City of Pella v. Fowler, 40742

CourtUnited States State Supreme Court of Iowa
Writing for the CourtSTEVENS, C. J.
Citation244 N.W. 734,215 Iowa 90
PartiesCITY OF PELLA, Appellant, v. WALTER H. FOWLER, Appellee
Docket Number40742
Decision Date25 October 1932

Appeal from Marion District Court.--W. S. COOPER, Judge.

Action at law to recover a sum alleged to be due plaintiff from the defendant, who is the grantee of a franchise in the plaintiff city to operate a telephone system. The particulars of the case are fully stated in the opinion. A demurrer to the petition was sustained and judgment entered dismissing the same. The plaintiff appeals.


Dick C Van Zante and Clark, Byers, Hutchinson & Garber, for appellant.

H. E DeReus and Parrish, Cohen, Guthrie & Watters, for appellee.




This action was disposed of in the court below upon a demurrer to the petition. Appellant's cause of action was pleaded in three counts. Count one is based upon an express contract. Count two is based upon an alleged implied contract to pay the fair and reasonable value of the use of the streets and public places of appellant city for the telephone exchange; while count three is based upon section five of the franchise ordinance, which appellant interprets as in the nature of a regulatory ordinance requiring the payment of a tax, license fee or compensation for the use of the streets and public places of said city.

The ultimate material facts admitted by the demurrer, which raises all of the propositions herein discussed, are as follows: On or about December 6, 1898, the appellee filed with the mayor of the appellant city an application duly signed by the requisite number of property owners resident therein for a franchise to establish, maintain and operate a telephone exchange and for a special election to be held on a specified date to vote upon the proposition. In pursuance of the aforesaid application, a special election was duly called by the mayor and held on February 21st, 1899. The proposition submitted and voted upon at said special election, which carried, was as follows:

"Shall the following privilege be granted: Shall Walter H. Fowler, his successors and assigns be granted the privilege of operating a telephone exchange within the City, and the use of so much of the streets, alleys and public grounds as may be necessary for the telephone communication?"

Subsequently and on or about April 4th, appellant presented for adoption by the city council a draft of a proposed ordinance designed to consummate the franchise, to be known in the record as Ordinance No. 51. This ordinance, among others, embraces the following propositions:

"Section 1. That there be and is hereby granted to Walter H. Fowler, of Pella, Iowa, his successors, heirs and assigns the right to maintain and use upon the streets, alleys and public highways and public grounds of said city, (The Garden Square excepted) poles, wires and fixtures necessary and convenient for supplying the citizens of said city and the public communication by telephone or other electrical signals under the provisions hereof for a term of ten years. * * *

"Section 4. * * * And shall furnish to said city two telephones at such places within the city as the council may determine and maintain and keep the same in working order during the first five years of the life of this franchise, free of charge, * * *"

"Section 5. Upon the expiration of said five years, said Walter H. Fowler his successors, heirs or assigns, shall in lieu of said free telephones, pay into the city treasury for the use of its street and alley fund the sum of (5) five per centum upon its gross receipts payable quarterly upon the expiration of each quarter, to wit: on May 30, Aug. 31st, Nov. 30th and Feb. 28th of each year after January 1904. * * *

"Section 8. This ordinance shall take effect upon the filing by Walter H. Fowler, his successors, heirs or assigns, an acceptance of the terms hereof and after its publication in the Pella Blade and Pella's Nieuwsblad weekly newspapers published at Pella, Iowa, and a failure to accept within ten (10) days from the passage hereof shall forfeit all rights hereunder."

After the enactment of Ordinance No. 51 and on May 11th, 1899, appellee filed his written acceptance of the ordinance in the office of the city clerk as follows: "I do hereby accept city ordinance No. 51 in its entirety." Although repeated demand was made of appellee for the payment of the 5 per cent of the grow income derived from the operation of the telephone system, as provided in Section 5, no payment was ever made, and appellee at all times denied liability therefor.

The franchise expired in 1909, but appellee continued to occupy the streets and public places of appellant city and to operate a telephone exchange therein until in 1925, when a new franchise was granted. Although the legality of Ordinance No. 51 and particularly the provision of Section 5 requiring the payments in controversy to be made is challenged by the demurrer, it is not necessary at this point to discuss or pass upon the proposition so advanced.

It is, in fact, conceded by appellant that its cause of action upon the alleged express contract was barred by the statute of limitations when this action was commenced unless the statute was tolled by certain acts, conduct and misrepresentations of appellee.

It is alleged in the petition that appellee at all times denied and fraudulently represented that he ever filed an acceptance of the ordinance; That such representations, statements and denials were made by appellee to the officers of the appellant city for the purpose and with the intention of deceiving said officers and to lull them into the belief that no acceptance had been filed until the cause of action herein pleaded should become barred by the statute of limitations; that the officers of appellant city believed and relied upon said denials and representations of appellee and did not know that the same were wholly false until shortly before the commencement of this action, when the written acceptance of appellee was discovered among some misplaced papers of said city.

What, if any, diligence does the petition allege was exercised by the officers of appellant city to ascertain from its files whether the ordinance had, or had not, been accepted? It is alleged in the petition that the officers of said city relied upon the denials and representations of appellee and did not commence this action within the statutory period because thereof.

Section 8 of Ordinance No. 51 contains the specific provision that the failure of the grantee to accept the ordinance within ten days from the passage thereof would forfeit all his rights thereunder. No action of any kind was commenced by appellant to forfeit the ordinance or to remove the poles, wires, etc., of appellee from the streets and public places of the city. The cause of action, which is based upon the express provision of the ordinance, was well known to the officers of appellant city from the day it accrued. The only element lacking, if any, was the written proof of appellee's acceptance of the franchise. There was no concealment by appellee of the cause of action, which he at all times denied existed.

It is well settled in this state that where the party against whom a cause of action lies by fraud or actual fraudulent concealment prevents the party in whose favor the cause of action exists from obtaining knowledge thereof, the statute of limitations will commence to run only from the time when the cause of action was, or might with due diligence have been, discovered. District Township of Boomer v. French, 40 Iowa 601; Findley v. Stewart, 46 Iowa 655; Bradford v. McCormick, 71 Iowa 129, 32 N.W. 93; Mereness v. First Nat. Bank, 112 Iowa 11, 83 N.W. 711; Mullen v. Callanan, 167 Iowa 367, 149 N.W. 516; Pullan v. Struthers, 201 Iowa 1179, 207 N.W. 235; McBride v. Railway Co., 97 Iowa 91. The ultimate facts alleged clearly do not bring this case within the rule of the cited cases. This is true for the reason that there was no concealment of the cause of action. At most, there was a denial of a fact material to the proof of appellant's cause of action. McBride v. Railway Co., supra.

There is the absence of diligence to discover the written acceptance which at all times was in the possession of the appellant city. The officers charged with the duty of enforcing the terms and provisions of the contract could not blindly accept the mere denials of appellee and abandon all other means available to them of ascertaining the facts. The first payment, according to the terms of the ordinance, came due in five years. Surely, all reasonable means to discover the truth, by the exercise of reasonable diligence, had not at that early date been lost to appellant. The petition does not allege facts which will excuse the delay of appellant in prosecuting its action or constitute the fraudulent concealment of a cause of action. The demurrer to this count of the petition was properly sustained.

II. The proposition submitted and voted upon at the special election contained no specific limitation of the term, but Section one of Ordinance No. 51 fixed the same at 10 years. This limitation, we think, was valid, and the franchise and all rights thereunder expired at the termination of that period.

In any event, the cause of action pleaded in Count two is based upon an alleged implied contract, and not upon the ordinance. That a franchise constitutes a contract is, of course, conceded. Cedar Rapids Water Co. v. Cedar Rapids, 118 Iowa 234, 91 N.W. 1081; City of Des Moines v. Iowa Telephone Co., 181 Iowa 1282, 162 N.W. 323; Schnieders v. Inc Town of Pocahontas, 213 Iowa 807, 234 N.W. 207. Upon the...

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