Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Philip L. Sullivan, Judge.
Before SPARKS, KERNER, and MINTON, Circuit Judges.
Plaintiff, a Michigan corporation, appeals from a decree dismissing for want of equity its amended complaint against the City of North Chicago, Gust F. Santry, Maryland Casualty Company, and certain individuals, who are the mayor, ex-officio president of the Board of Local Improvements of the City of North Chicago, the members of the city council, the city treasurer, city clerk and city attorney.
The complaint, filed August 25, 1934, shows affirmatively the requisite jurisdictional amount and the necessary diversity of citizenship. Since the appeal is from the dismissal of this complaint, we must accept as true the allegations of the complaint and determine whether they state any cause of action cognizable in the federal courts.
In 1924 the City of North Chicago decided to build a sewer and to pay for it by special assessment, as provided in the Local Improvement Act of Illinois, Chap. 24, Article 84, Ill. Rev. Stat. 1941. Accordingly, the city filed the necessary petition therefor in the County Court of Lake County, Illinois, the assessment roll was spread, and the County Court duly entered an order confirming the assessment. Immediately thereafter, the Board of Local Improvements advertised for bids and several months later accepted the $15,000 bid of Gust Santry for the construction of the gravity flow sewer.
The contract between North Chicago and Santry provided that on the last day of each month during the progress of the work the city should cause its engineer to make estimates of the amount and value of the work actually constructed and in its permanent place. Upon the Board's approval of the estimates it was to deliver to Santry vouchers levied against the special assessments to the amount of 85% of the estimated value of said work completed during the previous month. The vouchers were redeemable in bonds payable both as to interest and principal out of the special assessment, as and when collected. Until the work had been fully completed, accepted by the Board, and the acceptance certified and confirmed by the County Court of Lake County, the city was to retain the remaining 15% of the special assessment as a guarantee against poor workmanship and material.
Pursuant to the contract, Santry as principal and the Casualty Company as surety filed with the city a penal bond conditioned upon contractor Santry's faithful performance of his contract. Santry began the work on June 17, 1924, and finished it August 27, 1924. His work was not a faithful performance of the contract; it deviated greatly from the plans and ordinance, producing a different and inferior sewer. Yet, the city engineer fraudulently and wrongfully submitted as correct to the Board of Local Improvements two partial estimates during the progress of the work and a final estimate upon its completion. With neither inspection nor investigation of the work and with notice and knowledge of this noncompliance, the Board accepted these estimates when presented and, in disregard of its statutory duties, issued to Santry some $13,000 worth of bonds pursuant to the estimates. Without Santry's filing the required maintenance bond in lieu of the 15% reserve, he received in bonds some $1400 out of the reserve fund of $2800 retained to secure the faithful performance of the contract. These were not the only distributions from the special assessment fund: a special attorney, an inspector, the city engineer, and city attorney received from the fund vouchers or money for alleged services rendered.
On October 1, 1924, after the Board of Local Improvements had accepted the sewer and the work had been covered up, the plaintiff purchased $10,000 par value of the bonds from Hanchett Bond Company. From August 27, 1924, the date of the final completion and acceptance of the sewer, to the present date, the Board of Local Improvements has never caused to be filed in the County Court of Lake County, Illinois, a certificate of completion or noncompletion, although such is their mandatory duty to be performed within 30 days after the completion and final acceptance of the improvement. See Ill. Rev. Stat. c. 24, Art. 84, par. 84, and Blackhawk Const. Co. v. Village of Homewood, 343 Ill. 182, 175 N.E. 427.
In May 1931, at the suggestion of the city attorney and upon his assurance that the city would file its certificate of completion or noncompletion if so directed, the plaintiff petitioned the County Court of Lake County so to direct. Although that court entered such an order, the Board refused to obey the ruling. Plaintiff asked for a rule to show cause why the members of the Board should not be held in contempt, but that court denied the motion and set aside its order on the ground that it was a serious matter to hold a public officer in contempt.Since that time, there have been frequent negotiations between the plaintiff, the city and the Casualty Company, but they have failed because they were not conducted in good faith by the city, the Board, and the city attorney.
The sewer to this day serves the public and abutting property owners without cost to them, notwithstanding the deviations from the ordinance. These property owners and the Board are opposed to making the improvement conform to the ordinance and have a personal interest in defeating the assessment. Since 1925 the Board and the city have requested Santry and the Casualty Company to complete the sewer in accordance with the ordinance, but neither Santry nor the Casualty Company have complied with the request.
The plaintiff seeks relief against these actions. It requests an injunction commanding theBoard members to cause a certificate of cost for the improvement to be filed and to state whether the improvement conforms with the ordinance; that it be adjudged that the Casualty Bond is breache; that an accounting be had and that judgment be entered in favor of the plaintiff.
At the threshold we are met with the contention that the District Court lacks jurisdiction to entertain plaintiff's complaint. With this contention we do not agree.
It appears to be conceded that certain of the rights claimed by the plaintiff exist by virtue of the Illinois statutes, and defendants argue that these statutes contemplate the submission of all questions arising out of the creation and administration of a special or local improvement to a state court of record. Even so, that fact does not prevent plaintiff from seeking the protection of these rights in a federal court. The remedy and the right must not be confused.Although a state statute can neither enlarge the remedial right to proceed in a federal court, Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 497, 43 S. Ct. 454, 67 L. Ed. 763, nor reduce that right, Mississippi Mills v. Cohn, 150 U.S. 202, 14 S. Ct. 75, 37 L. Ed. 1052; Guffey v. Smith, 237 U.S. 101, 114, 35 S. Ct. 526, 59 L. Ed. 856, still the state created substantive right will be protected by the federal courts if they can give a remedy. In the instant case the District Court was not asked to be "a sort of appellate tribunal over the County Court of Lake County or a super-Board of Local Improvements, or a super-administrative agency." To be sure, if such were the case, it could not and would not exercise jurisdiction. In our case the gravamen of the plaintiff's cause is not the mere existence of an unsatisfied statutory right; it is the manner of the defendants' disregard of these alleged rights which prompts the plaintiff to seek the aid of a federal court of equity in putting to an end ...