North River Electric Light & Power Co. v. City of New York

The precise question we are called upon to determine is whether the failure to make a written contract between the parties hereto is fatal to the plaintiff’s right to recover; or, differently expressed, and using the language of the submission, “the only objection of the comptroller of the city of New York and of defendant to auditing and paying said bill is that no written contract has been entered into between this plaintiff and defendant.” That would imply that all the requirements leading up to a valid contract had been complied with except the reduction of the same to writing, and its formal execution. The changes effected by the Greater New York charter in establishing departments of the municipal government, and in conferring upon the heads thereof powers of administration, subject to the right of the municipal assembly to regulate by general ordinance the exercise of such powers, led to a contrariety of opinion as to the person by whom or the body by which particular public duties should be performed. As a consequence, in December, 1898, a controversy arose, which still continues, between the department of public buildings, lighting, and supplies and the board of public improvements on the one hand and the municipal assembly on the other, as to their respective rights, powers, and duties relative to contracts for lighting the streets and public buildings of the city. Assuming that it was necessary for the assembly to first pass ordinances, the board of public improvements prepared suitable resolutions and ordinances on that subject, and forwarded them to the assembly for adoption. Notwithstanding the urgent necessity for action, the assembly absolutely refused to act, and, various lighting companies having threatened to cut off the supply of light unless contracts were made in writing, the resolutions were withdrawn from the assembly in March, 1899, and suitable contracts—among others the one here in question— were made by the proper officers. It appears, as a result of that contest, that the city would have been plunged in darkness after January 1, 1899, had it not been that the various lighting companies, on

Begard being had to the fact that the only objection made is that the contract was not in writing, it would appear that all the necessary preliminary steps essential to a binding contract had been taken, and thus all the evils were avoided which the statute was intended to guard against; such as favoritism in awarding contracts without obtaining bids. Hence the failure to execute a written contract would not be fatal to the plaintiff’s right to recover. Paul v. City of New York (Sup.; Dec. 8, 1899) 61 N. Y. Supp. 570 . If, however, that is not so, we are still of opinion that upon the conceded facts, the city is liable to pay for the light furnished. Deeming themselves to be with-' out power to execute a written contract, the officials pursued the only course open by authorizing the companies to furnish the light upon terms and conditions which it is admitted were reasonable, and which were the same as those that had been imposed by the written contracts of the previous year, and which, after public letting, had been entered into between the companies atid the city. It is conceded that the prices agreed upon were fair and reasonable, and the obligation sought to be enforced is just. But it is urged that no recovery

“This principle has been invoked in many cases of local improvement in cases where fraud was apparent and collusion manifest between the corporation officers and the contractors; and when, under the guise of extra work, they have sought to avoid the publicity of advertising for bids for work and material, the courts have been careful to protect the people from such fraudulent contracts and contrivances, and hold the municipality strictly to its statutory duties and obligations; but in other cases, like the one at bar, where the corporation has received a substantial benefit, and retained such benefit, and the work was necessary in carrying out the contract, either as extra work or to meet exigencies which were unforeseen when the contract was entered into, the courts have been more lenient in their construction of corporate powers upon principles of equity.”

Again, in Moore v. Mayor, etc., 73 N. Y. 248 , the court say:

“When there has been a bona fide performance of a contract, of which the city has had the benefit, there is a strong equity in favor of the contractor seeking his pay, entitling him to the benefit of a ratification, even of a void contract, upon slight evidence, if the ratifying body has general power over the subject of the contract, and of an estoppel when an estoppel fairly results from the conduct of the general agents of the city.”

Here, when the power of the officials who could make a written contract was subsequently determined, they complied with all the preliminary steps as to advertising for bids, etc., and in April, 1899, made a written contract, which, in terms, covered the whole year of 1899, and thus, so far as they were able, ratified what had been done in the way of furnishing light for the prior months of the year.

In Port Jervis Waterworks Co. v. Village of Port Jervis, 151 N. Y. 117 , 45 N. E. 389 , the court say:

“It is true that no express contract was entered into between the parties for the three years in controversy. But the water was furnished by the plaintiff and accepted by the defendant during that time under circumstances in which the law will imply a contract to pay what the water was fairly and reasonably worth for the period.”

Here the officials who directed the furnishing of the light were the persons who had control.and jurisdiction over the subject of lighting, and they did not attempt to violate or evade the requirements of the • statute by entering into a contract contrary to its provisions. Doubtful of their powers concerning the execution of a written contract, and in an emergency thus created, and under the pressure of a public necessity, which required that they should act ia order to avert a condition of affairs which would not only be a menace to persons and property, but, if permitted even for a short time, would be a public nuisance, they appealed to the lighting companies to furnish the light,

The leading case in this state supporting the theory of an obligation upon an implied contract is Harlem Gaslight Co. v. Mayor, etc., of New York, supra, which has been cited with approval in many subsequent cases, and which, so far as we have found, has never been expressly overruled. There the court said:,

“The power and duty of the municipal government to furnish light for the-streets and avenues of the city is not disputed or put in controversy in this action. Indeed, it could not he with any show of reason or good sense. In our northern latitudes, when darkness prevails for over half the twenty-four hours for a large part of the year, light diffused through the public streets and avenues is a predominant and urgent necessity which no well-governed city can do without. * * * The modern gaslight diffusing its rays over every part of the public thoroughfare is a source of pleasure -and comfort and convenience, as well as a security against crime and disorder which no other agency can supply. It is indispensable at all times, and no municipality can be said

to be well governed which is not able to command its presence under all circumstances. Nor can it be maintained that a municipal corporation may not be made liable, like a natural person, upon an implied assumpsit, unless the general rule is modified and changed by some positive legislation.”

And in speaking of the failure to comply literally with the provisions of the law in regard to lighting contracts it is further said in the same case:

“The purpose of the statute is to insure economy in the public administration, and honesty, fidelity, and good morality in the administrative officers. Competitive offers or bids may have no other object but to insure economy and exclude favoritism and corruption in the furnishing of labor, services, property, and materials for the uses of the city. This was the purpose, and the only purpose, of the framers of the statutes, and when they have this effect given to them nothing further is needed. They are not to have such a construction as to defeat this purpose, to impede the usual and regular progress of the public business, or to deprive the inhabitants, even temporarily, of those things necessary and indispensable to their subsistence, their health, or the security and protection of their persons or property. Contingencies may arise when services, materials, and property above the prescribed value may be immediately needed, and where competitive offers and written contracts would be unserviceable or impossible. In such a case the statutes would not apply, because such application could not have been intended. Whenever the nature of the service or of the property needed for the public uses, or the time within which it must be had to prevent irreparable mischief under competitive offers, is impossible, then the provisions of the acts referred .to cannot apply, because such could not have been the intention of the lawmakers, and such emergencies were not amongst the mischiefs which the provisions referred to were designed' to correct.”

Upon the agreed facts here there was shown a great public necessity, and an emergency not contemplated by the statute; one which would not permit of delay, but required immediate action by the defendant to protect its interest, as well as the lives and property of its citizens. There being, therefore, no attempt to override the statute, or to do that which it prohibited, and a situation' being presented to which the statute did not apply, we think the plaintiff may invoke the rule of liability similar to that relating to an implied contract.

It will be noticed that we have not thus far adverted to nor placed any stress upon the conceded fact that the plaintiff here was the only company having the ability to furnish lights in the territory in question, and therefore had no competitor, and that, under the former advertisement for bids, was the only bidder. Upon the argument this fact was not relied upon, and request was made for a decision which would be equally applicable to the other companies who, by permission of the court, were heard upon the argument and in respect to which that fact did not exist; there being in the territory, or a portion of it, in which they furnished light, other' competitors. Considering, then, the question as we have done, stripped of that circumstance, we think that the unusual and exceptional facts appearing of the light being furnished in an emergency at the request of the city officials, but at a price fixed by the officer having administrative charge of that part of the city’s affairs,—the failure to enter into a written contract having resulted .from a technical mistake,—together with the evident good faith and entire honesty of all parties, present a case never likely to create a precedent for unlawful raids upon the treasury. Whether we invoke the rule of an implied contract or not, there is, upon the

Judgment should therefore be for the plaintiff, but, under- the circumstances, without costs.

PATTERSON, J., concurs.

I concur in the result of Mr. Justice O’BRIEN’S opinion. The city authorities were bound not to allow such a condition of things to obtain that the streets became, so to speak, public nuisances, which they would be, if allowed to remain unlighted. If the streets were to remain in darkness, the city would be liable for any and all damages which might be sustained because of the want of light. This condition of things the authorities having charge of.this branch of the city government were bound to avoid, and, as they were not responsible for the situation, and had done everything in their power to avoid the difficulty which had arisen, there is an implied obligation upon the part of the city to pay for supplies, etc., furnished to it in order to avoid the great evils which would have ensued from allowing the city to remain in darkness.

(dissenting). The question in this case is one of great importance, involving, as it does, the liability of the city of New York for contracts made by public officers without compliance with the provisions of the charter in relation to the execution of contracts and the incurring of liabilities by the city of New York for supplies furnished to the city where no contract has been made as provided for by the charter. That the plaintiff should be paid for the services that it has rendered in lighting the streets of the city, of New York for the period named, and that the lights were furnished under the assurance of the city officials that some means would be found to provide for the payment of their bills, should not blind us to the fact that we are dealing with a purely legal question, involving, as it does, a liability of the taxpayers of the city of New York for the acts of public officials appointed under legislative authority. This court is now asked to grant to this plaintiff a judgment against the city of New York, which must be paid out of the money raised by taxation; and the question which arises at'the threshold of the case, and which must be controlling upon us in its determination, is whether, under the charter of the city of New York, there was imposed, by the facts stated, upon the municipality, a legal obligation. We can grant to this plaintiff no judgment which would take from the city of New York a large sum of money, unless under the charter of the city the law imposes such an obligation upon the municipal corporation. The facts upon which the plaintiff seeks to impose this liability upon the city are as follows: The plaintiff, a corporation organized to supply electricity for the purposes of lighting the streets and public buildings, had been furnishing electricity to the city under a contract made

“I£ we analyze the complex powers usually conferred upon a municipality in this coontry, we shall discover that these are of two general classes, viz.: (1) Those which relate to health, good government, efficient police, etc., in which all the inhabitants have an equal interest, and ought to have an equal voice; (2) those which directly involve the expenditure of money, and especially those relating to local improvements, the expense of which ultimately falls upon the property owners.”

This distinction, is carried through all of the legislative provisions in relation to the performance of these duties by municipal corporations and the authority given to the public officers to perform these duties. Among the most important of these duties is that of maintaining the public streets and highways within the municipality which include the lighting of streets. This duty directly relates to the health, good government, and efficient police of a municipality, and is thus directly within the first class before referred to. The nature of this obligation or duty is clearly governmental. By its exercise the municipal corporation receives no direct benefit, the object being the proper protection, preservation, and well-being of the inhabitants of the municipality, and generally of the inhabitants of the state: The expense of performing this duty, however, is imposed upon the municipal corporation, and it is authorized to raise by taxation the money necessary to its performance. In the performance of such obligation thus imposed, and in the exercise of the power granted to the officers of the corporation, the charter of the corporation by which it is created is its organic law. Neither the corporation nor its officers can do any act, or make any contract, or incur any liability not authorized thereby, or by some legislative, act applicable thereto. All acts beyond the scope of the powers granted are void. At page 528 (section 457) Judge Dillon says;

“The general principle oí law is settled beyond controversy that the agents, officers, or even the city council oí a municipal corporation, cannot bind the corporation by any contract which is beyond the scope of its powers, or entirely foreign to the purposes of the corporation. * * * This doctrine grows out of the nature of such institutions, and rests upon reasonable and solid grounds. The inhabitants are the corporators; the officers are but the public agents of the corporation.' The duties and powers of the officers or public agents of the corporation are prescribed by statute or charter, which all persons not only may know, but are bound to know. * * * These considerations vindicate both the reasonableness and necessity of the rule that the corporation is bound only when its agents or officers, by whom it can alone act, if it acts at all, keep within the limits of the chartered authority of the corporation.”

Further, at page 540, it is said:

“An absolute excess of authority by the officers of a corporation, in violation of law, cannot be upheld; and, where the officers of such a body fail to pursue the requirements of a statutory enactment under which they are acting, the corporation is not bound. In such cases the statute must be strictly followed, and a person who deals with a municipal body is obliged to see that its charter has been fully complied with. When this is done, no subsequent act of the corporation can make an ultra vires contract effective.”

Further, at page 543, it is said:

“Where the charter or incorporating act requires the officers of the city to award contracts to the lowest bidder, a contract made in violation of its requirements is illegal; and in an action brought on such contract for the work the city may plead its illegality in defense; and neither the municipality nor the subordinate officers can make a binding- contract for such work except in compliance with the requirements of the law."

As we have seen, the duty to maintain and regulate the streets in the city of New York is imposed upon the municipal corporation.by the legislature, and the methods by which that duty is to be performed are expressly regulated by the organic law under which the corporation exists; and in the performance of that duty or obligation the officers of the municipal corporation must strictly follow the provisions of the charter. It is only where such provisions have been so followed, and a contract is made in strict compliance with the legislative direction, that the corporation is liable. This principle has been applied in this state in ah unbroken line of authorities. It has been again and again reiterated by the highest court of the state. It will be necessary to cite but one or two cases in which this rule has been distinctly and emphatically maintained. Thus, in McDonald v. Mayor, etc., 68 N. Y. 27 , it is said:

“Nor can it be that the provisions of the statute are alone for the instruction of the department and officials of the defendant. They were a restraint upon them, but upon other persons as well. They put upon all who would deal with the city the need of first looking for the authority of the agent with whom they bargain. Quite clearly do they impose upon the paying agent of the defendant a prohibition against an unauthorized expenditure. And are they not also a restraint upon the municipality itself? They are fitted to insure official care and deliberation, and to hold the agents of the public to personal responsibility for expenditure; and they are a limit upon the powers of the corporation, inasmuch as they prescribe an exact mode for the exercise of the power of expenditure. * * * It is fundamental that those seeking to deal with a municipal corporation through its officials must take great care to learn the nature and extent of their power and authority.”

“Here there is an express legislative inhibition upon the city that it may not incur liability unless by writing and by record. How can it be said that a municipality is liable upon an implied promise when the very statute which continues its corporate life, and gives it its powers, and prescribes the mode of the exercise of them, says that it shall not, and hence cannot, become liable, save by express promise? * * * It is plain that, if the restriction put upon municipalities by the legislature for the purposes of reducing and limiting the incurring debt and the expenditure of the public money may be removed upon the doctrine now contended for, there is no legislative remedy for the evils of municipal government, which of late have excited so much attention and painful foreboding. Restriction and inhibition by statute are practically of no avail if they can be brought to naught by the unauthorized action of every official of lowest degree, acquiesced in, or not repudiated, by his superiors. * * * statute may not be carried further than its intention, certainly not further than its letter. Its purpose is to forbid and prevent the making of contracts by unauthorized official agents for supplies for the use of the corporation. This opinion goes no further than to .hold that, where a pers.on makes a contract with the city of New York for supplies to it, without the requirements of the charter being observed, he may not recover the value thereof upon an implied liability.”

See, also, Dickinson v. City of Poughkeepsie, 75 N. Y. 65 ; Smith v. City of Newburgh, 77 N. Y. 133 .

The same rule is stated as well settled in 15 Am. & Eng. Enc. Law (1st Ed.) 1086, where all the authorities are cited. It has been attempted many times to impose upon this rule an exception in cases where an immediate necessity for the article to be procured or services to be rendered has arisen, so that it would be impracticable to comply with the express provisions of the contract; and the learned counsel for the plaintiff has endeavored to bring this case within such an exception, and the case of Harlem Gaslight Co. v. Mayor, etc., of New York, 33 N. Y. 309 , is cited as an authority. In that case there were two opinions of the court,—one by Judge Porter, in which he held that the contract there in question was not within the legitimate scope and intent of the provisions of the amended charter; and one by Judge Brown, to the same effect. The case does not show with which of these opinions the court agreed, but, even by Judge Brown’s opinion, the right of the plaintiff to recover is put upon the express ground that, under the particular terms of the charter then in force, it could not have been intended to apply. But this case cannot be considered as an authority for a proposition that, when the furnishing of a special object or the rendition of a special class of services is expressly provided for by the charter, and provision is expressly made for the making of a contract for the supply of such materials or the rendition of such services, the court would nullify the statute, and hold that it could not apply, because, in its opinion, an immediate necessity arose for a violation of the charter. The question in this case must come down to the determination of the effect of the provisions of the charter regulating the making of contracts like the one in question. If there was no special provision in the charter for mailing contracts for lighting the streets or supplying gas or electricity to the city for lighting purposes, it might be that the rule ap

“The commissioner of public buildings, lighting and supplies * * * shall prepare the terms and specifications under which contracts shall be made for lighting the streets, public buildings and parks of said city. Separate contracts shall be made for such lighting in each of the boroughs of the city of New York, or in such subdivisions of the city as may appear to the board of public improvements and the municipal assembly to be for the best interest of said city. * * * Such bids shall be prepared and advertised for, and such contracts shall be executed in the manner prescribed for herein as to other contracts entered into by said city or the departments thereof. Contracta shall be made for the term of one year and shall be awarded to the lowest bidder.”

“All contracts shall be entered into by the appropriate heads of departments, and shall, except as herein otherwise provided, be founded_ on sealed bids or proposals made in accordance with public notice duly advertised in the City Record and the corporation newspapers, the said notice to be published at least ten days. If. the head of a department shall not deem it for the best interest of the city to reject all bids, he shall without the consent or approval of any other department or officer of the city government award the contract to the lowest bidder, unless the board of public improvements by a vote of a majority of its members of whom the mayor and comptroller shall be two, shall determine that it is for the public interest that a bid other than the lowest shall be accepted.”

It cannot be doubted but that these provisions of the charter provide a complete scheme for lighting the public streets and buildings, and for the procuring by the city of the necessary gas, electricity, or other illuminants for that purpose. The commissioner who is to have cognizance and control of the making and performance of contracts for that purpose was designated, and his duty as to such contracts was prescribed by section 587. The number, kind, and location of the lights to be furnished under each of said contracts was to be determined and prescribed by the commissioner. Bids were to be prepared and advertised for and contracts executed in the manner prescribed in the charter as to other contracts entered into by the city or the departments thereof, and such contracts were to be made for one year, and were to be awarded to the lowest bidder, Uothing could be more specific, and it is difficult to see how the legislature could have more clearly indicated its intention to require contracts for the furnishing of gas and electricity or other illuminants to be furnished under general contracts of this kind, to run for one year, and to be let to the lowest bidder, after public advertisement for bids, and restricting the power of the commissioner to make such contracts in any other manner than that prescribed by the charter. It seems to me that it was intended that the contract should provide that the contracting party should furnish to the city the light required by the city, and fix the price that it was to pay. Undoubtedly, the commissioner could, during the year, change the number of lights to be supplied by the contracting party, and the contract could be so arranged that the contracting party would be bound to furnish all lights required under the contract. What seems to me to be the clear intention of the legislature was that these contracts for public lighting should extend over a whole borough, or to such other territorial extent as the board of public improvements should provide, and that within such territory all lights to be furnished should be furnished by the contractor whose bid was accepted under the provisions of this section, and that these contracts should be made for one year. We have thus a complete and consistent scheme for procuring a contractor who will undertake to furnish to the city the necessary light for its public streets, places, and buildings; and the commissioner has no authority to enter into any other contract except such as are authorized by this express provision of the charter. Look for a moment at the effect of any other construction. Any officer holding this position of commissioner of buildings, lighting, and supplies, by simply making daily or monthly contracts,

There should, therefore, be judgment for the defendant, with costs.

(dissenting). That the commissioner of public buildings, lighting, and supplies did all in his power to make a contract for lighting with the plaintiff in the manner and for the time required by the statute, and that, so far as he could, he took every step necessary for that purpose, is conceded. It is also conceded that he was prevented from carrying the contract into effect by the failure of the municipal assembly to pass a general ordinance regulating the making of such contracts, and by its refusal to approve this particular •contract without giving any valid reason, so that the contract might be amended. It is also conceded that upon the verbal request of the commissioner the plaintiff furnished lights for the time during which it claims to be paid, although the statute authorizing contracts for lighting requires them to be made in a particular way, and for a particular time, and this was not done. Greater New York Charter, §§ 419, 587. And the law seems.to be settled that, where the mode of contracting is specially and plainly prescribed and limited, that mode