Horton Tp. of Osceola Cnty. v. Drainage Dist. No. 26 of Osceola Cnty.

• Decision Date: 06 April 1921
• Docket Number: No. 33749.,33749.
• Citation: 182 N.W. 395,192 Iowa 61
• Parties: HORTON TP. OF OSCEOLA COUNTY ET AL. v. DRAINAGE DIST. NO. 26 OF OSCEOLA COUNTY ET AL.
• Court: Iowa Supreme Court

192 Iowa 61

182 N.W. 395

HORTON TP. OF OSCEOLA COUNTY ET AL.

v.DRAINAGE DIST. NO. 26 OF OSCEOLA COUNTY ET AL.

No. 33749.

Supreme Court of Iowa.

April 6, 1921.

Appeal from District Court, Osceola County; C. C. Bradley, Judge.

Action in equity to enjoin board of supervisors from carrying into effect a compromise contract, whereby the construction company was to complete a certain segment of an improvement for a certain consideration, and was to be relieved from constructing the other portion of the improvement, and of its liability under the original contract. Facts appear in the opinion. Affirmed.Clark, Dwinell & Meltzer, of Sibley, for appellants.

B. F. Butler, of Sibley, and Morse, Kennedy & Herrick, of Estherville, for appellees.

ARTHUR, J.

On May 1, 1917, the board of supervisors of Osceola county, by resolution, established drainage district No. 26, containing lands in Horton and Fairview townships and certain highways adjacent to the land. Thereafter a tax was levied against the agricultural lands and highways. The drainage district was established on petition by the township trustees asking that a drainage district be established for the purpose of draining highways surrounding certain described lands in Horton and Fairview townships, Osceola county. About November 2, 1917, in pursuance of notices for bids, the board of supervisors entered into a contract with the Crowley Construction Company for constructing the improvement in said district, to furnish all labor and materials excepting certain materials, for the sum of $18,463.95. The construction company, in lieu of a bond, deposited with the county auditor, for the use and benefit of the drainage district, certain checks in the aggregate of $4,620.

Thereafter, on the 6th of August, 1919, before the work was to be completed under the contract, and while the company was doing some, but very little, work on the improvement, and while no part of the work was finished, and when on a large part of the improvement no work had been done, the board, on behalf of the drainage district, served notice on the defendant the Crowley Construction Company of intention to cancel all the rights of the construction under the contract, and to hold the company liable for the forfeiture of all estimates due, or to become due, as liquidated damages, and to make the cash deposited by the construction company for a bond liable for the damages because of the failure to properly perform its contract. Thereafter, on about the 8th day of September, 1919, the board, acting on behalf of the drainage district, entered into a new contract with the defendant Crowley Construction Company, whereby the construction company was to finish the work of certain portions of the improvement upon which the company had already done some work, which work was specifically itemized in the contract, and amounted to $6,778, as itemized under the former contract, upon which the company had received in warrants upon estimates $4,458.40, leaving due the construction company, when it had finished its work under the new contract, the sum of $2,319.60. The construction company finished the work under the new contract, but before payment had been made to it this action was begun to restrain the board of supervisors and county officers from making payments under the new contract.

The so-called “new contract” was entered into by the board of supervisors, acting for the drainage district, and the construction company in compromise of the controversies pending between them. By the terms of the original contract the construction company was to have cash for their work as they progressed with the work under estimates to be made by the engineer. A bond issue was authorized by the board, and bonds issued and sold. The bonds were legally defective, and money was not realized on them until the issue was legalized by the Legislature in April, 1919. By reason of the county's not furnishing the money in payment of the work under the contract, as provided in the contract, the construction company claimed that the county had breached the contract. On the other hand, the county claimed that the work under the contract had not progressed, and had not been done as provided in the contract.

At the time the board entered into the new contract this situation confronted the board: The Crowley Construction Company would complete the work on the segment of the improvement provided for in the contract, at the prices of the original contract, amounting to $6,778, and credit thereon warrants which had been issued to it in the amount of $4,458.40, leaving due it $2,319.60, to be paid upon completion of the job; that it would cost from $8,000 to $10,000 to secure another contractor to complete the work started by the company, and not completed by it to the point then reached, the work provided for in the new contract. The Crowley Construction Company, a corporation, was insolvent, and recovery against it for anything in addition to the cash bond of $4,620, plus the deferred 20 per cent. amounting to $1,114.60, aggregating $5,734.60, was impossible. The board had served notice on the company of intention to cancel the original contract; the time for completion of the work under the original contract had not expired, and the company might recover for the work they had done on quantum meruit. The construction company had not received pay for the work done as provided in the original contract; scarcity of labor, caused by the World War, would be urged by the company as an excuse for not having progressed with the work as provided in the contract.

The record shows that the board made full investigation of facts affecting the issues involved before entering into the compromise or new contract. It is conceded that the board acted, in the execution of the compromise or new contract, in perfect good faith.

Such was the situation under which the board entered into the new contract whereby controversies between the board and the construction company were compromised, and whereby the construction company was to finish the work on the segment of the improvement on which they had commenced and done some work. There was a portion, perhaps half or more of the original improvement, upon which no work had been begun. Under the new contract the construction company was released from its original contract with respect to that portion of the work. A letting was advertised for the construction of the improvement in the portion of the district upon which the Crowley Construction Company had done no work. The lowest bid was over $30,000, which was rejected.

[1] The issues presented to the lower court were whether or not, the board of supervisors having let the original contract upon notice, and as a result of competitive bidding, it then had authority to release the Crowley Construction Company and its cash bond from all liability for failure to complete the original contract by entering into the new contract; and whether or not the board acted ultra vires, when, without notice to the appellant taxpayers, it entered into private negotiations and attempted to sublet, by the new agreement, a portion of the work provided for in the original contract. The court held that the board had authority, without notice to the township trustees and taxpayers within the district, to enter into the second or new contract; that is, that no notice as to the second contract was required; that section 1989a10 of Title 10, Supplement Code 1913, providing for completion of work, does not, in terms, require notice to the taxpayers. In this holding the court was correct. The notice prior to an original contract relates to the character and extent of the work proposed, and not to the terms of the contract. Bids are made and the original contract drawn after the notices without knowledge or notice to the landowners as to the particulars regarding such matters. Section 1989a10.

Appellees cite Humboldt County v. Ward Bros., 163 Iowa, 510, 145 N. W. 49, in support of...