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Knickerbocker v. Athletic Co.


As early at least as 1898 the company had borrowed a large sum of money from the Franklin Bank, and these three gentlemen had become sureties on said notes, Mr. Thompson loaning collaterals which he was anxious to receive again, and all of them were desirous of having these notes to the bank and some obligations of the company to the street railway company paid from the earnings of the defendant company, and thus release them from their individual liability on the notes. We think it was understood and arranged between Mr. Thompson and the other two persons that the earnings of the defendant company for the season of 1899 were to be applied to the payment of these other obligations of the company, and Mr. Thompson was to wait for the amount of his first bond and the interest due until September 1, 1900; and accordingly the profits of the season of 1899 were so applied, and the notes taken up. The time when this understanding was arrived at is not clearly shown, but we think there is no denial on the part of Mr. Thompson that this was done with his full concurrence-that is, the payment of the bank debts. This payment was made prior to the time of the regular meeting of the stockholders for the election of directors and of the meeting of the directors to elect the officers of the company. These meetings were held October 17. 1899, at the office of the Messrs. Pogue, the attorneys for the company. Messrs. Thompson, Lilley and Devere were present, owning stock as before stated, and the three represented all the stock of the company except fifty-one shares, held by a Mr. Lawson, who was not present. It is testified substantially by Messrs. Pogue, Lilley and Devere that at these meetings it was made known what disposition had been made of the earnings of the company and the payment of these notes therefrom, and it was then and there agreed by Mr. Thompson that if this action was approved by the company, and no dividend declared, and certain specified improvements should be made on the property of the company for the next season, that he would extend the time for the payment of the bond due and the interest to September 1, 1900; and that this was acceded to and accepted by the company, and such expenditures were thereafter made on the ground. It is true that Mr. Thompson testifies that he did not agree to such extension; that it was not his way of doing business. But the arrangement seems to us a natural one under the circumstances, and we think he is mistaken in his recollection. This view is strengthened by the testimony of Mr. Marlin that some time after this meeting Mr. Thompson had told him in New York that he had extended the time of payment to September 1, 1900.

Finding, then, that the agreement was made, and on a good consideration, we hold that the action was prematurely brought, and that plaintiff is not entitled to have a receiver appointed or any other relief in this action.

Cuyahoga Circuit Court.



[Cuyahoga Circuit Court, January Term, 1901.]

Caldwell, Hale and Marvin, JJ.



A municipal corporation is simply an agency of the state for the conduct of the affairs of government and therefore subject to the control of the legislature in all respects, except as limited by the constitution.


The state, acting through its legislature, has absolute power and control over all the public works within the state, undertaken and carried on with public funds, whether the work be paid for by a municipality or by the state at large, and those who let the contracts, superintend the construction, audit the bills and pay them, are in such work but the agents of the state, whether the agency be created by the provisions of a charter or by special enactment.


It is competent for a state, by its legislature to provide that its agents and agencies, wherever throughout the state they may be situated, in the doing of a public work, shall pay the going wages wherever the work is to be doue by day's work; and whenever it is to be done by contract, that the agent wherever situated, shall put into the contract that it executes by authority of the state, a provision that the contractor shall pay such rate.

4. LEGALITY OF MUNICIPAL CONTRACTS INCORPORATING SUCH A STATUTE. A successful bidder for a municipal contract, upon being awarded and voluntarily executing the contract, into which is incorporated the provisions of a statute, that labor to be performed under the contract, must be paid for by the contractor at the going rate, is bound by the terms of the contract, although the statute itself may be declared nnconstitutional.


Wilcox, Collister, Hogan & Parmely and Weed & Meals, for plain. tiff in error.

Hogsett, Beacom, Excell and Gage & Carey, for defendant in error. CALDWELL, J.

There is really no opinion in this case, for we have preferred to adopt others that we have found rather than to write one of our own. The opinion referred to in the pamphlet from New York State (The People of the State of New York ex rel. Rodgers, Respondent, v. Birc S. Coler, Comptroller of the City of New York, Appellant, rendered February 26, 1901,) is, on the part of the majority of the court, a wel reasoned opinion, and one that we think lays down the law of this case and we follow the law there laid down; that is, the majority of the cour do.

There is another case, Low v. Printing Co., 41 Neb. 127 (24 L. R A. 702; 43 Am. St. 670), that has a law very much like the one that i being contested in this court, and we like the reasoning in that case very much.

In 62 Am. St. Rep. 176, there is a note that discusses much of th litigation on this question, and it shows that the courts are not unani

Construction Co. v. Cleveland.

mous, and, as a rule, the opinion of the judges of a court passing upon the law, is not by a unanimous court, the opinion being by the majority only. Some courts have stood equally divided. But we follow these opinions, although it would seem from the adjudications that oftentimes the opinion is the other way.

[Court of Appeals of the State of New York.]


LANDON, J. (Concurring)

PARKER, C. J. (Dissenting)
HAIGHT, J. (Dissenting)


Refusal of comptroller based upon violation of the Labor Law (Chap. 415 of the Laws of 1897, as amended by Chap. 192 and Chap. 567 of the Laws of 1899), of the state of New York.


PARKER, C. J. (Dissenting):

*** The legislature, which is vested with the power to direct the conduct of the business operations of the state, by this statute has not only declared it to be the policy of the state as a proprietor to pay the prevailing rate of wages, but has enjoined upon its several agents and agencies the duty of executing this policy. * * *

No one has presumed to challenge the right of an individual either to pay the prevailing rate of wages in his locality, or, if he concludes to have his work done by contract, to refuse to award it to a contractor who will not agree to pay the going wages to all employes that may be engaged upon the work. But the state seems to be regarded in some quarters as having less power as a proprietor than an individual, so that what an individual may contract to do in the performance of his own work, the state itself may not do when it assumes the role of proprietor and attempts the construction of important public work. ***

* * *

So, if authority be needed, we have the authority of this court that the legislature has the power to provide that the policy of the state shall be to pay the going rate of wages in the locality in which a public work is to be done and to command its agents to obey its directions in that regard. * Of course, a contractor would not be obliged to accept a contract under such terms; but certainly would do so if he wished the work, for the state as proprietor would have the right to impose any terms it might choose as a condition of awarding the contract, just as an invidual might do. Terms might thus be imposed which would be wise or very foolish for both the state and the contractor, in the estimation of the latter; * * *

The authority of the state, however, is supreme in every part of it, and in all of the public undertakings the state is the proprietor. For convenience of local administration the state has been divided into municipalities, in each of which there may be found local officers exercising a certain measure of authority, but in that they are but the agents of the state, without power to do a single act beyond the boundary set

Cuyahoga Circuit Court,

by the state acting through its legislature. Charters are given to cities by means of which are created what are known as municipal corporations; but the creation is solely for the purpose of doing the work of the state in the particular locality affected, and in the creation of these agencies the legislature designates the number of officers, determines what they shall be called, prescribes what particular portion of the municipal work each shall do, fixes their compensation and provides a method by which shall be chosen a proper amount of assistance, clerical and otherwise, to perform the work, and from time to time enlarges or restricts the fields of labor of the several officers; it also from time to time by special enactment authorizes undertakings of large public importance, not contemplated perhaps at the time of the granting of the charter or at the time of a general revision of it. If the legislature becomes dissatisfied with the general working of a charter it may change it or create a new one, for it is possessed of supreme authority to povide how the municipal affairs shall be conducted and to determine what great public works, if any, shall be undertaken. * * *

Similar instances almost without number might be multiplied, all of which would serve as illustrations merely that the state acting through its legislature has absolute power and control over all the public works within the state, undertaken and carried on with public funds, whether the work be paid for by a municipality or by the state at large, and that those who let the contracts, superintend the construction, audit the bills and pay them, are in such work but the agents of the state, whether the agency be created by the provisions of a charter or by special enactment. If authority be needed in support of this proposition, it may be found in Williams v. Eggleston, 170 U. S. 304. At page 310 the court say: "A municipal corporation is, so far as its purely municipal relations are concerned, simply an agency of the state for conducting the affairs of government, and as such it is subject to the control of the leglature." Mayor v. Tenth National Bank 111 N. Y. 446.

Other authorities in which the proposition is in effect either decided or asserted that a municipal corporation is simply an agency of the state for the conduct of the affairs of government, and therefore, subject to the control of the legislature in all respects except as expressly lim ited by the constitution, are: In re Protestant Episcopal School, 46 N. Y. 178; Terrett v. Taylor, 9 Cranch, 43; Payne v. Treadwell, 16 Cal. 221; Jones v. Lake View, 151 Ill. 663; Frederick City v. Groshon, 30 Md. 463; Groff v. Frederick City, 44 Md. 67; State Bank v. Madison, 3 Ind. 43; Patterson v. Society for E. M. U., 24 N. J. L. 385; State ex rel. Cleveland v. Board of Finance, 38 N. J. L. 259; In re Dalton, 59 Pac. Rep. 336.

In the latter case the petitioner was arrested for violating the provisions of Chap. 114 of the Laws of 1891 of the state of Kansas, which provided that eight hours should constitute a day's work for laborers, workmen, mechanics and other persons employed by or on behalf of the state of Kansas, or by or on behalf of any county, city, township or other municipality in the state. He sought to be relieved from trial through habeas corpus proceedings, claiming that the act was unconstitutional, and in the course of the opinion the court said:

"Whatever orders the state may give directly to its own agents it may require of its political subdivisions, instrumentalities of said gov ernment, such as counties cities, townships. These subdivisions are

Construction Co. v. Cleveland.

merely involuntary political or civil divisions of the state, created by statute to aid in the administration of government. * * *",

If the views so far expressed be sound, it would seem to follow that the position taken by the state in enacting this statute is precisely like that of an individual who for any reason determines that if it be a little more than honest, as that term is usually employed, it is not more than just to pay for a thing what it is fairly worth, and that the principle should be applied as well to the compensation of labor as to the payment for material, and hence decides thati n construction work he will pay the market price. The state having determined upon such a course of action by this statute, directs its agents and agencies, wherever throughout the state they may be situated, that in the doing of a public work they shall pay the going wages whenever the work is to be done by day's work; and whenever it is to be done by contract, then the agent, wherever situated, shall put into the contract that it executes, by authority of the state, a provision that the contractor shall pay such rate.

There are no authorities in this state that militate against the position that I have taken. On the contrary, such as there are support it. In People v. Warren, 17 Hun. 120, the defendant had been charged before a police magistrate with a violation of Section 504, Chapter 105, of the Laws of 1891, entitled, "Act to revise the charter of the city of Buffalo." That charter provided, among other things, that "in contracting for any work required to be done by the city, a clause shall be inserted that the contractor submitting proposals shall bind himself, in the performance of such work, not to discriminate, either as to the workmen or wages, against members of labor organizations, or accept any more than eight hours as a day's work, to be performed within nine consecutive hours. ***"}

The city said to the defendant and to all other contractors, when it invited the bids for the performance of the work, the statute is one of the conditions which must be assumed by the contracting party. The defendant was not obliged to bid. The conditions imposed applied equally to all who should bid. The act of bidding was with full knowledge and voluntary. Under these conditions defendant made its bid. and when awarded the contract voluntarily executed the same and assumed the obligations imposed upon the city by the statute. How can it be said that he was an independent contractor freed of obligation? He was an independent contractor, but he is not independent of the obligations imposed by the contract." People ex rel. Warren v. Beck, 10 Misc. Rep. 77.

It should also be said, before passing to the consideration of the contract, that the judge before whom this matter came at special term, was of the opinion that the ac' is constitutional, and while there was a difference of view in the appellate division as to certain questions, not one of the judges of that court expressed an opinion that the state, in so far as it directed its agents to insert a provision in the contract that the prevailing rate of wages should be paid, acted beyond its power. In deed, in the prevailing opinion, it is said: "I am satisfied that the legislature has power to prescribe the form of contracts which shall be made by municipal corporations with those entering into contracts with it. No one is bound to enter into such a contract or to do work for a municipal corporation, but when he does he must accept the terms of the contract as prescribed by law, and it he voluntarily makes a contract by which he is to receive pay only upon condition of his performing cer

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