A. conveyed, March 6, 1859, to a county in Nebraska certain
lands for a "poor farm," and they were thereafter used as such. The
county, pursuant to its agreement, made one cash payment, and for
the remainder of the stipulated consideration gave its notes
secured by mortgage, and payable respectively in one, two, three,
and four years. A. assigned the notes to B. Sometime thereafter,
the supreme court of the state decided that, by the purchase of
lands for such a purpose, a county could not be bound to pay at any
specified time the purchase money, or to secure it by mortgage upon
them, but was limited to a payment in cash and to the levy of an
annual tax to create a fund wherewith to pay the residue. A. and
B., the notes remaining unpaid, filed, Sept. 10, 1877, a bill
praying for a reconveyance and an accounting, or, should the county
elect to retain the lands, then for a decree for the value of
them.
Held:
1. That in view of that decision, the contract being
unauthorized only so far as it relates to the time and mode of
paying the purchase money, and the title to the lands having passed
by the conveyance, the county holds that title as a trustee for the
benefit of B., and that he is entitled to the relief prayed
for.
2. That unless the sum due on account of the purchase money,
after a proper allowance shall be made as a compensation for a
failure of A.'s title to a small part of the lands, be paid within
a reasonable time, to be fixed by the court below, having reference
to the necessity of raising the same by taxation, as prescribed and
limited by the statute, the county be required to execute and
deliver a deed, releasing to A. all the title acquired under his
deed, and that he convey the same to B.
3. That the suit is not barred by the Statute of
Limitations.
This is a bill in equity filed Sept. 10, 1877, by Chapman, a
citizen of Tennessee, and the representatives of Charles A. Ely,
deceased, citizens of Ohio, against the County of Douglas, a
municipal corporation of Nebraska.
The object of the bill is declared to be, and the prayer
corresponds to it, to compel the county to surrender possession of
two certain tracts of land therein described, one of one hundred
and sixty acres and one of ten acres, and to reconvey and release
the title thereto, which the county acquired under a deed made by
Chapman to the county on March 5, 1859, and for an account of the
rents and profits thereof; or,
"in case said County of Douglas and the corporate authorities
thereof shall elect and request to be allowed to retain and hold
the land described, then and in that case to compel said county and
the corporate authorities thereof to pay to or for your
orators,
Page 107 U. S. 349
as the court shall direct, the reasonable price and value of
said land, as stated in said deed of conveyance, with lawful
interest thereon from the date of said deed to the time of the
making of such payment."
It appears that on March 4, 1859, an agreement in writing and
under seal was entered into between Chapman and the County of
Douglas, the latter acting by the county commissioners, whereby
Chapman agreed to sell and convey the premises in controversy
"on the following conditions, to-wit, that the party of the
second part shall pay to the party of the first part at the
ensealing and delivery of a warranty conveyance from the party of
the first part to the party of the second part of the real estate
aforesaid, two thousand ($2,000) dollars in county orders of the
County of Douglas aforesaid on the treasurer of said County of
Douglas, and the balance of six thousand ($6,000) dollars in four
equal annual payments, together with interest on the amount due at
ten (10) percent per annum until paid, and the said party of the
first part will, when required, resign to and give up the
possession of said property to the party of the second part, or its
assigns or agents, immediately on the payment of the first payment
hereinbefore enumerated, and put the said County of Douglas or its
agents in full and peaceable possession of said described property.
And the said party of the second part agrees to purchase said
property on the terms aforesaid of the from the party of the first
part, and for the security of the deferred payments, as
hereinbefore set forth, to give a mortgage upon said described
property to the party of the first part."
On the next day, March 5, 1859, in pursuance of this agreement,
Chapman and wife executed and delivered to the county commissioners
a deed to the County of Douglas for the land, which was accepted
and placed by them on record. The first installment of the purchase
money, $2,000 in county orders, was paid at that time, when, also,
the county commissioners, in the name of the county, executed and
delivered to Chapman the four promissory notes required by the
agreement, payable in one, two, three, and four years from that
date, respectively, and a mortgage, in the usual form of a
conveyance in fee, with a defeasance to secure the payment of the
same, which was accepted and recorded.
Page 107 U. S. 350
The property was purchased for the use of the county for a
poorhouse and farm. Possession of it was taken immediately by the
county authorities, and it has been improved and used for that
purpose continuously ever since. The title of Chapman as to the one
hundred and sixty-acre tract was perfect, but as to the ten-acre
tract has failed.
On November 26, 1860, the notes and mortgage were assigned, for
value, to Charles A. Ely, who having since deceased, his rights
have devolved upon his legal representatives. On June 13, 1868,
William A. Ely, a minor and the devisee of Charles A. Ely, by his
next friend and guardian, commenced a suit in the district court
for Douglas County for the foreclosure of the mortgage, to which a
demurrer was interposed, on the ground that the notes and mortgage
were void
ab initio for want of power on the part of the
county to make them, and also because any action on them was barred
by the statute of limitations. This demurrer having been sustained,
the plaintiff dismissed the action on July 21, 1868, without
prejudice. On August 8, 1868, a similar suit, by bill in equity,
was begun in the circuit court of the United States, which, on
November 19, in the same year, was dismissed without prejudice, and
on March 15, 1869, a similar bill was filed in the same court, to
which the same defenses, as above stated, were raised upon a
demurrer, which was sustained, and subsequently, on December 30,
1872, the bill was dismissed without prejudice.
The answer to the present bill admits that no part of the $5,000
of the original purchase money has been paid, and that the rents,
issues, and profits of the premises, since the county has been in
possession of them, exceed the amount of the first installment
which was paid, and sets up the same defenses as before, that the
mortgage and notes are void for want of power on the part of the
county to make them, and that any action accruing to the
complainants is barred by lapse of time and the statutes of
limitation. It also admits
"that both the said commissioners and the said Chapman believed
that the said county had full power and authority to purchase said
lands and execute the said notes and mortgage for the unpaid part
of the purchase price, and that all the actings and doings of the
said parties in that behalf were had, made, and done in
Page 107 U. S. 351
perfect good faith, and for good and sufficient considerations,
in all things conformable to equity and good conscience, save as
hereinafter stated."
This saving is that
"the sum paid by this defendant for said lands, to-wit, $2,000,
was the full, fair value thereof at the time of the said purchase
and sale, and the amount of the said notes and mortgage was just so
much in excess of the true value thereof. This defendant is
informed and believes, and now here charges, that the said notes
and mortgage were made between the said Chapman and the said
commissioners, acting in the name of said county, with the full
knowledge on the part of all of them that the full and fair value
of the premises had been already paid therefor by the said county,
and that the agreement to give the said notes and mortgage was
unjust and oppressive toward the said county, and that, in fact
they were without consideration, and that the giving thereof was
induced by some secret and fraudulent agreement or understanding
between the said commissioners, or some of them, on the one side,
and the said Chapman on the other."
It also admits that during the delay of the complainants in
bringing their suit, "the evidences of the fraudulent, corrupt,
oppressive, and unjust contract of purchase have disappeared." No
evidence in support of the alleged fraud is therefore offered, and
the defendant is constrained to rely upon the statutes of
limitation, if any cause of action ever existed. In reference to
the allegation of the oppressive amount of the price agreed to be
paid, in addition to the fact admitted in the answer that the rents
and profits accrued to the county since it has been in possession
amounted in value to more than the payment made, it is also urged
in argument by its counsel, against a rescission of the contract,
that
"there has been such a change of circumstances that that mode of
relief would be most oppressive. This land, purchased when the
county was very sparsely settled, and situated very near to a town
which has recently grown to great importance, must have greatly
appreciated in value. Besides which fact there is the further one
already adverted to, that the county has improved it to the extent
of $30,000."
It is therefore insisted that the county should be permitted to
retain the land without paying for it.
Page 107 U. S. 352
On final hearing the bill was dismissed, and the decree to that
effect is brought here for review by this appeal.
MR. JUSTICE MATTHEWS delivered the opinion of the Court, and,
after stating the case as above, proceeded as follows:
The statute of Nebraska, in force at the date of the transaction
in question, conferring power on the county commissioners over the
subject provides: "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 six
hundred and forty acres for the purpose of said poor house." Secs.
17 and 18, Rev.Stat.Neb., c. 40. Sec. 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 one percent, on the taxable property in the
county and to appropriate the same to the purchase of land not
exceeding the aforesaid six hundred and forty 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 sec. 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 County, 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.
Page 107 U. S. 353
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 one percent 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."
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
Page 107 U. S. 354
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 would have been obliged to wait during
the reasonable delays of administration. "Whoever," said the
Supreme Court of Nebraska in
Brewer v. Otoe County, 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 12th 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."
Chap. 5, sec. 1, Rev.Stat. . . . From these, as well as numerous
other enactments
Page 107 U. S. 355
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 sale 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
County, 10 Wall. 676,
77 U. S. 684,
and repeated in
Louisiana v. Wood, 102 U.
S. 294,
102 U. S.
299,
"The obligation to do justice rests upon all persons, natural
and artificial,
Page 107 U. S. 356
and if a county obtains the money or property of others without
authority, the law, independent of any statute, will compel
restitution or compensation."
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. 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.
Page 107 U. S. 357
The decision of this Court in
Hitchcock v. Galveston,
96 U. S.
341,
96 U. S. 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 County, 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 on 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
Page 107 U. S. 358
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 ten 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 twenty-one 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.Stat.Neb.
1866, p. 395, sec. 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 ten 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 ten 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
ten-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
Page 107 U. S. 359
the limitation was twenty-one 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 County, 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
Page 107 U. S. 360
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
Parkersburg v. Brown, 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.
106 U. S. 106 U.S.
487. 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
Crampton 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 poor farm, making any proper allowance as a compensation for
the failure of the title to the ten-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
Page 107 U. S. 361
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.
