Court Opinion

ID: 9720666
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:38:36.866582+00
Date Added: 2024-06-11T18:24:20.443788
License: Public Domain

UHLENHOPP, Justice
(dissenting).
This appeal in equity presents a problem of restitution — the so-called “recovery back” problem which arises when a contractor has received payment for construction of a public improvement under a purported contract which was actually invalid because of procedural irregularities by public authorities.
Several circumstances are important. The supervisors and the contractors acted in good faith; no fraud or concealment existed. The contractors did not hasten to the courthouse to get their money, knowing that the public’s proceedings were invalid. The contractors’ charges were fair and reasonable. The landowners received the benefit of the contractors’ work and have not and cannot restore the status quo ante. The project of cleaning out the lateral drain was within the general power of the supervisors, but the manner in which they exercised the power was not correct. (The supervisors thought the word “district” in the statute means the drainage district. Code, 1962, § 455.135. Subsequently, however — four years after the work was done and two years after the contractors were paid — this court held that “district” means subdistrict when only a lateral drain is involved. Thompson v. Joint Drainage Dist. No. 3-11, 259 Iowa 462, 143 N.W.2d 326.)
Under all such circumstances, we should deny recovery back of the payments made to the contractors, on the basis of authority and of the equities.
I. The great weight of authority, including Iowa authority since 1872, simply denies recovery back under such conditions. In 1872 this court decided Long v. Boone County, 36 Iowa 60. There a county official, without necessary public vote, ordered certain road work done. The reporter succinctly stated the holding of the court in headnote 6:
When the legally constituted agent of the county contracts for work in respect to which he has no power unless authorized by a special vote of the people, and executes a warrant for the amount thereof on the treasurer of the county which is voluntarily paid by the latter officer, the county cannot recover back the amount so voluntarily paid.
See also Kagy v. Independent Dist. of West Des Moines, 117 Iowa 694, 89 N.W. 972; Diver v. Keokuk Savings Bank, 126 Iowa 691, 102 N.W. 542; Miller v. Des Moines, 143 Iowa 409, 425, 122 N.W. 226, 232 (“To say that the party doing such work must receive no remuneration therefor, and must return the compensation already received, is to impose all the penalty upon an innocent party for the profit of the only party chargeable with the wrong. We are not disposed to so order.”); cf. Painter v. Polk County, 81 Iowa 242, 47 N.W. 65; Des Moines v. Horrabin, 204 Iowa 683, 687-688, 215 N.W. 967, 969 (“There is no charge of fraud or unfair dealing in this case, and it is not disputed that all parties acted in the best faith. Furthermore, it may be observed that the city of Des Moines has accepted the benefits of the supplemental contract and still retains them. As a matter of fact, it cannot place the appellee in statu quo. There is a strong morality in this case.”).
*385Decisions elsewhere are of like import, under the circumstances of this case. Recovery back denied where self-dealing involved but no fraud: Brewer v. Howell, 227 Ark. 517, 299 S.W.2d 851; Culver ex rel. Longyear v. Brown, 259 Mich. 294, 243 N.W. 10; Mares v. Janutka, 196 Minn. 87, 264 N.W. 222; Polk Township v. Spencer, 364 Mo. 97, 104, 259 S.W.2d 804, 807 (“In short, in the circumstances of this case, there has been no unjust enrichment of the defendant or any loss to the plaintiff and there is no occasion for the affirmative application of the principles of restitution.”); Village of Bethesda v. Mallonee, 60 Ohio Ops. 107, 75 Ohio L.Abst. 257, 136 N.E.2d 457. Recovery back denied where failure to comply with competitive bidding requirements but good faith: Gamewell Co. v. Phoenix, 216 F.2d 928 (9th Cir.); State v. Fourth Nat’l Bank, 270 Ala. 135, 117 So.2d 145; Pillager v. Hewett, 98 Minn. 265, 107 N.W. 815; Burns v. Nashville, 142 Tenn. 541, 221 S.W. 828; Ellefson v. Smith, 182 Wis. 398, 196 N.W. 834; Tobin v. Town Council of Sundance, 45 Wyo. 219, 17 P.2d 666. Recovery back denied where various other illegalities: Vincennes Bridge Co. v. Board of County Commissioners, 248 F. 93, 99-100 (8th Cir.) (“since the county has paid it, it cannot recover it back because it has received, accepted, and is using, and has never tendered or offer [sic] to return, the bridges”); Miles Auto Co. v. Dorsey, 163 Ky. 692, 174 S.W. 502; Farmer v. St. Paul, 65 Minn. 176, 67 N.W. 990; Love Co. v. Carthage, 218 Miss. 11, 65 So.2d 568; Bride v. Slater, 263 S.W.2d 22 (Mo.); State ex rel. Hunt v. Fronizer, 77 Ohio St. 7, 16, 82 N.E. 518, 520 (“there can be no recovery back of the money paid without putting, or showing readiness to put, the other party in statu quo”) ; Scott Township School Dist. Authority v. Branna Const. Corp., 409 Pa. 136, 185 A.2d 320; Jones v. Centraba, 157 Wash. 194, 222, 289 P. 3, 13 (“when labor has been performed and material furnished in good faith under a contract with a municipal corporation, and such contract, by reason of some mistake in procedure, is void, the person furnishing the labor or material is entitled to retain money which has been paid him”); Frederick v. Douglas County, 96 Wis. 411, 71 N.W. 798. See also Moore v. Mayor, 73 N.Y. 238.
II. Recovery back should also simply be denied here on the basis of the equities.
A governmental subdivision seeking to recover back payments made to a contractor is essentially asking to be placed in the position it was before; it is seeking restitution. Restitution is founded on equitable considerations. Restatement, Restitution, 4-9.
When governmental officials do not correctly follow procedural statutes and let a purported contract which is actually invalid, the contractor, though he be ever so innocent and his . performance be ever so workmanlike, cannot recover on the purported contract, and he gets nothing. This result is necessary or the court would affirmatively use its powers to aid in the avoidance of the statutory procedural requirements. The court simply leaves the parties where it finds them. Everds Bros, v. Gillespie, 256 Iowa 317, 126 N.W.2d 274. The policy has been carried a step farther. If the contractor admits the contract is invalid and merely asks for the reasonable value of his work, he is also denied relief. This result is necessary for the same reason. Madrid Lumber Co. v. Boone County, 255 Iowa 380, 121 N.W.2d 523.
The recovery back situation involves yet another step. The contract has been let, the work has been done, the contractor has been paid, and then the governmental subdivision or landowners seek to recover back without restoring the contractor’s performance to him. This time the governmental subdivision or landowners are the ones asking the court to exercise its powers. But this time by the exercise of its powers the court would work a positive injustice — through the court’s own affirmative action the subdivision or landowners would end up with both the contractor’s *386performance and the money. Again the court should simply leave the parties where it finds them.
Fundamentally, two conflicting interests are involved: those of the public under the procedural statutes relating to public improvements, and those of the good-faith contractor who furnishes value. The task is to balance those interests. Restatement, Restitution, § 62, Comment b. When the contractor has not been paid, the procedural statutes are vindicated by denying him relief on contract or quantum meruit. Thus the court does not affirmatively use its powers to assist in the avoidance of the statutes. But when the contractor has been paid and the landowners retain his performance, the interests of the public are adequately protected by allowing recovery back only if the landowners show one or more circumstances, such as bad faith by the contractor, disentitling him to retain the payments in good conscience. Thus the court does not affirmatively use its powers to take the money from the contractor unless as a matter of justice he should not keep it. E. g., action of officials wholly beyond their powers, Gamewell Co. v. Phoenix, 216 F.2d 928 (9th Cir.) ; Laird Norton Yards v. Rochester, 117 Minn. 114, 134 N.W. 644; Grand River Township v. Cooke Sales & Service, 267 S.W.2d 322 (Mo.); Heese v. Wenke, 161 Neb. 311, 73 N.W.2d 223; haste in disbursement to contractor, Tobin v. Town Council of Sundance, 45 Wyo. 219, 253, 17 P.2d 666, 678 (“haste in disbursement, willful evasion of the law, fraud, collusion, concealment, or elements which disclose violations or principles of public policy”) ; contractor’s charges not at reasonable rates, Culver ex rel. Longyear v. Brown, 259 Mich. 294, 243 N.W. 10; expenditure for illegitimate purpose, Chaska v. Hedman, 53 Minn. 525, 55 N.W. 737; participation by contractor in evasion of statute — tailoring specifications to exclude all but him, Mayes Printing Co. v. Flowers, 154 So.2d 859 (Fla.); fraud, Ritchie v. Topeka, 91 Kan. 615, 138 P. 618; tender of return of performance — road equipment, Grand River Township v. Cooke Sales & Service, 267 S.W.2d 322 (Mo.).
In none of the cases in which recovery back has been allowed did the conduct of the contractor even approach the innocence of the conduct of the contractors here. See Annot. 140 A.L.R. 583. No circumstances exist in this case disentitling the contractors to keep the payments.
The result in this case is not changed by a couple additional features — partial payment of the contractors and partial payment of the assessments. All of the contractors received only part of their money and they respectively received varying proportions of their money. This does not alter the general principle allowing a good faith contractor to keep the money to the extent he has been paid. All this means is that the contractors who received a smaller proportion of their money are less fortunate than those who received a larger proportion. All of them, of course, will suffer irremediable loss to the extent they are unpaid, by virtue of Madrid Lumber Co. v. Boone County, 255 Iowa 380, 121 N.W.2d 523.
Nor is the general principle denying recovery back changed by the varying proportions of the assessments actually paid by the respective landowners. All this means is that not all landowners receive the same windfall. A landowner who paid none of his assessment has a complete windfall, whereas a landowner who paid half of his assessment has a 50% windfall and a landowner who paid his entire assessment has no windfall. Granting the landowners recovery back from the contractors would simply work a complete windfall to all landowners — the money and the performance both.
Our general rule preventing an unpaid, good faith contractor from recovering anything at law or in equity is harsh enough. We ought not extend the rule to the case *387of the paid or partly paid contractor, and thus affirmatively use the power of the courts to make a harsh result more harsh.
The decree of the trial court should be affirmed.
MOORE, C. J., joins in this dissent.