Scofield Engineering Co. v. City of Danville

Decision Date28 March 1942
Docket NumberNo. 4800.,4800.
Citation126 F.2d 942
PartiesSCOFIELD ENGINEERING CO. v. CITY OF DANVILLE.
CourtU.S. Court of Appeals — Fourth Circuit

Waldo G. Miles and Hugh T. Williams, both of Danville, Va. (John W. Carter, Jr., and Mary H. Williams, both of Danville, Va., on the brief), for appellant.

E. Walton Brown, of Danville, Va., for appellee.

Before PARKER, SOPER and DOBIE, Circuit Judges.

DOBIE, Circuit Judge.

This is an appeal from the judgment of the District Court of the United States for the Western District of Virginia. A civil action was instituted by Scofield Engineering Company, a Pennsylvania corporation, against the City of Danville, a municipal corporation of the State of Virginia. The parties are hereinafter referred to as plaintiff and defendant as they appeared in the lower court.

On motion for judgment on the pleadings, Judge Barksdale, in the District Court, entered judgment on the plaintiff's claim in favor of the defendant and on the defendant's counter-claim in favor of the plaintiff. We think judge Barksdale was eminently correct in each of these decisions, so we affirm the judgment of the District Court.

We adopt, as fair and accurate, the statement of facts contained in the opinion of Judge Barksdale 35 F.Supp. 668, 669:

"In the spring of 1933, the City of Danville desired to construct a hydro-electric power plant at the Pinnacles of the Dan in Patrick County, Virginia, to be operated by the municipality for the purpose of supplying electric power to the City of Danville, and its citizens. The City contemplated financing the project by obtaining a loan from the Reconstruction Finance Corporation and issuing its bonds for the balance of the money required. Plaintiff, a Pennsylvania corporation engaged in engineering, was invited by the City to prepare the necessary engineering data for filing an application for a loan from the Reconstruction Finance Corporation for this project, the City officials representing to the plaintiff that in the event the plant was constructed, plaintiff would be employed as consulting engineers for the project. After some negotiations, an agreement was reached between the plaintiff and defendant, which was embodied in a resolution adopted by the Council of the City of Danville on May 10, 1933, which in effect recites an agreement to pay the plaintiff the sum of $3,000 for the preparation of the necessary engineering data for the City's loan application, and an employment of the plaintiff at an agreed compensation, as consulting engineers for the project `should the proposed loan be made by the Reconstruction Finance Corporation to the City of Danville and the proposed development carried out.'

"The engineering data was obtained and formulated by the plaintiff, the City's application was filed, first with the Reconstruction Finance Corporation, and later transferred to the Public Works Administration, the same engineering data being used and the plaintiff continuing to render engineering services in connection with the application. On January 12, 1934, the Public Works Administration approved a loan and grant to the City of Danville for this project in the sum of $3,000,000, of which 30 per cent was to be a grant, and 70 per cent a loan to be evidenced by the bonds of the City of Danville.

"It was understood by both plaintiff and defendant, at the inception of their relationship in this regard and throughout the transaction, that issuance of revenue bonds of the City of Danville was contemplated and was necessary for the financing of the project.

"The Charter of the City of Danville provides that:

"`2. Except as otherwise provided in this chapter, no bonds of the City of Danville shall be issued until the question of issuing them shall have first been submitted to the qualified voters of the city at a general or special election and shall have been approved by two-thirds of such voters voting on the question of such issue, which two-thirds shall include a majority of the qualified registered voters owning real estate in said city and voting in such election on the question of such issue. * * *'

"An Act of the General Assembly of Virginia, approved September 7, 1933 (Acts of Assembly 1933, Ex.Sess., chapter 26, page 47), to facilitate the acceptance of grants and the making of contracts with the Public Works Administration under the National Industrial Recovery Act of Congress 48 Stat. 195, provided in Section 14 that:

"`Provided, however, that in the cities of Roanoke and Danville no money shall be borrowed and no bonds issued and no indebtedness incurred hereunder until and unless the proposal so to do shall have been submitted to the qualified voters of such city at a special election and approved by a majority of the qualified voters who vote in said special election.'

* * * * *

"On February 26, 1934, an election was held in the City of Danville, at which the proposal to accept the proposed loan and grant from the Public Works Administration, issue the City's revenue bonds in the amount necessary for the City to avail itself of the loan and grant, and construct the hydro-electric development, was submitted to the voters, and a majority of the voters who participated therein voted against the issuance of said bonds.

"Thereafter, the plaintiff was at all times ready, willing and able to perform engineering services for the City pursuant to its contract, but these services were not availed of, and in July, 1934 a citizens' committee procured an appropriation of $2,000 out of current revenue from the City Council and employed another engineering firm, Charles T. Main, Inc., of Boston, to investigate the situation and make recommendations. After the report of said Charles T. Main, Inc., the City renewed its application for a loan and grant, and this time received from the Public Works Administration an offer of a loan and grant of $2,750,909, of which 45 per cent was to be a grant and 55 per cent to be a loan. The proposal to accept this offer, issue the City's revenue bonds in the necessary amount and to construct the hydro-electric development, was submitted to the people at an election on October 1, 1935, at which election the proposal was approved, and thereafter the City proceeded to issue its revenue bonds, secure the 45 per cent grant from the Public Works Administration, and construct the project under the supervision of Charles T. Main, Inc., as supervising engineers.

"The plaintiff alleges that it was willing and able to act as consulting engineers in the development of the project, and that the City was bound by its contract of May 10, 1933, to avail itself of such services, and the City's failure so to do constituted a breach of contract, for which the City is liable in damages. Upon the City's refusal to pay, this suit was instituted.

"The City bases its motion for a judgment on the pleadings primarily upon the grounds:

"(1) That under the law the Council of the City of Danville had no right or power to contract to spend any portion of the avails of the contemplated loan until after the issuance of the bonds had been authorized by the voters of the City of Danville in an election as required by its Charter and the statute (Acts of Assembly 1933, Ex.Sess., c. 26, p. 47); and

"(2) That if the contract of May 10, 1933, was valid, it was conditioned upon the approval of the proposition then under consideration by the voters at a special election, and that inasmuch as that proposal was disapproved by the vote of the people in the election of February 26, 1934, the occurrence of the condition precedent to the validity of the contract failed, and therefore the contract was rendered void and of no effect for all time by the failure of the proposal to carry at the election of February 26, 1934.

"The plaintiff contends that the City Council did have the power to make a contract involving the expenditure of the proceeds of the bond issue before approval of such bonds by an election, provided that such expenditure was conditioned upon subsequent approval in an election, and further that, even if the City is not liable to it upon the express contract, it is liable on a quantum meruit upon the implied contract.

"It is conceded by counsel that the charter and statutory inhibition against the issuance of bonds is equivalent to an inhibition against incurring indebtedness, in that it was understood by both parties that this project must necessarily be financed out of the proceeds of a bond issue."

It seems quite clear that this case is controlled by the applicable law of the State of Virginia. We, accordingly, proceed to discuss the case in the light of the decisions of the highest court of Virginia, The Supreme Court of Appeals.

We agree with Judge Barksdale that, even if the validity of the contract between plaintiff and defendant be conceded, this contract was terminated and imposed no further obligations upon either party thereto when plaintiff paid to defendant the stipulated sum of $3,000 for the work of plaintiff, and when, at the election held in Danville on February 26, 1934, a clear majority of the voters who participated therein voted against the issuance of bonds to finance the project in question.

This is in line with the decision of the Supreme Court of Appeals of Virginia in Royer v. Board of County Supervisors of Albemarle County, 176 Va. 268, 10 S.E.2d 876, where the facts were very strikingly similar to the facts of the instant case. In his opinion in the Royer case, 10 S.E.2d at page 879, Judge Eggleston said:

"It is true that in 1935 the Board of Supervisors employed the plaintiff to file an application for a federal grant and agreed that, in the event the application was approved and the offer of the government to assist in financing the project was accepted by the board, the latter would pay him for preparing and furnishing the necessary plans and specifications. The application was prepared and filed and the...

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