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Argenti v. City of San Francisco

Supreme Court of California
Jul 1, 1860
16 Cal. 255 (Cal. 1860)


In Argenti v. City of San Francisco (1860) 16 Cal. 255, Chief Justice Field explained, in the course of denying rehearing in that matter: "[W]hen a rehearing is granted, the opinion previously delivered falls, unless reaffirmed after the reargument.

Summary of this case from Shalabi v. City of Fontana


[Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material]          Rehearing Denied 16 Cal. 256 at 275 .

         Appeal from the Fourth District.

         Judgment reversed, and cause remanded.


         I. There was no contract. Proposals were made and accepted, and a contract executed by the Street Commissioner. The Common Council took no action; passed no ordinance authorizing the execution of any contract. The delegated power to receive proposals and award or accept them by the committees and the Street Commissioner, was preparatory only to the making of a contract. It was necessary to ratify these doings by ordinance. The Common Council could not make a contract binding the city to pay for the entire work. Article five of the Charter of 1851 forbids that the city shall pay more than one third.

         II. If the transactions between the city and the contracters make out any contract at all, it was a contract to do the work at the entire expense of the property holders, the city not to pay any of it. And there being no count in the complaint against the city for not assessing and collecting from the property holders, and no count for not paying over money so collected, the suit fails, unless an express or implied contract be made out. The duty of the city was confined to a mere agency to carry out certain public objects in the mode and under the conditions prescribed. The contractor, when he made proposals, knew who were to pay, and was aware of the means provided.

         As to ratification of the alleged contract by acts in pais, it is impossible. A municipal corporation, in exercising its public governmental or police powers, can only contract for the objects and in the mode pointed out by its charter.

         III. No action can be sustained on the warrants, for the reasons stated by Judge Burnett, in his opinion in Lucas, Turner & Co. v. The City of San Francisco (7 Cal. 475 ).

         IV. The city is not liable, because the contract is in violation of the fifth section of article three of the city charter, limiting the capacity of the city to create debts. Nor can the city be charged as having received money on the assessments--for warrants on the street assessment fund were received, not money. This prohibition in the charter is to be construed as has been the eighth article of our Constitution.

         For authorities on the whole case, see Smith's Com. sec. 677; Bac. Abr. J. Corporations, D; 2 Kent's Com. 298, notes; Halstead v. Mayor of New York, 3 Comst. 430; 1 Duer, 505; 4 Sandf. 421; New London v. Brainard, 22 Conn. 552 -4; Lake v. Trustees of Williamsburqh, 4 Denio, 520; McCulloch v. Brooklyn, 23 Wend. 458 .

          F. M. Haight, for Appellant.

          J. A. McDougall, for Respondent.

         I. The Common Council by ordinance, directed the Street Commissioner to advertise their intention to make the improvements in question; and thus one third of the property holders not protesting, the Street Commissioner should advertise for proposals; the proposals to be opened and the contract awarded to the lowest bidder. Advertisement was made--there was no protest. Proposals were received, opened, and the contract awarded--as in complaint alleged. The Street Commissioner executed the contract.

         It is said, in the first place, notwithstanding the contract was awarded in strict pursuance of the ordinance, that these proceedings must be ratified by an express legislative act; and that the award of the contract gives the bidder no contract rights, but is merely preliminary to the consideration of the question of contract by the Common Council. The answer to this is, that the committee named in the ordinance, were authorized to accept the proposals on behalf of the city--they did accept the proposals, as alleged, and the formal contract is the embodiment of the proposals and acceptance, giving them form, but not vitality. For this purpose the Street Commissioner was the proper officer under the charter and ordinances of the city.

         II. Corporations cannot generally go beyond the power conferred by their charters. But for the irregular exercise of its power, a corporation cannot take greater advantage of its own error, than can a private person.

         III. The city had full power to make the contracts in question. There is no privity between the contractor and the property, or the property owner. The city, by virtue of her legislative power, and by official acts, may charge the property by assessment, and may enforce the payment--over these acts and proceedings the contractor has no power.

         It is a general rule of municipal law, that this class of improvements to streets--the benefits of which are more local than general--shall not be entirely borne by the general public, but by those benefited, in proportion to their interests. This rule makes the distinction between assessments and taxes; yet all the business and incidents of assessments are as much public, as the business and incidents of taxation. It is the business of the public to assess, levy and collect assessments, as well as taxes; and the contractor, for whose labor and materials the assessment is made, is as foreign to the proceedings and rights incident to an assessment, as a salaried officer is to the proceedings under our revenue laws. (For authority, see City Charter Act, art. 3, sec. 13; art. 5, sec. 5; art. 6, sec. 7; Brady v. City of Brooklyn, 1 Barb. 590.)

         IV. The contract, if in any respect irregular, has been ratified by the city. 1. By levying assessments to meet the expenses, and collecting and receiving the assessments. 2. By standing by and seeing the work done, and by accepting it when done. 3. By passing an ordinance for settlement with the contractor. 4. By actual settlement, and issuance of warrants for the amount due on the contract. 5. By assuming, by ordinance, to receive the amount chargeable against the property in city indebtedness, and by so receiving the same, in fact. (Moodaly v. The East Indies Co. 1 Brown Ch. 469; Lloyd v. The Mayor, etc. 1 Seld. 374; City of Dayton v. Pease, 4 Ohio State R. 100; Ross v. The City of Madison, 1 Carter, 283; McCombs v. The Town of Akron, 15 Ohio, 479; Alleghany City v. McClarkan, 14 Penn. 82; Delafield v. The State of Illinois, 26 Wend. 225; De Grave v. The Mayor and Corporation of Monmouth, 4 C. & P. 111 (19 Eng. C. L. 300); Bank of U.S. v. Dandridge, 12 Wheat. 64; Proprietor's Canal Bridge v. Gordon, 1 Pick. 304; Underwood v. Newport Lyceum, 5 B. Mon. 130.

         V. An action lies on the warrants. They are notes or bills, and negotiable as such. The fact that they were payable out of a particular fund, at most, only shows that the holder was entitled to receive his money out of that fund; but if the city was liable, the designation of the fund does not show that no debt was due. The warrants import a direct liability on the part of the city; First, because they presume the existence of a fund out of which payment may be made; indeed, the city would be estopped to deny funds; the warrants drawn by herself on herself, are equivalent to an order drawn and accepted. Second, the city would be liable if there were no funds, because if a man gives an order payable out of a fund, he is not discharged because of his own fraud or mistake in not having funds to meet it. Third, the warrants are at least equal to a certificate of settlement, and are prima facie evidence of indebtedness.

         VI. The fifth section of the third article of the charter is directory. (5 Hill, 137; 7 Cow. 485 ; 5 Wheat. 326 .)

         JUDGES: Cope, J. delivered the following opinion. Field, C. J. concurring in the judgment only.


         COPE, Judge

         This is an action to recover a sum of money alleged to be due the plaintiff for grading and planking certain streets within the corporate limits of the city of San Francisco. The plaintiff relies for a recovery: First, upon an implied contract for work, labor and materials; Second, upon certain express contracts under which the work and labor were performed and the materials furnished; and, Third, upon various warrants drawn by the Mayor and Controller upon the Treasurer of the city. The questions in the case relate to the right of the plaintiff to recover in any form.

         There are two objections which it is proper to dispose of before proceeding to consider the other question in the case. The first is, that the power of the city to contract a debt of this character, was limited by the charter to one third of the cost of the improvements; and the second is, that the indebtedness of the city already exceeded the sum of $ 50,000, over and above its annual revenue.

         In respect to the first objection, the charter vested in the Common Council power to open streets and alleys, and to alter and improve the same, but provided that at least two thirds of the expense of every improvement should be borne by the property adjacent. (Charter 1851, art. 5, sec. 2.) We see nothing in this provision to justify the construction contended for; and, when taken in connection with other provisions of the charter, it is clear that such a construction is entirely inadmissible, and would lead to the grossest and most palpable injustice. The power to improve the streets necessarily included the authority to enter into a contract for that purpose, and it would be absurd to say that the city could not bind itself by a contract which it was legally authorized to make. It is certain that such a contract could not be treated as the contract of the property holders, and an action maintained upon it as against them. Their liability was exclusively to the city, and the manner of its enforcement was pointed out by the charter. The remedy was limited to assessments upon the property itself. These assessments were to be levied and collected by the city, and it was evidently intended that the money, when received, should be paid into the city treasury. No provision was made for any other disposition of it, and no restriction was placed upon the right of the city to use it for any purpose whatever.

         In support of this objection, the counsel for the city relies upon the case of McCullough v. The Mayor, etc., of Brooklyn (23 Wend. 458 ). The question there was, whether the city of Brooklyn was liable for certain damages, which had been assessed in favor of the plaintiff in contemplation of the opening of a street upon his land. By the terms of the charter, the persons to be benefited by the improvement were to pay the damages; and these persons were required to deposit the amount with the Treasurer of the city, whose duty it was to pay it over to the party entitled to receive it. The city had not taken possession of the property, and could not do so until the damages were paid. There was no contract in the case and no question in relation to the power of the city. The damages were to be paid in a particular manner, and it was held that the mere fact that an assessment had been made, did not render the city liable. We do not question the authority of that case; but in what respect it resembles the case at bar we are unable to perceive. Here the city did not occupy the position of an agent. The proceeds of assessments were to be paid into the treasury, and when paid in became the property of the city.

         In respect to the second objection, it was provided by the charter that the Common Council should not create, nor permit to accrue, any debts or liabilities which, in the aggregate, with all former debts or liabilities, should exceed the sum of $ 50,000, over and above the annual revenue of the city, except in certain specified cases, and then only in a particular manner. We regard this provision as directory to the Common Council, and not as a limitation upon the power of the city. It was too indefinite and uncertain to admit of any other construction. Of course, the amount of the annual revenue of the city was incapable of ascertainment in advance of its collection, and it could not have been intended that a debt contracted by the city should be valid or invalid as the revenue for the year might exceed or fall short of a particular amount. No consequence was attached to a violation of the charter in this respect, and the revenue was a matter so completely within the control of the city, that we must regard the provision as directory to the Common Council, or conclude that it was the intention of the Legislature to furnish the city with the means of avoiding its debts and liabilities at pleasure. We are not disposed to adopt an interpretation so disparaging to the integrity of the Legislature.

         It is contended that, in legal effect, this provision of the charter and the clause in the Constitution prohibiting the Legislature from creating debts against the State, are precisely similar. The difference is so palpable that the argument is without the semblance of plausibility. The limit prescribed by the Constitution is fixed, certain, and definite. To determine when this limit has been reached, it is only necessary to ascertain whether the indebtedness of the State amounts to $ 300,000--a fact the existence or non-existence of which is at least susceptible of ascertainment. The limit prescribed by the charter was indefinite, and entirely uncertain. When this limit had been reached, it was impossible to ascertain. The amount of the annual revenue of the city depended, of course, upon the productiveness of the various sources from which its revenue was derived, and until the expiration of the year, and the revenue had been received, its amount could only have been the subject of surmise and conjecture. We cannot suppose that a provision so entirely uncertain was intended by the Legislature to operate as a limitation upon the power of the city.

         But even if we are mistaken in our construction of the charter, there is still a clear and conclusive answer to both of these objections. It is well settled in relation to the contracts of corporations, that where the question is one of capacity or authority to contract, arising either on a question of regularity of organization, or of power conferred by the charter, a party who has had the benefit of the contract cannot be permitted, in an action founded upon it, to question its validity. " It would be in the highest degree inequitable and unjust," says Mr. Sedgwick, " to permit the defendant to repudiate a contract, the fruits of which he retains." (Sedg. on Con. and Stat. Law, 90.) In Silver Lake Bank v. North (4 John. Ch. R. 370.), where it was alleged that a foreign corporation had exceeded its power in making a loan, Chancellor Kent said, " It would rather belong to the government of Pennsylvania to exact a forfeiture of their charter, than for this Court, in this collateral way, to decide a question of misuser by setting aside a just and bona fide contract." In The State of Indiana v. Woram (6 Hill, 37 ), it was contended that the Staten Island Whaling Co. had no power, by its charter, to purchase or deal in State bonds; and Mr. Justice Bronson, in delivering the opinion of the Court, said: " I agree with the counsel for the defendant that this company had no authority to purchase or deal in these bonds. But since the decision in Moss v. The Rossie Lead Mining Co. (5 Hill, 137 ) I do not see that a corporation can ever avoid its obligation on the ground that it was given for property which the corporation was not authorized to purchase. And if the company was bound, I see no reason why the defendant should not also be bound by the contract." In The Steam Navigation Co. v. Weed (17 Barb. 378), Mr. Justice Parker, in delivering the opinion of the Court, said: " I am happy to come to the conclusion that the law will not sustain this most unconscionable defense. It ill becomes the defendant to borrow from the plaintiff $ 1,000 for a single day, to relieve his immediate necessities, and then to turn round and say, 'I will not return you this money, because you had no power, by your charter, to lend it.' We shall lose our respect for the law, when it so far loses its character for justice as to sanction the defense here attempted." (See also Chester Glass Co. v. Dewey, 16 Mass. 94; McCutcheon v. Steamboat Co. 13 Penn. 13; Sackett's Harbor Bank v. Lewis County Bank, 11 Barb. 213.) We shall show that this rule applies with equal force to all corporations, whether public or private.

         Having disposed of the objections to a recovery upon the ground of a want of authority in the city, we now proceed to examine the question of the liability of the city independent of these objections. It is well settled that the contracts of corporations stand upon the same footing as those of natural persons, and depend upon the same circumstances for their validity and effect. The doctrine of ratification and estoppel is as applicable to corporations as to individuals, and the former are bound by the acts of their agents in the same manner and to the same extent, as the latter. There is no difference in this respect between public and private corporations; for in matters of contract, a public corporation is regarded merely as a legal individual, and treated in all respects as a private person.

         Angell and Ames, in their work on Corporations, (sec. 219) say: " The old rule of the common law undoubtedly was, that corporations aggregate could contract, or appoint special agents for that purpose, or any other, except for service of the most inferior and ordinary nature, only by deed. In England, this rule has, in modern times, been greatly though gradually relaxed; and in our country, where private corporations of this kind, for every laudable object, have been multiplied beyond any former example, on account of the inconvenience and injustice which must, in practice, result from its technical strictness, the rule has, as a general proposition, been completely done away. The course of modern decisions seems to place corporations, with regard to their mode of appointing agents, and making contracts in general, upon the same footing with natural persons." The same authors (sec. 238) say: " It having been established that corporations might contract otherwise than by their corporate seals--that they might make parol promises, either by vote or through their authorized agents, no reason could be found in technical principle or substantial justice, why they should not be subject and entitled to the same presumptions as natural persons." In speaking of municipal corporations, they say: " If the powers conferred be granted for public purposes exclusively, they belong to the corporate body in its public and municipal character; but if for purposes of private advantage and emolument, though the public derive a common benefit therefrom, the corporation, quoad hoc, is to be regarded as a private company." (Id. sec. 38.) And they add, in a note to the same section, that " it is upon the like distinction that municipal corporations, in their private character, as owners and occupiers of houses and lands, are regarded in the same light, and dealt with accordingly." The same distinction exists in reference to contracts, in respect to which all corporations stand upon the same footing as natural persons.

         Seagraves v. The City of Alton (13 Ill. 366 ) is a strong case upon the question of the liability of a municipal corporation upon an implied contract. The action was for necessaries furnished a pauper, and the charter required the Common Council to provide for the support of all paupers within the limits of the city. Treat, C. J., in delivering the opinion of the Court, said: " In the present case, the evidence tended to the conclusion that Reeves was a pauper, and properly chargeable to the corporation. It also clearly appeared that the plaintiff, with whom Reeves resided, made repeated applications to the city authorities for relief, which was refused. If Reeves was a pauper in fact, the plaintiff, by continuing to maintain him, pursued the course that humanity prompted, and the law approved, and he ought to be remunerated." The jury had been instructed that the plaintiff could not recover unless the necessaries were furnished in pursuance of an express contract with the corporation; and it was held that this instruction was erroneous, and the judgment, which was in favor of the corporation, was reversed. This question is elaborately discussed in the opinion of Mr. Justice Field, in the case of the Gas Company v. The City of San Francisco (9 Cal. 453 ), and we are satisfied that the conclusion there attained is not only correct in principle, but supported by all the authorities.

         In Ross v. The City of Madison (1 Carter, 281) the question was, whether the city was liable for an injury resulting from the negligence of its agents in the construction of a culvert. The culvert was constructed without express authority from the city, and it was contended that the city could not therefore be made responsible for the injury. But the Court said: " The English rule was, and still appears to be, that corporations aggregate cannot enter into contracts of an important nature, except under their common seal. But in this country it is well established that the contracts of corporations rest upon the same footing as those of natural persons, and are valid without seal, whether expressly made by the corporation, or arising by implication from the general relations of the agent towards the corporation, or from the ratification of acts done on behalf of the corporation by parties assuming to act as agents, although without sufficient authority."

         In The City of Dayton v. Pease (4 Ohio, 80 ) the same question was involved, the injury for which the action was brought having been occasioned by the negligence and unskillfulness of an agent of the corporation. In speaking of the legal reasons upon which the liability of the corporation rested, the Court said: " The liability of a private person, under precisely such circumstances, rests upon one of the oldest and best settled doctrines of the common law. We have again and again affirmed that the liabilities of corporations, private and municipal, are no less extensive; and that the maxim, respondeat superior, properly applies to them in the same manner and the same extent as in its application to the liabilities of private individuals." In reference to the double character of a municipal corporation, the Court, after stating that such a corporation was not responsible for an injury resulting from the exercise of its public, judicial, or political powers, said: " But when a municipal corporation undertakes to execute its own prescribed regulations, by constructing improvements for the especial interest or advantage of its own inhabitants, the authorities are all agreed that it is to be treated merely as a legal individual, and as such, owning all the duties to private persons, and subject to all the liabilities that pertain to private corporations or individual citizens. To this class most clearly belong the construction, repair, and maintenance of its streets."

         In Alleghany City v. McClarken (14 Penn. 81 ) the question was as to the validity of certain scrip or notes, which had been issued without express authority from the city, and in the absence of any provision in the charter authorizing their issuance. The Court said: " The object of all law is, to promote justice and fair dealing, when that can be done without violating principle. We cannot perceive that any principle is violated by holding a corporation liable for the contracts of its accredited agents, even not expressly authorized, where these contracts, for a series of times, were entered into publicly, and in such manner as, by necessity and irresistible implication, to be within the knowledge of the corporation. It was the acquiescence of the corporators, and the habit and custom of business of the corporation, which induced the public to give credit to the scrip or notes, which was evidence of contract. But when, to this circumstance, we add that the corporators themselves received the value of these notes, in the erection of improvements in the city, and enjoyed, and still enjoy the value of them, the conclusion is irresistible that the corporation ought to pay them, by the assessment of taxes on the corporators, if it has no other available means. * * * One rule of law is often met and counteracted by another of equal force, so that, although the corporators are, in general, protected from unauthorized acts of their agents, yet, at the same time, a rule of equal force requires that they should not deceive the public, or lead them to trust and confide in unauthorized acts of their agents. If they receive the avails and value of these acts, it is explicit evidence that they consented to and authorized them. They adopt the act, and are responsible to those who, on the faith of such acquiescence and approbation, trusted their agents."

         In Underwood v. The Newport Lyceum (5 B. Mon. 129) it was contended that the corporation had no power to contract the debt for which the suit was brought; but the Court said: " A corporation, as is well established by the authorities, may be made responsible in an action on the case for a tort, and even in an action of trespass, if, by its managers and authorized agents, it commands the trespass to be committed, or sanctions and approves the act when committed. If, therefore, as a corporate body, it may be made responsible for perpetrating a wrong, to the injury of others, the power to do which their charter can never be presumed to confer, much more may a corporation be rendered responsible, in damages, for a breach of their assumpsit to strangers, who may be presumed to be ignorant of the powers by which they engage their services, and induce them to expend their labor, time, and means, at their instance and for their benefit."

         The doctrine laid down by these authorities has also been repeatedly recognized by the English Courts. In Moodalay v. The East India Company (1 Brown Ch. R. 459) the Master of the Rolls said: " At the outset, I thought the cases of a corporation and of an individual were different; but I am glad to have the authority of Lord Talbot, that they are not * * * I admit that no suit will lie in this Court against a sovereign power, for any thing done in that capacity, but I do not think that the East India Company is within that rule. They have rights as a sovereign power--they have also duties as individuals; if they enter into bonds in India, the sums secured may be recovered here.

         So in this case, as a private company, they have entered into a private contract, to which they must be liable."

         In De Grave v. The Corporation of Monmouth (19 Eng. Com. Law. C. P. 109) the question was, whether the corporation was responsible for certain weights and measures purchased by the Mayor. It was shown that they had been taken from the boxes in which they were packed, and examined at a meeting of the corporation, and that some of them had been subsequently used. It was objected, that the corporation could only bind itself by its corporate seal, but Lord Tenterden said: " I think that the examination of these weights and measures by the corporation, at the meeting in the jury-room, was exercising an act of ownership over them; and that, by so doing, the corporation have recognized the contract."          It was laid down by this Court, in Touchard v. Touchard (5 Cal. 806 ), that a municipal corporation, in reference to all matters of contract, must be looked upon and treated as a private person, and its contracts construed in the same manner and with like effect as those of natural persons. And this distinction was subsequently recognized and acted upon in the case of Holland v. The City of San Francisco (7 Cal. 361 ). The principle upon which the distinction rests was discussed in Bailey v. The Mayor, etc. of New York, 3 Hill 539; Lloyd v. The Mayor, etc. of New York, 1 Seldon, 374; and Milhau v. Sharp, 15 Barb. 210.

         We do not propose to examine all the authorities in support of the propositions we have endeavored to establish. For the benefit of those who desire to pursue the subject further, we refer to the following additional cases: Bank of of the United States v. Dundridge, 12 Wheat. 64; Delafield v. The State of Illinois, 26 Wend. 192; McComb v. The Town Council of Akron, 15 Ohio, 474; City of New York v. Bailey, 2 Denio, 433, Goodloe v. The City of Cincinnati, 4 Ham. 500; Bank of Chilicothe v. The Town of Chilicothe, 7 Ohio, 358; and Rhodes v. The City of Cleaveland, 10 Id. 159 .

         It is necessary to notice some of the authorities cited by counsel for the city, and relied upon as establishing a different doctrine in relation to the contracts of corporations.

         In Hodges v. The City of Buffalo (2 Denio, 110 ) the question was, whether the corporation was liable for the cost of an entertainment furnished to the citizens and guests of the city, under a contract with the Common Council. Mr. Justice Jewitt, who delivered the opinion of the Court, after stating certain general principles, relating to the powers of corporations, proceeded to say: " The plaintiff's counsel, failing to find express authority to make expenditures for this purpose, insists that the claim can be sustained on the ground that the plaintiff, having furnished this entertainment, the corporation has received the consideration, and is bound to pay, although the engagement was made without legal authority. It is said to be analogous to a subsequent ratification by a corporation of the unauthorized act of the agent. I cannot concur in this view of the case. The doctrine referred to assumes that the principal had power to confer the requisite authority in the first instance. It cannot be maintained that the corporation can, by a subsequent ratification, make good an act of its agent which it could not have directly empowered him to do." This case may have been correctly decided, but its authority stands upon a very doubtful footing. It is in indirect conflict with two cases previously decided by the same Court: Moss v. The Rossie Lead Mining Company (5 Hill, 137 ), and the State of Indiana v. Woram ( 6 Id. 37 ), besides, the right of the plaintiff to recover did not depend upon a ratification, but upon the fact that the corporation, having made the contract, had received the benefit of it, and could not, therefore, be permitted to question its validity. But, admitting that the case was properly decided, it cannot be regarded as authority in the case at bar. The decision proceeded solely upon the ground of a want of power in the corporation, and it was inferentially admitted that if the corporation had possessed the requisite power it could have been as effectually bound by a subsequent ratification as by a valid exercise of the power in the first instance. In the present case, there is no doubt as to the existence of the power.

         The case of Halstead v. The Mayor, etc., of New York (3 Com. 430), is not in point. The suit was brought to recover the amount of two drafts drawn by the defendants upon the Treasurer of the city, payment of which had been refused. The defense was that these drafts were without consideration, and upon that ground the defendants obtained a verdict. On appeal, it was held that the verdict was right, though three of the Judges, including Chief Justice Bronson, dissented.

         The case of Lake v. Williamsburg (4 Denio, 520 ) is analogous in principle to that of McCullough v. The Mayor of Brooklyn, to which we have already referred, and was decided upon the authority of that case.

         In The City of London v. Brainard (22 Conn. 552 ), the corporation was enjoined from paying out money for a purpose not contemplated by the charter. There was no contract in the case, and the only question was as to the validity of a voluntary appropriation of the funds of the corporation.

         The other authorities referred to seem to have been cited for the purpose of showing that a corporation possesses only such powers as are specifically granted by the act of incorporation, and such as are necessary to carry into effect the powers expressly granted. This doctrine we understand to be perfectly well settled, and we have no disposition to question its correctness. The only difficulty is as to its application in particular cases, and its effect when brought in contact with other rules equally well settled.

         The doctrine contended for by the counsel for the city received the sanction of this Court in Seale v. The City of San Francisco, decided at the July term, 1858: but a rehearing having been granted in that case, it is still undetermined, and the same questions are presented to us, unembarrassed by previous decisions of the Court. In the lengthy opinion of Mr. Justice Burnett, many authorities are cited as supporting the conclusion there attained. Some of these authorities we have already noticed, and we propose, at present, only to refer to the cases emanating from this Court.

         In Phelan v. The County of San Francisco (6 Cal. 531 ), the plaintiff had sold to the Court of Sessions, for the use of the county, a certain lot of land, for which he was to receive the sum of sixty thousand dollars. The Court of Sessions took possession of the property, and continued to manage and control it until the organization of a Board of Supervisors, when it passed into their hands, and was afterward controlled and taken care of by them. The action was brought to recover the purchase money; but it was held that the Court of Sessions had no power to make the contract, and that the whole transaction was void. It was also held that the acts of the Board of Supervisors did not amount to a ratification of the contract, so as to bind the county. " Nay, more," said the Court; " we are satisfied that a deliberative body like the Board of Supervisors, cannot be bound by acts in pais, but that the best and only evidence of its acts and intentions is to be drawn from the record of its proceedings." This was one of several reasons given by the Court for its decision, and we do not pretend to say that it was not of itself entirely sufficient. It was not regarded as essential to the determination of the case, and may have been stated in broader terms than the Court intended to employ. We are not required to pass upon the question of its correctness, and it is only necessary for us to say that no such rule exists in reference to the private transactions of a municipal corporation.

         In Lucas, Turner & Co. v. The City of San Francisco (7 Cal. 463 ), the only question passed upon by the Court, was the sufficiency of a demurrer to the complaint. Mr. Justice Burnett, in delivering the opinion in the case, commenced by saying: " The decision of the Court below was given against the plaintiff, upon a demurrer to the complaint. The complaint contains nine counts, setting forth the cause of action in different forms, and the demurrer was to the whole complaint, and to each count separately, and was sustained as to all the counts. The objections raised by the demurrer can only apply to some of the counts, and for that reason, if for no other, the judgment of the Court below must be reversed." The learned Judge then proceeded to discuss the case upon the merits, and arrived at the conclusion that, though the judgment must be reversed, the city would eventually be entitled to recover. The reasons assigned were that the city could only bind itself by an ordinance, and could not be estopped by acts in pais. Murray, C. J. and Terry, J. signed a special concurrence as follows: " We concur in reversing the judgment of the Court below, on the first ground stated in the opinion of Judge Burnett, but differ with him as to the other questions passed upon in his opinion." If this case is to be regarded as authority at all, it stands in direct antagonism to Seale v. The City of San Francisco, and expressly repudiates the doctrine that a municipal corporation cannot be bound by acts in pais .

         In Holland v. The City of San Francisco (7 Cal. 361 ) the questions involved were entirely different, and it will be sufficient for us to determine whether we will adhere to the principles of that case, when the same questions are again brought before us.

         From this examination of the authorities, it is evident that the doctrine contended for by the counsel for the city cannot be maintained. The theory is, that a municipal corporation can only be bound by a contract to which it has expressly assented, and that such a corporation is exempt from the operation of the rules which relate to and govern the contracts and liabilities of individuals. We readily admit that the powers of a corporation are derived solely from the act creating it; and that, as a general rule, these powers must be exercised in the particular mode pointed out by the charter. It does not follow, however, that even a want of authority is, in all cases, a sufficient test of the exemption of a corporation from liability in matters of contract. Of course, an executory contract, made without authority, cannot be enforced; but a different question arises where the contract has been executed, and the corporation has received the benefit of it. In such a case, the law interposes an estoppel, and will not permit the validity of the contract to be called in question.

         It remains to be determined whether the plaintiff has made out a case upon which he is entitled to recover, and if so, to what extent. It is shown by the evidence, that the improvements mentioned in the complaint were constructed for the exclusive benefit of the city and its inhabitants; that these improvements were of a valuable and permanent character, and were constructed in pursuance of certain contracts entered into with an officer of the corporation, who executed the same in his official capacity; that, in making the improvements, reliance was placed upon the validity of these contracts, and the obligation of the city to pay as therein provided; that the improvements were made under the immediate supervision of an officer of the city government, and, when completed, were approved of and received by him on behalf of the city; that the authorities of the city were fully informed of these facts, and took no steps to repudiate the contracts, or enlighten the plaintiff as to the disposition of the city to pay for the improvements. Such other facts as are necessary to be noticed, will be referred to in connection with the the subjects to which they relate.

         It is not disputed that the city received the benefit of the improvements for which the plaintiff seeks to recover; and so far as these improvements are concerned, the question is, whether there was any contract, express or implied, to pay. The fact that the improvements were constructed for the benefit of the city, is sufficient to raise the presumption of a contract; and it will not be contended that there is anything in the evidence to destroy the effect of this presumption. But, in our opinion, the plaintiff is entitled to recover upon the contracts under which the improvements were made. It is true, there is no evidence that the agent who signed these contracts on behalf of the city was expressly authorized to do so; but it sufficiently appears that the city authorities were cognizant of the facts, and their silence, under the circumstances, was equivalent to a direct sanction of the acts of the agent, and estops the city from denying his authority. It was well known that these contracts, involving, as was supposed, the liability of the city, were the only considerations inducing the construction of the improvements, and now that the improvements have been completed, and the city has received the benefit of them, it is to late to repudiate the contracts and avoid responsibility. It is unnecessary to enumerate the various acts of the city government in relation to these contracts. They were acquiesced in from the commencement to the completion of the improvements, and until the city had received all the benefit to be derived from their performance, their validity was never called in question. We think that upon no principle of law or equity can this be done now. It would be a fraud upon the plaintiff to permit it, and it is a proper case in which to invoke the protection of an estoppel.

         In reference to the warrants, the rights of the plaintiff stand upon a different footing. They are drawn upon a particular fund, and cannot, therefore be regarded either as bills of exchange or promissory notes. The designation of the fund was not intended as a mere direction to the Treasurer, and such is not its legal effect. He had no discretion as to the mode or means of payment. He was required to pay from moneys belonging to the fund mentioned in the warrants, and was not at liberty to resort to any other source for that purpose. The effect of the warrants must be controlled by the terms and conditions expressed upon their face, and these are too plain to admit of any doubt as to their construction. The failure to pay them did not alter their nature, or so change their legal effect as to render them the proper subjects of an action. The only remedy was an action upon the original indebtedness, and in such an action it is possible that the warrants might have been used as evidence for the purpose of establishing the indebtedness. It is clear, however, that no action can be maintained upon the warrants themselves.

         Our conclusion is, that the right of the plaintiff to recover is limited to the amount specified in the contracts to which we have referred, and legal interest upon such amount. The judgment is for a larger sum than the plaintiff is entitled to recover, and must, therefore, be reversed. Upon the return of the cause, the Court below will render a judgment in accordance with this opinion.

         Judgment reversed, and cause remanded.

Summaries of

Argenti v. City of San Francisco

Supreme Court of California
Jul 1, 1860
16 Cal. 255 (Cal. 1860)

In Argenti v. City of San Francisco (1860) 16 Cal. 255, Chief Justice Field explained, in the course of denying rehearing in that matter: "[W]hen a rehearing is granted, the opinion previously delivered falls, unless reaffirmed after the reargument.

Summary of this case from Shalabi v. City of Fontana

In Argenti v. San Francisco, 16 Cal. 255 (supra), where a contract for street improvements had been fully executed, it was held that the plaintiff could recover, although it did not appear that the officer signing the contracts had express authority; it did appear that the work was beneficial to the city, had been duly accepted and approved by the city officers; and that the assessments levied upon the owners of adjacent real estate to pay for the improvement had been collected by the defendant.

Summary of this case from Pocasset Ice Co. v. Burton, Town Treasurer

In Argenti v. San Francisco, 16 Cal. 255, it was held that if the city obtained the money by mistake, or without authority of law, it is her duty to refund it, not from any contract entered into by her upon the subject, but from the general obligation to do justice which binds all persons, whether natural or artificial, and that in these cases the city does not make any promise, but the law implies one. (See, also, Grogan v. San Francisco, 18 Cal. 590.)

Summary of this case from County of Colusa v. County of Glenn

In Argenti v. City of San Francisco, 16 Cal. 255, and Sussman v. San Luis Obispo Co., 126 Cal. 536 [ 59 P. 24], it is held that although the actual representations are made by an agent, the consenting principal is estopped.

Summary of this case from Callahan v. General Oil Well Supply Co.
Case details for

Argenti v. City of San Francisco

Case Details


Court:Supreme Court of California

Date published: Jul 1, 1860


16 Cal. 255 (Cal. 1860)

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