Thompson v. L. J. Voldahl, Inc.

• Citation: 188 N.W.2d 377
• Decision Date: 17 June 1971
• Docket Number: No. 54275,54275
• Parties: Theodore E. THOMPSON, et al., Appellants, v. L. J. VOLDAHL, INC., et al., Appellees.
• Court: United States State Supreme Court of Iowa

Page 377

188 N.W.2d 377

Theodore E. THOMPSON, et al., Appellants, v. L. J. VOLDAHL, INC., et al., Appellees.

No. 54275.

Supreme Court of Iowa.

June 17, 1971.

Fitzgibbons Brothers, Estherville, for appellants.

Nels W. Branstad, Forest City, for appellee Thompson-Courier.

Laird, Burington, Bovard & Heiny, Mason City, for appellee L. J. Voldahl, Inc.

Hoxie & Teske, Waterloo, for appellee Zeidlers, Inc.

BEKCER, Justice.

Plaintiff taxpayers seek judgment in favor of Winnebago County for special assessment funds paid by the county to defendants as partial payment on void contracts. Plaintiffs seek eventual repayment of such funds to them as the special assessment taxpayers. Trial court dismissed plaintiffs' petition. We reverse and remand.

This case is an aftermath of our holding in Thompson v. Joint Drainage District, No. 3--11, 259 Iowa 462, 143 N.W.2d 326 (1966). We there held certain special assessments illegal and void. The contracts on which the assessments were based were not specifically mentioned in the opinion. However, the trial court had held the Board of Supervisors in making the contracts (with defendants here) acted without jurisdiction and enjoined collection of the special assessments levied pursuant to the void proceedings. We affirmed.

For full understanding of the history of this litigation we must take note of a second lawsuit prosecuted to conclusion by plaintiffs herein and not appealed. After the holding noted above plaintiffs sought mandamus against the Joint Drainage District, the Board of Supervisors, the County Auditor and County Treasurer, seeking refund of the special assessments paid by plaintiffs under the void assessments. This was Winnebago County action No. 11016, separate and distinct from the present action. The court ordered the county officers to make return showing the collections made under the void special assessments, disbursements and balance on hand. It held the undisbursed funds were to be distributed to the taxpayers in a pro rata formula basis but the disbursed funds could not be recovered from the county:

'If plaintiffs are entitled to relief, refund of the assessments paid must be from funds paid by plaintiffs, not from general county funds. A refund of special taxes, such as drainage district taxes, erroneously or illegally exacted, cannot be paid from general county funds, but the only source of refund thereof is District Drainage funds. Whisenand vs. Nutt, 235 Iowa 301, 15 N.W.2d 533.

'It further appears that if there is to be a refund of a drainage assessment, it must come from the funds paid in as a result of the assessment, not from other funds belonging to the Drainage District or portion thereof. See Kerr vs. Chilton, 249 Iowa 1159, 91 N.W.2d 579.'

The county officials did not appeal. They complied with the ruling, accounted for the funds and repaid the undisbursed funds to the special assessment taxpayers, pro rata. They now have no funds in their hands from the special assessment collections. The accounting shows the following disbursements had been made to defendants:

                                                                  Amount
                            Name                   Warrant       Received
                -----------------------------  ---------------  ----------
                Thompson Courier               (No. 1)          $    54.21
                L. J. Voldahl, Inc.            (No. 2)            3,012.80
                Zeidler Concrete Products Co.  (Nos. 3 to 9
                                                    Inc.)         6,739.90
                                                                ----------
                                                         Total   $9,806.91
                

The trial court refused to order the county officials to attempt to recover the disbursements. The defendants admitted demand for such action had been made and refused. The court added its refusal was, '* * * without prejudice to the rights of plaintiffs to bring a separate action against the payees of Warrants 1 to 12, if any they have.' This action ensued.

Plaintiffs here seek judgment against defendants in the amounts set out above, to be paid to County Treasurer of Winnebago County and by him to be refunded to plaintiffs.

Details of how this situation occurred and why the original contracts between the County Board of Supervisors and defendant contractors were void are to be found in Thompson v. Joint Drainage District No. 3--11, supra. The parties here agree defendant contractors acted in good faith in entering into the contracts subsequently declared void. The charges made by defendants were reasonable and the warrants issued in payment of work partially completed were for the contested project.

The records of Cause No. 11016 show without dispute that the funds used to pay defendants were taken from the special assessments paid by plaintiffs; some specially assessed taxpayers paid nothing on their special assessments while many others (including these plaintiffs) paid in full; plaintiffs in Cause No. 11016, with one exception, received back from the undisbursed funds a repayment of 5.9 percent of the funds they had paid in. The one exception was Ingvald B. Olsen who received 100 percent repayment ($506.90) because he had paid the assessment 'under protest'.

The various types of illegally assessed taxpayers fall into several classifications: (1) There are those who simply failed to pay the void assessments. They paid nothing and are out nothing but have the benefit of defendants' work. (2) The protest taxpayer was fully reimbursed but has the benefit of defendants' work. (3) The taxpayer Orville Sill who elected the 10-year option, paid only one-tenth of the assessment, received back 5.9 percent of that, but had the benefit of defendants' work. (4) Some taxpayers paid in full and are not shown to have sought reimbursement. They have received nothing back and have the benefit of defendants' work. (5) Finally, plaintiffs who have paid in full, have received back 5.9 percent of full payment. The also have received the benefit of defendants' work. Taxes assessed and paid range in amount from a low of 42 cents to a high of $2,492.

Defendants, on the other hand, have reasonable bills or claims totaling $17,232.55 on which they have received payment of $9,806.91. There is also a wide discrepancy as to how defendants have fared under the accident of payments to be found in this case. The total claims and amounts received by each contractor follows:

                                                 Amount          Amount            Percent of
                          Name                   Claimed         Paid              Claim Paid
                -------------------------  -------------------  ---------------  --------------
                Thompson Courier                $   68.87       $   54.21            78.71%
                L. J. Voldahl                    4,300.00        3,012.80            70.06
                Zeidler Concrete Products       12,863.68        6,739.90            52.39
                 *Leonard Harmon              3,802.49        2,422.08            63.70
                 **Wallace Holland            1,574.83
                Roger Brown                        200.00
                Winnebago Co.Sec.Road              175.00
                

* Leonard Harmon died before this action was started and is not a defendant.

** The last three claimants received nothing. Thus they are not defendants

here.

I. Where a public contract is declared void by the courts the contractor-claimant cannot recover unpaid claims from the public coffers. We have held that one who contracts with a municipality or a political subdivision is bound at its peril to take cognizance of statutory limitations upon the authority of the government agency. Recovery is denied under the frim public policy that the taxpayers should be protected from the evasion of statutory prerequisites by the public body and from the opportunity for fraud or collusion between public officials and contracting parties. Everds Brothers v. Gillespie, 256 Iowa 317 at 322, 126 N.W.2d 274 at 277; Madrid Lumber Co. v. Boone County, 255 Iowa 380 at 386, 121 N.W.2d 523 at 527; Lytle v. City of Ames, 225 Iowa 199 at 214, 279 N.W. 453 at 461.

II. Defendants do not dispute this Iowa law and do not seek to recover the balance of their claims. But they maintain their right to keep what they have already been paid. They are able to cite many cases throughout the country where courts have refused to compel repayment of funds paid on a void public contract. Recovery in such cases is usually denied on broad equitable principles. He who seeks equity must do equity. The parties cannot, under the circumstances, be restored to the Status quo ante bellum. Restitution is impossible. Plaintiffs (or the taxing body) will be unjustly enriched if recovery back is allowed. Therefore equity will not aid plaintiffs to recover the money illegally paid but will leave the parties where it finds them. Kagy v. Independent District of West D.M., 117 Iowa 694, 89 N.W. 972, (1902).

An annotation found at 140 A.L.R. 583, 585, entitled Recovery Back-Invalid Public Contract, collects a large number of cases dealing with this problem. The author warns, '* * * the formulation of any general principles of purportedly universal application, with respect to the right of public body to recover back sums paid under an invalid or unenforceable contract, is an exceedingly dangerous undertaking.' We agree. The myriad fact situations and consequent diverse results defy formulation of general principles. We make no effort to analyze the various cases but confine ourselves to the facts at hand and a few cases considered particularly pertinent.

The two Iowa cases closest in point are Kagy v. Independent District, supra, and Miller v. Des Moines, 143 Iowa 409, 122 N.W. 226 (1909). In Kagy the contracts under attack were between members of the school board as contractors and the board itself. Also, some of the contracts were let Sans prior voter and school superintendent approval as required by law. Plaintiff taxpayer sought to have the funds returned to the school board. The court did not refer to these contracts as void but...