Empire State Sur. Co. v. City of Des Moines

• Decision Date: 06 June 1911
• Citation: 131 N.W. 870,152 Iowa 531
• Parties: EMPIRE STATE SURETY CO. v. CITY OF DES MOINES ET AL.
• Court: Iowa Supreme Court

152 Iowa 531

131 N.W. 870

EMPIRE STATE SURETY CO.

v.CITY OF DES MOINES ET AL.

Supreme Court of Iowa.

June 6, 1911.

Appeal from District Court, Polk County; Wm. H. McHenry, Judge.

Action in equity brought by plaintiff as surety on a bond given by the Marsh Bridge Company to secure the performance by the latter of the obligations of a contract with the city of Des Moines for the construction of a concrete bridge across the Des Moines river within the city limits, known as the Locust Street Bridge, to procure its release from liability on such bond, or to be subrogated to the rights of claimants for labor and material who should be found to have valid claims payable out of the amount remaining due from the city on its contract with the Marsh Bridge Company. With this action was consolidated an action brought by Wayland C. Ballard, as taxpayer of the city of Des Moines, to restrain the collection of a certain special bridge tax and certificates payable therefrom, levied and issued on account of the construction of said bridge on the ground that the said tax and certificates had been levied and issued in violation of law. In these cases there was a decree against plaintiff in each, dismissing the action on the merits, and in each case the plaintiff appeals. Various actions brought by claimants who furnished labor and material for the construction of the bridge against the surety company on its bond for unpaid claims on account for such labor and material were also consolidated with that of the surety company against the city. The plaintiffs in these cases have been made defendants in the main case. In each of these cases the court in its final decree determined what amount, if anything, was due to the claimant, and rendered judgment for the amount found due to him; and the appeal of the surety company covers the judgments included in the decree in favor of these various claimants against it, as well as its provisions denying relief to the surety company and to Ballard. Some of the claimants gave notices of cross-appeal, and there was a notice of appeal by B. N. Moss, trustee of the Marsh Bridge Company, bankrupt. The Empire State Surety Company, having first served notice of appeal, will be treated as the appellant. Modified and affirmed.Charles A. Clark and James C. Hume, for appellant.

R. O. Brennan and J. M. Parsons, for appellee City of Des Moines.

Guernsey, Parker & Miller, for appellee Central State Bank.

Clark & Hutchinson, for appellee B. N. Moss, trustee in bankruptcy of the Marsh Bridge Company.

C. W. Johnston, Bowen & Alberson, C. F. Maxwell, Read & Read, C. S. Bradshaw, Dale & Harvison, Schenk & Berryhill, and Hager & Powell, for other appellees.

McCLAIN, J.

On August 21, 1907, the city of Des Moines entered into a written contract with the Marsh Bridge Company for the erection of a concrete bridge over the Des Moines river at Locust street for the contract price of $124,800, to be completed in September of the following year. Under this contract, $25,000 in warrants drawn on the special appropriation made from the bridge fund of the current year was to be paid on estimates as the work progressed, and $25,000 more was to be paid by warrants out of the bridge fund of the next year so far as the amount of that fund would permit, and the balance of the contract price was to be paid from the proceeds of a tax levied in accordance with the provisions of chapter 36 of the Laws of the Thirty-Second General Assembly, in certificates issued in anticipation of the collection of such tax in accordance with that statute. To secure the performance of this contract on the part of the Marsh Bridge Company, it executed its bond to the city of Des Moines “and to all persons who may be injured by any breach of any of the conditions” of the contract in the sum of $30,000; a condition of the bond being that the bridge company should pay “all claims for labor and material furnished for said work and save said city of Des Moines harmless from * * * any liens and claims for labor and material under the laws of the state of Iowa.” The Empire State Surety Company became the surety for the Marsh Bridge Company on this bond. Under this contract and bond, the Marsh Bridge Company proceeded with the construction of the bridge. Certain modifications of the contract as to the method of construction were made by agreement between the city and the bridge company after the date fixed for the final completion of the work. On January 5, 1909, when, as the trial court found, the piers for the bridge were fully constructed and the bridge had been filled with earth approximately to the level of the street and was passable for teams and for passengers and was in use by the public in that manner, the city council passed a resolution in which it was recited that it was deemed inadvisable to construct the paving and cement walks on the bridge until such time as the filling had become thoroughly settled and compact, and that it was equally inadvisable at that season of the year to finish the cement work incident to balustrades and steps, and that the public convenience required the opening of the bridge without unnecessary delay; and it was therefore provided that certificates for the balance of the total contract price not already paid in warrants be issued for the total amount of $74,800, of which amount $18,000 should be retained by the city until such time as the bridge company should have fully performed its contract and until the final acceptance of the bridge, and that the balance of said bridge certificates should upon the surrender of partial estimate obligations be delivered to the bridge company as part payment of the contract price. In its resolution it was provided that the bond given by the bridge company on which the Empire State Security Company was surety should remain in full force and effect, and that the resolution should not have any force or effect unless the bridge company should file with the city clerk its own written acceptance of the provisions thereof and also the consent and acceptance of the surety company. The acceptance of the bridge company thus provided for was filed on the 7th of the same month, and on the 18th there was filed with the city clerk the consent of the surety company to the resolution last above referred to; such assent bearing date the 16th and purporting to be signed at the principal office of the company in New York City. On the 13th of the same month an ordinance was passed for the issuance of certificates bearing date on the 15th; and also on the 13th an ordinance was passed levying and appropriating a special tax as provided by chapter 36, Acts of the Thirty-Second General Assembly, authorizing the city to levy taxes for the purpose of paying for the building of bridges and the issuance of certificates against such levies. Certificates were accordingly issued for $74,800, bearing date on the 15th as provided in the resolution, and on the 19th these certificates with the reservation of $18,000 as above indicated for the completion of the bridge were delivered by the proper officers of the city to certain banks under the direction of the bridge company and receipts for the certificates so delivered bearing the same date were given to the city auditor. The Central State Bank now holds all of these certificates. Soon after the issuance of the certificates, involuntary proceedings in bankruptcy were instituted against the Marsh Bridge Company, and it was declared a bankrupt, B. N. Moss being appointed its trustee, and by order of the bankrutpcy court assented to by the city and other parties, not including the surety company, the trustee proceeded to carry to completion the contract entered into by the bankrupt with the city, which had already been partially performed.

[1] The contention in the Ballard Case is briefly that the levy of the special tax and certificates issued in pursuance thereof were invalid. Their enforcement should be enjoined for the reason that the city was without jurisdiction or authority to act prior to the completion of the bridge in view of the provision of the statute authorizing such levy of tax and issuance of certificates (32 G. A., c. 36, already referred to), in which it is recited that, when the whole or any part of the cost of building any bridge such as is referred to in the act “shall be levied upon all property within said city, it shall have the power after the completion of the work by ordinance or resolution to levy at any one time the whole or any part of the cost of such improvement upon all of the taxable property within such city,” designating the percentage to be paid each year and the number of years given for the maturity of each installment, and that certificates under such levy shall be issued payable out of said tax as collected. The contention of the surety company is that for the same reasons the levy and certificates were wholly invalid, and that the city is now bound to make a valid levy and issue valid certificates which shall be applied to the payment of claims for labor and material for the payment of which the surety company is obligated under its bond. The surety company also contends that the issuance of the bridge certificates before the completion of the bridge enhanced its liability and resulted in its discharge from all liability on said bond. The trustee of the bridge company joins in the contention that the levy and certificates were invalid, and that a new levy should be made and new certificates issued. These contentions may be properly disposed of in one division of this opinion.

1. Much is said in argument on the questions whether the language of the statute as to the time when the levy may be made and the certificates issued is mandatory or directory only, and as to whether the city council was so far without jurisdiction as that its action in making the levy and ordering the issuance of certificates was...