This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If performance by the adversary party gives something of value to the public corporation, suitable for the purposes for which it was formed, it is, according to the weight of authority, bound to pay a reasonable compensation therefor.1 Thus where or if ultra vires warrants are issued in payment for street curbing and paving,13 reasonable compensation must be made for such labor. A purchaser of invalid bonds from the original holder is allowed in some jurisdictions to recover on quantum meruit as assignee of such claim,14 in others not.15 One who buys void warrants can recover the amount originally paid in to the city only on showing that such funds were devoted to proper purposes.16 A public corporation may be liable in quantum meruit for work and labor furnished under a void contract, the benefits of which were received by the city.17 Thus if a city makes an ultra vires lease of land by the terms of which the lessee is to fill in on each side of a stone gutter which the city is to construct, which will prevent the soil from washing away, and the city does not construct such gutter, and therefore the lessee cannot use the realty for the purpose intended, the city is at least liable for the work done by him in making such fill.18 If the benefits under the contract have been received not by the municipality but by individuals or some local body, the corporation is not liable for what the adversary party has parted with under an ultra vires contract. A public corporation is not liable for local improvement made pursuant to unauthorized contracts.19 So a city is not liable in assumpsit for money received by it from the sale of bonds issued to aid a railroad, which money was expended in constructing a railroad depot and tracks within the city limits.20 Some courts have suggested a theory which is in some respects at least inconsistent with the views heretofore expressed. It is suggested as a proper test that if the contract is within the scope of corporate power and the power is merely exercised irregularly so as to make the contract itself unenforceable, recovery should he allowed on quantum meruit.21 On the other hand, if the contract is entirely without the powers of the corporation, there is no liability for work done thereunder even in quantum meruit.22
5 Kansas City v. O'Connor, 82 Mo. App. 655; Portland v. Paving Co., 33 Or. 307; 72 Am. St. Rep. 713; 44 L. R. A. 527; 52 Pac. 28.
6 Kansas City v. O'Connor, 82 Mo. App. 655.
1 Mealey v. Mayor, etc., Hagers-town, 92 Md. 741; 48 Atl. 746; Thomas v. Port Huron, 27 Mich. 320; State v. Pullman, 23 Wash. 583; S3 Am. St. Rep. 836; 63 Pac. 265; Balch v. Beach, 119 Wis. 77; 95 N. W. 132.
2 State v. Pullman, 23 Wash. 583; 83 Am. St. Rep. 836; 63 Pac. 265 (contract to buy a waterworks).
3 Penley v. Auburn, 85 Me. 278; 21 L. R. A. 657: 27 Atl. 158.
1 Chapman v. Douglas Co., 107 U. S. 348; Parkersburg v. Brown, 106 U. S. 487; City of Louisiana v. Wood, 102 U. S. 294; Pimental v. San Francisco. 21 Cal. 351; Ar-genti v. San Francisco, 16 Cal. 256; National Tube Works Co. v. Chamthe corporation receives money,2 as by the sale of void bonds,3 and it is used for a lawful purpose,4 or it borrows money without authority, and uses it for a lawful purpose, as for improving streets,5 or in buying a schoolhouse,6 or where a corporation receives a water supply,7 or public lights,8 it must make compensation therefor. So where a bond is invalid, because for a time shorter than the statutes provide, the lender may recover on debt.9 So if property is transferred to a public corporation under an ultra vires contract10 and the corporation voluntarily retains the property it must make compensation therefor. So if a city receives certain of its own bonds cancelled and given up under an ultra vires contract for refunding it must either return such bonds and recognize them as valid, or else account for whatever it has received under such contract.11 So if ultra vires bonds are issued for work done in laying a sidewalk,12 berlain, 5 Dak. 54; 37 N. W. 761; Chicago v. McKechney, 205 111. 372; 68 N. E. 954; affirming, 91 111. App. 442; Schipper v. Aurora, 121 Ind. 154; 6 L. R. A. 318; 22 N. E. 878; Turner v. Cruzen, 70 Ia. 202; 30 N. W. 483; Brown v. Atchison, 39 Kan. 37; 7 Am. St. Rep. 515; 17 Pac. 465; Grand Island Gas Co. v. West, 28 Neb. 852; 45 N. W. 242; Ward v. Forest Grove, 20 Or. 355; 25 Pac. 1020; Livingston v. School District, 11 S. D. 150; 76 N. W. 301; Schneider v. Menasha, - Wis. -; 95 N. W. 94; Paul v. Kenosha, 22 Wis. 266; 94 Am. Dec. 598.
2 Bangor Savings Bank v. Stillwater, 49 Fed. 721; Allen v. La Fayette, 89 Ala. 641; 9 L. R. A. 497; 8 So. 30.
3 Geer v. School District, 111 Fed. 682; 49 C. C. A. 539; Paul v. Kenosha, 22 Wis. 266; 94 Am. Dec. 598.
4 Thomson v. Elton, 109 Wis. 589; 85 N. W. 425.
5 Bangor Savings Bank v. Stillwater, 49 Fed. 721.
6 Allen v. La Fayette, 89 Ala. 641; 9 L. R. A. 497; 8 So. 30.
7 Higgins v. San Diego, 131 Cal. 294; 63 Pac. 470; Higgins v. San Diego, 118 Cal. 524, 537; 45 Pac. 824; modified on rehearing, 50 Pac. 670; Nicholasville Water Co. v. Nicholasville (Ky.), 38 S. W. 430; denying rehearing in 36 S. W. 549.
8 City of Kansas City v. Gas Co., 9 Kan. App. 325; 61 Pac. 317; Wellston v. Morgan, 59 O. S. 147; 52 N. E. 127. So a city must pay for private water pipe taken for the city's system and kept if it cannot restore it. Cleveland v. Denison, 16 Ohio C. C 541.
9 People's Bank v. School District, 3 N. D. 496; 28 L. R. A. 642; 57 N. W. 787.
10 Chapman v. Douglas County, 107 U. S. 348; Parkersburg v. Brown, 106 U. S. 487.
11 Brown v. Atchison, 39 Kan. 37; 7 Am. St. Rep. 515; 17 Pac. 465.
12 Hitchcock v. Galveston, 96 U. S. 341.
13 Johnson v. Alderson. 33 W. Va. 473; 10 S. E. 815.
14 Geer v. School District, 111 Fed. 682; 49 C. C. A. 539.
15 Coquard v. Oquawka, 192 111. 355; 61 N. E. 660.
16 Watson v. Huron, 97 Fed. 449; 38 C. C A. 264.
17 Chicago v. McKechney, 205 111. 372; 68 N. E. 954; affirming, 91 111. App. 442.
18 Schipper v. Aurora, 121 Ind. 154; 6 L. R. A. 318; 22 N. E. 878.
19 Willis v. Wyandotte Co., 86 Fed. 872; 30 C. C. A. 445; Wrought Iron Bridge Co. v. Hendricks Co., 19 Ind. App. 672; 48 N. E. 1050.
20 Travelers' Ins. Co. v. Johnson City. 99 Fed. 663; 49 L. R. A. 123; 40 C. C. A. 58.