Red River Valley National Bank v. City of Fargo

Engerud, J. The complaint sets forth three causes of action, the first of which is in substance as follows: On October 7, 1895, the defendant city issued to McDonald & Q’Neil a warrant for the payment to them of $500 out-of the Front street paving fund of said city, which warrant was issued in part payment of the agreed price for paving part of said street. That said paving had been done by McDonald & O’Neil under a contract with the city wherein said contractors agreed to do the paving for a fixed price, and were to be paid by the city in warrants drawn upon, and payable out of, a paving fund to. be created and collected by the defendant under and pursuant to the laws of the state applicable to the paving of cities. That the warrant was presented for payment, and not paid for want of funds, and was subsequently assigned to plaintiff. That the city collected and received into its treasury money properly applicable to the payment of the warrant in question sufficient in amount to pay the same, but wrongfully applied such money to the satisfaction of other warrants subsequently presented and registered for payment. It is further alleged that, if sufficient money had not been collected to pay all such paving warrants, such failure was due to the neglect of the city to take proper steps to that end. The second and third causes are in the same form. The second is based upon a second Front street paving warrant held by plaintiff, and the third is upon a .similar warrant issued under a contract for paving Eighth street, similar in terms to the Front street contract. The answer was a general denial and certain affirmative-al [92] legations, which will be hereinafter mentioned, to the effect that the contracts and warrants in question were invalid. There was a trial by jury, and a directed verdict for plaintiff. Defendant’s motion for a new trial based upon a statement of the case was denied. The appeal is from the judgment, and the order refusing a new trial. It is claimed in behalf of the appellant that when the city council decided to have this paving done, and made the contract therefor, the city’s indebtedness exceeded the constitutional limit of 5 per cent of the assessed valuation of taxable property therein; that the contract, at least to the extent of the cost of street intersections, purported to create an indebtedness against the city payable by general taxation; that no appropriation for that purpose preceded the contract, and there was no record of the yea and nay vote of the members of the council with respect to the incurring of the debt and the disbursement of the moneys therefor. By reason of these facts, all of which did not appear in the case of Pine Tree Lumber Co. v. City, 12 N. D. 360, 96 N. W. 357, which involved this same paving contract, it is urged that that case is not decisive of this; and the correctness of that decision in some respects is also questioned. It will be unnecessary to pass upon these propositions, because we are agreed that the city is not in a position, under the undisputed facts of this case, to escape liability by urging the invalidity of the acts of its officials which preceded and resulted in the payment into its treasury of the money collected and received by it for the sole purpose of paying for that part of the value of the paving represented by plaintiff’s warrants. With respect to the Front street paving, the undisputed facts are that on July 29, 1895, pursuant to some resolution or ordinance which does not appear, the city made a contract with McDonald & O’Neil whereby the latter undertook to pave a part of Front street for an agreed price, payable' in city warrants from time to time as the work progressed. The paving was completed and accepted, and warrants were issued to the contractors in payment therefor; amongst them being the two warrants in suit, Nos. 11,217 and 11,219. The total cost of the work for which warrants were issued was $23,025.22. For some reason which does not appear, the entire cost of the paving was not assessed upon the abutting property. The cost of paving the street intersections was paid for from a fund styled “Street Intersection Fund,” which was created by general taxation. The remainder of the cost of the work was pro [93] vided for by special assessments upon the abutting property. The cost of the intersections was $4,952.89, for which warrants were drawn upon the Front street intersection fund, and all of these warrants -have been paid. The special assessments aggregated $18,025.22, and warrants aggregating that amount — amongst them being the two in question — were issued upon such special assessment fund. All of these warrants have been paid, except the two in question, and a third one, which was presented for payment, registered and marked, “Unpaid for want of funds,” tenth in order after No. 11,219. All these special assessments have been paid, except one, the amount o'f which does not appear; and the lot subject to this unpaid assessment was sold and bid in by the county at the delinquent tax sale of 1897. There were ten special assessment warrants presented to and registered by the city treasurer on his warrant book after the two in question. Nine of these subsequently presented warrants, aggregating more than $1,500, have been paid. It was the duty of the treasurer to immediately register each warrant presented for payment, and to pay such registered warrants, or call them in for payment, in the order of presentation, as soon as he received sufficient money to pay them, belonging to the fund upon which the warrants were drawn. Rev. Godes 1899, sections 1293-1295, 2178. The money derived from special assessments cannot be diverted to any other use than the payment of the obligation for which the assessment was made. Rev. Codes 1899, section 2183. When sufficient money had been collected from the special assessment to pay all the warrants presented and registered for payment prior to the two in question, every dollar thereafter coming to that fund, up to the amount required to redeem each of these warrants, became impressed with a trust'in favor of the holder of each warrant, and the city was the trustee. If the trust funds were, misapplied, the city is liable to the same extent as any other unfaithful trustee. Pine Tree Lumber Co. v. City, 12 N. D. 360, 377, 96 N. W. 357, and authorities there cited. The limitations upon the débt-creating power, the inhibition against contracts without a prior appropriation therefor, the provisions requiring the recording of the yeas and nays upon propositions to appropriate or expend money, and other provisions of that character, whether constitutional or statutory, were designed for the protection of those upon whom, as taxpayers, the burden of the [94] municipal obligation rests. It is self-evident that those for whose benefit these protective provisions were designed can waive that protection. In this case such waiver is evidenced most unequivocally. The intersection fund warrants have all been paid. Those liable for assessments have paid into the oity treasury, to be applied Upon the special assessment warrants in the order of registration, money enough, which, if properly applied, would have paid the warrants in question and all of those which had been previously registered.. The money paid for these special assessments was paid to and received by the city for the sole purpose of paying for this paving. It is too clear for argument that the city cannot be heard to say that it is under no obligation to pay the money so received to those for whose benefit it was paid because those who paid it could not have been compelled to do so. Substantially the same state of facts was shown in support of the third cause of action for the Eighth street paving warrant. (103 N. W. 390.) It is finally urged that the diversion of the money was the wrongful -act of the city treasurer, for which he, and not -the city, is liable. That argument is manifestly untenable. There is no privity between the creditors of the city and the treasurer. The latter is the agent of the muncipality, and for any violation of his duties he is answerable 'to his principal. The receipt of the money imposed an obligation upon the city in favor of the contractors or their assignee. The malfeasance or misfeasance of the treasurer can no more absolve the city from its obligations to third persons than could like acts by an agent of a .private person relieve his principal of like obligations. Some of the evidence which was admitted to establish some of the material facts upon which we base this decision was objected to for incomipetency and immateriality. Numerous assignments of error are based .upon such rulings of the trial court. The materiality of the evidence has already been shown. Counsel have not pointed out any reason to question the competency of the proof, and, where a ruling is not palpably erroneous, this court will not search for error. Supreme Court rule 14. The judgment and order appealed from are affirmed. All concur.