Court Opinion

ID: 7097122
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:12:07.284562+00
Date Added: 2024-06-11T16:13:17.322905
License: Public Domain

Beck, J.,
dissenting,. — I am unable to assent to the foregoing opinion, and will proceed, as briefly as I can, to express my views upon the controlling points of law involved in the case. Adams, J., does not concur in the decision, and, I am authorized to say, approves. the views I entertain and the arguments upon which I rely to support the positions I have taken in the case.
I. Plaintiff insists that, under the contract between the parties, it was to receive for each of its bonds issued a certificate for the same amount of stock in the railroad company; that the contract, by its very terms, was divisible, and it is, therefore, entitled to stock of the defendant to the amount of bonds issued to it. It is claimed the evidence establishes that the contract under which the bonds were issued and delivered so *604provides. We are of the opinion the evidence fails to support this position, certainly so far as that the plaintiff paid its subscription upon a contract different from that entered into by other subscribers to the stock of defendant, and having terms other than those prescribed by the charter and by-laws of defendant. Whether, ■ under the charter and by-laws of defendant, the plaintiff is entitled to stock to the amount of payments made is, however, as it will be seen, in the view we take of the case, quite unnecessary to determine.
II. It was adjudged in an action between these same parties that plaintiff had no power to subscribe for the stock of defendant, and, in payment therefor, issue its bonds, and that its contract and act, in that respect, was ultra vires and void. The State ex rel., etc., v. The County of Wapello, 13 Iowa, 388. Without considering the doctrines of that decision, it is sufficient to remark that the power of the county to make the contract and the right of defendant to enforce it, are res adjudieat'a, which, as between the parties to this action, cannot again be presented to the courts for adjudication. The decision operated upon the contract of subscription, so far as the same had not been performed, and declared that it could not be enforced so as to require plaintiff to issue the bonds to pay the balance claimed to be due on the subscription. The judgment was that plaintiff could not be compelled to issue the bonds to the amount of $70,000, which was the relief asked by defendant. The grounds and reasons of this judgment are the invalidity of the subscription and the want of power in the county to become a stockholder in a railroad corporation. While the doctrines of the decision, applied to the bonds already issued, would declare them void, yet that was not a matter adjudged in the cause. The parties are bound no farther than as to the matters actually covered and' included in the judgment. So far, our conclusions arc based upon prim ciples that are elementary and cannot be' questioned.
4. — ■: estop<Ee mutual.' III. But the United ■ States Courts have held the bonds issued in payment of defendant’s stock, to - the amount of $30,000, to be valid, and to constitute a legal obligation resting upon the county, and as such have *605enforced them by judgments. While, as to these bonds, there has been a conflict in the principles announced by the State and Federal Courts, in the cases arising thereon and other like cases, there has been no conflict as to the judgments of the different forums upon the question of the obligation and power of the county to issue the bonds for the $70,000 of stock not paid. The record does not show that the United States Courts have adjudged, in a proper case involving that identical subject matter, that the county has authority to issue these bonds. The State court has adjudged that the county has no such power. The court was of competent jurisdiction and its judgment has not been reversed nor invalidated. Upon the subject matter of this judgment there has been no other adjudication to change the rights and relations of the parties as to the contract of subscription, so far as it remains unperformed. Neither does the record show that there has been any adjudication by the State court, upon those $30,000 of bonds issued to defendant, in conflict with the judgment of the Federal Courts thereon, involving the subject matter of those judgments, namely, these same bonds. -The case presented, then, is this: The State court, possessing competent jurisdiction, has, in a judgment between these same parties, adjudged that the contract for stock, the subscription of plaintiff, being ultra vires, cannot be enforced, and cannot be lawfully performed so far as it remains unexecuted. The Federal Courts, clothed also with jurisdiction, have decided, in cases brought to enforce the payment of interest due on these bonds, that they are valid instruments and binding upon plaintiff.
The plaintiff is estopped to deny the validity of the subscription and of the bonds issued thereon, so far as the judgments rendered against it have declared them .valid. Because the right of recovery was based upon the fact that the plaintiffs in those judgments were gcfod faith purchasers, etc., does not give the county the right, under any circumstances, to deny the validity of the bonds upon which the judgments were based. The plaintiff is forever estopped to deny the validity of the causes of action upon which the judgments were rendered. This cannot be doubted. The estoppels' *606must be reciprocal and operate upon the plaintiff in the judgments. It would be inconsistent, too, with legal principles, to hold one party to a judgment estopped thereby and not the other. See Bigelow on Estoppel, pp. 47, 467, and authorities cited.
While defendant, in this case, may not stand in the relation of a privy to the plaintiffs in the judgments recovered against the county, so that it would be ^stopped thereby, yet it comes within the operation of an exception to the rule that judgments bind only parties and privies. Judgments are conclusive against third persons as to the relationship of debtor and creditor and the extent of that relationship, and must, also, be so regarded as to the foundation thereof — the origin of the relationship so far as it was in issue. Bigelow on Estoppel, pp. 81, 104, and authorities cited.
Now the validity of the bonds was in issue in the actions wherein judgments were rendered. It may be said that the validity of the subscription was not involved in these actions. This may be conceded. But the railroad company, after having entered into the contract with plaintiff embraced in the subscription, and received the bonds thereon which it transferred, and upon which judgments were rendered, whereby, as we have seen, defendant is estopped to deny the relation of debtor on the part of plaintiff, and the foundation of the indebtedness, settled by the adjudication, cannot now insist that the contract so far as these bonds are concerned is void. To permit defendant to make such a defense would be simply to authorize it to take $30,000, or more, from plaintiff without the payment of one cent as a consideration. No principles of law can be so wrested as to bring about such a result.
The case then presents this state of facts: The defendant is estopped to deny the validity of the bonds upon which the judgments were rendered. These bonds were issued upon a contract entitling plaintiff to stock in. the railroad company. The validity of that contract defendant cannot deny because it is a party thereto, and has received the • bonds thereon. Under the contract the county is entitled to one dollar in stock for each dollar of its bonds issued to the defendant. If defend*607ant were in a situation to restore the bonds to plaintiff, it-might do so and then plead the invalidity of the contract. But no principle of law or equity will permit it to keep the stock and bonds both, while the county, by its act, has been rendered liable for the ful! amount of the bonds.
IY. Under the decision of the State court the contract based upon plaintiff’s subscription', as to the bonds not issued, must be regarded as void and neither party can support any claim thereon. It does not have the force and effect of a contract; it is without any validity, in respect to the $70,000 in bonds unpaid upon the stock. As to that subject matter it is not a contract. It is quite clear, therefore, that defendant cannot claim plaintiff is bound to issue and deliver these bonds; in law there is no such a contract, and defendant has no rights derived therefrom. Neither can defendant or plaintiff deny that the bonds issued are valid. Defendant by receiving and transferring them'is estopped to deny their validity, and both parties are bound by the adjudications of the Federal Courts, enforcing them.
B _. re_ ofV(5nsideraturn. The question now arises involving the rights of plaintiff and liability of defendant on account of the bonds received by the latter. The law will not permit one to receive, retain and appropriate to his own use, money or property of another without accounting therefor. In' some cases when money is paid under a mistake of law it cannot be recovered back. But this principle is not applicable to the case before us. The mistake of the parties, if there was one, related to the existence of a legal contract, the parties believing a valid contract existed. It was then a mistake of fact. . An illustration will possibly make this position, plainer. A pays to B a sum of money in satisfaction of a promissory note supposed to be given to and held by the latter against the former. It is afterwards discovered that the note was not executed by A but by another person, or that it is a forgery, or that no such paper actually existed. .Here is a mistake as to the existence of the contract. It cannot be doubted that the money could be recovered from the party receiving it. The case before us is not unlike the one put in *608the illustration. The bonds were delivered to defendant on the supposition that a contract existed between the parties. It has been judicially determined that, as to the balance of plaintiff’s unpaid subscription, the contract is ultra, vires and, therefore, void, that there was no contract at all between the parties. The mistake, then, related to the very existence of the contract. Had plaintiff possessed the power to make the con7 tract, but on account of defective execution or other informality, lapse of time, or other matters, it could not be enforced, the case would be different. Or had plaintiff received benefits which were alone the consideration for issuing the bonds it would have no claim on defendant. Kraft v. City of Keokuk, 14 Iowa, 86.
It has been held that where a municipal corporation receives money on a contract, which is void on account of want of authority so to bind itself, the sum so paid may be recovered back by the other party. Dill v. Warham, 7 Met., 438. See, also, Argente v. San Francisco, 16 Cal., 255. Undoubtedly the corporation would have the right, under the same principles, to recover money paid by it on its own contract, void for a like reason. We conclude that plaintiff is not deprived of the right to relief on the ground of the voluntary delivery of the bonds upon the void contract.
The defendant, having received and appropriated the bonds, which were valuable and useful in its enterprise, and are now valid and binding upon plaintiff, ought, ex eguo et bono, to account to plaintiff therefor. This position is supported by the plainest principles of equity.
6. —:-. Y. It is now necessary to determine what is the nature of the relief to which plaintiff is entitled' against defendant; whether it may recover the value of the bonds at the time they were delivered to defendant, with interest, or whether it is a stockholder of defendant and entitled to certificates as such. The defendant cannot deny that the transactions resulting in its acquisition of the bonds, so far as they are alone concerned, are legal; nor can it deny that plaintiff’s contract to issue the others is void, for it is bound by the adjudication to that effect.
*609The bonds were issued by plaintiff and received by defendant in payment for stock of the railroad corporation. This stock was the specific consideration to be rendered by defendant. The law will not imply a promise of defendant to pay plaintiff money for the bonds, but will carry out the very object of the transaction, namely, the acquisition by plaintiff of stock in the corporation. The bonds having been issued and delivered to defendant to purchase stock, and the transactions leading thereto having been held valid by an adj ndication binding upon both of the parties, plaintiff is entitled to the stock. An illustration may serve to strengthen this position. A enters into a contract, entire in its provisions, to purchase of B one hundred bushels of wheat at two dollars per bushel, and pays $100 thereon. In an action between the parties it is adjudged that the contract, so far as it has been performed, is valid, but that it cannot be enforced so as to compel A to pay the balance of the money provided for therein. In that case A could not recover the money paid on the contract. By the payment he became entitled to fifty bushels of wheat, and he would recover accordingly. The case under consideration involves the same principles as the one here supposed.
YI. It is insisted that plaintiff is entitled to no relief on account of bad faith in refusing to perform the contract before the courts had decided adversely to its power to issue the bonds, and in resisting, by legal proceedings, the efforts of defendant to procure a performance of the contract by plaintiff. We do not think plaintiff can be convicted of bad faith in refusing to do that which the law prohibits, and in relying upon and enforcing its legal rights. It is the duty of corporations, as it is of citizens, to obey the law. And certainly a political corporation of the character of plaintiff is not guilty of bad faith in refnsing to exercise powers withheld by the law. An appeal to the courts to determine its powers ought not to be the occasion of rendering its contracts valid which, in such proceedings, are declared invalid.
Upon this point the opinion of the majority, in our judgment, presents a view that is impossible to be taken from a judicial standpoint. The decision declaring the county had *610no authority to issue the bonds was made in this court. Now the majority of this court hold that the county acted in bad faith in presenting its case for determination. The opinion proceeds in this language: “Instead of showing a desire to perform its agreement, it seems to have determined to repudiate it as soon as it became apparent that the road would be built through Ottumwa and the benefit of the contract in any event secured.” For myself I may say that I fail to find support in the record for this statement of fact here made. But that is not the point to be considered just now. This court held the contract void — made without authority, in conflict with the law and constitution. Yet a majority of this court now hold good faith required the county to perform this illegal contract. Its action, done under the sanction of the judgment of this court, is stigmatized with the word “repudiate” everywhere odious, and which is never applied to the refusal to perform a void contract, but to the denial of the binding force of a valid obligation;
The opinion of the majority further says that the county “was instrumental in procuring the first adjudication of the Supreme Court (this court) declaring the illegality of the contract which it had made.” The county, in bad faith, procured a decision of this court whereby it was enabled to consummate its intention to repudiate its debt! This is the thought of the quotation, and it is no less severe upon this court than upon the county.
7 _. con_ sideration. YII. It is next insisted that plaintiff has received the benefit of the road built by defendant which was the consideration agreed upon for all the bonds to be issued defendant under the contract. But we do not so understand the facts. The consideration of the bonds under the contract was the stock of the defendant; the building of the. road was an inducement to the subscription, but not a consideration therefor.
YIII. It is next urged that “ there is an entire want of mutuality in plaintiff’s claim, as neither plaintiff nor the court can reinstate the parties to the contract as they stood when the contract was made.” In answer to this objection it *611is only to be said that, under the' conflicting adjudications, the contract has been partly enforced and partly annulled. It cannot be set aside and the parties restored to their, original condition, and such a remedy is not sought. The ‘£ mutuality of plaintiff’s claim,” as we understand the expression, is found in the fact that defendant has received and realized-upon the bonds issued by plaintiff in return for which stock is demanded.
8_. fallm.e to perform, IX. It is set up in the answer, that the failure and refusal of plaintiff to issue all the bonds was the source of loss and detriment to the defendant in delaying the compietion of the road, and probably for other reasons. It may be, but the point we do not decide, that plaintiff would, be liable for results of that character. -But, be this as it may, while defendant’s witnesses, or some of them, state that defendant did suffer as claimed, yet the extent and nature of its loss is not established. It cannot be considered in this case. Loss is often sustained by reason-of the non-performance of contracts for which the party suffering thereby can recover no compensation.
9.--: stat-turns. ' X. It is insisted by defendant’s counsel that the action is barred by the statute of limitations. .Only a brief consideration of this point is necessary. The delivery -to defendant of- the $30,000 in bonds constituted plaintiff a stockholder in the railroad corporation. The certificate of stock is but evidence of that fact. The failure to issue these certificates did not defeat plaintiff of its rights as a stockholder or destroy its property in the stock. The object of this suit is not only to obtain the certificates, but also to determine plaintiff’s right to the stock itself. The statute would not commence to run until the cause of action accrued. It is obvious that a mere failure to issue the certificates, without a denial of plaintiff’s right thereto and its property in the stock, would not be a ground of action. The custody of both certificates and stock, so to speak, was lawfully in the defendant. An action to obtain the certificates and establish plaintiff’s right to the stock, would be answered by showing that the certificates were never demanded and plaintiff’s *612right's never denied. This action accrued, then, upon refusal to issue the certificates and a denial of plaintiff’s property in the stock, which was within the time fixed by the statute of limitations.
But defendant’s counsel insist that, when the bonds were delivered to defendant, the plaintiff demanded certificates. It is conclusively shown, however, that the demand was not for paid up certificates, which would be evidence that plaintiff is the holder of paid up stock, but those showing partial payments. The claim then made was not that plaintiff was the holder of $30,000 of stock, but had paid $30,000 on its subscription of $100,000. Plaintiff claims that there was a special contract, apart from the subscription, to the effect that its bonds delivered to defendant entitled it to paid up stock pro ianto. Under this contract it claims the defendant agreed, upon request of plaintiff’s agent when the bonds were delivered, to issue certificates of stock. As we have before stated, we do not think the evidence establishes such a contract. That demand or request cannot be considered as fixing the time when plaintiff’s right to this action accrued. Indeed, plaintiff’s rights, as we recognize them, did not accrue until after the actions concerning the bonds and the subscription, the decisions in which, according to the views of this opinion, are the foundation of plaintiff’s right of action as presented in this cause. After this right of action accrued, defendant did not deny plaintiff’s right to the stock, nor refuse to issue the certificate, until a demand was made in 1869, as it appears from the evidence. We conclude that the action is not barred by the statute.
We reach the conclusion that the judgment of the District Court ought to be reversed, and dissent from the decision announced in the opinion of the majority of this court.