Court Opinion

ID: 7101548
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:16:19.645285+00
Date Added: 2024-06-11T16:13:25.537284
License: Public Domain

Adams, J.,
dissenting. — I think that the plaintiffs are each entitled to recover. The two cases differ but little from each other. They might properly enough be discussed together. Whatever can properly be said of one might generally, with equal propriety, be said of the other. Eor convenience and brevity, however, I will treat mainly of the case of Wapello county.
The right of recovery is denied by the defendant upon various grounds. By the majority of this court it is denied upon the alleged ground that the plaintiff received a benefit from the construction of the road by the way of Ottumwa. But in my opinion, this does not constitute a defense. It is not pleaded as a defense, nor is there anything in any part of the pleadings having any tendency to show where the road was constructed. The defenses pleaded are prior adjudication, the statute of limitations, and that the payment was voluntary. To justify the defendant in relying upon the fact that the road was constructed by the way of Ottumwa, (if such fact could in any event be deemed of any significance,) the defendant should, I think, not only have pleaded it, but should have pleaded that the road was so constructed as a part of the contract in pursuance of which the bonds were issued. I do not think, indeed, that such fact, even if pleaded, would constitute a defense. But, if I am wrong in this, I do not think that the defense, if made, could be sustained, because I am unable to find any evidence that the defendant constructed its road by the way of Ottumwa as a part of its contract. To this question of fact I will refer hereafter. Eor the present, let us suppose that the defendant had made such proof, and let us suppose, also, that it had laid the foundation for it by a proper averment in its answer. *394We come, then, to the question as to whether the plaintiff should, for that reason, be denied all right of recovery. If it can be, it is not because the plaintiff has received the full consideration for the bonds. It was to have stock in the defendant company of equal amount. It has received no part of the stock, and the defendant lias escaped all liability for its issue. If, then, the plaintiff must be denied all right of recovery upon the ground above supposed, the rule of law is that the receipt by a corporation of a part of the benefit of an ultra vires contract, however small the part may be, estops the corporation from setting up that the contract is ultra vires. Now I know of no decision which has gone so far. It will be observed that there is no question in the case of a retention of benefit by the plaintiff. It has nothing which it could restore, and never had. If it is estopped, it is simply by 'reason of the construction of the road, and nothing more; and that under no pretense could constitute more than part of the benefit. It was to have thirty thous- and dollars of stock which it has not received, and never will receive. Does, then, the mere receipt by a corporation of a part of the benefit of an ultra vires contract, independent of any question of voluntary retention, estop it from setting up that the contract is ultra vires? I think not. Such rule would be bad enough as applied to a private corporation. But, as applied to a municipal corporation, it is still' more objectionable. If such is the law, I do not see what protection there is for tax payers. If a loss of thirty thousand dollars can be imposed, as in this case, as the result of mistaken and unauthorized acts, a loss of any amount, however large, might be.
Decisions can be found where courts have held that the receipt by a corporation of even the whole beuefit of an ultra vires contract does not estop it from setting up that the contract is ultra vires. I think that was virtually held in McPherson et al. v. Foster Bros., 43 Iowa, 48. But we do not need to go that far. If the plaintiff were a private cor*395poration, we probably could not go that far. Thompson v. Lambert, 44 Iowa, 248. But such question is not before us. The plaintiff is a public corporation, and has received, at most, only a part of the benefit, and that is of such a character that it cannot be restored. The case to my mind is not more favorable to the defendant than one where county officers should, for the purpose of encouraging manufactures, offer a large bonus for the establishment of a manufactory, and pay the same out of the county treasury. Does any one doubt that money so paid could be recovered by the county, and especially if the county officers contracted for a fractional interest in the manufactury in behalf of the county, and which interest the proprietors refused to convey? I think that no one would say that the benefit received by the county would stand in its way. I do not care to insist that the county i/n its corporate capacity could not receive a benefit of such a character, nor even that the tax-payers could not, if what was paid for was mere location, as at the county seat instead of somewhere else in the county. Such position might be tenable enough, but I do not need to resort to it. Let us make a supposition where there would be no doubt as to the benefit received. If county officers should conceive the idea of going into a speculation in grain in behalf of the county, and should buy a thousand bushels, and pay for the same out of the county treasury, and should receive only one bushel, but should sell that and put the proceeds in the county treasury, the receipt of the one bushel should not prevent the county from recovering the money wrongfully paid out, and for which it received nothing. If the county should bring an action to recover the whole, it may be that the defendant should be allowed to aver and prove the amount delivered, and value thereof, by way of reduction of the plaintiff’s damages. I do not think that any court has gone further than this. My attention, it is true, has not been called to any case especially supporting the limitation upon which I insist, but it is clear to me upon principle, and has been *396inferentally recognized in Hayes v. Galion Gaslight Co., etc., 29 Ohio St., 330; Grant v. Henry Clay Coal Co., 80 Pa. St., 208; and De Groff v. Am. Lin. Th. Co., 21 N. Y., 127.
This is not a case for punishing the county and rewarding the railroad company. It is no case for punishment on the ground that the county should have known its own powers. Doubtless it should, but it is not lor the company to say this. The county is a public corporation, and the company also should have known its powers. McPherson et al. v. Foster Bros., above cited. " They dealt with each other with equal knowledge. Nor has the company in fact, though mistaken, been misled to its injury. What it has done it has done for itself, and has the full benefit of it. I do not say that what it has done could not be sufficient as a technical consideration to support a contract otherwise unobjectionable. It may be conceded that it would be. Mills County v. Burlington & M. R. R. Co., 47 Iowa, 66. But that is not the question before us. We.do not even have the question as to the measure of the benefit received by the plaintiff. The theory of the majority opinion is that it is immaterial how small the benefit may be — that, however small, the company ought to have the benefit of the county bonds, and escape all liability on its part.
The benefit to the county in its corporate capacity, I think, is nothing. B.ut regarding the county in its corporate capacity as identical with the tax payers, it is manifest that the benefit is one which could not be measured. I do not see then that the defendant’s position would have been improved by any averments which it could have made in its answer upon this point.
If I am correct in my view of the law, it is wholly unnecessary to inquire whether the company built its road by Ottumwa under any contract with the county to do so, or in acceptance of the contract under which the bonds were issued. But I have discovered no evidence that any person, either ■with or without authority, attempted to make any agreement *397on the part of the company to build the road by Ottumwa, or that the company did not build the road precisely where its interest required, and where it would have built it independent of any contract with the county.
The pretended partial execution of the ultra vires contract is the only point which I care to discuss. I think it would have been sufficient, so far as the "Wapello county case is concerned, to have said that this is not pleaded.
In the Jefferson county ease, the defendant avers in its answer, in substance, that it contracted with the plaintiff to build its road through the county, and that it did so build it. This seems to be pleaded by way of estoppel, and as a complete defense. I have given my reasons why I think that it cannot be so regarded.
As a partial defense, or ground of allowance to the defendant, it must be said that there is a total absence of both averment and evidence. As a further defense to both actions, the defendant insists that, even if the plaintiffs have a cause of action, it is not that set out in the petition and proven by the evidence; and that a recovery should be denied for that reason, if no other; and in this the defendant is sustained in the majority opinion.
The plaintiffs set out the issuance of the bonds, the negotiation of them by the defendant, the payment of them by the plaintiffs; and they aver that they were issued and paid' for the use and benefit of the defendant; and these facts are, I think, substantially proven.
It is not material to inquire with what degree of propriety the bonds can be called accommodation paper. The right of recovery, if it exists, depends upon the facts averred and proven. Now, the facts are that the bonds were issued under such circumstances that they had no validity as between the parties, and acquired no validity until they were negotiated, and then acquired their validity solely by reason of the fact that they were negotiated; and, as between the plaintiffs and defendant, the latter was under obligation to protect the for*398mer, which it has failed to do. Where one person executes paper which has no validity until it is negotiated, and where the party receiving and negotiating it has the sole benefit of it, such paper has the essential characteristics of accommodation paper, though it were not designed as such paper originally.
It may be that the defendant would not have received this paper knowingly as accommodation paper. That does not change the fact that it has had the sole benefit of it, and, having had such benefit, it is not for it, I think, to set up its ignorance of the law, to enable itself to retain this benefit, and impose a corresponding loss upon the tax payers of the plaintiff counties.
.Mr. Justice Reck concurs in this dissent.