowell County do recover of the defendant, B. F. Smith, the sum of $1,800, the amount of damages assessed by the jury in response to the fifth issue, with interest on the same from 31 May, 1909, until paid, together with the costs of this action, to be taxed by the clerk of this court; and, further, that the script issued to defendant is valid, and the injunction heretofore issued to be dissolved." From which judgment both parties appealed to this Court. PLAINTIFF'S APPEAL. After stating the case: The appeal of the plaintiffs presents but two questions, to wit: (1) Did the Board of Commissioners of McDowell have the power to exceed the amount authorized by chapter 242, Laws 1901, in the improving and enlarging the courthouse in that county? (2) is the county estopped by the acceptance of the benefit of the executed contract to deny its liability?

It is well settled by several decisions of the Court that the building and repairing of the courthouse in a county is a necessary expense.Halcombe v. Comrs., 89 N.C. 346; Vaughan v. Comrs., 117 N.C. 429; Blackv. Comrs., 129 N.C. 121; Ward v. Comrs., 146 N.C. 524. But "counties are but agencies of the State Government." White v. Comrs., 90 N.C. 437. They can be created, changed (Dare v. Currituck, 95 N.C. 189) or abolished (Mills v. Williams, 33 N.C. 558) at the legislative will. They are subject to legislative authority, which can direct them to do, as a duty, all such matters as they can empower them to do. Harris v. Wright, 121, N.C. 171; McCormac v. Comrs., 90 N.C. 441; Tate v. Comrs.,122 N.C. 812. In Jones v. Comrs.,137 N.C. 579, this Court said: "These counties are not, strictly speaking, municipal corporations at all, in the ordinary acceptance of the term. They have many of the features of such corporations, but (567) they are usually termed quasi public corporations. In the exercise of ordinary governmental functions, they are simply agencies of the State, constituted for the convenience of the local administration, in certain portions of the State's territory, and in the exercise of such function they are subject to almost unlimited legislative control, except where this power is restricted by constitutional provision." In White v. Comrs.,90 N.C. 437, this Court said: "They are subdivisions of its (State's) territory, embracing the people who inhabit the same, created by the sovereign authority and organized for political and civil purposes. They are created by the sovereign, without any special regard for, or the solicitation, consent or desire of the people who reside in them. . . . They are not, in strict legal sense, municipal corporations; they are sometimes called quasi corporations, and this designation distinguishes them on the one hand from private corporations aggregate, and on the other from municipal corporations proper, such as cities and towns, organized under charters and special statutes, and invested with more and special powers, and endowed with more of the functions of corporate life." They may be sued only in such cases and for such causes as may be provided for and allowed for the statute. Tate v. Comrs., supra, was an action to compel bymandamus the commissioners of Haywood County to put in force a legislative enactment requiring the county authorities to work their roads by taxation.Jones v. Comrs., supra, was an action to compel by mandamus the commissioners of Madison County, to obey a legislative act by issuing bonds to pay the existent debt of the county, contracted, for necessary expenses. The power of the Legislature to compel the county commissioners to levy taxes to the constitutional limit to pay the necessary expenses of maintaining the county has never been questioned. In Broadnax v. Groom,64 N.C. 244; Cromartie v. Comrs., 87 N.C. 134; Ward v. Comrs., supra, and similar cases, the question involved was the power of the courts to interfere with the action of the commissioners, and not the powers of the Legislature. In Hightower v. Raleigh, 150 N.C. 569, Mr. Justice Brown, speaking for this Court, said: "While it is within the province of the courts to determine what are necessary public buildings and what classes of expenditure falls within the definition of the necessary expenses of a municipal corporations, the authority for determining the kind of building that is needed, or what would be a reasonable cost for it, is not within the purview of the judicial authority. It is vested in the Legislature (568) and municipal authority, and not in the courts. Vaughan v. Comrs., supra."Vaughan v. Comrs., supra."

In construing section 7, Article VII, Constitution of North Carolina, this Court, in Evans v. Comrs., 89 N.C. 154, said: "This provision leaves the Legislature free to confer upon municipal organizations the power to create debts and issue public securities in order to raise funds to meet those `necessary expenses,' when it may be deemed expedient, and the legislation may be made dependent on the result of a popular vote for its efficacy." This power of the Legislature to prescribe the manner of contracting debts, even for necessary expenses, was further elaborated and enforced by this Court in Wadsworth v. Concord, 133 N.C. 587, and, when prescribed, is exclusive. Controlled by the doctrine announced in the foregoing decisions of this Court, which has for many years maintained the wise and salutary principle that the legislative department of the government has the power to control and govern the counties of the state as its creatures and political agencies, the conclusion is irresistible that in contracting a debt, even for such a necessary expense as the repairs of a courthouse, the Legislature has the power, if it choose to exercise it, to put a limitations upon the cost. The Legislature did, by act (chapter 242, laws 1901), limit the Board of Commissioners of McDowell to $5,000 for the purposes of enlarging and improving the courthouse in McDowell, and the commissioners had no power, in obeying the act of the Legislature, to exceed the limit prescribed for this expense. In the contract made by the commissioners with the defendant, in the attempt to carry out and obey the act of the Legislature, the commissioners did exceed the limit prescribed by the Legislature, and it appears from the evidence of Smith, the defendant, that he knew of the act and of its limitation. The contract was an entirety; the consideration a "lump sum." Where the Legislature has interposed its will and plainly declared it; where it has by its act prescribed the limit of expenditure, even for a necessary expense for a county, it cannot, under the decisions of this Court herein cited, be maintained that the commissioners can disregard and set at naught the legislative will by setting up a general power of contracting debts for necessary expenses, restrained only by the constitutional limitation of taxation. The fallacy of this condition is that the power to contract debts within the limit of the constitutional limitation of taxation is not without limit. The Legislature of the State — that power which made, at its pleasure, and can unmake at its will, the county itself — can interpose its will; and when it does so, its will is supreme and must be obeyed. The Legislature has enacted general laws (569) which control, in the absence of particular acts. It is, however, suggested that the act under the consideration limited the issue of bonds, and not the cost of the improvement of the courthouse, but this construction of the act is too narrow. It is manifest that it was contemplated that the proposed enlargement of the courthouse would not cost more than $5,000, and the Legislature placed this limit upon it, "not exceeding the sum of $5,000," and authorized the commissioners "to issue coupon bonds or county script." By "county script" is meant notes or evidences of debt, other than "coupon bonds." It is also contended thatFawcett v. Mt. Airy, 134 N.C. 125, is decisive of this case. We do not think so. That case is distinguishable from the present case upon its facts. In that case the town of Mt. Airy issued bonds to the amount of the legislative limit, $50,000 (Private Laws 1901, ch. 216, sec. 1), and expended the proceeds for the purposes authorized by the act. The town authorities did not attempt to issue any more bonds or incur any larger debt under the act, but after it had expended the $50,000 it was discovered that the sum was insufficient to complete the sewerage system and lighting plant authorized by the act, and the town then undertook to issue other notes to complete the plants. In this case the original contract was for $6,500 — $1,500 in excess of the legislative limit. The contract was by express limitation an entire contract. In the Fawcett case, the main if not the only question considered by this Court was whether the building of a lighting plant and sewerage system was "a necessary expense," and this was clearly the only point considered. Over towns the power of the Legislature is more restricted (Jones v. Comrs., 137 N.C. 579); but even as to these municipal corporations this Court, in Wharton v. Greensboro,146 N.C. 356, said: "There can be no doubt that the General Assembly may thus restrict (section 2977, Revisal), the powers of municipal corporations to contract debts. They are but instrumentalities of the State for the administration of local government, and their power may be enlarged, abridged or withdrawn entirely, at the pleasure of the Legislature. Lillyv. Taylor, 88 N.C. 490; Jones v. Comrs., 137 N.C. 592."

The only other question that remains for consideration is: Can the county commissioners avail themselves of their want of power to contract the debt in excess of $5,000, as the work has been performed, accepted and notes issued for $1,500 in payment of the excess contract price over $5,000? We think the defense is available to the county commissioners, and we do not think they are estopped by the (570) fact that the work contracted for has been performed and accepted and notes in payment therefore issued, to deny their validity. In Davies v. Dickinson 117 U.S. 657, Mr. Justice Gray said: "The county court has no power to subscribe for stock in the railroad corporation, or to issue bonds therefor, except as authorized by statute. The statute authorized the county court to subscribe for such amount of stock only as should be fixed and proposed by the commissioners named in the statute and be approved by a vote of the majority of the voters of the county; and the authority of the county court either to levy taxes or to issue bonds was limited to the amount so proposed and voted. That amount was $250,000. The county court therefore had no authority to issue bonds for a greater amount, and any bonds issued in excess of that amount were unlawful and void." Nor can the payment of interest on all the bonds have the effect of ratifying bonds issued beyond the lawful limit, for a ratification can have no greater force than a previous authority, and the county cannot ratify what it could not have authorized. Marsh v. Fulton, 10 Wall, 676. See authorities cited, 11 Rose's Notes, 131; Comrs. v. Call, 123 N.C. 308; Comrs. v. Payne, 123 N.C. 432;Debnam v. Chitty, 131 N.C. 657. In Bank v. South Hadley,128 Mass. 503, it is held that "If a town treasurer borrows money in a manner unauthorized by statute, the lender cannot maintain an action against the town to recover it back, although the money is used by the treasurer in payment of debts of the town." The court further said: "It is sometimes said, indeed with reference to money borrowed in disregard of positive prohibition, when both parties are in fault, that it cannot under any circumstances be recovered back, because that would be to defeat the prohibition in favor of a guilty party. McDonald v. Mayor, 68 N.Y. 23." In the McDonald case, cited supra, is similar to the present case, the New York Court said: "It is plain that if the restriction put upon municipalities by the Legislature for the purpose of reducing and limiting the incurring of debt and the expenditure of the public money may not be removed, upon the doctrine now contended for (receipt of benefit), there is no legislative remedy for the evils of municipal government." Thomas v.Port Huron, 27 Mich. 320; Snyder v. Mt. Pulaski, 176 Ill. 397; Murphy v.Louisville, 9 Bush (Ky.), 189; 4 Thomp. Corp., sec. 5262; 2 Herman on Estoppel, sec. 1224.

The defendant, in his testimony, stated that he knew of the act of the Legislature, and that the amount was limited to $5,000. The principle announced in Trustees v. Realty Co., 134 N.C. 41, to wit, "Where a corporation is a party to an executed contract and has (571) received the benefit therefrom, it is estopped from pleading that the contract was ultra vires," does not apply to counties, towns or cities, where they have exceeded the legislative limit in contracting the debt sought to be recovered.

For the reasons given, and under the authorities cited, we are of the opinion that the three notes, of $500 each, issued to the defendant by the Board of Commissioners of McDowell are invalid and unenforcible, and his Honor's judgment declaring them valid is erroneous. The Superior Court of Burke County will enter judgment declaring the notes invalid and ordering the defendant to surrender them to the clerk of the said court, who will cancel them.

In the plaintiff's appeal the judgment is

Reversed. *Page 550

DEFENDANT'S APPEAL.