Southern Surety Co. v. Dardanelle Road Imp. Dist. No. 1

• Decision Date: 02 November 1925
• Docket Number: (No. 207.)
• Citation: 169 Ark. 755,276 S.W. 1014
• Parties: SOUTHERN SURETY CO. v. DARDANELLE ROAD IMPROVEMENT DIST. NO. 1.
• Court: Arkansas Supreme Court

276 S.W. 1014

169 Ark. 755

SOUTHERN SURETY CO. v. DARDANELLE ROAD IMPROVEMENT DIST. NO. 1.

(No. 207.)

Supreme Court of Arkansas.

November 2, 1925.

Rehearing Denied with Modification November 30, 1925.

Appeal from Yell Chancery Court; W. E. Atkinson, Chancellor.

Suit by Dardanelle Road Improvement District No. 1 against the Southern Surety Company. Judgment for plaintiff, and defendant appeals. Affirmed.

Samp Jennings, of El Dorado, and Buzbee, Pugh & Harrison, of Little Rock, for appellant.

Coleman, Robinson & House, of Little Rock, and J. B. Ward and Hays, Priddy & Hays, all of Russellville, for appellee.

CAMPBELL, Special Judge.

This suit was brought in the Yell chancery court, for the Dardanelle district, by appellee against appellant, to recover money alleged to have been paid appellant by appellee as premium on certain construction bonds executed by appellant as surety for Rich Construction Company, in which bonds appellee was obligee.

Rich Construction Company was not made a party to the suit. Appellant interposed a general demurrer to the complaint, but did not raise any objection, by demurrer or answer, to the failure of appellee to make Rich Construction Company a party, nor did appellant ask to have said construction company made a party.

The facts disclosed by the record in this case are substantially as follows: The Dardanelle road district in Yell county was created by Act 244, passed by the regular session of the 1919 Legislature, and approved March 11, 1919. The roads to be improved by said district, as described in that act (section 1), were as follows:

"A road starting at the pontoon bridge in the town of Dardanelle and running on streets to be selected by the commissioners and southwesterly to Moseley, and Chickalah.

"A road beginning on the western border of section seven (7) township seven (7) north, range twenty-one (21) west, and running southeasterly through Dardanelle on streets to be selected by the commissioners and thence south on the west line of sections five (5) and eight (8), township six (6) north, range twenty (20) west to the southwest corner of section eight (8), and thence to the southeast corner of said section, thence south to the southeast corner of section thirty-two (32), of said township and range; thence southeasterly and easterly and northeasterly through Neely and Fowler to the southeast corner of section twenty-three (23), township six (6) north, range nineteen (19) west, thence north to the northeast corner of said section.

"A road leaving the last named road on the outskirts of Dardanelle and running southwesterly and southerly to the center of section thirty (30), township six (6) north, range twenty (20) west.

"A road starting from some point in the town of Dardanelle to be selected by the commissioners and running west to the top of Mt. Nebo; and said district shall consist of the following territory in Yell county, and shall include all towns within the territory."

On January 21, 1920, the board of commissioners of said district entered into a contract with Rich Construction Company for the construction of the roads within the district for the total sum of $792,278.50. On January 26, 1920, the assessment of benefits was filed in the office of the county clerk. The amount of benefits assessed, as shown by the assessment filed on said date, was $1,716,910.

On February 6, 1920, Act 63 of the 1920 Special Session of the General Assembly was approved. This Act 63 amended the original Act 244 by making substantial changes in the roads to be improved by the district; the roads to be improved being described in said amendatory act as follows:

"A road beginning on the western border of section 7, township 7 north, range 21 west at a point where the present Dardanelle and Paris road crosses the west line of said section 7, and running southeasterly along established highways through Dardanelle on streets to be selected by the commissioners to the northeast corner section 5, in township 6 north, range 20 west, thence in southerly, southeasterly, and easterly direction to the southeast corner of section 8, in township 6 north, range 20 west, thence in a southerly direction to a point at or near the southeast corner of section 32 of said township and range; thence southeasterly and easterly and northeasterly through Neely and Fowler to the southeast corner of section 23, township 6 north, range 19 west, thence north and to the northeast corner of said section, section 23 said township and range; a road beginning at a point in the above described route where the present Centerville and Neely road intersects the above described road and running in a general westerly direction to a point on the west line of section 5, township 5 north, range 20 west, where the present Centerville and Neely road crosses the said west line of said section 5."

Said amendatory act also purported to ratify and confirm all the official acts of the commissioners of said district up to its enactment, including the contract with Rich Construction Company; and section 2 of said amendatory act further provided as follows:

"The assessment of benefits against each tract and parcel of real estate, railroad right of way, and tramroads heretofore made by the commissioners of said district on the basis of the improvement contemplated in said act as hereby amended and filed with the county clerk of Yell county, is hereby ratified and confirmed and declared to be just, equal, and proportionate and the same shall stand as the assessment of benefits of said district until revised as provided in said act."

On March 25, April 1, and April 8, 1920, notice of the filing of the assessment of benefits in said district with the county clerk was published in a newspaper having general circulation in the district, setting April 23, 1920, as the day for hearing on said assessments before the commissioners of said district in the courthouse at Dardanelle.

On April 23, 1920, a large number of the landowners of said road district met at the courthouse at Dardanelle for the purpose of protesting against the assessment of benefits of said district. The meeting was adjourned to May 20, 1920, when two of the commissioners resigned and their successors were appointed, after which the board of commissioners heard and considered the protests which had been filed against the assessment of benefits and reduced all benefits which had been assessed against the property of said district 75 per cent. At said meeting the board of commissioners also adopted the following resolution:

"Whereas, the board of commissioners of Dardanelle road improvement district of Yell county, after an investigation, is of the opinion that the cost of constructing the improvement contemplated largely exceeds the benefits which would be derived by the lands, lots and improvements of the district from said construction; and,

"Whereas, the board is unwilling to impose the burden upon the landowner of the district:

"Now, therefore, be it resolved that it is the sense of the board that the proposed improvement ought to be abandoned and that the same is hereby abandoned; that the secretary is hereby directed to advertise, by inserting a notice in some paper having a general circulation in the district, once a week for two consecutive weeks, calling upon all persons having claims against the district to file same with the secretary, at his office in Dardanelle, Ark., within thirty days."

The contract between the commissioners of the road district and Rich Construction Company provided that said company should "cover the entire contract with satisfactory surety bonds on 10-mile sections," and the road district agreed in said contract to advance the premiums on the surety bonds, such advances to be repaid to the district out of the 15 per cent. retained on the monthly estimates under said construction contract.

On February 3, 1920, the commissioners of the road district issued certificates of indebtedness aggregating $17,800 and sold them to E. J. Hahn for that amount of cash.

On February 11, 1920, the district issued its check payable to Rich Construction Company for $17,800, being the amount the attorney for the district was told would be required to pay the premiums on the surety bonds which were to support the construction contract. This check was delivered by the commissioners of the district to the attorney for the district, who took it to Louis Rich of Rich Construction Company, who indorsed it, and the attorney for the road district then took the check to the office of appellant in Little Rock, gave it to appellant's agent in charge of said office, and informed said agent what the check was for. Appellant's said agent told said attorney for the district the bonds would be sent up, which was later done. Copies of the construction contract were attached to and made a part of the surety bonds executed by appellant. No work was ever done under the construction contract.

The Legislature of 1921, by Act 275, approved March 17, 1921, repealed Act 244, which created said road district, and also amendatory Act 63, and conferred jurisdiction on the chancery court of Yell county for the Dardanelle district to wind up the affairs of said district. Demand was made on appellant to pay back the $17,800 which had been paid to its agent from the funds of said district, which demand was refused, and hence this suit was brought.

It is contended by counsel for appellee that the construction contract, in support of which the surety bonds were executed, was not legally effective when entered into because the assessment of benefits had not then been filed, so that it had not been determined that the benefits would exceed the cost of the improvements, and that said construction contract never became legally effective, because, when final action was taken by the commissioners of said district upon the assessment of benefits, the benefits were found...