§ 909 (729). Where Corporation is a Trustee of Property or Funds. In respect of property held by municipal corporations in trust, or clothed with public duties, equity has always asserted its jurisdiction to see that the trusts were observed and its public duties in respect of such property discharged.1 In England, and probably also in this country, the bill may in such cases be filed against the municipal corporation and its officers by the Attorney-General, on his own motion or on behalf of the corporators or persons interested; or the latter may perhaps, in certain cases under the line of decisions in this country presently to be mentioned, exhibit the bill in their own names. The jurisdiction of chancery in such cases over municipal corporations is forcibly asserted by the House of Lords, in an interesting and important case in which the corporation of Dublin, under an Act of Parliament, was the trustee of funds raised from waterrates, to supply the city with water, and where the bill charging the corporation with breaches of trust and mismanagement was filed by the Attorney-General on behalf of the inhabitants of Dublin paying water-rates. Here the public were interested in the proper administration of the authority which had been conferred upon the city corporation in respect to the supply of water to the city; it is obvi many of the American cases upon the subject of injunctions against municipal corporations. High on Injunctions, secs. 783-795. See also Joyce, Injunc. 716. 1 Attorney-Gen. v. Liverpool, 13 Eng. Ch. (1 Mylne & Cr. 171) 343, 359 (1835); Attorney-Gen. v. Dublin, 1 Bligh N. R. 312 (1827); ante, secs. 64, 80, 169; chapter on Corporate Property, ante, secs. 567-571; chapter on Dedication, ante, sec. 653; Baltimore v. B. & O. R. R. Co., 21 Md. 50 (1863); Barnum v. Baltimore, 62 Md. 275. Post, sec. 920, note and cases. It is "a distinctive characteristic of a corporation that it is accountable in equity for misapplication of trust funds, whereas any other body of men, as a parish, can only (where relief can be had at all) be touched through the individuals, or their representatives, who have committed the actual breach of trust." Grant on Corp. 138. Mr. Spence discusses the subject of the equity jurisdiction over corporations as trustees satisfactorily. 2 Spence Eq. Jurisd. 32-35. 2 Attorney-Gen. v. Dublin, 1 Bligh N. R. 312 (1827). See also Attorney-Gen. v. Liverpool, 13 Eng. Ch. (1 Mylne & Cr. 171) 343 (1835). The doctrine of these cases was approved by Gray, C. J., in Attorney-Gen. v. Boston, 123 Mass. 460 (1877), who, referring to Attorney-Gen. v. Salem, 103 Mass. 138, says, “if the waterrents had been collected and misapplied by the city (of Salem), there would have been such a misappropriation of trust funds held by the city for a public charitable purpose as would have supported an information in equity in the name of the Attorney-General." Noticed more fully, infra, sec. 920, note. The principles on which equity will enjoin the proceedings of public officers are stated by Lord Cottenham. Frewin v. Lewis, 18 Eng. Ch. (4 Mylne & Cr.) 249 (1838). See also Baltimore v. Horn, 26 Md. 194 (1866); Holland's Case, 11 Md. 186; Baltimore v. Porter, 18 Md. 284 (1861); Attorney-Gen. v. Heelis, 2 Sim. & Stu. 67; People v. Canal Board, 55 N. Y. 390 (1874), where the subject is discussed by Allen, J. Attorney-Gen. v. Boston, 123 Mass. 460 (1877); infra, sec. 920, note. Duties and liabilities of public officers. Ante, sec. 237, and note. ous that there was no adequate remedy at law, and hence the propriety of a resort to equity by the ratepayers, in the name of the officer authorized to represent the king.1 § 910 (730). Fraudulent Dispositions of Corporate Property and Abuses of Powers relating thereto. So the Court of Chancery, in England, notwithstanding another remedy (which is considered to be cumulative) is given by statute, will relieve against fraudulent dispositions of corporate property. It will also interfere to prevent municipal councils from abusing powers relating to property and funds intrusted to them to be exercised in conformity with law for the benefit of the incorporated place or its inhabitants. The just and sound view is taken, that the powers conferred by the Municipal Corporations Act upon councils in respect to the corporate funds and corporate property are public trusts, and the property owned by the corporations is held by them in trust for the purposes specified or authorized in the act; and hence, if these powers are abused, as, for example, the power of a council to award compensation to officers of the corporation, or if corporate property is collusively alienated, this is a breach of trust of which equity will take cognizance. The uniform and settled mode of proceeding in England 1 In England it is settled that in cases such as those mentioned in the text, or where the corporation is a trustee of property or funds for public uses, it can be made to account to the crown, on an information, but not to private persons in a suit in equity. Grant on Corp. 138; Skinners' Co. v. Irish Soc., 12 Cl. & F. 487. See also 2 Spence Eq. Jurisd. 32-35. 2 Attorney-Gen. v. Poole, 4 Mylne & Cr. 17, 30, and overruling 2 Keen, 190, 206 Parr v. Attorney-Gen. 8 Cl. & F. 409; Attorney-Gen. v. Aspinwall, 2 Mylne & Cr. 613, overruling Master of the Rolls, 1 Keen, 513; Attorney-Gen. v. Wilson, 9 Sim. 30; affirmed by the Lord Chancellor, 1 Cr. & Ph. 1, noted infra; Evan v. Avon, 29 Beav. 144. Text cited and approved. Place v. Providence, 12 R. I. 1; Roper v. McWhorter, 77 Va. 214 (lease of ferries enjoined). In explanation of the English decisions referred to in this note, it may be observed that by sec. 92 of the Municipal Corporations Act of 1835 before mentioned (ante, secs. 8, 48), the income of all the property belonging or payable to any of the old corporations was to be paid to the treasurer of the new or remodelled corpora tion, and the fund so created was to be subject to the payment of the debts of the old corporation, to the payment of the salaries of municipal officers, of municipal election expenses, municipal court expenses, and all other expenses incident to carrying the act into effect; with a provision that any surplus should be applied, under the direction of the council, for the public benefit of the inhabitants and the improvement of the borough. In case the borough fund thus obtained should prove insufficient for the enumerated purposes, power is given to the council to raise the deficiency by taxation or a borough rate. The author does not see that property thus held, income thus derived, and public powers thus to be exercised, are in essence different from the property, income, and powers ordinarily appertaining to our American municipalities. If this be so, the English cases below cited are especially instructive. Summary of leading English cases: In the leading case of the Attorney-Gen. v. in such cases is by information or by bill filed in the court of equity by the Attorney-General. Aspinwall, supra, Lord Chancellor Cottenham held that the property in question became, upon the enactment of the Municipal Corporations Act, subject to the public trusts declared by that act, and was not under the absolute control of the corporation; and that if any given appropriation of this fund or property be not consistent with the trust, but for purposes foreign to it, the Attorney-General has a right to file an information or bill in equity, asking "that the fund may be recalled, secured, and appropriated for the public, or in other words, charitable purposes, to which it is by the act devoted." 2 Mylue & Cr. 618. He says: "I cannot doubt that a clear trust was created by this act for public, and therefore, in the legal sense of the term, charitable purposes, of all the money belonging to the corporation at the time of the passing of the act." Ib. 623. On the same principle Lord Cottenham, in the case of the Attorney-Gen. v. Poole, supra, held that chancery had jurisdiction on an information of the Attorney-General filed on the relation of certain ratepayers of the corporation, to prevent the munici pal council from awarding unauthorized compensation to the officers of the corpora tion out of the borough fund, and that it was immaterial that the means of payment were to be raised by a rate or tax over the levy of which the court might not have any control. The ground of interference was that the fund of the corporation, however acquired, is a trust fund, to be used for, and only for, purposes consistent with the provisions of the Municipal Corporations Act, and that trustees may in equity be restrained from committing breaches of trust. To the objection that "the information did not impute fraud in the proceedings of the council" the Lord Chancellor said: "But a trustee may be guilty of a breach of trust from error or ignorance of his duty, and if it were necessary to impute fraud, the term itself need not be used; it is sufficient if the facts stated amount to a case of fraud." Conformably to these principles, where the municipal council, without authority VOL. II. -29 The king as parens patriæ insti of law, gave a bond to secure compensation out of the corporate funds to an officer of the corporation, this was held to be a breach of their trust, cognizable in chancery. Parr v. Attorney-Gen., 8 Cl. & F. 409. So in the Attorney-Gen. v. Lichfield, 13 Simons, 547 (1843), the corporation was enjoined on an information by the Attorney-General from ordering their treasurer to pay out of the borough fund' or any funds of the corporation the amount of a promissory note to one Mallett for £200 borrowed money, and the ground of the order was, in the language of ViceChancellor Shadwell, that, " taking all the Acts of Parliament together, it is quite clear that the corporation had no authority to give the promissory note to Mallett." So, also, in Attorney-Gen. v. Norwich, 16 Simons, 225 (1848), the corporation was restrained, in a suit by the AttorneyGeneral at the instance of ratepayers, from using the borough fund for an unau thorized purpose; viz., to pay the expenses of procuring an Act of Parliament to improve the navigation of a river flowing through the corporation. See Attorney. Gen. v. Wigan, 34 Eng. Ch. (5 De Gex, M. & G.) 52 (1854); Frost v. Belmont, 6 Allen (Mass.) 152 (1863). So in this country, it has been held that a New England town cannot appropriate money to pay the expenses of a committee to petition the legislature for the annexation of the town to another town, thereby merging its own organization. Minot v. West Roxbury, 112 Mass. 1 (1873); s. c. 17 Am. Rep. 52; ante, sec. 479, note. In Sherlock. Winnetka, 59 Ill. 389 (1871), a fraudulent and illegal exercise of the powers of the municipal council looking to the creation of unauthorized debt of the municipality was treated as a breach of trust and a fraud upon the law, against which equity would relieve at the instance of taxpayers and property-owners. So in Canada the members of the council are not the corporation, but the agents of the corporation for the management of its affairs and funds. When these agents are shown so to misappropriate the tutes the suit by his proper officer, the Attorney-General, who files the necessary information, or information and bill, as a prerogative right, -the right which the sovereign has to call, by his appropri funds of the corporation as to put the money into their own pockets when not authorized so to do, a bill in equity at the instance of a ratepayer, Blakie v. Staples, 13 Grant (Can.), 67, or an action at the suit of the corporation, will lie against them to recover it back; and when that misappropriation is mixed up with what may have been rightfully paid, it is but right, in order to operate as a safeguard to the corporation, to cast the burden of proof on the agent, to separate from the appropriation he has received that portion which he would be legally entitled to take. East Nissouri v. Horseman, 16 Up. Can. Q. B. 588. In Canada there is not only a civil but a criminal remedy. Daniels v. Burford, 10 Up. Can. Q. B. 481. See, further, Baxter v. Kerr, 23 Grant (Can.), 367. The treasurer should not pay money on any or every draft and order which the reeve for the time being may direct him to pay. The township moneys will probably be considered as still in his hands, unless paid out on a proper legal authority, for purposes contemplated and authorized by law, at least until he has received a formal acquittance and discharge from the mu nicipality. East Nissouri v. Horseman et al., 9 Up. Can. C. P. 191, per Draper, C. J. Nor should he pay money on an illegal order or resolution, for an Act of Parliament should be regarded by him as a higher authority than the resolution or by-law of a corporation created by an Act of Parliament. Daniels v. Burford, 10 Up. Can. Q. B. 481. And if a treasurer so pay money on an illegal order or resolution, he would be probably subject to criminal prosecution. East Nissouri v. Horseman, 16 Up. Can. Q. B. 580. But he is not now liable to any action at law for moneys paid by him in accordance with a by-law or resolution of the council. Harrison's Munic. Man. for Canada (5th ed.), p. 186. In The Attorney-Gen. v. Wilson, 9 Simons, 30 (1837), affirmed by the Lord Chancellor, 1 Cr. & Ph. 1 (1840), which was an information and bill in equity by the Attorney-General at the relation of the corporation of Leeds, it was held that chancery had jurisdiction (notwithstanding a special remedy in the Municipal Corporations Act) to relieve against fraudu. lent alienations of corporate property, and that the corporation could impeach the fraudulent acts of its officers, and maintain a suit to set aside transactions fraudulent against it, though carried into effect in the name of members of its council; and this right the Lord Chancellor considered not to be affected by the circumstance that the Attorney-General had the like power. A similar power to protect corporate property was asserted by the Master of the Rolls in The Attorney-Gen. v. Liverpool, 13 Eng. Ch. (1 Mylne & Cr. 171), 343 (1835), where the information was filed by the Attorney-General at the relation of two merchants of Liverpool, one of whom was a burgess or ratepaying citizen, against the corporation of Liverpool. The line of English decisions cited in secs. 909 and 910 is referred to at length, and distinguished by Allen, J., in People v. Ingersoll, 58 N. Y. 1 (1874); post, secs. 913, 920, note, and cases, 922; unte, sec. 908, note. a If members of a corporation contrive scheme to defraud a corporation of its property, they are personally liable. Attorney-Gen. v. Wilson, supra. See, also, Attorney-Gen. v. Lichfield, 11 Beav. 120; Attorney-Gen. v. Leicester, 9 Beav. 546; Attorney-Gen. v. Plymouth, 9 Beav. 67; Regina v. Liverpool, 9 A. & E. 435; Grant on Corp. 137-139, 142; ante, secs. 236, 237, note. Whether funds derived by a munici pality from taxation for municipal improvements, the payment of municipal expenses, &c., are charitable funds, see Attorney-Gen. v. Brown, 1 Swanst 265; compare Attorney-Gen. v. Heelis, 2 Sim. & Stu. 67. Both of these cases are referred to in Attorney-Gen. v. Dublin, 1 Bligh N. R. H. L. Cas. 312, 334. See Carlton v. Salem, 103 Mass. 141 (1869), referred to infra, sec. 920, note. ate officers, upon the several courts of justice, according to the nature of their respective jurisdictions, to see that right is done to his subjects, who are incompetent to act for themselves. While it is usual to join relators in the suit, it is not necessary. The object in joining them is that the defendants may not be oppressed, without remedy, by vexatious suits, since the relators are liable to costs, while the crown is not.1 § 911 (730 a). Extent and Mode of Equitable Interference in this Country. In this country the preventing or the redressing of the excesses of municipal power by a resort to a court of equity has given rise on some points to much contrariety of judicial opinion. Corporations here derive their powers from express legislative enactment. Most, if not all, of the States have an officer styled an Attorney-General, whose duties are prescribed by statute; and these duties differ in many respects from the duties of the AttorneyGeneral in England. The question has several times arisen how far this officer, or the public law officer of the State, may exercise the powers which belong to the office of the Attorney-General at common law, to file informations or bills in equity, to prevent or redress the illegal acts of municipal officers and corporations; and connected with this inquiry is the further one, when or in what cases private persons may in their own names resort to equity to prevent the municipal authorities from passing beyond the line of their rightful powers, or to have unauthorized corporate acts set aside or the injury caused thereby redressed or corrected. How far a court of equity may control the acts of municipal and public corporations or of their officers, and in what manner or at whose instance it will exercise its jurisdiction where it exists, are questions upon which, as above observed, the courts in this country are by no means fully agreed. It must suffice, in our further treatment of this subject, to notice briefly the adjudications respecting it, and to state what, in the absence of controlling legislative enactments, would appear upon principle and sound public policy to be the correct doctrine, as to the extent and mode of equitable interference with the exercise of municipal powers, or with the acts of municipal officers. 1 Per Lord Redesdale, in the AttorneyGen. v. Dublin, Bligh N. R. 312 (1827); Attorney-Gen. v. Birmingham, 3 Law Rep. Eq. 552 (1867); Attorney-Gen. v. Exeter, 51 Eng. Ch. 507 (1852); 29 Beav. 44. The answer of a municipal corporation to a bill in chancery need not be signed by an officer thereof; where the name of the corporation is written to such an answer, and there is nothing to show that it is unauthorized, it will be sufficient. Harrison v. Peoria, A. & D. R. R. Co., 77 Ill. 11 (1875). |