Cushman v. Warren-Scharf Asphalt Paving Co.

• Decision Date: 05 January 1915
• Docket Number: 2063.
• Citation: 220 F. 857
• Parties: CUSHMAN et al. v. WARREN-SCHARF ASPHALT PAVING CO.
• Court: U.S. Court of Appeals — Seventh Circuit

220 F. 857

CUSHMAN et al. v. WARREN-SCHARF ASPHALT PAVING CO.

No. 2063.

United States Court of Appeals, Seventh Circuit.

January 5, 1915

In 1899 appellee, a New York corporation, contracted with the city of Michigan City, Ind., to pave three certain streets. The work was finished and accepted in 1900. In 1901 the city levied a special assessment to pay for it. Appellants or their predecessors in title having refused to pay, appellee sought foreclosure of its alleged liens in the state court. In 1908 on final appeal, the paving contracts were held void for lack of proper advertisement and the assessments were annulled.

In 1901 the law then in force governing such improvements was repealed, and in 1905 the entire subject-matter was regulated by a new enactment. In 1909 an act purporting to amend the law of 1905 was adopted, which permitted cities to remedy irregularities when assessments should have been held void on account of defects or irregularities in the preliminary steps. This amendment was not in express terms limited to assessments made under the act of 1905. Thereafter, on appellee's petition, the city proceeded regularly as if a new improvement were to be made, contracted with appellee to do the work at the old price, and at once accepted the work long theretofore finished as a compliance with the new contracts. New assessments identical with the old were spread, and due notice of a hearing was given to the property owners. Appellants protested that the proceedings were without legal authority, and, on their agreement to indemnify and save harmless the city from any costs or damages which might result from a refusal to levy the assessments, the board of public works, despite appellee's demand declined to take any further steps.

Thereupon in 1910, appellee sued the city of Michigan City in the United States Circuit Court for the District of Indiana. The total amount demanded was $6,043.33, the amount of the original unpaid assessments, with interest from the date of levy thereof. The complaint in three counts, one as to each street and contract, set up the history of the transactions in detail, concluding each count (except as to the amount of damages) as follows: 'Plaintiff further says that, by reason of the failure and refusal of the defendant to act in the premises, no fund has been raised by defendant wherewith to pay plaintiff the contract price of said improvement, and the plaintiff has thereby been deprived of the use of the money representing such contract price. Plaintiff further says that by reason of the failure and refusal of defendant to cause assessments to be levied, thereby creating a fund wherewith to pay this plaintiff the contract price of said improvement, defendant has failed to discharge a duty owing to this plaintiff, and has become liable tot his plaintiff in damages; that plaintiff has been damaged to the extent of a sum equal to the assessments which defendant should have levied for plaintiff's benefit, together with interest thereon. Whereupon plaintiff prays for damages against defendant in the sum of $4,000, and for such further and additional relief in the premises as to the court may seem proper.'

The demurrer, later overruled by the court, and then the answer of the city, were filed by attorneys who were employed by appellants, and who, with the city's consent, had complete control and management of the defense. The answer set up: First, that the later contracts differed from the originals in certain specified particulars, and were therefore void; second, that, because the work had long before been completed, the curative proceedings and the contracts based thereon were invalid; third, that the state court decisions adjudging the original proceedings void, and the enactment, while those suits were pending, of the act of 1905, rendered the later proceedings void and of no effect.

A demurrer to this answer was sustained, and thereupon, the defendants therein declining to answer further, on motion of the plaintiff therein for judgment for the amount of the original unpaid assessments, with interest from January 17, 1901, the date of the levy thereof, the court, in February, 1911, entered a judgment which, after reciting defendant's election to stand upon its answer, proceeds as follows: 'And the plaintiff having moved for judgment for defendant's failure so to plead or answer further, said motion of the plaintiff is now sustained in part as follows: 'The court, being duly advised in the premises, does hereby finally order and adjudge that plaintiff have and recover from the defendant the sum of $6,043.33, being the amount for which special assessments should be levied by the defendant without interest; said judgment to be enforceable only by a writ of mandamus against the defendant to compel the defendant to levy said assessments, and to pay over to the plaintiff the amount collected thereon. With respect to so much of plaintiff's motion for judgment as prays for interest upon the amount above named, the same is overruled. It is further ordered and adjudged that plaintiff have and recover from the defendant its costs in this proceeding, all of which is finally ordered and adjudged."

No attempt has ever been made to have this judgment reversed. Thereafter, on due notice of a hearing, at which none of appellants appeared, final assessments were levied, and, as they remained unpaid after due notice given by appellee, a bill in equity was filed in 1913, in the District Court of the United States for the District of Indiana, by appellees against appellants and two other property owners, who have not joined in this appeal.

The bill recited that appellee took steps in 1904 to effect a voluntary dissolution, became dissolved, but under the laws of New York continued its corporate existence to transact incomplete business and to wind up. It then sets up the history of the transactions as hereinabove set forth, alleged its ownership of the several unpaid assessments, and prayed for such relief as it might be entitled to, and, for the purpose of giving complete effect to the judgment of February, 1911, that defendants be decreed to pay the assessments to the city for appellee, or to appellee, and, upon failure, that the liens of the assessments be foreclosed. After a motion to dismiss had been overruled, answers were filed practically admitting most of the allegations of the bill, but denying knowledge as to some of them. It appeared from the answer that the amount involved in the assessment of each piece of property and of the property of each defendant was less than $3,000. A decree was entered in accordance with the prayer of the bill. The cause is before us on an appeal from this decree.

William A. McVey, of La Porte, Ind., and George T. Buckingham, of Chicago, Ill., for appellants.

Morris M. Townley, of Chicago, Ill., for appellee.

Before BAKER, SEAMAN, and MACK, Circuit Judges.

MACK Circuit Judge (after stating the facts as above).

It is unnecessary for us to consider either the applicability of the act of 1909 to special assessment proceedings begun under acts other than that of 1905, its constitutionality, if given retroactive effect, or the unconstitutionality of the foreign corporation act of 1879 (Burns' R.S. 1908, Sec. 4105), in view of the conclusion reached, that the judgment of the United States Circuit Court, affirming the right and duty of the city to levy assessments, was, under the pleadings in the case, within its jurisdictional power, and that it is therefore res adjudicata as to those questions, all of which were necessarily litigated in and determined thereby in favor of appellee, both as against the city, the party defendant therein, and as against appellants as privies thereto. Bradley Co. v. Eagle Co., 57 F. 980, 6 C.C.A. 661.

First. While appellants assert that they were neither parties nor privies to the case in the Circuit Court, the conceded facts demonstrate that they were privies thereto, inasmuch as the entire defense was conducted by them, with the city's...