
    The Incorporated Village of Hicksville v. Blakeslee et al. Purdy v. The Incorporated Village of Hicksville et al.
    
      Office and officers — Civil liability — >Municipal councilmen — Exercise of legislative discretion — ■Voting for unlawful legislation — Notice and knowledge — ■Limitation of legislative power — Illegal commission for sale of bonds.
    
    1. A resolution of a village council providing for the sale of the municipality’s bonds is legislative in its nature, and the act of an individual member of council in voting for or against such resolution is the exercise of legislative discretion by such member.
    2. The members of a municipal council, when acting in good faith, are exempt from individual liability for the 'exercise of their legislative discretion in voting, as such members of council, for . or against any proposed legislation before them for consideration.
    3. The fact that the proposed legislation is prohibited by law does not make it any the less legislative in its nature.
    4. All persons dealing with a municipality are bound to know the statutory limitations upon the legislative power of its legislative body, and upon subjects in excess of such power they deal with it at their peril.
    (Nos. 16601 and 16643
    Decided November 22, 1921.)
    Error to the Court of Appeals of Defiance county.
    The 'incorporated village of Hicksville filed a petition against Warren PI. Blakeslee, E. F. Armstrong, C. C. Battershell, Fred Clemmer, B. F. Griest, Charles D. Hilbert and William Purdy, alleging that the defendants other than Purdy were at the time of the transactions set forth in the petition the duly qualified and acting members of the village council of the village of Hicksville. The petition was in the short form authorized by Section 286-1, General Code, and was based upon a report of the bureau of inspection and supervision of public offices, portions of which report were copied in the petition. The copies of such report in the petition recite that during the year 1914 the council offered for sale bonds of the village in the sum of $48,000, for the improvement of Main, Maple, Cornelia, Bryan and Smith streets; that no bids were received upon the offer; and that on September 7, 1914, the following resolution was adopted:
    “Motion of Armstrong and Blakeslee that the offer of Wm. Purdy to place, the 1914 street paving bonds as advertised, at par and accrued interest be accepted. Vote Armstrong aye, Blakeslee aye, Bat-tershell aye, Clemmer aye, Griest aye, Hilbert aye.”
    “Resolution No. 6 — 1914. To provide for the payment of a commission, attorney fees and other expenses for securing a market for the $48,000.00 issue- of Main, Maple, Cornelia, Bryan and Smith street improvement bonds of the village of Hicks-ville, Ohio.
    “Whereas, by reason of the stringency of the money market caused by the war now progressing in Europe, there were no bids received by the clerk of the village of Hicksville, Ohio, for the purchase of the $48,000.00 issue of Main, Maple, Cornelia, Bryan and Smith street improvement bonds of said village.
    “Whereas, on account of said financial stringency the council of said village deem it necessary to offer a commission to encourage the sale of said bonds; and whereas the contract for which said bonds were issued has been completed to such extent that there now exists a valid debt against said village of Hicksville, Ohio, in favor of the contractors, The Johnson Construction Company of Chicago, 111., and Clemmer and Johnson of Hicksville, Ohio.
    “Now therefore, be it resolved by the council of ’ the village of Hicksville, Defiance County, State of Ohio, three-fourths the members elected thereto concurring:
    “Section 1. That in order to secure a market for the $48,000.00 issue -of Main, Maple, Cornelia, Bryan and Smith street improvement bonds of said village, said village shall pay to Wm. Purdy the sum of $2400.00 to cover the cost of attorney’s fees, commission and other expenses incurred by said Wm. Purdy in securing and obtaining a market and buyers for the $48,000.00' issue of Main, Maple, Cornelia, Bryan and Smith street improvement bonds of said village of Hicksville. Said payment shall be due and payable when said bonds or any part of them are sold and the proceeds thereof delivered to the treasurer of said village, and the sáme shall be paid at the rate of 5% of the face value of the bonds delivered.
    “Section 2. That said Wm. Purdy shall pay 6% accrued interest on said bonds from September 1, 1914, to the date of delivery of the purchase price for the same to said treasurer of said village.
    “Section 3. That in no event shall any personal responsibility or liability attach to or be recoverable against the officers who have executed this resolution for and on behalf of the village of Hicksville, Ohio. „
    “Section 4. That this resolution is hereby declared to be an emergency measure, and the same shall take effect and be in full force from and after its passage and adoption.
    “Passed and adopted, October 19, 1914.”
    The petition also recites from the report the following statement of the amounts paid by the village to Purdy:
    Oct. 28, 1914, warrant No. 2149 on.......... $22,200.00 $1,100.00
    Nov. 2, 1914, warrant No. 2153 on.......... 3,000.00 150.00
    Nov. ‘ 9, 1914, warrant No. 2179 on.......... 6.600.00 350.00
    Dec. 11, 1914, warrant No. 2227 on.......... 9.600.00 480.00
    Jan. 4, 1915, warrant No. 2253 on.......... 6.600.00 ......
    $330.00 less accrued interest at ■ 1% on total amount, $90.60 ....... 239.40
    $48,000.00 $2,309.40
    The petition also reproduces from the report the f ollowing:
    “Council Journal November 16,* 1914, page 374.
    “ ‘Motion of Blakeslee and Armstrong that the clerk be authorized to pay the commission and expenses for sale of the 1914 Street Improvement bonds out of the sinking funds. Vote, Armstrong, aye; Blakeslee, aye; Battershell, aye; Clemmer, aye; Griest, aye; Hilbert, aye.’ ”
    The petition then quotes from the report portions of Sections 4506, 4513, 4517, 4510 and 4518, General Code, and the following observation of the party making the report:
    “The sinking fund trustees and members of the council were thoroughly conversant with the above quoted sections and therefore had full knowledge that it was illegal and contrary to the provisions of law to pay said commissions from the sinking funds.
    “The officials having full knowledge that the transaction was contrary to the provisions of law did deliberately, willfully and knowingly divert, appropriate and apply funds, or a- part of a fund raised by taxation or otherwise, and used the same for a purpose other than for which the money was raised and the fund created, contrary to Sections 4506 to 4517, G. C., and are liable to the penalty provided in Section 12878, G. C.”
    The petition then prays judgment against the defendants for the sum of $2,309.40, with interest from the 13th day of November, 1917.
    To this petition a demurrer was filed by Purdy, and a separate demurrer was filed by the defendants other than Purdy. The demurrer of the defendants. other than -Purdy was sustained by the trial court. The Purdy demurrer was overruled. The plaintiff not desiring to plead further as to the defendants other than Purdy, judgment was entered in their favor against the village of Hicksville. Thereupon Purdy filed his, separate answer, admitting substantially the averments of the petition, and averring that during the month of June, 1914, he had loaned to the village the sum of $20,000 to enable it to proceed with its improvement of the streets mentioned in the petition, which sum was to be repaid from the proceeds of the sale of the $48,-000 bond issue; averring that the streets mentioned in the petition were the principal business streets of the village; that during the summer of 1914 the contractor had excavated all - of said streets to a great distance below the abutting sidewalks and surfaces of other streets, so that it was impossible for the citizens and other persons to travel through the streets, and that all the money available, including the $20,000 borrowed from him, had been expended by the village in pursuance to the contract of improvement; averring further that the village was unable to sell the bonds at either public or private sale, and that he, after the contractor had refused to proceed further with the work of the improvement of the streets, on or about the first of September offered, in consideration of the municipality agreeing to pay him as commission, attorney’s fees and expenses the sum of $2400, to sell the bonds for plaintiff at par and accrued interest, which offer was accepted, and that in pursuance of such contract he made trips to Toledo, Detroit, Cleveland; Chicago, Indianapolis and Ft. Wayne and marketed the bonds and paid to the village full par value therefor, together with accrued interest thereon; that he was compelled to sell various blocks of bonds at a discount and that the discount was borne by him, amounting to $1900; that in addition to this discount he was compelled to pay his traveling expenses, and that after paying the discount and traveling expenses he had only about $250 remaining in payment of his services in selling the bonds; and that with the money thus provided by him the village proceeded towards and did complete all of the improvement and that the village and its citizens have been in continual use and enjoyment of same ever since.
    To this answer the village of Hicksville demurred, which demurrer was overruled by the trial court, and the plaintiffs not desiring to plead further judgment was rendered against the village.
    Error was prosecuted to the court of appeals by the village, where the judgment of the*court of common pleas in sustaining the demurrer of the defendants other than Purdy to the petition was affirmed and the judgment of the court of common pleas in overruling the demurrer of the village to the answer of Purdy was reversed.
    Error is prosecuted here by the village of Hicksville to the affirmance of the judgment of the court of common pleas sustaining the demurrer of the defendants other than Purdy to the petition, and error is prosecuted here by Purdy to the judgment reversing the judgment of the court of common pleas overruling the demurrer of the village to the answer of Purdy.
    
      
      Messrs. Snook & Wilcox; Mr. John G. Price, attorney general, and Mr. Ray Martin, for plaintiffs in error.
    
      Mr. R. H. Sutphen and Messrs. Denman, Kirkbride, Wilson & McCabe, for defendants in error.
   Robinson, J.

The action below was a joint one against the members of' the council of the village of Hicksville as individuals and William Purdy. The court of appeals affirmed the judgment of the court of common pleas as to the councilmen and reversed the judgment as to Purdy. Two separate petitions in error were here filed, one by the village of Hicksville against the members of the council as individuals, the other by Purdy against the village of Hicksville, and they were docketed here as distinct cases. Both cases will be considered in this opinion.

An examination of the petition discloses that the village of Hicksville during the summer of 1914, while the bonds were in process of sale, had contracted with the Johnson Construction Company for the improvement of the streets mentioned in the petition; that by reason of the stringency of the money market incident to the world war no bids were received by the clerk for the purchase of the bond issue in question; that on account of the financial stringency the council deemed it necessary to offer a commission to encourage the sale of bonds; that the contract for which the bonds were issued had been completed to such an extent that there existed .a valid debt against the village in favor of the contractors; that in order to secure a market for the bond issue the council authorized the payment of the sum of $2400 to William Purdy to cover the cost of attorney’s fees, commission and other expenses to be incurred by Purdy in securing a buyer for the bond issue.

It was conceded in argument that the petition did not charge the councilmen with having received any portion of the $2,309.40, or with any purpose to act other than in the best interest of the village, but it is claimed that by reason of the statement in the report of the bureau of inspection and supervision of public offices, that “The officials having full knowledge that the transaction was contrary to the provisions of law, did. deliberately, wilfully and knowingly divert, appropriate and apply funds, or a part of the funds raised by taxation, or otherwise, and use the same for a purpose other than for which the money was raised and the fund created,” the court may not look beyond that statement to determine whether the petition states a cause of action, that by a demurrer to the petition the defendants for the purposes of the demurrer admit the truth of every material averment of the petition. It does not follow, however, that where a petition states the facts upon which it bases a conclusion the demurrer admits the correctness of such conclusion, and a court, while accepting the aver-ments of facts as true, will consider the conclusions with reference to the facts there stated, and the petition having disclosed that the bonds in question were regularly authorized, regularly advertised, and regularly offered at public sale, that no bids were received by reason of the stringency of the money market, that on account of such stringency the council deemed it necessary to offer a commission to secure the sale of the bonds, that the contract for the payment of which the bonds were issued had been completed to such an extent that there existed a valid debt against the village, disclosed a state of facts consistent with the good faith of the members of the council in their attempt to discharge their obligation to keep the streets of the village safe for travel; and the element of corruption or bad faith is negatived by such facts.

The demurrer then presents the square question whether a councilman acting in good faith who votes for an unauthorized and therefore void and illegal resolution or ordinance thereby becomes liable to the village for such sum as may thereafter be paid under the supposed authority of such void resolution or ordinance. That legislative officers are not liable personally for their legislative acts is so elementary, so fundamentally sound, and has been so universally accepted, that but few cases can be found where the doctrine has been questioned and judicially declared.

In the case of Jones v. Loving, 55 Miss., 109, the supreme court of Mississippi held: “Where the officers of a municipal corporation are invested with legislative powers, they are exempt from individual liability for the passage of any ordinance within their authority,' and their motives in reference thereto cannot be inquired into; nor are they individually liable for the passage of any ordinance not authorized by their powers, for such ordinance is void, and need not be obeyed or respected by any one.”

In the case of Russell v. Tate, 52 Ark, 541, the supreme court of Arkansas held that although members of a town council are not liable for the exercise of their discretion in voting upon measures before them, yet where they vote an appropriation for their own benefit, which is paid, the transaction is a conversion of trust funds, and in the opinion the court uses this language: “As against the liability of these defendants, it is contended that a City Council-being in some sort a legislative body, its members are not liable for the erroneous exercise of their discretion in voting upon measures before them. This is true.” (Citing Jones v. Loving, supra, and Borough of Freeport v. Marks, 59 Pa. St., 253.)

The exercise of discretion by a village councilman in voting for a resolution or an ordinance void by reason of a statutory limitation upon the power of the council is no different from the exercise of discretion by a member of the general assembly in voting for a statute void by reason of a constitutional limitation upon the power of the general assembly, yet no one would claim that a legislator would be liable either in his official or in his individual capacity for the exercise of his judgment and discretion in voting for such void statute. It is apparent that the action of council in providing by resolution a plan for the disposition of the bonds in question, which they had been unable to dispose of in the regular.way, was legislative in its nature, it being an attempt to enact the necessary legislation to make lawful that which was theretofore unlawful; and the fact that it was ineffective in the accomplishment of its purpose does not make it any the less legislative in its nature, and this is the more apparent • when the reason why it is ineffective is considered, to-wit, because the general assembly had by legislation provided a plan for the sale of municipal bonds which the municipality was bound to follow, and with which the scheme adopted by the municipality was inconsistent. We see no reason for applying a different rule to a municipal legislator, who, in good faith, exercises his discretion in voting for a resolution void because of legislative limitations upon his power, than is applied to a state legislator exercising his discretion in voting for a statute void by reason of a constitutional limitation upon his power.

Much stress is laid by counsel for the village upon Section 3 of the resolution of September 7, 1914, which reads: “That in no event shall any personal responsibility or liability attach to or be recoverable against the officers who have executed this resolution for and on behalf of the village of Hicksville, Ohio.” The contention is made that this section amounts to. an admission by the members of the council voting for the resolution that they knew that their action with respect to the contract with Purdy was illegal, and, therefore, evinced bad faith. Granting the construction of counsel for the village to be the correct construction of this section, the authorities go so far as to hold that the motive of the legislator in the exercise of his discretion cannot be questioned. We, however, do not find the language of this section to be inconsistent with an honest desire on the part of the members of the council, to honestly discharge their duties as councilmen, and are of opinion that it was no more than an extraordinary attempt on their part to emphasize the fact that they were acting in the matter officially and not in their individual capacity.

The legislation of council of -November 16, 1914, attempting to authorize the payment of the commission to Purdy out of the sinking fund, being an attempt to do a thing expressly prohibited by statute, was absolutely void for that reason and for the further reason that the statute authorizing the sale of bonds at private sale expressly provides that such sale be “under the directions of the mayor and the officers and agents of the corporation by whom such bonds have been, or may be, prepared, advertised and offered at public sale.” This court in the case of State, ex rel. Zielonka, City Solicitor, v. Carrel, Auditor, ante, 50, held that where the statute makes it the duty of an .officer to do a certain thing council is without authority to provide for the payment of another to perform the service which the official duty of . the officer required of him. The trustees of the sinking fund in the payment of such commission were in no different situation by reason of such legislation than they would have been had no such legislation been attempted, and, indeed, the facts as disclosed by the petition would indicate that little reliance was placed upon such legislation, for the statement of the amounts paid by the village to Purdy discloses that $1600 of the commission had been paid by the trustees of the sinking fund prior to the adoption of such legislation. The legislation of council in this respect was not effective to authorize the trustees of the sinking fund to draw a warrant upon that fund nor to authorize the payee to receive the money upon such warrant. The trustees of the sinking fund and the payee of the warrant were bound to know all the statutory limitations upon the power of the council, including the limitations upon its power to contract to pay a commission to an agent for the sale of its bonds, and the limitation upon its power to authorize the payment of such commission out of the sinking fund.

The judgment of the court of appeals will be affirmed in both cases.

Judgments affirmed.

Marshall, C. J., Johnson, Jones and Matthias, JJ., concur.

Hough, J., concurs in propositions 1, 2 and 3 of the syllabus and in the judgment in cause No. 16601.

Wanamaker, J., concurs in the judgment in cause No. 16643.  