1. Where an individual contracted with a city corporation to
pave its streets, and the corporation afterwards, by way of
assisting him with funds, issued to him its bonds, having several
years to run (and then worth in the market but fifty cents on the
dollar), with the understanding that the bonds might be sold for
what they would bring, and that other bonds might be afterwards
bought by the contractor, so that the city might have its bonds
again when they matured, and the contractor sold the bonds,
held, on a suit between the parties for a settlement under
the original contract for paving, that the contractor could
discharge himself from his obligation to return the bonds to the
city by charging himself with and paying their market value at the
time of accounting in the suit; and that he was not obliged to
return the bonds
in specie before he could compel the city
to pay him for his work.
Held further that the fact that
the city was pecuniarily embarrassed, and had no money with which
it could go into the market and buy the bonds, did not alter the
case.
2. Before a court will sanction the exaction of hard conditions
made by a city with its contractors, who have been reduced to
necessities by the omission of the city itself to keep with
strictness its promises to them,
it will be careful to know that every stipulation on the part of
the city under any new agreement has been fully performed by it.
Hence, where a city agreed to issue a certain amount of bonds to a
contractor who was embarrassed in carrying on his contract with it,
the embarrassment being produced in part through the city's own
nonpayment to the contractor of what it owed him, the contractor
agreeing on his part in the new agreement to release the city from
certain obligations under which by the original contract it was
bound,
held that the city, not having carried out its new
agreement
completely, could not avail itself of the
release; that what was done was not an accord and satisfaction, but
an executory agreement for a release upon the performance of
certain conditions, which, not having been performed, left the
release without obligatory force.
3. Under the laws of Tennessee and its own charter, the City of
Memphis, in the state just named, had full power to make contracts
for paving the city, and to bind itself to pay for the work either
in cash or in the bonds of the city or in both. Moreover, the city
was liable on such contracts
to a suit by the contractor. If the city has guaranteed payment
for the paving in case others (as the owners of property along the
street) did not pay, and the highest court of the state decides
that such owners cannot constitutionally be charged with the cost
and be compelled to pay, the city cannot allege the illegality of
the contemplated mode of the contractor's getting payment as a
defense to a claim on it for payment. Power given to the city to
assess the expense of paving upon the adjoining
Page 87 U. S. 290
owner, does not impair the power of the city itself to do the
work. It is permissive merely.
4. Where it city expressly contracts to pay for paving a street,
a subsequent modification of the details of the contract and in
which provision is made for the assessment and collection of
certain portions of the expense, which mode of collection was
subsequently declared by the courts to be illegal, will not be held
to be an abandonment or waiver of the original agreement of the
city to pay for the paving.
5. Where a city contracts with persons to do work for it,
agreeing to pay them in bonds having some years to run and with
interest warrants or coupons attached,
"principal and interest
guaranteed and provided for by a sinking fund set aside for that
purpose," and the contractor takes the bonds, but the city
does not provide any sinking fund for the payment of either
principal or interest, the contractor to do the work cannot, in a
suit against the city to recover what it owes him, adduce evidence
of bankers and stockdealers to show what damage, in their judgment,
he has suffered by the city's violation of its contract in
providing the sinking fund, the witnesses making the value of the
sinking fund depend upon the conditions -- 1st, that it should be
actually collected; 2d, that it should be placed in the hands of
trustees; and 3d, that the trustees should be persons of integrity
-- conditions which made no part of the city's contract in the
matter. There is no legal standard by which damages founded on such
a claim can be fixed. They are speculative. There can be no
standard market value of that which never existed.
6. A reception of bonds without this guaranty being fulfilled,
and negotiating them as valid debt, of the city, waives the claim
for the guaranty. The claim for damages for not providing a
guaranty (if any exist) belongs to the holders of the bonds, and
not to the contractor.
7. When the ordinances of a city, which has a "city attorney" as
one of its officers, require that such
attorney prosecute
all suits to which the city may be a party or in which it may be
interested persons who enter into a contract with the city under
ordinances and on advertisements made pursuant to them and on bids
put in to pave its streets, with a provision in the contract that
the accounts for the paving shall be made out by the city engineer,
and delivered to the contractors for collection, and if not paid
within ten days after the payment becomes due, "shall be placed in
the hands of the
city attorney for collection, under the
city charter," cannot, even though those accounts are numerous and
the collection of them onerous and expensive, employ other
attorneys and charge to the city what they pay to the additional
attorneys for
their professional services. A contract made
under such circumstances cannot be modified like an ordinary
contract made by the city. It must be performed according to its
terms.
8. The fact that the mayor and city attorney urged the
contractors to make great efforts in the collections and advised
them to retain counsel in looking up titles and to aid in bringing
suits does not alter the case, there being no evidence that the
city legislature, or any committee
Page 87 U. S. 291
which was the agent of the city in making the contract, advised
or assented to any change in its terms.
9. Where, under large contracts for paving a city, the city and
the contractors to do the work having become embarrassed, have
resorted to various rather irregular devices to raise money and
carry on the work, the city issuing its bonds and the contractors
selling them at half their nominal value, and things between the
parties have got into a confused and complicated state, and a suit
at law has been instituted and a bill and cross-bill in chancery
filed, a court may, not improperly (even before the case is ready
for it decree, and without having settled the rights of the
parties), refer the case to a master for an account of labor done
and materials furnished, and the value thereof, and to find how
many bonds the city has issued to the contractors, and whether such
bonds had a value, and when they matured, and how much the city
owed the contractors when the suit was brought, and -- the parties
consenting that the action at law be consolidated with the suits in
equity -- to hear and report to the court the proofs and his
conclusions upon various matters deemed pertinent by the court and
specified by it, including, as a final one, that he state an
account between the parties, embracing therein all the matters in
the cause of the bill and cross-bill and showing in the result the
aggregate of debt of the debtor party to the other. And if the
parties do not except to such order, but appear under it before the
master and take, both of them, testimony upon the subjects of
reference for as long a term as they desire, and then, announcing
that they do not desire to take further evidence, submit the
matters of reference for the determination of the master (taking no
exception before him), it is no ground of error (the circuit court
having passed upon his report, and with some modifications
confirmed it) that before the cause was ready for a decree, and
without settling the rights of the parties, the court referred it
to the master for an account, and that the master took and stated
an account in accordance with the terms of the order.
By a general incorporation act of the State of Tennessee, all
cities of the state have full power to provide for the paving of
streets, alleys, and sidewalks. [
Footnote 1]
The charter of the City of Memphis in the state just named
enacts that
"The Board of Mayor and Aldermen shall have power to improve,
preserve, and keep in good repair
Page 87 U. S. 292
the streets, sidewalks, public landings and squares of the city.
[
Footnote 2]"
It enacts also [
Footnote 3]
that the city may require lot owners to improve the streets
fronting their lots, and that
"Should any owner fail to comply with any ordinance requiring
him to repair, grade, and pave the same, the mayor and board of
aldermen may contract with some suitable person for repairing,
grading, and paving the same, and pay therefor and collect the
amount from the lot owner."
It enacts also that the city may issue its bonds "for the
construction and pavement of the principal streets of the city,"
and an act amendatory of the charter authorizes the issue of bonds
"for any public improvement." Nothing was said as to the rates at
which it might sell these bonds.
The ordinances of the city require that "the city attorney"
should prosecute all suits to which the city might be a party, or
in which it might be interested.
These provisions of law and this ordinance being in force, the
City of Memphis, in the year 1866, being desirous to have certain
of its streets paved with what is known as the Nicholson pavement,
passed an ordinance directing the mayor to advertise for twenty
days for paving the whole or parts of them according to the plans
and specifications of the engineer's office, and further authorized
the mayor and the finance committee to make and enter into contract
or contracts with the lowest responsible bidder, as to payments and
time of completion, with such restrictions as they might think
best.
The ordinance went on:
"The city civil engineer shall forthwith proceed to make a plat
of said streets and a plat of the lots bounding and abutting the
same; and shall be actual measurement ascertain the number of feet
front on each lot bounding and abutting the said streets, and shall
mark upon his plat the names of the owners of such lot and the
number of feet belonging to each. . . . He
Page 87 U. S. 293
shall also prepare and lay before the board of mayor and
aldermen at their first meeting after a contract shall have been
made by them for the grading, constructing, and paving of the
street, upon which such lots front, an estimate of the entire cost
of said improvement under the contract aforesaid, as shall be
opposite the respective lot or lots, and shall mark upon said lot
the amount thereof; and such amounts are hereby declared to be a
special tax upon such lots respectively, and a debt due by the
owners thereof in such installments as the board of mayor and
aldermen may determine; and he shall make out and deliver to the
attorney for the city a list of the owners and the amounts due
respectively, with the number of the lot and time of payment, and
the attorney shall proceed to collect the same, and in
case the owner shall fail to pay on demand, to enforce the lien
against the lots given by the charter of the city."
The advertisements and surveys directed were made, and bids put
in by different parties. Among the bids were one by Taylor, McBean
& Co., and another by Forest, Mitchell & Co. These two bids
were accepted.
Accordingly, on the 11th of March, 1867, the city entered into a
contract with Taylor, McBean & Co. for the paving, in sections,
certain streets. The contract said:
"Upon the completion of each section, the contractors shall
receive from the owner or owners of lots fronting upon said section
one-half of the price of the same
in cash, the remaining
half to be paid by the said owner or owners in thirty, sixty, and
ninety days, they giving their notes for the same, with the lien
fixed by the city charter retained in said notes."
"The accounts for said pavement will be made out upon the
completion of each section, by the city engineer, against the
property owner or owners and delivered to the contractors for
collection, and if not paid according to the terms above specified,
within ten days after said payment becomes due, said accounts shall
be placed in the hands of the
city attorney for collection
under the city charter."
"
The City of Memphis will and does hereby guarantee to the
contractors the payment of said accounts, as so assessed against
the property owner or owners for the pavement."
This contract was called "the cash contract."
Page 87 U. S. 294
On the 16th of July, 1867, the city entered into another
contract, this one being with Forest, Mitchell & Co., for
paving, in like sections, certain other streets. This contract
said:
"Upon the completion of each section the contractor shall
receive from the city the whole amount due under the conditions of
this contract for said section; the same to be paid
in Memphis
City paving bonds, payable in five, ten, and fifteen years, in
equal proportions, with six percent coupons attached, payable
semiannually.
Principal and interest guaranteed and provided
for by a sinking fund set aside for that purpose. Bonds to be
taken at par."
This contract was called "the bond contract."
As the reader will observe, there was no provision in this
contract for assessment, nor any reference to property owners, or
guarantee of payment. The contract was, however, subsequently
modified as to the amount to be paid for certain portions of the
work and as to the form of payment, with a provision for assessment
and collection of certain portions thereof, as had been made in the
cash contract.
Both of the contracting firms above named were unable to perform
what they had contracted to do, and with their consent and that of
the city, a new firm, that of Brown & Co., was substituted in
their places; succeeding to their obligations and to their rights.
Brown & Co. paved the streets according to the contract.
The propertyholders of the streets paved did not pay for the
paving opposite to their respective lots; and this failure of
theirs producing embarrassment on the part of Brown & Co.,
these last sought relief by an application to the city. To give
this relief, the city, in August, 1868, lent to Brown & Co. its
bonds to the nominal amount of $99,000. The bonds were worth at the
time not more than fifty cents on the dollar, and they were lent
with the understanding that they might be sold for what they would
bring, and that other bonds might be bought to replace them when
they should mature. Early in November, 1868, another application of
the same character was made for $175,000 of the
Page 87 U. S. 295
city bonds, and a resolution was passed on the 18th by the city
councils, and an agreement signed on the 20th of November by the
city of the first part and Brown & Co. of the second. The
agreement recited:
"That whereas the party of the first part, in session on the
18th day of November, 1868, did pass the following resolution,
to-wit:"
" Resolved &c., that the city will loan Messrs. Brown &
Co., the contractors of the Nicholson pavement, one hundred and
seventy-five thirty-year $1,000 pavement bonds for eighteen months,
upon condition that said contractors will place in the hands of the
city attorney paving bills against the propertyholders to the
amount of the face value of said bonds,
and upon the further
consideration that said contractors WILL release the city from all
liabilities upon said paving contract, unless it should be decided
by the courts of least resort that the propertyholders are not
liable for said pavement. The interest upon said bonds shall
be paid by the said Brown & Co., and at the end of said
eighteen months, said bonds shall be returned to the city,
principal and interest, unless said interest has been previously
paid:"
"
Which said resolution embraces all the conditions of said
loan, and is accepted by the parties of the second part."
The instrument then proceeded:
"It is further agreed by said parties that the city will furnish
said bonds as rapidly as they can be executed, and that as said
bonds are delivered to the said Brown & Co., the said Brown
& Co. will deliver to the city attorney the collaterals to
secure the same. This agreement is in no wise to affect or modify
the terms and obligations of the original contracts for paving the
streets of Memphis with the Nicholson pavement, as now existing
between the parties or the owners of the lots abutting on the
streets,
except when said contracts are changed and modified by
the above resolution of the board of mayor and aldermen and this
agreement."
The city did not comply with this contract. The master thus set
forth the facts:
"Brown & Co. received, with much delay in their issue,
$140,000 in city bonds. The remainder of the loan ($35,000) was
willfully withheld by the then acting representatives of the city
and applied to payment of interest on the general funded debt of
the city, the city getting about fifty cents on the dollar for
Page 87 U. S. 296
the bonds thus withheld. The mayor had given to Brown & Co.
a letter (called by the city an acceptance, but which does not
possess a single quality of a commercial acceptance), stating that
Brown & Co. should be entitled to receive $35,000 of Memphis
City bonds so soon as they could be signed and ready for delivery.
But they were never signed, or if signed, never delivered, and in
that particular the city did not comply with the stipulations
whereby it received an agreement for release from its guaranty of
the cash payments by propertyholders. The greatest and apparently
most inexcusable neglect and delay were exhibited by the city
government in the delivery of the bonds promised to Brown & Co.
under their loan contracts."
The following was the form of one of the papers termed
acceptances:
"MEMPHIS, August 27, 1868"
"MESSRS. BROWN & CO.: As soon as it is possible for me to
sign them, I will issue to you or your order ten $1,000 bonds of
the City of Memphis, the same being a part of the number you are
entitled to by a recent order of the board. You may use this in any
negotiation necessary to accomplish your purpose, and the bonds can
be delivered to your order on return of this letter."
"W. LEFTWICH, Mayor"
Brown & Co. and the city not being able to arrange matters
between them, Brown & Co., in 1869, brought a suit at law to
recover from the city $600,000 which the firm asserted the city now
owed it upon the two contracts for paving. The city set up the
agreement of November 20, 1868, as an accord and satisfaction, and
full performance was averred.
At a subsequent date, to-wit, in November, 1870, the city filed
a bill in equity against Brown & Co. alleging various matters
of equitable defense and asking that the firm be restrained from
proceeding in a suit at law. To this bill Brown & Co. made
answer and also filed a cross-bill against the city.
In November, 1870, all proceedings in the suit at law were
ordered to be stayed to the end that the matters in controversy be
determined in the equity suit, and in that
Page 87 U. S. 297
same month, Brown & Co. moved for an order of reference,
upon the following notice:
"Come, Brown & Co., by solicitors, and move the court in
this cause to order an interlocutory decree of reference to the
clerk of this Court, as master, to find and report to the court, at
a future day in this term, or so soon as practicable, of and
concerning the following matters:"
"1. That he state an account of all the labor done, and
materials furnished, and the value thereof, at the agreed prices
under all the contracts set out and referred to in the bill and
cross-bill herein, distinguishing the value of that paving done
opposite the lots of private owners from the remainder and also of
all payments made on account of _____, distinguishing the payments
as above in the paving, and also finding how such payments were
made, and under what agreement, if any."
"2. That he find how many bonds the City of Memphis loaned Brown
& Co.; and whether such bonds had a market value, and what that
value was at the date of the loans; also, at the date of the
maturity of the loans; also, at the bringing of this suit, also,
how much, if any, the City of Memphis was indebted to Brown &
Co. at the date of such loans."
"3. That he find and report how many of the city's bonds were
delivered under the contracts dated July 16 and November 13, 1867,
in payment, as therein provided; and also the value of such bonds
when delivered; and the average value of such bonds in this market
and New York, since delivery, to the bringing of this action; also,
the value, at such times, in Memphis and New York, of such bonds
having the payment of the principal and interest secured by a
sinking fund set aside for that purpose."
"4. That he find and report whether any, and if so how much work
was done by such contractors for the city, additional to that
provided."
In April following, no exception being filed, this motion was
granted, and an order entered reciting that the action at law
involving an accounting and adjudication of questions arising
thereon was by consent joined with the present action, and the
cause being at issue and coming on for hearing, it was ordered that
it be referred to Mr. Mitchell as
Page 87 U. S. 298
master in chancery to take proof, hear, and report to the court
the proof, and his conclusions upon twenty-seven items specified,
of which the final was,
"that he state an account between the plaintiff and defendant,
embracing therein all the matters in the cause of the bill and
cross-bill herein, and showing in the result the aggregate balance
of debt of the debtor party to the other."
Under this order, the master entered upon his office, and
evidence was taken before him by the parties.
As already said, the owners of lots along the streets paved, did
not in the majority of instances pay the special charges assessed
for the paving against the lots. Brown & Co. accordingly put
the claims (which the city ordinance had made liens against the
lots) into the hands of the attorney of the city. But in addition
to this, other attorneys were employed to assist him in enforcing
these special assessments or liens for paving, and as appeared,
Messrs. Humes & Poston, lawyers of Memphis, were paid for
prosecuting between four and five hundred suits through the courts,
$10,000, and other attorneys for collecting them without the
judicial process, $25,000.
It did not appear that this employment of special counsel was
authorized by the city councils, or by any committee entrusted by
them with the collection of the liens, though the evidence tended
to show that the mayor of the city and the city attorney knew and
approved of what was done.
Mr. Waddel, one of the attorneys at law, employed by Brown &
Co. to collect the special assessments, testified:
"
As to specific directions given by the mayor, city
attorney, or other officers of the corporation, I do not know that
I ever heard of any; but I do know that the mayor and city
attorney were apprised of the extraordinary efforts we were making
to effect collections without suits, and approved the same, and
urged us to make all possible. In several visits which I made to
the mayor, he generally expressed his anxiety for us to effect
collections in the manner we were pursuing, his idea being to get
as much as possible without suit. My recollection is that the city
attorney advised the same course. "
Page 87 U. S. 299
Brown himself testified:
"Both the
mayor and
city attorney requested
that every effort should be made to collect bills without suit by
turns and trades, exchanges and discounts, and putting a large
collection force at work, and making every effort to work as many
of the bills into the paving of the streets as possible.
Their advice and direction was followed. After it became
evident it was necessary to sue, the
city authorities
advised suits to be brought, and to employ counsel to aid the city
attorney in the examination of titles, drafting papers, and the
work of suing. The
city attorney took us to the office of
Humes & Poston, saying that the city business outside of this
was so large that it would be impossible for him to bring these
suits; that he must have assistance, and preferred them. The mayor
said substantially the same thing, and under their direction I
retained Humes & Poston, who brought about four hundred
suits."
The testimony of one Ballard, a subcontractor, and who was with
Brown in his interview with the mayor and city attorney, showed
exactly the same facts, and that of the city engineer was to about
the like effect.
The city attorney, as the evidence showed, did little in the
matter except show himself in court when the cases were tried and
assist more or less with general counsels.
The "bond contract," as it was called, bound the contractors, as
the reader will remember, to take the bonds "at par," and on the
other hand, the city engaged that the principal and interest of the
bonds should be
"guaranteed and provided for by a sinking fund
set aside for that purpose."
No sinking fund was ever set aside for the purpose of paying
either principal or interest of the bonds. The interest was not
paid, and the bonds would bring in the market only about fifty
cents on the dollar. Brown & Co. adduced four bankers or
stockdealers in Memphis to testify what the same bonds
would have been worth had the city kept its contract in
this particular and had the bonds, principal and interest, been
"guaranteed and provided for by a sinking fund set apart for that
purpose."
One of them, Mr. Elder, testified that the market value
Page 87 U. S. 300
in Memphis of bonds and stocks was governed by the New York
market; that the range of value of Memphis City thirty-year six
percent bonds, in Memphis, from the 1st day of January, 1868, to
1st January, 1871, had been from forty-six to fifty-two cents on
the dollar; that personally he knew nothing of the New York price,
but that the price in Memphis would be regulated by the price
there; that the value of the bonds had been depressed by the
failure to pay the interest; that his opinion was that if a sinking
fund had been actually provided and placed in the hands of a
trustee, the market value, in Memphis and in New York -- between
the dates just named, of Memphis City short bonds, running five,
ten, and fifteen years in equal proportions, with six percent
coupons attached, payable semiannually, principal and interest
guaranteed, and provided for by a sinking fund set aside for that
purpose --
would have been from eighty-five to ninety
cents on the dollar.
Another witness, Mr. Murphy, president of the Memphis Bank,
testified that in his
"opinion," had the city guaranteed
and provided for the payment of the bonds, principal and interest,
by a sinking fund set aside for that purpose --
"had such fund
been actually collected and placed in the
hands of trustees of known integrity, and had that fact been
generally known by the community, in Memphis and in the Eastern
cities -- such bonds would be readily sold from eighty to ninety
cents on the dollar."
Mr. Barrett, "dealer in stocks and securities," gave the same
estimates. Mr. Tobey, a banker, one slightly higher, eighty-five to
ninety cents on the dollar.
On the 6th of June, 1871, the counsel of the respective parties
having announced that they had no further evidence to present,
submitted to the master's determination the matters which had been
referred to him. The master having considered the cases, thus
reported:
1. He charged Brown & Co. with the market value, say fifty
cents on the dollar, of all the bonds that the city had lent them
and which they had sold with a purpose to replace them before
maturity.
Page 87 U. S. 301
2. He held that the city not having furnished to Brown & Co.
the full $175,000 of bonds, as it had contracted by its contract of
June 20, 1868, to do, the city was not released by the said
contractors from all liabilities on the contract, even though the
courts of last resort had not decided that the property owners were
not liable for the pavement put before their lots.
3. He held that under its charter, the laws of Tennessee and the
city ordinances, the city had a right to bind itself by guaranty to
the payment of the cash contracts, and had done so.
4. He held, that the modifications of the bond contract bound
the city.
5. He held that the city was liable to Brown & Co.
for all damage suffered by failure of the city to
guarantee and provide for the payment of paving
bonds as stipulated,
the master herein estimating
that
had the sinking fund been provided, the bonds would
have been worth eighty-five cents on the dollar . . . .
. . $115,216
6. He held that it was bound to pay, as the
reasonable value of the services of attorneys
employed to prosecute special assessments, by request
of the city . . . . . . . . . . . . . . . . . . . . . . . .
10,000
7. And bound to pay further the value of services
in the collection of special assessments or paving
bills, without process of law, by request of the
city. . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,000
--------
$150,216
The master, accordingly, including the last three items,
amounting to $150,216, as proper charges against the city, found as
due to Brown & Co., on the assumption already stated, the sum
of $496,352.
Upon the report and the evidence on which the master had acted,
coming to the circuit court, that court fixed what would have been
the value of the bonds had a sinking fund been provided, at
seventy-eight cents on the dollar, and
Page 87 U. S. 302
Allowed in the place of the sum allowed by the master,
that is to say. . . . . . . . . . . . . . . . . . . . . . .
$115,216
The reduced sum of. . . . . . . . . . . . . . . . . . . .
89,808
--------
A difference of . . . . . . . . . . . . . . . . . . . . .
$25,408
And confirming essentially the rest of the report, decreed in
favor of Brown & Co. for $488,993.
From this decree the City of Memphis took this appeal, alleging
that the court below had erred:
1st. (This being in the substance of three different
assignments) in decreeing that Brown & Co. could discharge
themselves from their obligation to return the bonds lent to them
by paying their market value, and that the court ought to have
decreed that they return the bonds and coupons, or else pay the
city their "face value;" that the same error existed in regard to
the bonds overpaid them on the bond contracts, and also in relation
to the bonds paid to them on the cash contracts.
2d. In decreeing that Brown & Co. could maintain a suit on
the paving contracts before any court of last resort had decided
that the propertyholders were not liable to pay for the same; the
resolution and contract of November 26, 1868, having released the
city from all liability upon that contract unless such court did so
decide.
[N.B. Although no court of last resort had made such a decision
when the case was before the master, it appeared that afterwards,
and before the case got here, the Supreme Court of Tennessee, in
the case of
Taylor v. Hart, did so decide.]
3d. In decreeing the city liable for the payment of the cash
contracts, by reason of their guaranty, or for any other reason,
for paving laid in front of private property; that the decree
should have been that the property owners were liable therefor, and
that the city was not.
4th. In holding the city liable for the paving under the bond
contracts, as, after the modifications agreed upon, the contracts
contained no agreement by the city to pay or to guarantee.
Page 87 U. S. 303
5th. In holding that the city was chargeable with $89,808 or
other sum as damages suffered by Brown & Co., for its failure
to guarantee and provide for the payment of the bonds by a sinking
fund.
6th. In allowing the $10,000 and the $25,000 as fees to counsel
employed to assist the official attorney of the city.
7th. (This being assigned as an error arising upon the entire
record): That the court below, before the cause was ready for
decree and without settling the rights of the parties, referred it
to a master for an account, and that the master took and stated the
account under his own view of the law and the facts, and virtually
decided the entire case, instead of the court.
MR. JUSTICE HUNT, having stated the general nature of the case,
delivered the opinion of the Court.
I. The first three assignments of error are based upon a single
idea, to-wit, that there was error in decreeing that Brown &
Co. could discharge themselves from their obligation to return the
bonds loaned to them by paying their market value; that the same
error existed in regard to the bonds overpaid them on the bond
contracts, and also in relation to the bonds paid to them on the
cash contracts.
As to each class it is insisted that the bonds in specie should
have been returned or their nominal face value allowed to the city.
The loan was of 240 bonds of $1,000 each. At the time of making the
loan, there was due to Brown & Co. on the paving contracts
several hundred thousand dollars. This indebtedness the city did
not wish to pay, or was unable to pay. To meet the emergency, the
city loaned its bonds to Brown & Co., to be returned in
eighteen months with interest.
The argument is that by their contract, Brown & Co.
Page 87 U. S. 304
agreed to return the bonds to the city, and that a specific
performance of this agreement is necessary to do justice to the
city.
Conceding the power of the court to compel the specific
performance of a contract relating to personal property, this does
not appear to be a case justifying its exercise. Specific
performance is never decreed where the party can be otherwise fully
compensated. [
Footnote 4]
If Brown & Co. have received bonds of the city which they
are bound to return and do not return, what damage does the city
suffer? The face of the bonds and interest, it is said, as if they
run to maturity, the city will then be liable for the payment of
the whole amount. Not so. We are not to inquire what may be the
damage to the city eighteen years hence, but what it suffers at the
present time by the default of Brown & Co. If Brown & Co.
should now be decreed to pay the face of the bonds instead of an
indemnity, the city would make an actual profit. Suppose the amount
of bonds in question to be $200,000. With the sum of $100,000, the
city could now purchase the whole amount of bonds supposed to be in
issue and retain as a premium or profit the remaining $100,000. In
his brief, the appellant's counsel says that it is not material
that the very bonds loaned shall be returned, so that an equal
amount, with corresponding coupons, are returned. That this equal
amount may now be purchased by the city at fifty cents on the
dollar would seem to be conclusive that when Brown & Co. are
charged with the bonds at fifty cents on the dollar, and the city
is credited with that sum, that the damage of the city for the item
in question is properly assessed.
But it is said that the city has not the money at command to buy
these bonds; that it cannot thus indemnify itself, and therefore
its loss is the face of the bonds. This consideration can have no
legitimate influence. A rule of law is based upon principle, upon
sound considerations of justice and public policy, and usually as
manifested by the precedents
Page 87 U. S. 305
and authorities. It is the same for all classes and conditions.
None is so high as to be above its claims, none so low as to be
beneath its protection. It will be a sad era in the history of any
country when the application of a rule of law shall depend upon the
wealth or the poverty of a party to a suit -- upon his wealth,
which would thus enable him to increase that wealth, or his
poverty, which would be thereby aggravated.
No court and no government can protect against the misfortunes
of poverty. The unfortunate mortgagor who sees his farm sold by his
rigid creditor for half its value for the want of money to redeem
it receives our sympathy, but the rules of law cannot be altered or
suspended to aid him. So, in the case before us, the law is the
same whether the City of Memphis is in funds or whether it has no
funds. The value of its bonds in the market is fifty cents on the
dollar. With that amount of money it can now place in its treasury
the bonds which Brown & Co. fail to return. It is difficult to
see that the damage sustained can be beyond that amount.
Whether the city had the legal right to loan its bonds does not
seem to be a practical question. It did loan them, and the
contractors received them. If not a loan, the transaction was a
gift, which will not be pretended, or it was a loan of so much
money as was realized by their sale. The defense of usury is not
set up in the pleadings, or apparently claimed on the trial, and it
cannot now be urged. We assume the issue of the bonds to have been
a legal transaction, and think the rule of damages for their
nonreturn was properly fixed by the master.
In
Dana v. Fiedler, [
Footnote 5] the court said:
"Complete indemnity requires that the vendee shall receive that
sum which, with the price he had agreed to pay, would enable him to
buy the article which the vendor had failed to deliver."
In
Griffith v. Burden, [
Footnote 6] being a suit for the conversion of a state
bond, the court said:
"Another rule, equally well
Page 87 U. S. 306
grounded and more frequently applied, is that the damages ought
to be such as will compensate the party for his loss. In this case,
the plaintiff has lost his bond. Another like bond of precisely
equal value to the plaintiff can be purchased in the market for the
amount of the verdict in this case, the market value. Hence the
verdict compensates him for his loss, and is the precise measure of
damages."
These are the general rules upon the subject, and that they
control the question in the case before us sufficiently appears
from numerous authorities. [
Footnote 7]
II. It is insisted secondly by the appellants that Brown &
Co. cannot maintain a suit on the paving contracts for the reason
that, by the resolution and contract of November 20, 1868, Brown
& Co. released the city from all liabilities upon the paving
contract, unless it should be decided by the courts of last resort
that the propertyholders are not liable to pay for the same.
[This resolution, and the contract of November 20 reciting it
are set forth
supra, p.
87 U. S. 295 --
REP.]
In deciding upon the effect of this contract, the situation and
condition of the parties are to be considered. Brown & Co., the
contractors, had embarked in an enterprise involving the
expenditure of nearly a million of dollars. The property owners
refused to pay the assessments made upon them. The city was not
able or was not willing to meet its guaranty of payment, and was
indebted to the contractors in the amount of several hundred
thousand dollars. The contractors must have relief or go to the
wall, as their predecessors had done. They applied to the city for
that relief, and instead of making payments, the city undertook to
make a loan of its bonds. It imposed harsh and severe conditions
which nothing except the financial desperation of the contractors
could justify them in accepting. Their claim against the city for
the amount of work done was valid, and
Page 87 U. S. 307
the amount was then payable. There was no good reason why they
should delay a call for its present payment, especially none for
its delay until the last possible chance of litigation in the state
courts was exhausted. There was no good reason why the large sum
due from the city should be thus indefinitely suspended in
consideration of a loan of bonds to the nominal amount of $175,000,
but which were worth some $80,000 only, about one-fourth of the
amount actually owing to the contractors.
It is not necessary to decide whether this presented a case of
moral duress which in equity avoids the contract, or whether a
contract can under any circumstances be so avoided. It is
sufficient to say that it is a hard and oppressive contract, that
if the pound of flesh is exacted, the party must take care that he
violates no law of the state in obtaining it. Before the court will
sanction the exaction of conditions so harsh and oppressive, it
will be careful to know that every stipulation on the part of the
creditor has been fully performed.
As the consideration for the release, the city undertook and
promised to deliver to the contractors one hundred and seventy-five
one thousand dollar pavement bonds, and to deliver the same as
rapidly as the same could be executed by the officers of the
city.
How the city performed this agreement is stated by the master in
his report. [
Footnote 8]
In the performance of this contract, to which assent was given
by Brown & Co. to obtain immediate relief, we find first that
there was great delay in delivering $140,000 of the bonds. Delay,
we may well assume, was a serious injury to the contractors. Their
necessities brooked no delay. Delay was nearly as bad as a
refusal.
We find secondly that $35,000 of the bonds were never
delivered.
We find thirdly that this nondelivery was willful on the part of
the city authorities, and fourthly that they applied
Page 87 U. S. 308
in payment of the other debts of the city the bonds thus pledged
and appropriated to Brown & Co.
After taking advantage of their necessities to make a hard and
oppressive bargain with those whose necessities placed them at the
mercy of anyone having money or the means of raising money, they
willfully and deliberately refuse to perform their part of the
agreement. It is difficult to understand how parties standing
before a court of equity can ask for the enforcement of a contract
thus violated by themselves.
The letter of credit was a shift to avoid a direct refusal to
deliver the bonds as agreed. As stated by the master, these letters
have no single element of a commercial acceptance. They are equally
destitute of every quality by which money could be raised upon
their credit. The city had already violated its agreement by delay
in issuing the $140,000 of bonds. It was violated again in the
delivery of these letters instead of the bonds themselves. What
security had any capitalist that further shifts and contrivances
would not be resorted to to avoid the delivery of the bonds? None
whatever, and it could not be otherwise than, as the fact proved,
that they would be unavailing to Brown & Co. for the purposes
required by them.
The agreement of November 20 was, in substance, an executory
agreement for an accord and satisfaction. The release was to
operate when the city actually loaned the bonds, not when it agreed
to loan them. It is set up in the pleadings as an accord and
satisfaction, and full performance is averred. The consideration
for the release was wholly executory, and it was never performed,
but the release was dependent entirely on such performance. The
language of the release is this:
"And upon the further consideration that the said contractors
will release the city upon all liabilities upon said
paving contract, unless it shall be decided,"
&c. There is no present release, but an agreement to release
based upon the performance of the considerations specified. The
performance failing, the agreement to release goes with it. It is a
case not where the value of the bonds
Page 87 U. S. 309
is sought to be recovered, but where a forfeiture is sought to
be enforced. In 1 Smith's Leading Cases it is said: [
Footnote 9] "The accord must be executed, and
a mere executory agreement can never be pleaded as an accord and
satisfaction." Again: "If part of the consideration agreed on be
not paid, the whole accord fails."
Many other considerations might be added to show the invalidity
of the claim we are considering. A single one only will be
mentioned. It is shown that the court of last resort of the State
of Tennessee has recently decided that the propertyholders are not
liable to pay for this pavement. [
Footnote 10] The appellate court in equity would scarcely
overrule a decision of the court below made under such
circumstances were it conceded that the law was prematurely held by
that court to be as it is now found by the court of last resort in
that state, and although the suit was commenced prior to such
actual adjudication.
We hold that this objection is not well taken.
III. It is alleged also that there was error in decreeing the
city to be liable for the payment of the cash contracts, by reason
of their guaranty or for any other reason.
The general incorporation act of the State of Tennessee gives to
cities of the state full power to provide for the paving of
streets, alleys, and sidewalks.
The charter of this city declares that
"The board of mayor and aldermen shall have power to improve,
preserve, and keep in good repair the streets, sidewalks, public
landings, and squares of the city."
It provides also that the city may require lot owners to improve
the streets fronting their lots, and that,
"Should any owner fail to comply with any ordinance requiring
him to repair, grade, and pave the same, the mayor and board of
aldermen may contract with some suitable person for repairing,
grading, and paving the same, and pay therefor"
and collect the amount of the lot owner.
Page 87 U. S. 310
By the contract in question, the contractors agreed to do the
paving specified and the city agreed "to pay or cause to be paid to
the parties of the second part" the price specified
"upon the following terms of payment, to-wit: upon the
completion of each section, the contractor shall receive from the
owner of lots fronting on said section one-half of the price of the
same in cash, the remaining half to be paid by the owners in
thirty, sixty, and ninety days, they giving their notes for the
same, with the lien fixed by the charter retained in the notes. The
City of Memphis will and does hereby guarantee to the contractors
the payment, of said accounts as so assessed against the property
owner."
It is said that about half of these assessments have been paid
by the property owners, that the residue of the lot owners have
refused to pay. The statutes referred to give the city ample power
to undertake the work of paving, and to contract to pay for the
same. [
Footnote 11]
The charter also gives the city power to issue bonds of the city
to be used for paving the principal streets of the city. [
Footnote 12] Under this authority,
the city passed an ordinance providing for the issue of city bonds
to the amount of $900,000 for the purpose of paving the streets and
alleys of the city. [
Footnote
13]
These references show full authority in the city to make
contracts for paving, to be paid for in cash, as was done in the
first contract, or in the bonds of the city, as was done in the
case of the second contract.
General power and authority over the subject is by law given to
the city, and the power also vested in the city to require that the
cost may be assessed upon the adjoining owner, does not impair the
power of the city itself to do the work. [
Footnote 14] It is permissive merely. The city may
require the owner to pay, but it is not compelled to do so.
In the contracts we are now considering, the following provision
was contained:
"The City of Memphis will and does hereby guarantee to the
contractors the payment of said accounts as so assessed against the
property owner or
Page 87 U. S. 311
owners for the pavement according to the plans and
specifications."
It will be perceived that this is a guarantee of payment, and
not of collection merely, and upon which, upon general principles
of law, a suit may be commenced against the grantor without any
previous suit against the principal. [
Footnote 15]
The thirty, sixty, and ninety days had long passed, and the
payments had not been made by the owners. These periods, we think,
furnish the limit of delay that could have been contemplated before
the city became liable to pay. Numerous authorities are cited in
the brief of counsel and in the learned opinion of the circuit
judge to show that upon a contract thus worded the city is liable
in a suit brought by the contractor. They fully sustain the
position. The fact, however, that the Supreme Court of Tennessee
has now decided that an assessment upon the property owner for this
expense is void as in violation of the constitution of the state
would seem to render much discussion unnecessary. The work was done
under a contract with and by the employment of the city; the claim
of the contractor is upon his contract, to which the city alone is
the counter party. A particular mode in which payment was expected
to be obtained fails. The city cannot allege the illegality of the
proposed detail of payment as a defense to itself. If it "caused"
the owners to pay, that was well. If it failed in that, as it has,
both in fact and in law, its guarantee of payment remains in force.
[
Footnote 16]
IV. It is further alleged that there was error in holding the
city liable for the paving under the bond contracts, as after the
modifications agreed upon, the contracts, it is said, contained no
agreement by the city to pay or to guarantee.
In the bond contract, dated July 16, 1867, the undertaking
Page 87 U. S. 312
of the city was direct to make payment to the contractors for
the work done in the bonds of the city. There was no provision for
assessment, no reference to property owners, and no guarantee of
payment. This agreement was subsequently modified as to the amount
to be paid for certain portions of the work and as to the form of
payment, with a provision for assessment and collection of certain
portions thereof, as had been made in the cash contracts, and which
contracts were declared to be binding on the parties
respectively.
The principles laid down in considering the last preceding
objection control this one also. The contract was made with the
city, and it cannot evade its payment, whether contracted to be
paid for directly or through other persons or by an illegal
assessment. The latter contract contains no abandonment or waiver
of the original agreement of the city to pay for the work. Such
waiver cannot be presumed or implied.
V. By the report of the master there was found to be due to
Brown & Co. from the city, and which went to make up the
balance, the following item,
viz.: "3d. To damage suffered
by failure of the city to guarantee and provide for the payment of
paving bonds as stipulated, $115,216."
In the judgment of the court, rendered in November, 1872, this
item was reduced from the sum of $115,216 to $89,808, and as thus
modified the item forms a portion of the judgment in the case. The
allowance of this item is the fifth ground of error alleged by the
appellant.
By the contract termed the bond contract, the contractors
undertook to do the work mentioned at prices specified. The city
undertook to pay for the same
"in Memphis City paving bonds, payable in five, ten, and fifteen
years, in equal proportions, with six percent coupons attached,
payable semiannually, principal and interest guaranteed and
provided for by a sinking fund set aside for that purpose. Bonds to
be taken at par."
Several questions arise upon this objection which it is not
necessary to discuss. Thus it is argued that this breach
Page 87 U. S. 313
of the contract had occurred before the assignment of the
contracts to Brown & Co., that the assignment was taken and
assented to by the city, upon the request of Brown & Co.,
without suggestion of claim for compensation on that account, and
that they are estopped now to make such claim again. It is insisted
that the duty of providing a fund for redeeming the bonds was a
ministerial duty which could be enforced by mandamus and for which
no other remedy exists, and that this remedy still remains.
We pass by the consideration of these points and place our
objection to the allowance of the item in question upon the ground
first, that the damages allowed are not in their nature capable of
legal computation, that there is no legal standard by which they
can be fixed, that they are shadowy, uncertain, and
speculative.
The claim is based upon the theory that if the city had provided
a sinking fund, which it did not do, Brown & Co. could have
sold the bonds which were delivered to them for a greater price
than they were in fact able to obtain for them.
The evidence on the subject was from four bankers or
stockdealers in Memphis. The evidence of the first one examined,
Mr. Elder, is as follows:
"Q. State, if you know, what establishes the market value in
Memphis of bonds and stocks or how the market value in this city is
affected by the New York market."
"A. They are governed by the New York market."
"Q. State what has been the cash market value of Memphis City
thirty-year six percent bonds in New York and this city from 1st
day of January, 1868, to 1st January, 1871."
"A. The range here has been from forty-six to fifty-two cents on
the dollar. Personally, I know nothing of the New York price, but
the price here would be regulated by the price there. The value of
the bonds has been depressed by the failure to pay the
interest."
"Q. State, if you know, the market value in this city and in New
York from 1st January, 1868, to 1st January, 1871, of Memphis City
short bonds, running five, ten, and
Page 87 U. S. 314
fifteen years in equal proportions, with six percent coupons
attached, payable semiannually, principal and interest guaranteed
and provided for by a sinking fund set aside for that purpose."
"A. My opinion is that if the sinking fund had been actually
provided and placed in the hands of a trustee, such bonds would
have been worth from eighty-five to ninety cents on the
dollar."
"Q. State whether or not the City of Memphis ever placed any
money in your hands, as trustee for the payment of either principal
or interest on the paving bonds alluded to in the last question and
answer; if yea, when and how much and whether you so applied
it."
"A. The city never placed any money in my hands for any such
purpose."
The testimony of Mr. Murphy, a banker, was as follows:
"Q. What in your judgment would have been the market value of
the bonds described in the last question and answer during the
period and at the places referred to had the city guaranteed and
provided for the payment of the bonds, principal and interest, by a
sinking fund set aside for that purpose?"
"A. Had such fund
been actually collected and placed in the
hands of trustees of known integrity, and that fact generally
known by the community here and in the eastern cities, in my
opinion such bonds would be readily sold from eighty to ninety
cents on the dollar."
The evidence of the other bankers did not differ materially from
that of Elder and Murphy.
In the report of the master, the damages allowed were based upon
the conclusion that the bonds would have been worth eighty-five
cents on the dollar if the sinking fund had been provided, and the
difference between this value and the market value of the bonds as
they were made up the sum of $115,216. The circuit judge fixed the
value of the bonds upon the same evidence at seventy-eight cents on
the dollar, and reduced the item by some $25,000.
It will be seen upon this statement of the facts that the
Page 87 U. S. 315
bankers allowed themselves a range of ten percent in the value
of the bonds to be guaranteed by the city, and that the master and
the circuit judge differed to the extent of seven percent in
estimating their value. These differences and the reasons given
furnish a strong illustration of the shadowy and unsubstantial
character of the claim.
The master reaches his conclusion by finding for what sum the
contractors were willing to do the work in cash, for what sum they
would do the same work for guaranteed bonds, and from these facts
he reaches a conclusion of the cash value of the bonds as estimated
by the parties. He argues further that if not actually worth
eighty-five cents, they might have been so placed by the
contractors as to be worth that rate to them.
The learned judge, on the other hand, repudiates these views and
says that the question is not what the parties estimated the bonds
to be worth, as they might have been and most likely were mistaken
in their estimate of value, but that the sole question is the
market value.
The answer to the argument of the master appears to be a good
one, but we think the argument of the judge is no sounder.
How can there be a correct market value of that which never
existed? A. contracts to deliver to B., on the first day of
October, one thousand bushels of merchantable winter wheat. He
delivers the quantity of wheat, but it is spring wheat, is dirty,
musty, and unsound. The damages, the difference or value between
the article agreed to be delivered and that actually delivered, are
readily ascertained. The unsound wheat is there, and the sound,
merchantable wheat is there. But it would be very difficult to
estimate these damages if sound wheat had never been bought or sold
-- if, in fact, it had never existed. It would have been equally
difficult if the value of standard wheat should be claimed to be
more valuable when held by one man than when held by another. By
this is meant to indicate the uncertainty and unknown character of
what is termed a sinking fund set apart for that purpose by the
City of Memphis.
Page 87 U. S. 316
This uncertainty is well illustrated by the evidence of the
witnesses before quoted. Mr. Elder says that if
"the sinking fund had been actually provided and placed in the
hands of a trustee, such bonds would have been worth from
eighty-five to ninety cents on the dollar."
But the city did not undertake to raise the sinking fund in
advance, nor at any time to place it in the hands of a trustee,
beyond their own control. It would have been as easy to have paid
to cash as to have done this.
Mr. Murphy says:
"Had such fund been actually collected and placed in the hands
of trustees of known integrity, and that fact generally known by
the community here and in the Eastern cities, in my opinion, the
bonds would be readily sold from eighty to ninety cents on the
dollar."
The witnesses make the value of the sinking fund depend upon
these conditions: 1st, it should be actually collected in advance;
2d, it should be placed in the hands of trustees, 3d, these
trustees should be persons of known integrity. These conditions the
city never undertook to perform. It was not expected by either
party that the money should be raised in advance or that it should
be beyond the control of the city when or so far as raised. When
the city made a pretense or an attempt at raising such a fund, it
was only by directing that a certain portion of its income should
be placed in the hands of its own officers as trustees, and, of
course, subject to its own control. When paving bonds to the amount
of $900,000 were authorized by law and were executed, the city
officers used them at pleasure for the ordinary purposes of the
city, regardless of the special purpose for which they were
created. What security had any person that they would not do the
same with any sinking fund in their possession? No time was
specified within which the fund should be raised or commenced; no
rate or proportion for any year or years was fixed upon. It was
wholly indefinite and uncertain.
The witnesses were quite right in their statement of what
constituted a valuable sinking fund.
The market value of a bond security depends chiefly upon
Page 87 U. S. 317
the confidence or want of confidence in its ultimate payment.
Its immediate convertibility enters largely into the question.
United States six percent bonds sell at this time at about twenty
percent above par. Immediately previous to the late civil war, and
during the early part of the contest, they sold at prices ruinously
low. The existence of the government and the payment of its bonds
were then doubtful. The solvency and the good faith of the
government are now undoubted, and its bonds are convertible into
money as readily as one species of money may be converted into
another. Seven percent bonds of the State of New York sell at about
seven percent above par. Missouri sixes sell at about ninety-five
percent, or five percent below par. Of the corporate bonds of
railroads secured by mortgage, those of the Chicago, Burlington
& Quincy road (eight percents) are quoted at one hundred and
ten, the Michigan Southern & Northern Indiana (seven percent)
at one hundred and five, Cleveland & Toledo (seven percent) at
one hundred and three. The accumulation of interest may make slight
difference in some instances, as exemption from taxation may
enhance the price of United States securities. These references are
made to show how variable and beyond any principle of calculation
is the market price of securities, each as good as securities can
well be. The genuine recognized bond of the State of New York
affords as complete security for the return of the principal and
the regular payment of the interest as does a United States bond,
but although bearing one percent greater interest, its selling
price is thirteen percent less than that of a United States bond.
Liability to taxation can explain but a small portion of this
difference. Corporate bonds as perfect in their character as such
securities can be show a like variation. Memphis City bonds of the
ordinary character sold at about fifty cents on the dollar at the
time the present bonds were issued. No man can undertake to say
that this price would be essentially increased or how much by a
sinking fund like that we have discussed.
The value of a Memphis City bond, guaranteed by a sinking
Page 87 U. S. 318
fund of the city, depended first upon a confidence or want of
confidence in the resources of the city. If it was absolutely
unable to pay its debts, a promissory sinking fund would not raise
its credit to any perceptible extent. The value depended next upon
the public estimate of the honesty and good faith of those having
the city affairs in charge. If they were tricky, dishonest, and
unprincipled persons who would not scruple to misapply or pervert a
sinking fund, their bonds would be of little value. A dishonest
person is an unsafe debtor. There is no satisfactory evidence of
the resources of the city, and certainly no satisfactory evidence
that a sinking fund would be of any practical value to the
bondholders. The city was liable for the face of the bonds in any
event, and that was all there was of the obligation.
We are of the opinion, upon this view of the contract before us,
that there was no legal standard by which the damages claimed could
be measured, and no legal evidence that such damages existed. The
principles and ideas upon which the alleged damages are claimed
cannot be reduced to a money standard. They do not form the subject
of legal calculation in dollars and cents.
2d. We think that Brown & Co. are not now at liberty to
claim damages for the nonexistence of the sinking fund.
They were quite aware of the provision in the contract for the
sinking fund. They knew that this provision had not been made; they
received the bonds as a performance without objection or protest,
and made no demand that this provision should be complied with.
They have never offered to return the bonds; they are now
outstanding, a valid claim against the city to their face. This was
a waiver. [
Footnote 17]
3d. They negotiated the bonds. They negotiated the coupons.
These securities are still outstanding against the city. Whatever
claim there may be for a sinking fund or for damages for the want
of it would seem to belong to the holders of the bonds, and not to
the party to whom issued. The right to a fund for redemption of a
bond, to enforce it
Page 87 U. S. 319
by mandamus or to ask damages for its violation is an incident
of the bond, attached to and inseparable from it. [
Footnote 18] There cannot be a cause of
action in one to recover the whole face of the bond and interest
and in another to recover damages for the want of a collateral
security to the bond. The allowance of damages now to Brown &
Co. will be no defense to a claim for the whole face of the bond,
to be made by the holder of it. The city would thus be liable to
pay the face and interest of the bond to the holder after having
paid twenty-eight percent to Brown & Co. for the absence of
guaranty of the payment of the same bond. This cannot be sound
law.
VI. In the accounts allowed by the master and sustained by the
court were the following items,
viz.:
"4th. To cash paid as the reasonable value of the services of
attorneys employed to prosecute special assessments, by request of
the city, $10,000."
"5th. To the value of services in the collection of special
assessments or paving bills, without process of law, by request of
the city, $25,000."
The allowance of these items constitutes the sixth allegation of
error. The items are closely akin, and may be considered
together.
The ordinances of the City of Memphis required that the city
attorney should prosecute all suits to which the city might be a
party or in which it might be interested.
By the terms of the cash paving contracts, it was provided that
the accounts for the paving should be made out by the city engineer
and delivered to the contractors for collection, and if not paid
within ten days after the payment became due, "said accounts, or so
much as shall be due and unpaid, shall be placed in the hands of
the city attorney for collection under the city charter."
The duty of the parties under this stipulation is plain. The
contractors are to collect the accounts, so far as they are able to
do so, within ten days after the payment becomes
Page 87 U. S. 320
due. They can demand no compensation for this duty, however
onerous or expensive it may be. It is a duty imposed upon them by
the express terms of the contract. After the lapse of ten days, the
burden is shifted and the duty falls upon the city to proceed
through the agency of their attorney to collect the accounts. The
contractors have nothing to do with this further proceeding. They
are not bound to employ other attorneys, nor are they at liberty to
do so and charge the expense to the city. Taking the contract as a
guide, the matter seems too plain for argument.
But it is said that these services were rendered by the
contractors at the request of the city, and that the employment of
the additional attorneys was also at the request of the city. We
think this is not an answer to the objection.
1st. This paving contract was entered into under a special and
restricted authority, and in a mode specifically pointed out by the
local law. The mayor was authorized to advertise for twenty days
for proposals for doing the work according to the plans and
specifications. The mayor and finance committee were therefore
authorized
"to make and enter into a contract with the lowest responsible
bidder as to payments, time of completion, and under such
restrictions as they may think best."
The city engineer was then directed to make a plat of the work
to be done, to lay before the board an estimate of the entire cost
of the improvement under the contract, marking upon each lot the
amount for which it should be liable, and which amount was declared
to be a debt due from the owner, and to be a lien upon the lot.
This authority was pursued in making the contract. Bids were
sought by advertisement. Bids were made by different parties. The
bid of Taylor, McBean & Co. was accepted, as the most favorable
to the city. The formal contract was entered into under these
stipulations. We think this contract cannot be modified, as if it
were an ordinary contract, made under the ordinary municipal
authority. If the common council can vary it by assuming duties and
waiving obligations therein imposed upon the contractors, in
respect
Page 87 U. S. 321
to the collection of the bills and the employment of attorneys,
they may do it by increasing the price to be paid for the work.
Instead of favoring the contractors to the extent of $35,000, as is
proposed in the present instance, they may give them unlimited
favors. This idea is in hostility to the entire scheme of
advertising for bids, contracting with the lowest bidder, fixing
the amount of the debt and lien of each lot owner. We think the
contract as made must be abided by. It must be performed according
to its terms.
2dly. The case fails to show any variation of the contract by
authority of the city. No act of the common council appears giving
sanction to the changes alleged to have been made. "The mayor and
the city attorney," one of the attorneys employed testifies,
"were apprised of the extraordinary efforts we were making to
effect collections without suit, and approved the same and urged us
to make all possible efforts. My recollection is that the city
attorney advised the same course."
The city engineer, Mr. Ballard and Mr. Brown, all testify on
this subject. In no instance is there any other evidence of
authority than that the mayor and city attorney urged them to make
great efforts in the collections, and advised them to retain
counsel in looking up titles and to aid in bringing suits. It is
not suggested even that the finance committee, which was the agent
of the city in making the contract, advised or assented to any
change in its terms. We think that a contract entered into with the
solemnities observed in the present instance cannot be modified
upon the evidence of authority here referred to. There is no
evidence that the city ever assented to the change. [
Footnote 19]
VII. It is also alleged as error that before the cause was ready
for a decree, and without settling the rights of the parties, the
court referred it to a master for an account, and the master took
and stated the account under his own view of the law and the facts
and virtually decided the case instead of the court.
Page 87 U. S. 322
In November, 1870, Messrs. Brown & Co. moved for an order of
reference upon the notice already set out [
see supra, p.
87 U. S.
297].
No exception was taken to the order of reference. No exception
was taken before the master. All the evidence was presented that
was desired by either party. Full justice in this respect was
attained, and we are of the opinion that this allegation of error
is not well grounded. [
Footnote
20]
The result of our opinion is that the judgment is correct except
as to the items hereinbefore discussed -- of $89,608 damages for
the want of a sinking fund, of $10,000 for the services of
attorneys, and $25,000 for the plaintiff's services in collecting
the bills for paving. As to these, there was error.
Decree reversed and the case remitted to the circuit court
with directions to enter a decree in accordance with these
views.
JUSTICES FIELD and BRADLEY concurred in the judgment of
reversal, but dissented from the opinion, they holding that the
contractors ought to be charged with the full amount of bounds
received by them, inasmuch as the City of Memphis had no authority
to sell its bonds for less than their par value.
[
Footnote 1]
1 Thompson & Stigers's Statutes, 1871, § 1359.
[
Footnote 2]
Act February, 1859, Bridges' Digest, 112 and 208.
[
Footnote 3]
Ib. 120.
[
Footnote 4]
Story's Equity §§ 714 to 730.
[
Footnote 5]
2 Kernan 48.
[
Footnote 6]
35 Ia. 138.
[
Footnote 7]
Griffith v. Burden, 35 Ia. 138;
Wheeler v.
Newbould, 5 Duer 37;
Brown v. Ward, 3
id.
660;
Brightman v. Reeves, 21 Tex. 70;
Tracy v.
Talmage, 14 N.Y. 162-191.
[
Footnote 8]
Set out
supra, pp.
87 U. S.
295-296 -- REP.
[
Footnote 9]
Seventh American edition 604 (*445); 605 (*445) American note,
where numerous cases are cited in support of the principles laid
down.
[
Footnote 10]
See Taylor v. Hart.
[
Footnote 11]
Bridge's Digest 132.
[
Footnote 12]
Ib., 192, 233.
[
Footnote 13]
Ib., § 110.
[
Footnote 14]
Ib., 140.
[
Footnote 15]
Railroad Company v.
Howard, 7 Wall. 407;
Zabriskie
v. Railroad Company, 23 How. 381;
Leggett v.
Raymond, 6 Hill 641.
[
Footnote 16]
Kearney v. City of Covington, 1 Metcalfe (Ky.) 339;
Baldwin v. City of Oswego, 2 Keyes 141;
Sleeper v.
Bullen, 6 Kans. 307;
City of Louisville v. Hyatt, 5
B.Monroe 199;
Cumming v. Mayor of Brooklyn, 11 Paige 596;
Manice v. City of New York, 8 N.Y. 130.
[
Footnote 17]
Reed v. Randall, 29 N.Y. 358.
[
Footnote 18]
Tracy v. Talmage, 14 N.Y. 162;
Oneida Bank v.
Ontario Bank, 21
ib. 490.
[
Footnote 19]
Carroll v. St. Louis, 12 Mo. 444;
Butler v.
Charlestown, 7 Gray 12;
Clough v. Hart, 11 American
Law Register (N.S.) 95;
Halstead v. Mayor of New York, 3
Comstock 430.
[
Footnote 20]
Field v.
Holland, 6 Cranch 25;
Story v.
Livingston, 13 Pet. 359; 2 Smith's Chancery
Practice 372;
Troy Iron & Nail Factory v. Corning, 6
Blatchford 328.