Board of Public Works of Hammond v. Bernard
1982 Ind. App. LEXIS 1233, 435 N.E.2d 575 (1982)
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Rule of Law:
A contract with a municipality is void to the extent it obligates the city beyond its legislative appropriation, but the city may still be liable under the equitable theory of quantum meruit for the reasonable value of services it knowingly accepted and from which it benefited.
Facts:
- In 1972, the Board of Public Works of the City of Hammond contracted with L. Cosby Bernard and Co. for architectural services on a public works project.
- The contract set the architects' fee at 6.5% of the total construction cost, with payment due after an approved appropriation or bond sale.
- The Board authorized final plans based on an estimated cost of $1.5 million, and the Common Council appropriated funds sufficient for this amount.
- Subsequently, the City Engineer instructed the architects to prepare more elaborate and expensive plans for a larger facility to support the City's application for federal funds.
- The mayor and other city officials used these expanded architectural plans to apply for the federal grant.
- The architects submitted a final bill for an additional $84,796.18, reflecting the increased scope of the project.
- The City Controller refused to pay the additional amount because it exceeded the funds appropriated by the Common Council.
Procedural Posture:
- L. Cosby Bernard and Co. (architects) filed a lawsuit against the Board of Public Works of the City of Hammond in the Lake Superior Court (trial court) for unpaid fees.
- The trial court granted the architects' motion for summary judgment, finding the City liable under the contract for $84,796.18.
- The Board of Public Works of the City of Hammond (appellant) appealed the trial court's summary judgment to the Court of Appeals of Indiana. L. Cosby Bernard and Co. is the appellee.
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Issue:
Is a city liable for professional services that exceed the amount appropriated by the city council, either contractually or under an equitable theory for the value of benefits received?
Opinions:
Majority - Conover, J.
No as to the contract, but yes as to the potential equitable liability. A city is not contractually liable for services exceeding a legislative appropriation because Indiana statute expressly voids any such obligation. The contract itself conditioned payment on an 'approved appropriation,' and no exception to the statute was invoked by the City's governing body. However, a city may be liable under the equitable theory of quantum meruit to prevent unjust enrichment. Long-standing Indiana law allows for recovery of the reasonable value of services rendered if the city's governing body had full knowledge of the services, knowingly accepted their benefits, and the services were within the city's powers to procure. Because there is a factual dispute as to whether the City's governing body knew of and approved the use of the expanded plans for the federal grant application, summary judgment was improper and the case must be remanded to determine liability under quantum meruit.
Analysis:
This decision reinforces the strict statutory requirement that municipal obligations cannot exceed appropriated funds, protecting public finances from unauthorized spending by city officials. However, it balances this fiscal control with the equitable principle against unjust enrichment. The case establishes that while a contract may be void, a separate equitable claim (quantum meruit) can arise if a city's governing body knowingly accepts and benefits from services, preventing municipalities from using statutory protections to unfairly avoid paying for work they have received. This creates a dual-track analysis for claims against municipalities, first examining contractual validity and then potential equitable liability.
