City of Floydada v. AMERICAN LA FRANCE & FOAMITE I.

• Decision Date: 23 February 1937
• Docket Number: No. 8191.,8191.
• Citation: 87 F.2d 820
• Parties: CITY OF FLOYDADA v. AMERICAN LA FRANCE & FOAMITE INDUSTRIES, Inc.
• Court: U.S. Court of Appeals — Fifth Circuit

87 F.2d 820 (1937)

CITY OF FLOYDADA v. AMERICAN LA FRANCE & FOAMITE INDUSTRIES, Inc.

No. 8191.

Circuit Court of Appeals, Fifth Circuit.

January 26, 1937.

Rehearing Denied February 23, 1937.

E. L. Klett, of Lubbock, Tex., and Ben P. Ayres, of Floydada, Tex., for appellant.

W. H. Jack, Jr., of Dallas, Tex., for appellee.

Before HUTCHESON and HOLMES, Circuit Judges, and STRUM, District Judge.

HOLMES, Circuit Judge.

In January, 1929, the appellee sold and delivered to appellant a certain truck, equipped with fire-fighting apparatus, for the price of $10,500, payable $2,500 upon delivery and the balance in eight annual installments of $1,000 each, evidenced by a city warrant for each installment, bearing interest at the rate of 6 per cent. per annum from January 1, 1929. The delivery payment of $2,500 was satisfied in cash, except as to $1,500 which was allowed as a credit for an old truck, traded by the City to the seller of the new truck. The first three warrants were paid upon maturity, but the fourth, which became due in January, 1933, was not paid, and no further payments have been made by the City upon the balance of $5,000 and interest. The contract of sale provided that the buyer, when requested by the company, should furnish a satisfactory opinion of its attorney to the effect that the City had the power to make the contract, and that the warrants to be given for the purchase price would be "valid, legal, and enforceable obligations of the municipality." It does not appear that a request for such opinion was ever made by the company, but we regard this as immaterial, because, as will appear later, this clause fell with the whole contract which was avoided by a constitutional inhibition.

On May 23, 1936, the appellee filed suit against the City, seeking to recover the balance due on the purchase price, and, if for any reason it was not entitled to have judgment upon said unpaid warrants, praying for the return of the truck and a reasonable rental for its use during the time it had been in possession of the municipality. It is conceded that the contract of sale and the warrants issued in pursuance thereof were void, under sections 5 and 7, art. 11, of the Constitution of Texas, because at the time the debt was created no provision was made to assess and collect annually a sufficient sum to pay the interest thereon and create a sinking fund of at least 2 per cent. of the principal (City of Terrell v. Dessaint, 71 Tex. 770, 773, 9 S.W. 593); but appellant assigns error to the action of the court in awarding title and possession of the truck to appellee and a reasonable rental as compensation for its use. The City objects to surrendering the truck and paying for its use, upon the contention that this action is wholly barred by local statutes of limitation.

The Constitution of the State was binding upon both parties to the contract, and it was their duty to see to it that provision for the tax was made at the time the debt was created. Since they failed to do so, their express contract of sale in violation of the Constitution was nullified, and the warrants sued on never became valid or enforceable.

However, upon the facts accomplished in the frustrated effort to deal between themselves without complying with the constitutional mandate, the general law fixed the legal relation of the parties and implied a contract between them consistent with honesty and...