Municipal Securities Corp. v. Buhl Highway District

RICE, C. J. Respondent, as assignee of the Hanchett Bond Company, recovered a judgment against appellant [379] for a sum of money deposited as a guarantee of good faith upon the execution of a contract for the purchase of appellant’s bonds. The contract provided that certified copies of the proceedings leading up to the issuance and sale of the bonds should be submitted to certain named attorneys, or some other reputable bond • attorney satisfactory to the Hanchett Bond Company, for an opinion as to the legality of said bonds. It was further provided that if the proceedings should fail to receive the attorney’s approval, the sum deposited was to be returned promptly. A certified copy of the proceedings was submitted by the Hanchett Bond Company to F. William Kraft, who failed to approve the proceedings leading up to the issuance of the bonds. The undisputed evidence shows that Mr. Kraft is a reputable bond attorney, and there is nothing in the record which impeaches in the slightest degree his good faith in disapproving the bond issue. Unless the contention of appellant, which will be hereafter considered, is valid, respondent was entitled to recover judgment. (United States Trust Co. v. Incorporated Town of Guthrie Center, 181 Iowa, 992, 165 N. W. 188; Thurman v. City of Omaha, 64 Neb. 490, 90 N. W. 253; City of Amarillo v. W. L. Slayton & Co. (Tex. Civ.), 208 S. W. 967; City of Rome v. Breed, Elliot & Harrison, 21 Ga. App. 805, 95 S. E. 474; City of Omaha v. Venner, 243 Fed. 107, 155 C. C. A. 637.) It is alleged in the complaint that one of the reasons for the disapproval of the bonds by Mr. Kraft was because they were sold below par, contrary to law. Appellant’s contention is that the sale of the bonds is a contract; that the complaint sets up that appellant and respondent entered into an illegal contract; that both parties violated the law by entering into a contract for the sale of the bonds below par; that the contract is the basis of respondent’s action, since it seeks to recover the earnest money deposited in accordance therewith. The contract to purchase provided on its face for the purchase of the bonds at par, with accrued interest. It appears from the record, however, that on October 10, [380] 1917, prior to the publication of notice for the sale of the bonds, the board of commissioners of appellant adopted a resolution, reciting that in the best judgment of the board it would be impossible to sell the bonds at par, and therefore appointing and employing L. A. Trowbridge, president of the Hanchett Bond Company, its fiscal agent, for the purpose of marketing its bonds, and agreeing to pay him for his services, when rendered, $42.86 on each one thousand | dollars of bonds sold. In Mr. Kraft’s opinion it is stated: “The result of such arrangement is to authorize the sale of the bonds at less than par in direct violation of the statute forbidding bonds to be sold at less than par.” (C. S., see. 1554.) We think the appointment of a fiscal agent was a matter separate and distinct from the contract of purchase of the bonds. (See McConnon v. Holden, ante, p. 75, 204 Pac. 656.) If thp resolution appointing the fiscal agent was illegal, as it probably was, it could not have been enforced, nor could-it have been set up as a defense in any action brought upon the contract to purchase. The other objections noted by Mr. Kraft were sufficient to justify him in disapproving the bonds. The respondent, therefore, did not rely upon an illegal contract, and the judgment is affirmed. Costs awarded to respondent. , Budge, McCarthy and Dunn, JJ., concur. (August 3, 1922.) Pleading and Practice — Contracts—Illegality op. 1. Where an amendment to a pleading is inconsistent with the original, the amended pleading must be resorted to in determining the issues tendered and the facts admitted. 2. Where a contract eimtains illegal provisions, and also a separable legal agreement, the latter will be enforced if no necessity exists for reliance by the party seeking to enforce it upon any of the illegal provisions thereof.