It is a generally accepted rule of policy that a municipal corporation is under no obligation to make restitution for a benefit received under an ultra vires contract entered into by its officers, in case such restitution would increase the burden of taxation upon the members of the municipality:
Thomas v. City of Richmond, 1870, 12 Wall. (U. S.) 349: Bradley, J. (p. 356): "But, in the case of municipal and other public corporations, another consideration intervenes. They represent the public, and are themselves to be protected against the unauthorized acts of their officers and agents, when it can be done without injury to third parties. This is necessary in order to guard against fraud and peculation. Persons dealing with such officers and agents are chargeable with notice of the powers which the corporation possesses, and are to be held responsible accordingly." 1
1 Grand Lodge v. Waddill, 1860, 36 Ala. 313.
2 Valley R. Co. v. Lake Erie Iron Co., 1888, 46 Oh. St. 44 ; 18 N. E. 486; 1 L. R. A. 412. And see In re Mutual, etc., Ins. Co., 1899 107 la. 143; 77 N. W. 868.
Where, on the other hand, restitution will impose no burden upon the taxpayers, a recovery in quasi contract is permitted. Instances of this kind are found in cases of ultra vires contracts under which money is received by the corporation which either remains in its treasury or is expended for legitimate corporate purposes.2 This rule is held not to apply, however, to a case in which to allow a recovery would be to accomplish the very purpose of the ultra vires contract, as where it is sought to recover money paid for unauthorized municipal bonds or notes which have reached maturity.1
1 Also: Litchfield v. Ballou, 1884, 114 U. S. 190; 5 S. Ct. 820; Citizens' Bank v. City of Spencer, 1904, 126 la. 101; 101 N. W. 643, 645; South Covington Dist. v. Kenton Water Co., 1904, 117 Ky. 489; 25 Ky. Law Rep. 1592; 78 S. W. 420; Agawan Nat. Bank v. South Hadley, 1880, 128 Mass. 503; Bloomsburg Land Imp. Co. v. Blooms-burg, 1906, 215 Pa. St. 452; 64 Atl. 602.
See note in 4 Columbia Law Rev., 67 : "Municipal corporations stand in particular need of protection against their officers. In order to afford this protection the legislature has usually defined minutely the powers of these officers and the manner in which the same shall be exercised. When any act of the corporation, through its officers, will, directly or indirectly, vary in kind or degree the burden thus authorized to be placed upon the members of the corporation, public policy demands that recovery in any form shall be denied. If, however, reparation will not in any manner affect the burden upon the taxpayers the ordinary principles of quasi-contract will be applied."
2 Butts County v. Jackson Banking Co., 1908, 129 Ga. 801; 60 S. E. 149; 121 Am. St. Rep. 244; Dill v. Wareham, 1844, 7 Metc. (Mass.) 438; Leonard v. City of Canton, 1858, 6 George (35 Miss.) 189; Long v. Lemoyne Borough, 1908, 222 Pa. St. 311; 71 Atl. 211, (In First Nat. Bank v. City of New Castle, 1909, 224 Pa. St. 285; 73 Atl. 331; 132 Am. St. Rep. 779, recovery was denied where money had been advanced to the city treasurer or placed to his official account, the treasurer being at that time a defaulter: Long v. Lemoyne Borough, supra, approved.); Thomson v. Town of Elton, 1901, 109 Wis. 589. See also Lea v. Board of Com'rs, 1902, 114 Fed. 744; 52 C. C. A. 376; Municipal Security Co. v. Baker County, 1901, 39 Or. 396; 65 Pac. 369, (holding that where a county has received personal property or land under an ultra vires contract the vendor may recover in specie. Here, though, the statute of limitations had run).
It is necessary to distinguish between a benefit for which a municipal corporation has no power to contract, and a benefit for which it has the power to contract but which is actually received under a contract ultra vires because of its terms, or void because of non-compliance with some formal or preliminary requirement of the law, or because of an agent's want of authority. If a benefit is one which might have been lawfully obtained, restitution in value would not impose an unauthorized burden upon the taxpayers. It has accordingly been held that a city is liable for the value of the use of a water plant the lease of which was ultra vires because of a condition that the lessor should construct a railroad;2 likewise, that a city is bound to pay for the paving of streets although the contract provided for payment in bonds of the corporation the issue of which was unauthorized by law.3 Whether or not quasi contractual obligation arises from the receipt of a benefit under a contract not in substance or in terms beyond the power of the corporation to enter into, but void because of non-compliance with a formal or preliminary requirement relating to its formation, is a question upon which the authorities differ.4 Much depends, it is submitted, upon the purpose of the requirement and the extent to which it is disregarded. If the irregularity-is such as to deprive the municipality of the protection of a safeguard against the extravagance or corruption of its officers - as a substantial failure to comply with a requirement that contracts shall be let to the lowest bidder after due publication of notice1 - recovery should be denied. But if the irregularity is of a character that does not prejudice or endanger the interests of the municipality - as a failure to renew in writing, as required by law, a contract for gas supply2 - recovery should be allowed. There is likewise an apparent conflict of authority as to whether there can be a recovery for benefits conferred upon a municipal corporation under a contract void for want of authority in the officers acting or professing to act for the municipality.1 But here, again, the circumstances of the particular case are important. In general it would seem that a recovery should be allowed, but if the fact that the contract was made by one who had no authority to make it appears to have deprived the municipality of the protection of safeguards against maladministration, recovery should be denied:
1 Thomas v. City of Richmond, 1870, 12 Wall. (U. S.) 349; Litchfield v. Ballou, 1884, 114 U. S. 190; 5 S. Ct. 820. See Luther v. Wheeler, 1905, 73 S. C. 83; 52 S. E. 874; 4 L. R. A. (N. S.) 746, (criticism of this view by Wood, J.).
2 Higgins v. City of San Diego, 1897, 118 Cal. 524; 45 Pac. 824; 50 Pac. 670.
3 Hitchcock v. Galveston, 1877, 96 U. S. 341, (recovery on the contract appears to have been allowed). See also Chapman v. County of Douglas, 1882, 107 U. S. 348; 2 S. Ct. 62; City of Kansas City v. Wyandotte Gas Co., 1900, 9 Kan. App. 325; 61 Pac. 317, (same as to lighting contract).
4 Allowing a Recovery: Lincoln Land Co. v. Village of Grant, 1898, 57 Neb. 70; 77 N. W. 349, (ordinance void for defective title: approved, Nebraska Bitulithic Co. v. City of Omaha, 1909, 84 Neb. 375; 121 N. W. 443); Wentink v. Board of Freeholders, 1901, 66 N. J. L. 65; 48 Atl. 609, (failure to give notice to lower bidder in default before awarding contract to plaintiff); Ward v. Town of Forest Grove, 1891, 20 Or. 355; 25 Pac. 1020, (required ordinance wanting); Memphis Gaslight Co. v. City of Memphis, 1894, 93 Tenn. 612; 30 S. W.
25, (contract not in writing). See also Contra Costa Water Co. v. Breed, 1903, 139 Cal. 432; 73 Pac. 189, (opinion of McFarland, J.), For a good discussion of this distinction, see Bell v. Kirkland, 1907, 102 Minn. 213; 113 N. W. 271; 13 L. R. A. (N. S.) 793; 120 Am. St. Rep. 621.
Denying a Recovery: Zottman v. San Francisco, 1862, 20 Cal. 96; 81 Am. Dec. 96, (required publication, etc., wanting); Reichard v. Warren County, 1871, 31 la. 381, (not submitted to vote of people, as required); McCurdy v. County of Shiawassee, 1908, 154 Mich. 550; 118 N. W. 625, (money borrowed without authorization by vote of people); W. W. Cook & Son v. City of Cameron, 1910, 144 Mo. App. 137; 128 S. W. 269, (contract not reduced to writing and signed, as required by statute); McDonald v. Mayor, 1876, 68 N. Y. 23; 23 Am. Rep. 144, (required certificate of necessity, authorization by council, publication, etc., wanting); City of Bryan v. Page, 1879, 51 Tex. 532; 32 Am. Rep. 637, (required ordinance wanting); Paul v. City of Seattle, 1905, 40 Wash. 294; 82 Pac. 601, (required ordinance wanting). But see Moore v. Mayor, 1878, 73 N. Y. 238; 29 Am. Rep. 134, where it was said that a latent irregularity in an ordinance authorizing a contract will not bar a recovery. In many cases it has been held, contrary to principle, that a contract void for some irregularity or informality in its execution may be ratified by an acceptance of the benefit of its performance. See Abbott, "Municipal Corporations," Sec. 279 and cases cited.
1 McDonald v. Mayor, 1876, 68 N. Y. 23; 23 Am. Rep. 144, and other cases cited supra; City of Providence v. Providence Electric Light Co., 1906, 122 Ky. 237; 91 S. W. 664. But see Peterson v. City of Ionia, 1908, 152 Mich. 678; 116 N. W. 562; Nebraska Bitu-lithic Co. v. Omaha, 1909, 84 Neb. 375; 121 N. W. 443.
2 Memphis Gaslight Co. p. City of Memphis, 1894, 93 Tenn. 612; 30 S. W. 25. But see W. W. Cook & Son v. City of Cameron, 1910, 144 Mo. App. 137; 128 S. W. 269.
Hague v. Philadelphia, 1865, 48 Pa. St. 527: Agnew, J. (p. 529): "All experience teaches the utter impossibility of wholly preventing unfairness, and advantage taken in the execution of public contracts, even with the most vigilant watchfulness of the public interest. If, in addition, courts of justice hold that public servants can without authority bind the public for extras, even in proper and honest cases, they establish a principle which will greatly add to the demoralization of public contracts, and the means of robbing the treasury, whenever fraud and dishonesty can succeed in covering up the wrong. Now, more than ever, do we need a rigid enforcement of public contracts, and a stricter moral discipline, to defeat the varied plans by which money is taken from the treasury without authority. The older we grow as a people, the more systematized and difficult of detection do the schemes become for plundering the public; and among them all, none are more prominent or successful than those which concern contracts and jobs."
1 Allowing a Recovery: Chicago v. McKechney, 1903, 205 111. 372; 68 N. E. 954; Central Paving Co. v. Mt. Clemens, 1906, 143 Mich. 259; 106 N. W. 888; Auerbach v. Salt Lake County, 1901, 23 Utah 103; 63 Pac. 907; 90 Am. St. Rep. 685, (here there had been bribery on the part of the plaintiff's assignor and the contract was ultra vires); Rice v. Ashland County, 1902, 114 Wis. 130; 89 N. W. 908.
Denying a Recovery: Fountain v. Sacramento, 1905, 1 Cal. App. 461; 82 Pac. 637; Shaw v. City and County of San Francisco, 1910, 13 Cal. App. 547; 110 Pac. 149; Otis v. Inhabitants of Stockton, 1884, 76 Me. 506; Baldwin v. Inhabitants of Prentiss, 1909, 105 Me. 469; 74 Atl. 1038; Bartlett v. Lowell, 1909, 201 Mass. 151; 87 N. E. 195; Groton Bridge, etc., Co. v. Board of Suprs., 1902, 80 Miss. 214; 31 So. 711; Burgin v. Smith, 1909, 151 N. C. 561; 66 S. E. 607; Hague v. Philadelphia, 1865, 48 Pa. St. 527. And see Floyd County v. Allen, 1910, 137 Ky. 575; 126 S. W. 124; 27 L. R. A. (N. S.) 1125; Floyd County v. Owego Bridge Co., 1911, 143 Ky. 693; 137 S. W. 237, allowing the plaintiff to remove materials furnished.
In Ohio, the legislature, in prescribing how and by whom municipal contracts should be made, enacted that every "contract, agreement, or obligation" made contrary to the provisions of the act should be void as against the corporation, and it was held that quasi contractual obligations were included in the prohibition. City of Wellston v. Morgan, 1901, 65 Ohio St. 219; 62 N. E. 127.