Mitchell County v. Odden

• Decision Date: 12 March 1935
• Docket Number: 42696.
• Citation: 259 N.W. 774,219 Iowa 793
• Parties: MITCHELL COUNTY v. ODDEN et al.
• Court: Iowa Supreme Court

259 N.W. 774

219 Iowa 793

MITCHELL COUNTY v. ODDEN et al.

No. 42696.

Supreme Court of Iowa.

March 12, 1935

Appeal from District Court, Mitchell County; M. F. Edwards, Judge.

Action to recover from the defendants, county treasurer and bond company, surety on his official bond, damages on account of alleged wrongful, negligent, and illegal payment of county funds. Tried as an equity cause. Judgment and decree for plaintiff. Defendants appeal.

Affirmed.

Darwin J. Paulson and Conway & Bartlett, all of Osage, and Carr Cox, Evans & Riley, of Des Moines, for appellants.

William H. Salisbury and H. R. Duncan, both of Osage, for appellee.

HAMILTON, Justice.

The plaintiff, in its petition, alleges: That some time in the year 1919, drainage district No. 3 was created and established in Mitchell county, Iowa, by the board of supervisors of said county, and bonds were issued against the district; that on the 1st day of November, 1930, O. L. Odden as treasurer of said county, paid to the holders of said bonds the sum of $4,120, being principal and interest; that at the time of said payment there was only $1,752.66 in the funds of said drainage district; that to make up the difference the treasurer withdrew $2,367.34 from the funds of Mitchell county, other than those of the drainage district, thus creating an overdraft in the drainage district account of $2,367.34; that at the time of said payment the AEtna Casualty & Surety Company was surety upon the official bond of O. L. Odden; that in November, 1931, the supervisors of said county attempted to make a new levy and assessment against said drainage district No. 3, which was denied by the district court.

Said petition alleges that, in the making of said payment as aforesaid, the treasurer was highly negligent; that in so doing he violated the Iowa statutes relative to the handling and disposal of said funds; that he had no authority to use the funds of the county in the payment of said bonds; and that by virtue of said illegal, negligent, and unauthorized act of said O. L. Odden, as treasurer, Mitchell county has been damaged to the amount of $2,367.34, and plaintiff asks for judgment in this amount, with interest, against O. L. Odden and his surety, the AEtna Casualty & Surety Company.

Appellants summarized their defense as follows:

In division 1 of the answer it is denied that the county treasurer committed any wrongful act or violated any duty which could be construed to be a breach of his bond.

In division 2 it is pleaded that the plaintiff is estopped to complain.

In division 3 it is alleged that the plaintiff has, in reality, suffered no loss, and moreover, that the loss, if any, which is asserted by plaintiff, was the result of the plaintiff's own negligence, and not of any act of the treasurer.

In division 4 it is pleaded that plaintiff has waived all that is now complained of.

In division 5 the defendants pleaded the right of subrogation, by which the defendants are entitled to set off or counterclaim the liability of the plaintiff in the event any sum is found to be due by the treasurer to the county.

In division 6 they plead the unconscionable character of plaintiff's claim; the injustice which would result in the event of recovery; the multiplicity and circuity of actions which would necessarily result before justice could be accomplished; and the inadequacy of the defendants' legal remedy; and pray for dismissal of the petition, judgment for the defendants, for an injunction against the prosecution of any further claim against the defendants, and for other equitable relief.

Upon motion of the defendants, the cause was transferred to equity and tried to the court without a jury, which resulted in a decision and judgment for plaintiff.

There seems to be little or no dispute as to the facts. The case was tried on an agreed stipulation of facts. The particular propositions urged by appellants for reversal are that plaintiff has pointed out no specific violation of statute by the treasurer; that the treasurer's acts were done at the specific direction of the plaintiff's board of supervisors; that the treasurer rendered a complete report and accounting to said supervisors, which was accepted and approved by them, and the wrongful acts, if any, were committed by the plaintiff through its board of supervisors; that the plaintiff has in reality suffered no loss, because the payments made by the treasurer satisfied and discharged an obligation and liability of the county, for, had the payments not been made by the treasurer, the county would have been liable for negligence in failing to make the levy and collect the drainage assessments and for breach of recitals in the bonds, the loss which is asserted being the result of plaintiff's own negligence and not due to any act of the treasurer. Appellants further contend:

That if any amount is found due the county from the treasurer, they claim an equitable right of subrogation to the rights of the bondholders, for the county, being bound to levy the assessment, and failing to do so, is liable for negligence in not making same, and, had the treasurer not made the payment, the bondholders could have sued the county and recovered in damages; hence, since the county treasurer satisfied this liability, the right of the bondholders is in equity kept alive for the purpose of subrogation, and therefore any claim asserted by the county is offset by the county's liability for negligence in not providing the funds to meet the bonds.

That the plaintiff is bound, in the absence of fraud, by the acts of the board of supervisors, acting pursuant to its statutory powers and within the scope of its authority, and therefore the plaintiff is estopped in equity by the negligent acts of said board in failing to make the necessary levy and collect proper and sufficient drainage assessments.

That the county thus violated the pledge contained in the bonds to the effect that proper and sufficient assessment had been levied and that the amount of the bonds did not exceed the assessment, and by its own acts thus created the deficiency and alleged loss, about which it is now complaining; that no act of the county treasurer was responsible for this negligence or the creation of the alleged loss, and, therefore, the plaintiff cannot be heard to complain of what the treasurer did, which only served to satisfy and discharge the county's obligation and liability.

That the plaintiff accepted the semiannual reports of the treasurer, which disclosed the custom, practice, or course of dealing, that is, of taking from the general county funds, from time to time, money with which to meet the payment of bonds, and of later replacing the same from the drainage fund, which practice was carried on at the direction of, and with the knowledge of, plaintiff's board of supervisors; that these reports consistently showed the overdrafts, and were accepted and approved by the plaintiff; that the report and accounting of the treasurer for the year ending December 31, 1930, during which the payments now complained of were made, showed the overdraft, and this report was accepted and approved by the plaintiff's board of supervisors, and it is now too late for plaintiff to undo that settlement and attempt to escape its responsibility by unloading it upon an innocent official.

And, finally, that it would be unreasonable, unjust, and unconscionable to allow the plaintiff to recover from the defendants for an alleged loss for which the defendants were not in any way responsible, and for which the plaintiff itself is truly responsible; that no claim is made that the treasurer was guilty of any fraud or any act of bad faith, or that he failed to account for a single penny of the money in his hands, or that he profited one cent by the acts of which the plaintiff complains; that the payment satisfied a claim which in equity the county, because of the negligence of its board of supervisors, should pay; that to saddle this upon the shoulders of an innocent official would be intolerable, and to allow the plaintiff to recover would amount to holding that the bondholders had no remedy for a breach of the bonds, and that notwithstanding the county's solemn pledge, contained therein, those bonds, to the extent they exceeded the amount of the drainage fund, were mere, worthless scraps of paper.

The facts are undisputed, and we will recite only sufficient thereof to give a proper understanding of the discussion of the principles involved in the determination of the case.

In the year 1919 the board of supervisors of Mitchell county, Iowa created and established drainage district No. 3. The original assessment against the lands in the district was made in accordance with, and based upon, estimates made by the commissioners for the drainage district. The assessment was made by virtue of a resolution of the board of supervisors of Mitchell county, in the exact amount of said estimate of the commissioners, which proved to be insufficient to meet all the costs of said improvement. Repairs were later made in the sum of $864.34. Also, there were reductions in assessments against individual property owners, totaling $1,225, an allowance to a contractor for extra work, and a few other small items, all of which added to the deficit. The board of supervisors of Mitchell county, Iowa, issued and sold bonds against said drainage district No. 3, and the bonds in question were duly and legally issued by virtue of a resolution of said board. The county auditor prepared and furnished the treasurer a drainage tax list, wherein were entered the names of the property owners in said district, descriptions of such property, and the amounts of the tax installments and interest to be...