City of Williston v. Ludowese

Decision Date16 March 1926
Docket NumberNo. 4880.,4880.
Citation53 N.D. 797,208 N.W. 82
PartiesCITY OF WILLISTON v. LUDOWESE, City Treasurer, et al.
CourtNorth Dakota Supreme Court
Syllabus by the Court.

Defendant, N. B. Ludowese, as city treasurer of the city of Williston, April 14, 1923, unlawfully deposited with defendant Williams County State Bank city funds in the sum of $17,850.23, and received from the bank a certificate of deposit showing such deposit to have been made by the city of Williston. As security for said deposit said bank executed and delivered to said city treasurer warranty deed purporting to convey to him real estate situated in the city known as the bank's city real estate. The bank closed June 12, 1923, and in due course a receiver was appointed by the court. The receiver assumed control over the bank and its assets. Appellant and the receiver attack this transaction as ultra vires and as against public policy, insisting that the bank officials had no authority in law so to pledge its assets and secure a deposit of funds in said bank. Held:

(a) The defense of ultra vires is not available under a general denial, but to be taken advantage of must be specially pleaded.

(b) The receiver holds the title and right to possession of the property of the bank of which he is receiver by the same right and title as the bank, subject to liens, priorities, and equities existing at the time of his appointment. The title which he acquires to the property is no other, greater, or better interest, right, or equity than had the bank, and he can set up no rights against claims which the debtor, the bank, could not have maintained.

(c) The general rule is that ultra vires transactions, not mala in se or mala prohibita, are recognized as unassailable and permitted to stand as the foundations of rights acquired under them after they have been fully performed on both sides, and banks are not excepted from the operation of the rule.

(d) Where the corporation which has received the benefit of an ultra vires contract is estopped by equitable considerations from avoiding that contract, such contract cannot be avoided on the ground that it is ultra vires by one with notice succeeding to its rights.

(e) Under the facts and circumstances arising in this case, the sovereign (the state) alone can be heard to object, and then only in a direct proceeding to oust the corporation of its usurped powers.

(f) Whether a contract is against public policy is a question of law for the court to be determined from all the facts and circumstances of each case.

In an equity action removed to this court for trial de novo, the findings of the trial court are not clothed with the same presumptions in their favor as in cases triable to a jury wherein the jury is waived and trial is had to the court. But such findings of the trial court upon facts material to the issues in the case are entitled to some appreciable weight.

The board of city commissioners of cities organized under the commission form of government (sections 3835-3839, C. L. 1913) is clothed with the right to exercise the powers conferred by the Legislature on cities so organized.

City commissioners, acting singly as individuals, or collectively as a group, but not regularly assembled as the board of city commissioners, have no authority or power to bind the municipality by their actions, representations, or declarations, unless authority to do so is actually or ostensibly conferred upon them by the board of city commissioners.

A municipality ordinarily is not estopped to assert that dealings with its officers of limited authority are not binding upon it, where the authority has been exceeded or not exercised in the manner required by law.

Inasmuch as it appears from the record that the city may have security other than the lien on the property involved in this action, the judgment is modified so as to be without prejudice to the rights, if any, the bank of North Dakota may have to compel the marshaling of the securities held by the city.

Johnson, J., dissenting.

Appeal from District Court, Williams County; Geo. H. Moellring, Judge.

Suit by the City of Williston against N. B. Ludowese, as City Treasurer of the City of Williston, and others, to enforce a lien and for other relief. From a judgment for the plaintiff, defendant the Bank of North Dakota appeals. Modified and affirmed.

O'Hare & Cox, of Bismarck, for appellant.

Fisk, Craven & Taylor and John J. Murphy, City Atty., all of Williston, for respondent.

Conmy, Young & Burnett and Pierce, Tenneson, Cupler & Stambaugh, all of Fargo, amici curiæ.

PUGH, District Judge.

[1] The Williams County State Bank, hereinafter referred to as the Williston State Bank, became a depository for $10,000 of the public funds of the plaintiff, the city of Williston, on or about June 6, 1921, under the provisions of chapter 56 of the Laws of 1921, which sum was placed and deposited in said bank between June 15th and August 1st of that year by defendant N. B. Ludowese, then, and until and including the year 1923, the city treasurer of said city. On the 14th day of April, 1923, the defendant Ludowese, city treasurer, deposited of the public funds of the city in said bank an additional sum of $17,580.23, and received from the bank a paper known as a certificate of deposit, dated that day, reciting that the city of Williston had deposited in said bank said sum of money payable to the order of itself 6 or 12 months after date, with interest at the rate of 6 per cent. per annum, and at the same time, as security for the payment of said sum, the bank by its president and cashier executed and delivered to said Ludowese a warranty deed conveying to said Ludowese in his individual name two certain tracts of land within the city of Williston, then occupied by tenants, and also executed and delivered to Ludowese in his own name a certain assignment of rentals due or to become due from the tenants occupying said premises. And, further, the bank delivered to said Ludowese mortgages owned by it aggregating approximately $4,500, covering farm lands. Said additional deposit of $17,580.23 was so made by defendant Ludowese without the authority, approval, or knowledge of the city commission of the city of Williston. The defendant Ludowese did not record said deed in the office of the register of deeds. It appears that the defendant Williston State Bank was in financial difficulties. This condition, however, was not known to Ludowese at the time of said overdeposit, so called. On or about the 24th day of January, 1923, Rodman, the president of the bank, endeavored to secure a loan for the bank of $50,000 from the depositors' guaranty fund commission and the Bank of North Dakota, and offered as security therefor certain real estate of the bank, including the real estate situated in the city of Williston involved in this action. The Bank of North Dakota thereupon or shortly afterwards advanced to defendant bank upon said proposed loan the sum of $15,000, for which collateral security, consisting of notes owned by the bank, was given. In connection with the making of this loan a Mr. Desmond, representing the depositors' guaranty fund commission, went to Williston, checked up the bank and the securities offered by the president, and made report thereon to the said depositors' guaranty fund commission. Later a meeting of the commission and the state bank examiner was held at Max, N. D., and the proposition of the loan was discussed. It was then learned that certain of the securities the bank had promised as security for the loan aforesaid were not available, and that the city real estate of the bank located in the city of Williston had been parted with, pledged, or conveyed so that the title was not in the same condition as when the agreement for the loan was made. Thereafter, and on or about May 20, 1923, upon a request by telephone, C. R. Green, manager of the Bank of North Dakota, went to Williston for the purpose of completing the loan, provided this could be accomplished under the terms as to security formerly agreed upon. Desmond was then at Williston. Green met, and had consultations with, one or two groups of business men of the city, which included the president of the city commission and one or two other members thereof, the object of which was to devise means by which the loan aforesaid might be consummated. Desmond was present at one or both of such meetings. Green remained during Monday, the 21st, and thereafter returned to Bismarck. Desmond remained at Williston to close the transaction for the loan. The bank executed and delivered to him a mortgage dated May 23, 1923, conveying to the Bank of North Dakota the real estate in question and other real estate and collateral notes to secure to it the payment of $50,0000 on demand. On the same day this mortgage was filed for record in the office of the register of deeds in and for Williams county, and recorded therein. After the filing of the said mortgage in the office of the register of deeds, and on the same day, Desmond went to the office of Ludowese, and after some short delay, but on the same day, received from him the deed and assignment of rents which had been executed and delivered to Ludowese by the Williston State Bank. The Williston State Bank was closed to business June 12, 1923, and in due course L. R. Baird became the receiver thereof under appointment of the court, took charge, and now has charge, of the affairs of said bank. On August 4, 1923, Ludowese executed and delivered to the Bank of North Dakota an assignment to it of the assignment of the rents which had been delivered to him by the Williston State Bank. He did not at any time execute and deliver to the Bank of North Dakota, or any one for it, a deed to the premises described in the deed delivered to him by said bank. September 12, 1923, the plaintiff, city of Williston, instituted this action. The complaint recites the facts...

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