San Francisco Gas Co. v. City of San Francisco , 9 Cal. 453 ( 1858 )

Field, J.

This case was before this Court at the last October Term, and the judgment of the Court below was then affirmed. A re-hearing having been granted, the appellants contend that they are entitled to recover the amount claimed in the second count upon the pleadings, and also upon the merits of the case, as disclosed by the report of the referee.

On the first hearing it was held by my associates that the answer was sufficient to raise an issue; and, that the rule which requires a defendant to answer positively as to the facts alleged in a verified complaint, which are presumptively within his own knowledge, does not apply to municipal corporations. I did not then concur in the opinion of my associates. I do not concur now. I think the answer fatally defective in not denying any of the allegations of the second count, either positively or according to information and belief; the only forms in which the allegations of a verified complaint can be controverted so as to raise an issue. A denial in any other form is unknown to our system of practice, and can not have any legal effect. The answer is that the defendant has “no knowledge or information" in respect to the allegations of the second count, “ and therefore denies the same." But the statute imposes upon the defendant, if a natural person, and if a corporation, upon its officers and agents, the duty of acquiring the requisite knowledge or information respecting the matters alleged in the complaint, to enable them to answer in the proper form. Such knowledge or information will be obtained before trial, if a defence is interposed, and there is no good reason why it should not be obtained before answer. In the case at bar, the facts alleged are presumptively within the knowledge of the officers of the corporation, and the denial should have been made positively. Any other form of denial in such cases is an evasion of the statute. In the opinion referred to, the general rule is admitted, but municipal corporations are excepted from its operation. I am unable to find any authority for the exception. The statute makes no distinction between the rules of pleading applicable to natural persons and those applicable to artificial persons. It does not give one rule to determine the effect of a pleading when the defendant is an individual, and another and different rule when the defendant is a municipal corporation. It prescribes certain requisites to good pleading, and certain consequences to bad pleading; and corporations are not exempted from its provisions. By the rules it gives, is the sufficiency of the pleadings to be judged. Its language is: “ All the forms of pleading in civil actions and the rules by which the sufficiency of the pleadings shall be determined, shall be those prescribed by this Act.” (Prac. Act, §37.)

In Thorn et al. v. The New York Central Mills, (10 How., 20,) the complaint was upon a promissory note, alleged to have been executed by the defendant, (a corporation,) to the plaintiffs, by an agent duly authorized, and was verified. The defendant put in the following answer, verified by one of the directors of the company: “ This defendant has no knowledge or information sufficient to form a belief, that it did at the time, for that purpose stated in the complaint by its authorized agent, make its promissory note, by the name and for the amount, as in this respect set forth in said complaint, or that it is indebted to the said plaintiffs upon such anote as is in the said complaint mentioned.” A question as to the sufficiency of this answer was raised, in the decision of which Bacon, J., of the Supreme Court of New York, laid down the rule above stated, and held it equally applicable to corporations as to individuals. “A corporation,” says the Justice, “ is as much bound to know whether it has entered into contracts, made purchases, given promissory notes in the course of its business, and by its appropriate agents, as an individual. I have serious doubts, indeed, whether a corporation is permitted to answer in any case in the form adopted in this cause. How can-, an individual director, know that “it” (the corporation, as it is styled in the answer,) has no knowledge, information, or belief, in the premises? The intangible, incorporeal entity may not have, and such a thing is not predicable of a corporation, but non constat that some other director or officer may not have all the knowledge or information necessary to form a full and perfect belief. Where is the agent who gave the note, where the bill-book of the company, or the appropriate entries to show the transaction out of which the note may have sprung? * * * I hold, therefore, that in this case the defendant was bound to know, or, at least, to inquire, and thus gain the information as to the fact of the existence of the note in question in this suit, and that the company are not at liberty to answer otherwise than by an explicit admission or denial of the giving of the note.”

The case above is one of three cases brought against the same defendant upon promissory notes, in each of which the same answer was filed; and in each the same decision was rendered and an appeal taken to the general term of the Supreme Court. The case on appeal is entitled “ Shearman v. The New York City Mills,” and is reported in 1 Abbott, 187. The Court held the answer insufficient, and said :

“ If a corporation may answer in this manner in one case, it may in all eases. It is, from its nature, under the necessity of acting by agents. If, therefore, it were endowed with all the faculties of a natural person, it would have no actual knowledge of any facts.

“It could, therefore, in all cases, deny knowledge or information. But a corporation is an artificial being, which, from its nature, can have no knowledge or belief on any subject independent of the knowledge or belief of its agents. It is a mere legal entity. It neither knows nor thinks. If, therefore, this method of denial on the part of the corporation in this case be correct, a corporation cannot be compelled in any case to admit or deny any allegations, even those of its own organization. It can not be possible that the Legislature intended to grant to them any such dispensation.”

These cases establish the position that, in pleading, the same rule must prevail with corporations as with individuals. The defendant, it is true, was a private corporation, and the opinion limits the exception in the application of the rule above mentioned to municipal corporations, assigning as the reason, the distinction between the two corporations stated in the case of Holland v. The City of San Francisco. The distinction alluded to refers to the double character of a municipal corporation ; its public and political character, in which it exercises subordinate legislative powers, and its private character, in which it exercises the powers of an individual or private corporation. The very distinction, it appears to me, dissipates the exception taken, at least so far as the case at bar is concerned. It is admitted that the rule of pleading, for which I contend, is applicable to private corporations. The purchase of gas involves only the exercise of a power of a private corporation; it requires no exercise of any political power. It is as much an act of a private character as if made by a private corporation. In truth, a municipal corporation, outside of its governmental capacity, is, in many respects, to be regarded the same as a private corporation, and its officers and agents through whom it acts must be presumed to know the contracts it enters into, the purchases it makes, and the property it uses. The knowledge of such matters must rest with some of its officers, and the corporation ought not to be permitted to shelter itself under an assertion of ignorance.

Having stated the reason for dissenting from the former opinion of my associates, I proceed to consider the case on its merits. The facts, as reported by the referee, are not disputed. From them, it appears that the plaintiff furnished the gas, according to the allegations of the second count of the complaint, amounting in value to the sum of $18,188 ; that the gas was consumed in lighting the city-hall and fire-engine-houses belonging to the corporation ; that it was furnished and used nightly for that purpose, from November, 1854, to June, 1856 ; that bills for the same were rendered monthly to the common council, and those previous to June, 1855, were audited and allowed, and the comptroller directed to issue his warrants upon the treasury therefor; that such warrants were accordingly issued and delivered to the plaintiff, but not being paid were returned and canceled, and the bills remain unpaid; that it was necessary to the efficiency of the fire department that the engine-houses should be lighted, and necessary for the convenience of the officers of the city in the discharge of their respective official duties, and for the due administration of the city government that the city-hall should be lighted; that the gas was used in the chambers of the common council during its sittings, in the offices of the mayor, comptroller, treasurer, police officers, and other public offices, whilst occupied by the mayor and other officers of the city, in the discharge of their official duties; that the gas was lighted and extinguished from time to time, by the officers themselves, or by their direction ; and the meters and fixtures by means of which the gas was furnished and used in the citv-hall and engine-houses, were put up and paid for by the corporation.

Upon these facts, the appellant asserts a right to recover against the defendant for the gas furnished. The respondent denies the right upon the sole ground that there was no evidence of any ordinance of the common council authorizing the furnishing of the gas. The proposition of the respondent is that a municipal corporation can incur no liabilities otherwise than by ordinance. The position, in its full extent, is not tenable. Under some circumstances, a municipal corporation may become liable by implication. The obligation to do justice rests equally upon it as upon an individual. It cannot avail itself of the property or labor of a party, and screen itself from responsibility under the plea that it never passed an ordinance on the subject. As against individuals, the law implies a promise to pay in such cases, and the implication extends equally against corporations. This is as well established by the authorities as any principle of law can be.

In Abbott v. The Inhabitants of the Third School-District in Herman, (7 Greenl., 96,) a school-house had been built under contract with persons, who assumed without authority to act as a district committee, but yet as a school was afterwards kept in it by direction of a school-agent, it was held, that the building was accepted by the district, and that the inhabitants were bound to pay its reasonable value. The Court, in its opinion, says : “If one accepts or knowingly avails himself of the benefit of services done for him without authority or request; he shall be hold to pay a reasonable compensation for them. So, in the present case, the same principle may be applied."

In Ross v. The City of Madison, (1 Carter, 281,) it was contended that the city was not liable, because no contract had been made by it for the construction of a certain culvert, which had occasioned the injury for which the suit was brought. The Court below instructed the jury that if they found that certain evidence adduced before them constituted all the written evidence tending to prove that the defendant authorized the construction of the culvert, they must find for the defendant. The Supreme Court held the instruction wrong, and in its opinion said : “ It is well established that the contracts of corporations rest upon the same footing as those of natural persons, and are valid, without seal, whether expressly made by the corporation, or arising by implication from the general relations of the agent towards the corporation, or from the ratification of acts done on behalf of the corporation by parties assuming to act as agents, although without sufficient authority.”

In The Overseers of North Whitehall v. Overseers of South Whitehall, (3 Sergt. & Rawle, 117,) it was held that implied assumpsit would lie to recover the expenses of a town pauper, which had been paid by the plaintiff for the benefit of the defendant. It was contended that the corporation was not liable to an action unless bound by a contract under its corporate seal, as in the pi-esent case it is contended that the defendants are not liable unless bound by ordinance. The objection in the two cases is the same in principle, as the ground of the objection is, that the consent of the corporation has not been given in the requisite manner. To this objection, Tilghman, C. J., said: “This point has been so much discussed, and so well settled, in other Courts, that I shall not go over the ground again, but content myself with expressing my opinion that the action may be supported on an implied contract, and with referring to the cases of Bank of Columbia v. Patterson, (7 Crunch, 299;) Danforth v. The Schoharie Turnpike Company, (12 Johns., 227;) and Hayden v. The Middlesex Turnpike Company, (10 Mass. R., 397.)”

In Alleghany City v. McClarkin & Co., (14 Penn., 81,) the plaintiffs claimed to recover the amount of certain small notes, or city-scrip, issued by the defendants, and the question was presented, whether the common council of a city, a municipal corporation, could subject their constituents to the penalty of the act of the Legislature forbidding the issuing of small notes as a circulating medium. The Court, per Coulter, J., said: “The Charter, or Act of Assembly, incorporting the city of Alleghany, was not produced or read on the argument; but I take it for granted that it contains no express authority to the corporation to issue such notes as those embraced in this action. But it does not follow that the corporators are therefore not answerable for them in their corporate capacity. They have received value for them in the various public works and improvements erected and made in the city, through their instrumentality, and it hardly comports well with fair dealing, that they should seek to exonerate themselves from a debt on this account, contracted by and through their accredited agents, and with their silent acquiescence. It is not universally true that a corporation _ can not bind the corporators beyond what is expressly authorized in the charter. There is power to contract, undoubtedly, and if a series of contracts have been made openly and palpably within the knowledge of the corporators, the public have a right to presume that they are within the scope of the authority granted. * * One rule of law is often met and counterchecked by another of equal force, so that although the corporators are, in general, protected from unauthorized acts of their agents, yet, at the same time, a rule of equal force requires that they should not deceive the public, or lead them to trust and confide in unauthorized acts of their agents. If they receive the avails and value of those acts, it is implicit evidence that they consented to and authorized them. They adopt the act, and are responsible to those who, on the faith of such acquiescence and approbation, trusted their agents.”

The reasoning of the Court, in this case, is applicable to the facts of the case at bar. The defendant has received the benefit of the plaintiff’s labor and materials for over a year and a half, and it ill comports with fair dealing that it should now seek to exonerate itself from liability, and the law will fail to effect its true end, if the defence interposed can prevail. The position contended for by the respondent, it is believed, is asserted in this State for the first time. The reports in other States are full of adjudged cases where actions upon implied contracts have been sustained against municipal corporations. They have been argued by able and distinguished counsel, and decided by eminent Judges, and the distinction has never been made between the liability of a private corporation and a municipal corporation, under circumstances analogous to those presented in the case at bar. Thus, in Clark v. The City of Washington, (12 Wheaton, 40,) the action was founded on an implied assumpsit to pay the amount of a prize drawn by a lottery-ticket for which the plaintiff claimed the city had made itself liable, in consequence of the acts of its agents and officers. Mr. Webster and the Attorney-G-eneral, Mr.- Wirt, in the course of their argument, used the following language: “Where special duties are imposed upon corporations, which can only be performed through the instrumentality of their agents, the law will raise an implied assumpsit, under the same circumstances as in dealings with private individuals. It is enough to show a ratification of the acts of the agents, by receiving the benefit of the acts, or otherwise. In short, they are responsible, under these circumstances, for their promises, whether express or implied, in writing or by parol.” The correctness of this position was not even questioned by the opposing counsel, and the point was not deemed of sufficient doubt to be noticed by'the Court, in its decision; and judgment was ordered for the plaintiffs.

In Powell v. Trustees of Newburgh, (19 John., 284,) the action was brought to recover the expenses incurred by the trustees in the defence of an action brought against the corporation for discontinuing and obstructing a street. There was no contract in the case, except the implied contract which the law raised from the circumstances, yet the Supreme Court of New York held the plaintiff entitled to recover.

In Brady v. The Mayor, etc,, of Brooklyn, (1 Barb., 584), the recovery was upon an implied assumpsit. There was no proof of any ordinance authorizing the indebtedness for which the action was brought.

Cases ad infinitum might be cited showing a general recognition in the Courts of the several States of the doctrine that municipal corporations, like individuals, may, under some circumstances, be held upon implied contracts. A corporate act is not essential in all cases to fasten a liability, and if it were necessary the law would sometimes presume, in order to uphold fair dealing and prevent gross injustice, the existence of such act, and estop the corporation from denying it.

Where the contract is executory, the corporation cannot be held bound unless the contract is made in pursuance of the provisions of its charter; but whore the contract has been executed, and the corporation has enjoyed the benefit of the consideration, an implied assumpsit arises against it. It will be presumed, for the purposes of justice, that the authority exercised by the officers of the corporation was proj>erly delegated to them, and that contracts made by them without authority, have been ratified. “ If officers of the corporation,” says Story, J., in Bank of U. S. v. Dandridge (12 Wheat., 70,) “openly exercise a power which presupposes a delegated authority for the purpose, and other corporate acts show that the corporation must have contemplated the legal existence of such authority, the acts of such officers will be deemed rightful, and the delegated authority will be presumed. * * In short, we think that the acts of artificial persons afford the same presumptions as the acts of natural persons. Each affords presumptions from acts done of what must have preceded them as matters of right, or matters of duty.”

But not merely as I have stated will such presumptions be indulged ; the corporation, in order to prevent injustice, will be estopped from denying the authority of its agents. “ In general,” says Parsons, in his work on Contracts, “ if a person, not duly authorized, make a contract on behalf of a corporation, and the corporation take and hold the benefit derived from such contract, it is estopped from denying the authority of the agent.” The doctrine applies equally to municipal as to private corporations.

I am of opinion that the order modifying the report of the referee should be set aside, the judgment entered on the eighteenth of March, 1857, be reversed, and that the judgment entered on the twentieth of January, 1857, should stand as the final judgment in the cause.

Ordered accordingly.

Burnett, J.

Upon a re-argument, and a more careful examination, we are satisfied that our former opinion was erroneous.

We have lately held, in the case of Humphreys and others v. McCall and others, and Curtis v. Richards and Yantine, that there were but two forms in which the defendant can controvert the allegations of a verified complaint. In both of these forms, the denial of each controverted allegation must be specific. The statute is without exception. A specific denial of each allegation is a separate denial, applicable only to the particular allegation controverted.

The answer in this case gives rise to two questions:

1. Can a defendant excuse himself from a specific denial of each controverted allegation by stating that he has no knowledge or information in relation to the allegations of the complaint ?

2. Conceding that he can not, does this rule apply to municipal corporations ?

In reference to the first question, we may remark that the Hew York Code provides that the answer shall contain “ a general or .specific denial of each material allegation of the complaint controverted by the defendant, or of any knowledge or information thereof sufficient to form a belief.” (Voorhies’ Code, p. 163, 5th ed., 1857.) Under our Code, as it was originally framed in 1850, and as amended in 1851, the defendant might put in issue the allegations of the complaint by a denial of any knowledge thereof sufficient to form a belief. But this section was amended in 1854. As it now stands, the denial must be in one of the only-two forms given. Under the act of 1850, the denial could be “ according to information and belief, or of any knowledge thereof sufficient to form a belief/-’ The section as amended has left out the latter portion of the section as it formerly stood, and has thus cut off the privilege of a denial of any knowledge sufficient to form a belief. This change in the language of the section must have been intended to secure a specific denial of each allegation.

It would seem, on first reflection, to be idle for the Code to require the defendant to deny specifically, according to his information and belief, when he states in his answer he has no information, and, of course, no belief.

But this conclusion, though apparently very clear, is not correct. When the facts alleged in a verified complaint are presumptively within the knowledge of the defendant, the Code requires his denial to be specific, not general. The object of the provision is to call the attention of the defendant, and to confine each denial to one allegation at a time, and not permit him to deny all at once. Under the equity practice the complainant usually annexed interrogations to his bill for the purpose of sifting the conscience of the defendant. Our system intended to accomplish the same result by requiring the plaintiff first to state the facts that constitute his cause of action, and then of the defendant, a specific denial of each allegation. The same reason which requires the defendant to be specific in this case, would equally require the denial to be specific where the facts are not presumptively within the knowledge of the defendant. The plaintiff may state in his complaint a number of facts, some of which the defendant could not specifically deny, according to his information and belief. But if he be permitted to make a sweeping denial, upon the ground'that he has no information, he avoids the responsibility of denying each separate allegation. He may have information in reference to one of a number of alleged facts, and as to that one he believes it to be true; but if permitted to deny generally, he would be strongly tempted to say he had no information as to the facts alleged, and, therefore, denied the same. The object of the Code was to require a specific denial of the allegations of a verified complaint in all cases, without exception. This must have been the intention of the Legislature in amending the section. The object of the Code was to narrow the proofs upon the trial; and. to accomplish this end, the plaintiff was allowed to verify his complaint, and thus compel the defendant to deny specifically each separate allegation.

As to the second question, we are satisfied upon more mature reflection that although there may exist the best reasons for a different rule of pleading when a municipal corporation is a defendant, we can make no distinction, because the Code makes none. It is a matter for the Legislature, and not for the Court. The thirty-i eventh section of the Code provides that “ all the forms of pleadings in civil actions, and the rules by which the sufficiency of the pleadings shall be determined, shall be those prescribed in the act.” The Code prescribes that the answer to a verified complaint shall be in one of two forms, in all cases, without any exception, and we cannot make one when the law has not made it.

We might be disposed to permit the answer to he amended, were we not fully satisfied of the intrinsic justice of the plaintiff’s claim. The defence of the city is purely a technical one, and as it was not made in a technical manner, it should fail. For these reasons I concur in the judgment specified in the opinion of Judge Field.

Terry, C. J.—I dissent.