Town of Capitol Heights v. Steiner

• Decision Date: 26 June 1924
• Docket Number: 3 Div. 673.
• Citation: 101 So. 451,211 Ala. 640
• Parties: TOWN OF CAPITOL HEIGHTS v. STEINER.
• Court: Alabama Supreme Court

101 So. 451

211 Ala. 640

TOWN OF CAPITOL HEIGHTS v. STEINER.

3 Div. 673.

Supreme Court of Alabama

June 26, 1924

Rehearing Denied Oct. 16, 1924.

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Action for damages by L. Steiner against the Town of Capitol Heights. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

Steiner Crum & Weil, of Montgomery, for appellant.

Sternfeld & Lobman and James J. Mayfield, all of Montgomery, for appellee.

THOMAS J.

The town of Capitol Heights issued certain paving assessment bonds bearing date July 1, 1913, payable July 1, 1923, with semiannual interest coupons attached, pursuant to the provisions of section 1411 of the Code. The plaintiff was the purchaser and holder of some of these bonds on which the interest was regularly paid; however, the assessments collected were insufficient to pay the principal in full at maturity. This was due to a failure of the then city officials to make an assessment sufficient in amount to pay the principal in full at maturity.

The plaintiff brought suit against the town, alleging the negligent failure of its officers to make a sufficient assessment with which to discharge the obligation. The demurrer to the several counts of the complaint having been overruled, defendant pleaded, in short, by consent the general issue, and any matter that might be specially pleaded. The trial was upon an agreed statement of facts, by the court without the intervention of a jury.

The question presented has never been decided in this state. The amendatory act of 1920 (Gen. & Loc. Acts Sp. Sess. p. 155) has no application to the contract, or to the alleged breach of duty as to such contract sought to be made the basis of the instant suit.

The bonds were issued pursuant to section 1411 of the Code of 1907, Capitol Heights being at the time of that issue within the class covered by the statute authorizing any city having a population of less than 6,000 to issue bonds for certain public improvements, and expressly stipulating that the same should be a lien or charge only against the property improved and against the fund collected from the assessment levied against the property improved, and should not be the general obligation of the city or town, nor should such city or town be in any way liable to the holders of such bonds in case of failure to collect the same. This section further provides that the bonds when issued shall convey and transfer to the owners thereof all right, title, and interest in and to the assessment, and the lien upon the respective lots or parcels of grounds therein provided for, which liens and assessments shall stand as security for such bonds and coupons until they are paid, with full power in the holder of such bonds or coupons to enforce the collection thereof by foreclosure in any court of competent jurisdiction.

The bonds recite that they are issued pursuant to the provisions of said statute and for the purpose of paving streets, and they were secured by a lien only against the property improved and against the funds collected from the assessments levied against the property improved, and that it was payable solely from the said assessments.

It is conceded that there is no liability upon the municipality on the bonds as such. The contention of appellee, however, is that in its corporate capacity the town of Capitol Heights is liable for the negligent failure of its board of aldermen or officers authorized and required to make and levy an assessment pursuant to the ordinance; the alleged negligent failure being to make a sufficient assessment with which to pay the bonds with interest at maturity. Appellant's counsel insist that in the light of the stringent provisions of section 1411 of the Code, it was the evident purpose of the Legislature to prevent a general liability against the town, directly or indirectly, and that a judgment against the town for the alleged negligent failure of the officers of the town to make an adequate assessment would indirectly carry a general obligation against the town upon or for the issuance of the bonds in question. The facts relating to the making of the levy and the assessment on the abutting properties and entering into the sufficiency or insufficiency of the assessment were matters of public record preliminary to and preceding the issuance of the bonds, and were as fully open to the inspection and investigation of the purchaser of the bonds as to the then officials of that municipality. Under the rules obtaining in the premises, as matter of law the purchasers were cognizant of these preliminary steps and of the extent of the failure of the levy of a sufficient assessment, before the bonds were purchased.

The discussion in Henderson v. City of Enterprise, 202 Ala. 277, 80 So. 115, is to this effect:

"As, under Code 1907, § 1411, bonds of a city of less than 6,000 inhabitants, issued for the payment of improvements, do not become the general obligations of the city, but are a lien only against the property benefited enforcement of an ordinance providing for paving in such a city will not be enjoined, on the ground the city was already indebted beyond the legal limits, and such bonds would increase the indebtedness; it being wholly speculative whether the city would attempt to pledge its credit for the paving."

It is not decisive of the instant question.

We may observe that no attempt is being made to enforce the payment by the municipality of the bonds in an action ex contractu: nor is it sought to hold the municipality responsible for a failure of its officials to collect the assessments and pay over the assessments collected. It is an action in case (ex delicto [Sloss-Sheffield S. & I. Co. v. Greek (Ala. Sup.) 99 So. 791]) for the failure of the former officials of the municipality to levy a sufficient assessment to pay principal and interest on the bonds.

Mr. Dillon, in his Municipal Corporations, vol. 2 (5th Ed.) pp. 1250-1253, § 827, collects the authorities to his text treating the liability of the city to a contractor, saying:

"When the charter or statute authorizing the improvement, or an express stipulation in the contract, provides that the contractor shall be remunerated from the proceeds of an assessment on the property benefited and shall look only to the assessment as the source for payment, or when the city charter provides no other means to pay the contractor than the proceeds of the assessment as it is collected, there is no liability on the city to the contractor other than to make and collect the assessment and pay it over, unless the city fails in some duty it owes to the contractor connected with the levy and collection of the assessment. Upon the receipt of the assessment the city becomes liable to the contractor as for money received to his use. But where the contract price is payable from assessments, the courts having regard to the duty of the municipality to cause the assessment to be made and collected in a proper manner and without unreasonable delay after the work is done, have laid down the principle that the municipality is answerable in damages to the contractor for a breach of its duty in this respect, and in many cases have held that the failure of the municipality to discharge its duty by making the necessary assessment, or by its unreasonable delay in collecting and paying over the money, constitutes a breach of the contract or a liability ex delicto, giving to the contractor a right to recover his compensation or damages against the municipality generally.

"But some cases have denied or qualified this doctrine so far as to hold that there is no general liability upon the city, so long, at least, as it remains within the power of the city to collect the assessment, and that a general liability does not attach if the city is proceeding in good faith without unreasonable delay to make a new assessment; or if it has not had a reasonable opportunity to correct defects in the original assessment by reassessing the property benefited; and the right to a general recovery against the city has been denied to the contractor in some instances so long as any method remained of levying and collecting an assessment on the property benefited."

The case from the Supreme Court of the United States that is cited by the author is Memphis v. Brown, 20 Wall. 289, 22 L.Ed. 264, where the contract guaranteed to the contractor the "payment of said accounts as so assessed against the property owner." The same case is reported in 97 U.S. 300, 24 L.Ed. 924.

The Illinois court holds that the power to contract for a public improvement gives the city, by implication, power to stipulate in the contract that the contractor shall look only to the proceeds of an assessment for his compensation, and thereby protect its general fund. Village of Park Ridge v. Robinson, 198 Ill. 571, 65 N.E. 104, 92 Am. St. Rep. 276.

It has been held by the New York court that when the charter provides no other means of payment than a special assessment for the costs of the improvement, a person contracting with the city to do such improvement is chargeable with notice of such limitations or provisions and is held to have contracted with reference to the only source of payment provided by law. Baker v. City of Utica, 19 N.Y. 326, 328.

Mr. Dillon, in his Municipal Corporations, vol. 2 (5th Ed.) pp. 1388, 1390, § 893, in the chapter on "Improvement Bonds Payable from Assessment Only," says:

"Although such obligations do not constitute debt of the municipality in the constitutional sense of the word, or an obligation which is payable from its general funds, yet bonds which are issued in the name of the municipality, to be paid only from a special fund created

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