Dakota Trust Co. v. City of Hankinson, 4889.
| Decision Date | 02 November 1925 |
| Docket Number | No. 4889.,4889. |
| Citation | 53 N.D. 356,205 N.W. 990 |
| Parties | DAKOTA TRUST CO. v. CITY OF HANKINSON. |
| Court | North Dakota Supreme Court |
OPINION TEXT STARTS HERE
Syllabus by the Court.
Warrants issued by a city in payment for a special improvement are not negotiable instruments.
Where a contractor is engaged to construct a public improvement, and where during the progress of the work the city council, in exercise of the powers conferred by section 3710 of the Compiled Laws for 1913, approves estimates of the city engineer, and makes partial payment to the contractor in the form of warrants, and where the warrants are transferred, the transferee is not subject to defenses subsequently arising due to the failure of the contractor to complete the work in accordance with the plans and specifications.
Where a contract for a public improvement obligates the contractor to receive payment in warrants, and where the city council authorizes the issuance of warrants to such contractor, as upon part performance of his contract, exercising powers conferred by section 3710 of the Compiled Laws for 1913, and where such warrants are transferred to one as against whom the city cannot assert a defense arising out of the subsequent failure of the contractor to completely perform the contract, the city owes to the warrant holder the duty to levy special assessments to pay such warrants.
Following Pine Tree Lumber Co. v. City of Fargo, 12 N. D. 360, 96 N. W. 357, the failure of the city authorities to make a proper assessment upon property in a special assessment district to meet obligations under its special assessment warrants will subject the city to a general liability, although its credit be not pledged to meet the costs and expenses incident to the special improvement.
Appeal from District Court, Richland County; Chas. E. Wolfe, Judge.
Action by the Dakota Trust Company against the City of Hankinson, tried with a special proceeding for mandamus. From a judgment in the action for plaintiff, and an order overruling a motion for a new trial, defendant appeals. Affirmed.
An action and a special proceeding were tried together in the district court of Richland county. In the action the plaintiff sought a judgment against the defendant on two special improvement warrants for $500 each, issued by the defendant and payable out of the funds of sewer improvement districts Nos. 1 and 2, respectively. The special proceeding was an application, on relation of Kistler, for a writ of mandamus directed to the defendant corporation and to the members of the city council, city officers, and special assessment commission to compel the levy of special assessments to defray the cost of the improvement, on account of which two warrants, each for the sum of $500, payable from the funds of sewer improvement districts Nos. 1 and 2, respectively, had been issued, which were owned by the relator. The proceeding was later amended to include additional warrants, also owned by Kistler. Upon the application an alternative writ or order was issued requiring the levying of special assessments for the total cost of the improvement,on account of which the warrants owned by the relator had been issued. Both the action and the special proceeding came on for trial before the district judge without a jury at the same time, and it was stipulated by counsel that the evidence taken in the one case should be considered as taken in the other so far as material, and upon these appeals there is but one statement of the case.
In the Dakota Trust Company Case, in which judgment is sought on the warrants, judgment was rendered for the plaintiff. A motion for a new trial was made and overruled. The appeal is from the judgment and from the order overruling the motion for a new trial. In the Kistler Case a judgment was entered awarding the writ as prayed for, and the appeal is from the judgment.
The facts out of which the controversy arises may be stated as follows: In 1920 the city council of the city of Hankinson undertook to establish a sewer system and a waterworks system, taking all the necessary steps therefor, as will appear from the case of Jones v. City of Hankinson, 48 N. D. 618, 186 N. W. 276, in which case it was held that the plaintiffs had not sustained the burden of proving irregularities in the proceedings which were alleged as a basis for injunction.
On August 12, 1920, bids were received and opened for the construction of a sewer system, and a resolution was passed for the letting of the contract to the John O'Connor Company of Fargo for $82,716.29. Under date of August 13, 1920, a contract was entered into between the city and the O'Connor Company in accordance with the resolution. The contract provided, among other things, for the doing of the work in accordance with a proposed schedule and specifications; that the city of Hankinson assumed and incurred no general liability; that the payments thereunder were to be made by warrants bearing 7 per cent. interest; that the work should be subject to the approval of the engineer of the city, who should superintend and inspect the work during its progress; and it provided for the completion by July 1, 1921. This date was later extended. Work was begun under this contract in 1921, and it seems that, when trenches were dug in which to lay the tile or sewer pipe, there was uncovered throughout a large portion of the trenches a bed or beds of quicksand. It also appears that water seeped into the trenches, thus making the work of laying the pipe difficult; that on account of this condition the joints in the pipe, which were required by the specifications to be laid in Portland cement mortar and to be water tight, were cemented only over the top and not underneath, as the water prevented the cementing operations beneath; that the quicksand did not furnish a good foundation upon which to lay the pipe; that the steps required to be taken to improve the foundation were not taken; and that as a consequence the pipe, when laid, was more or less uneven; that the joints were not sufficiently tight to prevent the infiltration of quicksand; and that, due to these conditions, principally the settling of the pipe in the quicksand beds and the infiltration of quicksand, the sewer system, when completed, worked imperfectly, and throughout a large part of the area did not work at all; that it became entirely plugged up in sections, and at one place, if not several, it settled so that it did not make a proper connection with the manhole; that attempts to clear the system here and there failed; that at one time, though it seems this condition was later remedied, the outlet was not properly connected with the septic tank; that a sludge bed had not been properly constructed, due to the failure to supply gravel thereon at the proper thickness; that during the progress of the work the engineers, whose duty it was to make inspections, made only cursory examinations; that there was little, if any, effort made to counteract the adverse physical conditions in order that the sewer, when completed, might be in more perfect condition; that, even though it had been constructed according to plans and specifications, the grade of the sewer was such that it would require attention occasionally, such as flushing, in order to prevent the accumulation of solid matter at various places; that the sewer did not receive this attention on the part of the city, though several permits were given to make connections therewith. The city engineer employed was a corporation known as Dakota Engineering & Construction Company.
From time to time, during the progress of the work, estimates were submitted to the city council and allowed. Among these was the following:
“Hankinson, N. D., Feb. 6, 1922.
Honorable Mayor and City Council, Hankinson, N. D.-Gentlemen: We submit herewith a partial estimate of the amount due the John O'Connor Company to date of February 4, 1922, on their contract covering the construction of a sewer system for the city of Hankinson.
Dakota Engineering & Const. Co.
The action of the council thereon was:
“The following resolution was offered...
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