Boyle v. Grant — 36 N.Y. St. Rep. 207

Majority

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Charles Boyle and Peter Butterly, App’lts, v. Hugh J. Grant, Mayor, et al., Resp’ts.

(Supreme Court, General Term, First Department,

Filed December 31, 1890.)

Headnote

1. Municipal corporations—Contract—Waste.

An action by a taxpayer to restrain the city from making a contract with a corporation to light its streets cannot be maintained under chap. 531, Laws 1881, where the bid of such corporation was the lowest one made and was made in good faith. The fact that the corporation has no Tight to erect its poles in the street cannot be taken advantage of by the taxpayer to show that such contract would be illegal, as the corporation would be bound on entering into the contract to obtain the necessary right to enable it to perform. "

3. Same.

The bid of such corporation stated that no other person or corporation had any interest therein or in the contract proposed to be taken. In fact another corporation had agreed to pay the interest on its bonded indebtedness and a certain dividend on its stock, in return for which the bidding company was to pay over to it all its net earnings. Held, that the corporation ordinance was intended to compel the disclosure by bidders of just such relations with other parties, but that as there was nothing to show that such statement was made with intent to deceive or mislead the city authorities and as the latter were fully aware of the facts before the bid was accepted, they furnished no ground for judicial interference.

Appeal by plaintiffs from an order denying a motion for an injunction in a taxpayers’ action under chap. 531 of the Laws of 1881, as amended by chap. 673 of the laws of 1887.

The following is the opinion below:

Ingraham, T. This action is brought under the provisions of chapter 531, Laws 1881, and to entitle plaintiffs to maintain the action they must show that the defendants, as officers or commissioners acting on behalf • of the city, are about to do an illegal official act, or are about to commit some waste or injury to property or funds of the city. Plaintiffs have failed to show that the awarding of the contract by the defendants for the electric lighting of the streets named is illegal, or that the granting of such contract will be an injury to the property of the city. It is not ■claimed but that the bid of the United States Illuminating Company was the lowest bid for. lighting the streets named, but the ■plaintiffs appear to base their claim for an injunction upon the ■ground that the bid did not comply with an ordinance of the city of New York, which required that the bid should state the names •of all persons interested in the contract awarded. The evidence, however, fails to show that any other person or corporation had any interest in the proposed contract The fact that the corporation making the bid has an agreement with another corporation whereby such other corporation- agrees to pay interest on its bonded indebtedness, and a dividend on its stock, and to receive

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iu • consideration therefor the net earnings of the company over and above the expenses of the business, the interest on the bonds, and the guaranteed dividends, does not place such other corporations or individuals in the position of having an interest in the-contract any more than the stockholders of the corporation would, have such an interest if the net profits of the business were to b& paid to them. It is the corporation that is to execute the contract and perform the service, and to the United States Illuminating: Company is to be paid the money for such service. As to what the corporation will do with the money if it receives it is entirely immaterial either to the city, or the plaintiffs as taxpayers. The contract proposed will amply protect the city, and the services to-be performed under .the contract being at a less price than has heretofore been paid for the same service, and less than the other-bidders, it is evidently for the interest of the city and the plaintiffs, as taxpayers, that the contract should be awarded to such corporation, rather than to the other corporations or individuals-demanding a greater price.

There is no evidence but that the bid was made in perfect, good faith, and the fact that it is the lowest bid tends to show that no one else could be found to do the work on as advantageous terms to the city as this corporation. The other objections to the act of the defendants taken by plaintiffs are untenable, YThether or not the illuminating company has the right to erect its poles in the street to carry out its contract cannot be taken advantage of by the plaintiffs. The fact that the company has no such right does not show that the act of the defendants in awarding the contract to it is illegal. It undertakes to do the work for which the city is to pay, and proposes to furnish the necessary bonds as security for the performance of the contract. The burden- is upon the corporation to obtain the necessary right to-enable it to perform its contract. The objections taken by plaintiffs are all extremely technical. Rone of them would interfere' at all with the validity of the contract to be made in pursuance of the bid or the obligations of the sureties to the contract when executed. There is no reason to .suppose that in any way the corporation could procure a person to perform the service required at a less price, than that bid by the lowest bidder. The discretion .is vested in the defendants as to whether or not they will accept the bid of the United States Illuminating Company,, and I see no reason to doubt that that discretion will be properly-exercised and the city be amply protected by the defendants. Motion for injunction must therefore be denied, and temporary-injunction vacated, with costs.

Andrew Blake, for app’lts; William H. Clark, for resp’ts.

This action was instituted by the plaintiffs as taxpayers to prevent what they alleged to be an illegal official act on the part of the defendants in executing a contract with the United States Illuminating Company for the lighting of certain streets in the city of New York. The reasons which were given by the learned judge at chambers for denying the application for

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an injunction are so fully stated and so satisfactory in all respects but one that it is only necessary to discuss the single point in which we differ from his view of the law applicable to the case; and this difference does not affect the correctness of the result which he reached.

Section 64 of the New York city consolidation act of 1882 provides that contracts for supplies for the municipal corporation, in cases involving the expenditure of more than $1,000, shall be made under such regulations as shall be established by ordinance of the common council. A corporation ordinance .prescribes that all estimates for contracts for doing work or furnishing supplies for the city of New York shall state, among other things, whether the party, person or corporation making said estimate is the only person interested therein; and that if any other person or corporation have any interest in said estimate or the contract proposed to be taken thereby, the same shall be so stated.

In the estimate or bid of the United States Illuminating Company, it was stated that such bidder was the only person or corporation interested therein and that no other person or corporation had any interest in the estimate or in the contract proposed to betaken. The estimate, therefore, literally complied with the requirement of the ordinance. But the plaintiffs allege that the statement was untrue, and showed upon the hearing that an agreement existed between the United States Illuminating Company and the Safety Electric Light & Power Company, whereby the latter corporation had agreed to pay the interest on the bonded indebtedness of the former and a certain percentage of dividend on its stock in return" for which the United States Illuminating Company was to pay over to the Safety Electric Light & Power Company all its earnings over and above the expenses of the-business, the interest on its bonds and the amount of its guaranteed dividends.

The court below held that this arrangement did not make the Safety Electric Light & Power Company interested in the bid of the United States Illuminating Company in the contract sought thereunder “ any more than the stockholders of the corporation would have such an interest if the net profits of the business were to be paid to them.”

We are not prepared to accept this view. On the contrary, we are strongly inclined to the opinion that the ordinance under consideration was designed to compel the disclosure on the part of the bidders of just such relations with other parties as those which were0shown to exist in this case between the United States Illuminating Company and the Safety Electric Light & Power Company. But there is nothing to show that the statement in the bid to the effect that no one else was interested in the estimate or contract was made with any intent to deceive or mislead the city authorities ; they became fully aware of the exact interest, if it was an interest, of the Safety Electric Light & Power Company in the contract before the bid was accepted; there is not the slightest basis shown in the papera which were before the court for any

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supposition that the proposed contract was not in all respects beneficial to the city or that the defendants in accepting the bid had not acted in the best interest of the taxpayers; and hence the mere fact that a statement in the bid might be regarded as untrue upon a particular construction of a city ordinance, while under another interpretation it was entirely true, furnished no sufficient ground for any judicial interference with the action of the defendants in entering into the proposed contract.

The order below was right and should be affirmed, with costs and disbursements.

Yan-Brunt, P. J., and Barrett, J., concur.