Sioux Falls Taxpayers Ass'n v. City of Sioux Falls

• Decision Date: 17 December 1942
• Docket Number: 8494.
• Citation: 7 N.W.2d 136,69 S.D. 93
• Parties: SIOUX FALLS TAXPAYERS ASS'N v. CITY OF SIOUX FALLS et al.
• Court: South Dakota Supreme Court

7 N.W.2d 136

69 S.D. 93

SIOUX FALLS TAXPAYERS ASS'N v. CITY OF SIOUX FALLS et al.

No. 8494.

Supreme Court of South Dakota

December 17, 1942

Rehearing Denied Jan. 19, 1943.

Hugh S. Gamble, of Sioux Falls, for appellant.

Roy E. Willy and Sioux K. Grigsby, both of Sioux Falls, for plaintiff and respondent and intervener-plaintiff and respondent.

WARREN, Judge.

An action was brought by the plaintiff to enjoin the city of Sioux Falls from paying W. T. Davis Construction Company a balance which it claimed to be due and owing it from the city of Sioux Falls upon a contract for doing certain work on the water tanks and standpipes, a part of the city water system. Sioux K. Grigsby made application to intervene and the court upon a showing permitted the intervention. It developed later that said Grigsby sought to recover for the city of Sioux Falls certain payments made to the said Davis, charging that the payments were illegal and that the said payments were outside of the original contract for cleaning and painting certain water tanks and standpipes which had been entered into between the city of Sioux Falls and Intervener-Defendant W T. Davis Construction Company on the 26th of July, 1939.

The contract provided that all foreign substances, including paint, should be removed by what is known as sandblasting operations. After the execution of the contract, Davis began work on the Menlo Avenue tank. Shortly after the work was started, the sandblasting operation uncovered certain deteriorations of the rivets and metal body of the tanks due to chemical reaction of the water upon the steel plates and rivets to such an extent that in a number of places of the bottom and the sides of the tank and riser were perforated with small holes.

A Mr. Nelson the Water Commissioner, consulted with Mr. Reese, the Water Superintendent, about the condition of the tank and an inspection of the tank and riser was made. Commissioner Nelson and Mr. Reese believed that immediate action and repairs should be made. They consulted with Davis as to the cost of such repairs. Mr. Davis believed it was impossible to give any estimate of the entire cost of repairing; that the defect could not be determined until after the sandblasting had been completed. He quoted several figures as to prices charged by men engaged in that type of work. After this conversation with Commissioner Nelson and Water Superintendent Reese, Davis proceeded to do the repair work under an arrangement entered into with said Nelson and Davis, in which the Intervener-Defendant was to be paid at a certain rate per hour per man and also to be paid per hour for air compressors and attachments, per hour for electric welders. The city was to furnish all necessary materials. The work was begun on the Menlo Avenue tank and after its completion, the other tanks and standpipes named in the written contract were repaired and completed. The condition of the second and third tanks and standpipes were found in even worse condition than had existed on the Menlo tank.

The plaintiff and intervener Grigsby claim that all of the repairs were made without the express authority of the city of Sioux Falls; that the defendant Nelson, without discussing the matters of repairs with any of the members of the Commission or calling on the City Engineer for his opinion, permitted Davis to do the repair work without any authority or approval from the City Commission. It would seem from time to time over a period of some four months, weekly bills were submitted to Nelson, approved by him and referred to the City Auditor for checking and then presented to and approved by the City Commission. It further appears that the original contract price was for only $3,415, while the total claims submitted amounted to $26,653.62. At the time of the issuance of the restraining order, there were claims pending before the City Commission in the sum of $3,782.92. No useful purpose would be served to detail the claims in this opinion. The trial court made a finding allowing the original contract price in the sum of $3,415. The trial court further found that the additional work for which the contractor claimed additional compensation amounted to more and in excess of the statutory limitation of $500; that no bids were asked for and that no contract had been let for such extra work to the lowest bidder; that no estimate of the cost thereof had been prepared by the City Engineer and that the City Engineer had not been consulted in connection with said work. The court further found that Nelson, as Water Commissioner, entered into the oral agreement with intervener Davis, whereby Nelson undertook, as City Commissioner, to obligate the defendant to pay said intervener for such extra work at a certain price for labor and machinery used. The court further found that certain additional work had been performed by intervener Davis and that a sum of $8,678.85 was the total amount to be recovered. The court also found that intervener Davis had been paid for 13 of the 14 separate estimates totaling $22,889.15 and that the total actual value of the services rendered by the intervener was $12,812.25 and that, therefore, said intervener had been overpaid by the city in the sum of $10,076.70. A judgment was entered against intervener Davis for that amount. He has appealed to this Court.

Appellant has grouped his argument and claims that the issues present four questions of law. In answering the first contention that the complaint of the plaintiff fails to state a cause of action as it is not a citizen and taxpayer residing within the municipality as required by SDC 45.0112, we hold that there was a proper party plaintiff in the Sioux Falls Taxpayers Association, a Corporation.

There seems to be sufficient authority to hold that the Sioux Falls Taxpayers Association, a Corporation, was a citizen and a taxpayer and under the statute could bring and maintain this action or proceeding for the purpose of restraining violation of any provision of the statute relating to municipal corporations. Haines v. Rapid City, 59 S.D. 58, 238 N.W. 145, and Dale v. School District, 66 S.D. 346, 283 N.W. 158.

The findings of fact seem to be based upon sufficient evidence to sustain the allegations in paragraphs 1, 2, 3, 4 and 5 of the complaint which, in substance, recites the organization, purpose and existence of the plaintiff corporation; that the action is brought as a taxpayer of the city of Sioux Falls and brings the action on its own behalf and on the behalf of all its members, consisting of taxpayers owning real and personal property, and pays taxes annually to the city, county and state.

The defendants, the City of Sioux Falls, John T. McKee, Bert T. Yeager, Commissioners, and Joseph S. Nelson as Mayor, served their answer admitting allegations 1, 2, 3, 4 and 5 of plaintiff's complaint. The allegations in the complaint seem sufficient and broad enough so that we must hold that the defendants conceded by the admission in their answer the corporate existence, the residence and that the plaintiff was a taxpayer.

The citizenship of the corporation is challenged upon the theory that the statute uses the words, "citizen and taxpayer", does not mean and does not include a corporation as a citizen and, therefore, this action is not brought by a proper party plaintiff and that even though Grigsby was permitted to intervene as a citizen and taxpayer, that could not give life to the dead proceeding before the court; that the intervener Grigsby could not take over the action and cure the defect in the proceedings and give life thereto as the proceedings, without having been brought by the proper party plaintiff, had no standing in court.

Much has been written upon the subject of citizenship of a corporation. We do not deem it necessary to deal with the citizenship of the plaintiff at length except to interpret, SDC 45.0112, "Citizen and taxpayer may bring action. Any citizen and taxpayer residing within a municipality may maintain an action or proceeding to prevent, by proper remedy, a violation of any provision of this title", which we believe confers the right of a citizen and taxpayer to bring an action such as the present one. It would seem obvious that the legislature must have intended that corporations should be included within the meaning of bringing an action or proceeding to prevent a violation of the various provisions within the title.

The authorities before us seem to indicate that courts have encountered considerable trouble in dealing with the question of residence and citizenship of a corporation.

In a late, well-considered case of Jackson Securities & Inv. Co. v. State, 241 Ala. 288, 2 So.2d 760, 764, the Supreme Court of Alabama has covered the field quite thoroughly and we quote a portion thereof which we believe is of great weight in deciding the citizenship of the plaintiff in this action and we quote:

"The general rule is recognized everywhere that a corporation is a citizen, resident or inhabitant of the state under whose laws it was created, and nonresident of every other state, though it does business in such other state by its permission under its laws so providing. Boyette v. Preston Motors Corporation, 206 Ala. 240, 89 So. 746, 18 A.L.R. 1376; 20 Corpus Juris Secundum, Corporations, p. 17, § 1794; 23 Amer. Jur. 46, § 35; 13 Amer.Jur. 280, § 147; Seaboard Rice Milling Co. v. Chicago, R. I. & P. R. Co., 270 U.S. 363, 46 S.Ct. 247, 70 L.Ed. 633."

In pursuing the interpretation of the statute to gather the true intention of the legislature, w...