California Land & Construction Co. v. Halloran

• Decision Date: 29 December 1932
• Docket Number: 5138
• Citation: 82 Utah 267,17 P.2d 209
• Parties: CALIFORNIA LAND & CONSTRUCTION CO. v. HALLORAN
• Court: Utah Supreme Court

17 P.2d 209

82 Utah 267

CALIFORNIA LAND & CONSTRUCTION CO. v. HALLORAN

No. 5138

Supreme Court of Utah

December 29, 1932

Rehearing Denied January 13, 1934.

Appeal from District Court, Third District, Salt Lake County; R. I McDonough, Judge.

Action by the California Land & Construction Company against W. J Halloran. From a judgment dismissing the action, plaintiff appeals.

REVERSED AND REMANDED, with directions.

H. D. Moyle and R. C. Wilson, both of Salt Lake City, for appellant.

Dan B. Shields and D. M. Draper, both of Salt Lake City, for respondent.

ELIAS HANSEN, J. STRAUP and EPHRAIM HANSON, JJ., concur. CHERRY, C. J., FOLLAND, J., dissenting.

OPINION

ELIAS HANSEN, J.

Plaintiff brought this action by filing a complaint in the district court of Salt Lake county, Utah. Defendant demurred specially and generally to the complaint. The demurrer was sustained. Plaintiff declined to amend its complaint, and thereupon the action was dismissed. The appeal is prosecuted from the judgment of dismissal. The order sustaining the demurrer and judgment dismissing the action are assigned as error. It is in substance alleged in the complaint: That plaintiff is, and at all times mentioned in the complaint has been, a corporation organized and existing under and by virtue of the laws of the state of California; that on November 21, 1924, plaintiff complied with the laws of the state of Utah entitling it to do business in this state; that the defendant is a resident of Salt Lake county, Utah; that on June 7, 1924, plaintiff entered into a written contract with the Price River water conservation district, a municipal corporation of the state of Utah; that in said contract plaintiff agreed to construct a dam and relocate a track for the Denver & Rio Grande Railway so as to permit the construction of the dam and the subsequent impounding of water above the dam; that in consideration of the construction of the dam, the relocation of the railway track, and the performance of certain other covenants contained in the contract, the Price River water conservation district agreed to pay plaintiff in progressive payments $ 750,000, par value of its bonds; that immediately after the contract above mentioned was entered into plaintiff entered upon the actual performance of the work and other acts and undertakings which it was obligated to perform; that on July 22, 1924, the plaintiff and the Price River water conservation district entered into an escrow agreement with the Halloran-Judge Trust Company, a corporation. A copy of the escrow agreement is attached to the complaint and by reference made a part thereof. The escrow agreement in substance provides: That the Price River water conservation district has deposited $ 750,000, par value of its bonds, to be held by the Halloran-Judge Trust Company until disposed of strictly in accordance with instructions contained in the escrow agreement. The bonds so deposited with the Halloran-Judge Trust Company were to be used for the following purposes: $ 250,000 to pay for the construction of the railway track; $ 150,000 to pay for the construction of the dam; $ 125,000 to purchase a water right; $ 125,000 to purchase land to be inundated by the proposed reservoir; $ 20,000 to be used to effect a settlement of a suit relative to a water right which was in the course of litigation; $ 50,000 to pay incidental expenses such as printing of bonds, inspection, expenses of test pits, etc.; and $ 30,000 to pay attorneys and engineers for professional services rendered in connection with the proposed irrigation project. As the work of constructing the dam progressed, the Halloran-Judge Trust Company was directed by the escrow agreement to release to plaintiff from the bonds allocated to the construction of the dam sufficient bonds to pay 85 per cent of the monthly certified estimate of the engineer in charge of the construction. Upon the completion of the dam and the acceptance thereof by the engineer in charge, the remaining bonds allocated to the payment of the construction of the dam were to be delivered to the plaintiff. The escrow agreement contained a similar provision with respect to the delivery of the bonds to the plaintiff as the construction of the railway progressed. The $ 125,000 allocated to the purchase of the water right, the $ 20,000 allocated to pay for the settlement of litigation concerning some of the water right, and the $ 125,000 allocated to the purchase of the land to be inundated, were to be paid to the plaintiff as soon as title to the water and land vested in the district. The $ 50,000 allocated to pay for test pits, printing of bonds, inspection expenses, etc., were to be delivered to the plaintiff when the project was completed. The $ 30,000 par value of bonds allocated to the payment of professional services rendered by attorneys and engineers in connection with the construction of the project were to be delivered to the plaintiff upon the attorneys and the engineers filing receipts acknowledging that they had received full payment for their services. The escrow agreement further provides:

"Should any of the above bonds be sold by the undersigned California Land & Construction Company, prior to delivery hereunder, Halloran-Judge Trust Company may deliver said bonds or any part thereof so sold, provided it receive all moneys arising from said sale or sales, and allocate the same in lieu of the bonds sold to the respective purposes herein set out, and hold the same as respective funds for the purposes and payments in cash in lieu of bonds; and in such event the California Land & Construction Company will accept cash in lieu of bonds on any engineer's estimate or on the fulfillment of any of its obligations hereunder referred to at the same rate of discount as that at which the bonds may have been sold.

"In case of default of construction company and certification of that fact to you by the engineers of the District, then and in that event all bonds or proceeds of bonds left in your hands hereunder shall henceforth be held subject only to the order of the District."

It is further alleged in the complaint that the plaintiff prosecuted the work of constructing the irrigation project in reliance upon the prompt delivery of the bonds according to the terms of the escrow agreement and if the bonds or the cash proceeds thereof had been so delivered the plaintiff would have been ready, willing, and able to finance itself and provide the necessary funds for the complete performance of its contract with the Price River water conservation district; that plaintiff was, however absolutely dependent upon the prompt delivery of the bonds or the proceeds derived from the sale thereof in order to pay the necessary expenditures incurred in the prosecution of its contract with the conservation district; that the defendant W. J. Halloran at all times mentioned in the complaint was the president of the Halloran-Judge Trust Company; that he knew the plaintiff was dependent upon the bonds or the proceeds thereof for funds with which to carry out its contract with the conservation district; that on or about September 20, 1924, "defendant W. J. Halloran as an individual and not in his capacity as president of the said trust company, without plaintiff's knowledge or consent and without any claim of right, fraudulently, maliciously and in wanton disregard of plaintiff's rights, and intending to injure and oppress plaintiff and to force plaintiff by reason of financial embarrassment to breach its said construction contract with said Water Conservation District, withdrew from said escrow certain bonds of said Water Conservation District of the total par value of $ 25,000.00, and sold the same for the sum of $ 25,000.00 and converted to his own use the proceeds of said sale, all of which was then unknown to plaintiff; that the said bonds thus wrongfully withdrawn and sold by said Halloran, were bonds which were to have been held in trust for delivery to or sale by the plaintiff, and plaintiff was the owner of and entitled to the immediate possession of the proceeds of the sale of said bonds"; that immediately after the defendant converted the bonds he deceitfully and with intent to mislead the plaintiff to its financial embarrassment caused plaintiff to be notified that $ 25,000 of the bonds were sold, or contracted to be sold, at par; that plaintiff upon such information expended $ 15,000 in purchasing and renting equipment and shipping the same to the place where the construction work was to be performed. "That during the month of October, 1924, plaintiff tendered to defendant Halloran, bonds of the par value of $ 25,000.00, which said bonds plaintiff had thus been led to believe defendant Halloran had sold or contracted to sell for and on behalf of plaintiff, and demanded payment by defendant Halloran or said trust company of the cash price of said bonds in the sum of $ 25,000.00. Whereupon said defendant Halloran informed plaintiff that he had previously taken from escrow bonds of the total par value of $ 25,000.00 and had sold them and received the proceeds thereof, amounting to the sum of $ 25,000.00, but that he, Halloran, refused, without explanation of any claim of right, to pay to plaintiff the said cash proceeds." That when defendant refused to pay to plaintiff the $ 25,000 he derived from the sale of the bonds, plaintiff was rendered financially unable to continue its operations in constructing the irrigation project for the conservation district and was compelled to enter into a contract with Sutherlin, Barry & Co., a corporation, and Ernest S. Shields, an individual, to finish constructing the irrigation project for the Price River water conservation district; that defendant has failed...