Citizens' Savings Bank v. Owensboro, 173 U.
S. 636, followed to the point that in the case of a bank
whose charter was granted subsequently to the year 1866, and which
had accepted the provisions of the Hewitt Act
Page 174 U. S. 413
and had thereafter paid the tax specified therein, there was no
irrepealable contract in favor of such bank that it should be
thereafter and during its corporate existence taxed under the
provisions of that act.
The agreement set forth in the statement of facts between the
City of Louisville, the sinking fund commissioners of that city,
represented by the city attorney, and the various banks of that
city acting by their attorneys, was not a valid agreement within
the power of an attorney at law to make.
An attorney, in his capacity merely as such, has no power to
make any agreement for his client before a suit has been commenced
or before he has been retained to commence one, and if, under such
circumstances, he assumes to act for his principal, it must be as
agent, and his actual authority must appear.
An equitable estoppel which would prevent the state from
exercising its power to alter the rate of taxation in this case
should be based upon the clearest equity, and the payment of the
money under the circumstances of this case, not exceeding the
amount really legally due for taxes, although disputed at the time,
does not work such an equitable estoppel as to prevent the
assertion of the otherwise legal rights of the city.
The bill in this case was filed in 1897 by the Bank of Commerce,
a citizen and resident of the City of Louisville, in the State of
Kentucky, for the purpose of obtaining an injunction restraining
the defendants from assessing the complainant, and from collecting
or attempting to collect any taxes based upon the assessment spoken
of in the bill, and for a final decree establishing the contract
right of the complainant to be taxed in the method prescribed by
the Act of May 17, 1886, known as the "Hewitt Act," the terms of
which it alleged it had accepted. The bill sought to perpetually
enjoin the defendants from assessing the franchise or property of
the complainant in any other manner than under that act. The
material provisions of the Hewitt Act are set out in the opinion of
the court, delivered by MR. JUSTICE WHITE, in the case of
Citizens' Savings Bank of Owensboro v. Owensboro,
173 U. S. 636.
In 1891, Kentucky adopted a new constitution, section 174 of
which, providing for the taxation of all property in proportion to
its value, is also set forth in the above-cited case.
The legislature of the state in 1892 passed an act in relation
to the taxation of banks and other corporations which was in
conflict with the Hewitt Act, and provided for taxing the
Page 174 U. S. 414
banks in a different manner from that act, and also subjected
the banks to local taxation, the total being much more onerous than
that enforced under the Hewitt Act.
The complainant was incorporated under an Act of the legislature
of Kentucky approved February 10, 1865, and it had all the powers
granted by that act and the several amendments thereof as alleged
in its bill.
There were various other banks in the City of Louisville which
also alleged that they had accepted the terms of the Hewitt Act,
and by reason thereof had a valid contract with the state that they
should be taxed only under the provisions of that act.
The complainant alleges in its bill that early in the year 1894,
a demand was made on the part of the defendant the City of
Louisville, based upon the act of 1892 and the ordinance adopted in
pursuance thereof, for the payment of a license tax equal to four
percent of its gross receipts into the sinking fund of the city.
The banks denied their liability to pay any tax other than that
provided in the Hewitt Act, and hence arose the differences between
the city and the banks.
No litigation had been commenced for the purpose of testing the
questions at issue between the city and the banks, although
negotiations looking to that end had been in progress between the
city attorney of Louisville and the members of the sinking fund
board, on the one hand, and the counsel for the various banks and
trust companies, on the other. There is set forth in the bill of
the complainant the action of the sinking fund board, as
follows:
"Sinking Fund Office,
Feb'y 13, 1894"
"A committee, consisting of Messrs. Thomas L. Barrett, John H.
Leathers, and George W. Swearingen appeared before the board on
behalf of the banks who are members of the Louisville Clearing
House and stated that it was the purpose of said banks to resist
the payment of the license fee demanded of them under the license
ordinance approved January 29, 1894, on the ground that said banks
were not legally liable to pay the same, but, in order to save the
sinking fund
Page 174 U. S. 415
from any embarrassment occasioned by their refusal to pay said
license fee, the banks, with two or three exceptions, were willing
to enter into an arrangement whereby they would pay a part of the
amount demanded of them and lend the sinking fund the balance
thereof, to be repaid, with interest at four percentum per annum,
if it was finally decided and adjudged that the banks were not
liable to pay said license fees."
"After discussion, the president was, on motion of Mr. Tyler,
seconded by Mr. Summers, authorized to enter into the following
arrangement with the different banks, trust and title companies who
will be subject to the payment of the license fees if the license
ordinance is finally adjudged to be valid and enforceable:"
"First. To accept from each of said banks and companies a
payment equal to the difference between the amount they now pay to
the state for state taxes and the amount they would be required to
pay for state taxes under the provisions of what is known as the
'Hewitt Bill.' This sum shall be an actual payment, not to be
repaid under any circumstances, but its payment shall not in any
manner or to any extent prejudice the banks or companies paying it,
or be taken as a waiver of any legal right which they have in the
premises."
"Second. In addition to making the above payments, the said
banks and companies, save those selected to test the question
involved, shall each lend to the sinking fund a sum which, added to
said payment, will equal four percentum of its gross earnings
during the year 1893, and the sinking fund will execute for said
loans its obligations, agreeing to repay the same, with interest at
four percentum per annum, when and if it shall be finally adjudged
by the court of last resort that said banks or companies are not
liable to pay the license fee required by the ordinance aforesaid;
but if it is finally adjudged that they are liable to pay said
license fee, then the said loan shall be taken and deemed as a
payment of said license fee, and the obligation to repay the same
shall be void."
"Third. The banks or companies selected to test the question
involved will each lend the sinking fund a sum equal to four
percentum of their gross earnings for the year 1893, and
Page 174 U. S. 416
will receive therefor the obligations of the sinking fund as
above described."
"Fourth. This arrangement is to be entered into with the
understanding that the said banks and companies will institute
without delay and diligently prosecute such actions as may be
necessary to settle and adjudge the right and liabilities of the
parties in the premises, and pending such proceedings, the sinking
fund will not prosecute them, or any of them, for doing business
without license."
"A true copy. Attest: J. M. Terry"
"
Secretary and Treasurer"
Following the above, the complainant's bill contains what is
termed a
"Stipulation between the City of Louisville, the Commissioners
of the Sinking Fund of the City of Louisville, and the Banks,
Trust, and Title Companies of the City of Louisville,"
which stipulation reads as follows:
"It is agreed between the City of Louisville, the Commissioners
of the Sinking Fund of the City of Louisville, represented by H. S.
Barker, City Attorney, acting under the advice and by the authority
of the Board of Sinking Fund Commissioners, given at a regular
meeting of said board, and the Mayor of the City of Louisville, on
the one part, and the various banks, trust and title companies of
the City of Louisville, acting by Humphrey & Davie and Helm
& Bruce, their attorneys, of the other part:"
"First. That in February, 1894, it was agreed between the City
of Louisville and the board of sinking fund commissioners, acting
together in the interest of the said city, and the various banks,
trust and title companies, acting through their committee, to-wit,
Messrs. Thomas L. Barrett, John H. Leathers, and George W.
Swearingen, and their counsel, to-wit, Messrs. Humphrey & Davie
and Helm & Bruce, that the question of the liability of said
banks and trust and title companies to pay municipal taxes, either
license or
ad valorem, otherwise than as provided by the
revenue law, commonly known as the 'Hewitt Bill,' should be tested
by appropriate litigation looking to that end. "
Page 174 U. S. 417
"Second. In order to effectually test the question as to all of
said companies, they were divided into three classes, it being
understood that all who had accepted the provisions of the said
Hewitt Bill would fall in one or the other of the classes named,
to-wit:"
"(A) Banks whose charters had been granted prior to 1856."
"(B) Banks whose whose charters had been granted subsequent to
1856."
"(C) National banks."
"It being understood that the trust and title companies which
had accepted the provisions of the Hewitt Bill would fall in class
B, above named."
"Third. In pursuance of that agreement the sinking fund
commissioners caused to be issued warrants against the Bank of
Kentucky, representing class A, the Louisville Banking Company,
representing class B, and the Third National Bank, representing
class C, and these banks respectively applied for a writ of
prohibition against the City Court of Louisville, proceeding with
the hearing, that being the manner pointed out by the city charter
for testing the validity of city ordinances."
"It was distinctly understood and agreed at that time -- and
this agreement was made for the best interest of all parties to it
-- that if any bank in any class should eventually fail to
establish the existence and validity of the contract which it was
claimed was made under the Hewitt Bill, that all of that class
should thereafter regularly and promptly submit to the existing
laws and pay their taxes, and it was also agreed that if any bank
of any class should succeed in establishing a contract and the
validity thereof under the Hewitt Bill, that that should exempt all
banks and companies falling within that class from the payment of
taxes except as provided in the Hewitt Bill."
"Fourth. On the faith of this agreement, all of the banks and
companies aforesaid paid into the sinking fund the amounts of taxes
claimed against them under the terms and conditions named in the
minutes of the sinking fund commissioners of February 13, 1894, an
attested copy of which is hereto attached as part hereof; but at a
later date, and in further
Page 174 U. S. 418
reliance upon said agreement, all said banks and companies,
except those actually involved in the test cases, paid the whole of
the amount of taxes claimed as against them by the City of
Louisville, without reservation, until the question thus raised
should be finally disposed of."
"Humphrey & Davie"
"Helm & Bruce"
"
For Banks, Trust and Title Companies, of the City of
Louisville"
"H. S. Barker,
City Att'y"
"Approved:"
"C. H. Gibson"
"
Pres't Comm'rs Sinking Fund City of Lou."
"A true copy. Attest:"
"Huston Quinn"
"Arthur Peter"
"M. McLoughlin"
The Louisville Banking Company was one of the banks which
brought an action for the purpose of testing the question of its
liability to taxation. The charter of that company was granted
subsequent to the year 1856, and in that respect it was like the
defendant bank. It also claimed to have accepted the provisions of
the Hewitt Act. In the litigation which followed, the Louisville
Banking Company was adjudged by the Court of Appeals of Kentucky to
have an irrepealable contract, throughout its charter existence, to
be taxed under the Hewitt Act, and judgment pursuant to that
adjudication was entered in favor of that company. The complainant
herein claimed the benefit of the foregoing adjudication, and the
circuit court allowed it, and gave judgment as follows:
"1. That the complainant is entitled to the benefit of the
proceedings taken in the case of
Louisville Banking Company v.
R. H. Thompson, Judge, etc., in the Jefferson Court of Common
Pleas, and the proceedings taken in said cause on appeal to the
Court of Appeals of Kentucky wherein the Louisville Banking Company
was appellant, and the said R. H. Thompson, judge, etc., and the
City of Louisville, were appellees, to the same extent as if the
complainant had been a party to said proceedings. "
Page 174 U. S. 419
"(2) That it is
res judicata between the complainant
and the City of Louisville that the complainant is entitled to be
taxed under what is known as the 'Hewitt Revenue Law,' and not
otherwise, and it is therefore adjudged, ordered, and decreed that
the defendants Samuel H. Stone, Charles Findley, and George W. Long
are perpetually enjoined and restrained from making any assessment
under the Act of November 11, 1892, or certifying the same, to the
City of Louisville, upon any rights, properties, or franchises, or
shares of stock, of the complainant, and that any provisions of the
constitution of the State of Kentucky, and any provision of the
said Act of November 11, 1892, or of the city charter, which may be
construed as authorizing the levy or assessment of any tax against
the complainant, its rights, properties, or franchises, other than
as allowed by the said Hewitt Law, is, during the corporate
existence of the complainant, unconstitutional and void, and that
the complainant and its shares of stock are exempt from all other
taxation whatsoever except as prescribed in the said Hewitt Law, so
long as said tax shall be paid during the corporate existence of
complainant."
The defendants appealed directly to this Court from the judgment
of the circuit court under the provisions of section 5 of the act
of 1891, 26 Stat. 826, because the case involved the application of
the Constitution of the United States and because a law of the
State of Kentucky was claimed to be in contravention of that
Constitution.
MR. JUSTICE PECKHAM, after stating the facts, delivered the
opinion of the Court.
We have already decided, in
Citizens' Saving Bank of
Owensboro v. City of Owensboro, 173 U.
S. 636, that in the case of a bank whose charter was
granted subsequently to the
Page 174 U. S. 420
year 1856, and which had accepted the provisions of the Hewitt
Act, and had thereafter paid the tax specified therein, there was
nevertheless no irrepealable contract, in favor of such bank that
it should be thereafter, and during its corporate existence, taxed
under the provisions of that act. And in the same case we held that
the bank was properly taxed under the act of the Legislature of
Kentucky passed in 1892. Unless the complainant is right in its
contention that it is a privy to the judgment in the case of the
Louisville Banking Company (mentioned in the foregoing statement),
and that the question is
res judicata in its favor, the
complainant has failed to make good its claim to be exempted from
the provisions for its taxation under the act of 1892. The circuit
court has held that the complainant was entitled to be regarded as
privy to the judgment above mentioned in favor of the Louisville
Banking Company, 88 F. 398, and that it could therefore avail
itself of the judgment in that case, as
res judicata.
The sole question to be determined in this case is as to the
validity and effect of the agreement above set forth. The
complainant herein was not in fact a party to the judgment in the
Louisville Banking Company case, and it can only obtain
the benefit of that judgment by virtue of the agreement.
The commissioners of the sinking fund form a separate and
distinct corporation from the City of Louisville, and no right is
shown to sign or make the agreement for itself or to bind the city
thereby. The agreement is not signed by the mayor, nor is it
pretended that there was any action on the part of the general
council of the city authorizing the making of the agreement. It was
signed by the city attorney, and, if he had no power to sign on
behalf of the city, there is nothing to create any liability on its
part by virtue of the agreement unless the payment of the money
therein spoken of operates by way of estoppel to prevent the city
from setting up the invalidity of such agreement. The effect of the
payment of the money will be adverted to hereafter.
Upon its face, there is no agreement even formally made between
the City of Louisville and the banks, of which the complainant
herein is one, unless the signature of the city
Page 174 U. S. 421
attorney makes a valid agreement for the city. When the
agreement was made, no suit had been commenced by any of the
parties; no litigation in regard to matters in dispute was pending.
Prior to the making of the agreement, it was a question altogether
in the future as to what means should be adopted, and what suits
commenced, for the purpose of establishing the rights of the
various parties as claimed by them. The question as to what course
should be pursued was not one of law only. It was also one of
policy. The stipulation actually entered into was of an
administrative, as well as of a legal, nature involving the
administration of the law regarding taxation and the best means of
determining the legal questions involved in the dispute while at
the same time obtaining so far as possible payment of the taxes
claimed by the commissioners of the sinking fund as due from the
various banks and trust companies. These were questions which an
attorney would have no power to decide and concerning which he
would have no power to make any agreement.
An attorney, in his capacity merely as such, has no power to
make any agreement for his client before a suit has been commenced
or before he has been retained to commence one. Before the
commencement of a suit or the giving of authority to commence one,
there is nothing upon which the authority of an attorney to act for
his client can be based. If, before the commencement of any suit,
an attorney assumes to act for his principal, it must be as agent,
and his actual authority must appear, and if it be not shown, it
cannot be inferred by comparison with what his authority to act
would have been if a suit were actually pending and he had in fact
been retained as attorney by one of the parties. The authority of
an attorney commences with his retainer. He cannot, while acting
generally as an attorney for an estate or a corporation, accept
service of process which commences the action without any authority
so to do from his principal. This was directly decided in
Starr
v. Hall, 87 N.C. 381, and
Reed v. Reed, 19 S.C. 548,
so far as regards a personal defendant, but the same rule would
follow in case of a corporation unless authority to appear were
specially given.
Page 174 U. S. 422
When an attorney has been retained, he has certain implied
powers to act for his client, in a suit actually commenced, in the
due and orderly conduct of the case through the courts. In cases of
suits actually pending, he may agree that one suit shall abide the
event of another suit involving the same question, and his client
will be bound by this agreement.
Ohlquest v. Farwell, 71
Ia. 231;
Northern Missouri Railroad Company v. Stephens,
36 Mo. 150;
Eidam v. Finnegan, 48 Minn. 53;
Gilmore v.
American Central Insurance Company, 67 Cal. 366; 1 Lawson,
Rights, Rem. & Pr., section 173, page 292; 1 Thompson on
Trials, section 195.
One case has gone to the extent of holding the attorney's
authority to agree that the case of his client should abide that of
another included his right to agree that the case should abide that
of another involving the same question, although his client was not
a party to that case, and had no power to interfere in its
prosecution or defense.
Scarritt Furniture Company v.
Moser, 48 Mo.App. 543, 548.
There might perhaps be some doubt about the correctness of a
decision which so extended the power of the attorney. It would be
carrying the authority of an attorney a good way to thus hold. It
is not, however, in the least necessary for us to decide the
question in this case.
All the above cases relate to the authority of the attorney
after the actual commencement of suit, and after the jurisdiction
of the court has attached, and the agreements made were in the
discharge of the duties owing as between attorney and client, and
subject to the supervision and power of the court itself.
Nothing of the kind exists in the agreement here in question. It
is more than a mere agreement of an attorney to abide the event of
a decision in an actually existing suit. This agreement was not in
the execution of the general power of an attorney to decide upon
the proper conduct of a suit then on its way through the courts. It
was an agreement much more than that, and of a different nature. As
we have said, the question to be determined was one of policy as
well as of law -- eminently one for the consideration of the city
authorities, its
Page 174 U. S. 423
mayor and its general council, aided and assisted by the advice
of the attorney of the city. But it was a decision of a corporate
nature, and not one to be decided by any but the corporation, and
it was one which we think was beyond the power of an attorney to
make, while acting merely in his capacity as attorney, before suit
brought and without specific authority.
We are also of opinion that as, city attorney, he had no greater
power to bind the city by that agreement than would an attorney
have in the case of an individual. The power of an attorney to
conduct an actually existing suit, and in its proper conduct to
agree to certain modes or conditions of trial, cannot be enlarged
by implication so as to embrace a power on the part of an attorney,
before litigation is existing and before he has been retained to
conduct it, to enter into an agreement of the nature of this one.
It might be convenient to have such power, and the commencement of
a suit and a retainer to defend may be a mere technicality, but the
power of an attorney depends upon the authority given him to
commence a suit or to defend a suit actually brought, and he has no
power as an attorney until such fact exists.
Section 2909, Revised Statutes of Kentucky, provides that:
"There shall be elected by the general council, immediately upon
the assembling of the new board, a city attorney, whose duty it
shall be to give legal advice to the mayor and members, of the
general council, and all other officers and boards of the city in
the discharge of their official duties. If requested, he shall give
his opinions in writing, and they shall be preserved for reference.
It shall also be his duty to prosecute and defend all suits for and
against the city, and to attend to such other legal business as may
be prescribed by the general council."
We do not think this section gave him the power to bind the city
by the agreement in question. He is undoubtedly the retained
attorney of the city in every suit brought against it, and it would
have been his duty to take charge of the litigation when it should
arise between the banks and the commissioners of the sinking fund
or the City of Louisville -- that is, when the suit was commenced
the statute operated in place
Page 174 U. S. 424
of a retainer in case of a personal client. When suits were
commenced against the city, it was his duty to defend them, but he
had no power to appear for the city as a defendant in a suit which
had not been commenced or to accept service of process and waive
its service upon the proper officer without authority from that
officer. Merely as city attorney, he had no larger powers to bind
his clients before suit was commenced than he would have had in the
case of an individual in like circumstances. There must be
something in the statute providing for the election or appointment
of an attorney for a corporation that would give such power;
otherwise, it does not exist. We find nothing of the kind in the
statute cited. The supreme court of New York held at special term
that the counsel to the Corporation of the City of New York had no
greater powers than an ordinary attorney to bind his client.
People v. Mayor, etc., of New York, 11 Abb.Pr. 66.
The agreement here in question, it is perceived, is much more
extensive than a mere agreement to abide the event of another suit,
and it is quite plain that it embraces more than the attorney had
the right to bind the city to, even if an action had then been
commenced and the agreement was made in that action. However
imperative may have been his duty to save costs and expenses to the
city, he was not authorized on that account to enter into
agreements of the nature of this one where no suits had been
commenced against the city and the commencement of which he had no
power to provide for.
Nor do we see that the commissioners of the sinking fund were
granted any power to make the stipulation in question -- certainly
none to bind the City of Louisville. Our attention has not been
drawn to any statute giving them power to make an agreement of this
nature.
Parties dealing with a municipal corporation are bound to know
the extent of the powers lawfully confided to the officers with
whom they are dealing in behalf of such corporation, and they must
guide their conduct accordingly.
Murphy v. Louisville, 72
Ky. 189.
As a result, we think the stipulation was not a valid one,
Page 174 U. S. 425
binding either the commissioners of the sinking fund or the City
of Louisville.
It is contended, however, on the part of the complainant that
the payment of the money to the commissioners of the sinking fund
pursuant to the provisions of the stipulation and its receipt by
them estops the City of Louisville from asserting the invalidity of
the stipulation. The claim of complainant on this branch of the
case is in substance that it has the right, under the agreement, to
the benefit of the judgment in favor of the Louisville Banking
Company as
res judicata in its favor because the city,
having received the money by virtue of the agreement, is estopped
by that fact from insisting upon its invalidity.
The money was paid to the commissioners of the sinking fund, and
not to the city, which is a separate and distinct corporation. No
corporate act on the part of the city is shown since the payment
which recognizes or approves it. There is no ratification by the
City of Louisville of this unauthorized act of its attorney. In
speaking of the act of the attorney as unauthorized, we do not mean
to reflect in the slightest degree unfavorably upon the conduct of
the city attorney, which seems by this record to have been prompted
solely by a regard for the best interests of the city and by the
most scrupulous good faith. We speak only of the act as one for
which the law would not hold the city answerable.
But let us look for a moment at the position occupied by the
respective parties and the facts which surround this alleged
estoppel upon the city, and for this purpose, the invalidity of the
agreement is assumed. The banks of which complainant was one at the
time this agreement was entered into conceded that they were liable
to the payment of taxes under the Hewitt Act and denied that they
were liable to pay taxes under the act of 1892. The city, on the
contrary, asserted the right to tax under the act of 1892, and the
question became one for judicial decision. The banks paid the
moneys spoken of in the agreement, and proceedings were inaugurated
to test the legal question involved in the dispute.
Page 174 U. S. 426
It is alleged on the part of the complainant that the taxes
under the act of 1892 were and are greater in amount than under the
Hewitt Act, and it is not alleged or contended that the amount of
moneys paid by the various banks was any greater than would have
been due and payable under the act of 1892 -- that is, the banks
have in fact paid no more than they ought to have paid if they had
complied with the provisions of the act of 1892. This Court has
just decided in the
Owensboro case, above cited, that the
claim on the part of the banks of an irrepealable contract under
the Hewitt Act was not well founded, and that the banks (so far as
concerns that contention) have been liable to pay taxes under the
act of 1892 ever since that act was passed. The complainant now
asserts that because the banks paid the money which they did under
the agreement above mentioned (although such money was certainly no
more than they were legally bound to pay under the act of 1892),
therefore the city is estopped from setting up the invalidity of
this agreement. The result would be that complainant, by virtue of
the judgment in the
Louisville Banking Company case, could
only be taxed under the Hewitt Act for the remainder of its
corporate existence, although the act of 1892 is a perfectly valid
act under which, but for the judgment above mentioned, the
complainant would be liable to much greater taxation than the
Hewitt Act provides for. We think these facts form no basis for the
equitable estoppel claimed by the complainant. The payment of money
by complainant under the agreement, when it ought to have paid at
least as large a sum under the act of 1892, but which it refused to
pay under that act because it denied the validity thereof, we think
is not the basis for an appeal to the equitable powers of a court.
As a result of the judicial inquiry, it is seen that the banks have
been at all times liable to pay taxes under the act of 1892. The
fact that they disputed this liability, and paid the money under an
agreement which did not admit the validity of the act of 1892,
forms no basis for this equitable estoppel when the fact appears
that the moneys actually paid were certainly no more than the banks
were liable to pay under
Page 174 U. S. 427
the disputed act. If, however, it were found that the banks had
paid at any time an amount greater than they would have been liable
to pay under the act of 1892, the city, by the passage of the
ordinance approved August 6, 1895, provided a means for crediting
any bank with the amount of such overpayment. In no way, therefore,
has the complainant been legally damaged by the payment of the
money to the sinking fund. The only thing that may be said is that,
by virtue of the agreement, the complainant paid, and the sinking
fund received, the money at the times mentioned, which otherwise
would have been refused; but when we come to consider that,
although the legal question was in dispute, the right was really
with the city, and the banks were really liable to pay taxes under
the act of 1892, we think the payment they then made under the
agreement would form no equitable estoppel in favor of complainant.
If so, it would thereby be enabled to secure for itself the benefit
of the plea of
res judicata, and would thus prevent the
application of the act of 1892 to it during its corporate
existence. This result would not, in our opinion, be an equitable
one, and, as complainant has not in reality suffered legal injury
by the payment of the money, there is no basis for the support of
an estoppel.
An equitable estoppel which is to prevent the state from
receiving the benefit of an exercise of its power to alter the rule
or rate of taxation for all the time of the existence of a business
corporation should be based upon the clearest equity. It is fitly
denominated an "equitable estoppel" because it rests upon the
doctrine that it would be against the principles of equity and good
conscience to permit the party against whom the estoppel is sought
to avail himself of what might otherwise be his undisputed rights.
The payment of money under the circumstances of this case, not
exceeding the amount really legally due for taxes, although
disputed at the time, does not seem to work such an equitable
estoppel as to prevent the assertion of the otherwise legal rights
of the city.
Nor does the fact that the complainant bank, upon the execution
of the agreement, omitted to sue and obtain
Page 174 U. S. 428
judgment against the city, add any force to the claim of
estoppel.
The complainant, it must be assumed, knew the invalidity of the
agreement because of the lack of power on the part of those who
signed it to bind the city or the sinking fund as a corporation.
There was no dispute as to facts, and no misrepresentations were
made. The law made the invalidity. Knowing the agreement to be
invalid, the omission to sue forms no ground upon which to base the
estoppel. The complainant had no valid agreement upon which to
stand, and, if it omitted to sue, it was at its own risk. There
would seem to be no reason of an equitable nature, springing out of
the facts herein, why the complainant should not hereafter be bound
to pay the taxes prescribed in the act of 1892.
We think the judgment of the circuit court should be
reversed, and the case remanded, with instructions to dismiss the
bill, and it is so ordered.
MR. JUSTICE HARLAN and MR. JUSTICE WHITE dissented.
