Carthan v. Lang, 69 Iowa 384

Carthan v. Lang

69 Iowa 384 | Iowa | 1886

Beck, J.

l. school citshouse fiii-o1’ traúLpaytion. I. The petition alleges tbe following among other matters. Tbe electors of the independent school-distUct of Hardin voted a tax of $1,000 to build a school-house. The plaintiff is a resident and taxpayer of the district. The directors contracted for the building of tbe scbool-house with one *385Adams, tbe materials to be of tbe best quality, and tbe work to be done “ in a substantial and workman-like manner,” and agreed to pay him for the work and materials $800. It is alleged that the directors and Adams confederated together to defraud the district by the erection, by the contractor, of a house of a character inferior to the building required by the contract, and the acceptance and payment therefor by the directors. Other charges of fraud are made in the petition, which, in the view we take of the case, need not be here recited. By an amended petition it is shown that there has been a change of the directors of the district, and those who became directors after the original petition was filed, with those still holding office, together with Adams, are made defendants. It is alleged that the directors will, if not restrained, accept and pay for the house, though it is not built as provided for -by the contract, and is of less value than it would have been if honestly constructed. It appears that a preliminary injunction, in accord with the prayer of the petition, was allowed.

II. The evidence touching the character of the materials furnished and work done in constructing the house is conflicting. We are of the opinion that the preponderance of the evidence shows that the house falls far short of complying with the requirements of the contract. An attempt to set out or discuss tbe evidence would prove to be without profit. We do not think that the evidence shows fraudulent confederation and agreement between the directors and the contractor, further than may be inferred from the fact that, through neglect of duty, or by intention, the directors accepted or propose to accept the house and pay for it. We think it so lacks compliance with the contract that its acceptance should be regarded as a fraud against the district and the taxpayers, which demands relief in a court of equity. Surely, if the directors and contractors had agreed and confederated together to rob the district by building and accepting a house not complying with the contract, equity would inter*386fere. So it will give relief if the same thing is done through the negligence of, or failure to perform, their duty by the directors. The contractor in that case would be guilty of an absolute fraud, and the failure of duty on the part of the directors would have the same effect as an actual fraud on their part, and is regarded as a fraud in law. Neglect of duty by an officer of a corporation, whereby the corporation may be defrauded-, is a part of the fraudulent transaction, constituting an element of the fraud itself. The rule of equity which will set aside contracts for fraud may be applied with the most just and excellent affects to the protection of corporations from robberies committed by those who take advantage of the negligence or confidence of their officers. In the case before us, the extent of the defects in the building, and the failure of the contractor to comply with the terms of the contract, forbid the conclusion that the house was approved through error of judgment. It could have been approved only through uegligence or failure of duty on the part of the directors.

2» INJUNCtio.v: violar tion bufore linaiheiiHiig; effect ou ac-ti°u. III. It is alleged that, after the suit was commenced, Adams was paid for the work done, and discharged from obligation under the contract. If this be so, the ^ rights.of plaintiff cannot be affected thereby for => L J the reason that it was done after the suit was brought and a preliminary injunction was allowed.

The decree of the circuit court restrains the defendants, and their successors in office, from settling and paying for the house under the contract; but finds that the house is of the value of $550, and directs that the independent district shall be discharged of all liability by the payment of that sum. This provision of the decree is in accord with the prayer of the petition, and is correct. In our opinion, the decree ought to be

Aeeibmed.