Chapman v. Board of County Comissioners of the County of Douglas/Opinion of the Court

The statute of Nebraska, in force at the date of the transaction in question, conferring power on the county commissioners over the subject, (Rev. St. Neb. c. 40,) provided, section 17, 'that the county commissioners in each county are authorized, whenever they see fit to do so, to establish a poor-house;' and in the next section, that 'they may take to the county, by grant, devise, or purchase, any tract of land, not exceeding 640 acres, for the purpose of said poor-house.' Section 19 of the same chapter declares that 'said commissioners are hereby empowered to receive donations to aid in the establishment of such poor-house; and also empowered, from time to time, as they shall see fit, to levy and collect a tax, not exceeding 1 per cent., on the taxable property in the county, and to appropriate the same to the purchase of land not exceeding the aforesaid 640 acres; and to erect and furnish buildings suitable for a poor-house, and to put into operation and to defray the actual expenses of said poor-house, should the labor of the inmates be inadequate thereto. By section 23 of the same act, the commissioners are authorized, if they deem it to be for the interest of the county, to appropriate out of any other money belonging to the county any sum not exceeding $2,500, for the purpose of purchasing a farm and erecting thereon suitable buildings, as contemplated in the sections before referred to.

These provisions of the statute were construed by the supreme court of Nebraska in the case of Stewart v. Otoe Co. 2 Neb. 177. It does not appear from the report when this decision was made, but as the case arose upon a contract dated in January, 1870, it must, of course, have been long after the making of the contract which is the foundation of the present litigation. The decision of the supreme court of Nebraska referred to was rendered in an action brought upon a contract, similar in its character to the one between Chapman and Douglas county, to recover against Otoe county damages for its refusal to accept a deed and execute the note and mortgage contemplated. A judgment against the plaintiff sustaining a general demurrer to the petition was affirmed, on the ground that the contract was illegal and void. The court said:

'There is no authority of law for the county commissioners to     bind the county in the manner contemplated. They cannot give     a promissory note, nor can they mortgage the property of the      county. Should they formally do so, their action would be a     nullity. In the purchase of land for a poor-farm, the     authority of the commissioners of a county is very clearly      set forth. The mode of raising the money, and paying it over,     are all definitely stated. These statutes set a limit, beyond     which they cannot go. They are a guide, not only to the     commissioners, but equally so to all persons dealing with      them, who must see to it that their contracts are within the      boundaries thus described. * *  * Here we find the authority,      and indeed the only authority, for the purchase and payment      of money for a 'poor-farm' by the county commissioners; and      here, too, is specially designated the money that may be used      for that purpose, together with the mode of raising it. But     there is not one word about mortgaging the property of the      county to secure the payment of the purchase money at a given      time. The statutes provide the only security that can be     given. The public faith is pledged; and a tax, not exceeding     1 per cent., may be levied upon all the taxable property of      the county annually, and, when collected, paid to the person      entitled thereto by an order upon the treasurer of the      county, payable out of that special fund.'

The doctrine of this decision has been accepted by all parties to this suit, and we are not asked to consider any question as to its correctness, or as to our obligation to adopt it. We, therefore, assume it to be the law of Nebraska, applicable to the case, and the basis of further inquiry as to the relative rights of the parties to this litigation.

It is expressly declared by the supreme court of Nebraska, in this case, that it is clear that the county commissioners had power to purchase a poor-farm. The point of the decision is that this power does not extend to an agreement to pay as a definite time, or to give as security for payment a lien upon the land. The vendor must either receive the purchase money on delivery of the deed, or wait for its payment in the due course of administration, by the appropriation of the taxes levied, collected, and paid into the treasury applicable to that purpose.

If, in the present case, such had been the original understanding between the parties, and the deed had been delivered without payment, but upon orders drawn upon the county treasurer payable according to law, the vendor woudl have been obliged to wait during the reasonable delays of administration.

'Whoever,' said the supreme court of Nebraska, in Brewer v.     Otoe Co. 1 Neb. 373, 'deals with a county and takes in      payment of his demand a warrant of the character of these, no      time of payment being fixed, does so under an implied      agreement that if there be no funds in the treasury out of      which it can be satisfied, he will wait until the money can      be raised in the ordinary mode of collecting such revenues. He is presumed to act with reference to the actual condition,     and the laws regulating and controlling the business of the      country. He cannot be permitted, immediately upon the receipt     of such warrant, to resort to the courts to enforce payment      by judgment and execution, without regard to the condition of      the treasury at the time, or the laws by which the revenues      are raised and disbursed.'

Accordingly, in that case it was decided that the statute of limitations did not apply to cases of such claims against counties. The court, on that point, said:

'But these warrants do not, nor was it the intention of the     legislature that they should, fall within the operation of      this act. * *  * Nor can any action be brought on such warrant      until the fund is raised, or at least sufficient time has      elapsed to enable the county to levy and collect it in the      mode prescribed in the revenue laws. That the legislature     never intended that county warrants should be affected by the      limitation act before referred to, is evident, I think, from      the whole course of legislation respecting them. As late as     the twelfth of February, 1866, it was enacted that 'all debts      heretofore incurred by the county commissioners of any      county, acting in good faith, and duly recorded at the time      on their books, shall be deemed valid and the county shall be      held liable for the same.' Chapter 5, § 1, Rev. St. *  *  *      From these, as well as numerous other enactments of the legislature that might be cited, I have reached the      conclusion that the plea of the statute of limitations cannot      be successfully made against these warrants, and that      whenever it can be shown that the funds have been collected      out of which they can be paid, or sufficient time has been      given to do so in the mode pointed out in the statute, their      payment may be demanded, and, if refused, legally coerced.'

And if, in such cases, a proceeding in mandamus should be considered to be the more appropriate, and, perhaps, the only effective, remedy, it also is not embraced in the statute of limitations prescribed generally for civil actions. The writ may well be refused when the relator has slept upon his rights for an unreasonable time, and especially if the delay has been prejudicial to the defendant, or to the rights of other persons, though what laches, in the assertion of a clear legal right, would be sufficient to justify a refusal of a remedy by mandamus must depend, in a great measure, on the character and circumstances of the particular case. Chinn v. Trustees, 32 Ohio St. 236; Moses, Mandamus, 190. There is no statute of limitations in Nebraska applicable to that proceeding.

In the present case, however, it was not the understanding of the parties that the vendor should await the collection of taxes, as prescribed by the statute, for the payment of the purchase money, but, on the contrary, there was an agreement for payment in a definite time, without regard to the condition of the county treasury, and for security by way of notes and mortgages. The agreements, as we have assumed, so far as it relates to the time and mode of payment, is void; but the contract for the saie itself has been executed on the part of the vendor by the delivery of the deed, and his title at law has actually passed to the county. As the agreement between the parties has failed by reason of the legal disability of the county to perform its part, according to its conditions, the right of the vendor to rescind the contract and to a restitution of his title would seem to be as clear as it would be just, unless some valid reason to the contrary can be shown. As was said by this court in Marsh v. Fulton Co. 10 Wall. 676, 684, and repeated in Louisiana v. Wood, 102 U.S. 294, 299, 'the obligation to do justice rests upon all persons, natural and artificial, and if a county obtains the money or property of others without authority, the law, independent of any statute, will compel restitution or compensation.' And see, also, Miltenberger v. Cooke, 18 Wall. 421. The illegality in the contract related, not to its substance, but only to a specific mode of performance, and does not bring it within that class mentioned by Mr. Justice BRADLEY in Thomas v. Richmond, 12 Wall. 349, 356. The purchase itself, as we have seen, was expressly authorized. The agreement for definite times of payment and for security alone was not authorized. It was not illegal in the sense of being prohibited as an offense; the power in that form was simply withheld. The policy of the law extends no further than merely to defeat what it does not permit, and imposes upon the parties no penalty. It thus falls within the rule, as stated by Mr. Pollock, in his Principles of Contract, 264:

'When no penalty is imposed, and the intention of the     legislature appears to be simply that the agreement is not to      be enforced, then neither the agreement itself nor the      performance of it is to be treated as unlawful for any other      purpose.' Johnson v. Meeker, 1 Wis. 436.

The principle was applied in the case of Morville v. American Tract Society, 123 Mass. 129, 137, where it was said:

'The money of the plaintiff was taken and is still held by     the defendant under an agreement which, it is contended, it      had no power to make, and which, if it had power to make, it      has wholly failed on its part to perform. It was money of the     plaintiff, now in possession of the defendant, which in      equity and good conscience it ought now to pay over, and      which may be recovered back in an action for money had and      received. The illegality is not that which arises where the     contract is in violation of public policy or of sound morals,      and under which the law will give no aid to either party. The     plaintiff himself is chargeable with no illegal act, and the      corporation is the only one at fault in exceeding its      corporate powers by making the express contract. The     plaintiff is not seeking to enforce that contract, but only      to recover his own money and prevent the defendant from      unjustly retaining the benefit of its own illegal act. He is     doing nothing which must be regarded as a necessary      affirmance of an illegal act.' The decision of this court in Hitchcock v. Galveston, 96 U.S. 341, 351, covers the very point. There a recovery was allowed for the value of the benefit conferred upon the municipal corporation, notwithstanding, and, indeed, for the reason, that the contract to pay in bonds was held to be illegal and void. 'It matters not,' said the court, 'that the promise was to pay in a manner not authorized by law. If payments cannot be made in bonds, because their issue is ultra vires, it would be sanctioning rank injustice to hold that payment need not be made at all. Such is not the law.'

This doctrine was full recognized by the supreme court of Nebraska as the law of that state in the case of Clark v. Saline Co. 9 Neb. 516, in which it adopts, from the decision of the supreme court of California in Pimental v. City of San Francisco, 21 Cal. 362, the following language:

'The city is not exempted from the common obligation to do     justice which binds individuals. Such obligations rest upon     all persons, whether natural or artificial. If the city     obtains the money of another by mistake or without authority      of law, it is her duty to refund it, from this general      obligation. It she obtain other property which does not     belong to her, it is her duty to restore it, or, if used, to      render an equivalent therefor, from the like obligation. Argenti v. San Francisco, 16 Cal. 282. The legal liability     springs from the moral duty to make restitution.'

The conveyance by Chapman to the county of Douglas passed the legal title, but upon a condition in the contract which it was impossible in law for the county to perform. There resulted, therefore, to the grantor the right to rescind the agreement upon which the deed was made, and thus to convert the county into a trustee, by construction of law, of the title for his benefit, according to the often-repeated rule, as stated by Hill, Trustees, 144, that 'whenever the circumstances of a transaction are such that the person who takes the legal estate in property cannot also enjoy the beneficial interest, without necessarily violating some established principle of equity, the court will immediately raise a constructive trust, and fasten it upon the conscience of the legal owner, so as to convert him into a trustee for the parties who, in equity, are entitled to the beneficial enjoyment.' Upon this principle the vendor of real estate is treated as trustee of the title for the purchaser; and the mortgagee, having the legal title, after payment of the mortgage debt, is a trustee for the mortgagor. The analogy is complete between these, and every case, of which the present is one, where the holder of the legal title is under a duty to convey to another.

But, admitting that Chapman was entitled to call for a reconveyance, it is alleged that the statute of limitations of Nebraska, which bars the right to recover the title to real estate in 10 years from the time it first accrued, defeats the recovery.

The statute of limitations in force March 5, 1859, which was the date of the deed, prescribed 21 years, after the cause of action shall have accrued, as the period within which an action for the recovery of the title to lands must be brought. Rev. St. Neb. 1866, p. 395, § 6.

On February 12, 1869, the legislature of Nebraska passed an act, which took effect July 1, 1869, which amended this section so as to reduce the limitation to 10 years. It is not denied that if Chapman's cause of action first accrued to him on March 5, 1859, this amendment could not operate upon it, because to give it that effect would be to take away an existing right of action by mere legislation, as the 10 years would then have fully expired. It is, therefore, claimed that his right of action for a reconveyance of the title could only have first accrued when the first installment of the purchase money became due,-that is, on March 5, 1860,-which left eight months after the statute took effect before the 10-years' limitation would expire, which, it is claimed, would be a reasonable time within which to require that suits upon existing causes of action should be brought. But this view cannot be supported; for the original contract for payment, at a fixed time, is rendered invalid, for the same reason that avoided the notes and mortgage, the objection being, according to the decision of the supreme court of Nebraska, that the county had no power to bind itself to pay in any other manner than that prescribed by the statute. Hence, it must be held, in this aspect of the case, that the right of action was not postponed, after the date of the deed, by the credit given, and if it accrued at that time the limitation was 21 years, according to the statute then in force, within which the present suit was in fact brought.

But the more satisfactory answer to this defense is that none of the statutes of limitation referred to apply to the case at all. We have already seen that by the decision in the case of Brewer v. Otoe Co. 1 Neb. 373, it is the declared law of Nebraska that the claim against the county for the purchase money, on the supposition that the understanding had been to accept payment according to the terms of the statute, was not liable to the bar of the limitation acts. So that the obligation of the county to pay would not be extinguished by the statutory lapse of time. Now, although the right of Chapman to rescind the contract and demand a reconveyance accrued at the very date of the deed, he was not bound to exercise the right, and his cause of action did not accrue until he had made manifest his election. He had the right to treat as null that part of the contract which was illegal, and, having executed it on his part, to waive performance according to its terms, on the part of the county, and wait a reasonable length of time for the county to make the payment in the mode made lawful by the statute, before exerting his power to rescind the contract. Until that time had elapsed, and until, after that, Chapman had elected to rescind, there was no existing cause of action, and consequently nothing upon which the statute of limitations could begin to take effect. When that reasonable time expired we have no means of determining. It would depend upon circumstances not disclosed in the record, such as the state of the county treasury, the extent of its other obligations, the value of the taxable property, and its general financial condition. There is nothing whatever to show that the delay that has taken place in filing the present bill has been unreasonable. It is impossible, therefore, to say that any statute of limitations has even begun to run against the cause of action, much less that its bar has become complete.

There is nothing, therefore, to prevent the relief prayed for being granted, if it can be done without injustice to the defendant. On this point, it is said, it would be inequitable to decree a rescission of the contract and a restoration of the title to and possession of the property, because the parties cannot be placed In statu quo; that the circumstances have greatly changed by the increase in the value of the property and the expensive improvements that have been put upon it by the county. If the relief asked and expected was an unconditional reconveyance of the title and surrender of possession, this would undoubtedly be true. But such is not the case. Any such injurious and inequitable results as are deprecated may easily be averted by the simple payment of the amount due on account of the purchase money, which the appellants consent to receive, which is within the statutory powers of the county, and for which proper provisions may be made in the decree.

The principles on which we proceed to establish the right of the appellants to the relief prayed for were announced and acted upon by this court in the case of City of Parkersburg v. Brown, 1 SUP. CT. REP. 442, in which it was also held that the equity of the original grantor of the property sought to be reclaimed, passed by an assignment of the void securities. This settles the relative rights of Chapman and his co-complainants, the representatives of Ely, and entitles the latter, in the name of the former, to the relief prayed for in the bill.

And conversely, the right of the county, represented by its taxpayers, to require a rescission of such a contract, on condition of a surrender of the void securities on the part of the vendor, and a reconveyance of the title in consideration of which they were issued, was recognized by this court in the case of Champton v. Zabriskie, 101 U.S. 601.

In not granting this relief the circuit court erred, and its decree must be reversed, with directions to ascertain the amount due from the county of Douglas on account of the purchase money of the poorfarm, making any proper allowance as a compensation for the failure of the title to the 10-acre tract, and thereupon to render a decree, unless the amount so found due be paid within a reasonable time, to be fixed by the court, having reference to the necessity of raising the same by taxation, as regulated by the statute; that the county of Douglas be required by its commissioners to execute and deliver a deed, releasing to Chapman all the title acquired by it by virtue of the deed from him of March 5, 1859, to be conveyed by Chapman to William A. Ely, his co-complainant, and sole representative of Charles A. Ely, upon such terms as the equities of the case may require. It is accordingly so ordered.