Webster v. Douglas County

77 N.W. 885, 102 Wis. 181, 1899 Wisc. LEXIS 4

• Court: Wisconsin Supreme Court
• Decided: February 21, 1899
• Status: Published

Opinion

The following opinion was filed January 10, 1899:

Winslow, J.

It is well settled in this state that a taxpayer may maintain an action in equity, on behalf of himself and all other taxpayers, to restrain public officers from paying out the. public money for illegal purposes, and may also, under the proper circumstances, compel public officers, and even third persons, to repay into the public treasury money already paid out illegally. These propositions do not require further discussion. Willard v. Comstock, 58 Wis. 565; Frederick v. Douglas Co. 96 Wis. 411; Quaw v. Paff, 98 Wis. 586; Land, L. & L. Co. v. McIntyre, 100 Wis. 245, 258.

The crucial question in this case is whether the county could legally spend more than $8,000 in one fiscal year upon highways, under the provisions of sec. 1308, E. S. 1878. This section, after providing that county boards may adopt highways or parts of highways as county roads, or may designate highways or parts of highways for the purpose of spending money in their repair without adopting them as county roads, then provides that any county board “may annually levy, on the taxable property of the county, a county road tax not exceeding eight thousand dollars, which shall be expended under their direction, in making culverts, grading, graveling, ditching or otherwise improving such highways.”

It seems very manifest to us, from a careful reading of the section, that the amount of the tax fixes the amount which may be expended in any one year. The amount is plainly limited to the amount previously raised by the tax. The board may first raise a sum, and then spend it. Whatever is said to the contrary in Harrison v. Milwaukee Co. 51 Wis. 645, was not necessary to the decision of that case, and must be considered as overruled. See Kane v. School Dist. 52 Wis. 502.

In the present case the board raised $8,000 by tax levied in November, 1893, and spent the entire sum before the 5th of June, 1894. They then proposed to spend $8,000 more, and pay for the work temporarily out of the normal school fund, and finally out of the levy to be made in November, 1894. This they had no power nor right to do. They however proceeded, not in the manner required by sec. 1309, but in a lawless and irregular manner, to parcel out $2,000 to each of the chairmen of the four county towns, and to allow each chairman to spend his portion as he chose. To say that this entire proceeding was irregular and illegal is to speak of it very mildly. The plaintiffs brought their action after the work had begun, and just after about $2,300 of orders had been issued and paid. Laying aside, for the moment, all questions as to the status of the sums which had thus been paid out before the action was begun, we can see no reason why the plaintiffs did not present a cáse which would require all further work and payments to be stopped. Certainly, it cannot be said that there was laches so far as future work was concerned, and, as we Rave already indicated, the expenditure was clearly illegal.

The temporary injunctional order, in no uncertain terms, prevented the board from carrying out the work which had been illegally commenced under the resolution of June 5th. It forbade absolutely the allowance of any bills, or the payment of any orders, for any such work done thereafter and prior to the next tax levy. The only substantial change in this prohibition, which was made by the modifying order of September 3d, so far as the present question is concerned, was to allow necessary repairs to be made upon county roads or roads which had been designated for the expendí-ture of county money. The purpose and meaning of this modification was to allow the board to make emergency repairs, or such repairs on roads as were necessary to make travel safe, so that the duty of the county to travelers upon its highways might still be discharged. It is idle to say or to argue that the meaning of the modification was to allow general road work, as contemplated by the resolution of June 5th, to be carried on under new contracts. If such was its meaning, then it was not a modification, but an abrogation, of the injunctional order, and the proper course would have been to vacate the original order. Hew contractors were found who were willing to go on with the work and take their chances. A majority of the county board, after the tax levy of hlovember, 1894, pretended to accept the work, and a considerable part of it was paid for. It is said, and gravely found by the circuit court, that this was all done in good faith ! There is as little room for good faith in the deliberate disobedience of an injunctional order as there is in the deliberate commission of a crime. Eor is there room for ratification or estoppel. The plain fact is that the acts of the public officials and contractors, after the injunctional order of August Ith was issued and served upon them, in proceeding with general road work, and in issuing orders to pay for the work, and in actually paying for a good part of it, were and are utterly indefensible. They were deliberate contempts of court. They could not be in good faith, under such circumstances, nor can acts of ratification or estoppel nullify the command of the court. By the temporary injunction the parties to the action were commanded to refrain from further action until the controversy was heard upon its merits and decided, so that the final judgment might be effective. This order has been disobeyed, and large sums have been paid out by the county officers in defiance of the order. Now, at the close of the litigation, it is found that the preliminary injunction should be made permanent; but the status quo has been changed by disobedience of the preliminary order, and this disobedience is alleged to have been a disobedience in good faith, and a disobedience which the county board has ratified and condoned. These claims are manifestly absurd.

The work, under the resolution of June 5,1894, was illegal from start to finish. After the injunctional order of August Yth, it should have stopped at once in obedience to the -order of the court; but the order having been disobeyed and .a large part of the money having been paid out, the officials who assisted in the violation of the injunction, either by voting the issuance of orders or by countersigning the same, or by paying out the money thereon, as well as the defendants who received such moneys, to the extent of the amounts respectively received by them, must be required by the judgment to repay to the county treasury the sums so wrongfully paid out.

The question of the recovery of the sums paid out on the 6th of August, just prior to the commencement of this action, is now to be considered. The total amount then paid out was $2,342.95, of which $1,008 was paid to the defendant McClure, chairman of the town of Nebagamain, and also chairman of the county board, upon four orders issued to the contractor Cassidy, and indorsed by him to McClure for the convenience of Cassidy; $1,007.25 was paid to the defendant the Duluth Trust Company upon four orders issued to the contractor McLaggan, and purchased by the company of McLaggan; and $327.70 was paid to the defendant O. K. Anderson, then county clerk of Douglas county, upon an order issued to the contractor Cloney and by him transferred to Anderson. As to the moneys paid to McClure and Anderson, as assignees of the Cassidy and Cloney orders, the situation is not doubtful. Both of these defendants were public officials, charged with important duties in relation to the expenditure of the public moneys. They were trustees of the public funds. Among other duties, both of these officers were required to countersign all county orders. R. S. 1878, secs. 667, 709, subd. 3. It was their sworn duty to issue no orders for highway work, under sec. 1309, until a committee of three had viewed the work and reported that the same was done in accordance with the contract. This duty they violated flagrantly. Not only was there no such inspection of the work, but the bills were railroaded through the board on the day of their presentation or on the following day, when there were no moneys in the fund to pay them, evidently with a settled design to give no opportunity for inspection. The warrants were immediately indorsed by the contractors to the defendants McClure and Anderson, respectively, and the money drawn out of the treasury. It is true the court has found that the defendants in question had no pecuniary interest in the transaction, and that they acted in good faith, but even these findings cannot relieve them from liability for their breach of trust in drawing out of the treasury money for a purpose not authorized by law. Such money they must return, even if they had no wicked intent; but we do not think the circumstances in proof admit of a finding of good faith. The allowance of these accounts and payment of these mon-eys were marked by haste and apparent collusion with the contractors which requires an explanation more convincing than any which appears in the evidence in this case. The presumption of fraud which necessarily arises from the allowance of illegal bills so hastily, when there were no funds in the treasury to pay them with, the money being drawn out by the auditing officers themselves, has not been met and rebutted. Under the authorities cited in this opinion in our own state, as well as the authorities cited in Frederick v. Douglas Co., supra, we hold that the defendants McOl/wre and Anderson must be held liable to return the county funds so received by them. The general principles of law laid down in the cases of Frederick v. Douglas Co. 96 Wis. 411, and Land, L. & L. Co. v. McIntyre, 100 Wis. 245, 258, are applicable to this case. Moneys paid out by public officers in direct violation of law may be recovered from the officials 'themselves, and from the recipients thereof, in actions which are seasonably brought by taxpayers on behalf of the public, especially where the transaction is marked by haste, fraud, collusion, or concealment. The evidences of haste, collusion, and concealment in this case are too plain to be overlooked or misunderstood, and it is evident that the contractors McLaggan, Cassidy, Cloney, and Agen actively assisted the disbursing officers in their efforts to deplete the treasury before interference by action was possible, and hence they must also be held liable to the extent of the moneys received by them, respectively.

As to the moneys paid to the Duluth Trust Company, the court found that the orders held by the company were purchased for a valuable consideration, and in good faith, and with no knowledge of any conspiracy or irregularity in the expenditure of the money. These findings are sufficiently supported by the evidence, and we think they must be held to free the defendant trust company from liability in this form of action, at least. It is true that the orders possess none of the qualities of negotiable paper, and that the holder stands in the shoes of the payee. 1 Dillon, Mun. Corp. § 503. Had payment been refused by the county treasurer, and action been brought against the county upon them, all the defenses which could have been urged against the original holder could have been urged against the transferee. But the question here is quite different. The resolution under which the work in question was done was adopted June 5, 1894, and work was at once commenced under it, so that nearly $3,000 worth of highway work had been done on the 3d of August before this suit was commenced. The resolution was public in its nature, the work was also public, and we feel that the neglect in bringing the action until after so much work had been- done, and orders issued and negotiated in the hands of innocent third persons, must operate to prevent recovery against such third persons, upon the principle of laches, as laid down in the case of Frederick v. Douglas Co. 96 Wis. 411. The plaintiffs have invoked the relief of a court of equity, and they have delayed in so doing until serious injury will result to a party who had no participation in the illegal'contract, if the plaintiffs be allowed to recover. "We are not now discussing the rights or remedies of the county itself, in a proper action brought by its officers to recover funds illegally obtained from the treasury, but simply what a court of equity will do when its aid is invoked by a taxpayer who might have brought his suit earlier and prevented the mischief, had he chosen to do so.

The defendant trust company cannot be held liable in this action. The supervisors who authorized the illegal contracts and expenditures must, however, be held liable, and the auditing and disbursing officers, as well as the contractors and their assignees, to the extent of the amounts received by them, respectively, after the commencement of this action.

By the Court.— As to the defendant Duluth Trust Company, the judgment is affirmed, without costs, except attorney’s fees; and, as to the remaining defendants, the judgment is reversed, with costs, and with directions to enter judgment for the plaintiff in accordance with this opinion.

The following opinion was filed February 21, 1899:

Winslow, J. A motion is made to correct the mandate in this case so that it shall direct the allowance of interest upon the sums drawn out of the county treasury. It is apparent that interest ought to be allowed from the time the moneys were unlawfully drawn out, and the opinion and mandate will be amended so as to direct that such interest be allowed. The motion also asks that the trial court be directed to allow costs against the defendants upon final judgment. Certainly there can be no question but that the defendants should be adjudged to pay the costs of the action, and the circuit court should be directed to enter such judgment.

By the Court. — It is so ordered.

Bardeen, J., took no part.