Burt v. Road Improvement District No. 11

Wood, J. On the 10th day of April, 1920, one J. A. Burt (hereafter called .appellant) entered into a contract with Road Improvement District No. 11 '(hereafter called district) to construct a road for the district. He was to complete the work within two hundred working days. The appellant deposited a certified check in the sum of $5,000 to guarantee the execution of the contract. The commissioners of the district refused to award the appellant the contract unless the bonds of the district could be sold for par. Appellant procured One H. C. Argo, president of the First National Bank of Cotton Plant, Arkansas, to make a contract with the district to buy the bonds at par. Appellant gave Argo his notes in the sum of $6,200 as a consideration therefor. Argo transferred the notes to the district as part payment of the purchase price of the bonds. Appellant began work on April 26 by putting a crew to moving fences and telephone poles and by employing one W. T. Burks as a subcontractor to grade part of the road. . Appellant failed to make bond. The appellant was paid for the work done in May and June, amounting to the sum of $7,177.40. Appellant paid W. T. Burks for the work done by him in May, but failed to pay him for his work in June. The district .refused to pay appellant for the work done in July, due August 10, because of his alleged failure to give bond and to pay his subcontractor, but told him it would pay him if he would give the bond, pay his men, and proceed to expedite the work. On August 23 the district employed other contractors to assist appellant, by grading the road through the bottom lands. Burks performed his subcontract and completed the same about August 30. There was due him for his work the sum of $10,445.73. On September 27th the district cashed the $5,000 certified check of the appellant and paid same to Burks, leaving a balance due of $5,445.73. On October 27th the appellant made an assignment of all his property in this State for the benefit of his creditors. This action was begun by Burks against the appellant and the district and its commissioners. He set up the contract between the appellant and the district, and alleged that he had a subcontract under appellant; that he performed work according to his contract, and that there was due him the balance of $5,445.73. He made the trustees of appellant in the assignment parties, and also the People’s Bank of DeVall’s Bluff, the depository of the district, and'sought to impound the funds in its hands for the payment of his claim. The appellant and the trustees in the assignment answered and alleged that Burks had been paid all sums of money due him directly by the district. They, made their answer a cross-complaint against the district, setting up the contract of the district with the appellant, and alleged that he did all the work of clearing the right-' of-way, which amounted to the sum of $5,000; that'the district had never paid; that he had sublet the excavation work to Burks; that the district had breached the contract in letting out work to others; and' that, but for such breach, appellant would have been able to complete the work at a large profit. They alleged that appellant had deposited a certified check with the district for $5,000, which the district had cashed, and they prayed that an accounting be had, and that they be given a decree for the .amount due the appellant. The district answered the cross-complaint, denying that it had violated the contract with appellant, and denying that it was indebted to him in any amount, and alleged that the appellant had failed to give bond, and had abandoned the contract; that he was indebted to the district in the sum of $6,200 on notes given by him to Argo, which had been transferred to the district, for which it asked judgment, or that these notes be set-off against any amount that might be found due the appellant. It .also made its answer a cross-complaint against Burks, and alleged that the appellant had refused to give bond, and had - abandoned his contract; that, under a provision of the contract with the appellant, the district might pay any subcontractor for the work performed by such subcontractor out of any money due the contractor, and that, under such' provision of - the contract, the district had paid to Burks the sum of $5,000; that at that time nothing was due from the district to the appellant, and that the payment of $5,000 to Burks was therefore contrary to the contract, and illegal. The district therefore prayed judgment against Burks in the sum of $5,000. Burks answered the cross-complaint of the district, and set up that, after the controversy arose .between the appellant and the district, the commissioners and its engineer had Burks to continue the work of the district, and that the $5,000 for which the district asked judgment against him was paid him for construction work which he performed for the district under supervision of its engineer, after the controversy arose between the appellant and the district. Burks also, in an amendment to his ■ complaint, asked that a writ of mandamus he awarded him, directed to the commissioners, commanding them to issue to him certificates of indebtedness for the amount found to Be due him by the district, and that they be required to levy a tax to pay the same. After the suit had been filed the district, in the summer of 1921, made a new contract with Burks to complete the improvement at a much lower cost than that fixed in the original contract between the appellant and the district, and appellant asked that in the accounting he be allowed credit for the amount saved by the district under this new contract with Burks. The trial court, after hearing the testimony, found that appellant failed to give the bond required by the statute and by his contract with the district, and that he was not entitled to recover on his claim for profits against the district; that the district was indebted to the appellant in the sum of $10,502.75, which amount should be credited by $7,177.40, leaving a balance due him of $3,325.35; that appellant was indebted to the district in the sum of $6,200, with interest thereon, for the notes, for which the district should have a decree against the appellant, and that, after deducting the $3,325.35 due appellant from the $6,200 and interest due the district, the appellant would be due the district the sum of $3,042, for which the district should be allowed judgment against'appellant and his trustees. The court further found that the appellant was entitled to a credit in the sum of $5,000 for the certified check which he had deposited with the district, which amount should be set-off against the sum of $5,000 paid by the district for the appellant on his indebtedness to Burks. The court also found that Burks had no cause of action against the district, and dismissed his complaint for want of equity against the district and the Bank of DeVall’s Bluff, and also dismissed the cross-complaint of the district against Burks. The court rendered a decree in favor of Burks against the appellant in the sum of $5,445.73 principal, and $612.64 interest, making the total sum of $6,058.37. The appellant, the district, and Burks appeal from the decree in so far as it is adverse to their respective interests. Such other facts as we deem necessary will be stated as we proceed. 1. We will first dispose of the issues presented by the appeal of the appellant. The first question is, was the appellant entitled to recover under the contract? Section 5446 of C. & M. Digest provides as follows: “All contractors shall be required to give bond for the faithful performance of such contract as may be awarded to them, with good and sufficient security in an amount to be fixed by the board of commissioners, and said bond shall contain an additional obligation that such contractor, or contractors, shall promptly make payment to all persons supplying him, or them, labor and materials in the prosecution of work provided for in such contract.” Road improvement districts created under what is. known as the Alexander road law, act 338 of the Acts of 1915, ch. 81, C. & M. Digest, §§ 5399 to 5462 inclusive, are g-wasi-governmental agencies of special and limited powers. They can only exercise such powers and in such manner as is expressly authorized by the law under which they are created, or which, by necessary implication, is included in the powers expressly conferred. The language of the above provision in regard to the bond shows that it is mandatory in terms, and a compliance therewith is prerequisite to the validity of any contract between the district and contractors for the building of roads which such district undertakes. The bond is for the benefit and protection, not only of the district, but also of those who supply labor or material to be used in the construction of the improvement. We cannot agree therefore with learned counsel for the appellant that the giving of the bond is a condition subsequent, and that it does not affect the validity of the contract. On the contrary, the giving of this bond is a condition precedent, and essential to the validity of the contract for the building of roads under the road improvement district law. The commissioners therefore had no authority to enter into this contract with the appellant, and to allow him to enter upon the performance thereof, before he had executed the bond required by the above statute. While the statute does not specify whether the bond shall be made before or after the contract is actually signed, the language clearly contemplates * that no contract entered into between the district and contractors shall be binding on the district until the bond is made. Such is the effect, we believe, of the doctrine of our own cases construing similar pro-lusions, and the authorities generally. Wiegel v. Pulaski County, 61 Ark. 78; Altheimer v. Board, 79 Ark. 234; Carswell v. Hammock, 127 Ark. 119; Ellison v. Oliver, 147 Ark. 267; Ark. Nat. Bank v. School Dist., 152 Ark. 507; 19 R. C. L. 1063, sec. 352; 28 Cyc. 1043; 9 C. J. 730; Bowditch v. Supt. of Streets of Boston, 46 (Mass.) N. E. 1026; Baker v. So. Const Co. (Ky.), 47 S. W. 608; Donnelly on Public Contracts, § 17. It follows that the contract between the appellant and the district was ultra vires and void because no bond was executed in compliance with the statute, and appellant is entitled to recover nothing under the contract. The decree of the court was correct in so holding. 2. The court allowed appellant the sum of $10,-502.75 as quantum meruit for work lie had done, and of which the district had received the benefit, and charged him with the amount the district had paid him and with three notes in the aggregate sum of $6,200 which the district held, and rendered a judgment in favor of tb-^ district for the balance. The appellant contends that the amount allowed him for his work on a auantum meruit basis was too small, and that the court also erred in not. canceling his notes. It could serve no useful purpose to set-out and discuss at length, the testimony bearing upon the issue as to whether or not the court should have allowed the appellant a greater sum for the work done by him. The testimony of the engineer of the district tended to show that the work done by appellant was of no real value to the district until the road was completed; that the road, which he had graded in spots, did not become of any real benefit to the district until the entire roadway was completed in 1921. In the meantime a considerable portion of the roadway which appellant had done had washed away because of appellant’s failure to properly drain the work. The engineer deducted the amount that was necessary to pay for the work that had washed away from the cost of doing the work at present prices, which left the sum of $10,502.75, the amount allowed the appellant. The appellant contends that he should have been allowed the amount that it cost him to do the work at the time it was done. But the district, on a quantum meruit, cannot be made to pay more than the value of the work at the time it received the benefit thereof, and, as the preponderance of the evidence shows, the district did not get the benefit of his work until the summer of 1921. Therefore the measure of appellant’s recovery, if he is entitled to recover at all, is the value of his work to the district at that time. 9 C. J. p. 820, § 157. We cannot agree with learned counsel for the district that the appellant is not entitled to recover on a quantum meruit, and that the district is entitled to recover back the amount paid appellant, because, forsooth, the appellant failed to execute the bond, which thereby rendered the purported contract ultra vires and ineffectual. The district and the appellant were equally at fault and censurable, the one for permitting and the other for performing work without complying with the statute as to the execution of a bond. The commissioners of the district did not stop appellant from proceeding with the work after they knew that the bond had not been executed, but, ou tlie contrary, permitted bim to proceed with the same, and, in effect, received and accepted the benefits of his work by paying for what he had already done and allowing him to perform that for which he had not been paid before he abandoned the ' work. While the contract was ineffectual, the work which the appellant did, and the district permitted, did not involve any fraud against the district; and, while the contract was ultra vires, yet the entering into such contract is not immoral. The language of the statute does not expressly prohibit the making of such a contract and does not expressly make it unlawful to enter into such a contract. Therefore it does not come within the general rule that, where a contract is immoral or expressly prohibited, or is malum prohibitum, no court of justice will entertain an action upon it or upon any asserted rights growing out of it. See Thalman v. Lewis, 124 Ark. 6; Carter v. Bradley County Road Imp. Dists., 155 Ark. 288. The appellant did the work, the district permitted him to perform it under the supervision of its engineer, and it received the benefit of such work, and it is but just and equitable that the district should pay for the value of the benefit it received at the time the benefit was realized. The court did not err in allowing judgment in favor of the appellant against the district in the sum of $10,502.75, less the amount that had already been paid him by the district. The judgment rendered by the court in favor of the district against the appellant for the aggregate amount of the notes, $6,200 and interest, was likewise correct. The appellant testified that he gave Argo the notes to help him sell the bonds. He was willing to stand that much loss to hasten the sale of the bonds, so that he could go on with his work. His superintendent of the work advised him that he had a good profit in the job, and that he had best take that much loss in order for the district tb get money on the bonds. His idea in giving the notes was that .the’ bonds could be sold, the district get the money, and he would be paid for his work. Appellant’s superintendent testified that the contract could not be let because the bonds could not be sold at par. He told Arg’o, appellant’s banker, about it, and he got in touch with Thweatt, one of the attorneys of the district. The notes were given to make the bonds bring par. , Then they revised the bid to take up the $6,200. Appellant was still under all bidders. Argo testified concerning this that he made a contract with the district to buy the bonds. * * * The notes for $6,200 were given him to take care of the difference between the bonds at 96c and at par. The district was not willing to sell below par. When the bonds were finally sold, he turned appellant’s notes over to the district as cash and as part of the purchase price of the bonds. The whole issue of bonds was $155,000. He sold $75,000. He paid $7,500 by paying $1,300 by check and giving the district appellant’s notes for $6,200. The district got $67,000 from the bond purchasers, $1,300 from witness by check, and $6,200 of appellant’s notes, and witness’ original deposit of $2,500, making $77,500 for $75,000 in bonds. Witness lost $3,800 on the transaction, and the arrangement was that the appellant should lose '$6,200. The testimony of Thweatt, one of the'attorneys of the district, who was mainly instrumental in negotiating the contract for the district, was to the effect that the appellant was the successful bidder for the work of constructing the road for the district. The commissioners first determined not to award a contract unless they could dispose of the bonds at par. Appellant’s bid was $6,200 less than the piice of the next lowest bidder. Appellant agreed that he would find a buyer for the bonds at par if the district would permit him to add $6,200 to the price for his work. This proposition the district ac1 cepted, and the contract figure included the $6,200 added to the bid' prices. Appellant then arranged for Argo to lray the bonds at par, and gave him the $6,200 in notes as a consideration therefor. Argo had no knowledge of the arrangement between the district and the appellant that his bid might be increased the amount of the notes to Argo. Appellant wanted Argo to make the contract to buy the bonds, and agreed to give him $6,200 consideration therefor, which he did by executing his notes. Argo signed the contract to buy the bonds, and appellant carried out his contract with Argo, which was the consideration for the notes. The notes were afterwards transferred to the district. The district received them from Argo at the time of the transaction in lieu of that much cash. It thus appears that the notes were unconditional. They were given for a consideration that had already been performed by Argo in the execution of the contract to buy bonds of the district. When the district accepted Argo as a satisfactory buyer for the bonds, the consideration for the. notes was performed. The fact that the commissioners of the district entered into a contract whereby they allowed appellant to increase his bid in the amount of the notes did not destroy the consideration upon which the notes were executed to Argo and the consideration from the district to Argo in the contract of the sale of the bonds to him. The district obtained the notes from Argo for a valid consideration, and owns the same, and the appellant is liable therefor. The statute under which this district was created does not prohibit the commissioners from selling bonds below par. The appellant was awarded the contract, and thus secured the opportunity and privilege for doing the work, and received in consideration for his notes an increase of $6,200 in the price that was to be paid him for work that he was to do. The preponderance of the testimony shows that he would have been paid this amount if he had not abandoned the work. Although the contract was ultra vires, there was nothing in the law prohibiting the commissioners from allowing him the sum of $6,200 increase in his original bid for the work that he had engaged to do, and, as we have stated, the preponderance of the evidence shows that he would have'realized this additional amount which the commissioners agreed to pay him if he had completed his work. The district therefore is entitled to recover the amount of the notes. 3. The court erred in not rendering a decree in favor of Burks against the district in the sum of $5,445.73, with interest. The testimony of Burks was to the effect that, as a subcontractor under the appellant, he did work for which the district received the benefit, and he had not been paid for such work. The total amount of his work in the aggregate was $13,706.82. The district had paid him .thereon the sum of $8,261.09, leaving’ a balance due him of $5,445.73. He performed the work under the supervision of the engine'er of the district. The engineer testified, among other things, that this sum was the correct amount due Burks for his work, and that this amount was due on or before August, 1920. He further testified that the work done by Burks was entirely satisfactory. The testimony tended to prove that the district had withheld $5,000, the cash in its hands which had been deposited by the appellant, and which it had withheld from him because he had failed to pay his subcontractor, and that it turned over this amount to Burks, on the theory that he should have pay for his work and that they were authorized to pa3>- him under the provisions of § 5448 of 'Crawford & Moses’ Digest. That section provides, among other things, that “when it appears to the board of commissioners that the contractor is not paying for labor and material, they may withhold, in addition to the fifteen per cent., any and all amounts due the said contractor until the labor and material has been paid for, or, if they deem it best, they may, upon proper notice to the contractor, pay out to laborers and material-men such funds as are on hand to the credit of the contractor.” While Burks’ contract was with the appellant, and while he had no contract with the district, yet the fact remains that Burks did the work under the supervision of the engineer of the district. The commissioners of the district knew that he had not been paid for the work. Neither had the district paid the appellant for this work. The work was satisfactory'; the district received the benefit of it; the district does not deny that the work was worth the amount which Burks claims; therefore it occurs to us that, in equity and good conscience, the district is liable upon a quantum meruit to Burks in the sum of $5,445.73, with interest at 6 per cent, from August, 1920. For this sum the court should have entered its decree. See Kramrath v. Albany, 127 N. Y 575; Buck v. Eureka, 124 Calif. 61; New Athens v. Thomas, 82 Ill. 259; Frankfort Bridge Co. v. Frankfort, 18 B. Monroe, 41; Hardwick v. Wolcott, 61 Atl. 471. The cause will be remanded, with directions to the trial court to enter final decrees in accordance with this opinión, and for such other and further proceeding’s as may be necessary to conserve the rights of the parties.