
    Ludwig Hommel & Co. v. Incorporated Village of Woodsfield.
    
      Municipal corporations — Village board of public affairs — Contracts to be authorized by council and advertised for bids, when — Sections 1328 and 1861, General Code — -No valid obligation upon village where authorization and advertisement omitted.
    
    1. Under Sections 4328 and 4361 of the General Code, the board of public affairs of a village may not make any contract or purchase of supplies or material for any work under the supervision of the board of public affairs involving more than $500 unless such expenditure is first authorized and directed by ordinance of council, and unless after such authorization and direction the board of public affairs of the village has made a written contract with the lowest and best bidder after advertisement for not less than two or more than four consecutive weeks in a newspaper of general circulation within the village.
    2. When either the requirement of authorization and direction by ordinance of council or of advertisement for bids has been omitted, such contract imposes no valid obligation upon the village.
    (No. 19852
    Decided February 1, 1927.)
    Error to the Court of Appeals of Monroe county.
    This was an action instituted by Ludwig Hommel & Co. in the court of common pleas of Monroe county to recover from the village of Woodsfield for supplies furnished by the plaintiff to the village upon orders of the board of public affairs of the village in question. In addition to the usual formal allegations, the petition alleged that the plaintiff company deals in electrical appliances, machinery supplies, and radio apparatus; that the defendant has an electric light plant which is managed by the board of public affairs; and that the electric light plant required a large amount of electrical supplies to equip its plant.
    The petition further alleged that about the month of March, 1923, plaintiff “entered into an agreement with the defendant, at the instance and request of said board of public affairs of said village, whereby it was to furnish for the period of one year, beginning March 28, 1923, and ending March 28, 1924, such reasonable amount of electrical supplies and furnishings in plaintiff’s line as said defendant, through its board of public affairs, might require and order from plaintiff,” at prices which were to be reasonable, which equipment and supplies were to be shipped by plaintiff to defendant, as orders were received by the plaintiff from the defendant through its board of public affairs; that it was agreed that such shipments should be charged against the defendant in an account headed “Board of Public Affairs, Woods-field, Ohio,” and that such shipments were to be f. o. b. Pittsburgh; that it was further agreed that certain old junk meters should be purchased by the plaintiff at an agreed price of 75 cents each, and that the amount derived from such sale should be placed on the credit side of said account.
    The petition further alleged that plaintiff has carried out the terms of said contract so entered into, and has filled the orders of defendant and made shipments as such orders were sent in, and that plaintiff has credited the defendant for junk meters sent to it by defendant.
    The petition further alleged that all of the charges for goods, wares, and merchandise shipped by the plaintiff to the defendant are just and reasonable, and that the total debits on said account as set forth in said summary are $1,529.34, and the total credits of the defendant are $1,012.45, and that there is still due, owing, and unpaid from the defendant to the plaintiff the sum of $516.89, against which sum there are no credits or offsets, for which sum plaintiff prays judgment, with interest from August 17, 1923.
    The answer admitted the delivery of the meters and the nonpayment of the balance sued for. The gist of the answer was that inasmuch as the authority of council was not sought or obtained to enter into the contract, and inasmuch as bids were not advertised for, under Section 4328 of the General Code, no valid contract existed between the parties and no recovery could be had.
    The reply admitted that no authority of council had been given for the contract, and that no bids had been advertised for, and made other allegations not material in this error proceeding.
    In the court of common pleas, the jury found in favor of the plaintiff and returned a verdict for the full amount claimed. Upon error proceedings to the Court of Appeals, the judgment of the court of common pleas was reversed and final judgment rendered in favor of the village. The case comes into this court upon allowance of motion to certify the record.
    
      Messrs. Moore, Devaul & Moore, for plaintiff in error.
    
      Mr. F. W. Ketterer and Messrs. Mats & Mats, for defendant in error.
   Allen, J.

It is conceded that the orders listed in the petition, signed in several instances by every member of the board of public affairs of the village of Woodsfield, were sent to the electrical company; that the supplies were furnished in accordance with the orders; that the village accepted each shipment of goods, and used the meters, without complaint. The controlling question in the case is whether plaintiff should be denied recovery because of the fact that bids were not advertised for and authority of council not received for entering into the contract, under the provisions of Section 4328 of the General Code. Under Sections 4357 to 4361 of the General Code, it is provided that the board of public affairs of a village shall have the same powers and perform the same duties as are possessed and exercised by the director of public service of a municipality. The powers of the director of public service are described in Section 4328, General Code, which reads as follows:

“The director of public service may make any contract or purchase supplies or material or provide labor for any work under the supervision of that department not involving more than five hundred dollars. When an expenditure within the department, other than the compensation of persons employed therein, exceeds five hundred dollars, such expenditure shall first be authorized and directed by ordinance of council. When so authorized and directed, the director of public service shall make a written contract with the lowest and best bidder after advertisement for not less than two or more than four consecutive weeks in. a newspaper of general circulation within the city.”

It is claimed on behalf of the company that each of the orders sent for the meters constituted an independent contract upon which an independent action could have been brought by the electrical company, and that as none of these separate orders amounted to $500, Section 4328 does not apply, and it was not necessary for the board of public affairs either to advertise for bids or to secure the authorization of council in order to make valid contracts with regard to each order. It is claimed, on the other hand, by the village, that the separate orders were issued by the members of the board of public affairs in an effort to circumvent the statutes of Ohio and to avoid the requirements of Section 4328, General Code, by splitting the order into five separate allotments, each amounting to less than $500; that the orders constituted one contract; and that the proceedings were hence illegal under Section 4328, General Code.

Did the agreement and the subsequent orders and transactions between the parties, for the purposes of this suit, constitute one contract or separate contracts?

The agreement between the village and the company provided that: “The company shall furnish said meters to the purchaser for a period of twelve months from date * * V’

In paragraph 5 of the contract, the company agreed to pay the purchaser “rebates, if this total net purchases under this agreement have reached the amounts below, as follows: $1,000 to $2,500 — 2 per cent. $2,500 to $5,000 — 3 per cent. $5,000 or more — 4 per cent.”

The petition alleges that, about the month of March, 1923, the electrical company “entered into an agreement with the defendant, at the instance and request of said board of public affairs, of said village, whereby it was to furnish for the period of one year, beginning March 28, 1923, and ending March 28, 1924, such reasonable amount of electrical supplies and furnishings in plaintiff’s line, as said defendant, through its board of public affairs, might require and order from plaintiff.”

The petition then prays for judgment upon the agreement. This was necessary, for to state a good cause of action against a municipality in matters ex contractu the petition must declare upon a contract, agreement, obligation, or appropriation made or entered into according to statute. A petition on an account merely, in such case, is not sufficient. City of Wellston v. Morgan, 65 Ohio St., 219, 62 N. E., 127. The petition states an action upon an account arising out of the agreement, listing debits and credits and praying for judgment for the balance alleged to be due.

Now the account declared upon in the petition set forth mutual credits founded upon a subsisting debt owed by each party, the electric company and the village. The account consisted of a series of transactions, of different dates, with items on both sides, arising out of the orders for the meters and the return of the junk meters with credits therefor. This series of transactions was based upon a course of dealing in which each party gave credit to the other in reliance on an understanding that upon settlement each side of the account would be allowed, so that one would reduce the other. In other words, it was a running and mutual account. 1 Ruling Case Law, 205, 206.

The case of Courson’s Ex’rs. v. Courson, 19 Ohio St., 454, is cited as authority for the proposition that the account in question here consisted of separate and independent transactions arising out of separate and independent contracts. The Courson case, however, presents a situation of a simple account instead of a mutual running account.

The great weight of authority holds that where a mutual running account exists between parties a cause of action does not exist with reference to each item of the account, but only as to the balance that may be due to one or the other of the parties, and it exists in favor only of that party in whose favor the balance is due. 1 Ruling Case Law, 357.

There is a presumption that all transactions between the same persons are part of the same account, and constitute one cause of action. 1 Ruling Case Law, 257, note 8; Gilbert v. Bd. of Education of City of Newton, 45 Kan., 31, 25 P., 226, 23 Am. St. Rep., 700; Gaddis v. Williams, 81 Okl., 289, 198 P., 483.

An extensive note upon this subject, under Norton v. Larco, 89 Am. Dec., 80-82, 84, 85, reviews this whole subject and shows that in the case of mutual accounts arising out of reciprocal demands, where the two sides of the account are linked together by an express or implied agreement constituting a mutual course of dealing, the rule with regard to simple accounts does not apply, and the balance due is considered to be one demand. In the case herein presented, certainly, the express agreement, as shown in the petition, was that there was to be a mutual course of dealing and that the account was to be permitted to run with a view to the. ultimate judgment and ascertainment of the final balance. The parties did not regard the different items of this mutual account as separate transactions. The agreement between the board of public affairs and the company was to cover a period of 12 months, the rebates to be given the purchaser were only to arise in case of total net purchases aggregating $1,000 at the smallest. Also, the petition itself alleges that the items were listed in one account by the plaintiff, whose counsel here seek to claim that the transactions were independent and separate. It was evident, therefore, that the parties considered the agreement as an entirety, and did not understand that they were entering into' a separate and distinct transaction for the purchase of every item. Since the agreement was an entirety, Section 4328 applies, and as its requirements were not complied with the agreement was void and recovery thereunder must he denied the plaintiff.

This holding makes it unnecessary to consider whether the orders were split in order to evade the requirements of the statute.

It is urged by the company that the village has accepted and used these meters with no complaint as to quality or service. The fact that the municipality received and used the meters does not estop the municipality from setting up the omission of the státutory requirement as a defense to the action. City of Lancaster v. Miller, 58 Ohio St., 558, 51 N. E., 52.

Parties who deal with a municipality are bound by the notice which they receive from the statutes to know the extent of the power and authority of the municipality to contract. McCloud & Geigle v. City of Columbus, 54 Ohio St., 439, 44 N. E., 95; Buchanan Bridge Co. v. Campbell et al., Com’rs., 60 Ohio St., 406, 54 N. E., 372.

Since the contract was invalid, the municipality took no title to the meters under the contract. However the contract was not malum in se, it was merely malum prohibitum. It did not contravene public policy. Hence the doctrine applies which is laid down in the case of Hill County v. Shaw & Borden Co., (C. C. A.), 225 F., 475. This case exhaustively discusses the authorities upon this point, and holds that if a political subdivision, such as a county on a municipality, obtains the money or property of others without authority, the law will compel restitution or compensation. To the same effect is the case of Morse v. Board of Com’rs. of Granite County, 19 Mont., 450, 48 P., 745, which rules that where a sale to a county is adjudged void because the seller is a county commissioner the title to the goods remains in the seller, so that he may sell the property to another, who, in turn, may sell it to the county and recover of it therefor.

Hence the title to and right of possession of the meters still remain in the company.

Judgment of the Court of Appeals affirmed.

Judgment affirmed.

Marshall, C. J., Day, Kinkade, Robinson, Jones and Matthias, JJ., concur.  