U.S. Trust Co. v. Inc. Town of Guthrie Ctr.
| Decision Date | 26 November 1917 |
| Docket Number | No. 31546.,31546. |
| Citation | 165 N.W. 188,181 Iowa 992 |
| Parties | UNITED STATES TRUST CO. v. INCORPORATED TOWN OF GUTHRIE CENTER. |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Guthrie County; W. H. Fahey, Judge.
Suit to have restored a deposit made as an evidence of good faith in a contract to buy bonds issued by the appellee. The trial court found for the defendant. Plaintiff appeals. Reversed.Morsman & Maxwell, of Omaha, Neb., and Milligan & Moore, of Guthrie Center, for appellant.
Brown & Batschelet and Weeks & Vincent, all of Guthrie Center, for appellee.
1. The agreement which is the basis of the controversy is signed by the appellant and offers par and accrued interest, if any, for $10,000, more or less, of 6 per cent. sewer disposal plant bonds of appellee, being dated as soon as practicable after July 1, 1914, due ten years from date and in $500 denominations; $500 of said bonds to be optional annually from four to nine years from their dates, inclusive, balance due in ten years from date, and for $30,000, more or less, of 6 per cent. sewer bonds. The contract provides that:
“Prior to delivery of bonds to us, you are to furnish us full certified copy of records of all proceedings, had preliminary to and authorizing the issuance of said bonds necessary to satisfactorily evidence their legality to our counsel.”
There is the further statement that there is given over therewith a check for $1,000, “to be held by you as a guaranty of good faith, said check to be returned to us forthwith in case said bonds are not legal to the satisfaction of our counsel, without expense to us.”
There is a controversy over whether the amount of money that could be lawfully raised by taxation within the legal and constitutional limitations of the laws and the Constitution of the state of Iowa by the defendant during the life of the proposed bonds would or would not be sufficient to pay the bonds and the interest thereon. Attorneys for plaintiff advised it that in their opinion said $10,000 issue was not valid.
[1] The theory of the defendant is that this opinion is reviewable, and that it was rightly disregarded because the issue is in fact legal. The trial court proceeded as it would have if no contract provision making the attorney's opinion a factor existed; treats that provision as redundant and surplusage. It may not so be dealt with. Haney v. Preston, 119 Iowa, 192, 193, 93 N. W. 297. And see Butler v. Tucker, 24 Wend. (N. Y.) 447; Barton v. Hermann, 11 Abb. Prac. N. S. (N. Y.) 378; Gray v. Railway, 11 Hun (N. Y.) 70; Boyd v. County, 122 Iowa, 458, 98 N. W. 274. The point is as well stated by the Supreme Court of Nebraska in Thurman v. City, 64 Neb. 490, 90 N. W. 253, a bond bid case, as it is anywhere. It is there said that where a party stipulates that his contract of purchase shall be subject to the opinion of his attorney as to the title to or legal status of the thing to be purchased, the plain purpose being to make his act dependent upon the personal opinion of his legal adviser, the sole requirement is that such legal adviser in fact pass upon the subject and give his honest opinion, and the merits of an honest opinion actually given are not subject to review--that his decision is conclusive, provided he really passes upon the question and reaches a conclusion honestly, whether his conclusion is right or wrong.
The question is not whether the buyer “ought to be,” but whether acting in good faith he is satisfied. Inman v. Cereal Co., 124 Iowa, 737, 100 N. W. 860;Singerly v. Thayer, 108 Pa. 291, 2 Atl. 230, 56 Am. St. Rep. 218;Liberman v. Beckwith, 79 Conn. 317, 65 Atl. 153, 8 Ann. Cas. 271;Hollingsworth v. Colthurst, 78 Kan. 455, 96 Pac. 851, 18 L. R. A. (N. S.) 741, 130 Am. St. Rep. 382. Good faith is the sole limitation. Inman v. Cereal Co., 124 Iowa, 737, 100 N. W. 860. So held in bond bid cases, on refusal because bonds were invalid in opinion of buyer's attorney. Sargent v. Sibley, 6 Ohio Dec. 1219. So, unless the opinion is fraudulent, capricious, and in bad faith. City v. Rollins (Tex.) 127 S. W. 1166;Michigan Stove Co. v. Harris, 81 Fed. 928, 27 C. C. A. 6;Webb v. Trustees, 143 N. C. 299, 55 S. E. 719. In cases other than agreements to take bonds it is held the buyer may refuse to take the goods that are to satisfy him, unless the refusal is a mere caprice. Singerly v. Thayer, 108 Pa. 291, 2 Atl. 230, 56 Am. Rep. 207;Manning v. District, 124 Wis. 84, 102 N. W. 356. Or his dissatisfaction is feigned. McCormick v. Okerstrom, 114 Iowa, 264, 265, 86 N. W. 284. Or he acts with a fraudulent motive. Liberman v. Beckwith, 79 Conn. 317, 65 Atl. 153, 8 Ann. Cas. 271. Some cases hold the right to reject for failure to satisfy is absolute. Wood Machine Co. v. Smith, 50 Mich. 565, 15 N. W. 906, 45 Am. Rep. 57. But we do not care to go that far. It must not be an unreasonable refusal in a case where the title was good “beyond all dispute.” Vought v. Williams, 120 N. Y. 253, 24 N. E. 195, 8 L. R. A. 591, 17 Am. St. Rep. 634. It must be an honest refusal. Hartford v. Brush, 43 Vt. 528;Daggett v. Johnson, 49 Vt. 345. A good faith refusal. Stotts v. Miller, 128 Iowa, 633, 105 N. W. 127;Inman v. Cereal Co., 124 Iowa, 737, 100 N. W. 860;McCormick v. Okerstrom, 114 Iowa, 260, 86 N. W. 284;Haney v. Preston, 119 Iowa, 188, 93 N. W. 297. Where an expressed ground for rejecting a certificate of health is frivolous, and it does not appear what the true ground of the rejection is, the rejection will not base a forefeiture. Miesell v. Insurance Co., 76 N. Y. 115. It must not be arbitrary. O'Dea v. City, 41 Minn. 424, 43 N. W. 97;Stockton v. Stockton, 51 Cal. 328;Duplex Co. v. Garden, 101 N. Y. 387, 4 N. E. 749, 54 Am. Rep. 709;Folliard v. Wallace, 2 Johns. (N. Y.) 395.
It does not matter that a title rejected by the attorney is in fact perfect if the rejection is in good faith. Church v. Shanklan, 95 Cal. 626, 30 Pac. 789, 17 L. R. A. 207;Liberman v. Beckwith, 79 Conn. 317, 65 Atl. 153;Hollingsworth v. Colthurst, 78 Kan. 455, 96 Pac. 851, 18 L. R. A. (N. S.) 741, 130 Am. St. Rep. 382;Watts v. Holland, 86 Va. 999, 11 S. E. 1015. It is immaterial that after the bonds have been refused and sold to other parties the state Supreme Court adjudges the bonds to be valid, as the purchaser then has no opportunity to accept them with the benefit of such adjudication. City of Great Falls v. Theis et al. (C. C.) 79 Fed. 943. In Kihlberg v. United States, 97 U. S. 398, 24 L. Ed. 1106, a contract between the United States and A., for the transportation by him of stores between certain points, provided that the distance should be “ascertained and fixed by the chief quartermaster.” The distance, as ascertained and fixed by the chief quartermaster, was less than by air line, or by the usual and customary route. It was held that his action is, in the absence of fraud, or such gross mistake as would necessarily imply bad faith, or a failure to exercise an honest judgment, conclusive upon the parties.
[2] 1a. It is not disputed that counsel to whom the matter was submitted gave it as their opinion that the $10,000 bond issue was not legal. There is neither claim nor proof that the opinion is arbitrary and bad faith, unless that is made out by the fact that counsel for appellee and the trial court differ from that opinion. Indeed, the only argument here is that the opinion is and was held to be an erroneous one, and therefore cannot control. Reliance is placed upon Hoffman v. Colgan (Ky.) 74 S. W. 724. It does not rule this case. It turns wholly on the status of an opinion founded on a mistake of fact. In its essence, it is a rightful decision that when it would presume fraud if the giver of the opinion knew what the true facts are, that, therefore, it should rather be presumed that the opinion would have been the opposite if the true facts had been known, wherefore the opinion, due to an honest mistake of fact, does not govern. It makes a proper distinction between an opinion resting purely upon a mistake of fact and one which in good faith errs in applying the law to the existing facts. It does not attempt to overturn the well-settled rule which exists where the mistake is an honest mistake of law. To overturn that rule would, in effect, nullify all agreements that bonds need not be...
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