Morris v. City of Sheridan

• Decision Date: 25 September 1917
• Citation: 167 P. 593,86 Or. 224
• Parties: MORRIS v. CITY OF SHERIDAN. [*]
• Court: Oregon Supreme Court

167 P. 593

86 Or. 224

MORRIS v. CITY OF SHERIDAN. ^[*]

Supreme Court of Oregon

September 25, 1917

Department 1.

Appeal from Circuit Court, Yamhill County; H. H. Belt, Judge.

Action by J. W. Morris against the City of Sheridan, a municipal corporation. Judgment for plaintiff, and defendant appeals. Affirmed.

J. W Morris is attempting to recover money from the city of Sheridan because of the failure of the city to pay the full amount of twelve warrants which the city issued on account of engineering services performed by him. On February 6, 1913 the city and J. W. Morris entered into a written contract by the terms of which Morris agreed "to perform all engineering services necessary and proper in connection * * * with the paving of all streets ordered to be improved and all work upon these * * * streets incident thereto as ordered by the city of Sheridan during the year 1913. * * *" The defendant agreed to pay Morris for his services 5 per cent of the total cost of street improvements ordered by the city. During the year 1913, eight different streets were paved by order of the city, and Morris rendered services as an engineer in the prosecution of the work. The cost of the paving, including the amount agreed to be paid to Morris, was charged against the abutting property by the levy of special assessments. On September 13, 1913, Morris executed a writing, assigning "to the United States National Bank of Portland, Or., warrants in full for the money due or to be due me, amounting to $3,700, more or less, to be drawn against my contract on various street improvements during the year 1913." This writing was filed with the city, and pursuant to the directions given in the assignment the defendant issued twelve warrants to the United States National Bank of Portland for all the services performed by Morris. Morris had borrowed money from the bank, and the assignment was made for the purpose of securing the loans.

A separate special fund was created for each street improved and for that reason a warrant issued for services rendered by Morris in a given street was made payable from the special fund created for such street. The history of a single warrant will illustrate each of the remaining eleven warrants. South Bridge street was one of the several streets ordered paved when the improvement was completed the city issued a warrant for $125.64, payable to the order of the United States National Bank of Portland, "from S. Bridge St. Imp. Fund * * * for acct. J. W. Morris engineer services on S. Bridge St." The twelve warrants which were issued for services rendered by Morris aggregated $3,626.52. The Warren Construction Company was the contractor, and as such laid the pavement on each of the eight streets. On September 1, 1913, the Warren Construction Company assigned such sums as might become due to it for work to the United States National Bank of Portland, the city issued its warrants payable to the order of the bank; and these warrants, like those issued for services performed by Morris, were made payable from a specified special fund.

Some of the property owners paid the assessments against their property; some owners made application to pay their assessments in installments, as permitted by the Bancroft Bonding Act (L. O. L. §§ 3245-3253); and the remaining owners allowed their assessments to become delinquent. The city attempted to collect the amount of delinquent assessments by selling the delinquent property; but in most, if not all, cases where property was sold the land brought less than the amount of the special assessment, leaving a deficit in the special fund to which the assessment belonged. All the street improvement work was done by the Warren Construction Company as contractor and by Morris as the engineer. While the record is not direct and certain, we nevertheless understand from the argument of counsel that the city never became indebted to any one for street paving, except for work done by the Warren Construction Company and for services rendered by Morris; and hence the warrants issued to the bank represented all the warrant indebtedness incurred for street improvements. The warrants which had been issued to the bank for work done by the Warren Construction Company were presented and paid in full. The warrants which had been issued to the bank for services rendered by Morris were presented to the city; but, because of a want of funds, none of the warrants were paid in full, although part payments, aggregating $829.62, were made on the principal of four of the warrants, while no payments at all were made on the remaining eight warrants, leaving an unpaid balance on the principal amounting to $2,796.90.

On April 15, 1916, Morris began an action against the city for the recovery of the unpaid portion of the amount earned by him. The complaint in that action recited the making of the contract with the city, the street improvements, the total amount earned by Morris, the sums paid by the city, alleged that the balance was due and unpaid, and demanded a judgment for the balance. The first action was purely an action ex contractu, and proceeded upon the theory that, since the city had agreed to pay for services rendered by Morris, he was entitled to a judgment on the contract for the unpaid balance earned by him. The complaint did not contain any averments concerning the issuance of warrants; nor did it allege that the city had agreed to create a special fund, but it was framed on the theory that the liability of the city constituted a general obligation which was payable out of the general fund. While the record presented to us in the instant case is not as clear as it should be, we understand from the abstract and briefs here that the city claimed in the first case that the action was barred by the indebtedness limitation in the charter, and that Morris acknowledged the correctness of the contention made by the city by voluntarily moving for a judgment of nonsuit.

After reciting the contract made with the city, the street improvements ordered by the defendant, the services rendered by Morris, and the issuance of warrants for the services rendered by him, the complaint alleges that the parties agreed:

"That the plaintiff should look for payment only to the special fund to be assessed against the property liable for such improvements and collected and paid into the city treasury, or in any other lawful manner created by the council of the defendant city of Sheridan in accordance with the provisions of its charter, for that purpose."

The plaintiff avers that he had borrowed money from the bank and that the warrants for services rendered by him were issued to the bank merely as security, and that the warrants had been assigned to him prior to the commencement of this action. The complaint charges the city with negligence by alleging that it failed to collect or create a sufficient fund to pay all the warrants, "although a reasonable time had elapsed to enable the defendant so to do"; that the city sold lots and parcels of land "for trifling sums compared with the amounts assessed against the same," and for sums disproportionate to the value, "and that, by reason of said negligent and careless conduct on the part of the defendant, the defendant has wholly exhausted all means provided by the charter" for the collection of special assessments for the creation of special funds; that the city has also been guilty of negligence by failing to supply the balance of the special fund from the general fund; and that the city exhausted the special funds by wrongfully paying the warrants which had been issued for the work done by the Warren Construction Company, notwithstanding the fact that they were "subsequent in date and order" to the warrants issued for the services rendered by Morris.

The answer denies that the city was guilty of negligence, and pleads the indebtedness limitation fixed by the charter as one of the excuses for the failure to pay the warrants. The city seeks to avoid liability for paying the Warren Construction Company warrants by alleging that all warrants had been issued to the bank and were owned by it; that the defendant "paid said warrants issued to said United States National Bank in such order as the said bank desired and wholly exhausted all special funds"; and that therefore no damage could have been done by paying one warrant in preference to another. The answer pleads a counterclaim arising out of the claim that the city was damaged in the sum of $4,000 on account of a failure of Morris to perform his full duty as an engineer; and, finally, the defendant attempts to estop the plaintiff from prosecuting this action by alleging that the commencement of the first action operated as an election of remedies, and precluded Morris from maintaining this second action.

The reply alleges that the Warren Construction Company had borrowed money from the United States National Bank, and in order to secure the loans had caused the warrants for moneys earned by the company to be issued to the bank; that the city knew that the warrants were issued as security for loans; that by reason of information appearing on the face of the warrants the city knew what warrants were held as security for loans to Morris, as well as what warrants were held to secure loans to the Warren Construction Company; and that an officer of the company presented the Warren Construction Company warrants in behalf of the company, and the city, knowing that such person was such officer and was presenting the warrants for the company, paid the warrants and exhausted the special funds, although the city knew that the Morris warrants were prior in date and were still outstanding and unpaid.

The cause was tried without a jury, and...