Flanagan v. Drainage Dist. No. 17
Decision Date | 30 January 1928 |
Docket Number | (No. 149.) |
Citation | 2 S.W.2d 70 |
Parties | FLANAGAN et al. v. DRAINAGE DIST. NO. 17 et al. |
Court | Arkansas Supreme Court |
Bill by W. H. Baker and another against J. T. Flanagan and others, with a cross-bill by defendants Flanagan and others against Drainage District No. 17. From the decree, defendants Flanagan and others appeal. Affirmed.
J. T. Coston, of Osceola, for appellants.
Trieber & Lasley and Coleman & Riddick, all of Little Rock, for appellees.
Drainage district No. 17, in Mississippi county, Ark., was a very large district created by Act No. 103 of the Acts of 1917, p. 485. The plans of the district showed that it would require many drains or ditches to complete the project. Among these was a ditch or drain designated as improvement No. 48, which hereafter for convenience will be so called, which would drain approximately 70,000 acres of the district.
On the 15th of July, 1920, a contract was entered into by one J. T. Flanagan and district No. 17 for the construction of improvement No. 48, as called for by the plans. On February 8, 1921, Flanagan assigned the contract to the Harding Construction Company, a Minnesota corporation, and on the same day the Harding Construction Company in turn assigned a two-thirds interest in the contract to Andrew and Tolleff Jacobson, and they in turn conveyed a one-sixth interest in the contract to J. O. and A. G. Shuland. On the 10th of October, 1921, after Flanagan had done considerable clearing on the right of way under the contract, and was ready to commence excavation, he was notified by the directors of the district that his contract would not be carried out by the district.
In December, 1920, J. R. McGibbon entered into a contract to purchase $450,000 worth of the bonds of the district. John R. McGibbon was manager of the Northwestern Mortgage & Security Company of Fargo, N. D., which the Jacobsons controlled. The contract for the purchase of the bonds was in his name, but he was buying the bonds for the company he was managing. On November 7, 1921, Baker and Sheppard, two landowners in the drainage district, filed a bill in the chancery court of Mississippi county against Flanagan and his associates and McGibbon and his associates, and later filed an amended complaint in which it was alleged: (1) That Flanagan was in reality the purchaser of the bonds, and that the two contracts were let at one and the same time, one being the consideration for the other; (2) that the construction contract was let privately, for an exorbitant price, without competition; (3) that an error of 2 feet was made in establishing the levels of improvement No. 48; (4) that, on account of said error, improvement district No. 48 would not give the relief intended to be given to the landowners; and (5) that, if the plans were changed so as to construct improvement No. 48 deep enough to give the relief intended, it would be so deep that it could not be maintained, owing to quicksand and other defects in the soil.
The complaint and amended complaint both concluded with a prayer for the cancellation of both contracts, and that Flanagan be enjoined from attempting to enforce his contract, and that some sum be fixed by this court to be deposited with the court by drainage district No. 17, to "protect the same J. T. Flanagan in any judgment for damages that he may secure in this cause for breach of said contract, heretofore set out, in the event it should be finally determined that said contract was a valid obligation on the part of said drainage district No. 17." Flanagan and his associates and McGibbon and his associates filed an answer denying all charges of fraud and irregularity in letting the contracts, and embodied in the answer a cross-bill against the district, concluding with a prayer for an injunction enjoining the district from annulling its contract.
Later, an amendment was filed by the defendants to their cross-complaint, in which they reaffirmed the allegations of the original cross-complaint, and alleged that the district had abrogated its contract with Flanagan, and had repudiated its contract with McGibbon for the sale of $450,000 worth of the bonds of the district, and had sold and delivered these bonds to other parties; that, if Flanagan and his associates had been allowed to perform the contract, they would have realized a profit of $300,000 net, and, if McGibbon and his associates had been allowed to purchase the bonds in accordance with the provision of his contract, they would have realized a net profit of $75,000. McGibbon and his associates, therefore, prayed judgment in that sum against the district for a violation of the contract for the sale of bonds to McGibbon; and Flanagan and his associates prayed judgment in the sum of $300,000 for the violation of the construction contract with the district for the construction of improvement No. 48.
The district answered the complaint of the plaintiff, admitted its allegations, and denied the allegations of the cross-complaint, and prayed for cancellation of the construction and bond contracts.
Issues were joined by a denial by the defendants of the allegations of the amendments to the amended or supplemental complaint of the plaintiffs, except the district admitted, as stated, the allegations of the complaint, and denied the allegations of the cross-complaint; and there was also an answer of the plaintiffs to the allegations of the cross-complaint and amended cross-complaint in which the allegations of these pleadings were denied.
On November 7, 1921, a temporary injunction was issued restraining the district, its commissioners, and Flanagan from carrying out the provisions of the contract for the construction of improvement No. 48, and restraining the district from paying to Flanagan any sum of money in settlement or adjustment as damages for the breach of such contract, and restraining Flanagan, his agents, attorneys, and employees, from instituting any separate action seeking to recover damages from the district, or to interfere or prevent the district from selling or delivering the bonds.
A large volume of testimony was taken fully developing the facts on the issues joined.
On September 24, 1923, the chancery court of Mississippi county, through its chancellor, J. M. Futrell, rendered the following decree:
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