United States Trust Co. v. Incorporated Town of Guthrie Center

181 Iowa 992
CourtSupreme Court of Iowa
DecidedNovember 26, 1917
StatusPublished
Cited by15 cases

This text of 181 Iowa 992 (United States Trust Co. v. Incorporated Town of Guthrie Center) is published on Counsel Stack Legal Research, covering Supreme Court of Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States Trust Co. v. Incorporated Town of Guthrie Center, 181 Iowa 992 (iowa 1917).

Opinion

Salinger, J.

1. construcSon tíon :°saíe'deopinion ofnattomey. I. The agreement which is the basis of the controversy is signed by the appellant, and offers par and accrued interest, if any, for $10,000, more or less, of 0 per cent sewer disposal plant bonds of appellee, being dated as soon as practicable after July 1, 1914, due 10 years from date, and in $500 denominations; $500 of said bonds to be optional annually from 4 to 9 years from their dates, inclusive; balance due in 10 years from date; and for $30,000, more or less, of 6 per cent sewer bonds. The contract provides that:

“Prior to delivery of bonds to us, you are to furnish us full certified copy of records of all proceedings had preliminary to and authorizing the issuance of said bonds necessary to satisfactorily evidence their legality to our counsel.”

There is the further statement that there is given over therewith a check for $1,000, “to be held by you as a guaranty of good faith, said check to be returned to us forthwith in case said bonds are not legal to the satisfaction of our counsel, without expense to us.”

There is a controversy over whether the amount of [994]*994money that could be lawfully raised by taxation, within the legal and constitutional limitations of the laws and the Constitution of the state of Iowa, by the defendant during the life of the proposed bonds, would or would not be sufficient to pay the bonds and the interest thereon. Attorneys for plaintiff advised it that, in their opinion, said $10,000 issue was not valid.

The theory of the defendant is that this opinion is reviewable, and that it was rightly disregarded because the issue is in fact legal. The trial court proceeded as it would have if no contract provision making the attorney’s opinion a factor existed — treats that provision as redundant and surplusage. It may not so be dealt with. Haney-Campbell Co. v. Preston C. Assn., 119 Iowa 188, at 192, 193. And see Butler v. Tucker, 24 Wend. (N. Y.) 447; Barton v. Hermann, 11 Abb. Prac. N. S. (N. Y.) 378; Gray v. Central R. Co. of N. J., 11 Hun (N. Y.) 70; Boyd v. Woodbury County, 122 Iowa 455, 458. The point is as well stated by the Supreme Court of Nebraska in Thurman v. City, 90 N. W. 253, a bond bid case, as it is anywhere. It is there said that, where a party stipulates that his contract of purchase shall be subject to the opinion of his attorney as to the title to or legal status of the thing to be purchased, the plain purpose being to make his act dependent upon the personal opinion of his legal adviser, the sole requirement is that such legal adviser in fact pass upon the subject and give his honest opinion, and the merits of an honest opinion actually given are not subject to review — that his decision is conclusive, provided he really passes upon the question and reaches a conclusion honestly, whether his conclusion is right or wrong.

The question is not whether the buyer “ought to be,” but whether, acting in good faith, he is, satisfied. Inman Mfg. Co. v. American Cereal Co., 124 Iowa 737; Singerly v. [995]*995Thayer, 108 Pa. St. 291; Liberman v. Beckwith, (Conn.) 65 Atl. 153; Hollingsworth v. Colthurst, (Kans.) 96 Pac. 851. Good faith is the sole limitation. Inman Mfg. Co. v. American Cereal Co., 124 Iowa 737. So held in bond bid cases, on refusal because bonds were invalid, in opinion of buyer’s attorney. Sargent v. Sibley, 6 Ohio Dec. 1219. So, unless the opinion is fraudulent, capricious and in bad faith. City v. Rollins, (Tex.) 127 S. W. 1166; Michigan Stone & Supply Co. v. Harris, 81 Fed. 928; Webb v. Trustees, (N. C.) 55 S. E. 719. In cases other than agreements to take bonds, it is held the buyer may refuse to take the goods that are to satisfy him, unless the refusal is a mere caprice (Singerly v. Thayer, 108 Pa. St. 291, Manning v. School Dist. [Wis.] 102 N. W. 356); or his dissatisfaction is feigned [McCormick Harv. Mach. Co. v. Okerstrom, 114 Iowa 260, at 264, 265); or he acts with a fraudulent motive (Liberman v. Beckwith, [Conn.] 65 Atl. 153). Some cases hold the right to reject for failure to satisfy is absolute. Wood Machine Co. v. Smith, (Mich.) 15 N. W. 906. But we do not care to go that far. It must not be an unreasonable refusal, in a case where the title was good “beyond all dispute.” Vought v. Williams, (N. Y.) 24 N. E. 195. It must be an honest refusal (Hartford S. Mfg. Co. v. Brush, 43 Vt. 528, Daggett v. Johnson, 49 Vt. 345); a good-faith refusal (Stotts v. Miller, 128 Iowa 633, Inman Mfg. Co. v. American Cereal Co., 124 Iowa 737, McCormick Harv. Mach. Co. v. Okerstrom, 114 Iowa 260, Haney-Campbell Co. v. Preston Cream. Assn., 119 Iowa 188). Where an expressed ground for rejecting a certificate of health is frivolous, and it does not appear what the true ground of the rejection is, the rejection will not base a forfeiture. Miesell v. Globe Mut. Life Ins. Co., 76 N. Y. 115. It must not be arbitrary. O’Dea v. City, (Minn.) 43 N. W. 97; Stockton & V. R. Co. v. City of Stockton, 51 Calif. 328; Duplex S. B. Co. v. Garden, 101 N. Y. 387; Folliard v. Wallace, 2 Johns. (N. Y.) 395.

[996]*996It does not matter that a title rejected by the attorney is in fact perfect, if the rejection is in good faith. Church v. Shanklin, (Calif.) 30 Pac. 789; Liberman v. Beckwith, (Conn.) 65 Atl. 153; Hollingsworth v. Colthurst, (Kans.) 96 Pac. 851; Watts v. Holland, (Va.) 11 S. E. 1015. It is immaterial that, after the bonds have been refused and sold to other parties, the state Supreme Court adjudges the bonds to be valid, as the purchaser then has no opportunity to accept them with the benefit of such adjudication. City of Great Falls v. Theis, 79 Fed. 913. In Kihlberg v. United States, 97 U. S. 398, a contract between the United States and A., 'for the transportation by him of stores between certain points, provided that the distance should be “ascertained and fixed by the chief quartermaster.” The distance as ascertained and fixed by the chief quartermaster was less than by air line or by the usual and customary route. It was held that his action is, in the absence of fraud, or such gross mistake as would necessarily imply bad faith, or a failure to exercise an honest judgment, conclusive upon the parties.

1-a

It is not disputed that counsel, to whom the matter was submitted, gave it as their opinion that the $10,000 bond issue was not legal. There is neither claim nor proof that the opinion is arbitrary and in bad faith, unless that is made out by the fact that counsel for appellee and the trial court differ from that opinion. Indeed, the only argument here is that the opinion is and was held to be an erroneous one, and therefore cannot control. Reliance is placed upon Hoffman v. Colgan, (Ky.) 74 S. W. 724. It does not rule this case. It turns wholly on the status of an opinion founded on a mistake of fact. In its essence, it is a rightful decision that, when it would presume fraud if the giver of the opinion knew what the true facts are, therefore it should rather be presumed that the opinion would have [997]

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