In my opinion the City of Klamath Falls is an indispensable party to this suit. It is vitally interested in the contract and cannot be divested of its rights therein without an opportunity to have had its day in court. The fact that plaintiff alleges the contract to be illegal does not alter the rule. Has not the city a right to be heard as to whether it is entering into an alleged illegal contract? Indeed, it is presumed that municipalities, as well as individuals, are fair and honest in business transactions.
The rule is thus stated in 32 C.J. 298:
"Where the property rights or interest of a municipal corporation will be affected in case the injunction asked for is granted, it is generally held that it, as well as the particular officer or officers sought to be enjoined, should be made a party *Page 68 or parties. However, the municipality is not an indispensable party where there is no attempt to divest it of a right or to impose an obligation upon it."
Basham v. Holcombe (Tex.Civ.App.), 240 S.W. 691, was a suit to enjoin the execution of a contract by the city for public improvements, for the reason that the city officials did not accept the lowest bid. The court held:
"Although the suit was an effort to restrain the officials of the city from making a contract on its behalf with, and from paying out its money to, a designated person, neither the city itself nor the person affected were made parties, as has been before stated. Under well-settled authority, both were necessary parties to a proceeding so directly and vitally affecting their interests" — citing many authorities.
In Allison et al. v. Ellis et al. (Tex.Civ.App.),248 S.W. 814, it was contended, as here, that a municipality was not a necessary party in a suit to enjoin the execution of an alleged invalid contract; but the court said:
"It cannot with any degree of sound reasoning be contended that the county will not be affected by the decree rendered in this case, whether it be to sustain the acts of its officers and agents or to annul them. Neither can a want of necessary parties be disregarded on an assumption that the allegations of the petition show an invalid contract by which the county is not bound. The demands for the necessary parties in a court of equity cannot be met in any such way. The county has the right to be in at the death of a contract to which its officers have bound it. Its interests cannot be determined in a suit to which it is not a party." *Page 69 Eames v. Kellar et al., 102 A.D. 207 (92 N.Y. Supp. 665), was a proceeding to restrain the performance of a contract made in behalf of the City of New York for the reason that certain aldermen were interested in the same. The city was not made a party. The court thus spoke:
"A complete determination of this action without the presence of the city of Watertown as a party is impossible; and while it may be said that the performance of a contract in which a member of the common council is interested is illegal, and therefore must be a waste of public funds, yet even this question cannot be conclusively determined until the city has a right to be heard" — citing Wenk v. City of New York, 171 N.Y. 607 (64 N.E. 509).
This ruling was adhered to in the more recent case of Bachia v. Estates of Havemeyer Point, 77 Misc. Rep. 362 (136 N.Y. Supp. 435).
Also in support of the conclusion herein reached, see:Renshaw v. Arnett (Tex.Civ.App.), 158 S.W. 1197;Gillespie v. Gibbs, 147 Ala. 449 (41 So. 868); Moore v.Held et al., 73 Iowa, 538 (35 N.W. 623); Turner et al. v.Cruzen et al., 70 Iowa, 202 (30 N.W. 483); Bradley v.Gilbert, 155 Ill. 154 (39 N.E. 593).
It is argued that many of the cases cited involved executed contracts and that the law therein announced has no application where relief is sought to restrain the city from entering into an illegal contract. If it be conceded that the city would be an indispensable party in a proceeding involving an executed contract, it would seem that it is entitled to be heard on the question of the right so to contract.
From the complaint it appears uncertain whether the contract has been executed: *Page 70
"* * proceeding to make and enter into said contract, in violation of the said city charter, with the defendant Klamath News Publishing Company, as the defendant now threaten and will do, or that if the defendants have made and entered into said contract, then and in that event that they be restrained from proceeding thereunder in the behalf of said city."
In the prayer of the complaint it is asked:
"That a restraining order, or an injunction, issue restraining the defendants as prayed in the complaint herein, that if such contract has been executed, to prevent any performance thereof, of is (or if) the said contract has not been executed, to restrain the defendants from its execution."
When tested by demurrer the pleading is construed more strictly against the pleader. What if the contract had been executed? Would it be contended that the city, being a party thereto, could be divested of its rights in such manner? The plaintiff should specifically state its theory. If after the commencement of the suit it appeared that the contract had been executed, such fact should have been alleged in a supplemental complaint.
We are not concerned with the question of bringing in new parties after a cause is at issue on the merits, but we are called upon to decide whether the court was right in sustaining the demurrer to the complaint.
The complaint was challenged by demurrer on the ground, among others, that there was a defect in parties defendant in that the City of Klamath Falls was not joined as such. The respondent should have profited thereby instead of standing on the bill. Aside from the question as to whether the complaint stated facts sufficient to constitute a cause of suit, the trial court was right in sustaining the *Page 71 demurrer for the reasons above stated, and its decree should be affirmed.