First National Bank v. City of Emmetsburg

• Decision Date: 14 November 1912
• Citation: 138 N.W. 451,157 Iowa 555
• Parties: THE FIRST NATIONAL BANK OF RED OAK, IOWA, Appellant, v. THE CITY OF EMMETSBURG, IOWA
• Court: Iowa Supreme Court

138 N.W. 451

157 Iowa 555

THE FIRST NATIONAL BANK OF RED OAK, IOWA, Appellant, v. THE CITY OF EMMETSBURG, IOWA

Supreme Court of Iowa, Des Moines

November 14, 1912

Appeal from Palo Alto District Court.--HON. D. F. COYLE, Judge.

Reversed and Remanded.

Carr Carr & Evans and O. M. Brockett, and John Menzies, for appellant.

E. A and W. H. Morling, for appellee.

OPINION

THE facts are stated in the opinion.

SHERWIN, J.

This is a suit at law to recover the amount of the unpaid balance due on municipal contracts for the construction of sewers, represented by special assessment certificates for redemption, and for the payment of which defendant negligently failed to make provision. The petition, as summarized by counsel for appellant, alleges as follows:

The issuance by defendant of the certificates to the contractors as pretended payment of and compliance with the contracts therefor.

That the special assessment to create a fund for the payment of such of them as were involved in the suit had been vacated, and further levy therefor enjoined in Bennett et al. v. Emmetsburg.

That plaintiff is the present owner and holder of all said unpaid certificates, and of all rights of the contractors to any remedy for collection of the amount thereof, with interest.

That B. O. Hanger had become liable to the plaintiff as surety for the contractors prior to September 30, 1904, for a large sum of money advanced to enable them to construct the sewers contracted for, and the certificates to be issued therefor, and all rights of the contractors were also pledged as security therefor, both to him and plaintiff, and plaintiff's assignor, Century Savings Bank.

That while so liable, and while a controversy was pending between said contractors and the defendant as to whether said sewer construction had been performed and completed in accordance with the contracts therefor, and under threats then made by the defendant to proceed against said contractors to enforce its remedies for such alleged breach, and on said 30th day of September, said Hanger, acting for himself and said contractors, entered into a compromise contract in writing set out in the petition, in which, in consideration of certain repairs and changes he had made under such demand, and of the further deposit by him of $ 688 to be paid to defendant upon its delivery of the special assessment certificates and otherwise performing its covenants in the sewer contracts, all controversy was fully settled.

That thereafter a dispute arose as to the right of the defendant to take down said deposit, because of its failure to levy the special assessment and issue the certificates within the time stipulated in said compromise agreement.

That at the September term, 1908, of said court, the Valley National Bank, holding the rights of said Hanger to said deposit by assignment set out, brought suit therefor against this defendant, and against the depositary, the Farmers' Savings Bank of Emmetsburg.

That the defendant answered therein that it had fully performed said compromise agreement, having therein made said sewer construction comply in all respects with the requirements of the plans and specifications, and had on account thereof become liable on all its covenants in the sewer contracts, and had, as required thereby, made the special assessment and issued the certificates in all respects as in said contracts agreed. All this, it declared in said answer, had been done in reliance upon said compromise agreement, and pleaded certain alleged facts as an excuse for failure on its part to perform said compromise agreement within the time limited therein, and denied the right of plaintiff to complain of such delay because of alleged laches of Hanger.

That while said suit was pending, and on or about May 13, 1909, the Valley National Bank, plaintiff herein, sold and assigned its chose in action to this plaintiff by a written instrument set out in the petition, which was concurred in by B. O. Hanger by indorsement thereon.

That on or about August 17, 1909, said suit was compromised by the terms whereof the defendant received $ 600 of said fund; this plaintiff receiving the remainder after paying the costs of the suit.

That prior to September 20, 1904, Hanger had appeared before the city council of the defendant, and notified them fully of the facts of the relation which created his interest in having the sewer construction made satisfactory and paid for by the defendant as agreed.

That on or about the 19th day of September, 1904, said city council passed a resolution detailing what it claimed were the particular respects in which the work differed from the requirements of the contracts, and directed notice thereof to be served on Hanger and on the contractors, including demand that the same be remedied within ten days thereafter, failing which the defendant would do so and collect the cost thereof from the contractors.

That on the next day such notice was issued and served accordingly. Whereupon Hanger, for himself and said contractors, within said ten days entered upon the work of making the changes thus demanded, and, after having incurred something over $ 112 expense therein, substituted for the completion thereof said compromise agreement of September 30th, in the doing of all which he and the contractors relied upon the good faith of the defendant, and believed it thereby became bound to pay for said sewers in accordance with the contracts therefor.

That the sewer certificates all recited among other things that 'it is hereby certified and recited that all the acts, conditions, and things required to be done precedent to and in the issuing of this certificate have been done, happened, and performed in regular and due form as required by law. And the city of Emmetsburg hereby transfers to the said Shepherd and Hanrahan or assigns all right and interest of the said city of Emmetsburg in the assessment herein described, and the holder hereof is authorized to receive and collect said assessment by or through any of the methods provided by law for its collection as the same matures.'

That the defendant has accepted said sewers, possesses, uses, and controls the same, and enjoys all the benefits of its recognition of the validity of the contracts under which they were constructed.

That certain persons named against whose property the special assessment was levied, this defendant, the county treasurer, the contractors, engineer, Hanger, the Century Savings Bank, and assignors of plaintiff, were parties to the Bennett case.

That plaintiff and its several assignors in extending the credit and entering into the several transactions recited, relied upon the representations, covenants, and conduct of defendant recited, and would not have done so but for such reliance, and were, at the times thereof, ignorant of the fact, if it was a fact, that they were not in accord with the truth.

That this defendant had answered in said Bennett case denying generally and specifically the allegations of the petition therein, and declared the facts as to the controversy with the contractors, and the compromise thereof by the transaction of September 30th, and the performance of it with knowledge of the plaintiffs, estopped them from complaining; further, that they had waived the right, either by failure to object to the assessment upon due notice of proceedings for, or by failure to appeal from, adverse findings of the council on such objections as were then made, and because plaintiffs had petitioned for the sewers and they have been constructed and accepted and the citizens of defendant were then using the same and enjoying the benefits thereof; that they were concluded by the action of the council as a special tribunal, and had waived their right of complaint by failure to pursue such remedy; that such right, if it had existed, had been lost by laches and delay, and because, if the assessment were vacated, 'the defendant would be in danger of an action in behalf of said contractor to recover personal judgment against this defendant for the construction of the said sewer, and thereby jeopardize and imperil the interests of the general taxpayers of the defendant and those who, in good faith, paid their said assessments.'

That in the trial of said Bennett case in the district court, and afterward in the appeal thereof to the Supreme Court, the defendant had united with this plaintiff's assignors in controverting the contentions of the plaintiffs therein as to the invalidity of the sewer contracts, the special assessment, and the certificates, contending therein, among other things, that the success of the plaintiffs therein would subject the defendant to the liability claimed by the plaintiff in the present suit; that its liability had become fixed by the compromise of September 30th if not otherwise; and generally claiming, as does now this plaintiff, that defendant is bound by its covenants in said contracts in view of the premises, and plaintiffs therein should not have the relief sought. And plaintiff herein averred that its assignors relied upon such conduct by the defendant and was led thereby to forego other remedy if any they had.

That defendant had refused, since the entry of final decree in the Bennett case, and still refuses, to take any action to make provision for payment of the balance due on the contracts.

That plaintiff's assignor, the Century Savings Bank, had extended its credit in part upon an order drawn in its favor by Shepherd & Hanrahan, October 31, 1903, on the city of Emmetsburg, and accepted by the latter about November 18 1903, by which the defendant agreed to pay the money and to issue the certificates provided for in the sewer contracts to said...