Town of Windfall City v. First National Bank of New Castle

• Decision Date: 01 April 1909
• Docket Number: 21,226
• Citation: 87 N.E. 984,172 Ind. 679
• Parties: Town of Windfall City et al. v. First National Bank of New Castle
• Court: Indiana Supreme Court

87 N.E. 984

172 Ind. 679

Town of Windfall City et al. v. First National Bank of New Castle

No. 21,226

Supreme Court of Indiana

April 1, 1909

Rehearing Denied October 7, 1909, Reported at: 172 Ind. 679 at 691.

From Tipton Circuit Court; J. C. Blacklidge, Special Judge.

Suit by the First National Bank of New Castle, Indiana, against The Town of Windfall City and others. From a judgment for plaintiff against such city, defendants appeal.

Reversed.

W. O Dean and L. B. Nash, for appellant Town of Windfall City.

Gifford & Gifford for appellants School Town of Windfall City and Wildcat School Township of Tipton County.

Forkner & Forkner, for appellee.

OPINION

Jordan, C. J.

Appellee commenced this suit in the lower court by filing a complaint in two paragraphs, making the town of Windfall City, of Tipton County, the school town of Windfall City and Wildcat school township defendants, together with Samuel Gaddis, Samuel Dingle and William H. Minnick (the latter persons constituting a firm of contractors), they being made defendants to answer to their interest in the subject-matter of the suit. The purpose of the suit was to recover money alleged to be due and unpaid on street improvement bonds, and to enforce a lien for the payment thereof. The bond in suit arises out of certain street improvements made by the town of Windfall City under and in pursuance of certain sections of what is commonly known as the Barrett law (§§ 4288, 4289, 4290, 4297 Burns 1901, Acts 1889, p. 237, §§ 1-3, 9).

By the first paragraph of the complaint the plaintiff seeks to recover an unpaid balance alleged to be due on account of the improvement of College street, a public street of the town of Windfall City. By the second paragraph the recovery is sought of an unpaid balance arising out of the improvement of South Independent street and other public streets of said town. Among other things, the first paragraph alleges that the plaintiff is a banking corporation, duly organized under the laws of the United States; that the town of Windfall City, Tipton county, Indiana, and the school town of Windfall City and Wildcat school township, of Tipton county, Indiana, are municipal corporations, duly organized and existing under the laws of the State of Indiana; that on December 6, 1898, there was, and for a long time prior thereto had been, and is yet, a public street in said town of Windfall City known as College street; that abutting on this street is out-lot No. 41, which lot is owned jointly by said school town and said Wildcat school township, and which lot was and is used by said school corporations for the maintenance of schools for the education of the children of said town and township; that said lot abuts on said College street for a distance of 359 feet; that on the date last mentioned the board of trustees of the town of Windfall City, by a unanimous vote, passed a necessity resolution under the aforesaid statute, declaring thereby the necessity of improving said College street, along and past said school lot and property, said improvement to be made by grading and paving the roadway with paving brick the entire length of the street, etc.

The pleading then sets forth in detail the various steps taken by the town, leading up to said improvement, all in accordance with and as required by the aforesaid statute, including the contract for the construction of said work entered into by and between said defendants Minnick, Gaddis and Dingle and the board of trustees of the town of Windfall City, the execution of a bond by said contractors, the making and completion of said improvement by them according to their contract, and the acceptance of the work by the board of trustees of said town, the total cost of the work, the assessments made by the board of trustees against the several abutting property owners according to their frontage upon said street, etc. By this assessment there was charged against said out-lot No. 41 the amount of $ 757.49 as its portion of the cost of said street improvement, etc. The execution of waivers, as authorized by the statute, by the several property owners, including the two school corporations herein, is shown by the averments of the pleading. After the execution of these waivers, it is alleged that the board of trustees of said town of Windfall City, relying upon the faith of said waivers and the agreements and promises therein, "duly passed and adopted an ordinance thereof authorizing and directing the issue of bonds for the sum of $ 2,306.76, for the purpose of raising money with which to pay for said improvement; said bonds to bear five per cent interest, payable semiannually, to be issued in the name of the town of Windfall City." It is averred that during the performance of said improvement by the aforesaid contractors, and in order to obtain means with which to perform said work, they pledged their contract and all rights thereunder to the People's Bank of the town of Windfall City, in consideration that said bank would furnish to them in advance funds necessary to pay for the material and labor in the performance of such work. Under the contract between the town and the aforesaid contractors, it was provided that the town would cause to be issued street improvement bonds, as provided by said statute, and acts amendatory thereof, and said contractors agreed therein that they would accept such bonds in the payment of said improvements to be made. On December 6, 1899, said town did execute and deliver unto the aforesaid contractors a certain street improvement bond, in payment of the contract for the improvement of said street, a copy of which bond was filed with the pleading and made a part thereof. By the terms of this bond the town of Windfall City agreed to pay to the bearer at the People's Bank in the town of Windfall City, State of Indiana, $ 2,306.76 as follows: Ten per cent thereof on November 6, 1899, and ten per cent on the first Monday of November of each year until the whole amount of said bond was paid, the bond to bear interest at the rate of five per cent per annum on the unpaid portions, payable semiannually, on the first Mondays of May and November in each year. This bond was to be paid as provided upon the face thereof out of the assessments made upon the following described real estate in the town of Windfall City, Tipton county, Indiana, viz., College street for the entire length, etc., and Independent street, etc., these being the two streets improved. It was further stipulated in the bond, and on the interest coupons attached thereto, that the credit and good faith of the town is "hereby pledged."

Upon the issue of this bond, and the delivery thereof to said contractors, the latter transferred and delivered it to the People's Bank as further security. Thereafter this bank transferred and delivered the bond, with the unpaid coupons attached, to the plaintiff. It is alleged that plaintiff purchased and received the bond in good faith for the full value thereof, in the ordinary course of business, without notice of any defect, alleged defect or illegality thereon, etc.; that, by reason of the purchase of said bond, plaintiff became and is equitably substituted to all the rights of said contractors under the original contract for and on account of work and labor performed by them in the improvement of said streets as against each and all parties hereto, and became substituted to all the rights of said People's Bank, and that said Minnick, Gaddis and Dingle, individually and under their partnership name, before the commencement of this action, transferred and assigned unto the plaintiff all of their rights of every kind and character, and all claims arising under and in pursuance of said contract for the work and labor performed and material furnished under and in pursuance of said contract; "the plaintiff is informed that the school corporations, defendants herein, claim and aver that said assessment against said school property is null and void, and without authority at law, and that said school corporations are not bound by their said waivers, and are in nowise liable for the payment of said bond, or any part thereof, and that said town now denies all liability for the payment of said bond, and refuses to pay the same or any part thereof."

After averring other facts in respect to attorneys' fees arising out of the prosecution of this action, the pleading closes as follows: "The plaintiff therefore brings suit and demands judgment in the sum of $ 1,000, the establishment and foreclosure of a lien against said school property for the amount of said assessment, with accrued interest thereon, and should the court determine that said assessment is illegal and void, and that the town of Windfall City had no power or authority to make the same against the property, then it demands judgment against said town for the sum aforesaid and for all other proper relief." Copies of the contract, contractors' bond, and of the improvement bond in the suit, are filed as exhibits with the pleading. In the bond it is stated that it was issued pursuant to an act of the General Assembly of the State of Indiana, approved March 8, 1889, and amendments subsequent thereto, and in pursuance of the provisions of an ordinance passed by the board of trustees of said town on January 3, 1899. There is no averment in either paragraph of the complaint to show that any assessment whatever was made against the town of Windfall City, or that said city had collected or received any money upon the improvement bond issued, or upon any of the assessments made against any of the property owners which it had not accounted for and paid over. In fact, nothing is averred to show that the town of Windfall City has in any...